Publisher Liable For Plaintiff’s Reliance On Ad That Represented Defendant Physician As Board-Certified

The Oregon Supreme Court has affirmed the lower court decision in the case of Knepper v. Brown, in which the plaintiffs sued a physician and an advertiser for injuries arising out of a failed medical procedure.

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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. 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  Still, the historical references to “proximate injury” as an element of fraud indicates that courts also recognize that there is some limitation on the consequences for which a perpetrator of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.

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Read the entire opinion here. The case is Knepper v. Brown, CC 9903-02495; CA A128550; SC S055155 (2008).