Apples to Oranges: No More Comparing the Comparables When Deciding Fee Awards in Trial De Novo After Mandatory Arbitration

Civil lawsuits brought in superior court seeking money damages of $50,000 or less are generally subject to mandatory arbitration.[1]  The legislature implemented this requirement in an effort to reduce court congestion and speed up the resolution of civil cases.[2]

After the arbitrator issues an award, any party may appeal to the superior court and request a trial de novo.[3]  But consistent with the overall purpose of the mandatory arbitration statutes and rules, RCW 7.06.060(1) provides that if the appealing party “fails to improve his or her position on the trial de novo,” the superior court “shall assess costs and reasonable attorneys’ fees against [that] party.”  MAR 7.3 contains similar language.  This one-way cost-shifting rule is intended “to encourage settlement and discourage meritless appeals.”[4]

Whether the appellant has improved his or her position on a trial de novo is usually clear – but not always.  Suppose, for example, the arbitrator awards the plaintiff $10,000 in damages and denies a request for prejudgment interest.  The defendant appeals, and the superior court awards the plaintiff $9,500 plus $1,000 in prejudgment interest, for a net judgment of $10,500?  Division 2 of the Court of Appeals has consistently interpreted RCW 7.06.060(1) and MAR 7.3 to require an award of attorneys’ fees and costs to the plaintiff in this circumstance.[5]  Until recently, however, Division 3 probably would have reached the opposite result, comparing not the aggregate amounts of the arbitration award and the trial court judgment, but only the “comparables” – meaning the award and the compensatory damages portion of the judgment.[6]  It is unclear how Division 1 would have decided the issue.[7]

Recently, however, in Niccum v. Enquist, the Washington State Supreme Court rejected the doctrine of comparing comparables.[8]  After the plaintiff (Niccum) obtained an arbitration award, the defendant (Enquist) appealed and Niccum offered to settle the case for $17,350, including costs and attorneys’ fees.[9]  Under RCW 7.06.050(1)(b), an unaccepted settlement offer replaces the amount of the arbitration award for the purpose of determining whether the appellant has improved his or her position on a trial de novo.  Enquist rejected Niccum’s offer, and the jury awarded Niccum $16,650 in damages.[10]  The trial court then gave Niccum $1,016.28 in statutory costs.[11]  Reasoning that to “compare comparables” (damages awards only) it would have to subtract $1,016.28 from Niccum’s settlement offer, the trial court concluded that the jury had awarded Niccum more in damages than the “damages” portion of his offer.[12]  The trial court therefore awarded attorneys’ fees and costs to Niccum under RCW 7.06.060(1).[13]  Division 3 affirmed.[14]

The Supreme Court reversed, in part because it “ha[d] not adopted the doctrine of comparing comparables.”[15]  “[C]omparing the jury’s $16,650 award to Niccum’s $17,350 offer of compromise does not involve a comparison of damages to damages plus costs, as Niccum suggests, but rather a comparison of damages to the lump sum that he offered to accept in exchange for settling the lawsuit. * * *  A straightforward application of the statutory language shows that Enquist improved his position on trial de novo.  We hold, therefore, that Niccum is not entitled to reasonable attorney’s fees.”[16]

Division 3 recently followed Niccum in Miller v. Paul M. Wolff Co.[17]  Miller sued his former employer for unpaid sales commissions.[18]  The arbitrator awarded Miller about $22,800 in damages, but denied Miller’s request for attorneys’ fees under a statute authorizing fee awards in wage cases.[19]  Miller appealed, and after trial the superior court awarded him about $21,600 in damages and $75,560 in attorneys’ fees and costs under the wage statute.[20]  The court concluded that Miller had improved his position on trial de novo, and therefore denied the defendant’s request for attorneys’ fees under RCW 7.06.060(1) and MAR 7.3.[21]

Division 3 affirmed.[22]  It noted that in Niccum the Supreme Court had rejected the doctrine of comparing comparables, and explained:

If we were to compare solely the compensatory damages in this case, Mr. Miller did not improve his position on trial de novo.  But, Mr. Miller was awarded attorney fees on trial de novo after the arbitrator denied attorney fees based on the exact argument that was successful at trial.  The situation may be different if attorney fees were not requested at arbitration.  Indeed, to truly compare the comparables, the success of aggregate claims asserted should be considered in deciding if Mr. Miller “improve[d] . . . [his] position.”  MAR 7.3; RCW 7.06.060(1).[23]

The upshot is this:  At least for now (Niccum was a 5-4 ruling), it seems clear that in determining whether a party appealing an arbitrator’s award improved his or her position on trial de novo, Washington’s courts will no longer compare comparables.[24]  Instead, they will compare the total amount received in arbitration with the total amount received on trial de novo, if the same claims were presented to the arbitrator and the superior court.[25]  Arguably, this is the way ordinary people would compare arbitration awards and trial court judgments.[26]  It is unclear what impact, if any, this shift will have on the policies of decreasing court congestion, encouraging settlement, and discouraging meritless requests for trial de novo.

–Duncan Manville