California First-Year Law Students' Exam (Baby Bar) — MCTortsMedium
A disgruntled former employee, seeking revenge against their previous employer, intentionally spread false rumors to several key clients, stating that the employer was on the verge of bankruptcy. This caused three major clients to terminate their contracts and take their business elsewhere, resulting in significant financial losses for the employer. Which tort has most likely been committed?
- AIntentional Infliction of Emotional Distress
- BMisrepresentation
- CDefamation
- DInterference with Prospective Economic Advantage
Show answer & explanationAnswer & explanation
Correct answer: B. Misrepresentation
The former employee intentionally made false statements of fact (the employer was on the verge of bankruptcy) to third parties (clients) with the intent to induce reliance and cause economic harm, and the clients did rely, causing damage. This fits the elements of misrepresentation.
Why the other options are wrong
- A. Intentional Infliction of Emotional Distress requires extreme and outrageous conduct causing severe emotional distress, which is not the primary harm described here.
- C. While elements of defamation may be present, the core harm here is economic loss due to client contract termination based on false statements, making misrepresentation a more direct fit.
- D. Interference with prospective economic advantage typically involves interfering with a business expectancy, whereas here, existing contracts were terminated due to false statements.
Misrepresentation (Fraudulent)
A false statement of material fact, made with knowledge of its falsity and intent to induce reliance, on which the plaintiff justifiably relies to their detriment.
- False statement of material fact.
- Scienter (knowledge of falsity or reckless disregard).
- Intent to induce reliance.
- Justifiable reliance by plaintiff.
- Damages.
Memory trick: False words, lost deals, ruined wealth.