chevron-down Created with Sketch Beta.

ARTICLE

Quick Tips for Pleading “Fraud” with Particularity

Brian Esler

Summary

  • It has often been said that fraud is easy to allege but hard to prove.
  • Pleading a plausible claim for fraud requires attention to the details, and failure to provide those details in the complaint will be fatal to those claims.
Quick Tips for Pleading “Fraud” with Particularity
Image Source via Getty Images

 

“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. Rule 9(b). Beyond just claims denominated as “fraud,” numerous courts have applied Rule 9(b)’s requirements to other types of claims involving allegations of false or misleading conduct. See, e.g., Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106-1108 (9th Cir. 2003) (applying Rule 9(b) to claims under California’s Consumer Legal Remedies Act); Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001) (Rule 9(b) applies to claims under the False Claims Act); A.H. Lundberg Assoc., Inc. v. TSI, Inc., No. C14-1160, 2014 5365514, at *7 (W.D. Wash. Oct. 21, 2014) (surveying cases to conclude Rule 9(b) applies to false advertising claims under the Lanham Act).

With respect to claims to which Rule 9(b) may apply, it has long been the case that generalized and conclusory allegations will not suffice. Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001). Since the Supreme Court adopted the “plausibility” standard for pleadings in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), plaintiffs have generally had to plead specific facts to show that it is plausible that the plaintiffs could prevail for even non-fraud claims. When Rule 9(b)’s “particularity” requirement also applies, courts are now even more inclined to dismiss poorly pleaded fraud claims before discovery occurs. US ex rel. Grubbs v. Kanneganti, 565 F. 3d 180, 185–186 (5th Cir. 2009).

To satisfy Rule 9(b), a party’s pleading must identify "the who, what, when, where, and how of the misconduct charged," as well as "what is false or misleading about [the purportedly fraudulent] statement, and why it is false." Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (cleaned up). For plaintiffs whose claims may rely on any allegations of false or misleading conduct, it is important to be precise in identifying specifically who made a false statement, why that statement was important, how the defendant owed the plaintiff a duty to act otherwise, when the defendant made the false statement and to whom, and what was false or misleading about the statement.

When a plaintiff is trying to plead fraud by omission, it is especially important that the plaintiff establish clearly and plausibly that the plaintiff’s relationship to the defendant was one that gave rise to a duty to speak, what information was withheld and how the plaintiff knows that, why the plaintiff was entitled to rely on defendant to disclose that information, and what the defendant gained by its silence. Only certain special relationships—such as when the defendant owes the plaintiff a fiduciary duty—will normally give rise to a positive duty to disclose information, which means a plaintiff alleging fraud by omission must plead specific facts that make it plausible that such a special relationship existed such that the defendant was under a legal duty to disclose.

It has often been said that fraud is easy to allege but hard to prove. Pleading a plausible claim for fraud requires attention to the details, and failure to provide those details in the complaint will be fatal to those claims.

    Author