Opinion ID: 2382863
Heading Depth: 2
Heading Rank: 3

Heading: The Elements of Fraud in the Inducement.

Text: As we explained in Hercules I, 566 A.2d at 39-40 n. 16, common law fraud is never presumed, and a plaintiff alleging it must do so with particularity and must prove it by clear and convincing evidence. Super.Ct.Civ.R. 9(b); Bennett v. Kiggins, 377 A.2d 57, 59 (D.C.1977), cert. denied, 434 U.S. 1034, 98 S.Ct. 768, 54 L.Ed.2d 782 (1978). To be entitled to a trial on the merits of a fraud claim, a plaintiff must allege such facts as will reveal the existence of all the requisite elements of fraud. Allegations in the form of conclusions on the part of the pleader as to the existence of fraud are insufficient. Bennett, 377 A.2d at 59-60; Higgs v. Higgs, 472 A.2d 875, 876-78 (D.C.1984). At common law, the requisite elements of fraud were (1) a false representation (2) made in reference to a material fact, (3) with knowledge of its falsity, (4) with the intent to deceive, and (5) an action that is taken in reliance upon the representation. Bennett, supra, 377 A.2d at 59. At least in cases involving commercial contracts negotiated at arm's length, there is the further requirement (6) that the defrauded party's reliance be reasonable. Hercules I, 566 A.2d at 39 n. 16; Isen v. Calvert Corp., 126 U.S.App.D.C. 349, 353, 379 F.2d 126, 130 (1967); Day v. Sidley & Austin, 394 F.Supp. 986, 990 (D.D.C.1975). Moreover, in order to obtain an evidentiary hearing on a claim of fraud in the inducement, a party seeking to avoid arbitration must allege in its pleadings facts that establish all the elements of fraud with respect to the arbitration clause in particular. A complaint alleging only that the entire contract was fraudulently induced is insufficient as a matter of law to avoid referral of the issue of fraud to arbitration. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04, 87 S.Ct. 1801, 1805-06, 18 L.Ed.2d 1270 (1967).