SCOVT affirms Rule 12(b)(6)dismissal of fraud and negligent misrepresentation claims; as to fraud holding opinions and broken promises are not actionable and any misrepresentations of fact were not plead with the particularity required by Rule 9; as to negligent misrepresentation holding justifiable reliance was not adequately plead because no specific factual allegation supported the conclusory allegation that plaintiff took “reasonable steps to determine” the facts.

 Lynn v. Slang Worldwide, Inc. , 2025 VT 30 [June 13, 2025.]

EATON, J. Plaintiff Shayne Lynn appeals the trial court's dismissal of plaintiff's complaint for failure to state a claim. Plaintiff argues that his complaint, which alleges fraud and negligent misrepresentation by defendants, is sufficient to meet Vermont's pleading standards and that the trial court erred when it held otherwise. We affirm.

 

We will uphold a motion to dismiss for failure to state a claim only if it is beyond doubt that there exist no facts or circumstances that would entitle the plaintiff to relief.  However, the Court is not required to accept conclusory allegations or legal conclusions masquerading as factual conclusions.

 

Fraudulent-Inducement Claim

 

To maintain a claim for fraudulent inducement, the plaintiff must show "an intentional misrepresentation of existing fact, affecting the essence of the transaction," where "the misrepresentation was false when made and known to be false by the maker, was not open to the defrauded party's knowledge, and was relied on by the defrauded party to his damage." Statements of opinion cannot be fraud unless the misrepresentation of opinion is part of a scheme to defraud. Promises to act in the future cannot constitute the requisite misrepresentation of existing fact unless there is a present intention to act contrary to the promise.

 

Plaintiff alleges that Miller and Driessen misrepresented that Slang was "financially sound," had a "bright economic future," and that its finances were "in excellent shape"; promised Slang would invest $18 million in High Fidelity; and provided  documents to plaintiff that were "intentionally and materially misleading" and "did not reflect that the company was about to fail."

 

Miller and Driessen's opinions about Slang's financial outlook were not actionable misrepresentations of material fact sufficient to create a claim of fraudulent inducement.

 

Miller and Driessen's alleged promise to invest in High Fidelity cannot support a fraud claim, absent an express allegation of present intent to renegotiate on the promise. See V.R.C.P. 9(b) (requiring allegations of fraud to be stated with particularity)

 

The general assertion that that Plaintiff was provided with misleading data is not pled with particularity. Sutton v. Vt. Reg'l Ctr., 2019 VT 71A, ¶ 73, ("Rule 9(b) requires that plaintiffs identify the particular statements . . . that they claim were fraudulent.")

 

Plaintiff argues that  opinion and broken promises can be the basis of a fraud claim if part of a scheme to defraud, citing  Winey v. William E. Dailey, Inc.,  161 Vt. 129,  133,  and  Fayette v. Ford Motor Credit Co.,  129 Vt. 505, 510 (1971).

 

 In cases where an opinion or a promise was sufficient to support a fraud claim, there was also a material misrepresentation of existing facts or a present intent not to follow through on the promise. See, e.g., Harponola Co. v. Wilson,  96 Vt. 427, 433-34 (1923 (considering promise in combination with "the original fraud" of factually misrepresenting product's value); Proctor Trust Co. v. Upper Valley Press, Inc., 137 Vt. 346, 351,   (1979)(considering opinions "which [plaintiffs] knew were extremely likely to turn out to be false" combined with income projections based on highly unreliable data which "closely resemble misrepresentations of existing fact"); Fayette,129 Vt. at 510, (considering promise combined with steps taken by defendant indicating no intention of following through on promise). Without such allegations here, plaintiff fails to state a claim for a fraudulent scheme.

 

Plaintiff's complaint is insufficient as a matter of law to support a claim of a scheme to defraud. None of the statements alleged by plaintiff are fraudulent misrepresentations of material fact. They are puffery, trade talk, and an unspecified allegation of misleading data. Plaintiff cannot create a fraudulent scheme by combining an unsubstantiated promise with puffery and a general allegation of misleading financial data. Plaintiff has failed to allege fraudulent inducement.

 

Negligent-Misrepresentation Claim

 

Justifiable reliance is a key aspect of a claim of negligent misrepresentation, and any complaint must plead facts that support such reliance. In McGee v. Vermont Federal Bank, FSB, we held that the plaintiffs did not state a claim for negligent misrepresentation because they failed to adequately allege justifiable reliance. 169 Vt. 529, 531(1999) (mem.). Specifically, "[no]owhere in the [plaintiff's] pleadings do they indicate that they could not verify the information" provided to them. Id. Similarly, in Burgess v. Lamoille Hous. P'ship,  we held that the plaintiff failed to demonstrate justifiable reliance where the evidence showed that there was relevant information readily available that demonstrated the falsity of the information provided by the defendant. 2016 VT 31, ¶ 23.

 

Plaintiff argues that he has sufficiently pled justifiable reliance for the purposes of the notice pleading standards by alleging that "the financial data made available to him was intentionally materially misleading," that "he took reasonable steps to determine the financial status of [Slang]," and that had he "known the true financial status of [Slang], he would never have agreed to merge with it."  Plaintiff's allegations that the documents and information were "false," not "true," and "misleading," and that plaintiff acted "reasonably" to ascertain their veracity are mere restatements of the legal elements required for a claim of negligent misrepresentation. Without specific factual allegations to support these conclusory statements, they are insufficient to prevent dismissal of his claim.

 

Furthermore, justifiable reliance requires both that the plaintiff is unaware of the truth and that the truth is "not within the knowledge of" the plaintiff.  Burgess, 2016 VT 31, ¶ 22  We decline to infer the missing element—that he was unable to learn Slang's real financial situation—into plaintiff's complaint. Plaintiff therefore failed to state a claim for negligent misrepresentation.

Affirmed.

How cited

SCOVT NOTE: In the view of the drafters of the current Restatement, "justifiable" reliance is no longer an element of a claim of negligent misrepresentation. The Third Restatement replaces the requirement that the plaintiff's reliance be “justifiable” with statement that the conventional rules of comparative responsibility apply. See Reporter's Note, Restatement (Third) of Torts: Liability for Economic Harm § 5 (2020). 

Rule 12(b)(6) dismissal of suit against attorney by non-client affirmed. Attorney owes no duty in contested proceeding to the adverse party. Elements of fraud not alleged with particularity.

Felis v. Downs Rachlin Martin, PLLC, 2015 VT 129 [filed October 16, 2015]

DOOLEY, J. This case arises out of a divorce proceeding between plaintiff and his former wife. DRM represented wife in the divorce proceeding. Plaintiff claims that “DRM knowingly submitted false material evidence” or “participated in the submission of false material evidence” to the court with the intent and effect of improperly influencing the outcome of the trial, causing damage and injury to plaintiff. Plaintiff appeals the court’s decision granting defendant’s motion to dismiss plaintiff’s claims of breach of fiduciary duty and fraud. We affirm

The court granted defendants’ Rule 12(b)(6) motions, concluding that: (1) DRM owed no duty to plaintiff on which he could base a claim for breach of fiduciary duty; and (2) plaintiff failed to allege the necessary elements of fraud in his complaint. With respect to the fiduciary duty claim, the court stated that a party to litigation cannot assert negligence or breach of fiduciary duty against opposing counsel. With respect to the fraud claim, the court found that the plaintiff failed to allege that DRM directed the false statements to plaintiff, rather than the court, that he was unaware the statements were false, or that he relied on any allegedly false statements.

1.

It is well established that an attorney owes no duty to an adverse party.  Hedges v. Durrance, 2003 VT 63, ¶ 6. “This privity rule ensures that ‘attorneys may in all cases zealously represent their clients without the threat of suit from third parties compromising that representation.’ ” Id. (quoting  Bovee v. Gravel,, 174 Vt. 486, 487, 811 A.2d 137, 140 (2002) (mem.)). The rationale behind this policy is particularly salient “where, as here, the third party is the client’s adversary who is also represented by her own counsel in the proceedings.” Id.

To maintain such an action against another party’s attorney, the third party must demonstrate that “the primary purpose and intent of the attorney-client relationship itself was to benefit or influence the third party.” Hedges, 2003 VT 63, ¶7. (quotation omitted).  As in Hedges, we will not review DRM’s alleged duty of care to the marital estate “independently of the larger adversarial context.” Id. We therefore affirm the judgment of the superior court that plaintiff has failed to state a claim for breach of fiduciary duty

2.

To maintain a cause of action for fraud, plaintiff must demonstrate five elements: “(1) intentional misrepresentation of a material fact; (2) that was known to be false when made; (3) that was not open to the defrauded party’s knowledge; (4) that the defrauded party act[ed] in reliance on that fact; and (5) that thereby harmed.”  Estate of Alden v. Dee 2011 VT 64, ¶ 32, 190 Vt. 401, 35 A.3d 950. Failure to prove any one of the five elements defeats the fraud claim. Id. We focus on the third and fourth elements, which were central to the superior court’s discussion. We conclude, as did the superior court, that plaintiff has failed to allege facts to support these two elements.

With respect to the third element, plaintiff’s knowledge of the alleged falsity, the statements in his complaint directly contradict the presence of this element. Drawing all reasonable inferences from these statements, plaintiff was fully aware of DRM’s discovery practices early on.

With respect to the fourth element, we find no allegation to support a claim that plaintiff relied on defendants’ alleged misrepresentations. Plaintiff acknowledges that his complaint does not explicitly allege reliance. In essence, plaintiff asks us to assume reliance, but reliance is a required element of fraud that plaintiff has the burden to plead and prove “with particularity.” V.R.C.P. 9(b).  Allegations about defendants’ intent in making the alleged misrepresentations says nothing about plaintiff’s justifiable reliance, a required element of fraud. See  Sugarline Assocs. v. Alpen Assocs.., 155 Vt. 437, 445, 586 A.2d 1115, 1120 (1990) (stating that “with any action in fraud” plaintiff is required to show “justifiable reliance upon the misrepresentation” (quotation omitted)); Restatement (Second) of Torts § 531 (1977) (requiring justifiable reliance for recovery under fraudulent misrepresentation)

In other contexts third-party reliance, without direct reliance by the plaintiff, is insufficient to satisfy the reliance requirement. Glassford v. Dufresne & Assocs.., 2015 VT 77, ¶¶ 22-23. A party cannot bring a private cause of action for tort under a theory of fraud on the court. We can find no case where a court has accepted a third-party reliance claim on the basis that the reliance was by the court and the plaintiff was a litigant who had a full opportunity to respond to the allegedly fraudulent evidence. We need not determine whether we ever would accept a third-party reliance theory in a fraud case to hold that we would not accept it on the factual situation here.

Punitive damages must be considered whenever jury finds actual fraud.

 
Follo v. Florindo, 2009 VT 11 (Burgess, J.)  

This is an action for common-law fraud and violations of Vermont’s Consumer Fraud Act in connection with the sale of a bed and breakfast business.  The purchaser and current operator of the bed and breakfast claims error in the trial court’s exclusion of punitive damages as a matter of law.  We reverse the trial court’s punitive-damages decision.

The particular intentional tort for which a party is liable is one of the integral issues in determining whether punitive damages are appropriate.  Because the jury found defendants liable for actual common-law fraud, an intentional act with a specific intent to defraud the buyer, the trial court erred in not sending the issue of punitive damages to the jury. 

The prerequisites for imposing punitive damages in tort actions are demanding, Brueckner “limit[s] the availability of punitive damages to cases where the evidence shows that ‘defendant’s wrongdoing has been intentional and deliberate, and has the character of outrage frequently associated with crime.’”  Monahan, 2005 VT 110, ¶ 55 (quoting Brueckner,) 169 Vt. at 129, 730 A.2d at 1095 (internal quotation omitted)).  Malice is not established by proof of “intentional, wrongful, [or] even illegal conduct” alone; it requires, additionally, proof sufficient to “support[] an inference of ‘bad motive.’“  Id. ¶ 56 (quoting Brueckner,). Merely intentional, but non-fraudulent torts, can be performed without the tortfeasor acting maliciously. 

By contrast, our cases indicate that it is proper to put the issue of punitive damages to the jury whenever the jury finds that “actual fraud” was committed.  Proctor Trust Co. v. Upper Valley Press, Inc., 137 Vt. 346, 354, 405 A.2d 1221, 1226 (1979).  Actual common-law fraud, as opposed to other kinds of intentional torts, inherently possesses the necessary malice and ill will that may make punitive damages appropriate.