¶ 1. In this action for fraud, defendants R. Brown & Sоns, Robert Brown, and Stephanie Brown appeal from a default judgment on liability entered against them as a discovery sanction below. Defendants also bring several challenges to the court’s final judgment on damages. Plaintiff Rathe Salvage, Inc. cross-appeals. We reverse the default judgment, remand the matter, and decline to consider the remaining issues on appeal and cross-appeal.
¶ 2. The relevant facts arе as follows. For over thirty years, Rathe and R. Brown were engaged in a business relationship in which R. Brown crushed automobiles owned by Rathe, which operates a salvage yard, and hauled the scrap metal to Canadian steel mills such as Associated Steel, located outside of Montreal. By oral agreement, Rathe would telephone R. Brown to inquire about the prevailing price per ton, and if the rate was agreeable, would authorize R. Brown to come
¶ 3. In January 2004, Rathe brought this action alleging that defendants committed fraud, breach of contract, and trespass in the course of R. Brown’s business dealings with Rathe. Early in the litigation, Rathe requested from defendants copies of all documents reflecting transactions between R. Brown and Associated Steel. While defendants provided Rathe with the weigh slips in their possession, those slips were printed on R. Brown’s letterhead. Rathe claimed, however, that Associated Steel typically issued its own original weigh slips for scrap metal transactions and that the original slips were dispositive to the litigation. Defendants failed to produce any Associated Steel documents, and Rathe filed a motion to compel. The court conditionally granted the motion in September 2004, ordering defendants to provide Associated Steel’s documents, “subject to a confidential agreement to be produced by [defendants] and submitted to court in connection with this order.” Thereafter, defendants represented to Rathe that they would not execute the court-ordered agreement until Rathe provided them with the specific documents it was seeking from Associated Steel, asserting that Rathe was not entitled to unlimited access to Associated Steel’s records concerning its business relations with R. Brown. As such, defendants failed to comply with the court order, and in November 2004, Rathe filed a motion for discovery sanctions. The court held a hearing on the motiоn on January 13, 2005, after which it granted Rathe’s motion and ordered defendant Robert Brown to sign a release form authorizing Associated Steel “to provide copies of any and all records in its possession to [Rathe’s counsel] relating to transactions with R. Brown & Sons, Inc. during the year 2003, which involved scrap metal or other goods from Rathe.” Despite Associated Steel’s earlier representations that it would release relevant reсords to Rathe’s counsel with R. Brown’s permission, Associated Steel refused to provide the requested documents.
¶ 4. In May 2005, Rathe deposed defendant Robert Brown. At deposition, Robert Brown was asked if he had communicated with Associated Steel since signing the release form in January. He answered that he had, stating: “I told them not to give anybody any of my records.” In an effort to clarify his client’s position, defense counsel stated on the record that his client did not object to Associated Steel producing the documents requested in the release form, but that he did not want any other “personal records” turned over to
¶ 5. On July 28, 2005, Rathe applied for a letter rogatory from the court, pursuant to Vermont Rule of Civil Procedure 28, to assist it in compelling production of documents held by Associated Steel in Canada. Defendants responded to the application, but did not object to the letter rogatory. The court granted Rathe’s request and issued a letter rogatory in August 2005, and Rathe commenced proceedings in Quebec Province. On September 15, 2005, the Quebec Superior Court issued an order and writ of subpoena duces tecum to the principal of Associated Steel, requiring him to submit to examination by Rathe’s counsel and to bring with him the requested documents for Rathe’s review. Associated Steel moved to strike the subpoena, and the matter was scheduled to be heard on September 28, 2005. Following the hearing on September 28, 2005, the Quebec Superior Court issued an order requiring Associated Steel’s principal to appear, with relevant documents, for examination by Rathe’s counsel. The following day, Associated Steel appealed the decision, which resulted in an automatic stay of the order. At some point thereafter, Rathe determined that the litigation in the Canadian courts was becоming too costly to continue and dismissed the pending appeal.
¶ 6. In January 2006, Rathe filed a motion requesting that R. Brown be held in contempt of court and, as a discovery sanction, that that the court order R. Brown to reimburse Rathe for attorney’s fees incurred in Canada in pursuit of the documents, and draw an adverse inference against R. Brown based on its actions. A hearing on the motion was held in May 2006, and on September 11, 2006, the court granted Rathe’s motion, entering a default judgment on liability against defendants as a sanction for discovery violations. Furthermore, the court ordered defendants to pay the attorney’s fees incurred by Rathe in the Canadian litigation against Associated Steel.
¶ 7. Defendants waived their right to a jury trial on the damages portion of the case, and a merits hearing was held on July 2, 2007. The court issued its findings of fact and conclusions of law on September, 6, 2007, finding defendants liable tо Rathe in the amount of $54,885 for fraud committed in 2003, and Robert Brown liable in the amount of $38,830 for lost rent due to his failure to remove R. Brown’s property from Rathe’s premises and for other miscellaneous items.
¶ 8. Defendants now appeal, raising issues both related to the court’s default judgment as well as the final judgment on damages. Defendants argue first that the superior court abused its discretion in issuing a default judgment against defendants as a discovery sanction. Furthеrmore, they contend that the court erred in awarding attorney’s fees to Rathe in the Canadian litigation to which defendants were not a party. With respect to the final judgment, defendants claim that the court erred in: (1) finding damages for fraud; (2) holding defendant Stephanie Brown liable for fraud and ordering her to pay damages; (3) failing to hold a Daubert hearing on the admissibility of proffered polygraph evidence; (4) awarding punitive damages; and (5) awarding damаges for lost rent.
¶ 10. As all other issues on appeal derive from the court’s default judgment on liability, we begin by considering whether it was an appropriate discovery sanction against defendants given the facts of this case. Defendants contend that the documents requested by Rathe were neither in their possession nor their control, and that it was an abuse of discretion for the court to impose such an extreme sanction against them for the actions of a third party, Associated Steel. Rathe counters by arguing essentially that R. Brown’s close business relationship with Associated Steel gave defendants constructive control over the records in Associated Steel’s possession, and furthermore, that defendants affirmatively interfered with Rathe’s pursuit of the records from Associated Steel.
¶ 11. Under the rules of civil procedure, the trial court has discretion to sanction a party that “fails to obey an order to provide or permit discovery.” V.R.C.R 37(b)(2). If warranted, the court may sanction a party by “rendering a judgment by default against the disobedient рarty.”
Id.
37(b)(2)(C). We typically review discovery sanctions ordered by the trial court only for abuse of discretion. See
John v. Med. Ctr. Hosp. of Vt., Inc.,
¶ 12. Despite trial courts’ otherwise broad discretion to impose discovery sanctions, however, litigation-ending sanctions are reserved for only the most flagrant cases and are inappropriate where failure to produce discovery is due to an inability fostered by circumstances outside of the party’s control. See, e.g.,
Beil v. Lakewood Eng’g & Mfg. Co.,
¶ 13. In this case, Rathe requested that defendants produce Associated Steel’s original documents reflecting business transactions between R. Brown and Associated Steel. Defendants claim that it was unreasonable for the court to issue a default judgment here because defendants were unable to produce the requested documents,
¶ 14. Under Rule 34(a), a рarty may request that another party produce documents only if they “are in the possession, custody or control of the party upon whom the request is served.” (Emphasis added.) The trial court, in its January 13, 2005 discovery order requiring Robert Brown to sign the release form, acknowledged, at least implicitly, that defendants did not have physical possession of the documents sought by Rathe, and yet, in its default judgment order, the court charged defendants with failing “to produce documents which exist аnd are in [their] control.” Likewise, Rathe has conceded that defendants produced all relevant documents in their possession, but argues that the records are “presumptively in [R. Brown’s] control” and that defendant affirmatively interfered with Rathe’s pursuit of the documents from Associated Steel.
¶ 15. In
Castle v. Sherburne Corp.,
we considered whether a party could be compelled under Rule 34 to produce medical records that were not in the party’s actuаl possession, but were in the possession of the treating hospital.
¶ 16. By contrast, Rathe presented no evidence at the hearing on the motion for sanctions, or otherwise, that defendants had any legal right to Associated Steel’s documents or practical ability to induce the company to produce the requested documents. See
Gerling Int'l Ins. Co. v. C.I.R.,
¶ 17. Nor did defendant Robert Brown’s May 2005 deposition statement provide a sufficient basis for imposing the “drastic sanction” of a default judgment.
Manosh v. First Mountain Vt.,
¶ 18. We conclude that the trial court abused its discretion in sanctioning defendants by rendering a default judgment on liability against them under the circumstances of this case. Rathe in no way established that R. Brown, a Vermont-based scrap-hauling operation, had the ability to produce documents in the possession of Associated Steel, a multinational company based in Canada. As discussed above, R. Brown did not have “control” over the documents in Associated Steel’s possession as required by Rule 34, nor was there sufficient evidence that R. Brown exerted the kind of influence over Associated Steel that would justify imposing liability against it for Associated Steel’s actions in withholding the requested documents. Thus, we hold that it was error for the court to conclude that defendants displayed “willful and deliberate disregard” for the court’s discovery orders when defendants did not have control of the documents and were therefore unable to produce them. Consequently, we reverse the court’s default judgment. *
¶ 19. In light of our decision to reverse the court’s default judgment, we likewise vacate its оrder requiring defendants to reimburse Rathe for attorney’s fees and costs incurred in the
Canadian litigation to which it was not a party. We decline, however, to address defendants’ other arguments on appeal because each of those issues is predicated on the court’s erroneous imposition of the default judgment on liability. Instead, we remand the case for further proceedings consistent with this opinion.
¶20. As a final matter, we address Rathe’s cross-appeal — primarily, its assertion that the Consumer Fraud Act applies to this action. In its final ruling, the court cursorily addressed the applicability of the Consumer Fraud Act to the facts of this case. First, it noted that “it was probably not the Legislature’s intent to benefit corporate plaintiffs under the scope of the Act.” Then the court went on to consider whether Rathe could, in any event, qualify as a “consumer” vis-a-vis R. Brown, a prеrequisite to protection under the Act. It concluded that “Rathe was a seller of goods rather than a purchaser of services,” and therefore was not a consumer covered by the Act.
¶ 21. First, we respond to the court’s doubts as to the applicability of the Act to businesses in general. Prior to 1997, the Consumer Fraud Act defined “consumer” as:
any person who purchases ... or otherwise agrees to pay consideration for goods or services not for resale in the ordinary course of his or her trade or business but for his or her use or benefit or the use or benefit of a member of his or her household.
9 V.S.A. § 2451a(a) (1997). Under the original language of the statute, it was unclear whether businesses could bring an action for consumer fraud. In 1997, however, the Legislature amended the statute, adding to its definition of “consumer”:
a person who purchases ... or otherwise agrees to pay consideration for goods or services not for resale in the ordinary course of his or her trade or business but for the use or benefit of his or her business or in connection with the operation of his or her business.
9 V.S.A. § 2451a(a). Furthermore, the bill proposing the amendment to the Act, as introduced, provided that its purpose was “to create a private cause of action for businesses under Vermont’s consumer fraud statute.” H.226, 1997-1998 Gen. Assem., Bien. Sess. (Vt. 1997). Thus, passage оf the amendment unambiguously signaled the Legislature’s intent to provide businesses with the
same protections under the Act as individuals have historically-received. See
Ice Ctr. of Washington W., Inc. v. Town of Waterbury,
¶ 22. Despite its ambivalence about the applicability of the statute to businesses, the court concluded that vis-á-vis R. Brown, Rathe was a seller of goods and was consequently excluded from the protections of the Act in any event. In reaching its decision, the court acknowledged that the parties had not focused on the question at the hearing on dаmages, stating that “the precise nature of the Rathe/[R. Brown] contract ha[d] not been analyzed by counsel.” Given that we have determined that the Act applies to businesses in general and are remanding for a hearing on the merits, the parties should be allowed a full opportunity to present evidence related to the question of whether Rathe qualifies as a “consumer” under the specific facts of this case at trial.
Revеrsed and remanded for further proceedings consistent with the views expressed herein.
Notes
We do not decide whether, or under what specific circumstances, a party opponent not legally entitled to access to documents held by another could nevertheless be subject to sanctions due to actual influence, or control in fact, over the other’s failure to disclose. The record here is simply insufficient to support a finding of such influence or control.