Lachenmeier, Enloe & Rall - February, 2004 Publication

APPEALING OPTIONS:
Court Annexed Arbitration and the Request for Trial De Novo

Then, King Solomon said, “Bring me a sword.” So, they brought a sword before the king.
-1 Kings 3:24

Mandatory Arbitration

     Nothing good can come from splitting a baby. That is, however, exactly what the wise King Solomon proposed, in what may have been the earliest recorded arbitration in history.

     Unfortunately, the phrase, and the idea behind it, remains firmly fixed in our modern legal vernacular. Too-frequently, we see the distasteful results of “baby splitting” in the decisions made by arbitrators. Each party gets a little something, but no one gets what they want.

     As you probably know, Oregon law provides for a mandatory arbitration program in cases involving less than a certain amount in controversy ($50,000 in most counties). This process of resolving smaller-sized disputes, thus minimizing the drain on limited court resources, is strongly favored by the state legislature and the courts themselves. It is so strongly favored, in fact, that the statutory scheme that establishes the program also provides for potential penalties against parties who unsuccessfully challenge the arbitration results.

     Though it is favored, mandatory arbitration is not binding, which is good news if you receive an award that is entirely adverse, or even if the baby has simply been split beyond acceptance. A party can simply appeal the arbitration award, and request a jury trial. There are a few deadlines and consequences, however, that you need to first be aware of.

Timing

     Mandatory arbitration in this state is controlled by Chapter 36 of the Oregon Revised Statutes and Chapter 13 of the Uniform Trial Court Rules. ORS 36.425(1) requires that, at the conclusion of the arbitration, the arbitrator file the award with the court. UTCR 13.220 requires that it be filed with the court and served on the parties within 14 days, unless an extension is granted by the court.

     Once filed, the clock starts ticking on the right of the parties to file an appeal and ask for a jury trial. ORS 36.425(2) provides for 20 days in which to file a written notice of appeal and request for trial de novo, and serve it on all other parties to the matter. If no appeal is filed within the time provided, the court is directed by statute to enter a judgment based on the award.

     In 2005, the Court of Appeals ruled that ORCP 10C applied to the requirements of ORS 36.425. ORCP 10C provides, essentially, that if a party is required to take some action within a prescribed period of time after the service of a notice, and the notice is served by mail, an extra 3 days shall be added to the time period. See Guess v. Lee, 198 Or App 304 (2005). Caution is advised, though, as the decision was based upon the particular facts of that case, and trial courts are not eager to enlarge the 20-day time limit.

Appeal

     Not just anyone can appeal an arbitration award. ORS 36.425 (2) provides that only a party against whom relief was granted, or a party whose claim for relief was greater than what was awarded, may appeal the arbitration award.

     If, after careful consideration of the risks and benefits, a party wishes to appeal, it must, within the prescribed time, serve the notice of appeal and request for trial on the other parties, file it with the court along with a certificate of service, and deposit $150 with the court clerk. The appealing party will also be responsible for the statutory trial fee as provided by ORS 21.270.

     If the arbitration award is properly appealed, a completely new trial will be held on all issues of law and fact.

Costs and Fees

     As stated above, arbitration is favored by the courts and the legislature. Litigants are encouraged to resolve their disputes through the arbitration process, and there are serious risks associated with appealing an award.

     The first consideration a party must make before appealing an arbitration award is whether they are likely to improve their position at trial. The risks that a party faces are dependant upon that question.

It is occasionally difficult to determine just what it means to “improve a position,” particularly when new claims are added to the matter between arbitration and trial. The Oregon Court of Appeals has clarified that improvement should be measured by a party’s relative success on the same claims that were submitted to arbitration. So, if a defendant loses on new issues submitted after arbitration, but improves on the issues previously arbitrated, then the defendant has improved its position. See Friedman v. Christy, 158 Or App 189 (1999); see also ORS 36.425(7).

     One of the smaller risks faced by an appealing party is the loss of the $150 deposit. When an arbitration appeal is filed, the appealing party must deposit $150 with the trial court. If the part subsequently improves its position at trial, then the court will return the deposit. If the party’s position is not improved, the court will keep the money. As the deposit may be returned, it does not count as a “cost” to be awarded. See Olson v. Eclectic, 201 Or App 155 (2005). However, the $150 is the least of that party’s concerns…

     If the appealing party was entitled to attorney fees under another law or contract, such as ORS 20.080, but does not improve its position at trial, even if the party technically wins a favorable verdict, then the party loses its right to costs and attorney fees. But wait, that’s not all. In addition to losing its costs and fees, that party also becomes responsible for the costs and fees of the other parties associated with the trial.

     If, however, the appealing party was not originally entitled to fees, and the party fails to improve its position at trial, it still remains on the hook for the costs and fees of the other parties with regard to the trial. A party’s respective liability for fees under this rule is determined by whether the party is a plaintiff or a defendant. ORS 36.425(5) clarifies that a court shall award reasonable attorneys fees not to exceed: (a) Twenty percent of the judgment if the defendant appeals the arbitration, and does not improve its position; or (b) Ten percent of the amount claimed in the Complaint if the plaintiff appeals, but does not improve its position.

     The statute does provide against double dipping, however. If the non-appealing party is entitled to attorney fees under this statutory scheme, and is also entitled to fees under another law or contract, the court shall award costs and fees pursuant to the other law or contract.

     Fortunately, if a party disagrees only with the award or denial of costs or fees at arbitration, ORS 36.425(6) provides a means of review short of a full appeal. Within seven days of the arbitrator filing the award, a party may file written exceptions with regard to the decision on costs and fees, and the opposing party is afforded seven days to respond. The issue will then be heard by a judge. However, the hearing on an exception does not constitute an appeal.

Conclusion

While we wish that arbitrators would have the wisdom of Solomon, we would also prefer that they avoid the practice of baby splitting. It seems unavoidable, though, and we are at least afforded the opportunity to appeal the awards that we do not like. That decision, however, must not be made lightly. There are risks, some substantial, which must be assessed. Because, being a party that appeals, but who does not improve its position, is not an appealing position to be in.

You may address questions regarding this area of law to Brian Ruff, brian@lerlaw.com, (503) 768-9600.