MINDFUL INSIGHTS, LLC, an Oregon limited liability company v. VERIFYVALID, LLC, a Michigan limited liability company, and Paul DOYLE, an individual and Steve Sprindis, an individual
14CV11173; A161850
Multnomah County Circuit Court
December 11, 2019
February 26, 2020
301 Or App 256; 454 P3d 787
POWERS, J.
Argued and submitted May 31, 2018; supplemental judgment reversed in part, otherwise affirmed December 11, 2019; appellant‘s amended petition for reconsideration filed January 24, and respondent‘s response to petition for reconsideration filed January 30, reconsideration allowed by opinion February 26, 2020. See 302 Or App 528, 461 P3d 1034 (2020)
Plaintiff filed an action against defendant to recover unpaid consulting fees, alleging separate “claims for relief” in its complaint for (1) breach of a written consulting agreement, which included an attorney-fee provision; (2) breach of an implied contract for its consulting services; and (3) quantum meruit based on the benefit that plaintiff conferred. The jury found in defendant‘s favor on the first issue but for plaintiff on the second and third issues. Thereafter, each party sought its attorney fees—defendant on the ground that it had successfully defended against the claim for breach of a written contract, and plaintiff on the ground that it had prevailed on an implied agreement to the same terms as the written contract, attorney-fee provision included. The trial court ruled that plaintiff was the only prevailing party, awarded plaintiff $260,000 in attorney fees, and denied defendant‘s attorney-fee request. On appeal, defendant argues that the trial court erred both in denying its request and in awarding attorney fees to plaintiff. Held: Plaintiff‘s separately denominated “claims” for breach of a written contract and breach of an implied-in-fact contract were alternative theories within a single claim for breach of contract, and the trial court correctly ruled that plaintiff, not defendant, was the prevailing party on that claim. However, the court erred in awarding plaintiff its attorney fees for prevailing on the implied-in-fact contract theory. The jury expressly rejected the theory that the parties had agreed to the terms of the written consulting agreement, and there was no evidence of any conduct itself from which to infer that the parties had otherwise reached an implied agreement on a term related to attorney fees.
Supplemental judgment reversed in part; otherwise affirmed.
Thomas M. Ryan, Judge.
Sara Kobak argued the cause for appellant. Also on the briefs were Sara C. Cotton and Schwabe, Williamson & Wyatt, P.C.
Amy Heverly argued the cause for respondent. Also on the brief was Jordan Ramis PC.
Before Ortega, Presiding Judge, and Egan, Chief Judge, and Powers, Judge.*
POWERS, J.
Supplemental judgment reversed in part; otherwise affirmed.
* Egan, C. J., vice Garrett, J. pro tempore.
POWERS,
Under Oregon law, the prevailing party on a breach-of-contract claim can recover its attorney fees if the terms of the contract, whether express or implied, authorize the award.
Plaintiff, Mindful Insights, LLC, filed this action against defendant, VerifyValid, LLC, to recover unpaid consulting fees, alleging
Defendant appeals, arguing that the trial court erred both in denying its request and in awarding attorney fees to plaintiff. For the reasons explained below, we conclude that plaintiff‘s separately denominated “claims” for breach of a written contract and breach of an implied-in-fact contract were alternative theories within a single claim for breach of contract, and we affirm the trial court‘s ruling that plaintiff, not defendant, was the prevailing party on that claim for purposes of
BACKGROUND
The relevant background underlying the attorney-fee issues is largely undisputed for purposes of appeal. Plaintiff is a consulting firm specializing in the intersection of technology and banking. Defendant is a company that invented a system for electronic check payments. In July 2013, defendant‘s chief operating officer, Ted Spooner, reached out to plaintiff‘s managing member and chief consultant, Edward Woods, and told him that he was now working for defendant; Spooner had previously done consulting work for plaintiff, and he and Woods had previously worked together at an online banking company.
Spooner eventually emailed Woods and requested that he send an “engagement agreement” for plaintiff to perform consulting work for defendant. Spooner then invited Woods and another of plaintiff‘s consultants, Thomas Brooke, to participate in a conference call along with some of defendant‘s staff. Following that call, an attorney working for defendant, Thomas Coke, emailed Woods and said that Spooner “wanted me to follow up with regards to an existing contract you have that we might use to engage you with [defendant].” In response, Woods sent Coke plaintiff‘s “standard” Master Consulting Services Agreement (MCSA).
On October 1, 2013, Coke told Woods, “I‘m looking over the contract now, and will let you know if I see anything that stands out.” That same day, Coke emailed Spooner, saying, “I think the contract is fine. We can move forward.”
Two days later, Woods, Brooke, Coke, and Spooner participated in a conference call in which they discussed the scope of plaintiff‘s work for defendant. According to Woods, Spooner told him that he was “able to get approval for your doing work” for defendant but with two exceptions—the price would need to be $28,000 for a 30-day term, and Woods and Brooke would have to attend an upcoming trade show called Money 2020. The MCSA was not discussed, nor was it returned to plaintiff.
Thereafter, Brooke and Woods attended the Money 2020 trade show, where they performed work for defendant, including meeting with defendant‘s president, Paul Doyle, as well as with defendant‘s potential clients and business contacts. Following that trade show, Brooke and Woods continued to perform consulting work for defendant.
On October 22, Woods emailed a copy of the MCSA to Spooner, stating, “Attached is the MCSA (exactly the same as previously sent to you and Thomas Coke) and the work order capturing the scope we‘ve discussed and have been working under.” The MCSA, as well as an attached project initiation work order, were signed by Woods and included
Meanwhile, plaintiff continued performing consulting services for defendant, including sending consultants to defendant‘s headquarters in Michigan in early November. Over the next few weeks, Woods sent invoices to Spooner and Sprindis in the amount of $46,818.74 that went unpaid. During that time, Spooner assured Woods that “[w]e will pay [plaintiff‘s] bill that we‘ve approved but I‘ve got to get a handle on what we can do for December and beyond in the next few days.”
On December 13, Doyle fired Spooner for acting beyond his authority with regard to engaging plaintiff. Three days later, on December 16, Woods, Brooke, Sprindis, and Doyle participated in a conference call. Doyle expressed dismay at the size of the invoices, explained that he had terminated Spooner for reasons related to plaintiff, and that Doyle was trying to understand what work plaintiff had performed for defendant. Following the call, plaintiff provided defendant with additional documentation for the work that plaintiff had performed, but defendant still did not pay plaintiff.
Eventually, plaintiff filed a complaint that included four claims for relief against defendant: “Breach of Contract“; “Breach of Implied Contract“; “Unjust Enrichment/Quantum Meruit“; and “Fraud.”1 In allegations common to all claims, plaintiff alleged that, on October 3, 2013, defendant indicated that it accepted the MCSA and that it would engage defendant on a monthly basis for $28,000 per month while the parties worked out a longer-term scope of engagement. Plaintiff further alleged that defendant twice renewed the engagement, for the months of November and December 2013.
Plaintiff alleged that it rendered approximately 300 hours of consulting services and incurred $4,818.74 in costs and expenses, and that defendant terminated its engagement with plaintiff and reneged on its obligation to pay for the consulting services. The total alleged debt was $88,818.74 for consulting services rendered and costs and expenses incurred.
In its “First Claim for Relief,” denominated as “Breach of Contract,” plaintiff realleged and incorporated its previous allegations and then alleged that plaintiff “had a contract with [defendant] to provide consulting services,” that defendant “materially breached its obligations under the MCSA by failing to pay for services rendered,” that plaintiff performed all of its obligations under the MCSA, and that, as a result of the breach, plaintiff was entitled to not less than $88,818.74, “which includes the unpaid balance of the MCSA and [plaintiff‘s] hard costs that were incurred in connection with the engagement.” And, of particular import for this appeal, plaintiff alleged, “The MCSA provides that the prevailing party may recover its reasonable attorneys’ fees and costs incurred in arbitrating, litigating, or otherwise resolving any dispute arising out of the MCSA.”
In its “Second Claim for Relief,” which was denominated “Breach of Implied Contract,” plaintiff realleged and incorporated by reference its previous allegations; it then alleged as follows:
“[Defendant] requested that [plaintiff] provide [defendant] with consulting services.
“[Plaintiff] communicated, and [defendant] understood, that it expected to be compensated for the consulting services it provided.
“[Plaintiff] then provided consulting services to [defendant].
“[Defendant] received progress reports and encouraged [plaintiff] to continue to provide consulting services.
“Based on the conduct of the parties, [plaintiff] was to provide consulting services to [defendant] on the condition that these services would be paid for. [Plaintiff] is therefore entitled to recover the reasonable
value of the services performed and costs and expenses incurred.”
(Paragraph numbering omitted.) The final paragraph of that claim alleged the same amount of damages that was alleged with regard to breach of the express contract: “The reasonable value of the consulting services performed and costs and expenses incurred is not less than $88,818.74.”
Plaintiff‘s third claim for relief was captioned “Quantum Meruit/Unjust Enrichment.” After again realleging and incorporating all previous allegations, plaintiff alleged that it had conferred a benefit on defendant by providing the consulting services, defendant had knowledge of the benefit, defendant accepted and retained the benefit, and that it would be inequitable for defendant to keep the benefit without paying for it. Plaintiff alleged that the “value of the benefits conferred” was “not less than $88,818.74.”
Plaintiff also alleged an additional claim against defendant and against Doyle and Sprindis for fraud.2 That claim alleged that defendant, with the authorization of Doyle and Sprindis, falsely represented to plaintiff that it would pay for consulting services when it had no intention of doing so.
Those four claims were tried to a jury, and much of the parties’ evidence and their theories at trial revolved around the involvement of Spooner, his authority to bind defendant, and what he communicated to plaintiff. In its closing argument, plaintiff stated that it “had every reason to believe that the chief operating officer [for defendant] was being accurate with us” with regard to whether its contract was approved, even though Spooner‘s testimony was “a little ambiguous about what exactly he communicated.”3 In describing its theories of recovery to the jury, plaintiff explained that, “even though we have four claims, we‘re not asking for [$]88,818.74 times four. So all of our claims fall under the same set of facts, which is different legal theories on which [plaintiff] would be entitled to recover those damages.”
With regard to the contract-based claims, plaintiff explained that “the first one is breach of express contract. That‘s the Master Consulting Services Agreement.” With respect to that claim, plaintiff told the jury that defendant by “its words and conduct” agreed to the terms that were incorporated into the MCSA.
After further describing the facts supporting its theory that defendant had accepted the terms of the MCSA, plaintiff turned to its second theory, breach of an implied contract:
“So I‘ll turn next to the breach of implied contract claim. That‘s a different legal theory that‘s closely related, that‘s whether or not the parties agreed to the terms of the Master Consulting Services Agreement, we can infer from the parties’ conduct that they were acting together as if they had a contract.
“And when you look at the volume of communications, it‘s two giant binders. The slides we‘ve seen and the testimony you heard, [defendant and plaintiff] were acting as if they had a contract and [defendant] was requesting work. [Plaintiff] was doing it. [Plaintiff] was repeatedly making clear they expected to be paid and [defendant] promised to pay.”
The jury was subsequently instructed about contracts generally and implied-in-fact contracts in particular. The jury first was instructed: “For a contract to exist, there must be an offer that is accepted,” and that
Later, the jury received the following written instruction, captioned “Contract Implied in Fact“:
“In the alternative to their express contract claim, plaintiff contends, and defendants deny, that there is a contract implied in fact in which defendant agreed to a legally enforceable promise or set of promises with plaintiff.
“A contract implied in fact can arise where the natural and fair interpretation of the acts of the parties leads a reasonable person to conclude that they agreed to the implied contract. The assent and the terms of the parties’ agreement may be inferred from the parties’ conduct.”
The jury ultimately returned a split verdict. It found in defendant‘s favor on claims for breach of an express contract and fraud. With respect to the former, the jury answered “No” to the question, “Did the MCSA form the terms of an express contract between [plaintiff] and [defendant]?”
The jury also found in plaintiff‘s favor on the remaining two claims. It answered “Yes” to the question, “Did [defendant] breach an implied contract it had with [plaintiff]?” It then awarded plaintiff $46,818.74 on that claim—essentially, the amount on the invoices sent in November that Spooner said were approved and would be paid. The jury also returned a verdict in plaintiff‘s favor on the claim for quantum meruit. The jury found that the amount of the benefit conferred was $56,000.
In the wake of that split verdict, both parties claimed an entitlement to attorney fees as the prevailing party. Defendant sought to recover fees it incurred defending against the claim for breach of the MCSA, based on a statutory right to recover attorney fees authorized by a contract even if the defense is “that the prevailing party was not a party to the contract,”
The trial court agreed with plaintiff, ruling that the express and implied contract claims were “alternative methods of proving the existence of a contract and are not mutually exclusive claims. That the jury found that there was a contract implied in fact and not an express contract does not negate that plaintiff is the prevailing party.” The court further concluded that, in addition to the implied-in-fact contract claim, the quantum meruit claim “was an alternative theory for recovering the same damages” and that plaintiff was entitled to fees for work performed on that claim as well. The court, after further proceedings related to the reasonableness of the amount requested by plaintiff, entered a supplemental judgment awarding plaintiff $260,000 in attorney fees and $10,251.92 in litigation costs. Defendant appeals from that supplemental judgment.
ANALYSIS
On appeal, defendant assigns error to the court‘s denial of its petition for fees for breach of the MCSA and to the award of fees to plaintiff for the implied-in-fact contract and quantum meruit claims. Plaintiff defends both rulings, arguing that it alone was entitled to fees under an implied agreement to the fee provision in the MCSA. Those competing arguments present two overarching questions: (1) How is a “prevailing party” determined in the context of a split verdict like this one? (2) What were the terms of the implied-in-fact contract in this case?
A. Express and Implied Contracts
The answer to both questions turns, in significant part, on the distinction between three related concepts: express contracts, implied-in-fact
“When an agreement consists of words, written or spoken, stating in terms the understanding and obligations of the parties, it is called an ‘express contract‘; but when it is inferred from the acts or conduct of the parties, instead of their words, it is an ‘implied contract.’ But in either instance it exists as an obligation solely because the contracting party has willed, under circumstances to which the law attaches the sanction of an obligation, that he shall be bound. And the distinction between an express and implied contract lies, not in the nature of the undertaking, but solely in the mode of proof. In either case there must be an offer of terms, or its equivalent, on the one side, and the acceptance of such terms, or its equivalent, on the other. *** When this intention is expressed, we call the contract an express one. When it is not expressed, it may be inferred, implied, or presumed, from circumstances as really existing, and then the contract, thus ascertained, is called an implied one.”
(Internal citation and quotation marks omitted.)
We made the same observation more recently in Staley, explaining that the “only difference” between an express contract and an implied-in-fact contract “is the means by which the parties manifest their agreement. In an express contract, the parties manifest their agreement by their words, whether written or spoken. In an implied-in-fact contract, the parties’ agreement is inferred, in whole or in part, from their conduct.” 165 Or App at 262 (citing Restatement § 4 comment a); accord Gadalean v. SAIF, 364 Or 707, 717 n 3, 439 P3d 965 (2019) (“In an implied-in-fact contract, the parties’ agreement is inferred, in whole or in part, from their conduct. *** This court has explained that a contract implied in fact arises ‘where the natural and just interpretation of the acts of the parties warrants such [a] conclusion.’ Owen v. Bradley, 231 Or 94, 103, 371 P2d 966 (1962).“).
In that way, an implied-in-fact contract differs substantially from an implied-in-law contract, also referred to as a “quasi-contract” theory. See Staley, 165 Or App at 262 (observing that “[t]he two concepts differ substantially, and the failure to distinguish them has sometimes led to confusion” (citing Arthur Linton Corbin, 1 Corbin on Contracts § 19 at 44 (1963)). Unlike an express or implied-in-fact contract, a “‘quasi contractual obligation is one that is created by the law for reasons of justice, without any expression of assent,‘” and “[t]he category includes a variety of types of contractual obligations that are implied to prevent injustice.” Id. (quoting 1 Corbin on Contracts § 19 at 46).
B. Determination of “Prevailing Party”
With those conceptual differences in mind, we turn to the preliminary question posed on appeal: Who is properly considered a “prevailing party” in the context of this split verdict?
According to defendant, it is entitled to attorney fees under two related statutes,
“A prevailing party in a civil action relating to an express or implied contract is entitled to an award of attorney fees that is authorized by the terms of the contract or by statute, even though the party prevails by reason of a claim or defense asserting that the contract is in whole or part void, a claim or defense asserting that the contract is unenforceable or a claim or
defense asserting that the prevailing party was not a party to the contract.”
“In any action or suit in which a claim is made based on a contract that specifically provides that attorney fees and costs incurred to enforce the provisions of the contract shall be awarded to one of the parties, the party that prevails on the claim shall be entitled to reasonable attorney fees in addition to costs and disbursements, without regard to whether the prevailing party is the party specified in the contract and without regard to whether the prevailing party is a party to the contract.”
(Emphasis added.)
As the emphasized parts of those statutes reflect, both refer to recovery of attorney fees by the “prevailing party.” That is where a third statute,
“(1) In any action or suit in which one or more claims are asserted for which an award of attorney fees is either authorized or required, the prevailing party on each claim shall be determined as provided in this section. The provisions of this section apply to all proceedings in the action or suit, including arbitration, trial and appeal.
“(2) For the purposes of making an award of attorney fees on a claim, the prevailing party is the party who receives a favorable judgment or arbitration award on the claim. If more than one claim is made in an action or suit for which an award of attorney fees is either authorized or required, the court or arbitrator shall:
“(a) Identify each party that prevails on a claim for which attorney fees could be awarded;
“(b) Decide whether to award attorney fees on claims for which the court or arbitrator is authorized to award attorney fees, and the amount of the award;
“(c) Decide the amount of the award of attorney fees on claims for which the court or arbitrator is required to award attorney fees; and
“(d) Enter a judgment that complies with the requirements of ORS 18.038 and 18.042.”
As the text of
In defendant‘s view, under a claim-by-claim approach, it prevailed on a separate claim for breach of an express contract, even
We reached a similar conclusion in Mount Hood Community College v. Federal Ins. Co., 199 Or App 146, 111 P3d 752 (2005). In that case, the plaintiff brought claims for breach of contract and quantum meruit. We assumed, for the sake of argument, that the contract contemplated an award of attorney fees on a “claim-by-claim basis,” but rejected the defendant‘s argument that there were actually two separate “claims” for purposes of determining a prevailing party:
“*** [D]efendants are incorrect that plaintiff‘s quantum meruit claim is a separate ‘claim’ under the contract for these purposes. Plaintiff sought damages of $59,570.35 on its claim for breach of contract. Plaintiff alleged the same operative facts and sought the same amount—$59,570.35—on its quantum meruit claim. Although not captioned as such, plaintiff‘s quantum meruit claim was an alternative theory for recovering the same damages that it claimed under its breach of contract claim. Indeed, the use of a quantum meruit claim as an alternative to a breach of contract claim is so common that it is not only unremarkable but something that is expected. As is also common, plaintiff based both its breach of contract claim and its quantum meruit claim on the same operative facts. Plaintiff was entitled to plead alternatively on an express contract and in quantum meruit without having to elect the theory upon which it would rely. Kashmir Corp. v. Patterson, 289 Or 589, 592, 616 P2d 468 (1980); see also
ORCP 24 A .”
199 Or App at 158 (emphasis omitted). Although our analysis in Mount Hood Community College was not premised on
The same is true here: Although not captioned as such, plaintiff alleged a single “claim” based on alternative theories of recovery for the same conduct involving a breach of promises about the same services, and for the same amount of damages. See
C. The Terms of the Implied-in-Fact Contract
The remaining issue is whether plaintiff, having prevailed on the contract claim, was entitled to recover its attorney fees. Oregon follows the so-called “American rule” that parties ordinarily bear their own costs of litigation, so plaintiff must prove that a statute or a contract authorizes the recovery of those fees. See Peace River Seed Co-Op v. Proseeds Marketing, 355 Or 44, 65, 322 P3d 531 (2014); Draper v. Mullennex et al, 225 Or 267, 271, 357 P2d 519 (1960) (“If plaintiff is entitled to a judgment for attorney‘s fees against a defendant by reason of any special contract *** then the right to such recovery should be particularly pleaded and proved.“). In this case, plaintiff contended, and the trial court agreed, that the implied contract between the parties authorized the recovery of fees.
The trial court‘s ruling was premised on the view that the attorney-fee provision in the MCSA was part of the implied-in-fact agreement. The court‘s letter opinion begins by quoting that provision from the MCSA:
“The attorney fee provision in the contract between the parties is very broad and provides, in relevant part:
“‘In the event of any dispute arising out of the subject matter of this Consulting Agreement, the prevailing party shall recover, in addition to any other damages assessed, its reasonable fees and costs incurred in arbitrating, litigating, or otherwise settling or resolving such dispute.‘”
Although the trial court did not explain the basis for concluding that the parties’ implied-in-fact agreement included that fee provision, it presumably agreed with the argument that plaintiff made below and continues to advance on appeal: that “what makes an express contract is the oral or written specific assent to the terms. And [an] implied contract, which can still be reflected in the terms of the MCSA, is accepting it by their conduct.” In other words, plaintiff contends that the only difference between its theories of an express contract and an implied-in-fact contract was the manner of acceptance.
As defendant correctly observes, that is not how the case was tried by plaintiff or decided by the jury. First, plaintiff‘s express contract theory was not limited to acceptance of those terms by signature or words, as opposed to conduct. During closing argument, plaintiff told the jury that “the first one is breach of express contract. That‘s the Master Consulting Services Agreement.” Plaintiff then explained, “They started working on that and [defendant], by its words and conduct makes a—agreed to those terms and those terms were eventually incorporated into the Master Consulting Services Agreement, which Edward Woods had sent two days before in which [defendant] never disagreed with.” That argument was consistent with the jury instructions, which likewise stated that acceptance is either “words, conduct, or both that would reasonably lead the party who made the offer to believe the essential terms of the offer had been agreed to.”
At the close of the evidence, plaintiff told the jury that the terms of the “implied-in-fact” theory presented a different question from whether the parties agreed to the terms of the MCSA: “That‘s a different legal theory that‘s closely related, that‘s whether or not the parties agreed to the terms of the Master Consulting Services Agreement, we can infer from the parties’ conduct that they were acting together as if they had a contract.” Then, when describing the evidence to support that theory, plaintiff made no mention of the MCSA being sent or that the terms of the implied-in-fact contract were the same as the MCSA. Rather, plaintiff pointed to a
“And when you look at the volume of communications, it‘s two giant binders. The slides we‘ve seen and the testimony you heard, [defendant] and [plaintiff] were acting as if they had a contract and [defendant] was requesting work. [Plaintiff] was doing it. [Plaintiff] was repeatedly making clear they expected to be paid and [defendant] promised to pay.”
The written jury instructions then reiterated that the implied-in-fact contract theory was “[i]n the alternative to their express contract claim“; the instructions were also consistent with the distinction between acceptance of express terms through conduct (an express contract theory) and plaintiff‘s closing argument on its claim for breach of the express contract, which stated that the terms of the MCSA had been accepted by words and conduct.
And then the verdict form itself reflected the distinction between a contract theory based on the terms of the MCSA (the express contract) and an implied-in-fact con-tract in which the terms were not expressed but could be inferred from the parties’ conduct. Whereas the jury was asked specifically whether “the MCSA form[ed] the terms of an express contract between” the parties, the question regarding the implied-in-fact contract theory simply referred to “an implied contract” defendant had with plaintiff.
In light of how the case was tried, plaintiff‘s post-trial explanation—that the jury found an implied contract with the same terms as the MCSA—has no support in the record. The only fair reading of the verdict is that the jury explicitly rejected plaintiff‘s theory that the parties, through words or conduct, had agreed to the express terms set out in the MCSA, but nonetheless found that it had an implied-in-fact agreement to pay for the invoiced consulting services and plaintiff‘s expenses.
Because the jury rejected the theory that the parties agreed to the terms of the MCSA, that theory cannot supply a basis for concluding that plaintiff prevailed at trial on such a claim. Moreover, because there is no evidence of any conduct itself from which to infer that the parties otherwise reached an implied agreement on a term related to attorney fees, the trial court erred in awarding plaintiff its attorney fees and litigation costs on that basis.6 Accordingly, we reverse those parts of the supplemental judgment and otherwise affirm.
Supplemental judgment reversed in part; otherwise affirmed.