Hooban v. Unicity International, Inc.
2012 UT 40
Utah2012Background
- Unicity contracts with independent distributors; Hooban purchased H&H’s stock after H&H filed for bankruptcy.
- Unicity sought to exercise its 'first offer' right under the distribution agreement; Hooban claimed to be the contract party's successor.
- District court granted summary judgment: Hooban not a party to the contract, lacking standing to enforce it.
- Unicity moved for attorney fees under Utah Code section 78B-5-826; district court denied as inapplicable.
- Court of Appeals reversed, applying Bilanzich v. Lonetti to allow fee recovery where the contract would allow fees and the action is based on a contract.
- This Utah Supreme Court opinion affirms, holding section 826 applies and defines 'party' and 'based upon a contract' to include the hypothetical outcome if the other party prevailed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether section 78B-5-826 applies when the plaintiff is not a party to the contract | Hooban contends statute targets contracting parties only | Unicity argues statutory reach extends to litigation based on a contract, regardless of party status | Section 826 applies |
| How to interpret 'the provisions of the contract allow at least one party to recover attorney fees' | Bilanzich limits to unilateral fees; Hooban relies on historical purpose | Statute applies whenever contract permits fees for at least one party, regardless of unilateral/bilateral form | Contract allows at least one party to recover; statute applies |
| What makes the action 'based upon a contract' for fee shifting purposes | If Hooban is a non-party, the action isn’t based on the contract | Action rests on enforceability of the contract as basis for recovery, satisfying 'based upon a contract' | Action is based upon a contract; statutory trigger met |
| Whether the statutory inquiry should be conducted under a hypothetical scenario where the other party prevailed | Hypothetical analysis not appropriate for bilateral contracts | Use hypothetical outcome to determine if contract would allow fees if the opposing party prevailed | Adopt hypothetical-counterfactual approach; contract would allow fees if the opposite party prevailed |
| Scope of 'party' for fee shifting when the litigant is not a contract signatory | Non-party cannot recover under contract terms | Prevailing party status suffices; hypothetical party would be bound to contract if they prevailed | Unicity entitled to fees; Hooban’s status does not bar fee shifting |
Key Cases Cited
- Bilanzich v. Lonetti, 160 P.3d 1041 (2007 UT 26) (statute permits fee shifting when contract allows at least one party to recover)
- Giusti v. Sterling Wentworth Corp., 201 P.3d 966 (2009 UT 2) (bilateral fee provisions; discretionary award limits fees when no default exists)
- Anglin v. Contracting Fabrication Machining, Inc., 37 P.3d 267 (2001 UT App 341) (statutory fees applicable to prevailing party where contract governs fees)
- Dejavue, Inc. v. U.S. Energy Corp., 993 P.2d 222 (1999 UT App 355) (statutory fees awarded where contract contains unilateral provision in favor of lessor)