Opinion ID: 855368
Heading Depth: 2
Heading Rank: 1

Heading: if its award exceeded the actual injury

Text: DENNIS CAUSED OR WAS BASED UPON DENNIS’S BREACH OF CONTRACT, THE DIVORCE COURT OVERSTEPPED THE BOUNDS OF ITS DISCRETION WHEN IT AWARDED TAMMY ALL OF HER FEES AND COSTS ¶28 We conclude that the court did not exceed its discretion when it awarded Tammy the amounts she incurred related to the appointment of a receiver and the hiring of forensic accountants. As discussed below in Part A, the court’s award of the fees related to the receiver was proper as a contempt sanction. Similarly, the court’s award of the fees related to the forensic accountants was proper either as a contempt sanction or as a discovery sanction. But as discussed below in Part B, a portion of the remainder of the court’s award may have exceeded the court’s discretion. Specifically, to the extent that the court’s award of attorney fees and out-of-pocket costs exceeds the fees and costs actually caused by Dennis’s sanctionable behavior, and to the extent that any portion of the court’s award is based upon the court’s conclusion that Dennis breached an oral contract, we conclude that the divorce court overstepped the bounds of its discretion. A. The Court Overstepped Its Discretion Only to the Extent That It Awarded Tammy Fees and Costs in Excess of the Amount Dennis Actually Caused Her to Incur ¶29 The divorce court awarded Tammy various fees and costs associated with the divorce proceedings. Specifically, the court awarded Tammy fees and costs associated with the appointment of a receiver, fees for expert accountants, attorney fees, and out-ofpocket costs. The court found that Tammy had incurred attorney fees “largely due to [Dennis’s] untoward and contemptuous behavior . . . in the contempt proceedings and in the collateral case to her direct damage,” and awarded Tammy her fees. The court further noted that “these fees were necessary, reasonable, a proper sanction for [Dennis’s] contempt, and required to protect [Tammy’s] interests particularly in light of the litigation strategy, tactics and the overall behavior of [Dennis] in these proceedings and the collateral case.” The court noted that Dennis prevailed on some of his claims, and that “usually there is an adjustment in attorney’s fees and cost awards reflective of having prevailed in part on some of the claims.” But because “this is far from the usual case in that [Dennis’s] obstructive, deceptive conduct reasonably led to [Tammy] having to examine every transaction,” the court found that “only a full and 11 GOGGIN v. GOGGIN Opinion of the Court complete award of attorney’s fees and costs in [Tammy’s] favor is equitable.” Further, the court awarded Tammy her out-of-pocket costs “for the same reasons.” The court found that the remainder of Tammy’s incurred fees and costs—related to appointing a receiver and hiring expert forensic accountants—were “due solely to [Dennis’s] wrong doing and contemptuous behavior,” and awarded Tammy those fees as well. ¶30 Dennis argues that the court erred in granting this award because (1) “the statute governing fee and cost awards in divorce actions does not permit the awarding of attorney’s fees . . . in the absence of the recipient’s financial need”; (2) “the statute governing fee and cost awards in divorce actions does not permit the awarding of attorney’s fees . . . as a contempt sanction”; and (3) Goggin I held that there was no enforceable contract. ¶31 We conclude that the court acted within its discretion when it awarded Tammy the fees and costs she incurred in connection with the receiver and the expert forensic accountants. These awards were proper as contempt sanctions. Further, we conclude that the award of fees related to the forensic accountants was proper as a sanction under rule 37 of the Utah Rules of Civil Procedure. But we conclude that the court exceeded its discretion if it awarded Tammy any attorney fees or costs beyond those that she incurred as a result of Dennis’s contemptuous behavior. ¶32 In general, a prevailing party may not recover attorney fees unless such an award is authorized by statute or contract.14 But four sources of authority permit a court to award attorney fees or other costs in a situation where one party has been uncooperative and failed to comply with discovery requests and court orders.15 First, a 14 Hughes v. Cafferty, 2004 UT 22, ¶ 21, 89 P.3d 148. 15 Regardless of the parties’ behavior, an award of attorney fees is also permissible in divorce actions under two circumstances. First, in an “action to establish an order of . . . division of property in a domestic case,” the court may award fees to “enable the other party to prosecute or defend the action.” UTAH CODE § 30-3-3(1) (emphasis added). An award under this section must be based on a finding of the party’s financial need. Kerr v. Kerr, 610 P.2d 1380, 1384 (Utah 1980). Alternatively, in an “action to enforce an order of . . . division of property in a domestic case,” the statute permits a court to award fees “upon determining that the party substantially prevailed upon (continued...) 12 Cite as: 2013 UT 16 Opinion of the Court court may properly award to a party the fees the party incurred as a result of the opposing party’s contemptuous behavior. Section 78B- 6-311 of the Utah Code (Contempt Statute) provides that “[i]f an actual loss or injury to a party in an action or special proceeding is caused by the contempt, the court . . . may order the person proceeded against to pay the party aggrieved a sum of money sufficient to indemnify him and to satisfy his costs and expenses.” We have held that this statute permits courts to award attorney fees in cases where one party’s contemptuous behavior necessitated the proceedings—and thus necessitated the fees.16 ¶33 Second, rule 37 of the Utah Rules of Civil Procedure provides that a court “may impose appropriate sanctions for the failure to follow its orders, including . . . order[ing] the party . . . to pay the reasonable expenses, including attorney fees, caused by the failure.”17 Accordingly, so long as “the district court has made a factual finding that the party’s behavior merits sanctions,” we will uphold a district court’s award of discovery sanctions unless “abuse of discretion [is] clearly shown.”18 We have explained that “[o]ur 15 (...continued) the claim or defense.” UTAH CODE § 30-3-3(2) (emphasis added). 16 Bradshaw v. Kershaw, 627 P.2d 528, 533 (Utah 1981) (upholding the court’s award of attorney fees against a party who had been found to be in contempt, noting that the fees were incurred in an effort to enforce the court’s orders, and concluding that “[t]he court’s award of attorney’s fees in this contempt case was justified . . . under the ‘costs and expenses’ provision” of the Contempt Statute); Davidson v. Munsey, 80 P. 743, 744 (Utah 1905) (holding that the Contempt Statute was “intended” to permit the court to award the “unavoidable expenditures” that an aggrieved party incurred in attempting to “secure the benefits” of the proceedings); see also Beardall v. Beardall, 629 P.2d 425, 427 (Utah 1981); Tribe v. Tribe, 202 P. 213, 216 (Utah 1921) (upholding an award of attorney fees when the fees were incurred in an attempt to force the opposing party to comply with the court’s orders). 17 UTAH R. CIV. P. 37(e)(2)(E). 18 Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d 957 (alteration in original) (internal quotation marks omitted). 13 GOGGIN v. GOGGIN Opinion of the Court deferential review recognizes that trial courts must deal first hand with the parties and the discovery process.”19 ¶34 Third, a court may award equitable attorney fees. “[A] court has inherent equitable power to award reasonable attorney fees when it deems it appropriate in the interest of justice and equity. . . . Indeed, the power to award such fees is part of the original authority of the chancellor to do equity in a particular situation.”20 And we have recognized that “[c]ourts have exercised that inherent power in several categories of cases,” including situations where “a party acts in bad faith, vexatiously, wantonly, or for oppressive reasons.”21 A court making an equitable award of attorney fees “must ascertain whether the equities of a given case justify the use of its inherent and discretionary power to award fees.”22 ¶35 Finally, a court may be able to award attorney fees as a sanction under its inherent sanction powers. It is well established that courts have inherent powers to sanction attorneys.23 And although we have never held that courts possess a similar inherent power to sanction parties, we have suggested that such a power may exist. Specifically, in upholding a court’s award of attorney fees as a sanction for an attorney’s bad behavior, we noted that “such awards are within the inherent powers of the court and are in fact imposed regularly as a means of controlling the conduct of attorneys and litigants.”24 Additionally, the Utah Court of Appeals has expressly held that, under the court’s inherent sanction power, 19 Id. (internal quotation marks omitted). 20 Stewart v. Utah Pub. Serv. Comm'n, 885 P.2d 759, 782 (Utah 1994) (internal quotation marks omitted). 21 Id. (internal quotation marks omitted). 22 Hughes, 2004 UT 22, ¶ 20. 23 Griffith v. Griffith, 1999 UT 78, ¶ 13, 985 P.2d 255 (“It is undoubtedly true that courts . . . possess certain inherent powers not derived from any statute. Among these are the power to punish for contempt . . . .” (internal quotation marks omitted)). 24 Barnard v. Wassermann, 855 P.2d 243, 249 (Utah 1993) (emphasis added). 14 Cite as: 2013 UT 16 Opinion of the Court courts may properly award attorney fees that were caused by the opposing party’s misbehavior.25 ¶36 Thus, a court’s authority to impose an award of fees as a sanction against a party who has been obstructive or contemptuous is derived from several statutes and common law doctrines. But none of those statutes or doctrines permit the amount of the award to exceed the amount of fees, costs, or injury that the other party actually incurred. Specifically, the amount of fees and costs awarded under the Contempt Statute cannot exceed the amount of “actual loss or injury” suffered by the other party.26 And sanctions imposed under rule 37 of the Utah Rules of Civil Procedure are limited to the amount of fees and expenses “caused by the failure” to follow the court’s orders.27 Similarly, a court’s award of equitable attorney fees, by its nature, is limited to the amount of fees incurred by the other 25 Liston v. Liston, 2011 UT App 433, ¶¶ 26–27, 269 P.3d 169 (reviewing the district court’s decision to use its “inherent power to sanction” to “award[] Wife [$5,000] of her attorney fees based on the issue of fault, primarily [Husband]’s ongoing and blatant attempts to hide assets, confuse financial transactions, and otherwise avoid being accountable for his Court Ordered and marital obligations,” and confirming the award, concluding that it was proper “[g]iven the trial court’s findings and Husband’s failure to challenge the trial court’s inherent power to award attorney fees as a sanction” (third alteration in original) (internal quotation marks omitted)); Anderson v. Anderson, 2010 UT App 392U, para. 5 (upholding an award of attorney fees “because Wife’s unpreparedness and failure to seek a continuance prior to [a] hearing caused the other parties to appear unnecessarily,” and concluding that “[s]uch awards fall within the district court’s inherent powers”). 26 UTAH CODE § 78B-6-311 (providing that “[i]f an actual loss or injury to a party in an action or special proceeding is caused by the contempt, the court . . . may order the person proceeded against to pay the party aggrieved a sum of money sufficient to indemnify him and to satisfy his costs and expenses”). 27 UTAH R. CIV. P. 37(e)(2)(E); see also Morton v. Cont’l Baking Co., 938 P.2d 271, 274 (Utah 1997) (noting that sanctions under rule 37 are inappropriate if they are not supported by an “evidentiary basis” (internal quotation marks omitted)). 15 GOGGIN v. GOGGIN Opinion of the Court party.28 Finally, the amount of fees and costs awarded under the court’s inherent sanction power is designed to compensate the other party for the expense resulting from the sanctionable behavior and must be “related to the nature of the misconduct and the resulting prejudice.”29 Accordingly, when a court imposes an award of fees or costs as a sanction, its award must be limited to the amount actually incurred by the other party. ¶37 In the divorce proceedings in this case, the divorce court awarded Tammy fees associated with appointing a receiver, finding that she incurred those fees “due solely to [Dennis’s] wrong doing and contemptuous behavior.” Similarly, the court awarded Tammy fees associated with hiring expert forensic accountants, finding that those fees were “necessitated by [Dennis’s] behavior referred to herein and [in] the contempt and collateral proceedings.” Because these awards compensated Tammy for the “actual loss or injury” that Dennis caused, they were proper under the Contempt Statute.30 Further, Tammy was forced to hire forensic accountants as a direct result of Dennis’s failure to comply with discovery requests—and ultimately with court orders—requiring him to submit an accounting. Thus, the court’s award of the forensic accountant fees is also proper under rule 37 of the Utah Rules of Civil Procedure.31 Accordingly, we conclude that the court did not overstep the bounds of its discretion when it awarded Tammy her fees and costs associated with the receiver and the forensic accountants. ¶38 But the divorce court awarded Tammy her attorney fees and out-of-pocket costs after finding that she incurred those fees “largely due to [Dennis’s] untoward and contemptuous behavior.” (Emphasis added.)32 Although it is unclear, this language implies 28 See Stewart, 885 P.2d at 782 (“[A] court has inherent equitable power to award reasonable attorney fees when it deems it appropriate in the interest of justice and equity.”). 29 Wilson v. IHC Hosps., Inc., 2012 UT 43, ¶ 94, 289 P.3d 369; see also Griffith, 1999 UT 78, ¶ 14; Barnard, 855 P.2d at 248–49. 30 See UTAH CODE § 78B-6-311. 31 UTAH R. CIV. P. 37(e)(2)(E). 32 We note that although the court’s reasoning for awarding the out-of-pocket costs is somewhat unclear, it appears that the court awarded them “for the same reasons as set forth” in the discussion (continued...) 16 Cite as: 2013 UT 16 Opinion of the Court that Tammy may have been awarded at least some attorney fees and out-of-pocket costs that were not caused by Dennis’s contemptuous behavior. In other words, the court’s award of attorney fees and outof-pocket costs may have exceeded the amount of injury Dennis caused. And as discussed above, the court lacks authority to impose, as a sanction, an award of fees and costs in excess of the actual injury caused to the other party. Accordingly, to the extent the court awarded Tammy fees and costs in excess of the actual injury Dennis caused, we conclude that the court exceeded its discretion. We therefore remand this issue to the divorce court with instructions to identify and excise any portion of its award of attorney fees and outof-pocket costs that exceeds the amount actually caused by Dennis’s sanctionable behavior. B. The Court Overstepped Its Discretion to the Extent It Awarded Tammy Any Amount Based Upon Dennis’s Breach of Contract ¶39 As explained above, in the Collateral Action, the Collateral Court found that Tammy and Dennis had created an oral contract to “purchase, hold, and develop the [Riverbend Property], and the equestrian business therein, for their mutual enjoyment and benefit,” and that Dennis’s breach of that agreement had caused Tammy to suffer damages. But in Goggin I, which we issued after the divorce court entered its Divorce Findings and Corrected Findings, we concluded that no enforceable contract existed, and we reversed that portion of the Collateral Court’s Collateral Order.33 ¶40 In the divorce proceedings in this case, when the divorce court calculated its award to Tammy, it appears to have taken into account Dennis’s breach of that contract. Specifically, the divorce court noted that “[t]he damages issue” before the divorce court “refers to, among other things, the damages due to [Dennis’s] breach of the parties’ contract and his failure to properly account for and administer income and funds attributable to marital assets.” And later, in its Corrected Findings, the court listed, as one of ten reasons supporting the reasonableness of Tammy’s attorney fees, that the “action was necessary to vindicate [Tammy’s] rights under the contract that has been referenced throughout the case and throughout these Findings.” 32 (...continued) of the attorney fees award. 33 Goggin I, 2011 UT 76, ¶ 38, 267 P.3d 885. 17 GOGGIN v. GOGGIN Opinion of the Court ¶41 Thus, although the court did not specify an amount of damages caused by Dennis’s breach of contract, it appears that some portion of the total award of Tammy’s fees and costs may have been based upon that breach. But in light of our conclusion in Goggin I, it is clear that any such award would be improper. We therefore conclude that, to the extent the court’s award was based upon Dennis’s breach, the court exceeded the bounds of its discretion. Accordingly, we remand this issue to the divorce court with instructions to identify and excise any amount of its award to Tammy that was based upon Dennis’s breach of contract.34