Cheryl Lloyd Humphrey Land Inv. Co. v. Resco Prods., Inc.
Cheryl Lloyd Humphrey Land Inv. Co. v. Resco Prods., Inc.
Opinion
*256 Plaintiff appeals the dismissal of its complaint by the trial court. Because the trial court dismissed Plaintiff's complaint under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, our recitation of the facts is based on the allegations in Plaintiff's complaint.
I. Background
A. Factual Background
Plaintiff Cheryl Lloyd Humphrey Land Investment Company, LLC ("Plaintiff") is a limited liability company that owns real estate in Orange County, North Carolina. In the summer of 2013, Plaintiff entered negotiations with Braddock Park Homes, Inc. ("Braddock Park Homes") to sell Braddock Park Homes approximately 45 acres of real property located on Orange Grove and Enoe Mountain Road in Hillsborough, North Carolina. Braddock Park Homes planned to develop a 118 unit townhome subdivision similar in style to the existing Braddock Park townhome development located in Hillsborough. However, the proposed development could not be completed as planned unless the Town of Hillsborough ("the Town") agreed to annex the property and make certain zoning changes.
A series of meetings took place in the fall of 2013 in which the Town and its planning board considered whether to annex and re-zone the property as proposed. Defendants Resco Products, Inc. and Piedmont Minerals Company, Inc. ("Defendants"), owners of real property adjacent to the proposed development, participated in these meetings, opposing approval of the project by the Town. During the course of these proceedings, Defendants made various representations to the Town and *257 its planning board regarding the dangers posed by fly rock, air blasts, and ground vibrations resulting from their operations of a mine on land adjacent to the proposed townhome development and, specifically, blasting conducted at the mine. Despite Defendants' opposition to the project, however, the meetings before the Town and its planning board culminated in the Town approving Braddock Park Homes's request that the property be annexed by the Town, and making the required zoning changes.
After securing approval of the project from the Town, Plaintiff entered into a Purchase and Sale Agreement ("the Agreement") with Braddock Park Homes, the negotiation of which had been ongoing throughout the time of the proceedings before the Town and its planning board in fall of 2013 and early 2014. Defendants were aware of these negotiations.
The Agreement Plaintiff entered into with Braddock Park Homes contemplated two development phases. In Phase I, Braddock Park Homes agreed to purchase approximately 41 acres of real estate from Plaintiff for $85,000 per acre. In Phase II, Braddock Park Homes was granted a "free look" for a specified period of time to purchase an additional 5.5 acres, which was directly adjacent *398 to land owned by Defendants, near the location of their mining operation. Under the Agreement, Braddock Park Homes enjoyed the right to terminate Phase II of the project. Although Phase I was consummated, Braddock Park Homes exercised its right to modify the Agreement on 9 October 2014, terminating Phase II. Braddock Park Homes cited the representations made by Defendants to the Town during the approval process as the reason for terminating Phase II.
B. Procedural History
On 27 October 2017, Plaintiff initiated this action. In its complaint, Plaintiff alleges a single cause of action for tortious interference with prospective economic advantage. Plaintiff's claim for tortious interference with prospective economic advantage is based on representations made by Defendants to the Town and its planning board during the approval process. Plaintiff asserts that these representations were in fact misrepresentations, and that these misrepresentations were made by Defendants maliciously, intentionally, and without justification, proximately resulting in the termination by Braddock Park Homes of Phase II of the Agreement, and injuring Plaintiff in an amount equal to the $85,000 per acre price of Phase I.
In lieu of an answer, Defendants filed a motion to dismiss Plaintiff's complaint for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure.
*258 The motion came on for hearing before the Honorable Michael J. O'Foghludha in Orange County Superior Court on 1 October 2018. The trial court granted Defendants' motion in an order entered the same day. Plaintiff entered timely notice of appeal on 29 October 2018.
II. Analysis
A. Standard of Review
A motion to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure "tests the legal sufficiency of the complaint by presenting the question whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief can be granted under some recognized legal theory."
Cage v. Colonial Bldg. Co., Inc.
,
Our review of the decision by a trial court to grant a motion to dismiss under Rule 12(b)(6) is
de novo
.
Ventriglia v. Deese
,
B. The Noerr-Pennington Doctrine
This appeal first presents the question of the applicability of the Noerr - Pennington doctrine. Defendants contend that the trial court did not err in concluding that Plaintiffs' complaint fails to state a claim upon which relief can be granted because the allegations in Plaintiffs' complaint are insufficient, as a matter of law, under the Noerr - Pennington doctrine. We disagree.
*259 i. Introduction
We note at the outset that this case is not a dispute between competitors in the marketplace, nor does it arise in a context in which concerns about the consolidation of market power detrimentally impacting consumers animate a statutory or regulatory framework under which any claim at issue in this case arises. In the discussion that follows we summarize the origins of the Noerr - Pennington *399 doctrine and its application in North Carolina. We go on to hold that the Noerr - Pennington doctrine does not apply to this case. Accordingly, we reject the argument that the complaint fails to state a claim upon which relief can be granted under the Noerr - Pennington doctrine.
ii. The Origins of the Noerr-Pennington Doctrine
The
Noerr
-
Pennington
doctrine originates from the U.S. Supreme Court's decisions in
Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.
,
However, the Supreme Court in
Noerr
recognized an exception to this immunity where the conduct at issue is a "mere sham," such as where an anti-competitive publicity campaign, while "ostensibly directed toward influencing governmental action, is ... actually nothing more than an attempt to interfere directly with the business relationships of a competitor[.]"
*260
Octane
Fitness, LLC v. ICON Health & Fitness, Inc.
,
iii. The Application of the Noerr-Pennington Doctrine in North Carolina
This Court has addressed the applicability of the
Noerr
-
Pennington
doctrine three times previously. The first was
Reichhold Chemicals, Inc. v. Goel
,
We observed in
Reichhold Chemicals
that the Supreme Court's decision in
Noerr
was based "on the First Amendment right to petition and ... federal antitrust law."
Id. at 148,
We addressed the
Noerr
-
Pennington
doctrine for a second time in
Good Hope Hosp., Inc. v. NC Dep't of Health and Hum. Sevs.
,
*400
Good Hope Hosp.
involved a Certificate of Need ("CON") issued by the North Carolina Department of Health and Human Services ("the Department") to one of the plaintiffs, a hospital, to build a replacement facility roughly three miles from its existing facility.
Id. at 268,
In
Good Hope Hosp.
, we held that the
Noerr
-
Pennington
doctrine applied.
(1) defendant's advocacy before the Department was objectively baseless and merely an attempt to stifle competition; (2) defendant engaged in a pattern of petitions before the Department without regard to the merit of the petitions; or (3) defendant's misrepresentations before the Department deprived the entire CON proceeding of its legitimacy.
Id.
at 276,
Good Hope Hosp. was not this Court's last word on the applicability of the Noerr - Pennington doctrine in North Carolina state courts.
*262
See
North Carolina Farm Bureau Mut. Ins. Co. v. Cully's Motorcross Park, Inc.
,
After a bench trial but before the court entered a judgment, the plaintiff moved for a new trial or, in the alternative, a judgment that it enjoyed
Noerr
-
Pennington
immunity as a defense to the malicious prosecution claim.
Id.
at 215-16,
We rejected the plaintiff's argument on appeal that the trial court erred in denying the motion for new trial or for judgment as a matter of law on the issue of
Noerr
-
Pennington
immunity.
Id.
at 232,
*263 iv. Applicability of the Noerr-Pennington Doctrine to the Present Case
As noted previously, the present case is not a dispute between competitors in the marketplace, nor does it arise in the CON context, where concerns about the consolidation of market power detrimentally impacting consumers inform decisions by the Department to approve or deny a CON. There is no cause of action pleaded by Plaintiff or Defendants for a conspiracy in restraint of trade under
We hold that the
Noerr
-
Pennington
doctrine does not apply to the facts as alleged in Plaintiff's complaint, which we consider true on review of a trial court's decision to grant a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure.
See,
e.g.
,
Hinson
,
*264 C. The Alleged Misrepresentations
The alleged misrepresentations at issue present a question of first impression under North Carolina law; namely, whether misrepresentations about the dangers of an activity North Carolina law regards as ultrahazardous-indeed, *402 the only activity regarded by North Carolina law as ultrahazardous-can be overstated and, in their overstatement, become actionable misrepresentations upon which a cause of action for tortious interference with prospective economic advantage can be predicated. We hold that they can.
North Carolina law has recognized blasting activities as ultrahazardous since the Supreme Court's decision in
Guilford Realty & Ins. Co. v. Blythe Bros. Co.
,
The alleged misrepresentations in this case involve the very dangers North Carolina law guards against in its recognition of blasting as ultrahazardous. However, Defendants, the parties engaged in the blasting activities at issue, cite the ultrahazardous nature of their activities as the
*265
reason Plaintiff's claim cannot succeed, unlike in the more typical case, where the plaintiff will be relieved of proving an element of his or her case - breach of a duty of reasonable care - against a defendant engaged in blasting activities. Citing the numerous decisions by the Supreme Court reiterating the principle that no amount of reasonable care can "eliminate the risk of serious harm" accompanying an ultrahazardous activity such as blasting,
see
Woodson
,
It does not follow that simply because no amount of reasonable care eliminates the risk of serious harm from blasting it is impossible, as a matter of law, to overstate the risks of harm from blasting. The former principle is a proposition stating the rationale for imposing strict liability for injuries resulting from blasting; it does not mean that the dangers inherent in the activity cannot be described - or mis-described. And it does not mean that an injury resulting from such mis-description, as is alleged in this case, is not actionable. Similarly, the principle that no amount of reasonable care eliminates the risk of serious harm from blasting does not imply that detrimental reliance on a misrepresentation of the risk of this ultrahazardous activity could not be the basis for recovery on a fraud claim, or for challenging the validity of a contract, a party's consent to which was procured by fraud. We hold that a claim that has as an element the truthfulness of a representation *403 about an activity North Carolina law regards as ultrahazardous can survive a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure even though the content of the representation relates to an activity regarded by the law as ultrahazardous. Success on Plaintiff's claim for tortious interference with prospective economic advantage thus is not precluded by the content of Defendants' representations to the Town, notwithstanding the rule of strict liability applicable to cases in which injury is alleged to result from an ultrahazardous activity.
D. Tortious Interference with Prospective Economic Advantage
A number of arguments raised by the parties relate to whether the cause of action for tortious interference with prospective economic advantage was properly pleaded by Plaintiff. In a related vein, *266 Defendants argue that facts alleged in the complaint, if established, foreclose the possibility of Plaintiff's success at trial. We disagree, and hold that the claim for tortious interference with prospective economic advantage was properly pleaded, and that the facts alleged in Plaintiff's complaint do not foreclose the possibility of Plaintiff's success at trial.
Generally speaking, "[a]n action for tortious interference with prospective economic advantage is based on conduct by the defendants which prevents the plaintiff[ ] from entering into a contract with a third party."
Walker v. Sloan
,
arises when a party interferes with a business relationship by maliciously inducing a person not to enter into a contract with a third person, which he would have entered into but for the interference if damage proximately ensues, when this interference is done not in the legitimate exercise of the interfering person's rights.
Beverage Sys. of the Carolinas v. Assoc. Beverage Repair et al.
,
In its complaint, Plaintiff alleges as follows:
17. In the summer of 2013, the Plaintiff began negotiations with Braddock Park Homes, Inc., to sell that entity approximately 45 acres of real property located on Orange Grove and Enoe Mountain Road, Hillsborough, North Carolina.
...
29. At the time Defendants made [certain] malicious misrepresentations to the Town of Hillsborough, it was aware that the Plaintiff was negotiating with Braddock Park Homes for the townhome development project.
30. On February 28, 2014, the Plaintiff entered into a Purchase and Sale Agreement with Braddock Park Homes, Inc., whereby the Plaintiff agreed to sell Braddock Park Homes, Inc. approximately 41 acres of real property *267 located in Orange Groves and Enoe Mountain Road, Hillsborough, North Carolina at $85,000 per acre.
31. The February 28, 2014 Purchase and Sale Agreement contained a provision that gave Braddock Home a specified period of time for a "free look" at Phase II (Section B) of the project, which was the 5.5 acres located adjacent to Defendants' Hillsborough Mine, due to the request of the Defendants to deny the approval of that Phase of the project due to the potential threat of damage to health, safety and welfare of future residents of Enoe Mountain Village due to fly rock, nitrogen and structural damage from the operations of the Defendant's Hillsborough Mine.
32. The February 29, 2014 [ sic ] Purchase and Sale Agreement further gave Braddock Park Homes, Inc. the right, subject to Plaintiff's acceptance, to terminate Phase II of the Town Home Project from the contract if this threat of liability was not removed to its satisfaction.
*404 33. On October 9, 2014, Braddock Park Homes, Inc. exercised its right to modify the Purchase and Sale Agreement and terminate Phase II (Parcel B-3) from the Agreement, citing dangers of foundation damage to homes, fly rock from blasting and nitrogen dangers to future inhabitants based on the Defendants misrepresentation to the Town of Hillsborough.
34. The Defendants' malicious misrepresentations to the Town of Hillsborough were without justification in that at the time they were made, the Defendants were required by their September 11, 2013 Permit to take measures to prevent physical hazard to any neighboring dwelling house if their mining excavation came within 300 feet thereof, regardless of the cost of doing so.
35. The Defendants intentionally induced Braddock Park, Inc. not to enter into a contract for the purchase of Phase II of the Town Home Project by making these intentional misrepresentations to the Town of Hillsborough.
36. The Defendants' malicious misrepresentations to the Town of Hillsborough were without justification in that at the time they were made the Defendants had no evidence that the blasting operations from their Hillsborough Mine *268 had endangered persons or neighboring property from fly rock or excessive air blasts or ground violations.
37. The Defendants' interference with the Plaintiff's pending contract with Braddock Park Homes, Inc. was without justification in that the Defendants' motives were not reasonably related to the protection of the legitimate business interest of the Defendants.
38. In making these intentional misrepresentations, the Defendants acted without justification, not in the legitimate exercise of Defendants' own rights, but with design to injure Plaintiff or obtain some advantage at their expense.
39. By virtue of their malicious misrepresentations made to the Town of Hillsborough, the Defendants induced Braddock Park Homes, Inc. not to perform Phase II of the Purchase and Sale Agreement so that the Defendants could purchase the 5.5 acre tract adjacent to their property at a substantially discounted price.
40. Subsequent to the town's approval of the Town Home Project, the Defendant did in fact offer to purchase the 5.5 acre tract located adjacent to its Hillsborough Mine far below the fair market value for the Property.
41. By virtue of their intentional and malicious misrepresentations made to the Town of Hillsborough, the Defendants tortuously interfered with the Plaintiff's economic advantage by inducing Braddock Park Homes, Inc. not to perform Phase 2 of the Town Home Project.
42. But for the intentional misrepresentations of the Defendants, Braddock Park Homes, Inc. would not have modified the February 29, 2014 Purchase and Sale Agreement to eliminate Phase II of the Town Home Project.
43. By virtue of the Defendants' tortious interference with the Plaintiff's prospective economic advantage, the Plaintiff has suffered damages in the amount of $467,755.
Our review of the allegations in Plaintiff's complaint confirms that Plaintiff has alleged (1) the existence of a valid business relationship; (2) interference with that business relationship by an outsider; (3) the absence of a legitimate justification for the alleged interference by the outsider; (4) malice by the outsider in engaging in the alleged *269 interference; (5) causation from the alleged interference resulting in damages to Plaintiff; and (6) damages suffered by Plaintiff to a sum certain, $467,755. These allegations are adequate to make out a cause of action for tortious interference with prospective economic advantage.
Defendants argue that Plaintiff has not adequately pleaded a claim for tortious interference with prospective economic advantage because the alleged interference did not induce Braddock Park Homes to refrain from entering into a new contract with Plaintiff but instead only induced Braddock Park Homes to exercise its modification rights to back out of Phase II of its multi-phase development deal with Plaintiff. Defendants suggest *405 that it would be an expansion of the tort of tortious interference with prospective economic advantage under North Carolina law "to include ... modifications in addition to prevented contracts and contract breaches." We disagree.
The tort of tortious interference with prospective economic advantage under North Carolina law not only embraces instances in which "the defendant ... induce[s] a third party to refrain from entering into a contract with the plaintiff,"
see
MCL
Automotive v. Town of Southern Pines
,
Similarly, the difference between a party to an agreement exercising modification rights in a multi-phase development deal to terminate one part of a multi-part agreement, as is alleged to have occurred in this case, and the party canceling the entire agreement, is not relevant to whether the third party whose interference resulted in the choice to terminate the contract is liable for tortious interference with the prospective economic advantage derived from one or all phases of the multi-part agreement. As we observed in
Reichhold Chemicals
, "[i]nducing a person not to enter into a contract is as much a tort as interference with an
*270
established contract."
III. Conclusion
We reverse and remand the trial court's dismissal of Plaintiff's complaint for failure to state a claim upon which relief can be granted for three reasons. First, the allegations in the complaint do not establish the Noerr - Pennington doctrine applies to this case to bar Plaintiff's claims. Second, the alleged misrepresentations are actionable under North Carolina law even though their content relates to activity regarded by the law as ultrahazardous. Third, the cause of action for tortious interference with prospective economic advantage alleged in Plaintiff's complaint is properly pleaded, and this tort includes terminations of parts of multi-part agreements.
REVERSED AND REMANDED.
Judges STROUD and HAMPSON concur.
We also note that the Town apparently did not credit Defendants' alleged misrepresentations, approving the Braddock Park Homes development project despite their vocal opposition to approval of the project.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.