Commercial Litigation and Arbitration

No Fraud If Recipient of Falsehoods Was Not Deceived — Fraud Action May Not Be Based on Misrepresentations of Law

Calif. Pharm. Mgmt., LLC v. Redwood & Cas. Ins. Co., 2009 U.S. Dist. LEXIS 105770 (C.D. Cal. Oct. 26, 2009) (mail fraud-based RICO action; also upholding assignee’s standing to assert RICO claims without discussion):

In dismissing the SAC, this Court identified two deficiencies with Plaintiff's RICO claim. First, the SAC's allegations could not support an intent to deceive. The SAC (like the TAC) alleged that Defendants submitted baseless objection letters to CPM in response to its claims for payment. However, as this Court recognized, an action for fraud cannot lie "where the sender knows the recipient will not be deceived by the falsehoods." Sosa [v. DIRECTV, 437 F.3d 923, 941 (9th Cir. 2006)] (citing United States v. Pendergraft, 297 F.3d 1198, 1209 (11th Cir. 2002)). Second, the SAC alleged that Defendants' allegedly baseless objection letters collectively advanced an incorrect interpretation of California law with respect to CPM's conduct and, in so doing, defrauded CPM. However, "misrepresentations of the law are not actionable as fraud, including under the mail and wire fraud statutes, because statements of the law are considered merely opinions." Id. at 940.

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