Case Title: Barbara Parmenter Living Trust v. Lemon

Citation: 

Docket Number: S054971

State: oregon

Court: Oregon Supreme Court

Date: 2008-10-09T00:00:00Z

Document:
FILED: October 9, 2008
IN THE SUPREME COURT OF THE STATE OF OREGON
BARBARA PARMENTER LIVING TRUST,
Respondent on Review,
v.
STEVE LEMON
and KYMBERLY LEMON,
Petitioners on Review.
(CC 12-02-23704; CA A126429; SC S054971)
En Banc
On review from the Court of Appeals.*
Argued and submitted January 9, 2008.
Brian D. Cox, of Cox & Associates, LLC,
Eugene, argued the cause and filed the brief for petitioners on review.
William E. Flinn, of Hurley, Lynch & Re, PC,
Bend, argued the cause for respondent on review.
KISTLER, J.
The decision of the Court of Appeals is
reversed.  The supplemental judgment of the circuit court is reversed, and the
case is remanded to the circuit court for further proceedings.
*Appeal from Lane County Circuit Court, Karsten H.
Rasmussen, Judge. 212 Or App 669, 159 P3d 1174 (2007).
KISTLER, J.
This case arises out of a
landlord-tenant dispute.  The trial court ruled in landlord's favor on one of
its claims and in tenants' favor on two of their claims.  The court designated
both landlord and tenants as prevailing parties but declined to award either of
them attorney fees.  Tenants appealed, arguing that they were the only
prevailing parties and that the trial court should have awarded them attorney
fees.  A divided panel of the Court of Appeals affirmed.  Barbara Parmenter
Living Trust v. Lemon, 212 Or App 669, 159 P3d 1174 (2007).  We allowed
tenants' petition for review and now reverse the Court of Appeals decision and
the trial court's judgment and remand this case to the trial court for further
proceedings.
Landlord brought this action against
tenants, alleging claims for breach of the rental agreement and waste.  Tenants
answered and alleged counterclaims for unlawful entry, ouster, unlawful
disposition of personal property, and unlawful debt collection practices. 
After a bench trial, the trial court ruled in landlord's favor on its claim for
breach of the rental agreement and awarded it $345 in damages.  The court ruled
in tenants' favor on their unlawful entry and ouster counterclaims and awarded
them $1,396 in damages.  The court ruled against both parties on their
remaining claims.  The court entered a general judgment reflecting those
rulings.  Neither party appealed from that judgment.
After the trial court entered the
general judgment, both parties sought prevailing party fees, costs,
disbursements, and attorney fees.  After considering the parties' arguments,
the trial court issued an order that addressed two issues.  First, it rejected
tenants' argument that, under ORS 90.255, it should designate only one
prevailing party and agreed with landlord that, under ORS 20.077, both tenants
and landlords were prevailing parties.  Second, although tenants and landlord
were both eligible as prevailing parties to recover their attorney fees under
ORS 90.255, the trial court declined to award either party any fees.  The court
reasoned:
"1.  Both parties engaged in conduct that both caused
and complicated the dispute and prolonged the litigation.
"2.  Both parties presented minor meritorious claims
and significant non-meritorious claims.
"3.  Granting an award of attorney fees to either party
would merely encourage non-meritorious claims in the future.
"4.  An award of attorney fees in this case would not
deter others from bringing meritless claims in the future.
"5.  Inadequate settlement offers were made by both
parties.
"6.  Having found that each party is a 'prevailing
party' under Oregon law, the Court awards each party a prevailing party fee. 
The Court, however, explicitly declined to award either party an enhanced
prevailing party fee.  Hence, this category does not impact the Court's
attorney fee ruling.
"7.  As the Stocker [v. Keith, 178 Or App
544, 38 P3d 283 (2002),] court indicated, a prevailing party is ordinarily
entitled to attorney fees in [a Residential Landlord Tenant Act] case.  The
Court has considered this factor.
"8.  The outcome sought, the outcome obtained, and the
amount of fees sought in this case are all highly disproportional.  In [its]
complaint, [landlord] sought relief in the amount of $2,308.20.  [It] obtained
relief in the amount of $345.00.  [Landlord] now seeks attorney fees in the
amount of $32,270.50.  In their answer, [tenants] sought a total of $10,308.50
in relief.  [Tenants] obtained relief in the amount of $1,396.00.  [Tenants]
now seek attorney fees in the amount of $40,424.42."
The trial court later entered a supplemental judgment, which
denied both parties' requests for "costs, disbursements and attorney fees *
* * for the reasons set forth [in the trial court's order]."
Tenants appealed from the supplemental
judgment.  Landlord did not cross-appeal.  On appeal, tenants argued that the
trial court had erred in designating landlord as a prevailing party.  In
tenants' view, there can be only one prevailing party under ORS 90.255, and
only they had prevailed.  Tenants also argued that the trial court should have
awarded them attorney fees.  As noted, a divided Court of Appeals affirmed. 
The majority concluded that tenants' objections to designating landlord as a
prevailing party were not properly before it.  Barbara Parmenter Living
Trust, 212 Or App at 672-73.  Regarding tenants' attorney fee claim,
the majority agreed with tenants that, except in unusual circumstances, the
prevailing party under ORS 90.255 is entitled to fees.  Id. at 675.  The
majority concluded, however, that the circumstances that the trial court had
identified were sufficiently unusual to warrant denying tenants fees.  Id.
at 676.  The dissent would have held that those circumstances provided a basis
for reducing a fee award but not a basis for denying fees altogether.  Id.
at 676-77 (Armstrong, J., dissenting).  We allowed tenants' petition for review
to consider those issues.
We begin with tenants' argument that
the trial court erred in designating landlord as a prevailing party.  Tenants
reason that, under ORS 90.255, there can be only one prevailing party and that,
because the net award was in their favor, only they prevailed.  Landlord
responds that ORS 20.077, a later enacted statute, points in a different
direction.  Landlord argues that, under ORS 20.077, when a case contains
multiple fee-generating claims, there are as many prevailing parties as there
are fee-generating claims.  Because both landlord and tenants prevailed on
fee-generating claims, landlord concludes that the trial court correctly
designated both of them as prevailing parties.
We need not decide whether ORS 90.255
contemplates only one prevailing party and, if it does, whether the legislature
modified that statute when it enacted ORS 20.077.  In this case, tenants'
challenge to designating landlord as a prevailing party presents a purely
academic issue.  The designation has not resulted in any harm to tenants.  More
particularly, designating landlord as a prevailing party has not resulted in
tenants having to pay landlord any costs or fees;(1) it did not preclude the trial court from also designating tenants as prevailing
parties; and it played no role in the trial court's decision not to award
tenants attorney fees.  It follows that the question that tenants urge us to
decide -- whether the trial court erred in designating landlord as a prevailing
party -- presents only an abstract question, which we decline to reach.  See
Davis v. Board of Parole, 341 Or 442, 448, 144 P3d 931 (2006) (declining to
decide issue when neither party had an interest in it).(2)
Tenants raise another issue on
review.  Relying on Executive Mgt. Corp. v. Juckett, 274 Or 515, 547 P2d
603 (1976), tenants argue that under ORS 90.255 a prevailing party should
receive attorney fees except in unusual circumstances.  They contend that the
trial court erred in determining that the circumstances in this case were
sufficiently unusual to deny them any fees.  Landlord responds that a later
enacted statute, ORS 20.075, gives trial courts greater latitude in deciding
whether to award fees and that, in light of ORS 20.075, Juckett's
interpretation of ORS 90.255 is either no longer good law or of minimal
significance.
In analyzing that issue, we begin
with the text of ORS 90.255.  We then discuss this court's decision in Juckett
and turn finally to the effect of ORS 20.075.  ORS 90.255 provides, in
part:
"In any action on a rental agreement or arising under
this chapter, reasonable attorney fees * * * may be awarded to the prevailing
party together with costs and necessary disbursements, notwithstanding any
agreement to the contrary."
The text of ORS 90.255 says that a trial court
"may" award the prevailing party attorney fees in an action on a
rental agreement or arising under ORS chapter 90.  It does not say that trial
courts must award the prevailing party fees unless unusual circumstances are
present.  Tenants argue, however, that the following passage from Juckett
requires that we read the statutory text to say something different:
"The [tenant] also argues that '[t]he award of
attorney's fees under [ORS 90.255] is permissive, not mandatory, and the court
need not award fees in every case.'  However, we conclude that normally a
'prevailing party' would be entitled to recover attorney fees, barring unusual
circumstances which might arise in any particular case."
Juckett, 274 Or at 519.  Tenants argue that this
passage from Juckett establishes that, under ORS 90.255, trial courts
must award prevailing parties attorney fees except in unusual circumstances.
The passage from Juckett is
not a model of clarity.  The sentence on which tenants rely contains two
qualifiers.  It says that "normally" a prevailing party will be
entitled to fees "barring unusual circumstances."  The use of the word
"normally" implies that the proposition -- that a prevailing party
will receive fees barring unusual circumstances -- does not always apply and
that reasons other than unusual circumstances will justify a court's decision
not to award fees.  If we give both phrases -- "normally" and
"barring unusual circumstances" -- meaning, then the sentence on
which tenants rely reduces to a preference for a fee award to the prevailing
party, not a mandate to award fees.  That reading, not the one that tenants
advance, is the only reading that arguably can be squared with the
legislature's use of "may" in ORS 90.255.
Not only do tenants read Juckett
for more than it is worth, but the legislature enacted ORS 20.075(1) after this
court decided Juckett.  See Or Laws 1995, ch 618, § 6
(enacting ORS 20.075).  That statute lists eight factors that a court
"shall consider * * * in determining whether to award attorney fees in any
case in which an award of attorney fees is authorized by statute and in which
the court has discretion to decide whether to award attorney fees."  ORS
20.075(1).(3) 
Among other things, ORS 20.075(1) directs trial courts to consider such factors
as the reasonableness of the parties' claims and defenses, the extent to which
a fee award would deter others from asserting good faith claims and defenses,
and the extent to which a fee award would deter others from asserting meritless
claims and defenses.
ORS 20.075(1) defines the terms that
a trial court shall consider in exercising its discretion under ORS 90.255. 
The variety and diversity of those terms confirms that a trial court's exercise
of discretion under ORS 90.255 is not limited to determining whether unusual
circumstances exist.  Rather, it extends to the full range of factors that ORS
20.075(1) requires courts to consider.  It follows that the question on review
regarding the trial court's fee decision is not whether unusual circumstances
exist, as tenants argue; rather, it is whether the trial court abused its
discretion in applying the factors set out in ORS 20.075(1).
We begin our analysis of that
question by noting that ORS 90.255 authorized the trial court to award the
prevailing party attorney fees on four claims:  landlord's claim for breach of
the rental agreement and tenants' counterclaims for unlawful entry of premises,
unlawful ouster, and unlawful disposition of property.(4) 
Tenants prevailed on two of those claims:  (1) unlawful entry of the premises
and (2) unlawful ouster.  Landlord prevailed on two of those claims: 
(1) breach of the rental agreement and (2) unlawful disposition of
personal property.  Of the remaining two claims, tenants prevailed on a claim
(waste) for which no fees are authorized and lost on a claim (unlawful debt
collection practices) for which another statute, ORS 646.641(2), authorizes attorney
fees to the prevailing party.  The only question before us is whether the trial
court abused its discretion in denying tenants fees on the two claims for
relief on which they prevailed (unlawful entry and unlawful ouster).
The trial court made eight findings
in support of its decision to deny tenants fees.  Although we review the trial
court's decision for abuse of discretion, the terms on which the trial court
exercised its discretion must be legally permissible.  See State v. Cox,
337 Or 477, 490, 98 P3d 1103 (2004) (recognizing that principle); McCarthy
v. Oregon Freeze Dry, Inc., 334 Or 77, 92-93, 46 P3d 721 (2002) (reversing
fee decision because the premise on which the Court of Appeals based its
decision to award the defendant attorney fees was legally incorrect).  In this
case, the trial court made explicit findings, which aid our review.  Cf.
McCarthy v. Oregon Freeze Dry, Inc., 327 Or 185, 190-91, 957 P2d 1200
(1998) (on reconsideration) (explaining that, although courts need not make
lengthy or complex findings under ORS 20.075(1), courts still "must
describe the relevant facts and legal criteria for the court's decision to
award or deny attorney fees in any terms that are sufficiently clear to permit
meaningful appellate review").
As we explain below, some of the
findings that underlie the trial court's decision to deny tenants attorney fees
are not legally permissible.  Because it is necessary to remand this case to
the trial court, we discuss all the trial court's findings to aid its task on
remand.  We do not discuss the trial court's findings in numerical order. 
Rather, we have grouped the findings that discuss similar or related factors. 
We begin with the trial court's second and eighth findings.
The trial court's second finding
states that "[b]oth parties presented minor meritorious claims and significant
non-meritorious claims."(5) 
(Emphasis added.)   The trial court's eighth finding touches on the same point
and sheds further light on the trial court's thinking.  That finding states:
"The outcome sought, the outcome obtained, and the
amount of fees sought in this case are all highly disproportional.  * * * In
their answer, [tenants] sought a total of $10,308.50 in relief.  [Tenants]
obtained relief in the amount of $1,396.00.  [Tenants] now seek attorney fees
in the amount of $40,424.42."
As we understand the trial court's second and eighth
findings, they reflect its conclusion that a fee award is inappropriate in this
case because the amount of attorney fees that tenants sought was
disproportionate to the amount that they recovered on the two claims on which
they prevailed.
The trial court's second and eighth
findings are difficult to square with the legislature's decision to authorize a
fee award in landlord-tenant actions.  Authorizing an award of attorney fees to
the prevailing party in landlord-tenant actions removes a barrier -- the cost
of hiring an attorney -- that otherwise might discourage injured parties from
bringing small but legitimate claims.  As this court has explained in
considering statutes similar to ORS 90.255, "[t]he obvious purpose of th[os]e
statute[s] is to encourage settlement of damage claims where the amount
involved is not large."  Heen v. Kaufman, 258 Or 6, 8, 480 P2d 701
(1971) (describing purpose of ORS 20.080(1)); see also Lamy v. Jack Jarvis
& Company, Inc., 281 Or 307, 313, 574 P2d 1107 (1978) (noting that the
purpose of attorney fee provision in ORS 652.200 for unpaid wages is to
"assur[e] that one who works in a master an servant relations, usually
with a disparity of economic power * * * shall be assured of prompt
payment.").  In the absence of such statutes, an "injured person
might forego action upon a small claim because he realize[s] that, after paying
his attorney, his net recovery would not be worth the time and trouble of a
vexatious law suit."  State Scholarship Com. v. Magar, 288 Or 635,
639, 607 P2d 167 (1980) (quoting Colby v. Larson, 208 Or 121, 126, 297
P2d 1073 (1956)) (describing ORS 20.080(1)).
The legislature authorized trial
courts to award prevailing parties attorney fees in landlord-tenant actions to
encourage litigants to vindicate their statutory rights, even though the amount
recovered may be minor.  It follows that the fact that tenants recovered less
than they sought on their two fee-generating claims provides no basis to deny
them attorney fees on those claims.  The principle that underlies the trial
court's second and eighth findings does not correspond with any of the seven
enumerated factors listed in ORS 20.075(1)(a) to (g).  Although ORS
20.075(1)(h) authorizes courts to consider other, nonenumerated factors, the
proposition on which the trial court based its second and eighth findings is
contrary to the legislature's decision to authorize a fee award in the first
place.(6)
The trial court's third and fourth
findings address a different issue.  The third finding states that
"[g]ranting an award of attorney fees to [tenants] would merely encourage
non-meritorious claims in similar cases."  The logic of that finding is at
odds with ORS 90.255.  Under ORS 90.255, a court may award attorney fees to
tenants only on those fee-eligible claims on which tenants prevailed.  By
definition, awarding a party fees on claims on which it prevailed does not
encourage nonmeritorious claims; it encourages meritorious claims.  The trial
court's third finding does not track any of the enumerated statutory factors
set out in ORS 20.075(1)(a) to (g).(7) 
Although ORS 20.075(1)(h) authorizes courts to consider additional,
nonenumerated factors in deciding whether to award fees, that paragraph does
not permit courts to base their fee decisions on incorrect legal premises.
The trial court's fourth finding
states that "[a]n award of attorney fees in this case would not deter
others from bringing meritless claims in the future."  The court did not
explain the basis for its statement, which makes the finding problematic.  We
note that ordinarily, when a party successfully defends against a
fee-generating claim and the claim is meritless, awarding that party (the
prevailing party on that claim) attorney fees serves to deter meritless claims
in the future.(8) 
In any event, the trial court's fourth finding does not apply to tenants' fee
claims.  Rather, by its terms, that finding applies only to a party who
successfully defends against a fee-generating claim -- something that tenants
did not do in this case.  It thus appears that the trial court erred in two
respects.  It denied tenants fees based on a finding that, by its terms, does
not apply to tenants' fee claims, and the logic of its finding is problematic,
at least without some further explanation.
Each of the trial court's remaining
four findings addresses separate issues, and we discuss each in turn.  The
trial court's first finding states that "[b]oth parties engaged in conduct
that both caused and complicated the dispute and prolonged the
litigation."  That finding appears to be based on two statutory factors --
ORS 20.075(1)(a), which directs courts to consider the nature of the conduct
that gave rise to the litigation, and ORS 20.075(1)(e), which directs courts to
consider the objective reasonableness of the parties' conduct during the
litigation.
Regarding the first statutory factor,
ORS 20.075(1)(a) directs courts to consider 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."  That factor focuses on the nature of the conduct that gave rise
to the litigation.  For example, if a party's conduct that gave rise to the
litigation was "reckless, willful, malicious, in bad faith or
illegal" and if the opposing party prevails on a fee-generating claim,
then the nature of the losing party's conduct cuts in favor of awarding fees to
the prevailing party.
In this case, the trial court found
that "[b]oth parties engaged in conduct that * * * caused * * * the
litigation."  That finding adds little to the analysis that ORS 20.075(1)(a)
contemplates.  That finding does not address whether tenants' conduct was
sufficiently blameworthy that it is appropriate to deny them fees entirely on
the claims on which they prevailed or whether landlord's conduct was
sufficiently reasonable that it is appropriate to reach the same result.  It
may be that the trial court concluded that both parties' conduct that gave rise
to the litigation was sufficiently egregious that neither party should recover
fees.  However, the trial court did not say that.  We need not decide whether
that omission would be sufficient to require us to vacate and remand the trial
court's fee award if that were the only problem with the trial court's ruling. 
The problems with the findings discussed above require a remand, and we note
that omission so that the trial court can clarify its intent on remand.
The second part of the trial court's
first finding states that "[b]oth parties engaged in conduct that * * *
complicated the dispute and prolonged the litigation."  
ORS 20.075(1)(e) directs courts to consider "[t]he
objective reasonableness of the parties and the diligence of the parties and
their attorneys during the proceedings."  As we understand the second part
of the trial court's first finding, the trial court concluded that tenants'
lack of objective reasonableness and diligence in conducting this litigation
cuts against a fee award, even on the two fee-generating claims on which they
prevailed.  That finding is consistent with ORS 20.075(1)(e).
The trial court's sixth finding
states that, because it had declined to award either party an enhanced
prevailing party fee, "this category does not impact the Court's attorney
fee ruling."  ORS 20.075(1)(g) directs a court to consider the amount of
any prevailing party fee that it has awarded, including an award of an enhanced
prevailing party fee, in deciding whether to also award attorney fees. 
Implicit in that factor is the proposition that the amount of an enhanced
prevailing party fee, which can be as much as $5,000, may obviate the need to
award the prevailing party attorney fees.  A related subsection reinforces that
point.  ORS 20.190(3) lists eight factors that a trial court shall consider in
deciding whether to award an enhanced prevailing party fee.  Those factors
mirror the factors set out in ORS 20.075(1).  ORS 20.190(3)(g), for example,
directs courts to consider any award of attorney fees to the prevailing party
in deciding whether to also award an enhanced prevailing party fee.
As we understand ORS 20.075(1)(g) and
ORS 20.190(3)(g), courts should consider whether awarding a prevailing party
both its attorney fees and an enhanced prevailing party fee would
overcompensate that party.  Conversely, the decision not to award enhanced
prevailing party fees either is neutral or leaves open the possibility of an
award of attorney fees under ORS 20.075(1).  In this case, the trial court
regarded the absence of an enhanced prevailing party fee as neutral, and we
cannot say that it erred in doing so.
The trial court's fifth finding
states that "[i]nadequate settlement offers were made by both
parties."  That finding is based on ORS 20.075(1)(f), which directs courts
to consider "[t]he objective reasonableness of the parties and the
diligence of the parties in pursuing settlement of the dispute."  It is
not easy to discern the trial court's reasoning from its finding.  The fact
that a party offers a low amount to settle a case does not necessarily mean
that the party's settlement negotiations were not objectively reasonable or
diligent.  Much depends on the context in which the negotiations took place,
and merely describing the offers as "inadequate" does not shed much
light on the factual context that persuaded the trial court that, in this case,
tenants' strategy during settlement cuts against a fee award.  On remand,
further explanation would facilitate meaningful appellate review of the trial
court's decision.
The trial court's seventh finding
states:  "As the Stocker court indicated, a prevailing party is
ordinarily entitled to attorney fees in [a] RLTA case.  The Court has
considered this factor."  To understand the trial court's seventh finding,
it is necessary to describe briefly the Court of Appeals decision in Stocker. 
In that case, the Court of Appeals attempted to reconcile this court's decision
in Juckett with ORS 20.075(1).  Stocker, 178 Or App at 551-52.  
Relying on Preble v. Dept. of Rev., 331 Or 599, 19 P3d 335 (2001), the
Court of Appeals held that ORS 20.075(1) superseded the "rule" from Juckett
that, under ORS 90.255, a prevailing party is entitled to recover its attorney
fees except in unusual circumstances.  Stocker, 178 Or at 551-52. 
According to the Court of Appeals, the rule from Juckett no longer
supplies the governing principle in awarding fees under ORS 90.255; rather, it
"is merely an additional consideration that the court must take into
account under ORS 20.075(1)(h)."  Id. at 552.  In its seventh
finding, the trial court followed the Court of Appeals decision in Stocker
and considered the rule from Juckett.
As explained earlier in this opinion,
we do not read Juckett as broadly as the Court of Appeals did in Stocker. 
Juckett recognizes that a court has discretion to award fees to the
prevailing party under ORS 90.255, and the subsequent enactment of ORS
20.075(1) confirms that the terms on which a court may exercise its discretion
to deny fees under ORS 90.255 are not limited to unusual circumstances.  We
also disagree with the Court of Appeals that the reasoning in Juckett is
something that a trial court "must take into account" under ORS
20.075(1)(h).  See Stocker, 178 Or App at 552.  Rather,
subsection (1)(h) requires consideration only of "[s]uch other factors as
the court may consider appropriate under the circumstances of the
case."  (Emphasis added.)  By its terms, subsection (1)(h) is permissive,
not mandatory.  Cf. Preble, 331 Or at 604 (in reviewing an attorney fee
petition, this court exercised its discretion to consider a factor, articulated
in an earlier case, that mirrored some of the statutorily enumerated factors).
That said, we think that two
statutory factors bear on a related issue.  As explained above, the purpose of
ORS 90.255 is to encourage litigants in landlord-tenant disputes to vindicate
their statutory rights.  That purpose can factor into the analysis when a court
is deciding whether to award fees to a party who has brought and prevailed on
an objectively reasonable claim.  See ORS 20.075(1)(b) (directing courts
to consider that factor).  Similarly, that purpose can factor into the analysis
when deciding whether an award of attorney fees in this case will deter others
from asserting meritless defenses to such claims.  See ORS 20.075(1)(d)
(directing courts to consider that factor).  As with all the statutory factors,
none is necessarily dispositive, but all must be considered.
Having reviewed the trial court's
eight findings that underlie its fee decision, we conclude that four of those
factors (the second, third, fourth, and eighth factors) are not legally permissible. 
Because we cannot say that the trial court would have reached the same
conclusion if it had not considered these factors, we reverse the trial court's
supplemental judgment and remand for further proceedings.  Our holding does not
preclude the trial court from reaching the same conclusion on remand.  If,
however, the trial court reaches the same conclusion, it must do so after
considering all the required factors and it must base its decision on terms
that are legally permissible under ORS 20.075.
The decision of the Court of Appeals
is reversed.  The supplemental judgment of the circuit court is reversed, and
the case is remanded to the circuit court for further proceedings.
1. In its order, the trial court stated that each party was entitled to a
prevailing party fee.  The supplemental judgment, however, did not award either
party any costs, fees, or disbursements.  The Court of Appeals concluded that
the supplemental judgment superseded the order, Barbara Parmenter Living Trust,
212 Or App at 672, and tenants have not challenged that conclusion on review.
2. If landlord had cross-appealed and argued that it was entitled to
fees or costs as a prevailing party, then the question whether the trial court
erred in designating landlord as a prevailing party would present a live
issue.  Landlord, however, did not cross-appeal from the supplemental judgment.
3. ORS 20.075(1) provides:
"A court shall consider the following
factors in determining whether to award attorney fees in any case in which an
award of attorney fees is 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 pursuing 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."
4. ORS
90.255 provides that the prevailing party may recover attorney fees "[i]n
any action on a rental agreement or arising under this chapter." 
Landlord's claim on the rental agreement falls within that statute, and the
three counterclaims listed above arise under ORS chapter 90.  See ORS
90.322 (unlawful entry of premises); ORS 90.375 (unlawful ouster); ORS 90.425
(unlawful disposition of personal property).
5. We note as an initial matter that, under ORS 90.255, tenants may
receive fees only on those fee-generating claims on which they prevailed.  In
light of that fact, it is difficult to see why the relative size of their
meritorious and nonmeritorious claims matters. 
6. On remand, if the trial court decides to award tenants fees on the
two fee-generating claims on which they prevailed and if it finds that tenants'
lawyers expended an unreasonable amount of time on those claims, then the court
may always reduce any fee award to reflect that finding.  However, the fact
that the amount of the claims on which tenants prevailed was "minor"
provides no basis for denying fees entirely.
7. ORS 20.075(1)(d) directs courts to consider "[t]he extent to
which an award of an attorney fee in the case would deter others from asserting
meritless claims and defenses."  In this case, the trial court substituted
the word "encourage" for "deter" and did so without
recognizing that, under ORS 90.255, fees may be awarded only to a prevailing
party.
8. This court has explained, in a related context, that a claim is
"meritless when it is entirely devoid of legal or factual support."  Mattiza
v. Foster, 311 Or 1, 8, 803 P2d 723 (1990) (footnote omitted).