When Alleging Injury, a Tentative Claim Yields an Unambiguous Dismissal
Ellis & Winters
This post looks at a potentially overlooked roadblock in proving a violation of N.C. Gen. Stat. § 75-1.1: the requirement that the claimant have standing to sue.
You might think of standing as an exclusively federal-court concept, but North Carolina law has its own standing requirement. Indeed, we’ve noted at least one decision that bounced an alleged 75-1.1 violation because the complaint failed to show causation, an element of standing.
Standing, though, requires more than causation. It also requires an injury-in-fact—a concrete, actual invasion of a legally protected interest.
Alleging this prerequisite requires some amount of detail, even under North Carolina’s notice-pleading regime. We examine in this post a new decision of the North Carolina Business Court that reinforces this point, and that dismisses a section 75-1.1 claim in the process.
A premium warranty for a beat-up truck?
The case, called Gateway Management Services, Ltd. v. Carrbridge Berkshire Group, Inc., involves competitors in the market for commercial used-truck warranties. The plaintiff does business as “Premium 2000+.”
Gateway accused the defendants of unfair competition. It claimed that the defendants falsely held themselves out as substantial companies with substantial assets and as having substantial insurance. According to Gateway, the defendants falsely advertised associations with Lloyd’s of London and Berkshire Hathaway. These representations mattered, Gateway said, because companies in the industry must have plenty of capital, reserves, and insurance to pay out warranty claims.
Gateway then alleged that, because of the alleged misrepresentations, customers and potential customers of Gateway instead did business with the defendants. Gateway did not provide any further detail. In fact, Gateway made some of its allegations about losing business to the defendants “upon information and belief.”
On these allegations, Gateway asserted claims for both unfair competition and violation of section 75-1.1. The defendants moved to dismiss.
On the unfair-competition claim, the defendants argued that none of the alleged wrongful conduct involved Gateway. Instead, the alleged misrepresentations concerned third parties (Lloyd’s and Berkshire Hathaway). The defendants contended that no law allows one competitor to sue another competitor based on representations about a third party.
On the 75-1.1 claim, the defendants argued that Gateway failed to plead reliance, an element of a deception-based violation of the statute. The defendant also argued that Gateway lacked standing, given that the defendants allegedly made representations to third parties, and not to Gateway.
Injury and specificity
Judge Michael L. Robinson agreed with the defendants on the unfair-competition claim. He explained that, to the extent that the defendants misappropriated any business’s commercial advantage, they misappropriated the commercial advantage of third parties other than Gateway. Gateway therefore lacked standing to assert the claim.
Judge Robinson then turned to the defendants’ standing argument on the 75-1.1 claim. He noted that, for 75-1.1 claims, standing “is broad.” He added that the statute “gives anyone whose injury is proximately caused by an unfair or deceptive act standing to sue.”
That language might have sounded promising to Gateway—until Judge Robinson emphasized the injury component of standing. Judge Robinson acknowledged Gateway’s allegations about a diminished marketplace position and a loss of current and potential customers, but he characterized those allegations as “conclusory.”
He also referred back to his analysis of the unfair-competition claim. In that analysis, even accepting Gateway’s allegations as true, Gateway did not allege that the defendants misappropriated Gateway’s commercial advantage.
For these reasons, Gateway raised only “speculative or conjectural injuries.” Judge Robinson therefore dismissed the 75-1.1 claim.
A bad result—but not a prejudicial one
Importantly, standing is a jurisdictional prerequisite. A dismissal for lack of standing is therefore without prejudice.
Theoretically, then, Gateway could keep fighting. A continued fight, however, will require a different arsenal. Judge Robinson’s opinion leaves no question that any claims by Gateway about the defendants’ alleged misrepresentations made to parties other than Gateway will have an uphill climb.
Author: Stephen Feldman