SCOVT affirms punitive damage award against landlord; reverses and remands compensatory award for further findings

Soon K. Kwon v. Eric Edson and Dina Well, 2019 VT 59 [filed 8/23/2019]

CARROLL, J. In this landlord-tenant dispute, following a bench trial, the court granted tenant Edson damages to compensate him for work he performed on landlord’s properties and tenant Well compensatory and punitive damages for breach of the implied warranty of habitability and illegal eviction.

Landlord appeals, arguing that the court erred in (1) finding that there was an oral rental agreement between the parties and that defendants were tenants; (2) awarding rent for only a portion of the period tenants occupied the property; (3) awarding tenant Edson damages because the claim was not properly pled; and (4) awarding tenant Well punitive damages.

Tenants cross appeal, arguing that the court abused its discretion in finding there was an agreement to pay rent once the building was compliant with the housing code and erred in awarding landlord back rent based on a theory of unjust enrichment. We affirm in part and reverse and remand in part.

  Unjust enrichment is “based on an implied promise to pay when a party receives a benefit and the retention of the benefit 10 would be inequitable.”  DJ Painting, Inc. v. Baraw Enters., Inc., 172 Vt. 239, 242 (2001).  Recovery under this theory depends on “whether, in light of the totality of circumstances, it is against equity and good conscience to allow defendant to retain what is sought to be recovered.”  Id. at 243 (quotation omitted).  The existence of a contract does not preclude recovery pursuant to an unjust-enrichment claim, but the existence of a contract and the terms of that contract are “highly relevant in determining whether denying further payment . . . is unjust.”  Id.

  

We conclude that the evidence supports the court’s finding that the parties entered an oral agreement allowing tenants to stay in landlord’s apartment rent-free for some portion of time. However, because the court’s findings as to the terms of the contract are not supported by the evidence, we cannot determine if a remedy for unjust enrichment would be appropriate in this case. Therefore, the award of back rent and electricity to landlord is reversed and the matter is remanded for the court to make new findings based on the evidence presented at trial as to the terms of the parties’ agreement. Based on these findings, the court can determine if damages are appropriate either pursuant to an oral contract or as an equitable remedy for unjust enrichment.

  

We affirm the court’s award of damages to tenant Edson for the work he performed for landlord, concluding that the issue was tried by implied consent. Under the circumstances, the breach-of-contract claim was tried by “implied consent of the parties” and therefore should be treated as if it “had been raised in the pleadings.”  V.R.C.P. 15(b)

Finally, we conclude that an award of punitive damages was allowable as damages for breach of the warranty of habitability and affirm the award of punitive damages to tenant Well. There was sufficient evidence of willful and wanton conduct for the court to make an award of punitive damages.

• The trial court found that after being notified about habitability issues in the apartment, landlord took far more than a reasonable time to address those issues. See 9 V.S.A. § 4458(a) (allowing tenant to recover damages where landlord fails to make repairs “within a reasonable time”).
•  Landlord took seven days to fix the heat issue when a reasonable amount of time was two days.
• Landlord took nine days to address the lack of water when a reasonable time was twenty-four hours.
• Moreover, landlord did not offer to pay for tenant Well to stay in a hotel room while the apartment was not habitable until he was told by code enforcement that he had to do so.
• Landlord also used propane heaters in the basement of the apartment, which posed a serious fire hazard and a risk of carbon-monoxide poisoning.
• Landlord fraudulently represented to the city that the apartment was not occupied so he could avoid providing tenant with lead-paint notices.
•  Finally, landlord resorted to self-help by having Well’s car towed on two occasions to force her out of the premises without a court eviction order while the eviction proceedings were pending.

These facts are sufficient to show willful and wanton conduct and support an award for punitive damages

How cited

SCOVT affirms denial of punitive damages for lack of evidence of defendant's wealth.

Kneebinding, Inc., John Springer-Miller, Tina Springer-Miller and ACL Investments, LLC v. Richard Howell, 2018 VT 101 [filed 10/5/2018] How cited

ROBINSON, J. This case comes to us after a lengthy bench trial. On appeal, Kneebinding and the Springer-Millers argue that the trial court abused its discretion by awarding nothing against Howell for punitive damages for defamation.  We affirm.

In its August 2016 decision, the trial court concluded that Howell’s numerous internet posts stating that Kneebinding ski bindings were defective and dangerous were false and defamatory, In a subsequent opinion released in January 2017, the court found that Howell acted with “ill will and insult,” justifying “some reasonable level of punitive damages.”

But, before deciding on the specific amount of both general and punitive damages, the court directed the parties to submit still further memoranda. The court issued its final decision on defamation damages in March 2017. 

The court explained that it had reconsidered its previous conclusion that this case merits punitive damages. Noting that there was no evidence, or even an implication, that Howell had any assets worthy of note, as well as his lack of malice against Kneebinding, the court concluded that punitive damages were not justified.

The calculation of punitive damages is,within the trial court’s discretion. See Pion v. Bean, 2003 VT 79, ¶ 44, 176 Vt. 1, 833 A.2d 1248 (noting that when evaluating punitive damage award, we defer to trial court because “[p]unitive damages by their nature cannot be precisely measured”).

The trial court did not abuse its discretion in denying punitive damages. Its conclusion that most of Howell’s ire was directed at the Springer-Millers and not Kneebinding itself was supportable on the record, and, in any event, the court’s decision not to impose punitive damages in the absence of evidence about Howell’s finances is supported by our caselaw.

"We have stated that, in assessing punitive damages, the fact-finder must take into account the character and the standing of the party, the malice or wantonness of the party’s conduct, and the party’s financial status.” Pion, 2003 VT 79, ¶ 44.

Faced with no evidence of the latter factor, the trial court reasonably declined to impose punitive damages.


SCOVT Note

The Court does not discuss its precedent that proof of a defendant's actual means or wealth is not essential to the recovery of punitive damages. See Shahi v. Madden, 2008 VT 25, ¶ 11, 183 Vt. 320, 949 A.2d 1022.

Divided Court affirms judgment on a verdict for conversion of proceeds of sale, breach of fiduciary duty, and unjust enrichment, but reverses punitive damages

Eugene W. Beaudoin, Derivatively on Behalf of The New England Expedition Ltd. Partnership II & IV v. Barry E. Feldman, The New England Expedition-Colchester LLC and Colchester Managing Member Inc., 2018 VT 87  [filed 8/17/2018]

SKOGLUND, J. In this commercial dispute involving the sale of a grocery store, defendants Barry Feldman, the New England Expedition-Colchester, LCC (NEE-Colchester), and Colchester Managing Member, LLC (CMM), ask this Court to strike jury-awarded punitive damages and to find that the trial court erred in numerous evidentiary rulings, in denying defendants’ motion for judgment as a matter of law, and in denying defendants’ motion for a new trial. For the below-stated reasons, we strike the punitive damages, but affirm the remainder of the trial court’s rulings and orders.

Feldman appeals, arguing that the trial court: (1) erred by allowing the jury to consider punitive damages in this commercial dispute; (2) abused its discretion by allowing Beaudoin to introduce evidence of the Rhode Island contempt order; (3) abused its discretion by excluding evidence of Beaudoin’s pre-2005 tax returns; (4) abused its discretion by admitting evidence of Feldman’s additional real estate projects; (5) erred by denying Feldman’s motion for judgment as a matter of law for Beaudoin’s failure to join allegedly indispensable parties; and (6) erred in denying Feldman’s motion for a new trial after Beaudoin’s counsel’s closing statement remarks.

Where a party failed to object to jury instructions pursuant Rule 51(b), it properly preserved its claim “that the trial court erred in submitting plaintiffs’ demand for punitive damages to the jury” by seeking judgment as a matter of law in compliance with Rule 50(a) and  renewing its motion after entry of the judgment as required by Rule 50(b). Murphy v. Stowe Club Highlands, 171 Vt. 144, 154, 761 A.2d 688, 695-96 (2000). Because Feldman challenges the presentation of punitive damages to the jury in the first, Feldman properly preserved his claim for appellate review by complying with V.R.C.P. 50(a) and (b), regardless of “whether or not [he] also objected to the jury instruction.”

An award of punitive damages requires a showing of two essential elements—“wrongful conduct that is outrageously reprehensible” and “malice, defined variously as bad motive, ill will, personal spite 9 or hatred, reckless disregard, and the like.” The “conduct need not only be wrongful, but truly reprehensible,” and malice must be proven by “some showing of bad motive.”

Not every claim of bad faith, conversion, or breach of fiduciary duty warrants a punitive-damages award. The dispute must result in behavior that is truly reprehensible or egregiously awful. The evidence in this case did not rise to that level This was a dispute between two businessmen. While Feldman’s conduct may have been wrongful, intentional, and even actionable—as evidenced by the conversion, unjust enrichment, and breach of fiduciary duty judgments against him—as a matter of law, it falls short of the type of egregious behavior this Court has found to support punitive damages in the past.  The record before this Court “cannot support a punitive award given the absence of outrageously reprehensible conduct and the lack of actual or legal malice towards” Beaudoin. Fly Fish Vermont, 2010 VT 33, ¶ 17. The trial court erred when it submitted the question of punitive damages to the jury because there was insufficient evidence to support it, and thus this Court must strike the punitive damages awarded by the jury.

ROBINSON, J., dissenting. The trial court’s refusal to admit highly relevant evidence bearing on the critical issue in this case was not supported by its reasoning and exceeded its discretion. I dissent from the majority’s affirmance of the trial court’s exclusion of evidence of Beaudoin’s pre-2005 tax returns, and I would reverse

I cannot agree that the trial court’s conclusion that the proffered evidence was irrelevant was within its broad discretion. I respectfully dissent. I am authorized to state that Chief Justice Reiber joins this dissent

Punitive Damages. Evidence of both reprehensibility and malice was sufficient to support $4M punitive award where defendant knowingly placed dangerous product in the market.

Drake v. Allergan, Inc., No. 2: 13-cv-234 (D. Vt. May 22, 2015).

WILLIAM K. SESSIONS, III, District Judge. Allergan argues that is entitled to judgment as a matter of law on the issue of punitive damages because the evidence was insufficient to support the jury's verdict. The Court disagrees.

The Vermont Supreme Court's jurisprudence on punitive damages, by its own concession, "has not been a model of clarity." Fly Fish Vermont Inc. v. Chapin Hill Estates, 2010 VT 33, ¶ 18, 187 Vt. 541, 996 A.2d 1167. Plaintiffs seeking punitive damages must prove two elements: 1) "wrongful conduct that is outrageously reprehensible" and 2) malice, "defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like." Id. ¶ 18.

Thus, the Plaintiffs were required to prove that Allergan's conduct was outrageously reprehensible and that Allergan acted with malice. It is clear that in this case the Plaintiffs do not allege — nor could they prove — that Allergan had any ill will, personal spite, or hatred towards the Drakes individually. The question then is whether the Plaintiffs proved that Allergan's conduct was outrageously reprehensible and demonstrated a "bad motive" or "reckless disregard" sufficient to constitute malice in the state of Vermont.

Defining the contours of a standard for reckless disregard sufficient to warrant a finding of malice proved to be somewhat slippery for the Vermont Supreme Court. On the one hand, the court had held that in order to qualify for punitive damages the conduct at issue must be more than simply wrongful or unlawful. Fly Fish, 2010 VT 33, ¶ 19. And conduct evincing a "mere reckless disregard of the plaintiff's rights" or "a reckless disregard of the right of others" is likewise insufficient. Id. ¶¶ 19-20 (discussing Brueckner v. Norwich University, 730 A.2d 1086 (Vt. 1999) and Bolsta v. Johnson, 848 A.2d 306 (Vt. 2004) (internal quotation omitted)). The court noted that there must be some kind of bad motive on top of the tort because a threshold of reckless disregard, without more, would be so flexible it could become virtually unlimited in its application. Fly Fish, 2010 VT 33, ¶¶ 20-21.On the other hand, the Vermont Supreme Court had long-recognized the notion of malice arising from acting with a wanton disregard for great harm. Id. ¶ 23.

When defining the line between "reckless, wanton, or heedless misconduct" sufficient to warrant punitive damages and "mere reckless disregard" the Vermont Supreme Court held:

the culpability necessary for an award of punitive damages based on reckless or wanton misconduct requires evidence that the defendant acted, or failed to act, in conscious and deliberate disregard of a known, substantial and intolerable risk of harm to the plaintiff, with the knowledge that the acts or omissions were substantially certain to result in the threatened harm.

Id. ¶¶ 19, 21, 25. This is the measure by which reckless misconduct reaches the point of actual malice sufficient to support an award of punitive damages. Id. ¶ 25.

There are some circumstances, however, in which no reckless disregard analysis was necessary to find malice when there was either an element of bad motive by definition or otherwise demonstrable malice present. For example, the Vermont Supreme Court explained that an attorney who intentionally misappropriated money from a widowed plaintiff and lied about it in DeYoung v. Ruggiero, 2009 VT 9, ¶ 27, 185 Vt. 267, 971 A.2d 627, was egregious enough that malice could be inferred. Fly Fish, 2010 VT 33, ¶ 29.

In DeYoung the court noted that "malice may arise from deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another's expense, even if the motivation underlying the conduct is to benefit oneself rather than harm another." DeYoung, 2009 VT 9, ¶ 27. The defendant's admitted motive in DeYoung was to enrich himself and promote the interests of his company, which the court found "in and of itself demonstrates a bad motive." Id. ¶ 29. It is not necessary to find an intention to do harm to find malice. Id. The court also included dicta suggesting that punitive damages should be available against companies that "knowingly [place] dangerous products into the market, hoping that people [will] not get hurt" while ignoring a great risk of harm to increase profits. Id. The court later explained that malice could be inferred in situations like the one DeYoung presented without an analysis of recklessness. Fly Fish, 2010 VT 33, ¶ 22.

The other cases in which the court described finding demonstrable malice involved, for example, fraud, Follo v. Florindo, 2009 VT 11, 185 Vt. 390, 970 A.2d 1230, a campaign of terror motivated by sectarian and racial bias, Shahi v. Madden, 2008 VT 25, 183 Vt. 320, 949 A.2d 1022, and filing a false mechanic's lien on property in an effort to extort right-of-way concessions from owners who had no prior business with the company and owed nothing, Wharton v. Tri-State Drilling & Boring, 2003 VT 19, 175 Vt. 494, 824 A.2d 531.

Wrongful and Outrageously Reprehensible Conduct. The evidence was sufficient to support the jury's conclusion that Allergan's promotional activities were outrageously reprehensible, especially in light of the Plaintiffs' evidence regarding the promotion of higher doses. The jury could have reasonably concluded that Allergan's conduct was outrageously reprehensible because Allergan did more than simply promote an off-label use. Allergan promoted the use of doses that it knew were risky in order to increase profits. A reasonable jury could have felt morally outraged by a corporation's desire to put its bottom line above children's health, safety, and even lives.

Malice. Evidence presented by the Plaintiffs reasonably suggested that Allergan was motived by financial gain and knowingly encouraged risky doses despite the real possibility that children could be injured. Even if malice cannot be inferred on this evidence, the Plaintiffs presented sufficient evidence from which a jury could find that Allergan's promotional campaign was undertaken "in conscious and deliberate disregard of a known, substantial and intolerable risk of harm to the plaintiff, with the knowledge that the acts or omissions were substantially certain to result in the threatened harm." Fly Fish, 2010 VT 33, ¶ 25. The jury could have found that Allergan was aware of the risks of high doses but promoted them anyway in order to reap greater profits.

Thus the Court finds that the Plaintiffs' evidence was sufficient to support the jury's award of punitive damages.

Lost profits not proved by evidence of lost revenue. Blocking access was sufficiently unreasonable and substantial to be a nuisance. Threat to drive up litigation costs was sufficient “malice” to support punitive damages, even if there was no “ill will.”

Post and Beam Equity Group, LLC  v. Sunne Village Development Property Owners Association, 2015 VT 60 [Filed May 15, 2015.]

ROBINSON, J.   This case involves a dispute concerning access to property over a subdivision roadway.  Defendant property owners’ association  appeals a judgment for compensatory and punitive damages and for attorney’s fees awarded for a nuisance affecting the Plaintiff P&B’s restaurant.  We affirm the judgment for P&B on its nuisance claim; uphold the award of punitive damages and attorney's fees; but reverse the award of compensatory damages because of the lack of evidence to support the award.

Nuisance. A private nuisance is a nontrespassory invasion of another's interest in the private use and enjoyment of land. To prove a nuisance, plaintiffs must demonstrate an interference with the use and enjoyment of another's property that is both unreasonable and substantial. An intentional invasion of another's interest in the use and enjoyment of land is “unreasonable” if the gravity of the harm outweighs the utility of the actor's conduct. The standard for determining whether a particular type of interference is “substantial” is that of definite offensiveness, inconvenience or annoyance to the normal person in the community.

The Association installed a guardrail that prevented access to P&B's property from Sunne Village Lane. The Association also put up numerous "Private Lane—Residents Only" signs. Ample evidence supports the court's findings that the blockade caused difficulties for vehicles (especially those towing trailers with snowmobiles), leading to complaints by patrons and lost business and revenue. The erection of the guardrails occurred without warning and just prior to the ski season, which was the busiest time of year for the restaurants. Given these facts, we have no difficulty in upholding the trial court's determination that the level of the Association's interference with P&B's use and enjoyment of its land was sufficiently unreasonable and substantial to be a nuisance.

Punitive damages. The requisite degree of actual malice to support punitive damages may be shown by conduct manifesting personal ill will or carried out under circumstances evidencing insult or oppression, or even by conduct showing a reckless or wanton disregard of one's rights. The trial court concluded that the Association’s board engaged in intentional, unreasonable, bad-faith, and malicious behavior, supporting an award of punitive damages in the amount of $5000. This behavior included insinuating that the Association would drive up litigation costs if P&B did not agree to meet various demands  

The Association argues here that the findings of malice are not supported by the evidence and  that there was no "evidence of personal animus."   Even if the POA lacked any "personal animus" toward P&B, this would not preclude an award of punitive damages, because conduct that is not based upon personal hatred or dislike may nevertheless be malicious—it may be insulting or oppressive, or carried out with reckless or wanton disregard of another's rights.  The findings were sufficient to support the conclusion that the Association’s actions in this case evidenced insult or oppression or were carried out in reckless or wanton disregard of P&B's rights.

Attorney’s fees. The court made this award under 27A V.S.A. § 4-117(a), the fee-shifting provision of the VCIOA, which provides that "[a] declarant, association, unit owner, or any other person subject to this title may bring an action to enforce a right granted or obligation imposed by this title, the declaration, or the bylaws. The court may award reasonable attorney fees and costs."  The Association challenged the claimed attorney's fees, arguing that any legal fees incurred on common-law claims were distinct from the VCIOA claims to which the fee-shifting statute applies. On appeal the Association argues that P&B's VCIOA claims do not revolve around a common core of facts with the common-law claims. We acknowledge that this is a close case, but conclude that the trial court did not abuse its discretion in determining that most of the evidence presented was relevant to all claims.

Compensatory damages. We agree with the Association that the evidence of lost revenues relied upon by the trial court cannot support its finding concerning lost profits.  The trial court here compared P&B's patronage after the Association placed the guardrail across the entrance with P&B's patronage during a comparable period the prior year. But without evidence of the impact of the reduction in patronage on P&B's costs, the court could not reliably quantify the lost profits. We simply do not know what costs, if any, P&B was able to avoid as a result of the drop in covers. On this record, any leap from lost revenues to lost profits is necessarily speculative.  P&B's evidence need not have established its fixed and avoidable costs with "mathematical exactness," but P&B was required to present sufficient evidence to support a reasonable determination of its lost profits. In this case, P&B did not present even generalized evidence that its costs remained stable during the period in question.

Note: It is puzzling, probably because of a failure of advocacy, that the Court did not cite or apply the new punitive damage standards regarding reprehensibility and recklessness announced in Fly Fish Vermont v. Chapin Hill Estates, 2010 VT 33 (Burgess, J.)

Municipalities are immune from punitive damage awards.

In re Town Highway No. 20 Town of Georgia 2012 VT 17 (Skoglund, J.)

In 1995, John Rhodes, a resident of the Town of Georgia, petitioned his local governing body, the selectboard, to clarify several issues surrounding two roads that bordered his land.  While this case began as a suit over the existence and use of two ancient roads, it grew over time into a test of constitutional guarantees and a saga about abuse of power. After almost fifteen years of litigation, the court found that Rhodes’s request to access his land over town roads had been repeatedly and maliciously frustrated by the Town selectboard in an ongoing attempt to protect the value of a neighbor’s property, a violation of Chapter I, Article 7 of the Vermont Constitution, the Common Benefits Clause.  The court concluded that Article 7 was self-executing and, although it awarded monetary damages for the constitutional violation, it denied punitive damages.    Rhodes claims that the trial court erred in denying his claim for punitive damages given the court’s finding that the selectboard acted in bad faith and with malice, arguing that the Town should be treated like any other corporate entity.  We disagree.

To support an award of punitive damages for a defendant’s intentionally wrongful conduct, a plaintiff must show that the defendant acted with actual malice: that the defendant’s wrongdoing has been intentional and deliberate, and has the character of outrage frequently associated with crime.  Regardless of whether the Town’s actions meet this standard, we hold that, absent a clear legislative directive to the contrary, municipalities are immune from punitive damage awards.

This result is in line with our precedent and that of many of other jurisdictions.  See Willett v. Village of St. Albans, 69 Vt. 330, 38 A. 72 (1897).  The U.S.Supreme Court in  City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-67 (1981) vacated  an award of punitive damages against a city in a federal § 1983 suit because the history and policy behind § 1983 suits did not “support exposing a municipality to punitive damages for the bad-faith actions of its officials.”  Id. at 271. The same policy rationale for limiting punitive damages is persuasive here.   

By their very nature, punitive damages are not meant to reward the injured, but to punish and deter the wrongdoer. The twin aims behind punitive damages—punishment and deterrence—would not be met if they were levied against a municipal corporation for the malicious and wrongful acts of its officers.  Rather than exclusively targeting the wrongdoers, such an award would punish all of the town’s taxpayers. Facing no direct financial hardship, deterrence of individual officials is wanting.   Because the twin aims of punishment and deterrence are not served when punitive damages are levied against a population for the acts of its elected officials, municipal corporations cannot be held liable for punitive damages.

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. 

Procedure: denial of motion to amend affirmed; Rule 50, punitive damage issue not preserved.

Ferrisburgh Realty Investors v. Schumacher, 2010 VT 6 (Skoglund, J.)
Developer Ferrisburgh Realty Investors (FRI) appeals from the trial court’s decision, following a jury verdict, in this contract dispute. Landowner Robert Schumacher cross-appeals.[1] FRI argues that the court erred by: (1) denying its request to allow certain claims to go to the jury; (2) refusing to allow it to amend its complaint to add a new claim; (3) reducing the jury’s award of damages; and (4) denying its request for injunctive relief. Landowner asserts that the court erred in: (1) finding an enforceable contract; and (2) upholding the punitive damages award. With the exception of a revision to the jury award for breach of contract, we affirm

FRI sought to add an abuse of process claim to its complaint. FRI argues that its request should have been granted because it could have completed discovery on this claim prior to the rescheduled jury draw. The record shows that FRI sought to add this claim in April 2007, seven months after its original complaint was filed. The jury draw had already been continued once in March 2007.and the court again postponed the jury draw to August, The court did not err in refusing to postpone the proceedings further to accommodate FRI’s desire to add a new claim. See Colby v. Umbrella, Inc., 2008 VT 20, ¶ 4, 184 Vt. 1, 955 A.2d 1082 (denial of a motion under Rule 15(a) may be justified based upon a consideration of undue delay, among other factors). While FRI now suggests that it could have completed discovery on its new claim before the August jury draw, the court implicitly concluded otherwise. The trial court offered adequate grounds for its decision in this case, and we find no error.

We turn next to the punitive damages award. Schumacher argues that his conduct was not sufficiently egregious to warrant an award of such damages Schumacher fails to demonstrate that he preserved this argument. He did not raise the issue in his motion for a directed verdict at the close of FRI’s case, and he does not show that he raised the issue at trial. Instead, Schumacher appears to have raised the issue for the first time in his post-trial motion for judgment as a matter of law. He thus waived this claim of error. See V.R.C.P. 50(a), (b) (party who believes there is no legally sufficient evidentiary basis for reasonable jury to find for opposing party on certain issue must make motion for judgment as a matter of law before case is submitted to jury, and motion must be renewed post-verdict); Lemnah, 144 Vt. at 571, 482 A.2d at 702 (where defendant first challenged punitive damages by motion for judgment notwithstanding the verdict, issue was not preserved for review); see also V.R.A.P. 28(a)(4) (appellant’s brief should explain what the issues are, and how they were preserved).

SCOVT note. Compare Beaudoin v. Feldman, 2018 VT 83 (defendant  preserved his claim for appellate review by complying with V.R.C.P. 50(a) and (b), regardless of whether or not he also objected to the jury instruction on punitive damages.)

Punitive damages award reversed. Standard for punitives based on recklessness announced. "Reprehensibility" required.

Fly Fish Vermont v. Chapin Hill Estates, 2010 VT 33 (Burgess, J.)
In this action involving a boundary dispute and claims of nuisance and trespass related to the siltation of a pond, the appealing landowner argues that the court erred by awarding punitive damages without finding the requisite wrongful intent, or, alternatively, by awarding an excessive amount of damages. We reverse its award of punitive damages. Despite defendants’ generally reckless violation of the permit conditions imposed for the protection of plaintiffs’ pond, we agree the record cannot support a punitive award given the absence of outrageously reprehensible conduct and the lack of actual or legal malice towards plaintiffs.       


Generally punitive damages require a showing of essentially two elements. The first is wrongful conduct that is outrageously reprehensible. The second is malice, defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like (at¶ 21) In this case the court adopts and incorporates recklessness as a component of malice, and establishes a measure by which recklessness reaches the point of actual malice.     


The court “holds” that punitive damages are not limited to intentional egregious torts, but can also extend to “egregious harm” resulting from reckless conduct amounting to malice.  The minimum culpability necessary for an award of punitive damages based on reckless or wanton misconduct requires evidence that the defendant acted, or failed to act, in conscious and deliberate disregard of a known, substantial and intolerable risk of harm to the plaintiff, with the knowledge that the acts or omissions were substantially certain to result in the threatened harm. (at ¶ 25)   But neither such indifference to plaintiff's rights nor  even wilful violation of law is  determinative of malice. Vindication of the permit process is not a basis for punitive damages.     


In keeping with the court’s “consistent preconditioning of punitive damage upon outrageously egregious misconduct” such “reckless malfeasance or nonfeasance and its attendant risk of harm must all be more reprehensible than simply wrongful or illegal behavior." The findings show that defendants were merely  reckless scofflaws in wilful violation of their permit who were indifferent to plaintiffs’ interest.  The threatened and resulting harm were not—compared to our precedent— so “outrageously reprehensible” as to render defendants’ recklessness malicious as a matter of law.

Stealing customers by insider is both breach of fiduciary duty and interference with business relations worthy of punitive damages:

J.A. Morrissey, Inc. v. Smejkal, 2010 VT 66 (Johnson, J.)
This case arises from the demise of a business relationship within a construction company. Defendants appeal from the partial denial of their post-trial motion for judgment as a matter of law, or in the alternative, for a new trial, following a jury verdict in favor of plaintiffs in an action for breach of fiduciary duty, interference with business relations, and fraudulent conveyance. On appeal, defendants first assert that the evidence did not support the jury’s conclusion that Smejkal breached his fiduciary duties. Second, defendants challenge the jury’s verdict with respect to interference with prospective business relationships. Third, defendants argue that the fraudulent conveyance finding was erroneous. Finally, defendants assert that punitive damages were not properly assessed against Smejkal because there was insufficient evidence of malice. We affirm.

Smejkal owed a fiduciary duty to JAM in his role as vice-president and corporate director of the company. This duty imposed an obligation upon Smejkal to act with the utmost good faith and loyalty for the best interests of JAM. Officers and directors have been found to have breached their fiduciary duties when, while still employed by the company, they solicit the business of a single customer before leaving the company, or use the company’s facilities or equipment to assist them in developing their new business . A corporation’s fiduciary is not permitted to take advantage of business opportunities which are considered to belong to the corporation as far as the fiduciary is concerned.. Based on the evidence the jury could have concluded that Smejkal abused his position and intentionally failed to inform JAM about the Johnson estimate because he wanted to usurp the project for himself, thereby breaching his fiduciary duties to JAM.

To prevail on a claim for interference with prospective business relationships, a plaintiff must show: (1) the existence of a valid business relationship or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3) an intentional act of interference on the part of the interferer; (4) damage to the party whose relationship or expectancy was disrupted; and (5) proof that the interference caused the harm sustained. Gifford v. Sun Data, Inc., 165 Vt. 611, 613 n.2, 686 A.2d 472, 474 n.2 (1996). A plaintiff must show that the interferer acted with the purpose to harm the plaintiff or by means that are dishonest, unfair, or improper. Id. at 613, 686 A.2d at 474-75. Competitive business practices are not proscribed under the tort unless those practices are criminal or fraudulent. Id. at 613, 686 A.2d at 475; see Restatement (Second) of Torts § 768(1) (1979) (competition does not rise to level of improper interference if “actor does not employ wrongful means”). Based on the evidence, it was reasonable for the jury to infer that Smejkal wrongfully used his position as a trusted, high-ranking JAM employee to sabotage JAM and then usurp Paluska as a client for his new company. The jury could also have inferred that Smejkal knew that the Johnson estimate would generate work for JAM and then chose not to tell anyone at JAM about the estimate or his work on the project because he wanted to perform work for Johnson himself and for his own benefit. Indeed, the facts show that Smejkal abused his position of trust at JAM to surreptitiously obtain work for himself.

An award of punitive damages requires a showing of: (1) wrongful conduct that is outrageously reprehensible; and (2) malice. Fly Fish Vt., Inc. v. Chapin Hill Estates, Inc., 2010 VT 33, ¶ 18. Malice is “defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like.” Id. Malice may be found where one seeks to profit, through conduct that is deliberate and outrageous, at the expense of another. DeYoung v. Ruggierio, 2009 VT 9, ¶ 27, 185 Vt. 267, 971 A.2d 627 (“[M]alice may arise from deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another.”). Compare Villeneuve v. Beane, 2007 VT 75, ¶ 10, 182 Vt. 575, 933 A.2d 1139 (mem.) (concluding that landlord’s conduct in unlawfully evicting tenants was “intentional, unlawful, criminal in nature, and outrageous” and justified punitive damages) with Monahan v. GMAC Mortgage Corp., 2005 VT 110, ¶¶ 53, 60, 179 Vt. 167, 893 A.2d 298 (concluding that “conduct that does not involve a deliberate decision by the promisor to breach, falls far short of the punitive damages standard” and that conduct evidencing breach of covenant of good faith and fair dealing which consisted “mainly of inaction” did not “indicate the personal ill will, or evidence the bad motive associated with malice”).

We conclude that the evidence presented here is sufficient to support the jury’s assessment of punitive damages against Smejkal because the jury could have found that Smejkal “harbored ill will, and actual malice towards JAM, and intentionally desired, and took concrete actions to steer economic benefits to himself and away from JAM.” In light of the relationship between the parties and the trust that was placed in Smejkal as an important member of a small company, his actions meet the standard of intentional and sufficiently wrongful conduct necessary to sustain punitive damages. The jury could have properly found that Smejkal’s conduct—which included a concerted effort to sabotage JAM’s professional relationship with longstanding clients and to siphon off those clients for his own financial benefit—demonstrated actual malice towards JAM.

Stealing plaintiffs’ money and then lying to them about the theft, notwithstanding fiduciary duty, was malice as a matter of law.

New trial on amount of punitive damages granted, even though plaintiff made no Rule 50 motion. DeYoung v. Ruggerio, 2009 VT 9 (Dooley, J.)

This is an action by clients against a lawyer who misappropriated funds belonging to the clients. The lawyer failed to answer the complaint, and the superior court entered a default judgment in favor of plaintiffs. The court held a trial on damages, and a jury awarded no punitive damages based on a special interrogatory that it did not find malice. On appeal, we conclude that the element of malice was demonstrated as a matter of law in this case. Even though Plaintiff made no Rule 50 motion on this issue, we reverse the judgment in part and remand the matter for the jury to determine how much in punitive damages, if anything, to award plaintiffs.

Our longstanding definition of malice has been a source of confusion by referring not only to “conduct manifesting personal ill will” but also to “conduct showing a reckless disregard to the rights of others.” Although defendant acknowledges stealing plaintiffs’ money and then lying to them about the theft for years notwithstanding his fiduciary duty to them, he contends that the jury could reasonably have found no malice because (1) he did not intend to harm them, and (2) he always intended to return the money to them sooner rather than later. We conclude that even if the jury accepted this explanation entirely, defendant’s fraudulent conduct demonstrated bad motive and malice as a matter of law.

Malice or “bad motive” does not arise exclusively from “personal ill will” toward a particular person. Malice may also be found when the defendant engages in deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another. To find malice, the jury was not required to determine that defendant’s motive in stealing plaintiffs’ estate funds was to harm them rather than enrich himself. Especially this case involving wrongdoing by a fiduciary, Defendant’s admitted motive to enrich himself and promote the interests of his company, in and of itself demonstrates a bad motive.

The trial court could have found malice as a matter of law, in light of the record demonstrating his intentional course of wrongdoing, committed with conscious and deliberate disregard for plaintiffs’ rights, and pursuant to an illegitimate motive. In the absence of a Rule 50 motion, the court should have granted plaintiffs’ post-hearing motion for a new trial based on the complete absence of evidence to support the jury’s finding of no malice. Accordingly, we reverse and remand for the jury to consider the proper amount of punitive damages, if any, without requiring them to make the threshold determination of whether malice existed.