Deep Photonics Corp. v. LaChapelle

385 P.3d 1126, 282 Or. App. 533
CourtCourt of Appeals of Oregon
DecidedNovember 30, 2016
DocketC114435CV; A154999 (Control); C114435CV; A155359, A155367
StatusPublished
Cited by22 cases

This text of 385 P.3d 1126 (Deep Photonics Corp. v. LaChapelle) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Deep Photonics Corp. v. LaChapelle, 385 P.3d 1126, 282 Or. App. 533 (Or. Ct. App. 2016).

Opinion

TOOKEY, J.

These consolidated appeals arise from the trial court’s dismissal of a third-party complaint that Joseph LaChapelle and James Field (collectively plaintiffs) filed against Wayland Brill and Brill’s law firm, Enterprise Law Group, Inc. (collectively defendants). Defendants filed a special motion to strike the third-party complaint under ORS 31.150, Oregon’s anti-SLAPP1 statute, and a separate motion to dismiss under ORCP 21 A(8). The trial court denied the special motion to strike, concluding that the claims alleged in the third-party complaint did not qualify for treatment under ORS 31.150. However, the trial court granted defendant’s motion to dismiss under ORCP 21 A(8) based on its conclusion that Brill, a California attorney, was constrained under California law from using attorney-client privileged communications that were necessary to defendants’ defense of the third-party complaint. Defendants appeal the trial court’s denial of the special motion to strike, and plaintiffs appeal the trial court’s grant of defendants’ motion to dismiss.

We conclude that the trial court did not err in denying the special motion to strike because plaintiffs’ claims against defendants did not “arise out of’ protected activity under ORS 31.150(2). However, we conclude that the trial court did err in granting defendants’ motion to dismiss under ORCP 21 A(8). That is so because not all of the claims against defendants, on the face of the third-party complaint, implicate the attorney-client privilege as a barrier to defendants mounting a defense against those claims and, for the one claim that does—a derivative legal malpractice claim— the trial court’s dismissal was premature. Accordingly, we affirm on defendants’- appeal (A154999), and we reverse and remand for further proceedings on plaintiffs’ appeals (A155359, A155367).

BACKGROUND

On review from a motion to dismiss under ORCP 21 A(8), “we accept as true all well-pleaded allegations in the complaint and give plaintiff the benefit of all favorable [537]*537inferences that may be drawn from the facts alleged.” Granewich v. Harding, 329 Or 47, 51, 985 P2d 788 (1999). On review from a special motion to strike, we take the facts from the complaint and also from the supporting and opposing affidavits, ORS 31.150(4), and view the facts in the light most favorable to the plaintiff. Plotkin v. SAIF, 280 Or App 812, 815, 385 P3d 1167 (2016). With regard to the affidavits filed in connection with defendants’ special motion to strike, we consider those additional facts only in the section of this opinion that analyzes the special motion to strike. Here, for purposes of background, we set forth the facts from plaintiffs’ third-party complaint,2 which are relevant to our review of both the special motion to strike and the motion to dismiss.

Plaintiffs, LaChapelle and Field, are shareholders in a company called Deep Photonics Corporation (DPC), which was incorporated in Delaware and headquartered in Oregon. DPC was formed in 2004 by LaChapelle and Ted Alekel to manufacture lasers and crystals that Alekel had developed that could be used in laser technology. Until the fall of2009, LaChapelle was the CEO and a director of DPC, and Field was employed by DPC to develop customers and markets for DPC’s technology. Defendant Brill, an attorney licensed only in California, is DPC’s general counsel and secretary. Brill is the majority shareholder of his law firm, defendant Enterprise Law Group. ELG Partners, an entity controlled by Enterprise Law Group, is a DPC shareholder. The other directors of DPC, who along with ELG Partners also make up the majority shareholders, are Alekel, Dong Kwan Kim, Bruce Juhola, and Roy Knoth.

In 2008, LaChapelle learned that Alekel’s crystal technology could not be replicated in DPC’s lab and, accordingly, initiated an investigation of Alekel’s claimed research. LaChapelle then brought his concerns to the attention of Brill and the other directors. According to the third-party complaint,

[538]*538“instead of acting on the evidence LaChapelle presented and conducting a thorough investigation, the board instead hired a lawyer who, at Brill’s direction, effectively papered over the alarming evidence LaChapelle had uncovered. The lawyer did this by conducting a sham investigation that was, in actuality, not an investigation at all. This was because Brill expressly instructed the lawyer not to interview the specific witnesses who had represented to LaChapelle that Alekel’s claims about his research were false.”

After receiving a report of the investigation Brill arranged, the board of directors took no further action with respect to the investigation, made Alekel president of DPC, and allocated new investment in Alekel’s crystal. LaChapelle, however, developed and began implementing a plan to focus on manufacturing and marketing lasers that did not use Alekel’s crystal.

In the fall of 2009, DPC terminated LaChapelle as CEO and as a director, terminated Field and other DPC employees, shut down its Oregon operations, and transferred assets and operations to Korea to be placed under Kim’s, or his company’s, control. LaChapelle and Field allege that this was accomplished through a conspiracy between the directors and Brill, and resulted in defendants obtaining significant financial and other benefits to the detriment of DPC. After those actions, LaChapelle and Field, who remained shareholders of DPC, received no information about DPC or its activities.

In 2011, DPC brought a complaint against, among others, LaChapelle and Field, seeking damages in the amount of $75 million, based primarily on claims that, in 2009, they had improperly removed or transferred the assets, intellectual property, and trade secrets of DPC to put to their own use. In turn, LaChapelle and Field brought, as plaintiffs, the third-party complaint that is the subject of this appeal.

In the third-party complaint, plaintiffs brought derivative and individual claims against defendants Brill and Enterprise Law Group, and the directors of DPC, seeking $75 million in damages. As relevant on appeal, [539]*539plaintiffs alleged in Count 2 of their derivative claim that Brill breached his fiduciary duty, along with the directors, by taking actions that enriched Kim’s company and themselves at the expense of DPC, failing to take any effective action about the concerns with Alekel’s crystal, deciding to fire LaChapelle and shut down the Oregon operations, making Alekel president and allocating new investment in his crystal, and approving DPC’s lawsuit without understanding that DPC would be responsible for advancing defense costs of certain defendants pursuant to DPC’s bylaws and Delaware law. Plaintiffs also alleged in Count 2 that defendants, as DPC corporate counsel, were also “independently negligent in failing to advise the company of its advancement obligations and/or the consequences of ignoring them.”

In Count 3 of their derivative claim, plaintiffs alleged that defendants breached their fiduciary duty, as corporate counsel, and Brill, as DPC secretary, by

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Cite This Page — Counsel Stack

Bluebook (online)
385 P.3d 1126, 282 Or. App. 533, Counsel Stack Legal Research, https://law.counselstack.com/opinion/deep-photonics-corp-v-lachapelle-orctapp-2016.