Unfair & Deceptive Practices

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A manager of an limited liability company may not, as a condition of the payment of consideration from a merger of the LLC, require that the member receiving the consideration execute a general release exonerating the manager and insiders from any misconduct.  Holding the consideration "hostage" in exchange for such a release might amount to willful and wanton conduct warranting punitive damages.

An LLC member pursuing a derivative claim must be a member of the LLC at the time the suit is filed.  Where the LLC no longer existed at the time…

Continue Reading Fliehr v. Storick, December 3, 2007 (Diaz)(unpublished)

Paintiffs, who had suffered signficant losses on variable annuity policies sold to them by the defendant agents and insurance companies, asserted claims on multiple theories: breach of fiduciary duty, constructive fraud, unfair and deceptive practices, negligence, negligent misrepresentation, aiding and abetting breach of fiduciary duty, and unjust enrichment. 

The Court dismissed some claims and ordered the Plaintiffs to replead others with more particularity. 

It held that Plaintiffs could proceed on their claims against some of the agents for breach of fiduciary duty, given the Plaintiffs alleged lack of financial sophistication…

Continue Reading Cox v. Mitchell, February 6, 2008 (Tennille)(unpublished)

The Court denied Defendant’s motion to dismiss Plaintiff’s unfair and deceptive practices claim.  It rejected the argument that the matter before the Court was simply a private dispute which did not implicate the consuming public or the general marketplace, and was therefore not "in commerce."

The Court held that the statute reaches "derivative claims arising out of fraudulent activities relating to the manner in which a business conducts its “regular, day-to-day activities, or affairs . . . .” It further held that plaintiff, in its derivative action, had alleged fraud…

Continue Reading Braun v. Earthworks Lawn & Landscape, Inc., June 2007 (Diaz)(unpublished)

The Court declined to award attorneys’ fees under the Unfair and Deceptive Practices Statute. It found that there was no unwarranted refusal to fully resolve the matter, the case involved unique issues of law, and the defendant had valid reasons to refuse to settle this matter and to litigate it to conclusion.

Full OpinionContinue Reading Media Network, Inc. v. Long Haymes Carr, Inc., January 14, 2008 (Diaz)(unpublished)

Four North Carolina counties sued hotels.com, alleging that the online aggregator purchased blocks of hotel rooms from hotel owners and only paid occupancy tax based on the price paid, even though they sold those rooms to lodgers for more than they had paid and even though the lodgers paid occupancy tax based upon the higher price. (The Court referenced a series of cases filed across the country on the same issue).

The plaintiff counties had various ordinances and various administrative procedures regarding the enforcement of those ordinanances, and the Court…

Continue Reading Wake County v. Hotels.Com, LP, 2007 NCBC 35 (N.C. Super. Ct. Nov. 19, 2007)(Diaz)

Defendant, a veterinarian, had signed a covenant not to compete with his former employer. He was, at the time, the sole shareholder, sole officer, and sole director of his employer, although the management of the company was controlled by an affiliated entity (VetCor). Defendant left the business and sold its stock, but before doing so he formally cancelled his own non-compete and that of his wife, another veterinarian.

His former employer sued for breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair and deceptive…

Continue Reading Battleground Veterinary Hospital, P.C. v. McGeough, 2007 NCBC 33 (N.C. Super. Ct. Oct. 19, 2007)(Diaz)

The Court held that the plaintiffs could not state a claim for fraud because neither of them took advantage of their opportunity to investigate the facts presented to them or to seek clarification, and there was no allegation that they had been denied the opportunity to investigate.

Plaintiffs also had no claim for unfair and deceptive practices, because their claims were not "in or affecting commerce." Their claims were essentially a dispute over compensation due to them as employees under the terms of various documents that governed their relationship with…

Continue Reading Schlieper v. Johnson, 2007 NCBC 29 (N.C. Super. Ct. Aug. 31, 2007)(Tennille)

The North Carolina Insurance Commissioner sued the defendants, shareholders of insurance carriers in liquidation, for breach of fiduciary duty. Defendants moved to dismiss, claiming that the claims were barred by the statute of limitations at the time of the filing of the petition for liquidation. The Court found the statute of limitations for breach of fiduciary duty to be the three year statute contained in N.C.G.S. §1-52(2).

The Court held that "[a]n ambiguous, ill-defined limitations period for breach of the standards of conduct for directors and officers would have a…

Continue Reading State ex re. Long v. Custard, 2007 NCBC 26 (N.C. Super. Ct. Aug. 8, 2007)(Tennille)

The Court held that plaintiffs had failed to plead fraud with particularity, and dismissed their fraud claim pursuant to Rule 9(b) of the North Carolina Rules of Civil Procedure. Plaintiffs had attempted to plead both affirmative misrepresentations and fraud by concealment. With regard to the first, the Court held that the Complaint contained no specific allegations about the identity of the speaker, or the time or place when, or where, the supposedly fraudulent statements were made.

On the claim of fraud by concealment, the Court adopted the mutli-factor test adopted by…

Continue Reading Lawrence v. UMLIC-Five Corp., 2007 NCBC 20 (N.C. Super. Ct. June 18, 2007)(Diaz)

The only issue before the Court in this case was whether it should dismiss plaintiff’s unfair and deceptive practices claim. Plaintiffs had sought to raise money to recapitalize their business. Defendants had promised to provide the necessary capital, but then reneged on their commitment. Plaintifs suffered a loss as a result, and sued on a variety of theories, including unfair and deceptive practices.

The Court held, reluctantly, that the only relevant question was "whether the transactions at issue involved securities or other financial instruments involved in raising capital." The Court…

Continue Reading Latigo Investments II, LLC v. Waddell & Reed Financial, Inc., 2007 NCBC 17 (N.C. Super. Ct. June 8, 2007)(Diaz)