Larsen v. Selmet, Inc. ( 2022 )

227
Argued and submitted May 31, affirmed October 5, 2022, petition for review
allowed February 9, 2023 (370 Or 740)
See later issue Oregon Reports
PattyAnn LARSEN,
Plaintiff-Appellant,
v.
SELMET, INC.,
Defendant-Respondent.
Linn County Circuit Court
19CV34867; A175393
519 P3d 164
Plaintiff filed this action against defendant, her former employer, assert-
ing various claims based on allergen exposure in the workplace. The trial court
granted summary judgment for defendant on the basis that plaintiff was not
the real party in interest. At the time of filing the action, plaintiff had recently
gone through bankruptcy, such that the bankruptcy trustee was the real party in
interest. Plaintiff does not challenge the summary judgment ruling against the
claims that she brought in her own name, as she now acknowledges that she was
not the real party in interest. However, she contends that the trial court abused
its discretion when it denied her motion to substitute the bankruptcy trustee as
the plaintiff. The trial court found that plaintiff did not make an honest mistake,
but rather a strategic choice, in bringing the action in her own name. The court
interpreted ORCP 26 A as not requiring an opportunity for substitution in such
circumstances, and it exercised its discretion to deny substitution. Plaintiff con-
tends that the court abused its discretion, including by applying the wrong legal
standard and by presuming dishonesty. Held: The trial court did not abuse its
discretion. Under ORCP 26 A, when the named plaintiff did not make an honest
mistake in bringing the action in his or her own name, the trial court has dis-
cretion whether to allow substitution of the real party in interest. Here, the trial
court made a finding of dishonesty—it did not presume dishonesty—and it acted
within its discretion in denying substitution.
Affirmed.
Michael B. Wynhausen, Judge.
Kevin T. Lafky argued the cause for appellant. Also on
the opening brief were Christopher M. Edison and Lafky
& Lafky. Also on the reply brief were Amanda L. Reilly
and Lafky & Lafky. Mark A. Crabtree argued the cause for
respondent. Also on the brief was Jackson Lewis P.C.
Before James, Presiding Judge, and Aoyagi, Judge, and
Joyce, Judge.
AOYAGI, J.
Affirmed.
228 Larsen v. Selmet, Inc.
AOYAGI, J.
After repeated allergen exposures at work, plaintiff
filed this action against defendant, her former employer, for
disability discrimination and worker’s compensation retali-
ation. When she filed the action, plaintiff had recently gone
through bankruptcy, such that the bankruptcy trustee, not
plaintiff, was the real party in interest. On that basis, the
trial court granted summary judgment for defendant on
the claims that plaintiff had brought in her own name—a
ruling that is not challenged on appeal. What is challenged
on appeal is the trial court’s denial of plaintiff’s subsequent
motion to substitute the bankruptcy trustee as the plaintiff
in this action. That ruling was made under ORCP 26 A and
was based on the court’s finding that plaintiff did not make
an honest mistake in bringing the action in her own name.
For the reasons explained below, we conclude that the trial
court did not apply the wrong legal standard or otherwise
abuse its discretion in denying plaintiff’s motion to substi-
tute. Accordingly, we affirm.
FACTS1
In March 2018, plaintiff, who is allergic to latex,
began working for defendant as a darkroom attendant.
Plaintiff was repeatedly exposed to latex on the job. On
February 24, 2019, she decided to pursue a civil action
against defendant. She ceased working for defendant the fol-
lowing day. Plaintiff consulted with a law firm on March 14,
2019, regarding potential claims against defendant, and, on
March 25, 2019, she entered into an official representation
agreement with the law firm.
On April 12, 2019, plaintiff filed a petition for
Chapter 7 bankruptcy. She was represented by different
counsel in the bankruptcy. A question on the asset schedule
required plaintiff to disclose any existing claims that she
had against third parties, regardless of whether litigation
1
Neither party has directly addressed what materials the trial court could
consider in deciding the motion to substitute. Like the parties, we take the his-
torical facts from the court’s findings and from undisputed facts contained in
declarations filed in connection with defendant’s summary judgment motion and
plaintiff’s substitution motion.
Cite as 322 Or App 227 (2022) 229
had been filed or demands had been made. Plaintiff did not
disclose her employment claims against defendant.
Five days later, on April 17, 2019, plaintiff, through
her employment counsel, sent a demand letter to defen-
dant. That letter included a statement that plaintiff had
instructed her employment counsel “to vigorously pursue
her legal rights for the unlawful conduct of [defendant] and
its employees” and that employment counsel intended to file
an action in state court alleging numerous claims, includ-
ing disability discrimination and workers’ compensation
retaliation.
On July 15, 2019, the federal bankruptcy court dis-
charged plaintiff’s debts and closed the bankruptcy case.
On August 8, 2019, plaintiff filed this action against
defendant in the Linn County Circuit Court, alleging dis-
ability discrimination (three claims) and workers’ compen-
sation retaliation (one claim).
Six months later, on February 6, 2020, the United
States Trustee moved to reopen plaintiff’s bankruptcy case
to allow for administration of the claims against defendant,
which had not been disclosed and therefore had not been
administered. (The record appears to be silent as to how
the Trustee learned of the claims.) The federal bankruptcy
court granted the motion on the same day and appointed
Vanessa Pancic as trustee. On February 20, 2020, plain-
tiff amended her bankruptcy schedules to list her claims
against defendant as assets.
On August 21, 2020, in this action, defendant moved
for summary judgment on multiple grounds. As relevant
here, defendant argued that plaintiff’s bankruptcy divested
her of standing to pursue the claims in her complaint, that
plaintiff was not the real party in interest, and that plain-
tiff was judicially estopped from bringing claims that she
had not disclosed in her bankruptcy petition. In response,
plaintiff argued against judicial estoppel. She also claimed
that, because she amended her bankruptcy schedules on
February 20, 2020, she “is a real party in interest in this
case” and “has standing to proceed.” At the same time, plain-
tiff filed a declaration by Pancic, the bankruptcy trustee, in
230 Larsen v. Selmet, Inc.
which Pancic asserted that the claims were the property of
the bankruptcy estate.
After a hearing, the trial court granted summary
judgment for defendant, ruling orally on November 18, 2020,
and by written order on November 25, 2020. The court rea-
soned that plaintiff was not the real party in interest, given
the bankruptcy proceeding, and therefore lacked stand-
ing.2 The court gave plaintiff leave to file a motion to sub-
stitute the bankruptcy trustee—something that plaintiff
had requested in the event that the court granted summary
judgment.
Plaintiff thereafter moved to substitute the bank-
ruptcy trustee as the plaintiff in this action. Defendant
opposed. Plaintiff replied and filed a supplemental decla-
ration. In her supplemental declaration, plaintiff attested
that she “did not realize that the lawsuit against Defendant
was an asset when [she] filed [her] bankruptcy petition on
April 12, 2019”; that she “made an honest and understand-
able mistake when [she] filed the action without disclosing
or otherwise scheduling claims against Defendant in the
original bankruptcy documents”; and that, in filing the civil
action, she “did not have the intent to deceive the Court.”
After a hearing, the trial court denied plaintiff’s
motion to substitute. In doing so, the court interpreted ORCP
26 A as allowing it to deny substitution of the real party in
interest if the court was not persuaded that, when plaintiff
brought the action in her own name, she did so as the result
of “an honest and understandable mistake.” The court was
not so persuaded. To the contrary, the court expressly found
that, at the time of her bankruptcy filing, plaintiff intended
to assert employment claims against defendant, but did not
identify those claims in her bankruptcy petition, and that
2
The summary judgment ruling is not before us on review, so we express no
opinion on whether it was technically accurate to describe plaintiff as lacking
“standing” because she was not the real party in interest. See Feist v. Consol.
Freightways Corp., 100 F Supp 2d 273, 275 (ED Pa 1999), aff’d, 216 F3d 1075 (3d
Cir 2000), cert den, 532 US 920 (2001) (recognizing that “there is much confusion
surrounding the distinction between the doctrine of standing and the principle
of the real party in interest” and explaining why, in a case involving similar
circumstances as this one, the issue was properly understood as one of the real
party in interest, not standing).
Cite as 322 Or App 227 (2022) 231
plaintiff’s “decision to exclude her employment claims in her
bankruptcy petition was not an honest or understandable
mistake.” Or, as the court described its findings orally, plain-
tiff’s filing of this action in her own name was “not either an
excusable mistake or inadvertent” but, rather, “a calculation
to discharge her debts prior to going forward with the law-
suit, and to allow herself to reap the benefits of the lawsuit
while at the same time discharging her debts.” The court
decided not to allow substitution under the circumstances.
In doing so, the court recognized that its ruling would likely
“result in a bar to taking further action based on the statute
of limitations.”
The court entered a general judgment dismissing
plaintiff’s claims. This appeal followed.
ANALYSIS
Plaintiff does not challenge the summary judgment
ruling. That is, she no longer disputes that, once she filed for
bankruptcy, any employment claims that she had against
defendant became the property of the bankruptcy estate,
making the bankruptcy trustee the real party in interest.
See generally Concienne v. Asante, 299 Or App 490, 500,
450 P3d 533 (2019), rev den, 366 Or 135 (2020) (“As to legal
claims that a debtor might have against third parties that
are property of the estate, the bankruptcy trustee is the
real party in interest to the exclusion of the debtor and has
standing to pursue those claims or is entitled to abandon
them.”). Plaintiff’s sole assignment of error is directed to the
denial of her motion to substitute the bankruptcy trustee as
the plaintiff in this action. Plaintiff contends that the court
abused its discretion by denying substitution, particularly
by applying an incorrect legal standard.
To determine whether the trial court applied the
correct legal standard, we must first identify what rule or
doctrine the court was seeking to apply. That is more com-
plicated than usual in this case. Given the arguments pre-
sented to it, the trial court theoretically could have ruled
under ORCP 34, ORCP 26 A, or a judicial estoppel theory—
and the parties do not seem to entirely agree on appeal as
to the basis for the court’s ruling. In our view, however, it
is apparent from the trial court’s reasoning—particularly
232 Larsen v. Selmet, Inc.
its heavy reliance on Feist v. Consol. Freightways Corp.,
100 F Supp 2d 273 (ED Pa 1999), aff’d, 216 F3d 1075 (3d
Cir 2000), cert den, 532 US 920 (2001)—what path the court
took in deciding the motion to substitute. We understand the
court to have based its decision on ORCP 26 A. We therefore
do not address ORCP 343 or judicial estoppel.4 We discuss
only ORCP 26 A.
ORCP 26 A provides, in relevant part:
“Every action shall be prosecuted in the name of the real
party in interest. * * * No action shall be dismissed on the
ground that it is not prosecuted in the name of the real
party in interest until a reasonable time has been allowed
after objection for ratification of commencement of the action
by, or joinder or substitution of, the real party in interest;
and such ratification, joinder, or substitution shall have the
same effect as if the action had been commenced in the
name of the real party in interest.”
(Emphasis added.)
This case presents an issue of first impression as
to whether there are circumstances in which ORCP 26 A
allows a court to dismiss an action brought by someone other
than the real party in interest without allowing substitution
3
In ruling, the court did not mention ORCP 34—which pertains to substitu-
tion after a party’s death or disability, a transfer of interest, or a public officer’s
death or separation from office—its federal analog, FRCP 25, or any case law
applying ORCP 34 or FRCP 25. On appeal, plaintiff mentions ORCP 34 only in
passing; defendant discusses it.
4
After explaining that it was denying substitution based on Feist, the court
stated that it did not seem necessary to make “further rulings on the estoppel
issue,” but that it was “happy to rule on that as well,” and invited responses.
Neither party asked for a ruling on judicial estoppel, and the hearing ended. On
appeal, the parties have come to agree that there was no actual ruling on judicial
estoppel, but plaintiff contends that the issue is still at play in that the trial court
“clearly considered those arguments and applied judicial estoppel principles and
law when making its ruling.” It is fair to say that the parties did not clearly
distinguish between ORCP 34, ORCP 26 A, and the doctrine of judicial estoppel
in their arguments to the trial court, and some of that commingling is reflected
in statements by the court. Ultimately, however, we do not understand the court
to have relied on “judicial estoppel principles and law” in denying substitution.
Rather, we understand it to have relied on the reasoning of Feist, which, as will
be described shortly, turns entirely on the correct interpretation of the federal
equivalent of ORCP 26 A. Accordingly, we do not address the doctrine of judicial
estoppel, nor do we discuss cases cited by plaintiff—such as Ah Quin v. Cty. of
Kauai Dep’t of Transp., 733 F3d 267 (9th Cir 2013)—that turn solely on the appli-
cation of the doctrine of judicial estoppel.
Cite as 322 Or App 227 (2022) 233
of the real party in interest. Absent controlling precedent,
the trial court was persuaded to adopt the standard articu-
lated in Feist, a Pennsylvania federal district court decision
that interpreted the analogous federal rule—Federal Rule
of Civil Procedure 17 (FRCP 17)—with heavy reliance on
the commentary to FRCP 17.
ORCP 26 A is based on FRCP 17(a). Reutter v. RWS
Construction Inc., 128 Or App 365, 369, 875 P2d 1187 (1994).
The text of ORCP 26 A is substantively identical to text in
FRCP 17(a). See FRCP 17(a)(1) (“An action must be pros-
ecuted in the name of the real party in interest.”); FRCP
17(a)(3) (“The court may not dismiss an action for failure to
prosecute in the name of the real party in interest until,
after an objection, a reasonable time has been allowed for
the real party in interest to ratify, join, or be substituted
into the action. After ratification, joinder, or substitution,
the action proceeds as if it had been originally commenced
by the real party in interest.”). Consequently, the commen-
tary to FRCP 17(a) “is helpful in construing ORCP 26 A.”
Reutter, 128 Or App at 369. Further, we may consider fed-
eral case law interpreting FRCP 17(a) for its persuasive
value. See State v. Meyer, 109 Or App 598, 602, 820 P2d 861(1991), rev den, 312 Or 677 (1992) (treating federal case law
on Federal Rule of Criminal Procedure 8(a) as “persuasive”
in construing Oregon statutory language that was “adapted
from” that federal rule, where no Oregon precedent existed).5
We begin with Feist, the federal case on which the
trial court expressly relied. In Feist, the defendant moved
5
To be clear, because the federal case law that we discuss developed after
the enactment of ORCP 26 A, we consider it only for its persuasive value. See
OR-OSHA v. CBI Services, Inc., 356 Or 577, 593, 341 P3d 701 (2014) (“Court deci-
sions that existed at the time that the legislature enacted a statute—and that, as
a result, it could have been aware of—may be consulted in determining what the
legislature intended in enacting the law as part of the context for the legislature’s
decision. That is so especially as to case law interpreting the wording of a stat-
ute borrowed from another jurisdiction. Case law published after enactment—of
which the legislature could not have been aware—is another matter. That is not
to say that later-decided federal cases cannot be persuasive. Decisions from other
jurisdictions may carry weight, based on the force of the reasoning and analysis
that supports them. But the fact that they involve similarly worded statutes, by
itself, does not make those decisions controlling.” (Internal citations omitted.)).
We find the federal case law to be particularly persuasive here because of its
focus on the commentary to FRCP 17. That commentary predates the enactment
of ORCP 26 A and therefore is itself relevant context for ORCP 26 A.
234 Larsen v. Selmet, Inc.
to dismiss a personal-injury action after learning that the
plaintiff had filed for bankruptcy shortly before filing the
personal-injury action. 100 F Supp 2d at 274. The plaintiff
moved to substitute the bankruptcy trustee as the real party
in interest. Id. In ruling on the motion to substitute, the court
noted that a “literal interpretation” of FRCP 17(a)(3) would
require courts to allow substitution in “every case in which
an inappropriate plaintiff was named.” Id. at 275. However,
looking to the commentary to FRCP 17, the court explained
that the purpose of FRCP 17(a)(3) is “ ‘to prevent forfeiture
when determination of the proper party to sue is difficult or
when an understandable mistake has been made’ ” and that
substitution may be denied when allowing it would not fur-
ther that purpose. Id. at 275-76 (quoting FRCP 17 Advisory
Committee Notes, 1966 Amendments). Relying on the com-
mentary, and citing a leading treatise and supportive case
law from other jurisdictions, the Feist court concluded that
FRCP 17(a)(3) does not require a court to allow substitution
of the real party in interest if the plaintiff fails to establish
that “when he brought this action in his own name, he did
so as the result of an honest and understandable mistake.”
Id. at 276.
The Feist court proceeded to apply that standard
to the plaintiff’s motion to substitute. The court reviewed
in detail the events surrounding the plaintiff’s bankruptcy
proceeding and the filing of his personal-injury action, and
it ultimately found that the plaintiff had failed to prove
“that the filing of this case in his own name was an honest
mistake.”6 Id. at 280. The court denied substitution, explain-
ing that “[t]o allow a substitution where a plaintiff cannot
establish that he was acting as the result of an honest mis-
take would contravene the purpose of [FRCP] 17(a).” Id. The
court was not swayed by the bankruptcy trustee’s contention
that it was the plaintiff’s creditors who would “suffer most”
if substitution was denied, concluding that “the interest of
Plaintiff’s creditors in recovering some of the debts owed
to them is not sufficient to justify substitution of the bank-
ruptcy trustee as the real party in interest in this case.” Id.
6
Although the Feist court described FRCP 17(a) as requiring substitution
only in the event of “an honest and understandable mistake,” 100 F Supp 2d at
276, its actual holding focused on the absence of an “honest” mistake, id. at 280.
Cite as 322 Or App 227 (2022) 235
The trial court relied specifically on Feist, but we
have surveyed the federal case law more broadly, and it
appears that every federal court to consider the issue has
interpreted FRCP 17(a)(3) as permitting consideration of
the plaintiff’s honesty or good faith, albeit with variations
as to how that principle is articulated. As “the Advisory
Committee and courts applying the rule have made clear,
Rule 17(a)(3) isn’t a plenary license to fix ‘pleading errors’
in all cases for all reasons.” In re Engle Cases, 767 F3d
1082, 1113 (11th Cir 2014). “Read literally, Rule 17(a) would
appear to require that a party always be given a reasonable
time to substitute the real party in interest[,]” but such a lit-
eral reading “would countenance conduct in violation of the
spirit of the Rules.” Esposito v. United States, 368 F3d 1271,
1275 (10th Cir 2004) (emphasis in original).
Some courts have taken the view that FRCP 17(a)(3)
permits a court to deny substitution if the court is unper-
suaded that the plaintiff brought the action in his or her own
name due to an “honest and understandable mistake.” For
example, in Jones v. Las Vegas Metro. Police Dep’t., 873 F3d
1123, 1128-29 (9th Cir 2017), the Ninth Circuit concluded
that, where the named plaintiff made an “honest” mistake
that was “not unreasonable,” it was an abuse of discretion
to deny substitution under FRCP 17(a)(3). Accord Goodman
v. United States, 298 F3d 1048, 1053 (9th Cir 2002) (FRCP
17(a)(3) is “designed to avoid forfeiture and injustice when
an understandable mistake has been made in selecting the
party in whose name the action should be brought.” (Internal
quotation marks omitted.)). In Lans v. Digital Equip. Corp.,
252 F3d 1320, 1328-29 (Fed Cir 2001), the Federal Circuit
held that the district court acted “well within” its discretion
in denying substitution where the named plaintiff’s actions
were not “honest and understandable mistakes.” And, in
Wieburg v. GTE Sw. Inc., 272 F3d 302, 308 (5th Cir 2001),
the Fifth Circuit held that a district court needed to con-
sider whether the named plaintiff made an “understandable
mistake” before dismissing his claims without allowing sub-
stitution or joinder of the real party in interest.
Other courts have focused on whether the plain-
tiff acted honestly or in good faith, with less concern for
whether a mistake was understandable. For example, the
236 Larsen v. Selmet, Inc.
Tenth Circuit’s standard “focus[es] primarily on whether
the plaintiff engaged in deliberate tactical maneuvering
(i.e., whether his mistake was ‘honest’), and on whether the
defendant was prejudiced thereby.” Esposito, 368 F3d at 1276.
In Esposito, that led the court to conclude that the district
court abused its discretion by denying substitution where
the named plaintiff made an “honest” mistake, regardless of
whether it was an “understandable” one. Id. at 1277; see also
Faden v. Sam’s W., Inc., No. 2:04CV860, 2005 WL 8177169 at
*2-3 (D Utah May 31, 2005) (initially denying substitution of
the bankruptcy trustee, where it appeared that the plaintiff
“was not being entirely honest when she failed to disclose
her claim against [the defendant] in her bankruptcy,” but
then allowing substitution on reconsideration, based on new
evidence of an “honest” mistake).
The Second Circuit looks to whether the plaintiff
acted in “bad faith” or in a “deliberate or tactical” manner—
with an “honest mistake” being nothing more than one way
to show that the plaintiff did not act in a “deliberate or tac-
tical manner.” Klein ex rel. Qlik Tech., Inc. v. Qlik Tech.,
Inc., 906 F3d 215, 218, 227 (2d Cir 2018), cert dismissed sub
nom Cadian Capital Mgmt., LP v. Klein, ___ US ___, 139
S Ct 1406 (2019) (“Rule 17(a)(3) allows substitution of the
real party in interest so long as doing so does not change
the substance of the action and does not reflect bad faith
from the plaintiffs or unfairness to the defendants. There
is no ‘honest mistake’ requirement beyond that.”); see also
Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F3d
11, 20-21 (2d Cir 1997) (“There plainly was a mistake as to
the legal effectiveness of the documents to permit AMI to
sue as assignee. However, the [district] court did not refer to
any evidence suggesting that the mistake itself was deliber-
ate or tactical, and we have been pointed to no evidence that
would indicate that the attempted assignments were under-
taken in bad faith or in an effort to deceive or prejudice the
defendants.”).
As the foregoing discussion demonstrates, there
is some difference of opinion among federal courts as to
whether it matters for purposes of FRCP 17(a)(3) whether
an honest mistake was “understandable.” That difference
of opinion is somewhat theoretical at present, insofar as
Cite as 322 Or App 227 (2022) 237
Esposito appears to be the only published case that actually
involved a plaintiff who was deemed to have made an “hon-
est mistake” that was “not understandable.” It also bears
noting that the commentary to FRCP 17 refers to an “hon-
est mistake” and an “understandable mistake” somewhat
interchangeably:
“Modern decisions are inclined to be lenient when an hon-
est mistake is made in choosing the party in whose name
the action is to be filed—in both maritime and nonmari-
time cases. The provision should not be misunderstood or
distorted. It is intended to prevent forfeiture when deter-
mination of the proper party to sue is difficult or when an
understandable mistake has been made.”
FRCP 17 Advisory Committee Notes, 1966 Amendments
(emphases added; internal citations omitted).
Whether the federal courts view prejudice to the
defendant as a necessary consideration in exercising discre-
tion under FRCP 17(a)(3) is also not entirely clear. At least
two courts have identified it as an important consideration.
See Esposito, 368 F3d at 1273 (the Tenth Circuit standard
“focus[es] primarily on whether the plaintiff engaged in
deliberate tactical maneuvering (i.e., whether his mistake
was ‘honest’), and on whether the defendant was prejudiced
thereby”); Fund Liquidation Holdings LLC v. Bank of America
Corp., 991 F3d 370 (2d Cir 2021) (providing for consideration
of whether substitution would prejudice the defendant or
otherwise be unfair to the defendant). Few cases demon-
strate the application of that consideration, however, and
some cases do not mention it at all. Meanwhile, some courts
have expressly considered prejudice to the plaintiff, to the
real party in interest, or to the plaintiff’s creditors. Compare
Feist, 100 F Supp 2d at 280 (deciding that “the interest of
Plaintiff’s creditors in recovering some of the debts owed
to them is not sufficient to justify substitution of the bank-
ruptcy trustee as the real party in interest in this case”),
with Cantebury v. Federal-Mogul Ignition Co., 483 F Supp 2d
820, 827 (SD Iowa 2007) (allowing substitution of the bank-
ruptcy trustee, even if the plaintiff acted dishonestly, based
on the court’s weighing of the interests of the plaintiff, the
bankruptcy trustee (who “was not aware of the claims until
after the statute of limitations had expired”), the plaintiff’s
238 Larsen v. Selmet, Inc.
creditors, and the defendant); 7 see also Wilburg, 272 F3d at
308-09 (indicating that, on remand, the district court should
consider the effect of dismissal on the plaintiff’s creditors, in
deciding whether to allow the bankruptcy trustee to substi-
tute or join).
To summarize what we have gleaned from our
review of the federal case law on FRCP 17(a)(3), it appears
to be universally agreed that, when the plaintiff acted dis-
honestly in bringing an action in his or her own name, the
district court has discretion whether to allow substitution
of the real party in interest. There are variations in how
the standard is articulated, in terms of what is necessary
to trigger a mandatory substitution opportunity. Some
courts refer to an “honest and understandable mistake,”
other courts require only an “honest mistake,” and at least
one circuit focuses on an absence of “bad faith” or tactical
maneuvering. There are also variations in how courts dis-
cuss prejudice and how it affects the exercise of discretion in
individual cases.
With the federal case law in mind, we return to the
present case. To recap what happened here: The trial court
interpreted ORCP 26 A as allowing it to deny substitution
of the real party in interest if the court was not persuaded
that, when plaintiff brought the action in her own name,
she did so as the result of an “honest and understandable
mistake.” The court expressly found that, at the time of her
bankruptcy filing, plaintiff intended to assert employment
claims against defendant, but did not identify those claims
in her bankruptcy petition, and that plaintiff’s “decision to
exclude her employment claims in her bankruptcy petition
was not an honest or understandable mistake.” The court
7
Cantebury is the only case we have found in which a court decided to allow
substitution notwithstanding dishonesty by the plaintiff. The next closest case
is Posley v. Clarian Health, No. 1:11-cv-01511-TWP-MJD, 2012 WL 3886328 (SD
Ind 2012), a case cited by plaintiff, which contains fairly strong pro-substitution
dicta. See id. at *1 (“The inclination to be lenient when an honest mistake is
made falls far short of prohibiting ratification except when an honest mistake is
made.”). However, the actual ruling in Posley turned on the fact that the plain-
tiff filed for bankruptcy after filing her employment action, such that her “only
choice was to file the lawsuit in her own name”—it was “not a mistake, honest
or otherwise” and “was not a deceitful or strategic decision at the time of filing.”
Id. at *3.
Cite as 322 Or App 227 (2022) 239
then exercised its discretion to deny substitution. In doing
so, the court recognized that its ruling would likely “result
in a bar to taking further action based on the statute of lim-
itations,” evincing its consideration of the prejudice to plain-
tiff and her creditors. The question is whether the court
abused its discretion, particularly by applying an incorrect
legal standard.
We conclude that the trial court did not abuse its
discretion by denying substitution. We disagree with plain-
tiff that the court applied the wrong legal standard under
ORCP 26 A. Plaintiff focuses particularly on whether an
honest mistake must be “understandable,” whether the court
“presumed” dishonesty, and whether substitution must be
allowed absent prejudice to the defendant, so we do the
same.
As a preliminary matter, we note that we have not
found a single published case in which a federal court has
interpreted FRCP 17(a)(3) to require substitution in every
case, or to require substitution when the plaintiff acted dis-
honestly, and we see no reason to adopt such an interpre-
tation of ORCP 26 A. We agree with the trial court that,
under ORCP 26 A, the court had discretion whether to allow
substitution if it was unpersuaded that plaintiff made an
“honest mistake.”
Here, the court was unpersuaded that plaintiff
made an honest mistake. It found that plaintiff acted nei-
ther honestly nor understandably in bringing this action
in her own name. Plaintiff argues that the court improp-
erly relied on a “presumption of deceit,” essentially presum-
ing dishonesty because it did not consider the mistake to
be understandable. It is certainly true that someone may
be more skeptical that a person made an honest mistake
if the person’s claimed state of mind seems unreasonable.
However, ultimately, we understand the trial court to have
relied on the specific evidence in this record and reasonable
inferences from the timing of particular events to find that
plaintiff’s attestations of good faith and ignorance were not
credible. Credibility determinations often depend on such
circumstantial evidence. We understand the court to have
240 Larsen v. Selmet, Inc.
made a finding, not a presumption, that plaintiff did not
make an honest mistake.8
Because the trial court found that plaintiff’s con-
duct was neither an honest mistake nor understandable, we
decline to opine in hypothetical terms as to how much dis-
cretion a court would have to deny substitution if the plain-
tiff made an honest-but-not-understandable mistake. That
is, we do not necessarily agree with the trial court (or Feist)
that ORCP 26 A requires an “honest and understandable
mistake” before the court is required to provide a substi-
tution opportunity. An “honest mistake” might be enough
to trigger the rule, even if it is not an understandable one.
There is very little case law on honest-but-not-understand-
able mistakes, however, and we are disinclined to grapple
with that hypothetical scenario in a case in which it does
not affect the result. Whereas dishonest conduct is neces-
sarily not “understandable,” an honest mistake may be
understandable or not understandable, and we will resolve
the nuances of ORCP 26 A as applied to honest mistakes if
and when we are presented with a case involving an honest
mistake. This is not that case.
As for prejudice, it is certainly appropriate for a
trial court to consider prejudice—including prejudice to the
real party in interest from denying substitution, and preju-
dice to the defendant from granting substitution—in decid-
ing whether to dismiss a claim under ORCP 26 A without
allowing substitution. When the real party in interest is a
bankruptcy trustee, the court should also consider prejudice
to the plaintiff’s creditors, as they are the real parties in
interest in a practical sense, as well as to the plaintiff, who
could still benefit from the litigation if it were to result in a
damages award greater than the plaintiff’s unpaid debts.
Indeed, given the nature of a motion to substitute the real
8
Plaintiff also takes the position that, in ruling on her motion to substitute,
the trial court was obligated to view the record in the light most favorable to
her, i.e., was required to accept the attestations in her supplemental affidavit.
Plaintiff offers little explanation for that position, beyond analogizing to the
summary judgment standard. But plaintiff is challenging the denial of a motion
to substitute, not the grant of summary judgment. Moreover, the summary judg-
ment standard favors the nonmoving party, and plaintiff was the moving party
on substitution. In any event, such an approach would be impossible to square
with the FRCP 17 case law and the principles underlying it.
Cite as 322 Or App 227 (2022) 241
party in interest, it is difficult to imagine any court deciding
such a motion without considering those realities, at least
implicitly. We disagree with plaintiff, however, that estab-
lished prejudice to the defendant is a necessary predicate to
denying substitution. That is, under ORCP 26 A, when the
plaintiff acts dishonestly in bringing an action in her own
name, the court has discretion whether to allow for substi-
tution, even in the absence of established prejudice to the
defendant.
In this case, the parties’ arguments both in the
trial court and on appeal have centered almost entirely on
(1) identifying the applicable legal standard and its con-
tours, and (2) the factual issue as to whether plaintiff made
an honest mistake. Plaintiff has not meaningfully devel-
oped any argument that, even if she acted dishonestly, it
was an abuse of discretion on this particular record to deny
substitution. Unlike some substitution cases, the bank-
ruptcy trustee never took a definitive position as to whether
she intended to pursue these claims on behalf of plaintiff’s
creditors, making plaintiff’s assertion of prejudice to her
creditors inherently more speculative. Moreover, plaintiff
never made any arguments to the trial court regarding her
specific creditors, the amounts owed to them, the likelihood
that plaintiff herself would benefit from any civil recovery
once her creditors were paid,9 or any other case-specific prej-
udice arguments, other than asserting a lack of prejudice to
defendant.10
We are unpersuaded that the mere fact that the real
party in interest is a bankruptcy trustee (who may or may
not pursue the claims), coupled with a lack of established
prejudice to the defendant, deprives the court of any discre-
tion with respect to whether to allow substitution. There is
always a real party in interest involved, and the prejudice
analysis should be conducted in a case-specific manner. On
this record, and given the arguments that were made, we
9
Plaintiff sought to recover $450,000 in damages in this action. According
to an exhibit that defendant included in its summary judgment filing—which no
one cited in relation to the substitution motion—plaintiff reported $110,135 in
debts (to a total of approximately 100 creditors) when she filed for bankruptcy.
10
In opposing substitution, defendant did not identify any specific prejudice
from its being in litigation with the wrong party for the length of time that it was.
242 Larsen v. Selmet, Inc.
are unpersuaded that the trial court abused its discretion in
weighing the various considerations as it did and ultimately
deciding to deny substitution. The court might have had dis-
cretion to allow substitution—we express no opinion on that
issue—but it did not abuse its discretion by denying it.
Affirmed.