TAM Shareholder Robert J. Zavaglia, Jr. today obtained a complete defense verdict for his client in a million-dollar consumer marketing dispute venued in Steamboat Springs.
Rob’s client, a regional wholesale manufacturer of custom systems built housing, provides internet and catalog information about its product and the process involved in designing, building, and delivery and assembly of manufactured custom homes. Typical for the industry, in the sales areas which it does not directly service the manufacturer vets local general contractors who demonstrate the knowledge and ability to perform the delivery and assembly steps of the process. Any manufacturer inquiries from potential homeowners in those areas are referred to the local independent contractors for follow-up. Potential homeowners can pursue home design and purchase, plus any other contracting services they desire, directly through the independent contractor.
The plaintiff in the case originally obtained a manufacturer catalog through the internet in February of 2006. Her information was referred to a local independent contractor, but serious discussions about homebuilding were deferred until 2008. In May of 2008, the plaintiff met with the local contractor and, over the course of nearly six months, worked on custom design and specifications for both a systems built house, as well as site work, outbuildings, landscaping, and other construction services the contractor would provide. The plaintiff made a deposit and advance payments to the contractor during that time, and in November of 2008 the contactor made a wholesale purchase order to the manufacturer based on customer specifications for the house.
By February of 2009, the manufacturer completed factory construction and the unit was ready to ship to the contractor, but it had only been paid 40% of the wholesale purchase price. Reasons why remain unknown, but though it had been paid substantially more from its customer than the wholesale purchase price, the contractor failed to make further payments to the manufacturer or schedule delivery. In April of 2009 the independent contractor terminated its wholesale purchase relationship with the manufacturer, and by the end of that year ceased any further work on the project for its customer. Workaround efforts between the manufacturer and the contractor’s customer in 2009 and early 2010 were not fruitful.
In the summer of 2010, having neither paid the balance owed to the manufacturer nor refunded the advances from its customer, the independent contractor filed for bankruptcy. The plaintiff’s suit originally named the contractor and its principal as co-defendants and alleged against them causes of action for civil theft, trust fund statute violation, fraud and breach of contract. After a suggestion of the bankruptcy proceeding, the plaintiff dropped those defendants and proceeded solely against the manufacturer on consumer fraud and negligent misrepresentation claims, seeking more than $460,000 in actual damages and asking for trebled punitive damages and attorneys’ fees under statute.
Before trial, the manufacturer sold the constructed unit at a loss and deposited the down payment received from the bankrupt contractor with the court. During trial, the court dismissed three of the four consumer fraud theories on directed verdict. After the conclusion of evidence, the jury deliberated four hours and returned a defense verdict on all remaining claims. Post-trial matters are pending, and the contractor’s bankruptcy trustee was notified about the available refunded deposit for estate creditors.