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Mindful Insights, LLC v. Verify Valid, LLC

Court of Appeals of Oregon

December 11, 2019

MINDFUL INSIGHTS, LLC, an Oregon limited liability company, Plaintiff-Respondent,
v.
VERIFY VALID, LLC, a Michigan limited liability company, Defendant-Appellant, and Paul DOYLE, an individual and Steve Sprindis, an individual, Defendants.

          Argued and Submitted May 31, 2018.

          Multnomah County Circuit Court 14CV11173 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. [*]

         [301 Or.App. 257] Case Summary:

         Plaintiff fled 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.

         [301 Or.App. 258] POWERS, J.

         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. ORS 20.077; ORS 20.083; ORS 20.096. The question in this case is how that fee recovery operates when a plaintiff has alleged both an express contract and an implied contract as alternative theories of recovery from a defendant, and a different party prevails on each theory.

         Plaintiff, Mindful Insights, LLC, filed this action against defendant, VerifyValid, LLC, 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.

         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 plaintiffs 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 ORS 20.077, ORS 20.083, and ORS 20.096. We further conclude, however, that the court erred in ruling that the right to attorney fees was part of an implied-in-fact contract between the parties, and we therefore reverse the trial court's attorney-fee award to plaintiff.

         [301 Or.App. 259] 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 plaintiffs 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 plaintiffs 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 plaintiffs "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 plaintiffs 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, [301 Or.App. 260] 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 blank spaces for execution by defendant. Spooner replied, "no problem will make sure we turn it around asap." Spooner also forwarded Woods's email to defendant's chief financial officer, Steve Sprindis.

         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 [plaintiffs] 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, [301 Or.App. 261] 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 [plaintiffs] 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.
[301 Or.App. 262] "[Plaintiff] then provided consulting services to [defendant]. "[Defendant] received progress reports and encouraged [plaintiff] to continue to ...

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