Key Points

  • The Oregon Court of Appeals affirmed a $1,237,191.92 judgment against Lamar Obie Co. for breach of the implied duty of good faith and fair dealing.
  • The court held that, as a matter of law, the parties could have held the objectively reasonable expectations underlying the building owners' claim, so the jury properly decided whether they held them and whether Lamar's conduct, including surrendering the ODOT sign permit for relocation credit, defeated them.
  • A lease's silence on a permit, and ODOT's legal authorization of the surrender, did not foreclose the claim because the implied covenant fills gaps the contract leaves open.
  • Future lost-profit damages were not too speculative merely because the owners had separate pending lawsuits against ODOT that might have restored the sign.
  • Lamar's challenges to the summary judgment denial and post-trial motions were unreviewable, and its jury instruction challenges failed.

The Oregon Court of Appeals on Thursday upheld a $1,237,191.92 judgment against advertising company Lamar Obie Co., holding that a jury could find Lamar broke faith with a Portland building owner when it turned in the state permit for the building's wall sign after their lease ended, leaving the owner unable to sell advertising on the wall.

Presiding Judge Ortega, writing for a three-judge panel that included Judges Joyce and Hellman, turned back all nine of Lamar's assignments of error. The panel held that the trial court properly let the jury decide the building owners' claim, that their future damages were not too speculative, and that the jury instructions contained no reversible error.

The published decision holds that the implied covenant of good faith and fair dealing, a duty Oregon reads into every contract that bars one party from destroying the other's benefit of the bargain, can reach conduct a contract never mentions and that state law allowed. It also holds that when the claimed expectations are not foreclosed by the contract's terms, a jury may decide whether the parties actually held them.

The plaintiffs, Jim A. Atwood, his trust and J.A. Atwood Corporation, own a building on West Burnside in Portland whose large west wall they had leased to advertising companies for decades. After that stretch of Burnside was designated a state highway, the Oregon Department of Transportation began requiring permits for such signs in June 2015.

The tenant at the time, OnDisplay Advertising, asked Atwood for a letter supporting its permit application. Atwood agreed so long as his side owned the permit when the lease ended, and his letter said the permit "shall be in the name of: OnDisplay Advertising, J A Atwood, J A Atwood Corporation, their successors and assigns, as his or its interest may appear." ODOT nonetheless issued the permit solely to OnDisplay, which sold its assets, including the Atwood lease, to Lamar in June 2015. ODOT then reissued the permit only in Lamar's name, and no one told the owners.

Revenue fell under Lamar, according to the opinion, and the owners told Lamar in 2018 that they would not renew the lease when it expired on June 30, 2019. In February 2019, Lamar told Atwood that if the lease ended it would remove the sign's lighting and cabling and relinquish the permit, the first notice the owners had that the permit was in Lamar's name alone. Lamar refused Atwood's offers to buy out the lease or to renew it with the permit transferred. Through counsel, the opinion says, Lamar explained it would not serve its interest to "allow a competing advertising agency to saturate the market even further."

After the lease ended, and despite a letter from the owners telling it not to, Lamar surrendered the permit to ODOT on July 18, 2019, in exchange for relocation credit, which allows a holder to display advertising at a new site within strict geographic limits. The opinion says no such site was available for Lamar's credit. ODOT then refused to issue the owners a new permit, and the wall has carried no commercial advertising since July 1, 2019.

The owners sued OnDisplay and Lamar, settled with OnDisplay and went to trial against Lamar. A Multnomah County jury, in a trial before Judge Katharine von Ter Stegge, found for them on the good-faith claim and rejected a conversion claim.

On appeal, Lamar argued that the owners' expectations were unreasonable as a matter of law because the fully integrated lease said nothing about the permit, because Lamar owned the permit and had no duty to hand it over, and because state law authorized it to seek relocation credit. Lamar cast the claim as an attempt to add a term requiring it to give up the permit when the lease ended.

The panel rejected that characterization. "However, Lamar does not get to frame plaintiffs' claim for them," Ortega wrote. The owners had claimed expectations that Lamar would seek advertisers, return the wall at the end of the lease and leave it in a condition to be leased again, and Lamar's handling of the permit was conduct that allegedly defeated those expectations. "The distinction we make here may appear narrow, but it is an important one," the opinion said.

The lease's silence on the permit did not help Lamar, the court held, because "the implied duty of good faith and fair dealing is by its nature a gap filler for contracts." The lease and its addendum were also signed before ODOT required permits. Nor did the agency's approval save Lamar. "That ODOT permitted that action does not relieve Lamar of its implied duty of good faith and fair dealing in its lease with plaintiffs," Ortega wrote, pointing to evidence that Lamar could not use the credit and acted "with a purpose to prevent another agency from displaying ads on plaintiffs' wall sign."

The panel also rejected Lamar's argument that damages for permanent loss of the wall were speculative because the owners had two pending cases against ODOT that might restore the sign. Lost profits need only be proved to a reasonable certainty, the court said, and the owners showed continuing harm. "Lamar's assertion that plaintiffs' damages may cease at some point in the future because of separate lawsuits did not make those damages speculative," Ortega wrote; it was evidence the jury could weigh. Both ODOT cases have since ended against the owners, according to the opinion.

The court found two assignments unreviewable, holding that a denied summary judgment motion turning on material facts cannot be reviewed after trial, and that Lamar's post-trial motions rested on insufficiency of the evidence. It rejected the instruction challenges, saying Lamar had not explained how any instruction misled the jurors or affected the outcome.

Drew L. Eyman of Snell & Wilmer LLP argued for Lamar. Nicholas A. Kampars of Wildwood Law Group LLC argued for the Atwood plaintiffs.

The decision, reported at 354 Or App 516, affirms the judgment in full. The case is Atwood v. Lamar Obie Co., LLC, No. A181594, on appeal from Multnomah County Circuit Court No. 20CV29502.