Business Torts & Fraud

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Commercial litigation cases primarily fall into one of two categories: 1) contract claims and 2) tort claims. A “tort” is a wrongful act, or an infringement of a legal right of another, that causes injury. A tort can be intentional, accidental or in between, and can arise from decisions or definitions by courts or by statute. Common business torts include breach of fiduciary duty, fraud and misrepresentation, tortious interference, and conversion. In each, some basic business principle, such as truthfulness, has been violated. When this ripens into an open dispute, with damages at stake, a lawsuit can arise and the courts become involved.

The trial attorneys at Ogborn Mihm LLP have decades of experience representing clients in business tort litigation. Unlike many business litigation firms, who usually litigate on paper and settle, we have substantial experience trying such cases to juries and judges. We are true trial lawyers. Settlement negotiations are much more productive when opposing counsel knows we can, and will, try the case if necessary. We have successfully represented clients in hundreds of jury trials, bench trials, and arbitrations involving a wide variety of business disputes, including the following:

Breach of Fiduciary Duty

A fiduciary is a person (or company) with a legal obligation to act in the best interests of another, even if it results in a disadvantage to the fiduciary. Businesspeople, for example, can have fiduciary duties to shareholders, investors, partners, or others. They are responsible for doing what’s best for someone else, not themselves. Fiduciary duties can arise in a wide range of business circumstances:

An officer or director of a corporation have fiduciary duties to the company’s shareholders;
A majority owner of a company can have fiduciary duties to the minority owners;
Business partners have fiduciary duties to each other;
A manager of a limited liability company can have fiduciary duties to the LLC’s members;
An agent can have a fiduciary duty to the principal;
A stockbroker or investment adviser can have a fiduciary duty to a client-investor;
An executor or personal representative of an estate has fiduciary duties to the decedent’s heirs;

Fraud and Misrepresentation

Fraud is a multipart tort. To prove fraud, the plaintiff must show that: 1) the defendant made a false representation of a material fact while knowing that representation to be false; 2) the person to whom the defendant made representation was made did not know that the representation was false; 3) the defendant made the false representation with the intent that the plaintiff act upon it; 4) the plaintiff in fact relied upon the false representation; and 5) the plaintiff’s reliance resulted in damage to the plaintiff.

Conversion and Civil Theft

Conversion is loss of property misappropriated, or taken, by another. To recover on a claim for conversion, a plaintiff must prove 1) that they had the right to ownership or possession of the property in question; 2) the defendant had wrongful dominion and control over the property; and 3) damages. Civil theft is a form of conversion that provides a remedy of three times actual damages plus attorney fees in circumstances where the plaintiff can prove the elements of the crime of theft.

Tortious Interference With Prospective Business Relations

Many states recognize the intentional tort of interference with a prospective business relationship. To succeed, it is not necessary for the plaintiff to have formed a contract. Rather, the plaintiff must show that the defendant intentionally and improperly interfered with the plaintiff’s prospective business relationships, and thus prevented the plaintiff from forming a contract.

Fraudulent Transfer Act

A fraudulent conveyance is a transfer undertaken by a debtor with the intent of placing property beyond the reach of creditors. The Colorado Uniform Fraudulent Transfer Act provides remedies to the creditor up to, in some cases, 1.5 times the value of the assets fraudulently transferred.

Deceptive Trade Practices

The deceptive trade practices statute is part of the Colorado Consumer Protection Act (CCPA). It identifies certain acts that are considered deceptive trade practices if conducted in the course of trade or commerce. This statute is a powerful tool because successful plaintiffs may be entitled to attorney fees and, in the event of bad faith conduct by the defendant, treble damages as well.

Computer Fraud & Abuse Act

The Computer Fraud and Abuse Act is a federal statute originally enacted to give the FBI a weapon for prosecuting computer hackers. The CFAA also permits hacking victims of to sue a hacker, or those who aided the hacker. We have represented companies whose employees have been accused of hacking into a competitor’s computer network, for example, as well as companies who are victims of such attacks.

Racketeer Influenced and Corrupt Organizations Act

The Racketeer Influenced and Corrupt Organizations Act (RICO) imposes criminal and civil liability on persons who engage in certain “racketeering activities”. Originally enacted to combat traditional organized crime, the statute’s scope has broadened considerably. To successfully state a RICO claim, a plaintiff must sufficiently allege 1) conduct 2) of an enterprise 3) through a pattern 4) of racketeering activity. “Racketeering activity” includes a multitude of illegal acts, including state-law crimes, crimes indictable under federal statute, and certain federal offenses.

Colorado Organized Crime Control Act

Colorado’s version of RICO, the Colorado Organized Crime Control Act (COCCA), is generally patterned after RICO. Like its federal counterpart, COCCA prohibits activities constituting a “pattern of racketeering” to influence an enterprise.. Under COCCA, any person injured by any prohibited activities may maintain a private cause of action.

For more information on business litigation matters, click on our Commercial Litigation and Corporation, Partnership & LLC Dispute pages.

Featured Cases

A South Dakota real estate agent and financial advisor representing an elderly couple talked them into rejecting a number of qualified offers for a large ranch the couple owned. Instead, the agent had the couple sell the ranch to him for approximately half the amount offered by other potential purchasers. Our lawyers presented the case to a jury in Burke, South Dakota and received a verdict in favor of the couple in the amount of $1,568,200.

Our lawyers represented a bankruptcy trust formed to pursue claims arising out of a real estate fraud scheme that involved 100+ institutional lenders and private investors who provided more than $70 million dollars to the debtors or their straw buyers. The trust sued several title companies for (i) aiding and abetting breaches of fiduciary duty, (ii) breaching their contracts, (iii) fraud, (iv) securities fraud, and (v) breaching their fiduciary duty in the handling of over 1,200 title transactions. After five years of litigation, two sets of defense counsel, and two appeals taken by the defendants, the case settled favorably for the trust.

Our lawyers represented a private equity fund who sued the former CEO of one of its portfolio companies, along with the CEO’s spouse and brother, for fraud, breach of fiduciary duty, and embezzlement. After a 10-day trial, during which the defendants filed for bankruptcy, a state court jury in Fort Worth, Texas, found the defendants liable for fraud, breach of fiduciary duty, conversion and civil conspiracy, and awarded damages of $632,000 to our client. The trial court later awarded attorney fees and costs, and other relief.

When general counsel for a CB radio manufacturing company was sued personally for securities fraud by the company’s lender for allegedly failing to disclose material information, our lawyers tried the case before the Nebraska Federal District Court bench. They succeeded in defeating the claim and precluding millions of dollars in alleged damages.

Our lawyers represented clients in a fraud and unfair trade practices lawsuit against a company that arranged independent medical examinations for the insurance industry. Relying on the “whistle blower” testimony of the company’s former employees, we established that the defendant company had fabricated a medical expert witness opinion in a related personal injury lawsuit, to the detriment of our clients, and had routinely altered medical expert witness reports in other cases. The case settled for a confidential amount shortly before trial.

Our lawyers represented a Colorado employment agency that placed a Chief Financial Officer in a construction company. The employee later embezzled from the company, was convicted and sent to prison. The plaintiffs accused the defendant of not conducting a sufficiently thorough background investigation. After a 6-day trial, the jury found in favor of our client.

One of our lawyers was appointed as Special Counsel representing two Chapter 7 bankruptcy trustees of the estates of a real estate developer and his affiliated companies who perpetrated a Ponzi scheme involving straw buyers and promises of “guaranteed returns on investment.” The case involved more than 80 defendants, many of whom were early “winners” in the scheme while other late investors and creditors went unpaid. The Trustees recovered more than $1 million for the estates.

Our lawyers represented a real estate development company in a breach of fiduciary lawsuit against the company’s manager and obtained a judgment of $983,000. The arbitrator awarded damages of $509,000 and costs of $104,000 against the manager, plus other remedies. The trial court later confirmed the arbitration awarded and entered judgment against the manager for an additional $179,000 in prejudgment interest and $191,000 in post-judgment interest.

Our lawyers represented our clients, investors in a startup business that had grown to more than $1 billion in annual sales in less than 5 years, in a lawsuit alleging breach of contract, breach of fiduciary duty, securities fraud and other claims. The defendants, the company and its senior management, had squeezed our clients out of the business. We settled the case for $3,450,000 shortly before trial.

When a minority owner of a technology company sued one of Colorado’s leading business law firms alleging that the firm had aided and abetted the majority owners in squeezing him out of the company, the law firm retained our attorneys to defend it at trial. After a 9-day jury trial, the jury found in favor of our client law firm.