STATE OF OREGON, Respondent on Review, v. EMA RAMOS, Petitioner
CC C092342CR; CA A150423; SC S062942
IN THE SUPREME COURT OF THE STATE OF OREGON
February 19, 2016
On review from the Court of Appeals.*
Argued and submitted September 15, 2015.
Morgen E. Daniels, Deputy Public Defender, Salem, argued the cause and filed the brief for petitioner on review. With her on the brief was Ernest G. Lannet, Chief Defender, Office of Public Defense Services.
Doug M. Petrina, Assistant Attorney General, Salem, argued the cause and filed the brief for respondent on review. With him on the brief were Ellen F. Rosenblum, Attorney General, and Paul L. Smith, Deputy Solicitor General.
Amy C. Liu, Portland, filed the brief for amicus curiae National Crime Victim Law Institute. With her on the brief was Margaret Garvin.
Before Balmer, Chief Justice, and Kistler, Walters, Landau, Baldwin, Brewer, and Nakamoto, Justices.**
WALTERS, J.
The decision of the Court of Appeals and the judgment of the circuit court are affirmed.
______________
** On appeal from Washington County Circuit Court, Kirsten E. Thompson, Judge. 267 Or App 164, 340 P3d 703 (2014).
** Linder, J., retired December 31, 2015, and did not participate in the decision of this case.
Case Summary: Defendant was convicted of second-degree arson and attempted first-degree aggravated theft after she set fire to her restaurant and attempted to collect insurance proceeds. She was ordered to pay restitution, including restitution to her own insurer for the expenses relating to the investigation of the arson and defendant’s fraudulent insurance claim. Defendant argued that the insurer’s expenses did not qualify as “economic damages” under
Held:
The decision of the Court of Appeals and the judgment of the circuit court are affirmed.
WALTERS, J.
After defendant set fire to her restaurant and filed a fraudulent claim with her insurance company for damage to restaurant equipment, she was convicted of second-degree arson and attempted first-degree aggravated theft. Thereafter, the state sought a restitution award against defendant. Under
The pertinent facts are undisputed. Defendant operated a restaurant on premises that she leased, and, in December 2008, set
Thenell actively participated in Oregon Mutual’s investigation of defendant’s claim, and he also retained
others to assist him. Those persons included a private fire investigation firm to investigate the cause and origin of the fire, a forensics firm to examine and test electrical components in order to determine the cause and origin of the fire, and a private investigator to take witness statements and gather information. Thenell also ordered a credit check that revealed defendant’s financial situation, including the fact that she was behind on her home mortgage.
Oregon Mutual denied defendant’s claim approximately one month after the fire, and the state charged defendant with second-degree arson and attempted first-degree aggravated theft. After defendant was convicted of those crimes, the state sought an award of restitution on behalf of Oregon Mutual in the sum of $28,417.98, and the court awarded that sum.2
On appeal to the Court of Appeals, defendant objected to two categories of restitution that the trial court had awarded: (1) the attorney fees that Oregon Mutual had paid to Smith Freed, and (2) the expenses that Oregon Mutual had paid for the other investigators’ time in investigating defendant’s claim and in presenting grand jury and trial testimony. Alternatively, defendant argued that an award of the amounts that Oregon Mutual had paid investigators after it had denied her claim was impermissible. Ramos, 267 Or App at 174. According to defendant, those portions of the restitution award violated limitations on liability drawn from civil law and applicable through the statutory definition of “economic damages,”
The state responded that the challenged categories of restitution met the terms of
“economic damages,” as that term is used in
In this court, defendant takes issue with the premise from which the Court of Appeals reasoned—that “economic damages,” as that term is used in
are economic damages.” Defendant explains that, in a civil action, economic damages also must be reasonably foreseeable and contends that that same limitation applies to “economic damages” awarded as criminal restitution. Likewise, defendant contends, attorney fees and litigation costs are not awarded as damages in a civil action and therefore may not be awarded as damages in a restitution proceeding. Defendant argues that, because the trial court failed to apply those applicable civil law principles, the trial court erred in awarding Oregon Mutual the challenged expenses under
The state adopts the reasoning of the Court of Appeals and contends that the causal connection between a defendant’s criminal activities and a victim’s damages required by
Thus, this case requires us to determine whether a criminal restitution award is subject to two limitations on damages drawn from civil law: (1) that damages are limited to harms that result from reasonably foreseeable risks; and (2) that attorney fees and litigation costs are generally not recoverable unless authorized by statute or contract. For
the reasons that follow, we conclude, first, that the statutory definition of “economic damages,” as used in
We begin our analysis with the reasonable foreseeability limitation and the text of
“When a person is convicted of a crime *** that has resulted in economic damages, the district attorney shall investigate and present to the court, at the time of sentencing or within 90 days after entry of the judgment, evidence of the nature and amount of the damages. *** If the court finds from the evidence presented
that a victim suffered economic damages, in addition to any other sanction it may impose, the court shall enter a judgment or supplemental judgment requiring that the defendant pay the victim restitution in a specific amount that equals the full amount of the victim’s economic damages as determined by the court.”
Thus,
“‘Economic damages’ means objectively verifiable monetary losses including but not limited to reasonable charges necessarily incurred for medical, hospital, nursing and rehabilitative services and other health care services, burial and memorial expenses, loss of income and past and future impairment of earning capacity, reasonable and necessary expenses incurred for substitute domestic services, recurring loss to an estate, damage to reputation that is economically verifiable, reasonable and necessarily incurred costs due to loss of use of property and reasonable costs incurred for repair or for replacement of damaged property, whichever is less.”
As is obvious, neither
Former
“When a person is convicted of a crime *** that has resulted in pecuniary damages, the district attorney shall investigate and present to the court, prior to the time of sentencing, evidence of the nature and amount of such damages. If the court finds from the evidence presented that a victim suffered pecuniary damages, in addition to any other sanction it may impose, the court shall:
“(a) Include in the judgment a requirement that the defendant pay the victim restitution in a specific amount that equals the full amount of the victim’s pecuniary damages as determined by the court.”
Former
“‘Pecuniary damages’ means all special damages, but not general damages, which a person could recover against the defendant in a civil action arising out of the facts or
events constituting the defendant’s criminal activities and shall include, but not be limited to, the money equivalent of property taken, destroyed, broken or otherwise harmed, and losses such as medical expenses and costs of psychological treatment or counseling.”
Thus, the major change made in 20055 was to replace “pecuniary damages” (special damages,
current nomenclature for damages. As we explained in Clarke v. OHSU, 343 Or 581, 608 n 17, 175 P3d 418 (2007):
“General damages *** now are described as noneconomic damages and encompass nonmonetary losses, including damages for pain and suffering, emotional distress, injury to reputation, and loss of companionship. See, e.g.,
ORS 31.710(2)(b) (defining noneconomic damages in the context of a statute limiting recovery for noneconomic damages in civil cases). Special damages now are described as economic damages and refer to the verifiable out-of-pocket losses, including medical expenses, loss of income and future impairment of earning capacity, and costs to repair damaged property. See, e.g.,ORS 31.710(2)(a) (defining economic damages).”
See also Bass v. Hermiston Medical Center, P.C., 143 Or App 268, 270 n 1, 922 P2d 708 (1996) (after statutory changes made in the 1980s, “the bench and bar appear to have generally equated economic damages with special damages and noneconomic damages with general damages, even though economic damages include some items of loss, such as future impairment of earning capacity, that have historically been styled as general damages”).
That history demonstrates that the 2005 amendments to
In 2003, when the legislature had amended
that he approved of the restitution process because it allowed the victim to recover what the victim had a right to receive without having to go through the additional arduousness of a civil case. Audio Recording, House Committee on Judiciary, SB 617, June 26, 2003, http://www.leg.state.or.us/cgi-bin/list_archives.cgi?archive.2003s&HJUD&Judiciary (accessed February 16, 2016).
In 2005, the legislature again amended
In 2005, the Attorney General’s Restitution Task Force submitted House Bill (HB) 2230 (2005) to the legislature. Fred Boss, then-Chief Counsel of the Department of Justice Civil Enforcement Division, described the bill to a subcommittee of the House Committee on Judiciary and told the subcommittee that the reference in the definition of “pecuniary” damages to special and general damages was confusing. Audio Recording, House Committee on Judiciary, Subcommittee on Civil Law, HB 2230, Jan 24, 2005, http://www.leg.state.or.us/cgi-bin/list_archives.cgi?archive.2005s&HJCIV&Judiciary+Subcommittee+on+Civil+Law (accessed Feb 16, 2016). The committee chair sought clarification that the bill substituted a definition of “economic damages” that was commonly used in tort law and referred to objectively verifiable monetary losses and not things such as pain and suffering. Id. (statement of Rep Bob Ackerman, committee chair). Another committee member verified that the definition included property damage. Id. (statement of Rep Greg Macpherson); see also Exhibit D, House Committee on Judiciary, Subcommittee on Civil Law, HB 2230, Jan 24, 2005 (written testimony of Jason Barber, Assistant Director, Crime Victim’s Assistance Section, Department of Justice) (bill was intended to “clarify the definition of damages,” thus increasing a victim’s chances of recovering true economic losses). Nothing at that public hearing or in the committee’s subsequent work sessions indicated that the definitional changes that the legislature made were meant to expand the scope of damages recoverable as restitution or to change the purpose of restitution proceedings.
The bill passed the House and went on to the Senate Committee on Judiciary. At a public hearing, Kelly Skye, representing the Oregon Criminal Defense Lawyers Association, spoke against the bill, arguing that, as it was worded at that point, it did, in fact, broaden the prior definition because
One of the difficulties with the state’s position that a court must discern the meaning of
$8,000 in damages from the defendant>”). Although there may be differences in the types of damages that are recoverable at law and those that are recoverable in equity, and in the types of damages that are recoverable in tort claims and those that are recoverable in breach of contract claims, a party seeking damages of any sort seeks those damages in a civil action. See id. at 262 (defining “civil” as “[o]f or relating to private rights and remedies that are sought by action or suit, as distinct from criminal proceedings <civil litigation>”). The term “damages” has a civil law connotation.
Likewise, the factual causation that
The question that this case presents is whether, in giving meaning to the statutory terms “economic damages” and “result from,” a court also must consider an additional concept applicable in civil actions: that there be not only a “but-for” factual connection between a defendant’s conduct and damages but also that the damages be reasonably foreseeable. As to that question, the state argues that
that the text of
We agree with defendant that the legislature’s cross-reference to the definition of “economic damages” applicable in civil actions, and the legislature’s purpose in creating the restitution procedure as a substitute for a civil proceeding, make civil law concepts
of [a criminal defendant] needed therapy and had a car accident on the way to her therapist’s office. The resulting medical costs, in a literal sense, would be a factual result of the offense. But it would be strange indeed to make a defendant pay restitution for these costs.”
“common-law negligence imposes liability for harms of the general kind and to plaintiffs of the general class placed at risk, harms that a reasonable factfinder, applying community standards, could consider within the range of foreseeable possibilities.” Id. at 12-13. Thus, under Fazzolari, reasonable foreseeability determines a defendant’s responsibility for its conduct and the kinds of harm for which a defendant may be held liable.
In a criminal case, the same inquiry may not be necessary. By statute, the legislature will have established the conduct and the mental state that define the crime. A court, often following a jury verdict, already will have determined the defendant’s criminal responsibility. In awarding restitution as a sanction, then, a court will have no need to determine whether a defendant who has violated the statute should be held responsible for harm that the statute identifies. In most instances, the legislature already will have made both of those determinations. Thus, taking this case as an example,
That does not mean, however, that the concept of reasonable foreseeability is inapplicable in a restitution proceeding. The question that this case presents is not whether the trial court was correct to award some “economic damages” as restitution; certainly it was. As noted, defendant does not challenge the aspect of the court’s restitution award that required that she pay the restaurant owner and the owner’s insurer for fire damage to the building in which defendant’s restaurant was located. The narrower question
significance that the law is justified in imposing liability. Some boundary must be set to liability for the consequences of any act ***.’ [W. Page Keeton, Prosser and Keeton on the Law of Torts § 41 (5th ed 1984)]. In Oregon, we determine that boundary by whether the consequential injury is foreseeable.” (Ellipsis in Wright; bracketed material added; citation omitted.)
that this case presents is whether the civil law concept of reasonable foreseeability is a concept that a court must consider in deciding whether the particular kinds of harm sought as restitution are recoverable. Thus, again taking second-degree arson as an example, suppose that the state were to seek not only an award of restitution for damage to the victim’s property, but also the medical expenses that the victim incurred when, in the course of responding to the building’s fire alarm, the victim was injured in a car accident. Those circumstances would present the narrower question at issue in this case: whether reasonable foreseeability is a limiting concept that a court must consider in deciding whether to award the particular damages sought as restitution.
We conclude that reasonable foreseeability is a limiting concept that applies to an award of economic damages under
“too remote” rather than intending that some other test of “remoteness” apply.
In the civil law, the test that a court uses to determine whether damages are too attenuated to be recoverable is whether a reasonable person in the defendant’s position would have foreseen that someone in the victim’s position could reasonably incur damages of the same general kind that the victim incurred. Cf. Stewart v. Jefferson Plywood Co., 255 Or 603, 608-09, 469 P2d 783 (1970) (limiting liability to harms that are of the general kind to be anticipated from the tortious conduct). That is the test that we conclude the legislature intended to impose for use in restitution proceedings. In arriving at that conclusion, we do not interpret
In this case, defendant did not argue to the trial court that, as a factual matter, it was not reasonably foreseeable that Oregon Mutual would pay attorneys and investigators for the time that they spent investigating defendant’s claim for benefits and in providing grand jury and trial testimony. Instead, the premise of defendant’s argument was that Oregon Mutual’s expenditures were not reasonably foreseeable as a matter of law. We disagree. The record shows that, within a day of a fire that destroyed business property at her restaurant, defendant called Oregon Mutual to make a claim for insurance benefits. Oregon Mutual hired an attorney whose practice was to “provide legal guidance to the insurance company to determine its coverage obligations” and to help “steer the investigation into the cause and origin of the fire and whether there would be coverage for the fire.” That attorney testified that he often performed similar services for insurance companies and that he routinely
hired others to assist him in his investigation. The record does not establish that Oregon Mutual’s expenses were not reasonably foreseeable as a matter of law. In fact, as defendant acknowledges, “[i]t is generally reasonably foreseeable that when an insured makes a claim on an insurance policy, the insurance company will investigate the circumstances to determine whether the claim is legitimate and must be paid.”9 See, e.g.,
Given defendant’s acknowledgement, it may be that defendant’s stronger argument is an argument that the Court of Appeals described as her “alternative argument”; that is, that the fees and costs that Oregon Mutual incurred after it denied defendant’s claim are not recoverable. Although defendant does not use reasonable foreseeability terms in describing that argument, it can be understood as an argument that it was not reasonably foreseeable that Oregon Mutual would continue to investigate defendant’s claim for benefits after it had denied her claim. However, even if defendant had made such an argument, we could not conclude, as a matter of law, that Oregon Mutual’s expenditures after its claim denial were not reasonably foreseeable as a matter of law, particularly given an insured’s right to challenge an insurer’s denial. See, e.g.,
In addressing defendant’s arguments thus far, we have focused on the civil law concept of reasonable foreseeability. We do so because reasonable foreseeability is a concept on which defendant has relied and not because we mean to foreclose consideration of other civil law concepts
in future cases. For instance, in this case, defendant did not argue to the trial court that Oregon Mutual’s expenses were unreasonable in amount, see
We do, however, turn our attention to the second civil law principle that defendant raises in this court: that is, that attorney fees and costs that a party incurs in a civil action are not “economic damages” that are recoverable in a civil action. Accordingly, defendant contends, such expenses also are not recoverable as restitution. Defendant asserts that, as used in
victims are entitled, under
Defendant’s argument fails because it overstates the civil law limitation on the recovery of attorney fees. Defendant is correct that, in a civil action, a party is generally not entitled to an award of attorney fees or litigation costs that that party incurs in that action, unless a statute or contract allows for such recovery. Montara Owners Assn. v. La Noue Development, LLC, 357 Or 333, 360, 353 P3d 563 (2015); see also Baker Botts L.L.P. v. ASARCO LLC, 573 US ___, 135 S Ct 2158, 2164, 192 L Ed 2d 208 (2015) (acknowledging the “bedrock principle known as the American Rule: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”). Although that limitation generally applies, its application in any particular case depends on the specific claims and facts at issue. For example, when a plaintiff brings a claim against a defendant for damages, the plaintiff may seek, as an element of damages, attorney fees and costs that the plaintiff incurred in litigation with a third party. Montara, 357 Or at 360, see also Huffstuter v. Lind, 250 Or 295, 301, 442 P2d 227 (1968) (“[A]ttorney fees are generally allowable as damages in an action against a defendant where the defendant’s tortious or wrongful conduct involved the plaintiff in prior litigation with a third party.”); Dan B. Dobbs, 2 Law of Remedies § 9.2(3) (2d ed 1993) (If a defendant’s fraudulent misrepresentation causes “the plaintiff to litigate with third person, then the reasonable expenses of that litigation, including the plaintiff’s own attorney fees, are recoverable as items of damages consequent upon the misrepresentation.”).
In Osborne v. Hay, 284 Or 133, 141, 585 P2d 674 (1978), this court explained that the American Rule applies only to an award of fees incurred in litigation between two parties and not to fees incurred by one of those parties in separate litigation with a third party. In doing so, the court quoted from the Restatement (First) of Torts § 914, 591 (1939), which notes that third party litigation may include a separate action brought by the state:
“‘A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney fees and other expenditures thereby suffered or incurred.’
“Comment A states that:
“‘The rule stated in this Section applies where the preceding action was brought either by a third person or by the State and also where the present plaintiff has been led by the defendant’s tort to take legal proceedings against a third person. ***’”12
Thus, although a party to a civil action will generally recover the attorney fees and costs incurred in that action only if a statute or contract permits their recovery qua fees and costs, there are instances in which attorney fees and litigation costs incurred in separate litigation may be recovered as an element of a plaintiff’s damages. Defendant’s argument that the term “economic damages” necessarily excludes attorney fees and litigation costs is without merit.
We also reject defendant’s further argument that the American Rule nevertheless should apply by analogy in restitution proceedings as not applicable to this case. Here, even if we were to apply the American Rule, it would not bar recovery of the attorney fees and costs that Oregon Mutual incurred. Those fees and costs fall into two categories—attorney fees and costs that Oregon Mutual incurred in hiring an attorney
The fees that Oregon Mutual incurred in employing Smith Freed to investigate defendant’s claim for benefits
were not fees that Oregon Mutual paid to have an attorney represent it in litigation against defendant; they were expenses that Oregon Mutual incurred because defendant filed a claim for benefits and Oregon Mutual had to decide whether to pay that claim. The American Rule would not bar the recovery of those attorney fees and nonattorney investigative costs.
The second category of litigation costs at issue here concerns the costs that Oregon Mutual paid to its nonattorney investigators for their time giving testimony in the underlying criminal prosecution of defendant. As discussed above, a restitution hearing takes place after a defendant has been convicted of a crime; it is a proceeding in which the state seeks, as a sanction, an award of the damages that the victim could recover if the victim were a plaintiff in a hypothetical civil action suing the defendant for defendant’s criminal/tortious conduct. Defendant argues that, if a victim were to bring a tort action for damages, the victim, as plaintiff, would not be able to recover the litigation costs incurred in that action as damages and that a victim in a restitution proceeding should be subject to the same limitation. What defendant fails to recognize, however, is that, if a victim were to bring such a tort claim, the American Rule would not preclude the victim from recovering fees and costs that the victim incurred as a result of the victim’s involvement in a separate proceeding, such as a criminal proceeding to prosecute the defendant tortfeasor for a crime. See Osborne, 284 Or at 141 (quoting Restatement (First) of Torts § 914, 591 (1939)). Therefore, even if the American Rule were to apply in restitution proceedings by analogy, an issue we reserve and do not decide, that rule would not preclude a victim from recovering attorney fees and costs that the victim incurred as a result of the victim’s involvement in the underlying criminal prosecution. A victim in a restitution proceeding is not required to bring a separate tort action to obtain an award of damages, and therefore the prosecution of the defendant and the award of damages occur in the same criminal proceeding. We conclude, however, that the combined procedure does not deprive the state from seeking, on behalf of the victim, the same damages that the victim could have obtained if the victim had filed a separate action,
and that those damages may include attorney fees and litigation costs that the victim incurred in the underlying criminal prosecution.13
That does not mean, however, that attorney fees and litigation costs that a victim incurs in connection with an underlying criminal prosecution are necessarily recoverable in a restitution proceeding. Like all economic damages, such fees and costs must “result from” a defendant’s criminal activity in the “but-for” sense and also must be a reasonably foreseeable result of the defendant’s criminal activities. That will not always be the case. To take an extreme example, consider an instance in which police officers investigate a defendant’s criminal activity and, in the course of that investigation, discover not only that the defendant committed a crime against the victim but also that the victim herself committed an entirely unrelated crime. In that instance, if the victim sought restitution for the economic damages that she incurred as a result of the defendant’s crime and included, as requested restitution, the attorney fees that she incurred in defending herself against criminal charges, a trial court potentially could find that the victim’s crime would not have been discovered but for the defendant’s criminal activity and therefore that there was a factual connection between the fees and the defendant’s conduct. In that situation, however, the victim’s own criminal activity, prosecution and defense may not have been reasonably foreseeable,
In this case, defendant did not argue in the trial court that the attorney fees and costs that Oregon Mutual incurred either in investigating defendant’s fraudulent insurance claim or in compensating its investigators for their time in grand jury and trial proceedings were not reasonably foreseeable as a matter of fact or as a matter of law. See
prosecuting suspected criminal conduct involving insurance). We therefore do not address those issues.
In summary, we conclude that (1) a court is precluded from awarding, as “economic damages” under
The decision of the Court of Appeals and the judgment of the circuit court are affirmed.