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). 

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.