"[T]he legal viability of any particular claim under Oregon law * * * is strictly a matter of law."
How later courts described this case
- "[T]he legal viability of any particular claim under Oregon law * * * is strictly a matter of law."
Written by the judges who cited it.
The opinion
No. 8 March 3, 2016 639
IN THE SUPREME COURT OF THE
STATE OF OREGON
Gerald L. ROWLETT,
an individual;
Westlake Development Company, Inc.,
an Oregon corporation; and
Westlake Development Group, LLC,
an Oregon limited liability company,
Respondents on Review,
v.
David G. FAGAN,
an Oregon resident;
James M. Finn, an Oregon resident;
and Schwabe Williamson & Wyatt, PC,
an Oregon professional corporation,
Petitioners on Review.
(CC 090101006; CA A146351; SC S062451)
On review from the Court of Appeals.*
Argued and submitted May 12, 2015.
Christopher T. Carson, Kilmer, Voorhees & Laurick,
P.C., Portland, argued the cause for petitioners on review.
Stephen C. Voorhees filed the brief. With him on the brief
was Candice R. Broock.
David W. Melville, The Law Offices of David Melville,
Portland, argued the cause and filed the brief for respon-
dents on review. With him on the brief was Katherine R.
Heekin, The Heekin Law Firm, Portland.
Scott A. Shorr, Stoll Stoll Berne Lokting & Shlachter
PC, Portland, filed the brief for amicus curiae Oregon Trial
Lawyers Association.
Janet M. Schroer, Hart Wagner LLP, Portland, filed the
brief for amicus curiae Professional Liability Fund. With her
on the brief was Matthew J. Kalmanson.
______________
* On appeal from the Multnomah County Circuit Court, Henry Kantor,
Judge. 262 Or App 667, 327 P3d 1 (2014).
640 Rowlett v. Fagan
Before Balmer, Chief Justice, and Kistler, Walters,
Landau, Baldwin, and Brewer, Justices.**
WALTERS, J.
The decision of the Court of Appeals is reversed in part
and affirmed in part. The case is remanded to the Court
of Appeals to address plaintiffs’ remaining assignments of
error.
Case Summary: Plaintiffs filed a legal malpractice action against defendants,
alleging negligence and other claims. Defendants had represented plaintiffs in
an earlier action against plaintiffs’ business partners in an LLC; the case settled,
and plaintiffs claimed that they would have had a better outcome in the earlier
litigation if not for defendants’ mishandling of their case. A jury in the malprac-
tice action found that defendants were negligent in the underlying litigation but
that defendants’ negligence was not a cause of harm to plaintiffs. On plaintiffs’
appeal, the Court of Appeals held that the trial court in the malpractice action
erred (1) in striking two specifications of negligence from the complaint relating
to defendants’ failure to timely file an oppression claim against the LLC and its
other members in the earlier litigation, and (2) in permitting the verdict form
to include the settlement date among other dates for valuing plaintiffs’ inter-
est in the LLC, and remanded the case for a new trial. Held: Any error in the
trial court’s rulings striking two negligence allegations relating to an oppression
claim from the legal malpractice complaint and permitting the verdict form to
include the settlement date among other dates for valuing plaintiffs’ interest in
the LLC in the underlying litigation was harmless.
The decision of the Court of Appeals is reversed in part and affirmed in part.
The case is remanded to the Court of Appeals to address plaintiffs’ remaining
assignments of error.
______________
** Linder, J., retired December 31, 2015, and did not participate in the deci-
sion of this case. Nakamoto, J., did not participate in the consideration or decision
of this case.
Cite as 358 Or 639 (2016) 641
WALTERS, J.
Rowlett and his two companies, Westlake
Development Company, Inc., and Westlake Development
Group, LLC (plaintiffs), filed an action for malpractice
against the law firm Schwabe, Williamson, and Wyatt,
PC, (Schwabe) and lawyers Fagan and Finn (collectively,
defendants), alleging claims for negligence, negligent mis-
representation, breach of fiduciary duty, and claims related
to attorney fees. Defendants had represented plaintiffs in
an action against plaintiffs’ business partners in Sunrise
Partners, LLC (Sunrise). Plaintiffs settled the Sunrise
litigation in 2007, and, soon thereafter, initiated the mal-
practice action, alleging that they would have had a better
outcome in the Sunrise litigation but for the mishandling
of their case by defendants. A jury ultimately found that
defendants were negligent in their representation of plain-
tiffs, but that defendants’ negligence did not cause plaintiffs
any damage. The jury also reached a defense verdict on the
breach of fiduciary duty, negligent misrepresentation, and
attorney fee claims. Plaintiffs appealed, asserting seven
assignments of error. The Court of Appeals reversed as to
two of those assignments of error and remanded the case
for a new trial. Rowlett v. Fagan, 262 Or App 667, 327 P3d
1 (2014). For the reasons we discuss below, we now reverse
the decision of the Court of Appeals as to those two assign-
ments of error and remand the case to the Court of Appeals
to address plaintiffs’ remaining assignments of error.1
1
Plaintiffs assigned error to the trial court’s (1) grant of defendants’ motion
to dismiss their negligence claim to the extent it was based on oppression allega-
tions; (2) denial of their motion in limine to limit the use in the malpractice case
of evidence of the settlement in the Sunrise litigation; (3) ruling permitting the
settlement date in the Sunrise litigation to be included on the verdict form among
other dates for valuing Rowlett’s equity interest in Sunrise; (4) and (5) rulings
permitting a certain defense witness to testify as an expert at trial in the mal-
practice case and to use a certain valuation method to value Rowlett’s interest in
Sunrise; (6) grant of defendants’ motion to dismiss plaintiffs’ damage claim for
attorney fees and costs that plaintiffs had paid to Schwabe in the Sunrise litiga-
tion; and (7) grant of defendant’s summary judgment motion regarding plaintiffs’
claim for attorney fees that they would have recovered from the Sunrise defen-
dants, as measured by the fees that they incurred in the malpractice action. As
we will discuss, the Court of Appeals agreed with plaintiffs and reversed as to
assignments of error (1) challenging the granting defendants’ motion to dismiss
the oppression claim, and (3) challenging the inclusion of the settlement date on
the verdict form. The court rejected assignment of error (6), relating to plaintiffs’
642 Rowlett v. Fagan
The facts of this case are complicated and are
explained in detail in the Court of Appeals’ decision. For
our purposes here, the following summary suffices. Rowlett
is a real estate developer and is the sole principal in his two
companies. He had an option to purchase for development
a property in Gresham, Oregon, referred to as the Kelley
Creek property. Rowlett’s companies also obtained options
to purchase three properties in Happy Valley, known as the
Sunnyside Road properties, which Rowlett also wished to
develop. In the fall of 2000, Rowlett and two other individ-
uals, Pruett and Baron, formed Sunrise, a limited liability
corporation (LLC), to finance both projects. After Sunrise
was formed, Rowlett assigned his options to purchase the
Kelley Creek property and the Sunnyside Road properties to
Sunrise. Sunrise initially struggled to find other investors
and had difficulty raising money. It soon stopped making
payments on the Kelley Creek option and lost the option to
purchase that property. Sunrise also defaulted on a pur-
chase agreement for one of the Sunnyside Road properties.
Sunrise sought other investors, and Baron and Pruett then
began taking actions that, in Rowlett’s view, disregarded his
interest in Sunrise. Among other things, for example, they
excluded Rowlett from meetings and made another investor,
Keys, a member of Sunrise over Rowlett’s objection.
In June 2002, Rowlett contacted Schwabe for
advice. Rowlett had lost approximately $90,000 when the
Kelley Creek purchase option lapsed, and he was con-
cerned about the actions that Baron and Pruett had taken
at Sunrise. Schwabe assigned the matter to Fagan, a
junior lawyer with only three to four years of experience.
In November 2002, Fagan filed a complaint on behalf of
plaintiffs in Multnomah County Circuit Court, against
Pruett, Baron, Keys, and others, alleging that those defen-
dants had intentionally allowed the Kelley Creek option to
lapse, causing Rowlett to lose the value of his investment
claim for reimbursement of fees paid to Schwabe in the Sunrise litigation, but
it did not reach assignment of error (7), because, having granted plaintiffs a
new trial on their negligence claim, the court concluded that that issue could be
resolved on remand. Additionally, in light of its reversal on the verdict form issue,
the Court of Appeals did not reach assignment of error (2), related to the denial
of plaintiffs’ motion in limine, or assignments of error (4) and (5), related to the
defense witness testimony.
Cite as 358 Or 639 (2016) 643
in that property. The complaint sought general damages in
the amount of $670,000. However, a clause in the Sunrise
operating agreement required arbitration of disputes. That
fact was called to Fagan’s attention, and, in January 2003,
Rowlett stipulated to dismissal of the complaint pending
arbitration.
Fagan did not file an arbitration demand until
December 2003. That arbitration demand’s “statement
of claim” contained the same claims as had been alleged
in the circuit court complaint, and also contained allega-
tions relating to actions that Sunrise members had taken,
allegedly to the detriment of Rowlett’s interests, after the
circuit court complaint was filed. Specifically, the 2003
arbitration statement alleged that, in March and April
2003, the Sunrise members removed Rowlett as manager of
Sunrise, admitted another new member, Robinson, without
Rowlett’s consent, called meetings without telling him, and
took other actions to dilute the value of Rowlett’s stock. The
arbitration statement alleged that those facts established
a breach of fiduciary duty by Baron and Pruett. Unlike a
later-filed arbitration statement, the 2003 statement did
not specifically allege an additional claim for oppression,
nor did it contain a demand for the compulsory buyout of
Rowlett’s interest.2 The 2003 arbitration demand sought
damages for the diminution in the number and value of
Rowlett’s shares in Sunrise, as well as $675,000 in dam-
ages for defendants’ breach of fiduciary duty, fraud, conspir-
acy, and misrepresentation.
Fagan took no significant additional steps there-
after to pursue Rowlett’s claims; he left Schwabe in May
2005 to take another position. When Fagan left, another
Schwabe lawyer, Finn, took over the case, met with Rowlett,
and began reviewing the file. Finn also began looking for
an arbitrator and reinitiated communication with Sunrise,
sending a letter to opposing counsel in October 2005 dis-
cussing discovery issues in the arbitration. At that point,
Keys’ counsel objected to further arbitration and, in March
2006, filed a motion to reinstate the 2002 case and dismiss
it with prejudice for lack of prosecution.
2
It also did not assert any claim against Sunrise.
644 Rowlett v. Fagan
Meanwhile, in October 2005, Baron, Keys, and
Robinson arranged for Sunrise to distribute $5.8 million to
all Sunrise members except Rowlett. Rowlett received noth-
ing. Additionally, Baron, Keys, and Robinson amended the
Sunrise operating agreement to remove Rowlett as a mem-
ber of Sunrise.
In April 2006, Finn filed an amended arbitration
statement naming Baron, Keys, and Sunrise as respondents
and adding allegations pertaining, among other things, to
the capital distribution to all Sunrise partners other than
Rowlett and his removal as a member of Sunrise. The state-
ment alleged a claim for breach of fiduciary duty and, for
the first time, specifically alleged a claim for oppression.
The arbitration statement alleged that Rowlett had been
deprived of the entire value of his ownership interest in
Sunrise and that he was entitled to a buyout of that owner-
ship interest in an amount of at least $900,000.
In September 2006, the circuit court granted Keys’
motion to reinstate and dismiss the 2002 complaint. In a
letter opinion, the court stated that it would dismiss all
claims that had been pleaded in the original complaint with
prejudice. In March 2007, Finn filed a second complaint in
Multnomah County Circuit Court, against Sunrise, Baron,
Keys, Robinson, and others, alleging essentially the same
claims as had been alleged in the 2006 arbitration state-
ment, and again seeking approximately $900,000 in dam-
ages. Like the 2006 arbitration statement, the 2007 com-
plaint included an oppression claim against all defendants,
as well as breach of fiduciary duty claims that plaintiffs or
Rowlett asserted against the defendants, individually and
as a group, and a breach of contract claim against Sunrise.
By late 2007, the real estate market had dropped.
In November 2007, Sunrise offered to settle the case for
$200,000 and plaintiffs’ reasonable attorney fees as deter-
mined by the circuit court, and Rowlett accepted the offer.
The court awarded part of the fees Schwabe had billed plain-
tiffs for work on the 2007 litigation, approximately $60,000.
In 2009, plaintiffs filed this malpractice action
against defendants, alleging that defendants had commit-
ted malpractice in the Sunrise litigation and had caused
Cite as 358 Or 639 (2016) 645
plaintiffs to settle for significantly less than what the Sunrise
defendants would have paid if the case had been litigated
properly. The complaint alleged negligence claims against
all defendants, based on allegations that defendants had
failed to act promptly and competently in various respects
after filing the 2002 complaint in circuit court.3 Specifically,
the complaint alleged that defendants were negligent in fail-
ing to arbitrate the Sunrise dispute within six months as
required by the Sunrise operating agreement, in failing in
various ways to gather evidence to support and prove plain-
tiffs’ claims, in failing to competently represent plaintiffs’
interests in various ways, in failing to adequately commu-
nicate with plaintiffs, and, as relevant here, in “[f]ailing to
allege plaintiffs’ [oppression] claims in a timely manner”
and in “fail[ing] to recognize that the factual circumstances
gave rise to [an oppression] claim related to Rowlett’s inter-
est in Sunrise Partners, LLC.”4 With respect to damages,
plaintiffs alleged that defendants’ damages included the fol-
lowing: “The difference between the settlement amount in
the 2007 case and * * * the value of Plaintiff Rowlett’s equity
interest in Sunrise Partners LLC as of either March 13,
2003 or October 7, 2005, which is $2,200,000.”
A few weeks before trial, defendants moved to dis-
miss certain claims and individual allegations from the
complaint. As relevant here, defendants moved to dismiss
all of the allegations in the complaint relating to defendants’
failure to allege an oppression claim in the Sunrise litiga-
tion. The trial court granted that motion in part.5 During
the ensuing trial, both parties presented evidence relating
to plaintiffs’ claims in the Sunrise litigation, including evi-
dence and testimony pertaining to the value of Rowlett’s
3
The complaint was amended three times before trial; we quote in this
opinion from the operative complaint—the third amended complaint—filed in
February 2010.
4
Plaintiffs also alleged claims for negligent misrepresentation, negligent
supervision, and breach of fiduciary duty, as well as various claims relating to
attorney fees. As noted, the jury returned defense verdicts on those claims. They
are not at issue on review.
5
As we will discuss in more detail below, the trial court agreed to strike
two allegations of negligence pertaining to defendants’ failure to timely bring a
claim against the Sunrise defendants for oppression, but it left other allegations
referring to the oppression claim in the complaint.
646 Rowlett v. Fagan
interest in Sunrise on March 13, 2003, when Rowlett was
removed as manager of Sunrise, and on October 7, 2005,
when Baron, Keys, and Pruett disbursed $5.8 million in
Sunrise assets to themselves and allegedly removed Rowlett
as a member of Sunrise. Rowlett presented evidence that
the value of his interest in Sunrise on March 13, 2003, was
over $1 million, and on October 7, 2005, was over $2.2 mil-
lion. Defendants responded with evidence valuing Rowlett’s
interest in Sunrise at about $30,000 as of March 2003, and
at either $108,000 or $355,000 in October 2005, depending
on which operating agreement controlled.
At the conclusion of the trial, the court gave the jury
a verdict form that asked the jury to determine whether
defendants were negligent and if so, whether defendants’ neg-
ligence had caused injury to plaintiffs and in what amount.
In the event that the jury assessed damages, the verdict
form also asked the jury to choose among three “valuation
dates” for Rowlett’s equity interest in Sunrise: March 13,
2003; October 7, 2005; and December 7, 2007. Plaintiffs
had objected to including that third date on the jury form.
Plaintiffs had argued that only the first two dates—dates
on which Rowlett claimed that defendants had taken actions
to effectively squeeze him out of Sunrise—should appear
on the verdict form. Defendants had argued that the third
date—the settlement date—also should appear on the ver-
dict form, because their witnesses had testified that the sum
for which plaintiffs settled in 2007 was appropriate to com-
pensate Rowlett for his losses in the Sunrise case and that
it either exceeded or approximated the value of his interest
in Sunrise in March 2003 and October 2005.
As noted, the jury ultimately found that defendants
were negligent in their representation of plaintiffs but that
defendants’ negligence was not a cause of damages to plain-
tiff. The jury did not, therefore, answer the question on the
verdict form involving valuation dates.
Plaintiffs appealed the jury’s verdict to the Court of
Appeals, assigning error to seven trial court rulings. As per-
tinent here, plaintiffs asserted that the trial court erred in
dismissing two allegations in the complaint relating to defen-
dants’ negligent failure to timely allege an oppression claim
Cite as 358 Or 639 (2016) 647
and that the trial court erred in granting defendants’ motion
to include on the verdict form the date that the Sunrise lit-
igation settled as an alternative date for valuing Rowlett’s
interest in Sunrise. The Court of Appeals agreed with plain-
tiffs and reversed the rulings of the trial court as to those
assignments of error.6 In this court, defendants challenge
both of those aspects of the Court of Appeals’ decision.
A. Plaintiffs’ Oppression Allegations
We turn first to the Court of Appeals’ reversal of the
trial court’s ruling striking two allegations from the mal-
practice complaint relating to defendants’ failure to timely
assert an oppression claim in the Sunrise litigation. In a
pretrial motion in the malpractice case, defendants moved
to dismiss the complaint to the extent that it alleged neg-
ligent failure to timely press an oppression claim, arguing
that Sunrise was an LLC, and no claim for oppression by an
LLC member against an LLC or other members of an LLC
exists in Oregon under either the LLC statutes or the com-
mon law. Defendants argued that, because plaintiffs never
had a viable oppression claim, it could not have been mal-
practice for defendants to have failed to raise such a claim
earlier in the Sunrise litigation.
Defendants made their motion under ORCP 21
G(3), which provides:
“A defense of failure to state ultimate facts constituting
a claim, a defense of failure to join a party indispensable
under Rule 29, and an objection of failure to state a legal
defense to a claim or insufficiency of new matter in a reply
to avoid a defense, may be made in any pleading permitted
or ordered under Rule 13 B or by motion for judgment on
the pleadings, or at the trial on the merits. The objection or
defense, if made at trial, shall be disposed of as provided
in Rule 23 B in light of any evidence that may have been
received.”
As the Court of Appeals pointed out, under that rule, a
failure-to-state-a-claim defense may be asserted at three
different junctures: in a pleading under Rule 13 B, by motion
6
Plaintiffs’ other assignments of error in the Court of Appeals and the Court
of Appeals’ disposition of those assignments of error are set out at 358 Or at
641-42 n 1. None is at issue on review.
648 Rowlett v. Fagan
for judgment on the pleadings, and at trial on the merits.
Rowlett, 262 Or App at 678. Plaintiffs had argued to the
trial court that ORCP 21 G(3) does not itself provide a mech-
anism for a defendant to seek dismissal for failure to state
a claim just before trial, and they challenged defendants’
motion on that ground. The trial court, however, ignored
that procedural problem and considered defendants’ motion,
ruling as follows:
“As to the oppression claim, it’s also out. The plaintiff
has not provided me with any basis to permit this except
for the broad language of the LLC statute and I disagree
with you. I don’t think it’s as broad—I think it’s actually
more restrictive and it does not include the opportunity to
demonstrate oppressive conduct.
“Even if it did I would conclude as a matter of law that
the breach of fiduciary duty claims, which exist from the
exact same conduct, and there is no other, would provide a
sufficient remedy in a case where we are now.
“After all, we’re talking about the legal malpractice
claim. We can’t consider dissolution obviously. And so
what’s the alternative to dissolution here? It’s not really—it
doesn’t work. And so even if I [sic] were permitted to go
forward, I wouldn’t permit a remedy under it. So you can’t
have any in this particular case.
“I’d appreciate—I’m not saying as a matter of law there
is no such thing as a—an oppression or squeeze-out claim
under an LLC. I’m saying the plaintiff has not provided
me with a basis for it. I’m still wondering out there. I still
think there might be something out there, but I haven’t
been shown it.”
The trial court did not grant defendants’ request to strike
all of the allegations in the complaint referencing an oppres-
sion claim. Rather, it struck two allegations of negligence:
“[f]ailing to diligently prepare and pursue plaintiffs’ claims
by * * * [f]ailing to allege plaintiffs’ [oppression] claims in
a timely manner,” and “[f]ailing to competently represent
plaintiffs’ interests by * * * [d]efendant Fagan’s failure to
recognize that the factual circumstances gave rise to [an
oppression] claim related to Rowlett’s interest in Sunrise
Partners, LLC.” That ruling left in the complaint several fac-
tual allegations referencing an oppression claim, including
Cite as 358 Or 639 (2016) 649
an allegation that Schwabe failed to timely hire experts to
evaluate Rowlett’s interest in Sunrise for his oppression
claim, and an allegation that, had Schwabe timely asserted
an oppression claim, Rowlett would have received a larger
monetary award for his Sunrise ownership interest than he
received in settlement.
On appeal, given the parties’ and the trial court’s
treatment of defendants’ motion, and given the fact that
plaintiffs had had an opportunity to, and did, in fact, pres-
ent arguments on the merits of defendants’ motion, the
Court of Appeals reviewed defendants’ pretrial motion as
one for judgment on the pleadings under ORCP 21 B (“After
the pleadings are closed, but within such time as not to
delay the trial, any party may move for judgment on the
pleadings.”). Rowlett, 262 Or App at 679. As the Court of
Appeals explained, to prevail on a motion for judgment
on the pleadings, a party must show that “the nonmoving
party cannot prevail as a matter of law.” Id. On review of a
judgment on the pleadings, the appellate court accepts as
true all well-pleaded allegations in the complaint. Id. (cit-
ing Boyer v. Salomon Smith Barney, 344 Or 583, 586, 188
P3d 233 (2008)). Judgment on the pleadings may be granted
only when the pleadings, taken together, affirmatively show
that the plaintiff has no claim against the defendant. Id.
The Court of Appeals ruled that that meant that,
“to obtain a judgment on the pleadings, defendants had the
burden to establish that, assuming the truth of the allega-
tions in the complaint, they were entitled to prevail on that
part of plaintiffs’ negligence claim. Looking solely at the
allegations in the complaint, plaintiffs sufficiently alleged
negligence.”
262 Or App at 680 (emphasis in original).
To succeed in a malpractice claim based on neg-
ligence, a plaintiff must prove a duty that runs from the
defendant to the plaintiff, a breach of that duty, a result-
ing harm to the plaintiff measurable in damages, and
causation—a causal link between the breach of duty and
the harm. Stevens v. Bispham, 316 Or 221, 227, 851 P2d
556 (1993). The Court of Appeals pointed out that plain-
tiffs alleged that the oppression claim arose in 2003, that
650 Rowlett v. Fagan
defendants did not assert the oppression claim on Rowlett’s
behalf until the 2006 amended arbitration statement and
the 2007 complaint, and that plaintiffs would have received
a higher monetary value for Rowlett’s ownership interest in
Sunrise if defendants had pressed an oppression claim in a
timely manner between 2003 and 2005. Rowlett, 262 Or App
at 680. According to the Court of Appeals, the trial court was
required to assume, for purposes of defendants’ motion for
judgment on the pleadings, that all of those allegations were
true. And, the Court of Appeals concluded, because those
allegations, if true, would have proved defendants’ duty to
plaintiffs, their breach of that duty, harm to plaintiffs, and
causation, the trial court erred in ruling that defendants
were entitled to judgment on the pleadings. Id. at 280-81.
In so concluding, the Court of Appeals rejected
defendants’ argument that it was relevant, even dispositive,
that plaintiffs did not have a viable claim for oppression
because Oregon law does not allow an oppression claim to
be brought by an LLC member against an LLC or its other
members. As the court stated,
“it is apparent that the trial court placed the burden on
plaintiffs to establish the viability of an oppression claim
as a legal matter, regardless of what plaintiffs had alleged.
However, that is not the applicable standard on a motion for
judgment on the pleadings.”
Id. at 681. The court offered no support for that proposition,
but noted that, if “defendants [had] wanted to test plaintiffs’
proof before trial,” they could have filed a timely motion for
summary judgment under ORCP 47 and argued that there
was no material dispute of facts and that they were entitled
to judgment as a matter of law. Id. (emphasis in original).
However, had that happened, the Court of Appeals stated,
plaintiffs could have proven defendants’ breach of their duty
of care through an expert, and, in any case, defendants did
not file such a motion. Id. at 681-82. Moreover, the Court
of Appeals held, even if defendants were correct that an
oppression claim by a minority member of an LLC against
the LLC is not viable in Oregon,
“defendants still could have breached their duty of care by
failing to assert a colorable claim of oppression earlier in
the Sunrise litigation.”
Cite as 358 Or 639 (2016) 651
Id. at 682. That is so, the Court of Appeals stated, because
“an assertion of a colorable claim could have altered the out-
come for Rowlett considerably by giving him increased lever-
age to secure a settlement on much more favorable terms
than what he obtained.” Id. at 686.7
As a preliminary matter, we observe that it appears
that an implicit premise of the Court of Appeals’ holding is
that the legal viability of an oppression claim against an
LLC in Oregon is a question of fact that, if alleged, must be
accepted as true, and if challenged by a motion for summary
judgment, may be proved or disproved by expert testimony.
Yet the legal viability of any particular claim under Oregon
law—including an oppression claim in the LLC context—is
strictly a matter of law. Thus, the legal viability of a claim
or of a position that a lawyer failed to take is decided by
the court, based on argument by the parties; an allegation
in a complaint that a claim is viable is not a factual allega-
tion and it need not be accepted as true. Chocktoot v. Smith,
280 Or 567, 572-74, 571 P2d 1255 (1977). For that reason,
the trial court could properly have ruled on defendants’
motion for judgment on the pleadings and concluded, based
on defendants’ and plaintiffs’ legal arguments on the point,
that the pleadings affirmatively showed that plaintiffs had
no claim against defendants for oppression, because no such
claim for relief exists in Oregon.8
7
Judge Armstrong concurred in the majority’s disposition of the case but
wrote separately to explain that he did not agree with the majority’s conclusion
that, because the plaintiffs’ claim for oppression was colorable and there was
an evidentiary basis for that claim, the trial court had erred in dismissing the
allegations of negligence based on the oppression allegations. Judge Armstrong
stated that that argument had not been presented below or even argued to the
Court of Appeals on appeal, and, further, that that conclusion “also results in
the unsettling proposition that a party may be held liable for malpractice for
failing to assert a claim that is not, in fact, cognizable.” Rowlett, 262 Or App
at 700 (Armstrong, J., concurring). Nonetheless, Judge Armstrong agreed with
the majority that the trial court’s ruling should be reversed, because, in his
view, an oppression claim by a minority member of an LLC is viable in Oregon.
Id.
8
It also follows that, to extent the Court of Appeals was suggesting that
expert testimony would have been appropriate to prove whether or not a claim
for oppression was viable in Oregon as a matter of law, the court was incorrect.
Expert testimony may assist the court to determine a factual matter, but the
court alone decides questions of law. Chocktoot, 280 Or at 573 (“The legal conse-
quences of an attorney’s failure, in the earlier case, to present a timely pleading
or motion to take an appeal are matters for argument, not proof.”).
652 Rowlett v. Fagan
We also disagree that lawyers can be held to have
breached a duty of care in a malpractice action by failing
to raise claims that are merely colorable, but not necessar-
ily viable. This court has never suggested that a lawyer’s
duty to a client requires taking “colorable,” but ultimately
incorrect, legal positions. Rather, as the court has stated, a
client who alleges malpractice in litigation must prove the
existence of “a valid cause of action or defense, which, had
it not been for the attorney’s alleged negligence, would have
brought about a judgment favorable to the client in the orig-
inal action.” Harding v. Bell, 265 Or 202, 205, 508 P2d 216
(1973). See also Kelly v. Hochberg, 349 Or 267, 273, 243 P3d
62 (2010) (in legal malpractice case, first issue is whether
plaintiff would have been successful had he timely filed tort
action); Milton v. Hare et al., 130 Or 590, 598, 280 P 511
(1929) (“Unless [the client] has a good cause of action against
[her adversary], whom she accuses of having cheated and
defrauded her, she has no cause of action against [the defen-
dant lawyers]. Unless she had a good cause of action against
[her adversary] for fraud, she lost nothing by the conduct
of [the defendant lawyers], even though they were guilty of
gross negligence.”).
Using “colorable” as the standard to define a law-
yer’s duty to a client would place lawyers in an untenable
position, given that, any time an area of law is unsettled,
both sides arguably are “colorable,” and, in every case that
goes to trial, one side loses. As one commentator has stated,
“Of all professionals, * * * lawyers are the most vulnerable
to an error revealed in hindsight. The essence of the legal
system portends a high frequency of errors. Unlike any
other profession, the practice of law often involves a pro-
cess by which attorneys must take positions inconsistent to
those of their clients’ adversaries, antagonists or competi-
tors. Usually, only one side will prevail.”
Ronald E. Mallen, 2 Legal Malpractice § 19:1, 1226 (2016
ed). For that reason, the commentator states, it is “univer-
sally recognized” that “an attorney is not liable for an error
in judgment on an unsettled proposition of law.” Id.
That conclusion resolves the Court of Appeals’ sug-
gestion that defendants could have breached their duty of
Cite as 358 Or 639 (2016) 653
care to plaintiffs by failing to assert a colorable claim of
oppression earlier in the Sunrise litigation because “such an
assertion of a colorable claim could have altered the outcome
for Rowlett considerably by giving him increased leverage
to secure a settlement on much more favorable terms than
what he obtained.” Rowlett, 262 Or App at 686. Whether
plaintiffs could have proved that factual proposition is not
of consequence. A lawyer cannot be held liable for failing to
assert a claim that is colorable but not viable.
For all of the foregoing reasons, we reject the bases
for the Court of Appeals’ conclusion that the trial court erred
in dismissing the two oppression allegations from plain-
tiffs’ complaint. We turn now to consider the issue as it was
framed and decided in the trial court. In the trial court, the
dispute over whether to strike the oppression allegations in
the malpractice complaint centered on whether a claim for
damages for oppression by one member of an LLC against
the LLC or its other members is available under Oregon
statutory or common law, and thus would have been avail-
able to Rowlett against Sunrise and other Sunrise members
in the underlying litigation, so that defendants could have
been negligent for failing to assert it in a timely manner.
The trial court struck the two oppression allegations for
two reasons: First, the court was not persuaded by plain-
tiffs’ argument that an oppression claim is viable in the
LLC context in Oregon; and second, it concluded that plain-
tiffs’ breach of fiduciary duty claims in the Sunrise litiga-
tion were based on exactly the same conduct as would have
supported an oppression claim, and, therefore, those breach
of fiduciary duty claims “would provide a sufficient remedy
in a case where we are now.”
On appeal to the Court of Appeals, plaintiffs asserted
that they had had a viable claim for oppression against the
Sunrise defendants and would have been entitled to a com-
pulsory buyout or judicial dissolution if the claim had been
asserted in a timely manner. However, because of defen-
dants’ negligence, plaintiffs argued, the oppression claim
was not pressed until 2006, by which time the market had
dropped and the Sunrise defendants had plundered Sunrise’s
assets. Therefore, they argued, the trial court erred in dis-
missing the two specifications of negligence pertaining to
654 Rowlett v. Fagan
defendants’ failure to timely assert an oppression claim. In
response, defendants repeated their arguments that Oregon
law does not recognize a claim for oppression by a member
of an LLC against an LLC or its other members. In addi-
tion, they argued that dismissal of the two oppression alle-
gations from the malpractice complaint had no effect on the
outcome, and, therefore, any error was harmless. As already
discussed, the Court of Appeals did not address the viability
of an oppression claim and instead found that the trial court
erred in dismissing the two oppression allegations because
an oppression claim was “colorable.” The Court of Appeals
also rejected defendants’ harmless error arguments.9
On review, we agree with defendants that, even if
the trial court erred in concluding that an oppression claim
by a minority member of an LLC against the LLC or its other
members is not viable in Oregon, an issue we do not reach,
any such error was harmless. As we will explain, striking
the two negligence allegations concerning defendants’ fail-
ure to raise the oppression claim earlier in the Sunrise liti-
gation did not affect the outcome of the malpractice case.
First, the trial court did not strike all of the allega-
tions referring to plaintiffs’ oppression claim from the mal-
practice complaint. As noted, the court did not strike allega-
tions that Schwabe failed to timely hire experts to evaluate
Rowlett’s interest in Sunrise for his oppression claim and
that, had Schwabe timely asserted an oppression claim,
Rowlett would have received a greater sum for his Sunrise
ownership interest. In addition, the court never read the
complaint to the jurors, and it never instructed the jury that
any allegations had been stricken from it.
9
Defendants proffered a two-pronged harmless error analysis. They argued
that dismissing the oppression allegations had no effect on how the case was
tried or its outcome because the same facts would have established both a breach
of fiduciary duty claim and an oppression claim against the Sunrise defendants,
and plaintiffs were able to seek identical relief from defendants in the malpractice
case based on the breach of fiduciary duty claims in the 2007 Sunrise litigation.
Alternatively, defendants argued that plaintiffs’ oppression claim was equitable
and would have been determined by the trial court in the Sunrise litigation, but
the trial court had made clear that it would not have found that plaintiffs incurred
damages because of defendants’ negligence. The Court of Appeals addressed only
defendants’ second harmless error argument in its opinion. Rowlett, 262 Or App
at 687.
Cite as 358 Or 639 (2016) 655
Second, as the 2007 complaint against the Sunrise
defendants makes clear, plaintiffs’ oppression and breach of
fiduciary duty claims were both based on the duty of “good
faith” that the other Sunrise members owed to Rowlett,
and each supported a claim for damages measured by the
value of Rowlett’s interest in Sunrise, which the 2007 com-
plaint quantified as approximately $900,000. Plaintiffs
have argued that a claim for oppression also would have
entitled them to seek buyout or dissolution as a remedy in
the Sunrise litigation, that those remedies were unique and
unavailable for a claim for breach of fiduciary duty, and
that if defendants had filed a claim for oppression earlier
in the litigation and sought dissolution or buyout as reme-
dies, then that would have put additional pressure on the
Sunrise defendants to settle the case sooner, on more favor-
able terms. We do not understand the trial court’s ruling on
defendants’ motion to strike as precluding plaintiffs from
making that argument. As noted, plaintiffs’ complaint con-
tinued to include an allegation that, had Schwabe timely
asserted an oppression claim in the underlying action,
Rowlett would have received a greater sum for his Sunrise
ownership interest. Plaintiffs could have argued that the
availability of dissolution or buyout as remedies for the
Sunrise defendants’ misconduct was a factor that would
have led to that result. We also think it significant that, in
the malpractice action, plaintiffs did not allege that defen-
dants were negligent in failing to seek dissolution or buyout
in the Sunrise litigation; that theory of negligence was nei-
ther alleged nor stricken.
Third, the central premise behind plaintiffs’ argu-
ment that defendants were negligent for failing to press the
oppression claim earlier is that Rowlett was entitled to the
value of his interest in Sunrise on the date that the oppres-
sive conduct occurred (between $1 million and $2.2 million,
depending on the date used), but that the real estate mar-
ket had dropped dramatically by 2007, when he settled the
case. However, at the pretrial hearing on defendants’ motion
to dismiss the oppression allegations, plaintiffs’ lawyer con-
ceded that plaintiffs’ breach of fiduciary duty claims against
Sunrise and its other members were based on the identical
conduct that would have supported an oppression claim and,
656 Rowlett v. Fagan
importantly, would permit an identical valuation of Rowlett’s
interest in Sunrise:
“THE COURT: Let me ask you a question. If I were to
conclude that the defense is right, that there was no avail-
able oppression or squeeze-out claim and you were pro-
ceeding only under breach of fiduciary duty and negligence
claims, would that affect your decisions as to valuation
dates for damages or does it really matter?
“[PLAINTIFFS’ COUNSEL]: The way I read the case
law, there’s talk about when you’ve got the kind of facts that
amount to breach of fiduciary duty, it’s intertwined with
what amounts to oppressive conduct.
“And so in the way that I read the case law, it appears
our Appellate Courts treat it as one and the same, even
though they end up being a claim at law and a claim in
equity.
“THE COURT: Mm-hmm.
“[PLAINTIFFS’ COUNSEL]: So we would, of course,
like to continue to have all theories available to us.
“THE COURT: I understand. I’m just trying to figure
out if it matters to your argument on valuation dates. It
doesn’t sound like it does.
“[PLAINTIFFS’ COUNSEL]: No, because the breach
of fiduciary duty allegations are similar.
“THE COURT: They’re pretty much identical.
“[PLAINTIFFS’ COUNSEL]: Exactly.”
Thus, in the malpractice action, although the trial court
ruled that plaintiffs could not argue that they had received a
lesser sum for Rowlett’s share in Sunrise due to defendants’
negligent failure to timely assert an oppression claim, plain-
tiffs were not harmed by that ruling, because they were able
to make virtually identical arguments as to the valuation
dates based on defendants’ alleged negligence in litigating
plaintiffs’ breach of fiduciary duty claim against the Sunrise
defendants.
Fourth, and relatedly, although plaintiffs have
couched their argument in terms of defendants’ delay
in asserting the oppression claim, the crux of plaintiffs’
Cite as 358 Or 639 (2016) 657
negligence charge against Schwabe was their contention
that defendants were negligent for failing to realize in
2007, at the time that the Sunrise litigation settled, that an
oppression claim would have entitled Rowlett to the value of
his interest on the date the oppressive conduct occurred—
either March 2003 or October 2005. Rowlett asserted that
defendants had not properly advised him on that point and,
instead, led him to believe that the best he could hope to
achieve at settlement was the value of his interest on the
date of settlement. Plaintiffs’ argument that the trial court’s
ruling striking the oppression allegations affected the out-
come of the malpractice case fails to recognize that plain-
tiffs were permitted to pursue that identical theory under
the allegations that remained in the complaint after the two
oppression allegations were stricken. Plaintiffs were permit-
ted to, and did, put on evidence from experts to establish the
value of plaintiffs’ interest in Sunrise in March 2003 and
October 2005, and they strenuously argued during closing
that they were entitled to damages based on the value of
their interest in Sunrise on those dates. That is, at trial in
the malpractice case, plaintiffs presented the same evidence
about the date of valuation to support the same claims for
damages that they would have been entitled to present had
the trial court not granted defendants’ motion to strike two
of the negligence allegations relating to oppression.
Fifth, and finally, the stricken oppression allega-
tions alleged alternative bases on which a jury could find
that defendants had had a duty of care and that they had
breached that duty. Because the jury found that defendants
were negligent in their representation of plaintiffs in the
Sunrise litigation, the jury necessarily found that defen-
dants had had a duty of care to plaintiffs and that they had
breached that duty.10 It follows that the stricken alternative
bases for those conclusions were unnecessary and that the
10
Respecting the jury’s determination that defendants were negligent, the
trial court had instructed as follows:
“The law imposes a duty upon each person to use reasonable care to avoid
causing harm. Reasonable care is the degree of care and judgment used by
reasonably careful people in the management of their own affairs to avoid
harming themselves or others.
“* * * * *
658 Rowlett v. Fagan
jury’s verdict as to the duty and breach elements of plain-
tiffs’ negligence claim was unaffected by the trial court’s
ruling striking the two oppression allegations.
Because we conclude that any error that the trial
court made in striking two oppression allegations from the
complaint was harmless, we hold that the Court of Appeals
erred in reversing the trial court’s order striking the oppres-
sion allegations from the negligence claim.
B. The Verdict Form
Defendants also challenge the Court of Appeals’
reversal of the trial court ruling permitting the settlement
date to be listed among other valuation dates on the ver-
dict form. Some background is helpful to understand this
issue.11
As we have discussed, the gravamen of plaintiffs’
complaint against defendants was that defendants negli-
gently valued Rowlett’s interest in Sunrise as of the time of
the settlement of the Sunrise litigation in 2007, but should
have understood that Rowlett actually had been entitled to
claim the value of his interest when the Sunrise defendants
“A person is negligent, therefore, when that person does some act that a rea-
sonably careful person would not do, or fails to do something that a reasonably
careful person would do under similar circumstances.”
(Emphasis added.)
11
We note that defendants complain that, notwithstanding that they were
the prevailing parties at trial on the issues of causation and damages, it is evi-
dent throughout the part of the Court of Appeals’ opinion addressing the verdict
form issue that the Court of Appeals ignored the facts supporting the defense
verdict on damages and causation and viewed the facts in the light most favorable
to plaintiffs. Defendants are correct that, even though the jury found defendants
negligent in their representation of plaintiffs in the Sunrise litigation (that is,
that their representation of plaintiffs fell below the standard of care), defendants
prevailed on the issues of causation and damages, and ultimately prevailed on
the negligence claim in the malpractice trial, because the jury concluded that
defendants’ negligence was not a cause of damage to plaintiffs. We agree with
defendants that the appellate courts should view the facts surrounding causation
and damages in the light most favorable to them. See Brown v. J.C. Penney Co.,
297 Or 695, 705, 688 P2d 811 (1984) (appellate court does not weigh evidence,
but considers the evidence, including inferences, in the light most favorable to
the prevailing party). In its opinion in this case, the Court of Appeals did not
specifically state how it viewed the facts in evaluating plaintiffs’ contention that
the verdict form misled the jury in its consideration of damages. However, as we
discuss below, we agree with defendants that the Court of Appeals was required
to view those facts in the light most favorable to defendants.
Cite as 358 Or 639 (2016) 659
manifested their intent to deprive him of his interest in
Sunrise—March 13, 2003, and October 7, 2005. Plaintiffs
therefore contended in the complaint and at trial that they
were entitled to damages in the amount of the difference
between the value of Rowlett’s interest on those dates and
the amount Rowlett obtained in settlement on December
7, 2007. In support of their position, plaintiffs introduced
expert and other testimony and evidence to explain both the
legal theory supporting the propriety of valuing Rowlett’s
interest in Sunrise on those dates and the monetary value of
his interest on those dates. Specifically, plaintiffs introduced
evidence that the value of Rowlett’s interest in Sunrise in
March 2003 was over $1 million, and in October 2005 was
over $2.2 million.
In response, defendants argued, and introduced
evidence to show, that Rowlett had not actually been ousted
from membership in Sunrise in October 2005, and, because
Sunrise was a going concern at the time of the settlement in
2007, the settlement date was an appropriate date for valu-
ing Rowlett’s interest. Defendants also presented evidence
that, regardless of whether Rowlett’s interest in Sunrise was
valued in 2003, 2005, or 2007, the 2007 settlement amount
exceeded or approximated the value of Rowlett’s interest.
Specifically, defendants introduced evidence that the value
of Rowlett’s interest in Sunrise on the operative dates was
significantly less than Rowlett claimed: about $30,000 in
March 2003, and either $108,000 or $355,000, depending on
which operating agreement controlled, in October 2005.
After the presentation of evidence and before the
case was submitted to the jury, the parties discussed the
proposed jury instructions and verdict form. Neither party
objected to the following proposed jury instructions on
causation and damages:
“If you find that the defendants were negligent as
claimed by the plaintiffs, then you must decide whether
that negligence caused any harm to the plaintiffs. The
plaintiffs, therefore, must prove facts that, but for the
defendants’ alleged negligence, they would have received
a more favorable outcome in the original lawsuit than they
actually received.
660 Rowlett v. Fagan
“* * * To determine whether the defendants’ alleged neg-
ligence in fact resulted in a less favorable outcome for the
plaintiffs, you must first determine what the outcome for the
plaintiffs would have been had the defendants not been neg-
ligent. If the outcome that would have occurred is no more
favorable than the outcome that did occur, then the plaintiffs’
loss or damage cannot have been caused by the defendants.
“In this case, a settlement of the underlying case
occurred. The fact that a client is dissatisfied with the set-
tlement he received does not prove that the attorney was
negligent or that the attorney caused damage to the cli-
ent. Likewise, the fact that a client settles its lawsuit is not
conclusive evidence that the attorney was not negligent, or
that the amount of the settlement necessarily reflects the
actual value of the client’s claims. The client must prove
that, but for the attorney’s negligence, the client would not
have accepted the settlement and would have subsequently
achieved a better outcome, either through a higher settle-
ment or at trial.
“* * * * *
“If you find that the defendants were negligent * * *, then
you must decide whether the plaintiffs have been damaged,
and, if so, the amount of their damages.
“* * * * *
“The parties in this case seek only economic damages,
which economic damages are the objectively verifiable mon-
etary losses that each party has allegedly incurred.
“The maximum amount the plaintiffs have claimed in
all of their claims—so this covers all the different claims—
are as follows:
“First, the difference between the settlement amount in
the 2007 case and the value of Mr. Rowlett’s equity interest
in Sunrise Partners, LLC, as of March 13th, 2003, or alter-
natively, October 7th, 2005.
“The maximum amount for that item is $2,200,000.”
With regard to the verdict form, plaintiffs had
requested that the trial court include a question asking the
jury to determine prejudgment interest in the event it found
in their favor as to damages, as well as a question identify-
ing the valuation date that the jury had used in the event
Cite as 358 Or 639 (2016) 661
it had awarded damages. The trial court concluded that it
would not permit the jury to determine prejudgment inter-
est. The court then turned to the question whether nonethe-
less to include valuation dates, which, the court concluded,
needed to be decided, either by the court or by the jury, for
an eventual determination of prejudgment interest.
Plaintiffs’ counsel explained that the operative
dates, from her standpoint, were March 13, 2003, and
October 7, 2005. She argued that the particular date was
a question for the jury to decide, and she stated that she
would argue for those dates in the alternative. Defense
counsel agreed that the March 2003 date was appropriate
for valuing plaintiffs’ interest. However, she argued that
the evidence showed that the October 2005 date was “not an
actual date of oppressive conduct,” because Rowlett still was
a member of Sunrise on that date and the LLC remained
a going concern. Defense counsel observed that Finn had
testified that he had valued Rowlett’s interest as a member
of a going concern for purposes of the settlement and, she
argued, that approach was correct.
Apparently still considering the issue in the context
of prejudgment interest, the court concluded that, because
there was evidence supporting both the March 2003 and
October 2005 dates, those dates would go to the jury:
“Now that I feel I heard it, I heard conflicting views, the
jury is going to pick the date that they think is—where the
damages started and then apply the number of damages,
assuming there is any, to that date.”
At that point, defense counsel interjected to offer the
December 2007 date:
“[DEFENSE COUNSEL]: And also, the way Mr. Finn
did it, which was currently as the case, in 2007. * * *
December 7, 2007, when he accepted the offer of judgment.
That’s what we—
“THE COURT: You don’t want—you’d rather have
the—which date do you want? The—
“[DEFENSE COUNSEL]: This is where it gets confus-
ing Your Honor, because Mr. Finn did it a certain way.
662 Rowlett v. Fagan
“THE COURT: Yeah.
“[DEFENSE COUNSEL]: And our position is it was
a reasonable approach. So how of you deal within the time
frame? They’re saying it was an unreasonable settlement
at that time. That’s the—that’s the touchstone of this case.
The settlement figure. And so I agree with that.
“THE COURT: It’s conceivable the jury could conclude
that is the right date. * * * Three dates. December 7, 2007?
“[PLAINTIFFS’ COUNSEL]: I don’t know that there’s
been any evidence that that is a fair value date. * * * I don’t
believe there’s ever been any testimony about December
7th, 2007, as a valuation date.
“THE COURT: The difficulty I guess I have, [defen-
dants], is let’s assume they want to pick that date but con-
clude that the settlement was not enough. What would be
the number that they would go to?
“* * * * *
“[DEFENSE COUNSEL]: But to give them only those
two dates when Mr. Finn did it a certain way. [A defense
expert] agreed with that approach. [Another defense expert]
did provide evidence as to what actually happened with
Sunrise, which was consistent with Mr. Finn’s approach,
which is what the tax returns show. I think there’s plenty
of evidence that that’s what’s an appropriate—that’s our
position on this.
“THE COURT: So if they pick that date, there’s no
damages; right?
“[DEFENSE COUNSEL]: Yeah, I think that’s proba-
bly right. * * *
“* * * * *
“[PLAINTIFFS’ COUNSEL]: * * * There was no testi-
mony by any of the experts about—with a fair value dam-
age claim that December 7, 2007, is a valuation date.
“THE COURT: I’m going to permit the jury to con-
sider all three alternatives, because Mr. Finn’s testimony
supports it. I don’t necessarily think you need expert tes-
timony. Mr. Finn would be viewed as an expert, but even
with his background I think is—I will permit all three
alternatives to be presented to the jury. They can figure it
out based on what they’ve heard.”
Cite as 358 Or 639 (2016) 663
Ultimately, the verdict form that the court provided
to the jury asked pairs of questions similar to the following
for each defendant:
“QUESTION 1
“Was [a particular defendant] negligent in one or more of
the ways plaintiffs claim?
“ANSWER: (Yes or No) _______
“Nine of you must agree on your answer to this question.
If your answer is ‘no,’ do not answer Question 2. Proceed to
Question 3. If your answer is ‘yes,’ proceed to Question 2.
“QUESTION 2.
“Was [the particular defendant’s] negligence a cause of
damage to plaintiff?
“ANSWER: (Yes or No) _______
“At least the same jurors who answered ‘yes’ to Question 1
must also agree on your answer to Question 2. Whatever you
answer, proceed to Question 3.”
Questions 1 and 2 pertained to Fagan’s negligence, Questions
3 and 4 pertained to Finn’s negligence, and Questions 5 and
6 pertained to Schwabe’s negligence. The jury answered
“yes” to each question about whether the defendant was neg-
ligent (Questions 1, 3, and 5), and the jury answered “no”
to each question about whether that defendant’s negligence
was “a cause of damage to plaintiffs” (Questions 2, 4, and 6).
The verdict form next instructed, “If you have
answered ‘yes’ to one or more of Questions 2, 4, and/or 6,
proceed to Question 7. Otherwise, do not answer Questions 7
through 10, but proceed to Question 11 instead.” Questions
7, 8, and 9 pertained to plaintiffs’ contributory negligence.
Question 10 asked,
“A. What is plaintiffs’ total damage?
“ANSWER: $_______
“B. What forms the basis, by category, for the total dam-
ages listed in subsection A?
“The difference between the settlement value of the
2007 case and:
664 Rowlett v. Fagan
“a. The value of Gerald Rowlett’s equity interest
in Sunrise Partners?
“ANSWER: $_______
“b. The amount that Gerald Rowlett paid to
maintain the option on the Kelley Creek
property?
ANSWER: $_______
“If you entered a dollar amount in 10(B)(a), then answer
10(C).
“C. What was the valuation date of Gerald Rowlett’s
equity interest in Sunrise Partners?
“ANSWER: (March 13, 2003, October 7, 2005, or
December 7, 2007)”
As instructed, the jurors, having answered Questions 2, 4,
and 6 “no,” did not answer question 10(A), (B), or (C).12
On appeal, plaintiffs argued that, generally, a set-
tlement does not indicate the true value of a case, and that,
other than as a baseline, the settlement in this case, and
the settlement date, December 7, 2007, were not relevant to
the damages that the Sunrise defendants should have paid
in the Sunrise litigation. They contended that, according
to their expert, courts set the valuation date on the date
most favorable to the oppressed LLC member, which, in this
case, would have been either March 13, 2003, or October 7,
2005. Plaintiffs disputed the trial court’s finding that Finn’s
testimony supported the inclusion of the settlement date on
the verdict form, and argued that the inclusion of that date
permitted the jury to consider the worst possible valuation
date—the settlement date—which coincided with a signifi-
cant downturn in the real estate market.
Finally, plaintiffs argued that the error harmed
them. Plaintiffs asserted that, based on the inclusion of the
settlement date on the verdict form, defendants had argued
in closing that the settlement “was based on reality and real
12
The verdict form went on to ask similar sets of questions on the issues of
negligent misrepresentation and breach of fiduciary duty. The jury found none of
the defendants liable on either of those claims. A final set of questions pertained
to attorney fees. The jury answered those questions in defendants’ favor as well.
Cite as 358 Or 639 (2016) 665
money earned and what really happened with this project
and what Mr. Rowlett really had a piece of,” and defendants
told the jury that “the date you set for the value is the date
that the case settled. December 7, 2007. * * * You pick that
date, because that’s what Mr. Finn’s approach to damages
was.” Plaintiffs argued that those statements were unfair,
and, thus, the error prejudiced them by creating an errone-
ous impression in the mind of the jurors that affected the
outcome of the case.
Defendants responded that the parties and the trial
court decided to place the dates on the verdict form only to
determine a date from which to compute pre-judgment inter-
est should damages be awarded. They contended that they
had not argued to the jury that it should fix damages on the
date of settlement or that the settlement amount fixed the
value of Rowlett’s interest in Sunrise, but rather that the set-
tlement amount was reasonable in light of all the evidence
adduced at trial regarding plaintiffs’ damages. And, in any
case, defendants argued, plaintiffs had not explained how the
mere presence on the verdict form of the settlement valuation
date could have harmed them, given that the jurors had been
instructed to answer the questions in order, and, therefore,
they had never reached the question of valuation dates.
The Court of Appeals, as discussed, agreed with
plaintiffs that the presence of the settlement date in Question
10 was erroneous and that it prejudiced them. The Court of
Appeals held that the trial court erred in including the set-
tlement date on the verdict form, because, according to the
court, there had been no expert testimony at trial stating
that the settlement date was a permissible date for valuing
Rowlett’s interest in Sunrise, and case law supported plain-
tiffs’ expert’s testimony that the proper dates for valuing an
LLC member’s interest in a case like this one was the date
when the improper conduct culminated. Thus, according to
the Court of Appeals, “the trial court erroneously permitted
the jury to consider a valuation date that had no basis in the
expert testimony or, it appears, in Oregon law.” Rowlett, 262
Or App at 691.
The court also held that plaintiffs were harmed by
the error. The court stated that, even though defendants
666 Rowlett v. Fagan
had not argued that the settlement amount fixed the value
of Rowlett’s interest in Sunrise,
“defendants cannot overcome the effect of arguments that
they did make to the jury that are salient to prejudicial
error in this case. Defendants argued to the jury that
it should use the settlement date as the date to ‘value’
Rowlett’s interest in Sunrise as it was considering whether
plaintiffs were damaged. Defense counsel told the jury, ‘the
date that you set for a value is the date the case settled.
December 7th, 2007.’ Defendants further argued to the jury
that Finn’s settlement assessment was reasonable, and
that the jury should answer “no” to the question of negli-
gence being ‘a cause of damage to plaintiffs[.]’ Again, Finn
testified that he had concluded that the settlement amount
approximated the value of Rowlett’s interest in Sunrise at
the time of the settlement in December 2007. Defendants,
therefore, urged the jury’s reliance on the incorrect valu-
ation date allowed by the court, at a time when Sunrise’s
value was very low due to the significant drop in the res-
idential real estate market in late 2007, and argued that
plaintiffs suffered no damages.
“* * * * *
“[T]he prejudicial effect of error on a verdict form, like
instructional error, is assessed by whether it probably cre-
ated an ‘erroneous impression of the law in the minds of
the jurors’ that ‘affected the outcome of the case.’ Nolan
[v. Mt. Bachelor], 317 Or [328,] 337[, 856 P2d 305 (1993)]
(internal quotation marks omitted). We agree with plain-
tiffs that the addition of the settlement date as one of the
proper valuation dates was error that probably affected the
outcome of the case, particularly with regard to whether
plaintiffs suffered any damages at all. That is because
defendants were able to and did argue, in line with the ver-
dict form, that the jury should use the December 7, 2007,
settlement date to value Rowlett’s interest in Sunrise,
that Finn’s settlement assessment—which Finn testified
approximated the value of Rowlett’s interest in Sunrise
at that time—was reasonable, and that the jury should
answer ‘no’ in response to the question on the verdict form
asking whether defendants’ negligence was ‘a cause of dam-
age to plaintiffs [.]’ Causation was not truly in dispute. As a
result, we conclude that plaintiffs are entitled to a new trial
on the negligence claim.”
Cite as 358 Or 639 (2016) 667
262 Or App at 692-94.
In this court, defendants assert that the Court of
Appeals, in its analysis of the verdict form issue, failed to
consider evidence that defendants had presented to the jury
as to the value of Rowlett’s interest not only in 2007, but
also in 2003 and 2005. That evidence, defendants contend,
was relevant to an essential issue in the case—causation.
Defendants point out that, in closing, defense counsel did
not argue that the jury was required to use the settle-
ment date to value plaintiffs’ interest, but, rather, counsel
went through each of the alternative valuation dates and
explained that Rowlett’s interest in Sunrise on those dates
was less than or equivalent to the settlement amount. That
causation argument, they contend, was entirely proper.
In sum, defendants argue, had the Court of Appeals
used the correct standard and viewed the evidence concern-
ing valuation of Rowlett’s interest in 2003, 2005, and 2007
in the light most favorable to defendants, the court would
have had to agree with the trial court that evidence before
that court permitted consideration of the 2007 date on the
verdict form, and it would have had to find that the jury’s “no
causation” defense verdict had evidentiary support regard-
less of the valuation date used.
As the Court of Appeals noted, a verdict form “ ‘is
similar to an instruction in the sense that the court submits
it to the jury and requires the jury to follow it.’ ” Rowlett, 262
Or App at 690 (quoting Nolan, 317 Or at 336). However, as
with a jury instruction, error is reversible only if the erro-
neous verdict form substantially affected the party’s rights
under ORS 19.415(2).13 Montara Owners Assn. v. La Noue
Development, LLC, 357 Or 333, 350, 353 P3d 563 (2015).
That standard requires the party seeking reversal to show
that the error “skewed the odds against a legally correct
result.” Purdy v. Deere and Company, 355 Or 204, 226, 324
P3d 455 (2014). That is, the party must show that there is a
significant likelihood that the error affected the result. Id. In
this case, we need not decide whether the Court of Appeals
13
ORS 19.415(2) provides that “[n]o judgment shall be reversed or modified
except for error substantially affecting the rights of a party.”
668 Rowlett v. Fagan
was correct to hold that the trial court erred in permitting
the settlement date to appear on the verdict form, because
we are not persuaded that there is a significant likelihood
that any error affected the result.
To determine whether an erroneous instruction
substantially affected the rights of a party (in other words,
whether the error was harmless), the court considers the
instructions as a whole in light of the evidence and the par-
ties’ theories of the case at trial. Purdy, 355 Or at 231-32. As
we have already discussed, plaintiffs’ theory was that they
were damaged because the settlement amount in 2007 was
less than the value of Rowlett’s interest in Sunrise on the
dates when the Sunrise defendants manifested their intent
to deprive him of his interest in Sunrise—March 13, 2003,
and October 7, 2005. Plaintiffs asked the jury to calculate
the value of Rowlett’s interest in Sunrise as of those dates
and to compare those values to the settlement he received
in 2007. The trial court’s instructions to the jury, which the
trial court judge provided to the jury before reading the ver-
dict form, were consistent with that theory. As set out above,
the trial court instructed the jury how to determine dam-
ages for negligence (and causation) as follows:
“To determine whether the defendants’ alleged * * * negli-
gence in fact resulted in a less favorable outcome for the
plaintiffs, you must first determine what the outcome for
the plaintiffs would have been had the defendants not been
negligent. If the outcome that would have occurred is no
more favorable than the outcome that did occur, then the
plaintiffs’ loss or damage cannot have been caused by the
defendants.”
The instructions did not require the jury to determine a “val-
uation date” for Rowlett’s interest, nor did they suggest or
imply that the jury could value Rowlett’s interest in Sunrise
for purposes of their damage determination as of the date of
settlement.14 Rather, the instructions made clear to the jury
that its determination of whether defendants’ negligence
injured plaintiffs depended entirely on a determination of
14
In fact, the trial court also did not instruct the jury how to decide whether
to use the 2003 or 2005 date for determining causation or damages.
Cite as 358 Or 639 (2016) 669
what the outcome of the Sunrise litigation would have been
had defendants not been negligent—that is, if defendants’
representation of plaintiffs had not fallen below the stan-
dard of care. And, while the trial court did not specifically
instruct the jury that the outcome of the Sunrise litigation,
in turn, hinged on the value of Rowlett’s interest in Sunrise
in 2003 and 2005, or direct the jury to calculate plaintiffs’
damages by comparing the settlement amount with the
value of Rowlett’s interest in Sunrise in 2003 and 2005, that
formulation was implicit in the following instruction, which
was the only instruction that the trial court provided to the
jury that mentioned the operative dates:
“The maximum amount the plaintiffs have claimed in
all of their claims—so this covers all the different claims—
are as follows:
“First, the difference between the settlement amount in
the 2007 case and the value of Mr. Rowlett’s equity interest
in Sunrise Partners, LLC, as of March 13th, 2003, or alter-
natively, October 7th, 2005.
“The maximum amount for that item is $2,200,000.”
(Emphasis added). Thus, the instructions, taken as a whole,
instructed the jury that, if the value of Rowlett’s interest
in Sunrise on either March 13, 2003, or October 7, 2005,
exceeded the settlement amount in 2007, then defendants’
negligence caused plaintiffs damage. If not, then defendants’
negligence did not cause plaintiffs damage.
After the court so instructed the jury, it read the
jury the verdict form. As we will explain, we conclude that
the inclusion of the settlement date in Question 10(C) of the
verdict form did not undermine the instructions so as to cre-
ate a significant likelihood that the jury would improperly
understand that the settlement amount reflected the actual
value of plaintiffs’ claims against the Sunrise defendants.
First, the jury had been instructed that the fact
that a client settles its lawsuit is not conclusive evidence
that the amount of the settlement necessarily reflects the
actual value of the client’s claims, and the jury is presumed
to follow the court’s instructions. Wallach v. Allstate Ins. Co.,
344 Or 314, 326, 180 P3d 19 (2008).
670 Rowlett v. Fagan
Second, as discussed, the jury answered Questions
2, 4, and 6 on the verdict form in the negative, finding that
defendants’ negligence was not “a cause of damage” to plain-
tiffs. The only instructions that the jury had received about
how to make that causation determination were the instruc-
tions set forth above, which directed the jury to decide the
value of Rowlett’s equity interest in Sunrise in 2003 and
2005 and compare those amounts to the settlement amount
in 2007. Plaintiff has not challenged those instructions and
the jury is presumed to have followed them. The disputed
question on the jury form—Question 10(C)—asked the jury,
in the event that it found that defendants’ negligence was
a cause of damage to plaintiffs and then determined an
amount of damage, to choose among three dates as the “val-
uation date of Gerald Rowlett’s equity interest in Sunrise
Partners.” We do not know that the jury even considered
that question, given that it found that defendants’ negligence
was not a cause of damage to plaintiffs, but, even assuming
that it did, that does not suggest that the jury was permit-
ted to ignore the court’s earlier, more specific, instructions
and conclude, contrary to those instructions, that the value
of plaintiffs’ interest in Sunrise in December 2007 should
be used to determine whether defendants’ negligence was a
cause of damage to plaintiffs.
The Court of Appeals concluded that defendants’
closing argument to the jury improperly invoked the erro-
neous date on the verdict form to argue that the jury should
use the settlement date as the date to “value” Rowlett’s
interest in Sunrise and thus conclude that plaintiffs suf-
fered no damages. In so ruling, the court may have misun-
derstood defendants’ theory of defense and their causation
argument. Defendants’ theory, which they argued to the
jury, was that their negligence was not “a cause of damage”
to plaintiffs, because the settlement in 2007, for a sum that
was equal to the value of Rowlett’s interest at that time, was
reasonable insofar as it was the same as or greater than
the value of Rowlett’s equity interest in Sunrise in 2003
and 2005. Therefore, defendants reasoned and argued, “the
jury should answer ‘no’ in response to the question on the
verdict form asking whether defendants’ negligence was ‘a
cause of damage to plaintiffs.” Defendants’ defense turned
Cite as 358 Or 639 (2016) 671
primarily on causation. The trial court instructed the jury
on causation. And there is no question but that causation
was in dispute. The Court of Appeals, therefore, was mis-
taken when it stated that “[c]ausation was not truly in dis-
pute.” 262 Or App at 694.
We agree with defendants that the Court of Appeals’
view of defendants’ closing arguments failed to take defen-
dants’ evidence respecting causation into account. As noted,
we are required to view the evidence of causation and dam-
ages in the light most favorable to defendants, and there was
evidence in the record that Rowlett’s interest in Sunrise was
worth less in March 2003 and October 2005 than it was in
late 2007. Thus, the value of Rowlett’s interest in 2007 was
relevant to defendants’ argument that the 2007 settlement
amount reflected the best possible outcome for plaintiffs,
even if it amounted to what the Court of Appeals character-
ized as a “very low” value “due to the significant drop in the
real estate market in late 2007.” 262 Or App at 694.
As we stated above, instructions, including verdict
forms, are considered as a whole in light of the evidence and
the parties’ theories of the case at trial when determining
whether an erroneous instruction substantially affected
the rights of a party. Purdy, 355 Or at 231-32. In this case,
we conclude, based on our review of the instructions as a
whole—the jury instructions and the verdict form—and the
evidence and the parties’ theories of the case, that, even if
the trial court erred in including the settlement date among
other dates in a question on the verdict form concerning the
valuation of Rowlett’s interest in Sunrise, there was not a
significant likelihood that the error affected the result.
The decision of the Court of Appeals is reversed in
part and affirmed in part. The case is remanded to the Court
of Appeals to address plaintiffs’ remaining assignments of
error.