O'Kain v. Landress ( 2019 )

417
Argued and submitted December 12, 2017, reversed and remanded
September 18, 2019
Alan N. O’KAIN;
Victoria E. O’Kain;
Cambridge Land Company, LLC; and
Cambridge Land Company, II, LLC,
Plaintiffs-Appellants,
v.
Sanford LANDRESS;
Greene & Markley PC,
an Oregon professional corporation;
and Charles Markley,
Defendants-Respondents.
Clackamas County Circuit Court
CV15090658; A162859
450 P3d 508
Plaintiffs, two limited liability corporations and two individual plaintiffs,
appeal from a judgment of the trial court dismissing with prejudice their legal
malpractice claim against defendant attorneys and their law firm. Plaintiffs’
claim arose out of advice defendants gave about the need to file for bankruptcy
in advance of a state court’s appointment of receivers to manage the corporate
properties in foreclosure proceedings. Defendants moved for summary judgment
on the grounds that plaintiffs’ damages caused by the appointment of receivers
were not reasonably foreseeable and that the individual plaintiffs were not defen-
dants’ clients. The individual plaintiffs moved for partial summary judgment on
the ground that they were defendants’ clients as a matter of law. The trial court
granted defendants’ motion and denied plaintiffs’ motion. Plaintiffs assign error
to both rulings. Held: The trial court erred in granting defendants’ motion for
summary judgment, because the evidence in the record on summary judgment
gives rise to a genuine issue of material fact as to whether plaintiffs’ damages
resulting from the appointment of receivers were reasonably foreseeable to defen-
dants. The record on summary judgment also creates a genuine issue of material
fact that precludes summary judgment for defendants on the ground that defen-
dants did not represent the individual plaintiffs. Those same facts require the
conclusion that there was a genuine issue of material fact that precludes sum-
mary judgment for plaintiffs on plaintiffs’ motion for partial summary judgment.
Reversed and remanded.
Michael C. Wetzel, Judge.
Margaret H. Leek Leiberan argued the cause and filed
the briefs for appellants.
418 O’Kain v. Landress
Nena Cook argued the cause for respondents. Also on the
brief were Lori Irish Bauman and Ater Wynne LLP.
Before Hadlock, Presiding Judge, and Egan, Chief Judge,
and Mooney, Judge.*
EGAN, C. J.
Reversed and remanded.
______________
* Hadlock, J., vice Wollheim, S. J.; Mooney, J., vice Garrett, J. pro tempore.
Cite as 299 Or App 417 (2019) 419
EGAN, C. J.
Plaintiffs Alan and Victoria O’Kain (the individual
plaintiffs), Cambridge Land Company, LLC (Cambridge),
and Cambridge Land Company II, LLC (Stoneridge)
(together the LLC Plaintiffs), appeal from a judgment of the
trial court dismissing with prejudice their legal malprac-
tice claim against defendants Sanford Landress, Charles
Markley, and their law firm, Greene & Markley. Plaintiffs
assign error to the trial court’s granting of defendants’
motion for summary judgment on the claim and the trial
court’s denial of plaintiffs’ motions for partial summary
judgment on the issue whether defendants represented the
individual plaintiffs as well as the LLC Plaintiffs. We con-
clude that the trial court did not err in rejecting the indi-
vidual plaintiffs’ motion for partial summary judgment, but
erred in granting defendants’ motion and therefore reverse.
On review of cross-motions for summary judgment,
we view the record for each motion in the light most favor-
able to the party opposing it to determine whether there is
a genuine issue of material fact and, if not, whether either
party is entitled to judgment as a matter of law. ORCP 47 C;
Yartzoff v. Democrat-Herald Publishing Co., 281 Or 651, 655,
576 P2d 356 (1978); Vision Realty, Inc. v. Kohler, 214 Or App
220, 222, 164 P3d 330 (2007).
The LLC Plaintiffs were in the business of owning
and managing the Stonebridge and Cambridge apartments
in Salem, Oregon. The LLC Plaintiffs had defaulted on their
loans and were subject to a foreclosure action in Marion
County Circuit Court. The lender, Fannie Mae, sought the
appointment of a receiver, and the court set a hearing date
of September 27, 2013.
Plaintiff Alan O’Kain is an attorney licensed to
practice law in California. He was the person in control of
both LLC Plaintiffs. Alan and his revocable living trust
were the primary investors in Cambridge and the sole
investors in Stonebridge.1 Alan did not want to lose man-
agement of the properties, and he believed that the filing of
1
The Alan O’Kain Trust, a revocable living trust, was an investor in the
LLC Plaintiffs.
420 O’Kain v. Landress
Chapter 11 bankruptcy on behalf of each LLC would stay
the foreclosure proceeding and prevent the appointment
of a receiver so that he could retain management and con-
trol of the properties, to allow him to preserve his existing
and future equity. See 11 USC § 362(d) (providing for auto-
matic stay of judicial proceedings upon filing of petition for
bankruptcy).
Alan is married to plaintiff Victoria O’Kain, who is
an inactive member of the Oregon State Bar and a former
associate attorney with Greene & Markley. Victoria O’Kain
does not have a direct financial interest in or formal control
of the LLC Plaintiffs.2 Defendants are a law firm and attor-
ney members of the firm who have extensive experience in
insolvency law.
In her declaration in opposition to defendants’ motion
for summary judgment and in support of plaintiffs’ motion
for partial summary judgment, Victoria O’Kain averred
that she chose to consult defendants for advice about pre-
serving the equity and managerial control of Stoneridge
and Cambridge. In their declarations, the individual plain-
tiffs averred that defendant Markley had represented them
on multiple occasions in the past and that, prior to meeting
in person with defendants, plaintiffs had several telephone
conversations with defendants in which they discussed their
concern that a receiver appointed by the Marion County
Circuit Court would represent only Fannie Mae’s creditor
interest in the properties and would not manage the proper-
ties so as to preserve Alan’s equity.
On September 25, 2013, two days before the sched-
uled hearing on the appointment of a receiver in the fore-
closure action, the individual plaintiffs met with defen-
dants Markley and Landress at the Greene & Markley
firm. Plaintiffs’ legal counsel in the foreclosure proceeding
also attended. In their declarations, the individual plain-
tiffs stated that, at the September 25 meeting, defendant
Landress advised plaintiffs not to worry about the appoint-
ment of a receiver in the foreclosure proceedings. He told
them that, even if the state court appointed receivers, the
2
Neither party has made any argument about the significance of Victoria’s
lack of ownership interest, and we express no opinion on that issue.
Cite as 299 Or App 417 (2019) 421
Bankruptcy Court in a later Chapter 11 bankruptcy pro-
ceeding would remove the receiver and return managerial
control to Alan as the debtor in possession. Plaintiffs stated
in their declarations that defendants advised plaintiffs to
have their foreclosure counsel attend the receivership hear-
ing before filing for Chapter 11 bankruptcy. Defendants also
advised Alan not to restructure his personal investment
interest in the LLCs before filing a Chapter 11 bankruptcy.
The individual plaintiffs stated in their declarations that
they believed at the September 25 meeting that defendants
were representing them personally as well as the LLC
Plaintiffs and were giving them advice on how to protect
Alan’s interest in the properties. Defendants did not tell
plaintiffs at the September 25 meeting that they were repre-
senting only the LLC Plaintiffs. Alan relied on defendants’
advice and did not have the LLC Plaintiffs file for Chapter
11 bankruptcy in advance of the receivership hearing.
After the September 25 meeting, Alan signed a
“retainer contract” providing that Green & Markley was
retained “to represent [the LLC Plaintiffs] as legal coun-
sel for research and advice concerning feasibility of Ch. 11
Bankruptcy filing.”
At the receivership hearing for Stoneridge on
September 27, 2013, the Marion County Circuit Court entered
an order appointing a receiver selected by Fannie Mae. On
October 14, the court entered an order appointing the same
receiver in the Cambridge foreclosure action.
After the appointment of a receiver on Stoneridge,
on September 30, 2013, Landress sent an email to Alan and
Victoria advising them against Chapter 11 bankruptcy,
because of the costs and the risks of failure, and recommend-
ing Chapter 7 bankruptcy instead, which would require a
sale of the properties.3
Alan sought advice from different counsel. On
October 16, Stoneridge filed for Chapter 11 bankruptcy with
3
Landress’s advice included estimated costs for Chapter 11 bankruptcy of
$100,000 for a legal retainer and at least $30,000 to $40,000 for expert witness
fees. Landress advised plaintiffs that the early, “First-Day Motion” stage of
Chapter 11 bankruptcy litigation would include “litigation to get control of the
properties back from the receiver.”
422 O’Kain v. Landress
different legal counsel, and on October 18, Cambridge
filed for Chapter 11 bankruptcy with the same coun-
sel. On November 14, 2013, over plaintiffs’ objections, the
Bankruptcy Court determined that the receiver selected by
Fannie Mae and appointed in the foreclosure proceedings
would serve as receiver in the bankruptcy proceeding.
While the matter was in Chapter 11 bankruptcy,
in August 2014, Alan and Victoria found a purchaser for
the properties for a combined price of $9.7 million, which
exceeded the LLC Plaintiffs’ debt to Fannie Mae. With the
court’s approval, the properties were sold and, in December
2014, the court dismissed the bankruptcy proceeding.
In September 2015, plaintiffs brought this legal
malpractice action, alleging that defendants were neg-
ligent in advising them at the September 25 meeting to
wait until after the receivership hearing to file for bank-
ruptcy. Plaintiffs alleged that, as a result of defendants’
negligence, the management of the properties was removed
from Alan’s control and remained within the control of the
receiver selected by Fannie Mae. Plaintiffs alleged that, as
a result of defendants’ negligence, they incurred costs in
the bankruptcy proceeding relating to the appointment of
the receiver that would not otherwise have been incurred,
including the receiver’s fees of $60,000, the receiver’s legal
fees of $350,000, and an extraordinary bankruptcy admin-
istration fee of $150,000. Plaintiffs alleged that they were
further damaged by a reduction in the properties’ values
and loss of rental revenues as a result of the receiver’s main-
tenance of vacancies.4
As noted, the trial court granted defendants’ motion
for summary judgment on plaintiffs’ claim and denied plain-
tiffs’ motion for partial summary judgment. The trial court
4
In November 2015, the LLC Plaintiffs and Alan O’Kain brought breach of
contract and breach of fiduciary duty claims against Hummel, a former mem-
ber of the LLC Plaintiffs and the former property manager of Stoneridge and
Cambridge. The complaint alleged that Hummel had mismanaged the proper-
ties during an unspecified period ending July 2013, leaving the properties in
horrific condition and resulting in a decrease in value of $1 million and total
damages of $2 million. The complaint alleged that the receiver appointed by the
court in October 2013 “further detailed and accounted for the destruction of the
properties.”
Cite as 299 Or App 417 (2019) 423
granted defendants’ motion on the grounds that (1) only
the LLC Plaintiffs, and not the individual plaintiffs, were
clients of defendants, and (2) the damages that the LLC
Plaintiffs claim they suffered as the result of the appoint-
ment of a receiver were not foreseeable by defendants. The
court denied without further explanation plaintiffs’ motion
for partial summary judgment seeking a determination
that the individual plaintiffs were defendants’ clients.
On appeal, plaintiffs assign error to the granting of
defendants’ motion for summary judgment and the denial of
plaintiffs’ motion for partial summary judgment. Because it
is potentially dispositive, we first address plaintiffs’ conten-
tion, raised in their third assignment of error, that the trial
court erred in granting defendants’ motion on the ground
that the LLC Plaintiffs’ damages alleged to have been
caused by the receiver’s mismanagement were not reason-
ably foreseeable by defendants as a matter of law.
Initially, we note what is not at issue in the third
assignment. Defendants do not dispute plaintiffs’ conten-
tions in their declarations that defendants advised against
the need to rush to file for bankruptcy before the appoint-
ment of a receiver.5 Defendants also have not challenged in
their motions for summary judgment the LLC Plaintiffs’
allegation of damages that they assert are attributable to
the appointment of a receiver or whether defendants’ con-
duct was the factual cause of plaintiffs’ damages. The only
issue raised in the motion for summary judgment on which
the trial court ruled was whether it was reasonably fore-
seeable to defendants that the receiver would mismanage
the properties so as to cause the LLC Plaintiffs’ alleged
5
In their answer to the complaint, defendants alleged that “there was
no advice by Defendants not to file for bankruptcy before the appointment of
a receiver.” However, in their declarations, Landress and Markley did not con-
tradict plaintiffs’ statements that defendants advised them on September 25 to
attend the receivership hearing before filing for bankruptcy. Defendants’ pri-
mary contentions are that they did not represent the individual plaintiffs and
that their representation of the LLC Plaintiffs was limited by the retainer agree-
ment to “research and advice concerning feasibility of Ch. 11 Bankruptcy fil-
ing.” However, defendants’ arguments do not address plaintiffs’ contention and
averments that the advice on which they relied and that damaged them was the
advice that defendants gave at the September 25 meeting, before the signing
of the retainer agreement, to attend the receivership hearing before filing for
bankruptcy.
424 O’Kain v. Landress
damages. The trial court explained in its letter opinion that,
“as a matter of law, it was not foreseeable that the indepen-
dent acts of a court-supervised fiduciary would cause the
damages alleged by Plaintiffs to have occurred.” We have
reviewed the record on summary judgment in the light
most favorable to plaintiffs and conclude that it does pres-
ent a genuine issue of material fact that precludes summary
judgment.
Ordinarily, foreseeability is a factual determination;
if disputed, the question is one to be decided by the fact-
finder. Piazza v. Kellim, 360 Or 58, 70, 377 P3d 492 (2016).
The record presents a genuine issue of material fact if “a
reasonable person considering the potential harms that
might result from his or her conduct would have reasonably
expected the injury to occur.” Chapman v. Mayfield, 358 Or
196, 206, 361 P3d 566 (2015). The Supreme Court said in
Chapman that “[t]he community’s judgment, usually given
voice by a jury,” determines whether a defendant’s conduct
created a reasonably foreseeable risk of harm. A court will
intervene to remove a case from the jury “only when it can
say that the actor’s conduct clearly meets the standard or
clearly falls below it.” Stewart v. Jefferson Plywood Co., 255
Or 603, 607, 469 P2d 783 (1970); see also Sloan v. Providence
Health System, 282 Or App 301, 312, 300 P3d 203 (2016),
aff’d, 364 Or 635, 437 P3d 1097 (2019) (“ ‘Foreseeability’ acts
as a limitation on liability and reflects societal judgment
regarding the extent to which a defendant can be considered
to be at fault for a plaintiff’s harm.”).
In the case of a special relationship such as that
of the attorney and client, the relationship may create or
define a defendant’s duty to the plaintiff that goes beyond
the ordinary duty to avoid a foreseeable risk of harm. Oregon
Steel Mills, Inc. v. Coopers & Lybrand, LLP, 336 Or 329, 340-
42, 83 P3d 322 (2004); Watson v. Meltzer, 247 Or App 558,
565, 270 P3d 289 (2011), rev den, 352 Or 266 (2012). So, for
example, we have said that in the lawyer-client relation-
ship, the duty of an attorney toward the client is “to act as
a reasonably competent attorney in protecting and defend-
ing the interests of the client.” Pereira v. Thompson, 230 Or
App 640, 654, 217 P3d 236 (2009). Although the relation-
ship creates a special duty of care, even in that context, the
Cite as 299 Or App 417 (2019) 425
harm itself must be a reasonably foreseeable consequence
of the defendant’s conduct. See Oregon Steel Mills, Inc., 336
Or at 344-45 (addressing foreseeability of harm in profes-
sional malpractice claim). Here, the question in reviewing
the trial court’s ruling on summary judgment is whether
there is evidence creating a genuine issue of material fact
as to whether plaintiffs’ alleged damages were a reasonably
foreseeable consequence of defendants’ advice to attend the
receivership hearing before filing for bankruptcy.
Likely in an effort to narrow the inquiry to one on
which defendants thought they could prevail, defendants
contended that the record on summary judgment did not
give rise to a genuine issue of material fact on the foresee-
ability of the receiver’s mismanagement, casting plaintiffs’
claim as one based exclusively on the receiver’s mismanage-
ment of the properties.6 Defendants contended that the LLC
Plaintiffs cannot recover on the malpractice claim because
they have not been able on summary judgment to create an
issue of fact concerning the foreseeability of the misman-
agement by the receiver. But, even assuming that some of
the LLC Plaintiffs’ damages have as their source misman-
agement by the receiver, mismanagement by the receiver
was not the only source of the LLC Plaintiffs’ damages as
alleged in the complaint or as put forth in the declarations,
and a failure to prove the foreseeability of mismanagement
would not defeat the claim. Rather, the LLC Plaintiffs also
asserted damages arising generally from the appointment
of a receiver—which caused them to lose control of the prop-
erties and resulted in costs relating only to the appointment
of the receiver. Plaintiffs are entitled to prevail on appeal if
the record on summary judgment presents a genuine issue of
material fact as to whether any of the LLC Plaintiffs’ losses
were a reasonably foreseeable consequence of defendants’
conduct. Oregon Steel Mills, Inc., 336 Or at 344. We conclude
that the evidence in the record on summary judgment gives
rise to a genuine question of material fact on that issue: In
his declaration, defendant Markley stated that Alan O’Kain
consulted Greene & Markley “to express an interest in having
6
The trial court broadened the issue slightly in its ruling, explaining that
it was not foreseeable that the independent acts of a court-supervised fiduciary
would cause the damages alleged.
426 O’Kain v. Landress
the LLC Plaintiffs file bankruptcy to block the appoint-
ment of a receiver.” In their own declarations, the individual
plaintiffs averred that (1) they were concerned that man-
agement of the properties by the lender’s chosen receiver
would preserve only the lender’s interest and not Alan’s
existing and potential equity in the properties and (2) they
expressed those concerns to defendants. In his declaration,
Alan stated that at the meeting of September 25, 2013,
“Landress assured us that the appointment of receivers in
the foreclosure cases was nothing to worry about because
(a) there was a chance we could win those hearings and
(b) because even if the state court appointed the receivers,
the bankruptcy court in a later chapter 11 bankruptcy fil-
ing would remove the receivers and return managerial con-
trol to me as debtor in possession. Defendants instructed
us to send our state court attorney to argue the receiver
hearing before filing the chapter 11.”
Subsequently, in his September 30 email, sent first
to Victoria and then to Alan, Landress advised plaintiffs not
to file for Chapter 11 bankruptcy. In that email, Landress
explained that a Chapter 11 bankruptcy would be costly
and that efforts to regain control of the properties from the
receiver “will likely be hotly opposed by the government
lender represented by a big expensive law firm.” Landress
told plaintiffs that, to regain control of the properties under
Chapter 11, plaintiffs would first
“have to win the tough and expensive ‘First-Day’ motion
battles. That is not easy in this type of case, especially not
within the limited resources at hand and the tough, well-
funded opponent.”
Landress’s September 30 email had a decidedly different
tone from the assurances that Alan and Victoria declared
Landress gave them in their in-person meeting with defen-
dants on September 25 that “a later chapter 11 bankruptcy
filing would remove the receivers and return managerial
control” to plaintiffs. There is evidence from which it could
be found that plaintiffs had expressed to defendants their
interests in Alan retaining control of the properties so as
to maximize their equity and value, and had shared with
defendants their concern that a receiver selected by the
lender would not have Alan’s interests in mind. Landress’s
Cite as 299 Or App 417 (2019) 427
September 30 email is evidence that, contrary to plaintiffs’
interest in having Alan retain control of the properties, and
despite the advice given on September 25, defendants were
aware that the appointment of a receiver in the foreclosure
proceeding would result in Alan’s loss of control that would
be hard to undo in a subsequent Chapter 11 bankruptcy.
Defendants asserted in the trial court and assert
on appeal that plaintiffs have not offered “concrete facts”
from which it may be found that plaintiffs’ damages due to
the negligence of an “intervening third party”—the court-
appointed receiver—were reasonably foreseeable. See Piazza,
360 Or at 69-70 (stating that “[t]he concept of foreseeability
embodies a prospective judgment about the course of events;
it ‘therefore ordinarily depends on the facts of a concrete sit-
uation’ and, if disputed, is a jury question” (quoting Fazzolari
v. Portland School Dist. No. lJ, 303 Or 1, 4, 734 P2d 1326(1987)). But that argument is a red herring. As noted above,
the receiver’s “mismanagement” of the properties by main-
taining a high vacancy rate was but one source of the LLC
Plaintiffs’ alleged damages. Plaintiffs contend that it was
the appointment of the receiver and the loss of Alan’s ability
to control the properties that was the primary cause of their
loss. The individual plaintiffs presented evidence that they
shared with defendants their fear that the management of
the properties by the lenders’ receiver would preserve only
the lender’s interest in the recovery of debt and not Alan’s
existing and future equity in the property. Alan averred that
he hoped to continue to manage the properties to allow him
to refinance the properties and return them to profitability.
Defendants have not disputed those assertions and also did
not contend in their motion for summary judgment that the
LLC Plaintiffs have not shown that they suffered damages as
a result of Alan’s loss of control of the properties. Their only
contention was that “mismanagement” by the receiver was
not foreseeable. But it was reasonably foreseeable to defen-
dants that the appointment of a receiver in the foreclosure
proceeding would create a risk that Alan would not be able
to regain control of the properties—a risk that was contrary
to plaintiffs’ expressed interest.
In any event, even assuming that defendants’ knowl-
edge of the risk of the loss of Alan’s ability to control the
428 O’Kain v. Landress
properties is not, in itself, sufficient to avoid summary judg-
ment, plaintiffs have alleged damages in addition to those
relating to loss of control, also due to the appointment of the
receiver. In their complaint, plaintiffs alleged that the indi-
vidual plaintiffs and the LLC Plaintiffs incurred costs for
the receiver in the bankruptcy proceeding. Defendants did
not dispute those costs in their answer or on summary judg-
ment, but assert on appeal that plaintiffs have not offered
evidence that those costs are greater than would have been
incurred without the appointment of a receiver. The abil-
ity to ultimately prove damages, however, is not an issue
relating to foreseeability of harm, which was the basis for
defendants’ summary judgment motion and the trial court’s
ruling. The record on summary judgment would permit the
finding that it was reasonably foreseeable to defendants that
the appointment of a receiver in the foreclosure proceeding
would result in increased costs to the LLC Plaintiffs. We
conclude therefore that the trial court erred in granting
defendants’ motion for summary judgment based on the
ground that plaintiffs’ damages caused by the appointment
of a receiver were not reasonably foreseeable.7
Defendants contend that the trial court’s rulings on
summary judgment should nonetheless be affirmed on two
other grounds raised in defendants’ motion for summary
judgment but not reached by the trial court. We have con-
sidered and reject those contentions without discussion.
The trial court’s second basis for granting defen-
dants’ motion for summary judgment was its determina-
tion that the individual plaintiffs were not defendants’ cli-
ents. In reaching that conclusion, the court mentioned that
both individual plaintiffs are lawyers and that the retainer
agreements named only the LLC Plaintiffs as clients and
addressed services that would be applicable only to the LLCs.
In their first assignment of error on appeal, plaintiffs con-
tend that there is evidence in the record on summary judg-
ment from which a trier of fact could find that the individual
plaintiffs were clients as well. In their second assignment,
7
We address only issues raised on summary judgment, see Two Two v.
Fujitec America, Inc., 355 Or 319, 331, 325 P3d 707 (2014), and do not imply any
conclusion as to plaintiffs’ ultimate ability to prove damages at trial.
Cite as 299 Or App 417 (2019) 429
plaintiffs contend that the evidence in the record on sum-
mary judgment requires the conclusion that plaintiffs were
defendants’ clients as a matter of law. Defendants respond
that the only lawyer-client relationship was that formed
by defendants’ retainer agreement with the LLCs, that
the only advice given by defendants was Landress’s letter
of September 30, directed to the LLCs, and that there is
no evidence in this record that defendants gave advice to
the individual plaintiffs. In light of the retainer agreement,
defendants contend that there is no “objective evidence” that
would support plaintiffs’ subjective belief that defendants
represented the individual plaintiffs personally.
We recently addressed the issue of when a lawyer-
client relationship arises in Jenson v. Hillsboro Law Group,
287 Or App 697, 403 P3d 455 (2017), a legal malpractice
case, and in Lahn v. Vaisbort, 276 Or App 468, 470, 369 P3d
85 (2016), also a legal malpractice case. In Lahn, 276 Or
App at 477, citing In re Wyllie, 331 Or 606, 615, 19 P3d 338
(2001), we said that a lawyer-client relationship need not
arise from an explicit contract, but may be inferred from
the circumstances and the conduct of the parties. Contrary
to defendants’ assumption, the existence of the retainer
agreement with the LLC Plaintiffs does not preclude, and
is not inconsistent with, a determination that the individual
plaintiffs were also defendants’ clients. Citing In re Weidner,
310 Or 757, 768, 801 P2d 828 (1990), we said in Lahn that a
lawyer-client relationship may exist when an attorney has
performed services of the kind that are traditionally per-
formed by lawyers, or where a putative client has intended
that the relationship be created. Lahn, 276 Or App at 477.
As to that latter circumstance, we quoted from the Supreme
Court’s opinion in Weidner for the standard that guides the
court in determining whether a relationship has been cre-
ated as a result of the putative client’s intentions:
“ ‘[A] putative client’s subjective, uncommunicated inten-
tion or expectation [of a lawyer-client relationship] must
be accompanied by evidence of objective facts on which a
reasonable person would rely as supporting existence of
that intent; by evidence placing the lawyer on notice that
the putative client had that intent; by evidence that the
lawyer shared the client’s subjective intention to form the
430 O’Kain v. Landress
relationship; or by evidence that the lawyer acted in a way
that would induce a reasonable person in the client’s posi-
tion to rely on the lawyer’s professional advice.’ ”
Lahn, 276 Or App at 477 (quoting Weider, 310 Or at 770)
(alteration in Lahn). In the absence of an express agreement,
a putative client’s subjective belief that there is a lawyer-
client relationship must be accompanied by objective facts
that make that belief reasonable.
Contrary to defendants’ contention, although the
retainer agreements do indeed establish defendants’ lawyer-
client relationship with the LLCs, they do not preclude the
existence of a lawyer-client relationship with the individual
plaintiffs as well, through conduct and plaintiffs’ reasonable
expectations. See Lahn, 276 Or App at 477 (a lawyer-client
relationship may arise through conduct in performing ser-
vices that are traditionally performed by lawyers or through
the intentions of the putative client). Plaintiffs’ affidavits
present a genuine issue of fact as to whether plaintiffs rea-
sonably understood that defendants were advising them per-
sonally: Defendants had represented the individual plain-
tiffs previously, on multiple occasions, on personal matters.
At the meeting of September 25, defendants advised the
individual plaintiffs concerning their personal finances by
advising Alan not to restructure his investments interest in
the LLCs before filing for Chapter 11 bankruptcy. It is true,
as defendants contend, that during plaintiffs’ conversations
with defendants beginning in September, the focus had
been on the fate of the LLCs. But defendants were aware
that Alan was the only person in control of the LLCs and,
through his revocable trust, the sole owner of Stonebridge,
and the primary owner of Cambridge. See In Re Brownstein,
288 Or 83, 87, 602 P2d 655 (1979) (When a small, closely
held corporation is involved, and in the absence of a clear
understanding with the corporate owners that the attor-
ney represents solely the corporation and not the individual
interests, “[i]n actuality, the attorney * * * represents the
corporate owners in their individual capacities as well as the
corporation unless other arrangements are clearly made.”).
That is evidence of “objective facts” that support plaintiffs’
subjective belief that defendants were representing them
personally in the matter relating to the LLCs. Plaintiffs are
Cite as 299 Or App 417 (2019) 431
correct in their first assignment of error that the evidence in
the record on summary judgment creates a genuine issue of
material fact that precludes summary judgment for defen-
dants on the ground that defendants did not represent the
individual plaintiffs.
Those same facts also require the conclusion that
there was a genuine issue of material fact that precludes
summary judgment on plaintiffs’ motion for partial sum-
mary judgment. Although the evidence is undisputed that,
at the meeting of September 25, defendants advised them on
the narrow question regarding whether to restructure their
investment interest in the LLCs before filing a Chapter 11
bankruptcy,8 there is also evidence that the focus of the
entire engagement was the impending bankruptcy of the
LLCs and the effect of the appointment of the receiver on
the LLCs. The retainer agreement concerned only the LLCs
and the correspondence and telephone conversations related
to the LLCs. We conclude that that evidence gives rise to a
genuine issue of fact as to whether defendants’ advice was
intended for plaintiffs individually, and therefore precludes
summary judgment for plaintiffs on that issue.
In summary, the trial court erred in granting sum-
mary judgment to defendants on the ground that the indi-
vidual plaintiffs were not defendants’ clients and on the
ground that damages alleged to have arisen as a result of
that appointment of the receiver were not reasonably fore-
seeable. However, the trial court did not err in denying the
individual plaintiffs’ motion for partial summary judgment.
Reversed and remanded.
8
Defendants assert on appeal that plaintiffs have not alleged how that
advice caused them damages, but defendants did not make that argument below
and, in any event, we question how it would be relevant to the question whether
the individual plaintiffs were clients.