The Ultimate Guide to Bringing and Defeating Negligent Misrepresentation Claims in California Courts
It is often said that a cause of action for fraud is easy to allege, but hard to prove. Perhaps the easiest form of fraud to allege is negligent misrepresentation. This makes it perhaps the most common form of fraud alleges by parties in litigation. However, a close examination of the elements, definition and defenses to negligent misrepresentation revealing its exact parameters shows when it properly allegedly and justifiably rejected by courts in California. In this article, we explore negligent misrepresentation cases in California, offering a great handbook on how to prevail over negligent misrepresentation claims in California Courts!
Definition of Negligent Misrepresentation under California Law
What is negligent misrepresentation? Negligent misrepresentation, a form of “deceit,” is defined by Civil Code Section 1710(2) as: “The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true.”
Negligent misrepresentation is further defined by Civil Code Section 1572(2) as follows: “Actual fraud, within the meaning of this Chapter, consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract:…The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true.”
Said another way: “To be actionable deceit, the representation need not be made with knowledge of actual falsity, but need only be an ‘assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true’ Civ.Code, s 1710 (2)” Gagne v. Bertran (1954) 43 Cal. 2d 481, 487.
Elements of Negligent Misrepresentation under California Law
“The elements of negligent misrepresentation are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant made the representation without reasonable ground for believing it to be true; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” Majd v. Bank of Am., N.A. (2015) 243 Cal.App. 4th 1293, 1307, as modified (Jan. 14, 2016) (citing West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792); accord West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal. App. 4th 780, 792.
CACI No. 1903 Elements for Negligent Misrepresentation
Judicial Council of California Civil Jury Instructions No. 1903 provides the elements of negligent misrepresentation as follows:
Name of plaintiff claims [he/she/it] was harmed because [name of defendant] negligently misrepresented a fact. To establish this claim, [name of plaintiff] must prove all of the following:
1. That [name of defendant] represented to [name of plaintiff] that a fact was true;2. That [name of defendant]’s representation was not true;3. That [although [name of defendant] may have honestly believed that the representation was true,] [[name of defendant]/he/she] had no reasonable grounds for believing the representation was true when [he/she] made it;4. That [name of defendant] intended that [name of plaintiff] rely on this representation;5. That [name of plaintiff] reasonably relied on [name of defendant]’s representation;6. That [name of plaintiff] was harmed; and7. That [name of plaintiff]’s reliance on [name of defendant]’s representation was a substantial factor in causing [his/her/its] harm.
Defense of Innocent Misrepresentation
“If the defendant’s belief is both honest and reasonable, however, the misrepresentation is innocent and there is ordinarily no tort liability.” Innocent Misrepresentation., 5 Witkin, Summary 11th Torts § 949 (2020). For example, Graham v. Ellmore (1933) 135 Cal. App. 129, 133 “found that the appellants relied upon statements innocently made by the salesman and wrongfully and knowingly made by the owner.”
Expressions of Opinion are Not Generally Treated as Representations Giving Rising to Negligent Misrepresentation
Perhaps the most common defense to negligent misrepresentation is that the statement must be factual, not one of opinion. “The law is quite clear that expressions of opinion are not generally treated as representations of fact, and thus are not grounds for a misrepresentation cause of action.” Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal. App. 4th 303, 308. Numerous cases have helped defined the contours of what constitutes an opinion, as opposed to a fact.
Puffery and Other Vague, Salesy Statements Made When Pitching a Product or Service are Mere Opinions That Are Not Actionable as Negligent Misrepresentations
Analyzing a proclaimed fraud under § 523(a)(2)(A), a California bankruptcy court explained that: “California law has long recognized the distinction between actionable fraud and non-actionable ‘puffing,’ or exaggerated expressions of opinion upon which the purchaser will rely at his peril. See Lee v. McClelland, 120 Cal. 147, 149, 52 P. 300 (1898).” In re Biswas, No. 07-10440-B-7, 2009 WL 9084765, at *3 (Bankr. E.D. Cal. Feb. 18, 2009), aff’d, No. ADV.07-01097-WRL, 2009 WL 7809011 (B.A.P. 9th Cir. Sept. 2, 2009). Biswas explained that: “Mere ‘puffing’ in the negotiation of a construction contract does not rise to the level of fraud.” Biswas found “[t]he fact that Biswas overestimated his own ability does not mean that he knowingly lied.” The court explained that the plaintiffs “could have easily asked Biswas for references, prior examples of his work, to satisfy themselves of his ability, but they proceeded without doing so, relying largely on the recommendation of a friend. In the absence of some evidence that [the debtor] knowingly lied to the [plaintiffs], the court cannot find that [the debtor] committed fraud within the meaning of § 523(a)(2)(A).”
Negligent Misrepresentation Does Not Apply to Implied Assertions
Many parties have unsuccessfully attempted to shoehorn silence into a negligent misrepresentation. For example, the “failure of church officers to disclose pastor’s history of pedophilia [is] not actionable in absence of affirmative representation denying that history, because ‘[t]he tort of negligent misrepresentation requires a ‘positive assertion’ and does not apply to implied misrepresentations.'” Randi W. v. Muroc Joint Unified Sch. Dist. (1997) 14 Cal. 4th 1066, 1083, as modified (Feb. 26, 1997) (quoting Evan F. v. Hughson United Methodist Church (1992) 8 Cal.App.4th 828, 840–841, fn. 2).
Future Events Are Mere Opinions that Are Not Actionable as Negligent Misrepresentation
“It is hornbook law that an actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions.” Pub. Employees’ Ret. Sys. v. Moody’s Inv’rs Serv., Inc., 226 Cal. App. 4th 643, 662 (Cal. App. 2014). For example, a California court deemed a representation “nonactionable as opinion or prediction…that [an investment] would be cash flow positive at the end of the first quarter 2000.” Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 241 (Cal. App. 2007).
Heightened Pleading Standard for Fraud is Required When Alleging Negligent Misrepresentation
Many parties think they can just allege a negligent misrepresentation without the specific facts. However, the courts have held that “claims for negligent misrepresentation must adhere to the same heightened pleading standards as claims for fraud.” EBS Concrete, Inc. v. Target Fin. & Ins. Servs. (Cal. Ct. App. Apr. 29, 2009) No. D053150, 2009 WL 1153288, at *4 (unpublished; citing Small v. Fritz Companies, Inc. (2003) 30 Cal. 4th 167, 184). When such a standard applies: “Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).
Representation of Value are Non-Actionable as Negligent Misrepresentation
“The law is quite clear that expressions of opinion are not generally treated as representations of fact, and thus are not grounds for a misrepresentation cause of action. Representations of value are opinions.” Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal. App. 4th 303, 308.
Contact a Skilled Negligent Misrepresentation Attorney in Los Angeles, Orange County, San Diego, Riverside, Palm Springs, San Bernardino, Palo Alto, and San Jose
Our attorneys have extensive experience in business fraud cases throughout the State of California. By scheduling a free initial consultation with our legal team, we will evaluate your case and walk you through the best option to take in your situation.
If you believe you have suffered a loss due to a negligent misrepresentation or have been alleged to have made a negligent misrepresentation, contact the skilled business fraud attorneys or a real estate fraud attorney at Talkov Law at (844) 4-TALKOV (825568) or contact us online for a free consultation about your case and learn how to protect your rights.