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). 

Negligent misrepresentation. Non-client did not justifiably rely on attorney's statement where non-client was in a position to know from a “simple review of the governing statutes” that it was false.

Burgess v. Lamoille Housing Partnership, 2016 VT 31 (filed March 11, 2016).

Plaintiff appeals the grant of summary judgment on plaintiff's claim that he is entitled to damages from the town attorney for negligently misrepresenting that he would receive a tax collector's deed to property if he redeemed it from fax sale. We affirm.

The complaint alleged that the attorney, in her capacity as attorney and agent for the municipal defendants, told plaintiff that if he submitted to her $1373 he would acquire a right to receive a tax collector's deed to the subject parcel one year and a day after the date of the tax. We agree with the superior court that, apart from the issue of whether the attorney owed a duty to plaintiff,[i] plaintiff cannot prevail on his negligent misrepresentation claim because, under the circumstances of this case, he cannot show that he justifiably relied upon the alleged statement.

Justifiable reliance is determined under an objective standard; we have upheld a jury instruction stating that "[p]laintiffs may justifiably rely upon a representation when the representation is not obviously false and the truth of the representation is not within the knowledge of, or known by plaintiffs." See McGee v. Vermont Fed. Bank, 169 Vt. 529, 531, 726 A.2d 42, 44-45 (1999) (mem.) (quotation omitted) (emphasis in original). In McGee, we held that the plaintiff homebuyers failed to state a cause of action for negligent representation against the defendant bank because they did not indicate in their pleadings that they were unable to verify information provided by the bank concerning the status of home insurance coverage or that they could not have obtained that information directly from the sellers or the insurance company.

In was not reasonable as a matter of law for plaintiff to rely on statements by the taxing authority's attorney, particularly given plaintiff's acknowledgement that he was familiar with the tax sale redemption process. Plaintiff had a college degree in legal assisting and had worked as a paralegal for ten years and educated himself as to the tax sale and redemption process by reading the relevant statutes and case law. A simple review of the governing statutes reveals that redemption of property sold at a tax sale does not entitle the redeeming party to a collector's deed.

Plaintiff was in a position to know, or at least ascertain the falsity of any representation made to him by the attorney. Under these circumstances, plaintiff cannot demonstrate justifiable reliance on the alleged statement made by the attorney- Cf. Restatement (Second) of Torts § 552A ("The recipient of a negligent misrepresentation is barred from recovery for pecuniary loss suffered in reliance upon it if he is negligent in so relying"); Sain v. Cedar Rapids Cnty. Sch. Dist., 626 N.W.2d 115, 125 (Iowa 2001) (noting that tort of negligent representation "is generally thought to only apply to business transactions")
__________
[i] Related to questions of duty and reliance is the requirement in § 552(1) that the defendant have a pecuniary interest with respect to the information given. "If [the defendant] has no pecuniary interest and the information is given purely gratuitously, [the defendant] is under no duty to exercise reasonable care and competence in giving it." Restatement (Second) of Torts § 552(1) cmt. c. Giving the information "in the course of the defendant's business, profession or employment is a sufficient indication that [the defendant] has a pecuniary interest in it, even though [the defendant] receives no consideration for it," but is not "conclusive." Id. cmt. d. If the information is supplied purely gratuitously, the recipient of the information is not justified in relying upon it. Id. Here, plaintiff did not dispute the facts, as stated by the attorney, that she was compensated immediately after the tax sale by receiving fifteen percent of the delinquent tax, and did not receive any further compensation in connection with the tax sale of the subject property or her contact with plaintiff

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.

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

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

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

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

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

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

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

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

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

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

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

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

how cited.

---

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

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

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

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

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

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

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

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

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

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

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