If the parties involved have a special legal relationship with each other, the law relaxes certain of the demanding requirements of alleging the fraud. For example, partners or co-owners of a business owe heightened, strict duties to each other -- what one famous judge has called "the punctilio of an honor" -- also known as "fiduciary" duties. There are many special legal relationships that serve to dispense with certain elements of the fraud-- officers of a company owe the shareholders special duties, agents owe special duties to the "principal" or person for whom they work and so on. When these special relationships exist, it is not necessary to allege or prove that the fraudulent party actually knew that the information was false -- this is called "constructive fraud." Also, in such circumstances, fraud can be established even if material information is simply concealed rather than affirmatively misrepresented.
In addition to the specificity required in the complaint alleging fraud, when it comes to actually proving the fraud with evidence, the law imposes a higher standard than in other civil cases. Ordinarily in civil cases, a party asserting a claim must convince a trier of fact -- whether judge or jury -- that it is more probable than not that its claim is valid. So a party can prevail if it proves the likelihood of its case by a margin of 51% to 49%. With fraud, however, the standard of proof is higher -- what the law calls "clear and convincing evidence." This is generally more than 51% but less than the standard in the criminal law -- "proof beyond a reasonable doubt."
So, the law provides a host of effective remedies for someone who has been defrauded, but claims of fraud are given greater scrutiny before they can prevail. As in many aspects of the law, the most powerful remedies are available to those who protect themselves and act wisely and prudently.
Kevin Schlosser is a Member and the Chair of the firm’s Litigation and Dispute Resolution Department. An experienced civil litigator, Mr. Schlosser has engineered the legal strategy for a broad range of cases and arbitrations, including complex commercial disputes, business torts, fraud, breach of fiduciary duty, breach of contract, professional liability and malpractice claims, construction law, real estate and commercial landlord-tenant disputes, corporate and partnership disputes, ERISA, health law and the prosecution and defense of other tort-related claims.