Court Opinion

ID: 3008619
Source: CourtListenerOpinion
Date Created: 2015-10-08 14:08:36.921966+00
Date Added: 2024-06-11T11:46:13.141545
License: Public Domain

RENDERED : FEBRUARY 19, 2009
                                                          TO BE PUBLISHED

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                      2006-SC-000471-DG
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FLECxLES, INC .                                  APPELLANT/ CROSS-APPELLE

                    ON REVIEW FROM COURT OF APPEALS
V.                CASE NOS . 2004-CA-002487-MR AND
                             2005-CA-000162-MR
                  CARLISLE CIRCUIT COURT NO . 03-CI-00005

TRUSERV CORPORATION                             APPELLEE/ CROSS-APPELLANT

             OPINION OF THE COURT BY JUSTICE ABRAMSON

                                  AFFIRMING

      Following a five-day trial, a Carlisle County jury awarded Flegles, Inc., a

family-owned hardware and lumber business located in Bardwell, Kentucky,

$1 .3 million in damages allegedly arising from the company's 1999-2000

construction of and move to an expanded store. Flegles claimed that the ill-

fated move was induced by fraudulent business projections provided by its

wholesale cooperative, TruServ Corporation,' and further that TruServ's

misrepresentations about its prices and its own operating losses in the late

1990s, induced Flegles to remain a member of the cooperative and to proceed

with its expansion . Holding that as a matter of law none of the alleged

misrepresentations could support a claim for fraud, the Court of Appeals

  TruServ Corporation has since changed its name to TruValue Company.
 reversed and in effect ordered the dismissal of Flegles' complaint. We granted

 Flegles' petition for discretionary review to consider its contention that the

 Court of Appeals misapplied controlling precedent . We also granted TruServ's

 cross-petition for discretionary review to consider its contention that the trial

was tainted by biased jurors. Agreeing with the Court of Appeals that TruServ

is entitled to judgment as a matter of law, we affirm that Court's ruling and so

need not address TruServ's cross-petition .

                                RELEVANT FACTS

       The Flegles family has operated a hardware and lumber business in

Bardwell since the 1920s. In the 1970s, the company joined the Cotter       8v

Company cooperative, and at that time or soon thereafter began using the True

Value® trade name. In 1997, when Cotter merged with Servistar Coast to

Coast Corporation to form TruServ, Flegles retained its membership in the

merged organization and continued to use the True Value*) name until late

2002, when TruServ terminated Flegles' membership and it joined the Acet

cooperative .

      TruServ is a Delaware corporation with its headquarters in Chicago,

Illinois and, as noted, is the wholesaler for, among others, True Value*)

hardware stores . As a cooperative wholesaler, TruServ does not retain the

yearly profits from the sale of merchandise and services to its members, but

after deducting its operating expenses from its revenues it distributes any

remaining profits to the cooperative's members based on the member's share of

the year's purchases . Members thus have use of TruServ's marks and benefit
 from the group buying power, group billing procedures, and other services

 TruServ offers .

           In the early 1990s, Flegles became desirous of expanding, in part at least

 to stave off competition in the surrounding area from "box" stores such as

 Lowe's and Wal-Mart . It acquired land for a new building and in 1996 availed

 itself of business audits which TruServ-then Cotter and Company-provided

free-of-charge to its qualifying members. The audit was to help determine

whether an expansion was feasible and if so what form the expansion should

take . In 1996 and 1997, TruServ representatives used computer programs to

process Flegles' financial and other data and generated a 500-page report with

projections indicating that Flegles' desired expansion to a 32,000 square-foot

facility could be profitable if the new store included a product rental program,

known as "Just Ask" rental (the "1996 Audit") . In 1999, Flegles asked TruServ

to update the 1996 Audit, and again using data supplied by Flegles, a TruServ

representative generated a "guide" which projected profits for both the rental

program and the expanded store (the " 1999 Guide") . At that point Flegles

proceeded with its expansion, and the new store opened in January 2000 .

Unfortunately, Flegles encountered higher than expected building costs, which

necessitated substantial debt . Also, owing largely to a downturn in the local

construction industry, its business during the new store's first three years did

not meet TruServ's projections, particularly the projections regarding rental

profits.
       In the meantime, TruServ's house was not entirely in order . Following

the aforementioned 1997 merger with Cotter, inventory accounting problems

led TruServ to overstate its profits for fiscal years 1997-99, with the result that

in 2000 the errors became public and the company was obliged to declare a

  131 million loss.

       When the parties "fell out" over Flegles' unpaid cooperative debt in early

2003, Flegles brought this action alleging that its expansion had been

fraudulently induced by TruServ's faulty expansion advice as well as its failure

to provide accurate financial reports . The misrepresentations, Flegles alleged,

caused losses of more than $2 million . At a jury trial in July 2004, Flegles was

awarded fraud damages of $1 .3 million . As noted above, the Court of Appeals

reversed, and Flegles now seeks reinstatement of the trial court judgment . It

contends that the Court of Appeals misconstrued the rule that statements of

mere opinion or statements about the future will not support a claim of fraud.

Convinced that the Court of Appeals correctly applied existing law, we affirm .

                                    ANALYSIS

I. TruServ's Forward-Looking Expansion Advice Did Not Amount To An
Actionable Fraudulent Misrepresentation .

      In reversing the trial court's judgment and dismissing Flegles' fraud

claim, the Court of Appeals correctly observed that in Kentucky such a claim

requires proof, by clear and convincing evidence, of the following six elements:

(1) that the declarant made a material representation to the plaintiff, (2) that

this representation was false, (3) that the declarant knew the representation

was false or made it recklessly, (4) that the declarant induced the plaintiff to
 act upon the misrepresentation, (5) that the plaintiff relied upon the

 misrepresentation, and (6) that the misrepresentation caused injury to the

 plaintiff. United Parcel Service Company v . Rickert, 996 S .W .2d 464 (Ky.

 1999) . The plaintiff's reliance, of course, must be reasonable, McHargue v.

Fayette Coal   8v   Feed Company, 283 S .W.2d 170 (Ky. 1955), or, as the

Restatement states, "justifiable ." Restatement (Second) of Torts § 537 (1977) .

The misrepresentation, moreover, must relate to a past or present material

fact. "A mere statement of opinion or prediction may not be the basis of an

action." McHargue , 283 S.W .2d at 172 . This means, as the Court of Appeals

held, that forward-looking opinions about investment prospects or future sales

performance such as those involved in this case generally cannot be the basis

for a fraud claim.

      There are, of course, recognized "deception" exceptions to this general

rule where the opinion either incorporates falsified past or present facts or is so

contrary to the true current state of affairs that the purported prediction is an

obvious sham. In Kentucky Electric Development Company's Receiver v . Head ,

252 Ky . 656, 68 S .W.2d 1 (1934), for example, a Depression Era case in which

securities agents bilked a seventy-year-old woman by grossly misrepresenting

the current condition of the company whose stock they were pushing and by

making outlandish promises about its future performance, the former Court of

Appeals held that a declarant who "falsely represents his opinion of a future

happening" could be subject to liability . Id. at 3. In that case, a

misrepresentation about prompt future payment of a dividend was actionable
because the company was not then financially able to pay dividends, there was

no present intention to pay the dividend, and the representation was made to

deceive the buyer . Similarly, in Edward Brockhaus Co . v. Gilson, 263 Ky. 509,

92 S.W.2d 830 (1936), the Court recognized that misrepresentations regarding

the future listing of a company's stock on a stock exchange and the company's

commencement of operations would be actionable if the speaker knew there

was no present intent to do so.

       As the Head Court emphasized, however, these narrow exceptions do not

relieve market participants, particularly experienced participants such as

Flegles, of their duty to protect themselves :

             It is a settled rule that mere commendation, or even
             false representation by the seller of stock as to its
             value, when the purchaser has an opportunity to
             ascertain for himself such value by ordinary vigilance
             or inquiry, has no legal effect on the rights of the
             contracting parties, even when made with the
             intention to deceive .

68 S .W .2d at 3 (citation omitted) . In short, the law imposes upon recipients of

business representations a duty to exercise common sense . Accordingly, other

courts attempting to delineate the scope of these exceptions have held that

absent misrepresentation of objective data, "forward-looking recommendations

and opinions are not actionable . . . merely because they are misguided,

imprudent or overly optimistic ." In re Salomon Analyst AT&T Litigation, 350

F .Supp .2d 455, 467 (S .D.N.Y. 2004) (citing Stevelman v . Alias Research Inc .,

174 F.3d 79, 85 (2nd Cir. 1999)) .
       Confronted with the unavoidable fact that the 1996 Audit and the 1999

 Guide are projections about future events, Flegles maintains that TruServ

 misrepresented the past or existing facts on which they were based. Flegles

 complains that TruServ misrepresented the reliability of its business audits in

 several ways: by characterizing them as "customized" when they were based in

 part on the average performance of TruServ members ; by referring to the "Just

Ask" rental program as a "cash cow" and estimating the return from that

program on the basis, again, of averages not necessarily reflective of Flegles'

circumstances; and in the 1999 Guide by generating a projection of the rental

program's performance based on optimistic market assumptions but failing to

reveal two projections based on less optimistic assumptions. None of these

allegations constitutes the sort of misrepresentation of objective fact required

by the aforementioned exceptions.

      TruServ's audits were customized at least to the extent of being based on

Flegle's financial records and facts about its layout and inventory, data that

Flegles itself provided . Otherwise, the "customized" and "cash cow" references

are nothing but trade talk or "puffing," which is not actionable as fraud.

McHargue, 283 S .W .2d at 172 ("`sales talk' or `puffing' which is universal and

an expected practice") . Nor does the fact that TruServ's analyses may not have

been particularly sophisticated or precise-employing broad averages where

more focused comparisons might have been more accurate-entitle Flegles to

relief. Although Flegles complains that the TruServ representatives it

questioned could not account for the manner in which a member survey
 underlying the 1999 Guide was complied, that fact is hardly clear and

 convincing evidence of fraud, inasmuch as there was no evidence that those

 representatives had anything to do with producing the survey . More

 significantly, there is no claim or evidence that TruServ falsified the averages it

 used or based its predictions on objectively false data. The mere lack of

 sophistication or precision is not fraud .

       Alternatively, Flegles contends that. even if TruServ did not misrepresent

objective facts underlying its opinions, it misrepresented the opinion itself in

the 1999 Guide when it generated a relatively optimistic projection of potential

profits from the "Just Ask" rental program without also disclosing two less

optimistic projections . As noted above, however, mere optimism, even

excessive optimism, is not actionable . Surely Flegles, in business for over

seventy years, did not need TruServ to tell it that market projections are

subject to many variables and that less desirable results are always possible .

      TruServ, moreover, did provide warning. Its analyses were accompanied

by disclaimers that they were based upon estimates and averages and were "for

general guidance only and do not represent any guarantee of performance."

Disclaimers, to be sure, as the Court of Appeals recently observed, do not

insulate a party from its fraud, Radioshack Corporation v. Comsmart, Inc . , 222

S .W.3d 256 (Ky. App. 2007), but they do put the opposing party on notice that

projections ought not to be uncritically relied upon. In the face of the

disclaimers in this case, a case in which there is no plausible argument that

the defendant lied about actual facts, but only, if anything, failed to share all of
its opinions (i .e ., all three projections), Flegles' action "boils down to the

hopelessly expansive claim that investors can sue an analyst because there is

some possibility that his `actual' opinion was slightly less pro and more con

than what he presented." In re Salomon Analyst AT&T Litigation, 350
F. Supp. 2d at 468. This is not Kentucky law. Flegles would make TruServ an

insurer of its expansion merely because it failed to detail for Flegles all of the

obvious risks that the expansion entailed.

       Flegles also maintains that its fraud claim is sustainable because

TruServ was its fiduciary. In Johnson v . Lowery, 270 S.W .2d 943 (Ky. 1954),

the former Court of Appeals held that a real estate agent, as a fiduciary, was

subject to liability for asserting a fraudulent opinion overvaluing the house he

had sold to the plaintiff. The court recognized the general rule that "puffing" by

sellers is not actionable, but relying on Section 542 of the Restatement (Second)

of Torts, noted that "when the rule pertaining to false representation

concerning value comes in conflict with the rule requiring utmost good faith by

a fiduciary, the former rule must yield ." Id. at 945 .

      Section 542 of the Restatement (Second) of Torts (1977-2008), cited

favorably in Johnson v. Lowery, supra, provides that

             [t]he recipient of a fraudulent misrepresentation solely
             of the maker's opinion is not justified in relying upon it
             in a transaction with the maker, unless the fact to
             which the opinion relates is material, and the maker:
             (a) purports to have special knowledge of the matter
             that the recipient does not have, or
             (b) stands in a fiduciary or other similar relation of
             trust and confidence to the recipient, or
             (c) has successfully endeavored to secure the
             confidence of the recipient, or
               (d) has some other special reason to expect that the
               recipient will rely on his opinion .

 Flegles contends that it was justified in relying on TruServ's allegedly

 misleading expansion advice not only under the fiduciary provision of clause (b)

 but under every clause of this section . However, as the Restatement's

 commentary makes clear, this section is not meant to alter the general rule

 that

              [i]f the subject matter of the transaction is one upon
              which both parties have an approximately equal
              competence to form a reliable opinion, each must trust
              to his own judgment and neither is justified in relying
              upon the opinion of the other.

Section 542, Comment d. Flegles not only had "approximately equal

competence" in the hardware business, it had very specific competence and

knowledge about the construction industry and competitors in the Bardwell

area where it was expanding. This general premise aside, none of the four

clauses of Section 542 is applicable to the Flegles/TruServ relationship .

        According to the commentary, clause (a) refers to transactions in which

the seller's expertise is in an area about which laymen know nothing and so

must rely on the specialist vendor, transactions such as sales of valuable

jewels, valuable paintings, or legal services . The services at issue in this case,

on the other hand, involved experienced businesses on both sides pooling their

judgment about business prospects . TruServ did not claim expertise in reading

the business future, but merely offered Flegles the collective experience of

TruServ's members . TruServ's knowledge, therefore, was not the sort that
 would excuse Flegles from exercising its own judgment about expanding a

 business it had operated since the 1920s .

       Clause (b) does not apply because TruServ was not Flegles' fiduciary.

 TruServ's directors and officers may well have owed fiduciary duties to the

 corporation and to its shareholders, TruServ Corporation v. Chaska Building

 Center, Inc . , 2003 WL 924509 (N.D .111 2003) ; KRS 2718 .8-300 ; KRS 2718 .8-

420 ; Acree v. E .I .F.C., Inc . , 502 S .W.2d 43 (Ky. 1973), but Flegles has cited no

authority holding that a cooperative wholesaler owes a fiduciary duty to its

members as customers . The relationship between wholesaler and retailer, of

course, is not one of the traditional fiduciary relationships, but is generally an

ordinary, arms-length market arrangement . A fiduciary, moreover, is one who

has expressly undertaken to act for the plaintiff's primary benefit. Steelvest,

Inc . v. Scansteel Service Center, Inc. , 807 S .W.2d 476 (Ky. 1991) . Although

fiduciary relationships can be informal, a fiduciary duty does not arise from the

universal business duty to deal fairly nor is it created by a unilateral decision

to repose trust and confidence; it derives from the conduct or undertaking of

the purported fiduciary. In re Sallee , 286 F.3d 878 (6th Cir. 2002) (discussing

Kentucky fiduciary law and noting that even banks do not typically have a

fiduciary relationship with their customers) .

      Flegles contends that TruServ converted itself to a fiduciary by

undertaking to analyze Flegles' expansion prospects, but as the discussion

above makes clear, TruServ did not control any aspect of Flegles' business, it

did nothing to prevent Flegles from obtaining other information and advice
 concerning the expansion, and it never undertook to act for Flegles' primary

 benefit, but always acted, openly, for the benefit of the cooperative as a whole,

as it had a duty to do. The relationship between the parties, wherein Flegles

was authorized to use trademarks, received business advice, and had access to

standardized products, was much like the relationship between franchisor and

franchisee, which courts have almost universally held not to be a fiduciary one .

See      William L. Killion, "Existence of Fiduciary Duty Between Franchisor and

Franchisee," 52 A. L. R.5th 613 (1997) (noting the "great majority of courts" have

refused to hold that the relationship between franchisor and franchisee or

between manufacturer and distributor is a fiduciary one) . That widely accepted

rule is persuasive here, where TruServ did nothing inconsistent with it so as to

suggest that it was assuming a fiduciary role . Flegles' decision to rely

exclusively on TruServ's analyses did not change that fact. Clause (b),

therefore, does not apply.

          Clauses (c) and (d), according to the Restatement commentary, refer to

situations in which the party expressing an opinion seeks to induce reliance by

playing upon a non-business relationship with the recipient, such as friendship

or kinship, or in which he takes advantage of some disability in the recipient,

such as his illiteracy or lack of intelligence . Neither clause is pertinent to this

case .

          In sum, the general rule remains that mere statements of opinion or

prediction of future performance will not support a claim of fraud . The Court

of Appeals correctly held that Flegles' allegations concerning TruServ's

                                          12
 expansion advice failed under this general rule and that no "deception"

 exception to the rule applies .

 II. TruServ's "Puffery" About its Prices Did Not Defraud Flegles, And Its
 Failure To File Accurate Financial Statements Did Not Cause Flegles'
 Losses .

       Flegles also contends that TruServ defrauded it by claiming to be the

 wholesaler with the best prices and by failing to disclose in a timely manner the

 losses it suffered in the late 1990s. The "price" contention is meritless, for as

noted above "best price" claims are mere puffing and do not amount to fraud.

Nothing prevented Flegles from shopping for better prices if it so desired .

Otherwise, Flegles argues that had it known of TruServ's compromised

financial health it would, perhaps, have sought another wholesaler or would at

least have been more skeptical about TruServ's advice and so, in either event,

would not have undertaken the expansion. Aside from being utterly

speculative, the argument fails because, as the Court of Appeals correctly

observed, to be actionable the alleged misrepresentation must not only have

induced the recipient's reliance, but must also have caused the recipient's loss .

United Parcel Service Company, supra.

      "Cause" here, of course, means legal or proximate cause, which "consists

of a finding of causation in fact, i.e., substantial cause, and the absence of a

public policy rule of law which prohibits the imposition of liability." Deutsch v .

Shein , 597 S .W .2d 141, 144 (Ky. 1980) . In Deutsch, a negligence case, we

borrowed the following discussion of "substantial cause" from the Restatement

of Torts (Second) § 431 Comment a (1965)

                                        13
             In order to be a legal cause of another's harm, it is not
             enough that the harm would not have occurred had
             the actor not been negligent. [This] is necessary, but it
             is not of itself sufficient . The negligence [here the
             misrepresentation] must also be a substantial factor in
             bringing about the plaintiff's harm. The word
             "substantial" is used to denote the fact that the
             defendant's conduct has such an effect in producing
             the harm as to lead reasonable men to regard it as a
             cause, using that word in the popular sense, in which
             there always lurks the idea of responsibility, rather
             than in the so-called "philosophic sense," which
             includes every one of the great number of events
             without which any,happening would not have
             occurred. Each of these events is a cause in the so
             called "philosophic sense," yet the effect of many of
             them is so insignificant that no ordinary mind would
             think of them as causes.

597 S .W.2d at 144 . Even if Flegles relied on TruServ's apparent financial

health in remaining a member of the cooperative and going forward with its

plans, the cooperative's accounting problems had absolutely nothing to do with

the viability of Flegles' expansion, and so under Deutsch the failure to reveal

those problems cannot be deemed a substantial cause of Flegles' alleged losses.

See Movitz v. First National Bank of Chicago , 148 F.3d 760 (7th Cir . 1998)

(discussing in the fraud context the distinction between transaction causation,

or reliance, and loss causation, or proximate cause) . Accordingly, the Court of

Appeals correctly ruled that this part of Flegles' claim, like the part concerning

TruServ's projections, failed as a matter of law .

III . Flegles Was Not Entitled To Additional Jury Instructions .

      Finally, in addition to its fraud theory, Flegles sought jury instructions

on theories of breach of fiduciary duty and negligent misrepresentation . The

trial court refused to give the additional instructions out of concern that they

                                         14
 would confuse the jury and lead to redundant damages . Flegles contends that

 the trial court erred and that even if Flegles' fraud theory fails it is entitled to a

 new trial on these other claims . The Court of Appeals regarded this argument

 as inadequately preserved. We agree with the courts below that Flegles is not

 entitled to relief on this ground, for even if preserved the alternative claims fail

 for the same reasons the fraud claim fails .

       First, as noted above, TruServ did not owe a fiduciary duty with respect

to the projections, but even if it had breached a fiduciary duty with respect to

its own inaccurate financial reports that breach cannot be deemed the cause of

Flegles' alleged losses . Like the cause of action for fraud, moreover, a negligent

misrepresentation claim requires proof of an actionable misrepresentation, i .e .

"false information ." Presnell Construction Managers, Inc . v. EH Construction,

LLC , 134 S .W .3d 575 (Ky. 2004) . Flegles' allegations concerning TruServ's

mere opinions and predictions cannot be deemed to meet that requirement .

                                    CONCLUSION
       In sum, although we recognize that jury verdicts are not to be disturbed

lightly, the allegations in this case are simply that TruServ made sales

performance and profitability predictions which failed to materialize . These

allegations do not take the case outside the general rule that forward-looking

projections or opinions, even if ultimately proven incorrect, do not amount to

fraud . A contrary result would mean that anyone, whether an individual or

business entity, who undertook to make business projections in Kentucky

would proceed at great peril, and might be subject to liability to the recipient

                                          15
even though the projections were not realized solely because of factors beyond

the predictor's control . That has not traditionally been Kentucky law, and we

decline to move in that direction . Because the Court of Appeals followed

existing law and correctly determined that Flegles failed to establish its fraud

and other claims as a matter of law, we affirm its ruling.

      Minton, C .J . ; Cunningham and Noble, JJ ., concur. Scott, J ., dissents by

separate opinion in which Schroder and Venters, JJ ., join .

COUNSEL FOR APPELLANT/ CROSS-APPELLEE :

Jim L . Flegle
Loewinsohn, Flegle 8v Deary, LLP
12377 Merit Drive
Suite 900
Dallas, TX 75251

Michael Wayne Hogancamp
P.O . Box 514
Bardwell, KY 42023

COUNSEL FOR APPELLEE/CROSS-APPELLANT :

Jean Winfield Bird
Virginia Hamilton Snell
Wyatt, Tarrant 8v Combs, LLP
2800 PNC Plaza
500 W. Jefferson Street
Louisville, KY 40202-2898
                                          RENDERED : FEBRUARY 19, 2009
                                                      TO BE PUBLISHED

           ~*Uyrrmr vwurf of ~Rrufurhv
                              2006-SC-000471-DG

                              2007-SC-000155-DG

FLEGLES, INC.                               APPELLANT/ CROSS-APPELLEE

                  ON REVIEW FROM COURT OF APPEALS
V.           NOS 2004-CA-002487-MR 8v 2005-CA-000162-MR
               CARLISLE CIRCUIT COURT NO . 03-CI-00005

TRUSERV CORPORATION                         APPELLEE/CROSS -APPELLANT

                DISSENTING OPINION BY JUSTICE SCOTT

      I must respectfully dissent from the majority's holding concerning

Flegles' fraud claim . In determining that Truserv is entitled to judgment

as a matter of law, the majority has usurped the fact-finding function of

the jury. I simply cannot agree with the majority's holding that

misrepresentations about investment prospects and expected sales

performance cannot, as a matter of law, support a fraud claim. In my

view, the jury had ample support in the record to conclude that TruServ

falsely misrepresented the potential for sales and income from the

expanded store. It would seem axiomatic to me that withholding

multiple   unfavorable   market projections from a client to whom one owes

a fiduciary duty, while instead presenting contrary and misleading
 market information, goes to the very heart of a fraud claim. Indeed, it is

 well-settled that to establish fraud in Kentucky, one must only show

        (1) that defendant made a material representation; (2) that it
        was false ; (3) that when he made it he knew it was false, or
        made it recklessly, without any knowledge of its truth and as
        a positive assertion ; (4) that he made it with intention of
        inducing plaintiff to act, or that it should be acted upon by
        the plaintiff; (5) that plaintiff acted in reliance upon it, and
        (6) that plaintiff thereby suffered injury .

 Sanford Const . Co . v . S 8, H Contractors, Inc . , 443 S .W .2d 227, 231 (Ky.

 1969) (quoting Cresent Grocery Co . v. Vick, 194 Ky. 727, 240 S .W . 388

 (1922)) .

        In Kentucky Electric Development Co .'s Receiver v. Head , we

 noted, "a misrepresentation, to be [actionable], must concern an existing

or a past fact, and not a future promise, prophecy, or opinion of a future

event, unless declarant falsely represents his opinion of a future

happening." 252 Ky. 656, 68 S .W.2d 1, 3 (1934) (emphasis added) . This

is exactly what Flegles proved TruServ did in this case - falsely

misrepresented its opinion as to the potential for sales and income at the

expanded store - how else can you characterize concealed conflicting

projections?

       The majority attempts to distinguish Head by citing it for the

proposition that Flegles had a "common sense" duty to protect itself.

While this general observation may be true, it must not be overlooked

that Head acknowledges a duty upon a market participant of the

obligation to use "ordinary vigilance" in ascertaining the type of
 information that would be readily available to that participant, i.e ., in

 that instance, ascertaining the value of stock. See Head, 68 S .W.2d at 3

 (emphasis added) . In contrast, here, regardless of Flegles' experience in

 the industry, or vigilance expended, the type of information that it

 required in making the business decision was uniquely in the province

 and control of TruServ. No amount of vigilance could have negated

TruServ's active misrepresentation of that information.

       Flegles pointed to overstated numbers for the Just Ask Rental

program and undisclosed adverse projections as evidence that TruServ's

opinion was not as it was represented . Thus, a viable case for fraud was

presented to the jury as to a misrepresentation of opinion .

        In addition to the misrepresentation of opinion, TruServ

concealed from Flegles $131 million in business losses . The Court of

Appeals, however, determined that Flegles did not establish that it would

have refrained from going forward with the expansion had it known

about TruServ's loss. The Court of Appeals appears to have imposed on

Flegles the burden to establish proximate cause in demonstrating their

store loss arose from TruServ's loss. This is improper . Flegles was

entitled to show a pattern of concealment to buttress the weight of its

evidence of TruServ's intent behind its actions .

      In my view, Flegles was not required to show that every grievance

that it had against TruServ was a direct cause of the business losses it

incurred at the new store, just that it related to an ongoing pattern of

concealment . To that end, Flegles presented a comprehensive case
                                      3
revealing numerous facts and statements made by TruServ that were

false. Flegles contends that if it had known the totality of the actual

facts they would not have gone forward with the expansion . TruServ's

losses were merely one of the misrepresentations that Flegles complained

about. Certainly, if that were the entire case for Flegles; it would not be

sufficient to show causation, however, it was only a facet of the whole

case . Thus, Flegles presented a question of fact for the jury to

determine: whether TruServ's misrepresentations caused injury.

      Although I agree that some of the statements amounted to "mere

puffing" or "sales talk," since the jury had an adequate and actionable

basis for determining that there was fraud, their verdict should not have

been invalidated due to the fact that some of the statements could be

properly (and maybe wrongfully) characterized as "mere puffing ."

      For the foregoing reasons, I must dissent.

      Schroder, J ., and Venters, J ., join this dissenting opinion .