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Brownstein v. Pearson3/8/2000
Appeal from Circuit Court, Multnomah County.
Robert W. Redding, Judge.
Argued and submitted July 1, 1999.
Reversed and remanded.
Plaintiff is a law firm. It filed an action against defendant to collect fees that defendant allegedly owed it. Defendant counterclaimed for negligence and breach of fiduciary duty. The trial court granted plaintiff's motion for partial summary judgment on defendant's counterclaims and entered judgment on those counterclaims pursuant to ORCP 67 B. We reverse and remand.
Because this case arises on plaintiff's summary judgment motion, we state the facts in the light most favorable to defendant. See Olson v. F & D Publishing Co., Inc., 160 Or App 582, 584, 982 P2d 556 (1999). Defendant was the president of Consolidated Rock Products, Inc. Consolidated leased equipment to run its business from Eucon Corporation, and Eucon took a security interest in all of Consolidated's equipment, assets, receivables, and inventory. A dispute arose between Consolidated and Eucon over the leased equipment. In 1988, Eucon filed a complaint against Consolidated in state circuit court, alleging that Consolidated had breached the lease. Eucon also obtained a temporary restraining order (TRO) that "restrained [Consolidated's] business activities." Under the TRO, Consolidated "could not use or sell its inventories of processed rock."
Because Consolidated was having cash flow problems, it needed "a litigation forum to assert its claims against Eucon, and to work a reduction in the monthly payments to Eucon." One of plaintiff's attorneys advised defendant that "a Chapter 11 bankruptcy proceeding would provide the most effective forum to litigate [Consolidated's] dispute with Eucon and to force Eucon to reduce the monthly lease payments." Based on the attorney's advice, defendant chose to file for bankruptcy rather than oppose the TRO in circuit court. As a result of the bankruptcy, debts that Consolidated owed defendant were discharged; defendant had to repay preferences he had received from Consolidated; and when Consolidated was liquidated in 1989, defendant purchased its assets, inventory, and accounts receivable.
Although defendant experienced unanticipated losses in the bankruptcy proceeding, his attorney "told that the result we had obtained as a result of the bankruptcy proceeding was at least as good as we could have expected had [Consolidated] not filed for Chapter 11 Bankruptcy." After the bankruptcy, defendant continued to employ plaintiff as his counsel. One of plaintiff's attorneys helped defendant form a new company, which continued to operate the rock quarry. That attorney acted as the counsel for defendant's new company until 1995 and also represented other business entities owned by defendant during that time.
In 1996, plaintiff filed an action against defendant, seeking payment for work that plaintiff had done between 1986 and 1991. Defendant consulted another attorney in 1997, and, according to defendant, learned for the first time that plaintiff's allegedly negligent advice had caused the losses that defendant had experienced in the bankruptcy proceeding. Defendant accordingly counterclaimed for professional negligence and breach of fiduciary duty. Specifically, defendant alleged that plaintiff negligently advised him to file for bankruptcy rather than defend against Eucon's claim in circuit court. He did not allege that plaintiff was negligent in the way it handled the bankruptcy proceedings.
Plaintiff moved for partial summary judgment on defendant's counterclaims on two grounds. It argued primarily that defendant's counterclaims were time barred. It also argued that
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