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Business Tort and Fraud Litigation - Breach of Contract Lawyer in Denver, CO

Business tort litigation is a general term that describes business litigation in which the legal claims arise from various claims other than from breach of contract claims. In American law, civil liability is divided into two general categories: 1) contract claims and 2) tort claims. A “tort” is a civil wrong or wrongful act, or an infringement of a legal right of another, that causes injury to another. A tort can be intentional or accidental. Tort claims can arise from case law or by statute. Torts include all negligence claims as well as intentional acts which cause harm to others. In business litigation, the line between contract litigation and business tort litigation can be fuzzy.

Business tort claims can include the following types of claims:

Breach of Fiduciary Duty

A fiduciary is person (or company) who has an obligation to act in the best interests of others, even if doing so results in a disadvantage to the fiduciary. Business people can have fiduciary duties to shareholders, investors, partners, or others. Fiduciary duties can arise in a wide range of circumstances. Below are some of the times of fiduciary duties that can arise in the business context:

  • 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 employee can have fiduciary duties to his or her employer;
  • A lawyer has fiduciary duties to a client and, under states under some circumstances, to people other than the client;
  • A trustee can have a fiduciary duty to the trust’s beneficiaries;
  • 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;
  • A real estate broker may have fiduciary duties to the seller or buyer of real property;
  • The trustee of an ERISA plan has fiduciary duties to the beneficiaries of the plan; and
  • Lenders may have fiduciary duties to borrowers.

Fraud & Misrepresentation

Fraud is a common law tort claim that permits the victim of the fraud to recover his or her losses caused by the deception. 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. Fraud claims are subject to a three-year statute of limitations. C.R.S. § 13-80-101(1)(c).

Conversion and Civil Theft

Conversion is a common law tort claim to recover for losses of property misappropriated by another. o recover with a common law claim for conversion, a plaintiff must prove 1) that the plaintiff had the right to ownership or possession of the property in question; 2) the defendant’s wrongful dominion and control over the property; and 3) damages. A claim for conversion is subject to a three-year statute of limitations. C.R.S. § 13-80-101(1)(h). Civil theft is a statutory version of the common law conversion claim. Colorado’s Rights in Stolen Property statute, C.R.S. § 18-4-405, 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. When determining whether a defendant has improperly interfered with a plaintiff’s business relationship, it is not necessary for the plaintiff to show that it actually 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 the contract.

Deceptive Trade Practices

The deceptive trade practices statute is found at C.R.S. § 6-1-105(1), and is part of the Colorado Consumer Protection Act (CCPA). The statute identifies certain acts which are considered deceptive trade practices if conducted in the course of trade or commerce. This statute has the possibility of being a particularly powerful tool because, if proven, the successful plaintiff is entitled to attorney fees and, if it is established by clear and convincing evidence that the defendant engaged in bad faith conduct, treble damages. C.R.S. §§ 6-1-113(2)(a) and (b).

Computer Fraud & Abuse Act

The Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030 (2006), is a federal statute originally passed to give the FBI a weapon for prosecuting computer hackers. CFAA also provides victims of computer hacking with statutory basis to sue the person accused of hacking, or aiding the hacker. We have represented companies whose employees have been accused of hacking into a competitor’s computer network, and we have represented companies who are victims of such attacks.

Racketeer Influenced and Corrupt Organizations Act.

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 through 1968, imposes criminal and civil liability upon persons who engage in certain “racketeering activities” as defined in § 1961(1). Section 1962 lists prohibited activities, and almost all of RICO claims against professionals allege a violation of § 1962(c). 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. 18 U.S.C. § 1961(1). A “pattern of racketeering activity” consists of two or more acts of racketeering activity that have occurred within the last 10 years. 18 U.S.C. § 1961(5).

Colorado Organized Crime Control Act.

Colorado’s version of RICO, the Colorado Organized Crime Control Act (COCCA), C.R.S. §§ 18-17-101, et seq., is generally patterned after RICO. Like its federal counterpart, COCCA prohibits activities constituting a “pattern of racketeering” to influence an enterprise. C.R.S. § 18-17-104. Under COCCA, any person injured by reason of any prohibited activities listed in C.R.S. § 18-17-104 may maintain a private cause of action.

Fraudulent Transfer Act.

A fraudulent conveyance is a transfer undertaken by a debtor with intent to place property beyond reach of creditors. The Colorado Uniform Fraudulent Transfer Act, C.R.S. §§ 38-8-101, et seq., governs fraudulent conveyances and provides remedies to the creditor such as, in some cases, 1.5 times the value of asset fraudulently transferred.

The trial attorneys at Ogborn Mihm LLP have decades of experience representing business clients in high-stakes litigation involving business torts. Unlike many business litigation firms, who usually litigate on paper and settle, we have substantial experience trying such cases to juries and judges. We have successfully represented clients in hundreds of jury trials, bench trials and arbitrations involving a wide variety of business disputes.

Featured Cases

Ranch owners obtain $1.57 million verdict against real estate broker for fraud in sale of a family ranch – South Dakota (for the Plaintiff)
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 the agent for approximately half the amount that had been offered by other potential purchasers. Mike Ogborn and Murray Ogborn presented the case to a jury in Burke, South Dakota and received a verdict in favor of the clients in the amount of $1,568,200. Part of that award has been overturned on appeal and the punitive damages will be retried in 2014. Bailey v. Duling, 827 N.W.2d 351 (S.D. 2013).

$70 Million Ponzi Scheme – Settlement (for the Plaintiff)
Susan Jacks 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 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 Susan settled the case favorably to the trust.

Fraud and embezzlement by a company CEO - $632,000 Jury Verdict (for the Plaintiff)
Michael Mihm and Susan Jacks represented a private equity fund who sued the former CEO of one of its 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 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. International Beauty Products, LLC vs. Garth Beveridge, Dinah Beveridge and Craig Beveridge, District Court for Tarrant County Texas, 48th Judicial District.

General counsel defends against securities fraud claim (for the Defense)
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, Murray Ogborn tried the case before the Nebraska Federal District Court bench. He succeeded in defeating the claim, and warding of millions of dollars in alleged damages. Prudential Insurance Company v. Thompson, et al.

Victim of consumer fraud and unfair trade practices obtains settlement for fraudulent medical examination (for the Plaintiff)
Michael Mihm represented clients in fraud and unfair trade practices lawsuit against a company that arranges 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. District Court, City and County of Denver, Colorado.

Executive placement company defends against claims that a CFO embezzled (for the Defense)
Michael Mihm 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 Michael's client. District Court, El Paso County, Colorado

Ponzi Scheme - $1 million recover (for the Plaintiff)
Susan Jacks 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 which were early “winners” in the scheme while other late investors and creditors went unpaid. The Trustees recovered more than $1 million for the estates.

Real estate developer recovers $983,00 arbitration award against self-dealing manager (for the Plaintiff)
Michael Mihm and Elizabeth Hyatt 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. Florado Partners, LLC v. Ronald Gollehon, et al., Case No. 2005CV137, District Court, City and County of Denver, Colorado.

Minority owner squeezed out of start-up company - $3.45 million settlement – Utah (for the plaintiff)
Elizabeth Hyatt and Michael Mihm represented our clients, investors in a start-up 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 out our clients from the business. We settled the case for $3,450,000 shortly before trial. U.S. District Court, District of Utah.

Aiding and abetting a breach of fiduciary duty - oppression of minority shareholders (for the Defense).
When a minority owner of a technology company sued one of Colorado's leading business law firms alleging that the defendant law firm had aided and abetted the majority owners in squeezing him out of the company, the law firm retained Michael Mihm and Elizabeth Hyatt to defend it at trial. After a 9-day jury trial, the jury found in favor of Michael and Betsy’s client law firm. District Court, City and County of Denver, Colorado.

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