Fraud

Proving Fraud

Though easy to allege, proving fraud is challenging, as it requires proving underlying elements that support a claim for fraud. First, a party alleging fraud must prove the representation amounted to a misrepresentation of material fact. A representation is a misrepresentation when it asserts that something is a particular way when the defendant knows it is not. This can be evidenced by specific actions to mislead, to cover up the truth, or to impede the ability to discover the truth; through a failure to disclose where the law recognizes a duty to disclose; or through a partial disclosure that is misleading. A misrepresentation is material when a reasonably prudent person would consider it important when making a decision or where the defendant has reason to know that this particular plaintiff would consider it important when making a decision. A material misrepresentation concerns a matter of fact when it is not opinion and it can be proven as true or false through use of objective facts.

Second, a party alleging fraud must prove the misrepresentation was intentionally or recklessly made. A misrepresentation is intentionally made when it is communicated for the purpose of deceiving, and is recklessly made when it is communicated with reckless disregard for its truth or falsity.

Third, a party alleging fraud must prove the misrepresentation was committed with intent to induce the plaintiff's reliance. Intent to induce reliance is shown through direct misrepresentation of facts that support an inference of intent to defraud or through indirect evidence of intent to defraud, where the plaintiff is within the expected affected class of persons expected to rely on the misrepresentation at the time it was made.

Fourth, a party alleging fraud must prove they relied on the misrepresentation, and that reliance was justifiable under the circumstances. Where facts would put reasonably prudent persons on notice that they are being deceived, the law imposes a duty to investigate before relying. Where facts do not exist, the plaintiff may rely on an apparently reliable statement without incurring a duty to investigate. In proving that reliance on the misrepresentation was justified, the plaintiff must show that a reasonably prudent person in the same or similar situation would have relied. Where the defendant preys on known vulnerabilities, the requirement may not apply. Where the plaintiff is a professional or possesses special knowledge or experience applicable to the subject matter being misrepresented, justifiable reliance will be judged from the perspective of a reasonably prudent professional with the same or similar qualifications. Additionally, where the defendant possesses knowledge unavailable to the plaintiff, where certain relationships of trust apply; where the defendant has special expertise, or where the defendant has an interest in the transaction under claim of independent authority, the law provides certain presumptions to aid in proving justifiable reliance.

...