Oregon Legal Update: Oregon Supreme Court Addresses Whether it is Prejudicial to Defendants to Allow a Plaintiff to Amend their Pleadings Two Days Before Trial.

From the desk of Joshua P. Hayward: In this landlord-tenant forcible entry and detainer action, the Oregon Supreme Court was asked to determine whether a party could add a new claim for relief two days before trial.  Typically, courts freely grant leave as long as it will not prejudice the opposing party.  Here, the Oregon Supreme Court establishes that adding certain new claims for relief only days before trial results in substantial prejudice to a defendant.  It determined that the trial court had abused its discretion in allowing such a modification. 

Case Pointer: Oregon Rule of Civil Procedure (ORCP) 23 allows a party to amend their pleading as long as certain conditions are met.  If the conditions are not satisfied, the amendment can still be made, but not without leave of court or the adverse party’s written consent.  Such leave “shall be freely given when justice so requires.”  The trial court has broad discretion in this regard.  However, that discretion may not be exercised in such a way that results in prejudice to the opposing party.  In this case, the trial court presiding over a forcible entry and detainer (FED) action granted leave to amend pleadings just two days before trial.  Upon review, the Oregon Supreme Court determined that the resulting prejudice to defendant was too great and that the trial court had abused its discretion. 

C.O. Homes, LLC v. Cleveland, 366 Or. 207 (March 5, 2020). 

The facts of this case involve a landlord (Plaintiff), a tenant (Defendant), a rental agreement, and Defendant’s failure to make certain payments. Under the agreement, Defendant was to pay monthly rent as well as monthly installments towards a security deposit.  Defendant was paying rent, but was not paying the security deposit installments.  Plaintiff subsequently provided Defendant with a 30-day “for cause” notice of termination under ORS 90.392.  A month later, Plaintiff gave Defendant a different, 72-hour notice of termination, permissible under ORS 90.394 when a tenant has failed to pay their rent.  Plaintiff then filed a forcible entry and detainer (FED) action against Plaintiff, attaching only the 72-hour notice to its complaint.  The 30-day “for cause” notice was not mentioned at any point, nor was it attached to the complaint. 

The parties attended a first-appearance hearing and were unable to settle their dispute.  Therefore, Defendant filed an answer which included an allegation that “the notice of termination filed in [the] case [was] wrong.”  Two days before trial, Plaintiff filed an ORCP 23 motion seeking leave to amend its complaint to attach the 30-day “for cause” notice.  Defendant opposed the motion on the grounds that (1) it would add a new claim for relief and (2) she would be prejudiced if Plaintiff were allowed to rely on that notice for its claim for possession.  The trial court granted Plaintiff’s motion.  Defendant won a directed verdict as to the 72-hour notice, but Plaintiff won a directed verdict as to the 30-day notice.  Defendant appealed and the trial court was affirmed.  The Oregon Supreme Court accepted review to determine whether the trial court had erred in allowing Plaintiff to amend its complaint over Defendant’s objections. 

Generally, amendments to pleadings can be made until the opposing party has filed some form of responsive pleading.  At that point, amendments can still be made, but they require either leave of court or permission from the opposing party.  Such leave is to be freely granted but is still subject to the court’s discretion.  The critical inquiry is whether allowing a pretrial amendment would result in undue prejudice to the opposing party.  In making the decision, the court should consider factors such as: 

1. Whether the opposing party has a reasonable opportunity to research appropriate law, move against the pleading, avail themselves of discovery procedures, and prepare requested instructions; and 

1. Whether the amendment would change the claim for relief. 

Leave to amend should be granted when there is (1) no prejudice to the defendant and (2) no material change in the substance of the complaint. 

Using these parameters, the Oregon Supreme Court assessed each party’s arguments.  Plaintiff asserted that attaching the 30-day notice did not change the basis for the termination of the tenancy and therefore its basis for recovery.  Defendant responded that the two notices arose under two different statutes, each of which allows a landlord to terminate a lease, but in different factual circumstances.  The Court looked at the two statutes and their respective notices side by side and determined that allowing an amendment attaching the 30-day notice would “substantially change the operative facts on which [Plaintiff’s] claim was based.” 

The question then turned to whether the proposed amendment was likely to result in undue prejudice.  The Court agreed that it would – especially considering that the trial was looming just two days away.  For example, Defendant was wholly unprepared to address whether the 30-day notice was valid since she was unaware that Plaintiff would rely on that until two days before trial.  She argued that, with enough time to prepare, she could have challenged its validity.  Additionally, Defendant had already made the strategic (and consequential) decision of filing an answer contesting the eviction based on the 72-hour notice, thereby exposing her to attorney fees under relevant Oregon statutes.  Those same statutes prohibited her from having a second hearing to determine, in light of the 30-day notice, whether any other statutory procedure could enable her to challenge Plaintiff’s claim without subjecting her to attorney fee exposure. 

Ultimately, the Oregon Supreme Court reversed the holdings of both the Court of Appeals and trial court.  The court determined that the proposed amendment substantially changed Plaintiff’s claim for relief and prejudiced Defendant.  The trial court had therefore abused its discretion in allowing Plaintiff to make the requested amendment.