330 P.3d 662
Or. Ct. App.2014Background
- Greenwood Products (Greenwood) bought inventory from Greenwood Forest Products (Forest Products) under an APA; Greenwood employees (including bookkeeper Fahey and VP Pattillo) provided management/accounting services for Forest Products during a transition period.
- CPA Schmidt reconstructed both companies’ books after an audit and concluded Greenwood had overpaid Forest Products by $819,731.68 for inventory it never received.
- At civil trial, Fahey (a Greenwood employee who later pleaded guilty to theft) was deposed (partially asserting Fifth Amendment) and later invoked the Fifth at trial when defendants tried to call him; his deposition had been sealed mid-litigation.
- Jury returned verdict for plaintiffs on breach of contract awarding $819,731.68 (and for defendants on promissory-note counterclaim). After the civil verdict, Fahey was sentenced criminally and executed an affidavit describing detailed Navision database manipulations he said Pattillo directed (the “NEGAPP” entries), showing inventory was removed from Forest Products’ system while checks were issued — undermining the overpayment theory.
- Defendants moved for a new trial under ORCP 64 B(4) based principally on Fahey’s post-trial affidavit as newly discovered evidence; the trial court effectively denied the motion (order untimely), and the matter was remanded following the Oregon Supreme Court decision in Greenwood II.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants are entitled to a new trial under ORCP 64 B(4) based on Fahey’s post-trial affidavit | Fahey’s statements were not newly discovered because defendants lacked diligence and some material could have been explored at trial; affidavit is cumulative or impeaching and may be incredible | Affidavit provides qualitatively new, database-based proof (specific queries, NEGAPP entries, tied checks/orders) that could not, with reasonable diligence, have been discovered or presented at trial due to Fifth Amendment limitations and counsel constraints | Court held defendants met ORCP 64 B(4): affidavit was newly discovered, not discoverable with reasonable diligence at trial, material, noncumulative, and would probably change the result; new trial granted on breach claim |
| Whether defendants exercised reasonable diligence in discovering Fahey’s database evidence before or during trial | Plaintiffs: defendants could have developed the evidence earlier or challenged the privilege ruling | Defendants: pretrial interactions with Fahey were limited by Fahey’s counsel and pending criminal matters; plaintiffs’ unethical procurement and sealing of deposition further impeded discovery; full database review occurred after Fahey’s sentencing | Court held defendants acted with reasonable diligence given counsel constraints and the factual context; they could not have used the database evidence at trial |
| Effect of granting new trial on attorney-fee awards in supplemental judgment | Plaintiffs: (implicit) fee award should stand until reversed | Defendants: reversal of breach judgment requires reversal of attorneys’ fee award tied to that judgment | Court reversed attorney-fee award to plaintiffs on breach claim as a consequence of reversing that judgment; remanded for defendants’ expert-expense award on counterclaim |
Key Cases Cited
- State v. Arnold, 320 Or 111 (establishes six-part test for newly discovered evidence under ORCP 64 B(4))
- State v. Acree, 205 Or App 328 (interpreting the probability standard for whether newly discovered evidence will probably change the result)
- Greenwood Products v. Greenwood Forest Products (Greenwood II), 351 Or 604 (Oregon Supreme Court decision remanding parts of the case to Court of Appeals)
- In re Newell, 348 Or 396 (disciplinary opinion addressing counsel’s misconduct in procuring Fahey’s deposition)
- Mitchell v. Mt. Hood Meadows Oreg., 195 Or App 431 (discusses legal nature of ORCP 64 B(4) inquiry and appellate review)