As we’ve previously discussed, fraud is one of the most contentious causes of action that arises in business litigation. What many aggrieved parties don’t understand when they first seek out an attorney is that it is so difficult to even plead a proper complaint for fraud that a good deal of cases never even make it off the ground and get past the initial pleadings stage.
As a matter of background, filing a complaint with a court doesn’t mean that the case will simply proceed smoothly — defendants often file “motions to dismiss” that claim that a complaint either fails to include all the necessary elements necessary to state a claim, or that the causes of action alleged are barred by an affirmative matter (such as failing to bring the cause of action within the time for doing so allotted by law, for instance).
In Illinois State Court, you are likely to see a lot more of these motions to dismiss, because Illinois is what is known as a “fact pleading jurisdiction” where a plaintiff has to put forth a good deal of background facts that bolster their potential claim, as opposed to federal courts (and other individual states) that have a lower hurdle to reach under what is known as a “notice pleading” standard where you can be a bit more conclusory.
The Illinois standard is hard enough to meet as it is, but fraud claims are very unique in that they have an even higher hurdle to meet on top of that — in the text of the complaint itself, before anyone has exchanged any discovery, taken any depositions, or the case has even taken shape, a plaintiff has to meet a “heightened pleading requirement” where the facts alleged specifically relating to an alleged fraud must be plead with sufficient specificity to appraise the defendant as to what he is called on to answer to. See Green v. Rogers, 234 Ill. 2d 478, 494 (2009).
Just as a “refresher,” the basic elements that a complaint must include in regards to a fraud claim requires:
(1) a false statement of material fact;
(2) the party making the statement knew or believed it to be untrue;
(3) the party to whom the statement was made had a right to rely on the statement;
(4) the party to whom the statement was made did rely on the statement;
(5) the statement was made for the purpose of inducing the other party to act; and
(6) the reliance by the person to whom the statement was made led to that person’s injury.
See Cramer v. Insurance Exch. Agency, 154 Ill.2d 513, 529 (1996).
So how this works in practice is that it isn’t enough to plead that “john doe” made a statement on a certain date, and it’s not even enough to even really paraphrase, or plead what it was that “john doe” told you to do. In almost all circumstances, for a fraud claim to meet the heightened pleading requirement, you have to practically quote the allegedly fraudulent statement in a complaint, or at least put out enough specific details that paint a very detailed picture.
This is no accident that the requirement is this high — the heightened pleading requirement is there to ensure that the courthouse isn’t flooded with everyone who feels “short changed” when a business deal or advice goes bad. This isn’t a typical situation where you can plead things that you “think” happened and let the case take shape as it goes along.
Fraud is a very serious allegation with very serious penalties, and if you are going to take the very serious step of filing suit against someone for this offense, then you need to have a good deal of ammunition and you need to be prepared to use it right from the outset.
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