Elements of Fraud in DC
In the District of Columbia, “[f]raud requires (1) a false representation regarding a material fact; (2) known to be false when made or made with reckless indifference to the truth; (3) for the purpose of deceiving or defrauding the person claiming injury; (4) that action was taken in reliance upon the misrepresentation, and the person had a right to rely upon it; and (5) that actual damage was suffered resulting from the misrepresentation.” United States ex rel. Landis v. Tailwind Sports Corp., 234 F. Supp. 3d 180, 205 (D.D.C. 2017) (quotation marks and citation omitted); Va. Acad. of Clinical Psychologists v. Grp. Hospitalization & Med. Servs., 878 A.2d 1226, 1233 (D.C. 2005); Powell v. D.C. Hous. Auth., 818 A.2d 188, 197-98 (D.C. 2003).
A fraud claim must be proven by clear and convincing evidence. Landis, 234 F. Supp. 3d at 205. “Clear and convincing evidence” means “between preponderance of the evidence and proof beyond a reasonable doubt” – in other words, “highly probable.” Addington v. Texas, 441 U.S. 418, 425 (1979); Koszola v. FDIC, 364 393 F.3d 1294, 1300 (D.C. Cir. 2005).
In the District, a party alleging fraud “must state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); DC Super. Ct. R. 9(b). That is, a fraud plaintiff must provide" “the time, place, and contents of the false representations, the facts misrepresented, and what was obtained or given up as a consequence of the fraud." Phone Recovery Services, LLC v. Verizon Washington, DC, Inc., 191 A.3d 309, 322 (D.C. 2018)
If an agent commits fraud against his or her principal, the agent foregoes any right to compensation. As the District of Columbia Court of Appeals has held: “An agent is entitled to no compensation for a service which constitutes a violation of his [or her] duties of obedience. This is true . . . even though the agent believes that he [or she] is justified in so acting.” Lemp v. Keto, 678 A.2d 1010, 1022 (D.C. 1996), quoting Restatement (Second) of Agency § 469 cmt. a (1958); see also Keith v. Berry, 64 A.2d 300, 303 (D.C. 1949); Brown v. Coates, 253 F.2d 36, 41 (D.C. Cir. 1958) (if an agent is “faithless to the trust reposed in him as agent,” the principal may “disallow his commission entirely” and recover punitive damages); Evans v. United States Fidelity & Guaranty Co., 127 A.2d 842, 849 (D.C. 1956) (breach of duty of agent to account accurately to principals at termination of agency “disentitles [agent] to any compensation for [his] services”). The principal can defeat an agent’s claim for compensation by showing fraud “without further proof of injury” other than the fraud itself. Hendry v. Pelland, 73 F.3d 397, 402 (D.C. Cir. 1996). See generally Restat. 2d of Agency, § 469 (“An agent is entitled to no compensation for conduct which is disobedient or which is a breach of his duty of loyalty; if such conduct constitutes a wilful [sic] and deliberate breach of his contract of service, he is not entitled to compensation even for properly performed services for which no compensation is apportioned.”).
Sean Griffin litigates fraud and contract cases in Virginia, Maryland, and the District of Columbia. He may be reached by email at sgriffin@dykema.com or by phone at (202) 906-8703.