This opinion was filed for record
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Supreme Court Clerk

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

JESS NELSON, an individual, )
)
Petitioner, ) No. 92489-9
)
v. ) En Bane
)
MICHAEL ERICKSON and JANE DOE ) Filed _ _ 1 _13_2~_16_____
A_UG__
ERICKSON, and the marital community )
composed thereof, )
)
Respondents. )
_______________________)

OWENS, J. - In many civil cases, arbitration is mandatory. After

arbitration, either party can request a full trial, but if they do not improve their

position from arbitration, they have to pay the opposing party's attorney fees. In this

case, Michael Erickson requested a trial after arbitration, and the issue before us is

whether he improved his position at trial. This is not as simple to resolve as it might

seem because his position prior to trial was unclear. We hold that his position prior to

trial should be interpreted as an ordinary person would. Applying that rule, Erickson

improved his position at trial and is not required to pay the opposing party's attorney

fees. We affirm the Court of Appeals.
Nelson v. Erickson
No. 92489-9

FACTS

Plaintiff Jess Nelson sued Erickson for personal injuries after a car accident.

They went to mandatory arbitration, and the arbitrator awarded the plaintiff a total of

$44,923. Of that total award, $1,522 was for attorney fees and costs. The defendant

decided to seek trial de novo. In an effort to avoid trial, the plaintiff offered to settle

for "$26,000 plus taxable costs incurred at arbitration." Clerk's Papers at 839. This

language from the settlement offer is the center of the legal dispute in this case.

The defendant did not respond to the offer, and the parties went to trial. The

jury awarded the plaintiff $24,167. Upon the plaintiff's motion for additur, the judge

added $3,000 for future noneconomic damages. This brought the total award at trial

to $27,167.

The plaintiff then moved for attorney fees under MAR 7.3, arguing that the

defendant had not improved his position at trial. The plaintiff characterized the

settlement offer (that read "$26,000 plus taxable costs incurred at arbitration") as

simply $26,000, and since the trial award was $27,167, the defendant did not improve

his position by going to trial. The trial judge agreed and awarded the plaintiff$58,908

in attorney fees and $4,488 in costs.

The defendant appealed, arguing that the settlement offer was actually for

$26,000 plus the !mown arbitration costs of$1,522. The total offer of$27,522 was

more than the award at trial, and thus the defendant had improved his position at trial

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Nelson v. Erickson
No. 92489-9

and was not liable for the plaintiff's attorney fees under MAR 7.3. The Court of

Appeals agreed and vacated the award of fees and costs to the plaintiff. Nelson v.

Erickson, noted at

190 Wn. App. 1003

2015 WL 5345709

, at *10. We granted

review. Nelson v. Erickson,

185 Wn.2d 1010

367 P.3d 1083

 (2016).

                                          ISSUE

       Did the defendant improve his position at trial?

                                       ANALYSIS

       If a party requests trial de novo after mandatory arbitration and he or she does

not improve his or her position at trial, he or she must pay the other side's attorney

fees. MAR 7.3. If a party offers to settle prior to trial, that settlement offer replaces

the arbitration award when determining whether the party who requested trial de novo

improved his or her position. RCW 7.06.050(1)(b). "[T]he purpose of MAR 7.3 is to

encourage settlement and discourage meritless appeals." Niccum v. Enquist,

175 Wn.2d 441,451

286 P.3d 966

 (2012).

       In this case, the plaintiff's settlement offer was "$26,000 plus taxable costs

incurred at arbitration." At issue is how the settlement offer should be interpreted~as

simply $26,000 (as the plaintiff contends) or as $26,000 plus the known arbitration

costs (as the defendant contends).

       In our leading case on this issue, Niccum, we analyzed an offer that purported

to include costs. Both parties claim that Niccum clearly supports their position in this



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Nelson v. Erickson
No. 92489-9


case. That is because our Niccum holding relied on two principles: first, that parties

generally cannot include costs in their settlement offers; and second, that courts

determine the amount of the settlement offer by reading the offer as an ordinary

person would. While those principles both led to the same outcome in Niccum, those

two principles conflict in this case. Thus, we must decide which of those principles

prevails in this case. As explained below, we read this offer as an ordinary person

would: $26,000 plus the known arbitration costs of $1,522. This ruling comports with

the plain language of the rule and provides an incentive for parties to avoid making

confusing settlement offers.

       Like this case, Niccum involved a car accident that went to mandatory

arbitration.

175 Wn.2d at 443-44

. The arbitrator awarded the plaintiff a total of

$24,496 for medical expenses, lost wages, and pain and suffering. I d. at 444. As in

this case, the defendant requested a trial de novo and the plaintiff offered a settlement

prior to trial. I d. The plaintiff first offered a settlement of $22,000, but that was

rejected. The plaintiff then offered to settle for $17,350. ld. The offer explained,

"'Such compromise is intended to replace the arbitrator's award of $24,496.00 and

replace the previous offer of compromise, with an award of $17,350.00 including

costs and statutory attorney fees."' ld. The defendant rejected the offer, and the

parties went to trial.




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Nelson v. Erickson
No. 92489-9


       The jury awarded the plaintiff $16,650 for past medical expenses and

noneconomic damages. The plaintiff then moved for costs and attorney fees pursuant

to MAR 7.3, arguing that the defendant had failed to improve his position at trial. The

plaintiff argued that since his $17,350 settlement offer included "costs and statutory

attorney fees," the court should subtract costs and statutory fees from the offer,

leaving only the portion of the offer that related to damages to compare to the jury

award. The plaintiff calculated that costs and fees totaled $1 ,016.28, and thus the

portion of the offer that related to damages was $16,333.72. The p1aintiffreasoned

that this portion of the offer was less than the $16,650 that the jury awarded in

damages, so the defendant had not improved his position at trial.

       We rejected that argument, ruling that "[a] straightforward application of the

statutory language shows that [the defendant] improved his position on trial de novo."

Id. at 452

. We explained that the rule under MAR 7.3-whether a party improves on

their position at trial-was '"meant to be understood by ordinary people."' !d.

(quoting Cormar, Ltd. v. Sauro,

60 Wn. App. 622, 623

806 P.2d 253

(1991)). We

held that "[i]t is our view that an ordinary person would consider that the 'amount' of

an offer of compromise is the total smn of money that a party offered to accept in

exchange for settling the lawsuit." !d. (citing WEBSTER'S THIRD NEW

INTERNATIONAL DICTIONARY 72 (2002)). Applying that rule to the facts in Niccum,

the court found that the jury verdict of $16,600 was less than the settlement amount

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Nelson v. Erickson
No. 92489-9

offered of$17,350. Since the jury verdict was lower than the settlement offer, the

defendant had improved his position at trial and the plaintiff was not entitled to

attorney fees under MAR 7.3.

As mentioned above, the Niccum decision also addressed the specific issue of

including costs in an offer of compromise. The court explained that parties should not

address costs in their offers because "a party is not entitled to costs in connection with

an offer of compromise." !d. at 448. Costs are awarded to a prevailing party only

upon judgment. !d. at 449. The court explained that a party may ask for a specific

amount of money as part of an offer to cover expenses, but those dollars should be

distinguished from statutory costs. !d. at 450. The court held that costs should not be

subtracted from an offer, but instead the offer should be treated as "the lump sum that

he offered to accept in exchange for settling the lawsuit." !d.

Thus, both parties are correct that Niccum provides some support for their

position. On the one hand, Niccum explained that parties should not reference costs in

their settlement offer because costs are generally statutory and awarded by courts. On

the other hand, Niccum also explained that offers should be interpreted as an ordinary

person would interpret them, and that we should view the offer as a whole-as "the

total sum of money that a party offered to accept in exchange for settling the lawsuit."

Id. at 452.

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Nelson v. Erickson
No. 92489-9

We treat this offer as an ordinary person would interpret it. The plaintiff

offered to settle the case for $26,000 plus the costs incurred at arbitration. Unlike

Niccum, the costs were known at the time of the offer-$1,522. An ordinary person

would understand that the plaintiff was offering to settle the case for $26,000 plus

$1,522. The plaintiff is essentially arguing that the defendant should have !mown that

Niccum prevented any inclusion of costs in an offer, and thus the defendant should

have known that the offer was only for $26,000. But if the plaintiff wanted to offer

$26,000, he could have done so by simply offering "$26,000." He now argues that he

had no right to make the offer he did, but he places responsibility for identifying that

flaw on the defendant. Simply as a matter of fairness, we cannot accept that

argument. If he had no right to include costs in the offer, why did he purport to

include them? Either he was intentionally making a confusing offer or he negligently

made a confusing offer. Regardless, we cannot reward him for making a confusing

offer that he now argues was improper.

As we explained in Niccum, the purpose of the Mandatory Arbitration Rules is

to encourage settlement and discourage meritless appeals. In order to do so, parties

must be able to determine "what position it must improve upon to avoid paying

reasonable attorney's fees if it elects to continue to trial." !d. at 452. When

settlement offers are uncertain, it stymies the system. Not only is it more difficult for

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Nelson v. Erickson
No. 92489-9

parties to figure out whether to settle, it will likely increase litigation after the fact, as

the parties must then litigate the meaning of vague offers. !d. at 451.

Pursuant to Niccum, we discourage parties from including costs in their offers

and from making vague or confusing settlement offers. We hold parties to the total

settlement amount in their offer, and we do not dissect the offer after the fact. This

reasoning and result is the most faithful to Niccum, MAR 7.3, and common sense.

CONCLUSION

In this case, we believe any ordinary person would understand the settlement

offer to be $26,000 plus the costs incurred at arbitration, which both parties lmew to

be $1,522. The defendant did not accept the offer, went to trial, and obtained a jury

verdict that was less than the settlement offer. Since he improved his position at trial,

the opposing party is not entitled to attorney fees. We affirm the Court of Appeals.

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Nelson v. Erickson
No. 92489-9

WE CONCUR:

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