424 P.3d 811
Or. Ct. App.2018Background
- Merchants Paper Co. (plaintiff) engaged attorney (defendant) to review exclusive distribution agreements with Pact (competitor) for Oregon and Washington; agreements included unilateral opt-out favoring Pact and dual minimum purchase obligations.
- Defendant reviewed the contracts, approved them on March 3, 2012, but did not call out the unilateral termination clause that favored Pact.
- After performance problems, plaintiff stopped buying after June 2012 and, on January 23–25, 2013, attempted to terminate; defendant advised plaintiff the contracts were unenforceable and sent a letter to Pact asserting legal defects on February 25, 2013.
- Pact demanded compliance and sued plaintiff on April 1, 2013; plaintiff retained new counsel mid‑April 2013 and later lost summary judgment in Pact’s suit, settling for $135,000 in 2014.
- Plaintiff sued defendant for legal malpractice on February 24, 2015, seeking $250,000 (settlement plus defense fees); defendant moved for summary judgment arguing the malpractice claim was time‑barred under the two‑year statute of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did malpractice claim accrue under discovery rule? | Accrual occurred when Pact sued and plaintiff hired new counsel (April 2013), because that is when plaintiff knew it suffered measurable harm. | Plaintiff knew of harm by Jan–Feb 2013 (when it discovered the unilateral clause, contract became undesirable, or when it breached), so claim filed Feb 2015 is time‑barred. | Reversed: genuine issue whether plaintiff knew of actionable, measurable harm before April 2013; summary judgment improper. |
| Does merely being bound to an unexpected/unwanted contract establish measurable harm? | Harm here was measured by actual settlement and defense costs, not speculative contract defects. | Any unwanted contractual obligation constitutes harm for accrual purposes (per Jaquith). | Jaquith limited: harm requires a known, measurable loss; mere undesirability is not automatically actionable harm. |
| Are opportunity costs (lost business flexibility) sufficient to trigger accrual? | Plaintiff did not assert lost‑opportunity damages; harm claimed was actual defense/settlement costs. | Opportunity costs inherent in every contract create measurable harm once contract restricts business. | Court rejected treating abstract opportunity costs as automatic, measurable harm absent pleadings/evidence. |
| Does plaintiff’s voluntary breach trigger accrual when breach occurred? | Plaintiff reasonably relied on defendant’s advice that breach would have no consequences; thus did not know harm until new counsel contradicted that advice. | Choosing to breach made harm reasonably knowable at that time. | Reliance on attorney assurances creates factual dispute on whether plaintiff knew breach would cause harm; accrual may be later (April 2013). |
Key Cases Cited
- U.S. Nat'l Bank v. Davies, 274 Or. 663 (discovery rule and accrual for malpractice actions)
- Kaseberg v. Davis Wright Tremaine, LLP, 351 Or. 270 (malpractice accrual requires knowledge of substantial possibility of actionable injury)
- Jaquith v. Ferris, 297 Or. 783 (contractual obligation that creates a known, measurable economic loss can constitute harm for accrual)
- Jeffries v. Mills, 165 Or. App. 103 (threat of future harm not yet realized does not trigger accrual)
- Parker v. Harris Pine Mills, Inc., 206 Or. 187 (damages must be established with reasonable certainty; speculative damages disallowed)