Opinion ID: 200468
Heading Depth: 2
Heading Rank: 2

Heading: Kratze's Liability for Fraudulent Inducement7

Text: 40 The defendants also challenge the jury's verdict against Kratze on the fraudulent inducement claim on the ground that it was not supported by the evidence produced at trial. In evaluating claims that the evidence does not support the jury verdict, our standard of review is de novo. Walton v. Nalco Chem. Co., 272 F.3d 13, 23 (1st Cir.2001). We draw all reasonable inferences in favor of the prevailing party, and we will affirm unless the evidence was `so strongly and overwhelmingly inconsistent' with the verdicts that no reasonable jury could have returned them. Id. (quoting Negron v. Caleb Brett U.S.A. Inc., 212 F.3d 666, 668 (1st Cir.2000)). In order to overturn the verdict, we must find that no reasonable jury could have found that all five elements of common law fraud were met with respect to the alleged misrepresentations.... These elements are: (1) that the statement was knowingly false; (2) that [the defendants] made the false statement with the intent to deceive; (3) that the statement was material to the plaintiffs' decision to sign the contract; (4) that the plaintiffs reasonably relied on the statement; and (5) that the plaintiffs were injured as a result of their reliance. Turner v. Johnson & Johnson, 809 F.2d 90, 95 (1st Cir.1986). The defendants contend that no reasonable jury could have found that Rischitelli reasonably relied on the statements Kratze and Germain made when he signed the contracts. 41 At trial, Rischitelli testified that Kratze and Germain brought in a chart that showed projections where they were going to make $50 million in the next year running their pool league. He also testified that Kratze talked to him about the league affiliating with Oprah's Angels 8 — that he had 300,000 kids signed, sealed and delivered as league participants. Finally, Rischitelli testified that Kratze told him he was going to invest his own money in the corporation. The defendants argue that these statements cannot be the basis for fraud liability. 42 Noting that the statements relied upon by Rischitelli were not incorporated into the signed contracts, the defendants point to an integration clause included as Paragraph 10 of the Agreement, which states: Each party hereto agrees that this Agreement is the entire agreement and understanding between the parties and no verbal statements at any time shall affect in any way the terms and conditions of this Agreement. But it is well settled in Massachusetts that [a]n integration clause in a contract does not insulate automatically a party from liability where he induced another person to enter into a contract by misrepresentation. Starr v. Fordham, 420 Mass. 178, 648 N.E.2d 1261, 1268 (1995). See Sound Techniques Inc. v. Hoffman, 50 Mass.App.Ct. 425, 737 N.E.2d 920, 924 (2000) (Whether we refer to the clause in question as a merger clause, an integration clause, or an exculpatory clause, the settled rule of law is that a contracting party cannot rely upon such a clause as protection against claims based upon fraud or deceit.); see also Broomfield v. Kosow, 349 Mass. 749, 212 N.E.2d 556, 562 (1965) (Fraud involved in the contract may be proved by extrinsic evidence....). 9 43 Rischitelli testified that he actually relied on the statements cited above when deciding to sign the contracts: I inquired about whether or not I could become a stockholder with them. I liked what he had to say about the fact that they were going to give some money and they had Oprah's Angels already signed up.... [They said t]he only way to bring me on board was for me to sign a consulting agreement. The jury could have found that Rischitelli's reliance was reasonable. 44 [S]tatements of present intention as to future conduct may be the basis for a fraud action if ... the statements misrepresent the actual intention of the speaker and were relied upon by the recipient to his damage. McEvoy Travel Bureau Inc. v. Norton Co., 408 Mass. 704, 563 N.E.2d 188, 192 (1990). Kratze's statement that he planned to invest his own money into Pot O'Gold is more than just a vague promise. Rischitelli could have believed that it accurately expressed his intent at the time he convinced Rischitelli to sign the contract. Rischitelli had no reason to believe that Kratze did not intend to carry through with this investment. The evidence adduced at trial indicated that Kratze never invested any of his own money into Pot O'Gold. 45 Similarly, Kratze's statement that he had a signed, sealed, and delivered contract with the Oprah's Angel Network was a statement of fact, which Rischitelli also had no reason to suspect was not true. The defendants contend that Rischitelli was a sophisticated businessman who could have detected Kratze's intentional misrepresentations simply by asking to see the contract with Oprah. Although Rischitelli might have demanded more of his future business associates, his failure to confirm that there was actually a contract with Oprah's Angels does not make his reliance unreasonable. Certainly where a defendant has wilfully made false representations with intent to deceive he ought not to be relieved of liability because of his victim's lack of diligence. Yorke, 124 N.E.2d at 916. The outer limit of this doctrine requires only that the relied-upon statement not be preposterous or palpably false. Id.; see Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass. 459, 781 N.E.2d 787, 795 (2003) (finding that plaintiffs could not have reasonably relied on an oral statement made during contract negotiations when the statement's falsity would have been discovered if plaintiffs had read the entire contract). The mere fact that Rischitelli could have discovered Kratze's misrepresentation by pressing Kratze to produce the contract at issue does not render the statement palpably false. See Prosser and Keeton on Torts, supra, § 108 (It is now held that assertions of fact as to ... matters inducing commercial transactions ... may justifiably be relied on without investigation... where the falsity of the representation might be discovered with little effort by means easily at hand.); see also Zimmerman v. Kent, 31 Mass.App.Ct. 72, 575 N.E.2d 70, 71 (1991) (upholding the determination that the plaintiff reasonably relied on the false statement, even though its falsity would have been uncovered merely by obtaining an independent estimate). Hence, the jury supportably could have found that Rischitelli's reliance on Kratze's representations without further investigation was not unreasonable. 46 Kratze's statement that Pot O'Gold could generate $50 million in revenue in 1998 presents a more difficult question on the issue of justifiable reliance. Because we find Rischitelli could have reasonably relied on Kratze's other statements, and these provide a sufficient basis for the jury's verdict, we need not determine whether Kratze's projection was mere puffery. 47