2023 OADC Fall Seminar CLE Materials

OADC 2023 FALL SEMINAR November 17, 2023 | The Benson Hotel | 6 CLE Hours

Continuing Legal Education Guidebook

Table of Contents

Winning at Mediation .

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4

UM/UIM Arbitration – Maximizing the Benefits and Minimizing the Pitfalls . . . . . . . .

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Artificial Intelligence: What’s Here, What’s Coming and How to Adapt to our AI-Driven World . .

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. 36

Lunch with Featured Speakers, Judge Angela Lucero & Judge Benjamin Souede. . . . . . . 54 Cybersecurity Threats: Managing Legal, Ethical & Operational Risk . . . . . . . . . . . . 71 Oregon Insurance Bad Faith – The Good, The Bad, And The Ugly! . . . . . . . . . . . . . 73

Agenda 7:45 - 8:20 am

Registration, Continental Breakfast, Exhibits

8:20 - 8:30 am

Welcome, Announcements, and Introduction

8:30 - 9:30 am

Winning at Mediation Judge Kathleen Dailey

9:30 – 9:45 am

Break & Exhibits

9:45 - 10:45 am

UM/UIM Arbitration – Maximizing the Benefits and Minimizing the Pitfalls John Bachofner & Erica Glaser

10:45 - 10:50 am

Break & Exhibits

10:50 - 11:50 am

Artificial Intelligence: What’s Here, What’s Coming, and How to Adapt to Our AIDriven World Meghan Anzlec, Ph.D & Scott Kveton

11:50 - Noon

Break & Exhibits

Noon - 1:00 pm Lunch Served

Civil Defense in Multnomah County: Roundtable with Judges Judge Angela Lucero and Judge Benjamin Souede

1:15 - 1:30 pm

Break & Exhibits

1:30 - 2:30 pm

Cybersecurity Threats: Managing Legal, Ethical & Operational Risk Sean Hoar

2:30 - 2:45 pm

Break & Exhibits

2:45 - 3:45 pm

Oregon Insurance Bad Faith – The Good, The Bad, And The Ugly!

Lloyd Bernstein & FJ Maloney

3:45 - 5:00 pm

Join us for Happy Hour in the Benson Hotel Bar – Sponsored by AMG

202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

Winning at Mediation PRESENTED BY:

Judge Kathleen Dailey

8:30am – 9:30am

Judge Kathleen Dailey Judge Kathleen Dailey currently serves as a Senior Judge, having retired Jan 31, 2022 from Multnomah County Circuit Court after 17.5 years of service. As a sitting Judge, she presided over both criminal and civil cases. Judge Dailey began her mediation practice in June 2022. She has mediated a variety of civil case disputes including auto negligence, personal injury, employment discrimination, commercial litigation, medical malpractice, and professional liability.

When not working, Judge Dailey enjoys traveling (having been to 30 national parks), hiking, yoga, and family time. She’s also been known to dance at music festivals, and bake her Covid quota of two loaves of bread a week.

Dailey Mediation, LLC Kathleen M Dailey daileymediation@gmail.com

CASE CLOSED: COMPROMISING WISELY OADC Fall Seminar November 17, 2023 I.

REASONS TO MEDIATE A. What is preventing informal resolution: B. Plaintiff counsel would benefit from mediator due to client needs: 1. Client needs “day in court” 2. Client expectations - reality check C. Entrenched from previous interactions 1. With adjuster 2. With opposing counsel 3. Motion practice set stage 4. Previous attempts at settlement have stymied resolution D. Adjuster not on board with your perspective E. Mediator can offer independent/objective evaluation

II.

WHEN TO MEDIATE A. Reasons to mediate pre-filing: 1. Cost effective 2. Less entrenchment of position - legal and emotional B. Reasons to wait until further into litigation: 1. Need more information through discovery process 2. Want IME/Expert development of case 3. Need legal issue(s) decided - Summary Judgment

III.

CHOOSING A MEDIATOR A. Considerations 1. What is the mediator’s legal practice experience/skillset 2. Who are the parties?

3. Style of mediator - facilitate, evaluate, restorative. Usually a mix 4. Is mediator open to being teachable?

5. How efficient? Or do you need a slower pace?

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B. Benefits of a Judge mediator 1. Judge mediator brings neutral trial experience, knowledge of verdicts 2. Recognized role of authority in the legal process 3. Can explain risk/benefit - what a trial might look like, how a jury might view it IV.

ONLINE (ZOOM) MEDIATION A. Be aware of appearance: the setting, yourself, your client B. Try to be “eye to eye” with mediator - conference table too distant?

1. Different computers for the different people even in same room 2. 90% of communication is nonverbal C. Prepare your client for that style of interaction

V.

PREPARING FOR MEDIATION A. Talk to mediator ahead of mediation if you think valuable 1. What are your expectations? What are you wanting help with?

B. Need documents/missing info to evaluate case C. Get authority D. Need offer/demand before mediation E. Make sure you know policy limits 1. If more than one defendant: a) Idea of fair share between multiple defendants b) Sort out allocation, order of policies, mediation fee split F. Estimate your costs of trial G. Adjuster issues 1. Local vs Out of jurisdiction a) Mediator can educate adjuster to local practice, culture so you maintain your relationship with your client/adjuster.

H. Submissions 1. Summary of case a) emphasis on defense to claims b) anticipated response to Plaintiff's positions on issues c) medical evaluation - medical bill summary 2. Attorney opinion a) Highlights of what is most important for your position - know your facts b) Is it primarily a factual dispute or legal dispute? c) Negatives you know you have to overcome 3. Documents a) Complaint, Answer b) Important pending or decided motions, court rulings c) Attachments - photos, medical records, “hot docs” d) Deposition highlights

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e) Don't send all the medical records - too much info f) Pertinent case law 4. Liens a) PIP, ERISA, Medicare, other medical b) Are they an obstacle to settlement?

5. Send submission with enough time for mediator to prepare VI.

MEDIATION PROCESS A. Practical considerations 1. Bring decision makers or necessary persons - too many cooks in the kitchen?

2. How much should you to share to settle? It’s about building trust. a) With mediator? b) With opposing party?

3. Be sure to indicate what you want kept confidential a) Understanding all is confidential but need to emphasize 4. Concede what you can't win to mediator / opposing counsel to build credibility, to get buy-in from Plaintiff.

B. Legal issues 1. Highlight most important cases, why they support your position 2. Battle of experts - how confident are you in your expert?

3. What is the value of the case? Be prepared to support it. a) Know your likely exposure at trial (1) Verdicts have been higher recently 4. Defendant vs Plaintiff a) Corporation, Insurance co. defendants often have greater resources and specialization - more of business decision b) Expect more time spent with less skilled party C. Emotional obstacles that arise and how to overcome 1. With Plaintiff - be willing to acknowledge impact a) Letter of apology b) If you like the plaintiff, say so (1) you see case differently based on data, etc (2) Acceptance isn't approval, validating person isn't agreement D. Confidentiality - get on table early so don't have to buy it at the end 1. What does it mean? Terms, amount only?

2. Nondisparagement No rehire - how to address this

VII.

ROLE OF ATTORNEY A. Keep Calm and Carry On: 1. Your personal investment 2. Be reasonable - recognize feasibility of other side’s position a) Attorney as advocate vs guide

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(1) A good mediator understands this balance.

3. Balancing clients desire to resolve vs litigate vs realities of case B. Have to be willing to try the case. Understand how the case is likely to present to a jury. Understand the power of story - likable plaintiff? Emotional facts?

C. Listen….

VIII.

EBB AND FLOW A. Remember, the process matters!

B. Need to build rapport C. Tools to end logjam and move forward 1. Brackets 2. Using bigger jumps - shows investment in mediation process 3. Mediator number - no more movement at mediation But seem close enough not to throw in towel.

D. Impact of “final” offers 1. Consult mediator about likely impact E. Including cost of mediation in negotiations F. Not done until done - keep conversation going after formal mediation

IX.

SEAL THE DEAL A. Send confirming email including mediator B. Have a confirming signed document with a more formal settlement document and release to follow.

X.

EXTRA TIP A. Nonviolent Communication - Marshall Rosenberg B. Feedback to mediator about process

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202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

UM/UIM Arbitration – Maximizing the Benefits and Minimizing the Pitfalls PRESENTED BY:

John Bachofner & Erica Glaser

9:45am – 10:45am

John Bachofner John R. Bachofner has practiced law in Oregon since 1988 and Washington since 1989, with a focus on insurance coverage and litigation. Recently retired from the private practice of law as a Shareholder and Director at Jordan Ramis, PC, where he served as the firm’s Ethics and Loss Prevention Shareholder, and Chair of the firm’s Insurance Coverage and Defense Group. He is now working solely as an arbitrator, mediator, and consultant with Bachofner Arbitration & Mediation.

Erica Glaser Erica Glaser is a 1996 graduate of the University of Oregon School of Law. She has 26 years of litigation experience. She defended cases for Farmers Insurance’s in-house legal office for seven years. After gaining considerable jury trial experience on the defense side, Erica joined the plaintiff’s bar and continued to litigate personal injury cases. She has tried more than 55 personal injury jury trials to verdict. Beginning in 2002 Erica began serving as a court-annexed arbitrator. Twelve years ago, Erica focused her practice exclusively on Alternative Dispute Resolution. She serves as a neutral working as both an arbitrator and a mediator in a variety of civil cases including UM arbitrations, court-annexed arbitration hearings, and mediations.

UM/UIM Arbitration MAXIMIZING THE BENEFITS AND MINIMIZING THE PITFALLS

Oregon Association of Defense Counsel November 17, 2023 Presented By:

John R. Bachofner Attorney/Arbitrator/Mediator John@BAM-ADR.com (503) 830-6706 .

UM/UIM ARBITRATION §

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Bachofner Arbitration & Mediation was founded on the principal that litigation of disputes is expensive, and that parties need alternative dispute resolution options to help resolve their disputes.

Having practiced as an attorney for over 34 years, and served as an arbitrator for over 20 years, John Bachofner is frequently chosen as a selected arbitrator in Commercial, Personal Injury, Uninsured and Underinsured Motorist (“UM/UIM”), and Personal Injury Protection (“PIP”) arbitrations.

Certified by the National Association of Certified Mediators, John Bachofner has helped many parties efficiently resolve their disputes. .

UM/UIM ARBITRATION What is Arbitration? §

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Arbitration is an alternative dispute resolution device, similar to a trial, but in a much less formal setting. Each side presents their evidence and arguments to be considered by one or more arbitrators who then render a decision.

Arbitration can be binding on the parties, with little or no right to appeal a decision, or non-binding. Non-binding Arbitration follows the same procedure, but allows either party to appeal a decision with which they disagree. Both can be effective means for resolving a dispute. .

UM/UIM ARBITRATION How is an Arbitration Hearing Conducted? § §

§ § §

Arbitration may occur in person or via videoconference.

Many parties prefer to Arbitrate their dispute by videoconference, while others prefer to resolve their dispute in person.

Most arbitrations take at least several hours, but can last as long as several days or weeks. A full day is the norm.

Even if conducted in person, witnesses can appear by videoconference to decrease costs to the parties.

BAM has the resources to accommodate either preference.

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UM/UIM ARBITRATION How is an Arbitration Hearing Conducted? § §

§ §

Each party prepares their evidence and witnesses to present at the hearing Typically, each party is required to provide the arbitrator(s) with a Pre-Hearing Statement of Proof 14 days in advance of the hearing that outlines the evidence to be presented, along with a notebook of documents.

Arguments are made and witnesses testify as in court.

The arbitrator(s) review the evidence and render a decision on the merits, similar to a Judge in court.

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ARBITRATION VERSUS MEDIATION What is Mediation? §

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Unlike Arbitration, where one or more Arbitrators adjudicate the evidence and issue a decision to the parties, Mediation is a voluntary, non-binding process in which a Mediator listens to each side and works to bring the parties to agreement on resolution of their dispute.

Mediation is a voluntary, reconciliatory process designed to bring parties together for conflict resolution. The Mediator listens to each side and serves as an ambassador to negotiate a resolution that is acceptable to both parties.

By law, information disclosed during Mediation is confidential and cannot be used as evidence later. .

ARBITRATION VERSUS MEDIATION How is Mediation Conducted? § §

§

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Mediation may also occur in person or via videoconference.

Since the Covid-19 Pandemic, the overwhelming majority of mediations take place via videoconference as a much less expensive form of alternative dispute resolution.

Each participant must sign a Mediation Agreement that identifies the process, its confidential nature, and logistics for the Mediation process.

Typically, the parties are separated to allow the Mediator to conduct shuttle diplomacy, discussing various issues with each side .

ARBITRATION VERSUS MEDIATION How is Mediation Conducted? §

§ § §

Each side typically provides a Mediation Brief that summarizes the facts surrounding the dispute, identifies the issues to be resolved, and provides their position on those issues.

Mediation is completely non-binding as the parties decide whether and how they want to resolve their dispute.

Any party may terminate the Mediation at any time.

Most Mediations can be completed in one-half to a full day. However, some require multiple sessions over days, weeks, or even months. .

ARBITRATION VERSUS MEDIATION How is Mediation Conducted? §

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Because Mediation communications are confidential, it is important that a resolution be documented in a Mediated Agreement that summarizes the important points of the settlement, and is signed by the parties.

This minimizes the possibility of “buyer’s remorse.”

The Mediator acts as a scrivener to document the agreement in the parties’ own words as much as possible.

A Mediated Agreement is different from a Settlement Agreement, which contains many more legal provisions and is executed by all parties. .

UM/UIM ARBITRATION What conflicts are Appropriate for Arbitration or Mediation? §

Any conflict or dispute can be Arbitrated or Mediated by agreement of the parties. John Bachofner’s experience allows him to more efficiently analyze the issues and resolve disputes in the following areas:

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Personal Injury Business Litigation Insurance Coverage Bankruptcy Professional Liability Uninsured/Underinsured Motorist Claims Personal Injury Protection Claims

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Arbitration versus Trial – Which is Better?

Binding Arbitration is Voluntary Oregon law precludes an insurer from requiring binding arbitration as improperly restricting a person’s constitutional right to a jury trial. § ORS 742.504(1) and (10) make binding arbitration optional if both parties agree. If one party insists on their right to a jury trial, the claim must be brought in court. §

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Arbitration versus Trial – Which is Better?

Considerations: § Costs § Timing § Attorney Fee exposure (Safe Harbor Letter?) § Value § Impact of Bad Facts on Jury

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Arbitration Logistics How do you select an Arbitrator? § Absent agreement, PIP and UM/UIM arbitrations must include a three-arbitrator panel. § Each side selects one arbitrator, and together they select a third, swing arbitrator. § Select an experienced attorney with whom you are familiar to serve as your arbitrator. .

Arbitration Logistics How do you select an Arbitrator? § Beware of selecting an arbitrator who too aggressively advocates for your case unless the other party’s selection is aggressively advocating for theirs. § Consider their experience with particular medical or evidentiary issues, reputation in the community, and rapport with counsel. § Will they provide post-award debriefing or suggestions for improvement as added value? § Discuss with your arbitrator if you prefer a unanimous award, or one that is less favorable with a dissent.

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Arbitration Logistics How do you select an Arbitrator? § Choose an arbitrator that will coordinate selection of the swing arbitrator with you. § Some swing arbitrators may have specific procedures they prefer to use, restrict questions by the arbitrators, or require that the deliberations be kept confidential. It is useful to know this information before selecting a particular swing arbitrator. .

Arbitration Logistics What rules apply? § ORS 742.505(2) requires UM/UIM arbitration to be conducted under local court rules in the county where the arbitration is held. § UTCR 13.010(1) provides for UTCR Chapter 13 to apply to non-binding arbitration under ORS 36.400 – 36.425, but not to apply to arbitration by private agreement, under any other statute, matters exempt by ORS 36.400, and any civil action exempt from arbitration by action of a presiding judge. § UTCR 13.010(2) provides that each judicial district may adopt an SLR requiring arbitration proceedings commenced under ORS 742.505 and ORS 742.521 to be conducted pursuant to UTCR 13.140 [Discovery pursuant to ORCP], 13.150 [Subpoenas pursuant to ORCP], 13.170 [Pre-hearing Statement of Proof], 13.180 [Conduct of hearing], and 13.190 [Certain documents admissible]. § Some counties have adopted local court rules that appear to address UM/UIM arbitration. For example, Jackson County has adopted SLR 13.011, while Clackamas, Multnomah, and Washington County have not. Check the local rules for your county to see if such a rule has been adopted

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Arbitration Logistics What Discovery is available? § Medical authorization pursuant to ORS 742.504(5)(b). § Examination under Oath/Depositions pursuant to ORS 742.504(5)(a). § IME pursuant to ORS 742.504(5)(b). § Subpoenas pursuant to ORS 36.675. § Arbitrators may also permit or limit discovery as appropriate. .

Arbitration – Best Practices Agree to provide Prehearing Statements of Proof (“PHS”) 14 days before the hearing. § Check with your arbitrator(s) to determine their preferences for receipt of materials. While some arbitrators prefer to receive materials solely in electronic form, others prefer the delivery of notebooks containing the materials. § Goal is to persuade the arbitrator(s) in your client’s favor. Get them the materials early enough to allow a proper review. Take the time necessary to organize your materials in a persuasive way. §

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Arbitration – Best Practices Include: § Pre-Hearing Statement of Proof § Vehicle photos § Police Reports § Deposition Transcripts § Recorded Statements § Complete Relevant Medical Records (pre-accident and post-accident) § Summary of Medical Specials (Total and Reasonably Related Amount § IME or Records Review Report § Wage Loss Summary and Supporting Documentation Do NOT Include: § Insurance Policy (unless there is an agreement to address a coverage issue, and then redact limits information) § PIP ledger § Liability Release (or anything else showing amount of underlying settlement) § Medical Bills § Anything identifying underlying settlement amount, offsets, or UM/UIM limits

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Arbitration – Best Practices § If there are more than a few providers or

records, provide an accurate Medical Summary or index as a means for quickly locating a particular record. § Provide it to your arbitrator(s) and opposing counsel with your PHS as a means to save time and money for arbitrator review of the medicals. .

Arbitration – Best Practices Provide an Arbitration Memorandum §

§ §

§ §

Some prefer to include a memorandum in their PHS, while others prefer to prepare a separate Arbitration Memorandum, or forego one altogether.

Provide copies of the Memorandum to opposing counsel and the arbitrator(s) no later than the start of the hearing.

Summarize helpful deposition testimony with page numbers, the claims being asserted, and highlighting the information that is helpful to your case.

Honestly disclose blemishes in your case, but explaining why the arbitrator(s) should decide in your favor on particular issues.

Tell the arbitrator(s) the range of award is appropriate, and why.

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Mediation – Best Practices § Choose a Mediator that has no involvement

in the case. § Choose a Mediator with experience in the area of dispute. § Choose a Mediator that is respected in the community. § Choose a Mediator that has time available to resolve the dispute. .

Mediation – Best Practices Provide the Mediator with the Good, Bad, & the Ugly about your case. § Disclose the issues to be considered, along with which issues are a priority. § Actively participate in Mediation by suggesting possible solutions. § Be open to “Outside the Box” solutions. § Remember: the parties are in control in mediation. §

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Any Questions?

John R. Bachofner John@BAM-ADR.com Direct: (503) 830-6706 www.BAM-ADR.com

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202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

Artificial Intelligence: What’s Here, What’s Coming and How to Adapt to our AI-Driven World PRESENTED BY:

Meghan Anzlec, Ph.D & Scott Kveton

10:50am – 11:50am

Meghan Anzelc, Ph.D. Meghan Anzelc, Ph.D. is the Chief Data & Analytics Officer at Three Arc Advisory.

She has two decades of experience in data and analytics, having previously served as Global Head of Data & Analytics at Spencer Stuart. She has a decade of experience in financial services, most recently as the first Chief Analytics Officer at AXIS Capital. Dr. Anzelc’s global experience in data and AI have made her uniquely qualified to shape strategy at businesses adapting to new and emerging AI capabilities ethically while managing risk appropriately. She advises boards of directors and executive teams on AI, data, and digital transformation across strategy and operations, serves as an Advisor to startups, and previously served on the board and as chair of the Nom/Gov Committee of the Chicago Literacy Alliance. She holds a Master’s and PhD in Physics and Astronomy from Northwestern University and a Bachelor’s in Physics from Loyola University Chicago.

Scott Kveton Scott Kveton is the co-founder and CEO of CaseMark AI, Inc., a leading provider of generative-AI solutions for the legal profession. With over 20 years of experience, Kveton has built a career helping companies navigate the disruptions brought on by the transitions from web1, web2, and web3. He has co-founded companies like Urban Airship (now Airship), Odava, and Bac’n and made significant technological contributions through projects like the Open Source Lab, OpenID, and OAuth.

Kveton’s dynamic leadership has resulted in successful fundraising, impactful deals, and the creation of wonderful company cultures. Scott also finds joy in being a pizza maker, meat smoker, crypto-currency owner, bacon lover, and a loving father and husband in Portland, OR.

Artificial Intelligence: What's Here, What's Coming, and How to Adapt to Our AI-driven World OADC Fall 2023 Seminar November 2023 Meghan Anzelc, Ph.D., Chief Data & Analytics Officer, Three Arc Advisory Scott Kveton, Co-Founder and CEO, CaseMark

Introduction

AI: Artificial Intelligence

ML: Machine Learning

Generative AI

AI is a broad term used to describe machines that can think and act like humans.

ML is a subset of AI that focuses on algorithms that can learn from data.

Generative AI is a type of AI that focuses on create new data from existing data.

Three main types of AI: Artificial Intelligence, Machine Learning and Generative AI

How AI Already Impacts Your Life and Work ●

●

AI/ML used in every industry and across many use cases including: ○ Pricing (insurance, groceries, flights) ○ Marketing (personalized ads) ○ Logistics (traffic estimate, supply chain) ○ Fraud identification (credit cards, insurance claims) Generative AI still early in its business applications - lots of energy and excitement, perhaps not enough planning and focus ○ Draft content generation (text, slides, images) ○ Customer support automation

AI and Generative AI in Legal Today ● ● ● ● ●

Trial Preparation: research, writing, jury exhibit creation Administration: e.g. trial summaries, deposition summaries, translations, drafting contracts Insight Generation: e.g. summaries and searchable data from audio recordings Iterative Tasks: contract redlines, bulk contract review, corroborative testimony review Automations: intake, scheduling experts/depos/deadlines

Examples

● ● ● ● ●

Contract Negotiation - Quarter close for corporate counsel can be busy; leveraging AI against a pre-designed, natural language “playbook” can streamline that Bulk Contract Review - Review large number of contracts for specific exposure(s) Summaries: Deposition, case or trial summaries from large transcripts Medical Chronology - Create a summary of medical history in a pre-designed format Immigration EB-1A Forms - Automatically fill out complex federal forms leveraging templates and detailed information provided by clients

What’s Coming Next ●

AI/ML with text, images, video getting more mature ○ ○

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Generative AI: ○ ○ ○ ○

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e.g. with aerial images: estimate repairs after hurricane, predict crop yields Democratizing capabilities (e.g. simulated data, lower-cost tools and technology) Legal issues (privacy, copyright) to play out Likely to see more deep fakes, misinformation Niche solutions by industry, company (e.g. using natural language questions to get answers from company data) Better understanding of which use cases are good applications of Generative AI

Crafting motions based on audience

Risks & Opportunities ● ● ● ● ● ● ●

Regulatory Data security and privacy (protecting IP, PII, client privacy) Ethics - Clearview AI Copyright / Attribution Contractual restrictions on data usage Workforce impacts (processes, skill sets, change management) Bad information: hallucinations, model drift

●

●

Business results: greater profitability, new revenue streams, lower cost of doing business Early adopter advantages: speed to market, increased market share, competitive advantage

Client Privacy & AI ● ● ●

ChatGPT and Microsoft equivalents do not have sufficient privacy and security infrastructure in place to utilize sensitive client/case information Specific versions have licensing options to utilize your data for training purposes Training from your data can lead to “leakage” or situations where users of newly trained models can determine what it was trained on potentially exposing sensitive data

Breakdown of Tools ● ● ● ● ●

Document Drafting - Simple file and clause templates that can be used as a starting point ○ AI isn’t really suited to this - lots of better tools for this Discovery Data Summarization - Bucket sensitive case information for use in relevant ChatGPT-like queries Process Summarization - Demand package, deposition or medical chronology summaries generated from new data and based on existing templates Predictive Analysis - Examining exposure and risk based on pre-set guidelines set out in natural language by counsel for a specific organization Advanced Data Analysis - making sense of or finding interesting trends in large data sets that might be discovered otherwise

Existing players pivoting to AI:

Companies

New entrants:

Raised $12M from Moxxie

Raised $35M from Khosla Raised $26M from Sequoia

Exits: Sold: $550M Thomson Reuters

Evaluating Tools ● ● ● ● ● ●

What is the potential ROI for your use case? How will you track and verify value is delivered?

How was the tool built? On what data, over what timeframe? How well will it apply to your use case?

How is the tool maintained? How often are new versions released? Can you fix to a specific version?

Who is the company behind the tool? Do they have funding? Are they experienced in this space or in building companies like this? What security certifications do they have?

How will your data be used by the tool provider? Other third parties? Review the SaaS contract closely as it should specifically call out these elements.

What training and support is provided? Does that fit to your company culture and needs?

Pro-Tip: Check out the free Legal Prompt Guide: legalpromptguide.com

Understanding Prompting What is a prompt?

Prompts != Search

A prompt is a piece of text that you provide to a

Utilizing ChatGPT is iterative; your first result will likely not yield what

language model as a starting point for generating text.

you want. However, now that session has context you can iterate from.

Chain ChatGPT Prompts 1.

Write a memo for our law firm regarding the use of ChatGPT

2.

The memo should have 3 topics around tips, examples and don’ts

3.

Rewrite in the voice of RBG

Good/Better/Best Prompt > Write a motion to compel …

Good: for someone’s social media data Better: for social media data for [person] at [address] for the State of [XX] Best: for social media data for [person] at [address] for State of [XX] citing specific state and federal case law

Learn from ChatGPT

Define a ChatGPT role

Like you are teaching Clearly / Concisely

Uniquely

Opposing Counsel With an example

A judge

Like Justice

Clarence

Roberts

Thomas

Explain Like I’m 5 years old

A paralegal

Act As A jury member Insurance adjuster

How to Get Started Using AI and Generative AI ● ● ● ● ●

● ●

Start with the end in mind - what problem are you trying to solve?

Is AI (or Generative AI) an appropriate solution? Is there a simpler solution available?

Understand what you CAN do with your data: regulations, customer consent forms, client contract language, vendor tools and partnerships What is your risk tolerance? How should this inform your build vs. buy strategy?

What *should* you do: ○ Given other initiatives in flight and how much change can happen at one time? ○ Given what your competitors are doing?

AI, ML, Generative AI won’t go away - what will you do to adapt and adopt?

Get organization buy-in - leadership & IT, utilize expertise across multiple domains: regulatory, privacy, information security, architecture, data owners, product and business owners, data science and analytics teams

1. Scan this QR code

2. Ente,r this code o,,n th,e screen

or ,go to alk..acJ3arcadv- ory

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Final Thoughts

Thank you!

Meghan Anzelc, PhD

meghan.anzelc@3arcadvisory.com https://www.linkedin.com/in/meghananzelc/ Three Arc Advisory, https://3arcadvisory.com/

Scott Kveton scott@casemark.ai https://www.linkedin.com/in/kveton/ CaseMark, https://casemark.ai/

202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

Lunch with Featured Speakers, Judge Angela Lucero & Judge Benjamin Souede PRESENTED BY:

Judge Angela Lucero & Judge Benjamin Souede

Noon – 1:00pm

Judge Angela Lucero The Honorable Angela Franco Lucero was appointed to the Multnomah County Circuit Court by Governor Kate Brown and was sworn in as a circuit court judge on September 16, 2019. She is assigned to the court’s general trial docket, presiding over both civil and criminal matters.

Judge Lucero was born and raised in Las Cruces, New Mexico. She earned her Bachelor of Criminal Justice and her Bachelor of Arts in Spanish from New Mexico State University in May 2000. She earned her J.D. from Northwestern School of Law at Lewis & Clark College in May 2003. She began her legal career as an associate for the Law Office of Tom Kranovich. In 2009 she became a member and manager of Kranovich & Lucero, LLC. Judge Lucero’s legal practice focused on defending civil litigation claims. She represented clients in bodily injury, property damage and insurance coverage disputes. She represented individual clients, insurance companies and self-insured public bodies. As an attorney she continuously strived to be a better attorney, colleague, mentor and future leader within the profession and the community.

Judge Lucero is a co-chair of the Oregon Hispanic Bar Association, and a member and past chair of the Oregon State Bar Board of Bar Examiners. She is a past president of Oregon Women Lawyers, and a founding member and former president of Clackamas Women Lawyers. She is a member of the Oregon Minority Lawyers Association. Judge Lucero speaks at continuing legal education seminars for the Oregon State Bar and the Multnomah Bar Association.

Outside of the court, Judge Lucero spends time with her family, playing soccer, traveling, watching movies and reading good books.

Judge Benjamin Souede Judge Benjamin Souede has been a Multnomah County Circuit Judge since 2017.

Prior to his appointment to the bench, Judge Souede moved between private practice and public service throughout his legal career. His private practice in Oregon (first at Lane Powell and then as a founding member of the Angeli Law Group) focused on complex civil and white collar criminal litigation. His public service career included stints as a Senior Advisory to Senator Hillary Rodham Clinton, and as General Counsel to Oregon Governor Kate Brown.

MULTNOMAH COUNTY JUDGES CIVIL MOTION CONSENSUS STATEMENT MAY 2023 Periodically, the Judges discuss their prior rulings and the differences and similarities in their decisions.

When it appears, Judges have ruled similarly over time on any particular question, it is announced to the bar as a “consensus”. The current consensus is set out below. The statements do not have the force of law or Court rule; the statements are not binding on any Judge. A consensus statement is not a predetermination of any question presented on the merits to a Judge in an action. In every proceeding before a Judge of this Court, the Judge will exercise independent judicial discretion in deciding the questions presented by the parties under the unique facts of that specific case.

I. ARBITRATION A. Motions: Once a case has been transferred to arbitration, all matters are to be heard by the arbitrator, except (1) motions to amend pleadings that will add a party or parties to the case, or (2) where a party shows cause why a motion should not be decided by the arbitrator. (UTCR 13.040(3); SLR 13.035(3)) The party must file such motions in Court pursuant to ORCP 23 and those motions will be heard by the Multnomah County Arbitration Judge.

B. Punitive Damages: Where the actual damages alleged are less than the arbitration threshold ($50,000 as of the date of this statement), the pleading of a punitive damages claim which may be in excess of the arbitration threshold does not exempt a case from mandatory arbitration. For cases in mandatory arbitration, the arbitrator has the authority to decide any motion to amend to claim punitive damages. The arbitrator’s decision may be reconsidered by a Judge as part of de novo review under UTCR 13.040(3) and 13.100(1).

II. DISCOVERY A. Medical Examinations (ORCP 44): 1. General – a party who undergoes a physical or mental examination by a physician, psychologist, neurologist, or any other health care professional pursuant to ORCP 44 A, is generally not required to complete general intake forms or provide any oral history absent a showing of good cause.

2. Vocational Rehabilitation and Psychological/Neuropsychological Exams – Vocational rehabilitation and neuropsychological exams have been authorized when the exam is performed as part of an ORCP 44 examination by a physician, psychologist, or a neuropsychologist.

3. Recording Exams and Presence of Third Persons – Audio recordings have been allowed absent a particularized showing that such recording will interfere with the exam. Videotaping or the presence of a third person in any ORCP 44 examination has been denied absent a showing of good cause or special need (e.g., an especially young plaintiff) by the moving party. For mental health or neuropsychological exams, audio and/or video recordings are generally not permitted absent a showing of good cause.

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4. Pretrial Disclosure – Pretrial disclosure of the percentage of a medical examiner’s income received from forensic work and amount of the examiner’s charges has been ordered for the prior three years. The information is permitted to be provided by an affidavit or declaration from the examiner prior to the start of trial, instead of the underlying documentation. The examination itself is not conditioned on the disclosure of the information, however the affidavit must be produced prior to the start of trial. Failure to disclose the affidavit or declaration prior to the start of trial may result in exclusion of the expert witness testimony.

B. Depositions: 1. Attendance of Experts – Attendance of an expert at a deposition has generally been allowed but has been reviewed on a case-by-case basis upon motion of a party.

2. Attendance of Others – Persons other than the parties and their lawyers have been allowed to attend a deposition, but a party may apply to the Court for the exclusion of witnesses.

3. Out-of-State Parties: a. Non-Resident Plaintiff – Non-resident plaintiff is normally required to appear at plaintiff’s expense in Oregon for deposition. Upon a showing of undue burden or expense, the Court has ordered, among other things, that plaintiff’s deposition occur by electronic means with a follow-up personal appearance deposition in Oregon before trial. b. Non-Resident Defendant – Non-resident defendants normally have not been required to appear in Oregon for deposition at their own expense. The deposition of non-resident corporate defendants, through their agents or officers, normally occurs in the forum of the corporation’s principal place of business. However, the Court has ordered that a defendant travel to Oregon at either party’s expense, to avoid undue burden and expense and depending upon such circumstances as whether the alleged conduct of the defendant occurred in Oregon, whether defendant was an Oregon resident at the time the claim arose, and whether defendant voluntarily left Oregon after the claim arose.

4. Videotaping – Videotaping of discovery depositions has been allowed with the requisite notice.

The notice must designate the form of the official record. There is no prohibition against the use of BOTH a stenographer and a videographer, as long as the above requirements are met.

5. Remote Depositions – Remote video depositions held via zoom, WebEx or any other secure video platform are permitted upon stipulation of the parties. a. Notice Requirement – The parties must provide the requisite notice advising the deposition will be taken via remote means by identifying the platform and providing all login information. The notice must designate the form of the official record. There is no prohibition against the use of BOTH a stenographer and a videographer, as long as the above requirements are met.

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b. Individuals in Attendance – At the outset of the remote video deposition, the record should correctly identify all individuals logged into the remote deposition, regardless of whether those individuals’ display screens are turned on or off. The record should also reflect all individuals who are in the room with the deponent, even if those individuals are off screen. c. Display Screen – Unless the witness being deposed is being shown a demonstrative exhibit on the screen, the display screen must display the attorney conducting the deposition, the witness being disposed, and the witness’ attorney, if the witness is represented. The parties and witness participating in the remote depositions are required to use appropriate backgrounds/backdrops during the entire deposition.

6. Explanatory or Argumentative Objections – Attorneys should not state anything more than the specific legal grounds for the objection to preserve the record. Objection should be made without further comment. Objections as to form during deposition serve the purpose of allowing counsel to correct the objectionable question during the deposition. Accordingly, objections should be specific enough to allow the questioning party to rephrase and ask a nonobjectionable question and sufficiently specific so that a Judge can rule on the objection later.

Such specific objections include for example, “objection, hearsay” or “objection, compound” or “objection, argumentative” etc. Although a generic “objection as to form” may be sufficient in some circumstances, it may not be sufficient to preserve the objection in other circumstances.

7. Protective Orders – Protective orders that purport to bind the Court or Court staff, for example to treat documents as confidential, that require sealing before the Court has seen a particular document, or follow particular administrative processes, will be rejected.

8. Failure to Appear – In response to the failure of a party to appear for deposition after being served with proper notice, the Court may issue orders pursuant to ORCP 46 D, such as orders establishing facts, prohibiting use of certain evidence, striking pleadings or parts thereof, or dismissal of the action.

C. Experts: The scope of discovery under ORCP 36 B(1) generally has not been extended to the identity of nonmedical experts.

1. Expert Files – Prior to any expert witness being called to testify at trial, the expert witness shall make their complete file (including but not limited to, all notes, chart notes, emails, medical records, medical bills, photographs, reports, charts, graphs, etc. regarding the subject of the expert witness testimony) available for review by opposing counsel. Failure to produce a complete copy of the expert file may result in exclusion of the expert witness testimony.

2. Electronic or Digital Expert Files – If the parties arrange for the expert file to be produced electronically or in a digital format, the party calling the expert witness must ensure that the expert file is produced in an electronic or digital format that is easily readable or viewable by opposing counsel within the time agreed by the parties or imposed by the Court. If the attorney calling the witness is not able to produce the expert file in a readable/viewable electronic format, the attorney must produce a complete hard copy of the expert file for review by opposing counsel.

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3. Preservation of Expert File – All expert witnesses who are hired and will be called to testify at trial must preserve the complete contents of their expert files. The attorney who has retained the expert witness must instruct the expert witness of their obligation to preserve the complete contents of their expert files.

D. Insurance Claims Files: An insurance claim file “prepared in anticipation of litigation” has been held to be protected by the work product doctrine regardless of whether a party has retained counsel.

Upon a showing of hardship and need pursuant to ORCP 36 B(3) by a moving party, the Court has ordered inspection of the file in camera and allowed discovery only to the extent necessary to offset the hardship (i.e., not for production of entire file). If a file is ordered to be produced in discovery or for in camera inspection, the file must be produced in a format, digital or otherwise, that is easily readable or viewable by opposing counsel or the Court.

E. Medical Chart: 1. Medical Records for Current Injury – Medical records, including chart notes and reports, are generally discoverable in personal injury actions. These are in addition to reports from a treating physician under ORCP 44. The party who requests an ORCP 44 report has been required to pay the reasonable charges of the practitioner for preparing the report.

2. Medical Records for Prior/Other Injuries – ORCP 44 C authorizes discovery of prior medical records “of any examinations relating to injuries for which recovery is sought.” Generally, records relating to the “same body part or area” are discoverable. Records sought must actually relate to the presently claimed injuries.

3. Mental Health/ Psychological Records – In personal injury lawsuits, the pleading of garden variety pain and suffering expressed in terms of emotional and mental distress does not generally open the door to counseling and psychological records without the allegation of a specific psychological condition or injury. In some cases, discovery of counseling and/or psychological records has been granted based on particular facts of a claim which distinguish it from what may be considered a “garden variety” general damage claim.

F. Photographs: Photographs generally have been discoverable. For digital images, the metadata associated with the original image is also discoverable and should generally be preserved.

G. Social Media, Instant Messaging, and other similar applications: Generally, relevant social media and instant messaging content has been discoverable, despite the privacy settings imposed by the account user. Data residing on social media platforms is subject to the same duty to preserve as other types of electronically stored information (ESI). The duty to preserve is triggered when a party reasonably foresees that evidence (ESI or otherwise) may be relevant to issues in litigation. All evidence in a party’s “possession, custody, or control” is subject to the duty to preserve. ESI generally is considered to be within a party’s “control” when the party has the legal authority or practical ability to access or obtain the ESI.

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H. Tax Returns: In a case involving a wage loss claim, discovery of those portions of tax returns showing an earning history, i.e., W-2 forms, has been held appropriate, but not those parts of the return showing investment data or non-wage information.

I.

Witnesses: 1. Identity – The Court has required production of documents, including those prepared in anticipation of litigation, reflecting the names, addresses and phone numbers of occurrence witnesses. To avoid having to produce documents which might otherwise be protected, attorneys have been permitted, but are not required to, provide a “list” of occurrence witnesses, including their addresses and phone numbers.

2. Statements – Witness statements, if taken by a claims adjuster or otherwise in anticipation of litigation, have been held to be subject to the work-product doctrine. Generally, witness statements taken within 24 hours of an accident, if there is an inability to obtain a substantially similar statement, have been discoverable. ORCP 36 B(3) specifies that any person, whether a party or not, may obtain his or her previous statement concerning the action or its subject matter.

J. Surveillance Tapes: Surveillance tapes of a plaintiff taken by defendant generally have been protected by the work-product privilege, and not subject to production under a hardship or need argument.

K. Updating Admissions: The Court may impose sanctions when a party fails to update, where appropriate, their responses to any requests for admission before trial. For example, where a party responds to an RFA by denying medical bills are reasonable but at trial does not contest this fact, causing unnecessary expense for the opposing party who prepared to litigate this issue.

L. Timelines: All timelines specified within the ORCPs, UTCRs or SLRs must be followed, unless otherwise ordered by the Court. The stipulation of the parties to a different timeline than those specified by rule(s) is not sufficient without prior Court approval.

III. VENUE A. Change of Venue: Generally, the Court has not allowed a motion to change venue from Multnomah to Clackamas, Washington or Columbia counties on the grounds of the convenience of witnesses and the parties (ORS 14.110(1)(c)).

B. Change of Venue – FELA: Generally, the Court has followed the federal guidelines regarding choice of venue for FELA cases.

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IV. MOTION PRACTICE A. Conferring and Good Faith Efforts to Confer (UTCR 5.010): 1. “Conferring” – Judges have held that “to confer” means to talk in person or on the phone.

Generally, sending a text message or email does not constitute adequate conferral.

2. Good Faith Efforts to Confer – Because “confer” means to talk in person or on the phone, a “good faith effort to confer” is action designed to result in such a conversation. In various cases, motion Judges have held that a letter to opposing counsel, even one that includes an invitation to call for a discussion, does not constitute a good faith effort to confer unless the moving attorney also makes a follow-up phone call to discuss the matter.

3. Messages – The phone call leaving a message must be specific as to the subject matter before it constitutes a good faith effort to confer. Likewise, a message that says simply: “This is Jane.

Please call me about Smith v. Jones,” is not enough. Last minute phone messages or electronic transmissions immediately before the filing of the motion have been held not to satisfy the requirements of a good faith effort to confer.

B. Complying with the Certification Requirement: UTCR 5.010(3) specifies that the certificate of compliance is sufficient if it states either that the parties conferred or contains facts showing good cause for not conferring. Judges have held that the certificate is not sufficient if it simply says: “I made a good faith effort to confer.” It must either state that the lawyers actually talked or state the facts showing good cause why they did not. Failure to comply with the certification requirement will result in denial of the motion.

C. Copy of Complaint: The failure to attach a marked copy of the complaint to Rule 21 motions pursuant to UTCR 5.020(2) or motions for leave to amend pleadings pursuant to UTCR 5.070 has resulted in denial of the motions. UTCR 1.090.

D. Bench Copies: The UTCR permits a Court to require delivery of a copy of any electronic filing to the Judge assigned to hear the motion. Multnomah County SLR’s specifically require courtesy copies to be delivered for all motions, responses and replies to the assigned Judge. If a Judge does not receive a copy of the material, the hearing may be cancelled. Parties should contact the Judge’s Judicial Assistant to determine in what format the Judge prefers to receive the documents, paper or electronic. (If lengthy exhibits are submitted in support of any motion, for example deposition excerpts, those portions of the exhibit being referenced should be underlined or highlighted in the Judge’s copy.)

E. Motion for Expedited Hearing: The Court is likely to deny expedited consideration of: (i) motions to compel brought close to trial that could have been brought earlier or (ii) motions for summary judgment brought after the time set by rule or order unless with the prior consent of the parties and the Court.

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F. Proposed Orders: As required by Multnomah County SLR 5.035, all judgments, orders, and other documents requiring the signature of a specific Judge shall have the Judge’s name in the case caption below the document title. Failure to include the Judge’s name in the caption of the document, may result in a delay of the document getting signed.

V. DAMAGES A. Non-economic Cap: The Court has not struck the pleading of non-economic damages over the statutory damages cap on authority of ORS 31.710. Post-trial, the Court will determine whether the amount awarded in excess of any statutory cap violates the Oregon Constitution.

B. Punitive Damages: 1. Motion to Amend – All motions to amend to assert a claim for punitive damages are governed

by ORS 31.725, ORCP 23 A, UTCR Chapter 5, and Multnomah County SLR Chapter 5. Motions for additional time to respond or reply to a request to add punitive damages are governed by ORS 31.725(4), ORCP 15 D, and UTCR 1.100.

2. Discovery Pending Amendment – A party may not include a claim for punitive damages in its pleading without Court approval. A party may include in its pleading a notice of intent to move to amend to claim punitive damages. While discovery of a party’s ability to pay an award of punitive damages is not allowed until a motion to amend is granted per ORS 31.725(5), the Court has allowed parties to conduct discovery on other factual issues relating to the claims for punitive damages once the opposing party has been put on written notice of an intent to move to amend to claim punitive damages.

3. Evidence in Support – All evidence submitted must be admissible per ORS 31.725(3); evidence to which an objection is not made is deemed received. Testimony generally is presented through deposition or affidavit; live testimony has not been permitted at the hearing absent extraordinary circumstances and prior Court order. Although the evidence in support of punitive damages must be clear and convincing, that standard of proof “relates to how a jury weighs the evidence at trial, not to how a trial Court assesses the capability of the evidence to establish facts on the motion to amend.”

4. Subsequent Motion – If the motion to amend to add punitive damages is denied, the plaintiff may file a subsequent motion based on a different factual record (i.e. additional or different facts) without the second motion being deemed one for reconsideration, which are prohibited

by Multnomah County SLR 5.045.

5. Arbitration – For cases in mandatory arbitration, the arbitrator has the authority to decide any motion to amend to claim punitive damages. However, the arbitrator’s decision may be reconsidered by a Judge as part of de novo review under UTCR 13.040(3) and 13.100(1).

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United States v. Brace, 1 F.4th 137 (2021)

1 F.4th 137 United States Court of Appeals, Third Circuit.

UNITED STATES of America v.

West Headnotes (18) [1]

Robert BRACE; Robert Brace Farms; Robert Brace & Sons Inc., Appellants No. 20-1892 | Argued: March 23, 2021 | (Filed: June 11, 2021) Synopsis Background: Government brought cause of action under the Clean Water Act for farmer's unauthorized clearing and drainage of wetlands. Government filed motion to strike and for summary judgment. The United States District Court for the Western District of Pennsylvania, No. 1:17cv-00006, Barbara Jacobs Rothstein, Senior District Judge, 2019 WL 3778394, granted motion, and subsequently granted injunctive relief, 2020 WL 956460. Appeal was taken.

[2] the Court of Appeals would exercise pendent jurisdiction over district court's orders striking defendant's summary judgment brief and granting partial judgment on the pleadings to government; and [3] district court order that struck defendant's summary judgment brief as pretrial sanction for defense counsel's repeated flouting of court rules was not abuse of discretion.

Affirmed.

Procedural Posture(s): On Appeal; Motion to Strike; Motion for Summary Judgment.

Other

Non-Monetary Costs, Fees, and Sanctions Sanctions Litigants flout court rules at their peril, and district courts have broad discretion to punish them by striking their briefs, if necessary.

[2]

Federal Courts

In general; necessity

Under “final judgment” rule, the Court of Appeals ordinarily lacks jurisdiction over appeals prior to judgment. 28 U.S.C.A. § 1291.

[3]

Federal Courts Injunction Court of Appeals can always review nonfinal district court orders that grant an injunction, an order directed to a party, other than a temporary restraining order, that grants some of the substantive relief sought and is enforceable by contempt. 28 U.S.C.A. § 1291.

[4]

Environmental Law waterfront conservation

Water, wetlands, and

Environmental Law

Injunction

Holdings: The Court of Appeals, Bibas, Circuit Judge, held that: [1] district court's interlocutory order directing defendant to submit a proposed deed restriction and mitigation plan was in nature of appealable injunction;

Costs, Fees, and Sanctions Sanctionable Conduct

In action under the Clean Water Act arising from defendant's clearing and drainage of wetlands, district court's interlocutory order directing defendant to submit a proposed deed restriction and mitigation plan was in nature of appealable injunction; that order set both the nature and extent of the relief that district court will ultimately grant, i.e., that defendant would have to restore wetlands that he tore up, and all that the parties had left to do was to propose how to implement that relief. 28 U.S.C.A. § 1291; Federal Water Pollution Control Act Amendments of 1972, § 101 et seq., 33 U.S.C.A. § 1251 et seq.

1 Case that cites this headnote

© 2023 Thomson Reuters. No claim to original U.S. Government Works.

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United States v. Brace, 1 F.4th 137 (2021)

More cases on this issue [5]

Environmental Law Injunction In action under the Clean Water Act arising from defendant's clearing and drainage of wetlands, on appeal from district court's interlocutory injunctive order directing defendant to submit a proposed deed restriction and mitigation plan, the Court of Appeals would not exercise pendent jurisdiction over district court's orders striking certain exhibits to defendant's brief and defendant's Daubert motions, as having at most an abstract link with the appealable injunction.

28 U.S.C.A. § 1291; Federal Water Pollution Control Act Amendments of 1972, § 101 et seq., 33 U.S.C.A. § 1251 et seq.

Federal Courts Interlocutory, Collateral, and Supplementary Proceedings and Questions; Pendent Appellate Jurisdiction Pendent appellate jurisdiction gives the Court of Appeals discretion to review orders if they either: (1) are inextricably intertwined with appealable ones, or (2) must be reviewed with them to ensure meaningful review.

1 Case that cites this headnote

[6]

Federal Courts Interlocutory, Collateral, and Supplementary Proceedings and Questions; Pendent Appellate Jurisdiction Court of Appeals uses pendent jurisdiction sparingly: review must be necessary, and the Court may use its discretion to decide what to reach.

More cases on this issue [9]

Federal Courts Interlocutory, Collateral, and Supplementary Proceedings and Questions; Pendent Appellate Jurisdiction Pendent appellate jurisdiction requires more than an abstract link with appealable order.

1 Case that cites this headnote

1 Case that cites this headnote [7]

Environmental Law waterfront conservation

Water, wetlands, and

Injunction Environmental Law In action under the Clean Water Act arising from defendant's clearing and drainage of wetlands, on appeal from district court's interlocutory injunctive order directing defendant to submit a proposed deed restriction and mitigation plan, the Court of Appeals would exercise pendent jurisdiction over district court's orders striking defendant's summary judgment brief and granting partial judgment on the pleadings to government; to review the appealable injunction thoroughly, the Court of Appeals had to review the other orders as well, as being inextricably intertwined therewith. 28 U.S.C.A. § 1291; Federal Water Pollution Control Act Amendments of 1972, § 101 et seq., 33 U.S.C.A. § 1251 et seq.

More cases on this issue [8]

Environmental Law waterfront conservation

Water, wetlands, and

[10]

Federal Courts Sanctions District court order striking summary judgment brief as pretrial sanction is reviewed for abuse of discretion.

[11]

Attorneys and Legal Services monetary sanctions

Non-

Before imposing the pretrial sanctions of dismissal or default judgment, or their functional equivalent, court should consider the Poulis factors, 747 F.2d 863: (1) how much a party is personally responsible for the challenged actions; (2) how much those actions prejudiced the opposing party; (3) the history of dilatoriness ; (4) whether the party or its lawyer acted willfully or in bad faith; (5) how effective alternative sanctions less than dismissal would be; and (6) whether the party has meritorious claim or defense.

13 Cases that cite this headnote

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United States v. Brace, 1 F.4th 137 (2021)

[12]

Attorneys and Legal Services monetary sanctions

Non-

[15]

Before imposing the pretrial sanctions of dismissal or default judgment, or their functional equivalent, court should consider all six Poulis factors, 747 F.2d 863, but need not find all six to award sanctions.

[13]

Summary Judgment Opposition

default judgment, or the like as pretrial sanction.

[16]

12 Cases that cite this headnote Response or Other

Unopposed summary judgment motion is not tantamount to a default judgment, because the court still must find for itself that there is no genuine dispute of material fact and that the movant deserves judgment as a matter of law.

Fed. R. Civ. P. 56(a).

[17]

Non-

In action under the Clean Water Act arising from defendant's clearing and drainage of wetlands, district court order that struck defendant's summary judgment brief as pretrial sanction for defense counsel's repeated flouting of court rules, thereby forcing the government to waste time and money deciphering incomprehensible pleadings, scouring through noncompliant briefs, and moving again and again for compliance, all to no avail, was not abuse of discretion; district court's repeated orders to show cause, warnings, and threats of sanctions had not deterred defense counsel's chronic misbehavior, and thus the striking of brief, while severe, was not unreasonable. 28 U.S.C.A. § 1291; Federal Water Pollution Control Act Amendments of 1972, § 101 et seq., 33 U.S.C.A. § 1251 et seq.

More cases on this issue

Costs, Fees, and Sanctions to amount

Discretion as

District courts have broad discretion to impose proportional pretrial sanctions.

Attorneys and Legal Services Multiplication of proceedings in general Attorneys and Legal Services monetary sanctions

Federal Courts Failure to mention or inadequacy of treatment of error in appellate briefs Arguments not raised in appellant's brief or developed in his response to the opposing party's brief were forfeited and did not need to be addressed on appeal, where appellant offered no compelling reason to overlook the forfeiture.

9 Cases that cite this headnote [14]

Attorneys and Legal Services Nonmonetary sanctions As a rule, courts should gauge party's knowledge before dismissing case, entering

[18]

Costs, Fees, and Sanctions conclusions Federal Courts

Findings and

Sanctions

When district court's explain how they weigh the Poulis factors, 747 F.2d 863, prior to imposing the pretrial sanctions of dismissal or default judgment, or their functional equivalent, the Court of Appeals can confirm the reasonableness of those sanctions.

2 Cases that cite this headnote

*139 On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 1:17-cv-00006), District Judge: Barbara Jacobs Rothstein Attorneys and Law Firms Matthew L. Wolford [ARGUED], Wolford Law Firm, 638 West Sixth Street, Erie, PA 16507, Counsel for Appellants Ellen J. Durkee [ARGUED], U.S. Department of Justice, Environment & Natural Resources Division, 601 D Street,

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United States v. Brace, 1 F.4th 137 (2021)

N.W., Room 2731, Washington, DC 20044, Laura S. Irwin, U.S. Attorney's Office, 700 Grant Street, Suite 4000, Pittsburgh, PA 15219, Counsel for Appellee Before: HARDIMAN, GREENAWAY, JR., and BIBAS, Circuit Judges.

Brace and his sons cleared and drained the wetlands. They used a bulldozer to clear vegetation, an excavator to dig out stumps, a track hoe to dig ditches, and a tile plow to install a tile drain. They dumped (sidecast) the dirt, rocks, and the like back into the wetlands. Brace did not have a permit for any of that. Soon, the Government discovered this. So it sued him again under the Act, seeking civil penalties and an injunction.

This suit is about only the Marsh Site.

OPINION OF THE COURT BIBAS, Circuit Judge.

[1] Litigants flout court rules at their peril. District courts have broad discretion to punish them by striking their briefs if needed. We will not upset these sanctions lightly.

The U.S. Government sued Robert Brace and his farm for violating the Clean Water Act. Brace's then-lawyer persistently violated court rules—even after the court repeatedly ordered Brace to show cause, warned him, and threatened sanctions. After prolonged discovery, the Government moved for summary judgment. But Brace's lawyer responded to the Government's motion late. When the court gave him another chance, he again violated the rules. At last, the court struck Brace's brief, treated the motion as unopposed, and granted summary judgment for the Government. Because that severe sanction was not an abuse of discretion, we will affirm.

I. BACKGROUND A. Robert Brace repeatedly clears and drains wetlands, triggering suits Robert Brace is a farmer. He owns hundreds of acres in Erie County, Pennsylvania. Decades ago, he bought a parcel of pasture that included thirty acres of wetlands, cleared it, and drained it to grow crops. The Government ordered him to stop mowing the site, yet he kept doing it. So it sued him under the Clean Water Act *140 and prevailed. Brace had dug up dirt, rocks, and the like in the wetlands and redeposited them without a permit. That, we held, violated the Act. United States v. Brace, 41 F.3d 117, 120–22, 127–28 (3d Cir. 1994).

This was only the beginning. In 2012, Brace expanded his farm, buying a neighboring parcel from the Marsh family.

The Marsh Site adjoins Elk Creek, a tributary of Lake Erie, and includes about fourteen acres of wetlands. About a month later, two Government officials visited and advised him to get a wetlands delineation on the Marsh Site. He did not. Instead,

B. Brace's then-lawyer repeatedly flouts rules, ignores deadlines, and tests the District Court's patience “What followed the initiation of this action is a procedural history replete with extended deadlines, missed deadlines, and completely ignored deadlines—all by Defendant[s’ counsel].” United States v. Brace, 2019 WL 3778394, at *2 (W.D. Pa. Aug. 12, 2019). Brace's lawyer's misdeeds started small, but snowballed. We commend the District Court for staying patient in the face of appalling, unlawyerly behavior.

1. Perfunctory pleading. First, Brace's counsel pleaded his defenses without any detail. His answer listed eleven affirmative defenses, each in an unlabeled, one-sentence paragraph. The Government moved to strike eight of them as too vague. The District Court struck all eight, noting that the “one-sentence paragraphs contain no particularities at all” and are so vague that they “cannot be expected to put the United States on notice.” Id. (quoting Supp. App. 18).

2. Discovery recalcitrance. Next, Brace failed to cooperate on discovery. Rule 26 requires parties to meet and confer to create a plan for turning over electronic data. Fed. R. Civ. P. 26(f)(2), (f)(3)(C). Yet Brace's lawyer was evasive and slow to answer emails and tried to smuggle in “superfluous information and inappropriate discovery requests.” 2019 WL 3778394, at *2. The Government had to move for and get a discovery order.

3. Pattern of extending and missing deadlines. Then, Brace's lawyer started missing deadlines even after they had been extended. After eight months of fact and expert discovery, he moved for more time to finish those tasks. Over the Government's objection, the District Court gave Brace several more weeks.

The extended deadline came and went. A week passed. Then another. Followed by one more. Not until three-plus weeks after the extended deadline did Brace's counsel ask for yet another extension, seeking four more months to prepare an expert report. Over the Government's objection, the District

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Court gave him two more months. But it warned Brace that this was it: if he did not give the Government the expert report promptly, the court would bar him from using it at trial.

Even so, Brace's counsel filed the report ten days late, with no explanation or request for more time. Though the District Court ordered Brace to show cause, it relented and let the report in. *141 Brace's former lawyer then missed more deadlines.

A few months later, he asked for and got more time to file dispositive and Daubert motions. But he waited until the day after the extended deadline passed to file two motions in limine. Again, he did not acknowledge or explain his lateness. When the Government moved to strike, Brace's lawyer explained that the motions were late “because local counsel refused to submit motions that exceeded the Court's page limitation.” App. 18. He also claimed that he was a solo practitioner. (He was not.) Even so, the District Court declined to strike the motions. But it did strongly criticize Brace's pattern of lateness and again ordered him to show cause.

As for Brace's Daubert motions, both trickled in about two months after the extended deadline. The District Court summarily struck both as untimely.

4. Overlength briefs smuggling in extra-record materials.

Meanwhile, the Government had moved for partial judgment on the pleadings, and Brace opposed it. But his opposition relied on evidence not in the record and on factual allegations not in his amended answer. Disregarding that information, the District Court granted the motion. It struck Brace's affirmative defenses, holding that he again had not adequately pleaded them.

The Government later moved for summary judgment. Brace responded a day late. His opposition ran more than 9000 pages long, lacked an appendix, and included thousands of duplicative pages. The Government moved to strike his brief plus thirty-three of his exhibits. In Brace's brief, his counsel referred to many materials that the court had already stricken.

And he had not produced those exhibits in discovery. One of the exhibits was a 248-page expert report, dated four months after the close of discovery, that the court had explicitly excluded.

The District Court struck all thirty-three challenged exhibits because he had not produced them in discovery. It also struck

the opposition. Yet again, it chose leniency, letting Brace refile. But it warned him not to file or rely on new materials, or else they would be “summarily stricken.” 2019 WL 3778394, at *5.

Brace's renewed filing was timely but massive. Though he cut the appendix in half, it was still thousands of pages long. His responsive statement of facts was “122 pages and in a font with frustratingly inconsistent spacing.” Id. at *6.

His brief was eight pages over the forty-page limit. Though Brace's counsel admitted that in a footnote, he asserted that the Government “has not demonstrated how it has been incurably prejudiced” by his overlength brief. Id. at *8 (quoting Brace's brief). The Government moved to strike.

C. The District Court strikes Brace's brief and grants summary judgment for the Government At long last, the District Court had had enough: it struck Brace's opposition to summary judgment. Though the court thought it had the inherent authority to strike the brief as a sanction, it also analyzed that sanction under the Poulis factors—factors that a court must consider before dismissing a case as a sanction. Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d Cir. 1984). Either way, it found the sanction fitting. Left with no opposition, it then spent thirty-five pages assessing the Government's motion for summary judgment.

The court granted summary judgment for the Government on liability, holding that Brace had violated the Act. But the District Court's work was not yet done. It had bifurcated liability from remedies and still needed to set a penalty. To aid its decision, the court ordered *142 Brace to submit a proposed deed restriction and restoration plan. It also ordered both parties to provide status reports. And it said that to set the penalty, it would first need to assess Brace's good faith in repairing the land.

Before that could happen, Brace filed this appeal.

II. WE HAVE JURISDICTION OVER PART OF THIS INTERLOCUTORY APPEAL, BUT NOT ALL On appeal, Brace challenges the District Court's order to propose a deed restriction and restoration plan. We have jurisdiction to review that injunction. He also challenges the grant of partial judgment on the pleadings; the summaryjudgment order; and the striking of his brief opposing

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summary judgment, his thirty-three exhibits, and his Daubert motions. We have jurisdiction to review the first three of these, but not the last two.

these actions as well. The District Court's analysis cannot stand if one of them falls.

C. We will not extend our pendent jurisdiction to the orders striking the thirty-three exhibits and the A. We can review the injunction [2] [3] There is no final judgment yet. Under the finalDaubert motions judgment rule, we ordinarily lack jurisdiction over appeals [8] [9] But we do not need to review the striking of Brace's before judgment. See 28 U.S.C. § 1291. But we can always exhibits or Daubert motions. *143 Though in theory both could matter to our review, pendent jurisdiction requires more review nonfinal district-court orders that grant an injunction: than an abstract link. Because we need not consider either one an order directed to a party, other than a temporary restraining order, that gives some of the substantive relief sought and is to review the injunction, we will not. enforceable by contempt. In re Pressman-Gutman Co., 459 F.3d 383, 392 (3d Cir. 2006); § 1292(a)(1).

[4] When the District Court ordered Brace to submit a proposed deed restriction and mitigation plan, it issued an appealable injunction. That order set both the nature and extent of the relief that the court will ultimately grant: Brace must restore the wetlands that he tore up. All the parties have left to do is to propose how to implement that relief. Thus, as the parties agree, we can review it. See Hoots v. Pennsylvania, 587 F.2d 1340, 1350 (3d Cir. 1978).

B. Our pendent jurisdiction extends to the summaryjudgment order, the striking of Brace's brief, and the grant of partial judgment on the pleadings [5] [6] Any further interlocutory jurisdiction must be pendent. Pendent appellate jurisdiction gives us discretion to review orders if they either (1) are “inextricably intertwined” with appealable ones or (2) must be reviewed with them to “ensure meaningful review.” Reinig v. RBS Citizens, N.A., 912 F.3d 115, 130 (3d Cir. 2018) (internal quotation marks omitted). Even then, we use pendent jurisdiction sparingly: review must be necessary, and we may use our discretion to decide what to reach. Id. [7] We will exercise pendent appellate jurisdiction over the summary-judgment order. It is “inextricably intertwined” with the injunction, which flows from the order. Thus, we will review both the striking of Brace's summary-judgment brief and its grant of partial judgment on the pleadings. The District Court treated the summary-judgment motion as uncontested only because it had stricken his brief. And in that order, the court set aside Brace's four remaining affirmative defenses; it rejected two for independent reasons and the other two as resolved by the grant of partial judgment on the pleadings. To review the appealable injunction thoroughly, we must review

III. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION BY STRIKING BRACE’S BRIEF [10] Though Brace asks us to review the injunction, he does not attack the substance of the injunction or even the grant of summary judgment. Instead, he challenges only the District Court's procedure in getting there—specifically, its order striking his summary-judgment brief. We review that sanction for abuse of discretion. Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 237 (3d Cir. 2007). And here, the District Court's sanction was eminently reasonable.

A. Poulis generally [11] [12] [13] We start with a word on Poulis. The District Court thought it had the inherent authority to strike the brief as a sanction. But it recognized that we typically require district courts to analyze the Poulis factors before imposing sanctions of dismissal or default judgment or their functional equivalent. Knoll v. City of Allentown, 707 F.3d 406, 409 (3d Cir. 2013). So just in case, it analyzed the sanction under our Poulis factors too. There are six: 1. How much the party is personally responsible for the challenged actions; 2. How much those actions prejudiced the opposing party; 3. The history of dilatoriness; 4. Whether the party or its lawyer acted willfully or in bad faith; 5. How effective alternative sanctions less than dismissal would be; and

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6. Whether the party has a meritorious claim or defense.

Poulis, 747 F.2d at 868. The court should consider all six factors but need not find all six to award sanctions. We have not yet required a Poulis analysis for the sanction that the District Court imposed here. An unopposed summaryjudgment motion is not tantamount to a default judgment, because the court still must find for itself that there is no genuine dispute of material fact and that the movant deserves judgment as a matter of law. Fed. R. Civ. P. 56(a); Anchorage Assocs. v. V.I. Bd. of Tax Rev., 922 F.2d 168, 175 (3d Cir. 1990). And because factors five and six are geared towards dismissals, they do not map neatly onto striking a brief.

At a minimum, we urge district courts to consider the relevant factors, to aid our review. This ensures that they assess important issues and explain their thoughts clearly, on the record. Here, the District Court's thoughtful Poulis analysis confirms that it did not abuse its discretion.

B. The District Court did not abuse its discretion [14] Though the District Court's Poulis analysis was largely right, it was not perfect. On the sixth factor, for instance, it looked to the merits of the Government's summary-judgment motion, not Brace's brief. Though a misstep on a Poulis factor will typically give us pause, the rest of the District Court's analysis shows that it did not abuse its discretion.

[15] The first factor, the party's personal responsibility, was neutral. Even though “it stretches credulity [to believe that Brace had] no idea how counsel [wa]s conducting this case,” the court gave Brace the benefit of the doubt and set that factor aside. 2019 WL 3778394, at *9 n.9. That is fine; not all the Poulis factors need be satisfied. *144 Mindek v. Rigatti, 964 F.2d 1369, 1373 (3d Cir. 1992). But as a rule, future courts should gauge a party's knowledge before dismissing the case, entering a default judgment, or the like.

The other four Poulis factors strongly support the District Court's sanction. On the second one, prejudice is clear. Brace's former lawyer's misconduct forced the Government to waste time and money “deciphering incomprehensible pleadings, scouring through noncompliant briefs, and moving again and again for compliance ... all to no avail.” 2019 WL 3778394, at *10. And Brace concedes factor three, the history of dilatoriness .

On factor four, the District Court reasonably found that Brace's former lawyer had acted in bad faith. Indeed, it is hard to classify counsel's repeated flouting of court rules as anything else. The court saw this misbehavior firsthand, and we defer strongly to its judgment. See NHL v. Metro. Hockey Club, Inc., 427 U.S. 639, 642–43, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (per curiam).

And on the fifth factor, alternative sanctions, the District Court noted that its repeated orders to show cause, warnings, and threats of sanctions had not deterred counsel's chronic misbehavior. To be sure, it often makes sense to consider or impose other escalating sanctions first, like fines. But even if we might have done things a bit differently, this judgment call was hardly an abuse of discretion.

Overall, striking Brace's brief was severe but reasonable. The District Court saw the action live and was admirably patient.

Especially given the astounding misbehavior here, we trust its judgment that the punishment fit the wrongs.

IV. BRACE FORFEITED HIS REMAINING ARGUMENTS [16] That leaves Brace's claim that the District Court erred by granting partial judgment on the pleadings. He does not challenge the merits of that decision. Instead, he argues only that the Government's motion was really under Rule 12(f), not 12(c), and that the Ashcroft v. Iqbal standard does not apply to judgment on the pleadings. 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). But Brace forfeited these arguments below. The Government's brief below set forth the Rule 12(c) standard and argued for the Iqbal standard. Yet Brace's lengthy opposition brief did not challenge either one.

Brace acknowledges this forfeiture but asks us to overlook it. We decline his invitation. Brace could have developed this argument in his response to the Government's brief but did not. He offers no compelling reason to overlook the forfeiture, so we will not. See Barna v. Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877 F.3d 136, 146–47 (3d Cir. 2017). ***** [17] [18] District courts have broad discretion to impose proportional sanctions. When they explain how they weigh the Poulis factors, we can confirm the reasonableness of those sanctions. Though striking Brace's summary-judgment brief

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was harsh, it was a reasonable response to his former counsel's persistent, extreme misconduct. We will affirm.

All Citations 1 F.4th 137

End of Document

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© 2023 Thomson Reuters. No claim to original U.S. Government Works.

8

202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

Cybersecurity Threats: Managing Legal, Ethical & Operational Risk PRESENTED BY:

Sean Hoar

1:30 – 2:30pm

Sean Hoar Sean Hoar is a partner in the Portland office of Constangy Brooks, Smith & Prophete LLP, and serves as chair of the Constangy Cyber Team. His background includes almost 25 years of experience with data privacy and information security matters. He is a former cyber attorney for the U.S. Department of Justice where he served as the lead cyber attorney for the U.S. Attorney’s Office in Oregon, and worked with the Computer Crime & Intellectual Property Section in Washington, D.C. During that time, he worked closely with the FBI, the Secret Service, and other federal agencies in prosecuting complex white collar and high-tech cybercrime. Sean was also honored twice with the Director’s Award, one of the highest awards bestowed upon Assistant U.S. Attorneys. He has been recognized for his leadership in the data privacy and cybersecurity space, having been named by the Cybersecurity Docket as one of the best and brightest data breach response lawyers in the United States. His credentials include being a Global Information Security Professional (GISP), a Certified Information Systems Security Professional (CISSP), and a Certified Information Privacy Professional for United States law (CIPP/US). In managing the national Constangy Cyber Team, Sean continues to manage responses to complex data breaches, and works with information security personnel and corporate executives in managing and mitigating cyber risk.

202 3 OADC FAL L S E MINAR C O N T I N U I N G L E G AL E DUCAT ION G UIDE BOOK

Oregon Insurance Bad Faith – The Good, The Bad, And The Ugly!

PRESENTED BY:

Lloyd Bernstein & FJ Maloney

2:45 – 3:45pm

Lloyd Bernstein Lloyd Bernstein has been protecting the interests of insurers and businesses in the Pacific Northwest for more than 25 years. They rely on him to navigate them through thorny legal issues, resolve insurance coverage and commercial disputes and defend extra-contractual and bad faith claims. Because he has been handling these types of cases for a long time, he has a thorough understanding of the insurance and legal issues involved. He’s also keenly aware of the nuances relative to the local venues and knows the landscape, judges and insurance laws unique to these jurisdictions.

Lloyd’s work often involves extensive motion practice or trial in state and federal court. But he also recognizes that effective representation does not always mean going to trial, and that an arbitrated, mediated or negotiated resolution can oftentimes be more successful. Clients appreciate that he’s a straight shooter and that they can count on his real-life approach and practical advice. Given his significant experience, he’s better prepared to lay out the risks and counsel clients on the best path for resolution.

FJ Maloney F.J. Maloney is recognized as the “go-to” attorney in large first-party extra contractual and “Bad Faith” litigation. F.J. started his legal career as a Deputy District Attorney for Deschutes County, Oregon, where he gained valuable trial experience prosecuting criminal cases ranging from juvenile delinquencies and dependencies to minor misdemeanors and major felonies including capital murder. As a civil practitioner, he has developed expertise in a wide range of first-party cases involving SIU and fraud, tort defense, “Bad Faith” and extra contractual trial work. F.J. is panel counsel for several national insurance companies and has litigated cases in both the state and federal courts of Oregon, Washington, South Dakota, Tennessee, Oklahoma, Idaho, Nevada, New Mexico and Arizona. FJ also has appellate experience in Oregon, Washington, the Eight Circuit and the Sixth Circuit. His published articles have appeared in the Tort Trial & Insurance Practice Law Journal and Mealey’s Litigation Report, and he is a frequent speaker at various conferences such as the Tort Trial & Insurance Law Section of the American Bar Association and the Large Loss PLRB. Prior to attending the University of Oregon School of Law, FJ obtained his undergraduate degree from Boston College in English and Environmental Geosciences. FJ also pursued graduate studies at Northeastern University’s College of Criminal Justice while training as an associate instructor with the Hurricane Island Outward Bound School. He later spent a year as a ski instructor in Park City, Utah, then two years as a deckhand and mate aboard a large motoryacht during a global circumnavigation. Although his office is in Portland, he lives in Bend where he remains active trail running, mountain biking and skiing with his family, and spends much of his free time volunteering as a first responder and member of the Mt. Bachelor National Ski Patrol.

Oregon Insurance Bad Faith The Good, The Bad, and the Ugly!

By Lloyd Bernstein & FJ Maloney

What is a “bad faith” or extracontractual claim?

Typically, tort claims for the breach of the implied covenant of good faith and fair dealing which exists by operation of law under an insurance contract.

In certain jurisdictions (Washington), when an insurer’s actions are “unreasonable, unfounded and frivolous,” the policyholder may recover certain noneconomic damages beyond the scope of the insurance contract.

Pre-Moody First Party “Bad Faith” Claims in Oregon Oregon did not recognize the typical “bad faith” claims seen in other jurisdictions.

Absent unique circumstances, there were no extracontractual claims for failure to pay a first-party claim pre-Moody.

Pre-Moody Status of First Party “Bad Faith” Claims in Oregon 1. Violation of a standard of care independent of the terms of the insurance contract; and 2. That the standard of care arises out of a “special” or fiduciary-type relationship between the parties.

3. This was typically and almost exclusively in the duty to defend context. See Strader, 179 Or. App. at 333; Georgetown Realty, 313 Or. at 110-11.

Pre-Moody Status of First Party “Bad Faith Claims in Oregon • Farris v. U.S. Fid. And Guar. Co., 284 Or. 453, 458 (1978) • “It was certainly not intended by the legislature that additional pressure to perform the contract be exerted by allowing the recovery of damages for emotional distress, since the statute provides for civil damages recoverable by the state for that purpose.

• There is nothing to indicate that the legislature intended, when it prohibited certain claims settlement practices in ORS 746.230, that actions for breach of insurance contracts would be transformed, in all of the covered instances, into tort actions with a resulting change in the measure of damages.

• The statutes express no public policy which would promote damages for emotional distress. Concern about the insured’s peace of mind does not appear to be the gravamen of the statutory policy.” (Emphasis added)

Pre-Moody Status of First Party “Bad Faith” Claims in Oregon… continued No Oregon case has ever held that a “special relationship” exists between an insured and insurer in the firstparty context.

Bennett v. Farmers Ins. Co. of Oregon, 332 Or. 138, 161-63, 26 P.3d 785, 799 (2001) -- A first-party insurance contract creates an economic arms-length relationship only. By the very terms and nature of that contractual relationship, there is no basis for a special relationship.

Santilli v. State Farm Ins. Co., 278 Or. 53, 563 P.2d 965 (1997) -- “the unique relationship which gives rise to the special duty of liability insurers to attempt to settle within their policy limits does not arise” in the first-party context.

Employers’ Fire Ins. Co. v. Love It Ice Create Co., 64 Or. App. 784, 790 (1983)-- Breach of the Implied Covenant of Good Faith and Fair Dealing were limited to contractual damages, only. And ORS 746.239(1)(f), which requires insurers to settle claims promptly and in good faith where their liability is reasonably clear, does not give rise to a tort action.”

The USDC Oregon Agreed.

Judge Simon in Foraker v. USAA Cas. Ins. Co., No. 3:14-cv-87-SI, 2017 U.S. Dist. LEXIS 116895, at *15-16 (D. Or. July 26, 2017), when analyzing whether a negligence claim predicated on the UCSPA as a standard of care was allowed, held: Although Oregon appellate courts have not specifically addressed Plaintiff’s argument that ORS §746.230 provides a statutory standard of care that is independent of the contract and therefore gives rise to a tort claim against the insurer under Georgetown Realty, several federal decisions in this district, and a recent unpublished decision in the Ninth Circuit affirming one such decision, have relied on the Oregon cases discussed above, among others, to hold that a tort action may not be brought against a first party insurer. *** …this federal court is tasked with evaluating what it believes the Oregon Supreme Court would most likely decide. After considering the body of Oregon case law, the Court does not believe Oregon would allow an insured to bring a negligence per se claim against its insurer for an alleged violation of ORS §746.230 under the facts of this case.”

See also Clymo v. Am. States Ins. Co., No. 2:18-cv-00168-SU, 2018 U.S. Dist. LEXIS 134506, at 8 (D. Or. June 7, 2018 (discussion of relevant case law).

Effect of Pre-Moody “Bad Faith Allegations Limited to contractual damages – no need for personal injury type of discovery

Less discovery disputes – no need to produce manuals, employee files, loss ratio discovery, etc.

Capable of Rule 21/Rule 12 adjudication or summary judgment routinely

Borderline “throwaway” claim used by policyholders as leverage

The Moody Decision Bad facts make bad law.

The Plaintiff brought a lawsuit to recover life insurance benefits from the defendant insurer following the death of her husband. The life insurance policy at issue offered benefits in the amount of $3,000 to be paid on the death of decedent, who died tragically when he was accidentally shot and killed by his friend on a camping trip.

The decedent’s toxicology report revealed that there was evidence of marijuana in his system. When Plaintiff presented her claim under the policy, the defendant insurer denied it based on a provision in the policy that excludes coverage for death caused by accidents resulting from the insured being under the influence of intoxicants, and cited decedent’s toxicology report as evidence supporting its denial.

Defendant insurer did not investigate the cause of the loss or the impact of being under the influence, instead relying solely on the toxicology report.

The Moody Decision… continued Plaintiff filed suit alleging that the denial of benefits was improper because decedent was killed when he was shot by another person; not because he was intoxicated.

The lawsuit advanced several theories of recovery including: 1) breach of contract for unpaid benefits under the policy; and 2) a tort theory of negligence per se based on the defendant insurer’s failure to conduct a reasonable investigation of decedent’s death and failure to settle the Plaintiff’s claim in good faith – all in violation of UCSPA (ORS 746.230 et. seq.).

Plaintiff was seeking economic damages in the amount of $3,000 and noneconomic damages of $47,001.

Pursuant to Farris and Love It Ice Cream, the circuit court granted defendant insurer’s motion to dismiss. The defendant insurer then tendered the $3,000 contractual benefit and the parties proceeded on appeal of the dismissal of the negligence per se claim.

The Moody Decision Holding: The Court of Appeals ruled that the Plaintiff’s negligence per se theory entitled her to emotional distress damages, and reversed the lower court.

The Court of Appeals first acknowledged that, ordinarily, the remedy for a violation of the terms of the contract is a claim for breach of contract.

However, the Court also recognized an exception to the general rule when the breach of contract violates a standard of care independent of the terms of the contract. Citing Abraham v. T. Henry Construction, Inc., 230 Or. App. 564, 572 (2009).

The Court noted that in Abraham, the Supreme Court found that the OBC established an independent standard of care, and that violations constituted a basis for a negligent per se claim.

Based on the Supreme Court’s decision in Abraham, the Court concluded that an independent standard of care is expressed in ORS 746.230, and that the same can support a claim for negligence per se.

The Moody Decision… New Law Upon finding that the UCSPA established an independent standard of care, the Court went on to find that Plaintiff’s Complaint satisfied the four requirements of a negligence per se claim: 1. that defendant violated ORS 746.230; 2. that Plaintiff was a member of the class of persons meant to be protected by the statute; 3. that Plaintiff was injured as a result of the violation; and 4. that the injury suffered was the type that the statute was meant to prevent.

The Impact of Moody The ruling in Moody completely reverses what has been the prevailing interpretation of Oregon law for many years. The Moody Court reached two fundamental conclusions that prior cases had not: 1. that the UCSPA expresses a standard of care independent from the terms of the insurance policy that gives rise to a negligence per se claim; and 2. that the UCSPA was enacted to provide insureds with peace of mind and protect policyholders from emotional distress caused by an insurer’s unfair settlement practices.

The Court of Appeals distinguished prior case law (Farris) as plainly dictum to arrive at its decision in the case at bar.

Status of Moody Petition for review granted by Oregon Supreme Court – June 23, 2022

On review, the issue is:

Does Oregon law recognize a tort claim against an insurer for negligence per se predicated on an insurer’s alleged violations of ORS 746.230(1) (unfair claim settlement practices)?

Oral Argument with the Oregon Supreme Court – November 17, 2022

Current Viability of Moody Claim?

• Runyan v. Foremost Ins. Co. Grand Rapids, Mich., Case No. 6:21-cv-01341-MC, Opinion and Order (D. Or. Oct. 26, 2022) (concluding Moody does not align with Oregon Supreme Court decision in Farris).

• KOA v. Allstate Indem. Co., Case No. 1:22-cv-00658-CL, Opinion and Order (D. Or. Mar. 23, 2023) (declining to adopt magistrate judge’s recommendation to follow Moody).

• White v. United Heritage Prop. & Cas. Co., No. 3:21-cv-01524-JR, 2023 WL 2611152, at *1 (D. Or. Mar. 23, 2023) (“The Court finds that the ruling by Oregon Court of Appeals in Moody [ ] has not definitively changed Oregon law to allow a plaintiff to bring a negligence per se claim against an insurer for impermissible claim settlement practices in violation of O.R.S. 746.230”).

• District Court, Medford – On motion to dismiss, minute order stayed proceedings awaiting Moody decision.

Availability of Emotional Distress Damages: Generally Pled: Insurer’s claims handling caused plaintiff to suffer emotional distress – anxiety, depression, frustration, and/or stress.

Oregon Supreme Court has “consistently…rejected claims for emotional distress caused by a defendant’s negligence, in the absence of any physical injury.” Paul v. Providence Health Sys.-Or., 351 Or. 587, 597 (2012).

“Under Oregon law, a plaintiff who has suffered emotional distress as a result of a defendant’s negligence ordinarily may not recover damages for such emotional harm in the absence of some sort of physical impact.” I. K. v. Banana Republic, LLC, 317 Or. App. 249, 254 (2022); Lowe v. Philip Morris USA, Inc., 207 Or. App. 532, 551 (2006).

Impact of Physical Impact Rule • Regardless of Moody, “a plaintiff must still demonstrate either physical injury or a Hammond exception to receive damages for emotional distress.” Bryant v. Allstate Ins. Co., 605 F Supp 3d 1326, 1331 (D Or 2022).

• “Oregon courts adhere to the physical impact rule, which requires an actual physical injury to support damages for emotional distress.”

Leonard v. Scottsdale Ins. Co., 2023 WL 2968624 at *3 (D Or 2023); • Emotional distress must be caused by physical harm that resulted from the negligent claims handling. Nordin v. Standard Fire Ins. Co., 3:22-cv-00775-HZ, 2023 WL 6462616, at *13 (D Or Oct 3, 2023).

Example – Emotional Distress Damages Recoverable McKenzie v. Pac. Health & Life Ins. Co., 118 Or. App. 377, 381 (1993):

The plaintiff’s health insurance company refused to pay for the plaintiff’s surgery;

As a result, the plaintiff experienced physical injury due to the delay in his ability to receive surgery; Court of Appeals specifically noted emotional distress damages may be allowed when the emotional distress is caused by the physical harm that results from breach of contract.

Hammond Exceptions to Physical Impact Rule: 1. “Where the defendant intended to inflict severe emotional distress[,]” 2. “Where the defendant intended to do the painful act with knowledge that it will cause grave distress, when the defendant’s position in relation to the plaintiff involves some responsibility aside from the tort itself[,]” and 3. “Where the defendant’s conduct infringed on some legally protected interest apart from causing the claimed distress,” – i.e., a “special relationship.”

Hammond v. Cent. Lane Commc’ns Ctr., 312 Or. 17, 22 (1991).

Legally Protected Interest Exception?

In Philibert v. Kluser, 360 Or. 698, 704 (2016), the Oregon Supreme Court held that to support a claim for negligent infliction of emotional distress, without physical injury, the legally protected interest must be: 1. “of sufficient importance as a matter of public policy to merit protection from emotional impact”; and 2. the emotional distress must have been a foreseeable result of violation of the legally protected interest.

Nordin v. Standard Fire Ins. Co., 3:22-cv-00775-HZ, 2023 WL 6462616, at *13 (D. Or. Oct. 3, 2023) - “The Court concludes the Oregon Supreme Court would likely decide that §746.230 does not permit recovery of emotional distress damages [ ] premised on an insurer’s failure to satisfy § 746.230.”

Intentional Infliction of Emotional Distress To state a claim for intentional infliction of severe emotional distress, a plaintiff must plead that: 1. The defendant intended – acted with the purpose – to inflict severe emotional distress on the plaintiff, 2. The defendant’s acts were the cause of the plaintiff’s severe emotional distress, and 3. the defendant’s acts constituted an extraordinary transgression of the bounds of socially tolerable conduct.

Richardson v. Guardian Life Ins. Co., 161 Or. App. 615, 629, 984 P.2d 917, 926, rev. denied, 319 Or. 553 (1999); Buscemi v. AAA Oregon/Idaho, CIV. 99-183HA, 2000 WL 900489, at *4-5 (D. Or. Mar. 15, 2000).

Litigating Moody Claims Allegations/Complaints STATE COURT: • Avoid cursory allegations. Use Rule 21 Motions to your advantage – ORCP 21D make more definite and certain.

• What are the misrepresentations and policy provision? What did the insurer do wrong?

• What are the damages? Was there any physical injury?

FEDERAL COURT: • Use interrogatories to flush out specific facts related to alleged violations to avoid “fishing expedition” discovery tactics in later motion practice.

• Futility argument on motion for leave to amend arguing Court is required to follow Farris holding as binding precedent.

• Consider removal – extracontractual claim likely to exceed $75k.

Discovery Post Moody • Double-edged sword • Now likely relevant: guidelines, manuals, training, and materials related to good faith claims handling. Other pattern and practice discovery could be implicated based on specific allegations (e.g. other lawsuits with similar conduct) • Challenge relevance of requests to allegations in complaint to confirm within reasonable scope • BUT: Plaintiff’s medical records, tax records, financial statements, diaries, personnel files, etc. are likely now within scope – effectively, “Personal Injury” discovery.

• Result: More costly, expensive, and litigious discovery for insurance industry.

• Caution: It is largely unknown how courts will rule on discovery post- Moody. Take reasonable approaches to discovery positions and attempt to work out disagreements through conferral.

• Bad facts and positions make bad law. See e.g., Cedell in Washington;

Attorney Fees Under ORS 742.061 Attorney fees for litigating Moody negligence per se claims are likely not recoverable under ORS 742.061 because it is not “an action upon an insurance policy.” See Goddard v. Farmers Ins. Co. of Oregon, 177 Or. App. 621, 33 P.3d 1075 (Or. 2001) (holding that the attorney fee statute applies only to a contract claim and does not apply to an excess liability claim framed in terms of negligence.)

TACTICS • Issue a Long payment on contractual claim to attempt to mitigate exposure; settle contractual claim and litigate Moody claim.

• Segregate contract and negligence per se claim as much as possible in motion practice and discovery. This may allow you to segregate billing entries.

Trying a Moody claim • Be aggressive on Motions in Limine • Additional Experts likely required: • Claims handling or “good faith” experts; • IME’s; additional medical experts, • CPA/financial experts depending on the allegations.

• Additional trial days (as much as 2X the contractual claim).

• Verdict Potential – the Great Unknown.

• No trials on damages to date -- Unknown what a jury would award to a policyholder for violations.

Legislative Efforts to Change Law Almost every session, there are bills submitted to change the law to make UCSPA (ORS §746.230) independently actionable or otherwise add extracontractual or “bad faith” claims.

2023 -- HB 3242 & 3243 -- jointly proposed to create a cause of action that would allow an insured to recover actual damages that result from violations of unfair claim settlement practices under ORS §746.230, together with attorney fees and costs, and further allow the court to award treble damages if it determined that the insurer acted unreasonably.

1 vote shy of becoming law.

Q&A

Leonard v. Scottsdale Insurance Compnay, Slip Copy (2023)

2023 WL 2968624 Only the Westlaw citation is currently available.

United States District Court, D. Oregon.

James LEONARD, an individual, Plaintiff, v.

SCOTTSDALE INSURANCE COMPNAY, an Ohio insurance corporation, Nationwide Property and Casualty Insurance Company, an Ohio insurance corporation, Defendants.

Civ. No. 6:22-cv-01764-MC | Signed April 17, 2023 Attorneys and Law Firms Gabriel Joseph Le Chevallier, Ryan M. DesJardins, Parsons Farnell & Grein LLP, Portland, OR, for Plaintiff.

Lloyd Bernstein, Sean Douglas McKean, Bullivant Houser Bailey PC, Portland, OR, for Defendants.

OPINION AND ORDER MCSHANE, Judge: *1 Plaintiff James Leonard alleges Defendants Scottsdale Insurance Company and Nationwide Property and Casualty Insurance Company breached the parties’ insurance policy.

Defendants move to dismiss Plaintiff's negligence and negligence per se claims for failure to state a claim under Fed. R. Civ. P. 12(b)(6). Defs.’ Mot. to Dismiss 2, ECF No. 10. Because Plaintiff's negligence and negligence per se claims necessarily fail, Defendants’ Motion to dismiss is GRANTED.

BACKGROUND In November 2020 and January 2021, high winds caused two large sections of a nearby tree to fall on Plaintiff's home, which caused a hole on the roof of the dwelling. Pl.’s Compl. ¶¶ 9-11, ECF. No. 1. Plaintiff filed a claim, and Defendants assigned a claim number. Id. Six months later, Plaintiff heard a loud “crack” somewhere in the home. Compl. ¶ 12. Plaintiff noticed the home was leaning to one side and seemed to be twisting. Id. Defendants’ adjuster determined that one of

the central foundation beams had cracked, causing structural instability in the rest of the house. Id. Defendants issued Plaintiff payment of $48,411.61 for the repairs. Compl. ¶ 14.

In May 2022, Plaintiff received an estimate of $179,813.87 to repair the damage to the home. 1 Compl. ¶ 16. Defendants relied on a subsequent report, which determined earth movement, not falling trees, caused the structural damage.

Compl. ¶¶18-20. Plaintiff alleges that the Defendants wrongfully relied on the “pretextual” subsequent report and “misrepresented facts when they denied further coverage for” Plaintiff's losses. Compl. ¶ 20. With respect to the physical and emotional symptoms at issue in the motion to dismiss, Plaintiff alleges: Mr. Leonard has experienced significant stress, anxiety, depression, and frustration from the Insurers’ failure to timely and adequately address the Claims. Eventually, Mr. Leonard's emotional distress began manifesting as physical symptoms.

In December 2020 and January 2021, and as a direct result of dealing with the Insurers’ failures to fully fund repairs and their delays relating to the claims, including an earlier claim, Mr. Leonard suffered two “mini-strokes.”

In early 2022, Mr. Leonard was diagnosed with a stress ulcer and hospitalized for two weeks.

Compl. ¶¶ 21-23.

In November 2022, Plaintiff filed this action bringing claims for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) Negligence; and (4) Negligence per se. Pls.’ Compl. ¶¶ 31, 35, 43, 50. With respect to his negligence claim, Plaintiff alleges that, given his “fragile health and the damage to the Dwelling, the Insurers’ refusals to pay the claims created a foreseeable risk of harm to Mr. Leonard's health.” Compl. ¶ 39. Plaintiff bases his negligence per se claim on Defendants’ violations of the Oregon Unfair Claims Settlement Practices Act. Compl. ¶ 45. As relevant to the pending motion, Plaintiff requests emotional distress damages on his negligence claims.

STANDARDS *2 To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must contain sufficient factual matter that “state[s] a claim to relief that is plausible on its face.”

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the mere possibility of misconduct.”

Id. at 678.

When considering a motion to dismiss, the Court must accept all allegations of material fact as true and construe those facts in the light most favorable to the non-movant party.

Burgert v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the court is “not bound to accept as true a legal conclusion couched as a factual allegation.”

Twombly, 550 U.S. at 555. If the complaint is dismissed, leave to amend should be granted unless “the pleading could not possibly be cured by the allegation of other facts.” v. United States, 58 F.3d 494, 497 (9th Cir. 1995).

Doe

DISCUSSION In January 2022, the Oregon Court of Appeals held that plaintiffs bringing a breach of contract claim against their insurers may also bring a negligence per se claim for violations of the statutory standard of care under Oregon's Insurance Code ( ORS 746.230).

Moody v. Or. Cmty.

Credit Union, 317 Or. App. 233, 238, review allowed, 369 Or. 855 (2022). However, this Court previously declined to follow Moody, concluding it does not align with the Oregon Supreme Court opinion in Farris v. U. S. Fid. & Guar.

Co., 284 Or. 453, 587 (1978). See Runyan v. Foremost Ins. Co. Grand Rapids, Mich., Case no. 6:21-cv-01341MC, Opinion and Order (D. Or. Oct. 26, 2022); see also Koa v. Allstate Indem. Co., Case no. 1:22-cv-00658-CL, Opinion and Order (D. Or. Mar. 23, 2023) (declining to adopt magistrate judge's recommendation to follow Moody). 2 As this Court previously noted: In Farris, the court stated that when drafting ORS 746.230, the legislature clearly did not intend to allow recovery of emotional distress damages in actions for breach of insurance contracts, or to convert such actions “into tort actions with a resulting change in the measure of damages.” [

587 P.2d] at 1018. Like Farris, this case

sounds in contract law, not tort. This Court agrees with the Farris court that the civil penalties outlined in the Insurance Code under ORS 746.230 do not suggest that another remedy exists outside of contract liability. Id. **** Moody conflicts with the Oregon Supreme Court opinion in Farris. The court in Moody permitted a negligence per se claim for violations of the Insurance Code, stating that “the legislature enacted the code to ensure that the insurance-buying public gets what it pays for, including the peace of mind that is a principal benefit of an insurance policy.” Moody, 505 P.3d 1047 at 1056-57. The court of appeals noted that, prior to Moody, they had endorsed the assumption that Farris “answered the question whether ORS 746.230 creates statutory liability for the violation of its provisions.”

Id. at 1054 n.2 (citing to multiple Oregon Court of Appeals cases which endorse that violations of ORS 746.230 “are not independently actionable” and “do[ ] not give rise to a tort action”).

While the Moody court assents that they are answering a different question, it appears to overturn 40 years of precedent.

Moody, 505 P.3d 1047 at 1055. Until the Oregon Supreme Court rules otherwise, negligence per se is unavailable as a cause of action for insurance contract disputes. *3 Runyan, Opinion and Order 2-3 (second alteration in original).

Recognizing this Court's skepticism regarding Moody, Plaintiff argues that “whether or not Moody was correctly decided is an academic dispute” because “this case involves physical injury.” Plt.’s Resp. to Defs.’ Mot. to Dismiss 5-6, ECF No. 15. Plaintiff is correct in that, regardless of Moody, “a plaintiff must still demonstrate either physical injury or a Hammond exception to receive damages for emotional distress.”. 3 Bryant v. Allstate Indemnity Co., 605 F. Supp.

3d 1326, 1331, (D. Or. 2022); Runyan, Opinion and Order 4 (same). “Oregon courts adhere to the physical impact rule, which requires an actual physical injury to support damages for emotional distress.” Bryant, 605 F. Supp. 3d at 1030 (citing Paul v. Providence Health Sys.-Or., 351 Or. 587, 597 (2012)).

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Leonard v. Scottsdale Insurance Compnay, Slip Copy (2023)

As noted above, Plaintiff alleges he “experienced significant stress, anxiety, depression, and frustration from the Insurers’ failure to timely and adequately address the Claims. Eventually, Mr. Leonard's emotional distress began manifesting as physical symptoms.” Compl. ¶ 21. Plaintiff's physical symptoms included two “mini-strokes” and a stress ulcer. Compl. ¶¶ 22-23. Under longstanding Oregon caselaw, Plaintiff's alleged physical symptoms—stemming from Plaintiff's emotional distress caused by Defendants’ negligent handling of Plaintiff's insurance claim—do not clear the physical impact or injury hurdle necessary to recover damages for emotional distress.

Oregon cases have long held that the impact rule requires emotional distress to accompany the physical impact. See Lowe v. Philip Morris USA, Inc., 207 Or. App. 532, 551, (2006) (noting Oregon “courts have recognized claims for emotional distress caused by ordinary negligence, but only if the distress is accompanied by physical impact.”) (emphasis added) aff'd, 344 Or. 403 (2008); See also Norwest, By & Through Crain v. Presbyterian Intercommunity Hosp., 293 Or. 543, 559 (1982) (“But we have not yet extended liability for ... emotional injury not accompanying any actual or threatened physical harm or any injury to another legally protected interest.”). The Oregon Supreme Court has confirmed “that one suffering from injuries to his person due to the negligence of another may recover for mental distress and anguish which directly and as a natural consequence flows from the physical injury....”

Fehely v. Senders, 170 Or. 457, 461 (1943) (emphasis added) (citations omitted). The Oregon Court of Appeals notes that, “[c]onsistently with Fehely, we have referred to the physical impact rule as requiring a ‘physical injury’ that gives rise to emotional distress.” Chouinard v. Health Ventures, 179 Or. App. 507, 514 (2002) (emphasis added) (citation omitted).

Here, Plaintiff's temporal sequence—where the emotional distress precedes any physical symptoms—is at odds with the requirement that any recoverable emotional distress flow directly from the physical impact or injury.

court, however, did not abrogate the general impact rule; instead, the Court carved out an exception for bystander recovery, where the plaintiff is not the direct victim. Id. at 702. As Plaintiff was not a bystander, Philibert simply does not apply. Instead, to recover for emotional distress damages, Plaintiff must pass the general impact test, which requires “that there be a direct accompanying injury to the person who suffers the emotional distress as a prerequisite to its compensability.”

Saechao v. Matsakoun, 78 Or. App. 340,

346 (1986) (abrogated on other grounds in Philibert, 360 Or. 698). As noted above, Plaintiff's alleged physical injuries —which do not result directly from Defendants’ alleged negligence—fall short.

Plaintiff's alleged physical impacts fare even worse. Plaintiff argues Defendants’ “refusal to fully fund repairs of his home resulted in Mr. Leonard being ‘exposed ... to the elements’ during the wintertime.” Resp. 9 (quoting Compl. ¶¶ 11, 38). Plaintiff goes on to argue that this “exposure to ‘cold air’ and ‘moisture’ while the Insurers slow-played Mr. Leonard's insurance claims had a perceptible physical effect on Mr. Leonard.” Resp. 9. There are numerous fatal problems with Plaintiff's theory. First, as demonstrated above, any physical impact here was not a direct and immediate consequence from Defendants’ alleged negligence (in not fairly and quickly resolving Plaintiff's claim). Additionally, Defendants did not cause natural elements, in the form of wind and cold temperatures, to impact Plaintiff. And Plaintiff alleges Defendants, not the natural elements, caused his emotional distress. See Compl. ¶¶ 21-22 (alleging Plaintiff “experienced significant stress ... from the Insurers’ failure to timely and adequately resolve” his claim and he suffered two “mini-strokes” “as a direct result of dealing with the Insurers’ failures to fully fund repairs”). Plaintiff is unable to point to any Oregon caselaw remotely supporting this novel argument.

And the alleged physical impact here is a far cry from the “offensive sexual touching” Oregon courts have found to satisfy the impact rule absent physical injury.

179 Or. App. at 514-15 (citations omitted).

Chouinard,

*4 Plaintiff's argument that the Oregon Supreme Court, in Philibert v. Kluser, 360 Or. 698 (2016), rejected any requirement that emotional distress flow from a physical impact is meritless. In Philibert, the Oregon Supreme Court rejected the general “impact rule as the test for a bystander's recovery of emotional distress resulting from injury to another.”

360 Or. at 710 (emphasis added). The Philibert

CONCLUSION “The generally accepted rule is that emotional distress caused by pecuniary loss resulting from breach of contract is not recoverable.” Farris, 284 Or. At 456. As Plaintiff fails to allege an exception to that general rule, he may

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not recover for any alleged emotional distress. Defendants’ Motion to Dismiss (EFC No. 10) is GRANTED and Plaintiff's negligence and negligence per se claim are dismissed with prejudice.

IT IS SO ORDERED. All Citations Slip Copy, 2023 WL 2968624

Footnotes 1

The home sits on a lakeside lot, with no road access. Compl. ¶ 5. To repair any damage, workers and equipment have “to be barged” to the property. Compl. ¶ 15.

2

At least one other Oregon district judge reached a similar conclusion. See White v. United Heritage Prop. & Cas. Co., No. 3:21-CV-01524-JR, 2023 WL 2611152, at *1 (D. Or. Mar. 23, 2023) (“The Court finds that the ruling by Oregon Court of Appeals in Moody [ ] has not definitively changed Oregon law to allow a plaintiff to bring a negligence per se claim against an insurer for impermissible claim settlement practices in violation of O.R.S. 746.230. Additionally, because Plaintiff cannot recover either emotional distress damages or punitive damages, his negligence per se claim fails.”)

3

The Hammond exceptions to the impact rule are: (1) “Where the defendant intended to inflict severe emotional distress[,]” (2) “where the defendant intended to do the painful act with knowledge that it will cause grave distress, when the defendant's position in relation to the plaintiff involves some responsibility aside from the tort itself[,]” and (3) “where the defendant's conduct infringed on some legally protected interest apart from causing the claimed distress, even when that conduct was only negligent.”

Commc'ns Ctr., 312 Or. 17, 22. (1991).

End of Document

Hammond v. Cent. Lane

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Nordin v. Standard Fire Insurance Company, Slip Copy (2023)

2023 WL 6462616 Only the Westlaw citation is currently available.

United States District Court, D. Oregon.

Eva NORDIN, Plaintiff(s), v.

The STANDARD FIRE INSURANCE COMPANY, a foreign corporation, Defendant(s).

No. 3:22-cv-00775-HZ | Signed October 3, 2023 Attorneys and Law Firms Paul H. Krueger, Kymber R. Lattin, Paul Krueger Law Firm PC, 4380 S.W. Macadam Avenue, Suite 450, Portland, OR 97239, Attorneys for Plaintiff.

Peder A. Rigsby, Sean Douglas McKean, Bullivant Houser Bailey, One SW Columbia, Suite 800, Portland, OR 97204, Attorneys for Defendant.

OPINION & ORDER HERNÁNDEZ, District Judge: *1 This matter is before the Court on Defendant The Standard Fire Insurance Company's Motion for Summary Judgment. ECF 24. For the reasons that follow the Court grants Defendant's Motion.

BACKGROUND Plaintiff Eva Nordin was at all relevant times self-employed as a home appraiser. On May 3, 2021, Plaintiff was involved in a motor vehicle accident and suffered bodily injuries that affected her ability to “carry out her usual and customary income-producing activities.” Notice of Removal, ECF 1, Ex. A (Complaint) at ¶ 9. Plaintiff had automobile insurance through Defendant and asserted a claim under that insurance for personal injury protection (“PIP”) income continuation expense benefits.

On May 3, 2022, Plaintiff filed a complaint in Multnomah County Circuit Court against Defendant and alleged claims for payment of PIP benefits, breach of the covenant of good

faith and fair dealing, and negligent infliction of emotional distress. On May 27, 2022, Defendant removed the matter to this Court on the basis of diversity jurisdiction.

On July 3, 2023, Defendant filed a Motion for Summary Judgment. The Court took the matter under advisement on August 21, 2023.

STANDARDS Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of “ ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting former Fed. R. Civ. P. 56(c)).

Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present “specific facts” showing a “genuine issue for trial.”

Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927–28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial.

Bias v. Moynihan, 508 F.3d

1212, 1218 (9th Cir. 2007) (citing 324).

Celotex, 477 U.S. at

The substantive law governing a claim determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the light most favorable to the nonmoving party.

Earl v. Nielsen Media Rsch., Inc., 658 F.3d 1108, 1112 (9th Cir. 2011). If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support its claim than would otherwise be necessary.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

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Nordin v. Standard Fire Insurance Company, Slip Copy (2023)

DISCUSSION Defendant moves for summary judgment as to all of Plaintiff's claims. The parties also raise a number of objections to evidence submitted in relation to the Motion for Summary Judgment I. Evidentiary Objections A. Profit and Loss Statements *2 Defendant objects to Exhibit 14 to the Declaration of Kymber Lattin, ECF 30, on the grounds that Lattin lacks adequate personal knowledge to authenticate the documents in that exhibit and/or they contain hearsay. Pages one through six of Exhibit 14 are titled “Monthly Profit and Loss Statements” and pages seven through ten are copies of bank statements with handwritten notes. Defendant notes Plaintiff testified at deposition that the profit and loss statements are not records prepared by Plaintiff in the ordinary course of her business. Rather they were prepared by Plaintiff's previous counsel in response to Defendant's requests for information regarding her income. McKean Decl, ECF 35, (“McKean Decl. II”), Ex. J at 5-6 (“I never do these statements,” but Defendant “wanted something more specific, so ... the [legal] assistant gave me these forms to try to fill in as much as I could .... This is not something [I] made.”). These documents were not created by Lattin nor was Lattin involved in creating these documents. In addition, the record does not reflect who wrote the notes on the bank statements and Lattin does not indicate that she wrote the notes. According to Defendant, therefore, Lattin lacks the personal knowledge to authenticate the profit and loss statements or the bank account records.

In response to Defendant's objection Plaintiff filed a Declaration, ECF 38, and a copy of the profit and loss statements that include Plaintiff's handwritten notations.

Local Rule 56-1(b), however, provides that “[i]f an evidentiary objection is raised by the moving party in its reply memorandum, the non-moving party may file a surreply memorandum ... addressing only the evidentiary objection; the moving party may not file further briefing on its evidentiary objection.” Plaintiff's Declaration and additional evidence, therefore, is not permitted under Local Rule 56-1. Accordingly, the Court declines to consider Plaintiff's Declaration, ECF 38, and the exhibit attached in determining whether the profit and loss statement is properly authenticated.

“To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is.” Fed. R. Evid. 901(a). Such evidence may include testimony of a witness with knowledge of the document. Fed. R. Evid. 901(b)(1). However, a witness may testify only to a matter on which the witness has personal knowledge. Fed. R. Evid. 602. It is clear that Lattin was not involved in the creation of the profit and loss statements and, therefore, she lacks personal knowledge of how the documents were generated and what information Plaintiff's prior counsel relied on in their production. Lattin, therefore, lacks the requisite personal knowledge required to authenticate the profit and loss statements. Lattin also lacks personal knowledge of the origin of the handwritten notes on the bank statements to authenticate them.

Defendant also asserts that even if the documents in Exhibit 14 were properly authenticated they are inadmissible hearsay without an applicable exception. Defendant contends the documents contain statements regarding Plaintiff's income and expenses that were not made under oath in connection with this matter and that Plaintiff offers to prove her income and expenses with these documents. The only potentially applicable hearsay exception is for records “kept in the course of a regularly conducted activity of a business.” Fed. R. Evid.

803(6)(B). As noted, however, the profit and loss statements are not records that Plaintiff kept as a regular activity of her business. In addition, although the bank account records appear to contain some information that may be business records, there is no admissible evidence of the origin of the handwritten notes, or evidence that those notes constitute business records.

Accordingly, the Court declines to consider Exhibit 14 to Lattin's Declaration when evaluating Plaintiff's response to Defendant's Motion for Summary Judgment.

B. Plaintiff's Statement Regarding Causation and Recovery Defendant also objects to Plaintiff's statement in her Declaration that she “did not recover properly from [her] low back surgery as a result of dealing with [her] insurance carrier and now suffer[s] ongoing pain as a result.” Pl.’s Decl., ECF 31, at 2. Defendant asserts this is expert testimony within the scope of Federal Rule of Evidence 702 that Plaintiff is not qualified to provide because she has not presented any evidence that she has the “knowledge, skill, experience, training, or education” necessary to qualify her to testify as

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to a person's recovery from lower back surgery or the impact that “dealing with [her] insurance carrier” may have had on that recovery. *3 Plaintiff responds that she is competent to testify as to her own bodily condition and that statements made for medical diagnosis or treatment that describe medical history, symptoms, sensations, or their general cause is an exception to the rule against hearsay pursuant to Federal Rule of Evidence 803(4). Specifically, Plaintiff asserts that her statement is “a recitation of statements made by her medical providers.” Pl. Rep. to Def.’s Obj., ECF 37, at 3.

The Court agrees that Plaintiff may testify as to her pain and bodily condition. Plaintiff, however, is not competent to testify as to whether she recovered “properly” from back surgery or the medical cause of her alleged failure to properly recover because that is evidence within the scope of Rule 702.

In addition, the Ninth Circuit has held that Rule 803(4) does not provide an exception to the hearsay rule for statements that a doctor makes to a patient. See, e.g., Bulthuis v. Rexall Corp., 789 F.2d 1315, 1316 (9th Cir. 1985)(“Rule 803(4) applies only to statements made by the patient to the doctor, not the reverse.”). See also Wik v. Shelton, No. CV. 07-1726HA, 2009 WL 2163529, at *1 (D. Or. July 17, 2009)(“803(4) provides an exception to the hearsay rule for statements made by a patient to a doctor, but not for statements made by a doctor to a patient.”). The fact that Plaintiff's statement is a recitation of statements made by her medical professionals does not except it from the hearsay rule pursuant to Rule 803(4).

Accordingly, the Court will disregard Plaintiff's statement that she “did not recover properly from [her] low back surgery as a result of dealing with my insurance carrier.” The Court will not, however, disregard Plaintiff's statement that she suffers ongoing pain.

C. Exhibits N and O to McKean Declaration Plaintiff asserts in her Response to Defendant's Evidentiary Objections that Exhibits N and O to McKean's Declaration in support of Defendant's Reply are inadmissible and should be struck from Defendant's Reply. Specifically, Plaintiff asserts these documents are “correspondence of a compromised offer to resolve the case,” and, therefore, they may not be used to prove or disprove the validity or value of a claim pursuant to Federal Rule of Evidence 408.

Defendant responds that the letters in Exhibits N and O were not communications for the purpose of negotiating settlement; Defendant did not offer them to prove the value or invalidity of Plaintiff's claim, but rather to show that Defendant had issued payments at particular times; and, in any event, Defendant produced other evidence of the dates and amount of its payments to Plaintiff.

Because the Court relied on Defendant's other evidence of the dates and amounts of payments to Plaintiff and did not consider Exhibits N and O in its evaluation of Plaintiff's claims, the Court denies Plaintiff's motion to strike Exhibits N and O as moot.

II. PIP Payment Claim Plaintiff asserts Defendant breached the insurance contract when it failed to pay Plaintiff all of the income expense continuation benefits due under her PIP coverage.

The policy provides in relevant part: We will pay Oregon Personal Injury Protection [PIP] benefits to an insured who sustains “bodily injury” .... [PIP] benefits consist of the following: *** 2. “Income Continuation Expense”: 70% of the “insured's” loss of income from work during a period of disability provided that: a. The “insured” was usually employed at the time of the accident; and *4 b. The period of disability continues for at least 14 days.

Income continuation expenses include only expenses for loss of income incurred from the date the disability began to the date on which the “insured” is able to return to his usual occupation. Income continuation expenses will only be paid for a total of 52 weeks of loss of income.

McKean Decl., ECF 26 (“McKean Decl. I”), Ex. I at 19 (emphasis in original). The Limits of Liability section of the policy provides PIP is limited to “$3,000 per month, up to a maximum of 52 weeks, for ‘income continuation expenses’ ” Id. at 21.

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It is undisputed that Plaintiff satisfied the requirements for income continuation expense benefits from May 3, 2021, through March 28, 2022. The parties, however, dispute the total amount of benefits to which Plaintiff is entitled.

Defendant asserts it has paid Plaintiff all of the income continuation expense benefits to which she is entitled.

Plaintiff disagrees.

A. Contract Interpretation “[F]ederal court[s], sitting in diversity, appl[y] state law to interpret ... insurance polic[ies].” Good George, LLC v. Cincinnati Ins. Co., No. 3:20-CV-01705-AR, 2022 WL 16984217, at *3 (D. Or. Aug. 23, 2022)(citing Travelers Prop.

Cas. Co. of Am. v. ConocoPhillips Co., 546 F.3d 1142, 1145 (9th Cir. 2008)). Under Oregon law, the interpretation of an insurance policy is a question of law. Hunters Ridge Condo.

Ass'n v. Sherwood Crossing, LLC, 285 Or. App. 416, 422 (2017)(citing Hoffman Const. Co. v. Fred S. James & Co., 313 Or. 464, 469 (1992)).

“When interpreting insurance policies, Oregon courts ‘determine the intention of the parties based on the terms and conditions of the insurance policy.’ ”

Twigg v. Admiral

Ins. Co., 324 Or. App. 259, 269 (2023)(quoting Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469 (1992)). Oregon courts “interpret the policy ‘from the perspective of an ordinary purchaser of insurance.’ ” Id. (quoting Bighorn Logging Corp. v. Truck Ins. Exchange, 295 Or App 819, 828 (2019)). The court interprets terms that are not defined in the policy “according to their plain meaning.”

Id.(citation omitted). “The court determines whether words have a plain meaning by ‘reference to the usual source of ordinary meaning, the dictionary.’ ” N. Pac. Mgmt., Inc. v.

Liberty Mut. Fire Ins. Co., 558 F. Supp. 3d 1097, 1101 (D. Or. 2021)(quoting Phillips v. State Farm Fire & Cas. Co., 302 Or. App. 500, 506 (2020)(defining the term “directly” by reference to Webster's Third New Int'l Dictionary 641 (unabridged ed. 2002)).

“If there is more than one plausible interpretation of an undefined term, [the court] ‘examine[s] the word or phrase in the context in which it is used in the policy and the broader context of the policy as a whole.’ ” Id. (quoting Bighorn Logging, 295 Or. App. at 828). “If ambiguity or reasonable doubt remains regarding the meaning of a policy word or phrase in the context of the entire policy, that doubt is resolved against the drafter, the insurance company, and

in favor of the insured. Id. (citation omitted). Ultimately, the policyholder bears the initial burden of establishing coverage.

ZRZ Realty Co. v. Beneficial Fire & Cas. Co., 222 Or. App. 453, 465 (2008). If the policyholder satisfies this burden, the insurer then has the burden of establishing an exclusion to coverage. Id. *5 As noted, the policy defines income continuation expense benefits in relevant part as “70% of the ‘insured's’ loss of income from work during a period of disability” limited to the sum of ... $3,000 per month, up to a maximum of 52 weeks.” McKean Decl. I, Ex. I at 21. The policy does not define “income,” nor does it include any statement regarding the general purpose of the income continuation expense. Although the parties do not expressly assert differing definitions of “income,” their arguments indicate that Defendant asserts “income” means monthly revenue.

Plaintiff's arguments indicate that Plaintiff asserts “income” means revenue less expenses averaged monthly.

The Court interprets terms that are not defined in the policy “according to their plain meaning.” The dictionary defines “income” as “a gain or recurrent benefit usually measured in money that derives from capital or labor; the amount of such gain received in a period of time.” Webster's Third New Int'l Dictionary https://www.merriam-webster.com/ dictionary/income (last visited October 2, 2023). Black's Law Dictionary defines income as “[t]he money or other form of payment that one receives usu. periodically from employment, business, investments, royalties, gifts, and the like.” Income, Black's Law Dictionary (9th ed. 2009).

Neither of these sources’ definition of income includes expenses. In fact, Black's Law Dictionary specifically differentiates “income” from “profit” and defines profit as “the excess of revenues over expenditures in a business transaction.” Profit, Black's Law Dictionary (9th ed. 2009).

Similarly, Merriam Webster defines “profit” in relevant part as “the excess of returns over expenditure in a transaction or series of transactions; ... net income 1 usually for a given period of time.” Webster's Third New Int'l Dictionary https://www.merriam-webster.com/ dictionary/profit (last visited October 2, 2023). These definitions support Defendant's suggested definition of income as revenue rather than Plaintiff's suggested definition of revenue less expenses.

Plaintiff does not cite any policy provision, definition, or other authority support for her assertion that “income” under the policy should be defined as revenue less expenses.

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Nordin v. Standard Fire Insurance Company, Slip Copy (2023)

Rather, Plaintiff relies on the fact that during the claims adjustment process Defendant used information from the monthly profit and loss statements provided to it by Plaintiff instead of revenue taken from her business ledger to calculate Plaintiff's monthly income. Plaintiff asserts the profit and loss statements included the expenses from her business from May 3, 2020 through May 2, 2021 and, therefore, Defendant interpreted “income” within the meaning of the income continuation expense benefit provision as revenue minus expenses.

Defendant notes Plaintiff testified at deposition that her business ledger was the most accurate way to determine “how much [Plaintiff] made for appraisals” in a given month.

McKean Decl. II, Ex. J at 2. Plaintiff stated that because she was paid for appraisal work at differing times, her bank account records were not an accurate method of determining when she performed work. Specifically, Plaintiff testified it would be “pretty impossible” to “match up deposits [to her bank account] ... with the days that [she] perform[ed] ... work” because she was paid for doing appraisals at inconsistent times. Id. at 7. Plaintiff's business ledger does not include expenses, rather it lists each appraisal job she performed, how much she charged for the job, and whether and when she was paid. Defendant explains that it did not use the ledger during the claims adjustment process because Plaintiff did not produce her business ledger to Defendant until April 23, 2023, which was after discovery closed in this action.

Because Defendant was not aware of Plaintiff's business ledger during the claims adjustment process, it relied on the profit and loss statements provided by Plaintiff to calculate her income continuation expense benefits. Defendant's use of profit and loss statements under these circumstances do not establish that Defendant interpreted “income” under the policy as revenue less expenses. The Court concludes on this record that the plain meaning of “income” in the context of the income continuation expense benefit is revenue from Plaintiff's appraisals. *6 Even if the Court concluded “income” in the context of the income continuation expense benefit is revenue less expenses, the Court finds Plaintiff has not submitted admissible evidence to support her alleged expenses.

Specifically, the amounts Plaintiff cites as expenses for May 2021 through October 2021 come from the monthly profit and loss statements attached at Exhibit 14 to Lattin's Declaration.

The amounts used for expenses for November 2021 through January 2022 appear to come from the handwritten notes on the bank statements attached at Exhibit 14 to Lattin's

Declaration. For the reasons noted above, the Court has concluded these documents are inadmissible because they are not properly authenticated and they contain inadmissible hearsay. In addition, even if the bank statements are admissible, Plaintiff has not established that they accurately represent her expenses for November 2021 through January 2022 because Plaintiff testified at deposition that she “pay[s] all [her] business expenses on [her] credit card.” McKean Decl. II, Ex. K, at 118. Plaintiff, however, did not submit any of her credit card statements or evidence of her credit card statements. Finally, Plaintiff lists expenses of “$811.72 (avg.)” for both February and March 2022. Pl. Resp., ECF 29, at 21. Plaintiff, however, does not provide any support for that amount, nor is it clear what time period was used to average the expenses of $811.72. Moreover, Plaintiff testified at deposition that “most of [her] main expenses[, such as her real estate license,] are all pretty much at the beginning of the year, ... January, February, March.” McKean Decl. II, Ex. J, at 100. Plaintiff also stated, however, that her expenses for things such as her real estate license, her business license, training classes, and insurance premiums apply to different periods. For example, some are biannual payments, some are annual payments, and some are quarterly payments. Plaintiff, therefore, has not established that it is reasonable to assume Plaintiff's expenses in any individual month are indicative of her expenses in later months or that averaging payments for some unspecified period of time is a reasonably accurate way to determine expenses. The Court, therefore, concludes that if “income” within the meaning of the income continuation expenses benefit was intended to mean revenue less expenses, even viewing the evidence in the light most favorable to Plaintiff, Plaintiff fails to establish her expenses.

B. Amount of Benefits Paid by Defendant Defendant asserts Plaintiff is entitled to $26,132.10 in income continuation expense benefits and that it has paid Plaintiff in full. Plaintiff asserts even if the Court adopts Defendant's method of calculating her benefits, Defendant has paid her only $14,717.54.

Plaintiff relies on Defendant's PIP ledger attached to Lattin's Declaration to support her assertion. ECF 30, Ex. 6. The PIP ledger relied on by Plaintiff reflects payments to Plaintiff in the amount of $14,717.54 from May 24, 2021 through January 12, 2022. Defendant points out, however, that the PIP ledger relied on by Plaintiff is out of date and notes that the current PIP ledger reflects it paid Plaintiff $2,717.54, on January 13, 2022; $7,917.06, on February 27, 2023; and $799.96, on June 29, 2023, for a total of $26,132.10. Van Nest Decl., ECF 36,

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¶ 3, Ex. P. The Court concludes on this record that Defendant has established it has paid Plaintiff $26,132.10 in income continuation expense benefits.

C. Defendant's Method Calculation of Benefits In the two years before the motor vehicle accident Plaintiff reported that her business, Nordin Appraisal Service, had gross income of $85,456 in 2019 and $85,855 in 2020.

McKean Decl., Exs. G and H (United States Income Tax Form 1040, Schedule C tax years 2019 and 2020). Drawing all inferences in Plaintiff's favor, Defendant estimated that $85,855 was the annual income 2 that Plaintiff would have earned in 2021 and 2022 if she had not been injured in May 2021. Plaintiff's business ledger indicates she had actual income of $1,700 in May 2021 (after May 3, 2021); $3,875 in June 2021; $3,925 in July 2021; $7,440 in August 2021; $5,770 in September 2021; $3,175 in October 2021; $775 in November 2021; $1,785 in December 2021; $1,550 in January 2022; $3,125 in February 2022; and $2,350 in March 2022. Lattin Decl., Ex. 13. In reaching its total amount of income continuation expense benefits in this action Defendant calculated Plaintiff's lost income for each month during the relevant period by subtracting the actual income Plaintiff reported each month in her business ledger from the estimated monthly earnings of $7,154.59. 3 As noted, however, the policy permits recovery of only 70% of Plaintiff's lost income up to $3,000 per month. Accordingly, Defendant then multiplied each month's lost income by 70% and when that amount was less than $3,000, Defendant paid Plaintiff the actual amount for the month. When the amount was greater than $3,000, Defendant paid Plaintiff $3,000 for the month. Using this method, Defendant calculated Plaintiff's total income continuation expense benefits in the amount of $26,132.10. *7 The Court notes that Defendant ended its calculation of Plaintiff's actual income on March 31, 2022, and Plaintiff ended her calculation on March 25, 2022. As a result, Defendant included in Plaintiff's March 2022 income a payment of $575 on March 29, 2022, and a payment of $550 on March 31, 2022, neither of which are included in Plaintiff's calculations. Plaintiff's calculated actual income for March 2022 is, therefore, $1,125 less than that calculated

by Defendant. See McKean Decl. I, Ex. D at 3. The record reflects Plaintiff's work was impacted by her injuries through March 28, 2022. Id., Ex. F. Defendant, therefore, should not have included payments made after that date in its calculation of Plaintiff's actual income for March 2022. The difference

in actual income, however, does not affect the total amount of income continuation expense benefits as calculated by Defendant because using either actual income figure results in a 70% lost revenue figure that exceeds $3,000 for the month of March 2022. Under either actual income figure, therefore, Plaintiff was entitled to only $3,000 for March 2022 and Defendant paid Plaintiff $3,000 for March 2022. Accordingly, Defendant's error is not material.

D. Plaintiff's Method of Calculation As noted, Plaintiff asserts Defendant's method is improper because Defendant failed to consider Plaintiff's expenses. The Court, however, has already concluded “income” within the meaning of the policy is composed only of Plaintiff's revenue not revenue less expenses or, in the alternative, that Plaintiff failed to establish her requested expenses.

Plaintiff also asserts the method Defendant used to calculate Plaintiff's income in this action is improper because during the claims adjustment process Defendant used a monthly average to calculate Plaintiff's income continuation expense benefits.

Plaintiff asserts that Defendant should have continued to do so when calculating Plaintiff's benefits in this litigation. Under Plaintiff's suggested method, Defendant projected Plaintiff to make $85,855 annually when she was injured. Plaintiff, therefore, was projected to make $1,651.06 per week if she had not been injured. 4 Plaintiff was injured for 47 weeks, therefore, her projected annual income during her period of reduced work was $77,599.71. Plaintiff, however, earned actual income of $25,416.10 during the relevant 47-week period. The difference between Plaintiff's actual and projected income based on the weekly method is $52,183.61. Prorated over the 47 weeks of her injury, the “shortfall” in Plaintiff's weekly income was $1,110.29. In order to calculate a monthly shortfall, Plaintiff multiplies the $1,110.29 weekly income shortfall by four for a total monthly income shortfall of $4,441.16, Seventy percent of that figure is $3,108.81. As noted, Plaintiff's income continuation expense benefits are limited to a maximum of $3,000 per month. According to Plaintiff's method, therefore, Plaintiff is entitled to income continuation expense benefits of $3,000 every month for the 11 months that she was injured for a total of $33,000 rather than the $26,132.07 to which Defendant asserts Plaintiff is entitled.

Defendant asserts Plaintiff's method is not supported by the language of the policy or the record. Specifically, Defendant notes the policy permits Plaintiff to recover “70% of [her]

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loss of income from work during a period of disability.” The policy, therefore, contemplates payment for 70% of income actually lost rather than recovery of estimated weekly income averaged monthly, particularly when, as here, there is a record of Plaintiff's actual income during the relevant period. In addition, the policy provides a limit of $3,000 per month, not per four weeks. According to Defendant, therefore, it was required to determine Plaintiff's actual income per month during the relevant period and Plaintiff is entitled to recover 70% of that actual lost income per month up to $3,000.

Plaintiff does not point to any language in the policy that supports calculating average weekly income and multiplying that by four.

Defendant explains that it used an average monthly income calculation method during the claims adjustment process because it was not aware of Plaintiff's business ledger in which she specifically tracked her business income by date.

As noted, Plaintiff did not produce her business ledger to Defendant until after the close of discovery. At deposition after she produced her business ledger Plaintiff testified that her ledger was the most accurate way to calculate her actual monthly income. McKean Decl. II, Ex. J at 2. Plaintiff stated that determining how much less income she earned while she was injured was “a little tricky ... because VA pays a lot more money per appraisal; so I can do very few appraisals and just do a few of VA, and I still make as much money if I worked for other companies that pay[ ] me ... less for an appraisal .... [E]very company pays me different.” McKean Decl. I, Ex. A at 5. In addition, she does not get paid the same day that she does an appraisal, and the payment times vary. Id., Ex. A at 8. As a result, to accurately figure out “how much money [Plaintiff] made in any given time period,” one would have to review Plaintiff's business ledger. In fact, in her Response, Plaintiff uses the income figures taken from her business ledger in her calculations of the amount of income continuation expenses benefits that she asserts she is due rather than the income figures she used in the profit and loss statements that she provided to Defendant during the claims adjustment process. Compare Pl.’s Response at 20 and Lattin Decl., Ex 13 (revenue for August 2021 of $7,440) with Lattin Decl., Ex. 14 at 3 (income for August 2021 of $3,715). *8 Finally, Defendant notes that the ledger demonstrates that the number of appraisal jobs that Plaintiff performed per month and that the amount of income she earned per month varied significantly throughout the relevant period.

For example, in September 2021 Plaintiff performed 11 inspections and in November 2021 she performed only one.

McKean Decl. I, Ex. D at 2. Conversely, Plaintiff had income of $4,465.71 in November 2021 and $969.21 in September 2021. Id. The average income approach that Plaintiff suggests Defendant should have continued to use even after it received her business ledger fails to account for these wide variations in the amount of work performed by Plaintiff each month and the amount of income Plaintiff received each month.

The Court concludes that Defendant has established that the provisions of the policy and the record support use of Defendant's method of calculating Plaintiff's income continuation expense benefits based on Plaintiff's monthly income found in her business ledger. Defendant has also established that using this method Plaintiff was entitled to $26,132.07 in income continuation expense benefits and that Defendant has fully paid Plaintiff that amount. Accordingly, the Court grants Defendant's Motion for Summary Judgment as to Plaintiff's claim for breach of contract.

III. Breach of Implied Covenant of Good Faith In her second claim Plaintiff alleges that “[a]s a direct and foreseeable result of [Defendant's] breach of its duty of good faith and fair dealing, plaintiff has suffered additional and unnecessary non-economic damages.” Compl. ¶ 17.

Defendant moves for summary judgment on this claim on the basis that Plaintiff seeks only noneconomic damages for that claim and under Oregon law Plaintiff cannot recover noneconomic damages for breach of the implied covenant of good faith.

Under Oregon law every contract has an implied covenant of good faith and fair dealing. See, e.g., Zygar v. Johnson, 169 Or. App. 638, 645 (2000)(“Every contract contains an implied covenant of good faith and fair dealing, one that serves to protect the objectively reasonable contractual expectations of the parties.”). “Significantly, however, that implied covenant cannot contradict an express contractual term, nor otherwise provide a remedy for an ... act that is permitted expressly by the contract.” Id. (citation omitted). See also Morrow v.

Red Shield Ins. Co., 212 Or. App. 653, 661-62 (2007)(“The law imposes a duty of good faith and fair dealing to facilitate performance and enforcement of the contract when it is consistent with and in furtherance of the agreed-upon terms of the contract, or where it effectuates the parties’ objectively reasonable expectations under the contract.”). Because the Court has concluded that Defendant did not breach the insurance contract in its payment of PIP benefits, the Court also concludes Defendant did not breach the implied duty of good faith and fair dealing. See, e.g., Ramos v. Wells Fargo

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Bank N.A., No. 6:12-CV-00246-AA, 2012 WL 4863708, at *5 (D. Or. Oct. 5, 2012)(Noting the covenant of good faith and fair “cannot ... provide a remedy for an act ... that is expressly permitted by the terms of the contract,” and, therefore, the defendants’ enforcement of the terms of the loan contract on plaintiffs’ material default was “not actionable.”)(quotation omitted)); Uptown Heights Assocs. Ltd. P'ship v. Seafirst Corp., 320 Or. 638, 645 (1995)(“The party invoking its express, written contractual right does not, merely by so doing, violate its duty of good faith”).

Even if Plaintiff could bring a claim for the breach of the duty of good faith and fair dealing, as noted, Plaintiff seeks only noneconomic damages for that claim. Defendant points out that in Keltner v. Washington County., 100 Or. App. 27 (1990), the Oregon Court of Appeals stated it was “bound by the holding of Farris v. U.S. Fid. and Guar. Co., 284 Or. 453 (1978), that emotional distress damages are not recoverable in a contract action.” Id. at 30. The Oregon Supreme Court affirmed that holding and declined to “reconsider the general rule of law in Oregon that a plaintiff in an action for breach of contract may not recover damages for purely mental distress.”

Keltner v. Wa. Cnty., 310 Or. 499, 502 (1990). The Court noted that in Farris it had reversed an award to the plaintiff of contract damages for mental distress explaining: *9 “the defendant's failure to undertake representation of plaintiffs ... could only have been a breach of contract, and, in cases of breach, the law is clear that no recovery for mental distress because of threat of pecuniary loss is recoverable.

Plaintiffs argue that one who enters into a contract of insurance does so to guarantee himself peace of mind in case an action or claim is made against him .... The argument does not furnish a logical basis for recovery for emotional distress because many contracts for services, materials or financial assistance, as well as insurance contracts, are similarly made for economic and financial peace of mind.”

Id. at 507-08 (quoting in Keltner).

Farris, 284 Or. at 464–65)(emphasis

Plaintiff concedes that “ordinarily, emotional distress caused by pecuniary loss resulting from a breach of contract is not recoverable.” McKenzie v. Pac. Health & Life Ins. Co., 118 Or. App. 377, 381 (1993)(citing Farris, 284 Or. 456). Plaintiff asserts, however, that McKenzie created a narrow exception to

Farris and that Plaintiff satisfies the criteria of that exception permitting her to recover emotional-distress damages for her breach of contract claim.

In McKenzie the defendant issued a policy to the plaintiff that insured him against major medical expenses up to $1 million. The plaintiff developed aseptic necrosis in both hips. The plaintiff advised the defendant that he would need surgery to treat his aseptic necrosis, but the defendant denied coverage. 118 Or. App. at 379. The plaintiff brought an action alleging the defendant refused to authorize surgery for the plaintiff's condition “without investigation of any kind and specifically in contradiction to the medical advice received by plaintiff's physician.” Id. The plaintiff asserted a claim for breach of the implied covenant of good faith and fair dealing in which he alleged the defendant's breach “caused plaintiff ... bodily harm” and “[a]s a result of defendant's breach, plaintiff ... has suffered bodily harm and emotional distress.” Id. at 380. The defendant moved to strike plaintiff's allegations that the defendant's breach caused the plaintiff to suffer bodily harm and emotional distress. The trial court granted the defendant's motion. The Oregon Court of Appeals reversed acknowledging that “[o]rdinarily, emotional distress caused by pecuniary loss resulting from a breach of contract is not recoverable.” Id. (citing Farris, 284 Or. at 456).

The court, however, noted that “[w]hen ... the emotional distress is caused by physical harm that results from the breach of contract, the case is different” and emotional distress damages may be allowed. Id. (citing Coffey v.

Northwestern Hospital Assn., 96 Or. 100, 115 (1919); Keltner, 310 Or. at 506). Plaintiff here asserts that because she has alleged that she suffered headaches and physical tension as a result of the way Defendant handled her claim, her claim is similar to that in McKenzie and she has sufficiently established she may claim emotional distress damages for her breach of contract claim.

Defendant asserts McKenzie is an Oregon Court of Appeals decision, accordingly, to the extent it contradicts or expands an exception to the Oregon Supreme Court's holding in Farris, the Oregon Supreme Court's decision in Farris governs. In addition, even if McKenzie is permissible, it is distinguishable. Specifically, in McKenzie the plaintiff's health insurance company refused to pay for the plaintiff's surgery and as a result the plaintiff experienced physical injury due to the delay in his ability to receive surgery for his aseptic necrosis. The Court of Appeals specifically noted emotional-distress damages may be allowed when the

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emotional distress is caused by the physical harm that results from breach of contract. Here, however, Plaintiff testified at deposition that she did not “suffer any physical injury as a result of the way [Defendant] handled [her] claim.” McKean Decl., Ex. K at 3. Plaintiff, in fact, alleges the reverse of the plaintiff's allegations in McKenzie: Plaintiff's emotional distress from Defendant's alleged breach caused her physical harm in the form of headaches and physical tension. *10 The Court need not determine whether McKenzie seeks to impermissibly expand or extend an exception in Farris or whether it contradicts Farris because the Court concludes even if McKenzie's holding is permissible, it does not apply here. The Court agrees with Defendant that Plaintiff alleges her emotional distress from Defendant's alleged breach of the duty of good faith and fair dealing caused her to suffer physical injuries, i.e., headaches and physical tension, not that Defendant's alleged breach caused her physical injury that, in turn, caused her emotional distress. The Court, therefore, applies the “general rule of law in Oregon that a plaintiff in an action for breach of contract may not recover damages for purely mental distress.” Keltner., 310 Or. 502. Accordingly, the Court grants Defendant's Motion for Summary Judgment as to Plaintiff's claim for breach of the duty of good faith.

IV. Negligent Infliction of Emotional Distress In her claim for negligent infliction of emotional distress Plaintiff alleges a “special relationship was created between” the parties due to “the insurance contract entered into between plaintiff and defendant.” Compl. ¶ 19. Plaintiff alleges that Defendant's “failure or refusal to resolve” Plaintiff's claim for income continuation expense benefits “violated duties that were implied under the parties’ contract of insurance, as well expressly provided under applicable insurance codes.”

Id. ¶ 21. “In failing to abide by the terms of the insurance contract entered into with plaintiff defendant intended to inflict emotional distress, or alternatively knew, or should have known that emotional distress was substantially certain to result from defendant's conduct.” Id. ¶ 22. As a result of Defendant's alleged failure to pay Plaintiff's income continuation expense benefits “as was required under both the parties’ insurance contract, as well as was mandated under the Oregon Insurance Code, plaintiff suffered emotional distress including anxiety, disappointment, grief and worry.” Id. ¶ 23.

Plaintiff seeks noneconomic damages.

It is not entirely clear from Plaintiff's Complaint whether Plaintiff intends to assert a claim for negligence based on Plaintiff's relationship with Defendant or a claim for

negligence per se based on Defendant's alleged violation of Or. Rev. Stat. § 746.230. In any event Defendant asserts in its Motion for Summary Judgment that Plaintiff's claim for negligent infliction of emotional distress whether brought as a claim for negligence or negligence per se, fails as a matter of law because the Oregon Supreme Court has “consistently ... rejected claims for emotional distress caused by a defendant's negligence, in the absence of any physical injury.”

Paul v.

Providence Health Sys.-Or., 351 Or. 587, 597 (2012)(citing Hammond v. Central Lane Communications Ctr, 312 Or. 17, 23 (1991)).

“Under Oregon law, a plaintiff who has suffered emotional distress as a result of a defendant's negligence ordinarily may not recover damages for such emotional harm in the absence of some sort of physical impact.” I. K. v.

Banana Republic, LLC, 317 Or. App. 249, 254 (2022)(citing Norwest v. Presbyterian Intercommunity Hosp., 293 Or. 543, 558-61 (1982)). “There is an exception to that general rule when the defendant violated a ‘legally protected interest’ independent of the plaintiff's interest in being free from negligent conduct.” Id. (citing

Norwest, 293 Or. at 559).

In Philibert v. Kluser, 360 Or. 698 (2016), the Oregon Supreme Court held that a “legally protected interest” in the context of a claim for negligent infliction of emotional distress is “an independent basis of liability separate from the general duty to avoid foreseeable risk of harm.”

Id. at 704. The court added, however, that to support a claim for negligent infliction of emotional distress the legally protected interest must be “of sufficient importance as a matter of public policy to merit protection from emotional impact.”

Id. at 705. For example, although the law recognizes a right of privacy, the invasion of that right will not always support a claim for emotional distress, “because the nature and context of the invasion influences the extent to which privacy is legally protected and can be the basis for a successful emotional distress claim.” Id. In addition, the emotional distress must have been a foreseeable result of violation of the legally protected interest. Id. See also Shin v. Sunriver Preparatory Sch., Inc., 199 Or. App. 352, 365 (2005)(explaining that the exception applies only when “liability for negligence [has] a legal source that goes beyond the common-law duty to exercise reasonable care to prevent foreseeable harm” and “the legally protected interest so identified [is] of sufficient importance to warrant the award

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of damages for emotional distress.”); Tovar v. United States, No. 3:21-CV-01794-HZ, 2022 WL 1125657, at *4 (D. Or. Apr. 15, 2022)(citing Lowe v. Philip Morris USA, Inc., 207 Or. App. 532, 545 (2006))(“In other words, if a party has assumed a heightened duty of care, [the court must determine whether] ... that heightened duty “include[ ] a specific duty to avoid the infliction of emotional distress.”).

*11 The analysis of a claim for negligent infliction of emotional distress thus proceeds in three steps: First, [the court] must determine whether the complaint alleges the violation of a legally protected interest.

Second, [the court] must determine whether such interest is of sufficient importance as a matter of public policy to merit protection from emotional impact. And third, [the court] must determine whether the complaint alleges that the emotional distress was the foreseeable result of the violation of the legally protected interest. 5

I. K., 317 Or. App. at 255.

A. Legally Protected Interest Defendant asserts insurance contracts do not create a special relationship between an insurer and an insured sufficient to establish an independent basis of liability separate from the general duty to avoid foreseeable risk of harm and, therefore, they do not support emotional distress damages.

The Court agrees. In Shin the court noted that if an insurer undertakes to defend its insured against a third-party claim, the carrier assumes control of the defense and settlement negotiations and therefore stands in a special relationship with the insured. Id. at 366 (citing Georgetown Realty v.

The Home Insurance Company, 313 Or. 97, 110-11 (1992)).

When, however, “the insurer does not undertake the defense of the insured, the carrier does not assume the fiduciary duty that would result from having done so, and its responsibilities are confined to the contract terms.” Id. (citing Farris, 284 Or. at 460; Warren v. Farmers Ins. Co. of Or., 115 Or. App. 319, 324–25 (1992)).

In her Response Plaintiff appears to concede that the insurance contract in this case does not create a special relationship between Plaintiff and Defendant sufficient to give rise to a legally protected interest. Plaintiff, however, asserts

Oregon Revised Statute § 746.230 and the

Oregon Court of Appeals’ decision in Moody v. Oregon Community Credit Union, 317 Or. App. 233 (2022), provide an independent standard of care that qualifies “as a legal source that goes beyond the common-law duty to exercise reasonable care to prevent foreseeable harm.”

Although Plaintiff did not specifically set out provisions of Or. Rev. Stat. § 746.230 that she asserts create the required standard of care, in her Response Plaintiff asserts the following provisions of that statute apply to provide an independent duty of care: (1) An insurer or other person may not commit or perform any of the following unfair claim settlement practices: *** (c) Failing to adopt and implement reasonable standards for the prompt investigation of claims; (d) Refusing to pay claims without conducting a reasonable investigation based on all available information; *** (f) Not attempting, in good faith, to promptly and equitably settle claims in which liability has become reasonably clear; (g) Compelling claimants to initiate litigation to recover amounts due by offering substantially less than amounts ultimately recovered in actions brought by such claimants; *** (l) Failing to promptly settle claims under one coverage of a policy where liability has become reasonably clear in order to influence settlements under other coverages of the policy.

Defendant asserts in its Reply that the Oregon Supreme Court's decision in Farris forecloses Plaintiff's argument because in that case the Court made clear that emotional

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distress damages that result from an insurer's claim handling practices are not the kind of harm that enacted to prevent.

§ 746.230 was

Emp'rs Fire Ins. Co. v. Love It Ice Cream Co., 64 Or. App. 784 (1983)(rejecting bad faith claim for refusal to pay

*12 The Oregon Supreme Court held in Farris that Or. Rev. Stat. § 746.230 does not permit recovery of emotional distress damages. The Court explained “[i]t is evident from [ § 746.230] that it was the intention of the legislature to prohibit insurance companies from intentionally breaching their contract to settle their insureds’ claims ... and to inflict certain consequences for so doing.”

statutory theory, holding that a violation of [ § 746.230] ‘does not give rise to a tort action.’ ” Id. at 578 (quoting

Farris, 284 Or. at

458. “Because [ § 746.230] ... provide[s] for the payment of damages not usually recoverable in such a situation, it would appear that had the legislature intended to enlarge the damages further [to include emotional distress damages], it would have so provided.” Id. The Court concluded “[i]t was certainly not intended by the legislature that additional pressure to perform the contract be exerted by allowing the recovery of damages for emotional distress since the statute provides for civil damages recoverable by the state for that purpose.” Id. Indeed, “[t]here is nothing to indicate that the legislature intended, when it prohibited certain claims settlement practices in ORS 746.230, that actions for breach of insurance contracts would be transformed, in all of the covered instances, into tort actions with a resulting change in the measure of damages.” Id. In addition, Or. Rev. Stat. § 746.230 “express[es] no public policy which would promote damages for emotional distress. Concern about the insured's peace of mind does not appear to be the gravamen of the statutory policy.” Id. Plaintiff asserts Farris does not apply because she “does not invoke Defendant's violation of ORS 746.230 as a cause of action, in an of itself,” rather she relies on the statute only to determine that claim's “standard of care” element for her common law claim of negligence. Pl.’s Resp. at 10. Courts, however, have found such a claim is not actionable whether framed as a claim for violation of the statute, for negligence, or for negligence per se. For example, in Braun-Salinas v. Am. Family Insurance Group, the plaintiffs asserted that Oregon has recognized negligence per se claims based on an insurer's failure to pay insurance benefits in violation of the standard of care set forth in Oregon Revised Statute § 746.230.

665 F. App'x 576, 577 (9th Cir. 2016). The Ninth Circuit noted that “[t]he Oregon Court of Appeals has rejected a

fire insurance benefits in violation of

ORS 746.230) and

citing Richardson v. Guardian Life Ins. Co. of Am., 161 Or. App. 615 (1999)(rejecting bad faith claim for refusal to pay disability insurance benefits in violation of ORS 746.230 because such a violation was “not independently actionable”)). The plaintiffs asserted that Love It Ice Cream and Richardson barred “a statutory claim - meaning a private right of action created by statute - whereas the [plaintiffs brought] a common law claim for negligence per se that relies on the statute only to determine that claim's “standard of care” element.” Id. (emphasis in original). The Ninth Circuit found the plaintiffs’ argument “unpersuasive because the Oregon Court of Appeals has also declined to recognize a common law negligence claim for failure to pay first-party insurance benefits.” Id. (citing Strader v. Grange Mut. Ins. Co., 179 Or. App. 329 (2002)). For the reasons set out in BraunSalinas, this Court finds Plaintiff's assertion that she “does not invoke Defendant's violation of ORS 746.230 as a cause of action, in an of itself,” rather she relies on the statute only to determine that claim's “standard of care” element for her common law claim of negligence is unavailing. Oregon courts have concluded that emotional distress damages are not available for violations of § 746.230 or for common law negligence claims resting on that statute.

Plaintiff also relies on Abraham v. T. Henry Constr., Inc., 230 Or. App. 564 (2009) in which the Oregon Court of Appeals recognized a negligence per se claim based on violations of the building code. “In the insurance context, however, Oregon courts have declined to recognize a claim based on failure to pay first-party insurance benefits under both a statutory and common law negligence theory,” therefore, this case is in applicable under the circumstances here. Braun-Salinas, 665 F. App'x 578. *13 Finally, Plaintiff asserts the Oregon Court of Appeals recently found that a claim for negligence per se based on violation of

§ 746.230 was permitted under Oregon law

in Moody v. Oregon Community Credit Union, 317 Or. App. 233 (2022). The defendants in Moody asserted that even if a plaintiff may state a claim for negligence per se

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based solely on the violation of a statute, plaintiff in that case could not do so because the Supreme Court determined in Farris that

ORS 746.230(1) does not provide a cause

of action for damages.

Id. at 243. The Oregon Court of Appeals concluded that Farris did not answer the inquiry because its statement that “[t]here is nothing to indicate that the legislature intended, when it prohibited certain claims settlement practices in ORS 746.230, that actions for breach of insurance contracts would be transformed, in all of the covered instances, into tort actions with a resulting change in the measure of damages” was dictum, and, therefore, “has 6

no particular precedential force.” Id. at 243–44, 245. The court also stated the issue in Farris was different from that in Moody because Farris involved whether the legislature intended to create a statutory cause of action, Moody involved whether the violation of a statute may support a negligence per se claim.

Id. at 246. “The fact that the legislature may not have intended to create a private right of action for recovery of emotional distress damages does not necessarily mean that the legislature did not enact ORS 746.230, at least in part, to prevent such emotional distress from occurring.” Id. Ultimately, the Court of Appeals concluded the trial court erred when it dismissed the plaintiff's claim for negligence per se and struck her allegation of emotional distress damages. The court explained.

[t]he legislature may well have declined to provide a private right of action for damages when it enacted ORS 746.230. But, ... given that the very nature of insurance is that it is purchased to ensure peace of mind, it is hard to imagine that the legislature did not intend the law ... to prevent policyholders from being forced to experience the stress of dealing with unfair insurance claim settlement practices.

Scottsdale Ins. Co., No. 6:22-CV-01764-MC, 2023 WL 2968624, at *2 (D. Or. Apr. 17, 2023). See also Koa v. Allstate Indem. Co., No. 1:22-CV-00658-CL, 2023 WL 3066268, at *1 (D. Or. Mar. 23, 2023)(declining to adopt magistrate judge's recommendation to follow Moody); White v. United Heritage Prop. & Cas. Co., No. 3:21-CV-01524JR, 2023 WL 2611152, at *1 (D. Or. Mar. 23, 2023)(“The Court finds that the ruling by Oregon Court of Appeals in Moody [ ] has not definitively changed Oregon law to allow a plaintiff to bring a negligence per se claim against an insurer for impermissible claim settlement practices in violation of O.R.S. 746.230. Additionally, because Plaintiff cannot recover either emotional distress damages or punitive damages, his negligence per se claim fails.”).

In any event, federal courts sitting in diversity apply “ ‘the substantive law of the state.’ ” Clark v. Eddie Bauer LLC, 30 F.4th 1151, 1154 (9th Cir. 2022) (quoting Albano v.

Shea Homes Ltd. P'ship, 634 F.3d 524, 530 (9th Cir. 2011)).

When “determining the law of the state for purposes of diversity, a federal court is bound by the decisions of the highest state court.” Id. (quotation omitted). “In the absence of such a decision, a federal court must predict how the highest state court would decide the issue.” In re Kirkland, 915 F.2d 1236, 1239 (9th Cir. 1990). The Court notes that although Moody found the Oregon Supreme Court's decision in Farris was dictum, the Oregon Court of Appeals itself has not consistently reached that same conclusion. See e.g., Richardson, 161 Or. App. at 623-24 (violations of ORS 746.230 “are not independently actionable,” citing Farris); Love It Ice Cream, 64 Or. App. at 790 (violation of ORS 746.230 “does not give rise to a tort action,” citing Farris). In addition, this Court concludes Farris provides strong guidance as to how the Oregon Supreme Court would decide the issue. Accordingly, the Court concludes the Oregon Supreme Court would likely decide that § 746.230 does not permit recovery of emotional distress damages nor are emotional distress damages permitted for a common law claim for negligence or a claim for negligence per se premised on an insurer's failure to satisfy

Id. at 248.

Defendant points out that judges in this Court have “declined to follow Moody, concluding it does not align with the Oregon Supreme Court opinion in Farris.” Leonard v.

§ 746.230.

*14 The Court, therefore, concludes Plaintiff has not established a sufficient legally protected interest to support emotional distress damages for her negligence claim.

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Nordin v. Standard Fire Insurance Company, Slip Copy (2023)

B. Interest of Sufficient Importance As noted, “ ‘[n]ot just any legally protected interest warrants protection against emotional distress. The interest must be of sufficient importance as a matter of public policy.’ ” I. K., 317 Or. App. at 261 (quotation omitted). “There appears to be no clear-cut test for determining whether a given interest is of sufficient importance. Primarily, it appears that courts compare the interest at issue with those that the courts have found to be of sufficient importance in other cases.” Id. at 262.

Defendant asserts the alleged invasion of the interest here was not of sufficient importance to warrant the award of damages for emotional distress. Defendant notes that Oregon courts “have held that, where the underlying loss is an economic or property loss that predictably also results in emotional distress, the invasion is not of sufficient importance to warrant an award of damages for emotional distress.”

In summary, the Court concludes Plaintiff fails to establish a claim for negligent infliction of emotional distress. The Court, therefore, grants Defendant's Motion for Summary Judgment as to that claim.

CONCLUSION The Court GRANTS Defendant The Standard Fire Insurance Company's Motion for Summary Judgment. ECF 24.

IT IS SO ORDERED.

EXHIBIT 1

Shin, 199

Or. App. at 371. For example, in Collver v. Salem Ins. Agency, Inc., 132 Or. App. 52, 54-55 (1994), the court held that the loss of the plaintiff's driving privileges due to the allegedly negligent failure of his insurance broker and carriers to procure auto insurance coverage was not an invasion of sufficient importance to warrant an award of damages for emotional distress because the invaded interest was “chiefly an economic one.” Similarly, in McCulloch v. Price Waterhouse LLP, 157 Or. App. 237, 251–52 (1998), the court held that the alleged infringement by the defendant accountants of the plaintiff's interest in trust assets and in having tax returns filed timely was not sufficient to support an award for emotional distress. Defendant contends that unlike in Shin, Plaintiff here suffered emotional distress as a secondary consequence of an economic or property loss allegedly caused by Defendant's. The Court agrees and concludes, therefore, that Plaintiff has not established the alleged invasion of the interest here was of sufficient importance to warrant an award of damages for emotional distress.

EXHIBIT 2

All Citations Slip Copy, 2023 WL 6462616

Footnotes 1

Net income is defined as “the balance of gross income remaining after all allowable deductions and exemptions are taken.” Webster's Third New Int'l Dictionary https://www.merriam-webster.com/legal/net% 20income (last visited October 2, 2023).

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Nordin v. Standard Fire Insurance Company, Slip Copy (2023)

2

$85,855 rounds to a monthly gross revenue of $7,154.58. Defendant, however, used $7,154.59 in its calculations of Plaintiff's income continuation expense benefits and Plaintiff does not object to that portion of Defendant's calculations. The Court, therefore, uses the estimated monthly revenue of $7,154.59 in its analysis.

3

See Exhibit 1 to this Opinion and Order for calculations.

4

See Exhibit 2 to the Opinion and Order for calculations.

5

Because the Court concludes Plaintiff fails to establish the first two steps, the Court does not address the third step.

6

The court noted, however, that it “appear[s] to have endorsed th[e] assumption” that the holding in Farris made clear that violation of

§ 746.230 does not give rise to a negligence claim. Id. at 244 n.2 (citing

Richardson v. Guardian Life Ins. Co., 161 Or. App. 615, 623-24 (1999) (violations of “are not independently actionable,” citing Farris);

ORS 746.230

Love It Ice Cream, 64 Or. App. 784, 790, 670 P.2d 160

(1983)(violation of ORS 746.230 “does not give rise to a tort action,” citing Farris). The court, nevertheless, reached the opposite conclusion in Moody.

End of Document

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