Can I Get Fees With That? The Costs of Litigation in Utah
Terry Jessop & Bitner Newsletter
One of the most common questions asked to attorneys is whether a party will be entitled to an award of attorney's fees if that party prevails in court. The answer is, "It depends." In Utah, the award of attorney's fees is governed by the following principles:
1. Contract or Statute. Utah follows the "American Rule," which is that attorney's fees are awarded to the prevailing party only if allowed by statute or contract. While there are some exceptions, the rule is widely applied and enforced in Utah. In most cases where there is no statute or contract that provides for an attorney fee award, both sides must pay their own attorney's fees.
2. Reciprocal Application. When a contract gives only one party the right to recover attorney's fees, the court will apply that provision to the other party as well. In other words, one party won't be able to say, "But the contract says that only I get attorney's fees." Under Utah law, if the contract says one is entitled, then both are entitled.
3. Bad Faith. This is an exception to the general rule. It is rarely applied. If a court finds that a lawsuit is filed, or a defense is raised in bad faith, the court can award attorney's fees to the prevailing party, even without an applicable contract or statute. Many people feel the opposing side is litigating in bad faith, but courts rarely agree. The bar is very high when it comes to proving bad faith.
4. Offer of Judgment. Utah law allows a party to offer a judgment to the other side. A refusal of the offer may cut off the right to recover attorney's fees. For example, if a party is sued for $10,000, but feels only $5,000 is owed, she may offer judgment for $5,000. If the other side rejects the offer, the parties continue litigating. If the actual judgment ends up being $5,000 or less, the offering party does not have to pay the other side's attorney's fees incurred after the offer (assuming there is a statute or contract that gives the prevailing party the right to attorney's fees). There are many factors that affect offers of judgment. Please consult an attorney before making such an offer.
5. But, I'm Not a Party to the Contract. In a recent case, a plaintiff sued for breach of contract. The court found that the plaintiff was not a party to the contract and did not have standing to sue. The prevailing party asked for attorney's fees based on the contract. The plaintiff argued that if it was not a party to the contract, then the contractual attorney fee provision should not apply to it. The Utah Court of Appeals disagreed. It explained that an award of attorney's fees is proper where the contract at issue allows at least one party to recover fees. Hooban v. Unicity Intern., Inc., 285 P.3d 766, 2012 UT 40 (Utah 2012). Hence, as long as at least one litigant is a party to a contract with an attorney fee provision, then the winning party will probably be entitled to an award of attorney's fees, even if he was not a party to the contract.
6. The Court Sets the Amount. Let's face it. "Reasonable attorney's fees" is an oxymoron. When awarding fees, the court may not require the other side to pay every penny, but may only require the reimbursement of some portion of your fees. This is common.
The potential for recovering fees weighs heavily in litigation. Please call us if you have questions. We can help.
© Terry Jessop & Bitner February 2016