When does Utah's reciprocal attorney fees statute apply to non-parties? Hooban v. Unicity Explained

Utah’s reciprocal attorney fees statute, Utah Code § 78B-5-826, creates important opportunities for fee recovery in contract disputes. But what happens when a party sues on a contract but is ultimately found not to be a party to that contract? The Utah Supreme Court addressed this question in Hooban v. Unicity, clarifying when the statute applies in complex contractual scenarios.

Background and Facts

Hooban purchased stock in H&H Network Services through a bankruptcy auction and claimed he succeeded to H&H’s rights under a distribution agreement with Unicity. When Unicity refused to recognize Hooban as a distributor, Hooban sued for breach of the distribution agreement and sought attorney fees under the contract’s fee provision. The district court granted summary judgment for Unicity, holding that Hooban was not a party to the agreement and lacked standing to sue. Unicity then sought attorney fees under Utah’s reciprocal attorney fees statute, but the district court denied the motion, reasoning that the statute only applied to parties to the underlying contract.

Key Legal Issues

The central issue was whether Utah Code § 78B-5-826 applies when: (1) litigation is based on a written contract containing an attorney fees provision, (2) one party to the litigation claims rights under the contract but is ultimately found not to be a party to it, and (3) the contract contains a bilateral rather than unilateral fee provision.

Court’s Analysis and Holding

The Utah Supreme Court affirmed the court of appeals’ reversal, holding that the reciprocal attorney fees statute applies based on a hypothetical analysis. The court rejected Hooban’s argument that the statute only applies to unilateral fee provisions, noting that the statutory text refers to contracts that “allow at least one party to recover attorney fees” – language that encompasses both unilateral and bilateral provisions. Critically, the court adopted a hypothetical approach: the statute applies when the contract would have allowed at least one party to recover fees if that party had prevailed, even if the prevailing party was ultimately found not to be bound by the contract.

Practice Implications

This decision significantly broadens the scope of Utah’s reciprocal attorney fees statute. Practitioners should note that the statute applies to both unilateral and bilateral fee provisions, and that a party’s ultimate status vis-à-vis the contract does not determine applicability. Instead, courts must analyze whether the contract would have entitled the losing party to fees if that party had prevailed. This hypothetical analysis preserves the statute’s core purpose of leveling the playing field in contract disputes while expanding its reach beyond the archetypal scenario of unilateral fee provisions.