Lachenmeier, Enloe & Rall - December, 2002 Publication

When the Tail Wags the Dog or Darn Those Attorney Fees
December, 2002

     It is 4:30 on a Friday and you just slipped out half an hour early to get an early start on your two week vacation. A letter gets faxed in from that obnoxious attorney who has been demanding $15,000 ransom on the little tap rear ender with $350 in chiropractic bills. You offered $1,500 over the phone just to try to get rid of it before you went on vacation, but you had not put it in writing. The faxed letter from plaintiff’s attorney came in at 4:55 and was just put on your desk with other correspondence awaiting your return. Now, two weeks later, suntanned and feeling sane, you return to the office early one Monday morning and start thrashing through your piles of correspondence and find the letter. It is a 10 day demand citing ORS 20.080, demanding $5,500, and threatening to ask for costs and attorney fees if not accepted within 10 days.

     The letter ticks you off, so you push it off to one side thinking you will give that attorney “what for” when he calls and you start working on the more important files. Then, in the early afternoon, you get an email from your insured’s agent incredulously indicating that your insured was served this morning with a complaint seeking $5,500 in damages plus costs, disbursements and reasonable attorney fees to be set by the court. Exasperated, you call up plaintiff’s counsel and ask him what he is doing on this $1,500 case and in response he says you are going to owe him way more than that, just in attorney fees, and hangs up. What do you do now?

     In this case, as well as those brought under the Landlord/Tenant Act, the Timber Trespass Statute and the Fair Housing Act, to name but a few, it is the claim for attorney fees that you are often most concerned about because it can quickly become much larger than the value of the underlying claim. The purpose of this article is to both help you sort through the pitfalls of ORS 20.080 and to discuss how your attorneys can use ORCP 54E to file offers to allow judgment and attempt to cut off costs and fees.

In relevant part, ORS 20.080(1) provides as follows:

“In any action for damages for an injury or wrong to the person or property, or both, of another where the amount pleaded is $5,500 or less, and the plaintiff prevails in the action, there shall be taxed and allowed to the plaintiff, at trial and on appeal, a reasonable amount to be fixed by the court as attorney fees for the prosecution of the action, if the court finds that written demand for payment of such claim was made on the defendant not less than 10 days before the commencement of the action.... However, no attorney fees shall be allowed to the plaintiff if the court finds that defendant tendered to the plaintiff, prior to the commencement of the action….an amount not less than the damages awarded to the plaintiff.”

(emphasis added).

Note that the written demand must precede the filing of the Complaint by 10 days. During those 10 days, assuming you aren’t on the beach sipping margaritas in Tahiti, you have an opportunity to cut off attorney fees. Specifically, you must “tender” to the plaintiff prior to the commencement of the action an amount not less than the damages awarded to the plaintiff.

In a case decided this summer, Reed v. Jackson County Citizen’s League, 183 Or App 89, 50 P3rd 1287 (2002), the Court of Appeals analyzed a trespass claim where the plaintiff had sent out a demand under 20.080 for $5,500. Fully aware of the 10 day deadline, defendants took the demand letter to their attorney, who wrote a letter to plaintiff’s counsel, which questioned the validity of plaintiff’s trespass allegations, but added:

“Nonetheless, our client would like to resolve this matter without incurring further expenses and has authorized us to make a settlement offer in the amount of $200 for a full release of your claims against our client and provisions for confidentiality.”

Id. at 91 (emphasis added).

Plaintiff did not respond to the counter-offer but instead filed a Complaint seeking damages of $5,500 plus attorney fees. Before trial, defendant made an offer to allow judgment pursuant to ORCP 54E in the amount of $200 and plaintiff accepted, but reserved the issue of attorney fees, costs and disbursements for the court. The issue then for the court was whether or not the offer made by defendant in the letter prior to filing cut off attorney fees. The trial court, feeling that plaintiff only got what he had been offered pre-filing, denied attorney fees. The Court of Appeals reversed, holding in essence that the $200 offered pre-filing contained had an impermissible condition, because of the requirement of confidentiality in it, something that the defendant was not entitled to as a matter of right. Most importantly for the insurance industry, the Court of Appeals did not find fault with the concept of a letter constituting a “tender” of the monies pursuant to ORS 20.080. The import of this case is that if the letter is clear and is unconditional, the letter response in the first 10 days will cut off attorney fees if, but only if, the ultimate resolution is for that sum or less.

Thus, if while you were away on vacation the adjuster covering your desk had responded to the 10 day demand letter by following the crystal clear log notes that you had written concerning sending an offer in writing for $1,500 in exchange for full and complete release, you would be protected from attorney fees, if you were right on the value of the claim. Please note that the Court of Appeals in a footnote in the Reed case said that

“Given our conclusion that confidentiality was not the sort of condition upon which defendant had a legal right to insist, we need not and do not, determine whether defendant’s insistence on a full release was a permissible condition.”

Id. at 96 n.8.

     Accordingly, that question is still open, but assuming that plaintiff is entitled to no other relief besides money and that he has no claims against your insured other than the one being made in his demand letter, it is my belief that the release language would be considered something upon which “defendant was legally entitled to insist.” Id. at 95. Given the public policy favoring settlements and the need for an insurance company to protect its insured by getting a full and complete release, and that being the standard practice, I think it is highly unlikely that the Court would find requiring a full and complete release as an impermissible condition. Thus, the letter could have read, “On behalf of defendant Blank, I hereby offer to pay plaintiff $1,500 in exchange for a full and complete release of my insured.” The chances are high that the Court would find that permissible. Remember, however, it only cuts off attorney fees if ultimately the amount of judgment for the plaintiff is less than or equal to the offer of $1,500 used in this example.

     If you do not make the offer in writing in time, or you are facing one of the other kinds of cases carrying attorney fees, what can you do? In Fair Housing Act cases, usually in federal court, it would not be unusual or unexpected for a plaintiff to receive 10, 20 or $30,000 in attorney fees, even if the underlying judgment for the plaintiff is modest, say $500. Attorney fees claims in timber trespass or landlord/tenant claims are instances where the fees will probably be looked at more conservatively by state court judges, but many would consider $250 an hour reasonable fees for plaintiffs’ attorneys, so that large sums can be at stake quickly in those cases as well.

     The best tool for dealing with those cases is ORCP 54E. 54E reads in relevant part as follows:

“Except as provided in ORS 17.065 through 17.085, the party against whom a claim is asserted may, at any time up to 10 days prior to trial, serve upon the party asserting the claim an offer to allow judgment to be given against the party making the offer for the sum, or the property, or the effect therein specified. If the party asserting the claim accepts the offer, the party asserting the claim or such party’s attorney shall endorse such acceptance thereon, and file the same with the clerk before trial, and within three days from the time it was served upon such party asserting the claim, and thereupon judgment shall be given accordingly, as a stipulated judgment. Unless agreed upon otherwise by the parties, costs, disbursements, and attorney fees shall be entered in addition as part of such judgment as set forth in Rule 68. If the offer is not accepted and filed within the time prescribed, it shall be deemed withdrawn, and shall not be given in evidence on the trial; and if the party asserting the claim fails to obtain a more favorable judgment, the party asserting the claim shall not recover costs, prevailing party fees, disbursements, or attorney fees incurred after the date of the offer, but the party against whom the claim was asserted shall recover of the party asserting the claim costs and disbursements, not including prevailing party fees, from the time of the service of the offer.”

     The key elements are that an Offer to Allow Judgment must be made more than 10 days prior to trial and what it cuts off is not attorney fees incurred before the offer, but attorney fees incurred after the offer if, but only if, the judgment is less than the amount of the offer. Thus, the earlier the offer is made, the more fees are potentially blocked. In addition, the defendant who makes such an offer can get costs and disbursements, other than the prevailing party fee, from the time of the service of the offer, meaning trial fees, etc.

     A trap for the unwary, however, is to file an offer for a fixed amount, say in our previous example, $1,500 inclusive of all costs and attorney fees. The problem is that unless you know the amount of plaintiff’s attorney fees, you don’t know what you have offered aside from fees to settle the case. Thus, to make dollar for dollar comparisons of the offer and the judgment you normally need to make an offer exclusive of costs and attorney fees, knowing that you may have to then arm wrestle the judge to keep him from awarding more fees than you think is reasonable under the circumstances.

     While an Offer to Allow Judgment does have some advantages concerning costs and expenses in cases not involving attorney fees, it is most useful in cases that do involve attorney fees.

     One of the practical problems of an Offer to Allow Judgment in addition to the attorney fee issue, is that you have to be right with your offer. Sometimes in these little cases it is not possible to evaluate accurately the case unless, or until, you take depositions, but doing so increases the very attorney fees you may have to pay plaintiff. One possibility is to file immediately an Offer to Allow Judgment with your best shot based on just the file and, if after depositions, you decide it is low, file another one. The disadvantage is that costs and attorney fees incurred between offers will be added on if the second offer is accepted; the advantage is that it gives you a second shot at it. The rules of procedure do not specifically authorize multiple Offers to Allow Judgment, but neither do they restrict them, so it is at least worth the effort.

     To effectively deal with attorney fee cases, you must be attuned to the risk that attorney fees play in blowing these cases out of proportion. Ten day demand letters under ORS 20.080 are immediate red flags and need to be dealt with. Timber trespass, landlord/tenant or any other case where attorney fees are alleged, should be given prompt attention. It is often best to cut off the tail with some kind of offer before it has a chance to wag the dog.

     If you have any questions, please feel free to contact the author, Rudy R. Lachenmeier, by phone at (503) 768-9600, or by email at rudy@lerlaw.com.