Summary of a Recent
Judicial Development in
Agritourism

Common Law Fraud Claims Arising from Sale
of a Bed and Breakfast

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Follo v. Florindo, --- A.2d ---, 2009 Vt. LEXIS 3 (Vt. 2009), the Supreme Court of Vermont held that a trial court had not abused its discretion in denying the defendants' request for additional discovery time, prohibiting the defendants from introducing expert witnesses at trial, or denying the defendants' motions for a new trial, and also held that the trial court should have presented the issue of punitive damages to the jury because malice is inherent in common-law fraud.

Background

The plaintiff purchased an inn from the defendants, relying on the profit-and-loss statement included in the marketing brochure for the inn and other reports, including tax returns, from the defendants showing the revenues, sales, expenses, and net income of the inn. Id. at *5. After he began operating the inn, the plaintiff realized that sales were less than one-quarter of what he expected based on the information provided by the defendants. Id. at *6. Suspecting that the defendants had not truthfully represented the inn's actual revenues and occupancy rates, he filed this lawsuit for common law and consumer fraud. Id. at *7. The trial court denied the defendants' request to allow more time for discovery because they were already several months late in disclosing their expert witnesses and deposing experts, and it held that the defendants were prohibited from presenting any expert witnesses at trial because of their violation of the discovery schedule. Id. at *7-8. The court did, however, grant the defendants' motions to exclude punitive damages as a matter of law. Id. at *8-9. During closing arguments, the plaintiff's counsel suggested, over the defendants' objections, that the defendants had lied about the dates on some of the tax returns they had provided because the dates had been marked out. Id. at *9. The jury found in favor of the plaintiff, and the defendants moved for a new trial or remittitur of the damages award, arguing that it was excessive. Id. They also challenged the plaintiff's valuation method. Id. at *9-10. The court rejected the request for a new trial and upheld the valuation method used, but it granted remittitur and reduced the award from $645,000 to $295,000. Id. at *10-11. The defendants then appealed the judgment, and the plaintiff cross-appealed. Id. at *11.

Arguments

The defendants argued that the trial court abused its discretion when it upheld the original scheduling order for discovery and prohibited them from presenting expert witnesses, and that the evidence did not support the verdicts against them. Id. at *14, *18.

Analysis and Holdings

The court found that the trial court had not abused its discretion in denying the defendants' request for additional discovery time because, at the time of the request, the defendants were already six months late in disclosing their expert witnesses. Id. at *16-18. The court further found that there was sufficient evidence that the defendants knowingly or recklessly made false statements regarding the inn's occupancy and revenues on which the plaintiff relied. Id. at *35. The court concluded that, given the jury instructions and the totality of the evidence presented at trial, there was no basis for reversing the jury's verdict or ordering a new trial. Id. at *36.

The court then explained that punitive damages are appropriate where a defendant acts intentionally and deliberately, and with malice. Id. at *37. The court added that 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, and therefore the issue of punitive damages should have been put to the jury. Id. at *39. Lastly, the court held that the trial court had not abused its discretion in ordering remittitur, because the jury's award far exceeded the amount it could have calculated based on market value and purchase price. Id. at *46-47.

The case was decided on January 23, 2009.