Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Vt. Sup. Ct.: Direct involvement required to hold website operator liable under Consumer Fraud Act, (Nov 11, 2013)

By Jody Coultas, J.D.

A trial court correctly held that the Vermont Association of Realtors, Inc. (VAR) could not be held liable under the Vermont Consumer Fraud Act (CFA) for providing allegedly unfair and deceptive real estate form agreements on its website, the Vermont Supreme Court has held (Knutsen v. Dion, November 8, 2013, Dooley, J.).

Janet Knutsen entered into a purchase and sales contract for the purchase of a home. Her broker prepared the purchase and sales contract using a template that VAR provided on its website. Knutsen alleged that VAR’s form purchase and sale agreement violated the CFA in that the limited liability clause and the mandatory mediation clause were unfair and deceptive.

A trial court held that the clauses, either alone or in conjunction, did not violate the CFA and that VAR’s sole connection to this case—drafting the template clauses—could not support a CFA claim. The Vermont Supreme Court agreed.

Although VAR was not involved in the home transaction, Knutsen argued that she could pursue a CFA violation against any “violator,” regardless of whether VAR’s actions actually harmed her. Derivative liability for consumer fraud cannot be imposed under the CFA absent direct participation in the unfair or deceptive acts, direct aid to the actor, or a principal/agent relationship in CFA cases brought by the Attorney General, according to the state high court.

The application of this test in private CFA cases was appropriate because it looks to “the nature of the alleged violator’s activities, not whether the violator falls into a defined statutory category.” There was no evidence that VAR provided direct aid to the buyer or the broker, the court held. There also was no case law to support holding a website operator liable for forms that could be used by third parties.

The case is No. 2012-294.

Attorneys: Kimberly B. Cheney (Cheney Saudek & Grayck PC) for Janet Knutsen. Thomas F. Heilmann (Heilmann, Ekman & Associates, Inc.) for Vermont Association of Realtors, Inc.

Companies: Vermont Association of Realtors, Inc.

Cases: StateUnfairTradePractices VermontNews