Hudgens v. Prosper, Inc.

2010 UT 68
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Chad Hudgens, 	No. 20090391
Plaintiff and Appellant,
v.
Prosper, Inc., and 	F I L E D
Joshua Christopherson,
Defendants and Appellees. 	November 23, 2010
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Fourth District, Provo Dep’t
The Honorable Gary D. Stott
No. 080400249
Attorneys: 	Sean N. Egan, Salt Lake City, for plaintiff
Evan A. Schmutz, Andy V. Wright, Provo, for
defendants
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DURRANT, Associate Chief Justice:
INTRODUCTION
¶1 	This appeal arises from the district court’s dismissal
of claims made by Chad Hudgens against Prosper, Inc., and Joshua
Christopherson (collectively, “Prosper”) for injuries related to
the alleged waterboarding of Mr. Hudgens by Mr. Christopherson.
Prosper filed a motion to dismiss Mr. Hudgens’s complaint, which
the district court granted. 	Before the order dismissing Mr.
Hudgens’s claims was entered, however, Mr. Hudgens filed a motion
for leave to amend his complaint. 	The district court denied Mr.
Hudgens leave to amend and dismissed his claims with prejudice.
Mr. Hudgens asks that we review (1) whether the district court
erred when it dismissed his substantive claims and (2) whether
the district court abused its discretion when it refused to grant
Mr. Hudgens leave to amend his complaint. 	We conclude that the
district court abused its discretion when it denied Mr. Hudgens’s
motion for leave to amend because the district court’s order
denying leave to amend failed to provide adequate reasons for the

1 See Berneau v. Martino, 2009 UT 87, ¶ 3, 223 P.3d 1128.
2 This practice is commonly known as “waterboarding.”
No. 20090391 	2
denial. 	Because we find that the district court abused its
discretion in denying Mr. Hudgens leave to amend, we decline to
review Mr. Hudgens’s substantive claims and the dismissal of
those claims by the district court. 	Accordingly, we reverse and
remand for further proceedings.
BACKGROUND
¶2 	Because this is an appeal from dismissal under Utah
Rule of Civil Procedure 12(b)(6), we must accept all of Mr.
Hudgens’s factual allegations as true. 1 	The facts in this
section are set forth in accordance with this standard.
¶3 	This case arises from an incident that occurred on May
29, 2007. 	At that time, Mr. Hudgens was an employee of Prosper
under the direct supervision of Mr. Christopherson. 	During the
ten months that Mr. Hudgens worked for Prosper, Mr.
Christopherson had engaged in numerous questionable management
practices. 	Specifically, when an employee did not meet
performance goals, Mr. Christopherson would draw a mustache on
the employee using permanent marker or he would remove the
employee’s chair. 	Additionally, he would patrol the employees’
work area with a wooden paddle, which he would use to strike
desks and tabletops. 	Prosper was aware of Mr. Christopherson’s
actions and encouraged his behavior because it led to increased
revenue.
¶4 	On May 29, 2007, Mr. Christopherson asked for
volunteers for a new motivational exercise. 	He offered no
explanation to his team members regarding the nature of the
exercise. 	In his search for volunteers, Mr. Christopherson
challenged the loyalty and determination of his team members.
Mr. Hudgens volunteered to be a part of the exercise to prove his
loyalty and determination. 	Mr. Christopherson then led his team
members to the top of a hill near Prosper’s office. 	Once on the
hill, Mr. Christopherson ordered Mr. Hudgens to lie down, facing
up, with his head pointed downhill. 	Mr. Christopherson ordered
other team members to hold Mr. Hudgens down by his arms and legs.
Mr. Christopherson then slowly poured water from a gallon jug
over Mr. Hudgens’s mouth and nose so that he could not breathe. 2
Mr. Hudgens struggled and tried to escape but, at Mr.
Christopherson’s direction, the other team members held him down.
After concluding the exercise, Mr. Christopherson instructed his

3 In conjunction with Prosper’s motion to dismiss, the
parties agreed to the dismissal of this claim. 	It is not a part
of any of Mr. Hudgens’s claims on appeal.
3 	No. 20090391
team members that they should work as hard at making sales as Mr.
Hudgens had worked at trying to breathe.
¶5 	Mr. Hudgens reported the incident to Prosper’s human
resources department. 	Prosper took no action in response to the
incident prior to the time that Mr. Hudgens quit working for
Prosper. 	Mr. Hudgens quit working because the waterboarding
incident caused him to suffer sleeplessness, anxiety, depression,
and to feel sick to his stomach at work. 	Because of the distress
caused by the incident, Mr. Hudgens has undergone psychological
counseling and has suffered physical and emotional harm.
¶6 	Approximately seven months after the incident, on
January 15, 2008, Mr. Hudgens filed a complaint against Prosper
and Mr. Christopherson asserting four causes of action. 	First,
Mr. Hudgens alleged common law assault and battery against
Prosper and Mr. Christopherson. 	Second, Mr. Hudgens alleged
intentional infliction of emotional distress against Prosper and
Mr. Christopherson. 	Third, Mr. Hudgens alleged Prosper and Mr.
Christopherson had wrongfully terminated him from his position.
Finally, Mr. Hudgens alleged that Mr. Christopherson had
intentionally interfered with his contractual relationship with
Prosper. 3
¶7 	Prosper filed a motion to dismiss the complaint and
argued that Mr. Hudgens had failed to allege sufficient facts to
demonstrate any claim for relief. 	Prosper argued that the claims
of common law assault, battery, and intentional infliction of
emotional distress were barred by the exclusivity provision of
the Utah Workers Compensation Act. 	Specifically, Prosper argued
that although there is an exception to the exclusivity provision
for certain intentional acts, Mr. Hudgens’s claim failed to fit
into the exception because his complaint did not allege the
necessary mental state. 	As to the claim of wrongful termination,
Prosper argued that under Utah’s at-will employment doctrine, Mr.
Hudgens failed to state a claim for wrongful termination.
Specifically, Prosper acknowledges a public policy exception to
the at-will employment doctrine, but contends that Mr. Hudgens’s
claim does not fit into the public policy exception because Mr.
Hudgens failed to identify a public policy on which he relied and
failed to establish facts necessary to support his claim.
¶8 	Mr. Hudgens responded to Prosper’s motion to dismiss by
arguing that, because his complaint alleged and specifically

No. 20090391 	4
identified Mr. Christopherson’s actions as intentional, the
complaint satisfied the relevant standard for stating a claim.
Mr. Hudgens also identified a number of statutory and common law
public policies that supported his claim for wrongful discharge.
Finally, Mr. Hudgens, in his memorandum opposing the motion to
dismiss, sought leave to amend his original complaint. 	He argued
that if the allegations in the original complaint were deemed
insufficient, then he should be entitled to an opportunity to
cure those defects. 	Mr. Hudgens sought leave to amend only in
that memorandum; he did not, at that time, file a separate motion
for leave to amend.
¶9 	In a ruling issued on July 23, 2008, the district court
dismissed Mr. Hudgens’s complaint without prejudice. 	The court
concluded that Mr. Hudgens’s complaint failed to state a claim
for common law assault, battery, or intentional infliction of
emotional distress because the purpose of Mr. Christopherson’s
exercise was to motivate his team members, not to injure Mr.
Hudgens. 	The court also concluded that Mr. Hudgens’s complaint
failed to state a claim for wrongful termination because it
failed to adequately allege the violation of a pulic policy. 	The
district court also denied Mr. Hudgens leave to amend his
complaint, holding that Mr. Hudgens had failed to properly move
the court for leave to amend because, rather than filing a motion
for leave to amend, Mr. Hudgens incorporated his request for
leave to amend into his Memorandum in Opposition to Prosper’s
Motion to Dismiss. 	The court indicated that the claims were to
be dismissed without prejudice and instructed Prosper to draft an
order reflecting its ruling. 	Prosper delivered that order to
Mr. Hudgens on September 17, 2008, and the court signed it on
October 8, 2008.
¶10 	Between the delivery of the draft order to Mr.
Hudgens’s attorney and the signing of the order by the district
court judge, Mr. Hudgens filed a motion for leave to amend his
complaint. 	Mr. Hudgens’s motion identified the liberal standard
for granting leave to amend and highlighted the fact that Prosper
would not be prejudiced if leave were granted because the
litigation was in a relatively early stage. 	Included with the
motion for leave to amend was Mr. Hudgens’s proposed amended
complaint. 	The amended complaint included additional facts and
allegations intended to cure the original complaint’s
deficiencies as identified by the district court.
¶11 	In spite of this motion to amend, the district court
signed Prosper’s proposed order dismissing Hudgens’s claims
without prejudice. 	Even though it had successfully obtained the
dismissal of Hudgens’s claims, Prosper moved the court to amend

5 	No. 20090391
the order so that the claims would be dismissed with prejudice.
In seeking dismissal of the claims with prejudice and arguing
against Hudgens’s motion to amend, Prosper argued that leave
should be denied because the facts in the amended complaint were
inconsistent with the facts as set forth in the original
complaint, and that the original complaint could not be
superseded unless these factual discrepancies were adequately
explained. 	Prosper also argued that the amendment was futile
because even if the court were to grant leave to amend and accept
the new complaint, the complaint would still fail to state
legally sufficient claims for assault, battery, intentional
infliction of emotional distress, and wrongful termination.
¶12 	The court denied Mr. Hudgens’s motion for leave to
amend and granted Prosper’s motion to amend the court’s prior
order to dismiss all of Mr. Hudgens’s claims with prejudice.
Although the district court directed Prosper to draft the amended
order, Prosper failed to do so. 	Presented with this delay, Mr.
Hudgens’s counsel drafted a proposed order and presented it to
the court. 	The relevant portion of this order states as follows:
Having considered the submissions of the
parties, having heard oral argument from
counsel and for good cause otherwise
appearing, it is hereby ordered as follows:
1. Plaintiff’s Motion for Leave to File an
Amended Complaint is denied; and 2.
Defendant’s Motion to Dismiss all Claims with
Prejudice is granted.
In addition to being presented to the district court, this
proposed order was delivered to Prosper’s counsel on February 26,
2009. 	The order was signed by the district court judge on March
27, 2009.
¶13 	On direct appeal, Mr. Hudgens asks this court to
reverse the district court’s order denying leave to amend. 	He
also argues that the district court erred in dismissing his
original complaint and asks that this court consider the legal
sufficiency of the original complaint. 	Because we conclude that
Mr. Hudgens should have been permitted to amend his complaint, we
do not examine whether the district court also erred in
concluding that the original complaint failed to state a claim
upon which relief could be granted. 	We have jurisdiction
pursuant to section 78A-3-102(3)(j) of the Utah Code.

4 See Helf v. Chevron U.S.A., Inc., 2009 UT 11, ¶ 14, 203
P.3d 962.
5 Brown v. Div. of Water Rights, 2010 UT 14, ¶ 10, 228 P.3d
747.
6 Franco v. Church of Jesus Christ of Latter-Day Saints,
2001 UT 25, ¶ 10, 21 P.3d 198 (quoting Prows v. State, 822 P.2d
764, 766 (Utah 1991)).
7 See Norman v. Arnold, 2002 UT 81, ¶ 38, 57 P.3d 997.
8 See Utah R. Civ. P. 15(a) (“[L]eave shall be freely given
when justice so requires.”).
9 See Norman, 2002 UT 81, ¶ 39; Aurora Credit Servs., Inc.
v. Liberty West Dev., Inc., 970 P.2d 1273, 1282 (Utah 1998);
Bekins Bar V Ranch v. Huth, 664 P.2d 455, 464 (Utah 1983).
No. 20090391 	6
STANDARD OF REVIEW
¶14 	We review the grant of a motion to dismiss for
correctness, granting no deference to the decision of the
district court. 4 	A motion to dismiss should be granted only if,
“assuming the truth of the allegations in the complaint and
drawing all reasonable inferences therefrom in the light most
favorable to the plaintiff, it is clear that the plaintiff is not
entitled to relief.” 5 	We will affirm the dismissal of a
complaint “‘only where it clearly appears that the plaintiff
. . . would not be entitled to relief under the facts alleged or
under any state of facts they could prove to support their
claim.’” 6
¶15 	We review a district court’s denial of leave to amend
for an abuse of discretion. 7 	Under the Utah Rules of Civil
Procedure, this leave should be granted liberally. 8 	But we have
held that this liberality is limited, such as, for example, when
it would result in prejudice to the opposing party, when leave to
amend is sought during or after trial instead of before trial, or
if the amendments would be futile. 9
ANALYSIS
¶16 	The parties in this case disagree as to whether the
district court’s denial of Mr. Hudgens’s motion for leave to
amend was an abuse of the court’s discretion. 	Among other
things, Mr. Hudgens argues that the district court failed to
adequately justify its reasons for denying his motion for leave

10 Savage v. Utah Youth Vill., 2004 UT 102, ¶ 9, 104 P.3d
1242 (quoting Johnson v. Brinkerhoff, 57 P.2d 1132, 1136 (Utah
1936)).
11 Swan Creek Vill. Homeowners Ass’n v. Warne, 2006 UT 22,
¶ 20, 134 P.3d 1122.
12 Id. ¶ 18 (internal quotation marks omitted).
13 See Aurora Credit Servs., Inc. v. Liberty W. Dev., Inc.,
970 P.2d 1273, 1281-82 (Utah 1998).
7 	No. 20090391
to amend. 	He contends that the district court’s failure to
provide adequate reasoning to justify its denial was a per se
abuse of discretion.
¶17 	Prosper sets forth essentially the same arguments it
presented to the district court--that the amended complaint is
factually inconsistent with the prior complaint, and that, even
if these inconsistencies are not, standing alone, a sufficient
reason for denying leave to amend, leave to amend should also be
denied because the amended complaint still fails to state any
claim upon which relief may be granted.
I. 	THE DISTRICT COURT ABUSED ITS DISCRETION WHEN IT DENIED MR.
HUDGENS LEAVE TO AMEND HIS COMPLAINT BECAUSE THE COURT FAILED TO
SET FORTH ANY REASONS FOR THE DENIAL
¶18 	Rule 15(a) of the Utah Rules of Civil Procedure sets
forth the standard for granting leave to amend a complaint. 	It
states that “leave shall be freely given when justice so
requires.” 	Underlying rule 15(a) is the “court’s ultimate goal
[of having] the ‘real controversy between the parties presented,
their rights determined, and the cause decided.’” 10 	But the
liberal standard underlying rule 15(a) is not without boundaries.
Where an amended complaint is sought “as the result of a dilatory
motive, bad faith, or unreasonable neglect,” a district court has
discretion to deny leave to amend. 11 	Because a district court is
“best positioned to evaluate the motion to amend in the context
of the scope and duration of the lawsuit,” we will reverse denial
of leave to amend only if the district court abused its
discretion. 12
¶19 	But to guarantee that the purposes underlying rule 15
are served, such deference is not appropriate where the district
court’s order denying leave to amend does not permit meaningful
appellate review. 13 	When a district court denies leave to amend
without adequately explaining its reasons for doing so, this

14 See id. at 1282 (“Where no reason is assigned as grounds
for the denial of a motion to amend a pleading, this Court has no
guide whereby it can determine if a trial court has abused its
discretion. 	This Court is then left in a dilemma wherein
reversible error becomes a possibility if not a probability even
though the trial court’s reasoning might have been a proper
exercise of its judicial discretion.” (internal quotation marks
omitted)).
15 Id. at 1281.
16 Foman v. Davis, 371 U.S. 178, 182 (1962).
17 Id.
No. 20090391 	8
court has no way of knowing whether the district court properly
balanced the purposes underlying rule 15’s liberality with
competing, but nevertheless legitimate, reasons for denying leave
to amend. 14 	Accordingly, we will treat a district court’s order
as an abuse of discretion when the district court fails to
articulate its reasoning for denying leave to amend, unless the
court’s reasoning is apparent from the record. 15 	With regard to
a similar rule adopted by federal courts, the Supreme Court has
stated
the grant or denial of an opportunity to
amend is within the discretion of the
District Court, but outright refusal to grant
the leave without any justifying reason
appearing for the denial is not an exercise
of discretion; it is merely abuse of that
discretion and inconsistent with the spirit
of the . . . [r]ules. 16
Thus, when a district court does not provide any reasons for
denying leave to amend, the denial is a per se abuse of
discretion. 17
¶20 	In this case, the district court’s order denying Mr.
Hudgens leave to amend contains virtually no reasoning. 	The only
reasoning given in the order is that the district court denied
leave based on the oral arguments, the briefs, and for good
cause. 	This level of detail is simply insufficient to permit
meaningful appellate review. 	In a prior case on this point, we
acknowledged the possibility that the rule we apply here would
not prevent review of the district court’s judgment if the
reasons supporting dismissal of the complaint were apparent from

18 See Aurora Credit Servs., 970 P.2d at 1282.
19 See, e.g., Holmes Dev., LLC v. Cook, 2002 UT 38, ¶ 31, 48
P.3d 895 (holding that “[a] plaintiff cannot amend the complaint
. . . in a memorandum in opposition to a motion to
dismiss . . . because such amendment fails to satisfy Utah’s
pleading requirements” (citations omitted)).
20 See Aurora Credit Servs., 970 P.2d at 1282.
9 	No. 20090391
the record. 18 	But there is no basis for upholding the district
court’s decision that is apparent on this record. 	As discussed,
Mr. Hudgens’s first attempt at obtaining leave to amend was
unsuccessful because he failed to formally move the court for
leave to amend. 19 	The reasons that supported that decision no
longer applied when the district court denied Mr. Hudgens leave
to amend the second time. 	By the second time leave was denied,
Mr. Hudgens had corrected his earlier mistake by correctly filing
a formal motion for leave to amend.
¶21 	Thus, the district court’s earlier rationale simply no
longer applied at the time it signed the order from which Mr.
Hudgens appeals. 	Nor was it sufficient for the district court
merely to cite the arguments set forth in the briefs and oral
arguments as support for its decision. 	Like the reasoning set
forth in the court’s prior order, it is not clear that all of the
arguments set forth in the parties’ motions and at oral arguments
would provide legitimate justification for the district court’s
decision. 	And without any indication in the court’s order of the
precise reasoning it adopted, we cannot meaningfully review
whether that reasoning was correct.
¶22 	The district court’s failure to state reasons for
denying Mr. Hudgens leave to amend requires both this court and
the parties to speculate as to the district court’s reasons for
the denial. 	This makes it impossible for us to determine whether
the district court properly complied with rule 15. 	In such
circumstances, consistent with the liberal standard underlying
rule 15(a), the district court’s decision is deemed to be an
abuse of discretion.
¶23 	In the past, when this court has reversed a district
court’s denial of leave to amend for failure to adequately
explain its reasoning, we have remanded the case to the district
court with instructions to provide the omitted reasoning. 20 	In
this case, we find it appropriate to instruct the district court
to grant Mr. Hudgens the leave he seeks and to proceed with the
case based on Mr. Hudgens’s amended complaint.

21 Swan Creek Vill. Homeowners Ass’n, 2006 UT 22, ¶ 22.
22 Utah R. Civ. P. 15(a).
23 See Heritage Bank & Trust v. Landon, 770 P.2d 1009, 1010
(Utah Ct. App. 1989).
24 2009 UT 11, 203 P.3d 962.
25 See id. 	¶¶ 16-24.
26 For instance, the district court’s conclusions about
whether Prosper intended to injure Hudgens were based on the fact
that the purpose of the waterboarding was to motivate members of
Prosper’s sales teams. 	But in Helf, we “caution[ed] courts to
maintain the distinction between motive and the legal concept of
intent.” 	Id. ¶ 33.
No. 20090391 	10
¶24 	We adopt this course of action for two reasons. 	First,
one consequence of the district court’s failure to set forth its
reasoning is that there is no indication that the district court
found Mr. Hudgens’s actions to be the “result of a dilatory
motive, bad faith, or unreasonable neglect.” 21 	In our own review
of the record, we have found no evidence that denying leave on
these grounds would have been appropriate. 	Second, and more
importantly, it is unclear that Mr. Hudgens was even required to
seek leave to amend prior to filing his motion. 	Under rule
15(a), Mr. Hudgens was entitled to “amend his pleading once as a
matter of course at any time before a responsive pleading [was]
served.” 22 	A motion to dismiss is not a responsive pleading. 23
Thus, no action by Prosper had cut off Mr. Hudgens’s right to
amend as a matter of course. 	Accordingly, on remand, the
district court is instructed to grant Mr. Hudgens leave to amend
his initial complaint.
¶25 	Finally, we pause to note the somewhat unique timing of
the events in this case. 	In February 2009, we issued an opinion
in Helf v. Chevron, U.S.A., Inc. 24 	In that case, we addressed in
some detail the intentional injury exception to the exclusivity
provision of the Workers Compensation Act. 25 	The issues
addressed in Helf are of crucial importance to many of Mr.
Hudgens’s claims. 26 	But because Helf was issued after the
district court dismissed Mr. Hudgens’s complaint, his substantive
claims were evaluated without the benefit of our most recent
consideration of these issues. 	Mr. Hudgens points out that we
have the ability to independently evaluate the legal sufficiency

11 	No. 20090391
of the claims he set forth in his initial complaint and to
consider Helf in doing so.
¶26 	We choose not to reach the merits of Mr. Hudgens’s
claims because of the posture of this case. 	Specifically, the
briefing before this court has focused on the merits of two
different complaints and on various reasons why both of those
complaints either were or were not sufficient. 	Thus, the status
of the law since Helf was decided has been presented to us in the
context of this case’s unique procedural background. 	In these
circumstances, we conclude that, if the legal sufficiency of the
complaint is challenged again on remand, examination of that
complaint will best be accomplished by the district court. 	On
remand, the parties will be able to focus their attention solely
on the meritoriousness of the claims in light of the facts the
parties are able to prove, instead of on how the claims relate to
the district court judge’s exercise of discretion. 	We are
confident that, on remand, the district court’s treatment of Mr.
Hudgens’s claims will appropriately account for our holding in
Helf and any other developments in the relevant law.
CONCLUSION
¶27 	Because we determine that the district court exceeded
the bounds of its discretion, we reverse the district court’s
order denying Mr. Hudgens’s motion for leave to amend and remand
for further proceedings. 	We also conclude that Mr. Hudgens’s
proposed amended complaint should be permitted by the district
court, and we instruct the district court accordingly.
---
¶28 	Chief Justice Durham, Justice Parrish, Justice Nehring,
and Judge Peuler concur in Associate Chief Justice Durrant’s
opinion.
¶29 	District Judge Sandra N. Peuler sat.