When can non-parties be liable for attorney fees under contract provisions? Gold's Gym v. Chamberlain Explained

Background and Facts

In Gold’s Gym v. Chamberlain, members of Health Source of St. George LLC sued Gold’s Gym after discovering that their co-manager had secretly sold their Gold’s Gym franchise without their knowledge. The individual members filed suit claiming they had personally entered into the license agreement with Gold’s Gym, despite the fact that only the LLC was actually a party to that agreement. The district court allowed the members to proceed with their claims, but after a bench trial, found that the members had failed to prove their claims against Gold’s Gym.

Key Legal Issues

The central issue was whether Gold’s Gym could recover attorney fees under the license agreement’s fee provision from the individual LLC members who were not parties to that contract. Gold’s Gym advanced several theories: that the claims were derivative claims subject to the substantial benefit doctrine, that non-signatories who assert contract rights must accept all contract burdens, that Utah’s reciprocal attorney fees statute applied, and that the members had signed personal guaranties.

Court’s Analysis and Holding

The Utah Supreme Court rejected all of Gold’s Gym’s arguments, primarily on preservation grounds. The court found that Gold’s Gym had not adequately preserved most of its arguments below and had failed to provide sufficient legal authority on appeal. Regarding the core principle that non-signatories who assert contract benefits must accept all burdens, the court noted this was not a universal rule. The court explained that while assignees, third-party beneficiaries, and subrogees can assert contract rights, they are not automatically liable for all contract burdens. The court also declined to consider Gold’s Gym’s nonsignatory estoppel argument because it was raised for the first time in supplemental briefing.

Practice Implications

This decision highlights the critical importance of proper preservation of arguments in the trial court and adequate briefing on appeal. Practitioners seeking attorney fees from non-parties to contracts must ensure their theories are clearly presented to the trial court with supporting authority. The decision also clarifies that Utah law does not automatically impose all contractual obligations on parties who assert rights under contracts they did not sign. When dealing with derivative claims or closely held entities, practitioners should carefully consider standing issues and potential fee-shifting implications early in the litigation.