Chapter 75 claims have rarely fared well in the Business Court, though there is not much doubt about why they are included in almost every Complaint in the Court. The prospect of treble damages (per G.S. §75-16) and attorneys’ fees (per G.S. § 75-16.1) is too tempting for many to pass up.
Unfair And Deceptive Practices
Supreme Court Rejects Chapter 75 Claim Between Partners
In modern business litigation in North Carolina, it is increasingly rare to see a complaint that does not contain a claim under G.S. § 75-1.1 for unfair or deceptive trade practices. Courts that have prevented the statute from having almost unlimited application have done so by determining that particular activities are not "in or affecting…
Claims Involving The “Raising Of Capital” Aren’t Covered By North Carolina’s Unfair And Deceptive Practices Statute
Claims involving the "raising of capital" don’t fall within the scope of North Carolina’s unfair and deceptive practices statute. That was the basis for the dismissal of Chapter 75 claims yesterday in two cases, one decided by the North Carolina Court of Appeals and the other by the North Carolina Business Court.
In the Court…
Plaintiff’s Bribes Didn’t Bar Its Unfair And Deceptive Practices Claim
Plaintiff’s bribes to an employee of the Defendant didn’t bar the Plaintiff’s unfair and deceptive practices claim, per the Court of Appeals decision today in Media Network, Inc. v. Long Haymes Carr, Inc., The ruling upheld a $1.3 million jury verdict in favor of the Plaintiff, trebled by the Business Court to $3,776,085.…
Court Of Appeals Rules That Partner’s Self-Dealing Isn’t “In Or Affecting Commerce” And Isn’t An Unfair And Deceptive Practice
The Court of Appeals split today 2-1 on whether two partners with claims against a third partner for self-dealing and breach of opportunity could make an unfair and deceptive practices claim. The case is White v. Thompson. Judge Wynn wrote the majority opinion, and Judge Ervin dissented.
The partnership was Ace Fabrication and Welding, the partners were White, Ellis, and Thompson. Ace did several jobs for a large customer, but Thompson then secured a number of jobs from that customer on his own, without performing them with the partnership.
The other partners obtained a jury verdict on a breach of fiduciary duty claim, and were awarded damages of $138,195. The trial court trebled the damages, but the Court of Appeals majority reversed.
Its reasoning was that the claim was for a breach of partnership duties involving matters of internal management of the partnership, so the claim did not make out the "in or affecting commerce" requirement of a Section 75-1.1 claim. It said that the Defendant’s activities had indeed harmed the partnership, "but had no impact in the broader marketplace."
Judge Ervin saw things completely differently. He said:
"Impairing the ability of others to compete for work in this fashion is tantamount to unfair competition, a type of conduct which is clearly actionable" as an unfair and deceptive practice.
"The effect of such conduct was to deprive the partnership of the ability to actually perform certain specialty fabrication jobs . . . a fact which clearly implicates the ‘activities the business regularly engages in and for which it [was] organized.’"
"Depriving the partnership of the opportunity to perform these . . . jobs inevitably affected its financial viability, producing an inevitable impact on competitive conditions in the market for the performance of . . . jobs in the area served by the partnership."
The North Carolina Business Court has faced the issue of what is "in or affecting commerce" on a number of occasions.…
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Business Court Rejects Bright Line Rule That A Subsidiary Cannot Conspire With Its Parent
The Business Court provided a thorough discussion today on whether a subsidiary and its parent can conspire with one another, in BHB Enterprises, Inc. v. Waste Management of Carolinas, Inc.
Judge Diaz rejected Defendants’ argument that a parent can never be liable for the actions of its subsidiary under a conspiracy theory. But he dismissed the claim anyway, in the absence of any assertion that the subsidiary had been rendered unable to pay its debts by the action of the parent.
The Court also rejected Plaintiff’s attempt to bring an unfair and deceptive practices claim based on what was essentially a breach of contract, notwithstanding what the Court called "artful pleading."
Plaintiff runs a restaurant in Charlotte called Vinnie’s Sardine and Raw Bar. It had contracted with Waste Management of Carolinas, Inc. ("WMC"), a subsidiary of Waste Management, Inc., for waste collection and disposal services.
WMC had unilaterally increased its monthly charges to Vinnie’s, relying on contract provisions that permitted such increases under certain circumstances. Vinnie’s contested WMC’s right to raise the charges and sought to represent a class of WMC customers. Among other claims, Plaintiff asserted one for civil conspiracy, alleging that WMC and its parent were in cahoots on the unauthorized price increases.
WMC responded that that it was not possible for a parent to conspire with a wholly owned subsidiary. Judge Diaz disagreed. He stated that "the Court’s research discloses only six (6) cases addressing the doctrine of intracorporate immunity in the context of a claim for civil conspiracy under North Carolina law," and summarized all six of them. He observed that none of these cases dealt with the point "whether a parent and its wholly owned subsidiary are capable of committing a civil conspiracy under the doctrine."
Judge Diaz looked to Delaware law. Relying on Allied Capital Corp. v. GC-Sun Holdings, LP, 910 A.2d 1020 (Del. Ch. 2006), he concluded that such a claim could be made, although he reiterated the concern raised by the Allied case in permitting such claims:
"if plaintiffs were allowed to sue parent entities whenever the decision to cause a subsidiary to act in a certain manner originated with the parent, it ‘would increase litigation costs and deter the use of subsidiaries, even when there is a legitimate purpose for doing so and there is no wrong to others in being forced to look only to the subsidiary for relief.’"
The Court dismissed the claim made by Vinnie’s, stating that there was no allegation that WMC would be unable to satisfy a judgment if Plaintiff were to prevail, concluding that the civil conspiracy claim was barred by the intracorporate immunity doctrine.…
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The Practice Of “Litigation Funding” Gets A Chilly Reception From The North Carolina Court Of Appeals
Today, the North Carolina Court of Appeals allowed a plaintiff to proceed with her lawsuit that "litigation funding," the practice by which private firms make advances to plaintiffs involved in litigation in exchange for a substantial return in the event of a successful result, violates the law of North Carolina. Reversing the trial court, the Court of Appeals let stand claims for usury, unfair and deceptive practices, and a violation of the North Carolina Consumer Finance Act. The Court threw out, however, claims that this practice constitutes "unlawful gaming" and champerty.
In the case of Odell v. Legal Bucks, LLC, the litigation funder had advanced Ms. Odell $3,000 for her motor vehicle accident claim. Ms. Odell ultimately settled her claim for $18,000, but found that the terms of her agreement required her to pay Legal Bucks $9,582, or more than triple the advance that she had received. Ms. Odell, certainly unhappy at having to give up more than half of her recovery, then sued Legal Bucks, seeking class certification on her multiple claims.
The principal argument of Legal Bucks against the usury claim was that Ms. Odell was not under an absolute obligation to repay the money she had been advanced, and that the arrangement between them was therefore not usurious. The Court recognized that the litigation funding was not a "loan," because a "loan" carries the requirement of an unconditional obligation to repay principal, but held that N.C. Gen. Stat. §24-1.1 also covers "advances," which do not have the same requirement. The Court found that the agreement between the parties demonstrated an understanding that the principal of the advance would be returned, meeting a key element of the test for usury. The Court further found that there was no dispute "that the rate of interest provided for in the Agreement substantially exceeds that permitted" by the statute, and that Legal Bucks had "intentionally entered into a contract to receive a greater amount of interest that that allowed" by law.
Since Legal Bucks wasn’t licensed under the Consumer Finance Act, that made out a violation of the Act, as did its violation of the usury statute. The unfair and deceptive practices claim also went forward, over Legal Bucks’ objection that the terms of the agreement had been fully disclosed to the plaintiff. The Court held that:
"violations of statutes designed to protect the consuming public and violations of established public policy may constitute unfair and deceptive trade practices." In this regard, we note that it is a "paramount public policy of North Carolina to protect North Carolina resident borrowers through the application of North Carolina interest laws." N.C. Gen. Stat. § 24-2.1 (2003). [The] [d]efendants’ practice of offering usurious loans was a clear violation of this policy.
Continue Reading The Practice Of “Litigation Funding” Gets A Chilly Reception From The North Carolina Court Of Appeals
No Unfair And Deceptive Practices Claim In Dispute Between LLC Members
Reid Pointe, LLC v. Stevens, 2008 NCBC 15 (N.C. Super. Ct. August 18, 2008).
The Business Court today threw out, on a Motion for Judgment on the Pleadings, an unfair and deceptive practices claim stemming from a dispute between members of a limited liability company. The Reid Pointe, LLC v. Stevens case also…
Missing Page From Asset Purchase Agreement Might Lead To Reformation
A-1 Pavement Marking, LLC v. APMI Corp., 2008 NCBC 13 (N.C. Super. Ct. August 4, 2008)(Diaz)
The North Carolina Business Court on August 4th denied a Motion for Judgment on the Pleadings on a counterclaim for reformation of an asset purchase agreement. Judge Diaz, in denying the Motion, held that if the reformation were…
Communications Decency Act Doesn’t Insulate StubHub From Scalping Lawsuit
Today, the North Carolina Business Court ruled in Hill v. StubHub, Inc. that the Communications Decency Act didn’t provide a defense to on-line ticket seller StubHub against claims that it had violated North Carolina’s anti-scalping laws.
In his opinion, Judge Tennille allowed Plaintiffs to proceed on their unfair and deceptive practices claims against StubHub. He dismissed, however, several other claims brought by the Hills, who were frustrated purchasers of Hannah Montana concert tickets for their eight year old daughter.
According to the Amended Complaint, the Hills’ daughter had repeatedly told her parents that she had a "sincere and strong" wish to see this show. Mrs. Hill tried buying tickets on-line when they went on sale, but they sold out in moments. The Hills, probably under unrelenting “sincere and strong” pressure from their daughter, bought four tickets to the concert on StubHub, at a price nearly $100 per ticket higher than the $56 face value of each ticket.
Then, the Hills sued, alleging that StubHub, along with the unnamed John Doe defendants who actually owned the tickets, had violated North Carolina’s anti-scalping law. The Hills sought class certification, not just for those who had to purchase tickets via StubHub for the Hannah Montana show, but also for the purchasers of tickets to the “many concerts, sporting events and other events and at numerous venues throughout the State of North Carolina” for which tickets had been sold through StubHub. The Hills made multiple claims: (1) violation of North Carolina’s anti-scalping statute (2) civil conspiracy, (3) tortious action in concert, (4) unfair and deceptive practices, and (5) punitive damages. …
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