The Many Types of Fraud in Michigan, and the Challenges of Proving It

We hear “fraud” in various contexts, including personal life, business disputes, and on big news headlines. Wire fraud, insurance fraud, internet fraud, and mail fraud are just some of the many examples of fraud that we hear about. And while fraud applies to many different contexts, there are certain requirements that can make proving a fraud-based claim a real challenge for many litigants. Fortunately, the experienced attorneys at Grewal Law PLLC can assist in navigating this complex area of civil litigation.

Michigan law recognizes different causes of action for fraud, and there remains a higher challenge for litigants to prove their claims. First, when pleading a cause of action involving fraud, the plaintiff must allege the facts constituting fraud with sufficient particularity.

Typically, sufficient particularity includes:

1. The time and place of where the alleged fraud occurred;
2. The contents or nature of the alleged fraud;
3. What facts were misrepresented; and
4. What was obtained by committing the alleged fraud.

Additionally, Michigan law requires a fraud claim to be proven by clear, satisfactory, and convincing evidence. In civil cases, this is the highest burden of proof, as compared to the lower standard of a preponderance of the evidence.

Lastly, there are multiple types of statements that are not actionable under a claim of fraud. While certain exceptions do apply, a promise to do something in the future does not constitute an action for fraudulent misrepresentation. Additionally, Michigan courts require that the representation must be made at the time it was made. Last but not least, neither a statement of opinion nor belief will constitute a misrepresentation; typically, this includes “puffing,” such as during a sales transaction.

Fraudulent Misrepresentation

The traditional and common cause of action for fraud is fraudulent misrepresentation, which requires the plaintiff to prove each of the following elements:

1. That the other party made a material representation;
2. The representation was false;
3. The other party either knew the representation was false or recklessly made the representation without knowledge of its truth;
4. The representation was intentionally made to cause the plaintiff to rely on the representation;
5. The plaintiff relied on the representation; and
6. The plaintiff suffered injury or damages.

The elements of a fraudulent misrepresentation claim require proof of two mental impressions of the defendant—knowledge that the representation was false and the intent to cause reliance on the representation.

Silent Fraud

While fraud typically requires an actual misrepresentation, a person may still be liable for silent fraud for failing to disclose facts that a person has a legal duty to disclose. For example, a legal duty to disclose often arises based on fiduciary relationships or real estate transactions.

Under a claim for silent fraud, the plaintiff must prove the following elements:

1. There was a legal duty for the defendant to make a disclosure;
2. The defendant failed to disclose in order to induce reliance by the plaintiff;
3. Failing to disclose was misleading because of what the defendant did or said;
4. The defendant knew that not disclosing would be misleading;
5. The plaintiff relied on the defendant’s failure to disclose; and
6. The plaintiff suffered injury or damages.

Lastly, it is important to remember that there is no duty to disclose what is not known, thus there may not be a cause of action if the defendant did not know about the undisclosed matter.

Innocent Misrepresentation

The main difference between fraudulent misrepresentation and innocent misrepresentation is that the latter does not require the third and fourth elements of fraudulent misrepresentation. In other words, the plaintiff does not have to show that the party making the representation knew that the representation was false or intended for the plaintiff to rely on the representation.

Importantly, the cause of action for innocent misrepresentation is limited to circumstances in which a misrepresentation is made when making a contract between the parties. If the parties are not in privity of contract, there is not actionable cause of innocent misrepresentation.

Negligent Misrepresentation

Similar to innocent misrepresentation, negligent misrepresentation also does not require knowledge of falsity or intent to induce reliance, but instead focuses on whether a misrepresentation was negligently made. Technically, this is not an action for fraud, but instead premised under a legal theory of negligence.

In addition, as opposed to innocent misrepresentation that only applies between contracting parties, negligent misrepresentation applies when a party breaches a duty owed to the plaintiff, such as a professional or business-related duty.

The elements to prove negligent misrepresentation are:

1. The defendant made a material representation;
2. The representation was false;
3. The defendant negligently made the representation by breaching a duty that was owed to the plaintiff; and
4. The plaintiff suffered damages.

There are a lot of elements, considerations, and necessary evidence that go into pleading and proving a fraud-based claim. Our Michigan civil attorneys at Grewal Law PLLC can answer your questions and help determine whether you have an actionable claim of fraud.

Schedule your free consultation today—call (888) 211-5798 or contact us online.