Filed: March 3, 2000

IN THE SUPREME COURT OF THE STATE OF OREGON

BERGER FARMS,
an Oregon partnership;
KEITH A. BERGER; KENNETH A. BERGER;
REBECCA BERGER; STEVEN BERGER,

Petitioners on Review,

v.

FIRST INTERSTATE BANK OF OREGON, N.A.,
a national banking association,

Respondent on Review.

(TC 9509-06466; CA A91677; SC S44594)

On review from the Court of Appeals.*

Argued and submitted November 9, 1998.

Jeffrey M. Edelson, of Markowitz, Herbold, Glade & Mehlhaf, P.C., Portland, argued the cause for petitioners on review. David B. Markowitz filed the petition for review. J. David Yeager, David B. Markowitz, and Jeffrey M. Edelson filed the brief. Also on the petition and brief was Markowitz, Herbold, Glade & Mehlhaf, P.C., Portland.

Thomas W. Sondag, of Lane Powell Spears Lubersky LLP, Portland, argued the cause and filed the brief for respondent on review.

Before Carson, Chief Justice, and Gillette, Van Hoomissen, Durham, and Kulongoski, Justices.**

CARSON, C.J.

The order of the Court of Appeals is reversed.

*Appeal from Multnomah County Circuit Court.

148 Or App 33, 939 P2d 64 (1997).

**Leeson and Riggs, JJ., did not participate in the consideration or decision of this case.

CARSON, C.J.

Plaintiffs challenge a Court of Appeals order that awarded attorney fees to defendant on appeal under a contractual provision granting to the "prevailing party" the right to obtain reasonable attorney fees. We are presented with two questions on review: (1) whether the Court of Appeals had authority to award attorney fees, given its earlier conclusion that most of the parties' underlying dispute was subject to arbitration; and (2) whether defendant was entitled to attorney fees at that particular stage of the proceedings as the "prevailing party" under ORS 20.015. (1) We conclude that the Court of Appeals was without authority to award attorney fees incurred on the claims that were subject to arbitration and that defendant was not the prevailing party as to the remaining claims. We therefore reverse the order of the Court of Appeals.

This dispute arose from two loan agreements between plaintiffs and defendant. The agreements, which were executed in 1992 and 1994, respectively, contained binding arbitration clauses that provided, in part:

"7. MANDATORY ARBITRATION OF ALL DISPUTES.

"7.1 Binding Arbitration. All disputes arising out of or in connection with or related to this Agreement or any related agreements or instruments or any transaction of which this Agreement is a part shall be resolved by binding arbitration in accordance with Title 9 of the United States Code and the then effective Commercial Arbitration Rules of the American Arbitration Association.

"7.2 Dispute Defined. 'Dispute' is defined to mean any action, demand, dispute, claim, counterclaim or controversy between the parties whether in contract, tort, arising out of statute, or otherwise."

In 1995, plaintiffs filed an action against defendant in circuit court, alleging seven claims: breach of fiduciary duty, negligent misrepresentation, breach of oral contract, interference with business relations, fraudulent misrepresentation, fraud, and racketeering. Defendants moved to stay the court action pending arbitration of plaintiffs' claims under section 3 of the Federal Arbitration Act (FAA), 9 USC