Northwest Business Litigation

Ninth Circuit outlines attorney liability for securities fraud

Today the Ninth Circuit Court of Appeals issued an opinion stating that an attorney who undertakes to make representations to prospective purchasers of securities can be liable for securities fraud under federal law if the representations turn out to be false. 

In Thompson v. Paul, the defendant attorney represented a company that was preparing to issue stock to plaintiff as part of a litigation settlement. Plaintiff claimed she agreed to accept the stock based on a representation by the attorney that the company's CEO was not under criminal investigation.  When the CEO was indicted three days later, the stock price dropped and plaintiff sued the attorney for securities fraud.  The attorney argued that he owed no duty to plaintiff, but only to his client, the issuer of the stock.  The Ninth Circuit disagreed, holding that the attorney-client relationship does not shield an attorney from liability to third parties under Section 10(b) of the Securities Exchange Act. 

Federal Vaccine Act does not preclude civil remedy, Oregon Court of Appeals holds

Last week, the Oregon Court of Appeals held the federal Vaccine Act, which creates a special program for compensation for a vaccine-related injury or death, does not bar family members of a person who has suffered a vaccine-related death from filing a civil action seeking damages for their own injuries.

In reaching its decision in Hobart v. Holt, the Court of Appeals relied on the text of 42 U.S.C. section 300aa-11(a)(9), which states that the Vaccine Act program provides compensation only to persons who have themselves sustained a vaccine-related injury or death.  Based on that statute, the Court held the Vaccine Act is not preclusive where the legal representative of an injured person has accepted compensation under the program for the decedent's losses and a subsequent civil action seeks to recover only for the derivative loss suffered by others.

The Court also rejected the argument that Oregon's wrongful death statute prohibits the decedent's children from bringing a civil action since they already received compensation via the Vaccine Act benefits paid to the decedent's estate.  A wrongful death action is a derivative action because the decedent's children may bring an action only if the decedent might have maintained an action had the decedent lived.  The defendants argued the decedent could not have maintained an action against them for her injuries had she lived because her estate accepted the judgment issued under the Vaccine Act program.  In interpreting the wrongful death statute, the Court noted that the temporal benchmark for determining the decedent's ability to maintain an action is at the time of her death.  Thus, it is not relevant that the decedent's estate later elected to accept compensation from the Vaccine Act program, because at the time of her death nothing would have precluded her from bringing an action against the defendants for her vaccine-related death. 

Oregon Supreme Court: City not liable for erroneous statement to business owner

The Oregon Supreme Court held last week that a government body cannot be liable for negligently providing incorrect information.  In Loosli v. City of Salem, the court concluded that a used car dealer can't recover damages resulting from the City of Salem's erroneous certification as part of the dealer's application for a vehicle dealer certificate.  The city mistakenly stated that the location for the proposed used car lot complied with land use rules.  When that turned out to be wrong, the dealer incurred costs associated with moving the business to a different location. 

The case turns on the application of the economic loss doctrine, which provides that a negligence claim to recover for purely economic losses must be based on some special duty that defendant owes to plaintiff beyond the ordinary duty to exercise reasonable care to avoid foreseeable harm.  In this case, the dealer contended that the special duty arose from the city's statutory obligation to provide the land-use certification.   But the court concluded that the certification was not intended to benefit the dealer specifically, but rather to protect the public at large.  Because there was no special duty, the dealer could not recover its business losses.

The Supreme Court affirmed a Court of Appeals ruling that the city was entitled to summary judgment on the dealer's negligence claim.  See our coverage of the 2007 Court of Appeals opinion here.

Controversial medical testimony is admissible, Oregon Court of Appeals holds

Oregon courts should not exclude scientific expert testimony simply because it is controversial or arguably invalid, according to an opinion issued this week by the Court of Appeals.  In Kennedy v. Eden Advanced Pest Technologies, plaintiff claimed he suffered from multiple chemical sensitivity, and that defendant's application of pesticides in his home aggravated the condition and caused injury.  At trial, the court excluded testimony from his treating physician regarding the diagnosis, his opinion of causation, and proposed treatment.  To support admissibility, plaintiff offered evidence that multiple chemical sensitivity is recognized as a diagnosable condition by a number of medical groups.  Defendant responded with testimony from another doctor who said the condition has never been subject to scientific proof and is not recognized within mainstream medical practice.

On appeal, plaintiff argued that the testimony should have been admitted as scientific evidence.  Judge Edmonds, writing for the Court, agreed, stating that controversy within the scientific community is not necessarily a basis to exclude scientific evidence.  Plaintiff had shown that the testimony was relevant, would have assisted the jury, and was unlikely to have caused confusion or have misled the jury.  He concluded, "given the Oregon legislature's strong policy to aid the trier of fact to understand the evidence presented at trial in the context of the parties' theory of the case, we believe that the legislature intended controversial evidence like [the treating physician's] testimony to be presented to the jury."