Opinion ID: 159203
Heading Depth: 3
Heading Rank: 1

Heading: Kansas Standard of Materiality

Text: 115 To support their contention that the proper definition of materiality under Kansas fraudulent misrepresentation law is a subjective one, the Plaintiffs rely on four Kansas cases and the Kansas Judicial Council's Pattern Instructions (PIK). The first two cases to which the Plaintiffs cite do not in fact recite any materiality definition. See State ex rel. Stephan v. GAF Corp., 747 P.2d 1326, 1331 (Kan. 1987); Dushane v. Union Nat'l Bank, 576 P.2d 674, 678 (Kan. 1978). Although the Plaintiffs' next case, Fisher v. Mr. Harold's Hair Lab, Inc., does state a subjective definition of materiality, several paragraphs later the court also articulates an objective standard. See 527 P.2d 1026, 1032 (Kan. 1974). It is only the Plaintiffs' final case, McGuire v. Gunn, which clearly defines materiality in subjective terms. See 300 P. 654, 656 (Kan. 1931). McGuire, however, has aged nearly seventy years, and the Kansas Supreme Court long ago ceased relying upon it, 16 instead now applying an objective standard. Finally, PIK Civ.3d 127.40 (1997), which the Plaintiffs maintain directs courts to issue an instruction defining materiality subjectively, speaks to this issue as inconsistently as Fisher. Although the proposed instruction states, A representation is material when it relates to some matter that is so substantial as to influence the party to whom it was made, the comments following provide, Materiality of representation is defined in Griffith v. Byers Constr. Co. . . . and Timi v. Prescott State Bank . . . . As discussed below, both Griffith and Timi unequivocally define materiality in objective terms. 116 This court has previously stated that in a fraudulent misrepresentation action pursuant to Kansas law, A fact is material if it is one to which a reasonable person would attach importance in determining his or her choice of action in the transaction involved. 17 City of Wichita v. U.S. Gypsum Co., 72 F.3d 1491, 1495 (10th Cir. 1996) (citing Timi, 553 P.2d at 325). Following the doctrine of stare decisis, one panel of this court must follow a prior panel's interpretation of state law, absent a supervening declaration to the contrary by that state's courts or an intervening change in the state's law. Cf. Kinnison v. Houghton, 432 F.2d 1274, 1277 (10th Cir. 1970) (concluding that the panel need not look to a Tenth Circuit opinion addressing state law which supported the appellant's position, because an intervening state court decision held to the contrary). Because the Plaintiffs have failed to alert us to any supervening Kansas decisions contrary to U.S. Gypsum's reading of the materiality element in a Kansas fraud action, and we have located no such authority, this court is bound by U.S. Gypsum's conclusion that Kansas law defines materiality under an objective standard in a state fraud action. 117 Moreover, negotiating the labyrinth of Kansas jurisprudence confirms that the standard of materiality for fraudulent misrepresentation, as presently defined by the Kansas Supreme Court, is an objective one. In Griffith, a case involving an action for fraudulent concealment, the Kansas Supreme Court first indicated that such an action is governed by the identical legal standard as a fraudulent misrepresentation claim. See 510 P.2d 198, 205 (Kan. 1973). In defining materiality for such an action, the Kansas Supreme Court stated, A fact is material if it is one to which a reasonable [person] would attach importance. Id.; see also Timi, 553 P.2d 315, 317, 325 (Kan. 1976) (defining materiality in the same terms in a fraudulent misrepresentation case). Indeed, in its recent review of a consumer protection action alleging illegal misrepresentation, the Kansas Supreme Court relied on Griffith's objective definition of materiality. See York v. InTrust Bank, N.A., 962 P.2d 405, 420 (Kan. 1998); see also Farrel v. General Motors Corp., 815 P.2d 538, 548 (Kan. 1991). Furthermore, in discussing the elements of fraud by silence, the Kansas Supreme Court recently noted that a duty to disclose material facts only arises when the other party would reasonably expect disclosure. See OMI Holdings Inc. v. Howell, 918 P.2d 1274, 1300-01 (Kan. 1996). This court's review of Kansas law and binding Tenth Circuit precedent thus leads to the conclusion that the district court properly instructed the jury on materiality under Kansas law.