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Merchants Paper Co. v. Newton

Court of Appeals of Oregon

June 20, 2018

MERCHANTS PAPER CO., an Oregon corporation, Plaintiff-Appellant,
v.
Paul W. NEWTON, Defendant-Respondent.

          Argued and submitted January 4, 2018.

          Multnomah County Circuit Court 15CV04306. Eric J. Neiman, Judge pro tempore.

          Zachariah H. Allen argued the cause for appellant. With him on the briefs were Bonnie Richardson and Folawn Alterman & Richardson LLP.

          Stephen P. Rickles argued the cause for respondent. With him on the brief were Martin W. Jaqua and The Rickles Law Firm, PC.

          Before James, Presiding Judge, and DeVore, Judge, and DeHoog, J. [*]

         [292 Or.App. 498] Case Summary: Plaintiff filed suit against its former attorney for professional negligence in advising plaintiff concerning a contract. The trial court found for defendant on summary judgment, concluding that plaintiff's claim was barred by the statute of limitations, because plaintiff knew of the existence of all elements of the claim-including the existence of harm measurable in damages-more than two years prior to the fling of the malpractice suit. On appeal, plaintiff assigns error to the trial court's grant of summary judgment, arguing that, because it incurred damages only as a result of terminating the contract, the operative time when it knew, or should have known, that defendant's conduct harmed it in a measurable way was when plaintiff was sued for breach of contract and retained new counsel. Held: The trial court erred in granting summary judgment. On this record, in the light most favorable to plaintiff, the termination of the contract came as a result of defendant's advice that ending the contract would have no negative consequences for plaintiff. A reasonable trier of fact could determine that the operative time for assessing harm was when plaintiff learned from new counsel that defendant's assurances of escaping the contract unscathed were incorrect, which occurred within the statute of limitations.

         Reversed and remanded.

         [292 Or.App 499] JAMES, P. J.

         Plaintiff, a corporation, filed suit on February 24, 2015, against its former attorney, defendant, for professional negligence in advising the company concerning a distribution contract. The trial court found for defendant on summary judgment, concluding that plaintiff's claim was barred by the statute of limitations, because the company knew of the existence of all elements of the claim-including the existence of harm measurable in damages-more than two years prior to the filing of the malpractice suit. We reverse and remand.

         We state the facts adduced by the parties on summary judgment in the light most favorable to the nonmoving party, in this case, plaintiff. Outdoor Media Dimensions, Inc. v. State of Oregon, 331 Or. 634, 638, 20 P.3d 180 (2001); Hampton Tree Farms, Inc. v. Jewett, 320 Or. 599, 613, 892 P.2d 683 (1995). In early 2012, Northwest Cups, a company that would later become Pact Trading Group (Pact), approached plaintiff, Merchants Paper Co., about entering an exclusive distribution deal for Oregon for its paper cup products. Pact had been plaintiffs competitor in the wholesale paper cup business. Under the proposed deal, Pact would withdraw from direct customer sales and instead serve as an intermediary between plaintiff's and Pact's paper cup suppliers in Asia.

         Plaintiff requested defendant review the distribution contracts, and defendant responded with comments and some proposed drafting changes. However, at the time of negotiations, defendant did not call to plaintiff's attention that the agreements included a unilateral opt-out clause, which gave Pact the right to terminate the contract without cause on 30 days' notice, but provided no corresponding right for plaintiff to terminate the deal in a similar manner.

         Later in the negotiations, Pact and plaintiff sought to expand the proposed deal beyond Oregon to include paper cup sales in Washington. A second, proposed contract was drafted-this one for Washington-and defendant reviewed that contract as well. The Washington contract contained all the terms of the Oregon contract, including the unilateral [292 Or.App 500] opt-out provision. It also contained the same minimum purchase requirements; thus, signing the two agreements would commit plaintiff to two mandatory minimum purchase orders instead of one.

         On March 1, 2012, once the final agreements had been drafted, plaintiff forwarded them to defendant for defendant to review and give plaintiff his "okay." On March 3, 2012, defendant informed plaintiff that the agreements "look OK to me."

         The agreements became effective April 1, 2012. Very quickly after Pact and plaintiff entered into the agreements, issues began to arise, such as Pact's former customers' unwillingness to buy from plaintiff and problems around lead times and shipping. In June of 2012, plaintiff ordered over $64, 000 of product from Pact, pursuant to its purchase obligations under the contract. Plaintiff made no further purchases after June. On January 23, 2013, Pact contacted plaintiff asking it to place its contractually obligated order. However, plaintiff had substantial inventory that remained unsold. Plaintiff emailed Pact, saying that its inventory was too high to consider another order from Pact at that time and ended the email with "* * * I think we are going to terminate our agreement." Pact responded that termination was not possible.

         On January 25, 2013, plaintiff emailed defendant informing defendant that plaintiff had tried to terminate the distribution agreements and commented that plaintiff had noticed that "* * * we neglected to say we also have the right to terminate." Plaintiff also told defendant that Pact was unwilling to allow plaintiff to walk away from the agreements, but that plaintiff did not see "anything that shows what relief if any they can get if we do not live up to our agreement and are found ...


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