At-will employment & claims of fraud, fraudulent inducement, and breach of fiduciary duty

NO DETRIMENTAL RELIANCE ON PROMISE OF FUTURE EMPLOYMENT IN THE EMPLOYMENT-AT-WILL CONTEXT Both common-law fraud and fraudulent inducement require proof of detrimental reliance. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997). In the employment context, courts have held that an employee cannot establish justifiable reliance on alleged promises of continued employment when the employment is at-will. See, e.g., Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 379, 381 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (holding promissory estoppel and fraud claims were barred because of at-will employment); Brown v. Swett & Crawford of Tex., Inc., 178 S.W.3d 373, 379-80 (Tex. App.—Houston [1st Dist.] 2005, no pet.) (holding status as at-will employee precluded claim for fraudulent inducement in wrongful termination lawsuit). As this court [14th CoA] stated in Collins v. Allied Pharmacy Management, Inc.: A promise to provide employment which is subject to termination at any time or for any reason does not provide any assurances about the employer’s future conduct, and does not provide a basis for detrimental reliance as a matter of law. 871 S.W.2d 929, 937 (Tex. App.—Houston [14th Dist.] 1994, no writ). We agree with the trial court that the same reasoning bars [ FORMER EMPLOYER-PLAINTIFF ] from claiming that it justifiably relied on promises or statements of intent by its at-will employee to remain employed. See Collins, 871 S.W.2d at 937-38 (“An employee may quit at any time, or may never start performance and suffer no liability. . . . [E]mployees are not indentured servants.”). BREACH OF FIDUCIARY DUTY The elements of a breach of fiduciary duty claim are (1) a fiduciary relationship between the plaintiff and defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or benefit to the defendant as a result of the defendant’s breach. Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008, pet. denied). DETRIMENTAL RELIANCE NOT AN ELEMENT OF BoFD Unlike a fraud claim, a claim for breach of fiduciary duty does not require a plaintiff to establish reliance. See id. (listing elements of the claims). Consequently, the fact that at-will employment precludes [ PLAINTIFF ] from establishing justifiable reliance for purposes of its fraud claim on alleged statements by [ EMPLOYEE ] regarding future employment with [ DEFENDANT ] does not bar its breach of fiduciary duty claim. See Wilson, 305 S.W.3d at 74-75 (although similarity existed “in the abstract” between the elements of the two claims, claims had different elements and thus exception did not apply); see also Lundy, 260 S.W.3d at 506-07 (fraud and breach of fiduciary duty claims, although based on the same set of facts, were separate theories of liability for which plaintiff had to make an election of remedies). SOURCE: Houston Court of Appeals - 14-10-00513-CV - 6/28/11

When Is Fraudulent Misrepresentation Actionable in Texas? - Essential Elements of Fraudulent Misrepresentation as a Tort

FRAUDULENT MISREPRESENTATION AS A CAUSE OF ACTION UNDER TEXAS LAW 

The elements of a fraudulent misrepresentation claim include proof by the plaintiff that (1) the defendant made a material misrepresentation; (2) the representation was false; (3) the defendant knew the representation was false when made or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intention that it should be acted upon; (5) the representation was in fact justifiably relied upon; and (6) damage to the plaintiff resulted. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); see also Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 575 (Tex. 2001).
 
Fraudulent inducement of contract 
 
As a general rule, a party is not bound by a contract procured by fraud. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998); see also Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997).
 
Detrimental reliance on false representations
 
A false representation made indirectly to a third party and later relied on by the defrauded party may constitute fraud under certain circumstances. See BP Am. Prod. Co. v. Marshall, 288 S.W.3d 430, 444–45 (Tex. App.—San Antonio 2008, pet. granted) (holding misrepresentations made to one sibling acting as agent for all siblings constituted misrepresentations to all siblings). “[A] person who makes a misrepresentation is liable to the person or class of persons the maker intends or ‘has reason to expect’ will act in reliance upon the misrepresentation.” Ernst & Young, 51 S.W.3d at 578. “Even an obvious risk that a misrepresentation might be repeated to a third party is not enough to satisfy the reason-to-expect standard; rather, the alleged fraudfeasor must ‘have information that would lead a reasonable man to conclude that there is an especial likelihood that it will reach those persons and will influence their conduct.’” Id. at 580 (quoting Restatement (Second) of Torts § 531 cmt. d (1977)) (emphasis added).
 
Deliberate misrepresentation vs. mistake, misunderstanding 
 
Fraud requires proof of an affirmative misrepresentation, not simply a misunderstanding by a party. See Orion Ref. Corp. v. UOP, 259 S.W.3d 749, 771–72 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (stating misunderstanding and other evidence do not amount to actionable misrepresentations).

SOURCE: Houston Court of Appeals 01-10-00104-CV 4/28/11

The Elements of Fraud (Common Law Cause of Action) | Proving Causation

The Elements of Common Law Fraud [per 1st CoA] Elements of common-law fraud are that (1) a material representation was made; (2) the representation was false; (3) when the speaker made it he knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (4) the speaker made it with the intention that it should be acted upon by the party; (5) the party acted in reliance on it ; and (6) he thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 759 (Tex. 2001). Proving the Element of Causation To establish the element of causation in a fraud claim, a plaintiff must show that the defendant's acts or omissions were a cause-in-fact of foreseeable losses. Prospect High Income Fund, ML CBO IV v. Grant Thorton, LLP, 203 S.W.3d 602, 618 (Tex. App.--Dallas 2006, pet. denied) (citing Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727 (Tex. 2003)). The defendant's acts or omissions are a cause-in-fact if the plaintiff can show, beyond mere conjecture, guess, or speculation, that an act or omission was a substantial factor in bringing about an injury which would not otherwise have occurred. Id. A plaintiff establishes reliance in a fraud claim by showing that the defendant's acts and representations induced it to either act or refrain from acting, to its detriment. Id. SOURCE: 01-07-00792-CV (9/10/09)

Elements of fraud in Texas law, common-law fraud cause of action

BRIEF CITE ON THE ELEMENTS OF FRAUD AS A COMMON-LAW CLAIM 

In order to prove fraud, a plaintiff must show that (1) the defendant made a material representation that was false, (2) the defendant knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth, (3) the defendant intended to induce the plaintiff to act upon the representation, and (4) the plaintiff actually and justifiably relied on the representation, which caused the injury. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). 
    
SOURCE: Wood v. Texas Chiropractic College (Tex.App.- Houston [1st Dist.] July 24, 2008) (Jennings) (suit by student against private educational institution, DTPA claim, misrepresentation, summary judgment affirmed, no showing of reliance) 


ELEMENTS OF FRAUD - CASE LAW SNIP (IMAGE)