Opinion
3:23-cv-262-JR
12-19-2023
RYAN CORBRIDGE, Plaintiff, v. ENCOMPASS INDEMNITY COMPANY, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo, United States Magistrate Judge
Plaintiff, Ryan Corbridge, brings this action against defendant, Encompass Indemnity Company, alleging wrongful use of civil proceedings and intentional infliction of emotional distress (IIED). Plaintiff moves for leave to file a fourth amended complaint. Defendant moves to dismiss. For the reasons stated below, the motion to amend should be granted and the motion to dismiss should be denied.
BACKGROUND
In January 2015, Tara Dorney sustained injuries as a result of car accident with Grant Gruber. Dorney's insurer, Commerce West Insurance Company, paid $51,000 in personal injury protection (PIP) benefits to Dorney.
Defendant Encompass Indemnity Company insured Gruber. Dorney brought an action against Gruber and reached a settlement where Gruber paid Dorney $144,788 in exchange for dismissal of the case with prejudice. The agreement did not specify who was responsible for reimbursing Commerce West for their $51,000 PIP payment.
Commerce West pursued reimbursement pursuant to Or. Rev. Stat. § 746.534. Commerce West and Encompass entered into an agreement to resolve Commerce West's claim for $51,000 through binding intercompany arbitration. Following arbitration, Encompass was required to pay Commerce West $51,000.
After Encompass was ordered to pay Commerce West, Encompass demanded Dorney satisfy their $51,000 debt to Commerce West and Dorney refused. Encompass, through its attorney Doug Foley, initiated an action in Washington County, Oregon on or about February 16, 2021, against Dorney and Dorney's counsel plaintiff Corbridge. Encompass asserted Dorney agreed to satisfy all liens, subrogation claims, or other rights of interest asserted against the $144,788 settlement and that Dorney and her counsel was thus liable for the $51,000 Encompass was ordered to pay Commerce.
Plaintiff Corbridge did not formally appear in the Washington County case. On or about March 5, 2021, the Washington County Court entered the following Stipulated General Judgment of Dismissal:
Plaintiff, Encompass Indemnity Company, by and through its attorneys, Douglas F. Foley, of Foley Sampson & Nicholes, PLLC, and Defendants, Ryan Corbridge, Corbridge Law Offices, P.C., and Tara Dorney, by and through their attorney, Heather C. Beasley, of Davis Rothwell Earle & Xochihua, P.C., hereby agree and stipulate to a General Judgment of Dismissal with prejudice and without costs to any party on all claims as this matter has been fully resolved.
Encompass obtained none of the relief sought in the complaint, however it did negotiate with Commerce, a reduction to the $51,000 it owed pursuant to the arbitration award prior to entering into the stipulated dismissal with plaintiff and Dorney.
Plaintiff initiated this action in Multnomah County, Oregon Circuit Court on January 23, 2023, alleging Encompass instructed the attorney defending Gruber to settle “for the sum of $144,766, inclusive of the $51,000 debt owed by Encompass to Commerce West.” Complaint at ¶ 16 (ECF 1-1). Plaintiff asserts counsel nonetheless settled the case “for $144,766, exclusive of the $51,000 debt owed by Encompass to Commerce West.” Id. at ¶ 17. Plaintiff alleges defendant Encompass hired Doug Foley to sue plaintiff for the $51,000 to “cover up, and/or to repair,” the conduct of counsel hired to defend Gruber. Id. at ¶ 18.
Plaintiff alleges defendant Encompass knew its allegation in the complaint against him and Dorney were false when asserting Commerce West had a PIP lien in the amount of $51,000 for payments made to her and thus owed Encompass for the resulting $51,000 award against it to Commerce West. Id. at ¶¶ 23-24. Thus, plaintiff alleges, defendant is liable in “tort” to plaintiff for the damage he suffered as a consequence of the lawsuit filed against him and Dorney.
Defendant Encompass removed the case to this Court on February 22, 2023. The parties then conferred regarding the sufficiency of the complaint. The parties discussed voluntary amendment to state a cause of action for wrongful use of civil proceedings and also discussed whether the complaint appropriately alleged the elements including whether malice has been alleged. On February 28, 2023, plaintiff's counsel informed defense counsel he intended to amend to address concerns regarding the pleading of a claim for wrongful use of a civil proceeding and that he was going to add an intentional infliction of emotional distress (IIED) claim. (ECF 21
On March 3, 2023, Plaintiff filed an amended complaint asserting a claim for wrongful use of a civil proceeding. (ECF 6). Plaintiff did not assert a claim for IIED and noted he initially brought an action for wrongful use of a civil proceeding in the Multnomah County complaint. Id. at p. 1.
On March 17, 2023, defendant again communicated to plaintiff it believed the complaint failed to sufficiently plead the elements of wrongful use of a civil proceeding specifically arguing the complaint pleaded the favorable termination element in a conclusory fashion. (ECF 21-4 at p. 6). Nonetheless, the parties agreed that plaintiff could file another amended complaint.
Plaintiff filed a second amended complaint on March 21, 2023, again asserting only a claim for wrongful use of a civil proceeding. On April 4, 7, and 10, 2023, defendant informed plaintiff it believed the allegations were deficient and that it intended to file a motion to dismiss. (ECF 284 at pp. 10-11). Plaintiff offered again to amend. Id. at pp. 11, 13-14.
On April 17, 2023, plaintiff filed a third amended complaint and for the first time asserted a claim for IIED in addition to wrongful use of a civil proceeding.Third Amended Complaint (ECF 14). On April 21, 2023, defense counsel informed plaintiff's counsel of his belief that the complaint still failed to plead a claim for wrongful use of a civil proceeding and that no amendment could cure the deficiency. (ECF 28-4 at p. 15). Defendant also asserted the IIED claim was barred by the statute of limitations. Id. at p. 16. The parties subsequently engaged in discussions regarding the filing of a Fourth Amended Complaint. Plaintiff then filed a motion to amend, and defendant seeks dismissal of this action with prejudice. Accordingly, the Court focuses on the proposed Fourth amended Complaint in determining whether plaintiff has plausibly alleged claims for wrongful use of a civil proceeding and IIED.
Plaintiff changed the introduction of the complaint to assert he brought an action in Multnomah County asserting the IIED claim in addition to the wrongful use of civil proceeding claim.
Defendant also complained that plaintiff failed to obtain consent to file the third amended complaint or seek leave of court to file. (ECF 28-4 at p. 17).
PROPOSED ALLEGATIONS
In the proposed Fourth Amended Complaint, plaintiff alleges Tara Dorney hired plaintiff Ryan Corbridge to represent her for injuries she sustained in a January 6, 2015, motor vehicle collision caused by Grant Gruber. Proposed Fourth Amended Complaint (ECF 21-3) at ¶ 5. Commerce West insured Dorney and paid Dorney $51,000 in PIP benefits. Id. at ¶¶ 7-8. Encompass insured Gruber. Id. at ¶ 10.
Plaintiff alleges Commerce West notified him that the PIP limit had been reached and that it would pursue its own subrogation interest. Id. at ¶ 9. Plaintiff asserts Commerce West informed Encompass that it elected to pursue reimbursement of the $51,000 directly from Encompass. Id. at ¶ 11.
Plaintiff alleges Encompass attorney Doug Foley received a ruling, prior to filing the action against Dorney and Corbridge, informing him that when a liability insurer makes a prejudgment PIP reimbursement payment to another insurer, it is not performing its promise to its insured under the insurance policy, but, rather, it is meeting its own legal obligation imposed by statute. Id. at 12. Plaintiff further alleges Commerce West did not seek any money from plaintiff or Dorney nor did it elect to pursue reimbursement for the $51,000 by lien or subrogation against its insured. Id. at ¶¶ 13-15.
Plaintiff alleges Commerce West instead elected to file, on December 30, 2016, an intercompany arbitration action against Encompass seeking reimbursement of the $51,000 PIP payment from Encompass. Id. at ¶ 16.
On October 11, 2018, plaintiff filed an action, on behalf of Tara Dorney, against Encompass's insured Grant Gruber related to the January 6, 2015, collision. Encompass hired Sarah Tuthill-Kveton to represent its and Gruber's interest in the action. Id. at ¶ 18.
Plaintiff alleges Encompass and Dorney entered into an agreement to settle on April 27, 2020, in which Encompass agreed to pay Dorney $144,766 in exchange for dismissal of the case against Gruber. Id. at ¶¶ 19-20. Plaintiff alleges that “[a]t no time prior to signing the April 27, 2020, settlement agreement did Encompass convey to Commerce West, Ms. Dorney or Mr. Corbridge that Ms. Dorney was required to pay Commerce West any money out of the $144,766.00 settlement funds, including asking Ms. Dorney to hold Encompass harmless and/or indemnify Encompass from any potential award in the Arbitration Forums Inc. case between Commerce West and Encompass.” Id. at ¶ 21.
However, plaintiff alleges, Encompass then provided a copy of the settlement to Commerce West and asserted that the agreement required plaintiff and/or Dorney to satisfy Commerce West's claim for the $51,000. Id. at ¶ 22. Plaintiff alleges Commerce West rejected Encompass's assertion that the settlement agreement required plaintiff and or Dorney to pay the $51,000 because Oregon statues limited Commerce West's avenue of recovery to inter-company arbitration, lien, or subrogation and it elected to recover through arbitration because it sought to avoid having to reduce the reimbursement by a proportionate amount of the expenses, costs, and attorney fees incurred by Dorney as required by law with respect to the other means. Id. at ¶ 23. Plaintiff asserts because Commerce West elected inter-company arbitration, it was barred from collecting money from the $144,766 settlement directly from plaintiff or Dorney because when a liability insurer “makes a prejudgment PIP reimbursement payment to another insurer, it is not performing its promise to its insured under the insurance policy, but rather, it is meeting its own legal obligation imposed by ORS 742.534 to reimburse the PIP insurer and Commerce West expected Encompass to honor its statutory obligation to reimburse Commerce for the $51,000 directly.” Id. Plaintiff further alleges the settlement agreement only required Dorney to pay out of her settlement claims that were made against the settlement proceeds and Commerce West had made no such claim. Id.
Plaintiff alleges Encompass then implemented a plan to eliminate or reduce the amount it would pay to Commerce West by:
-Threatening plaintiff, Dorney, Commerce West with economic emotional/economic harm;
-Rejecting any thought of rescinding the contract because it would remove the economic/emotional pressure necessary to induce plaintiff and Dorney or Commerce West into reducing the $51,000 amount claimed;
-Lying to plaintiff that Commerce West filed a lien in the amount of $51,000 against the $144,766 settlement proceeds in an attempt to induce him to pay the $51,000;
-Lying to plaintiff that personal injury cases almost always include a lien for PIP with few exceptions to induce payment;
-Threatening to make an ethical complaint to the Oregon State Bar against plaintiff to induce payment;
-Threatening to ruin plaintiff's reputation for failing to pay the $51,000;
-Attempting to create the appearance of a conflict of interest by claiming plaintiff had agreed to take personal responsibility for paying Commerce West the $51,000 to prevent plaintiff from representing Dorney (who likely would not then be able to afford an attorney to represent her in the suit against Encompass) to induce Dorney to pay; and
-Refusing to pay Commerce West and claiming plaintiff/Dorney agreed to take responsibility to induce Commerce West to try to save money in ensuing litigation by agreeing to take a reduced amount sought from Encompass.Id. at ¶¶ 25-32.
Plaintiff alleges that on December 28, 2020, Arbitration Forums Inc. awarded Commerce West $51,000 to be paid by Encompass and that at no time between settling the cases between Gruber and Dorney and December 28, 2020, did Encompass allege or claim in the arbitration proceeding that plaintiff or Dorney were required to reimburse Commerce West. I\d. at ¶¶ 33-34. Plaintiff alleges Encompass did not challenge the Arbitration ruling. Id. at ¶ 36. Instead, plaintiff asserts, Encompass hired Doug Foley to sue plaintiff for the $51,000 while knowing: (1) lawyers are prohibited from taking personal responsibility for their client's debts; (2) lawyers may not induce other lawyers to violate rules of conduct; (3) “[E]very. insurer whose insured is. legally liable for. injuries sustained. by a person for whom personal injury protection benefits have been furnished by another such insurer. shall reimburse such other insurer for the benefits it has so furnished if it has requested such reimbursement, [and] has not given notice as provided in ORS 742.536 that it elects recovery by lien in accordance with that section. Disputes between insurers as to such issues of liability and the amount of reimbursement required by this section shall be decided by arbitration. If an insurer does not request reimbursement under this section for recovery of personal injury protection payments, then the insurer may only recover personal injury protection payments under the provisions of ORS 742.536 or 742.538”; (4) “That ORS 742.536 mandates that: . An insurer may elect to seek reimbursement as provided in this section for benefits the insurer has furnished to the injured person out of any recovery the injured person obtains from a claim or legal action if the insurer has not been a party under ORS 742.534 to an interinsurer reimbursement proceedings The insurer shall give written notice of an election under this subsection by personal service or by registered or certified mails [and] a return showing service of the notice of election must be filed with the clerk of the court but is not a part of the record except to give notice to the claimant and the defendant of the lien of the insurers. If the insurer serves a written notice of the insurer's election under subsection (2) of this section ands files a return showing service: (a)s an insurer has a liens against an injured person's recovery in an action for damages”; (5) “That ORS 742.538 mandates that: If a motor vehicle liability insurer has furnished personal injury protection benefitss to a person who was injured in a motor vehicle accident and the interinsurer reimbursement benefit of ORS 742.534 is not available under the terms of that section, the insurer has not elected recovery by lien as provided in ORS 742.536, and the insurer is entitled by the terms of the insurer's policy to the benefit of this section: s the insurer is entitled to the proceeds of any settlement or judgment that results from the exercise of any rights of recovery the injured person has against any person legally responsible for the accident”; and (6) When a liability insurer makes a prejudgment PIP reimbursement payment to another insurer, it is not performing its promise to its insured under the insurance policy, but, rather, it is meeting its own legal obligation imposed by ORS 742.534 to reimburse the PIP insurer.” Id. at ¶¶ 38, 39.
Plaintiff alleges Commerce West has not provided anyone with a copy of: (1) a written notice from Commerce West that it had elected a lien; (2) a notice of election filed with the clerk; or (3) any communication for Commerce West that it was entitled to subrogation. Id. at ¶ 40.
To further implement its plan to reduce its obligations following arbitration, plaintiff alleges Encompass filed an action against plaintiff for the $51,000 in Multnomah County seeking the $51,000 plus costs. Id. at ¶ 42. However, plaintiff alleges Encompass knew it would never obtain the relief sought but only filed the action to threaten plaintiff, Dorney, and Commerce West with emotional/economic harm to induce them to contribute to the $51,000 awarded against it in arbitration. Plaintiff alleges Encompass falsely alleged Commerce West had a PIP lien in the $51,000, and that Dorney was both aware of the lien and the subrogation interests against her award. Id. at ¶ 45. Plaintiff alleges Encompass knew the claims made in the action were false, that there was no basis in law supporting its request for relief and had no objectively reasonable belief it would prevail against plaintiff. Id. at ¶¶ 46-47. Nonetheless, Encompass successfully negotiated a reduction of the debt with non-party Commerce West and notified plaintiff stating:
Encompass agreed to pay a discounted PIP number to ACIC. I am told ACIC accepted a tender from Dorney. The deal between Encompass and ACIC requires this case to be dismissed so that ACIC doesn't incur further defense costs. Here is the Stipulated Judgment. I have no idea who is really representing who yet (nor do I really care) since I don't have formal appearances - but if this is accurate, sign it and return it. If you need to put other counsel on the signature lines - that is fine. I don't know if the court will accept this Judgment with signatures by attorneys who have not appeared of record, but that's an issue for the Court to raise.Id. at ¶ 48.
Plaintiff alleges he never appeared in the case initiated by Encompass. Plaintiff further alleges he requested voluntary dismissal by Encompass pursuant to Or. R. Civ. P. 54(A)(1). Id. at ¶¶ 50-51. Plaintiff alleges Encompass instead requested a voluntary dismissal by stipulation even though it was available only to parties who had formally appeared in the action, and he agreed to attempt such dismissal in order to avoid incurring any expenses. Id. at ¶¶ 53-56. Plaintiff alleges that on March 8, 2021, Encompass, pursuant to Or. R. Civ. P. 54(A)(1), dismissed the case. Id. at ¶ 57. Plaintiff alleges Encompass dismissed the case because it knew it lacked an objectively reasonable believe that it had any chance of prevailing, that it lacked a basis in law for the claimed relief, and that it achieved its primary purpose of reducing the amount it owed non party Commerce West. Id. at¶ 58.
The judgment is entitled “Stipulated General Judgment of Dismissal with Prejudice.” (ECF 28-2).
Plaintiff alleges a claim for wrongful use of a civil proceeding. Id. at ¶ 59. Plaintiff also alleges a claim for IIED asserting:
Encompass intended to inflict on Mr. Corbridge severe emotional distress or was certain or substantially certain that Mr. Corbridge would suffer severe emotional distress as a result of its conduct. Encompass' acts in fact caused Mr. Corbridge severe emotional distress. Encompass' acts constitute an extraordinary transgression of the bounds of socially tolerable conduct or exceed any reasonable limit of social toleration.Id. at ¶ 60.
DISCUSSION
As noted above, plaintiff moves for leave to file the Fourth Amended Complaint and defendant moves to dismiss all claims against it with prejudice.
A. Amendment
Although it appears plaintiff did not specifically confer with counsel for defendants regarding his intent to seek leave to file a Fourth Amended Complaint, the issue had been discussed and it was clear that while defendant felt there are no set of facts plaintiff could plead to state a claim, plaintiff's counsel did discuss further amendment with the defense. Accordingly, to the extent defendant seeks denial of the motion for failure to confer, the Court declines and considers the merits of the motion.
Although plaintiff has attempted amendments several times to mollify defendant's concerns regarding certain elements of the wrongful use of civil proceedings claim, the case remains at the beginning stage and the Court is only now in a position to review the plausibility of the allegations. Accordingly, to the extent defendant asserts issues of undue delay or dilatory motive as reasons to deny the motion, the Court declines to deny the motion for these reasons. However, as discussed below, given the statute of limitations issue regarding the IIED claim, issues of delay are of course relevant with respect to the motion to dismiss. The primary issues raised in opposition to the motion to amend is futility of amendment. Because the futility analysis necessarily invokes the standards related to motions to dismiss, the Court analyzes such issue within the discussion regarding whether the claims against Encompass should be dismissed.
B. Dismissal
1. IIED
Defendant asserts plaintiff's purported IIED claim does not relate back to any properly filed complaint prior to the running of the statute of limitations on such claim and thus it is time barred.
As noted above, plaintiff did not explicitly allege a claim for IIED until filing, without leave of court or consent, the third amended complaint on April 17, 2023. A two-year statute of limitations applies to IIED claims. Or. Rev. Stat. § 12.110(1). Plaintiff concedes the operative date for the statute of limitation is March 8, 2023, but contends the IIED claim relates back to the original complaint because the original allegations asserted:
Plaintiff's counsel states “he was under the impression that since plaintiff had heard nothing from defendant [after defense counsel communicated he needed to discuss amendment], it agreed to the filing.” (ECF 25 at p. 15). Nonetheless, plaintiff chose not to engage in argument over whether there was a stipulation to file the Third Amended Complaint and instead chose to seek leave to file the complaint currently under consideration.
Suing Mr. Corbridge without probable cause, including lies in that lawsuit and doing it with the purpose of passing on a $51,000 mistake was an “extraordinary transgression of socially tolerable conduct” and exceeded any “reasonable limit of social toleration.” Doing it in a way where Encompass knew that it was going to create a conflict of interest between Mr. Corbridge and Ms. Dorney and lying by publishing that Mr. Corbridge misappropriated funds from his trust account, knowing he would lose his license to practice law if true, is evidence that Encompass intended to inflict severe emotional distress on Mr. Corbridge and supports the reasonable conclusion that Mr. Corbridge's emotional harms were severe.(ECF 33 at p. 7).
The last complaint filed within the applicable time period alleged that defendant hired Doug Foley to sue plaintiff because of the debt it owed Commerce West and Encompass filed a lawsuit against plaintiff for the amount it owed Commerce West. See Amended Complaint (ECF 6) at ¶¶ 19, 23. Plaintiff also alleged various facts regarding knowledge of liens and avenues of recovery for the $51,000 by Commerce West that defendant knew rendered the allegations in its complaint false. The proposed Fourth Amended Complaint adds new allegations of specific actions taken by defendant such as threats directed at plaintiff of emotional and economic harm, lies told to plaintiff about the existence of a lien which in turn implied ethical violations by plaintiff causing emotional and economic distress, and direct threats to plaintiff's reputation creating emotional distress. See Proposed Fourth Amended Complaint (ECF 21-3) at ¶¶ 24-25, 27-30, 41. The only reference to emotional distress in the Amended Complaint is the general allegation that:
As a foreseeable and/or direct result of Encompass' conduct as alleged herein, Ryan Corbridge suffered anger, embarrassment, humiliation, anxiety, fear, aggravation and/or emotional distress, all to his noneconomic damage in a reasonable amount to be determined by the jury and not to exceed $4,975,000.00.Amended Complaint (ECF 6) at ¶ 29.
To properly plead a claim for IIED, plaintiff must allege: (1) defendant intended to inflict severe emotional distress upon plaintiff; (2) defendant's acts caused such distress; and (3) the acts constituted “extraordinary transgression of the bounds of socially tolerable conduct. Patton v. J.C. Penney Co., 301 Or. 117, 122, 719 P.2d 854, 857 (1986). An amended complaint does not relate to an earlier complaint when it asserts a new ground for relief supported by facts that differ in both time and type from those set forth in the original pleading. Mayle v. Felix, 545 U.S. 644, 650, (2005). Under the Oregon Rules, a new claim cannot relate back to an earlier pleading unless there
is at least enough of a nexus between the claims for the defendant to have been able to discern from the earlier pleading that the existence of the claim was a possibility. Evans v. Salem Hosp., 83 Or.App. 23, 31-32, 730 P.2d 562, 567 (1986).
The original complaint does reference knowledge of falsity by defendant regarding the allegations of the existence of a lien. The Amended Complaint did not allege instances of acts to inflict emotional harm nor intent to inflict such harm, but the core of the amended complaint is deliberate conduct by defendant to cause harm to plaintiff. The Fourth Amended Complaint fleshes out the conduct to include pre-complaint threats related to the allegations in the action brought by Encompass. There is a nexus between alleged lies made in the complaint and the alleged lies and threats made to plaintiff prior to bringing the complaint. In addition, these factual allegations of lies and threats form the basis for the new allegation that such conduct constitute an extraordinary transgression of the bounds of socially tolerable conduct. Accordingly, the IIED claim properly relates back to the Amended Complaint. The motion to amend to add this claim should be allowed and the motion to dismiss the claim based on the statute of limitations should be denied.
2. Wrongful Use of a Civil Proceeding
To properly plead a claim for wrongful use of a civil proceeding, plaintiff must allege:
(1) The commencement and prosecution by the defendant of a judicial proceeding against the plaintiff;
(2) The termination of the proceeding in the plaintiff's favor;
(3) The absence of probable cause to prosecute the action;
(4) The existence of malice, or as is sometimes stated, the existence of a primary purpose other than that of securing an adjudication of the claim; and
(5) Damages.Alvarez v. Retail Credit Ass'n of Portland, Or., Inc., 234 Or. 255, 259-60, 381 P.2d 499, 501 (1963).
Defendant contends that after four attempts, plaintiff still cannot sufficiently plead the element of termination of the Encompass action in plaintiff's favor because plaintiff stipulated to its dismissal.
Where a proceeding has been terminated without regard to its merits or propriety by agreement or settlement of the parties, there is no termination which may support a wrongful proceeding claim. Gumm v. Heider, 220 Or. 5, 24, 348 P.2d 455, 464 (I960). Defendant asserts the stipulated judgment constituted an agreement between plaintiff and defendant and the proposed complaint, taken as true, establishes a valid contract negating the favorable termination element.
Gumm involved a malicious prosecution claim after dismissal of a criminal case. However, an action for wrongful initiation of civil proceedings is the civil analog to a malicious prosecution action and the torts are so similar that the legal analysis often is used interchangeably. Checkley v. Boyd, 170 Or.App. 721, 736, 14 P.3d 81, 91 (2000).
As noted above, the parties entered into a stipulated judgment of dismissal. Prior to entry of judgment, plaintiff alleges he requested defendant dismiss the case by filing a notice of voluntary dismissal by plaintiff pursuant to Or. R. Civ. P. 54(A)(1), but that defendant denied the request. Proposed Fourth Amended Complaint (ECF 21-3) at ¶¶ 51-53. Accordingly, plaintiff asserts, he was forced to either spend more money on attorney fees than he could recover in a cost bill or agree to voluntary stipulated dismissal despite his having not formally appeared in the action.Plaintiff also alleges defendant was uncertain if the Court would accept the stipulation because of plaintiff's lack of formal appearance. Id. at ¶¶ 54-55. Plaintiff alleges the defendant sought voluntary dismissal because it lacked an objectively reasonable belief in the basis for its case and/or knew it had a low likelihood of prevailing. Id. at ¶ 58.
Or. Civ. P. 54(A)(1) provides “a plaintiff may dismiss an action in its entirety or as to one or more defendants without order of court by filing a notice of dismissal with the court and serving the notice on all other parties.” In addition, the rule provides for voluntary dismissal by stipulation “signed by all adverse parties who have appeared in the action.”
While the judgment entered in the action brought by Encompass indicates the parties stipulated to dismissal “with prejudice and without costs to any party on all claims as this matter has been fully resolved,” it does not identify any terms the parties reached in exchange for the dismissal. The only terms the Court can glean from the allegations and the judicially noticed judgment of dismissal is that plaintiff obtained a dismissal of the claims against him with prejudice in exchange for not seeking costs and defendant saved costs and achieved a reduction in the payment it owed to non-party Commerce West. The allegations are not susceptible, on their face, to the conclusion that the parties settled the action without regard to its merits or propriety.Moreover, plaintiff has alleged he would have been forced to incur additional expenses he could not recoup if he did not stipulate to dismissal. Therefore, the complaint also contains facts that plausibly allege he agreed to stipulate to dismissal under economic duress. It may be that when the proceeding terminates as the result of a compromise or settlement, that termination may not be availed for the purpose of a malicious prosecution action. Nonetheless if a settlement is not a free and voluntary act by the plaintiff in a malicious prosecution but is brought about by duress practiced upon him by the defendant, that settlement rule does not apply. Gowin v. Heider, 237 Or. 266, 279, 386 P.2d 1, 7 (1963), adhered to, 237 Or. 266, 391 P.2d 630 (1964). In any event, the allegations do not demonstrate the stipulation was made without regard to the merits of the case brought by Encompass.
As a party defendant who did not formally appear, the Court can infer from the allegations plaintiff would not have incurred any recoverable costs in the action. Accordingly, a plausible reading of the complaint is that plaintiff obtained a stipulated dismissal of the claims against him with prejudice without providing any consideration in return. Defendant does not present a reasonable reading of the complaint that it agreed to dismiss the claims against plaintiff if he agreed not to pursue any claims he may have as a resulted of defendant bringing the allegedly baseless action against him. To the extent defendant may argues the dismissal with prejudice of all claims necessarily include counterclaims that may have been brought, the wrongful use of proceedings claim can not arise until termination of the underlying proceeding.
Defendant contends the stipulation necessarily results in termination of the action without regard to the merits or propriety of the claims because there was no judgment entered in plaintiff's favor for a specified amount or specific relief pursuant to Or. Civ. P. 67(F)(1). However, plaintiff did not seek any specific relief and the judgment was allegedly entered in his favor because he obtained dismissal of all claims against him, and defendant “obtained no relief whatsoever from Ryan Corbridge.” Proposed Fourth Amended Complaint (ECF 21-3) at ¶ 44.
It is well established that a termination resulting from a settlement among the parties is not a favorable termination as to any of those parties. Gowin, 237 Or. at 279, 386 P.2d 1 (“[W]here the proceeding is terminated as the result of a compromise or settlement of the parties there is no such termination as may be availed of for the purpose of such an action.” .... Traditionally, courts have reasoned either that the settlement is an admission of probable cause or that, where the plaintiff has consented to termination, he or she cannot later take advantage of it.Perry v. Rein, 215 Or.App. 113, 129, 168 P.3d 1163, 1172-73 (2007). Here, the allegations plausibly establish that plaintiff, while stipulating to dismissal, did not enter into any settlement agreement with defendant, provided no consideration to defendant, and did not agree to limit any cause of action that may arise from the allegedly baseless claim brought by Encompass upon its conclusion. All that resulted from the stipulated dismissal was dismissal of all claims against plaintiff, with prejudice, without any need for him to formally appear in the action and incur any costs. The Court should allow the parties to develop the facts regarding the dismissal of the Encompass action against plaintiff and determine the sufficiency of the facts developed vis-a-vis the favorable termination element, i.e., whether the Encompass proceeding was terminated without regard to its merits or propriety, upon summary judgment or, more likely, at trial:
in Oregon, the voluntary dismissal of an underlying action before a trial on the merits is favorable to the defendant if it reflects adversely on the merits of the underlying action [footnote omitted]. That determination does not necessarily depend on whether the dismissal was with, or without, prejudice. Instead, it requires an examination of the circumstances resulting in the termination. Such a factspecific approach is consistent with the Restatement (Second) of Torts § 674 (1977) [footnote omitted]. Comment j to section 674 explains:
“Civil proceedings may be terminated in favor of the person against whom they are brought under the rule stated in Clause (b), by (1) the favorable adjudication of the claim by a competent tribunal, or (2) the withdrawal of the proceedings by the person bringing them, or
(3) the dismissal of the proceedings because of his failure to prosecute them. * * *
“Whether a withdrawal or an abandonment constitutes a final termination of the case in favor of the person against whom the proceedings are brought and whether the withdrawal is evidence of a lack of probable cause for their initiation, depends upon the circumstances under which the proceedings are withdrawn.”
If the action was voluntarily terminated by the plaintiff, a finder of fact might determine that the termination was an admission that the claim lacked merit. However, the abandonment also might reflect financial impecunity or a determination that the potential recovery did not justify the cost of litigation. Because any number of factual explanations might be at the root of a voluntary dismissal, the question often is not well-suited for resolution on a summary judgment record.Portland Trailer & Equip., Inc. v. A-1 Freeman Moving & Storage, Inc., 182 Or.App. 347, 35657, 49 P.3d 803, 808-09 (2002) (emphasis added).
Here, plaintiff has pleaded facts demonstrating defendant was aware that Commerce West did not have a PIP lien or subrogation interests but instituted the action anyway in an improper attempt to reduce or eliminate a debt it incurred to Commerce West in arbitration. Plaintiff also alleges the action resulted in voluntary (albeit stipulated) dismissal with prejudice favorable to plaintiff in all respects except as to costs which were likely not incurred by plaintiff. Defendant asserts the parties settled the case without regard to the merits, but as noted above, the allegations bring that assertion into question given that plaintiff allegedly provided no consideration for a termination of the claims against him with prejudice and without any need to formally appear in the action. At this stage of the proceedings, that is enough for a tryer of fact to plausibly infer favorable termination and to the extent defendant seeks a legal conclusion on the formation of a contract in settling the case, that conclusion cannot be made on the basis of the pleadings without further development of the record. The motion to dismiss should be denied, and the Court should allow plaintiff to file the Fourth Amended Complaint.
CONCLUSION
Defendant's motion to dismiss (ECF 22) should be denied and plaintiff's motion for leave to file an amended complaint (ECF 21) should be granted.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.