For many types of civil actions in Oregon, a prevailing party cannot obtain an attorney fees award against the losing party, despite having won the case. In such cases, all parties should have a strong incentive to avoid litigation, because even a victory may result in high legal fees that dilute or outweigh the victory obtained in litigation.
An exception to the general Oregon rule that each party pays its own attorney fees can be found in ORS 20.080, 20.082, and 20.083. These statutes allow a prevailing party in a lawsuit for $10,000 or less to obtain an attorney fees award against the losing party, so long as certain statutory requirements are followed. In some such cases, the risk of an adverse attorney fees award may pose a much greater economic threat to the defendant than the actual damages sought by the plaintiff.
ORS 20.080 applies to most types of civil claims, including various torts. ORS 20.082 applies to claims for breach of contract. ORS 20.083 applies to claims arising from failed contracts. For sake of brevity, I will use “ORS 20.080” as a placeholder for all three statutes, as the requirements of each statute are very similar.
In my experience, many small business owners, and even some insurance claims adjusters, initially fail to recognize the danger inherent in ORS 20.080 claims. When a prospective defendant rejects a claim made under ORS 20.080,the defendant’s potential liability for the claimant’s attorney fees immediately begins to grow, and will continue to grow until the claim is settled or tried to an arbitrator or court.
Absent a basis for an attorney fees award, it may sometimes be a good negotiating strategy for a defendant to either flatly reject an initial claim for damages, or make a very low ball offer, and then perhaps negotiate upwards. Applying this strategy in an ORS 20.080 situation, however, can lead to catastrophe. Instead, upon receipt of an ORS 20.080 demand, it often makes sense for a prospective defendant to immediately offer the probably actual damages the plaintiff would be entitled to in litigation. Then, if the plaintiff fails to beat the settlement offer in litigation, the defendant could seek an attorney fees award against the plaintiff. Thus, by making a generous initial settlement offer, the defendant can shift the huge potential liability for attorney fees back on to the plaintiff in part.
Rest assured that most Oregon civil attorneys are well aware of ORS 20.080, and will aggressively utilize the statute to maximize the value of their clients’ claims. For this reason, if a small business owner receives an ORS 20.080 demand letter, that person should, in my opinion, immediately consult with an attorney before responding. Otherwise, the economic cost of resolving the claim may quickly balloon out of control.