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Recent Appellate Decisions – August 17 to August 23, 2012

Selected summaries prepared by Commissioner James Verellen (ret.)

Division I Washington State Court of Appeals

August 20, 2012

Atlas Supply  v. Realm No. 66504-9

NOTE:  The opinion originally issued on July 30, 2012 has been amended to correct a portion of a footnote.  The holding is unchanged.

attorney fees – contract for costs of collection – includes defense of compulsory counterclaim

A “costs of collection” fee provision extends to the defense of compulsory counterclaims.

Atlas sold construction materials to Realm on credit. Realm refused to pay when materials failed. Atlas sued to recover the purchase price. Realm counterclaimed for breach of contract, breach of warranty and negligent misrepresentation. Atlas’s suppliers were also joined in the litigation. The credit application signed by Realm included Realm’s agreement “to pay the costs of collection, including reasonable attorney fees in suit by Atlas…for the merchandise sold to applicant.”

The parties agreed to a reduced amount to be paid to Atlas for the materials, but could not agree on the amount of attorney fees. The trial court granted summary judgment against Realm for the agreed amount and ultimately awarded attorney fees of $56,247.14, denying Atlas additional fees incurred in defending Realm’s counterclaims.

Division I reversed the trial court and remanded to include reasonable fees incurred in defending Realm’s counterclaims:

  • Realm’s counterclaims “arose out of the same purchase transaction that led to Atlas’s original debt collection action. If successful, they would have defeated Atlas’s claim on the debt.”
  • By contrast, a permissive counterclaim does not arise out of the transaction or occurrence that is the subject of the opposing party’s claim. A permissive counterclaim does not affect nor is it affected by the outcome of the original claim.
  • Atlas had to address Realm’s compulsory counterclaims to prevail on its collection action. “The trial court erred by ruling the credit application did not entitle Atlas to fees relating to the compulsory counterclaims.”

Greenwood v Monnastes No. 66628-2

attorney fees – mandatory arbitration – substantially improve position – costs not included in offer of compromise

M sued G for a car accident.  In mandatory arbitration, the arbitrator awarded M $22,719.38 for economic damages and pain and suffering.  G requested a trial de novo.  M offered to compromise her arbitration award down to $16,000.  G declined.  The jury returned a verdict in favor of M for $15,661.00 in special and general damages.  The trial court awarded M costs of $1,790.18.  M requested attorney fees arguing that when costs were added in, M recovered more than the $16,000 offer, and G failed to improve his position in the trial de novo.  The trial court agreed and awarded M attorney fees of $22,500.  G appealed.

Division I reversed the trial court award of attorney fees:

  • Consistent with Tran v Yu, 118 Wn.App. 607, 75 P.3d 970 (2003), a court should “compare comparables” when deciding whether a party improved their position in a trial de novo; M’s $16,000 offer of compromise should be compared with the $15,661 jury verdict in M’s favor, so G did improve his position.
  • M’s offer of compromise replaced the arbitrator’s award for purposes of determining whether the appealing party improved his position; the offer did not mention statutory attorney fees or costs or  being a ‘global settlement.’
  • “To the extent a nonappealing party seeks to replace the arbitrator’s award of compensatory damages with an offer of compromise that includes not only compensatory damages, but also costs, that party should so specify in the offer of compromise.”

Division II Washington State Court of Appeals

August 21, 2012

Hickok-Knight v. Wal-Mart Stores No. 41008-7

costs – CR 68 – deposition and record costs incurred prior to offer of settlement are not recoverable

In an odd case, H-K sued Wal-Mart for injuries when her shopping cart ran over her foot after a fork-lift bumped a row of carts that in turn collided with her cart.  Despite “normal” x-rays, CT scan, MRI, electromyogram and nerve conduction studies, H-K had complaints of pain.  After a 3-week trial, the jury awarded $6,433.35 in damages.  Because H-K had declined Wal-Mart’s $30,000 offer of judgment, Wal-Mart sought and was awarded costs of $5,526.17 under RCW 4.84.010.

Division II affirmed the trial court on a variety of issues, but reversed and remanded to limit the cost award to the costs incurred after the offer of judgment:

  • Any error in compelling the jurors to touch H-K’s feet (presumably regarding her report that her injured foot often was cold) was harmless.
  • The damage award was consistent with H-K’s work history, surveillance footage, and expert testimony.
  • The trial court did not abuse its discretion in allowing physicians to discuss medical and social histories.
  • There was no showing of bias by the trial court.
  • Jury instructions were adequate in view of the evidence presented at trial.
  • The trial court did not abuse its discretion in denying a motion for a new trial.
  • CR 68 provides an offeree must “pay the costs incurred after the making of the offer” if the offeree obtains less than the offer of judgment; costs for depositions and records are incurred when obtained, even though the depositions and records were not offered into evidence until trial.
  • The costs must be recalculated on remand.

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