Fraud Claims in Business Litigation

Business disputes come in many shapes and sizes. When filing a lawsuit, of course, attorneys will attempt to cast the facts in the light most favorable to their clients. Likewise, they will select the legal theories that best correspond to the underlying factual scenarios and which provide the best remedies. Many, if not most, business disputes have their basis in a contract. Accordingly, those disputes will tend to focus on breach of contract causes of action and theories of recovery. But there are also a host of tort theories of recovery, some of which provide remedies that are preferable to those available in a simple breach of contract dispute. One such cause of action, that for fraud or deceit, is routinely asserted in business litigation matters. In fraud cases, punitive damages are available for outrageous conduct, while punitive damages are not a remedy in breach of contract cases. So why don’t all business litigation claims asserted as fraud claims? The answer is simple. They are hard to win; and losers don’t get punitive damages. The standard of proof is heightened in fraud cases. Instead of requiring proof by a preponderance of the evidence, the case has to be proven by clear and convincing evidence. Additionally, while breach of contract cases require no showing of ill intent by the breaching party, fraud requires proof of a very specific intent to deceive. Additionally, there are several legal defenses that prevent a simple breach of contract dispute from being re-cast as a fraud claim. A business litigation plaintiff who brings a fraud claim can count on facing legal challenges to the fraud theory as the case progresses toward trial. For this reason, depending upon the facts and circumstances of the particular case, the better approach may be to avoid the urge to file a fraud claim if the facts make that approach a dubious one.