Target National Bank v. Jeanette E. Higgins

• Court: Court of Appeals of Washington
• Decided: March 20, 2014
• Docket: 31575-4
• Status: Published

Opinion

FILED

MARCH 20, 2014

In the Office of the Clerk of Court

WA State Court of Appeals, Division III

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION THREE

TARGET NATIONAL BANK, ) ) No. 31575-4-III Respondent, ) ) v. ) PUBLISHED OPINION ) JEANETTE E. HIGGINS, et aI., ) ) Appellant. )

FEARING, J. - Target National Bank sued Jeanette Higgins for defaulting on a

credit card debt. The trial court granted Higgins' motion for summary judgment. As the

prevailing party, Higgins requested $11,076 in reasonable attorney fees and costs under

both RCW 4.84.250 and RCW 4.84.330, respectively labeled "the small claims

settlement statute" and the "reciprocal attorney fees clause statute." The trial court

denied fees under RCW 4.84.250, ruling that Higgins gave no notice that she sought fees

under the statute. The trial court granted Higgins fees and costs under the Target contract

and RCW 4.84.330 but limited the award to $5,625 because of the minimal amount in

dispute. Higgins appeals this award as deficient. We agree with her that she may recover

fees under RCW 4.84.250 and that, based upon the policies behind the statute, the amount

in dispute should not be a factor when awarding reasonable attorney's fees. We reverse No. 31575-4-111 Target Nat 'i Bank v. Higgins

and remand for an additional hearing on the amount of fees to award.

FACTS

Target filed suit for breach of contract against Jeanette Higgins for nonpayment of

a credit card debt in the amount of$2,052.37. In its complaint, Target requested

reasonable attorney's fees, although it did not identify any basis for the request. In a

default judgment motion, Target also claimed it was "entitled to its costs and attorney's

fees pursuant to contract and/or statute." Clerk's Papers (CP) at 12. In her answer,

Higgins denied liability, admitting only that she "at one time had an account with some

Target affiliated entity." CP at 6. She also requested "reasonable attorney's fees and

costs for the defense of such action." CP at 7. The answer did not specify any basis upon

which attorney's fees were sought.

Jeanette Higgins sent to Target a notice of deposition, requests for production,

interrogatories, and requests for admissions. After the deadline for answering discovery

passed, Higgins moved for summary judgment, claiming that Target failed to respond, in

discovery, with any admissible evidence to prove a debt. In addition, Higgins argued that

Target's law firm was an unlicensed debt collector, the lack of a license barred the action,

and Target failed to show compliance with consumer protection laws.

Before the hearing on Jeanette Higgins' summary judgment, Target moved for

summary judgment and responded to Higgins' requests for discovery. As part of its

response to Jeanette Higgins' summary judgment motion, Target filed a copy of the

No. 31575-4-II1 Target Nat'/ Bankv. Higgins

purported credit card agreement. Section 12 of that agreement reads, in part:

DEFAULTrrERMINATION OF CREDIT PRIVILEGES . ... Ifwe refer your Account to an attorney for collection, you must pay to us all costs and expenses of collection, including attorneys' fees, to the extent not prohibited by law.

CP at 137.

After motions were filed but before any summary judgment hearing, Jeanette

Higgins wrote Target, through counsel, offering to settle if Target paid her $3,700 in

attorney's fees incurred to date. The letter contained no reference, however, to

RCW 4.84.250 or any other statutory basis for an award of attorney's fees. The letter did

not even expressly state that Higgins will seek an award of reasonable attorney's fees and

costs from the court, if successful in litigation. The letter read, in part:

Thank you for your letter dated November 22, 2011. My client agrees that it is in the parties['] best interest to settle this matter and not waste anymore of the court[']s time or incur any additional attorney's fees and costs. Thus, my client is willing to accept the sum of$3700.00 to resolve the state-court lawsuit. This amount reflects an approximation of my attorney's fees incurred to date and will necessarily increase should your client force me to perform additional work in this matter.

CP at 256.

The trial court heard Target's motion for summary judgment first. The trial court

denied Target's motion, ruling that Target failed to produce admissible evidence to

support a debt owed by Higgins. Two weeks later, the trial court granted Higgins'

motion for summary judgment. The trial court repeated its ruling that Target failed to

No. 31575-4-111 Target Nat 'I Bank v. Higgins

produce admissible evidence to establish a foundation for the Target credit card

agreement.

Jeanette Higgins requested an award of reasonable attorney's fees and costs. In

support of the request, Higgins filed a declaration from her counsel, and a log of the

services counsel performed. A memorandum in support of her application for fees was

the first mention of either RCW 4.84.250 or RCW 4.84.330 being the basis for the

request. Higgins requested $5.25 in costs, $7,788.50 in attorney's fees for 36.3 hours

worked at $225.00 per hour, and a multiplier of one and one-half for an exceptional

outcome and counsel's representing a client who would typically lack representation.

Target moved for reconsideration of the summary judgment ruling, which motion

the trial court denied. Higgins responded to this motion for reconsideration and moved to

strike the declaration of opposing counsel supporting the motion. Higgins' counsel also

filed a second declaration in support of defendant's motion for award of attorney's fees

and costs. With the addition of time spent responding to the motion for reconsideration,

Higgins sought $9,333.50 for 44.1 hours worked.

On the day scheduled for the fees hearing, Target's new counsel, who had yet to

file a notice of appearance, requested a continuance. The trial court granted this request

and continued the hearing two weeks. Higgins' counsel then filed a third declaration,

which added time for the additional hearing and phone calls with opposing counseL The

new request was $10,143.50 in attorney's fees for 47.7 hours worked.

Target filed a declaration from its counsel in opposition to Higgins' motion for

attorney's fees. The declaration stated, in part, that counsel was not notified that Higgins

sought an award of fees under RCW 4.84.250 until judgment was granted to Higgins.

Higgins replied to this motion the next day. Higgins' counsel also filed his last

declaration in support of attorney's fees and costs seeking an additional $877.50 for 3.9

hours worked for the reply.

The trial court ruled that Higgins failed to meet RCW 4.84.250's notice

requirement. The trial court, however, awarded attorney's fees and costs to Higgins

under the Target contract and RCW 4.84.330. The court reduced Higgins' counsel's

proposed hours worked from 51.85 hours to 25 hours. The award was $5,625, based

upon an hourly rate of $225. The trial court noted by hand, in its written order, that

"[t]he court also considered the amount in controversy-$2,052.37." CP at 272.

LAW AND ANALYSIS

Notice Under the Small Claims Settlement Statute

When a party seeks reasonable attorney's fees and costs on two grounds and is

granted fees and costs under one ground, a court generally need not determine if the party

may recover attorney's fees under the second ground. The trial court granted Jeanette

Higgins reasonable attorney's fees and costs under RCW 4.84.330, but she assigns error

to the trial court's failure to grant her full request for fees. She claims the trial court

mistakenly considered the amount in controversy as a factor when discounting the fees

sought. More importantly, Higgins posits that RCW 4.84.250, the small claims

settlement statute, unlike RCW 4.84.330, the reciprocal attorneys' fees clause statute,

encourages a full award in claims under $10,000. The trial court denied recovery under

RCW 4.84.250. Therefore, we must address whether Higgins is entitled to an award

under the small claims settlement statute. In specific, we must address whether Higgins

needed to provide notice under the statute and, if so, whether she gave sufficient notice.

Higgins otherwise qualifies for fees under RCW 4.84.250.

This court reviews the legal basis for an award of attorney's fees de novo. Hulbert

v. Port a/Everett, 159 Wn. App. 389, 407, 245 P.3d 779 (2011). In Washington,

attorney's fees may be awarded only when authorized by a private agreement, a statute,

or a recognized ground of equity. Labriola v. Pollard Grp.] Inc., 152 Wn.2d 828, 839,

100 P.3d 791 (2004). RCW 4.84.250 authorizes a trial court to award attorney's fees,

under certain circumstances, in disputes of$IO,OOO or less. Under RCW 4.84.250, a trial

court shall award the prevailing party attorney's fees if the statutory requirements are

satisfied. Davy v. Moss, 19 Wn. App. 32, 33-34, 573 P.2d 826 (1978).

RCW 4.84.250 states in full:

Notwithstanding any other provisions of chapter 4.84 RCW and RCW 12.20.060, in any action for damages where the amount pleaded by the prevailing party as hereinafter defined, exclusive ofcosts, is seven thousand five hundred dollars or less, there shall be taxed and allowed to the prevailing party as a part ofthe costs of the action a reasonable amount

No. 31575-4-II1 Target Nat 'I Bank v. Higgins

to be fixed by the court as attorneys 'fees. After July 1, 1985, the maximum amount of the pleading under this section shall be ten thousand dollars.

(Emphasis added.) A plainti ff is the prevailing party only if her recovery exceeds the

amount at which she offered to settle. RCW 4.84.260. RCW 4.84.280 outlines the

procedure for a settlement offer and requires that the offer be made at least 10 days prior

to trial. Beckmann v. Spokane Transit Auth., 107 Wn.2d 785, 787, 733 P.2d 960 (1987).

A defendant is the prevailing party if the plaintiff recovers nothing, even if the defendant

made no settlement offer, or, if a settlement offer is made, the award is less than the offer.

RCW 4.84.270; see Puget Sound Nat 'I Bank v. Burt, 56 Wn. App. 868, 786 P.2d 300

(1990). The purpose ofRCW 4.84.250 is to encourage out-of-court settlements and to

penalize parties who unjustifiably bring or resist small claims. Williams v. Tilaye, 174

Wn.2d 57, 62,272 P.3d 235 (2012); Beckmann, 107 Wn.2d at 788; Harold Meyer Drug

v. Hurd,23 Wn. App. 683, 687, 598 P.2d 404 (1979). "The obvious legislative intent is

to enable a party to pursue a meritorious small claim without seeing his award diminished

in whole or in part by legal fees." Northside Auto Serv., Inc. v. Consumers United Ins.

Co., 25 Wn. App. 486, 492, 607 P.2d 890 (1980).

Common law has consistently required that the party from whom attorney's fees

are sought receive notice before trial that it may be subject to fees under the pertinent

statute. Lay v. Hass, 112 Wn. App. 818, 824, 51 P.3d 130 (2002); Pub. Uti/so Dist. No.1

ofGrays Harbor v. Crea, 88 Wn. App. 390, 393-94, 945 P.2d 722 (1997) (PUD No.1).

No. 3 I 575-4-III Target Nat 'I Bank v. Higgins

The law with respect to the timing, form and content of notice required for an award

under RCW 4.84.250 has experienced a convoluted history. We review the key cases in

an attempt to discern whether Washington law is lenient enough to deem Target on notice

that Higgins sought fees under RCW 4.84.250.

In Tatum v. R&R Cable, Inc., 30 Wn. App. 580, 585, 636 P.2d 508 (1981), we

held that the "provisions ofRCW 4.84.250" must be pled to put the defendant on notice

of the fact that the plaintiff seeks attorney's fees under the statute. The holding, if taken

literally, would require the litigant to quote from the statute in addition to referencing the

statute in the complaint or answer. The Tatums' award exceeded their offers to

settle, but they pled the statute providing for treble damages for damage to trees, not

RCW 4.84.250, in their prayer seeking an award of reasonable attorney's fees and costs.

Thus, we denied the request for fees.

We followed the holding of Tatum in Warren v. Glascam Builders, Inc., 40 Wn.

App. 229, 698 P.2d 565 (1985), and applied the holding to a fee request under

RCW 49.48.030, which provides for recovery of fees in an action in which the claimant

recovers judgment for wages or salary. In his complaint, Warren asked for an award of

reasonable attorney's fees and costs, but did not cite the statute. Therefore, he was

denied a fee award.

The Supreme Court overruled Tatum and Warren in Beckmann. Beckmann sued

for personal injuries and, II days before trial, delivered to the transit authority an offer to

No. 3 I 575-4-III Target Nat'{ Bank v. Higgins

settle for $3,000. Beckmann, 107 Wn.2d at 787. The offer infonned the transit authority

that it was tendered pursuant to RCW 4.84.280, a statute related to RCW 4.84.250. The

trial court awarded her $4,360 in damages. Beckmann, 107 Wn.2d at 787.

The Beckmann court affinned that the purpose behind RCW 4.84.250 requires

some type of notice so that the opposing party would realize the amount of the claim is

small and the party should settle or else risk paying the prevailing party's attorney's fees.

Beckmann, 107 Wn.2d at 788-89. However, notice in the original pleadings was not

necessary. Id. at 789. The Tatum court had provided little justification as to why notice

was needed in the initial pleadings. The Beckmann court agreed with Beckmann that the

10-day notice provision in RCW 4.84.280 should be sufficient to apprise the defendant

that attorney's fees are being sought. The court noted the predicament of a personal

injury plaintiff giving notice to a defendant as to the amount of an award sought, since

RCW 4.28.360 prohibits the complainant from stating the amount of damages she seeks.

The court, however, did not limit its holding to personal injury cases.

The posture of Higgins' suit is distinct from the posture of Beckmann, Tatum, and

Warren. In the three previous cases, plaintiffs sought fees. Notice to defendant was, in

part, needed in order to alert the defendant as to the amount sought in litigation. Jeanette

Higgins is the defendant. The defendant can recover reasonable attorney's fees and costs

without an offer of settlement, if the plaintiff recovers nothing. Target already knew the

amount, for which it sued, was under $10,000. Thus, notice to Target could be

No. 31575-4-III Target Nat'/ Bankv. Higgins

considered superfluous. All plaintiffs could be considered automatically on notice that

they are subject to an award of fees if the amount in issue is less than $10,000. The

defendant giving notice serves little, if any, purpose under such circumstances.

Beckmann promotes substance over form and teleology over technicality to the favor of

Jeanette Higgins. But Beckmann does not hold that a defendant need not give any notice,

nor does it stand for the proposition that a defendant may give notice of a claim for fees

without specifying that she relies on RCW 4.84.250.

The next decision chronologically, Toyota ofPuyallup, Inc. v. Tracy, 63 Wn. App.

346,818 P.2d 1122 (1991), brings us closer to the appeal before us. Tracy brought his

car to Toyota for repairs of the engine and transmission. Toyota sued Tracy for a repair

bill, a portion of which Tracy disputed. Six months before trial Tracy's counsel wrote to

Toyota's counsel offering "'to settle all claims with Toyota of Puyallup by payment of

$1,800.00.'" Id. at 353. The court granted Toyota judgment for $1,152.55, after which

Tracy applied for an award of reasonable attorney's fees and costs under RCW 4.84.250.

Toyota argued it was entitled to notice that Tracy would be seeking reasonable attorney's

fees under RCW 4.84.250 through .290 if the offer was not accepted. The Court of

Appeals agreed. The court characterized counsel's letter as "no notice at all." Toyota, 63

Wn. App. at 354. The letter said nothing about the consequences of not accepting the

offer, about reasonable attorney's fees, or about any statutory authority for fees. In his

original answer, Tracy alleged that he was entitled to reasonable attorney's fees

'''pursuant to the reciprocal attorney's fee statute,'" or RCW 4.84.330. Toyota, 63 Wn.

App. at 354 n.9. The answer did not notify Toyota that Tracy would seek reasonable

attorney's fees under the authority ofRCW 4.84.250 through .290. The court denied

Tracy an award.

With Tracy, we draw one step closer to our case, but still one step away. Toyota

recovered something, although less than Tracy offered. Target, on the other hand,

recovered nothing. Therefore, an offer from Jeanette Higgins was not needed to qualify

for fees. We must still determine what notice is necessary when a defendant recovers

nothing.

The next decision is Last Chance Riding Stable, Inc. v. Stephens, 66 Wn. App.

710,832 P.2d 1353 (1992). Last Chance obtained two judgments against Tommy and

Debbie Stephens in small claims court. On the Stephenses' appeal to superior court, both

judgments were reversed and both lawsuits dismissed. Attorney's fees were awarded to

the Stephenses under the small claims settlement statute. Last Chance appealed the

award of attorney's fees and the Court of Appeals reversed. Last Chance argued that the

superior court erred in awarding attorney's fees because the Stephenses did not give

notification that they were seeking fees prior to the trial de novo. The Stephenses

contended no prior notice was required. The trial court awarded attorney's fees pursuant

to RCW 4.84.250 and the Court of Appeals reversed.

No. 3 I 575-4-III Target Nat'/ Bank v. Higgins

The Last Chance court reasoned that requiring an offer of settlement or other prior

notice of intent to seek attorney's fees under the facts presented fulfills the purpose of

RCW 4.84.250 through .300, which is to encourage out-of-court settlements and to

penalize parties who unjustifiably bring or resist small claims. These purposes require

some type of notice so that parties would realize the amount of the ciaim is small and that

they should settle or else risk paying the prevailing party's attorney's fees. Since the

record failed to show Last Chance was given notice of the Stephenses' attempt to seek

attorney's fees, the fees were improperly awarded.

In re Estate ofTosh, 83 Wn. App. 158, 920 P.2d 1230 (1996) goes the additional

step, supports Jeanette Higgins' position, but rests on shaky ground. The case entails a

claimant recovering nothing and the defendant seeking an award under RCW 4.84.250.

Rita Willis brought suit contesting the validity of a trust signed by her father before his

death. She sued the beneficiary under the trust and Security Benefits, Inc., who prepared

the trust instrument. The Court of Appeals mentioned difficulty in discerning the nature

of the claim against Security Benefits but speculated the claim might be for professional

malpractice. The opinion does not disclose the amount of the claim against Security

Benefits. The trial court denied Willis relief and granted reasonable attorney's fees and

costs to Security Benefits under RCW 4.84.250. On appeal, Willis sought to overturn the

award and argued that Security Benefits was required to give notice of a request for fees

10 days before the scheduled trial date in order to qualify for an award. Security Benefits

No. 31575-4-III Target Nat 'I Bank v. Higgins

in fact gave notice of its request for fees 11 days before trial began. The court rejected

Willis' contention that the scheduled trial date, as opposed to the date trial actually began,

must be used to determine the timeliness of the notice. The decision does not disclose

the form or content of the notice given.

The Tosh court could have ended its discussion when holding the notice was

timely, but went further and wrote that it doubted that Beckmann stood for the

proposition argued by Willis. The Tosh court read Beckmann to establish that giving

notice of the claim being small was important, if not controlling, rather than giving notice

that the party sought fees under RCW 4.84.250. The Tosh court wrote that "[t]he

settlement offer in Beckmann did not explicitly refer to either RCW 4.84.250 or attorney

fees." Tosh, 83 Wn. App. at 165. This comment is erroneous. Although the Beckmann

settlement letter did not specify RCW 4.84.250, the offer informed the defendant

that it was tendered pursuant to RCW 4.84.280, part of the statutory scheme with

RCW 4.84.250. RCW 4.84.280 is the provision that explains service of the offer of

settlement and the statute specifically references RCW 4.84.250.

The Tosh court further wrote:

The [Beckmann] court nevertheless held that the settlement offer provided sufficient notice that RCW 4.84.250 applied. Thus, Beckmann does not require explicit, advance notice of a fee request, but requires only notice of the size of the claim. At least one other court similarly interpreted Beckmann [citing Schmerer v. Darcy, 80 Wn. App. 499, 910 P.2d 498 (1996)]. Where, as here, a plaintiff pleads a dollar amount less than the statutory maximum, all parties are put on notice that the small claim fee

No. 3 1575-4-III Target Nat 'I Bank v. Higgins

provision applies, and the Beckmann notice requirement is satisfied. Nor did Beckmann require a notice to be given ten days before trial. Beckmann involved a prevailing plaintiff, who must make a settlement offer in order to qualifY for a fee award. The ten-day provision referred to in that case applies to settlement offers. Unlike the plaintiff, a prevailing defendant in a case within the statutory limit need not make a settlement offer to qualifY for a fee award, and thus need not comply with that ten-day provision.

Tosh, 83 Wn. App. at 165 (footnote omitted). Tosh's dicta declares that a

defendant need not give any notice that she seeks an award of reasonable

attorney's fees and costs, let alone identifY RCW 4.84.250 as the basis of the claim

for fees, when the plaintiff recovers nothing.

Contrary to the dicta in Tosh, Schmerer did not hold that advance notice of a fee

request is not mandatory. In Schmerer, the defendant asserted a counterclaim against

plaintiff and the plaintiff provided an offer to settle pursuant to RCW 4.84.250. The

defendant recovered nothing on the counterclaim. Plaintiff then sought an award of fees,

which was denied because the counterclaim exceeded $10,000 in amount.

Next in history comes PUD No.1, 88 Wn. App. 390. The trial court assessed

$8,870 in attorney's fees against the public utility district that had unsuccessfully sued

Timothy Crea for $6,570 in damages to a utility pole struck by Crea's car. The public

utility district appealed the award, arguing that RCW 4.84.250 did not authorize an award

of attorney's fees because Crea did not give notice of his intent to seek such award. The

Court of Appeals affirmed.

No. 31575-4-111 Target Nat'{ Bank v. Higgins

Before trial, the public utility district made a written offer of settlement, which

Crea rejected. The offer of settlement read, ", Pursuant to RCW 4.84.250, et seq[.], we

hereby offer to settle the claim ofthe plaintiff in the above action for $6,570.24." PUD

No.1, 88 Wn. App. at 392 n.2. The jury returned a verdict in Crea's favor, finding that

Crea was not negligent.

After trial, Crea requested $9,307.19 in attorney's fees under RCW 4.84.250,

which the trial court granted. The Court of Appeals affirmed. According to the court in

PUD No.1, Beckmann did not require a party seeking attorney's fees specifically to plead

RCW 4.84.250 or to ask for attorney's fees. PUD No.1, 88 Wn. App. at 394. It is

sufficient that the charged party received actual notice of the statute prior to trial, thereby

putting that party on notice of the risk of an attorney's fees assessment. Id. The public

utility district had actual notice of the statute giving rise to an award of attorney's fees to

the prevailing party. The public utility district itself cited RCW 4.84.250 in its letter to

Crea offering to settle. That Crea did not provide additional notice to the public utility

district was irrelevant.

The PUD No.1 court considered there to be two acceptable alternatives to achieve

the objectives ofRCW 4.84.250: an offer of settlement or other prior notice of intent to

seek attorney's fees. PUD No.1, 88 Wn. App at 395. All that is required is '" some type

of notice so that parties would realize the amount of the claim is small and that they

should settle or else risk paying the prevailing party's attorney's fees.'" Id. (quoting Last

No. 31575-4-III Target Nat'l Bank v. Higgins

Chance, 66 Wn. App. at 714).

Lay v. Hass, 112 Wn. App. 818, a property line dispute, comes next on our

odyssey. The Lays filed a motion for summary judgment that encompassed all of their

claims, including their claims for damages and attorney's fees and costs. Before the trial

court ruled on the Lays' summary judgment motion, the Lays filed a motion for nominal

damages and attorney's fees, in which they specifically pled attorney's fees under

RCW 4.84.250. The trial court granted the summary judgment motion and awarded fees

to the Lays.

On appeal, the Hasses unsuccessfully argued they lacked notice that the Lays

sought reasonable attorney's fees and costs under RCW 4.84.250. The Lay court agreed

with PUD No.1 that the party seeking attorney's fees need not specifically plead

RCW 4.84.250 or to ask for attorney's fees. Actual notice to the opposing party is

sufficient. Thus, the Lays' motion for attorney's fees and damages was sufficient notice

under RCW 4.84.250 to apprise the Hasses that the amount in controversy was only $433

and that the Lays sought attorney's fees if they prevailed. The Hasses had more than 10

days, after notice but before the motion hearing, to settle the suit.

The last decision addressing notice under RCW 4.84.250 is In re 1992 Honda

Accord, 117 Wn. App. 510, 71 P.3d 226 (2003). Becerra sued the city of Warden

claiming the city wrongfully impounded his car. The reviewing court granted him relief

but denied him an award of fees under RCW 4.84.250. Becerra did not give notice of his

No. 31575-4-III Target Nat'/ Bank v. Higgins

intent to seek fees under RCW 4.84.250, nor did he broach the possibility of settlement.

Jeanette Higgins broached settlement with Target. In her settlement demand, she

insisted on payment of her attorney's fees and warned that the amount would increase if

the case went to trial. She did not expressly state that she would seek an award of

reasonable attorney's fees after trial, but such intent was inescapably implied. Thus, we

conclude that Higgins gave notice that she would ask the court for an award of fees if she

prevailed at trial or hearing.

Going further, we conclude that Target was on notice that Higgins would seek fees

under RCW 4.84.250. Higgins' counsel should have, as a matter of precaution, but did

not cite the statute in his settlement demand. Nevertheless, Target, as the master of its

claim, knew that the suit was limited to $2,052.37. Target would know that any party

will ask for fees under whatever grounds are available and the small claims settlement

statute would apply. Target's counsel protests that he did not know that Higgins would

seek fees under the small claims settlement statute. He should have known after Higgins

insisted on payment of fees as a condition of settlement.

The Beckmann court affirmed that the purpose behind RCW 4.84.250 requires

some type of notice so that the opposing party would realize the amount of the claim is

small and the party should settle or else risk paying the prevailing party's attorney's fees.

Beckmann is the only Supreme Court case addressing notice requirements. Beckmann

emphasizes notice of the claim being small as more important than notice of the statute

No. 3 1575-4-III Target Nat '[ Bank v. Higgins

under which fees will be sought. Again, Target knew its claim was small and counsel's

letter warned of a risk of paying more fees if the case was not settled.

PUD No.1 holds that actual notice of the statute is sufficient notice, even ifno

notice is given by the prevailing defendant. Target argues it did not have actual notice.

But the PUD No.1 ruling does not preclude a ruling that constructive notice is also

sufficient.

The Tosh court wrote that, "Where ... a plaintiff pleads a dollar amount less than

the statutory maximum, all parties are put on notice that the small claim fee provision

applies, and the Beckmann notice requirement is satisfied." Tosh, 83 Wn. App. at 165.

Under this language, constructive notice satisfies the notice requirement. Admittedly this

language is dictum, but the dictum furthers the teaching of Beckmann to avoid

technicalities. We hold that under these circumstances, when the plaintiff knows that its

claim is under $10,000 and the defendant has demanded payment of fees as part ofa

settlement demand, the defendant may recover reasonable attorney's fees and costs under

RCW 4.84.250.

In so ruling, we recognize that RCW 4.84.250 through .290 imposes no duty upon

a defendant, in cases where the plaintiff recovers nothing, to give plaintiff any notice in

order to recover reasonable attorney's fees. Notice requirements were created by the

courts. The legislature retains the authority to determine what notice is required under

various circumstances.

18 No. 3 1575-4-III Target Nat 'I Bank v. Higgins

Because we hold that Jeanette Higgins is entitled to recover reasonable

attorney's fees under the small claims settlement statute, we do not address the impact of

RCW 4.84.330 on the amount of fees recoverable. We agree with Higgins that the small

claims settlement statute is more likely to reject the amount in dispute as a factor in

determining the reasonableness of fees.

Amount in Controversy as Factor to Consider in Awarding Fees

Under Small Claims Settlement Statute

Our holding that Higgins may recover reasonable attorney's fees and costs under

RCW 4.84.250 is only a partial victory for Higgins. We must still decide whether the

trial court should have granted more fees. In particular, we must determine if the trial

court correctly considered the amount in dispute when reducing the fee award. Because

of the numerous suits with a limited amount in controversy and the impact this decision

may have on those many suits, we perform, before reaching our conclusion, a thorough

examination of the purpose behind RCW 4.84.250 and Washington case law addressing

whether the amount in controversy is relevant when awarding reasonable attorney's fees.

Under RCW 4.84.250, a court, in an action where the amount pleaded is $10,000

or less, shall award to the prevailing party "a reasonable amount to be fixed by the court

as attorneys' fees." This statutory language echoes the general principle that an award of

attorney's fees against an opposing party, known as fee shifting, must be "reasonable" in

amount, a principle applied regardless of what statute grants the award or if a contract

clause affords the prevailing party an award of fees. Generally, a determination of

reasonable attorney's fees begins with a calculation of the "lodestar," which is the

number of hours reasonably expended on the litigation multiplied by a reasonable hourly

rate. Scott Fetzer Co. v. Weeks, 122 Wn.2d 141, 149-50,859 P.2d 1210 (1993);

Berryman v. Metcalf, 177 Wn. App. 644, 660, 312 P.3d 745 (2013).

Under the lodestar method of determining reasonable fees, the court must first

"exclude from the requested hours any wasteful or duplicative hours and any hours

pertaining to unsuccessful theories or claims." Mahler v. Szucs, 135 Wn.2d 398, 434,

957 P.2d 632 (1998). Second, the trial court may adjust or apply a multiplier to the

award "either upward or downward to reflect factors not already taken into

consideration"-specifically, the contingent nature of success and the quality of work

performed. Ross v. State Farm Mut. Auto. Ins. Co., 82 Wn. App. 787, 800,919 P.2d

1268 (1996), reversed on other grounds, 132 Wn.2d 507, 940 P.2d 252 (1997); see also

Bowers v. Transamerica Title Ins., 100 Wn.2d 581, 598-99,675 P.2d 193 (1983). "The

lodestar amount may be adjusted to account for subjective factors such as the level of

skill required by the litigation, the amount of potential recovery, time limitations imposed

by the litigation, the attorney's reputation, and the undesirability of the case." San Juan

County v. No New Gas Tax, 160 Wn.2d 141, 171, 157 P.3d 831 (2007).

RPC 1.5(a) lists 12 factors to consider when evaluating the reasonableness of

attorney's fees for purposes of attorney ethics. Washington courts have ruled that the

factors should be considered when addressing fee shifting in litigation. Mahler, 135

Wn.2d at 433 n.20 (1998); Fetzer, 122 Wn.2d at 148-49; Brand v. Dep't o/Labor &

Indus., 139 Wn.2d 659, 666,989 P.2d 1111 (1999); Berryman, 177 Wn. App. at 660.

Factor four directs consideration of "the amount involved and the results obtained."

RPC 1.5(a)(4) (emphasis added). Our courts have disagreed as to the importance ofthis

"proportionality" factor. Two courts have written that, in assessing the reasonableness of

a fee request, a "vital" consideration is "the size of the amount in dispute in relation to the

fees requested." Berryman, 177 Wn. App. at 660; accord Fetzer, 122 Wn.2d at 150. An

earlier court wrote that the amount of damages involved is not a compelling factor in

fixing the amount of fees. Travis v. Wash. Horse Breeders Ass 'n, 111 Wn.2d 396,409,

759 P.2d 418 (1988). The trial court based Higgins' award on the nominal size of the

dispute and significantly reduced the amount sought for no other stated reason.

F or several reasons, we reverse the trial court and hold that the size of the

controversy must not be considered when fees are awarded under RCW 4.84.250.

First, taking into account the size of the dispute conflicts with the purposes behind

RCW 4.84.250. In the setting of worker's compensation claims, the Supreme Court has

rejected the amount in controversy as a dynamic in awarding fees. Second, Washington

courts proclaim the principle that size matters, but do not apply it. Cases under contract

attorney's fees clauses and other statutes profess to apply the "amount in issue" factor,

but a careful reading of the cases shows that the disproportionate fee request was based

upon padding by the lawyer. Fetzer, 122 Wn.2d at 149; Berryman, 177 Wn. App. at 660.

Third, decisions under RCW 4.84.250 permit fee awards disproportionate to the amount

in dispute. Lay, 112 Wn. App. 818. Even outside the context ofRCW 4.84.250, when a

party seeks an award of fees disproportionate to an award, courts readily grant the request

when documentation supports a reasonable expenditure of time on tasks performed by

counsel. Fiore v. PPG Indus., Inc., 169 Wn. App. 325, 279 P.3d 972 (2012); Taliesen

Corp. v. Razore Land Co., 135 Wn. App. 106, 144 Po3d 1185 (2006); Mayer v. City of

Seattle, 102 Wn. App. 66, 10 Po3d 408 (2000); Dash Point Vill. Assocs. v. Exxon Corp.,

86 Wn. App. 596, 937 P.2d 1148 (1997).

We first review cases wherein the attorney's fees award was reduced ostensibly, in

part, because of a disproportionate recovery, but the decisions show that other factors led

to a reduction in fees. The cases illustrate that courts may combat inflating of attorney

bills by rules unrelated to the size of the controversy.

In Fetzer, 122 Wn.2d 141, the Scott Fetzer Co. sued Dwight's Discount Vacuum

Cleaner City over the ownership of 120 vacuum cleaners, valued at $19,000. Dwight's

prevailed on a motion to dismiss for lack of jurisdiction, and requested attorney's fees of

$180,914. The trial judge granted $116,788. The Supreme Court reversed the fee award

as excessive and remanded the issue for the trial judge to reevaluate both the hourly rate

and the number of hours claimed. On remand, the trial judge reduced the total award of

fees and costs to $72,746038. On a second appeal, our state high court further reduced the

NO.3l575-4-III Target Nat'l Bank v. Higgins

total award of fees and costs to $22,454.28. The court wrote that the fee award should be

proportionate to the recovery, but the fee application was problematic for other reasons.

Fetzer, 122 Wn.2d at 150. The court held that the number of hours awarded for bringing

the initial jurisdictional motion exceeded those that were reasonably necessary to prevail

on that motion. Id. at 144. One of the defendant's counsel remarkably spent 34 hours

across three days to prepare the motion to dismiss. Each party had'" declared war'" on

the other, using tactics that were subject to question. Fetzer, 122 Wn.2d at 152 n.7.

In Berryman, 177 Wn. App. 644, our court declared the amount in dispute to be a

vital consideration, but many other valid reasons explained the court's reduction in fees.

The trial court approved as reasonable a total of 468.55 hours billed by two attorneys for

taking a minor soft tissue injury case through a short trial de novo, where the defendant

did not improve its position after a mandatory arbitration. The jury awarded Berryman

$36,542 in damages. The trial court doubled the lodestar amount and awarded nearly

$292,000, which the appellate court considered an abuse of discretion. There was no

indication that the trial judge actively and independently confronted the question of what

was a reasonable fee. The trial court failed to address whether Berryman's attorneys

double charged for some of the work they performed and that Berryman requested fees

for wasted efforts, duplicative efforts, unidentifiable costs, and inconsistent or vaguely

worded time entries. Records showed that Berryman's two attorneys billed for preparing

for and attending the same depositions, reviewing the same documents, and engaging in

No. 3 1575-4-III Target Nat '/ Bank v. Higgins

the same pretrial preparation. The attorney~ recorded 43.1 hours for their attempt to

obtain discovery of Farmers' claims files, when bad faith was not an issue. The attorneys

billed more than 80 hours for efforts to exclude a defense expert. The attorneys billed a

combined total of 97.4 hours for "client and witness preparation," they billed additional

hours for "witness preparation" on trial days, and they billed an additional 33.5 hours for

"preparation for trial" not otherwise detailed. Berryman, 177 Wn. App. at 663. Block

billing entries obscured time performed on discrete tasks.

We next review cases wherein the attorney's fees award was lopsided compared to

the money in controversy. In Collings v. City First Mortgage Services, LLC, 177 Wn.

App. 908, 929, 317 P.3d lO47 (2013), City First complained on appeal that the attorney's

fee award to Collings of over $600,000 was excessive when compared to his recovery of

$120,000. The court answered that, while the amount of recovery is a relevant

consideration in determining the reasonableness of the fee award, it is not a conclusive

factor. ld. A large attorney's fee award in civil litigation will not be overturned merely

because the amount at stake in the case is small. ld. The top-heavy fee award was

affirmed.

In Fiore, 169 Wn. App. 325, Fiore was awarded $24,406.20 against his employer,

PPG, for unpaid wages. The trial court also awarded Fiore $596,559.47 in attorney's fees

and costs, 24 times the amount of the damage award. On appeal, PPG asserted that the

trial court erred by rejecting considerations of proportionality between the damages

award and the attorney's fee award. The court disagreed noting that our Supreme Court

determined that it would'" not overturn a large attorney fee award in civil litigation

merely because the amount at stake in the case is small. '" ld. at 352 (quoting Mahler,

135 Wn.2d at 433). Rather, the court held, the reasonableness of the fee award is

determined by the lodestar method. ld. The trial court determined that the number of

hours and the hourly rate billed were reasonable and entered extensive findings and

conclusions in support of its determination. Both Fiore and Collings illustrate that the

goal of preventing excessive billing or padding can be reached by discounting time spent

on nonproductive tasks, rather than arbitrarily reducing the amount sought because of the

amount involved. The trial court can also combat an excessive fee request by ensuring

that the fees billed relate to the claims upon which the party won.

Mayer, 102 Wn. App. 66, confirms our view that the court should follow the

lodestar method. Kurtis Mayer, a real estate developer, sued the adjacent property owner,

city, and cement manufacturers under theories of nuisance, negligence, strict liability,

negligence per se and violations of the Model Toxics Control Act (MTCA), chapter

70.105D RCW. Toxic cement kiln dust escaped onto Mayer's property. The superior

court granted the defendants' motion for summary judgment on the tort claims, ruled that

the city and the adjacent owner were strictly liable under the MTCA, and awarded the

developer $26,314.28 in remedial action costs, $238,702.50 in attorney's fees and

$35,599.55 in litigation costs under the MTCA. Mayer, 102 Wn. App. at 74. The

defendants appealed the attorney's fees award.

The Mayer Court of Appeals reversed the summary judgment dismissal of the tort

claims and remanded for a new hearing on the amount of attorney's fees. The trial court

had granted fees for work related to the tort claims, which the appellate court found to be

error. The defendants also argued that the attorney's fee award was unreasonable

because it grossly exceeded the amount of the underlying recovery. The court refused to

criticize the trial court on this ground. The court noted that, '" [W]e will not overturn a

large attorney fee award in civil litigation merely because the amount at stake in the case

is small.'" Mayer, 102 Wn. App. 83 (quoting Mahler, 135 Wn.2d at 433). The relevant

question is whether the court properly applied the lodestar methodology. Id. The amount

of the underlying judgment is relevant in determining the reasonableness of the fee

award, but is not a conclusive factor. Id. On remand, the trial court could award an

amount in attorney's fees disproportionate to the underlying judgment, provided the court

followed the lodestar method.

In Dash Point, 86 Wn. App. at 612-13, our court upheld the recovery of$375,000

in attorney's fees and costs even though the cleanup costs recovered were about $20,000.

The fees were 18.75 times the size of the damage award.

In Taliesen Corp., 135 Wn. App. 106, our court also affirmed a disproportionate

award of fees and costs in an MTCA suit. One defendant, though liable for only $3,400

in remediation costs, was held liable to pay $537,000 in attorney's fees to the plaintiffs.

Another defendant, liable for $34,000 in remediation costs, was held liable to pay over

$500,000 in attorney's fees. The former award was 157 times the amount of the

damages.

We now analyze the statute at issue, RCW 4.84.250. "The primary goal of

statutory interpretation is to ascertain and give effect to the legislature's intent and

purpose." Yakima County v. Yakima Herald-Republic, 170 Wn.2d 775, 797,246 P.3d

768 (2011). The paramount concern of this court is to ensure that the statute is

interpreted consistently with the underlying policy of the statute. Safeco Ins. Cos. v.

Meyering, 102 Wn.2d 385, 392, 687 P.2d 195 (1984). In determining the amount ofa fee

award, the court must consider the purpose of the statute allowing for attorney's fees.

Fetzer, 122 Wn.2d at 149; Brand, 139 Wn.2d at 667; Berryman, 177 Wn. App. at 668.

"The purpose ofRCW 4.84.250 is to encourage out-of-court settlements and to

penalize parties who unjustifiably bring or resist small claims." Beckmann, 107 Wn.2d at

788. Beckmann's use of the word "penalize" is important, since the civil law rarely seeks

to penalize a litigant. "Another purpose is to enable a party to pursue a meritorious small

claim without seeing his award diminished in whole or in part by legal fees." Lay, 112

Wn. App. at 824 (internal quotation marks omitted). These purposes demand ignoring

the amount in controversy when judging the reasonableness of attorney's fees under

RCW 4.84.250. Considering the amount in issue is an anathema to the essence of the

No. 31575-4-111 Target Nat '[ Bank v. Higgins

statute.

Lay, 112 Wn. App. 818, reviewed earlier on the issue of notice, illustrates the

purpose behind the small claims settlement statute. A property line dispute arose

between the Lays and the Hasses when the Hasses erected a fence on the Lays' property.

The Lays sued and filed a summary judgment motion for nominal damages and

attorney's fees. The trial court granted the Lays' motion and awarded the Lays $360 for

the trees and shrubs the Hasses removed and $73 for the Hasses' occupation of their land.

The trial court also awarded the Lays $13,545.05 in attorney's fees. On appeal, the

Hasses challenged the reasonableness of the fees.

The Hasses' only argument regarding excessiveness on appeal was that the

attorney's fees awarded were 31 times the case's actual value. The appeals court

affirmed the award, without any mention that the amount involved should be considered.

Instead, the court noted the factors of the reasonableness of the hourly rate, the

reasonable amount of time required to represent the party's case, and the type of case

involved. Id. at 826. The court emphasized that the policy of RCW 4.84.250 is to punish

parties who resist small claims. The court wrote:

"[A]lthough the attorney fees in this case amounted to 31 times the actual value of the case, the trial court did not abuse its discretion when it reasoned that 'in accordance with the spirit of the statute and the history of this case that $13,545.05 is a reasonable and just figure.'"

Id. at 827.

28 No. 31575-4-III Target Nat '/ Bank v. Higgins

Brand, 139 Wn.2d 659, compels our ruling in favor of Jeanette Higgins because

our Supreme Court held, based upon the purposes behind a statute, that the amount in

controversy was irrelevant to the attorney's fee award. Catherine Brand, a worker's

compensation claimant, appealed from the decision of the Board of Industrial Insurance

Appeals finding that she was not totally disabled and assessing the degree of her injuries.

The jury increased her partial disability award. The trial court awarded attorney's fees,

but in an amount less than requested. On appeal, our high court held it was not

appropriate to reduce Brand's fee award based on her degree of success at trial.

Catherine Brand's attorneys requested attorney's fees under RCW 51.52.130,

which provides that the court shall fix a "reasonable fee" for the services of a worker's

attorney if the Board's decision is reversed or modified and additional relief is granted to

the worker on appeal. The trial court awarded Brand an additional $3,120 on appeal, but

rejected her claim for total disability, which would have entitled her to a pension worth

$113,583. The Department argued that the amount of attorney's fees awarded should

have been reduced in light of Brand's small recovery.

The Brand court dutifully uttered the principle that the amount in dispute is a

factor to be considered. But then the court rejected the principle. The court noted a 1929

decision, in which the court held that, in worker's compensation cases, "'the amount of

recovery is but little, if any, guide.'" Brand, 139 Wn.2d at 666 (quoting Rehberger v.

Dep 't ofLabor & Indus., 154 Wash. 659,662,283 P. 185 (1929)). The Brand court

further wrote:

Central to the calculation of an attorney fees award, however, is the underlying purpose of the statute authorizing the attorney fees. . .. Given that attorney fees statutes may serve different purposes, it is important to evaluate the purpose of the specific attorney fees provision and to apply the statute in accordance with that purpose. The purpose behind the award of attorney fees in workers' compensation cases is to ensure adequate representation for injured workers who were denied justice by the Department.

In light of the plain language ofRCW 51.52.130, we hold that reducing attorney fees awards to account for a worker's limited success is inappropriate in this context. Under the statute, the worker's degree of overall recovery is inconsequential. This holding is consistent with the purposes behind RCW 51.52.130. Awarding full attorney fees to workers who succeed on appeal before the superior or appellate court will ensure adequate representation for injured workers.

Commentators have noted that limiting the amount of attorney fees awarded in workers' compensation cases is inconsistent with the general purpose of the workers' compensation system. Obligating successful workers to cover their legal costs reduces the worker's already limited recovery. . .. [W]e conclude that the worker's degree of overall recovery is not a relevant factor in calculating the attorney fees award.

ld. at 667, 670, 671.

The facts in this appeal fulfill the purpose behind the small claims settlement

statute and beg for an award of fees unencumbered by the amount in controversy.

Jeanette Higgins' defense was undesirable work to the great majority of attorneys.

Unless Higgins won and she was awarded fees, her attorney might never obtain payment.

Many law firms would not allow Higgins through the office front door. Since the amount

at issue was small, many lawyers would shun her request for employment arid advise her

No. 3 I 575-4-II1 Target Nat 'I Bank v. Higgins

that it is not economical to hire an attorney or advise her to employ an incompetent

attorney who lacks work.

Higgins denied the debt such that discovery was needed to discern the basis of

Target's claim. Large corporate defendants can be uncooperative in discovery leading to

an increase in effort expended by the debtor's attorney. The delay by Target and its filing

of a summary judgment motion before answering discovery illustrates the truth to this

generalization.

Higgins' attorney should be applauded for performing a service to that portion of

the community that often lacks legal assistance. He should be recompensed for his

services. Target, who could not present facts showing any amount owed, should pay for

those services rather than Higgins. Target was warned by Higgins' counsel not to

proceed further with the lawsuit, but Target insisted on continuing with litigation with the

result that Higgins' counsel's fees increased. Target's attorneys have likely been paid

their entire bill. Higgins' attorney should also be paid his.

Reducing the attorney's fee award by the amount in controversy, rather than

holding to the lodestar method, could lead to arbitrary awards of fees. The decision of

the trial court illustrates the arbitrary nature of reducing a fee request based upon the

amount in dispute. Neither RPC 1.5(a) nor any other principle of law provides any

guidelines for determining the amount of the fee to cut because of the amount at stake.

Other than a low amount being in controversy, our trial court gave no explanation for

reducing the fees sought from $11,076 to $5,625 and gave no explanation as to how it

arrived at $5,625. If the court is to consider the size of the dispute, $3,000 or $7,000

might have been just as appropriate an award.

By our ruling, we do not mean to discount the importance ofRPC 1.5 in disputes

between a client and the attorney concerning fees or in the award of fees in another

setting. But, in the setting of small claims, the purpose ofRCW 4.84.250 should prevail

over the listing of one factor under the code of professional responsibility. Our state high

court has held that, under at least one statute, the amount in controversy shall not be

considered, meaning some policies take precedence over RPC 1.5(a)(4). Brand, 139

Wn.2d 659. If awarding full attorney's fees to workers who succeed in court will ensure

adequate representation for injured workers, awarding full attorney's fees to litigants in

small claims will also promote adequate representation.

Our ruling does not preclude the trial court from reducing the amount sought by

Jeanette Higgins' attorney. As argued by Target, some of the work performed by counsel

may have been wasteful since the work addressed unsuccessful claims, such as the debt

collector license statute. Under our ruling, wasteful and duplicitous work is still a factor

to consider when determining the reasonableness of the fees. The trial court might also

find that counsel spent excessive time on a particular task. Nevertheless, under our

ruling, the trial court should not reduce the fees sought because of the amount in dispute.

Findings ofFact

We vacate the trial court's award of reasonable attorney's fees and costs and

remand the case for a second review of the fees requested by Jeanette Higgins. In

reviewing the fee application, the trial court will have discretion in determining the

amount to award consistent with this decision.

We also direct the trial court to enter findings of fact that will allow us to review

any additional appeal of the award. If the court reduces the award from the amount

sought, the trial court should enter findings explaining a reason for the reduction other

than the amount in controversy. Washington courts have repeatedly held that the absence

of an adequate record upon which to review a fee award will result in a remand of the

award to the trial court to develop such a record. Mahler, 135 Wn.2d at 435; Smith v.

Dalton, 58 Wn. App. 876, 885, 795 P.2d 706 (1990); Rhinehart v. Seattle Times, 59 Wn.

App. 332, 342-43, 798 P.2d 1155 (1990); Bentzen v. Demmons, 68 Wn. App. 339, 350­

51,842 P.2d 1015 (1993); State Farm Mut. Auto. Ins. Co. v. Johnson, 72 Wn. App. 580,

595-96,871 P.2d 1066 (1994).

Jeanette Higgins assigns error to the form of the order"the trial court previously

signed awarding attorney's fees. Because those fees have since been paid by Target, we

decline to address this assignment because of its mootness. Generally, this court will not

consider a case if the issue presented is moot. State v. Walker, 93 Wn. App. 382, 385,

967 P.2d 1289 (1998).

33 No. 3 1575-4-III Target Nat 'I Bank v. Higgins

Attorney's Fees on Appeal

Both parties request reasonable attorney's fees and costs on appeal.

RCW 4.84.290 allows the prevailing party on appeal, attorney's fees on appeal. Lay, 112

Wn. App. at 827. The statute reads, in part:

In addition, if the prevailing party on appeal would be entitled to attorneys' fees under the provisions ofRCW 4.84.250, the court deciding the appeal shall allow to the prevailing party such additional amount as the court shall adjudge reasonable as attorneys' fees for the appeal.

RCW 4.84.290. We award attorney's fees for the appeal to the Jeanette Higgins upon her

compliance with RAP 18.1 (d).

CONCLUSION

We reverse and vacate the trial court's award of reasonable attorney's fees to

Jeanette Higgins. We remand the case to the trial court for a determination of reasonable

fees consistent with this decision.

,,:kMl~.3- Fearing, J. )

WE CONCUR:

-~

D~~ J~ Brown,1. Kulik, J.P.T.