Law Office of Andrew Bergh

November, 2009
"Comparables" should be considered in determining whether party improves position on
trial de novo
by Andrew Bergh

While statistics might prove otherwise, it sure seems like defense requests for trials de novo in mandatory arbitration cases are the rule, and not the exception, these days. When that happens, the plaintiff must decide whether to serve an offer of compromise under RCW 78.06.050(1), and, if so, the amount by which the MAR award should be reduced. There’s a lot riding on this decision because if the defendant rejects the offer of compromise and fails to improve his position at trial, the plaintiff, as the nonappealing party, is also entitled to his costs and reasonable attorney fees.

But predicting the amount a jury will award is almost as difficult as picking winning Lotto numbers. At best, it is only educated guesswork. And sometimes, it doesn’t hurt to have a modicum of luck on your side.

Want a testimonial? Just ask Jeffery Niccum.

Niccum filed a lawsuit against Ryan Enquist in Spokane County Superior Court to recover damages arising from a car accident. At mandatory arbitration, he received an award totaling $24,496. The breakdown consisted of $6,896 for medical bills, $7,600 for wage loss, and $10,000 for pain and suffering.

After Enquist requested a trial de novo, Niccum served an offer of compromise for $22,000 that included the following language:

Such compromise is intended to replace the arbitrator’s award of $24,496.00 with an award of $22,000.

After this offer was rejected by the defense, Niccum later served a second offer of compromise for $17,350. This time, the wording was slightly tweaked:

Such compromise is intended to replace the arbitrator’s award of $24,496.00 and replace the previous offer of compromise with an award of $17,350.00 including costs and statutory attorney fees.

(Emphasis added.)

When Enquist likewise rejected this offer, the case proceeded to trial and a Spokane County jury ultimately returned a $16,650 verdict for Niccum. (Interestingly, the jury matched the arbitrator’s award for general damages ($10,000) and almost matched the award for medical bills ($6,650 versus $6,896) – but gave nothing for income loss.)

Niccum then moved post trial for fees and costs under MAR 3.7 on the ground that Enquist had failed to improve his position at trial. The specific amounts sought were $15,640 (attorney fees) and $1,016.28 (costs). To determine whether Enquist had improved his position at trial, the trial court deducted Niccum’s costs ($1,016.28) from his second offer of compromise ($17,350) to reach a revised total of $16,288.72. Since that sum was lower than the jury verdict – albeit by less than $400 – the court awarded attorney fees and costs in the amounts requested by Niccum. In addition, the court awarded $1,461 for expert witness fees that Niccum incurred after the arbitration.

In the ensuing appeal, the Court of Appeals (Division Three) assumed the task of construing the following language in RCW 7.06.050(1)(b):

In any case in which an offer of compromise is not accepted by the appealing party within ten calendar days after service thereof, for purposes of MAR 3.7, the amount of the offer of compromise shall replace the amount of the arbitrator’s award for determining whether the party appealing the arbitrator’s award has failed to improve that party’s position on the trial de novo.

(Emphasis added.)

According to Enquist, the first offer of compromise was replaced by the “entire amount” of the second offer. He had therefore improved his position, the defendant claimed, because the amount of the jury verdict ($16,650) was less than the amount of the second offer ($17,350).

In its short-and-sweet analysis, Division Three rejected Enquist’s interpretation of RCW 7.06.050(1)(b), instead finding that the offer-of-compromise statute “should be read so that any segregated amount of an offer must replace an amount in the same category granted under the arbitrator’s award” (my emphasis). In so holding, the Court of Appeals relied heavily on Tran v. Yu, 118 Wn. App. 607 (2003).

In Tran, it was the plaintiff who appealed the arbitration award. Although the amount of damages awarded by the jury was less than those awarded by the arbitrator, the judgment wound up being higher because the trial court added the plaintiff’s statutory costs and CR 37 sanctions imposed against the defendant. Since the plaintiff had improved her position, said the trial court, she wasn’t liable for the nonappealing party’s attorney fees or costs.

But as Division Three observed, the Tran court ultimately reversed:

Based on case law and a logical interpretation of MAR 3.7, the [Tran] court concluded that a court should “compare comparables” to determine whether a party failed to improve its position. [Citation.] As applied in Tran, this meant that the court would compare the compensatory damages awarded by the arbitrator with the compensatory damages awarded at trial. [Citation.] The court would not include awards for statutory costs and CR 37 sanctions. In fact, the court noted that a party would invariably improve its position if costs such as attorney fees, and interest were taken into account.

Finding Tran persuasive, the Niccum court followed suit:

Tran determined that the statutory costs and CR 37 sanctions should not be considered when making a MAR 3.7 determination because these costs were not before the arbitrator and were not “comparables” to the compensatory damages awarded by the arbitrator. [Citation.] Tran’s analysis is applicable here. Thus, we conclude that the trial court correctly considered comparables in the offer of compromise and the jury verdict, and properly subtracted costs and fees.

Enquist didn’t get completely shut out, as Division Three reversed the award of expert witness fees since they don’t qualify as statutory costs. This savings ($1,461) is a relative pittance, however, since Enquist now owes not only Niccum’s attorney fees under MAR 3.7 ($15,640) but also his fees on appeal.

There will often be cases where, as in Niccum v. Enquist, the difference between the arbitration award and the jury verdict will be small. Between Tran and Niccum, however, the message should now be loud and clear: Only “comparables” will be compared in determining whether the appealing party did or did not improve his position under RCW 7.06.050(1)(b). As a consequence, if a party decides to serve an offer of compromise under RCW 7.06.050(1)(b), keeping it nice and clean without any reference to statutory costs is probably the preferred way to go.

Andrew Bergh, WSTLA EAGLE member, former prosecutor and insurance defense attorney, now limits his practice to plaintiff's personal injury cases, including professional liability and insurance bad faith.