Saturday, August 16, 2008

Klein on Comparative Fault and Fraud

Andrew Klein (Indiana-Indianapolis) has posted Comparative Fault and Fraud on SSRN.  Here is the abstract:

The evolution of comparative fault is among this generation's most important tort law developments. Today, nearly every state follows some form of the rule, seeking to better align liability with culpability. Despite this guiding premise, states have struggled to define comparative fault's boundaries within the context of doctrine that developed in an earlier era. Courts have addressed many issues as part of this effort. One question that has escaped significant attention, however, is whether comparative fault should apply in a fraud action.

This Article asserts that comparative fault jurisdictions should not bar plaintiffs from recovering in fraud when they fail to establish justifiable reliance on a misrepresentation. Rather, courts should apply comparative fault principles and evaluate all parties' conduct in assessing damages. The Article begins by providing a brief overview of fraud, including the traditional element of justifiable reliance. It then considers the forces arrayed against the extension of comparative fault to fraud. These include the argument that justifiable reliance is merely a proxy for other elements of fraud, as well as courts' historical hesitation to apply comparative fault in any intentional tort claim or actions for purely economic harm. From there, the Article questions the status quo. It suggests that, in fact, some courts do take justifiable reliance seriously. It also notes that historical barriers to comparative fault's application in the area might be eroding. The Article then asserts that the application of comparative fault in fraud actions makes sense. It notes that policies relied upon by scholars who would limit the extension of comparative fault do not inherently apply in the area of fraud. More positively, the Article suggests that extending comparative fault to fraud would serve policies that led courts and legislatures to adopt comparative fault in the first place, as well as policies that underlie tort law generally. In sum, the refusal of courts to apply comparative fault to fraud is a vestige of an earlier day in which "all-or-nothing" rules dominated tort law. The policies that led to the development of comparative fault in almost every other area of tort law also deserve consideration in fraud.

--CJR

http://lawprofessors.typepad.com/tortsprof/2008/08/klein-on-compar.html

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