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Division I Again Addresses Attorney Fees Awards Under MAR 7.3 and RCW 7.06.060(1)

Division I of the Washington State Court of Appeals again addressed the mandatory attorney fees provisions found in the Revised Code of Washington and the Rules of Mandatory Arbitration, having previously considered the same matter in 2016. Bearden v. McGill, 193 Wn. App. 235, 372 P.3d 138 (2016). That iteration of the case went to the Supreme Court, which remanded with an order to reconsider in light of Nelson v. Erickson, 186 Wn.2d 385, 377 P.3d 196 (2016). Now again in February 2017, the Division I Court of Appeals ruled attorney fees are not awardable under the facts below.

The litigation involves a 2011 motor vehicle accident. The parties arbitrated the matter. The arbitrator awarded Bearden $44,000 in damages. He then amended the award to include $1,187 in fees and costs for a total award of $45,187. McGill requested trial de novo. The jury awarded Bearden $42,500 in damages and $3,296.39 in costs for a total award of $45,796.39. Bearden moved for attorney fees under MAR 7.3, which requires a court to assess costs and reasonable attorney fees against a party who appeals an arbitration award and fails to “improve the party’s position on the trial de novo.” MAR 7.3. Bearden argued McGill failed to improve his position because the trial court award, including costs, was $45,796.39, which is greater than the arbitration award, including costs, of $45,187. McGill countered he improved his position by decreasing the awards without costs from $44,000 to $42,500. The trial court agreed with Bearden and awarded him $71,800 in attorney fees.

In coming to its decision on this matter, the Court of Appeals analyzed two cases: Niccum v. Enquist, 175 Wn.2d 441, 286 P.2d 966 (2012); and Nelson v. Erickson, 186 Wn.2d 385, 377 P.3d 196 (2016). In Niccum, an arbitrator awarded $24,496 in damages in a motor vehicle accident case. The plaintiff made an offer of compromise of $17,350 “including costs and statutory attorney fees.” At trial, the jury awarded Plaintiff $16,650 in damages. Plaintiff then requested attorney fees, arguing because his $17,350 offer included costs, the value of those costs ($1,026.28) should be deducted from the offer for purposes of determining whether Defendant improved his position. After deducting the fees, the offer of compromise was $16,333.72, or less than the jury award. The Supreme Court rejected that argument, stating because costs are not entitled in connection with an offer of compromise, it would be improper to subtract them for purposes of comparing awards. The Supreme Court utilized what it called a “straightforward application of the statutory language” in reaching its decision.

Nelson also involved a motor vehicle accident. The arbitrator awarded $44,923 including costs and attorney fees. Defendant requested trial de novo. Plaintiff then made an offer to settle for “$26,000 plus taxable costs incurred at arbitration.” The parties knew the arbitration costs were $1,522. At trial, a jury awarded Nelson $27,167 total damages. Plaintiff moved for attorney fees, claiming his settlement offer of $26,000 was less than the damages award of $27,167. The Supreme Court stated the trial court should interpret a party’s position prior to trial as an ordinary person would. Based on this standard, the Court stated an ordinary person would have understood Plaintiff’s offer to include $1,522 in known arbitration costs. On this basis, the Court found Defendant improved his position at trial and denied attorney fees.

Both Niccum and Nelson differ from the instant case because those cases involve offers of compromise, whereas Bearden does not. Therefore, the Court of Appeals applied the ordinary person analysis standard for the first time in this context. The Court found in this context, an ordinary person would consider the arbitration award to be the initial award, not the amended award including costs. The Court noted omitting costs from the comparison furthered MAR 7.3’s intended purpose of encouraging settlement and discouraging meritless appeals because including costs would make recovery of attorney fees under MAR 7.3 more difficult. Therefore, the Court found for Defendant on the issue of attorney fees, because the $42,500 jury verdict is lower than the $44,000 initial arbitration award. The Court held trial courts should determine a requesting party’s position after trial by looking at the damages the court awarded, exclusive of costs.

ABOUT THE AUTHOR: Kyle Jones is an associate attorney in Tyson & Mendes’ Seattle office. Mr. Jones specializes in general liability, employment, and construction litigation. Contact Kyle at 206.420.4267 or kjones@tysonmendes.com.