When can Utah courts award attorney fees in trust litigation? Hughes v. Cafferty Explained

The Utah Supreme Court’s decision in Hughes v. Cafferty provides important guidance on when courts may exercise their inherent equitable power to award attorney fees in trust disputes. This case clarifies both the standard of review for such awards and the circumstances that justify them.

Background and Facts

Five siblings disputed the administration of family trusts established by their parents. Two siblings, Joe and Rikki, assumed exclusive control as trustees despite trust provisions requiring all siblings to act as co-trustees by majority vote after certain triggering events. They failed to provide regular accountings to beneficiaries, paid themselves excessive trustee fees, and used trust funds for an unsuccessful conservatorship proceeding. When sister Linnea and brothers Dwight and John asserted their trustee rights, Joe and Rikki refused to recognize them. The trial court found multiple breaches of trust and ordered repayment of approximately $61,000 to the trust. Using its inherent equitable power, the court also awarded attorney fees to Linnea.

Key Legal Issues

The Supreme Court addressed two critical questions: (1) what standard of review applies to equitable attorney fee awards in trust litigation, and (2) whether courts must follow specific factors when making such awards. Joe and Rikki argued that the court of appeals applied an inappropriately narrow review and should have considered their good faith and Linnea’s alleged misconduct.

Court’s Analysis and Holding

The Court established that abuse of discretion is the proper standard for reviewing equitable attorney fee awards, distinguishing them from statutory or contractual fee awards reviewed for correctness. The Court emphasized that equity decisions must remain flexible and cannot be reduced to mechanical tests. Courts have inherent power to award fees when “a beneficiary sues a trustee for violation of the trust and obtains a recovery for all other beneficiaries whose rights were also violated by the trustee.” The Court rejected establishing rigid factors, noting that “individualization in the exercise of a discretionary power will alone retain equity as a living system.”

Practice Implications

This decision gives trial courts significant discretion in awarding attorney fees in trust disputes while providing clear guidance on the standard of review. Practitioners should focus on demonstrating clear trustee breaches that benefit all beneficiaries rather than arguing specific factor tests. The Court’s rejection of formulaic approaches preserves equity’s flexibility while confirming that meaningful trustee misconduct can justify personal liability for attorney fees.