Conway v. Pacific University

Decision Date11 October 1996
Citation924 P.2d 818,324 Or. 231
Parties, 132 Lab.Cas. P 58,178, 134 Lab.Cas. P 58,307, 113 Ed. Law Rep. 942, 12 IER Cases 233 Patrick W. CONWAY, Petitioner on Review, v. PACIFIC UNIVERSITY, Respondent on Review. CC C920640 CV; CA A80633; SC S41611.
CourtOregon Supreme Court

Bernard Jolles, of Jolles, Bernstein & Garone, P.C., Portland, argued the cause for petitioner on review. With him on the petition was Rick Klingbeil.

Thomas M. Christ, of Mitchell, Lang & Smith, Portland, argued the cause for respondent on review. With him on the briefs was Scott J. Meyer.

Alfredo Wheelock, Portland, filed a brief on behalf of amicus curiae Oregon Trial Lawyers Association.

Before CARSON, C.J., and GILLETTE, VAN HOOMISSEN, FADELEY, GRABER and DURHAM, JJ. **

CARSON, Chief Justice.

In this action for negligent misrepresentation, the issue before us is whether the law imposed a duty upon the defendant, Pacific University (or "the university"), to exercise reasonable care in making certain representations to Conway, the plaintiff.

The facts of this case are as follows. 1 In 1990, Conway was a professor at Central Oregon Community College ("COCC"), holding a "tenure-track" position. At COCC, the end goal of a tenure-track position was to achieve tenure after a requisite number of years of employment. In the fall of 1990, Conway took a leave of absence from COCC to work as a visiting professor on Pacific University's campus during the 1990-91 academic year. The university had hired Conway to serve as a temporary replacement, in order to fill a vacancy in the university's psychology department, while the university searched for a permanent replacement. During the 1990-91 academic year, Conway had a one-year, "term appointment" with the university. 2

In January 1991, Conway applied for the permanent, tenure-track position in Pacific University's psychology department. In May 1991, the university offered Conway that position. In the meantime, Conway had received student evaluations for the fall, 1990, semester that were below those of the average teacher employed by the university. Conway spoke to some of his colleagues about how those student evaluations might affect his future employment. One colleague suggested that Conway speak to the Dean of the College of Arts and Sciences ("the dean") about his concerns.

Shortly after Pacific University offered Conway the new position, he approached the dean and, after a conversation about seniority, salary, and other matters, asked whether his poor student evaluations would affect his chances to receive tenure. The dean told Conway that the student evaluations "will not be a problem."

After that conversation, Conway resigned his position with COCC and accepted the new position with Pacific University. Conway returned to teach on the university's campus in the fall of 1991 under an annual, "tenure-track" appointment. During the spring of 1991 and during the 1991-92 academic year, Conway's student evaluations did not improve. After several remedial efforts, the university offered Conway only a nonrenewable, one-year contract for the 1992-93 academic year. In large part, that decision was based upon Conway's poor student evaluations.

Conway filed this tort action, claiming that the dean negligently misrepresented to him that the student evaluations would not affect his prospects of receiving tenure. 3 Before trial, Pacific University moved to dismiss the claim, arguing that Conway had not stated a claim for negligent misrepresentation because Conway and the university did not have the type of relationship that gave rise to a duty of care on the university's part to avoid making negligent misrepresentations to Conway. The trial court deferred ruling on that motion until later in the proceedings. At trial, after Conway had completed his case-in-chief, the university moved for a directed verdict based upon several grounds, including its prior argument that the alleged misrepresentations were not actionable because the university did not owe Conway a duty of care. The trial court denied that motion, and, subsequently, the jury returned a verdict for Conway on the negligent misrepresentation claim and awarded economic and noneconomic damages.

Pacific University appealed to the Court of Appeals, arguing that "plaintiff cannot recover for negligent misrepresentation, because the misrepresentation occurred during arm's-length negotiations about the tenure track position, and * * * negligent misrepresentations made during arm's-length negotiations are not actionable." Conway v. Pacific University, 129 Or.App. 307, 309-10, 879 P.2d 201 (1994). The Court of Appeals agreed with the university and concluded that, "in negotiating about a possible employment contract with plaintiff, Pacific [University] was not in a special relationship with plaintiff that would give rise to a duty to exercise due care regarding representations that it made in the course of negotiations." Id. at 313, 879 P.2d 201. Consequently, the Court of Appeals held that the trial court should have granted the university's pre-trial motion to dismiss the negligent misrepresentation claim. Ibid.

Conway petitioned this court for review. We allowed the petition and now affirm the decision of the Court of Appeals.

As noted above, the trial court deferred ruling on Pacific University's pretrial motion to dismiss Conway's claim for negligent misrepresentation. The court ultimately rejected the university's argument in support of dismissal, but the court did so in the context of ruling on the university's motion for a directed verdict. We therefore address the denial of the motion for directed verdict, rather than the motion to dismiss, and we consider the evidence presented at trial in determining whether the university owed Conway a duty to avoid making negligent misrepresentations. Upon review of a denial of a motion for a directed verdict, we will not set aside a jury verdict "unless we can affirmatively say that there is no evidence from which the jury could have found the facts necessary to establish the elements of [the] plaintiff's cause of action." Brown v. J.C. Penney Co., 297 Or. 695, 705, 688 P.2d 811 (1984).

In Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 159, 843 P.2d 890 (1992), this court acknowledged, for the first time, that Oregon recognized the existence of a limited version of the common law tort of negligent misrepresentation. In that case, the plaintiffs and the defendants were parties to a land sale contract. Before the contract negotiations were complete, the defendants told the plaintiffs that, upon payment, certain parcels of land would be released to the plaintiffs. After payment by the plaintiffs, the defendants did not release the parcels, stating that the parcels could not be released until they were resold to third parties. Id. at 153-55, 843 P.2d 890. The plaintiffs brought a claim for negligent misrepresentation. Id. at 155, 843 P.2d 890.

This court stated that, "under some circumstances, one may be liable for economic loss sustained by others who rely on one's representations negligently made." Id. at 159, 843 P.2d 890. The court emphasized, however, that "a negligence claim for the recovery of economic losses caused by another must be predicated on some duty of the negligent actor to the injured party beyond the common law duty to exercise reasonable care to prevent foreseeable harm." Ibid. (footnote omitted; emphasis added). The court then concluded that the defendants in Onita did not owe a duty to exercise reasonable care to avoid making negligent misrepresentations to the plaintiffs, because "the relationship was adversarial. In an arm's-length negotiation, a negligent misrepresentation is not actionable." Id. at 165, 843 P.2d 890.

Conway contends that, unlike the arm's-length relationship between the parties in Onita, Conway and Pacific University were in the type of relationship that gave rise to a duty on the university's part to exercise reasonable care to avoid making negligent misrepresentations to Conway about his future employment status. The university, on the other hand, contends that no such duty existed. For the reasons that follow, we conclude that the university did not owe Conway a duty to avoid making negligent misrepresentations.

As noted above, in Oregon, the tort of negligent misrepresentation requires that one party in a relationship owe a duty "beyond the common law duty to exercise reasonable care to prevent foreseeable harm" to the other party. Onita, 315 Or. at 159, 843 P.2d 890. Under Onita, that kind of heightened duty arises when one party is acting, at least in part, to further the economic interests of the other party. Id. at 161, 843 P.2d 890. In other words, for the duty to avoid making negligent misrepresentations to arise, the parties must be in a "special relationship," in which the party sought to be held liable had some obligation to pursue the interests of the other party.

In Onita, this court surveyed some of the types of relationships in which one party owes the other a heightened duty of care, including certain professional relationships in which one party has a professional obligation to protect the interests of the other party. Id. at 160-61, 843 P.2d 890. This court further recognized that "contractual relationships may also give rise to a tort duty to exercise reasonable care on behalf of another's interests." Id. at 160, 843 P.2d 890. That is, parties to a contract may place themselves in the type of relationship that gives rise to a duty in tort. Indeed, "it may be necessary for a plaintiff to show a contract between himself and the defendant in order to establish that the defendant has assumed a position, relationship or status upon which the general law predicates a duty independent of the terms of the contract." Georgetown Realty v. The Home Ins. Co., ...

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