Reynolds v. Schrock

Rule of Law:

A lawyer acting on behalf of a client and within the scope of the lawyer-client relationship is protected by a qualified privilege from joint liability for substantially assisting the client in conduct that breaches the client’s fiduciary duty to a third party, unless the lawyer acts outside the scope of that relationship (e.g., criminal/fraudulent conduct, acting solely in self-interest).

Facts:

• Clyde Reynolds, a naturopathic physician, and Donna Schrock, his patient, jointly purchased two parcels of land.
• In 1999, Schrock filed two separate lawsuits against Reynolds: one concerning the jointly owned land, and another alleging improper sexual conduct during their doctor-patient relationship.
• The parties, represented by their respective lawyers, including Schrock’s lawyer Charles Markley, settled the consolidated lawsuits through a settlement agreement.
• The settlement agreement required Reynolds to transfer his share of one property (the 'lodge property') to Schrock, and for both parties to sell the second property (the 'timber property'), with proceeds going to Reynolds.
• The agreement also stipulated that if the timber property proceeds were less than $500,000, Schrock would pay Reynolds the difference and grant him a security interest in the lodge property for that amount.
• After the settlement, Reynolds transferred his interest in the lodge property to Schrock.
• Markley advised Schrock that she was not expressly required to retain the lodge property for a potential security interest, and he assisted her in selling it to a third party without Reynolds's knowledge, asking the escrow officer to keep the sale confidential.
• Markley also advised Schrock that she could revoke her consent to sell the timber property due to Reynolds’s alleged failure to provide value information, and he assisted her in revoking that consent.

Procedural Posture:

• Plaintiff Clyde Reynolds sued Donna Schrock and her lawyer Charles Markley.
• Plaintiff alleged Schrock breached fiduciary duties and converted property, and that Markley was jointly liable for aiding and abetting Schrock's torts and interfering with the settlement contract.
• Plaintiff and Schrock subsequently settled their claims, leaving Markley as the sole defendant.
• Markley moved for summary judgment, which the circuit court (trial court) granted in his favor on all claims.
• Plaintiff appealed the circuit court's judgment to the Court of Appeals, challenging the rulings on joint-liability tort claims (breach of fiduciary duty and conversion).
• The Court of Appeals affirmed the summary judgment in Markley's favor on the conversion claim.
• The Court of Appeals reversed the summary judgment in Markley's favor on the breach of fiduciary duty claim.
• Markley (defendant-appellant) petitioned the Oregon Supreme Court for review, which was allowed.