Monday, November 25, 2013

Fool Me Once...

Shame on you. Fool me twice, shame on me.

This bit of conventional wisdom is particularly applicable in the law. If you need to sue someone for fraud you have to prove - in lawyer speak (and real person speak) - that the person made a misrepresentation of a material fact (he lied to you), when he made the misrepresentation he intended for you to rely on it (he wanted you to believe the lie and do something), you reasonably relied on the misrepresentation (a reasonable person would have believed him, and he tricked you), and you were damaged (you did what he wanted and, usually, lost money).

I've litigated and settled several fraud claims over the course of my career and I'm likely to deal with many more before I retire in the distant future. Resolving fraud claims poses a special problem. If you sue someone for fraud once, you are unlikely to "reasonably rely" on any lie in the future. It's that whole "fool me twice" issue.

In one settlement, the defendant (read as "the alleged bad guy") wanted my client to give up its claims against him before she paid the settlement amount in full. When I wouldn't concede the point with my opposing counsel, the defendant (you know how to read this now) called my client to plead her case. Among other things, she said that if my client released the fraud claim my client could trust the defendant to pay everything she owed.  Fortunately, my client is a big believer in "fool me twice." My client's response was that it was my client's word to release the claim after being paid that they would be trusting.

It's unlikely that a court will help the second time someone defrauds. Why? Because we sued the defendant for fraud. If the person had fooled me once, I should not trust that person anymore. My reliance on his word is no longer "reasonable." While there are some limited exceptions to this they are usually limited to cases where there is a physical or mental disability or where the relationship between the people are so close the continued reliance is acceptable. Fooled me twice is my fault.

Yet, human nature is such that most of us want to trust. Most of us want to believe that the first time was just a horrible misunderstanding. We give scammers our money. Sometimes we let them "sell" us the same bill of goods more than once - i.e. now that you bought our critique of your novel, we think you need some editing services, let us recommend. . . (another one of their fraudulent companies). There's so much noise out there it's hard to tell the truth from a flim flam.

Most of the time we get fooled twice. If we didn't the cliché wouldn't exist. Maybe the best we can do is be a bit more like Malcolm Reynolds (care of Firefly and Serenity). When Mal has to work with someone who's double crossed him before he goes into the deal knowing that he's likely to be bit again. 
Still, fooled me twice isn't a fun place to be. My client had the right of it in the one settlement negotiation. If someone's fooled you once, don't trust them again because . . .well, you know.

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