We all “know” that statements of opinion are not actionable … right?
Not so fast. It is true that claims for defamation and intentional misrepresentation require misstatements of fact, and an opinion need not be supported by facts. But not all opinions are equal, and certain classes of speakers must exercise due care to prevent their conclusions from harming to reasonably foreseeable audiences.
California’s Negligent Misrepresentation Law
In California, negligent misrepresentation is a form of deceit: “The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true.” Cal. Civ. Code § 1710(2).
Generally, an actionable statement must be an assertion of fact. “A representation is an opinion “‘if it expresses only (a) the belief of the maker, without certainty, as to the existence of a fact; or (b) his judgment as to quality, value … or other matters of judgment.’” “ Graham v. Bank of America, N.A., 226 Cal. App. 4th 594, 606-607 (2014) (internal citations omitted). An opinion of property value, for example, is “quintessentially a matter of opinion, not a statement of fact.” Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells, 86 Cal. App. 4th 303, 310 (2000).
Opinions may be actionable misstatements of fact in three circumstances: “(1) where a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former’s superior knowledge; (2) where the opinion is by a fiduciary or other trusted person; (3) where a party states his opinion as an existing fact or as implying facts which justify a belief in the truth of the opinion.’” Borba v. Thomas, 70 Cal. App. 3d 144, 152 (1977) (internal citations omitted).
“Whether a statement is nonactionable opinion or actionable misrepresentation of a fact is a question of fact for the jury.” Furla v. Jon Douglas Co., 65 Cal. App. 4th 1069, 1080-1081 (1998).
The Speaker’s Superior Knowledge
In Cohen v. S & S Construction Co., 151 Cal. App. 3d 941 (1983), plaintiffs paid a premium to purchase their property lots upon the sales agent’s assurances that the applicable Declaration of Covenants, Conditions and Restrictions protected the view and prevented the neighbors from building obstructions of plaintiffs’ view (spoiler alert: it did not). The tract developer authored the Declaration, controlled the governing Association’s board of directors, and employed the sales agent who made the misrepresentation to plaintiffs.
Although the defendants argued the sales agent’s statements were nonactionable opinion, the Court of Appeal for the Fourth District reversed the trial court’s dismissal of plaintiffs’ cause of action for negligent misrepresentation for two reasons relating to the first Borba factor: (1) the developer held themselves out to the public as “experts in establishing and administering homeowner associations and maintaining the aesthetic integrity of their developments,” and (2) the sales agent who worked for the developer was in a position to know facts accessible only to him or his principal. 151 Cal. App. 3d at 946.
The Negligence in Negligent Misrepresentation
A corporation commissioned its attorneys and an accounting firm to prepare confidential offering memoranda (COM) to share with prospective investors in the corporation’s limited partnerships. The COMs included financial forecasts and projected a return of 16 to 19 percent over a six-year period. The reports summarized the assumptions and accounting policies supporting the forecasts and warned that the investment “involved a high degree of risk and should be made only by investors who could afford a total loss of their contributions.” Anderson v. Deloitte & Touche, 56 Cal. App. 4th 1468, 1472 (1997).
Plaintiffs brought suit after the limited partnerships filed chapter 11 bankruptcy petitions. Plaintiffs’ expert opined that the accounting firm failed to conduct its examination of the corporation’s forecasts according to applicable accounting guidelines. Anderson, 56 Cal. App. at 1475. The trial court granted summary judgment in favor of the defendant accounting firm.
In reversing the trial court, the Court of Appeal for the First District emphasized that ostensible statements of opinion may be actionable assertions of fact where the speaker does not speak with due care: “If the acts or conduct of a professional accountant performed in preparation for an audit or representation fall below the applicable standard of care for the profession, in that the accountant failed to examine or acquire the necessary information required to support the accountant's professional opinion disseminated to potential investors, the opinion is made without a reasonable ground for believing it to be true … When a statement, although in the form of an opinion, constitutes “ ‘a deliberate affirmation of the matters stated’ ” … as occurred here, “it may be regarded as a positive assertion of fact.” Anderson v. Deloitte & Touche 56 Cal.App.4th 1468, 1477 (1997) (internal citations omitted).
Know Your (Foreseeable) Audience
Accountants are regularly hired by clients to prepare independent audits and reports on the client’s businesses. But who is the intended audience of those reports: the clients who commissioned them, or third parties who may rely on the reports to their detriment? As to the third parties: It Depends.
In Bily v. Arthur Young & Co., 3 Cal. 4th 370 (1992) the California Supreme Court affirmed that “Under certain circumstances, expressions of professional opinion are treated as representations of fact. When a statement, although in the form of an opinion, is ‘not a casual expression of belief’ but ‘a deliberate affirmation of the matters stated,’ it may be regarded as a positive assertion of fact.” Bily, 3 Cal. 4th at 408, quoting Gagne v. Bertran, 43 Cal. 2d 481, 489 (1954).
The Bily court next considered whether third parties may rely on such opinions, and whether the speaker could be liable to those third parties. The “‘class of persons entitled to reply upon the representation is restricted to those to whom or for whom the misrepresentations were made. Even though the defendant should have anticipated that the misinformation might reach others, he is not liable to them.’” Bily v. Arthur Young & Co., 3 Cal. 4th 370, 408 (1992) (internal citations omitted). The Court endorsed the approach of Restatement Second of Torts section 552(b), which “creates an objective standard that looks to the specific circumstances…to ascertain whether a supplier has undertaken to inform and guide a third party with respect to an identified transaction or type of transaction.” Bily, 3 Cal. 4th at 410. “If such a specific undertaking has been made, liability is imposed on the supplier. If, on the other hand, the supplier ‘merely knows of the ever-present possibility of repetition to anyone, and the possibility of action in reliance upon [the information] on the part of anyone to whom it may be repeated,’ the supplier bears no legal responsibility.” Id. (internal citations omitted).
Conclusion
Opinions can be complicated things – a combination of beliefs, impressions, judgments … and a suggestion of the facts that support these. While an opinion may not expose its speaker to liability for intentional fraud, speakers should exercise due care to ensure their audience is not harmed by their statements, even if couched as an opinion. And this care should extend not only to the immediate audience, but also to those who will foreseeably rely on the speaker’s representation.
For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, or Joshua Korr.
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