K&M Collision, LLC v. N.C. Farm Bureau Mut. Ins. Co.

2017 NCBC 107

• Court: North Carolina Business Court
• Decided: November 21, 2017
• Docket: 17-CVS-308
• Status: Published

Opinion

K&M Collision, LCC v. N.C. Farm Bureau Mut. Ins. Co., 2017 NCBC 107.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION CATAWBA COUNTY 17 CVS 308

K&M COLLISION, LLC,

Plaintiff,

v.

NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, ORDER AND OPINION ON INC.; DARRYL PRITCHARD; DEFENDANTS’ MOTION FOR CONNIE MELTON; LEE HANKINS; JUDGMENT ON THE PLEADINGS CHRISTOPHER G. MANN; SHANE J. CRAFTON; DEXTER SHORT; DOUG CARPENTER; ERIN W. VALENTINE; ERIC HOOKS; and ROBERT CALLAHAN,

Defendants.

1. THIS MATTER is before the Court on Defendants’ Motion for Judgment

on the Pleadings (the “Motion”) filed on September 7, 2017. (ECF No. 94.) For the

reasons set forth below, the Court hereby DENIES the Motion.

Law Offices of James Scott Farrin, by Gary W. Jackson and Christopher R. Bagley, and Law Offices of Jason E. Taylor, P.C., by Lawrence E. Serbin, for Plaintiff.

Young Moore and Henderson, P.A., by Walter E. Brock, Glenn C. Raynor, and David W. Earley, and Patrick, Harper & Dixon, LLP, by David W. Hood, for Defendants.

I. PROCEDURAL HISTORY

2. The Court sets forth here only those portions of the procedural history

relevant to its determination of the Motion. 3. Plaintiff K&M Collision, LLC (“Plaintiff” or “K&M”) initiated this action on

February 8, 2017 by filing its verified Complaint asserting claims against Defendants

North Carolina Farm Bureau Mutual Insurance Company, Inc. (“Farm Bureau”),

Darryl Pritchard (“Pritchard”), Connie Melton (“Melton”), Lee Hankins (“Hankins”),

Christopher G. Mann (“Mann”), Shane J. Crafton (“Crafton”), Dexter Short (“Short”),

Doug Carpenter (“Carpenter”), Erin W. Valentine (“Valentine”), Eric Hooks

(“Hooks”), and Robert Callahan (“Callahan”), (collectively, the “Defendants”). (ECF

No. 12.)

4. This action was designated as a complex business case under Rules 2.1 and

2.2 of the General Rules of Practice for the Superior and District Courts and was

assigned to the undersigned by order of the Chief Justice of the Supreme Court of

North Carolina dated April 5, 2017. (ECF No. 45.)

5. Defendant Mann filed his First Amended Answer on March 29, 2017. (ECF

No. 43.) Defendants Crafton and Hooks filed separate answers on April 17, 2017.

(ECF Nos. 46–47.) Defendants Callahan, Melton, and Pritchard filed separate

answers on April 18, 2017. (ECF Nos. 48–50.) Defendants Hankins, Valentine,

Carpenter, and Short filed separate answers on April 21, 2017. (ECF Nos. 51–54.)

Farm Bureau filed an answer on May 8, 2017, (ECF No. 55), and then filed its First

Amended Answer and Counterclaim on June 6, 2017, (ECF No. 61).

6. Defendants filed the Motion and a brief in support on September 7, 2017

seeking judgment on the pleadings as to some, but not all, of Plaintiff’s claims. (ECF

Nos. 94–95.) 7. On November 14, 2017, the Court held a hearing on the Motion at which all

parties were represented by counsel.

8. Following the hearing on the Motion, on November 15, 2017, Plaintiff filed

a Notice of Voluntary Dismissal, dismissing its libel per se claim as to all Defendants

and dismissing its claim for a declaratory judgment as to Defendant Short, both

without prejudice. (ECF No. 125.)

9. The Motion has been fully briefed and is now ripe for resolution.

II. FACTUAL BACKGROUND

10. The Court does not make findings of fact on a motion for judgment on the

pleadings under Rule 12(c) of the North Carolina Rules of Civil Procedure (“Rule(s)”),

but only recites the factual allegations of the Complaint and the undisputed factual

allegations of the Defendants’ answers.

A. The Parties

11. Plaintiff is a North Carolina company that has operated as an auto body

repair shop in Catawba County since 1991. (Compl. ¶¶ 1–2, ECF No. 12.) Meredith

Bradshaw (“Ms. Bradshaw”) is K&M’s president and her son, Michael Bradshaw

(“Mr. Bradshaw”), is K&M’s Vice President of Operations. (Compl. ¶¶ 62, 67.)

Neither Ms. Bradshaw nor Mr. Bradshaw are parties to this litigation.

12. Defendant Farm Bureau is a North Carolina corporation licensed to sell

auto insurance by the North Carolina Department of Insurance. (Compl. ¶¶ 4–5.)

13. Defendants Pritchard, Melton, Hankins, Mann, Crafton, Short, Carpenter,

Valentine, Hooks, and Callahan are past or present employees of Farm Bureau. (Compl. ¶¶ 6, 8, 10, 12, 14, 16, 18, 20, 22, 24.) Defendant Pritchard is Farm Bureau’s

chief appraiser, (Compl. ¶ 6), and Defendant Short was Farm Bureau’s field claim

manager at all relevant times, (Compl. ¶ 14).

B. Plaintiff’s Administrative and Diagnostic Analysis Fees

14. Plaintiff alleges that when a vehicle owner insured by Farm Bureau (“first-

party claimant”) sustains damage to a vehicle that is covered under a Farm Bureau

policy, or when a vehicle owner sustains damage to his or her vehicle caused by the

fault of a Farm Bureau insured (“third-party claimant”), Farm Bureau must repair

or replace the vehicle with like kind and quality as required by the terms of the

standard insurance policy mandated by the state of North Carolina and the North

Carolina Department of Insurance . (Compl. ¶¶ 28–31.)

15. After a vehicle is damaged, it is typical business practice for insurers to

require first- and third-party claimants (together, the “claimants”) to get an initial

estimate of the cost to repair the damaged vehicle. (See Compl. ¶¶ 97, 147.) After

the initial estimate, additional hidden damage is often discovered when vehicles are

examined more thoroughly, necessitating supplemental repairs and increasing the

estimated repair costs. (Compl. ¶¶ 56, 60.) When the total repair estimate exceeds

seventy-five percent of the vehicle’s total pre-accident value, the insurer is required

under the North Carolina Administrative Code to declare the vehicle a “total loss.”

(See Compl. ¶ 39; see also 11 N.C. Admin. Code 04 .0418(5).)

16. When a vehicle brought to Plaintiff for repairs is declared a total loss after

Plaintiff has taken possession of the vehicle and performed diagnostic work, Plaintiff charges the owner of the vehicle “administrative fees” and “diagnostic analysis fees”

to compensate itself for the time and effort expended in receiving the vehicle and

evaluating the damage. (Compl. ¶¶ 39, 130.) Plaintiff alleges that these fees are only

charged for the small fraction of claims where a vehicle brought to Plaintiff is later

declared by the insurer to be a total loss. (Compl. ¶ 39.)

C. Farm Bureau’s Alleged Campaign Against Plaintiff

17. Plaintiff alleges that from June 2014 through the date of the filing of the

Complaint, “Farm Bureau, at the direction of Pritchard and other management

personnel, . . . have [sic] engaged in a deliberate campaign to cause economic,

competitive and reputational harm to [Plaintiff], in violation of North Carolina law

and public policy against defamation, tortious interference, restraint of trade and

steering” in an attempt to dissuade vehicle owners from using Plaintiff to repair their

vehicles. (See Compl. ¶ 35.)

1. Threats to Blacklist Plaintiff

18. According to Plaintiff, in June 2014, Defendant Pritchard and another

Farm Bureau adjuster who is not a party to this litigation came to Plaintiff’s premises

to inspect a vehicle brought there for repair by a Farm Bureau insured. (Compl. ¶ 63.)

Plaintiff alleges that Ms. Bradshaw “sensed hostility” from the two Farm Bureau

employees “and asked Pritchard why the relationship between [Plaintiff] and Farm

Bureau had recently soured[.]” (Compl. ¶ 66.) Plaintiff alleges that Pritchard told

Ms. Bradshaw that the relationship had soured because of Mr. Bradshaw and that

Farm Bureau and other insurers would “blacklist” Plaintiff if Mr. Bradshaw continued in his employment with Plaintiff. (Compl. ¶¶ 67–69.) Plaintiff does not

provide further explanation in the Complaint as to the origin of the hostility between

Defendants and Mr. Bradshaw.

2. Defendant Short’s Letters to Plaintiff

19. Plaintiff alleges that Defendant Short sent two letters to Plaintiff in early

2015. (Compl. ¶¶ 40, 43.) Defendant Short’s first letter to Plaintiff was dated

January 9, 2015 (the “January 9th letter”) and claimed that Farm Bureau had an

absolute right to re-inspect vehicles before Plaintiff made any additional repairs not

provided for in the initial estimate. (Compl. ¶ 43.) Defendant Short’s first letter also

stated that Farm Bureau intended to notify its claimants that that if car owners who

have selected Plaintiff for repairs allow Plaintiff to perform repairs before Farm

Bureau has been given an opportunity to inspect the vehicle, they do so at the risk of

being personally responsible for additional costs and expenses, as Farm Bureau “is

not a party to any agreement [the customer] make[s] with [Plaintiff], and is therefore

not bound by any such agreement.” (Compl. ¶ 45.)

20. Defendant Short’s second letter, sent to Mr. Bradshaw and dated March 4,

2015 (the “March 4th letter”), stated that Farm Bureau “has recently encountered

charges on [Plaintiff’s] invoices for a ‘Diagnostic Analysis Fee’ and ‘Administrative

Fees’ and [Plaintiff] has refused to release vehicles until these fees are paid.” (Compl.

¶¶ 40–41, Ex. A.) As to the diagnostic fee, the March 4th letter stated that “if the

vehicle is determined to be a total loss, no ‘Diagnostic Analysis Fee’ is warranted.”

(Compl. Ex. A.) As to the administrative fees, the March 4th letter indicated that Farm Bureau “does not take the position that [Plaintiff] cannot charge an

‘Administrative Fee’ to its clients; however, [Farm Bureau] will not pay those fees[,]”

as they “are not included in the scope of our liability under the law or the terms and

conditions of our policy.” (Compl. Ex. A.) Defendant Short’s March 4th letter advised

Plaintiff that Farm Bureau intended to inform all claimants that if they select

Plaintiff for repairs, Farm Bureau will not pay Plaintiff’s administrative fees or any

additional storage charges incurred as a result of Plaintiff’s refusal to release a

claimant’s vehicle until such fees are paid. (Compl. Ex. A.) Plaintiff alleges that

Farm Bureau had never previously objected to Plaintiff’s diagnostic or administrative

fees and paid them on a routine basis. (Compl. ¶ 46.)

3. The Uncovered Fees Letter

21. Around June 2015, Farm Bureau began sending a letter to claimants who

selected Plaintiff for repairs informing them of certain charges that would not be

covered by Farm Bureau (the “Uncovered Fees Letter”). (Compl. ¶ 49.) Plaintiff

attached a copy of the letter to the Complaint, which reads in pertinent part:

This letter is directed at all insureds of [Farm Bureau] and/or any person asserting a property damage claim for damage to your motor vehicle against a person insured by [Farm Bureau]. Please be advised that you have the right to have your vehicle repaired at the body shop of your choice. If you have selected K&M Collision in Hickory, NC, please be advised that you may incur certain charges that will not be covered by [Farm Bureau], including, but not limited to charges for “Administrative Fees” and/or “Diagnostic Analysis Fees.”

If [Farm Bureau] is responsible for storage fees on your vehicle, we will not pay any additional storage fees that may be incurred because K&M Collision elects not to release the vehicle until they are paid for “Administrative Fees” and/or “Diagnostic Analysis Fees.” You may be personally responsible for paying those fees, as well as any additional storage fees that accrue pending payment of these fees. K&M Collision has the right to charge its customers as they see fit, but this letter is to advise you that some charges may not be covered by [Farm Bureau]. . . .

(Compl. Ex. B.)

22. Notwithstanding the statement in the Uncovered Fees Letter that it is sent

to all Farm Bureau claimants, Plaintiff alleges that the letter was sent only to those

claimants who wished to use Plaintiff for repairs. (Compl. ¶ 50.) Plaintiff further

alleges that the Uncovered Fees Letter was sent to claimants prior to Farm Bureau’s

inspection of the vehicle and regardless of whether the claimant’s vehicle was

expected to be a total loss. (Compl. ¶¶ 53, 56.) Because only a small percentage of

claims are declared a total loss, even after disassembly reveals the need for

supplemental repairs, Plaintiff alleges that sending the letter to all claimants who

wished to take their vehicles to Plaintiff was unwarranted and designed to steer

customers away from Plaintiff. (Compl. ¶¶ 52–53, 56, 217(b).)

4. Defendants’ Defamatory and Misleading Oral Statements

23. Plaintiff alleges that Defendants made oral defamatory statements to

Plaintiff’s current and prospective customers, stating or implying that Plaintiff is not

up to industry standards, (Compl ¶ 98); is not fair, (Compl. ¶ 99); overcharges for its

repair work, (Compl. ¶¶ 104, 126, 158, 172, 183(c)); performs unnecessary repairs and

has excessive fees, (Compl. ¶¶ 127, 150(a), 167(d), 172, 183(c)); does not have good

business practices, (Compl. ¶ 127); is not a good repair shop, (Compl. ¶ 183(d)); is

difficult to deal with, (Compl. ¶¶ 150(b), 183(a)–(b)); and is horrible or awful, (Compl.

¶¶ 183(a), 184). Plaintiff also contends that Defendants recommended that some claimants use a repair shop other than Plaintiff. (Compl. ¶¶ 99, 103, 138, 152, 155,

190.) Plaintiff asserts that these statements were made to discourage claimants from

taking their vehicles to Plaintiff for repairs. (Compl. ¶ 227.)

5. Defendants’ Conduct in Processing Claims

24. The Complaint alleges that Farm Bureau intentionally created delays in

processing claims for vehicles taken to Plaintiff for repairs, in part by using a special

adjuster and then an independent appraiser assigned to all claims involving Plaintiff.

(Compl. ¶¶ 33, 79–80.) It is undisputed that Farm Bureau assigned Defendant

Pritchard to handle all claims where a claimant selected Plaintiff for repairs. (Compl.

¶ 33; First Am. Answer Farm Bureau ¶ 33, ECF No. 43.) Plaintiff alleges that this

practice “is uniquely targeted to [it],” as Farm Bureau does not assign a special

adjuster or appraiser to handle all claims at any other repair shop. (Compl. ¶¶ 33,

80.)

25. Beginning in April 2016, Farm Bureau engaged William Hawfield

(“Hawfield”), a non-party to this litigation, as an independent appraiser to process all

claims involving Plaintiff because of tensions between Plaintiff and Defendant

Pritchard. (Compl. ¶ 71.) Plaintiff contends that Hawfield is “a surrogate, without

true independence” from Farm Bureau and has been used by Farm Bureau “to delay,

harass, and interfere with [Plaintiff]’s operations.” (Compl. ¶¶ 77–78.) For instance,

Plaintiff alleges that Farm Bureau refused to process any claims involving vehicles

taken to Plaintiff for repair for a ten-day period when Hawfield was on vacation, thus creating unnecessary delays and harming Plaintiff’s business and reputation.

(Compl. ¶¶ 78, 80.)

26. Plaintiff further alleges that when it ultimately repaired vehicles for Farm

Bureau’s insureds or claimants, Defendants delayed making payment for the repairs,

refused to pay the full amount necessary to repair the vehicle, and refused to pay

repair rates that it promised to Plaintiff. (Compl. ¶¶ 90–91, 117, 120, 143, 167(h),

185.)

27. Plaintiff also contends that Defendants further delayed the processing and

resolution of claims by insisting that they be permitted to re-inspect vehicles before

Plaintiff could begin repairs, and then refusing to arrange mutually agreeable times

for re-inspection. (Compl. ¶ 44.)

28. In addition, Plaintiff alleges that Defendants improperly declared vehicles

brought to Plaintiff for repairs as a total loss in an effort to harm Plaintiff’s business.

(Compl. ¶¶ 81, 130, 199, 207.) Plaintiff alleges that Hawfield told Plaintiff that Farm

Bureau had decided to single out Plaintiff by uniformly declaring all vehicles brought

to Plaintiff as a total loss when the cost of repairs would total forty-percent of the

vehicle’s value, substantially less than the seventy-five percent threshold mandated

by North Carolina law. (Compl. ¶¶ 81, 209; see also 11 N.C. Admin. Code 04 .0418(5).)

D. Defendants’ Interactions with Plaintiff’s Customers

29. The Complaint describes Defendants’ interactions with twelve of Plaintiff’s

customers and potential customers in processing insurance claims for repair of their

vehicles. (Compl. ¶¶ 82–210.) 1. Customers with Whom Plaintiff Had Repair Contracts

30. The Complaint alleges that Plaintiff had binding contracts with nine of the

twelve customers described in the Complaint and that Defendants induced these

customers to breach their repair contracts with Plaintiff. (Compl. ¶¶ 224, 227.)

Plaintiff further alleges that Defendants were not parties to these repair contracts,

as acknowledged by Defendant Short’s January 9th letter, (Compl. ¶¶ 45, 225), and

contends that Defendants were aware of Plaintiff’s contracts with the nine claimants.

(Compl. ¶ 226.) Despite this knowledge, Plaintiff avers that Defendants maliciously

induced these nine customers to breach their contracts with Plaintiff through the

above-described campaign. (Compl. ¶ 228.)

31. As to three of these nine customers with whom Plaintiff had repair

contracts, Farm Bureau ultimately declared their vehicles to each be a total loss, thus

avoiding the need for repairs and causing Plaintiff to lose the income expected from

those repairs. (Compl. ¶¶ 130, 199–200, 207, 210.) As to one customer in particular,

the Complaint alleges that Plaintiff prepared an estimate concluding that it would

cost $15,351.50 to repair the customer’s vehicle, a 2016 Ford F-150 with a market

value of over $40,000. (Compl. ¶ 198.) Plaintiff claims that Farm Bureau declared

the vehicle to be a total loss, notwithstanding the fact that the repair estimate was

for less than forty percent of the vehicle’s value. (Compl. ¶ 199.)

32. Plaintiff repaired the vehicles of the six other customers with whom it had

repair contracts. (Compl. ¶¶ 91, 117, 142, 167(h), 176, 185.) Of these six, Plaintiff

alleges that Farm Bureau refused to pay the full amount necessary to repair or replace three customers’ vehicles as required by the standard auto insurance policy

in North Carolina. (Compl. ¶¶ 89, 93, 117, 121, 185.) As to the remaining three

customers, Plaintiff alleges that Farm Bureau withheld payment for significant

periods of time before ultimately paying the full repair cost. (Compl. ¶¶ 143, 167(h),

176.) Plaintiff alleges that as to the first customer, the delay in payment harmed

Plaintiff’s reputation with the customer and caused Plaintiff to incur additional

expenses, (Compl. ¶ 143); as to the second customer, Farm Bureau paid the full cost

of repairs only after the customer threatened legal action, (Compl. ¶ 167(h)); and as

to the third customer, Farm Bureau only paid the full repair cost after requiring the

customer to execute a “Policyholders’ Release,” which Plaintiff alleges was in violation

of Farm Bureau’s policy terms and North Carolina law, (Compl. ¶ 176).

2. Customers Who Selected a Repair Shop Other Than Plaintiff

33. Plaintiff also alleges that at least three prospective customers would have

contracted with Plaintiff for vehicle repairs but for Defendants’ campaign to drive

customers away. (Compl. ¶¶ 107, 153, 195.) One of those customers allegedly told

Plaintiff that “it was obvious to him that Defendant Farm Bureau did not like

[Plaintiff]” and believed that Farm Bureau was attempting to steer him away from

Plaintiff. (Compl. ¶ 106.) Another customer who ultimately selected a different

repair shop allegedly said that “when she told Farm Bureau that she was taking her

vehicle to Plaintiff, ‘they freaked out[,]’” made negative comments about Plaintiff, and

when asked what the customer was supposed to do, an unknown employee of Farm

Bureau allegedly told her “to go to ‘one of the two shops down the road.’” (Compl. ¶¶ 148, 150, 152.) According to Plaintiff, the third customer was told that selecting

a different repair shop “would work best for everyone” and that if she selected

Plaintiff, a special adjuster would have to be assigned to handle her claim. (Compl.

¶¶ 190, 194.) Plaintiff alleges that it lost prospective income that it would have

earned from the repairs for these three customers had it not been for Defendants’

unlawful interference. (Compl. ¶¶ 107–08, 153, 195.)

E. Claims

34. Plaintiff currently asserts the following claims for relief in its verified

Complaint: (1) libel per quod, slander per se, and slander per quod against Defendants

Farm Bureau, Pritchard, Hooks, Crafton, Carpenter, and Callahan; (2) tortious

interference with contract and prospective economic advantage against all

Defendants; (3) unfair and deceptive trade practices (“UDTP”) against all

Defendants; (4) breach of contract against Farm Bureau; (5) a declaratory judgment

action against all Defendants except Defendant Short; and (6) punitive damages

against all Defendants. (Compl. 35, 41, 46, 48, 49–50.) Plaintiff has previously

voluntarily dismissed its claim for libel per se against all Defendants and its

declaratory judgment action against Defendant Short.

35. Defendants’ Motion seeks judgment on the pleadings on Plaintiff’s claims

for (1) libel per se; (2) tortious interference with contract and prospective economic

advantage; (3) UDTP against Defendant Short; (4) declaratory judgment against

Defendant Short; and (5) punitive damages against Defendant Short. (Defs.’ Mot. J.

Pleadings 1, ECF No. 94.) III. LEGAL STANDARD

36. “A motion for judgment on the pleadings should not be granted unless the

movant clearly establishes that no material issue of fact remains to be resolved and

that he is entitled to judgment as a matter of law.” Carpenter v. Carpenter, 189 N.C.

App. 755, 761, 659 S.E.2d 762, 767 (2008). On a Rule 12(c) motion, “[t]he movant is

held to a strict standard and must show that no material issue of facts exists and that

he is clearly entitled to judgment.” Ragsdale v. Kennedy, 286 N.C. 130, 137, 209

S.E.2d 494, 499 (1974). “[T]he court cannot select some of the alleged facts as a basis

for granting the motion on the pleadings if other allegations, together with the

selected facts, establish material issues of fact.” J. F. Wilkerson Contracting Co. v.

Rowland, 29 N.C. App. 722, 725, 225 S.E.2d 840, 842 (1976). The Court must read

the pleadings in the light most favorable to the nonmoving party, and

[a]ll well pleaded factual allegations in the nonmoving party’s pleadings are taken as true and all contravening assertions in the movant’s pleadings are taken as false. All allegations in the nonmovant’s pleadings, except conclusions of law, legally impossible facts, and matters not admissible in evidence at the trial, are deemed admitted by the movant for purposes of the motion.

Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499 (citations omitted). In ruling on a 12(c)

motion, the Court may consider documents attached to and incorporated within the

Complaint. Weaver v. Saint Joseph of the Pines, Inc., 187 N.C. App. 198, 204–05, 652

S.E.2d 701, 707–08 (2007).

37. “Judgment on the pleadings is not favored by the law . . . .” Huss v. Huss,

31 N.C. App. 463, 466, 230 S.E.2d 159, 162 (1976). Rule 12(c)’s function “is to dispose

of baseless claims or defenses when the formal pleadings reveal their lack of merit.” Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499. “[J]udgment on the pleadings is not

appropriate merely because the claimant’s case is weak and he is unlikely to prevail

on the merits.” Huss, 31 N.C. App. at 469, 230 S.E.2d at 163. “A motion for judgment

on the pleadings is allowable only where the pleading of the opposite party is so

fatally deficient in substance as to present no material issue of fact . . . .” George

Shinn Sports, Inc. v. Bahakel Sports, Inc., 99 N.C. App. 481, 486, 393 S.E.2d 580, 583

(1990).

IV. ANALYSIS

A. Tortious Interference Claim

38. The elements of a claim for tortious interference with contract are:

(1) a valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the contract; (3) the defendant intentionally induces the third person not to perform the contract; (4) and in doing so acts without justification; (5) resulting in actual damage to plaintiff.

United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988).

39. To sustain an action for tortious interference with prospective economic

advantage, “a plaintiff must show that defendant, without justification, induced a

third party to refrain from entering into a contract with plaintiff, which would have

been made absent the defendant’s interference.” MLC Auto., LLC v. Town of

Southern Pines, 207 N.C. App. 550, 570, 702 S.E.2d 68, 79 (2011).

40. Claims for tortious interference with contract and prospective economic

advantage are properly dismissed under Rule 12(c) where the complaint shows that

the interference was justified or privileged. See Peoples Sec. Life Ins. Co. v. Hooks, 322 N.C. 216, 220, 367 S.E.2d 647, 650 (1988) (affirming dismissal of a tortious

interference with contract claim on a Rule 12(b)(6) motion). However “[t]he privilege

[to interfere] is conditional or qualified; that is, it is lost if exercised for a wrong

purpose.” Id. at 221, 367 S.E.2d at 650 (alterations in original). An interference is

unjustified when it is done “not in the legitimate exercise of defendant’s own right,

but with design to injure the plaintiff, or gaining some advantage at his expense.”

Owens v. Pepsi Cola Bottling Co., 330 N.C. 666, 680, 412 S.E.2d 636, 644 (1992).

Stated differently, “[i]nterference is without justification if a defendant’s motive is

not reasonably related to the protection of a legitimate business interest.” Sellers v.

Morton, 191 N.C. App. 75, 81–83, 661 S.E.2d 915, 921–22 (2008) (quotation marks

omitted).

41. Defendants argue that the Court should grant the Motion and dismiss

Plaintiff’s claim for tortious interference with contract and tortious interference with

prospective economic advantage because Farm Bureau’s legitimate business interest

in getting damaged vehicles repaired for a reasonable price is a complete bar to

Plaintiff’s claim, “irrespective of [Plaintiff]’s allegations of malice.” (Defs.’ Br. Supp.

13.)

42. North Carolina’s case law paints a less-than-clear picture of when a

defendant’s interference is justified by a legitimate business interest. Many cases

purport to apply a bright-line rule that for the interference to be unjustified, “the

complaint must admit of no motive for the interference other than malice.” See, e.g.,

Wagoner v. Elkin City Sch. Bd. of Educ., 113 N.C. App. 579, 587, 440 S.E.2d 119, 124 (1994); Privette v. Univ. N.C., 96 N.C. App. 124, 134–35, 385 S.E.2d 185, 191 (1989).

Courts have applied this rule in at least some cases where defendant’s interference

simultaneously served a legitimate business interest and potentially a malicious

ulterior motive. Wagoner, 113 N.C. App. at 587, 440 S.E.2d at 124; Privette, 96 N.C.

App. at 134–35, 385 S.E.2d at 190–91. However, other cases reveal that this line is

not so bright as it may first appear.

43. For instance, our Supreme Court unanimously held that dismissal of a

plaintiff’s tortious interference with contract claim on a Rule 12(b)(6) motion was

improper where plaintiff alleged that defendants’ conduct was not within their

qualified privilege to interfere and there were questions concerning defendants’

motives. Embree Constr. Grp. v. Rafcor, Inc., 330 N.C. 487, 499, 411 S.E.2d 916, 925

(1992). In Embree, this State’s highest court stated that justification for interference

with contract is in the nature of an affirmative defense and that it is not proper at

the pleading stage to demand that plaintiff’s complaint negate facts that support the

defense. Id. at 499–500, 411 S.E.2d at 925. Additionally, there are a number of cases

from this Court in which the Court has declined to dismiss a tortious interference

claim notwithstanding the fact that defendant arguably had a legitimate business

interest in plaintiff’s contract with a third party where there was a question as to

whether defendant’s actions were related to defendant’s legitimate interest or were

done to harm the plaintiff. See, e.g., Hopkins v. MWR Mgmt. Co., 2017 NCBC LEXIS

47, at *51–52 (N.C. Super. Ct. May 31, 2017) (denying summary judgment where a

question of fact remained as to whether defendant’s conduct was intended to harm plaintiff rather than to protect defendant’s legitimate interest); HSG, LLC v. Edge-

Works Mfg. Co., 2015 NCBC LEXIS 91, at *15–16 (N.C. Super. Ct. Oct. 5, 2015)

(denying motion to dismiss where the factual allegations were sufficient to state that

the interference was malicious and unjustified); Allegis Grp., Inc. v. Zachary Piper

LLC, 2014 NCBC LEXIS 37, at *36 (N.C. Super. Ct. Aug. 7, 2014) (“Where there is

an issue as to a defendant’s intent, summary judgment is inappropriate.”). Although

the above-cited cases are factually and procedurally distinct from this case, the Court

believes they stand for the proposition that dismissal at the pleading stage is

inappropriate where questions of fact remain as to Defendants’ justification for

interfering with Plaintiff’s business relations.

44. In support of their argument that they have an absolute privilege to

interfere with Plaintiff’s business relations with its current and prospective

customers, Defendants rely on Williams v. State Farm Mut. Auto. Ins. Co., 67 N.C.

App. 271, 312 S.E.2d 905 (1984). (Defs.’ Br. Supp. 10–13.) In Williams, the Court of

Appeals affirmed a directed verdict in favor of defendant auto insurer and its agents

as to plaintiff body shop owner’s tortious interference with contract claim, concluding

that defendants’ interference was justified by a legitimate business interest in getting

insured automobiles repaired correctly and for the lowest price. Id. at 277, 312 S.E.2d

at 909. The Court of Appeals held that “[i]f the outsider has a sufficient lawful reason

for inducing the breach of contract, he is exempt from liability for so doing, no matter

how malicious in actuality his conduct may be.” Id. However, Williams not only predated our Supreme Court’s decision in Embree, but was decided at a much later

stage of litigation than a Rule 12 motion.

45. Defendants also rely on Pack Bros. Body Shop, Inc. v. Nationwide Mutual

Insurance Co., 2003 NCBC LEXIS 2 (N.C. Super. Ct. Jan. 10, 2003) (Tennille, J.), a

case from the North Carolina Business Court, arguing that the court in that case

“viewed Williams as holding that the insurer’s legitimate interest in having vehicles

repaired correctly and for a good price barred the plaintiff’s tortious interference

claim.” (Defs.’ Reply Br. Supp. Mot. J. Pleadings 5, ECF No. 120 (citing Pack Bros.

Body Shop, Inc., 2003 NCBC LEXIS 2, at *27)). Judge Tennille did not make such a

strong pronouncement in Pack Brothers as characterized by Defendants, as the court

never discussed Williams in relation to a tortious interference claim. Pack Bros. Body

Shop, Inc., 2003 NCBC LEXIS 2, at *29, 32. Judge Tennille did, however, discuss

Williams in relation to plaintiffs’ defamation claim, where he declined to hold that an

insurer’s interest in getting automobiles repaired correctly and for the lowest price

granted an absolute privilege in the defamation context, noting that in Williams the

“Court of Appeals found only a protectable interest.” Id. at *26–27 (emphasis added).

The opinion, therefore, suggests that an insurer’s interest in getting vehicles repaired

inexpensively and correctly does not grant an absolute privilege to engage in tortious

behavior.

46. Despite Defendants’ contentions to the contrary, the fact that Defendants

unquestionably have a protectable interest in getting vehicles repaired for the lowest

price does not foreclose the question of whether or not Defendants’ interference was reasonably related to that legitimate business interest. Here, Plaintiff alleges that

prior to the alleged campaign to steer customers away from Plaintiff, Defendant

Pritchard told Ms. Bradshaw that Farm Bureau and other insurers would “blacklist”

Plaintiff if Mr. Bradshaw continued to work for the company. (Compl. ¶¶ 68–69; First

Am. Answer Farm Bureau ¶¶ 68–69; Answer Darryl Pritchard ¶¶ 68–69, ECF No.

50.) The Complaint also alleges that Farm Bureau’s agent, Hawfield, told Plaintiff

that Farm Bureau had decided to declare all vehicles taken to Plaintiff as total losses

where the cost of repairs was at least forty percent of the vehicle’s total value.

(Compl. ¶ 209.) The Complaint claims that on several occasions Defendants declared

a vehicle to be a total loss either without properly inspecting the damage to the

vehicle or when the cost of repairs would have been well under the legally recognized

seventy-five percent total loss threshold. (Compl. ¶¶ 198–99, 203, 206–07.) In

particular, Plaintiff alleges Defendants declared one customer’s vehicle to be a total

loss where the repair estimate was $15,351.50 and the vehicle’s total value exceeded

$40,000. (Compl. ¶¶ 198–99.) Finally, Plaintiff alleges that Defendants purposely

created administrative hurdles and delays in claims processing that increased the

overall cost of repairs and made Plaintiff a less attractive repair shop for vehicle

owners. (Compl. ¶ 143.)

47. The foregoing demonstrates that material questions of fact remain as to

Defendants’ motives for interfering and whether Defendants’ actions were reasonably

related to their interest in having vehicles repaired for the lowest price. Taking as

true the allegation that Defendant Pritchard threatened that Farm Bureau and other insurers would blacklist Plaintiff if Mr. Bradshaw continued to work there, there is a

question as to whether Defendants acted in the interests of Farm Bureau in getting

vehicles repaired correctly and for a low price, or alternatively whether they acted

out of personal hostility towards Mr. Bradshaw and Plaintiff. Further, a reasonable

argument exists for the proposition that declaring vehicles as total losses when such

was unnecessary and intentionally delaying the processing of claims and payments

served no legitimate business purpose.

48. Viewing the facts and permissible inferences in the light most favorable to

Plaintiff, as the Court must at this stage, the Court concludes that Plaintiff has

adequately alleged the elements of both a claim for tortious interference with contract

and tortious interference with prospective economic advantage. As a result,

judgment on the pleadings as to Plaintiff’s tortious interference claim is unwarranted

as there are unresolved questions of fact regarding whether Defendants’ interference

was justified.

B. Claims Against Defendant Short

49. Defendants argue that the Motion should be granted as to all claims against

Defendant Short because there is no factual or legal basis for such claims. (Defs.’ Br.

Supp. 13.)

50. The Complaint alleges that Defendant Short, at all relevant times, was a

field claim manager for Farm Bureau. (Compl. ¶ 14.) The only allegations specific to

Defendant Short are that he mailed two letters to Plaintiff—the January 9th letter

and the March 4th letter. (Compl. ¶¶ 40, 43.) The Complaint alleges that prior to the March 4 letter, Defendants had never objected to Plaintiff’s diagnostic analysis

and administrative fees. (Compl. ¶ 46.) Then, in June 2015, just three months after

Short’s letter threatened to do so, Farm Bureau began sending the Uncovered Fees

Letter to all claimants considering Plaintiff for repairs. (Compl. ¶ 49.) The only other

factual allegation that may be construed as referring directly to Defendant Short is

that, “at the direction of Pritchard and other management personnel,” Farm Bureau

began a deliberate campaign to harm Plaintiff “in violation of North Carolina law and

public policy against defamation, tortious interference, restraint of trade and

steering.” (Compl. ¶ 35 (emphasis added).)

1. UDTP Claim

51. Under North Carolina’s Unfair Trade Practices Act, “[u]nfair methods of

competition in or affecting commerce, and unfair or deceptive acts or practices in or

affecting commerce, are declared unlawful.” N.C. Gen. Stat. § 75-1.1(a). To establish

a claim for UDTP, plaintiff must show that “(1) defendant committed an unfair or

deceptive act or practice, (2) the action in question was in or affecting commerce, and

(3) the act proximately caused injury to the plaintiff.” Dalton v. Camp, 353 N.C. 647,

656, 548 S.E.2d 704, 711 (2001). “The Act was intended to benefit consumers, but its

protections extend to businesses in appropriate situations.” Id. (citation omitted).

52. Defendants argue that the UDTP claim against Defendant Short must be

dismissed because there is no allegation that he personally committed an unfair or

deceptive practice, and, in particular, that Plaintiff has not alleged that Short

personally defamed Plaintiff or interfered with Plaintiff’s business relations. (Defs.’ Br. Supp. 14.) However, Defendants fail to address Plaintiff’s allegation that “Farm

Bureau, at the direction of Pritchard and other management personnel,” which

necessarily includes Defendant Short, “engaged in a deliberate campaign to cause

economic, competitive and reputational harm to [Plaintiff]” in a variety of unlawful

ways. (Compl. ¶ 35.) A person may be liable for harm to a third person that results

from the tortious conduct of another if he “orders or induces the conduct” and knows

or should know of the circumstances that make the conduct tortious. Restatement

(Second) of Torts § 877. Here, Plaintiff alleges that (1) Defendant Short was a field

claim manager, (2) management personnel directed a campaign to harm Plaintiff,

and (3) Farm Bureau carried out the threat in Short’s March 4th letter to inform

Plaintiff’s current and prospective customers that Farm Bureau would not pay

certain fees charged by Plaintiff. Although sparse on specific details, the Court

concludes that the Complaint sufficiently alleges that Defendant Short engaged in

unfair or deceptive acts or practices by directing other Farm Bureau employees to

engage in conduct that, if proved, may properly form the basis of a UDTP claim. See

Eli Global, LLC v. Heavner, 794 S.E.2d 820, 827–28 (N.C. Ct. App. 2016) (reversing

dismissal of plaintiff’s UDTP claim where plaintiff adequately alleged slander per se);

Roane-Barker v. Se. Hosp. Supply Corp., 99 N.C. App. 30, 41, 392 S.E.2d 663, 670

(1990) (noting that tortious interference with contract can support a UDTP claim).

As such, Defendant Short’s Motion to dismiss this claim is denied. 2. Punitive Damages

53. Punitive damages are only available if the claimant proves that the

defendant is liable for compensatory damages and engaged in fraudulent, malicious,

or willful or wanton conduct that related to the injury for which compensatory

damages were awarded. N.C. Gen. Stat. § 1D-15(a).

54. Defendants contend that in the absence of any viable claim against

Defendant Short, the Court should also enter judgment as to Plaintiff’s request for

punitive damages. Having concluded that Defendant Short is not entitled to

judgment on the pleadings as to Plaintiff’s UDTP claim against him, Plaintiff’s

request for punitive damages against him may proceed.

55. Therefore, the Motion is denied as to Plaintiff’s request for punitive

damages as to Defendant Short.

V. CONCLUSION

56. For the foregoing reasons, the Court hereby DENIES Defendants’ Motion

for Judgment on the Pleadings as follows:

A. The Court DENIES as moot the Motion as to Plaintiff’s libel per se

claim and Plaintiff’s declaratory judgment action against Defendant

Short given Plaintiff’s voluntary dismissal of these claims.

B. The Court DENIES the Motion as to Plaintiff’s claim for tortious

interference with contract and prospective economic advantage.

C. The Court DENIES the Motion as to Plaintiff’s UDTP claim against

Defendant Short. D. The Court DENIES the Motion as to Plaintiff’s request for punitive

SO ORDERED, this the 21st day of November, 2017.

/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases