Claims to Recoup Defense Fees and Costs Take Another Hit from Oregon Supreme Court

As discussed in an earlier blog, a March 2015 Oregon Supreme Court decision struck a blow against common law indemnity claims, including claims for defense fees and costs, in cases where Oregon’s comparative negligence statutes apply. In Eclectic Investment LLC v. Patterson, 357 Or 25 (March 19, 2015), the Court held that the judicially created doctrine of common law indemnity is unnecessary in cases where Oregon’s comparative negligence statutes apply. The Court reasoned that under Oregon’s comparative fault system, defendants are only severally, and not jointly, liable to a plaintiff. Co-defendants are not responsible for any fault of their co-defendants, and thus cannot sustain a claim in common law indemnity against one another. This includes claims seeking to recoup defense fees and costs. See our earlier blog for a complete discussion of this opinion. [click here]

In Eclectic, Jackson County and McAllister were co-defendants in a construction defect case. The case was tried to a jury, and the comparative negligence statutes were applied. The jury found the plaintiff to be more than 50% at fault, and consequently, neither the County nor McAllister were held liable to the plaintiff. Nevertheless, the County continued to seek its defense fees and costs from McAllister on a theory of common law indemnity, arguing that its negligence was passive and secondary, while McAllister’s was active and primary. The Court held that the County was not entitled to recover its defense fees and costs under a theory of common law indemnity.

The County petitioned for reconsideration and the Court issued a modified decision on June 11, 2015. Eclectic Investment LLC v. Patterson, 357 Or 327 (June 11, 2015). Therein the Court upholds its prior decision, and provides additional clarification regarding the validity (or lack thereof) of common law claims against a co-defendant to recoup defense fees and costs.

The County argued on reconsideration that its claim for fees and costs should be treated as a separate and distinct claim from a common law indemnity claim for damages. The Court’s prior ruling included a footnote which arguably could have been construed to recognize such an independent claim. In footnote 9 of the earlier opinion, the Court stated:

We do not decide whether a prevailing defendant may be permitted to recover its costs of defense from another tortfeasor on a theory other than common-law indemnity . . . . Here, the county’s cross-claim was not a tort claim against the contractor alleging that the contractor had committed a tort that required the county to protect its interests by defending a claim brought by plaintiff or that plaintiff’s claim against the county existed only because of the tort of the contractor. Rather, plaintiff alleged that the county was liable for its own negligence.

Eclectic, 357 Or at 39, FN 9.

In response to the County’s argument, on reconsideration the Court stated: “Even if the county is correct that a claim for common-law indemnity includes a claim for attorney fees, it is incorrect that a defendant has an independent claim for attorney fees when the plaintiff’s claim for restitution itself is not viable.” 357 Or at 331.

The Court further disagreed with the County’s argument that precluding such a claim is fundamentally unfair in light of the County’s assertion that its alleged negligence was passive and secondary, while that of its co-defendant was active and primary. The Court noted that “undisputed facts reveal that the county investigated and observed the excavation at issue in this case during and after its completion and ultimately issued a permit approving the excavation . . . .” Id. at 332.

Stay tuned to this blog as we will continue to monitor developments in this area of Oregon law.

By: Elizabeth Wright, Portland, Oregon