## Facts

- Tyrone Cruze, Sr. and Jacqueline Cruze (plaintiffs) owned property they wanted to sell to a developer.
- Martin Hudler, a real-estate developer, negotiated with Cruze to purchase the property.
- Hudler and Charles Markley, an attorney, were partners in a group of interconnected real-estate-development businesses.
- During negotiations, Hudler—allegedly with Markley’s knowledge—represented that the businesses were successful, that Hudler and Markley had made large investments in them, and that they had high net worth.
- Hudler persuaded Cruze to form a joint venture rather than complete a straightforward sale.
- Plaintiffs then paid or loaned more than $3,500,000 to three companies connected to Hudler and Markley.
- Plaintiffs later claimed the success-and-capitalization representations were false and that Hudler was trying to run a Ponzi-type operation—raising new money to repay earlier investors and conceal losses.
- Plaintiffs sued Hudler and Markley for fraud and related claims.
- Hudler and Markley moved for summary judgment; the trial court denied Hudler’s motion but granted summary judgment to Markley, reasoning that there was no evidence Markley personally made misrepresentations to plaintiffs.
- The trial court also denied plaintiffs leave to amend their complaint to add a racketeering claim under Oregon’s RICO statute (ORICO) against Hudler and Markley.
- Plaintiffs appealed.

## Issues

1. Whether summary judgment for Markley was proper where plaintiffs produced evidence permitting an inference that Markley knew of and participated in the alleged fraud, even if Hudler made the statements directly to plaintiffs.
2. Whether plaintiffs’ “right to rely” on the alleged misrepresentations could be decided against them as a matter of law at the summary-judgment stage.
3. Whether the trial court abused its discretion by denying leave to amend the complaint to add an ORICO racketeering claim against Hudler and Markley.

## Decision

- The Oregon Court of Appeals reversed the summary judgment entered for Markley and remanded for further proceedings.
- The court held that the summary-judgment record, viewed with all reasonable inferences in plaintiffs’ favor, could support a finding that Markley’s role went beyond providing peripheral legal services and that a factfinder could find him liable on fraud-related theories despite the lack of direct, face-to-face misrepresentations from Markley to plaintiffs.
- The court also reversed the denial of leave to amend to assert an ORICO claim, concluding that refusing the amendment was error on the record presented.
- On reconsideration, the court modified its opinion to make clear that it had considered and rejected Markley’s “right to rely” argument when reversing summary judgment, and it corrected a factual statement; the disposition remained reversal and remand.

## Legal Principles

- On summary judgment, the court views the record and all reasonable inferences in the light most favorable to the nonmoving party; if competing inferences are available on a material point, summary judgment is improper.
- A defendant may face fraud liability where the evidence would allow a finding that the defendant knowingly participated in, assisted, or benefited from a fraudulent scheme, even if another person communicated the misrepresentations to the plaintiff.
- The “right to rely” component of common-law fraud may depend on context and the record; it is not automatically resolved against a plaintiff as a matter of law simply because the transaction involved investment or business dealings.
- Oregon pleading rules favor allowing amendments; a court may err by denying leave to amend when the proposed new claim is not clearly futile on its face and the opposing party has not shown unfair prejudice that justifies refusal.

## Conclusion

Cruze v. Hudler held that plaintiffs’ evidence permitted a jury to decide whether attorney-partner Markley participated in an alleged investment-fraud scheme and that summary judgment could not rest solely on the absence of misrepresentations spoken directly by Markley to plaintiffs; the court also ruled that the trial court wrongly denied plaintiffs permission to amend to add an ORICO racketeering claim, so the case was sent back for further proceedings.


Cruze v. Hudler, 267 P. 3d 176 (2011)