Diamond Heating, Inc. v. Clackamas Cnty.
| Citation | 316 Or.App. 579 |
| Docket Number | A166975 |
| Decision Date | 29 December 2021 |
| Parties | DIAMOND HEATING, INC., Plaintiff-Appellant, v. CLACKAMAS COUNTY and Dawn Penberthy, Defendants-Respondents. |
| Court | Court of Appeals of Oregon |
Argued and Submitted August 29, 2019
Clackamas County Circuit Court 17CV16465; Roderick A. Boutin Judge pro tempore.
Kathryn H. Clarke argued the cause and fled the reply brief for appellant. Also on the opening brief was Jess M. Glaeser. On the supplemental brief was Kathryn H. Clarke.
Scott C. Ciecko argued the cause for respondents. Also on the brief was Stephen L. Madkour. On the supplemental brief was Scott C. Ciecko.
Before Ortega, Presiding Judge, and Shorr, Judge, and James, Judge.
Plaintiff Diamond Heating, Inc., appeals the dismissal of its negligence claim against defendants. Its complaint alleges that, more than three years after hiring Deana Freauff as a financial manager and bookkeeper in Seaside, plaintiff discovered that Freauff had embezzled significant sums of money during her employment. In the resulting criminal prosecution of Freauff, plaintiff learned that, when she was hired, Freauff was serving a sentence of probation imposed by the Multnomah County Circuit Court and was under the supervision of the Clackamas County Community Corrections Department for previous convictions of embezzlement. Plaintiffs resulting negligence action against Clackamas County and a probation officer employed in its Community Corrections Department alleges that defendants failed to take reasonable steps to monitor and enforce Freauff s compliance with court-ordered special conditions of probation.
Defendants moved to dismiss under ORCP 21 A(8), arguing that, on the alleged facts, the "economic loss rule" barred plaintiffs negligence claim, and the trial court agreed and granted the motion. Plaintiff appeals, arguing, as it did in the trial court, that the special conditions of probation imposed by the Multnomah County Circuit Court, which prohibited Freauff from undertaking employment duties like those she assumed for plaintiff without written permission from her probation officer, and which required Freauff to make "full disclosure" to the employer, created duties for defendants that allow plaintiff to recover its economic losses. Like the trial court, we conclude that the probation conditions that governed Freauff s conduct did not impose duties on defendants that avoid the economic loss rule. Accordingly, we affirm the judgment of dismissal.
We review the trial court's ruling dismissing the claim for legal error, assuming the truth of all well-pleaded facts alleged in the complaint. Doe v. Lake Oswego School District, 353 Or. 321, 323, 297 P.3d 1287 (2013). As noted, plaintiffs amended complaint alleges that, more than three years after plaintiff hired Freauff as its financial manager and bookkeeper, it learned that she had embezzled more than $200, 000 from plaintiffs business. During the criminal investigation of Freauff, plaintiff learned that she had previously pled guilty to multiple counts of embezzlement from one former employer and had been convicted of embezzlement from another former employer. After those convictions, the Multnomah County Circuit Court sentenced Freauff and allegedly imposed special probation conditions requiring Freauff to "advise * * * any future employer * * * of this probation and nature of the crime" and to provide her probation officer with employment information for purposes of monitoring her compliance with the probation conditions.[1] The conditions allegedly also provided that Freauff was "prohibited from taking any employment involving the handling of money or negotiable instruments without the written permission of the probation officer and after making full disclosure" to the employer. Defendants were responsible for supervision of Freauffs probation.
Plaintiff further alleged that "[t]he primary purpose of each of these special conditions of probation were [sic] for the protection of the financial interests of any employer or potential employer" from Freauff and that, once plaintiff became Freauffs employer, "the purposes of the special conditions of the probation were to protect plaintiffs financial interests." Plaintiff alleged that defendants were negligent in performing their duties of supervising Freauffs employment and sought over $200, 000 for "direct cash loss" as a result of Freauff s theft plus more than $23, 000 for accounting and legal fees, and significant additional damages totaling $750, 000.
The parties agree that the central question on appeal is whether plaintiffs negligence claim is barred by the economic loss doctrine, a common-law doctrine created in response to pragmatic concerns over unbounded liability. See JH Kelly, LLC v. Quality Plus Services, Inc., 305 Or.App. 565, 572, 472 P.3d 280 (2020) (citation omitted). In general, Oregon law imposes liability for negligence if one's conduct unreasonably creates a foreseeable risk of harm to others. Id. (citing Slogowski v. Lyness, 324 Or. 436, 441, 927 P.2d 587 (1996)). However, where purely economic loss is alleged, the plaintiff must also allege facts sufficient to establish that the defendants owed a duty of care to the plaintiff beyond the common law duty of reasonable care. Paul v. Providence Health System-Oregon, 351 Or. 587, 591, 273 P.3d 106 (2012) .
Plaintiff urges that the necessary additional duty arose from the special conditions of probation imposed on Freauff. It argues that the prohibition on Freauff taking employment involving the handling of money without written permission from the probation officer, and the requirement that she provide her probation officer with employment information to monitor her compliance, gave rise to a duty owed by defendants to any of Freauff s future employers to monitor her compliance with those conditions, and argues that that duty was specifically owed to plaintiff.
The first problem with plaintiffs argument is that the probation conditions impose duties only on Freauff and make no reference to duties imposed on the person supervising Freauff. Further, plaintiff does not plead (and apparently cannot establish) that defendants were parties to the court order imposing conditions of probation on Freauff, who was not sentenced either in Clackamas County or in the county where plaintiff is located. Unlike the situation in McEvoy v. Helikson, 277 Or. 781, 785, 562 P.2d 540 (1977), on which plaintiff relies, there is no court order directing defendants to act for the benefit of plaintiff. Compare id. ().
In addition, plaintiffs allegations in the amended complaint that the probation conditions had the purpose of protecting plaintiff are not allegations of fact that we must accept as true. As with any written instrument, an interpretation of the meaning of the probation conditions is an issue of law for us to determine based on the document's text, and plaintiff cannot, through artful pleading, turn that into an issue of fact. See State v. Langford, 260 Or.App. 61, 68, 317 P.3d 905 (2013) (); see also Gafur v. Legacy Good Samaritan Hospital, 344 Or. 525, 529, 185 P.3d 446 (2008) (). Plaintiffs bare allegation about the purpose of the probation conditions does not provide a factual basis for imposition of a duty that would avoid operation of the economic loss rule. Plaintiff has not alleged facts that would impose a duty on defendants beyond the common law duty to exercise reasonable care to prevent foreseeable harm.
Plaintiffs reliance on Brennan v. City of Eugene, 285 Or. 401, 591 P.2d 719 (1979), is misplaced. In that case, the Supreme Court held that an ordinance imposed on a municipality a duty to exercise reasonable care regarding the licensing of taxicabs, so as to avoid creating a foreseeable risk of harm to others. Id. at 411. The duty alleged to have been breached in Brennan arose from a specific obligation stated in the ordinance, in contrast to the generalized duty of a probation officer to stay informed about a probationer's activities, as alleged by plaintiff here. In all events, the plaintiff in Brennan had suffered physical injury, and the opinion does not address applicability of the economic loss rule.
The dissent raises ORS 137.630 as the source of a duty in addition to the common law duty. But we may not simply declare that a statutory duty exists without undertaking the necessary steps of statutory construction. Additionally, plaintiff has not cited that statute in the complaint or in the briefs as the source of a duty or offered any statutory analysis, and we will not undertake that advocacy on plaintiffs behalf.
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