On November 6, 2017 the First District released its opinion in Arlington Pebble Creek, LLC v. Campus Edge Condominium Association, Inc. Although the opinion is based on well settled Florida law, it is a reminder of the challenge faced in proving a claim for fraudulent misrepresentation.
In its complaint, Campus Edge, a condominium association, (“Association”) alleged that it was fraudulently induced by Arlington Properties (“Developer”) into accepting maintenance obligations for the condominium’s common elements.
The basis for the Association’s claim was that the Developer knew that there was an ongoing problem of water intruding into the condominium buildings, but turned over responsibility for upkeep and repairs to the Association after falsely representing that the buildings were “Good” and only suffered from “localized deterioration.”
In Florida, a party seeking to establish fraudulent misrepresentation is required to prove the following four elements:
(1) a false statement concerning a material fact;
(2) the representor’s knowledge that the representation is false;
(3) an intention that the representation induce another to act on it; and
(4) consequent injury by the party acting in reliance on the representation.
At trial, the Association introduced prima facia evidence that the Developer made a false representation of a material fact and had knowledge that the representation was false. The Association did not present additional evidence establishing the developer had “an intent to induce reliance by the Association” or that the Association “actually relied” on the fraudulent representation.
The Developer moved for a directed verdict arguing that the Association failed to present evidence that the false representation was made with the intention to induce the Association to rely on it and that the Association did not actually rely on the false statement. The trial court denied the motion for directed verdict and the jury returned a verdict in favor of the Association.
On appeal, the Developer argued that its motion for directed verdict should have been granted. The Association argued that the evidence that the Developer knowingly made a false statement of material fact was also prima facia evidence that the Developer intended to induce the Association to rely on it.
In reversing the judgment with directions to enter a judgment in favor of the Developer, the First District held: “Contrary to [] the Association’s arguments, the existence of a fraudulent statement does not in itself establish reliance on that statement–to so hold would eliminate the third and fourth elements of the cause of action required by Butler .”
Arlington Pebble Creek is a reminder of the challenges that a plaintiff faces in bringing a fraudulent misrepresentation claim to trial. It’s not enough to simply prove that a false statement of material fact was made and that the representor knew that the statement was false. A plaintiff must also offer distinct proof that that false statement was made with the intention to induce the plaintiff to rely on the statement and that the plaintiff suffered injury by relying on the statement.