Hooban v. Unicity Int'l, Inc., 20090932.
| Decision Date | 03 July 2012 |
| Docket Number | No. 20090932.,20090932. |
| Citation | 2012 UT 40,285 P.3d 766,712 Utah Adv. Rep. 46 |
| Parties | Roger HOOBAN, Plaintiff and Petitioner, v. UNICITY INTERNATIONAL, INC., Defendant and Respondent. |
| Court | Utah Supreme Court |
OPINION TEXT STARTS HERE
Chad C. Shattuck, Draper, for petitioner.
Steven C. Smith, Derrick C. Hughes, Santa Ana, CA, for respondent.
¶ 1 Roger Hooban sued Unicity International for breach of a distribution agreement. The district court entered summary judgment for Unicity, holding that Hooban was not a party to the agreement and lacked standing to sue for its enforcement. Unicity then filed a motion for attorney fees under Utah's reciprocal attorney fees statute, Utah Code section 78B–5–826.1 The district court denied the motion on the ground that section 826 was inapplicable given that Hooban was not a party to the underlying contract. Unicity appealed, and the court of appeals reversed, interpreting our opinion in Bilanzich v. Lonetti, 2007 UT 26, 160 P.3d 1041, to dictate a fee award in litigation that is based on a written contract where the contract allows at least one party to the litigation to recover fees.
¶ 2 We affirm. Section 826 applies here because, had Hooban's theory of the case prevailed in the district court, he would have been a party to the contract and the contract would have allowed Hooban to recover fees. The statute thus authorizes the court to award fees to Unicity, as the court of appeals correctly concluded.
¶ 3 Unicity is a multilevel marketer of nutritional supplements and personal care products. It contracts with independent distributors who, in turn, recruit other distributors to sell its products to consumers.
¶ 4 In 1994, Unicity entered into a distribution agreement with an entity called H & H Network Services. Under this agreement, H & H agreed to policies and procedures that, among other things, limited H & H's right to assign or transfer its distributorship to a third party and secured Unicity a right of “first offer”—a right to purchase the distributorship instead of allowing it to be transferred to a third party.
¶ 5 The owners of H & H filed a bankruptcy petition in 2004, and Hooban ended up purchasing all of H & H's stock in an auction held by the bankruptcy trustee. Upon learning of the stock transfer, Unicity sought to exercise its “first offer” right to purchase the distributorship under the terms of the agreement. Hooban rejected Unicity's offer, asserting that he was the owner of H & H's stock and succeeded to its rights under the agreement. Unicity refuted Hooban's claim, insisting that Hooban was not a party to the agreement and had no right to operate under it as a Unicity distributor.
¶ 6 Hooban then filed this suit. His complaint sought enforcement of the distributorship agreement, including damages for Unicity's failure to recognize and compensate Hooban as a distributor. It also requested an award of attorney fees under a provision in the contract providing that “[i]n the event of a dispute, the prevailing party shall be reimbursed attorney's fees ... by the other party.”
¶ 7 The district court granted Unicity's motion for summary judgment, holding that Hooban was not a party to the distribution agreement and thus lacked standing to sue under its terms. The court also upheld Unicity's “first offer” right under the contract and rejected Hooban's claim that he was authorized to operate as a distributer.
¶ 8 In the wake of this ruling, Unicity filed a motion for an award of its attorney fees. It based its request on Utah Code section 78B–5–826, which authorizes a fee award to “either party that prevails in a civil action based upon any promissory note, written contract, or other writing ... when the provisions of the ... writing allow at least one party to recover attorney fees.”
¶ 9 The district court denied the motion. The court concluded that the statute “only applies to the parties to the contract in question ‘and not any party to the litigation,’ ” quoting Anglin v. Contracting Fabrication Machining, Inc., 2001 UT App 341, ¶ 10, 37 P.3d 267. The court further “opine [d] that the intent of the statute is to allow the party in the contract in a weaker position to have reciprocal rights to seek attorney's fees,” establishing a “level playing field between all parties.” Because Hooban did not execute the Unicity agreement and “cannot be bound by its terms,” the court concluded that section 826 did not apply to the facts of this case.
¶ 10 Unicity appealed, challenging the district court's analysis and application of the reciprocal attorney fees statute. The court of appeals reversed. Hooban v. Unicity Int'l, Inc., 2009 UT App 287, 220 P.3d 485. It held that Unicity was not barred from asking the district court for an award of attorney fees under section 826 as interpreted in Bilanzich v. Lonetti, 2007 UT 26, 160 P.3d 1041. The court of appeals concluded that, under Bilanzich, a party may recover attorney fees under section 826 if two requirements are satisfied: “first, the underlying litigation must be based upon a contract; and second, the contract must allow at least one party to recover attorney fees.” Hooban, 2009 UT App 287, ¶ 9, 220 P.3d 485. Applying these criteria, the court concluded that Hooban's action was based on a written contract and that a provision of that contract allowed at least one party to recover its attorney fees. Id. ¶ 10. Finally, although Hooban was found “not to be a party to the [c]ontract,” the court of appeals held that this did not bar application of section 826 “because the statute ‘requires only that a party to the litigation assert the [contract's] enforceability as basis for recovery.’ ” Id. ¶ 10 (alteration in original) (quoting Bilanzich v. Lonetti, 2007 UT 26, ¶ 16, 160 P.3d 1041).
¶ 11 Hooban challenges this decision on certiorari. We review the court of appeals' decision de novo, granting no deference to its statutory construction. State v. Arave, 2011 UT 84, ¶ 24, 268 P.3d 163.
¶ 12 The reciprocal attorney fees statute provides as follows:
A court may award ... attorney fees to either party that prevails in a civil action based upon any ... written contract ... when the provisions of the ... contract ... allow at least one party to recover attorney fees.
Utah Code § 78B–5–826. This provision consists of a conditional if/then statement: (a) If the provisions of a written contract allow at least one party to recover attorney fees in a civil action based upon the contract, (b) then a court may award attorney fees to either party that prevails.
¶ 13 Largely ignoring this text, Hooban urges against the applicability of the statute here in light of its avowed purpose. Citing the legislative history, Hooban asserts that the statute was intended to “level the playing field” between contracting parties with disproportionate bargaining power, and he contends that it applies only to “equalize one-sided attorney's fees provisions in [disputes] between contracting parties.” Because the contractual fee provision at issue is bilateral and Hooban was found not to be a party to the contract, Hooban claims that this case does not implicate the statutory purpose of leveling the playing field between parties to a unilateral contract.
¶ 14 Unicity, in response, contends that the statute reaches more broadly. Citing the statutory text, its drafting history, and our decision in Bilanzich v. Lonetti, 2007 UT 26, 160 P.3d 1041, Unicity insists that the statute is invoked upon satisfaction of two conditions: (a) the provisions of the contract at issue must “allow at least one party to recover fees” if that party had prevailed and (b) the underlying litigation must be “based upon a contract” in the sense that a party to the litigation must “assert the writing's enforceability as basis for recovery.” Because the distribution agreement authorized a fee award for “at least one party,” and because Hooban was a party to the litigation and asserted the enforceability of the agreement as his basis for recovery, Unicity claims that these conditions are met and that it is entitled to a fee award.
¶ 15 We agree with Unicity and affirm. In so doing, however, we clarify some latent ambiguities in section 826 that are implicated by the parties' competing arguments. First, we hold that the statute applies even in the face of a bilateral fee clause, rejecting Hooban's contrary arguments based in legislative history and presumed statutory purpose. Second, in embracing Unicity's construction of the statute, we clarify the meaning of the term “party” as it is used in the statute, concluding that Unicity is entitled to fees because it was the prevailing party and because Hooban would have been a party to the contract if he had prevailed in this suit.
¶ 16 Hooban urges us to limit section 826's reach to contract disputes involving unilateral fee provisions. In support of this view, Hooban points to a statement of Representative Richard Maxfield, the sponsor of the bill that became the reciprocal fee statute, in which he characterized “[t]he purpose of the above-proposed legislation” as putting “those who deal with the more sophisticated on more equal footing,” or in other words as addressing the circumstance of “[b]anks, corporations, etc., having their own legal staff and custom made forms ... that do[ ] not cut both ways in the event of defaults and/or misconduct.” H.B. 175, 46th Leg., Gen. Sess. (Utah 1986) (). Hooban also quotes the bill as originally introduced by Representative Maxfield, which provided that “the right to recover legal expenses shall be reciprocal” in “a civil action where a promissory note, contract, or other writing permits one of the parties but not the other to recover attorney fees.” Id. Finally, Hooban cites Bilanzich, in which we explained that “[t]he statute levels the playing field by allowing both parties to recover fees where only one party...
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