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Heron Bay Acquisition, LLC v. United Metal Finishing, Inc. - Dismissal of UDTPA Claim

In a court of appeals decision filed February 16, 2016, Heron Bay Acquisition, LLC v. United Metal Finishing, Inc., Heron appealed the trial court's summary judgment order dismissing his Unfair or Deceptive Trade Practices Act (UDTPA) claim.

Heron Bay Acquisition wanted to buy United Metal Finishing's business and real estate. The parties entered into an Asset Purchase Agreement (APA) and real estate purchase contract.  The APA gave Heron the exclusive right to purchase United Metal Finishing, "by preventing defendants from negotiating with other potential purchasers."  The APA also provided a right to terminate the APA after a specific date if the sale had not yet occurred, unless the termination was from a willful breach.

Plaintiff discovered that defendants had discussions about selling United Metal Finishing with another party.  Because the defendants had violated the "no-shop clause" in the APA, plaintiff added a claim for violation of the Unfair or Deceptive Trade Practices Act (UDTPA claim). The trial court entered summary judgment for defendants on the UDTPA claim but denied defendant's motion for summary judgment on claims for breach of contract based on the violation of the no-shop clause.

Under N.C. Gen. Stat. § 75-1.1(a) (2013), the elements of an unfair or deceptive trade practice are:

  1. An unfair or deceptive act or practice by [the] defendant,
  2. In or affecting commerce,
  3. Which proximately caused actual injury to [the] plaintiff.

Wilson v. Blue Ridge Elec. Membership Corp., 157 N.C. App. 355, 357, 578    S.E.2d 692, 694 (2003).

Unfair or deceptive trade practices are separate from breach of contract actions. Some type of egregious or aggravating circumstances must be present before a UDTPA claim can succeed.  In this case, plaintiff failed to identify any substantial aggravating circumstance on top of the breach that could satisfy a UDTPA claim. Without the "no-shop clause," defendants could freely negotiate selling the same business and land with other parties. The court found that the plaintiff only had a "simple breach of contract" claim.  The court also found that the negotiations, even though they violated the "no-shop clause" did not result in a change in the plaintiff's status, so they did not fit the elements of an unfair or deceptive trade practice.

Although the court noted that defendant's sales negotiations with other parties "indicated defendant's intention to deliberately sabotage the APA," without proof that defendant's termination resulted from the breaching negotiations, the trial court's dismissal stands.

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