In Re Porter , 320 Or. 692 ( 1995 )

FADELEY, J.,

concurring.

I concur in the portion of the opinion finding a violation of DR 1-102(A)(3). The accused’s letter and the other circumstances surrounding the application for default without notice, when taken together, show conduct involving dishonesty and misrepresentation in violation of DR 1-102(A)(3). I write separately to underline the difference between that rule — requiring probity in transactions between members of the law profession — and the legal norm or rule that a majority has applied, over my dissent, to transactions between persons engaged in business in Onita Pacific Corp. v. Trustees of Bronson, 315 Or 149, 166, 168, 843 P2d 890 (1992) (Fadeley, J., concurring in part and dissenting in part: concurring that there is a tort of negligent misrepresentation, recognized in Oregon; but dissenting from the view that the tort remedy is not applicable to business negotiations conducted “at arm’s length”).

DR 1-102(A)(3) enforces the same standard of conduct as stated in Restatement (Second) of Torts § 552(1) (1977). ¹ The Restatement rule, requiring honest representations, evenhandedly applies that rule to “business, profession or employment, or in any other transaction in which he [or she] has a pecuniary interest.” However, Onita renders that standard inapplicable to the plaintiff and defendant in this case, because those parties were dealing “at arm’s length” in a business transaction.

The legally mandated standard governing the conduct of lawyers amongst themselves while engaged in the practice of law is one that this court, erroneously, will not apply to transactions between business people. Put another way, a lawyer’s business client is able to engage in sharper practices in relation to the persons with whom the business person is completing a business transaction than may the lawyer. Certainly the lawyers in this case had clients who were dealing with each other at arm’s length, and the lawyers were under a duty to advocate for their clients to the limit the law allowed. The accused’s client required him to take a default, as permitted by a federal rule of procedure, and to do so without notifying the lawyer on the other side. Under those circumstances, the accused’s letter to the other lawyer, quoted in the lead opinion, misrepresented the accused’s intention. Applying Onita, the accused’s conduct, were this simply a business transaction, would have been permissible.² Under the Code of Professional Responsibility, however, it is not. Thus, DR 1-102(A)(3) prevents — as between the lawyers — what the Onita majority expressly allows as between their respective clients. In short, the client has a right to mislead that the lawyer-advocate does not.

Recently, a majority of the court has also relegated the implied covenant of good faith and fair dealing between business persons to some sort of legal museum for former remedies that are no longer used. Compare Best v. U.S. National Bank, 303 Or 557, 562, 739 P2d 554 (1987) (holding that the purpose of that covenant “is to prohibit improper behavior in the performance and enforcement of contracts”), with Pacific First Bank v. New Morgan Park Corp., 319 Or 342, 876 P2d 761 (1994) (a 4-2 decision).

In my view, however, the law applicable to the business world requires it to live by the same standard as applies to transactions between lawyers. I would also apply to “business” transactions the same rule of honesty and good faith that we require within the legal profession. I believe that is the community norm today, in both Oregon’s business and legal communities. I want that norm to continue. I write separately here in the hope that the majority will see the light and return our commercial law to principles requiring rectitude between business people equal to that required between lawyers in the representation of clients.

Perhaps my point regarding the importance of requiring honesty of representation in all areas of law, not just between lawyers, is thoughtfully illustrated by Margaret Thatcher in a 1994 lecture delivered at Hillsdale College in Michigan. She said:

“The most important problems we have to tackle today are problems, ultimately, having to do with the moral foundations of society. There are people who eagerly accept their own freedom but do not respect the freedom of others — they, like the Athenians, want freedom from responsibility. But if they accept freedom for themselves, they must respect the freedom of others. If they expect to go about their business unhindered and to be protected from violence, they must not hinder the business of or do violence to others.” Margaret Thatcher, The Moral Foundations of Society, 24 Imprimis No. 3, at 3 (March 1995).

1 Restatement (Second) of Torts § 552(1) provides:

“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.”

2 In Onita, the younger Bronson told a buyer-assignee that lots in a Deschutes County residential development would be released for development or resale by the buyer after certain payments were made. The buyer plowed about a million dollars of assets into those payments, but the elder Bronson, who benefited from the payments and acquired the ability to release the lots in question to his own joint venture because of those payments, refused to release them to his buyer-assignee, thereby financially breaking the buyer. Bronson was, by the Onita majority, held legally blameless because the negotiations had been at arm’s length and, therefore, no account could be taken of the misrepresentation by which Bronson profited and the buyer who received nothing in return for his money went belly-up.