Tort Law for Paralegals Chapter 14, Fraud, Misrepresentation, and Business Tort

FACTS PRESENTED: Shareholder's suit

In 1990's and early 2000's, the End-Run Corporation was a high flyer. Its stock price, which had remained around $20 per share in the 1980s, rose to over $100 per share. End-Run posted huge profits and proclaimed a rosy future. End-Run executives received huge, and apparently well-earned, seven-figure salaries and a host of perquisites. Then a reporter for the local newspaper broke a story claiming that the "huge profits" of End-Run were actually part of a corporate scheme to fool stockholders and the public. In fact, End-Run was seriously in debt but had disguised the fact by clever (and illegal) accounting practices. Tom, who owns, 1,000 End-Run shares, has just walked into our office. He wants to sue End-Run for what he says is outright fraud.

Draft a complaint for negligent misrepresentation using the facts presented in the shareholder's suit, with one important change: Instead of owning 1,000 shares of End-Run Corporation, Tom is now a major investor who has reviewed the bogus financial statements and has been induced by them to purchase a 51 percent share in the company. How do you address these issues in your complaint.

Small Business Section https://www.usa.gov/business?source=busa obla loan, so Forms and Court Documents Willou Rocking A complaint alleging negligent misrepresentation. is smoe busfl boilmmos ismysil lon terms, value or nods Jud sb IN THE SUPERIOR COURT STATE OF PLACID FILE NUMBER: COUNTY OF BARNES The req Bart Bowler, the fina Plaintiff ow parti es esavel VIlead ing steal isdi boissonq eayr songbivs leisi won k isity VS.Van In early would Rockingham Finance, Inc. and ( ) fromre ferd gounisesiqs sri podall Finance Mark Wolf, assuran Defendants Plaintif self Complaint w sill isHA .It sbem ed node COMES NOW Bart Bowler, Plaintiff in the above-styled action and makes On Oct the following allegations: for the s ing date Plaintiff is and was at all times relevant to the allegations in this Complaint, a citizen of Barnes County, State of Placid. iger sry salem of ginodius and bed Two da 12. onT . bong est rate Defendant Rockingham Finance, Inc., (hereafter "Rockingham Finance") is a corporation organized under the laws of the state of Placid and maintains its In mid- headquarters in Barnes County. sen ers board or boffhead tourfoul Wolf in loan. Defendant Mark Wolf is an employee of Rockingham Finance Corporation and was employed by Rockingham Finance as a loan officer at all times perti- The Fi nent to the allegations in this Complaint. feited $ On September 6, 2017, Plaintiff entered into a sales contract with Able 4. Properties to purchase the Fiesta Ball, a bowling alley, and the five acres of As a r incurreFraud, Misrepresentation, and Business Torts 551 land surrounding it for $2 million. The agreement provided that the pur- chase was contingent upon Plaintiff's obtaining financing by October 10, 2017. 5. Plaintiff tendered $10,000 earnest money to seller, and the same amount was due upon acceptance. 6. Plaintiff contacted his banker, James Willoughby, at Placid State Bank to obtain financing. Placid State Bank was not interested in financing that large a presentation loan, so Willoughby suggested Plaintiff contact Rockingham Finance. 7. to inporn Willoughby and Plaintiff later met with Mark Wolf, a vice president of Rockingham Finance. The three discussed financing arrangements in general IN THE SUPERIOR OUTS terms; Rockingham Finance was willing to lend 80 percent of the appraised FILE NUMBER value or the sale price, whichever was lower. 8 . The required appraisal, however, was not scheduled to be completed until after the financing contingency date set forth within Plaintiff's sales agreement. 9 . In early October, the appraiser verbally assured Plaintiff that the appraisal would be for at least $2 million. Plaintiff then called Wolf at Rockingham Finance, explained he was risking $20,000 earnest money, and requested assurance that Rockingham Finance would extend the loan. According to Plaintiff, Wolf responded affirmatively. 10. On October 8, 2017, Plaintiff released the financing contingency in exchange plaint in the above-styled action andize for the seller's agreement to a 30-day extension of the November 1, 2017, clos- ing date. Two days later, Plaintiff and Wolf discussed a repayment schedule and inter- 1 1. to the allegations in this Comple est rates. as sepp ingroute s mol svia bluew heim Inogligon mort 112. I ssob at and W In mid-November, the appraisal came in at $2.1 million. In late November, and mumm Wolf informed Plaintiff that Rockingham Finance National had rejected the loan . how to notinfish offs jimil 13 . The Fiesta Ball was thereafter sold to another purchaser, and Plaintiff for- feited $5,000 earnest money. qudansmestre Ismon ob woll As a result of Defendant Wolf's false and misleading statement, Plaintiff 14 . incurred monetary losses . bust lenthins bas bubil livis nsowled valqghoT zesnieud bris nolletnsesso Chapter 14 Fuq ord Jeri babivong Insmearge sil 15. moillim $2 01 li guibquora brad Defendant Wolf's statement concerning Rockingham Finance's approval of the Plaintiff's loan was made in reckless disregard of the truth. RIOS 16. Defendant Wolf's statement was negligent misrepresentation of the actual facts involved in the loan approval process. .sprintgooss noqu sub WHEREFORE, the plaintiff requests judgment for damages against Defendants, individually and jointly and severally, as follows: gaionsnil nisido 1. General damages in the amount of league ydriguolliW oa insol 2. Special damages in the amount of_ 3. Punitive damages in an amount to be determined by the court; dquolliw 4. Plaintiff also requests costs of suit;cab sgirl off SneniA madgabbof 5. Such other and further relief as the court may deem just and proper; and 6. Plaintiff also requests a trial by jury on the issues raised in this Complaint. Respectfully submitted, this the day of 20 insmsorge eslee a finish findtive niel ise stab yousantinoo anbasalt sul Clarence D. Arrow niall beruses (Warfuse aselfagge silt , todotoo yhss el Attorney for the Plaintiff mad Filmtell noillion $2 tosal is 101 ad bluew batesuper Bre Nonom testnine 000.Osa qablair sew ed banislars socom Kev Terms Clear and convincing Material fact Ratification Review Questions 1 Are there any factual changes that you could make to our hypothetical shareholder's suit that would give Tom a stronger case against End-Run? 2 What is fraud, and how does it differ from negligent misrepresentation: W