North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA) has long been a source of consternation for lawyers looking to seek 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 for conduct that is found to violate the law. However, 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.”
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, 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 that were used and incorporated into their breach of contract claims. In particular, the court wanted to see evidence of substantial aggravating circumstances–something other than the breaching party’s willful breach of a contractual promise. Even here, where the intentional breaches included allegations of intentionally misleading conduct, the court was not persuaded that this amounted to a substantial aggravating circumstance.
While the court did not give any guidance as to what circumstances would be considered substantially aggravating, some guidance can be gleaned from the dismissal of these claims in particular. Notably, where a plaintiff alleges fraud or UDTPA, separate allegations from the breach of contract claim are required. It is not enough that a breach of contract was willful or egregious. Additional and separate allegations must be made in regards to how the actions of the defendant crossed the line by engaging in criminal or tortious conduct that was separate from the contract itself. These allegations could include how the defendant breached a duty to the plaintiff that was distinct from the duties owed under the contract that served as the basis for the suit.
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.
Click here to read the full Broadnax opinion from the NC Business Court.