World Enterprises et al v. Aquila et al
MEMORANDUM DECISION AND ORDER granting 11 Motion to Dismiss (treated as a Motion for Summary Judgment). Signed by Judge David Nuffer on 8/28/13 (alt)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRALCENTRAL DIVISION
WORLD ENTERPRISES; ABM, INC.;
SECURITY FUNDING, INC.; STANDARD
INDUSTRIES, INC.; C.O.P. COAL
MEMORANDUM DECISION AND ORDER
GRANTING SUMMARY JUDGMENT
Case No. 2:12-cv-00021-DN
AQUILA, INC., d/b/a KANSAS CITY
POWER AND LIGHT COMPANY and/or
KCP&L; GREAT PLAINS ENERGY
INCORPORATED; CHRISTOPHER (CHRIS)
M. REITZ; DOES 1 through 20,
District Judge David Nuffer
TABLE OF CONTENTS
Introduction ..................................................................................................................................... 2
Standard of Review ......................................................................................................................... 3
Undisputed Facts ............................................................................................................................. 3
Disputed Facts ................................................................................................................................. 9
Conversion ........................................................................................................................ 11
Abuse of Process ............................................................................................................... 14
Improper purpose .................................................................................................. 14
Standing ................................................................................................................ 17
Intentional Interference with Economic Relations ........................................................... 18
The Element of Intent to Interfere ........................................................................ 18
The Element of Improper Purpose or Improper Means ........................................ 19
Stay of Judgment Unnecessary to Preserve Claims Pending Appeal ............................... 23
Order ........................................................................................................................................... 25
On July 16, 2012, Plaintiffs filed an Amended Complaint 1 making three claims:
conversion, 2 abuse of process, 3 and intentional interference with economic relations. 4 On July
19, 2012, Aquila Inc. filed a motion to dismiss 5 on the basis of res judicata. The court entered an
order 6 stating that the defendant’s motion to dismiss would be treated as one for summary
judgment under Rule 56 of the Federal Rules of Civil Procedure, pursuant to Rule 12(d). This
case arises from and is related to ongoing litigation in In re C.W. Mining Co. (the Bankruptcy
Case) 7 and its associated adversary proceedings.
The memoranda and evidentiary materials submitted by the parties have been carefully
reviewed. Because the issue of Plaintiffs’ security interest has been litigated in In re C.W.
Mining Co. and specifically in the related Adversary Proceeding 09-02047, 8 issue preclusion
prevents continued litigation of Plaintiffs’ security interest here, and therefore Plaintiffs’ claim
for conversion must fail. Furthermore, Plaintiffs have failed to provide evidence of more than
aggressive tactics by Aquila, and their claims of abuse of process and intentional interference
also fail. Therefore, Aquila’s motion to dismiss, treated as a motion for summary judgment, is
Amended Complaint, docket no. 10, filed July 16, 2012.
Id. at 9.
Id. at 10.
Id. at 14.
Aquila’s Motion to Dismiss First Amended Complaint with Prejudice (Motion to Dismiss), docket no. 11, filed
July 19, 2012.
Order taking under Advisement Motion to Dismiss, docket no. 15, filed Oct. 27, 2012.
In re C.W. Mining Company, Case No. 08-20105 (Bankr. D.Utah).
In re C.W. Mining Company, Case No. 08-20105, Adversary Proceeding 09-02047 (Bankr. D.Utah) (Adversary
STANDARD OF REVIEW
The court “shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 9 In
applying this standard, the court must “view the evidence and draw all reasonable inferences
therefrom in the light most favorable to the party opposing summary judgment.” 10 However,
“the nonmoving party must present more than a scintilla of evidence in favor of his position.” 11
A dispute is genuine only “if the evidence is such that a reasonable jury could return a verdict for
the nonmoving party.” 12
C.W. Mining Company (CWM) was the operator of the Bear Canyon Mine in
Emery County, Utah, owned by Plaintiff C.O.P. Coal Development Company, a Utah
corporation (COP). 13
COP leased the Bear Canyon Mine mineral rights to CWM under terms requiring
CWM to pay COP royalties for the coal CWM produced. 14
Plaintiffs World Enterprises, ABM, and Security Funding are all Nevada
corporations with principal places of business in Utah. 15
Fed. R. Civ. P. 56(a).
Anderson v. Liberty Lobby, Inc., 447 U.S. 242, 248 (1986); Kerber v. Qwest Group Life Ins. Plan, 647 F.3d 950,
959 (10th Cir. 2011).
Ford v. Pryor, 552 F.3d 1174, 1178 (10th Cir. 2008).
Anderson, 447 U.S. at 248.
Amended Complaint ¶¶ 5, 13.
Id. ¶ 13.
Id. ¶¶ 1–3.
These plaintiffs are creditors of CWM, having loaned CWM money to implement
major capital improvements. 16
Plaintiff Standard Industries, Inc. (Standard) is a Nevada Corporation with its
principal place of business in Utah. 17
Standard made written and oral agreements with CWM to buy and pay in advance
for coal that CWM had not yet produced as another means for CWM to raise money. 18
Standard also served as CWM’s exclusive broker for coal, and CWM had
assigned to Standard all amounts payable to CWM for the sale of coal. 19
As security for its debts, CWM granted all of the plaintiffs (COP, World
Enterprises, ABM, Security Funding, and Standard) (Creditors) a security interest in all of
CWM’s assets, supposedly perfected by the filing of UCC-1 financing statements with the Utah
Division of Corporations and Uniform Commercial Code. 20
In the later Adversary Proceeding No. 09-02047, the bankruptcy court found that
the UCC-1 financing statements were improperly executed, leaving Creditors without a security
Id. ¶ 14.
Id. ¶ 4.
Id. ¶ 14.
Id. ¶ 15.
Id. ¶ 16.
Memorandum Decision Granting in Part and Denying in Part Trustee’s Motion for Partial Summary Judgment as
to UEI Receivable and Avoidance of Liens (Order in Adversary Proceeding 09-02047) at 15, in Adversary
Proceeding 09-02047, document no. 194, filed Aug. 24, 2009.
CWM’s debts to Creditors include at least the following: greater than $6 million
to World Enterprises, greater than $5 million to ABM, greater than $3 million to Security
Funding, greater than $10 million to Standard, and greater than $4 million to COP. 22
Aquila is a Delaware corporation with its principal place of business in Kansas
City, Missouri, providing utility service to several central states. 23
On September 16, 2003, Aquila contracted with CWM to buy coal for two of its
coal-fired power plants in Missouri. 24
During the performance of this contract, CWM failed to deliver the required
quantity and quality of coal. 25
Aquila sued CWM for damages on this breach of contract in the district of Utah,
and on October 30, 2007, Judge Campbell ordered judgment for Aquila in the amount of
$24,841,988 (the 2005 Case). 26
Aquila’s judgment award against CWM was affirmed by the Tenth Circuit. 27
To collect its judgment, Aquila garnished CWM bank accounts and served writs
of garnishment on companies with coal purchasing contracts with CWM, including Tennessee
Valley Authority (TVA) and UtanAmerian Energy, Inc. (UEI). 28
Amended Complaint ¶ 17.
Id. ¶ 6.
Amended Findings of Fact and Conclusion of Law at 2, in Aquila, Inc. v. C.W. Mining Co., Case No. 2:05-cv-555
TC (the 2005 Case), document no. 115, filed Oct. 30, 2007.
Id. at 15; Memorandum in Support of Aquila’s Motion to Dismiss First Amended Complaint with Prejudice
(Memorandum in Support) at 5, docket no. 12, filed July 19, 2012; Judgment in the 2005 Case, document no. 116,
filed Oct. 30, 2007; also attached as exhibit A to Memorandum in Support, docket no. 12-1; Amended Complaint ¶
Aquila, Inc. v. C.W. Mining Co., 545 F.3d 1258, 1269 (10th Cir. 2008).
Amended Complaint ¶¶ 20–22.
CWM’s contract with UEI acknowledged that UEI should pay Standard. 29
Standard alleges that it had already paid CWM for the coal sold to UEI and that
CWM had assigned the proceeds to Standard. 30
On January 3, 2008, Defendant Christopher M. Reitz, general counsel and senior
vice president of Aquila, came to Utah for settlement discussions with CWM, and Creditors
attended the discussions. 31
CWM requested leniency in Aquila’s judgment collection so that CMW would
have the needed funds to make its longwall mining system fully operational, giving CWM the
ability to pay Aquila in full. 32
Reitz explained that collecting the judgment was not Aquila’s goal, and neither
the cost nor CWM’s potential failure was an important consideration for Aquila. 33
Defendant Reitz stated that Aquila’s shareholders “had already been made whole
through a rate adjustment that would pay Aquila the amount of its judgment against CWM.” 34
Furthermore, Defendant Reitz stated that Aquila’s purpose was “looking
aggressive in the eyes of its shareholders and the Public Service Commission.” 35
Defendant Reitz demanded that part of the coal sale proceeds from TVA be paid
to Aquila as a condition for Aquila’s cooperation in releasing the writs of garnishment. 36
Id. ¶ 22.
Id. ¶ 24.
Id. ¶ 25.
Id. ¶ 26.
Id. ¶ 27.
Standard claims ownership of the coal sale proceeds from TVA. 37
Mr. Reitz demanded that CWM’s other creditors pay substantial amounts to
Aquila on its judgment against CWM as a condition for Aquila’s release of its writs of
The parties attempted but failed to negotiate terms under which Aquila would
release its writs of garnishment and return the garnished funds. 39
On January 8, 2008, Aquila took part in filing an involuntary Chapter 11
bankruptcy petition against CWM.40
The Bankruptcy Court entered an order for relief on the involuntary bankruptcy
petitions pursuant to Aquila’s motion for summary judgment. 41
The Bankruptcy Appellate Panel affirmed the bankruptcy court’s ruling; 42 the
Tenth Circuit reviewed the matter and remanded the case with instructions to dismiss the
appeal; 43 and the United States Supreme Court denied a petition for a writ of certiorari. 44
Amended Complaint ¶ 28. See Notice of Involuntary Bankruptcy Case Against C.W. Mining Company by Aquila
in the 2005 Case, document no. 171, filed Jan. 10, 2008.
See Order Granting Motion for Partial Summary Judgment, filed in the Bankruptcy Case as document no. 192,
Sep. 17, 2008.
C.W. Mining Co. v. Aquila, Inc. (In re C.W. Mining Co.), 636 F.3d 1257, 1259 (10th Cir. 2011) (stating that the
Bankruptcy Appellate Panel had affirmed).
Id. at 1266.
C.W. Mining Co. v. Aquila, Inc., 132 S.Ct. 104 (2011).
After the bankruptcy filing, Standard asked the court, in the 2005 case, to quash
Aquila’s writs of garnishment. 45 The court ruled that the Bankruptcy Court was “the proper
forum for the relief sought” by Standard. 46
Standard’s first invoice under the UEI contract was not due until January 27,
2008, nearly three weeks after the filing of the involuntary bankruptcy, 47 but Aquila garnished
CWM’s UEI receivable bank account on January 2, 2008, 48 taking $275,000. 49
UEI filed an interpleader action in the Bankruptcy Case, seeking a declaration as
to who was entitled to the funds owed by UEI, 50 and the Bankruptcy Court ruled that the funds
should be paid to the estate of the Debtor, and ordered that the interpleaded funds be paid to the
The bankruptcy proceeding caused CWM to default on its obligations to Creditors
because CWM was unable to continue mining operations and eventually went out of business. 52
Creditors state an entitlement to relief from Aquila in “an aggregate amount
exceeding $29 million, plus late fees, penalties, collection costs and interest pursuant to
Memorandum in Support at 6; Motion to Quash Garnishments, filed in the 2005 Case as document no. 162, Jan. 7,
2008. Judge Nuffer was the referred magistrate judge on the 2005 case.
Memorandum in Support at 6; Order Taking Under Advisement Motion to Quash Garnishments and Motion to
Quash Subpoena in the 2005 case, document no. 174, filed Jan. 14, 2008; also attached as exhibit C to Memorandum
in Support, docket no. 12-3, filed July 19, 2012.
Amended Complaint ¶ 30.
Id. ¶ 22.
Id. ¶ 30.
Memorandum in Support at 7.
Id. See also Order: (1) Certifying Avoidance Order as a Final Judgment Under Fed. R. Bankr. P. 7054 and Fed. R.
Civ. P. 54(b) and (2) Ordering Court Clerk to Pay UEI Receivable Proceeds to Trustee without Delay, in Adversary
Proceeding 09-02047, document no. 238, filed July 2, 2010; also attached as exhibit E to Memorandum in Support,
docket no. 12-5, filed July 19, 2012..
Amended Complaint ¶¶ 37, 69.
[Creditors]’ various contracts,” 53 while Standard claims entitlement “in an amount equal to all
lost future profits Standard would have made form brokering coal mined by CWM, in an amount
that has not been fully calculated but whose present value is presently believed to exceed $50
There are two potentially disputed facts, but they are not material. First, the complaint
alleges “Aquila violated the automatic stay by refusing to return any garnished property, by
refusing to release its writs, and by using the writs to exercise control over property and interests
subject to the automatic stay.” 55 However, in its Motion to Dismiss, Aquila stated that it timely
turned over all garnished funds in its possession to Kenneth A. Rushton, the Chapter 7 Trustee in
the Bankruptcy Case. 56
The parties appear to discuss two distinctly different time frames. Creditors aver in the
complaint that Aquila did not return funds to them upon demand, which is true, and Aquila
points out that it did return the garnished funds to the debtor’s trustee during the resolution of the
involuntary bankruptcy. The discrepancy merely reveals the issue of property interest in these
funds, an issue that was resolved by the bankruptcy court. Aquila was not required to return
garnished funds to Creditors before the bankruptcy court decided which parties owned the
property interests. Therefore this potentially disputed fact is not material.
Id. ¶ 71.
Id. ¶ 72.
Amended Complaint ¶ 34.
Reply Memorandum in Support of Aquila’s Motion to Dismiss First Amended Complaint with Prejudice (Reply
Memorandum in Support) at 4, docket no. 14, filed Aug. 10, 2012.
Second, in regard to the UEI proceeds, Creditors state that “Aquila refused to allow the
UEI proceeds to be paid directly to CWM,” 57 and “on information and belief, Aquila would
agree only that the fun[d]s be paid not to CWM, but to the Clerk of Court.” 58 Aquila responds
that it attempted to have the funds from the Bank of Utah account be paid to the debtor, but
Creditors objected. 59 The minute entry for that hearing supports Aquila’s account:
Mr. Kelly [representing Aquila] also moved that the current garnished funds be
paid to CW Mining or to the attorney of CW Mining to avoid business closure.
Discussion heard on the TVA garnishment(s) and responses. Mr. Hansen
[representing Standard] responded, stating the objection for the record. 60
Creditors’ allegation that Aquila refused to return the UEI funds to the debtor is not supported.
Creditors objected to an attempt to make the return they now complain never occurred.
Although, the parties’ dispute this fact in their filings, the record in the 2005 Case is clear.
Creditors have asserted three claims in their Amended Complaint against Aquila, Inc. for
its actions subsequent to an involuntary bankruptcy against debtor and contractor C.W. Mining
Company: conversion, 61 abuse of process, 62 and intentional interference with economic
relations. 63 All claims arise out of Aquila’s garnishment of the debtor’s funds and other assets
Amended Complaint ¶ 32.
Id. ¶ 36.
Memorandum in Support at 6.
Minute Entry for Proceedings Held Before Magistrate Judge David Nuffer, in the 2005 Case, document no. 160,
filed Jan. 30, 2008; also attached as exhibit B to Memorandum in Support, docket no. 12-2, filed July 19, 2012.
Amended Complaint at 9–10.
Id. at 10–14.
Id. at 14–15.
after the filing of involuntary bankruptcy as Aquila sought to collect a $24 million judgment for
breach of contract obtained before the filing of involuntary bankruptcy.
Aquila seeks summary judgment, asserting that Creditors’ claims are barred by the
doctrine of res judicata, having already been decided by other courts. There is no dispute that
other courts have or are currently considering issues relevant to this case. This supports Aquila’s
argument. However, Creditors argue that these claims have not been fully litigated and that the
decisions of other courts are not yet final while they are under appellate review, and therefore,
summary judgment is not proper.
Creditors’ first claim against Aquila is conversion. 64 Under Utah law conversion “‘is an
act of willful interference with a chattel, done without lawful justification by which the person
entitled thereto is deprived of its use and possession.’” 65 Creditors assert that Aquila used writs
of garnishment to tie up coal sale proceeds to which CWM and or Standard had right of
immediate possession, in violation of the automatic bankruptcy stay, 66 and that Aquila’s
garnishment of $275,000 from CWM’s UEI receivable bank account constitutes a conversion of
Standard’s property interest in the UEI proceeds. 67 However, the bankruptcy court already
decided this issue on February 2, 2010 when it ruled that “any proceeds from the sale of Postpetition Coal mined by the Debtor are free and clear of any security interest claimed by Standard
or the other Lenders.” 68
Amended Complaint at 9–10.
Mumford v. ITT Commercial Fin. Corp., 858 P.2d 1041, 1045 n.5 (Utah Ct. App. 1993) (quoting Allred v.
Hinckley, 328 P.2d 726 (Utah 1958)).
Amended Complaint ¶ 40.
Id. ¶¶ 39, 42.
Order in Adversary Proceeding No. 09-02047 at 6.
Creditors appealed the bankruptcy ruling to the district court before Judge Stewart. 69 On
March 8, 2013, Judge Stewart affirmed the bankruptcy court in the Bankruptcy Appeal, finding
that Creditors had not perfected a security interest in the UEI funds. 70 Judge Stewart reversed
and remanded the bankruptcy court’s determination on other grounds, 71 but the district court’s
decision provides another final ruling on the salient issues in this case, again barring Creditors’
claims. However, Creditors filed an appeal with the Tenth Circuit on April 11, 2013, 72 and
CWM’s trustee filed a cross appeal on April 25, 2013. 73
Aquila argues that the bankruptcy court ruling is final and res judicata applies to bar
relitigation of those claims, regardless of the pendency of an appeal. 74 Creditors originally
argued that “numerous Courts around the country have held that res judicata does not apply until
the appeal has been adjudicated.” 75 Creditors “encourage the Court to adopt the better reasoned
approach adopted by [those courts]. Applying res judicata, in this case, while appeals are
pending, could potential[ly] foreclose [Creditors]’ legitimate claims.” 76
Standard Indus. v. ANR, Case No. 2:10-cv-00271-TS (the Bankruptcy Appeal).
Memorandum Decision and Order on Combined Appeal, filed in the Bankruptcy Appeal as document no. 47, Mar.
USCA case no. 13-4075. See Notice of Appeal, filed in the Bankruptcy Appeal as document no. 49, Apr. 11,
Notice of Cross Appeal, filed in the Bankruptcy Appeal as document no. 53, Apr. 25, 2013.
Memorandum in Support at 11.
Supplemental Memorandum in Opposition to Aquila’s Motion to Dismiss (Supplemental Memorandum in
Opposition) at 4–5, docket no. 16, filed Nov. 9, 2012 (citing In re Med. Educ. & Health Servs., Inc., 474 B.R. 44
(D.P.R. 2012) (finding that a Court decision does not constitute res judicata until the appeal process is final and
unappealable)); Caperton v. A.T. Massey Coal Co., Inc., 679 S.E.2d 223 (W.Va. 2008) (explaining that under
Virginia law, a judgment is not final for the purposes of res judicata when it is being appealed, or when the time
limits fixed for perfecting the appeal have not expired).
Supplemental Memorandum in Opposition at 4–5.
Creditors’ argument concerning the application of res judicata during the pendency of
appeal is therefore not per se mooted. However, Creditor’ cited cases from the district court in
Puerto Rico and the state court in West Virginia do not constitute a “better reasoned approach”
by “numerous courts around the country” as Creditors suggest. 77 The cases cited relied on
Puerto Rico and West Virginia law, not on federal law.
The Sixth and Ninth Circuits hold that an order retains full res judicata effect unless and
until it is overturned on appeal. 78 The Federal Circuit has described a “vast weight of case law”
including “case law from the Supreme Court and from the Second, Fifth, Sixth, Seventh, Ninth,
Eleventh, District of Columbia and Federal circuits for the proposition that a final judgment
retains its preclusive effect despite the pendency of an appeal.” 79 Specifically governing this
court, the Tenth Circuit held in Phelps v. Hamilton 80 that an “established rule in federal courts is
that a final judgment retains all of its res judicata consequences pending decision of the
The ownership of coal and coal proceeds in this case has already been decided by the
bankruptcy court, and that decision was affirmed on appeal to the district court since the filing of
these motions. Those rulings are final until they are modified on direct appeal. Res judicata bars
Creditors from re-litigating the fact that they have no proprietorship interest in the proceeds in
See, e.g., Erebia v. Chrysler Plastics Prods. Corp., 891 F.2d 1212, 1215 n.1 (6th Cir. 1989) (“[T]he established
rule in the federal courts is that a final judgment retains all of its preclusive effect pending appeal.”); Robi v. Five
Platters, Inc., 838 F.2d 318, 327 (9th Cir. 1988) (the preclusive effects of a judgment are not suspended by taking an
Pharmacia & Upjohn Co. v. Mylan Pharms., Inc., 170 F.3d 1373, 1381 (Fed. Cir. 1999) (citing SSIH Equipment
S.A. v. United States Int’l Trade Comm’n, 718 F.2d 365, 370 (Fed. Cir. 1983)).
122 F.3d 1309 (10th Cir. 1997).
Id. at 1318.
question, and they cannot satisfy the entitlement element of a conversion claim. Creditors’ claim
for conversion fails and Aquila is entitled to judgment as a matter of law.
Abuse of Process
Creditors’ second claim for relief is abuse of process. 82 “A claim for abuse of process
requires the plaintiff to show (1) that the defendant used legal process, (2) to accomplish an
improper purpose or purpose for which that process was not designed, (3) causing the plaintiff’s
harm.” 83 The use of legal process is not in doubt here, but Creditors have failed to allege
sufficient facts to meet the requirement “to produce evidence that the defendant’s action caused
injury to the plaintiff.” 84 Furthermore, that causal relationship is too attenuated or incidental
even if facts alleged had been sufficient. However, the Creditors’ claim fails on the second
element because they cannot show improper purpose. Creditors are correct that improper
purpose has never been addressed in litigation, 85 so res judicata does not bar this claim.
As proof of Aquila’s alleged improper purpose or purpose for which the legal process
was not designed, Creditors recite the contents of settlement discussions that took place on
January 3, 2008 between CWM, Creditors, and defendant Christopher M. Reitz, general counsel
and senior vice president of Aquila. 86 In these discussions, Reitz explained that Aquila’s goal in
pursuing the CWM’s judgment debt was not just collecting that debt because Aquila’s
Amended Complaint at 10–14.
Mountain West Surgical Ctr., L.L.C. v. Hosp. Corp. of Utah, 173 P.3d 1276, 1278 (Utah 2007).
Memorandum in Opposition to Aquila’s Motion to Dismiss (Memorandum in Opposition) at 8, docket no. 13,
filed Aug. 6, 2012.
Amended Complaint ¶ 24.
shareholders had already recovered the judgment amount through rate adjustments. 87 According
to Creditors, “Reitz stated that Aquila’s purpose was “looking aggressive in the eyes of its
shareholders and the Public Service Commission.” 88
Creditors argue that Aquila’s use of the process of levying writs of garnishment was not
to collect on its judgment against the debtor, but to appear aggressive, 89 and that “demonstrate[s]
that Aquila used the legal process for an improper purpose. 90 Creditors allege that Aquila used
to give Aquila leverage over C.W. Mining and secured creditors to put pressure on
C.W. Mining and secured creditors to pay Aquila money to which Aquila had no
claim, to extort payments to which Aquila was not entitled, to give Aquila more
favorable treatment than Aquila was entitled to as an unsecured creditor, and to make
it impossible for C.W. Mining to implement a workable Chapter 11 reorganization
In response, Aquila argues that these statements cannot form the basis of an abuse of
process claim because “the comments were made in the course of a confidential settlement
negotiation and are inadmissible as evidence in this case.” 92 This is correct. The Federal Rules
of Evidence expressly provide:
(a) Prohibited Uses. Evidence of the following is not admissible – on behalf of
any party – either to prove or disprove the validity or amount of a disputed
claim or to impeach by a prior inconsistent statement or a contradiction:
(1) Furnishing, promising, or offering – or accepting, promising to
accept, or offering to accept – a valuable consideration in
compromising or attempting to compromise the claim; and
(2) Conduct or a statement made during compromise negotiations
about the claim – except when offered in a criminal case and when
Id. ¶¶ 32–33.
Id. ¶ 26.
Memorandum in Opposition at 8.
Id. at 8–9.
Reply Memorandum in Support at 8.
the negotiations related to a claim by a public office in the exercise
of its regulatory, investigative, or enforcement authority. 93
Creditors offer statements from settlement negotiations to support their claims, which is
directly prohibited by the rules of evidence. Creditors carry the burden of proving the elements
of their claims beyond a preponderance of the evidence, and “[Creditors] bear the risk of failing
to prove their claims.” 94 Barred evidence cannot support the claim.
Even assuming, arguendo, that the statements were admitted into evidence and the trier
of fact had the opportunity to consider them, they do not form a basis for a claim of abuse of
process. As Aquila argued, an aggressive position and harsh demands during settlement
negotiations “illustrate at most that Aquila was intent on aggressively collecting its money
despite any impact that its collection efforts might have on the Debtor’s future business.” 95 The
purpose behind Aquila’s actions was to collect its $25 million judgment against CWM.
Creditors do not disagree that Aquila’s goal was collection of its judgment, but they contend that
the underlying motivation behind that purpose wasn’t proper.
A prevailing party is entitled to collect on an awarded judgment. Furthermore, Creditors
cite no authority requiring the court to verify or even consider the virtue of every layer of
motivation underlying Aquila’s purpose of collecting its judgment. Assuming that Aquila’s
motivation was to appear aggressive, it would accomplish that goal by collecting its judgment,
the purpose for Aquila’s actions.
Even if the motivation behind Aquila’s purpose was to put CWM out of business, the
element of improper purpose would still not be satisfied. Indeed, “there is no action for abuse of
Fed. R. Evid. 408(a).
Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 56 (2005).
Memorandum in Support at 13.
process when the process is used for the purpose for which it is intended, but there is an
incidental motive of spite or an ulterior purpose of benefit to the defendant.” 96 Furthermore, the
Utah Supreme Court has agreed with a ruling of this court that “‘even a pure spite motive is not
sufficient to state a claim for abuse of process where process is used only to accomplish the
result for which it was created.’” 97 It is immaterial whether Aquila wanted to collect the
judgment to recuperate funds, appear aggressive, or for any other possible reason. “The fact that
certain consequences flowed from [defendant’s actions] . . . is not sufficient to state a cause of
action for abuse of process.” 98
Aquila claims that Creditors lack standing to argue abuse of process because Aquila did
not owe Creditors or any other party a duty to ensure that C.W. Mining did not go out of
Aquila’s actions were directed toward the Debtor and not Creditors.
Creditors therefore lack standing to pursue an abuse-of-process claim
because any harm to them was merely tangential, and it was no different
than the harm caused to multiple creditors every time a company cannot
pay its bill and goes out of business or into bankruptcy. 100
Creditors do not address this lack of standing argument. This argument is another reason this
Bennett v. Jones, Waldo, Holbrook & McDonough, 70 P.3d 17, 29 (Utah 2003) (quoting Restatement (Second) of
Torts § 682 cmt. b (1977)).
Id. (quoting Keller v. Ray, Quinney & Nebeker, 896 F.Supp. 1563, 1572 (D. Utah 1995)).
Reply Memorandum in Support at 7–8.
Memorandum in Support at 13.
Intentional Interference with Economic Relations
Creditors’ third claim for relief is intentional interference with economic relations. 101
“To establish the tort a plaintiff must prove (1) that the defendant intentionally interfered with
the plaintiff’s existing or potential economic relations, (2) for an improper purpose or by
improper means, (3) causing injury to the plaintiff.” 102
Creditors were injured by the closure of CWM, thereby eliminating the possibility of
payment of the debts owed to them. However, even if the court assumes that all of Creditors’
facts are true, they are not sufficient to prove the elements of the tort. Specifically, those facts do
not establish that Aquila’s use of writs of garnishment against CWM funds or the
commencement of the involuntary bankruptcy (1) reveal an intent to interfere with Creditors’
business relations under the first element of the tort, (2) show Aquila acted with an improper
purpose or that its actions constitute improper means under the second element, or (3) establish
that Aquila’s actions were the cause of Creditors’ injuries under the third element.
The Element of Intent to Interfere
Creditors’ claim of intentional interference with economic relations falters on the first
element because Creditors have not stated facts showing that Aquila intentionally interfered in
Creditors’ economic relations. In Leigh Furniture and Carpet Co. v. Isom, 103 the Utah Supreme
Court held that an accumulation of individual interferences, aimed directly at the plaintiff’s
business, crossed the threshold of tortious conduct, although they would individually be regarded
merely as overly zealous attempts to protect a seller’s contract interest and “none would establish
Amended Complaint at 14–15.
Mountain West Surgical Ctr., L.L.C. 173 P.3d at 1278 (internal quotations omitted).
657 P.2d 293 (Utah 1982).
the intentional interference element of this tort.” 104 In that case, the court described the actions
aggressive or abrasive–though not illegal or tortious–tactics, excesses that occur
in contractual and commercial relationships. But in total and in cumulative effect,
as a course of action extending over a period of three and one-half years and
culminating in the failure of [plaintiff’s] business, [defendant’s] acts cross the
threshold beyond what is incidental and justifiable to what is tortious. 105
In this case, Aquila’s actions had no total or cumulative effect, and they did not extend
over a long period. Creditors state “that Aquila used conversion, abuse of process and violations
of bankruptcy law, including violations of the automatic stay . . . .” 106 The claims for conversion
and abuse of process have been dismissed in this order, and the underlying actions cannot form a
basis for the element of intentional interference with economic relations because they are
singular instances of “aggressive or abrasive–though not illegal or tortious–tactics.” 107 In Leigh
Furniture the defendant individually and directly interfered in repeated events with the plaintiff’s
business for over more than three years. Aquila attempted to collect its judgment debt against a
non-party, CWM, without any direct interference against Creditors, and did not engage in
numerous actions over many years.
The Element of Improper Purpose or Improper Means
Creditors cannot prevail on the second element of the interference claim because they
have not shown that Aquila acted with either improper means or with an improper purpose. 108
“To establish the first alternative, improper purpose, it is not enough to show that the defendant
Id. at 306.
Memorandum in Opposition at 6.
Leigh Furniture and Carpet Co., 657 P.2d at 306.
See Anderson Dev. Co. v. Tobias, 116 P.3d 323, 331 (Utah 2005) (stating only one alternative is required, a
plaintiff need not prove both).
was motivated by ill will toward the plaintiff. Rather, the plaintiff must show that the
defendant's predominant purpose was to injure the plaintiff.” 109 The analysis of improper
purpose under the abuse of process claim in the previous section of this order applies here as
well. Therefore, Creditors’ claim cannot stand on any allegations of improper purpose.
The alternative on this prong of the analysis, improper means, fares no better. To
establish the second alternative, improper means, a plaintiff must show “that the defendant's
means of interference were contrary to statutory, regulatory, or common law or violated an
established standard of a trade or profession.” 110 Creditors allege that Aquila used improper
means by (1) violating the automatic stay in violation of bankruptcy law 111 and (2) improperly
serving writs of garnishment on TVA.
Violation of the Bankruptcy Stay as Improper Means
First, whether Aquila violated the automatic stay is a question for the bankruptcy court in
which Creditors had full opportunity to raise this issue. Because Creditors never raised the issue,
the bankruptcy court made no rulings pertaining to Aquila and the automatic stay, and this court
is not the proper forum to address issues neither party raised during the bankruptcy proceedings.
Earlier in the 2005 case, on Standard’s motion to quash Aquila’s writs of garnishment, the court
told the parties that “the bankruptcy court is the proper forum for the relief sought by the present
motions.” 112 Indeed, other courts have held that “the proper forum for a claim for damages
arising out of an alleged breach of the automatic stay provision is the bankruptcy court, not the
Memorandum in Opposition at 6.
Order Taking Under Advisement Motion to Quash Garnishment and Motion to Quash Subpoena, in the 2005
Case, document no. 174, filed January 14, 2008; also attached as exhibit C to Memorandum in Support, docket no.
12-3, filed July 19, 2012.
district court.” 113 This court has not altered its position, and it is improper for Creditors to file
another lawsuit to claim the same injuries that they were previously instructed to address in the
Creditors stated from the outset that these claims depend on the bankruptcy court’s
rulings pertaining to violations of the automatic stay, but offer no orders or findings from that
court to support their claims. Creditors have not disputed Aquila’s argument that this court is not
the proper forum to determine breach of the bankruptcy stay. Moreover, they admit in the
Amended Complaint that this is not the proper forum to determine whether a party violated the
automatic stay: “While [Creditors] believe that Aquila has violated the automatic stay . . . [they
assert] these claims to preserve such claims in the event that the bankruptcy court finds Aquila
violated the automatic stay related to the conduct asserted herein.” 114
Aquila points out that Standard and COP were held in contempt in the bankruptcy
proceeding for violating the automatic stay. 115 This carries little weight in determining whether
Aquila violated the automatic stay but emphasizes that the bankruptcy court is the proper forum.
Creditors had the opportunity to argue in the bankruptcy court that Aquila violated the automatic
stay when the same was argued against them. Whether Creditors directly assert a claim for a
violation of the stay itself, or assert that a violation of the stay constitutes an improper means
under a tort claim, the underlying question of the violation of the stay is one for the Bankruptcy
See G.B. “Boots Smith” Corp. v. United States, No. 2:05mc113KS-MTP, 2006 WL 2708593, at *2 (S.D. Miss.
Sept. 20, 2006).
Amended Complaint ¶ 68.
See Order of Civil Contempt Against Standard Industries, Inc. and C.O.P. Coal Development Company for
Violations of the Automatic Stay, in the Bankruptcy Case, document no. 98, filed July 23, 2008; also attached as
exhibit A to Reply Memorandum in Support, docket no. 14-1, filed Aug. 10, 2012.
Court, and that court has never held that Aquila violated the automatic stay. 116 Therefore,
Creditors cannot argue that Aquila’s actions in relation to the automatic stay constitute an
improper means without any finding from the Bankruptcy Court that Aquila’s actions violated
Aquila’s Writs of Garnishment as Improper Means
Creditors’ last remaining argument that could satisfy the element of improper means is
the allegation that Aquila improperly served writs of garnishment on (a) the UEI funds and (b)
TVA after the commencement of the involuntary bankruptcy. Aquila responds that both issues
are barred by res judicata.
Aquila’s Writs on the UEI Funds are not Improper Means
Aquila’s writ of garnishment against the UEI funds was adjudicated by the bankruptcy
court in Adversary Proceeding No. 09-02047, and Creditors acknowledge that the decision is
final. 117 The bankruptcy court found that the Creditors had not perfected a security interest in
the UEI funds taken by Aquila, and the funds were paid back to the debtor’s trustee. The
bankruptcy court did not find that Aquila’s writs of garnishment violated bankruptcy law, but it
did not find that Aquila’s wits were proper either. Therefore, Aquila’s uses of writs of
garnishment might constitute “means of interference [that] were contrary to statutory, regulatory,
or common law or violated an established standard of a trade or profession.” 118
However, a claim for interference with economic relations based solely on Aquila’s writ
of garnishment against the UEI funds would fail on the other two elements of the tort. Aquila
See Reply Memorandum in Support at 4–5.
Memorandum in Opposition at 7.
Anderson Dev. Co., 116 P.3d at 331.
was collecting a judgment debt that did not directly involve Creditors. 119 And Aquila did not
injure Creditors with the UEI garnishments because Creditors had no immediate right to the
funds, and because the writs were employed after the commencement of the bankruptcy. The
bankruptcy prevented Creditors from immediately collecting funds even if they had a security
Aquila’s Writs against TVA are not Improper Means
Aquila’s writs of garnishment against TVA have not been as thoroughly addressed by the
Bankruptcy Court as it addressed the UEI funds, and therefore res judicata does not bar litigation
of the issue of the TVA garnishments.
Creditors have offered no set of facts that support a claim that Aquila’s actions regarding
TVA actually injured them, and there is no suggestion that the writs of garnishment were used
with the intention of interfering with Creditors’ economic relations. “TVA did not comply with
the writ of garnishment that was obtained by Aquila from this Court. Rather, the TVA paid
millions of dollars to Standard.” 120 Furthermore, Aquila alleges that “Standard has never
complied with the Bankruptcy Court’s order. Specifically, it has not paid the TVA money to the
bankruptcy estate of C.W. Mining, and it has not provided the Bankruptcy Court and Aquila with
the accounting that the Bankruptcy Court ordered.” 121
Therefore, Aquila is entitled to judgment as a matter of law.
Stay of Judgment Unnecessary to Preserve Claims Pending Appeal
In responding to the original motion to dismiss, Creditors requested that if the court
dismissed their claims, it should dismiss the claims without prejudice allowing the possibility of
See Judgment in the 2005 Case, document no. 116, filed Oct. 20, 2007.
Reply to Supplemental Memorandum at 3, docket no. 17, filed Nov. 19, 2012.
Reply Memorandum in Support at 6.
refilling in the future. 122 Creditors argued that the issue of their security interest was on appeal
before the Tenth Circuit, 123 and a final ruling on that appeal may alter the outcome of Creditors’
claims before this Court.
Creditors explain their filing of these claims before they were fully adjudicated in the
bankruptcy court by arguing that had they waited for final judgment, “Aquila would have surely
argued that [Creditors]’ claims were barred by the applicable statutes of limitation. As such, it
was necessary to file the Complaint in a timely manner.” 124 Creditors state their purpose in
filing these claims now is “to protect and preserve claims, which may or may not be affected by
future court hearings, determinations, and orders . . . [because] Defendants would not agree to a
tolling agreement or other method to hold this case in abeyance pending resolution of the
bankruptcy issues.” 125 Aquila responds that Creditors, disappointed by adverse rulings, are
merely seeking to relitigate in this court issues that have already been decided. 126
This is not a case of simple relitigation but further litigation partially relying on other
issues still pending litigation. There are final judgments that preclude the litigation of some
issues in this case. An appeal could alter the outcome of this case, and given the amounts in
controversy, Creditors may have grounds in the future to prevail on some of their claims. If the
Tenth Circuit reversed lower court rulings, Creditors could move for relief from this grant of
Memorandum in Opposition at 9–10.
Standard Industries et al. v. ANR et al., case no. 13-4055 (10th Cir.) (appeal); Standard Industries et al. v. ANR et
al., case no. 13-4075 (10th Cir.) (cross-appeal by Kenneth Ruston). The Tenth Circuit dismissed the appeal and
cross-appeal for lack of jurisdiction because the district court’s decision ordered a remand to the bankruptcy court
for further proceedings. “In light of the proceedings to be conducted on remand in this matter, the court concludes
that the district court’s decision is not final and appealable.” Order at 3, Mandate of USCA, document no. 60 in the
Bankruptcy Appeal, filed July 22, 2013.
Supplemental Memorandum in Opposition at 5.
Amended Complaint at 2.
Memorandum in Support at 3.
summary judgment pursuant to Federal Rules of Civil Procedure 60(b)(5) which allows for relief
from a judgment “based on an earlier judgment that has been reversed or vacated.” 127 There is
no reason to stay judgment pending appeal.
IT IS HEREBY ORDERED that Aquila’s Motion to Dismiss, 128 treated as a motion for
summary judgment, is GRANTED. The clerk is directed to close this case.
Signed August 28, 2013.
BY THE COURT
District Judge David Nuffer
Fed. R. Civ. P. 60(b)(5).
Motion to Dismiss, docket no. 11, filed July 19, 2012.
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