California Jury Instruction CACI 1903 Negligent Misrepresentation

New September 2003; Revised December 2009, December 2013

Nakase Wade | California Business Lawyers & Corporate Lawyers

Give this instruction in a case in which it is alleged that the defendant made certain representations with no reason to believe that they were true. (See Civ. Code, § 1710(2).) If element 5 is contested, give CACI No. 1907, Reliance, and CACI No. 1908, Reasonable Reliance.

If both negligent misrepresentation and intentional misrepresentation are alleged in the alternative, give both this instruction and CACI No.1900, Intentional Misrepresentation. If only negligent misrepresentation is alleged, the bracketed reference to the defendant’s honest belief in the truth of the representation in element 3 may be omitted. (See Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407–408 [11 Cal.Rptr.2d 51, 834 P.2d 745].)

•Negligent Misrepresentation. Civil Code section 1710.

•“Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit. ‘Where the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief, he may be liable for negligent misrepresentation, a form of deceit.’ ” (Bily, supra, 3 Cal.4th at p. 407, internal citations omitted.)

•“This is not merely a case where the defendants made false representations of matters within their personal knowledge which they had no reasonable grounds for believing to be true. Such acts clearly would constitute actual fraud under California law. In such situations the defendant believes the representations to be true but is without reasonable grounds for such belief. His liability is based on negligent misrepresentation which has been made a form of actionable deceit. On the contrary, in the instant case, the court found that the defendants did not believe in the truth of the statements. Where a person makes statements which he does not believe to be true, in a reckless manner without knowing whether they are true or false, the element of scienter is satisfied and he is liable for intentional misrepresentation.” (Yellow Creek Logging Corp. v. Dare (1963) 216 Cal.App.2d 50, 57 [30 Cal.Rptr. 629], original italics, internal citations omitted.)

•“Negligent misrepresentation requires an assertion of fact, falsity of that assertion, and the tortfeasor’s lack of reasonable grounds for believing the assertion to be true. It also requires the tortfeasor’s intent to induce reliance, justifiable reliance by the person to whom the false assertion of fact was made, and damages to that person. An implied assertion of fact is ‘not enough’ to support liability.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 154 [239 Cal.Rptr.3d 788], internal citation omitted.)

•“ ‘To be actionable deceit, the representation need not be made with knowledge of actual falsity, but need only be an “assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true” and made “with intent to induce [the recipient] to alter his position to his injury or his risk. …’ ” The elements of negligent misrepresentation also include justifiable reliance on the representation, and resulting damage.” (B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 834 [64 Cal.Rptr.2d 335], internal citations omitted.)

•“[Plaintiffs] do not allege negligence. They allege negligent misrepresentation. They are different torts, as the Supreme Court expressly observed in [Bily, supra, 3 Cal.4th at p. 407]: ‘[N]either the courts (ourselves included), the commentators, nor the authors of the Restatement Second of Torts have made clear or careful distinctions between the tort of negligence and the separate tort of negligent misrepresentation. The distinction is important not only because of the different statutory bases of the two torts, but also because it has practical implications for the trial of cases in complex areas … . [¶] Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit.’ In short, the elements of each tort are different. Perhaps more importantly, the policies behind each tort sometimes call for different results even when applied to the same conduct.” (Bock v. Hansen (2014) 225 Cal.App.4th 215, 227−228 [170 Cal.Rptr.3d 293].)

•“As is true of negligence, responsibility for negligent misrepresentation rests upon the existence of a legal duty, imposed by contract, statute or otherwise, owed by a defendant to the injured person. The determination of whether a duty exists is primarily a question of law.” (Eddy v. Sharp (1988) 199 Cal.App.3d 858, 864 [245 Cal.Rptr. 211], internal citations omitted.)

•“The tort of negligent misrepresentation is similar to fraud, except that it does not require scienter or an intent to defraud. … [T]he same elements of intentional fraud also comprise a cause of action for negligent misrepresentation, with the exception that there is no requirement of intent to induce reliance … .” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 845 [199 Cal.Rptr.3d 901], internal citation omitted.)

•“ ‘ “Where the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief, he may be liable for negligent misrepresentation, a form of deceit.” ’ If defendant’s belief ‘is both honest and reasonable, the misrepresentation is innocent and there is no tort liability.’ ” (Diediker v. Peelle Financial Corp. (1997) 60 Cal.App.4th 288, 297 [70 Cal.Rptr.2d 442], internal citations omitted.)

•“[A] cause of action for misrepresentation requires an affirmative statement, not an implied assertion.” (RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089, 1102 [223 Cal.Rptr.3d 458].)

•“Whether a defendant had reasonable ground for believing his or her false statement to be true is ordinarily a question of fact.” (Quality Wash Group V, Ltd. v. Hallak (1996) 50 Cal.App.4th 1687, 1696 [58 Cal.Rptr.2d 592], internal citations omitted.)

•“[T]here are two causation elements in a fraud cause of action. First, the plaintiff’s actual and justifiable reliance on the defendant’s misrepresentation must have caused him to take a detrimental course of action. Second, the detrimental action taken by the plaintiff must have caused his alleged damage.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1062 [141 Cal.Rptr.3d 142].)

•“The law is well established that actionable misrepresentations must pertain to past or existing material facts. Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469 [169 Cal.Rptr.3d 619], internal citation omitted.)

•“Where, as here, a negligent misrepresentation claim is brought against the provider of a professional opinion based on special knowledge, information or expertise regarding a company’s value, the California Supreme Court requires the following: ‘The representation must have been made with the intent to induce plaintiff, or a particular class of persons to which plaintiff belongs, to act in reliance upon the representation in a specific transaction, or a specific type of transaction, that defendant intended to influence. Defendant is deemed to have intended to influence [its client’s] transaction with plaintiff whenever defendant knows with substantial certainty that plaintiff, or the particular class of persons to which plaintiff belongs, will rely on the representation in the course of the transaction. [However,] [i]f others become aware of the representation and act upon it, there is no liability even though defendant should reasonably have foreseen such a possibility.’ ” (Public Employees’ Retirement System v. Moody’s Investors Service, Inc. (2014) 226 Cal.App.4th 643, 667−668 [172 Cal.Rptr.3d 238].)

•“[P]laintiffs rely on section 311 of the Restatement Second of Torts (section 311), which addresses negligent misrepresentation involving physical harm. Under section 311(1), ‘[o]ne who negligently gives false information to another is subject to liability for physical harm caused by action taken by the other in reasonable reliance upon such information, where such harm results [¶] … [¶] to such third persons as the actor should expect to be put in peril by the action taken.’ [¶] Section 311’s theory of liability is intended to be ‘somewhat broader’ than that for mere pecuniary loss. It ‘finds particular application where it is a part of the actor’s business or profession to give information upon which the safety of the recipient or a third person depends.’ This court applied and followed section 311 …” (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162–163 [226 Cal.Rptr.3d 336, 407 P.3d 18], internal citations omitted.)