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February 24, 2015 in 75-1.1 Exemptions by

Do treble damages count toward minimum amounts in controversy?

Today’s post involves the relationship between N.C. Gen. Stat. § 75-1.1 and amounts in controversy—especially the new amount in controversy in the statute that governs assigning cases to the North Carolina Business Court.

Do treble damages under section 75-1.1 count toward these required amounts? Probably so. However, to answer the question, we’ll have to venture outside North Carolina law.

The New Amount-in-Controversy Requirement and the Questions It Raises

Amounts in controversy have taken on more significance since the 2014 amendments to the statute that defines the North Carolina Business Court’s authority to hear “mandatory complex business” cases. N.C. Gen.
Stat. § 7A-45.4
  now requires that cases in several broad categories (including antitrust cases and disputes over trade secrets and other intellectual property) be assigned to the Business Court when the amount in controversy equals or exceeds $5 million. In such a case, in fact, the amended statute requires the court where a case was originally filed to stay the case until the responsible party designates the case to the Business Court. (Cases that fall below the five-million-dollar threshold may, but need not, be assigned to the Business Court.)

The 2014 amendments raise many procedural questions, including this one: If a plaintiff makes a claim that entails treble damages, such as a 75-1.1 claim, what counts toward the five-million-dollar minimum amount in controversy: the trebled damages or only the single damages?

This question might seem a bit theoretical, because section 7A-45.4 says that antitrust disputes that “arise solely” under section 75-1.1 do not qualify for a Business Court designation. However, in antitrust cases in North Carolina state court, 75-1.1 claims often accompany other claims, such as claims under North Carolina’s analogues to sections 1 and 2 of the Sherman Act. Moreover, 75-1.1 claims often arise in disputes over trade secrets and other intellectual property—disputes that section 7A-45.4 covers expressly. Thus, the effect of treble damages on amounts in controversy is a live question indeed.

The Answer

Treble damages are likely to count toward the new five-million-dollar minimum amount in controversy, but it takes work to get to that conclusion.

Section 7A-45.4 says that amounts in controversy under the statute are calculated according to N.C. Gen. Stat. § 7A-243. Section 7A-243 describes how to calculate amounts in controversy to apply the $25,000 minimum that now governs the civil jurisdiction of North Carolina Superior Courts.

Section 7A-243 sets out several amount-in-controversy standards. When a pleading demands a specific sum of money, that sum is taken as the amount in controversy unless the pleading shows—to a legal certainty—that the party cannot recover that amount. The statute also excludes interest and costs from the figures that count toward amounts in controversy.

In contrast, section 7A-243 is silent on a key issue: whether trebled damages and other noncompensatory damages (such as punitive damages) count.

North Carolina decisions don’t add much to the language of section 7A-243. In particular, they don’t say whether courts can take into consideration the trebling of damages when courts apply amount-in-controversy tests.

Given this lack of state-court decisions, North Carolina courts might refer to decisions that apply federal amount-in-controversy requirements. Referring to these decisions would make some sense, because most of the tests in section 7A-243 mirror the federal courts’ tests for measuring amounts in controversy.

Under these federal tests, courts consider the full amount of treble damages when they examine amounts in controversy. For example, a federal court held that a claim for treble damages under a Wisconsin antitrust statute met the amount-in-controversy requirement for diversity jurisdiction. Analogizing to earlier decisions that counted punitive damages toward amounts in controversy, the court held that treble damages should likewise count, unless it is legally certain that a plaintiff cannot recover the treble or punitive damages that it claims.

To be sure, the federal courts’ analogy between treble damages and punitive damages might not hold quite as much water under North Carolina law. The North Carolina Supreme Court has stated more than once that the treble-damages remedy for violations of section 75-1.1 is “both punitive and remedial.” (The court first adopted this description during a period when parties were beginning to challenge section 75-1.1 as unconstitutionally vague. Void-for-vagueness challenges generally apply only to penal statutes.)

In sum, and to use the language of the test that governs amounts in controversy: It is not legally certain that treble damages for violations of section 75-1.1 will not count toward the North Carolina Business Court’s new five-million-dollar jurisdictional test. Indeed, it’s fairly likely that they will count.

Author: George Sanderson