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“In or Affecting Commerce”: The Initial Hurdle to an Unfair and Deceptive Trade Practices Claim

Unfair and deceptive trade practices claims are becoming increasingly popular in North Carolina business and consumer litigation cases. Many people think you can state a cause of action for the same just by alleging that the defendant’s conduct was “unfair” or “deceptive,” but the analysis does not end there. Before the defendant’s actual conduct is analyzed, the plaintiff must first prove that the conduct at issue was “in or affecting commerce.” Even if the conduct is “unfair” or “deceptive,” if it does not meet the initial “in or affecting commerce” requirement, the claim will fail as a matter of law.

Business Activities, Sometimes.

The definition of “in or affecting commerce” “is intended to include all types of business activities” (Prince v. Wright, Jr., 141 N.C. App. 262, 268, 541 S.E.2d 191, 197 (2000)), but does not apply to all wrongs in a business setting. HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 403 S.E.2d 483 (1991). The conduct does not have to induce a sale, but it must “surround or affect a sale.” United Roasters, Inc. v. Colgate-Palmolive Co., 485 F. Supp. 1041, 1045 (E.D.N.C. 1979). The proper inquiry is not whether a contractual relationship existed between the parties, but rather whether the defendant’s allegedly deceptive acts affected commerce. J.M. Westall & Co. v. Windswept View of Asheville, Inc., 97 N.C. App 71, 387 S.E.2d 67 (1990). Generally, the conduct must occur between two business or between a business and a consumer.

An Exchange

The use of the word “trade” interchangeably with the word “commerce” throughout indicates that N.C.G.S. § 75-1.1 (the Unfair and Deceptive Trade Practices Act, or “the Act”) contemplated a narrower definition of commerce which would comprehend an exchange of some type. Johnson v. Pheonix Mut. Life Ins. Co., 300 N.C. 247, 266 S.E.2d 610 (1980). Since the Act, at its core, is designed as a consumer protection law, it would logically follow that some sort of transfer or transaction would be required to support a claim under the Act.

Not Internal Governance

Matters of internal corporate management, such as the manner or selection of and qualifications of directors, do not affect commerce in the context of a claim of unfair and deceptive trade practices. Similarly, disputes among LLC members/managers or corporate shareholders related to their respective companies do not affect commerce.

Not Securities Transactions

No authority exists for imposing a duty upon securities brokers, to oversee the manner in which the funds in question were invested, and securities transactions were not subject to N.C.G.S. § 75-1.1, because such application would create overlapping supervision, enforcement, and liability in an area of law that was already pervasively regulated by state and federal statutes and agencies. Sterner v. Penn, 159 N.C. App. 626, 583 S.E.2d 670 (2003).

While it can be difficult to assess the merits of your own case, and the applicability of a complex statute like N.C.G.S. § 75-1.1 to your damages, it’s always best to seek competent business litigation representation prior to moving forward with a lawsuit to protect your interests.