After a 9 day trial the Costa Mesa Conference and Visitors Bureau (Bureau) failed to convince a jury that a local marking firm had defrauded it. In July of 2012 the Bureau filed a lawsuit against HyperDisk Marketing Inc. for breach of contract, unjust enrichment, and fraud. The Bureau claims that HyperDisk was hired to perform consulting, web design, and marketing services. However, when asked to provide an accounting of where the money went, the Bureau claimed that HyperDisk was unable to account for $600,000 of the Bureau’s fees. The jury found in favor of HyperDisk on October 3, 2013.
HyperDisk’s defended itself on the basis that Bureau paid HyperDisk a flat monthly fee of $14,800; because this was a flat rate HyperDisk contended that there was no way to account for every dollar HyperDisk spent. They also claimed that the Bureau management had been happy with HyperDisk’s services and never required a written contract for services. However, when new management came on board HyperDisk claimed that the Bureau became leery of the unwritten nature of the agreement and so terminated the contract in 2011.
HyperDisk claimed in court filings that the lawsuit had no merit, and that the Bureau resorted to shakedown tactics, which included publicizing the lawsuit and specifically requesting $5 million in punitive damages. California law forbids making specific requests for punitive damages. HyperDisk claimed that this was a strategic move by the Bureau to pressure it into settling. In response the Bureau amended their complaint to remove the specific request for punitive damages, however this was after the press had gotten wind of the story.
In a press-release the President of HyperDisk Marketing stated that the quality of services provided to the Bureau had been “award-winning”. HyperDisk’s president also lamented that tax money had been squandered in taking this case to trial. Although the Bureau does not directly receive funding from the City of Costa Mesa, it is funded by local tax revenue on hotel stays.
Elements of California Civil Fraud Law
Two of the most common types of fraud in businesses dealings like the above mentioned include intentional misrepresentation and negligent misrepresentation, the elements of intentional misrepresentation are:
1) A misrepresentation was made because the accused made a representation was: false, a concealment of truth, or nondisclosure of a material fact;
2) The accused knew that the misrepresentation was false or was reckless in their disregard that the representation might be false;
3) The accused intended to induce the alleged victim to rely on the misrepresentation;
4) The alleged victim justifiably relied on the misrepresentation;
5) Damages from the reliance.
If the alleged victim of fraud cannot show that the accused had knowledge that that the misrepresentation was false, the accused may still be liable for negligent misrepresentation if they had no reasonable grounds for believing that the representation made was true.
Fraud requires much more evidence than breach of contract. By contrast, to obtain damages for a breach of contract a party need only show that:
1) A valid contract existed between the two parties;
2) The other party did not perform, and was not excused;
3) The party lost money or was harmed as a result of the other party not performing.
The damages for fraud are generally much higher than those for breach of contract.
Orange County Fraud Defense
If you are facing allegations of fraud contact the Law Offices of Tony T. Liu. We offer experienced business fraud litigation services and can determine what your best legal options are in defending against business fraud lawsuits.