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The post below was published on Monday, September 13th, 2010 at 8:02 AM.

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Florida Supreme Court: Justifiable Confusion

Some may be interested to learn that, in a unanimous per curiam opinion, the Florida Supreme Court announced this past week that justifiable reliance is not an essential element of a fraudulent misrepresentation claim. The decision is available here.

To quote the decision: “Justifiable reliance is not a necessary element of fraudulent misrepresentation.” In the language that followed, the court recited the elements of fraud, describing the fourth of which as “consequent injury by the party acting in reliance on the representation.” The court then explained that the recipient of a fraudulent misrepresentation may rely on its truth even if an investigation would have revealed its falsity, unless it is obviously false or the recipient knows of its falsity.

The first portions of the court’s pronouncement would seem to be in tension with numerous decisions holding that justifiable reliance is an element of fraud.

Just a few months ago, in this case, the Fifth District held, “The fourth element of fraud is a justifiable reliance on the false statement causing injury.” Similar statements can be found here, here, and here, in recent decisions from the Third, First, and Fourth Districts, respectively.

Indeed, for decades, Florida case law has held that justifiable reliance is an element of fraud.

Did the supreme court mean to overrule that case law?

In both fraudulent and negligent misrepresentation claims, a plaintiff must prove reliance, but permissible reliance is qualified in both situations and not a matter of mere causation. In a fraudulent misrepresentation claim, permissible reliance does not include circumstances where the representation’s falsity is known or obvious. In a negligent misrepresentation claim, permissible reliance requires reasonable conduct by the plaintiff, including any investigation that should reasonably be done, and thus excludes unreasonable reliance.

Viewed in this way, both fraudulent and negligent misrepresentation claims require justifiable reliance, but what constitutes justifiable reliance differs between the two, and the judiciary’s frequent references to justifiable reliance as an element of fraudulent misrepresentation apparently referred to the particular reliance required to prove that specific claim.

The supreme court’s decision in this earlier case would seem to agree. The court spoke repeatedly of how a fraudulent misrepresentation claim requires reliance that is “justified” and discussed situations where reliance would “not be justified” as a matter of law.

The court’s latest discussion did not state an intent to change the law on fraud. Whether anything has changed remains to be seen.

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