Fraud
Introduction
Fraud occurs when all of the following
occur: (1) a person or business entity intentionally makes an untrue
statement about an important fact or event, intending that the
person to whom the statement is made rely on that statement; (2) the
untrue statement is believed by the person to whom the statement is
made; (3) that person justifiably relies on and acts upon the untrue
statement; and (4) he or she suffers damages as a result of that
reliance on the untrue statement. In the products liability context,
the untrue statement generally relates to the characteristics,
safety, or performance of a particular product.
If you have been the victim of such a
fraudulent statement, you may be able to sue to recover your
damages. An experienced products liability attorney can help
determine whether a valid fraud claim exists and provide information
and representation throughout the entire legal process, in order to
ensure that you secure the compensation to which you are entitled.
False Statements About Products Can Give
Rise to a Products Liability Claim.
In common parlance, fraud means lying to or
fooling another person. Although the legal definition is somewhat
the same, to constitute legally actionable fraud there are several
other factors that must be present. First, the most basic
requirement is that there must be a misrepresentation (or a
nondisclosure) made with knowledge of its falsity (or with knowledge
that the nondisclosure would give rise to a false impression).
Further, the maker of the false statement must intend to defraud the
person to whom the statement is made; that is, the maker must intend
to induce the hearer to rely on the misrepresentation. The person to
whom the statement is made must in fact rely on the
misrepresentation, and that reliance must be justifiable; if a
reasonable person would have known that he or she would be foolish
to rely on a particular statement, fraud has probably not occurred.
And the person so relying and acting on the misrepresentation must
suffer damages as a result.
Fraud thus results from an intentional
misrepresentation, but in some cases it can even arise from a
negligent misrepresentation. A negligent misrepresentation is made
when, for example, a seller tells a buyer that a product is safe for
a particular use when he or she actually does not know if it is safe
or not; if the product turns out to be unsafe, the seller may not
have intentionally misled the consumer, but it was negligent for him
or her to make the statement without knowing the facts, and thus it
is a misrepresentation giving rise to fraud nonetheless.
Exploring the misrepresentation element
even further, in order to form the basis for a fraud claim, the
misrepresentation must generally be of a past or present fact.
Misrepresentations about what a person believes will happen in the
future are usually not considered fraudulent. It is sometimes
difficult to distinguish between present- and future-based
statements. For instance, if a seller says that new accounting
software will not be technologically surpassed in the next five
years, there is no clear cut answer as to whether that is a
misrepresentation of a present or a future fact.
In addition, the misrepresentation, to be
actionable, must be of a material fact. If the software salesperson
tells a customer that it is raining outside when it is not, there
probably has been no fraud that would support a products liability
claim. In other words, if the statement, even if false, is not
material to the consumer's decision about whether or not to buy a
product, it generally cannot form the basis for a fraud claim.
Opinions, too, because they are not statements of fact, are
generally not actionable. There are exceptions to this general
premise, however, such as when a seller holds himself or herself out
as an expert on the product, or if the maker of the statement
presents his or her opinion as if it were fact.
Concealment or suppression of facts may
constitute an actionable misrepresentation if the person doing the
concealing had an obligation or duty to reveal the information
suppressed. Similarly, nondisclosure, while perhaps not as
purposeful a concept as concealment, can lead to fraud liability if
there is a special, or "fiduciary," relationship between the parties
such that there is an absolute duty to disclose all facts relevant
to the transaction. A fiduciary duty may arise when one person knows
that the other person is relying on his or her specialized knowledge
or expertise. In addition, nondisclosure may give rise to liability
for fraud if the person holding the knowledge is aware of the fact
that the other party does not know and cannot discover the facts.
The next elements of a fraud claim relate
not to the statement itself but to its maker. A legally recognizable
claim for fraud requires "scienter"-the person making the
misrepresentation must actually know that the statement is false.
Innocent misstatements are not punishable under the law, but
statements made in reckless disregard for whether or not they are
true may constitute fraud. The maker of the false statement must
also intend that the hearer rely on the misrepresentation. This
element is interrelated with the requirement of materiality, since
the maker of a false statement probably would not intend that the
hearer rely on and act upon an immaterial misrepresentation, such as
one about what he had for lunch, or that her dog's name is "Fluffy"
when it really is "Fifi."
The focus next shifts to the recipient of
the misrepresentation. The hearer must justifiably rely on the false
statement or omission. This element requires, first, that the hearer
not know that the statement is false, since if he or she did know
that it was false any reliance on the statement would not be
justified. Second, there must be actual reliance, meaning that the
false statement must actually have led to the action taken thereon
(e.g., the purchase of the product about which the false statement
was made). And the reliance must have been justifiable under the
circumstances, which, in addition to requiring no knowledge of the
statement's falsity, also sometimes requires a duty to investigate
(unless there is that fiduciary relationship, discussed above, in
which the maker of the misrepresentation knows that the recipient is
relying on his or her superior knowledge of the subject matter).
Damages available in a fraud action may be
more limited than those available in a products liability case based
on other allegations, like negligence or strict liability, for
instance. In certain cases and in certain jurisdictions, fraud
damages may be limited to economic losses. Under those
circumstances, it may be wise to plead alternative or multiple
counts in a products liability complaint to ensure the most
comprehensive recovery possible.
Lastly, in some states, fraud claims may be
subject to statutes relating to consumer fraud, or regulations
applicable to particular industries and business transactions. A
products liability attorney will be aware of all applicable statutes
and regulations and can determine whether they have been violated,
as well as whether they govern a consumer's claim such that
particular procedures must be followed.
Conclusion
If you have been injured as a result of a
fraudulent statement about a product, you may be able to make a
claim against the manufacturer or seller that made the statement.
When seeking an attorney to represent you in connection with such a
claim, be sure to investigate his or her background in products
liability law. Ask questions about his or her training, experience,
and track record so that you can make an informed decision about
whether this is the right person to zealously represent your
interests against a big company that may have many more resources
than you do to fight the claims against it. Only with a veteran
products liability attorney on your side can you be sure to achieve
an outcome that best compensates you for your losses.
Disclaimer
This publication and the information
included in it are not intended to serve as a substitute for
consultation with an attorney. Specific legal issues, concerns and
conditions always require the advice of appropriate legal
professionals.