On August 8, 2012, the Minnesota Supreme Court published an opinion reversing a $1 million verdict in the Jimmy Williams v. Tubby Smith negligent misrepresentation case.  The Minnesota Court of Appeals previously upheld the verdict on the theory Williams harmed Smith when he falsely represented that he had authority to hire Williams as an assistant basketball coach for the University of Minnesota in the spring of 2007.

To prove negligent misrepresentation, a plaintiff must be able to prove that:

  1. The defendant owed a duty of care in conveying information;
  2. The defendant breached that duty by negligently providing false information;
  3. The plaintiff reasonably relied on the misrepresentation; and
  4. The plaintiff’s reliance proximately caused damages.

The Minnesota Supreme Court reversed the verdict in the Williams case on the grounds that the University of Minnesota did not owe a duty of care to Williams.

To support its conclusion that the University of Minnesota did not owe a duty of care to Williams, the Minnesota Supreme Court emphasized two principles.  First, the Court cited authority for the principle that “sophisticated parties negotiating a commercial transaction are entitled to legal protection only for intentional, fraudulent misconduct.”  Second, the Court cited a previous case in which it held that parties who challenge erroneous government action as “wrongful” must show something more than “simple inadvertence, mistake, or imperfect conduct” by the defendant government agency.  In either of these situations, something more than mere negligence is required to permit recovery.

The Court concluded that “the legal relationship between Williams and Smith is not the type of relationship entitled to legal protection, and therefore no duty of care against negligent misrepresentation is owed.”  The Court explained that there was no professional, fiduciary, or special legal relationship between the parties in which one party had superior knowledge or expertise.  Instead, Williams and Smith were two sophisticated business people who negotiated at arm’s-length.  The Court held that no public policy warranted imposing a duty of care in that context.

Takeaways:  The Minnesota Supreme Court’s decision in the Williams case is a victory for the University of Minnesota, but the decision is based on the relatively unique facts of the case.  Employers should still be cautious to avoid making misrepresentations during the hiring process.  For additional tips on the hiring process, click here and here.