Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP
Docket: 9708-06108; A107366
Court: Court of Appeals of Oregon; August 29, 2001; Oregon; State Appellate Court
The trial court granted two motions for partial summary judgment from the defendant, an accounting firm, effectively eliminating the primary damage claims of the plaintiff, a corporation. The plaintiff appealed this final judgment, contesting the court's decisions. The plaintiff had retained the defendant for accounting services, and in 1994, a subsidiary conducted a stock sale based on the defendant's advice, which incorrectly classified the sale proceeds as a gain on financial statements from 1994 to 1995. In early 1996, as the plaintiff prepared for a stock and debt offering, the defendant discovered this misclassification and refused to support the offering until the SEC approved the treatment of the proceeds. The SEC subsequently required the plaintiff to restate its 1994 financial statements, delaying the public offering by over six weeks and resulting in an estimated loss of $35 million due to unfavorable market conditions at the time of the delayed offering.
Additionally, the plaintiff sought approximately $12 million in tax damages, arguing that any recovery for the stock price differential would be taxable, unlike the non-taxable nature of the stock offering proceeds. The trial court ruled against the plaintiff on this issue, determining that such claims could not be pursued based on federal law precedents. The court also granted summary judgment on the claim regarding the difference in proceeds from the offering, applying the "loss causation" doctrine from federal securities law, which limits liability to losses directly caused by the defendant's conduct rather than market fluctuations. The appellate court affirmed in part and reversed in part, siding with the trial court's interpretation of the law regarding both claims.
The doctrine of 'loss causation' suggests that a defendant is not responsible for ancillary losses from market fluctuations unless their wrongful act directly contributes to the loss in value or impacts the timing of a market transaction. Under federal law, if a broker neglects to execute a sell order just before a market drop, they could still be liable for the customer's losses due to that negligence. In Oregon tort law, similar principles apply, allowing recovery for damages linked to a defendant's negligent acts that foreseeably impact a plaintiff's market activities. The summary judgment must consider facts favorably for the nonmoving party, indicating that the plaintiff's claim of damages resulting from the defendant's negligence is a triable issue. The plaintiff's damages, resulting from a delay in securities sale due to alleged malpractice, are recoverable since they stem directly from the defendant's actions. This aligns with Oregon negligence law, which holds parties liable for harm caused by their negligent conduct if it is a substantial factor in the resulting damages. If the plaintiff demonstrates the defendant's negligence caused a delay leading to reduced sale proceeds, a jury could find the defendant liable for those losses.
