A review of Kentucky’s Fraud Claims Law
Kentucky law recognizes the tort of fraud by omission, which includes the following four elements: (1) that the defendants had a duty to disclose a fact or facts, (2) that the defendants failed to disclose such fact, (3) that the failure to disclose induced the plaintiff to act, and (4) that the plaintiff suffered actual damages therefrom. Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 641 (Ky.Ct.App.2003). “However, a duty to disclose is only created where a fiduciary or confidential relationship exists between the parties, where such duty is imposed by statute, or where the defendant has already partially disclosed facts creating the impression that a full disclosure has been made.” Marrowbone Pharmacy, Inc.,2011 WL 6004345, at *5 (citing Rivermont Inn, Inc., 113 S.W.3d at 641. The standard of proof of fraud in Kentucky is clear and convincing evidence. Keck v. Wacker, 413 F.Supp. 1377, 1383 (E.D. Ky 1976).
Kentucky law also recognizes the tort of fraudulent misrepresentation. In Kentucky, fraud by misrepresentation comprises six elements: (1) the defendant must have made a material misrepresentation; (2) that was false; (3) that the defendant knew was false, or made with reckless disregard for its truth; (4) that was intended to induce the plaintiff to act, based on the misrepresentation; (5) that the plaintiff reasonably relied; and (6) that caused the plaintiff injury. Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009). To be actionable, a misrepresentation. . . must relate to a past or present material fact. A mere statement of opinion or prediction may not be the basis of an action. This means . . . that forward-looking opinions about investment prospects or future sales performance . . . generally cannot be the basis for a fraud claim.” Ibid. Nor does “sales talk or puffing which is universal and an expected practice . . . amount to actionable misrepresentation. This is certainly true where the parties deal at arm’s length and have equal means of information.” McHargue v. Fayette Coal & Feed Co.,283 S.W.2d 170, 172 (Ky. 1955) (internal quotation marks omitted). A caveat to the necessary elements under either a fraud by omission claim or a fraudulent misrepresentation claim is that “mere silence does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other.” Bryant v. Troutman, 287 S.W.2d 918, 920–921 (Ky.1956).