It is said that the difference between a fairy tale and a war story is that a fairy tale begins with "once upon a time," and a war story begins with "you won't believe this but..."
In today's blog, I want to talk a little bit about a case I worked on, and to do that, I need to set the stage. You see, I work for a "plaintiff's firm." Normally that means I am litigating, either at the trial court or the appellate court, for the plaintiff, the person bringing the lawsuit. But from time to time, either because of friendship or because of requests by other firm members, I represent the defendant. In some ways, it's pretty fun.
As a lawyer I've had to go up against some really great attorneys in court and on appeal. These lawyers are tough to work against because they're smart and they're cagey. So over the years I've learned - sometimes through the school of hard knocks - the tricks of the defense trade. It has served me quite well.
Recently, I've been dealing with a lot of fraud cases. Fraud is one of the most complex kind of cases a plaintiff can bring. A plaintiff has to show that a lie induced them to take action, and they were harmed as a result. But the law requires the plaintiff to prove the "nine badges" of fraud. Courts set those out as "elements." Under Missouri law, the elements of a claim for fraud are: (1) a representation, (2) its falsity at the time made, (3) its materiality, (4) the speaker's knowledge of the falsity, (5) the speaker's intent that the statements should be acted upon by the other party in the manner contemplated, (6) the other party's ignorance of the falsity, (7) the other party's reliance on the perceived truthfulness of the representation, (8) the right to rely upon the statement, and (9) damages.
So, imagine this chain of events. You go to buy a used car. You ask the dealer if it is mechanically sound, and he says "in my opinion this is a good car." Now, at this point you should probably have run screaming from the dealership because a guy who won't answer a direct question is probably not someone you want to deal with. But let's say you're convinced. You buy the car. You get home and the car quits running. A mechanic tells you that the engine in shot. Do you have a claim for fraud?
No. Because when the dealer offered his "opinion" about the car, he was not stating a fact. He was giving you an opinion, and an opinion is not a fact. See why fraud cases are so hard to prove?
Here's another scenario. You go to buy a piano. The seller says the piano is in good condition, but given what happened to you with your car purchase, you know you can't trust the seller. So you bring along a piano tuner who looks it over and tells you it's a good piano. When you get it home you find it can't be tuned because the soundboard is bad. Can you sue the seller for fraud?
Well, you can sue, but you'll lose. One of the elements of fraud is the buyer's ignorance of the truth and the buyer's right to rely on the statement of the seller. Under the law in most states, if you make an inspection of the goods and buy them after you inspected them, you can't claim fraud because you have no right to rely on the seller's representation. Ouch, who knew?
For every element of fraud there are a dozen or more defenses. This makes proving fraud a very difficult thing to do. Many attempts fail.
Recently in a real case I handled, Pissed Away LLC v. Stricker (I am not making this up), the issue was whether the buyer of an airplane who made an inspection of the aircraft could claim fraud and breach of contract. The buyer had sent an agent to oversee the purchase of the plane. The agent made an inspection with a pilot who had a long history of flying this type of aircraft. The agent signed a delivery slip that said the aircraft was in the condition suitable for delivery. When the aircraft was delivered to California the buyer suddenly developed buyer's remorse and tried to sue for damages under a claim of fraud. he Court held otherwise. It said:
The Court finds as a matter of law that the correct information regarding the misrepresentations and fraud alleged by Pissed Away were reasonably ascertainable by Pissed Away. The parties' contract allowed Pissed Away a full inspection of the aircraft, and allowed Pissed Away to reject the aircraft after inspection without penalty. Pissed Away has alleged no facts suggesting that the aircraft defects that it discovered upon delivery could not have been discovered during the inspection - which occurred before Pissed Away accepted the aircraft. Pissed Away has thus failed to state a claim for negligent misrepresentation or fraudulent inducement.
In this case, the defendant, a physician friend who likes to dabble in aircraft, was honest and had not induced the buyer to take a less-than-suitable aircraft. The buyer simply wanted to undo the deal. His efforts at claiming fraud failed.
Being accused of fraud is a serious thing. Good lawyering is an important part of defeating any fraud claim. If you have the occasion to be sued for fraud, your first act is to find a good attorney.