Northwest Business Litigation

Oregon Court of Appeals derails MERS non-judicial foreclosures

Last week the Oregon Court of Appeals weighed in on an issue being litigated around the country by homeowners who have defaulted on their mortgages: whether a nonjudicial foreclosure can occur where there has been no recorded assignment to the party seeking to foreclose.  In Niday v. GMAC Mortgage, LLC, the defaulting homeowner filed suit to stop a foreclosure, claiming that the holder of the promissory note was not the original lender, and that the assignment of the note had not been recorded with the county. 

At issue was the Mortgage Electronic Registration System, Inc. -- known as MERS -- which lenders have used for nearly 20 years to track electronically the transfer of beneficial interests in loan obligations.  Lenders using the MERS system do not record the sale or assignment of a beneficial interest because MERS remains in place as the "beneficiary" of a trust deed notwithstanding the sale or assignment.

The Court of Appeals, interpreting Oregon's 1959 law allowing foreclosure by a private, advertised trustee's sale rather than through a court-ordered foreclosure, held that a nonjudicial foreclosure cannot occur if an assignment of the beneficial interest was not recorded.  The Court rejected the argument by MERS that, even though it was not the lender or a successor to the lender, foreclosure was proper because it had been designated as beneficiary of the trust deed when the homeowner took out the loan. 

There was evidence in Niday that the lender assigned its interest in the trust deed without recording the assignment, and the Court of Appeals ordered a trial on whether the predicates to nonjudicial foreclosure had been satisfied.

The day after the Court of Appeals issued the opinion in Niday, the Oregon Supreme Court accepted a certified question from the U.S. District Court in a case also addressing nonjudicial foreclosures of mortgages tracked by MERS.

Oregon Supreme Court on apparent agency liability for personal injuries

The Oregon Supreme Court last month held that an LLC that leased office space to a physician could not be held liable on an apparent agency theory for physical injuries suffered by the physician's patient. 

In Eads v. Borman, the injured patient contended that the landlord, Willamette Spine Center, LLC, through signage on the building and other representations, created the appearance that the building housed a group medical entity of which the physician was an agent.  Plaintiff claimed that that the LLC thereby created an apparent agency relationship with the physician. 

The Supreme Court noted that an agency relationship can arise from the appearance of consent by one person to allow another to act on its behalf. And a principal can be vicariously liable for the negligence of an agent who is not an employee, but only if the principal actually or apparently had a right of control over the agent's injury-causing actions. 

The Court then surveyed other states' treatment of apparent agency in the context of medical malpractice.  The Court agreed with those authorities that a hospital or other entity can be held vicariously liable for a physician's negligence on an apparent authority theory if the entity held itself out as a direct provider of medical care, and if plaintiff relied on those representations by looking to the entity, rather than the physician, as the provider of care. 

In this case, the Court concluded that there was insufficient evidence that the landlord LLC held itself out as a provider of medical services that it delivered through agents such as its tenant, plaintiff's physician.  Further, there was insufficient evidence that plaintiff relied on any representation by the LLC to believe that the LLC was itself a medical provider.  On that basis, the Court found no apparent agency relationship and affirmed summary judgment for the LLC.

Ninth Circuit won't criminalize violations of computer use policies

The federal Computer Fraud and Abuse Act, 18 USC sec. 1030, imposes criminal liability for unauthorized access to a computer, or for exceeding authorized access. An en banc panel of the Ninth Circuit last month narrowly interpreted the CFAA, holding that it does not apply to violations of private computer use policies. The opinion sets up a conflict with other federal circuit courts that may end up being resolved by the US Supreme Court.

In US v. Nosal, the defendant was convicted of aiding and abetting a violation of the CFAA after he convinced employees of an executive search firm to give him confidential client information from the firm's database. While the employees were authorized to access the information, their employer's policy prohibited disclosing confidential information to persons outside the company. The validity of the conviction turned on the meaning of the phrases "without authorization" and "exceeds authorized access" in the CFAA.

Defendant argued that the CFAA was intended to criminalize hacking -- unauthorized access to computers -- but not unauthorized use of data that is obtained from a computer through authorized access. The Ninth Circuit agreed that persons with authorized access who violate private computer use policies should not be subject to criminal liability. Judge Alex Kozinski, writing for the majority, set out a "parade of horribles" to justify a narrow reading of the statute, noting that innocent violations of terms of use occur every day: "Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by g-chatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies . . . [and] under the broad interpretation of the CFAA, such minor dalliances would become federal crimes."

The opinion acknowledges that the result creates a conflict with the Fifth, Seventh, and Eleventh Circuits. A dissent by Judge Barry Silverman and Judge Richard Tallman argues that the majority improperly ignores the plain wording of the statute. Further, according to the dissent, criminalization of innocent violations of corporate terms of use is unlikely because the CFAA explicitly requires an intent to defraud.

 

Roommate-matching service can't be sued for housing discrimination

The anti-discrimination provisions of the Fair Housing Act don't apply to a Roommate.com, the Ninth Circuit Court of Appeals ruled last month in Fair Housing Council v. Roommate.com, LLC.

Roommate.com operates a web site that helps roommates find each other.  When users sign up they create a profile stating their sex, sexual orientation, and whether children will be living with them.  Users may also complete an "Additional Comments" section.  Users are asked to list their preferences for roommate characteristics, including sex, sexual orientation, and familial status.  Based on the profiles and preferences the web site provides potential matches.  The site also allows users to search based on roommate characteristics.

Plaintiff sued Roommate.com alleging that the questions about users' characteristics, and matching and steering based on those characteristics, violate the federal Fair Housing Act, which prohibits discrimination in the sale or rental of dwellings. 

Judge Kozinski, writing for the Ninth Circuit, found no violation, based on the fact that roommates necessarily share a single "dwelling":  "It makes practical sense to interpret 'dwelling' as an independent living unit and stop the FHA at the front door."  According to the court, the selection of a roommate is more akin to a private relationship -- in which the government won't meddle -- than to a landlord-tenant relationship that's protected against discrimination.

Ater Wynne scores trial victory for NAACP

Ater Wynne's Seattle trial lawyers, Steve Kennedy and Rob Roy Smith, today prevailed in a lawsuit filed against the NAACP, following a week-long bench trial in King County Superior Court.  At issue was whether the national office of the NAACP was liable for legal malpractice, breach of contract, and negligence, arising from the alleged acts and omissions of a lawyer who also happened to work as a volunteer officer at the Seattle-King County Branch of the NAACP. 

The plaintiff alleged that the lawyer mishandled his earlier race discrimination lawsuit against a former employer.  Plaintiff also alleged that he thought he was being represented by the NAACP, which had supposedly "assigned" the lawyer to his case.

Relying on the U.S. Supreme Court's 1982 decision in NAACP v. Clairborne Hardware Co., the trial court found that there was no credible evidence that the NAACP authorized or ratified (either expressly or by implication) any of the activities of the local lawyer in connection with the previous discrimination lawsuit.  The court found that neither the NAACP nor the Seattle-King County Branch was acting as the plaintiff's lawyer;  rather, the plaintiff separately retained the lawyer as a private attorney.

Tailoring court filings to the on-line reader

As more courts require electronic filing, the possibility arises that judges will read pleadings and briefs from a screen rather than on paper.  This post on the CEBblog discusses the challenge of making briefs lively and readable in an electronic format, suggesting that the answer may lie in adopting the style and formatting found on web sites.

Oregon Court of Appeals limits comparative fault defense in medical malpractice cases

This month, the Oregon Court of Appeals addressed the comparative fault defense in the context of medical malpractice cases in Son v. Ashland Community Healthcare Services.  Sara Burns died while under the medical care of Ashland Community Healthcare Services ("ACHS") after she attempted suicide by overdosing on various drugs.  Her mother, as personal representiatve of Sara's estate, brought a wrongful death action against ACHS alleging professional negligence in its treatment of Sara.  ACHS raised the comparative fault defense, alleging that Sara failed to inform ACHS of her ingestion of a particular drug that would have changed ACHS' treatment plan and likely prevented her death.  The jury returned a verdict for the plaintiff for $740,000, after which the court reduced the award by a percentage because of Sara's comparative fault.  Plaintiff appealed.

    The Oregon Court of Appeals reversed, addressing for the first time the comparative fault defense in the context of medical malpractice cases.  The general rule for comparative fault comes from Fazzolari v. Portland School Dist. No. 1J and has been stated as "whether facts of the case indicate that the plaintiff took some action or failed to take some action which a reasonable person could have foreseen would increase the risk of harm to the plaintiff, and that the plaintiff did indeed suffer harm of the type which could have been foreseen."  The Oregon Court of Appeals narrowed the rule in medical malpractice cases to the injury caused by the negligent treatment, not the oringal injury that necessitated the need for treatment.  Here, the court found that Sara's negligent conduct occured prior to ACHS' negligent treatment and was therefore not eligible to be considered as comparative fault. 

In sum, the court annouced a new rule that, "as a matter of law, conduct that merely creates the need for medical treament cannot cause the type of harm at issue in medical malpratice cases--the injury resulting from the malpractice."

Multnomah County offers fast track to civil trials

In response to the long-term decline in the number of trials in civil cases, Multnomah County Circuit Court now offers an expedited track for jury trials.  Presiding Judge Jean Kerr Maurer has announced a new initiative for "summary jury trials."  If parties choose to participate, they will conduct limited discovery and will be able to go to trial within four months.  See more details 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.