Marshall v. PricewaterhouseCoopers, LLP , 316 Or. App. 416 ( 2021 )

416
Argued and submitted October 15, 2020; reversed and remanded as to
plaintiffs’ negligence claim, otherwise affirmed December 15, 2021
John M. MARSHALL
and Karen M. Marshall, individuals;
Patsy L. Marshall, an individual;
Patsy L. Marshall, as Personal Representative
of the Estate of Richard L. Marshall, Deceased;
and Marshall Associated, LLC,
an Oregon limited liability corporation,
Plaintiffs-Appellants,
v.
PRICEWATERHOUSECOOPERS, LLP,
a limited liability partnership,
Defendant,
and
SCHWABE WILLIAMSON & WYATT, P. C.,
an Oregon professional corporation,
Defendant-Respondent.
Multnomah County Circuit Court
17CV11907; A169635
505 P3d 40
In this complex civil case, plaintiffs appeal from a limited judgment in
favor of plaintiffs’ former law firm, defendant Schwabe Williamson & Wyatt,
P.C. (Schwabe). On appeal, plaintiffs raise two assignments of error contend-
ing that the trial court erred in granting Schwabe’s motion to dismiss plain-
tiffs’ negligence claim as barred by the statute of repose in ORS 12.115(1). In a
cross-assignment, Schwabe contends that the trial court erred in rejecting its
motion to dismiss plaintiffs’ negligence claim based on issue preclusion grounds.
Held: The trial court erred in applying ORS 12.115(1) to plaintiffs’ negligence
claim, because ORS 12.115(1) is applicable to actions that seek recovery for “neg-
ligent injury to person or property.” Plaintiffs’ negligence claim only sought recov-
ery for economic loss. As to Schwabe’s cross-assignment of error, the trial court
did not err in denying Schwabe’s motion to dismiss on issue preclusion grounds,
because the factual issues decided in the prior litigation were not identical to
those raised in plaintiffs’ negligence claim.
Reversed and remanded as to plaintiffs’ negligence claim; otherwise affirmed.
Jerry B. Hodson, Judge.
Scott Hessell, Illinois, argued the cause for appellants.
Also on the opening brief were Sperling & Slater, P.C., Jeff
Cite as 316 Or App 416 (2021) 417
S. Pitzer, Peter M. Grabiel, and Pitzer Law. Also on the com-
bined reply and answering on cross-assignment brief were
Sperling & Slater, P.C., John J. Dunbar, and Dunbar Law
LLC.
Janet M. Schroer argued the cause for respondent. Also
on the combined answering and cross-assignment of error
brief was Hart Wagner LLP. Also on the reply on cross-
assignment of error brief were Holly E. Pettit and Hart
Wagner LLP.
Before Shorr, Presiding Judge, and Powers, Judge, and
Landau, Senior Judge.
SHORR, P. J.
Reversed and remanded as to plaintiffs’ negligence claim;
otherwise affirmed.
418 Marshall v. PricewaterhouseCoopers, LLP
SHORR, P. J.
In this complex civil case, plaintiffs appeal from
a limited judgment in favor of plaintiffs’ former law firm,
defendant Schwabe Williamson & Wyatt, P.C. (Schwabe). On
appeal, plaintiffs raise two assignments of error contending
that the trial court erred in granting Schwabe’s motion to
dismiss plaintiffs’ negligence claim as barred by the statute
of repose in ORS 12.115(1). In a cross-assignment, Schwabe
contends that the trial court erred in rejecting its motion to
dismiss plaintiffs’ negligence claim based on issue preclu-
sion grounds. For the reasons that follow, we conclude that
the court erred in applying ORS 12.115(1) to plaintiffs’ neg-
ligence claim, but did not err in denying Schwabe’s motion to
dismiss on issue preclusion grounds. As a result, we reverse
and remand the judgment as to plaintiffs’ negligence claim.1
I. FACTUAL BACKGROUND
Because both plaintiffs’ first assignment of error
and Schwabe’s cross-assignment of error require us to
review the trial court’s rulings on Schwabe’s motions to dis-
miss, we take the facts from plaintiffs’ operative complaint
at the time of Schwabe’s motions to dismiss. Our review
“is limited to the face of the pleadings. In conducting that
review, we assume the truth of all allegations in the com-
plaint and give the plaintiff, as the nonmoving party, the
benefit of all favorable inferences that could be drawn from
those allegations.” Kelly v. Lessner, 224 Or App 31, 33, 197
P3d 52 (2008).2
1
Because we agree with the argument raised in plaintiffs’ first assignment
of error, that the trial court erred in applying ORS 12.115(1) to plaintiffs’ negli-
gence claim against Schwabe, we need not address plaintiffs’ second assignment
of error, which contends that, even if ORS 12.115(1) was applicable to plaintiffs’
claim, the trial court erred in concluding that ORS 12.115(1) barred the claim.
We also do not address the trial court’s dismissal of plaintiffs’ breach of con-
tract claim, which plaintiffs have not challenged on appeal.
2
Defendant contends that, “[g]iven [plaintiffs’] opportunity to replead facts
alleging negligent conduct within the statute of repose period and plaintiffs’
inability to do so,” “[p]laintiffs are not entitled to any inferences in their favor
regarding the facts alleged in the [operative complaint]” and asserts that we
“must assume that the [operative complaint] already alleges all facts favorable
to the plaintiffs.” Defendant fails to cite any case in which we, or the Oregon
Supreme Court, have modified our usual standard of review as to the facts in
such a way. We find no authority supporting such a modification either. As such,
we apply our usual standard of review.
Cite as 316 Or App 416 (2021) 419
We briefly summarize the relevant facts giving rise
to this litigation. Plaintiffs were the sole shareholders of
Marshall Associated Contractor Inc. (MAC), a heavy con-
struction corporation that, in 1982, was awarded a contract
to complete work on two separate projects in Utah. Disputes
over both projects led to a lengthy 20 years of litigation,
which finally ended in a 2002 court ruling awarding plain-
tiffs approximately $40 million.
Interested in minimizing the tax consequences
of that award, in June 2002, plaintiffs began negotiating
with a company called Fortrend that proposed to purchase
all of MAC’s stock and assume all its liabilities, including
the expected federal and state taxes associated with the
$40 million award.3 Plaintiffs’ complaint explains:
“Fortrend claimed, among other things, that MAC’s
remaining assets would facilitate Fortrend’s ‘debt-collection’
business, and that Fortrend would employ MAC’s tax lia-
bilities to legitimately offset tax deductions associated with
its debt-collection business. As a result, Fortrend said,
Plaintiffs would realize a greater net return on its invest-
ment in MAC than would otherwise be the case if MAC
simply distributed its assets to the shareholders.”
Plaintiffs engaged their usual attorneys from the
preceding 50 years, Schwabe, in spearheading an evaluation of
the proposed deal. Plaintiffs’ accountants, Pricewaterhouse-
Coopers (PwC), also participated in the evaluation.4 Specif-
ically, plaintiffs engaged Schwabe and PwC to examine all
legal and tax implications of the proposed transaction, advise
plaintiffs on whether the transaction complied with appli-
cable laws, and advise plaintiffs as to whether the trans-
action created a risk of greater tax liabilities beyond what
would be expected from a simple stock sale. Schwabe and
3
Ultimately, plaintiffs assert that MAC’s stock was purchased by Essex
Solutions Inc., an entity jointly owned by Fortrend and another company,
Midcoast. Plaintiffs’ advisors negotiated with representatives of Fortrend, Essex,
and Midcoast during the period in which the transaction was evaluated and con-
summated. For simplicity’s sake, we refer to the buyer in this transaction as
Fortrend, because the distinct roles played by those three involved entities are
not important to our analysis.
4
PwC is not a party to this appeal, and we explain its role in the case only to
the extent necessary to clarify the facts and address the parties’ arguments on
appeal.
420 Marshall v. PricewaterhouseCoopers, LLP
PwC also communicated and negotiated with Fortrend on
plaintiffs’ behalf and were tasked with handling all aspects
of consummating the deal if approved. Plaintiffs assert that
they “wanted to avoid any potential controversy or litiga-
tion,” informed their advisors of that position, and would
not have entered the transaction had they been advised
or believed that the transaction did not comply with the
law.
Schwabe and PwC proceeded to investigate the pro-
posed transaction. Plaintiffs assert that Schwabe quickly
identified a risk that the transaction could be challenged
as a fraudulent transfer in a bankruptcy proceeding, but
ultimately concluded that it was unlikely such a challenge
would be successful and did not inform plaintiffs of its
research. Plaintiffs also assert that Schwabe became aware
of a risk that, if Fortrend did not pay MAC’s taxes, plaintiffs
could be held liable for any unpaid tax liability as trans-
ferees, but did not believe such a challenge would be suc-
cessful and did not communicate their concerns to plaintiffs
at that time. In all, both advisors identified potential tax
risks associated with the transaction but viewed them as
“minimal.” Plaintiffs assert that Schwabe and PwC “both
recommended that [plaintiffs] go forward with the proposed
transaction.”
In January 2003, plaintiffs decided to go through
with the Fortrend transaction. Schwabe handled all aspects
of negotiating and consummating the transaction with
PwC’s assistance. Following the close of the transaction in
March 2003, both advisors continued to represent plaintiffs
in matters related to the transaction, its tax and account-
ing implications, and plaintiffs’ communications with the
IRS. Plaintiffs contend that, during that period, Schwabe
never advised plaintiffs that their earlier advice regarding
the transaction’s risks may have been flawed or that plain-
tiffs were at risk for additional tax liability. After closing the
transaction, Schwabe wrote to plaintiffs to summarize the
transaction and enclose its final bill, stating in part that it
believed that it was unlikely the transaction would be chal-
lenged as a fraudulent transfer and that any risk plaintiffs
faced was “minimal.”
Cite as 316 Or App 416 (2021) 421
Plaintiffs assert that they later discovered the Fortrend
transaction was an “improper tax-avoidance” mechanism
known as a “Midco” transaction. Although such transac-
tions were apparently marketed to shareholders as a legiti-
mate method for avoiding federal income taxes through the
1990s, in 2001 the IRS issued Notice 2001-16, which made
certain Midco transactions “listed transactions” subject to
IRS challenge and penalties. Intermediary Transactions
Tax Shelter, Notice 2001-16, 2001-1 CB 730 (2001). Plaintiffs
contend that Schwabe never advised them of Notice 2001-16
or the IRS’s position on similar transactions.
As a result of plaintiffs’ participation in the trans-
action, plaintiffs were subject to an IRS investigation that
in August 2011 resulted in a determination that plaintiffs
were liable to the IRS for over $20 million in back taxes,
penalties, and interest. In June 2016, the United States Tax
Court ruled that plaintiffs were responsible for the taxes,
penalties, and interest based on a theory of transferee tax
liability, concluding that plaintiffs had constructive knowl-
edge that MAC’s taxes would not be paid. Estate of Marshall
v. C.I.R., 111 TCM (CCH) 1579, 2016 WL 3460226 (2016),
aff’d sub nom Marshall v. C.I.R., 782 F Appx 565 (9th Cir
2019), cert den, ___ US ___, 140 S Ct 1270 (2020).
In March 2017, plaintiffs filed suit against advisors
PwC and Schwabe, alleging various claims including the
negligence claim at issue before us. Plaintiffs alleged that
Schwabe negligently advised plaintiffs in connection with
the Fortrend transaction, failed to communicate to them and
advise them of the relative risks and benefits of the transac-
tion, and failed to adequately protect plaintiffs’ interests. In
particular, plaintiffs contend that Schwabe failed to prop-
erly advise plaintiffs of the risk that the transaction was a
“listed transaction” that could be challenged by the IRS and
result in plaintiffs’ transferee liability for substantial taxes,
penalties, and interest. Plaintiffs contend that they would
not have proceeded with the transaction but for Schwabe’s
negligence. They claimed damages in the form of attorney
fees and costs associated with “deal[ing] with the IRS and
ODR claims of transfer tax liability,” fees paid to Schwabe
for its representation in the transaction, and the entirety of
plaintiffs’ assessed transferee liability.
422 Marshall v. PricewaterhouseCoopers, LLP
II. PLAINTIFFS’ FIRST ASSIGNMENT OF ERROR
We begin with a consideration of plaintiffs’ first
assignment of error, which asserts that the trial court erred
in granting Schwabe’s motion to dismiss on the grounds that
the statute of repose in ORS 12.115(1) applied to and barred
plaintiffs’ negligence claim against Schwabe. Having summa-
rized the factual background of the case, we turn to the proce-
dural facts relevant to plaintiffs’ first assignment of error.
A. Relevant Procedural History
Schwabe moved under ORCP 21 A(9) to dismiss
plaintiffs’ negligence claim as untimely. Schwabe contended
that the 10-year statute of ultimate repose contained in ORS
12.115(1) barred the claim, and cited Withers v. Milbank, 67
Or App 475, 678 P2d 770 (1984), for the proposition that ORS
12.115(1) applies to legal malpractice claims. Specifically,
Schwabe contended that “the alleged negligent conduct
occurred no later than March 7, 2003—the date the * * *
transaction closed.” Plaintiffs’ lawsuit was filed on March 21,
2017, over 14 years later. Plaintiffs opposed the motion,
arguing, in part, that “the ORS 12.115(1) statute of repose
does not apply to actions, like this one, seeking to recover for
exclusively economic losses.”
The trial court granted Schwabe’s motion to dismiss
plaintiffs’ negligence claim, concluding that ORS 12.115(1)
applied to the claim because it was a legal malpractice claim.
The court granted plaintiffs the opportunity to replead “an
act of negligence by Schwabe that occurred after March 21,
2007.” Plaintiffs declined to replead and this timely appeal
followed.
B. Analysis
Plaintiffs contend that the trial court erred in
granting Schwabe’s motion to dismiss plaintiffs’ negligence
claim on the grounds that ORS 12.115(1) barred the claim.
We review that ruling for legal error. Zsarko v. Angelozzi,
281 Or App 506, 508, 385 P3d 1239 (2016), rev den, 361 Or
312 (2017).
On appeal, plaintiffs reprise their arguments made
before the trial court. They contend that ORS 12.115(1)
Cite as 316 Or App 416 (2021) 423
does not apply to their negligence claim against Schwabe.
ORS 12.115(1) applies a 10-year repose period to “action[s]
for negligent injury to person or property,” while plain-
tiffs’ negligence claim against Schwabe, they contend, only
asserts a claim for financial losses. Plaintiffs cite Securities-
Intermountain v. Sunset Fuel, 289 Or 243, 611 P2d 1158(1980), a Supreme Court case interpreting “injuries to a per-
son or to property” in ORS 12.135(1) (1971), and Portland
Trailer & Equipment v. A-1 Freeman Moving, 166 Or App 651,
5 P3d 604, adh’d to as modified on recons, 168 Or App 654,
4 P3d 741 (2000) (Portland Trailer), a case from this court
interpreting “injury to person or property” in ORCP 4 C.
Both cases, plaintiffs claim, support their contentions that
economic or financial losses are distinct in kind from per-
sonal or property injuries and that ORS 12.115(1) “does not
include the mutually exclusive term ‘economic loss.’ ”
In turn, defendant asserts that the trial court did
not err in determining that ORS 12.115(1) applies to legal
malpractice claims such as the one at issue here. In sup-
port of that contention, defendant cites Davis v. Somers, 140
Or App 567, 915 P2d 1047, rev den, 324 Or 78 (1996), and
Withers, 67 Or App 475, two of our past cases that applied
ORS 12.115(1) to legal malpractice claims. Defendant
argues that Securities-Intermountain and Portland Trailer
are irrelevant because they interpreted other statutes, not
ORS 12.115. And while defendant concedes that there is an
established distinction between injuries to “person or prop-
erty” and economic losses, it contends that that distinction
is only relevant to the duty of care in negligence actions, “not
* * * the interpretation of statutes imposing statutes of lim-
itation or repose on negligence claims.” Finally, defendant
asserts that legislative history supports that ORS 12.115
was intended to encompass all tort claims, including legal
malpractice claims.
In reply, plaintiffs contend that defendant miscon-
strues their argument. They do not argue that ORS 12.115
never applies to legal malpractice claims; instead, they only
argue that ORS 12.115 does not apply to this particular legal
malpractice claim that seeks to recover for only economic
loss. In plaintiffs’ view, ORS 12.115(1) turns on the type
of injury and not on the theory of legal liability. Further,
424 Marshall v. PricewaterhouseCoopers, LLP
plaintiffs contend that Withers and Davis do not control here
because the claims in Withers and Davis implicated prop-
erty rights; their claim, they contend, does not. And, to the
extent that the legislative history surrounding ORS 12.115
may appear to support defendant’s position, plaintiffs con-
tend, such an interpretation is in conflict with the plain text
of the statute.
Thus, the question before us is whether ORS 12.115(1)
applies to plaintiffs’ legal malpractice claim, which seeks to
recover for the economic losses plaintiffs suffered as a result
of the Fortrend transaction. That presents a question of stat-
utory construction for which we examine the statute’s text
in context, as well as legislative history if relevant. State
v. Gaines, 346 Or 160, 171-73, 206 P3d 1042 (2009) (outlin-
ing the methodology). “The pertinent context includes other
provisions of the same statute and other related statutes,
as well as the preexisting common law and the statutory
framework within which the statute was enacted.” Bell v.
Tri-Met, 353 Or 535, 540, 301 P3d 901 (2013) (internal quo-
tation marks omitted).
ORS 12.115 was passed in response to Berry v.
Branner, 245 Or 307, 421 P2d 996 (1966), where the Supreme
Court held that “the statute of limitations in a medical mal-
practice case, involving a foreign object left in the body cavity
of a surgery patient, did not commence to run until such time
as the object was discovered, or, in the exercise of reasonable
care, should have been discovered by the patient.” Josephs v.
Burns & Bear, 260 Or 493, 496, 491 P2d 203 (1971) (summa-
rizing Berry). The legislature responded to Berry by enact-
ing Oregon Laws 1967, chapter 406, section 1, which codi-
fied the Berry discovery rule and enacted a repose period for
medical malpractice actions that required that such actions
be commenced within an overall seven-year period “from
the time of the treatment, omission or operation upon which
the action was based,” regardless of whether or when the
injury was actually discovered. Josephs, 260 Or at 497. The
legislature also enacted Oregon Laws 1967, chapter 406,
section 2, which became ORS 12.115. ORS 12.115(1), which
has never been amended, states that “[i]n no event shall any
action for negligent injury to person or property of another be
commenced more than 10 years from the date of the act or
Cite as 316 Or App 416 (2021) 425
omission complained of.” (Emphasis added.) Four years later
in Josephs, the Supreme Court construed ORS 12.115(1) for
the first time and held that it barred an action that alleged
that architect and engineer negligence had caused a roof to
collapse 17 years after its construction. 260 Or at 495-96.
In later years, other statutes of repose were passed
to apply to other particular types of actions. See, e.g., ORS
12.135 (six- or 10-year repose period for actions arising from
construction, alteration, or repair of improvements to real
property; enacted in 1971); ORS 12.280 (10-year repose
period for actions arising out of the survey of real property;
enacted in 1995). However, ORS 12.115(1) remained the
statute governing actions for negligent injuries to persons
or property generally that were not governed by other laws.
See, e.g., Shell v. Schollander Companies, Inc., 265 Or App
624, 633, 336 P3d 569 (2014), aff’d, 358 Or 552, 369 P3d 1101
(2016).
We have applied ORS 12.115(1) to legal malpractice
claims. We first did so in Withers, a case involving a claim
against an attorney for alleged negligence in the drafting of
an antenuptial agreement. 67 Or App at 477. Although the
spouses had allegedly intended for the agreement to apply
in the event of either divorce or death, the final agreement
failed to “provide for the contingency of divorce.” Id. The mar-
riage was subsequently dissolved, and a decree was entered
“providing for certain payments to be made by plaintiff to
his former wife and for a division of the parties’ property.”
Id. Shortly thereafter, the plaintiff filed a legal malpractice
action seeking $290,000 in damages.5 Id. We concluded that
“[t]here is no reason to treat legal malpractice actions differ-
ently than other types of negligence” and determined that
ORS 12.115(1) barred the claim. Id. at 478. We did not ana-
lyze the statute’s “injury to person or property” language,
however.
5
Our opinion in Withers did not clarify the nature of the $290,000 in dam-
ages sought by the plaintiff. The damages may have related to tangible property
the plaintiff lost in the property division, reimbursement for the “payments” he
had been ordered to pay his former wife, or both. Likewise, it is unclear whether
the “certain payments” plaintiff had been ordered to pay as part of the dissolution
decree took the form of spousal support or were an aspect of the property divi-
sion itself. Regardless, the plaintiff’s legal malpractice action at issue in Withers
related to the division of property implemented in the dissolution decree.
426 Marshall v. PricewaterhouseCoopers, LLP
We again applied ORS 12.115(1) to another legal mal-
practice claim in Davis, 140 Or App 567. In that case, the
plaintiffs asserted that they were the intended residuary
beneficiaries of a will, but that the drafting attorney had
negligently failed to include any residuary clause. Id. Unlike
in Withers, we briefly addressed the statute’s “injury to per-
son or property” language:
“Plaintiffs next argue that ORS 12.115(1) does not
apply because theirs is not an action for ‘injury to person or
property,’ but rather, theirs is an action for injury to their
‘rights’ under the intended disposition of [the testator’s]
estate. Their ‘rights,’ however, relate to the ownership and
disposition of property. The argument has no merit.”
Id. at 571.
Having reviewed the plain text of ORS 12.115(1), as
well as our prior opinions in Withers and Davis, we conclude
that, despite defendant’s arguments to the contrary, those
cases do not stand for the proposition that ORS 12.115(1)
applies to all legal malpractice actions regardless of the type
of injury claimed. First, the express terms of ORS 12.115
make it applicable to actions for “negligent injury to person
or property of another.” That language does not describe any
conceivable legal malpractice claim regardless of what type
of injury it seeks recovery for—to state the obvious, it is lim-
ited to “injur[ies] to person or property.” If it applied to all
legal malpractice claims regardless of injury, the inclusion
of the phrase “injury to person or property” would be wholly
superfluous. See, e.g., State v. Stamper, 197 Or App 413, 418,
106 P3d 172, rev den, 339 Or 230 (2005) (“[W]e assume that
the legislature did not intend any portion of its enactments
to be meaningless surplusage.”). Second, Withers and Davis
concluded that ORS 12.115(1) applied to the legal malprac-
tice claims at issue in those cases—claims which asserted
injuries to property resulting from the negligent draft-
ing of an antenuptial agreement and a will, respectively.
Although our opinion in Withers was brief in its description
of the claim, it is nevertheless clear that the asserted injury
was the unintended distribution of property that resulted
when the marriage dissolution was finalized. In Davis, the
asserted injury was, similarly, the unintended distribution
of property that resulted when the will was probated, and we
Cite as 316 Or App 416 (2021) 427
stated affirmatively that such a claim asserted an “injury to
property” within the purview of ORS 12.115(1) because it
“relate[d] to the ownership and disposition of property.” 140
Or App at 571. At bottom, both Withers and Davis involved
injuries to property, or at least injuries to an interest in
property. Those rulings, while informative, provide limited
guidance for whether ORS 12.115(1) applies when a legal
malpractice claim asserts a purely financial loss that does
not appear to involve physical damage to tangible property
or implicate the ownership or disposition of property. For
those reasons, further analysis is required to determine
whether ORS 12.115(1) applies to plaintiffs’ claim.
Plaintiffs correctly note that the “injury to person
or property” language adopted in ORS 12.115(1) has been
used in other statutes since the enactment of ORS 12.115,
and we agree that it is appropriate to consider those statutes
and any prior constructions as instructive to our construc-
tion of ORS 12.115(1). Of particular import is the Supreme
Court’s opinion in Securities-Intermountain, 289 Or 243, in
which the court construed ORS 12.135(1) (1971),6 the stat-
ute then setting limitation and repose periods for actions
“for injuries to a person or to property” arising from the
construction, alteration, or repair of real property improve-
ments. The court noted that, unlike the statutes of limita-
tions delineated in ORS 12.080(1) and ORS 12.110(1), ORS
12.135(1) “does not define its coverage by the legal source or
nature of the liability on which the action is founded but on
the character of the injuries incurred in a specified context.”
Id. at 247. The court then turned to the question of “whether
ORS 12.135 applies to a claim of financial losses from
alleged breaches of contract by the persons so engaged.” Id.Considering the case law interpreting the statute and the
statute’s legislative history, the court concluded that
“the phrase ‘injuries to * * * person[s] or to property’ was
thought to encompass what is commonly meant by ‘per-
sonal injuries,’ i.e. bodily injuries including their psychic
consequences, and physical damage to existing tangible
6
ORS 12.135(1) has been amended numerous times since the Supreme
Court’s discussion of the statute in Securities-Intermountain. However, those
amendments are not relevant here, and we cite the 1971 version throughout our
discussion.
428 Marshall v. PricewaterhouseCoopers, LLP
property, but not financial losses such as a reduced value
of the completed project due to the unsatisfactory perfor-
mance of the work or the added cost of satisfactory comple-
tion or replacement.”
Id. at 251.7 The court eventually concluded that the statute
of limitations in ORS 12.080(1), not ORS 12.135, applied to
that action. Id. at 262.
We applied a similar analysis in Portland Trailer,
166 Or App at 655. In that case, the plaintiffs had initi-
ated an action for wrongful use of a civil proceeding to
recover attorney fees associated with defending a separate
Oklahoma action. Id. at 654. The trial court had granted the
defendants’ motion to dismiss for want of personal jurisdic-
tion. Id. On appeal, we considered whether ORCP 4 estab-
lished the defendants’ jurisdiction in Oregon. Id.As relevant here, we considered whether the plain-
tiffs in Portland Trailer had established personal jurisdic-
tion under ORCP 4 C, which, since 1978, has provided that
an Oregon court has jurisdiction over a party “[i]n any action
claiming injury to person or property within or without this
state arising out of an act or omission within this state by
the defendant.” Id. We concluded that the plaintiffs had not
established jurisdiction pursuant to that subsection:
“ORCP 4 C applies only to claims for personal injury
or injury to property. The rule does not mention damages
arising from economic loss. Although not defined in ORCP
4, each of the foregoing types of damage has a well estab-
lished and mutually exclusive legal meaning. The term
‘economic loss’ describes financial losses such as indebted-
ness incurred and return of monies paid, as distinguished
from damages for injury to person or property. Plaintiffs’
complaint does not allege damages for personal injury
or injury to property. Instead, it only seeks damages for
7
We note, briefly, that there may appear to be some inconsistencies in
how Oregon courts have defined “injury to property.” Compare, e.g., Securities-
Intermountain, 289 Or at 251 (defining injury to property as “physical damage
to existing tangible property”), with Davis, 140 Or App at 571 (concluding that
injury to the plaintiffs’ rights under the intended disposition of a testator’s estate
was an “injury to property” because the rights “relate[d] to the ownership and
disposition of property”). However, those varying definitions do not affect our
analysis in the instant case. As we explain below, plaintiffs’ legal malpractice
claim does not assert an “injury to property” under either definition.
Cite as 316 Or App 416 (2021) 429
economic loss in the form of attorney fees incurred as a
result of defendants’ conduct.”
Id. at 655 (emphasis in original; internal citations omitted).
Both Securities-Intermountain and Portland Trailer
relied on the distinction between purely economic loss and
injuries to persons or property that has long been the basis
of the economic loss doctrine, which “bars a party that has
suffered a purely economic loss from bringing a negligence
action against the party that caused the loss, unless there
is a special relationship between the parties.” Harris v.
Suniga, 344 Or 301, 305, 307, 180 P3d 12 (2008) (explaining
the common law origins of the economic loss doctrine).8
“For purposes of the economic loss doctrine, ‘economic
losses’ means ‘financial losses,’ as distinguished from ‘dam-
ages for injury to person or property.’ Harris, 344 Or at 306(citation omitted). Some examples of purely economic losses
include a reduced stock price, a monetary gift to a benefi-
ciary, a debt incurred, and return of monies paid. Id. at 310.
By contrast, when negligence results in personal injury or
property damage, the loss is not ‘purely economic’—and
the economic loss doctrine does not apply—even though
the plaintiff may seek compensation for resulting economic
losses, such as medical expenses or repair costs. See id.(‘Every physical injury to property can be characterized as
a species of “economic loss” for the property owner, because
every injury diminishes the financial value of the property
owner’s assets,’ but ‘the law ordinarily allows the owner of
[a] damaged car or residence to recover in negligence from
the person who caused the damage.’).”
Lansing v. John Does 1-5, 300 Or App 803, 807-08, 455 P3d
541 (2019) (brackets in original). Defendant contends that
the economic loss doctrine is primarily relevant to the ques-
tion of whether a defendant to a negligence action owed the
requisite duty of care required to support the claim. But
that does not mean that the distinction between economic
8
Although the economic loss doctrine does not appear to have been acknowl-
edged or applied in Oregon prior to the Supreme Court’s decision in Snow v. West,
250 Or 114, 440 P2d 864 (1968), the doctrine had been widely recognized at com-
mon law long before then. See Ore-Ida Foods v. Indian Head, 290 Or 909, 916 &
nn 5-10, 917 & nn 11-14, 627 P2d 469 (1981) (detailing the history of the economic
loss doctrine in the United States and England and citing cases applying that
rule from numerous jurisdictions going back to 1856).
430 Marshall v. PricewaterhouseCoopers, LLP
loss and property injuries is irrelevant in other areas.
Securities-Intermountain and Portland Trailer elucidate
that. And although Securities-Intermountain and Portland
Trailer both construe provisions enacted after ORS 12.115
was passed in 1967, and both cases were obviously decided
after ORS 12.115 was enacted as well, they remain rele-
vant to our construction of ORS 12.115(1). Those construc-
tions reflect the “plain, natural, and ordinary meaning” of
the “injury to person or property” language used in ORS
12.115(1). See PGE v. Bureau of Labor and Industries, 317
Or 606, 611, 859 P2d 1143 (1993) (explaining that “words of
common usage typically should be given their plain, natu-
ral, and ordinary meaning”).
Thus, we conclude that ORS 12.115(1) is applicable
to actions for “negligent injury to person or property,” but
not to actions seeking only recovery for economic loss, as
those terms have been defined in our case law. Further, we
conclude that the legislative history of ORS 12.115 does not
mandate a contrary result. As explained earlier, ORS 12.115
was passed in response to Berry, which created a discovery
rule applicable to the statute of limitations for medical mal-
practice claims. Josephs, 260 Or at 496-97. The legislature
responded by, among other things, creating Oregon’s first
statutes of repose setting maximum time limits for certain
claims regardless of when the injury was or should have
been discovered—one applicable to medical malpractice
claims specifically, and the other more generally applicable
to “any action for negligent injury to person or property of
another.” ORS 12.115(1); DeLay v. Marathon LeTourneau
Sales, 291 Or 310, 315, 630 P2d 836 (1981) (summarizing
that history). Defendant contends that the legislative his-
tory of ORS 12.115 “establishes that the legislature was spe-
cifically concerned about unlimited statutes of limitations
for other types of professional negligence claims to which
a discovery rule might apply” and gives “no indication * * *
that the legislators were cognizant of or made any distinc-
tion between the types of damages sought in the different
types of tort cases to which the statute of repose would
apply.” (Emphasis in original.) Indeed, the legislative history
indicates that in passing ORS 12.115, the legislature con-
sidered at least some other types of professional negligence
Cite as 316 Or App 416 (2021) 431
claims. See, e.g., Tape Recording, House Committee on
Judiciary, SB 134, Apr 19, 1967, Tape 79 (discussing pro-
fessional negligence claims against architects and engi-
neers). But regardless of what types of claims the legisla-
ture may have envisioned when enacting ORS 12.115, the
reality is that the plain text of the enacted statute applies
only to actions for “negligent injury to person or property”;
ORS 12.115(1) is limited to claims that cause certain types
of injuries. And, the legislature chose that specific language
as part of a bill that also amended ORS 12.110, which, both
then and now, includes a provision applicable to actions “for
any injury to the person or rights of another, not arising
on contract.” ORS 12.110(1); Or Laws 1967, ch 406, § 1. We
cannot ignore the fact that the legislature chose to forgo the
broader language previously adopted in ORS 12.110(1) when
it enacted ORS 12.115(1) and instead adopted narrower
language.
We recognize that some past cases discussing and
applying ORS 12.115(1) used language that could be seen
to imply that ORS 12.115(1) sets a repose period for cer-
tain actions regardless of injury. See DeLay, 291 Or at 314(describing ORS 12.115 as “the statute of repose for negli-
gent injuries generally”); Josephs, 260 Or at 499 (describing
ORS 12.115(1) as establishing “an ultimate cut-off date * * *
for the commencement of tort claims litigation”); Shell, 265
Or App at 633 (describing ORS 12.115 as the repose stat-
ute “govern[ing] actions for negligence that are not governed
by other laws”); Withers, 67 Or App at 478 (applying ORS
12.115(1) to “legal malpractice actions”). However, it is also
true that in all those cases, the claims at issue were claims
for “injury to person or property.” We have found no case,
and the parties have cited none, that has ever asserted that
ORS 12.115(1) should apply even when no injury to person or
property is implicated and when the action seeks to recover
for economic loss alone.
Defendant submits that “[a]ttorneys, clients and
their insurers have relied on the application of ORS 12.115
to legal malpractice for decades, and structured their busi-
ness accordingly on matters including tail coverage rates,
file closure and destruction policies,” and that “[c]hanging
432 Marshall v. PricewaterhouseCoopers, LLP
the interpretation of ORS 12.115(1) as plaintiffs request
would be contrary to the expectations of attorneys, clients,
and insurers.” However, no case has ever stated that ORS
12.115(1) applies to all legal malpractice claims regardless of
the type of injury asserted. Although we acknowledge those
whose expectations may be unsettled by our construction
of ORS 12.115(1), we also must interpret statutory provi-
sions in a fashion that gives primary weight to the statute’s
text and context. Gaines, 346 Or at 171-73. Policy consider-
ations may not take precedence over a statute’s plain text,
and here ORS 12.115(1) plainly states that it applies to
actions “for negligent injury to person or property.” As the
Supreme Court explained in Securities-Intermountain in ref-
erence to the “injuries to a person or to property” language
then contained in ORS 12.135(1), that language defines
its coverage “on the character of the injuries incurred.”
289 Or at 247. The same is true for the language of
ORS 12.115(1).
Thus, ORS 12.115(1) applies only to actions for
“injury to person or property.” Having considered the text
and context of that statute as well as legislative history, we
conclude that ORS 12.115(1) does not apply to actions that
seek recovery for purely economic loss, which is “mutually
exclusive” from injuries to persons or property, and which
we have previously defined to include “financial losses
such as indebtedness incurred and return of monies paid.”
Portland Trailer, 166 Or App at 655. Plaintiffs’ claim against
Schwabe is an action to recover legal fees associated with the
Fortrend transaction and later IRS investigation and litiga-
tion, as well as the financial losses plaintiffs suffered when
they were found liable to the IRS for over $20 million in
back taxes, penalties, and interest. Those injuries fit firmly
within our established definition of “economic loss” and form
a claim that seeks recovery for “indebtedness incurred [or]
return of monies paid.” Id. Plaintiffs’ claim does not assert
any “injury to person or property,” because it does not impli-
cate physical damage to existing tangible property or relate
to the ownership and disposition of property. Thus, the trial
court erred in granting defendant’s motion to dismiss plain-
tiffs’ negligence claim on the grounds that it is barred by
ORS 12.115(1).
Cite as 316 Or App 416 (2021) 433
III. DEFENDANT’S CROSS-ASSIGNMENT
OF ERROR
We next turn to defendant’s cross-assignment of
error, in which defendant contends that the trial court erred
in denying its motion to dismiss plaintiffs’ negligence claim
on issue preclusion grounds. Again, “we assume the truth of
all allegations in the complaint and give the plaintiff, as the
nonmoving party, the benefit of all favorable inferences that
could be drawn from those allegations.” Kelly, 224 Or App at
33.
A. Relevant Procedural History
We briefly describe the procedural facts relevant to
defendant’s cross-assignment of error. At the same time that
Schwabe moved under ORCP 21 A(9) to dismiss plaintiffs’
negligence claim as untimely pursuant to ORS 12.115(1),
Schwabe also moved under ORCP 21 A(8) to dismiss plain-
tiffs’ claims as barred by issue preclusion. Schwabe argued
that plaintiffs’ allegations of negligence were in direct con-
flict with the factual findings of the 2016 United States Tax
Court decision that determined that plaintiffs were liable
to the IRS as transferees. Estate of Marshall, 2016 WL
3460226. Schwabe contended that plaintiffs had already
litigated the factual issues of what they had been advised
and what they appreciated or knew prior to entering the
transaction; that contrary to plaintiffs’ allegations, the tax
court found that Schwabe and PwC both advised plain-
tiffs of the risks associated with the transaction; and that
finally, those findings were critical and necessary to the tax
court’s judgment. Defendant PwC also moved to dismiss
plaintiffs’ negligence claim against PwC based on similar
arguments. Both defendants pointed to the tax court’s find-
ings that PwC had warned plaintiff John Marshall that the
proposed transaction was similar to a listed transaction
and had advised that plaintiffs not engage in it. In opposi-
tion to both motions, plaintiffs asserted, among other argu-
ments, that the tax court had not resolved the questions pre-
sented by plaintiffs’ claims and had not considered whether
the advisors had breached their professional duties to
plaintiffs.
434 Marshall v. PricewaterhouseCoopers, LLP
The trial court first determined that the tax court
decision had preclusive effect as to plaintiffs’ negligence
claim against PwC. In dismissing that claim, the court
noted that “it was critical to [the tax court’s] holding in the
case that [plaintiffs] were warned by PwC that the stock
sale was similar to a listed transaction and advised * * * not
to engage in the stock sale.” Considering those findings, the
court concluded that plaintiffs could not “assert the essen-
tial elements” of negligence against PwC. However, as to
Schwabe, the court “fe[lt] differently.” The court explained
that “the [tax] court was not assessing whether or not
[Schwabe] met the standard of care of * * * an attorney in
those circumstances,” and stated that it could not infer from
the tax court findings “what specifically was said about the
risks of transferee liability, how strongly it was said, [or]
what other things were said in that context.” In response to
a request for clarification from Schwabe’s counsel, the court
added that
“all I know at this point is that risks were discussed. I don’t
know anything about how they were discussed. What I
know about * * * PwC is they said don’t enter this trans-
action. The tax court did not say the same thing about
Schwabe.
“* * * * *
“* * * [T]here’s nothing in the tax court opinion that tells
me that [plaintiffs] were told by Schwabe the level of those
risks to the point where they shouldn’t have proceeded
with the transaction. I know nothing about the details. The
difference—and the reason that I come out where I do with
PwC is because PwC said don’t do the transaction. I cannot
see how anyone can be held liable who tells somebody not
to do a transaction. That’s not—there’s nothing in the tax
court opinion that says Schwabe told the plaintiff don’t do
this transaction.”
B. Analysis
Schwabe assigns error to the denial of its motion
to dismiss plaintiffs’ negligence claim on issue preclusion
grounds. “We review whether the trial court erred in apply-
ing issue preclusion for errors of law.” Berg v. Benton, 297 Or
App 323, 327, 443 P3d 714 (2019).
Cite as 316 Or App 416 (2021) 435
The parties essentially reprise the arguments made
in the trial court. Schwabe asserts that “[t]he tax court find-
ings * * * are identical to issues that plaintiffs must prove to
prevail on their negligence claim. Additionally, those find-
ings were actually litigated and were necessary to the tax
court’s imposition of transferee liability.” Schwabe points
to the tax court’s findings that Schwabe told plaintiffs
that, if Fortrend “took steps to render MAC unable to pay
its tax liability, the IRS could pursue transferee liability”
against plaintiffs, and “discussed the risk of transferee lia-
bility with [plaintiffs]” before the transaction closed. Those
findings, Schwabe asserts, leave plaintiffs unable to “prove
the facts necessary to establish that [Schwabe] breached a
duty to advise plaintiffs of the risks associated with” the
transaction. Schwabe also points to the tax court’s find-
ings that PwC told plaintiff John Marshall that the stock
sale was similar to a listed transaction, explained what a
listed transaction was, and advised against the stock sale.
Schwabe contends that those findings establish that plain-
tiffs were aware of the transaction’s significant risks and
preclude plaintiffs from proving the causation element
of their negligence claim against Schwabe, regardless of
how plaintiffs came to that knowledge. In Schwabe’s view,
the trial court’s ruling that issue preclusion barred plain-
tiffs’ negligence claim against PwC “necessarily requires”
the same ruling as to plaintiffs’ negligence claim against
Schwabe.
In response, plaintiffs assert that the trial court’s
ruling was not erroneous. Among other arguments, plain-
tiffs contend that the ultimate issue raised in their negli-
gence claim against Schwabe “was not addressed by the tax
court and was not essential to the merits of the tax court’s
decision.” Plaintiffs also argue that the trial court’s issue
preclusion ruling as to PwC has little bearing on whether
Schwabe was negligent and whether that negligent advice
caused plaintiffs’ damages.
We begin with the legal principles that control our
analysis, starting with issue preclusion. “Issue preclusion
arises in a subsequent proceeding when an issue of ultimate
fact has been determined by a valid and final determination
436 Marshall v. PricewaterhouseCoopers, LLP
in a prior proceeding.” Nelson v. Emerald People’s Utility
Dist., 318 Or 99, 103, 862 P2d 1293 (1993).9
“If one tribunal has decided an issue, the decision on
that issue may preclude relitigation of the issue in another
proceeding if five requirements are met:
“1. The issue in the two proceedings is identical.
“2. The issue was actually litigated and was essential
to a final decision on the merits in the prior proceeding.
“3. The party sought to be precluded has had a full
and fair opportunity to be heard on that issue.
“4. The party sought to be precluded was a party or
was in privity with a party to the prior proceeding.
“5. The prior proceeding was the type of proceeding to
which this court will give preclusive effect.”
Id. at 104 (internal citations omitted).
In this case, the parties primarily dispute whether
the first requirement was established—whether the tax
court decided ultimate fact issues that are essential to plain-
tiffs’ negligence claim against Schwabe, such that issue pre-
clusion bars the relitigation of those issues. We thus first
examine in detail what issues the tax court decided.
In Estate of Marshall, the tax court was tasked with
determining whether plaintiffs were liable as transferees for
their MAC’s unpaid federal income tax liability, plus accom-
panying penalties and interest. 2016 WL 3460226 at *1.
That determination required the court to consider whether
the various transfers that made up the Fortrend transac-
tion should be “collapsed.” Id. at *11-12. The court applied
the legal standard used in “jurisdictions with fraudulent
transfer provisions similar to Oregon’s” and asked whether
9
“The general rule is that the preclusive effect to be given to a judgment is
determined by the law of the jurisdiction in which the judgment was rendered,”
and for that reason, “state courts generally are bound by federal law in deter-
mining the preclusive effect of federal court judgments.” Aguirre v. Albertson’s,
201 Or App 31, 46, 117 P3d 1012 (2005). However, there are “few or no differ-
ences” between federal and Oregon preclusion principles, and our past cases have
applied both Oregon and federal case law in analyzing whether preclusion arises
from a prior federal judgment. Id.; see also Durham v. City of Portland, 181 Or
App 409, 424-26, 45 P3d 998 (2002).
Cite as 316 Or App 416 (2021) 437
plaintiffs “had constructive knowledge that the debtor’s
debts would not be paid.” Id. at *11. The court explained the
standard:
“Finding that a person had constructive knowledge does
not require finding that he had actual knowledge of the
plan’s minute details. It is sufficient if, under the totality
of the surrounding circumstances, he ‘should have known’
about the tax-avoidance scheme. HBE Leasing Corp. v.
Frank, 48 F3d 623, 636 (2d Cir 1995).
“Constructive knowledge also includes ‘inquiry knowl-
edge.’ Constructive knowledge may be found where the
initial transferee became aware of circumstances that
should have led to further inquiry into the circumstances
of the transaction, but no inquiry was made. Id. Some cases
define constructive knowledge as the knowledge that ordi-
nary diligence would have elicited, while others require
more active avoidance of the truth. [Diebold Foundation,
Inc. v. C.I.R., 736 F3d 172, 187 (2d Cir 2013)].”
Id. at *12.
The tax court concluded that plaintiffs had “con-
structive knowledge” of the scheme regardless of which defi-
nition of “constructive knowledge” was applied. Id. The court
first explained that its analysis focused “on what [plaintiff
John Marshall] knew,” due to his assumed role as repre-
sentative for the remaining plaintiffs in communications
regarding the transaction, as well as “what [plaintiffs] were
advised and what they themselves appreciated.” Id. The
court then determined that plaintiffs, Schwabe, and PwC
“had constructive knowledge of the entire scheme.” Id.
The court noted certain findings that were rel-
evant to its analysis. The court found that plaintiff John
Marshall “knew that [Fortrend] was interested in buying
MAC only for its tax liability; that [Fortrend] intended to
use high-basis low-value assets to offset MAC’s income;
that [Fortrend] intended to obtain a refund of MAC’s pre-
paid taxes, a plan he was leery about; and that [Fortrend]
was splitting MAC’s avoided taxes with [plaintiffs]. Id. The
court found that Schwabe had advised each of the plain-
tiffs before the transaction closed that they faced a risk of
transferee liability. Id. Additionally, the court found that
438 Marshall v. PricewaterhouseCoopers, LLP
John Marshall “was warned by PwC that the stock sale was
similar to a listed transaction and was advised by PwC not
to engage in the stock sale.” Id. The court also found that
plaintiffs were motivated to enter into the transaction as
a way to mitigate the resulting tax liability from the 2002
litigation award, and that they had received promotional
materials from Fortrend that referenced IRS Notice 2001-
16. “Given this reference [in the promotional materials] and
especially PwC’s warning to John [Marshall], the Marshalls
and [Schwabe] were or should have been on heightened alert
for other red flags.” Id.
Finally, the court cited the legal standard applied
in Diebold Foundation, Inc., stating that, “if the advisers
knew or should have known then the transferee is deemed
to have had the same knowledge and had a duty to inquire.”
Id. at *13 (citing 736 F3d at 188-90). The tax court explained
that John Marshall, PwC, and Schwabe were “analogous
to the advisers” in Diebold Foundation, Inc. and that the
remaining Marshall plaintiffs Richard, Patsy, and Karen
were “akin to the shareholders in that case.” Id. The court
concluded that plaintiffs had a duty to inquire and were lia-
ble as transferees. Id.
We now turn to plaintiffs’ negligence claim against
Schwabe.
“[In a] legal malpractice action, as in other tort actions
in which there is a special relationship between the plain-
tiff and the defendant, the plaintiff usually must allege
and prove (1) a duty that runs from the defendant to the
plaintiff; (2) a breach of that duty; (3) a resulting harm to
the plaintiff measurable in damages; and (4) causation, i.e.,
a causal link between the breach of duty and the harm.”
Stevens v. Bispham, 316 Or 221, 227, 851 P2d 556 (1993)
(emphases in original). An attorney’s duty of care to a cli-
ent is “to act as a reasonably competent attorney in protect-
ing and defending the interests of the client.” Onita Pacific
Corp. v. Trustees of Bronson, 315 Or 149, 160, 843 P2d 890(1992). In legal malpractice cases, juries “often require[ ]
expert evidence setting forth the appropriate standard of
care owed by a reasonable attorney and how the defendant
failed to uphold that standard.” Pereira v. Thompson, 230 Or
Cite as 316 Or App 416 (2021) 439
App 640, 654, 217 P3d 236, 247 (2009). To prove causation,
a plaintiff must show “that the result would have been dif-
ferent except for the negligence.” Watson v. Meltzer, 247 Or
App 558, 565, 270 P3d 289 (2011), rev den, 352 Or 266 (2012)
(citing Harding v. Bell, 265 Or 202, 205, 508 P2d 216 (1973)).
The critical components at issue in defendant’s cross-
assignment of error are breach and causation—plaintiffs
must show that Schwabe breached its professional duties to
plaintiffs, and that but for that negligence, plaintiffs would
not have entered into the Fortrend transaction, and would
not have suffered transferee tax liability and other result-
ing damages. As relevant to breach, plaintiffs essentially
contend that Schwabe knew or should have known that the
proposed transaction carried significant risks but failed to
identify or communicate that information prior to the close
of the transaction. As relevant to causation, they allege that
they would not have taken part in the transaction but for
Schwabe’s negligent advice.
We conclude that issue preclusion does not apply
here, because the factual issues decided in the tax court lit-
igation are not identical to those raised in plaintiffs’ neg-
ligence claim against Schwabe. The tax court considered
whether plaintiffs had constructive knowledge of whether
the Fortrend transaction would leave MAC unable to pay
its taxes, and the findings that were critical to that con-
clusion were what John Marshall and the remaining plain-
tiffs had been advised and what they themselves knew and
appreciated. The court necessarily made factual findings
about whether plaintiffs were privy to enough informa-
tion regarding the transaction that a reasonable taxpayer
in their position should have inquired further regarding
whether the transaction would leave MAC unable to pay
its taxes. The tax court’s decision did not necessitate fac-
tual findings regarding the precise content of any warn-
ings Schwabe provided to plaintiffs, or whether a reason-
able attorney in Schwabe’s position would have done more
to inform or dissuade plaintiffs regarding their participa-
tion in the transaction. It was also not necessary for the tax
court to make any findings regarding what role Schwabe’s
advice played in plaintiffs’ decision to proceed with the
transaction.
440 Marshall v. PricewaterhouseCoopers, LLP
In contrast, such findings would be necessary to
plaintiffs’ negligence claim against Schwabe. The issues
of ultimate fact that are necessarily relevant to plaintiffs’
negligence claim against Schwabe are (1) Schwabe’s specific
actions and the precise content of its advice to plaintiffs
regarding the Fortrend transaction, (2) what a reasonably
competent attorney would have done in such circumstances
to protect and defend plaintiffs’ interests, and (3) if Schwabe’s
representation was indeed negligent, whether plaintiffs
would have moved forward with the transaction but for
Schwabe’s negligence. Plaintiffs’ negligence claim against
Schwabe rises or falls based on those issues. None of the
factual issues necessarily decided by the tax court answer
those questions or allow for a conclusive determination as to
whether or not Schwabe breached its duty of care to plain-
tiffs, causing damages.
We recognize that the tax court found certain facts
that are, no doubt, unfavorable to plaintiffs’ negligence claim,
particularly with respect to advice and information John
Marshall received from PwC about the transaction and its
risks. However, that advice, while relevant to the causation
element of their negligence claim, is not determinative of it.
Whether plaintiffs had been warned about the transaction’s
risks by PwC does not, as a matter of law, foreclose liability
on the part of Schwabe if it breached its duty to plaintiffs in
its legal advice and that breach caused plaintiffs damages.
This is especially so if the advice plaintiffs received from the
two firms differed, or if Schwabe downplayed the severity of
the risks, especially in light of Schwabe’s role as plaintiffs’
primary advisor in the transaction. Although we state no
opinion on plaintiffs’ likelihood of prevailing at trial on its
negligence claim, plaintiffs’ success at trial is nevertheless
possible under these circumstances and is not precluded by
the tax court’s factual findings. Because the factual issues
in the two proceedings are not identical, issue preclusion
does not apply to bar plaintiffs’ negligence claim against
Schwabe.
In conclusion, we reverse and remand on plain-
tiffs’ negligence claim for further proceedings. We conclude
that the trial court erred in granting Schwabe’s motion to
Cite as 316 Or App 416 (2021) 441
dismiss plaintiffs’ negligence claim, because the statute of
repose in ORS 12.115(1) does not apply to that claim, but did
not err in denying Schwabe’s motion to dismiss plaintiffs’
negligence claim on issue preclusion grounds.
Reversed and remanded as to plaintiffs’ negligence
claim; otherwise affirmed.