THE VERDICTTM

Flat Fee Billing Evolution of ’s Stubblefield Rule Defending Mandatory Oregon Association Reporting Claims OADC of Defense Counsel Trial Lawyers Defending You in the Courts of Oregon Candor in Mediation 2013 • Issue 3 ORCP 69 Letters 2013 OADC Practice Group Leaders

COMMERCIAL CONSTRUCTION COVERAGE EMPLOYMENT NEW LAWYERS

Daniel Larsen, Chair Anne Cohen, Chair Lloyd Bernstein, Chair Allyson Krueger, Chair Ryan Boyle, Chair Ater Wynne LLP Smith Freed & Eberhard PC Gordon & Polscer Dunn Carney Schwabe Williamson 1331 NW Lovejoy St., #900 111 SW 5th Ave., #4300 9755 SW Barnes Rd., #650 851 SW 6th Ave., 1500 1211 SW 5th Ave., #1500 Portland, OR 97209 Portland, OR 97204 Portland, OR 97225 Portland, OR 97204 Portland, OR 97204 503/226-1191 503/227-2424 503/802-9153 503/417-5461 503/796-2879 503/226-0079 (fax) 503/227-2535 (fax) 503/242-1264 (fax) 503/224-7324 (fax) 503/796-2900 [email protected] [email protected] [email protected] [email protected] [email protected]

Thomas Hutchison, Vice Chair Brian Church, Vice Chair Matthew Hedberg, Vice Chair Karen Vickers, Vice Chair Jamie Valentine, Vice Chair Bullivant Houser Bailey PC Davis Rothwell Earle & Xóchihua Bullivant Houser Bailey PC Mersereau & Shannon Keating Jones Hughes PC 888 SW 5th Ave., #300 111 SW 5th Ave., #2700 888 SW 5th Ave., #300 1 SW Columbia, #1600 1 SW Columbia, #800 Portland, OR 97204 Portland, OR 97204 Portland, OR 97204 Portland, OR 97224 Portland, OR 97258 503/228-6351 503/222-4422 503/228-6351 503/226-6400 503/222-9955 503/295-0915 (fax) 503/222-4428 (fax) 503/295-0915 (fax) 503/226-0383 (fax) 503/796-0699 (fax) [email protected] [email protected] [email protected] [email protected] [email protected]

Alan Galloway, Publications Katie Smith, Publications Jillian Hinman, Publications Brenda Baumgart, Publications Blair McCrory, Publications Davis Wright Tremaine LLP Henrie & Smith LLP Thenell Law Group PC Stoel Rives LLP Dunn Carney 1300 SW Fifth Ave., #2300 1915 NW AmberGlen Pkwy 10260 SW Greenburg Rd., #400 900 SW 5th Ave. #2600 851 SW 6th Ave., #1500 Portland, OR 97201 Suite 400 Portland, OR 97223 Portland, OR 97204 Portland, OR 97204 503/241-2300 Beaverton, OR 97006 503/372-6450 503/224-3380 503/242-9610 503/778-5299 (fax) 503/593-8548 503/372-6496 (fax) 503/220-2480 (fax) 503/224-7324 (fax) [email protected] [email protected] [email protected] [email protected] [email protected]

Jon Stride, Board Liaison Jeffrey D. Eberhard, Board Liaison Jay Beattie, Board Liaison Todd Hanchett, Board Liaison Vicki Smith, Board Liaison Tonkon Torp LLP Smith Freed & Eberhard PC Lindsay Hart Stoel Rives LLP Bodyfelt Mount 888 SW 5th Ave., #1600 111 SW 5th Ave., #4300 1300 SW 5th Ave., #3400 900 SW 5th Ave. #2600 707 SW Washington St., #1100 Portland, OR 97204 Portland, OR 97204 Portland, OR 97201 Portland, OR 97204 Portland, OR 97205 503/802-2034 503/227-2424 503/226-7677 503/294-9454 503/243-1022 503/972-3734 (fax) 503/227-2535 503/226-7697 (fax) 503/220-2480 (fax) 503/243-2019 (fax) [email protected] [email protected] [email protected] [email protected] [email protected]

PRODUCT LIABILITY PROFESSIONAL LIABILITY TRANSPORTATION TRIAL PRACTICE

George Pitcher, Chair Molly Marcum, Chair Eric Meyer, Chair Eric DeFreest, Chair Williams Kastner & Gibbs PLLC Keating Jones Hughes PC Zipse Elkins & Mitchell Luvaas Cobb 888 SW 5th Ave., #600 1 SW Columbia, #800 10200 SW Greenburg Rd., #700 777 High St. Portland, OR 97204 Portland, OR 97258 Portland, OR 97223 Eugene, OR 97401 503/944-6961 503/222-9955 503/245-3211 541/484-9292 503/222-7261 (fax) 503/796-0699 (fax) 503/245-3191 (fax) 541/343-1206 (fax) [email protected] [email protected] [email protected] [email protected]

Jennifer Durham, Vice Chair Clark Horner, Vice Chair Kevin Crawford, Vice Chair Kelly Giampa, Vice Chair Hiefield Foster & Glascock LLP Hart Wagner LLP Law Office of Kevin Crawford PC Hart Wagner LLP 6915 SW Macadam Ave., #300 1000 SW Broadway, 20th Floor 1193 Liberty St. SE 1000 SW Broadway, 20th Floor Portland, OR 97219 Portland, OR 97205 Salem, OR 97302 Portland, OR 97205 503/501-5430 503/222-4499 503/540-8106 503/222-4499 503/501-5626 (fax) 503/222-2301 (fax) 503/365-0374 (fax) 503/222-2301 (fax) [email protected] [email protected] [email protected] [email protected]

Nicholas Kampars, Publications Katie Eichner, Publications James Rich, Publications Grant Stockton, Publications Davis Wright Tremaine LLP Lindsay Hart Harris Wyatt & Amala LLC Brisbee & Stockton LLC 1300 SW Fifth Ave., #2400 1300 SW 5th Ave., #3400 5778 Commerical St. SE PO Box 567 Portland, OR 97201 Portland, OR 97201 Salem, OR 97306 Hillsboro, OR 97123 503/778-5364 503/226-7677 503/378-7744 503/648-6677 503/778-5299 (fax) 503/226-7697 (fax) 503/378-1013 (fax) 503/648-1091 (fax) [email protected] [email protected] [email protected] [email protected]

Mary-Anne Rayburn, Board Louis Kurtz, Board Liaison John Bachofner, Board Liaison Michael Lehner, Board Liaison Liaison Kurtz Ford & Johnson LLP Jordan Ramis PC Lehner & Rodriques PC Martin Bischoff LLP 400 E 2nd Ave. 1498 SE Tech Center Pl. 1500 SW 1st Ave. 888 SW 5th Ave., #900 Suite 101 Suite 380 Suite 1150 Portland, OR 97204 Eugene, OR 97401 Vancouver, WA 98683 Portland, OR 97201 503/224-3113 503/484-1273 360/567-3900 503/226-2225 503/224-9471 (fax) 503/683-1815 (fax) 360/567-3901 (fax) 503/226-2418 (fax) [email protected] [email protected] [email protected] [email protected] OADC BOARD OF DIRECTORS OFFICERS MICHAEL (SAM) SANDMIRE President Ater Wynne LLP 1331 NW Lovejoy St., #900 Portland, OR 97209 503.226.1191 • 503.226.0079 (fax) [email protected] TM The Verdict DAN SCHANZ President Elect A quarterly publication of OADC Schanz Lawler PC 825 Liberty Street NE Salem, OR 97301 [email protected]

GORDON WELBORN Secretary/Treasurer Hart Wagner LLP 439 SW Umatilla Ave. Redmond, OR 97756 541.548.6044 • 541.548.6034 (fax) F E A T U R E S [email protected] DIRECTORS Assigning Claims Against an Insurer: The Evolution John Bachofner 4 Jordan Ramis PC of the Stubblefield Rule in Oregon 1498 SE Tech Center Pl. #380 Vancouver, WA 98683 Thomas W. Purcell, Martin Bischoff Templeton Langslet & Hoffman LLP 360.567.3900 • 360.567.3901 (fax) [email protected] Flat fee Billing: A Feasible Alternative? Jay Beattie 6 Lindsay Hart Katie Smith, Henrie & Smith LLP 1300 SW 5th Ave., #3400 Portland, OR 97201 503.226.7677 • 503.226.7697 (fax) To Report or Not to Report: Understanding and [email protected] 8 Defending Mandatory Child Abuse Reporting Claims Jeffrey Eberhard Smith Freed & Eberhard PC Jordan M. New, Zimmer Family Law LLC 111 SW 5th Ave., #4300 Portland, OR 97204 503.227.2424 • 503.227.2535 (fax) Mediation – A License to Lie? Comments and Anecdotes [email protected] 10 on Candor from Oregon Mediators and Settlement Todd hanchett Stoel Rives LLP Judges 900 SW 5th Ave., #2600 Portland, OR 97204 James Rich, Harris Wyatt & Amala LLC 503.294.9454 • 503.220.2480 (fax) [email protected] ORCP 69 LETTERS: Pitfalls of Standard Language Louis Kurtz 12 Kurtz Ford & Johnson LLP Gavin W. Bruce, Lindsay Hart LLP 400 E. 2nd Ave. #101 Portland, OR 97401 541.484.1273 • 541.683.1815 (fax) [email protected]

Michael Lehner D E P A R T M E N T S Lehner & Rodrigues PC 1500 SW 1st Ave., #1150 Portland, OR 97201 503.226.2225 • 503.226.2418 (fax) [email protected] FROM THE PRESIDENT 2 mary-anne rayburn Martin Bischoff LLP 888 SW 5th Ave., #900 Portland, OR 97204 503.224.3113 • 503.224.9471 (fax) RECENT CASE NOTES 16 [email protected]

Vicki smith Bodyfelt Mount 707 SW Washington St., #1100 Portland, OR 97205 PETITIONS FOR REVIEW 23 503.243.1022 • 503.243.2019 (fax) [email protected]

Jon Stride Tonkon Torp LLP 888 SW 5th Ave., #1600 ASSOCIATION NEWS Portland, OR 97204 24 503.802.2034 • 503.972.3734 (fax) [email protected] ADMINISTRATIVE OFFICE ✔ PRACTICE TIPS 25 SANDRA FISHER, CAE 147 SE 102nd Portland, OR 97216 503.253.0527 • 503.253.9172 (fax) 800.461.6687 • [email protected] LEGISLATIVE UPDATE 28 ▼

p r e s i d e n t ’ s m e s s a g e By M i c h a e l (S a m) S a n d m i r e

OADC and DRI Happenings and Opportunities

his year, the Annual Conven- (Greg Lusby, Dan Schanz, Mike Lehner, tion provided a forum for the and Sandra Fisher) as well as the past organization’s practice group Presidents who provided valuable input T leaders to gather with the and historical insight. Board to discuss the activities At this writing, we take a breather to of the practice groups, what’s working enjoy the summer before some important and what needs improvement, and what upcoming events this fall. For our newer the future holds in terms of activities attorneys, our Defense Practice Academy and direction of the practice groups and will be a “deposition boot camp” held OADC as a whole. At the same time, the on September 26. The faculty includes past Presidents of OADC met to discuss seasoned trial attorneys, judges, and the present state of the court reporters. In addition to general organization and ideas instruction, attendees will take and de- for the future. These fend depositions in a variety of different meetings provide im- case contexts based on provided written portant feedback to case file materials. This program is lim- the Board, as do the ited to 35 OADC members within their program evaluations first five years of practice. In the past, a Michael (Sam) our members complete number of attorneys have joined OADC Sandmire after our CLE programs. as members in order to benefit from this Looking at the evaluations from this program, and we expect the program will year’s Annual Convention, it was by all ac- fill up quickly. counts a great success—this due in large hard work of our practice group leaders October 16-20 is the Defense Re- search Institute (“DRI”) Annual Meeting part to the hard work of our co-chairs of ensured that this was a program filled the program, OADC Board members Jay in Chicago. If you are not a DRI member, with valuable and practical advice for Beattie, Jeff Eberhard, and Mike Lehner, you should join. If you are a member but our civil litigation practices. and our administrative professionals, haven’t attended the Annual Meeting Our business meeting at the Annual Sandra and Mike Fisher. (or haven’t for a while), you should go. Convention resulted in a unanimous af- Speakers included in-house and out- DRI is a business development, edu- side counsel, mediators, consultants, and firmative vote of all members present cational, and networking organization experts, and trial and appellate judges to adopt the amendments to the Bylaws for 22,000 civil defense attorneys and addressing the theme “What do they that I highlighted in my last President’s industry representatives nationwide, and want from us?” The topic, the distin- Message. Special thanks go to those who OADC is a qualifying “State and Local guished panelists and speakers, and the served on the special bylaws committee Defense Organization” of DRI. DRI also

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2 The VerdictTM ■ 2013–Issue 3 ▼ President’s Message continued from page 2

provides a national voice for preserv- times over by the benefits afforded to and business development events, and ing the civil justice system and on other members through DRI’s website and first-class entertainment, OADC will host matters of concern to the defense bar, in its many online, practice-oriented, and a reception for all Oregon attendees as the same way that OADC’s Government substantive resources. Newer lawyers we did last year in New Orleans. So, check Affairs Committee monitors proposed pay only $165 per year and receive a cer- out the organization and the upcoming legislation and provides testimony in tificate to attend for free a DRI seminar Chicago events at www.dri.org. Oregon. And similar to OADC—though of their choice. Finally, as your summer winds down, on a national level—DRI provides best- As we continue to look for the mark your calendars for the annual Fall in-class legal educational programs and economy to come back and we watch Seminar on November 22. This year, networking opportunities. OADC mem- the many changes in the evolution of the Fall Seminar returns to the Portland bers who have never been DRI members our profession, the upcoming DRI An- Hilton, with an emphasis on insurance qualify for a free one-year membership, nual Meeting in Chicago is aptly entitled defense and coverage topics, along with allowing you to test-drive the organiza- “Energizing Your Career: Making Rain in a number of topical break-out sessions. tion for a year at no cost. After that, the Windy City.” In addition to 12 CLE Enjoy what’s left of your summer, and we dues are reasonable and offset many credits (four ethics), endless networking will see you this fall.

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The VerdictTM ■ 2013–Issue 3 3 FEATURES

Assigning Claims Against an Insurer: The Evolution of the Stubblefield Rule in Oregon

Thomas W. Purcell Martin Bischoff Templeton Langslet & Hoffman LLP

hen a defendant’s tender has to defend the claim. Plaintiff and the doc- subsequent to the covenant not to ex- been refused by its insurer, tor then settled, agreeing to a judgment ecute. However, in Lancaster v. Royal Ins. a common practice is to as- for $50,000 against the doctor but with Co. of Am.,3 the W sign the defendant’s claims a covenant not to execute on that judg- reversed course and held that Collins was against the insurer to the ment for any amount in excess of $5,000, erroneously decided. Lancaster held that plaintiff in exchange for a release of the which the doctor agreed to pay himself. “[t]he key to Stubblefield is found in the defendant’s liability or a covenant not Additionally, the doctor assigned to the language of the covenant [not to execute], to execute on a judgment. However, in plaintiff all claims against his insurer in not in its timing”—because the covenant Oregon, the so-called Stubblefield rule excess of $5,000. in Stubblefield was “unconditional” in its holds that an insurer is The plaintiff then pursued the insurer release of the insured, no liability against liable to pay only those directly for the remaining $45,000 owed an insurer could attach. “Whether the and expenses under the settlement agreement. On assignment was made of a judgment in which its insured is ob- appeal, the Oregon Supreme Court held existence or a judgment to come into ligated to pay. The rule that the insurer’s obligation to pay the existence is not determinative of whether acts to bar claims against insured’s liability was terminated upon or not the insured’s assignee may maintain an insurer that have execution of the covenant not to execute. an action against the insurance company. Thomas W. Purcell already been settled The insurance policy at issue contained Rather, the language of the covenant is against the insured—and also presents a typical language obligating the insurer determinative.”4 to pay “all sums which the [i]nsured shall trap for the unwary lawyer. ORS 31.825 be [l]egally obligated to pay as damages Conversely, the Stubblefield rule can also Apparently in response to Stubble- and expenses . . . .” However, pursuant to provide a substantial windfall for the field and Lancaster, the Oregon legislature the settlement agreement and covenant insurer. Although the Oregon legislature enacted ORS 17.100 in 1989 (re-codified as not to execute, the insured in Stubblefield has provided statutory avenues around 31.825 in 2003) which provides as follows: was no longer obligated to pay anything the rule, two recent opinions from the to the plaintiff. Thus, by releasing the A defendant in a action Oregon Court of Appeals have confirmed insured from liability under the terms of against whom a judgment has that strict statutory compliance is required the settlement agreement and covenant been rendered may assign any to avoid the Stubblefield rule and that the not to execute, the plaintiff unwittingly that defendant failure to properly execute an assignment released the insurer as well. This holding has against the defendant’s in- of claims against an insurer can have con- came to be known as the “Stubblefield surer as a result of the judgment sequences for the insured. rule.” to the plaintiff in whose favor Stubblefield and Its Progeny Opinions interpreting the Stubble- the judgment has been entered. In Stubblefield v. St. Paul Fire & Ma- field rule have shown confusion about the That assignment and any release rine Ins. Co.,1 the plaintiff sued his wife’s timing of the release and its effect on the or covenant given for the as- doctor for “alienation of affections” and liability of an insurer. In Collins v. Fitzwa- signment shall not extinguish “criminal ” after the doctor ter,2 the Oregon Supreme Court held that the cause of action against the seduced plaintiff’s wife. Great American the Stubblefield rule only applied when a insurer unless the assignment Insurance insured the doctor but refused judgment against an insured was entered specifically so provides.

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4 The VerdictTM ■ 2013–Issue 3 FEATURES stubblefield rule continued from page 4

At the very least, ORS 31.825 appeared civil action against the contractor, at which ate payment of $900,000 from Zurich. to resolve the issue of whether a judgment time the agreed-upon payments would The settlement agreement assigned the must be entered prior to, or subsequent be made; (2) within five days of the filing contractor’s rights against Capitol to the to, the release of the insured. The statute of the complaint, the parties would file a plaintiff and expressly stated that “[plain- provides that a release or assignment by stipulated judgment against the contractor tiff] shall be entitled to seek recovery of a defendant “against whom a judgment for the remaining damages; and (3) within the unexecuted portion of [the stipulated has been rendered” does not extinguish five days after entry of the stipulated judg- judgment] against [Capitol].” However, the cause of action against the insurer. ment, the contractor would formally assign the stipulated judgment was not entered Thus, the terms of the statute indicate his claims against Great American to the until after the settlement agreement was that a judgment must be entered against school district in exchange for the district’s finalized and the contractor’s rights had the insured prior to a release or covenant covenant not to execute the judgment already been assigned to the plaintiff. The not to execute. However, some courts against the contractor. Court of Appeals held that the Stubblefield concluded that ORS 31.825 went a step After the judgment was entered and rule barred the plaintiff’s claims against further and effectively superseded the the terms of the assignment were carried Capitol because the language of ORS holding in Stubblefield.5 However, two out, the school district sued Great Ameri- 31.825 “necessarily connotes that the recent opinions from the Oregon Court of can, alleging a breach of the insurance con- judgment must be entered before the as- Appeals indicate that ORS 31.825 is limited tract, among other claims. Great American signment of rights,” and in this case, the in its application, and that the Stubblefield argued that Stubblefield barred the school “order of events” did not conform to the rule is very much alive. district’s claims against it because the as- “statutorily prescribed sequence.” Read together, the rule from Portland Portland School Dist. No. 1J and signment and release were agreed to in School Dist. No. 1J and Brownstone Homes Brownstone Homes the settlement, prior to the time a suit is clear: for an assignment of claims against In Portland School Dist. No. 1J v. Great against the contractor was filed. The Court an insurer to be effective, the judgment Am. Ins. Co.,6 and Brownstone Homes of Appeals disagreed and held that the against its insured must be entered before Condominium Ass’n v. Brownstone Forest settlement agreement and release com- the assignment is executed. Heights, LLC,7 the Oregon Court of Appeals plied with ORS 31.825 because—pursuant interpreted ORS 31.825 as an exception to to the schedule laid out in the settlement Conclusion the Stubblefield rule, but also confirmed agreement—“the district had no enforce- Although ORS 31.825 provides a the continued validity of the rule itself. able right to assignment and the contrac- workable exception to the Stubblefield In Portland School Dist. No. 1J, a roof- tor had no enforceable right to release rule, counsel for insurers should be on ing contractor was sued for his negligent from liability” until after the stipulated the lookout for assignments that do not work on a local school. The contractor judgment was entered. comply with the strict requirements of tendered to his primary insurer (CNA) The most recent decision on the Stub- ORS 31.825. Conversely, counsel for the and to his excess insurer (Great Ameri- blefield rule, Brownstone Homes, was de- settling parties must be careful to assign can). Great American denied coverage. cided earlier this year. That case illustrates claims against insurers in accordance with Thereafter, the contractor, the school the consequences of failing to conform a the timing requirements of the statute. district, and CNA entered into a settle- release and covenant not to execute to Endnotes ment agreement whereby the contractor the timing requirements of ORS 31.825. 1. 267 Or 397 (1973). agreed to pay $50,000, CNA agreed to pay In that case, the plaintiff sought damages 2. 277 Or 401 (1977). its policy limits, and the contractor agreed from a siding contractor for construction 3. 302 Or 62 (1986). to assign all claims and rights against Great defects in a condominium project. Two 4. 302 Or at 67. American to the school district. Notably, insurance companies, Zurich and Capitol, 5. See, e.g., Walthers v. Travelers Cas. and the settlement agreement specified a insured the contractor. Zurich accepted Sur. Co., 1999 WL 793939 (D Or 1999) detailed time frame for accomplishing the contractor’s claim but Capitol did not. (“ORS [31.825] was adopted after each of these tasks, which was designed The plaintiff reached a settlement with Stubblefield as part of a tort reform to comply with the requirements of ORS the contractor under which the plaintiff package and appears to be directly 31.825. Under the agreement: (1) within released the contractor from liability in aimed at overruling Stubblefield.”) five days after execution of the settlement exchange for a stipulated judgment in 6. 241 Or App 161 (2011). agreement, the school district would file a the amount of $2,000,000 and immedi- 7. 255 Or App 390 (2013).

The VerdictTM ■ 2013–Issue 3 5 FEATURES

Flat Fee Billing: A Feasible Alternative?

Katie Smith Henrie & Smith LLP

he concept of a flat fee billing Ethical Considerations for Handling fee. A. Hollister, “New” Guidelines for arrangement between an the Fee Fixed and So-called Nonrefundable Fees, insurance company and Although a flat fee is collected at Bulletin (October 2011). T insurance defense counsel the outset of the case, unless otherwise In either situation, defining up front is not a new one. While agreed upon, the fee is not “earned” until when the fee, or portions thereof, is hourly rate billing is the most prevalent the legal work is completed. Waiting earned by the attorney is critical because fee structure for insurance defense firms to “earn” a fixed fee until the work is ownership of the fee determines whether in Oregon, flat fee billing can be and complete months or years later makes the money is deposited in the business has been a successful billing model for the flat fee arrangement conceptually account or client trust account. ORPC 1.15- more predictable cases. difficult. Alternatively, the attorney and 1(a) requires an attorney to hold property Further, there has client can (1) identify phases following of clients separate from the attorney’s been a recent increase which a percentage of the fee is earned, own property. If a flat fee is “earned in interest among or (2) the parties can treat the fee as upon receipt” then it is the property of insurance companies “earned upon receipt.” the attorney and must be deposited into in a variety of different With a phased approach, the attorney the attorney’s own business account. If case types, such as and client identify specific phases in a case the flat fee is earned based on specified Katie Smith multi-party complex and identify the portion or percentage phases of the case, then the fee is client construction defect litigation. This new of the fee that will be earned upon property and must be deposited into the trend has left defense counsel wondering completion of each phase. For example, client trust account until the specified if they can turn flat fee billing into a the parties could agree that upon the portion of the fee is earned, at which profit, or if they must risk losing a client to completion of the discovery phase, 60 time it can be withdrawn. If there is no a more competitive firm willing to agree percent of the fee would be earned. In agreement up front, the fee may not be to the alternative billing arrangement. this type of arrangement, initially the fee considered “earned” until the legal work is deposited into the client trust account, is fully complete, and any unearned fees Flat Fee Billing vs. Hourly Billing and upon completion of a specified phase must be held in a client trust account. In a flat fee billing arrangement, of work, the firm can transfer the agreed- compensation for legal services is based upon portion of the flat fee into the firm’s The Non-Refundable Misnomer on a fixed fee. Ideally the fee is set business account. Regardless of whether the fee is based on the attorney’s estimate of the If the attorney and client desire to considered earned upon receipt, the client time required to complete the legal treat the fee as “earned upon receipt,” it is entitled to a refund of all or part of the work involved, though in a competitive is necessary that the agreement complies fee if the legal services are not completed.1 market, the client may dictate the flat with ORPC 1.15(c), which requires a Failure to refund the unearned fee runs fee. Unlike an hourly billing arrangement written agreement, signed by the client, afoul of ORPC 1.5(a), which prohibits an where fees are collected after the legal explaining that (i) the funds will not be attorney from charging or collecting a work has been performed, under a flat deposited into the client trust account, clearly excessive fee. If the relationship fee agreement, the fee is collected at the and (ii) the client may discharge the is terminated before the services are outset before any legal work has been lawyer at any time and be entitled to a complete, the challenge lies in identifying performed. refund of the unearned portion of the which portion of the fee relates to work

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6 The VerdictTM ■ 2013–Issue 3 FEATURES flat fee billing continued from page 6 that was completed and which portion there are other terms or conditions being Bar and Oregon Professional Liability of the fee is unearned. In many flat fee imposed as part of the flat fee agreement Fund also provide free and confidential arrangements, the attorney, continues that are unconscionable or conflict consultation. It is worth contacting one to record hours in order to track from with the attorney’s own interest (such or both organizations when structuring a business perspective the profitability as indemnification provisions); and (2) a flat fee agreement, or if any concerns of the flat fee arrangement. While whether a dual billing arrangement can arise with an existing flat fee agreement. the attorney may want to calculate the be undertaken (i.e., representing a client portion of the fee earned by multiplying on behalf of two insurance companies, Endnotes his or her hourly rate by the hours spent, one based on an hourly rate and the other 1 In re Conduct of Obert, 352 Or 231, the attorney cannot retroactively convert based on a flat fee). (2012); In re Conduct of Thomas, the flat fee agreement into an hourly One thing is clear: any flat fee billing 294 Or 505, 526 (1983) (stating that agreement without client , and arrangement should be set out in writing “any fee that is collected for services must find some other way to determine and, to avoid any ethical pitfalls associated that is not earned is clearly excessive 2 which portion of the fee is earned. with ownership of the funds, should regardless of the amount”). See clearly outline when the fee is earned. also, In re Gastineau, 317 Or 545, Feasibility of Flat Fee Billing 551 (1993) (finding it a violation of While flat fee billing is certainly The more specific the agreement can be RPC 1.5(a) when the lawyer “collects permissible, can the flat fee arrangement with respect to which portion of the fee a nonrefundable fee, does not work for complex litigation? Unfor- is earned and at what time, the better perform or complete the professional tunately there is no right or wrong answer off the attorney will be if the relationship to that question. The challenge is to is terminated before the legal work is representation for which the fee determine the appropriate fee to charge. complete. The prudent practitioner was paid, but fails promptly to remit In cases like construction defect, involving will also carefully review the Oregon the unearned portion of the fee”); multiple plaintiffs and/or defendants and Rules of Professional Conduct and ethics OSB Formal Opinion No. 2005-151 often driven by outside complex coverage opinions that relate to fee agreements (Revised 2011). issues, it is very difficult to predict at the and flat fee billing. The Oregon State 2 In re Balocca, 342 Or 279, 291 (2007). outset of the case what work will be involved or how long the case is likely to last. Often the complexity can be driven by the role of the client. For example, Oregon Association in a construction defect case, whether of Defense Counsel the client is the general contractor or OADC subcontractor (and if the subcontractor, whether it is the installer of siding or Oregon Association of Defense Counsel gutters) will be critical. From an ethical standpoint, an Fall Seminar attorney cannot charge or collect a clearly excessive fee. Perhaps a more November 22, 2013 realistic concern when structuring a flat Hilton Portland fee arrangement is to remember that a Portland, Oregon fee should not be too low. A fee that is Mark your calendars to attend the OADC Fall Seminar on Friday, too low could jeopardize the attorney’s November 22nd! The seminar will be filled with great speakers on a ability to zealously and profitably variety of topics and valuable CLE credits. complete the necessary work. Additional considerations that are likely to arise Fall Seminar Registration: Information will be available in September. when trying to fit the flat fee model into Check our website, www.oadc.com, at that time for more information. complex litigation include (1) whether

The VerdictTM ■ 2013–Issue 3 7 FEATURES

To Report or Not to Report: Understanding and Defending Mandatory Child Abuse Reporting Claims

Jordan M. New Zimmer Family Law LLC

very state has a statute re- Statutory Tort the legislative history suggests any intent quiring certain individuals to To have a valid statutory tort claim, a to subject mandatory reporters to civil report suspected child abuse. plaintiff must be within the class of per- liability. While a review of the archived E Some of the statutes explic- sons the legislature intended to protect, legislative records does not reveal any itly authorize civil claims and the injury must be of the type the comments suggesting an intent to create against mandatory reporters who fail to legislature intended to prevent by creat- a right of action, plaintiffs bringing claims report; however, Oregon’s statute (ORS ing the statute.3 Additionally, the statute based on the reporting statute often point 419B.010) does not. Oregon’s statute re- must create an independent, civil remedy, to a failed attempt to amend the statute quires public and private officials to make expressly or implicitly.4 in 1999. House Bill 2226 (1999) would a report with their local DHS office when Case law cautions courts to pause have amended ORS 419B.010 to explicitly they have “reasonable cause” to believe before implying a statutory right of action prohibit a right of action. Although the they have come in contact with a victim where the legislature did not provide for bill was passed in the house and senate, or perpetrator of child one. In Dunlap v. Dickson, the Oregon the governor vetoed it. In that veto, the abuse.1 Violating ORS Supreme Court declined to acknowledge argument goes, the court can find intent 419B.010 is punishable an implied remedy. The court noted that to allow the statute to be used to create criminally as a Class A “[t]he legislature has spoken to statutory a civil right of action. violation.2 civil liability in this area. We cannot, on Several points should be made when Although the Or- our own, create what the legislature has addressing the failure of HB 2226. First, egon legislature did not chosen to forego.”5 the executive branch’s decision to veto Jordan M. New explicitly provide for The inclusion of a criminal sanction in HB 2226 cannot be considered any civil remedy, plaintiffs in Oregon have a statute suggests that the legislature did of the intent of the legislative branch in used ORS 419B.010 as the basis of statutory not intend to create an independent, civil passing the reporting statute 28 years tort and claims against doctors, lawyers, school districts, cause of action. In Burnette v. Wahl, the earlier. Further, there is evidence from and other government agencies. The Or- Oregon Supreme Court held that by in- legislative hearings on HB 2226 that it egon appellate courts have not addressed cluding criminal sanctions in the statute at represented a clarification of previously whether the duty to report may form the issue, the legislature voiced its intent not existing intent, rather than a policy 7 basis for a private right of action, and the to create a new realm of civil liability: “It is change. Finally, the 1999 legislature was trial courts have come down on both sides obvious that had the legislature intended reacting to only two circuit court cases in of the issue. a civil action it would have provided for which the courts found a private right In defending claims based on ORS one, as legislatures many times do.”6 of action in the reporting statute; there 419B.010, it is important to distinguish In exploring whether the legislature was no dramatic eruption of these claims between statutory and common law implicitly intended to create a statutory that would have caused the legislature to when analyzing whether the plaintiff has right of action for failure to report child rethink a previous policy intent. It appears a valid right of action. abuse, trial courts may be curious whether that the legislature sought to clarify that

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8 The VerdictTM ■ 2013–Issue 3 FEATURES

CHILD ABUSE REPORTING CLAIMS continued from page 8

they never intended to create a right of Closing Comments action in the first place. Oregon circuit courts are split on the issue of whether the mandatory Common Law Negligence child abuse reporting statute creates Not all statutes or rules are a private right of action for victims of appropriate bases for negligence per se abuse, with some holding that there is no claims. A statute is appropriate to set the right of action whatsoever, while others standard of care in a negligence per se holding that there is a right of action claim only if it “so fixes the legal standard based in statutory tort or in negligence, of conduct that there is no question of due or that both theories can support a right 8 care left for a factfinder to determine.” of action. Unless and until Oregon’s A negligence per se claim based on ORS appellate courts address the viability of 419B.010 would leave a factfinder to such claims, mandatory reporters should determine whether the reporter had anticipate being faced with these claims “reasonable cause to believe” that child and should be prepared to raise the abuse has occurred. The doctrine of legislative intent and policy considerations negligence per se allows a plaintiff to discussed above. supplant the applicable standard of care with a statutory rule; however, in this Endnotes case the rule itself contains an issue of 1 ORS 419B.010(1). fact that requires a subjective analysis by 2 ORS 419B.010(3). the factfinder. 3 Bellikka v. Green, 306 Or 630, 634-35 (1988). Other States 4 See Dunlap v. Dickson, 307 Or 175, 179 Our neighbors to the north and (1988); Shahtout v. Emco Garbage Co., south are among the states that have 298 Or 598, 600 (1985). found an implied right of action based on 5 Dunlap, 307 Or 179-80. mandatory reporting statutes, although 6 Burnette v. Wahl, 284 Or 705, 711-12 Washington’s statute, unlike Oregon’s, criminal rather than civil sanctions for (1978). does not provide for criminal liability.9 violations of ORS 419B.010. 7 “[T]he defeat of an amendment, even Of the states whose statutes provide The California statute is also one concerning only one substantive for criminal sanctions but are silent as distinguishable. For one, negligence aspect of a bill, is of dubious value to civil liability, including Oregon, and per se is available in far more cases in in determining legislative intent. whose courts have ruled on the issue, the California. All California statutes are Dickerson, The Interpretation and majority have decided not to allow private presumed to create a standard of care.10 Application of Statutes, at 160 rights of action. (At last count, the split Additionally, the California Supreme (1975).” Springfield Educ. Ass’n v. was 16 states to two.) Court held that reporters could be held Springfield Sch. Dist. No. 19, 24 Or The arguments for allowing a civilly liable for failing to report only App 751, 758, 650 modified, 25 Or private right of action in Washington if they had actual knowledge of the App 407 (1976). and California were both stronger than in abuse.11 Permitting liability under the 8 Shahtout, 298 Or at 601. Oregon. As noted above, the Washington Oregon statute would go further than 9 Beggs v. State Dept. of Social & Health statute does not provide for any criminal the California courts by imposing liability Services, 171 Wash 2d 69, 247 P3d 421 liability. Without the courts finding an not only when a reporter had actual (2011); Landeros v. Flood, 17 Cal 3d implied right of action, therefore, there knowledge of the abuse, but when the 399, 551 P2d 389 (1976). would be no penalty for violations. The reporter only had “reasonable cause to 10 California Evidence Code §669(a). Oregon legislature chose to impose believe” it occurred. 11 Landeros, 17 Cal 3d at 414-15 n. 13.

The VerdictTM ■ 2013–Issue 3 9 FEATURES

Mediation – A License to Lie? Comments and Anecdotes on Candor from Oregon Mediators and Settlement Judges James Rich Harris Wyatt & Amala LLC

orse seller: “This horse has advocate for our clients. Of course, learn more about the case as we go along. great teeth. It is a bargain at tension can develop between the “candor” Your opponent may raise an issue or argu- the price I am asking.” requirements and the “zealous advocacy” ment that you have not addressed. New H Reluctant Buyer: “First, obligation. Settlement facilitators observe information to address the new issue is I am not really interested in that tension first-hand. (See, e.g., the very helpful.” spending any money on a horse. Second, attorney claim that “There is absolutely • In your mind is it ever acceptable for those teeth are not that great.” no way this case is worth $50,000.” The an attorney to be dishonest during Senior judge and private mediator reality: “The insurer has authorized me a mediation or a settlement confer- Don Dickey referenced the horse trading to pay up to the $50,000 policy limits to ence? analogy when he and I recently spoke. settle, but I want to look good by saving Justice Leeson: “An outright lie about We also hear the used-car analogy as some money.”) evidence or facts can sabotage mediation. an illustration of Judge Dickey was one of several expe- But so can evasiveness and refusal to be negotiation posturing: rienced “neutrals” from whom I solicited candid about needs, interests, and risk e.g., “It’s mint, has comments on candor. I also heard from assessment. Mediation is a party-driven low miles, and was Justice Susan Leeson (Retired), Judge Philip process. If parties (or counsel) choose to only driven to church Arnold, Jeff Batchelor, Peter Chamberlain, sabotage it, that is their choice. It’s not a on Sundays.” Stories and Richard Spier; another source pre- good choice, in my opinion, but it is one abound of negotiators ferred to remain “on background” only. that belongs to the parties.” James Rich using “puffery” or flat- Here are some of their comments: Judge Arnold: “No.” out lying to seal the deal. My curiosity • Do you expect parties or their at- Richard Spier: “No. In mediation, about such tactics during mediations and torneys to disclose everything to you counsel should not knowingly or recklessly settlement conferences prompted this when you serve as a mediator? make any false statements, or intentionally article. Jeff Batchelor: “No. To the contrary, I make any misleading statement, about the As attorneys we must comply with prefer that lawyers and their clients release facts. It is okay to withhold information the Oregon Rules of Professional Conduct information strategically. In particular, I on “bottom lines” and settlement goals, and must commit to the Oregon State do not want to know the defense lawyer’s as long as no direct misrepresentation is Bar’s Statement of Professionalism. authority and I do not want to know the made (but the standard may be different ORPC 3.3(a)(1) provides that “A lawyer plaintiff’s perceived bottom line. These in settlement conferences with judges). It shall not knowingly . . . make a false things change over the course of a day is okay to withhold disclosure of factual or statement of fact or law to a tribunal or or however long the mediation extends.” legal weaknesses of which you think the fail to correct a false statement of material Richard Spier: “No. The parties are other side is unaware, as long as that lack of fact or law previously made to the tribunal negotiating with the mediator as well as awareness is not due to or discovery by the lawyer[.]” ORPC 4.1(a) states that with the other party or parties.” violations, but (a) the other side may know “In the course of representing a client a Peter Chamberlain: “No. It is okay or discover the issue anyway; and (b), since lawyer shall not knowingly . . . make a to keep your cards close to your chest. it may come out anyway, you can help the false statement of material fact or law to Don’t flat out lie to me but it is okay to mediator do his or her job with your client a third person [.]” We must also zealously not disclose your authority. I also like to by revealing the information in confidence

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10 The VerdictTM ■ 2013–Issue 3 FEATURES candor in MEDIATION continued from page 10 to the mediator.” the presence of the client in private caucus, three minutes later.” • Does it matter if it is the client/litigant for the mediator to be able to do an ef- Judge Arnold related a story about who is obfuscating or if it is the at- fective job. Okay to withhold information how both sides in a construction defect torney? on negotiating positions, but not okay to case candidly explained each of their ex- perts’ distinct repair plans. The plaintiff Peter Chamberlain: “No, especially if misrepresent.” argued that only its expert’s plan would you are aware of it. Letting your client lie Justice Leeson indicated that she work. The defendant argued that its ex- is no different from lying.” expects full disclosure of “undisputed pert’s plan would be sufficient and that Richard Spier: “Yes. Counsel is subject facts and procedural status of the case” anything more would be unnecessary. to ethical standards. However, if client and and that she tolerates less than complete Judge Arnold convinced both sides to let counsel are well prepared, the client also candor regarding “interests, claims about the defendant try its “fix” and to let the should comply with lawyer standards— willingness [or] desire to litigate the case.” litigation go forward if that plan failed. counsel should not permit false or reckless On the topic of candor about “the The defendant’s “fix” was “tweaked” misstatements of fact by the client.” facts,” Judge Dickey said, “Better to be some during the repairs, but the case Judge Arnold: “I rely on attorneys to pragmatic and just deal with the ‘bad’ settled. Judge Arnold commented, “At be truthful. I don’t expect attorneys to facts. At least you get to deal with them the beginning of the mediation process, berate their clients; they should support on your own terms.” perhaps none of the participants can an- them. It’s clear to a mediator when an at- • What does the neutral do with a lie? ticipate the outcome. Honesty lets every- torney is advocating and when s/he is pre- On this topic, Justice Leeson said, one explore all the possibilities.” senting factual material to the mediator.” “Sometimes lawyers will take me aside Jeff Batchelor said, “When I mentor • About what subjects do you expect and ask for help working with the client young lawyers, I sometimes counsel: Cred- full disclosure? About what subjects because the lawyer knows or believes the ibility is a terrible thing to waste.” client is not telling the truth or is shad- do you tolerate less than complete Judge Dickey told me a story about a candor? Are there any subjects about ing the facts, and asks me to ask hard husband’s claim. The which you almost expect the parties questions or explain the consequences of defense discovered salacious information or their attorneys to either withhold continuing with lack of candor. [C]lients about the wife and asked Judge Dickey information from you or misrepresent have interrupted their lawyer and stated to keep the details confidential. When information to you? that the lawyer is exaggerating a point caucusing with the plaintiff and generically Peter Chamberlain: “I am okay with about the strength of a particular claim, disclosing, with the defense’s consent, that coyness regarding authority. I am not okay exposing a conflict between the lawyer the defense had “something big,” the with lying to me about it.” [This sentiment (who wants to litigate) and the client (who plaintiff husband blurted out different— was quite common among my sampling wants to settle).” but equally salacious—information about of neutrals.] One neutral said that a party caught his own activities. Jeff Batchelor: “A lawyer is duty- in a falsehood about a “medical fact” can One final, and rather comforting, bound not to lie to me about his or her be shown a conflicting medical record comment about our chosen profession: authority, which is why I never ask about and then guided toward the idea that a My “on background” source told me that that until quite late in the game, if I ask at jury is likely to view the medical records after reflecting on over 700 mediations all. The lawyer need not disclose his or her as “the Bible.” in the last 11 years, not one “blatant lie” authority, but I rarely ask for a disclosure Some Anecdotes on Candor: by an attorney during a mediation could like that. Rather, I wait until we reach it, if Justice Leeson related the following: be recalled. That same source, however, we do. Apart from questions of authority, “Parties in an employment case started noted that many instances came to mind I guess I do not expect complete candor.” out more than $300,000 apart. They hit when a client “absolutely lied.” Richard Spier: “Full disclosure of facts impasse at $900 apart. I asked the lawyers Thanks to Justice Susan M. Leeson, is not required, but any statements must to step into the hall with me, where I Judge G. Philip Arnold, Judge Don be truthful. Less than complete candor is asked, ‘What’s going on?’ Plaintiff’s lawyer A. Dickey, Jeffrey Batchelor, Richard okay on negotiating positions. However, it said, ‘My client needs to feel that she Spier, Peter Chamberlain, and my “on is important for counsel to acknowledge finally got the last word.’ Defense lawyer background” source for all of their time weaknesses in the case to the mediator, in responded, ‘Done!’ Settlement occurred and insights.

The VerdictTM ■ 2013–Issue 3 11 FEATURES

ORCP 69 LETTERS: Pitfalls of Standard Language Gavin W. Bruce Lindsay Hart LLP

ear Plaintiff’s Counsel: “[t]o ‘appear’ you must file with the court prior written notice to me. I represent defendant a legal document called a ‘motion’ or 2 I look forward to working with in the above-referenced ‘reply’.” Thus, by the plain language of you on this case.7 D matter and will be enter- the rule, it would appear that a defendant ing an appearance on be- cannot be considered to have “appeared” Relying on its interpretation of Supreme half of my client. Pursuant as a result of informal correspondence Court precedent (Baker v. Foy), the court to ORCP 69, please do not petition between the parties—such as an ORCP 69 maintained that service without a follow- the court for an order or judgment letter—nor would such correspondence up mailing was reasonably calculated to of default without at least 10 days’ waive any of defendant’s affirmative apprise a defendant of the pendency of written notice to me. In the mean- defenses. the action, where a defense attorney sent time, please provide me with copies However, some in the plaintiffs’ bar an ORCP 69 letter acknowledging receipt 8 of the returns of service. Thank you recently resurrected a 2002 Court of Ap- of the complaint. for your courtesies. peals opinion to contend that mailing an Under Baker v. Foy, courts evaluating ORCP 69 letter to plaintiff’s counsel should the adequacy of service complete a two- Very Truly Yours, be considered in determining whether step analysis.9 First, the court must deter- Defense Counsel the service requirements of ORCP 7 are mine whether service was properly made This letter should sound familiar to met. Even more alarming, plaintiffs now upon the defendant as permitted by ORCP all defense attorneys. We draft and send argue that an ORCP 69 letter constitutes a 7 D(3) and was accomplished in accordance similar letters in response to nearly all waiver of defendant’s affirmative defenses with ORCP 7 D(2).10 If the requirements complaints that come across our desks. regarding inadequate service of process. are not met, a court must then determine We utilize ORCP 69 letters to protect our In Williams v. Jett,3 plaintiff filed a whether service is adequate under ORCP clients’ interests and to afford ourselves medical malpractice action, effecting 7 D(1).11 ORCP 7 D(1) does not require a time to fully investigate service by delivery of the summons and particular manner of service; instead, it the asserted claims prior complaint to the defendant doctor’s of- “endorses the process of examining the to filing a responsive fice.4 Plaintiff did not proceed with the totality of the circumstances, to determine pleading. The letter also follow-up mailing required by ORCP 7 D(2) if the service of summons was reasonably serves as a professional (c).5 The next week, defendant’s attorney calculated to provide [the] defendant with courtesy, notifying op- sent a typical ORCP 69 letter to plaintiff’s notice of the action and [a] reasonable op- posing counsel of your counsel.6 That letter stated: portunity to appear and defend.”12 representation, likely The holding in Williams confirmed Gavin W. Bruce I will be representing Dr. Jett in beginning a dialogue about the case. that “the ‘window’ for evaluating the this case. Unfortunately, in circumstances where sufficiency of service in this case for either adequacy of service or statute of I have just received a copy of the purposes of ORCP 7 D(1) encompasses, limitations are at issue, ORCP 69 letters complaint you have filed but do at least, plaintiff’s attorney’s receipt of can have calamitous results. not yet have the doctor’s chart. defendant’s attorney’s June 6 letter.”13 It is common knowledge that informal As soon as I have it, I will review Therefore, plaintiff’s failure to send a correspondence does not constitute a first it and then enter an appropriate follow-up mailing was not fatal because appearance.1 Indeed, the language required appearance. In the meantime, plaintiff could reasonably conclude, based in summonses required by Oregon Rules pursuant to ORCP 69, please do on defense counsel’s representations, that of Civil Procedure require a court filing: not apply for a default without defendant had received the summons and

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12 The VerdictTM ■ 2013–Issue 3 FEATURES

ORCP 69 LETTERS continued from page 12 complaint and, thus, was afforded an op- service reasonably calculated to provide 2. ORCP 7 C(3). portunity to appear and defend against the defendant with notice of the action. 3. 183 Or App 611, 54 P3d 624 (2002). the suit.14 In effect, the case holds that a Thus, a letter that indicates only the intent 4. Id. at 613-14. defendant waives her affirmative defense to appear and does not acknowledge re- 5. Id. of inadequate service not through an ap- ceipt of the complaint may be sufficient 6. Id. pearance—as ORCP 21 G indicates—but to avoid a similar ruling. However, as 7. Id. at 614. instead through informal correspondence evidenced by the redacted letter at the 8. Id. at 626. between the parties. beginning of this article, merely removing 9. 310 Or 221, 228-29, 797 P2d 349 reference to the complaint may be insuf- (1990). Tips For Avoiding Inadvertent Waiver ficient to preserve your client’s defenses. 10. Id. The letter quoted at the beginning Regardless of the suggested additions 11. Id. of this article is a redacted version of a to the ORCP 69 letter, defense lawyers 12. Id. at 225. real ORCP 69 letter that a Multnomah should remain extremely cautious. If a 13. 183 Or App at 620. In a district court County Circuit Court judge recently held case involves significant service of process opinion, Magistrate Stewart found was evidence of sufficient service under issues, or a statute of limitation defense the absence of a Rule 69 letter decisive Williams. Clearly, this raises a number of based on failure to commence an action in Dingus v. City of Portland, CV-05- concerns with the standard ORCP 69 letter under ORS 12.020(1-2), the lawyer must 1298-ST, Findings and Recommenda- currently used by many defense attorneys. weigh the risk of relinquishing the 10-day tion dated February 8, 2006 adopted As in this recent case, plaintiff may success- by Judge Haggerty, March 10, 2006. fully argue that the language effectively notice against the unfortunately real risk “[U]nlike Williams, plaintiff’s attorney waives defendant’s affirmative defenses of waiving inadequate service defenses. A received no communication from any regarding insufficient service. cautious lawyer should consider whether attorney representing Officers Honl In light of this plaintiff’s tactic, it is an ORCP 69 letter is in a client’s best inter- and McIntyre confirming their receipt evident that reliance on form ORCP 69 est at all. of the summons and complaint.” Id. letters can prove problematic. Tailoring Endnotes 6-7. language to fit specific issues in each case 1. ORCP 7 C(2) and 15 A. 14. Id. at 621. may avoid inadvertent waivers. Below is some suggested language that may pre-

serve inadequate service defenses:

. Stars Rising or Lawyers Super Oregon 2013

This letter is not a waiver of any defenses based on statute of are attorneys our of all nearly but brag, to Not limitations, service of process, or any other applicable defenses. And for the more verbose among us: Pursuant to ORCP 69, but without waiving and specifically reserving all objections, including objections as to improper jurisdiction, improper venue, and insufficient service of process, please do not petition the court for an order or judgment of default without at least ten days’ written notice to me. Additionally, the letter in Williams confirms that defense counsel is in “receipt of the complaint,” a fact that the Oregon Excuse us if we’re just a little head over heels about this. Court of Appeals relied on in determining

The VerdictTM ■ 2013–Issue 3 13 OADC 2013 ▼

Past President Wife Dawn Davis, Past President Chris Kitchel and husband Jan Kitchel, and Past Board Member Steve Voorhees and Pam Welch.

Speaker TriMet General Counsel Jana Toran.

Golf Tournament Winners

1st Place Low Gross - Tie Break 66 Lloyd Bernstein Dan Lindahl Martin Jaqua Joe Rayburn

1st Place Low Net - 47

Thursday evening family reception in the Great Hall. Bob Barton Jim Edmonds Frank Lagesen Peter Willcox-Jones

Prize Holes Men’s Long Drive Hole #2 - Gavin Bruce Men’s Long Drive Hole #12 - Bob Carey Women’s Long Drive Hole #6 - Kristen Stedman Women’s Long Drive Hole #15 - Katie Smith Men’s KP Hole #3 - Bob Carey Men’s KP Hole #17 - Gavin Bruce Women’s KP Hole #7 - Pam Welch

Speakers Judges Alta Brady and Michael Hogan.

14 The VerdictTM ■ 2013–Issue 3 Convention Highlights ▼

Socializing between CLE sessions.

Speaker Sukhsimranjit (Sukh) Singh.

Fun Run Winners

2.5 Mile Run 1st Place Women’s Lucy Loftis ...... 22:53 2nd Place Women’s Katie Smith ...... 25:20 3rd Place Women’s Melissa Beyer ...... 28:15 Past President Wife Jennifer Hood and son Connor. 1st Place Men’s Henry Hood...... 23:39 2nd Place Men’s Connor Hood...... 25:35 3rd Place Men’s Lee Catherman...... 45:18 (a walker!)

5 Mile Run 1st Place Men’s Kevin Chaney ...... 33:20 2nd Place Men’s Blair Loftis ...... 35:06

1st Place Women’s Janet Larsen ...... 36:39

Lucy Loftis leading the pack of fun runners.

The VerdictTM ■ 2013–Issue 3 15 RECENT CASE NOTES Recent Case Notes

Matthew J. Kalmanson, Hart Wagner LLP Case Notes Editor

Evidence ter was accused of sexual abuse. At trial, witness with evidence of the witness’s the defendant presented an offer of possible bias or interest. The court relied proof regarding the victim’s application upon three cases: State v. Hubbard, 297 Evidence of motivation to for a “U Visa,” which is a special visa for Or 789 (1984), State v. Muldrew, 229 Or lie is admissible with proper victims of sexual abuse. The defendant App 219 (2009), and State v. Knobel, foundation argued that the U Visa application was 97 Or App 559 (1989). The court noted evidence that the victim had reason to that the party presenting impeachment In State v. Valle, 255 Or App 805 fabricate her allegations of sexual abuse. evidence must lay an appropriate foun- (March 27, 2013), the Oregon Court of The trial court sustained the state’s objec- dation for admissibility of impeachment Appeals reversed a criminal conviction tion to the defendant’s line of question- evidence. The court, however, split on because the trial court improperly denied ing. The jury convicted the defendant. whether the defendant had created an the defendant’s attempt to impeach On appeal, the Court of Appeals appropriate record. the alleged victim with evidence of her concluded that exclusion of the im- The majority ultimately held that a motivation to fabricate the allegations. peachment evidence was reversible error party can establish a sufficient founda- The defendant in this criminal mat- because a party is entitled to impeach a tion through an offer of proof or other

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16 The VerdictTM ■ 2013–Issue 3 RECENT CASE NOTES Recent Case Notes means, such as having the attorney sum- plaintiff’s expert affidavit was sufficient rule applies either have not involved tort marize the expected testimony. The to defeat summary judgment. claims subject to the ORS 12.110 two- majority found that the foundation in In January 2006 the plaintiff was year period . . . or this case was sufficient because it showed transported in an ambulance to a hospi- have related to torts that did not involve that the “evidence had a tendency, how- tal. The plaintiff could not recall the trip claims of bodily harm.” It rejected de- ever slight, to demonstrate that the [vic- but remembered that the paramedic act- fendant’s assertion that a claim tim] had a personal interest in testifying ed “boorish” while at the hospital. After is “inherently discoverable,” ruling that against the defendant.” The court deter- discharge she suffered from nightmares there was a question of fact pertaining mined that the defendant had created an regarding the paramedic. In December to the plaintiff’s claim of amnesia. adequate foundation through an offer 2007, the plaintiff learned that the para- The court then held that plaintiff’s of proof, that any factual ambiguity in medic had been charged with sexually ORCP 47 E affidavit, when combined with the offer of proof would not preclude ad- assaulting women during ambulance the other evidence in the record, was mission of evidence demonstrating that transports. Plaintiff concluded that she, sufficient to create an issue of fact on the victim could be biased, that evidence too, had been assaulted, but did not re- whether a battery occurred. The court of bias was admissible for impeachment, member it because of traumatic amnesia. agreed that an expert may not “vouch” and that exclusion of the evidence was She filed a lawsuit for sexual battery in for a plaintiff, but it could not tell from reversible error. November 2009, which would be beyond the affidavit whether this was the- ex In reaching this conclusion, the court the two-year statute of limitations if her pert’s plan. While the court understood noted that the rules of admissibility are claim had accrued at the time of the bat- the defendant’s frustration with its in- “particularly true for a defendant in a tery under ORS 12.110(1). The trial court ability to “discover or learn any facts” criminal case, who has a right, under granted the defendant’s motion for sum- about the alleged , it observed both the state and federal constitutions, mary judgment based on the statute of that this was “the result of ORCP 47 E’s to confront witnesses.” The court’s limitations and because plaintiff’s ORCP clear mandate that parties litigating sum- opinion, however, did not rely on the 47 E affidavit was insufficient to establish mary judgment need provide only very constitution or otherwise state that a that a battery had occurred. limited information about the expert different standard would apply in civil On appeal, the defendant cited opinions on which they intend to rely cases. J many statutes that contain an express at trial.” J — Submitted by Grant D. Stockton, discovery rule, and argued that the — Submitted by Grant D. Stockton, Brisbee & Stockton LLC legislature was adept at stating when Brisbee & Stockton LLC it intended for a discovery rule to toll Statute of a statute of limitations. The plain text Class Collective of ORS 12.110(1), by contrast, did not And Actions limitations include a discovery rule for acts of bat- tery. Plaintiff’s response was based on Discovery rule applies to bat- Berry v. Branner, 245 Or 207 (1966), a Ninth Circuit upholds wage tery claim foundational case where the court found and hour “hybrid” class and a discovery rule inherent in the word collective action claims In Whalen v. American Medical Re- “accrued” in ORS 12.010. sponse Northwest, 256 Or App 278 (April The Court of Appeals agreed with In Busk v. Integrity Staffing Solu- 17, 2012), the Oregon Court of Appeals the plaintiff. It held that, under Berry, tions, Inc., 713 F3d 525 (9th Cir 2013), the reversed summary judgment in favor of the discovery rule applies to cases involv- Ninth Circuit held that claims involving the defendant because (1) the discovery ing bodily harm. It noted that “cases in collective actions under the Fair Labor rule applies to a battery claim, and (2) the which we have flatly held no discovery Standards Act (“FLSA”) and also class

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The VerdictTM ■ 2013–Issue 3 17 RECENT CASE NOTES Recent Case Notes

actions based on state wage statutes brought under FRCP 23 were not inher- ently incompatible and could exist in the same lawsuit. In Busk, the Ninth Circuit addressed the procedural complexity that results from the different class certification mechanisms under the FLSA and FRCP 23. First, certifying an FLSA collective action is usually a two-step process involving “conditional” certification after limited initial class discovery and then later “final” certification, while certifying a class action under state law pursuant to FRCP 23 involves only one step after significant class-based discovery. Second, other employees must affirmatively “opt in” to an FLSA collective action to join it and be bound by its outcome, but in FRCP 23 class actions those coworkers will automatically be joined to the class, and be bound by the outcome, unless they affirmatively “opt out.” Because of the historically low opt-in rates to FLSA collective actions (usually five to 20 percent), plaintiffs bringing FLSA claims usually also assert FRCP 23 class claims to maximize the size of the potential class. One defense raised by employers facing these so-called “hybrid” class and col- lective actions has been to try to get the state law claims dismissed on the basis that these procedural differences create The Defense Research Institute (DRI) offers a free one-year membership to any so much confusion and complexity that member of OADC who has not previously been a member of DRI. DRI is an or- the claims are inherently incompatible. ganization of defense attorneys and in-house counsel that provides access to The plaintiffs in Busk were ware- resources and tools for attorneys who strive to provide high-quality, balanced and house workers who filed a class action excellent service to their clients and corporations. DRI is host to more than 25 lawsuit alleging that their employer had substantive committees whose focus is to develop ongoing and critical dialogue required them to work off the clock, re- about areas of practice. DRI provides access to resources and tools to grow your sulting in various violations of the FLSA practice—members can search a database of more than 65,000 experts, attend and Nevada wage laws. The defendant renowned CLE seminars, conferences and webcasts, network with 22,000+ like- filed, an FRCP 12(b)(6) motion to dismiss minded defense practitioners and more. in district court, arguing, among other

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18 The VerdictTM ■ 2013–Issue 3 RECENT CASE NOTES Recent Case Notes things, that the procedural differences lose, verbally offered him another job at Statute of between FLSA collective actions and Lithia that met his health needs, and set class actions asserted under state law up a meeting to sign paperwork, assur- Limitations/Public pursuant to FRCP 23 conflicted and were ing the plaintiff that the meeting was a Bodies/Torts inherently incompatible and therefore “mere formality.” As it turned out, the could not coexist in the same lawsuit. other job at Lithia was not available, Two-year statute of limita- The district court granted the motion. and because the plaintiff delayed, he did tions governs survival actions The Ninth Circuit reversed, finding not get the job with the other employer. that despite the procedural differences, The plaintiff sued Lithia for fraud and against public bodies class and collective wage claims can promissory estoppel, asserting that he In Bell v. Tri-County Metropolitan “peacefully coexist.” In reaching this detrimentally relied on his supervisor’s Transportation District of Oregon, 353 Or conclusion, the Ninth Circuit joined other promise. In the trial court Lithia moved 535 (2013), the Oregon Supreme Court circuits that approved similar hybrid to dismiss, arguing that because Oregon held that a two-year statute of limita- collective and class action wage claims. is an “at will” employment state and Lith- tions applies to survival actions against See, e.g., Knepper v. Rite Aid Corp., 675 ia could have terminated the plaintiff’s public bodies. F3d 249 (3d Cir 2012); Ervin v. OS Rest. employment at any time, the plaintiff In 2007, decedent was injured while Servs., 632 F3d 971 (7th Cir 2011). J could not have reasonably relied on the exiting a TriMet bus. In 2008, he died — Submitted by Ryan Gibson, Stoel job offer as a matter of law. The Oregon from injuries unrelated to the TriMet Rives LLP Court of Appeals agreed with Lithia and accident. His sued TriMet for per-

affirmed the dismissal. sonal injuries more than two years—but Employment The Supreme Court reversed. Rely- less than three years—after the accident. ing on the Restatement definition of The trial court granted defendant’s ORCP Oregon Supreme Court holds promissory estoppel, which states that 21 motion to dismiss based on the statute employee’s detrimental reli- the claim can depend on factual cir- of limitations. Both the Court of Appeals cumstances such as the reasonableness and the Oregon Supreme Court affirmed. ance on employer’s statement of the person’s reliance, the Court held The issue was whether decedent’s estate had two years or three years to created binding job offer that such a claim in the employment sue TriMet, a public body. ORS 30.275(9) context should not be per se precluded In Cocchiara v. Lithia Motors, Inc., provides a two-year statute of limitations by Oregon’s “at will” doctrine. The Court 297 P3d 1277 (Or 2013), the Oregon for actions against public bodies, which reasoned that, just because an employer Supreme Court held that an employee trumps any other “limitation on the can terminate the employment of an “at could pursue a claim of promissory estop- commencement of an action” (i.e., any will” employee at any time, it does not pel and fraudulent misrepresentation other statute of limitations). The parties follow that it necessarily will. Therefore, when he relied, to his detriment, on an disagreed as to whether the three-year employer’s promise of a job. the Court concluded, it does not follow limit in ORS 30.075(1) —the survival In Cocchiara, the plaintiff was a long- that “a prospective employee can never statute—is a statute of limitations or a time successful salesman in Lithia’s car reasonably rely on a promise of at-will tolling provision. ORS 30.075(1) states, dealership until health issues forced him employment, “and” if a prospective in pertinent part, that a survival action to take a job with less pressure and fewer employee does reasonably rely on such “shall be commenced . . . within three hours. After the plaintiff notified his a promise, a remedy may be necessary to years by the personal representatives if supervisor that he had found a suitable avoid injustice.” J not commenced prior to death.” job with another employer, the supervi- — Submitted by Andrea The dissent argued that ORS 30.075(1) sor told him he was “too valuable” to Thompson, Stoel Rives LLP should not be considered a limitation;

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The VerdictTM ■ 2013–Issue 3 19 RECENT CASE NOTES Recent Case Notes rather, it is an extension of time to file Court of Appeals upheld summary judg- alter the nature of the underlying claims suit. The dissent observed that survival ment in favor of third-party defendants in a third-party case.” Therefore, Ater actions give “additional life to an existing in a construction defect lawsuit, based no longer had a legitimate basis to sue action that would have been destroyed primarily on the impact of a settlement Marvin and Medallion for contribution under common law,” and concluded that between the plaintiff and the third-party and indemnity. the legislature did not intend to create a plaintiff. The court also affirmed judgment “limitation.” Rather, it intended to cre- Ater Construction Company built against Ater on its third-party negli- ate new rights not previously available and sold a house to Keith and Rebecca gence claims on the ground that the under the common law. Marton in 1998. Eight years later, in 2006, general contractor sought economic The majority disagreed, holding that the Martons sued Ater for leaky windows loss. Although the homeowners suffered the three-year limit in ORS 30.075(1) is and resultant property damage. The property damage, the general contrac- a statute of limitations. The Court rea- Martons alleged breach of and tor did not. Rather, Ater “sought to soned that, unlike a tolling provision, negligence theories against Ater. recover Ater’s own economic losses that ORS 30.075(1) does not “interrupt” an Ater filed a third-party complaint were caused by Marvin’s and Medallion’s already existing statute of limitations. against the window manufacturer and negligence, and such a claim generally is In response to the dissent, it argued that the window distributor, Marvin Win- barred under Oregon law regardless of while the legislature granted new rights dows and Medallion Industries, Inc. the nature of the underlying claims.” Be- when it enacted the survival statute, it Ater alleged contribution, common law cause Ater’s alleged damages were pure also limited those rights when it required indemnity, and negligence theories. economic loss, its third-party negligence personal representatives to sue within The Martons and Ater settled, but the claims were invalid. J three years. Therefore, ORS 30.075(1) settlement did not extinguish Marvin — Submitted by Robert E. Sinnott, is a “limitation on the commencement and Medallion’s potential liability to the Keating Jones Hughes PC of an action,” and a two-year statute Martons. Constitutional of limitations applies to survival actions Marvin and Medallion filed motions against public bodies. J for summary judgment against Ater. Constitutional — Submitted by Robert E. Sinnott, They argued that (1) Ater could not bring Law Keating Jones Hughes PC a contribution or indemnity claim be- cause Ater’s settlement did not extinguish Federal Defense of Marriage Third-Party Marvin and Medallion’s liability; and (2) Ater’s negligence claim sought recovery Act (“DOMA”) Violates Fifth Practice/ of economic loss. The trial court granted Amendment Settlement summary judgment. The Court of Appeals upheld sum- In v. Windsor, 133 S Ct Agreements/ mary judgment. First, it agreed that 2675 (2013), the U.S. Supreme Court Construction Ater could not bring a contribution or held that Congress violated the Fifth Defect indemnity claim post-settlement because Amendment when it defined marriage, the settlement did not extinguish Marvin for purpose of federal law, to exclude and Medallion’s liability to the plaintiff. same-sex marriages. Terms of a settlement agree- In response to Ater’s argument that ORCP Edith Windsor and Thea Spyer, ment precluded third-party 22 C altered the analysis, the court ob- both women and residents of New claims served that the rule simply allows a party York, married in Canada. to prosecute its third-party claims in the recognized the marriage as valid. When In Marton v. Ater Construction Co., underlying action; it “does not provide Spyer died she left her estate to Windsor, LLC, 256 Or App 554 (2013), the Oregon an independent source of liability or who claimed the estate tax, exemption Continued on next page

20 The VerdictTM ■ 2013–Issue 3 RECENT CASE NOTES Recent Case Notes

for surviving spouses. The federal counsel against hearing an appeal from a to demean those persons who are in a government rejected the claim based decision with which the principal parties lawful same-sex marriage,” the Court on Section 3 of the Defense of Marriage agree.” held that it violated the Due Process Act (“DOMA”), which excludes same- On the merits, the Court then Clause of the Fifth Amendment, which sex partners from the definition of held that DOMA violated the Fifth contains within it the “prohibition “spouse” in all federal statutes. Windsor Amendment. Writing for the majority, against denying to any person the equal paid the taxes and then challenged the Justice Kennedy found significant that protection of the laws.” The Court noted law. The federal district court and the New York recognized the marriage as that “no legitimate purpose overcomes Second Circuit ruled that DOMA was valid, observing that by “history and the purpose and effect to disparage unconstitutional. tradition the definition and regulation of and to injure those whom the State, by In a 5-4 decision, the Supreme marriage . . . has been treated as being its marriage laws, sought to protect in Court affirmed. The first question was within the authority and realm of the personhood and dignity.” whether the Court had jurisdiction. separate States.” Through DOMA, Left unanswered by the Court were: The Obama administration had issued however, Congress sought to “injure the (1) whether a state can prohibit same an opinion concluding that DOMA was very class New York seeks to protect.” sex marriage, and (2) what level of unconstitutional, so it refused to defend This “violates basic due process and scrutiny applies. In a companion case it in the district court but continued to equal protection principles applicable decided on the same day, Hollingsworth enforce the statute. A “Bipartisan Legal to the Federal Government. . . . The v. Perry, the Court refused to consider Advisory Group” (“BLAG”) from Congress Constitution’s guarantee of equality the constitutionality of California’s then intervened to defend the statute. must at the very least mean that a bare The Court concluded that it did have congressional desire to harm a politically Proposition 8—which defined marriage jurisdiction, because the district court’s unpopular group cannot justify disparate in a manner similar to DOMA—on order requiring the United States to treatment of that group.” jurisdictional grounds. This left in place pay Ms. Windsor a tax refund provided The Court observed that interference a federal district court’s opinion striking a sufficient “injury” to satisfy Article with the “equal dignity of same sex down Proposition 8 as unconstitutional, III’s case and controversy requirement. marriages” was not an incidental effect but is not binding on any state other than In addition, BLAG’s “sharp adversarial of DOMA—it was the “essence” of the California. J presentation of the issues satisfies the law. Because the “principal purpose — Submitted by Matt Kalmanson, prudential concerns that otherwise might and the necessary effect of this law are Hart Wagner LLP

The VerdictTM ■ 2013–Issue 3 21 ...... PROMOTING...... EXCELLENCE ...... AFFIRMING...... JUSTICE ...... “A well-informed judiciary...... is in the best interests for all engaged...... in the judicial process” ...... The National Foundation for Judicial ...... Excellence (NFJE) was established in 2004 by...... leading defense attorneys. The mission ...... of NFJE is to address important legal...... policy issues that affect law and the civil justice...... system by providing meaningful ...... education for the judiciary, and engaging...... in other efforts to enhance judicial excellence...... and fairness for all engaged in ...... the judicial process. Our premise is that...... the entire legal system benefits from judicial...... education because a judge who is ...... acquainted with an issue prior to facing...... it on the docket will render a more informed,...... better decision...... NFJE is the only organization of its...... kind providing judicial education that...... is governed by defense lawyers. This ...... education has proven to be effective...... in imparting to judges the necessary knowledge...... to assist them in evaluating all ...... sides of an issue. In the end, NFJE is an...... important force in promoting a balanced...... point of view by the judiciary...... “If not us, who?” No individual is as...... committed to preserving an independent judiciary...... than is an officer of the court...... “Why should I care?” America’s civil...... justice system has been shown to be the...... best, most fair means of resolving ...... disputes the world has ever known...... “What can I do now?” Inspire your...... colleagues and clients to learn about NFJE;...... encourage the appellate judges of your ...... state to attend an annual symposium;...... make your own financial gift to NFJE...... Please join us...... and become a member of the NFJE ...... Sustainer Society...... Yes! I would like to make a contribution to the National Foundation for Judicial Excellence!

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NFJE is a 501(c)(3) charitable foundation. All contributions are tax deductible. A receipt will follow in the mail. PETITIONS FOR REVIEW Petitions For Review Matthew J. Kalmanson, Hart Wagner LLP Case Notes Editor

The following is a brief summary of cases for which petitions for review have been granted by the Oregon Supreme Court. These cases have been selected for their possible significance to OADC members; however, this summary is not intended to be an exhaustive listing of the matters that are currently pending before the court. For a complete itemization of the petitions and other cases, the reader is directed to the court’s Advance Sheet publication.

Remedies/Punitive Damages Preservation/Verdict Forms This petition is from a Court of n Evergreen West Business Center, n Dwight G. Purdy v. Deere and Appeals’ decision that affirmed a judgment LLC v. Terry W. Emmert (S061049) Company (S060993), 252 Or App 635 quieting title to certain real property to (Control) (S061158), 254 Or App 361 (2012). Oral argument scheduled for the defendant. On review, the issues are: (2012). Oral argument scheduled for September 20, 2013. (1) What is the basic law of accretion in November 4, 2013. A jury found for the defendant in Oregon—i.e., when new land forms by accretion, who becomes the owner of the This case concerns allegations of this products liability and negligence newly accreted land? (2) What is the basic breach of fiduciary duty by a member action concerning a lawn mower. The verdict form was “compound,” meaning law of tidelands ownership in Oregon— of an LLC arising out of the purchase of it addressed the standard of care and i.e., how are the boundaries of tidelands property. The jury found for the plaintiff causation in the same question. Because established, and is there a temporal and awarded $1 in nominal damages the jury answered “no” to the compound component to that determination? (3) Has and $600,000 in punitive damages. The question, it was impossible to know Oregon adopted the doctrine of lateral trial court reduced the punitive award whether the jury had found that the accretion, and, if so, how does it affect the to $4, and then gave the plaintiff the defendant did not breach the standard of basic law of accretion in Oregon? option of the $5 money award or the care, or did not cause the injury, or both. imposition of a constructive trust where Applying Shoup v. Wal-Mart Stores Inc., Workers Compensation n Oregon Occupational Safety & Health the property would be sold and the 335 Or 164 (2003), the Court of Appeals Division v. CBI Services, Inc. (S061183), proceeds distributed to the plaintiff and refused to consider the plaintiff’s various 254 Or App 466 (2013). Oral argument its creditors. The plaintiff chose the trust. assignments of error on evidentiary issues scheduled for November 4, 2013. On appeal, the Court of Appeals held that because they all concerned standard of The Supreme Court granted review the equitable remedy of a constructive care and not causation. of a Court of Appeals decision that trust was not available to the plaintiff On review, the question for the reversed and remanded an order of given the award of actual damages, but Supreme Court is whether an appellant an administrative law judge that had reinstated the $600,000 punitive award. must demonstrate than an asserted affirmed an Oregon Occupational Safety The Supreme Court accepted the instructional or evidentiary error was & Health Division (OR-OSHA) citation necessarily implicated in the jury’s verdict cross-petitions for review. In addition to the defendant for a “serious” safety in order to establish reversible error. to questions of preservation, the Court violation. On review, the issue is whether will review: (1) whether the remedy of a Property OR-OSHA can establish a prima facie case constructive trust is available to a party n Sea River Properties v. Loren E. of constructive knowledge by showing who has a legal remedy for damages; and Parks (S061094), 253 Or App 643 that a site supervisor was in close proximity (2) whether the Court of Appeals erred in (2012). Oral argument scheduled for to a serious violation and allegedly had the reinstating the punitive award. September 20, 2013. opportunity to observe it.

The VerdictTM ■ 2013–Issue 3 23 ASSOCIATION NEWS Association News

New Members Calendar

OADC welcomes the following new and returning Defense Practice Academy and members to the association: Judges Reception David Williams Artman Kristen Stedman September 26, 2013 Williams Kastner Bodyfelt Mount Schwabe Williamson • Portland, OR Lawrence Blunck Jeffrey Trautman Blunck & Walhood LLC Fetherston Edmonds LLP Fall Seminar Madeleine Campbell Debra Velure November 22, 2013 Professional Liability Fund Zipse Elkins & Mitchell Hilton Portland • Portland, OR Sean Lanz David Wiles Barger Law Group PC Wiles Law Group LLC All programs are subject to change John MacMillan Brent Wilkins MacMillan Scholz and Marks PC Frohnmayer Deatherage Gary Norris Akeem Williams Law Office of Gary G. Norris Hart Wagner LLP Deadline

Contributions for The VerdictTM Council on Court Procedures are always welcome. For our next edition, please send your articles The Council on Court Procedures submitted online via the “contact to: reconvenes on September 14, 2013 us” page of the Council’s Website, for the 2013-2015 Biennium. The www.counciloncourtprocedures.com. Jeanne Loftis, Editor in Chief Council will then meet monthly from Bullivant Houser Bailey PC September until June to evaluate OADC members are encouraged to get involved with the Council 888 SW 5th Ave., #300 changes suggested by the Bench and on Court Procedures. If you are Portland, OR 97204 Bar and to address any carry-over is- interested in serving on the 503/499-4601 sues from the prior biennium. OADC Council, please contact one of the [email protected] Members are encouraged to submit OADC members on the Council: proposals for ORCP amendments or Kristen David, John Bachofner, Jay Beattie, or Bob Keating. Please email your articles in Word clarifications. Such proposals can be format. ✪

24 The VerdictTM ■ 2013–Issue 3 PRACTICE TIPS ✔✔ Practice Tips Let’s Keep This Between Us: The Proper Use of a Mary Carter Agreement

Eric Meyer Elkins Zipse & Mitchell

ather round, kids, and Uncle Eric will tell you about the time he outsmarted himself G and possibly came close to committing an ethical violation. I once represented one of two defendants in a lawsuit in which the plaintiff was suing my client and another person for similar injuries arising out of two separate automobile accidents. Not surprisingly, the defense posture of the other defendant’s attorney and me essentially boiled down to pointing at each other’s client and saying, in effect, “Don’t blame us—it was him.” Eric Meyer of the case for the sum we had proposed, the jury to return a verdict, with a clear During global he would never agree to pay what the understanding between plaintiff’s counsel mediation, I at one point put the final plaintiff’s attorney believed he should. and me that we would honor the terms offer on behalf of my client on the table, I then came up spontaneously with of our secret agreement, regardless of advising that if it was not accepted, the the outcome. If I “beat” the settlement claims representative for my client’s what I believed to be a clever solution: insurer and I would walk. The mediator we would agree to the settlement figure figure at trial, that was my tough luck; if left to present that to the plaintiff, then in secret, not telling the other defendant’s plaintiff’s counsel did, that was his. came back with the following message: attorney that we had settled at all, let alone Both the mediator and the plaintiff’s The plaintiff’s attorney was willing to the amount for which we had settled. If attorney were impressed by my perhaps recommend that his client accept our offer, settlement was not reached between dubious ingenuity, and we all shook hands but he was in a Catch-22, because he was the plaintiff and the other defendant, I on our secret deal, agreeing that the other confident that, if the other defendant’s would appear at trial and go through the defendant’s attorney would be advised attorney learned that he had let us out motions of defending my client, allowing only that my claims rep and I were going to Continued on next page

The VerdictTM ■ 2013–Issue 3 25 ✔✔PRACTICE TIPS

PRACTICE TIPS continued from page 25 leave the mediation at that point without “throw” the trial by standing up after the been in the position of having to think of providing any further information to him. opening statement of plaintiff’s counsel a way to say to a jury, “Leave the gun, take We all knew, of course, that we could not and saying, “Well, I guess I can’t argue with the cannoli,” without looking completely lie to the other lawyer about what had or any of that,” and then sitting back down. insane. had not been agreed to, but we figured (I would never have done such a thing, of After this short period of probably that whatever his imagination came up course, but it was fun to imagine the look unwarranted self-congratulation, with to “fill in the blanks” was not our of shock on the other defense attorney’s however, a wiser and more mature friend cautioned that he felt “uneasy” responsibility. face if I did.) Because there would be no about what I was planning to do and Meanwhile, no settlement was danger to my client whatsoever, I even recommended that I make sure that the reached between the plaintiff and the accepted a challenge from a friend to let arrangement I had made with plaintiff’s other defendant, so it appeared that we her assign me a line of dialogue from a counsel was in fact ethically appropriate. were going to trial. movie of her choosing that I would have Because the thought that I might ever For the next few days, I was feeling to work into the trial at some point. The have done anything ethically or legally rather satisfied with myself, actually only restriction I imposed was that the improper causes me to break into a cold somewhat looking forward to the prospect line could not contain profanity, because sweat, I immediately dove into the statutes of doing a trial with no pressure and no I didn’t want to be held in contempt of and the case law to make sure that I was risk whatsoever. I even joked in confidence court. Other than that, she could make allowed to do what I was planning at trial. with a few close friends that I could me say anything she wanted; I could have Spoiler Alert: I never found a definite answer to this question—I still don’t know for sure what the answer is today—but what follows will take you through the legal authority I was able to find that led to my ultimate decision. The agreement that plaintiff’s counsel and I had come to was arguably a “Mary Carter Agreement,” in that it was a deal whereby the liability of my client was determined in advance, in exchange for the understanding that I would continue to participate in the litigation. It may not, however, have been a Mary Carter Agreement in the strictest sense, as there Words can’t describe how it feels losing was no agreement whereby my client or his insurer was to receive any portion of to a better argument. There’s just not a lot to sums ultimately recovered from the other say. “Better luck next time?” No, next time make sure defendant. Unfortunately, the statute that you have the better argument. appeared to be most on point, ORS 31.815, raised more questions than it answered: 31.815 Covenant not to sue; Markowitz Herbold effect; notice. Glade & Mehlhaf pc (1) When a covenant not to sue t r i a l l a w Y e r S or not to enforce judgment is given in good faith to one of p o r t l a n d I 503. 295. 308 5 I w w w . m h g m . c o m two or more persons liable in tort Continued on next page

26 The VerdictTM ■ 2013–Issue 3 PRACTICE TIPS ✔✔

PRACTICE TIPS continued from page 26

for the same injury to person or claiming similar physical complaints (i.e., and I had agreed to was not unequivocally property or the same wrongful soft-tissue injuries to the neck and back) unethical, he could not give us an absolute death or claimed to be liable in from two separate accidents occurring on “clean bill of health” either, and that we tort for the same injury or the different dates. If “the same injury” meant would have to exercise our own discretion same wrongful death: (a) It does identical physical complaints, then our in going forward, accepting the possibility not discharge any of the other settlement had to be disclosed; if, however, of negative ramifications if we chose to tortfeasors from liability for the it meant the same tort or injuring event, proceed as we had planned. injury or wrongful death unless it did not. I will let you decide whether what I its terms so provide; but the Feeling utterly at a loss, I contacted did next was an act of good judgment or claimant’s claim against all other ethics counsel at the OSB to discuss this cowardice: I prevailed upon the plaintiff’s persons specified in ORS 31.600 dilemma, as I was by then concerned not attorney to consent to a voiding of our (2) for the injury or wrongful only with the ambiguous language of ORS deal and to disclose the settlement to death is reduced by the share of 31.815 but also with the larger question the other defendant’s attorney, and he the obligation of the tortfeasor of whether or not going through trial agreed. I never got to do my “mock trial,” who is given the covenant, as according to the terms plaintiff’s counsel and the jury never got to hear me say, determined under ORS 31.605 and I had agreed upon might constitute a “May the force be with you,” or whatever and 31.610; and (b) It discharges fraud on the court. (A judge with whom the tortfeasor to whom it is given I later shared all of this chuckled and said, other movie line my friend was going to from all liability for contribution “I’ll bet you’re the only attorney in history assign me. to any other tortfeasor. to self-report.” I replied that the lesson If you ever find yourself tempted to make a similar secret deal with opposing (2) When a covenant described of Watergate is that the cover-up is often in subsection (1) of this section worse than the crime. But that’s another counsel in a multi-party litigation, I can is given, the claimant shall give story.) only give you the advice that the Bar gave notice of all of the terms of the In the end, OSB counsel advised that, me: Use your judgment. You’ve been covenant to all persons against while the deal the plaintiff’s attorney warned. whom the claimant makes claims. Upon my first reading of this statute, my immediate thought was that “the jig was up” and that plaintiff’s counsel and illiam linn (541) 385-3177 W E. F [email protected] I needed to disclose our secret deal to Mediation & arbitration the other defendant’s attorney and let him decide whether he was willing to let 747 SW Mill View Way u Bend OR 97702 u http://www.flinnmediation.com/ us go forward with the trial pursuant to the terms of our agreement or he would u Member of OADC for 40 Years demand that our settlement be voided and that we go to trial on the merits, agreeing u Past Member OADC Executive to be bound by whatever the jury decided. Committee On further reflection, however, it u Over 250 jury trials occurred to me that ORS 31.815 might not require disclosure of the settlement, as the u Trials in over half of Oregon’s 36 counties statute refers specifically to a covenant u Will travel to all parts of Oregon and given “to one of two or more persons Northwest liable in tort for the same injury to person or property.” (Emphasis mine.) The problem was how to read this No Travel Fees or Travel-Related Expenses language. In our case, the plaintiff was

The VerdictTM ■ 2013–Issue 3 27 legislative update Legislative Update Sine Die By Inga Deckert, Tonkon Torp LLP

Oregon’s 77th Legislative Assembly be willing to call a special session of the Safety Commission to begin a process adjourned its 2013 regular session sine legislature if one can be achieved. whereby providers can discuss the incident die on July 8. The session took off like a with legal protections in the hopes of bullet train, but slowed to a handcar pace, OADC Priority Legislation resolving the incident early and without bypassing the targeted June 28 adjourn- During the 2013 session, OADC the filing of a lawsuit. SB 483 passed and ment date by 10 days. tracked 73 bills. Of these, 18 passed into became effective on March 18, 2013. With the economic recovery still slug- law and 55 died in committee. The OADC HB 2561 and HB 2562: HB 2561 gish, budgetary and cost-saving measures Government Affairs Committee reviewed, would have allowed the Chief Justice of were a primary focus of the session. The prioritized, and determined OADC’s posi- the Oregon Supreme Court to establish legislature passed cost-saving reforms to tion on bills that may impact the practice fees for the eCourt system. OADC and the Public Employees Retirement System of its members. A sampling of high priority several other stakeholders participated (PERS) and the correctional system, as well bills includes the following: in discussions about the reasonableness as additional reforms in education, particu- HB 3160 would have included insur- of the fees and how the fees would be larly in higher education. Two significant ance in the definition of “real estate, applied. HB 2561 did not pass, but HB taxes that were set to expire this fall—the goods or services” in the Unfair Trade 2562 did. HB 2562 places a five percent tax on large hospitals and long-term care Practices Act (UTPA); made a violation surcharge on filing fees for eCourt filings facilities—were re-enacted. The legisla- of the Unfair Claim Settlement Practices and services. The bill has a short lifespan ture also followed up on reforms passed Act in ORS Chapter 746 a violation of the with a sunset date of June 30, 2014, so con- in prior sessions by passing additional leg- UTPA; and created a private right of action versations about the appropriate structure islation to facilitate health care reform via for individuals. Several house and senate and amount of fees for the eCourt system Coordinated Care Organizations (CCO) and bills relating to unlawful insurance prac- will continue into the interim, and OADC Cover Oregon, Oregon’s health insurance tices and unlawful trade practices were will continue to be involved. exchange, which will begin enrollment introduced, none of which passed into law. SB 46 shortens the statute of ul- this fall. HB 3160 was the only such bill to gain any timate repose for architects, landscape There was strong bipartisan support traction and pass one chamber. architects, and engineer design profes- to increase funding for K-12 schools to OADC’s position: OADC opposed HB sionals from 10 years to six years for large stem the tide of cutting teachers and 3160, concerned that attorneys could be commercial structures. SB 46 passed and school days. An attempt led by Governor liable in representing their clients for viola- applies to causes of action on or after Kitzhaber to achieve a bipartisan package tions of the bill. OADC worked with the January 1, 2014. of bills for significant PERS reform and tax proponents of the legislation on amend- increases to boost school funding became ments to ensure that the bill would not Legislative Interim known as the “Grand Bargain.” After sev- apply to attorneys in representation of The legislature has set its interim com- eral fits and starts, delayed adjournment their clients. mittee meetings for three consecutive days of the session, and a near compromise, Status: HB 3160 died in committee. in the months of September, November the Grand Bargain collapsed. In the end, SB 483 is the product of the Patient and January, in preparation for the Febru- the legislature added roughly $1 billion Safety and Defensive Medicine Task Force ary 2014 regular session. If the Governor in K-12 funding and simply balanced the established by the passage in 2012 of SB is able to find compromise and enough budget with more minor PERS reforms and 1580. OADC closely monitored the work votes for a Grand Bargain, he may call the a projected increase in the state’s revenue of the task force and SB 483 as it moved legislature into a special session before forecast. through the process. SB 483 is referred then. Stay tuned! The Governor, however, continues to to as the “early disclosure and offer bill,” To view a report containing all 73 bills meet with legislators in attempt to reach because it allows a filing of notice of an OADC tracked during the 2013 legislative a Grand Bargain and has said he would adverse health incident with the Patient session, visit www.oadc.com.

28 The VerdictTM ■ 2013–Issue 3 Trial Lawyers Defending You in the Courts of Oregon FIRST CLASS Oregon Association MAIL of Defense Counsel U.S. POSTAGE OADC PAID 147 S.E. 102nd Portland, OR Portland, Oregon 97216 Permit No. 2175