Opinion ID: 171119
Heading Depth: 1
Heading Rank: 6

Heading: Judgment as a matter of law on Specialty's fraud claim

Text: Specialty claims that the district court wrongly granted Pabst's motion for judgment as a matter of law on Specialty's fraud claim. Before turning to the merits on this issue, however, we briefly consider a threshold issuewhether Oklahoma law allows a plaintiff to bring simultaneous claims for fraud and breach of contract. Oklahoma law on this point is well settled. While a party may not obtain double recovery, election of remedies is not required. See Rogers v. Meiser, 68 P.3d 967, 970 n. 5 (Okla.2003); Howell v. James, 818 P.2d 444, 447-48 (Okla.1991). Accordingly, Specialty was free to pursue both fraud and breach-of-contract claims. [12] We turn, then, to the merits of Specialty's fraud claim. That claim, as set forth in the pretrial order, is based on the theory that Pabst knowingly and willfully misrepresented to Specialty the nature of Pabst's agreement with Marrs. Specifically, Specialty alleges that Pabst represented that Marrs merely had an expired one year letter agreement . . . that Pabst was not going to renew. Pabst knowingly failed to inform Specialty that Pabst and Marrs actually had an exclusive distributor agreement with no expiration date. As a result, Specialty alleges that it entered into the letter agreement with Pabst, hired a sales manager, rented additional warehouse space, incurred new debt, purchased beer from Pabst, and took orders from customers in reliance upon Pabst's representations. Finally, Specialty alleges that had it known Pabst's representations were untrue, it would not have done any of these things. Oklahoma recognizes several different theories that would support a fraud claim. Specialty Beverages presented sufficient evidence to withstand Pabst's Rule 50 motion under at least one of those theories. Oklahoma Stat. tit. 15, § 59 establishes a cause of action for constructive fraud. Constructive fraud occurs: 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him; or, 2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud. Okla. Stat. tit. 15, § 59. As specifically relevant here, [c]onstructive fraud is `the concealment of material facts which one is bound under the circumstances to disclose.' Bankers Trust Co. v. Brown, 107 P.3d 609, 613 (Okla.Civ.App.2004) (quoting Varn v. Maloney, 516 P.2d 1328, 1332 (Okla.1973)). To recover under a theory of constructive fraud, Specialty Beverages must prove: (1) That the defendant owed plaintiff a duty of full disclosure. This duty could be part of a general fiduciary duty owed by the defendant to the plaintiff. This duty could also arise, even though it might not exist in the first instance, once a defendant voluntarily chooses to speak to plaintiff about a particular subject matter; (2) That the defendant misstated a fact or failed to disclose a fact to plaintiff; (3) That the defendant's misstatement or omission was material; (4) That plaintiff relied on defendant's material misstatement or omission; and (5) That plaintiff suffered damages as a result of defendant's material misstatement or omission. Lillard v. Stockton, 267 F.Supp.2d 1081, 1113 (N.D.Okla.2003) (applying Oklahoma law; emphasis added). There is no requirement, however, that the plaintiff prove that the defendant acted with the intent to deceive. See State ex rel. Okla. Bar Ass'n v. Lloyd, 787 P.2d 855, 860 n. 16 (Okla.1990); Doerr v. Henry, 806 P.2d 669, 673 (Okla Civ.App.1991). Although to recover a plaintiff must ultimately prove fraud by clear and convincing evidence, it is not necessary that evidence of fraud be `clear and convincing' to escape a demurrer to the evidence. However, there must be evidence of each element of fraud presented before the issue may be submitted to the jury. [13] P.E.A.C.E. Corp. v. Okla. Natural Gas Co., 568 P.2d 1273, 1277 (Okla.1977); see also Roberts, 990 F.2d at 1173; Silk v. Phillips Petroleum Co., 760 P.2d 174, 177 (Okla. 1988); see also Barnett v. Life Ins. Co. of the S.W., 562 F.2d 15, 19 (10th Cir.1977). The existence of fraud, given evidence for each element, is a question of fact for the jury. Murray v. D & J Motor Co., 958 P.2d 823, 831 (Okla.Civ.App.1998) (citing Silk, 760 P.2d 174). 1. Duty to speak Oklahoma law does not restrict the duty necessary for a constructive fraud claim to a general fiduciary duty. Instead, the requisite duty may arise if a party selectively discloses facts that create a false impression. See Uptegraft v. Dome Petroleum Corp., 764 P.2d 1350, 1353 (Okla.1988) (The duty to speak arose when the defendant began negotiations; on disclosing in part the pertinent facts, such duty would be breached by withholding other pertinent facts. A duty to speak may arise from partial disclosure, the speaker being under a duty to say nothing or to tell the whole truth.). In other words, [o]ne conveying a false impression by the disclosure of some facts and the concealment of others is guilty of fraud even though his statement is true as far as it goes, since concealment is in effect a false representation that what is disclosed is the whole truth. Roberts Ranch Co. v. Exxon Corp., 43 F.Supp.2d 1252, 1259 n. 12 (W.D.Okla.1997)(applying Oklahoma law); see also Gentry v. Am. Motorist Ins. Co., 867 P.2d 468, 472 n. 3 (Okla.1994) (`If on account of peculiar circumstances there is a positive duty on the part of one of the parties to a contract to speak, and he remains silent to his benefit and to the detriment of the other party, the failure to speak constitutes fraud.') (quoting Hubbard v. Bryson, 474 P.2d 407, 410 (Okla. 1970)); Uptegraft, 764 P.2d at 1353 (noting that, although one may not be under a duty to speak, if he undertakes to do so he must speak the truth and not suppress the facts within his knowledge or materially qualify those stated); id. at 1353-54 (Although a party may keep absolute silence and violate no rule of equity, yet, if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to disclose the whole truth). In the instant case, Specialty Beverages' evidence demonstrates that a reasonable jury could conclude that Pabst owed Specialty such a duty. During their negotiation of the appointment letter, Pabst chose to speak to Specialty Beverages about Pabst's contractual relationship with Marrs, telling Specialty that Pabst had a one-year appointment letter with Marrs that had already expired and that Pabst did not intend to renew. By not fully disclosing its contractual relationship with Marrsthat Pabst also had an exclusive distributor agreement that could only be cancelled in limited circumstances Pabst created a false impression and thereby had a duty to correct that misrepresentation. See Uptegraft, 764 P.2d at 1353 (noting duty to speak arose when party made only partial disclosure during negotiations); Doerr, 806 P.2d at 669-71, 673; cf. Gentry, 867 P.2d at 472 & n. 3 (holding insurance company's agent had special duty to disclose exclusions when he sold policy to insured). 2. Failure to disclose In light of our determination regarding Pabst's duty of full disclosure, we have little trouble concluding that Pabst failed to disclose the complete facts of its contractual relationship with Marrs. Toby Tindell and Mike Francher, two Specialty employees, testified that, while Pabst informed them about the appointment letter with Marrs, it did not tell them about the exclusive distributor agreement with Marrs. The failure to disclose this fact was sufficient to satisfy this element. See Doerr, 806 P.2d at 674 (holding that the sellers' failure to disclose their uncertainty regarding the boundaries of the property satisfied the failure to disclose element because the sellers had described the property boundaries to the buyers). 3. Materiality, Reliance, & Damages We similarly have no doubt that Specialty relied on Pabst's failure to disclose the material nature of its relationship with Marrs and that Speciality suffered damages as a result. Toby Tindell testified that Specialty would not have entered into any agreement with Pabst if it had been aware of the full extent of the relationship between Pabst and Marrs. Tindell also testified that Specialty expanded its warehouse capacity, hired additional staff, increased its credit line, and arranged for refrigeration capacity after Pabst sent it the appointment letter. 4. Conclusion Specialty, thus, presented sufficient evidence on each element of a constructive fraud claim under Okla. Stat. tit. 15, § 59. The existence of fraud, given evidence for each element, is a question of fact for the jury. Murray, 958 P.2d at 831 (citing Silk, 760 P.2d 174). We therefore hold that the district court improperly granted Pabst's Rule 50(a) motion on Specialty's fraud claim. Although the parties address constructive fraud here, the pretrial order itself did not limit Specialty Beverages fraud claim to a theory of constructive fraud. It may be that Specialty's evidence would also support a fraud claim under another theory recognized under Oklahoma law. [14] We need not decide that here, but leave it instead for the parties to determine on remand what fraud theories, pled in district court, that Specialty's evidence would support.