Perry v. Rein

• Jurisdiction: Oregon
• Parties: Kenneth R. PERRY, Plaintiff-Appellant, v. Scott J. REIN; Dressler, Rein, Evans and Sestanovich, LLP, a California limited liability partnership; Stuart I. Teicher and Sussman, Shank, Wapnick, Caplan & Stiles, LLP, an Oregon limited liability partnership, Defendants-Respondents.
• Citation: 168 P.3d 1163,215 Or. App. 113
• Docket Number: A126163.,000909797.
• Court: Oregon Court of Appeals
• Decision Date: 26 September 2007

168 P.3d 1163

215 Or. App. 113

Kenneth R. PERRY, Plaintiff-Appellant, v. Scott J. REIN; Dressler, Rein, Evans and Sestanovich, LLP, a California limited liability partnership; Stuart I. Teicher and Sussman, Shank, Wapnick, Caplan & Stiles, LLP, an Oregon limited liability partnership, Defendants-Respondents.

000909797.

A126163.

Court of Appeals of Oregon.

Argued and Submitted April 4, 2007.

Decided September 26, 2007.

Linda K. Williams, Portland, argued the cause for appellant. With her on the briefs was Kafoury & McDougal.

Richard J. Stone, Portland, argued the cause for respondents Scott J. Rein and Dressler, Rein, Evans and Sestanovich LLP. With him on the briefs were Brad T. Summers, Robert W. Wilkinson, and Ball Janik LLP.

David C. Landis, Portland, argued the cause and filed the briefs for respondents Stuart I. Teicher and Sussman, Shank, Wapnick, Caplan & Stiles, LLP.

Before SCHUMAN, Presiding Judge, and EDMONDS and ORTEGA, Judges.

EDMONDS, J.

Plaintiff, an attorney, appeals a judgment dismissing his claims for wrongful initiation of civil proceedings. Those claims allege that defendants, attorneys Rein and Teicher and their respective law firms, prosecuted an action against him in federal court without probable cause and with an improper purpose. The trial court granted defendants' motions for summary judgment on the ground that plaintiff failed to demonstrate a genuine issue of material fact as to whether the federal action was terminated in his favor. ORCP 47 C. Defendants cross-assign as error the trial court's order allowing plaintiff to amend his complaint to request punitive damages. We reverse and remand the judgment and reverse in part the order allowing plaintiff to amend his complaint to request punitive damages.

I. BACKGROUND

The summary judgment record in this case is, to some measure, an outgrowth of its procedural history, including an earlier appeal, Perry v. Rein, 187 Or.App. 572, 71 P.3d 81 (2003) (Perry I). Plaintiff commenced this action in 2000, alleging that defendants had, on behalf of their client, DeAbate, wrongfully initiated an action in federal court in the District of Oregon that named him as a defendant on the theory that he was part of a scheme to defraud DeAbate of $1 million. Plaintiff's complaint further alleges that defendants initiated the action without probable cause and with a purpose other than to secure adjudication of the claims against him. Defendants moved for summary judgment on plaintiff's claims on various grounds, including that the federal action had not terminated in plaintiff's favor, that defendants had probable cause for bringing the federal action, and that plaintiff had not demonstrated that defendants acted with malice. The trial court granted the motion on the ground that plaintiff failed to demonstrate that defendants lacked probable cause and did not reach the other issues.

Plaintiff appealed that ruling. On appeal, we summarized the facts in the light most favorable to plaintiff. Because that factual summary provides relevant background for purposes of the present appeal, we quote it at length:

"The somewhat complex web of facts of this case began in 1999, when plaintiff agreed to represent Mac Obioha (Obioha) on a civil matter. At the time, Obioha was in a federal prison in California. On October 5, 1999, Ann DeAbate (DeAbate), through her attorney, defendant Scott Rein (Rein), filed an action in the United States District Court in Connecticut seeking to recover $1 million of DeAbate's funds that allegedly had been wrongfully converted by Obioha, one of his associates, Michael Boyd (Boyd), and various other individuals. DeAbate had deposited the money into an offshore bank account for investment purposes, and, at some point, the money was removed from her account. At least some of that money, after it was removed from DeAbate's account, was deposited into Boyd's bank account. The Connecticut federal court issued a temporary restraining order (TRO) that same day, restraining Boyd and the other individuals from moving, transferring, or withdrawing any monies from their bank accounts.

"The same day that DeAbate filed the action and the Connecticut federal court issued the TRO, Boyd wired $150,000 to plaintiff for purposes related to his representation of Obioha on a matter that was unrelated to the DeAbate matter. It is unclear whether the money was wired before or after Boyd was served with the TRO. However, after a telephone conference with Rein, Boyd agreed to reverse the wire transfer. When it was learned that Boyd could not reverse the transfer, Rein called plaintiff on the morning of October 6. Plaintiff confirmed that he represented Obioha and that he had received the $150,000 from Boyd. Rein demanded that plaintiff return that money promptly. According to plaintiff, he told Rein that he had contacted the Oregon State Bar and the Professional Liability Fund to seek advice regarding his legal and ethical obligations concerning the disposition of the funds and that he was awaiting instructions from the Bar. He said that he would contact Rein after he had received guidance from the Bar. In his deposition, Rein testified that plaintiff refused to return the money in his account or to give any assurances that he would not disburse it. In an affidavit in the summary judgment record, Rein averred that plaintiff refused to reverse the wire transfer or to agree to freeze the funds until plaintiff had an opportunity to speak to the Bar.

"At some point later that day, Rein again contacted plaintiff by telephone. According to plaintiff, he told Rein that he had received advice from the Bar and that he had been advised to contact his client and then respond to Rein's proposals regarding disposition of the funds by the end of the day on October 7 or the morning of October 8 at the latest. Rein averred in his affidavit that, in the second conversation, plaintiff `simply reiterated his previous statement' and refused to agree to return the money.

"Plaintiff contacted his client and then called Rein and defendant Teicher, DeAbate's Oregon counsel, on October 7. He advised them that he was making arrangements to have the money sent back. On that same day, defendants filed a complaint in federal district court in Oregon on behalf of DeAbate, alleging that plaintiff had conspired to defraud DeAbate of $1 million, that he had converted no less than $1 million of DeAbate's funds, and that he had been unjustly enriched in that same amount. The complaint requested that a constructive trust be imposed on the $150,000 that plaintiff had received and on the $1 million that defendants alleged plaintiff had converted.

"On that same day, defendants also obtained a temporary restraining order, an order to show cause why the court should not issue a preliminary injunction, and a writ attaching the sum of $150,000 in plaintiff's bank account. In support of those requested remedies, defendants represented to the court that their restraining order and injunction requests were `founded upon the undisputed fact that the funds which [plaintiff] is holding are [DeAbate] funds to which he is a constructive trustee[.]' The order to show cause, in relation to plaintiff, stated that plaintiff was required to appear and to show cause why the court should not issue an injunction preventing him from disbursing the $150,000. On or about October 12, plaintiff gave instructions to his bank to return the $150,000 to Connecticut. A hearing on the show cause order was held on October 19 * * *.

"The following month, the matter was settled between Boyd, Obioha, and DeAbate. Pursuant to the terms of that settlement, Boyd returned DeAbate's money, and DeAbate filed an amended complaint in the Oregon action; as part of that complaint, DeAbate dropped all claims against plaintiff except the claim for a constructive trust. The complaint continued to allege that plaintiff held $150,000 of DeAbate's funds. The settlement agreement also mandated that the amended complaint be dismissed against Boyd and Obioha with prejudice and against plaintiff, but without prejudice. At no time was plaintiff ever a party to settlement negotiations or the final settlement itself. One day after filing the amended complaint, the Oregon federal district court dismissed the action against plaintiff."

187 Or.App. at 574-77, 71 P.3d 81.

After summarizing the facts, we proceeded in Perry I to determine whether, on the record before the trial court, there existed a genuine issue of material fact as to whether defendants initiated the federal action without probable cause. Based on the record before us, we concluded that there was "no evidence in the record from which it [could] be inferred that defendants reasonably believed that plaintiff was involved in the alleged original scheme to defraud DeAbate of her funds." Id. at 580, 71 P.3d 81 (emphasis in original). Thus, we held that the trial court erred in granting summary judgment to defendants on that ground. Id.

We next turned to the question of whether the federal action terminated in favor of plaintiff. Although the trial court did not reach that question, defendants urged us to reach it as an alternative basis for affirmance. The question was complicated, we explained, because the federal action was "terminated as a result of a settlement to which plaintiff was not a party and that resulted in a voluntary dismissal without prejudice of the action against him." Id. at 582, 71 P.3d 81. We further explained that, under Oregon law,

"`the voluntary dismissal of an underlying action before a trial on the merits is favorable to the defendant if it reflects adversely on the merits of the underlying action. That determination does not necessarily depend on whether the dismissal was with, or without, prejudice. Instead, it requires an examination of the circumstances resulting in the termination.'"

Id. (quoting Portland Trailer & Equipment v. A-1...