Northwest Business Litigation

Oregon Court of Appeals affirms judgment against title company in real estate sale gone wrong

A title company is liable for negligence in a real estate transaction in which plaintiff thought he had purchased a lot that -- it was later discovered -- had already been sold to another party.  Last week the Oregon Court of Appeals in Peterson v. McCavic affirmed a jury verdict for negligence against Amerititle, Inc., which had served as escrow agent and title insurer in the transaction. 

Plaintiff undertook to purchase an empty lot in The Dalles, Oregon, but the property description in the earnest money agreement was changed after he signed it -- leading to his purchase of a lot about 50 feet from the one he thought he was buying.  Plantiff learned of the mistake from the actual owners of the land he thought he had purchased, but only after spending several months building a house on the wrong lot. 

Amertitle argued that, pursuant to the economic loss doctrine, it could be liable for negligence only if it had a special relationship with plaintiff.  An escrow holder generally is a neutral party with no obligation to either party to the transaction.  However, an escrow holder can assume a duty when it volunteers advice or otherwise acts outside the scope of its normal duties.  Viewed in the light most favorable to plaintiff, the evidence showed that the escrow agent changed the property description in the earnest money agreement, and prepared closing documents based on that change, without direction from or knowledge of the parties to the transaction. By doing so, it acted outside the duties of a neutral party and incurred an obligation to exercise due care.  On that basis, the court affirmed the jury verdict.

See our earlier discussion of the economic loss doctrine here.

D.C. Circuit enjoins NLRB's rule requiring notice of employee union rights

On April 17, 2012, the D.C. Circuit issued an injunction blocking the National Labor Relation Board's controversial rule that would have required most private sector employers to post a notice of employee rights under the National Labor Relations Act. The rule is controversial because some organizations, such as the National Association of Manufacturers, see it as an unauthorized effort by the NLRB to encourage union membership. To be sure, the NLRA does not expressly grant the NLRB the authority to require employers to post notices of employee rights. The NLRB, however, argues that the NLRA's rulemaking provision authorizes the NLRB to issue the rule. Moreover, the NLRB believes that employees' ignorance of their rights under the NLRA is a major impediment to the exercise of those rights.

The rule was supposed to go into effect on April 30, but the D.C. Circuit's injunction will put the rule on hold pending the appeal of a lower court decision that found the NLRB had only limited means to enforce the rule. The injunction also comes on the heels of a ruling by a federal judge in South Carolina that the NLRB did in fact exceed its authority by issuing the rule. The NLRB stated in a press release that it will not implement the rule until the courts resolve the pending legal issues.

Washington expands statutory limitation on contractual indemnity obligations

Washington will alter the limitation on indemnity obligations in the construction arena when amendments to RCW 4.24.115 become effective on June 7, 2012. The current version of the law limits the contractual indemnity obligations a party can incur related to the construction, alteration, repair, maintenance, or development of a building, highway, railroad, or other project attached to real property (or a motor transportation contract). In particular, it limits the duty to defend to the extent of the indemnitor's own negligence.  The amendment expands the indemnity limitations to apply to "architectural, landscape architectural, engineering and land surveying services." 

RCW 4.24.115 was originally enacted to curb the growing practice of contractually pushing more and more responsibility for problems related to construction projects to those entities (typically lower tier subcontractors) that were not in a position to control the risk, did not have the leverage to change the language of the contract, and often could not fully fund such an indemnity obligation. In the past, design professionals have argued in the courts that the law applied to them, with varied success. The revisions to the law now make clear that indemnity limitations do apply to design professionals. 

The new version of RCW 4.24.115 expands the scope of the limitation in two other respects. First, the existing limitation prohibits Party A from indemnifying Party B for personal injury or property damages arising out of Party B’s sole negligence. The new limitation also prohibits Party A from agreeing to take on the duty and costs to defend against such claims. Additionally the amendment applies the limitation to liability for all damages arising out of the services provided by Party A, not just damages arising out of bodily injury or damage to property.

To see the new law in its entirety click here.

Ater Wynne scores victory in Idaho Supreme Court employment case

Last month the Idaho Supreme Court addressed the rights of at-will employees, affirming summary judgment for the employer on contract and tort claims asserted by a laid-off employee.  Ater Wynne attorney Lori Irish Bauman briefed and argued the case on behalf of the employer.

In Bollinger v. Fall River Rural Electric Cooperative, Inc., plaintiff claimed, among other things, that she was wrongfully terminated for reporting safety violations to her managers.  Under Idaho law, an at-will employee may have a claim for wrongful termination where the employer's motivation for the termination contravenes public policy.  But in Bollinger the employer was entitled to summary judgment because plaintiff failed to identify a violation of a particular statute or regulation governing workplace safety.  Absent a violation tied to a statute or regulation, plaintiff could not pursue a wrongful termination claim.

Failure to allege right to fees in a pleading or motion sinks attorney fee award

The Oregon Court of Appeals last week drew a hard line in enforcing the procedures for recovering attorney fees.  In Anderson v. Dry Cleaning To-Your-Door, Inc., the Court reversed a trial court award of more than $100,000 in attorney fees to plaintiffs who successfully defeated contempt sanctions, on the ground that plaintiffs failed to allege the right to fees in a pleading or motion as required by ORCP 68C(2). 

In Anderson, plaintiffs in a breach of contract case obtained a judgment against defendant which included a non-competition provision.  Defendant later claimed that plaintiffs violated the non-competition portion of the judgment, and initiated contempt proceedings against plaintiffs under ORS 33.055.  The trial court found plaintiffs were not in contempt, and requested that the parties prepare a proposed judgment.  

The trial court entered plaintiffs' proposed form of judgment, in which plaintiffs asserted for the first time an entitlement to recover their fees in the contempt proceeding.  Defendant objected that plaintiffs did not allege a right to attorney fees in a pleading or motion as required by ORCP 68C(2), but the trial court nonetheless awarded the requested fees in the amount of $115,980. 

On appeal, the Court of Appeals held that plaintiffs could not avoid the obligation to state in a pleading or motion the facts, statute or rule that entitled them to recover fees.  That obligation exists even though plaintiffs did not initiate the contempt proceedings.  Because plaintiffs did not comply with ORCP 68C(2), the Court reversed the award of fees.

Exclusive remedy of Oregon's workers compensation law won't protect member of LLC

The Oregon Court of Appeals recently held that a member of a limited liability company is not protected from suit by the exclusive remedy provision of Oregon’s workers’ compensation law, Oregon Revised Statutes 656.018.  In Cortez v. Nacco Materials Handling Group, Inc.,an employee of the LLC was injured by a forklift.  The employee obtained workers’ compensation benefits from the LLC’s insurer, but subsequently filed an action against an LLC member as an individual defendant for negligence and under the Oregon Employer Liability Law (ELL).  While the court concluded that the LLC member-defendant was not entitled to the protection of the exclusive remedy provision, it refused to impose liability on the LLC member under the ELL because there was no evidence that the member had the required level of control over the employee’s activity.  The court emphasized that the LLC itself “owned and controlled the forklift’s day-to-day use.  Management of the forklift fell on [the LLC], not defendant.”  It also rejected the notion that the “right to control” could be found solely by the existence of a broad contractual right to intervene in safety procedures; instead the defendant must have control over the actual instrument that caused the injury.  Since the defendant did not specifically control matters related to the forklift, there was no valid ELL claim.  On the other hand, the court allowed plaintiff’s negligence claim to proceed to trial.  It rejected the notion that, if “there is no basis for a claim under the ELL, there cannot be a claim for common-law negligence.”  The Court’s full opinion can be found here.