Court Opinion

ID: 6215669
Source: CourtListenerOpinion
Date Created: 2022-02-07 16:00:53.126483+00
Date Added: 2024-06-11T08:57:05.151171
License: Public Domain

Appellate Case: 19-4131     Document: 010110641811       Date Filed: 02/07/2022    Page: 1
                                                                                  FILED
                                                                      United States Court of Appeals
                                       PUBLISH                                Tenth Circuit

                        UNITED STATES COURT OF APPEALS                      February 7, 2022

                              FOR THE TENTH CIRCUIT                      Christopher M. Wolpert
                          _________________________________

  BANNER BANK, successor by merger of
  American West Bank which formerly did
  business in Utah as Far West Bank,

       Plaintiff Counter Defendant –
       Appellant,

  v.                                                          No. 19-4131

  JAMES M. SMITH, a Utah resident;
  LOREE C. SMITH, an individual,

        Defendant Counterclaimants –
        Appellees.
                       _________________________________

                       Appeal from the United States District Court
                                 for the District of Utah
                             (D.C. No. 2:12-CV-00763-CW)
                         _________________________________

 Steven W. Call, Ray Quinney & Nebeker P.C., Salt Lake City, Utah (Jonathan A. Dibble,
 Ray Quinney & Nebeker P.C., Salt Lake City, Utah, with him on the briefs), for Plaintiff
 Counter Defendant - Appellant.

 Robert D. Drummond, Jr., Robert D. Drummond, Jr. Law Office, Fairhope, Alabama
 (Dallis Nordstrom Rohde, Carman Lehnhof Israelsen LLP, Salt Lake City, Utah, with
 him on the briefs), for Defendant Counterclaimants - Appellees.
                          _________________________________

 Before HARTZ, PHILLIPS, and EID, Circuit Judges.
                   _________________________________

 EID, Circuit Judge.
                          _________________________________
Appellate Case: 19-4131    Document: 010110641811        Date Filed: 02/07/2022     Page: 2

       Banner Bank (“Banner”) provided a multimillion-dollar loan to James and

 Loree Smith and their business entities. 1 As collateral, James Smith pledged several

 properties. Banner later contracted to release Loree Smith from all actions associated

 with the loan. When the loan entered default, Banner named Loree in this diversity

 action to foreclose on the collateral, notwithstanding the release. Loree brought a

 successful breach of contract counterclaim and recovered attorneys’ fees through

 Utah’s bad-faith fee-shifting statute. See Utah Code Ann. § 78B-5-825. After

 finding Loree satisfied every statutory requirement, the district court issued a

 judgment awarding $105,550 in fees to Loree. Banner appeals, arguing that every

 prong of the bad-faith statute is unmet and the fee award was unreasonable. We also

 asked the parties to brief the question whether the judgment below is final. Finding

 that it is, we exercise our jurisdiction under 28 U.S.C. § 1291. We do not reach any

 of Banner’s specific statutory arguments but reverse the fee award for a more

 fundamental reason. Section 78B-5-825 is a procedural attorneys’ fees statute, so it

 cannot be used to recover fees when a federal court sits in diversity.

                                            I.

       James Smith owned a business: Real Estate Investor Support (“REIS”). James

 Smith also owned real and personal property across the United States, some of which

 his ex-wife Loree Smith co-owned. Banner’s predecessor loaned money to REIS. As

 part of the agreement, REIS gave Banner a promissory note worth $2.3 million in

       1
        Banner Bank is the successor by merger of AmericanWest Bank, which
 formerly did business in Utah as Far West Bank.
                                            2
Appellate Case: 19-4131      Document: 010110641811        Date Filed: 02/07/2022       Page: 3

 July 2009. James personally guaranteed the loan and signed a Deed of Trust that put

 up several properties in Oregon (eleven parcels of land, called the Eleven Parcels,

 and a condominium, called Unit 7) as collateral. The Eleven Parcels were solely

 owned by James, while Unit 7 was at that time jointly owned by James and Loree.

          James signed the document but Loree refused. Banner accepted the deed

 anyway and tried to record it in Oregon. The county recorder’s office rejected the

 filing because Loree had not signed it.

          Banner revised the trust deed in September 2010 to remove Unit 7 from the

 property securing the loan and delete Loree’s name and signature block. James

 signed the revised deed but only sent Banner an electronic copy of the signature

 page, retaining the original. Banner did not receive or record the revised deed of

 trust.

          Meanwhile, in December 2010, REIS, James, and Loree sold REIS’s assets to

 Real Estate Investor Education (“REIE”). REIE agreed to assume the Banner loan.

 It also agreed to release Loree from any lawsuits that might arise in connection with

 it. The release states:

          In consideration of this Agreement, the Borrower and Lender, on behalf
          of themselves, their successors, assigns, legal representatives
          (collectively and individually, the “Releasing Parties”), hereby fully,
          finally and completely RELEASE and FOREVER DISCHARGE Loree
          Smith of and from any and all claims, controversies, disputes, liabilities,
          obligations, demands, damages, debts, liens, actions and causes of
          action of any and every nature whatsoever relating to the Loan.

 Aplt. App’x Vol. I at 150.

                                              3
Appellate Case: 19-4131    Document: 010110641811        Date Filed: 02/07/2022       Page: 4

       REIE defaulted in March 2011. James, the guarantor, did not make any

 payments on the loan. Banner’s only recourse was the property James pledged, so it

 “determined that it needed to record the defective Deed of Trust.” Aplt. App’x

 Vol. IV at 846. Through counsel, Banner made multiple changes to the original,

 defective deed using pen, pencil, and white-out. In July 2011, Banner recorded the

 altered document.

       In August 2012, Banner filed this action against REIS, REIE, JMS Marketing,

 James, Loree, and ten John Does to enforce the loan and foreclose on James’s interest

 in the Eleven Parcels and Unit 7. 2 To foreclose on solely James’s interest, Banner

 sought a declaratory judgment that Loree did not hold any interest in the collateral.

 Loree, as a third-party beneficiary of the release, brought several counterclaims,

 including breach of contract, against Banner. James also brought counterclaims.

 Banner attached a copy of the trust deed to its complaint, but the copy did not contain

 the alterations described above. The alterations were likewise not visible in the copy

 certified by the Oregon county, or in any copy provided during discovery.

       The district court ruled that all defendants except Loree were liable for the

 loan amount. In 2014, the court entered default judgments against REIS, REIE, and

 JMS Marketing. Then, in 2017, the district court entered summary judgment against

 James, holding him liable for the same sum. However, the court declined to enter

 summary judgment on the issue of foreclosing on the Oregon property because of

       2
         The district court properly invoked its diversity jurisdiction because the
 parties were of diverse citizenship. See 28 U.S.C. § 1332.
                                            4
Appellate Case: 19-4131     Document: 010110641811         Date Filed: 02/07/2022     Page: 5

 factual disputes concerning the altered deed. In that same order, the district court

 rejected all counterclaims brought by James and Loree except Loree’s counterclaim

 for breach of contract, on which it reserved judgment.

        In December 2014, Loree obtained sole ownership of Unit 7 pursuant to a final

 order entered in the Smiths’ Florida divorce case. In 2017, Banner released its

 interest in Unit 7, so the sole pending claim against James concerned only the Eleven

 Parcels he owned in full. The other claim remaining at that point was Loree’s

 counterclaim for breach of contract.

        The district court held a three-day bench trial on the two remaining claims in

 June 2017. Banner produced the altered version of the trust deed for the first time in

 this litigation on the second day of trial. The parties submitted written closing

 arguments and the court scheduled a hearing for October 2017. On September 5,

 2017, James filed for bankruptcy. As a result, the district court stayed the case. See

 11 U.S.C. § 362(a). Later, as the court explained in a 2019 order, “the Trustee in

 James’s bankruptcy proceeding abandoned the Oregon Properties, thereby mooting

 Banner Bank’s request for an order to foreclose on the Eleven Parcels.” Aplt. App’x

 Vol. IV at 842. With the foreclosure claim moot, that left only one cause of action:

 Loree’s counterclaim for breach.

        The district court ruled that Loree prevailed on her breach of contract

 counterclaim because Banner sued her despite their unambiguous release agreement.

 The court explained that “[w]hile Banner Bank [wa]s certainly within its legal rights

 to foreclose on property for which it ha[d] a secured interest[,] . . . the existence of

                                              5
Appellate Case: 19-4131    Document: 010110641811        Date Filed: 02/07/2022    Page: 6

 this right does not negate the legal consequences to Banner Bank for violating its

 promise to release Loree from such a controversy.” Id. at 853.

       Although Banner’s notice of appeal encompasses the district court’s decision

 on Loree’s counterclaim, Banner does not directly challenge that ruling. Instead,

 Banner challenges the attorneys’ fees Loree recovered under Utah’s bad-faith fee-

 shifting statute. See Utah Code Ann. § 78B-5-825. The statute requires awarding

 “reasonable” attorneys’ fees to a “prevailing party if the court determines that the

 action or defense to the action was without merit and not brought or asserted in good

 faith.” Id. § 78B-5-825(1). The statute contains exceptions that are not relevant to

 this appeal.

       Loree’s breach of contract counterclaim is governed by Utah law. Utah

 follows the American Rule that attorneys’ fees are typically not recoverable, win or

 lose, unless law or contract provides otherwise. See USA Power, LLC v. PacifiCorp,

 372 P.3d 629, 662 (Utah 2016). The Utah Supreme Court has not, it seems,

 addressed whether and when fees may be recovered as damages for breach of a

 release agreement, which some jurisdictions treat differently. See Sonja A. Soehnel,

 Annotation, Recovery of Attorneys’ Fees and Costs of Litigation Incurred as Result

 of Breach of Agreement Not to Sue, 9 A.L.R. 5th 933 (1993) (surveying different

 approaches).

       Leading up to trial, Loree sought to recover attorneys’ fees as direct damages

 for Banner’s alleged breach of the release. See Defs.’ Resp. in Opp’n to Banner

 Bank’s Mot. to Alter and Amend at 4, Banner Bank v. Real Estate Investor

                                            6
Appellate Case: 19-4131    Document: 010110641811        Date Filed: 02/07/2022    Page: 7

 Education, LLC, et al., No. 2:12-CV-00763-CW (D. Utah) (May 11, 2017), ECF

 No. 219 (“[A]ttorney’s fees, as well as other costs and expenses, incurred by Loree

 Smith are the damages as a result of a Breach of the Consent, Waiver and Release

 Agreement and are recoverable . . . because they are in and of themselves, in part, the

 damages as a direct result of Banner’s breach.”). 3 Loree’s pretrial brief likewise said

 nothing about claiming fees under the Utah statute. See Aplt. App’x Vol. IV at 796.

 At trial, however, Loree suggested she sought fees under both Utah statutory law and

 the district court’s inherent powers. See Redacted Tr. at 13, Banner Bank, No.

 2:12-CV-00763-CW (Aug. 8, 2017), ECF No. 251. In her closing brief, Loree

 formalized this request by invoking § 78B-5-825. See Loree Smith’s Br. as to

 Closing Arg. at 3, Banner Bank, No. 2:12-CV-00763-CW (Aug. 10, 2017), ECF No.

 254.

        The district court awarded attorneys’ fees under the Utah statute, concluding

 that Banner’s action against Loree was both meritless and brought in bad faith. In a

 later order, the court rejected Banner’s argument that Loree was not a “prevailing

 party” under Utah law as she failed to satisfy the damages element of her breach

 claim. The court explained that the release’s “obvious” and “sole[] purpose” was

 “ensur[ing] that Loree was released and protected from ‘any and all’ legal claims ‘of

 any and every nature whatsoever relating to the Loan.’” Aplt. App’x Vol. V at 1068

        3
         We take judicial notice of arguments made in certain district court documents
 that do not appear in the record compiled by the parties. See St. Louis Baptist
 Temple, Inc. v. FDIC, 605 F.2d 1169, 1172 (10th Cir. 1979).
                                            7
Appellate Case: 19-4131     Document: 010110641811        Date Filed: 02/07/2022     Page: 8

 (quoting release). “[T]he natural result of Banner Bank’s breach was that Loree had

 to hire an attorney to defend her against Banner Bank’s claims,” so her attorneys’ fee

 claim was “a proper assertion of direct damages for a breach of contract.” Id.

 (internal quotation marks omitted).

       The district court reduced its initial fee award because of Loree’s lawyer’s

 travel time and entered judgment against Banner for her remaining attorneys’ fees in

 the amount of $105,550. Banner timely appealed. Banner contests all three prongs

 of the fee statute as well as the reasonableness of the fee award. We also asked the

 parties to provide supplemental briefing on whether we have jurisdiction under the

 final judgment rule. See 28 U.S.C. § 1291.

                                             II.

       We begin with finality, which determines our jurisdiction. Under the final

 judgment rule, we have jurisdiction over “appeals from all final decisions of the

 district courts.” Id. To be final, a district court’s “decision must reflect the

 termination of all matters as to all parties and causes of action.” Dodge v. Cotter

 Corp., 328 F.3d 1212, 1221 (10th Cir. 2003) (internal quotation marks omitted). The

 judgment below was final with respect to all parties and claims.

       Banner’s case had five defendants: REIS, REIE, JMS Marketing, James, and

 Loree. The latter two brought counterclaims. Finality is apparent with respect to all

 parties and claims. First, the district court’s 2014 default judgments against REIS,

 REIE, and JMS Marketing terminated the proceedings with respect to those

 defendants. Next, in 2017, the district court rejected all claims by and against Loree

                                             8
Appellate Case: 19-4131   Document: 010110641811        Date Filed: 02/07/2022     Page: 9

 except her breach of contract counterclaim. Upon adjudicating that counterclaim in

 2019, all claims involving Loree were also resolved.

       In 2017, the district court granted summary judgment against James on

 Banner’s claim that he was liable as a guarantor and on James’s counterclaims.

 Citing factual disputes, the court declined to enter summary judgment on Banner’s

 attempt to foreclose on the Oregon properties. Around that time, Banner released its

 interest in the condominium, so the foreclosure claim only concerned the Eleven

 Parcels owned by James. Then James filed for bankruptcy and the district court

 halted proceedings. Shortly thereafter, however, the estate abandoned the Eleven

 Parcels, so Banner had nothing to go after. The district court explicitly recognized

 that this terminated Banner’s remaining claim against James, explaining in a 2019

 order that “the Trustee in James’s bankruptcy proceeding abandoned the Oregon

 Properties, thereby mooting Banner Bank’s request for an order to foreclose on the

 Eleven Parcels.” Aplt. App’x Vol. IV at 842. That ended the proceedings with

 respect to James.

       All claims against all parties were thus resolved or deemed moot by the district

 court before Banner appealed, so the judgment is final and we have jurisdiction under

 28 U.S.C. § 1291. The only claim on which the district court granted relief was

 Loree’s counterclaim for breach of contract, to the extent the court awarded fees

 under § 78B-5-825. We turn to that issue now.

                                           9
Appellate Case: 19-4131      Document: 010110641811         Date Filed: 02/07/2022      Page: 10

                                              III.

         The district court awarded fees under Utah’s bad-faith statute, which provides

  that “[i]n civil actions, the court shall award reasonable attorney fees to a prevailing

  party if the court determines that the action or defense to the action was without merit

  and not brought or asserted in good faith.” Utah Code Ann. § 78B-5-825(1). On

  appeal, “[w]e review a district court’s award of attorney fees for abuse of discretion.”

  Chieftain Royalty Co. v. Enervest Energy Institutional Fund XIII-A, L.P., 888 F.3d

  455, 459 (10th Cir. 2017). Our task “includes review de novo of the legal principles

  underlying the fee award—such as the choice of whether to apply state or federal

  law.” Id. In a diversity case like this, the Erie doctrine requires federal courts to

  apply federal procedural law and state substantive law. See Racher v. Westlake

  Nursing Home Ltd. P’ship, 871 F.3d 1152, 1162 (10th Cir. 2017); see also Erie R.R.

  Co. v. Tompkins, 304 U.S. 64 (1938). That means we cannot reach Banner’s

  arguments about Utah’s bad-faith statute unless we determine it was proper for the

  district court, sitting in diversity, to award fees pursuant to the statute in the first

  place. It is therefore immaterial that neither party has raised the Erie issue. As the

  Supreme Court has made clear, “a court may consider an issue ‘antecedent to . . . and

  ultimately dispositive of’ the dispute before it, even an issue the parties fail to

  identify and brief.” U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508

  U.S. 439, 447 (1993) (quoting Arcadia v. Ohio Power Co., 498 U.S. 73, 77 (1990)).

  Whether the district court’s fee award was appropriate under Erie is precisely such an

  antecedent issue. Cf. Scottsdale Ins. Co. v. Tolliver, 636 F.3d 1273, 1277 (10th Cir.

                                               10
Appellate Case: 19-4131     Document: 010110641811        Date Filed: 02/07/2022      Page: 11

  2011) (“[In a case] grounded on diversity jurisdiction, we are obligated by the Erie

  doctrine to apply . . . federal procedural law.”).

         For Erie purposes, we have “distinguish[ed] between two different types of

  attorney fees, depending on the basis for the fee award”: substantive fees and

  procedural fees. Chieftain Royalty Co., 888 F.3d at 460. “If the statute is procedural,

  federal law applies, but if it is substantive, then the court must follow the law of the

  forum state.” Scottsdale Ins. Co., 636 F.3d at 1279. “Substantive fees are part and

  parcel of the cause of action over which we have diversity jurisdiction,” while

  procedural fees “ha[ve] nothing to do with the nature of the cause of action and do[]

  not derive in any way from state substantive law.” Chieftain Royalty Co., 888 F.3d

  at 460. Put another way, “[s]ubstantive fees are those which are tied to the outcome

  of the litigation, whereas procedural fees are generally based on a litigant’s bad faith

  conduct in litigation.” Scottsdale Ins. Co., 636 F.3d at 1279 (internal quotation

  marks omitted). We draw this distinction from the Supreme Court’s observation that,

  in diversity cases, a “state law denying the right to attorney’s fees or giving a right

  thereto, which reflects a substantial policy of the state, should be followed.” Alyeska

  Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 259 n.31 (1975) (emphasis

  added); see also Chambers v. NASCO, Inc., 501 U.S. 32, 52 (1991) (clarifying that,

  under Alyeska, federal courts should only apply state “fee-shifting rules that embody

  a substantive policy, such as a statute which permits a prevailing party in certain

  classes of litigation to recover fees”).

                                              11
Appellate Case: 19-4131     Document: 010110641811          Date Filed: 02/07/2022    Page: 12

        With these principles in mind, we proceed to decide whether Utah’s bad-faith

  statute is procedural or substantive, and whether it conflicts with valid federal law.

  Starting with whether § 78B-5-825 is procedural or substantive, a bad-faith

  fee-shifting statute like Utah’s is the quintessential procedural attorneys’ fees statute.

  See Scottsdale Ins. Co., 636 F.3d at 1279 (“[P]rocedural fees are generally based on a

  litigant’s bad faith conduct in litigation.”) (internal quotation marks omitted);

  Chieftain Royalty Co., 888 F.3d at 460 (“[A]n attorney-fee award against bad-faith

  conduct in the litigation has nothing to do with the nature of the cause of action and

  does not derive in any way from state substantive law.”). Utah’s statute is no

  different. It applies in all “civil actions.” Utah Code Ann. § 78B-5-825(1). It

  embodies no apparent substantive policy judgment concerning certain kinds of

  claims. Rather, it polices the general conduct of litigation in the state’s courts. That

  renders it a core procedural provision. See Chambers, 501 U.S. at 52 (“[N]either of

  [Erie’s] twin aims” of “discouragement of forum-shopping and avoidance of

  inequitable administration of the laws . . . is implicated by the assessment of

  attorney’s fees as a sanction for bad-faith conduct.”).

        It is true that § 78B-5-825’s fees are only available to prevailing parties and

  we have previously held a different Utah prevailing-party fee-shifting provision to be

  substantive and thus applicable in diversity. See Xlear, Inc. v. Focus Nutrition, LLC,

  893 F.3d 1227, 1239 (10th Cir. 2018). In Xlear, we reasoned that a provision of the

  Utah Truth in Advertising Act (UTIAA) “award[ing] attorneys’ fees to the prevailing

  party” in UTIAA cases turned upon “an outcome-based reason for awarding fees that

                                              12
Appellate Case: 19-4131     Document: 010110641811        Date Filed: 02/07/2022     Page: 13

  is part and parcel of the state law cause of action,” making it substantive. Id.

  Critically, the fee-shifting provision in Xlear was tied to the UTIAA. See id. That

  suggested the statute embodied a substantive judgment about a particular class of

  claim, specifically UTIAA claims. In contrast, § 78B-5-825 applies to all civil

  litigation. More importantly, prevailing is insufficient to receive fees under

  § 78B-5-825. Rather, the statute’s primary focus is on a claim’s merit and a litigant’s

  bad faith. That renders it procedural under our precedents. See Boyd Rosene and

  Assocs., Inc. v. Kan. Mun. Gas Agency, 174 F.3d 1115, 1125–26 (10th Cir. 1999)

  (“This court recognizes a distinction, as do other courts and commentators, between

  loser-pays attorney’s fees, that is, attorney’s fees awarded to a party simply because

  it prevailed, and attorney’s fees assessed for a willful violation of a court order or

  against a losing party who acted in bad faith, vexatiously, wantonly, or for oppressive

  reasons.”).

        Turning to conflict, Utah’s bad-faith statute instructs a district court to award

  fees to a prevailing party if it finds a claim or defense meritless and brought in bad

  faith. See Utah Code Ann. § 78B-5-825. That plainly conflicts with federal

  procedure. As the Fifth Circuit has explained, any procedural statute authorizing a

  fee award automatically conflicts with “federal policy,” specifically with the

  American Rule that parties bear their own fees and costs in court. Camacho v. Tex.

  Workforce Comm’n, 445 F.3d 407, 412 (5th Cir. 2006). The validity of the American

  Rule in federal court cannot be seriously questioned.

                                             13
Appellate Case: 19-4131     Document: 010110641811        Date Filed: 02/07/2022    Page: 14

        The Utah statute thus also conflicts with equally valid exceptions to the

  American Rule—sanctions under Rule 11 and a federal court’s inherent power to

  punish bad faith by shifting fees. See Fed. R. Civ. P. 11; Chambers, 501 U.S. at 45–

  46. The problem is that § 78B-5-825 imposes a rival regime for bad-faith

  fee-shifting that is beholden to the Utah Supreme Court’s definition of bad faith.

  Compare Pinder v. Duchesne Cty. Sheriff, 478 P.3d 610, 630 (Utah 2020) (“To find

  that a party acted in bad faith [under § 78B-5-825], the court must conclude that at

  least one of the following factors existed: (i) The party lacked an honest belief in the

  propriety of the activities in question; (ii) the party intended to take unconscionable

  advantage of others; or (iii) the party intended to or acted with the knowledge that the

  activities in question would hinder, delay, or defraud others.” (quoting Migliore v.

  Livingston Fin., LLC, 347 P.3d 394, 403 (Utah 2015))), with Nikols v. Chesnoff,

  435 F. App’x 766, 773 (10th Cir. 2011) (unpublished 4) (noting that “the standards for

  the Utah fee shifting statute [§ 78B-5-825] and Rule 11 are not the same”), and

  Mountain W. Mines, Inc. v. Cleveland-Cliffs Iron Co., 470 F.3d 947, 954 (10th Cir.

  2006) (noting that the Tenth Circuit “sets a high bar for bad faith awards” under the

  American Rule’s bad-faith exception by “insist[ing] that a trial judge make a finding

  of bad intent or improper motive”). Because these federal procedures are not

  controlled by the Utah definition of bad faith that covers § 78B-5-825, they cannot

        4
          Unpublished cases are not binding precedent, but we consider them for their
  persuasive value. See Fed. R. App. P. 32.1; 10th Cir. R. 32.1.
                                             14
Appellate Case: 19-4131      Document: 010110641811         Date Filed: 02/07/2022      Page: 15

  coexist with the Utah statute. 5 See Burlington N. R.R. Co. v. Woods, 480 U.S. 1, 7

  (1987) (“[T]he purposes underlying the [federal procedure] are sufficiently

  coextensive with the asserted purposes of the [state] statute to indicate that the

  [federal procedure] occupies the statute’s field of operation so as to preclude its

  application in federal diversity actions.”).

         This conflict between competing procedural rules—federal and state—means

  that Utah’s law has no application in federal court. The federal procedure is

  “‘sufficiently broad’ to cause a ‘direct collision’ with the state law or, implicitly, to

  ‘control the issue’ . . . thereby leaving no room for the operation of” Utah Code Ann.

  § 78B-5-825. Id. at 4–5 (quoting Walker v. Armco Steel Corp., 446 U.S. 740, 749

  (1980)). As a result, § 78B-5-825 is displaced in the federal system and district

  courts sitting in diversity cannot award fees under it. See Taylor v. Nat’l Collegiate

  Student Loan Tr. 2007-1, Case No. 2:19-CV-00120-BSJ, 2021 WL 872494 (D. Utah

  Mar. 9, 2021) (“[T]he Tenth Circuit has explained that in diversity cases, fees that are

  based on a litigant’s bad faith conduct are procedural fees and are thus governed by

  the federal rules . . . [so § 78B-5-825 is] inappropriate to justify [a] sanction . . . for

  bad faith.” (citing Chieftain Royalty Co., 888 F.3d at 460–61)).

         It is true that we have previously, albeit without any Erie analysis, affirmed a

  fee award under § 78B-5-825. See Cascade Energy and Metals Corp. v. Banks, 896

         5
           We do not consider affirming the fee award on the basis of these federal
  alternatives because both are rooted in a district court’s discretionary determinations
  about litigants’ conduct.
                                                 15
Appellate Case: 19-4131    Document: 010110641811        Date Filed: 02/07/2022     Page: 16

  F.2d 1557, 1579 (10th Cir. 1990). But intervening precedent clarifying the interplay

  between attorneys’ fees and Erie doctrine demands a fresh look at whether the

  district court appropriately awarded fees. See Chambers, 501 U.S. at 52; Chieftain

  Royalty Co., 888 F.3d at 460–61. Having taken that look, we conclude the decision

  below must be reversed and the fee award pursuant to § 78B-5-825 vacated. Our

  opinion is limited to the Erie problems raised by applying § 78B-5-825, a state

  procedural statute, in a diversity case. On remand, the district court remains able to

  award fees pursuant to the bad-faith exception to the American Rule or the

  sanctioning mechanism of Rule 11. Recalling how Loree briefed the case before

  trial, state law may also permit an award of attorneys’ fees as breach of contract

  damages. See, for example, Dallas Gas Partners, L.P. v. Prospect Energy Corp., 733

  F.3d 148, 158 (5th Cir. 2013). We express no opinion on these options or the

  propriety of the district court’s legal conclusions and fee calculations under

  § 78B-5-825.

                                            IV.

        For the reasons above, we REVERSE the district court’s award of attorneys’

  fees under § 78B-5-825 and REMAND for further proceedings.

                                             16