Fraud is considered both a crime and an intentional tort. In civil courts, fraud is often alleged as “intentional misrepresentation.” To prevail on a claim for intentional misrepresentation in Nevada, the plaintiff must prove each of the following elements:
1. the defendant made a false representation,
2. with knowledge or belief that the representation is false or
without sufficient basis for making the representation,
3. with the intent to induce the plaintiff to act or refrain from
acting on the representation,
4. which representation the plaintiff justifiably relies upon, and
5. which reliance damages the plaintiff.
Because fraud is intentional, and its effects are often devastating, Nevada has strong policies against fraud. Nevada’s laws are intended to punish those who commit fraud as well as deter others from engaging in fraud.
Perhaps the biggest benefit to a prevailing plaintiff in a fraud case is that a judgment for fraud is not dischargeable in bankruptcy.
Judgments in Nevada last for six years, but can be indefinitely renewed, so a defendant found to have committed fraud cannot escape the judgment through bankruptcy, and as long as the judgment remains unsatisfied, interest accrues.
Moreover, where fraud is proven, in addition to damages equaling the financial loss, a plaintiff can recover up to three times the amount of actual loss in punitive damages. In many cases, attorney’s fees are also available.
Once there has been a judicial finding of fraud, particularly if there is a criminal fraud conviction, that evidence can be used in future proceedings to discredit fraud defendants, regardless of whether in future cases they are plaintiffs, defendants, or mere witnesses.
The consequences of fraud are severe and long lasting. Thus, it is not uncommon for attorneys representing plaintiffs to try to find ways to include allegations of fraud in their complaint. However, due to the serious nature of the consequences, fraud comes with higher burdens and additional hurdles.
These heightened standards play a role even at the earliest stages of a fraud case. For most other claims, a complaint need only allege enough to put the defendant on notice of the claims being brought—very few facts actually have to be included in the complaint.
Once the plaintiff overcomes this initial hurdle, it must also meet a higher evidentiary standard. Whereas most civil cases require a “preponderance of the evidence” standard of proof, meaning the evidence makes the allegations more probably true than not; in fraud cases, the plaintiff must present proof by “clear and convincing evidence,” meaning that the jury can only find for the plaintiff if the evidence makes it highly and substantially more true than not that the fraud has occurred. “Clear and convincing evidence” is the highest burden of proof in civil cases.
Meeting this burden can be particularly difficult because one of the elements of fraud is intent, which requires proof of the defendant’s state of mind—something not easily proven. To prove intent, the plaintiff must often rely on external manifestations of the defendant’s mental processes, which is usually circumstantial.
One Supreme Court Justice explained this burden by writing, “[i]t is seldom that a fraud or conspiracy to cheat can be proved in any other way than by circumstantial evidence, as knaves have usually sufficient cunning to have no witnesses present who can testify directly to their fraudulent contrivances.”
Pursuing a fraud claim is often further complicated — and therefore harder to win — by virtue of the fact that many fraud schemes are extraordinarily complicated. Sometimes a seemingly innocent transaction is revealed to be fraudulent once layers consisting of thousands of documents are peeled back. Alternatively, documents may also disprove liability for what may initially appear to be fraud.
Fraud is a well-recognized cause of action that is easy to allege but difficult to prove. Every fraud case is different. The difference between a win and a loss in a fraud case may depend on how well the attorney understands how to litigate a fraud case and how to simplify complicated subjects for the jury. Victims of fraud and those wrongly accused of fraud would do well to understand the elevated stakes in a fraud case and consult with an attorney who understands how to litigate fraud cases.
Zachariah B. Parry is a civil litigation attorney and partner at his firm, Pickard Parry. He can be reached at 702-910-4300, or through his firm’s website at www. pickardparry.com or his direct email address at email@example.com.