Nobel v. Foxmoor Grp.

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA19-506

Filed: 7 July 2020

New Hanover County, No. 15 CVS 4534

LORETTA NOBEL, Plaintiff,

v.

FOXMOOR GROUP, LLC, MARK GRIFFIS, DAVE ROBERTSON, Defendants.

Appeal by Defendant Robertson from judgment entered 30 November 2018 by

Judge Charles H. Henry in New Hanover County Superior Court. Heard in the Court

of Appeals 5 February 2020.

Mason & Mason, by Amanda B. Mason and Sarah C. Thomas, for plaintiff-
appellee.

The Lea Schultz Law Firm, P.C., by James W. Lea, III, for defendant-appellant.

MURPHY, Judge.

A contract under seal is subject to a ten-year statute of limitations for its

breach, as opposed to a three-year statute of limitations for a contract not under seal.

A promissory note stating it shall take effect as a sealed instrument, with no seal

following the principal’s signature, may be deemed “sealed” where evidence

demonstrates that the parties intended the promissory note to be a sealed

instrument. To be entitled to judgment on a claim that a party has violated the

Unfair and Deceptive Trade Practices Act (“the UDTPA”), a plaintiff must establish,

among other things, that the defendant’s action in question was in or affecting

commerce, namely business activities. However, soliciting funds to build up capital
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Opinion of the Court

is not a business activity, even when it is unfair or deceptive, and is therefore not

subject to the UDTPA.

BACKGROUND

This case arises from Plaintiff Loretta Nobel’s (“Nobel”) loan to Foxmoor

Group, LLC, which did not repay the loan and subsequently dissolved. Mark Griffis

(“Griffis”) and Dave Robertson (“Robertson”) were the sole members and managers of

Foxmoor Group, LLC (collectively “Defendants”), and actively encouraged Nobel to

invest in the company.1

Nobel met Griffis and Robertson in 2003 through social and charitable

functions in which all three participated. Nobel contributed articles to a lifestyle

magazine that Robertson co-owned and managed, and Griffis and Robertson assisted

Nobel with custody litigation expenses and medical bills. After facing financial

difficulties and divorcing her spouse, Nobel moved from North Carolina to Ecuador

with her grandson, although she later returned to North Carolina. Griffis and

Robertson knew about Nobel’s difficulties.

Griffis founded Foxmoor Group, LLC in 2010 while Nobel was in Ecuador. On

9 December 2011, the Secretary of State sent “Notice of Grounds for Administrative

Dissolution” to Foxmoor Group, LLC due to the company’s failure to file an annual

1 Only Robertson filed a timely notice of appeal, and, to the extent the other two Defendants
intended to appeal the trial court’s judgment, their appeal of this matter was dismissed by our Order
on 31 January 2020.

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report. After the company was dissolved due to its failure to file an annual report in

2011, Robertson helped Griffis obtain Foxmoor Group, LLC’s reinstatement.

Foxmoor Group, LLC obtained reinstatement in 2012. Griffis and Robertson told

Nobel throughout this time period the business was performing very well and asked

Nobel to provide financial capital to Foxmoor Group, LLC.

Despite the 9 December 2011 notice of pending dissolution from the Secretary

of State, Griffis advised Nobel in a 12 December 2011 email of an investment

opportunity in the company and proposed potential investment amounts of

$75,000.00 or $150,000.00. Nobel responded that she could only invest $25,000.00 at

that time, and after Griffis agreed that amount was acceptable, she subsequently sent

a $25,000.00 check to Griffis on 9 January 2012 for “a buy in of 4 years and a renewal

of [$]10,000[.00] for an additional 4 years.” Defendants made three payments to

Nobel toward repaying the $25,000.00 investment on 1 March 2012, 1 April 2012, and

1 May 2012.

After moving back to North Carolina in February of 2012, and in response to

Griffis’s and Robertson’s continued representations concerning the strength and

growth of the company, and a corresponding financial opportunity for her, Nobel

loaned an additional $75,000.00 to Foxmoor Group, LLC. To convince Nobel to make

the loan, Griffis also offered her four years of health insurance as an employee of

Foxmoor Group, LLC, and included that promise in an additional written agreement.

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Griffis and Nobel signed the 24 May 2012 additional written agreement. The

additional written agreement also provided that the contract would renew “at a wage

of $3[,]500[.00] per month for as long as such time [Nobel] continues in her desire for

employment.” On 24 May 2012, a promissory note (“the promissory note”) was

executed for repayment of Nobel’s $75,000.00 loan. Robertson prepared the

promissory note, and Griffis signed the promissory note as “CEO” of Foxmoor Group,

LLC. The promissory note contained the language “[t]his note shall take effect as a

sealed instrument and is made and executed under, and is in all respects governed

by, the laws of: [] the State of North Carolina.” However, the promissory note did not

contain a seal following Griffis’s signature. According to the terms of the promissory

note, in exchange for the $75,000.00 “value received” from Nobel, Foxmoor Group,

LLC would make monthly payments of $3,500.00 to Nobel from 1 July 2012 to 1 July

2016. Nobel was initially hesitant to make the loan. On 24 May 2012, the same day

the promissory note and additional written agreement were executed, Defendants

cashed and deposited the $75,000.00 check.

Nobel later received a $7,000.00 check, dated 10 June 2012, from Foxmoor

Group, LLC, executed by Robertson. Only $3,500.00 was for repayment of the

promissory note, and the other half of the check was a fourth installment payment

toward her prior investment of $25,000.00. After the 10 June 2012 payment, Nobel

received no further payments from Defendants. Additionally, she was never covered

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by any health insurance policy in connection with Foxmoor Group, LLC. When she

contacted Griffis asking why she was not receiving payments, he responded that if

she tried to get the money owed to her, he would declare bankruptcy, and she would

lose everything. Instead of repaying Nobel for her $25,000.00 investment, and

$75,000.00 loan under the terms of the promissory note, Griffis and Robertson used

their position in Foxmoor Group, LLC to access corporate funds and use those funds

for personal use.

After obtaining reinstatement in 2012, Foxmoor Group, LLC did not file an

annual report in 2013, and was dissolved on 4 March 2014.

In December 2015, Nobel sued Defendants for breach of contract, piercing the

corporate veil, fraudulent misrepresentation, money owed, and unfair and deceptive

trade practices. Defendants argued that the promissory note was not a sealed

instrument, meaning the statute of limitations had expired, and denied Nobel’s

allegations. The trial court, sitting without a jury, found that the promissory note

was an instrument under seal, determined Foxmoor Group, LLC was an alter ego of

Griffis and Robertson, meaning the instrumentality rule allowed for the piercing of

the corporate veil, and held Defendants liable for breach of contract, fraud in the

inducement, and unfair and deceptive trade practices.

ANALYSIS

A. Statute of Limitations and Breach of Contract

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The first issue on appeal is whether the trial court erred in finding and

concluding the promissory note was an instrument under seal. Nobel’s breach of

contract cause of action regarding the $25,000.00 investment was barred by the

statute of limitations. N.C.G.S. § 1-52(1) (2019). If the 24 May 2012 promissory note,

with monthly payments beginning 1 July 2012, was not deemed to be a sealed

instrument, Nobel’s December 2015 breach of contract cause of action regarding the

$75,000.00 loan would likewise be barred by the statute of limitations. Miller v.

Randolph, 124 N.C. App. 779, 781, 478 S.E.2d 668, 670 (1996) (“[N.C.G.S. § 1-52(1)]

begins to run when the claim accrues; for a breach of contract action, the claim

accrues upon breach.”). The statute of limitations for actions “[u]pon a sealed

instrument . . . against the principal thereto” is ten years. N.C.G.S. § 1-47(2) (2019).

In contrast, the statute of limitations for actions upon an unsealed contract or liability

arising out of an unsealed contract is three years. N.C.G.S. § 1-52(1) (2019). Here,

the promissory note includes language directly preceding the principal’s signature

that states: “[t]his note shall take effect as a sealed instrument . . . [,]” but does not

include a seal following the principal’s signature. Since the instrument lacks a seal,

Robertson argues it is not a sealed instrument and does not fall under the ten-year

statute of limitations.

Robertson does not contest any of the trial court’s findings of fact on the issue

of whether the promissory note was, in fact, sealed. Instead, he argues the trial court

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erred as a matter of law in concluding the instrument was sealed and that, therefore,

Nobel’s claims related to the promissory note fall under the three-year statute of

limitations. Conclusion of Law 2 concludes the promissory note is a sealed

instrument and the ten-year statutory period applies as to Nobel’s breach of contract

claim.

Our Supreme Court has advised, “the determination of whether an instrument

is a sealed instrument, commonly referred to as a specialty, is a question for the

court.” Square D Co. v. C.J. Kern Contractors, Inc., 314 N.C. 423, 426, 334 S.E.2d 63,

65 (1985) (citing Security Nat’l Bank v. Educator's Mut. Life Ins. Co., 265 N.C. 86,

143 S.E.2d 270 (1965)). However, we have treated the issue of the parties’ intention

to seal the document as an issue of fact: “We are constrained to hold that a material

issue of fact remains as to the intent of the parties to enter into a sealed instrument,

and accordingly [N.C.]G.S. [§] 1-47(2) is not necessarily applicable to the present

action.” First Citizens Bank & Trust Co. v. Martin, 44 N.C. App. 261, 267, 261 S.E.2d

145, 150 (1979) (holding “the trial court erred in concluding as a matter of law that

the statute of limitations did not bar [the] plaintiff’s action against [the] defendant .

. . , and summary judgment against [the defendant] was improvidently granted”).

In Square D Co., the question for the court was “whether [a] corporate seal

transforms the party’s contract into a specialty[.]” Square D Co., 314 N.C. at 428, 334

S.E.2d at 66. Our Supreme Court held the determinative factor in reaching such a

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decision “is whether the body of the contract contains any language that indicates that

the parties intended that the instrument be a specialty or whether extrinsic evidence

would demonstrate such an intention.” Id. (emphasis added). “[A]bsent any evidence

. . . indicat[ing] that the parties intended that the contract was to be a sealed

instrument, . . . the contract in this case was not a specialty and [] the ten-year period

of limitation contained within [N.C.]G.S. [§] 1-47(2) would be inapplicable to [the]

plaintiff’s action.” Id.

Although the instrument here does not contain a seal—corporate or

otherwise—there is convincing evidence within the four corners of the promissory

note that the parties intended the instrument to be sealed, which allows it to be

treated as such. Our holding in First Citizens Bank & Trust Co. v. Martin supports

the premise that the parties’ intent to file the instrument under seal is relevant to

the determination of whether the document was, in fact, filed under seal. First

Citizens Bank & Trust Co., 44 N.C. App. at 267, 261 S.E.2d at 150. The trial court

did not make such a finding of fact here, but still noted the language “this note shall

take effect as a sealed instrument” in the promissory note in Finding of Fact 16.

Based on our caselaw, an instrument will be deemed “sealed” where it appears

on its face or through extrinsic evidence that the parties intended it to be a sealed

instrument. In rare instances, as here, this clearly-stated intent will result in an

instrument being treated as though it was filed under seal even where the principal(s)

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to the contract do not include a seal after their name. The trial court concluded that

the promissory note was to be “strictly construed against [Robertson and Griffis]”

because it was “generated and drafted by [Robertson] and signed by [Griffis] as a

sealed contract.” Additionally, “[Robertson and Griffis] had the best opportunity to

protect their own interests thus any doubt as to its interpretation will be resolved

against them.” Each of these sub-conclusions is supported by unchallenged findings

of fact, and the trial court’s conclusion that the ten-year statute of limitations applies

to the promissory note is affirmed.2

B. Instrumentality Rule

Robertson argues that “the trial court erred in ruling that the individual

Defendants were the alter-egos of Defendant Foxmoor,” and the corporate veil should

not have been pierced.

“In North Carolina, what has been commonly referred to as the

‘instrumentality rule,’ forms the basis for disregarding the corporate entity or

‘piercing the corporate veil.’” Glenn v. Wagner, 313 N.C. 450, 454, 329 S.E.2d 326,

330 (1985). The corporate form may be disregarded, and the corporation and the

shareholder treated as the same entity, if “the corporation is so operated that it is a

2 Robertson also argues, in Section V of his Appellant’s Brief, that the trial court “erred as a
matter of law by entering judgment against [him] for breach of contract[.]” This argument is two
sentences long: the first sets out the two elements of a breach of contract claim under North Carolina
law, and the second states, “[t]he trial court erred in concluding that [Robertson] executed a sealed
promissory note with [Nobel] . . . .” Given our conclusion that the promissory note was filed under
seal, we hold the trial court did not err in entering judgment against Robertson for breach of contract.

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mere instrumentality or alter ego of the sole or dominant shareholder and a shield for

his activities in violation of the declared public policy or statute of the State[.]” Estate

of Hurst ex rel. Cherry v. Moorehead I, LLC, 228 N.C. App. 571, 577, 748 S.E.2d 568,

573–74 (2013). There are three elements of a successful “instrumentality rule” claim:

(1) Control, not mere majority or complete stock control,
but complete domination, not only of finances, but of
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; and

(2) Such control must have been used by the defendant to
commit fraud or wrong, to perpetrate the violation of a
statutory or other positive legal duty, or a dishonest and
unjust act in contravention of plaintiff's legal rights;
and

(3) The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained
of.

Glenn, 313 N.C. at 454-55, 329 S.E.2d at 330.

Here, in Finding of Fact 28, the trial court made the following unchallenged

finding:

The individual defendants had complete domination over
the finances, policy making and business practices of
Foxmoor with respect to the events which injured [Nobel]
so that Foxmoor had at the time no existence of its own.
Griffis and Robertson used their control over the company
to siphon and drain the corporation of funds for personal
use so that it could not satisfy its legal obligations under
the promissory note delivered to the plaintiff.

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As this finding of fact is not challenged by Robertson, it is binding on appeal. See

Koufman v. Koufman, 330 N.C. 93, 97, 408 S.E.2d 729, 731 (1991). This finding

independently supports the trial court’s Conclusion of Law 5 that Nobel proved all

three elements of an “instrumentality rule” claim—indeed, the trial court used the

exact language from Glenn in entering this finding of fact. See Glenn, 313 N.C. at

454-55, 329 S.E.2d at 330.

Conclusion of Law 5 is supported by Finding of Fact 28, which is supported by

competent evidence. The trial court heard the following testimony: that Griffis and

Robertson were the only members of Foxmoor Group, LLC; that both Griffis and

Robertson told Nobel that business was thriving; that Robertson prepared the

promissory note; that Robertson signed the 10 June 2012 check from Foxmoor, LLC

toward repaying the promissory note; and, that Nobel never received further

payment, other than the 10 June 2012 check, toward the promissory note. Although

Robertson points us to testimony to the contrary, it is the factfinder’s duty to

determine the credibility of testimony. GEA, Inc. v. Luxury Auctions Marketing, Inc.,

259 N.C. App. 443, 455, 817 S.E.2d 422, 432 (2018); see also Smithwick v. Frame, 62

N.C. App. 387, 392, 303 S.E.2d 217, 221 (1983) (noting that “the trial judge, sitting

without a jury, has discretion as finder of fact with respect to the weight and

credibility that attaches to the evidence”). “The trial court must itself determine what

pertinent facts are actually established by the evidence before it, and it is not for an

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appellate court to determine de novo the weight and credibility to be given to evidence

disclosed by the record on appeal.” Coble v. Coble, 300 N.C. 708, 712-13, 268 S.E.2d

185, 189 (1980). The trial court’s conclusion that the instrumentality rule applies is

affirmed.

C. False Representation/Fraud

Robertson next argues “the trial court erred as a matter of law in concluding

the Defendants made false representations to induce [Nobel] to invest in Foxmoor.”

Although he does not use the word “fraud” here, Robertson’s argument is that the

trial court erred in concluding he committed fraud in the inducement. In relevant

part, the trial court concluded:

7. The [D]efendants made false representations to
induce [Nobel] to loan the [D]efendants the sum of
$75,000[.00]. [Nobel] did, in fact, rely on this
misrepresentation in reaching her decision to loan this
money. The [D]efendants demonstrated no intention on
providing health insurance to [Nobel] or repaying fully
their obligation established by the promissory note.

8. [Nobel] has suffered a financial injury, and the
[D]efendants’ conduct was the proximate cause of that
injury.

These two conclusions of law do not include a specific monetary award.

However, Conclusion of Law 10 is an award that corresponds with the breach of

contract, fraud, and UDTPA violation claims. Specifically, Conclusion of Law 10

states: “[Nobel] is to recover as damages from the [D]efendants for breach of contract

the sum of $164,500[.00]. That same amount is also the amount of damages for the

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unfair and deceptive trade practices. Pursuant to N.C.G.S. § 75-16 those damages

are trebled.” In light of our holdings that (1) the promissory note was not erroneously

determined to be a sealed instrument, and our affirming the trial court’s conclusion

that Defendants breached their contract with Nobel, and (2) the corporate veil could

be pierced as to Robertson, we need not address the fraud issue because vacating the

trial court’s conclusion regarding fraud would not make an impact on the trial court’s

ultimate award of monetary damages.

D. Unfair and Deceptive Trade Practices Act

To be entitled to judgment on a claim that a party has violated the UDTPA, a

plaintiff must have established that: “(1) defendant committed an unfair or deceptive

act or practice, (2) the action in question was in or affecting commerce, and (3) the act

proximately caused injury to the plaintiff.” Dalton v. Camp, 353 N.C. 647, 656, 548

S.E.2d 704, 711 (2001). In challenging the trial court’s conclusion that Robertson

violated the UDTPA, he does not take issue with elements one or three; instead, he

argues the acts in question were not “in or affecting commerce” and therefore do not

fall within the protections of the UDTPA. N.C.G.S. § 75-1.1 (2019). On this issue,

the trial court concluded that “[t]he [D]efendants[’] conduct involved a regular

business activity of the [D]efendants that affected commerce.”

“For [the] purposes of [the UDTPA], ‘commerce’ includes all business activities,

however denominated, but does not include professional services rendered by a

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member of a learned profession.” N.C.G.S. § 75-1.1(b) (2019). “‘Business activities’

is a term which connotes the manner in which businesses conduct their regular, day-

to-day activities, or affairs, such as the purchase and sale of goods, or whatever other

activities the business regularly engages in and for which it is organized.” HAJMM

Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991).

However, “any unfair or deceptive practices occurring in the conduct of extraordinary

events of, or solely related to the internal operations of, a business will not give rise

to a claim under the [UDTPA].” White v. Thompson, 364 N.C. 47, 52, 691 S.E.2d 676,

679 (2010).

In HAJMM Co., our Supreme Court addressed a situation where a corporate

defendant had issued a corporate plaintiff a number of “fund certificates,” or, “in

essence, corporate securities.” HAJMM Co., 328 N.C. at 593, 403 S.E.2d at 493. The

defendant’s “bylaws provide[d] that the purpose of issuing the certificates was to

‘build up . . . capital.’” Id. Our Supreme Court held that the sale of such instruments

was not a business activity, but an “extraordinary event done for the purpose of

raising capital in order that the enterprise can either be organized for the purpose of

conducting its business activities or, if already a going concern, to enable it to

continue its business activities.” Id. at 594, 403 S.E.2d at 493. Our Supreme Court

reasoned “[s]ecurities transactions are related to the creation, transfer, or retirement

of capital. Unlike regular purchase and sale of goods, or whatever else the enterprise

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was organized to do, they are not ‘business activities’ as that term is used in the

[UDTPA].” Id. Therefore, “[t]hey are not . . . ‘in or affecting commerce,’ even under

a reasonably broad interpretation of the legislative intent underlying these terms.”

Id.

Our Supreme Court affirmed this interpretation of the UDTPA in White, and

described the central holding of HAJMM Co. as standing for the proposition that “any

unfair or deceptive practices occurring in the conduct of extraordinary events of, or

solely related to the internal operations of, a business will not give rise to a claim

under the [UDTPA].” White, 364 N.C. at 52, 691 S.E.2d at 679. Further, our Supreme

Court reasoned that the General Assembly’s intent in passing the UDTPA was to

regulate “two types of interactions in the business setting: (1) interactions between

businesses, and (2) interactions between businesses and consumers.” Id. “As a result,

any unfair or deceptive conduct contained solely within a single business is not

covered by the [UDTPA].” Id. at 53, 691 S.E.2d at 680.

Here, Robertson’s unfair or deceptive practices all relate to inducing an

investment from Nobel for the purpose of funding Foxmoor Group, LLC, i.e. providing

a loan for the purpose of giving the business additional capital with which to operate.

Based on our Supreme Court’s interpretation of the UDTPA, soliciting funds to build

up capital, as occurred here, was an extraordinary act and not a business activity of

Foxmoor Group, LLC. It is not a “regular purchase and sale of goods, or whatever

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else the enterprise was organized to do[.]” HAJMM Co., 328 N.C. at 594, 403 S.E.2d

at 493. Instead, the alleged unfair or deceptive act here is almost directly equivalent

to the sale of fund certificates by the defendant in HAJMM Co., as the promissory

note signed by Griffis is a “capital-raising device[].” 328 N.C. at 595, 403 S.E.2d at

493. In following our binding precedent from HAJMM Co. and White, we conclude

the trial court erred as a matter of law in concluding Robertson’s acts were “in or

affecting commerce,” and therefore subject to the UDTPA. The trial court’s

conclusions to the contrary—and the related monetary award and trebling of the

same—are reversed.3

CONCLUSION

The trial court did not err in concluding the promissory note was an instrument

under seal, Nobel could pierce the corporate veil, and Robertson was liable for breach

of contract as to the promissory note. However, Defendants’ soliciting funds to raise

capital were not a business activity, and the trial court erred in concluding that the

proven acts violated the UDTPA.

AFFIRMED IN PART; REVERSED IN PART.

Judge ZACHARY concurs.

Judge ARROWOOD concurs in part and dissents in part in a separate opinion.

3As the appeals of Foxmoor Group, LLC and Griffis were dismissed, the judgments against
them remain undisturbed.

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ARROWOOD, Judge, concurring in part and dissenting in part.

I concur fully with that portion of the opinion in so far as it affirms the trial

court’s holding that the promissory note was an instrument under seal, and plaintiff’s

claims are thus not barred by the statute of limitations. I also concur with that

portion of the opinion concerning defendant’s liability for breach of contract and

fraud.

However for the reasons set forth below, I dissent from that portion of the

majority’s opinion which reverses the trial court’s award of damages on plaintiff’s

claim under the Unfair and Deceptive Trade Practices Act.

I. Discussion

Pursuant to the North Carolina Unfair and Deceptive Trade Practices Act

(“UDTPA”), “[u]nfair methods of competition in or affecting commerce, and unfair or

deceptive acts or practices in or affecting commerce, are declared unlawful.” N.C.

Gen. Stat. § 75-1.1(a) (2019). The majority correctly notes that to be entitled to

judgment on a claim that a party has violated the UDTPA, a plaintiff must establish

that: “(1) defendant committed an unfair or deceptive act or practice, (2) the action

in question was in or affecting commerce, and (3) the act proximately caused injury

to the plaintiff.” Dalton v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704, 711 (2001) (citing

Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 461, 400 S.E.2d 476, 482 (1991)).

The Act clarifies that “[f]or purposes of this section, ‘commerce’ includes all business

activities, however denominated, but does not include professional services rendered
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Arrowood, J., Concurrence-Dissent

by a member of a learned profession.” N.C. Gen. Stat. § 75-1.1(b). “Business

activities” refers to “the manner in which businesses conduct their regular, day-to-

day activities, or affairs, such as the purchase and sale of goods, or whatever other

activities the business regularly engages in and for which it is organized.” HAJMM

Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991).

The Act thus does not cover all wrongs in a business setting: it does not cover

ordinary employer-employee disputes, Buie v. Daniel International, 56 N.C. App. 445,

289 S.E.2d 118 (1982), securities transactions, Skinner v. E.F. Hutton & Co., 314 N.C.

267, 333 S.E.2d 236 (1985), or those wrongs committed by and against partners

within the same company, where the wrongs committed only affected that company

and or its co-owners, White v. Thompson, 364 N.C. 47, 691 S.E.2d 676 (2010).

For instance, in White, three partners formed Ace Fabrication and Welding

(“ACE”) to provide specialty construction and fabrication services for a plant operated

by Smithfield Packing Company, Inc. (“Smithfield”). Id. at 48, 691 S.E.2d at 677.

The partners agreed that they would divide up the contracts ACE won among

themselves and receive hourly wages from ACE for the hours each of them actually

worked. Id. One of the partners, the defendant, later violated this agreement by

hiring several people not affiliated with ACE to help him perform certain Smithfield

jobs that had been awarded to ACE. In addition, he formed a new company, called

PAL, and used it to compete for Smithfield jobs. Id. at 49-50, 691 S.E.2d at 677-78.

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Arrowood, J., Concurrence-Dissent

As a result of the defendant’s actions, ACE ultimately went out of business. Id. at

50, 691 S.E.2d at 678. The defendant’s former business partners sued him for unfair

and deceptive trade practices, among other claims. Id.

Our Supreme Court held that “[b]ecause [the] defendant . . . unfairly and

deceptively interacted only with his partners, his conduct occurred completely within

the ACE partnership and entirely outside the purview of the [UDTPA].” Id. at 54,

691 S.E.2d at 680. In reaching its decision, our Supreme Court emphasized that the

UDTPA “is not focused on the internal conduct of individuals within a single market

participant, that is, within a single business[,]” but rather “the General Assembly

intended the Act’s provisions to apply to interactions between market participants.”

White, 364 N.C. at 53, 691 S.E.2d at 680. See also Alexander v. Alexander, 250 N.C.

App. 511, 516-17, 792 S.E.2d 901, 905 (2016) (quoting Id. at 53-54, 691 S.E.2d at 680)

(holding that, where the “ ‘unfairness of [Defendant’s] conduct did not occur in his

dealings with [other market participants]’ ” but rather only with the plaintiff, his co-

owner, his conduct fell “ ‘entirely outside the purview of the [UDTPA].’ ”).

In the present case, unlike the plaintiff in White, plaintiff here is neither a

partner nor has any ownership stake in Foxmoor Group, LLC (“Foxmoor”). Instead,

plaintiff acted as an outside investor, and is therefore better viewed as a separate

market participant. Moreover, though part of the repayment agreement for plaintiff’s

second loan included an agreement that Foxmoor would pay for her insurance as an

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Arrowood, J., Concurrence-Dissent

employee of the company, she was not an employee in any real sense of the term.

Rather, as the agreement between the parties made clear, plaintiff was to be treated

as an employee for health insurance purposes only, as part of the consideration for,

and repayment of, her $75,000.00 loan. Because defendant did not “unfairly and

deceptively interact[] only with his partners,” White, 364 N.C. at 54, 691 S.E.2d at

680, or employee, I would hold that his conduct does not fall outside the scope of the

UDTPA.

The majority argues that the present case is analogous to that of HAJMM.

There, the plaintiff was an LLC engaged in agricultural marketing, and the

defendant was an agricultural cooperative engaged in the business of processing

turkeys and other poultry. 328 N.C. at 580, 403 S.E.2d at 485. The defendant was

formed and partially capitalized with the plaintiff’s sale of all of its stock in Raeford

Turkey Farms, Inc. In consideration for the sale, the plaintiff received revolving fund

certificates issued by the defendant which became part of the defendant’s capital

structure. Id. The defendant’s bylaws specified that the certificates could be retired

at the discretion of the board and “[f]unds arising from the issue of such certificates

shall be used for creating a revolving fund for the purpose of building up such an

amount of capital as may be deemed necessary by the board of directors from time to

time and for revolving such capital.” Id. at 581, 403 S.E.2d at 486. The plaintiff’s

certificate continued to be listed on the defendant’s books as part of its capital

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Arrowood, J., Concurrence-Dissent

structure. When the plaintiff later demanded payment on the certificate, the

defendant refused without good reason. Id.

Our Supreme Court, relying on its decision in Skinner, held the plaintiff was

not entitled to recover under the UDTPA because corporate securities were outside

the scope of the Act. Id. at 593, 403 S.E.2d at 492-93. In Skinner, that Court held

that securities transactions are beyond the scope of the UDTPA. Specifically, it

reasoned that it’s holding

is consistent with [N.C. Gen. Stat.] § 75-1.1’s purpose to
protect the consuming public, the North Carolina cases
holding that other federal or state statutes may limit the
scope of [N.C. Gen. Stat.] § 75-1.1, the absence of any other
state court decision holding that securities transactions are
subject to a similar Unfair Trade Practices Act, and the
absence of any federal court decision holding that
securities transactions are subject to § 5(a)(1) of the FTC
Act. We do not believe that the North Carolina legislature
would have intended [N.C. Gen. Stat.] § 75-1.1, with its
treble damages provision, to apply to securities
transactions which were already subject to pervasive and
intricate regulation under the North Carolina Securities
Act, N.C. Gen. Stat. § 78A-1 et seq. (1981), as well as the
Securities Act of 1933, 15 U.S.C. § 77a et seq. (1982), and
the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq.
(1982). Furthermore, to hold that [N.C. Gen. Stat.] § 7-51.1
applies to securities transactions could subject those
involved with securities transactions to overlapping
supervision and enforcement by both the North Carolina
Attorney General, who is charged with enforcing [N.C.
Gen. Stat.] § 75-1.1, and the North Carolina Secretary of
State, who is charged with enforcing the North Carolina
Securities Act.

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314 N.C. at 275, 333 S.E.2d at 241 (quoting Lindner v. Durham Hosiery Mills, Inc.,

761 F.2d 162, 167-68 (1985)). Our Supreme Court in HAJMM thus further extended

its holding in Skinner to include corporate securities, noting that “the legislature

simply did not intend for the trade, issuance and redemption of corporate securities

or similar financial instruments to be transactions ‘in or affecting commerce’ as those

terms are used in N.C. [Gen. Stat.] § 75-1.1(a).” Id. at 594, 403 S.E.2d at 493. Because

“revolving fund certificates are, in essence, corporate securities[,]” whose “purpose is

to provide and maintain adequate capital for enterprises that issue them,” the Court

held that the plaintiff’s claim did not fall under the purview of the UDTPA. Id. at

593, 403 S.E.2d at 493.

The majority asserts the same reasoning applies to the current case. However,

there is a significant distinction between the two cases: HAJMM involved corporate

securities, while the present case notably does not. While the plaintiff’s claim in

HAJMM fell outside the purview of the UDTPA precisely because it involved

corporate securities, the same reasoning cannot apply here because no securities

transactions or corporate securities are at issue. Rather, the present dispute arose

due to nonpayment of a promissory note (along with certain other considerations),

whose funds were misappropriated. Because, in my view, plaintiff, as an outside

investor, was a separate market participant and her promissory note was not the

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Arrowood, J., Concurrence-Dissent

equivalent of a corporate security or similar instrument, I would affirm the judgment

of the trial court and hold that her claim does not fall outside the scope of the UDTPA.

7