Court Opinion

ID: 9564682
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:05:26.014228+00
Date Added: 2024-06-11T09:18:36.773505
License: Public Domain

DURHAM, J.,
dissenting.
In Onita Pacific Corp. v. Trustees of Bronson, 315 Or 149, 159, 843 P2d 890 (1992), this court recognized the tort of negligent misrepresentation and said that
“[t]he rule stated in Restatement (Second) of Torts § 552[1] * * * is close to the mark. But, for the reasons that follow, *250rather than adopting a black letter ‘rule.,’ we opt to develop the scope of the duty and the scope of recovery on a case-by-case basis, in the light of related decisions of this court.”
The Onita court relied on the following reasoning in concluding that the Restatement rule did not impose liability for negligent misrepresentation in the relationship between business adversaries negotiating at arm’s length in a commercial setting:
“The text of section 552 and the comments and illustrations thereto suggest that the editors, in using the words ‘[o]ne who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions,’ had in mind relationships other than the relationship between persons negotiating at arm’s length. The comments provide no illustrations dealing with business adversaries in the commercial sense.” Id. at 164.
The court concluded that the parties in Onita, who were buyers and sellers of real property, occupied the latter relationship and, consequently, that no liability existed.
Onita misreads the Restatement rule. By its terms, the rule applies whenever one acts in the course of one’s business, profession, or employment, or in a transaction in which one has a pecuniary interest, and negligently supplies false information for the guidance of others in their business transactions. The requirement that the negligent misrepresentation occur in the course of the speaker’s business, profession, or employment, or in a transaction in which the speaker is interested pecuniarily, concerns the relationship *251between the speaker, the speaker’s business or professional activities and interests, and the statement made. If the statement bears a sufficient relationship to the speaker’s business activities and interests, the Restatement rule recognizes liability for the resulting harm. The salutary policy behind that rule is that, in the business environment, those persons who negligently communicate false factual statements for the guidance of others in their financial transactions should be liable for the resulting harm. Neither that policy nor the text of the Restatement rule precludes the rule’s application to parties, like those in Onita, who are business adversaries negotiating at arm’s length in a commercial setting.2
Some other case may afford the opportunity to correct the Onita majority’s mischaracterization of the Restatement rule.3 That exercise is unnecessary here, because the evidence in the record satisfies even the narrow formulation of the rule described in Onita.
According to Onita, the judicial task is to determine whether some aspect of the parties’ relationship distinguishes it from that of business adversaries negotiating at arm’s length. 315 Or at 160. The court listed two circumstances in which the duty to avoid making negligent misrepresentations would exist.
*252First, the court noted that certain professionals owe an obligation to their clients to exercise reasonable care when acting on their clients’ behalf. The court cited lawyers, engineers, architects, real estate brokers, and primary insurers as examples of the types of professionals upon whom the law imposes a duty of care. See id. at 160-61 (citing pertinent cases).
Second, the court stated that “contractual relationships may also give rise to a tort duty to exercise reasonable care on behalf of another’s interests.” Id. at 160. The court stated:
“We read Restatement section 552 as consistent with the rule that this court has adopted for negligence actions for the recovery of economic losses, viz., nongratuitous suppliers of information owe a duty to their clients or employers or to intended third-party beneficiaries of their contractual, professional, or employment relationship to exercise reasonable care to avoid misrepresenting facts.” Id. at 165.
According to Onita, if a contract requires one party to supply information for the benefit or guidance of another in a business transaction, the law imposes a duty on the nongratuitous supplier of information to avoid misrepresenting facts. In that circumstance, the tort duty arises “ ‘from the relation of the parties under the contract, rather than the contract itself.’ ” Georgetown Realty v. The Home Ins. Co., 313 Or 97, 102, 831 P2d 7 (1992) (quoting Currey v. Butcher, 37 Or 380, 385, 61 P 631 (1900)). The Onita court analyzed the record for the presence of either of those circumstances and concluded that neither existed. Onita, 315 Or at 161-65.
By recognizing, pursuant to the Restatement rule, the liability of nongratuitous suppliers of information for negligent misrepresentation resulting in economic losses, Onita would give effect to the policy of the Restatement rule, i.e., to fulfill the reasonable expectation of participants in commercial transactions that one who, in the course of business, profession, or employment, acts to guide another in a business transaction or decision by supplying information must use due care to avoid supplying false information.
In a discussion that is relevant to its analysis of the “nongratuitous supplier of information” concept, the majority *253acknowledges that “Conway and the university were not in a fully arm’s-length relationship in the same sense as were the parties in Onita,” 324 Or at 241, and that, due to their existing employment relationship, they “were not strangers coming to the bargaining table to negotiate a first-time contract,” Ibid. The import of those statements is obvious. Conway and the university were not business adversaries negotiating at arm’s length. Conway had a right to receive and rely on information supplied by the university’s agent regarding tenure prospects. Because the university was Conway’s partner in the contract to supply accurate tenure information, Conway had no reason to treat the university as his adversary.
The majority avoids the logical import of its statements by creating a new barrier to liability that Onita did not impose. The majority states:
“However, earlier in its opinion, the Onita court distinguished between an adversary in a sales transaction, who does not owe a duty to avoid making negligent representations, and ‘one who holds out to the general public that he or she supplies information,’ who does owe such a duty. Id. at 162 (emphasis added). That statement suggests that a ‘non-gratuitous supplier of information’ under Onita is someone in the business of supplying information for a fee. Accordingly, the university, which contractually promised to provide its employees, not the general public, with certain information, does not qualify as a nongratuitous supplier of information.” Id. at 243 (emphasis in original).
Onita adopted no such limitation on who may qualify as a nongratuitous supplier of information. The passage from Onita quoted by the court was a summary — an inaccurate summary, at that — of a law professor’s statement in an article;4 the summary was never referred to or adopted as a holding of the Onita court.
*254The trial court applied Onita and concluded that Conway and the university were not business adversaries negotiating at arm’s length. I cannot fault that analysis. Even the majority acknowledges that Conway and the university were not in an arm’s-length relationship, as were the parties in Onita, and that Conway had a right to receive accurate information regarding his tenure prospects from the university. 324 Or at 238, 241. Certainly Conway should have the right to rely on information about tenure that he is entitled by contract to receive. Under the rule articulated in Onita, the university was exposed to liability for its negligent misrepresentation as a nongratuitous supplier of information.
The evidence in the record supports the jury’s determination that, in telling Conway that his student evaluations would be “no problem,” the university’s agent negligently misrepresented a fact that was critical to Conway’s goal of obtaining tenure. The evidence indicates that, aside from student evaluations, plaintiffs file contained no negative material on which defendant could have based a termination decision. It cannot be gainsaid that, as the jury found, the denial of tenure was a significant injury to Conway’s professional career as a professor. See John D. Copeland and John W. Murray, Jr., Getting Tossed From the Ivory Tower: The Legal Implications of Evaluating Faculty Performance, 61 Mo L Rev 233, 238-39 (1996):
“Obviously, faculty members have an equally important interest in the evaluation process. Nontenured faculty members are year-to-year employees and must be concerned about the nonrenewal of their contracts following a poor evaluation. In most institutions, tenure track faculty members who do not achieve tenure within a specified period of time are then given terminal contracts for only one more year of service. Those who are thus ‘tossed from the *255ivory tower’ are denied not only the prestige, security, and financial benefits associated with tenure, but are also stigmatized as being ‘unworthy’ faculty members. As ‘tainted goods,’ their prospects of employment at other institutions of higher learning may be very limited.”
Like the trial court, I would uphold the jury’s verdict.
I respectfully dissent.
Fadeley, J., joins in this dissenting opinion.

 Restatement (Second) of Torts § 552 (1977) provides:
“(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
*250“(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
“(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
“(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
“(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.”

 The Onita majority’s conclusion that the Restatement rule governs only particular relationships, and does not apply to arm’s-length relationships, is a mischaracterization. The rule applies to conduct occurring in the course of one’s business, profession, or employment, or in a transaction in which one has a pecuniary interest. Restatement § 552(1). The rule recognizes a duty to use due care to avoid negligent misrepresentations whenever one acts in the course of those types of transactions and is not limited to transactions between parties who occupy fiduciary or other special relationships.

 The Onita majority’s articulation of the rule appears to have been more a result of its faulty interpretation of the Restatement rule than a decision to depart from the Restatement rule. Because the Onita majority apparently was operating from a flawed understanding of the rule, its description of the rule, in retrospect, seems both artificial and confused. To cite but one example, the announcement in Onita that fiduciaries can be sued for economic losses caused by their negligent misrepresentations would surprise no one because, for many years, the law already had imposed tort liability on fiduciaries for such losses through theories of malpractice, interference with contract or prospective economic advantage, and ordinary negligence, among others. In that regard, the net effect of Onita’s departure from the Restatement rule was to extend to plaintiffs a theory of potential liability that they did not need and to protect defendant fiduciaries from liability in circumstances in which they already enjoyed adequate protection.

 The entire passage in Onita says:
“Similarly, Professor Alfred Hill distinguishes between misrepresentations made by an adversary in a sales transaction and by one who holds out to the general public that he or she supplies information and has noted:
“ ‘The situation is different in the case of “antagonists.” When the aggrieved person is a buyer, who does not complain of the negligent performance of a service but rather of misrepresentation by a seller inducing the making of a contract, the conceptual mold has been different from the inception of modern contract law: the options have been to sue on the contract or to sue in deceit, without a middle ground consisting *254of actionable negligence.’ Hill, Damages for Innocent Misrepresentation, 73 Colum L Rev 679,688 (1973).
“Hill also states that allowing recovery for negligent misrepresentations made in the bargaining process would undermine the law of contracts, especially rules of law concerning written contracts. Id. at 717-18.” Onita, 315 Or at 162.
That passage makes clear that Professor Hill did not mention, let alone require, that a nongratuitous supplier of information must be a person who holds out to the general public that he or she supplies information.