This opinion was filed for record at ~-·.()0~ on~.?OI{p ~~LO 1 · Supreme Court Clerk
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
JESS NELSON, an individual, ) ) Petitioner, ) No. 92489-9 ) v. ) En Bane ) MICHAEL ERICKSON and JANE DOE ) Filed _ _ 1 _13_2~_16_____ A_UG__ ERICKSON, and the marital community ) composed thereof, ) ) Respondents. ) _______________________)
OWENS, J. - In many civil cases, arbitration is mandatory. After
arbitration, either party can request a full trial, but if they do not improve their
position from arbitration, they have to pay the opposing party's attorney fees. In this
case, Michael Erickson requested a trial after arbitration, and the issue before us is
whether he improved his position at trial. This is not as simple to resolve as it might
seem because his position prior to trial was unclear. We hold that his position prior to
trial should be interpreted as an ordinary person would. Applying that rule, Erickson
improved his position at trial and is not required to pay the opposing party's attorney
fees. We affirm the Court of Appeals. Nelson v. Erickson No. 92489-9
FACTS
Plaintiff Jess Nelson sued Erickson for personal injuries after a car accident.
They went to mandatory arbitration, and the arbitrator awarded the plaintiff a total of
$44,923. Of that total award, $1,522 was for attorney fees and costs. The defendant
decided to seek trial de novo. In an effort to avoid trial, the plaintiff offered to settle
for "$26,000 plus taxable costs incurred at arbitration." Clerk's Papers at 839. This
language from the settlement offer is the center of the legal dispute in this case.
The defendant did not respond to the offer, and the parties went to trial. The
jury awarded the plaintiff $24,167. Upon the plaintiff's motion for additur, the judge
added $3,000 for future noneconomic damages. This brought the total award at trial
to $27,167.
The plaintiff then moved for attorney fees under MAR 7.3, arguing that the
defendant had not improved his position at trial. The plaintiff characterized the
settlement offer (that read "$26,000 plus taxable costs incurred at arbitration") as
simply $26,000, and since the trial award was $27,167, the defendant did not improve
his position by going to trial. The trial judge agreed and awarded the plaintiff$58,908
in attorney fees and $4,488 in costs.
The defendant appealed, arguing that the settlement offer was actually for
$26,000 plus the !mown arbitration costs of$1,522. The total offer of$27,522 was
more than the award at trial, and thus the defendant had improved his position at trial
2 Nelson v. Erickson No. 92489-9
and was not liable for the plaintiff's attorney fees under MAR 7.3. The Court of
Appeals agreed and vacated the award of fees and costs to the plaintiff. Nelson v.
Erickson, noted at 190 Wn. App. 1003,2015 WL 5345709, at *10. We granted
review. Nelson v. Erickson, 185 Wn.2d 1010, 367 P.3d 1083 (2016).
ISSUE
Did the defendant improve his position at trial?
ANALYSIS
If a party requests trial de novo after mandatory arbitration and he or she does
not improve his or her position at trial, he or she must pay the other side's attorney
fees. MAR 7.3. If a party offers to settle prior to trial, that settlement offer replaces
the arbitration award when determining whether the party who requested trial de novo
improved his or her position. RCW 7.06.050(1)(b). "[T]he purpose of MAR 7.3 is to
encourage settlement and discourage meritless appeals." Niccum v. Enquist, 175
Wn.2d 441,451, 286 P.3d 966 (2012).
In this case, the plaintiff's settlement offer was "$26,000 plus taxable costs
incurred at arbitration." At issue is how the settlement offer should be interpreted~as
simply $26,000 (as the plaintiff contends) or as $26,000 plus the known arbitration
costs (as the defendant contends).
In our leading case on this issue, Niccum, we analyzed an offer that purported
to include costs. Both parties claim that Niccum clearly supports their position in this
3 Nelson v. Erickson No. 92489-9
case. That is because our Niccum holding relied on two principles: first, that parties
generally cannot include costs in their settlement offers; and second, that courts
determine the amount of the settlement offer by reading the offer as an ordinary
person would. While those principles both led to the same outcome in Niccum, those
two principles conflict in this case. Thus, we must decide which of those principles
prevails in this case. As explained below, we read this offer as an ordinary person
would: $26,000 plus the known arbitration costs of $1,522. This ruling comports with
the plain language of the rule and provides an incentive for parties to avoid making
confusing settlement offers.
Like this case, Niccum involved a car accident that went to mandatory
arbitration. 175 Wn.2d at 443-44. The arbitrator awarded the plaintiff a total of
$24,496 for medical expenses, lost wages, and pain and suffering. I d. at 444. As in
this case, the defendant requested a trial de novo and the plaintiff offered a settlement
prior to trial. I d. The plaintiff first offered a settlement of $22,000, but that was
rejected. The plaintiff then offered to settle for $17,350. ld. The offer explained,
"'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."' ld. The defendant rejected the offer, and the
parties went to trial.
4 Nelson v. Erickson No. 92489-9
The jury awarded the plaintiff $16,650 for past medical expenses and
noneconomic damages. The plaintiff then moved for costs and attorney fees pursuant
to MAR 7.3, arguing that the defendant had failed to improve his position at trial. The
plaintiff argued that since his $17,350 settlement offer included "costs and statutory
attorney fees," the court should subtract costs and statutory fees from the offer,
leaving only the portion of the offer that related to damages to compare to the jury
award. The plaintiff calculated that costs and fees totaled $1 ,016.28, and thus the
portion of the offer that related to damages was $16,333.72. The p1aintiffreasoned
that this portion of the offer was less than the $16,650 that the jury awarded in
damages, so the defendant had not improved his position at trial.
We rejected that argument, ruling that "[a] straightforward application of the
statutory language shows that [the defendant] improved his position on trial de novo."
Id. at 452. We explained that the rule under MAR 7.3-whether a party improves on
their position at trial-was '"meant to be understood by ordinary people."' !d.
(quoting Cormar, Ltd. v. Sauro, 60 Wn. App. 622, 623, 806 P.2d 253 (1991)). We
held that "[i]t is our view that an ordinary person would consider that the 'amount' of
an offer of compromise is the total smn of money that a party offered to accept in
exchange for settling the lawsuit." !d.
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This opinion was filed for record at ~-·.()0~ on~.?OI{p ~~LO 1 · Supreme Court Clerk
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
JESS NELSON, an individual, ) ) Petitioner, ) No. 92489-9 ) v. ) En Bane ) MICHAEL ERICKSON and JANE DOE ) Filed _ _ 1 _13_2~_16_____ A_UG__ ERICKSON, and the marital community ) composed thereof, ) ) Respondents. ) _______________________)
OWENS, J. - In many civil cases, arbitration is mandatory. After
arbitration, either party can request a full trial, but if they do not improve their
position from arbitration, they have to pay the opposing party's attorney fees. In this
case, Michael Erickson requested a trial after arbitration, and the issue before us is
whether he improved his position at trial. This is not as simple to resolve as it might
seem because his position prior to trial was unclear. We hold that his position prior to
trial should be interpreted as an ordinary person would. Applying that rule, Erickson
improved his position at trial and is not required to pay the opposing party's attorney
fees. We affirm the Court of Appeals. Nelson v. Erickson No. 92489-9
FACTS
Plaintiff Jess Nelson sued Erickson for personal injuries after a car accident.
They went to mandatory arbitration, and the arbitrator awarded the plaintiff a total of
$44,923. Of that total award, $1,522 was for attorney fees and costs. The defendant
decided to seek trial de novo. In an effort to avoid trial, the plaintiff offered to settle
for "$26,000 plus taxable costs incurred at arbitration." Clerk's Papers at 839. This
language from the settlement offer is the center of the legal dispute in this case.
The defendant did not respond to the offer, and the parties went to trial. The
jury awarded the plaintiff $24,167. Upon the plaintiff's motion for additur, the judge
added $3,000 for future noneconomic damages. This brought the total award at trial
to $27,167.
The plaintiff then moved for attorney fees under MAR 7.3, arguing that the
defendant had not improved his position at trial. The plaintiff characterized the
settlement offer (that read "$26,000 plus taxable costs incurred at arbitration") as
simply $26,000, and since the trial award was $27,167, the defendant did not improve
his position by going to trial. The trial judge agreed and awarded the plaintiff$58,908
in attorney fees and $4,488 in costs.
The defendant appealed, arguing that the settlement offer was actually for
$26,000 plus the !mown arbitration costs of$1,522. The total offer of$27,522 was
more than the award at trial, and thus the defendant had improved his position at trial
2 Nelson v. Erickson No. 92489-9
and was not liable for the plaintiff's attorney fees under MAR 7.3. The Court of
Appeals agreed and vacated the award of fees and costs to the plaintiff. Nelson v.
Erickson, noted at 190 Wn. App. 1003,2015 WL 5345709, at *10. We granted
review. Nelson v. Erickson, 185 Wn.2d 1010, 367 P.3d 1083 (2016).
ISSUE
Did the defendant improve his position at trial?
ANALYSIS
If a party requests trial de novo after mandatory arbitration and he or she does
not improve his or her position at trial, he or she must pay the other side's attorney
fees. MAR 7.3. If a party offers to settle prior to trial, that settlement offer replaces
the arbitration award when determining whether the party who requested trial de novo
improved his or her position. RCW 7.06.050(1)(b). "[T]he purpose of MAR 7.3 is to
encourage settlement and discourage meritless appeals." Niccum v. Enquist, 175
Wn.2d 441,451, 286 P.3d 966 (2012).
In this case, the plaintiff's settlement offer was "$26,000 plus taxable costs
incurred at arbitration." At issue is how the settlement offer should be interpreted~as
simply $26,000 (as the plaintiff contends) or as $26,000 plus the known arbitration
costs (as the defendant contends).
In our leading case on this issue, Niccum, we analyzed an offer that purported
to include costs. Both parties claim that Niccum clearly supports their position in this
3 Nelson v. Erickson No. 92489-9
case. That is because our Niccum holding relied on two principles: first, that parties
generally cannot include costs in their settlement offers; and second, that courts
determine the amount of the settlement offer by reading the offer as an ordinary
person would. While those principles both led to the same outcome in Niccum, those
two principles conflict in this case. Thus, we must decide which of those principles
prevails in this case. As explained below, we read this offer as an ordinary person
would: $26,000 plus the known arbitration costs of $1,522. This ruling comports with
the plain language of the rule and provides an incentive for parties to avoid making
confusing settlement offers.
Like this case, Niccum involved a car accident that went to mandatory
arbitration. 175 Wn.2d at 443-44. The arbitrator awarded the plaintiff a total of
$24,496 for medical expenses, lost wages, and pain and suffering. I d. at 444. As in
this case, the defendant requested a trial de novo and the plaintiff offered a settlement
prior to trial. I d. The plaintiff first offered a settlement of $22,000, but that was
rejected. The plaintiff then offered to settle for $17,350. ld. The offer explained,
"'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."' ld. The defendant rejected the offer, and the
parties went to trial.
4 Nelson v. Erickson No. 92489-9
The jury awarded the plaintiff $16,650 for past medical expenses and
noneconomic damages. The plaintiff then moved for costs and attorney fees pursuant
to MAR 7.3, arguing that the defendant had failed to improve his position at trial. The
plaintiff argued that since his $17,350 settlement offer included "costs and statutory
attorney fees," the court should subtract costs and statutory fees from the offer,
leaving only the portion of the offer that related to damages to compare to the jury
award. The plaintiff calculated that costs and fees totaled $1 ,016.28, and thus the
portion of the offer that related to damages was $16,333.72. The p1aintiffreasoned
that this portion of the offer was less than the $16,650 that the jury awarded in
damages, so the defendant had not improved his position at trial.
We rejected that argument, ruling that "[a] straightforward application of the
statutory language shows that [the defendant] improved his position on trial de novo."
Id. at 452. We explained that the rule under MAR 7.3-whether a party improves on
their position at trial-was '"meant to be understood by ordinary people."' !d.
(quoting Cormar, Ltd. v. Sauro, 60 Wn. App. 622, 623, 806 P.2d 253 (1991)). We
held that "[i]t is our view that an ordinary person would consider that the 'amount' of
an offer of compromise is the total smn of money that a party offered to accept in
exchange for settling the lawsuit." !d. (citing WEBSTER'S THIRD NEW
INTERNATIONAL DICTIONARY 72 (2002)). Applying that rule to the facts in Niccum,
the court found that the jury verdict of $16,600 was less than the settlement amount
5 Nelson v. Erickson No. 92489-9
offered of$17,350. Since the jury verdict was lower than the settlement offer, the
defendant had improved his position at trial and the plaintiff was not entitled to
attorney fees under MAR 7.3.
As mentioned above, the Niccum decision also addressed the specific issue of
including costs in an offer of compromise. The court explained that parties should not
address costs in their offers because "a party is not entitled to costs in connection with
an offer of compromise." !d. at 448. Costs are awarded to a prevailing party only
upon judgment. !d. at 449. The court explained that a party may ask for a specific
amount of money as part of an offer to cover expenses, but those dollars should be
distinguished from statutory costs. !d. at 450. The court held that costs should not be
subtracted from an offer, but instead the offer should be treated as "the lump sum that
he offered to accept in exchange for settling the lawsuit." !d.
Thus, both parties are correct that Niccum provides some support for their
position. On the one hand, Niccum explained that parties should not reference costs in
their settlement offer because costs are generally statutory and awarded by courts. On
the other hand, Niccum also explained that offers should be interpreted as an ordinary
person would interpret them, and that we should view the offer as a whole-as "the
total sum of money that a party offered to accept in exchange for settling the lawsuit."
Id. at 452.
6 Nelson v. Erickson No. 92489-9
We treat this offer as an ordinary person would interpret it. The plaintiff
offered to settle the case for $26,000 plus the costs incurred at arbitration. Unlike
Niccum, the costs were known at the time of the offer-$1,522. An ordinary person
would understand that the plaintiff was offering to settle the case for $26,000 plus
$1,522. The plaintiff is essentially arguing that the defendant should have !mown that
Niccum prevented any inclusion of costs in an offer, and thus the defendant should
have known that the offer was only for $26,000. But if the plaintiff wanted to offer
$26,000, he could have done so by simply offering "$26,000." He now argues that he
had no right to make the offer he did, but he places responsibility for identifying that
flaw on the defendant. Simply as a matter of fairness, we cannot accept that
argument. If he had no right to include costs in the offer, why did he purport to
include them? Either he was intentionally making a confusing offer or he negligently
made a confusing offer. Regardless, we cannot reward him for making a confusing
offer that he now argues was improper.
As we explained in Niccum, the purpose of the Mandatory Arbitration Rules is
to encourage settlement and discourage meritless appeals. In order to do so, parties
must be able to determine "what position it must improve upon to avoid paying
reasonable attorney's fees if it elects to continue to trial." !d. at 452. When
settlement offers are uncertain, it stymies the system. Not only is it more difficult for
7 Nelson v. Erickson No. 92489-9
parties to figure out whether to settle, it will likely increase litigation after the fact, as
the parties must then litigate the meaning of vague offers. !d. at 451.
Pursuant to Niccum, we discourage parties from including costs in their offers
and from making vague or confusing settlement offers. We hold parties to the total
settlement amount in their offer, and we do not dissect the offer after the fact. This
reasoning and result is the most faithful to Niccum, MAR 7.3, and common sense.
CONCLUSION
In this case, we believe any ordinary person would understand the settlement
offer to be $26,000 plus the costs incurred at arbitration, which both parties lmew to
be $1,522. The defendant did not accept the offer, went to trial, and obtained a jury
verdict that was less than the settlement offer. Since he improved his position at trial,
the opposing party is not entitled to attorney fees. We affirm the Court of Appeals.
8 Nelson v. Erickson No. 92489-9
WE CONCUR:
~vt:M~-, g. 0o/~~52