Opinion ID: 760532
Heading Depth: 2
Heading Rank: 1

Heading: Intentional or Reckless Misrepresentation

Text: 14 To support their claims of misrepresentation under Oregon law, Plaintiffs must establish 1) that Defendants made a false representation of material fact; 2) with the knowledge or belief that it was false, or with an insufficient basis for asserting that it was true; 3) with the intent that Plaintiffs rely on it; 4) that Plaintiffs justifiably relied; and 5) that Plaintiffs suffered consequent damages. Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1431, 1439 (9th Cir.1995) (citing Riley Hill Gen'l Contractor v. Tandy Corp., 303 Or. 390, 737 P.2d 595, 604 (Or.1987)). 15 Reckless indifference to the truth or falsity of a statement can satisfy the state of mind requirement for a misrepresentation action. Elizaga v. Kaiser Foundation Hospitals, 259 Or. 542, 487 P.2d 870, 873 (Or.1971). A party need not make an affirmative statement to be liable for fraud. Caldwell v. Pop's Homes, Inc., 54 Or.App. 104, 634 P.2d 471, 477 (1981). The mere nondisclosure of material facts can be a form of misrepresentation where the defendant has made representations which would be misleading without full disclosure. Elizaga, 487 P.2d at 873. The extent to which a representation is misleading and, therefore, imposes a duty of disclosure, is a question of fact. Gregory v. Novak, 121 Or.App. 651, 855 P.2d 1142, 1144 (1993).
16 Defendants assert that no rational trier of fact could find that Defendants made false representations. The district court agreed. However, viewing the evidence in the light most favorable to Plaintiffs, a reasonable trier of fact could find that Defendants' agents made false representations. 17 In order to show that Defendants made misrepresentations, Plaintiffs need not establish a duty to disclose, but instead must prove the truth of their claim that Defendants had already reached a decision on the closure of El-Jay. Plaintiffs have adduced sufficient evidence to be allowed to prove this before a trier of fact. If the trier of fact finds that Defendants' decision was sufficiently certain, they could then conclude that Defendants' representations of future growth, ramping up, etc. were false at the time they were made. 18 There are two bases on which Defendants could be found to have made false representations. First, the mere nondisclosure of material facts can be a form of misrepresentation where the defendant has concealed a known fact that is material to the transaction, see Millikin v. Green, 283 Or. 283, 583 P.2d 548, 550 (1978), or has made representations that would be misleading without full disclosure, see Felonenko v. Siomka, 55 Or.App. 331, 637 P.2d 1338, 1340 (1981). Defendants argue that nondisclosure is actionable only where a defendant has made representations that would be misleading without full disclosure and there is a duty to disclose. The district court apparently agreed and held that since there was no duty to disclose, there was no actionable fraud. However, this is not entirely correct. [O]ne who makes a representation that is misleading because it is in the nature of a 'half-truth' assumes the obligation to make a full and fair disclosure of the whole truth. Gregory, 855 P.2d at 1144. 19 Under Oregon law, there is a duty to disclose likely material contingencies. In Elizaga v. Kaiser Found. Hosp., 259 Or. 542, 487 P.2d 870 (1971), an employer made representations that could imply that the job offered to the plaintiff would continue past a certain date. The employer knew, however, that the position would probably be terminated before that date. Since nondisclosure of material facts can be a form of misrepresentation where the defendant has made representations which would be misleading without full disclosure, the Oregon Supreme Court held that [i]n order to avoid misleading plaintiff, defendant was under a duty to disclose that the Board of Examiners might well terminate the program. Id. at 873; see also Caldwell, 634 P.2d at 477 (holding that failure to disclose possible sale of mobilehome park was actionable because the likelihood that the mobile home would remain in the park was crucial to plaintiff's decision to purchase). 20 Second, Plaintiffs contend that no duty to disclose is required when fraud is based upon active concealment, as opposed to nondisclosure. Plaintiffs allege Defendants actively concealed the closure by intentionally withholding material information from El-Jay management. The fact that El-Jay management did not know of the closure is irrelevant because [a] principal who deliberately withholds material facts from his agent in order that the agent may innocently misrepresent the facts is guilty of fraud if the agent does in fact make such a misrepresentation and it is relied on by the third party. Bodenhamer v. Patterson, 278 Or. 367, 563 P.2d 1212, 1215-16 (Or.1977); Restatement (Second) Agency 555 § 256. 21 The district court erred in holding, as a matter of law, that no reasonable trier of fact could conclude that Defendants made false representations. Plaintiffs have put forth sufficient evidence to allow a jury reasonably to decide either way. 22 Defendants argue that they should not be forced to disclose sensitive business information. Defendants would not have been placed in this position, however, but for the false impression created by statements suggesting future growth and the ramping up of production. But for Defendants' affirmative misrepresentations, there would be no duty to disclose.
23 The district court held that Plaintiffs were not justified in relying on representations and omissions made during their pre-employment negotiations, as a matter of law, because Plaintiffs each signed an at-will employment agreement. That Plaintiffs' employment with Defendants was at-will does not defeat their justified reliance on Defendants' representations about El-Jay. Even in the presence of language stating no promises about employment have been made, an action for fraud in the inducement of a contract is possible. See Wilkinson v. Carpenter, 276 Or. 311, 554 P.2d 512, 515 (1976). The representation Plaintiffs relied upon in this case is that El-Jay was growing and expanding. Plaintiffs were not relying on representations as to the duration of their employment. Plaintiffs accepted at-will employment, but they accepted at-will employment with a company that represented its Eugene facility as growing while failing to disclose and/or concealing that it was closing. 24 Furthermore, Plaintiffs contend that their injuries were suffered as a result of the fraudulent inducement to enter employment, not the premature termination of that employment. The district court apparently treated the claims as breach of contract claims rather than claims of fraudulent inducement to form a contract. 25 Finally, Plaintiffs maintain that allowing at-will employment to defeat Plaintiffs' reliance would effectively allow employers to make any representations to prospective employees and then not fulfill those representations once employment began. We agree. Although Plaintiffs had no reasonable expectations for employment of any particular duration, they reasonably relied on statements as to the company's future growth, particularly when given in response to Plaintiffs' concerns. If Plaintiffs can prove Defendants' representations were knowingly or recklessly false, then a reasonable trier of fact could find the requisite elements of the tort of fraudulent misrepresentation. 26 Therefore, because genuine issues of material fact exist as to whether Defendants made false representations and whether Plaintiffs justifiably relied on those representations, we reverse the district court's grant of summary judgment on this claim.
27 In order for Plaintiffs' spouses to establish a claim for misrepresentation, Plaintiffs will have to prove that Defendants made a representation to [Plaintiffs] ... under circumstances that entitled [the spouses] to believe that [Cedarapids] had authorized [Plaintiffs] to communicate the representation to [the spouses]. Johnsen v. Mel-Ken Motors, Inc., 134 Or.App. 81, 894 P.2d 540, 545 (1995). Because spouses usually make decisions as a family unit rather than as separate individuals, it is likely that the process of deciding whether to relocate for a new job involves convincing the spouse that the positive qualities of the new job outweigh the difficulties caused to the family. Although Defendants argue that Plaintiffs cannot prove that any representations were made under such circumstances, we do not, as a matter of law, hold that Plaintiffs cannot so prove. Therefore, we reverse the district court's grant of summary judgment on this claim. 28