Today’s Ask the SCOV™ letter is inspired by a home-purchase
transaction.
Apprehensive Association writes:
Dear SCOV:
If we provide a form for
our members’ use, can we be held liable for consumer fraud when our members
modify and use that form in a transaction?
Dear Apprehensive:
Nope.
(At least in this case.)
—The
SCOV
In reality, though, it’s hard to know what to make of this
case. Essentially, it’s a consumer-fraud
case against a non-party (to the underlying transaction), who provided a form
to its membership that was eventually turned into the parties’ purchase-and-sale
agreement.
Since that description is confusing, let’s try to give it a little
context. The Vermont Association of
Realtors, Inc. (VAR) provides a pre-printed, form purchase and sale contract. Most, if not all, real-estate brokers’ use
this form, and it is available on the VAR’s website. The contract has a
limitation of liability to the broker’s commission or $5,000, whichever is
greater. The form contract also requires
pre-filing mediation.
In this case, Plaintiff’s broker used this form to prepare the
purchase-and-sale agreement for plaintiff’s home.
But, Plaintiff’s home, it turns out, had an inadequately disclosed
water-infiltration problem. So,
plaintiff filed suit against a number of parties. She initially settled with some, and some got
booted from the trial court because she filed suit without pre-filing
mediation. Undeterred, plaintiff re-filed,
adding VAR as a defendant (along with some others). The claim against VAR was based on the
limited-liability and pre-filing-mediation clauses, which plaintiff alleged
were unfair and deceptive.
Both plaintiff and VAR moved for summary judgment. VAR won.
The trial court opined: “VAR’s sole connection to this case—drafting the
template clauses that [plaintiff] and her buyer’s broker eventually used—cannot
support a consumer fraud claim.”
Plaintiff appealed, and her surviving claims were stayed while the SCOV
sorted this one out.
To sort this one out, the SCOV applies the same standard as the
trial court, which regular readers might recall as the “so what?”
standard. Summary judgment is
appropriate only when there is no genuine question of material fact and the
party is entitled to judgment as a matter of law. Evidence is viewed in the light most
favorable to the nonmoving party.
There’s a bit more of a discussion here on the standard.
The only issue on appeal is plaintiff’s consumer-fraud claim
against the VAR. Plaintiff essentially
argues that there need not be any actual damage for a consumer-fraud violation,
and she takes issue with the “trial court’s observation that plaintiff was not
harmed because she had not been deceived by the challenged provisions and
because her damages could be satisfied even under the limitation of liability
provision.” Plaintiff argues that the
provisions are a “per se” violation and no damages need be shown.
The SCOV begins by assessing VAR’s liability. The SCOV notes VAR was not involved in the
home-purchase transaction, nor with the brokers’ actions in completing the
contract. “VAR’s sole involvement was to post on its website a model purchase
and sales contract that could be used by member real estate brokers and was
used by plaintiff’s real estate broker.”
Vermont’s Consumer Fraud Act (CFA) prohibits: “[u]nfair
methods of competition in commerce, and unfair or deceptive acts or practices
in commerce.” It provides the attorney
general or authorized state’s attorney with enforcement powers. It also provides consumers who are injured or
damaged with a private remedy against a “seller, solicitor or other violator.”
The SCOV first considers whether the VAR can be considered an
“other violator” under the act. The SCOV
notes that it has previously considered, and rejected, derivative liability
under the CFA “absent direct participation in the unfair or deceptive acts,
direct aid to the actor, or a principal/agent relationship.” With this backdrop, the SCOV notes that VAR’s
lack of direct involvement in the transaction itself creates a situation where
the attorney general would not be able to sustain an action against VAR.
As the SCOV sees it, plaintiff’s construct envisions a “private
attorney general” who can bring a claim whether or not there are actual
damages. The SCOV notes that this would
effectively increase the scope of private causes of action beyond the attorney
general’s authority. This, the SCOV
posits, is not the intent of the CFA.
Though the remedial scope of the CFA is broad, it is not without
limitations.
Here, the VAR’s only involvement was providing a form. The SCOV notes that if the provisions’ language is deceptive and plaintiff can show
damages or injury, then she has a remedy against her broker under the CFA and
can otherwise contest the validity of the provisions against any broker that
relies on them.
The SCOV writes: “We can find no case law holding the operator of
a web site liable because that site contains forms with contractual provisions
that, if used by third parties at their election, may cause violations of the
CFA.” The SCOV also notes that other
jurisdictions’ decisions are generally consistent with the some-direct-involvement the SCOV has articulated previously and in
this case.
The SCOV concludes that the trial court properly granted summary
judgment because VAR’s only involvement was providing a form for third-party
use.
This is a damned good thing because if plaintiff prevailed, it
would probably shut down Internet. And
then where would we watch hilarious videos of dogs talking about food or how to avoid “the doghouse” during the holidays?
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