Marshall v. Miller
| Decision Date | 07 April 1981 |
| Docket Number | No. 72,72 |
| Citation | 302 N.C. 539,276 S.E.2d 397 |
| Court | North Carolina Supreme Court |
| Parties | John E. MARSHALL, Marna J. Marshall, Devon G. Bell, Rhonda T. Rogers, Edward L. Howell, Amon G. Stewart, Betty J. Stewart and G. C. Brown v. Ernest W. MILLER and Wife et al. |
Atty. Gen. Rufus L. Edmisten by Sp. Deputy Atty. Gen. John R. B. Matthis, Alan S. Hirsch and Asst. Attys. Gen. James C. Gulick, amicus curiae, for the State.
Edwards, Greeson, Weeks & Turner by Joseph E. Turner, Greensboro, for plaintiffs-appellants.
Hatfield, Hatfield & Kinlaw by John B. Hatfield, Jr. and Kathryn K. Hatfield, Greensboro, for defendants-appellees.
Plaintiffs, residents of a mobile home park in Greensboro, North Carolina, bring this action seeking damages from defendants, owners and managers of the park. Each of the plaintiffs seeks damages for certain misrepresentations allegedly made by defendants concerning services which defendants would provide to plaintiffs, lessees of lots in the mobile home park. Plaintiffs offered evidence, and the jury found as fact, that defendants had led plaintiffs to believe that they would be furnished the following services or amenities by the mobile home park: two playgrounds, one basketball court, one swimming pool, adequate garbage facilities and pickup, complete yard care, paved and lighted streets and common facilities. The jury further found that, during the period between 7 October 1974 and the filing of this action on 7 October 1977, defendants had failed to provide any of those facilities or services. Based on these findings of fact by the jury, Judge Alexander determined as a matter of law that certain of defendants' misrepresentations constituted unfair or deceptive acts or practices in or affecting commerce within the meaning of G.S. 75-1.1. The procedure to be followed by trial courts, that the jury find facts upon which the trial judge bases conclusions of law as to whether a practice is proscribed by G.S. 75-1.1, was outlined by this Court in Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 (1975). Judge Alexander, following this procedure, determined that the defendants had engaged in unfair and deceptive practices and damages assessed by the jury were trebled pursuant to G.S. 75-16.
The Court of Appeals found error in several of the issues submitted to the jury. Our review is limited to Issue No. 4, which was as follows:
Did the defendant, after October 7, 1974, without the intent and/or the ability to perform lead the plaintiffs or any of them to believe that he would provide the following equipped facilities for their use, reasonable wear and tear accepted (sic)?
ANSWER: Yes
ANSWER: Yes
ANSWER: Yes
ANSWER: No
ANSWER: Yes
ANSWER: Yes
ANSWER: Yes
ANSWER: Yes
ANSWER: Yes
The Court of Appeals deemed that statement of the issue erroneous because defendants could be adjudged to have committed unfair or deceptive acts without a showing that they acted in bad faith.
In determining that bad faith was an essential element of plaintiffs' claim, the Court of Appeals recognized that G.S. 75-1.1(a) closely follows the portion of Section 5 of the Federal Trade Commission Act codified at 15 U.S.C. § 45(a) (1) (hereinafter FTC Act). In fact, the language of our statute is identical to that section of the FTC Act. Both acts further provide for government enforcement, our state Act through actions brought by the Attorney General to obtain mandatory orders. (G.S. 75-14). The court may impose civil penalties in suits instituted by the Attorney General in which the defendant is found to have violated G.S. 75-1.1 and the G.S. 75-15.2. Unlike our own statutory scheme, however, the FTC Act confers no private right of action upon an injured party. Holloway v. Bristol-Myers Corp., 485 F.2d 986 (D.C.Cir.1973); Carlson v. Coca Cola Co., 483 F.2d 279 (9th Cir. 1973). Rather, the provisions for private enforcement found in our statute are more closely analogous to Section 4 of the Clayton Act, which provides for private suits with treble damage recovery for violation of federal antitrust laws. 15 U.S.C. § 15 (1976).
It is established by earlier decisions of this Court that federal decisions interpreting the FTC Act may be used as guidance in determining the scope and meaning of G.S. 75-1.1. Johnson v. Insurance Co., 300 N.C. 247, 266 S.E.2d 610 (1980); Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342 (1975). Federal courts have uniformly held that the FTC may issue a cease and desist order to enforce Section 5 where an act or practice has a capacity to deceive, regardless of the presence or absence of good faith on the part of the offending party. Chrysler Corp. v. F.T.C., 561 F.2d 357, 363 (D.C.Cir.1977); Doherty, Clifford, Steers & Shenfield, Inc. v. F. T. C., 392 F.2d 921 (6th Cir. 1968); Montgomery Ward & Co. v. F. T. C., 379 F.2d 666 (7th Cir. 1967). Although recognizing the precedential value of FTC decisions the Court of Appeals held that, because our state Act provides for a private action, federal decisions to the effect that bad faith was not necessary to show a violation of the FTC Act were not dispositive. Good faith, said the Court of Appeals, may be irrelevant where the Attorney General seeks injunctive relief under G.S. 75-14, a remedy analogous to an FTC cease and desist order, but it should be relevant where a party is potentially liable in a private action for treble damages under G.S. 75-16. Our task is to determine whether the intent of the Legislature will be more fully served if the addition of a private action under our statute brings with it a concomitant requirement that a private party must show bad faith in order to recover treble damages. In resolving that question, we are guided by two other questions: (1) what was this State's unfair and deceptive trade practice act intended to accomplish, and (2) how can the purpose for which the law was passed be most fully realized.
Between the 1960's and the present, North Carolina was one of forty-nine states to adopt consumer protection legislation designed to parallel and supplement the FTC Act. Leaffer and Lipson, Consumer Actions Against Unfair or Deceptive Acts or Practices: The Private Uses of Federal Trade Commission Jurisprudence, 48 Geo.Wash.L.Rev. 521 (1980). The statute enacted in North Carolina in fact had its genesis in the first of several alternative forms suggested to the states by the Federal Trade Commission and the Committee on Suggested State Legislation of the Council of State Governments. Council of State Governments, Suggested State Legislation (Vol. XXIX 1970); Lovett, State Deceptive Trade Practices Legislation, 46 Tulane L.Rev. 724, 732 (1972). The Commission encouraged state-level legislation because it recognized that enforcement of the FTC Act's broad Section 5 proscription against "unfair or deceptive acts or practices" could not possibly be accomplished without extra-agency assistance. L. Richie & H. I. Saferstein, Private Actions for Consumer Injury Under State Law The Role of the Federal Trade Commission, in FTC Trade Regulation Advertising, Rulemaking and New Consumer Protection 415 (PLI 1979). In enacting G.S. 75-16 and G.S. 75-16.1, our Legislature intended to establish an effective private cause of action for aggrieved consumers in this State.
Such legislation was needed because common law remedies had proved often ineffective. Tort actions for deceit in cases of misrepresentation involved proof of scienter as an essential element and were subject to the defense of "puffing." Comment, Maryland's Consumer Protection Act: A Private Cause of Action for Unfair or Deceptive Trade Practices, 38 Md.L.Rev. 733, 734 (1979). Proof of actionable fraud involved a heavy burden of proof, including a showing of intent to deceive. Ragsdale v. Kennedy, 286 N.C. 130, 209 S.E.2d 494 (1974). Actions alleging breach of express and implied warranties in contract also entailed burdensome elements of proof. See Langer & Ormstedt, The Connecticut Unfair Trade Practices Act, 54 Conn.B.J. 388 (1980). A contract action for recision or restitution might be impeded by the parol evidence rule where a form contract disclaimed oral misrepresentations made in the course of a sale. Use of a product after discovery of a defect or misrepresentation might constitute an affirmance of the contract. Any delay in notifying a seller of an intention to rescind might foreclose an action for recision. Richie and Saferstein, supra at 416-17. Against this background, and with the federal act as guidance, North Carolina and all but one of her sister states have adopted unfair and deceptive trade practices statutes. Richie & Saferstein, supra at 441.
In its opinion, the Court of Appeals sought to draw a distinction between actions brought by the Attorney General and private actions brought by aggrieved consumers. Careful examination of the applicable precedent in this jurisdiction and our interpretation of the intent of the Legislature leads us to conclude that, in determining whether a violation of G.S. 75-1.1 has occurred, the question of whether the defendant acted in bad faith is not pertinent. The character of the plaintiff, i. e. whether public or private, should not alter the scope of the remedy under this statute.
As authority for finding bad faith to be an essential element in a private cause of action under G.S. 75-1.1, Judge Parker cited Trust Co. v. Smith, 44 N.C.App. 685, 262 S.E.2d 646 (1980) and United Roasters Inc. v. Colgate Palmolive Co., 485 F.Supp. 1049 (E.D.N.C.1980). In Smith, defendants, defaulting obligors on...
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