Washington Case Law Update: Statutory Costs Included When Comparing Arbitration Award with Trial Judgment

Washington Case Law Update: Statutory Costs Included When Comparing Arbitration Award with Trial Judgment
From the Desk of Joshua P. Hayward: Following arbitration, if either party is not satisfied with the arbitration award, that party is entitled to request a trial.  If the party that requested trial fails to improve their position at trial, the opposing party is entitled to reasonable attorney fees incurred in litigating the case through trial.  When determining whether a party improved their position at trial, are statutory costs included in the computation? Read on to find out.
Claims Pointer: In this case arising out of a car accident, the Washington Supreme Court determined that statutory costs are to be included when comparing the arbitration award with the trial award.  This case is important to consider when deciding whether or not to appeal an arbitration award.  One key point to consider is that the statutory costs after trial are typically a few thousand dollars more than those awarded after the mandatory arbitration.  This effectively means that a defendant will typically need to obtain a damages award a few thousand dollars larger at trial to be considered to have improved their position.  Conversely, using this logic, a plaintiff can request a trial de novo, obtain a damages award equal to or slightly less than the arbitration award, and still be considered to have improved their position.
Bearden v. McGill, 94320-6, Washington Supreme Court (April 12, 2018)
James Bearden (“Plaintiff”) sued Dolphus McGill (“Defendant”) for damages caused by a motor vehicle accident.  At arbitration, Plaintiff was awarded $44,000 in damages, and $1,187 in statutory costs as the prevailing party under RCW 4.84.010, for a total arbitration award of $45,187.  Defendant requested trial, and following the trial, the jury awarded Plaintiff $42,500 in damages and $3,296 in statutory costs, for a total judgment of $45,796.  In other words, Plaintiff was awarded less damages at trial, but received a larger overall award.  Plaintiff asked the trial court for attorney fees, arguing that Defendant failed to improve his position at trial because the total award at trial ($45,796) exceeded the total arbitration award ($45,187).  The trial court agreed with Plaintiff and awarded Plaintiff $71,800 in attorney fees.  Defendant appealed.
The Washington Supreme Court began its analysis by providing a general overview of the mandatory arbitration process.  The Court explained that after the arbitrator enters an award, either party is entitled to request a trial de novo.  Pursuant to Mandatory Arbitration Rule (“MAR”) 7.3, if the party requesting trial “fails to improve the party’s position on the trial de novo,” then the opposing party is entitled to an award of costs and reasonable attorney fees incurred after the arbitration award.  According to the Court, the rule is intended to “encourage settlement and discourage meritless appeals.” The Court noted that for purposes of comparing recovery under MAR 7.3, the rule is focused solely on the position of the requesting party, and “is blind to the position of the nonrequesting party.”
The Court looked to the statute itself to determine if the plain words of the statute offered any guidance on the proper calculation.  The Court found no reference to any element of the award, that is, no specific reference to damages or costs.  According to the Court, the legislature’s failure to include language explicitly excluding costs from the computation supported “the inclusion of costs in that comparison.”  The Court next looked to other related statutes, and found that the plain wording and legislative history underlying the related statutes supported the notion that statutory costs should be included in the computation.
Lastly, the Court determined that including statutory costs in its computation is consistent with how an “ordinary person” would compare the arbitration judgment and trial court judgment.  The Court looked to previous Washington case law, which interpreted MAR 7.3 “to be understood by ordinary people who, if asked whether their position had been improved following a trial de novo, would certainly answer ‘no’ in the face of a superior court judgment against them for more than the arbitrator awarded.” In a rather brief and conclusory manner, the Court determined that “[i]n the present case, the superior court judgment exceeds the arbitral award, and an ordinary person would therefore conclude that the defendant did not improve his position.”
Interestingly, Justice Wiggins authored a dissent where he argued that excluding statutory costs from the computation was consistent with a rule that is “understood by ordinary people.”  Justice Wiggins explained that only the damages awarded at arbitration and trial should be taken into consideration “[b]ecause the amount of costs awarded to a party generally has nothing to do with the merits of the dispute.”  Justice Wiggins noted that by adding costs to the calculation, courts “introduce an element that has nothing to do with the merits or legitimacy of the claims.”  Nevertheless, the majority’s decision in this case is likely to remain the standard used by trial courts for the indefinite future.
View full opinion at: https://www.courts.wa.gov/opinions/pdf/943206.pdf 
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This article is to inform our clients and others about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in this post without seeking professional counsel.