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Stone v. Town of Irasburg

Supreme Court of Vermont

April 25, 2014

Linda Stone
Town of Irasburg

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[Copyrighted Material Omitted]

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Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Orleans Unit, Civil Division. Robert R. Bent and Howard E. Van Benthuysen, JJ. (summary judgments). Dennis R. Pearson, J. (final judgment).

Affirmed in part, reversed in part, and remanded for proceedings consistent with this decision.

Charles L. Merriman and James Pepper, Legal Intern, of Tarrant, Gillies, Merriman & Richardson, Montpelier, for Plaintiff-Appellant.

Philip C. Woodward of Woodward & Kelley, PLLC, South Burlington, for Defendant-Appellee.

Present: Reiber, C.J., Skoglund, Robinson and Crawford, JJ., and Zimmerman, Supr. J. (Ret.), Specially Assigned.


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[¶1] Plaintiff Linda Stone sued the Town of Irasburg alleging that the selectboard had acted unlawfully in ordering her, as town treasurer, to raise her bond to $1,000,000. Following plaintiff's inability to obtain the bond and her removal from office by the selectboard, she claimed the Town improperly raised her bond and prevented her from obtaining the bond. She sought monetary damages based on common law defamation, tortious interference with office, violation of the Vermont Constitution, and deprivation of due process. She also asserted that the Town was obligated to pay her attorney's fees pursuant to statute. In several different orders, the trial court granted the Town summary judgment on all counts. Plaintiff appealed. We affirm in part, and reverse and remand in part.

[¶2] The record reveals the following facts. On March 2, 2010, plaintiff was elected treasurer of the Town of Irasburg at town meeting. The positions of town clerk and treasurer had previously been held by Barbara Lawson for twenty years. Lawson's granddaughter Danielle Ingalls held the position of assistant town clerk. After Lawson retired as clerk, the selectboard appointed Ingalls to the position pending the election.

[¶3] At town meeting, plaintiff and Ingalls ran for both positions. Ingalls was elected town clerk; plaintiff was elected treasurer.

[¶4] Tension between the selectboard and plaintiff developed almost immediately. On March 22, 2010, a member of the selectboard proposed that the Town's auditors perform an audit every two weeks for the first two months and every month thereafter. On March 30, 2010, the auditors complained to the selectboard that they were unable to balance the Town's books due to mistakes in the reports they received from the treasurer. The errors included changes in the amounts of payment orders, bills written for wrong amounts, transposition of figures, and mistakes in some budget categories.

[¶5] The minutes of the April 5, 2010 selectboard meeting describe Ingalls' decision to obtain legal advice from the town attorney Duncan Kilmartin about what to do if the auditors could not balance the books. Kilmartin advised increasing the treasurer's bond limit from $500,000 to $1,000,000 if plaintiff could not satisfy the auditors. The minutes note that " Randy [Wells] made a motion to follow Duncan [Kilmartin]'s advice, Roger [Gagnon] seconded, approved."

[¶6] In a subsequent undated letter, the selectboard gave plaintiff until April 19 to " settle and reconcile [her] accounts to the satisfaction of the auditors." The letter stated that the selectboard had notified the current bonding company of the dispute and warned of the potential need for increased bonding limits and the appointment of an assistant treasurer.

[¶7] The minutes of the April, May and June meetings describe continuing tension over plaintiff's performance. Plaintiff advised that she felt " set up" by the auditors and the town clerk. She admitted that she

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had made some mistakes and was seeking additional training for her position. During this period plaintiff sought to increase her bond limit to $1,000,000 by seeking the higher coverage from the Poulos Insurance Agency in Newport. The Poulos agent forwarded her request to the Cincinnati Insurance Co., which provided the required application forms, including a form for a statement from plaintiff's employer.

[¶8] The dispute between plaintiff and the selectboard came to a head after a dispute arose concerning an envelope containing $200 which was received at the town offices as partial payment of property taxes for a particular taxpayer. The details remain contested but in broad strokes, the envelope containing the bills was received and placed overnight in the treasurer's safe. When plaintiff next looked at the envelope, it bore a taxpayer's name in handwriting. Since she believed that the envelope was unmarked when it went into the safe, she concluded that a member of the selectboard had opened her safe in her absence. One selectboard member had installed the safe and thus had access to the combination. The matter was discussed at the June 28, 2010 selectboard meeting.

[¶9] The selectboard member suspected of opening the safe abstained from any decision, and the two remaining members of the selectboard responded to plaintiff's allegations in writing on July 1, 2010. In their fevered five-page letter, the board members made accusations of their own, stating that plaintiff had made " false accusations" against town officials, presented " false evidence," repeated the accusations when she was told they were false, and continued in her accusations " after acknowledging that [her] own 'supporters' doubt [her] honesty." The letter questioned plaintiff's truthfulness, honesty, reliability, and ability to perform the duties of Irasburg Town Treasurer. The letter stated that plaintiff had written the name on the envelope herself and then falsely accused the board member of opening the safe and writing the name. It accused her of " deliberate and malicious fabrication of evidence" and lying. It stated that her " pattern from the beginning [of her term as treasurer] has been to accuse others of being responsible for [her] failures."

[¶10] The letter required plaintiff to increase her bonding limit from $500,000 to $1,000,000. The selectboard sent copies of the letter to the Vermont League of City and Towns (VLCT), which provided the bond then in effect. The letter explained that:

It is your responsibility to obtain the bond, not ours. You will have to deal directly with VLCT and the bonding company. We are simply notifying them of the reasons for our order to you to increase your bond, and providing them with the evidence which you provided to us, so that they can make appropriate underwriting investigations and determinations.

The letter gave plaintiff ten days to obtain the bond, and stated that if she failed to comply, her position would be declared vacant.

[¶11] During July, plaintiff renewed her efforts to obtain the higher bond from Cincinnati as well as other insurers. Cincinnati repeated its request for the employer statement which " tells [the bond company] about the job she will be doing and all the controls in place for the funds she will be overseeing."

[¶12] In response, town attorney Kilmartin sent the insurer an email declining to fill out the statement on the ground that the selectboard was not plaintiff's employer and " lacks the most fundamental form of control over the person who collects and disburses tax monies." Kilmartin suggested

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that plaintiff presented an " underwriting risk which both Poulos and Cincinnati would want to evaluate." The selectboard wrote to plaintiff at the same time to tell her they were unwilling to fill out the employer's portion of the application. Despite her efforts, plaintiff was unable to obtain the higher bonding limit.

[¶13] At the next meeting of the selectboard on July 12, 2010, the selectboard extended the deadline for the increased bonding limit to July 22, 2010. Plaintiff appeared at the meeting and attempted to defend her performance as treasurer.

[¶14] On July 12, 2010, plaintiff filed suit. The initial complaint sought only to " permanently enjoin [the Town] from demanding an increase in [plaintiff's] bond." The court issued an ex parte temporary restraining order (TRO) in plaintiff's favor on July 15, 2010. Following a hearing, the court vacated the TRO four days later without prejudice to renewal. The court noted that plaintiff agreed that since the Town had allowed plaintiff until July 22, 2010 to obtain the bond, there was no imminent harm. The case was scheduled for a preliminary injunction hearing.

[¶15] Plaintiff filed an amended complaint on July 22, 2010. She continued to seek an injunction enjoining the Town from seeking an increased bond and requested, alternatively, that the Town be required to cooperate with her in obtaining the bond.

[¶16] On July 26, 2010, based on plaintiff's failure to obtain the increased bond, the selectboard met and declared the position of treasurer to be vacant. On July 27, the selectboard wrote to plaintiff to inform her of the termination of her position. On July 28, the selectboard met and appointed an interim treasurer and assistant treasurer.

I. Litigation History

[¶17] In August 2010, after the Town declared her position vacant, plaintiff filed a motion for a preliminary injunction seeking reinstatement and for a writ of mandamus " ordering the Selectboard to grant [her] full and unfettered access to her office and restore her control and custody of the Town's accounts, financial computer programs, and finances." The Town filed a series of motions opposing the request for an injunction, and also sought to dismiss the action for failure to state a claim. The court denied the motions to dismiss in December 2010.[1] The trial court concluded that plaintiff's claims that representatives of the Town had thwarted her efforts to obtain the increased bond by publishing false statements about her established a prima facie case for a " stigma-plus" civil rights claim for deprivation of a liberty interest in violation of the Fourteenth Amendment.[2]

[¶18] The trial court commenced an evidentiary hearing on the motion for a preliminary injunction on January 31, 2011. The hearing continued through a second day on February 28, 2011. It was never completed because plaintiff's failure to win reelection at town meeting on March 7, 2011 rendered the claim for injunctive relief moot.

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[¶19] On April 11, 2011, plaintiff filed a second amended complaint. The filing was subsequently permitted by the trial court. As amended, the complaint sought money damages and attorney's fees on five legal theories: (1) violation of Chapter I, Article 8 of the Vermont Constitution (granting voters " right to ... be elected into office, agreeably to the regulations made in this constitution" ); (2) civil rights violation arising from the selectboard's actions in demanding an increase in bonding and ousting plaintiff without a vote; (3) common law defamation; (4) tortious interference with performance of office; and (5) indemnification of legal fees pursuant to 24 V.S.A. § 901. In two decisions, the trial court granted summary judgment to the Town on all five claims.

[¶20] Plaintiff filed the first motion for summary judgment. She sought a ruling that the selectboard failed to conduct a formal vote to increase the amount of her bond from $500,000 to $1,000,000 and to declare her position vacant. Those assertions related to count 2. She also sought a ruling with respect to count 5 that 24 V.S.A. § 901(b), which requires municipalities to pay the reasonable legal fees " incurred by an officer ... acting in the performance of his duties" obligated the town to pay her legal fees in this case. The Town filed cross-motions for summary judgment on both counts.

[¶21] In a detailed decision dated July 5, 2012, the trial court granted summary judgment to the Town. It analyzed the civil rights violation as a stigma-plus claim. The court determined that for purposes of summary judgment plaintiff had made out a prima facie case of a stigma-plus claim by alleging damage to her reputation through false statements by the selectboard and the related loss of her position as treasurer. The court noted that the stigma-plus claim was a constitutional claim of deprivation of liberty without due process. It considered the " process" afforded to plaintiff through her participation in multiple selectboard meetings at which her performance as treasurer and the increase in the bonding requirement were discussed openly. Plaintiff had received advance notice of the selectboard's concerns and proposed actions through the July 1 letter and the discussions at selectboard meetings during the months of April to July 2010. The court concluded that the selectboard meetings on June 28 and July 12 provided a sufficient opportunity for ...

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