Particularity and Permitting

By Andy Delaney

Two decisions this week, both arguably (although tangentially) related to farming and business.     

We'll start with what I'm calling the case of the marijuana merger misrepresentations.  Plaintiff is the founder of Vermont cannabis company High Fidelity. High Fidelity merged with another cannabis company called Slang Worldwide, Inc. (Side note: I think it'd be a fun job to come up with clever names for cannabis companies.) 

In the events leading up to the merger, plaintiff claimed that Slang’s leadership misrepresented the company’s financial health, promised an $18 million investment, and provided misleading financial data, all of which allegedly induced him to merge High Fidelity into Slang. When the true state of Slang’s finances came to light—namely, that it was in dire straits and needed a yuge loan—plaintiff was soon ousted from his position "to save money." So plaintiff sued for fraud in the inducement and negligent misrepresentation. 

Defendant contended that plaintiff's complaint failed to state a claim. The trial court agreed and dismissed. Plaintiff appeals. 

SCOV affirms. 

SCOV "blazes" through the complaint and concludes that both the fraud and negligent-misrepresentation claims don't make it past the pleading threshold. 

"Puffery" is a great word for an opinion about cannabis, don't you think? But here, SCOV "passes" (I'm sorry) because puffery—that is, in this context, making statements of opinion like Slang was "financially sound," had a "bright economic future," and was in "excellent shape"—isn't fraud. It's not "high" enough (I'm the worst). In fraud claims, false representations of fact are actionable whereas statements of opinion are not. Because the statements here aren't objectively verifiable, they're not actionable. The promise of future action—in this case, Slang’s promise to invest $18 million in High Fidelity—meets a similar fate. A promise to do something in the future is actionable only if the promisor had a present intention not to perform. Because that isn't alleged in the complaint, plaintiff didn't sufficiently allege that Slang was going to "bogart" (I know, I know) the funds.  

All this adds up to failing to plead fraud "with particularity." A quick and likely unnecessary pleading lesson. Back in the day, well before our time, pleadings were highly technical and subject to dismissal if the proverbial i's weren't crossed and t's dotted (I know that's backwards). This was called "code pleading." Anywho, in the 1930s, the federal rules introduced the idea of "notice pleading" or a "short and plain statement of the claim showing that the pleader is entitled to relief." Notice became the prevailing standard, which Vermont has retained (the federal standard has switched to "plausibility" but we needn't go there today). Anyway, one exception to notice pleading is a claim of fraud. Fraud must, by rule, be pleaded "with particularity," which means pleading specific facts that are, you know, fraudulent.        

So, plaintiff claimed he was given "intentionally and materially misleading" financial documents. While SCOV agrees that misleading financial data could, in theory, be actionable, plaintiff fails to specify what data was misleading or how it was so. General assertions don't cut it here. 

Plaintiff also argues that, taken together, the opinions, promises, and misleading data amounted to a scheme to defraud. The Court points out that prior cases allowing fraud claims based on opinions or promises involved either a misrepresentation of fact or a present intent not to perform. Here, there’s no such allegation, so the "scheme" argument also fails.

The negligent misrepresentation claim fails on reliance grounds. Under the applicable standard (from the Restatement (2d) of Torts), a defendant is liable if they supply false information in a business deal that the plaintiff justifiably relies on to his detriment. SCOV emphasizes that justifiable reliance requires that the truth of the representation be not within the plaintiff’s knowledge or readily available to the plaintiff.

Plaintiff contends he took reasonable steps to verify Slang's finances and wouldn't have merged had he known the truth. But SCOV concludes these are conclusory statements, not factual allegations. There’s no claim that the truth was unavailable to him or that he couldn't have discovered it. SCOV won’t infer this missing element. 

And that's that. While the threshold for notice pleading is "exceedingly low," it's important to be careful pleading fraud and where reliance is a required element, there also has to be a little more than  conclusory allegations. Lynn v. Slang Worldwide, Inc., 2025 VT 30.

Next up, we have a land use appeal. I feel like I write about land use a lot without fully understanding it. Between writing SCOV Law summaries and serving on planning commissions for the past decade and a half, I probably have picked up enough to write a passing answer on the bar exam, but that's not a particularly stringent standard. This is really just a reminder that you should never rely too much on anything written on this blog—you have no idea how badly I want to throw in another cannabis joke now. But we've moved on from the weed part of today's update.  

A farm-based company and its affiliate (applicants) sought an Act 250 permit to build a 9,000-square-foot, two-story farm store on Route 5 in Hartland, Vermont (near the I-91 exit). The Hartland Planning Commission (HPC) objected, arguing the project didn’t satisfy Act 250 Criteria. The Environmental Division granted summary judgment for applicants. 

HPC appeals. SCOV, in a 3-2 decision, affirms.

The first thing to deal with is "strip" development. Basically, the idea is to concentrate business development in "existing settlements" like cities and downtowns and avoid "strip malls" popping up alongside the highways. 

The project here is outside the Village area boundary, so it's subject to stricter scrutiny. SCOV reasons that the use is efficient because only a small part of the parcel will be developed, clustered near the road. And no new roads or utilities are needed; the project uses on-site water and waste systems. There's some environmentally friendly stuff planned and most of the 13-acre parcel remains agricultural or undisturbed, with fruit trees, berry bushes, and apiaries.

That doesn't mean it's not strip development though. In fact, it hits five out of seven statutory factors. But it’s a two-story building (not single-story), and it coordinates with the surrounding agricultural and rural uses.

Here’s the twist. Even if a project is "strip development," it's not barred unless it also contributes to a "pattern" of strip development. Here, the SCOV majority concludes that this is more of a one-off and is not going to lead to a strip development pattern. For one, at least 60% of sales must be from the owners' farm. Second, on the whole, the project is agricultural because it's not just a generic retail outlet. It's a farm store. The permit actually prohibits conversion to a supermarket, hardware store, or other primary retail. Third, the surrounding area is limited in developable land. So, while the project is technically "strip development," it doesn't set up a "pattern" likely to draw more of the same.

A project also has to be consistent with local plans under Act 250. Here, HPC argues the farm store violates the town plan, which says only "low-density residential development with home occupations" is allowed in rural areas.

The majority reasons that the plan is internally inconsistent. In other spots, it describes the area as a "rural business area" and encourages "traveler services," "farming heritage," and business compatible with rural surroundings. The plan also encourages working landscapes and agriculture near villages.

Because of these inconsistencies, the majority reasons, the plan isn't clear enough to bar the project.

Justice Carroll, joined by Justice Eaton, dissents. The dissent agrees the project meets the definition of strip development and makes efficient use of resources, but would remand for further fact-finding on whether the project contributes to a pattern of strip development. The dissent argues the record is incomplete on whether surrounding lands are conserved or could be developed, and that the Environmental Division should make this determination in the first place.

So, it's really the "pattern" that's the deciding issue here. So-called "strip" development isn't a complete no-no—it's only when it becomes a pattern that it's a hard stop. In re SM Farms Shop, LLC, 2025 VT 33.