Follo v. Florindo

In 2000, Paul Florindo and Susan Morency (defendants), bought a bed-and-breakfast business for $825,000 and an adjoining cottage for $175,000. Florindo and Morency operated the business together. In 2002, Carl Follo (plaintiff) was interested in buying the bed-and-breakfast business owned by Florindo and Morency. To determine whether he would buy the business, Follo asked for and received business records from Florindo and Morency. Florindo provided the records to Follo. Morency was not involved in the business’s tax returns or financials, nor did Morency transmit records to Follo. Morency was involved in the creation of the guest-information forms and room-assignment books. Relying on the records provided by Florindo, Follo offered $1,245,000 for the business and adjoining cottage. After Follo began to operate the business, he noticed that his sales figures were less than a quarter of the sales he had expected based on the business’s records that he had reviewed while negotiating the sale. Follo communicated with Florindo and Morency about the lower sales; their response made Follo suspicious. Follo sued, alleging fraud. Prior to and during litigation, Follo obtained evidence showing that the profit-and-loss statements, tax returns, guest-information forms, and room-assignment books were false or contradictory. Morency claimed she did not know about the fraud because she did not handle the profit-and-loss statements nor the tax returns. Follo claimed his damages were $645,000, based on a formula derived from the business’s actual sales. A jury found for Follo for $645,000. The trial court ruled that the evidence supported only $295,000 in damages and issued a remittitur to that effect. The trial court denied Follo’s request for a punitive-damages instruction. Florindo and Morency appealed, and Follo cross-appealed.