Case Title: McCarthy v. Oregon Freeze Dry, Inc.

Citation: 

Docket Number: S43877

State: oregon

Court: Oregon Supreme Court

Date: 1998-04-23T00:00:00Z

Document:
FILED: April 23, 1998
IN THE SUPREME COURT OF THE STATE OF OREGON
TERRY B. McCARTHY,
Petitioner on Review,
	v.
OREGON FREEZE DRY, INC.,
an Oregon corporation,
Respondent on Review.
(CC 93-0020; CA A87840; SC S43877)
 	On review from the Court of Appeals.*
	Argued and submitted November 3, 1997.
	William G. Wheatley, of Jaqua & Wheatley, P.C., Eugene,
argued the cause for petitioner on review.  With him on the
briefs was Nickolas Facaros, Eugene.
	William F. Gary, of Harrang Long Gary Rudnick P.C., Eugene,
argued the cause for respondent on review.  With him on the
briefs were Judith Giers, Eugene, and Brendan Dunn, Salem.
	Stephen L. Brischetto, Portland, filed a brief for amicus
curiae Oregon Trial Lawyers Association.
	Before Carson, Chief Justice, and Gillette, Van Hoomissen,
Durham, and Kulongoski, Justices.**
	DURHAM, J.
	The order of the Court of Appeals is vacated and the case is
remanded to that court for further proceedings.
	*Order Allowing Attorney Fees dated November 20, 1996.
	**Fadeley, J., retired January 31, 1998, and did not
participate in this decision.  Graber, J., resigned March 31,
1998, and did not participate in this decision.
	DURHAM, J.
	The issue in this proceeding is whether the
Court of Appeals erred in awarding attorney fees on
appeal to defendant.  Because the order awarding attorney
fees lacks necessary findings to explain the legal and
factual basis for the award, we vacate the order and
remand the case to the Court of Appeals for further
proceedings.
	Plaintiff worked for defendant as a forklift
operator.  In August 1991, plaintiff filed a claim for
workers' compensation benefits for an on-the-job injury. 
On October 7, 1991, defendant terminated plaintiff's
employment.
	On October 6, 1992, plaintiff filed this action
against defendant for breach of employment contract,
wrongful discharge, unlawful employment practices and
reckless infliction of severe emotional distress. 
Plaintiff based his claim for unlawful employment
practices on ORS 659.121(1) and alleged generally that
defendant had discriminated against plaintiff because of
his workers' compensation claim in violation of ORS
659.410 to 659.420.(2) 
	On August 31, 1993, plaintiff filed a notice of
dismissal pursuant to ORS 12.220 and ORCP 54 A(1). 
Defendant sought an award of its attorney fees but later
withdrew that request.(3)  The court entered a judgment of
dismissal on December 7, 1993.
	On December 5, 1994, plaintiff filed a motion
under ORCP 71 B to set aside the judgment of dismissal
and to reinstate the action.  He also filed a second
amended complaint that restated his claim against
defendant under ORS 659.121 for unlawful employment
practices.  The court denied plaintiff's motion on the
ground that plaintiff had not shown that the court had
entered the judgment due to his excusable neglect.
	Plaintiff appealed, arguing that the trial
court had erred in refusing to set aside its judgment
dismissing the action.  The Court of Appeals affirmed
without opinion, and this court denied review.  McCarthy
v. Oregon Freeze Dry, Inc., 142 Or App 595, 922 P2d 729,
rev den 324 Or 322 (1996).
	Following plaintiff's loss of his appeal,
defendant petitioned for attorney fees on appeal in the
sum of $18,268, arguing that it was a prevailing party
under ORS 659.121(1) and that plaintiff's appeal was
frivolous.  Plaintiff filed objections.  On November 20,
1996, the Court of Appeals entered an order that stated
only the following:  "Respondent's petition for attorney
fees is allowed in the amount of $12,000."  This court
granted review of that order.
	Plaintiff argues that the award of attorney
fees on appeal is flawed on both procedural and
substantive grounds.  First, plaintiff contends that
defendant failed to comply with various provisions of
ORCP 68 C in seeking fees on appeal.  Plaintiff relies on
ORCP 68 C(1), which provides:  
		"Notwithstanding Rule 1 A and the
procedure provided in any rule or statute
permitting recovery of attorney fees in a
particular case, this section governs the
pleading, proof, and award of attorney fees in
all cases, regardless of the source of the
right to recovery of such fees, except where:
		"C(1)(a) Such items are claimed as damages
arising prior to the action; or 
		"C(1)(b) Such items are granted by order,
rather than entered as part of a judgment."
Plaintiff points out that ORCP 68 C(1) provides that ORCP
68 governs in "all cases" and "[n]otwithstanding Rule 1
A," subject to exceptions that do not apply here. 
Defendant responds that the Oregon Rules of Civil
Procedure (ORCP) apply only in trial courts, not
appellate courts.  
	Because plaintiff's arguments based on
defendant's noncompliance with ORCP 68 fail if that rule
is inapplicable, we address that question first.  In
answering the question whether ORCP 68 applies to an
award of attorney fees by the Court of Appeals, this
court's objective is to discern and give effect to the
legislature's intention.  The first step toward that
objective is the examination of the text and context of
the material provisions of the ORCP.  In conducting that
examination, we follow the interpretive methodology that
applies in the construction of statutes.  See State v.
Arnold, 320 Or 111, 119, 879 P2d 1272 (1994) (because a
provision of the ORCP "is a statute," the court discerns
the meaning of the rules of civil procedure by applying
the methodology for statutory interpretation set forth in
PGE v. Bureau of Labor and Industries, 317 Or 606, 610-11, 859 P2d 1143 (1993)); see also Pamplin v. Victoria,
319 Or 429, 433, 877 P2d 1196 (1994) (ORCP is subject to
"the usual method of statutory interpretation," citing
PGE).  
	On its face, ORCP 68 would seem to apply. 
Certainly the phrase "in all cases" supports such a
reading.  We turn to context to determine whether there
is anything at the first level of analysis that calls
into question the apparently absolute declaration in ORCP
68 C(1).  See PGE, 317 Or at 610 (court examines both
text and context at first level of analysis).
	ORCP 68 C(1) cross-references ORCP 1 A, which
is context for ORCP 68 C(1).  ORCP 1 A provides:
		"These rules govern procedure and
practice in all circuit courts of this state,
except in the small claims department of
circuit courts, for all civil actions and
special proceedings whether cognizable as
cases at law, in equity, or of statutory
origin except where a different procedure is
specified by statute or rule.  These rules
shall also govern practice and procedure in
all civil actions and special proceedings,
whether cognizable as cases at law, in equity,
or of statutory origin, for the small claims
department of circuit courts and for all other
courts of this state to the extent they are
made applicable to such courts by rule or
statute.  Reference in these rules to actions
shall include all civil actions and special
proceedings whether cognizable as cases at
law, in equity or of statutory origin."  
	The context of ORCP 1 A and ORCP 68 also includes statutes
that relate to the same subject as those rules.  ORS 1.735(1),
which is part of the context of those rules, provides, in part:
		"The Council on Court Procedures
shall promulgate rules governing pleading,
practice and procedure, including rules
governing form and service of summons and
process and personal and in rem jurisdiction,
in all civil proceedings in all courts of the
state which shall not abridge, enlarge, or
modify the substantive rights of any litigant. 
The rules authorized by this section do not
include rules of evidence and rules of
appellate procedure."  (Emphasis added.)
	ORCP 1 A does not resolve completely the
question whether the ORCP apply to appellate court
proceedings.  However, our examination of the context of
that rule eliminates any doubt about that matter: the
ORCP apply only in trial courts. 
	It is inescapable that rules governing the
procedures for recovering an award of attorney fees in an
appellate court are "rules of appellate procedure" within
the meaning of ORS 1.735(1).  That statute thus makes it
clear that ORCP addresses trial procedure.  It follows
that ORCP 68 C(1) cannot be read plausibly to govern a
claim for attorney fees in an appellate court.  Thus, we
reach the same conclusion here that this court reached
earlier in deciding a related issue in State ex rel KOIN-
TV v. Olsen, 300 Or 392, 394 n 1, 711 P2d 966 (1985),
viz., "The Oregon Rules of Civil Procedure do not govern
procedure in this court." 
	Our review of the text and context of ORCP 68
C(1) satisfies us that the applicable scope of that rule
is clear.  Accordingly, we proceed no further.  See Jones
v. General Motors Corp., 325 Or 404, 419, 939 P2d 608
(1997) (illustrating methodology).  Defendant was not
obligated to comply with ORCP 68 in seeking attorney fees
in the Court of Appeals.  
	Plaintiff also argues that defendant failed to
allege a claim for attorney fees in any pleading or
motion in the trial court, as required by ORCP 68 C(2)(a)
and (b) and, consequently, has no right to seek attorney
fees on appeal.  We disagree.  ORS 659.121(2) does not
condition the right of a prevailing party to recover
attorney fees on appeal in cases of this kind on that
party's compliance with rules governing recovery of
attorney fees at trial.  ORAP 13.10, which states the
rules of procedure for seeking attorney fees on appeal,
does not impose a requirement of prior notification of an
attorney fee claim similar to that found in ORCP 68
C(2)(a) and (b).  On appeal, a party may request attorney
fees by filing a petition under ORAP 13.10.  Defendant
followed that procedure.  
	Plaintiff next argues that, in petitioning for
attorney fees, defendant violated ORAP 13.10(5), which
provides, in part: 
		"A petition shall state the total
amount of attorney fees claimed and the
authority relied on for claiming the fees." 
(Emphasis added.) 
Plaintiff contends that he filed this action under ORS
659.121(2), but defendant petitioned for fees pursuant to
ORS 659.121(1).  According to plaintiff, ORS 659.121(1)
is not "authority," within the meaning of ORAP 13.10(5),
for recovery of a fee in an action filed under ORS
659.121(2).  We disagree.
	The requirement in ORAP 13.10(5) of a statement
of the "authority relied on" is not a jurisdictional
prerequisite, but is a direction to the parties to assist
the appellate court in determining whether the court has
authority to award attorney fees on appeal.  ORS
659.121(1) and (2) both authorize the court to award
attorney fees "at trial and on appeal."  The actions
authorized by those subsections differ only slightly. 
Subsection (1) permits an action that seeks equitable
relief.  Subsection (2) permits an action that seeks both
equitable relief and money damages.  Defendant's citation
to subsection (1) met the requirement of ORAP 13.10(5),
even though it referred to the incorrect subsection of
the correct statute, because it reasonably served to
guide the court to the source of its authority to award
an attorney fee.  Nothing in the record indicates that
defendant's citation caused any prejudice or confusion
below.  From all that appears before us, the parties
litigated the issue of the court's authority to award
fees under ORS 659.121 without regard to the reference to
subsection (1) in the petition or the substantive
distinctions between subsections (1) and (2).  Moreover,
those distinctions could not have made a difference here,
because plaintiff did not prevail below and,
consequently, obtained no relief.  No reversible error
arises from the fact that defendant cited ORS 659.121(1)
in the petition for attorney fees.
	Plaintiff further argues that ORS 659.121, as
interpreted by numerous cases from the Court of Appeals,
bars recovery of attorney fees by a prevailing defendant
in the absence of a showing that plaintiff's claim is
frivolous, unreasonable, or without foundation. 
Plaintiff contends that defendant's petition made no such
showing and that the Court of Appeals' order contains no
findings of fact or conclusions of law explaining that
the court agreed with defendant's theory.  Defendant
responds that ORS 659.121(2) does not require the showing
to which plaintiff refers and that, even if it did,
defendant did show that plaintiff's appeal was frivolous. 
	Several rules are relevant to our response to
the parties' arguments.  ORS 659.121(2) provides that
"the court may allow the prevailing party costs and
reasonable attorney fees at trial and on appeal."  ORS
20.075(4) provides the factors that the   court must
consider in deciding whether and to what extent to award
attorney fees under ORS 659.121(2).  ORS 20.075 applies
to an award of attorney fees by a "court."  Thus, ORS
20.075 applies to an award of attorney fees by an
appellate court as well as a trial court.  
	Plaintiff is correct in asserting that, before
the enactment of ORS 20.075, the Court of Appeals,
relying on the discretionary character of ORS 659.121,
had construed ORS 659.121 to require the use of a
different standard in awarding attorney fees to
prevailing plaintiffs and to prevailing defendants.  The
Court of Appeals has said:
	"[R]elying on comparable federal law, we
have construed the apparently discretionary
language of ORS 659.121(1) to require an award
of attorney fees to a prevailing plaintiff but
to limit an award to a prevailing defendant to
situations in which the plaintiff's claim was
frivolous, unreasonable, or without
foundation.  Robinson v. School District No.
1, 92 Or App 627, 631-32, 759 P2d 1116 (1988);
Payne v. American- Strevell, Inc., 65 Or App
265, 670 P2d 1065 (1983)." 
Schlumberger Technologies, Inc. v. Tri-Met, 145 Or App
12, 21 n 9, 929 P2d 331 (1996), rev den 325 Or 80 (1997). 
See Dobie v. Liberty Homes, 53 Or App 366, 374, 632 P2d
449 (1981) (in seeking fees under ORS 659.121(1), the
prevailing defendant must show that "the claim is brought
in bad faith, is unreasonable or groundless"). 
	The "comparable federal law" to which the Court
of Appeals referred included Christiansburg Garment Co.
v. EEOC, 434 US 412, 98 S Ct 694, 54 L Ed 2d 648 (1978),
which held that a different standard applied to an award
of attorney fees against a losing plaintiff under Title
VII of the Civil Rights Act of 1964, 42 USC 2000e et
seq, because, according to the Court:
	"To take the further step of assessing
attorney's fees against plaintiffs simply
because they do not finally prevail would
substantially add to the risks inhering in
most litigation and would undercut the efforts
of Congress to promote the vigorous
enforcement of the provisions of Title VII." 
434 US at 422.
	Defendant's claim that the text of ORS 659.121
does not permit the Court of Appeals to adopt the
discretionary rule described in Schlumberger raises an
issue that we need not resolve here.  ORS 20.075 is part
of the context for ORS 659.121, because it addresses
related subject matter.  See PGE, 317 Or at 611 (context
includes other related statutes).  ORS 20.075(1)(c)
requires the Court of Appeals, in deciding whether to
award an attorney fee pursuant to discretionary statutes
such as ORS 659.121, to consider, among other things,
"[t]he extent to which an award of an attorney fee in the
case would deter others from asserting good faith claims
* * *."  Properly understood, the question is not, as
defendant states, whether ORS 659.121, standing alone,
authorizes the Court of Appeals to enforce its
Schlumberger rule.  Rather, the question is whether ORS
659.121 and ORS 20.075, when interpreted together,
authorize the Schlumberger rule.  In view of the
discretionary character of ORS 659.121 and the text of
ORS 20.075(1)(c), we think that the answer is yes.  
	Our inquiry does not end, however, with the
determination that the Court of Appeals lawfully could
have applied its Schlumberger rule if it chose to do so. 
Defendant also asserts that the Court of Appeals
necessarily must have accepted its argument that
plaintiff's appeal was frivolous because that was
defendant's only argument below.  We disagree.  As
discussed above, defendant also claimed, incorrectly,
that the Court of Appeals was not entitled to require it
to show that plaintiff's appeal was frivolous.  
	Defendant also contends that some criteria
stated in ORS 20.075 authorize the court to deter
frivolous litigation through an award of attorney fees. 
See ORS 20.075(1)(b) (requiring consideration of the
"objective reasonableness of the claims * * * asserted by
the parties") and (d) (requiring consideration of the
"extent to which an award of an attorney fee in the case
would deter others from asserting meritless claims * *
*").  Defendant asks this court to hold that, in view of
the probability that the Court of Appeals relied on that
permissible rationale, that court did not abuse its
discretion in awarding attorney fees. 
	Plaintiff argues that neither his appeal nor
his underlying claim was frivolous, as required by the
Schlumberger rule, and that the record before the Court
of Appeals does not support that conclusion under ORS
20.075 or any other applicable statute.  Plaintiff also
argues that, if this court chooses not to require a
showing of "frivolousness," and modifies the rule stated
in Schlumberger, any new less stringent standard should
apply only prospectively in light of plaintiff's
reasonable reliance on that case.  See Peterson v.
Temple, 323 Or 322, 332- 34, 918 P2d 413 (1996)
(discussing the prospective application of a change in
law).  Finally, plaintiff argues that this court has
required the Court of Appeals, in analogous circumstances
under ORS 20.105(1),(5) to make findings on the record to
support an award of attorney fees and has held that such
special findings are a prerequisite for meaningful review
of any award.(6)
	We address only the parties' arguments
regarding the lack of special findings to support or
explain the order under review.  The Court of Appeals
order awarding attorney fees gave no explanation, through
special findings of fact or otherwise, of the court's
basis for the award.
	We agree that ORS 20.075 states criteria that
the Court of Appeals, and any other court, shall consider
in determining whether and to what extent to award
attorney fees pursuant to statute.  ORS 20.075(3)
contemplates appellate review of an award of attorney
fees that is subject to that statute for abuse of
discretion.
	In Tyler v. Hartford Insurance Group, 307 Or
603, 771 P2d 274 (1989), this court declined to review an
award of attorney fees under ORS 20.105(1) by the Court
of Appeals, because that court's failure to state its
special findings to support the award obstructed the
process of appellate review by this court.  The court
remanded the case for necessary findings, although the
applicable statute did not require findings expressly,
stating:
	"That statute does not expressly require
the Court of Appeals to make findings on the
record.  Nevertheless, we conclude that
findings are required.  Otherwise, we have no
basis upon which to review the award of
attorney fees, nor to consider what the Court
of Appeals understood the relevant statutory
words to mean."  Id. at 605.  
	In Mattiza v. Foster, 311 Or 1, 10-11, 803 P2d
723 (1990), this court made a similar point, this time
with regard to an award of attorney fees by a trial
court:
	"[T]he award of attorney fees under ORS
20.105(1) is a situation in which special
findings are a prerequisite to meaningful
review by an appellate court.  Not only should
the trial court make findings regarding the
merit of the party's claim, defense, or ground
for appeal or review, and which of the three
grounds under ORS 20.105(1) the court is
considering, but it should also specify which
actions of the party are violative of the
statute."  (Citations omitted.)  
	The issue addressed in those passages from
Tyler and Mattiza is indistinguishable from the issue
that this court faces under ORS 20.075.  As a practical
matter, this court cannot analyze the record to determine
whether a court's decision to award or deny an attorney
fee pursuant to statute was an abuse of discretion unless
the court, in its findings, identifies the relevant facts
and legal criteria on which the court relies in awarding
attorney fees.  Because the rationale in Tyler and
Mattiza controls here, we vacate the order awarding
attorney fees and remand for further proceedings.
	The order of the Court of Appeals is vacated
and the case is remanded to that court for further
proceedings.
1.	ORS 659.121 provides, in part: 
		"(1) Any person claiming to be aggrieved
by an unlawful employment practice prohibited by
ORS 25.363, 399.235, 659.030, 659.035, 659.227,
659.270, 659.295, 659.330, 659.340, 659.410,
659.415, 659.420, 659.425 or 659.470 to 659.494
may file a civil suit in circuit court for
injunctive relief and the court may order such
other equitable relief as may be appropriate,
including but not limited to reinstatement or the
hiring of employees with or without back pay. 
Back pay liability shall not accrue from a date
more than two years prior to the filing of a
complaint with the Commissioner of the Bureau of
Labor and Industries, pursuant to ORS 659.040, or
if no such complaint has first been filed, then,
more than two years prior to the filing of the
civil suit provided for in ORS 659.040, 659.045,
659.095 and this section.  In any suit brought
under this subsection, the court may allow the
prevailing party costs and reasonable attorney
fees at trial and on appeal.
		"(2) Any person claiming to be aggrieved
by alleged violations of ORS 659.033(1) or (3),
659.295 or 659.400, 659.405, 659.410(1), 659.415
to 659.435 and 659.550 may file a civil action in
circuit court to recover compensatory damages or
$200, whichever is greater, and punitive damages. 
In addition, the court may award relief authorized
under subsection (1) of this section and such
equitable relief as it considers appropriate.  At
the request of any party, the trial of such case
shall be by jury.  In any action brought under
this subsection, the court may allow the
prevailing party costs and reasonable attorney
fees at trial and on appeal.  Any attorney fee
agreement shall be subject to approval by the
court."
	2.	ORS 659.410(1), 659.415(4), and
659.420(5) declare that violations of the rights
of injured workers, as described in those
sections, are unlawful employment practices. 
Violations of those sections are actionable under
ORS 659.121(1) and (2).  
	3.	On October 5, 1993, defendant filed a
separate action against plaintiff to recover the
cost of its attorney fees in defending plaintiff's
action.  Plaintiff filed counterclaims that
restated his claims for unlawful employment
practices and wrongful discharge from his original
action.  The parties dispute the legal effect of
that separate action.  We conclude that that
action is not material to the issues that we
decide here. 
4.	ORS 20.075 was enacted in 1995, Or Laws 1995,
ch 618, 6, and provides, in part:	
		"(1) A court shall consider the following factors
in determining whether to award attorney fees in any case
in which attorney fees are authorized by statute and in
which the court has discretion to decide whether to award
attorney fees:
		"(a) The conduct of the parties in the
transactions or occurrences that gave rise to the
litigation, including any conduct of a party that
was reckless, willful, malicious, in bad faith or
illegal.
		"(b) The objective reasonableness of the claims
and defenses asserted by the parties.
		"(c) The extent to which an award of an attorney
fee in the case would deter others from asserting good
faith claims or defenses in similar cases.
		"(d) The extent to which an award of an attorney
fee in the case would deter others from asserting
meritless claims and defenses.
		"(e) The objective reasonableness of the parties
and the diligence of the parties and their attorneys
during the proceedings.
		"(f)	The objective reasonableness of the parties
and the diligence of the parties in pursing settlement of
the dispute.
		"(g)	The amount that the court has awarded as a
prevailing party fee under ORS 20.190.
		"(h)	Such other factors as the court may consider
appropriate under the circumstances of the case.
		"(2)	A court shall consider the factors specified
in subsection (1) of this section in determining the
amount of an award of attorney fees in any case in which
attorney fees are authorized by statute and in which the
court has discretion to decide whether to award attorney
fees.  In addition, the court shall consider the following
factors in determining the amount of an award of attorney
fees in those cases:
		"(a)	The time and labor required in the
proceeding, the novelty and difficulty of the questions
involved in the proceeding and the skill needed to
properly perform the legal services.
		"(b)	The likelihood, if apparent to the client,
that the acceptance of the particular employment by the
attorney would preclude the attorney from taking other
cases.
		"(c)	The fee customarily charged in the locality
for similar legal services.
		"(d)	The amount involved in the controversy and
the results obtained.
		"(e)	The time limitations imposed by the client or
the circumstances of the case.
		"(f)	The nature and length of the attorney's
professional relationship with the client.
		"(g)	The experience, reputation and ability of the
attorney performing the services.
		"(h)	Whether the fee of the attorney is fixed or
contingent.
		"(3)	In any appeal from the award or denial of an
attorney fee subject to this section, the court reviewing
the award may not modify the decision of the court in
making or denying an award, or the decision of the court
as to the amount of the award, except upon a finding of an
abuse of discretion."
5.	ORS 20.105(1) provides:
		"In any civil action, suit or other proceeding in
a circuit court or the Oregon Tax Court, or in any civil
appeal to or review by the Court of Appeals or Supreme
Court, the court shall award reasonable attorney fees to
a party against whom a claim, defense or ground for appeal
or review is asserted, if that party is a prevailing party
in the proceeding and to be paid by the party asserting
the claim, defense or ground, upon a finding by the court
that the party willfully disobeyed a court order or that
there was no objectively reasonable basis for asserting
the claim, defense or ground for appeal."
	6.	Plaintiff raised the issue of the lack
of special findings in his petition for review to
this court.  He was not required to take action to
preserve that issue below, because it arose when
the Court of Appeals issued its order.