The word “fraud” is one of the most used legal terms in every-day language, and, as a result, one of the most misused too. It takes a lot more than telling a lie to make a fraud. Depending on how thinly one slices the onion, there may be as many as 11 elements to prove before fraud can be shown.
It will be no surprise then that fraud is not only a heavily litigated topic, it is also the object of frequent appeals. Without going too far into minutia, we can review what makes up fraud.
First, the plaintiff will have to prove three things the defendant did:
– The defendant made a false statement (i.e. lied)
– About a fact
– For the purpose of getting the plaintiff to do something.
So if John tells Jane that he drives a new car even though he does not, it’s a lie, and it’s a lie about a fact (the newness of his car), but since he’s not doing that to get Jane to act a certain way, the claim for fraud dies an early death.
On the other hand, if John tells Jane his car is 2 years old when it is really 5 years old, and he knows Jane is looking to buy a used car less than 3 years old, his lie is meant to get her to buy the car, and there may be a foundation for fraud. But we are not there yet. In the next step, the Plaintiff (our hypothetical Jane) will have to prove 3 more things:
– She did act in the way John wanted
– It was reasonable for her to do so
– She was harmed as a result.
So the case for fraud will require that Jane actually buys the car, and that it was reasonable for her to believe John when he said it was only 2 years old. If it was a clunker held together by duct tape, her claim will fail. And finally, there must be a financial injury, such as paying more than the car was worth, or possibly being forced into all kinds of repairs because the car was so old.
Each of these elements are argued and counter-argued in fraud cases. Here is a real world example that hinged on what should perhaps be the most straightforward element: what is a fact (by opposition to an opinion). A private law school in New England told prospective students they did not need to worry about accreditation from the ABA, even though it knew there were issues to be fixed before it could hope to receive it. When the school failed to get accredited and students sued for fraud, it asserted that “not needing to worry” was just its opinion. The court found it was a fact. Whether it was reasonable for students to take the school at its word without checking further would be a story for another day.
This is where careful attorneys and skilled appellate counsel come in, to advise their clients honestly and help them identify what is actionable, and what is a lesson learned at the School of Hard Knocks.