Oregon Supreme Court Limits the Impact of an Offer to Allow Judgment

From the desk of Jeffrey D. Eberhard:

In certain circumstances, if a plaintiff is successful, they can recover attorney fees. However, ORCP 54 (the offer to allow judgment rule) limits a plaintiff’s recovery of fees to those incurred prior to the date of an offer of judgment, provided the offer was more than the plaintiff’s ultimate award. Does this limit conflict with a statute’s language that plaintiff is entitled to “a reasonable sum for attorney fees”? If so, what does that mean for the amount a plaintiff can recover?

Claims Pointer:

Both ORS 20.080 and 652.200 allow a plaintiff to obtain attorney fees if they prevail. The Oregon Supreme Court held that ORCP 54’s (offer to allow judgment rule) limit on attorney fees conflicts with statutes that allow a plaintiff to recover “a reasonable sum of attorney fees.” Therefore, the statute controls and attorney fees are not limited by ORCP 54.  However, in determining the reasonableness of attorney fees, the court must consider: (1) objective reasonableness; (2) the diligence of the parties in pursuing settlement; and (3) the results obtained. Therefore, you should still make reasonable settlement offers, before and after a suit has been filed, if you wish to avoid significant attorney fee awards.

Mathis v. St. Helens Auto Center, Inc., 367 Or 437 (December 31, 2020)

Facts:

This case involved a dispute over unpaid wages between a former employee and his employer. The plaintiff was an employee of the defendant for many years before the defendant fired him. Several months after the plaintiff was fired, he filed an action seeking unpaid wages and attorney fees under ORS 652.200(2). Before arbitration, the defendant made an offer of judgment for $2,000, which the plaintiff rejected. The suit then went to arbitration, where the plaintiff was awarded $1,400 in unpaid and penalty wages. The plaintiff sought an additional $62,508 in costs and attorney fees. ORCP 54 E(3) provides that if the plaintiff’s ultimate award is less than the defendant’s offer, attorney fees are limited to those incurred up until the date of the offer. The arbitrator found this rule applicable and awarded only $6,310 in attorney fees. The plaintiff appealed, and in a divided decision, the Oregon Court of Appeals affirmed the award of attorney fees. The plaintiff then petitioned the Oregon Supreme Court for review, which was granted.

Law:

The issue in this case arises from the apparent conflict between two provisions that outline when and how attorney fees should be awarded. The first provision is a statute, ORS 652.200(2), which allows for a successful plaintiff to recover “a reasonable sum for attorney fees” in actions for unpaid wages. The other provision is a rule of civil procedure, ORCP 54 E(3), which prohibits a plaintiff from recovering attorney fees and costs incurred after the date of an offer of judgment, as long as the award the plaintiff ultimately obtained is less than the offered amount. If these two provisions actually conflict and cannot be construed in a way that gives effect to both, then the more specific provision, ORS 652.200(2), applies. This would mean that the plaintiff’s recovery of attorney fees would not be restricted to the amount incurred prior to the date of the offer of judgment. Which in this case, could result in the plaintiff recovering almost ten times the amount capped by ORCP 54 of attorney fees he was awarded by the arbitrator.

To determine if the two provisions conflict, the court looked to the legislative intent behind ORS 652.200(2). The intent behind enacting this statute was to aid in an employee’s efficient collection of unpaid compensation and deter an employer from using its economically superior position to dissuade an employee from seeking unpaid wages. The court then examined if ORS 652.200(2) and ORCP 54 E(3) could be construed in a way that would give effect to both. In this analysis, the court noted that in a suit for unpaid wages, ORS 652.200(2) incentivizes the employer to resolve the dispute before an action is commenced due to the potential exposure to a significant amount in attorney fees. However, ORCP 54 E(3)’s fee-limiting provision disincentivizes employers from resolving the dispute prior to a lawsuit. As long as the employer makes a reasonable offer at the early stages of litigation, the employer’s exposure to significant attorney fees is capped to the amount of fees incurred prior to the offer.

Throughout its decision, the court pointed to the similarities of this issue and a previous Oregon Supreme Court decision, Powers v. Quigley. 345 Or 432 (2008). Powers involved attorney fees under ORS 20.080, which allows for recovery of attorney fees in low-value tort claims if the plaintiff provides notice prior to filing the suit and obtains a judgment greater than any of the defendant’s pre-suit settlement offers. In Powers, the court found that ORCP 54 E(3) conflicted with the legislative intent of ORS 20.080, which similarly, was to incentivize the resolution of matters pre-suit due to the risk of exposure to hefty attorney fees.

Analysis:

Ultimately, in this case, the Oregon Supreme Court held that these two provisions do conflict and the more specific provision, ORS 652.200(2), applies in cases for unpaid wages. The court did note that when awarding attorney fees, courts are supposed to consider certain factors in this determination. Relevant factors include:

(1) the “objective reasonableness of the parties”;

(2) “the diligence of the parties in pursuing settlement of the dispute”; and

(3) “the results obtained.”

Thus, the court noted that although ORCP 54 E(3) provides a guarantee that an award of attorney fees will be capped at the amount incurred prior to a reasonable offer to allow judgment, the same result might be achieved under the reasonableness analysis of ORS 20.075.

The Big Picture:

The Oregon Supreme Court once again found that limiting the plaintiff’s recovery of attorney fees to those incurred prior to the date of an offer of judgment, pursuant to ORCP 54 E(3), is in conflict with a statute. Due to this conflict, the more specific provision, in this case ORS 652.200(2), is the one to have effect. This means that plaintiffs have a greater potential to recover a significant amount in attorney fees because there is no guaranteed limit on the award. However, when awarding attorney fees, under ORS 20.075, the courts should still consider reasonableness. Therefore, it is still in the defendant’s best interest to provide a reasonable settlement offer in actions brought under ORS 652.200, as well as ORS 20.080. Ultimately, the Oregon Supreme Court reversed the Court of Appeals’ decision and remanded the case for further proceedings.