When must a contingency fee be disclosed to recover it as consequential damages in Utah? Western Mortgage v. Walker Explained

Background and facts

Keith and Lorin Walker planned a 10,000-home development near Sand Hollow Reservoir in Washington County, but the 2008 financial crisis forced them into a joint-venture agreement with Western Mortgage & Realty Company and its owner, Frank Tiegs. Western was to clear title and transfer it to a shared entity — an entity it never formed. Western then sued to quiet title outright. The Walkers counterclaimed for breach of contract and breach of fiduciary duty, and after a bench trial the district court found for the Walkers, awarding over $1 million in damages, a constructive trust interest, and attorney fees as consequential damages under the fiduciary-duty exception to the American Rule.

The district court directed the Walkers to quantify those fees in a post-trial Rule 73 motion. It was only through that motion that Western first learned the Walkers had a hybrid hourly-contingency agreement — a 10–15% contingency kicker never disclosed during discovery or proven at trial. The district court found the failure to disclose was for good cause or harmless, ruled that Rule 73 displaced Rule 26’s disclosure requirements for attorney fees, and awarded roughly $900,000 in fees plus adjustments to the constructive trust percentage to account for the contingency fee. Western appealed.

Key legal issues

The Utah Supreme Court confronted three interrelated questions: (1) whether the parties’ pre-motion stipulation waived Western’s appellate arguments; (2) whether consequential damages in the form of attorney fees must be disclosed under Utah Rule of Civil Procedure 26 and proven at trial, including as to foreseeability; and (3) whether Rule 73 — with its mandatory language requiring fees to be claimed by post-trial motion — supplants Rule 26’s disclosure regime when fees are sought as damages rather than as a prevailing-party award.

Court’s analysis and holding

The court reviewed the rule-interpretation questions for correctness. It held that the stipulation did not bar Western’s challenge because the contingency-fee rulings were expressly carved out as “future rulings” related to the fee award. On the merits, the court reaffirmed that fees sought under a Campbell-style fiduciary-duty exception are consequential damages, not prevailing-party fees, and must satisfy the full consequential-damages framework: pleading, Rule 26 disclosure, and trial-level proof of causation, foreseeability, and amount within reasonable certainty. For a contingency fee specifically, there is a second foreseeability requirement — the specific contingency arrangement must itself have been foreseeable at the time the fiduciary duty arose. The court rejected the district court’s reading that Rule 73’s mandatory language or its status as a rule governing a “practice area” displaced Rule 26, and held that the Walkers’ failure to disclose the contingency arrangement was neither for good cause nor harmless, because Western had no opportunity to contest foreseeability during discovery or at trial.

Practice implications

This decision draws a sharp line between two categories of attorney fee awards. Prevailing-party fees authorized by statute or contract flow from the litigation and may be claimed by post-trial Rule 73 motion. Consequential damages fees — those sought under exceptions like the fiduciary-duty rule, the third-party litigation doctrine, or bad-faith breach of insurance contract — flow from the underlying wrongdoing and must be treated like any other special damage: disclosed early, supplemented as information develops, and proven at trial. Practitioners who represent clients with contingency or hybrid arrangements in cases where fees may be recoverable as damages must disclose the fee structure in Rule 26 initial or supplemental disclosures and present foreseeability evidence during their case-in-chief. Relying on a post-trial Rule 73 motion to introduce that information for the first time will forfeit the contingency component entirely, regardless of whether the court informally directed a Rule 73 process.