Legal Memorandum: Fraudulent Misrepresentation Claim in IA

Issue: Under Iowa law, what are the elements of a fraudulent misrepresentation claim?

Hyler v. Garner, 548 N.W.2d 864 (Iowa 1996)

·    Fraudulent inducement also gives rise to a tort claim for damages.

·    The elements of a tort claim for misrepresentation are well established: (1) representation; (2) falsity; (3) materiality; (4) scienter; (5) intent; (6) justifiable reliance; and (7) resulting injury or damage.

·    Because the remedy of rescission is seen as less severe than an award of damages, rescission has traditionally been available upon a lesser showing.

·    Thus, the proof required for rescission based on misrepresentation under Iowa law is less demanding than the proof necessary for the tort of misrepresentation.

·    Scienter is knowledge of the falsity of a material representation.

·    By showing that the defendant had actual knowledge of the falsity, possessed reckless disregard for the truth [or] falsely stated or implied that the representations were based on personal knowledge or investigation. . . .

·    On occasion, we have equated proof of scienter with proof of intent to deceive: scienter and intent to deceive may be shown when the speaker has actual knowledge of the falsity of his representations or speaks in reckless disregard of whether those representations are true or false.

·    The elements of an equitable claim for rescission based on misrepresentation are (1) a representation, (2) falsity, (3) materiality, (4) an intent to induce the other to act or refrain from acting, and (5) justifiable reliance.

Tralon Corp. v. Cedarapids, Inc., […]