Florida’s Fourth District Court of Appeal recently addressed the necessity of justifiable reliance for a claim of for fraudulent inducement. In the case of Terry L. Norman v. Jack “Jackson” Padgett, Mark Negrete, George L. Kessinger, Adam Burnett and Ronald F. Gofrank, 38 Fla. L. Weekly D1342a (4th DCA 6/19/13), the purchasers of shares of stock in a business called Gat Bar, Inc. asserted a claim against Terry Norman (“Norman”) for fraudulent inducement. After a non-jury trial, the trial court entered a final judgment against Norman with respect to the fraud claim.
Since the issue presented was the sufficiency of the evidence supporting the fraud claim, the appellate court reviewed the judgment applying a de novo standard of review. The Court quoted from Besett v. Basnett, 389 So.2d 995, 997 (Fla. 1980), for the proposition that:
The recipient of a fraudulent misrepresentation is not justified in relying upon its truth if he knows that it is false or its falsity is obvious to him.
The basis for the fraud claim was an alleged misrepresentation by Norman concerning the business’s weekly payroll expenses. Specifically, Norman allegedly told the purchasers that those costs would be $17,500 per week and, instead, they turned out to be more than $15,000 more than that. However, the Fourth DCA stated that one of the purchasers had prepared a document before purchasing the business that included an assumption that the total labor costs would exceed $35,000 per week. Based upon that assumption, the Court determined that the purchasers “were either aware of the falsity of the alleged misrepresentation or its falsity would have been obvious to them.” Accordingly, the Court determined that Norman could not be held liable for fraudulent misrepresentation and reversed the judgment that had been entered against him. Put another way, a claim for fraudulent inducement cannot be maintained where there is no justifiable reliance.
Norman is an important ruling for those defending against fraud claims wherein the claimant either knew that the alleged misrepresentations were false or it should have been obvious to the claimant that the alleged misrepresentations were false.
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David Greene is a partner in the Litigation Department of Fox Rothschild LLP. David represents clients in a variety of commercial litigation matters in State and Federal Courts throughout Florida. You can reach David at (561) 804-4441 or dgreene@foxrothschild.com.