Utah Telecomm. Open Infrastructure Agency v. Hogan

• Decision Date: 10 January 2013
• Docket Number: No. 20110629–CA.,20110629–CA.
• Parties: UTAH TELECOMMUNICATION OPEN INFRASTRUCTURE AGENCY, aka UTOPIA, Plaintiff and Appellee, v. Chris HOGAN, Defendant and Appellant.
• Court: Utah Court of Appeals

294 P.3d 645

725 Utah Adv. Rep. 41

UTAH TELECOMMUNICATION OPEN INFRASTRUCTURE AGENCY, aka UTOPIA, Plaintiff and Appellee,

v.Chris HOGAN, Defendant and Appellant.

No. 20110629–CA.

Court of Appeals of Utah.

Jan. 10, 2013.

Steve S. Christensen, Craig L. Pankratz, and Samuel J. Sorensen, Attorneys for Appellant

Eric C. Olson and Stephen W. Geary, Attorneys for Appellee.

McHUGH, Judge:

¶ 1 Chris Hogan appeals from the trial court's denial of his motion for attorney fees and its refusal to hold Utah Telecommunication Open Infrastructure Agency (UTOPIA) in contempt. We affirm in part, and reverse and remand in part.

BACKGROUND

¶ 2 UTOPIA and Hogan entered into a two-year Agreement for Professional Services (the Agreement) on May 12, 2009.¹ The Agreement outlined the scope of Hogan's duties and included a confidentiality provision, stating, “[Hogan] understands that the Services performed for UTOPIA are confidential and [Hogan] agrees to maintain such confidentiality. This [provision] shall survive the termination of this Agreement.” On March 17, 2011, UTOPIA informed Hogan that it did not intend to renew the Agreement and offered to pay him the remaining amount due “with no further services rendered.” Hogan responded on March 21, 2011, with a brief letter from his attorney attached to a draft complaint alleging breach of contract, breach of the covenant of good faith and fair dealing, wrongful discharge, and promissory estoppel. On March 24, 2011, UTOPIA provided Hogan with a formal “Notice of Expiration of Professional Services Agreement.” The same day, Hogan made a settlement proposal stating that he was “acutely aware that public scrutiny spurred by members of the media threatens to destroy the work of UTOPIA. Although his lawsuit may be necessary to redress Mr. Hogan's rights under the contract ... he would prefer to resolve this case without public scrutiny.” The letter included a list of Hogan's specific grievances and “a list of ... requirements” to be met in order to avoid a lawsuit.

¶ 3 In a letter responding to the settlement proposal, UTOPIA described Hogan's settlement conditions as “extravagant demands” and stated, “What Mr. Hogan attempts in proposing this extravagant course, at least as he frames the matter and perceives UTOPIA's interests and vulnerabilities, go by the names of ‘blackmail’ and ‘extortion.’ ” UTOPIA also stated its intent to enforce the Agreement's confidentiality provision. Hogan's next correspondence states that he did not intend to “extort or blackmail UTOPIA” but that if his “objectives” were not met, he would file a lawsuit to “protect the public trust by exposing what he believes is mismanagement.” He further predicted that “[i]f the media, which has already been critical of UTOPIA, learns of the lawsuit, it will recommence its assault on UTOPIA.”

¶ 4 On April 18, 2011, UTOPIA filed a complaint seeking to permanently enjoin “Hogan from disclosing any information obtained during the course of rendering services under the Agreement.” In addition, UTOPIA requested a declaration that the Agreement would expire on May 13, 2011, and that UTOPIA had no obligation to renew the Agreement or to compensate Hogan beyond the expiration date. UTOPIA simultaneously filed an ex parte motion seeking a temporary restraining order and a preliminary injunction to prevent Hogan from releasingconfidential information during the pendency of the action. UTOPIA also filed a motion to seal the record of the litigation.² In a supporting affidavit, UTOPIA indicated that “Hogan has threatened to publicly disclose this confidential information; [that] Hogan has already compiled this information in the form of the letters and draft complaint”; and that UTOPIA would be irreparably harmed if Hogan were to release the information.

¶ 5 Following an ex parte hearing on April 18, 2011, the trial court issued a temporary restraining order and an order sealing the record of the case and scheduled an evidentiary hearing to determine whether to issue a preliminary injunction. One day before the evidentiary hearing, Hogan filed a lawsuit against UTOPIA in federal court, which described Hogan's allegations of mismanagement. The trial court proceeded with the scheduled evidentiary hearing and declined to issue the preliminary injunction. In denying the injunction, the trial court stated, “It appears that all of the information that [Hogan] ... threatened to disclose, is not prevented by this contractual provision,” that it would be adverse to the public interest to enjoin Hogan from filing a claim, and that UTOPIA would be unlikely to prevail on the merits of its complaint. After declining to issue the preliminary injunction, the trial court set a subsequent hearing to determine whether to unseal the record. Prior to that scheduled hearing, the parties stipulated that the record could be unsealed. However, no order unsealing the record was entered at that time. On April 27, UTOPIA filed a motion to dismiss its complaint and to withdraw its motion to seal the record, which the trial court had previously granted. Meanwhile, Hogan filed a motion for $17,246 in attorney fees with a supporting affidavit. He also submitted a motion to strike UTOPIA's notice of dismissal in order to keep the attorney fee issue open.

¶ 6 On May 1, 2011, KSL.com published an article that quoted UTOPIA's response to Hogan's settlement offer in which UTOPIA had characterized Hogan's settlement demands as “extortion” and “blackmail.” The article opened with the statement, “Chris Hogan ... is being accused of extortion in court documents....” The letter, which UTOPIA had submitted to the court as Exhibit E, remained under seal at the time, pursuant to the trial court's order. On May 8, 2011, Hogan filed a motion to seal Exhibit E, but to otherwise unseal the record. In support, Hogan attached an affidavit in which he claimed that UTOPIA had leaked sealed documents, including Exhibit E, to the author of the KSL.com article ³ and to the author of another article published on May 2, 2011, on www. fiercetelecom. com. Hogan alleged that both articles “misrepresent[ed] facts, inaccurately attribute[d] statements to [Hogan], and misquote[d] statements made in documents which were filed with UTOPIA's pleadings.” Hogan subsequently filed a Motion for Order to Show Cause (the Motion), arguing that UTOPIA should be held in contempt for releasing the sealed documents to third parties. In a supporting affidavit, Hogan stated that similar allegations of extortion had appeared in other articles. He also asserted, “[UTOPIA] appears to have aggressively mounted a negative campaign against me in the media using this sealed information.... This egregious smear campaign will likely make it impossible to find work for the foreseeable future.”

¶ 7 Following a May 16, 2011 hearing, the trial court ordered that the entire record be unsealed, including Exhibit E. The trial court also struck from the record as immaterial the two paragraphs in Exhibit E relating to blackmail and extortion (the Stricken Language) under rule 10(h) of the Utah Rules of Civil Procedure.

¶ 8 Thereafter, at a June 13, 2011 hearing on the issues of contempt and attorney fees, Hogan argued that UTOPIA should be held in contempt because it had “unilaterally ... leaked” the Stricken Language, knowing that the record was sealed. UTOPIA asserted that it had released the Stricken Language only after it had withdrawn its motion to seal the record and after Hogan had filed the federal complaint which “quotes from and characterizes the State action.” The trial court declined to hold UTOPIA in contempt.

¶ 9 Hogan next argued that he was entitled to attorney fees both because the complaint was brought without merit and in bad faith and because he had been wrongfully enjoined. The trial court declined to award Hogan attorney fees because “the inference ... that the prevailing party is entitled to their attorney's fees is not merited.” The trial court further ruled that the action was not frivolous or brought in bad faith because it was “an action based on contract.” Hogan now appeals.

ISSUES AND STANDARDS OF REVIEW

¶ 10 Hogan first claims that he is entitled to attorney fees under section 78B–5–825 of the Utah Code and under rule 65A of the Utah Rules of Civil Procedure. Generally, “ ‘[w]hether attorney fees are recoverable in an action is a question of law, which we review for correctness.’ ” Anderson & Karrenberg v. Warnick, 2012 UT App 275, ¶ 8, 289 P.3d 600 (quoting Valcarce v. Fitzgerald, 961 P.2d 305, 315 (Utah 1998)). When reviewing a denial of fees under section 78B–5–825, “[t]he ‘without merit’ determination is a question of law, and therefore we review it for correctness.” Jeschke v. Willis, 811 P.2d 202, 203–04 (Utah Ct.App.1991) (interpreting Utah Code Ann. § 78–27–56 (Michie Supp.1990) (current version at id.§ 78B–5–825 (LexisNexis 2012))). “A finding of bad faith is a question of fact and is reviewed by this court under the ‘clearly erroneous' standard.” Id. at 204.

¶ 11 Hogan next challenges the trial court's refusal to hold UTOPIA in contempt. “On review of both criminal and civil proceedings, we accept the trial court's findings of fact unless they are clearly erroneous.” Von Hake v. Thomas, 759 P.2d 1162, 1172 (Utah 1988), superseded on other grounds as stated in State v. Hurst, 821 P.2d 467, 470 (Utah Ct.App.1991). UTOPIA argues that Hogan lacks standing to challenge the trial court's decision not to hold UTOPIA in contempt. Standing is a jurisdictional question, which “we have an ‘independent obligation’ to resolve.” Summer v. Summer, 2012 UT App 159, ¶ 12, 280 P.3d 451 (mem.) (quoting In re Adoption of Baby E.Z., 2011 UT 38, ¶ 36, 266 P.3d 702).

ANALYSIS

I. Attorney Fees

¶ 12 Hogan challenges the trial court's denial of his request for attorney fees under two separate theories. First, Hogan claims he is entitled to attorney fees under section 78B–5–825 of the Utah Code,...