Justifiable Reliance Required For Fraudulent Inducement Claim

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...