## Facts

- John and Sherri Harkness invested proceeds from conventional mortgage loans into a “hard-money” construction-loan scheme promoted by Lynn Kantor, a loan officer employed first by Sunset Mortgage and later by Directors Mortgage, Inc.
- Kantor had actual authority from her employers to originate conventional mortgage loans and used her position, employer forms, and loan-processing channels while dealing with the Harknesses.
- Kantor diverted funds through personal accounts, forged some documents, and failed to record or properly perfect liens, leaving the Harknesses with substantial unpaid notes and losses exceeding $1 million.
- The Harknesses sued Kantor and her employers and retained Jack H. Platten as co-counsel and primary strategist.
- On Platten’s advice, the Harknesses settled the underlying litigation for $600,000, based on assurances they could recover additional funds from a large borrower in separate litigation; Platten later refused to pursue that borrower, who subsequently entered bankruptcy.
- The Harknesses sued Platten for legal malpractice and negligent misrepresentation, alleging that competent handling of the underlying case would have produced recovery exceeding the settlement, including against the employers based on Kantor’s apparent authority.
- At trial in the malpractice case, the court directed a verdict for Platten on the ground that the underlying claims against the employers could not succeed as a matter of law; the Court of Appeals affirmed.

## Issues

1. Whether, viewing the evidence favorably to the Harknesses, a reasonable jury could find that Kantor had apparent authority from her employers to engage in the hard-money transactions, making the employers potentially liable in the underlying case.
2. Whether the trial court erred by directing a verdict for Platten in the malpractice action by removing the apparent-authority question from the jury.

## Decision

- The Oregon Supreme Court reversed the Court of Appeals and reversed the directed verdict for Platten.
- The Court held that the evidence permitted reasonable inferences that the employers’ manifestations and the context of Kantor’s role could have led the Harknesses reasonably to believe Kantor was authorized to act for the employers in the transactions at issue.
- Because a reasonable jury could find apparent authority on this record, the directed verdict was improper.
- The case was remanded for further proceedings.

## Legal Principles

- Apparent authority exists when a principal’s manifestations cause a third party reasonably to believe the agent is authorized to act for the principal; the focus is on the principal’s conduct, not the agent’s self-assertions.
- Evidence of an agent’s actual authority, job position, and customary responsibilities in the industry may inform what authority a reasonable third party would attribute to the agent.
- Apparent authority commonly presents a fact question for the jury when the evidence supports competing reasonable inferences.
- A directed verdict is proper only when, viewing the evidence and all reasonable inferences in favor of the nonmoving party, no reasonable juror could find for that party.

## Conclusion

The Oregon Supreme Court held that the malpractice plaintiffs presented sufficient evidence for a jury to decide whether the underlying defendants could have been liable under apparent-authority principles; therefore, the trial court erred in directing a verdict for the attorney, and the case was remanded.


Harkness v. Platten, 359 Or. 715 (2016)