Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Vt. Sup. Ct.: CFA did not apply to business transaction outside consumer marketplace, (Dec 16, 2013)

By Jody Coultas, J.D.

A trial court properly held that the Vermont Consumer Fraud Act (CFA) did not apply to a business transaction between Foti Fuels, Inc. and Kurrle Corporation, the Vermont Supreme Court has held (Foti Fuels, Inc. v. Kurrle Corp., December 13, 2013, Reiber, P.).

The owner of Foti Fuels sold most of his fuels business to the owner of Kurrle and agreed to sell gasoline to Kurrle through his retained wholesale distributorship. After the relationship soured, Foti Fuels sued Kurrle for one month’s nonpayment of gasoline and other claims. Kurrle counterclaimed for violation of the CFA based on the original purchase of Foti’s business.

A trial court submitted the CFA counterclaim to the jury. The jury awarded actual and punitive damages to Kurrle on the CFA claim. However, the court granted Foti Fuel’s renewed motion for judgment as a matter of law and vacated the damages award. The court held that the CFA did not cover the business transaction because it did not occur “in commerce” as defined in the CFA.

A party violates the CFA if he or she engages in an unfair or deceptive act or practice in commerce. The CFA does not define “in commerce,” and courts in states with similar statutes have found that the “in commerce” requirement narrows the statute’s applicability. Broadening the scope of the CFA to encompass transactions that do not occur in the consumer marketplace would not serve the CFA’s aim of public protection, and there are adequate remedies available for private business transactions.

The court held that the “in commerce” requirement narrows the CFA’s application to prohibit only unfair or deceptive acts or practices that occur in the consumer marketplace. A transaction took place “in commerce” if it was in the context of an ongoing business. The deceptive practice must have a potential harmful effect on the consuming public. Private negotiations between two individual parties are not covered by the CFA.

Because the parties’ transaction did not occur in the consumer marketplace, the court held that the CFA did not apply to the parties. Foti Fuels did not offer his fuels business to the public at large. Also, the transaction did not involve products, goods, or services purchased or sold for general consumption. Finally, the transaction’s high level of customization did not typically occur in the consumer marketplace.

Non-competition agreement. The trial court erred in granting Foti Fuel’s motion for judgment as a matter of law on Kurrle’s claims arising from the non-competition agreement, according to the court. Kurrle argued that the court erred in granting judgment as a matter of law on breach of the non-competition agreement claims. The trial court held that failure to establish lost profits was fatal to a breach of contract claim based upon an alleged violation of a non-competition agreement, and rejected using consideration as the measure of damages. Although Kurrle failed to establish consequential damages with the type of specificity that would permit a fact finder to make an appropriate and rational award, an inability to establish consequential damages does not foreclose all remedies for a breach of non-competition agreement. Consequential damages are merely one way to determine a remedy in a breach of contract action. Kurrle was entitled to claim the return of the consideration as an alternative form of contractual relief if the jury concludes that Foti Fuels breached the terms of the non-competition agreement. Because the trial court should have sent the case to the jury on those grounds, the claims were remanded.

The case is No. 2012-195 (2013 VT 111).

Attorneys: Christopher D. Roy (Downs Rachlin Martin PLLC) for Foti Fuels, Inc. L. Brooke Dingledine (Valsangiacomo, Detora & McQuesten, Barre) for Kurrle Corp.

Companies: Foti Fuels, Inc.; Kurrle Corp.

Cases: StateUnfairTradePractices FranchisingDistribution VermontNews