Trial: Fraud and The Directed Verdict

Today I finished the second day of trial in a fraud case. I represented the three defendants accused by the plainitffs of defruading them out of money in a real esate deal. For two days the plaintiffs presented witnesses and entered dozens of documents into evidence. Then the Plaintiffs rested their case. They were done presenting their case for fraud against my clients.

Unlike other types of causes of action, a fraud claim requires you to convince the court of the defendants' bad intent. When you sue for breach of contract, for example, all you have to prove is someone had a contractual obligation they breached and that you were damaged because of that breach. To win your case as a plaintiff where intent is not in play, you have to prove your case by a preponderance of the evidence. That in effect means 50.1% of the evidence versus 49.1% of the evidence.

By contracst, in a fraud case you do have to prove intent. In other words, unlike the breach of contract example, not only do you have to prove the money was owed, but you also have to prove the defendants intended to steal money they were not entitled to have.

And the standard of proof is much higher in a fraud case. Not only do you have to prove what was inside the heads of the defendants (i.e. their intent), you have to do it by "clear and convincing evidence". Generally this means the evidence must show a "high probability of truth of the fact for which it is offered as proof." (In re Angelia P. (1981) 28 Cal.3d 908, 919 [171 Cal.Rptr. 637, 623 P.2d 198) 50.1% is not very "high probability".

California law defines fraud as an "intentional misrepresentation, deciet, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury." (Civil Code Sect. 3294) This is what you have to prove by clear and convincing evidence. Not an easy task.

After the plaintiffs' case was done today I rose to my feet and made a motion for a directed verdict in favor of two of my three clients accused of fraud. A directed verdict is a motion to have the court dismiss the case at the end of the plaintiffs' case because they have not presented enough evidence to even require a defense.

"What evidence is there, counsel, that these two defendants intended to defraud your clients?" , the judge asked the Plaintiffs' attorney after I made my oral motion for a directed verdict to dismiss the case.

"Your honor, you heard the testimony from all the plaintiffs that all three defendants told them they were having their names removed from the title for the sole purpose of refinancing the property" the plaintiffs' attorney argued. "They all also testified all three defendants told them they would be put back on title and would then be paid the proceeds of the sale of that property."

It was a classic "we said / they said" situation. There was no documentary proof of the fraud or my clients' intent. It was only the plaintiffs' word versus the defendants' word. But the plaintiffs have the burden to prove intent by a high probability. They simply had not done it and the judge granted the motion. Those two defendants won their case today without having to even present their defense.

All of this goes to show just how tough it is to win a fraud case. And you better be careful because if you make fraud claims and lose, especially by a directed verdict, you may expose yourself to being sued by the prevailing defendant for malicious prosecution. That issue will have to wait for another day and another post. Have to prep for tomorrow's next day of trial.

-Nick Tepper

Categories: Trial, Civil Law
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