Can beneficiaries recover attorney fees when suing trustees for trust violations? Cafferty v. Hughes Explained

The Utah Court of Appeals in Cafferty v. Hughes addressed important questions about trustee accountability and attorney fee recovery in trust litigation involving family disputes.

Background and Facts

Five siblings disputed distribution of a trust created by their parents in 1974. After their father’s death, two siblings (Joe and Rikki) continued acting as sole trustees despite trust provisions requiring all five children to act by majority vote. The other three siblings repeatedly sought trust information but were rebuffed. The unauthorized trustees paid themselves fees, used trust funds for a California conservatorship proceeding, and failed to provide required accountings to beneficiaries.

Key Legal Issues

The primary issues involved: (1) whether the court could award attorney fees to beneficiaries who successfully challenged trustee misconduct; (2) the appropriate standard for determining reasonable attorney fees; and (3) whether trust expenses incurred without proper authorization should be recaptured from the unauthorized trustees’ distributions.

Court’s Analysis and Holding

The court affirmed the trial court’s equal distribution with offsets. Regarding attorney fees, the court applied the principle that Utah courts have inherent equitable power to award reasonable attorney fees when beneficiaries sue trustees for trust violations and obtain recovery for all beneficiaries. The court emphasized that calculation of reasonable attorney fees lies within the trial court’s sound discretion and will not be overturned absent clear abuse of discretion. Trial courts must consider what legal work was performed, how much was reasonably necessary, whether billing rates are consistent with local standards, and additional relevant factors.

Practice Implications

This decision reinforces that beneficiaries can recover attorney fees when challenging trustee misconduct, even without contractual or statutory authorization. Practitioners should document all instances of unauthorized trustee actions, failure to provide accountings, and improper use of trust funds to support fee-shifting arguments. The decision also demonstrates that courts will closely scrutinize trustee fee agreements and can recapture trust expenses incurred for purposes inconsistent with the trust’s objectives.