Chamberlain v. Golds Gym, 471 P.3d 170

Background

In 1999 Health Source of St. George, LLC (the LLC) — owned by Vince Engle (50%) and Members Clark Chamberlain and Brent Statham (25% each) — entered into a License Agreement with Gold’s Gym; Members did not sign the License Agreement and were not managers.
Members later sued Gold’s Gym (and others), repeatedly alleging they personally entered into the License Agreement and asserting contract and tort claims that relied on License Agreement rights.
Gold’s Gym repeatedly argued in district court that Members lacked standing and that the LLC, not the individual members, owned the claims; the district court nonetheless allowed the claims to proceed to trial and did not require derivative-action procedures.
After a bench trial the court found for Gold’s Gym; Gold’s Gym moved for attorney fees under the License Agreement’s fee clause, but the district court denied fees because Members were nonsignatories and the claims did not arise out of the License Agreement.
On appeal Gold’s Gym advanced multiple theories for recovering fees from nonsignatories (substantial-benefit doctrine for derivative plaintiffs, nonsignatory estoppel, reciprocal-fee statute, guaranty, and general ‘‘accept benefits/accept burdens’’ principle), but several theories had not been preserved or adequately briefed below.
The Utah Supreme Court held that Gold’s Gym failed to carry its burden to show entitlement to fees from noncontracting parties, primarily because of preservation and briefing defects and the lack of controlling authority extending the asserted doctrines to this situation; the denial of fees was affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Gold’s Gym may recover contractual attorney fees from Members who were not signatories to the License Agreement	Members: They are not parties to the License Agreement; fee clause does not apply to them	Gold’s Gym: Members asserted contract-based rights and thus must bear the agreement’s burdens including fees	Denied — Gold’s Gym did not establish entitlement; Members not bound and fee award not warranted on record
Whether the substantial-benefit doctrine (derivative-plaintiff fees) permits a prevailing defendant to recover fees from derivative plaintiffs	Members: N/A (they disputed derivative treatment)	Gold’s Gym: If claims were derivative, substantial-benefit doctrine allows fee recovery against plaintiffs who asserted the LLC’s rights	Rejected — doctrine applies to successful derivative plaintiffs who recover for the entity, not to a prevailing defendant; Gold’s Gym offered no authority to extend it
Whether nonsignatory estoppel (or ‘‘accept benefits/accept burdens’’) binds Members to the License Agreement’s fee clause	Members: They are nonsignatories and did not assent; argument to bind them was not preserved	Gold’s Gym: Nonsignatory estoppel / equitable principles should bind those who invoke contractual benefits	Not considered/failed — court would not consider nonsignatory estoppel because Gold’s Gym did not raise it below; general ‘‘accept benefits/accept burdens’’ claim was unpreserved or inadequately briefed and unsupported by authority in this context
Whether alternative bases (Utah reciprocal-fee statute or Members’ personal guaranties) permit fees	Members: These theories were not raised/do not apply	Gold’s Gym: Reciprocal-fee statute and personal guaranties permit a fee award even if Members are nonsignatories	Not reached/denied on preservation grounds — these arguments were not preserved in district court and were inadequately briefed on appeal

Key Cases Cited

Aurora Credit Servs., Inc. v. Liberty West Dev., Inc., 970 P.2d 1273 (Utah 1998) (recognized narrow exception allowing direct suits in closely held entities rather than derivative procedures)
Dansie v. City of Herriman, 134 P.3d 1139 (Utah 2006) (noting Aurora’s closely held exception has limits and may have overstated a trend)
Ellsworth v. Am. Arbitration Ass’n, 148 P.3d 983 (Utah 2006) (suggested nonsignatory estoppel might bind a nonsignatory to arbitrate under certain circumstances)
Hooban v. Unicity Int’l, Inc., 285 P.3d 766 (Utah 2012) (interpreting Utah’s reciprocal attorney-fee statute in contexts where a plaintiff is a stranger to a contract)
Prudential Fed. Sav. & Loan Ass’n v. Hartford Accident & Indem. Co., 325 P.2d 899 (Utah 1958) (party bound by supplemental agreement where it expressly agreed to portions and accepted benefits)
Salt Lake City v. Kidd, 435 P.3d 248 (Utah 2019) (appellate principle that parties must develop and support arguments; courts will not be left to construct parties’ cases)