NORTH CAROLINA NORTH CAROLINA UNFAIR AND UNFAIR AND

DECEPTIVE TRADE DECEPTIVE TRADE PRACTICES ACT PRACTICES ACT

(UDTPA)(UDTPA)Albert Diaz & John JollyAlbert Diaz & John Jolly

Special Superior Court Judges for Special Superior Court Judges for ComplexComplex

Business CasesBusiness Cases

BLUEPRINTBLUEPRINT

I.I. INTRODUCTIONINTRODUCTION- History- History- Purpose- Purpose- What Activity is Covered- What Activity is Covered- The Choice of Law - The Choice of Law

ProblemProblem- Statute of Limitations- Statute of Limitations

II.II. ELEMENTSELEMENTS- Issue of Violation- Issue of Violation- Issue of Commerce- Issue of Commerce- Issue of Proximate - Issue of Proximate

CauseCause- Issue of Damages- Issue of Damages- Acts that Amount to - Acts that Amount to

UDTPAUDTPA

III.III. TRIAL OF A UDTPA TRIAL OF A UDTPA CLAIMCLAIM

- Role of the Jury- Role of the Jury- Role of the Judge- Role of the Judge- Treble Damages- Treble Damages- Punitive Damages- Punitive Damages- Attorney’s Fees- Attorney’s Fees

IV.IV. PRACTICAL PRACTICAL POINTERSPOINTERS

HISTORYHISTORY

§ 75-1 of North Carolina’s General § 75-1 of North Carolina’s General Statutes, the equivalent of the federal Statutes, the equivalent of the federal Sherman Act, was enacted in 1913. Sherman Act, was enacted in 1913. ““Consumer Protection and Unfair Competition in North Carolina – Consumer Protection and Unfair Competition in North Carolina –

The 1969 LegislationThe 1969 Legislation,” 48 N.C.L. Rev. 896 (1970). ,” 48 N.C.L. Rev. 896 (1970). Scope of 75-1, however, is narrow Scope of 75-1, however, is narrow

(focusing on contracts or combinations (focusing on contracts or combinations in restraint of trade) and thus does not in restraint of trade) and thus does not provide effective remedy for other provide effective remedy for other forms of unfair business practices. forms of unfair business practices.

HISTORYHISTORY UDTPA § 75-1.1 was enacted on June 14, UDTPA § 75-1.1 was enacted on June 14,

19691969

In its current version: In its current version: Declares unlawful Declares unlawful “unfair methods of competition in or “unfair methods of competition in or affecting commerce, and unfair or affecting commerce, and unfair or deceptive acts or practices in or affecting deceptive acts or practices in or affecting commerce.commerce.””

§ 75-1.1 (a) is reproduced verbatim from the § 75-1.1 (a) is reproduced verbatim from the federal Trade Commission Act (FTCA), and federal Trade Commission Act (FTCA), and NCGA adopted this section to parallel and NCGA adopted this section to parallel and supplement the FTC Act. supplement the FTC Act. Hageman v. Twin City Hageman v. Twin City Chrysler-Plymouth, Inc.Chrysler-Plymouth, Inc., 681 F. Supp. 303 (M.D.N.C. 1988)., 681 F. Supp. 303 (M.D.N.C. 1988).

HISTORYHISTORY

§ 75-16 was also amended to § 75-16 was also amended to extend the possibility of treble-extend the possibility of treble-damages recoveries to consumers. damages recoveries to consumers. It specifically provides for statutory It specifically provides for statutory relief to relief to any personany person who is injured who is injured by the acts of another in violation by the acts of another in violation of Chapter 75. of Chapter 75.

PURPOSEPURPOSE

““[T]o declare, and to provide civil legal [T]o declare, and to provide civil legal means to maintain, ethical standards of means to maintain, ethical standards of dealings between persons engaged in dealings between persons engaged in business and between persons engaged business and between persons engaged in business and the consuming public in business and the consuming public within this State to the end that good within this State to the end that good faith and fair dealings between buyers faith and fair dealings between buyers and sellers at all level[s] of commerce and sellers at all level[s] of commerce be had in this State.” be had in this State.” Bhatti v. BucklandBhatti v. Buckland, 328 N.C. , 328 N.C. 240, 400 S.E.2d 440 (1991).240, 400 S.E.2d 440 (1991).

PURPOSEPURPOSE

Originally enacted as a consumer Originally enacted as a consumer protection statuteprotection statute

1.1. Established a private cause of action Established a private cause of action for aggrieved customersfor aggrieved customers

2.2. Necessary because common law Necessary because common law remedies for fraud and deception remedies for fraud and deception often proved ineffective.often proved ineffective.

Bhatti v. BucklandBhatti v. Buckland, 328 N.C. 240, 400 S.E.2d 440 (1991); , 328 N.C. 240, 400 S.E.2d 440 (1991); Brinkman v. Barrett Kays & Assocs., P.A.Brinkman v. Barrett Kays & Assocs., P.A., 155 N.C. App. , 155 N.C. App. 738, 575 S.E.2d 40 (2003). 738, 575 S.E.2d 40 (2003).

PURPOSEPURPOSE Now clear, however, that the statute applies Now clear, however, that the statute applies

to all transactions in commerce (unless to all transactions in commerce (unless otherwise excepted). otherwise excepted). Stolfo v. KernodleStolfo v. Kernodle, 118 N.C. App. 580, 455 S.E.2d 869 (1995) , 118 N.C. App. 580, 455 S.E.2d 869 (1995) (holding that § 75 applies to buyers and sellers at all levels of (holding that § 75 applies to buyers and sellers at all levels of commerce). commerce).

Applies to indirect purchasers, who may sue Applies to indirect purchasers, who may sue without regard to privity of contract. without regard to privity of contract. Hyde v. Hyde v. Abbott Labs, Abbott Labs, 123 N.C. App. 572, 584, 423 S.E.2d 680, 688 (1996).123 N.C. App. 572, 584, 423 S.E.2d 680, 688 (1996).

The remedy is a creature of the statute – The remedy is a creature of the statute – neither wholly tortious nor wholly neither wholly tortious nor wholly contractual in nature. contractual in nature. Page v. Lexington Ins. Co.Page v. Lexington Ins. Co., 628 S.E.2d 427 (N.C. Ct. App. 2006). , 628 S.E.2d 427 (N.C. Ct. App. 2006).

UDTPA claims may not be assigned. UDTPA claims may not be assigned. Horton v. Horton v. New South Ins. Co., New South Ins. Co., 122 N.C. App. 265, 468 S.E.2d 856 122 N.C. App. 265, 468 S.E.2d 856 (1996).(1996).

WHAT ACTIVITY IS WHAT ACTIVITY IS COVERED?COVERED?

Private sale by Private sale by homeownerhomeowner of residential of residential property not covered property not covered Willen v. HewsonWillen v. Hewson, 622 S.E.2d 187 (N.C. Ct. App. 2005). Narrow , 622 S.E.2d 187 (N.C. Ct. App. 2005). Narrow and uncertain exemption. and uncertain exemption. See Bhatti v. Buckland, See Bhatti v. Buckland, 328 N.C. 240, 328 N.C. 240, 400 S.E.2d 440 (1991)(exemption did not apply where individual 400 S.E.2d 440 (1991)(exemption did not apply where individual sold two lots for residential construction).sold two lots for residential construction).

But renting residential property is But renting residential property is Stolfo v. KernodleStolfo v. Kernodle, 118 N.C. App. 580, 455 S.E.2d 869 (1995) , 118 N.C. App. 580, 455 S.E.2d 869 (1995)

Exception for professional services Exception for professional services rendered by learned professionals, rendered by learned professionals, including debt collection activities by including debt collection activities by attorneys § 75.1-1(b); attorneys § 75.1-1(b); Reid v. Ayers, Reid v. Ayers, 138 N.C. App. 261, 138 N.C. App. 261, 531 S.E.2d 231 (2000). 531 S.E.2d 231 (2000). See also Burgess v. Busby, See also Burgess v. Busby, 142 N.C. App. 142 N.C. App. 393, 544 S.E.2d 4 (2001)(doctor not liable for UDTPA for 393, 544 S.E.2d 4 (2001)(doctor not liable for UDTPA for “blackballing” jurors, but may be liable based on common law “blackballing” jurors, but may be liable based on common law obstruction of justice). obstruction of justice).

WHAT ACTIVITY IS WHAT ACTIVITY IS COVERED?COVERED?

Advertising mediums (i.e. Advertising mediums (i.e. newspapers, TV, radio, etc.) when newspapers, TV, radio, etc.) when disseminating ads, provided disseminating ads, provided publisher, owner, etc., does not publisher, owner, etc., does not have knowledge of false or have knowledge of false or misleading character of misleading character of advertisement advertisement andand medium does medium does not have direct financial interest in not have direct financial interest in sale or distribution of advertised sale or distribution of advertised product or service. product or service. § 75.1-1 (c) § 75.1-1 (c)

WHAT ACTIVITY IS WHAT ACTIVITY IS COVERED?COVERED?

The State or any agency thereof, The State or any agency thereof, including cities, may not be sued including cities, may not be sued under UDTPAunder UDTPARea Constr. Co. v. City of CharlotteRea Constr. Co. v. City of Charlotte, 121 N.C. App. 369, , 121 N.C. App. 369, 465 S.E.2d 342 (1996).465 S.E.2d 342 (1996).

But the State may sue under the But the State may sue under the Act Act State ex rel. Cooper v. NCCS Loans, Inc.State ex rel. Cooper v. NCCS Loans, Inc., 624 S.E.2d 371 , 624 S.E.2d 371 (N.C. Ct. App. 2005); (N.C. Ct. App. 2005); F. Ray Moore Co., v. State, F. Ray Moore Co., v. State, 80 N.C. 80 N.C. App. 139, 341 S.E.2d 371 (1986). App. 139, 341 S.E.2d 371 (1986).

WHAT ACTIVITY IS WHAT ACTIVITY IS COVERED?COVERED?

Securities transactions are not covered. Securities transactions are not covered. Sterner Sterner v. Pennv. Penn, 159 N.C. App. 626, 583 S.E.2d 670 (2003)., 159 N.C. App. 626, 583 S.E.2d 670 (2003).

But political advertisements made during a But political advertisements made during a campaign are campaign are Boyce & Isley, PLLC v. CooperBoyce & Isley, PLLC v. Cooper, 153 N.C. App. 25, 568 S.E.2d 893 , 153 N.C. App. 25, 568 S.E.2d 893 (2002). (2002).

Employer-employee relationships generally Employer-employee relationships generally not covered by UDTPA unless conduct involves not covered by UDTPA unless conduct involves egregious activities outside the scope of egregious activities outside the scope of assigned employment duties, and otherwise assigned employment duties, and otherwise qualifies as unfair or deceptive practices that qualifies as unfair or deceptive practices that were in or affecting commerce.were in or affecting commerce.Dalton v. Camp, Dalton v. Camp, 353 N.C. 647, 548 S.E.2d 704 (2001). 353 N.C. 647, 548 S.E.2d 704 (2001). Cf. Sara Lee Cf. Sara Lee Corp. v. Carter, Corp. v. Carter, 351 N.C. 27, 519 S.E.2d 308 (1999) (where court 351 N.C. 27, 519 S.E.2d 308 (1999) (where court affirmed liability as to employee engaged in direct unfair competition affirmed liability as to employee engaged in direct unfair competition against employer). against employer).

THE CHOICE OF LAW THE CHOICE OF LAW PROBLEMPROBLEM

Often hotly contested because it Often hotly contested because it will determine whether action will determine whether action survives.survives.

Traditionally in tort actions, the Traditionally in tort actions, the choice of law is determined by the choice of law is determined by the place where the injury occurred. place where the injury occurred. Andrew Jackson Sales v. Bi-Lo Stores, Inc.Andrew Jackson Sales v. Bi-Lo Stores, Inc., 68 , 68 N.C. App. 222, 314 S.E.2d 797 (1984).N.C. App. 222, 314 S.E.2d 797 (1984).

Choice of law in UDTPA actions Choice of law in UDTPA actions does not follow this traditional rule.does not follow this traditional rule.

THE CHOICE OF LAW THE CHOICE OF LAW PROBLEMPROBLEM

One viewOne view: In UDTPA actions, the choice of : In UDTPA actions, the choice of law is determined by the state with the most law is determined by the state with the most significant relationship to the occurrence significant relationship to the occurrence that gave rise to the cause of action. that gave rise to the cause of action. IdId.. (requiring examination of various factors).(requiring examination of various factors).

Alternate viewAlternate view: The law of the State where : The law of the State where the last act occurred that gave rise to the last act occurred that gave rise to defendant’s injury governs. defendant’s injury governs. United Virginia Bank v. United Virginia Bank v.

Air-Lift AssociatesAir-Lift Associates, 79 N.C. App. 315, 339 S.E.2d 90 (1986)., 79 N.C. App. 315, 339 S.E.2d 90 (1986). This can be difficult to discern in multi-state This can be difficult to discern in multi-state

commercial relationships, i.e. does injury occur commercial relationships, i.e. does injury occur where business is lost (in the customer’s state) or where business is lost (in the customer’s state) or where the profits are lost (in plaintiff’s principal where the profits are lost (in plaintiff’s principal place of business)?place of business)?

THE CHOICE OF LAW THE CHOICE OF LAW PROBLEMPROBLEM

Choice of law provision in a contract Choice of law provision in a contract will not govern as to UDTPA claim will not govern as to UDTPA claim arising from same set of facts. arising from same set of facts. United United Dominion Indus. Inc., v. Overhead Door Corp., Dominion Indus. Inc., v. Overhead Door Corp., 762 F. Supp. 126 762 F. Supp. 126 (W.D.N.C. 1991). (W.D.N.C. 1991).

STATUTE OF LIMITATIONSSTATUTE OF LIMITATIONS

The statute of limitations for any civil The statute of limitations for any civil action brought under Chapter 75 is action brought under Chapter 75 is four years (§ 75-16.2)four years (§ 75-16.2)

§75-16.2 tolls running of the statute §75-16.2 tolls running of the statute of limitations in certain of limitations in certain circumstances circumstances

1.1. In a state proceeding to punish a In a state proceeding to punish a violation of Chapter 75violation of Chapter 75

2.2. When the party raising the statute of When the party raising the statute of limitations as a defense has committed a limitations as a defense has committed a fraudulent concealment fraudulent concealment

STATUTE OF STATUTE OF LIMITATIONSLIMITATIONS

Accrual of Cause of Action Accrual of Cause of Action Accrues from the date of violationAccrues from the date of violation When an action is based on fraud, the When an action is based on fraud, the

action does not accrue until the fraud action does not accrue until the fraud is discovered. is discovered. Hunter v. Guardian Life Ins. Co. of Hunter v. Guardian Life Ins. Co. of Am.Am., 162 N.C. App. 477, 593 S.E.2d 595 (2004)., 162 N.C. App. 477, 593 S.E.2d 595 (2004).

When an action more closely When an action more closely resembles a claim for breach of resembles a claim for breach of contract, statute of limitations runs on contract, statute of limitations runs on the date of the breach. the date of the breach. Drug Co. v. Carolina Drug Co. v. Carolina Medicorp Enter., Medicorp Enter., 96 N.C. App. 277, 385 S.E.2d 801 (1989), 96 N.C. App. 277, 385 S.E.2d 801 (1989), overruled on other grounds in Crossman v. Moore, overruled on other grounds in Crossman v. Moore, 341 N.C. 341 N.C. 185, 459 S.E.2d 715 (1995).185, 459 S.E.2d 715 (1995).

STATUTE OF LIMITATIONSSTATUTE OF LIMITATIONS

When an action is continuing in When an action is continuing in nature, following the first violation, nature, following the first violation, each week the violation continues each week the violation continues is a separate offense for the is a separate offense for the purpose of the statute of limitations purpose of the statute of limitations (N.C. Gen. Stat. §75-8). (N.C. Gen. Stat. §75-8). See Medicare Rentals, Inc., v. Advanced Services, See Medicare Rentals, Inc., v. Advanced Services, 119 N.C. 119 N.C. App. 767, 460 S.E.2d 361 (1995)(summary judgment reversed App. 767, 460 S.E.2d 361 (1995)(summary judgment reversed where complaint alleged continuous UDTPA violations and did where complaint alleged continuous UDTPA violations and did not show on its face that the claims were time barred). not show on its face that the claims were time barred).

ELEMENTSELEMENTS

Bottom Line: What is sufficient to make Bottom Line: What is sufficient to make out UDTPA claim will depend on the facts out UDTPA claim will depend on the facts of each case. of each case.

Elements: Elements: (1) An unfair or deceptive act or practice;(1) An unfair or deceptive act or practice;

(2) In or affecting commerce; which(2) In or affecting commerce; which

(3) Proximately caused actual injury to the (3) Proximately caused actual injury to the

claimant or his business claimant or his business Furr v. Fonville Morisey Realty, Furr v. Fonville Morisey Realty, 130 N.C. App. 541, 503 S.E.2d 401 130 N.C. App. 541, 503 S.E.2d 401 (1998).(1998).

ISSUE OF VIOLATIONISSUE OF VIOLATION An act or practice is An act or practice is unfairunfair under the under the

meaning of §75-1.1 if it:meaning of §75-1.1 if it: Violates industry standardsViolates industry standards

Compare Melton v. Family First Mortg. Corp.Compare Melton v. Family First Mortg. Corp., 156 N.C. , 156 N.C. App. 129, 576 S.E.2d 365 (2003)(SJ for defendant proper App. 129, 576 S.E.2d 365 (2003)(SJ for defendant proper with respect to handling of mortgage documents where with respect to handling of mortgage documents where plaintiff failed to show that any of the allegedly unfair or plaintiff failed to show that any of the allegedly unfair or deceptive acts violated industry standards or caused deceptive acts violated industry standards or caused actual injury), with actual injury), with Walker v. Fleetwood Homes of North Walker v. Fleetwood Homes of North Carolina, Inc.Carolina, Inc., 627 S.E.2d 629 (N.C. Ct. App. 2006)(holding , 627 S.E.2d 629 (N.C. Ct. App. 2006)(holding that a violation of regulatory statutes regarding warranty that a violation of regulatory statutes regarding warranty repairs for manufactured homes makes out a UDTPA repairs for manufactured homes makes out a UDTPA claim).  claim). 

Offends established public policyOffends established public policyCompare McInerney v. Pinehurst Area Realty, Inc.Compare McInerney v. Pinehurst Area Realty, Inc., 162 , 162 N.C. App. 285, 590 S.E.2d 313 (2004)(claim properly N.C. App. 285, 590 S.E.2d 313 (2004)(claim properly dismissed where developer acted in conformance with dismissed where developer acted in conformance with restrictive covenants), with restrictive covenants), with Morgan, A/K/A Owen v. AT&T Morgan, A/K/A Owen v. AT&T Corp.,Corp.,168 N.C. App. 534, 608 S.E.2d 559 (2005)(UDTPA 168 N.C. App. 534, 608 S.E.2d 559 (2005)(UDTPA claim should have survived SJ where phone company claim should have survived SJ where phone company persisted in billing plaintiff for charges after she cancelled persisted in billing plaintiff for charges after she cancelled contract and forwarded account to collection agency). contract and forwarded account to collection agency).

ISSUE OF VIOLATIONISSUE OF VIOLATION

An act or practice is also An act or practice is also unfairunfair under the meaning of §75-1.1 if it:under the meaning of §75-1.1 if it:

Is immoral, unethical, oppressive, Is immoral, unethical, oppressive, unscrupulous, or substantially unscrupulous, or substantially injurious to customers injurious to customers ((IdId.).)

Amounts to an inequitable assertion of Amounts to an inequitable assertion of the party’s power or position the party’s power or position ((IdId.).)

ISSUE OF VIOLATIONISSUE OF VIOLATION

An act or practice is deceptive An act or practice is deceptive under the meaning of §75-1.1 if it under the meaning of §75-1.1 if it has the capacity or tendency to has the capacity or tendency to deceive. deceive. RD&J Props. v. Lauralea-Dilton Enters., LLCRD&J Props. v. Lauralea-Dilton Enters., LLC, 165 N.C. , 165 N.C. App. 737, 600 S.E.2d 492 (2004)(SJ for defendant App. 737, 600 S.E.2d 492 (2004)(SJ for defendant affirmed even though it failed to disclose alleged defect affirmed even though it failed to disclose alleged defect in property, where it was sold “as is” and with right of in property, where it was sold “as is” and with right of inspection, because the defendant’s acts did not have a inspection, because the defendant’s acts did not have a tendency to deceive an average businessman).tendency to deceive an average businessman).

ISSUE OF VIOLATIONISSUE OF VIOLATION

Mere breach of contract without more Mere breach of contract without more is not enoughis not enoughSoutheastern Shelter Corp. v. Btu, Inc.Southeastern Shelter Corp. v. Btu, Inc., 154 N.C. App. 321, 572 , 154 N.C. App. 321, 572 S.E.2d 200 (2002); S.E.2d 200 (2002); Broussard v. Meineke Disc. Muffler ShopsBroussard v. Meineke Disc. Muffler Shops, 155 , 155 F.3d 331 (4th Cir. 1998).F.3d 331 (4th Cir. 1998).

On the other hand, actual fraud is not On the other hand, actual fraud is not required. The relevant question is required. The relevant question is whether the act had the tendency or whether the act had the tendency or capacity to mislead, or created a capacity to mislead, or created a likelihood of deception. likelihood of deception. Melton v. Family First Mortg. Corp.Melton v. Family First Mortg. Corp., 156 N.C. App. 129, 576 S.E.2d , 156 N.C. App. 129, 576 S.E.2d 365 (2003). 365 (2003).

ISSUE OF VIOLATIONISSUE OF VIOLATION Intent of the defendant and good Intent of the defendant and good

faith are irrelevant faith are irrelevant Hageman v. Twin City Chrysler-Plymouth, Inc.Hageman v. Twin City Chrysler-Plymouth, Inc. , 681 F. Supp. , 681 F. Supp. 303 (M.D.N.C. 1988). 303 (M.D.N.C. 1988).

Contributory negligence is not a Contributory negligence is not a defense to UDTPA claim.defense to UDTPA claim.Winston Realty Co. v. G.H.G., Inc.,Winston Realty Co. v. G.H.G., Inc., 314 N.C. 90, 331 S.E.2d 314 N.C. 90, 331 S.E.2d 677 (1985).677 (1985).

Bottom line – Bottom line – party must allege and party must allege and prove attendant aggravating prove attendant aggravating circumstances surrounding a circumstances surrounding a breach of contract claim to make breach of contract claim to make out UDTPA violation. out UDTPA violation. See MeinekeSee Meineke

ISSUE OF COMMERCEISSUE OF COMMERCE Commerce is defined as “all business Commerce is defined as “all business

activities, however denominated, but does activities, however denominated, but does not include professional services rendered not include professional services rendered by a member of a learned profession.”by a member of a learned profession.”

N.C. Gen. Stat. § 75-1.1(b) encompasses N.C. Gen. Stat. § 75-1.1(b) encompasses broad swath of commercial activity.broad swath of commercial activity.

Plaintiff must allege substantial effect on Plaintiff must allege substantial effect on in-statein-state business operations and UDTPA business operations and UDTPA will not apply merely because defendant is will not apply merely because defendant is a North Carolina entity, where injury has a North Carolina entity, where injury has negligible effect on NC trade or commerce. negligible effect on NC trade or commerce. The ‘In’ Porters v. Hanes Printables, Inc., The ‘In’ Porters v. Hanes Printables, Inc., 663 F. Supp. 494 663 F. Supp. 494 (M.D.N.C. 1987).(M.D.N.C. 1987).

ISSUE OF COMMERCEISSUE OF COMMERCE

““Matters of internal corporate Matters of internal corporate management, such as the manner of management, such as the manner of selection and qualifications for selection and qualifications for directors, do not affect commerce directors, do not affect commerce and therefore do not make out and therefore do not make out UDTPA claim.” UDTPA claim.” Wilson v. Blue Ridge Elec. Mbrshp. Corp.Wilson v. Blue Ridge Elec. Mbrshp. Corp., 157 N.C. App. 355, 578 , 157 N.C. App. 355, 578 S.E.2d 692 (2003). S.E.2d 692 (2003).

ISSUE OF PROXIMATE ISSUE OF PROXIMATE CAUSECAUSE

The allegedly unfair or deceptive The allegedly unfair or deceptive act or practice must have act or practice must have proximately caused actual injury to proximately caused actual injury to the claimant, or to his business.the claimant, or to his business.Bob Timberlake Collection, Inc. v. EdwardsBob Timberlake Collection, Inc. v. Edwards, 626 S.E.2d 315 , 626 S.E.2d 315 (N.C. Ct. App. 2006); (N.C. Ct. App. 2006); Old Salem Foreign Car Serv., Inc. v. Old Salem Foreign Car Serv., Inc. v. Webb, Webb, 159 N.C. App. 93, 582 S.E.2d 673 (2003). 159 N.C. App. 93, 582 S.E.2d 673 (2003).

ISSUE OF DAMAGESISSUE OF DAMAGES § 75-16 provides for mandatory recovery of § 75-16 provides for mandatory recovery of

treble damages if the court finds a violation treble damages if the court finds a violation of the statute. This provision is intended to of the statute. This provision is intended to encourage private enforcement actions.encourage private enforcement actions. Page v. Lexington Ins. Co.Page v. Lexington Ins. Co., 628 S.E.2d 427 (N.C. Ct. App. , 628 S.E.2d 427 (N.C. Ct. App. 2006); 2006); Morgan v. AT&T Corp.Morgan v. AT&T Corp., 168 N.C. App. 534, 608 S.E.2d , 168 N.C. App. 534, 608 S.E.2d 559 (2005). 559 (2005).

NCGS § 75-16 is both punitive and remedial NCGS § 75-16 is both punitive and remedial in nature in nature

Encourages private enforcement Encourages private enforcement Makes it more economically feasible to bring an Makes it more economically feasible to bring an

action in cases where possible money damages action in cases where possible money damages are limited are limited

Increases the incentive for settlementIncreases the incentive for settlementMarshall v. MillerMarshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981)., 302 N.C. 539, 276 S.E.2d 397 (1981).

ISSUE OF DAMAGESISSUE OF DAMAGES To recover damages, party must present To recover damages, party must present

evidence from which a jury could evidence from which a jury could reasonably calculate damages.reasonably calculate damages.Castle McCulloch, Inc. v. FreedmanCastle McCulloch, Inc. v. Freedman, 169 N.C. App. 497, 610 , 169 N.C. App. 497, 610 S.E.2d 416 (2005).S.E.2d 416 (2005).

Actual injury should be determined by the Actual injury should be determined by the “out of pocket loss suffered by the plaintiff.”“out of pocket loss suffered by the plaintiff.”Jacobs v. Physicians Weight Loss Ctr. of Am., Inc.Jacobs v. Physicians Weight Loss Ctr. of Am., Inc., 620 S.E.2d 232 , 620 S.E.2d 232 (N.C. Ct. App. 2005).(N.C. Ct. App. 2005).

The jury should not be told that damages The jury should not be told that damages may be trebled. may be trebled. Mapp v. Toyota World, Inc.Mapp v. Toyota World, Inc., 81 N.C. App. 421, 344 S.E.2d 297 , 81 N.C. App. 421, 344 S.E.2d 297 (1986) (trial judge properly sustained objection to reference in (1986) (trial judge properly sustained objection to reference in opening statement to treble damages). opening statement to treble damages).

ACTS THAT AMOUNT TO ACTS THAT AMOUNT TO UDTPAUDTPA

False representation of condition of a False representation of condition of a productproductDaimlerChrysler Corp. v. KirkhartDaimlerChrysler Corp. v. Kirkhart, 148 N.C. App. 572, 561 , 148 N.C. App. 572, 561 S.E.2d 276 (2002).S.E.2d 276 (2002).

Systematic overcharging for product Systematic overcharging for product or servicesor servicesAdams v. Aventis, S.A.Adams v. Aventis, S.A., 2003 NCBC 7, 2003 NCBC LEXIS 10 , 2003 NCBC 7, 2003 NCBC LEXIS 10 (August 26, 2003)(holding that the full amount of the (August 26, 2003)(holding that the full amount of the overcharge can be recovered, and trebled).overcharge can be recovered, and trebled).

Failing to maintain rental property Failing to maintain rental property and insisting on full rent and insisting on full rent Dean v. HillDean v. Hill, 171 N.C. App. 479, 615 S.E.2d 699 (2005), 171 N.C. App. 479, 615 S.E.2d 699 (2005); ; Stolfo v. KernodleStolfo v. Kernodle, 118 N.C. App. 580, 455 S.E.2d 869 , 118 N.C. App. 580, 455 S.E.2d 869 (1995).(1995).

ACTS THAT AMOUNT TO ACTS THAT AMOUNT TO UDTPAUDTPA

Libel/slander regarding business Libel/slander regarding business dealingsdealingsBoyce & Isley, PLLC v. CooperBoyce & Isley, PLLC v. Cooper, 153 N.C. App. 25, 568 S.E.2d , 153 N.C. App. 25, 568 S.E.2d 893 (2002).893 (2002).

Failing in good faith to settle Failing in good faith to settle insurance claimsinsurance claimsPage v. Lexington Ins. Co.Page v. Lexington Ins. Co., 628 S.E.2d 427, 2006 N.C. App. , 628 S.E.2d 427, 2006 N.C. App. LEXIS 862 (N.C. Ct. App. 2006).LEXIS 862 (N.C. Ct. App. 2006).

REMEMBERREMEMBER

WHEN THROWN INTO WHEN THROWN INTO DEEP WATER, BEFORE DEEP WATER, BEFORE TRYING TO SWIM TO TRYING TO SWIM TO SHORE, FIRST BE SHORE, FIRST BE SURE TO GET OUT OF SURE TO GET OUT OF THE BURLAP SACK!THE BURLAP SACK!

TRIAL OF A UDTPA CLAIMTRIAL OF A UDTPA CLAIM THE ROLE OF THE JURYTHE ROLE OF THE JURY

The jury decides the factual issues The jury decides the factual issues relevant to the case relevant to the case

Whether the defendant did what was Whether the defendant did what was alleged;alleged;

Whether the defendant’s conduct was in or Whether the defendant’s conduct was in or affected commerce; affected commerce; Generally, not in dispute, unless the conduct is Generally, not in dispute, unless the conduct is

specifically excluded by statute or case law. If specifically excluded by statute or case law. If sufficient facts are admitted or stipulated to sufficient facts are admitted or stipulated to permit the court to find that the defendant's permit the court to find that the defendant's conduct was "in commerce" or "affected conduct was "in commerce" or "affected commerce," the court may find as a matter of law commerce," the court may find as a matter of law that this issue is proven. that this issue is proven. Hardy v. TolerHardy v. Toler, 288 N.C. , 288 N.C. 303, 218 S.E.2d 342 (1975).303, 218 S.E.2d 342 (1975).

Whether the defendant’s actions were the Whether the defendant’s actions were the proximate cause of the plaintiff’s injuries; proximate cause of the plaintiff’s injuries; andand

The actual damages.The actual damages.

TRIAL OF A UDTPA CLAIMTRIAL OF A UDTPA CLAIM

THE ROLE OF THE JUDGETHE ROLE OF THE JUDGE The court determines, as a matter of The court determines, as a matter of

law, whether the facts established by law, whether the facts established by the jury amount to a violation of the jury amount to a violation of Chapter 75. Chapter 75. Hageman v. Twin City Chrysler-Plymouth, Inc.Hageman v. Twin City Chrysler-Plymouth, Inc., 681 F. , 681 F. Supp. 303 (M.D.N.C. 1988); Supp. 303 (M.D.N.C. 1988); McInerney v. Pinehurst Area McInerney v. Pinehurst Area Realty, Inc.Realty, Inc., 162 N.C. App. 285, 590 S.E.2d 313 (2004)., 162 N.C. App. 285, 590 S.E.2d 313 (2004).

TREBLE DAMAGESTREBLE DAMAGES If the judge so finds, he/she If the judge so finds, he/she must must

award treble damages. award treble damages. Pinehurst, Inc., v. O’Leary Bros. Realty, Pinehurst, Inc., v. O’Leary Bros. Realty, 79 N.C. App. 51, 79 N.C. App. 51, 338 S.E.2d 918 (1986).338 S.E.2d 918 (1986).

PUNITIVE DAMAGESPUNITIVE DAMAGES

If facts also support recovery for If facts also support recovery for punitive damages, the plaintiff may punitive damages, the plaintiff may allege both, but the recovery is allege both, but the recovery is limited to one or the other.limited to one or the other.Compton v. KirbyCompton v. Kirby, 157 N.C. App. 1, 577 S.E.2d 905 (2003). , 157 N.C. App. 1, 577 S.E.2d 905 (2003).

Plaintiff elects its remedy either prior to Plaintiff elects its remedy either prior to jury instructions or after return of the jury instructions or after return of the jury verdict. jury verdict. State ex. Rel. Easley v. Rich Food Servs. Inc., State ex. Rel. Easley v. Rich Food Servs. Inc., 139 N.C. App. 139 N.C. App. 691, 535 S.E.2d 84 (2000). 691, 535 S.E.2d 84 (2000).

ATTORNEYS’ FEESATTORNEYS’ FEES In his/her discretion, the judge In his/her discretion, the judge maymay award award

reasonable attorney fees to the attorney reasonable attorney fees to the attorney representing the prevailing party when:representing the prevailing party when:

The party charged with violation willfully The party charged with violation willfully engaged in the act or practice, and there was engaged in the act or practice, and there was an unwarranted refusal by such party to fully an unwarranted refusal by such party to fully resolve the matter which constitutes the basis resolve the matter which constitutes the basis of such suit; of such suit;

Willen v. HewsonWillen v. Hewson, 622 S.E.2d 187 (N.C. Ct. App. 2005);, 622 S.E.2d 187 (N.C. Ct. App. 2005); oror The party instituting the action knew, or The party instituting the action knew, or

should have known, the action was frivolous should have known, the action was frivolous and malicious.and malicious.

Marshall v. MillerMarshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981). , 302 N.C. 539, 276 S.E.2d 397 (1981).

ATTORNEYS’ FEESATTORNEYS’ FEES

Even when all of the requirements have been Even when all of the requirements have been met, judge may properly decide not to award met, judge may properly decide not to award attorney’s fees.attorney’s fees.Castle McCulloch, Inc. v. FreedmanCastle McCulloch, Inc. v. Freedman, 169 N.C. App. 497, 610 S.E.2d , 169 N.C. App. 497, 610 S.E.2d 416 (2005). 416 (2005).

The court must make specific findings of fact The court must make specific findings of fact on these issues, to include findings as to the on these issues, to include findings as to the time and labor expended, the skill required to time and labor expended, the skill required to perform the services rendered, the customary perform the services rendered, the customary fee for like work, and the experience and fee for like work, and the experience and ability of the attorney. ability of the attorney.

PRACTICAL POINTERSPRACTICAL POINTERS

Pay attention to the scope of Pay attention to the scope of voir direvoir dire questions regarding UDTPA claims, or to questions regarding UDTPA claims, or to arguments regarding trebling in front of arguments regarding trebling in front of the jury. The jury should not be advised of the jury. The jury should not be advised of trebling provisions of UDTPA statute.trebling provisions of UDTPA statute.

Jury decides whether alleged acts were Jury decides whether alleged acts were committed, whether they arise in committed, whether they arise in commerce, proximate cause, and commerce, proximate cause, and damages. The court then determines as a damages. The court then determines as a matter of law whether the alleged acts matter of law whether the alleged acts amount to a violation of the statute.amount to a violation of the statute.

PRACTICAL POINTERSPRACTICAL POINTERS Have parties submit special interrogatories for Have parties submit special interrogatories for

each alleged violation and bifurcate the factual each alleged violation and bifurcate the factual issues from legal determination as to whether issues from legal determination as to whether proven facts amount to a violation of the statute. proven facts amount to a violation of the statute.

Also remember bifurcation of punitive damages Also remember bifurcation of punitive damages phase, if any.phase, if any.

Be on lookout for UDTPA claims thrown in to Be on lookout for UDTPA claims thrown in to gain leverage for what is really a breach of gain leverage for what is really a breach of contract case. A not-uncommon practice. contract case. A not-uncommon practice. Potential sanctions. Potential sanctions. See Mieneke.See Mieneke.

Make specific findings of fact regarding any Make specific findings of fact regarding any award of attorney’s fees. award of attorney’s fees.

PRACTICAL POINTERSPRACTICAL POINTERS When considering UDTPA claim in When considering UDTPA claim in

commonly-seen default setting:commonly-seen default setting: Plaintiff still has burden of proving actual Plaintiff still has burden of proving actual

damages before trebling.damages before trebling. Be cautious in proceeding without evidentiary Be cautious in proceeding without evidentiary

inquiry – trebling in “sum certain” cases. Related inquiry – trebling in “sum certain” cases. Related considerations in punitive damages cases.considerations in punitive damages cases.

Election of remedies by plaintiff still required Election of remedies by plaintiff still required when pleadings raise issues of punitive and treble when pleadings raise issues of punitive and treble damages. Strategy considerations in face of low damages. Strategy considerations in face of low compensatory damages, collectibility of judgment compensatory damages, collectibility of judgment issues, threat of bankruptcy, etc.issues, threat of bankruptcy, etc.

What if jury trial has been demanded by plaintiff? What if jury trial has been demanded by plaintiff? Or, more problematically, by non-appearing Or, more problematically, by non-appearing defendant who made earlier appearance? Can defendant who made earlier appearance? Can plaintiff unilaterally waive jury trial? plaintiff unilaterally waive jury trial? Consider Consider Frissel v. FrisselFrissel v. Frissel, 47 N.C. App. 149, 266 S.E.2d 866 , 47 N.C. App. 149, 266 S.E.2d 866 (1980). (1980).

QUESTIONS??QUESTIONS??