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To establish a cause of action for fraud, a plaintiff has to prove each element of fraud by the applicable standard of proof: a preponderance of clear, satisfactory, and convincing evidence. The plaintiff must prove the following elements of fraud: (1) a material misrepresentation, (2) made knowingly (scienter), (3) with intent to induce the plaintiff to act or refrain from acting, (4) upon which the plaintiff justifiably relies, (5) with damages.
Appellees, personal injury claimant and ex-wife, filed suit in federal court against appellant manufacturer, alleging that appellant's product injured appellee personal injury claimant. Appellant stated in its answer to appellees' complaint that it manufactured the product. Subsequently, appellant discovered that it did not manufacture the slide, and the federal trial court granted judgment to appellant. The limitations period ran on appellees' action, and appellees then filed suit against appellant in state court, alleging that appellant made a negligent misrepresentation in the federal action that it manufactured the product, thus depriving appellees the opportunity to bring suit against the correct manufacturer. The trial court found for appellees, and appellant sought review, raising the issue of whether the appellees would have obtained judgment against the true manufacturer.
The court noted that in order to establish their present cause of action, the appellees had to prove each element of fraud by the applicable standard of proof: a preponderance of clear, satisfactory, and convincing evidence. Appellees had to prove the following elements of fraud: (i) a material misrepresentation, (2) made knowingly (scienter), (3) with intent to induce the plaintiff to act or refrain from acting, (4) upon which the plaintiff justifiably relied, (5) with damages. In this case, the court found that all the elements of fraud were present. According to the court, scienter and intent to deceive were closely related and were shown not only when the speaker has actual knowledge of the falsity of his representations but also when he spoke in reckless disregard of whether his representations were true or false. Thus, the court affirmed the judgment in favor of the appellees with respect to the issue of appellant’s negligent misrepresentation. On the issue of collectibility, the court noted that appellees were required to introduce substantial evidence from which the trier of fact could have reasonably found that the judgment against the true manufacturer would have been collectible. Collectibility was an element of appellees' cause of action; thus, the client has the burden of proving not only the amount of the judgment he would have obtained but for the negligence, but also what he would have collected. The case was remanded for a new trial on the issue of whether a judgment would have been collectible against the actual manufacturer.