S055155, Opinion — Knepper v. Brown

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Argued and submitted June 3, decision of Court of Appeals and judgment of
circuit court affirmed October 9, 2008

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)
195 P3d 383

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CJS, Fraud § 50.

On review from the Court of Appeals .*

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.

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# 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 pre-
sented 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 dis-
agreed 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 par-
ties 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 pathol-
ogy. 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" liposuc-
tion in his office, after receiving some limited informal train-
ing 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.

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In 1996, Brown placed a second advertisement
in Dex's Yellow Pages-this time under the subheading
"Surgery, Plastic and Reconstructive." The new advertise-
ment 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 attract-
ing more liposuction patients. Mueller met with Newman to
help her "mock up" a new advertisement. Mueller told
Newman that the "plastic and reconstruction surgery" sub-
heading 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. Knepper1 was consid-
ering 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 facil-
ities 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

1 Plaintiffs are Knepper and her husband.

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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 lipo-
suction 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 contin-
uing 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 adver-
tisement and retained Brown to perform liposuction surgery;
(5) if Knepper had known the truth about Brown's creden-
tials, 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 dem-
onstrate a sufficient causal link between the alleged misrep-
resentation 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

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directed verdict citing a lack of evidence with respect to vari-
ous elements of plaintiffs' claims. The trial court denied the
motion and the case went to the jury. However, the jury dead-
locked and the first trial ended in a mistrial.

In a second trial, plaintiffs presented Knepper's tes-
timony regarding her injuries and her decision to retain
Brown to perform liposuction; Newman's testimony regard-
ing Dex's involvement in developing the misleading adver-
tisement 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 pro-
cedures. 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, train-
ing, 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 "uncorrect-
able 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 notwith-
standing the verdict, or a new trial. As noted, the Court of

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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 con-
duct and that plaintiffs in this case failed to present such evi-
dence. 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, regard-
less 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 foresee-
ability 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, argu-
ments 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 pub-
lishing Brown's Yellow Pages ad would result in his com-
mitting 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 argu-
ment, viz., an argument that plaintiffs had failed to present
evidence showing that Knepper's injuries had resulted from

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 fore-
seeability 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.

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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 pre-
serve 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 "back-
stop" 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, dis-
cussed 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

3 For example, in Fazzolari v. Portland School Dist. No. 1J, 303 Or 1, 17, 734
P2d 1326 (1987), this court stated that the issue of liability for a harm resulting

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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 cre-
ated 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 suf-
fered-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
Contractor 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 proxi-
mate cause or proximate injury is equivalent to the concept of

from a defendant's conduct "depends on whether that conduct unreasonably cre-
ated 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 Corrections 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).

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"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 rec-
ognize that there is some limitation on the consequences for
which a perpetrator of an intentional fraud may be held lia-
ble. 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 misrepresen-
tation justifiably induced. Restatement (Second) of Torts
§ 548A (1977) incorporates that requirement:

"A fraudulent misrepresentation is a legal cause of a pecu-
niary 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 foreseea-
ble 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

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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 reason-
ably 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 mis-
representation. An advertisement that misrepresents a med-
ical provider's qualifications self-evidently creates a risk that
a consumer who seeks treatment from the provider in reli-
ance 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 per-
form the liposuction, and a juror could infer from that testi-
mony that Knepper believed that she was more likely to suf-
fer an adverse result from being treated by a medical
provider who was not board certified in plastic surgery. Fur-
ther, 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' inju-
ries 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

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was more likely if Brown, rather than a board-certified plas-
tic surgeon, performed liposuction surgery. There is no addi-
tional 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 fol-
lows 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 unconstitu-
tional chilling effect on the free flow of information, Oregon
courts must recognize that publishers require some addi-
tional protection from claims arising out of false or mislead-
ing advertisements, and cannot be held liable for the publi-
cation of such advertisements unless the publication is done
maliciously or with intent to harm another or in reckless dis-
regard of that possibility.

We think that Dex's argument demands too much.
This is not a case of the unwitting publication of an advertise-
ment that turns out to be false. It is, instead, a case in which
the publisher took a knowing and active part in the perpetra-
tion 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). In fact, 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 pro-
tection 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 sur-
geon, thereby luring them into accepting surgery by Brown

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that he was not specially trained to perform. The misrepre-
sentation 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 judg-
ment of the circuit court are affirmed.