Case Title: Vandermay v. Clayton

Citation: 

Docket Number: S44717

State: oregon

Court: Oregon Supreme Court

Date: 1999-07-15T00:00:00Z

Document:
Filed:  June 11, 1999

IN THE SUPREME COURT OF THE STATE OF OREGON

LARRY J. VANDERMAY and TAMARA 

VANDERMAY, husband and wife, 

and FLYING DUTCHMAN ENTERPRISES, an Oregon

corporation,

		Respondents on Review,

	v.

PAUL D. CLAYTON,

	Petitioner on Review.

(CC 92-2104; CA A91235; SC S44717)

	En Banc

	On review from the Court of Appeals.*

	Argued and submitted November 9, 1998.

	Thomas W. Brown, of Cosgrave, Vergeer & Kester, LLP,
Portland, argued the cause for petitioner on review.  With him on
the briefs was Barbara L. Johnston of Brisbee & Stockton.

	Jeanyse R. Snow, of Snow & Snow, Astoria, argued the cause
and filed the brief for respondents on review.

	LEESON, J.

	The decision of the Court of Appeals is affirmed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.

	*Appeal from Tillamook County Circuit Court,

	Rick W. Roll, Judge.

	147 Or App 95, 935 P2d 1221 (1997).

	LEESON, J.

	In this legal malpractice action, the question is
whether the trial court erred in granting defendant's motion for
a directed verdict on the ground that, without expert testimony,
the jury could not have found that defendant had been negligent. 
The Court of Appeals held that expert testimony was not necessary
and reversed the trial court.  Vandermay v. Clayton, 147 Or App
95, 935 P2d 1221 (1997).  For the reasons that follow, we affirm.

	We review the trial court's grant of a directed verdict
for errors of law, considering the evidence in the light most
favorable to plaintiff,(1) the party against whom the verdict was
entered.  Mauri v. Smith, 324 Or 476, 479, 929 P2d 307 (1996). 
In that light, the facts are as follows:  Plaintiff worked for a
major oil company for many years in a variety of capacities,
including as a dealer representative, training instructor, and
territory manager.  While working for that company in California,
plaintiff and Bob Wester decided that they would like to buy an
oil company in Oregon.  In 1977, they formed the VanWest Oil
Company (VanWest) and negotiated the purchase of Macklin Oil
Company (Macklin) in Tillamook.  After they had made a tentative
agreement for the purchase of Macklin, plaintiff and Wester
employed defendant, a Eugene lawyer and Wester's brother-in-law,
to "[handle] the legalese with the Macklins' attorney and put the
deal together."  In addition to buying Macklin, which consisted
of two bulk oil plants and several service stations, VanWest
leased several other service stations and entered into several
supply contracts to deliver gasoline and petroleum products in
the area.  

	After the purchase of Macklin, plaintiff and his wife
moved to Tillamook.  Defendant served as plaintiff's corporate
and personal lawyer from 1977 until March 1990, and plaintiff
relied on defendant's legal advice.  During plaintiff's ownership
of VanWest, the corporation acquired additional service stations
and entered into more supply agreements.  In 1983, Wester sold
his shares in VanWest to plaintiff, and defendant represented
both parties in that transaction. 

	In 1986, plaintiff decided to sell VanWest, and he
listed it with a real estate company in Lake Oswego.  Three years
later, VanWest still was on the market, and plaintiff continued
to operate and expand its business.  By the end of 1989, VanWest
had doubled in size from what it was in 1977, and plaintiff had
made improvements at several of its properties, including
upgrading tanks and lines, adding car washes at service stations,
and putting in a new fuel island at one of the service stations. 
In the spring or summer of 1989, plaintiff was planning to tear
down and replace a service station and add a convenience store on
West Marine Drive in Astoria (Astoria site).  Those plans
included applying for a loan of over $400,000 to finance the
project and working with City of Astoria planning and zoning
staff to acquire the necessary permits.  

	By the end of the 1980s, environmental rules affecting
underground storage tanks were being implemented at both the
national and state levels.  Plaintiff realized that the bank loan
for the Astoria site upgrade would not be approved without an
environmental assessment.  Consequently, in October 1989, he
hired a company to conduct soil tests at the Astoria site.  Those
tests revealed soil contamination at depths of five, ten, and
fifteen feet.  Plaintiff believed that the contamination had been
caused by small spills from storage tank filling over the years
and that it would not cost much to clean it up.  Plaintiff did
not report the results of the soil tests to the Department of
Environmental Quality (DEQ).

	In October 1989, David Harris expressed an interest in
buying VanWest.  He submitted a written offer to plaintiff on
December 19.  Paragraph 11 of the offer included an
indemnification provision requiring plaintiff to hold Harris
harmless "against any claims, environmental or otherwise"
existing before the sale.  The indemnification provision also
stated that Harris would accept the 1989 soil test report that
showed some contamination at the Astoria site and that, regarding
that site, plaintiff's "indemnity under this paragraph will apply
to the contamination conditions described therein." 

	Negotiations for the sale of VanWest continued for
several weeks after Harris submitted his written offer, and
defendant represented plaintiff in those negotiations.  In
January 1990, plaintiff learned that his loan application for the
Astoria site upgrade had been rejected.  Plaintiff also learned
that there was contamination at a VanWest bulk plant site, but he
had insurance coverage for any environmental contamination there,
subject to a $25,000 deductible.  Plaintiff was concerned about
the continuing liability that he might face at the Astoria site
because he knew that, under paragraph 11 of Harris's offer to
purchase VanWest, Harris refused to be responsible for any
cleanup at that site.  Plaintiff estimated that it would cost
about $2,500 to clean up the contamination that was discovered at
the Astoria site in 1989.  However, to "make the deal fly" with
Harris, plaintiff agreed that he would pay up to $5,000 to clean
up that site.  Plaintiff was not willing to be responsible for
more than $5,000 for that cleanup.  He instructed defendant to
draft a separate indemnity agreement for the sale of VanWest that
limited his liability to $5,000 for cleaning up the Astoria site. 

	Consistent with plaintiff's instructions, on February
26, 1990, defendant submitted to Harris an indemnity agreement 
that provided, in part:		

"Notwithstanding that Harris Enterprise, Inc. has
accepted the environmental report concerning [the
Astoria site], the indemnification agreement contained
in Paragraph 11 shall apply to any cleanup costs or
costs of remediation of the condition existing therein,
* * * in an amount up to, but not exceeding, the sum of
$5,000.00."

	The sale of VanWest to Harris closed on March 1, 1990. 
The transaction included the sale of most of VanWest's holdings,
but it also included some lease-backs to VanWest, an employment
contract for plaintiff, a noncompetition agreement, and an
indemnity agreement.  Because of the large number of documents
that had to be signed, the closing lasted for more than two
hours.  During the closing, Harris informed plaintiff that the
indemnity agreement that defendant had drafted was unacceptable
to Harris.  Plaintiff gave no indication to defendant that, in
light of Harris's rejection of that indemnity agreement,
plaintiff was willing to be responsible for more than $5,000 to
clean up the Astoria site.  Harris had his lawyer prepare a
different indemnity agreement covering both the bulk site where
contaminates had been discovered and the Astoria site.  That
agreement provided:

"The parties further understand that there is no
insurance coverage available for the costs of any
cleanup and remedial action at the Astoria site.  As
between the parties hereto, it is agreed that VanWest
shall not be required to expend more than the sum of
$5,000 for any costs of cleanup and remedial action at
the Astoria site; provided, however, it is understood
and agreed that VanWest may be liable for such costs in
excess of $5,000 under applicable environmental federal
and state laws." 

	Plaintiff read the agreement and saw that "it said
$5,000 liability."  He testified that he looked down the table at
defendant, who indicated, apparently by the nod of his head, that
it was "okay for [plaintiff] to sign it."  Plaintiff signed the
new indemnity agreement and the other documents, thereby
completing the sale of VanWest to Harris.  Plaintiff testified
that he would not have proceeded with the sale of VanWest if he
had known that he would be liable for "something much greater"
than $5,000 to clean up the Astoria site.(2)

	In October 1990, additional soil tests at the Astoria
site revealed substantial contamination.  In December, petroleum
fumes were detected in an apartment building adjacent to the
Astoria site.  At that time, under one of the agreements that the
parties had signed as part of the sale of VanWest, Harris
employed plaintiff as an environmental control officer. 
Plaintiff began an investigation and soon discovered that the
contamination at the Astoria site was extensive.  The DEQ
informed plaintiff that he should have reported the soil
contamination that was discovered in 1989, and it ordered both
plaintiff and Harris to clean up the site. 

	In subsequent litigation between plaintiff and Harris,
plaintiff contended that his liability for cleaning up the
Astoria site was limited to $5,000, and Harris contended that
plaintiff's liability was unlimited.  The trial court found that
the indemnity agreement that Harris's lawyer had drafted, which
plaintiff and Harris signed on March 1, 1990, was ambiguous. 
Ultimately, plaintiff and Harris settled their litigation,
agreeing to share equally the costs of cleaning up the Astoria
site.  Plaintiff's share of the cost was over $585,000.

	Plaintiff brought this action against defendant,
alleging legal malpractice and seeking $585,895.02 in damages.  
At trial, plaintiff called one expert witness, a lawyer who, at
that time, had specialized in environmental law for over 25 years
at a large law firm in Portland.  Plaintiff asked the expert if
he had an opinion about what a lawyer in defendant's position,
exercising due care, skill, and diligence in representing his
client, would have done regarding the indemnity agreement that
Harris presented to plaintiff on March 1, 1990.  Defendant
objected to that question on the ground that plaintiff had failed
to lay an adequate foundation.  According to defendant, plaintiff
had failed to establish whether the expert was familiar with the
quality of care that ordinarily is exercised by general
practitioners in small law firms.  The trial court excused the
jury and conducted a hearing pursuant to OEC 103(3) and OEC 104(4) to
determine whether an adequate foundation existed for the expert's
opinion testimony.

	In that hearing, the expert testified that he did not
know the standard of care that would apply to a practitioner in
defendant's circumstances but that there were others in his firm
who did business with small firm practitioners.  Plaintiff did
not make an offer of proof regarding the expert's opinion about
whether defendant's conduct breached the applicable standard of
care.  

	The trial court concluded that the foundation for the
expert's testimony was inadequate, because the expert was not
personally aware of the standard of care applicable to general
practitioners who provide advice in circumstances like those
presented in this case.  The court therefore sustained
defendant's objection.  Plaintiff then rested his case.

	Defendant moved for a directed verdict under ORCP 60,(5)
arguing that, without expert testimony on whether defendant had
breached the standard of care, plaintiff had failed to present
sufficient evidence.  Plaintiff responded that no expert
testimony was required because defendant's negligence was a
simple matter of defendant's failure to secure an indemnity
agreement that limited plaintiff's liability for cleaning up the
Astoria site to $5,000.  The trial court granted defendant's
motion.  It held that expert testimony was required, because it
is not within the common knowledge of jurors what a lawyer in
defendant's position should have done in the circumstances
presented by this case.(6) 

	On plaintiff's appeal, the Court of Appeals held that,
on the record, and absent an offer of proof by plaintiff, it
could not tell what the expert's testimony would have been
regarding the reasonableness of defendant's actions in
negotiating or drafting the indemnity agreement.  Vandermay, 147
Or App at 98.  Consequently, it held that any error in excluding
the expert's testimony would not justify reversal.  Id. at 99.(7) 

	However, the Court of Appeals agreed with plaintiff
that, in this case, expert testimony was not required, because
defendant "either did or did not comply" with plaintiff's
specific instructions to draft an indemnity agreement that would
limit plaintiff's liability at the Astoria site to $5,000.  Id.
The Court of Appeals therefore reversed the trial court.  Id.(8) 

	We granted defendant's petition for review to address
whether, on these facts, plaintiff was required to offer expert
testimony regarding whether defendant's conduct fell short of the
required standard of care.  According to defendant, expert
testimony was required, because "what a reasonably careful
attorney would have done is not something jurors are capable of
answering on their own."  Plaintiff responds that no expert
testimony was required because, "[w]hen an attorney fails to
follow a client's specific instruction, a jury using ordinary
knowledge may be competent to consider the matter without the
assistance of expert testimony." 

	Defendant's motion for a directed verdict raised a
question of law for the trial court, namely, whether plaintiff
was required to present expert testimony to establish that
defendant had breached the standard of care.  See Godell v.
Johnson, 244 Or 587, 590-91, 418 P2d 505 (1966) (motion for
directed verdict asserts, as a matter of law, that evidence
adduced by opposing party is not sufficient to submit issue to
jury).  A directed verdict for defendant was proper if plaintiff
failed to present sufficient evidence regarding whether
defendant's conduct fell below that required by the standard of
care.  See Yamaha Store of Bend, Inc. v. Yamaha Motor Corp., 310
Or 333, 337, 798 P2d 656 (1990) (denial of motion for directed
verdict proper if plaintiff presented sufficient evidence on
issue). 

	This court has not addressed whether expert testimony
is required in legal malpractice actions to establish breach of
the standard of care.  However, this court has held that, "in
most charges of negligence against professional persons, expert
testimony is required to establish what the reasonable practice
is in the community."  Getchell v. Mansfield, 260 Or 174, 179,
489 P2d 953 (1971).  Specifically, expert testimony is required
if the issues are not within the knowledge of the ordinary lay
juror.  Id.; see also Tiedemann, 299 Or at 249 (expert testimony
required regarding explanation that physician should have given
to patient to receive informed consent); Lynd v. Rockwell
Manufacturing, 276 Or 341, 349, 554 P2d 1000 (1976) (in design
defect case, expert testimony required where issues were
technical and beyond common knowledge and experience of average
juror).  Expert testimony is not required if, without an expert's
opinion, the jury is capable of deciding whether the
professional's conduct was reasonable.  Getchell, 260 Or at 179-80.  

	With respect to the need for expert witness testimony,
legal malpractice actions are no different from other
professional malpractice actions.  Whether expert testimony is
necessary to establish that a defendant's conduct fell below the
standard of care is a legal question that the court must
determine by examining the particular malpractice issues that the
case presents. 

	Viewed in the light most favorable to plaintiff, the
evidence in this case is that plaintiff told defendant that he
wanted to limit his liability to $5,000 for cleaning up the
contamination at the Astoria site, and he instructed defendant to
prepare an indemnity agreement to accomplish that goal. 
Defendant understood that a limit on plaintiff's liability for
cleaning up that site was a critical condition that plaintiff had
placed on the sale of VanWest to Harris.  Viewing the evidence in
the light most favorable to plaintiff, plaintiff would not have
sold VanWest if he had understood that he would be liable after
the sale for substantially more money to clean up the Astoria
site.  Harris rejected the indemnity agreement that defendant had
drafted at plaintiff's request and submitted another indemnity
agreement at the closing meeting, but those facts did not alter
plaintiff's directives to defendant to obtain the indemnification
that plaintiff requested.  Although defendant knew or should have
known that the indemnity agreement drafted by Harris's lawyer did
not limit plaintiff's liability for cleaning up the Astoria site
to $5,000, defendant instructed plaintiff to sign that agreement
nonetheless.

	The facts surrounding the sale of VanWest were
complicated, because the sale involved many agreements, there
were disputes over which indemnity agreement would be acceptable
to the parties, and both plaintiff and Harris were aware of the
implications of environmental contamination.  Nonetheless,
whether defendant failed to warn plaintiff that the
indemnification agreement that plaintiff was signing did not
contain the protections that plaintiff insisted on is
straightforward.  If defendant failed to do so, then he breached
the standard of care he owed to his client.  A lay jury is
capable of making that determination without expert testimony. 
The trial court therefore erred in granting defendant's motion
for a directed verdict on the ground that, without expert
testimony, plaintiff failed to present evidence from which the
jury could find that defendant breached the standard of care. 

	The decision of the Court of Appeals is affirmed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.

1. 	The plaintiffs in this action are Larry Vandermay,
Tamara Vandermay, his wife, and Flying Dutchman Enterprises,
Vandermay's oil business.  Neither Tamara Vandermay nor Flying
Dutchman Enterprises played a significant role in the events
leading to this litigation.  Therefore, we use the singular term
"plaintiff" in this opinion.

2. 	Defendant gave a substantially different account of
what transpired between him and plaintiff at the closing meeting. 
According to defendant, he and plaintiff "talked about what the
differences were in the form [defendant] had proposed and the
form that was actually revised at [the] closing [meeting] and
what that meant from the standpoint of potential exposure down
the road."  Defendant also testified that he told plaintiff that
the indemnity agreement that Harris presented at the closing
[meeting] "was not an absolute $5,000 limit."  However, as noted
at the outset of this opinion, we view the facts in the light
most favorable to plaintiff and do not seek to resolve conflicts
in the parties' testimony.

3. 	OEC 103 provides, in part:

"(1)  Evidential error is not presumed to be
prejudicial.  Error may not be predicated upon a ruling
which admits or excludes evidence unless a substantial
right of the party is affected, and:

		"* * * * * 

		"(b)  In case the ruling is one excluding
evidence, the substance of the evidence was made known
to the court by offer or was apparent from the context
within which questions were asked.

		"(2)  The court may add any other or further
statement which shows the character of the evidence,
the form in which it was offered, the objection made
and the ruling thereon.  It may direct the making of an
offer in question and answer form.

		"(3)  In jury cases, proceedings shall be
conducted, to the extent practicable, so as to prevent
inadmissible evidence from being suggested to the jury
by any means, such as making statements or offers of
proof or asking questions in the hearing of the jury."

4. 	OEC 104 provides, in part:		

"(1)  Preliminary questions concerning the
qualification of a person to be a witness, the
existence of a privilege or the admissibility of
evidence shall be determined by the court, subject to
the provisions of subsection (2) of this section.  In
making its determination the court is not bound by the
rules of evidence except those with respect to
privileges."

5. 	ORCP 60 provides, in part:

"Any party may move for a directed verdict at the
close of the evidence offered by an opponent or at the
close of all the evidence.* * * A motion for a directed
verdict shall state the specific grounds therefor.

	* * *"

6. 	Defendant also argued that he was entitled to a
directed verdict on other grounds, but the trial court did not
rule on those additional grounds.

7. 	In his cross-petition for review, plaintiff asserts
that the Court of Appeals erred in holding that, absent an offer
of proof, it could not consider whether the trial court erred in
holding that a statewide standard of care applied in this case.
As will become apparent, we need not address that issue. 

8. 	Plaintiff also argued to the Court of Appeals that the
complaint could be read to state a claim for breach of contract
in addition to negligence and that standard of care evidence is
not relevant to a breach of contract claim.  The Court of Appeals
declined to address that argument because plaintiff had not made
it at trial.  Vandermay, 147 Or App at 99 n 1.  We decline to
address that argument on review for the same reason.