MIAMI BUSINESS LITIGATION: FRAUDULENT REPRESENTATION VS. NEGLIGENT REPRESENATION

Fraudulent misrepresentation and negligent misrepresentation are similar claims. Both involve the expression of a false statement. However, there are differences between the two, and those differences can alter the outcome of a business dispute if they are not considered carefully. The Miami 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.

Fraudulent misrepresentation involves an act of intentionally misrepresenting an untrue fact to another. The four elements of fraudulent misrepresentation are the existence of a false statement made by the defendant concerning a material fact, the defendant’s knowledge the representation was false at the time it is made, the defendant’s intention to induce the plaintiff to act on the false representation, and damages resulting from the plaintiff’s reliance on the false representation. Butler v. Yusem, 44 So. 3d 102 (Fla. 2010). Defendants sometimes move to dismiss a fraudulent misrepresentation claim arguing the plaintiff did not allege he or she relied on the defendant’s false statement to recover. However, this is an incorrect analysis of the law because “[j]ustifiable reliance is not a necessary element of fraudulent misrepresentation.” Butler, 44 So. 3d 102. Rejection of the requirement to allege justifiable reliance on the false representation is consistent with other fraud jurisprudence relieving a plaintiff of any obligation to investigate the veracity of the defendant’s statements. Besett v. Basnett, 389 So. 2d 995 (Fla. 1980) (A “recipient may rely on the truth of a representation, even though its falsity could have been ascertained had he made an investigation, unless he knows the representation to be false or its falsity is obvious to him.”). A plaintiff does not have a duty to investigate because the maker of the fraudulent statement has superior knowledge of its truth. As a result, the recipient of the statement is always justified in relying on the statement’s veracity even though the recipient may have ascertained its falsity by conducting an investigation.

Negligent misrepresentation is different. In a negligent misrepresentation claim, the plaintiff must prove the defendant made a misrepresentation of material fact he believed to be true even though the representation was false, the defendant was negligent in making the statement because he should have known the representation was false, the defendant intended to induce the plaintiff to rely on the misrepresentation, and the plaintiff was injured due to his or her reliance on the false representation. Howard v. Murray, 184 So. 3d 1155 (Fla. 1st DCA 2015). In addition, a plaintiff must prove he or she relied on a false statement that was negligently made. Gilchrist Timber Co. v. ITT Rayonier, Inc., 696 So. 2d 334 (Fla. 1997) (adopting the view that “a misrepresenter is liable only if the recipient of the information justifiably relied on the erroneous information.”). Courts impose the extra burden on the plaintiff because “there [was] no intent to deceive[,] but only good faith coupled with negligence, the fault of the maker of the misrepresentation is sufficiently less to justify a narrower responsibility for its consequences.” Restatement (Second) of Torts § 552 (1977).

The distinction between fraudulent misrepresentation and negligent misrepresentation is important because a plaintiff pursuing either claim must contemplate a few issues. A plaintiff may prefer a fraudulent misrepresentation claim to avoid reliance requirement. But in so doing, the plaintiff will need to prove the defendant intentionally made a statement. Conversely, a plaintiff may prefer asserting a negligent misrepresentation claim because his or her intent evidence is weak. This will require the plaintiff to prove the extra element of reliance.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.