Knutsen v. Dion , No. 342

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[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the accompanying data included in the Vermont trial court opinion database is not guaranteed.] STATE OF VERMONT

SUPERIOR COURT CIVIL DIVISION Washing ton Unit Docket No. 342

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JANET KNUTSEN

Plaintiff

v.

DAVID M. DION et al.

Defendant s

DECISION Pending Motions

In the Court’s February 26, 2015 decision, the remaining claims in this case were

identified as follows: “ (1) Ms. Knutsen’s claim that Mr. Dion is liable for misrepresentations regarding the likelihood of flooding; (2) . . . Mr. Dion’s right to indemnity from the Sweetsers; and (3) Mr. Dion’s right to attorney f ees and other litigation expenses from Ms. Knutsen.” T he claim for attorney fees is predicated on an asserted contract right in paragraph 20 of the Purchase

and Sales Contract (P&S) and the bad faith exception to the American Rule.

Following the Court’s ruling, Ms. Knutsen filed two motions labeled a s a motion to

dismiss and a motion in limine. The court understands Ms. Knutsen, b y these motions , to be seeking to voluntarily dismiss her remaining claim against Mr. Dion, which moots Mr. Dion’s

claim for indemnity against the Sweetsers. Ms. Knutsen also seeks a ruling on Mr. Dion’ s claim for attorney fees

. In response, Mr. Dion insists that he is entitled to proceed to a jury on his

claim for attorney fees

.

The function of a jury is to resolve disputes of fact. Juries do not decide issues as a matter of law or resolve equitable matters. Mr. Dion has not identified any dispute of fact necessitating a jury trial. The interpretation of an unambiguous contract presents a legal issue.

Entitlement to attorney fees under the bad faith exception to the American Rule presents an equitable issue. This case (not to mention the previous case between these parties) has bee n pending for over five years. In the interest of judicial economy, the Court will add ress Mr.
Dion’s claim for attorney fees now.

The contract right

The contract relates to the sale of a home by the Sellers to the Purchaser. There are no other parties to the contract. The disputed right to attorney fees appears in paragraph 20, which

reads as follows:

Default : If Purchaser fails to close as provided herein, or is otherwise in default, Seller may terminate this Contract by written notice to Purchaser and retain all2

Contract Deposits as liquidated damages, or may pursue all legal and equitable remedies provided by law. If Seller does not notify Purchaser of Sellers’s election of remedies within thirty (30) calendar following notice of Purchaser’s default,

Seller’s so le remedy shall be retention of all Contract Deposits as liquidated damages. Because of the nature and subject matter of this Contract, damages arising from Purchaser’s default may be difficult to calculate with precision. The amount of the Contract Depo sits reflect, in part, a reasonable estimate of Seller’s damages for Purchaser’s default. The provision hereof granting Seller the

election to retain the Contract Deposits as agreed

- upon liquidated damages is intended solely to compensate Seller for Purch aser’s default. It is not intended to be a penalty for Purchaser’s breach nor is it an incentive for Purchaser to perform the obligations of this Contract. If Seller fails to close, or is otherwise in default, Purchaser may terminate this Contract by wri tten notice to Seller and shall receive back all Contract Deposits and may pursue Purchaser’s rights to all legal and equitable remedies provided by law. In the event legal action is instituted arising out of a breach of this Contract, the substantially p revailing party shall be entitled to reasonable attorney’s fees and court costs.

P&S ¶ 20 (emphasis added). Mr. Dion is not a party to this contract. He was neither a seller n or a buyer. The only way that the fee provision in paragraph 20 could extend to him is if he is a n intended beneficiary of that portion of paragraph 20.

The Restatement describes an intended beneficiary as follows:

(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circums tances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Restatement (Second) of Contracts § 302(1); see also Herbert v. Pico Ski Area Management Co.

, 180 Vt. 141 , 150 ( 2006 ) (applying § 302)

.

Nothing in the P&S implies that the Purchaser and the Sellers intended to make Mr. Dion a beneficiary of the fee provision in paragraph 20. They clearly intended to make him a beneficiary of the limitation of liability provision in paragraph 13. That paragraph inc ludes this:

“ Seller and Purchaser each agree that there is valid and sufficient consideration for this limitation of liability and that the real estate brokers are the intended third

- party beneficiaries of this provision .” This language plainly makes Mr. Dion a beneficiary of paragraph 13, not paragraph 20 or the contract as a whole. There simply is no applicable right to attorney fees in

the contract.3

The bad faith exception to the American Rule

Absent a contract right, parties typically are responsible for their own at torney fees under

the American Rule. The equitable exceptions to the American Rule are reserved for exceptional

cases. See Cameron v. Burke , 153 Vt. 565, 576 (1990) (“Exceptional cases include instances where a litigant acts ‘ in bad faith’ or ‘vexatiously’ and where a litigant’s conduct is ‘unreasonably obdurate or obstinate.’” (citation omitted)).

Mr. Dion clearly feels that Ms. Knutsen’s claims against him were unwarranted and

liti gated with too much zeal. He no doubt sha res that sense of affront with a great many others who find themselves in court defending claims that eventually are withdrawn or prove n meritless. However

, t he law makes room for marginal claims. See, e.g., LeClair v. Reed ex rel.

Reed , 2007 VT 89, ¶ 6, 182 Vt. 594 (noting that claims that are novel or extreme should not, for those reasons, be dismissed). It gives plaintiffs room to frame their claims and explore them on the evidence turned up in discovery. See Colby v. Umbrella

, 2008 VT 20, ¶ 6, 184 V t. 1 (noting

the “ generous standard governing Rule 15(a) motions to amend ”); Alger v. Dep’t of Labor &

Indus. , 2006 VT 115, ¶ 12, 181 Vt. 309 ( noting that novel or extreme cases “ should be explored in the light of facts as developed by the evidence ) . It demands that lawyers represent their clients

with zeal. See Rules of Professional Conduct 3.1 cmt. [1] (“The advocate has a duty to use legal procedure for the fullest benefit of the client’s cause, but also a duty not to abuse legal procedure.”).

After five years of litigation, it is clear that this case does not include the sort of

circumstance s that would warrant an equitable exception to the American Rule. Ms. Knutsen’s claims may have been novel or extreme, but they were not overtly frivolous . Her counsel’s

tactics may have been aggressive, but they were not in any apparent way vexatious , abusive, or obdurate. As one court said, “ No one likes to be sued. Parties sometimes even settle lawsuits that they consider to be extortion. But that do es not make the filing of a complaint in such an

action extortionate. ” Park South Associates v. Fishbein , 626 F. Supp. 1108, 1114 (S.D.N.Y. 1986). The Court denies Mr. Dion’s claim for attorney fees.

ORDER

For the foregoing reasons, Ms. Knutsen’s motions are granted. Her remaining claim is withdrawn; Mr. Dion’s claim for indemnity against the Sweetsers is moot; and Mr. Dion’s claim for attorney fees is dismissed.

Dated at Montpelier, V ermont this ____ day of June 201 5

.

_________________ ____________ Mary Miles Teachout Superior Judge