De Young v. Brown

530

On appellant’s petition for attorney fees filed May 20, respondents’ response

to appellant’s petition filed June 3, and appellant’s reply filed June 13, opinion

filed May 1 (297 Or App 355, 443 P3d 642); petition for attorney fees and costs

allowed in the amount of $15,335.55 for attorney fees on appeal and $818 in

costs, remanded for a determination of attorney fees and costs before the circuit

court November 14, 2019

James B. DE YOUNG,

a resident of Damascus,

Plaintiff-Appellant,

v.

Kate BROWN,

in her official capacity as Governor of Oregon;

State of Oregon; and Clackamas County,

a political subdivision of the State of Oregon,

Defendants-Respondents,

and

DAMASCUS,

a municipal corporation,

Defendant.

Clackamas County Circuit Court

16CV12583; A162584

451 P3d 651

After successfully appealing a judgment of the circuit court declaring the

validity of the election results disincorporating the City of Damascus, plaintiff

seeks attorney fees in the amount of $41,086.05, relying on the Court of Appeals’

inherent equitable authority as described in Gilbert v. Hoisting & Port. Engrs.,

237 Or 130, 384 P2d 136 (1963), cert den, 376 US 963 (1964). Defendants object,

asserting that, because plaintiff’s appeal was decided on statutory grounds—

instead of on constitutional grounds—any award of attorney fees is foreclosed

by Bobo v. Kitzhaber, 194 Or App 419, 95 P3d 731 (2004). Held: Courts have the

inherent equitable power to award attorney fees when a plaintiff prevails on

statutory grounds. Under the “substantial benefit” theory of equitable attorney

fees, when a plaintiff acts in a representative capacity and confers a substantial

benefit on others, attorney fees may be awarded. In this case, plaintiff acted in

a representative capacity on behalf of the City of Damascus and its residents to

ensure that a special election to disincorporate the city complied with statutes

governing municipal disincorporation. The benefit conferred—both in regard to

the direct litigation and potentially in regard to how the legislature makes refer-

rals to voters—is substantial enough to warrant an award of attorney fees.

Petition for attorney fees and costs allowed in the amount of $15,335.55 for

attorney fees on appeal and $818 in costs; remanded for determination of attor-

ney fees and costs before the circuit court.

Cite as 300 Or App 530 (2019) 531

Katherine E. Weber, Judge.

Tyler Smith for petition.

Ellen F. Rosenblum, Attorney General, Benjamin Gutman,

Solicitor General, Jona J. Maukonen, Assistant Attorney

General, and Stephen Madkour for respondents.

Before DeVore, Presiding Judge, and Egan, Chief Judge,

and Powers, Judge.

POWERS, J.

Petition for attorney fees and costs allowed in the amount

of $15,335.55 for attorney fees on appeal and $818 in costs;

remanded for a determination of attorney fees and costs

before the circuit court.

532 De Young v. Brown

POWERS, J.

Plaintiff, a former resident and city councilor of the

City of Damascus, brought statutory and constitutional

challenges to a judgment that declared that the city validly

disincorporated pursuant to Ballot Measure 93, which the

voting residents of Damascus approved in a special election.

We agreed with plaintiff’s statutory arguments and reversed

the trial court’s judgment. See De Young v. Brown, 297 Or

App 355, 443 P3d 642 (2019) (concluding that the passage

of Ballot Measure 93 did not comply with ORS 221.610 and

ORS 221.621, which provide the only means for a city to

disincorporate, and that the legislature did not effectively

exempt Ballot Measure 93 from the requirements of those

statutes or otherwise provide an alternative means of disin-

corporation). Plaintiff now seeks an award of attorney fees

in the amount of $41,086.05, relying on this court’s inher-

ent equitable authority as described in Gilbert v. Hoisting &

Port. Engrs., 237 Or 130, 384 P2d 136 (1963), cert den, 376

US 963 (1964), Deras v. Myers, 272 Or 47, 535 P2d 541 (1975),

and Armatta v. Kitzhaber, 327 Or 250, 959 P2d 49 (1998).

Defendants object to an award of attorney fees, asserting

that, because plaintiff’s appeal was decided on statutory

grounds—instead of on constitutional grounds—any award

of attorney fees is foreclosed by Bobo v. Kitzhaber, 194 Or App

419, 95 P3d 731 (2004), rev den, 338 Or 374 (2005). Thus, as

framed by the parties, the issue is whether a plaintiff must

prevail on a constitutional issue in order for us to exercise

our inherent equitable power to award attorney fees. For the

reasons that follow, we conclude that courts have the inher-

ent equitable power to award attorney fees when a plain-

tiff prevails on statutory grounds. Applying that holding in

this case, we allow plaintiff’s petition for attorney fees in the

amount of $15,335.55 and costs in the amount of $818, and

remand the case for a determination of attorney fees and

costs before the circuit court.

Before turning to the specific arguments that the

parties raise on appeal, we begin with a brief overview of a

court’s equitable authority to award attorney fees. Generally

speaking, a court awards attorney fees only if such an award

is authorized by statute or contract. Swett v. Bradbury, 335

Or 378, 381, 67 P3d 391 (2003) (so stating). Courts also have

Cite as 300 Or App 530 (2019) 533

the inherent equitable power to award attorney fees. Id.;

Gilbert, 237 Or at 137; Deras, 272 Or at 65-66.

The inherent equitable power to award attorney

fees was first recognized in Oregon in Gilbert. In that case,

the plaintiffs, as representatives of all of the members of a

local union, brought suit in equity for the appointment of

a receiver, an accounting, and other relief. The trial court

awarded the plaintiffs their attorney fees, and the defen-

dants appealed, arguing that there is no authorization in

the statutes for an award of attorney fees under the circum-

stances of the case. The Supreme Court affirmed the award

of attorney fees, stating:

“The authority of a court of equity to award attorneys’ fees

is not derived solely from the statutes. Equity may under

some circumstances as a part of its inherent equitable pow-

ers award attorneys’ fees. This power is frequently exer-

cised where the plaintiff brings a representative suit on

behalf of other members of an organization * * *.”

Gilbert, 237 Or at 137. The court explained that no pecuni-

ary benefit to the organization is necessary, and that the

preservation of the democratic process in the functioning of

unions is a matter of primary concern, not only to union

members but to the public as well. Id. at 138. The court cau-

tioned, however, that attorney fees would not be awarded in

all equity cases; rather, recovery would be limited to cases

“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 pre-

vails in the suit is awarded attorneys’ fees.” Id. at 142.

Following Gilbert, the court awarded equitable attor-

ney fees to the plaintiff in Deras, who successfully sought a

declaratory judgment that statutes that limit amounts spent

on political campaigns are unconstitutional. Deras, 272 Or

at 49. The court stated that the protection of individual lib-

erties guaranteed against governmental infringement is an

even greater public interest than the public’s interest in the

preservation of the democratic functioning of unions that

was present in Gilbert. Id. at 66. Therefore, the court con-

cluded that the plaintiff in Deras, at least as much as the

534 De Young v. Brown

plaintiff in Gilbert, should not be required to bear the cost of

litigation that benefits all members of the public equally. Id.

In Armatta, a case involving a challenge to the con-

stitutionality of Ballot Measure 40, a crime victims’ rights

initiative, the Supreme Court awarded attorney fees to the

plaintiffs. In discussing the principles of the equitable attor-

ney fee doctrine, the court noted three prerequisites for an

award: (1) the proceeding must be one in equity; (2) the party

requesting attorney fees must be the prevailing party; and

(3) “in filing the action, the party requesting attorney fees

must have been seeking to ‘vindicat[e] an important consti-

tutional right applying to all citizens without any gain pecu-

liar to himself,’ Dennehy v. City of Gresham, 314 Or [600,]

602[, 841 P2d 633 (1992)], as opposed to vindicating ‘indi-

vidualized and different interests,’ Vannatta [v. Keisling],

324 Or [514,] 549[, 931 P2d 770 (1997)], or ‘any pecuniary or

other special interest of his own aside from that shared with

the public at large[,]’ Dennehy v. Dept. of Rev., 308 Or [423,]

427[, 781 P2d 346 (1989)].” Armatta, 327 Or at 287 (emphasis

added).

In this case, plaintiff asserts that attorney fees

should be awarded under this court’s inherent equitable

authority, because he brought the suit in a representative

capacity and succeeded in protecting the rights of others as

much as his own. See Deras, 272 Or at 66 (court’s inherent

equitable authority to award attorney fees frequently exer-

cised “where the plaintiff brings suit in a representative

capacity and succeeds in protecting the rights of others as

much as his [or her] own”). Plaintiff explains that he meets

the requirements for an equitable attorney fee award set

out in Armatta: (1) Plaintiff brought the case in equity and

sought only declaratory relief and a permanent injunction;

(2) he was the prevailing party; and (3) he sought to vin-

dicate important constitutional rights, along with his stat-

utory arguments, and was not seeking pecuniary gain for

himself. See Armatta, 327 Or at 287.

In objecting to plaintiff’s petition, defendants do

not dispute that plaintiff prevailed on appeal, nor do they

contest the reasonableness of hours expended on appeal.

Instead, defendants’ sole objection to an award of attorney

Cite as 300 Or App 530 (2019) 535

fees is focused on the court’s authority to award fees under

the circumstances of this case. That is, defendants assert

that, under Bobo, plaintiff’s judgment must have vindicated

an important constitutional right, and not be based merely

on statutory arguments. In Bobo, the plaintiffs prevailed

on appeal in an action seeking declaratory relief to restore

money to the 2001 “kicker” tax refund. 194 Or App at 421.

This court denied attorney fees, explaining that the court

decided the case on statutory grounds without considering

the constitutional arguments and that Deras and Armatta

do not provide for attorney fees when a plaintiff prevails on

statutory grounds. Id. According to defendants, although

plaintiff in this case argued that Ballot Measure 93 vio-

lated the Oregon Constitution, this court resolved the case

on statutory grounds and did not reach the constitutional

argument. See De Young, 297 Or App at 358. Thus, because

plaintiff’s appeal was decided on statutory grounds, defen-

dants assert that any equitable attorney fee award is fore-

closed by Bobo.1

Our review of cases involving the equitable power

to award attorney fees leads us to reject defendants’ argu-

ment. As this court explained in Bova v. City of Medford, 264

Or App 763, 767, 333 P3d 1144, rev den, 356 Or 574 (2014),

a court’s inherent, equitable power to award attorney fees

may be exercised in three types of cases: (1) when a party

1

Defendants also summarily assert that plaintiff’s reliance on Gilbert is

misplaced because (1) Gilbert predates Deras by more than 10 years and Bobo

by 50 and (2) Gilbert is limited to the union representative context. We disagree.

First, it is difficult to glean why the time that has elapsed between the vari-

ous cases affects the analysis, and defendants do not develop their argument

to explain the significance, if any. Similarly, defendants’ summary conclusion

that Gilbert is limited to the union context is not supported by any argument or

analysis. See Beall Transport Equipment Co. v. Southern Pacific, 186 Or App 696,

701 n 2, 64 P3d 1193, adh’d to as clarified on recons, 187 Or App 472, 68 P3d 259

(2003) (“[I]t is not this court’s function to speculate as to what a party’s argument

might be. Nor is it our proper function to make or develop a party’s argument

when that party has not endeavored to do so itself.”). In any event, as discussed

below, Gilbert represents one of three types of cases in which a court may use its

inherent equitable power to award attorney fees. Gilbert has not been superseded

by Deras or Bobo. In fact, Deras and later opinions relied upon Gilbert. See, e.g.,

Armatta, 327 Or at 289; Crandon Capital Partners v. Shelk, 342 Or 555, 157 P3d

176 (2007); Tanner v. OHSU, 161 Or App 129, 133-34, 980 P2d 186, rev den, 329

Or 528 (1999); Bova v. City of Medford, 264 Or App 763, 333 P3d 1144, rev den, 356

Or 574 (2014). Further, none of the opinions following Gilbert have limited Gilbert

to the union representative context.

536 De Young v. Brown

has vindicated an important constitutional right applying to

all citizens without any personal gain (the “constitutional”

theory), Pendleton School Dist. v. State of Oregon, 347 Or 28,

33-34, 217 P3d 175, adh’d to as modified on recons, 347 Or

344, 220 P3d 744 (2009); (2) when a party creates, discovers,

increases, or preserves a common fund of money to which

others also have a claim (the “common fund” theory), Strunk

v. PERB, 341 Or 175, 181, 139 P3d 956 (2006); and (3) when

a party’s action confers a substantial benefit, even if neither

constitutional nor financial, on others (the “substantial ben-

efit” theory).

The Supreme Court has described the principles

that underlie a court’s inherent authority to award attorney

fees when a party initiates litigation that benefits similarly

situated parties. The court explained that the equitable doc-

trine of attorney fees

“allows a court to award attorney fees to a party whose

legal action has conferred a benefit on others, when it

would be inequitable for that party to bear all the costs

of the litigation. See Gilbert, 237 Or at 137 (‘Equity may

under some circumstances * * * award attorneys’ fees * * *

where the plaintiff brings a representative suit on behalf

of other members of an organization, as for example where

a stockholder brings a derivative suit against a corpora-

tion.’). In those circumstances, the court may spread the

cost of litigation to avoid unjust enrichment to persons who

have benefitted from the litigation without shouldering any

of the costs, as well as to compensate the party’s attorneys

for the services that they have rendered.”

Crandon Capital Partners v. Shelk, 342 Or 555, 565, 157 P3d

176 (2007).

The court explained that when a party has conferred

a substantial benefit on others through litigation, the court

may use its equitable powers to award attorney fees. Id. at

562-63 (citing Krause v. Mason, 272 Or 351, 358, 537 P2d 105

(1975) (citing Gilbert, 237 Or 130).2 “[W]hen a shareholder

2

Though Crandon and Krause involved shareholder derivative suits, the

court in Crandon clarified that the substantial benefit theory is not limited to

proceedings involving corporations, as the doctrine began with Gilbert. Crandon,

342 Or at 562 n 4.

Cite as 300 Or App 530 (2019) 537

undertakes derivative litigation at its own expense and the

corporation realizes ‘substantial benefits’ as a result of the

litigation, it is equitable to spread the costs of the litigation

among those who have benefitted.” Crandon, 342 Or at 563

(citation omitted). The substantial benefit theory originated

in the idea that fees may be awarded when the benefit that

was conferred by the litigation was nonpecuniary and thus

provided no fund from which to award fees. See Gilbert, 237

Or at 138 (rejecting the defendants’ suggestion that no fees

should be awarded because the plaintiffs’ litigation had pro-

duced no pecuniary benefit). In a substantial benefit case,

fees are awarded not, as in a “prevailing party” case, to

make the plaintiff whole by shifting all costs to the wrong-

doer, but instead in recognition of the costs incurred and the

benefits conferred among all those on whose behalf the case

was brought. Crandon, 342 Or at 566; see also id. at 564 (dis-

tinguishing substantial benefit attorney fee claims from fee

claims under Deras or under statutory provisions requiring

that the plaintiff be a “prevailing party”).

Our statement in Bobo, on which defendants rely,

that the Deras rationale for awarding attorney fees has not

been extended to statutory claims, stemmed from the plain-

tiffs’ characterization of Deras and later cases. See Bobo,

194 Or App at 421 (“While invoking Deras and its progeny,

[the] plaintiffs recognize that the cases in which attorney

fees have been awarded under Deras have involved consti-

tutional, rather than statutory, victories.”). Prior decisions

in this area may not have been clear when describing or ref-

erencing the different types of equitable attorney fee cases,

particularly in describing the substantial benefit theory,

which has led to understandable confusion.3 For example,

3

The confusion regarding whether equitable attorney fees may be awarded

only in cases of constitutional significance began shortly after the Supreme

Court’s decision in Deras. In Marbet v. Portland Gen. Elect., 25 Or App 469, 488,

550 P2d 465 (1976), rev’d, 277 Or 447, 561 P2d 154 (1977), the petitioners sought

judicial review of an agency order recommending approval of the siting of a

nuclear power plant. This court denied the petitioners’ request for attorney fees,

citing the lack of a constitutional issue and the fact that agencies that permit

public intervention in licensing or in environmental decision-making could have

numerous intervenors, each representing different facets of the public interest.

Later, we cast doubt on the suggestion in Marbet that equitable attorney fees

may be awarded only in constitutional cases in Koon v. City of Gresham, 123

Or App 513, 517, 860 P2d 848 (1993), rev den, 318 Or 326 (1994). We noted that

538 De Young v. Brown

Armatta, which sets forth the prerequisites for an equita-

ble attorney fee award, quotes the phrase “important con-

stitutional right” from Dennehy v. City of Gresham, 314 Or

at 602. Armatta, 327 Or at 287. In Dennehy, the petitioners

sought a determination of whether Measure 5 applied to a

storm drain user charge imposed by the city. The Tax Court

held that the charge was subject to Measure 5, but denied

the petitioners’ request for attorney fees under Deras. The

Supreme Court affirmed, noting that “the propriety of an

award of attorney fees under Deras depends on the particu-

lar facts involved.” Dennehy, 314 Or at 604. In Dennehy, the

facts did not justify an award of attorney fees, because the

petitioners did not succeed in having a tax declared uncon-

stitutional; rather, they succeeded in having the storm drain

user charge declared a tax under Measure 5. The court found

those facts to be “a far cry from the facts of Deras, where the

plaintiff vindicated an important constitutional right apply-

ing to all citizens without any gain peculiar to the plaintiff.”

Id. Thus, the court did not deny attorney fees because the

petitioners did not vindicate an important constitutional

right; rather, the court denied the request for attorney fees

because the significance of the petitioner’s success did not

justify an equitable award of attorney fees.

Although Armatta quotes Dennehy’s use of the phrase

“important constitutional right,” neither opinion relied upon

the fact that the issue to be vindicated was constitutional.

In fact, in Armatta, the emphasis is on the requirement that

the plaintiff’s action must benefit the public as opposed to

an individual. See Armatta, 327 Or at 287-88 (focusing on

vindication of important rights applying to all citizens as

opposed to “vindicating individualized and different inter-

ests” or any pecuniary or special interest of the plaintiff’s

own “aside from that shared with the public at large” (inter-

nal quotation marks and citations omitted)). Moreover, in

the predicates for an award of attorney fees under the rationale of Deras are

(1) whether the subject of the action is one of general importance and (2) whether

the plaintiff sought to vindicate the rights of a large class of persons. Id.

Questioning Marbet, we stated, “Without deciding whether we were correct in

Marbet in limiting Deras only to questions of constitutional magnitude, it is clear

that the logic of the attorney fee analysis in Deras and later cases applies only

when the issue is one of some magnitude and when the plaintiff obtains some

cognizable public benefit.” Id. (emphasis in original).

Cite as 300 Or App 530 (2019) 539

Armatta, when concluding that the plaintiffs sought to ben-

efit all Oregonians by their challenge to the ballot measure

and that they should be awarded their attorney fees, the

court cited Gilbert, which did not involve a constitutional

challenge. Armatta, 327 Or at 289; see also Tanner v. OHSU,

161 Or App 129, 133-34, 980 P2d 186, rev den, 329 Or 528

(1999) (citing Armatta’s quote from Dennehy, but also citing

Armatta’s use of Gilbert as an example of a public benefit).

And in Dennehy, the use of the phrase “important constitu-

tional right” referred to the distinction between the facts of

Dennehy and the facts of Deras, but the Dennehy opinion does

not suggest that an equitable award of attorney fees requires

a constitutional challenge. See Dennehy, 314 Or at 604.

To summarize, the vindication of a constitutional

right has never been required by the Supreme Court in

awarding attorney fees under a court’s equitable powers.4

In Dennehy, the court used the phrase “vindication of an

important constitutional right” to distinguish the facts of

other cases that did not justify an equitable award of attor-

ney fees, but the court did not require that a case be decided

on a constitutional issue for an equitable attorney fee

award. Thus, just as vindication of an important constitu-

tional right may justify an equitable attorney fee award, an

award may be justified under either a “common fund” theory

or “substantial benefit” theory as well. The “substantial ben-

efit” theory, originally adopted in Gilbert and described in

more detail in Crandon and Bobo, is a form of the equitable

attorney fee doctrine that does not require the vindication of

a constitutional right.

In this case, plaintiff requests fees under the sub-

stantial benefit theory. That theory allows equitable attor-

ney 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.” Gilbert,

4

Nor has this court required vindication of a constitutional right before

awarding equitable attorney fees. See Williams v. City of Astoria, 43 Or App 745,

753, 604 P2d 411 (1979), rev den, 288 Or 667 (1980) (awarding attorney fees in a

declaratory action brought by city employees arguing that a city charter section

and city ordinance relating to political activities were preempted by statute).

540 De Young v. Brown

237 Or at 142. The action must confer a “substantial benefit”

on others. Bova, 264 Or App at 767. By successfully appeal-

ing a judgment declaring that the City of Damascus validly

disincorporated pursuant to Ballot Measure 93, plaintiff

conferred a substantial benefit on others. Plaintiff acted in

a representative capacity on behalf of the City of Damascus

and its residents to ensure that a special election to deter-

mine whether to disincorporate the City of Damascus com-

plied with ORS 221.610 and ORS 221.621, the statutes that

govern municipal disincorporation. We conclude that the

benefit conferred in this case—both in regard to the direct

litigation and potentially in regard to how the legislature

makes referrals to voters—is substantial enough to warrant

an award of attorney fees.5

Plaintiff has requested $41,086.05 in attorney fees.

Defendants argue that if attorney fees are awarded, plain-

tiff is entitled only to fees associated with the appeal, not

the trial court work. See ORCP 68 C(4)(a) (requiring peti-

tion for costs and fees to be filed in the trial court within 14

days of judgment); ORAP 13.10(2) (requiring petition for fees

to be filed within 21 days of the appellate court’s decision).

Defendants do not object, however, to the reasonableness of

the counsel’s rate or the number of hours billed on appeal.

We hold that plaintiff, as the prevailing party on appeal, is

entitled to reasonable attorney fees through the entire pro-

ceeding. See Williams v. City of Astoria, 43 Or App 745, 753,

604 P2d 411 (1979), rev den, 288 Or 667 (1980) (so stating).

Accordingly, we award plaintiff $15,335.55 in attorney fees

on appeal and remand the case for a determination of rea-

sonable attorney fees at the trial level.

As the prevailing party on appeal, plaintiff is

also entitled to an award of costs and disbursements. ORS

20.310(1).

5

We also note that following our decision in De Young, the legislature passed

Senate Bill (SB) 226 (2019) “to cure any defect in the procedures, and to ratify

the results” of any disincorporation vote held on the date of a primary election

before the effective date of SB 226, at which a majority of the voters participating

voted in favor of disincorporation. Or Laws 2019, ch 545, § 4(1). The legislature

also gave the Supreme Court original jurisdiction to determine the validity of the

substantive provisions of the law. Id. § 4(2). A petition for review was filed, and

that case is now pending before the Supreme Court. City of Damascus v. State of

Oregon, S066939.

Cite as 300 Or App 530 (2019) 541

“Costs and disbursements on appeal to the Court of

Appeals or Supreme Court or on petition for review by the

Supreme Court are the filing or appearance fee, the rea-

sonable cost for any bond or irrevocable letter of credit, the

prevailing party fee provided for under ORS 20.190, the

printing, including the excerpt of record, required by rule

of the court, postage for the filing or service of items that

are required to be filed or served by law or court rule, and

the transcript of testimony or other proceedings, when nec-

essarily forming part of the record on appeal.”

ORS 20.310(2). We may award only those costs that we have

authority to award, and we understand our authority to

extend only so far as those costs specified in ORS 20.310(2).

Cf. ORAP 13.05(6)(e) (even in the absence of objections, a

court may award requested costs only if it has “authority”

to do so). Consequently, we award plaintiff his filing fee

and transcript costs, totaling $718. We also award plain-

tiff the prevailing party fee of $100 under ORS 20.190

(1)(a). The remainder of plaintiff’s claimed costs, including

the $500 undertaking for costs that he filed in the trial court

as required by ORS 19.300(1) and his trial court filing fees,

are not authorized by ORS 20.310, and we therefore decline

to award them.

Petition for attorney fees and costs allowed in the

amount of $15,335.55 for attorney fees on appeal and $818

in costs; remanded for a determination of attorney fees and

costs before the circuit court.