Court Opinion

ID: 4417033
Source: CourtListenerOpinion
Date Created: 2019-07-16 12:05:45.753601+00
Date Added: 2024-06-11T12:33:01.654710
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA19-76

                                Filed: 16 July 2019

Orange County, No. 17 CVS 1399

CHERYL LLOYD HUMPHREY LAND INVESTMENT COMPANY, LLC, Plaintiff,

             v.

RESCO PRODUCTS, INC. and PIEDMONT MINERALS COMPANY, INC.,
Defendants.

      Appeal by Plaintiff from order entered 1 October 2018 by Judge Michael J.

O’Foghludha in Orange County Superior Court. Heard in the Court of Appeals 22

May 2019.

      Manning Fulton & Skinner, P.A., by Charles L. Steel, IV, and J. Whitfield
      Gibson, for the Plaintiff-Appellant.

      McGuireWoods LLP, by Abbey M. Krysak, for the Defendants-Appellees.

      BROOK, Judge.

      Plaintiff appeals the dismissal of its complaint by the trial court. Because the

trial court dismissed Plaintiff’s complaint under Rule 12(b)(6) of the North Carolina

Rules of Civil Procedure, our recitation of the facts is based on the allegations in

Plaintiff’s complaint.

                                   I. Background

                              A. Factual Background
             HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                 Opinion of the Court

      Plaintiff Cheryl Lloyd Humphrey Land Investment Company, LLC (“Plaintiff”)

is a limited liability company that owns real estate in Orange County, North

Carolina. In the summer of 2013, Plaintiff entered negotiations with Braddock Park

Homes, Inc. (“Braddock Park Homes”) to sell Braddock Park Homes approximately

45 acres of real property located on Orange Grove and Enoe Mountain Road in

Hillsborough, North Carolina. Braddock Park Homes planned to develop a 118 unit

townhome subdivision similar in style to the existing Braddock Park townhome

development located in Hillsborough. However, the proposed development could not

be completed as planned unless the Town of Hillsborough (“the Town”) agreed to

annex the property and make certain zoning changes.

      A series of meetings took place in the fall of 2013 in which the Town and its

planning board considered whether to annex and re-zone the property as proposed.

Defendants   Resco   Products,   Inc.   and   Piedmont   Minerals   Company,    Inc.

(“Defendants”), owners of real property adjacent to the proposed development,

participated in these meetings, opposing approval of the project by the Town. During

the course of these proceedings, Defendants made various representations to the

Town and its planning board regarding the dangers posed by fly rock, air blasts, and

ground vibrations resulting from their operations of a mine on land adjacent to the

proposed townhome development and, specifically, blasting conducted at the mine.

Despite Defendants’ opposition to the project, however, the meetings before the Town

                                        -2-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

and its planning board culminated in the Town approving Braddock Park Homes’s

request that the property be annexed by the Town, and making the required zoning

changes.

      After securing approval of the project from the Town, Plaintiff entered into a

Purchase and Sale Agreement (“the Agreement”) with Braddock Park Homes, the

negotiation of which had been ongoing throughout the time of the proceedings before

the Town and its planning board in fall of 2013 and early 2014. Defendants were

aware of these negotiations.

      The Agreement       Plaintiff entered into with Braddock Park Homes

contemplated two development phases. In Phase I, Braddock Park Homes agreed to

purchase approximately 41 acres of real estate from Plaintiff for $85,000 per acre. In

Phase II, Braddock Park Homes was granted a “free look” for a specified period of

time to purchase an additional 5.5 acres, which was directly adjacent to land owned

by Defendants, near the location of their mining operation. Under the Agreement,

Braddock Park Homes enjoyed the right to terminate Phase II of the project.

Although Phase I was consummated, Braddock Park Homes exercised its right to

modify the Agreement on 9 October 2014, terminating Phase II. Braddock Park

Homes cited the representations made by Defendants to the Town during the

approval process as the reason for terminating Phase II.

                               B. Procedural History

                                         -3-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

      On 27 October 2017, Plaintiff initiated this action. In its complaint, Plaintiff

alleges a single cause of action for tortious interference with prospective economic

advantage.   Plaintiff’s claim for tortious interference with prospective economic

advantage is based on representations made by Defendants to the Town and its

planning board during the approval process.               Plaintiff asserts that these

representations were in fact misrepresentations, and that these misrepresentations

were made by Defendants maliciously, intentionally, and without justification,

proximately resulting in the termination by Braddock Park Homes of Phase II of the

Agreement, and injuring Plaintiff in an amount equal to the $85,000 per acre price of

Phase I.

      In lieu of an answer, Defendants filed a motion to dismiss Plaintiff’s complaint

for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the

North Carolina Rules of Civil Procedure. The motion came on for hearing before the

Honorable Michael J. O’Foghludha in Orange County Superior Court on 1 October

2018. The trial court granted Defendants’ motion in an order entered the same day.

Plaintiff entered timely notice of appeal on 29 October 2018.

                                      II. Analysis

                                A. Standard of Review

      A motion to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil

Procedure “tests the legal sufficiency of the complaint by presenting the question

                                          -4-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

whether, as a matter of law, the allegations of the complaint, treated as true, are

sufficient to state a claim upon which relief can be granted under some recognized

legal theory.” Cage v. Colonial Bldg. Co., Inc., 337 N.C. 682, 683, 448 S.E.2d 115, 116

(1994) (internal marks and citation omitted). A motion to dismiss for failure to state

a claim upon which relief can be granted should not be granted unless it “appears to

a certainty that plaintiff is entitled to no relief under any state of facts which could

be proved in support of the claim.” Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161,

166 (1970).

      Our review of the decision by a trial court to grant a motion to dismiss under

Rule 12(b)(6) is de novo. Ventriglia v. Deese, 194 N.C. App. 344, 347, 669 S.E.2d 817,

819–20 (2008). In determining whether “the allegations of the complaint, if treated

as true, are sufficient to state a claim upon which relief can be granted under some

legal theory[,] . . . [we] must construe the complaint liberally[.]” Hinson v. City of

Greensboro, 232 N.C. App. 204, 208, 753 S.E.2d 822, 826 (2014) (internal marks and

citation omitted). We will not affirm the dismissal of a complaint under Rule 12(b)(6)

“unless it appears beyond a doubt that the plaintiff could not prove any set of facts to

support his claim which would entitle him to relief.” Enoch v. Inman, 164 N.C. App.

415, 417, 596 S.E.2d 361, 363 (2004) (internal marks and citation omitted).

                          B. The Noerr-Pennington Doctrine

                                          -5-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

      This appeal first presents the question of the applicability of the Noerr-

Pennington doctrine.    Defendants contend that the trial court did not err in

concluding that Plaintiffs’ complaint fails to state a claim upon which relief can be

granted because the allegations in Plaintiffs’ complaint are insufficient, as a matter

of law, under the Noerr-Pennington doctrine. We disagree.

                                   i. Introduction

      We note at the outset that this case is not a dispute between competitors in the

marketplace, nor does it arise in a context in which concerns about the consolidation

of market power detrimentally impacting consumers animate a statutory or

regulatory framework under which any claim at issue in this case arises. In the

discussion that follows we summarize the origins of the Noerr-Pennington doctrine

and its application in North Carolina. We go on to hold that the Noerr-Pennington

doctrine does not apply to this case. Accordingly, we reject the argument that the

complaint fails to state a claim upon which relief can be granted under the Noerr-

Pennington doctrine.

                  ii. The Origins of the Noerr-Pennington Doctrine

      The Noerr-Pennington doctrine originates from the U.S. Supreme Court’s

decisions in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365

U.S. 127, 81 S. Ct. 523, 5 L. Ed.2d 464 (1961) (“Noerr”), and United Mine Workers v.

Pennington, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed.2d 626 (1965) (“Pennington”),

                                         -6-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

which are together its namesake. In Noerr, the Supreme Court held that the First

Amendment protects businesses when they engage in certain petitioning activities,

such as initiating litigation, providing them with immunity from antitrust liability

when their conduct is aimed at influencing governmental action and their petitioning

activity otherwise potentially violates §§ 1 and 2 of the Sherman Act, which proscribe

conspiracies to restrain trade and attempts to impose monopolies, respectively. See

365 U.S. at 135-37, 81 S. Ct. at 528-29. Pennington then reiterated the core teaching

of Noerr: that immunity from antitrust liability under the First Amendment exists

for “concerted effort[s] to influence public officials regardless of intent or purpose.”

381 U.S. at 670, 85 S. Ct. at 1593.

      However, the Supreme Court in Noerr recognized an exception to this

immunity where the conduct at issue is a “mere sham,” such as where an anti-

competitive publicity campaign, while “ostensibly directed toward influencing

governmental action, is . . . actually nothing more than an attempt to interfere

directly with the business relationships of a competitor[.]” 365 U.S. at 144, 81 S. Ct.

at 533. For example, for the “sham” exception to the doctrine to apply to a lawsuit it

“must be objectively baseless and must conceal an attempt to interfere directly with

the business relationships of a competitor”; that is, “the plaintiff must have brought

baseless claims in an attempt to thwart competition (i.e., in bad faith).” Octane

                                          -7-
               HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 556, 134 S. Ct. 1749, 1757,

188 L. Ed.2d 816 (2014) (internal marks and citation omitted).

        iii. The Application of the Noerr-Pennington Doctrine in North Carolina

        This Court has addressed the applicability of the Noerr-Pennington doctrine

three times previously. The first was Reichhold Chemicals, Inc. v. Goel, 146 N.C.

App. 137, 555 S.E.2d 281 (2001). Reichhold Chemicals involved the departure of an

expert in the field of moisture cured polyurethane adhesives from the employ of the

plaintiff, a business competing in the adhesives space, and the subsequent

engagement of this expert, the defendant, by a direct competitor of the plaintiff in the

adhesives business, who was not a party to the appeal to this Court. Id. at 142-43,

555 S.E.2d at 284-85.

        We observed in Reichhold Chemicals that the Supreme Court’s decision in

Noerr was based “on the First Amendment right to petition and . . . federal antitrust

law.”   Id. at 148, 555 S.E.2d at 288.      Rejecting the plaintiff’s challenge to the

sufficiency of the pleading of the defendant’s counterclaims based on the Noerr-

Pennington doctrine, we reasoned that the defendant’s counterclaims did not

interfere with the plaintiff’s First Amendment rights to seek redress from the

government for the harms it allegedly suffered as a result of its competitor’s conduct.

Id. The defendant, therefore, was not required to supplement the pleadings in his

counterclaim by including allegations that, if proven, would establish that the sham

                                          -8-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                    Opinion of the Court

exception under the Noerr-Pennington doctrine applied.            See id.   We instead

concluded that the Noerr-Pennington doctrine itself did not apply, refusing to accept

the argument that the failure to plead through the exception to Noerr-Pennington

immunity was fatal to the defendant’s counter-complaint. See id. (observing that

“even if plaintiff’s suit against [its competitor] was objectively reasonable, plaintiff

could still be liable for tortious interference” to the defendant).

      We addressed the Noerr-Pennington doctrine for a second time in Good Hope

Hosp., Inc. v. NC Dep’t of Health and Hum. Sevs., 174 N.C. App. 266, 620 S.E.2d 873

(2005). Good Hope Hosp. involved a Certificate of Need (“CON”) issued by the North

Carolina Department of Health and Human Services (“the Department”) to one of the

plaintiffs, a hospital, to build a replacement facility roughly three miles from its

existing facility. Id. at 268, 620 S.E.2d at 876-77. After the CON was issued by the

Department, the plaintiff entered a joint venture with a hospital group, and through

this joint venture applied for a second CON, this time for a larger facility, in a

different location than the replacement facility that had initially been approved. Id.

at 268, 620 S.E.2d at 877. The application for this second CON was not approved,

and the plaintiff-hospital and plaintiff-hospital group, along with the municipality

where the second, larger proposed facility was to be located, sought a declaratory

judgment that the proposed, larger facility was not subject to the CON approval

requirements under the Department’s purview. Id. at 269, 620 S.E.2d at 877. They

                                           -9-
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

also filed various claims against the Department and another hospital that had

opposed approval of the second facility, including claims for tortious interference with

contract, tortious interference with prospective economic advantage, a conspiracy in

restraint of trade under N.C. Gen. Stat. § 75–1, unfair and deceptive trade practices

under N.C. Gen. Stat. § 75–1.1, and common law unfair competition. Id.

      In Good Hope Hosp., we held that the Noerr-Pennington doctrine applied. Id.

at 275, 620 S.E.2d at 881. Observing that numerous federal courts, including the

Fourth Circuit, had applied the Noerr-Pennington doctrine, we noted in particular

that Noerr-Pennington immunity had been recognized by the federal courts to be

applicable “in the context of certificate of need cases.” Id. at 276, 620 S.E.2d at 881.

In holding the doctrine applicable, we affirmed the trial court’s dismissal of the

plaintiffs’ claims on the basis of the Noerr-Pennington doctrine because the plaintiffs’

complaint did not contain allegations that, if proven, would establish that their

lawsuit was not a “mere sham,” thus falling within the exception to Noerr-Pennington

immunity. Id. at 276-78, 620 S.E.2d at 881-82. We went on to explain that in CON

cases implicating Noerr-Pennington immunity, the allegations in the plaintiff’s

complaint must “show one of three things”:

             (1) defendant’s advocacy before the Department was
             objectively baseless and merely an attempt to stifle
             competition; (2) defendant engaged in a pattern of petitions
             before the Department without regard to the merit of the
             petitions; or (3) defendant’s misrepresentations before the
             Department deprived the entire CON proceeding of its

                                          - 10 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

             legitimacy.

Id. at 276, 620 S.E.2d at 882 (internal marks omitted). Because a review of the

complaint revealed no allegations that, if proven, would establish that the sham

exception applied, we affirmed the trial court’s dismissal of the complaint on the basis

of Noerr-Pennington immunity. Id. at 277-78, 620 S.E.2d at 882.

      Good Hope Hosp. was not this Court’s last word on the applicability of the

Noerr-Pennington doctrine in North Carolina state courts. See North Carolina Farm

Bureau Mut. Ins. Co. v. Cully’s Motorcross Park, Inc., 220 N.C. App. 212, 725 S.E.2d

638 (2012), rev’d in part on other grounds, 366 N.C. 505, 742 S.E.2d 781 (2013).

Cully’s Motorcross involved the denial of an insurance claim on a policy covering a

historic building that burned under circumstances considered suspicious by the

plaintiff, the defendants’ insurance company. Id. at 214-15, 725 S.E.2d at 640-41.

Based on the circumstances surrounding the purchase of the building and the fire

that destroyed it, the insurance company made a report to law enforcement, and one

of the defendants was arrested and charged with obtaining property by false

pretenses on the basis of this report. Id. at 215, 725 S.E.2d at 641. Thereafter, the

insured who was arrested and charged criminally, one of the defendants, asserted a

counterclaim against the insurance company, for malicious prosecution. Id. at 215,

725 S.E.2d at 641. The criminal charge against this defendant was later dismissed.

Id.

                                          - 11 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

      After a bench trial but before the court entered a judgment, the plaintiff moved

for a new trial or, in the alternative, a judgment that it enjoyed Noerr-Pennington

immunity as a defense to the malicious prosecution claim. Id. at 215-16, 725 S.E.2d

at 641. The trial court denied the motion, finding the plaintiff liable for malicious

prosecution, and awarding the defendants damages and costs, including treble

damages and attorney’s fees. Id. at 215-16, 725 S.E.2d at 641.

      We rejected the plaintiff’s argument on appeal that the trial court erred in

denying the motion for new trial or for judgment as a matter of law on the issue of

Noerr-Pennington immunity. Id. at 232, 725 S.E.2d at 650. We clarified that our

decision in Reichhold Chemicals was based on the objective reasonableness of the

defendant’s counterclaims, which did not need to be pleaded through the sham

exception to Noerr-Pennington immunity where the doctrine did not apply. Id. at

231-32, 725 S.E.2d at 650. We reasoned that the trial court’s ruling on the motion for

a new trial or for judgment as a matter of law based on the Noerr-Pennington doctrine

was not error because the trial court’s basis for concluding that the doctrine did not

apply – that the claim for malicious prosecution was asserted without probable cause

– was sound. Id. at 232, 725 S.E.2d at 650. We therefore affirmed the trial court’s

conclusion that the doctrine did not apply to the facts before us, despite our holding

in Good Hope Hosp., that the doctrine is applicable in North Carolina state courts.

See id.

                                         - 12 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

       iv. Applicability of the Noerr-Pennington Doctrine to the Present Case

      As noted previously, the present case is not a dispute between competitors in

the marketplace, nor does it arise in the CON context, where concerns about the

consolidation of market power detrimentally impacting consumers inform decisions

by the Department to approve or deny a CON. There is no cause of action pleaded

by Plaintiff or Defendants for a conspiracy in restraint of trade under N.C. Gen. Stat.

§ 75–1, unfair and deceptive practices under N.C. Gen. Stat. § 75–1.1, common law

unfair competition, or any other anti-competitive-related harm proscribed by law.

Instead, Plaintiff’s sole cause of action involves various alleged misrepresentations

made by Defendants to the Town about the dangers posed by fly rock, air blasts, and

ground vibrations created by the mining operation conducted by Defendants on the

property adjacent to the proposed townhome development, including both the

approximately 41 acres in Phase I, the sale of which was consummated, and the 5.5

acres in Phase II, which Plaintiff alleges Defendants’ “malicious[], intentional[], and

[] [un]justifi[ed] misrepresent[ations]” rendered significantly less valuable that it

would have been, were it not for these alleged misrepresentations.

      We hold that the Noerr-Pennington doctrine does not apply to the facts as

alleged in Plaintiff’s complaint, which we consider true on review of a trial court’s

decision to grant a motion to dismiss for failure to state a claim upon which relief can

be granted under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. See,

                                          - 13 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

e.g., Hinson, 232 N.C. App. at 208, 753 S.E.2d at 826 (“We consider whether the

allegations of the complaint, if treated as true, are sufficient to state a claim upon

which relief can be granted under some legal theory.”) (internal marks and citation

omitted). The absence of allegations in Plaintiff’s complaint pleading the cause of

action for tortious interference with prospective economic advantage into the “sham”

exception to the Noerr-Pennington doctrine is not a defect of the complaint, much less

one warranting dismissal of the complaint for failure to state a claim upon which

relief can be granted under Rule 12(b)(6). This is the case because the allegations in

the complaint do not show that Defendants, as a matter of law, enjoy Noerr-

Pennington immunity from Plaintiff’s claim for tortious interference with prospective

economic advantage. To be sure, the question would be closer if there were an

allegation that actionable anti-competitive-related harms resulted from petitioning

activity protected by the First Amendment. However, no such allegation has been

made in this case, and there does not appear to be support for such an allegation in

the record before us. Accordingly, we conclude that, on the facts of the complaint, the

Noerr-Pennington doctrine does not apply.

                            C. The Alleged Misrepresentations

      The alleged misrepresentations at issue present a question of first impression

under North Carolina law; namely, whether misrepresentations about the dangers of

an activity North Carolina law regards as ultrahazardous—indeed, the only activity

                                         - 14 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

regarded by North Carolina law as ultrahazardous—can be overstated and, in their

overstatement, become actionable misrepresentations upon which a cause of action

for tortious interference with prospective economic advantage can be predicated. We

hold that they can.

      North Carolina law has recognized blasting activities as ultrahazardous since

the Supreme Court’s decision in Guilford Realty & Ins. Co. v. Blythe Bros. Co., 260

N.C. 69, 131 S.E.2d 900 (1963). The Supreme Court in Blythe identified blasting as

“intrinsically dangerous,” reasoning that the impossibility of “predict[ing] with

certainty the extent or severity of [resulting] consequences” rendered blasting

ultrahazardous. Id. at 74, 131 S.E.2d at 904. The Supreme Court held that a rule of

strict liability applies to actionable harms resulting from blasting. Id. Numerous

subsequent decisions by the Supreme Court have reiterated the holding of Blythe.

See, e.g., Trull v. Carolina-Virginia Well Co., 264 N.C. 687, 691, 142 S.E.2d 622, 624

(1965) (“[O]ne who is lawfully engaged in blasting operations is liable without regard

to whether he has been negligent, if by reason of the blasting he causes direct injury

to neighboring property or premises”); Falls Sales Co. v. Bd. of Transp., 292 N.C.

437, 442, 233 S.E.2d 569, 572 (1977) (“We have held that blasting is an . . .

[ultrahazardous] activity and that persons using explosives are strictly liable for

damages proximately caused by an explosion”); Woodson v. Rowland, 329 N.C. 330,

350, 407 S.E.2d 222, 234 (1991) (“Parties whose blasting proximately causes injury

                                         - 15 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

are held strictly liable for damages . . . largely because reasonable care cannot

eliminate the risk of serious harm.”). Blasting is the only ultrahazardous activity

under North Carolina law. See Jones v. Willamette Indus., 120 N.C. App. 591, 596,

463 S.E.2d 294, 298 (1995); O’Carroll v. Texasgulf, Inc., 132 N.C. App. 307, 311 n. 2,

511 S.E.2d 313, 317 n. 2 (1999); Kinsey v. Spann, 139 N.C. App. 370, 374, 533 S.E.2d

487, 491 (2000); Harris v. Tri-Arc Food Sys., 165 N.C. App. 495, 499, 598 S.E.2d 644,

647 (2004); Vecellio & Grogan, Inc. v. Piedmont Drilling & Blasting, Inc., 183 N.C.

App. 66, 69, 644 S.E.2d 16, 19 (2007).

      The alleged misrepresentations in this case involve the very dangers North

Carolina law guards against in its recognition of blasting as ultrahazardous.

However, Defendants, the parties engaged in the blasting activities at issue, cite the

ultrahazardous nature of their activities as the reason Plaintiff’s claim cannot

succeed, unlike in the more typical case, where the plaintiff will be relieved of proving

an element of his or her case – breach of a duty of reasonable care – against a

defendant engaged in blasting activities.          Citing the numerous decisions by the

Supreme Court reiterating the principle that no amount of reasonable care can

“eliminate the risk of serious harm” accompanying an ultrahazardous activity such

as blasting, see Woodson, 329 N.C. at 350, 407 S.E.2d at 234, Defendants contend that

these risks simply cannot be overstated to an extent that they constitute actionable

                                          - 16 -
                HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                        Opinion of the Court

misrepresentations upon which a claim for tortious interference with prospective

economic advantage can be based. We disagree.1

       It does not follow that simply because no amount of reasonable care eliminates

the risk of serious harm from blasting it is impossible, as a matter of law, to overstate

the risks of harm from blasting. The former principle is a proposition stating the

rationale for imposing strict liability for injuries resulting from blasting; it does not

mean that the dangers inherent in the activity cannot be described – or mis-described.

And it does not mean that an injury resulting from such mis-description, as is alleged

in this case, is not actionable. Similarly, the principle that no amount of reasonable

care eliminates the risk of serious harm from blasting does not imply that detrimental

reliance on a misrepresentation of the risk of this ultrahazardous activity could not

be the basis for recovery on a fraud claim, or for challenging the validity of a contract,

a party’s consent to which was procured by fraud. We hold that a claim that has as

an element the truthfulness of a representation about an activity North Carolina law

regards as ultrahazardous can survive a motion to dismiss pursuant to Rule 12(b)(6)

of the North Carolina Rules of Civil Procedure even though the content of the

representation relates to an activity regarded by the law as ultrahazardous. Success

on Plaintiff’s claim for tortious interference with prospective economic advantage

       1 We also note that the Town apparently did not credit Defendants’ alleged misrepresentations,
approving the Braddock Park Homes development project despite their vocal opposition to approval of
the project.

                                               - 17 -
               HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                     Opinion of the Court

thus is not precluded by the content of Defendants’ representations to the Town,

notwithstanding the rule of strict liability applicable to cases in which injury is

alleged to result from an ultrahazardous activity.

               D. Tortious Interference with Prospective Economic Advantage

       A number of arguments raised by the parties relate to whether the cause of

action for tortious interference with prospective economic advantage was properly

pleaded by Plaintiff. In a related vein, Defendants argue that facts alleged in the

complaint, if established, foreclose the possibility of Plaintiff’s success at trial. We

disagree, and hold that the claim for tortious interference with prospective economic

advantage was properly pleaded, and that the facts alleged in Plaintiff’s complaint do

not foreclose the possibility of Plaintiff’s success at trial.

       Generally speaking, “[a]n action for tortious interference with prospective

economic advantage is based on conduct by the defendants which prevents the

plaintiff[] from entering into a contract with a third party.” Walker v. Sloan, 137 N.C.

App. 387, 392-93, 529 S.E.2d 236, 241 (2000). Tortious interference with prospective

economic advantage

              arises when a party interferes with a business relationship
              by maliciously inducing a person not to enter into a
              contract with a third person, which he would have entered
              into but for the interference if damage proximately ensues,
              when this interference is done not in the legitimate
              exercise of the interfering person’s rights.

Beverage Sys. of the Carolinas v. Assoc. Beverage Repair et al., 368 N.C. 693, 701, 784

                                            - 18 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

S.E.2d 457, 463 (2016) (internal marks and citation omitted). Stating a claim for

tortious interference with prospective economic advantage requires that the plaintiff

“allege facts [] show[ing] that the defendants acted without justification in inducing

a third party to refrain from entering into a contract with them[,] which contract

would have ensued but for the interference.” Walker, 137 N.C. App. at 393, 529

S.E.2d at 242.

      In its complaint, Plaintiff alleges as follows:

             17.    In the summer of 2013, the Plaintiff began
             negotiations with Braddock Park Homes, Inc., to sell that
             entity approximately 45 acres of real property located on
             Orange Grove and Enoe Mountain Road, Hillsborough,
             North Carolina.

             ...

             29.   At the time Defendants made [certain] malicious
             misrepresentations to the Town of Hillsborough, it was
             aware that the Plaintiff was negotiating with Braddock
             Park Homes for the townhome development project.

             30.    On February 28, 2014, the Plaintiff entered into a
             Purchase and Sale Agreement with Braddock Park Homes,
             Inc., whereby the Plaintiff agreed to sell Braddock Park
             Homes, Inc. approximately 41 acres of real property located
             in Orange Groves and Enoe Mountain Road, Hillsborough,
             North Carolina at $85,000 per acre.

             31.    The February 28, 2014 Purchase and Sale
             Agreement contained a provision that gave Braddock
             Home a specified period of time for a “free look” at Phase II
             (Section B) of the project, which was the 5.5 acres located
             adjacent to Defendants’ Hillsborough Mine, due to the
             request of the Defendants to deny the approval of that

                                          - 19 -
HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                     Opinion of the Court

Phase of the project due to the potential threat of damage
to health, safety and welfare of future residents of Enoe
Mountain Village due to fly rock, nitrogen and structural
damage from the operations of the Defendant’s
Hillsborough Mine.

32.     The February 29, 2014 [sic] Purchase and Sale
Agreement further gave Braddock Park Homes, Inc. the
right, subject to Plaintiff’s acceptance, to terminate Phase
II of the Town Home Project from the contract if this threat
of liability was not removed to its satisfaction.

33.    On October 9, 2014, Braddock Park Homes, Inc.
exercised its right to modify the Purchase and Sale
Agreement and terminate Phase II (Parcel B-3) from the
Agreement, citing dangers of foundation damage to homes,
fly rock from blasting and nitrogen dangers to future
inhabitants based on the Defendants misrepresentation to
the Town of Hillsborough.

34.    The Defendants’ malicious misrepresentations to
the Town of Hillsborough were without justification in that
at the time they were made, the Defendants were required
by their September 11, 2013 Permit to take measures to
prevent physical hazard to any neighboring dwelling house
if their mining excavation came within 300 feet thereof,
regardless of the cost of doing so.

35.    The Defendants intentionally induced Braddock
Park, Inc. not to enter into a contract for the purchase of
Phase II of the Town Home Project by making these
intentional misrepresentations to the Town of
Hillsborough.

36.   The Defendants’ malicious misrepresentations to
the Town of Hillsborough were without justification in that
at the time they were made the Defendants had no
evidence that the blasting operations from their
Hillsborough Mine had endangered persons or neighboring
property from fly rock or excessive air blasts or ground

                            - 20 -
HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                     Opinion of the Court

violations.

37.   The Defendants’ interference with the Plaintiff’s
pending contract with Braddock Park Homes, Inc. was
without justification in that the Defendants’ motives were
not reasonably related to the protection of the legitimate
business interest of the Defendants.

38.    In making these intentional misrepresentations, the
Defendants acted without justification, not in the
legitimate exercise of Defendants’ own rights, but with
design to injure Plaintiff or obtain some advantage at their
expense.

39.   By virtue of their malicious misrepresentations
made to the Town of Hillsborough, the Defendants induced
Braddock Park Homes, Inc. not to perform Phase II of the
Purchase and Sale Agreement so that the Defendants could
purchase the 5.5 acre tract adjacent to their property at a
substantially discounted price.

40.    Subsequent to the town’s approval of the Town
Home Project, the Defendant did in fact offer to purchase
the 5.5 acre tract located adjacent to its Hillsborough Mine
far below the fair market value for the Property.

41.    By virtue of their intentional and malicious
misrepresentations made to the Town of Hillsborough, the
Defendants tortuously interfered with the Plaintiff’s
economic advantage by inducing Braddock Park Homes,
Inc. not to perform Phase 2 of the Town Home Project.

42.   But for the intentional misrepresentations of the
Defendants, Braddock Park Homes, Inc. would not have
modified the February 29, 2014 Purchase and Sale
Agreement to eliminate Phase II of the Town Home Project.

43.   By virtue of the Defendants’ tortious interference
with the Plaintiff’s prospective economic advantage, the
Plaintiff has suffered damages in the amount of $467,755.

                            - 21 -
               HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                   Opinion of the Court

      Our review of the allegations in Plaintiff’s complaint confirms that Plaintiff

has alleged (1) the existence of a valid business relationship; (2) interference with

that business relationship by an outsider; (3) the absence of a legitimate justification

for the alleged interference by the outsider; (4) malice by the outsider in engaging in

the alleged interference; (5) causation from the alleged interference resulting in

damages to Plaintiff; and (6) damages suffered by Plaintiff to a sum certain, $467,755.

These allegations are adequate to make out a cause of action for tortious interference

with prospective economic advantage.

      Defendants argue that Plaintiff has not adequately pleaded a claim for tortious

interference with prospective economic advantage because the alleged interference

did not induce Braddock Park Homes to refrain from entering into a new contract

with Plaintiff but instead only induced Braddock Park Homes to exercise its

modification rights to back out of Phase II of its multi-phase development deal with

Plaintiff. Defendants suggest that it would be an expansion of the tort of tortious

interference with prospective economic advantage under North Carolina law “to

include . . . modifications in addition to prevented contracts and contract breaches.”

We disagree.

      The tort of tortious interference with prospective economic advantage under

North Carolina law not only embraces instances in which “the defendant . . . induce[s]

a third party to refrain from entering into a contract with the plaintiff,” see MCL

                                          - 22 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

Automotive v. Town of Southern Pines, 207 N.C. App. 555, 571, 702 S.E.2d 68, 79

(2010), it also extends to inducement by a third party, the outsider, of a party to a

contract “to terminate or fail to renew [that] contract,” see Robinson, Bradshaw &

Hinson v. Smith, 129 N.C. App. 305, 317, 498 S.E.2d 841, 850 (1998). The reason the

difference between the interference preventing a new contract from being made,

resulting in the cancellation or termination of an existing agreement, or prompting a

party to an existing agreement to allow the agreement to expire rather than renew it

for an additional term, is not a meaningful one as this element relates to a party’s

liability, is that in all three variations, the requirement is met that the prospective

economic advantage with which the outsider interferes is substantial enough to

permit recovery, and not a “mere expectancy,” which has been held to be insufficient.

See Beverage Sys. of the Carolinas, 368 N.C. at 701, 784 S.E.2d at 463.

      Similarly, the difference between a party to an agreement exercising

modification rights in a multi-phase development deal to terminate one part of a

multi-part agreement, as is alleged to have occurred in this case, and the party

canceling the entire agreement, is not relevant to whether the third party whose

interference resulted in the choice to terminate the contract is liable for tortious

interference with the prospective economic advantage derived from one or all phases

of the multi-part agreement. As we observed in Reichhold Chemicals, “[i]nducing a

person not to enter into a contract is as much a tort as interference with an

                                         - 23 -
              HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                                  Opinion of the Court

established contract.” 146 N.C. App. at 151, 555 S.E.2d at 290. So too is inducing a

person or entity to terminate a contract, see Smith, 129 N.C. App. at 317, 498 S.E.2d

at 850, such as in this case, by allegedly inducing a third party not to consummate a

later phase of a multi-phase development deal, regardless of whether the contractual

vehicle defeating the prospective economic advantage is denominated a termination,

cancellation, prevention, rescission, or other language of similar import and effect.

Accordingly, we hold that the tort of tortious interference with prospective economic

advantage under North Carolina law includes contractual modifications equivalent

in effect to terminations of parts of multi-part agreements.

                                   III. Conclusion

      We reverse and remand the trial court’s dismissal of Plaintiff’s complaint for

failure to state a claim upon which relief can be granted for three reasons. First, the

allegations in the complaint do not establish the Noerr-Pennington doctrine applies

to this case to bar Plaintiff’s claims. Second, the alleged misrepresentations are

actionable under North Carolina law even though their content relates to activity

regarded by the law as ultrahazardous.        Third, the cause of action for tortious

interference with prospective economic advantage alleged in Plaintiff’s complaint is

properly pleaded, and this tort includes terminations of parts of multi-part

agreements.

      REVERSED AND REMANDED.

                                         - 24 -
     HUMPHREY LAND INVESTMENT CO. V. RESCO PRODS. ET AL.

                      Opinion of the Court

Judges STROUD and HAMPSON concur.

                             - 25 -