State v. Lee

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, 893 A.2d 338 (mem.) (quoting In re Moriarty, 156 Vt. 160, 163, 588 A.2d 1063, 1064 (1991)).  Here, the TRO was effective for one day-the day
  of the demonstration-and enjoined defendant only from selling products or
  services, which he claims it was not his intention to do anyway.  A ruling
  on the validity of the TRO would be null, as the TRO related only to the
  one advertised show, and a reversal would at this point have no effect on
  either of the parties.  In any event, however, the superior court acted
  within its discretion when it issued the one-day TRO based on the State's
  evidence that: (1) defendant's advertisement offered free electricity for
  life, (2) UCSA's representative admitted that the technology for free
  electricity did not exist, and (3) Vermont consumers were expected to
  attend defendant's show that day as a result of the deceptive
  advertisement.

                           II.  Motions to Compel

       ¶  11.  Next, we consider defendant's argument that the superior
  court abused its discretion by granting the State's two motions to compel
  discovery.  Discovery rulings are entrusted to the broad discretion of the
  trial court, and will not be disturbed absent a showing that discretion was
  abused or entirely withheld.  Schmitt v. Lalancette, 2003 VT 24, ¶ 9, 175
  Vt. 284, 830 A.2d 16.  So long as the trial court had a reasonable basis
  for its actions, we will not interfere with its discovery rulings "even if
  another court might have reached a different conclusion" on the same issue. 
  State v. Simoneau, 2003 VT 83, ¶ 21, 176 Vt. 15, 833 A.2d 1280 (internal
  quotations omitted).  
   
       ¶  12.  Defendant claims that to bolster the discoverability of the
  information it requested, the State erroneously alleged in its first motion
  to compel that defendant's "deceptive" advertisement "offered various
  technologies for sale," and that the trial court therefore erroneously
  granted the motion.  We find defendant's argument unpersuasive.  The text
  of the advertisement itself included language inviting Vermonters to "[b]uy
  a furnace that runs on fumes from your septic tank to heat and cool your
  home."  In addition, defendant's website sold videos, technologies, and
  "dealerships."  Thus, it was not an abuse of discretion for the court to
  determine that any discovery requests related to defendant's offer of
  technologies for sale were within the scope of discovery.  See V.R.C.P.
  26(b)(1) (permitting discovery of any nonprivileged information relevant to
  the subject matter of the pending action).

       ¶  13.  Furthermore, we reject defendant's assertion that the court
  should not have granted the State's motions to compel without an
  evidentiary hearing on discovery.  Vermont Rule of Civil Procedure
  78(b)(2) - cited by defendant as requiring the court to grant his requests
  for a hearing - allows the court to decline a request to present evidence
  where it finds no genuine issue as to any material fact.  Here, the court
  was justified in determining that no genuine issues of material fact
  existed pertaining to discovery, as the State's requests fell squarely
  within the scope of Rule 26(b) and defendant failed to present cogent
  arguments otherwise.  See V.R.C.P. 78(b)(2) ("The request for an
  opportunity to present evidence shall include a statement of the evidence
  which the party wishes to offer.").  In fact, it was not until oral
  argument that defendant asserted the State's requests implicated "trade
  secrets" that should have been privileged from discovery. (FN2)  It was
  therefore reasonable, and not an abuse of discretion, for the court to
  compel defendant's compliance with the State's discovery requests related
  to the underlying violation of the Act as well as defendant's ability to
  pay penalties.                                                   

       ¶  14.  We decline to address defendant's claim that the lower
  court's order to compel discovery amounted to an unreasonable search and
  seizure under the Fourth Amendment to the United States Constitution. 
  Defendant failed to raise the issue at the trial court, and therefore, we
  will not consider it on appeal.  State v. Ovitt, 2005 VT 74, ¶ 13, 178
  Vt. 605, 878 A.2d 314 (mem.).

                               III.  Sanctions

       ¶  15.  Defendant alleges that the superior court's actions in
  imposing sanctions for failure to comply with both orders to compel were
  abuses of discretion. As with other discovery rulings, the decision to
  impose sanctions for failure to comply with an order compelling discovery
  "lies well within the discretion of the trial court."  Manosh v. First
  Mountain Vt., L.P., 2004 VT 122, ¶ 10, 177 Vt. 616, 869 A.2d 79; V.R.C.P.
  37(b)(2) (allowing court to make such orders and impose such fees as are
  just when party fails to comply with order to compel).  Here, the trial
  court acted reasonably when it granted the State's motions for sanctions,
  and we will not disturb the trial court's orders.

       ¶  16.  Again, the State's requests for discovery were entirely
  within the limitations set by Rule 26(b), and the trial court was justified
  in ordering defendant to comply with those requests.  Defendant was allowed
  numerous extensions of time to comply with discovery and failed to do so on
  each occasion.  Defendant continued his noncompliance even in the face of
  court orders compelling discovery.  Given this history, the superior court
  had reasonable grounds, and appropriately exercised its discretion, when it
  imposed sanctions on defendant taking as established the facts set out by
  the State on the issues of liability and remedies.  See V.R.C.P.
  37(b)(2)(A) (authorizing trial court to designate that certain facts are
  established for purposes of the action when a party fails to comply with an
  order to compel).
   
       ¶  17.  Nor are we persuaded by defendant's contention that the
  superior court was required to make findings on the record prior to
  imposing such sanctions.  When a trial court imposes the ultimate sanction
  of dismissal, we require findings of fact to show bad faith or deliberate
  and willful disregard of the court's orders, as well as prejudice to the
  opposing party.  John v. Med. Ctr. Hosp. of Vt., Inc., 136 Vt. 517, 519,
  394 A.2d 1134, 1135 (1978); see also V.R.C.P. 37(b)(2)(C) (authorizing
  trial court to dismiss action for failure to comply with order to compel). 
  Here, however, dismissal was not ordered, and defendant was allowed
  additional opportunities to argue against the relief sought by the State in
  response to its motions for summary judgment.  Regardless of the sanctions
  imposed on defendant, the trial court's ruling on liability hinged on the
  incontrovertible facts that: (1) the advertisement for the August 1, 2001
  show offered "free electricity," (2) the technology for "free electricity"
  did not yet exist, and (3) defendant planned to engage in sales to Vermont
  consumers, as evidenced by the text of the advertisement and the commercial
  nature of UCSA's website.  Thus, defendant was in no way prejudiced by the
  court's order establishing the facts as alleged by the State.

                            IV.  Hearing Schedule

       ¶  18.  Finally, defendant challenges the superior court's
  refusal to reschedule the October 19, 2004 hearing on sanctions as an abuse
  of discretion.  Defendant was given twenty days' notice of the upcoming
  hearing but requested a "short adjournment to accommodate a calendar
  conflict for a previously scheduled critical business meeting."  The trial
  court denied the request, citing defendant's repeated attempts at delaying
  the proceedings and the insufficiency of information to support the request
  for a continuance.  We can discern no function that is more appropriately
  left to the broad discretion of the trial court than the scheduling of
  hearings and find no abuse thereof.

       Affirmed.


                                       BY THE COURT:


                                       _______________________________________
                                       Paul L. Reiber, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice

                                       _______________________________________
                                       Brian L. Burgess, Associate Justice


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                                  Footnotes

FN1.  While the text of the advertisement in the Burlington Free Press was
  identical to that in the Caledonia Record, the second sentence appeared in
  capital letters in one publication and lower-case letters in the other. 

FN2.  While defendant responded to numerous discovery requests from the
  State by asserting that the information was "privileged, confidential and
  classified," he provided no basis for these assertions and made no mention
  of "trade secrets" until his oral argument before this Court.