MURPHY v. ALLSTATE CORPORATION et al
Filing
23
MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE that Defendants' Motion to Dismiss Counts One and Two of Plaintiff's First Amended Complaint and to Dismiss Defendant Allstate Corporation as a Party to this Action (D ocket Entry [11}) be GRANTED; however, as Plaintiff's claim for wrongful termination against public policy remains against Allstate Insurance and Allstate Financial, the Clerk should schedule an initial pre-trial conference. Signed by MAG/JUDGE L. PATRICK AULD on 9/27/2011. (Lapira, Sharon)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
OCTAVIUS A. MURPHY,
Plaintiff,
v.
ALLSTATE CORPORATION, ALLSTATE
INSURANCE COMPANY, and ALLSTATE
FINANCIAL SERVICES, LLC,
Defendants.
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1:09CV00915
MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This
matter
comes
before
the
undersigned
United
States
Magistrate Judge, pursuant to this Court’s Amended Standing Order
30, for a recommended ruling on Defendants’ Motion to Dismiss
Counts One and Two of Plaintiff’s First Amended Complaint and to
Dismiss Defendant Allstate Corporation as a Party to this Action.
(Docket Entry 11.)
For the reasons that follow, the Court should
grant Defendants’ motion to dismiss.
Procedural Background
Plaintiff filed a Complaint against Defendants The Allstate
Corporation (“Allstate Corporation”),1 Allstate Insurance Company
(“Allstate
Insurance”)
and
Allstate
Financial
Services,
LLC
(“Allstate Financial”) in the General Court of Justice, Superior
Court Division in and for Forsyth County, North Carolina, alleging
1
Plaintiff’s Complaint names Allstate Corporation as a defendant. (See
Docket Entry 8-2 at 4.) Defendants’ motion to dismiss notes that the correct
party name is The Allstate Corporation. (See Docket Entry 11 at 1.)
(1) abuse of process (Docket Entry 5, ¶¶ 52-59); (2) unfair and
deceptive
trade
practices
(id.,
¶¶
60-68);
and
(3)
termination against public policy (id., ¶¶ 69-82).
thereafter
filed
a
First
Amended
Complaint
in
wrongful
Plaintiff
that
action
consisting of the same claims for relief. (Docket Entry 8-2 at 2240.)
Defendants removed the case to this Court based on diversity
of citizenship.
(Docket Entry 8, ¶ 5; see also Docket Entry 1.)
This action now comes before the Court on Defendants’ motion to
dismiss, through which Defendants seek to dismiss: (1) Allstate
Corporation as a party to the lawsuit; (2) Plaintiff’s claim for
abuse
of
process;
and
(3)
deceptive trade practices.
Plaintiff’s
claim
for
unfair
and
(Docket Entry 11.)
Factual Background
The First Amended Complaint alleges the following facts:
Plaintiff, a black male, worked for Allstate Insurance for
over eighteen years in various positions.
22.)
Most
recently,
Plaintiff
held
the
(Docket Entry 8-2 at
position
of
Market
Distribution Leader, the functional title for a district manager.
(Id. at 24.) In this role, Plaintiff served seventeen counties and
supervised fifty-one agents in central North Carolina.
(Id.)
In
order to maintain his position with Allstate Insurance, Plaintiff
was required to maintain his National Association of Securities
-2-
Dealers, Inc. (“NASD”) affiliation with Allstate Financial.
(Id.
at 31).2
On
or
about
April
2006,
Chinedu
“Steven”
Onyeberechi
(“Onyeberechi”), a black male, was appointed as an exclusive agent
for Allstate Financial.
(Id. at 25.)
Plaintiff became the
Designated Supervisory Principal for Onyeberechi.
Williamson
(“Williamson”)
Consultant.
(Id.)
In
was
her
named
role,
(Id.)
Doris
New
Agency
to
provide
Onyeberechi’s
Williamson
was
assistance with the start up of Onyeberechi’s new Allstate agency.
(Id.)
New Agency Consultants have the most direct supervisory and
advisory responsibilities over agents during their first twelve
months.
(Id.)
Designated
Supervisory
relationship
exclusive
supervisory
In accordance with company policy discouraging the
between
agent,
Principal
the
New
Plaintiff
control
over
relevant time period.
from
with
the
new
Agency
Consultant
and
the
allowed
Williamson
to
maintain
Onyeberechi’s
(Id.
interfering
at 25-26.)
activities
during
the
Williamson reported
directly to Lee Herring (“Herring”) on Onyeberechi’s activities and
her concerns related to those activities.
received copies of these reports.
(Id. at 26.)
Plaintiff
(Id.)
Shortly after Onyeberechi’s hiring, concerns arose regarding
Onyeberechi’s personal website and his residential rental property
2
The NASD is now the Financial Industry Regulatory Authority (“FINRA”).
(See Docket Entry 8-2 at 9); see also Newman v. First Montauk Fin. Corp., No.
7:08-CV-116-D, 2010 WL 2933281, at *2 n.1 (E.D.N.C. July 23, 2010) (unpublished)
(“In July 2007, NASD and the New York Stock Exchange (“NYSE”) consolidated their
member-regulation operations into one self-regulatory organization, the Financial
Industry Regulatory Authority (“FINRA”).”)
-3-
business
-
Millennium
Properties”).
information
(Id.)
Properties
&
Investments
(“Millennium
Onyeberechi’s personal website contained
regarding
Onyeberechi’s
professional
including as an exclusive agent for Allstate Financial.
services,
(Id.)
Williamson consulted with Allstate Financial’s compliance
division regarding Onyeberechi’s website.
(Id.)
The compliance
division informed Williamson that Onyeberechi’s website did not
comply with Allstate Financial’s standards, as Allstate Financial
does
not
permit
agents
to
mention
securities
products
advertising until the agents are licensed to sell them.
in
(Id.)
Williamson expressed her concern to Onyeberechi regarding the
website’s mention of securities products in a May 15, 2005, email.
(Id.)
Subsequently, Herring and LaBertha Tomlin (“Tomlin”), the
Regional Supervisory Principal, supervised Williamson’s work with
Onyeberechi to correct Onyeberechi’s website over the next month.
(Id.)3
Plaintiff was copied on these emails.
(Id.)
On June 27, 2006, Vivian Smith (“Smith”), a Field Compliance
Principal for Allstate Financial, informed Onyeberechi, via email,
that she had reviewed Onyeberechi’s website, that it did not comply
with Allstate Financial’s policies, and that Onyeberchi had to make
changes to the website. (Id.) Again, Plaintiff was copied on this
email.
(Id.)
On June 28, 2006, and continuing through the beginning of
August 2006, Tomlin raised additional concerns to Onyeberechi
3
Plaintiff’s First Amended Complaint does not identify which Defendant
employed Williamson, Herring and Tomlin. (See Docket Entry 8-2 at 22-40.)
-4-
regarding Onyeberechi’s personal website and Onyeberechi’s outside
business activity.
(Id.)
Specifically, Tomlin was concerned that
Onyeberechi planned to spend fifty percent of his time operating
Millennium Properties. (Id. at 26-27.) Tomlin wrote to Plaintiff,
explaining that she could prohibit Onyeberechi’s outside business
activities, but that she wanted Plaintiff’s thoughts before doing
so.
(Id.)
After Plaintiff assured Tomlin that he had reviewed
Onyeberechi’s business activities before Onyeberechi joined the
company and that he was comfortable with Onyeberechi running the
rental business, Tomlin decided not to forbid Onyeberechi from
continuing to run Millennium Properties.
(Id. at 27.)
Allstate
Insurance and Allstate Financial had no policy in place detailing
the requirements for an outside business activity that would have
informed an agent or employee about what types of outside business
activity were acceptable.
(Id.)
The applicable NASD standard
stated only that no registered agent could be employed by another
person outside his own firm without prompt written notice to the
employing firm.
In
July
(Id.)
2006,
Tomlin
expressed
her
concerns
regarding
Onyeberechi’s personal website in a series of emails and other
communications between Onyeberechi, Plaintiff and other Allstate
Insurance and Allstate Financial employees, including Herring,
Williamson and Smith.
(Id. at 28.)
Herring requested Plaintiff’s
involvement in bringing Onyeberechi’s activities into compliance
with Allstate Financial’s regulations.
(Id.)
Also in July 2006,
Tomlin contacted Plaintiff via conference call to notify him that
-5-
he was responsible for supervising Onyeberechi’s outside business
activities and helping Onyeberechi alter his personal website to
comply with Allstate Financial’s regulations.
worked
with
Onyeberechi
to
revise
(Id.)
Onyeberechi’s
Plaintiff
website
to
accommodate all changes requested by Smith, Tomlin and others.
(Id.)
Plaintiff wrote to Tomlin on August 2, 2006, to report the
changes performed on Onyeberechi’s website, and further explained
that Millennium Properties was listed on Onyeberechi’s website as
an affiliate partner not associated with Allstate.
(Id.)
On
August 4, 2006, Tomlin announced via email that she was prohibiting
Onyeberechi from running Millennium Properties based on her belief
that Plaintiff had earlier reported that Onyeberechi’s website
referred to Millennium Properties only, but Plaintiff was now
reporting
that
Onyeberechi’s
Properties with Allstate.
website
(Id.)
associated
Millennium
Tomlin stated that she was going
to prohibit Onyeberechi from running Millennium Properties until
she had more detailed information regarding Onyeberechi’s website.
(Id.)
On August 7, 2006, Plaintiff replied to Tomlin explaining that
Onyeberechi’s mistake with the personal website was Onyeberechi’s
attempt to associate Millennium Properties with Allstate.
(Id. at
29.)
he
Plaintiff
further
noted
that
for
two
months
and
Onyeberechi worked to correct the website and that the website now
complied with Allstate Financial’s regulations.
then
stated
that
he
was
Onyeberechi’s
-6-
(Id.)
Designated
Plaintiff
Supervisory
Principal
and
he
believed
that
any
decision
to
prohibit
Onyeberechi’s outside business activities was premature since there
was no articulated problem with the website.
(Id.)
Plaintiff
requested that, if Tomlin had further concerns with Onyeberechi’s
website or outside business activities, Tomlin specify the activity
that seemed questionable or any other compliance issue.
Plaintiff
promised
to
answer
any
questions
Tomlin
(Id.)
asked
him
regarding Onyeberechi’s website or outside business activities.
(Id.)
Tomlin replied on August 8, 2006, and promised to work with
Allstate Financial’s compliance division on the website and stated
that she would not prohibit Onyeberechi’s outside business activity
without
the
compliance
division’s
further
direction.
(Id.)
Plaintiff did not at any point possess the ultimate authority to
approve Onyeberechi’s outside business activity.
this authority rested with Tomlin.
(Id.)
Rather,
(Id. at 30.)
On August 25, 2006, Allstate Financial filed a Form U-5
Uniform Termination Notice for Securities Industry Registration
with the NASD with respect to Onyeberechi (“Form U-5”). (Id.) The
filing of the Form U-5 terminated Onyeberechi’s affiliation with
Allstate Financial.
(Id.)
Allstate Financial listed the sole
reason for termination as: “Providing inaccurate response on the
firm’s outside business activity questionnaire, and additional
information found by the firm did not meet firm’s outside business
activity approved policies.”
inaccurate
responses
to
(Id.)
the
-7-
Onyeberechi did not provide
outside
business
activities
questionnaire or otherwise provide inaccurate information in his
capacity as an exclusive agent.
(Id.)
Defendants suspended Plaintiff, alleging that he failed to
properly supervise Onyeberechi’s outside business activity.
(Id.)
Allstate Financial’s Chief Compliance Officer, Phillip Hoeh, filed
a Form U-5 with respect to Plaintiff with the NASD.
(Id. at 31.)
Said form listed the reason for terminating the affiliation between
Allstate Financial and Plaintiff as: “Loss of confidence resulting
from erroneous approval of a representative’s outside business
activity. [sic] contrary to firm’s standards.”
30,
2006,
Plaintiff’s
position
with
(Id.)
Allstate
On October
Insurance
was
terminated for failure to maintain his affiliation with Allstate
Financial.
(Id. at 32.)
Plaintiff’s termination came sixteen
months before he qualified for direct investment of his retirement
funds.
(Id.)
Plaintiff
disciplined
outside
in
and
Onyeberechi
connection
business
with
activities.
were
the
only
the
approval
(Id.)
No
two
of
Form
individuals
Onyeberechi’s
U-5
or
other
disclosures of incompetence with the NASD were filed against any
other
parties
authority
Properties.
to
involved,
prohibit
including
Tomlin,
Onyeberechi’s
who
operation
had
of
ultimate
Millennium
(Id. at 31.)
Legal Standard
“[T]he highest court of the state is the final arbiter of what
is state law.
When it has spoken, its pronouncement is to be
accepted by federal courts as defining state law unless it has
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later given clear and persuasive indication that its pronouncement
will be modified, limited or restricted.”
Tel. Co., 311 U.S. 223, 236 (1940).
West v. American Tel. &
However, “[a] state is not
without law save as its highest court has declared it.
There are
many rules of decision commonly accepted and acted upon by the bar
and inferior courts which are nevertheless laws of the state
although the highest court of the state has never passed upon
them.”
Id.
Accordingly, “it is the duty of [a federal court
facing a question of state law] to ascertain from all the available
data what the state law is and apply it . . . .”
Id. at 237.
“Where an intermediate appellate state court rests its considered
judgment upon the rule of law which it announces, that is a datum
for ascertaining state law which is not to be disregarded by a
federal court unless it is convinced by other persuasive data that
the highest court of the state would decide otherwise.”
Id.
Although the Court looks to state law in analyzing Plaintiff’s
substantive claims, “pleading standards are a matter of procedural
law governed in this Court by federal, not state, law.”
McFadyen
v. Duke Univ., ___ F. Supp. 2d ___, ___, 2011 WL 1260207, at *22
(M.D.N.C. 2011) (Beaty, C.J.) (citing Jackson v. Mecklenburg Cnty.,
N.C., No. 3:07-cv-218, 2008 WL 2982468, at *2 (W.D.N.C. July 30,
2008) (unpublished) (“North Carolina substantive law applies to the
elements of Plaintiff’s state law claims, but the Federal Rules of
Civil Procedure govern procedural law and North Carolina pleading
requirements, so far as they are concerned with the degree of
details to be alleged, are irrelevant in federal court even as to
-9-
claims arising under state law.”) (internal quotation marks and
citations
omitted)).
Under
the
applicable
federal
pleading
standard, a complaint fails to state a claim if it does not
“contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’”
Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal citations omitted)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
This standard “demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.”
Id.
In other words, “the tenet
that a court must accept as true all of the allegations contained
in a complaint is inapplicable to legal conclusions.
Threadbare
recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”
Id.
Discussion
I.
Plaintiff’s Claims against Allstate Corporation
Plaintiff contends that Allstate Corporation is liable for
Plaintiff’s claims of abuse of process, unfair and deceptive trade
practices and wrongful termination due to Allstate Corporation’s
ratification of the actions of Allstate Insurance and Allstate
Financial.
(See Docket Entry 8-2 at 23.)
A. Standard
North Carolina follows the instrumentality rule for holding a
parent company liable for the actions of its subsidiaries.
Glenn
v. Wagner, 313 N.C. 450, 455, 329 S.E.2d 326, 330 (1985).
Under
this standard, a parent corporation may be held liable for torts of
its subsidiaries when (1) the parent corporation has “complete
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domination” over the “policy and business practice in respect to
the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of
its own”, (2) the parent used this control to commit a wrong in
contravention of plaintiff’s legal rights, and (3) the wrong
proximately caused plaintiff’s injury or loss.
Id.
B. Application
Plaintiff’s
actions
and
First
Amended
misconduct
Complaint
undertaken
by
alleges
that
defendants
“[a]ll
[Allstate
Insurance] or [Allstate Financial], as [Allstate Corporation’s]
subsidiaries, were ratified and endorsed by defendant [Allstate
Corporation] as the parent company, in that the conduct described
herein by officers, directors, employees, agents and servants was
in accordance with [Allstate Corporation’s] method of business and
course of dealings, notwithstanding the applicable law.”
Docket Entry 8-2 at 23.)
(See
Plaintiff’s First Amended Complaint
contains no further allegations regarding Allstate Corporation’s
role in the incident in question.
(See id. at 22-40.)
Defendant
contends that “[s]uch bare legal conclusions are insufficient as a
matter of law and, therefore, warrant the dismissal of Allstate
[Corporation] as a party to this action.”
¶ 5.)
(See Docket Entry 11,
This position has merit.
Plaintiff’s First Amended Complaint is deficient on two
fronts: (1) Plaintiff offered no factual assertions to support the
contention that Allstate Corporation “ratified” the actions of
Allstate Financial or Allstate Insurance (see Docket Entry 8-2 at
-11-
23); and (2) even if the Court accepted Plaintiff’s conclusory
allegations as true, mere ratification would fall short of the
“complete domination” required by Glenn, 313 N.C. at 455, 329
S.E.2d at 330.
The First Amended Complaint thus lacks “sufficient
factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face,’”
Iqbal, 129 S. Ct. at 1949 (internal
citations omitted) (emphasis added) (quoting Twombly, 550 U.S. at
570). Accordingly, Plaintiff’s claims against Allstate Corporation
should be dismissed.
II.
Plaintiff’s Claim for Abuse of Process
Plaintiff contends that Allstate Financial’s filing of an
allegedly defamatory Form U-5 in order to terminate Plaintiff’s
NASD
affiliation
with
Allstate
Financial
and
thereby
provide
grounds for Allstate Insurance to terminate Plaintiff’s employment
constitutes common law abuse of process.
(See Docket Entry 8-2 at
32-34.)
A. Standard
“Abuse of process is the misapplication of the civil or
criminal process to accomplish some purpose not warranted or
commanded by the process.”
Pinewood Homes, Inc. v. Harris, 184
N.C. App. 597, 602, 646 S.E.26 826, 831 (2007) (quoting David A.
Logan & Wayne A. Logan, North Carolina Torts § 19.40 at 432
(1996)); see also Fowle v. Fowle, 263 N.C. 724, 728, 140 S.E.2d
398, 401 (1965) (“[A]buse of process is the misuse of the legal
process for an ulterior purpose.”); Barnette v. Woody, 242 N.C.
424, 431, 88 S.E.2d 223, 227 (1955) (“Abuse of process consists in
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the malicious misuse or perversion of a civil or criminal writ to
accomplish some purpose not warranted or commanded by the writ.”).
“It consists in the malicious misuse or misapplication of that
process after issuance to accomplish some purpose not warranted or
commanded by the writ.”
Fowle, 263 N.C. at 728, 140 S.E.2d at 401
(citation omitted) (emphasis in original). Thus, “abuse of process
‘requires both an ulterior motive and an act in the use of the
legal
process
proceeding.’”
not
proper
in
the
regular
prosecution
of
the
Stanback v. Stanback, 291 N.C. 181, 201, 254 S.E.2d
611, 624 (1979) (quoting R. Byrd, Malicious Prosecution in North
Carolina, 47 N.C.L. Rev. 285, 288 (1969)).
B. Application
Plaintiff’s claim for abuse of process fails to state a claim
for which relief can be granted under Fed. R. Civ. P. 12(b)(6) as
Plaintiff has not alleged any legal process which Defendants may
have abused.
Plaintiff contends that the filing of the Form U-5
with the NASD constitutes sufficient process. (See Docket Entry 18
at 12.) Specifically, while Plaintiff concedes that NASD is a nongovernmental entity, he argues that NASD’s “quasi-judicial” role in
securities regulation sufficiently qualifies its actions to support
an abuse of process claim. (Id.) However, Plaintiff fails to cite
any case law supporting the assertion that an abuse of process
claim in North Carolina would reach matters outside traditional
civil and criminal proceedings.
Independent
research,
(See Docket Entry 18 at 12-13.)
likewise,
-13-
has
failed
to
reveal
such
precedent.4
Despite
Plaintiff’s
contention
that,
“[u]nless
plaintiff is permitted to prosecute an abuse of process claim for
knowing and intentional misuse of the [Form] U-5 by defendants on
the basis that the [Form] U-5 is process, defendants and all other
NASD-registered firms will . . . have a public forum in which to
publically discredit their former employees without penalty” (see
Docket Entry 13 at 18), the Court should not expand this cause of
action beyond the bounds set by the North Carolina courts.
See
Myers v. Sessoms & Rogers, P.A., ___ F. Supp. 2d ___, ___, 2011 WL
683914, at *3 (E.D.N.C. 2011) (“Federal courts applying state laws
should
not
create
or
expand
a
state’s
common
law
or
public
policy.”) (citing Time Warner Entm’t-Advance/Newhouse P’ship v.
4
Moreover, authority from other jurisdictions supports the contrary
conclusion. See, e.g., Ioppolo v. Rumana, No. 06-193-JJB, 2011 WL 3568863, at
*5 (M.D. La. Aug. 15, 2011) (unpublished) (finding proceedings with American
Association of Neurosurgeons not “process” for abuse of process claim as
“Louisiana jurisprudence suggests that ‘process’ (as that term is contemplated
in an abuse of process claim) comprises only legal process and/or court
process”); Tom v. GMAC Mortgage, LLC, No. 10-00653 SOM/BMK, 2011 WL 2133705, at
*10 (D. Haw. May 25, 2011) (unpublished) (“The nonjudicial foreclosure process
does not involve ‘legal process’ because it occurs outside of the range of
procedures incident to litigation, and instead involves actions unrelated to
court authority.” (internal quotation marks and citations omitted)); Yanik v.
Countrywide Home Loans, Inc., No. CV 10-6268 CAS (RZx), 2010 WL 4256312, at *6
(C.D. Cal. Oct. 18, 2010) (unpublished) (“Plaintiff fails to state a claim for
abuse of process because there is no allegation that any defendant misused a
court proceeding. Although it is not entirely clear from plaintiff’s complaint,
the allegation appears to be that defendants initiated a non-judicial
foreclosure.”). Even courts that have adopted “broad” views of process for abuse
of process claims seemingly fail to extend the tort as far as Plaintiff asks in
the instant case. See, e.g., Reichart v. City of New Haven, 674 N.E.2d 27, 31
(Ind. Ct. App. 1996) (“‘Process’ should not be ‘limited to the strict sense of
the term, but [should be] broadly interpreted to encompass the entire range of
procedures incident to litigation . . . . This broad reach of the ‘abuse of
process tort can be explained historically, since the tort evolved as a ‘catchall’ category to cover improper uses of the judicial machinery . . . .’”)
(emphasis added) (quoting Groen v. Elkins, 551 N.E.2d 876, 878 n.3 (Ind. Ct. App.
1990), and Barquis v. Merchants Collection Assn., 496 P.2d 817, 824 (Cal. 1972)).
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Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314-15 (4th
Cir. 2007)).
Accordingly, Plaintiff’s claim for abuse of process
should be dismissed.5
III. Plaintiff’s Claim for Unfair or Deceptive Trade Practices
Plaintiff
contends
that
his
termination
from
Allstate
Insurance, which arose from Allstate Financial’s filing of the
allegedly
defamatory
Form
U-5
that
resulted
in
his
loss
of
affiliation with Allstate Financial, violated North Carolina’s
Unfair and Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat.
§ 75-1.1.
(See Docket Entry 8-2 at 34-35.)
A. Standard
“[A UDTPA] claim under [North Carolina law] requires proof of
three elements: (1) an unfair or deceptive act or practice, or an
unfair method of competition, (2) in or affecting commerce, (3)
proximately causing actual injury to plaintiff or plaintiff’s
business.”
AG Sys., Inc. v. United Decorative Plastics Corp., 55
F.3d 970, 974 (4th Cir. 1995) (internal brackets and quotation
marks omitted); accord Dalton v. Camp, 353 N.C. 647, 656, 548
S.E.2d 704, 711 (2001).
“A practice is unfair if it is unethical
or unscrupulous, and it is deceptive if it has a tendency to
deceive.”
Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 148
5
Defendants have also argued that Plaintiff’s claim for abuse of process
should fail because either (1) Plaintiff failed to allege that Defendants took
any action after the filing of the Form U-5 (see Docket Entry 21 at 3-4); or (2)
the action accrued at the time of filing of the Form U-5 and thus is barred by
the applicable three-year statute of limitations (see id. at 4-5). A finding
that the filing of the Form U-5 does not constitute legal process for purposes
of an abuse of process claim renders Defendants’ alternate arguments moot.
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(4th Cir. 1987) (citing Marshall v. Miller, 302 N.C. 539, 276
S.E.2d 397, 403 (1981), and Overstreet v. Brookland, Inc., 52 N.C.
App. 444, 452-53, 279 S.E.2d 1, 7 (1981)).
“The determination of
whether an act or practice is an unfair or deceptive practice that
violates N.C. Gen. Stat. § 75-1.1 is a question of law for the
court.” Gray v. N.C. Ins. Underwriting Ass’n, 352 N.C. 61, 68, 529
S.E.2d 676, 681 (2000) (internal citations omitted).
“Proof of unfair or deceptive trade practices entitles a
plaintiff to treble damages, and thus constitutes a boilerplate
claim in most every complaint based on a commercial or consumer
transaction in North Carolina.”
Allied Distrib., Inc. v. Latrobe
Brewing Co., 847 F. Supp. 376, 379 (E.D.N.C. 1993).
Accordingly,
“[t]he North Carolina courts have warned that application of this
statute is not to be unfettered.
Some type of egregious or
aggravating circumstance must be alleged and proved before the
statute’s provisions may be applied.”
Id. (internal quotation
marks and citations omitted).
In particular, under North Carolina law, a presumption exists
against claims for unfair and deceptive trade practices that arise
from employer-employee relationships. Dalton, 353 N.C. at 658, 548
S.E.2d at 711.
pure
“The rationale behind this general rule is that
employer-employee
disputes
are
not
sufficiently
‘in
or
affecting commerce’ to satisfy the second element of a UDTPA
claim.”
Gress v. Rowboat Co., Inc., 190 N.C. App. 773, 777, 661
S.E.2d 278, 282 (2008).
However, “the mere existence of an
employer-employee relationship does not in and of itself serve to
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exclude a party from pursuing an unfair trade or practice claim.”
Dalton, 353 N.C. at 656, 548 S.E.2d at 710 (internal citations
omitted).
The North Carolina courts have found limited exceptions
where the circumstances were “in or affecting commerce” to such a
degree as to rise above the level of the typical employer-employee
dispute.
S.E.2d
See, e.g., Sara Lee Corp. v. Carter, 351 N.C. 27, 519
308
(1999)
(allowing
UDTPA
claim
in
employer-employee
relationship where employee, as buyer for employer, bought computer
parts and services at excessive prices from companies which he
owned without employer’s knowledge); Gress, 190 N.C. App. at 775,
661
S.E.2d
corporation
at
and
281
(permitting
potential
UDTPA
purchaser
claim
of
where
owner
corporation
of
created
fictitious employment contract as cover to conduct due diligence).
B. Application
The
First
Amended
Complaint
failed
to
allege
facts
establishing that the actions of Defendants were sufficiently “in
or affecting commerce” to support a claim under the UDTPA.
The
presumption against UDTPA claims in employer-employee disputes is
premised on the rationale “that pure employer-employee disputes are
not sufficiently ‘in or affecting commerce’ to satisfy the second
element of a UDTPA claim.”
at 282.
Gress, 190 N.C. App. at 777, 661 S.E.2d
Although Plaintiff contends that he was not employed by
Allstate Financial, the filer of the Form U-5 (see Docket Entry 18
at 17), and that his employment status with Allstate Insurance was,
for all intents and purposes, terminated prior to said filing (see
Docket Entry 18 at 17-18), Plaintiff’s allegations of how the
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instant matter affected commerce remain those which would arise
from a standard employer-employee relationship.
See Smith v.
Waverly Partners, LLC, No. 3:10CV28, 2011 WL 1655592, at *5
(W.D.N.C. Apr. 29, 2011) (unpublished) (“Plaintiff’s lack of an
employment relationship with Defendants does not preclude her claim
from arising out of an employment relationship or from otherwise
being one that fails to affect commerce.
Rather, statements made
by non-employer Defendants . . . can be properly defined as arising
out of the employment relationship and not affecting commerce.”)
(citing Esposito v. Talbert & Bright, Inc., 181 N.C. App. 742, 746,
641 S.E.2d 695, 697-98 (2007)).
If the Court accepted Plaintiff’s argument that Defendants’
actions were “in or affecting commerce” in that they “impeded
defendants’ competitors from acquiring [Plaintiff’s] talents as an
employee and manager” (Docket Entry 18 at 16) and “affected and
continue[] to affect defendant’s competitors and [Plaintiff’s]
professional reputation and subsequent employment opportunities in
the
Greensboro
insurance
marketplace”
(id.),
the
Court
would
effectively permit run of the mill employer-employee disputes to
support a UDTPA claim.
This conclusion would directly contradict
the basis for the presumption against such findings as put forth by
the courts of North Carolina.
Plaintiff’s contentions do not
allege facts sufficient to support a conclusion that the instant
case affected commerce to such a degree as to warrant application
of any previously recognized exception to this presumption.
See,
e.g., Sara Lee, 351 N.C. 27, 519 S.E.2d 308; Gress, 190 N.C. App.
-18-
at 775, 661 S.E.2d at 281.
resolving
employment
allegations
terminated.
claim.”
concern
“The UDTPA is not . . . appropriate for
disputes.
the
.
manner
.
in
.
[A]ll
which
of
his
[P]laintiff’s
employment
was
The [C]ourt [should], therefore, dismiss the UDTPA
Johnson v. Wal-Mart Stores East, L.P., No 3:10CV659, 2011
WL 2183155, at *6 (W.D.N.C. June 6, 2011) (unpublished).6
Conclusion
Plaintiff’s
claims
against
Allstate
Corporation
lack
sufficient factual assertions to allow this Court to make a
determination of plausibility as required by Iqbal, and therefore
fail to state a claim.
Furthermore, Plaintiff’s allegations in
support of his claims for abuse of process and unfair and deceptive
trade practices fall short with respect to a necessary element.
IT IS THEREFORE RECOMMENDED that Defendants’ Motion to Dismiss
Counts One and Two of Plaintiff’s First Amended Complaint and to
Dismiss Defendant Allstate Corporation as a Party to this Action
(Docket Entry 11) be GRANTED; however, as Plaintiff’s claim for
wrongful termination against public policy remains against Allstate
Insurance and Allstate Financial, the Clerk should schedule an
initial pre-trial conference.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
September 27, 2011
6
In light of this conclusion, the Court need not address Defendants’
argument as to whether the Form U-5 was defamatory per se. (See Docket Entry 12
at 10-12.)
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