Fraud is a confusing and widely misunderstood tort. I wrote about the elements of fraud on this blog a few years ago, and last month I dug deeper into what it means to make a fraudulent misrepresentation. This month, I’m going to elaborate a bit more about the requirement that fraudulent misrepresentations be made with the intent to mislead someone before liability will arise. In other words, we’re talking about the expectation on the part of the speaker that the person hearing the statement (i.e., the person being defrauded) will take some action–or refrain from taking some action–as a direct result of hearing the statement. To win a case for actual fraud, you need to establish that the defendant not only misrepresented a fact, but did so intending to influence your behavior.

Who can sue? Generally speaking, anyone whose conduct the speaker intended to influence and who was, in fact, influenced as intended. Sometimes the defendant intends to defraud a single person. Sometimes the defendant seeks to influence an entire group of people. Even if a defendant did not specifically intend to defraud a particular plaintiff, if the defendant had reason to expect that the plaintiff would act or refrain from acting in reasonable reliance on his untrue statement, liability may attach. There may be a valid defense, however, if the defendant could not have anticipated that a particular plaintiff would hear the fraudulent statement and take action upon it. Let’s look at some examples.

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The Virginia Consumer Protection Act is a Virginia law designed to protect consumers against fraudulent and deceptive business practices. In situations where it applies, defrauded consumers won’t be limited to suing for fraud; they will be entitled to pursue the additional remedies allowed by the VCPA, such as reimbursement of legal fees and–if the deception was willful–triple damages. The statute’s application, however, is limited to “consumer transactions.” What are those? According to the official statutory definition, “consumer transaction” means:

  1. The advertisement, sale, lease, license or offering for sale, lease or license, of goods or services to be used primarily for personal, family or household purposes;
  2. Transactions involving the advertisement, offer or sale to an individual of a business opportunity that requires both his expenditure of money or property and his personal services on a continuing basis and in which he has not been previously engaged;
  3. Transactions involving the advertisement, offer or sale to an individual of goods or services relating to the individual’s finding or obtaining employment;
  4. A layaway agreement, whereby part or all of the price of goods is payable in one or more payments subsequent to the making of the layaway agreement and the supplier retains possession of the goods and bears the risk of their loss or damage until the goods are paid in full according to the layaway agreement; and
  5. Transactions involving the advertisement, sale, lease, or license, or the offering for sale, lease or license, of goods or services to a church or other religious body.

(See Va. Code § 59.1-198). The most common application of the VCPA is under the first part of the definition: “goods or services to be used primarily for personal, family or household purposes.” Does that mean that every contract to make or sell a personal or household item will be subject to the VCPA, regardless of the identity of the parties to the contract? The Virginia Supreme Court hasn’t yet spoken to this issue, but in a recent ruling out of Fairfax Circuit Court, the court said no.

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Restrictive covenants in employment agreements (e.g., noncompete and nonsolicitation clauses) are enforceable in Virginia if they are (1) narrowly drawn to protect the employer’s legitimate business interests, (2) not unduly burdensome on the employee’s ability to earn a living, and (3) are not against public policy. There was once a time when litigation brought to enforce noncompete and nonsolicitation agreements would be routinely dismissed at the outset of a case based on a finding that one of these elements was lacking. For example, a noncompete provision restricting a former employee from taking a similar job with a nearby competitor for five years might have been quickly dismissed based on the judge’s quick determination that five years is simply too long.

This changed with the 2013 Virginia Supreme Court decision in Assurance Data, Inc. v. Malyevac. There, the court pointed out that every case is different, and held that an employer seeking to enforce a restrictive covenant must be given the opportunity to present evidence demonstrating reasonableness. Since this decision, some judges–like Fairfax County Circuit Court Judge John M. Tran–have opined that in appropriate cases, courts can still dismiss noncompete cases without an evidentiary hearing, such as when an employer fails to even proffer a legitimate business interest. Others hold that Assurance Data forecloses facial attacks on restrictive covenants. This appears to be the more common interpretation of the case.

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In Virginia, a civil action for fraud requires more than just dishonest or unethical behavior on the part of the individual or business being sued. People lie all the time, and tort liability usually does not arise. The law of fraud is more concerned about pecuniary loss resulting from the intentional misrepresentation or nondisclosure of material facts. Several years ago, I posted a blog entry entitled “Fraud: What It Is, and What It Is Not.” There, I explained that a plaintiff bringing an action for fraud must allege and prove (1) a false representation, (2) of a present, material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reasonable reliance by the party misled, and (6) resulting damage. Today, I want to elaborate on the first of those elements: the requirement of a fraudulent misrepresentation.

First of all, when we talk of false or fraudulent misrepresentations, we’re not just dealing with the written word. Just as the hearsay rule can apply to nonverbal conduct intended as an assertion, the first element of fraud can apply to nonverbal conduct that amounts to an assertion of fact inconsistent with the truth. If a person acts in such a way as to suggest the existence of a fact, and that fact does not exist, a misrepresentation has occurred upon which a fraud action may potentially be based.

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Most laws were written before people started texting naked pictures of each other on their phones. No one had heard of so-called revenge porn until around 2010, when the controversial website “Is Anyone Up?” launched, allowing users to upload sexually explicit images of former romantic partners. That site ceased operation just two years after it started, but revenge porn is now more widespread than ever. So widespread, in fact, that several states (Virginia included) have decided that existing laws against copyright infringement, intentional infliction of emotional distress, and bullying were not offering victims sufficient protection. In Virginia, revenge porn is now a crime, as well as a civil cause of action for which legal remedies are available.

Under Virginia Code § 8.01-40.4, victims can sue for compensatory damages, punitive damages, and attorney’s fees. Injunctive relief may also be available. But what kind of financial recovery can vicitms expect to receive? How does one measure the emotional harm suffered as a result of sexual cyberbullying? If you bring a lawsuit and win, will the rewards outweigh the uncomforable and expensive process of open-to-the-public litigation? These are difficult questions to answer because–at least here in Virginia–few (if any) civil actions have been tried to verdict under the new revenge porn statute. But looking to some other jurisdictions may provide a clue as to what kinds of damage awards you might expect here in Virginia.

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Unauthorized access to another’s email account can give rise to a variety of claims. The Computer Fraud and Abuse Act (“CFAA”), for example, prohibits a wide variety of improper computer activity, including unauthorized access to another’s email account. Specifically, it makes it illegal to intentionally access a computer without authorization and to thereby obtain information which results in a loss worth at least $5000 over the course of a year. (See 18 U.S.C. § 1030(a)(2)(C)). In Virginia, the Computer Crimes Act prohibits “computer fraud,” which occurs when a person uses a computer without authority and thereby obtains property or services by false pretenses. It also makes it a crime to commit “computer invasion of privacy,” which occurs when a person, without permission, logs onto someone else’s computer and examines that person’s employment, salary, credit, or any other financial information.

To obtain relief under the Virginia Computer Crimes Act, a plaintiff must have suffered injury to person or property. (See Va. Code § 18.2-152.12). And as mentioned above, you need at least $5000 in damages to recover anything under the CFAA. But what if someone hacks into your email and reads your personal messages without actually causing any direct pecuniary loss or personal injury?

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Actual fraud is defined in Virginia as a misrepresentation of a material fact, made knowingly and intentionally, with the intent to mislead another person, when the person to whom the misrepresentation was made reasonably relies on that misrepresentation and suffers damages as a result. In other words, you commit fraud when you lie to someone for the purpose of tricking that person into doing something (or refraining from doing something), and the person believes you and falls for it. The misrepresentation does not need to be expressed in words; it can be communicated through nonverbal conduct. Sometimes even silent non-communication can amount to “fraud by omission.” If you know that remaining silent would cause someone to reasonably (but erroneously) infer certain facts and you intentionally fail to speak up, that could be actionable as fraud. If the misrepresentation causes the recipient to do something he would not have done had he not heard the lie, he is said to have relied on the misrepresentation.

If you don’t want your fraud lawsuit to get dismissed at the outset, be sure to allege in the complaint that the misrepresentation was made concerning a present or past fact. A common mistake is to confuse fraudulent misrepresentations with broken promises. You can sometimes sue for a broken promise, but a broken promise is not fraud because a promise is an undertaking to take some action in the future. Assuming you’re not psychic or clairvoyant (which is an assumption the judge is going to make, I assure you), you don’t know what the future holds, so you can’t “misrepresent” the future. If you say you will do something in the future but then you don’t actually do it, you have broken a promise and perhaps breached a contract; you haven’t committed fraud.

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Suppose your employer asks you to create a Google account for the company. So you do. You set up everything yourself: Google Drive, Google+, Gmail–the works. You even set the password to your dog’s name. All of Google’s terms and conditions are accepted by you personally when creating the account. You proceed to use the account on behalf of the company, using Google Drive to store hundreds of company documents. Then you leave your job. Is the Google account yours? You created it, so are you free to make whatever use of the account you wish? Can you delete it?

Marcelo Cuellar thought so, but he was wrong. According to papers filed in Estes Forwarding Worldwide v. Cuellar in the Eastern District of Virginia, here are the facts. Cuellar joined Estes Forwarding Worldwide (“EFW”)–a transportation logistics company–in 2010. EFW has developed trade secrets relating to the best transportation solutions for various types of shipments, including information about type of freight, freight dimensions, routing decisions, vendor selection, and so on. It keeps this information in spreadsheets and other electronic documents.

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The “janitor test” isn’t the only hypothetical scenario that, when applied to a non-compete agreement governed by Virginia law, can render the contract unenforceable. In NVR, Inc. v. David Nelson, the federal court in Alexandria imagined a number of hypothetical situations when struggling to interpret an ambiguous geographic limitation in a noncompete agreement. When some of those hypotheticals resulted in an unreasonable restriction, the court decided the noncompete was overly broad and therefore unenforceable.

Noncompete agreements are disfavored in Virginia because they restrain free trade. For this reason, if such an agreement is ambiguous, it will be construed in favor of the employee. Before a court will enforce the agreement, the employer will have to demonstrate that the restraint is no greater than necessary to protect a legitimate business interest; that it is not unduly harsh or oppressive in curtailing the employee’s ability to earn a livelihood; and that the terms are reasonable in light of sound public policy. Courts examine reasonableness primarily by looking at three factors: function (i.e., the activity being restricted), geographic scope (the area in which the restriction applies), and duration.

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If you look up “deposition” on YouTube, you’ll likely find over 200,000 videos to choose from. Many include graphics and commentary that the uploader added after the deposition was taken, usually with the aim of mocking the witness being deposed. The purpose of the discovery process is to require witnesses and corporations in possession of information potentially relevant to a case to divulge information to the requesting party for the purpose of assisting in the preparation of a litigated dispute for trial. Depositions are a specific form of discovery designed to allow litigants to obtain sworn testimony from witnesses in advance of the trial date and to get that testimony in a video format suitable for presenting to a jury. With the soaring popularity of video-sharing social-media sites, the temptation can be great to humiliate your opponent in litigation by posting embarrassing video depositions (or other discovery responses) on Facebook or YouTube, either during the pendency of the litigation or after it has ended. Is this permissible in Virginia?

There are authorities coming out on both sides of this question. On the one hand, “pretrial depositions and interrogatories are not public components of a civil trial.” (See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984)). Thus, while the public generally has a common law right of access to court orders and legal proceedings, information collected through discovery is not a matter of public record to which that right extends. In other words, regardless how entertaining it might be to watch a celebrity make a fool of himself at a deposition, it’s really nobody’s business outside of the confines of the court proceeding. On the other hand, dissemination of pretrial discovery materials by the receiving party is not automatically prohibited absent a protective order.

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