Misrepresentation Case Analysis

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There are several possible grounds for this decision to be either reversed in whole or in part, if it were to receive further review in the Wisconsin Supreme Court.

The first is whether the elements of intentional misrepresentation were met. As the court noted, one of the elements is, “the statement must be made with the intent to defraud and for the purpose of inducing the other party to act.”

The court concluded that this element was satisfied because Fleming clearly acted with intent to deceive. However, intent to deceive does not necessarily equate to intent to defraud. Telling a fool that he is intelligent may be deception, but unless that deception is done to separate the fool from his money, it would not count as fraud.
Similarly, while Betterman was indisputably deceived, nothing indicates that he was defrauded of anything.

Furthermore, the court does not at any point state exactly what Fleming was “inducing” Betterman to do by deceiving him. Theoretically, Fleming could have done what it did to induce Betterman not to file a lawsuit for employment discrimination. However, the court does not state so anywhere in its decision, and thus, this element of misrepresentation is entirely speculative.

The second potential ground for reversal is the calculation of compensatory damages.

The court correctly notes that Wisconsin is among those jurisdictions that follows the benefit of the bargain rule in intentional misrepresentation cases, rather than the out of pocket rule.

However, that standard is arguably not the one that should be applied in a case such as this, inasmuch as it contemplates, and is intended for, a very different type of representation — one in which the defrauded party is induced to buy property for more than it is worth.

In Ollerman v. O’Rourke, 94 Wis.2d 17, 52-53, 288 N.W.2d 95 (1980), for example, the court stated, “Under the benefit of the bargain rule, the measure of the purchaser’s damages is typically stated as the difference between the value of the property as represented and its actual value as purchased (emphases added).”

In the case at bar, however, there was no property at issue, nor any purchase, and the benefit of the bargain rule is illsuited to calculate damages.

The method has the potential to either overcompensate or undercompensate a plaintiff in a case such as this. If Betterman had turned down a job offer that paid more than he earned at Fleming, in reliance on Fleming’s representation that he still had a job waiting for him, then the benefit of the bargain rule would undercompensate him for the actual damage suffered.

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Here, however, the benefit of the bargain rule overcompensates Betterman. The jury specifically found that there was no discrimination by Fleming in terminating him; if Fleming had simply terminated him outright (lawfully), Betterman would be entitled to nothing in lost wages.

Which leads to the third possible ground for reversal — the absence of causation. The actual misrepresentation caused no damages, save for Betterman undergoing arguably inappropriate therapy, and possibly building the deck to his house in expectation of better financial prospects.

Because Fleming had no obligation not to terminate Betterman after his breakdown, the misrepresentation itself caused no lost wages. If one party represents that an item worth $1 is actually worth $10, the misrepresentation causes $9 worth of damages.

Here, however, if Fleming had told Betterman the truth, he would be in exactly the same position as he was being lied to; in both instances, he would have no job.

However, that loss is caused by the lawful termination itself, rather than the misrepresentation.

– David Ziemer

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David Ziemer can be reached by email.