Bearden v. McGill

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IN CLINKS OIPICI This opinion was filed for record
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SUSAN L CARLSON
SUPREME COURT CLERK

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

JAMES BEARDEN,

Petitioner, No. 94320-6

V. En Banc

DOLPHUS McGILL,et ux.,
Filed APR 1 2 2018
Respondents.

OWENS,J. — Mandatory arbitration provides an efficient and inexpensive

procedure to resolve low dollar amount disputes. Parties to mandatory arbitration

may request a trial de novo after the arbitration award is issued. If the party that

requests a trial de novo after mandatory arbitration "fails to improve" his or her

position at the trial, then the opposing party may move for the requesting party to pay

the reasonable attorney fees incun'ed as a result of the trial de novo. Mandatory

Arbitration Rule(MAR)7.3. In this case, we are asked to determine whether to

include statutory costs when comparing the trial judgment with the arbitration award.

We reaffirm that the determination of whether a requesting party's position was
Bearden v. McGill
No. 94320-6

improved should follow the reasoning of an ordinary person. Accordingly, we hold

that statutory costs should be included. We therefore reverse the Court of Appeals.

FACTS

Plaintiff James Bearden sued Dolphus McGill after they were involved in a car

accident. They went to mandatory arbitration, and the arbitrator awarded plaintiff

Bearden $44,000.00 in damages. Bearden moved for statutory costs under RCW

4.84.010 as the prevailing party. The arbitrator, consistent with MAR 6.4(d), filed an

amended award granting the fee request. The amended award granted $1,187.00 in

costs to the plaintiff, amounting to a total award of$45,187.00. Defendant McGill

requested a trial de novo. At trial, the jury awarded Bearden $42,500.00 in damages

and $3,296.39 in RCW 4.84.010 costs for a total award of $45,796.39. Bearden

moved for attorney fees under MAR 7.3, arguing that McGill had not improved his

position at trial because the trial award of $45,796.39 exceeded the arbitral award of

$45,187.00. The trial judge agreed and awarded Bearden $71,800.00 in attorney fees

and costs incurred as a result of the trial.

McGill appealed, arguing that the trial court erred by including trial costs in the

MAR 7.3 comparison. The Court of Appeals vacated the award of attorney fees and

costs to Bearden, holding that the proper comparison was between the common

elements ofthe awards in both proceedings, including only "those costs and fees

litigated before both the arbitrator and trial court." Bearden v. McGill, 193 Wn. App.
Bearden v. McGill
No. 94320-6

235,253, 372 P.3d 138(2016){Bearden I). This court granted review and remanded

the case to the Court of Appeals for reconsideration in light of Nelson v. Erickson, 186

Wn.2d 385, 377 P.3d 196(2016), a recent decision from this court. Bearden v.

McGill, 186 Wn. 2d 1009, 380 P.3d 489(2016).

On remand, the Court of Appeals again vacated the award offees and costs,

holding that the MAR 7.3 comparison should only include the damages portions of

each award, exclusive of any statutory costs awarded in either proceeding. Bearden v.

McGill, 197 Wn. App. 852, 861, 391 P.3d 577(2017). McGill appealed, and this

court granted review. Bearden v. McGill, 188 Wn.2d 1015, 396 P.3d 343 (2017).

ISSUE

Are statutory costs to be included in the MAR 7.3 comparison?

ANALYSIS

After an arbitrator files a decision in mandatory arbitration, either party may

request a trial de novo. RCW 7.06.050(1). If a party who requested a trial de novo

"fails to improve the party's position on the trial de novo," then the opposing party is

entitled to an award of its costs and reasonable attorney fees incurred as a result ofthe

request for a trial de novo. MAR 7.3; RCW 7.06.060.

The purpose ofthe fee-shifting provision in MAR 7.3 is "to encourage

settlement and discourage meritless appeals." Niccum v. Enquist, 175 Wn.2d 441,

451, 286 P.3d 966(2012); Williams v. Tilaye, 174 Wn.2d 57, 63, 272 P.3d 235 (2012).
Bearden v. McGill
No. 94320-6

Without this fee-shifting provision to deter parties from appealing, arbitration could

"become just another procedural step before trial.... [It] would be nothing more

than a dress rehearsal for the real trial, with each side getting a good look at the

other's case." Williams, 174 Wn.2d at 63. MAR 7.3 deters frivolous appeals by

penalizing pyrrhic victors: a party who congests a trial court's docket by requesting a

trial de novo in order to lose money shall succeed in that endeavor, and parties who

wish to appeal close calls do so at their own peril.

MAR 7.3 focuses solely on the position of the requesting party and is blind to

the position ofthe nonrequesting party. In a scenario where a defendant who lost at

arbitration requests a trial de novo and spends $3,000 in additional costs in pursuit of

a $500 reduction in judgment, both sides will be worse offthan before. Such a no-win

situation is precisely why the fee-shifting rule exists. Niccum, 175 Wn.2d at 451.

Such a rule is essential because the expenses to be considered are not only those ofthe

nonrequesting party, who without fee-shifting would be forced to incur relatively

large attorney fees to relitigate a low-amount claim, but also the public fisc, which

incurs a cost as well, as do the jurors if a jury trial is requested. To deter this mutually

dissatisfactory scenario, MAR 7.3 penalizes a party who requests a trial de novo and
Bearden v. McGill
No. 94320-6

does not improve their position, without regard to the position of the nonrequesting

party.'

The court is asked to interpret the meaning of"improve the party's position," as

used in MAR 7.3. Because "[t]he surest indication of legislative intent is the language

enacted by the legislature," an attempt to interpret the phrase "improve the party's

position" must begin by attempting to ascertain the plain meaning ofthat provision.

State V. Ervin, 169 Wn.2d 815, 820, 239 P.2d 354(2010). This inquiry looks "to the

text ofthe statutory provision in question, as well as 'the context ofthe statute in

which that provision is found, related provisions, and the statutory scheme as a

whole.'" Id. (quoting State v. Jacobs, 154 Wn.2d 596, 600, 115 P.3d 281 (2005)). If

the plain language is ambiguous, this court"may look to the legislative history ofthe

statute and the circumstances surrounding its enactment to determine legislative

intent." Rest. Dev., Inc. v. Cananwill,Inc., 150 Wn.2d 674,682, 80 P.3d 598 (2003).

Turning first to the language itself, no reference is made in the text of MAR 7.3

or RCW 7.06.060 to any element of an award, either damages or costs. Legislative

bodies are aware of how to disaggregate the cost and damages portions of an eventual

award for the purposes of a fee-shifting provision, and elected not do so here. See,

e.g., RCW 4.84.250,.260,.270; RCW 64.55.160(4)(all expressly using the phrase

'Thus, a party may improve his or her position and not be the prevailing party for the purposes
of RCW 4.84.010. Likewise, a party may be considered a prevailing party at trial for the
purposes of RCW 4.84.010 and still fail to improve his or her position. These statutes are wholly
distinct.
Bearden v. McGill
No. 94320-6

"exclusive of costs" when the legislature intends for analysis to disregard costs). In

light ofthis legislative silence, the absence of an express provision excluding costs

from the MAR 7.3 analysis supports the inclusion of costs in that comparison. See

State V. LGElecs., Inc., 186 Wn.2d 1, 10, 375 P.3d 636 (2016).

The statutory history of related provisions also supports the inclusion of costs

in the MAR 7.3 analysis. MAR 7.1, which provides the deadline for requesting a trial

de novo, was amended in 2011. Whereas MAR 7.1 previously provided that an

aggrieved party could request a trial de novo within 20 days after the award, MAR 7.1

was amended so that the request for trial de novo could be made within 20 days ofthe

later of"(1)the award or(2)a decision on a timely request for costs or attorney fees."

MAR 7.1(a). The amendment essentially extended the timeline for requesting a trial

de novo, giving the parties an opportunity to consider the arbitrator's decision on costs

and attorney fees. This change signals an intent to allow parties to consider costs and

attorney fees before deciding whether to request a trial de novo.

Imagine a party that requests a trial de novo, based in part on what it correctly

assessed to be an incorrect denial of statutory costs and fees. At trial, the party is

properly awarded the fees it was incorrectly denied at arbitration. If costs are not

included in the MAR 7.3 comparison and that party received the same compensatory

damages at trial and at arbitration, then that party would be found not to have

"improved his or her position" and would be liable for the other party's fees, despite
Bearden v. McGill
No. 94320-6

prevailing with regard to an issue of such importance that the MARs were amended to

allow parties time to consider it. Such an outcome would be contrary to the balance

struck by fee-shifting, deterring frivolous appeals while preserving warranted

challenges.

The legislative history ofRCW 7.06.060 further supports including costs when

considering whether the party's position has improved. The final senate bill states that

"[t]he determination of whether or not the appealing party's position has been

improved is based on the amount awarded in arbitration compared to the amount

awarded at the trial de novo." FINAL B.Rep. ON S.B. 5373, at 1, 57th Leg., Reg. Sess.

(Wash. 2002). In 2011, the legislature made clear that statutory costs, such as RCW

4.84.010 costs, may be properly granted in mandatory arbitration. See MAR 3.2, 6.4,

7.1. The procedure by which a party may request statutory costs and attorney fees is

detailed in MAR 6.4. This provision was completely amended in 2011, along with

MAR 3.2, to resolve any ambiguity as to the arbitrator's authority to award statutory

costs and fees. 4A Karl B. Tegland, Washington Practice: Rules Practice

drafter's cmts. at 6-7, 15 (Supp. 2017). Because the amount awarded at arbitration

includes costs granted via MAR 6.4, the legislative history supports including

arbitration costs when considering whether the party's position improved. Thus,

based on the plain language ofthe rule and the legislative history of related
Bearden v. McGill
No. 94320-6

provisions,"improved the party's position" should be interpreted to include statutory

costs.

This interpretation is also consistent with how an ordinary person would

compare the arbitral award and the superior court judgment. MAR 7.3 "was meant to

be understood by ordinary people who,if asked whether their position had been

improved following a trial de novo, would certainly answer 'no' in the face of a

superior courtjudgment against them for more than the arbitrator awarded." Cormar,

Ltd. V. Sauro,60 Wn. App. 622,623, 806 P.2d 253 (1991); see also Niccum, 175

Wn.2d at 452; Nelson, 186 Wn.2d 385. MAR 7.3 is intended to shape the conduct of

the parties, and the rule should be interpreted as an ordinary party to an action would

understand it. In the present case, the superior court judgment exceeds the arbitral

award, and an ordinary person would therefore conclude that the defendant did not

improve his position.

In Bearden, the Court of Appeals found that while some costs should be

included in the MAR 7.3 comparison, any costs incurred solely due to the trial de

novo should be excluded. 193 Wn. App. at 144. Rather than task trial courts with

disaggregating common costs from solely trial costs, and in keeping with the

"ordinary person" standard, we hold that generally the comparison to be made is

between the total amended arbitration award, including costs, and the total trial award,

including costs.
Bearden v. McGill
No. 94320-6

In so holding, however, we do not disturb our ruling in Haley v. Highland. 142

Wn.2d 135, 155, 12 P.3d 119(2000). In Haley, we held that a substantive claim not

raised at arbitration but brought at trial could not be used to inflate the trial award for

the purposes of a MAR 7.3 analysis. Id. The inclusion of newly incurred statutory

costs is distinguishable from the addition of new claims, newly joined or released

parties, or other changes in a case's posture that have previously been found to render

a straight award-to-award comparison inequitable. See, e.g., Christie-Lambert Van &

Storage Co. v. McLeod, 39 Wn. App. 298, 304,693 P.2d 161 (1984)(a new claim

brought in the trial de novo not considered in the comparison); Hedger v. Groeschell,

199 Wn. App. 8, 18-20, 397 P.3d 154(2017)(sanctions based on conduct at trial

excluded from the comparison); Sultani v. Leuthy, 86 Wn. App. 753, 759,943 P.2d

1122(1997)(apportionment ofjudgment at trial among defendants rendered

comparison to joint and several arbitration award improper).

Trial costs are procedural in nature, are predictable, and can be factored into a

defendant's decision of whether or not to request a trial de novo. We leave to the trial

courts the task of determining in each case whether changed circumstances between

the arbitration and trial render a portion of the trial award not fairly comparable with

the arbitral award. Our holding is merely that generally, the inclusion of additional

statutory costs incurred as a result ofthe trial does not render a comparison unfair.
Bearden v. McGill
No. 94320-6

CONCLUSION

Because statutory costs are intended to be accounted for in the calculus of a

party considering a trial de novo, and in keeping with an ordinary person's
understanding of what it means to improve one's position, costs should be included
when determining whether a party improved his or her position. Because an ordinary

person would compare an arbitral award to a trial award without severing trial costs
from arbitration costs, even statutory costs incurred solely as a result ofthe trial de

novo should generally be included in the analysis. However, a substantive change

between arbitration and trial, such as a change in party posture or claims brought, may

render a simple award-to-award comparison unfair.

Bearden's statutory costs should be included, and the Court of Appeals is

reversed.

10
Bearden v. McGill
No. 94320-6

WE CONCUR:

UA

11
Bearden v. McGill, No. 94320-6
Yu, J.(concurring)

No. 94320-6

YU,J.(concurring)—The majority opinion arrives at the right result, but its

simple conclusion is lost in its meandering analysis. As succinctly summarized by

the petitioner: "In deciding whether the appealing party improved its position, an

ordinary person would compare the amount the party would have had to pay to

satisfy the arbitration award to the amount the party would be required to pay to

satisfy the trial court judgment." Pet'r Bearden's Suppl. Br, at 5 (formatting

omitted). This court agrees. Therefore, the calculation must include statutory

costs. No mind-boggling, convoluted explanation is required.

I concur.
Bearden v. McGill, No. 94320-6
Yu, J.(concurring)
Bearden (James) v. McGill(Dolphus & Kelli Knox)

No. 94320-6

WIGGINS, J. (dissenting)—To determine whether a party has improved its

position at trial after seeking a trial de novo from an arbitration award, we must decide

whether that party's pre- and posttrial positions include only the damages awarded for

the claim at each proceeding, or if the party's compared positions also include the

statutory costs awarded for expenses incurred during litigation. Because the amount

of costs awarded to a party generally has nothing to do with the merits of the dispute,

costs should not be considered in determining whether a party improved its position

at the trial de novo; only the arbitrator's award of damages and the damages awarded

at the trial de novo should be compared. I respectfully dissent.

I agree with the reasoning of the Court of Appeals in both of its opinions in this

case, and I have little to add.^ Bearden v. McGill, 193 Wn. App. 235, 372 P.3d 138

(2016){Bearden I), adhered to on remand, 197 Wn. App. 852, 391 P.3d 577 (2017)

{Bearden II). As the Court of Appeals held, whether a party improved its position at

trial should be determined by "comparing comparables." See Bearden 1, 193 Wn. App.

at 239; see also Wllkerson v. United Inv., Inc., 62 Wn. App. 712, 717, 815 P.2d 293

(1991); Haley v. Highland, 142 Wn.2d 135, 154, 12 P.3d 119 (2000). We should also

adhere to a rule that is easily '"understood by ordinary people.'" NIccum v. Enqulst,

^ I disagree with the Court of Appeais in one respect; because I believe that the award of costs does not
reflect the merits of the case, i wouid exclude all costs from the comparison of an arbitration damages
award to a trial de novo damages award.
Bearden (James) v. McGill(Dolphus & Kelli Knox), No. 94320-6
(Wiggins, J., dissenting)

175 Wn.2d 441, 452, 286 P.3d 966 (2012) (whether a party improves his or her

position at trial is meant to be understood by ordinary people (quoting Cormar, Ltd. v.

Sauro, 60 Wn. App. 622, 623, 806 P.2d 253 (1991)). Here, the Court of Appeals

recognized that in our leading cases interpreting this rule, Niccum v. Enquist, id., and

Nelson v. Erickson, 186 Wn.2d 385, 377 P.3d 196 (2016), this court calculated a

party's posttrial position by looking only to the damages award in the trial de novo,

exclusive of costs, and correctly concluded that the party's pretrial position must be

established the same way: by looking at the initial arbitration award, exclusive of costs.

Bearden II, 197 Wn. App. at 854 (citing Nelson, 186 Wn.2d 385); Niccum, 175 Wn.2d

441.

The purpose of mandatory arbitration is to discourage "meritless appeals from

arbitration as well as [to] preserv[e] superior court resources for trial of larger claims."

Fernandes v. Mockridge, 75 Wn. App. 207, 212, 877 P.2d 719 (1994). At the same

time, the "rules are not intended to divert from superior court, or burden with increased

risk, those claimants whose legitimate damage claims have a reasonable possibility

of exceeding the threshold amount." Id. In short, the rules are intended to discourage

meritless requests for trial de novo, while not unduly burdening legitimate damage

claims.

To balance the competing goals of discouraging meritless appeals and

accommodating legitimate damage claims, we should adopt a rule that is based on

the merits of cases and the legitimacy of the damage claims. The best bench marks

for evaluating whether a party brought a meritorious request for trial de novo are the
Bearden (James) v. McGill(Dolphus & Kelli Knox), No. 94320-6
(Wiggins, J., dissenting)

damages awarded at the arbitration compared to the damages awarded at the trial de

novo. A higher award at the trial de novo obviously means that the plaintiff improved

its position and a lower award that the defendant improved its position. This easily

understood and applied rule automatically balances the goals of discouraging

unnecessary trials de novo while encouraging legitimate claims.

In contrast, if we include costs in the calculation, we introduce an element that

has nothing to do with the merits or legitimacy of the claims. This case provides a

classic example. Plaintiff James Bearden was awarded $44,000 in damages by the

arbitrator. At the trial de novo, plaintiff was awarded less, $42,500. If we do not include

costs, it is clear that defendants Dolphus and Kelli Knox McGill improved their position

because their liability was reduced by $1,500. But when costs are included ($1,187 at

arbitration and $3,296 at trial), plaintiff Bearden's total award at arbitration becomes

$45,187 and at trial de novo $45,796. Defendants' position after the trial de novo

changed from a net reduction of liability of $1,500 on the merits to a net increase of

liability of $609. This modest $609 difference triggered an award of actual attorney

fees against the McGills in the amount of $71,800.

The costs that caused this significant swing in outcome consist of plaintiffs filing

fees, service of process fees, witness fees, deposition costs, medical records, police

report, expert report, and a statutory attorney fee of $200. None of these costs reflects

the merits of the defendants' decision to seek a trial de novo.

Comparing an arbitrator's award of damages to the damages award in a trial

de novo employs a meaningful measure of one's position pre- and posttrial: the merits
Bearden (James) v. McGill(Dolphus & Kelli Knox), No. 94320-6
(Wiggins, J., dissenting)

of the clainn. Not only does this approach "promote[ ] sinnplicity," as Judge Leach

remarked, Bearden II, 197 Wn. App. at 859, it parallels the legislative purpose of the

fee-shifting rule: to discourage meritless appeals. RCW 7.06.060; MAR 7.3.

Additionally, severing the merits of a trial de novo from a party's pre- and post-

trial positions by allowing costs to be a thumb on the improvement scale is not only

contrary to an ordinary person's understanding,^ it is inequitable: a defendant's

request for a trial de novo can be meritorious (i.e., the damage award is more

favorable than the arbitrator's award) and still result in the defendant's having not

improved her position, while a plaintiff's request for a trial de novo can be fruitless

(i.e., the damage award is less favorable than the arbitrator's award) and still result in

the plaintiff's having improved her position.

Conclusion

Comparing an arbitrator's award of damages to a trial de novo damage award

to determine whether a party improved its position at trial emphasizes the merits of a

case by employing a meaningful measure of one's position, while still discouraging

meritless requests for trials de novo. Including costs in this equation departs from our

precedent, promotes uncertainty, and turns a meaningful measure into an arbitrary

and inequitable determination. Therefore, I would affirm the Court of Appeals.

^ Ordinary defendants such as the McGllls would understand that their position had improved if
the jury verdict was lower than the arbitration award.
4
Bearden v. McGill, No. 94320-6
(Wiggins, J., dissenting)

I respectfully dissent.