Title: Knepper v. Brown

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: October 9, 2008
IN THE SUPREME COURT OF THE STATE OF OREGON
M. M. KNEPPER
and J. J. KNEPPER,
Respondents
on Review,
v.
TIMOTHY BROWN, M.D.;
TIMOTHY BROWN, M.D. P.C.;
AMERICAN ACADEMY OF COSMETIC SURGERY;
and AMERICAN SOCIETY OF LIPO-SUCTION SURGERY, INC.,
Defendants,
and
DEX MEDIA, INC.,
fka U S WEST DEX, INC.,
Petitioner
on Review.
(CC
9903-02495; CA A128550; SC S055155)
On review
from the Court of Appeals.*
Argued and
submitted June 3, 2008.
Michael
H. Simon, of Perkins Coie LLP, Portland, argued the cause and filed the brief
for petitioner on review.
Kathryn
H. Clarke, Portland, argued the cause and filed the brief for respondents on
review.  With her on the brief was Gregory A. Smith, Salem.
H.
Scott Althouse, Washington, D.C., filed the brief for amicus curiae
Yellow Pages Association.
Before,
De Muniz, Chief Justice., and Gillette, Durham, Balmer, Walters, and Linder, Justices.**
GILLETTE,
J.
The
decision of the Court of Appeals and the judgment of the circuit court are
affirmed. 
*Appeal from Multnomah County Circuit Court, Janice R. Wilson, Judge. 213 Or App
598, 162 P3d 1026 (2007).  
**Kistler, J., did not participate in the consideration or decision of this case.
GILLETTE, J.
In this common-law fraud action,
plaintiffs obtained a $1.5 million jury verdict against Dex Media, Inc. (Dex), based
on Dex's involvement in creating and publishing a Yellow Pages advertisement
that misrepresented a doctor's qualifications.   On appeal, Dex argued that
plaintiffs presented no evidence that the misrepresentation caused the injuries
that plaintiffs claimed (pain and physical deformities resulting from a botched
liposuction procedure) and that it therefore was entitled to a directed verdict
or to a judgment notwithstanding the jury's verdict.  The Court of Appeals
disagreed and affirmed the judgment for plaintiffs.  Knepper v. Brown,
213 Or App 598, 162 P3d 1026 (2007).  We allowed Dex's petition for review and,
for the reasons that follow, now affirm the decision of the Court of Appeals
and the judgment of the trial court.
Because Dex challenges the trial
court's denial of a motion for a directed verdict, we consider (and describe)
the evidence, and the reasonable inferences that may be drawn therefrom, in the
light most favorable to plaintiffs -- the parties opposing the motion.  
Allen v. County of Jackson County, 340 Or 146, 149, 129 P3d 694 (2006). 
Dr. Timothy Brown is a licensed
medical doctor who holds certifications from the American Board of Medical
Specialties in dermatology and anatomic and clinical pathology.  Brown started
a dermatology practice in Oregon in 1985 and thereafter maintained an
advertisement in Dex's Yellow Pages directory, under the heading "Physicians
and Surgeons" and the subheading "Dermatology (skin)."  The
advertisement listed various services and prominently noted that Brown was
"Certified by the American Board of Dermatology."
In 1993, Brown began to offer "tumescent"
liposuction in his office, after receiving some limited informal training in
how to perform that procedure.  He mentioned the new service in his 1993/94 Yellow
Pages advertisement, which still appeared under the "Dermatology"
subheading and which still referred to his board certification in dermatology.
In 1996, Brown placed a second
advertisement in Dex's Yellow Pages -- this time under the subheading
"Surgery, Plastic and Reconstructive."  The new advertisement stated
that Brown performed liposuction, wrinkle treatments, and sclerotherapy.  It
also stated that Brown was "Board Certified" -- without specifying any
area of certification.  
The new advertisements were added at
the urging of a Dex sales representative, Mueller.  Brown's office manager,
Newman, told Mueller that Brown was interested in attracting more liposuction
patients.  Mueller met with Newman to help her "mock up" a new
advertisement.  Mueller told Newman that the "plastic and reconstruction
surgery" subheading in the Yellow Pages would be the best place to reach
that target market.  Mueller also told Newman that the advertisement should
identify Brown as "board certified," because "patients were
expecting a [board certified] plastic surgeon to do these techniques." 
Newman repeatedly told Mueller that she was concerned that such an advertisement
would be misleading, because Brown's board certification was in dermatology,
not plastic and reconstructive surgery.  Mueller continued to push for a nonspecific
"board certified" designation under the "Surgery, Plastic and Reconstructive"
subheading, and Brown, who had the final say, acceded to Mueller's advice.
Early in 1997, plaintiff M. M. Knepper(1)
was considering cosmetic liposuction surgery.  She knew that she wanted to be
treated by a plastic surgeon.  She consulted the "Surgery, Plastic and
Reconstructive" subheading in the Yellow Pages and compiled a list of
doctors and medical facilities that performed liposuction.  Knepper saw Brown's
advertisement and included his name and telephone number on her list, believing
him to be a plastic surgeon because of the location of his ad and the "board
certified" designation that appeared after his name.  Knepper did not call
Brown's office at the time, however.
Some months later, Knepper attended a
Women's Show and stopped at a booth offering information about Brown's cosmetic
surgery practice.  Knepper recognized Brown's name from her list of potential
plastic surgeons.  She picked up a brochure, which stated that Brown was board
certified in, among other things, "Dermatologic Surgery."  One of
Brown's employees, who was manning the booth, told Knepper that Brown was a
board-certified plastic surgeon.  Knepper thereafter made an appointment to
discuss liposuction with Brown.  At the consultation, Brown also told Knepper
that he was board certified in plastic surgery.
Knepper decided to retain Brown, and
he performed a liposuction procedure on her in December 1997.  After the
procedure, Knepper contacted Brown's office to report continuing pain and
"misshapenness," and Brown performed two more liposuction procedures
in an unsuccessful attempt to repair the damage.  Plaintiffs eventually filed
the present action against Brown and Dex, alleging claims of medical malpractice,
fraud, conspiracy to commit fraud, and loss of consortium.  Brown later settled
with plaintiffs, leaving plaintiffs' fraud claim (and the derivative conspiracy
and loss of consortium claims) against Dex to be decided at trial.  Plaintiffs'
fraud claim alleged that (1) Dex knew that Brown was not board certified in
plastic and reconstructive surgery;  (2) Dex and Brown together designed and
developed an advertisement that falsely implied that Brown was a board-certified
plastic surgeon; (3) Knepper wanted a board-certified plastic surgeon to
perform liposuction surgery on her; (4) Knepper relied in part on the misleading
Dex advertisement and retained Brown to perform liposuction surgery; (5) if
Knepper had known the truth about Brown's credentials, she would not have
consented to surgery by him; and (6) Brown performed the liposuction
negligently, causing injury to plaintiffs.  
Prior to trial, Dex moved for summary
judgment, arguing, among other things, that plaintiffs could not demonstrate a
sufficient causal link between the alleged misrepresentation regarding Brown's
credentials and Knepper's injury at the hands of Brown.  The trial court
granted the summary judgment motion, but the Court of Appeals reversed and
remanded.  Knepper v. Brown, 182 Or App 597, 623, 50 P3d 1209 (2002).  On
remand, the case proceeded to trial.  At the close of evidence, Dex submitted a
motion for a directed verdict citing a lack of evidence with respect to various
elements of plaintiffs' claims.  The trial court denied the motion and the case
went to the jury.  However, the jury deadlocked and the first trial ended in a
mistrial.
In a second trial, plaintiffs
presented Knepper's testimony regarding her injuries and her decision to retain
Brown to perform liposuction; Newman's testimony regarding Dex's involvement in
developing the misleading advertisement and Dex's knowledge that the
advertisement was misleading; and the testimony of Brown himself, regarding his
negligent treatment of Knepper.  Plaintiffs also presented the testimony of Dr.
Lloyd Hale, a plastic surgeon, regarding the nature and extent of Knepper's
injuries and whether Knepper's three liposuction procedures were performed in a
manner that met the applicable standard of care.  Hale also testified about the
qualifications of dermatologists, as opposed to those of plastic surgeons, to
perform surgical procedures.  He observed that dermatologists usually do not
receive formalized surgical training, while plastic surgeons receive extensive
surgical training over a period of many years.  Hale further observed that
surgical knowledge, training, and experience are important for obtaining good
results from liposuction.  Hale acknowledged that plastic surgeons do not
always meet the standard of care for liposuction or other surgical procedures,
but he stated that he had never seen an injury like Knepper's -- which he described
as an "uncorrectable disaster" -- at the hands of a doctor who had
gone through formalized surgical training.
After the close of evidence, Dex
again moved -- on roughly the same grounds as it had in the first trial-- for a
directed verdict.  The trial court again denied the motion.  This time,
however, the jury did not deadlock, but returned a $1.58 million verdict for
plaintiffs, which the trial court reduced by the amount of plaintiffs'
settlement with Brown.  Dex thereafter moved for a judgment notwithstanding the
verdict, but the trial court denied that motion.  
Dex appealed, arguing that plaintiffs
had failed to prove various elements of their claims and that the trial court
should have granted a directed verdict, a judgment notwithstanding the verdict,
or a new trial.  As noted, the Court of Appeals rejected those arguments and
affirmed, Knepper, 213 Or App 598, and we allowed Dex's petition for
review.
Before this court, Dex argues, first,
that a common-law fraud claim requires evidence that the damage at issue is a
reasonably foreseeable consequence of the defendant's conduct and that
plaintiffs in this case failed to present such evidence.  Dex acknowledges that
the jury was instructed that plaintiffs must prove "that a company in
Dex's position could reasonably foresee when it published the ad that Dr. Brown
would be negligent in performing liposuction on [] Knepper and cause her
injury."  Dex contends, however, that, regardless of how the jury was
instructed or what the jury found, plaintiffs failed to present specific
evidence respecting that issue.  
Before we turn to the merits of that
issue, we briefly consider plaintiffs' objection that the issue is unpreserved
-- that is, that Dex never raised lack of evidence of foreseeability as a basis
for its request for a directed verdict.(2) 
The Court of Appeals held that defendant had preserved the issue
because, in moving for a directed verdict at the second trial, defense counsel
expressly incorporated, by reference, arguments raised in the defendant's
motion for a directed verdict in the first trial, including an argument that
"it was not and could not have been reasonably foreseeable to Dex that
publishing Brown's Yellow Pages ad would result in his committing medical
malpractice against a reader of that ad."  Knepper, 213 Or App at
603 (quoting defense motion).  
Plaintiffs acknowledge that that statement
was made in the first directed verdict motion, but they argue that it was
presented there as a part of an entirely different argument, viz., an
argument that plaintiffs had failed to present evidence showing that Knepper's
injuries had resulted from any reliance on Brown's advertisement.  Plaintiffs contend
that, in light of the context in which it appeared, the sentence that the Court
of Appeals quoted was not sufficient to preserve Dex's present argument.
In our view, plaintiffs are attempting
to hold Dex to an unreasonably stringent standard.  In tort law, the correct
formulation for deciding issues of causation is not always clear, and defendant's
causation argument in the cross-referenced directed verdict motion reflected a
desire to cover all of the bases.  While the argument may have begun with one
causation theory -- that plaintiffs must prove that Knepper's injuries were a
"direct and necessary" result of the alleged misrepresentation -- it
ended with a related "backstop" causation theory -- that plaintiffs
must prove that Brown's malpractice (the direct cause of Knepper's
injuries) at least was a reasonably foreseeable result of the publication of
Brown's advertisement.  We conclude that, although defense counsel did not
specifically mention lack of evidence of foreseeability in the second trial in
his oral motion for a directed verdict, his reference to the argument made in
the first trial was sufficient to preserve the claim of error.  We turn to the
merits of that issue.
As noted, Dex's initial argument is
that, to hold Dex liable for fraud, plaintiffs were required, but failed, to
present evidence establishing that Brown's negligent treatment of Knepper was a
reasonably foreseeable consequence of Dex's publication of Brown's
advertisement.  Defendant observes that this court historically has regarded
"proximate cause" as an element of fraud and that several legal
authorities, discussed below, generally equate the concept of proximate cause
with reasonable foreseeability when applied to claims of fraud.  Defendant then
draws on general discussions of reasonable foreseeability in this court's negligence
cases to support its contention that, in the fraud context, a defendant
is liable for a plaintiff's injuries only to the extent that the particular
kind of harm that the plaintiff suffered was a reasonably foreseeable
result of the defendant's fraudulent conduct.(3) 
Finally, defendant relies on another of this court's negligence cases, Buchler
v. Oregon Corrections Div., 316 Or 499, 853 P2d 798 (1993),(4)
to support its view that a defendant may be held liable for injuries caused by
a third party's "harm-producing act" only if those injuries are of a
kind that are within the reasonably foreseeable scope of the risk created by
the defendant's conduct.  Applying that proposed rule to the present case, Dex argues
that plaintiffs were required to prove that the particular type of injury that Knepper
suffered -- a botched medical procedure at the hands of a third party (Brown) --
was a reasonably foreseeable consequence of  Dex's publication of Brown's misleading
advertisement.  Dex further contends that plaintiffs failed to present evidence
that addressed that element of the case.
We begin our analysis by noting that this
is a fraud case, i.e., a case involving an intentional tort.  Our past cases
have referred to proximate cause (or "proximate injury") as one of
nine elements of a claim for tortious fraud.(5) 
Although our more recent cases have employed a more abbreviated list of the elements
of fraud, see, e.g., Riley Hill General Contractors v. Tandy Corp.,
303 Or 390, 405, 737 P2d 595 (1987) (listing five elements), we agree that some
notion of proximate cause is subsumed under the last element in that
abbreviated list:  "Damage to the plaintiff, resulting from [the
plaintiff's] reliance [on defendant's representation]."  Id.
(emphasis added).
The question, then, is whether that notion
of proximate cause or proximate injury is equivalent to the concept of
"reasonable foreseeability," as we have used that phrase in cases
like Fazzolari and Buchler.  We are persuaded that it is.
Courts have noted that, when an
intentional tort is involved, the range of legal causation can be quite broad: 
"'For an intended injury, the law is astute to discover even very remote
causation.'"  W. Page Keeton, Prosser and Keeton on Torts § 43, 293
n 6  (5th ed 1984) (quoting Derosier v. New England Telephone
& Telegraph Co., 81 NH 451, 130 A 145 (1925)); see also American
Fed. Teachers v. Oregon Taxpayers United, 345 Or 1, 17, 189 P3d 9 (2008) (in
action under Oregon Racketeer and Corrupt Organizations Act, person who was intended
target of illegal acts was injured "by reason of" those acts).  Still,
the historical references to "proximate injury" as an element of
fraud indicates that courts also recognize that there is some limitation
on the consequences for which a perpetrator of an intentional fraud may be held
liable.  A requirement that any claimed damages be foreseeable appropriately
recognizes that the scope of liability for an intentional, fraudulent misrepresentation
depends on the nature of the misrepresentation, the audience to whom the
misrepresentation was directed, and the nature of the action or forbearance,
intended or negligent, that the misrepresentation justifiably induced.  Restatement
(Second) of Torts § 548A (1977) incorporates that requirement:
"A fraudulent misrepresentation is a legal cause of a
pecuniary loss resulting from action or inaction in reliance upon it if, but
only if, the loss might reasonably be expected to result from the reliance."
(Emphasis added.)  Comments to that Restatement
section make the same point even more clearly:
"a.  * * * In general, the misrepresentation is a legal
cause only of those pecuniary losses that are within the foreseeable risk of
harm that it creates.  There is an analogy here to the rules as to legal
causation of physical harm resulting from negligent conduct, stated in §§ 435
to 461.
"b.  Pecuniary losses that could not reasonably be
expected to result from the misrepresentation are, in general, not legally
caused by it and are beyond the scope of the maker's liability.  This means
that the matter misrepresented must be considered in light of its tendency to
cause those losses and the likelihood that they will follow.  * * *
"In determining what is foreseeable as a
result of the misrepresentation, the possibility of intervening events is not
to be excluded altogether."
Id., comments a, b.  Similarly, in Prosser and
Keeton on Torts § 110 at 767, the author states:
"Furthermore, the consequential or special damages must
have been proximately caused by the fraudulent conduct.  In general and with
only a few exceptions, the courts have restricted recovery to those losses
which might be expected to follow from the fraud and from events that are
reasonably foreseeable."
(Footnotes omitted.)
When we apply that foreseeability principle
in the present case, it is clear that plaintiffs' damages reasonably might be
expected to result from their reliance on Dex's misrepresentation.  An
advertisement that misrepresents a medical provider's qualifications self-evidently
creates a risk that a consumer who seeks treatment from the provider in
reliance on that misrepresentation will suffer an adverse result that would not
have occurred if the provider's qualifications had been as represented.  The
testimony at trial showed that Knepper's injuries fell precisely within the foreseeable
risk of harm that the misrepresentation created:  Knepper testified that she
wanted to have a board-certified plastic surgeon perform the liposuction, and a
juror could infer from that testimony that Knepper believed that she was more
likely to suffer an adverse result from being treated by a medical provider who
was not board certified in plastic surgery.  Further, plaintiffs' medical
expert testified that he had never seen adverse results like the ones that
Knepper experienced from a medical provider who was certified in plastic
surgery.  A juror could infer from that testimony that plaintiffs' injuries
probably would not have occurred if Knepper had received treatment from a board-certified
plastic surgeon (as she believed Brown to be).  Stated in terms of the
applicable legal standard, Dex had reason to expect that Knepper would act in
justifiable reliance on Dex's misrepresentation by retaining Brown for the
surgery, and that an adverse result was more likely if Brown, rather than a
board-certified plastic surgeon, performed liposuction surgery.  There is no
additional requirement that plaintiffs also prove that Dex in fact did foresee
that Knepper would suffer the particular adverse results of the medical
services that Brown performed.  It follows that plaintiffs' injuries were foreseeable
as a result of Dex's intentional misrepresentation, and that is all that
plaintiffs had to show.  Dex must respond in damages accordingly.  
We turn to Dex's next argument --
that the trial court erred in declining to direct a verdict on plaintiffs'
fraud and conspiracy claims on the ground that plaintiffs failed to submit any
evidence that Dex had "acted maliciously, with the intention to harm
another, or in reckless disregard of the consequences."  Dex contends
that, to prevent an unconstitutional chilling effect on the free flow of
information, Oregon courts must recognize that publishers require some additional
protection from claims arising out of false or misleading advertisements, and cannot
be held liable for the publication of such advertisements unless the
publication is done maliciously or with intent to harm another or in reckless
disregard of that possibility.  
We think that Dex's argument demands
too much.  This is not a case of the unwitting publication of an advertisement
that turns out to be false.  It is, instead, a case in which the publisher took
a knowing and active part in the perpetration of the fraud.  Punishing fraud
has no impermissible "chilling" effect on the right to express views
on "any subject whatever."  See Article I, section 8, of the Oregon
Constitution (protecting such a right of expression).  Fraud is excepted from
that constitutional protection.  See State v. Robertson, 293 Or 402,
412, 649 P2d 569 (1982) (explaining principle).  What Dex argues would extend
constitutional protection to fraud, and we reject that argument.
As we have explained, plaintiffs'
evidence permitted the jury to infer that the fraudulent misrepresentation by
Dex and Brown was designed to mislead potential patients into believing that
Brown was a board-certified plastic surgeon, thereby luring them into accepting
surgery by Brown that he was not specially trained to perform.  The
misrepresentation created the risk that those who relied on it would be harmed
as a particular result of Brown's lack of expertise as a plastic surgeon, and
that is what happened to plaintiffs.  The trial judge did not err in refusing
to grant Dex's motions for directed verdict and judgment notwithstanding the
jury's verdict.
The decision of the Court of Appeals
and the judgment of the circuit court are affirmed. 
1. Plaintiffs are Knepper and her husband.
2. Plaintiffs acknowledge that Dex raised lack of evidence of
foreseeability in its motion for judgment notwithstanding the verdict at the
end of the second trial, but argues, correctly, that Dex cannot question the
sufficiency of the evidence of foreseeability on appeal unless it moved to
withdraw the issue from the jury before the jury returned its verdict.  See
ORCP 63 A ("When a motion for a directed verdict, made at the close of all
the evidence, which should have been granted has been refused and a verdict is
rendered against the applicant, the court may, on motion, render a judgment
notwithstanding the verdict * * *.").  Accordingly, the proper focus is on
whether defendant raised the issue when it moved for a directed verdict.
3. For example, in Fazzolari v. Portland School District No. 1J,
303 Or 1, 17, 734 P2d 1326 (1987), this court stated that the issue of
liability for a harm resulting from a defendant's conduct "depends on
whether that conduct unreasonably created a foreseeable risk  * * * of the kind
of harm that befell the plaintiff."  (Emphasis added.)
4. In Buchler, this court held that the state Corrections
Division was not liable in negligence for bodily injuries intentionally
inflicted on members of the public by a prisoner who had escaped from the
Division's supervision.  The court acknowledged that the Corrections Division
in some sense may have facilitated the prisoner's escape, but held that
"mere 'facilitation' of an unintended adverse result, where intervening
intentional criminality of another person is the harm-producing force, does not
cause the harm so as to support liability for it."  316 Or at 511-12.  
5. See, e.g., U. S. National Bank v. Fought, 291 Or 201,
220-21, 630 P2d 337 (1981) (quoting list of nine elements of fraud, including
"consequent and proximate injury," from Conzelmann v. N.W.P &
D. Prod. Co., 190 Or 332, 350, 225 P2d 757 (1950) ); Webb v. Clark,
274 Or 387, 391, 546 P2d 1078 (1976) (same); Rice v. McAlister, 268 Or
125, 128, 519 P2d 1263 (1974) (same).