Allegations of business fraud can be financially damaging and emotionally draining. Defending against them is time consuming and stressful, not to mention the damage to a company’s reputation and relationships with partners, investors, and customers.
An experienced business litigation attorney is critical to mounting a vigorous, comprehensive defense. When your livelihood and all you’ve worked for is on the line, your partner in the courtroom is an investment in your future.
Standards of Proof in Business Fraud Law
Attorneys know the courts in their jurisdictions. They study past cases to tailor their strategies to Wisconsin law and judicial expectations. The right counsel will know how to apply state laws, precedent, and to use appropriate legal concepts.
A key element of business fraud, a civil infraction, is intent, the deliberate act of deceiving another for financial gain. The plaintiff must prove, to the court’s satisfaction, that the business knowingly and intentionally misrepresented key terms that another business relied upon and suffered damages as a result. These key facts can include:
- Sales figures
- Product performance
- Financial statements
Wisconsin’s Deceptive Trade Practices law forbids false or misleading statements in the sale of goods or services. But the standard is high for proving that a business intentionally rather than mistakenly misled another business regarding the goods or services promised. Claims of fraud typically arise during business sales, contract negotiations, or in supplier relationships.
To achieve this standard before the court, the plaintiff must show:
- A false statement of fact
- Knowledge that the statement was false (or disregard for the truth)
- Proof of intent to induce reliance—to get another company or person to act on the false statement, to rely on it
- Actual reliance
- Damages resulting from the business’s actions or statements
Wisconsin’s economic loss doctrine limits when a party can sue for fraud in a contract dispute. If the harm is purely financial and arises from the contract itself, courts usually treat it as a contract issue, not a tort. Fraud claims can usually only move forward if the misrepresentation was separate from the contract or caused other property or personal damage.
Without intention and resulting damages, the claim is a contract dispute rather than a fraudulent business act. Fraud-like statements or claims, in the context of a business transaction, can rise to the status of a tort, a civil wrongdoing, if all of the elements are present.
Under the state’s Deceptive Trade Practices Act, businesses or individuals can sue for false or deceptive practices in an advertisement or during a sale. Plaintiffs must show they relied on this false statement and suffered a monetary loss. Making a claim under this law does not require proof of intent.
The threshold for the court to find fraud is high. There must be tangible harm such as lost profits or extra costs. Disappointment is not enough.
Things for a company on the defensive to consider:
- Understanding the timelines required by the court for responding to a fraud claim and producing documentation promptly is key.
- Document each step in product development and capture how claims about products were developed.
- Clear contracts should thwart fraud claims: make sure product information is clear and avoid the use of “may” to reduce assumptions. Regular audits of contracts and marketing claims can catch potential issues before they lead to disputes.
- Consulting early with a defense attorney provides time to fully develop a strategy including potential out of court settlement to save the cost of a trial.
Change the Outcome of Your Business Contracts
Contracts can complicate your business relationships. Unclear language, too much boilerplate text, and no penalties for partners who disregard deadlines are all issues that can be fixed by a qualified business attorney from Kerkman and Dunn. Preventative advice from experienced counsel can prevent expensive litigation.
