Westerlund Log Handlers, LLC v. Esler

• Decision Date: 29 January 2018
• Docket Number: Case No. 3:16-cv-922-SI
• Parties: WESTERLUND LOG HANDLERS, LLC, et al., Plaintiffs, v. MICHAEL J. ESLER, et al., Defendants.
• Court: U.S. District Court — District of Oregon

WESTERLUND LOG HANDLERS, LLC, et al., Plaintiffs,
v.
MICHAEL J. ESLER, et al., Defendants.

Case No. 3:16-cv-922-SI

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

January 29, 2018

OPINION AND ORDER

Judy Danelle Snyder and Holly M. Lloyd, LAW OFFICES OF JUDY SNYDER, 1000 SW Broadway, Suite 2400, Portland, OR 97205. Of Attorneys for Plaintiffs.

Matthew J. Kalmanson, Gordon L. Welborn, and Jason R. Poss, HART WAGNER LLP, 1000 SW Broadway, 20th Floor, Portland, Oregon 97205. Of Attorneys for Defendants.

Michael H. Simon, District Judge.

Plaintiffs are Westerlund Log Handlers, LLC ("WLH") and David Westerlund ("Westerlund"), who owns 60 percent of WLH.¹ Defendants are Michael J. Esler ("Esler") and the law firm of Esler, Stephens & Buckley, LLP ("ESB").² Plaintiffs allege legal malpractice and breach of fiduciary duty. Before the Court is Defendants' motion for summary judgment. For the reasons that follow, Defendants' motion is granted in part and denied in part.

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STANDARDS

A party is entitled to summary judgment if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment," the "mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

BACKGROUND

Westerlund and Nance formed WLH in 2009. In 2013, WLH was providing log handling services for China National Building Materials Import and Export Corporation ("CN"). In the spring of 2013, and again in November and December 2013, Nance and Westerlund met with Dennis J. Murphy, Sr. ("Murphy" or "Dennis Murphy") and other representatives of Murphy Overseas U.S.A. Timber and Land Development, LLC and Murphy Overseas U.S.A. Holdings, LLC (collectively, "the Murphy Group").³ During these meetings, Nance and Westerlund discussed with the Murphy Group the possibility of working together.

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In late December 2013,⁴ Westerlund and Nance met with the Murphy Group at the office of the Murphy Group's accountant, Craig Vagt. Representatives of the Murphy Group who attended the late December meeting included Dennis Murphy and Ed Morrissey.⁵ Esler also attended the late December meeting. At this meeting, the participants discussed and reviewed several documents relating to WLH's business operation and its contracts with CN. According to Plaintiffs, the late December meeting lasted three to four hours, during which time the Westerlund Parties and the Murphy Group agreed to form (or agreed to formalize) a joint venture in the future. The joint venture would involve the creation of a new company, ownership of which would be split between the Westerlund Parties and the Murphy Group. According to Plaintiffs, the Murphy Group would receive 70 percent ownership of the new company because it would be paying all legal costs and investing money in the new venture; the Westerlund Parties would receive a 30 percent ownership interest.

Before the late December meeting, Nance and Westerlund believed that WLH's log handling agreement with CN called for an exclusive relationship on the part of WLH. (The written contract between CN and WLH was one of the documents reviewed and discussed at the late December meeting.) Nance and Westerlund believed that they owed a duty to CN to "stick it out" during the duration of that agreement. According to Plaintiffs, however, Esler told Nance

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and Westerlund at the late December meeting that if the Murphy Group decided to do business with WLH, the Murphy Group could "coexist" with CN as a WLH customer. In other words, according to Plaintiffs, Esler told Nance and Westerlund that WLH could work with both CN and the Murphy Group. While Esler was out of the room, Morrissey reiterated to Nance "our lawyer thinks" that WLH's contract with CN is not exclusive.

Also at the late December meeting, Esler told Westerlund and Nance that the WLH agreement with CN was unfavorable to WLH and that before the Murphy Group and the Westerlund Parties could work together on a future joint venture, WLH needed to disentangle itself from its contract with CN. Westerlund testified that Esler looked over the CN agreement and said that Westerlund was "being cheated." According to Nance and Westerlund, they relied on statements by both Esler and Morrissey about how to terminate the agreement between WLH and CN. Indeed, according to Nance, he discussed with Esler the details of WLH's termination letter to CN. In addition, the Murphy Group's Ed Morrissey proofread WLH's termination letter before WLH sent it to CN.⁶

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At the late December meeting, Nance understood that Dennis Murphy was paying Esler to be at the meeting. In that meeting, Esler did not agree to represent WLH. While Esler was present, there was no discussion of who Esler or his law firm represented. Plaintiffs, however, testified that they believed that Esler was representing the interests of the future joint venture that was under discussion, while also orchestrating a plan to get WLH disentangled from CN in order to further that future partnership. According to Plaintiffs, Esler did not want a formal or written agreement regarding the joint venture prepared at this time because that might later be used by CN to support a claim that the Murphy Group had tortuously interfered with the business relationship between CN and WLH. Nance stated that he believed that Esler, whom Nance characterized as "Murphy's lawyer," was present to help get WLH "unhooked" from CN. Nance also believed that WLH could rely on Esler, who was representing the Murphy Group during these meetings, because as of the late December meeting, WLH and the Murphy Group were either partners or, at least, future partners. Westerlund stated that he had a similar belief, including that Esler was the Murphy Group's lawyer. At the late December meeting, Esler, however, did not expressly tell either Nance or Westerlund that Esler could not represent them.⁷

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Approximately one week after the late December meeting, Esler told Morrissey to relay a message to Nance recommending attorney Mike Haglund ("Haglund") for the Westerlund Parties. Shortly thereafter, Haglund and Esler spoke by phone. Haglund told Esler that he had decided not to represent WLH, Westerlund, or Nance.

Between the late December meeting and January 13, 2014, Esler worked on drafting an agreement that ultimately became the written Log Handling Agreement ("LHA") between the Westerlund Parties and the Murphy Group. On January 8, 2014, Nance and Esler spoke by telephone. Esler sought further information that he needed for drafting the LHA. Esler asked Nance whether there was an operating agreement with CN, who was the lessor on the Port of Astoria lease, and who was the lessor on the lease with the Lewis & Clark Log Yard.

On January 13, 2014, the Westerlund Parties and the Murphy Group met at Esler's law office (ESB) to discuss the LHA. Esler attended the meeting for approximately 30 minutes. Before that, Esler had given the Murphy Group a draft of the LHA. At this meeting, Esler did not tell the Plaintiffs that he could not represent them.⁸

In addition, before the January 13 meeting, Esler had not provided any written notice to Nance or Westerlund that Esler did not represent them, or that Nance and Westerlund should

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obtain their own counsel for the Westerlund Parties. According to Esler, at the January 13 meeting, Esler did not know whether the Westerlund Parties were represented by counsel.

The LHA was signed on January 13, 2014. A representative of AFP signed the LHA for the Murphy Group.⁹ Nance and Westerlund signed the agreement in their office in Astoria for the Westerlund Parties.¹⁰ At the time of the January 13 meeting at Esler's office, Westerlund understood that Esler represented the Murphy Group, but Westerlund also thought that they, including Esler, "were all working as a group." Westerlund did not ask Esler any questions about the LHA. Nance testified that Esler did not "directly" advise him to sign the LHA, but Nance believed that Esler was the "architect" who put together the whole deal, with the interests of the joint venture (or future joint venture) in mind.

At some point in January—though not at the January 13 meeting—Nance asked Esler whether Esler would be representing WLH in its dispute with CN. Esler told Nance that he would not, but that he would "hire someone" to represent WLH in that matter. Westerlund testified that representatives of the Murphy Group reassured Westerlund that "Esler was creating a strategy to protect the company, Westerlund Log Handlers, while [it] was going through and proving that [CN] had breached the contract." Westerlund never asked Esler or any other ESB attorney about this strategy in December 2013 or January 2014. Westerlund testified, however, that both Morrissey and Daggett from the Murphy Group consistently reassured him and urged Westerlund to "trust Murphy." On January 15, 2014, WLH terminated its contract with CN.

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On approximately January 12, Esler spoke...