When An Opinion Is Fraud

When an Opinion is Fraud
By: R. Scott Alagood

As social media expands at an exponential rate and communication to the masses is made as easy as a click of a button, the world is spewing their thoughts, views, and opinions for everyone to see. Can such statements come back to haunt the party making them. Certainly, in many different way. Just ask Donald Sterling.

However, when do statements rise to conduct which may place the party making the statements in jeopardy of being sued for fraud. Fraud or representation claims must be based on false statements. So long as a statement consists of “pure” opinion, it cannot constitute a false representation. Purity in acting is hard to find. Purity is not so much a condition fixed in time and space, but an ideal or a standard that may be sought after. Like Perfection, it is a pursuit and not something that is necessarily attainable.

It is also difficult to determine whether a statement is one of “opinion” or “fact’. Webster’s definition of opinion is “a belief stronger than an impression and less strong than positive knowledge.” Courts seem to follow this definition in most instances. Courts group “opinions” along the “judgments”, “probabilities”, and “expectations”. Therefore, statements made about matters that fall short of positive knowledge should not be actionable as an “opinion”.

There are a few exceptions to the general rule that “opinions” are not actionable fraud or misrepresentations. These exceptions are: 1) opinions the speaker knows to be false; 2) opinions mixed with false statements of fact; 3) and opinions based on knowledge.

The first exception is creates a situation that is difficult to prove in court. The party accused of making an actionable misrepresentation is put in the position having to prove that although their opinion is wrong, they didn’t know it at the time. This situation requires the party asserting the exception to prove a negative, which is difficult if not impossible. So at best, the party ends up testifying that they didn’t know their opinion was untruthful, hopefully backed up by some sensible rationale, and hope that there isn’t any direct or circumstantial evidence to the contrary. Otherwise, the simple fact of making an incorrect opinion may be enough to allow the fact finder to imply knowledge of the untruthful nature of the statement.

The second exception is fairly self-explanatory. Where a party expresses an opinion mixed with statements of fact that are false, the opinion portion of the statement will not clothe the false facts with any protection. Reliance upon the false facts by the other party will support an action for fraud. Further, where facts are included with “opinion”, such “opinion” cannot be considered “pure”.

The final exception relates to opinions based on special knowledge. Special knowledge means knowledge of specific facts that underlie the false opinion. However, many courts appear to often confuse special knowledge with special expertise held by persons such as doctors, lawyers, or engineers. In practice, this exception often makes it difficult for the accused to use the “opinion” defense where the accused party is significantly more sophisticated than the other party to whom the statement was made. When correctly applied, this exception will negate the “opinion” defense if the party making the statement has actual knowledge of or special access to particular facts underlying the false statement and the party relying upon such statement does not have such knowledge or access.

Making false statements of opinion can place a party in potentially hot water. To reduce the chances of being sued for fraud for incorrect statements, consider the following suggestions. Make it clear when you are expressing an opinion that you are only expressing “your opinion. Phrases such as “in my opinion”, “I believe”, “speaking for myself”, or “I think”, will help bolster an argument that the statement was not a statement of fact, but instead an “opinion”. Be certain that any factual statements are correct and you have the ability to justify their accuracy. Indicate that you are not sure if that is the case. In real estate or stock transactions, false statements of fact can create liability even if you honestly believed them at the time. Give the other party access to the same information you can utilize in forming your opinion or statement of fact. Give them the opportunity to review it for themselves. Do what you can to encourage them to look into the subject for themselves.

Finally, be careful who you talk to and how you disseminate information. Know your intended audience, and realize that in today’s world, everyone is listening.