Fraud Allegations in Commercial Litigation Cases

Summary

These fraud allegation clauses can be used in a complaint when asserting a fraud claim in a commercial litigation case. This clause includes practical guidance, drafting notes, and an alternate clause. A claim for fraud generally arises out of a material misrepresentation or material omission of fact, typically used to induce a party to enter into, or avoid entering into, a particular transaction. To successfully prove a fraud claim, the plaintiff must show: (1) a material misrepresentation or material omission of a presently existing or past fact; (2) knowledge or belief by the defendant of the falsity of the material misrepresentation or omission (known as scienter); (3) an intention that the other party rely on the misrepresentation or omission; (4) actual and reasonable reliance on the misrepresentation or omission by the other party; and (5) resulting damages. See Banco Popular N. Am. v. Gandi, 876 A.2d 253, 260 (N.J. 2005); J&R Multifamily Group, Ltd. v. U.S. Bank Nat'l Ass'n, 2019 U.S. Dist. LEXIS 209758 (S.D.N.Y. 2019); Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc, 960 S.W.2d 41, 47 (Tex. 1998). A fraud claim must be generally pled with particularity. See Federal Rules of Civil Procedure (FRCP) 9(b) (a party must state with particularity the circumstances constituting fraud or mistake, while malice, intent, knowledge, and other conditions of a person's mind may be alleged generally). Most jurisdictions maintain similar requirements. For example, see New York's Civil Practice Laws and Rules 3016(b), Massachusetts' Rules of Civil Procedure 9(b), Florida's Rules of Civil Procedure 1.120(b), New Jersey's Rule 4:5-8(a), and Pennsylvania's Rules of Civil Procedure No. 1019(b). Note, however, that while the elements for a fraud claim in different states are usually very similar, the requirements may vary in different jurisdictions and you should therefore review the applicable state law relevant to your client's dispute to confirm the specific elements that are required for and must be plead to set forth a valid cause of action for fraud in that particular jurisdiction. For additional information, see Common Law Fraud in the Business Context, Asserting a Fraud Claim (Commercial Litigation), Defending a Fraud Claim (Commercial Litigation), and Commercial Litigation Causes of Action.