| -- End Ad Box ---> | | | | misrepresentations. |
| Fraud Lawsuits in California | | | | 3. Concealment. A claim for fraud may also arise |
| The various ways a victim can be defrauded are | | | | if the defendant concealed or failed to disclose a |
| as limitless as the bounds of human ingenuity. But | | | | material fact during a transaction, causing damage |
| under California law, wrongful actions are generally | | | | to the victim. The elements of a claim for |
| characterized as civil "fraud" only under one of the | | | | fraudulent concealment are:a. The defendant failed |
| following legal theories: | | | | to disclose or concealed a material fact with an |
| 1. Intentional Misrepresentation. Probably the most | | | | intent to defraud the victim.b. The defendant had |
| common type of fraud is a false statement. But | | | | a duty to disclose. There is not always a duty to |
| not every false statement is fraudulent. The | | | | disclose facts during a transaction. If there is a |
| elements of a claim for intentional | | | | duty, it generally arises in one of four different |
| misrepresentation are:a. An intentionally or | | | | circumstances: (i) The defendant is in a "fiduciary |
| recklessly false statement of fact. Not every | | | | relationship" (such as being a partner) with the |
| false statement is a false statement of "fact." | | | | victim; or (ii) The defendant took steps to hide |
| Statements of opinion generally are not actionable. | | | | important information from the victim (as |
| Sales talk, or "puffing" ("This is the best location in | | | | opposed to simply failing to tell the victim); or (iii) |
| the county!"), is generally not actionable. However, | | | | The defendant disclosed some information to the |
| if the defendant claims to be an expert or there | | | | victim, but the disclosed information is misleading |
| are other reasons to expect that the victim | | | | unless more information is given; or (iv) The |
| would rely upon the defendant’s opinion as | | | | defendant is aware of key information and knows |
| a statement of "fact," an opinion may be treated | | | | the victim is unlikely to discover that information. |
| by the court as a statement of fact. Also, a | | | | In addition, California laws may create a duty to |
| statement need not be made directly to the | | | | disclose in certain transactions. For example, |
| victim. For instance, if the defendant made the | | | | sellers of residential property in California generally |
| false statement to a third person with the | | | | are required to make written disclosures about |
| expectation that the statement would be | | | | the condition of the house.c. The victim must |
| repeated to the victim, the victim may have a | | | | have been unaware of the fact and would not |
| valid claim for fraudulent misrepresentation.b. | | | | have acted as he or she did if he or she knew of |
| Intention to defraud. If a representation of fact | | | | the fact.d. The victim sustained damages as a |
| was intentionally false and a material part of the | | | | result of the concealment. |
| transaction (e.g., "this house does not have | | | | 4. False Promise. A claim of fraud may arise if a |
| flooding problems"), it is likely the false promise | | | | defendant entered into a contract and made |
| was made with the intention to defraud the | | | | promises that it never intended to perform. The |
| victim.c. Reasonable reliance upon the false | | | | elements of a false promise claim are:a. The |
| statement. The victim must have actually relied | | | | defendant made a promise.b. The promise was |
| upon the statement to change his or her position | | | | important to the transaction.c. At the time he or |
| (e.g., the victim would not have purchased the | | | | she made the promise, the defendant did not |
| house if he or she knew the truth). The false | | | | intend to perform it.d. The defendant intended the |
| statement need not be the only reason the victim | | | | victim to rely upon the promise.e. The victim |
| changed his or her position, but it must be at least | | | | reasonably relied upon the promise.f. The |
| part of the reason. Also, the victim’s | | | | defendant did not perform the promise.g. The |
| reliance on the false statement must be | | | | victim was harmed as a result of defendant not |
| reasonable. If the victim knew or should have | | | | carrying out his or her promise.h. The |
| known the statement was false, the victim did | | | | victim’s reliance on the defendant’s |
| not reasonably rely. The sophistication of the | | | | promise was a substantial factor in causing the |
| victim will play a role in determining whether his or | | | | victim’s harm. |
| her reliance on the statement was reasonable; | | | | It is important to understand that a broken |
| e.g., a sophisticated real estate investor’s | | | | promise, alone, is not a sufficient basis for a fraud |
| reliance on a representation about the qualities of | | | | claim. More than a mere broken promise is |
| a house may not be reasonable while an | | | | required. The victim must also prove that the |
| unsophisticated buyer’s reliance may be. | | | | defendant did not intend to perform the promise |
| Even an unsophisticated victim, however, "may | | | | at the time the promise was made. In practice, it |
| not put faith in representations which are | | | | is usually difficult to tell the difference between a |
| preposterous, or which are shown by facts within | | | | broken promise and a promise made without an |
| his observation to be so patently and obviously | | | | intention to perform. Courts generally look for |
| false that he must have closed his eyes to avoid | | | | circumstantial evidence to support a false promise |
| discovery of the truth." Seeger v. Odell (1941) 18 | | | | claim (as opposed to a broken promise claim), |
| Cal. 2d 409.d. Resulting in damages. There must | | | | such as the defendant broke its promise |
| be measurable damages that were caused by the | | | | immediately after making it. |
| fraud. It is not enough that the victim was told a | | | | Characterization of a claim as fraud has many |
| lie (e.g., "A famous movie star once slept in this | | | | advantages to a victim; primarily, the victim may |
| house"); the victim must also be able to prove | | | | be able to recover punitive damages in addition to |
| some type of damage resulted from the lie. | | | | actual damages. Also, the measure of damages is |
| 2. Negligent Misrepresentation. A claim for negligent | | | | generally more liberal under fraud and other "tort" |
| misrepresentation is generally the same as a claim | | | | theories, allowing victims a more complete |
| for intentional misrepresentation, except the | | | | recovery. But even if a wrongful action does not |
| victim must only prove the defendant did not | | | | fall under the definition of "fraud," it still may lead |
| have "a reasonable basis" to believe its statement | | | | to a valid legal claim. For instance, a broken |
| of fact was true (as opposed to proving the | | | | promise - while not necessarily fraudulently - may |
| defendant knew its statement was false). If the | | | | still constitute a valid breach of contract claim. |
| defendant’s false statement was both | | | | While punitive damages and emotional distress |
| honestly made and based upon reasonable | | | | damages are generally not available for breach of |
| grounds, however, there is no claim. Punitive | | | | contract in California, the victim still should be able |
| damages are not available for negligent | | | | to recover his or her monetary damages. |