Date: 04-15-2015

Case Style: Kurtiss Teegarden v. State of Orgeon

Case Number: A152071

Judge: Sercombe

Court: Oregon Court of Appeals on appeal from the Circuit Court, Marion County

Plaintiff's Attorney: Kevin Lafky argued the cause for appellant. With him
on the briefs were Tonyia J. Brady and Lafky & Lafky.

Defendant's Attorney: Inge D. Wells, Assistant Attorney-in-Charge, argued the
cause for respondents. With her on the brief were Ellen F.
Rosenblum, Attorney General, and Anna M. Joyce, Solicitor
General.

Description: Plaintiff, who is a former employee of the State of
Oregon—specifically, Oregon Youth Authority—filed a complaint
seeking damages from the state and Sid Thompson,
the superintendent of MacLaren Youth Correctional Facility
where plaintiff had worked (collectively, OYA).1 After OYA
moved for judgment on the pleadings pursuant to ORCP 21 B,
the trial court concluded that plaintiff had resolved “all
civil areas of dispute” by way of a settlement agreement.
Accordingly, the court entered a judgment dismissing all of
plaintiff’s claims with prejudice. Plaintiff appeals the trial
court’s judgment and, as explained below, we reverse and
remand.
We state the facts as alleged in the complaint and
supplemented by the terms of the settlement agreement,
which was attached to OYA’s answer. See Boyer v. Salomon
Smith Barney, 344 Or 583, 589 n 3, 188 P3d 233 (2008)
(where the defendants incorporated a contract into their
answer and plaintiff did not object to the trial court considering
the terms of that agreement in evaluating a motion for
judgment on the pleadings, the appellate court treated the
terms of the agreement “as having been admitted by plaintiff,
the same as if plaintiff had alleged those terms in his
complaint”).
Plaintiff worked for OYA as a group life coordinator
at MacLaren. In that position, plaintiff’s main job duty was
to supervise youth offenders in the facility. Over the course
of several months in 2010, plaintiff made a number of complaints
to management about staff being attacked by youth
offenders, knowledge of offenders planning attacks on staff,
differential treatment of offenders, staff being put physically
at risk, lack of policies and rules governing the unit, and
failure to provide treatment to offenders. On May 19, 2010,
OYA terminated plaintiff from his position.
After plaintiff was dismissed, he pursued a grievance
through his union. As part of the settlement of the
1 Because Thompson was sued as “the superintendent of OYA MacLaren
during all relevant times * * * [who was] acting within the course and scope of
his employment and under color of law,” we refer to him throughout this opinion,
along with the Oregon Youth Authority, as OYA.
376 Teegarden v. Oregon Youth Authority
grievance, OYA agreed that plaintiff’s dismissal would be
characterized as a resignation and that plaintiff would not
have any further legal issues regarding the events leading
to his termination. In return, plaintiff agreed to drop his
claims and release OYA from liability. Accordingly, the parties
signed a settlement agreement.
The agreement, entered into in August 2010, recites
that the parties “wish to resolve this grievance on mutually
satisfactory terms without further hearing or litigation
of any kind.” Accordingly, OYA “agrees to revoke the
Letter of Dismissal and accepts a Letter of Resignation * * *
from [plaintiff], effective upon final signature of this document.”
Plaintiff, for his part, “agrees not to appeal, grieve,
or otherwise challenge the * * * Letter of Dismissal,” and the
union “voluntarily withdraws the * * * grievance with prejudice.”
The agreement contains a provision stating that it
“is the sole and entire agreement between the parties. This
Agreement fully supersedes any and all written or oral contracts,
agreements or understandings between the parties
pertaining to the subjects discussed herein.” Furthermore,
“[t]his Agreement constitutes the good faith resolution of
all claims or potential claims [plaintiff] might have against
the State or OYA and is not and shall not in any way be construed
as an admission of any wrongful or discriminatory
act or omission against [plaintiff], or that [plaintiff]’s discipline
was in any way wrongful, unlawful, or contrary to
the terms of the parties’ collective bargaining agreement.”
Soon after the parties entered into the settlement
agreement, plaintiff was charged with official misconduct,
tampering with a witness, and fourth-degree assault based
on events related to his termination. Around the same
time, he obtained employment at the Oregon Department
of Fish and Wildlife (ODFW). Once ODFW conducted a further
background check, however, it terminated plaintiff’s
employment as a result of the pending criminal charges
against him.
Although OYA was aware that those criminal
charges would likely be brought against plaintiff, it did not
disclose that information to plaintiff during settlement negotiations.
Plaintiff would not have entered into the settlement
Cite as 270 Or App 373 (2015) 377
if that information had been provided. OYA encouraged the
prosecution, provided prosecutors and investigators access
to OYA employees, and provided paid time off to employees
who testified against plaintiff. After a jury trial, plaintiff
was acquitted of all the criminal charges against him.
In August 2011, plaintiff filed his complaint against
OYA in which he sought damages for malicious prosecution,
intentional infliction of emotional distress, intentional interference
with a prospective economic relationship, and violations
of 42 USC section 1983, along with a declaration, “pursuant
to ORS 28.010-28.020,” that “the release is invalid,
and of no legal effect[.]” OYA filed an answer to the complaint
and set forth a number of affirmative defenses; among other
things, OYA asserted that plaintiff’s claims were barred as
a result of the settlement agreement. In his reply, plaintiff
denied OYA’s affirmative defenses. Thereafter, OYA filed a
motion for judgment on the pleadings pursuant to ORCP 21
B on the ground that plaintiff’s claims were barred “because
he released all claims upon entering into a binding settlement
agreement with [OYA].”2 Plaintiff responded that the
settlement agreement had been breached by OYA or, alternatively,
that execution of the agreement was based on a
misrepresentation and, therefore, could not be enforced. He
also contended that, by its terms, the agreement only settled
his union grievance and did not apply to the claims at issue,
and pointed out to the trial court that issues of fact cannot
be tried on a motion for judgment on the pleadings.
The trial court held a hearing on the motion and
later issued a letter opinion concluding that “the Settlement
Agreement resolves all civil areas of dispute between OYA
and the Plaintiff.” Furthermore, the court observed that
“the District Attorney was not a party to the Settlement
Agreement” and “Plaintiff could not reasonably anticipate
the Settlement Agreement prohibited the District Attorney
from filing criminal charges against him.”
Plaintiff objected, asserting that his claims for
malicious prosecution and intentional interference with a
prospective economic relationship related to “conduct and
2 Under ORCP 21 B, “[a]fter the pleadings are closed, but within such time
as not to delay the trial, any party may move for judgment on the pleadings.”
378 Teegarden v. Oregon Youth Authority
facts that occurred after the execution of the settlement
agreement” and that the agreement did not “release future
claims when the facts that g[a]ve rise to the claims had not
yet occurred.” Furthermore, plaintiff contended that the
court could not dismiss his claim for declaratory relief:
“Plaintiff objects to having his sixth claim for declaratory
judgment against OYA dismissed because the court has not
ruled on the declaratory judgment nor has Plaintiff been
able to provide evidence at hearing. Pursuant to statute
and case law, if jurisdiction to render declaratory judgment
is properly invoked, the court has a duty to render judgment
declaring right of the respective parties litigant.”
The court held an additional hearing, but thereafter entered
an order granting the motion for judgment on the pleadings
and ordering that all of plaintiff’s claims be dismissed with
prejudice. Thus, the court concluded (1) that the settlement
agreement was enforceable as a matter of law despite plaintiff’s
assertions that it had been induced by misrepresentation
and (2) as a matter of law, the release contained in
the settlement agreement precluded all of plaintiff’s claims.
Accordingly, the court entered judgment in favor of OYA and
against plaintiff, dismissing with prejudice every claim set
forth in plaintiff’s complaint.
On appeal, plaintiff contends that the trial court
erred in granting the motion for judgment on the pleadings.
He asserts, in part, that the motion on the pleadings should
not have been granted because (1) his pleadings alleged
that the settlement agreement is unenforceable as he was
induced to execute the agreement by OYA’s misrepresentations,
(2) the settlement agreement did not release liability
for future torts, and (3) the trial court could not dismiss his
declaratory judgment claim. We agree with plaintiff on all
of those points.
“Motions for judgment on the pleadings are not
generally well-regarded by the courts, because hasty or
imprudent use of the procedure can conflict with the policy
of ensuring litigants a full and fair opportunity to try their
claim or defense.” Thompson v. Telephone & Data Systems,
Inc., 130 Or App 302, 309, 881 P2d 819, adh’d to as modified
on recons, 132 Or App 103, 888 P2d 16 (1994). Thus,
Cite as 270 Or App 373 (2015) 379
“[a] showing that the nonmoving party cannot prevail as a
matter of law is the basis for a motion for judgment on the
pleadings.” Rowlett v. Fagan, 262 Or App 667, 679, 327 P3d
1, rev allowed, 356 Or 516 (2014) (internal quotation marks
omitted). “Judgment on the pleadings, which is authorized
by ORCP 21 B, ‘is only allowable when the pleadings[,] taken
together[,] affirmatively show that plaintiff has no cause of
action against the defendant[.]’ ” Boyer, 344 Or at 586 (quoting
Salem Sand v. City of Salem, 260 Or 630, 636, 492 P2d
271 (1971)) (footnote omitted; brackets in Boyer). “On review
of a judgment on the pleadings, an appellate court accepts
as true all well-pleaded allegations of the complaint.” Id. To
“obtain judgment on the pleadings, defendants ha[ve] the
burden to establish that, assuming the truth of the allegations
in the complaint, they were[,]” nonetheless, entitled to
prevail. Rowlett, 262 Or App at 680 (emphasis omitted).
We begin by addressing plaintiff’s contention that
the court erred in dismissing his claims on the pleadings
based on the settlement agreement because the agreement
was procured by misrepresentation and was, therefore, unenforceable.
“Releases are a species of settlement agreement
and, as such, are favored by the law.” Pioneer Resources, LLC
v. D. R. Johnson Lumber Co., 187 Or App 341, 356, 68 P3d
233, rev den, 336 Or 16 (2003). “Nevertheless, under limited
circumstances, enforcement of a release may be barred if the
release was the product of misrepresentation or unconscionable
conduct.” Id.; see also Whitehead v. Montgomery Ward
& Co., Inc., 194 Or 106, 131, 239 P2d 226 (1952) (if a plaintiff
was induced to enter into a release “by means of [the] defendant’s
fraud or material misrepresentation, the transaction
is voidable”). However, “fraud or inequitable conduct with
respect to a transaction that is the subject of a release does
not bar enforcement of a release, so long as the release was
not itself the product of fraud in the inducement.” Pioneer
Resources, LLC, 187 Or App at 358.
Here, in his complaint, plaintiff alleged that, as
part of settlement discussions, OYA represented to him that
he “would not have any further legal issues regarding the
events leading to his termination.” However, “[w]ithin days
of signing the release” agreement, he was charged with
crimes relating to the events leading to his termination.
380 Teegarden v. Oregon Youth Authority
Furthermore, at the time of the settlement discussions,
“OYA was aware of the likelihood that Plaintiff would be
charged with crimes relating to the events related to his
termination, but failed to disclose that material fact to
Plaintiff when Plaintiff was considering whether to settle
his grievance.” OYA also “actively participated in the criminal
prosecution of Plaintiff.” That participation included
“encouraging the prosecution.” According to plaintiff, if OYA
had disclosed those facts during settlement discussions, he
“would not have signed the release and dropped his grievance.”
Thus, plaintiff claims that the release itself was procured
by fraud.3
OYA asserts that, assuming it failed to inform
plaintiff of the likelihood that criminal charges would be
filed against him, that is not a basis on which the agreement
would be unenforceable. In particular, assuming the truth
of the allegations in the complaint, OYA nonetheless contends
that the misrepresentation alleged could not render
the agreement unenforceable. OYA points to a clause in the
agreement that states “neither the State of Oregon, OYA,
nor any of their agents or attorneys has made any representations
or promises concerning the terms or effects of this
agreement other than those expressly set forth herein.” In
light of that provision, according to OYA, “plaintiff cannot
argue that defendants affirmatively made any promises to
him relating to the conduct of the criminal investigation.”
We are unpersuaded by OYA’s argument that, as a
matter of law, the disclaimer clause in the settlement agreement
precludes plaintiff from going forward on his contention
that the release should not be enforced because OYA’s
misrepresentations induced him to enter into the agreement.
A contract may be avoided on the basis of fraudulent representations
in the inducement despite a disclaimer clause
where the fraud complained of vitiates the entire transaction,
including the disclaimer clause. Wilkinson v. Carpenter,
276 Or 311, 318-19, 554 P2d 512 (1976) (citing Sharkey v.
3 Defendant does not claim that the release explicitly and unambiguously
released fraud in the inducement claims. See Lindgren v. Berg, 307 Or 659, 772
P2d 1336 (1989) (a sufficiently broad and unambiguous release could bar a claim
for fraud in the inducement of the release).
Cite as 270 Or App 373 (2015) 381
Burlingame Co., 131 Or 185, 282 P 546 (1929)); id. at 319
(where a party waived reliance on any previous representations
by contractual disclaimer, absent a showing of actual
fraud, the party could not avoid the effect of the disclaimer);
see also Bodenhamer v. Patterson, 278 Or 367, 370-73, 563
P2d 1212 (1977) (a party who was induced to enter into a
contract by a material misrepresentation on which the party
relied may rescind the contract even though the contract contains
a disclaimer clause expressly disclaiming reliance on
“any representations, warranties, guarantees or covenants”
by the other party). Again, plaintiff alleged that, although
OYA knew that plaintiff would likely be criminally charged
as a result of events leading to his termination and OYA,
indeed, encouraged the prosecution, it both failed to disclose
that information to plaintiff and affirmatively represented
to him during settlement discussions that he would have
no further legal issues with respect to those events. Thus,
plaintiff’s pleadings alleged that OYA fraudulently induced
plaintiff to enter into the agreement.
OYA, nonetheless, asserts that, even accepting
plaintiff’s allegations as true, any misrepresentation “about
whether criminal charges would be filed was not a fact
material to the resolution of the civil claims between these
parties.” In other words, OYA asserts that, even if there was
a misrepresentation, that misrepresentation was not material
and, therefore, as a matter of law, could not be a basis
to rescind the settlement agreement. “A misrepresentation
is material where it would be likely to affect the conduct of
a reasonable [person] with reference to a transaction with
another person.” Millikin v. Green, 283 Or 283, 285, 583 P2d
548 (1978). Determinations of materiality are “generally
committed to the trier of fact.” OPERB v. Simat, Helliesen &
Eichner, 191 Or App 408, 436, 83 P3d 350 (2004), rev withdrawn,
340 Or 411 (2006); see Everts v. Holtmann, 64 Or App
145, 151-52, 667 P2d 1028, rev den, 296 Or 120 (1983) (materiality
may be resolved as a matter of law only if reasonable
minds could not differ).
Here, plaintiff asserted that the misrepresentation
was material. He alleged that he was assured that, after
entering into the settlement with OYA, he would not have
any further legal issues and, had he known that there would
382 Teegarden v. Oregon Youth Authority
likely be criminal charges as a result of events leading to
his termination—charges that he alleged were encouraged
by OYA—he would not have entered into the agreement. We
cannot say that no reasonable person would consider the
alleged misrepresentation to be material. Accordingly, we
reject OYA’s contention that, as a matter of law, the misrepresentation
was not material and could not be a basis to
conclude that the release is unenforceable. In light of those
conclusions, the trial court erred in concluding on the pleadings
that the release was enforceable, despite plaintiff’s
assertions that his execution of the settlement agreement
was induced by material misrepresentations on the part of
OYA.
Furthermore, the trial court was incorrect in concluding
that, as a matter of law, the release contained in
the settlement agreement precluded all of plaintiff’s claims.
Specifically, the court could not dismiss plaintiff’s claims for
malicious prosecution and intentional interference with a
prospective economic relationship on the basis of the agreement.
As noted, plaintiff asserts that his claims for malicious
prosecution and intentional interference with a prospective
economic relationship should not have been dismissed based
on the settlement agreement “because the conduct and facts
alleged in Plaintiff’s complaint occurred after the execution
of the settlement agreement and were based on unrelated
operative facts.” According to plaintiff, although he “agreed
to drop his grievance and release OYA from liability related
to his employment,” he did not “release future tort liability
for harm when the facts that give rise to the claims had
not yet occurred.” Furthermore, he asserts that a contractual
provision in which one party “agrees that another party
will be exempted from future tort liability for harm caused
intentionally or recklessly is void as against public policy.”
OYA responds that, as to the malicious prosecution and
intentional interference claims, “the facts underlying the
[criminal] charges were known to the parties prior to execution
of the settlement agreement, and plaintiff released
all ‘potential claims’ relating to them. Thus, the settlement
agreement is a defense to those claims.” Accordingly, the
parties agree that the release of “potential claims” in the
agreement relates to liability for facts that existed at the
Cite as 270 Or App 373 (2015) 383
time of the agreement and does not relate to future torts
where the facts that give rise to the claims had not yet
occurred. OYA asserts that the circumstances out of which
these claims arise were known to the parties at the time of
the agreement.4
Again, the settlement agreement states that plaintiff
was dismissed and filed a grievance of that action and
that the parties wish “to resolve [plaintiff’s] grievance on
mutually satisfactory terms without further hearing or litigation
of any kind.” It further provides that the “Agreement
constitutes the good faith resolution of all claims or potential
claims grievant may have against the State and OYA[.]”
(Emphasis added.) Thus, the agreement does not purport
to (and the parties do not contend that it does) release OYA
from liability for future intentional torts for which the
underlying facts have not yet occurred.
As noted, to obtain judgment on the pleadings on
those claims, OYA had the burden to establish that, assuming
the truth of the allegations in the complaint, it was,
nonetheless, entitled to prevail. However, the complaint
alleges that, after the parties entered into the settlement
agreement, criminal charges were brought against plaintiff
and those charges were resolved in his favor, and also that,
as a result of the charges, he was terminated from employment
with ODFW.
The elements of a malicious prosecution claim are
“ ‘(1) the institution or continuation of the original criminal
proceedings; (2) by or at the insistence of the defendant;
(3) termination of such proceedings in the plaintiff’s favor;
(4) malice in instituting the proceedings; (5) lack of probable
cause for the proceeding; and (6) injury or damage
because of the prosecution.’ ”
Blandino v. Fischel, 179 Or App 185, 190-91, 39 P3d 258,
rev den, 334 Or 492 (2002) (quoting Rose (Betty) v. Whitbeck,
277 Or 791, 795, 562 P2d 188, modified on other grounds,
4 Given the parties’ agreement on the operative extent of the release provision,
we need not decide whether a release of future, unknown claims could be
enforced. See Patterson v. American Medical Systems, Inc., 141 Or App 50, 55,
916 P2d 881, rev den, 324 Or 229 (1996) (“It is axiomatic that a release cannot be
construed to include claims not within the contemplation of the parties.”).
384 Teegarden v. Oregon Youth Authority
278 Or 463, 564 P2d 671 (1977)). Thus, plaintiff’s claim for
malicious prosecution was necessarily predicated on the
institution and resolution of criminal proceedings against
him and, at the very least, there are factual issues regarding
when that occurred. Accordingly, the trial court erred
in concluding, based on the pleadings, that, as a matter of
law, the release contained in the settlement agreement precluded
plaintiff’s malicious prosecution claim.
Similarly, an intentional interference claim consists
of the following elements:
“(1) the existence of a professional or business relationship
(which could include, e.g., a contract or prospective economic
advantage), (2) intentional interference with that
relationship, (3) by a third party, (4) accomplished through
improper means or for an improper purpose, (5) a causal
effect between the interference and damage to the economic
relationship, and (6) damages.”
McGanty v. Staudenraus, 321 Or 532, 535, 901 P2d 841
(1995). Plaintiff alleged here that OYA intentionally interfered
with his employment (and prospective employment)
by encouraging and participating in the criminal charges
and their prosecution. As discussed above, according to the
complaint, plaintiff was not criminally charged until after
execution of the settlement agreement. Accordingly, the
trial court erred in concluding, as a matter of law, that the
release contained in the settlement agreement precluded
plaintiff’s intentional interference claim.
For those reasons, we agree with plaintiff that the
trial court incorrectly granted judgment on the pleadings
based on the settlement agreement. Accepting the truth of
the allegations in the complaint, OYA was not entitled to prevail
as a matter of law on the issues of (1) the enforceability
of the release or (2) whether the release precluded plaintiff’s
malicious prosecution and intentional interference claims.
For those reasons, OYA was not entitled to judgment on the
pleadings on any of plaintiff’s claims.
Finally, we note, in any event, that the trial court
erred when it dismissed the claim for declaratory relief. “A
claim for declaratory relief may be dismissed only if there
is no justiciable controversy. If there is such a justiciable
Cite as 270 Or App 373 (2015) 385
controversy, the court must dispose of the matter by a judgment
containing a declaration as to the matter in dispute.”
Advance Resorts of America, Inc. v. City of Wheeler, 141
Or App 166, 180, 917 P2d 61, rev den, 324 Or 322 (1996)
(internal citations omitted) (addressing dismissal of claim
for declaratory relief in summary judgment context). That
may be done, where appropriate, in the context of granting
a judgment on the pleadings, but the end result still must be
a judgment declaring the rights of the parties, not a judgment
of dismissal. Here, OYA did not (and does not) contend
that the claim for declaratory relief did not involve a
justiciable controversy. Instead, as noted, it asserts that the
settlement agreement was valid and enforceable. However,
that is not a basis on which the trial court could dismiss
the claim for declaratory relief. Instead, because there was
a justiciable controversy, the court could dispose of the claim
for declaratory relief only by entering a judgment containing
a declaration regarding the validity and enforceability of
the agreement.

Outcome: Reversed and remanded.

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Defendant's Experts:

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