Williams v. Clinic

• Decision Date: 08 September 2011
• Docket Number: 07C20184; A141570.
• Parties: Lara WILLIAMS, Plaintiff,v.SALEM WOMEN'S CLINIC, an Oregon corporation, Defendant.Salem Women's Clinic, Inc., Third–Party Plaintiff–Appellant,v.David R. Barlow, Third–Party Defendant–Respondent.
• Court: Oregon Court of Appeals

245 Or.App. 476

263 P.3d 1072

Lara WILLIAMS, Plaintiff,

v.SALEM WOMEN'S CLINIC, an Oregon corporation, Defendant.Salem Women's Clinic, Inc., Third–Party Plaintiff–Appellant,

v.David R. Barlow, Third–Party Defendant–Respondent.

07C20184; A141570.

Court of Appeals of Oregon.

Argued and Submitted Jan. 26, 2011.Decided Sept. 8, 2011.

Jossi Davidson, Silverton, argued the cause for appellant. With him on the briefs was Gracey & Davidson.William E. Gaar, Lake Oswego, argued the cause for respondent. With him on the brief were Michelle E. Lentzner and Buckley LeChevallier PC.Before ORTEGA, Presiding Judge, and SERCOMBE, Judge, and HADLOCK, Judge.^*

HADLOCK, J.

Defendant/third-party-plaintiff Salem Women's Clinic (SWC) appeals a judgment requiring it to pay attorney fees and an enhanced prevailing party fee to third-party-defendant David Barlow, its former practice manager. SWC assigns error both to the fee awards and to the trial court's denial of SWC's motion for sanctions against Barlow for an alleged discovery violation. We affirm the trial court's denial of the latter motion without discussion and write only to address SWC's challenge to the fee awards. We reverse the attorney fee award and vacate and remand the supplemental judgment so the trial court may reconsider the prevailing party fee award in light of this opinion.

As we explain below, because ORS 20.105(1) is the sole basis for the award of attorney fees, we must determine whether the record was “entirely devoid” of support for SWC's third-party breach of contract claim against Barlow. ¹ Olson v. Howard, 237 Or.App. 256, 269, 239 P.3d 510 (2010) (quoting Mattiza v. Foster, 311 Or. 1, 8, 803 P.2d 723 (1990)). We describe the pleadings, litigation, and evidence in light of that standard, without considering the trial court's resolution of disputed historical facts. Cf. Olson, 237 Or.App. at 268–69, 239 P.3d 510 (rejecting trial court's “no reasonable basis” determination, in part because the court had made that determination after it “weighed the parties' competing evidence”).

The underlying litigation began when plaintiff Lara Williams sued SWC, her former employer, claiming that SWC had breached its contract to provide her with lifetime “tail” insurance coverage when her employment ended.² Plaintiff alleged in her complaint that (1) SWC's practice was to offer “an unlimited tail policy” to physicians and midwives who worked for SWC for at least two years; (2) plaintiff, a physician, entered into contracts with SWC which provided that SWC would purchase tail coverage for plaintiff if she worked for at least two years; (3) plaintiff “expected to receive an unlimited tail policy”; and (4) Barlow had told plaintiff—before she executed her first contract with SWC—that the contract term related to tail coverage “was in fact an unlimited tail policy.” Plaintiff averred in a supporting declaration that Barlow had told her—again, during initial contract negotiations—that SWC would “purchase a lifetime tail policy” for her as long as she worked for the clinic for at least two years.³ Plaintiff also submitted a declaration from Barlow asserting that SWC's standard practice was to offer lifetime tail insurance and that he had understood the pertinent term in plaintiff's contract to refer to a lifetime policy.

SWC answered and filed a third-party complaint against Barlow, claiming that if Barlow had made the representations that plaintiff alleged, then he had breached his contract with SWC:

“If [Barlow] made the representations alleged by Plaintiff, then [Barlow] breached his employment agreement with SWC, and his implied duty of good faith and fair dealing. * * * [I]f Plaintiff is entitled to relief, [SWC] will be damaged in the amount of money required to be paid by [SWC]. [Barlow] should indemnify SWC for, and hold SWC harmless from, all sums expended by SWC as a result of the present litigation.”

During discovery, plaintiff again asserted that Barlow had agreed that her contract with SWC provided for “unlimited” tail coverage. In her deposition, she described the contract negotiations as follows:

“Q. Now, you mentioned discussions you had with Dave Barlow. Can you describe for me all of the discussions you had with him prior to signing your first employment contract?

“A. The discussions that I remember clearly were of the tail discussion. I asked him that— I said, you know, because this was my first contract with my first job I wanted to clarify that, you know, tail was an unlimited policy. I said, This will cover anything that happens while I'm at the clinic.

“And he said, Yes.

“And I said, Okay.”

(Emphasis added).⁴

All three parties moved for summary judgment. In a declaration supporting his motion, Barlow asserted that he and plaintiff had not discussed the duration of her tail insurance coverage during their contract negotiations. He also denied that he had told plaintiff that the tail insurance coverage referenced in her employment agreement would be lifetime, unlimited, or forever in duration. In opposing Barlow's motion, SWC relied both on plaintiff's deposition testimony and on the allegations in her original complaint and declaration to establish the existence of a dispute about what Barlow had told plaintiff during contract negotiations. The trial court denied each of the summary judgment motions, later explaining that “there remained a genuine issue of material fact, as to whether or not Barlow had acted in breach of his contract with SWC.”

A bench trial followed less than two weeks later. Plaintiff's case was directed primarily at establishing that the parties all had understood—based on contract language, industry standards, and SWC's prior practices—that SWC and plaintiff both had intended plaintiff's employment contract to provide her with lifetime tail coverage. During cross-examination by Barlow's attorney, plaintiff testified that Barlow had not told her “anything about the actual duration of [her] tail coverage.” Barlow testified similarly, stating that he had believed that plaintiff would receive unlimited tail coverage, but had not discussed the policy's duration with her. SWC's chief executive officer, Dr. Elizebeth Harmon, then testified about what she thought had contributed to plaintiff's belief that she was entitled to lifetime tail insurance. Harmon disclaimed any understanding of the legal basis for SWC's third-party claim against Barlow. Instead, she explained that, from her personal perspective, the problem was Barlow's failure to explain the policy terms to plaintiff at her exit interview, not any representation that Barlow may have made during initial contract discussions.

The circuit court ruled in plaintiff's favor, finding that she “had a right to an unlimited tail insurance policy pursuant to her contract.” The court also granted Barlow's motion for involuntary dismissal of SWC's third-party breach of contract claim and entered judgment accordingly. Barlow then moved for an award of attorney fees under ORS 20.105 and an enhanced prevailing party fee under ORS 20.190. The trial court issued two letter opinions explaining in detail why it was granting Barlow's motion and entered a supplemental judgment requiring SWC to pay the attorney fees and enhanced prevailing party fee.

On appeal, SWC assigns error to the trial court's award of attorney fees, arguing that the court's factual findings lack any basis in the record and, in any event, do not support its conclusion that SWC acted unreasonably in pursuing its third-party claim against Barlow. In response, Barlow argues that the trial court did not err in awarding attorney fees, characterizing that award as “one legal option” that was available to the court. In other words, Barlow contends, the trial court did not abuse its discretion by awarding him attorney fees.

The parties' arguments implicate two legal standards: (1) the standard that trial courts apply in considering motions seeking attorney fees under ORS 20.105(1); and (2) our standard of review. Both standards are well established. First, ORS 20.105(1) requires an attorney fee award if, and only if, the trial court finds that a party willfully disobeyed a court order or pursued a claim or defense with “no objectively reasonable basis”:

“In any civil action, suit or other proceeding in a circuit court or the Oregon Tax Court, or in any civil appeal to or review by the Court of Appeals or Supreme Court, the court shall award reasonable attorney fees to a party against whom a claim, defense or ground for appeal or review is asserted, if that party is a prevailing party in the proceeding and to be paid by the party asserting the claim, defense or ground, upon a finding by the court that the party willfully disobeyed a court order or that there was no objectively reasonable basis for asserting the claim, defense or ground for appeal.”

ORS 20.105(1). A claim lacks an objectively reasonable basis only if it is “entirely devoid of legal or factual support,” Olson, 237 Or.App. at 269, 239 P.3d 510, either at the time it is made or, “in light of additional evidence or changes in the law,” as litigation proceeds, Dimeo v. Gesik, 197 Or.App. 560, 562, 106 P.3d 697 (2005).

Second, whether a claim lacks an objectively reasonable basis is a legal question, and we review the trial court's ruling on that question for legal error. Olson, 237 Or.App. at 264–65, 239 P.3d 510; Morasch v. Hood, 232 Or.App. 392, 403–04, 222 P.3d 1125 (2009). Barlow's contention that we review for abuse of discretion is incorrect.⁵

Application of those standards in this case requires us to decide, as a matter of law, whether SWC lacked any objectively reasonable basis for bringing its third-party breach of contract claim against Barlow. Before doing so, we pause to note that the trial court strayed from the correct analysis. Instead of determining whether the record was “entirely devoid” of support for SWC's third-party claim, as ORS...