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Advanced Recovery Systems v. American Agencies

United States Court of Appeals, Tenth Circuit

May 7, 2019

ADVANCED RECOVERY SYSTEMS, a Utah limited liability company, Plaintiff Counterclaim Defendant,
v.
AMERICAN AGENCIES, a Pennsylvania limited liability company, Defendant Counterclaimant Third-Party Plaintiff -Appellee, NRA GROUP, a Pennsylvania limited liability company, a/k/a National Recovery Agency; STEVEN C. KUSIC, CEO/managing member of American Agencies, LLC and/or NRA Group, LLC, and individually, Defendants, BRENT SLOAN, Third-Party Defendant -Appellant, KINUM, INC.; SCOTT MITCHELL; BLAKE REYNOLDS, Third-Party Defendants, and SAJAX SOFTWARE, Third-Party Defendant Counterclaimant.

          Appeal from the United States District Court for the District of Utah (D.C. No. 2:13-CV-00283-DAK-BCW)

          Richard D. Salgado, Dentons U.S. LLP, Dallas, Texas (Kelley C. Cox, Dentons US, Dallas, Texas, and Wade P. K. Carr, Dentons US, Kansas City, Missouri, with him on the briefs), for Third-Party Defendant-Appellant.

          Michael K. Erickson (Carol A. Funk, with him on the brief), Ray Quinney & Nebeker P.C., Salt Lake City, Utah, for Third-Party Plaintiff-Appellee.

          Before BACHARACH, BALDOCK, and PHILLIPS, Circuit Judges.

          BACHARACH, CIRCUIT JUDGE.

         This appeal grew out of Mr. Brent Sloan's participation in two transactions. The first transaction entailed a merger between Advanced Recovery Systems, LLC and Kinum, Inc.;[1] the second transaction consisted of a sale of software from Kinum to Sajax Software, LLC.

         American Agencies, LLC alleged harm from these transactions and sued Mr. Sloan for damages and restitution.[2] After the close of evidence, Mr. Sloan filed a motion for judgment as a matter of law. Following the denial of this motion, a jury found Mr. Sloan liable on American Agencies' claims of tortious interference with business relations, conspiracy to interfere with business relations, tortious interference with contract, copyright infringement, unjust enrichment, and misappropriation of trade secrets.[3] Mr. Sloan unsuccessfully renewed his motion for judgment as a matter of law. After the district court denied this motion, Mr. Sloan appealed. We affirm in part and reverse in part based on four conclusions:

1. On the claims of tortious interference with business relations and conspiracy to interfere with business relations, Mr. Sloan contends that (1) one of American Agencies' theories of improper means is preempted by a Utah statute and (2) American Agencies did not present sufficient evidence of improper means. We disagree because Mr. Sloan did not preserve his preemption argument and the jury could have reasonably found improper means based on deceit. We thus conclude that the district court properly denied Mr. Sloan's motion for judgment as a matter of law on these claims.
2. On the claim of tortious interference with contract, Mr. Sloan argues that the jury instructions erroneously and prejudicially excluded improper means as an element. We agree with Mr. Sloan and reverse the judgment on this claim.[4]
3. On the claim of copyright infringement, Mr. Sloan contends that the jury could not have reasonably found commercial use or regarded the pertinent documents as original. We disagree, concluding that (1) Mr. Sloan did not preserve his commercial-use argument and (2) American Agencies' evidence on originality was sufficient.
4. On the claim of unjust enrichment, Mr. Sloan contends that the jury could not have reasonably inferred the value of a benefit to Mr. Sloan.[5] We agree, so we reverse the denial of Mr. Sloan's motion for judgment as a matter of law on this claim.

         Background

         1. Advanced Recovery Systems enters into a licensing agreement with American Agencies.

         American Agencies is a debt-collection agency that entered into a licensing agreement with Advanced Recovery Systems. Under the licensing agreement, American Agencies enjoyed

• the exclusive right to use certain debt-collection software developed by Advanced Recovery Systems and
• the right of first refusal with respect to any future sale of Advanced Recovery Systems.

         The debt-collection software contained American Agencies' customer data, including a client list, client history, fee structure, and rate of success.

         2. Advanced Recovery Systems merges into Kinum, and Kinum sells the software to Sajax.

         Without American Agencies' knowledge, Advanced Recovery Systems merged into Kinum. See p. 3 n.1, above. Mr. Sloan helped to facilitate the merger and became Kinum's chief executive officer after the merger. As the chief executive officer, Mr. Sloan oversaw Kinum's sale of the debt-collection software to Sajax. With the software came American Agencies' customer data.

         (Image Omitted)

         The Individual Claims and Mr. Sloan's Appellate Arguments

         1. Liability for tortious interference with business relations and conspiracy to interfere with business relations: The evidence adequately supported the jury's findings of liability.

         On the claims of tortious interference with business relations and conspiracy to commit this tort, American Agencies had to prove improper means. Overstock.com, Inc. v. SmartBargains, Inc., 192 P.3d 858, 864 (Utah 2008); see also Puttuck v. Gendron, 199 P.3d 971, 978 (Utah App. 2008) (stating that a claim of civil conspiracy under Utah law requires an underlying tort).[6] American Agencies alleged that Mr. Sloan had used improper means in two ways:

1. using deceit to conceal transfers of the debt-collection software and American Agencies' customer data
2. initiating unfounded litigation against American Agencies.[7]

         Mr. Sloan responds to these allegations by arguing that

• the theory of improper means through deceit is preempted by a Utah statute and
• the evidence did not indicate that the litigation had ...

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