SCOVT applies economic loss rule to bar product liability claims, holding no "special relationship" existed between user and supplier and that alleged misrepresentations by supplier did not justify exception to the rule.

PeakCM, LLC v. Mountainview Metal Systems, LLC , 2025 VT 50 [8/22/2025] (part two of two)

EATON, J.  In 2019, multiple siding panels fell off a newly constructed hotel in St. Albans, Vermont.  Plaintiff, PeakCM, LLC, the general contractor responsible for the hotel’s construction, sued the siding-panel installer, Mountainview Metal Systems, LLC.  Plaintiff amended its complaint to add a product-liability claim against the siding-panel manufacturer, ATAS International, Inc.  Plaintiff appeals from the trial court’s decision to grant ATAS summary judgment.   Plaintiff argues that the trial court erred in granting summary judgment to ATAS on plaintiff’s product-liability claim because both the “other-property” and “special-relationship” exceptions to the economic-loss rule apply.  Plaintiff also argues that the court improperly granted summary judgment to ATAS on Mountainview’s implied-indemnity claim.   We affirm

Product-Liability Claim and the Economic-Loss Rule..

 

The trial court granted ATAS’s motion for summary judgment on plaintiff’s product-liability claim because it concluded that the economic-loss rule barred the  claim.  Plaintiff argues that the trial court erred in granting summary judgment to ATAS because both the “other-property” and “special-relationship” exceptions to the economic-loss rule apply. 

 

Plaintiff does not contest that the economic-loss rule applies generally.  The economic-loss rule generally “prohibits recovery in tort for purely economic losses.”  Veljovic v. TD Bank, N.A., 2025 VT 38, ¶ 11 The economic-loss rule functions to separate claims that should be brought under contract law from those that should be brought under tort law. “Economic loss is defined as ‘damages other than physical harm to persons or property.’ ”  Id. ¶ 10   In the construction context, “the remedy for purely economic losses resulting from the reduced value or costs of repairs of . . . construction defects  sound [s] in contract rather than tort” law.  LongTrail House Condo. Ass’n, 2012 VT 80, ¶ 11  

 

This Court recognizes two exceptions to the economic-loss rule: the “other property” exception and the “special-relationship” exception.  See Walsh v. Cluba, 2015 VT 2, ¶ 28, 198 Vt. 453, 117 A.3d 789 (recognizing other-property exception); Veljovic, 2025 VT 38, ¶ 12 (describing special-relationship exception) Plaintiff argues that one or both of the exceptions to the rule allow plaintiff to bring its product-liability claim against ATAS.  We disagree. Plaintiff failed to demonstrate that either exception to the economic-loss rule applies here; accordingly, the economic-loss rule bars plaintiff’s product liability claim.  Thus, the trial court appropriately granted ATAS’s motion for summary judgment. 

 

 

 Under the other-property exception, the economic-loss rule does not apply if there has been some “accompanying physical harm” beyond purely economic loss.  Walsh , 2015 VT 2, ¶ 28 “The physical harm may be to property rather than persons, but injury to the product or property that is the subject of a contract is generally considered a disappointed economic expectation for which relief lies in contract rather than tort law.”  Id.  In the trial court, plaintiff argued that the other-property exception to the economic loss rule applied because the hotel was damaged in addition to the splice plates, and plaintiff was required to pay for the damage.  On appeal, rather than relying on damage to the hotel as it did in the trial court, plaintiff now argues for the first time that the other-property exception applies because there was minimal damage to “abutting properties”— namely, the neighboring building’s roof. This argument was not preserved, and we decline to consider it. 

 

 Under the special-relationship exception to the economic-loss rule a plaintiff asserting a negligence claim may be able to recover for purely economic losses where there is a special relationship between the plaintiff and the defendant.  The exception  typically involves  the defendant has assumed the responsibility not to violate a professional duty owed to the plaintiff.”  Facts other than a professional relationship  may support the establishment of a special relationship  Veljovic, 2025 VT 38, ¶ 14; Sutton v. Vt. Reg’l Ctr., 2019 VT 71A, ¶ 33, 212 Vt. 612, 238 A.3d 608).   Sutton is the sole case where this Court has held that a special relationship existed sufficient for the exception to apply.  In this case, unlike in Sutton, there is no evidence that plaintiff and ATAS had a “close relationship” where “exceptional oversight and management” was promised or performed.  Id. ¶ 33.  ATAS neither “personally solicited” the work, nor did it enter into an ongoing “individualized relationship[]” with plaintiff See  EBWS,LLC v. Britly Corp, 2007 VT 37, ¶ 32 (holding no special relationship existed even when defendant designed and built creamery for plaintiff because plaintiff “did not rely on the defendant to provide it with a professional service, and, consequently paid for the services of a contractor not a professional architect”); see also Restatement (Third) of Torts: Liab. for Econ. Harm § 4 (2020) (describing special-relationship exception justified by heightened standard of care and describing construction contractors and tradesmen as nonprofessionals).   

 

We are unpersuaded by plaintiff’s argument that the relationship between itself and ATAS rose to the level of a special relationship for the purpose of this exception The purchase of the panels by plaintiff’s subcontractor, plaintiff’s brief in-person encounter and emails with ATAS representatives, and plaintiff’s reliance on web-based information produced by ATAS, did not create a special relationship between plaintiff and ATAS sufficient for the purpose of this exception to the economic-loss rule. 

 

 Plaintiff finally argues that ATAS owed plaintiff a duty to provide accurate information that plaintiff was intended to rely on, and that this intended reliance is sufficient to support the existence of a special relationship.  See Limoge v.People’s Tr. Co., 168 Vt. 265, 268-69, 719 A.2d 888, 890 (1998) (outlining requirements for negligent-misrepresentation[1]claim). 

Essentially, plaintiff attempts to use the duty outlined in negligent-misrepresentation claims to establish a special relationship between ATAS and plaintiff.  This interpretation would drastically expand the special-relationship exception to the point of swallowing the economic-loss rule.  It ignores the typical determining factor that there be a professional service provided in the relevant interaction between the parties—with a corresponding heightened standard of care

 

Implied Indemnity Claim

Finally, plaintiff argues that the trial court erred when it granted summary judgment to ATAS on Mountainview’s implied indemnity claim because equity requires implied indemnity in this case.  ATAS argues that plaintiff lacks standing to bring this claim on appeal.  We agree. “The plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties. Plaintiff does not explain how plaintiff—not Mountainview—has the right to appeal the trial court’s summary-judgment decision on Mountainview’s implied-indemnity claim.  On appeal, plaintiff does not contest the court’s ruling that nothing in the contract allows plaintiff to assume Mountainview’s claims, and plaintiff does not identify any other legal basis for it to do so.  Because plaintiff has not shown that it has the right to assert this argument on behalf of Mountainview, we decline to consider whether the trial court appropriately granted summary judgment on Mountainview’s implied-indemnity claim.  Ladd v. Valerio, 2005 VT 81, ¶ 3 (mem.) (holding “courts have no jurisdiction to grant the relief sought” when “the plaintiff lacks standing”). 

Affirmed.

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[1] SCOVT NOTE: Limoge  adopts Section 552(1) of the Restatement (Second) of Torts (1977), which provides:

• One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Section 5 of the Restatement (Third) of Torts: Liability for Economic Harm is "largely identical" to Restatement Second Torts § 552; but there are three substantive changes. First, the requirement that the defendant's advice concern a “business transaction” has been eliminated. . Second, the requirement that the plaintiff's reliance be “justifiable” has been replaced with a statement that conventional rules of comparative responsibility are applicable. Third, liability under this Section has been eliminated when the plaintiff's representation comes in the performance or negotiation of a contract with the defendant. See Reporter's Notes, Restatement (Third) of Torts: Liability for Economic Harm  § 5 (2020).    Section 5, like Like § 552 (1), specifically refers to "pecuniary loss" :

• Restatement (Third) of Torts: Liability for Economic Harm  § 5:
• 
  
• (1) An actor who, in the course of his or her business, profession, or employment, or in any transaction in which the actor has a pecuniary interest, supplies false information for the guidance of others is subject to liability for pecuniary loss caused to them by their reliance upon the information, if the actor fails to use reasonable care in obtaining or communicating it.
• (2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered:
  • (a) by the person or one of a limited group of persons for whose guidance the actor intends to supply the information, or for whose guidance the actor knows the recipient intends to supply it; and
  • (b) through reliance upon the information in a transaction that the actor intends to influence, or that the actor knows the recipient intends to influence, or in a substantially similar transaction.
• (3) The liability of one who is under a public duty to supply the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.
• (4) A plaintiff's recovery under this Section is subject to the same principles of comparative responsibility that apply to other claims of negligence.
• (5) This Section does not recognize liability for negligent misrepresentations made in the course of negotiating or performing a contract between the parties.

On their face, both Restatements allow recovery against professionals and non-professionals for economic loss due to negligent misrepresentation. Thus in Glassford v. Dufresne & Assocs. P.C., 2015 VT 77 the Court found it sufficient to analyze an economic loss claim under section 552, which is a self-contained rule.  The  Court has further  explained that the drafters of the current Restatement reject  "a broad rule precluding recovery for economic loss."   Sutton v. Vermont Regional Center, 2019 VT 71A ¶ 31 n. 7 (noting the "plethora of exceptions to the broad formulation of the economic-loss rule," has induced the drafters of the current restatement to articulate "'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 cut. b (2020)  In other words, recovery in tort for economic loss is not exceptional; there is no geneeral rule against it, 

Given the third Restatement's approch, the text of  section 552 and the specificerecognition in I that  Section 552  is among the" host of exceptions" to the tradiional  ecoonomic loss rule, Sutton, 2019 VT 71A ¶ 31(citing  Limoge),   it is difficult to understand the PeakCM, Court’s concern that section 552 might “swallow” the economic loss rule.  

The simple truth is that section 552 states a black-letter rule imposing liability for economic loss due to  negligent misrepresentation. As stated in Sutton, 2019 VT 7 ¶ 36,(amended and superceded by 2019 VT 71A)  "The economic-loss rule is not an impediment to this claim."

SCOVT affirms Rule 12(b)(6) dismissal and denial of later motion to amend complaint for losses due to negligent notarization of fraudulent document, holding pleading and argument below failed to show a “special relationship” justifying exception to economic loss rule.

Veljovic v. TD Bank, N.A., 2025 VT 38 [filed 7/11/2025]

 REIBER, C.J.   Plaintiff Aleksandra Veljovic appeals from the dismissal with prejudice of her negligence, negligent supervision, and respondeat superior claims against TD Bank, N.A. and its former employee, Zlata Cavka.  Plaintiff alleged that the employee negligently notarized a fraudulent document that was ultimately used by plaintiff’s ex-husband to secure a divorce order in Serbia leading to her loss of marital property.  She argued that TD Bank should be held liable under the legal theories cited above.  The court dismissed plaintiff’s complaint, concluding that plaintiff could not recover for purely economic losses and she failed to show the existence of a special relationship between the parties.  It also denied plaintiff’s post-judgment request to amend her complaint.  We agree with the court’s conclusions and therefore affirm.

Plaintiff’s complaint lacked any allegations indicating that she had any relationship, much less a close or “special” relationship, with Cavka or that she relied on Cavka’s notarial services.  The only connection plaintiff alleges between herself and Cavka was that Cavka notarized a document purportedly containing plaintiff’s signature, allegedly presented to Cavka by plaintiff’s ex-husband.  Without facts that establish a relationship of trust, confidence, or reliance between plaintiff and Cavka, plaintiff’s claims are barred by the economic-loss rule.   

Plaintiff argues that the notary’s services qualify under the professional services exception to the economic loss rule because a notary is a public officer who owes a duty to the public to perform her service with diligence.  Plaintiff raised this argument in the trial court for the first time in her V.R.C.P. 59(e) motion to reconsider.  However, a “Rule 59(e) motion may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment.”  11 C. Wright & A. Miller, Federal Practice and Procedure § 2810.1 (3d ed. 2024)  Because plaintiff did not raise this argument in the trial court prior to judgment, it is not preserved for appeal.

Following the trial court’s ruling, plaintiff sought to amend her complaint to include an allegation that she held an account at TD Bank to support her contention that she shared a special relationship with the bank.   Vermont Rule of Civil Procedure 15(a) provides that a party may amend a pleading after entry of judgment “only by leave of court or by written consent of the adverse party.”  Additionally, for the court to grant leave to amend post-judgment, the plaintiff must first succeed in having the final judgment set aside under Rule 59(e), which did not occur here. See Stowe Aviation, LLC v. Agency of Com. & Cmty. Dev., 2024 VT 11, ¶¶ 18, 21( Even if a plaintiff never moved to amend before judgment, Rule 59(e) relief is available to amend pleadings but plaintiff must demonstrates one of the basic grounds for granting a Rule 59 motion.) In certain instances, denial of a Rule 15(a) motion “may be justified based upon a consideration” of several factors, including the futility of the amendment. Colby v. Umbrella, Inc., 2008 VT 20, ¶ 4, 184 Vt. 1, 955 A.2d 1082. We review a trial court’s denial of a plaintiff’s motion to file an amended complaint for abuse of discretion. N. Sec. Ins. Co. v. Mitec Elecs., Ltd., 2008 VT 96, ¶ 34, 184 Vt. 303, 965 A.2d 447. Plaintiff fails to show an abuse of discretion here.

Plaintiff’s amendment failed to establish that she shared a special relationship with the bank to oversee notarial services offered by any of its employees.  See Shulman v. Concord Gen. Mut. Ins. Co., 618 F. Supp. 3d 165, 175 (D. Vt. 2022) (holding that plaintiffs failed to sufficiently allege “a special relationship of trust” with insurer where insurer had “made no contact with plaintiffs”).  Therefore, because plaintiff’s proposed amended complaint, like her original complaint, cannot show that an exception to the economic-loss rule applies, it cannot withstand a motion to dismiss, and amendment would therefore be futile.  The trial court did not abuse its discretion in denying plaintiff’s post-judgment motion to amend her complaint.  

Affirmed.

____

SCOVT NOTE: Economic Loss "Rule," Public Duties and Notaries Public. This case has a special irony in that the trial court denied the Rule 59(e) motion on grounds that "plaintiff raised no issues of fact or law that the court had not already considered" and the Supreme Court affirmed on the grounds that "plaintiff did not raise [the correct argument] in the trial court prior to judgment." On the merits, the economic loss rule does not preclude recovery against notaries for breach of their pubic duties.

The Vermont Supreme Court has adopted the definition of Restatement (Second) of Torts § 552 for claims of negligent misrepresentation. Glassford v. Dufresne & Assocs. P.C., 2015 VT 77. It should now be beyond question that the economic loss "rule" does not preclude recovery under § 552. Id,; Sutton v. Vermont Regional Center, 2019 VT 71 ¶ 36 (amended and superceded by 2019 VT 71A) ("The economic-loss rule is not an impediment to this claim, and the Restatement (Second) provision describing the tort applies, by its own terms, to "pecuniary loss""); 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.)

In Glassford the Court observed that § 552(3) identifies the specific circumstances when liability for economic loss  may be imposed on defendants who have a duty to provide information for the benefit of the public.  Restatement § 552 cmt. k. This includes:

 For example, if a notary public negligently acknowledges a signature on a deed that turns out to be a forgery and a purchaser relies on the recorded deed in purchasing land, the notary is liable to the purchaser for any pecuniary losses as a result of the invalid deed. Id. illus. 16

2019 VT 71 at ¶ 16. See also 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: Liab. for Econ. Harm § 1 cmt. b (Tentative Draft No. 1, 2012)) 

As now set forth in Restatement (Third) of Torts: Liability for Economic Harm  § 5(3) (2020) the liability for pecuniary loss due to negligent misrepresentation by one who is under a "public duty" to supply the information "extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them."

SCOVT affirms the dismissal of investors’ claims against state actors in connection with Jay Peak EB-5 program, except reverses dismissal of claims of negligence and negligent misrepresentation, gross negligence, breach of contract and the implied covenant of good faith and fair dealing .

Sutton v. Vermont Regional Center, 2019 VT 71 [filed October 4, 2019] (amended and superceded by 2019 VT 71A) 

ROBINSON, J. Plaintiff investors appeal the dismissal of their claims against the Vermont Agency of Commerce and Community Development (ACCD) and current and former state employees arising from the operation of a federally licensed regional center in the United States Customs and Immigration Services (USCIS) EB-5 program. We reverse the dismissal of plaintiffs' claims of negligence and negligent misrepresentation against ACCD, gross negligence against defendants Brent Raymond and James Candido, and breach of contract and the implied covenant of good faith and fair dealing against ACCD. We affirm the dismissal of plaintiffs' remaining claims. 

Negligence. We conclude that plaintiffs have stated a claim for negligence based on ACCD's undertaking, and that the economic nature of their losses is not an impediment to such a claim [ We note that because of the plethora of exceptions to the broad formulation of the economic-loss rule, the Tentative Draft of the Restatement (Third) of Torts: Liability for Economic Harm articulates "a more limited principle: not that liability for economic loss is generally precluded, but that duties of care with respect to economic loss are not general in character; they are recognized in specific circumstances." Restatement (Third) of Torts: Liab. for Econ. Harm § 1 cmt. b (Tentative Draft No. 1, 2012) ("Stating the absence of a duty as a general rule can create confusion by seeming to threaten well-established causes of action, by leaving behind an uncertain and unwieldy number of exceptions, and by implying a needless presumption against the existence of a duty on facts not yet considered. The rule of this Section creates no such presumption. It merely means that duties to avoid causing economic loss require justification on more particular grounds than duties to avoid causing physical harm.")]. Plaintiffs have alleged sufficient facts to make out a “special relationship” between defendants and plaintiffs such that they may recover for their purely economic losses.

Negligent Misrepresentation. We conclude that plaintiffs have stated a claim for negligent misrepresentation under Restatement (Second) of Torts § 552(1)). 

Sovereign Immunity. We conclude that plaintiffs' claims are comparable to recognized causes of action against private persons and that the discretionary function exception to the State's waiver of sovereign immunity in the Tort Claims Act does not apply to these allegations. 

Gross Negligence against Individual Defendants. We conclude that certain individual defendants are absolutely immune from suit. That claim against another fails because plaintiffs have not alleged conduct by him that would overcome qualified immunity. That plaintiffs have not made out a claim of gross negligence against another individual but that. Plaintiffs have adequately alleged that Brent Raymond and James Candido are not shielded by qualified immunity and have made allegations that could establish gross negligence under the tort claims act. 

Breach of Contract and Covenant of Good Faith and Fair Dealing. We conclude that plaintiffs have made out claims for breach of contract and of the implied covenant of good faith and fair dealing sufficient to meet our lenient notice-pleading standards.

Third-Party Beneficiary Breach of Contract. We conclude that the trial court properly dismissed plaintiffs' claims for breach of contract.

Securities Fraud. We conclude that the trial court properly dismissed plaintiffs' claim of securities fraud under the Vermont Uniform Securities Act, 9 V.S.A. §§ 5501 and 5509, against all defendants. The claim falls squarely within an exception to the State's waiver of sovereign immunity through the Vermont Tort Claims Act, and as to the individual defendants, was not pled with the particularity required for averments of fraud under Vermont Rule of Civil Procedure 9(b). 

Breach of Fiduciary Duty Aiding, Abetting Breach of Fiduciary Duty and Breach of Implied Contract Breach-of-fiduciary-duty claims are distinct from ordinary negligence claims and rest on different elements of proof. Similarly, implied contract claims are distinct from contract claims. An implied-contract claim is not a contract claim. Because of inadequate briefing we do not address claims that the court erred in dismissing plaintiff’s claim of breach of fiduciary duty against all defendant, aiding and abetting breach of fiduciary duty against all defendants, and breach of implied contract against all defendants. 

Affirmed, except that the dismissal of the following claims is reversed:

• ·negligence against ACCD;
• ·negligent misrepresentation against ACCD;
• ·gross negligence against defendants Brent Raymond and James Candido; and
• ·Breach of contract and the implied covenant of good faith and fair dealing against ACCD.

The matter is remanded for further proceedings consistent with this opinion.

How cited

Note.  The foregoing opinion has been amended and superceded by the opinion reported as  2019 VT 71A . While a motion to reargue was pendiing on the issue of sovergin immunity ,the Court amended ts decision to reflect that plaintiffs withdrew their appeal of the trial court's dismissal of the negligent-misrepresentation claim against ACCD. Sutton v. Vermont Reg'l Ctr., 2019 VT 71A, n. 1. 'The mandae is amended  to read as follows:

Affirmed, except that the dismissal of the following claims is reversed: 

• negligence against ACCD; 
• gross negligence against defendants Brent Raymond and James Candido; and 
• breach of contract and the implied covenant of good faith and fair dealing against ACCD. 

The matter is remanded for further proceedings consistent with this 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.

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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.)

Economic-loss rule applies to bar tort claims for injury to property that is the subject of a contract between the parties.

Walsh v. Cluba, 2015 VT 2 [Filed February 13, 2015]


SKOGLUND, J. This case concerns a dispute over damage to a leased commercial space. The jury awarded plaintiff, landlord David Walsh, just under $11,000 in damages attributable to defendant, tenant Frank Cluba, but the court dismissed landlord's contract and tort claims against defendant Good Stuff, Inc., a business formed by Cluba and his partner that had possession of the subject property. We affirm.

The trial court granted Good Stuff summary judgment on contract claims, ruling that Good Stuff had not signed the lease and that Walsh had failed to point to any post-lease writing or action that could have bound Good Stuff to the lease. The court stated that the successor liability doctrine was inapplicable to this case, and that Walsh had abandoned his ratification theory by neither raising it nor offering facts to support it in his response to defendants' summary judgment motion. Accordingly, the court concluded that "[a]ll contractual claims against Good Stuff must be dismissed.”

At trial the court granted Good Stuff's Rule 50 motion, ruling that the economic-loss rule precluded the tort claim because the dispute was completely covered by Walsh's and Cluba's contractual relations and because the parties' duties were defined by the contract, which required the tenant to leave the premises in the condition in which he took them.

Walsh first argues that the trial court erred by dismissing his contractual claims against Good Stuff. We decline to consider the argument. The court declined to consider the ratification argument on the basis that it had neither been briefed nor supported by evidentiary material in Walsh's response to defendants' motion for summary judgment, in which defendants asserted that Walsh knew he was contracting solely with Cluba, made no attempt to bind Good Stuff to the lease agreement. Walsh made the tactical decision to abandon his contractual claims and instead rely on a negligence claim of liability and pointedly did not challenge the trial court's ruling below in his motion to clarify.

Walsh next argues that the court erred in barring his negligence claim against Good Stuff because he was claiming property damage as the result of Good Stuff's actions. Walsh alleged that "[i]n the process of vacating the premises, the Defendants negligently damaged them quite extensively which inhibited the Plaintiff from reletting the premises for some time, while repairs were made." Walsh sought a judgment that "the Defendants are liable for the cost of repairing the damages to the Lease Premises negligently inflicted by them, the loss of rentals during the period of repair, and other consequential damages resulting therefrom."

The economic-loss rule "maintain[s] a distinction between contract and tort law" by "prohibit[ing] recovery in tort for purely economic losses.” Negligence actions are generally limited to unanticipated physical injury, while contract law allows parties to protect themselves through bargaining.

Injury to the product or property that is the subject of a contract is generally considered a disappointed economic expectation for which relief lies in contract rather than tort law. Thus, the economic-loss rule generally applies to bar tort claims when the alleged damage is to property that is the subject of a contract between the parties. The determining factor in deciding whether to apply the economic-loss rule is not whether privity exists but rather whether there is "a duty separate and apart from a contractual duty.”

Walsh sought damages to his commercial property that was the subject of the lease agreement between him and his tenant, Cluba. Good Stuff occupied the property as the result of Cluba being its president and director and having signed the lease with Walsh. Thus, although Walsh and Good Stuff were legal strangers, any duty Good Stuff had concerning the subject property was established by virtue of the lease agreement. Here, the alleged tort duty was plainly interwoven with the subject contract—indeed, the contract was the source of the duty. Under these circumstances, the trial court did not err in dismissing Walsh's negligence claim based on the economic-loss rule.

Given the unique circumstances of this case, the trial court did not err in dismissing Walsh's negligence claim against Good Stuff under the economic-loss rule.


ROBINSON, J., concurring and dissenting. The majority expands the so-called economic-loss rule by applying it to claims resting on physical damage to property and by implying a presumptive prospective waiver of tort claims whenever parties assume corresponding contractual duties. In so doing, it misapprehends the rationale for and scope of the rule, further muddying an already confused area of law.

This Court has long recognized that the "economic losses" to which the economic-loss rule applies are intangible economic losses, and do not include losses accompanying physical harm to persons or property. Restatement (Third) of Torts: Liab. for Econ. Harm § 2 ("`[E]conomic loss' is pecuniary damage not arising from injury to the plaintiff's person or from physical harm to the plaintiff's property.”). This simply isn't an "economic-loss" case, in which a plaintiff is seeking a tort remedy for a purely economic loss. He does not seek damages for "economic loss without physical injury," or "absent some accompanying physical harm."

The majority shifts from a rule that recognizes that a contractual duty does not give birth to a tort duty to avoid purely economic losses to a rule that presumes that a contractual duty negates any pre-existing, independent tort duty concerning the same subject matter. This approach turns the analysis on its head and bypasses the proper threshold question—"Is there a duty here independent of the contract?" Wholly apart from any lease agreement, defendants here had a well-established duty not to unreasonably damage Walsh's premises.

Duty. Economic loss rule does not require that liability for physical harm be based on a tort duty independent of any contractual obligations. Liability in tort for physical harm can arise from failure to exercise reasonable care to perform a contractual undertaking.

Langlois v. Town of Proctor, 2014 VT 130 [Filed 05-Dec-2014]

DOOLEY, J. Kathleen Langlois, owner of a building with commercial space on the first floor and an apartment on the second floor, failed to pay her water bill for the property to defendant Town of Proctor. Plaintiff alleged she arranged with a representative of the Town to disconnect water service, but the Town failed to do so, and that she suffered damage in reliance on the Town’s undertaking when she discontinued heating the building, causing the pipes containing water to freeze and split with resulting flooding of the first floor and basement.

The jury found that there was a contract between plaintiff and the Town “regarding the turning off of her water service,” but that the Town had not breached that contract. It found that the Town was negligent, that its negligence was a proximate cause of harm to plaintiff, and awarded plaintiff damages of $64,918.44.

On appeal, the Town argues for reversal because a tort duty must arise independent of any contractual obligations, and that it had no tort duty to properly turn off plaintiff’s water service. We disagree with the Town but reverse on other grounds. Liability in tort for physical harm can arise from failure to exercise reasonable care to perform a contractual undertaking.

The Town relies on a sentence from Springfield Hydroelectric Co. v. Copp, in which this Court stated that a tort duty of care must be “independent of any contractual obligations.” 172 Vt. 311, 316, 779 A.2d 67, 71-72 (2001) (emphasis omitted) (quoting Grynberg v. Agri Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000)). Plaintiff responds that a tort duty arose from its undertaking to disconnect the water service and plaintiff’s reliance upon that undertaking. She bases this argument on the Restatement (Second) of Torts § 323 (1979) ( Negligent Performance of Undertaking to Render Services)

The Town reads too much into Springfield Hydroelectric. The issue in that case was whether the plaintiff could obtain a tort recovery for purely economic losses in the absence of physical damage. We did not hold that the duty on which plaintiff relies for a tort action can never be contractual. In fact, many of our duty cases are based on undertakings involving contractually assumed duties.

This Court has applied § 323, and its cousin, § 324A, which governs harm to a third person, in a number of cases. Neither § 323 nor § 324A suggest that the duty stemming from the undertaking cannot be contractually based. Both apply to an undertaking “for consideration,” which is one way to describe a contract. 

The evidence in this case was sufficient for a factfinder to find that the elements of § 323 were established.

Defective construction claim dismissed: Economic loss rule bars recovery for negligence; privity rule bars recovery for breach of warranties.

 Long Trail House Condominium Association, v. Engelberth Construction, Inc., 2012 VT 80 (Skoglund, J.)

Plaintiff Condominium Association appeals from the trial court's order granting summary judgment to defendant general contractor Engelberth Construction, Inc. on the Association’s complaint that Engelberth in constructing the project was negligent and breached express and implied warranties. The Association argues that the court erred by: (1) applying the economic loss rule to bar its negligence claim; and (2) dismissing its breach of warranty claim because of lack of privity. We affirm.

The economic loss rule "prohibits recovery in tort for purely economic losses." EBWS,LLC v. Britly Corp., 2007 VT 37, ¶ 30, 181 Vt. 513, 928 A.2d 497. The rule serves to maintain a distinction between contract and tort law. Id. We require actual injury, not simply risk of harm, before one can recover in negligence. Privity, or lack thereof, is not the determining factor. The rule's application does not turn on whether the parties had the opportunity to allocate risks. The existence of a duty, apart from a contractual duty, is a prerequisite to recovery of economic damages in a negligence case. That critical element is lacking in the instant case.  The "professional services" exception to the economic loss doctrine does not apply.  Foreseeability alone is not sufficient to warrant the imposition of a professional duty. We have twice rejected the notion that contractors owed a special duty of care for purposes of this exception, separate and apart from their contractual obligations.  Engelberth presented itself as a contractor and it operated as a contractor, not as a provider of a specialized professional service. 

Our case law plainly contemplates the existence of contractual privity before a breach of implied warranty claim can be raised. The Association's warranty remedy lies against the entity that sold it the condominium units and implicitly warranted through the sale that the units were built in a good and workmanlike manner and that they were suitable for habitation. Its remedy does not lie against Engelberth.

Note: Only two regular members of the Court sat on this case, Skoglund and Burgess, JJ.. These two joined by Davenport, Supr. JJ., formed the majority, with Kupersmit, Supr. JJ., and Johnson, J. (Ret.), dissenting.

SCOVT Note:  As  to the  Court's statement, "that the existence of a duty is a prerequisite to recovery of economic damages in a negligence case," at ¶ 18 see Restatement (Third) of Torts: Liability for Economic Harm  § 1 (rejecting a broader articulation of the economic loss rule)