"Liar, Liar, Pants On Fire" - The Practical Implications of Suing Someone for Fraud

Many people use the word "fraud" in daily language to mean many things. In daily use, it means dishonesty. But the more casual use of the word often misleads people to think that they have a legal case based on fraud merely because someone lied to them. That is not always the case. In the courts, the term "fraud" has a very specific and well-defined meaning.

In fact, in order to bring a lawsuit based on fraud, you must prove certain, very specific things:

1. Someone made a misrepresentation of fact to you;
2. They knew it was not true when they said it;
3. You did not know the truth and could not have known it had you undertaken a reasonable investigation into the facts;
4. You relied on the misrepresentation in some way that was reasonable; and
5. You were damaged due to your reliance on the misrepresentation.

This seems to be a very straightforward series of conditions. However, there is a lot of nuance that you might not recognize at first glance.

Misrepresentations of Fact
It is not enough that someone lied to you. That, alone, can make you quite angry, but it is not enough to allow you to prevail in a lawsuit. The misrepresentation must be a misrepresentation of fact. For example, "It looks like this product will make a million dollars" is really an opinion, and not a fact. You cannot sue someone for fraud because they expressed an opinion that something might be true. "I had an analysis done by X consultants, and they say that the product will make a million dollars over the next five years" is only fraud if X consultants did not actually analyze the product, or if they did not say it would make a million dollars. But, if they did, then there is no fraud. (You could have other rights against X consultants for negligence, for example, in some circumstances. But that still is not fraud.)

On the other hand, "I just invested a million dollars in this product, and if you do so, as well, it could double our money in five years" is fraud if there was no investment. In other words, if someone makes a misrepresentation about a fact, then you might have an action against them for fraud.

Knowledge of Falsity
If the person speaking knew that the statement was false when they said it, that is sufficient to support a claim if the other conditions are also met. If they did not know whether it was true or false, then that is not fraud. If they should have known it was false, then, even though it is not fraud, it might support a claim for "negligent misrepresentation." Practically, there is a big difference in the damages you can recover for fraud, as opposed to those you can recover for negligent misrepresentation. As a practical matter, judges and juries are more likely to award damages for a greater spectrum of injuries for fraud, because it is a more "immoral" act than negligent misrepresentation. In the case of fraud, you might also recover "punitive damages," which are damages intended to punish the wrongdoer and make sure that s/he does not try something like that again. In the case of negligent misrepresentation, there can be no punitive damages.

You Did Not Know The Falsity And Reasonably Relied On The Statement
These two conditions are related in most cases. If you could have undertaken a reasonable investigation and discovered the truth, then it would not be considered "reasonable" for you not to investigate. In such a case, your reliance on a misrepresentation would not be considered "reasonable." In another instance, you could not "reasonably" rely on a statement of someone where you know that they do not have the knowledge to make such a statement. For example, if your next door neighbor is a doctor who tells you, "I invested in this stock - it's worth millions!" you could not go out and sue him or her if you invest a million dollars in the stock and lose all of your money. If, on the other hand, your neighbor is the CEO of the company who tells you, "we were just awarded the contract to supply Coca Cola with all of its cans for the next 15 years, so you should invest" then you might have a right to sue if no such contract was awarded.

However, what is considered "reasonable" is often a subject on which reasonable minds can differ, so it is not always possible to predict consistently whether your reliance on a false statement will be found "reasonable" by a court or jury.

You Were Damaged By Your Reliance On The Statement
In deciding whether - and by how much - you were damaged, courts normally apply a practical test. This is referred to by the legal term, "proximate cause." If you give $100,000 to someone who promises to use it to start a company in which you will be a half partner, and s/he uses it for a vacation around the world instead, you have clearly been damaged by the $100,000 you invested. Courts also will normally award you interest on that money. If fraud is proven, most of the time you can get punitive damages, as well (normally up to $300,000). But if you say, "had I not given him/her the money, I would have invested it in X company and would have doubled my money by now," the law normally considers that kind of damage to be speculative, or too "remote." As a practical matter, the court then says that, as a matter of public policy, the failure to profit by an alternate investment was not "proximately" caused by the fraud because there is not a direct enough connection between the fraud and the loss.

That said, courts are normally willing to award a wider spectrum of damages for fraud than for a simple breach of contract. This is due primarily to the greater moral culpability in intentionally deceiving someone in order to gain a benefit from him or her. But we lawyers just state that there is a different, narrower "test" applied to determine contract damages as opposed to fraud damages.

Practical Implications Of Suing Someone For Fraud
If you decide that you want to sue someone for fraud, it is important to have a competent litigation attorney to handle your case. This is because there are a number of practical implications you must consider. For example, if someone has liability insurance, the insurance policy will not cover fraud claims. This is because fraud is an intentional act, which insurance policies do not cover. On the other hand, insurance will cover liability for negligent misrepresentation, because it is not intentional. When you file, it is good to consider whether having an insurance company on the other side of the case to pay any judgment, or the legal fees of your opponent, is in your best interest.

In addition, when you sue somebody for fraud, you have to list in great detail what the fraud is - for example, the exact statements made, who made them, the dates and manner in which they were made, and in some cases, the authority of the person to make the statements themselves. This is because fraud is considered a serious thing, and you can't just accuse someone of fraudulent conduct lightly. Often, people who try to do this without the necessary experience in litigation tactics and strategy do not do it correctly, resulting in the early loss of their fraud claims in the case.

Moreover, fraud cases will often be litigated more vigorously than contract cases. This is because of the stigma that attaches to the claim and the possibility of greater damages and liability of the person who is being sued. In other words, more is at stake, so more attention and time is spent on the case by both sides.

The bottom line is that you should never sue someone for fraud lightly. But, if you do, you should make sure that you have your ducks in a row first, and that you trust that your lawyer will do it correctly.

Website: http://www.hockani.com/

Steven I. Hochfelsen
Hochfelsen & Kani, LLP
Attorney
895 Dove Street, Suite 300
Newport Beach, California
U.S. 92660
Voice: (714) 907-0697
http://www.hockani.com/

Source:
"Liar, Liar, Pants On Fire" - The Practical Implications of Suing Someone for Fraud

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Men More Likely Than Women to Commit Scientific Fraud

January 22, 2013 (Bronx, NY) Male scientists are far more likely to commit fraud than females and the fraud occurs across the career spectrum, from trainees to senior faculty. The analysis of professional misconduct was co-led by a researcher at Albert Einstein College of Medicine of Yeshiva University and was published today in the online journal mBio.

The fact that misconduct occurs across all stages of career development suggests that attention to ethical aspects of scientific conduct should not be limited to those in training, as is the current practice, said senior author Arturo Casadevall, M.D., Ph.D., professor and chair of microbiology & immunology and professor of medicine at Einstein, as well as editor-in-chief of mBio.

He added, Our other finding that males are overrepresented among those committing misconduct implies a gender difference we need to better understand in any effort to promote the integrity of research.

In a previous study, Dr. Casadevall found that misconduct is responsible for two-thirds of all retractions of scientific papers. The finding was unexpected, since earlier research had suggested that errors account for the majority of retracted scientific papers.

Researchers embarked on the current study to better understand those who are guilty of scientific fraud. They reviewed 228 individual cases of misconduct reported by the United States Office of Research Integrity (ORI) from 1994 through 2012. ORI promotes the responsible conduct of research and investigates charges of misconduct involving research supported by the Department of Health and Human Services.

An analysis determined that fraud was involved in 215 (94 percent) of the 228 cases reported by the ORI. Of these, 40 percent involved trainees, 32 percent involved faculty members, and 28 percent involved other research personnel (research scientists, technicians, study coordinators, and interviewers).

Overall, 65 percent of the fraud cases were committed by males, but the percentage varied among the academic ranks: 88 percent of faculty members who committed misconduct were male, compared with 69 percent of postdoctoral fellows, 58 percent of students, and 43 percent of other research personnel. In each career category, the proportion of males committing misconduct was greater than would have been predicted from the gender distribution of scientists. The gender difference was surprisingly large among faculty, said Dr. Casadevall, who also holds the Leo and Julia Forchheimer Chair in/of Microbiology & Immunology. Of the 72 faculty who committed fraud, just 9 were female one-third of the expected 27 if females had committed fraud at the same rate as males.

The study did not examine why men are more likely to commit fraud. One possibility is that misconduct is biologically driven. As research has shown, males tend to be risk takers, more so than females, and to commit fraud entails taking a risk, said Dr. Casadevall. It may also be that males are more competitive, or that women are more sensitive to the threat of sanctions. I think the best answer is that we dont know. Now that we have documented the problem, we can begin a serious discussion about what is going on and what can be done about it.

The researchers had hypothesized that the majority of cases of misconduct would involve trainees, who face intense pressure to publish a critical step toward obtaining research funds. But they found that misconduct was spread rather evenly across the career spectrum. You might think that as scientists go up the career ladder, they would feel more secure. But the bigger the lab you run, the more grants you need, which increases the pressures to publish and the temptation to cheat, said Dr. Casadevall.

While calling for more research to understand the motives for scientific misconduct, Dr. Casadevall recommends periodic ethics training for scientists at all levels of academia. Right now we target trainees for ethics training, he added. We dont do anything after they are hired. It might help if universities required refresher courses in ethics, as they do with courses to prevent sexual harassment in the workplace. It wont stop all misconduct, but its one place to start.

The paper is titled "Males Are Overrepresented among Life Science Researchers Committing Scientific Misconduct. Additional authors are Ferric Fang, M.D., at the University of Washington School of Medicine, Seattle, Washington, and Joan W. Bennett at Rutgers University, New Brunswick, New Jersey.

The authors report no conflict of interest.

***

About Albert Einstein College of Medicine of Yeshiva University

Albert Einstein College of Medicine of Yeshiva University is one of the nations premier centers for research, medical education and clinical investigation. During the 2011-2012 academic year, Einstein is home to 724 M.D. students, 248 Ph.D. students, 117 students in the combined M.D./Ph.D. program, and 368 postdoctoral research fellows. The College of Medicine has 2,522 full time faculty members located on the main campus and at its clinical affiliates. In 2011, Einstein received nearly $170 million in awards from the NIH. This includes the funding of major research centers at Einstein in diabetes, cancer, liver disease, and AIDS. Other areas where the College of Medicine is concentrating its efforts include developmental brain research, neuroscience, cardiac disease, and initiatives to reduce and eliminate ethnic and racial health disparities. Its partnership with Montefiore Medical Center, the University Hospital and academic medical center for Einstein, advances clinical and translational research to accelerate the pace at which new discoveries become the treatments and therapies that benefit patients. Through its extensive affiliation network involving Montefiore, Jacobi Medical Center
Einsteins founding hospital, and five other hospital systems in the Bronx, Manhattan, Long Island and Brooklyn, Einstein runs one of the largest post-graduate medical training programs in the United States, offering approximately 155 residency programs to more than 2,200 physicians in training. For more information, please visit www.einstein.yu.edu and follow us on Twitter @EinsteinMed.

News source: NewsWise

Source:
Men More Likely Than Women to Commit Scientific Fraud

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