Vermont Legislature SmartTranscripts:

[Sen. Robert Norris (Vice Chair)]: We are live this morning.

[Sen. Nader Hashim (Chair)]: Good morning. We are back in the Senate Judiciary on January 21. We are taking a walk through of Route 103, and we have Michelle Fowlton, Ledge Counsel here with us. So Michelle, come see you and look forward to us.

[Michelle Childs (Office of Legislative Counsel)]: Good morning. So for the record, Michelle Childs, Office of Legislative Counsel, and we are taking up this 183 as introduced. And I think Henry has provided for you a few documents for your files to take a look at at your leisure. There are two trial court opinions, one from Washington unit and one from Franklin, that are with the genesis of this proposal. I also provided you with a copy of an ad from 2015, which those amendments that were done at that time are part of the matter of what the court was looking at, and what you were talking about. So home improvement fraud, legislature adopted this new statute in 2003. There have been a few amendments over the years. In 2008, the legislature added the home improvement fraud registry, and amended it again in 2015. It's removed, and we will look at the language in it, removed the requirement of an intent to defraud at the time that the contract is entered into, which is something that the Supreme Court of the United States has clearly ruled on for a long time that you have to have as an element of the crime as a piece meant to the fraud and the kind of that they made the contract, and it's it's elements of the crime. That was removed in 2015 among them. And then in 2024, the legislature added land improvements to the statute. So that's kind of a little back story on that. So last year there were two trial board decisions, and they ruled that the post 2015 language, which is the current law, violates the thirteenth Amendment's prohibition on involuntary servitude. So, you know that kind of, from hearing folks, I kind of see Senator Vyhovsky's look on her face there, you say, what? Thirteenth Amendment prohibits involuntary servitude, except as a punishment for crime where the party shall have been duly convicted. Voluntary servitude is essentially compelling someone to work against their will. You can do that through coercion, through legal coercion. As I mentioned, the SCOTUS has long held that criminal statute must include as an element of the crime an intent to defraud at the time the contract was entered into, and that laws that steeped a criminalized breach of a labor contract without requiring fraud or an intent at the time the contract was made are a violation of the thirteenth Amendment. Essentially, the state cannot make failure to labor in discharge of a debt part of one of the elements of a crime. So, if we look at the language

[Sen. Nader Hashim (Chair)]: in your

[Michelle Childs (Office of Legislative Counsel)]: bill, and it might be helpful if you have a copy of s one eighty three as well as act 13, which is the two twenty fifteen.

[Sen. Christopher Mattos (Clerk)]: I have one eight to three, but I have one that I have

[Michelle Childs (Office of Legislative Counsel)]: think everyone would have put it

[Sen. Christopher Mattos (Clerk)]: in your phone numbers. I

[Sen. Robert Norris (Vice Chair)]: only have 18. Right?

[Michelle Childs (Office of Legislative Counsel)]: Right behind your keys.

[Sen. Christopher Mattos (Clerk)]: So there were three phones on. This one I had this one.

[Sen. Nader Hashim (Chair)]: So

[Michelle Childs (Office of Legislative Counsel)]: if you look at the, so it's in number 13, and it says 2015 at the top. Can see what the statute previously had there. So if you just look at page one of what was H483, Act number 13, you're looking at the statute, and you look at subsection B, you'll see that in the first sentence, a person commits the offense of home improvement fraud when he or she knowingly enters into a contract or agreement. And he or she knowingly, and then it goes through, and previous language, which was props to that he or she does not intend for perform, and knows will not be performed in the whole foreign party. And so what that amendment did is it struck that knowing requirement. So we're talking about the mental state that's required as part of the crime. And it essentially made it a strict liability crime, meaning that you don't have to prove any intent at the wrong set there. Thus it made a failure to perform the labor and discharge of the debt part of your crime. Because if you look at the language that they added and striking out in subdivision, the existing subdivision one, it fails to perform the contractor agreements, co working part, and when the owner requests performance or refund the agreement, a person fails to either refund the payment, or may then comply with a definite plan for completion of the work that is agreed to by the homeowner. So essentially if you think about it, eliminating the intent, the element of intent to defraud at the beginning contract, of and then say down below that if the person does not complete the work, and then fails to come up with a plan to complete the work, then they're subject to a crime. And and the courts the trial courts based, again, on precedent, had said that that was a coercive inducement or for force and.

[Sen. Christopher Mattos (Clerk)]: I'm sort

[Michelle Childs (Office of Legislative Counsel)]: of she gives us a turn of risk in senator Baruth Square that circle. What I am a little confused about, or I guess I've got a question about, is if someone pays for work that isn't done, what recourse do they have? Or are they just out that money and too bad for them? Well, I think there's there's a way to still have a criminal statute by like, if you what I did for this draft, just for introduction purposes to get the conversation going, is I went back to the pre 2015 language, which added back in unknowingly and went back to the language that's in the statute prior to those changes. So, I think you can still have a criminal statute there, and there's also obviously civil rep fees, so somebody can sue the person, and generally breach of contracts are dealt with in a civil context, right? The issue here is the intent to defraud at the beginning, right? Rather than, so if you think of more the situation where a person enters into a contract, has good intent to complete the work, goes out of business, files bankruptcy, or for whatever reason doesn't complete, he knows the civil remedy. The issue is trying to approach it from a criminal standpoint. So it's two things at issue there, the intent and about whether or not there's an element around the kind of legal compulsion to complete the work. So let's look at the language in your bill, which, as I mentioned, is really just going back to the 2015 language. So subsection A is just your definition section. And so subsection B, we look at elements of the crime, so that's on page two, starting on line 17. So a person commits the offense of homeless person's subordinate crime. A person knowingly enters into a contract, and it could be for a thousand dollars or more with an owner for home or land improvement. Or it could be for multiple jobs, and then the threshold would be $2,500 for the default of under the statutes. And on page three, it's just striking the existing language, which is fails. The person knowingly fails to perform the contract or agreement When the owner requests performance payments or a refund of the payments made, the person fails to either refund the payment, make and comply with the of the court that's agreed to not. And so instead of that, it, again, connects the language from before 2015, which is that the person knowingly promises performance that the person who does not consent to perform or knows will not be performed simple or any hardships.

[Sen. Christopher Mattos (Clerk)]: So and and this is mass ran Mhmm. That we're talking about? Amazingly hard to prove or unless you have tests or something that

[Michelle Childs (Office of Legislative Counsel)]: Right. And I think, you know, I was not a person who had worked on this previously throughout the years and you know, but just looking at everything and reading the cases, I mean, I can understand from a policy standpoint why those changes were made. There also used to be an earlier version of permissive inference that was in the statute that was actually struck in the 2015 bill about that if the person doesn't complete the work, can use that as a permissive inference that they never intended to, and those have been held to be unconstitutional. That's right. Right, so that, we didn't bring that one back. But we added back in the knowing that at the time that you're entering into the contract, the intent is to defraud the person.

[Sen. Christopher Mattos (Clerk)]: So let me ask, make sure I understand her involuntary servitude. So if I'm looking at the struggle language, failed to perform the contract or agree to an ordering party, so somebody in good faith says, I'll do this order of duty, takes takes the money, They go bankrupt. So the money's gone. And then the the the finding on the Supreme Court was that forcing them to do the work at that point was involved in uncertainty. You got that. Okay. That's why it's stripped down to just knowing for all

[Michelle Childs (Office of Legislative Counsel)]: of Right, and so I think the question would be, and I know you have, you'll hear from the Attorney General's Office and DSAS on this, they're the ones that work with this statute and have for years. And so they may have some recommendations on another approach. I mean, I think you definitely need the knowing added back in for the, to be clear that at the time the contract was entered, there was an intent, a knowing intent to defraud the person. What you do with these other little pieces, you know, we could kind of play around with a little bit of the language, but it does make it, as said, much more difficult to prove, you know, to be able to prove that when they entered that contract, my guess is, I don't know, but my guess is that probably a lot of these situations involve someone who didn't necessarily intend to skip out with the money, but for whatever reason failed to do so, know, ran out of money and couldn't pay the person back.

[Sen. Christopher Mattos (Clerk)]: Yeah. So, and this is criminal that we're talking about? Yes. Yep. And so you would still have the ability in civil court Correct.

[Michelle Childs (Office of Legislative Counsel)]: Yep.

[Sen. Christopher Mattos (Clerk)]: To sue for these other sub groups.

[Michelle Childs (Office of Legislative Counsel)]: Yep, yeah, you can still go after them in civil court for whatever compensatory damages that you paid out to them, if you've accrued costs because of that failure to perform the work. There's also because now that this includes land fraud, it could be that someone was going to be harvesting timber on your land, and they did that, didn't complete the work, but then kept the timber and didn't give you whatever the agreed upon money back that they were supposed to give to you for harvesting the timber. You could get all of those and sue them in in several dimension.

[Sen. Robert Norris (Vice Chair)]: Senator Norris? So appears in my opinion that the ruling that came down offers malperfection for the electric perpetrator that doesn't know the perfect effect of the case. But getting back to the knowingly standard, if I tell somebody first, I'm gonna do this, give me money. Then two weeks later, go, do it. Three weeks later, I go. And six months later, nothing is being done. And your opinion is that knowingly or or because there's no time periods specified in here, but I've already hit three different subjects, shall we say. I've done nothing.

[Michelle Childs (Office of Legislative Counsel)]: You would have to prove that you were you were intending knowingly intending to defraud the person when you entered this.

[Sen. Robert Norris (Vice Chair)]: So after six months, three different customers, I haven't done anything. That seems kind of common sense to me that, yeah, he or she intended never to be worth bringing one of them, I guess, but it's a question for us to create

[Michelle Childs (Office of Legislative Counsel)]: a Well, know, it'd be a good question for when you hear from the prosecutors on how they approach these cases, right? Because I'm sure that there's many ways that they go about gathering the evidence to be able to present to the court that there was an intent to defraud, right? So, something like they could say, well, there's three different people. Work was supposed to commence within thirty days. Six months later, no work has been even started on any of the client's policies. They would, you know, have to make their case.

[Sen. Nader Hashim (Chair)]: Yeah, just a comment to that, and then Senator Baruth, I think, yeah, mean there's millions of variables that can go into it, you know, like if somebody took the money and, you know, they they're running a legitimate business and their their workshop catches on fire and, you know, to know the loss, you know, that's evidence against meeting that in that scenario, somebody who doesn't even have a license or a registration to run a business, they don't have any, there's no experience or some background that they have, they're just a person essentially pretending to be a contractor and they take this money and then when they take a plane to Canada, you know, those are factors that could be taken in and, you know, those kind of are the ingredients of baking the cake or through implementing right of

[Sen. Christopher Mattos (Clerk)]: the staff.

[Michelle Childs (Office of Legislative Counsel)]: Right, they would look at what steps have been done and of course with performance of the work. So were they showing up kind of regularly for a while and doing the work or whatever, and then they lost a couple employees, right? And then work starts to slow down. You know, like, you know, they can take all those factors into consideration as to whether or not they could prove intent to go wrong. So Does that the attorney general oversee or regulate contractors? Is the home improvement fraud registry. Talk to them about the registry. That is something that you can look at, and it's not amended in your bill. But if you look at, on S-one 183 on page four, subsection C, if someone is convicted of home improvement fraud, they go onto this home improvement registry for the DHE's office, and essentially they have to post a surety bond for I I see where you have that. I guess and as I think about this, this is consumer protection, which is firmly under the umbrella of the attorney general. So I guess I'm just wondering if there's actually the attorney general that take in these instances from a consumer protection framework. I'm sorry. What was I'm sorry. I didn't quite understand question. So as I see contractor fraud, it's responding to it is consumer protection, which is in, in my understanding, firmly in the home of the attorney general's office. So I guess what I'm wondering is if there are any actions attorney general could take in some of the instances we're talking about to remedy the situation or if it's just posting. I don't know. Okay. Do you have a question? I think attorney general. Let us This can obviously be prosecuted by either the attorney general's office or by state's attorneys. I don't know how often those cases where those come down.

[Sen. Christopher Mattos (Clerk)]: Similar question. So I know they take complaints, fraud complaints, and when I was on economic development, we were looking to require written documents, which was a failed trial, we were getting statistics from the fraud commission about how many complaints. So they are taking similar complaints, it's just that the registry is for people who have been convicted. Correct. Yeah, okay.

[Michelle Childs (Office of Legislative Counsel)]: Because they essentially have to post a bond that's gonna ensure that if they're engaging in that kind of work, that it's covered and that people will not be out there.

[Sen. Robert Norris (Vice Chair)]: Are lots of questions. One is when they have to inform the ATC office, is that both on civil and criminal level?

[Michelle Childs (Office of Legislative Counsel)]: No. This is just under conviction.

[Sen. Robert Norris (Vice Chair)]: Just under conviction? Under the statute. But either con either either civil or criminal? Or

[Michelle Childs (Office of Legislative Counsel)]: No. It's just under this criminal statute.

[Sen. Robert Norris (Vice Chair)]: Okay. And secondly, if if this goes back to crime versus the civil offense, there would be an expectation of the state's attorney attorney general's

[Michelle Childs (Office of Legislative Counsel)]: That the state's attorney instead of the attorney general's office?

[Sen. Robert Norris (Vice Chair)]: If it's a conservative crime versus a civil defense.

[Michelle Childs (Office of Legislative Counsel)]: Well, it could be either, because they have they're they're both have authority to prosecute these crimes. So you I mean, you ask them how they decide who's gonna take a case and and stuff.

[Sen. Robert Norris (Vice Chair)]: I think they rarely do. Just supposed to point of Trump.

[Sen. Christopher Mattos (Clerk)]: Any

[Sen. Nader Hashim (Chair)]: any further testimony or any questions for Michelle? Well, that's a helpful walk through, and I think I understand most of this.

[Michelle Childs (Office of Legislative Counsel)]: I agree the taste of it. You've done. So it is Oh, yeah. Okay. Go ahead. Yeah.

[Sen. Nader Hashim (Chair)]: I understand parts of it. He's still working through it. Think, you know, we are getting more testimony. Your testimony was very helpful in kind of setting the backdrop to having that.

[Michelle Childs (Office of Legislative Counsel)]: Yeah. I'm sure that the that the prosecutors can fill you in a lot more on their journey with the statute how often they're prosecuting, whether they're breaking visas.

[Sen. Robert Norris (Vice Chair)]: Well, this under appeal in

[Sen. Christopher Mattos (Clerk)]: any restricted county right now?

[Michelle Childs (Office of Legislative Counsel)]: No.

[Sen. Christopher Mattos (Clerk)]: It isn't. No. Martha mentioned that the dealing with the

[Michelle Childs (Office of Legislative Counsel)]: No. I mean, I will say, I think the trial court's opinions are pretty solidly based and precedent, you know, around at least the, you know, the element of that you have to you have to have in front of the fraud. Right. There's an element of the fraud community.

[Sen. Nader Hashim (Chair)]: Yeah. We'll be hearing from you folks tomorrow, that we provide some additional comments. Many any closing remarks?

[Sen. Christopher Mattos (Clerk)]: Thank you. Yes. Thank you. Great.

[Sen. Nader Hashim (Chair)]: Great. I mean,