Claims service loses business litigation claim based on fraud

Sometimes it appears that businesses are as vulnerable to a case of buyer’s remorse as anyone else. That seems to be a factor at play in a business litigation matter in which a company that purchased a California adjusting business turned around and sued the acquired company in 2011 for fraud. The acquiring company, IAS Claim Services, sued the Anaheim-based adjusting firm for allegedly misrepresenting the size of its customer base, therefore causing IAS to grossly overpay for the purchase.

A United States District Court Judge recently ruled, however, that IAS had not carried its case. Instead, the court ordered the plaintiff company to pay more than $1.6 million to the adjusting firm on its breach of contract counterclaim. IAS had been asking for the return of a $2.4 million down payment it had made to the adjuster and cancellation of a $1.2 million note. IAS also asked for punitive damages.

The federal court judge sitting in San Antonio had written in an August Order that the parties should have settled out of court. He included a picture of Abraham Lincoln in the Order and quoted Lincoln as saying that litigation should be discouraged and that people should compromise whenever they can. The extra advice and historical commentary are unusual to say the least, and most businesses are not given lessons in civic responsibility when they pursue a litigation matter.

The practical meaning of the court’s decision in this business litigation matter, however, is that the contention that the California company provided false customer information was not proved. IAS did not carry its burden of proving its allegations by the correct evidentiary standard in a fraud case. Therefore, the company was ordered to pay the final tab due on the contract with the adjuster firm based on that firm’s counterclaim for breach of the purchase contract. The judge, in effect, told the plaintiff company that it would have to live with its unjustified claim of buyer’s remorse.

Source:, “San Antonio insurance adjuster loses fraud suit“, Patrick Danner, Oct. 6, 2016

Tags: Business Litigation

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