Opinion ID: 1179849
Heading Depth: 1
Heading Rank: 7

Heading: fraudulent sale

Text: Plaintiffs claim that Pacesetter committed fraud when it sold him the defective pacemaker. They maintain that this claim was adequately pleaded in their First Amended Complaint and that the trial court erred in ruling to the contrary. Plaintiffs assert, in the alternative, that the court should have allowed them to amend their First Amended Complaint to include fraud. Plaintiffs did not specify fraud in their complaint and rely on our decision in Hall v. Kim, 53 Haw. 215, 491 P.2d 541 (1971), in which we stated that: [i]t is not necessary to plead under what particular law the recovery is sought. Id. at 221, 491 P.2d 541 (quoting United States v. Missouri-Kansas-Texas R.R., 273 F.2d 474 (10th Cir. 1959). Hall is inapposite to this case. The plaintiff in Hall alleged violation of specific statutes or regulations, while plaintiffs in this case are alleging fraud. The elements of fraud include: 1) false representations made by the defendant; 2) with knowledge of their falsity (or without knowledge of their truth or falsity); 3) in contemplation of plaintiff's reliance upon them; and 4) plaintiff's detrimental reliance. Hawaii's Thousand Friends, 70 Haw. at 286, 768 P.2d at 1301. HRCP Rule 9(b) provides that [i]n all averments of fraud ... the circumstances constituting fraud or mistake shall be stated with particularity. The rule is designed, in part, to insure the particularized information necessary for a defendant to prepare an effective defense to a claim which embraces a wide variety of potential conduct. 5 Wright & Miller, Federal Practice and Procedure § 1296 at 580 (1990). Thus, under Rule 9(b) general allegations of fraud are insufficient because they serve little or no informative function, Wolfer v. Mutual Life Ins. Co. of New York, 3 Haw. App. 65, 67, 641 P.2d 1349, 1359 (1982) (citing 5 Wright & Miller, Federal Practice and Procedure § 1298 at 415 (1969)); rather, a plaintiff must state the circumstances constituting fraud or mistake with particularity (e.g., allege who made the false representations) and specify the representations made. Ellis v. Crockett, 51 Haw. 45, 59, 451 P.2d 814, 823 (1969). We find that plaintiffs' First Amended Complaint not only failed to set forth particularized allegations regarding the circumstances constituting fraud, but that it was also flawed at a more basic level. Plaintiffs' complaint failed altogether to set forth a distinct claim for relief sounding in fraud. The complaint asserted piecemeal that Pacesetter sold plaintiff a pacemaker although Pacesetter knew that the pacemaker was defective. It also stated that in placing the product on the market, Pacesetter represented that the pacemaker would safely perform the function for which it was intended. Finally, the ad dannum clause prayed, inter alia, for punitive damages. Fraud was never expressly alleged in the complaint, and the complaint neglected to allege detrimental reliance. Punitive damages may be recovered in a products liability suit, in the absence of a fraud claim, so long as defendant has acted wantonly or oppressively or with ... malice. Masaki v. General Motors Corp., 71 Haw. 1, 11, 780 P.2d 566, 572 (1989) (citations omitted). We consequently agree with the trial court that plaintiffs' complaint was ambiguous and conclude that their complaint did not give Pacesetter fair notice of a fraud claim with sufficient particularity to satisfy the requirements of Rule 9(b). Although in some circumstances dismissal of a claim would be a drastic sanction for a pleading defect ... at odds with the liberal approach to pleading of the ... rules as a whole, 5 Wright & Miller, supra, § 1296 at 582, in this case the trial court's decision to deny plaintiffs' motion to amend and include a claim for fraud was not an abuse of discretion. HRCP Rule 15(a) allows a party to amend his pleadings once by right and thereafter only by discretionary leave of court. In the absence of an apparent or declared reason, leave should be freely given when justice so requires. Keawe v. Hawaiian Elec. Co., 65 Haw. 232, 239, 649 P.2d 1149, 1154 (1982). After filing their First Amended Complaint, plaintiffs filed two pretrial statements, both of which enumerated the various theories, (e.g., negligence) under which they were bringing the action. Neither the first nor the second pretrial statement alluded to fraud. The trial court found that plaintiffs' pretrial statements resolved any ambiguity in the First Amended Complaint and that Pacesetter was justified in its belief that fraud was not at issue. The court also determined that Pacesetter had relied on the absence of a claim for fraud when it conducted discovery and that Pacesetter would be unfairly prejudiced if plaintiffs were allowed to add a fraud claim on the eve of trial. In our view, the court's decision was reasonably supported and we therefore hold that it did not abuse its discretion in denying plaintiffs' motion to amend their First Amended Complaint.