De Young v. Brown

• Decision Date: 06 May 2021
• Docket Number: CC 16CV12583 (SC S067385)
• Citation: 486 P.3d 740,368 Or. 64
• Parties: James B. DE YOUNG, a resident of Damascus, Respondent on Review, v. Kate BROWN, in her official capacity as Governor of Oregon; and State of Oregon, Petitioners on Review, and Clackamas County, a political subdivision of the State of Oregon, Defendant-Respondent, and Damascus, a municipal corporation, Defendant.
• Court: Oregon Supreme Court

368 Or. 64

486 P.3d 740

James B. DE YOUNG, a resident of Damascus, Respondent on Review,

v. Kate BROWN, in her official capacity as Governor of Oregon; and State of Oregon, Petitioners on Review,andClackamas County, a political subdivision of the State of Oregon, Defendant-Respondent,andDamascus, a municipal corporation, Defendant.

CC 16CV12583 (SC S067385)

Supreme Court of Oregon, En Banc.

Argued and submitted January 16, 2020.

May 6, 2021

Philip Michael Thoennes, Assistant Attorney General, Salem, argued the cause and filed the briefs for petitioner on review Kate Brown. Also on the briefs were Ellen Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

Tyler Smith, Tyler Smith & Associates PC, Canby, argued the cause and filed the brief for respondent on review.

Kristian Spencer Roggendorf, The Zalkin Law Firm, Evergreen, Colorado, filed the brief for amicus curiae Oregon Trial Lawyers Association.

BALMER, J.

This case concerns attorney fees awarded by the Court of Appeals following its decision in De Young v. Brown , 297 Or. App. 355, 443 P.3d 642 (2019) (" De Young I "). The question before this court is a narrow one—namely, whether the Court of Appeals erred in allowing plaintiff's petition for attorney fees under the "substantial benefit" theory. For the reasons explained below, we hold that the Court of Appeals did not err, and, thus, we affirm.

Plaintiff De Young was a city councilor and resident of the City of Damascus. Defendants are Kate Brown, in her official capacity as Governor, and the State of Oregon. We refer to defendants, collectively, as "the state." In De Young I , the Court of Appeals considered the validity of an effort to disincorporate the City of Damascus. In a 2013 election, the residents of the city had voted on a referral from the city council to disincorporate the city. Although a majority of those participating in the election voted in favor of disincorporating, the number fell short of the absolute majority for disincorporation required by law. See ORS 221.610 (2013) (requiring affirmative vote of a "majority of the electors of the city" to disincorporate). Subsequently, in 2015, the legislature passed House Bill (HB) 3085, which referred to the voters of Damascus the decision whether to disincorporate and specifically provided that a majority of those voting, rather than an absolute majority of the city's electors, would be sufficient to disincorporate. That legislative referral appeared on the ballots of residents of the city as Measure 93 in the May 2016 election.

Prior to the 2016 election, plaintiff sought declaratory and injunctive relief, seeking to enjoin the scheduled disincorporation vote. He alleged that HB 3085 violated the city charter, state statutes, and the Oregon Constitution. The trial court denied plaintiff's request to enjoin the election, and the city residents subsequently voted to disincorporate. Following the election, the city paid its debts, transferred its assets to Clackamas County, surrendered its charter, terminated or transferred its employees, and, essentially, ceased to exist. Plaintiff continued his lawsuit, seeking a declaration that the vote had violated various statutory and constitutional requirements and, therefore, the city had not been validly disincorporated. The trial court granted summary judgment in favor of the state, declaring Measure 93 valid.

Plaintiff appealed, renewing his arguments that Measure 93 violated state statutory and constitutional provisions. The Court of Appeals ultimately agreed with plaintiff on his statutory argument, holding that ORS 221.610 and ORS 221.621 (2013) provided the only means by which a city could disincorporate and that, because Measure 93 had not complied with those statutes, it was invalid. De Young I , 297 Or. App. at 370-71, 443 P.3d 642. Because it disposed of the case on statutory grounds, the Court of Appeals did not reach plaintiff's constitutional argument. Id. at 355, 443 P.3d 642. Shortly after the Court of Appeals decision was issued, the legislature passed Senate Bill (SB) 226 (2019) "to cure any defect in the procedures, and to ratify the results" of the 2016 disincorporation vote. Or. Laws 2019, ch. 545, § 4(1). The legislature gave this court original jurisdiction to determine the validity of the substantive provisions of that law, id. § 4(2), which we did in City of Damascus v. State of Oregon , 367 Or. 41, 472 P.3d 741 (2020). In that case, we concluded that "SB 226 is valid and that it accomplishes what the legislature intended, i.e. , it gives effect to the 2016 vote by the city's residents to disincorporate." Id. at 43, 472 P.3d 741.

Following the Court of Appeals’ decision in De Young I but prior to the issuance of this court's decision in City of Damascus , plaintiff petitioned that court for an award of attorney fees and costs in the De Young I litigation, amounting to a little over $40,000. Plaintiff argued that he was entitled to fees because he was the prevailing party and because he sought "to vindicate important constitutional rights, and was not seeking a pecuniary gain for himself other than to protect the statutory and constitutional rights of those in Damascus who wanted the law to be followed." The state objected to the award of attorney fees, arguing that, "because [plaintiff] prevailed on statutory and not constitutional grounds, [Court of Appeals case law] forecloses any attorney fee award." Plaintiff filed a reply asserting that, contrary to the state's argument, the court's inherent equitable power to award attorney fees does not require a finding of a constitutional violation.

The Court of Appeals framed the threshold issue as "whether a plaintiff must prevail on a constitutional issue in order for us to exercise our inherent equitable power to award attorney fees." De Young v. Brown , 300 Or. App. 530, 532, 451 P.3d 651 (2019) (" De Young II "). The Court of Appeals explained that "[t]he inherent equitable power to award attorney fees was first recognized in Oregon in Gilbert [v. Hoisting & Port. Engrs. , 237 Or. 130, 384 P.2d 136 (1963), aff'd as modified , 237 Or. 130, 390 P.2d 320 (1964), cert. den. , 376 U.S. 963, 84 S.Ct. 1125, 11 L.Ed.2d 981 (1964),]" and that recovery of fees was "limited to cases * * * in which equitable relief would in effect be denied or severely inhibited unless the plaintiff who prevails in the suit is awarded attorneys’ fees." De Young II , 300 Or. App. at 533, 451 P.3d 651 (internal citations and quotation marks omitted).

The Court of Appeals held ultimately that "the vindication of a constitutional right has never been required by the Supreme Court in awarding attorney fees under a court's equitable powers," and that "[t]he ‘substantial benefit’ theory * * * is a form of the equitable attorney fee doctrine that does not require the vindication of a constitutional right." Id . at 539, 451 P.3d 651. The Court of Appeals described the "substantial benefit" theory as:

"allow[ing] equitable attorney fees where there is a representative or derivative suit brought for the benefit of the entire organization or where there are other circumstances in which equitable relief would in effect be denied or severely inhibited unless the plaintiff who prevails in the suit is awarded attorneys’ fees. The action must confer a ‘substantial benefit’ on others."

Id. at 539-40, 451 P.3d 651 (internal citations and quotation marks omitted). The Court of Appeals agreed with plaintiff that his litigation had directly benefitted the residents of Damascus by holding that the legislative referral and the resulting disincorporation election failed to comply with state statutes and that it also had "potentially" conferred an indirect benefit on other residents of the state "in regard to how the legislature makes referrals to voters." Id. at 540, 451 P.3d 651.¹ Applying the substantial benefit theory, the Court of Appeals allowed plaintiff's petition for attorney fees and costs in the amount of about $16,000 and remanded for a determination of fees and costs incurred in the circuit court. Id. at 532, 451 P.3d 651.

The state petitioned this court for review. In its petition, the state did not renew its argument that fees could be recovered only for a successful constitutional challenge, and not for a statutory one. The state instead responded to the Court of Appeals’ substantial benefit theory, asserting that the "beneficiaries" of the litigation were the residents of Damascus, but a fee award against the state would be paid by residents of the whole state—state taxpayers. The state contended that the fee award would "spread the cost of litigation not just among those who benefitted from it, but also to those who would not benefit from it," contrary to the purpose of the substantial benefit theory. The state also argued that any potential benefit from the litigation was uncertain, because of the pending City of Damascus case before this court. In the state's view, the substantial benefit theory does not permit an award of fees here because, "[e]ven assuming that reincorporating Damascus would confer a substantial benefit on those residents who opposed Measure 93, the Court of Appeals’ ruling did not confer that benefit * * * [b]ecause there is still substantial uncertainty whether Damascus will ever again exist as a city[.]"

Plaintiff filed a response to the state's petition for review, arguing that the state's articulation of the Court of Appeals’ decision was misleading because the Court of Appeals did not conclude, contrary to the state's assertion, that only the residents of Damascus benefitted from that court's ruling in De Young I . Rather, plaintiff noted that the Court of Appeals considered the benefits to be "both in regard to the direct litigation and potentially in regard to how the legislature makes referrals to voters." De Young II , 300 Or. App. at 540, 451 P.3d 651. Therefore, plaintiff argued, the Court of Appeals correctly understood...