Attorneys at Law




Plead It With Particularity


In a recent post, I summarized the Eighth Circuit case, Semi-Materials Co., Ltd. v. MEMC Electronic Materials, Inc., et al., in which two words in a contract were found to be “ambiguous,” compelling the court to remand the matter for an expensive trial.

In keeping with this theme, today, the Minnesota Court of Appeals released its unpublished opinion in Hardin County Savings Bank, et al., v. Housing and Redevelopment Authority of the City of Brainerd, et al.  The court of appeals affirmed the district court’s dismissal of Hardin County’s claim for negligent misrepresentation for failing to plead it with particularity.

Essentially, Hardin County alleged that an appraisal negligently misrepresented the value of certain real property to be developed for single-family homes.  Hardin County and other banks relied upon the appraised value when they decided to purchase bonds that were to fund the project.  Predictably, the Brainerd Housing and Redevelopment Authority defaulted on the bonds.  In its complaint, Hardin County alleged its negligent representation claim as such:

177.  [Appellants] reallege the allegations contained in paragraphs 1 through 176 as fully set forth herein.

178.  [Respondent] negligently supplied information to [appellants] which was false.

179.  [Respondent] acted in the course of its business and had a financial interest in supplying the information.

180.  [Respondent] intended to supply the information for the benefit and guidance of [appellants] in their business transactions.

181.  Alternatively, [respondent] knew Dougherty intended to supply the information for the benefits and guidance of [appellants] in their business transactions.

182.  [Respondent] intended the information to influence the transaction for which the information was supplied.

183.  Alternatively, [respondent] knew that Dougherty intended the information to influence the transaction for which the information was supplied.

184.  [Appellants] acted in reliance on the truth of the information supplied and were justified in relying on the information.

185.  Information supplied by [respondent] was a proximate cause of the [appellants’] damage, in an amount greater than $50,000.

The appellants argued that the district should have considered the “catch all” provision in paragraph 177, and not focused solely on paragraphs 178 through 185 (the allegations in the actual claim).  The court of appeals gave two reasons for its refusal to reverse the lower court.  “First, allowing a plaintiff to simply regurgitate 176 elements of a complex complaint against multiple defendants in one catch-all provision would undermine the purpose of requiring a fraud claim to be pleaded with particularity.”  See, United States ex rel Costner v. United States, 317 F.3d 883, 888 (8th Cir. 2003) (noting that the particularity requirement of the similar federal rule “is intended to enable the defendant to respond quickly to the potentially damaging allegations”).

Second, the court of appeals found that, “[N]owhere in the complaint do appellants expressly outline what information respondent negligently misrepresented…Instead, appellants’ complaint reads as though they simply disagree with respondent’s appraisal.”

As we all know, pleading fraud and negligent misrepresentation claims requires specificity.  Like I said earlier, Words are Important.  But just as important is making sure that the words you use are sufficiently detailed.  This is harsh result to something that, like the contract in the Semi-Materials case, could likely have been avoided.

P.S.  Judge Hudson dissented from this portion of the opinion, arguing, in part, that the rest of the complaint contained sufficient detail to save the complaint from dismissal.