Giles v. Mineral Resources International, Inc.

2014 UT App 259

_________________________________________________________

THE UTAH COURT OF APPEALS

JAMES GILES,

Plaintiff and Appellee,

v.

MINERAL RESOURCES INTERNATIONAL, INC.,

Defendant and Appellant.

Opinion

No. 20130694-CA

Filed October 30, 2014

Second District Court, Ogden Department

The Honorable Ernest W. Jones

No. 110907786

Zane S. Froerer and Paul H. Johnson, Attorneys

for Appellant

Donald L. Dalton, Attorney for Appellee

JUDGE JOHN A. PEARCE authored this Opinion, in which JUDGES

GREGORY K. ORME and MICHELE M. CHRISTIANSEN concurred.

PEARCE, Judge:

¶1 This appeal concerns a breach of fiduciary duty claim that

was the subject of a successful summary judgment motion.

Mineral Resources International, Inc. (MRI) challenges the

district court’s grant of summary judgment in favor of James

Giles and award of attorney fees to Giles. The district court ruled

that MRI had not presented sufficient evidence of actual

damages caused by the alleged breach of the duty Giles owed

MRI. On appeal, MRI contends that it presented sufficient

evidence of damages to survive summary judgment. MRI further

contends that even if the evidence of actual damages was

insufficient, summary judgment was inappropriate because MRI

Giles v. Mineral Resources International, Inc.

claimed it was entitled to nominal damages. Lastly, MRI posits

that the award of attorney fees was improper because the

underlying attorney fees clause was part of a contract between

Giles and MRI and the breach of fiduciary duty claim sounded

in tort rather than contract.

¶2 ‚On appeal from a district court’s summary judgment

ruling, we view the facts and all reasonable inferences drawn

therefrom in the light most favorable to the nonmoving party

and review the court’s legal conclusions and ultimate grant or

denial of summary judgment for correctness.‛ Judge v. Saltz

Plastic Surgery, PC, 2014 UT App 144, ¶ 13, 330 P.3d 126 (citation

and internal quotation marks omitted).

¶3 MRI employed Giles from 1995 to 2010 as an international

sales representative. Giles signed non-compete and non-

disclosure agreements that MRI prepared. MRI assigned Giles to

handle sales in Asia and the Pacific Rim. During this time, Giles

developed a strong relationship with a regional distributor, HCI,

which sold MRI’s products in the Philippines. HCI and MRI

entered into a five-year broker agreement in September 2003.

¶4 MRI’s product line included the dietary supplement

Concentrated Mineral Drops. In February 2008, Giles helped

HCI file an application to use a logo depicting the stylized letters

‚CMD‛ as a trademark. MRI started using the CMD trademark

for its Concentrated Mineral Drops ‚no later than July of 2008.‛1

In September 2009, MRI discovered HCI’s trademark application

and confronted Giles about it. Giles claimed that HCI had filed

the application on behalf of MRI and that HCI would resolve the

situation by allowing its application to lapse. The application did

1. Presumably, MRI’s plans to use the CMD trademark predated

HCI’s application and Giles was aware of those plans when he

helped HCI apply for the trademark.

20130694-CA 2 2014 UT App 259

Giles v. Mineral Resources International, Inc.

not lapse until the spring of 2012, although HCI apparently took

no further action to advance the application.

¶5 In December 2009, MRI asked Giles to sign a revised non-

compete agreement, but he refused. Giles then terminated his

employment with MRI in February 2010. In November 2011,

Giles brought an action seeking a declaration that the original

non-compete agreement was unenforceable. MRI filed a

counterclaim against Giles combined with a third-party

complaint naming ten John Does as defendants. Giles moved to

dismiss the combined counterclaim and third-party complaint.

After a hearing in February 2012, the district court dismissed

without prejudice MRI’s third-party complaint and the breach-

of-contract portion of MRI’s counterclaim. The remainder of the

counterclaim is the breach of fiduciary duty cause of action

currently before us on appeal.2 At a June 2013 hearing, the

district court noted that MRI had not conducted any discovery in

the nineteen months since the case had been filed in November

2011. The district court ruled that the claimed damages were ‚all

speculation‛ and that there was no evidence ‚to support the

claim that somehow Mr. Giles is responsible for the loss of

sales.‛ It therefore granted Giles’s motion for summary

judgment and awarded him attorney fees. MRI appeals those

decisions.

I. Actual Damages

¶6 MRI first contends that the district court erred in

determining that MRI had failed to present sufficient evidence of

actual damages caused by Giles’s actions. We review this

2. The parties have also litigated a contentious contract dispute

that was the subject of another appeal. See generally Giles v.

Mineral Resources International, Inc., 2014 UT App 37, 320 P.3d

684.

20130694-CA 3 2014 UT App 259

Giles v. Mineral Resources International, Inc.

determination for correctness. Judge v. Saltz Plastic Surgery, PC,

2014 UT App 144, ¶ 13, 330 P.3d 126. To prove a breach of

fiduciary duty claim, a plaintiff must demonstrate that the

defendant owed a duty, the defendant breached the duty, the

plaintiff suffered damages, and the plaintiff’s damages were

actually and proximately caused by the defendant’s breach. See

Christensen & Jensen, PC v. Barrett & Daines, 2008 UT 64, ¶ 23, 194

P.3d 931. The district court did not address the first three

elements, because it determined that no reasonable finder of fact

could conclude that Giles’s actions caused the damages MRI

alleged.

¶7 ‚Proximate cause is an issue of fact.‛ Harline v. Barker, 854

P.2d 595, 600 (Utah Ct. App. 1993). Where summary judgment is

sought due to a lack of evidence of causation, such judgment is

appropriate ‚only if there is no evidence upon which a

reasonable jury could infer causation.‛ Id. However, ‚*o+n

appeal from a district court’s summary judgment ruling, we

view the facts and all reasonable inferences drawn therefrom in

the light most favorable to the nonmoving party.‛ Judge, 2014 UT

App 144, ¶ 13 (emphasis added) (citation and internal quotation

marks omitted). Reasonable inferences must be more than

speculation and conjecture. State v. Cristobal, 2010 UT App 228,

¶ 7, 238 P.3d 1096. ‚It is well established that an inference would

be unreasonable if it would permit a jury to base its verdict on

mere speculation and conjecture.‛ Owen v. Burcham, 599 P.2d

1012, 1019 (Idaho 1979) (citing cases from three federal circuits).

‚While a plaintiff facing summary judgment ‘is entitled to all

favorable inferences, [a plaintiff] is not entitled to build a case on

the gossamer threads of whimsy, speculation and conjecture.’‛

Judge, 2014 UT App 144, ¶ 15 (quoting Ladd v. Bowers Trucking,

Inc., 2011 UT App 355, ¶ 7, 264 P.3d 752). ‚Plaintiffs therefore

must spin together myriad facts into a durable thread that

reasonably connects defendant’s breach to plaintiffs’ injury.‛

Kilpatrick v. Wiley, Rein & Fielding, 909 P.2d 1283, 1292 (Utah Ct.

App. 1996) (emphasis added).

20130694-CA 4 2014 UT App 259

Giles v. Mineral Resources International, Inc.

¶8 MRI argued that Giles breached his fiduciary duties in

2008 by helping HCI file the trademark application and that it

was ‚reasonable to conclude‛ that Giles’s actions ‚directly

contributed to creating a conflict between‛ MRI and HCI. MRI

claims that this conflict caused HCI to reduce its orders from

MRI by ten percent between 2010 and 2011 and by

approximately fifty percent between 2011 and 2012. In 2013, after

the onset of this litigation, HCI stopped communicating with

MRI and instead announced plans to buy similar products from

a different company.3 MRI admitted that it was ‚not certain

exactly what portion of . . . lost sales‛ could be attributed to

Giles’s actions but asserted that ‚it is reasonable to conclude that

[those] actions were a substantial factor in losing [HCI] as a

customer, and that [MRI] has suffered damages as a result.‛

¶9 The district court ruled that MRI had not established

sufficient facts to allow a reasonable jury to infer causation.

According to the district court, the causal thread between Giles’s

actions and the alleged damages was ‚all speculation.‛ The court

stated that it could not ‚find any proximate cause here that Mr.

Giles is responsible‛ for MRI’s loss of sales to HCI.4 On appeal,

MRI renews its assertion that Giles ‚assist*ed+ *HCI+ in

breaching their broker agreement with MRI in an apparent

attempt to ‘pirate’ one of MRI’s most valuable trademarks.‛ MRI

argues that the trademark dispute ‚created a reasonable

inference—based on circumstantial evidence—that Giles took

actions during the period of his employment with MRI . . . which

ultimately resulted in MRI losing *HCI+ as a customer.‛

3. MRI claims that this new supplier was ‚affiliated with Giles.‛

4. As previously noted, the district court was also troubled that

MRI had ‚done absolutely nothing in this case as far as

discovery in 19 months.‛

20130694-CA 5 2014 UT App 259

Giles v. Mineral Resources International, Inc.

¶ 10 The district court did not err in determining that these

speculative and conclusory claims are insufficient to permit a

reasonable finder of fact to conclude that the alleged breach

actually caused the alleged damages. Viewing the facts in the

light most favorable to MRI, Giles helped HCI file a trademark

application in 2008 that infringed on MRI’s intellectual property.

Giles left MRI in 2010, and any contractual obligation he owed

MRI expired two years later. In 2013, HCI decided to stop

buying MRI’s products after placing progressively smaller

orders with MRI for the two preceding years. MRI has adduced

no evidence linking HCI’s purchasing decisions to Giles’s role in

the trademark application. Instead, MRI speculates that Giles’s

assistance in 2008 may have fueled a slow-burning conflict that

resulted in a loss of business some four years later. These events,

standing alone, are too far removed in type and time for a

reasonable inference to be drawn that one caused the other. It

follows that MRI has not carried its burden on appeal of

demonstrating error in the district court’s determination.

II. Nominal Damages

¶ 11 MRI next contends that the district court inappropriately

granted summary judgment, because MRI demonstrated at least

the possibility that it was entitled to pursue an award of nominal

damages. MRI’s argument in support of this contention is

limited to a single sentence:

Moreover, even if the Court of Appeals were to

determine that MRI’s claimed damages were too

speculative to meet the standard necessary to

prove proximate cause in this case, and

accordingly, that MRI did not meet its burden to

avoid summary judgment on the issue of

compensatory damages, MRI has the right to

proceed with its claim of breach of fiduciary duty

against Giles, and to seek a judgment for nominal

damages.

20130694-CA 6 2014 UT App 259

Giles v. Mineral Resources International, Inc.

MRI provides a string citation to five cases but does not analyze

those cases or explain how they are analogous to the instant case.

¶ 12 Rule 24(a)(9) of the Utah Rules of Appellate Procedure

requires an appellant to support its brief with citations to the

authorities relied upon. ‚Case law applying this rule makes clear

that it requires not just bald citation to authority but

development of that authority and reasoned analysis based on

that authority.‛ Hale v. Big H Constr., Inc., 2012 UT App 283, ¶ 51,

288 P.3d 1046 (citation and internal quotation marks omitted).

‚Citing relevant provisions and cases without any meaningful

analysis of this authority falls short.‛ Id. (citation and internal

quotation marks omitted). Cf. Wohnoutka v. Kelley, 2014 UT App

154, ¶ 6, 330 P.3d 762 (‚An appellate court should not be asked

to . . . save an appeal by remedying the deficiencies of an

appellant’s brief.‛). MRI’s single-sentence contention in this

regard inadequately briefs an otherwise interesting question of

law. MRI has failed to carry its burden of persuasion on appeal.

We reject MRI’s nominal-damages argument for that reason

alone.

¶ 13 But even if we were to reach the merits of this claim, it is

far from clear that Utah law allows a plaintiff alleging breach of

fiduciary duty to proceed to trial purely on the issue of nominal

damages. The cases in MRI’s string citation do not address

whether Utah law would permit a breach of fiduciary duty claim

to proceed solely on nominal damages. The first three cases MRI

cites sounded in contract. Foote v. Clark, 962 P.2d 52, 53 (Utah

1998); Turtle Mgmt., Inc. v. Haggis Mgmt., Inc., 645 P.2d 667, 670

(Utah 1982); Snyderville Transp. Co. v. Christiansen, 609 P.2d 939,

940 (Utah 1980). The fourth case involved the tort of trespass.

Boyer v. Boyer, 2008 UT App 138, ¶ 22, 183 P.3d 1068. And the

fifth involved a claim for wrongful use of civil proceedings.

Gilbert v. Ince, 1999 UT 65, ¶ 1, 981 P.2d 841.

¶ 14 Generally, ‚*n+ominal damages are not recoverable in

cases in which actual damages are an element of the cause of

20130694-CA 7 2014 UT App 259

Giles v. Mineral Resources International, Inc.

action and [the] plaintiff has failed to prove those damages.‛

1 Stein on Personal Injury Damages Treatise § 1:3 (3d ed. 2014).

‚In such a case, nominal damages are not awarded, because the

plaintiff has failed to prove one essential element in his or her

cause of action,‛ id., namely, that actual damages were

sustained. However, courts in other jurisdictions are split on the

availability of nominal damages in breach of fiduciary duty

cases. Compare, e.g., Chimney Rock Pub. Power Dist. v. Tri-State

Generation & Transmission Ass’n, No. 10-cv-02349-WJM-KMT,

2014 WL 811566, at *5 (D. Colo. March 3, 2014) (district court’s

order explaining that ‚nominal damages for non-economic

harm, where no actual damages exist, are not available for a

breach of fiduciary duty under Colorado law‛), AMERCO v.

Shoen, 907 P.2d 536, 542 (Ariz. Ct. App. 1995) (‚We have no basis

for concluding that, in the absence of actual damage or unjust

enrichment, Nevada would encourage internecine corporate

litigation by permitting a nominal damage claim.‛), John E. King

& Assocs. v. Toler, 675 S.E.2d 492, 496 (Ga. Ct. App. 2009)

(‚*P+laintiffs must still show some injury to prevail on a breach

of fiduciary duty claim.‛), and Nelson v. Alliance Hospitality

Mgmt., LLC, No. 11 CVS 3217, 2013 WL 4506222, at *10 (N.C.

Super. Ct. Aug. 20, 2013) (North Carolina business court’s order

ruling that Georgia law applied and noting that under Georgia

law ‚nominal damages are only available upon a showing of

injury‛ (citations and internal quotation marks omitted)), with,

e.g., Continuum Condo. Ass’n v. Continuum VI, Inc., 549 So. 2d

1125, 1127 (Fla. Dist. Ct. App. 1989) (‚*N+ominal damages can be

awarded where a legal wrong has been proven, but the

aggrieved party suffered no damages . . . .‛), and Brian E. Weiss,

D.D.S., PC v. Miller, 564 N.Y.S.2d 110, 111 (N.Y. App. Div. 1990)

(‚[N]ominal damages will be awarded to a plaintiff where the

law recognizes a technical invasion of his right or a breach of

defendant’s duty, but where the plaintiff has failed to prove

actual damages or a substantial loss or injury to be

compensated.‛). This split may be partly attributable to courts’

occasional use of ‚the term ‘nominal damages’ broadly to

describe situations where . . . plaintiffs experienced actual

20130694-CA 8 2014 UT App 259

Giles v. Mineral Resources International, Inc.

damages insusceptible to reasonable calculation.‛ Chimney Rock,

2014 WL 811566, at *5 (citation and internal quotation marks

omitted).

¶ 15 In short, MRI has failed to cite, much less to properly

analyze and explain, any authority demonstrating that it was

entitled to pursue a breach of fiduciary duty claim in the absence

of proof of actual damages. Consequently, MRI has not met its

burden on appeal of showing error in the district court’s ruling

on nominal damages.

III. Attorney Fees

¶ 16 MRI next contends that the district court erred in

awarding attorney fees to Giles because there was no contractual

basis for doing so. We review the propriety of an award of

attorney fees for correctness. Jones v. Riche, 2009 UT App 196, ¶ 1,

216 P.3d 357.

¶ 17 ‚As a general rule, attorney fees are recoverable only if

authorized by contract or statute.‛ Hahnel v. Duchesne Land, LC,

2013 UT App 150, ¶ 16, 305 P.3d 208 (citation and internal

quotation marks omitted).5 ‚If the legal right to attorney fees is

5. The Utah Supreme Court has noted that breach of fiduciary

duty is ‚a well-established exception to the American rule

precluding attorney fees in tort cases generally.‛ Campbell v. State

Farm Mut. Auto. Ins. Co., 2001 UT 89, ¶ 122, 65 P.3d 1134, rev’d on

other grounds, 538 U.S. 408 (2003). However, Campbell discussed

whether attorney fees were recoverable by a prevailing plaintiff

who demonstrated a breach of fiduciary duty. Here, neither

party argues that the exception Campbell articulates should apply

to this dispute, in which the prevailing party defeated a breach

of fiduciary duty claim. Given our resolution of the case before

(continued...)

20130694-CA 9 2014 UT App 259

Giles v. Mineral Resources International, Inc.

established by contract, Utah law clearly requires the court to

apply the contractual attorney fee provision and to do so strictly

in accordance with the contract’s terms.‛ Id. (citation and

internal quotation marks omitted). We ‚first look to the writing

alone to determine its meaning and the intent of the contracting

parties.‛ Id. (citation and internal quotation marks omitted).

¶ 18 The non-compete agreement Giles signed provided that

Giles would not compete with MRI for two years following the

termination of his employment and that he would not share or

use MRI’s trade secrets.6 The non-compete agreement also

provided, ‚If any legal action arises under this agreement or

us on other grounds, we need not answer that unbriefed

question.

6. The operative terms of the non-compete agreement stated:

The undersigned shall not engage in designing,

manufacturing, and selling of any products or

services that are similar to our [sic] compete with

the present products or MRI and those products or

services under design, production, marketing,

directly or indirectly for himself or herself or in

behalf of or in conjunction with, any other person,

firm, partnership, entity, or corporation, within the

United States of America, or in the country(ies) or

Nation(s) where the undersigned is providing a

service for MRI, for the period of two (2) years

immediately following the termination of

contractual or other working arrangements with

MRI, or the full extent of the law, which ever [sic]

is applicable for said services, regardless of the

reason for termination or the party initiating

termination, and as to information which is

properly a trade secret of MRI.

20130694-CA 10 2014 UT App 259

Giles v. Mineral Resources International, Inc.

relating thereto, . . . [t]he prevailing party shall be entitled to costs

and reasonable attorney’s fees . . . .‛ (Emphases added.) A non-

disclosure agreement that Giles signed the same day contained a

similar provision.

¶ 19 Giles sought a declaratory judgment that certain

provisions within the agreements were unenforceable and thus

invalid—an action that arose from or related to the agreements.

MRI brought two counterclaims against Giles: a claim for breach

of fiduciary duty (the Fiduciary Duty Claim) and a claim for

injunctive relief on the basis of the agreements (the Contract

Claim). The Contract Claim was eventually dismissed without

prejudice, and Giles prevailed on summary judgment on the

Fiduciary Duty Claim. The district court awarded attorney fees

to Giles, prompting MRI to request clarification of the basis for

the award. The court stated that the written agreements allowed

for an award of attorney fees to a prevailing party and that Giles

had prevailed in the lawsuit. MRI argued that Giles had

prevailed only on the Fiduciary Duty Claim and that that claim

was not related to the non-compete and non-disclosure

agreements. The district court disagreed and awarded attorney

fees of $9,547.50 to Giles.

¶ 20 On appeal, MRI asserts that the Fiduciary Duty Claim did

not arise ‚under the non-competition agreement between the

parties and was not related thereto. Rather, it was an action

based strictly on a tort theory . . . .‛ According to MRI, the

Fiduciary Duty Claim was ‚based solely on the

agency/employment relationship of the parties, independent of

the contract between the parties.‛ MRI explains that it did not

‚assert in [the Fiduciary Duty Claim] any type of violation of the

non-compete/non-disclose agreement.‛ Accordingly, MRI argues

that ‚any attorney’s fees expended by Giles in litigating [the

Fiduciary Duty Claim] did not tangibly relate to any breach of

contract claims that may have been originally asserted.‛

20130694-CA 11 2014 UT App 259

Giles v. Mineral Resources International, Inc.

¶ 21 But the attorney fees provisions at issue are not limited to

litigation arising from the contract claims. Rather, they are

broadly worded and allow an award of such fees to the

‚prevailing party‛ in ‚any legal action aris[ing] under . . . or

relating‛ to the non-compete and non-disclosure agreements.

Under this broad contractual language, attorney fee awards are

not limited to the specific claims a party prevails upon but

instead may be awarded to the party who prevails in an action

that arises out of or relates to the agreements. Cf. Energy Claims

Ltd. v. Catalyst Inv. Group Ltd., 2014 UT 13, ¶¶ 11, 45, 325 P.3d 70

(holding that a breach of fiduciary duty claim fell within the

scope of a contract’s forum selection clause, which provided that

‚‘[a]ny dispute, controversy or claim arising out of or related to

the agreement shall be brought exclusively before the courts of

England [and] Wales,’‛ because the clause’s language did not

‚support a distinction between contract claims and tort claims‛

(alterations in original)).

¶ 22 We conclude that MRI’s claims constituted a legal action

arising under the agreements. There is no question that Giles’s

suit seeking declaratory relief freeing him from the agreements

is properly understood as a legal action arising under or relating

to those agreements. Nor is there any doubt that the Contract

Claim portion of MRI’s counterclaim was also a legal action

arising under the agreements. To describe the manner in which

Giles ‚misuse*d+ his position of employment and MRI’s

confidential proprietary information or trade secrets . . . for his

own purposes, to the detriment of MRI,‛ the Contract Claim

incorporated by reference all of the material allegations of the

Fiduciary Duty Claim. MRI itself characterized both claims as

mandatory counterclaims, i.e., claims that arose out of the same

transaction or occurrence as Giles’s declaratory-relief action. See

Utah R. Civ. P. 13(a). MRI has not convinced us that the

dismissal of a portion of that counterclaim—the Contract

Claim—could retroactively change the nature of the filing. We

therefore conclude that the Contract Claim and the Fiduciary

Duty Claim were filed together as a ‚legal action aris[ing]

20130694-CA 12 2014 UT App 259

Giles v. Mineral Resources International, Inc.

under‛ the agreements ‚or relating thereto‛ and that, as the

prevailing party in the action, Giles was entitled to an award of

attorney fees.

¶ 23 Finally, it is not clear that the district court awarded fees

only for Giles’s defense of the Fiduciary Duty Claim. Although

the Contract Claim was dismissed before the summary judgment

hearing, Giles incurred the expense of his attorney researching,

drafting, and filing a motion to dismiss it. He was therefore

entitled to recover ‚costs and reasonable attorney’s fees‛ for

those actions under the non-compete agreement.7

¶ 24 In light of these considerations and under these facts, MRI

has not carried its burden of demonstrating error in the district

court’s decision to award attorney fees to Giles.

¶ 25 Giles requests an award of his attorney fees incurred on

appeal. Generally, a party that received attorney fees below and

prevails on appeal is entitled to fees reasonably incurred on

appeal. See Giles v. Mineral Resources International, Inc., 2014 UT

App 37, ¶ 12 n.4, 320 P.3d 684. Here, the district court awarded

Giles attorney fees, and we affirm that award and the district

court’s grant of summary judgment. Accordingly, we also

determine that Giles is entitled to an award of his attorney fees

reasonably incurred on appeal. We remand to the district court

with instructions to ascertain the amount of those fees and enter

a judgment awarding them.

____________

7. On appeal, MRI does not challenge the district court’s

calculation of the amount of the attorney fees award.

20130694-CA 13 2014 UT App 259