Harkness v. Platten

John and Sherri Harkness (plaintiffs) sued their attorney, Jack Platten (defendant), for legal malpractice. A legal-malpractice case required that a plaintiff prove that the underlying case would have been successful but for the attorney’s malpractice. In the underlying case, the Harknesses wanted to sue Kantor, a loan officer who had perpetrated a fraudulent investment scheme on them, and also Kantor’s former employer, Sunset Mortgage, and her current employer, Directors Mortgage, Inc. (collectively, the employers). Kantor had actual authority from the employers to make loans. The Harknesses secured loans from Kantor’s employers using the equity in their homes. Then, Kantor invested the loan money in the form of construction loans to others without her employers’ knowledge. After two years of investing, the Harknesses learned that Kantor had forged documents and failed to record liens properly when they were sued and left holding unpaid loan notes totaling almost $1,000,000. The Harknesses sought to hold the employers liable under a theory of apparent authority. However, Platten, who was not ready for trial, convinced the Harknesses to settle with Kantor and the employers for $600,000 and to sue a large borrower for the remainder. Platten then refused to sue the borrower, who later filed for bankruptcy. On the legal-malpractice claim, a trial court granted Platten a directed verdict. An appellate court affirmed and failed to consider Kantor’s actual authority or the authority that was customary for a loan officer at a mortgage company in finding that a reasonable jury could not infer Kantor’s apparent authority or the objective reasonableness of the Harknesses’ reliance. The Harknesses sought review, which the Oregon Supreme Court granted.