Quesnoy v. Dep't of Revenue

286 Or.App. 359

400 P.3d 960

Sandra QUESNOY and Katelyn S. Oldham, Petitioners,

v.DEPARTMENT OF REVENUE, Respondent.

A154276

Court of Appeals of Oregon.

Argued and submitted June 23, 2015.

June 28, 2017

Katelyn S. Oldham, Portland, argued the cause and filed the briefs for petitioners.

Denise Fjordbeck, Assistant Attorney General, Salem, argued the cause for respondent. On the briefs were Ellen F. Rosenblum, Attorney General, Anna M. Joyce, Solicitor General, and Cecil A. Reniche-Smith, Assistant Attorney General.

Kristina J. Holm, Julia E. Markley, Christopher L. Garrett, and Perkins Coie LLP, filed the brief amicus curiae for the American Civil Liberties Union of Oregon, Inc.

Phil Goldsmith, Law Office of Phil Goldsmith, Charles S. Tauman and Charles S. Tauman, PC, filed the brief amicus curiae for Oregon Trial Lawyers Association.

Before Sercombe, Presiding Judge, and Hadlock, Chief Judge, and Tookey, Judge.

HADLOCK, C.J.

Several years ago, petitioner Quesnoy was convicted of a property crime. Her sentence included an 18-month term of incarceration and a requirement that she pay nearly $250,000 in restitution. The judgment of conviction ordered that $148,455.55 of the restitution "be referred to the Oregon Department of Revenue [ (DOR) ] for collection." Quesnoy later sued the State of Oregon, the Department of Corrections, and individual state employees in federal court, alleging that those defendants had violated her statutory and constitutional rights while she was incarcerated. She ultimately prevailed on some of her claims against the state and one individual defendant, and she was awarded a total of $50,000.00 in damages plus $121,970.20 in attorney fees and costs.

DOR initially sought to garnish both of those amounts as setoff against Quesnoy's restitution debt. After a contested case proceeding and some procedural complications that we describe below, DOR issued a final order on reconsideration that allows DOR to garnish the $50,000.00 damages award but that prohibits DOR from garnishing the $121,970.20 award for attorney fees and costs. On judicial review from that order on reconsideration, petitioners raise six claims of error.¹ We reject each of those six claims of error for the reasons set out below. Accordingly, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

No party has challenged the factual findings in DOR's final order on reconsideration. Accordingly, those findings establish the facts for the purposes of judicial review. Jefferson County School Dist. No 509- J v. FDAB , 311 Or. 389, 393 n. 7, 812 P.2d 1384 (1991). Our description of the facts is therefore based mainly on DOR's findings; to add context, we also set out some evidence from the record regarding facts that are not in dispute.

A. Quesnoy's Conviction, the Restitution Judgment, Quesnoy's Successful Federal Suit, and DOR's Efforts at Garnishment

In 2009, Quesnoy was convicted of first-degree aggravated theft of over $50,000. She was sentenced to 18 months in prison and ordered to pay nearly $250,000 in restitution. The judgment in the criminal case identified the state as the judgment creditor and included an order that "$148,455.55 of the victim restitution * * * be referred to [DOR] for collection."

The following year, Quesnoy brought a federal action against the State of Oregon and a state corrections employee, Raines, among others, for alleged "violations of [her] federally protected rights and rights protected by the state of Oregon" while she was incarcerated at the Coffee Creek Correctional Facility. As pertinent here, Quesnoy alleged that the state had violated state and federal laws prohibiting discrimination on the basis of disability. Those claims were based on Quesnoy's assertion that the state had failed to accommodate her disabilities, which impair her mobility, by (among other things) placing her in segregation without a wheelchair or walker. Quesnoy alleged that she suffered "humiliation, frustration, distress, physical pain, mental anguish, anxiety and loss of her freedom" as a result of the failure to accommodate her disabilities.² In separate claims, Quesnoy alleged that Raines had unlawfully retaliated against her, after Quesnoy protested her treatment in prison, and had also violated Quesnoy's rights under the Fourteenth Amendment to the United States Constitution.

Quesnoy ultimately succeeded on her claims against Raines for retaliation and for violation of her Fourteenth Amendment rights; she also prevailed on her claims that the state had violated state and federal disability-discrimination statutes. The jury awarded Quesnoy $15,000 on her claims against Raines and $35,000 on her claims against the state. The federal district court entered a $50,000 judgment in Quesnoy's favor in February 2012. At that point, Quesnoy had requested an award of attorney fees and costs, but the district court had not yet ruled on that request.

Shortly after entry of the federal district court judgment, DOR notified petitioners of its intention to garnish that money judgment. Petitioners challenged the garnishment, asserting that $10,000 of Quesnoy's $35,000 damage award against the state was exempt under ORS 18.345(1)(k) as payment awarded for personal bodily injuries.³ Specifically, Quesnoy asserted that her successful claims against the state "related to injuries and harm she suffered while incarcerated because she was denied access to needed mobility devices." Oldham also asserted that she had an interest in the attorney fees and costs yet to be awarded.

The federal district court subsequently entered a supplemental judgment awarding Quesnoy $121,970.20 in attorney fees and costs. Oldham filed a notice of attorney's lien against that supplemental judgment, which DOR sought to garnish.⁴ Over the next few months, the parties continued to dispute whether DOR properly could garnish either the damages award or the award of attorney fees. DOR denied each of the challenges to garnishment.

B. The Contested Case Hearing and the Initial Final Order

Petitioners eventually requested a contested case hearing on the garnishment matter, and a hearing was scheduled before an administrative law judge (ALJ). As later framed in the ALJ's final order, the issue to be decided at the hearing was whether the awards for damages and for attorney fees and costs were exempt from garnishment.

In a hearing memorandum, petitioners asserted that, while Quesnoy had been confined in segregation without a wheelchair or walker, she had "had to crawl to her toilet, had to crawl to the sink if she wished to access water, experienced physical injury due to falls in the cell, and experienced significant emotional distress and humiliation." Petitioners also asserted that Quesnoy had experienced dehydration and that her physical condition deteriorated. They argued that $10,000 of Quesnoy's damages award against the state should, therefore, be exempt from garnishment under the "personal bodily injury" exemption.

Petitioners also raised various challenges to DOR's ability to garnish the award of attorney fees and costs. Among other things, petitioners argued (in a memorandum and at the hearing) that the Supremacy Clause of the United States Constitution precluded garnishment of that award, that the attorney-fee lien held by Oldham took priority over the restitution debt, that the equitable remedy of setoff could not be used to accomplish garnishment under the circumstances here, and that the state would be unjustly enriched if it were permitted to garnish the judgments. DOR filed a memorandum supporting its right to garnish.

At the contested case hearing, Quesnoy testified in support of her contention that part of her damages award could not be garnished, given the "personal bodily injury" exemption. Quesnoy asserted that—in the federal civil case—she had testified to the jury about experiencing two falls as a result of being deprived of a mobility device while in segregation. Quesnoy also asserted that she had testified to the federal jury about physical injuries she had sustained and the medical treatment she had obtained for those injuries. She heard her attorney argue in closing that the jury should award damages for those injuries; the $35,000 damages award against the state followed.

On cross-examination, Quesnoy acknowledged that she had also testified in the federal action about "some mental health issues" that she had experienced while in segregation, including having been "under duress" and experiencing "humiliation and not being able to walk or move around freely." Quesnoy could not recall how much time she spent testifying at the federal trial about her physical injuries as compared to the time she spent testifying about mental health issues. Quesnoy was not aware of any documents or oral statements that would reveal how much of the damage award was attributable to "the falls or the bedsores or the mental health issues."

In closing argument before the ALJ, DOR questioned whether Quesnoy had met her burden of establishing entitlement to the "personal bodily injury" exemption from garnishment:

"I want to briefly address the claim for exemption that [Quesnoy] has. If she's claiming exemption for bodily injury, which would exempt up to ten thousand dollars, and I believe the principle is that if a party is going to claim exemption they have the obligation to—they have the burden to come forward and show that they are entitled to that exemption . * * *

"I think she has shown that there was some element of bodily injury here. I don't think she's—that's her burden to show the whole ten thousand. She acknowledged that, that damages she got on this claim were for two falls and bedsores and mental health damages. It's difficult to divide up among those and decide, you know, well, how much of this is for bodily injury. And frankly, I don't have a good suggestion for you on value, but she has to do it . I suspect you've got discretion probably to determine on your own based on what you

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