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The Court Considers Issues of Fraud, Breach of Fiduciary Duty, and SLAPP Suits in Connection with a Contentious Divorce

In Felis v. Downs Rachlin Martin PLLC and Gallagher, Flynn & Co., 2015 VT 129 (October 16, 2015), the Vermont Supreme Court affirmed on all counts the trial court’s grant of Defendants’ motion to dismiss and its denial of one Defendant’s motion to strike based on Vermont’s anti-SLAPP statute.

Issue: After a long and contentious divorce, Plaintiff husband sued his ex-wife’s attorneys (DRM) and the accounting firm that testified regarding business valuations relevant to the divorce (GFC), for fraud and breach of fiduciary duty. Plaintiff’s claim was based on the idea that DRM pursued a deliberately contentious discovery and litigation strategy that was meant to maximize its own fees. The trial court granted DRM and GFC’s Rule 12(b)(6) motions to dismiss, but denied GFC’s motion to strike, which was based on Vermont’s anti-SLAPP statute, finding it to be moot in light of the granting of its motion to dismiss. Plaintiff and GFC filed cross appeals.

Holding: The Court:

    1. Affirmed the dismissal of the fraud claim against DRM because Plaintiff failed to show that he was unaware of any alleged falsehoods and he failed to plead and prove with particularity that he relied on such alleged falsehoods. The Court particularly noted that an allegation that DRM lied to the court was not enough to show reliance on the Plaintiff’s part.
    2. Affirmed dismissal of the breach of fiduciary duty claim, noting that an attorney has no fiduciary duty to the opposing side in an adversarial process. The Court also noted that (though it was a stretch) there might possibly be a claim that Plaintiff’s ex-wife had a duty to preserve the marital estate, and DRM could be considered her agent for the purposes of that duty. However, the Court also noted that, if DRM had engaged in self-dealing in an attempt to maximize its fees, as Plaintiff alleged, that would break the agency relationship with Plaintiff’s ex-wife for these purposes.
    3. Rejected Plaintiff’s prima facie tort claim because Plaintiff did not raise the issue below and therefore waived it on appeal.
    4. Denied GFC’s motion to strike. While the Court acknowledged that the trial court’s granting of GFC’s motion to dismiss did not render its motion to strike moot (because, under the anti-SLAPP statute, it would be entitled to attorney’s fees if successful), it chose to determine the merits of the motion to strike itself, rather than remanding to the trial court, because a denial is subject to de novo review. The Court engaged in its first real consideration of the anti-SLAPP statute – which limits strategic lawsuits against public participation (“SLAPP suits”), or lawsuits that are intended to intimidate and censor critics by burdening them with the cost of mounting a legal defense – and conducted a review of how other jurisdictions have ruled on similar statutes. Ultimately, it denied the motion to strike because it found that Plaintiff’s action was not a SLAPP suit under the Vermont statute, because the testimony provided by GFC was not connected with a public issue.

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