Title: McCarthy v. Oregon Freeze Dry, Inc.
Citation: N/A
Docket Number: S46603
State: Oregon
Issuer: Oregon Supreme Court
Date: May 9, 2002

FILED: MAY 9, 2002
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 S46603)
	On review from the Court of Appeals.*
	Argued and submitted September 11, 2000.
	William G. Wheatley, Jaqua &amp; Wheatley, P.C., Eugene, argued
the cause for petitioner on review.  With him on the briefs was
Nickolas Facaros, Facaros Dugan Rosas, Eugene.
	William F. Gary, Harrang Long Gary Rudnick, P.C., Eugene,
argued the cause and filed the brief for respondent on review. 
With him on the briefs were Judith Giers, Karla Alderman, and
Brendan C. Dunn, Eugene.
	Before Carson, Chief Justice, and Gillette, Durham, Leeson,
and Riggs, Justices.**
	DURHAM, J.
	The order of the Court of Appeals is reversed.
	*Appeal from Linn County Circuit Court, Daniel R. Murphy, Judge. 158 Or App 654, 976 P2d 566 (1999).
	**Van Hoomissen, J., retired December 31, 2000, and did not
participate in the decision of this case.  Kulongoski, J.,
resigned June 14, 2001, and did not participate in the decision
of this case.  De Muniz and Balmer, JJ., did not participate in
the consideration or decision of this case.
	DURHAM, J.
	The issue on review in this case is whether the Court
of Appeals erred in awarding attorney fees on appeal to
defendant.  The Court of Appeals awarded attorney fees, because
that court determined that plaintiff's arguments on appeal were
frivolous, unreasonable, or without foundation.  We disagree with
that determination and reverse the order.
	Plaintiff brought an action against defendant for,
among other things, an unlawful employment practice.  Plaintiff
alleged that defendant had discriminated against plaintiff for
filing a claim for workers' compensation.  Under the applicable
statute, the prevailing party in such an action was entitled to
recover attorney fees at trial and on appeal.  Former ORS
659.121(1) (1995), repealed by Or Laws 2001, ch 621, § 90, (1)
provided in part: 
		"In any suit brought under this subsection, the
court may allow the prevailing party costs and
reasonable attorney fees at trial and on appeal."
	Before trial, plaintiff filed a notice of voluntary
dismissal under ORCP 54 A(1), (2) and the trial court entered a
judgment of dismissal.  Plaintiff later filed a motion under ORS
12.220 and ORCP 71 B(1) (3) to set aside the dismissal and reinstate
the action.  Plaintiff also filed an amended complaint that
restated the claim for an unlawful employment practice.  The
trial court denied the motion.  The court concluded that the
judgment of dismissal had resulted from a mistake by plaintiff's
lawyer, but that the mistake was not excusable. 
	Plaintiff appealed from the trial court's order
refusing to set aside the judgment of dismissal.  The Court of
Appeals affirmed, and this court denied review.  McCarthy v.
Oregon Freeze Dry, Inc., 142 Or App 595, 922 P2d 729, rev den 324
Or 322, 972 P2d 598 (1996).
	Defendant then petitioned the Court of Appeals for
attorney fees on appeal, arguing that defendant was the
prevailing party and that plaintiff's appeal was frivolous.  The
Court of Appeals awarded attorney fees to defendant, in the sum
of $12,000, and plaintiff petitioned for review.  This court
vacated the award and remanded the matter to the Court of Appeals
for an explanation of the facts and legal criteria that justified
the award.  McCarthy v. Oregon Freeze Dry, Inc., 327 Or 84, 957
P2d 1200, on recons 327 Or 185, 957 P2d 1207 (1998).
	On remand, the Court of Appeals noted that it had
discretion to award attorney fees on appeal under former ORS
659.121(1) (1995).  McCarthy v. Oregon Freeze Dry, Inc., 158 Or
App 654, 657, 976 P2d 566 (1999).  The court explained that it
would exercise that discretion in accordance with the rule
acknowledged in the line of cases culminating with Schlumberger
Technologies, Inc. v. Tri-Met, 145 Or App 12, 21 n 9, 929 P2d 331
(1996), modified on other grounds 149 Or App 316, 942 P2d 862
(1997), and it rejected "defendant's invitation to nullify that
line of cases.  McCarthy, 158 Or App at 656-57.  However, the
Court of Appeals accepted 
		"defendant's contention that plaintiff's arguments
in favor of the motion to set aside were frivolous,
unreasonable, or without foundation. * * *
		"* * * Beginning in Dobie v. Liberty Homes, 53 Or
App 366, 632 P2d 449 (1981), we have held that the
court may award a defendant attorney fees under [former
ORS 659.121(1)] only when the 'plaintiff's claim was
frivolous, unreasonable, or without foundation.'  Id.
at 373-74 (relying on Christianburg Garment Co. v.
EEOC, 434 US 412, 98 S Ct 694, 54 L Ed 2d 648 (1978)). 
See also Schlumberger Technologies, 145 Or App at 21 n
9; Robinson v. School District No. 1, 92 Or App 627,
632, 759 P2d 1116 (1988); Payne v. American-Strevell,
Inc., 65 Or App 265, 268, 670 P2d 1065 (1983)."
McCarthy, 158 Or App at 657.  The Court of Appeals concluded
that, like plaintiff's argument in the trial court,
	"plaintiff's argument on appeal that the trial court
abused its discretion in denying that motion [to set
aside the judgment of dismissal under ORCP 71 B] was
frivolous, unreasonable, or without foundation, because
it, too, lacked any legal basis."
Id. at 658-59.
	The Court of Appeals explained why plaintiff's argument
on appeal "lacked any legal basis" as follows:
		"The decision to set aside or not set aside a
judgment based on mistake, inadvertence, surprise, or
excusable neglect is committed to the sound discretion
of the trial court, but that discretion is controlled
by certain fixed legal principles.  Financial Indemnity
v. Howser, 38 Or App 369, 371-72, 590 P2d 276 (1979). 
For at least a century, the general rule has been that
the professional mistakes, negligence, or inadvertence
of an attorney do not constitute the 'mistakes,
inadvertence, surprise, or inexcusable [sic] neglect'
necessary to set aside a judgment.  Longyear, Admx. v.
Edwards, 217 Or 314, 319-20, 342 P2d 762 (1959)
(failure of attorneys to file an appearance); Carlson
v. Bankers Discount Corp. et al, 107 Or 686, 695, 215 P
986 (1923) (failure of attorney to file an answer);
Hicklin v. McClear, 19 Or 508, 510-11, 24 P 992 (1890)
(failure of attorneys to inform themselves of content
of deed); O. R. &amp; N. Co. v. Gates et al, 10 Or 514, 518
(1883) (party seeking to set aside a judgment for
mistake in failing to raise a particular legal argument
must show that his or her failure to make that argument
is not due to his or her own negligence or want of
diligence)."
McCarthy, 158 Or App at 658 (emphasis in original).
	On review, plaintiff argues that the Court of Appeals
misapplied the Schlumberger rule.  Plaintiff contends that, under
the Schlumberger rule, a defendant is entitled to an award of
attorney fees only if the court concludes that the plaintiff's
claim, i.e., the claim of discrimination, is frivolous,
unreasonable, or without foundation.  Plaintiff draws our
attention to the repeated references to the plaintiff's "claim"
in Schlumberger, and other related cases, as the proper focus of
the attorney fees inquiry in this context. (4)  According to
plaintiff, the Court of Appeals evaded the Schlumberger rule by
focusing on the relative merits of plaintiff's argument on appeal
regarding the trial court's refusal to set aside the judgment of
dismissal and failed to inquire, let alone decide, whether
defendant's petition for attorney fees demonstrated that
plaintiff's claim of discrimination was frivolous, unreasonable,
or without foundation. 
	Former ORS 659.121(1) (1995), quoted above, is the
source of the Court of Appeals' authority to award attorney fees
on appeal in this case.  The word "may" in that statute signifies
that the legislature has granted discretion to that court to
award attorney fees on appeal, including to a prevailing
defendant.  The Court of Appeals has made it clear that the
standard expressed in Schlumberger describes the manner in which
that court will exercise its discretion in this context. 
McCarthy, 158 Or App at 657.
	The source of the Schlumberger "frivolous,
unreasonable, or without foundation" standard is the United
States Supreme Court decision in Christiansburg Garment Co.  In
Christiansburg, the Equal Employment Opportunity Commission
(EEOC), acting in its own name, filed a claim against
Christiansburg Garment Co., contending that the company had
discriminated against an employee, Rosa Helm, on the basis of her
race.  The district court dismissed the action, concluding that
the pertinent amended federal statute authorized the EEOC to sue
in its own name to prosecute only those charges "pending" with
the EEOC on the effective date of the statutory amendment, and
Helm's charge was not pending with the EEOC when the EEOC filed
its action.  The district court granted summary judgment to the
employer, but declined to award prevailing party attorney fees,
reasoning that the EEOC's action in bringing the lawsuit was not
unreasonable or meritless.  434 US at 414-15.
	On appeal, the parties made almost diametrically
opposing arguments.  The employer argued that the statute
required the court to award attorney fees to a prevailing
defendant unless special circumstances would render such an award
unjust.  The EEOC argued that the court should award attorney
fees only if the court found that the EEOC had brought the action
in bad faith.  Id. at 417-18.
	The Supreme Court rejected both of those positions. 
Instead, the Court adopted an intermediate standard that granted
discretion to the trial court to award attorney fees to a
prevailing defendant if the plaintiff's action was frivolous,
unreasonable, or without foundation, even if it was not filed in
bad faith.  Id. at 421.  The Court emphasized that, in applying
those criteria, the trial court should not conclude, from the
fact that the plaintiff did not prevail, that the plaintiff had
filed or continued the litigation frivolously, unreasonably, or
without foundation.  Id. at 421-22.  The Court acknowledged that
a party might have a reasonable basis for bringing an action,
even if the law or the facts appear questionable or unfavorable
at the outset.  Id. at 422.  Finally, the Court recognized that
decisive facts may emerge, or the law may change or clarify,
during discovery or trial, and that those considerations would
guide the trial court in determining whether the plaintiff's
litigation either was frivolous from the outset or became
frivolous at a later time:  
		"Hence, a plaintiff should not be assessed his
opponent's attorney's fees unless a court finds that
his claim was frivolous, unreasonable, or groundless,
or that the plaintiff continued to litigate after it
clearly became so."
434 US at 421.  The standard for awarding attorney fees to a
prevailing defendant that the Court of Appeals applied in
Schlumberger is indistinguishable in substance from the
Christiansburg standard.  
	This court, citing Christiansburg, has used the word
"meritless" to describe a plaintiff's legal position that
warrants an award of attorney fees to a defendant under another
discretionary attorney fee statute, former ORS 20.105(1) (1989),
amended by Or Laws 1995, ch 618, § 2.  In Mattiza v. Foster, 311
Or 1, 8, 803 P2d 723 (1990), this court stated:
	"[W]e conclude that, for purposes of ORS 20.105(1), a
claim, defense, or ground for appeal or review is
meritless when it is entirely devoid of legal or
factual [footnote 10] support at the time it was made
[footnote 11].  [Citation omitted.]  A failure to
prevail does not, alone, render a party's position
meritless or even suggest that it is.  See
Christianburg, [434 US at 421] * * * ('[T]he term
"meritless" is to be understood as meaning groundless
or without foundation, rather than simply that the
plaintiff has ultimately lost his case.')."
Id.  Footnote 10 in Mattiza provides:
		"The definition of meritlessness is purposely
stated in the disjunctive.  Because there often may be
no clear distinction between factual and legal support,
we use the disjunctive to mean that a position is
meritless if it is not supported by the law as applied
to the facts.  For example, an airtight legal theory
combined with no support on the facts of the case at
hand indicates a meritless position."
Id. at 8 n 10 (emphasis in original).  Footnote 11 provides:
		"A claim that acknowledges the clearly contrary
state of current law, but which argues for a change,
may be 'meritless.'  However, as discussed in the text
below, unless this type of claim is made with an
improper purpose, a court could not award attorney fees
under ORS 20.105(1) to a party against whom that claim
was made.  Thus, there is no 'chilling effect' on a
good faith argument for a change in the law."
Id. at 8 n 11.  Like Christiansburg, Mattiza supports the view
that a plaintiff's legal position, although reasonable at the
commencement of a case, might become meritless if the plaintiff
continues to litigate, including on appeal, after it is clear
that the plaintiff's legal position no longer has any arguable
support in the law as applied to the facts.  The concept of
"meritlessness," as discussed in Mattiza, leaves ample room for
pursuit of reasonable arguments about the facts and the law as
applied to the facts, including reasonable arguments for a change
in the law.
	Returning to plaintiff's argument, we think that the
authorities cited above demonstrate that plaintiff reads too
narrowly the references to the term "claim" in the pertinent case
law.  The source of that standard, Christiansburg, explained that
a claim of discrimination that appears to be meritorious at the
outset might become meritless when adverse and decisive facts
emerge during litigation.  Christiansburg said nothing that
limits the inquiry regarding meritlessness to only the merits of
the claim of discrimination.  To the contrary, the circumstances
present in Christiansburg demonstrate that either procedural or
substantive developments during litigation may render meritless a
claim that previously appeared to be valid.  For example, the
employer's successful defense in Christiansburg concerned the
procedural question of the EEOC's statutory authority to sue in
its own name, not a substantive attack of the factual accuracy of
the claim of discrimination.  Christiansburg, 434 US at 414.  If
the Court had intended to confine the issue of meritlessness to
the factual merits of the underlying claim, as plaintiff
contends, it would have said so.  It did not.
	Mattiza is to the same effect.  Mattiza observed that a
claim, defense, or ground for appeal or review is meritless when
it is entirely devoid of legal or factual support when it was
made.  Mattiza, 311 Or at 8.  The court explained that
disjunctive definition at footnote 10, quoted above, and
emphasized that "there often may be no clear distinction between
factual and legal support * * *."  Mattiza, 311 Or at 8 n 10. 
Nothing in that analysis of the concept of meritlessness confines
the court's inquiry to the factual merits of the underlying claim
of discrimination.  Thus, a purely procedural defense, such as
the assertion that the claim was filed untimely under the
applicable statute of limitations, is sufficient to establish not
only that the plaintiff cannot prevail, but also to establish,
upon an adequate showing, that the claim, when it was made, was
devoid of support in the law as applied to the facts -- i.e., it
was meritless.
	The foregoing discussion leads us to conclude that the
Court of Appeals invoked the correct standard for deciding
whether plaintiff's position on appeal was meritless.  That
standard did not confine the court's analysis to the factual
merits of plaintiff's claim of discrimination.  We next address
plaintiff's argument that his ground for appeal was not devoid of
legal or factual support when it was made and, thus, that it was
not meritless.
	The Court of Appeals concluded that plaintiff's
argument on appeal was frivolous, unreasonable, or without
foundation because it "lacked any legal basis."  McCarthy, 158 Or
App at 659.  The Court of Appeals' opinion, when read in context,
demonstrates that, in the court's view, an argument that lacks
any legal basis is something more than an argument that is simply
erroneous. 
	The terms "frivolous," "unreasonable," and "without
foundation" are disjunctive standards, not synonyms, and might
apply differently in different contexts.  They are, however,
familiar legal concepts, and, in the context of an award of
attorney fees against a plaintiff for pursuing an appeal, they
establish a common requirement.  A court correctly characterizes
a party's appeal as frivolous, unreasonable, or without
foundation when a reasonable lawyer would know that each of the
arguments on appeal is not well grounded in fact or is not
warranted either by existing law or by a reasonable argument for
the extension, modification, or reversal of existing law.  See
Westfall v. Rust International, 314 Or 553, 559, 840 P2d 700
(1992) (stating and applying that standard under former ORS
656.390, which authorized sanctions for pursuit of frivolous
appeal).  Therefore, the issue before the court is whether every
argument made in support of plaintiff's appeal was not well
founded in fact or was not warranted either by existing law or by
a reasonable argument for the extension, modification, or
reversal of existing law.
	After plaintiff filed this action, plaintiff's counsel
advised plaintiff that ORS 12.220 entitled him to dismiss the
action and to refile it within one year of the dismissal. 
Plaintiff's counsel apparently believed that the expiration of
the applicable one-year period of limitations, former ORS
659.121(3) (1995), would not pose a problem if plaintiff, relying
on ORS 12.220, refiled the action within one year after
dismissal.  Plaintiff's counsel relied on the following passage
in Tikka v. Martin, 271 Or 287, 292, 532 P2d 18 (1975), in giving
that advice: 	
		"We think ORS 12.220 does not help plaintiffs.  As
this court held in White v. Pacific Tel. &amp; Tel. Co.,
168 Or 371, 123 P2d 193 (1942), and Wolfe Investments
v. Shroyer, 249 Or 23, 436 P2d 554 (1968), that statute
'gives additional limited time where an action is
dismissed that has not been heard on its merits and its
statutory limitation has expired after the initial
filing.'  249 Or at 25.  ORS 12.220 does not apply to
an action which has been dismissed after a trial upon
the merits.  We quote from White v. Pacific Tel. &amp; Tel.
Co., supra, as follows:
			"'That section [ORS 12.220] applies only when
an action has been commenced within the time
prescribed by the statute and has been dismissed
without a trial upon the merits, such as in a case
when judgment of nonsuit is given, or when an
action is dismissed for want of prosecution or for
want of jurisdiction, and the like, and it has no
application to a judgment entered after a trial
upon the merits.'"  
(Emphasis added.)  Relying on his lawyer's advice, plaintiff
voluntarily dismissed the action, and the court entered a
judgment of dismissal. 
	Later, plaintiff's counsel discovered other authority
that cast doubt on his earlier reliance on ORS 12.220 and Tikka. 
For example, this court held in Vandermeer v. Pacific Northwest
Dev. Corp., 284 Or 517, 587 P2d 98 (1978), and Haworth v.
Ruckman, 249 Or 28, 436 P2d 733 (1968), that a voluntary nonsuit
granted before the commencement of trial is not a "dismissal"
within the meaning of ORS 12.220 and does not save the underlying
claim from the possible expiration of the pertinent statute of
limitations.  Plaintiff filed a motion under ORCP 71 B(1) to set
aside the judgment of dismissal and to reinstate the action.  The
motion asserted that the judgment of dismissal had resulted from
mistake, inadvertence, surprise, or excusable neglect.
	Before the trial court, plaintiff's counsel argued that
his reliance on the reference to "nonsuit" in White, which Tikka
had quoted, was reasonable and that that passage, and other legal
authorities, led him to believe that, under ORS 12.220, plaintiff
could dismiss the action voluntarily and commence it again within
one year.  Defendant contended that the facts stated in the
motion amounted to only inexcusable mistake or neglect, that
Oregon law was clear that plaintiff could not rely on ORS 12.220
to justify a voluntary dismissal and refiling of the complaint,
and that the authorities on which plaintiff's counsel relied
reflected incomplete legal research. 
	The trial court denied plaintiff's motion to set aside
the judgment and, in a letter opinion, explained the ruling:
		"[T]he plaintiff filed a motion to set aside the
Judgment of Dismissal and allow the filing of an
amended complaint.  The court finds that the judgment
resulted from a mistake; it was not excusable; and the
motion to set aside was filed in reasonable time.  The
mistake was not excusable because it bore on an issue
of terminal importance to the case and could have been
avoided by merely shepardizing the case relied upon by
counsel in dismissing the case.  Shepardizing a case of
great significance does not constitute such a burden in
time or expense as to be unreasonable in these
circumstances."
(Emphasis added.)
	Plaintiff appealed, arguing that the trial court abused
its discretion in declining to set aside the judgment of
dismissal.  Among other arguments, (5) plaintiff asserted that, even
if plaintiff's counsel committed a legal error in concluding that
ORS 12.220 entitled plaintiff to refile a dismissed action,
certain Oregon case law entitled a party to relief from a
judgment of dismissal for a legal error.  Additionally, plaintiff
argued that plaintiff was free of negligence and not culpable for
any legal error committed by his attorney, and that certain
Oregon case law entitled an innocent party in plaintiff's
position to seek relief from a judgment of dismissal.
	We acknowledge at the outset that this case does not
require the court to decide whether those arguments legally are
correct.  Instead, we must determine only whether a lawyer acts
reasonably in presenting them on appeal.
	The Court of Appeals based its decision on a "general
rule" that we set out again for ease of reference:
		"For at least a century, the general rule has been
that the professional mistakes, negligence, or
inadvertence of an attorney do not constitute the
'mistakes, inadvertence, surprise, or inexcusable
neglect' necessary to set aside a judgment."
McCarthy, 158 Or App at 658.  The court cited four cases in
support of that statement:  Longyear, Admx. v. Edwards, 217 Or
314, 319-20, 342 P2d 762 (1959); Carlson v. Bankers Discount
Corp. et al, 107 Or 686, 695, 215 P 986 (1923); Hicklin v.
McClear, 19 Or 508, 510-11, 24 P 992 (1890); and O.R. &amp; N. Co. v.
Gates et al, 10 Or 514, 518 (1883).
	None of those cases recites or supports the rule
announced by the Court of Appeals.  Instead, for example,
Longyear states the following:
		"'Ordinarily a party will not be relieved from a
judgment or decree taken against him through the
mistake, negligence or inadvertence of his attorney,
unless the act or omission of the attorney was such,
that had it been committed or omitted by the party
himself, he would be entitled to a vacation of the
judgment or decree: * * *.'"
217 Or at 319 (quoting Carlson, 107 Or at 695).
	Longyear and Carlson require judicial examination of
"the act or omission of [the] attorney" to determine whether it
is the kind of mistake, negligence, or inadvertence that would
require vacation of the judgment.  Carlson also requires a
separate inquiry into the client's conduct in the circumstances:
		"In order for a client to obtain relief from a
judgment or decree taken against him through the
negligence of his attorney, the client must be free
from fault and must clear himself of the imputation of
want of due diligence or of indifference to his own
rights [citation omitted]."
107 Or at 697. 
	The court in Longyear, Carlson, Hicklin, and O.R. &amp; N.
Co. conducted the required examination of the circumstances
surrounding both the underlying mistake and the client's conduct
in response.  In Longyear, Carlson, and Hicklin, the court
concluded that the facts in the record disclosed a variety of
careless acts by the lawyer or the client that attended the entry
of the adverse judgment.  Additionally, Longyear and Carlson
separately evaluated the steps that the client had taken to
rectify the problem after notice and concluded that the lawyers'
negligence, and the clients' failure to react with due diligence
after notice of the problem, together justified the trial courts'
refusal to vacate the judgments.  See Longyear, 217 Or at 320
(noting that the plaintiff did not do anything to assure that
counsel were taking action on her case for over three years,
despite fact that record of dismissal was available to the
plaintiff during that time); Carlson, 107 Or at 696-98 (noting
that the defendant repeatedly was given notice that counsel was
failing to comply with filing requirements, but the defendant
continued to rely on counsel's assertions that he had taken care
of problem).  However, in O.R. &amp; N. Co., the court, applying
similar principles, enjoined execution of a judgment on a showing
that the judgment had been based on inadvertence or mistake by
the client's agent, and the client had acted promptly to seek
relief from the judgment on receiving notice of the mistake.  See
O.R. &amp; N., 10 Or at 518 (concluding that it would be inequitable
to enforce judgment based on timber inspector's mistake).  
	Plaintiff cited several cases in which Oregon courts
have granted relief under ORCP 71 B(1) or its statutory
predecessor, former ORS 18.160, repealed by Or Laws 1981, chapter
898, section 53, for a lawyer's factual or legal errors, or a
combination of both.  In Newbern v. Gas-Ice Corporation, 263 Or
250, 501 P2d 1294 (1972), the defendant filed a motion for
judgment on the pleadings.  One of the plaintiff's lawyers
advised the court that the plaintiff did not contest the motion. 
The trial court granted the motion and entered judgment on the
pleadings.  Within a few weeks, the plaintiff's lawyer filed a
motion to set aside the judgment on the pleadings, because the
plaintiff's counsel mistakenly had believed that the motion
pertained to a different action between the same parties.  The
lawyer argued that his error amounted to mistake and
inadvertence.  The trial court granted the motion and set aside
the judgment, and, after a trial, entered judgment for the
plaintiff.  On appeal, the defendant argued that the lawyer's
error did not amount to mistake, inadvertence, surprise, or
excusable neglect of the type that ORS 18.160 contemplates and
that the trial court had abused its discretion in setting aside
the judgment on the pleadings.
	This court stated:
		"While that mistake may not have been of the usual
type of 'mistake, inadvertence, surprise or excusable
neglect' contemplated by ORS 18.160, we hold that the
trial judge could properly find that it came within the
terms of that statute."
Id. at 254.  The court concluded that the trial court had not
abused its discretion in allowing the motion to set aside the
judgment on the pleadings.  Id.  Newbern does not require relief
under ORS 18.160 in all cases involving a lawyer's professional
error, but does support plaintiff's contention that, in some
circumstances, a lawyer's professional error may justify relief
from a judgment.
	In Federal Reserve Bank of S.F. v. Weant, 113 Or 1, 231
P 134 (1924), the trial court entered a default and decree that
foreclosed a claim against certain property by the defendant,
Nelson.  Nelson requested relief from the decree, arguing that he
was under a mistaken belief that a separate proceeding in
bankruptcy had terminated his right to proceed in court.  The
trial court refused to relieve Nelson from the decree, but this
court reversed, concluding that the trial court had abused its
discretion:  
		"It seems very plain to our mind that defendant
suffered a default in this case through misapprehension
as to the law and as to his rights in the matter, and
that he made such a showing that a reasonable exercise
of the court's discretion would have caused it to open
up the decree and set aside the default which had been
entered only two or three days previously."  
113 Or at 5 (emphasis added).
	In this case, plaintiff's counsel argued that his
oversight regarding his client's legal right to refile the action
was similar to Nelson's misapprehension of law in Federal Reserve
Bank and the lawyer's mistaken representation to the court
regarding the client's legal position in Newbern.  Plaintiff's
counsel also argued that the court must take into account the
fault of the client, and not only that of the lawyer, and that
his client was free from any fault.
	In our view, the arguments that plaintiff's counsel
submitted on appeal did not lack a legal basis.  His mistake of
law was sufficiently similar to the legal error at issue in
Federal Reserve Bank, to make it reasonable to rely on that case,
in which this court concluded that the trial court's refusal to
grant relief from the default amounted to an abuse of discretion. 
Reduced to its essence, plaintiff's counsel's argument on appeal
asked the Court of Appeals to apply to this case the rationale
and result followed by this court in Federal Reserve Bank.
	In summary, plaintiff asserted a tenable position on
appeal -- whether legally correct or not -- that the trial court
had abused its discretion in declining to relieve plaintiff of
the consequences of the error of plaintiff's lawyer.  That
argument finds at least some support in this court's case law
and, therefore, was warranted by existing law or, certainly, by a
reasonable argument for the extension of existing law. 
Consequently, plaintiff's argument on appeal was not frivolous,
unreasonable, or without foundation.
	The order of the Court of Appeals is reversed.


1. 	In 2001, the legislature enacted a new provision
allowing the prevailing party in an unlawful discrimination case
to recover attorney fees.  ORS 659 A. 885 (authorizing attorney fee
award).

2. 	ORCP 54 A(1) provides:  
		"Subject to the provisions of Rule 32 D and of any
statute of this state, an action may be dismissed by
the plaintiff without order of court (a) by filing a
notice of dismissal with the court and serving such
notice on the defendant not less than five days prior
to the day of trial if no counterclaim has been
pleaded, or (b) by filing a stipulation of dismissal
signed by all adverse parties who have appeared in the
action.  Unless otherwise stated in the notice of
dismissal or stipulation, the dismissal is without
prejudice, except that a notice of dismissal operates
as an adjudication upon the merits when filed by a
plaintiff who has once dismissed in any court of the
United States or of any state an action against the
same parties on or including the same claim unless the
court directs that the dismissal shall be without
prejudice.  Upon notice of dismissal or stipulation
under this subsection, the court shall enter a judgment
of dismissal."

3. 	ORS 12.220 provides:
		"Except as otherwise provided in ORS 72.7250, if
an action is commenced within the time prescribed
therefor and the action is dismissed upon the trial
thereof, or upon appeal, after the time limited for
bringing new action, the plaintiff, or if the plaintiff
dies and any cause of action in the favor of the
plaintiff survives, the heirs or personal
representatives of the plaintiff, may commence a new
action upon such cause of action within one year after
the dismissal or reversal on appeal; however, all
defenses that would have been available against the
action, if brought within the time limited for the
bringing of the action, shall be available against the
new action when brought under this section." 
		ORCP 71 B(1) provides:
		"By motion.  On motion and upon such terms as are
just, the court may relieve a party or such party's
legal representative from a judgment for the following
reasons: (a) mistake, inadvertence, surprise, or
excusable neglect; (b) newly discovered evidence which
by due diligence could not have been discovered in time
to move for a new trial under Rule 64 F; (c) fraud,
misrepresentation, or other misconduct of an adverse
party; (d) the judgment is void; or (e) the judgment
has been satisfied, released, or discharged, or a prior
judgment upon which it is based has been reversed or
otherwise vacated, or it is no longer equitable that
the judgment should have prospective application.  A
motion for reasons (a), (b), and (c) shall be
accompanied by a pleading or motion under Rule 21 A
which contains an assertion of a claim or defense.  The
motion shall be made within a reasonable time, and for
reasons (a), (b), and (c) not more than one year after
receipt of notice by the moving party of the judgment. 
A copy of a motion filed within one year after the
entry of the judgment shall be served on all parties as
provided in Rule 9 B, and all other motions filed under
this rule shall be served as provided in Rule 7.  A
motion under this section does not affect the finality
of a judgment or suspend its operation."

4. 	The following passage from Dobie v. Liberty Homes
illustrates plaintiff's point:
		"We conclude the reasoning of the Supreme Court
regarding guidelines for awarding attorney fees is
applicable in construing the attorney fee provision of
our statute.  We hold that a prevailing defendant in an
action pursuant to ORS 659.415 is entitled to an award
of attorney fees only if the claim is brought in bad
faith, is unreasonable or groundless or if plaintiff
persists in litigating the claim after it becomes
evident the claim is unreasonable or unfounded."
53 Or App at 373-74 (emphasis added).

5. 	For example, plaintiff argued that the trial court
erred by adding a modifier, "excusable," to the term "mistake" in
ORCP 71 B(1) and that the rule uses the term "mistake" with no
modifier.