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Cases decided October 9, 2008
M. M. Knepper, et al., v. Timothy Brown, M.D., et al., (TC 9903-02495) (CA A128550)
On review from the Court of Appeals in an appeal from the Multnomah
County Circuit Court, Janice R. Wilson, Judge. 213 Or App 598, 162 P3d 1026 (2007).
The decision of the Court of Appeals and the judgment of the circuit court are affirmed.
Opinion of the Court by Justice W. Michael Gillette. Justice Rives Kistler did not
participate in the consideration or decision of this case.
Today, in a fraud action brought by a liposuction patient against a publisher
of a Yellow Pages directory, alleging that the publisher had misrepresented a liposuction
provider's qualifications, the Oregon Supreme Court held that the Multnomah County
Circuit Court properly had denied the defendant's motions for a directed verdict and for
judgment notwithstanding the verdict. The Court held that, contrary to the defendant's
assertions, a factfinder reasonably could conclude from the evidence presented at trial
that the claimed damages were a reasonably foreseeable result of the alleged
The case arose when plaintiff, M.M. Knepper, was injured in the course of
cosmetic liposuction surgery performed by Timothy Brown, M.D. Knepper believed that
Brown was a board-certified plastic surgery when she retained him to perform the
surgery. That belief arose, in part, from Brown's advertisement in defendant Dex's
Yellow Pages directory, which Knepper had seen when she was looking for a provider.
The advertisement appeared in the "Physicians and Surgeons" heading of the directory,
under the subheading "Surgery, Plastic and Reconstructive," and it identified Brown as
After Knepper was injured, she and her husband brought an action against
Brown and Dex, alleging claims of medical malpractice and fraud. Brown settled with
plaintiffs, but the fraud claims against Dex proceeded to trial. There, plaintiffs presented
evidence that a Dex representative had worked closely with Brown on the Dex
advertisement, and that, although the Dex representative knew that Brown was not board
certified in plastic surgery, he had recommended that the advertisement be placed under
the plastic surgery subheading with the "board certified" designation. In the course of the
trial, Dex moved for a directed verdict and, later, after the jury returned a verdict for
plaintiffs, for a judgment notwithstanding the verdict (JNOV). The trial court denied
both motions and entered judgment for plaintiffs.
Dex appealed, arguing that the trial court had erred in denying its directed
verdict and JNOV motions, but the Court of Appeals affirmed the trial court judgment.
Dex then sought review.
In a unanimous opinion by Justice W. Michael Gillette, the Court affirmed.
The Court first considered Dex's contention that plaintiffs were required, and failed, to
present evidence showing that the claimed damages were a reasonably foreseeable result
of the alleged misrepresentation. The Court agreed with Dex that plaintiffs had to
establish foreseeability, but it held that plaintiffs had presented testimony from which
foreseeability could be implied. The Court also rejected Dex's suggestion that Article I,
section 8 of the Oregon Constitution required a different, more stringent standard be
applied to claims arising out of false or misleading advertisements. The Court noted that
Dex allegedly had taken a knowing and active part in the perpetration of fraud, and that
Oregon's free expression guarantee did not extend to fraud.
Barbara Parmenter Living Trust v. Steve Lemon, et al., (TC 12-02-23704) (CA A126429)
On review from the Court of Appeals in an appeal from the Lane County
Circuit Court, Karsten H. Rasmussen, Judge. 212 Or App 669, 159 P3d 1174 (2007).
The decision of the Court of Appeals is reversed. The supplemental judgment of the
circuit court is reversed, and the case is remanded to the circuit court for further
proceedings. Opinion of the Court by Justice Rives Kistler.
Today, in a case involving the right to attorney fees in a landlord-tenant
dispute, the Supreme Court held that trial courts must weigh the factors listed in ORS
20.075 when determining whether to award attorney fees in a landlord-tenant action
under ORS 90.255. Because the trial court did not properly weigh the factors, the Court
reversed the Court of Appeals and the circuit court and remanded to the circuit court for
Landlord brought an action against tenants, alleging claims for breach of
the rental agreement and waste. Tenants answered and alleged counterclaims for
unlawful entry, ouster, unlawful disposition of personal property, and unlawful debt
collection practices. After a bench trial, the trial court ruled in landlord's favor on its
claim for breach of the rental agreement and ruled in tenants' favor on their unlawful
entry and ouster counterclaims. The court ruled against both parties on their remaining
claims. The court entered a general judgment reflecting those rulings.
After the court entered the general judgment, both parties sought prevailing
party fees, costs, disbursements, and attorney fees. Although tenants and landlord were
both eligible as prevailing parties to recover their attorney fees under ORS 90.255, the
trial court declined to award either party any fees. Tenants appealed, but the Court of
Appeals, in a divided opinion, affirmed the trial court. The tenants petitioned and were
granted review by this Court.
In a unanimous opinion by Justice Rives Kistler, the Supreme Court
reversed the ruling of the trial court. The Court noted that a trial court has discretion
under ORS 90.255 to grant attorney fees in a landlord tenant dispute, but held that the
trial court misapplied the ORS 20.075 factors that it was required to use in making its
decision. Specifically, the Court held that although a trial court has the discretion to
reduce an award if claimed attorney fees are excessive, the size of the attorney fees
compared to the fee-generating claim does not warrant a denial of attorney fees. The
legislature authorized courts to award attorney fees in landlord-tenant actions to
encourage litigants to vindicate their statutory rights, even though the amount recovered
may be minor. The Court also observed that awarding attorney fees to a prevailing party
does not encourage non-meritorious claims, as an award of attorney fees is only granted
if the claim is in fact meritorious.
Because the Court could not determine whether the trial court would have
come to the same conclusion with a legally permissible interpretation of the factors set
forth in ORS 20.075, the Court reversed the Court of Appeals and the supplemental
judgment of the circuit court and remanded the case for further proceedings.
In re Complaint as to the Conduct of Ronald D. Schenck, (OSB 05-127, 05-128)
On review from the decision of a trial panel of the Disciplinary Board. The
accused is suspended from the practice of law for one year, commencing 60 days from
the date of filing of this decision. Opinion of the Court Per Curiam.
Today, the Supreme Court suspended Ronald D. Schenck (the accused)
from the practice of law for one year as a sanction for committing multiple violations of
the Code of Professional Responsibility Disciplinary Rules (DR) and one violation of the
Oregon Rules of Professional Conduct (RPC). The accused violated: DR 5-101(A)(1)
(prohibiting conflict of lawyer's self-interest); DR 5-104(A) (limiting business relations
with clients); DR 5-105(E) (prohibiting multiple current client conflict of interest); DR 5-
101(B) (barring preparation of instrument giving lawyer or person related to lawyer any
substantial gift from unrelated client); and RPC 8.1(a)(2) (requiring response to lawful
demand for information from a disciplinary authority).
The Bar charged that the accused violated DR 5-101(A)(1) when he
undertook to collect a third-party debt for his client while contemporaneously
renegotiating his own $8,500 debt with that client, without first obtaining consent.
According to the rule, unless his client consented after full disclosure, the accused could
not accept or continue employment if the exercise of his professional judgment on behalf
of his client would be or reasonably may have been affected by his own financial interest.
Contrary to the position of the accused, the Court concluded that a lawyer-client
relationship existed between the accused and his client. The Court further agreed with
the Bar that the accused's personal financial interest reasonably may have affected his
professional judgment, requiring his client's consent to that representation. The accused
did not obtain his client's consent, as required by the rule, and therefore violated DR 5-
The Bar charged that the accused violated DR 5-104(A) when he entered
into a loan agreement with his client, without first obtaining her consent. The accused
had renegotiated his $8,500 debt that included new terms to reduce his interest rate and
extend the maturity date of his preexisting debt to his client. According to the rule,
unless his client consented after full disclosure, the accused could not enter into a
business transaction with his client where they had differing interests and where the client
expected the accused to exercise his professional judgment for the client's protection.
The Court concluded that the accused and his client had differing interests in the loan
transaction and that the accused did not overcome the presumption that his client relied
on his professional judgment in negotiating the loan. The Court explained that, in the
absence of a contrary expression by his client, when a lawyer seeks to borrow money
from a non-lawyer client, who is not in the business of lending money, the lawyer must
assume that his client is relying on his professional judgment to the same extent that a
client would rely on the lawyer for advice concerning a loan to a third party. The
accused's assertion that his client was a strong-willed 85-year-old with a mind of her own
did not persuade the Court that the accused had provided sufficient evidence of the
needed "contrary expression." The Court agreed with the Bar that the accused was
required to obtain his client's consent after full disclosure before he entered into that
business transaction with her. His failure to do so violated DR 5-104(A).
The Bar charged that the accused violated DR 5-105(E) when he prepared
wills for two clients, who were sisters, knowing that they had an actual conflict. The
accused had prepared the wills knowing that they had an actual conflict as to how they
would each dispose of their estates. According to the rule, the accused could not
represent multiple current clients in any matters when such representation would result in
an actual conflict. The Court agreed with the Bar that the accused violated DR 5-105(E)
when he prepared those wills for the sisters, knowing that they had an actual conflict.
The Bar charged that the accused violated DR 5-101(B) when he prepared a
will for his client that included a gift of antiques and furniture, worth $1,000, to the
accused's wife and that also provided that the accused's wife would receive one-half of
the client's residual estate. According to the rule, the accused could not prepare an
instrument giving the lawyer, or a person related to the lawyer as parent, child, or spouse,
any substantial gift from a non-related client. The Court concluded that, regardless of the
potential value of his client's residual estate, the $1,000 value of the gift of furniture and
antiques was "substantial" within the meaning of the rule. Accordingly, the Court
concluded that the accused violated DR 5-101(B).
In the final matter, the Bar alleged that the accused violated RPC 8.1(a)(2)
when he failed to respond to the Bar's request for information regarding the debt that he
owed to his client. According to the rule, a lawyer shall not knowingly fail to respond to
a lawful demand for information from a disciplinary authority, in connection with a
disciplinary matter. The accused asserted that the Bar did not make a lawful demand for
the information. The Court explained that the Bar has the authority to investigate when it
has been presented with factual allegations that raise an arguable complaint of
misconduct. The Court concluded that the accused violated RPC 8.1(a)(2) by refusing
the Bar's two specific demands for information about his debt to his client.
In its per curiam decision, the Court concluded that clear and convincing
evidence supported each charge. The Court suspended the accused from the practice of
law for one year, effective 60 days from the filing date of the Court's decision.