Kansallis Finance Ltd. v. Fern

659 N.E.2d 731 (1995)

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Nature of the Case

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Facts

Stephen Jones and the four defendants (Ds) were law partners in Massachusetts when, in connection with a loan and lease financing transaction, Kansallis (P) sought and obtained an opinion letter from Jones. The letter on D letterhead contained several intentional misrepresentations concerning the transaction and was part of a conspiracy by Jones and others (though not any of the defendants here) to defraud P. Jones was later convicted on criminal charges for his part in the fraud, and P was unable to collect its $880,000 loss from Jones or his co-conspirators. P sued D on the theory that the partners were liable for the damage caused by the fraudulent letter. The judge and jury decided that Ds were not liable for Jones's conduct. The Court of Appeals affirmed both the judge's and the jury's factual findings and certified two questions to this court in order to resolve the legal issues. On P's common law claims, the jury held that Jones did not have apparent authority to issue the opinion letter and that his action in issuing the opinion letter was outside the scope of the partnership. On appeal, P contends that the jury based their second finding on an erroneous instruction to satisfy a three-prong test. It must have: (1) been 'the kind of thing a law partner would do'; (2) 'occurred substantially within the authorized time and geographic limits of the partnership; and' (3) been 'motivated at least in part by a purpose to serve the partnership.' P had objected to the addition of the third prong. On P's claim under G. L. c. 93A, the judge found that D had clothed Jones with apparent authority to issue the letter on its behalf. The judge held as a matter of law that 'innocent' partners may not be held vicariously liable under 93A for their partners' fraudulent acts. It held that a partner, entirely unaware and uninvolved with another partner's fraud, is immune from vicarious liability under 93A, even when the conduct constituting fraud was authorized.'