Strawn v. Farmers Ins. Co. of Or.

• Decision Date: 13 February 2012
• Docket Number: SC S057520 (Control), S057629).,(CC 9908–09080,CA A131605
• Citation: 297 P.3d 439,353 Or. 210
• Parties: Mark STRAWN, on his own behalf and as representative of a class of similarly situated persons, Petitioner on Review/Respondent on Review, v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon stock insurance company; Mid–Century Insurance Company, a foreign corporation; and Truck Insurance Exchange, a foreign corporation, Respondents on Review/Petitioners on Review, and Farmers Insurance Group Inc., a foreign corporation, Defendant.
• Court: Oregon Supreme Court

353 Or. 210

297 P.3d 439

Mark STRAWN, on his own behalf and as representative of a class of similarly situated persons, Petitioner on Review/Respondent on Review,

v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon stock insurance company; Mid–Century Insurance Company, a foreign corporation; and Truck Insurance Exchange, a foreign corporation, Respondents on Review/Petitioners on Review,andFarmers Insurance Group Inc., a foreign corporation, Defendant.

(CC 9908–09080; CA A131605; SC S057520 (Control), S057629).

Supreme Court of Oregon.

On Petitions for Attorneys Fees

June 23, 2011, Aug. 11, 2011,

and Feb. 13, 2012.

Resubmitted Jan. 7, 2013.

Decided Feb. 22, 2013.

Richard S. Yugler, Landye Bennett Blumstein LLP, Portland, filed the petitions for attorney fees and costs for Petitioner on Review/Respondent on Review.

P.K. Runkles–Pearson and James N. Westwood, Stoel Rives LLP, Portland, filed the responses/objections to the petitions for attorney fees for Respondents on Review/Petitioners on Review.

Before BALMER, Chief Justice, and KISTLER, LINDER, LANDAU, BREWER, and BALDWIN, Justices.^*

LINDER, J.

Mark Strawn, the plaintiff in this class action case, has petitioned for an award of attorney fees and costs incurred for the appellate work done on review before this court in Strawn v. Farmers Ins. Co., 350 Or. 336, 258 P.3d 1199,adh'd to on recons.,350 Or. 521, 256 P.3d 100 (2011), cert. den.,––– U.S. ––––, 132 S.Ct. 1142, 181 L.Ed.2d 1017 (2012). In addition, Strawn seeks two supplemental fee awards: one for the cost of litigating the fee petition, and the other for the cost of defending against a petition for certiorari in the United States Supreme Court after this court issued its decision. Finally, Strawn asks this court to award him a $5,000 incentive fee for his service on review as class representative. As we discuss in more detail later, the attorney fee awards that Strawn seeks are of two kinds. One is a so-called “fee-shifting award” pursuant to ORS 742.061(1) (set out later in this opinion), which would be paid by defendants Farmers Insurance Company of Oregon et al. (collectively, Farmers).¹ The other is a so-called “common-fund” award, which would be paid from the punitive damages recovery in the class action. Farmers raises various challenges to the fees requested in the main fee petition, in both supplemental fee petitions, and in the motion for an incentive fee.

Preliminarily, we observe that this court often resolves attorney fee petitions by order, rather than written opinion. The court does so because most fee petitions present few or no legal issues, and instead entail fact-bound or case-specific questions of entitlement to and reasonableness of the fees requested. This case, likewise, presents certain disputes that are fact-bound and case-specific. We resolve those issues with limited discussion, consistent with our practice of ordinarily resolving them by order.

In this instance, however, the petitions and objections also present legal issues that are appropriate to resolve by opinion. Those issues include: (1) the appropriate method for determining the amount of a reasonable fee award in a case that involves both a statutory fee-shifting award and a common-fund award; (2) the propriety of applying a multiplier to the awards; (3) how fees should be apportioned between the fee-shifting and the common-fund awards; (4) whether this court has authority to award attorney fees for work done in opposing a petition for writ of certiorari to the United States Supreme Court; (5) whether a court has authority to award post-opinion, prejudgment interest on court-awarded attorney fees; and (6) whether an appellate court may award a class representative a class incentive fee on appeal and review.

I. BACKGROUND

We begin with a brief outline of this litigation, to provide background for our discussion of the requested fees. Strawn filed a class action against Farmers raising two contractual claims (breach of contract and breach of the covenant of good faith) and one common law claim (fraud) in connection with auto insurance policies written by Farmers.² The contractual claims were premised on the common legal and factual theory that Farmers did not pay personal injury protection (PIP) benefits in the full amount owed under the auto insurance policies; the fraud claim was premised on the related theory that Farmers deceived the plaintiff class members by preventing them from being aware that Farmers was not paying their PIP benefits in the full amount owed. Strawn, 350 Or. at 343, 352–53, 258 P.3d 1199. The jury found for the class on the contractual claims and the fraud claim, and it made a single award of compensatory damages on those claims. In addition, and for the fraud claim only, the jury awarded punitive damages. Consistently with the jury's verdict, the trial court entered a judgment awarding the class approximately $900,000 in compensatory damages (which included prejudgment interest) and $8 million in punitive damages. Id. at 344, 258 P.3d 1199. The trial court also awarded Strawn attorney fees totaling over $3.1 million. Of that amount, over $2.6 million was a fee-shifting award to be paid by Farmers; about $500,000 was a common-fund award to be paid from the punitive damages awarded to the class.

Farmers appealed. The Court of Appeals rejected Farmers's challenges to liability but agreed with Farmers that the $8 million awarded in punitive damages was excessive under federal due process standards. See Strawn v. Farmers Ins. Co., 228 Or.App. 454, 485, 209 P.3d 357 (2009), aff'd in part and rev'd in part,350 Or. 336, 258 P.3d 1199 (2011). The Court of Appeals determined that punitive damages of four times plaintiffs' actual harm was the most that was constitutionally permissible; consequently, the court remanded the case for a new trial on punitive damages, unless plaintiffs agreed to remittitur of punitive damages to approximately $3.6 million (the maximum punitive damages that the court found constitutionally permissible, plus interest). Id. The Court of Appeals also rejected Farmers's challenge to the amount of the fee-shifting award that the trial court ordered it to pay. See id. at 457, 209 P.3d 357 (summarizing court's conclusions). The court later issued a second opinion awarding Strawn attorney fees for work done on appeal totaling $585,441 (according to our calculations). The bulk of that amount ($544,305) was awarded as a fee-shifting award payable by Farmers; the remainder ($41,136) was a common-fund award payable from the punitive damages recovery. See Strawn v. Farmers Ins. Co., 233 Or.App. 401, 410, 418, 422, 426, 226 P.3d 86 (2010) (figures not including cost awards).

Both Strawn and Farmers sought review by this court. Strawn asserted that the Court of Appeals had erred in reducing the punitive damages award. Farmers argued that the Court of Appeals had not reduced the punitive damages enough to comport with constitutional standards; Farmers also raised challenges that went to its liability on the contractual and fraud claims. Strawn, 350 Or. at 339, 258 P.3d 1199. In their respective petitions for review, neither party raised any issue about the attorney fee awards made by the trial court or the Court of Appeals.³

This court allowed both petitions for review. Ultimately, this court rejected Farmers's challenges to liability. Id. at 344–62, 258 P.3d 1199. On the punitive damages award, this court agreed with Strawn that Farmers had failed to raise its challenge on appeal in a way that permitted to Court of Appeals to reach the issue. Consequently, this court did not reach the parties' due process arguments about the amount of punitive damages that could constitutionally be awarded; instead, we affirmed the $8 million punitive damage award because of the procedural posture of Farmers's challenge. Id. at 369–70, 258 P.3d 1199. On Farmers's petition for reconsideration, this court issued a written opinion adhering to its prior opinion. Strawn v. Farmers Ins. Co., 350 Or. 521, 256 P.3d 100 (2011).

II. ATTORNEY FEES

As we previewed at the outset, Strawn seeks two types of attorney fee awards. The first is a statutory fee award pursuant to ORS 742.061(1).⁴ That statute directs trial and appellate courts to award attorney fees against the defendant in an action to recover on an insurance policy, if the plaintiff's recovery exceeds the amount of any tender in the case. Such an award typically is referred to as a “fee-shifting” award, because the prevailing party's attorney fees are shifted to the losing party. In this case, as Strawn agrees, ORS 742.061(1) authorizes a fee-shifting award against Farmers for the work done only on the contractual claims (breach of contract and breach of implied covenant of good faith and fair dealing). That statute does not authorize attorney fees on the common law fraud claim or the punitive damages award.

Consequently, for work in furtherance of the fraud claim and associated punitive damages, Strawn seeks attorney fees from the punitive damages award itself, pursuant to the so-called “common-fund” doctrine. That doctrine generally applies when a party has litigated to create or preserve a monetary fund on behalf of others, as occurs in a successful class action for damages. Rather than shift the plaintiff's litigation expenses to the losing party, the common-fund doctrine permits the burden of those expenses to be shared among those who benefitted from the litigant's efforts by allowing plaintiff's lawyers to be paid from the common fund created or preserved by the litigation. The doctrine is an equitable one, premised on the theory that those benefitted by the common fund would be unjustly enriched if they did not share in the cost of creating or preserving that fund that would otherwise be borne by the party that pursued the litigation. See Strunk v. PERB, 341 Or. 175, 181–84, 139 P.3d 956 (2006) (discussing common-fund doctrine). In the...