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contract breach ripping up contract Photo: YP_Studio via Shutterstock

“When can a breach of contract also support a claim for fraud?” This was the essential question faced by the Second Circuit in United States ex rel. O’Donnell v. Countrywide Home Loans, 822 F.3d 650 (2d Cir. 2016) (Countrywide). The court’s holding—that contractual obligations can support fraud claims only where there is proof of fraudulent intent at the time of the contract’s execution—incorporated common law precedent into federal mail and wire fraud cases in the Second Circuit involving contractual relationships between the alleged fraudster and victim. In its wake, courts in the circuit have had to grapple with the scope and application of Countrywide’s holding in criminal and civil fraud cases. Does it provide a possible defense for white-collar defendants alleged to have defrauded their counterparties? Or is it limited to its facts?

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