Title: State v. Lee

State: vermont

Issuer: Vermont Supreme Court

Document:

State v. Lee (2005-125)

2007 VT 7

[Filed 25-Jan-2007]

                                 ENTRY ORDER

                                  2007 VT 7

                      SUPREME COURT DOCKET NO. 2005-125

                             DECEMBER TERM, 2006


  State of Vermont                     }         APPEALED FROM:
                                       }
      v.                               }
                                       }         Washington Superior Court
                                       }
  Dennis Lee d/b/a United Community    }
  Services of America                  }         DOCKET NO. 408-8-01 Wncv

                                                 Trial Judges: M. Patricia 
                                                               Zimmerman
                                                               Matthew I. Katz

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  This appeal arises from a superior court finding of a Vermont
  Consumer Fraud Act (Act) violation.  Defendant Dennis Lee d/b/a United
  Community Services of America (UCSA) challenges four superior court rulings
  as abuses of discretion, but does not appeal the final judgment.  We find
  no abuse of discretion and affirm.

       ¶  2.  The State filed this consumer fraud action in Washington
  Superior Court following defendant's publication of an advertisement in the
  Burlington Free Press and Caledonia Record. (FN1)  The advertisement invited
  readers to a "free show" at the Sheraton Hotel in Burlington on August 1,
  2001 where "a dozen things the 'experts' say are impossible" were scheduled
  to be demonstrated.  The advertisement then claimed that attendees would
  witness-among other technologies-the following:

    We will prove water can flow up hill without using a pump. . . .       
    You can burn pure water to cut through thick steel . . . .         
    We will run a modified internal combustion engine in the room
    closed loop (with absolutely no exhaust system.      
    A camera that takes video through walls and can even look directly
    into the human body with no radiation. . . .                             
    Buy a furnace that runs on fumes from your septic tank to heat and
    cool your home . . . . 

  Finally, the advertisement promised, "[s]ign up to get all your electricity
  for the rest of your life absolutely free!"
   
       ¶  3.  The State contacted defendant's office at UCSA the
  day before the presentation was scheduled to take place, and a
  representative acknowledged that the technology for "free electricity" did
  not yet exist.  The State also discovered defendant's website which offered
  videotapes on the "free electricity" program for sale, several
  "technologies" for sale, and "dealerships" for "as little as $30,000." 
  Based on this information, the State alleged in its complaint that
  defendant had engaged in "unfair or deceptive acts or practices in
  commerce" in violation of the Act.  9 V.S.A. § 2453(a).

       ¶  4.  On August 1, 2001, the court issued a temporary restraining
  order (TRO) prohibiting defendant from "conducting a sales presentation" in
  Vermont on that day.  Defendant followed through with the demonstration,
  but did not engage in any direct sales activity.   

       ¶  5.  Defendant was served with the State's complaint, and after
  two extensions of time, filed his answer.  In January 2002, the State made
  its first discovery request and received a largely unresponsive set of
  answers from defendant, claiming that the vast majority of questions were
  either irrelevant, overly broad, or elicited confidential information. 
  After a failed attempt by the parties to resolve their discovery issues,
  the State moved to compel discovery in June 2002.  The trial court granted
  the State's motion and ordered defendant to comply with the State's
  discovery requests.  Both before and after the court issued its order to
  compel, defendant filed a series of motions in an attempt to block the
  State's discovery.  The court denied each of the motions-each time
  extending the period for compliance with the order-and defendant continued
  his noncompliance. 

       ¶  6.  In September 2002, the State moved for sanctions pursuant to
  Vermont Rule of Civil Procedure 37(b), including an order establishing
  certain facts and prohibiting defenses.  The court allowed defendant one
  last extension of time, until April 2003, to comply with discovery, "or the
  State's motion for sanctions [would] be granted," and "could include an
  order that certain facts are established favorable to the State." 
  Defendant again failed to comply, but filed a motion for a protective order
  in May 2003.  The court denied the motion, and the State renewed its motion
  for sanctions.  In August 2003, the court ordered sanctions against
  defendant and stated that the facts and allegations alleged in the State's
  complaint would be taken as established and that defendant would not be
  allowed to present a defense.  Defendant's appeal of that order was
  dismissed by this Court because it was not a final order.

       ¶  7.  The State subsequently filed a motion for summary judgment
  which was granted by the court in February 2004.  The court concluded that
  defendant violated the Act, but reserved the issue of appropriate remedies
  for later determination.  Shortly thereafter, the State sent defendant
  financial discovery requests to determine his ability to pay civil
  penalties under the Act.  Defendant replied with short answers and tax
  returns for two of the three businesses that he claimed to own.  The State
  then sent supplemental discovery requests to clarify factual issues raised
  by defendant's earlier responses, to which defendant failed to respond. 
  The State again filed a motion to compel, and the superior court granted
  the motion in June 2004.  Defendant refused to comply with the court's
  order, and the State filed another motion for sanctions under Rule 37(b),
  requesting that the court issue an order establishing facts and prohibiting
  defenses with respect to defendant's ability to pay penalties and costs.
   
       ¶  8.  In September 2004, the court scheduled a hearing on the
  pending sanctions motion for October 19, 2004, specifying "No telephone. 
  In person." on the entry form.  Defendant requested a continuance of the
  hearing, claiming a scheduling conflict.  The court denied the request,
  finding that there was insufficient information on which to base a
  continuance.  Defendant failed to appear at the hearing, and the court
  issued an order finding defendant able to pay $20,000 in civil penalties in
  addition to the State's fees and costs.

       ¶  9.  In late October 2004, the State filed a motion for summary
  judgment on the issue of remedies.  The court granted the motion in
  February 2005 and issued an order enjoining defendant from selling or
  marketing goods or services in or into Vermont; requiring defendant to
  state on UCSA's website that it does not offer anything for sale in or into
  Vermont; and awarding judgment to the State in the amount of $20,000 in
  penalties and $18,177.60 in fees and costs.  Defendant now appeals,
  claiming that the superior court abused its discretion by: (1) issuing an
  ex parte TRO prohibiting defendant from conducting sales in Vermont on
  August 1, 2001; (2) granting the State's two motions to compel discovery;
  (3) imposing sanctions against defendant for failure to comply with
  discovery; and (4) denying defendant's request to reschedule the hearing on
  the State's second motion for sanctions.  We address these claims in turn.

                                   I.  TRO

       ¶  10.  Defendant's first argument on appeal, that the superior court
  abused its discretion by issuing the August 1, 2001 TRO, fails for
  mootness.  "Generally, 'a case becomes moot when the issues presented  are
  no longer live or the parties lack a legally cognizable interest in the
  outcome.' " In re Vt. State Employees' Ass'n, 2005 VT 135, ¶ 10, 179 Vt.
  228,