Moro v. State of Oregon

No. 68 October 27, 2016 467

IN THE SUPREME COURT OF THE

STATE OF OREGON

Everice MORO;

Terri Domenigoni; Charles Custer; John Hawkins;

Michael Arken; Eugene Ditter; John O’Kief;

Michael Smith; Lane Johnson; Greg Clouser;

Brandon Silence; Alison Vickery; and Jin Voek,

Petitioners,

v.

STATE OF OREGON;

State of Oregon,

by and through the Department of Corrections;

Linn County; City of Portland;

City of Salem; Tualatin Valley Fire & Rescue;

Estacada School District; Oregon City School District;

Ontario School District; Beaverton School District;

West Linn School District; Bend School District;

and Public Employees Retirement Board,

Respondents,

and

LEAGUE OF OREGON CITIES;

Oregon School Boards Association;

and Association of Oregon Counties,

Intervenors,

and

CENTRAL OREGON IRRIGATION DISTRICT,

Intervenor below.

S061452 (Control)

Wayne Stanley JONES,

Petitioner,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD;

Ellen Rosenblum, Attorney General;

and Kate Brown, Governor,

Respondents.

S061431

468 Moro v. State of Oregon

Michael D. REYNOLDS,

Petitioner,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD,

State of Oregon; and Kate Brown,

Governor, State of Oregon,

Respondents.

S061454

George A. RIEMER,

Petitioner,

v.

STATE OF OREGON;

Oregon Governor Kate Brown;

Oregon Attorney General Ellen Rosenblum;

Oregon Public Employees Retirement Board;

and Oregon Public Employees Retirement System,

Respondents.

S061475

George A. RIEMER,

Petitioner,

v.

STATE OF OREGON,

Oregon Governor Kate Brown,

Oregon Attorney General Ellen Rosenblum,

Public Employees Retirement Board,

and Public Employees Retirement System,

Respondents.

S061860

On petitions for attorney fees and costs.

Petitions submitted on or before June 11, 2016.

Gregory A. Hartman, Bennett, Harman, Morris &

Kaplan, LLP, Portland, filed the petition for attorney fees

and costs for petitioners Everice Moro, Terri Domenigoni,

Charles Custer, John Hawkins, Michael Arken, Eugene

Ditter, John O’Kief, Michael Smith, Lane Johnson, Greg

Cite as 360 Or 467 (2016) 469

Clouser, Brandon Silence, Alison Vickery, and Jin Voek.

Also on the petition was Aruna A. Masih.

George A. Riemer, Sun City West, Arizona, filed the peti-

tion for attorney fees and costs on behalf of himself.

Michael D. Reynolds, Seattle, Washington, filed the peti-

tion for attorney fees and costs on behalf of himself.

Wayne Stanley Jones, North Salt Lake City, Utah, filed

the petition for costs on behalf of himself.

William F. Gary, Harrang Long Gary Rudnick P.C.,

Portland, filed the objections to petitions for attorney fees

and costs for respondents Linn County, Estacada School

District, Oregon City School District, Ontario School District,

West Linn School District, Beaverton School District, and

Bend School District and intervenors Oregon School Boards

Association and Association of Oregon Counties. Also on the

objections was Sharon A. Rudnick.

Keith L. Kutler, Assistant Attorney General, Salem, filed

the objections to petitions for attorney fees and costs for state

respondents. Also on the objections were Anna M. Joyce,

Solicitor General, and Michael A. Casper and Matthew J.

Merritt, Assistant Attorneys General.

Robert F. Blackmore, Innova Legal Advisors PC, Lake

Oswego, filed the objections to petitions for attorney fees and

costs for respondent Tualatin Valley Fire and Rescue. With

him on the objections was Heidi W. Mason.

Before Balmer, Chief Justice, and Kistler, Walters,

Brewer, Baldwin, and Nakamoto Justices.*

BALMER, C. J.

Attorney fees and costs awarded.

______________

*  Landau, J., did not participate in the consideration or decision of this case.

470 Moro v. State of Oregon

Case Summary: Moro v. State of Oregon, 357 Or 167, 351 P3d 1 (2015) affirmed

in part and denied in part challenges brought by petitioners to legislative amend-

ments aimed at reducing the costs of the Public Employee Retirement System

(PERS). Claimants, who are pro se petitioners and attorneys representing other

petitioners, seek their fees and costs for their efforts achieving that result. The

petitions for fees and costs were previously referred to a special master for recom-

mended findings of fact and conclusions of law. After the special master reported

those recommendations, the parties raised numerous issues. Held: (1) fees should

be awarded based on the common-fund and substantial-benefit doctrines and not

Deras v. Myers, 272 Or 47, 535 P2d 541 (1975); (2) self-represented attorneys are

eligible to receive a fee award under those the common-fund and substantial-

benefit doctrines; (3) a reasonable fee award under the lodestar approach must be

based on reasonable hourly rates and reflect reductions to account for duplicative

work and work on unsuccessful claims; and (4) an award in this case should be

paid for as determined by the Public Employees Retirement Board (PERB) in a

manner that is consistent with its statutory authority and fiduciary obligations.

Attorney fees and costs awarded.

Cite as 360 Or 467 (2016) 471

BALMER, C. J.

This matter is before us on petitions for attorney

fees and costs brought by a law firm and three individuals

(claimants) who participated in the underlying litigation.

In that litigation, claimants were petitioners or represented

petitioners who challenged legislation passed in 2013 that

changed the pension benefits paid to certain members of the

Public Employee Retirement System (PERS) by limiting the

statutory cost-of-living adjustment (COLA) and eliminating

a PERS income-tax offset for out-of-state retirees. In Moro

v. State of Oregon, 357 Or 167, 351 P3d 1 (2015) (Moro I),

this court largely agreed with petitioners’ argument that

modifications to the COLA formula impaired petitioners’

contractual rights, thus violating Article I, section 21, of the

Oregon Constitution. But the court rejected petitioners’ sim-

ilar challenge to the elimination of the income-tax offset.

Petitioners, who were active and retired members of PERS,

were the prevailing parties.

Following the decision in Moro I, claimants peti-

tioned for attorney fees and costs. State respondents and

county/school district respondents filed objections.1 We

referred those petitions to a special master for recommended

findings of fact and conclusions of law. Moro v. State, 358 Or

375, 381, 364 P3d 325 (2015) (Moro II). The special master

reported his recommendations to this court, and the parties

subsequently filed objections and responses to those recom-

mendations. The issues raised in those filings include which

legal doctrines justify an award of attorney fees in this case;

whether self-represented attorneys are eligible to receive an

award of attorney fees; whether the fees sought by claim-

ants are reasonable; and how to pay for an award of fees and

costs.

1

“State respondents” are the State of Oregon, Governor Kate Brown,

Attorney General Ellen Rosenblum, the Public Employees Retirement Board, and

the Public Employees Retirement System. “County/school district respondents”

are Linn County, Estacada School District, Oregon City School District, Ontario

School District, West Linn School District, Beaverton School District, and Bend

School District as well as intervenors Oregon School Boards Association and

Association of Oregon Counties. Further, respondent Tualatin Valley Fire and

Rescue joined in the objections filed by state respondents and county/school dis-

trict respondents.

472 Moro v. State of Oregon

After reviewing those filings, and for the reasons

described below, we conclude that fees should be awarded

based on the common-fund and substantial-benefit doc-

trines; that the self-represented attorneys are eligible to

receive a fee award under those doctrines; that a reasonable

fee award under the lodestar approach must be based on

reasonable hourly rates and reflect reductions to account for

duplicative work and work on unsuccessful claims; and that

an award in this case should be paid for as determined by

the Public Employees Retirement Board (PERB) in a man-

ner that is consistent with its statutory authority and fidu-

ciary obligations.

Four claimants seek compensation here. One claim-

ant is the law firm Bennett, Hartman, Morris & Kaplan, LLP

(“Bennett Hartman”), which represented the Moro group

of petitioners. The three additional claimants—Reynolds,

Riemer, and Jones—are PERS members who acted as pro

se petitioners in the underlying litigation. Reynolds and

Riemer, although pro se petitioners, also are attorneys and

seek both attorney fees and costs. Jones seeks only his costs.

Claimants who seek attorney fees have calculated

their fees using the lodestar method. Under the lodestar

method, a court determines a reasonable attorney fee award

by multiplying the reasonable hours expended by a reason-

able hourly rate and, when appropriate, enhancing the lode-

star amount with a fee multiplier. See Strawn v. Farmers

Ins. Co., 353 Or 210, 217, 297 P3d 439 (2013) (describing

the lodestar method). Bennett Hartman seeks $1,401,040

in fees, based on 1,693.8 hours of attorney time at between

$150 and $500 per hour and a fee multiplier of 2.0. Reynolds

seeks $562,000 in fees, based on 562 hours of attorney time

at $500 per hour and a fee multiplier of 2.0. And Riemer

seeks $397,500 in fees, based on 265 hours of attorney time

at $500 per hour and a fee multiplier of 3.0.

As it relates to costs, Bennett Hartman seeks

$62,066.13; Reynolds seeks $1,214.48; Riemer seeks

$1,159.15; and Jones seeks $1,479.24. Bennett Hartman’s

cost request is substantially higher because it includes the

costs of an expert witness who testified in support of peti-

tioners in the underlying litigation.

Cite as 360 Or 467 (2016) 473

State respondents and county/school district

respondents filed objections with this court asserting var-

ious reasons to deny or reduce the fees claimed. As an ini-

tial matter, respondents dispute what legal grounds are

available to justify attorney fees. Bennett Hartman and

Reynolds rely on the common-fund doctrine, while Riemer

relies on both the common-fund doctrine and on this court’s

decision in Deras v. Myers, 272 Or 47, 535 P2d 541 (1975).

Although respondents agree that a fee award may be jus-

tified under the common-fund doctrine, they dispute the

applicability of Deras, and county/school district respon-

dents additionally argue that a portion of the fee award

should be justified under the substantial-benefit doctrine.

Respondents also contend that, regardless of which doc-

trine justifies a fee award, no fees should be awarded to

Reynolds and Riemer because of their status as pro se peti-

tioners, rather than attorneys serving in a representative

capacity.

If fees are awarded, the parties agree that any fee

award allowed in this case must be reasonable. Respon-

dents object to the reasonableness of the fees sought—

specifically, whether claimants are using appropriate hourly

rates and fee multipliers and whether fees should be reduced

to account for duplicative work and work on the unsuccess-

ful tax-offset claim.

Finally, the parties dispute how to pay for any award

of costs and fees, namely, how to collect the money from the

beneficiaries of the litigation. Those beneficiaries consist of

active, inactive, and retired PERS members falling within

different tiers of membership. The assets of those beneficia-

ries are therefore spread out among different accounts held

within the Public Employees Retirement Fund (PERF). That

raises the question of whether the money for any awards

should come from, for example, payments being made to

retirees, PERS’s contingency reserve account, or individual

PERS accounts.

All those disputes were presented to the special

master, whose report contained recommended findings of

fact and conclusions of law. The special master concluded

that the common-fund and substantial-benefit doctrines

474 Moro v. State of Oregon

applied, but that Deras fees should not be allowed. The spe-

cial master further concluded that the common-fund and

substantial-benefit doctrines largely justified the fees sought

by Bennett Hartman, although he recommended using a 1.5

fee multiplier rather than the 2.0 fee multiplier that Bennett

Hartman requested.

The special master recommended no award of attor-

ney fees to Reynolds and Riemer, because they were acting

as pro se litigants rather than as attorneys. He also made

the alternative recommendation that, if this court were to

determine that Reynolds and Riemer were entitled to attor-

ney fees despite their status as pro se litigants, any fee

award should be adjusted based on his determination that

only 20 percent of their work contributed to the success of

the litigation. According to the special master, 80 percent

of their work either went to the losing tax-offset claim or

was duplicative of that performed by Bennett Hartman. The

special master did not recommend that any multiplier be

applied to fees awarded to Reynolds and Riemer.

Separate from attorney fees, Reynolds and Jones

seek their costs under ORAP 13.05; Bennett Hartman seeks

its litigation expenses as costs that should be awarded under

the common-fund doctrine; and Riemer seeks his costs

under both. The special master recommended an award of

costs to Bennett Hartman under the common-fund doctrine

in the amount of $62,066.13, to be paid in the same manner

as the fee award—that is, out of PERS funds held on behalf

of the PERS members who had benefitted from the litiga-

tion. And, based on ORAP 13.05, the special master recom-

mended granting the costs sought by Reynolds and recom-

mended small downward adjustments to the costs sought by

Riemer and Jones—leading to a total cost award of $548.05

for Riemer and $1,379.24 for Jones. With the exception of the

deduction applied to Riemer, we accept the special master’s

recommendations on costs.2

2

Riemer is the only party disputing the special master’s recommendation

with regard to costs. He argues that he is entitled to costs under the common-

fund doctrine, rather than the more limited costs available under ORAP 13.05,

as applied by the special master. For the reasons explained below, 360 Or at ___,

we agree that Riemer is entitled to costs under the common-fund and substantial-

benefit doctrines and, therefore, award him the costs that he requested: $1,159.15.

Cite as 360 Or 467 (2016) 475

The parties dispute numerous issues regarding

the special master’s recommended attorney-fee awards. We

address each of those issues below.

A.  Grounds for Attorney-Fee Recovery

The parties assert three grounds for attorney-fee

recovery: the common-fund doctrine, the substantial-benefit

doctrine, and this court’s decision in Deras. We address

that issue first because the rationales underlying different

grounds for recovering fees may influence how we resolve

other issues related to the determination of fee amounts.

Riemer is the only claimant seeking fees based on

Deras. Under Deras, a court has the discretion to award fees

if “the parties who request attorney fees prevailed [and]

those prevailing parties vindicated an important constitu-

tional right applying to all citizens” rather than “gain[ing]

something peculiar to themselves.” Lehman v. Bradbury,

334 Or 579, 583, 54 P3d 591 (2002).

In previous PERS litigation, we denied a claimant’s

request for Deras fees. Strunk v. PERB, 341 Or 175, 181,

139 P3d 956 (2006) (Strunk II). The special master in this

case recommends following that precedent. We agree. The

litigants in this case, including Riemer, were attempting

to gain something peculiar to themselves and other PERS

members. Although the number of people affected is large, it

is, nevertheless, a discrete group of people and a group that

is easily distinguished from the public as a whole. For that

reason, we deny Riemer’s request to award attorney fees

under Deras.

The remaining grounds offered by the parties are

the common-fund and substantial-benefit doctrines. Both

doctrines rest on the same equitable and restitutionary

grounds: to avoid unjust enrichment by spreading the liti-

gation costs among those who benefited from a legal action

brought by a plaintiff. Crandon Capital Partners v. Shelk,

342 Or 555, 566, 157 P3d 176 (2007). The common-fund

doctrine applies when a plaintiff’s “legal efforts create, dis-

cover, increase, or preserve a fund of money to which others

also have a claim.” Strunk II, 341 Or at 181. A party who liti-

gates such a case may recover the costs of those legal efforts,

476 Moro v. State of Oregon

including attorney fees, from the created or preserved fund.

Id. The substantial-benefit doctrine, on the other hand, ordi-

narily applies when a party’s legal efforts create nonliqui-

dated benefits—whether or not pecuniary—that are held in

common with others, such as when a union member’s lawsuit

benefits other union members, Gilbert v. Hoisting & Port.

Engrs., 237 Or 130, 137, 384 P2d 136 (1963), or a sharehold-

er’s lawsuit benefits the corporation and thus other share-

holders, Crandon Capital Partners, 342 Or at 562-63.

In common-fund and substantial-benefit cases,

a party pursuing its litigation objectives necessarily con-

fers benefits on nonparties, because the litigation impli-

cates interests that they share. See Restatement (Third) of

Restitution and Unjust Enrichment § 29 comment a (2011)

(“The underlying premise of all such claims in restitution is

that—by reason of the parties’ interconnected interests—the

claimant cannot pursue justifiable, self-interested objectives

without benefiting the [nonparties] as well.”). In Strunk II,

this court observed that the common-fund doctrine is “used

to spread litigation expenses among all beneficiaries of a pre-

served fund so that litigant-beneficiaries are not required to

bear the entire financial burden of the litigation while [non-

party-]beneficiaries receive the benefits at no cost.” 341 Or at

181. Similarly, in Crandon Capital, we linked the common-

fund and the substantial-benefit doctrines, noting that, for

both, “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 to spread the costs among those on whose

behalf the case was brought and who benefitted from plain-

tiff’s the efforts.” 342 Or at 566.

Thus, under both doctrines, nonparty beneficiaries

of the litigation may be required to contribute to the legal

expenses of the litigation that secured the benefits. A claim

for a contribution to those legal expenses may be brought

by the party who incurred the expenses or by the attorney

who provided the legal work. Strunk II, 341 Or at 183-84.3

3

In this case, as in the Strunk litigation, the Bennett Hartman firm’s con-

tract with the union that paid its fees provided that the firm would, on its own

behalf, seek an award of attorney fees if the petitioners prevailed. Thus, the

award that the firm seeks here is on its own behalf, not on behalf of the individual

clients or the union that paid its bills. Under the contract, the firm is obligated

Cite as 360 Or 467 (2016) 477

Requiring nonparties to pay the fee award is in contrast to

fee-shifting provisions, which generally require an adverse

party to pay the legal expenses of the prevailing party. See

Restatement § 29 comment c (“[T]here can be no common-

fund recovery against an adverse party.”).

We agree with the special master that both the

substantial-benefit and common-fund doctrines provide a

basis for attorney fees here. It is beyond dispute that the

litigation undertaken by petitioners conferred very sub-

stantial benefits on other PERS members. Some of those

members are retirees who, following enactment of the 2013

amendments, received smaller COLAs than they were enti-

tled to and, as a result of that litigation, are now recover-

ing that shortfall. Other PERS members, including retired

and active members, will benefit substantially over many

years from our decision that PERB cannot reduce the COLA

rights applied to PERS benefits earned before the legisla-

ture modified those COLA rights in 2013. See Moro I, 357 Or

at 184-87 (describing pre-amendment and post-amendment

COLA benefits).

According to the special master, the present com-

bined value of benefits of the COLA holding to all nonparty

beneficiaries is about $4.5 billion, and no party seriously

disputes that figure. As to the application of the common-

fund theory, there is disagreement over the size of the com-

mon fund established by the litigation. Claimants assert

that the litigation created a “fund” in the amount of the ben-

efit that the nonparty beneficiaries will receive over time—

essentially, the entire $4.5 billion of benefits identified by

the special master. County/school district respondents, how-

ever, argue that the only common fund created by the liti-

gation is the $66 million in restored COLA adjustments for

retired PERS members who had received lesser amounts

between the effective date of the 2013 COLA amendment

and this court’s decision invalidating those changes. The

remainder of the $4.5 billion, they argue, relates to amounts

that PERS members will receive over time, but is not a liqui-

dated “fund” of money subject to the common-fund doctrine.

to repay from any fee award the amount that it was paid by the union, but it is

entitled to retain any additional fees that are awarded.

478 Moro v. State of Oregon

We need not resolve that dispute over the size of

the common fund in order to determine attorney fees in this

case, however. As discussed, both the substantial-benefit

and common-fund doctrines provide a basis for an award of

fees here, and the difference between them is primarily in

the nature of the benefits created by the litigation. Under

both theories, the amount of the fee award is based on the

same equitable and restitutionary considerations. Indeed,

the Restatement treats the substantial-benefit doctrine as

an application of the common-fund doctrine, where the com-

mon fund is an entity in which the party and other benefi-

ciaries have interconnected interests. See id. at § 29 com-

ment f (“The standard example of a fund of this second type

involves corporate stock: in the terminology of Section 29,

the corporation itself is then the ‘fund’ and its sharehold-

ers the beneficiaries.”). Accordingly, we turn to a consider-

ation of the appropriate fee awards in this case, based on the

common-fund and substantial-benefit doctrines.

B.  Fees for Self-Represented Attorneys

The next question is whether self-represented attor-

neys may receive an attorney-fee award under the common-

fund and substantial-benefit doctrines. Claimants Reynolds

and Riemer contend that they are each entitled to an

attorney-fee award because they are both attorneys licensed

to practice law in other states—Reynolds in Washington

and Riemer in Arizona—and they performed legal work

in this litigation. Respondents object, arguing that neither

has the authority to practice law in Oregon and that the

equitable and restitutionary grounds for an award under

the common-fund and substantial-benefit doctrines do not

justify an award for self-represented attorneys. The special

master agreed with respondents and recommended award-

ing Reynolds and Riemer no attorney fees.

The special master reached that conclusion based

on both narrow technical grounds and broad policy grounds.

The narrow technical grounds are statutes and rules set-

ting out requirements for out-of-state attorneys to practice

law in Oregon courts, such as being admitted pro hac vice.4

4

See ORS 9.160(1) (providing that, with exceptions, only active members of

the Oregon bar may “practice law” in Oregon); ORS 9.241(1) (allowing out-of-state

Cite as 360 Or 467 (2016) 479

Neither Reynolds nor Riemer complied with those require-

ments. The special master therefore reasoned that neither

Reynolds nor Riemer was “practicing law” when they partic-

ipated in the litigation. Instead, both were allowed to partic-

ipate only because a statute, ORS 9.320, allows all parties to

a lawsuit, whether or not they are attorneys, to “prosecute[ ]

and defend[ ]” an action without violating the prohibition on

unauthorized practice of law. See also ORS 9.160(2) (estab-

lishing that self-represented parties do not violate ban on

the unauthorized practice of law).

For support, the special master contrasted the facts

presented by Reynolds and Riemer with the facts of Colby

v. Gunson, 349 Or 1, 238 P3d 374 (2010), a case in which

this court held that a self-represented attorney could obtain

fees under a statutory fee-shifting provision. In Colby, this

court noted that the self-represented attorney in that case

“is an attorney, in the ordinary sense of the word. He grad-

uated from law school, is a member of the Oregon State Bar,

and is authorized to practice law in this state. Throughout

the proceedings below, he was subject to the Oregon Rules

of Professional Conduct, along with other statutory provi-

sions that govern the conduct of attorneys.” Id. at 8. Because

Reynolds and Riemer were pro se litigants who had not com-

plied with the rules on pro hac vice admission, the special

master concluded that they were not authorized to practice

law in Oregon and, therefore, were not eligible for a fee

award.

The problem with relying on those narrow techni-

cal grounds is that they do not correspond to the equitable

goal served by a restitutionary attorney-fee award under the

common-fund and substantial-benefit doctrines—namely,

avoiding the unjust enrichment that would result from

allowing nonparties to enjoy the benefits of the litigation

without contributing to the costs of the litigation. A restitu-

tionary award for the services of another is generally lim-

ited to professional services. See Matter of Cont’l Illinois Sec.

attorney to practice in Oregon courts only if “the attorney is associated with an

active member of the Oregon State Bar”); ORAP 8.10(4) (allowing out-of-state

attorney to “appear by brief and argue the cause in a proceeding before an appel-

late court” if the attorney complies with UTCR 3.170); UTCR 3.170 (requiring

out-of-state attorney to be admitted pro hac vice).

480 Moro v. State of Oregon

Litig., 962 F2d 566, 571 (7th Cir 1992), as amended on denial

of reh’g (May 22, 1992) (Posner, J.) (“The basis for an award

of fees in a common-fund case is, as we said, restitutionary,

and the law of restitution (excepting salvage in admiralty)

generally confines the right to restitution to professionals,

such as doctors and lawyers.”) (citing 2 George E. Palmer,

The Law of Restitution, ch. 10 (1978)). Therefore, the under-

lying question in deciding on a restitutionary fee award is

whether Reynolds and Riemer were lawyers who performed

work normally performed by a lawyer.

The rules on pro hac vice admission and the unau-

thorized practice of law do not answer that question and are

not directed at unjust enrichment. Instead, those rules are

directed at consumer protection and prohibit a nonlawyer, or

an out-of-state lawyer who has not complied with the appli-

cable rules, from representing or advising another person as

a lawyer in Oregon. See Johnson v. Premo, 355 Or 866, 872,

333 P3d 288 (2014) (“The prohibition against nonlawyer

legal practice serves the dual purpose of protecting the pub-

lic interest and the rights of individual litigants.”). Those

rules do not apply to individuals representing themselves,

because, as noted above, parties to a lawsuit may generally

prosecute or defend themselves under ORS 9.320, regard-

less of whether they are lawyers.

Reynolds and Riemer failed to comply with the rules

of pro hac vice admission not because they could not satisfy

those standards, but because, as self-represented parties,

they were not required to comply with those rules. Their fail-

ure to comply with those rules means only that they did not

represent or advise others as lawyers; it does not answer the

question of whether they are lawyers and whether the work

that they performed was legal work, such that they may be

entitled to attorney fees under the substantial-benefit and

common-fund doctrines.

Further, our statement in Colby noting that the

attorney in that case was authorized to practice law in

Oregon, 349 Or at 8, should not be read as creating a stan-

dard for determining whether someone is a lawyer who per-

formed legal work. Instead, we stated only that someone

who is authorized to practice law in Oregon is an attorney,

Cite as 360 Or 467 (2016) 481

not that an attorney is only someone who is authorized to

practice law in Oregon.

Rather, like the attorney in Colby, Reynolds and

Riemer are lawyers. They went to law school and are active

members of bars in other states. And the work that they

performed in this case was legal work—namely, researching

the law, developing legal arguments, and presenting those

arguments in briefs to this court. Therefore, Reynolds and

Riemer were lawyers who performed legal work in this case.

The special master also denied Reynolds and Riemer

attorney fees based on broad policy grounds, which would

preclude fee awards even to self-represented attorneys who

were authorized to represent or advise others as a lawyer,

either as active members of the Oregon bar or as attorneys

admitted pro hac vice. The policy grounds that the special

master relied on are set out in Zucker v. Westinghouse Elec.,

374 F3d 221 (3d Cir 2004), where the court refused to award

fees under the common-fund doctrine to a self-represented

attorney who successfully raised objections to a proposed

class-action settlement. The court reasoned that “awarding

[a self-represented attorney] attorney’s fees potentially could

‘tempt’ other lawyer-shareholders to ‘advance garden vari-

ety objections because of the prospect of an award of attor-

ney fees for their personal service.’ ” Id. at 226. According to

the court,

“We note that [the self-represented attorney] did not incur

any financial liabilities for his work on this case. Failure

to award [the self-represented attorney] fees should not

discourage other shareholders from raising meritorious

objections in the future; it will only ensure that they pur-

sue objections with the assistance of third-party counsel.”

Id.5

There are two difficulties with applying those

grounds in this case. First, as to the concern that allowing

5

Those broad policy grounds have been applied in other federal cases to

deny fees to self-represented attorneys. See, e.g., In re Currency Conversion Fee

Antitrust Litig., 263 FRD 110, 132 (SDNY 2009), aff’d sub nom. Priceline.com,

Inc. v. Silberman, 405 Fed Appx 532 (2d Cir 2010); In re Texaco Inc. S’holder

Derivative Litig., 123 F Supp 2d 169, 173 (SDNY 2000), aff’d, 28 Fed Appx 83 (2d

Cir 2002).

482 Moro v. State of Oregon

fees would tempt self-represented attorneys to bring specious

claims, this court rejected a similar concern raised in Colby:

“Although not necessary to our decision here, we note that

the legislature has addressed that concern by permitting

attorney fees only to parties who ‘prevail[ ] in the suit’ and

by requiring that the attorney fee award be ‘reasonable.’

ORS 192.490(3). Further, the legislature has provided a

list of factors that a court must consider in determining the

amount of any attorney fee award, several of which protect

against the abusive fee generation potential that the Court

of Appeals feared. See ORS 20.075(1), (2) (listing factors to

be considered in determining amount of any attorney fee

award).”

349 Or at 8-9. Like the statutory fees at issue in Colby,

common-fund and substantial-benefit fees are allowed only

to prevailing parties and must be reasonable. Further,

common-fund and substantial-benefit fees include addi-

tional protections, because the fees cannot exceed the value

of the benefit conferred by the litigation. See Restatement at

§ 29(3)(b) (permitting an attorney-fee award from a common

fund only if “the measurable value added to the beneficiary’s

interest in the common fund by the claimant’s intervention

exceeds the beneficiary’s liability to the claimant”).

Second, as noted above, the purpose of a fee award

under the common-fund and substantial-benefit doctrines is

to avoid unjust enrichment. Whether the nonparty beneficia-

ries are enriched by the litigation, and whether that enrich-

ment is unjust, does not turn on whether that litigation was

brought by an attorney in a representative capacity or a non-

representative capacity. The California Supreme Court has

allowed fees to self-represented attorneys in common-fund

cases on that rationale:

“It would be inconsistent with the common fund theory to

deny [the self-represented attorney] compensation for his

services in these circumstances. The rationale of that the-

ory is that fees should be awarded to the person who cre-

ates such a fund because all who will benefit from it should

bear equally the burdens of its creation or preservation,

and this result is best achieved by taxing the fund itself.”

Consumers Lobby Against Monopolies v. Pub. Utilities Com.,

25 Cal 3d 891, 914-15, 603 P2d 41 (1979), overruled on other

Cite as 360 Or 467 (2016) 483

grounds by Kowis v. Howard, 3 Cal 4th 888, 838 P2d 250

(1992).

In this case, the litigation benefited nonparty

PERS members by invalidating COLA reductions, and

both Reynolds and Riemer participated in the litigation by

performing legal work as lawyers. That remains true even

though Reynolds and Riemer performed that work in a

self-represented capacity. As a result, Reynolds and Riemer

are entitled to an attorney-fee award necessary to avoid

unjust enrichment.

C.  Reasonableness of the Fees Requested

Determining the amount needed to avoid unjust

enrichment requires assessing the reasonableness of the

fees that claimants have requested. Under the common-fund

and substantial-benefit doctrines, an attorney-fee award is

limited to a reasonable fee. Claimants have the burden of

establishing the reasonableness of the fees that they are

requesting. Strawn, 353 Or at 225. There are three issues in

this case related to the reasonableness of the fees requested:

the hourly rates; the extent to which the legal work bene-

fitted the nonparty PERS members, including whether the

fees requested are duplicative of work by other claimants or

related to unsuccessful claims; and the fee multiplier, if any.

The special master found that the hourly rates

sought by Bennett Hartman were appropriate and that

all of Bennett Hartman’s work benefitted nonparty PERS

members. But the special master determined that Bennett

Hartman was entitled to a fee multiplier of 1.5, rather than

the 2.0 fee multiplier that Bennett Hartman sought. The

special master also recommended reasonable attorney fees

for Reynolds and Riemer—if this court determines, as we

have, that their status as pro se litigants does not prevent

them from receiving a fee award. In those alternative rec-

ommendations, the special master calculated the fee award

using the hourly rates sought by Reynolds and Riemer, but

he excluded work that went to the losing tax-offset claim and

work that was duplicative of that performed by Bennett and

Hartman. He concluded that only 20 percent of the work that

Reynolds and Riemer performed benefitted the nonparty

484 Moro v. State of Oregon

PERS members. Further, the special master recommended

that Reynolds and Riemer receive no fee multiplier.

1.  Hourly rates

Bennett Hartman seeks different hourly rates for

different attorneys, with the maximum rate of $500 per

hour for its lead counsel, Greg Hartman. Reynolds and

Riemer also seek fees based on an hourly rate of $500 per

hour. The special master concluded that Bennett Hartman’s

rates were reasonable. He did not address the reasonable-

ness of those rates for Reynolds and Riemer, but his alterna-

tive recommendations were based on the $500-per-hour rate

sought by Reynolds and Riemer.

The $500-per-hour rate exceeds Hartman’s normal

labor/employment rate of $315 per hour for work that is not

contracted to unions, which receive a lower rate because

they are long-standing clients. But the market for PERS-

related work is not the same as the market for normal labor/

employment work. Reynolds and Riemer offer no evidence

of their normal market rate. Reynolds appears to be retired

without an active legal practice. And Riemer is the staff

director of the Arizona Judicial Ethics Advisory Committee

without an active private practice.

A court should not rubberstamp hourly rates, par-

ticularly when an attorney seeks rates beyond what he or

she ordinarily would receive from paying clients and when

the rates sought are at the very top of the market, such as

those in this case. For context, in the 2012 Oregon State Bar

Economic Survey, which is the last one available, the hourly

billing rate for the 95th percentile of private practice attor-

neys in Portland was $450, and the 95th percentile for the

entire state was $405.

Nevertheless, the rates charged by Hartman and

Reynolds are justified, because they have substantial expe-

rience in appellate matters and both played a substantial

role in earlier PERS litigation.6 Hartman has represented

petitioners in each of the major PERS cases discussed in the

Moro I opinion. And Reynolds, while working as Assistant

6

The rates attributed to other attorneys at Bennett Hartman were all within

normal ranges for their experience levels.

Cite as 360 Or 467 (2016) 485

Attorney General, briefed and argued one of those cases,

Oregon State Police Officers’ Assn. v. State, 323 Or 356, 918

P2d 765 (1996), and participated in other PERS-related lit-

igation. As a result, they are uniquely knowledgeable about

the mechanics of PERS benefits and the relevant legal argu-

ments. And PERS cases are generally high stakes and are

both factually and legally complicated. So a rate at the top

of the market is not unreasonable for those skills. We there-

fore conclude that the hourly rates requested by Bennett

Hartman and Reynolds are reasonable.

It is difficult, however, to justify Riemer’s work at

that same rate. Although he has appellate experience brief-

ing and arguing attorney disciplinary cases before this

court in his previous role as General Counsel of the Oregon

State Bar, he has no particular expertise in PERS litiga-

tion. Based on his appellate experience but his lack of PERS

experience, we conclude that a reasonable hourly rate for

Riemer’s work is at the 75th percentile from the 2012 report,

which was $350 for Portland.

2.  Extent of the benefit provided by the work

“The cases are unanimous that simply doing work

on behalf of the class does not create a right to compensa-

tion; the focus is on whether that work provided a benefit to

the class.” In re Cendant Corp. Sec. Litig., 404 F3d 173, 191

(3d Cir 2005) (emphasis in original). For example, this court

has previously refused to award substantial-benefit fees to

parties that “gave no attention in their briefing and argu-

ment to the statute and rule on which the court’s ultimate

disposition turned.” Leo v. Keisling, 329 Or 273, 280, 986

P2d 562 (1999) (refusing equitable fees where the parties

made constitutional arguments but the court relied on stat-

utory grounds to reach its result).

The principle that compensable legal work must

benefit the nonparty beneficiaries has been applied by other

courts to deny or reduce fees to account for work on unsuc-

cessful claims. See, e.g., In re Enron Corp. Sec., Derivative &

ERISA Litig., 586 F Supp 2d 732, 822 (SD Tex 2008) (consid-

ering work on unsuccessful claims). It has also been applied

to account for duplication of effort. See, e.g., Reynolds v.

Beneficial Nat. Bank, 288 F3d 277, 288-89 (7th Cir 2002)

486 Moro v. State of Oregon

(denying fees to settlement objectors who “added nothing”

because lead counsel made same objections). The parties

dispute the extent to which the requested fees should be

reduced to account for work on unsuccessful claims or for

duplicative work. We address those issues separately.

In this case, petitioners presented numerous argu-

ments related to two broad categories of PERS benefits: the

COLA and the income-tax offsets for out-of-state retirees.

Petitioners prevailed on the COLA claim but not on the

tax-offset claim. To determine any reasonable amount of

fees, we must consider whether a fee award should include

fees for work advancing the unsuccessful claim for tax off-

sets. The special master did not reduce Bennett Hartman’s

fees to account for unsuccessful claims, but, in his alterna-

tive fee award for Reynolds and Riemer, the special mas-

ter reduced the award to account for work on unsuccessful

claims. Reynolds and Riemer object to that reduction. And

state respondents object to the special master’s failure to

similarly reduce Bennett Hartman’s fees to account for work

on the tax-offset claim.

In Strunk v PERB, 343 Or 226, 169 P3d 1242 (2007)

(Strunk III), this court did not reduce attorney-fee awards

to account for work on unsuccessful claims, but it is unclear

to what extent that issue was considered by the court or

previously presented to the special master in that case.

Nevertheless, while considering other proposed reductions,

the court announced the applicable standard for determin-

ing whether work contributed to the benefits in that case:

“[A]fter examining respondents’ other billing-related objec-

tions and carefully scrutinizing petitioners’ billing records,

we conclude that the requisite nexus between the benefits

provided in this case and the fees sought as a result is miss-

ing for some items that petitioners’ seek compensation for.”

Id. at 240. As a result, the court applied a standard requir-

ing a “nexus between the benefits provided * * * and the fees

sought.” Id.

That standard is similar to a frequently used stan-

dard in other courts: “whether the successful and unsuccess-

ful claims are based upon the same facts and legal theories,

i.e., whether the claims are related.” In re Enron Corp. Sec.,

Cite as 360 Or 467 (2016) 487

Derivative & ERISA Litig., 586 F Supp 2d at 822 (quotations

omitted). Under that standard, “[w]hen the successful and

unsuccessful claims involve a ‘common core of facts’ or ‘are

based on related legal theories,’ then attorney fees incurred

in the presentation of unsuccessful claims are recoverable

on the theory that they contributed to the plaintiff’s ulti-

mate success.” Id.

In this case, claimants argue that there was a

sufficient nexus between the successful COLA claim and

the unsuccessful tax-offset claim because the two claims

overlapped—that is, both were premised on constitutional

rights against the impairment of contracts, and the fac-

tual record largely addressed the respondent’s public policy

defenses related to economic necessity.

That overlap fails to establish a sufficient nexus,

however. To the extent that there is overlapping work,

that work would be treated as if it went solely to the fee-

generating COLA claim, because fees for that work would

have been incurred regardless of the non-fee-generating

claim. See Estate of Smith v. Ware, 307 Or 478, 481-82, 769

P2d 773 (1989) (holding, in a statutory fee case, that overlap-

ping work is treated as going to the fee-generating claim).

So the question is the extent to which nonoverlapping work

on the tax-offset claim contributed to the benefits.

On that question, claimants—including Bennett

Hartman—fail to present grounds for concluding that non-

overlapping work on the tax-offset claim benefitted the non-

party PERS members. The lack of such grounds is acute in

this case, because the COLA claim and the tax-offset claim,

if successful, would have benefitted two different classes

of potential nonparty beneficiaries. The COLA claim ben-

efits all PERS members who earned PERS benefits before

the 2013 legislative modifications. And the tax-offset claim

would have benefitted only those PERS members who

earned PERS benefits before October 1991—and only those

who now or in the future will reside outside of Oregon. It

is inconsistent with the restitutionary rationale justifying

the common-fund and substantial-benefit awards to require

PERS members who did not earn benefits before October

1991 to pay for legal work on the tax-offset claim, because

488 Moro v. State of Oregon

that work was never going to benefit them in the first place.

As a result, all fees awarded to Reynolds, Riemer, and

Bennett Hartman must be reduced to exclude work on the

tax-offset claim.

Respondents further argue that claimants’ fees

should be reduced to account for duplication of effort. When

two attorneys duplicate their efforts, they are generally

not both benefiting the nonparty beneficiaries of the liti-

gation, because the same benefit would result even if one

of the attorneys had not performed the duplicative work.

The special master recommended finding that, in this case,

Reynolds, Riemer, and Bennett Hartman duplicated their

efforts because each presented substantially similar legal

arguments with regards to the prevailing claim—namely,

that the COLA adjustments violated the right against

impairment of contract. The special master recommended

accounting for that duplication by reducing the fees awarded

to Reynolds and Riemer, but not the fees awarded to Bennett

Hartman.

Reynolds and Riemer object to the reductions rec-

ommended by the special master. They argue that there

are no grounds in this case to determine that their work

duplicated Bennett Hartman instead of determining that

Bennett Hartman duplicated their work. In Strunk III, for

example, the court stated that “the fact that petitioners’ law-

yers briefed some of the same issues in the course of bring-

ing their cases to this court * * * without more, is insufficient

to support” reducing the awards for duplication of effort.

343 Or at 239. The court went on to say that the record in

that case did not allow the court to determine which attor-

neys duplicated the efforts of which other attorneys. Id.

(“[T]hat argument assumes that the efforts of the Strunk

petitioners’ and their lawyers was the sine qua non of the

fund preserved here, while the work product of the other

parties named as petitioners in this case derived solely from

that effort.”).

This case, however, is distinguishable from Strunk

III. In that case, the special master made no findings rel-

evant to the issue of duplication. Moro II, 358 Or at 381

(“In Strunk III, the record created by the parties before the

Cite as 360 Or 467 (2016) 489

special master did not allow this court to determine the

extent to which those attorneys had duplicated their efforts

or directed their efforts toward unsuccessful claims.”).

In this case, however, by recommending that we reduce

Reynolds’ and Riemer’s fees to account for duplication of

Bennett Hartman, the special master found, in effect, that

Bennett Hartman acted as the lead counsel. That conclu-

sion is in accord with the apparent role of the attorneys in

the case, with Bennett Hartman taking the lead role in lit-

igating each stage of the case, from the factfinding proceed-

ings before the special master to oral arguments before this

court.

Because Bennett Hartman clearly acted as lead

counsel, Reynolds and Riemer had the burden to demon-

strate that the contributions of their work went beyond that

performed by Bennett Hartman. See, e.g., In re Cendant

Corp. Sec. Litig., 404 F3d at 191 (“In the ordinary case,

most work that lead counsel does will typically advance

the class’s interests, but the inquiry into non-lead counsel’s

work must be more detailed. Non-lead counsel will have to

demonstrate that their work conferred a benefit on the class

beyond that conferred by lead counsel.” (Emphasis in origi-

nal.)). Reynolds and Riemer have not satisfied that burden

beyond the fact that their duplicative work likely added some

marginal persuasive force to the argument. As a result, we

conclude that Reynolds’ and Riemer’s fee awards should be

reduced to account for their duplication of effort.

Having established that claimants should not receive

fees for work on the unsuccessful tax-offset claim and that

Reynolds and Riemer should not receive fees for work that

duplicated Bennett Hartman’s work on the COLA claim, we

must determine how much that work amounts to. The diffi-

culty with making that determination is that claimants pro-

vided this court with billing records that largely omit any

reference to which claim they were working on. That omis-

sion weighs against claimants, because it is their burden to

establish the reasonableness of the fees they are requesting.

Strawn, 353 Or at 225. Claimants chose not to update their

billing records even after this court instructed the special

master to make findings of fact on those issues and even

after the special master allowed claimants the opportunity

490 Moro v. State of Oregon

to do so. See Moro II, 358 Or at 381 (“[W]e instruct the spe-

cial master to make findings of fact, if possible, on the extent

to which the attorneys duplicated their efforts or directed

their efforts toward unsuccessful claims.”).

Without updated billing records, the special mas-

ter determined that Reynolds and Riemer should receive

20 percent of their requested fees and made no findings

with regard to Bennett Hartman’s work on the tax-offset

claim. As noted, Reynolds and Riemer object to the special

master’s reduction, and state respondents again argue that

those individuals should receive no fees and that Bennett

Hartman’s award should be reduced to account for duplica-

tion, as well as for work on the tax-offset claim.

We agree with some of respondents’ arguments

regarding the special master’s determinations. Moreover,

because claimants have the burden of establishing their

entitlement to fees and the reasonableness of their request,

the lack of more specific billing records weighs against them.

Although we have some, often nonspecific, time-keeping

records, as well as the transcript of the special master’s

hearing on the merits and the briefing before the special

master and in this court, adjustments to the fee requests to

account for duplication and work on the unsuccessful claims

are admittedly rough. Nevertheless, we agree with the spe-

cial master that adjustments are appropriate for time spent

on the unsuccessful tax-offset claim and for duplication of

work. We also agree with the special master’s implicit find-

ing that Bennett Hartman acted as lead counsel throughout

the proceeding.

Our review of the record and the proceedings in

the litigation suggests substantial duplication by Reynolds

and Riemer of the arguments of lead counsel concerning

the COLA and substantial time spent on the tax-offset

issue. The latter, of course, is not surprising, as Reynolds

and Riemer, PERS retirees now living outside the state, are

directly affected by that change in PERS benefits. As to the

duplication of effort on the COLA, Reynolds’ and Riemer’s

submissions do not identify any specific value that their

work added to petitioners’ case or any novel legal or factual

argument that Bennett Hartman did not make and that

Cite as 360 Or 467 (2016) 491

this court relied on in its decision. Respondents assert that

Reynolds and Riemer should receive no fee award because all

their work essentially duplicated Bennett Hartman’s work.

In our view, as noted, their work likely added some marginal

persuasive force to petitioners’ arguments. In these circum-

stances, we conclude that probably 90 percent of the time

incurred by Reynolds and Riemer essentially duplicated

Bennett Hartman’s work on the COLA issue or was spent

on the tax-offset issue. Therefore, Reynolds and Riemer are

entitled to 10 percent of their requested time. That entitles

Reynolds to compensation for 56.2 hours, which, at $500 per

hour, results in a lodestar amount of $28,100. Riemer is enti-

tled to compensation for 26.5 hours, which, at $350 per hour,

results in a lodestar of $9,275.

As noted, the special master made no adjustment

to the Bennett Hartman request for work on the tax-offset

claim. Based on our review of the record, and again con-

sidering the burden on the claimants to prove their claim

for fees, we find that 20 percent of the time submitted by

Bennett Hartman went to work on the tax-offset claim that

did not overlap with the COLA claim. Therefore, Bennett

Hartman is entitled to 80 percent of its requested time. That

entitles Bennett Hartman to compensation for 1,355 hours,

which results in a lodestar of $560,399.46.

3.  Fee multiplier

The final component in determining a reasonable

fee award is the multiplier. The special master recom-

mended awarding Bennett Hartman a 1.5 fee multiplier for

the exceptional success of the litigation and, in his alter-

native recommendations, recommended no fee multiplier for

Reynolds and Riemer. Bennett Hartman does not object to

the recommended fee multiplier of 1.5. Reynolds and Riemer

argue that they are entitled to the same fee multiplier as

Bennett Hartman because they shared in the same excep-

tional success of the litigation.

The grounds for a fee multiplier have been stated

differently in different cases. In Strawn, this court noted

that a fee multiplier may be justified to account for the risk

of nonpayment in a contingency fee case. 353 Or at 226. In

492 Moro v. State of Oregon

Strunk III, the court justified a fee multiplier based on the

“exceptional success” of the litigation, securing over $1 bil-

lion in benefits for PERS members. 343 Or at 246. The court

then stated that “factors such as the difficulty and complex-

ity of the issues involved in this case, the value of the inter-

ests at stake, as well as the skill and professional standing

of lawyers involved also support an enhancement of fees.” Id.

In this case, we place greater weight on the risk

of nonpayment, because the additional factors discussed in

Strunk III were already considered when determining rea-

sonable hourly rates for claimants’ work. As noted, none of

the claimants rely on a market rate that reflects a negoti-

ated rate with a client. So the hourly rates are a construc-

tion based on the same type of factors noted in Strunk III to

calculate a fee multiplier. That is particularly true because,

as noted above, the stakes of the litigation are a factor in

determining the attorneys’ hourly rates. Although the mon-

etary impact of this case will, over time, be larger than

the monetary impact of the Strunk litigation, that impact

reflects the higher dollar value of the COLA change that the

court invalidated, rather than a more exceptional success

by the attorneys as compared to the attorneys in the Strunk

litigation.7 The justification for a higher hourly rate is that

we would have expected another attorney who could also

command that rate to reach a similar result in this case.

Nevertheless, a fee multiplier may be justified

when the attorney’s payment is based on a contingency-fee

arrangement or there is otherwise a delay in getting paid.

Bennett Hartman was on a quasi-contingency-fee arrange-

ment, because, although it was paid its normal union rates,

it retained the right to seek to recover and keep market

rates in a fee request, if it prevailed. We therefore find that

Bennett Hartman is entitled to the fee multiplier of 1.5 rec-

ommended by the special master.

Reynolds and Riemer, however, were not working

based on a contingency-fee or even quasi-contingency-fee

arrangement. Instead, as self-represented parties, they did

7

In Strunk III, the court awarded the fee multipliers sought by the claim-

ants. 343 Or at 246. For some, that was a 2.0 fee multiplier; and for others (includ-

ing Bennett Hartman), that was a 1.5 fee multiplier. Id. at 233.

Cite as 360 Or 467 (2016) 493

not have a fee arrangement at all. Therefore, the grounds

that entitle Bennett Hartman to a 1.5 fee multiplier do not

apply to Reynolds and Riemer. And the other factors justify-

ing a fee multiplier in Strunk were already used to calculate

their reasonable hourly rates. Therefore, consistent with the

special master’s recommendation, we find that Reynolds

and Riemer are not entitled to a fee multiplier.

Based on those findings, and our findings above

establishing the reasonable rates and reasonable time for

claimants, we conclude that Bennett Hartman is entitled

to $840,599.19 in attorney fees, Reynolds is entitled to

$28,100 in attorney fees, and Riemer is entitled to $9,275 in

attorney fees. When combined with the cost awards noted

above, we conclude that each claimant is entitled to the fol-

lowing awards: Bennett Hartman, $902,665.32; Reynolds,

$29,314.48; Riemer, $10,434.15; Jones, $1,379.

C.  Funding the Fee Award

Having calculated the amounts to which claimants

are entitled, we turn to the issue of the appropriate source

of payment. The restitutionary principles underlying an

award of fees from a common fund suggest that the award

be paid from the PERF in a manner that affects only the

PERS members who benefit from the litigation—and not

PERS members who do not benefit from the litigation or

PERS employers. And, ideally, PERS members would con-

tribute to the fee award in proportion to the benefits that

they receive. See Restatement at § 29(2) (beneficiaries may

be required to pay from the “common fund for their benefit,

in proportion to their respective interests therein”).

But there are administrative obstacles to reaching

those ideals—namely, there is no segregated fund consist-

ing of the increased COLAs that PERS members who will

benefit from the litigation will receive over time. (Indeed,

because of the different terms of service and retirement

status of those members, there could not be such a fund.)

Instead, the PERF is made up of numerous accounts that

are designated for different purposes. According to a decla-

ration submitted by PERS Assistant Chief Administrative

Officer Mary Dunn, there are three accounts (or categories

of accounts) containing money belonging to PERS members.

494 Moro v. State of Oregon

Retired members have money in the “benefits-in-force”

reserve. Nonretired Tier One and Tier Two members have

money in their “member accounts.” And all PERS members

who earned benefits after the 2001 creation of the Oregon

Public Service Retirement Plan (OPSRP), which includes

Tier One, Tier Two, and OPSRP members, have money in

the Individual Account Program.

Money in those accounts is invested, and the invest-

ment income is credited back into the accounts. According to

Dunn, PERB can take money out of the investment income

before it is credited back into the specific accounts and use

that money to pay for the award of fees and costs. And,

because the credits are made proportional to each member’s

interest, withdrawing money from the investment income is

automatically ratable (in the same way that requiring a cor-

poration to pay a fee award in a common-fund or substantial-

benefit case is automatically ratable to each shareholder’s

interest in ownership).

The problem with that approach is that the fee

award must be paid now, while the actual value of the COLA

benefits to specific PERS members will depend on which tier

the member is in, as well as on future events. Tier One and

Tier Two members, but not OPSRP members, are entitled to

their COLA “bank” established prior to the amendments at

issue, which increases the value of the benefits. Moro I, 357

Or at 186-87 (describing COLA bank). Further, the earlier

a member retires and begins to receive benefits, the more

years he or she will receive COLA adjustments. As a result,

the COLA benefits will comprise a larger portion of those

members’ expected PERS benefits.

As an alternative, Bennett Hartman suggests

that at least some of the money for the fee award could be

drawn from the PERS contingency reserve. The contingency

reserve is funded through money that PERB sets aside from

investment income in certain years. ORS 238.670(1)(a).

One of the statutory purposes for the contingency reserve is

“[t]o pay any legal expenses or judgments that do not arise

in the ordinary course of adjudicating an individual mem-

ber’s benefits or an individual employer’s liabilities.” ORS

238.670(1)(b). This fee award fits that statutory description.

Cite as 360 Or 467 (2016) 495

Respondents object, however, noting that the contingency

reserve is funded through investment income from the

entire PERF, which includes funds containing employer con-

tributions that have not yet been allocated to other accounts.

If the fee award is paid from the contingency reserve, they

point out, then PERB may have to make larger future pay-

ments into the contingency reserve, which will be taken in

part from employer contributions. The effect of that would

be to marginally increase the amount that employers will

need to contribute in the future.

The special master did not make any finding as to

which PERF accounts would be appropriate to use and how

much money should be used from each account. Instead,

he recommended ordering PERB to pay the award and to

resolve later disputes that arise, if any, about the manner in

which it had paid for the award.

We agree that the better course is to allow PERB

to determine, consistent with its statutory authority and

fiduciary obligations, how best to allocate the burdens of the

fee award among the accounts, including the contingency

reserve, held within the PERF. Our cases recognize that trust

law principles and applicable statutes give PERB discretion

to make reasonable decisions in operating PERS. See White

v. Public Employees Retirement Board, 351 Or 426, 440-41,

268 P3d 600 (2011) (discussing PERB’s duties and author-

ity). That authority to operate the system includes making

decisions related to litigation, and, as long as PERB acts

reasonably and consistently with statutory requirements

and its fiduciary duty to members, such decisions ordinarily

will be upheld, unless PERB has abused its discretion. Id. at

442-45 (discussing PERB’s authority to conduct and settle

litigation). We direct PERB to pay the amounts ordered from

such PERF accounts as it deems appropriate, in the exercise

of its discretion and subject to its statutory and fiduciary

obligations and the principles discussed in this opinion.

To summarize: We conclude that Bennett Hartman

is entitled to $902,665.32 in costs and attorney fees;

Reynolds is entitled to $29,314.48 in costs and attorney

fees; Riemer is entitled to $10,434.15 in costs and attorney

fees; and Jones is entitled to $1,379.24 in costs. PERB shall

496 Moro v. State of Oregon

determine, consistently with this opinion, how to pay the

award from the accounts held in PERF and shall pay the

amounts awarded.

Attorney fees and costs awarded.