Background
The Utah Supreme Court held that a litigant cannot first reveal a contingency-fee calculation after trial when attorney fees are sought as consequential damages. Western Mortgage sued Keith and Lorin Walker over title to roughly 2,300 acres near Sand Hollow Reservoir. The Walkers had planned a large residential development but entered a rescue agreement with Western after the 2008 financial crisis. Western was to clear title and transfer the land to a jointly controlled entity but never formed that entity.
After a bench trial, the district court found that Western breached the contract and fiduciary duties. It imposed a constructive trust, recognized the Walkers’ interest, awarded more than $1 million, and allowed attorney fees as consequential damages under the fiduciary-duty exception to the American Rule. The parties limited their appellate rights but preserved challenges to later fee rulings.
Only in a posttrial motion under Utah Rule of Civil Procedure 73 did the Walkers disclose their hybrid hourly-contingency agreement. Western argued that rule 26 required the damages computation earlier and that foreseeability and amount had to be proved at trial. The district court treated all attorney fees as governed by rule 73 and found the late disclosure supported by good cause or harmless.
The Court’s Holding
Justice Nielsen’s opinion reversed the contingency component. Attorney fees recoverable under a statute or prevailing-party contract provision arise from the litigation and are commonly fixed under rule 73. Fees sought under the fiduciary-duty exception are different: they are consequential damages allegedly caused by the original wrongdoing. Their label does not remove them from ordinary damages rules.
A party seeking those damages must disclose the computation under rule 26 and prove causation, foreseeability, and amount with reasonable certainty at trial. A contingency arrangement requires particular attention to foreseeability. The Walkers disclosed a general claim for amounts paid to lawyers but not the contingency formula, preventing Western from conducting discovery, testing foreseeability, valuing exposure, or making informed settlement decisions.
The failure was neither supported by good cause nor harmless. Western had no duty to cure the Walkers’ deficient disclosure, and reopening discovery after judgment could not restore lost trial and settlement opportunities. The Court directed the district court to recalculate the award without the contingency-fee addition, while leaving unchallenged hourly fees and expenses intact.
Key Takeaways
- Attorney fees sought as consequential damages are governed by rule 26 disclosure and ordinary damages-proof requirements.
- A contingency formula included in damages must be disclosed before trial and shown to have been foreseeable, caused by the wrongdoing, and reasonably certain in amount.
- An opposing party’s ability to request late discovery does not shift the disclosure burden or make surprise after judgment harmless.
Why It Matters
Utah commercial litigators should decide early whether fees are requested as prevailing-party fees or as substantive damages. If they are damages, disclosures should identify the engagement terms and computation, and the trial record must establish causation, foreseeability, and amount. A generic reservation of attorney fees will not preserve an undisclosed contingency multiplier.
The ruling also affects settlement strategy and expert preparation in fiduciary-duty and real-estate disputes. Defendants are entitled to understand the claimed exposure before trial. Plaintiffs should treat contingency agreements as potentially discoverable components of damages when they ask the opposing party to pay that fee as a consequence of the underlying wrong.