FORT LAUDERDALE BUSINESS LITIGATION: CLAIMS OF “NEGLIGENT MISREPRESENTATION”

Sometimes businesses enter contracts under false pretenses because certain material information is misrepresented or concealed from the business. The business can assert a claim for fraudulent inducement to try and escape the contract. However, the business will have to prove the misrepresentation was made with fraudulent intent. Gemini Inv’rs III, L.P. v. Nunez, 78 So. 3d 94 (Fla. 3d DCA 2012) (“To plead fraudulent inducement, Gemini must allege that the defendants: (1) made a statement concerning a material fact, (2) knowing that the statement was false, (3) with intent that the plaintiffs act on the false statement; and (4)… damage[s].”). This element can be difficult to prove. See Collins v. McKelvain, 189 So. 655, 656 (Fla. 1939) (recognizing that it can be difficult to prove fraudulent inducement at the time the agreement is consummated). Asserting a claim for negligent misrepresentation offers an alternative avenue for redress. The Fort Lauderdale 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.

To prevail on a claim of negligent misrepresentation, a plaintiff must prove the following elements:

• A misrepresentation of material fact;
• The representer made the misrepresentation without knowledge of its truth or falsity;
• The representer intended to induce another to act on the misrepresentation; and
• An injury resulted to a party acting in reliance on the misrepresentation.

Gallon v. Geico Gen. Ins. Co., 150 So. 3d 252 (Fla. 2d DCA 2014). In addition, the plaintiff must establish the defendant owed a duty of care to the plaintiff in providing accurate information. See Gilchrist Timber Co. v. ITT Rayonier, Inc., 696 So. 2d 334 (Fla. 1997) (citing and adopting Restatement (Second) or Torts § 552 (1977)). The duty is often established by demonstrating the defendant had a pecuniary interest in the transaction. Blumstein v. Sports Immortals, Inc., 67 So. 3d 437 (Fla. 4th DCA 2011).

One example of a negligent misrepresentation lawsuit concerning a business transaction occurred in Atlantic Corp. of Wilmington, Inc. v. TBG Tech Co., LLC, 2022 WL 18495866 (S.D. Fla. 2022). In Atlantic Corp., a merchant sought to purchase gloves from a supplier. The supplier represented it would source the gloves from a manufacturer in Vietnam. The merchant sent the purchase money to the supplier’s attorney to hold in escrow. As time passed, the merchant grew concerned the manufacturer could not deliver the gloves. However, the supplier and its attorney reassured the merchant that the supplier could source the gloves from alternative manufacturers if the original supplier failed to deliver. Based on these assurances, the merchant authorized the attorney to release the payment to the supplier. However, the gloves were never delivered and the merchant’s refund request was rejected. The merchant sued the attorney for negligent misrepresentation and the attorney tried to dismiss the case arguing he did not owe a duty of care to the merchant. The court denied the motion because the attorney held himself out as a principal of the supplier and the merchant plausibly alleged he had a pecuniary interest in the transaction.

If a business is damaged by a false misrepresentation, a claim for negligent misrepresentation might be available. This claim could avoid the difficulties associated with proving fraudulent intent but brings with it other challenges like establishing a duty.

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