Opinion ID: 2567235
Heading Depth: 3
Heading Rank: 2

Heading: Subsection (3): Offer of Judgment

Text: ¶ 14 We now consider Pochynok's claims in regard to subsection (3) of the mechanic's lien attorney fees statute. Utah Code section 38-1-18(3) provides: A party against whom any action is brought to enforce a lien under this chapter may make an offer of judgment pursuant to Rule 68 of the Utah Rules of Civil Procedure. If the offer is not accepted and the judgment finally obtained by the offeree is not more favorable than the offer, the offeree shall pay the costs and attorneys' fees incurred by the offeror after the offer was made. Utah Code Ann. § 38-1-18(3) (2001). Pochynok argues that if it is held to be the successful party under Utah Code section 38-1-18(1), the resulting award of attorney fees against the Smedsruds should be included as part of the final judgment obtained pursuant to Utah Code section 38-1-18(3). In other words, Pochynok suggests that the determination of which party is successful under section 38-1-18(1) must be made before a court may determine under section 38-1-18(3) whether the judgment finally obtained is greater than the offer of judgment. The Smedsruds claim the opposite, arguing that an award of attorney fees under subsection (3) should be included in a determination of which party was successful for purposes of subsection (1). Subsection (3) was added to section 38-1-18 in 2001. Its operation in conjunction with subsection (1) is a matter of first impression in this court. ¶ 15 We look first to the plain language of a statute to determine its meaning. Stephens v. Bonneville Travel, 935 P.2d 518, 520 (Utah 1997). Only when there is ambiguity do we look further. Id. In addition, statutory enactments are to be so construed as to render all parts thereof relevant and meaningful, and . . . interpretations are to be avoided which render some part of a provision nonsensical or absurd. Millett v. Clark Clinic Corp., 609 P.2d 934, 936 (Utah 1980). ¶ 16 In construing section 38-1-18(3), the court of appeals held that the trial court's consideration of the refused offer of judgment in this case was appropriate in its successful party determination. Pochynok, 2003 UT App 375 at ¶ 19, 80 P.3d 563. Bypassing a consideration of the statute's plain language, the court of appeals looked to the legislative history of subsection (3), noting that it was added to the statute in 2001 in an effort to curb wrongful, outrageous, and fraudulent lien claims. Id. at ¶ 18 (citing ch. 257, 2001 Utah Laws 1202). As a result of this clear legislative policy, the court of appeals concluded that any award of attorney fees under subsection (3) should be considered in the determination of which party is successful under subsection one. Id. at ¶ 19. In further support of this conclusion, the court quoted a legislative note, stating: [T]he primary inequity in the mechanic's lien law as it currently operates is that a party can assert a claim for much more than he or she is legitimately owed forcing a defendant to litigate the claim, and yet still be entitled to attorney[] fees as the prevailing party even if the lien claimant only recovers a fraction of what was originally claimed. Id. at ¶ 18. ¶ 17 While this statement may accurately reflect the policy behind section 38-1-18 in general and subsection (3) in particular, we do not agree with the analysis of the court of appeals to the extent that it overlooks important realities regarding offers of judgment. We thus hold that the judgment finally obtained language in Utah Code section 38-1-18(3) includes an award of attorney fees to the successful party under section 38-1-18(1). In other words, if the offer of judgment explicitly includes attorney fees, [3] and turns out to be greater than the offeree's jury verdict plus any attorney fees awarded to the offeree as the successful party under section 38-1-18(1), then subsection (3) requires the offeree to pay the offeror's costs and attorney fees incurred after the offer was made. ¶ 18 The plain language and structure of the statute support this interpretation of subsection (3). Subsection (3) was added to the end of the already-existing section 38-1-18, suggesting it is an addition to, and not a starting point for, the required analysis under the statute. It also requires comparison of the offer of judgment to the judgment finally obtained. Utah Code Ann. § 38-1-18(3) (emphasis added). This formulation implies a finality that cannot be reconciled with a judgment that has yet to include the ultimate successful party determination under subsection (1). ¶ 19 We recognize, however, that the plain language of subsection (3) does not entirely eliminate ambiguity regarding the correct order of operation of subsections (1) and (3). We therefore also consider legislative history and policy. See Stephens, 935 P.2d at 520. We conclude that including successful party attorney fees awarded under subsection (1) in the subsection (3) calculation does not interfere with the policy goals behind section 38-1-18. The preamble to the legislature's 2001 amendment indicates that the purpose of subsection (3) is to provide[] for costs and attorneys' fees in cases where an offer of judgment is unreasonably rejected. Ch. 257, 2001 Utah Laws 1202. As the court of appeals pointed out, the legislature's goal in adding subsection (3) was to discourage unreasonable rejections of offers of judgment. See supra ¶ 16. Interpreting the judgment finally obtained under subsection (3) to include an award of attorney fees under subsection (1) does nothing to contravene that policy as long as the offer of judgment also included attorney fees. An offeree who rejects an offer of judgment that includes attorney fees and then receives a judgment, also including attorney fees, that is greater than the offer of judgment clearly has not acted unreasonably. ¶ 20 We are cognizant of the concern expressed in the legislative note attached to the 2001 amendment to section 38-1-18, which the court of appeals cited in support of its contrary interpretation of the statute's operation. However, that concern is largely resolved through the use of the flexible and reasoned approach which, we concluded above, was proper to determine the successful party under subsection (1). Under this approach, a party that makes an outrageous claim and then receives only a fraction of what it demanded will not likely be deemed the successful party. This approach also prevents a party judged successful from being required to pay attorney fees under subsection (3). Although this can create something of a winner-takes-all situation when it comes to attorney fees, this tendency is effectively balanced by the use of the flexible and reasoned approach in determining successful party status so that no party can expect to be the successful party simply because it receives a dollar more than the other party. In fact, the flexible and reasoned approach was first adopted in order to avoid situations such as those mentioned in the legislative note, in which the difference of a sum as negligible as one dollar could entitle one party to an award of attorney fees. Mountain States, 783 P.2d at 557. This approach ensures that only parties that are genuinely `successful' according to the trial court's common sense logic will be able to extract their attorney fees from their opponents. Whipple, 2004 UT 47 at ¶ 25, 94 P.3d 270. ¶ 21 Finally, we construe statutes to ensure that there will be no absurd results, particularly in the interplay of subsections of a single statute. See Millett, 609 P.2d at 936. Interpreting subsection (3) to operate before subsection one would allow a party to manipulate section 38-1-18 so as to achieve an unfair award of attorney fees. Though there is no such allegation here, the present case illustrates this potential problem. The Smedsruds' $40,000 offer of judgment was made on the eve of trial, by which time each party had incurred substantial legal fees. The offer of $40,000 explicitly included attorney fees, but represented less than half the amount Pochynok was claiming as damages at trial. If we were to hold that the judgment finally obtained does not include award of attorney fees under subsection (1), a party defending against a lien could make an offer of judgment, including attorney fees, that is well below what is fair for both the lien and the attorney fees but that is higher than what the other party could hope to win at trial exclusive of attorney fees. An interpretation of section 38-1-18(3) that does not account for an award of attorney fees to the successful party under section 38-1-18(1) would too easily allow an offeror to benefit by making an unfair offer.