Opinion
Case No. 3:18-cv-00023-SB
06-10-2019
QUATAMA PARK TOWNHOMES OWNERS ASSOCIATION, an Oregon nonprofit corporation, Plaintiff, v. RBC REAL ESTATE FINANCE, INC., a foreign corporation; LAMPLIGHT CAPITAL & ASSET MANAGEMENT, LLC, a Texas limited liability company; DECATUR ADVISORS LLC, a California limited liability company; SCOTT MCFERRAN, an individual; LAURA WILSON, an individual; DARON ANDERSON, an individual, Defendants.
FINDINGS AND RECOMMENDATION
BECKERMAN, U.S. Magistrate Judge.
Plaintiff Quatama Park Townhomes Owners Association (the "Association") moves for leave to file an amended complaint to correct typographical errors, make certain allegations more definite and certain, and add a claim for punitive damages against defendants RBC Real Estate Finance, Inc. ("RBC"), Lamplight Capital & Asset Management, LLC ("Lamplight"), Laura Wilson ("Wilson"), Scott McFerran ("McFerran"), and Daron Anderson ("Anderson") (collectively, "Defendants"). (Mot. for Leave at 2-4.) Defendants oppose the Association's proposed claim for punitive damages, arguing that it is futile, frivolous, made in bad faith, and will result in undue prejudice. (ECF Nos. 32, 33, and 34.) The Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1332. For the reasons that follow, the Court recommends that the district judge grant the Association's motion for leave to file an amended complaint.
The Association is not seeking punitive damages against defendant Decatur Advisors, LLC ("Decatur"), and Decatur has not filed an opposition to the Association's motion.
BACKGROUND
This litigation arises from a dispute regarding alleged construction defects at Quatama Park Townhomes ("Quatama Park"), a planned community located in Washington County, Oregon. As relevant here, the Association alleges that Defendants were aware of serious construction defects at Quatama Park that could lead to significant damage, but failed to pursue legal action against the original developers in order to protect their own business interests, and failed to disclose and lied about the defects to the Association and its homeowners.
ANALYSIS
I. STANDARD OF REVIEW
"Whether to grant leave to amend is committed to the sound discretion of the district court." United Bhd. of Carpenters & Joiners of Am. v. Bldg. & Constr. Trades Dep't, AFL-CIO, 770 F.3d 834, 845 (9th Cir. 2014). The Ninth Circuit has emphasized that "[t]he standard for granting leave to amend is generous," United States v. Corinthian Colls., 655 F.3d 984, 995 (9th Cir. 2011) (citation omitted), because the purpose of Federal Rule of Civil Procedure 15(a) is "to facilitate decision on the merits, rather than on the pleadings or technicalities." Novak v. United States, 795 F.3d 1012, 1020 (9th Cir. 2015) (citation omitted). Courts generally consider five factors under Rule 15(a): "bad faith, undue delay, prejudice to the opposing party, futility of the amendment, and whether the plaintiff has previously amended the complaint." Corinthian Colls., 655 F.3d at 995.
The test for futility is whether the amendment can survive a motion to dismiss under Rule 12(b)(6). See Nordyke v. King, 644 F.3d 776, 788 n.12 (9th Cir. 2011) ("A proposed amended complaint is futile if it would be immediately 'subject to dismissal.'") (quotation omitted), aff'd on reh'g en banc on other grounds, 681 F.3d 1041 (9th Cir. 2012). "Thus, the 'proper test to be applied when determining the legal sufficiency of a proposed amendment is identical to the one used when considering the sufficiency of a pleading challenged under Rule 12(b)(6).'" Id. (citation omitted). To survive a Rule 12(b)(6) "motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
II. DISCUSSION
Applying Twombly and Iqbal here, the Court finds that the Association's proposed claim for punitive damages is not futile, and is therefore not frivolous or made in bad faith and will not result in any undue prejudice to Defendants.
Punitive damages are recoverable under Oregon law if a plaintiff proves by clear and convincing evidence that a defendant acted "with malice or has shown a reckless and outrageous indifference to a highly unreasonable risk of harm and has acted with a conscious indifference to the health, safety and welfare of others." Or. Rev. Stat. § 31.730(1). "The Oregon Supreme Court has clarified that 'malice' means 'nothing more than a wrongful act done intentionally without just cause or excuse.'" Hedum v. Starbucks Corp., 546 F. Supp. 2d 1017, 1028 (D. Or. 2008) (quoting Friendship Auto Sales, Inc. v. Bank of Willamette Valley, 300 Or. 522, 535 (Or. 1986)). "The prerequisite for imposition of punitive damages is a degree of culpability greater than inattention or simple negligence." Badger v. Paulson Inv. Co., 311 Or. 14, 28 (1991); see also Boger v. Norris & Stevens, Inc., 109 Or. App. 90, 95 (1991) (holding that while negligence alone will not support a punitive damage award, negligence plus "aggravated misconduct" will suffice).
Although the Association does not plead specific facts to support punitive damages in its proposed claim alleging that Defendants "acted with malice or ha[ve] shown a reckless and outrageous indifference to a highly unreasonable risk of harm and ha[ve] acted with a conscious indifference to the health, safety and welfare of [the Association] and [the Association's] member-owners" (Mot. for Leave at 25-26), the proposed punitive damages claim incorporates by reference several prior paragraphs of the complaint. In its reply, the Association explained that its punitive damage claim relies on its allegations that Defendants were aware of serious construction defects at Quatama Park that could lead to significant damage, but failed to pursue legal action against the original developers in order to protect their own business interests, and failed to disclose and lied about the defects to the Association and its homeowners. Construing those facts in the light most favorable to the Association and applying Rule 15(a)'s liberal standard for amendment, the Court finds that the Association has sufficiently alleged wrongful acts done intentionally without just cause or excuse and facts supporting a degree of culpability greater than inattention or simple negligence, and therefore the Association's proposed claim for punitive damages is not futile. See Bogle v. Clackamas Cnty., No. 3:15-cv-00013-SI, 2016 WL 3102051, at *3 (D. Or. June 1, 2016) ("[T]he Court declines to find that [the plaintiff's] proposed amendment requesting punitive damages in his First Claim is futile."); Schultz v. Wells Fargo Bank, Nat'l Ass'n, No. 3:11-cv-1467-SI, 2013 WL 1826575, at *7 (D. Or. Apr. 30, 2013) ("Because [the plaintiff] has met the liberal pleading and amendment standards established by Federal Rules of Civil Procedure 8 and 15(a), [the defendant's futility] argument is unpersuasive, and Plaintiff's motion [for leave to amend the complaint] is granted with respect to the proposed claim for punitive damages."); Fulton v. Advantage Sales & Mktg, LLC, No. 3:11-cv-01050-MO, 2012 WL 5182805, at *2 (D. Or. Oct. 18, 2012) ("Construing the facts in the proposed amended complaint in the light most favorable to [the plaintiff], it is plausible a jury could find that Defendants acted with the necessary culpability to award punitive damages."); Eastwood v. Am. Family Mut. Ins. Co., No. 05-1579-HA, 2006 WL 2934260, at *5 (D. Or. Oct. 12, 2006) (granting the plaintiff's motion for leave to file amended complaint to add punitive damages claim in action alleging breach of fiduciary duty under Oregon law); cf. Benson Tower Condo. Owners Ass'n v. Victaulic Co., 22 F. Supp. 3d 1126, 1135 n.4 (D. Or. 2014) (denying motion to strike plaintiff condominium association's request for punitive damages in connection with its fraud claim).
Defendants provide no legal authority for the Court to evaluate at the pleading stage whether the amount of punitive damages the Association seeks is excessive, and the Court declines to do so.
CONCLUSION
For the reasons stated above, the Court recommends that the district judge GRANT the Association's Motion for Leave to File First Amended Complaint (ECF No. 30).
SCHEDULING ORDER
The Court will refer its Findings and Recommendation to a district judge. Objections, if any, are due within fourteen (14) days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen (14) days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.
DATED this 10th day of June, 2019.
/s/_________
STACIE F. BECKERMAN
United States Magistrate Judge