FORT LAUDERDALE BUSINESS LITIGATION: FRAUD BY OMISSION

 While fraud typically includes a fraudulent misrepresentation, under certain circumstances, omission of facts can also constitute fraud. In Florida, the elements of a claim of fraud are “(1) a false statement concerning a specific material fact; (2) the maker’s knowledge that the representation is false; (3) an intention that the representation induces another’s reliance; and (4) consequent injury by the other party acting in reliance on the representation.” Wadlington v. Cont’l Med. Servs., Inc., 907 So. 2d 631 (Fla. 4th DCA 2005). While fraud typically includes a false statement concerning a material fact, intentionally omitting material facts can also constitute fraud. Ward v. Atlantic Sec. Bank, 777 So. 2d 1144 (Fla. 3d DCA 2001). “A concealed fact is material to a transaction if a contract would not have been entered into but for the concealment.” Casey v. Cohan, 740 So. 2d 59 (Fla. 4th DCA 1999). The material fact must also “affect the value of the property or cause loss to the purchaser.” Id. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Every omission of material fact does not automatically constitute fraud unless deceit was used to prevent opposing party from learning the fact. Ramel v. Chasebrook Const. Co., 135 So. 2d 876 (Fla. 2d DCA 1961) (“In the absence of a fiduciary relationship, mere nondisclosure of all material facts in an arm’s length transaction is ordinarily not actionable misrepresentation unless some artifice or trick has been employed to prevent the representee from making further independent inquiry.”). Therefore, courts require that a party have a duty to another as a prerequisite to fraud. Friedman v. Am. Guardian Warranty Services, Inc., 837 So. 2d 1165 (Fla. 4th DCA 2003). The converse is also true. Parties engaging in an arms-length transaction with equal opportunities to discover the material fact at issue do not have a duties to disclose. Robson Link & Co. v. Leedy Wheeler & Co., 18 So. 2d 523 (Fla. 1944).

The duty to disclose can arise in different ways. One way is a fiduciary relationship, such as, a trustee’s relationship with a trust beneficiary. First Union Nat’l Bank v. Turney, 839 So. 2d 774 (Fla. 1st DCA 2003). Another way the duty arises is when a party undertakes disclosure of certain facts. That party must then disclose all material facts. Regions Bank v. Kaplan, 258 F. Supp. 3d 1275 (M.D. Fla., June 23, 2017) (“One party to a transaction who speaks has a duty to say enough to prevent his words from misleading the other party.”); Ramel v. Chasebrook Const. Co., 135 So. 2d 876 (Fla. 2d DCA 1961). (holding that home builder’s vague statement that a home was “well built” constituted a fraudulent misrepresentation because it failed to disclose that the home was built on a faulty foundation). A third way the duty arises is when a party to a transaction has superior knowledge of the facts and the other party does not have an equal opportunity to educate himself on those facts. Harrell v. Branson, 344 So. 2d 604 (Fla. 1st DCA 1977). An example of that occurred in Harrell v. Branson, where an uncle deeded property to his niece and her partner based on the incorrect belief that the niece and her partner were married. The niece knew her uncle incorrectly believed she was married, but failed to clarify the fact before consummating the transaction. The court rescinded the deed, finding that the niece had a duty to disclose to the uncle that she was not married to her partner because the party did not have an equal opportunity to discover that fact. It was not reasonable for the uncle to know his niece was not married because the uncle would have needed to search marriage records in numerous counties to know the marriage did not exist.  

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.