Utah Supreme Court Archives

Utah Supreme Court holds that UPUAA allows “prevailing” plaintiff to recover “reasonable attorney’s fee” in Westgate v. Consumer Protection Group

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The Utah Pattern of Unlawful Activity Act (“UPUAA”) provides a private right of action for persons “injured by a pattern of unlawful activity.” As part of this private right of action, the statute entitles a “prevailing party” to “recover … a reasonable attorney’s fee.”

In a recent appeal to the Utah Supreme Court handled by Christensen & Jensen (“C&J”) attorney Karra Porter, the Supreme Court held that while the Utah Uniform Arbitration Act (“UUAA”) does not authorize an arbitration panel to award attorney fees for court proceedings confirming the panel’s decision, the UPUAA allows prevailing plaintiffs to recover a reasonable attorney fee. Accordingly, the Supreme Court confirmed the panel’s award of attorney fees expended during the arbitration, as well as granting the appellee’s request for attorney fees associated with the appeal.

On appeal, Westgate argued that the arbitration panel had no authority to award attorney fees for the court proceedings confirming the panel’s decision, and that the arbitration panel manifestly disregarded the law by awarding attorney’s fees in excess of the amount Consumer Protection Group (“CPG”) agreed to pay their lawyer.

C&J has been pursuing this case for more than a decade now. In 2002, Westgate sued CPG for various alleged torts and breaches of contract. Then, in 2005, CPG raised counterclaims under the UPUAA. Under the UPUAA, a party may force arbitration of fraud claims, which Westgate took advantage of in 2008.

In 2010, an arbitration panel resolved the UPUAA claims in CPG’s favor. However, before the arbitration panel ruled on CPG’s request for attorney fees, Westgate discovered that one of the arbitrators was a first cousin of a shareholder at the law firm representing CPG. As a result, Westgate moved the district court to vacate the panel’s decision. The district court granted Westgate’s motion, CPG appealed, and the Supreme Court reversed, but without ruling on CPG’s request for attorney fees.

The case then went back to the arbitration panel, which declined to award fees for pre-award arbitration litigation, but ordered approximately $558,810.30 for work performed during the arbitration and approximately $88,829.50 for work in what the panel called “post-arbitration proceedings.” Westgate thereafter again moved the district court to vacate the panel’s decision, challenging the fee awards. The district court denied Westgate’s motion, and Westgate appealed to the Utah Supreme Court.

As to whether the arbitration panel exceeded the scope of its authority by awarding attorney fees for post-arbitration proceedings, the Supreme Court held that the section 122 of the UUAA does not authorize an arbitration panel to award post-arbitration fees. According to the Supreme Court:

The decision-makers most familiar with CPG’s attorneys’ work during the confirmation proceedings and resulting appeal were the courts that presided over those confirmation proceedings and resulting appeal. We think it best to assign those courts sole responsibility for granting attorney fees in those proceedings, and we therefore conclude that the panel exceeded its authority when it ordered Westgate to pay post- arbitration attorney fees.

In relation to the second issue raised on appeal, namely whether the arbitration panel acted in manifest disregard of the law by allowing CPG to collect attorney fees in excess of the contracted amount, the Supreme Court held that the arbitration panel did not manifestly disregard the law in awarding attorney fees to CPG as the prevailing party. In fact, the Supreme Court said that not only was the panel allowed to make such an award, but also that such an award was compelled under the UPUAA.

Instead of challenging the panel’s authority to award fees for arbitration, Westgate challenged the method the panel used to calculate the fees it awarded to CPG. The panel determined that the reasonable fee award to CPG was approximately $558,810.30, which it arrived at by multiplying reasonable hours by a reasonable market rate. Westgate asserted that the panel’s calculations were in error, and that Utah law required the panel to cap the attorney fees at the amount that CPG contracted to pay. The Supreme Court disagreed, holding:

Ultimately, because the UPUAA does not expressly limit a plaintiff’s attorney fees to those actually incurred and there is no controlling Utah case law interpreting this specific question, the arbitration panel did not commit an obvious error in its calculation of reasonable attorney fees. The district court’s order confirming the panel’s award of $558,810.30 is affirmed.

Finally, the Supreme Court addressed CPG’s request for attorney fees as it related to the instant appeal. There, the Supreme Court granted CPG’s request for attorney fees as it related to the appeal, finding that the UPUAA authorized attorney fees related to an appeal.

Update: Utah Supreme Court Reverses Court of Appeals’ Decision in Grace Kelson Case

In the fall of 2014, the Utah Supreme Court ruled to reverse a 2012 Utah Court of Appeals decision in the Grace Kelson case.

In the fall of 2014, the Utah Supreme Court ruled to reverse a 2012 Utah Court of Appeals decision in the Grace Kelson case, which had vacated Ms. Kelson’s conviction for pattern of unlawful activity and reversed and remanded for a new trial on all other charges. The Utah Supreme Court’s decision remanded the case back to the court of appeals for further consideration of any remaining issues in the case, namely to consider an alternative ground for reversal of Ms. Kelson’s convictions that the court of appeals did not consider.

As background, in or around October 2001, Ms. Kelson and the owners of a mortgage company attempted to purchase a $15 million letter of credit to fund the two development projects. In order to secure the letter of credit, Ms. Kelson and the owners had to raise $125,000. As a result, they set about persuading friends, colleagues, and the families of their friends and colleagues, to provide funds for the letter of credit. In exchange for funding the letter of credit, the investors received promissory notes signed by Ms. Kelson for amounts several times larger than the amounts they provided. The promissory notes stated a financial services company that Ms. Kelson was the registered agent of would pay the investors within thirty days. However, Ms. Kelson failed to secure the line of credit and the investors were never paid. Ms. Kelson was subsequently charged and convicted on three counts of securities fraud, one count of offering or selling unregistered securities; one count of sales by an unlicensed broker-dealer, agent, or investment advisor; and one count of engaging in a pattern of unlawful activity. Ms. Kelson appealed her convictions.

On appeal, Ms. Kelson argued that her convictions should be overturned on the basis of ineffective assistance of counsel, and that the trial court erred in denying her motion for directed verdict because the court misapplied the UPUAA. The Utah Court of Appeals agreed, overturning Ms. Kelson’s UPUAA conviction and remanding for a new trial on all other charges. Specifically as it related to the pattern of unlawful activity conviction, Ms. Kelson argued that her activity in this case didn’t constitute a pattern of unlawful activity as a matter of Utah law. The court of appeals agreed. According, to the holding in Hill v. Estate of Allred, “[t]he proper test for determining whether there was a pattern of unlawful activity is whether there was `a series of related predicates extending over a substantial period of time’ or a demonstrated threat of continuing unlawful activity and not whether there were multiple schemes.” In the eyes of the court of appeals, the State had failed to satisfy the Hill test because:

Although Kelson’s actions involved multiple alleged crimes committed for the common purpose of obtaining cash, Kelson’s alleged crimes took place over a matter of days. Kelson first alerted Employee about the opportunity shortly before October 11, 2001, and all checks exchanged for promissory notes were deposited by October 15, 2001. Thus, Kelson’s alleged unlawful activity took place over a “closed period,” and the State was required to show “‘a series of related predicates extending over a substantial period of time.'” The State does not contend that it has done so, nor could it have made such a showing. As the Supreme Court noted in H.J., “[p]redicate acts extending over a few weeks or months,” which do not threaten “future criminal conduct,” do not constitute a substantial period of time sufficient to show continuity. Accordingly, Kelson’s acts over the course of only a few days are insufficient as a matter of law to satisfy Hill’s requirement that a pattern of unlawful activity must occur over a substantial period of time.

The State thereafter filed a petition of certiorari to the Utah Supreme Court, but did not challenge the court of appeals ruling on the pattern of unlawful activity conviction. The Utah Supreme Court disagreed with the court of appeals ruling on the securities conviction, and overturned the decision. The Utah Supreme Court reasoned “the jury instruction in question was an accurate statement of the underlying criminal law and not a burden-shifting evidentiary presumption.” As a result, the Utah Supreme Court “reject[ed] Kelson’s claims of ineffective assistance of counsel and plain error, and reverse[d] and remand[ed] to the court of appeals,” for further consideration of any remaining issues in the case.

While Ms. Kelson’s vacated convictions for securities fraud were ultimately overturned by the Utah Supreme Court, the court of appeals decision regarding the UPUAA has stood. The court of appeals decision is important because it further solidifies the Hill test, which recognizes that in order to constitute a pattern of unlawful activity under Utah law, the criminal activity must extend over a “substantial period of time.” If it does not, then a UPUAA charge may not be sustained as a matter of law. It remains to be seen what will happen to the rest of Ms. Kelson’s appeal, but at least her case has produced one favorable result, even if her convictions are ultimately upheld by the court of appeals.

Calculating Damages Under the UPUAA

The UPUAA allows for both criminal and civil liability. Under the civil liability prong of the UPUAA.

The UPUAA allows for both criminal and civil liability. Under the civil liability prong of the UPUAA:

(1) A person injured in his person, business or property by a person engaged in conduct forbidden by an provision of Section 76-10-1603 may sue in an appropriate district court and recover twice the damages he sustains, regardless of whether:

(a) the injury is separate and distinct from the injury suffered as a result of the acts or conduct constituting the pattern of unlawful conduct alleged as part of the cause of action; or

(b) the conduct has been adjudged criminal by any court of the state or the United States.

Furthermore, a principal, in addition to being responsible for actual damages caused by his or her agent(s), may also be liable for double damages:

[I]f the pattern of unlawful activity alleged and proven as part of the cause of action was authorized, solicited, requested, commanded, undertaken, performed, or recklessly tolerated by the board of directors or a high managerial agent acting within the scope of his employment.

However, even if a civil plaintiff is able to recover double damages under either section of the UPUAA, how does a court properly calculate the plaintiff’s actual damages award?

In Alta Indus. v. Hurst, the Utah Supreme Court sought to shed some light on the damages calculation question as it related to civil liability under the UPUAA. There, Steelco had sued defendants alleging claims for fraud, conversion, conspiracy, receiving stolen property, and a pattern of unlawful activity. Following a bench trial, the trial court ruled that defendants had converted property, had entered into a civil conspiracy, and committed fraud in its dealings with Alta Industries. However, the court also dismissed Steelco’s claims for relief and double damages under the UPUAA. Defendants appealed the judgment, and Steelco cross-appealed the court’s ruling dismissing its pattern of unlawful activity claim.

On appeal, the Utah Supreme Court had two issues to consider as it related to Steelco’s pattern of unlawful activity claim: 1) whether the trial court erred in dismissing the claim; and 2) if so, what the proper calculation of damages was sustained by Steelco. As to the first question, the court found that the trial court had erred in its interpretation of the UPUAA. According to the trial court, for the act to apply, “there must be three similar episodes that involve separate and different entities, and not within the same entity.” However, the supreme court disagreed, holding:

While subsection 76-10-1602(3) requires the commission of at least three episodes of unlawful activity, the Act does not require three separate entities. The term “entity” does not even appear in the statute. Furthermore, while the Act requires the existence of an enterprise, section 76-10-1603 expressly provides that the existence of one enterprise is sufficient to invoke liability under the Act. Indeed, our case law establishes that the Act requires proof of only a single enterprise.

Having determined that the UPUAA did not require proof of separate enterprises, the court went on to find that defendants had engaged in a pattern of unlawful activity in this case. As a result, Steelco was entitled to double damages under the UPUAA. However, an issue remained concerning the calculation of the damages sustained by Steelco.

The court started its damages calculations analysis by pointing out that the civil prong of the UPUAA “does not provide a method for calculating actual damages. Furthermore all of the predicated acts, or unlawful activities, under the Act are crimes, not civil causes of action. Accordingly, we must look outside the Act to determine a method of calculating damages.” To that end, the court looked to causes of action similar to the crimes charged in this case. According to the court:

In the instant case, because the elements of civil conspiracy are subsumed in the crime of bribery proven in this case, the damage calculation applicable to a civil conspiracy can be used to arrive at the actual damages Steelco sustained due to the kickback arrangements. Similarly, because the elements of conversion are subsumed in the crime of receiving stolen property proven in this case, the damage calculation applicable to conversion can be used to arrive at the actual damages Steelco sustained because of the theft of the steel. The trial court awarded Steelco damages on the bases of fraud, in connection with the kickback scheme, and conversion, in connection with the steel theft. Those damages may also be used to arrive at the damages Steelco sustained as a result of the pattern of unlawful activity.

However, defendants claimed that the trial court erred in its damages calculation as it related to Steelco’s conversion claim.

The trial court awarded Steelco the amount of money received by defendants from the sale of the steel plus interest. Defendants disagreed with the award, claiming that the “appropriate market for a retailer of steel is the wholesale market, not the retail market, and therefore, Steelco was only entitled to recover its replacement costs.” To answer the question raised by defendants, the court noted that the Restatement (Second) of Torts gave Steelco three options for determining its damages, which included the amount of money defendants received from the sale of the steel. The trial court’s award was based upon the amount of money defendants received from the sale of the steel. As a result, the trial court’s damages calculation was not in error, and therefore “the measure of damages is twice the amount Wasatch received for the sale of the steel plus interest.”

The Utah Supreme Court’s ruling in Alta Industries rejects any argument that in order to recover a civil judgment under the UPUAA a plaintiff must prove the existence of different enterprise. However, it also provides guidance for determining the proper damages calculations for the various offenses a defendant may commit under the UPUAA. While the UPUAA does not provide for a way to properly calculate a plaintiff’s actual damages, other areas of the law can be examined for guidance on the issue.

When Trying to Prove “Enterprise” Goes Awry

Merely being an individual engaged in a pattern of unlawful of activity does not necessarily subject a criminal defendant to a racketeering charge under the UPUAA.

Merely being an individual engaged in a pattern of unlawful of activity does not necessarily subject a criminal defendant to a racketeering charge under the UPUAA. In order to sustain a racketeering conviction under the UPUAA, the state must prove more than just the substantive offense. Rather, the State must prove the existence of an “enterprise” and its relation to the racketeering activity.

In State v. Hutchings, the Utah Court of Appeals answered the questions of whether a person could also be an entity under the UPUAA, and whether the same facts could be used to prove the unlawful activity and the existence of an “enterprise”. Even still, a question lingered regarding the “enterprise” issue. In 2004, the Utah Court of Appeals reiterated the supreme court’s words, and further clarified the required proof to sustain a racketeering charge under the UPUAA.

In State v. Bradshaw, the court of appeals was tasked with answering the question of whether the State had to prove the existence of a relationship between the unlawful activity and the “enterprise”. The State alleged Mr. Bradshaw, over a period of several months defrauded eleven people for a total of approximately $5,400. According to the State, Mr. Bradshaw falsely represented himself as the owner of various mortgage companies, and that he would promise to assist his would-be victims in obtaining refinancing or to avoid foreclosure in exchange for a fee. Two of Mr. Bradshaw’s coworkers allegedly witnessed the fraudulent activity, and Mr. Bradshaw in fact asked one of those employees to falsely represent himself as an appraiser to one of the victims. Mr. Bradshaw was charged with eleven counts of communications fraud and one count of pattern of unlawful activity, all second-degree felonies. In response to the charges against him, Mr. Bradshaw filed a motion to quash the racketeering charge under the UPUAA and to reduce the degree of offense of the communications fraud charges. The trial court denied the motion, finding that the State could prove the “enterprise” element even if Mr. Bradshaw only used the funds for personal expenses, and that the State could in fact charge Mr. Bradshaw with all eleven counts of communications fraud.

After his motion was denied, Mr. Bradshaw entered into a plea agreement with the State. Pursuant to the plea agreement, Mr. Bradshaw pled guilty to four counts of attempted communications fraud, but he reserved his right to appeal the trial court’s denial of his motion. The trial court subsequently accepted the plea and the remaining charges were dismissed. Mr. Bradshaw thereafter appealed.

On appeal, the Utah Court of Appeals reversed the trial court’s decision and remanded with instructions to grant Mr. Bradshaw’s motion to quash the UPUAA charge and to reduce the degree of offense of the communications fraud charges. As it related to the racketeering charge, Mr. Bradshaw argued that the State had failed to establish probable cause that he was engaged in an “enterprise”. The court of appeals agreed, finding that neither the criminal information nor the stipulated facts properly alleged the existence of an UPUAA “enterprise”. As the court aptly pointed out:

“The State’s information merely parrots the language of UPUAA and offers no insight into the State’s theory of the alleged enterprise. Likewise, the stipulation nowhere mentions the word “enterprise.” On appeal, the State postulates that its theory of an enterprise is an “association in fact” between Bradshaw and his two former coworkers. An “association in fact” enterprise “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” The stipulation’s vague references to the fact that two of Bradshaw’s acquaintances witnessed some of the misrepresentations and may have participated on one occasion is not suggestive of an “ongoing organization” or that Bradshaw and his so-called accomplices “function[ed] as a continuing unit.”

Continuing on, the court of appeals noted that the State also misunderstood the UPUAA when it argued that it need only to point to the existence of an “individual” to satisfy the “enterprise” element. The court noted that while it is true that under Hutchings, a criminal defendant may be both an “individual” and an “enterprise” under subsections (1) ands (2) of the UPUAA, the State’s arguments in this case “would essentially collapse the ‘enterprise’ and ‘pattern of unlawful activity’ elements into one and would extend the scope of antiracketeering laws to virtually all substantive criminal offenses.” The court rejected this argument.

The court of appeals concluded its analysis of the racketeering charge by finding that the State had also failed to include any facts suggesting Mr. Bradshaw used the funds from his unlawful activity to invest or gain interest in an enterprise as required by subsection (1) of the UPUAA. According to the court of appeals:

The stipulation submitted in this case suffers from an additional fatal defect in that it fails to include any facts suggesting Bradshaw used the proceeds from his fraudulent activity to invest or gain an interest in an enterprise as required by section 76-10-1603(1). Instead, the stipulation states that Bradshaw used the money to pay his “personal bills.” The trial court nevertheless deemed the stipulation sufficient in this respect, finding that, as a matter of law, using the proceeds from a pattern of unlawful activity to pay one’s personal bills “qualif[ies as] racketeering.” We disagree.

The State appealed the court of appeals decision as it related to the communications fraud charges, but did not challenge the ruling on the UPUAA charge. The Utah Supreme Court overturned the court of appeals decision, and Mr. Bradshaw’s conviction was upheld. Even still, the court of appeals decision in Bradshaw represents an important decision regarding the necessary proof of an “enterprise” under the UPUAA and the connection that must be shown between the “unlawful activity” and that “enterprise”. Going forward, the State must do more than simply parrot the UPUAA in its charging documents and factual stipulations. Rather, it must prove the existence of an “enterprise” beyond the mere existence of the individual and that the enterprise is related to the “unlawful activity” to sustain a conviction under the UPUAA.

What Constitutes “Enterprise” Under the UPUAA?

In order to sustain a conviction under the UPUAA, the State must prove 1) the defendant is engaged in a pattern of unlawful activity and 2) the defendant is involved in an enterprise.

In order to sustain a conviction under the UPUAA, the State must prove 1) the defendant is engaged in a pattern of unlawful activity and 2) the defendant is involved in an enterprise. Often times the pattern of unlawful activity is easily proven, but proving the existence of an “enterprise” can be more challenging for the State. The UPUAA comprehensively defines “enterprise” as:

[A]ny individual, sole proprietorship, partnership, corporation, business trust, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity, and includes illicit as well as licit entities.

Thus, an “enterprise” for purposes of the UPUAA can be anything from an individual to a group of individuals to a corporation or association, whether legal or illegal. Even still, the question of what constitutes an entity under the various sections of the UPUAA isn’t as easily answered.

In 1988, the Utah Supreme Court, while the issue was not squarely before it, implicitly ruled that the same set of facts could be used to prove the pattern of unlawful activity as well as used to prove the existence of an enterprise. In State v. McGrath, the court rejected the defendant’s argument that there was insufficient evidence to prove the existence of an enterprise under the RICE Act, the predecessor to the UPUAA. In so ruling, the evidence relied on by the court to find a pattern of unlawful activity and the existence of an enterprise was the same, the defendant’s cocaine trafficking. According to the court’s opinion:

These facts show an ongoing enterprise the purpose of which was to traffic in controlled substances. Defendant’s participation in this enterprise, when combined with his acts constituting a pattern of racketeering activity, establishes the necessary elements to convict….

Almost ten years later in 1997, in State v. Hutchings, the Utah Court of Appeals clarified the supreme court’s previous statements in McGrath. In Hutchings, the court of appeals was squarely tasked with answering the question of whether a UPUAA defendant can also constitute a UPUAA enterprise under section 76-10-1603(1), (2), or (3). The court began by examining U.S. Supreme Court and federal circuit court precedent on the issue, which generally found that “the same set of facts used to prove a pattern of racketeering activity may be used to prove a RICO enterprise.” The court then turned to Utah law, which it determined had already “implicitly ruled [in McGrath] that the same set of facts used to prove the pattern of unlawful activity can be used to prove the existence of an enterprise.” As such, the court of appeals agreed with the majority of federal courts and the Utah Supreme Court’s previous implicit holding in McGrath and found that the same set of facts could be used to prove a pattern of unlawful activity and an enterprise.

The court of appeals next turned to the various provisions of the UPUAA to determine whether the whether the “person” under section 76-10-1603(1), (2), or (3) can be the same entity as the “enterprise.” The court held that, for purposes of section 76-10-1603(1), “the liable ‘person’ and the ‘enterprise’ can be the same entity,” under section 76-10-1603(1), as long as the “person” is “actually… the direct beneficiary of the pattern of racketeering activity.” Similarly, the court held that with respect to subsection (2) “the ‘person’ and ‘enterprise’ within section 76-10-1603(2) need not be separate and distinct.” However, the court wasn’t willing to extend the same reasoning to subsection (3). According to the court:

[We] hold that for the purposes of section 76-10-1603(3), the “person” and “enterprise” must be separate and distinct entities. We, too, would be stretching the interpretation of the language in section 76-10-1603(3) to impose liability on both the culpable person and the enterprise. “The enterprise is mentioned in the section only as the instrument of the person doing the racketeering, and there is no suggestion that the enterprise also may be liable, even if it is a wholly illegitimate operation.”

As a result, under Utah law in order to sustain a conviction under subsection (3), the State must prove the existence of an “enterprise” that is distinct from the defendant themselves. Furthermore, the court went on to examine whether the sole proprietorship at issue in this case could constitute an “enterprise” for purposes of subsection (3). The court of appeals determined that as it related to the sole proprietorship at issue in in this case, “the man and the proprietorship really are the same entity in law and fact.” As result the State had failed to pass the distinction test.

While the Utah Supreme Court has declined to require distinction between the individual and the entity under subsections (1) and (2), it does require the state to prove the existence of more than a one-man show under subsection (3). Defendants facing charges under the UPUAA need to be cognizant of this fact, and must take steps to ensure their counsel argues that point to the court, and that the jury is properly instructed on the issue at trial.

“Over a Substantial Period of Time”: Utah Supreme Court Defines Test for Determining a Pattern of Unlawful Activity

In Hill v. Estate of Allred, the Utah Supreme Court articulated what it determined to be the proper test for determining whether there was a pattern of unlawful activity under the UPUAA. After moving to Utah from Michigan, Ms. Hill met the leader of a small religious group, Mr. Shugart. Ms. Hill asked Mr. Shugart to help her purchase the Desert Inn Ranch, which was listed for $1.5 million. A friend of Mr. Shugart’s, Mr. Matthews and a former real estate agent, Mr. Putvin agreed to help Ms. Hill purchase the property. Mr. Shugart delivered $1 million in cash, belonging to Ms. Hill, to Mr. Putvin and Mr. Matthews and directed them to proceed with the purchase of the ranch. In addition to the $1 million, Ms. Hill provided another $500,000 for the purchase of the ranch and paid Mr. Putvin $40,000 for his services. However, Mr. Putvin and Mr. Matthews never delivered the ranch or repaid any of the money.

Ms. Hill filed suit to recover her lost money alleging claims of civil conspiracy, constructive fraud, conversion, unjust enrichment, money laundering, fraudulent misrepresentation, racketeering (pattern of unlawful activity), and intentional infliction of emotional distress. Following a bench trial, the district court determined that the defendants had engaged in a civil conspiracy to deprive Ms. Hill of her money, the defendants had converted Ms. Hill’s money, and that they had made false representations to Ms. Hill as well. However, the court found that Ms. Hill did not meet her burden of proof on her claims of racketeering and intentional infliction of emotional distress. Ms. Hill appealed, arguing among other things that the trial court erred in holding that she did not meet her burden of proving a pattern of unlawful activity under her racketeering claim. Defendants cross-appealed.

On appeal, Ms. Hill argued that each unlawful act by defendants in furtherance of the conversion of her money constitutes an episode of unlawful activity and therefore a pattern exists. Defendants argued that the conversion of Ms. Hill’s money, though not accomplished in one single act, was only one episode of criminal activity and, therefore, did not constitute a pattern of unlawful activity. The district court agreed with defendants and held that their actions did not constitute a pattern of unlawful activity because there was only one episode of criminal activity, the conversion of Ms. Hill’s money.

“Over a Substantial Period of Time”

However, the Utah Supreme Court disagreed, and reversed the district court’s holding on Ms. Hill’s pattern of unlawful activity claim. According to the Utah Supreme Court, the proper test for determining a pattern of unlawful activity is the “continuity plus relationship” test articulated in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989). “The proper test for determining whether there was a pattern of unlawful activity is whether there was ‘a series of related predicates extending over a substantial period of time’ or a demonstrated threat of continuing unlawful activity and not whether there were multiple schemes.” (emphasis added). As a result, in order to sustain allegations of a pattern of unlawful activity, a prosecutor or civil plaintiff must prove that the defendant(s) engaged in a series of related predicates over a substantial period of time. In Hill v. Estate of Allred, the Utah Supreme Court found that a period of five years was enough to satisfy this requirement. But there is no bright line rule as to what constitutes such a “substantial period of time.” Nevertheless, the substantial period of time requirement imposed in Hill v. Estate of Allred is an element of the offense, and juries should be instructed accordingly. The test adopted in Hill v. Estate of Allred may require previous cases to be reexamined, and will undoubtedly impact UPUAA cases going forward.