FOR PUBLICATION
IN THE DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. THOMAS & ST. JOHN
 
ROBERT ADDIE, JORGE PEREZ and 
JASON TAYLOR,
Plaintiffs,
v.
CHRISTIAN KJAER, HELLE
BUNDGAARD, STEEN BUNDGAARD,
JOHN KNUD FÜRST, KIM FÜRST,
NINA FÜRST, and KEVIN F.
D’AMOUR,
Defendants.
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Civil No. 2004-135
ATTORNEYS:
Gregory H. Hodges, Esq.
St. Thomas, U.S.V.I.
For the plaintiffs.
Carol G. Hurst, Esq.
St. Thomas, U.S.V.I.
For defendants Christian Kjaer, Helle Bundgaard, Steen
Bundgaard, John Knud Fürst, Kim Fürst, and Nina Fürst.
Gordon C. Rhea, Esq.
Mt. Pleasant, S.C.
 
For defendants Christian Kjaer, Helle Bundgaard, Steen
Bundgaard, John Knud Fürst, Kim Fürst, and Nina Fürst.
Maria T. Hodge, Esq.
St. Thomas, U.S.V.I.
For defendant Kevin F. D’Amour. 
 
MEMORANDUM OPINION
GÓMEZ, C.J.
During the course of the trial of the above-captioned
matter, the parties requested that the jury be instructed that
fraud must be proven by clear and convincing evidence.  The Court
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1  Premier is a former defendant in this matter.  The Buyers
settled their claims against Premier.  Premier has been
dismissed.
2  Other claims the Buyers asserted were disposed of at the
motion to dismiss and summary judgment stages of these
proceedings.
denied that request.  This opinion explains that ruling.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2004, Robert Addie, Jorge Perez and Jason Taylor
(together, the “Buyers”) agreed to purchase two parcels of land
from defendants Christian Kjaer; Helle Bundegaard; Steen
Bundegaard; John Knud Furst; Kim Furst; and Nina Furst (together,
the “Sellers”): Great St. James Island, St. Thomas, U.S. Virgin
Islands and Parcel No. 11 Estate Nazareth, No. 1 Red Hook
Quarter, St. Thomas, U.S. Virgin Islands.  The Buyers also agreed
to pay $1.5 million into an escrow account managed by Premier
Title Company, Inc., formerly known as First American Title
Company, Inc.1  At all times relevant, defendant Kevin D’Amour
was Premier’s president and sole shareholder.  D’Amour also acted
as counsel to the Sellers.  Neither parcel of land was conveyed
as the parties contemplated.  The escrow money was not returned. 
This action ensued.
The Buyers asserted a breach of contract claim and an unjust
enrichment claim against the Sellers.  The Buyers also asserted a
conversion claim and a fraud claim against D’Amour.2  The Sellers
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3  The defendants also raised this argument during their
motion for judgment as a matter of law at the close of the
Buyers’ case-in-chief.
asserted counterclaims against the Buyers for breach of contract
and fraud.
The two-stage trial of this matter began on June 22, 2009. 
All testimony in the first stage was heard by June 26, 2009.  On
that day, the Court held a charging conference during which the
parties expressed differing views on the burden of proof
governing fraud claims in the Virgin Islands.  D’Amour argued in
favor of a clear and convincing evidence standard3 while the
Buyers supported a preponderance of the evidence standard.  The
Court directed the parties to brief the issue.  In his brief,
D’Amour, relying on the case law of both this jurisdiction and
others, reiterated his subscription to a clear and convincing
evidence standard.  The Buyers asserted that Virgin Islands law
commands the application of a preponderance of the evidence
standard but seemed to concede that the majority rule in the
United States is that fraud must be proved by clear and
convincing evidence.
On June 29, 2009, before the Court charged the jury and
before closing arguments, the Court again heard from the parties
regarding the burden of proof for fraud.  The parties appeared to
concur that the majority rule sponsors a clear and convincing
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evidence standard for fraud and that that standard should apply
here.  Notwithstanding the parties’ apparent accord on this
point, the Court concluded that Virgin Islands law requires that
fraud be proved by a preponderance of the evidence and so
instructed the jury.
II. ANALYSIS
This Court’s jurisdiction is based on the diversity-of-
citizenship of the parties. See 28 U.S.C. § 1332; 48 U.S.C. §
1612(a).  As such, the Court is obligated to apply the
substantive law of the Virgin Islands. See Lafferty v. Gito St.
Riel, 495 F.3d 72, 76 (3d Cir. 2007) (“[A] federal court must
apply the substantive laws of its forum state in diversity
actions.” (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938)); Marino v. Indus. Crating Co., 358 F.3d 241, 243 n.2 (3d
Cir. 2004).
It is well established that the burden of proof is a matter
of substance as opposed to procedure. See Palmer v. Hoffman, 318
U.S. 109, 117 (1943); Hatco Corp. v. W.R. Grace & Co., 59 F.3d
400, 406 (3d Cir. 1995) (“In diversity cases, the burden of proof
is a matter of substantive law[.]” (citing Blair v. Manhattan
Life Ins. Co., 692 F.2d 296, 299 (3d Cir. 1982)); In re Decker,
595 F.2d 185, 189 n.4 (3d Cir. 1979) (“[B]urden of proof has been
held to be substantive rather than procedural.” (quotation marks
and citations omitted)); De Marines v. KLM Royal Dutch Airlines,
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580 F.2d 1193, 1200 (3d Cir. 1978) (The question of which party
bears the burden of proof in a diversity case ordinarily is a
matter of substantive law . . ., and so is governed by state
law.” (citations omitted)).  As a consequence, in this matter the
Court was required to determine the applicable burden of proof
for fraud in accordance with Virgin Islands law to the extent it
addresses the relevant substantive issues in this case.
Title 5 of the Virgin Islands Code is labeled “Judicial
Procedure.”  It sets forth various rules governing proceedings in
the local courts of the Virgin Islands.  In particular, Title 5,
Section 740 stipulates that “[t]he jury, subject to the control
of the court in the cases specified in this title, are the judges
of the effect and value of evidence addressed to them[.]” V.I.
CODE ANN. tit. 5, § 740.  That section further explains that the
jury is “to be instructed by the court on all proper occasions
that . . . [i]n civil cases the affirmative of the issue shall be
proved, and when the evidence is contradictory the finding shall
be according to the preponderance of evidence[.]” Id. § 740(5)
(emphasis supplied).
§ 740(5) speaks in no uncertain terms: all civil claims
brought under Virgin Islands law are governed by a preponderance
of the evidence standard.  That standard governs all such claims
in the Superior Court of the Virgin Islands.  This Court, sitting
in diversity, is also obligated to apply that standard to civil
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fraud claims unless there is some exception or contrary provision
for such claims.  The Court has undertaken an exhaustive search
of Virgin Islands law.  The Virgin Islands Code provides no such
exception or special provision for fraud claims.  Accordingly,
common law fraud claims in the Virgin Islands are subject to a
preponderance of the evidence standard. Cf. Wynfield Inns v.
Edward Leroux Group, Inc., 896 F.2d 483, 491 (11th Cir. 1990)
(holding that fraud in a diversity suit in federal court in
Florida must be proved by a preponderance of the evidence because
of pronouncements to that effect by the Supreme Court of
Florida); Beardshall v. Minuteman Press International, Inc., 664
F.2d 23, 26 (3d Cir. 1981) (explaining that because of the
Supreme Court of Pennsylvania’s holding that fraud must be proved
by a higher standard than by a preponderance of the evidence,
that higher standard governs fraud claims in diversity suits in
federal court in Pennsylvania).
In their submissions to the Court, the parties pointed to
various Virgin Islands cases suggesting that fraud is governed by
a clear and convincing evidence standard. See, e.g., Matheson v.
V.I. Cmty. Bank, Corp., 297 F. Supp. 2d 819, 833 (D.V.I. 2003)
(noting that because “derivative liability is akin to fraud, it
must be shown by clear and convincing evidence” (citation
omitted)); Colon v. Gremer Dev. Co., 28 V.I. 83, 87 (V.I. Terr.
Ct. 1993) (“The Plaintiff has the burden of proof to establish
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4  American Home Assurance Co. v. Sunshine Supermarket,
Inc., 753 F.2d 321 (3d Cir. 1985), is not to the contrary.  In
that case, the American Home Assurance Company brought a
declaratory judgment action in this Court for a declaration that
it was not liable under an insurance policy issued to Sunshine
Supermarket, Inc.  American Home alleged, among other things,
that Sunshine employees had wilfully made materially false
statements during American Home’s investigation of a fire and
that Sunshine fraudulently exaggerated its proof of loss claim. 
A jury returned a verdict for Sunshine.  On appeal, American Home
argued that the district court erred in striking its defense,
based on insufficient evidence, that the policy was voided by
Sunshine employees’ materially false statements to American Home. 
Before addressing American Home’s contentions, the Third Circuit
focused on the proper standard for determining the sufficiency of
the evidence to maintain such a defense under Virgin Islands law. 
The court found “[n]o Virgin Islands law or restatement provision
. . . concerning the sufficiency of the evidence necessary to
the fraud by clear and convincing evidence.” (citation omitted)). 
Those cases are not dispositive here.  The discussion in Matheson
centered on derivative liability and its statement on the burden
of proof for fraud was made in dictum.  Colon required a
plaintiff to prove by clear and convincing evidence that a
contract was voidable based on a fraudulent misrepresentation.
Importantly, Matheson and Colon make no mention of Title 5,
Section 740 of the Virgin Islands Code.  They also do not
specifically address the question squarely before this Court: the
burden of proof governing common law fraud claims under Virgin
Islands law.  The Virgin Islands Legislature has unequivocally
answered that question by enacting a statute mandating that all
civil claims, including fraud, be proved by a preponderance of
the evidence.4  In accordance with that mandate, the Court
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make out a case of fraud or false swearing by the insured.” Id.
at 327-38.  Canvassing other jurisdictions, the court concluded
that the majority rule is that fraud or false swearing in
insurance cases must be proved by  clear and convincing evidence.
The Third Circuit’s conclusion in American Home does not
inform an analysis of the burden of proof governing the fraud
claims asserted in this matter.  First, American Home, like
Matheson and Colon, does not mention Title 5, Section 740 of the
Virgin Islands Code.  Second, the majority rule on which the
Third Circuit settled is the majority rule in insurance fraud
cases, not common law fraud, as alleged here.
applied that standard.  Because Virgin Islands law supplies such
a mandate, a determination of the majority rule in the United
States, as any party may have urged, is both unnecessary and
inappropriate.  Indeed, this Court, sitting in diversity, cannot
subvert local substantive law because a different rule may exist
elsewhere.
     S\                        
         CURTIS V. GÓMEZ      
           Chief Judge
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