Fact, Opinion, and Law

Fact, Opinion, and Law

A misrepresentation is an assertion that is not in accord with the facts.¹ That test works only if the assertion can be laid beside the facts and found to match or miss. Some statements resist the comparison. A remark that a house has wonderful character leaves nothing to check, while a statement that the roof was replaced last spring invites checking at once. The Restatement gives the first kind a name: an assertion is one of opinion if it expresses only a belief, without certainty, about whether a fact exists, or only a judgment about quality, value, authenticity, or similar matters.² Statements about the law pose the same difficulty, because courts once treated them as opinions too.

The law's first response is a default rule. To the extent that an assertion is opinion only, the recipient is not justified in relying on it unless the recipient stands in such a relation of trust and confidence to the speaker that reliance is reasonable, reasonably believes the speaker has special skill, judgment, or objectivity on the subject, or is for some other special reason particularly susceptible to this kind of misrepresentation.³ A later section develops those exceptions. This section asks the prior question: when does a statement that looks like opinion or law still assert a fact? Three parts answer it. The first separates genuine opinion and puffery from checkable fact. The second shows how an opinion can imply facts about what the speaker knows. The third applies both lessons to statements about the law.

Opinion and Puffery

The definition of opinion has two halves, and they fit different speakers.⁴ One half covers the speaker who signals uncertainty about whether a fact is so. The other covers the speaker who offers an evaluation. A hedged belief announces its own uncertainty, and an evaluation has no single fact against which it can match or miss. Because a misrepresentation must be out of accord with the facts, neither kind of statement fits that description easily.⁵

Ordinary sales talk shows both halves at work. A seller who says a sofa is made of leather, or was made in the U.S.A., asserts an objectively ascertainable reality, and the assertion is false if the sofa proves to be vinyl or imported. A seller who calls it a very beautiful sofa voices a judgment, and a seller who says it will be the envy of the buyer’s friends and neighbors forecasts a reaction that has not yet occurred.⁶ Predictions receive opinion’s treatment for a structural reason: the fact represented must exist when the statement is made, so a forecast gives a court nothing to check unless it falsely implies that some present fact exists.⁷ Puffery, the trade name for commendations such as “good,” “excellent,” or “terrific,” completes the group, because buyers ordinarily take such words as casual sales talk and not as factual claims.⁸

Two features of fraud law explain the line. The plaintiff must prove a false statement of fact and justifiable reliance on it.⁹ Praise gives a court no fact to find false, and a listener who knows that sellers praise their goods has little reason to rely on the praise. A judgment of taste also gives a court no standard to apply. Two honest people can disagree about whether a kitchen is the nicest on the block, and a court that called one of them wrong would have nothing to measure against, whereas the age of a roof supplies the measure at once.

Because the line runs along a spectrum, specificity is the best working guide. The more specific an assertion, the more likely a court will treat it as fact, and the more general, the more likely it is opinion. A crane described as able to lift 20,000 pounds safely is the subject of a factual claim; a crane called a mighty strong crane is the subject of an opinion.¹⁰

Statements of value follow the same logic, which is why § 168(1) lists value among the subjects of judgment. Where property has a generally accepted market price, as government bonds, grain, and cattle do, a statement of its value may be a misrepresentation of fact, since anyone can check it.¹¹ A statement of worth, even one not phrased as an opinion, may nonetheless represent opinion and not fact. Byers v. Federal Land Co. illustrates: brokers told a buyer that grazing land was worth $35 an acre, and the court treated the statement as an honest opinion.¹²

Two decided cases show the difference between a checkable report and a flourish. In Italian Cowboy Partners, Ltd. v. Prudential Insurance Co. of America, a Prudential representative told prospective restaurant tenants that the building was practically new and problem-free, that the prior tenant had experienced no problems, and that the site was perfect for a restaurant.¹³ The tenants later terminated the lease because of a persistent sewer gas odor, and they learned that a severe odor had plagued the previous restaurant. Prudential argued that the statements were opinion, but the court held them actionable material misrepresentations as a matter of law.¹⁴ The checkability test explains the result. The building’s age and the prior tenant’s experience are matters of history and condition that can be verified, so the praise of a perfect site rode on top of verifiable claims.

In Nigro v. Lee, an online seller described a 1995 Mercedes as “gorgeous” with three minor blemishes. The buyer, who did not inspect the car in Nevada before buying it, received a vehicle with accident damage, stained upholstery, rust, and costly mechanical problems.¹⁵ The court called “gorgeous” a generalized expression of opinion and mere puffery.¹⁶ The word fails as a misrepresentation because it offers no fact to compare with the car. The count of minor blemishes was different: a verifiable assertion that the court regarded as more substantial. The buyer still lost, because the truth was easily discoverable through a vehicle history report and a mechanical inspection.¹⁷ That second ground concerns justified reliance, developed in a later section, and should not be mistaken for an application of the opinion rule. The two cases differ in what the words conveyed. The Texas statements told the tenants something about the building’s history; the adjective in the Nigro advertisement told the buyer only how the seller felt.

Real disputes arise in the middle of the spectrum, and there context decides. One court treated a prospective shareholder’s statement that shares priced at $8.00 would be worth $25.00 in a year as opinion, yet held actionable the representations that a chicken-raising franchise would return roughly half the income of an average Midwest farm for about six hours of daily attention.¹⁸ The franchise claims appeared in a glossy printed brochure, the franchise buyer had far less business experience than the investor, and the franchisor spoke with an aura of expertise as part of a regional selling campaign.¹⁹ Because so much turns on circumstances, a court will often leave the classification to the jury. In Syester v. Banta, the court repeated that whether a representation is opinion or fact is ordinarily a jury question that depends on the facts and circumstances of each case, and it sustained a fraud verdict over the defendants’ argument that their statements were puffing.²⁰

Calling a statement an opinion does not end the inquiry. An honest opinion honestly stated is not a fraudulent misrepresentation, but a statement offered as opinion that the speaker does not actually hold can be one.²¹ Courts also divide on how far the label protects a seller who knows better. In Ray v. Montgomery, the court held that calling a house nice, solid, and in good condition was opinion even though the seller knew of termite damage, while another decision holds that an opinion may support a fraud claim if actual fraudulent intent is proven.²² The next subsection shows how an opinion can imply facts, and the one after it extends the lesson to statements about the law.

Facts Implied by Opinion

Restatement (Second) of Contracts § 168(2) addresses what a listener may reasonably take an opinion to say about the facts behind it. Suppose a speaker gives an opinion about facts that the speaker did not disclose and the recipient does not otherwise know. If it is reasonable to do so, the recipient may read the opinion as asserting that the facts known to the speaker are not incompatible with it, or that the speaker knows facts sufficient to justify forming it.²⁴

Each reading is an implied assertion: a claim the words do not state outright but a reasonable listener draws from them. An implied assertion is tested like any other, against the facts as they stood when the contract was made, and one that does not match is a misrepresentation.²⁵ The opinion label therefore leaves the speaker’s implied claims about what the speaker knows open to the same inquiry as a flat statement of fact.

The rule exists because of what an opinion is. An opinion is shorthand for a body of underlying facts, and a listener who hears only the conclusion usually cannot see the facts behind it.²⁶ A buyer told that the house is sound, in the speaker’s opinion, naturally assumes that the speaker has looked and seen nothing alarming; that assumption is what makes the statement worth hearing. Only the speaker holds what the speaker knows, so the listener cannot check it. If the opinion label shut off inquiry into that knowledge, a speaker who had seen a cracked foundation could convey comfort the facts did not support and then defend the words as mere opinion. The implied-assertion rule closes that exit and leaves honest judgments alone.

The text keeps the rule narrow in two ways. It reaches only opinions about facts that were not disclosed and are not otherwise known to the recipient, because a listener who has been given the underlying facts, or already knows them, can form a judgment without inferring anything about the speaker’s knowledge. It also applies only when the inference is reasonable, and a remark that an informed listener would discount as ordinary sales talk is a weak candidate. Within those limits the rule offers two readings, which differ in how much the speaker is taken to know.

• No incompatible facts. The speaker is taken to know of no facts that cut against the opinion, so a speaker who knows of facts pointing the other way has made a false implied assertion.²⁷
• Facts sufficient to justify. The speaker is taken to have a real basis, meaning facts enough to justify forming the opinion, so a speaker who simply guessed has made a false implied assertion even if no contrary fact was known.²⁸

Which reading is fair depends on how the speaker presented the opinion. A passing remark from someone with no evident familiarity with the subject supports at most the first reading, while an opinion from someone who presents as having studied the matter invites the second.

The first reading carried Rodi v. Southern New England School of Law. A student enrolled after the dean told him that the school was “highly confident” of receiving American Bar Association accreditation, and the school knew that accreditation mattered to him because a degree from an unaccredited school would keep him from being admitted to practice in his home state.²⁹ When accreditation did not arrive in his first year, a successor dean assured him there was no cause for pessimism, and the school was never accredited before he would have graduated. The First Circuit reversed a dismissal and sent the case to trial on a theory of fraudulent misrepresentation, because the school knew it had substantial problems in obtaining accreditation and the student made a credible preliminary showing that the officials’ opinions were not honest, given what they knew about the accrediting criteria and the school’s prospects of meeting them.³⁰ The student could not see the school’s file on its dealings with the accreditor, so the statement of confidence told him something about what the officials knew, and the facts they knew were incompatible with the confidence they expressed.

The second reading explains Vokes v. Arthur Murray, Inc. A dance student alleged that the studio flattered her, assuring her she had “grace and poise,” was “rapidly improving,” and could become a beautiful dancer, as a prelude to selling her ever more hours of instruction when she was in fact making little progress.³¹ The court said it could reasonably be supposed that the studio had “superior knowledge” of her potential and progress, and it inferred that the praise came as much from the urge to “ring the cash register” as from an honest appraisal.³² It held that her complaint should not have been dismissed.³³ The two cases differ in what the speaker is said to have known. In Rodi the officials held specific facts that contradicted their confidence. In Vokes the studio held the only vantage point from which a judgment about the student’s potential could be formed, and praise offered without an honest appraisal behind it implied a basis that did not exist.

Hindsight proves nothing about the implied assertions, which concern the speaker’s knowledge at the moment of speaking.

An opinion also carries a second claim: that the speaker actually holds it. A speaker who states an opinion the speaker does not hold misstates the speaker’s own state of mind, and the statement then amounts to a misrepresentation of fact.³⁴ A lawyer who privately thinks a prospective client’s case is weak, and tells the client it is strong in order to win the engagement, has done exactly that.³⁵ Opinions that sound like taste can carry implied facts too. Calling a sofa fashionable suggests familiarity with current market trends, and such a fact-based opinion is a misrepresentation if the speaker knows the facts do not support it or speaks with reckless disregard of whether it is true.³⁶

Predictions follow the same logic, because a prediction is an opinion about what will happen. A forecast is not false when made merely because events later go the other way. It carries, though, an implied assertion that the speaker knows of no present facts inconsistent with it, and that assertion can be actionable when the speaker purports to have special knowledge of, or access to, those facts.³⁷ A prediction therefore supports a claim only to the extent that it falsely implies the existence of present facts.³⁸ In Hoffman v. L&M Arts, an intermediary told the seller of a painting that the buyer was a very private individual and that the work would “disappear” into the buyer’s collection. The buyer later offered it at public auction. The Fifth Circuit rejected the fraud claim, because the assurance was a nonactionable prediction resting on no present facts; it merely anticipated the later conduct of a third party whom the intermediary did not control.³⁹ A different result is easy to imagine had the intermediary had no factual basis at all for predicting that the buyer would keep the painting, because the prediction would then have implied a basis that did not exist.

A false implied assertion produces a misrepresentation, but the recipient must still show justified reliance, and § 169 governs that question for statements that are opinion only, as the section on reliance on opinion explains.⁴⁰

Statements of Law

Restatement (Second) of Contracts §§ 159 and 168(1) supply the tests that have sorted every statement in this section, and neither makes an exception for the law. One asks whether an assertion accords with the facts;⁴³ the other asks whether it expresses only a belief or a judgment.⁴⁴ Both look at what the words convey and whether it can be checked. A statement about the law is therefore sorted like any other: it either asserts or implies a fact, or it voices only a judgment. That approach displaced an older rule that gave legal statements a category of their own, and the reasons the older rule failed show how to apply the modern one.

The traditional rule held that a misrepresentation about the law could not make a contract voidable, however false or fraudulent. Two rationales supported it. One was that everyone is presumed to know the law. The other was that a statement of the law governing a set of facts is only an opinion, on which no one should rely without further research.⁴⁵ The two rationales contradict each other, because the first assumes the listener already knows the law and the second assumes the listener does not. The sorting itself was arbitrary as well. A representation that a college has legal authority to award a dental degree has no sensible answer to the question whether it states a fact or a law.⁴⁶

The presumption of knowledge proves less than it first appears to. The maxim holds a person accountable for the person’s own conduct: a violator of a statute cannot plead ignorance as an excuse. It says nothing about whether a person who relies on another’s specific claim about the law has been dealt with fairly, and applying it here would let a speaker profit from the very ignorance the speaker exploited. One court observed that the maxim is by no means universally true, since lawyers to advise and courts to decide what the law is would be unnecessary if ignorance of the law did not exist.⁴⁷

The better approach subjects a legal assertion to the same inquiries applied to a factual one.⁴⁸ Depending on its form and the circumstances, a statement about the law may be fact or opinion, and it may also carry implied assertions of fact.⁴⁹ A speaker who says a statute has been repealed reports an event that either happened or did not. A speaker who says a corporation has the legal right to do business in a state may be taken to represent that the steps needed to qualify it there have been completed.⁵⁰ At the other end of the range sits the pure legal opinion. A speaker who announces that, now that the Supreme Court’s composition has changed, a statute will be held unenforceable offers a forecast about a court’s judgment, and the forecast implies no fact that anyone could check.⁵¹

A lease negotiation shows the factual side of a legal statement. The tenant needed the premises to lie in an unrestricted zoning district, and it asked for an adjournment so that its lawyer could check. The tenant’s testimony, which the trial court accepted, was that the landlords’ lawyer, who was also one of the principals, said checking was unnecessary because the landlords owned the property, knew the area, and guaranteed that it was unrestricted. The negotiations closed only after the assurance was written into the lease.⁵² The landlords argued that only a misrepresentation of law was involved, and the court rejected the argument. It reasoned that the landlords were saying they knew as a fact that the zoning resolution did not restrict the use of the premises, and that what they misdescribed was the resolution’s description, map, and requirements, which are matters found in a law without being opinions about it.⁵³ The landlords also argued that a tenant with a lawyer knew or should have known the zoning status. The court answered that the assurance itself had persuaded the tenant’s lawyer to forgo verification, so the assurance and not carelessness explained the omission.⁵⁴ Whether a listener may rely despite a chance to check is the subject of the later section on justified reliance.

A statement that is pure opinion about the law stays subject to the rules on reliance on opinion. Reliance is ordinarily not justified on a legal conclusion offered by someone without specialized knowledge who implies no assertion of fact.⁵⁵ The forecast about the Supreme Court falls in that group. The identity of the speaker can change the answer, because a lawyer’s opinion about the law of the state where the lawyer practices may normally be relied on, even when the listener is an adversary and not a client.⁵⁶ That exception tracks the circumstance in which the recipient reasonably believes the speaker has special skill, as compared with the recipient, on the subject.⁵⁷ The reason is an inequality of competence: a lawyer speaking to a client or an insurance agent speaking to a customer is better placed to know the law than the person who hears the statement.⁵⁸

The label law therefore decides nothing by itself, and an answer that stops at the observation that a statement concerned the law stops before the analysis begins. Two questions carry the analysis. Does the statement report or imply a fact, such as what an ordinance provides or whether a statute remains in force? If it is pure opinion, does the speaker’s position supply one of the circumstances that make reliance on opinion justified?