Oregon Court of Appeals rejects product line exception to successor liability

By Lori Irish Bauman
May 17, 2015

If the manufacturer of a defective product sells its assets and goes out of business, can a party injured by the product sue the purchaser of the assets on a products liability theory?  The general rule of successor liability is that purchaser is not liable for the debts and liabilities of the transferor, unless (1) the purchaser agreed to assume the liabilities, (2) the transaction amounts to a consolidation or merger, (3) the purchaser is a mere continuation of the seller, or (4) the transaction was entered into fraudulently to escape liability.

In Gonzalez v. Standard Tools and Equipment Co., the plaintiff sought to add a fifth exception to the no-liability rule, called the "product line" exception.  Courts in other states have adopted that exception, holding that, where a successor company continues to produce the same type of product as the original company, the successor assumes tort liability for defects in units from the same product line.  The Court of Appeals last month rejected plaintiff's argument, declining to add a new exception to the "long-established rule" of successor liability.

Enforcement of voidable noncompete is not tortious, Oregon Court of Appeals holds

By Dan Larsen
May 14, 2015

Under Oregon law, a noncompetition agreement is "voidable," as opposed to void, if the employer fails to give notice two weeks before an employee starts work that the agreement is a condition of employment.   In Bernard v. S.B., Inc., the Oregon Court of Appeals last week examined whether a demand letter based on a voidable noncompetition agreement constitutes tortious interference with economic relations. 

In Bernard, plaintiff's former employer sent the noncompetition agreement to plaintiff's new employer with a demand that plaintiff stop working.  Plaintiff sued the former employer for tortious interference, contending that because the noncompetition agreement was voidable, the former employer acted tortiously when it attempted to invoke the agreement.  The Court held that the agreement was in fact valid at the time the employer attempted to enforce it because plaintiff took no steps to void it.  Invoking the express terms of a valid contract cannot constitute tortious interference, and as a result the Court concluded that the employer was not liable in tort for sending the demand letter.

Arbitrator may order remedies beyond the agreed scope of arbitration

By Lori Irish Bauman
April 27, 2015

If parties involved in an arbitration agree to resolve only the issue of liability, may the arbitrator issue an order determining not only liability but the appropriate remedies as well?  According to the Oregon Court of Appeals, the answer is yes, as long as the parties don't waive the statute that gives the arbitrator broad authority to order remedies.

In Couch Investments, LLC v. Peverieri, a landlord and tenant submitted to an arbitrator a dispute regarding allocation of responsibility for the cost of improvements to the property.  The agreement to arbitrate stated that liability was "the only issue to be resolved."  Notwithstanding the agreement, the arbitrator decided liability and also issued an order setting out a process for completion of the improvements. The landlord objected that the remedies were outside of the parties' agreement. 

ORS 36.695(3) states that "an arbitrator may order such remedies as the arbitrator considers just and appropriate under the circumstances."  According to the Court of Appeals, that statute acts as a default to grant arbitrators broad authority to order remedies.  If the parties do not express an intent to waive the statute, the arbitrator may properly order remedies.  Accordingly, the Court of Appeals affirmed a judgment in the form of the arbitration award.