Legal Malpractice Claim Reinstated

The Oregon Supreme Court reversed and remanded a previously dismissed legal malpractice claim.

This is a legal malpractice and negligent misrepresentation case where we review a trial court judgment directing a verdict in favor of Platten (defendant). In an earlier lawsuit, defendant had represented the Harknesses (plaintiffs) against Kantor, a loan officer, and her successive employers, Sunset Mortgage (Sunset) and Directors Mortgage, Inc. (Directors), as the result of a fraudulent investment and loan scheme directed at plaintiffs by Kantor. That case did not settle to plaintiffs’ satisfaction, and plaintiffs sought to recover their remaining loss from defendant. In this case, the trial court granted defendant’s motion for a directed verdict based on the conclusion that plaintiffs’ liability theories of apparent authority and respondeat superior asserted against Sunset and Directors were not supported by sufficient evidence in the record and could not have led to a result more favorable than the settlement. Plaintiffs appealed the trial court ruling, and the Court of Appeals affirmed. Harkness v. Platten, 270 Or App 260, 348 P3d 1145 (2015). For the reasons explained below, we reverse the decisions of the trial court and the Court of Appeals.

As to the evidence of apparent authority

We conclude… that the Court of Appeals made two missteps in determining that Sunset and Directors had made no manifestations from which plaintiffs could reasonably have concluded that Kantor was authorized to perform the acts constituting the fraudulent scheme. First, the court disregarded evidence concerning the actual authority with which Sunset and Directors clothed Kantor. Second, the court does not appear to have considered evidence in the record relating to the usual or customary authority of a loan officer for a mortgage company…

Viewing that evidence in the light most favorable to plaintiffs, we conclude that a reasonable factfinder could infer that Sunset and Directors manifested their assent to be bound by the acts of Kantor through the observable connections between Kantor and those organizations…

We further conclude that a reasonable factfinder could infer from the evidence that it was reasonable for plaintiffs to believe that Kantor was authorized—as a loan officer for Sunset and Directors—to engage in the investment and loan scheme on behalf of those companies. In particular, a factfinder could infer that plaintiffs reasonably believed that Kantor’s actions were part of her usual or customary authority as a loan officer hired by Sunset and Directors to make and arrange loans on behalf of the mortgage companies.

Thus

Based on the evidence we have discussed in relation to plaintiffs’ theory of apparent authority, we also conclude that a factfinder could infer that the requirements for holding an employer vicariously liable under the doctrine of respondeat superior are met in this case.

(Mike Frisch)