A Costly Miscalculation: Can Multiple Settlement Offers be Aggregated When Awarding Attorney Fees?

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From the Desk of Cliff J. Wilson:

In Oregon, ORS 20.080 can create big headaches in otherwise low-value cases by giving rise to the award of attorney fees to the plaintiff. How the Court will calculate when the application of attorney fees under the statute will apply, or not, can sometimes lead to the difference between a pragmatic settlement and a large attorney fee exposure.

Claims Pointer:

When attempting to resolve an ORS 20.080 case, it is important to keep in mind how the Court might calculate a judgment and how that might compare to any pre-filing offers. In Callais v. Henricksen II, the Oregon Court of Appeals determined that it was improper to aggregate separate prefiling settlement offers from multiple defendants when comparing the offers with a Judgment entered, jointly and severally against the defendants for the purposes of determining whether attorney fees should be awarded under ORS 20.080(1). This case highlights how important it is to consider how a Court might calculate the amount of an Offer of Judgment against multiple defendants, when those defendants had previously made separate pre-filing settlement offers.

Callais v. Henricksen II, 314 Or App 553 2021.

Facts:

In this case, Julie Callais (Plaintiff) was driving in Portland when she was rear-ended by Jon Henricksen II (Henricksen), and then almost immediately afterward rear-ended again by Brian Ivan (Ivan). Prior to filing suit, Plaintiff made a written demand on both Henricksen and Ivan (collectively Defendants), by sending each a demand letter for $10,000. In response, Henricksen made a pre-suit settlement offer to Plaintiff of $5,017.88, and Ivan made a pre-suit settlement offer of $4,983.60. Plaintiff ended up filing suit against both Henricksen and Ivan seeking $10,000 in damages she alleged was caused by both Defendants’ negligence.

After suit was filed, Defendants made a joint Offer of Judgment, offering to allow the Plaintiff to enter a Judgment against them in the amount of $10,000 “jointly and severally.” Plaintiff accepted that offer of $10,000, and then sought an award of costs and attorney fees under ORS 20.080, claiming that her recovery against the Defendants was higher than the pre-suit offers that they had made prior to the commencement of the lawsuit.

Defendants objected to the award of attorney fees, arguing that ORS 20.080 fees did not apply because Defendants’ separate pre-filing offers of $5,017.88 and $4,983.60 totaled $10,001.48, in aggregate, an amount that was higher than the judgment that was ultimately awarded against them. The trial court held that, since the aggregated pre-settlement offers of the Defendants exceeded the amount Plaintiff received as a result of accepting the combined Offer of Judgment, Plaintiff was not entitled to reasonable attorney fees under ORS 20.080 because the prosecution of the case was unnecessary (i.e. Plaintiff would have recovered more by settling than she ultimately did by suing). On appeal, the Oregon Court of Appeals reversed and remanded the case, holding that the trial court erred in denying Plaintiff’s request for ORS 20.080 attorney fees.

Law:

The Oregon Court of Appeals, noting that the purpose of ORS 20.080 “is to encourage settlement of small claims, to prevent insurance companies and tortfeasors from refusing to pay just claims, and to discourage plaintiffs from inflating their claims,” started its statutory interpretation analysis by looking at the text of the statute at issue and determined that there are four requirements for a plaintiff to be entitled to attorney fees under ORS 20.080. First, the plaintiff must have filed an action in which the amount pleaded was $10,000 or less. Second the plaintiff must have prevailed in that action. Third, the plaintiff must have made a written demand on the defendant for payment of such claim at least 30 days before filing the action. And fourth, the judgment that the plaintiff obtains in the action must be greater than any prefiling settlement offer made by the defendant. Johnson v. Swaim, 343 Or 423, 427-28 (2007). The Oregon Court of Appeals held that if the plaintiff satisfies these procedural requirements, the court must award “a reasonable amount” of attorney fees to the plaintiff.

Analysis:

The Oregon Court of Appeals determined that in this case, Plaintiff met all four of the requirements for the application of attorney fees under ORS 20.080. Under the first requirement, Plaintiff filed suit seeking $10,000 or less in total damages against both Defendants. The Oregon Court of Appeals held that the pre-suit demand letters Plaintiff sent to both Defendants separately, requesting $10,000 from each of them, did not matter because Plaintiff only pleaded an amount of $10,000 from both of them when she actually filed her suit. Second, Defendants offered to allow judgment against both of them in the amount of $10,000, “jointly and severally,” and Plaintiff accepted. Therefore, Plaintiff prevailed in the matter because she obtained a judgment against Defendants, “jointly and severally,” in the amount of $10,000. Third, Plaintiff made separate written demands to each Defendant for the claims at issue within the appropriate timeframe. Fourth, because each Defendant is jointly and severally liable for the full amount of the damages, the Court of Appeals held that trial court erred by aggregating the Defendants’ separate settlement offers. The Oregon Court of Appeals noted that if one Defendant cannot or does not pay Plaintiff, the other Defendant is liable for the entire amount of the judgment, and vice versa. The Court of Appeals concluded that, because Plaintiff can enforce the whole amount of the judgment against either Defendant, the trial court should have compared the amount tendered by each Defendant on its own against the $10,000 awarded to Plaintiff. Therefore, because neither Defendant separately offered more than Plaintiff ultimately recovered, Plaintiff was entitled to attorney fees under ORS 20.080.

The Big Picture:

An award of ORS 20.080 attorney fees can turn a relatively small case into a very expensive one.  Defendants and their insurers should be very careful to make sure that they comply with statutory requirements when they seek to avoid attorney fee awards, particularly when they are evaluating whether to attempt to resolve the case through an Offer of Judgment. When more than one defendant is involved in an action, each defendant must examine the statutory requirements of ORS 20.080 and determine how the Court will likely apply the statute to their respective pre-filing offers and the ultimate outcome to determine whether they might be on the hook for attorney fees.