Smith v. Grand Canyon Expeditions Co., 2003 UT 57

Summary

The Utah Supreme Court reviewed interlocutory rulings concerning Marc Smith's employment termination, stock valuation, entitlement to a portion of an Arizona tax refund, punitive damages, attorney fees, amendment of the complaint, and liability of individual defendants. The court affirmed the trial court on all issues except the refusal to dismiss the individual defendants, holding that the corporation's Subchapter S status alone did not support disregarding the corporate form. The court remanded for dismissal of those defendants.

Holdings

1. Employment-related breach-of-contract claims were barred by accord and satisfaction because there was a bona fide dispute over an unliquidated claim, the separation agreement provided payment in full settlement of the employment dispute, and Smith accepted the payment and related benefits.
2. Grand Canyon did not breach the implied covenant of good faith and fair dealing by using the valuation methodology specified in the buy-sell agreement, because the agreement delegated valuation to the company's accountant and required compliance with GAAP.
3. The court could not hold as a matter of law that the implied covenant was extinguished before Grand Canyon received the Arizona tax refund; the claim therefore survived summary judgment.
4. The trial court did not abuse its discretion by admitting Smith's accounting expert's testimony concerning the GAAP treatment of the Arizona tax refund.
5. The trial court properly dismissed Smith's punitive-damages and attorney-fee claims because the pleaded issues sounded in contract, the punitive-damages claim lacked a properly pleaded tort, and the attorney-fee request was not authorized by statute, contract, or an applicable exception.
6. The trial court properly denied Smith leave to amend because the proposed unjust enrichment claim was legally insufficient and futile.
7. The individual defendants could not be kept in the case merely because Grand Canyon elected S-corporation status and distributed refund proceeds to shareholders; the trial court was required to dismiss them.

Questions Presented

1. Whether Smith's employment-related breach-of-contract claims were barred by accord and satisfaction.
2. Whether Grand Canyon's use of GAAP-based accounting procedures breached the implied covenant of good faith and fair dealing in the buy-sell agreement.
3. Whether the implied covenant could apply to the Arizona tax refund claim and whether the accounting expert's testimony concerning the refund was admissible.
4. Whether punitive damages and attorney fees were available.
5. Whether Smith should have been allowed to amend his complaint to add an unjust enrichment claim.
6. Whether the individual defendants could be held liable under an alter ego theory merely because Grand Canyon was an S corporation and distributed refund proceeds to shareholders.

Disposition

reversed_and_remanded