Landlord tenant. Claim of breach of statutory warranty of habitability requires proof of notice of a habitability defect. CPA claim based upon the failure of landlords to disclose code violations related to the habitability of residential premises requires proof that the landlords knew or should have known of the alleged defect in the premises.

Terry v. O’Brien,  2015 VT 132 [October 23, 2015]

REIBER, C.J. Landlords appeal a jury verdict and post-judgment order in this landlord-tenant action involving warranty-of-habitability and consumer-protection claims. We vacate the verdict and judgment, except for the jury’s award of unpaid rent, and remand the matter for further proceedings consistent with this opinion.

Landlords’ general claims of error on appeal are that: (1) the trial court’s jury instructions misled the jury on tenants’ habitability and CPA claims, resulting in prejudice to landlords; (2) the court erred by vacating the jury’s unpaid-rent award in its post-judgment order.

(1)

We agree with landlords that the challenged warranty instruction is inconsistent with Vermont law and was prejudicial to them. The language of the current statutory warranty of habitability reflects the parameters of the common-law warranty as adopted in Hilder v. St. Peter, 144 Vt. 150, 478 A.2d 202 (1984) and expanded in Willard v. Parsons Hill P'ship, 2005 VT 69, 178 Vt. 300, 882 A.2d 1213.. In Hilder, we stated that “to bring a cause of action for breach of an implied warranty of habitability, the tenant must first show that he or she notified the landlord of the deficiency or defect not known to the landlord and [allowed] a reasonable time for its correction,” id. at 161. Because there is no evidence that landlords had actual notice of a habitability defect that led to the fire, tenants’ statutory habitability claim fails as a matter of law.

We also agree that the trial court’s instruction with respect to tenants’ CPA claim was overly broad in defining what constitutes a deceptive act, and that the instruction resulted in prejudice to landlords. The instruction is overbroad in two respects—in not including the element of materiality in defining a deceptive act, and in not requiring that landlords knew or should have known of the alleged defect that they failed to disclose and that led to the 2008 fire. We hold that, in cases where tenants are basing a CPA claim upon the failure of landlords to disclose code violations related to the habitability of residential premises, the tenants must show that the landlords knew or should have known of the alleged defect in the premises. On the record before us, we cannot conclude as a matter of law whether landlords knew or should have known of the electrical splice that led to the fire. Therefore, the matter must be remanded for retrial of tenants’ CPA claim

(2)

Landlords also argue that the trial court erred in its post-judgment order by vacating the jury’s award of $20,000 in unpaid rent pursuant to their counterclaim. The trial court’s ruling must be reversed because of our vacation of the jury’s verdict in favor of tenants with respect to their statutory warranty-of-habitability claim. Absent their habitability claim, there is no basis for tenants to withhold rent. Therefore, the jury’s verdict regarding unpaid rent must stand.

The jury verdict is vacated except for the award of unpaid rent; the trial court’s postjudgment order is reversed; and the matter is remanded for proceedings consistent with this Court’s opinion.

Negligent misrepresentation, economic loss rule, consumer protection. Certifying engineer not liable for failed septic system.

Glassford v. Dufresne & Associates, P.C., 2015 VT 77 (12-Jun-2015)

DOOLEY, J. Plaintiffs appeal a decision denying summary judgment to plaintiffs and granting summary judgment to defendant Dufresne & Associates, P.C. on plaintiffs’ claims of negligent misrepresentation and violation of the Vermont Consumer Protection Act (CPA). The superior court held that plaintiffs’ negligent misrepresentation claim failed because plaintiffs did not see defendant’s certification until the proceedings in this case and therefore did not rely on the alleged misrepresentation. With respect to the CPA claim, the court held that the claim failed because the parties did not contract for a sale of goods or services as required under the CPA. Plaintiffs appealed. We affirm.

Plaintiffs claim only economic losses, which usually are precluded in a tort action. Plaintiffs argued below that their case fits into an exception to the economic loss rule where a special relationship exists between the parties, particularly in the context of professional malpractice. According to plaintiffs, that special relationship was created by defendant’s statutory duty to file a certificate with the Agency. The superior court found the proper framework for plaintiffs’ claim under the common law tort of negligent misrepresentation, as defined in Restatement (Second) of Torts § 552 (1977), which provides a cause of action for “information negligently supplied for the guidance of others.” We previously have adopted this section of the Restatement for claims of negligent misrepresentation, and do so here. We conclude Restatement § 552 governs the claims of negligent misrepresentation and that plaintiffs do not have a valid claim under § 552. The superior court properly granted summary judgment for defendant and properly denied summary judgment for plaintiffs.

Liability for negligent representation under § 552 (2) attaches “only to those persons for whose benefit and guidance it is supplied.” Restatement § 552 cmt. h. Plaintiffs are homeowners who purchased their home direct from the builder. The builder hired defendant to certify that the on-site mound sewage disposal system constructed for the home satisfied state permitting requirements. Plaintiffs were not the intended recipient of the certificate. The certificate was provided to the Agency for determining compliance with the permitted design and was not intended for use by homebuyers in deciding whether or not to affect a purchase. That homebuyers, like plaintiffs, may at some point obtain the information is merely incidental and does not create a cause of action under subsection (2).

Liability for negligent representation under § 552 (3) attaches to “one who is under a public duty to give the information” and extends to loss suffered by any of the class of persons for whose benefit the duty is created.” Plaintiffs’ claim fails under subsection (3), because plaintiffs demonstrated no actual, or direct, reliance on the certificate.

A negligent misrepresentation claim requires a plaintiff to rely directly on the defendant’s misrepresentations and not on a third party’s reliance on such information. Plaintiffs never saw the certificate until after the sewage disposal system failed. The broadened liability under the public duty exception does not eliminate this need for direct reliance.

It is true the plaintiffs’ attorney viewed the certificate and prepared the title report, and plaintiffs relied on the marketability of the title in their decision to close on the transfer of title to their home. But the closing attorney’s interest in defendant’s certificate was based entirely on his opinion that the existence of defendant’s certificate was a requirement of good title under Bianchi v. Lorenz. If the attorney’s reliance on the certificate could be imputed to plaintiffs, it would only be reliance that plaintiffs obtained good title, not reliance sufficient to satisfy § 552. Actual reliance, as required under § 552, is a subjective state of mind, focusing on what a plaintiff “considered to be important in deciding to enter into the transaction in which the misrepresentation occurred,”

Under the CPA a plaintiff may recover damages only from the “seller, solicitor, or other violator.” § 2461(b). Relying on State v. Stedman, 149 Vt. 594, 547 A.2d 1333 (1988), as well as decisions from other jurisdictions, we have held that a person cannot be liable as an “other violator” unless he or she directly was involved in the transaction that gave rise to liability. Knutsen v. Dion, 2013 VT 106, ¶¶ 19-20 195 Vt. 512, 90 A.3d 866,. In Knutsen, we rejected plaintiffs contention that the Vermont Association of Realtors was an “other violator” because it placed a form which contained unfair provisions on its website.

Here there is no allegation that defendant had any interaction with plaintiffs. Defendant did not supply the permit to plaintiffs or any other prospective purchaser. The law required that the certificate be sent only to the government agency that issued the permit. There is no allegation that the seller used the certificate as part of its sales pitch, and no allegation that defendant had any part in the sales. The certificate was unrelated to the sale. The Knutsen standard for CPA liability requires that a person be directly involved in the transaction that gives rise to the claimed liability. That standard is not met.

ROBINSON, J., dissenting. Because I believe that the majority draws an artificial distinction between the significance of the certifications for marketable title and their significance in verifying that the wastewater system has been inspected and was constructed as designed, and because I do not believe the majority has afforded plaintiffs the benefit of favorable inferences from this summary-judgment record, I respectfully dissent.

If the lawyer had known the statements were inaccurate, and for purposes of this summary-judgment motion we assume that they were, a factfinder could most certainly infer that the lawyer would not have advised the plaintiffs to proceed without taking further steps to ensure that the wastewater system was properly constructed. By inferring as a matter of law that the truth of the statements in the certificate was of no consequence to plaintiffs’ lawyer—who had a fiduciary duty to them in connection with this transaction—the majority has failed to draw reasonable inferences in favor of the nonmoving party.

how cited.

---

SCOVT  Note on recovery for economic loss based on fraudulent or negligent misrepresentation.

Section 552 of the Restatement permits recovery for “pecuniary loss” caused by justifiable reliance upon false information negligently supplied for the guidance of others in their business transactions by one acting in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest.

On its face the Restatement allows recovery against both professsionals and non-professionals for certain negligently caused economic loss. Fraud is another tort that permits recovery for economic loss, without physical injury.

Some have argued that the economic loss rule trumps both Section 552 and fraud cases generally. R.C. Anzivino, The Fraud in the Inducement Exception to the Economic Loss Doctrine, 90 Marq. L. Rev. 921, 931-34 (2007).

Without controlling Vermont precedent the local federal court has allowed fraud in the inducement and constructive fraud claims to proceed. Sherman v. Ben & Jerry's Franchising, Inc., No. 1: 08-CV-207 (D. Vt. Aug. 10, 2009); Mount Snow, Ltd. v. Alli, No. 2: 12-cv-022-wks (D. Vt. May 30, 2012).

The local federal court, in contrast, on three occasions has applied the economic loss doctrine to bar negligent misrepresentation claims involving only economic loss, Hunt Constr. Group, 2008 U.S. Dist. LEXIS 93754, at *15-16; Vt. Country Foods, Inc. v. So-Pak-Co, Inc., No.1 :02-CV-83 (D. Vt. Jul. 28, 2004) (unpublished order), aff’d, Vt. Country Foods, Inc. v. So-Pak-Co., No. 05-3429, 170 Fed. Appx. 756 (2d Cir. 2006) (summary order); City of Burlington v. Zurn Indus., 135 F. Supp. 2d 454,461-62 (D. Vt. 2001).

The Second Circuit certified this issue to the Vermont Supreme Court but the case settled without a ruling. Hunt Construction Group, Inc., v. Brennan Beer Gorman / Architects, P.C..  607 F.3d 10 (2d Cir 2010) ( certifying the question, "Does the economic loss doctrine apply to claims of negligent misrepresentation?")  

Today, the Glassford Court implicitly holds the economic loss rule does not preclude a negligent misrepresentation claim. 

The Court mentions the economic loss rule and its professional services exception, and then analyzes and strictly confines the potential liability of the defendant engineer to the bounds of the Restatement § 552. It refuses to examine the potentially broader tort liability for breach of professional duty (malpractice). 

This is a consistent pattern. The Court has never expressly applied the "professional services" exception to the economic loss rule to allow recovery in tort for economic loss. See Hunt Const. v. Brennan Beer Gorman/Architects, 607 F.3d 10 ( 2nd Cir 2010)(“we know of no case in which the Vermont Supreme Court has actually found the exception to apply”); see, e.g., Walsh v. Cluba, 2015 Vt 2, ¶ 30 (refusing to apply exception to allow owner to recover from occupant where no professional relationship such as as doctor-patient or attorney-client exists); EBWS, LLC v. Britly Corp., 2007 VT 37, ¶¶ 31–32, 181 Vt. 513, 524–25, 928 A.2d 497, 508 (design build contractor not liable for economic loss due to negligent design because it did not provide specialized professional services); Long Trail House Condo. Ass’n v. Engelberth Constr., Inc., 2012 VT 80, ¶ 22, 192 Vt. 322, 59 A.3d 752 (general contractor not liable in tort for economic loss because it was hired to perform the services of a contractor, not that of an engineer, architect or other professional); Wentworth v. Crawford & Co., 174 Vt. 118, 127 (2002) (provider of vocational rehabilitation services hired by employer not within exception because plaintiff failed to "identify any professional standards to which entities like [the defendant] must adhere"); Springfield Hydroelectric Co. v. Copp, 172 Vt. 311, 316, 779 A.2d 67, 71 (2001 ) (employees of the power exchange "did not hold themselves out as providers of any licensed professional service."). But see Sachs v. Downs Rachlin Martin PLLC,, 2017 VT 100 ¶ 29 n.[4], ¶ 38 n.[5] (legal malpractice)

Nevertheless, after Glassford v. Dufresne & Assocs. P.C., 2015 VT 77. it should be beyond question that the economic loss "rule" does not preclude recovery under § 552. Id; cf Sutton v. Vermont Regional Center, 2019 VT 71 ¶ 31 n. 6 (amended and superceded by 2019 VT 71A) (noting the plethora of exceptions to the broad formulation of the economic-loss rule has induced the drafters of the current restatement to propose "a more limited principle: not that liability for economic loss is generally precluded, but that duties of care with respect to economic loss are recognized in specific circumstances.") (citing  Restatement (Third) of Torts: Liability for Economic Harm § 1 cmt. b (Tentative Draft No. 1, 2012));  See also Restatement (Third) of Torts: Liability for Economic Harm § 5 (redefining "negligent misrepresentation); but see PeakCM, LLC v. Mountainview Metal Systems, LLC , 2025 VT 50 (to use the duty outlined in negligent-misrepresentation claims to establish a "special- relationship" exception would drastically expand the exception to the point of swallowing the economic-loss rule.)

Consumer Fraud Claim fails where consumer has independent knowledge of the information.

West Dover Property, LLC. v. LaLancette Engineers, 2015 VT 48 [Filed March 20, 2015]

SKOGLUND, J. Plaintiff buyers in this consumer fraud action appeal from a summary judgment order in favor of defendant realtor who represented the seller in the sale of an inn. Plaintiffs argue that the trial court erred in concluding that defendant's alleged misrepresentation and omission were immaterial as a matter of law. We affirm.

Vermont's consumer protection statute provides a private cause of action for a consumer "who contracts for goods or services in reliance upon false or fraudulent representations or practices . . . or who sustains damages or injury as a result of [such representations or practices]." 9 V.S.A. § 2461(b). Defendant failed  to disclose the written estimate of roof repair costs to plaintiffs.  The omission of this information, as well as the affirmative representation that seller was aware of "no current problems with the roof" could give rise to a violation of the consumer protection statute.

However,  the plaintiffs' case fails for lack of proof on the element of causation and not because the information withheld was immaterial. Because the record is undisputed that the information about the need to replace the roof was known to plaintiffs, defendant's failure to provide the seller's estimate of repair costs to plaintiffs cannot satisfy the requirements for liability under the consumer protection act.  We hold that a buyer may not recover under Vermont's consumer protection statute for omission of information by the seller or his agent when, as in the circumstances of this case, the buyer has independent knowledge of the same information prior to the completion of the sale.

DOOLEY, J. dissenting. I would reverse the trial court's summary judgment decision and hold that plaintiffs' claim against defendant is sufficiently supported in the record to compel us to conclude that issues of material fact remain in dispute.

According to the majority, plaintiffs had independent knowledge of the same material information within the time allowed for cancellation of the purchase-and-sale agreement. The deficiency in this analysis is that its premise is incorrect—the information was not the same.  A jury could reasonably conclude that plaintiffs' response to the report provided by their inspector, in the face of a representation that there were no known problems with the roof, was very different from the response plaintiffs would have had if they had learned that the seller concluded that 6600 square feet of roof needed replacement.

Accordingly, I dissent from the majority's decision.  I am authorized to state that Justice Robinson joins in this dissent.

[Note:  The Court consisted of Dooley, Skoglund, Robinson and Crawford, JJ., and Eaton and Morris (Ret.), Supr. JJ., Specially Assigned Justice Crawford was present for oral argument, but did not participate in this decision. Judge Morris (Ret.) was not present for oral argument, but reviewed the briefs, listened to oral argument, and participated in this decision.]

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.

Consumer Protection. Operator of a web site containing forms with contractual provisions that, if used by third parties at their election, may cause violations of the CFA is not “other violator” liable under CFA because web site operator is not one who directly participates in the unfair or deceptive acts, who directly aids the actor, or who is in a principal/agent relationship with the actor.

 Knutsen v. Dion, 2013 VT 106 (08-Nov-2013).

 DOOLEY, J.   Plaintiff appeals the decision of the superior court denying her motion for summary judgment and granting defendant Vermont Association of Realtors, Inc.’s (VAR) motion for summary judgment on her consumer fraud claim arising out of her purchase of a home .  Plaintiff argues that the limited liability clause and the mandatory mediation clause of VAR’s form purchase and sale agreement that  was used in her real estate purchase were unfair and deceptive, and that by providing the form contract and representing on its website that the template is fair to all parties, VAR violated the CFA The trial court ruled that the clauses, either alone or in conjunction, were not “unfair or deceptive under the CFA.”  and that “VAR’s sole connection to this case—drafting the template clauses that [plaintiff] and her buyer’s broker eventually used—cannot support a consumer fraud claim” We affirm.

VAR was not involved in the transaction between plaintiff and sellers, nor in the actions of the real estate brokers who represented sellers and plaintiff and brought them to agreement. VAR’s sole involvement was to post on its website a model purchase and sales contract that could be used by member real estate brokers and was used by plaintiff’s real estate broker  Narrowly stated, the first issue in this case is whether, under plaintiff’s allegations, VAR is an “other violator” pursuant to § 2461(b)(permitting a consumer “who sustains damages or injury as a result of any false or fraudulent representations or practices prohibited by section 2453 of this title” to “sue and recover from the seller, solicitor or other violator….”).   

In Sawyer v. Robson, 2006 VT 136, 181 Vt. 216, 915 A.2d 1298, a private CFA suit, we stated “The plain meaning of ‘other violator’ is anyone engaged in an unfair or deceptive commercial practice in violation of the CFA’s prohibition on such activity.”  Id. ¶ 12.  We explained that “our focus in determining applicability of the CFA is the nature of the alleged violator’s activities, not whether the violator falls into a defined statutory category.”  Id.     In State v. Stedman, 149 Vt. 594, 547 A.2d 1333 (1988), a public CFA suit, we  held that derivative liability for consumer fraud could not be imposed “absent direct participation in the unfair or deceptive acts, direct aid to the actor, or a principal/agent relationship.”  Id. at 598, 547 A.2d at 1335-36. In various contexts under comparable statutory schemes, other courts have required some direct involvement for derivative liability to attach under a consumer protection act.

We conclude that the Stedman holding applies both to public CFA suits and to private CFA suits like the one before us.  Thus, VAR cannot be found liable “absent direct participation in the unfair or deceptive acts, direct aid to the actor, or a principal/agent relationship.”  Stedman, 149 Vt. at 598, 547 A.2d at 1335-36. The application of this test in private CFA cases is appropriate because it looks to “the nature of the alleged violator’s activities, not whether the violator falls into a defined statutory category.” Sawyer, 2006 VT 136, ¶ 12.  VAR had no direct involvement in the drafting of the contract used here and did not act as a principal with respect to plaintiff’s broker.  Thus, it may only be held liable if it provided “direct aid” to the broker.  The trial court correctly held that “VAR’s sole connection to this case—drafting the template clauses that [plaintiff] and her buyer’s broker eventually used—cannot support a consumer fraud claim.”  

Mortgage assignment, pooling and servicing agreement; standing. Consumer protection: no standing to sue where alleged deceptive act did not induce purchase, and no showing of injury or damages / declaratory judgment not an available private remedy.

Dernier v. Mortgage Network, Inc., 2013 VT 96 (18-Oct-2013)

 DOOLEY, J.   Plaintiffs Peter and Nicole Dernier appeal the dismissal for failure to state a claim, of their action for (1) a declaratory judgment that defendant U.S. Bank National Association cannot enforce the mortgage and promissory note for the debt associated with plaintiffs’ purchase of their house based on irregularities and fraud in the transfer of both instruments, (2) a declaration that U.S. Bank has violated Vermont’s Consumer Fraud Act (CFA) by asserting its right to enforce the mortgage and note, and (3) attorney’s fees and costs under the CFA.   We affirm in part and reverse in part.

We hold that plaintiffs do not have standing to challenge the assignments of the note and mortgage based on the perceived violations of the pooling and servicing agreement (PSA) governing the pool into which the mortgage had been assigned, because any such violations would render the assignments voidable rather than void. However the complaint also alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant.  These allegations are sufficient to give plaintiffs standing.  The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement.

Next, we turn to plaintiffs’ consumer fraud claim.   Here, plaintiffs allege that the violation was based on the letter under which defendant stated its legal position that, as a holder of the note and mortgage, it had the right to enforce. The section of the statute providing for a private right of action is § 2461(b), which requires a “consumer” to show either (1) reliance on a deceptive act in contracting for goods or services or (2) damages or injury from an unfair or deceptive act.  If a plaintiff, in bringing a consumer fraud action, either fails to allege facts that meet the definitions of an unfair or deceptive act under 9 V.S.A. § 2453 or fails to demonstrate the prerequisites to a private action, as we have itemized above under 9 V.S.A. § 2461(b), the case is properly dismissed.    We focus on the prerequisites for a private action under 9 V.S.A. § 2461(b), and find that plaintiffs do not meet these requirements,.  Specifically, we look at the second prong of § 2461(b), because plaintiffs cannot have relied on this letter to contract for goods or services, as it was sent long after the purchase.  Our only question thus becomes: assuming that defendant’s statement regarding its belief that it had the right to enforce the mortgage and note was indeed deceptive, did plaintiffs suffer damages or injury from this act?   Plaintiffs do not offer an explanation as to what injury or damages the letter caused, as they do not address the requirements of § 2461(b) at all.  Indeed, the complaint seeks neither damages nor an injunction, the remedies authorized by § 2461(b).  Instead it seeks a declaratory judgment that defendant “violated Vermont Consumer Fraud Law.”  We read the complaint as seeking a declaratory judgment that defendant violated § 2453, without having to prove entitlement to a private remedy under § 2461(b).     Plaintiffs have not established an injury for the purposes of standing under 9 V.S.A. § 2461(b).  

Affirmed as to dismissal of Counts 3 and 4 of plaintiffs’ proposed amended complaint; Reversed and remanded with respect to dismissal of Counts 1 and 2 of plaintiffs’ proposed amended complaint for further proceedings not inconsistent with this decision

Justiciability, constitutional and prudential standing: predatory pricing statute does not protect governmental "competitors" not engaged in "commerce".

 Franklin County Sheriff's Office v. St. Albans City Police Department (2011-266) (03-Aug-2012) (Reiber, C.J.)  

In this predatory pricing suit, the Franklin County Sheriff’s Office appeals the trial court’s judgment in favor of the St. Albans City Police Department.  The Sheriff’s Office contends that the City Police Department engaged in an unfair method of competition with the intent to harm competition under the Vermont Consumer Fraud Act’s (VCFA) predatory pricing provision, 9 V.S.A. § 2461c.  Specifically, the Sheriff’s Office argues that the City Police Department submitted an “artificially low” bid in response to the Town of St. Albans’s request for proposals for law enforcement services.  We affirm because the Sheriff’s Office was not denied something in which it had a legally protected interest, nor is its claim within the zone of interests protected by the statute, and it therefore lacks both constitutional and prudential standing.

Because it is a threshold requirement, we first address the question of standing.  Vermont courts are limited to deciding actual cases or controversies.   An element of the case-or-controversy requirement is that a plaintiff must have standing—that is, “must have suffered a particular injury that is attributable to the defendant and that can be redressed by a court of law.”  To bring a case, a plaintiff must show “(1) injury in fact, (2) causation, and (3) redressability.”  Standing also embodies a prudential component of self-imposed judicial limits under which a plaintiff’s complaint must “‘fall within the zone of interests protected by the law invoked.’”

The claim does not meet  the injury-in-fact element of constitutional standing.  This element requires an invasion of a legally protected interest, not a generalized harm to the public.  The VCFA prohibits engaging in predatory pricing because it is an unfair method of competition in commerce. The Town was under no obligation to entertain bids for police services in the first instance, or to award the contract to the lowest bidder.  Fundamentally,  the provision of police services in Vermont occurs outside the realm of commerce because it involves no interchange of goods or commodities on the open market.  It is a governmental function provided only by governmental entities for the benefit of the public.  We conclude that no commerce existed in this case. The Sheriff’s Office has no legally protected right to “fair competition” with other statutorily created government entities to provide police services to the Town.

Second, the claim does not meet the requirements of prudential standing, which demands that the Sheriff’s Office’s complaint fall within the zone of interests protected by the predatory pricing statute.  Predatory pricing in its orthodox form exists where a single firm, having a dominant share of the relevant market, cuts its prices in order to force competitors out of the market, or perhaps to deter potential entrants from coming in. Here, the “competitors” are all statutorily created entities, meaning that one entity cannot put another out of business. There is no threat of monopolization by any one of them.  Thus, the Sheriff’s Office’s injuries alleged in the complaint do not fall within the zone of interests to be protected by Vermont’s predatory pricing statute. 

Consumer Fraud Act can apply to statements other than at point of sale.

First Quality Carpets, Inc. v. Kirschbaum, 2012 VT 41 (Burgess, J.)

The Kirschbaums appeal the ruling of the Civil Division in favor of First Quality in a dispute over carpet installed in 2007.  The Kirschbaums argue that the civil division erred in awarding First Quality attorney’s fees under  9 V.S.A. § 4007(c) of the Prompt Pay Act because that section of the statute authorizing attorney’s fees recovery effectively expired in 1996 pursuant to a sunset provision included in the Act.  Alternatively, the Kirschbaums argue that because they withheld payment to First Quality in good faith, they were entitled to a directed verdict and that First Quality should not have been awarded attorney’s fees under § 4007(c). Finally, the Kirschbaums argue that the court erred in denying their counterclaim under the Consumer Fraud Act.  We affirm in all respects.

We hold section 4007(c) remained in effect after June 30, 1996, and reject the Kirschbaums’ argument that the court erred in denying their motion for a directed verdict on First Quality’s Prompt Pay Act claim.  The court’s findings as to the Kirschbaums’ bad faith are supported by the record.  The court relied on two particular instances of less-than-straightforward dealing to conclude that the Kirschbaums had no good faith basis to withhold payment.

To establish a claim under the CFA, a plaintiff must prove three elements: “(1) there must be a representation, practice, or omission likely to mislead the consumer; (2) the consumer must be interpreting the message reasonably under the circumstances; and (3) the misleading effects must be ‘material,’ that is, likely to affect the consumer’s conduct or decision with regard to a product.” The Kirschbaums argue that the court misinterpreted the CFA to apply only to statements made at the point of sale .  They assert that the CFA covers both sales as well as services provided after the point of sale, and that First Quality violated the CFA by failing to “disclose the extent of the installation of the defective carpeting” and “by refusing to replace all of the defective carpeting or repair defective seams.”  Material misrepresentations may be made either at the time of sale, or in the course of services provided after the point of sale.”[¶ 19 ] Jordan v. Nissan N. Am., Inc., 2004 VT 27, ¶ 5, 176 Vt. 465, 853 A.2d 40 (stating that to prove third element of consumer fraud plaintiff must show that “the misleading representation was material in that it affected the consumer’s purchasing decision”.) However the civil division did not reinterpret this third element of consumer fraud in denying the Kirschbaums’ claim.  Rather, its ruling rested on the factual determinations that First Quality made no misleading statements at any point regarding the defective carpeting and that, in any event, the Kirschbaums did not rely on any such statements in making decisions regarding their purchase.

Consumer fraud: no attorney’s fees for violation with no harm and no public rights vindicated.

Anderson v. Johnson, 2011 VT 17 (mem.)

Defendant broker appeals from a jury verdict finding it liable for violation of the Vermont Consumer Fraud Act but awarding no compensatory damages or other relief, as well as from an order granting attorney’s fees to plaintiff homebuyers. Defendant contends that the court erred in awarding attorney’s fees. We conclude that the award of attorney’s fees was erroneous in this case, where the verdict granted plaintiffs no relief, vindicated no significant legal rights, and advanced no broader policy interests.

The jury found that plaintiffs had reasonably relied on material representations by Defendant, that the representations were likely to be deceptive or misleading to the average reasonable consumer, and that they had influenced plaintiffs’ decision to enter into the contract of sale. The jury also found, however, that plaintiffs had suffered no damages from their entry into the contract, and declined to award any damages for lost value or restitution. The trial court ruled that an award of attorney’s fees is mandatory when a violation of the CFA has been found, even in the absence of actual damages. The court approved an award for $54,310.73, plus costs of $1871.80.


Despite the technical statutory violation, plaintiffs were ultimately induced to purchase nothing less than, or different from, what they thought that they were purchasing. Where no damages or other relief is awarded, or merely nominal damages are awarded, the purpose of a statutory fee-shifting provision may be served where the plaintiff has prevailed on a significant legal issue or accomplished some broader “public purpose” underlying the legislation.


The case at bar fits none of these categories. Plaintiffs claimed that Defendant was careless in providing confusing materials relating to the property’s boundaries, but their suit exposed no “lawless” or unscrupulous misconduct, much less any broader pattern of socially irresponsible behavior likely to deceive or mislead the consumer. The record at most shows that Defendant committed a mistake that was later corrected and resulted in no harm to plaintiffs. Nothing in the case suggests that the verdict will serve to deter future misconduct, educate consumers or vendors, or promote a more honest and open marketplace. Plaintiffs’ suit, in short, yielded no relief to plaintiffs, vindicated no significant legal rights, and advanced no broader public goals. That portion of the judgment awarding plaintiffs attorney’s fees is reversed.