Consumer Protection Act does not apply to sale of a business because Act requires a transaction “in commerce,” i.e. the consumer marketplace. Restitution of consideration is an alternate to lost profits as measure of damage for breach of noncompetition agreement

Foti Fuels, Inc. v. Kurrle Corporation, 2013 VT 111 (13-Dec-2013)

REIBER, C.J. Plaintiff Robert Foti sold most of his fuels business to defendant James Kurrle and agreed to sell gasoline to defendant through his retained wholesale distributorship. When their business relationship soured after several years, plaintiff sued defendant for one month’s nonpayment of gasoline and other claims. Defendant counterclaimed for breach of contract, breach of the covenant of good faith and fair dealing, and violation of the Vermont Consumer Fraud Act (CFA), all arising from his original purchase of plaintiff’s business. Defendant now appeals the court’s judgments as a matter of law on these counterclaims in favor of plaintiff. The trial court held that there was no sufficient evidentiary basis for the jury to find that the transaction occurred “in commerce,” as defined by the CFA. It also held that failure to establish lost profits is fatal to a breach of contract claim based upon an alleged violation of a non-competition agreement. We affirm in part and reverse in part.

We conclude, as the trial court did, that the CFA does not apply to this transaction as a matter of law. The CFA does not define “in commerce,” and our case law interpreting the term is limited. We hold that the “in commerce” requirement narrows the CFA’s application to prohibit only unfair or deceptive acts or practices that occur in the consumer marketplace. To be considered “in commerce,” the transaction must take place “in the context of [an] ongoing business in which the defendant holds himself out to the public.” Further, the practice must have a potential harmful effect on the consuming public, and thus constitute a breach of a duty owed to consumers in general. In purely private transactions, remedies available through well-established principles of contract, tort, and property law are adequate to redress wrongs.

Here, the parties’ transaction does not constitute a transaction “in commerce” for CFA purposes because it did not occur in the consumer marketplace. First, plaintiff held his offer out to defendant only, not to the public at large. Second, the transaction did not involve products, goods or services purchased or sold for general consumption, as those terms are generally understood, but rather the sale of an entire business from one party to another.

Consequential damages are merely one way to determine a remedy in a breach of contract action. In this case, we agree with the trial court that defendant failed to establish consequential damages with the type of specificity that would permit a fact finder to make an appropriate and rational award. Restitution may be the most appropriate where consequential damages, such as lost profits, are speculative and thus difficult to establish. We hold that defendant is entitled to claim the return of the consideration as an alternative form of contractual relief if the jury concludes that plaintiff breached the terms of the non-competition agreement. In light of the potential remedy of the consideration refund, we hold that the trial court erred in granting plaintiff’s motion for judgment as a matter of law on defendant’s claims arising from the non-competition agreement and therefore reverse and remand on this issue.

Affirmed as to defendant’s counterclaim under the Vermont Consumer Fraud Act; reversed and remanded with respect to the trial court’s grant of judgment as a matter of law on defendant’s counterclaims for breach of contract and breach of the covenant of good faith and fair dealing.