Opinion ID: 1131632
Heading Depth: 1
Heading Rank: 6

Heading: Meritlessness

Text: Both the federal courts and our Court of Appeals have required a finding of meritlessness as a prerequisite to a finding of bad faith. For example, in Portland Development Comm. v. CH2M Hill Northwest, 92 Or.App. 43, 758 P.2d 353, rev. den. 307 Or. 77, 763 P.2d 731 (1988), the Court of Appeals relied on federal cases decided subsequent to Alyeska but prior to enactment of ORS 20.105 to determine the meaning of bad faith. The court, citing Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir.1977), stated that a finding of `bad faith' requires clear evidence that a claim has been made entirely without any basis in fact or law. 92 Or.App. at 48, 758 P.2d 353. After determining that the plaintiff had legal and factual reasons for filing and continuing the proceeding, the court reversed the trial court's award of attorney fees. Other Court of Appeals' opinions have used similar language. In Brown v. Infotec Development, Inc., 88 Or.App. 37, 39, 744 P.2d 268 (1987), the Court of Appeals, without analysis, found that the plaintiff had brought this appeal knowing that it has no basis in law or in fact. We find that he has acted in bad faith and that defendant is entitled to its attorney fees [under ORS 20.105]. See also Tyler v. Hartford Insurance Group, 98 Or.App. 601, 605, 780 P.2d 755, rev. den. 308 Or. 660, 784 P.2d 1102 (1989) (Plaintiff brought this appeal despite having every reason to know and to understand that it has no basis in law or in fact.); Nortman v. City of Portland, 93 Or.App. 197, 198, 761 P.2d 8, rev. den. 307 Or. 182, 765 P.2d 814 (1988) (Warren, J., dissenting) ([N]o reasonable practitioner could honestly believe that plaintiff could obtain a reversal. I would therefore find that plaintiff's appeal was brought in bad faith.). We agree that meritlessness is a necessary precursor to a finding of bad faith. Further, we 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 [10] support at the time it was made. [11] Cf. Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir 1986) ([T]he subjective intent of the pleader or movant to file a meritorious document is of no moment.). A failure to prevail does not, alone, render a party's position meritless or even suggest that it is. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 700, 54 L.Ed.2d 648 (1978) ([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.). To summarize, after determining that the party seeking attorney fees has prevailed, the next inquiry under ORS 20.105(1) is whether the other party's claim, defense, or ground for appeal or review was meritless. A meritless position is one that the court determines is entirely devoid of factual or legal support. The Court of Appeals' decisions cited above are correct in that they require a finding of meritlessness, but to the extent they emphasize a party's perception of the merit of the position, that emphasis is relevant only to the party's improper purpose, discussed below. Moreover, the Court of Appeals' decisions improperly equate a lack of legal or factual merit with an ultimate finding of bad faith. A meritless claim is a prerequisite to, but rarely the equivalent of, circumstances necessary to a finding of bad faith under ORS 20.105(1).