McCarthy v. Oregon Freeze Dry, Inc., 334 Or. 77

Summary

The Oregon Supreme Court held that the Court of Appeals applied the correct standard for awarding attorney fees to a prevailing defendant in an employment-discrimination action. However, the plaintiff’s appellate arguments concerning relief from a voluntary dismissal had a legal basis and were not frivolous, unreasonable, or without foundation. The court reversed the attorney-fee award.

Holdings

1. Under former ORS 659.121(1), a prevailing defendant may receive attorney fees on appeal only when the plaintiff's position is frivolous, unreasonable, or without foundation. An appellate argument meets that standard when a reasonable lawyer would know that it is not well grounded in fact or warranted by existing law or by a reasonable argument for extending, modifying, or reversing existing law.
2. The inquiry into whether a plaintiff's position is frivolous, unreasonable, or without foundation is not limited to the factual merits of the underlying discrimination claim; procedural or appellate arguments may also render the position meritless if they lack legal or factual support.
3. McCarthy's appellate arguments were not frivolous, unreasonable, or without foundation because they had at least some support in Oregon case law and constituted a reasonable argument that the trial court abused its discretion in refusing to relieve him from the consequences of his attorney's legal error.

Questions Presented

1. Whether the Court of Appeals applied the correct standard in determining that McCarthy's appellate arguments were frivolous, unreasonable, or without foundation for purposes of awarding attorney fees to the prevailing defendant.
2. Whether McCarthy's arguments that the trial court abused its discretion in refusing to set aside the dismissal had any legal or factual basis.
3. Whether the attorney-fee inquiry was limited to the substantive merits of McCarthy's discrimination claim or could include procedural and appellate arguments.

Disposition

reversed