White v. Thompson

676 S.E.2d 104, 196 N.C. App. 568, 2009 N.C. App. LEXIS 530

• Court: Court of Appeals of North Carolina
• Decided: May 5, 2009
• Docket: COA08-953
• Status: Published

Opinions

WYNN, Judge.

To establish a claim for unfair or deceptive trade practices, evidence must show that the alleged unfair or deceptive acts were in or affecting commerce.¹ Defendants Andrew Thompson and Douglas Thompson argue that because their alleged unfair and deceptive acts were not in or affecting commerce, the trial court erred by trebling the award of damages against them. We reverse as to Defendant Andrew Thompson (internal partnership acts not in or affecting commerce) but affirm as to Defendant Douglas Thompson (accounting acts in or affecting commerce).

In October 2000, Plaintiffs Charles M. White and Earl Ellis formed a partnership, “Ace Fabrication and Welding (“Ace Welding”), with Defendant Andrew Thompson. The partners agreed that each would be entitled to a third of the partnership’s assets and hourly wages. Ace Welding hired Defendant Douglas Thompson (Defendant Andrew Thompson’s father) to keep the partnership’s accounting records. From the outset, Ace Welding won bids for several lucrative specialty fabrication projects at the Smithfield Packing Plant in Tarheel, North Carolina where Fran Lurkee was an “engineer over maintenance” and Carl Barnes was a superintendent.

The parties in this action presented contrasting positions on the nature of the partners’ involvement in Ace Welding. Plaintiff White testified that, soon after Ace Welding began operating, he discovered Defendant Andrew Thompson working on jobs without informing or incorporating the other Ace Welding partners. He stated that Defendant Andrew Thompson misreported the days on which jobs were to begin, resulting in the other partners missing out on jobs altogether.

On the other hand, Defendant Andrew Thompson testified that his two partners were unavailable or left in the middle of jobs. He stated: “[I]t became apparent that I was going to have to do it all. . . .” He testified that he told his partners he wanted out of Ace Welding in January 2001.

However, Plaintiff White stated that he first learned of Defendant Andrew Thompson’s desire to leave Ace Welding in February 2001. He stated that although Defendant Andrew Thompson denied that he was forming another company, Mr. Lurkee revealed that Defendant Andrew Thompson had decided to work independently and was bidding for jobs at the Smithfield Packing Plant under the business name of “Pal.” Defendant Andrew Thompson acknowledged that near the end of February 2001, he was finishing “jobs in Ace Welding name and was also working in the Pal name.”

Plaintiff White testified that Plaintiffs had problems trying to communicate with Defendants about Ace Welding’s finances after determining that Defendant Andrew Thompson had done work without informing Plaintiffs. He stated after determining that “[sjome of the money wasn’t being deposited,” he “went to the bank to move the money that was in the Ace Welding account... in a separate account until we got all this resolved.”

At some point, the three men divided Ace Welding’s tools, and Plaintiffs had an attorney draft a partnership withdrawal agreement; however, none of the partners signed that agreement. Plaintiffs continued as partners under the name “Whelco” but ceased operations a couple of months after its formation. Pal continued to do jobs at the Smithfield plant until October 2001.

In October 2002, Plaintiffs brought this action alleging that Defendant Andrew Thompson breached his fiduciary duties; conspired with Mr. Lurkee and Mr. Barnes to usurp Ace Welding’s opportunities;² and conspired with Defendant Douglas Thompson to improperly keep and maintain Ace Welding’s accounting records. Plaintiffs also alleged that Defendants’ acts amounted to unfair and deceptive trade practices.

The jury rendered a special verdict finding: 1) Defendant Andrew Thompson breached a fiduciary duty to Plaintiffs, resulting in $138,195 damages; 2) Defendant Douglas Thompson breached a fiduciary duty to Plaintiffs, resulting in $750 damages; and 3) Plaintiffs did not breach fiduciary duties they owed to Defendant Andrew Thompson. Thereafter, the trial court trebled the damages against Defendants.

On appeal, Defendants argue the trial court erred by: (I) trebling the awards under N.C. Gen. Stat. § 75-16 (2007); (II) allowing evidence from the court-appointed accountant about Defendant Andrew Thompson’s gross earnings in Pal; (III) allowing biased testimony by the accountant; (IV) failing to set aside the jury’s award of excessive damages which showed a manifest disregard for the court’s instructions; and (V) permitting Plaintiffs’ counsel to suggest that Defendant Andrew Thompson’s employment at Smithfield was discontinued because he was caught stealing.

I.

First, Defendants argue the trial court erred by trebling the damage awards because the partnership dispute did not meet the “in or affecting commerce” requirement of N.C. Gen. Stat. § 75-1.1 (2007), which states in relevant part:

(a) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.

(b) For purposes of this section, “commerce” includes all business activities, however denominated, but does not include professional .services rendered by a member of a learned profession.

Our courts have construed the term “commerce” broadly, encompassing more than mere business activity between sellers and buyers. Harrington Mfg., Inc. v. Powell Mfg., Inc., 38 N.C. App. 393, 396, 248 S.E.2d 739, 742 (1978) (“G.S. 75-1.1(b) speaks in terms of declaring and providing civil means of maintaining ethical standards of dealings ‘between persons engaged in business,’ as well as between such persons and the consuming public.”). To establish a claim for unfair or deceptive trade practices, a party must present evidence showing: “(1) an unfair or deceptive act or practice by defendant, (2) in or affecting commerce, (3) which proximately caused actual injury to plaintiff.” Wilson v. Blue Ridge Elec. Membership Corp., 157 N.C. App. 355, 357, 578 S.E.2d 692, 694 (2003) (citations omitted). “The proper inquiry ‘is not whether a contractual relationship existed between the parties, but rather whether the defendants’ allegedly deceptive acts affected commerce.’ ” Durling v. King, 146 N.C. App. 483, 488-89, 554 S.E.2d 1, 4 (2001) (original emphasis) (citations omitted).

In this case, we agree that the claim against Defendant Andrew Thompson differs from the typical claim for unfair and deceptive trade practices because his relationship to Plaintiffs was a partner, not a competitor or consumer. Indeed, Plaintiffs alleged and sought to establish at trial that Defendant Andrew Thompson formed and worked for Pal while representing that he was seeking and completing jobs for Ace Welding; conspired with Smithfield management to “siphon off work originally contracted for by Ace Welding;” and conspired with Defendant Douglas Thompson to conceal Ace Welding’s accounting records. These allegations relate to Defendant Andrew Thompson’s breach of duties owed to the Ace Welding partnership.

The proper inquiry in an unfair or deceptive trade practices case is not on the nature of the contractual relationship between the parties; rather, it must be shown that the alleged unfair or deceptive acts had an impact in the marketplace. See id. (“What is an unfair or' deceptive trade practice usually depends upon the facts of each case and the impact the practice has in the marketplace.”). The allegations against Defendant Andrew Thompson do not amount to practices impacting the marketplace; instead, Plaintiffs complain of Defendant Andrew Thompson’s breach of partnership duties — matters germane to the partners’ contractual agreement to form and operate. Ace Welding. Cf. Wilson, 157 N.C. App. at 358, 578 S.E.2d at 694 (“Matters of internal corporate management, such as the manner of selection and qualifications for directors, do not affect commerce as defined by Chapter 75 and our Supreme Court.”).

This Court confronted an unfair and deceptive trade practices claim in a partnership context in Compton v. Kirby, 157 N.C. App. 1, 577 S.E.2d 905 (2003). In Kirby, the partnership at issue was a real-estate brokerage firm. Id. at 4, 577 S.E.2d at 907. “One of the main goals of [the partnership] was to handle referrals” from an affiliated company and to win additional business in the Raleigh marketplace. Id. at 4-5, 577 S.E.2d at 908. The defendant-partner excluded the plaintiff-partners from multiple transactions, including the sale of a business, resulting in the defendant-partner becoming a principal owner in a company created to accomplish the stated partnership goals. Id. at 6-7, 577 S.E.2d at 909-10. This Court easily concluded that the defendant’s actions were “in or affecting commerce” because they “revolved around the sale of a business,” the availability of a real estate brokerage firm, “and the general marketing and sale of commercial real estate in [the Raleigh] market;” Id. at 20, 577 S.E.2d at 917.

Plaintiffs’ allegations and the evidence in this case are dissimilar to the real estate brokerage referrals and business sales that clearly impacted the marketplace in Kirby. Here, the evidence showed that Defendant Andrew Thompson sought and completed work at the Smithfield Packing Plant independently, or in the Pal business name, breaching his agreement to seek and complete the same work as an Ace Welding partner. Moreover, the Ace Welding partnership existed for the limited purpose of procuring and completing jobs at the Smithfield Packing Plant — a much narrower purpose than the multientity brokerage referrals that necessarily impacted the marketplace in Kirby. Nor did Defendant Andrew Thompson engage in any transactions, such as the sale of a business, that would inherently impact the marketplace. In sum, Defendant Andrew Thompson took for himself opportunities at the Smithfield Packing Plant that he agreed to pursue with Plaintiffs in the Ace Welding partnership; this usurpation harmed Ace Welding and Plaintiffs, but had no impact in the broader marketplace. Accordingly, we reverse the trial court’s award of treble damages against Defendant Andrew Thompson.

On the other hand, Defendant Douglas Thompson was hired to provide accounting services to Ace Welding; therefore, he was not situated as a partner or a partnership insider such that his actions can be characterized as matters of internal partnership management. Instead, Defendant Douglas Thompson was engaged in the business activity of providing accounting services to the partnership, and his actions may be considered unfair practices “in or affecting commerce.”

Furthermore, because the jury determined that Defendant Douglas Thompson breached a fiduciary duty, not a mere contractual duty, we summarily reject his contention that mere breach of contract is insufficient to show an unfair trade practice. See S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 613, 659 S.E.2d 442, 451 (2008) (“A fiduciary relationship ‘exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.’ ”). Accordingly, we uphold the trial court’s award of treble damages against Defendant Douglas Thompson.

II.

Defendants next argue that the trial court erred by allowing the accountant to testify to Pal’s gross earnings, as opposed to net earnings or profits, after Ace Welding dissolved. We disagree.

“The party seeking damages bears the burden of proving them in a manner that allows the fact-finder to calculate the amount of damages to a reasonable certainty.” Beroth Oil Co. v. Whiteheart, 173 N.C. App. 89, 95, 618 S.E.2d 739, 744 (2005) (citations omitted), disc. review denied, 360 N.C. 531, 633 S.E.2d 674 (2006). “Substantial damages may be recovered though plaintiff can only give his loss proximately.” Id. So long as the party claiming damages introduces sufficient evidence to permit a reasonable calculation, the fact finder may be left to determine the proper measure of damages. See id. at 96, 618 S.E.2d at 745.

Here, Defendants take issue with the trial court’s allowance of evidence of Pal’s gross earnings, contending that “the correct measure of damages is the net profit of the business . . . .” However, the accountant was subject to cross-examination and also testified to expenses and payments Defendant Andrew Thompson made from the Ace Welding account and the Pal account. Moreover, Plaintiff White testified that he typically recouped 60% of his gross earnings as profits; this testimony suggested that figure as a useful comparison to Defendant Andrew Thompson’s profits with Pal.

All the testimony concerning Pal’s earnings after Ace Welding’s dissolution, taken together with Defendants’ opportunity to cross-examine the accountant, provided “sufficient evidence to permit a reasonable calculation” by the jury. Id. Moreover, the jury awarded substantially less in damages against Defendants, than the amount Plaintiffs argued was lost to usurped opportunities. Therefore, the trial court did not err by allowing the accountant to testify regarding Pal’s gross earnings in 2001.

III.

Defendants next argue the trial court erred by allowing the accountant to testify because she lacked independence and was biased. However, in their brief, Defendants cite only nonbinding accounting standards rules and point to the portion of the transcript where the accountant was tendered and accepted as an expert. Defendants make no substantive argument before this Court regarding why the accountant lacked independence. Therefore, we must hold that Defendants abandoned this issue pursuant to N.C. R. App. P. 28(b)(6) (argument section of the brief should contain “the contentions of the appellant with respect to each question presented.”).

IV.

Next, Defendants argue the trial court erred by denying their motion for a new trial under N.C. Gen. Stat. 1A-1, Rule 59(a)(5) & (6) (2007) because the jury’s award of damages was excessive and showed a manifest disregard for the court’s instructions. We disagree.

Under Rule 59(a)(6), a trial court may grant a new trial on the ground that the jury awarded excessive damages under the influence of passion or prejudice. N.C. Gen. Stat. § 1A-1, Rule 59(a)(6) (2007). We review the trial court’s decision whether to grant a new trial on this basis for an abuse of discretion; however, the trial court’s discretion is “practically unlimited.” Decker v. Homes, Inc., 187 N.C. App. 658, 665, 654 S.E.2d 495, 500 (2007).

Defendants contend that the award against Defendant Andrew Thompson was “speculative,” and there was “no rational basis” to support the award against Defendant Douglas Thompson. We have already concluded above that testimony given by the accountant and Plaintiff White was sufficient to permit the jury’s reasonable calculation of the damages caused by Defendant Andrew Thompson’s breach of fiduciary duty to the Ace Welding partnership.

Likewise, the jury heard testimony from Defendant Douglas Thompson and other witnesses concerning his keeping of Ace Welding’s accounting records, and his failure to respond to Plaintiffs’ requests to settle accounting disputes. Considering that tax statements, check receipts, bank statements, and other accounting documents were submitted for the jury’s consideration, we cannot agree that the jury had “no rational basis” to calculate an award of damages against Defendant Douglas Thompson.

Nor is there any indication in the record that the jury disregarded the trial court’s instructions. The trial court gave specific instructions on how the jury should interpret each interrogatory, and there were no inconsistencies on the verdict sheet or in the verdict itself that would suggest the jury disregarded the trial court’s instructions. Accordingly, the record shows that the trial court was well within its discretion to deny Defendants’ motion for a new trial.

V.

Finally, Defendants contend the trial court erred by permitting Plaintiffs’ counsel to suggest that Defendant Andrew Thompson’s employment at Smithfield was discontinued because he was caught stealing. We disagree.

During Defendant Andrew Thompson’s cross-examination, Plaintiffs’ counsel initiated the following exchange:

Q: Can I have just a minute. Now when did Pal, the business that you formed, the unincorporated business that you formed, Pal, when did it quit doing work at Smithfield?

A: I’m not sure of the date. I think it was around October.

Q: Why did it quit doing business at Smithfield?

A: Because [Charles White] and Earl was running around with those checks that you just called out saying that I was paying bribes and bid rigging and bribery and got me fired.

Q: That’s not the real reason, is it, sir?

A: Yes sir.

Q: You got caught stealing from the plant, didn’t you?

A: No sir.

Thereafter, defense counsel objected, moved to strike, and requested a bench conference. After the bench conference, the trial court overruled the objection and permitted the cross-examination to continue.

Defendants argue that Plaintiffs’ counsel’s question was irrelevant under N.C. Gen. Stat. § 8C-1, Rule 401. Under Rule 401, evidence is relevant if it has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable. . . .” N.C. Gen. Stat. § 8C-1, Rule 401 (2007).

Here, evidence of the reason for Defendant Andrew Thompson’s discontinued employment at Smithfield was relevant to the extent of opportunities usurped from Ace Welding and the resulting lost profits — the main issues in the case. Therefore, the evidence bore substantial probative value and minimal risk of confusing the issues, misleading the jury, or unfairly prejudicing Defendants. Accordingly, the trial court did not abuse its discretion in allowing Plaintiffs’ counsel to ask questions concerning an alleged theft from Smithfield.

In summation, we reverse the award of treble damages imposed against Defendant Andrew Thompson, and otherwise affirm the trial court’s judgment.

Affirmed in part; reversed in part.

Judge ROBERT C. HUNTER concurs. Judge ERVIN concurs in part and dissents in part.

1 . N.C. Gen. Stat. § 75-1.1 (2007).

2 . Plaintiffs originally named Fran Lurkee and Carl Barnes as defendants. Neither are parties to this appeal: The trial court stated that “Carl Bames'was discharged in bankruptcy,” and Plaintiffs did not appeal from the trial court’s directed verdict in favor of Fran Lurkee.