VT Supreme Court Strictly Construes "Reliance" In Misrepresentation Claim
June 15, 2015
In a negligent misrepresentation claim, the Vermont Supreme Court strictly construed plaintiffs’ need to prove direct reliance on the alleged misrepresentation. Lacking such proof, the claim failed. To assert a viable consumer protection claim, plaintiffs must prove not merely that defendant made a statement, but that defendant was directly involved in the transaction at issue. Because it was not, the claim failed.
The case is Glassford v. Dufresne & Associates, P.C., 2015 VT 77 (June 12, 2015). Plaintiffs-homeowners alleged negligent misrepresentation and violation of the Vermont Consumer Protection Act. Superior Judge Toor granted summary judgment for defendant, and the Vermont Supreme Court affirmed.
The case involved defendant’s certification to the Agency of Natural Resources that the septic system in plaintiffs’ new home had been installed, and that it operated, as permitted. Vermont law (10 V.S.A. § 1973) requires such a certification. The builder of the home hired defendant to make the certification. Defendant filed the certification with the Agency shortly before plaintiffs purchased the home from the builder. Within a few weeks of their closing on the house, plaintiffs’ septic system failed. Plaintiffs contended that the soil placed over the system was improperly graded. Defendant contended that the house was too large; that plaintiffs operated a daycare center that added to the wastewater entering the system; and that plaintiffs’ horses were allowed to walk over the system. Plaintiffs alleged that defendant: 1) failed to properly inspect the system, and 2) misrepresented the proper construction of the system in the certification to the Agency.
The superior court granted judgment for defendant on the negligent misrepresentation claim because plaintiffs never saw the certification until the lawsuit commenced, and so couldn’t have relied on it in making their decision to purchase the home. The court granted judgment for defendant on the consumer protection claim because the parties did not contract with each other for a sale of goods or services.
On appeal, with respect to the negligent representation claim plaintiffs argued that they effectively relied on the certification because, even though they did not see it before they closed on the home, defendant had a “duty” to furnish it to them. Furthermore, they argued, because their closing attorney received a copy of the certification just before the closing, they relied on it through their agent.
As had the superior court, the Vermont Supreme Court analyzed the negligent misrepresentation issue under the Restatement (Second) of Torts § 552. The Court determined that plaintiffs – homebuyers purchasing a newly-constructed septic system – were among the class of people for whom the certification requirement in 10 V.S.A. § 1972 was intended. Thus, defendants could be liable to plaintiffs. However, plaintiffs’ claim failed because they demonstrated no direct reliance on the certification (i.e., the alleged misrepresentation), as § 552 requires. The Court surveyed case law from around the country and determined that in negligent misrepresentation claims plaintiffs must demonstrate that they directly relied on the alleged misrepresentation. Because plaintiffs here did not ever see the certification before they closed, they could not have relied, and did not rely, on what it said. The fact that their closing attorney saw the certification did not satisfy their burden to show direct reliance on it. The attorney’s knowledge of the certification could not substitute for actual reliance by plaintiffs on its contents. Accordingly, the Court affirmed the superior court’s judgment for defendant on the negligent misrepresentation claim.
On the consumer protection claim, the superior court ruled for defendant because the parties were not in privity. On appeal, the Supreme Court held that privity is not required on a consumer protection claim, but that the defendant must still be directly involved in the transaction that gives rise to the alleged liability. Here, defendant’s filing of the septic certification with the Agency was an act unrelated to the sale of the home to plaintiffs. The filing was unrelated to the issue of who bought or owned the home. There was no interaction between plaintiffs and defendant. Accordingly, defendant could not be liable under the consumer protection act and the Court affirmed judgment for the defendant on this claim.
It should be noted that one justice vigorously dissented.