Fraud and Misrepresentation- Torts 2

Exceptions to the general rule there is no affirmative duty to disclose =

1. A fiduciary relationship 2. Active concealment of a material fact 3. Incomplete Statement or Intentional Ambiguity 4. New Information Contradicting Prior Statements 5. Where the court creates a duty to disclose

Proximate cause for Intentional Misrepresentation: Who may sue?

1. All known 3rd parties 2. Anyone who is reasonably foreseeable (very broad, Palsgraf standard)

Examples of someone with special knowledge =

1. An appraiser 2. Lab tech with lab results 3. lawyer 4. doctor 5. jeweler

Liability is limited to loss suffered: negligent misrepresentation.***

1. By the person or one of a limited group of persons for whose benefit and guidance [the defendant] intends to supply the info or knows the recipient intends to supply it. AND 2. through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

Which cause the Plaintiff to act (or not act/refrain from acting) element, you need =

1. Cause in fact/materiality (but for cause) AND 2. Proximate cause (covers reasonably foreseeability)

Negligent Misrepresentation elements =

1. False [mis]representation 2. Made with negligence as to the falsity of the misrepresentation 3. Representation was made with the intent to induce P to act or refrain from acting 4. Which caused the P to act/refrain from acting 5. Plaintiff justifiably relied upon the false representation 6. Resulting in pecuniary damages

Intentional misrepresentation elements =

1. False representation or misrepresentation 2. Made with Scienter (as to the falsity of the misrepresentation) 3. With intent to induce plaintiff to act or refrain from acting 4. Which caused plaintiff to act -cause in fact/materiality -proximate cause 5. In justifiable reliance upon the false misrepresentation 6. Resulting in pecuniary damages

Exceptions to the general rule of no affirmative duty to disclose =

1. Fiduciary relationship (A fiduciary has a duty to disclose all material facts to the other person) 2. Active concealment of material fact 3. Incomplete statement, or intentional ambiguity 4. New information contradicting prior statements 5. Where a court creates a duty to disclose

Recognized causes of action for fraud/misrepresentation =

1. Intentional misrepresentation (fraud) 2. Negligent misrepresentation 3. Statutory consumer protection causes of action that are fraud-based (UCL in CA).

Intentional misrepresentation: Intent required?

1. Knowledge 2. Recklessness

For intentional misrepresentation you must have one of the following to satisfy scienter = -SCIENTER!

1. Knowledge (you know what you're saying is false) 2. Recklessness (reckless disregard as to whether it is true or false)

Int. Misrep.: Proximate cause =

1. Privity is not req. 2. Limited to all known 3rd parties 3. Anyone who is reasonably foreseeable

Other exceptions to the Economic Loss Rule, where economic recovery IS allowed =

1. Special relationship btw parties. 2. Negligent failure to obtain proper attestation of a will (putative beneficiaries may sue) 3. Negligent performance of profession. (Bankers, real estate agents, lawyers) 4. Maritime and admiralty law exceptions 5. Pollution of a stream by Defendant 6. Recovery by fisherman for negligent diminution of aquatic life because they were particularly foreseeable

Negligence in the conduct of an audit elements =

1. Standard of care = that which would ordinarily be done by a reasonably prudent auditor 2. Departure by the auditor from that standard 3. Causation 4. Damage

Important Non-Disclosure factors (Ollerman based) =

1. The condition is "latent" and NOT readily observable to the purchaser 2. The purchasers acts upon the reasonable assumption that the condition does or does not exist 3. The vendor has special knowledge or means of knowledge not available to the purchaser 4. The existence of the condition is material to the transaction (does it affect whether the transaction would have occurred)

Non-Disclosure factors found important in Ollerman =

1. The condition is latent and not readily observable 2. The purchaser acts upon the reasonable assumption that the condition does or does not exist 3. The vendor has special knowledge or means of knowledge not available to the purchaser 4. Condition is material to the transaction: meaning it influences whether the transaction is concluded at all or at the same price.

Statements about future events generally are NOT actionable as fraud; except when?

1. The speaker had no intention of performing when the promise was made; OR 2. If the speaker knows the statement is false

An opinion is generally are NOT actionable as fraud; except when? -This goes to "False Representation or misrepresentation"

1. The speaker knows the opinion is not true, or it is reckless AND 2. There is "special knowledge" -You need both.

For negligence in conducting an audit, who is the duty owed to?

A limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it. -And of course the duty is extended to those to whom the negligent misrepresentation was made.

Statements about future events generally are NOT actionable.

But, if 1. The speaker had no intention of performing when the promise was made. OR 2. If, at the time, speaker knows the statement is false This would satisfy "False representation or misrepresentation"

Proximate cause for Negligent misrepresentation: Liability for the duty is limited to loss suffered by the PERSON or one of a limited group of person for whose benefit and guidance he intends to supply the information OR knows that the recipient intends to supply it =

Class of persons for whose guidance the information was supplied.

Proximate cause for Negligent misrepresentation: Through reliance upon it in a transaction that he intends the information to INFLUENCE or knows that the recipient so intends or in a substantially similar transaction =

Class of persons whom the purveyor of the misstatement knows the original recipient intends to prove the information.

"Made with negligence as to the falsity of the misrepresentation" =

Defendant made the representation without any REASONABLE GROUND for believing it to be true. (negligence) -Statement made not with full knowledge that it is false, but merely with a lack of reasonable care to ensure its accuracy.

Justifiable reliance =

In justifiable reliance upon the false misrepresentation. (need to justify and rely on it) -This is meant to filter out those who are gullible.

Law is generally NOT actionable as fraud; except for?

Lawyer's special knowledge. -This means you can't be sued for a misrepresentation of law unless you are a layers who has special knowledge.

Puffing is NOT actionable as fraud.***

Puffing = Saying your product is bigger and better than it actually is. Ex. Papa John pizza

Puffing = not a false statement of fact.

Puffing = no facts

Special knowledge exception =

This applies to the opinions of specialized experts such as lawyers, doctors, scientists and dealers in antiques, where their opinions are based on concrete specific information and objective verifiable facts.

Exceptions to the Non-Disclosure rule: The court may create duty to disclose, example =

This happen in Ollerman where the court created a duty to disclose for experienced sellers dealing with inexperienced buyers.

Int. Misrep.: What is special knowledge =

This includes people with training on which they can give an opinion. -Because of training their opinion can be relied on.

Materiality is a question of importance =

This requirement filters out small misrepresentations. Ex. If Prius was advertised at 50 mpg and it only got 49 mpg.

Scienter =

Your knowledge about a particular thing. -Here, your knowledge about the truth or falsity of the representation. AT THE TIME you made the statement.

Liability is limited to loss suffered for..?

negligent misrepresentation. -By the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information OR knows that the recipient intends to supply it.