Opinion ID: 2632378
Heading Depth: 2
Heading Rank: 2

Heading: The Clear and Convincing Evidence Standard of Proof

Text: Bornemann next contends that the ICA erred by holding that a fraudulent transfer need only be proved by a preponderance of the evidence, inasmuch as a clear and convincing evidence standard of proof was required. We have previously discussed the various burdens of proof as follows: The law has evolved three standards of levels of proof for different types of cases. In most civil proceedings, such as a case involving a monetary dispute between private parties, the plaintiff must show by a preponderance of the evidence that his or her claim is valid. Under the preponderance standard, the parties share the risks of an erroneous verdict in roughly equal fashion. [ Addington v. Texas, 441 U.S. 418,] 423, 99 S.Ct. [1804,] 1808, 60 L.Ed.2d [323,] 329 [(1979)]. The preponderance standard directs the factfinder to decide whether the existence of the contested fact is more probable than its nonexistence. E. Cleary, McCormick on Evidence § 339, at 957 (3d ed.1984). As one commentator points out, to prevail, [a] plaintiff need only offer evidence sufficient to tip the scale slightly in his or her favor, and a defendant can succeed by merely keeping the scale evenly balanced. Comment, The Imposition of Punitive Damages in Product Liability Actions in Pennsylvania, 57 Temp. L.Q. 203, 224 (1984). At the other end of the spectrum, in criminal proceedings, the government is required to prove its case beyond a reasonable doubt. Society has judged that it is significantly worse for an innocent [person] to be found guilty of a crime than for a guilty [person] to go free. Therefore, as stated by the Supreme Court, [w]here one party has at stake an interest of transcending valueas a criminal defendant his [or her] libertythis margin of error is reduced as to him by the process of placing on the other party the burden . . . of persuading the factfinder at the conclusion of the trial of his guilt beyond a reasonable doubt. Speiser v. Randall, 357 U.S. 513, 515-26[,] 78 S.Ct. 1332, 1341[,] 2 L.Ed.2d 1460, 1472 (1958); see also Addington, 441 U.S. at 423-24, 99 S.Ct. at 1808, 60 L.Ed.2d at 329. The level of proof between these two extremes is that of clear and convincing evidence. . . . . . . . Thus, clear and convincing evidence may be defined as an intermediate standard of proof greater than a preponderance of the evidence, but less than proof beyond a reasonable doubt required in criminal cases. It is that degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the allegations sought to be established, and requires the existence of a fact be highly probable. See Welton v. Gallagher, 2 Haw.App. 242, 245-46, 630 P.2d 1077, 1081 (1981); Bud Wolf Chevrolet, Inc. v. Robertson, 519 N.E.2d 135, 138 (Ind.1988); McCormick, supra, § 340 at 959-60. Id. at 14-15, 780 P.2d at 574-75. Second, we are also aware that, as in cases involving allegations of fraud, quasi-criminal wrongdoing, and the imposition of punitive damages, a suit based on a co-employee's wilful and wanton misconduct may have a stigmatizing effect on a co-employee defendant's reputation. The clear and convincing standard would ameliorate this risk. As we have previously noted, the clear and convincing standard is typically used in civil cases involving allegations of fraud or some other quasi-criminal wrongdoing by the defendant. The interests at stake in those cases are deemed to be more substantial than mere loss of money and some jurisdictions accordingly reduce the risk to the defendant of have [sic] his [or her] reputation tarnished erroneously by increasing the plaintiff's burden of proof. Id. at 15, 780 P.2d at 574 (citation and internal quotation marks omitted). Similarly, [c]lear and convincing proof is a standard frequently imposed in civil cases where the wisdom of experience has demonstrated the need for greater certainty, and where this high standard is required to sustain claims which have serious social consequences or harsh or far reaching effects on individuals to prove willful, wrongful and unlawful acts to justify an exceptional judicial remedy. So, in a number of cases where an adverse presumption is to be overcome, or on the grounds of public policy and in view of peculiar facilities for perpetrating injustice by fraud or perjury, the degree of proof required is expressed in such terms as clear and convincing and the phrase preponderance of the evidence has been expressly disapproved as an insufficient measure of the proof required. Iddings v. Mee-Lee, 82 Hawai`i 1, 13-14, 919 P.2d 263, 275-76 (1996) (citations omitted) (some brackets added and some in original) (ellipses in original). At first glance, the present matter appears to consist of a monetary dispute between private parties, thus suggesting that a preponderance of the evidence standard is sufficient. However, we believe that the higher protections afforded by the clear and convincing standard of proof were necessary inasmuch as a finding of liability for a fraudulent transfer produces the reputational harm that should not be inflicted absent the degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the allegations sought to be established[.] Indeed the element of fraud connotes dishonesty and effectively brands the liable defendant with an imprimatur of quasi-criminality. The ICA, when it approved a preponderance of the evidence standard, relied upon United States v. Ayala, 107 B.R. 271 (Bankr. E.D.Cal.1989). There, the United States Bankruptcy Court for the Eastern District of California concluded that a preponderance of the evidence standard was appropriate despite the presence of a fraud element. Id. at 274. The court reasoned that the [Bankruptcy] Code [did] not state a level of proof necessary, [and] that in the face of this silence, [c]ourts may not imply a higher standard than the preponderance standard normally applied in civil proceedings. Id. However, the Ayala Court's reasoning is at odds with that of many other jurisdictions that have expressly required that a plaintiff prove a fraudulent transfer by clear and convincing evidence. See, e.g., Blood v. Nofzinger, 162 Ohio App.3d 545, 834 N.E.2d 358, 367-68 (2005); Parker v. Parker, 268 Neb. 187, 681 N.W.2d 735, 742 (2004); McCain Foods USA, Inc. v. Central Processors, Inc., 275 Kan. 1, 61 P.3d 68, 77 (2002); Bradford v. Bradford, 993 P.2d 887, 891 (Utah Ct.App. 1999); Gerow v. Covill, 192 Ariz. 9, 960 P.2d 55, 62 n. 8 (Ariz.Ct.App.1998); Farrell v. Farrell, 36 Conn.App. 305, 650 A.2d 608, 611 (1994); Jensen v. Eames, 30 Utah 2d 423, 519 P.2d 236, 239 (1974); Mohar v. McLelland Lumber Co., 95 Idaho 38, 501 P.2d 722, 726 (1972); Orsen v. Siegle, 178 Or. 403, 165 P.2d 990, 994 (1946). Moreover, this court has repeatedly required proof by clear and convincing evidence with respect to other fraud-related claims. See, e.g., Schefke v. Reliable Collection Agency, Ltd., 96 Hawai`i 408, 431, 32 P.3d 52, 75 (2001) (`[F]raud on the court under Rule 60(b) must be established by clear and convincing evidence[.]) (Citing Madonna v. United States, 878 F.2d 62, 65 (2d Cir.1989).) (Brackets in original.); Shoppe v. Gucci America, Inc., 94 Hawai`i 368, 386, 14 P.3d 1049, 1067 (2000) (stating that a party alleging fraudulent misrepresentation must establish its elements by clear and convincing evidence); Kang v. Harrington, 59 Haw. 652, 656-57, 587 P.2d 285, 289 (1978) (In dealing with written contracts, the standard of proof with respect to a showing of fraud is extremely high. A written contract will be cancelled because of fraud only in a `clear case and upon strong and convincing evidence.') (Citing Soares v. Freitas, 38 Haw. 64, 65-66 (1948).). Therefore, we conclude that the ICA gravely erred when it determined that a preponderance of the evidence standard was sufficient. Insofar as the fraudulent transfers have not been sufficiently proved, the circuit court's cancellation of certain quitclaim and confirmatory deeds must be vacated. Furthermore, inasmuch as neither party takes issue with the circuit court's instruction that the jury must find that the transfers were fraudulent in order to find a civil conspiracy, we also vacate Bornemann's liability for conspiring to commit fraudulent transfers. [6] Absent liability for the conspiracy claim, there is no basis for the $594,000 punitive damage award. See discussion supra at Part III.A.