Northwest Business Litigation

New Tort Decision by Oregon Court of Appeals

     Twenty years ago the Oregon Supreme Court issued three opinions which changed how negligence cases are decided in Oregon.  Based on the analysis in those cases, juries are to resolve virtually all negligence cases if it appears "reasonably foreseeable" that the plaintiff's injuries could result from the defendant's unreasonable conduct.  If the plaintiff cannot plead facts showing that the injuries were "reasonably foreseeable," however, then the judge is required to dismiss the case without a trial.  Deciding whether an injury was "reasonably foreseeable is a challenge that all lawyers who litigate tort claims in Oregon struggle with. 

     In a brand new opinion, Bailey v Lewis Farm, Inc., the ten judges on the Oregon Court of Appeals demonstrated that it is not just the lawyers who have trouble applying this "reasonable foreseeability" test.  In Bailey the plaintiff was injured when the dual wheels and tires on a tractor trailer fell off, bounced across the highway, and crashed into the tractor trailer driven by the plaintiff.  He sued several defendants, including a company that had once owned the tractor trailer, but had sold it a year before the accident.  Plaintiff alleged that the former owner had been negligent by failing to follow the manufacturer's recommendations for maintaining the rear axle assembly, and that it was "reasonably foreseeable" that this negligence would result in the kind of harm suffered by the plaintiff.

     Five judges on the Oregon Court of Appeals thought that the plaintiff's injuries were "reasonably foreseeable" and would have allowed the case to proceed, while the other five judges thought that the damages were not "reasonably foreseeable" and upheld the trial judge's dismissal of this claim.  Now it is likely that the Oregon Supreme Court will be given the opportunity to explain once again what is meant by the concept of "reasonable foreseeability."

     The lesson for Oregon businesses is to monitor closely the breadth of your insurance coverage.  If the Oregon Supreme Court says that a business can be held liable for negligent maintenance of a vehicle it no longer owns, then Oregon companies will have to make sure that their insurance coverage is broad enough to cover this type of claim.

Washington Denies Shareholder Status to Credit Union Members

In an opinion issued July 25, 2006, the Washington Court of Appeals affirmed a trial court dismissal of certain claims brought by the group Save Columbia Credit Union. The court held that the group, composed of credit union members, did not have standing to bring direct claims for breach of fiduciary duty against directors, nor could the group avail itself of statutory entitlements to access to records afforded to shareholders in other corporations. Although the opinion examines a number of Washington statutes, the fiduciary duty analysis is based on common law principles that could be applicable in other jurisdictions, including Oregon. Case information: Docket Number: 32858-5-II Title of Case: Save Columbia CU Committee etal, Appellants v. Columbia Community Credit Union etal, Respondents File Date: 07/25/2006

Deletion of Data by Former Employee May Violate Computer Fraud and Abuse Act and Breach Duty of Loyalty

The Computer Fraud and Abuse Act prohibits the transmission of a program, information, code or command, which as a result, intentionally causes damage to a protected computer. The Act was designed to address, for example, attacks by virus and worm writers, as well as disgruntled programmers who intentionally damage an employer’s data system. An employer sued its former employee under the Act for deleting data and evidence of improper conduct during employment from a laptop computer furnished by the employer. The former employee argued that no claim could be stated because he merely deleted data on his laptop and did not engage in “transmission” of a program or command, which is an essential element under the Act. 

The appellate court rejected the former employee’s argument and allowed the employer’s lawsuit to proceed. Specifically, the court found that “transmission” does not require a program or command to be sent remotely, as opposed to from the drive of the computer where the data or information was deleted. Furthermore, after the employee engaged in misconduct and decided to quit employment, his actions to destroy files on the laptop violated his duty of loyalty which then terminated his agency relationship with his employer and his authority to access the laptop. By accessing a computer without authorization to destroy files, the employee could also be liable for violating another provision of the Act that prohibits unauthorized access that causes damage.  International Airport Centers, LLC v. Citrin, (7th Cir. 2006)

Wal-Mart "Fair Share" Law Overturned

Wal-mart and its allies won a victory as a federal District Court overturned a Maryland statute that required employers with over 10,000 employees to spend at least 8% of in-state payroll on health care.  The court ruled that ERISA preempted the state statute, in accordance with ERISA's stated objective of permitting multi-state employers to provide nationwide benefits.  Otherwise, the court held, nationwide employers could possibly face 50 different state rules plus a nearly unlimited number of local benefit rules.  The decision is available here: http://www.retail-leaders.org/new/resources/RULING.pdf

Maryland's Attorney General intends to appeal the decision.  One argument against preemption likely to arise on appeal is that ERISA preempts laws requiring mandatory benefits but not taxes or other statutes of general application.  The statutory language appears to require the employer, not the employer's benefit plan, to comply.  ERISA preemption issues have made frequent appearances in federal Courts of Appeal and the Supreme Court.  This case is likely to provide additional guidance on the breadth of ERISA's preemptive reach. 

Approximately 30 states have enacted or are considering "Fair Share" statutes, including Oregon.  Generally, these statutes require large employers to provide health benefits that exceed a specified percentage of in-state payroll.  In Oregon, the AFL-CIO filed an initiative that requires employers with more than 4,500 employees in Oregon to spend at least 9% of payroll on employee health care.  Currently, 12 employers have that threshold number of employees, including Wal-Mart.  The initiative did not receive court approval in time for the 2006 ballot. 

The Maryland statute had particular language that the court criticized as violating ERISA.  However, the decision expressly recognizes that other states enacting these statutes may do so in a manner that complies with ERISA.  In other words, the court concluded the concept of Fair Share might be lawful, but Maryland's statute failed to properly address ERISA.  That suggests Fair Share proponents will continue their efforts to enact these statutes.

Use of narcotics for chronic pain disqualified employee for safety sensitive job

The federal district court in Dvorak v. Clean Water Services recently exonerated an Oregon employer for terminating an employee who was taking narcotics for chronic pain.  Dvorak had been performing a physically demanding and safety sensitive job that involved the operation of heavy equipment, working in areas of heavy traffic, and working over open manholes.  He requested a meeting with Human Resources to discuss the possibility of using medical marijuana instead of his current prescription medications, which his doctor said were damaging his liver and kidneys.  Although Dvorak had done his job without incident for years, an examining physician concluded that he could not continue to take his current medications or medical marijuana without at least a potential risk of danger to himself or others.  A subsequent physician who examined Dvorak opined that he was not a candidate for medical marijuana and his increasing use of narcotics presented an unacceptable risk for performing any safety sensitive job.  When Dvorak refused to enter a drug rehabilitation program designed to get him on an alternate form of pain management, he was fired. 

Dvorak sued, claiming state and federal disability discrimination based on actual, perceived, and a record of having a disability.  The court rejected all of Dvorak's claims, concluding that, at the time he was employed, he was not actually disabled in walking, lifting, self-care, or working; the employer did not perceive him as disabled from working in a broad range of jobs due to his drug use; and the employer was not aware of any record showing Dvorak ever suffered from a disabling condition.  Dvorak was, therefore, unable to prove he was a qualified individual with a disability.

Note: under Oregon law, if an employee is not disabled, the employer does not have to accommodate the employee's off-duty use of medical marijuana.  See Washburn v. Columbia Forest Products, in which the Oregon Supreme Court concluded that an employee's ability to counteract his physical impairment through mitigating measures (the use of prescription drugs) meant that his impairment was not "disabling" for the purpose of Oregon law.

Oregon Supreme Court Sidesteps Issue of "Common Law Wrongful Death"

In an En Banc decision, the Oregon Supreme Court in Juarez v. Winsor Rock Products, Inc. sidestepped the one issue the parties and many others in Oregon have argued recently; namely, whether Oregon recognizes a cause of action for "common law wrongful death." 

Following the workplace death of Felix Juarez, his adult children and mother brought a claim for "loss of society, companionship, guidance, emotional support, services and financial assistance."  Because in this situation the workers' compensation system only allows a burial payment and no compensation to the adult children and parents of the decedent, and because the workers' compensation system provides the exclusive remedy for workplace injuries, plaintiffs sued in civil court.  There they sought the typical statutory wrongful death damages and argued that the workers' compensation system violates Article I, section 10 of the Oregon Constitution by depriving them of a common law remedy (a wrongful death cause of action) available in 1857 when the Constitution was adopted.

Applying the methodology adopted in an earlier case, Smothers v. Gresham Transfer, Inc., the court concluded that the plaintiffs' claims for "loss of society, companionship, guidance, emotional support, services and financial assistance" did not include an injury to one of the rights protected by Article I, section 10.  Accordingly, without even deciding whether Oregon recognizes a cause of action for "common law wrongful death," the court affirmed the lower court's dismissal of the lawsuit.

You may view the entire opinion at:  http://www.publications.ojd.state.or.us/S52352.htm

Pebble Beach case limits Internet personal jurisdiction

The owner of the Pebble Beach bed and breakfast in southern England won't have to defend himself in California against a trademark infringement claim by -- who else -- Pebble Beach golf course.  That's the result the Ninth Circuit reached yesterday in Pebble Beach Co. v. Caddy. For nearly a decade courts have struggled with whether a party can be haled into a court far from home simply as a result of its presence on the Internet.  In this case, the court easily concluded that operating a web site at www.pebblebeach-uk.com wasn't sufficient to create personal jurisdiction halfway across the world.

BOLI taking comments on petition to eliminate set meal periods

BOLI has received a petition to eliminate the requirement under 839-020-0050 that employees take their meals at designated intervals during the work period.  The petition also proposes to allow employees who customarily receive commissions or tips to work through their meal period.

Comments are being accepted through August 4, 2006, via email to Marcia.L.Ohlmiller@state.or.us or by mail to Marcia Ohlmiller c/o Bureau of Labor and Industries, 800 NE Oregon St. # 1045, Portland, OR 97232.

SPOLIATION--Intentional Destruction of Evidence

Spoliation, also known at the intentional destruction of evidence, has received more attention recently in the courts. This may be due in part to high profile litigation where smoking gun documents were shredded as well as the development of technology that allows the instant storage and destruction of massive amounts of e-mail communications and computer files. When a company receives notice of a claim or lawsuit, the preservation of certain items should be considered with in-house or outside counsel.  Specifically, e-mails and computer files that concern the claims should be retained. Employees who have the ability to delete or purge such files should be notified so that accidental destruction or alteration does not occur. A company may also want to consider suspending routine document destruction policies for certain emails and files.

The danger of not taking steps to preserve evidence related to the claims includes accusations that the company intentionally destroyed evidence because it was harmful to the company with respect to the claims or litigation. If a court concludes that spoliation has occurred, it has wide discretion in awarding monetary sanctions and instructing the jury to conclude that the spoliated evidence was harmful to the company. Since the evidence no longer exists, it may difficult or impossible for the company to prove that the missing evidence was not harmful, and the court's instruction to the jury could make the difference between winning and losing a lawsuit.

Contractual survivorship clauses

No business likes to discover that it is a party to a contract that is unclear.  Here is an example:  Company A enters into a one year distribution agreement with Company B.  The contract includes a survivorship clause that defines the specific contractual provisions that remain in effect after the termination of the contract.  The contract also provides for all contract disputes to be resolved by arbitration and for the contract to be governed by Oregon law.  Unfortunately, neither the mandatory arbitration provision nor the choice-of-law provision is included in the list of contractual provisions that survive termination of the contract.

After the contract terminates a dispute develops between the parties.  Each company asks its respective lawyer if arbitration is required or if litigation is possible.  Each also asks if the post-termination dispute is governed by Oregon law or the law of some other state.  Their lawyers research the issues and then tell their respective clients that they cannot give a definitive answer.  The contract is ambiguous on its face so the arbitrator or court has to determine what the parties intended when they did not include the arbitration clause and choice-of-law clause in the list of clauses that survive the contract.  There is case law supporting either possible interpretation of the contract.

Both companies are frustrated and unhappy with the legal system and probably with their lawyers.  The solution:  when drafting a contract with a survivorship clause, make certain that both the dispute resolution provision and the choice-of-law provision survive the termination of the contract.  If, for some reason you client does not want those provisions to survive, say so explicitly in the agreement.