United States District Court, D. Oregon
A. HERNÁNDEZ United States District Judge.
Judge You issued a Findings and Recommendations  on
April 19, 2017, in which she recommends that this Court deny
Defendant Timothy Rote's Motion for Summary Judgment
 and Amended Motion for Sanctions . The matter is
now before the Court pursuant to 28 U.S.C. §
636(b)(1)(B) and Federal Rule of Civil Procedure 72(b).
Rote filed timely objections to Judge You's Findings
& Recommendations (“F&R”). When any party
objects to any portion of the Magistrate Judge's F&R,
the district court must make a de novo determination
of that portion of the Magistrate Judge's report. 28
U.S.C. § 636(b)(1); Dawson v. Marshall, 561
F.3d 930, 932 (9th Cir. 2009); United States v.
Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en
banc). The Court has conducted such a review and adopts in
part and declines to adopt in part Judge You's F&R.
Rote raises three objections to Judge You's F&R.
First, Mr. Rote argues that Judge You disregarded the
applicable legal standards for determining recovery of
arbitration costs. Second, Mr. Rote contends that Judge You
disregarded the applicable legal standards for determining
the statute of limitations in bringing a civil conspiracy
claim. Third, Mr. Rote asserts that Judge You is biased.
Rote objects to Judge You's conclusion that Plaintiff Max
Zweizig may be able to recover damages for costs associated
with the parties' prior arbitration. While the facts of
this case are set out in detail in the F&R and are
intimately known by the parties, a brief summary of relevant
facts is helpful here.
Zweizig was terminated from employment with Defendant NDT in
November of 2003. Second Amended Complaint
(“SAC”) ¶ 15, ECF 96. In April of 2006, NDT
commenced an arbitration proceeding against Mr. Zweizig.
Id. at ¶ 17. A few months later, Mr. Zweizig
brought counterclaims in the arbitration against NDT, Mr.
Rote, and other corporations controlled by Mr. Rote.
Id. However, according to Mr. Zweizig, “[i]n
reliance on the representation of the defendants'
then-attorney that NDT was the umbrella corporation and would
be financially responsible for any award, plaintiff dropped
the other defendants and litigated his claims in the
Arbitration Proceeding against NDT only.” Id.
arbitration proceeding lasted five years. Id. at
¶ 23. Mr. Zweizig alleges that during this time, from
2006 to 2011, Mr. Rote reorganized NDT and transferred its
assets in such a way that NDT became insolvent. Id.
at ¶ 21. On April 5, 2011, the arbitrator issued an
Opinion & Order and Arbitration Award in which he awarded
Mr. Zweizig $75, 375. Id. at ¶ 26. However, the
arbitrator declined to award Mr. Zweizig attorney's fees
or costs incurred in connection with the arbitral proceeding.
See Nw. Direct Teleservices, Inc. v. Zweizig, No.
3:11-CV-910-PK, 2011 WL 7331297, at *12 (D. Or. Nov. 18,
2011), F&R adopted, No. 3:11-CV-910-PK, 2012 WL
512404 (D. Or. Feb. 14, 2012).
Zweizig contends that Mr. Rote “caused NDT to commence
and continue the Arbitration Proceeding . . . after [Mr.
Rote] rendered NDT judgment-proof.” Pl.'s Resp. 23,
ECF 160. Mr. Zweizig alleges that he was required to respond
and defend against NDT's claims, thus incurring expenses.
Id. Mr. Zweizig argues that, if he prevails on his
civil conspiracy to defraud claim, he may be entitled to
recover damages for the arbitrator's fees, court reporter
costs, and miscellaneous costs associated with the
arbitration proceeding, a sum amounting to approximately $21,
This Court disagrees.
in a civil action, a party is not entitled to an award of
litigation costs incurred in that action, unless a statute or
contract allows for such recovery. State v. Ramos,
358 Or. 581, 600, 368 P.3d 446, 457 (2016). However, there
are exceptions to this general rule. “[W]hen a
plaintiff brings a claim against a defendant for damages, the
plaintiff may seek, as an element of damages, attorney fees
and costs that the plaintiff incurred in litigation with a
third party.” Id. In explaining this
principle, the Oregon Supreme Court referred to
Restatement (First) of Torts § 914, 591 (1939):
A person who through the tort of another has been
required to act in the protection of his interests by
bringing or defending an action against a third person is
entitled to recover compensation for the reasonably necessary
loss of time, attorney fees and other expenditures thereby
suffered or incurred.
Id. (emphasis added). Specifically, “[i]f a
defendant's fraudulent misrepresentation causes
‘the plaintiff to litigate with [a] third person, then
the reasonable expenses of that litigation, including the
plaintiff's own attorney fees, are recoverable as items
of damages consequent upon the
misrepresentation.'”). Id. (quoting Dan B.
Dobbs, 2 Law of Remedies § 9.2(3) (2d ed.
1993)); see also Montara Owners Ass'n v. La
Noue Dev., LLC, 357 Or. 333, 361, 353 P.3d 563, 579
(2015) (plaintiff may seek attorney's fees incurred in a
prior case when the defendant's tortious or wrongful
conduct “involved the plaintiff in litigation with a
in order for Mr. Zweizig to seek expenses incurred in the
underlying arbitration, he must allege that a tort committed
by Mr. Rote caused Mr. Zweizig to arbitrate with NDT. Mr.
Zweizig fails to make such an allegation. Instead, Mr.
Zweizig alleges that NDT initiated the arbitration based on
the parties' employment dispute. SAC ¶ 17. Mr.
Rote's alleged tort of fraudulent misrepresentation
caused Mr. Zweizig to be unable to collect the Arbitration
Award, once it was rendered. Even if Mr. Zweizig is correct
that Mr. Rote knew that NDT was judgment-proof when NDT
initiated the arbitration, Mr. Zweizig fails to offer any
authority for the proposition that it is a tort to initiate
arbitration on behalf of a judgment-proof
corporation. Accordingly, the cited decisions do not
support the conclusion that this Court should depart from the
general rule and allow Mr. Zweizig to recover damages for
costs incurred in the arbitration proceeding.
Mr. Rote's second objection regarding the applicable
legal standard for determining the statute of limitations in
bringing a civil conspiracy claim, Mr. Rote appears to be
objecting to a conclusion reached in a previous Findings and
Recommendation. See F&R, February 19, 2016, at
9, ECF 112 (“[T]he record contains sufficient evidence
which, at a minimum, prevents summary judgment on the
[conspiracy] claim based on the statute of
limitations.”). This Court already adopted the February
19, 2016 F&R and, in doing so, considered and rejected
the same arguments Mr. Rote raises in his Objections.
See Order, April 17, 2016, at 2, ECF 125. Thus, the
Court will not revisit Mr. Rote's argument in this Order.
Mr. Rote's third objection alleges that Judge You is
biased. While Mr. Rote provides four pages of detail
regarding his version of the facts in this case, he offers no
evidence or argument regarding any bias. The ...