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November 10, 2014 in 75-1.1 Exemptions by

Section 75-1.1 Stars in New Putative Class Action Against UNC

Last Thursday, former UNC football player Michael McAdoo filed a putative class action against UNC-Chapel Hill. This federal complaint has already received extensive publicity. The publicity, though, has overlooked the surprising lead claim in the complaint—a claim for unfair and deceptive practices under N.C. Gen. Stat. § 75-1.1.

McAdoo alleges that when UNC sought to attract football recruits like him, the university promised the recruits a high-quality education. His complaint states that UNC “did not provide the promised legitimate education. Instead, [it] systematically funneled its football student-athletes into a ‘shadow curriculum’ of bogus courses which never met and which were designed for the sole purpose of providing enrollees high grades.”

McAdoo’s Section 75-1.1 Claim

The first count in McAdoo’s complaint alleges violations of section 75-1.1. Specifically, it alleges that UNC “represent[ed] that it would provide a legitimate UNC education to Plaintiff and the Class, when in fact it did not.” McAdoo also alleges a breach of contract, so his 75-1.1 claim seems to involve both an “aggravated breach” theory and a deception theory.

Although McAdoo’s complaint hints at reliance on UNC’s representations, it suggests that the athletes might have problems meeting this requirement. McAdoo alleges that “[a]bsent UNC’s misrepresentation and deceit, Plaintiff and Class members . . . would have been able to pursue opportunities at educational institutions true to their promises of legitimate education” (emphasis added). Notably, the complaint doesn’t allege that these students actually would have attended other colleges.

In any event, the statements of UNC representatives—and the student-athletes’ and their families’ reactions to those statements—are likely to vary widely from one plaintiff to the next. These individualized issues on the 75-1.1 claim are likely to pose grave problems for class certification, if this case gets that far.

Threshold Issues

As significant as the above issues are, McAdoo’s 75-1.1 claim faces an even more fundamental problem: The North Carolina courts have held repeatedly that “the consumer protection and antitrust laws of Chapter 75 of the General Statutes do not create a cause of action against the State, regardless of whether sovereign immunity may exist.”

In Sperry Corp. v. Patterson, the decision that first announced this rule, the North Carolina Court of Appeals wrote that the state and its officials are not “person[s], firm[s] or corporation[s]” that are covered by section 75-16, the remedial statute for section 75-1.1. In later cases, the North Carolina courts have extended Sperry to other officials and to municipalities.

McAdoo is likely to have difficulty overcoming Sperry—especially in a federal court, which is bound to apply state law as the North Carolina Supreme Court would apply it, and which has no option to certify questions of state law to that court.

Indeed, the U.S. District Court for the Middle District of North Carolina—the court where McAdoo is pending—has already come close to extending the Sperry rule to UNC itself. In Board of Governors of the University of North Carolina v. Helpingstine, the university faced a counterclaim under section 75-1.1. The university moved for summary judgment based on two arguments:  (1) that it is not a person, firm, or corporation under section 75-16, and (2) that it has sovereign immunity as an arm of the state. The district court accepted the immunity argument, so it did not reach the 75-16 argument. It granted summary judgment against the 75-1.1 counterclaim.

In short, the section 75-1.1 claim in McAdoo is inventive, but it faces an NFL-level array of defenses.

Law students Kathleen O’Malley, Jamie Lynne Thomas, and Scottie Beth Forbes contributed to this post.

Author: Matt Sawchak