Osterman v. Sears

How Long Do You Have to Sue for Fraud or a Consumer Protection Violation in Montana? Osterman v. Sears, Roebuck & Co., 2003 MT 327

Boland Aarab PLLP

Two years. In Osterman v. Sears, Roebuck & Co., 2003 MT 327, the Montana Supreme Court held for the first time with full analysis that claims under Montana’s Unfair Trade Practices Act are a “liability created by statute” subject to the two-year limitation period in § 27-2-211, MCA. Fraud claims already carried a two-year period. The Court held that a Great Falls widow’s fraud and unfair-trade-practices claims were filed too late, but it reversed the District Court’s pro rata cut to her attorney fee award and sent that issue back.

Key Takeaways

• Actual and constructive fraud claims must be filed within two years under § 27-2-203, MCA, which runs from discovery of the facts constituting the fraud (Osterman ¶¶ 19–20).
• Claims under the Unfair Trade Practices Act are a “liability created by statute,” so the two-year period in § 27-2-211(1)(c), MCA, applies (¶¶ 22–24).
• The clock is not paused by “mere ignorance of the facts.” A plaintiff on inquiry notice must use ordinary diligence to discover them (¶¶ 27, 30).
• A court may not cut an attorney fee award by a mechanical, claim-by-claim pro rata formula. It must weigh the Swenson factors (¶¶ 39–41).

In this case sheet: At a glance · What the Court held · Our position and how the Court differed · What changed · Statutes · When it applies · How hard · FAQ

The practice Tom Boland built is the practice that handles your case today. Contact Boland Aarab PLLP for a free consultation at (406) 315-3737.

At a glance

What did the Montana Supreme Court hold in Osterman v. Sears?

In the summer of 1996, Laura Osterman, then 69 and recently widowed, answered a Sears mailing about vinyl siding (¶ 5). On August 15, 1996, a salesman from K-Designers, “a Sears authorized contractor,” visited her home. She agreed to buy about $22,000 of siding, financed through “Sears Financial” (¶¶ 5–6). She believed she was dealing only with Sears (¶ 7). On October 7, 1996, she paid K-Designers about $11,000 and signed a certificate of completion. She then found defects, including trim attached with double-sided tape and siding unsuited to Montana’s climate (¶ 8). She sued on May 4, 1999 (¶ 9).

The District Court dismissed her fraud and unfair-trade-practices claims as time-barred and her negligent misrepresentation claim on the merits. A Cascade County jury then awarded her $12,500 for breach of express warranty against both defendants (¶¶ 11–12). The District Court awarded fees only on the warranty claim and cut them by a pro rata formula to $5,487.50 (¶¶ 13–14).

The Supreme Court held:

1. Fraud claims (affirmed). Fraud and constructive fraud carry a two-year period (¶¶ 19–20). By October 7, 1996, when she wrote the check to K-Designers and signed the certificate, any confusion about who she was dealing with “was clearly resolved,” more than two years before suit (¶ 29).
2. Unfair Trade Practices Act (affirmed). The Act creates a liability “not existing at common law.” It gives an unqualified right to the greater of $200 or actual damages, and its treble damages are compensatory, not a penalty. The two-year period in § 27-2-211 therefore applies (¶¶ 23–24). The claim was untimely for the same reasons as the fraud claims (¶ 30).
3. Negligent misrepresentation (affirmed). This claim was timely under the three-year negligence period, but she did not identify a specific false statement of material fact (¶¶ 31, 33–34).
4. Attorney fees (reversed). Following Hensley v. Eckerhart, the Court rejected “a mathematical approach comparing the total number of issues in the case with those actually prevailed upon.” Because the pro rata calculation “failed to consider” the Swenson factors, the fee award was reversed and remanded (¶¶ 39–41).

What did Tom Boland argue, and how did the Court differ?

On the limitation period. Ms. Osterman argued that the two-year period was tolled. She believed she was dealing only with Sears and did not discover K-Designers’ involvement until later, so disputed facts about discovery should have prevented summary judgment (¶¶ 18, 25). She also relied on the rule that a person prevented from reading a document “by some fraud, trick, artifice, or devise” may still claim fraud (¶ 30).

The Court disagreed. The brochures named the manufacturer as “Gentek” and K-Designers as a Sears authorized contractor. The sales agreement she signed on the first day named K-Designers (¶ 28). She had shown no affirmative conduct to hide a claim, and the facts were not concealed by their nature. “Mere ignorance of the facts will not suffice to toll the statute of limitations” (¶ 30).

On negligent misrepresentation. She argued that the salesman’s failure to clearly explain his relationship to Sears, together with brochures that heavily promoted “SEARS SIDING,” led her to believe she was dealing only with Sears. The Court held that a party opposing summary judgment must set out specific facts, and she had not identified any false statement (¶¶ 33–34).

On attorney fees, the Court agreed with us. Ms. Osterman argued that her claims were “inextricably intertwined and predicated upon common core facts,” so the fee award should turn on the nature of the claims, not a count of which ones survived (¶ 38). The Court reversed the pro rata award and required a fresh determination under Swenson v. Janke and Plath v. Schonrock (¶¶ 39–41).

What did Osterman change in Montana law?

Before Osterman, the Court had upheld a two-year bar on an unfair-trade-practices claim only “without analysis” (¶ 21, discussing Deer Lodge Condominium). Osterman supplied the analysis. It holds that the Act creates a liability that would not exist but for the statute, that treble damages are not a penalty, and that § 27-2-211(1)(c) therefore sets a two-year period (¶¶ 22–24). It also applied to these claims the discovery and inquiry-notice rules used in fraud cases (¶¶ 26–27).

The case remains the standard Montana citation for these rules. Later Montana Supreme Court decisions cite it, including:

• Pederson v. Rocky Mountain Bank, 2012 MT 48, which cites ¶¶ 20 and 24 for the two-year periods on constructive fraud and consumer protection claims;
• Harpole v. Powell County Title Co., 2013 MT 257, and Deichl v. Savage, 2009 MT 293, on the elements of negligent misrepresentation (¶ 32);
• Meadow Lake Estates Homeowners Ass’n v. Shoemaker, 2008 MT 41, on the failure to identify a false statement (¶ 34);
• Davis v. Westphal, 2017 MT 276, Kostelecky v. Peas in a Pod LLC, 2022 MT 195, and Fowler v. Department of Justice, 2024 MT 24, for the summary judgment standard (¶ 17).

Which Montana laws and rules apply?

• § 27-2-203, MCA: two years for fraud or mistake, running from discovery of the facts constituting the fraud. The text is the same as quoted in ¶ 19.
• § 27-2-211, MCA: two years for “a liability created by statute” (subsection (1)(c)). The subsection is the same as quoted in ¶ 21.
• § 30-14-133, MCA: the private right of action under the Montana Unfair Trade Practices and Consumer Protection Act. The statute has been amended since the Court applied it. The current version expressly allows suit “within the timeframe described in 27-2-211.” It raises the minimum recovery from $200 to $500, bars class actions and punitive damages, limits treble damages and attorney fees, and excludes certain residential construction disputes.
• § 30-14-103, MCA: unfair or deceptive acts or practices are unlawful.
• § 27-2-204, MCA: the three-year period for negligence claims, which applies to negligent misrepresentation (¶ 31, citing Cechovic).
• Mont. R. Civ. P. 56 (summary judgment) (¶ 17)
• Hensley v. Eckerhart, 461 U.S. 424 (1983) (¶ 39)

When might Osterman apply to you?

• A home-improvement job goes wrong. Warranty and negligence claims may carry different deadlines than fraud or consumer protection claims. In Osterman, the warranty claim went to a jury after the fraud claims were time-barred.
• You find out later who was really behind a sale. The clock may start when the paperwork you signed made the facts clear, not when you personally realized them.
• You win on some claims but not others. When a contract or statute allows fees, a court may not simply divide the hours by the number of claims. It must consider the Swenson factors, including the results obtained.

Every case turns on its own facts. The practical lesson from Osterman is not to wait: read what you signed and get advice well before two years pass.

How hard is it to win a statute-of-limitations appeal in Montana?

These appeals are hard to win when the documents speak for themselves.

• Summary judgment is reviewed de novo. Once the moving party shows no genuine issue of material fact, the other side must prove, “by more than mere denial and speculation,” that a genuine issue exists (¶ 17).
• Inquiry notice. The test is “whether the plaintiff has information of circumstances sufficient to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his or her investigation” (¶ 27).
• Tolling requires more than ignorance. A plaintiff needs concealed facts or affirmative conduct by the defendant that was calculated to hide the claim (¶¶ 26, 30).
• Fee awards are reviewed for abuse of discretion. An award based on “an inaccurate view of the law” is reversible (¶ 36), which is why the fee ruling here was reversed.

The Boland Aarab Way

Thomas E. Boland, with Mark D. Meyer, represented Laura Osterman in this appeal. Tom was admitted in 1974 and practiced in Great Falls from 1979. His daughter, Caitlin Boland Aarab, and Samir F. Aarab founded Boland Aarab PLLP in 2017 as the successor to his practice. We lost the limitations issue and won the fee issue. We publish results like this because deadlines decide cases, and the firm applies that lesson from the first call in the catastrophic injury cases and serious trucking and injury cases it handles today. When you hire Boland Aarab, you work directly with the attorneys who carry that practice forward.

Frequently Asked Questions

What is the statute of limitations for fraud in Montana? Two years, but the claim does not accrue until the aggrieved party discovers the facts constituting the fraud (§ 27-2-203, MCA; Osterman ¶¶ 19–20). Constructive fraud carries the same two-year period (¶ 20).

How long do I have to sue under Montana’s Unfair Trade Practices Act? Two years, because the Act creates a “liability created by statute” under § 27-2-211(1)(c), MCA (Osterman ¶ 24). The current § 30-14-133(1)(a), MCA, now refers expressly to § 27-2-211.

Can a Montana court cut attorney fees by the number of claims that failed? Not by a mechanical pro rata formula. The court must consider the Swenson factors, including the results obtained (Osterman ¶¶ 39–41).

Work With the Lawyers Behind These Cases

Boland Aarab is a Great Falls trial firm built on Tom Boland’s practice. The same attorneys who brief and argue before the Montana Supreme Court handle our clients’ serious injury, trucking and wrongful-death cases from the first call. Contact Boland Aarab PLLP for a free consultation at (406) 315-3737.

About Boland Aarab PLLP: Boland Aarab PLLP is a Great Falls, Montana trial firm. Its attorneys, Caitlin Boland Aarab and Samir F. Aarab, have appeared in more than 40 matters before the Montana Supreme Court and have argued twice before the U.S. Court of Appeals for the Ninth Circuit. The firm carries on the Great Falls practice Thomas E. Boland began in 1974. Meet our attorneys.

Sources:

• Osterman v. Sears, Roebuck & Co., 2003 MT 327 (CourtListener PDF)
• § 27-2-203, MCA
• § 27-2-211, MCA
• § 30-14-133, MCA
• § 30-14-103, MCA
• § 27-2-204, MCA
• Hensley v. Eckerhart, 461 U.S. 424 (1983)

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship.