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Fraud as a Tort

Fraud is a tort in New York. The tort of fraud occurs when one person takes advantage of a second person through trickery or other dishonest schemes. These dishonest schemes may vary in their type and content, but, they generally have to do with lies that induce the plaintiff to act to their own detriment and benefit the defendant. The tort of fraud is one of the only torts that must be plead specifically.

If you believe you have a fraud claim or you have been sued for or accused of fraud, call our aggressive and thorough New York tort litigation lawyers for a free consultation.

The tort of fraud’s intent element, scienter, is also unique. Damages recoverable in fraud are restorative in nature and place the plaintiff back in the position they were in before the fraud, unless the fraud is aimed at the general public, involves a breach of fiduciary duty, or a vulnerable category of people. If the fraud targets the public, vulnerable people, or involves a breach of fiduciary duty punitive damages may be possible.  

If you believe you have a fraud claim or you have been sued for fraud, call our aggressive and thorough New York tort litigation lawyers for a free consultation.

The elements of fraud are as follows:

  • A lie or falsehood is made.
  • By the defendant with scienter, and the statement is false, or that there is no basis for believing that the information is factual.
  • The defendant intends to cause the plaintiff to do or not do some particular act based upon their falsehood or lie.
  • The plaintiff is justified in relying on the falsehoods or lies told by the defendant.
  • Harm results from the plaintiff’s reliance on the defendant’s statements.

Fraud requires the proof of scienter. What is scienter? Scienter is a technical legal term that describes a guilty state of mind. In the context of the tort of fraud, scienter has a refined meaning. For fraud, scienter means the intent to cheat or defraud by making statements that the defendant either knows are not true or has reckless indifference to whether the statements are true. Additionally, to establish the element of scienter, the defendant must intend for the plaintiff to act or not act based upon the statement.

Scienter may be found in situations where the defendant makes statements without any reference to readily available data and ignores the data’s impact on the truth of their statement. On the other hand, assurances, attitudes, and opinions may not establish scienter. Valuations also cannot be used to form the basis for determining scienter, since valuations are generally matters of opinion rather than facts. Direct evidence usually cannot be mustered to prove fraud and it is not required to prove scienter. Scienter can be established by circumstantial evidence alone.

Fraud is one of the only torts that must be plead with particularity. New York’s law of civil procedure has very low standards for what must be included in complaints. Generally, the complaint only must put the defendant on notice of what the charges are and the basic facts alleged that could prove the elements. This is not the case with fraud. The complaint must allege in particular detail, of each of the incidents of fraud. Each of the elements of fraud must be alleged, and facts must be set out so that a reasonable person could infer what conduct occurred. If the complaint is insufficiently particular, it will be dismissed.

A fraud complaint was dismissed where a Saudi real estate developer sued a finance company for fraud involving a breach of fiduciary duty and failed to allege that they had a fiduciary relationship. Another fraud complaint that failed to plead with sufficient particularity was made against an Israeli heating and cooling company when a sophisticated investor purchased a majority share in the company but did not specifically allege fraud against each shareholder that sold him stock. The court dismissed his complaint after considering the investor’s degree of sophistication. Therefore, if you believe you have a cause of action for fraud, it is imperative that you have one of the experienced and careful attorneys at Tilem & Associates draft your fraud complaint. On the other hand, if you have been sued for fraud, our aggressive tort litigation lawyers may be able to find deficiencies in the fraud complaint and get it dismissed.

If you would like to bring a claim for fraud or you have been sued for fraud, call our aggressive and experienced New York tort litigation attorneys for a free consultation.

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