University of Oregon v. Drummer et al, No. 6:2015cv00260 - Document 38 (D. Or. 2015)
Court Description: 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)
Download PDF
<![CDATA[
University of Oregon v. Drummer et al Doc. 38 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON UNIVERSITY OF OREGON, Case No.6:15-cv-00260-AA OPINION AND ORDER 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 Dockets.Justia.com 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 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 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. 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 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. <JI 16. Moreover, even if there was a clear material breach of the SubBroker Agreement, that would only relieve Marsh of its contractual 11 - OPINION AND ORDER duty to AJG; it would not necessarily resolve the separate question of whether Marsh breached its duty to the University. Therefore, Marsh's motion to dismiss AJG's contribution claim is denied. CONCLUSION Marsh's Motion to Dismiss negligence-based claims (doc. 24) is GRANTED as to AJG's (third and fourth causes of action) DENIED in all other respects. IT IS SO ORDERED. Dated this of November, 2015. Ann Aiken United States District Judge 12 - OPINION AND ORDER and
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
