Personal Jurisdiction in Oregon--Contacts May Not Be Enough

 A recent Oregon case offers a reminder that subrogating carriers need to carefully examine personal jurisdiction before pursuing an out-of-state defendant. In Robinson v. Harley Davidson Motor Company (Oregon Ct. App. 2012), Oregon resident Robinson was riding her Harley Davidson motorcycle in Idaho when she noticed a problem with the front wheel. Although she had purchased the motorcycle in Oregon, she took it to an Idaho dealer for warranty work. The next day, the wheel malfunctioned and Robinson was thrown from the motorcycle and injured.

Robinson sued the Idaho Harley dealer, among others, in Oregon state court. Although the Idaho dealer did not have a business located in Oregon, it maintained contacts there, including advertising in Oregon and selling parts, accessories and apparel to Oregon residents. Nevertheless, the Idaho dealer brought a motion to dismiss Robinson’s case, arguing that Oregon courts did not have personal jurisdiction over it.

The trial court agreed, and dismissed the Idaho dealer from Robinson’s case. In an opinion affirming the dismissal, the Oregon Court of Appeals held that “plaintiff’s claims do not arise out of or relate to defendant’s Oregon activities.” Since the Idaho dealer’s work on Robinson’s motorcycle did not take place in Oregon, the court found it was irrelevant that the dealer advertised or sold parts there.

In light of recent U.S. Supreme Court cases (such as J. McIntyre Machinery, Ltd. v. Nicastro) holding foreign manufacturers are not subject to personal jurisdiction simply by placing products in the stream of commerce, Robinson v. Harley offers another example where “contacts” with a state may not be enough to create personal jurisdiction there.

Inverse Condemnation Alive and Well in Oregon

In February 2011, the Oregon Court of Appeals reaffirmed that the doctrine of "inverse condemnation" is alive and well in Oregon. Inverse condemnation claims do not require a showing of negligence, and instead arise by showing that a government actor (e.g. a city) “substantially interfered” with an owner’s right to use his or her property, and that therefore the owner is owed “just compensation” under the Constitution (in this case, Article I, Section 18 of the Oregon Constitution—the “Takings Clause”). The case, Dunn v. City of Milwaukie (CV07040247), stemmed from property damage caused when a municipal sewer system backed-up into a home. The City, at the time, had been “hydrocleaning” a nearby sewer (blasting high-pressure water from a tanker), allegedly causing the backup. While this cleaning was taking place, sewer water shot from bathroom fixtures into the home and caused substantial property damage throughout.

The Court of Appeals affirmed the trial court's $55,000 award based on the homeowner's inverse condemnation claim. In its decision, the Dunn Court rejected arguments from the City that it did not "intend" to harm the plaintiff, and that since the damage was repairable, that there was no "substantial interference" with the homeowner’s property rights. The Dunn case is a recent reminder of the subrogation opportunities that may arise in property damage cases stemming from government work or municipal systems. Even where a case does not involve negligent work performed by a municipality (or other government actor), a subrogating carrier may still pursue a recovery case if it can demonstrate that the government impeded its insured’s property rights.
 

OREGON COURT FINDS THAT A PHD IS NO DEFENSE FOR NEGLIGENT HOME DESIGN

The Oregon Court of Appeals once again affirmed the viability of negligent construction claims while delivering another blow to the Economic Loss Doctrine.  In Cowan v. Nordyke, 232 Or.App. 384 (2009), plaintiff purchased a home from a Professional Home Designer (PHD).*  Of course, the home was not without problems, including water intrusion.  Plaintiff filed suit against the PHD claiming negligent design of the home and that the PHD's conduct fell below the standard of care for a reasonably prudent professional home designer.  The PHD’s motion for summary judgment was granted as Oregon does not recognize a tort for "professional negligence" by a PHD.  After attempts to amend the complaint to allege general negligence proved unsuccessful, plaintiff filed an appeal. 
While the Oregon Court of Appeals affirmed that Oregon does not recognize "professional negligence" by a PHD, it reversed on the issue of allowing a claim against a PHD for general negligence. In reaching its decision, the Court explained that Oregon deviates from traditional negligence concepts of "duty, breach and causation."  In Oregon, liability rests on whether the defendant's conduct unreasonably created a foreseeable risk of harm to the plaintiff.  Foreseeability applies unless the parties invoke a "status, relationship, or particular standard of conduct that limits the defendant's duty."  Here, the PHD argued that the foreseeability standard did not apply because its duty to plaintiff was defined and limited by its status as an unlicensed contractor and an "owner builder," rather than a "builder-vendor."  The PHD further contended that there were adequate contractual protections for plaintiff and that it need only disclose that it built the house and to disclose known defects.  The court was not swayed and correctly held that that being an unlicensed contractor did not provide a shield to limit liability.  The Court reasoned that a jury can determine whether damages sustained by a plaintiff are reasonably foreseeable.  With regard to contractual protections and the disclosure of defects, the Court agreed that the required disclosure might provide sufficient protection for known defects.  However, the Court recognized that not all latent defects "come to light" while the builder occupies the home.  Therefore contractual disclosure is not an adequate substitute for holding a builder liable under the general negligence standard.

Oregon continues to recognize negligent construction claims grounded in general negligence.  As Oregon continues to recognize negligence in this context, it further erodes the Economic Loss Doctrine.  See also Bunnell v. Dalton Construction, Inc. (2006 (water damage to interior not economic loss) and Harris v. Suniga (2006) (damage to physical structures is not economic loss).
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* A Professional Building Designer specializes in designing light-frame buildings such as single family homes and agricultural buildings.  Unlike architects, Professional Building Designers are not legally required to pass exams or receive special licenses.