Opinion ID: 2982178
Heading Depth: 2
Heading Rank: 4

Heading: Michigan Claim for “Silent Fraud”

Text: “Under Michigan law, ‘in order to prove a claim of silent fraud, a plaintiff must show that some type of representation that was false or misleading was made and that there was a legal or equitable duty of disclosure.’” Tocco v. Richman Greer Prof'l Ass’n., 912 F. Supp. 2d 494, 526 (E.D. Mich. 2012) (quoting M&D, Inc. v. W.B. McConkey, 585 N.W.2d 33, 39 (Mich. Ct. App. 1998)). “‘Mere silence is not enough to sustain a silent fraud cause of action. Instead, a plaintiff must establish that the defendant intentionally suppresse[d] material facts [in order] to create a false impression.’” Id. (citation omitted). “Accordingly, the touchstone of liability for misdirection or ‘silent fraud’ is that some form of representation has been made and that it was or proved to be false.” M&D, 585 N.W.2d at 38 (citation omitted). “A legal duty to make a disclosure ‘will arise most commonly in a situation where inquiries are made by the plaintiff, to which the defendant makes incomplete replies that are truthful in themselves but omit material information.’” MacDonald v. Thomas M. Cooley Law Sch., 880 F. Supp. 2d 785, 798 (W.D. Mich. 2012) (alteration omitted) (quoting Hord v. Envtl. Research Inst. of Mich., 617 N.W.2d 543, 550 (Mich. 2000) (per curiam)). Case law does not suggest that the silent fraud analysis under Michigan law mirrors that of a Rule 10b-5 claim. Nonetheless, the two causes of action undoubtedly share common elements. However, it is not clear how the Michigan state courts would treat this claim, if brought before them. 15 No 13-1444 Dailey v. Medlock The district court dismissed plaintiffs’ silent fraud claim with prejudice. Although the district court had supplemental jurisdiction over this claim pursuant to 28 U.S.C. § 1367, that statute also provides: (c) The district courts may decline to exercise supplemental jurisdiction over a claim . . . if – (1) the claim raises a novel or complex issue of State law, [or] . . . (3) the district court has dismissed all claims over which it has original jurisdiction. Both of these criteria apply, and we conclude that the silent fraud claim should be dismissed without prejudice pursuant to 28 U.S.C. § 1367(c). See Experimental Holdings, Inc. v. Farris, 503 F.3d 514, 521–22 (6th Cir. 2007).