Granewich v. Harding
| Decision Date | 09 July 1999 |
| Citation | 329 Or. 47,329 Ore. 47,985 P.2d 788 |
| Parties | William R. GRANEWICH, II, Petitioner on Review, v. Ben HARDING; Jeannie Alexander-Hergert; Founders Funding Group, Inc., an Oregon corporation, Defendants, and Michael J. Farrell; and Martin, Bischoff, Templeton, Langslet & Hoffman, a partnership, Respondents on Review. |
| Court | Oregon Supreme Court |
James R. Cartwright, Portland, argued the cause and filed the brief for petitioner on review. With him on the brief were Wendy M. Margolis and Cosgrave, Vergeer & Kester, LLP, Portland.
Thomas W. Brown, Portland, argued the cause and filed the brief for respondents on review. With him on the brief were Wendy M. Margolis and Cosgrave, Vergeer & Kester, LLP, Portland.
Michael A. Greene, Portland, filed briefs for amicus curiae Oregon Trial Lawyers Association. With him on the March 16, 1998, brief was B. Carlton Grew, Portland. With him on the September 15, 1998, brief were Richard H. Braun and Rosenthal & Greene, PC, Portland.
Thomas W. Sondag, of Lane Powell Spears Lubersky LLP, Portland, filed the brief for amicus curiae Oregon Association of Defense Counsel.
Before CARSON, Chief Justice, and GILLETTE, VAN HOOMISSEN, DURHAM, and KULONGOSKI, Justices.1
This is a civil action for damages based on allegations that the controlling shareholders and directors of a closely held corporation breached their fiduciary duties to plaintiff, a minority shareholder and director, through a corporate "squeeze-out." Plaintiff named as defendants the majority shareholders and directors, the corporation itself, the corporation's lawyer, and that lawyer's firm. As the case comes to us, all claims against the corporation and the shareholders have been dismissed, and only the allegations concerning the lawyers' role in the alleged squeeze-out are at issue.
The amended complaint alleges, among other things, that the controlling shareholders and directors amended the corporate by-laws to exclude plaintiff from the corporation and issued new shares of stock to themselves to dilute plaintiff's ownership interest in the corporation. The complaint also alleges that the lawyers are liable directly to plaintiff for breach of their own fiduciary duties to him as a director by assisting in those actions and that they are jointly liable with the majority shareholders and directors for breach of their fiduciary duties to him as a minority shareholder and director. The trial court dismissed the amended complaint as to the lawyers under ORCP 21 A(8) for failure to state a claim. A divided Court of Appeals, sitting en banc, affirmed that judgment, holding that the lawyers owed no direct fiduciary duty to plaintiff and that they could not be liable vicariously for the majority shareholders' and directors' alleged breach of fiduciary duty, if the lawyers themselves owed no such duty to plaintiff. Granewich v. Harding, 150 Or.App. 34, 945 P.2d 1067 (1997).
Plaintiff seeks review of only that part of the Court of Appeals decision that affirmed the trial court's judgment dismissing his claim against the lawyers. We limit our review accordingly. Because the case comes to us on an ORCP 21 A motion to dismiss, our only task at this stage is to determine whether the complaint adequately states a claim against the lawyers for joint tort liability for the alleged actions of the controlling shareholders and directors. We conclude that the amended complaint states a legally cognizable claim against the lawyers as joint tortfeasors. We therefore reverse that part of the decision of the Court of Appeals.
In determining the sufficiency of plaintiff's complaint, we accept as true all well-pleaded allegations in the complaint and give plaintiff the benefit of all favorable inferences that may be drawn from the facts alleged. Fearing v. Bucher, 328 Or. 367, 371, 977 P.2d 1163 (1999).
The amended complaint alleges the following facts: Founders Funding Group, Inc. (FFG) was incorporated in 1992. By early 1993, plaintiff and defendants Harding and Alexander-Hergert each owned one-third of the shares of FFG stock. Plaintiff, Harding, and Alexander-Hergert all were directors and officers of FFG as well as its employees. All three agreed initially that each would receive inadequate compensation for their respective services to the company but that each would receive the same amount of compensation from FFG, with the expectation and agreement that each ultimately would receive ample compensation for his or her efforts. They also agreed that each would be employed continually and perpetually by the corporation, with salaries and benefits commensurate with their services to it.
After a short time, FFG's business became substantially more successful and profitable. The complaint alleges that, at that point, Harding and Alexander-Hergert devised a plan to squeeze plaintiff out of the corporation. On May 5, 1993, they met with plaintiff and informed him that they had removed him as a director of FFG, relieved him of his executive position, and terminated him as an employee, all effective immediately. Plaintiff objected on the grounds that he had not received proper notice of any shareholders' or directors' meeting as required by FFG's by-laws, that his position as a director was protected by the cumulative voting requirements of the by-laws, that the actions of Harding and Alexander-Hergert represented a breach of the agreement between plaintiff and the others that each would be employed perpetually and continually by FFG, and that those actions represented a breach of the fiduciary duty that Harding and Alexander-Hergert owed to plaintiff by virtue of their ownership of two-thirds of the corporation's stock and their holding of two out of three positions on FFG's board of directors.
Soon thereafter, Harding and Alexander-Hergert, in their corporate capacities, met with and hired lawyer Farrell and his law firm, Martin, Bischoff, Templeton, Langslet & Hoffman (collectively, the lawyers), to provide legal services to the corporation. The complaint alleges that the lawyers then entered into an agreement with Harding and Alexander-Hergert to assist them in depriving plaintiff of his position as a director, of the value of his shares of stock, of his further employment with and compensation from FFG, and of the benefits of participating in the corporate affairs of FFG. The complaint alleges that, at all material times, the lawyers knew that the purpose of that agreement was to violate Harding's and Alexander-Hergert's fiduciary duties to plaintiff. Additionally, the complaint alleges that FFG itself "had no legitimate corporate interest in resolving the disputes between plaintiff * * * and defendants Harding and Alexander[-Hergert] in a manner which favored defendants Harding and Alexander[-Hergert] over plaintiff * * *."
The lawyers are alleged to have assisted Harding and Alexander-Hergert by drafting and sending two letters to plaintiff, at Harding's and Alexander-Hergert's request, containing statements that the lawyers knew to be false concerning the effectiveness of Harding's and Alexander-Hergert's previous efforts to remove plaintiff from the corporation. It also is alleged that, in their further efforts toward the same end, the lawyers knowingly provided legal assistance to Harding and Alexander-Hergert that substantially assisted Harding and Alexander-Hergert in breaching the fiduciary duties that they allegedly owed to plaintiff. Specifically, the complaint alleges that the lawyers assisted Harding and Alexander-Hergert in exercising actual control of the management and policies of FFG in ways inconsistent with their claimed fiduciary duties by calling special meetings, amending corporate by-laws, removing plaintiff as a director, and taking other actions to dilute the value of plaintiff's FFG stock. Finally, the complaint alleges that the lawyers' actions were outside the scope of any legitimate employment by FFG and that plaintiff suffered damages as a consequence of those actions.
The foregoing allegations concerning the role of the lawyers are set out or incorporated by reference in two claims for relief in the amended complaint. In analyzing the sufficiency of the specific allegations, the Court of Appeals considered whether those allegations constituted a legally cognizable claim under either a "conspiracy" or an "aid and assist" theory of joint liability. Granewich, 150 Or.App. at 38-49, 945 P.2d 1067.
As a preliminary matter, defendant lawyers argue that the Court of Appeals erred in considering the "aid and assist" theory and urge this court not to address it, on the ground that plaintiff neither mentioned "aid and assist" as a separate theory of recovery in the complaint nor argued it below. Therefore, defendant lawyers argue, the matter is not preserved.2
Defendant lawyers' argument is not well taken. For reasons explained more fully below, neither "conspiracy" nor "aid and assist" is a separate theory of recovery. See Bonds v. Landers, 279 Or. 169, 175, 566 P.2d 513 (1977) (); Bliss v. Southern Pacific Co., 212 Or. 634, 642, 321 P.2d 324 (1958) (same). Rather, conspiracy to commit or aiding and assisting in the commission of a tort are two of several ways in which a person may become jointly liable for another's tortious conduct.
Section 876 of the Restatement (Second) of Torts (1979) (Restatement) sets out three ways in which persons acting in concert may be held accountable for each other's tortious conduct:
To continue reading
Request your trial
-
McLean v. Pine Eagle Sch. Dist., Case No. 3:15-cv-654-SI
...a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.Granewich v. Harding , 329 Or. 47, 53–54, 985 P.2d 788 (1999) (quotation marks omitted). Thus, "conspiracy to commit or aiding and assisting in the commission of a tort are two of ......
-
Dale v. Ala Acquisitions, Inc.
...298, 300 (1990); Aetna Cas. & Sur. Co. v. Leahey Constr. Co., Inc., 219 F.3d 519, 533-34 (6th Cir.2000) (Ohio); Granewich v. Harding, 329 Or. 47, 985 P.2d 788, 792-93 (1999); Groff v. Maurice, C.A. No. 86-3808, 1993 WL 853801, *3 (R.I.Super. April 7, 1993); Future Group, II v. Nationsbank, ......
-
Time Warner Entertainment Co. v. Six Flags Over Georgia
...of action is implicit in their existing case law governing the liability of persons acting in concert. See, e.g., Granewich v. Harding, 329 Or. 47, 54-58, 985 P.2d 788 (1999); Holmes v. Young, 885 P.2d 305 (Colo. App.1994). Were we required to address this issue, we could follow suit, findi......
-
Mason v. BCK Corp.
...the type of secondary participation that will subject a person to liability for the conduct of another. See, e.g., Granewich v. Harding , 329 Or. 47, 53, 985 P.2d 788 (1999) (explaining that Oregon negligence law is consistent with section 876 of the Restatement (Second) of Torts (1979), wh......
-
Business Associations - Paul A. Quiros, Lynn S. Scott, and James F. Brumsey
...(1995); U3S Corp. v. Parker, 202 Ga. App. 374, 414 S.E.2d 513 (1991)). 161. Id. at 342-43, 537 S.E.2d at 407 (citing Granewich v. Harding, 985 P.2d 788 (Or. 1999); Holmes v. Young, 885 P.2d 305 (Colo. App. 1994)). 162. Id. at 343, 537 S.E.2d at 407. The court of appeals discussion, although......
-
Chapter 1 - § 1.4 • LAWYERS AS DIRECTORS
...24 Am. Law. 61 (June 2002).[122] ABA Formal Op. 98-410 (1998).[123] Restatement, supra n. 8, § 135 cmt. d.[124] See Granewich v. Harding, 985 P.2d 788 (Or. 1999) (allowing claim that attorneys who participated in "squeeze out" of minority shareholders aided and abetted breach of fiduciary d......