Northwest Business Litigation

The Northwest Business Litigation blog is a resource for in-house counsel, business executives, human resource managers and others who monitor litigation and legal issues affecting Northwest businesses. The litigation group of Ater Wynne LLP hosts the blog.  Go to Ater Wynne LLP's Website.

This site is provided for informational purposes only and does not constitute legal advice, nor does it form the basis for an attorney-client relationship.

Oregon Supreme Court on apparent agency liability for personal injuries

The Oregon Supreme Court last month held that an LLC that leased office space to a physician could not be held liable on an apparent agency theory for physical injuries suffered by the physician's patient. 

In Eads v. Borman, the injured patient contended that the landlord, Willamette Spine Center, LLC, through signage on the building and other representations, created the appearance that the building housed a group medical entity of which the physician was an agent.  Plaintiff claimed that that the LLC thereby created an apparent agency relationship with the physician. 

The Supreme Court noted that an agency relationship can arise from the appearance of consent by one person to allow another to act on its behalf. And a principal can be vicariously liable for the negligence of an agent who is not an employee, but only if the principal actually or apparently had a right of control over the agent's injury-causing actions. 

The Court then surveyed other states' treatment of apparent agency in the context of medical malpractice.  The Court agreed with those authorities that a hospital or other entity can be held vicariously liable for a physician's negligence on an apparent authority theory if the entity held itself out as a direct provider of medical care, and if plaintiff relied on those representations by looking to the entity, rather than the physician, as the provider of care. 

In this case, the Court concluded that there was insufficient evidence that the landlord LLC held itself out as a provider of medical services that it delivered through agents such as its tenant, plaintiff's physician.  Further, there was insufficient evidence that plaintiff relied on any representation by the LLC to believe that the LLC was itself a medical provider.  On that basis, the Court found no apparent agency relationship and affirmed summary judgment for the LLC.

Ninth Circuit won't criminalize violations of computer use policies

The federal Computer Fraud and Abuse Act, 18 USC sec. 1030, imposes criminal liability for unauthorized access to a computer, or for exceeding authorized access. An en banc panel of the Ninth Circuit last month narrowly interpreted the CFAA, holding that it does not apply to violations of private computer use policies. The opinion sets up a conflict with other federal circuit courts that may end up being resolved by the US Supreme Court.

In US v. Nosal, the defendant was convicted of aiding and abetting a violation of the CFAA after he convinced employees of an executive search firm to give him confidential client information from the firm's database. While the employees were authorized to access the information, their employer's policy prohibited disclosing confidential information to persons outside the company. The validity of the conviction turned on the meaning of the phrases "without authorization" and "exceeds authorized access" in the CFAA.

Defendant argued that the CFAA was intended to criminalize hacking -- unauthorized access to computers -- but not unauthorized use of data that is obtained from a computer through authorized access. The Ninth Circuit agreed that persons with authorized access who violate private computer use policies should not be subject to criminal liability. Judge Alex Kozinski, writing for the majority, set out a "parade of horribles" to justify a narrow reading of the statute, noting that innocent violations of terms of use occur every day: "Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by g-chatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies . . . [and] under the broad interpretation of the CFAA, such minor dalliances would become federal crimes."

The opinion acknowledges that the result creates a conflict with the Fifth, Seventh, and Eleventh Circuits. A dissent by Judge Barry Silverman and Judge Richard Tallman argues that the majority improperly ignores the plain wording of the statute. Further, according to the dissent, criminalization of innocent violations of corporate terms of use is unlikely because the CFAA explicitly requires an intent to defraud.

 

Oregon Court of Appeals affirms judgment against title company in real estate sale gone wrong

A title company is liable for negligence in a real estate transaction in which plaintiff thought he had purchased a lot that -- it was later discovered -- had already been sold to another party.  Last week the Oregon Court of Appeals in Peterson v. McCavic affirmed a jury verdict for negligence against Amerititle, Inc., which had served as escrow agent and title insurer in the transaction. 

Plaintiff undertook to purchase an empty lot in The Dalles, Oregon, but the property description in the earnest money agreement was changed after he signed it -- leading to his purchase of a lot about 50 feet from the one he thought he was buying.  Plantiff learned of the mistake from the actual owners of the land he thought he had purchased, but only after spending several months building a house on the wrong lot. 

Amertitle argued that, pursuant to the economic loss doctrine, it could be liable for negligence only if it had a special relationship with plaintiff.  An escrow holder generally is a neutral party with no obligation to either party to the transaction.  However, an escrow holder can assume a duty when it volunteers advice or otherwise acts outside the scope of its normal duties.  Viewed in the light most favorable to plaintiff, the evidence showed that the escrow agent changed the property description in the earnest money agreement, and prepared closing documents based on that change, without direction from or knowledge of the parties to the transaction. By doing so, it acted outside the duties of a neutral party and incurred an obligation to exercise due care.  On that basis, the court affirmed the jury verdict.

See our earlier discussion of the economic loss doctrine here.

D.C. Circuit enjoins NLRB's rule requiring notice of employee union rights

On April 17, 2012, the D.C. Circuit issued an injunction blocking the National Labor Relation Board's controversial rule that would have required most private sector employers to post a notice of employee rights under the National Labor Relations Act. The rule is controversial because some organizations, such as the National Association of Manufacturers, see it as an unauthorized effort by the NLRB to encourage union membership. To be sure, the NLRA does not expressly grant the NLRB the authority to require employers to post notices of employee rights. The NLRB, however, argues that the NLRA's rulemaking provision authorizes the NLRB to issue the rule. Moreover, the NLRB believes that employees' ignorance of their rights under the NLRA is a major impediment to the exercise of those rights.

The rule was supposed to go into effect on April 30, but the D.C. Circuit's injunction will put the rule on hold pending the appeal of a lower court decision that found the NLRB had only limited means to enforce the rule. The injunction also comes on the heels of a ruling by a federal judge in South Carolina that the NLRB did in fact exceed its authority by issuing the rule. The NLRB stated in a press release that it will not implement the rule until the courts resolve the pending legal issues.

Washington expands statutory limitation on contractual indemnity obligations

Washington will alter the limitation on indemnity obligations in the construction arena when amendments to RCW 4.24.115 become effective on June 7, 2012. The current version of the law limits the contractual indemnity obligations a party can incur related to the construction, alteration, repair, maintenance, or development of a building, highway, railroad, or other project attached to real property (or a motor transportation contract). In particular, it limits the duty to defend to the extent of the indemnitor's own negligence.  The amendment expands the indemnity limitations to apply to "architectural, landscape architectural, engineering and land surveying services." 

RCW 4.24.115 was originally enacted to curb the growing practice of contractually pushing more and more responsibility for problems related to construction projects to those entities (typically lower tier subcontractors) that were not in a position to control the risk, did not have the leverage to change the language of the contract, and often could not fully fund such an indemnity obligation. In the past, design professionals have argued in the courts that the law applied to them, with varied success. The revisions to the law now make clear that indemnity limitations do apply to design professionals. 

The new version of RCW 4.24.115 expands the scope of the limitation in two other respects. First, the existing limitation prohibits Party A from indemnifying Party B for personal injury or property damages arising out of Party B’s sole negligence. The new limitation also prohibits Party A from agreeing to take on the duty and costs to defend against such claims. Additionally the amendment applies the limitation to liability for all damages arising out of the services provided by Party A, not just damages arising out of bodily injury or damage to property.

To see the new law in its entirety click here.