What Is Fraud?
“Fraud” is a word that most of us know, and it’s one of the claims that comes up most frequently in civil litigation – especially litigation between ordinary people (as opposed to one multi-million-dollar company suing another). But what does fraud really mean in the civil litigation context?
At the outset, we’ll note that there are different kinds of fraud. These all fall broadly within the heading of “torts,” or civil wrongs. (There is also such a thing as criminal fraud, but we'll leave that aside for now - this is a big enough subject even looking at just the civil side.) For now, we’ll focus on providing a general overview of intentional fraud, also called deceit—that is what most people probably have in mind when they think of “fraud.”
We also want to be clear that each case is unique, and that this article isn’t legal advice but simply general information intended to educate and inform. If you want to know whether you have a good case against someone for fraud, you should seek the advice of an attorney based on the particular facts and circumstances of your case. (Feel welcome to contact Cooledge Law using the “Contact Us” link above!) This isn't just to cover ourselves; it's also good practical advice. You should not decide how to handle a legal matter based on one blog article alone!
As with other torts and crimes, California courts have broken down the tort of intentional fraud or deceit into “elements,” or components. The plaintiff must prove each and every one of these elements in order to make out a case for fraud. The elements of intentional fraud or deceit are stated in civil jury instructions published by the Judicial Council of California, known as “CACI.” The relevant CACI instruction, number 1900, can be found here. Most of the legal information and analysis in this article is taken from this jury instruction, so that’s an ideal place to begin if you’re looking for further reading on this subject.
As defined by CACI, the elements of intentional fraud or deceit are as follows: (1) the defendant represented to the plaintiff that a fact was true; (2) that representation by the defendant was false; (3) the defendant knew the representation was false when he or she made it, or had a reckless disregard as to whether the representation was true; (4) the defendant intended for the plaintiff to rely on that representation; (5) the plaintiff reasonably relied on the defendant’s representation; (6) the plaintiff was harmed; and (7) the plaintiff’s reliance on the defendant’s representation was a substantial factor in causing harm to the plaintiff. See CACI No. 1900. See also, e.g., Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974; Gonsalves v. Hodgson (1951) 38 Cal.2d 91, 100-101; Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 512. (These elements are sometimes stated or enumerated a bit differently, as in the Engalla case—but the fundamental meaning is the same.)
The elements above are the core of intentional fraud under California law. We can clarify this by breaking it down further, defining a couple of key terms, and looking at some hypothetical examples.
“Representation” means a statement of fact. This can be made orally, in writing, or even by nonverbal conduct. For example, if a buyer of a car says, “This car has a new engine, right?” and the seller grunts and nods, that could reasonably be seen as a representation of fact, even though the seller has not said any words. See Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1567; see also Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 938 (“a cause of action based in fraud may arise from conduct that is designed to mislead, and not only from verbal or written statements”).
The representation must be a statement of fact, not just an opinion. As you can imagine, what is fact vs. what is opinion is a tricky, murky area that is often the subject of litigation. A home seller who says “this is the best house in Long Beach” is probably just stating an opinion. On the other hand, a real estate agent who says “in my opinion, this building had a new roof installed just last year!” is probably not shielding herself from liability just by cloaking her plainly factual statement in the language of opinion. California courts have found that “’puffing,’ or sales talk,” is generally considered opinion, unless it involves a representation about a product’s safety. Hauter v. Zogarts (1975) 14 Cal.3d 104, 112. Along similar lines, in order to be factual and actionable, a statement must relate to past or existing facts. “Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469. So, in general, statements of “puffery,” such as “the ultimate driving machine” or “up-and-coming neighborhood” or “you’ll be sure to love this,” are very unlikely to fall within the legal definition of fraud.
It is important that the fact must be a material fact—it has to matter to the subject at issue—in order to make out a good case for fraud. (This is expressed by elements 4, 5, and 7 above.) Thus, if you’re buying a house and a real estate agent lies to you about what she had for breakfast the day before, you probably cannot sue her for fraud. What the agent ate for breakfast is not a material fact that was meant to influence, or did influence, your decision to buy the house.
The plaintiff’s reliance on the defendant’s statement must be reasonable, or justifiable. If the court finds you acted unreasonably or without justification in believing something the defendant said—even if what the defendant said was false and caused you harm—then you probably will not recover damages for fraud.
Finally, regarding the fourth element, the courts have found that whether or not a defendant had fraudulent intent is an issue for the trier of fact (i.e., the jury, or the judge in a bench trial) to decide. See, e.g., Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061. This means that the finder of fact must decide what the defendant’s intention was based on the evidence submitted. The court can’t magically take a look inside someone’s head to find out what he or she was thinking—but it can often do a pretty good job of finding out, based on the testimony and documentary evidence presented.
We hope the above information is helpful. If you’re considering suing for fraud, or are being sued, an attorney can help you decide what to do. Feel welcome to contact us today using the “Contact Us” tab at the top. Mention this article for a free 20-minute consultation!