Veracity Networks LLC v. MCG S. LLC

2019 UT App 53THE UTAH COURT OF APPEALS
VERACITY NETWORKS LLC,
Appellant,
v.
MCG SOUTHERN LLC,
Appellee.
Opinion
No. 20170580-CA
Filed April 4, 2019
Third District Court, Salt Lake Department
The Honorable Robert P. Faust
No. 160907558
Richard D. Burbidge and Carolyn J. LeDuc,
Attorneys for Appellant
Brennan H. Moss, Attorney for Appellee
JUDGE JILL M. POHLMAN authored this Opinion, in which
JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
FORSTER concurred.
POHLMAN, Judge:
¶1 In this interpleader case, Veracity Networks LLC appeals
the district court’s judgment awarding attorney fees to MCG
Southern LLC. Veracity contends that the district court erred in
awarding attorney fees under the attorney fees provision and the
indemnification provision of the parties’ lease agreement. We
agree with Veracity that the court erred in awarding fees under
the attorney fees provision, but we are unable to review the
court’s decision under the indemnification provision due to a
lack of findings and analysis. We therefore vacate the award and
remand for further proceedings consistent with this opinion.
Veracity Networks v. MCG Southern
BACKGROUND
¶2 Veracity leased certain commercial property from MCG.
In 2013, MCG filed a complaint for unlawful detainer and other
claims against Veracity (the Underlying Action), relying on a
written lease agreement (the Lease). The district court granted
summary judgment to MCG, concluding that, among other
things, Veracity did not have standing to contest the validity of
the Lease. Veracity appealed that decision to this court. See MCG
S. LLC v. Veracity Networks LLC, 2018 UT App 33, ¶¶ 9–10, 415
P.3d 1174.
¶3 While the appeal was pending, Veracity filed a complaint
for interpleader 1 and thereby initiated the present action (the
Interpleader Action). In the complaint’s general allegations,
Veracity described the Underlying Action. It acknowledged the
district court’s ruling, but it “maintain[ed] [that the Lease] is
invalid” and noted the pending appeal. Veracity then alleged
that after the district court’s ruling, it paid monthly rent to MCG,
albeit “under protest.” It also alleged that after Banner Bank—
MCG’s assignee of the rent payments—sent notice of assignment
of rents and demanded direct payment of rents, Veracity made
rent payments to Banner Bank, also “under protest.” Finally, it
1. “An action in interpleader is a proceeding in equity in which a
person who has possession of money or property which may be
owned or claimed by others seeks to rid himself of risk of
liability, or possible multiple liability, by disclaiming his interest
and submitting the matter of ownership for adjudication by the
court.” Terry’s Sales, Inc. v. Vander Veur, 618 P.2d 29, 31 (Utah
1980); see also Interpleader, Black’s Law Dictionary 943 (10th ed.
2014) (explaining that interpleader is a “suit to determine a right
to property held by a usu[ally] disinterested third party (called a
stakeholder) who is in doubt about ownership and who therefore
deposits the property with the court to permit interested parties
to litigate ownership”).
20170580-CA 2 2019 UT App 53Veracity Networks v. MCG Southern
alleged that Shawn Robinson, an attorney for MCG, claimed to
have an attorney’s lien against the commercial property and
demanded that Veracity make rent payments to him. Veracity
therefore named MCG, Banner Bank, and Robinson as
defendants in the Interpleader Action.
¶4 Given the “competing demands for payment of rent” and
the resulting potential for “multiple liabilities against Veracity,”
Veracity alleged in the only count of its complaint that although
it had “an obligation to pay monthly rent, in a disputed
amount,” it was “unable to determine the proper party to whom
the rent should be paid.” Veracity explained the nature of its
dispute, alleging that “Veracity disputes any obligation to pay
rent beyond 1.2 times the monthly mortgage payment owed by
MCG to Banner Bank and retains an interest in any rents paid
beyond that amount.” And Veracity concluded with the
allegation that it was necessary to interplead the current and
future rent payments with the district court, because Veracity
was “in doubt as to which claim or claims of the parties are
legally correct and have priority, and as [it] also claims an
interest in certain portions of the rent payments.”
¶5 In its prayer for relief, Veracity requested that “the Court
order that Veracity may interplead the funds at issue with the
Court”; that “each of the Defendants be restrained from
instituting any action against Veracity for the recovery of funds
at issue”; that the court “adjudge to whom the funds should be
paid”; and that “Veracity be discharged from all liability under
the premises.” It also requested that “Veracity be awarded its
reasonable fees and costs as provided by law” and that “the
Court order such other relief as the Court may deem proper.”
¶6 In answering Veracity’s complaint, Robinson admitted
that “his Lien is inferior to the obligation owed to Banner Bank
and withdr[ew] his claim for rents.” Based on a subsequent
stipulation, the district court dismissed Robinson from the case.
20170580-CA 3 2019 UT App 53Veracity Networks v. MCG Southern
¶7 Banner Bank answered the complaint by asserting that
“any rents that Veracity admits to owing to MCG under any
rental or lease agreement should be immediately paid to Banner
Bank.” It also urged the court to dismiss it from the Interpleader
Action “because there is no interpleader dispute existing
between Banner [Bank] and MCG.”
¶8 MCG moved to dismiss the Interpleader Action.
According to MCG, Banner Bank and MCG agreed that the rents
owed by Veracity “should be paid directly to Banner Bank,” and
therefore “there is no dispute to the funds.” MCG further argued
that “interpleader requires the plaintiff or stakeholder to
disclaim any interest in the funds,” that Veracity improperly
“continue[d] to maintain an interest in the funds,” and that
through the Interpleader Action Veracity was making an
“inappropriate collateral attack on” the ruling in the Underlying
Action. MCG thus asserted that the Interpleader Action was
“improper and should be dismissed.”
¶9 Veracity opposed MCG’s motion to dismiss. It stated that
“it has been faced with competing demands as to whom rents
should be paid and has asserted as much in its complaint, thus
stating a claim for interpleader.” According to Veracity, “there
[was] still a dispute as to the recipient of Veracity’s rental
payments,” and “[i]f MCG and Banner Bank were to stipulate to
the proper recipient of the interpleaded funds and future rents
and if MCG were to amend its Answer to acknowledge Banner
Bank’s right to the interpleaded funds and future rents, Veracity
would likely agree to dismissal and disbursement of the
interpleaded funds to Banner Bank,” “subject to reservation of
Veracity’s claimed interests.” With respect to Veracity’s claimed
interests, Veracity asserted that it “disputes the amount of rent
claimed by MCG but, nonetheless, has paid the amount claimed,
albeit under protest so as to preserve its rights to recoup
overpayments” and to “avoid any argument of waiver down the
road.” Veracity further explained that “[r]eserving its rights and
interests to overpayments is entirely consistent with modern
20170580-CA 4 2019 UT App 53Veracity Networks v. MCG Southern
interpleader” 2 and that its “reservation of rights does not
preclude Veracity’s interpleader action.”
¶10 The district court granted MCG’s motion to dismiss,
concluding that “there [was] no present basis for an interpleader
suit as the interpled Defendants [did] not dispute among
themselves as to which of them is entitled to the funds.” The
court explained that neither Robinson nor MCG disputed Banner
Bank’s rights to the rent payments and consequently Banner
Bank has an “uncontested assignment of rents and is entitled to
the rents.” The court also noted “the other issues of the
complaint have already been determined in another case which
is currently on appeal.”
¶11 After the Interpleader Action was dismissed,
MCG moved for an award of its attorney fees, relying on
two provisions of the Lease. First, under the attorney
fees provision in Paragraph 22.13, MCG argued that as a
prevailing party it should receive attorney fees from Veracity
in an action brought to interpret the Lease. In support,
MCG asserted that “not only was [the Interpleader Action]
brought to determine to whom the rent should be paid under
the Lease, but Veracity also put the terms of the Lease at issue
2. In arguing the motion to dismiss, the parties disputed whether
“modern interpleader,” which allows for actions “in the nature
of interpleader,” is consistent with Utah law. See generally 44B
Am. Jur. 2d Interpleader § 1 (2017) (“An action in the nature of
interpleader is one in which the interpleading plaintiff asserts an
interest in the subject matter of the dispute but is otherwise
identical to traditional interpleader.”). We need not decide
whether Utah law allows for an action “in the nature of
interpleader.” As discussed below, the only relevant question
about the nature of the present action is whether the Interpleader
Action is an action to interpret the Lease as required by the
attorney fees provision. See infra ¶ 19.
20170580-CA 5 2019 UT App 53Veracity Networks v. MCG Southern
in its Complaint.” Veracity did so, MCG asserted, “by
specifically requesting that [the district court] interpret the
Lease in its favor, either by recognizing and accepting its
arguments that Veracity should not be held liable for the face
value rental amount on the Lease or by holding that Veracity has
no liability under the Lease whatsoever for its occupancy of the
premises.” MCG’s assertions relied on the portions of Veracity’s
complaint disputing the amount due under the Lease, claiming
to “retain an interest” in rents, and asking for its liability to be
discharged. See supra ¶¶ 3–5. Second, under the indemnification
provision in Paragraph 11.1 of the Lease, MCG argued that it
should receive attorney fees because the litigation was
commenced by Veracity, MCG was made a defendant to the
case, and “[t]here has been no willful misconduct or gross
negligence by MCG.” 3
¶12 Veracity opposed MCG’s motion for attorney fees,
arguing that the plain terms of the Lease do not provide for an
award of fees to MCG. According to Veracity, the Interpleader
Action was not an action to “enforce or interpret any of the
provisions” of the Lease and therefore did not meet any of the
predicates for an award of attorney fees under the attorney fees
provision. Contrary to MCG’s claim that Veracity’s complaint
put the Lease’s interpretation at issue, Veracity stated that, in its
complaint, it “simply included its recitation of the underlying
facts and litigation [in the Underlying Action] as background
information for the Court . . . and to preserve its position that
MCG’s subject lease is invalid and the rental amounts are in
3. The indemnification provision states that Tenant shall
indemnify Landlord for losses “arising from . . . any litigation
commenced by or against Tenant to which Landlord is made a
party without willful misconduct or gross negligence on the part
of Landlord.”
20170580-CA 6 2019 UT App 53Veracity Networks v. MCG Southern
dispute.” 4 Veracity also argued that the indemnification
provision similarly does not authorize an award of attorney fees
to MCG for the reason that MCG had committed “willful
misconduct and gross negligence.” Specifically, Veracity argued
that MCG did not show that its failure to meet its obligations,
which included making its monthly mortgage payments and
paying its prior counsel, “was anything other than willful or
negligent.” Veracity further complained that it had “had no
opportunity to conduct discovery as to MCG’s failure to meet its
obligations.” In its reply memorandum in support of its motion
for attorney fees, MCG did not respond to Veracity’s arguments
and allegations related to the indemnification provision.
¶13 The district court granted MCG’s motion for attorney fees,
stating, “Pursuant to Rule 73 of the Utah Rules of Civil
Procedure and Paragraphs 22.13 and 11.1 of the Lease, MCG is
entitled to attorney fees from Veracity . . . .” Veracity appeals.
¶14 During the pendency of the present appeal, this court
reversed the district court’s summary judgment in the
Underlying Action. Concluding that the district court erred in
4. Additionally, after Banner Bank filed a proposed order to
distribute the interpleaded funds, Veracity objected to the
proposed language that “Banner Bank has an uncontested
assignment of rents and is entitled to the interpled funds.”
Veracity complained that the “paragraph should be modified to
reflect that Veracity disputes the amount of rent and is pursuing
relief from the Utah Court of Appeals” in the Underlying Action.
Veracity proposed modifying the paragraph to state that
“Banner Bank has an assignment of rents and is entitled to the
interpled rents subject to Veracity’s reservation of rights as to the
disputed amounts and the resolution of issues currently on
appeal.” The district court eventually entered an order simply
stating that “the interpleaded funds in this matter [will] be paid
by the Clerk of the Court to Banner Bank.”
20170580-CA 7 2019 UT App 53Veracity Networks v. MCG Southern
ruling that “Veracity could not defend [the] lawsuit by
contesting the validity of the lease,” this court remanded the
Underlying Action to the district court for further proceedings.
MCG S. LLC v. Veracity Networks LLC, 2018 UT App 33, ¶¶ 20–21,
415 P.3d 1174.
ISSUE AND STANDARD OF REVIEW
¶15 On appeal, Veracity contends that the district court erred
in awarding attorney fees to MCG under the attorney fees
provision and the indemnification provision of the Lease. “In
Utah, attorney fees are awardable only if authorized by statute
or contract.” R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 17, 40 P.3d
1119 (cleaned up). “[I]f provided for by contract, the award of
attorney fees is allowed only in accordance with the terms of the
contract.” Id. We review for correctness the district court’s
decision that attorney fees are recoverable. Id. ¶ 16.
ANALYSIS
¶16 Veracity contends that neither the attorney fees provision
nor the indemnification provision authorizes an award of fees in
this case and that therefore the district court erroneously
awarded attorney fees to MCG. We agree that the district court
should not have awarded attorney fees under the attorney fees
provision. But because we are unable to discern the basis for the
district court’s decision to award attorney fees under the
indemnification provision, we remand the case for entry of a
new decision on that issue.
I. The Attorney Fees Provision
¶17 Veracity contends that the district court’s award of
attorney fees is erroneous under the plain language of the
attorney fees provision. That provision, Veracity asserts, “only
20170580-CA 8 2019 UT App 53Veracity Networks v. MCG Southern
authorizes attorney fees in certain types of actions”—including
actions brought to interpret the Lease—and the Interpleader
Action “is not one of them.” In support, Veracity argues that, in
the Interpleader Action, it “only sought to have the district court
resolve the competing claims to Veracity’s rent payment,” not to
“relitigate the amount of monthly rent due under the Lease.”
Veracity explains that its factual recitations about the rent
dispute in the Underlying Action were merely “factual
background” and “were intended solely to avoid waiving its
rights to seek recoupment of rent overpayments in the event that
it obtains a rent reduction in the [Underlying Action].”
¶18 MCG responds that the district court correctly awarded
attorney fees under the attorney fees provision because the
Interpleader Action qualified as one of the types of actions for
which attorney fees are authorized, namely, an action “brought
to . . . interpret . . . the provisions of this Lease.” MCG asserts
that Veracity “put the terms of the Lease at issue” by
“attempt[ing] to use the [Interpleader Action] to have the court
interpret its rights under the Lease and to maintain its claim to a
portion of the lease payments.” MCG further asserts that
Veracity wanted to use the Interpleader Action “to get a ruling”
allowing it to “recover a portion of the monthly lease payments.”
¶19 The Lease’s attorney fees provision, contained in
Paragraph 22.13, states:
If any action is brought to recover any rent or other
amount under this Lease because of any default
under this Lease, to enforce or interpret any
provision of this Lease, or for recovery of
possession of the Premises, the party prevailing in
such action shall be entitled to recover from the
other party reasonable attorneys’ fees (including
those incurred in connection with any appeal), the
amount of which shall be fixed by the court and
made part of any judgment rendered.
20170580-CA 9 2019 UT App 53Veracity Networks v. MCG Southern
Under this provision’s plain language, attorney fees are
potentially available in only three types of actions: actions
“brought to recover any rent or other amount under this Lease
because of any default,” actions “to enforce or interpret any
provision of this Lease,” and actions “for recovery of possession
of the Premises.” Only the second of these is at issue here.
Hence, the question presented is whether the district court
correctly decided that the Interpleader Action was an action
brought to interpret the Lease.
¶20 We agree with Veracity that the Interpleader Action was
not brought to interpret the Lease. Veracity’s complaint in the
Interpleader Action alleged only one count, a count for
interpleader. In its prayer for relief, Veracity explained to the
district court that because “there are competing demands by the
Defendants against the monthly rent payments and because
Veracity is unable to determine the proper party to whom rents
should be paid,” it asked the court to “order that Veracity may
interplead the funds at issue with the Court,” to restrain the
defendants “from instituting any action against Veracity for the
recovery of funds at issue,” and to “adjudge to whom the funds
should be paid.” 5 For the district court to act on these requests, it
was not required to decide what the Lease meant. Rather, the
court would decide to whom rent should be paid by looking at
5. Veracity’s prayer for relief also asked that “Veracity be
discharged from all liability under the premises.” In the district
court, MCG relied on this language as evidence that Veracity
was asking the court to interpret the Lease. On appeal, Veracity
complains that MCG “mischaracteriz[ed]” this part of the
complaint, explaining that this portion of its prayer for relief
meant only that it wanted to “be relieved of any further liability
for the funds that it was depositing into the court.” On appeal,
MCG does not persuasively argue for an alternative
interpretation of this particular language.
20170580-CA 10 2019 UT App 53Veracity Networks v. MCG Southern
Banner Bank’s notice of assignment of rents, Robinson’s demand
letter, and other related documents. Thus, Veracity’s prayer for
relief did not request that the district court interpret the Lease in
the Interpleader Action.
¶21 Likewise, Veracity did not ask elsewhere in the
complaint for the district court to adjudicate the Lease’s
meaning or Veracity’s rights concerning the Lease. True,
Veracity’s complaint for interpleader mentioned that
Veracity maintained that the Lease was invalid, that the monthly
rent was “a disputed amount,” and that Veracity “also claims an
interest in certain portions of the rent payments.” Though
allegations like these are perhaps unusual in an interpleader
action, Veracity did not seek an interpretation of the Lease or
request an adjudication of disputed terms. Rather, Veracity
acknowledged in its complaint that issues relating to the
interpretation and enforcement of the Lease had been
adjudicated in the Underlying Action and were on appeal to this
court. The fact that Veracity sought to reserve its rights
regarding the funds it had deposited in the event it succeeded on
appeal in the Underlying Action does not mean that Veracity
sought to adjudicate those issues anew in the Interpleader
Action.
¶22 Moreover, Veracity’s subsequent filings in the
Interpleader Action confirm that Veracity did not seek relief
related to the interpretation of the Lease. For instance, in
opposing MCG’s motion to dismiss, Veracity stated that it
“asserted the dispute over the amount and its right to recover
any overpayments” in order to “avoid any argument of waiver
down the road.” Veracity reiterated this point in opposing
MCG’s motion for attorney fees, asserting that “its recitation of
the underlying facts and litigation” was included in its
complaint “as background information for the Court . . . and to
preserve its position that MCG’s subject lease is invalid and the
20170580-CA 11 2019 UT App 53Veracity Networks v. MCG Southern
rental amounts are in dispute.” 6 These later statements further
support that the complaint’s allegations about disputed amounts
and claimed interests in portions of the rent payments served to
reserve Veracity’s rights, not to invite the court to resolve those
disputes or claims. We therefore conclude that the Interpleader
Action was not brought to interpret the Lease and the district
court thus erred in awarding attorney fees to MCG on that basis
under the attorney fees provision. 7
II. The Indemnification Provision
¶23 Veracity next contends that the district court’s award of
attorney fees is erroneous under the plain language of the
indemnification provision. That provision, contained in
Paragraph 11.1 of the Lease, states, in relevant part:
Tenant shall indemnify, defend and hold harmless
Landlord . . . from and against all demands, claims,
causes of action, judgments, losses, damages,
liabilities, fines, penalties, costs and expenses,
including attorneys’ fees, arising from . . . any
litigation commenced by or against Tenant to
which Landlord is made a party without willful
misconduct or gross negligence on the part of
Landlord.
6. Veracity’s objection to a proposed order to distribute the
interpleaded funds was consistent with these statements. In that
objection, Veracity noted that it “dispute[d] the amount of rent
and [was] pursuing relief from the Utah Court of Appeals” in
the Underlying Action.
7. Because of our resolution of this issue, we need not resolve
Veracity’s alternative argument that MCG was not a prevailing
party as against Veracity as required by the attorney fees
provision.
20170580-CA 12 2019 UT App 53Veracity Networks v. MCG Southern
Veracity argues that this provision is inapplicable for two
reasons: first, because indemnification is available only in third-
party actions and, second, because MCG’s willful misconduct or
gross negligence necessitated and prolonged the Interpleader
Action. We address each in turn.
A. Indemnification Between Contracting Parties
¶24 Veracity asserts that the indemnification provision “does
not apply when Veracity sues MCG, but only when MCG is
‘made a party’ to litigation by some third party.” Relying
primarily on American Rural Cellular, Inc. v. Systems
Communication Corp., 939 P.2d 185 (Utah Ct. App. 1997), Veracity
asserts that “attorney fees are not available on an
indemnification theory when a contract otherwise provides for
attorney fees in an intra-party action.”
¶25 MCG contends that this issue is unpreserved and “should
not be considered because Veracity never raised the issue”
before the district court. MCG also defends the district court’s
decision on the merits, arguing that the indemnification
provision “should be interpreted based on [its] plain language,”
which does “not necessarily limit the provision to third-party
actions.” MCG further argues that the Lease’s language is
distinguishable from the contract in American Rural Cellular.
¶26 As an initial matter, we agree with MCG that Veracity did
not preserve this issue for appeal. “Generally, we will not
consider an issue unless it has been preserved for appeal by first
presenting the issue to the district court in such a way that the
district court has the opportunity to rule upon it.” Pepperwood
Homeowners Ass’n v. Mitchell, 2015 UT App 137, ¶ 11, 351 P.3d
844. Veracity did not raise the issue of whether the Lease’s
indemnification provision applies only to third-party actions
when it opposed MCG’s motion for attorney fees or at any other
time before the district court. Because Veracity did not give the
20170580-CA 13 2019 UT App 53Veracity Networks v. MCG Southern
district court an opportunity to rule on the issue, it has not
preserved the issue for appeal.
¶27 Nevertheless, Veracity asserts that we may reach the issue
under plain error review because “the district court committed
plain error when it entered its attorney fee award in conflict with
existing case law and the plain language of the Lease.” “Under
plain-error review, we may reverse the lower court on an issue
not properly preserved for appeal if the appellant demonstrates
that a prejudicial error should have been obvious to the district
court.” Id. (cleaned up). To show that “the error complained of
should have been obvious to the district court,” an appellant
“must show that the law governing the error was clear at the
time the alleged error was made.” Salt Lake City v. Josephson, 2019
UT 6, ¶ 23, 435 P.3d 255 (cleaned up). “Thus, an error is not
obvious if there is no settled appellate law to guide the trial
court.” Thomas v. Mattena, 2017 UT App 81, ¶ 13, 397 P.3d 856(cleaned up). We accordingly proceed to consider whether the
district court plainly erred in awarding fees under the
indemnification provision in this intra-party action. 8
¶28 Veracity points to American Rural Cellular in support of its
position that the district court’s decision was contrary to
settled Utah law. In that case, the plaintiff and defendant had
an agreement that included an indemnity clause in which
the plaintiff agreed to indemnify and hold the defendant
8. “Our supreme court recently noted the ‘ongoing debate about
the propriety of civil plain error review,’” but has not resolved
that debate for purposes of Utah law. Frugal Flamingo Quick Stop
v. Farm Bureau Mutual Ins. Co., 2018 UT App 41, ¶ 10 n.3, 420
P.3d 57 (quoting Utah Stream Access Coal. v. Orange St. Dev., 2017
UT 82, ¶ 14 n.2, 416 P.3d 553). Because MCG has not challenged
the applicability of plain error review, we decline to resolve the
debate here. See, e.g., Gerwe v. Gerwe, 2018 UT App 75, ¶ 6 n.1,
424 P.3d 1113.
20170580-CA 14 2019 UT App 53Veracity Networks v. MCG Southern
“harmless from all expenses and attorney fees of whatever
kind and nature in any way relating to” the parties’ agreement.
939 P.2d at 192 (cleaned up). The agreement also had an
arbitration clause that referred to attorney fees, stating that
“all disputes in connection with [the agreement] shall be settled
by means of mandatory binding arbitration” and “all costs of
arbitration and reasonable billed attorney’s fees shall be paid by
the nonprevailing party.” Id. (cleaned up).
¶29 Reading these provisions together, this court concluded
that given the presence of the arbitration clause, which governed
disputes between the contracting parties, “the hold-harmless
provision does not apply to disputes between [the contracting
parties], but instead to disputes between [one of the contracting
parties] and third parties.” Id.; see also B.J. Barnes & Sons Trucking,
Inc. v. Dairy Farmers of Am., Inc., Civil No. 2:05-CV-351BSJ, 2007
WL 315708, at *8 (D. Utah Jan. 30, 2007) (explaining that
this court in American Rural Cellular “declined to read
an indemnity provision to include a right to attorney’s fees in
disputes between the parties, in contrast to defending third-
party claims”); Blaisdell v. Dentrix Dental Sys., Inc., 2012 UT 37,
¶ 9, 284 P.3d 616 (reciting American Rural Cellular’s holding). The
hold-harmless provision therefore did not apply to authorize an
award of attorney fees in a dispute between the contracting
parties. American Rural Cellular, 939 P.2d at 192.
¶30 Although American Rural Cellular lends support to
Veracity’s position, Veracity has not shown that its application to
this case is clear enough such that it should have been obvious to
the district court. For example, Veracity has not addressed
whether the rationale of American Rural Cellular applies equally
to this interpleader action. Given the specific language in the
Lease’s indemnification provision and the distinct nature of this
particular action, we cannot say that American Rural Cellular
provided settled appellate law that obviously applied here such
20170580-CA 15 2019 UT App 53Veracity Networks v. MCG Southern
that the district court plainly erred. 9 See Thomas, 2017 UT App 81,
¶ 13.
¶31 In short, we conclude that Veracity has not shown “the
law governing the error was clear at the time the alleged error
was made.” 10 See Josephson, 2019 UT 6, ¶ 23 (cleaned up). Because
9. Veracity also cites other cases for the proposition that
contractual indemnification clauses “cannot support an award of
attorney fees in intra-party litigation.” But those cases involve
different contractual language and are not interpleader actions.
See, e.g., Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 191,
198–200 (2d Cir. 2003); Canopy Corp. v. Symantec Corp., 395 F.
Supp. 2d 1103, 1107, 1114–16 (D. Utah 2005) (applying Utah law);
Century Village, Inc. v. Chatham Condo. Ass’ns, 387 So. 2d 523, 523–
24 (Fla. Dist. Ct. App. 1980). Moreover, “there is a split of
authority as to whether an indemnification provision applies to
claims between the parties to the agreement or only to
third-party claims.” See NevadaCare, Inc. v. Department of Human
Services, 783 N.W.2d 459, 470–71 (Iowa 2010) (collecting cases).
Veracity therefore has not shown that there was pertinent and
well-established law to guide the district court such that the
alleged error should have been obvious. See State v. Ross, 951
P.2d 236, 238–39 (Utah Ct. App. 1997) (considering the status of
Utah law and whether other jurisdictions have reached
consensus in evaluating whether an alleged error should have
been obvious to the district court).
10. In reaching this conclusion, we harbor doubts as to the legal
correctness of the district court’s decision that the
indemnification provision authorizes an award of attorney fees
in this case. Yet we are constrained by the plain-error lens
through which we must analyze this issue and reject Veracity’s
argument solely on its failure to establish obviousness of any
error.
20170580-CA 16 2019 UT App 53Veracity Networks v. MCG Southern
Veracity thus has not shown that the alleged error should have
been obvious to the district court, Veracity has not demonstrated
that the district court plainly erred in ignoring American Rural
Cellular when it awarded attorney fees to MCG under the
indemnification provision. 11
B. Willful Misconduct or Gross Negligence
¶32 Veracity asserts that even if the indemnification provision
could authorize attorney fees in this action, the provision
provides for indemnification only when MCG acts without
“willful misconduct or gross negligence.” And because Veracity
“presented . . . uncontested evidence of MCG’s willful
misconduct or gross misconduct,” which “prolonged and
complicated the interpleader action,” MCG was not entitled to
indemnification. Veracity also argues that the district court did
not “disclos[e] its rationale” for awarding fees in the face of
Veracity’s evidence. MCG counters that “[b]ecause Veracity
could have resolved the dispute without filing an action or
naming MCG as a party, [Veracity] cannot claim that the action
was caused by MCG’s willful misconduct or gross negligence.”
11. Veracity also argues that the award of attorney fees here was
barred by Capson v. Brisbois, 592 P.2d 583 (Utah 1979), which—
according to Veracity—entitled it, as the interpleading
stakeholder, “to seek an award of attorney fees,” not MCG.
Because Veracity raises this argument for the first time on
appeal, it again seeks our review of this issue under plain error
review. In making this argument, Veracity does not show how
Capson might operate where, as here, contractual language
between the interpleading stakeholder and a defendant arguably
might authorize an award of attorney fees. As a result, Veracity
has not persuaded us that any alleged error should have been
obvious to the district court. See Thomas v. Mattena, 2017 UT App
81, ¶ 13, 397 P.3d 856.
20170580-CA 17 2019 UT App 53Veracity Networks v. MCG Southern
¶33 The indemnification provision states that “Tenant shall
indemnify, defend and hold harmless Landlord” when, among
other things, “Landlord is made a party [to litigation] without
willful misconduct or gross negligence on the part of Landlord.”
Under this plain language, MCG could recover attorney fees
only when it has not acted with “willful misconduct or gross
negligence.”
¶34 For this reason, MCG informed the district court when it
moved for attorney fees that “[t]here has been no willful
misconduct or gross negligence by MCG.” Veracity then
contested MCG’s assertion, claiming that MCG was “ignor[ing]
the genesis of this action.” According to Veracity, MCG acted
with willful misconduct and gross negligence when it failed “to
make monthly mortgage payments of $5,168.72 to Banner Bank”
despite receiving “almost double that amount” in monthly rental
payments from Veracity and when it failed “to pay its prior
counsel.” As evidentiary support, Veracity cited correspondence
from Banner Bank’s counsel and Robinson’s demand letter.
MCG’s conduct, Veracity contended, “resulted in competing
demands for Veracity’s rental payments, requiring Veracity to
file [the Interpleader Action] in order to resolve those demands.”
Thereafter, MCG did not respond to Veracity’s allegations of
willful misconduct and gross negligence—even in its reply
memorandum in support of its motion for attorney fees. Based
solely on the parties’ written filings, and without further
proceedings, the district court summarily concluded that MCG
was entitled to attorney fees under Paragraph 11.1, thereby
impliedly concluding that MCG did not act with willful
misconduct or gross negligence.
¶35 Generally, “where the inadequacy of the [district] court’s
findings of fact and conclusions of law results in our inability to
ascertain the basis of the district court’s decision, we are
prevented from effectively reviewing the district court’s decision
and may remand for the entry of more-detailed findings.” Maak
v. IHC Health Services, Inc., 2016 UT App 73, ¶ 45, 372 P.3d 6420170580-CA 18 2019 UT App 53Veracity Networks v. MCG Southern
(cleaned up). This is so because “without insight into the district
court’s reasoning, we are unable to ascertain whether the district
court’s [decision] follows logically from, and is supported by, the
evidence.” Id. ¶ 46 (cleaned up).
¶36 For the district court here to award attorney fees to MCG,
it was required to decide whether there was an absence of willful
misconduct or gross negligence on MCG’s part. And where the
parties controverted whether MCG acted with willful
misconduct or gross negligence, the district court was presented
with a factual and legal issue. Although the district court’s
decision awarding attorney fees implicitly resolved the dispute
in MCG’s favor, we cannot discern the district court’s basis for
doing so. In particular, the district court’s conclusory award of
attorney fees under Paragraph 11.1 does not disclose how the
court assessed Veracity’s evidence, which went unrefuted, or
why the court reached its apparent conclusion that MCG did not
commit willful misconduct or act with gross negligence. In other
words, the district court did not identify the factual or legal basis
for its award.
¶37 Because we lack insight into the district court’s rationale
for its decision, we cannot effectively review it. We therefore
remand the issue of attorney fees under the indemnification
provision to the district court for further proceedings, which
may require an evidentiary hearing, and for the court to
determine the issue anew and to provide reasoned analysis
supporting its decision. See id. ¶¶ 1, 45–46 (remanding a district
court’s ruling where this court was “unable to discern the
basis for the district court’s conclusion” because the ruling did
not provide “insight into the district court’s reasoning” or
“indicate what record evidence supports its determination”);
Tillotson v. Meerkerk, 2015 UT App 142, ¶ 14, 353 P.3d 165 (same);
see also J. Pochynok Co. v. Smedsrud, 2005 UT 39, ¶¶ 12–13, 116
P.3d 353 (remanding the issue of attorney fees to the district
court where the court’s reasoning supporting its award was not
20170580-CA 19 2019 UT App 53Veracity Networks v. MCG Southern
apparent in the record); Myrah v. Campbell, 2007 UT App 168,
¶ 36, 163 P.3d 679 (same).
III. Attorney Fees on Appeal
¶38 MCG asks this court to award it the attorney fees that it
incurred in defending this appeal. “Generally, a party that
received attorney fees below and prevails on appeal is entitled to
fees reasonably incurred on appeal.” Giles v. Mineral Res. Int’l,
Inc., 2014 UT App 259, ¶ 25, 338 P.3d 825. Because we vacate the
district court’s attorney fees award to MCG and because MCG
has not prevailed on appeal, MCG is not entitled to attorney fees
incurred on appeal.
CONCLUSION
¶39 The district court erred in awarding attorney fees to MCG
under the attorney fees provision of the Lease, and its reasoning
for awarding attorney fees under the indemnification provision
is not adequately detailed to permit meaningful appellate
review. Accordingly, we vacate the attorney fees award and
remand the case with the instruction that the district court
conduct further proceedings and enter the necessary findings
and conclusions of law regarding the propriety of awarding
attorney fees under the indemnification provision. 12
12. Given our resolution of this case, we need not and do not
express an opinion on Veracity’s alternative argument that this
court’s decision in MCG Southern LLC v. Veracity Networks LLC,
2018 UT App 33, 415 P.3d 1174, means that the Lease may yet be
“found to be invalid” in the Underlying Action and its
provisions therefore could not “form a basis for a fee award” in
the Interpleader Action.
20170580-CA 20 2019 UT App 53