Tops Well Services v. Goodrich Mud Company

2023 UT App 118

THE UTAH COURT OF APPEALS

THE GOODRICH MUD COMPANY, INC. AND MAX FLUID POWER, LLC,
Appellees,
v.
TOPS WELL SERVICES, LLC,
Appellant.

Opinion
No. 20220666-CA
Filed September 28, 2023

Eighth District Court, Vernal Department
The Honorable Gregory Lamb
No. 210800059

Emily Adams and Sara Pfrommer,
Attorneys for Appellant
Matthew M. Boley and Bradley M. Strassberg,
Attorneys for Appellees

JUDGE AMY J. OLIVER authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS concurred.

OLIVER, Judge:

¶1 After TOPS Well Services, LLC (TWS) refused to pay The
Goodrich Mud Company, Inc. (Goodrich) and Max Fluid Power,
LLC (Max Fluid) for sales taxes and products they provided,
Goodrich and Max Fluid filed suit. TWS was properly served
through its registered agent, who timely notified TWS of the
lawsuit by email. But TWS’s employee treated the emails from the
registered agent as spam, and TWS did not respond to the
complaint. Default judgment was entered against TWS, and the
district court denied TWS’s motion to set aside the default because
it determined that TWS did not act with due diligence. TWS
appeals this denial. Because we conclude the district court acted
within its discretion in denying TWS’s motion, we affirm.
Tops Well Services v. Goodrich Mud Company

BACKGROUND

¶2 TWS, a North Dakota limited liability company, engages in
hydraulic fracturing at various well locations in Utah. From 2017
to 2021, TWS bought sand from Goodrich and rented pumps from
Max Fluid to use in its operations.

¶3 Goodrich invoiced TWS for sand products and
transportation, initially assessing sales tax against the entire
invoice until TWS requested that Goodrich assess sales tax against
only the sand charges, claiming the transportation fees were tax-
exempt. Goodrich did so, but two years later, a state audit found
the transportation costs were not tax-exempt, and Goodrich
should have collected additional funds from TWS in sales tax.
TWS refused to pay Goodrich the sales taxes on the transportation
costs. Max Fluid also issued invoices to TWS for the pumps it
rented. Max Fluid agreed to a reduced rental price if TWS made
mechanical upgrades to the pumps and only charged TWS for one
month out of its two months of use. But TWS also refused to pay
Max Fluid.

¶4 On May 26, 2021, Goodrich and Max Fluid (collectively,
Plaintiffs) together filed a complaint against TWS in district court.
Goodrich alleged breach of contract, breach of the implied
covenant of good faith and fair dealing, unjust enrichment,
statutory liability for sales tax, and negligent misrepresentation.
Max Fluid brought claims for breach of contract and unjust
enrichment. Plaintiffs alleged TWS owed $550,241.96 to Goodrich
and $208,639.43 to Max Fluid.

¶5 On May 27, 2021, the summons and complaint were
properly served on “Registered Agents, Inc.”—TWS’s registered
agent in North Dakota. That same day, Registered Agents, Inc.
sent an email to TWS’s financial analyst (Financial Analyst),
notifying her of a “Delivered Service of Process.” The email was
signed by “Dakota W Registered Agent LLC.” Financial Analyst
asserted the email was “treated as spam” because it “did not have

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an appropriate subject line” and “did not contain any actual
attachments.” The next day, Registered Agents, Inc. sent another
email to Financial Analyst, stating, “The document we uploaded
on your company’s behalf could be really important and we want
to make sure you see it.” The email provided a link to view the
summons and complaint. Again, the email was signed by “Dakota
W Registered Agent LLC.” This email was apparently also
“treated as spam.”

¶6 Less than six months earlier, Financial Analyst had
received an email signed by “Dakota W Registered Agent LLC”
when TWS initially subscribed to the registered agent service. But
Financial Analyst later claimed she did not recognize Dakota W
Registered Agent LLC as TWS’s registered agent.

¶7 Because Plaintiffs’ complaint went unanswered, the
district court entered default judgment against TWS in the
amount of $320,396.26 1 to Goodrich and $208,639.43 to Max Fluid.
Notice of the default judgment was mailed to TWS—this time at
its operations location in Vernal, Utah. TWS then retained
counsel, who sent an email to Plaintiffs’ counsel stating there had
been a “communication issue” and it was only after receiving the
notice of the default judgment that TWS became aware of the suit.

¶8 TWS then filed a motion to set aside the default judgment
under rule 60(b) of the Utah Rules of Civil Procedure, arguing
(1) its motion was timely, (2) there were grounds under rule
60(b)(1) to grant such relief, namely inadvertence and excusable
neglect, 2 and (3) it had meritorious defenses to Plaintiffs’ claims.

1. The default judgment originally awarded Goodrich
$550,241.96, but due to calculation errors, it was later amended.

2. TWS also argued for relief under rules 60(b)(5) and 60(b)(6). See
Utah R. Civ. P. 60(b)(5) (providing relief from a judgment which
(continued…)

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Plaintiffs opposed the motion, arguing TWS “by its own
admission, simply ignored its own emails” and could not show
due diligence—a requirement for relief on grounds of mistake or
excusable neglect under rule 60(b)(1).

¶9 The district court found that while TWS’s motion had been
timely and demonstrated meritorious defenses, TWS could not
show a basis under rule 60(b)(1) to set aside the default because it
could not demonstrate due diligence. The court found that TWS
“d[id] not claim the email was quarantined or sent to a spam or
junk mail folder” or that “the email went unnoticed or was not
sent correctly.” Rather, TWS “merely claim[ed] that [Financial
Analyst] treated the email as spam and that she is a diligent
person.” The court disagreed, finding that “[f]ailing to read the
email from the registered agent is not excusable” and “[a]
reasonably diligent person would ensure they were aware of the
email address and the types of emails they would receive from
their registered agent.” And the court reasoned, “Setting aside the
judgment under these circumstances would render the
requirements of [r]ule 60(b)(1) virtually meaningless” because
“[a]nyone could claim they didn’t receive notice because they
didn’t think it was important.” Without a showing of due
diligence, the court found TWS could not show grounds for relief
and denied its rule 60(b) motion to set aside the default judgment.

ISSUE AND STANDARD OF REVIEW

¶10 TWS challenges the district court’s denial of its rule 60(b)
motion to set aside the default judgment. The parties dispute the

“has been satisfied, released, or discharged” or where “it is no
longer equitable that the judgment should have prospective
application”); id. R. 60(b)(6) (providing relief from a judgment for
“any other reason that justifies” it). On appeal, TWS does not
challenge the district court’s denial of relief on these grounds, so
we do not address them.

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standard of review. TWS asserts that this court should evaluate
the district court’s ruling for correctness because it was based on
a “legal ruling.” Plaintiffs disagree and assert that our review
should be for abuse of discretion. We agree with Plaintiffs.

¶11 It is well-settled that “[w]e review a district court’s denial
of a rule 60(b) motion under an abuse of discretion standard of
review.” Menzies v. Galetka, 2006 UT 81, ¶ 54, 150 P.3d 480; see also
In re Discipline of Spencer, 2022 UT 28, ¶ 11, 513 P.3d 759 (“A district
court has broad discretion in ruling on a motion to set aside an
order or judgment under rule 60(b), and thus, we review a district
court’s denial of a 60(b) motion under an abuse of discretion
standard.” (cleaned up)). And when “we peel back the abuse of
discretion standard and look to make sure that the court applied
the correct law,” we ultimately determine “whether the court
abused its discretion or regularly pursued its authority in denying
the motion.” Utah v. Boyden, 2019 UT 11, ¶¶ 21–22, 441 P.3d 737.
We thus review the district court’s denial of TWS’s rule 60(b)
motion for abuse of discretion, reversing only if the denial “was
so illogical, arbitrary, or unreasonable that it shocks our sense of
justice.” Somer v. Somer, 2020 UT App 93, ¶ 16, 467 P.3d 924.

ANALYSIS

¶12 In general, a movant is “entitled to have a default judgment
set aside” if “(1) the motion is timely, (2) there is a basis for
granting relief under one of the subsections of rule 60(b), and
(3) the movant has alleged a meritorious defense.” Young v. Hagel,
2020 UT App 100, ¶ 11, 469 P.3d 1136 (cleaned up). Rule 60(b)
provides several grounds for relief, including “mistake,
inadvertence, surprise, or excusable neglect.” Utah R. Civ. P.
60(b)(1). To qualify for such relief, a movant must demonstrate
due diligence. Sewell v. Xpress Lube, 2013 UT 61, ¶ 29, 321 P.3d
1080. “Due diligence is established where the failure to act was
the result of the neglect one would expect from a reasonably
prudent person under similar circumstances” or where the

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movant was “prevented from appearing by circumstances over
which they had no control.” Go Invest Wisely LLC v. Murphy, 2016
UT App 185, ¶ 21, 382 P.3d 631 (cleaned up).

¶13 In making due diligence inquiries, “district courts not only
have discretion, they have broad discretion.” Somer v. Somer, 2020
UT App 93, ¶ 16, 467 P.3d 924 (cleaned up). While this discretion
is “not unlimited,” Menzies v. Galetka, 2006 UT 81, ¶ 54, 150 P.3d
480 (cleaned up), a court’s due diligence inquiry is “rarely
vulnerable to attack” and will be reversed “only where the court
has exceeded its discretion.” Fisher v. Bybee, 2004 UT 92, ¶ 7,
104 P.3d 1198. And “[s]imply disagreeing with the district court’s
conclusion is not enough. We must conclude that the decision was
so illogical, arbitrary, or unreasonable that it shocks our sense of
justice.” Somer, 2020 UT App 93, ¶ 16.

¶14 Here, the district court found that TWS had not
demonstrated due diligence where Financial Analyst “treated the
email as spam and apparently did not read it” because “[f]ailing
to read the email from the registered agent [was] not excusable”
or “responsible,” and a “reasonably diligent person would ensure
they were aware of the email address and the types of email they
would receive from their registered agent.” A multitude of Utah
decisions regarding the failure to check or read correspondence
have reached similar conclusions. See Mini Spas, Inc. v. Industrial
Comm’n of Utah, 733 P.2d 130, 132 (Utah 1987) (determining a
delay in filing caused by notice being “inadvertently stuck” to
other papers in a drawer was “not due to circumstances beyond
the [party’s] control”); Rojas v. Montoya, 2020 UT App 153, ¶ 26,
477 P.3d 38 (stating parties’ knowing failure to correct their
addresses on file did “not demonstrate that they used due
diligence and that they were prevented from appearing by
circumstances over which they had no control” and “on the
contrary, they were fully in control of their own mailing
information”), cert. denied, 481 P.3d 1041 (Utah 2021); Mathena v.
Vanderhorst, 2020 UT App 104, ¶ 18, 469 P.3d 1144 (neglecting mail

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altogether “does not constitute any diligence, let alone sufficient
diligence”); Asset Acceptance LLC v. Stocks, 2016 UT App 84, ¶¶ 18–
19, 376 P.3d 322 (reasoning that choosing not to read litigation
documents and thus failing to see notices of requirement to
respond, or reading the notices but consciously choosing to
disregard such warnings is not excusable neglect); Aghdasi v.
Saberin, 2015 UT App 73, ¶¶ 6, 8, 347 P.3d 427 (holding an attorney
who received emails “even if he did not actually see or read them”
and accidentally deleted or lost them due to spam settings on his
email account was not diligent and “should have made the same
effort to be aware of incoming electronic filings as he would have
with paper filings”); White Cap Constr. Supply, Inc. v. Star Mountain
Constr., Inc., 2012 UT App 70, ¶ 6, 277 P.3d 649 (noting where
defendants’ regular practice was to ignore legal mail unless it
came through personal service or registered mail, they “exercised
no diligence at all” (cleaned up)); Stevens v. LaVerkin City, 2008 UT
App 129, ¶ 28, 183 P.3d 1059 (deciding that losing documents due
to office expansion, relocation, and new staff was not excusable
neglect because circumstances “were not beyond counsel’s
control”); Black’s Title, Inc. v. Utah State Ins. Dep’t, 1999 UT App
330, ¶ 15, 991 P.2d 607 (concluding that attorney who failed to
maintain correct address or check mail during an active
investigation could not claim excusable neglect because his “lack
of knowledge resulted from his own failure to exercise due
diligence”).

¶15 The district court’s findings—which TWS does not
challenge on appeal—note the email from the registered agent
was not “quarantined or sent to a spam or junk mail folder,” nor
was it “unnoticed or . . . not sent correctly.” Rather, the court
found Financial Analyst merely “treated the email as spam and
apparently did not read it.” The emails from the registered agent,
in our view, are quite clearly not spam and a reasonably diligent
person would have read these emails and discovered their
content. While a party need not be perfectly diligent to obtain
relief, “some diligence is necessary in order for the neglect to be

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considered excusable.” Asset Acceptance LLC, 2016 UT App 84,
¶ 16 (cleaned up). Because TWS ignored the emails from the
registered agent it hired, it failed to act with diligence—let alone
the due diligence required to justify relief under rule 60(b)(1).

¶16 TWS nonetheless argues the district court (1) failed to
consider several factors relevant to its analysis and (2) took too
narrow a view of excusable neglect and mistake. But without a
showing of due diligence, these arguments are unavailing. See
Jones v. Layton/Okland, 2009 UT 39, ¶¶ 23–24, 214 P.3d 859 (“[T]o
grant relief on the ground of excusable neglect where a party has
exercised no diligence at all, but simply because other equitable
considerations might favor it, subverts the purpose of the
excusable neglect inquiry . . . . [and] would allow relief based on
mere neglect alone.”); Weber v. Mikarose, LLC, 2015 UT App 130,
¶ 14, 351 P.3d 121 (“Relief may not be granted based on other
equitable considerations where a party has exercised no diligence
at all.” (cleaned up)). And, ultimately, “district courts not only
have discretion, they have broad discretion” with respect to rule
60(b) motions; showing an abuse of discretion requires more than
“simply disagreeing with the district court’s conclusion.” Somer,
2020 UT App 93, ¶ 16 (cleaned up).

¶17 Having found that TWS ignored two important emails
from the registered agent it hired, it was not illogical, arbitrary, or
unreasonable for the district court to find that TWS failed to
demonstrate that it acted with due diligence and deny the rule
60(b) motion.

CONCLUSION

¶18 The district court did not abuse its discretion in denying
TWS’s rule 60(b) motion to set aside the default judgment.
Accordingly, we affirm.

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