Knutsen v. Dion, Gardner, Vermont Association of Realtors, Inc.
2013 Vt. 106
Vt.2013Background
- In 2007 Knutsen purchased a Moretown home using a purchase-and-sale form her broker obtained from VAR’s website; the form included a liability cap for brokers and a mandatory pre-suit mediation clause, both initialed and signed by Knutsen.
- Knutsen later experienced basement water infiltration and sued sellers, inspectors, and realtors; she settled some claims and refiled adding VAR (maker/provider of the template) and brokers.
- Knutsen's CFA claim against VAR alleged VAR violated the Vermont Consumer Fraud Act by providing a form containing unfair/deceptive clauses and representing the template as fair.
- VAR moved for summary judgment arguing it had no direct role in the transaction and cannot be liable under the CFA for a third party’s use of its template.
- The trial court granted VAR summary judgment, holding the clauses were not unlawful under the CFA as applied to VAR and VAR’s drafting/posting of the template alone cannot support a consumer-fraud claim.
- Knutsen appealed; the Supreme Court affirmed, holding private CFA suits are subject to the same derivative-liability limits applied in public actions—liability requires direct participation, direct aid, or a principal/agent relationship.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether VAR can be sued under the CFA as an “other violator” for drafting/posting form clauses that a broker used | Knutsen: VAR’s template contains unfair/deceptive terms; private CFA allows a suit without showing public enforcement and without proof of direct harm | VAR: It merely provided a template; no direct participation, aid, or principal/agent relation—so no CFA liability | Held: VAR not liable absent direct participation, direct aid, or principal/agent relationship; summary judgment for VAR affirmed |
| Whether a private plaintiff can bring a CFA action irrespective of whether the Attorney General could bring one | Knutsen: Private plaintiff can act as a “private attorney general” and pursue statutory violations even if the AG could not | VAR: Private action supplements, not supplants, public enforcement; private suits should be cabined similarly to public suits | Held: Private remedy limited by same derivative-liability principles applicable to public CFA actions; Legislature did not intend broader private authority |
| Whether the specific clauses (liability cap and mandatory mediation) are per se unfair/deceptive under the CFA as to VAR | Knutsen: Clauses are unfair/deceptive and thus violate CFA irrespective of actual deception/damages | VAR: Clauses were adopted by broker and consumer; VAR did not deploy them in the transaction and had no role in the parties’ agreement | Held: Court did not reach a substantive ruling that clauses are per se unlawful as to consumers; focused on VAR’s lack of direct involvement and dismissed CFA claim against VAR |
| Whether providing forms via a website can constitute “direct aid” under the CFA | Knutsen: Posting/approving forms on member website facilitated deceptive clauses and thus aided brokers | VAR: Offering generic templates is not the type of active, transaction-specific aid that triggers liability | Held: Mere hosting/provision of model forms is insufficient; liability requires more direct, transaction-specific involvement |
Key Cases Cited
- State v. Stedman, 149 Vt. 594 (Vt. 1988) (derivative CFA liability requires direct participation, direct aid, or principal/agent relationship)
- Carter v. Gugliuzzi, 168 Vt. 48 (Vt. 1998) (real estate brokers can be treated as “sellers” under private CFA remedies)
- Elkins v. Microsoft Corp., 174 Vt. 328 (Vt. 2002) (broad remedial reading of §2461(b) can reach manufacturers as “other violators” absent privity)
- Sawyer v. Robson, 181 Vt. 216 (Vt. 2006) (focus on nature of alleged violator’s activities when applying private CFA)
- Goodman v. Federal Trade Commission, 244 F.2d 574 (9th Cir. 1957) (placing means of consummating fraud into another’s hands can ground liability)
- FTC v. Neovi, Inc., 604 F.3d 1150 (9th Cir. 2010) (operator of system that facilitates widespread fraud may be liable where it controls and is on notice of fraud)
- MRA Prop. Mgmt. v. Armstrong, 43 A.3d 397 (Md. 2012) (non-seller entities may be liable under consumer-protection law when their materials sufficiently implicate them in the sales transaction)