Vandermay v. Clayton

328 Or. 646 (1999)

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Nature of the Case

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Facts

P and Bob Wester decided that they would like to buy an oil company in Oregon. they formed the VanWest Oil Company (VanWest) and negotiated the purchase of Macklin Oil Company (Macklin). P and Wester employed F, a Eugene lawyer, and Wester's brother-in-law, to 'handle the legalese with the Macklins' attorney and put the deal together.' D served as P's corporate and personal lawyer from 1977 until March 1990, and P relied on d's legal advice. In 1983, Wester sold his shares to P, and D represented both parties in that transaction. P decided to sell VanWest. By the end of 1989, VanWest had doubled in size from what it was in 1977, and P had made improvements at several of its properties, including upgrading tanks and lines, adding car washes at service stations, and putting in a new fuel island at one of the service stations. By the end of the 1980s, environmental rules affecting underground storage tanks were being implemented at both the national and state levels. Soil tests at one site revealed soil contamination at depths of five, ten, and fifteen feet. Plaintiff believed that the contamination had been caused by small spills from storage tank filling over the years and that it would not cost much to clean it up. Plaintiff did not report the results of the soil tests to the Department of Environmental Quality (DEQ). In October 1989, Harris expressed an interest in buying VanWest. Paragraph 11 of the offer included an indemnification provision requiring plaintiff to hold Harris harmless 'against any claims, environmental or otherwise' existing before the sale. The indemnification provision also stated that Harris would accept the 1989 soil test report that showed some contamination at one site. In January 1990, P learned that there was contamination at another site, but he had insurance coverage for any environmental contamination there, subject to a $25,000 deductible. Plaintiff was concerned about the liability that he might face at the first site because he knew that, under paragraph 11 of Harris's offer to purchase VanWest, Harris refused to be responsible for any cleanup at that site. P estimated that it would cost about $2,500 to clean up the contamination that was discovered at the first site. P agreed that he would pay up to $5,000 to clean up that site. He instructed D to draft a separate indemnity agreement for the sale of VanWest that limited his liability to $5,000 for cleaning up the first site. During the closing, Harris informed P that the indemnity agreement that D had drafted was unacceptable to Harris. P gave no indication to D that P was willing to be responsible for more than $5,000 to clean up the first site. Harris had his lawyer prepare a different indemnity agreement covering both sited. That agreement provided: 'The parties further understand that there is no insurance coverage available for the costs of any cleanup and remedial action at the first site. As between the parties hereto, it is agreed that VanWest shall not be required to expend more than the sum of $5,000 for any costs of cleanup and remedial action at the Astoria site; provided, however, it is understood and agreed that VanWest may be liable for such costs in excess of $5,000 under applicable environmental federal and state laws.' P looked at D, who indicated by the nod of his head, that it was 'okay for P to sign it.' Additional soil tests revealed substantial contamination. The DEQ informed P that he should have reported the soil contamination that was discovered in 1989, and it ordered both P and Harris to clean up the site. The trial court found that the indemnity agreement that Harris's lawyer had drafted was ambiguous. P and Harris settled their litigation, agreeing to share equally the costs of cleaning up the first site. P's share of the cost was over $585,000. P sued D for malpractice. P called one expert witness, a lawyer who had specialized in environmental law for over 25 years at a large law firm. P asked the expert if he had an opinion about what a lawyer in D's position, exercising due care, skill, and diligence in representing his client, would have done regarding the indemnity agreement that Harris presented on March 1, 1990. D objected in that P had failed to establish whether the expert was familiar with the quality of care that ordinarily is exercised by general practitioners in small law firms. The expert testified that he did not know the standard of care that would apply to a practitioner in D's circumstances but that there were others in his firm who did business with small firm practitioners. The court sustained D's objection. P rested and D moved for a directed verdict in that without expert testimony on whether D had breached the standard of care, P had no case. P argued that no expert testimony was required. The court agreed with D and P appealed. The Court of Appeals agreed with P that expert testimony was not required. D appealed. P contends that 'when an attorney fails to follow a client's specific instruction, a jury using ordinary knowledge may be competent to consider the matter without the assistance of expert testimony.'