Attorney Fees Are Terrible! Why Do I Have to Pay For Someone Else’s Bad Behavior?

The general rule in our American system of justice is that each party to a lawsuit bears the costs of their own attorney fees.  However, in certain circumstances, Utah courts have the ability to shift that burden to the other party.  Generally, those examples include situations where attorney fee recovery is provided for by statute or by contract.

However, there is an interesting exception which exists in Utah common law and provides for the possibility of an order awarding reimbursement for attorney fees, even in the absence of a supporting contract or statute.  This exception is referred to as the “third-party tort rule.”  The third-party tort rule provides that if “a party” (“Party A”) “has to protect its interests through litigation with a third party” (“Party C”) “based on the actions of the original offending party” (let’s call it “Party B”), then Party A is entitled to be reimbursed by Party B for the attorney fees incurred during its litigation with Party C.

A recent Utah Court of Appeals case, State v. Sevastopoulos, 2020 UT App 6, 458 P.3d 1149 (Utah App. 2020) (quoted above), provides such an example. In Sevastopoulos, the Court of Appeals found that the third-party tort rule applied in a situation involving an adult daughter, her parents, and several credit card companies. The daughter had stolen approximately $250k from her parents through unauthorized wire transfers involving the parents’ credit cards. After discovering the misuse, the parents hired attorneys to deal with the various credit card companies through which the daughter had made these unauthorized purchases. They were successful in recuperating half of the stolen funds.

In the criminal case against the daughter where the parents were victims, there was a question with the trial court’s restitution award. Utah law provides that an order of restitution in a criminal case permits restitution to be determined by the damage amounts that could be awarded in a civil lawsuit.

The daughter objected to the inclusion of an award of attorney fees to the parents for the fees that the parents incurred for legal representation in dealing with the credit card companies. However, the Utah Court of Appeals found that the third-party tort rule applied.  The parents had to protect their interests in the stolen funds by hiring counsel to engage with the credit card companies. The only reason that they had to hire legal counsel was to protect their financial interests because the daughter had engaged in fraud by using the parents’ credit cards without permission.  The appellate court found that it was appropriate to order the daughter to be responsible for the attorney fees incurred by the parents.

An important consideration to remember is that even when a judge is permitted to award attorney fees, the judge might, in his or her subjective discretion, choose to refrain from doing so, or in using that discretion to decide what is reasonable to reimburse.  The judge’s decision will usually be influenced by the ultimate ruling in the case that determines which party has prevailed, but other factors will come into play.

If you have any questions about whether a legal basis exists to allow for the possibility of recovering attorney fees in your situation, it is always best to speak with a competent and experienced Utah attorney.  Call Daniel W. McKay & Associates, PLLC today to speak with such an attorney.