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Cortez v. Nacco Material Handling Group, Inc.

Supreme Court of Oregon, En Banc

October 2, 2014

Antonio CORTEZ, Respondent on Review/Cross-Petitioner on Review,
v.
NACCO MATERIAL HANDLING GROUP, INC., a Delaware corporation, assumed business name Hyster Company; and Papé Material Handling Inc., an Oregon corporation, fka Papé Lift, Inc., assumed business name Hyster Sales Company, Defendants, and SWANSON GROUP, INC., an Oregon corporation, Petitioner on Review/Cross-Respondent on Review

Argued and submitted April 30, 2013

On review from the Court of Appeals [*], CC 0503-02632; CA A144045.

Cortez v. Nacco Materials Handling Group, Inc., 248 Or.App. 435, 274 P.3d 202 (2012)

Matthew J. Kalmanson, Hart Wagner, LLP, Portland, argued the cause and filed the briefs for petitioner on review/cross-respondent on review. With him on the briefs was Janet M. Schroer.

Robert K. Udziela, Portland, argued the cause for respondent on review/cross-petitioner on review. J. Randolph Pickett, Pickett Dummigan LLP, Portland, filed the brief for respondent on review/cross-petitioner on review. With him on the brief were R. Brendan Dummigan, Kristen West and Kimberly O. Weingart of Pickett Dummigan LLP, Peter O. Hansen of Hanson & Malagon, and Robert K. Udziela.

W. Michael Gillette, Schwabe, Williamson & Wyatt, P.C., Portland, filed the brief for amicus curiae Associated Oregon Industries. With him on the brief was David Anderson.

OPINION

Page 112

[356 Or. 256] KISTLER, J.

Plaintiff worked for a lumber mill, Sun Studs, LLC. One evening while he was walking from one area of the mill to another, a forklift hit and severely injured him. After receiving workers' compensation benefits, plaintiff brought this action against Swanson Group, Inc., which owns Sun Studs, as well as other defendants. Plaintiff alleged that Swanson was liable for negligently failing (or for negligently failing to require Sun Studs) to provide a safe workplace and for failing to provide competent safety personnel. Plaintiff also alleged that Swanson was liable under the Employers Liability Law (ELL), which requires employers to take certain safety measures. Swanson moved for summary judgment, and the trial court granted its motion on the ground that the workers' compensation statutes provided the exclusive remedy for plaintiff's injuries. The court entered a limited judgment in Swanson's favor.

The Court of Appeals affirmed the trial court's judgment regarding plaintiff's ELL claim, reversed its judgment regarding plaintiff's negligence claim, and remanded the negligence claim for further proceedings. Cortez v. Nacco Materials Handling Group, 248 Or.App. 435, 274 P.3d 202 (2012). The court held that neither the workers' compensation statutes nor a statute immunizing limited liability company members and managers barred plaintiff's claims against Swanson. Id. at 441-43, 445. Turning to the merits of plaintiff's claims, the Court of Appeals held that the allegations in plaintiff's complaint stated a negligence claim but that plaintiff did not have a claim against Swanson under the ELL. Id. at 447-49. We allowed the parties' crosspetitions for review and now reverse the Court of Appeals decision. We affirm the trial court's judgment regarding plaintiff's negligence claim, reverse its judgment regarding plaintiff's ELL claim, and remand the ELL claim to the trial court for further proceedings.

Because Sun Studs is currently organized as a limited liability company (LLC), we discuss that form of organization briefly before setting out the facts. An LLC is a relatively new form of business organization. See Larry [356 Or. 257] E. Ribstein & Robert R. Keatinge, 1 Ribstein and Keatinge on Limited Liability Companies § 1.2 (2012) (explaining that the first limited liability company act was passed in 1977). The persons who own an LLC are its " members." ORS 63.001(21). The members can manage the LLC themselves, or they can appoint a manager or group of managers to manage the company. ORS 63.001(19), (20). The statutes accordingly distinguish between member-managed and manager-managed LLCs. See Synectic Ventures I, LLC v. EVI Corp., 353 Or. 62, 65 n 1, 294 P.3d 478 (2012) (discussing that distinction).[1]

LLCs share many attributes of limited partnerships, but they differ from that form

Page 113

of business organization in at least one respect: in Oregon, a " member or manager [of an LLC] is not personally liable for a * * * liability of the [LLC] solely by reason of being or acting as a member or manager." ORS 63.165(1). By contrast, in Oregon, a limited partner will become personally liable for the limited partnership's obligations if the limited partner " participates in the control of the business." ORS 70.135; see Ribstein and Keatinge, Limited Liability Companies § 1.6 (" Unlike limited partners, LLC members do not lose their limited liability for participating in control of the business." ).

With that background in mind, we turn to the facts of this case.[2] In 2001, Swanson Group, Inc., purchased a lumber mill, Sun Studs, Inc., and reorganized that business as a limited liability company.[3] Swanson is the sole member of Sun Studs, LLC, and it elected to manage Sun Studs, making Sun Studs a member-managed LLC. Sun Studs is one of several timber-related LLCs that Swanson owns and manages. Swanson sets general policies and priorities for those LLCs. Sun Studs, like the other LLCs that Swanson owns, has its own employees, who are responsible for the day-to-day operation of the mill and also for implementing Swanson's general directives.

[356 Or. 258] Regarding safety, Swanson provided the LLCs that it owned with a safety manual, which stated general policies and served as a " template" that each LLC could customize to its particular operations. Swanson delegated day-to-day responsibility for safety at Sun Studs to Sun Studs' mill manager and HR director. Specifically, Swanson delegated responsibility " to [Sun Studs' mill manager and HR director] to carry out the safety program and to follow as close as they can the template provided by [Swanson]." It was " up to [Sun Studs' mill manager and HR director] to identify and rectify any safety violations or unsafe workplace issues or safety hazard type issues" at the worksite.

Ash was Swanson's HR director and supervised his counterpart at Sun Studs. Swanson's executive vice president explained the relationship between Ash and Sun Studs' HR director:

" So the practical way it works is that Mr. Ash would provide what I would say is oversight in the overall direct setting: [Ash would tell Sun Studs HR director,] [y]ou need to have these types of programs. Here's the steps you need to take to implement. Here's the things you need to do. Here's the programs you need to ensure you've implemented. I'm here at this point if you [Sun Studs' HR director] need any help. Or if you want any support on your safety committee meetings or in your training sessions, then I'll [Ash] help you with that."

Harris was Swanson's vice president of operations. In that capacity, Harris supervised Sun Studs' mill manager. Swanson's executive vice-president explained the relationship between Harris and Sun Studs' mill manager:

" Mr. Harris was more of: You need to make sure you're doing what you have got to do safety-wise. You need to make sure that you're compliant. I'm going to be checking on you and making sure that I'm satisfied with your efforts in the safety program and the safety process."

Swanson's executive vice-president explained that the " [p]rimary responsibility for safety" rested with Sun Studs' HR director and mill manager.

Ash and Harris conducted periodic performance reviews of Sun Studs' managers. Ash and Harris also served [356 Or. 259] as a resource to whom Sun Studs' HR director and mill manager could turn if they had a problem that required " corporate level upper-end" decision-making. On one occasion, Ash attended a safety committee meeting at Sun Studs to ensure that Sun Studs' supervisors did not need any help or further assistance. Otherwise, Swanson executives did not visit Sun Studs to monitor safety conditions or set safety policy. If Ash or Harris observed a safety violation when either of them was on

Page 114

Sun Studs' worksite, each person had authority to direct Sun Studs to correct the violation.

In this case, plaintiff suffered severe injuries one evening when another Sun Studs employee drove a forklift down a dark corridor and accidently hit him. Plaintiff filed a claim for and received workers' compensation benefits from Sun Studs. He then filed this action against Swanson, as well as other defendants.[4] Plaintiff alleged in his amended complaint that Swanson was negligent in the following ways:

" (a) In failing to prevent violation [sic] of the requirements of the Oregon Occupational and Safety and Health Code as enacted by the department of Consumer & Business Services;
" (b) In failing to properly inspect the place where the plaintiff was required to work;
" (c) In failing to provide competent safety personnel to inspect the work site;
" (d) In failing to require Sun Studs, LLC to have available an appropriately marked crosswalk to cross a working yard at night in safety;
" (e) In failing to require Sun Studs, LLC to provide appropriate yard lighting so that pedestrians could be seen;
" (f) In failing to require Sun Studs, LLC to provide fluorescent work vests for better visibility of pedestrians;
" (g) In failing to require Sun Studs, LLC to provide forklifts equipped with audible and visual movement and backup alarms;
[356 Or. 260] " (h) In failing to furnish safe machinery, equipment, appliances, and instrumentalities for the use of employees;
" (i) In failing to see that the machinery equipment and appliances instrumentalities for the use of employees were inspected and maintained in safe condition; and
" (j) In failing to warn plaintiff of hazards or danger[s] when having actual knowledge or in the exercise of reasonable care would have had knowledge of hazards or dangers that would not be apparent to plaintiff."

Plaintiff also claimed that Swanson had violated the ELL, based on similar allegations.[5]

Swanson moved for summary judgment.[6] Swanson argued that it was immune from liability under either a statute that provides immunity to LLC members and managers, ORS 63.165(1),[7] or under the statute that provides that workers' compensation is the exclusive remedy for certain workplace injuries, ORS 656.018 (2011).[8] Plaintiff responded that neither ORS 63.165(1) nor ORS 656.018 (2011) immunized Swanson from liability under the ELL and negligence law. Additionally, in response to Swanson's summary judgment motion, plaintiff introduced evidence that, in his view, permitted a reasonable juror to ...


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