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Be Careful What You Say and What You Do Not Say…by Joe Capobianco

September 18, 2014 Posted in: Our Blog

For a claim of fraud to succeed, a plaintiff must establish the “five fingers” of fraud: (1) representation of a material fact (2) falsity (3) an intent to deceive (“scienter”) (4) reliance and (5) injury. Thus, the analysis with any fraud claim begins with whether there was a “representation.”

Under certain circumstances, a defendant may be liable for fraud without uttering a word. If there is a confidential or fiduciary relationship, a defendant has an affirmative obligation to disclose material facts or risk facing a claim for fraudulent concealment. The hallmark of a fiduciary duty or confidential relationship is created and exists in law when a person places trust and confidence in another.

Further, there is a well-developed body of law that imposes liability even without a confidential or fiduciary relationship. Under the so-called “special facts” doctrine, a duty to affirmatively disclose arises where one party’s superior knowledge of essential facts renders a transaction without disclosure “inherently unfair.” The “special facts” doctrine requires satisfaction of a two-prong test: (a) that the material fact was information peculiarly within the knowledge of the defendant; and (b) that the information was not such that could have been discovered through the exercise of ordinary intelligence. The doctrine’s applicability is a fact-intensive inquiry.

So, sometimes what you don’t say can be as harmful as what you do say.