New Life Given to Offers to Allow Judgment

From the desk of Jeff Eberhard: Oregon Rule of Civil Procedure (“ORCP”) 54(E) provides that a defendant may serve an offer on the plaintiff for a judgment that can be entered against the defendant and the plaintiff has the right to decline the offer. However, if the ultimate judgment obtained by the plaintiff is not more favorable than the offer, the plaintiff is limited in recovering costs and attorney fees to only those that were incurred prior to the date of the offer. How the offer and judgment amounts are calculated for this comparison clearly has a significant impact on the ultimate determination of the amount awarded in attorney fees. The Oregon Court of Appeals recently clarified how to properly calculate and compare these amounts. Read on to find out how.

Case Pointer: In the past, when tendering an offer to a plaintiff to allow judgment, the offer needed to state not only the offer amount, but also whether attorney fees were included. Now, according to the Oregon Court of Appeals, the language about the inclusion of attorney fees is no longer necessary. This change allows for later litigation over entitlement and amount of attorney fees. In consequence, this limits the freedom for a plaintiff to undermine an offer’s value by calculating just enough in attorney fees to make the final judgment more favorable.

Int’l Ass’n of Machinist, Woodworkers Local W-246 v. Heil, 302 Or. App. 442, 461 P3d 1035 (February 26, 2020)

FACTS

This case involved an action for breach of settlement agreement for failure to make agreed upon payments. The settlement agreement stemmed from an action for eviction of the defendants, Jon and Beverly Heil, for failing to make proper payments on land purchased from the plaintiff. Prior to trial, the plaintiff and the defendants entered a settlement agreement which provided the defendants with 90 days to pay the purchase price of the land. After the 90 days, the defendants still had failed to pay the plaintiff and did not vacate the land. Therefore, the plaintiff filed suit for breach of the settlement agreement. During the breach of settlement litigation, the defendants offered the plaintiff a judgment for $7,800 against defendant Jon. The offer did not include any mention of attorney fees or costs. The plaintiff rejected this offer and eventually a partial motion for summary judgment about defendants’ liability was granted. The case then went to the trial court to determine damages.

The trial court awarded the plaintiff $6,801 in damages, the plaintiff then requested attorney fees. Defendants objected to the petition for attorney fees, with the defendants arguing that the amount they offered, $7,800, exceeded the amount the plaintiff was awarded, $6,801. Thus, the attorney fees should be capped at the amount of fees incurred up until the date of the offer. The plaintiff calculated the total of attorney fees and costs incurred prior to the date of the offer as $1,400.10. Therefore, the plaintiff argued that the judgment of $6,801 plus the $1,400.10 in attorney fees prior to the day of the offer resulted in a total judgment of $8,201.10, which was greater than the amount offered, $7,800. The trial court agreed with the plaintiff and rejected the defendants’ objection to limiting the award of attorney fees. Ultimately, the trial court awarded the plaintiff a total of $28,752.32 in attorney fees and the defendants appealed.

LAW

Under ORCP 54 E(1), the defendant may serve an offer to the plaintiff allowing judgment of a specified amount. The plaintiff then has the right to decide to accept or reject the offer. However, if the plaintiff rejects the offer and then later does not obtain a judgment more favorable than the offer, he or she is unable to recover costs, prevailing party fees, disbursements, or attorney fees incurred after the date of the offer. While the defendant in this situation may be able to recover claim costs and disbursements, but not prevailing party fees incurred from the date of the offer. The rule also states that if the offer does not specify whether attorney fees are included, the plaintiff may submit a claim to the court under Rule 68 to seek attorney fees.

When comparing the offer amount to the judgment amount, it is established, through case law, that the judgment amount is considered to be the total of the damages awarded plus the costs and recoverable attorney fees incurred up to the time of service of the offer. However, before this case, it was unclear what, if any, costs or attorney fees need to be included in the offer amount when comparing, especially when no such fees are specified in the actual offer.

ANALYSIS

In examining this case, the court noted that the defendants original offer did not include attorney fees. According to ORCP 54(E), the plaintiff could still seek attorney fees through ORCP 68. Following this, if the plaintiff in this case had accepted the offer in this case, the plaintiff would have still been able to seek attorney fees. Therefore, the court concluded that attorney fees incurred prior to the date of the offer need to be added to the specified offer amount in order to properly compare the offer and judgment amounts.

As the plaintiff determined, the appropriate amount for attorney fees prior to the date of the offer was $1,400.10. This amount needs to be added to both the offer and judgement amounts for correct comparison. Resulting in the correct summed amounts as $9,200.10 for the offer and $8,201.10 for the judgment. Analyzing the two amounts in this light, plaintiff’s judgment plus pre-offer attorney fees was less than the defendants’ offer plus pre-offer attorney fees. Ultimately, making the judgment obtained by the plaintiff less favorable than the defendants’ offer. Thus, the plaintiff cannot recover costs and attorney fees incurred after the date of the offer.

THE BIG PICTURE POINT

The court goes on to clarify that the reasoning behind ORCP 54(E) is to encourage settlements and penalize plaintiffs who refuse to accept what are retrospectively considered reasonable offers. If attorney fees incurred up until the date of service were only applied to the judgment side of this comparison, the purpose of this rule would be defeated. Plaintiffs would be encouraged to reject reasonable offers, knowing that the judgment amount could be inflated through pre-offer attorney fees, while the offer amount could not. The court’s implementation of the proper calculations for comparison will instead effectuate the purpose of the rule and encourage reasonable settlements.

Ultimately, the Oregon Court of Appeals reversed the supplemental judgment for attorney fees and remanded the case back to the trial court for the proper determination of attorney fees pursuant to the rule outlined in this opinion.