In re Sonnenreich
In In re Sonnenreich, 2004 UT 3, 86 P.3d 712, the Court stated that bad faith constitutes a separate element under section 78-27-56 and cautioned against intertwining the statutory "without merit" and "bad faith" requirements.
The Court stated that "it does not follow that simply because the plaintiff had no legal foundation to bring the action that it was also acting in bad faith." Id.
The Court reversed the trial court's award of attorney fees in that case because the trial court had failed to make the specific findings necessary to support a finding of bad faith. Id.
In Sonnenreich, the Court further clarified that the "bad faith" determination must be made independently of the "without merit" determination by defining good faith, for purposes of section 78-27-56, as maintaining:
(1) an honest belief in the propriety of the activities in question;
(2) no intent to take unconscionable advantage of others;
(3) no intent to, or knowledge of the fact that the activities in question will hinder, delay, or defraud others." Id.
"To establish a lack of good faith, or 'bad faith' under section 78-27-56, a party must prove that one or more of these factors is lacking." Id.