Rohrer v. Knudson, 2009 MT 35
Rohrer bought a lot from Knudson and built a house where he experienced significant settling of the land underneath the building causing cracked walls, broken tile floors, and sticking doors. After investigating the history of the area, Rohrer found that a ditch and steep railroad embankment existed there and that major earth moving activities filled in the ditch and eliminated the embankment sometime before 1964. Claiming that Knudson should have been aware of and disclosed the fill conditions, Rohrer filed suit alleging negligence, negligent misrepresentation, and violations of the Montana Consumer Protection Act.
Issue 1: Whether the District Court abused its discretion in prohibiting the Rohrers from presenting evidence of differential settlement damage to other residences in Bel View Palisades.
At trial, Knudson claimed that the settlement problems resulted from Rohrer’s own negligence and submitted expert testimony stating that the cause of the settlement was invariably a water problem resulting from irrigation next to the foundation, poor site grading, and the failure to install drains around the foundation footings.
Before trial began, Knudson moved to preclude Rohrer from presenting evidence of differential settlement damage to neighboring residences claiming that such evidence was irrelevant and prejudicial. Despite Knudson’s counsel stating that he did not intend to argue that Roher’s house was a unique anomalous occurrence, SCOMONT found that they presented evidence calculated to imply that damage to other homes did not exist. By “eliciting testimony of the reputation for settlement in the area and suggesting that no extraordinary foundations were required for other houses in the area,” Knudson’s counsel opened the door to rebuttal. The District Court abused its discretion by excluding the evidence of settling in neighboring homes after such insinuations. The “exclusion of such rebuttal testimony affected the result since any change in the apportionment of negligence would alter the Rohrers’ recovery.” Reversed and remanded for retrial where Rohrer should be allowed to present evidence of settlement of other houses in the area to rebut any contention that there is no reputation for settlement in the area or that neighboring houses do not require extraordinary foundations because they are not built on fill.
Issue Two: Whether the District Court’s instruction defining “unfair practice” under the Montana Consumer Protection Act was a correct statement of the law.
Rohrer’s counsel offered a jury instruction defining an “unfair” act or practice as “one which offends established public policy and which is either immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Ultimately though, the court agreed with Knudson’s counsel and struck “substantially injurious” from the jury instruction defining an “unfair” act or practice.
As a matter of first impression, SCOMONT joined at least a dozen other states and adopted a version of the U.S. Supreme Court’s standard from FTC v. Sperry & Hutchinson Co. (S&H), which used the following criteria to determine whether a practice is unfair:
(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise – whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).
FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244, n. 5 (1972). SCOMONT held as a matter of law that under the Montana Consumer Protection Act, an unfair practice is “one which offends established public oplicy and which is either immoral, unethical, oppresssive, unscrupulous or substantially injurious to consumers.” Rohrer, ¶ 31.
