PRS Suit of Kevin - RVM Residents' mail group Home Page

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6 IN THE CIRCUIT COURT FOR THE STATE OF OREGON
7 FOR THE COUNTY OF JACKSON
8 KEVIN MCLOUGHLIN, an individual,
Case No. 13CV01653
9 Plaintiff,
DEFENDANT’S ANSWER AND
10 v. AFFIRMATIVE DEFENSES TO
PLAINTIFF’S FIRST AMENDED
11 PACIFIC RETIREMENT SERVICES, INC., COMPLAINT ANT) COUNTERCLAIMS
an Oregon nonprofit corporation,
12 Claims Stated: Breach of Fiduciary Duty;
Defendant.
Intentional Interference with Business
13 Relations
14 PRAYER: $2,350,000
15 CLAIM NOT SUBJECT TO
MANDATORY ARBITRATION
16
JURY TRIAL REQUESTED
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Defendant Pacific Retirement Services, Inc. (“PRS” or “defendant”) for its
answer, affirmative defenses, and counterclaims to the claims set forth in plaintiffs First
Amended Complaint (“First Amended Complaint”), hereby admits, denies, and alleges as
follows:
1.
In response to paragraph 1, PRS lacks information sufficient to form a belief as to
the truth of the assertion of plaintiffs current residency but admits, based on information and
belief, that plaintiff was a resident of Jackson County during the relevant time period.
Page 1-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
- DAVIS
WRIGHT TREMAINE LLP
1300 SW. Fifth Avenue. Suite 2400
Portland, Oregon 97201-5610
(503) 241 .2300 main - (503) 778-5299 fax

(503)
1 2.
2 PRS admits the allegations in paragraphs 2 and 3.
3 3.
4 In response to paragraph 4, PRS admits that RVM is a CCRC, that RVM was
5 incorporated in 1955, and that RVM serves more than 900 elderly residents, a substantial number
6 of whom are over age 65. PRS admits the allegations in the second sentence of paragraph 4.
7 Except as expressly admitted, PRS denies the remaining allegations in paragraph 4.
8 4.
9 PRS admits the allegations in paragraph 5,
Jo 5.
11 In response to paragraph 6, PRS admits and avers that RVM Housing Corporation
12 hired plaintiff on or about December 15, 1989 and that PRS made plaintiff an Administrator in
13 2000. PRS denies the allegations in the second sentence of paragraph 6. PRS admits the
14 allegations in the third sentence of paragraph 6.
15 6.
16 In response to paragraph 7, that paragraph contains legal conclusions to which no
17 response is required. To the extent a response is required, PRS denies the allegations in
18 paragraph 7.
19 7.
20 In response to paragraph 8, PRS lacks information sufficient to form a belief as to
21 the truth of the allegations contained in that paragraph and on that basis denies the same.
22 8.
23 In response to paragraph 9, PRS admits that Rogue Valley Manor filed a
24 complaint against PRS on August 10, 2012, commencing Case No. 123890-E2 in the Circuit
25 Court of the State of Oregon for Jackson County, which document speaks for itself. Except as
26 expressly admitted, PRS denies any remaining allegations in paragraph 9.
Page 2- ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAThIS
OAVI5 WRIGHT TREMATNE LLP
1300 SW. Fifth Avenue, Suite 2400
Poriland, Oregon 97201-5610
(503) 241-2300 main ‘ 778-5299 fax

1 9.
2 In response to paragraph 10, PRS admits that it placed plaintiff on paid
3 administrative leave on August 10, 2012 and that it issued a letter to plaintiff dated August 10,
4 2012, which document speaks for itself, and which letter stated that plaintiff was on leave
“pending resolution of the matter between [PRS] and [RVM]” and prohibiting him from visiting
6 or accessing RVM premises absent listed circumstances, and from communicating with RVM
7 staff, residents, board members, or attorneys representing RVM. Except as expressly admitted,
8 PRS denies any remaining allegations in paragraph 10.
9 10.
10 In response to paragraph 11, PRS admits that, on information and belief, the RVM
11 Board made a presentation to RVM residents on or about August 15, 2012. PRS lacks
12 information sufficient to form a belief as to the truth of the remaining allegations and on that
13 basis denies the same.
14 11.
15 In response to paragraph 12, PRS admits the allegations in the first sentence of
16 that paragraph. PRS lacks information sufficient to form a belief as to the truth of the allegation
17 in the second sentence of paragraph 12, and on that basis denies the same.
18 12.
19 PRS admits the allegations in paragraphs 13 and 14.
20 (FIRST CLAIM FOR RELIEF)
21 (Breach of Contract)
22 13.
23 In response to paragraph 15, PRS incorporates its responses to paragraphs 1
24 through 14 as though fully set forth herein.
25 14.
26 In response to paragraph 16, PRS admits that it issued a Whistleblower Policy,
Page 3-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
V
- DAvis
WRIGHT TREMAINE LLP
1300 SW. Fifil, Avenue, Suite 2400
Portland, Oregon 97201-5610
(503)241.2300 main (503) 778-5299 fax

j No. 3.1.24 during plaintiffs employment, which document speaks for itself. Except as expressly
2 admitted, PRS denies any remaining allegations contained in paragraph 16.
3 15.
4 PRS denies the allegations in paragraphs 17, 18 and 19.
5 SECOND CLAIM FOR RELIEF
6 (Whistleblowing —
7 16.
ORS
659A.885(Z))
8 In response to paragraph 20, PRS incorporates its responses to paragraphs 1
9 through 19 as though fully set forth herein.
10 17.
11 PRS denies the allegations in paragraphs 21, 22 and 23.
12 THIRD CLAIM FOR RELIEF)
(Breach of Contract)
14 18.
15 In response to paragraph 24, PRS incorporates its responses to paragraphs I
16 through 19 as though fully set forth herein.
17 19.
18 PRS denies the allegations in paragraphs 25, 26, 27, and 28.
19 20.
20 The remainder of plaintiff’s First Amended Complaint contains a prayer for relief,
21 to which no response is required. To the extent a response is required, PRS denies that plaintiff
22 is entitled to any of the relief he seeks.
23 21.
24 Except as expressly admitted herein, PRS denies each and every allegation
25 contained in plaintiff’s First Amended Complaint and the whole thereof.
26 I/
Page 4-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
DAVIS WRIGHT TREMAINE H.P
1300 S.W. PHIl, Avenue. Suite 2400
Portland, Oregon 97202.5620
(503) 241.2300 main (503) 778.5299 fax

22.
2 By alleging the separate and additional defenses set forth below, PRS does not
3 agree or concede that it has the burden of proof or persuasion as to any of these issues. For each
4 affirmative defense below, PRS incorporates its answers to plaintiff’s First Amended Complaint,
5 and further alleges:
6 FIRST AFFIRMATIVE DEFENSE
7 (EstoppellWaiver)
8 23.
9 Plaintiff, by his own acts or omissions, has waived or is estopped in whole or in
10 part from asserting his claims, including because plaintiff did not follow Whistleblower Policy
11 No. 3.1.24 or company policy or procedures in communicating information; acted in violation of
12 his employer’s policies, procedures and expectations; acted in violation of his fiduciary duties to
13 PRS, including by failing to disclose information to PRS, acting against PRS’s interests, and
14 acting to fbrther his own interests at the expense of PRS’s interests; and failed to properly report
is any information of elder abuse as required by PRS or by law.
16 SECOND AFFIRMATIVE DEFENSE
17 (No Performance or Occurrence of a Condition Precedent)
18 24.
19 Plaintiffs First Claim for Relief for Breach of Contract is barred in whole or in
20 part because it is dependent upon conditions precedent that have not occurred or been performed,
21 including that plaintiff did not comply with or utilize the procedures set forth in the alleged
22 policy and plaintiff did not act in good faith.
23 THIRD AFFIRMATIVE DEFENSE
24 (Good Faith/Business Judgment Rule)
25 25.
26 Any act or omission by PRS with respect to plaintiff was ajust and proper
Page 5- ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
V
DAVIS WRIGHT TREMAINE LLP
1300 SW. Fifth Avenue, Suite 2400
Portland, Oregon 97201-5610
(503) 241-2300 main (503) 778-5299 fax

-
DAVIS
exercise of its business judgment and discretion based on reasonable, legitimate and non-
2 retaliatory reasons other than the alleged wrongful conduct.
3 FOURTH AFFIRMATIVE DEFENSE
4 (After-Acquired Evidence)
5 26.
6 To the extent PRS acquired or acquires evidence of wrongdoing by plaintiff,
7 which wrongdoing would have materially affected the terms and conditions of plaintiffs
8 employment or would have resulted in plaintiff receiving a demotion, reduction in pay, or
9 termination, such after-acquired evidence shall bar plaintiff’s claims for liability or damages or
10 shall reduce such claims as provided by law.
11 FIFTH AFFIRMATIVE DEFENSE
12 (No Willful Conduct)
13 27.
14 PRS has not engaged in any unlawful practices, willfully, with malice, or with
15 reckless indifference to plaintiff’s legally-protected rights, and therefore PRS cannot be liable for
16 punitive damages.
17 SIXTH AFFIRMATIVE DEFENSE
18 (No Punitive Damages)
19 28.
20 To the extent that plaintiff’s intended claims for punitive damages are based on
21 verbal or expressive conduct, they are barred by Article 1, § 8 and 10 of the Oregon
22 Constitution, and any punitive damages award would violate constitutional due process.
23 29.
24 PRS reserves the right to amend this Answer to state additional affirmative or
25 other defenses as may be discovered during the pendency of this litigation.
26 I/
Page 6—ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
WRIGHT TREMAINE Lii’
1300 sW. P11th Avenue, Suite 2400
Portland, Oregon 91201-5610
(503) 241-2300 main (503) 778-5299 fax

COUNTERCLAIMS
2 For its counterclaims against plaintiff Kevin McLoughlin (“MeLoughlin”),
3 Pacific Retirement Services, Inc. (“PRS”), alleges:
4 30.
5 PRS incorporates its answers to paragraphs 1, 2, and 3 of plaintiff’s First
6 Amended Complaint.
7 31.
8 McLoughlin has submitted to the jurisdiction of and venue in this Court by
9 bringing the present action and, by his own allegations in his First Amended Complaint, venue is
io proper in Jackson County.
11 32.
12 McLaughlin was employed by PRS as Executive Director of RVM at all relevant
13 times until his termination from employment on August 24, 2012.
14 33.
15 McLoughlin’s duties as a PRS employee included but were not limited to business
16 operations, compliance, reporting, and management of RVM.
17 34.
18 At all material times, Crest Park, Inc. (CPI) was a for-profit corporation and a
19 wholly-owned subsidiary of PRS. CPI has assigned to PRS all claims that CPI possesses against
20 McLoughlin for breach of fiduciary duties.
21 35.
22 McLoughlin was a director of CPI, serving on its Board of Directors until on or
23 aboutJuly2oll.
24 36.
25 In 2011, McLoughlin began communicating with the RVM Board and its
26 attorneys regarding PRS and transactions involving PRS, including sharing certain of PRS’s and
Page 7- ANSWER, AFFJRMATWE DEFENSES AN]) COUNTERCLAIMS
DAVIS WRIGHT TREMMNE LLP
1300 SW. FlUb AVCnLIe, Suite 2400
Poriland. Oregon 97201-5610
(503)241-2300 main (503) 778.5299 fax

i CPI’s internal, confidential, and attorney-client privileged information with the RVM Board and
2 its attorneys without authorization to do so and without disclosing to PP.5 or CPI that he was
3 doing so.
4 37.
5 In 2011, McLoughlin began meeting with the RVM Board and its attorneys
6 regarding the possibility of ousting PRS as the sole member of RVM and also negotiated for a
7 position with an independent RVM.
8 38.
9 On or about May 1, 2012, following communications with McLoughlin, RVM
io provided notice to PRS that it intended to remove PRS as RVM’s sole member in contravention
II of RVM’s bylaws.
12 39.
On or about August 10, 2012, RVM filed a complaint against PRS, commencing
14 case No. 123 890-E2 in the Circuit Court of the State of Oregon for Jackson County, and PRS
15 was thereafter notified that the Rogue Valley Manor Residents Steering Committee intended to
16 file a class action lawsuit against PRS.
17 FIRST CLAIM FOR RELIEF
18 (Breach of Fiduciary Duty)
19 40.
20 PRS realleges paragraphs 30-39.
21 41.
22 At all relevant times, McLoughlin was employed by and was an agent of PRS,
23 which was McLoughlin’s principal.
24 42.
25 McLoughlin’s job duties and agency included acting as the executive director of
26 RVM and included communicating with the RVM Board as a PRS employee and agent.
PageS —ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
V
- 1300
DAl5 WRIGHT TREMAINE LLP
SW. Fifth Avenue, Suite 2400
Portland, Oregon 91201.5610
(503) 241.2300 mifl (503) 178-5299 fax

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43.
McLoughlin knew that PRS and RVM had adverse interests with respect
to
3
4
certain transactions and agreements between the parties, and knew that CPI and RYM had
adverse interests with respect to certain transactions involving CPI.
5 44.
6
7
McLoughlin provided information to the RVM Board and its attorneys regarding
matters on which PRS and RVM had adverse interests, despite knowing of those adverse
8
interests, and provided information
to
the RVM Board and its attorneys regarding matters on
9
which CPI and RVM had adverse interests, despite knowing of those adverse interests.
10 45.
11
12
RVM Board and
McLoughlin failed
its
to
attorneys; failed
keep PRS and CPI informed of his communications with the
to
keep PRS and
CPT
informed of his acts or omissions with
13
respect
to
PRS and CPI; and failed
to
keep PRS informed of the fact that RVM was preparing
14
litigation against PRS.
15 46.
16
17
career
as
McLoughlin desired
an executive of
an
to
independent RVM.
separate the PRS and RVM entities
to
ftrther his own
18 47.
19
As
an
agent of PRS, McLoughlin owed PRS the fiduciary duties of loyalty, due
20
care, and good faith and fair dealing.
21 48.
22
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As a director of CPI, McLoughlin owed CPI the fiduciary duties of loyalty, due
care, and good faith and fair dealing.
24 49.
25 In
communicating with, in sending internal, confidential
or
attorney-client
26
privileged information to, and
in
otherwise working with the RVM Board and its outside
Page
9-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
DAVIS WRIGHT TREMAINE LLP
1300 SW. FifEl, Avenue, Suite 2400
Poriland, Oregon 97201-5610
(503) 241.2300 main - (503) 778-5299 fax

i counsel, McLoughlin breached his fiduciary duties to PRS and CPI in one or more of the
2 following ways:
3 (a) by working on behalf of a third party with interests adverse to those of PRS
4 and CPI, which constituted a conflict of interest in breach of his duty of loyalty;
s (b) by working against and at the expense of PRS’s interests for his own self-gain
6 and to advance his own interest, which constituted self-dealing in breach of his duty of loyalty;
7 (c) by failing to use reasonable efforts to keep PRS and CPI fUlly informed of
8 material facts within the scope of his employment or agency, which constituted a failure to
9 disclose in breach of his duty of care;
10 (d) by sharing certain information without authorization by PRS or CPI, failing to
11 be candid with PRS and CPI about his conduct, and instigating antagonism between PRS and
12 RVM, all to the detriment of PRS and CPI, in breach of his duty of good faith and fair dealing.
13 50.
14 As a result of McLoughlin’s acts and omissions, PRS has been damaged.
15 51.
16 PRS’s damages include the attorney fees and costs incurred in litigation with the
17 RVM Board in Case No. 123890-E2 in the Circuit Court of the State of Oregon for Jackson
18 County and in a purported class action threatened by certain RVM residents in the approximate
19 amount of $450,000; reimbursement of attorney fees to the client trust account for the RVM
20 Residents Steering Committee, pursuant to Section 7.1 of the Settlement Agreement reached
21 following the threatened class action, in the approximate amount of $300,000; loss of revenue in
22 the approximate amount of $1.6 million over a three-year period due to reduced management
23 fees that PRS charges to RVM as a result of the Settlement Agreement; and reputational
24 damages in an amount to be proven at trial, together with prejudgment interest.
25 52.
26 As a result of McLoughlin’s acts and omissions, CPI has been damaged.
Page 10- ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
-
DAVIS
WRIGHT TREMAINE LU’
1300 SW. Fifth Avenue. Suite 2400
Portland, Oregon 97201.5610
(503) 241-2300 main ($03) 778-5299 fax

1 53.
2 CPI’s damages include the cost of an appraisal, together with any required
3 reimbursement to RVM, pursuant to Paragraph 5.0 of the Settlement Agreement and Release that
PRS entered into with various parties, in an amount to be determined at trial, as well as
5 reputational damages caused by McLoughlin’s conduct, together with prejudgment interest.
6 SECOND CLAIM FOR RELIEF
7 (Intentional Interference with Business Relations)
8 54.
9 PRS realleges paragraphs 30-40 and 42-51.
10 55.
11 At all relevant times, PRS had a business relationship with RVM, by virtue of
12 being RVM’s sole member, and provided services to RVM pursuant to a management services
13 agreement.
14 56.
15 McLoughlin’s duties as executive director of RVM did not include negotiating the
16 scope or existence of PRS’s relationship with RVM.
17 57.
18 McLoughlin intentionally interfered with PRS’s relationship with RVM by
i persuading RVM to engage in corporate maneuvers that threatened to oust PRS as RVM’s
20 member and terminate the existing business relationship between PRS and RVM.
21 58.
22 McLoughlin acted against PRS ‘ s interests and with no purpose to benefit PRS.
23 59.
24 McLoughlin acted for the sole purpose of personally benefiting himself as the
25 director of a new, independent RVM.
26 I/
Page 11-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
DAVIS WRIGHT TREMAINE LLP
1300 SW. Fifth Avenue, Suile 2400
Portland, Oregon 97201.5610
(503) 241-2300 main (503) 778.5299 fax

1 60.
2 McLoughlin’s improper persuasion of the RVM board was in violation of his
3 fiduciary duties of loyalty, care, and good faith and fair dealing to PRS.
4 61.
5 As a result of McLoughlin’s interference, RVM attempted to sever its relationship
6 with PRS.
7 62.
8 But for McLoughlin’s actions, RVM would not have attempted to sever its
9 relationship with PRS.
10 63.
11 As a result of MeLoughlin’s acts and omissions, PRS has been damaged.
12 64.
13 PRS’s damages include the attorney fees and costs incurred in litigation with the
14 RVM Board in Case No. 123890-E2 in the Circuit Court of the State of Oregon for Jackson
is County and in a purported class action threatened by certain RVM residents in the approximate
16 amount of $450,000; reimbursement of attorney fees to the client trust account for the RVM
17 Residents Steering Committee, pursuant to Section 7.1 of the Settlement Agreement reached
is following the threatened class action, in the approximate amount of $300,000; loss of revenue in
19 the approximate amount of $1.6 million over a three-year period due to reduced management
20 fees that PRS charges to RVM as a result of the Settlement Agreement; and reputational
2 I damages in an amount to be proven at trial, together with prejudgment interest.
22 WHEREFORE, having fully answered plaintiff’s First Amended Complaint and
23 asserted its counterclaims, PRS prays for judgment as follows:
24 1. Denying plaintiff any relief and dismissing plaintiffs First Amended
25 Complaint with prejudice;
26 2. Awarding PRS its costs, disbursements and reasonable attorney fees
Page 12-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
DWT 22243 121v8 0053654.000027
DAVIS WRiGHT TREMAINE LLP
1300 SW. Fifth Avenue, Suite 2400
Portland, Oregon 97201.5610
(503) 241.2300 main (503) 778.5299 tax

i
incurred herein;
2 3. On its Counterclaims, awarding PRS economic damages in the amount of
3 S2,3 50,000 and amounts to be proven at trial, together with prejudgment interest; and
4 4. For such other and further relief as this Court deems just and equitable.
5
6 DATED this 10 th day of July, 2013.
7 DAVIS WRIGHT TREMAINE LLP
8
By S4k5
9 J
CAROL J. BERNICK, OSB #894098
carolbernick(dwt.com
10
ROBERT P. NEWELL, OSB #790917
bobnewelldwt.com
11
CHRISTIE S. TOTTEN, OSB #085890
12 chjjstietotten@dwt.com
Telephone: 503.241.2300
13 Facsimile: 503.778.5299
Of Attorneys for Defendant
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Page 13- ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
- DAVIS
WRIGHT TREMAINE LLP
1300 SW Fifth Avenue. Suite 2400
Portland, Oregon 97201.5610
(503) 241-2300 main (503) 778.5299 fax

1 CERTIFICATE OF SERVICE
2 I hereby certify that I served a copy of the foregoing DEFENDANT’S ANSWER
3 AND AFFIRMATIVE DEFENSES TO PLAINTIFF’S FIRST AMENDED COMPLAINT
4 AND COUNTERCLAIMS on:
6
10
ffiehd S. Yugler
Jason A. Wright
Landye Bennett Blumstein LLP
7 1300 SW 5th Avenue, Ste. 3500
Portland, OR 97201
8 Tel: 503224-4100x107
Fax: 503 224-4133
Email: ryuglerä1bb1awyers.com
jwright’abblawyers.com
11 Attorneys for Plaintiff
12 H by mailing a copy thereof in a sealed, first-class postage prepaid envelope,
addressed to said attorney’s last-known address and deposited in the U.S. mail at Portland,
13 Oregon on the date set forth below;
14
15 above on the date set forth below;
by causing a copy thereof to be hand-delivered to said addresses as shown
16 H by faxing a copy thereof to said attorney at his/her last-known facsimile
17
number on the date set forth below.
18 DATED this 10
Ih day of July, 2013.
19 DAVIS WRIGHT TREMAINE LLP
20
By A&Cs
21 CAROL J. BERNICK, OSB #894098
22
23
carolberniek@dwt.com
ROBERT D. NEWELL, 0513 # 790917
bobnewe11Ødwt.corn
CHRISTIE S. TOTTEN, 058 #085890
24 christietottencdwt.com
Telephone: 503.241.2300
25 Facsimile: 503.778.5299
26
Of Attorneys for Defendant
Page 14-ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
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DAI5
WRIGHT TREMAINE LLP
1300 SW. Fifth Avenue, Suite 2400
Portland, Oregon 97201.5610
(503) 241 -2300 main (501) 778-5299 fax