In 2002, the California Legislature created the Victims of Corporate Fraud Compensation Fund as part of the Corporate Disclosure Act.  See Victims of Corporate Fraud Fund.  There are a number of conditions that must be met to receive a payout from the fund.  One of these conditions is that the victim secure "a final judgment in a court of competent jurisdiction against a corporation based upon the corporation’s fraud, misrepresentation, or deceit”.  Cal. Corp. Code § 2282.  In a recently published decision a California Court of Appeal decided that this condition was met even though the victims had not actually alleged “fraud, misrepresentation, or deceit”.  

In Alves v. Weber, 2025 WL 1379121, the plaintiffs were defrauded by a corporation that promised, but failed to provide, long-term health care and estate planning services.  The plaintiffs successfully obtained a judgment from the bankruptcy court that expressly adjudged plaintiffs to be "the victims of misrepresentation that satisfies all the essential elements of the California tort of intentional misrepresentation” and awarded specific monetary damages against the corporation”.  The plaintiffs then sought recompense from the Fund, but the Secretary of State denied their claims, stating:

The Applications have been denied because the Default Judgment issued by the United States Bankruptcy Court for the Eastern District of California . . . does not appear to be a qualifying judgment for corporate fraud for purposes of the [Fund]. Further, none of the three claims for relief alleged in the Complaint to Determine Non-Dischargeability of Debt (11 USC 523 & 727), upon which the Default Judgment was based, are a ‘cause of action . . . for fraud . . . ’. See California Corporations Code sections 2281(g) and 2288(b)(2).