Court Opinion

ID: 9580046
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:01:19.961351+00
Date Added: 2024-06-11T13:35:59.600461
License: Public Domain

ERVIN, Judge,
concurring in part and dissenting in part.
Although I concur in the remainder of the Court’s opinion, I respectfully dissent from the majority’s conclusion that the trial court erred by trebling the jury’s damage award against Defendant Andrew Thompson pursuant to N.C. Gen. Stat. § 75-1.1, et seq. As a result, I would affirm the judgment entered by the trial court in its entirety.
N.C. (Jen. Stat. § 75-1.1(a) provides that “[u]nfair methods of competition in or affecting commerce, and. unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.” “In order to establish a prima facie claim for unfair trade practices, a plaintiff must show: (1) defendant committed an unfair or deceptive act or practice, (2) the action in question was in or affecting commerce, and *578(3) the act proximately caused injury to the plaintiff.” Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704, 711 (2001).
“Whether a trade practice is unfair or deceptive usually depends upon the facts of each case and the impact the practice has in the marketplace.” Marshall v. Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403 (1981) (citation omitted). “A practice is unfair when it offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.” Johnson v. Insurance Co., 300 N.C. 247, 263, 266 S.E.2d 610, 621 (1980), overruled on other grounds by Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 374 S.E.2d 385 (1988); see also Boyd v. Drum, 129 N.C. App. 586, 501 S.E.2d 91 (1998), disc. rev. den. 349 N.C. 227, 515 S.E.2d 699 (1998), affd. 350 N.C. 90, 511 S.E.2d 304 (1999). As a general proposition, a practice is deceptive if it “possessed the tendency or capacity to mislead, or created the likelihood of deception[.]” Marshall, 302 N.C. at 548, 276 S.E.2d at 403; see also Dalton, 353 N.C. at 656, 548 S.E.2d at 711 (stating that “[a] practice is unfair if it is unethical and unscrupulous, and it is deceptive if it has a tendency to deceive”). “[C]onduct which constitutes breach of a fiduciary duty and constructive fraud is sufficient to support a UFDTP claim.” Compton v. Kirby, 157 N.C. App. 1, 20, 577 S.E.2d 905, 917 (2003).
“Commerce,” as that term is used in N.C. Gen. Stat. § 75-1.1(a), “includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession.” N.C. Gen. Stat. § 75-1.1(b). “ ‘Business activities’ is a term which connotes the manner in which businesses conduct their regular, day-to-day activities, or affairs, such as the purchase and sale of goods, or whatever other activities the business regularly engages in and for which it is organized.” HJAMM Co. v. House of Raeford Farms, 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991). Liability under N.C. Gen. Stat. § 75-1.1 is not limited “to cases involving consumers” or to claims between businesses that “concern[] fraudulent advertising and buyer-seller relationships.” United Laboratories, Inc. v. Kuykendall, 322 N.C. 643, 665, 370 S.E.2d 375, 389 (1988); see also, Dalton, 353 N.C. at 656, 548 S.E.2d at 711. “ ‘Commerce” in its broadest sense comprehends intercourse for the purposes of trade in any form.” Sara Lee Corp. v. Carter, 351 N.C. 27, 32, 519 S.E.2d 308, 311 (1999) (quoting Johnson, 300 N.C. at 261, 266 S.E.2d at 620 (internal quotation omitted)). “Although this statutory definition is expansive, the Act is not intended to apply to all wrongs in a business setting.” *579HJAMM Company, 328 N.C. at 593, 403 S.E.2d at 492. For example, N.C. Gen. Stat. § 75-1.1 does not apply to “most employer-employee disputes.” Dalton, 353 N.C. at 657, 548 S.E.2d at 711; see also Gress v. The Rowboat Co., - N.C. App. -, -, 661 S.E.2d 278, 281-82 (2008); Buie v. Daniel International, 56N.C. App. 445, 289 S.E.2d 118 (1982), dis. rev. den., 305 N.C. 759, 292 S.E.2d 574 (1982).
As I understand the Court’s decision, the majority has concluded that no unfair and deceptive trade practices claim is available against Defendant Andrew Thompson under the facts at issue here because “[t]he allegations against [him] do not amount to practices impacting the marketplace” and because the dispute between the parties amounts to a matter of internal partnership management. I cannot agree with either of these conclusions.
As I have already noted, a successful claim under N.C. Gen. Stat. § 75-1.1 is, contrary to Defendant Andrew Thompson’s apparent contention, available in situations other than those involving disputes between consumers and businesses. United Laboratories, 322 N.C. at 665, 403 S.E.2d at 492. All that has to be shown in support of a successful claim under N.C. Gen. Stat. § 75-1.1 is the existence of an unfair or deceptive act in or affecting commerce that proximately caused injury to Plaintiffs.
At trial, the jury appears to have credited Plaintiffs’ evidence that Defendant Andrew Thompson, while engaged in a partnership with Plaintiffs, obtained certain specialty fabrication jobs at the Smithfield Packing plant in Tarheel for himself rather than for the partnership. In order to achieve this result, Plaintiffs’ evidence suggested that Defendant Andrew Thompson gave his partners incorrect information concerning the date on which those jobs were to begin.
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 under N.C. Gen. Stat. § 75-1.1. Manufacturing Co. v. Manufacturing Co., 38 N.C. App. 393, 400, 248 S.E.2d 739, 744 (1978), dis. rev. den., 296 N.C. 411, 251 S.E.2d 469 (1979) (stating that “[u]nfair competition has been referred to in terms of conduct ‘which a court of equity would consider unfair’ ” (quoting Extract Co. v. Ray, 221 N.C. 269, 273, 20 S.E.2d 59, 61 (1942)). The effect of such conduct was to deprive the partnership of the ability to actually perform certain specialty fabrication jobs for Smithfield Packing, a fact which clearly implicates the “activities the business regularly engages in and for which it [was] organized.” HJAMM Company, 328 N.C. at 594, 403 *580S.E.2d at 493. Furthermore, depriving the partnership of the opportunity to perform these specialty fabrication jobs inevitably affected its financial viability, producing an inevitable impact on competitive conditions in the market for the performance of specialty fabrication jobs in the area served by the partnership. United Laboratories, 322 N.C. at 665, 403 S.E.2d at 389 (stating that “[a]fter all, unfair trade practices involving only businesses affect the consumer as well”).
The Court concludes, based upon an analysis of this Court’s decision in Compton, that, while actions “ ‘revolving] around the sale of a business,’ the availability of a real estate brokerage firm, ‘and the general marketing and sale of commercial real estate in [the Raleigh] market” are “in commerce” quoting Compton, 157 N.C. App. at 20, 577 S.E.2d at 917, the record in this case merely shows that Defendant Andrew Thompson “sought and completed work at the Smithfield Packing Plant independently, in the Pal business name, breaching his agreement to seek and complete the same work as an Ace Welding partner;” that “the Ace Welding partnership existed for the limited purpose of procuring and completing jobs at the Smithfield Packing Plant — a much narrower purpose than the multientity brokerage referrals that necessarily implicated the marketplace in [Compton];” and that Defendant Andrew Thompson did not “engage in any transactions, such as the sale of a business, that would inherently impact the marketplace.” As a result, although the Court concedes that “Defendant Andrew Thompson took for himself opportunities at the Smithfield Packing Plant that he agreed to pursue with Plaintiffs in the Ace Welding partnership,” it concludes that “this usurpation harmed Ace Welding and Plaintiffs, but had no impact in the broader marketplace.” I cannot, unfortunately, agree with the Court’s approach or this conclusion. •
First, the Court’s analysis suggests that satisfying the “in commerce” element of a claim lodged pursuant to N.C. Gen. Stat. § 75-1.1 requires proof that a particular unfair and deceptive trade practice had a certain quantitative impact. I do not believe that there is any such requirement in either the literal language of the statute, which merely requires that the relevant conduct be “in or affecting commerce,” or in the decisions of the Supreme Court and this Court construing N.C. Gen. Stat. § 75-1.1. On the contrary, this Court specifically held in Kent v. Humphries, 50 N.C. App. 580, 589, 275 S.E.2d 176, 183 (1981), mod. on other grounds and aff’d by 303 N.C. 675, 281 S.E.2d 43 (1981), that “the leasing of just one commercial lot satisfied ■ the Chapter 75 requirement of being in or affecting commerce.” Wilder v. Hodges, 80 N.C. App. 333, 334, 342 S.E.2d 57, 58 (1986); see *581also Adams v. Moore, 96 N.C. App. 359, 361, 385 S.E.2d 799, 801 (1989), dis. rev. den., 326 N.C. 46, 389 S.E.2d 83 (1990) (concluding that allegations relating to the sale of a single residence are sufficient to withstand a motion to dismiss for failure to state a claim where there was no showing that defendants did not “buy and sell houses as a business”); Robertson v. Boyd, 88 N.C. App. 437, 444, 363 S.E.2d 672, 677 (1988) (concluding that a transaction involving the sale of a single residence is sufficiently “in commerce” to support claims against a pest control business and a real estate agency under N.C. Gen. Stat. § 75-1.1); Love v. Pressley, 34 N.C. App. 503, 516, 239 S.E.2d 574, 582-83 (1977), dis. rev. den., 299 N.C. 441, 241 S.E.2d 843 (1978) (concluding that an incident involving the lease of a single residence was sufficient to support a finding of liability under N.C. Gen. Stat. § 75-1.1). Thus, I do not believe that the Court’s emphasis upon what it believes to be the relatively limited economic impact of Defendant Andrew Thompson’s conduct rests on a correct understanding of the “in commerce” element of an unfair and deceptive trade practices claim.
Secondly, unlike the majority, I do not believe that there is any material difference between the conduct found to be “in commerce” in Compton and the conduct at issue here. As noted above, the conduct of Defendant Andrew Thompson affected the nature and extent of the market in which Smithfield Packing procures speciality fabrication products. Moreover, the record suggests that Defendant Andrew Thompson’s activities resulted in the elimination of Ace Welding as a viable competitor in that market. Finally, although the record suggests that Ace Welding was formed for the purpose of providing speciality fabrication products to Smithfield Packing, its inability to survive necessarily affected the broader market for speciality fabrication products in the area in which Ace Welding chose to operate. I do not believe that there is any qualitative difference between the sale of a competitor in the Raleigh real estate market at issue in Compton and the elimination of a potential competitor in the speciality fabrication business in the area around the Smithfield Packing plant. Furthermore, I do not believe that there is any material difference between the “availability of a real estate brokerage firm in Raleigh” at issue in Compton and the availability of the speciality fabrication business at issue here. Finally, while the Raleigh real estate market may be larger than the market for the provision of speciality fabrication products to the Smithfield Packing plant, there is no qualitative difference between the impact of the conduct at issue in Compton on the Raleigh real estate market and the impact of Defend*582ant Andrew Thompson’s conduct on the market for the provision of speciality fabrication products to Smithfield Packing. Thus, for all of these reasons, I believe that there has been a more than adequate showing of an impact on “commerce” in this case and that the Court has erred by both requiring a showing of some quantitative market impact and by concluding that the evidence in this case fails to show that the actions of Defendant Andrew Thompson were “in and affecting commerce[.]”
Furthermore, this case does not involve either a pure employer-employee dispute, see Dalton, 353 N.C. at 656-58, 548 S.E.2d at 710-12 (concluding that there was no liability where an employee who had neither a fiduciary relationship with his employer nor functioned as a buyer or seller entered into a contract to publish a magazine for the employer’s customer in a situation involving no aggravating circumstances), or an internal business governance controversy, see Wilson v. Blue Ridge Electric Membership Corp., 157 N.C. App. 355, 358, 578 S.E.2d 692, 694 (2003) (concluding that there was no claim under N.C. Gen. Stat. § 75-1.1 where employer changes rules governing eligibility for service on employer’s board of directors since “[alteration of [employer’s] by-laws ... is not a day-to-day, regular business activity”). Here, however, we face a very different situation in which one partner has been found by a jury to have diverted an opportunity that should have been available to the partnership for his own gain.
As a result of the fact that a partner in a partnership has a fiduciary relationship with his or her partners, see Casey v. Grantham, 239 N.C. 121, 124-25, 79 S.E.2d 735, 738 (1954), self- dealing and similar activities constitute breach of a partner’s fiduciary obligations. Reddington v. Thomas, 45 N.C. App. 236, 262 S.E.2d 841 (1980). “[A] breach of a fiduciary duty amounts to constructive fraud,” which is sufficient to support an unfair and deceptive trade practices claim. Compton, 157 N.C. App. at 16, 577 S.E.2d at 914. Under similar logic, this Court upheld a finding of liability under N.C. Gen. Stat. § 75-1.1 against a partner who sold the partnership business to a third party without the consent of his partners or without informing the purchaser that the other partners had an ownership interest in the business. Compton, 157 N.C. App. at 19-20, 577 S.E.2d at 916-18; see also Carter, 351 N.C. at 31-34, 519 S.E.2d at 311-12 (concluding that an employee who was responsible for purchasing computer hardware and services at the best possible price for his employer, and who had a fiduciary duty to his employer, was properly found liable where he *583purchased computer parts and services from businesses he controlled for his employer at an excessive price); Adams, 96 N.C. App. at 362, 385 S.E.2d at 801 (concluding that two ministers, who had agreed to assist the plaintiff with her financial problems by taking title to and making a payment on her residence and then sold the residence for a large profit, owed a fiduciary duty to the plaintiff and were subject to liability under N.C. Gen. Stat. § 75-1.1 because their alleged conduct constituted a violation of a fiduciary duty to the plaintiff).
I believe that the evidence in the present record amply supports a finding that Defendant Andrew Thompson engaged in acts that amount to constructive fraud, a type of conduct which clearly supports a finding of liability under N.C. Gen. Stat. § 75-1.1. The fact that Defendant Andrew Thompson’s conduct involves a breach of fiduciary duty also renders the general rule that a mere breach of contract without aggravating circumstances does not support a finding of liability under N.C. Gen. Stat. § 75-1.1, see Johnson v. Colonial Life & Accident Insurance Co., 173 N.C. App. 365, 370, 618 S.E.2d 867, 871 (2005), disc. rev. den., 360 N.C. 290, 627 S.E.2d 620 (2006), inapplicable. Thus, for all of these reasons, I am unable to accept the Court’s conclusion that Defendant Andrew Thompson’s activities were not in “commerce” because of the fact that he was involved in a partnership relationship with the Plaintiffs.
As a result, I believe that the evidence received at trial fully supports the trial court’s conclusion that Defendant Andrew Thompson’s conduct was actionable under N.C.. Gen. Stat. § 75-1.1. Thus, I respectfully dissent from that portion of the Court’s opinion reversing the trial court’s award of treble damages against Defendant Andrew Thompson. As noted above, however, I do concur in the remainder of the Court’s opinion.