Tort Law for Utah Entrepreneurs

The Nature, Source and Purpose of Tort Law
A Utah entrepreneur may be held civilly liable for harms resulting from a deliberate act, an act of carelessness, the design or manufacture of a defectively dangerous product, or from conducting a business activity which by its nature is ultrahazardous or abnormally dangerous. This is called tort liability.

A tort is a civil wrong, not arising out of contract, which causes harm. Most torts originate in the common law our country inherited from England. Congress and state legislatures sometimes create new torts and often modify existing common law torts.

The purpose of tort law is to prevent harm. When that purpose is not achieved, tort law seeks to shift the burden of harm from an innocent victim to a party who most ought to bear it. This is done through the payment of money damages. The theory of tort law is that the payment of money to an injured party encourages the party responsible for the injury to act in a safer manner to prevent future harm.

Traditionally, torts have been classified into three main categories: Intentional torts; negligence torts; and strict liability torts. Individual torts will be discussed later in this chapter. The prefatory information found on the following pages will provide context and help the reader better understand how tort claims in Utah are handled.

Torts, Crimes, and On-the-Job Injuries.
In a criminal case, the complaining party (“plaintiff”) is the government. In a tort case, the plaintiff is a private person or entity. Many torts are also crimes.2 The government’s prosecution of a crime does not preclude the victim of the crime from bringing a civil tort action against the same person.3 Although a criminal sentence may include a requirement to pay restitution to the victim, such sentence does not preclude the victim from recovering compensation in a civil suit.4

When a person in the United States is injured on the job, compensation is paid under Workers Compensation schemes which exist in all states.5 Neither fault nor damage amount is at issue. The amount of compensation is set by statute.6 Although an injured worker may pursue claims against third parties responsible for his on-the-job injury7, he may not sue his employer or a co-worker8, except under very rare circumstances.9 Workers compensation awards are modest in amount.10

Comparative Fault
In Utah, a claimant who is partially responsible for her own injury may still recover damages for her injury but only if her fault is less than that of the defendant, or if there is more than one defendant, the fault of all defendants combined.11 The recovery will be reduced by the percentage of fault attributable to the claimant. A claimant who is 50% or more at fault for his own injury is barred from recovery altogether12. Whenever the fault of more than one party is at issue, the trier of fact (the judge unless there is a jury) compares the fault of the respective parties and assesses each party a percentage of that fault – from zero to one hundred, with the total assessment equaling 100%.13

BURDENS OF PROOF

A plaintiff in any trial must prove his case. A burden of proof denotes how compelling a plaintiff’s evidence must be to prevail. The burden of proof for plaintiffs in most tort claims is “preponderance of the evidence.” This phrase means that an alleged fact is “more likely than not” true. Thought of in terms of percentages, this would be 51%. In cases of intentional misrepresentation (fraud) a plaintiff must meet a higher burden of proof: The evidence of fraud must be “clear and convincing.”14 That “clear and convincing standard also applies to claims for punitive damages.15 This is a burden higher than “more likely than not” but not as high as “beyond a reasonable doubt,” the level of proof required in all criminal cases.

DAMAGES: COMPENSATORY AND PUNITIVE

Compensatory Damages

The law allows a tort victim to recover compensatory damages for his loss. Two forms of compensatory damages may be awarded a tort victim: Economic damages and noneconomic damages.16 Economic damages include those damages that are quantifiable, such as loss of wages, loss of business profits, loss of future earnings, and past and future medical expenses. Noneconomic damages consist of not readily quantifiable injuries and harms: pain, suffering, loss of enjoyment of life, loss of spousal consortium, etc.

Punitive Damages17
In Utah, punitive damages, sometimes referred to as exemplary damages, may be awarded only if compensatory have been awarded. They may not be awarded unless it is established by clear and convincing evidence that

the acts or omissions of the tortfeasor are the result of willful and malicious or intentionally fraudulent conduct, or conduct that manifests a knowing and reckless indifference toward, and a disregard of, the rights of others.18

Because punitive damages are designed to punish as a means of future prevention, the award must be relative to the wealth of the defendant. For example, while an award of $10,000.00 in punitive damages would be significant punishment to a business profiting

$50,000.00 per year, it would have no deterrent effect on an NBA franchise. For punitive damages to have their intended effect, the wealth of the defendant must be known. A court in Utah will not allow pretrial discovery into a defendant’s financial condition without a preliminary showing that a punitive damage award is reasonably likely and that the request for discovery is not sought for the purpose of harassment.

Having in mind that punitive damages are to deter bad conduct, not to provide a windfall to the injury victim, the Utah legislature has decreed that the punitive damage amount awarded be split between the state and the injured party: The injured party takes the first $50,000 and the balance is divided evenly between the injured party and the state.19 The trial court has the discretion to reduce a jury’s damage award

if it deems it excessive. Appellate courts also have that discretion. A decision of the U.S. Supreme Court in a case appealed from a decision of the Utah Supreme Court indicates punitive damages should rarely exceed a single digit multiple of the compensatory damages awarded in the case.20

Deadlines for Filing Tort Actions
A tort lawsuit must be brought within a period of time specified by statute. There are different deadlines for different torts. These deadlines are called statutes of limitations. Entering negotiations or filing a claim with the responsible party’s insurer does not constitute filing suit and will not prevent the statute of limitations from running. If one waits too long, one’s claims may be time barred by the statute of limitations.

For most tort claims, the statute of limitations begins to run when the cause of action “accrues” which means when all the elements of the tort are present. Some tort claims, however, do not begin to run until the plaintiff discovers or, through the use of reasonable diligence, should have discovered the existence of an actionable claim.21

Claims for the following torts are barred if suit is not filed within the time limits specified:

year: libel, slander, false imprisonment22;
years: medical malpractice, products liability, wrongful death23; 3 years: Fraud, trespass, conversion24;
4 years: negligence claims including those against all nonmedical professionals like lawyers, accountants, architects, et al., and catch-all for all tort claims not specified elsewhere;

Statutes of limitations time periods are suspended (“tolled”):

During the time a defendant is outside the state;26
For one year after the death of a defendant outside the state;27
For one year after the death of a plaintiff:28
During time of war, as to a plaintiff who is an alien subject or citizen of a country at war with the U.S.;29
During the time a plaintiff remains a minor (under the age of 18;)30
During the time a plaintiff is mentally incompetent without a legal guardian;31

 

Jury Verdicts
Tort cases in Utah are decided by judges unless any party to the suit requests a jury. Juries in Utah state court civil trials consist of 8 persons.32 They need not be unanimous in their findings. Each factual issue in a tort cases is resolved by a three-fourths majority vote. Six jurors must agree on the answer to each question presented. They do not have to be the same six jurors on each question.33

INTENTIONAL TORTS

An intentional tort is a wrongful act committed with intent. A person may commit an intentional tort without specifically intending to cause harm. Tort law presumes people intend the normal consequences of their acts. Motive is not required to prove liability. When one does an act intentionally, he may be liable for harm regardless of whether the person injured was the person at whom the intentional act was directed.34 Specific intentional torts exist and are commonly divided into discreet categories, such as torts against persons, torts against property, and torts against business interests. Not all intentional acts which cause harm may meet the definition of a particular tort or fit neatly into an existing category of torts. They may nevertheless be actionable if they satisfy the basic purpose of tort law.35

Intentional Torts Against a Person
Assault is committed when a person does an intentional act which causes another person apprehension of an imminent harmful or offensive bodily touching.36

Battery is committed when the actor actually causes such a contact. Here, however, apprehension is not a factor. A battery can occur even when the victim is unaware of its commission.

False imprisonment occurs when one intentionally confines another person within a boundary against his or her will. Here, the victim must be aware of, and opposed to, the confinement. Store owners have a privilege to detain employees or shoppers suspected of theft provided there is a reasonable basis for the suspicion and the detention is done reasonably.37

Intentional infliction of emotional distress occurs when one’s intentional actions cause another to suffer emotional distress. In normal daily life, people often suffer emotional distress from the actions of others without the commission of a tort. For this tort to occur, the actor’s conduct must be extreme and outrageous and the victim’s distress must be severe and usually accompanied by evidence of physical or psychological injury.

Defenses which a person accused of these torts may assert include self-defense, defense of another, and consent.38 A person has a privilege to use reasonable force – the minimum amount required by the circumstances – to protect himself and his property.39 While consent generally is a defense to a willful tort, lawful consent may not be given by a minor.40

Defamation occurs when one communicates or “publishes” false information about another which injures her reputation. Defamation may be committed through spoken words (slander) or written declarations (libel). Traditionally, declarations are deemed per se defamatory if they falsely impute to another the commission of a crime, unchastity, the possession of a loathsome disease, or the poor operation of a trade or business. Unless the person defamed is a public figure, intent to cause harm is not required. If the person about whom the statement is made is a public figure, defamation occurs only if the person making the assertion knows it to be false and publishes it with malice. Truth is an absolute defense to a defamation claim.

The following scenario illustrates these intentional torts:

Jack and Jill are playing a game of squash. While the ball is not in play, Jack raises his racquet above Jill’s head as if to strike her. If Jill suffers fright from this intentional act, Jack has committed assault, even if he intended it only as a joke and did not intend to harm her. If Jack actually strikes Jill with his racquet, he has committed battery. If he positions himself in front of the door of the squash court so that Jill cannot leave, though she wants to, he has committed false imprisonment. If he yells at the top of his lungs while chasing Jill around the court: “I am going to kill you Jill for beating me in that game,” and Jill is severely distressed by this, he has committed the tort of intentional infliction of emotional distress. If he does none of those things, but Jill tells her friends that he did all of them and falsely tells the police he also raped her on the squash court, Jill has committed defamation.

One may consider remote the likelihood of having occasion to sue or be sued for the commission of any of these common law torts. However, it takes little imagination to see how at least some of these torts may form the basis of claims involving unwanted sexual advances in workplace settings.

Invasion of Privacy occurs when one invades a person’s solitude, seclusion, or personal affairs when the person has the right to expect privacy. It may take four forms:

Appropriation of a person’s identity (name, picture, or likeness) for commercial purposes without permission;
Intrusion into a person’s seclusion or private affairs (by, for example, rifling through a person’s briefcase, eavesdropping by wiretap, scanning a person’s bank account, or peeping through a person’s window).
Putting a person in a false light, such as writing a story attributing to a person ideas not held by the person or actions not taken by the person.
Public disclosure of private facts, such as a newspaper’s reporting a private citizen’s sex life or financial affairs.

Intentional Misrepresentation
Intentional misrepresentation is often known by another word: fraud. A plaintiff claiming that a defendant has defrauded him must prove by clear and convincing evidence that:

The defendant made a false statement about an important fact;
knowing his statement was false or making it recklessly and without regard for its truth;
intending that the plaintiff rely on it;
The plaintiff did reasonably rely on it;
And suffered damage as a result of doing so.41

Silence, when one has a duty to speak, constitutes misrepresentation. Actively concealing an important fact is misrepresentation. If one holds a position of trust over another – such as an attorney, agent, parent or adult child – one has an affirmative duty to disclose an important fact. Fraud occurs if the failure to disclose is a substantial factor in causing damages.

A person who lacks fraudulent intent may be held liable for the tort of negligent misrepresentation if, being in a better position than the person to whom he makes his representation, he fails to use reasonable care to determine whether the representation is true and the person suffers damage resulting from its being false.

Misuse of Legal Procedure covers three torts: malicious prosecution, wrongful civil proceedings, and abuse of process. These torts occur when one uses the courts with the primary purpose of causing distress, reputational damage, or economic loss to an innocent person.

There are other serious intentional wrongs too often committed in Utah by persons of dubious character against unsuspecting, trusting victims. These intentional wrongs include affinity fraud, Ponzi schemes, and misrepresentations in investment solicitation documents. They are covered in Chapter 14 of this text as part of a discussion of state and federal securities law violations.

Intentional Torts Against Property Interests
Trespass to land occurs when one intentionally causes something or someone to enter the land or airspace of another, without permission. Trespass to chattel occurs when one interferes with the personal property of another. This involves using, but not appropriating, another’s property without permission.

Conversion is the civil equivalent of the crime of theft. It occurs when one takes another’s property intending to retain possession.

Disparagement of Property is an economically injurious falsehood about another’s product or property. Trade libel (alleging a product is defective or not what it claims to be) and slander of title (casting doubt on a person’s legal ownership of property are forms of this tort. Slander of title occurs when one untruthfully and without justification casts doubt on another’s ownership of property. An example is the recording of a lis pendens (a document indicating the pendency of a law suit concerning the property) when no suit has been filed. Another is a broker filing a lien against a piece of property knowing he had no basis for doing so.

Private Nuisance consists of interference with another’s peaceful enjoyment of his own land.

 

Intentional Torts Against Business Interests
The tort of injurious falsehood amounts to defamation against a person’s property interest. It must be intentional and malicious. An example is publishing word that another has bad credit when it is not true.

Interference with contractual relations is intentionally causing or conspiring with another to cause a breach of a contract with a third party.42 The interfering action must be wrongful and malicious and actual damage must result from the interference.43 This might occur, for example, when the owner of a professional basketball team tries to help an athlete under contract to play baseball for a professional baseball team to escape that contract in order to play basketball for his team.

Interference with prospective economic relations is another tort recognized in Utah. It “protects a party’s interest in prospective relationships of economic advantage not yet reduced to a formal contract (and perhaps not expected to be).”44 In essence, tort liability exists against one who competes for business for an improper purpose or by improper means. Having a predominant intent to harm or destroy a competitor’s business rather than build one’s own is an improper purpose.45 Violating a statute, regulation, common law rules, or the established standard of a trade or profession is competing by improper means.46

NEGLIGENCE

Negligence is the failure to do what a reasonably prudent person would do in the same or similar circumstances. Its essence is carelessness. A person may be negligent in acting or in failing to act.47 Entrepreneurs, like doctors, accountants, lawyers, architects, engineers, motorists, and all others, have a duty to exercise the level of care reasonably expected of those acting in their respective capacities to avoid injuring others. Negligence occurs when a motorist fails to keep a proper lookout and crashes his car into a car in front of her, when an appraiser fails to discover defects in a home which a reasonably careful appraiser would have discovered, and when an investment advisor or promoter fails to exercise due diligence before recommending an investment.

One scholar has defined negligence as the breach of a duty to behave reasonably which causes foreseeable harm to foreseeable victims.48 This simple definition embraces the four elements required to prevail on a negligence claim:

A duty owed to the person injured. People generally owe a duty of care to all persons who could foreseeably be injured by their acting without due care;
A breach of that duty. This occurs when one acts without reasonable prudence or care;
Causation. There must be a causal link between the careless conduct and the harm alleged. In the past terms of “causation in fact” and “proximate cause” have been used to indicate when that necessary causal link has been established. Because those terms can be confusing and misleading juries in Utah are now instructed that they may find the causation requirement met if they find that:
The person’s act or failure to act produced the harm directly or set in motion events that produced the harm in a natural and continuous sequence; and
The person’s act or failure to act could be foreseen by a reasonable person to produce a harm of the same general nature.49
Damages. Negligent conduct is not “actionable” unless it results in actual harm to a person. For example, a patient who learns her surgeon operated on her while under the influence of a narcotic drug will not succeed in a negligence claim unless she can show the surgeon’s impairment caused her harm.

Vicarious Liability
Under the doctrine of respondeat superior,50 an employer may be held liable for negligent acts or omissions of an employee occurring within the scope and course of that employee’s duties. A person who provide an alcoholic beverage to a person under 21 or to an apparently intoxicated person may be held liable for injuries and damages caused by that person.51 A parent may be held liable for harm caused by negligent driving of a child, as well as for intentional torts committed by a child.52

Proof of Breach of Standard of Care
Generally, expert testimony is required to establish that an investment counselor, a doctor, a lawyer, an engineer, or other professional acted beneath the standard of care expected of persons functioning in that field. However under the doctrine of res ipsa loquitur negligence can be established by a showing that the instrumentality of harm was within the exclusive control of the defendant and that what occurred normally doesn’t occur in the absence of negligence. A surgeon leaving a pair of forceps inside a patient’s body is an example of that.

When a statute, such as a traffic rule, exists which is intended to prevent the type of harm suffered by a negligence claimant, violation of that statute may establish negligence.53

Defenses to Negligence
A person accused of negligence may assert that the injured party assumed the risk of injury when choosing to participate in a potentially dangerous activity. The assumption of risk defense requires proof that the risk was fully appreciated and voluntarily incurred.

A defendant may also assert that negligence of the plaintiff himself caused or contributed to his injury.54

One may defend a claim of negligence by showing he acted in conformity with the standards or procedures commonly followed in his occupation but that will not necessarily save him. The standard is reasonable care whether or not it is followed by the majority of practitioners in a particular field and courts have imposed liability when they find an entire industry is not adhering to a reasonable standard of safety.55

 

STRICT LIABILITY

A person or company who carries on an abnormally dangerous or ultra-hazardous activity may be held strictly liable for harm caused by that activity without regard to fault or issues of the exercise of reasonable care.56 Strict liability has been applied in cases involving mine blasting, oil extraction, and the storage of toxic waste waters. Applying strict liability is a matter of public policy. A weighing of societal interests is involved. On the one hand, one considers the gravity of harm that might occur from the activity and the likelihood of that harm occurring. One the other hand, one considers the need of the activity in providing products needed in modern society and the burden, expense and feasibility of making the activity completely safe.

PRODUCTS LIABILITY

Injuries sustained in the use of chain saws, crutches, champagne corks, burglar alarms, farm machinery and other consumer products give rise to product liability claims. Typically, the plaintiffs allege negligence and breach of various warranties as a basis for recovery. The stronger claim now is strict liability based on a showing that the product is “defective and unreasonably dangerous” in one or more of three ways:

(1) In the way it was designed; 2. In the way it was manufactured; or 3. In the way its users were (or were not) warned.

A product has a defective design if as a result of its design, it fails to perform as safely as an ordinary user would expect it to perform when used in a manner reasonably foreseeable to the manufacturer.57 Some courts also require proof that a safer alternative design was available and feasible. 58 So far, no such showing has been required in Utah state courts.

A product has a manufacturing defect when the product departs from its intended design, even if all possible care was exercised.59

There is no duty to warn about a danger from a product’s foreseeable use which is generally known and recognized. There is a duty to warn about a danger from the product’s foreseeable use of which the defendant knew or reasonably should have known and which a reasonable user would not expect. If a duty to warn is found, any warning given must be adequate. A warning is adequate if it was designed to reasonably catch the user’s attention, was understandable to foreseeable users, fairly indicated the danger from the product’s foreseeable use, and was sufficiently conspicuous to match the magnitude of the danger.60

Defenses to Product Liability Claims
A product liability claim may be defeated by proof that the claimant misused the product and the misuse was not reasonably foreseeable. A defense of assumption of risk may also be asserted. It would require proof that the claimant knew and fully appreciated the risk of using the defective product and voluntarily assumed that risk, though his doing so was unreasonable. A controversial defense is that the product was subject to and satisfied government regulations and standards. The U.S. Supreme court approved that defense in the case of medical devices which have gone through a “rigorous process” of premarket approval by the FDA61. Whether this defense should preclude claims against other products remains the subject of intense debate.

CONCLUSION

Armed with basic knowledge of torts and how they are handled in Utah courts, an entrepreneur should be careful not to commit them and vigilant in guarding against employees and associates committing them.