On drafting a complaint and the voices in your head
Ellis & Winters
When drafting a complaint for North Carolina state court, you can sometimes hear two voices in your head. Those two voices are at war.
The first voice is the Voice of Vagueness. “Keep it vague!” that voice proclaims. “North Carolina is a notice-pleading state. There’s no Twombly. Vague pleading means flexible litigating!”
The second voice is the Voice of Specificity. “Are you listening to that moron Vagueness again? Come on! Specific allegations reduce the chance of a 12(b)(6) dismissal. They also show the bad guys that you’ve got the goods. A detailed complaint brings the bad guys to their knees.”
I’m not here to tell you which voice to listen to. But a recent decision by the North Carolina Court of Appeals shows why each of these voices has some reasonable points—and that those points can be determinative on whether you’ll be able to recover treble damages.
The decision comes in a construction-defect case called Bybee v. Island Haven, Inc. The plaintiff, Tammy Bybee, bought a new-construction home in Currituck County. A company named Quality Homes built the house, but the quality was poor, at least according to a Currituck County jury. Bybee won a $55,000 verdict from that jury for breach of warranty. Quality Homes paid the judgment with interest.
But that payment didn’t end the case, because Bybee had other claims for additional damages. Those claims included a violation of N.C. Gen. Stat. § 75-1.1. Quality Homes won dismissal of those claims early in the case. Bybee appealed the dismissal at the end of the case.
The attention here is on the 75-1.1 claim—a claim that contained no independent allegations and had only two paragraphs. The first paragraph reincorporated the complaint’s prior paragraphs. The second paragraph alleged that “[t]he fraud and other acts and omissions of defendants set forth herein constitute unfair and deceptive trade practices.”
Bybee’s opening appellate brief suggested that she was pressing a per se theory of 75-1.1 liability. She expressly argued that her complaint sufficiently alleged fraud, and fraud is a 75-1.1 violation. And that’s all she appeared to argue.
In response, Quality Homes noted that the 75-1.1 claim did not explicitly allege two elements of a 75-1.1 claim: that the conduct was “in or affecting commerce” and that the conduct proximately caused her injury. Quality Homes then noted that the 75-1.1 claim failed because Bybee’s fraud claim failed.
Bybee adjusted her argument on reply. She said that while fraud is a per se violation of section 75-1.1, fraud is not required to prove a violation. She then pointed to the elastic language in her 75-1.1 claim. That language referred not only to fraud, but also to “other acts and omissions of defendants.”
The Court of Appeals seized on that language. The Court affirmed the dismissal of the fraud claim for failure to satisfy Civil Rule 9(b), but it agreed that the 75-1.1 claim—based on the elastic language in the complaint’s 75-1.1 claim—wasn’t exclusively a per se claim. That language encompassed negligent construction, the failure to disclose that negligence, and expressly warranting the house with knowledge of the negligence.
For support, the Court of Appeals pointed to one of its own decisions from 1979 called Rosenthal v. Perkins. That case involved the sale of a home in Raleigh’s Blenheim neighborhood. The buyer alleged that the seller’s listing agent concealed flooding problems from the buyer. The buyer sued for breach of contract, fraud, and violation of section 75-1.1.
The Rosenthal court affirmed the dismissal of the fraud claim because the complaint didn’t allege the requisite intent or reasonable reliance upon any misrepresentation. But the 75-1.1 claim survived. The Rosenthal court emphasized that section 75-1.1’s mandate of “ethical standards of dealings” does not mean that fraud is required to show a 75-1.1 violation.
In Bybee, the Court of Appeals concluded that this principle controlled, and it reversed and remanded the 75-1.1 claim on that basis.
Does this mean that Bybee is a victory for the Voice of Vagueness?
Maybe, but maybe not. For one, the appellate briefing in Bybee left a lot of 75-1.1-specific arguments off the table. Quality Homes likely perceived the 75-1.1 claim to be a per se claim, regardless of the language in the complaint. Had Quality Homes treated the claim as potentially resting on another theory, it could have raised other arguments.
- For example, if the claim was based on a misrepresentation, Quality Homes might have argued that the complaint did not allege reasonable reliance.
- Quality Homes could also have argued that Rule 9(b) applies to 75-1.1 claims based on misrepresentations—a conclusion that federal courts have reached.
- If Quality Homes treated the claim as essentially a claim for breach of warranty, then Quality Homes might have argued that the claim did not allege substantial aggravating circumstances (though Bybee would likely have argued that the complaint alleges fraud in the formation of the contract).
- If Quality Homes treated the claim as based on negligent conduct, then it could have argued that the economic-loss rule applies.
Bybee might have responded to these points by showing that Rosenthal didn’t turn on any of them. These doctrines, however, all post-dated Rosenthal.
Where does this leave us?
Bybee shows that having multiple avenues to prove a 75-1.1 claim can be beneficial if any one avenue has serious roadblocks. This isn’t an endorsement of shotgun pleading, but a reality check that putting all of your 75-1.1 eggs in a single basket can have risks.
But Bybee is probably more instructive about what can happen if a defendant perceives—fairly or not—that the plaintiff has only alleged a single theory of 75-1.1 liability. If you’re going to do that as a defendant, you need to be sure that there’s not some escape hatch—or that you’ve raised alternative bases for dismissal that cover the escape hatch.
Author: Stephen Feldman