Wenzel v. Klamath County Fire District No.1 et al

Filing 176

OPINION AND ORDER: Adopting Findings and Recommendation #159 . Granting in Part Denying in Part Motions for Summary Judgment #115 , #118 , and #120 . The parties are directed to contact Courtroom Deputy Cathy Kramer at [e-mail] or [phone], to set a telephonic status conference to discuss how this case will proceed. Signed on 11/21/2017 by Judge Ann L. Aiken. (ck)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

JAMES L. WENZEL,

Case No. 1:15-cv-1371-CL
OPINION AND ORDER

Plaintiff,
vs.
KLAMATHCOUNTYFIREDISTRICTNO. l;
BOARD OF DIRECTORS OF KLAMATH
COUNTY FIRE DISTRICT NO. 1; STEPHEN
ROBERT HEDLUND; and JIM TODDY,
Defendants.

AIKEN, District Judge:
In this employment action, plaintiff James 'Nenzel asserts that defendants-Klamath
County Fire District No. 1 and its Board of Directors (collectively, "KCFD 1"), Stephen Hedlund,
and Jim Toddy-violated his rights under the United States Constitution, breached his
employment agreement, and committed various torts against him under Oregon law. On August
29, 2017, Magistrate Judge Clarke filed a Report and Recommendation ("R&R") recommending
this Court grant in part and deny in part defendants' motions for summary judgment. Three days
later, Judge Clarke issued a minute order ruling on defendants' motions to strike. The R&R and
1

- OPINION AND ORDER

minute order are now before me pursuant to 28 U.S.C. § 636(b) and Federal Rule of Civil
Procedure 72. All paiiies filed objections to the R&R, and KCFD 1 filed an objection to the
minute order. For the reasons set forth below, I decline to modify or set aside the minute order
and adopt the R&R in full.
The Magistrates Act establishes procedures for district judges to review orders issued by
magistrate judges. Depending on the nature of the order, review may be de nova or for clear
error. As relevant here, the minute order-which contains an evidentiary ruling regarding the
scope of the summary judgment record-is reviewed for clear error. 28 U.S.C. § 636(b)(l)(A);
Fed. R. Civ. P. 72(a). By contrast, for the R&R, I must review "de nova ... those portions ... to
which objection is made." 28 U.S.C. § 636(b)(l)(C); accord Fed. R. Civ. P. 72(b)(3); Holder v.
Holder, 392 F.3d 1009, 1022 (9th Cir. 2004).

I find no error, much less clear error, in Judge Clarke's ruling on the motion to strike. In
the Ninth Circuit, a court ruling on a motion for summary judgment "[does] not focus on the
admissibility of the evidence's foim," but instead concerns itself with the admissibility of its
contents. Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003); see also Norse v. City of
Santa Cruz, 629 F.3d 966, 973 (9th Cir. 2010) ("[T]he evidence presented at the summary

judgment stage does not yet need to be in a form that would be admissible at trial[.]") As Judge
Clarke noted, at trial, the standard changes, and the recording itself would be the only acceptable
proof of the recording's content. See Fed. R. Evid. 1002. But on a motion for summary
judgment, plaintiffs amateur transcript suffices, paiiicularly in the absence of any substantive
challenge to the transcript's accuracy.
I have reviewed the objected-to portions of the R&R de nova and find no error. With
respect to the claim of intentional interference with economic relations, Hedlund and Toddy
2

- OPINION AND ORDER

advance alternative interpretations of the evidence, but the theory of the case advanced by
plaintiff remains plausible; a factfinder could conclude, based on the evidence in the summary
judgment record, that Hedlund had a personal vendetta against plaintiff and pursued it through
the investigation, that Toddy shared Hedlund's wrongful motivation, and that their actions
harmed his employment relationship with KCFD 1. Regarding the "stigma-plus" libe1ty interest
claim, I agree with Judge Clarke that the stigmatizing allegations against plaintiff were
published.

Under Cox v. Roskelley, 359 F.3d 1105, 1112 (9th Cir. 2004), placement of

stigmatizing information in an individual's personnel file constitutes publication if the
information could be accessed via a public records request. KCFD! 's position in this litigation
has been that the repmt is subject to disclosure under the state public records law. That means
third parties could have gained access to the information through such a request, which is
sufficient for publication under Cox.

I also agree that on the facts of this case, Toddy's

interviews ofKCFDl employees and others constituted publication. It is plain based on Toddy's
testimony that the fifteen individuals he interviewed were made aware of the nature of the
allegations against plaintiff, and Toddy testified he took no action whatsoever to prevent those
interviewed from disclosing those allegations to third parties. I reject defendants' contention that
such a ruling will be "disastrous" for employers; only a nai1ow range of misconduct qualifies as
stigmatizing for due process purposes, and it is not unfair to expect employers who conduct a
freewheeling inquiry without putting any disclosure safeguards in place to provide a nameclearing hearing.
Turning to plaintiffs objections, the economic loss rule continues to bar all negligence
claims. Plaintiff has identified a sole purported injury to person or prope1ty: his interest in
continued employment. But for the reasons set out in the R&R, plaintiff did not have a property
3

- OPINION AND ORDER

interest in the renewal of his contract. Accordingly, he has alleged only economic losses, and his
negligence claims cannot proceed unless defendants owed him a special duty of care. See Onita

Pac. Corp. v. Trustees of Bronson, 843 P.2d 890, 896 n.6 (Or. 1992).

The special duty

requirement is fatal to plaintiffs negligence claims because he has not established that any of the
defendants owed such a duty to him. He contends he was a third-party beneficiary ofHedlund's
agreement to represent KCFDl and of Toddy's contract to perfonn the investigation, but that
assertion is belied by the record. Plaintiff, as the subject of a fraud investigation, was not an
intended beneficiary of that investigation. And although he may have been Hedlund' s client or
an intended beneficiary of Hedlund's agreement to represent KCFDl with regard to other
matters, he was not an intended third-party beneficiary of that agreement vis-a-vis the
investigation of his own purported misconduct. Hedlund and Toddy certainly owed duties of
honesty and competency to KCFDl, but those duties did not extend to plaintiff.
I ADOPT Judge Clarke's R&R (doc. 159). Defendants' motions for summary judgment
(docs. 115, 118, & 120) are granted in part and denied in part as set fo1ih in detail in the R&R.
The

parties

are

directed

to

contact

Comiroom

Deputy

Cathy

Kramer,

Cathy [e-mail] or [phone], to set a telephonic status conference to
discuss how this case will proceed.
IT IS SO ORD~(·
Dated this

d,L day of November 2017.

Ann Aiken
United States District Judge

4

- OPINION AND ORDER