Stokes Lazarus & Carmichael LLP Wins Important Ruling in Creditor Fraud Case

Our creditor client sued on a contract and account to collect a debt from a corporation to whom it extended credit for the sale of computers worth $325,000.00. The corporate debtor had consented to the jurisdiction of the State Court of DeKalb County in its credit agreement. Additionally, our creditor client sued the principal of the debtor corporation individually. The principal had not signed a personal guarantee or consented to the jurisdiction of the State Court of DeKalb County. The principal of debtor was sued based on fraud perpetrated against our creditor client. The basis of the fraud was that the principal of debtor corporation told the creditor it would be paid when the corporate debtor was paid by its customer. The principal of debtor had deposited with the creditor a check for $325,000.00 and asked our client creditor to hold the check until the corporate debtor was paid by its customer. In fact, debtor customer had been paid. At the time our client creditor deposited the $325.000.00 check, it was returned “NSF” but would have been good at the time it was given to our client creditor.

A lawsuit was filed in the State Court of DeKalb County against the corporate debtor on an account and against the principal of corporate debtor for fraud. The corporate debtor and corporate debtor’s principal filed a Motion to Dismiss which was fully briefed and argued before the judge in the State Court of DeKalb County. The Court held that there were sufficient contacts of the principal with Georgia to provide jurisdiction in Georgia in both contract and tort. Prior to this decision, jurisdiction in Georgia over an out-of-state defendant in a commercial transaction was either based on consent to jurisdiction (in this cases in the credit agreement) or sufficient contacts in the state (as set forth in case decisions). On the other hand, there was limited case law prior to this ruling regarding that an out-of-state party who perpetrated a tort against a corporation in Georgia could be subject to the jurisdiction of a Georgia court. This court, apparently, expanded the “contacts” concept to a case involving a tort (in this case fraud).

After significant further litigation, our client creditor filed a motion for summary judgment on its fraud claim against debtor’s principal. While recognizing that trial courts rarely grant summary judgment in fraud cases, we presented to the court plain and indisputable evidence that debtor’s principal perpetrated a fraud on our client and was damaged thereby. The trial court agreed and granted summary judgment to our client.

These important victories expanded applicable case law in Georgia and set a precedence that individuals who perpetrate a fraud, where the fraud injures a Georgia corporation, will be susceptible to suit in Georgia, regardless of attempts to argue lack of contact behind the corporate veil, and these wrongdoers will be held accountable for their actions. These important legal victories resulted from our tenacious efforts on behalf of our client. Additionally, our aggressive strategies, backed by the facts and the law, once again showed opposing counsel that we will aggressively represent our clients and will not be intimidated by the litigious actions of debtors, who hope that if they fight hard enough, we will just go away.