Fraudulent Misrepresentation
Lorraine Tessier v. Regina S. Rockefeller et al.,
(Decided September 15, 2011)

Facts:

The plaintiff is the wife of Thomas Tessier, an attorney who practiced law at the law firm of Christy & Tessier.  Tessier was hired by Dr. Frederick Jakobiec to handle some estate matters on his behalf.  Dr. Jakobiec subsequently hired Regina Rockefeller of the law firm of Nixon Peabody.  In June of 2006 Rockefeller accused Tessier of misusing and converting substantial assets of the Jakobiec family. 

The plaintiff alleged that Rockefeller met with her husband on several occasions and threatened him by demanding that the assets be returned immediately.  She claimed that Rockefeller told her husband that if he repaid the money no action would be taken against him, however, if he failed to do so she would report him to the Attorney Discipline Office and also threatened to institute criminal proceedings.   Plaintiff claimed that as a result of these threats she, acting under duress, entered into a settlement agreement, relinquished her interest in the family home, and that over the next two years she and her husband were stripped of their individual and joint interests in all of their tangible assets.  Nevertheless, the defendants still reported her husband’s conduct to his law partner, the Attorney Discipline Office and others.  Dr. Jakobiec also hired an attorney to file a civil lawsuit against Tessier and to foreclose on the mortgage that was the subject of the settlement agreement. 

 

The plaintiff filed suit against Rockefeller and Nixon Peabody asserting claims for abuse of process, tortious interference with advantageous contractual relationships, breach of the duty of good faith and fair dealing, intentional infliction of emotional distress, respondeat superior liability, negligent failure to train and supervise, and fraudulent misrepresentation. 

The defendants moved to dismiss the claims based on the absence of any duty owed by Rockefeller to the plaintiff, with whom Rockefeller had never communicated.  The trial court granted the motion to dismiss and the plaintiff appealed.

 

Held:  

Affirmed in part, reversed in part and remanded.

I. Duress 

The plaintiff alleged that Rockefeller’s promises and threats induced her under duress to enter into the settlement agreement with Dr. Jakobiec.  A contract entered into under duress is voidable and, therefore, duress is a defense to a breach of contract claim.  The Court held, however, that even if the facts alleged established duress, the plaintiff could not recover contract damages against Rockefeller and her firm because they were not parties to the settlement agreement and did not receive any of the assets transferred pursuant to that agreement.  Any such claim would have to be against Dr. Jakobiec, who was not a party to the lawsuit. As a result, the trial court properly dismissed the claims.

II. Fraudulent Misrepresentation

The plaintiff claimed that Rockefeller’s statements to her husband to the effect that if the misappropriated assets were repaid no further action would be taken, but if payment was not made then disciplinary action and criminal proceedings would be pursued, constituted fraudulent misrepresentations.  She alleged that these promises were communicated to her by her husband and that she relied on them in entering into the settlement agreement. 

One who fraudulently makes a misrepresentation in order to induce another person to act or refrain from acting in reliance on it is liable in deceit for the pecuniary loss caused by the justifiable reliance by the other person.  Intentional misrepresentation or fraud depends upon proof of a representation made with knowledge of its falsity or with conscious indifference to its truth with the intention of causing another person to rely on it.

The New Hampshire Rules of Professional Conduct require an attorney who knows that another attorney has committed a violation of the rules that raises a substantial question as to his honesty to report the violation.  The Court noted that lawyers are expected to know the rules and that since Rockefeller was required to report Tessier’s misconduct she had no intention of keeping the promise she made to him.  The Court found that the fact that the misrepresentation was not made directly to the plaintiff did not defeat the claim because the plaintiff alleged that Rockefeller intended or had reason to expect that it would be conveyed to her and that she would rely on it.

To recover on a fraudulent misrepresentation claim the plaintiff must also show that her reliance was justifiable because: 1) a reasonable person would consider the misrepresentation important in determining his course of action; or 2) the person making the misrepresentation regards or is likely to regard the matter as important in determining his choice of action although a reasonable man would not so regard it.  The Court ruled that this question is for a jury to decide and it could not say as a matter of law that the plaintiff’s reliance was unreasonable.  The Court also noted that one could reasonably expect that the plaintiff would rely on the misrepresentations and suffer pecuniary loss. Therefore, the trial court erred in dismissing the fraudulent misrepresentation claim.

III. Abuse of Process

The plaintiff claimed that the defendants made improper use of the civil and criminal process by threatening to take action and promising not to take action if the plaintiff paid money which she did not owe.

A person claiming abuse of process must show that: 1) a person used (2) legal process, whether criminal or civil, (3) against the party (4) primarily to accomplish a purpose for which it is not designed and (5) caused harm to the party (6) by the abuse of process.  There must be some court authority or jurisdiction used in order for a party to commit abuse of process.  Liability is based not on wrongful procurement of legal process or wrongful initiation of criminal or civil proceedings, but rather the subsequent misuse of the process, though properly obtained.

The trial court properly dismissed the abuse of process claims because at the time the criminal and disciplinary proceedings were instituted the plaintiff had already entered into the settlement agreement and completed the property transfers.  Therefore, the Court concluded that the actions could not have been instituted to force the plaintiff to act.  Furthermore, any threat by Rockefeller is not an abuse of process because it did not emanate from a court.

IV. Tortious Interference with Contractual Relations

The plaintiff alleged that the defendants acted in bad faith by reporting Tessier’s misconduct, despite having promised not to do so, even though the plaintiff had performed her obligations under the settlement agreement.  She claimed that the defendants knew this agreement was unenforceable due to the obligation to report Tessier’s theft of client funds.  She argued that the defendants interfered with the settlement agreed with Dr. Jakobiec by making it appear that the plaintiff had breached the agreement by failing to collect the amount owed by Tessier.  They then reported Tessier’s conduct to authorities while also advising Dr. Jakobiec to keep the money paid to him by the plaintiff. 

To recover for intentional interference with contractual relations a plaintiff must prove: 1) she had an economic relationship with a third party; 2) the defendant knew of this relationship; 3) the defendant intentionally and improperly interfered with this relationship; and 4) the plaintiff was damaged as a result of the interference. 

The Court held that because the plaintiff did not allege that Dr. Jakobiec failed to perform his obligations under the settlement agreement the plaintiff failed to plead a claim for intentional interference with contractual relations.  Even if the defendants were deemed parties to the settlement agreement and interfered with it by reporting Tessier, the claim would still fail because tortious interference requires interference by a person who is not a party to the contract.  The Court concluded that the trial court properly dismissed the claims.

V. Breach of Duty of Good Faith and Fair Dealing

Implied in every contract is a duty of good faith and fair dealing.  The plaintiff alleged that the defendants breached this duty when Rockefeller promised not to report her husband’s theft or institute criminal proceedings when she had no intention of complying with that agreement and did not do so.  The defendants argued that since they did not communicate with the plaintiff they did not enter into an oral contract with her.

A valid, enforceable contract requires an offer, acceptance, consideration and a meeting of the minds.  Since there was no communication between the plaintiff and the defendants, there was no meeting of the minds and, therefore, no oral contract.  Additionally, the defendants were not parties to the settlement agreement and therefore were not bound by its terms.  Since there was no oral or written contract between the parties the plaintiff did not properly allege a claim based on breach of the duty of good faith and fair dealing.

VI. Intentional Infliction of Emotional Distress

The plaintiff alleged that the defendants’ threats were intended to extract all of her property from her even though she had done nothing wrong, that the defendants conduct was deceitful and that the knew their actions would cause her severe emotional distress yet they intentionally caused her emotional distress by subjecting her to constant and continuous threats for one and a half years resulting in her loss of property as well as hospitalization.

A claim for intentional infliction of emotional distress requires proof that the defendant, “by extreme and outrageous conduct, intentionally or recklessly cause[d] severe emotional distress to another.”  The defendant’s conduct must be “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society.”  Liability does not extend to mere threats, however.  Thus, the plaintiff failed to allege facts sufficient to establish the requisite extreme and outrageous conduct and the trial court properly dismissed the claims.

VII. Negligent Infliction of Emotional Distress 

The plaintiff claimed that the defendants knew or should have known that their conduct would cause her severe emotional distress and did in fact cause her to such distress manifested by physical symptoms requiring medical care, medication and hospitalization.

The elements of a claim for negligent infliction of emotional distress include: 1) causal negligence by the defendant; 2) foreseeability; and 3) serious mental and emotional harm accompanied by objective physical symptoms.  The Court concluded that the same facts that supported the plaintiff’s claim for fraud also supported her claim for negligent infliction of emotional distress, that she had properly alleged such a claim and reversed the trial court’s dismissal of those claims.

VIII. Respondeat Superior Liability

The plaintiff alleged that Nixon Peabody was vicariously liable for the tortuous conduct of Rockefeller.  Under the doctrine of respondeat superior, an employer may be held vicariously liable for the tortuous acts of its employee who acts within the scope of his or her employment.  Conduct falls within the scope of employment if: 1) it is of the kind the employee is hired to perform; 2) it occurs substantially within the authorized time and space limits; and 3) it is actuated, at least in part, by a purpose to serve the employer. 

Because the trial court had ruled that the plaintiff did not properly allege any tortuous acts by Rockefeller it dismissed the respondeat superior claims.  Since the Supreme Court reversed the trial court’s decision as to the fraudulent misrepresentation and negligent infliction of emotional distress claims, it reversed the rulings as to the respondeat superior claims based on those theories of liability.

IX. Negligent Failure to Train and Supervise

The plaintiff claimed that Nixon Peabody had failed to properly train and supervise Rockefeller and other employees, resulting in her loss of property and severe emotional distress. A claim for negligent training and supervision is not based on vicarious liability. It is a separate theory of liability which requires proof of all elements of a negligence claim. Since the plaintiff failed to allege any facts to support a negligence action for failure to properly train or supervise, the trial court properly dismissed those claims.