Opinion ID: 815391
Heading Depth: 2
Heading Rank: 2

Heading: The State-Court Litigation

Text: Soon enough, things began to sour between ASC Utah and Wolf Mountain. The proposed golf-course development stalled, and in May of 2006 Summit County declared -4- Wolf Mountain to have defaulted under the Development Agreement. Litigation rapidly ensued. In June of 2006, ASC Utah sued Wolf Mountain for various alleged breaches of the Ground Lease and Development Agreement. The lawsuit was brought in Summit County, Utah, district court, which sits in Utah’s Third Judicial District. Wolf Mountain promptly countersued, and the state district court consolidated the ASC Utah and Wolf Mountain suits. At around the same time—in August of 2006—Osguthorpe brought a state-court action against Wolf Mountain, alleging breaches of their 1996 lease agreement. Osguthorpe initially filed its suit in Salt Lake County, but the Salt Lake County district court transferred the case to the neighboring Summit County court, where Osguthorpe also brought a separate action against ASC Utah in 2007. Over Osguthorpe’s protests, the Summit County district court consolidated Osguthorpe’s suits into the extant ASC Utah–Wolf Mountain litigation in August of 2008. The next year saw two significant new developments in the ongoing litigation. First, Wolf Mountain sought the court’s leave to add new parties to the suit. Upon the denial of its request, Wolf Mountain filed a demand for arbitration under the Development Agreement, along with a motion to compel arbitration. Although the litigation had proceeded in Summit County district court for the previous three years, this marked the first time that any party had invoked a purported right to arbitrate the dispute under the Development Agreement. The Summit County district court denied Wolf Mountain’s motion to compel arbitration, and Wolf Mountain appealed. In a published opinion, the Utah Supreme -5- Court upheld the state trial court’s decision, holding that Wolf Mountain had waived its right to arbitrate by actively and substantially participating in the litigation for years before ever asserting a contractual right of arbitration. See ASC Utah, Inc. v. Wolf Mountain Resorts, L.C., 245 P.3d 184, 194 (Utah 2010) (“Wolf Mountain clearly had the intent to pursue matters through litigation rather than to seek arbitration.”). While acknowledging the importance of the contractual right of arbitration, the Utah Supreme Court explained that Utah public policy favors arbitration agreements only insofar as they provide a speedy and inexpensive means of adjudicating disputes, and reduce strain on judicial resources. In this case, enforcing the arbitration agreement would undercut both policy rationales: arbitration at this point would be neither a speedy and inexpensive way to adjudicate this dispute, nor a means of reducing strain on judicial resources. Public policy is better served by finding waiver where a party has participated in litigation to a point inconsistent with an intent to arbitrate, when such participation causes prejudice to the other party. Id. at 197. Also in 2009, Summit County declared that Osguthorpe had defaulted under the Development Agreement by failing to set aside the portion of its property needed for building the golf course. Because the issuance of the default notice gave rise to additional claims and defenses under the Development Agreement that had not previously been available to Osguthorpe, the Summit County district court reopened the pleadings to allow Osguthorpe to assert supplemental claims. On July 19, 2010, Osguthorpe brought new claims against both ASC Utah and Wolf Mountain under the Development Agreement. On September 20, 2010—during the pendency of Wolf -6- Mountain’s appeal of the Summit County district court’s denial of its motion to compel arbitration—Osguthorpe filed a “Motion to Compel Arbitration and to Stay All Claims in This Action Bearing on or Relating in Any Way to Any Alleged Default Under the [Development] Agreement” in state court. Osguthorpe argued that the arbitration clause in the Development Agreement required the arbitration of all claims and issues arising under the Development Agreement—not only those between Osguthorpe, ASC Utah, and Wolf Mountain, but also those that had been litigated solely between ASC Utah and Wolf Mountain. The Utah Supreme Court issued its mandate in ASC Utah, Inc. v. Wolf Mountain Resorts, L.C. on November 19, 2010. The Honorable Robert K. Hilder, a Utah statecourt judge and a defendant–appellee in this case, denied Osguthorpe’s motion to compel arbitration, inter alia, the next day. In denying the motion, Judge Hilder noted that Osguthorpe was “situated differently from Wolf [Mountain] for several reasons, but not so differently that [it] can compel arbitration of any claims or defenses in this consolidated action.” App. at 136 (emphasis omitted). This was because “the policies underlying arbitration have been so violated in this case that arbitration is not an option