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. 

What's the Fuss About Electronic Discovery?

By Anna Jeno
April 8, 2015

The decade-old Zubulake v. UBS case set off a seismic shift in electronic discovery that many lawyers and litigants still don't fully comprehend.  One lesson many have learned the hard way is that the electronic discovery rules and practices that have been developed post-Zubulake must be a regular part of every organization's document management plans.

Zubulake was a standard employment discrimination lawsuit in the U.S. District Court for the Southern District of New York that is now seen as a turning point in electronic discovery.  This article provides an excellent summary of Zubulake and its impact. 

Increasingly, courts are disinclined to tolerate a party's failure to work cooperatively to minimize the cost of eDiscovery, as this plaintiff painfully discovered.   

Give just a moment to consider your organization’s electronic document protocols. Processes should be in place long before any subpoena or request for records arrives.  When your organization is hit with a lawsuit, what is the plan for preserving, requesting, organizing and producing documents? 

The Litigation Technology Team at Ater Wynne manages electronic documents and eDiscovery for clients in litigation of all sizes, from small document collections with just one or two file types to large, complex sets involving terabytes of data, millions of documents, and dozens of file types.  We utilize protocols and best practices developed in-house and multiple eDiscovery software platforms, keeping document management practices up-to-date and satisfying the courts' requirements.

In matters of eDiscovery, an ounce of prevention is better than a pound of cure.  For more information about Ater Wynne’s Litigation Technology Team, contact Kara Lindsay, Chief Litigation Technology Specialist at kzl@aterwynne.com.

NLRB issues further guidance on employment policies

By Stacey Mark
March 22, 2015

On March 18, 2015, the General Counsel for the NLRB issued a new memo providing guidance on common employer rules and policies that run afoul of Section 7 of the National Labor Relations Act.  The memo is divided into two parts.  In the first, the NLRB compares rules it found lawful with those that are unlawful, and provides its reasoning for both conclusions. The section includes employer rules that are frequently at issue before the agency, addressing issues such as:

  • Confidentiality
  • Professionalism and harassment
  • Communication with the media
  • Restrictions on the use of company logos, copyrights, and trademarks
  • Prohibitions on photography and recording (including the possession and use of personal recording devices)
  • Restrictions on leaving work
  • Conflicts of interest

The second section of the memo addresses handbook rules from a recently settled unfair labor practice charge against Wendy's International LLC, which followed an initial determination by the NLRB that several of Wendy's handbook rules were unlawful.  

Consistently with prior GC memos, the differences between rules and policies the NLRB found lawful and unlawful were not always obvious, or even consistent with each other or past interpretations.   Nevertheless, the memo is worth reviewing as a summary of the NLRB's current thinking and should serve as a reminder to employers that, if they have not updated their handbooks in a while, this is a good time to do it.  

Employers that take such advice to heart should also keep in mind the NLRB's recent reversal of the longstanding precedent under which employers were permitted to ban employees from using the company's email system for non-business purposes.   In Purple Communications, Inc., decided December 11, 2014, the NLRB held that employers given access to the company's email system must be permitted to use the system for communications protected under Section 7 during non-working time, unless the employer can show that special circumstances exist (most will not be able to make the required showing).

You can review our previous coverage of NLRB actions on rules, policies, and settlement terms here and here and here.  You can also find more in depth coverage on our website, here (see part 7, Employer Confidentiality Policies Under Attack by Federal Agencies).

For owners of closely held corporations, remedy for oppression must match the wrong

By Dan Larsen
March 6, 2015

Last week the Oregon Court of Appeals examined the remedies that a trial court may impose to remedy shareholder oppression.  In Hickey v. Hickey, ownership of a family ranching business was divided among several siblings.  One sibling acquired a majority interest by purchasing shares from others.  As controlling shareholder, he engaged in self-dealing and commingling of assets, to the detriment of the remaining minority shareholder.   The minority shareholder then filed suit under ORS 60.952 to impose remedies for oppression.  The trial court ordered amendment of the bylaws and articles of incorporation to strip the voting rights of the majority shareholder and remove him from management. 

 The appellate court reviewed the nonexclusive list of remedies provided under ORS 60.952 to rectify oppressive conduct, including: (1) cancellation or alteration of any provision in the corporations articles of incorporation or bylaws, (2) removal from office of any director or officer, (3) appointment of a custodian to manage the business, (4) appointment of a provisional director, (5) retention of jurisdiction by the trial court for protection of the minority shareholder, or (6) dissolution of the corporation.  While the trial court has many remedies to choose from, "[t]he remedy must correspond to the wrong--or legally recognized right--for which the remedy is provided under ORS 60.952." 

The Court of Appeals reversed the trial court, holding that the effect of the remedy selected was to convert the minority shareholder into the majority shareholder.  That constituted  a windfall to the plaintiff and was not within the "reasonable expectations" of either party.  The appellate court then remanded the case to the trial court with instructions to devise a more appropriate remedy, such as ordering a share purchase for fair value to remove one of the two shareholders from the business.

Nonprofit's governing documents dictate scope of director's liability

By Lori Irish Bauman
March 3, 2015

Last week the Oregon Court of Appeals addressed the liability of directors of a nonprofit corporation, reversing summary judgment for directors of a homeowners association on breach of fiduciary duty claims.

In WSB Investments, LLC v. Pronghorn Development Company, LLC, plaintiff was an owner of a timeshare and a member of the HOA that asserted various claims against the directors, including breach of fiduciary duty. In reviewing the trial court's grant of summary judgment, the court discussed the standards for directors' obligations to a nonprofit. While ORS 65.369(1) imposes liability for gross negligence or intentional conduct, the legislature has not defined gross negligence in this context. The court held that, for directors' liability, gross negligence means negligence characterized by near total disregard or indifference to the rights of others or the probable consequence of a course of conduct. The court further held that, while ORS 65.357 states the standard of care of uncompensated directors of a nonprofit, whether those standards have been violated must be determined with reference to the obligations set out in the governing documents.

Accordingly, the court found triable issues of fact as to,among other things, the use of reserve funds for operating expenses and failing to elect new board members in a timely fashion, all in violation of the HOA's governing documents.

Pom’s Wonderful Start to the New Year

By Ashley Long
January 5, 2015

The Ninth Circuit Court of Appeals last week handed a trademark victory to Pom Wonderful, reversing a district court decision denying its request for an injunction against competitor Pur Beverages.


Pom Wonderful, maker of the popular POM pomegranate juice drinks, requested a preliminary injunction to bar the defendant from using the word “pŏm” for its pomegranate flavored energy drinks, as seen below.

Pom

The district court denied the request, stating that Pom Wonderful did not establish a likelihood of confusion between the marks. 

On review, the Ninth Circuit focused on the Sleekcraft factors for likelihood of confusion.  Regarding the physical similarities of the marks, the Ninth Circuit found far more in common between the marks than not.  “Balancing the marks’ many visual similarities, perfect aural similarity, and perfect semantic similarity more heavily than the marks’ visual dissimilarities – as we must – the similarity factor weighs heavily in Pom Wonderful’s favor.”  Furthermore, when considering this factor, strong marks are given greater weight than weak marks.  As such, the district court clearly erred by giving more weight to the marks’ differences than their similarities.

The district court also erred in its “brick-and-mortar” trade channels analysis.  “Because Pom Wonderful and Pur sell highly similar products in supermarkets located across the country, the marketing channel convergence factor weighs in Pom Wonderful’s favor.  The district court clearly erred in . . . requiring Pom Wonderful to prove that its beverages were sold in the very same brick-and-mortar stores as Pur’s ‘pŏm’ beverage.”  Though a perfect overlap of retailer locations increases likelihood of consumer confusion, its absence does not undermine the convergence of the marketing channels.

Finally, the district court mistakenly weighed the remaining factors – actual confusion, defendant’s intent, and product expansion –against Pom Wonderful.  The absence of any evidence supporting these factors is to be considered merely neutral in a likelihood of confusion analysis.

In weighing the totality of the factors, the Ninth Circuit review revealed that five of the Sleekcraft factors weighed in favor of Pom Wonderful, none weighed in favor of Pur Beverages, and three factors were neutral.  Since the district court’s errors created a ripple effect, influencing its decision regarding the remaining preliminary injunction requirements, the Ninth Circuit reversed and remanded.

Oregon Supreme Court refines the "same nine" rule for jury verdicts

By Lori Irish Bauman
December 16, 2014

The Oregon Constitution and Oregon Rule of Civil Procedure 59G(2) both state that "in civil cases three-fourths of the jury may render a verdict."  The "same nine" rule requires that, if the questions presented to a jury are interdependent -- such as questions addressing the elements of a single claim -- the same nine out of 12 jurors must agree on every question.  Separate and independent questions are not subject to the same nine rule. 

Last week the Oregon Supreme Court elaborated on the rule, holding that the same nine jurors need not agree on the amounts of economic and noneconomic damages from the same injury when rendering a verdict.

In Kennedy v. Wheeler, defendant admitted liability for negligence in a personal injury action, and a 12-person jury set economic and noneconomic damages.  A jury poll showed that, while 10 jurors agreed on the amount of economic damages and 9 agreed on the amount of noneconomic damages, only 8 jurors agreed on both sums.  Defendant objected to the verdict and moved for a new trial, citing the same nine rule. 

On review, the Supreme Court stated that the test for applying the same nine rule is whether verdict is logically consistent despite the differing votes.  In Kennedy, the verdict did not violate the requirement of a verdict by three-fourths of the jury because there is no logical inconsistency when the same nine jurors do not agree on the amounts of each type of damages.

Oregon Supreme Court on statutory immunity of LLC members and managers

By Lori Irish Bauman
October 9, 2014

Members and managers of a limited liability company are shielded from vicarious liability for the LLC's torts, but can be held personally liable if they either knew of the tortious acts or participated in them.  That was the conclusion of the Oregon Supreme Court last week in Cortez v. Nacco Material Handling Group, Inc.

ORS 63.165(1) protects members and managers of an LLC from liability resulting "solely by reason of being or acting as a member or manager."  The scope of that statutory immunity was at issue in Cortez.  The court held that the immunity is comparable to that available to an officer or director of a corporation.  According the to court, "members or managers who participate in or control the business of an LLC will not, as a result of those actions, be vicariously liable" for the LLC's torts.  But a member or manager can be liable for its own negligent acts in managing the LLC, or for knowing of or participating in the LLC's torts.