Mack v. Utah Dep't of Commerce

2009 UT 47
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Richard W. Mack, 	No. 20070301
Plaintiff and Appellee,
v.
Utah State Department of 	F I L E D
Commerce, Division of Securities,
Defendant and Appellant. 	July 31, 2009
---
Third District, Salt Lake
The Honorable Joseph C. Fratto, Jr.
No. 060916268
Attorneys: 	Stephen K. Christiansen, Sam Meziani, Salt Lake City,
for plaintiff
Annina M. Mitchell, Salt Lake City, for defendant
Joseph V. Brady, Rex Staples, Stephen W. Hall,
Leslie M. Walker, Mark W. Pugsley, Salt Lake City,
amicus North American Securities Administrators
Association, Inc.
Glenn C. Hanni, Scott R. Jenkins, Salt Lake City,
amici Walnut Street Securities, Inc., Carole A.
Turner
---
DURHAM, Chief Justice:
INTRODUCTION
¶1 	The Utah Uniform Securities Act governs the licensing,
regulation, and discipline of professionals in the securities
industry. 	The Act provides two fora for disciplining
professionals: 	agency adjudications and district court actions.
¶2 	In this appeal, the Division of Securities (the
Division) argues that under the statute, it can only obtain
limited remedies from each forum. 	Thus, the Division asks us to
overturn the district court’s order enjoining the Division from
pursuing disciplinary action against appellee Richard W. Mack’s

No. 20070301 	2
securities license in an agency adjudication after a district
court dismissed with prejudice an earlier action based on the
same facts. 	We hold that the Division’s challenge to the
injunction was procedurally proper but that Mack is not required
to exhaust the administrative process, as the process itself
constitutes the harm of which Mack complains. 	We also hold that
claim preclusion bars the administrative action. 	Accordingly, we
affirm the district court’s order.
BACKGROUND
¶3 	In February 2005, the Division brought a civil action
in the district court against Richard Mack and other parties.
With respect to Mr. Mack, the Division sought sanctions and a
fine against Mack as the branch manager and a general principal
of Walnut Street Securities, Inc. for failing to supervise a
securities agent employed by the securities firm.
¶4 	This failure, the Division alleged, violated Utah Code
section 61-1-1, the antifraud provision of the Utah Uniform
Securities Act. 	Specifically, the Division alleged that Mack
failed to detect “red flags” in the agent’s behavior, to adopt
and implement adequate supervisory and compliance procedures, to
reasonably supervise the agent in a way that would detect or
prevent a violation of securities laws, to investigate
discrepancies between oral and written reports regarding outside
business activity provided by the agent, to maintain records of
efforts to inquire into the agent’s outside business activities,
and to reasonably carry out policies and procedures of Walnut
Street Securities’ compliance manual. 	As a remedy, the Division
requested a judgment that Mack violated the Utah Uniform
Securities Act, a permanent injunction enjoining him from
violating the Act, a restitution order, a fine, attorney fees,
and costs and expenses.
¶5 	Mack moved to dismiss the complaint pursuant to rule
12(b)(6) of the Utah Rules of Civil Procedure. 	Mack argued that
the acts alleged by the Division were unconnected with the sale
of securities and, if true, constituted mere negligent
supervision, which would not support a finding of fraud because
fraud requires willful conduct. 	Additionally, Mack argued that
the Utah Uniform Securities Act did not allow the Division to
seek restitution on behalf of private plaintiffs.
¶6 	After hearing argument from the Division, Mack, and
other defendants, the district court determined that the Division
had failed to allege willful conduct or a causal nexus between
Mack’s actions and the unlawful sale of securities. 	The court

3 	No. 20070301
therefore held that the Division failed to plead a cause of
action based on fraud. 	Additionally, the district court held
that restitution was not a remedy available to the Division under
the Utah Uniform Securities Act. 	Thus, on July 14, 2006, the
court dismissed the Division’s claims. 	However, the district
court specifically gave the Division thirty days from the
dismissal to file an amended complaint “if it [could] identify
appropriate facts and different grounds to support a claim for
injunctive relief as it pertain[ed] to the . . . [d]efendants’
licensure based on alleged failure to supervise.” 	Order, at 3,
State v. Walnut St. Sec., Inc., No. 050500310 (5th Dist. July 14,
2006). 	The Division did not file an amended complaint, and thus
on August 25, 2006, a final order was entered dismissing with
prejudice the Division’s claims against Mack. 	The Division did
not appeal this decision.
¶7 	Instead, on August 3, 2006, the Division filed an
administrative action with the director of the Division of
Securities seeking a revocation of Walnut Street Securities’ and
Mack’s securities licenses, a bar from the Utah securities
industry, and a $300,000 fine. 	In this administrative action,
the Division alleged the same facts relating to Mack’s failure to
supervise as it had alleged in the civil complaint. 	The Division
alleged that Mack’s omissions violated Utah Code section 61-1-
6(2)(j), the National Association of Securities Dealers Conduct
rule 3010, and Utah Administrative Code rule 164-6-1g(C)(28).
¶8 	In October 2006, Mack filed a complaint for injunctive
relief in the district court. 	Mack argued that res judicata
barred the Division’s administrative action and sought a
temporary restraining order and both a preliminary and a
permanent injunction to enforce this bar. 	Mack also sought
preliminary and permanent injunctive relief to enjoin the
Division from disseminating any information to the public or to
any source that might disseminate information to the public
regarding the administrative action.
¶9 	The district court denied Mack’s request for a
temporary restraining order and conducted a hearing to address
whether res judicata barred the administrative action and whether
Mack was required to exhaust administrative remedies by raising
the issues first in the administrative proceeding. 	After
argument, the district court issued a memorandum decision holding
that the administrative action was barred by res judicata because
(1) it involved the same parties, (2) the district court in the
earlier civil action had the authority to hear all claims that
were and should have been presented, and (3) the earlier case
ended in a final judgment on the merits. 	Further, the district

No. 20070301 	4
court held that the res judicata bar rendered the exhaustion of
administrative remedies requirement unnecessary. 	The court found
that Mack was likely to prevail on the merits of his request for
an injunction, but it declined to address the other injunction
requirements during that hearing.
¶10 	Approximately one month after the district court
entered its Memorandum Decision, the Division submitted a motion
to dismiss based on rule 12(b)(6) of the Utah Rules of Civil
Procedure. 	The Division argued that Mack failed to state an
underlying cause of action to support a grant of injunctive
relief because res judicata is a defense, not a cause of action,
and rule 65A of the Utah Rules of Civil Procedure does not create
a substantive right. 	The district court scheduled a hearing to
address the Division’s motion to dismiss and Mack’s requested
injunctive relief. 	Before the hearing, the Division stipulated
to a finding of irreparable harm. 	Additionally, before the
hearing, the parties resolved the dispute regarding the
Division’s communications about Mack. 	Therefore, the hearing
focused on the Division’s motion to dismiss for failure to state
a claim. 	Following the December 2006 hearing, the Court entered
an order denying the Division’s motion to dismiss and granting an
injunction barring the administrative proceeding against Mack
based on res judicata. 	The Division appealed the district
court’s order. 	We have jurisdiction pursuant to Utah Code
section 78A-3-102(3)(j) (2008).
ANALYSIS
¶11 	The Division asks us to address three questions:
first, whether the district court properly denied the Division’s
motion to dismiss; second, whether the district court properly
excused Mack from exhausting administrative remedies; and third,
whether the district court was correct in determining that the
Division’s administrative action was barred by res judicata. 	We
affirm the decision of the district court on all issues.
I. 	THE DISTRICT COURT PROPERLY DENIED
THE DIVISION’S MOTION TO DISMISS
¶12 	The propriety of a denial of a Rule 12(b)(6) motion is
a legal determination that we review for correctness. 	Summit
Water Distrib. Co. v. Summit County, 2005 UT 73, ¶ 12, 123 P.3d
437; see also Utah R. Civ. P. 12(b)(6). 	Mack argues that the
district court properly dismissed the motion because the
Division’s motion to dismiss was improper on procedural grounds
and failed on the merits. 	We conclude that the Division’s motion

5 	No. 20070301
was procedurally proper but that the district court correctly
denied it on the merits.
A. The Division Did Not Waive Its Defense for Failure to
State a Claim nor Did It Invite Error by Failing to
Bring the Motion to Dismiss Earlier in the Proceedings
¶13 	Mack argues that the district court should have denied
the Division’s motion to dismiss because the Division waived the
right to bring the motion by not including it in an answer or
responsive pleading. 	Further, Mack argues that by allowing the
district court to first consider the merits of Mack’s res
judicata claim, the Division waived its claim and invited error.
We disagree. 	The Division did not waive its rule 12(b)(6) claim
nor invite error because a party may raise a failure to state a
claim defense in later pleadings. 	Additionally, the Division did
not invite error because it moved for dismissal for failure to
state a claim before the case concluded, which provided the court
with the opportunity to address the issue.
¶14 	By moving for dismissal for failure to state a claim
before the final hearing, the Division avoided waiving the
defense. 	Normally, a party waives all defenses not raised in a
responsive pleading, such as an answer or reply. 	Utah R. Civ. P.
12(b) and (h). 	A defense of failure to state a claim, however,
falls under a procedural exception and may be raised any time
before the court or jury determines the validity of a party’s
claim. 	Utah R. Civ. P. 12(h) (“[T]he defense of failure to state
a claim upon which relief can be granted . . . may also be made
by a later pleading . . . or at the trial on the merits.”). 	In
other words, “[i]ssues brought under the exception of Rule 12(h)
may be raised before or during trial. 	However, Rule 12(h)
certainly does not mean that failure to state a claim can be
raised for the first time on appeal.” 	Smith v. Vuicich, 699 P.2d
763, 764 (Utah 1985)(internal citation omitted). 	Here, although
the Division’s timing created inconvenience, it was permitted to
move to dismiss the action based on rule 12(b)(6) before a trial
or ultimate hearing regarding Mack’s request for injunctive
relief.
¶15 	The invited error doctrine precludes an appellate court
from considering an issue on appeal that was not only unobjected
to in the trial court, but was in fact submitted by argument,
thereby depriving the court of the opportunity to correct any
error. 	State v. Winfield, 2006 UT 4, ¶ 14, 128 P.3d 1171
(“[U]nder the doctrine of invited error, we have declined to
engage in even plain error review when ‘counsel, either by
statement or act, affirmatively represented to the [trial] court

No. 20070301 	6
that he or she had no objection to the [proceedings].’”
(alterations in original)(quoting 	State v. Hamilton, 2003 UT 22,
¶ 54, 70 P.3d 111)). 	In this case, although the Division
responded to the substance of Mack’s res judicata claim before
asserting its 12(b)(6) argument, it eventually alerted the
district court, though belatedly, to its objection to the
injunctive action. 	This provided the district court with an
opportunity to rule on the Division’s objection. 	Thus, the
Division’s motion to dismiss was procedurally proper and the
trial court did not err by addressing its merits.
B. 	The District Court Correctly Denied the Division’s Motion
Because Mack’s Complaint and Accompanying Request for
Injunction Adequately Alerted the Division of His Claims
¶16 	The Division argues that the district court erred in
denying its motion to dismiss because to request injunctive
relief a party must allege a legal claim and Mack failed to do
so. 	We disagree; instead, we find that Mack’s Complaint for
Injunctive Relief sufficiently alleged a claim upon which relief
could be granted.
¶17 	A complaint that alleges the facts and sets forth the
legal basis for an available legal remedy adequately states a
claim upon which relief can be granted. 	Rule 12(b)(6) reflects
Utah’s adoption of notice pleading and, therefore, relies on rule
8 of the Utah Rules of Civil Procedure. 	Rule 8 requires a
complaint to contain a “short plain statement of the claim
showing that the pleader is entitled to relief.” 	Utah R. Civ. P.
8. 	Thus, under rules 8 and 12, a complaint must provide “‘fair
notice of the nature and basis or grounds of the claim and a
general indication of the type of litigation involved,’” Blackham
v. Snelgrove, 280 P.2d 453, 455 (Utah 1955) (quoting Barron &
Holtzoff, Fed. Prac. & Proc., vol. 1, p. 431-4), and “a complaint
does not fail to state a claim ‘unless it appears to a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proved in support of the claim.’” 	Id.
(quoting Leimer v. State Mut. Life Assur. Co., 108 F.2d 302, 306
(8th Cir. 1940)). 	When applying this standard, courts are to
liberally construe both rules 8 and 12 to favor finding a
pleading sufficient. 	Russell v. Standard Corp., 898 P.2d 263,
264 (Utah 1995) (explaining that when ruling on a motion to
dismiss for failure to state a claim, the court must construe the
complaint in the light most favorable to the plaintiff and
indulge all reasonable inferences in his favor); Gill v. Timm,
720 P.2d 1352, 1353 (Utah 1986) (“Rule 8(a) is to be liberally
construed when determining the sufficiency of a plaintiff’s
complaint.”).

1 A memorandum or brief can be used to clarify the
allegations in a complaint. 	See Pegram v. Herdich, 530 U.S. 211,
229-30 (2000).
2 The Division argued at length that Mack failed to allege
an underlying claim to support an injunction pursuant to rule
65A. 	However, the district court denied Mack’s request for a
temporary injunction before the state filed its motion to
dismiss. 	Thus, in this appeal, the Division challenges only the
grant of a permanent injunction and all arguments related to
preliminary injunctions under rule 65A are irrelevant.
7 	No. 20070301
¶18 	In this case, Mack’s complaint contained sufficient
facts and allegations to notify the Division of the grounds for
his claim and the injunctive relief sought. 	In particular,
Mack’s complaint recounted the factual basis for the earlier
district court action, the claims brought, and the court’s final
disposition of the claim. 	Similarly, Mack identified the facts
underlying the administrative proceeding. 	Mack clearly claimed
that he was entitled to temporary and permanent injunctive relief
because based on the facts alleged, res judicata barred the
administrative action. 	Additionally, in the memorandum
supporting Mack’s request for an immediate order of injunctive
relief, 1 Mack alleged that the Division, in the action in the
administrative forum, was attempting to relitigate issues and
claims previously adjudicated by the district court and was thus
subjecting Mack to duplicative and harassing litigation that was
barred by res judicata.
¶19 	The Division argues that despite the adequately
detailed allegations, Mack’s claim did not meet the requirements
of rules 8 and 12 because Mack relied on either his request for
injunctive relief or res judicata as his claim for relief and
neither is a “cause of action.” 2 	This argument interprets the
requirements to state a claim too narrowly. 	A party has a claim
if the alleged facts “‘give rise to a right enforceable in the
courts.’” 	Swainston v. Intermountain Health Care, Inc., 766 P.2d
1059, 1061 (Utah 1988)(quoting Original Ballet Russe v. Ballet
Theatre, 133 P.2d 187, 189 (2d Cir. 1943)); see also Johnson v.
Hermes Assocs., Ltd., 2005 UT 82, ¶ 13, 128 P.3d 1151 (explaining
that to obtain permanent injunctive relief, a party must show,
among other things, that he has a property right or protectable
interest irreparably harmed by the acts of the opposing party).
Here, by pleading the circumstances of both the first and second
actions brought by the Division, Mack provided the Division with
fair notice of the basis and grounds for his claim that he had a
protectable interest in avoiding duplicative, harassing, and

No. 20070301 	8
judicially barred litigation, and that without an injunction he
would be irreparably harmed.
¶20 	The Division also argues that even if Mack alleged a
sufficient claim for legal relief, he requested the wrong
equitable remedy for his alleged injury. 	The Division suggests
that extraordinary relief under rule 65B was instead the proper
procedural vehicle. 	Although rule 65B relief might indeed have
been available, this fact does not warrant a dismissal of Mack’s
complaint. 	As discussed above, Mack alleged sufficient facts to
support the legal elements required for his claim. 	Under our
liberal construction of rule 8, we find this was sufficient;
further, the facts alleged in Mack’s complaint were certainly
enough for the Division to defend against Mack’s claim that the
administrative action was judicially barred. 	In fact, the
Division appears to have responded to Mack’s claim as if he had
advanced it under rule 65B. 	Thus, under rule 15, the trial court
and this court could treat the complaint as a rule 65B action,
rather than a standard injunction action. 	In particular, under
rule 15, the fact that Mack never amended the complaint to seek
rule 65B relief cannot affect the outcome of the court’s granting
65B relief. 	Utah R. Civ. P. 15(b) (“When issues not raised by
the parties are tried by express or implied consent of the
parties, they shall be treated in all respects as if they had
been raised in the pleadings. . . . [F]ailure to so amend does
not affect the result of the trial of these issues.”); see also
Gill, 720 P.2d at 1353 (noting that amending pleadings to conform
to the evidence is much preferred to dismissal, especially when
trial on the existing pleading has taken place). 	Moreover
addressing remedies specifically, under rule 54(c) a district
court may tailor its judgment to the relief required. 	Mabey v.
Kay Peterson Constr. Co., 682 P.2d 287, 290 (Utah 1984)(“Utah R.
Civ. P. 54(c)(1) directs that every final judgment shall grant
the relief to which the party in whose favor it is rendered is
entitled, even if the party had not demanded such relief in his
pleadings.”).
¶21 	In conclusion, while it is possible that Mack could
have chosen a better procedural vehicle to bring this claim, the
court did not err by denying the Division’s motion to dismiss.
Liberally construing the requirements of rules 8 and 12, a court
should not dismiss a plaintiff’s complaint for inartful pleading.
In this case, because Mack provided adequate notice of the basis
for and type of claim he was bringing, and because it appeared
that relief could be granted, we hold that his complaint
satisfied the requirements of rules 8 and 12. 	The district court
did not err by denying the Division’s motion to dismiss.

9 	No. 20070301
II. 	THE DISTRICT COURT PROPERLY GRANTED A PERMANENT INJUNCTION
BECAUSE LEGAL AND ADMINISTRATIVE REMEDIES WERE INADEQUATE
¶22 	We next address whether the district court properly
granted injunctive relief or if instead Mack was required to
first exhaust his administrative remedies before seeking
injunctive relief. 	We review a grant of equitable relief for an
abuse of discretion. 	Harline v. Campbell, 728 P.2d 980, 984
(Utah 1986). 	We review the underlying legal questions, such as
whether a party is required to exhaust administrative remedies,
for correctness. 	State v. Wagenman, 2003 UT App 146, ¶ 6, 71
P.3d 184. 	As discussed below, neither the standard for
injunctive relief nor the Securities Act require Mack to submit
to the administrative action before seeking injunctive relief
from the district court.
¶23 	A court may only grant a permanent injunction when
legal remedies are inadequate. 	Johnson v. Hermes Assocs., Ltd.,
2005 UT 82, ¶ 13, 128 P.3d 1151. 	A legal remedy is inadequate
“when ‘[a party] is unlikely to be made whole by an award of
monetary damages or some other legal . . . remedy,’” 	Id. ¶ 20
n.8 (alteration in original)(quoting 42 Am. Jur. 2d Injunctions
§ 33 (2004)), or the legal remedy is not as “practicable and
efficient toward the ends of justice as an injunction.” 	Hunsaker
v. Kersh, 1999 UT 106, ¶ 9 n.1, 991 P.2d 67 (quoting 42 Am. Jur.
2d Injunctions § 39).
¶24 	In the present case, Mack alleges that defending his
interests in an administrative process will result in irreparable
harm to his reputation, as well as require him to incur extensive
expenses and expend great amounts of time. 	The only available
legal remedy for such damage would be a monetary award. 	However,
as Mack alleges, a monetary award could not compensate for the
damage to his reputation or the unnecessary stress and trouble he
would encounter if the administrative hearing was later found to
have been legally barred. 	Moreover, to obtain a monetary award,
Mack would be required to see the administrative action to its
conclusion, which could involve a trial de novo and a possible
appeal. 	See Utah Code Ann. 63G-4-402 (Supp. 2008). 	In this
case, the process of pursuing his res judicata arguments in the
administrative hearing itself constitutes the harm for which Mack
seeks relief. 	If he is required to submit to that harm before
being permitted to seek a remedy for it, the inadequacy of the
remedy seems self-evident. 	See Cont’l Can Co. v. Marshall, 603
F.2d 590, 597 (7th Cir. 1979). 	Therefore, the district court did
not abuse its discretion in determining that legal remedies were
inadequate.

No. 20070301 	10
¶25 	The Division, however, argues that a legal remedy was
not only an adequate remedy, but that Mack was required to
exhaust the administrative process that would itself occasion the
monetary damages. 	We disagree. 	While it is true that both
statute and case law strongly favor exhaustion of remedies,
exhaustion is not required in this case. 	In legal actions based
on the Utah Uniform Securities Act, a party is required to
exhaust all administrative remedies when challenging the final
decision of an administrative agency. 	See Utah Code Ann. § 61-1-
18.6 (Supp. 2008) (incorporating the Utah Administrative
Procedures Act); Id. § 63G-4-401 (Supp. 2008) (allowing judicial
review of a final agency action “only after exhausting all
administrative remedies available”). 	But Mack is not seeking
review of a final agency decision; he is instead attempting to
prevent what he claims is a duplicative and unlawful proceeding.
Thus, the exhaustion requirement does not apply to Mack’s claim.
III. 	CLAIM PRECLUSION BARS THE DIVISION FROM PURSUING THE
ADMINISTRATIVE ACTION AGAINST MACK
¶26 	Whether res judicata, and more specifically claim
preclusion, “bars an action presents a question of law” that we
review for correctness. 	Macris & Assocs., Inc. v. Neways, Inc.,
2000 UT 93, ¶ 17, 16 P.3d 1214. 	In this case, the district court
correctly held that claim preclusion barred the Division’s
administrative action to suspend Mack’s license because the
Division could have brought this claim in the district court
action. 	Because we hold that claim preclusion bars the
Division’s administrative action, we do not reach the Division’s
issue preclusion argument.
¶27 	Under the Utah Uniform Securities Act the Division has
three avenues for enforcing the provisions of the Act: equitable
actions, administrative proceedings, and criminal actions. 	At
issue in this case are the first two forms of enforcement. 	Utah
Code section 61-1-20 allows the Division to use adjudicative
procedures in the administrative forum to petition the Division
of Securities director to enter cease and desist orders, impose
fines, and bar persons from the securities industry in the state
of Utah. 	Utah Code Ann. § 61-1-20(1) (2006). 	Under the same
section, the Division may also bring an action in district court
to enforce compliance with the Act or any rule made pursuant to
the Act. 	Id. § 61-1-20(2). 	Subsection 2 grants the district
court jurisdiction to issue equitable relief, order disgorgement
and rescission, impose fines, or “enter any other relief the
court considers just.” 	Id. 	Additionally, Utah Code section 61-
1-6 allows the director through administrative proceedings to
sanction persons registered with the Division of Securities by

3 Although Utah Code section 61-1-6 was amended in 2008, no
substantive changes were made; therefore we cite to the most
current version of the statute. 	See 2008 Utah Laws 3336-37.
11 	No. 20070301
suspending and revoking securities licenses, barring a person
from the securities industry in Utah, restricting the
responsibilities of registered persons, and imposing fines. 	Id.
§ 61-1-6(1) (2006 & Supp. 2008). 3 	These sanctions are allowed
for enumerated acts such as failing to supervise agents or
employees. 	Id. § 61-1-6(2)(j). 	Section 61-1-6.5 also gives the
courts jurisdiction to order the Division to “withhold, suspend,
restrict, or reinstate the use of securities licenses issued
under” the Act. 	Id. § 61-1-6.5 (2006).
¶28 	In this case, the Division first pursued a civil action
against Mack, requesting the district court to enter a judgment
finding that Mack violated the Utah Uniform Securities Act,
permanently enjoining Mack from violating the Act, ordering
restitution, and imposing a fine based on the Division’s
allegation that Mack violated the Act’s prohibition of fraud by
failing to supervise his employees. 	The district court denied
this relief but invited the Division to amend its complaint to
bring any other claims it could based on the same facts relating
to the licensure of Mack. 	The Division declined to do so even
though section 61-1-6.5 gives the district court clear authority
to order the revocation of Mack’s license. 	The Division chose
instead to employ the administrative forum and requested the
director in the administrative proceedings to revoke Mack’s
license, to bar him from the securities industry in Utah, and to
impose a fine. 	Mack argues that this administrative action is
barred by res judicata. 	We agree.
¶29 	“The doctrine of res judicata embraces two distinct
branches: 	claim preclusion and issue preclusion.” 	Macris &
Assocs., 2000 UT 93, ¶ 19. 	“[C]laim preclusion corresponds to
causes of action[;] issue preclusion corresponds to the facts and
issues underlying causes of action.” 	Oman v. Davis Sch. Dist.,
2008 UT 70, ¶ 31, 194 P.3d 956. 	“Claim preclusion ‘is premised
on the principle that a controversy should be adjudicated only
once.’” 	Nebeker v. State Tax Comm’n, 2001 UT 74, ¶ 23, 34 P.3d
180 (quoting Salt Lake Citizens Cong. v. Mountain States Tel. &
Tel. Co., 846 P.2d 1245, 1251 (Utah 1992)). 	Whether a claim is
precluded from relitigation depends on a three-part test.
First, both cases must involve the same
parties or their privies. 	Second, the claim
that is alleged to be barred must have been
presented in the first suit or be one that

No. 20070301 	12
could and should have been raised in the
first action. 	Third, the first suit must
have resulted in a final judgment on the
merits.
Snyder v. Murray City Corp., 2003 UT 13, ¶ 34, 73 P.3d 325
(quoting Miller v. USAA Cas. Ins. Co., 2002 UT 6, ¶ 58, 44 P.3d
663). 	Here the first and third elements are easily met. 	Both
actions involve the same parties--the Division and Mr. Mack.
Further, the district court action, which was resolved under Utah
Rule of Civil Procedure 12(b)(6), resulted in a final judgment on
the merits. 	See Fed. Deposit Ins. Corp. v. Paul, 735 F. Supp.
375, 380 (D. Utah 1990) (“‘A motion to dismiss for failure to
state a claim upon which relief can be granted . . . [is a]
dismissal . . . on the merits and is accorded res judicata
effect.’” (alteration in original)(quoting 2A James Wm. Moore et
al., Moore’s Federal Practice § 12.07 (2d ed. Supp. 1987))).
Therefore, we focus our analysis on whether the claims in the
administrative action were, or could have been, presented in the
first action, the district court action. 	We hold that they
could.
¶30 	Claims or causes of action are the same as those
brought or that could have been brought in the first action if
they arise from the same operative facts, or in other words from
the same transaction. 	See Restatement (Second) of Judgments § 24
(1982). 	Previously we have held that two causes of action are
the same if they rest on the same “state of facts,” and the
evidence “necessary to sustain the two causes of action” is of
the same kind or character. 	Schaer v. State, 657 P.2d 1337, 1340
(Utah 1983). 	More recently, however, we have moved toward the
transactional theory of claim preclusion espoused by the
Restatement (Second). 	For example, in Burnett v. Utah Power &
Light Co., we noted that “[r]ather than resting on the specific
legal theory invoked, res judicata generally is thought to turn
on the essential similarity of the underlying events giving rise
to the various legal claims.” 	797 P.2d 1096, 1098 (Utah 1990)
(quoting Davis v. U.S. Steel Supply, 688 F.2d 166, 171 (3d Cir.
1982) (en banc)). 	See also 	Swainston v. Intermountain Health
Care, Inc., 766 P.2d 1059, 1061 (Utah 1988) (“A claim or cause of
action is ‘the aggregate of operative facts which give rise to a
right enforceable in the courts.’” (quoting Original Ballet Russe
v. Ballet Theatre, 133 F.2d 187, 189 (2d Cir. 1943))). 	While in
some cases we have still suggested that the evidence needed to
sustain the claims must be the same, this requirement was not
dispositive for these cases. 	For example, in Macris & Assocs.,
Inc., we held that a claim based on the Utah Fraudulent Transfer
Act was not the same as a claim for breach of contract because

13 	No. 20070301
they did not involve the same facts and different evidence would
be required to sustain each claim. 2000 UT 93, ¶¶ 29-31. 	We
found that the claims were based on very different facts; the
first claim was based on a distributorship agreement that was
allegedly breached in 1991, and the second claim was based on the
creation of a new company and a transfer of assets to this
company, all of which occurred in 1992. 	Critical to our holding
was the circumstance that the two claims arose out of different
transactions. 	Id. 	Thus, if a party raises claims based on the
same operative facts or the same transaction, it may be precluded
if the other elements of claim preclusion are met. 	There are,
however, exceptions to this rule, and the Division argues that
its administrative claims fall within the exceptions.
¶31 	The Division argues that it could not have brought its
claim for negligent supervision in the district court action,
even if it is the same claim under the operative fact test,
because the district court did not have subject matter
jurisdiction. 	According to the Division the district court does
not have subject matter jurisdiction over revoking or suspending
securities licenses because the legislature provided exclusive
fora for specific claims under the Securities Act.
¶32 	A claim is not the same claim, in terms of claim
preclusion, if it could not have been brought in the first
action, and, of course, a party may not bring a claim in a first
action if the court lacks subject matter jurisdiction. 	SMP, Inc.
v. Kirkman, 843 P.2d 531, 533 (Utah Ct. App. 1992)(“It is
axiomatic that before we will apply res judicata to the prior
adjudication of a claim, the prior adjudicating tribunal must
have had subject matter jurisdiction to adjudicate the claim on
its merits.”); Restatement (Second) of Judgments § 26(1)(c)
(explaining that claim preclusion does not apply when “[t]he
plaintiff was unable to rely on a certain theory of the case or
to seek a certain remedy or form of relief in the first action
because of the limitations on the subject matter jurisdiction of
the courts”). 	For this exception to apply, one of the fora used
must have exclusive jurisdiction, not merely limited
jurisdiction, over the claims alleged to be barred. 	Compare
Restatement (Second) of Judgments § 26 cmt. c(1), with id. § 24
cmt. g.
¶33 	A district court has subject matter jurisdiction over a
legal claim unless adjudicative authority for that claim is
specifically delegated to an administrative agency. 	District
courts have general jurisdiction, which provides them with broad
adjudicative authority. 	Utah Code Ann. § 78A-5-101 and -102
(2008). 	Only in instances where the legislature grants exclusive

No. 20070301 	14
jurisdiction to an administrative agency, or otherwise explicitly
restricts the courts’ jurisdiction, does the district court lack
subject matter jurisdiction. 	See, e.g., Beaver County v. Qwest,
Inc., 2001 UT 81, ¶¶ 10-11, 31 P.3d 1147 (holding that the
legislature granted exclusive authority over ratemaking to the
Public Service Commission). 	For example, the Workers’
Compensation Act gives the Labor Commission exclusive authority
over employees’ claims against their employers for injuries
sustained in the workplace. 	Utah Code Ann. § 34A-2-105 (Supp.
2008). 	Agencies, in contrast, are limited to the adjudicative
authority granted by the legislature. 	SMP, Inc., 843 P.2d at 533
(“As a statutorily created agency, the Industrial Commission has
only those powers expressly or impliedly granted by statute.”)
For this reason, it is more likely that an administrative
agency’s subject matter jurisdiction will be limited than a
district court’s. 	Id. (“[A]gencies typically have limited
subject matter jurisdiction.”); see also id. at 533-34 (holding
that the Industrial Commission only had subject matter
jurisdiction over claims under the payment of wages statute and
not contract claims); Nebeker, 2001 UT 74, ¶ 23 (holding that the
Tax Commission did not have subject matter jurisdiction to
resolve a constitutional challenge). 	In some instances, however,
such as in the Securities Act, the legislature creates a
statutory scheme that contemplates proceedings in different
tribunals affording possibly different remedies. 	In such
statutory schemes it is not immediately apparent whether the
legislature intended to create remedies exclusive to a particular
forum, thereby removing subject matter jurisdiction from the
other forum. 	Therefore, we carefully analyze the language and
structure of the Act to determine the legislature’s intent.
State v. Schofield, 2002 UT 132, ¶ 8, 63 P.3d 667.
¶34 	Reviewing both the grant of authority to the
administrative agency and the district court, and also the
Securities Act as a whole, we conclude that the remedies provided
therein are not exclusive to one forum and therefore the district
court did not lack subject matter jurisdiction to hear the
licensing issues. 	The Division argues that the district court
does not have jurisdiction because negligent supervision is
addressed under the section providing the director with authority
to suspend or revoke securities licenses. 	See Utah Code Ann.
§ 61-1-6(j). 	However, the negligent supervision subsection’s
placement in the statute does not grant the administrative agency
with exclusive authority over such issues. 	Instead, the statute
also grants the district court with broad authority, allowing the
court to revoke or suspend a license and to prohibit any
securities practices through an order to the Division, Utah Code
Ann. §§ 61-1-6(2)(d) and -6.5, or “enter any other relief the

15 	No. 20070301
court considers just” in order to “enforce compliance with [the
Securities Act] or any rule or order under [the Securities Act].”
Id. § 61-1-20(2)(viii) (2006). 	This power is granted “in
addition to” the sanction authority given to the director in
section 61-1-6. 	Id. § 61-1-20. 	Thus, with these overlapping
grants of authority, the Securities Act provides concurrent
jurisdiction in the district court and the Division director to
enforce the Securities Act. 	Because the Division does not have
exclusive authority to revoke or suspend securities licenses for
negligent supervision, it could have brought the licensing issues
related to Mr. Mack’s supervision of his employee in the district
court action, and it is now barred from doing so in an
administrative action.
CONCLUSION
¶35 	We hold that the district court did not err in granting
injunctive relief. 	While the Division properly brought a motion
to dismiss, the district court did not err in denying it when
Mack adequately alleged facts that put the Division on notice of
the basis and grounds for his claims. 	From these allegations it
appeared that there was an available remedy for Mack’s injury.
Additionally, Mack was not required to first exhaust
administrative or other legal remedies when such remedies were
themselves the harm he sought to prevent and therefore were
inadequate. 	Finally, the district court properly held that claim
preclusion barred the Division’s licensing claim brought in the
administrative action because the district court had authority to
revoke a securities license and provide all the relief available
in the administrative action; therefore, the Division’s
administrative claims could have been brought in the district
court action. 	Accordingly, we affirm the order of the district
court.
---
¶36 	Associate Chief Justice Durrant, Justice Parrish,
Justice Nehring, and Judge Kay concur in Chief Justice Durham’s
opinion.
¶37 	Having recused himself, Justice Wilkins does not
participate herein; District Judge Thomas L. Kay sat.