Portland General Elec. v. U.S. Bank Trust Ass'n, Civ. 98-1332-HA.
| Decision Date | 25 February 1999 |
| Docket Number | No. Civ. 98-1332-HA.,Civ. 98-1332-HA. |
| Citation | 38 F.Supp.2d 1202 |
| Parties | PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation, Plaintiff, v. U.S. BANK TRUST NATIONAL ASSOCIATION, a Minnesota corporation, Defendant. |
| Court | U.S. District Court — District of Oregon |
David B. Markowitz, Markowitz, Herbold, Glade & Mehlhaf, P.C., Portland, OR, David A. Aamodt, Portland General Electric Company, Portland, OR, for plaintiff Portland General Electric Company.
Thomas V. Dulcich, Scwabe, Williamson & Wyatt, P.C., Portland, OR, for Earl Thorsfeldt, Keith Olds and Commercial Appraisers, Inc.
Stephen L. Griffith, Stoel Rives, LLP, Portland, OR, for Enron Corp.
Pending before the court is Plaintiff Portland General Electric Co.'s ("PGE's") motion for a declaratory judgment against Trust No. 1 of Defendant U.S. Bank Trust National Association ("U.S.Bank") and motion to dismiss Trust No. 1's counterclaims. (Docs. 57 and 71.) PGE seeks a ruling that an appraisal of the value of two generators leased by PGE from Trust No. 1 is binding, while Trust No. 1 seeks to vacate the appraisal, claiming fraud, bias, and other grounds for relief. PGE and certain witnesses sought to be deposed by Trust No. 1 have also filed motions for an order protecting them from discovery. (Docs. 59, 79, and 80.) In light of the limited time constraints imposed by the contract underlying this dispute, the court held expedited argument on the matter. The court stayed discovery with the exception of allowing limited depositions of two appraisers on the narrow issue of their respective roles in rendering the appraisal. The court now makes its full findings and, for the reasons set forth below, shall grant in part the motion for a protective order, grant PGE's motion for declaratory judgment, and dismiss Trust No. 1's counterclaims.
Twenty-five years ago Plaintiff PGE, an electrical company based in Portland, Oregon, leased six generator "units," under two Lease Agreements, from the Bank of California National Association ("Bank of California"). Apparently, the Bank of California held title to the generators through three separate trusts ("Trusts No. 1, 2, and 3"). Through a series of acquisitions and assignments, Defendant U.S. Bank eventually became trustee for all of the trusts.
Both Lease Agreements terminate on August 8, 1999. Under § 24 of both Lease Agreements, PGE has the option to (1) renew them for an additional five-year term at fair market rental value, (2) purchase the units at fair market sales value, or (3) do nothing and let the Leases expire. PGE has until February 7, 1999 to make its decision. Under § 24 of the Lease Agreements, by giving written notice no earlier than one year prior to expiration of the lease, PGE could request those values be determined. If the parties failed to agree upon those values before ten months prior to expiration of the Lease Agreements (October 8, 1998), the Agreements allowed PGE to request an independent appraisal of the value of the equipment. If within 15 business days of the request for appraisal the parties failed to agree on who would be the independent appraiser, either party could request the American Arbitration Association ("AAA") to appoint an independent appraiser.
On October 27, 1998, PGE filed this action asking the Court to appoint an appraiser and instruct that appraiser how to determine the fair market rental value and fair market sales value. On November 13, 1998, the AAA appointed Keith Olds as the independent appraiser of the units owned by Trust No. 1 and sent the parties Olds's biographical information.2 On November 19, 1998, Trust No. 1 wrote the AAA, complaining about Olds's qualifications and alleged ex parte contacts between PGE and Olds. On November 23, 1998, the AAA rejected Trust No. 1's concerns and ruled that Olds's appointment would stand. On December 10, 1998, Olds and his colleague Earl Thorsfeldt issued their valuations that the value of each of Trust No. 1's generators was $4,877,083 fair market sales value and that semi-annual payments on a five-year lease extension would be $580,236.71.
On January 12, 1999, Trust No. 1, unsatisfied with these valuations, filed a series of counterclaims against PGE, running 99 paragraphs in length. In essence, Trust No. 1 alleges that Olds relied on false ex parte communications from PGE; the appraisal was "80% ghostwritten by PGE"; the appraisal was the product of a secret ex parte engagement letter between PGE and Olds; the appraisal was "the result of bad faith, bias, and fraud"; Olds improperly delegated his authority to Thorsfeldt in conducting the appraisal; even if Olds did conduct the appraisal, he was not qualified to appraise the generators because he had no relevant appraisal experience and had been retired for nine years; Thorsfeldt was also not a qualified appraiser; Olds was appointed by the AAA as a result of misrepresentations that he was qualified; PGE informed Olds that his qualifications had been challenged; PGE filed a preemptive suit and sought rulings to "prejudice" Trust No. 1's appraisal rights; Olds had a "sham relationship with Commercial Equipment Appraisers, itself a shell corporation controlled by Thorsfeldt"; the appraisers provided PGE with ex parte advance notice that they would use the "in-the-box" premise for fair market value, which was sought by PGE.
Trust No. 1 claims that PGE tampered with the appraisers because it needed to sell the Beaver Facility, including the GE Gas Turbines, prior to the Lease Agreement's expiration on August 8, 1999 in order to make a profit on them. Trust No. 1 claims "PGE developed an aggressive strategy intended to obstruct the fair and orderly appraisal of the GE Gas Turbines and thereby force Trust No. 1 and Trusts No. 2 & 3 into an early sale of the GE Gas Turbines at significant discounts from true market value." (Counterclaims, paragraph 12.)
In support of its counterclaims Trust No. 1 has submitted affidavits from three witnesses as evidentiary support. The affidavit of Phillip Douglas, Trust No. 1's counsel, states that he compared the appraisal and found sentences regarding how market value should be determined were similar to a brief PGE submitted to the court. Trust No. 1 argues from this evidence that the appraisal was "80% ghostwritten" by PGE. Douglas also states in his affidavit that the AAA obtained the reference for Olds by asking Thorsfeldt whom to contact.
Trust No. 1 also submits an affidavit of John Travers who is a member of a firm that specializes in selling power generators. Travers states that he examined national data bases and found that neither Olds nor Thorsfeldt were listed as licensed appraisers or were members of appraisal organizations. Trust No. 1 complains that Olds's most significant job was working for Pacific Power, a PGE competitor, as a construction inspector of high voltage transmissions and substations, and as a marketing manager. Travers also states in his affidavit that when he called Olds, Olds was at a home number, and employees who answered the telephone at Commercial Appraisers, Inc., the company with which Olds affiliated during the appraisal, had not heard of Olds. Trust No. 1 also contends that the appraisal report was not put together well, thus proving that the appraisers were not qualified, and it has submitted an affidavit of John Oates, an appraiser with the New York office of Deloitte & Touche, L.L.P., in support of this contention.
Travers affidavit contains statements about alleged ex parte conversations a PGE employee, Joseph Waitman, must have had with Olds, because when they were setting up times to meet, Waitman would indicate that Olds had changed the times or dates. Thus, Travers asserts Waitman had ex parte conversations with Olds. At the hearing, Trust No. 1's counsel asserted that the alleged ex parte conversations convinced Olds that he had to use the "in the box" valuation method, although there is no objective evidence of this other than the fact that he actually adopted the method in completing his valuation. It is important to note that Trust No. 1's counsel wrote a letter to PGE stating that it would have ex parte communications with the appraiser because it believed PGE was doing so. Thus, Trust No. 1 itself engaged in ex parte discussions with Olds. (Reply in Support of Motion for Protective Order/Stay, ex. 1.)
Finally, Trust No. 1 notes that Thorsfeldt signed the appraisal report as the "appointed appraiser" and Olds signed it an "appraisal consultant." According to Trust No. 1, Olds improperly delegated his authority to Thorsfeldt.
Trust No. 1 seeks declaratory relief that the appraisal is void, seeks vacation of the appraisal, and alleges that PGE breached the contractual covenant of good faith and fair dealing, and "aided and abetted" a "tortious breach of good faith an fair dealing" and "breach of fiduciary duty" by the appraisers.
Three sets of motions are before the court: (1) motions by PGE, the Appraisers, and Enron for a protective order or stay of discovery; (2) PGE's motion for a declaratory judgment that the appraisal is binding; and (3) PGE's motion to dismiss Trust No. 1's counterclaims.
Trust No. 1 has served the following discovery requests on PGE: (1) a request for production of documents, with 46 separate requests; (2) subpoenas seeking two days of deposition each of Olds and Thorsfeldt; (3) deposition of William Mehlhaf, counsel for PGE; and (4) FRCP 30(b)(6) corporate deposition notices on Enron, Commercial Equipment Appraisers, and the records custodian at the Markowitz, Herbold law firm, PGE's counsel. Trust No. 1 seeks all documents related to the appraiser's high...
To continue reading
Request your trial
-
MCI Construction v. Hazen and Sawyer, 1:99CV00002 (M.D.N.C. 8/29/2003)
...pertains even though it may well be very difficult to prove actual bias without discovery. See Portland General Elec. Co. v. U.S. Bank Trust Nat. Ass'n, 38 F. Supp.2d 1202, 1208 (D. Ore. 1999), rev'd on other grounds, 218 F.3d 1085 (9th Cir. 2000) (collecting (Order of June 28, 2001, at 2-3......
-
Greenwald v. Shayne
...of impropriety, a party is not entitled to discovery by way of deposing one or more arbitrators. Portland Gen. Elec. Co. v. U.S. Bank Trust Natl. Assn., 38 F.Supp.2d 1202 (D.Or., 1999). * * * The alleged partiality must be direct, definite, and capable of demonstration, and `the party asser......
-
Nationwide Mut. Ins. Co. v. Home Ins. Co., No. C2-95-880.
...of impropriety, a party is not entitled to discovery by way of deposing one or more arbitrators. Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Ass'n, 38 F.Supp.2d 1202 (D.Or., 1999). Further, a party must exercise due diligence and can raise questions of bias or fraud only after the rend......