Karsun v. Kelley

Oregon Supreme Court · Evidence

Evidenceother acts evidencesimilar representationsplan or designschemescienterORS 59.115Blue Sky Law

Facts

Plaintiff alleged that defendants sold him stock in Diagnostic Centers, Inc. by telling him, among other things, that the prospectus was out of date and should be disregarded and that the stock offering would be closed that weekend. Defendants generally denied the allegations and contended they had made no false representations to plaintiff. Plaintiff also presented testimony from two other witnesses that at about the same time defendant Kelley made substantially similar statements to them that the issue was almost sold out and they were lucky to get in. The trial court admitted that testimony with limiting instructions on knowledge, but later granted a new trial, concluding the evidence had been improperly admitted and was highly prejudicial.

Issue

In an action under ORS 59.115 where defendants deny making false representations and do not assert lack of knowledge as a defense, was testimony that defendant made similar representations to other purchasers at about the same time admissible, or did its admission require a new trial?

Rule

Although evidence of other similar acts is generally inadmissible to prove that a party acted similarly on the occasion in dispute, such evidence may be admitted when the similar representations are so closely alike and contemporaneous that they show a larger or continuing plan or design of which the representations in suit are individual manifestations. In an ORS 59.115 action, evidence of other false representations is not admissible on scienter once defendants have removed knowledge from the case by not pleading or relying on lack of knowledge, but it may still be admissible on the separate theory of proving conduct through plan or design.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Lena Ortiz sues Darren Pike under ORS 59.115 after buying units in a startup. Darren denies ever telling Lena that the offering would close by Friday and that only a few units remained. Lena offers testimony from two other investors that during the same week Darren told each of them, in nearly identical words, that the units were almost gone and they were lucky to get in before the deadline.

Should the trial court admit the two investors' testimony?

Explanation. The majority recognized the general rule against using similar-act evidence to prove conduct on another occasion, but held that an exception applies when the other representations are closely similar and near in time so they can be viewed as parts of a larger or continuing plan or design. In that situation, the evidence is admissible to help prove the disputed conduct itself—here, whether Darren made the statements to Lena. It is not necessary that scienter be at issue or that a conspiracy be pleaded. (Derived from Karsun v. Kelley (n.d.).)