Court Opinion

ID: 5139125
Source: CourtListenerOpinion
Date Created: 2021-12-21 15:32:57.421391+00
Date Added: 2024-06-11T08:24:15.004623
License: Public Domain

2020 UT App 57

               THE UTAH COURT OF APPEALS

                  COOK MARTIN POULSON PC,
                         Appellee,
                             v.
                      DANIEL G. SMITH,
                        Appellant.

                            Opinion
                       No. 20180488-CA
                       Filed April 9, 2020

             First District Court, Logan Department
                  The Honorable Kevin K. Allen
                           No. 140100505

          Russell S. Walker, Troy L. Booher, and Beth E.
               Kennedy, Attorneys for Appellant
         Thomas J. Burns and Aaron R. Harris, Attorneys
                          for Appellee

JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
  in which JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS
                         concurred.

CHRISTIANSEN FORSTER, Judge:

¶1    Daniel G. Smith appeals the district court’s finding of
contempt against him, entry of sanctions, entry of final judgment
in favor of Cook Martin Poulson PC (CMP), and entry of
summary judgment on Smith’s third-party complaint against
                  Cook Martin Poulson v. Smith

CMP shareholders Troy Martin, Richard Poulson, Kirk Eck, and
John Adams. 1 We reverse in part and affirm in part.

                       BACKGROUND

¶2     Smith began working as an accountant for CMP in 1995.
Each year through 2004, Smith signed an Employment
Agreement. The 2004 agreement permitted Smith’s termination
if he failed “to faithfully and diligently perform duties of
his employment.” It also included a non-compete provision,
which prohibited Smith, for a period of two years following
his termination, from providing “accounting services to any
client for whom [CMP] has performed accounting services
during the twelve-month period immediately preceding the
termination of [Smith’s] employment.” The agreement further
provided that in the event Smith breached the non-compete
provision, CMP would be entitled to liquidated damages equal
to 150% of what it had billed the clients to whom Smith
provided services during the twelve-month period preceding
his termination.

¶3    In 2005, Smith became one of five shareholders in CMP,
pursuant to a Shareholders’ Agreement. The Shareholders’
Agreement granted CMP the “right to purchase all of [a]
Shareholder’s shares” if the shareholder “engages in one or more
acts that in the unanimous opinion of the remaining
Shareholders, is discreditable.” The agreement outlined how the
value of the shares would be calculated as well as the manner
and timeframe in which the buyout would be paid. The
agreement also included a non-compete clause in which each
shareholder agreed not to “perform[] accounting services” for

1. Throughout this opinion, we refer to CMP and the third-party
defendants collectively as CMP except where the distinction is
relevant.

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                   Cook Martin Poulson v. Smith

two years following termination of employment with CMP “to
any client for whom [CMP] or Shareholder has performed
accounting services during the five year period immediately
preceding the termination of Shareholder’s employment.”
Finally, the agreement provided that if a shareholder violated
the non-compete provision after having been bought out under
the discreditable acts provision, “the balance remaining on the
note payable” for the buyout would “be deemed paid in full”
and CMP would “have no further obligation” to that
shareholder.

¶4     On July 31, 2014, CMP terminated Smith’s employment
“as a result of [his] failure to diligently perform the duties of his
employment despite repeated requests for improvement and
also as a result of discreditable acts committed by Smith during
his employment with CMP.” Specifically, CMP alleged that
Smith (1) “Submitted falsified production reports and billing
statements”; (2) “Failed to follow CMP’s billing procedures”; (3)
“Failed to follow CMP’s written and institutionalized due
diligence protocols”; (4) “Engaged in reckless oversight and
preparation of tax returns, schedules, audits, and financial
statements for numerous clients over many years”; (5) “Refused
to comply with demands from other Shareholders that he follow
CMP’s billing procedures, due diligence protocols, and other
policies”; and (6) “Provided accounting services for CMP clients
and non-CMP clients without informing CMP of the work done
while utilizing CMP-owned software, hardware, and other
resources and while not billing those clients[] for the benefit of
CMP, but instead billing the clients directly and accepting
payment without transferring the funds to CMP.” The other four
shareholders also invoked the discreditable acts provision of the
Shareholders’ Agreement to buy Smith out of his shares.

¶5    Following Smith’s termination, CMP learned that Smith
was continuing to hold himself out as a CMP employee and was
providing accounting services to a number of CMP clients. In

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                  Cook Martin Poulson v. Smith

December 2014, CMP filed a complaint against Smith requesting
a declaratory judgment regarding Smith’s obligations and
breaches under the Employment and Shareholders’ Agreements;
alleging claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, and breach of fiduciary
duty; requesting liquidated damages for violation of the
Employment Agreement; and requesting a temporary
restraining order (TRO) and injunction prohibiting Smith from
providing accounting services to CMP clients or from
influencing any clients of CMP to terminate their relationship
with CMP in violation of the agreements.

¶6     Smith filed an answer, counterclaim, and third-party
complaint, which purported to add CMP’s shareholders as third-
party defendants. In opposing CMP’s claims, Smith asserted,
among other things, that the claims were barred by CMP’s own
breach of the agreements. Smith’s counterclaim and third-party
complaint asserted that it was CMP and its shareholders who
breached the agreements and their duties of good faith by
improperly reducing Smith’s salary and distributions and
forcing him out of the company. He further asserted that CMP
and its shareholders had unjustly deprived him of his shares in
CMP.

¶7    On April 15, 2015, the district court issued a TRO

      [e]njoining Smith from directly or indirectly, for
      himself or any third party, soliciting or having any
      contact with any current client of CMP, or
      soliciting any person, firm, or corporation who was
      a customer of CMP within the 12 month period
      immediately preceding the termination of Smith’s
      employment, with regard to accounting or other
      services of the type CMP provides.

The court subsequently held a hearing on CMP’s request for a
preliminary injunction and, in a written memorandum decision,

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                  Cook Martin Poulson v. Smith

granted the injunction. The court’s memorandum decision
stated that Smith was not to “work for, or provide services to,
the clients [Smith] obtained while he was employed by
[CMP]” and directed CMP’s counsel to prepare an order in
conformance with the court’s memorandum decision. Smith
objected to CMP’s proposed order, and after another hearing,
the court overruled Smith’s objection and entered the order
submitted by CMP’s counsel. Significantly, the language of
the preliminary injunction order tracked the TRO language
except that the preliminary injunction order expanded the
no-soliciting restriction to those who had been clients for
five years previous to Smith’s termination rather than just
twelve months.

¶8     The parties then proceeded with discovery. On March 10,
2016, CMP filed a statement of discovery issues alleging that
Smith’s initial responses to its discovery requests “were
incomplete and evasive.” On May 24, 2016, the court ordered
Smith to “provide supplemental responses to his discovery
responses, responding in full to the information requested by
[CMP], within 7 days,” and to “produce all documents that are
responsive to the Requests for Production propounded by
[CMP] within 7 days.” At the same time, the court issued a
protective order permitting Smith to designate documents as
confidential and prohibiting use or disclosure of such documents
outside of the litigation.

¶9     Ten days after the court’s order on discovery issues,
Smith’s counsel contacted CMP’s counsel, offering to “produce
the non-privileged documents . . . at [his] office at a time
which is convenient.” CMP’s counsel pointed out that the
court’s deadline had passed and informed Smith’s counsel
that he expected the documents to be provided as ordered,
but Smith’s counsel continued to insist that the documents
should be inspected on Smith’s computer “as they are kept in
the usual course of business.” CMP’s counsel responded that

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                  Cook Martin Poulson v. Smith

the documents should be “produced in hard copy or
electronic format” and requested that Smith’s counsel arrange
for CMP to “image the hard drive” of Smith’s computer. Smith’s
counsel refused to cooperate with this request, and CMP filed a
motion for order to show cause asking that Smith be held in
contempt for failing to comply with the court’s order on
discovery issues.

¶10 In the meantime, CMP received information indicating
that Smith had “continued to provide accounting services for
several clients of CMP,” allegedly in violation of the court’s TRO
and preliminary injunction order. CMP filed another motion for
order to show cause requesting that Smith be held in contempt
for his violation of these court orders.

¶11 In response, Smith admitted that he had provided
accounting services to over 400 of CMP’s former clients but
maintained that he had not solicited any current CMP client, had
served only “clients who approached him,” and had not yet
invoiced them. He also argued that he had not violated the
injunction, because it was “wrongfully issued,” and asserted that
his actions had not harmed CMP. With respect to the production
of documents, Smith argued that he could not be held in
contempt because he had “repeatedly offered to provide CMP’s
counsel access to the computer” but that CMP’s counsel had
“refused to meet to inspect the information on Smith’s
computer.”

¶12 The court was unimpressed with Smith’s excuses.
It found that Smith had “blatantly ignored the Court” and
“unashamedly admit[ted] to doing so because he felt” the
court’s order was “wrongfully entered.” The court stated that
it did “not care if the clients contacted and requested [Smith]
do their accounting, or that [Smith] has not invoiced them for
the work done.” The court further found that Smith had
“ignored the time limitation” in the discovery order “and

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                 Cook Martin Poulson v. Smith

refused to tender the requested documents in the specific
requested form.” The court stated, “Merely providing a one-time
glance at a computer, 10 days after the Court’s order, does
not come close to comporting with [CMP’s] request or the
Court’s order.”

¶13 Based on these findings, the court held Smith in
contempt and imposed sanctions. Specifically, it ordered
Smith’s counterclaim stricken from the record, granted CMP
its attorney fees incurred in bringing the motions for order
to show cause, and entered CMP’s proposed findings of
fact. These findings included a determination that Smith
had engaged in the discreditable acts alleged by CMP in
violation of the Shareholders’ Agreement, that CMP followed
the appropriate protocol outlined in the Employment Agreement
in terminating Smith’s employment, that Smith had violated
the Employment Agreement and Shareholders’ Agreement
by providing accounting services to CMP clients after his
termination, that his conduct relieved CMP of any obligation
to pay him for his shares, and that the appropriate amount
of damages, pursuant to the liquidated damages provision of
the Employment Agreement, was $448,354. The court entered
final judgment in favor of CMP on its claims and also ordered
that Smith pay CMP’s attorney fees, pursuant to the terms
of the Shareholders’ Agreement, which provided for an
award of fees to the “non-defaulting party in enforcing this
Agreement.”

¶14 Relying on the court’s findings, the third-party
defendants also moved for summary judgment on Smith’s
claims against them. The court granted this motion, determining
that its findings that Smith breached the Employment and
Shareholders’ Agreements precluded his claims against the
third-party defendants.

¶15   Smith now appeals.

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                   Cook Martin Poulson v. Smith

            ISSUES AND STANDARDS OF REVIEW

¶16 Smith first argues that the district court erred by finding
him in contempt for violating the preliminary injunction and for
failing to comply with the court’s discovery order. “When
reviewing a district court’s decision to find a party in contempt,
we review the district court’s findings of fact for clear error and
its legal determinations for correctness.” Rosser v. Rosser, 2019
UT App 25, ¶ 9, 438 P.3d 1047 (quotation simplified), cert.
granted, 455 P.3d 1055 (Utah 2019). Ultimately, “the decision to
hold a party in contempt of court rests within the sound
discretion of the trial court and will not be disturbed on appeal
unless the trial court’s action is so unreasonable as to be
classified as capricious and arbitrary, or a clear abuse of
discretion.” Barton v. Barton, 2001 UT App 199, ¶ 9, 29 P.3d 13
(quotation simplified).

¶17 Smith next asserts that the sanctions imposed for his
violations were unduly harsh. We review the imposition of
contempt or discovery sanctions for abuse of discretion.
Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d
957; Barton, 2001 UT App 199, ¶ 9.

¶18 Finally, Smith argues that the district court’s default
findings were insufficient to support the summary judgments
against Smith on CMP’s claims and Smith’s third-party
complaint. 2 We review a court’s grant of summary judgment for
correctness, viewing “the facts and all reasonable inferences
drawn therefrom in the light most favorable to the nonmoving

2. Smith also asserts that the district court erred in denying his
motion for partial summary judgment and his motion for new
trial. However, his argument on these points is indistinguishable
from his argument regarding the sufficiency of the findings, and
we therefore do not address these points separately.

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                   Cook Martin Poulson v. Smith

party.” Mind & Motion Utah Invs., LLC v. Celtic Bank Corp., 2016
UT 6, ¶ 15, 367 P.3d 994 (quotation simplified).

¶19 To the extent that Smith’s arguments were not preserved
in the district court, he has asked us to review them for plain
error. Under plain error review, we will reverse only if “(i) an
error exists, (ii) the error should have been obvious to the trial
court, and (iii) the error is harmful.” In re A.T.I.G., 2012 UT 88,
¶ 22, 293 P.3d 276 (quotation simplified).

                           ANALYSIS

                           I. Contempt

¶20 Smith first asserts that the district court erred in holding
him in contempt because it incorrectly determined that he had
violated the preliminary injunction and discovery order. To
establish contempt, three elements must be proven: (1) “that the
person cited for contempt knew what was required,” (2) that the
person “had the ability to comply,” and (3) that the person
“intentionally failed or refused to do so.” Von Hake v. Thomas, 759
P.2d 1162, 1172 (Utah 1988), superseded by statute on other grounds
as stated in State v. Hurst, 821 P.2d 467 (Utah Ct. App. 1991).

A.    Violation of Preliminary Injunction

¶21 On appeal, Smith asserts that while he provided
accounting services for former clients, he did not violate the
preliminary injunction because he did not solicit any of CMP’s
clients—he claims they all approached him first—and because
the clients who approached him were all former (and not
current) clients of CMP. He asserts that, with respect to former
clients, the plain language of the injunction precludes him only
from “soliciting,” not from performing any services whatsoever.
He maintains that the plain language of the preliminary
injunction cannot be read as prohibiting him from performing

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                   Cook Martin Poulson v. Smith

accounting services for former clients that he did not actively
solicit and that the court therefore erred when it ruled that the
preliminary injunction ordered Smith “not to do any accounting
work” for former clients.

¶22 Smith did not preserve this argument in the district
court. 3 Although Smith represented to the district court that he
had provided services for only former clients who approached
him first, 4 he did not assert, as he now does on appeal, that the

3. Recent decisions from this court have noted that while our
supreme court has acknowledged the “ongoing debate about the
propriety of civil plain error review,” that court has not resolved
the debate for purposes of Utah law. See Utah Stream Access Coal.
v. Orange St. Dev., 2017 UT 82, ¶ 14 n.2, 416 P.3d 553 (questioning
the applicability of civil plain error review); Tronson v. Eagar,
2019 UT App 212, ¶ 18 n.7, 457 P.3d 407 (recognizing that
because the Utah Supreme Court has not yet resolved the debate
about the applicability of plain error review in civil cases, “Utah
appellate courts have sometimes applied plain error review in
civil cases in which neither party challenges its application”);
Frugal Flamingo Quick Stop v. Farm Bureau Mutual Ins. Co., 2018
UT App 41, ¶ 10 n.3, 420 P.3d 57 (applying plain error review in
a civil case without opining on its propriety). While CMP argues
that this court should not reach Smith’s challenge to the district
court’s finding of contempt for violating the preliminary
injunction order because this issue was not preserved, CMP has
not challenged the applicability of civil plain error review in this
case. Thus, as we have done before, we decline to resolve that
debate here and proceed to apply plain error review, without
opining on the propriety of doing so. See, e.g., Gerwe v. Gerwe,
2018 UT App 75, ¶ 6 n.1, 424 P.3d 1113.

4. For purposes of our analysis, we accept Smith’s assertions that
he did not solicit former clients and that he did not provide
                                                    (continued…)

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                  Cook Martin Poulson v. Smith

language of the preliminary injunction should be read to permit
him to provide such services so long as he did not “solicit” the
clients. Indeed, he claimed no confusion regarding the intent of
the court’s order and acknowledged that he had provided
accounting and tax services for former CMP clients. Rather, he
argued to the district court that the preliminary injunction was
improperly entered because he, rather than CMP, owned the
goodwill of the clients for whom he provided services and that
he should not be held in contempt for his violation because he
did not believe CMP had been harmed by his actions. The
district court rejected these arguments, and Smith does not
renew them on appeal.

¶23 Nevertheless, Smith asserts that we should review
his new argument regarding the language of the injunction
for plain error because he believes it should have been obvious
to the district court that the plain language of the court’s own
injunction order prohibited Smith only from soliciting former
clients, not from providing accounting services to former
clients who reached out to him. We agree with Smith that
the district court plainly erred in ruling that Smith violated
the preliminary injunction merely by performing accounting-
related services to CMP’s former clients because, with respect
to former clients, the plain language of the court’s order
prohibits Smith only from “soliciting any person, firm, or
corporation who was a customer of CMP within the 5-year
period immediately preceding the termination of Smith’s
employment.”

(…continued)
services to any of CMP’s current clients. On remand, the district
court can certainly explore whether these assertions are true. If
the court determines that Smith provided services to CMP’s
current clients or solicited any of CMP’s former clients, it may
elect to reinstate its contempt order.

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                   Cook Martin Poulson v. Smith

¶24 To begin, “we interpret language in judicial documents in
the same way we interpret contract language.” Iota LLC v. Davco
Mgmt. Co., 2016 UT App 231, ¶ 33, 391 P.3d 239. “When
interpreting a contract, we look to the language of the contract to
determine its meaning . . . .” Desert Mountain Gold LLC v. Amnor
Energy Corp., 2017 UT App 218, ¶ 13, 409 P.3d 74 (quotation
simplified). The plain language of the preliminary injunction
order does not prohibit Smith from working for or providing
services to former clients of CMP. The language of the
preliminary injunction order instead enjoins Smith from
“soliciting” former clients.

¶25 The findings and conclusions in the court’s preliminary
injunction ruling stated that the injunction was to “enforc[e] the
covenants not to compete found in the employment or
shareholder agreements” to prevent further harm to CMP
resulting directly from “Smith providing accounting services to
clients of CMP.” They also stated that Smith would be expected
to “compl[y] with the terms of the covenants not to compete,
particularly that he will not work for, or provide services to, the
clients he obtained while he was employed by CMP.” Further,
the court’s memorandum decision following the preliminary
injunction hearing stated that the court intended to enter an
order that would prohibit Smith from “work[ing] for, or
provid[ing] services to, the clients he obtained while he was
employed by [CMP].” Both the district court and CMP relied on
this language from the memorandum decision and the
preliminary injunction’s findings and conclusions to assert that
the injunction required Smith not to work for former clients at
all, regardless of who contacted whom. But we agree with Smith
that this language did not effectively enjoin Smith from working
for former clients, because the language appearing under the
heading “PRELIMINARY INJUNCTION ORDER” enjoined him
only from soliciting former clients and enjoined contact only
with respect to current clients.

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                   Cook Martin Poulson v. Smith

¶26 This court has determined that “to hold one in contempt
of an order, that order must be clearly understood to be an
order.” Salt Lake City v. Dorman-Ligh, 912 P.2d 452, 455 (Utah Ct.
App. 1996). Accordingly, injunctions must “be specific in terms
and . . . describe in reasonable detail, and not by reference to the
complaint or other document, the act or acts sought to be
restrained.” Utah R. Civ. P. 65A(d). Further, for a violation of an
order to justify sanctions, the “order must be sufficiently specific
and definite as to leave no reasonable basis for doubt regarding
its meaning.” Dorman-Ligh, 912 P.2d at 455. Here, the plain
language under the “PRELIMINARY INJUNCTION ORDER”
heading specifically prohibited Smith from soliciting or
contacting CMP’s current clients and from soliciting CMP’s
former clients. 5 It did not prohibit all contact with former clients
or all work for former clients. This portion of the order is the
portion to which a reasonable person would have been expected
to pay attention. Contradictory language in the findings and
conclusions is simply not “sufficiently specific and definite” that
it would have been read as undoubtedly modifying or adding to
the clearly labeled “PRELIMINARY INJUNCTION ORDER.” See
id. This should have been obvious to the district court, and
therefore, it was plain error for the court to find Smith in

5. We agree with Smith that it is notable that CMP’s counsel
drafted both the TRO and the preliminary injunction. The
language in both orders prohibited Smith from soliciting and
having contact with current clients and from soliciting former
clients. In fact, before the district court entered the preliminary
injunction, Smith objected to the form of the order and proposed
a competing preliminary injunction order that “track[ed] the
language set forth in the non-compete provision.” Smith’s
proposed order would have enjoined Smith from “providing
accounting services to any client for whom CMP has performed
accounting services.” But the district court overruled Smith’s
objections and entered the order drafted by CMP.

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                  Cook Martin Poulson v. Smith

contempt for violating the preliminary injunction solely on the
basis that Smith provided services to former clients.

¶27 CMP argues that Smith admitted to violating the
injunction when he acknowledged that he performed
accounting-related services for former CMP clients. But
admitting that he performed the services is not the same as
admitting that he violated the injunction. Smith consistently
maintained that the clients approached him independently and
that he “provided accounting services for certain former CMP
clients . . . who approached him to do the work.” The district
court did not make a finding that Smith worked for current CMP
clients or that he solicited former CMP clients, only that Smith
was “ordered not to do any accounting work for those
individuals.” But the plain language of the preliminary
injunction order did not prohibit Smith from working for former
CMP clients, so long as he did not solicit them, and the district
court plainly erred when it determined that Smith’s admitted
actions violated the terms of the preliminary injunction.
Accordingly, the court exceeded its discretion in holding Smith
in contempt for violating the preliminary injunction, and we
reverse and remand for further proceedings.

B.    Violation of Discovery Order

¶28 Smith next asserts that he did not violate the discovery
order, because he offered to produce the requested documents
on his computer, as they were kept in the usual course of
business. The court’s discovery order instructed Smith to
“produce all documents that are responsive to the Requests for
Production propounded by [CMP] within 7 days.” CMP’s
requests for production asked Smith to “make available any
computer” he had “used to provide accounting services to any
person at any time after July 31, 2014,” and also asked him to
provide “copies” of a number of different categories of
“documents.” In a section of its request defining “document,”

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                   Cook Martin Poulson v. Smith

CMP asked Smith to provide “responsive data or data
compilations kept in electronic form . . . in paper form where
such is possible” or otherwise “downloaded to disk.” Another
provision several pages later requested that Smith provide
“documents” “in the precise form and manner as they are kept
in the usual course of business.” It is undisputed that Smith
made no attempt to produce any of the requested documents
within the court’s seven-day deadline and that, subsequently, he
offered only to “meet and confer” at his attorney’s office where
he would “produce the non-privileged documents” by
permitting CMP’s counsel to “inspect the information on Smith’s
computer.”

¶29 The court found that Smith had “ignored the time
limitation, and refused to tender the requested documents in the
specific requested form.” The court found that CMP had
requested that the documents be delivered in paper form or
downloaded to disk and that Smith’s offer to permit CMP “a
one-time glance at a computer” did not comply with the court’s
order.

¶30 On appeal, Smith asserts that he complied with the
requests for production by offering to let CMP’s counsel inspect
the documents on his computer because that is how he keeps the
documents “in the usual course of business.” See Utah R. Civ. P.
34(c)(1). In support of this assertion, he relies on rule 34(c) of the
Utah Rules of Civil Procedure and language in CMP’s request
asking that “documents” be provided as “kept in the usual
course of business.”

¶31    Rule 34(c) of the Utah Rules of Civil Procedure provides,

       (c) Form of Documents and Electronically Stored
       Information.

              (1) A party who produces documents for
       inspection must produce them as they are kept in

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                   Cook Martin Poulson v. Smith

      the usual course of business or must organize and
      label them to correspond with the categories in the
      request.

             (2) If a request does not specify the form or
      forms for producing electronically stored
      information, a responding party must produce the
      information in a form or forms in which it is
      ordinarily maintained or in a form or forms that
      are reasonably usable.

Id. R. 34(c)(1)–(2). Smith seems to be under the impression that
subsection (c)(1) applies to the production of documents stored
on his computer. But in context, it is clear that this provision
applies to hard copy documents, while subsection (c)(2) applies
to electronically stored documents. See, e.g., SolarCity Corp. v.
Doria, No. 16cv3085-JAH (RBB), 2018 WL 467898, at *5 (S.D. Cal.
Jan. 18, 2018) (interpreting identical language used in the Federal
Rules of Civil Procedure as being intended to govern production
of hard copy documents and electronically stored information
separately); Anderson Living Trust v. WPX Energy Prod., LLC, No.
CIV 12-0040 JB/LFG, 2014 WL 930869, at *1, *13 (D.N.M. Mar. 6,
2014) (concluding that the term “documents” as used in rule 34
of the Federal Rules of Civil Procedure “does not include
[electronically stored information]” and therefore does not
require that such information be produced “in the usual course
of business,” and stating that the first subsection “governs hard
copy documents” while the second “governs [electronically
stored information], with no overlap between”).

¶32 First, the rule distinguishes “electronically stored
information” as a category separate from “documents.” See Utah
R. Civ. P. 34(a)(1) (listing “documents, electronically stored
information, [and] tangible things” as three categories of
discoverable items). Further, subsection (c)(2), pertaining
specifically to production of electronically stored information,

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                   Cook Martin Poulson v. Smith

would be rendered meaningless if “electronically stored
information” were subsumed by the definition of “documents,”
since production of documents is already governed by
subsection (c)(1). See Hall v. Utah Dep’t of Corr., 2001 UT 34, ¶ 15,
24 P.3d 958 (explaining that when we engage in statutory
interpretation, we “seek to render all parts [of the provision]
relevant and meaningful” and “avoid interpretations that will
render portions of a statute superfluous or inoperative”
(quotation simplified)). Thus, under rule 34(c)(2), Smith was
required to produce the electronic information in the form
requested by CMP or, if CMP did not specify, then the form
“ordinarily maintained” or “reasonably usable.” See Utah R. Civ.
P. 34(c)(2).

¶33 Smith alternatively asserts that permitting CMP to look
at the files on the computer complied with CMP’s own
request that he provide “documents” “in the precise form
and manner as they are kept in the usual course of
business.” However, CMP also requested that all “responsive
data or data compilations[ 6] kept in electronic form . . . be
produced in paper form where such is possible . . . [or]
downloaded to disk.” Unlike rule 34, CMP’s request explicitly
included “all electronic information in all electronic storage
media” in the definition of “documents.” Nevertheless, reading
the request as a whole, we agree with the district court that
Smith should have understood that CMP was requesting

6. Smith asserts that the files on his computer could not
be considered “data or data compilations.” (Quotation
simplified.) However, he makes no attempt to define this
term or explain why the electronic files would not fall
within this definition. See Data, Merriam-Webster.com,
merriam-webster.com/dictionary/data    [https://perma.cc/35EE-
LZD6] (defining data as “information in digital form that can
be transmitted or processed”).

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                  Cook Martin Poulson v. Smith

electronic information to be provided in paper or disk form. The
more specific request regarding “data and data compilations”
followed immediately after the language defining documents to
include electronic information, whereas the usual-course-of-
business language was included in a boilerplate paragraph
several pages later. And as with rule 34, the inclusion of this
separate instruction regarding electronic information would be
superfluous and meaningless if we were to interpret the request
as Smith suggests.

¶34 Additionally, as noted above, CMP’s request asked Smith
to provide “copies” of the requested documents. And CMP
specifically identified the categories of documents that it wanted
copies of. Smith could not have reasonably interpreted this
request as one to merely view the documents on his computer;
the specific request for copies made it clear that CMP was
requesting the documents in a portable format.

¶35 The court’s discovery order instructed Smith to “produce
all documents that are responsive to the Requests for Production
propounded by [CMP] within 7 days.” CMP’s request clearly
asked for copies of electronic documents to be provided in
paper format or on a disk. Yet Smith ignored the request
and refused to provide the documents in any format other
than viewed directly on his computer. 7 This was inconsistent
with the court’s order. Thus, the court did not exceed its
discretion in holding Smith in contempt for violating the
discovery order.

7. Smith also makes much of CMP’s request that he deliver the
entire computer hard drive for copying, asserting that this was
not required by the court order. But the court did not base its
determination on Smith’s failure to deliver the hard drive; it
based its determination on Smith’s complete refusal to deliver
any of the documents to CMP in either paper or disk form.

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                  Cook Martin Poulson v. Smith

                           II. Sanctions

¶36 Smith asserts that the sanctions imposed for his violations
of the preliminary injunction and the discovery order were
excessive and exceeded the district court’s discretion. Rule 37 of
the Utah Rules of Civil Procedure permits courts to “impose
appropriate sanctions for the failure to follow its orders.” Utah
R. Civ. P. 37(b). In doing so, the court may

      (1) deem the matter or any other designated facts
      to be established in accordance with the claim or
      defense of the party obtaining the order;

      (2) prohibit the disobedient party from supporting
      or opposing designated claims or defenses or from
      introducing designated matter into evidence;

      ...

      (4) dismiss all or part of the action, strike all or part
      of the pleadings, or render judgment by default on
      all or part of the action; [and]

      (5) order the party or the attorney to pay the
      reasonable costs, expenses, and attorney fees,
      caused by the failure

      ....

Id. “The striking of pleadings, entering of default, and rendering
of judgment against a disobedient party are the most severe of
the potential sanctions that can be imposed upon a
nonresponding party.” Marshall v. Marshall, 915 P.2d 508, 515
(Utah Ct. App. 1996) (quotation simplified). Though we affirm
the district court’s determination that Smith violated the court’s
discovery order, we hold that the district court exceeded its
discretion in holding Smith in contempt for violating the

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                    Cook Martin Poulson v. Smith

preliminary injunction based solely on a finding that he
provided accounting services to former clients. There is no way
for this court to know whether the district court would have
employed the same sanction based on the discovery violations
alone. Because it is possible that the court would have entered
other sanctions in response to the discovery violation alone, we
must reverse the sanctions and remand for further proceedings. 8

                       III. Summary Judgment

¶37 Because summary judgment was based on the default
findings that were imposed as a sanction, and we are unable to
affirm the sanctions, we must necessarily also reverse the court’s
summary judgment rulings and its order regarding attorney
fees. Nevertheless, as the summary judgment issues raised on
appeal would arise on remand in the event that the district court

8. We stop short of addressing the question of whether striking
Smith’s counterclaims based on the discovery violation alone
would be an abuse of discretion. We note, however, that district
courts have wide discretion in such cases, see Kilpatrick v.
Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d 957
(“[D]istrict courts are granted a great deal of deference in
selecting discovery sanctions, and we overturn a sanction only in
cases evidencing a clear abuse of discretion.”), and that Utah
courts have affirmed harsh sanctions for discovery violations in
other cases, see, e.g., First Fed. Sav. & Loan Ass’n of Salt Lake City v.
Schamanek, 684 P.2d 1257, 1266–67 (Utah 1984) (upholding a
decision to strike pleadings where the defendant claimed the
requested information was privileged but failed to establish that
a privilege applied); Wright v. Wright, 941 P.2d 646, 647, 650
(Utah Ct. App. 1997) (affirming a court’s decision to strike wife’s
answer and counter-petition in a divorce proceeding based on
her failure to respond to discovery requests even though her
counsel had withdrawn).

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                   Cook Martin Poulson v. Smith

reinstates its sanctions order based on appropriate findings, we
elect to address those issues here.

¶38 Smith argues that the district court erred in entering
judgment in favor of CMP on its breach-of-contract claims and in
granting the third-party shareholders’ summary judgment
motion, because its default findings did not establish all the
elements of breach of contract. To establish a prima facie case for
breach of contract, a plaintiff must establish “(1) a contract, (2)
performance by the party seeking recovery, (3) breach of the contract
by the other party, and (4) damages.” Bair v. Axiom Design, LLC,
2001 UT 20, ¶ 14, 20 P.3d 388 (emphasis added) (quotation
simplified), abrogated on other grounds as recognized by A.S. v. R.S.,
2017 UT 77, 416 P.3d 465. Smith asserts that the district court’s
default findings did not include a finding that CMP had
performed under the contracts and that the court’s summary
judgment ruling was therefore erroneous.

¶39 “Generally, when a trial court fails to make factual
findings on a material issue, such failure constitutes reversible
error . . . .” Uhrhahn Constr. & Design, Inc. v. Hopkins, 2008 UT
App 41, ¶ 29, 179 P.3d 808. Nevertheless, “missing findings can
be viewed as harmless error” if “the undisputed evidence clearly
establishes the factor or factors on which findings are missing”
or “if it is reasonable to assume that the trial court actually
considered the controverted evidence and necessarily made a
finding to resolve the controversy, but simply failed to record
the factual determination it made.” Hall v. Hall, 858 P.2d 1018,
1025 (Utah Ct. App. 1993) (quotation simplified).

¶40 The court found that Smith engaged in “discreditable acts
as contemplated by” the Shareholders’ Agreement; that CMP
“followed the exact protocol contemplated by” the Employment
Agreement in terminating Smith; that “Smith’s conduct, both
before and after his termination, breached his obligations under
the Shareholders’ Agreement”; and that “Smith’s conduct after

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                  Cook Martin Poulson v. Smith

his termination breached his obligations under the Employment
Agreement.” We agree with CMP that the default findings can
be construed as determining that CMP did not breach the
Employment Agreement; however, they cannot be construed as
determining that CMP did not breach the Shareholders’
Agreement.

¶41 With respect to the Employment Agreement, it can be
inferred from the court’s findings that CMP followed the
appropriate protocol in terminating Smith and that CMP did not
breach the Employment Agreement. Thus, such findings could
adequately support a determination that CMP established its
breach of contract claim on the Employment Agreement. 9 The
non-compete sections of the Employment Agreement provide
for an award of “liquidated damages in the amount of one
hundred fifty percent (150%) of the billings by [CMP] to the
clients during the 12-month period immediately preceding
termination for those clients to whom Employee has rendered
service subsequent to Employee’s termination.” Because the
default findings support a ruling in favor of CMP on its claim for
breach of the Employment Agreement, such findings could also
support an award of liquidated damages.

¶42 With respect to the Shareholders’ Agreement, Smith
asserted in his pleadings that CMP and the individual
shareholders violated the Shareholders’ Agreement in January
2014 by reducing his shareholder distributions and salary,
increasing the other shareholders’ distributions, and refusing “to
allow Smith to serve as a director.” He also asserted that they

9. Smith does not appear to have actually asserted that CMP or
the shareholders breached the Employment Agreement. Rather,
his argument rested on his assertion that he was no longer
subject to the Employment Agreement after the Shareholders’
Agreement went into effect.

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                  Cook Martin Poulson v. Smith

breached the Shareholders’ Agreement by terminating his
employment. While the district court’s default findings stated
that Smith violated the Shareholders’ Agreement prior to his
termination in July 2014, thus precluding his assertion that his
termination was itself a breach of the agreement, it is not clear
whether Smith’s violations occurred prior to January 2014, and
the district court made no findings regarding Smith’s allegation
that CMP and the shareholders breached the Shareholders’
Agreement in January 2014. Thus, the default findings could not
establish that CMP or the individual shareholders performed
under the Shareholders’ Agreement. Without such a
determination, the court could not rule in favor of CMP on its
claim for breach of the Shareholders’ Agreement. Likewise, these
findings could not resolve Smith’s third-party complaint against
the individual shareholders, which also rested on his assertion
that they had breached the Shareholders’ Agreement in January
2014.

                       IV. Fees on Appeal

¶43 CMP has requested an award of fees on appeal. “[W]hen a
party who received attorney fees below prevails on appeal, the
party is also entitled to fees reasonably incurred on appeal.”
Brown v. Richards, 840 P.2d 143, 156 (Utah Ct. App. 1992).
Because we must reverse the court’s sanctions and summary
judgment on the basis that its contempt order was plainly
erroneous, CMP has not prevailed on appeal, and its request for
fees is therefore denied.

                        CONCLUSION

¶44 Though the district court did not exceed its discretion in
holding Smith in contempt for violating the court’s discovery
order, the district court plainly erred in interpreting the
language of its own preliminary injunction order and did exceed
its discretion in holding Smith in contempt for violating that

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                  Cook Martin Poulson v. Smith

order solely based on a finding that he worked for former
clients. Because we cannot say whether the district court would
have imposed the same sanctions based only on the discovery
violation, we reverse the district court’s ruling in favor of CMP
and remand for further proceedings consistent with this opinion.

20180488-CA                   24                 2020 UT App 57