What is Fraud Under Minnesota Law?

There are many different types of fraud including check fraud, credit card fraud, internet fraud, mail fraud, charities fraud, telemarketing fraud, and tax fraud just to name a few. But, sometimes it is difficult to determine if a cause of action is fraud, a form of misrepresentation, or nothing at all. To add to the confusion, Minnesota courts have referred to misrepresentation and fraud interchangeably.

The original 11-part fraud test first coined by U.S. Supreme Court Justice Harry Blackmun has since been whittled down to a modern day 5-part test. The elements, however, remain the same. For a plaintiff to prevail there must have been a:

1. false misrepresentation of a past or present material fact;
2. knowledge by the person making the false assertion that it is false or ignorance of the truth of the assertion;
3. an intention to induce the claimant to act or to justify the claimant to act;
4. the claimant must have been induced to act or justified in acting in reliance on the representation; and
5. the claimant must suffer damage caused by the misrepresentation.

The Misrepresentation Must Be Specific and About Present or Past Facts

An important distinction when examining a potential claim for fraud is that a fraud claim cannot be based upon a misrepresentation tied to a future event. The statement also has to be specific enough to include a representation of fact. Such examples of language that courts have determined to be too vague to substantiate a fraud claim are “I’ll look into it” when an employer was responding to a request for severance payment or a salesman states a product has “years of trouble-free performance.”

The Fact Relied Upon Must Be Material

Another consideration is that the misrepresented fact must be material to support a fraud claim. To determine what is considered a material fact is dependent upon whether a party relied on it or believed it to be important.

The Defense of “Puffery”

Most people recognize the last statement, “years of trouble-free performance” as “puffery” that cannot be relied upon and therefore, are not actionable for a fraud claim. Puffery is defined as “publicity or acclaim that is full of undue or exaggerated praise.” The famous judge, Learned Hand, has stated in response to a seller’s “puffery,”

There are some kinds of talk which no sensible man takes seriously, and if he does he suffers from his credulity. If we were all scrupulously honest, it would not be se; but, as it is, neither party usually believes what the seller says about his own opinions, and each knows it. Such statements, like the claims of campaign managers before election, are rather designed to allay the suspicion which would attend their absence than to be understood as having any relation to objective truth.

There are exceptions to the “puffery” defense. Most notably, in the instance of pharmaceutical salesman due to public policy considerations. In sum, it is most likely that statements of opinion are considered puffery and are not viable fraud claims.