Nu-Med v. 4Life Research

2008 UT 50
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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Nu-Med USA, Inc., No. 20060505
Plaintiff and Appellant,
v.
F I L E D
4Life Research, L.C.,
Defendant and Appellee. July 29, 2008
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Third District, Salt Lake
The Honorable J. Dennis Frederick
No. 050912431
Attorneys: Peter H. Christensen, H. Scott Jacobson, Salt Lake
City, for plaintiff
Ryan M. Harris, John A. Pearce, Mark D. Tolman,
Salt Lake City, for defendant
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DURHAM, Chief Justice:
¶1 In this appeal we are asked to determine whether the
district court erred in granting summary judgment to 4Life
Research, L.C. (4Life). The district court concluded that Nu-Med
USA, Inc.’s (Nu-Med) claims were barred by rule 13 of the Utah
Rules of Civil Procedure as compulsory counterclaims that were
required to be litigated in prior litigation between the parties.
The court also rejected Nu-Med’s position that it could refile
the claims because they had been voluntarily dismissed without
prejudice in the prior litigation. We hold that Nu-Med’s claims
are not barred by rule 13 and reverse.
BACKGROUND
¶2 In early 2002, 4Life filed a lawsuit against Nu-Med and
Paul Ulrich (Ulrich) in the United States District Court for the
District of Utah (the federal case). Both Nu-Med and 4Life are
network marketing businesses engaged in the sale of various
health related products. In the federal case, 4Life alleged
claims against Nu-Med and Ulrich for breach of contract, business
defamation, intentional interference with business relations, and
conspiracy.

No. 20060505 2
¶3 Nu-Med answered 4Life’s complaint in the federal case
and asserted several counterclaims. Nu-Med moved for summary
judgment and, following discussion of Nu-Med’s motion during two
pre-trial conferences, the court granted Nu-Med’s motion. During
one of the pre-trial conferences, when the court asked if Nu-Med
was interested in pursuing its counterclaims if summary judgment
were granted, counsel for Nu-Med stated they were “willing to
dismiss without prejudice those counterclaims.” Concurrent with
the summary judgment order, Nu-Med voluntarily dismissed its
counterclaims against 4Life without prejudice and with the
court’s approval. The claims between Ulrich and 4Life proceeded
to trial. The jury awarded 4Life nominal damages for Ulrich’s
breach of contract. The jury also found that 4Life had defamed
Ulrich and interfered with the contract between Ulrich and Nu-
Med, and awarded Ulrich $425,000. 4Life appealed its adverse
judgment with respect to Ulrich to the Tenth Circuit, but
ultimately settled with Ulrich while the appeal was pending.
4Life did not appeal the adverse summary judgment grant of the
Nu-Med claims.
¶4 Subsequently, Nu-Med initiated this lawsuit (the state
case) in July 2005, filing claims substantially similar to the
counterclaims it had filed against 4Life in the federal case.
4Life responded that the claims should be dismissed as
“compulsory counterclaims” that could only have been litigated,
if at all, in the federal case. Following oral argument, the
district court agreed with 4Life, granted 4Life’s summary
judgment motion, and dismissed Nu-Med’s complaint with prejudice.
Nu-Med appealed the district court’s decision. We have
jurisdiction pursuant to Utah Code section 78A-3-102(3)(j)
(2008).
STANDARD OF REVIEW
¶5 “We review the district court’s decision to grant
summary judgment for correctness, affording the trial court no
deference. In reviewing the grant of summary judgment, we
recognize that summary judgment is appropriate only when there is
no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law.” Crestwood Cove
Apartments Bus. Trust v. Turner, 2007 UT 48, ¶ 10, 164 P.3d 1247
(citations and internal quotations omitted).
ANALYSIS
¶6 Rule 41 of the Utah Rules of Civil Procedure allows for
a voluntary dismissal of “any counterclaim.” Utah R. Civ. P.
41(c). Rule 13(a) of the Utah Rules of Civil Procedure,
governing compulsory counterclaims, mandates that a party must

1 The numbering within both Utah rule 41 and Federal rule 41
has been amended since the federal district court dismissed Nu-
Med’s claims without prejudice. None of the changes were
substantive. This decision cites the newly numbered versions.
3 No. 20060505
state any counterclaims arising “out of the transaction or
occurrence that is the subject-matter of the opposing party’s
claim.” Utah R. Civ. P. 13(a). 4Life argues that these two
rules are in conflict with each other, and that because rule
13(a) is the more specific of the two rules regarding compulsory
counterclaims, it must govern under ordinary rules of statutory
construction. See Grynberg v. Questar Pipeline Co., 2003 UT 8,
¶ 31, 70 P.3d 1 (quoting Perry v. Pioneer Wholesale Supply Co.,
681 P.2d 214, 216 (Utah 1984)). Nu-Med argues that rule 41’s
language allowing dismissal of “any counterclaim” permits Nu-Med
to refile its claims in this case. Alternately, Nu-Med contends
it fulfilled the requirements of rule 13 by stating its
counterclaims and litigating them up to the point when 4Life’s
claims against Nu-Med were resolved on summary judgment. As
explained below, we conclude that rules 13 and 41 are not in
conflict with each other.
I. RULE 41
¶7 While the federal district court dismissed Nu-Med’s
counterclaims without prejudice pursuant to Federal Rules of
Civil Procedure rather than the Utah Rules of Civil Procedure,
Utah’s rule 41 and its federal counterpart are similar. Both
allow a claimant, whether a plaintiff or a counter claimant, to
voluntarily dismiss a claim upon stipulation of the parties or by
order of the court upon such terms and conditions as the court
deems proper. Compare Fed. R. Civ. P. 41, with Utah R. Civ. P.
41.1 In the federal case, Nu-Med voluntarily dismissed its
counterclaims by court order. Under both the Utah and Federal
Rules of Civil Procedure, it is clear that unless otherwise
specified, a voluntary dismissal under rule 41 is without
prejudice. See Fed. R. Civ. P. 41(a)(2); Utah R. Civ. P.
41(a)(2)(ii). The plain language of both rules suggests that a
court order might specify that a dismissal is with prejudice.
See Fed. R. Civ. P. 41(a)(2); Utah R. Civ. P. 41(a)(2)(ii).
Under both sets of rules, a judge has discretion to set the terms
and conditions of a dismissal. See Fed. R. Civ. P. 41(a)(2);
Utah R. Civ. P. 41(a)(2)(ii); see also Yusky v. Chief Consol.
Mining Co., 236 P. 452, 456 (Utah 1925) (“[W]hat effect [a]
dismissal had presented a legal question for the court.”). In
the federal case, the court order specified that the dismissal of
Nu-Med’s counterclaims was without prejudice.

2 Unlike the Utah rule 41, which requires a court order even
upon stipulation of the parties, the federal rule 41 allows for a
voluntary dismissal without court order upon stipulation of all
parties. Compare Utah R. Civ. P. 41, with Fed. R. Civ. P.
41(a)(1). In this case, however, Nu-Med’s counterclaims were
dismissed upon court order.
No. 20060505 4
¶8 Conceivably, a dismissal without prejudice of a
plaintiff’s or counter claimant’s claim could result in costly
relitigation of the dismissed claim. We have held that this is
particularly true when a counter claimant voluntarily dismisses
its claim while aware that a plaintiff intends to appeal an
adverse judgment on its underlying claims. Harmon v. Greenwood,
596 P.2d 636, 639-40 (Utah 1979). Such is not the case here.
Although 4Life appealed its adverse judgment with regard to
Ulrich, and ultimately settled with Ulrich while the appeal was
pending, it never appealed its adverse judgment on the Nu-Med
claims. Further, the district court is given discretion to issue
or deny2 a voluntary dismissal order upon “such terms and
conditions as the court deems proper.” Utah R. Civ. P.
41(a)(2)(ii). This judicial discretion is key to ensuring that
claims that should not be brought again are not dismissed without
prejudice. The federal district court exercised its discretion
in dismissing Nu-Med’s claims without prejudice, rather than
dismissing them with prejudice or not allowing for a dismissal at
all. The Utah district court therefore had jurisdiction to
consider Nu-Med’s claims, and it was not barred by issue or claim
preclusion because the federal district court’s voluntary
dismissal was without prejudice. 4Life nonetheless argues that
when the counterclaims are compulsory under rule 13, they cannot
be relitigated in spite of the “without prejudice” nature of the
dismissal.
II. RULE 13(a)
¶9 Rule 13(a) of the Utah Rules of Civil Procedure
describes what makes a counterclaim compulsory, and thus barred
from litigation if not brought in the same action as certain
other claims:
A pleading shall state as a counterclaim any
claim which at the time of serving the
pleading the pleader has against any opposing
party, if it arises out of the transaction or
occurrence that is the subject-matter of the
opposing party’s claim and does not require
for its adjudication the presence of third
parties of whom the court cannot acquire

5 No. 20060505
jurisdiction. But the pleader need not state
the claim if (1) at the time the action was
commenced the claim was the subject of
another pending action, or (2) the opposing
party brought suit upon his claim by
attachment or other process by which the
court did not acquire jurisdiction to render
a personal judgment on that claim, and the
pleader is not stating any counterclaim under
this Rule 13.
Utah R. Civ. P. 13(a).
¶10 It is undisputed that Nu-Med’s federal counterclaims
arose “out of the same transaction or occurrence that is the
subject-matter” of 4Life’s claims. Neither is it disputed that
the claims Nu-Med now seeks to bring in the state case are
substantially similar to the counterclaims it brought against
4Life in the federal case. Thus, 4Life argues that these claims
should be deemed compulsory counterclaims that had to be
litigated in the federal case or be barred forever. Nu-Med
argues that because it stated and litigated its claims in the
federal case up to the point where 4Life’s claims were dismissed,
it complied with rule 13(a), and its claims should not be barred.
¶11 Nu-Med and 4Life each present us with cases decided by
other courts that have faced a similar problem. The most
pertinent cases are discussed below.
¶12 Arkansas decided a similar case, but under slightly
different rules of procedure. In Linn v. Nationsbank, the
Arkansas Supreme Court held that under the Arkansas Rules of
Civil Procedure, a counter claimant had a “right to proceed . . .
although the plaintiff’s action may have been dismissed” and that
Arkansas’ compulsory counterclaim rule only required that a
counterclaim be stated, but the court did not explicitly require
litigation of that claim. 14 S.W.3d 500, 505 (Ark. 2000).
Utah’s rule 13 requires more of the litigant than merely stating
a counterclaim. Were it otherwise, the judicial economy policy
of rule 13(a) could be defeated by simply stating a counterclaim
and then voluntarily dismissing it while the underlying claim
proceeded. However, that is not what happened here. Nu-Med
presented and litigated its counterclaims up until the point at
which 4Life’s claims were disposed of by way of summary judgment.
Only then were Nu-Med’s claims voluntarily dismissed without
prejudice.
¶13 In another case discussing compulsory counterclaims,
the Fourth Circuit held that a counter claimant who has its

No. 20060505 6
claims voluntarily dismissed could not bring substantially
similar claims in a new case. SSMC, Inc. v. Steffen, 102 F.3d
704, 711-12 (4th Cir. 1996). In SSMC, the district court held a
status conference with both parties where it discussed dismissing
a counterclaim without prejudice, but flatly stated that because
the counterclaim was compulsory, it had to be litigated in the
same case, so the effect was a dismissal with prejudice. Id. In
other words, the court let the parties know the “terms and
conditions” upon which the claim would be dismissed. Fed. R.
Civ. P. 41(a)(2). “[The counter claimant’s] attorney did not
object to this characterization of [the] counterclaim or this
legal analysis of the effect of dismissal of a compulsory
counterclaim.” SSMC, 102 F.3d at 712. Here, we are presented
with a different set of facts. In the federal case, there was
some discussion of the dismissal, but it all involved the term
“without prejudice.” The record before us is clear that the
federal district court did not intend this voluntary dismissal
without prejudice to act as a de facto dismissal with prejudice,
nor did the court imply that further litigation of the
counterclaims would be barred. The strongest evidence is the
order itself, which plainly dismisses Nu-Med’s counterclaims
without prejudice while dismissing 4Life’s complaint with
prejudice. Thus, unlike SSMC, where the court dismissed the
counter claimant’s claims without prejudice but with a caveat on
the record that the effect of the dismissal would be the same as
a dismissal with prejudice, there is no evidence in this case
that the federal district court intended anything other than a
dismissal without prejudice.
¶14 The Colorado Court of Appeals followed the Fourth
Circuit and distinguished itself from Arkansas when it was faced
with a similar case. Grynberg v. Phillips, 148 P.3d 446, 449
(Colo. Ct. App. 2006). Grynberg brought a breach of contract
counterclaim against Phillips in Wyoming state court. Id. at
447. This counterclaim was later dismissed without prejudice on
Grynberg’s own motion after all other claims in the case had been
resolved. Id. at 448. Grynberg then brought a lawsuit in
Colorado state court and therein reasserted the breach of
contract claim. Id. The Colorado district court dismissed the
breach of contract claim as a barred compulsory counterclaim and
held that it did not matter whether the Wyoming court dismissed
the claim with or without prejudice. Id. The Colorado Court of
Appeals upheld the dismissal, reasoning that “[t]o hold otherwise
would allow a defendant . . . to defeat the mandatory provisions
of [Colorado’s compulsory counterclaim rule] and preserve the
counterclaim simply by filing it in the first action and then
voluntarily dismissing it without prejudice.” Id. at 449. While
we generally agree with this rationale, we believe the policy of

7 No. 20060505
rule 13(a) is still served by allowing certain counterclaims to
be refiled after a voluntary dismissal.
¶15 We have stated that “[t]he purpose of rule 13(a) is to
ensure that all relevant claims arising out of a given
transaction are litigated in the same action.” Raile Family
Trust v. Promax Dev. Corp., 2001 UT 40, ¶ 12, 24 P.3d 980. Other
jurisdictions view their compulsory counterclaim rules similarly.
E.g., Linn, 14 S.W.3d at 504 (“The purpose for [Arkansas’
compulsory counterclaim rule] is to require parties to present
all existing claims simultaneously to the court or be forever
barred, thus preventing a multiplicity of suits arising from one
set of circumstances.”); Grynberg, 148 P.3d at 449. Simultaneous
litigation of claims and counterclaims serves judicial economy,
because litigating claims arising out of the same transaction
separately duplicates party efforts and wastes judicial
resources.
¶16 However, judicial economy ceases to present the same
concern for counterclaims the moment the underlying claims of the
opposing party are resolved permanently and without appeal.
Having no claim to counter, there is no independent reason to
insist upon continuing to litigate the original counterclaims if
both parties agree and the court decides “upon such terms and
conditions” as it deems proper that a voluntary dismissal is
appropriate. Utah R. Civ. P. 41(a)(2)(ii). At such a moment,
the counter claimant is more like a plaintiff because there is
only one set of claims between the two parties. There is no
efficiency to be gained by compelling litigation of claims that
are no longer being simultaneously litigated with an opposing
party’s claims. The court can still refuse to grant a voluntary
dismissal to a counter claimant pursuant to the discretion given
by rule 41, if for other reasons (having proceeded too far into
litigation, for instance) such a grant would not be proper, just
as the court can deny a similar request by a plaintiff.
¶17 In the federal case, 4Life’s claims against Nu-Med were
dismissed on summary judgment. Although the trial proceeded with
other claims between Ulrich and 4Life, Nu-Med was not a party to
those claims. 4Life appealed only judgments against it related
to Ulrich and not those involving Nu-Med. At that point, Nu-
Med’s claims ceased to be compulsory counterclaims because there
were no claims left to counter. The purpose of simultaneous
litigation, at least with respect to Nu-Med, was no longer
thwarted with a dismissal because there were no underlying claims
to simultaneously litigate.
¶18 It is possible that other circumstances might have led
the federal district court to hesitate before granting a

No. 20060505 8
voluntary dismissal without prejudice, but that decision lay
within its discretion. When the federal district court dismissed
Nu-Med’s claims without prejudice, it did not condition the
dismissal with any other language. 4Life did not object to the
characterization of the dismissal as being without prejudice.
Pursuant to Federal Rule of Civil Procedure 41, the federal judge
could have refused to grant the dismissal or dismissed the claims
with prejudice, but he did not. We defer to the federal judge’s
discretion in dismissing the counterclaims without prejudice.
Because 4Life’s underlying claims against Nu-Med were resolved at
the time of the voluntary dismissal, Nu-Med’s compulsory
counterclaims ceased to be compulsory. Therefore, there is no
violation of Utah Rule of Civil Procedure 13(a), and Nu-Med’s
claims may be litigated in a Utah court.
CONCLUSION
¶19 Our holding is narrow. If all underlying claims
against a party have been resolved, if these rulings are not
appealed, if the opposing party agrees to a voluntary dismissal
without prejudice, if the judge grants a voluntary dismissal
without prejudice, and if all other requirements are met for a
rule 41 dismissal without prejudice, then a party’s counterclaims
arising out of the same transaction or occurrence as the opposing
party’s original claims cease to be compulsory under rule 13 and
may be brought again.
¶20 Here, 4Life’s claims against Nu-Med in the federal case
were fully resolved upon summary judgment and were not appealed.
Without objection from 4Life, the federal district court granted
Nu-Med a voluntary dismissal without prejudice pursuant to
Federal Rule of Civil Procedure 41 on counterclaims that arose
from the same transaction or occurrence as 4Life’s claims. Thus
Nu-Med’s counterclaims are no longer compulsory under rule 13 and
may be brought again in a Utah court. We therefore reverse the
district court’s grant of summary judgment and remand this case
for further proceedings consistent with this opinion.
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¶21 Associate Chief Justice Durrant, Justice Wilkins,
Justice Parrish, and Justice Nehring concur in Chief Justice
Durham’s opinion.