Court Opinion

ID: 7009869
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:02:40.003189+00
Date Added: 2024-06-11T16:10:11.112604
License: Public Domain

TRAXLER, Circuit Judge,
concurring in part and dissenting in part.
I concur in all but sections IV(B)(1), (2), and (3) of the majority opinion. Because I do not believe the acts attributed to the Stroud Group constitute unfair trade practices under North Carolina law, I respectfully dissent on those issues.
In my judgment, the Stroud Group’s exercise of its contractual right to expel the Riese Group from the SALT partnership does not amount to an unfair trade practice. The Riese Group does not contest the fact that the Stroud Group had a contractual right to expel them after their misdeeds, and, in fact, the jury found that the expulsion did not violate the partnership agreement. The Riese Group has not directed our attention to a single North Carolina case in which the court premised UTPA liability on the exercise of a contractual right, and the state courts have actually expressed serious reservations about doing so. Indeed, two months after the instant appeal was argued, the North Carolina Court of Appeals reiterated its reluctance to extend the UTPA to cover actions that are proper under a contract, stating that “[a] violation of [the UTPA] is unlikely to occur during the course of contractual performance, as these types of claims are best resolved by simply determining whether the parties properly fulfilled their contractual duties.” Mitchell v. Linville, 557 S.E.2d 620, 624 (N.C.Ct.App.2001); see also Wachovia Bank & Trust Co. v. Carrington Dev. Assocs., 119 N.C.App. 480, 459 S.E.2d 17, 21 (1995) (finding that Wachovia did not engage in an unfair trade practice because it “simply exercised its right under the loan agreement to withhold funds”); Tar Heel Indus., Inc. v. E.I. duPont de Nemours & Co., 91 N.C.App. 51, 370 S.E.2d 449, 452 (1988) (finding that duPont was not liable under the UTPA for merely “exercising its [contractual] right to terminate the contract”).
The federal courts should be wary about extending state statutes into territories of state law previously untouched by those statutes, especially when a federal court is asked to extend a particular state statute to cover a particular set of circumstances and the state courts themselves have questioned the propriety of doing so. See Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 348 (4th Cir.1998) (“[A]s a federal court exercising concurrent jurisdiction over [an] important question of state law we are most unwilling to extend North Carolina tort law farther than any North Carolina court has been willing to go.”). Furthermore, because the state courts have also hesitated to apply the UTPA to protect those who otherwise had the opportunity and ability to prefect themselves, this court should be all the more reluctant to extend the Act to cover a party’s exercise of its contractual rights in a case like this one, where the contracts were the result of extended negotiations between two sophisticated business entities, each of which had an adequate opportunity to protect its own interests. See Hall v. T.L. Kemp Jewelry, Inc., 71 N.C.App. 101, 322 S.E.2d 7, 11 (1984) (refusing to impose UTPA liability on the *543defendant who was exercising its contract rights because the plaintiff “entered into a bargain which was freely negotiated over several days” and thus “had ample opportunity to look after his own interests before the sale became final”); Opsahl v. Pinehurst, Inc., 81 N.C.App. 56, 344 S.E.2d 68, 77 (1986) (refusing to impose UTPA liability on a land sales company that represented construction completion dates as firm when in fact they were not, given “the capacity of consumers to contract with reference thereto” and thus to adequately protect themselves).
Nor, in my judgment, does Simpson’s failure to disclose information to the Riese Group about the inadequacy of Today’s Contractors provide a sufficient basis upon which to impose UTPA liability. The Riese Group was the general contractor in the construction and development of the Lexington, and according to the Riese Group’s brief, Riese and Plichta have a combined seventy years of experience in construction and development between them. It was perfectly reasonable for Simpson to defer to the general contractor’s expertise and experience in selecting subcontractors.
Furthermore, the Riese Group does not contend that, in failing to disclose the information about Today’s Contractors, Simpson was setting the Riese Group up to fail so that the Stroud Group could later opportunistically expel them from SALT and effectively cut them out of any profit on the project. In the absence of proof to support any such contention, it is difficult to see how Simpson’s nondisclosure can be considered sufficiently egregious to support UTPA liability, especially in light of the “cost plus” nature of the contract. Because of that feature, Simpson, as a member of the Stroud Group, had a definite economic incentive to disclose his misgivings about Today’s Contractors if those misgivings were sufficiently serious to cause him to second-guess the Riese Group’s decision to award the company a subcontract. Proper framing was critical to the structural integrity of the Lexington, and therefore if the Stroud Group was forced to repair shoddy framing the total cost of the project was likely to increase significantly, ultimately reducing the Stroud Group’s profit on the project. Thus, because the Stroud Group stood to lose a great deal in terms of substantially increased costs if the framing of the Lexington was substandard, it is difficult to draw a negative inference from Simpson’s nondisclosure and this court should not do so.
For the forgoing reasons, I respectfully dissent from that portion of the court’s opinion that affirms the district court’s order imposing treble damages on the Stroud Group pursuant to the North Carolina UTPA. I fully concur in the rest of the opinion.