Kurtiss Teegarden v. State of Orgeon

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.

Reversed and remanded.