Lachenmeier, Enloe & Rall - February, 2004 Publication

New Case Drastically Alters Claims for Attorney Fees under ORS 20.080

In Powers v. Quigley, --- Or --- (2008), decided December 11, 2008, the Oregon Supreme Court held that an offer to allow judgment filed pursuant to ORCP 54 E does not cut off a claim for attorney fees under ORS 20.080. This opinion, which overruled several decisions by the Oregon Court of Appeals, will drastically limit the ability of defendants to limit attorney fee awards in ORS 20.080 cases.

In Powers, the plaintiff made an ORS 20.080 demand upon defendant and his insurer for $4,271 for diminished value to his automobile. Defendant’s insurer offered $3,200, which plaintiff rejected. Plaintiff then filed suit for $4,271 plus costs and attorney fees under ORS 20.080. Defendant then filed an offer to allow judgment for $3,636, exclusive of costs and attorney fees. The case was arbitrated and the arbitrator awarded $3,300 in damages plus $828.50 for attorney fees, even though plaintiff was claiming $5,482.33 in attorney fees. Plaintiff appealed the attorney fee award to the Multnomah County Circuit Court. The trial judge awarded plaintiff $1,267.67 in attorney fees, deciding that plaintiff was not entitled to attorney fees after the offer to allow judgment was filed. The decision was appealed and the issue on appeal was whether plaintiff was entitled to attorney fees incurred after the offer to allow judgment was filed, since he did not improve upon the offer. The Oregon Supreme Court reversed the trial court and the Oregon Court Appeals and held that plaintiff was entitled to recover attorney fees incurred even after the offer to allow judgment.

The first step in the Oregon Supreme Court’s analysis was deciding whether there was a conflict between ORS 20.080 (which provides for attorney fees) and ORCP 54 E (which may limit attorney fees).

As described by the Oregon Supreme Court, ORS 20.080 provides that “a plaintiff who files a tort claim for $5,500 or less shall recover attorney fees if (1) the plaintiff makes a written demand on the tortfeasor for payment of a tort claim of $5,500 or less, at least 10 days prior to filing an action; (2) the plaintiff files an action on that claim; (3) the plaintiff prevails; and (4) the plaintiff obtains a judgment for an amount greater than any prefiling settlement offer made by the tortfeasor.”

ORCP 54 E(1) states that a defendant may serve an offer to allow judgment, up to 10 days prior to trial. ORCP 54 E(3) states that if the offer is not accepted, then the plaintiff shall not recover costs, prevailing party fees, or attorney fees incurred after the date of the offer.

The Oregon Supreme Court stated that ORS 20.080 conflicts with ORCP 54 E because ORS 20.080 allows for attorney fees, but ORCP 54 E nullifies attorney fees, at least in part. The Court then stated that applying ORCP 54 E would undermine the legislative purpose of ORS 20.080, especially the goal of “preventing tortfeasors and their insurers from ignoring just claims.” The Court stated that ORS 20.080 was designed to pressure tortfeasors and insurers to settle claims before the commencement of an action. The Court stated that allowing a defendant to cut off attorney fees after the commencement of an action would reduce or eliminate the incentive to settle a claim before the commencement of an action.

After the Court determined that ORS 20.080 and ORCP 54 E were inconsistent, since applying ORCP 54 E would prevent the Court from giving ORS 20.080 full effect, it needed to decide which provision to apply. The Court decided to give full effect to ORS 20.080, since it is the more specific statute, whereas ORCP 54 E is a rule of general application.

This development will put insurers in a difficult position. As things stand currently, ORS 20.080 claims can be difficult to handle. One difficulty is that some claimants will send a demand pursuant to ORS 20.080 with little supporting information and then file a complaint before the insurer has a fair opportunity to evaluate the case. Another difficulty for insurers is that although a claimant needs to make a demand upon a tortfeasor to create an ORS 20.080 claim, a claimant is under no obligation to provide notice to the tortfeasor’s insurer. See Woods v. Carl Karcher Enterprises, Inc., 341 Or 549 (2006). If one were cynical, one might think that a plaintiff’s attorney might take advantage of the insurer’s position by intentionally failing to give the insurer a fair opportunity to evaluate and settle a damages claim in order to create a claim for attorney fees. As a result of the Powers decision, however, claimants may have a greater incentive to seek an attorney fee claim under ORS 20.080, and have a lesser incentive to allow an insurer an opportunity to evaluate the case before a lawsuit is filed. There will almost certainly be attempts in the legislature to modify ORS 20.080 or ORCP 54 E to address the court’s holding. In the meantime, insurers need to be aware that an offer made to prevent a claim for attorney fees under ORS 20.080, should be made before a lawsuit is filed.

As stated above, the Powers opinion addressed the interplay of ORS 20.080 and ORCP 54 E. Unsurprisingly, the opinion does not indicate whether other statutory attorney fee provisions will be affected by its holding. During oral argument (which can be viewed at the Lewis & Clark Law School website at http://lawlib.lclark.edu/podcast/?p=455), it was clear that the Court was aware that their analysis may affect other statutory attorney fee provisions and there were general discussions regarding how ORS 20.080 was similar or distinct from other statutes providing for attorney fees. It is difficult to tell from the Powers opinion whether ORS 20.080 is a “unique” exception to ORCP 54 E, or whether the same type of analysis would be appropriate for other attorney fee statutes. We can expect, however, that plaintiffs will argue that offers to allow judgment do not cut off attorney fees which may be awarded under other statutes, including ORS 742.061.

If you have any questions, please feel free to contact the author, Flavio A. Ortiz (alex@lerlaw.com), or Marty Rall (marty@lerlaw.com) at 503-768-9600.