University of Oregon v. Drummer et al
Filing
38
OPINION AND ORDER: Marsh's Motion to Dismiss 24 is GRANTED as to AJG's negligence-based claims (third and fourth causes of action) and DENIED in all other respects. See formal OPINION AND ORDER. Signed on 11/10/2015 by Chief Judge Ann L. Aiken. (rh)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
UNIVERSITY OF OREGON,
Plaintiff,
v.
MONICA DRUMMER and ARTHUR J.
GALLAGHER RISK MANAGEMENT
SERVICES, INC., an Illinois
Corporation,
Defendants.
MONICA DRUMMER and ARTHUR J.
GALLAGHER RISK MANAGEMENT
SERVICES, INC., an Illinois
Corporation,
Third-Party Plaintiffs,
v.
MARSH U.S. CONSUMER, a service of
SEABURY & SMITH, INC., a Delaware
Corporation,
Third-Party Defendant.
Joshua P. Strump
Harrang Long Gary Rudnick P.C.
1001 SW Fifth Ave., 16th Floor
Portland, OR 97204
1 - OPINION AND ORDER
Case No.6:15-cv-00260-AA
OPINION AND ORDER
Attorney for plaintiff
John E. Zehnder
Robert P. Schulhof, Jr.
Scheer & Zehnder LLP
101 SW Main St., Suite 1600
Portland, OR 97204
Attorneys for defendants/third-party plaintiffs
James T. McDermott
Gabriel M. Weaver
Ball Janik LLP
101 SW Main St., Suite 100
Portland, OR 97204
Attorneys for third-party defendant
AIKEN, Chief Judge:
Third-party
Seabury
&
Smith,
defendant
Inc.
Marsh
("Marsh"),
U.S.
moves
Consumer,
to
a
dismiss
service
of
third-party
plaintiffs Monica Drummer and Arthur J. Gallagher Risk Management
Services,
Inc.'s
(collectively "AJG")
claims pursuant to Fed. R.
Civ. P. 12(b) (6). For the reasons set forth below, Marsh's motion
is granted in part and denied in part.
BACKGROUND
In July 2012, plaintiff University of Oregon
("University")
began negotiating the terms of an insurance policy to cover bonuses
and payments
that
could come due
to the University's
football
coaching staff. Through its employment contracts with the coaches,
the University had tied bonus payments to the team's success. The
University wanted to insure against the possibility the football
team would do well, triggering a higher level of bonus payments.
2 - OPINION AND ORDER
The University initially negotiated the policy with Marsh.
After Marsh provided a quote, the University asked the Chief Risk
Officer of the Oregon University System ("OUS") to help it purchase
the
coverage.
OUS
informed
the
University
it
was
required
to
procure insurance through AJG, OUS's preferred broker.
OUS discussed the details of the sought-after policy with AJG
on September 4, 2012. This gave AJG only days to secure the policy
because the football season had already started.
To accommodate
this tight timeline, AJG approached Marsh for help. The two brokers
entered into a Sub-Broker Agreement 1 on September 6, 2012. Per the
agreement,
quote
Marsh assisted with the negotiations,
and binding of
the
insurance,
controlled the
and determined AJG' s
sub-
commission. The agreement also prohibited AJG from "writ[ing] any
documents regarding or interpreting coverage without prior written
approval from Marsh." Weaver Decl. Ex. A, at 1.
After reviewing the negotiated coverage, the University was
concerned
the
policy
did
not
cover
all
bonus
scenarios.
On
September 7, 2012, the University emailed AJG the following:
Greetings, we just have one clarification question.
Please confirm the maximum amount indicated is the
ceiling of coverage but does not preclude lower amounts
being covered . . . We believe this is the case, but want
to confirm.
1
AJG refers to and relies on the Sub-Broker Agreement in
its third-party complaint, such that the Court considers this
document in evaluating Marsh's motion. Knievel v. ESPN, 393 F.3d
1068, 1076 (9th Cir. 2005)
3 - OPINION AND ORDER
Am. Compl.
15. AJG responded:
~
That is correct. Any one item can trigger a partial
payment of the loss limit. Referring to page 6 of the
quote, if any one or combination of events occurs, the
policy will pay. That is per my conversation with [Marsh]
yesterday.
Am. Compl.
~
16. Later that day, the insurance policy was executed.
The University had a successful 2012-2013 football season, but
the team did not play in the national championship. As a result,
the University paid out $687,965.74
in bonuses to its football
coaches. The University subsequently made a claim under its policy
but was informed the insurance only covered maximum bonuses and not
the lesser bonuses actually paid. Therefore, the University's claim
was denied.
On January 5, 2015, the University filed a complaint against
AJG in Lane County Circuit Court; AJG removed the case to this
Court.
On
March
13,
2015,
the
University
filed
an
amended
complaint, realleging its negligence and contract-based claims.
On March 27,
included
a
2015,
third-party
contribution,
AJG answered the amended complaint and
complaint
negligence,
and
later agreed to withdraw its
action).
On
June
22,
2015,
against
negligent
Marsh
filed
STANDARD OF REVIEW
for
indemnity,
misrepresentation.
indemnity claim
dismiss.
4 - OPINION AND ORDER
Marsh
the
AJG
(second cause of
present motion
to
Where the plaintiff "fails to state a claim upon which relief
can be granted," the court must dismiss the action. Fed. R. Civ. P
12(b) (6). To survive a motion to dismiss, the complaint must allege
"enough facts to state a claim to relief that is plausible on its
face." Bell Atl. Corp. v. Twombly, 550 U.S.
purposes
of
a
motion
to
dismiss,
the
544,
570
complaint
is
(2007). For
liberally
construed in favor of the plaintiff and its allegations are taken
as true.
Bare
Rosen v. Walters,
assertions,
however,
719 F.2d 1422,
that
amount
to
1424
(9th Cir.
nothing more
1983).
than
a
"formulaic recitation of the elements" of a claim "are conclusory
and not entitled to be assumed true."
Ashcroft v. Iqbal, 556 U.S.
662, 681 (2009). Rather, to state a plausible claim for relief the
complaint "must contain sufficient allegations of underlying facts"
to support its legal conclusions.
Starr v.
Baca,
652 F.3d 1202,
1216 (9th Cir. 2011).
DISCUSSION
I. Negligence-Based Claims
Marsh first moves to dismiss AJG's claims for negligence and
negligent misrepresentation,
arguing those claims are barred by
Oregon's economic loss rule. AJG responds that rule does not apply,
alleging the Sub-Broker Agreement created a special relationship
between Marsh and AJG.
I
agree with Marsh the negligence-based
claims must be dismissed.
Ordinarily, Oregon law bars the recovery of purely economic
5 - OPINION AND ORDER
loss
in a negligence setting.
Hale v.
Groce,
304 Or.
281,
284
(1987). A negligence claim for the recovery of economic losses can
proceed,
however,
if
it
is
on
~predicated
some
duty
of
the
negligent actor to the injured party beyond the common law duty to
exercise reasonable care to prevent foreseeable harm." Onita Pac.
Corp. v. Trs. of Bronson, 315 Or. 149, 159 (1992). The existence of
this special duty of care, also known as a
~special
relationship,"
is a legal question to be determined by the court. A.T. Kearney,
Inc. v. Int'l Bus. Machs. Corp., 73 F.3d 238, 241 (9th Cir. 1995).
AJG
contends
Specifically,
AJG
a
special
alleges
relationship
Marsh would not
existed
cooperate
parties entered into the Sub-Broker Agreement.
~Per
here.
until
the
the Sub-Broker
Agreement," Marsh controlled various aspects of the negotiations.
Second Am. Answer, Affirmative Defenses and Third-Party Compl.
84.
Therefore,
AJG
alleges
Marsh
assumed
the
role
of
~
Broker,
superior to AJG's role of Sub-Broker. As such, Marsh allegedly owed
AJG a duty of care and fair dealing. Marsh disputes the existence
of a special relationship, arguing it and AJG were negotiating at
arm's length as adversarial parties, evidenced by their contractual
relationship under the Sub-Broker Agreement.
On
the
facts
alleged,
between AJG and Marsh.
relationship,
a
there
was
no
special
relationship
To determine whether there is a
court must
~examine
special
the nature of the parties'
relationship and compare that relationship to other relationships
6 - OPINION AND ORDER
. beyond the common
in which the law imposes a duty on parties .
law duty to prevent foreseeable harm." Conway v.
Or.
231,
239
(1996) (citing Onita,
315 Or.
at
Pac. Univ.,
160).
324
The Oregon
Supreme Court has delineated certain relationships in which the law
imposes a special duty of care to further the economic interests of
the
client:
physicians,
nthose
between
architects
and
'professionals'
engineers
and
such
their
as
lawyers,
clients;
those
between principals such as brokers and their agents; those between
trustees and beneficiaries; and, in some instances, those between
insurers and their insureds." Jones v. Emerald Pac. Homes,
188
Or.
App.
471,
477
(2003).
The
common
thread
in
Inc.,
these
relationships is none party has authorized the other to exercise
independent judgment in his or her behalf and,
consequently, the
party who owes the duty has a special responsibility to administer,
oversee, or otherwise take care of certain affairs belonging to the
other party." Conway, 324 Or. at 241.
If the relationship is not one of those enumerated by the
Oregon courts, a court must examine all aspects of the relationship
and determine whether it creates the same type of relationship as
those already recognized. Id. at 242. This includes an examination
of
any
contract
between
the
parties,
which
nserves
to
help
determine the type of relationship between the parties, but not to
determine
original).
the
existence
Overall,
or
type
of
duty."
Id.
this inquiry is functional,
7 - OPINION AND ORDER
(emphasis
not formal,
in
and
"the crucial aspect of the relationship is not its name, but the
roles that the parties assume in the particular interaction where
the alleged tort and breach of contract occur.n Strader v. Grange
Mut. Ins. Co., 179 Or. App. 329, 334
(2002).
As a threshold matter, the relationship alleged by AJG is not
one of the enumerated categories of relationships in which Oregon
law imposes a special duty of care. Further, examining the nature
of the relationship, AJG's allegations still fall short. AJG relies
on alleged aspects of Marsh's control to
position
in
the
negotiations
and
its
show Marsh's superior
independent
exercise
of
authority on AJG's behalf. However, these aspects derive from the
Sub-Broker Agreement, and adopting AJG's characterization of Marsh
based
solely
upon
the
agreement's
terms
would
transform
the
contractual obligation into a tort duty. See Georgetown Realty v.
The Home Ins. Co.,
313 Or.
97, 111
(1992)
(recognizing tort duty
must exist "independent of the contract and without reference to
the specific terms of the contractn).
Instead,
the
facts
alleged indicate both parties acted on
their own behalf: AJG took advantage of an opportunity to secure an
insurance policy for a client, and Marsh regained its access to the
negotiations and commission. AJG contends the time-sensitive nature
of the negotiations,
and Marsh's
involvement prior to the Sub-
Broker Agreement, placed AJG in a state of reliance. While it is
true AJG entered into the agreement to streamline the transaction,
8 - OPINION AND ORDER
AJG made that choice in light of a business opportunity. As OUS's
preferred
broker,
professional
AJG
footing
entered
and
was
relationship
the
fully
aware
of
on
the
equal
commercial
activities involved. With respect to AJG, Marsh was nothing more
than an adversarial party negotiating at arm's length. Therefore,
Marsh's motion to dismiss AJG's negligence-based claims (third and
fourth causes of action) is granted.
II. Contribution Claim
Marsh next moves to dismiss AJG's contribution claim (first
cause
of
action),
again
arguing
the
economic
loss
rule
bars
recovery. The right to contribution under Oregon law is set out at
Or. Rev. Stat.
§
31.800. This section provides, in pertinent part:
where two or more persons become jointly or severally in
tort for the same injury to person or property .
there is a right of contribution among them even though
judgment has not been recovered against all or any of
them. There is no right of contribution from a person who
is not liable in tort to the claimant.
Or. Rev. Stat.
§
31.800 (1)
(2015)
(emphasis added). Therefore, to
proceed on its contribution claim, AJG must show Marsh is liable in
tort to the University.
(1994).
Thus,
the
Jensen v.
inquiry
is
Alley,
whether
128 Or. App.
there
relationship between Marsh and the University.
was
673,
a
677
special
If there was not,
the economic loss rule would bar recovery.
AJG
has
relationship
sufficiently
between
9 - OPINION AND ORDER
Marsh
pled
and
the
the
existence
of
University.
a
special
In
Oregon,
nnongratuitous suppliers of information owe a duty to their clients
or employers
or to
intended third-party beneficiaries
of their
contractual, professional, or employment relationship to exercise
reasonable care to avoid misrepresenting facts." Onita, 315 Or. at
165
(emphasis added) .
Oregon recognizes three classes of third-
party beneficiaries: creditor, donee, and incidental beneficiaries.
Sisters
of
St.
Joseph
of
Peace,
Health,
and
Hosp.
Servs.
v.
Russell, 318 Or. 370, 374-75 (1994). Further, the professional must
be acting, at least in part, to further the economic interests of
the person to whom the duty is owed. Meininger v. Henris Roofing &
Supply of Klamath Cnty., Inc., 137 Or. App. 451, 454
(1995).
In Meininger, plaintiffs were prospective buyers of a home who
asked a real estate agent to obtain a roof inspection. Id. at 453.
The
agent
defendant,
entered
a
into
roofing
a
contractual
company.
Id.
The
relationship
defendant
the
provided
professional opinion about the condition of the roof,
knew would be communicated to and relied upon by
with
a
nwhich it
plaintiffs." Id.
at 455. Because the npurpose of that inspection was to provide an
opinion
to
plaintiffs,"
the
plaintiffs
were
intended
beneficiaries of the contract, and therefore a special relationship
existed between the parties. Id. at 454.
It is
reasonable to infer the University was the
third-party beneficiary of the Sub-Broker Agreement.
intended
Just as the
roofer in Meiniger knew the purpose of the inspection was to assist
10 - OPINION AND ORDER
the prospective buyers in deciding whether to purchase the home,
Marsh knew the purpose of the Sub-Broker Agreement was to assist
the University in obtaining the insurance policy. By entering into
the Sub-Broker Agreement, Marsh was acting, in part, to further the
University's economic interests.
Because a
special relationship
existed between Marsh and the University, the economic loss rule
does not bar AJG's contribution claim.
Marsh next argues AJG has no right to contribution because AJG
breached
the
Sub- Broker Agreement
when
it
gave
advice
without
Marsh's consent. Factual disputes are not subject to resolution on
a
motion
to
dismiss.
See
Newcal
Indus.,
Solution, 513 F.3d 1038, 1051 (9th Cir. 2008)
12 (b) ( 6)
Inc.
v.
rather
than
legal
Office
(dismissal under Rule
improper where argument in support "hinge [d]
disagreements
Ikon
deficiencies") .
on factual
Generally,
the
question of breach of contract "is a question of fact to be left to
the trier of fact." Palmiero v. Spada Distrib. Co., 217 F.2d 561,
565 (9th Cir. 1954).
On this record, whether the email correspondence between AJG
and the University constituted a breach of the Sub-Broker Agreement
remains a question of fact. Marsh may have been aware of or even
consented to AJG's email, which indicates the reassurance regarding
coverage was "per [AJG's] conversation with [Marsh]." Am. Compl.
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