Opinion ID: 199327
Heading Depth: 2
Heading Rank: 1

Heading: The Misrepresentation Claims

Text: 13 At first blush, it seems odd to permit an action for either deceit or negligent misrepresentation where the supposed misrepresentation is the subject of an express warranty (which disclaims all other warranties by its terms) and it is clear there was no breach of that warranty. In general, under Massachusetts law, if the contract was fully negotiated and voluntarily signed, [then] plaintiffs may not raise as fraudulent any prior oral assertion inconsistent with a contract provision that specifically addresses the particular point at issue. Starr v. Fordham, 648 N.E.2d 1261, 1268 (Mass. 1995) (quoting Turner v. Johnson & Johnson, 809 F.2d 90, 97 (1st Cir. 1986)). 14 But as to deceit actions, Massachusetts courts, for public policy reasons, have long held that a party cannot induce a contract by fraudulent misrepresentations and then use contractual devices to escape liability. See Bates v. Southgate, 31 N.E.2d 551, 558 (Mass. 1941) ([C]ontracts or clauses attempting to protect a party against the consequences of his own fraud are against public policy and void where fraud inducing the contract is shown . . ..). Here, Cummings claims that it would not have bought the roofs but for HPG's misrepresentations, and so its deceit claim, based on HPG's allegedly fraudulent misrepresentations, is not barred by the existence of an express warranty. 15 As for Cummings' negligent misrepresentation claim, in some circumstances an express warranty will operate as a bar to recovery. Where the legality of the bargaining process is not at issue, a party cannot avoid its contractual obligations by seeking recovery for negligent misrepresentation. See Sound Techniques, Inc. v. Hoffman, 737 N.E.2d 920, 927 (Mass. App. Ct. 2000) (declining to ignore our general policy of upholding freedom to contract by allowing [plaintiff] to avoid a contractual disclaimer that it agreed to, uninfluenced by any fraud or other egregious or intentional misbehavior on [defendant's] part). The express warranty in this case does not contain an integration clause like the one in Sound Techniques, which stated that the party has not been influenced to enter into this transaction nor has [it] relied upon any warranties or representations not set forth in this instrument. Id. at 922. 2 We do not, however, explore whether this difference in warranty language matters under state law, as HPG has not argued this point.
16 There is an important threshold determination for any misrepresentation claim, be it for deceit or for negligent misrepresentation: only statements of fact are actionable; statements of opinion cannot give rise to a deceit action, McEneaney v. Chestnut Hill Realty Corp., 650 N.E.2d 93, 96 (Mass. App. Ct. 1995), or to a negligent misrepresentation action, Logan Equip. Corp. v. Simon Aerials, Inc., 736 F. Supp. 1188, 1199 (D. Mass. 1990) Cummings argues that the district court erred in concluding that HPG's representations about its roofs were non-actionable statements of opinion. As to the first statement -- that the roof would last twenty years -- we do not consider it to be a statement of opinion. The second statement, the supposed superiority of the PVC product, does fall in the opinion category, as normal commercial puffing. HPG's statement that the roof was suitable for the New England Climate is close to the line between the two categories, but it is at least arguably more like a statement of fact than of opinion. 17 To draw the difficult distinction between a statement of fact and a statement of opinion, Massachusetts courts have looked to the Restatement (Second) of Torts, which provides that a representation is one of opinion if it expresses only (a) the belief of the maker, without certainty, as to the existence of fact; or (b) his judgment as to quality, value, authenticity, or other matters of judgment. Restatement (Second) of Torts § 538A (1977), quoted in McEneaney, 650 N.E.2d at 96. Statements touting the superlative quality of an item, such as mint condition or prime merchandise are considered mere puffing or seller's talk, non-actionable statements of opinion. Greenery Rehab. Group, Inc. v. Antaramian, 628 N.E.2d 1291, 1293 (Mass. App. Ct. 1994); see also Powell v. Rasmussen, 243 N.E.2d 167, 168 (Mass. 1969) (statements of mere opinion, estimate, or judgment cannot give rise to deceit action). 18 In contrast, statements that are susceptible of actual knowledge can give rise to a claim of deceit, if those statements are false. Zimmerman v. Kent, 575 N.E.2d 70, 74-75 (Mass. App. Ct. 1991). For example, a statement by the builder of a house that there would be no water in the cellar was deemed an actionable misrepresentation because it was susceptible of the builder's actual knowledge, Pietrazak v. McDermott, 167 N.E.2d 166 (Mass. 1960), as was a false representation by a corporate agent about a corporation's net worth, Gopen v. American Supply Co., 407 N.E.2d 1255, 1257 (Mass. App. Ct. 1980). Even a statement that in form is one of opinion may constitute a statement of fact if it may reasonably be understood by the recipient as implying that there are facts to justify the opinion or at least that there are no facts that are incompatible with it. McEneaney, 650 N.E.2d at 96. Here, HPG's representation that their roofs would last twenty years was specific and verifiable, not a mere expression of opinion or estimate. That statement was susceptible of HPG's actual knowledge, and, even if opinion, indicated that HPG, the manufacturer of the roofs, knew facts to justify its statement. Similarly, HPG's statement that the roofs were suitable for the Massachusetts climate is at least arguably a statement of fact.
19 The borderline between what is an action for deceit and what is an action for negligent misrepresentation is unclear under Massachusetts case law. In an action for deceit under Massachusetts law, a plaintiff must show that the defendant: made a false representation of material fact; for the purpose of inducing reliance; and that plaintiff relied upon the representation to his or her detriment. Danca v. Taunton Sav. Bank, 429 N.E.2d 1129, 1133 (Mass. 1982); Snyder v. Sperry and Hutchinson Co., 333 N.E.2d 421, 428 (Mass. 1975). Proof of intent to deceive is not required, so long as there is proof of a false representation of fact susceptible of the speaker's knowledge. Snyder, 333 N.E.2d at 428. The uncertainty has to do with what role the speaker's knowledge of the falsity plays. 20 Many Massachusetts cases say that an element of deceit is that the speaker made a false representation of a material fact with knowledge of its falsity. Danca, 429 N.E.2d at 1133 (emphasis added); see also Slaney v. Westwood Auto, Inc., 322 N.E.2d 768, 779 (Mass. 1975) (comparing common law fraud to Chapter 93A claim); Barrett Assoc. v. Aronson, 190 N.E.2d 867, 868 (Mass. 1963); Kilroy v. Baron, 95 N.E.2d 190, 191 (Mass. 1950); Rood v. Newberg, 718 N.E.2d 886, 892 (Mass. App. Ct. 1999); accord Borden v. Paul Revere Life Ins. Co., 935 F.2d 370, 379 (1st Cir. 1991). But other deceit cases say plaintiffs need not prove that [defendant] knew his statement to be false so long as there is proof that the representation was false and susceptible of actual knowledge. Nickerson v. Matco Tools Corp., 813 F.2d 529, 530 (1st Cir. 1987); see also VMark Software, Inc. v. EMC Corp., 642 N.E.2d 587, 593 n.9 (Mass. App. Ct. 1994) (speaker need not know statement is false if fact represented is susceptible of actual knowledge); Zimmerman, 575 N.E.2d 70 at 74 (same); Acushnet Fed. Credit Union v. Roderick, 530 N.E.2d 1243, 1244-45 (Mass. App. Ct. 1988) (same). 21 At the very least, there is a lack of clarity in Massachusetts case law. See In re Friedlander, 170 B.R. 472, 476-78 (Bankr. D. Mass. 1994) (noting confusion). The confusion may stem from the mixing of the concept of knowledge with the concept of intent to deceive, or from use of language without an effort to distinguish which sort of misrepresentation is alleged. The Supreme Judicial Court has not, as best we can tell, addressed this question. But it has referred to the Restatement (Second) of Torts in this area, see Robertson v. Gaston Snow & Ely Bartlett, 536 N.E.2d 344, 349 (Mass.) (intentional misrepresentation), cert denied, 493 U.S. 894 (1989); Rasmussen, 243 N.E.2d at 168-69 (same); Danca, 429 N.E.2d at 1134 (negligent misrepresentation), so we will use those Restatement definitions. 22 Since Massachusetts considers deceit to be a variety of fraud, we utilize the definition in Restatement (Second) of Torts § 526: 23 A misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be, (b) does not have the confidence in the accuracy of his representation that he states or implies, or (c) knows that he does not have the basis for his representation that he states or implies. 24 Knowledge for the purpose of showing fraud is established by any of these three conditions. A claim of deceit has been categorized as an intentional tort, Mohr v. Com, 653 N.E.2d 1104, 1115 n.16 (Mass. 1995); G & B Assoc. v. Springfield, 653 N.E.2d 203, 205 (Mass. App. Ct. 1995). As will be discussed later, [m]ere negligence in discovering the falsity before making the representation is not sufficient for an action in tort for deceit, but it is enough for an action in negligence. 37 J. Nolan & L. Sartorio, Massachusetts Practice § 143 at 240-41 (2d ed. 1989). A defendant who makes a false statement may be liable for deceit if he implicitly conveyed that he had knowledge of the represented fact. See McEneaney, 650 N.E.2d at 96; Restatement (Second) of Torts § 526. 25 The issue is whether, at the time HPG made the statements, HPG knew that the statements were false within the Restatement test. See Zimmerman, 575 N.E.2d at 74. Here, Cummings has failed to offer evidence that HPG had any basis for knowledge that the statements, at the time they were made, were false, a failure that is fatal to Cummings' deceit claim. See id. at 74-75. 26 The latest that HPG could have made any allegedly false representations was 1986, assuming arguendo that Cummings can maintain a claim based on the 1986 roof on a building sold to St. Thomas Realty in 1990, see infra. Cummings offers a single article, dated 1986, reporting problems (other than shattering) with PVC roofs in the early 1980s, and admits that it has no basis to impute knowledge of that report to HPG at the time of the sales. The letters and the other articles Cummings relies on post-date the 1986 sale, as does the shatter log, which shows that by 1990, HPG had tracked claims of 121 shattered roofs. There is simply no evidence to suggest that HPG knew or should have known that its statements about its product were false, in the Restatement sense, when HPG made the statements.
27 Cummings also pursues a negligent misrepresentation claim, which, under Massachusetts law, requires it to prove that HPG provided it with false information and with failure to exercise reasonable care or competence in obtaining or communicating the information. Nota Constr. Corp. v. Keyes Assoc., 694 N.E.2d 401, 405 (Mass. App. Ct. 1998). 28
29 The district court dismissed the negligent misrepresentation claim, predicting that Massachusetts courts would apply the economic loss doctrine in a new context -- to preclude claims of negligent misrepresentation about statements as to the viability of products made in a commercial setting to induce the purchase of products where the product is subject to warranties. The district court relied on the thoughtful analysis of the question contained in Sebago, Inc. v. Beazer East, Inc., 18 F. Supp. 2d. 70 (D. Mass. 1998). 30 In the context of ordinary negligence claims in tort actions, the Supreme Judicial Court has held that purely economic losses are unrecoverable in tort and strict liability actions in the absence of personal injury or property damage. FMR Corp. v. Boston Edison Co., 613 N.E.2d 902, 903 (Mass. 1993) (rejecting claim that negligent repair of electric lines caused power outages which caused loss of profits); accord Garweth Corp. v. Boston Edison Co., 613 N.E.2d 92, 93-94 (Mass. 1993) (rejecting claim that negligent oil spill caused damages for delay in ability to complete contract work). The SJC thus aligned itself with the majority rule as to the economic loss doctrine and cited a Supreme Court case which held that where a commercial product injures itself and nothing or no one else, there is no need to create a product liability cause of action independent of contract obligation. See FMR Corp., 613 N.E.2d at 903 (citing East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871-75 (1986)). 31 On the other side of the issue, as the district court here and in Sebago recognized, Danca suggests that the economic injury rule does not apply to bar negligent misrepresentation claims. Danca recognized a cause of action against a bank that made misrepresentations that led to plaintiffs proceeding to a sale which they otherwise would have cancelled. Danca, 429 N.E.2d at 1134. The court handled the overlap between this tort and contractual obligations by using special damages rules. Id. Danca can perhaps be distinguished, as Sebago suggests, as a case in which the contract obligation and the tort liability were not entirely coextensive because the misrepresentation claim stemmed from the provision of services, and not a defective product. See Sebago, 18 F. Supp. 2d at 96. But in 1998 the Massachusetts Appeals Court flatly stated, without drawing distinctions, that [a]n exception to the [economic loss] doctrine permits recovery for economic losses resulting from negligent misrepresentation. Nota, 694 N.E.2d at 405. 32 It is not clear to us which route Massachusetts will take as to the application of the economic loss doctrine to negligent misrepresentation claims. It may choose the FMR model or it may choose the Danca model, or do something else. As a result, we turn to a more traditional form of analysis, which disposes of the claim. 33
34 Looking to the Restatement (Second) of Torts definition, Massachusetts courts have held that in order to recover for negligent misrepresentation, a plaintiff must show that the defendant: (1) in the course of its business, (2) supplied false information for the guidance of others (3) in their business transactions, (4) causing and resulting in pecuniary loss to those others (5) by their justifiable reliance upon the information, and (6) that it failed to exercise reasonable care or competence in obtaining or communicating the information. Fox v. F & J Gattozzi Corp., 672 N.E.2d 547, 551 (Mass. App. Ct. 1996) (citing Restatement (Second) of Torts § 552(1) (1977)); see alsoMassachusetts School of Law at Andover, Inc. v. American Bar Ass'n, 142 F.3d 26, 41 (1st Cir. 1998). Although courts sometimes analyze negligent misrepresentation claims and deceit claims together, the degree of culpability a plaintiff must prove to establish liability for negligent misrepresentation is different, and less demanding, than that to establish liability for deceit. See Sound Techniques, 737 N.E.2d at 926 (Fraud and [negligent misrepresentation] embody two different states of mind . . ..) (quoting Snyder v. Lovercheck, 992 P.2d 1079, 1088 (Wy. 1999)); W. Page Keeton, ed., Prosser and Keeton on Torts, § 107 at 742 (5th ed. 1984) (scienter element distinguishes deceit action from negligent misrepresentation action). 35 In general, Massachusetts courts treat negligent misrepresentation claims more as negligence actions than deceit actions, focusing on the degree of care exercised by the speaker in making the statement. See Danca, 429 N.E.2d at 1133 (finding conduct and words negligently made gave rise to negligent misrepresentation claim). For a negligent misrepresentation claim, courts ask simply whether the speaker was negligent in failing to discover the falsity of his or her statements. See id.; Prosser and Keeton on Torts, § 107 at 745 (representation may be negligent where there is a lack of reasonable care in ascertaining the facts, or in the manner of expression, or absence of skill and competence required by a particular business or profession). 36 Even under a negligence standard, however, Cummings has failed to provide any evidence that HPG could have known that the representations were false when made. The future performance of the roofs cannot alter what HPG knew at the time the statements were made. Accordingly, Cummings' negligent misrepresentation claim, like its deceit claim, must fail. See Lawton v. Dracousis, 437 N.E.2d 543, 547 (Mass. App. Ct. 1982) (rejecting negligent misrepresentation claim where no evidence speaker had knowledge of undisclosed facts).