Northwest Business Litigation

Oregon Court of Appeals upholds arbitration clause in employment contract

The Oregon Court of Appeals has again enforced an arbitration clause in an employment contract, rejecting the employee's claim that the clause is unconscionable.  In Livingston v. Metropolitan Pediatrics, LLC, the plaintiff, a pediatrician, took issue with the conduct of his employer and other doctor members and employees related to an investigation of the clinic's child vaccine program.  He alleged he was ultimately terminated because of the concerns he expressed to his employer and government authorities. 

Plaintiff filed common law and statutory employment claims against his employer and the others in court.  The employer moved to abate the claims and compel arbitration, citing a clause in the employment agreement that required arbitration of "[a]ny controversy, dispute or disagreement arising out of or relating to this Agreement, or the breach thereof."  The trial court denied the employer's motion, ruling that the arbitration clause is "unconscionable" and, therefore, unenforceable.  The employer appealed, and the Court of Appeals last week agreed with the employer and sent the case back for arbitration of all claims.

The test for "unconscionability" in Oregon has two parts, one procedural and the other substantive.  A contract is procedurally unconscionable, and therefore not enforceable, if there is "oppression" or "surprise" in the "conditions of contract formation," but unequal bargaining power alone is insufficient for a finding of procedural unconscionability.  A contract is substantively unconscionable if the "terms" of the contract are "unreasonably" one-sided, such that their "effect" makes the parties' respective obligations "so unbalanced as to be unconscionable."

In this case, Plaintiff did not contend that the agreement was procedurally unconscionable; the Court of Appeals noted that, in any event, because plaintiff is a highly educated physician, any inequality in bargaining power was minimal.  The trial court, however, had found these aspects of the agreement substantively unconscionable:  (1)  the possibility that plaintiff would have to pay defendant's attorney fees and costs if plaintiff is unsuccessful on his "blacklisting" claim; (2)  excessive arbitration fees assessed against plaintiff; (3)  ambiguity about which set of American Arbitration Association rules would govern the arbitration; and (4) a requirement of confidentiality.  Before the Court of Appeals, plaintiff asserted these and other grounds for a finding of unconscionability and further argued that the arbitration clause should not apply to intentional torts, statutory claims, and claims against non-signatories to the employment agreement.  The Court of Appeals addressed the trial court's findings as well as the other arguments put forth by plaintiff, and held that none of the concerns arises to the level of substantive unconscionability or otherwise requires court litigation of the parties' disputes.  Central to the ruling of the Court of Appeals is the very broad language of the arbitration clause allowing for arbitration of "any controversy, dispute or disagreement."

U.S. Supreme Court defines corporations' place of residence for diversity jurisdiction

In January, the U.S. Supreme Court gots lots of attention for ruling, in Citizens United v. FEC, on the free speech rights of corporations.  On Tuesday, the Court addressed a less-controversial aspect of a corporation's role as "citizen" -- namely, how to determine its state of residence.

In federal court, diversity jurisdiction may exist if the parties are citizens of different states.  A corporation is deemed to be a citizen of the state or states where it is incorporated and where it has its principal place of business.  28 USC sec. 1332(c)(1).  The Supreme Court held in Hertz Corp. v. Friend that "principal place of business" means the place where a corporation's high level officers direct, control, and coordinate the corporation's activities -- i.e., its "nerve center." This reversed the Ninth Circuit, which held that a corporation's principal place of business can be the state where it conducts the most business activity.

See our earlier coverage of the case here.

Oregon Court of Appeals tackles defamation claim against a clergy member

Last week, the Oregon Court of Appeals addressed a First Amendment issue that had been untouched by both the United States Supreme Court and the Oregon courts. In Tubra v. The International Church of the Foursquare Gospel, the Oregon Court of Appeals determined that the First Amendment did not divest a lower court of jurisdiction to consider a defamation claim against a church pastor.

Plaintiff was the interim pastor of Vernonia Foursquare Church.  He was appointed by Pastors Cooke and Swor, the district superintendent and supervisor.  After a permanent pastor was hired for Vernonia and plaintiff was released, Cooke and Swor drafted a letter that Swor read aloud to the Vernonia congregation regarding the circumstances surrounding plaintiff's departure. The letter accused plaintiff of misappropriation of church funds and dishonesty during his tenure as interim pastor.  Plaintiff sued Cooke, Swor and the International Church of the Foursquare Gospel for, among other things, defamation based on the letter.

After a trial on the merits, during which the jury found for plaintiff, the defendants moved for a judgment notwithstanding the verdict, arguing that the First Amendment operated to deprive the court of jurisdiction over the defamation claim.  After a hearing, the trial court agreed and overturned the jury's verdict.

The Court of Appeals reversed, concluding that church pastors are not per se exempt from defamation claims.  The court announced that the same test guiding courts in fraud cases against religious institutions should guide courts dealing with defamation claims against church pastors. Jurisdiction hinges on whether the representation at the heart of the fraud or defamation case is "purely religious as a matter of law."  If so, the First Amendment deprives the court of jurisdiction; if not, the court may hear the case. 

Determining whether a representation is purely religious involves three inquires.  First, is the defendant organization of a religious nature?  Second, does the representation itself relate to the religious beliefs and practices of the organization?  If the answers to these first two inquires are "yes," the First Amendment deprives the court of jurisdiction unless the statements were made for a "wholly secular" purpose.  Some ideas, such as "the nature of a supreme being" and "the value of prayer and worship" must always and in every context be purely religious as a matter of law.  Other ideas, however, can be religious only because the one espousing them is doing so for a religious purpose.

Here, the Court of Appeals determined that the alleged defamatory statements --that plaintiff had misappropriated money and demonstrated a willingness to lie -- did not relate to the religious beliefs and practices of the International Church of the Foursquare Gospel, and as such, were not purely religious as a matter of law. 

U.S. Supreme Court blocks Ninth Circuit plan to broadcast trials

The "Proposition 8" gay marriage trial in San Francisco won't be broadcast after all, and neither will any other federal trial within the Ninth Circuit, at least for now. 

The U.S. Supreme Court extended its stay of an order allowing the broadcast on the ground that the Ninth Circuit Judicial Council hadn't followed established procedures in adopting a pilot program to allow cameras in federal courtrooms.  In a 5-4 decision, the majority concluded that the pilot program amounted to a change in the local rules without adequate opportunity for public notice and comment, in contravention of federal law.

See our earlier coverage here and here, and other law blog coverage here and here.

Broadcasting of federal court trials hits a snag

The Ninth Circuit's plan to allow broadcasting of non-jury civil trials was curtailed today when the U.S. Supreme Court temporarily blocked an order to stream video of the California gay marriage trial both live to courthouses across the country, and on a delayed basis on You Tube.  Shortly before the start of trial in San Francisco on the constitutionality of the state's gay marriage ban, the Supreme Court ordered that the broadcast must be limited to rooms within the court house, and barred posting on You Tube.

The Supreme Court's order is in effect until Wednesday and is subject to "further consideration" by the Court.

See further coverage of the order here and here.  See our earlier post on the Ninth Circuit's experimental program to broadcast trials here.

Oregon Court of Appeals on pleading prejudgment interest

A plaintiff is entitled to recover prejudgment interest -- i.e., interest accruing through the date judgment is entered -- if plaintiff can prove the exact amount claimed to be due by defendant, and the dates during which plaintiff was deprived of use of that sum.  

In Oregon state court there is an additional procedural hurdle to recovering prejudgment interest:  plaintiff must both request interest in the prayer of the complaint, and plead facts sufficient to show an entitlement to prejudgment interest.  Today in Tasaki v. Moriarty, the Oregon Court of Appeals reiterated that longstanding pleading rule, and held that plaintiff met the pleading standard even though the prayer in the complaint didn't mention prejudgment interest, but simply prayed for $25,000 "together with any interest accumulated on such sum."

Ninth Circuit: No jury trial and no money damages for ADA retaliation claim

In a case decided earlier this month, the Ninth Circuit held that a plaintiff claiming retailiation under the Americans with Disabilities Act is limited to equitable remedies.  In Alvarado v. Cajun Operating Co., plaintiff filed several claims against his former employer, including a claim for retaliation under the ADA.  Defendant immediately moved the court to bar plaintiff from seeking a jury trial or compensatory or punitive damages for his retaliation claim.  The district court granted the motion and the Ninth Circuit affirmed.

Remedies under the ADA are provided by the statute itself, and through the remedies assigned to it by the more general Civil Rights Act, 42 USC sec. 1981(a).  The Ninth Circuit noted that amendments to the Civil Rights Act extended compensatory and punitive damages to certain claims under the ADA, not including retaliation.  Relying on the plain language of the ADA and the exclusion of retaliation claims from those specified in the Civil Rights Act, the Ninth Circuit concluded that plaintiffs continue to be limited to equitable relief for retaliation claims. 

Supreme Court limits review of attorney-client privilege orders

The U.S. Supreme Court today held that a court's order compelling production of confidential information based on a waiver of the attorney-client privilege is not immediately appealable.  As a result, a party seeking to protect privileged material in federal court may have to wait until after entry of judgment to obtain appellate review.

In Mohawk Industries, Inc. v. Carpenter, a former employee of Mohawk sued for wrongful termination and sought production of documents relating to a meeting he had with the company's lawyers.  The District Court ordered production based on what it concluded was Mohawk's waiver of the privilege.  When the court declined to certify the order for interlocutory appeal, the company filed an appeal under 28 USC sec. 1291, which gives the Courts of Appeal jurisdiction of final judgments and a limited class of prejudgment orders.  The Supreme Court, citing the federal courts' preference for a "single appeal" in each case, agreed that the order compelling production of confidential material is not among those entitled to immediate appellate review, and affirmed dismissal.

Justice Sonia Sotomayor, writing for a unanimous Court, stated that a party disputing an order to produce materials based on a waiver of a privilege has several options short of producing the materials and waiting to raise the issue after entry of judgment.  The party can, for example, ask the trial court to certify an interlocutory appeal (which the District Court refused to do in this case), or refuse to produce the disputed materials and incur court-imposed sanctions which would be subject to appeal after entry of judgment.

Justice Sotomayor noted that Congress, in the 1990 Rules Enabling Act, expressed an intention that the universe of appealable prejudgment orders be expanded, if at all, by rulemaking and not by court decision.

U.S. Supreme Court to choose test for a corporation's "principal place of business"

Among the grounds for subject matter jurisdiction in federal court is diversity jurisdiction, which is available when the plaintiff and defendant are citizens of different states.  A corporation's citizenship is defined as its "principal place of business," and if a corporate defendant's principal place of business is in the state where plaintiff is a citizen, federal court may be unavailable as a forum.  A case currently pending before the U.S. Supreme Court will resolve which of several tests is appropriate for determining a corporation's principal place of business.

On November 10, 2009 the Supreme Court heard oral argument in the case of Hertz Corp. v. Friend.   In that case, the Ninth Circuit had applied the "place of operations" test, rather than the "nerve center," "center of activity," or "totality of the circumstances" tests favored in other circuits.  The court's ruling will be of vital importance to corporations looking to avoid being sued in state courts, which can be more plaintiff-friendly than federal courts.

New and increased fees in Oregon state courts starting October 1

The Oregon legislature is boosting state court filing fees and adding new fees in response to the current budget crisis.  Among the new charges effective October 1 are fees "for each additional party named" in a complaint, and for filing or submitting ex parte an order or judgment for signature.  Here is the legislation, HB 2287, from the Multnomah Bar Association web site.  Chief Justice Paul J. De Muniz has created various exemptions to the new fees, indicated here. 

See the Oregon Judicial Department web site for tables and other details.