Substantial Aggravating Circumstances Under the North Carolina UDTPA
North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA) has long been a source of consternation for lawyers seeking extra damages for business conduct that falls outside the realm of normal breaches of contract. North Carolina’s UDTPA attracts plaintiffs because of the possibility of treble damages, which allows for three times actual, compensatory damages. However, for a claim to qualify as a violation of UDTPA, the fraudulent business practices must surpass typical contractual failures.
As can be seen in a recent decision by the North Carolina Business Court, finding conduct that meets this standard is a high bar that requires pleading of undefined “substantial aggravating circumstances.”
Case Law for UDTPA Violations
In Broadnax v. Associated Cab & Transportation, Inc., a group of plaintiffs that worked as subcontractors for Associated Cab claimed that Associated Cab took unauthorized deductions from their paychecks after promising that it would not make unauthorized deductions, and that Associated Cab made promises to pass on price increases as raises to the subcontractors. The plaintiffs then asserted that Associated Cab intentionally breached these promises and never had any intentions of following through with the promises in the first place. Importantly, the plaintiffs claimed breach of contract, business fraud, and Unfair and Deceptive Trade Practices.
The Business Court rejected many of these fraud and UDTPA claims because the court found that the plaintiffs were essentially only alleging breaches of contractual promises, noting that the plaintiffs’ allegations of fraud and UDTPA violations were the same allegations as their breach of contract claims. In particular, the court wanted to see evidence of substantial aggravating circumstances other than the breaching party’s willful infringement of a contractual promise. Even here, where the allegations included intentionally misleading conduct, the court was not persuaded that this amounted to fraudulent business practices with substantial aggravating circumstances.
Qualifications for Substantial Aggravating Circumstances Under NC Law
While the court did not give any guidance as to what circumstances would be considered substantially aggravating, some can be gleaned from the dismissal of these claims in particular. Notably, where a plaintiff alleges fraudulent business practices or UDTPA violations, separate allegations from the breach of contract claim are required. It is not enough that a breach of contract was willful or egregious. Additional allegations must show the actions of the defendant crossed the line by engaging in criminal or tortious conduct separate from the contract complaint. These allegations need to include egregious activities, outside the scope of the employment contract, that were affecting commerce or creating unfair competition.
Other Legal Solutions
If allegations of substantial aggravating circumstances cannot be made, your case may still be enforceable under different laws. Consult an employment lawyer to determine if a breach of contract occurred or if your case may qualify for a UDTPA under North Carolina law. The UDTPA violations result in treble damages, but that’s another reason these are challenging to prove.
If you believe that you or your business have been the victim of fraud or may have a UDTPA claim, contact Miller Law Group today for a free consultation. We have experience handling willful breach claims, as well as claims of fraud and UDTPA violations.
Want more information? Read the full Broadnax opinion from the NC Business Court.
