Banner Bank v. Smith

Appellate Case: 19-4131 Document: 010110672844 Date Filed: 04/19/2022 Page: 1
FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 19, 2022
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
BANNER BANK, successor by merger of
American West Bank which formerly did
business in Utah as Far West Bank,
Plaintiff Counter Defendant -
Appellant,
No. 19-4131
v. (D.C. No. 2:12-CV-00763-CW)
(D. Utah)
JAMES M. SMITH, a Utah resident;
LOREE C. SMITH, an individual,
Defendant Counterclaimants -
Appellees.
_________________________________
ORDER
_________________________________
Before HARTZ, PHILLIPS, and EID, Circuit Judges.
_________________________________
This matter is before us on (1) Appellant’s Petition for Rehearing Seeking
Clarification and Correction of Certain Statements (“Petition”), and (2) a February 23,
2022 letter from counsel for Appellant requesting two of the same clarifications requested
in the Petition. Upon careful consideration, we direct as follows.
As an initial matter, we construe the aforementioned letter as a motion to clarify or
correct the court’s February 7, 2022 opinion. So construed, the motion is GRANTED. In
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addition, the Petition is GRANTED IN PART to the extent of the modifications in the
attached revised opinion.
The Clerk’s Office will replace the original opinion with the attached revised
opinion effective nunc pro tunc to the date the original opinion was filed. The remainder
of the relief sought in the Petition is DENIED.
Entered for the Court,
CHRISTOPHER M. WOLPERT, Clerk
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FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
February 7, 2022
UNITED STATES COURT OF APPEALS
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
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.
_________________________________
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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
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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.
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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 previous 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
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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 original 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
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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
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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
(quoting release). “[T]he natural result of Banner Bank’s breach was that Loree had
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).
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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
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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.
III.
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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.
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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”).
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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
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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.
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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) (unpublished4) (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.
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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.
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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.
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