Business Litigation Significant Alabama State Supreme Court Decision

At Clute & Clute P.C we have over thirty years combined experience being advocates for our clients involved in business litigation in Mobile, Alabama. Whenever the courts issue a significant decision involving business litigation we take an interest. The Alabama State Supreme Court recently issued such a decision that involved a fraud claim. In Target Media Partners Operating Co, LLC v. Specialty Marketing Corp., No. 1091758 (Ala. Dec. 21 2012), Specialty Marketing contracted with Target Media Partners to issue a trucking publication to be placed in truck stops. The contract in question arranged for specific distributions in specific locations. Target agreed to provide the distribution and Specialty agreed to pay Target in exchange for the distribution. During the trial evidence was submitted that indicated Target did not make all the distributions that were required of them under the contract. The evidence offered during trial also revealed that Target sent distribution reports to Specialty that misstated the distributions that were occurring. Specialty sued under both fraud and contract claims. The jury returned a verdict on both claims in favor of Specialty and Target appealed. The Alabama Supreme court reversed the trial court’s decision. Justice Main authored the majority opinion which denied, on two separate grounds, Specialty’s fraud claim. The majority stated their reasoning for rejecting the fraud claim was because Specialty could not have reasonably relied on distribution data which was provided by Target related to its contractual performance. The Supreme Court offered two reasons for this, the first being that despite the fact that Target provided to Specialty distribution spreadsheets containing inaccurate or even fabricated data, for a period of two years after receiving the last such spreadsheet Specialty continued to work with Target under the contract which should have put Specialty on inquiry notice. The second reason offered was a statement of former Justice Houston from the case Deupree v. Butner, 522 So.2d 242, 245 (Ala. 1988) that read “to assert a fraud claim that stems from the same general facts as one’s breach-of-contract claim, the fraud claim must be based on representations independent from the promises in the contract and must independently satisfy the elements on fraud”. The majority concluded that a fraud claim does not lie for misrepresentations of a party regarding the performance of the parties contract obligations. The dissent opinion, which was written by Justice Shaw, argued the evidence of fraud was strong enough for the fraud claim to go before the jury.

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