Torts. Concerted action in hunting accident not proved. Knowledge, foreseeability, duty and causation all lacking.

Lussier, Administrator v. Bessette, Lussier and Reed (2010-056) (19-Nov-2010) 2010 VT 104 (Reiber, C.J. ) 

The trial court granted summary judgment in favor of defendants in this wrongful death action.  On appeal, plaintiff argues the trial court erred in holding that defendants were not subject to concerted action liability for their participation in a hunt which culminated in the death of Rejean Lussier.  We affirm.

While on a joint hunt with defendants, Mr. Viens shot Lussier in boredom or poor judgment when  he looked through his scope at a tractor and fired. The pertinent inquiry for the trial court was whether defendants were engaged in concerted activity with Mr. Viens when he shot Mr. Lussier. As adopted by this Court, the Restatement sets out three alternative tests:

A person is subject to liability for harm resulting to a third person from the tortious conduct of another if the person: (1) commits a tortious act as part of a common design with the other; (2) gives substantial assistance to the other knowing that the other’s conduct is a breach of duty; or (3) gives substantial assistance to the other to accomplish a tortious result while also acting in a manner that is a breach of duty to the third person.   

Montgomery v. Devoid, 2006 VT 127, ¶ 33, 181 Vt. 154, 915 A.2d 270 (citing Restatement (Second) of Torts § 876 (1979)) 

At least a minimal knowledge requirement must be met before liability can be imposed on a common design theory. Defendants had no knowledge, nor any reason to suspect, that Mr. Viens was engaging in flagrant hunting violations in breach of his duty to Mr. Lussier.  Because defendants did not know that Mr. Viens was engaged in conduct constituting a breach of his duty to Mr. Lussier, they cannot be found guilty of concerted action liability under the first and second prong. 

 As to the third prong, there was nothing in defendant’s hunting plan—walking through the woods to flush a deer—that would have Mr. Viens’s hunting violations as its natural and probable result.  Neither were defendants’ actions a breach of some separate duty owed to Mr. Lussier.  It is not the duty of those in a hunting party to supervise other members.  Because defendants breached no separate duty to Mr. Lussier and because their actions did not proximately cause his death, they are not liable under this final prong.

Finally, the Restatement cautions that a person who encourages another to commit a tortious act  is ordinarily not liable for  acts of the other done in connection with the intended tortious act that were not foreseeable by him.  Restatement (Second) of Torts § 876, cmt. d (1979). It is generally not foreseeable that another hunter in hunting party will violate hunting safety rules. See, e.g., Kramschuster v. Shawn E., 565 N.W.2d 581 (Wis. 1997). Even assuming defendants’ plan was negligent, it was not foreseeable that as part of this plan that Mr. Viens would engage in the hunting violations that proximately caused Mr. Lussier’s death. Defendants may have  created the risk that someone would be shot when Mr. Viens attempted to shoot a dear in accordance with the group’s hunting plan,  but Mr. Viens was not acting pursuant to the plan when he looked through his scope at the tractor in boredom or poor judgment. 

Because Mr. Lussier’s death was the natural and probable result of Mr. Viens’s conduct, but not of defendants’, defendants cannot be found liable.

Criminal Procedure. Court affirms denial of suppression motion and validates seizure without cause by officer acting in private capacity

 State v. Young (2009-252) (29-Oct-2010) 2010 VT 97(Dooley, J.) 

Defendant Jason Young appeals from the denial of his motion to suppress evidence, obtained by a police officer after defendant drove into the driveway of the officer’s house.   

A little past ten o’clock on a mid-summer’s eve, after socializing with friends, defendant departed Barre in his pick-up truck to return to his home in Marshfield, triggering an improbably unlucky sequence of events. 

Shortly after defendant turned onto Plainfield Brook Road, a vehicle approached his truck from behind.  The vehicle was “approaching pretty rapidly,” so Defendant decided to take his next right onto Cassie Street, “assuming the vehicle would continue straight past.” 

Much to defendant’s dismay, the vehicle followed.  Defendant turned right at his next opportunity, this time pulling onto Valley View Circle.  Again, the vehicle followed. 

Defendant next began to search for an “available driveway to turn around in easily” and made his choice.  He pulled into the driveway, “assum[ing] the vehicle behind [him] would continue past.” 

It did not. 

Defendant testified to thinking that, “coincidentally, the person must live there.”  He was correct. 

What he did not realize at the time, however, was that the person who followed him and lived in the house was an off-duty police officer dressed in plain clothes.

Defendant put his truck in reverse and began to back out, but the vehicle pulled into the driveway, blocking defendant from exiting the driveway.  After blocking defendant in his driveway the officer observed that defendant “smelled strongly of alcohol, had bloodshot and watery eyes, and had slurred speech.” 

The trial court concluded that the officer was acting as a homeowner during this initial encounter, and not as a police officer, and thus, that no seizure occurred until the officer next ordered defendant out of his truck and requested that he perform the sobriety tests. 

We agree with the trial court that there was no seizure until the officer had grounds to do so.  We concur with the trial court’s conclusion that the officer was initially acting as a concerned homeowner, and not as a police officer, and that his conduct during the initial encounter therefore fell outside the scope of the Fourth Amendment.

Easement by prescription reversed and denied on appeal.

Schonbek, Trustee of the Isaiah 61 Foundation v. Chase (2009-292) (08-Oct-2010) 2010 VT 91 (Reiber, C.J.)  

Defendants appeal from a decision holding that plaintiff possessed a twelve-foot-wide prescriptive easement for vehicular and pedestrian ingress and egress across defendants’ property. Because the record does not support the trial court’s conclusion that plaintiff currently has a prescriptive easement over defendants’ land, we reverse.

The most that plaintiff could have received by way of a prescriptive easement was the right to make use of the alley in particular ways, not the right granted by the trial court for general ingress and egress.

The “nature and scope” of the use of property during the prescriptive time period “establishe[s] the general outlines of the easement.”  Cmty. Feed Store, Inc., 151 Vt. at 158, 559 A.2d at 1071-72. “No use can be justified under a prescriptive easement unless it can fairly be regarded as within the range of the privileges asserted by the adverse user.”  Id. 151 Vt. at 157, 559 A.2d at 1071 (quotation omitted)

The main problem with the trial court’s decision is that it failed to recognize the limits that necessarily accompanied any prescriptive easement established by plaintiff’s predecessors.  The trial court granted plaintiff an unlimited prescriptive easement “for the purpose of general ingress and egress, both pedestrian and vehicular,” based upon evidence that, even when viewed in the light most favorable to the prevailing party below, established nothing more than intermittent use of the land for specific purposes— such as deliveries of fuel oil, occasional use of the back door by upstairs tenants, trash removal out the back door; etc.

With the exception of the deliveries of fuel oil, all of the uses listed above were not just intermittent, but were in fact so infrequent as to be insufficient to establish a prescriptive easement. Further, by “on-site abandoning” of the oil tank and encasing that tank in concrete , plaintiffs “conclusively and unequivocally” manifested an intent to abandon any prescriptive easement that might have existed for fuel deliveries.

Insurance coverage for sexual abuse by minor at a day care center, unless subjective intent to harm.

Northern Security Insurance Company, Inc. v. Stanhope et al. (2009-078) (08-Oct-2010) 2010 VT 92 (Burgess, J.)    

Northern Security Insurance Company (Northern), appeals from a superior court judgment that it owes a duty of coverage to Rose, Steven, and Kyle Perron, its insureds under a homeowner’s policy. We affirm.

The first appeal, Northern Sec. Ins. Co. v. Perron, 172 Vt. 204, 777 A.2d 151 (2001) (Northern I) held that the inferred intent rule was inapplicable to minors.  Id. at 226, 777 A.2d at 167.  The Court remanded the case to the trial court for a factual determination on whether Kyle intended or expected injury to occur, as well as a ruling on Northern’s additional claim that coverage was voided by Rose Perron’s alleged misrepresentations in her policy application

Northern first contends the trial court erred in applying the innocent co-insured doctrine to hold that Rose Perron’s misrepresentation did not void coverage for Steven or Kyle.  The court found that our decision in Fireman’s Fund Ins. Co. v. Knutsen, 132 Vt. 383, 324 A.2d 223 (1974) was controlling. We conclude that the trial court did not err in applying the innocent co-insured doctrine to preserve coverage for Steven and Kyle.

Northern next contends the trial court erred in declining to allocate to defendants the initial burden of proving an occurrence, defined under the policy as “an accident” neither expected or intended.  We considered and rejected the same claim in State v. CNA Ins. Cos., 172 Vt. 318, 331, 779 A.2d 662, 672 (2001). Accordingly, we find no error in the trial court’s decision to place the burden of proof on Northern to establish that the harm was “intended or expected”.

Northern finally claims that the trial court erred in rejecting its request for an instruction on the intentional-harm exclusion that would have incorporated an objective rather than a subjective standard.  The trial court had propounded an instruction explaining that “[w]hen we say expected in this context, what we mean is this:  Did Kyle know . . . that his sexual actions would harm Jesse and/or Gus.”  Northern proposed modifying the instruction to state as follows: “Did Kyle know or have reason to know that his actions” would cause harm.  (Emphasis added).  The trial court’s rejection of this request was correct.  An insured expects an injury if he or she is subjectively aware that injury is substantially certain to result.

This ruling did not prevent Northern from arguing that intent to harm could be inferred from all of the surrounding facts and circumstances, including evidence that Kyle knew the assaults were harmful and non-consensual.

Our  conclusion that a subjective standard governs whether a minor in these circumstances intended or expected harm to result has no impact on our earlier decisions holding that, when the perpetrator of the sexual assault or harassment is an adult, such intent must be inferred.  

Attorney’s fees awarded to both landlord and tenant, although net amount of judgment was against tenant and tenant did not recover on one of two counterclaims

Kwon v. Eaton, et al. (2009-367) (06-Aug-2010) 2010 VT 73 (mem.)

Landlords appeal the Superior Court’s decision to award attorney’s fees to tenants who established a habitability violation. Landlords contend that because they recovered a net judgment of $8,071.50 and tenants did not recover any net sum, landlords alone should be entitled to receive attorney’s fees. We affirm

The plain language of 9 V.S.A. § 4458(a) does not require a tenant to establish that it was “the prevailing party.” Rather, it grants attorney’s fees to a tenant when “the landlord fails to comply with the landlord’s obligations for habitability.” The attorney’s fee award to tenant is supported by the jury’s verdict that landlords violated the warranty of habitability, even though tenant did not recover damages on their consumer fraud claim. The two theories pursued by tenants involved essentially the same operative facts and were overlapping. See Elec. Man, Inc. v. Charos, 2006 VT 16, ¶ 10, 179 Vt. 351, 895 A.2d 193 (attorney’s fee award should not be apportioned based on recovery on each claim when claims at issue share common core of facts); L’Esperance, 2003 VT 43, ¶ 24 (affirming attorney’s fee award for consumer-fraud claim, including time spent on alternative claims, when alternative claims arose out of same transaction).

Real estate: covenants extinguished by merger of benefited and burdened estates.

Beldock v. Town of Charlotte (2009-007) (13-Aug-2010) 2010 VT 74 (Skoglund, J. )

Plaintiffs appeal from a superior court order granting summary judgment to defendant Town of Charlotte. Plaintiffs argue that deeds place restrictive covenants upon the Town that require the Town to maintain gates and fences along a Town-owned private lane providing access to plaintiffs’ property. The trial court ruled that the Town “has no obligation or duty to erect, maintain, close, or open any gate(s) at either end” of the lane, nor any “obligation or duty to erect, or maintain any fence(s) along any portion of the length of, or in the vicinity” of the lane. We affirm.

Because of consolidated ownership of the property, the doctrine of merger applies to extinguish the covenant. As we have explained before, “[o]nce the title to the adjoining properties vested . . . , the right-of-way was extinguished by the unity of ownership and possession.” Capital Candy Co. v. Savard, 135 Vt. 14, 15, 369 A.2d 1363, 1365 (1976); In 1996 Plouffe possessed plaintiffs’ land and simultaneously held the fifty-foot-wide Plouffe Lane; and, finally, held his own land, including the retained right-of-way. All benefited land—plaintiffs’ and the Plouffe’s—merged with the Town’s burdened land, and any existing covenants were thus extinguished. To preserve a covenant on the Lane would have required the parties to include language in the conveyances of 1996—a step they chose not to take.

Discovery sanction that led to dismissal affirmed even though no finding of bad faith or prejudice, because the sanction was not technically a dismissal.

 State v. Howe Cleaners, Inc. et al. (2009-110) (06-Aug-2010) 2010 VT 70 ( BURGESS, J.)

The State appeals from the dismissal of its civil enforcement action to hold prior and past owners liable for its costs of responding to and cleaning up a hazardous waste contamination site. We affirm.

The State argues that the trial court erred in granting summary judgment to Banknorth based on a litigation-ending discovery sanction against the State by not considering a lesser penalty. Imposition of sanctions under this Rule 37 “is necessarily a matter of judicial discretion” that is “not subject to appellate review unless it is clearly shown that such discretion has been abused or withheld.” John v. Med. Ctr. Hosp. of Vt., 136 Vt. 517, 519, 394 A.2d 1134, 1135 (1978); accord State v. Lee, 2007 VT 7, ¶ 15, 181 Vt. 605, 924 A.2d 81 (mem.)

Notwithstanding this broad discretion, however, we have held “that where the ultimate sanction of dismissal is invoked, it is necessary that the trial court indicate by findings of fact that there has been bad faith or deliberate and willful disregard for the court’s orders, and further, that the party seeking the sanction has been prejudiced thereby.” John, 136 Vt. at 519, 394 A.2d at 1135; accord Rathe Salvage, Inc. v. R. Brown & Sons, Inc., 2008 VT 99, ¶ 12, 184 Vt. 355, 965 A.2d 460 Accordingly, we have reversed trial court orders dismissing cases or entering default judgments as discovery sanctions when the orders did not set forth findings indicating the existence of bad faith on the part of the recalcitrant party and prejudice to the other side. See John, 136 Vt. at 519, 394 A.2d at 1135;see also In re Houston, 2006 VT 59, ¶¶ 13-16, 180 Vt. 535, 904 A.2d 1174 (mem.) (reversing dismissal order as discovery sanction because order was not supported by findings demonstrating bad faith and prejudice); Manosh v. First Mountain Vt., L.P., 2004 VT 122, ¶¶ 1, 10, 177 Vt. 616, 869 A.2d 79 (mem.) (same).

We find the State’s reliance on John unavailing. However similar in its effect, no ultimate sanction was actually imposed here. Although the sanction order led to the adverse judgment against the State, there was no outright dismissal or default. This case is similar to Lee, where the trial court sanctioned the offending party for discovery violations by accepting facts and allegations in the complaint as established and precluding the offending party from presenting a defense. 2007 VT 7, ¶ 6. As here, the trial court later granted summary judgment to the other side, and the sanctioned party argued to this Court that “the superior court was required to make findings [of bad faith and prejudice] on the record prior to imposing such sanctions.” Id. ¶ 17. We acknowledged that such findings are necessary when the “trial court imposes the ultimate sanction of dismissal,” but concluded that “dismissal was not ordered.”

Rather than sanction the State by dismissing or defaulting its case, the court here tailored the sanction to fit the violation by precluding the State “from using at trial evidence that should have been provided in accordance with” the June 2006 order requiring the State’s representative(s) to be available for Banknorth’s noticed deposition. By its terms, the court’s order was the neutralizing evidentiary remedy contemplated by Rule 37(b)(2)(B) (authorizing trial court to prohibit disobedient party “from introducing designated matters in evidence”)—not a dismissal under Rule 37(b)(2)(C) (authorizing trial court to dismiss action). This sanction order required no special findings of bad faith, prejudice, or lack of enforcement alternatives.

Pleading standards. Prisoners’ rights; Equal Protection; Court reverses 12(b)(6) dismissal.

Nichols, Wool et al. v. Hofmann (2008-510) (30-Apr-2010) 2010 VT 36 (DOOLEY, J.)

Plaintiffs, prison inmates housed at the Lee Adjustment Center, a privately operated prison in Beattyville, Kentucky, appeal the dismissal of their petition for injunctive relief seeking both the right to use debit cards for telephone calls and the availability of free postage stamps. We reverse and remand.

“When an inmate requests and receives a list of parties approved to receive telephone calls, the inmate shall be provided the option of using a debit or collect call system to place such calls.” 8 V.S.A. § 802a(c), The plain language of the definition of “correctional facility” demonstrates that it encompasses out-of-state private prisons that house offenders under DOC custody. We conclude that plaintiffs have the statutory right to use debit cards for telephone calls when housed in an out-of-state private correctional facility.

Plaintiffs next contend that DOC’s refusal to provide them with free postage stamps violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. The Equal Protection Clause demands that states treat similarly situated people alike, unless they have a rational basis for treating them differently. Engquist v. Or. Dep’t of Agric., 553 U.S. 591, ___, 128 S. Ct. 2146, 2153 (2008); City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985). The State concedes that it does not provide free stamps to plaintiffs, but contends that plaintiffs are not situated similarly to inmates housed in Vermont. The issue is whether the groups involved are similar in relevant aspects, that is “with respect to the purpose of the law in question.” We conclude that the fact plaintiffs are housed out of state , alone, does not show that plaintiffs are not situated similarly with in-state inmates for purposes of an entitlement to stamps. The state also claims it has a rational basis for any discrimination between in-state and out-of-state inmates. Each of these claims requires factual support, and DOC has provided none because it filed a motion to dismiss that cannot go outside the facts alleged by plaintiffs.

To maintain open access to the courts and to implement our preference for dispositions on the merits, courts should view Rule 12(b)(6) motions with disfavor and rarely grant them. Bock v. Gold, 2008 VT 81, ¶ 4, 184 Vt. 575, 959 A.2d 990 (mem.); Endres v. Endres, 2006 VT 108, ¶ 4, 180 Vt. 640, 912 A.2d 975 (mem.). A court should therefore grant a Rule 12(b)(6) motion only if “it is beyond doubt that there exist no facts or circumstances that would entitle the plaintiff to relief.” Richards v. Town of Norwich, 169 Vt. 44, 48, 726 A.2d 81, 85 (1999) (quotation omitted). The trial court acted prematurely in dismissing plaintiffs’ equal protection claim with respect to stamps.

Pleading standards, Rule 12 (b)(6). Error to dismiss a complaint alleging personal participation in corporate tort.

Prive v. Vermont Asbestos Group and Manosh (2008-474) (14-Jan-2010) 2010 VT 2 (Reiber, C.J.)

Plaintiff appeals the dismissal of his complaint against defendant Howard Manosh, the president and CEO of VAG,. The trial court granted Manosh’s motion to dismiss on the grounds that plaintiff’s failure to allege facts that would make Manosh personally liable for his actions at VAG. the second amended complaint alleges that Manosh “has been found to make all decisions regarding . . . maintenance and control of erosion from tailing piles . . . [and] containment and storage of discarded mining [hazardous] waste.” we conclude that plaintiff’s amendments could survive a 12(b)(6) motion to dismiss and were not, therefore, futile. It was thus an abuse of discretion for the trial court to deny plaintiff’s second motion to amend. We reverse and remand.

The crucial issue here is whether plaintiff provided adequate notice that Manosh personally participated in the alleged wrongful acts. Plaintiffs face a “low threshold for withstanding a 12(b)(6) motion to dismiss.” Indeed this an “exceedingly low” threshold in that “[m]otions to dismiss for failure to state a claim are disfavored and should be rarely granted.” As we stated in Bock, “[d]ismissal under Rule 12(b)(6) is proper only when it is beyond doubt that there exist no facts or circumstances, consistent with the complaint[,] that would entitle the plaintiff to relief.” Bock, 2008 VT 81, ¶ 4. Further, Vermont Rule of Civil Procedure 8 on pleading “omits the requirement . . . that the facts relied upon be pleaded, requiring instead a short and plain statement of the claim showing that the pleader is entitled to relief.” Bock, 2008 VT 81, ¶ 5 (quotations omitted) (citing Reporter’s Notes, V.R.C.P. 8). The key to whether a complaint is sufficient is notice; the complaint must provide “a statement clear enough to give the defendant fair notice of what the plaintiff’s claim is and the grounds on which it rests.” Id.

“Vermont has recognized that a corporate officer may be held liable for a tort in which the officer personally participated even though the corporation may also be liable.” Agency of Natural Res. v. Upper Valley Reg’l Landfill Corp., 167 Vt. 228, 243, 705 A.2d 1001, 1010 (1997) (emphasis added). One of the clearest statements on liability for corporate officers comes from the United States Court of Appeals for the Tenth Circuit:

It is the general rule that if an officer or agent of a corporation directs or participates actively in the commission of a tortious act or an act from which a tort necessarily follows or may reasonably be expected to follow, he is personally liable to a third person for injuries proximately resulting therefrom. But merely being an officer or agent of a corporation does not render one personally liable for a tortious act of the corporation. Specific direction or sanction of, or active participation or cooperation in, a positively wrongful act of commission or omission which operates to the injury or prejudice of the complaining party is necessary to generate individual liability in damages of an officer or agent of a corporation for the tort of the corporation.

Lobato v. Pay Less Drug Stores, Inc., 261 F.2d 406, 408-09 (10th Cir. 1958). We made a similar statement in Parker v. Cone, 104 Vt. 421, 160 A. 246 (1932), where we relied upon agency law to hold that a corporate officer is “not personally liable for torts committed by [an employee] while carrying out his instructions, unless he specifically directed them to be done, or participated or cooperated therein.” Id. at 425, 160 A. at 248. It is true that a corporate officer has no liability merely by reason of his office, but it is not true that a corporate officer has immunity for acts performed for the benefit of the corporation . there are some actions for which both the corporation and the corporate officer can be held liable—namely, those actions in which the corporate officer “personally participated.”

Plaintiff does not allege that Manosh is liable because of his status as president and CEO of VAG—an allegation that would not in itself be sufficient grounds for stating a claim of personal liability against Manosh. The second amended complaint alleges that Manosh has “ma[d]e all decisions regarding what is left of VAG operations,” including decisions regarding “maintenance and control of erosion from tailing piles located on VAG’s asbestos mine property.” the second amended complaint alleges much more than mere guilt by association. Plaintiff’s second amended complaint sufficiently alleges facts to put Manosh on notice of the claims of active participation in the torts asserted against him and VAG -- that Manosh “personally participated” in the alleged tortious actions—namely, by directing where the tailing piles would be placed and how they would be contained.

Workers Compensation; evidence. Superior court has jurisdiction of appeal of summary judgment ruling even though it involves a question of law. Majority holds epidemiological causation evidence inadmissible under Daubert.

Estate of George v. Vermont League of Cities and Towns (2008-374)(14-Jan-2010) 2010 VT 1 (Skoglund, J.) (Dooley, J., concurring.) (Reiber, C.J., joined by Johnson, J., dissenting)
Claimant appeals from the superior court’s order granting summary judgment to insurer in this workers’ compensation case. He argues that the court: (1) exceeded its jurisdiction under 21 V.S.A. § 671 by granting summary judgment to insurer; and (2) abused its discretion by excluding the expert testimony that he offered. We affirm the trial court’s decision.

Commissioner certified to the superior court the following question for determination: was claimant’s NHL causally related to his work as a firefighter? Insurer moved for summary judgment arguing that the opinions of claimant’s experts should be excluded under Vermont Rule of Evidence 702 as irrelevant and scientifically unreliable, and that without any admissible evidence of causation, claimant was not entitled to workers’ compensation benefits. Claimant responded that the standard for the admissibility of expert testimony under Rule 702, delineated in Daubert does did not apply to workers’ compensation claims in superior court; that insurer had waived its right to challenge the admissibility of the evidence by failing to raise this argument before the Commissioner; and that the court lacked jurisdiction to grant a motion for summary judgment.

The fact that insurer was granted judgment as a matter of law in this case does not transform the certified question into one of pure law that must be decided only by this Court. The rules of evidence and procedure are applicable in workers’ compensation cases heard by the superior court. The court’s review of the Commissioner’s decision “involves a retrial de novo.” That means that insurer is not limited to the arguments raised below, and preservation—or lack thereof—is not at issue. The trial court was obligated to apply the rules of evidence and to determine if the expert testimony proffered by claimant was relevant and admissible. The Commissioner has no expertise in such matters, and no deference to the Commissioner’s approach is required.

Without evidence of specific causation, summary judgment was properly granted to insurer. Our law requires claimant to show, not merely that firefighting increased the likelihood of injury, but that it more likely than not caused his disease.  Claimant failed to establish good grounds for such a conclusion here. Claimant relied on epidemiological studies, studies that focus on general causation rather than specific causation.

The court did not abuse its discretion in finding that Dr. Guidotti’s opinion was not based on sufficient facts or data, and that Dr. Guidotti had not applied scientific principles and methods reliably to the facts of this case. Dr. Guidotti opined that, “within reasonable medical certainty and given the weight of evidence,” claimant’s NHL “arose from his work as a firefighter and was caused by exposures in the course of his occupation as a firefighter.” Dr. Guidotti acknowledged that the demonstration of “more likely than not” in the epidemiological literature corresponded to a relative risk, or an odds ratio, of 2.0, although he argued that this standard should not be followed here. Where six of eight epidemiological studies did not show a statistically significant risk, it was reasonable for the trial court to conclude that Dr. Guidotti’s expert opinion that claimant’s NHL was more likely than not caused by firefighting lacked a solid and reliable foundation. The trial court did not abuse its discretion in considering a relative risk greater than 2.0 as a reasonable and helpful benchmark under the circumstances presented here.

Justice Dooley writes separately to criticize the Court’s “unworkable and inconsistent distinctions” made in an attempt to resolve appellate jurisdiction in workers’ compensation cases.  The Commissioner’s ruling was the functional equivalent of granting judgment as a matter of law to insurer, and, just like the decision of the superior court, is one of law, not fact. Under Stoll, 2009 VT 61, ¶¶ 7-8, this case was appealed to the wrong court, and the appeal should be dismissed. The majority’s rationale for distinguishing Stoll puts “more mud in muddy water”. Justice Dooley says we should allow all cases like this to go to the superior court and not require that they go exclusively to this Court. Stoll v. Burlington Elec. Dep’t, 2009 VT 61, ¶ 11, ___ Vt. ___, 977 A.2d 1282 (Dooley, J., dissenting).

Chief Justice Reiber, joined by Justice Johnson concludes it was abuse of discretion to “exclude expert testimony that met the standards articulated in Daubert and adopted by this Court.” Regardless of whether the conclusions of claimant’s experts are ultimately persuasive—an issue that is not before us today—“[t]he trial court should have allowed the adversarial process to draw out any deficiencies in the expert testimony, rather than usurping the jury’s function.” Id.

Res judicata. Ordinarily, the court issuing a judgment should not address its preclusive effect on future litigation.

Alden and Alden v. Alden, Alden, Dee and Alden (2009-017) (22-Jan-2010) 2010 VT 3 (mem.)
Julia Dee and Todd Alden appeal the Superior Court’s denial of a Rule 59(e) motion to amend the court’s order terminating the 1973 William C. Alden Trust. Appellants contend that the court’s refusal to expressly limit the preclusive effect of the order was an abuse of discretion. We affirm.

With respect to the Termination Action, each of the beneficiaries consented to termination of the Trust. However, they disagreed over how to distribute the Trust assets. The court issued its final order distributing the Trust. Meanwhile, appellants filed a series of motions all requesting that the court clarify that they would not be precluded from litigating their fiduciary breach claims in the Fiduciary Breach Action and that they would not be precluded from each seeking one-fifth of the amount, if any, that decedent’s second wife is found to have misappropriated, as damages in the Fiduciary Breach Action. The superior court denied the various motions and objections and declined to address the preclusive effect of its orders on the Fiduciary Breach Action.

The general rule is that a court should not dictate preclusion consequences at the time of deciding a first action. Rather, the court in the subsequent action is entitled to make its own determination as to the preclusive effect of the earlier judgment. “It is the duty of the second trial court—which knows both what the earlier finding was and how it relates to a later case—to independently determine what preclusive effect a prior judgment may be given.” Any exception to this rule is entirely prudential and not compelled by law. In the instant case, the superior court had no obligation to address the res judicata effect of its judgment. Therefore, we conclude that the superior court did not abuse its discretion in refusing to amend its order.


However we are compelled to address the preclusive effect of the judgment here. Because appellants sought, but were not permitted, to raise their fiduciary breach claims in the Termination Action, res judicata principles would not preclude them from pursuing the fiduciary breach claims in the Fiduciary Breach Action. Further, should decedent’s second wife be found liable in the Fiduciary Breach Action, appellants remain free to argue that they should each receive one-fifth of the value of the Trust assets that decedent’s second wife is proven to have misappropriated.

Parental rights. State failed to carry its burden of proof of showing child abuse -- even though injuries to children were no accident -- because of no “non-medical” evidence of abuse.

In re M.L. & Z.L. (2009-089)(29-Jan-2010) 2010 VT 5 (Burgess, J. ) (Reiber, C.J., dissenting.)

The State of Vermont appeals from the family court’s dismissal of its petition to declare juveniles M.L. and Z.L. as children in need of care or supervision (CHINS). Children join the State’s appeal. The State asserts that the family court applied an improperly high standard of proof and relied on irrelevant evidence in reaching its conclusion. We affirm.

Following a two-day hearing, the family court, Judge Howard VanBenthuysen presiding, denied mother’s motion to return M. L. to her custody. The court found that the evidence clearly and convincingly established that Z.L.’s acute head injuries were caused when he was struck in the head by enormous force, such as the force generated when an infant is swung by his feet and its head is struck against an object The court recounted that Z.L. had suffered not one but two life-threatening skull fractures and grossly traumatic brain injuries within a two-to-four-week period. The latter incident nearly caused his death, and it required two extensive brain surgeries. The injuries caused the clinical death of nearly half of his brain. This latter incident alone, the court concluded, was sufficient for the court to be concerned about M.L.’s safety. It was so horrific, so traumatic, and required so much force, and it could only have been inflicted by an adult. It was therefore reasonable to conclude that M.L. could be in danger if returned to parents’ custody.

The family court, Judge Mark Keller presiding, subsequently held a nine-day hearing on the merits of the State’s CHINS petition. The court found the State’s medical evidence compelling, but reasoned that this evidence must be viewed in the totality of the circumstances. The court found that the nonmedical evidence established that parents were good parents, and that there was no nonmedical evidence to support the allegation that parents abused Z.L. It thus concluded that the State failed to prove by a preponderance of the evidence that Z.L. was abused or that M.L. was in need of care or supervision.

While we might have reached a different decision than the family court, we are not persuaded that the court held the State to a heightened standard of proof. The court heard evidence over the course of nine days, reached its decision after much review and deliberation. We are mindful that it is the exclusive role of the family court to weigh the evidence and assess the credibility of witnesses. This case turned on the court’s assessment of the weight of the evidence. While the State may have satisfied its prima facie burden, the family court was ultimately not persuaded by its evidence. In other words, although there was evidence tending to support the State’s position, the court reasoned that such evidence, in its judgment, did not preponderate, and so, in a legal sense, it was unable to find that the children were CHINS. We will not disturb the court’s assessment of the evidence on appeal.

The Chief Justice dissents on the grounds that the court explicitly stated it was not persuaded by the parents’ experts, that “a fall involving M.L. was probably not the cause of the extensive acute damage to the skull and brain;” and that Z.L.’s injuries “were probably the result of non-accidental means.” According to Justice Reiber, it was beyond the court’s discretion to ignore these findings because the parents also appeared to be good people. Under our standard of proof, competent, credible medical evidence of abuse cannot be overcome by testimony that parents appear to be caring and attentive.

Insurance: Personal injury coverage for “negligent defamation.” Where some claims are covered Insurer is liable for full judgment unless it intervenes in tort case to obtain special verdict showing part of verdict was based on uncovered claims. Insurer must fund appeals.

Pharmacists Mutual Insurance Co. v. Myer, 2010 VT 10, 993 A. 2d 413 (Reiber, C. J.)
Glenn A. Myer appeals from a summary judgment declaring that his insurer, Pharmacists Mutual Insurance Company, owed him no duty to indemnify or pay defense costs on appeal from a third-party defamation claim. We reverse the decision on the duty to defend and indemnify, and remand for further proceedings.

Myer tendered the complaint to Pharmacists, which had issued him a homeowner’s policy that included an endorsement providing liability coverage for “personal injury.” The policy defined the latter to include “misrepresentation, libel, slander [and] defamation of character,” but specifically excluded coverage for personal injury “caused by a publication or statement made by . . . an insured, if the insured knew or had reason to believe that the publication or statement was false.

Myer contends the court erred in concluding as a matter of law, based on the special verdict in the defamation case , that the statements which the jury found to have been made negligently were not covered. We agree. The jury was directed to consider separately the two categories of statements, and to return separate verdicts on each. We discern no basis to interpret the special verdict, as finding that all of the defamatory statements were made by Myer with knowledge of their falsity or reckless disregard thereof.

We reject Pharmacists’ claim that negligent statements necessaritly fall within the policy exclusion for defamatory statements which the insured knew or “had reason to believe . . . [were] false.” Courts and commentators routinely employ the phrase “knew or had reason to believe” as a shorthand for a state of mind equivalent to gross or willful misconduct or even actual malice. The exclusion does not apply to defamatory statements made negligently.

For purposes of judicial economy, we also consider the corollary issue, raised and briefed by the parties, as to how—if at all—to allocate the damage award in the event of a finding on remand that some of the defamatory statements were merely negligent and therefore within the policy coverage. As noted, the jury in the Cooper litigation rendered an undifferentiated award of $150,000 for defamation; it did not distinguish between covered and uncovered conduct. It is settled law in Vermont, however, that once an insured has demonstrated coverage under a policy, the burden falls “on the insurer to show that a third party’s claim against the insured is entirely excluded from coverage.” State v. CNA Ins. Cos., 172 Vt. 318, 324, 779 A.2d 662, 667 (2001) (emphasis added).

Thus, it was, and remains, Pharmacists’ burden to demonstrate that the award was based upon conduct entirely excluded from coverage, or to show how the jury allocated damages as between covered and uncovered conduct. To protect its interests and meet its burden it was incumbent upon Pharmacists to notify the trial court and the parties of the potential apportionment issue and of the need for special interrogatories allocating damages, to seek permission if necessary to attend the charge conference to propose such interrogatories, or even to intervene in the litigation if all else failed. Pharmacists failed to seek an allocated verdict on the defamation award and thus cannot meet its burden to demonstrate that the award was for statements entirely excluded from coverage under the policy. Pharmacists, therefore, would remain responsible for the defamation award in its entirety in the event that any of the statements are ultimately found to fall within the policy coverage.

Myer further claims that the trial court erred in concluding that Pharmacists had no duty to pay attorney’s fees and costs incurred in the appeal from the judgment in the Cooper litigation.. The ruling was unsound. The general rule is that an insurer under a general duty to defend is required to bring an appeal on its insured’s behalf “when there are reasonable grounds to believe that the insured’s interests might be served by an appeal.” As discussed, the underlying judgment here exposed Myer to both covered and uncovered damages; a reversal would plainly have served his interests; and the appeal raised at least reasonable—if ultimately unsuccessful—grounds for challenging the judgment. Accordingly, we hold that Myer was entitled to recover attorney’s fees and costs incurred in prosecuting the appeal in the Cooper litigation.

That portion of the summary judgment declaring that Pharmacists owed no duty to indemnify Myer for the $150,000 defamation award or to pay for attorney’s fees and costs incurred in his appeal from the underlying judgment in the Cooper litigation is reversed, and the matter remanded for further proceedings consistent with the views expressed herein.

Procedure: denial of motion to amend affirmed; Rule 50, punitive damage issue not preserved.

Ferrisburgh Realty Investors v. Schumacher, 2010 VT 6 (Skoglund, J.)
Developer Ferrisburgh Realty Investors (FRI) appeals from the trial court’s decision, following a jury verdict, in this contract dispute. Landowner Robert Schumacher cross-appeals.[1] FRI argues that the court erred by: (1) denying its request to allow certain claims to go to the jury; (2) refusing to allow it to amend its complaint to add a new claim; (3) reducing the jury’s award of damages; and (4) denying its request for injunctive relief. Landowner asserts that the court erred in: (1) finding an enforceable contract; and (2) upholding the punitive damages award. With the exception of a revision to the jury award for breach of contract, we affirm

FRI sought to add an abuse of process claim to its complaint. FRI argues that its request should have been granted because it could have completed discovery on this claim prior to the rescheduled jury draw. The record shows that FRI sought to add this claim in April 2007, seven months after its original complaint was filed. The jury draw had already been continued once in March 2007.and the court again postponed the jury draw to August, The court did not err in refusing to postpone the proceedings further to accommodate FRI’s desire to add a new claim. See Colby v. Umbrella, Inc., 2008 VT 20, ¶ 4, 184 Vt. 1, 955 A.2d 1082 (denial of a motion under Rule 15(a) may be justified based upon a consideration of undue delay, among other factors). While FRI now suggests that it could have completed discovery on its new claim before the August jury draw, the court implicitly concluded otherwise. The trial court offered adequate grounds for its decision in this case, and we find no error.

We turn next to the punitive damages award. Schumacher argues that his conduct was not sufficiently egregious to warrant an award of such damages Schumacher fails to demonstrate that he preserved this argument. He did not raise the issue in his motion for a directed verdict at the close of FRI’s case, and he does not show that he raised the issue at trial. Instead, Schumacher appears to have raised the issue for the first time in his post-trial motion for judgment as a matter of law. He thus waived this claim of error. See V.R.C.P. 50(a), (b) (party who believes there is no legally sufficient evidentiary basis for reasonable jury to find for opposing party on certain issue must make motion for judgment as a matter of law before case is submitted to jury, and motion must be renewed post-verdict); Lemnah, 144 Vt. at 571, 482 A.2d at 702 (where defendant first challenged punitive damages by motion for judgment notwithstanding the verdict, issue was not preserved for review); see also V.R.A.P. 28(a)(4) (appellant’s brief should explain what the issues are, and how they were preserved).

SCOVT note. Compare Beaudoin v. Feldman, 2018 VT 83 (defendant  preserved his claim for appellate review by complying with V.R.C.P. 50(a) and (b), regardless of whether or not he also objected to the jury instruction on punitive damages.)

Administrator’s sale set aside because of unspoken limitation that property be “ kept in the family”.

In re Estate of Doran (2007-483) (26-Feb-2010) 2010 VT 13 (Burgess, J.) (Reiber, C.J. and Dooley, J., dissenting.)
This case involves a dispute among family members regarding the disposition of the estate of Raymond Doran, who died intestate in February 2004. There are twenty-one interested heirs, including Raymond’s three surviving siblings and the children of four siblings who predeceased Raymond. At issue are 187 acres of real property near the town of Castleton.

The estate’s co-administrators obtained a license to sell the property, and they held a private auction limited to family members. Appellant James Doran, one of Raymond’s nephews, was the highest bidder.

The probate court confirmed the bids, and Raymond’s sister, Catherine Pellegrino, appealed this order to the superior court. Shortly thereafter, James assigned his interest in the property to a limited liability corporation, whose members included himself, his attorney in this case, Harry Ryan, and other nonfamily members.

The superior court struck the probate orders, finding that James had acted in bad faith, and it remanded the case to the probate court. James appeals from this decision, and we affirm because there was evidence the intestate wanted the property "kept in the family."

Reiber, C.J. and Dooley, J., dissenting on grounds that the superior court erred in concluding that written formalities could be dispensed with in the name of equity. Underlying legal principle prevents trial courts from placng restrictions on the alienation of property by after-the-fact guesswork, as opposed to advanced planning by formal written instruments, such as wills, covenants, and limited licenses to sell. The other heirs could have sought a limitation on the license to sell that prevented resale, or defined the conditions under which it would be allowed. In the absence of such a limitation, there is no ground to interfere with a bona fide sale under the unrestricted terms of the license. The majority’s conclusion to the contrary reduces probate administration to a swearing contest.

Workers Compensation. Commissioner erred in failing to address whether there was a valid claim for workers’ compensation and in barring the claim under § 649 because claimant was intoxicated at the time his injury.

Cyr v. McDermott's, Inc. (2008-290) (05-Mar-2010) 2010 VT 19 (Skoglund, J.) (Reiber, C.J., dissenting joined by Justice Burgess.)
The workers’ compensation structure in Vermont is meant to provide employees with reliable compensation for work-related injuries while limiting employer liability to legitimate harm arising out of, and in the course of, employment. Claimant Henri Cyr worked for McDermott’s, Inc., a hauling company that transports milk in bulk from farms to creameries. He was employed as a part-time mechanic’s helper, keeping the maintenance garage clean and occasionally servicing trucks. After accidentally drinking a caustic agent used to clean the milk trucks, he suffered severe internal chemical burns. He filed a claim for workers’ compensation under Title 21, chapter 9 of the Vermont Statutes. The Commissioner of Labor granted summary judgment to employer, finding claimant was intoxicated at the time his injury occurred and, thus, compensation was not allowed under 21 V.S.A. § 649. On appeal, claimant contends the Commissioner misapplied § 649. We conclude that the Commissioner erred in failing to address the threshold question of whether there was a valid claim for workers’ compensation and in barring the claim under § 649. We reverse the Commissioner’s grant of summary judgment and remand for further proceedings.

Arbitration proceeding not res judicata to later claim outside the scope of reference.

In re Shelburne Supermarket, Inc. (2009-181) (09-Apr-2010) 2010 VT 30 (Reiber, C.J. )
Parents Harry Clayton and Lucille Clayton appeal from the trial court’s order in this long-running family dispute over stock shares. An arbitrator concluded in 2002 that son Steven Clayton, rather than parents, owned certain disputed shares. The trial court confirmed this decision on appeal. Following additional proceedings, the trial court also concluded that son was entitled to $514,964.26 in past dividends paid on these shares. Parents argue that the court erred in awarding son this sum.

We affirm. As the trial court found, son was not “splitting his claim” because the issue of dividend payments was not within the scope of the agreed-upon arbitration. The requirements of res judicata are plainly not satisfied here.

It is true that “an arbitration is in the nature of a judicial inquiry, and thus has the same force and effect of an adjudication in terms of precluding the same parties from relitigating the same subject.” Unlike a judicial proceeding, however, the scope of an arbitration is a creature of contract.

Thus, as the trial court stated, the parties are free to arbitrate some parts of their dispute while setting other matters aside, regardless of the legal implications that would attach if the issue had been litigated rather than arbitrated. See also Restatement (Second) of Judgments, § 84, cmt. d. (1982) (“A preliminary question in giving res judicata effect to an arbitration award is whether the claim or issue was within the scope of the reference to arbitration.”). In this case, the parties did not agree to arbitrate the issue of payment for the shares and recovery of dividends.

Punitive damages award reversed. Standard for punitives based on recklessness announced. "Reprehensibility" required.

Fly Fish Vermont v. Chapin Hill Estates, 2010 VT 33 (Burgess, J.)
In this action involving a boundary dispute and claims of nuisance and trespass related to the siltation of a pond, the appealing landowner argues that the court erred by awarding punitive damages without finding the requisite wrongful intent, or, alternatively, by awarding an excessive amount of damages. We reverse its award of punitive damages. Despite defendants’ generally reckless violation of the permit conditions imposed for the protection of plaintiffs’ pond, we agree the record cannot support a punitive award given the absence of outrageously reprehensible conduct and the lack of actual or legal malice towards plaintiffs.       


Generally punitive damages require a showing of essentially two elements. The first is wrongful conduct that is outrageously reprehensible. The second is malice, defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like (at¶ 21) In this case the court adopts and incorporates recklessness as a component of malice, and establishes a measure by which recklessness reaches the point of actual malice.     


The court “holds” that punitive damages are not limited to intentional egregious torts, but can also extend to “egregious harm” resulting from reckless conduct amounting to malice.  The minimum culpability necessary for an award of punitive damages based on reckless or wanton misconduct requires evidence that the defendant acted, or failed to act, in conscious and deliberate disregard of a known, substantial and intolerable risk of harm to the plaintiff, with the knowledge that the acts or omissions were substantially certain to result in the threatened harm. (at ¶ 25)   But neither such indifference to plaintiff's rights nor  even wilful violation of law is  determinative of malice. Vindication of the permit process is not a basis for punitive damages.     


In keeping with the court’s “consistent preconditioning of punitive damage upon outrageously egregious misconduct” such “reckless malfeasance or nonfeasance and its attendant risk of harm must all be more reprehensible than simply wrongful or illegal behavior." The findings show that defendants were merely  reckless scofflaws in wilful violation of their permit who were indifferent to plaintiffs’ interest.  The threatened and resulting harm were not—compared to our precedent— so “outrageously reprehensible” as to render defendants’ recklessness malicious as a matter of law.

Stare decisis: Cat precedent applies to Dogs. Court refuses noneconomic damages for the malicious destruction of pet dog.

Scheele v. Dustin (2009-213) (21-May-2010) 2010 VT 45 (Skoglund, J)

This case asks the Court to decide the proper measure of damages for the loss of a family dog. David Putter, Montpelier, and Heidi Groff for Plaintiffs-Appellants. Plaintiffs appeal from a judgment denying them recovery for emotional damages for the intentional killing of their pet dog, Shadow. Though plaintiffs recovered $155 in economic damages for the destruction of their property, the issue is whether they are entitled to damages for emotional distress or loss of companionship as a result of Shadow’s death. They claim that the real worth of a pet is not merely financial and cannot be measured solely by the replacement value. Thus, they argue, their emotional suffering—the result of defendant’s malicious and intentional acts—warrants noneconomic damages. The Superior Court barred such recovery, holding that Vermont does not recognize noneconomic damages for the malicious destruction of personal property, even when the property is a beloved pet. We affirm.

Last year, in Goodby v. Vetpharm, we addressed a similar case that claims for emotional damages and loss of companionship stemming from alleged negligent or wanton acts resuling in the death of two pet cats. We affirmed the trial court’s denial of the plaintiffs’ request for noneconomic damages, including loss of companionship and emotional distress, on the ground that such damages were unavailable for the destruction of a pet because it is type of personal property. We see no reason to deviate from the sound logic of Goodby. That Goodby, sounded in negligence whereas, here, defendant alleged acted with intent and malice when he shot plaintiffs’ dog is not a distinction that entitles plaintiffs to noneconomic damages for their property loss. Instead, punitive damages are available in instances of an intentional and malicious tort.

The court at (¶ 15) refuses to extend the common law to recognize a new cause of action for the wrongful killing of a pet dog. While this Court has and will “change the common law to meet changing needs of the people of this state,” we also recognize instances where the issue presented “is better left for legislative resolution.” As in Goodby, here "[p]laintiffs fail to demonstrate a compelling reason why, as a matter of public policy, the law should offer broader compensation for the loss of a pet than would be available for the loss of a friend, relative, work animal, heirloom or memento—all of which can be prized beyond measure, but for which this state’s law does not recognize recovery for sentimental loss." 2009 VT 52, ¶ 11

Here we see no principled basis upon which to define categories of applicable harm or recovery. Moreover, when we have chosen in the past to expand the common law, we have recognized that such changes must still fit “within the doctrine of stare decisis.” See Hay v. Med. Ctr. Hosp. of Vt., 145 Vt. 533, 544, 496 A.2d 939, 945 (1985) (quotation omitted). While we do not hew to precedent without regard to the challenges and changing needs of the people of Vermont, we are not persuaded that plaintiffs’ cause requires a major shift in the landscape of the common law, especially coming so close upon the heels of our most recent ruling. Thus, as we stated above, our decision in Goodby and its predecessors continue to guide us today.

In holding with the traditional view that the law recognizes animals as a type of property, we are not blind to the special place they hold in our lives. Indeed, pets occupy a legal realm somewhere between chattel and children. 

Our animal protection statutes today circumscribe minimum standards of care for all animals, now defined as “all living sentient creatures, not human beings,” 13 V.S.A. § 351(1). Thus, under Vermont law, a person would face no criminal charges for ignoring their garden during a hot, dry summer or overloading a bookshelf to the point of collapse. Yet like treatment of a pet or other animal could result in incarceration or thousands of dollars in fines. See 13 V.S.A. § 352(2) & (4); id. § 353 (imposing criminal penalties). Over generations, the Legislature has shaped a complex and comprehensive structure guiding our treatment of animals. This statutory regime lends credence to our position that “[t]he changes plaintiffs request are better presented to the General Assembly,”

Property transfer tax. 90-day rule invalid.

Polly's Properties v. Department of Taxes (2009-124) (21-May-2010) 2010 VT 41 (Skoglund, J.)

Polly’s Properties, LLC (taxpayer) appeals from a superior court judgment upholding the Department of Taxes’ assessment of a property-transfer tax on two parcels of real property transferred to taxpayer as its start-up capital. Taxpayer contends the trial court erred in concluding that, because the transfers did not occur at the time of, or within ninety days thereafter, the filing of taxpayer’s articles of organization it was not entitled to a transfer-tax exemption under 32 V.S.A. § 9603(24). For the reasons set forth below, we reverse.

The Department of Taxes denied the claimed exemption on the ground that the transfer was not made at the time of the LLC’s “formation” or within the subsequent “ninety-day window” allowed by the Department. If the “formation” of an LLC for purposes of qualifying for the transfer-tax exemption necessarily occurs when it is “organized” by means of filing articles with the Secretary of State, it thus follows that the property transfers at issue here—which occurred some ten months after taxpayer filed its articles—were untimely and ineligible for the tax relief afforded by the statute. However, this renders the statue meaningless. As the Department acknowledges however, neither taxpayer nor any other LLC could literally comply with the plain terms of the statute because property transfers to an LLC must logically follow its organization.

The statute cannot be enforced according to its plain meaning because it leads to absurd results. To correct problem the Department arbitrarily created a ninety-day window for tax-exempt property transfers, with no reference whatsoever to any underlying legislative purpose or justification. Instead we construe the statute, consistent with the legislative tax-relief purpose, to mean that the “formative” event is the initial transfer of capital, or capitalization of the company.

Right of First Refusal requires matching offer.

Bischoff v. Bletz, Sr., Van Guilder and White (2009-192) (21-May-2010) 2010 VT 49 ( Dooley, J.)
White appeals from a judgment requiring that he pay the full purchase price offered by third-party purchasers as a requirement of exercising his right of first refusal for certain real property owned by sellers We affirm. White contends that he was required to match only the “net price” to be tendered at closing, i.e., the purchase price less payments already made by the third party for an option which, if exercised would have been credited toward the purchase price. . Sellers maintain that the trial court correctly concluded that nothing less than the full purchase price was sufficient to match the offer. A right of first refusal becomes an option to purchase once a purchaser makes an offer acceptable to the seller. The holder of the right of first refusal must exercise the option according to its terms in order to generate a binding contract to purchase. As in this case, the price term can be a requirement that the holder of the right of first refusal match the price from the prospective purchaser. The right of first refusal required White to purchase the properties “on the same terms and conditions as the original bona fide offer.” We agree with the trial court held that White would purchase the properties “on the same terms and conditions” as the offer only if he paid the full price.

Insurance. No coverage ruling affirmed: breach of warranty of habitability is not wrongful eviction or other “personal injury”; “reasonable expectations’ theory rejected; no decision whether there should be Chinese wall between coverage counsel and insurer-retained defense counsel.

Vermont Mutual Insurance Company v. Parsons Hill Partnership, Willard Group, Poulin Group and Fortin (2008-509) (04-Jun-2010) 2010 VT 44 (Dooley, J.)
Plaintiff insurance carrier sought a declaration that landlord’s liability insurance policies do not cover tenants’ claims for breach of an implied warranty of habitability, arising out of water contamination. The trial court granted insurance carrier’s motion for summary judgment .Defendants appeal. We affirm.

Coverage B provides coverage for “personal injury” defined as including wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor.” The trial court ruled there is no coverage because the underlying litigation does not involve damages for “personal injury” as that term is defined in the Policy. We conclude that this ruling was correct.

This type of coverage is a theory-based insurance coverage. It defines its coverage in terms of offenses, or theories of liability, not in terms of the injury sustained by the plaintiff. The court held that “[t]here was no constructive eviction here; . . . none of the tenants ever actually moved out, i.e., no involuntary ‘eviction,’ or loss of tenancy actually resulted” and “the toxic contamination of their drinking water [did not] materially invade, or compromise in any way their rights to exclusive possession of their leased premises.”

We agree with the trial court that tenants’ theory of landlord’s liability does not create coverage under Coverage B. As the trial court observed, the underlying claim does not involve eviction or wrongful entry. Thus, to claim an “offense” under Coverage B, the claim must involve an invasion of the tenants’ private right of occupancy. In our view, the breach-of-warranty claim does not involve an offense as that term is used in Coverage B. Construing a breach of warranty as an “invasion” stretches the language of the Policy beyond its plain and unambiguous meaning.

Defendants next argue that landlord had a reasonable expectation of coverage and that this expectation should trump any coverage limitations. Apart from circumstances where an agent of the insurance carrier promises specific coverage, we have not held that the expectations of an insured can control over unambiguous policy language. The standard policy provisions, particularly the provision of Coverage B at issue in this case, have been the subject of many court decisions, and their limitations can be readily determined. We cannot find any expectation of coverage under Coverage B to be reasonable given the unambiguous language of the policy.

Finally, defendants argue that we should reverse because insurance carrier’s coverage staff improperly used confidential information obtained by insurer-supplied defense counsel from his client, landlord, to deny coverage. The trial court found no facts from which it could infer that insurance carrier’s staff had improper access to confidential information “which would be of any use, or benefit at all in this coverage litigation.” We concur because the controlling coverage issue is purely one of law, and insurance carrier could not have obtained from defense counsel any information that could have any effect on whether coverage existed.

Condominium declaration cannot be altered solely by individual deed or private agreement.

Madowitz and Kohl v. The Woods at Killington Owners' Association (2008-502) (02-Jul-2010) 2010 VT 37 (Johnson, J.) (Dooley, J., dissenting joined by Joseph, D.J., Specially Assigned)
This interlocutory appeal arises out of a dispute over development rights at a condominium complex. An association of condominium unit owners appeals from a decision by the Superior Court granting summary judgment in favor of plaintiff developers who are seeking to further develop the project without obtaining written consent from each unit owner. The question on appeal is whether development rights created under declaration can be cut off by a ten-year durational limitation created by 105 of the 107 conveyances from the original developer to unit owners and by two separately executed limited powers of attorney. We conclude that because the declaration cannot be altered solely by individual deed or private agreement, developers’ rights to develop the project have not expired and that the superior court was correct in granting summary judgment in favor of developers.

Pursuant to 27 V.S.A. § 1306(b), a developer needed consent from each unit owner before he could alter the percentage of undivided interest held by each owner. Instead of procuring consent from each unit owner prior to each and every addition to the development, to comply with former § 1306(b), the developer included the following provision in the original 1985 declaration as a way to obtain prior consent from each unit owner:

[B]y acceptance of deeds of their Units, Unit Owners shall be deemed to have designated and appointed Declarant as their attorney in fact for the sole, limited and exclusive purpose of amending this Declaration in accordance with this section, so that an Amendment filed by Declarant pursuant hereto shall result in the amendment and reduction of such fractional interest without further action or consent by Unit Owners . . . .

This provision effectively provided unit owners’ consent to future project additions that would result in reductions of each owner’s percentage interest in the common areas. Though 27 V.S.A. § 1306 was later amended to prohibit the practice of obtaining prior consent to development in this manner there is simply no way to construe § 1306, as it appeared at the time the deeds of condominium were conveyed, as prohibiting this practice.]

A declaration or “master deed” effectively trumps individual deed restrictions. The declaration provisions directly conflict with the ten-year limitations found in 105 of the 107 deeds of condominium and two separately executed powers of attorney. There is simply no harmonious way to read these conflicting provisions, and we will not inject ambiguity into otherwise unambiguous provisions. The unambiguous language of the declaration explicitly gave developers the right to continue with their phased development plans



Dooley, J., dissenting joined by Joseph, D.J., Specially Assigned : I concur with Justice Mahady’s sentiment, expressed roughly twenty years ago, that “[t]he law should be more solicitous of . . . innocent consumers than of the tortfeasor-developer.” Meadowbrook Condo. Ass’n v. Burlington Realty Corp., 152 Vt. 16, 29, 565 A.2d 238, 245 (1989) (Mahady, J., concurring and dissenting). Because the Vermont Condominium Ownership Act, at its heart, is a consumer protection statute, the condominium owners should prevail on their claim that developers cannot dilute their share of the common area without their consent. The majority mistakenly treats this case as if it involved a conflict between condominium unit owners, or between unit owners and the condominium owners’ association. Instead, this is a conflict between the condominium owners and developers. The flaw in the majority’s decision and rationale lies in its statement that there is a “discrepancy between the declaration and the deeds and powers of attorney.” Rather than acting on this discrepancy with solicitude toward the innocent consumers, the majority enables developers to perpetrate a consumer fraud on the condominium purchasers, thus endorsing conduct that is outside the “spirit of fairness, justness, and right dealing.” Starr Farm Beach Campowners Ass’n, Inc. v. Boylan, 174 Vt. 503, 507, 811 A.2d 155, 160 (2002) (mem.) (quotation omitted).

Stealing customers by insider is both breach of fiduciary duty and interference with business relations worthy of punitive damages:

J.A. Morrissey, Inc. v. Smejkal, 2010 VT 66 (Johnson, J.)
This case arises from the demise of a business relationship within a construction company. Defendants appeal from the partial denial of their post-trial motion for judgment as a matter of law, or in the alternative, for a new trial, following a jury verdict in favor of plaintiffs in an action for breach of fiduciary duty, interference with business relations, and fraudulent conveyance. On appeal, defendants first assert that the evidence did not support the jury’s conclusion that Smejkal breached his fiduciary duties. Second, defendants challenge the jury’s verdict with respect to interference with prospective business relationships. Third, defendants argue that the fraudulent conveyance finding was erroneous. Finally, defendants assert that punitive damages were not properly assessed against Smejkal because there was insufficient evidence of malice. We affirm.

Smejkal owed a fiduciary duty to JAM in his role as vice-president and corporate director of the company. This duty imposed an obligation upon Smejkal to act with the utmost good faith and loyalty for the best interests of JAM. Officers and directors have been found to have breached their fiduciary duties when, while still employed by the company, they solicit the business of a single customer before leaving the company, or use the company’s facilities or equipment to assist them in developing their new business . A corporation’s fiduciary is not permitted to take advantage of business opportunities which are considered to belong to the corporation as far as the fiduciary is concerned.. Based on the evidence the jury could have concluded that Smejkal abused his position and intentionally failed to inform JAM about the Johnson estimate because he wanted to usurp the project for himself, thereby breaching his fiduciary duties to JAM.

To prevail on a claim for interference with prospective business relationships, a plaintiff must show: (1) the existence of a valid business relationship or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3) an intentional act of interference on the part of the interferer; (4) damage to the party whose relationship or expectancy was disrupted; and (5) proof that the interference caused the harm sustained. Gifford v. Sun Data, Inc., 165 Vt. 611, 613 n.2, 686 A.2d 472, 474 n.2 (1996). A plaintiff must show that the interferer acted with the purpose to harm the plaintiff or by means that are dishonest, unfair, or improper. Id. at 613, 686 A.2d at 474-75. Competitive business practices are not proscribed under the tort unless those practices are criminal or fraudulent. Id. at 613, 686 A.2d at 475; see Restatement (Second) of Torts § 768(1) (1979) (competition does not rise to level of improper interference if “actor does not employ wrongful means”). Based on the evidence, it was reasonable for the jury to infer that Smejkal wrongfully used his position as a trusted, high-ranking JAM employee to sabotage JAM and then usurp Paluska as a client for his new company. The jury could also have inferred that Smejkal knew that the Johnson estimate would generate work for JAM and then chose not to tell anyone at JAM about the estimate or his work on the project because he wanted to perform work for Johnson himself and for his own benefit. Indeed, the facts show that Smejkal abused his position of trust at JAM to surreptitiously obtain work for himself.

An award of punitive damages requires a showing of: (1) wrongful conduct that is outrageously reprehensible; and (2) malice. Fly Fish Vt., Inc. v. Chapin Hill Estates, Inc., 2010 VT 33, ¶ 18. Malice is “defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like.” Id. Malice may be found where one seeks to profit, through conduct that is deliberate and outrageous, at the expense of another. DeYoung v. Ruggierio, 2009 VT 9, ¶ 27, 185 Vt. 267, 971 A.2d 627 (“[M]alice may arise from deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another.”). Compare Villeneuve v. Beane, 2007 VT 75, ¶ 10, 182 Vt. 575, 933 A.2d 1139 (mem.) (concluding that landlord’s conduct in unlawfully evicting tenants was “intentional, unlawful, criminal in nature, and outrageous” and justified punitive damages) with Monahan v. GMAC Mortgage Corp., 2005 VT 110, ¶¶ 53, 60, 179 Vt. 167, 893 A.2d 298 (concluding that “conduct that does not involve a deliberate decision by the promisor to breach, falls far short of the punitive damages standard” and that conduct evidencing breach of covenant of good faith and fair dealing which consisted “mainly of inaction” did not “indicate the personal ill will, or evidence the bad motive associated with malice”).

We conclude that the evidence presented here is sufficient to support the jury’s assessment of punitive damages against Smejkal because the jury could have found that Smejkal “harbored ill will, and actual malice towards JAM, and intentionally desired, and took concrete actions to steer economic benefits to himself and away from JAM.” In light of the relationship between the parties and the trust that was placed in Smejkal as an important member of a small company, his actions meet the standard of intentional and sufficiently wrongful conduct necessary to sustain punitive damages. The jury could have properly found that Smejkal’s conduct—which included a concerted effort to sabotage JAM’s professional relationship with longstanding clients and to siphon off those clients for his own financial benefit—demonstrated actual malice towards JAM.

Mandatory retirement age constitutional

Badgley and Whitney v. Walton and Sleeper, Commissioners (2008-385) (02-Jul-2010) 2010 VT 68 (Dooley, J.)(Johnson, J., dissenting)
Plaintiffs appeal the Superior Court’s dismissal of their claim that the mandatory retirement of public safety officers violates the Common Benefits Clause of Chapter I, Article 7 of the Vermont Constitution. We decide that the mandatory retirement line currently drawn by the Legislature bears a reasonable and just relation to a legitimate state interest, and for that reason, we find no violation of the Common Benefits Clause of Chapter I, Article 7 of the Vermont Constitution. Affirmed.

The Common Benefits Clause of the Vermont Constitution provides, in pertinent part, “[t]hat government is, or ought to be, instituted for the common benefit, protection, and security of the people, nation, or community, and not for the particular emolument or advantage of any single person, family, or set of persons, who are a part only of that community.” Vt. Const. ch. I, art. 7. In Baker, 170 Vt. at 202-11, 744 A.2d at 869-77, we explained the relevant inquiry as follows:

We must ultimately ascertain whether the omission of a part of the community from the benefit, protection and security of the challenged law bears a reasonable and just relation to the governmental purpose. [F]actors to be considered in this determination may include: (1) the significance of the benefits and protections of the challenged law; (2) whether the omission of members of the community from the benefits and protections of the challenged law promotes the government’s stated goals; and (3) whether the classification is significantly underinclusive or overinclusive.
Id. at 212-14, 744 A.2d at 878-79. We accord deference to “legislation having any reasonable relation to a legitimate public purpose.” Id. at 204, 744 A.2d at 871-72.

Plaintiffs’ main arguments involve the third factor: whether the classification is overinclusive or underinclusive. Based on testimony of defendants’ witness, the trial court found that, because of the interdependent nature of police work, even a low percentage of police with unacceptable performance abilities significantly impairs the Department’s ability to perform its mission. If one member of a team cannot perform as required, the entire team cannot perform as required. Given the trial court’s findings and conclusions and the evidence on which they rest, we cannot conclude, that the mandatory retirement law is so overinclusive that it violates the Common Benefits Clause as a matter of law.

In reaching this conclusion, we specifically reject the dissent’s argument that when “substantial evidence from qualified experts is adduced against [the law], . . . the [State] has the burden of meeting it fairly and refuting it.” The dissent’s rule would nullify legislative fact-finding whenever the Court finds that the challenger’s expert witness is more persuasive than that put forward by the State. It would mean that no deference would be given to the Legislature’s policy choice, nor to the Legislature’s own analysis of the factual circumstances that necessarily occurred during the enactment process. \The dissent would wrongly strike down a Vermont statute based solely on the testimony of an expert witness.

Johnson, J., dissenting: This is the 21st century. This is the United States of America. This is Vermont. Nobody should lose their job because they have a birthday and because of no other reason. The mandatory retirement of fit, experienced, and capable state police officers, solely because of their age, is plainly unconstitutional under settled precedent of this Court. The law violates the guiding principle of the Common Benefits Clause to safeguard the rights and liberties of all Vermonters. Today’s decision makes our Common Benefits jurisprudence, not rigorous and principled as it ought to be, but merely idiosyncratic.