FAQ’s About Fraud & Fiduciary Duty Lawsuits
Frequently Asked Questions in Fraud & Fiduciary Duty Lawsuits
1. How Does a Lawsuit Work?
In order to get a lawsuit started, it must be filed with the court. A general civil lawsuit, which can include lawsuits for fraud, breach of contract, breach of fiduciary disputes, partnership or corporate disputes, conversion of property, construction and real estate disputes, personal injuries, starts when the Plaintiff (the party allegedly harmed) files a Summons and Complaint with the court.
The Summons is a notice to the Defendant (the person or entity that allegedly caused harm or injury) that a lawsuit has been filed. The Complaint is the form that tells the judge and the Defendant what wrongdoing is alleged to have happened and what the damages (monetary compensation, return of property, stop a specific action or process) are based on. Most courts in California also require the Plaintiff to file a Civil Coversheet that tells the court what type of case is being filed.
2. Time in Which to File a Lawsuit
The wrongful conduct or occurrence itself will dictate how much time there is to file a lawsuit in the appropriate court. Typically, the time to file a lawsuit starts on the day the wrongful conduct occurred, or from the date it was discovered, or should have reasonably been discovered. This timeframe is referred to as the Statute of Limitations. The statute of limitations, (the timeframe to file a suit), vary depending on the theories sued upon. For example, if someone breaches a written contract, the Plaintiff has four (4) years to resolve the case outside of court, or to file a lawsuit. If a lawsuit is not filed within the specific timeframe, the Plaintiff will be forever prevented from suing that person or entity for that specific wrong.
3. Who Can Be Sued?
Before a party can sue, they need to know the name of the person and/or entity they will sue (the “Defendant”), where the defendant lives or is located if suing a business, and the legal theories on which they plan to sue — for example, are the damages from a breach of contract or fraudulent conduct?
In some instances, a certain location or entity is tied to a governmental agency. The case becomes more complicated and the Plaintiff will have to follow specific statutes and rules that apply to governmental defendants. Also, before someone can sue a governmental entity, which includes local cities, various agencies (i.e. police departments, transit authority, schools) counties, and/or the state, they must give notice to the governmental entity by filing a “Claim” within a very specific period of time. The notice/claim time is different than the statutes of limitations that apply to non-governmental persons or entities. Some cities, counties and agencies have claim forms on their websites.
4. Serving the Defendant
Once the lawsuit is filed with the court, the defendant must be “served”, or notified that they are being sued. In some instances, the defendant already knows a lawsuit is being filed because they have been trying to settle the case before suit was filed. In either event, the defendant must receive (be “served” with) a copy of the complaint and summons and any related court documents.
Each and every defendant that is being sued is named in the complaint must be served will all the documents. It must be served by someone who is not a party to the action, and at least 18 years old. After service is complete, the person serving the documents must complete a Proof of Service and file the Proof with the court.
5. What Happens After The Defendant Is Served?
The defendant generally has 30 days from the date that they were served to “respond” to the complaint. The defendant can respond by filing an Answer, a general denial, a demurrer, or motions, like a motion to strike, motion to quash, or motion to transfer the case to a different court because a different court has the proper authority (jurisdiction) to hear the case. Once the defendant responds, the case is “at issue’ and the court process starts.
6. What is an Answer?
An Answer is the most common way to respond to a lawsuit. The Answer allows a defendant to admit or deny the specific allegations made against them in a complaint. In the Answer, the defendant must raise all defenses to the allegations in the complaint and supporting facts. Any statements in the complaint that are not denied will be taken as true for the purposes of the case.
7. What are Affirmative Defenses?
The Answer must also include all affirmative defenses. An affirmative defense is a type of defense in which the defendant seeks to avoid liability or fault by introducing new evidence not addressed in the plaintiff’s complaint. Depending on the causes of action in the complaint, a defendant can raise numerous affirmative defenses ranging from “failure to state a cause of action” to “breach of implied warranty”.
8. What is a Cross-Complaint?
After a complaint has been filed with the court and served with the Summons on the defendant, the defendant may file his or her own written complaint called a “cross-complaint” against the plaintiff, (the person originally suing the defendant). This is also known as a “counter-suit”.
A defendant can also file a cross-complaint against a third party who has some fault or involvement in the original lawsuit filed by the plaintiff, as long as the subject matter of the cross-complaint is related to the original complaint. The defendant is called the cross-complainant and the new defendant is called the cross-defendant. If a third party is sued in the cross-complaint, the new defendant must be personally served with the cross-complaint and a new summons. The cross-defendant has 30 days to respond to the cross-complaint.
9. How Long Does a Lawsuit Take?
A lawsuit can take a few weeks or several years to resolve. Each lawsuit is unique and there are too many variables to predict an exact timeline. Given today’s government budgetary cutbacks, the courts are often backlogged, and civil cases often have to wait for months until a judge or courtroom is available. The time length also depends on the complexity of the case, and the ability of the parties to come to an agreement without going to trial.
10. What is Discovery?
Discovery is a process that starts after the complaint and answer have been filed, and before a trial begins. Both sides collect and exchange information about the case from each other or third parties in preparation of trial. The information gathered during discovery is exchanged with all parties in the case, but is not filed with the court. Some of the discovery goals are to collect facts; take party and witness depositions, find out what the other side is going to say, evaluate opponent’s case, evaluate your case and evidence; and collect evidence (documents, photos, insurance policies, reports) you need to present your case in court.
It is possible to collect some evidence on an information basis, or without the need to prepare and serve “formal” discovery. Discovery is set forth on the California Code of Civil Procedure and includes some of the following discovery “tools”:
- Depositions —in-person oral questions asked that the person being deposed must answer under oath and penalty of perjury. The persons deposed may include the parties, “third-party” witnesses, expert witnesses, and custodian of records. A court reporter records everything that is said in the deposition and produces a written transcript. It is also common to videotape a deposition.
- Interrogatories —written questions directed to the other party that the other party must answer in writing and under oath. The interrogatories can be Form Interrogatories or specially prepared interrogatories. The answers can be used at trial.
- Requests for Production of Documents — requests for a specific document or a class of documents relevant to your case. A demand to inspect land may also be made under this section.
- Requests for Admissions — when a party asks the other side to admit a statement is true, or to admit to the genuineness of a document. Admissions general to allow the case to focus on what is truly in dispute. Responses to these written requests can be used at trial.
- Subpoenas — written court orders requiring the other side or a third party to testify or produce certain physical evidence such as books, records, or other documents for inspection.
Discovery is the legal process used by either party to obtain relevant material information necessary for the preparation of a case. Discovery can be used in a civil case or in a criminal matter.
Discovery allows the parties to obtain evidence that is not readily available to that party, and in the possession, control or custody of the other party or even a third party. Each party has the right to ask for information, and barring a legal objection, the opposing party must disclose the information.
Discovery helps the parties narrow the issues in the lawsuit, provides evidence that may be used at trial to support their causes of action, and in some instances obtain admissions from the opposing party. An overriding public policy consideration for discovery is to enable a fair and speedy resolution and justice, and in order to give the litigants access to all material facts in their case. Discovery also gives the parties an opportunity to evaluate their causes of action and overall lawsuit based on the facts and information they obtain through discovery.
a. How Does Discovery Work?
Discovery is generally obtained by the service of a notice to opposing counsel or by service of a series of questions or demands for the examination of documents and other things. The Discovery Act, found in the California Code of Civil Discovery sets out the parameters and rules regarding discovery. There are multiple discovery tools that can used to obtain relevant information.
b. How is Discovery Obtained?
There are multiple methods of obtaining discovery from a party and documents in the possession or custody of a third party. Discoverable material information can be obtained by use of written interrogatories, request for production of documents and inspection of writings and other things, requests for admission, physical and mental examinations and written and oral depositions.
During the discovery process, lawyers can object to questions, requests for admissions, interrogatories, and other requests. If the other side does not agree with the objections and insists on getting the requested information or insists on not providing the requested discovery, a motion can be filed in court to ask a judge to decide the discovery issues.
c. What is a Deposition?
Depositions are probably the best known discovery tool since depositions are frequently portrayed on TV shows and movies that have a legal theme. Depositions can be taken in most civil and criminal cases, and allow a party or witness to answer questions under oath. A deposition can assist in settlement negotiations before trial, or narrow the issues presented at trial.
An oral deposition can be taken in person, by telephone or videoconference. A deposition can also be taken in writing. Generally, the deposition of a litigant is set by serving a “notice of deposition” on the adverse party’s attorney. If the deponent is not a party to the action, a subpoena for deposition must be served on that person ordering him or her to attend the deposition. A deposition subpoena or notice can also demand that the deponent bring with him or her writings, books, records or other tangible things to the deposition.
Depending on the witness, there are specific rules about how far a deponent is required to travel to attend a deposition and starting in January 2013, the time-limit for a deposition in California state court proceedings is 7 hours. There are a few exceptions to this time-limit rule however, depending on the type of case and the type of witness being deposed.
A deposition gives the litigant’s attorney an opportunity to ask questions of the other party or witness (the deponent) under penalty of oath. The deponent’s testimony is recorded at the deposition by a certified court reporter, and later the testimony is transcribed verbatim. The party taking the deposition hires the court reporter.
The court reporter also administers an oath to the deponent at the start of the deposition and the deponent affirms that he or she will answer the questions truthfully. The deponent is then required to answer each question under penalty of perjury. In a multi-party case, each party has an option to attend the deposition and also to ask questions once the noticing party completes his or her line of questioning. The only persons required to attend a deposition is the party (or lawyer) noticing the deposition notice or subpoena, the deponent (the person answering the questions) with his or her attorney, if any.
A deposition is technically hearsay, but can be used in a court trial or hearing to impeach the witness with his or her inconsistent prior recorded statements and other limited purposes.
Depositions help to narrow issues, pin down a witness on specific facts and issues, and to obtain lay and expert witnesses’ opinions about what they intend to say at trial.
The parties can also be deposed by the adverse attorney. Before you are deposed, your lawyer will go over the parameters of a deposition, and what you can anticipate at a deposition. The key facts to remember at your deposition are to always answer each question truthfully, listen to the full question before you answer, and try to answer each specific question to the best of your ability. If you don’t recall the information that you are being asked to provide, it is ok to say “I don’t recall” or “I don’t know”. In addition to eliciting information from you under oath, the lawyer taking your deposition will be assessing your demeanor, credibility and composure. If the lawyer gets the sense that you are being untruthful or your answers are evasive the adverse lawyer will try to show these qualities to the judge or jury, and it could impact your case. The most important thing to remember at a deposition is to be yourself.
The cost of a deposition will vary and will be impacted by the witness that is deposed and the length of the deposition. It is best to discuss the cost with your lawyer ahead of time. You will be responsible for the court reporter’s fees, your lawyer’s time to prepare for the deposition and to attend the deposition, and if you are deposing an expert witness for their hourly fees, which can be substantial. After the deponent’s transcript is prepared, your lawyer will spend time to analyze it and how best to use it to impeach the witness at trial or how the testimony can be used to support or defend your case.
d. What Are Interrogatories?
Interrogatories consist of a formal set of written questions prepared by a party and sent to the other party for a response. The purpose of interrogatories, like most discovery tools, is to clarify matters of fact and assist in streamlining the issues to be presented at trial.
In California there are two types of interrogatories, “Form” interrogatories and “specially prepared” interrogatories.
e. Form Interrogatories:
Form interrogatories are questions that have been prepared and authorized by the Judicial Council. The Judicial Council is the policy making body of the California courts, the largest court system in the nation. The Counsel is responsible for ensuring the consistent, independent, and unbiased accessible administration of justice. The Council is under the leadership of the Chief Justice and in accordance with the California Constitution.
Form interrogatories are pre-printed forms with questions written in a generic fashion geared to elicit general information from a party. The asking party checks of the box next to the question they want the opposing party to answer.
The party responding to the interrogatories must sign the completed responses under penalty of perjury and served them on the propounding party. Discovery responses are typically due 30 days from date of service if personally served, or 35 days if received by mail.
f. Specially Prepared Interrogatories
Specially prepared interrogatories allow a party to ask specific questions related to the matters in their lawsuit. Each question must be complete in itself, and cannot be compound, contain subparts or be phrased in the conjunctive or disjunctive.
The California Civil Discovery Act allow up to thirty-five (35) specially prepared interrogatories or, “custom-written” interrogatories per party. Form interrogatories do not count against this limit. However, the 35 interrogatory limit may be exceeded by filing a declaration of necessity which must be executed under penalty of perjury. Therefore, it is a good idea to assess each interrogatory to make sure it is not deemed harassing and burdensome, which can expose a party or attorney to personal sanctions.
Like form interrogatories, the party responding to the interrogatories must sign the responses under penalty of perjury, unless the responses contain only legal objections. There is a time limit in which to respond to discovery, typically 30 days if personally served on the party, or 35 days if received by mail.
g. What is a Request for Production and Inspection of Tangible Things
Request for production and inspection of documents and tangible things allows a party to review relevant documents and tangle things supporting their claims or defenses. Information is “relevant” if it reasonably assists a party in evaluating the case, preparing for trial, or facilitating settlement.
In addition to demanding the production and inspection of documents, books, and other writings and tangible things, a demand to enter onto land for inspection and other legal purposes is allowed under the Code of Civil Procedure.
Unlike specially prepared interrogatories and requests for admission, there is no limit in the number of request for production that can be propounded. However, if the number of requests is excessive, the party receiving the request can seek protection from the court.
If a party is unable to comply with a request he or she must indicate in their response that they have made reasonable efforts to obtain the requested information. Also, like other discovery tools, the party responding to the requests must sign the responses under penalty of perjury. The same time limit for responding to other discovery applies here as well, and typically the responding party will have 30 days to respond if personally served, or 35 days if the request was sent by mail.
h. What are Request for Admissions
There are two types of requests for admission, request for admission of the truth of facts, or admission of genuineness of documents. Requests for admission allow a party to obtain an admission or denial regarding relevant facts, allegations or issues. It also allows a party to authenticate or admit the genuineness of a document relevant to the case. Requests for admission are generally limited to a total of thirty-five (35) requests. However, a party may make a declaration for additional requests if necessary.
Requests for admission are propounded before trial, and can be used in trial. The admission of a fact or the genuineness of a document will be taken as true unless it is properly rebutted with evidence at trial or unless the court allows a party to withdraw or change (amend) his or her response. If the admission remains valid, it may help in shortening the trial.
i. What is the Difference Between a Subpoena and a Subpoena Duces Tecum?
A subpoena is a court order for a person to appear at a hearing, at trial, or at deposition. The subpoena can also order a party to produce requested documents or information in court or at his or her deposition. At the hearing, trial or deposition, the person will be asked oral questions, among other things, about the requested documents or information. The testimony given at trial or deposition will be recorded by a certified court reporter.
The Latin phrase “subpoena duces tecum” on the other hand, literally means “under penalty to bring with you”. A subpoena duces tecum is a judicial process which orders the production of papers, documents or other tangible items of evidence from a third party not involved in the case. The person or entity required to produce the specified documents will do so without the need to give any oral testimony.
A subpoena duces tecum must identify with specificity the documents sought, which can include papers or writings physically or electronically stored or maintained by the person or entity subject to the subpoena duces tecum. The person/entity is only required to produce documents and other information that is actually under their possession or control. Refusal without legal justification to produce a requested item may force the requesting party to seek court intervention to compel the information.
The subpoena must be as precise as possible and identify in detail the items to be produced and for a relevant time period. The subpoena must also state a specific time for production for the document. Relevant information obtained by a subpoena duces tecum can be introduced as evidence at trial.
j. How Much Will Discovery Cost?
There is no easy answer to this question. Costs will vary and depend on a number of things, including the complexity of the case, the fee agreement you have with your attorney (a contingency fee agreement or an hourly fee), your attorney’s experience, the parties’ reasonableness and willingness to resolve the issues or to streamline the issues before trial, the need for expert witnesses, and whether the case can be resolved before extensive discovery is conducted, and without the need for a trial.
Discovery can be very expensive and time-consuming. In most civil cases the costs of discovery makes up a very large portion of the costs. The cost of extensive discovery, which can include but is not limited to, depositions of parties, lay witnesses and expert witnesses, subpoenas for documents and/or persons to appear at deposition or hearings and the hiring of expert witnesses, can be significant. If expert witnesses are required to provide an opinion in support of your case or to oppose the other side’s theories and experts, the cost can increase tremendously depending on the expert’s field of expertise.
Discovery also takes a significant amount of attorney and staff-time to prepare the actual discovery, to respond to discovery and to analyze responses. Additional time may be required if discovery disputes arise and have to be presented to a judge for resolution.
Other costs in a case include the filing fee for the compliant or answer filed with the court, fees for filing motions, reporter fees, and for jury fees which must be posted early in the case if any party requests a jury trial. Jury fees are set by statute and are paid directly to the court. In the event a case settles without the need of a jury trial jury fees will not be refunded. No jury fee is required for a “bench trial” (trial heard only by a judge and without a jury).
11. What is Mediation?
California Evidence Code §115 (a) defines mediation as “a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement.”
Mediation is another method to resolve legal disputes without the need of a trial and sometimes without ever stepping foot in the courthouse. Mediation also helps to reduce the case backlog in civil court.
Typically, the parties attend mediation on a voluntarily basis. The parties and their lawyers mutually agree on a mediator, and the case is presented to the mediator. A mediator can be a lawyer or a retired judge.
If an agreement is reached at mediation, the mediator or the parties write the terms of the settlement and each party signs the agreement. If worded correctly, the terms of the written agreement reached at mediation are enforceable by the court even if one of the parties changes his or her mind after they leave mediation.
A unique feature of mediation is the confidentiality afforded to the entire mediation process. A mediator cannot be compelled to disclose what was discussed by the parties or lawyers during mediation. If a resolution is not reached at mediation and the parties return to court, the parties and lawyers are also prohibited from disclosing discussions, offers or negotiated terms proposed at mediation.
12. What Is Arbitration?
Arbitration is another method to resolve a legal dispute outside of court. There are typically two types of arbitration, “judicial arbitration” and “contract arbitration” arbitration pursuant to a contract. The purpose of arbitration is to reduce the case backlog in civil court, to encourage pretrial settlement and simplify case resolution.
“Judicial Arbitration” is a statutory procedure found in the California Code of Civil Procedure which “diverts” certain civil cases before trial to nonbinding arbitration in hopes of resolution without a trial. Judicial arbitration is court ordered, regardless of a written contract to arbitrate or the parties’ agreement to attend arbitration.
“Contract arbitration” applies only if the parties have agreed in a contract (for example, if you agree to attend arbitration as part of your health insurance contract) to resolve the dispute by arbitration rather than litigation in court. The arbitration agreement will determine the details of the process and as supported by the California Code of Civil Procedure.
In either case, the parties bypass the traditional courtroom trial to resolve their dispute.
After the parties have attended arbitration and presented their case and evidence to an arbitrator a decision will be rendered by the arbitrator in favor of one of the parties. The arbitrator’s award (decision) in a contract-arbitration is binding on the parties. There are very limited circumstances (for example if there is a showing of misconduct by the arbitrator, acts in excess of the arbitrator’s authority, etc.) in which a trial court can review the arbitration decision. Once the award is made, the trial court must enter a judgment confirming the award.
On the other hand, a judicial arbitration award is not binding unless the parties stipulate ahead of time that the arbitration award will be binding or the parties accept the arbitrator’s decision as final by failing to file a timely request for a new trial (trial de novo) with the trial court. In some situations, an appeal from arbitration can also be filed.
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Brown & Charbonneau, LLP represents individuals as well as large and small companies in breach of fiduciary disputes, and has extensive knowledge and experience in breach of fiduciary duty claims involving corporate directors, officers and majority shareholders. If you are involved in a breach of fiduciary claim or would like to learn about your rights and how to protect your business, we can provide you with the information you need.