Court Opinion

ID: 9395878
Source: CourtListenerOpinion
Date Created: 2023-05-18 18:13:39.461083+00
Date Added: 2024-06-11T17:19:12.450033
License: Public Domain

2023 UT App 7

              THE UTAH COURT OF APPEALS

PLANTATIONS AT HAYWOOD 1 LLC, PLANTATIONS AT HAYWOOD 2
LLC, PLANTATIONS AT HAYWOOD 13 LLC, AND PLANTATIONS AT
                   HAYWOOD 23 LLC,
                      Appellants,
                          v.
  COTTONWOOD RESIDENTIAL OP LP, COTTONWOOD CAPITAL
  PROPERTY MA, COTTONWOOD CAPITAL MANAGEMENT, AND
                    DANIEL SHAEFER,
                      Appellees.

                           Opinion
                       No. 20210498-CA
                    Filed January 20, 2023

          Third District Court, Salt Lake Department
            The Honorable Todd M. Shaughnessy
                         No. 200903397

        Eric V. Anderton, Andrew G. Deiss, and Sean N.
                 Egan, Attorneys for Appellants
            Matthew L. Lalli, Sarah Anne Hafen, and
             Henry H. Oh, Attorneys for Appellees

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

CHRISTIANSEN FORSTER, Judge:

¶1      Plantations at Haywood 1 LLC, Plantations at Haywood 2
LLC, Plantations at Haywood 13 LLC, and Plantations at
Haywood 23 LLC (collectively, Plaintiffs) filed a lawsuit in
California against several entities, including Cottonwood
Residential OP LP, Cottonwood Capital Property MA,
Cottonwood Capital Management, and Daniel Shaefer
(collectively, the Cottonwood Defendants), alleging causes of
               Plantations v. Cottonwood Residential

action arising from a refinancing transaction related to property
located in South Carolina. When the Cottonwood Defendants
were dismissed from the California case, Plaintiffs refiled their
claims against them in Utah. That case was eventually dismissed,
without prejudice, for failure to prosecute. When Plaintiffs again
refiled their claims, the Cottonwood Defendants filed motions to
dismiss on grounds of failure to state a claim and failure to
prosecute. The district court granted both motions. We are asked
to determine whether the district court committed reversible error
in dismissing Plaintiffs’ claims. Because we determine that the
district court did not exceed its discretion in granting the
Cottonwood Defendants’ motion to dismiss for failure to
prosecute, we affirm.

                         BACKGROUND

¶2     In 2008, Plaintiffs, along with several other entities,
acquired tenant-in-common interests in a South Carolina
apartment complex (the Property). In 2011, to facilitate a refinance
of their purchase money loan, the various tenants in common
“rolled up” their interests in the Property by exchanging them for
membership interests in a new entity called Plantations at
Haywood M, LLC (Plantations). They also entered into an
operating agreement (the Operating Agreement) to govern
Plantations. In 2012, the Cottonwood Defendants acquired
contract rights to manage the Property.

¶3     In 2016, Plaintiffs sued numerous defendants in California,
alleging that the defendants had conspired to fraudulently induce
the tenants in common to roll up their interests into Plantations.
The Cottonwood Defendants were named in that suit, and the
causes of action pleaded against them included breach of the
Operating Agreement, breach of the covenant of good faith and
fair dealing, breach of fiduciary duty, constructive fraud, fraud
and deceit, negligent misrepresentation, and negligence. A few
months after the suit was filed, the California Superior Court

 20210498-CA                     2                 2023 UT App 7
               Plantations v. Cottonwood Residential

dismissed the Cottonwood Defendants from the suit for lack of
personal jurisdiction.

¶4     Approximately a year later, Plaintiffs refiled their
complaint against the Cottonwood Defendants in Utah. The
Cottonwood Defendants filed a motion to dismiss, which District
Judge Su Chon granted in part and denied in part, leaving only
Plaintiffs’ claims for breach of the Operating Agreement and
breach of the covenant of good faith and fair dealing.

¶5     Plaintiffs then filed a motion to stay the Utah action
pending the outcome of the litigation against the other defendants
in California. This motion was never submitted for decision, and
a Notice of Events Due Dates setting the fact discovery deadline
for January 15, 2019, was entered. The Cottonwood Defendants
attempted to move forward with discovery but allegedly
struggled to obtain responses from Plaintiffs.

¶6     In November 2018, some of the defendants in the
California action (the Debtor Defendants) filed for bankruptcy in
Florida. Once that occurred, Plaintiffs filed a notice of stay in the
Utah case, asserting that the bankruptcy proceedings
automatically stayed the Utah litigation. In December, the
Cottonwood Defendants moved to strike the notice on the ground
that they were not debtors in the bankruptcy.

¶7     Neither party took further action in the case, and in August
2019, Judge Chon issued a Notice of Intent to Dismiss stating that
“due to inactivity,” the matter “may be dismissed for lack of
prosecution pursuant to Rule 4-103, Code of Judicial
Administration[,] [u]nless a written statement is received by the
court within 20 days of this notice showing good cause why this
should not be dismissed.” Plaintiffs did not respond to the Notice,
allegedly because their local Utah counsel did not forward it to
their California counsel. In October 2019, Judge Chon dismissed
the remaining claims without prejudice for failure to prosecute.

 20210498-CA                     3                  2023 UT App 7
               Plantations v. Cottonwood Residential

¶8      Plaintiffs did not file a motion to set aside Judge Chon’s
dismissal, attempt to amend their complaint, or otherwise
complain about the lack of notice of the court’s intention to
dismiss. Instead, they waited until May 2020 to refile their
complaint. The newly filed case was assigned to District Judge
Todd M. Shaughnessy. In addition to the claims for breach of
contract and breach of the covenant of good faith and fair dealing,
the refiled complaint realleged all the causes of action that Judge
Chon had previously dismissed. After filing this third complaint,
Plaintiffs then waited another four months to serve the
Cottonwood Defendants. Plaintiffs took no further action to move
the refiled case forward.

¶9     In the meantime, the Cottonwood Defendants had become
a plan sponsor for the Debtor Defendants in their Florida
bankruptcy case and had negotiated a settlement with the
bankruptcy trustee that, if adopted, would include “a bar order
prohibiting all present and future litigation arising out [of] or
related to the debtors.” However, the settlement reached with the
trustee was ultimately not approved by the bankruptcy court.
Though it expressed sympathy for what it characterized as
“relentless, or perhaps even vexatious litigation” by Plaintiffs, the
court rejected the settlement at a December 2020 hearing in which
it concluded the case did not meet the high standard required for
a bar order.

¶10 In January 2021, the Cottonwood Defendants filed two
motions to dismiss the refiled Utah case. The first requested
dismissal of the complaint for failure to prosecute under rule 41(b)
of the Utah Rules of Civil Procedure (the Rule 41(b) Motion), and
the second requested dismissal of the complaint for failure to state
a claim under rule 12(b)(6) of the Utah Rules of Civil Procedure
on various grounds including the expiration of the statute of
limitations (the Rule 12(b)(6) Motion).

 20210498-CA                     4                  2023 UT App 7
                Plantations v. Cottonwood Residential

¶11 Plaintiffs did not file a written response to the Rule 41(b)
Motion, 1 but they opposed the Rule 12(b)(6) Motion, raising
arguments regarding the appropriate choice of law with respect
to the statute of limitations as well as the applicability of the Utah
savings statute. At no point in either their pleadings or at oral
argument did Plaintiffs assert that the ongoing Florida
bankruptcy negotiations justified their lack of action in the Utah
case.

¶12 Judge Shaughnessy granted both motions to dismiss with
prejudice. He granted the Rule 12(b)(6) Motion based on his
conclusion that the refiled complaint was barred by the Delaware
statute of limitations—which he found to be the statute applicable
to the claims at issue—and that the Utah savings statute did not
apply. Judge Shaughnessy also granted the Rule 41(b) Motion as
“an independent basis for dismissing the claims in this case.”

¶13    Plaintiffs now appeal.

              ISSUE AND STANDARD OF REVIEW

¶14 Plaintiffs challenge the district court’s ruling with respect
to the Rule 12(b)(6) Motion and the Rule 41(b) Motion. However,
as we ultimately affirm the district court’s ruling on the Rule 41(b)
Motion, which was an “independent basis” for dismissal, we need
not address the propriety of the district court’s grant of the Rule
12(b)(6) Motion. “[W]e review for abuse of discretion the trial
court’s decision to dismiss for failure to prosecute.” Cheek v. Clay
Bulloch Constr., Inc., 2011 UT App 418, ¶ 6, 269 P.3d 964.

1. Plaintiffs allege on appeal that, as with Judge Chon’s Notice of
Intent to Dismiss, their California counsel did not receive the Rule
41(b) Motion. However, they took no steps in the district court to
rectify this alleged error, such as asking for more time to respond
or moving to set aside the court’s ruling on the Rule 41(b) Motion.

 20210498-CA                      5                 2023 UT App 7
               Plantations v. Cottonwood Residential

                            ANALYSIS

¶15 Rule 41(b) of the Utah Rules of Civil Procedure provides,
“If the plaintiff fails to prosecute or to comply with these rules or
any court order, a defendant may move to dismiss the action or
any claim against it.” Utah R. Civ. P. 41(b). In determining
whether a district court has exceeded its discretion by dismissing
a case for failure to prosecute, we consider “(1) the conduct of both
parties; (2) the opportunity each party has had to move the case
forward; (3) what each party has done to move the case forward;
(4) the amount of difficulty or prejudice that may have been
caused to the other side; and (5) most important, whether injustice
may result from the dismissal.” Cheek v. Clay Bulloch Constr., Inc.,
2011 UT App 418, ¶ 7, 269 P.3d 964 (quotation simplified). The
burden is on the party “attacking a dismissal for failure to
prosecute [to] offer a reasonable excuse for its lack of diligence.”
Meadow Fresh Farms, Inc. v. Utah State Univ., 813 P.2d 1216, 1218
(Utah Ct. App. 1991).

¶16 The court made the following findings with respect to the
failure-to-prosecute factors:

   •   Conduct of both parties: “[T]he record shows that [Plaintiffs
       have] not been diligent, and [have] offered no convincing
       reasons for the various delays in the case. The
       [Cottonwood Defendants], on the other hand, [have] been
       diligent in prosecuting the case.”

   •   Opportunity to move the case forward: “[I]t’s clear from the
       record that [Plaintiffs] had a full and fair opportunity to
       move the case forward, in particular during the time that
       that case was pending before Judge Chon.”

   •   What each side has done to move the case forward: “[Plaintiffs
       have] done little to nothing to move the case forward in the
       years in which it has been pending; and again, the
       [Cottonwood Defendants have] been diligent.”

 20210498-CA                     6                  2023 UT App 7
                Plantations v. Cottonwood Residential

   •   Difficulty or prejudice to the defendant: “[T]he parties have
       been litigating this case for around five years. The events
       in question occurred a decade ago. The evidentiary record
       in this case is undoubtedly cold. The recollections will have
       faded, . . . relevant documents are likely gone forever. Also
       . . . [the Cottonwood Defendants have] been required to
       expend [substantial sums] in attorney’s fees to defend
       [themselves] against claims that despite the length of time
       in which they have been pending, have so far never gotten
       out of the starting gate.”

   •   Injustice to the plaintiff: “[T]here’s no injustice to [Plaintiffs]
       because [Plaintiffs] had a full and fair opportunity to
       litigate these claims.”

¶17 On appeal, Plaintiffs challenge these findings on the basis
that the court failed to take into account the Cottonwood
Defendants’ “obstructionist efforts” to seek a bar order in the
Florida bankruptcy that would prevent Plaintiffs from pursuing
their claims against the Cottonwood Defendants in the Utah case.
Plaintiffs assert that had the Cottonwood Defendants been
successful in obtaining the Florida bankruptcy court’s approval of
their settlement agreement with the bankruptcy trustee, it would
have made all Plaintiffs’ efforts to prosecute the Utah case moot.
And for this reason, they assert they were justified in delaying
prosecution of their Utah claims until the issues in the Florida
bankruptcy could be resolved.

¶18 But Plaintiffs never raised this argument to the district
court. In fact, they never filed a written response to the Rule 41(b)
Motion at all. We generally consider it “unfair to reverse a district
court for a reason presented first on appeal.” Patterson v. Patterson,
2011 UT 68, ¶ 16, 266 P.3d 828. “Under our adversary system, the
responsibility for detecting error is on the party asserting it, not
on the court.” Id. Because Plaintiffs did not provide the district
court with any justification for their delays, let alone the

 20210498-CA                        7                  2023 UT App 7
                Plantations v. Cottonwood Residential

justifications they now assert on appeal, we decline to reverse the
district court’s ruling on the basis of their new arguments
regarding the Florida litigation.

¶19 But even if we were to consider Plaintiffs’ arguments, we
are not convinced that the district court exceeded its discretion in
granting the dismissal here. There is nothing about the Florida
bankruptcy proceedings that actively prevented Plaintiffs from
pursuing litigation in Utah. And if they believed that the Florida
case might render their efforts in the Utah case moot, they should
have taken steps to formally delay the Utah litigation rather than
simply neglect it. But they did not request a stay of this action
pending the outcome of the Florida bankruptcy; they appear to
have dragged their feet on discovery in the initial case before
Judge Chon even before the Florida bankruptcy was filed; they
took no steps to avoid having their previous case dismissed by
Judge Chon or to set aside the dismissal after it occurred; and they
waited seven months to refile their claim after it was dismissed,
waited another four months to serve the Cottonwood Defendants
with the claim, and then took no further action until the
Cottonwood Defendants filed their motions to dismiss. The
Cottonwood Defendants, on the other hand, made initial efforts
to conduct discovery and stopped working to move the case
forward only after Plaintiffs resisted their discovery attempts.
And ultimately, the Cottonwood Defendants did not have the
same responsibility to move the case forward that Plaintiffs had.
See Cheek, 2011 UT App 418, ¶ 8 (“[T]he plaintiff bears the primary
responsibility for advancing the case and . . . the defendant’s
responsibility in this area is limited . . . to responding timely to the
action, expeditiously attending to discovery, and moving any
counterclaim along. The defendant has no general responsibility
to move [the] plaintiff’s action to judgment.” (quotation
simplified)). Given the length of time this case has been pending
and Plaintiffs’ complete lack of effort to move it forward, we do
not believe the district court abused its discretion in dismissing
the case for lack of prosecution.

 20210498-CA                       8                  2023 UT App 7
               Plantations v. Cottonwood Residential

                          CONCLUSION

¶20 Because Plaintiffs presented the district court with no
justification for their delays in prosecuting their case, we conclude
that the district court did not exceed its discretion in dismissing
their claims under rule 41(b) of the Utah Rules of Civil Procedure.
Accordingly, we affirm and award the Cottonwood Defendants
their costs on appeal.

 20210498-CA                     9                  2023 UT App 7
                              CERTIFICATE OF MAILING

I hereby certify that on the 20th day of January, 2023, a true and correct copy of the
attached OPINION was sent by standard or electronic mail to be delivered to:

ERIC V ANDERTON
CATANZARITE LAW FIRM
eanderton@catanzarite.com

SEAN N EGAN
ATTORNEY AT LAW
SEANNEGAN@SNEGANLAW.COM

MATTHEW L. LALLI
SARAH ANNE HAFEN
SNELL & WILMER LLP
MLALLI@SWLAW.COM
SAHAFEN@SWLAW.COM

HENRY H OH
SHUMENER ODSON & OH LLP
hoh@soollp.com

HONORABLE TODD M. SHAUGHNESSY
THIRD DISTRICT, SALT LAKE

THIRD DISTRICT, SALT LAKE
ATTN: CHERYL AIONO
cheryla@utcourts.gov

TRIAL COURT: THIRD DISTRICT, SALT LAKE, 200903397
APPEALS CASE NO.: 20210498-CA