Monday, June 11, 2012

The Fuzzy Fine Flooring Fiasco

First Quality Carpets, Inc. v. Kirschbaum, 2012 VT 38

Today’s case will floor you—

But seriously, folks  . . . in 2007, the Kirschbaums bought some carpet from First Quality and hired the company to install the same in their home.  Under the terms of their agreement, the Buyers agreed to split payments into thirds (1/3 down; 1/3 when carpet arrived from manufacturer; and 1/3 when it was installed).  In accord with this, Buyers made the first two payments with a credit card. 

Here, of course, is where it gets interesting.

When the carpet arrived from the manufacturer, Seller inspected it and found it defective.  When Seller told the Buyers that the carpet was defective and the installation would have to be delayed, the Buyers were irate. 

They looked at the defective carpet and insisted that First Quality install it anyway because the Buyers had a party coming up.  Seller reluctantly agreed to do so (and at a significant added cost to itself), with the understanding that when the defective carpet was replaced by the manufacturer, Seller would tear up the defective carpet and replace it with the new carpet. 

Over two days, Seller installed the carpet, but the Buyers were not satisfied with the seams.  And so, the Buyers contacted their credit card provider when the installation was competed and disputed their first two payments for the carpeting, falsely claiming that they had "not received the order." 

When the new carpet arrived, Seller cut the new carpet to fit the Buyers' home.  Then Seller tried to schedule the removal and replacement of the defective carpeting. Mr. Buyer asked if, instead, they could keep the original carpeting and receive a credit in place of the replacement.  Because the new carpet had already been cut, Seller said no.  Then the Buyers declined to schedule removal and installation.

So, the defective carpet stayed.  And the credit card provider reversed the charge because the Buyers claimed that the charges were unauthorized.  A different installer inspected the defective carpet and found the manufacturing defects and one installation defect. 

Seller sued under the Prompt Pay Act.  The Buyers counterclaimed for, among other things, consumer fraud and sought attorney’s fees. 

There was a bench trial.  At the end of Seller’s case, the Buyers moved for a directed verdict on the basis that they had a good-faith basis to withhold payments.  The trial court reserved its decision, but ultimately ruled in favor of Seller on its Prompt Pay Act claim. The trial court specifically found that the Buyers had no good-faith basis for reversing the credit card charges.  Because the replacement carpet was never installed, the trial court found that Seller was not entitled to the final installment-payment.  The trial court did, however, award Seller attorney’s fees, as the substantially prevailing party, under a provision in the prompt pay act (9 V.S.A. § 4007(c)).  The trial court nixed the Buyers' consumer fraud claim finding that Seller neither misrepresented to nor misled the Buyers. The Buyers appealed.

The Buyers’ first argument is an interesting exercise in statutory construction.  Essentially, their argument is that the statute under which the court awarded Seller its attorney’s fees wasn’t in effect at the time and so, the trial court erred.

Basically, the statute had a sunset provision.  Two months before the sun was going down (so to speak), the Legislature repealed the sunset.  But oho!  The Legislature did not specify an effective date for repeal.  If no date is specified, then statutes have an effective date of the July 1st following passage (1 V.S.A. § 212).  By default, that would mean that the sun had already set the day before the repeal was effective in this case, and so, the repeal would have no effect because the Legislature can’t revive an already-expired statute without affirmative reenactment (1 V.S.A. § 214).

The SCOV takes a dim view of this argument (pun intended).  Because this is an issue of statutory construction, the review standard is de novo, which is Latin for “We don’t care what the trial court said; we’re gonna do it our way.”  Citing clear legislative intent, the SCOV reasons that the effective-date “section is not a statutory island” and that the SCOV’s “primary obligation in interpreting statutes to effectuate legislative intent.”
The SCOV reasons that the Legislature fully intended to repeal the sunset provision and according to statutory construction 101 (seriously, it is 1 V.S.A. § 101), the SCOV is obligated to defer to the “manifest intent of the general assembly.”  In this case, the SCOV reasons, that the allegedly failed repeal of the sunset provision “was nothing other than a technical mistake.”  Because the repeal was passed before the whole sunset-provision-before-effective-date snafu, the SCOV reasons that the no-revival-of-expired-statute-without-affirmative-reenactment statute doesn’t apply.   

Moving on, the SCOV next considers the Buyers’ argument that the court erred in denying their motion for a directed verdict on Seller's Prompt Pay Act claim.  The Buyers make two arguments: (1) in order to award attorney’s fees, the trial court had to find that the Buyers had no good-faith basis for withholding payment, not just who was the substantially prevailing party; (2) they were entitled to a directed verdict because they withheld payment for the carpeting in good faith.

The SCOV finds no merit to these contentions.  Noting the Buyers’ putatively less-than-truthful challenge of the credit card charges and the Buyers’ actions in thwarting replacement of the defective carpet, the SCOV concludes that the requisite bad faith necessary for an attorney’s fees award was present.  Regarding the Buyers' argument that the trial court did not explicitly recite its finding of bad faith when awarding attorney's fees, the SCOV concludes that this “is either a hyper-technical or phantom concern” because the trial had court already stated its conclusion as to their lack of good faith when deciding the merits.

The Buyers' final argument is that the civil division improperly denied their claim under the Consumer Fraud Act (CFA). The Buyers basically argued that the trial court misinterpreted the CFA, and that Seller violated the CFA by failing to "disclose the extent of the installation of the defective carpeting" and "by refusing to replace all of the defective carpeting or repair defective seams."

There are three elements to a CFA claim: "(1) there must be a representation, practice, or omission likely to mislead the consumer; (2) the consumer must be interpreting the message reasonably under the circumstances; and (3) the misleading effects must be material,' that is, likely to affect the consumer's conduct or decision with regard to a product." (citations omitted).

Misrepresentations can be made at the point of sale or in services provided afterward.  The SCOV reasons that the trial court’s “ruling rested on the factual determinations that First Quality made no misleading statements at any point regarding the defective carpeting and that, in any event, the Kirschbaums did not rely on any such statements in making decisions regarding their purchase.” 

And so, the SCOV holds that “the court's conclusion that First Quality made no misrepresentation is supported by its findings, which are supported by the evidence.”  The SCOV notes that Seller initially refused to install the defective carpeting and, after the defective carpeting was installed at the Buyers’ insistence, the Buyers prevented Seller from replacing the defective carpet.  The trial court’s findings are “good ‘nuff” the SCOV reasons (paraphrasing). 

And so, the lesson here is that clever legal arguments don’t always carry the day.  Keep that in mind next time you go to challenge those charges on your credit card.  

1 comment:

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