                               UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT


                               No. 08-1933


CURTIS B. PEARSON MUSIC COMPANY; CURTIS B. PEARSON; ROBERT
C. PEARSON,

                 Plaintiffs - Appellants,

           v.

WILLIAM S. EVERITT,

                 Defendant – Appellee,

           and

MCFADYEN MUSIC, INCORPORATED; BROOK MAYS MUSIC COMPANY,

                 Defendants.



Appeal from the United States District Court for the Middle
District of North Carolina, at Durham.    James A. Beaty, Jr.,
Chief District Judge. (1:04-cv-00378-JAB)


Argued:   January 26, 2010                   Decided:   March 2, 2010


Before GREGORY and DUNCAN, Circuit Judges,        and   Catherine   C.
BLAKE, United States District Judge for           the    District   of
Maryland, sitting by designation.


Affirmed by unpublished opinion. Judge Blake wrote the opinion,
in which Judge Duncan joined.    Judge Gregory wrote a separate
opinion concurring in part and dissenting in part.
Ralph Hayes Hofler, III, HAYES HOFLER, PA, Durham, North
Carolina, for Appellants.    Richard Steven DeGeorge, ROBINSON,
BRADSHAW & HINSON, PA, Charlotte, North Carolina, for Appellee.


Unpublished opinions are not binding precedent in this circuit.




                                2
BLAKE, District Judge:

     Curtis B. Pearson Music Company, Curtis B. Pearson, and

Robert C. Pearson (“Appellants” or “the Pearsons”) appeal the

district court’s entry of judgment against them on their claims

against    William      S.    Everitt       for    unfair     and    deceptive        trade

practices under the North Carolina Unfair and Deceptive Trade

Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1, and fraud

under North Carolina common law. Following a bench trial, the

district    court    found     that     Mr.      Everitt    lacked        the    intent   to

deceive required to state a claim for fraud. Furthermore, the

district court held that Mr. Everitt’s actions did not rise to

the level of an unfair or deceptive trade practice prohibited

under   North     Carolina     law.        For    the    reasons     that       follow,    we

affirm.

                                            I.

     The    district         court    found        the     facts     to     include       the

following. Until August 7, 2000, Curtis Pearson served as the

President    of   the    Curtis       B.    Pearson       Music     Company      (“Pearson

Music”), which owned and operated retail music stores in North

Carolina    and     South     Carolina.          Curtis    Pearson’s        son,    Robert

Pearson, worked as a full-time employee and manager for Pearson

Music. Mr. Everitt is the President of Brook Mays Music Company




                                             3
(“Brook Mays”), a music retail business based in Texas. 1 In mid-

2000, Curtis Pearson began negotiations with Mr. Everitt for the

sale of Pearson Music to Brook Mays. Curtis Pearson and Mr.

Everitt met on June 27, 2000 to discuss the terms of the sale in

detail. Vincent McBryde, a Brook Mays business consultant, also

attended and took notes of the meeting.

     In connection with an asset purchase agreement, the parties

discussed an agreement whereby Curtis and Robert Pearson would

be   paid    certain      amounts     individually.     Curtis      Pearson     would

receive $500,000 in five annual $100,000 installments after the

sale and Robert Pearson would receive $100,000 in five annual

$20,000 installments. The Pearsons and Mr. Everitt now disagree

over exactly what consideration was agreed upon at the June 27

meeting in exchange for these five-year payments. The Pearsons

claim    that     they    promised    not   to   compete     with   Brook    Mays   in

consideration        of    these     payments    and   that    Robert       Pearson’s

payment     was    also    in   consideration     of   the    rights    to   musical

instrument        websites      he   had    created.   Mr.    Everitt,       however,

asserts that the Pearsons also agreed that these payments would

stop upon the termination of their at-will employment with Brook


     1
       Brook Mays acquired McFadyen Music, Inc. in May 2000. Mr.
Everitt continued as President of Brook Mays, the successor
company. The district court dismissed claims against McFadyen
Music, Inc. due to this acquisition and merger.



                                            4
Mays. While Mr. McBryde’s notes from the June 27 meeting are

ambiguous on the issue, Mr. McBryde also testified at trial that

the payments were contingent on continued employment.

     Following the June 27 meeting, Mr. Everitt transmitted Mr.

McBryde’s meeting notes to Brook Mays’s attorney, David Earhart,

and also left a voice mail, and instructed him to prepare a

draft agreement. Neither the July 6, 2000, nor the July 14,

2000, draft agreements sent to Curtis Pearson by Mr. Earhart,

however,    contained     any   mention       of     an    employment   contingency.

Instead, they simply stated that the installment payments would

be contingent on the Pearsons not disclosing trade secrets, not

competing with Brook Mays for five years after the date of the

closing or the cessation of their employment with Brook Mays,

and not inducing Brook Mays’s employees to leave the company

during the non-compete period. Although Mr. Everitt asked Mr.

Earhart to add the continued employment contingency to the July

14 draft, Mr. Earhart failed to do so.

     Curtis     Pearson    reviewed      the       July    14   draft   agreement     in

detail   with      an   attorney   and    both        Pearsons      indicated    their

approval to Mr. Earhart. At Mr. Everitt’s behest, Mr. Earhart

subsequently    added     the   continued       employment        provision     to   the

contract.    Mr.    Everitt     asserts       that    he    faxed   a   copy    of   the

amended agreement to the Pearsons on August 4, 2000, but they

claim to have never received it. The district court found that

                                          5
Mr. Everitt intended to fax the revised draft to the Pearsons

but was not successful in doing so. On August 7, 2000, Mr.

Everitt     travelled      to     North     Carolina      for     the     closing        and

presented Curtis Pearson with the amended agreement for signing.

Mr. Everitt did not point out the revision because he believed

the Pearsons had already received the faxed copy of the amended

agreement. Before signing the agreement, Curtis Pearson asked

Mr. Everitt, “Is this the contract we agreed to?” J.A. 551. In

response,    Mr.    Everitt       answered      “yes.”    Id.    Curtis       and    Robert

Pearson signed the contract without reading it.

     Until 2002, the Pearsons continued to work for Brook Mays

as at-will employees and received their annual installments, in

addition    to     their     regular      salaries       and     sales    commissions,

pursuant to the contract. In response to Brook Mays managers

reducing    the    scope     of   the     Pearsons’      sales    territory,         Robert

Pearson resigned in 2002. Soon after, Brook Mays informed Curtis

Pearson that they also considered him to have resigned. Upon the

Pearsons’ departure from Brook Mays, their installment payments

ended,    leaving    an    unpaid       balance     of   $400,000        as   to     Curtis

Pearson    and     $60,000      as   to    Robert     Pearson.      Neither         of   the

Pearsons violated the non-compete provisions of the agreement

during this time period. On April 22, 2002, the Pearsons learned

of the employment contingency provision in the final version of

the contract.

                                            6
      On April 6, 2004, the Pearsons and Pearson Music filed a

complaint in state court against Brook Mays and Mr. Everitt, in

his individual capacity, alleging (1) breach of contract, (2)

fraud and breach of fiduciary duty, and (3) unfair and deceptive

trade practices. The defendants removed the case to the U.S.

District    Court       for   the   Middle       District    of   North    Carolina    on

April 29, 2004. As Brook Mays filed for bankruptcy after the

case was removed to federal court, the district court dismissed

all     claims    and     counterclaims          involving    Brook       Mays   without

prejudice.       Given    that    Mr.   Everitt      did    not   sign    the    purchase

contract in his individual capacity, the district court found

the breach of contract claim not applicable to him. Instead, the

district court held a bench trial in January 2007 on the (1)

fraud or breach of fiduciary duty and (2) unfair and deceptive

trade     practices      claims     against       Mr.   Everitt     personally.       The

Pearsons now appeal the district court’s denial of their claims

against Mr. Everitt. 2




      2
       In addition to appealing the district court’s judgment,
the Pearsons initiated a separate cause of action against Mr.
Earhart and his law firm, claiming that they defrauded the
Pearsons in drafting the contract at issue in this case. See
Pearson v. Gardere Wynne Sewell LLP, No. 08-0919-JAB (M.D.N.C.).
We granted Mr. Everitt’s motion to take judicial notice of the
complaint  in   that   case  (hereinafter  “Appellants’   Second
Compl.”).




                                             7
                                           II.

      We    review    a     district       court’s      determination            of    legal

questions de novo. See South Atlantic Ltd. v. Riese, 284 F.3d

518, 535 (4th Cir. 2002). We may set aside a district court’s

factual    findings       following    a    bench     trial       only    if     they      are

clearly erroneous. See Ellis v. Grant Thornton LLP, 530 F.3d

280, 286 (4th Cir. 2008); Fed. R. Civ. P. 52(a). “A finding of

fact is clearly erroneous when, ‘although there is evidence to

support it, the reviewing court on the entire evidence is left

with the definite and firm conviction that a mistake has been

committed.’” Ellis, 530 F.3d at 287 (quoting United States v.

United     States    Gypsum    Co.,     333      U.S.    364,       395   (1948)).         In

addition, if “there are two permissible views of the evidence,

the   factfinder’s         choice     between        them     cannot        be        clearly

erroneous.” Anderson v. City of Bessemer City, N.C., 470 U.S.

564, 574 (1985).

      As the court has diversity jurisdiction over this case, it

must interpret the law in accordance with the highest court in

North Carolina. See Wells v. Liddy, 186 F.3d 505, 527-28 (4th

Cir. 1999). Where the law is unclear, the court must predict how

the Supreme Court of North Carolina would rule, considering:

“canons    of   construction,       restatements        of    the    law,      treatises,

recent     pronouncements      of     general     rules      or     policies          by   the



                                            8
state’s highest court, well considered dicta, and the state’s

trial court decisions.” Id. at 528.


                                         III.

       We turn first to Appellants’ argument that the district

court     erred    in    dismissing      their     fraud      claim.    Under        North

Carolina law, a plaintiff must prove that the defendant had the

“intent to deceive” in order to prevail on a claim for fraud.

See Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 374 S.E.2d

385,     391-92    (N.C.     1988).     Appellants         first    argue     that     the

district court ignored its own factual findings by concluding

that Mr. Everitt lacked the requisite intent to deceive. They

note the district court’s finding that Mr. Everitt made “false

representations         to   Plaintiffs     regarding        the    content     of    the

agreement” by replying “yes” when Curtis Pearson asked him if

the contract he was about to sign was the one to which they had

previously     agreed.       J.A.    554-55.    Yet    the   district        court    also

found that Mr. Everitt intended to give Curtis Pearson an honest

answer    to   his   question       about   the    contract,       finding     that   Mr.

Everitt believed that the parties had discussed the employment

contingency       provision     at    the   June      27   meeting     and    that     the

Pearsons had seen the faxed copy of the revised agreement. Id.

at 555. The district court’s characterization of Mr. Everitt’s

statement to Curtis Pearson as factually untrue does not negate


                                            9
its overall finding that Mr. Everitt made an honest mistake.

Thus the district court’s factual findings support its legal

conclusion       that    Mr.   Everitt       lacked    the        intent    to     deceive

necessary to prove fraud. 3

      In   the    alternative,        Appellants      argue       that     the   district

court’s factual findings as to Mr. Everitt’s intent are clearly

erroneous.   They       note   that    the    year    and     a    half     that   passed

between the bench trial and the district court’s decision may

have clouded the court’s recollections from the trial. Given the

ambiguity in the notes from the June 27 meeting, the testimony

of Mr. McBryde supporting Mr. Everitt’s recollection of what was

discussed June 27, and Mr. Everitt’s testimony that Mr. Earhart

failed to add the employment provision to the July 14 draft as

he had requested and that he believed the Pearsons were aware of

the   employment        contingency     provision,      however,           the   district




      3
       The district court also held that the Pearsons had failed
to establish a claim for “constructive fraud,” or breach of
fiduciary duty, which the Pearsons have not challenged on
appeal. Based on the court’s findings that the Pearsons were
“experienced businesspeople,” that Mr. Everitt was not in a
“confidential, advisory, or otherwise close relationship with
them,” and that the parties engaged in an arms-length business
transaction,   the   court    properly  denied   the   Pearsons’
constructive fraud claim. J.A. 557-58.



                                         10
court’s     finding      that   Mr.    Everitt      unintentionally         misled   the

Pearsons is a permissible interpretation of the evidence. 4

      The     Pearsons’      allegations      in    their    subsequent       complaint

against     Mr.     Earhart     and    his    law   firm    further        support   the

district      court’s     findings      of    fact.    In   this        complaint,   the

Pearsons allege that “Everitt believed that the Pearsons had

already agreed to the termination contingency provisions which

he had instructed his attorney, Earhart, to include for review.”

(Appellants’        Second    Compl.    ¶    14.)   They    also    assert    that   Mr.

Everitt did not provide copies of the final agreement to the

Pearsons    “because      he    believed      the   Pearsons       had    reviewed   and

approved the agreement.” Id. at ¶ 15. Generally, a party is

bound by admissions in its pleadings. See Lucas v. Burnley, 879

F.2d 1240, 1242 (4th Cir. 1989). Although this later pleading

was   filed    in    a   different     lawsuit,       Pearson      v.    Gardere   Wynne

Sewell LLP, its allegations relate to the same events at issue

in this case. Thus Appellants’ admissions in this subsequent

pleading relating to Mr. Everitt’s good faith, whether or not

binding in this case, at least support our conclusion that the


      4
       As Mr. Everitt points out in his brief, Curtis Pearson’s
recollection of events at trial was not always reliable.
(Appellee’s Br. 4.) Although Curtis Pearson denied during his
deposition that the $500,000 payment was discussed at all during
the June 27 meeting, he testified at trial that the payment was
indeed discussed at the meeting. See J.A. 151, 154.



                                             11
district court did not clearly err in finding that Mr. Everitt

made       an   honest      mistake         rather    than      an    intentional

misrepresentation. Finding that the Pearsons have not sustained

their      burden   of   showing    clear    error   in   the   district   court’s

factual determinations, we conclude that the district court did

not err in denying their claim for fraud.


                                        IV.

        Appellants also contend that the district court erred in

holding that Mr. Everitt had not engaged in unfair or deceptive

trade practices under the UDTPA. 5 We have earlier noted that

“[w]hat constitutes an unfair or deceptive trade practice is a

somewhat nebulous concept.”            Gilbane Bldg. Co. v. Fed. Reserve

Bank of Richmond, 80 F.3d 895, 902 (4th Cir. 1996). Unfairness

and     deception    have    been    identified      as    distinct   bases   for

liability under the UDTPA. See id. at 903; Johnson v. Phoenix

Mut. Life Ins. Co., 266 S.E.2d 610, 621 (N.C. 1980), abrogated

on other grounds by Myers, 374 S.E.2d at 391-92. For a trade

practice to be deceptive, it need not be untruthful, it simply

       5
       “In order to establish a violation of the [UDTPA], a
plaintiff must show: (1) an unfair or deceptive act or practice,
(2) in or affecting commerce, and (3) which proximately caused
injury to plaintiffs.” Gray v. N.C. Ins. Underwriting Ass’n, 529
S.E.2d 676, 681 (N.C. 2000). The latter two elements are not at
issue on appeal as the district court based its ruling solely on
its conclusion that the conduct at issue did not constitute an
unfair or deceptive act.



                                        12
must have the “capacity or tendency to deceive.” Johnson, 266

S.E.2d      at   622.       Furthermore,         an   actor’s      good    faith       has     been

described as irrelevant to the question of whether his conduct

was deceptive. Marshall v. Miller, 276 S.E.2d 397, 403 (N.C.

1981). A practice is “unfair” under the UDTPA, however, “when it

offends established public policy as well as when the practice

is         immoral,         unethical,           oppressive,         unscrupulous,               or

substantially injurious to consumers.” Id.

       Given that the UDTPA provides for treble damages, courts

have been reluctant to classify every instance of wrongdoing in

business transactions as a violation of the UDTPA. To prevail on

an    UDTPA      claim,       plaintiffs      must        demonstrate       “some       type     of

egregious        or   aggravating          circumstances.”         Dalton    v.        Camp,    548

S.E.2d      704,      711    (N.C.   2001)       (italics     in    original)          (internal

quotations and alterations omitted); see also South Atlantic,

284    F.3d      at    535     (describing         the    “egregious        or    aggravating

circumstances”              requirement       as      a     limit     on         the     UDTPA’s

application); Hancock v. Renshaw, -- B.R. --, 2009 WL 4840231,

at    *4    (M.D.N.C.        Dec.    11,    2009)     (holding      that     a    defendant’s

willful conversion did not constitute an unfair or deceptive

trade practice in and of itself under the UDTPA; there needed to

be    sufficient       egregious       or    aggravating        factors      in     addition).

Moreover, North Carolina courts look largely to the practice’s

impact      on   the    marketplace         in     determining      whether        conduct       is

                                                 13
deceptive or unfair. See Marshall, 276 S.E.2d at 403 (noting

that “[w]hether a trade practice is unfair or deceptive usually

depends on the facts of each case and the impact the practice

has in the marketplace”); Carcano v. JBSS, LLC, 684 S.E.2d 41,

50 (N.C. Ct. App. 2009) (explaining that “[t]he ‘relevant gauge’

of an act’s unfairness or deception is ‘[t]he effect of the

actor’s conduct on the marketplace’”) (quoting Ken-Mar Finance

v. Harvey, 368 S.E.2d 646, 648 (N.C. Ct. App. 1988)).

     In   Carcano,   the    court     refused     to   conclude          that   the

defendants’   recruitment     of    the   plaintiffs    into     a       fictional

limited liability company, which involved “deception, lies, and

misrepresentations,” was an unfair or deceptive trade practice.

Carcano, 684 S.E.2d at 50-51 (internal quotation marks omitted).

The court based its decision primarily on the fact that the

conduct   simply   involved   a    request   to    invest   in       a    business

arrangement among “sophisticated business entrepreneurs.” Id. at

50. As the court noted, the UDTPA “does not apply to all wrongs

in a business setting.” Id. 6



     6
       Contrary to the dissent’s assertion, Carcano was not a
“situation in which a third-party sabotages the business
dealings of a plaintiff and a defendant.”   Dissent.Op. at n.3.
Rather, as in this case, Carcano concerned the aftermath of a
defendant’s mistaken belief about a business transaction.
Although the defendants in Carcano also suffered as a result of
this misconception, this does not alter the court’s analysis as
to the level of egregiousness required under the UDTPA and the
(Continued)
                                     14
       The    Pearsons     have   not     demonstrated        any   egregious      or

aggravating factors at work in this case. Instead, based on the

district     court’s     findings,     Mr.     Everitt   is   guilty   only   of    a

mistaken belief with regard to a specific transaction, having

little     impact   on    the   general      marketplace.     Misunderstandings,

despite their capacity to deceive, ordinarily are insufficient

to sustain a claim of deceptive conduct under the UDTPA. See

Rice v. Vitalink Pharmacy Servs., Inc., 124 F. Supp. 2d 343, 348

(W.D.N.C.      2000)     (concluding     that    “a   mutual    misunderstanding

between the parties” did not give rise to a claim for deceptive

trade practices); Cockman v. White, 333 S.E.2d 54, 55 (N.C. Ct.

App.       1985)    (holding      that       “[w]e    do      not   believe     the

misunderstanding between plaintiff and defendant constituted a

deceptive representation”). 7



importance of a trade practice’s effect on the marketplace. 684
S.E.2d at 50.
       7
        The dissent, in elaborating its theory of “objective”
egregiousness, relies heavily on Pearce v. American Defender
Life Ins. Co., 343 S.E.2d 174 (N.C. 1986). We note that Pearce
involved a suit by a widow against an insurance company for
failure to pay on a policy. A separate statute governs unfair or
deceptive trade practices in the insurance industry under North
Carolina law, including misrepresentations about policy terms.
See N.C. Gen. Stat. § 58-54.4. In Pearce the court held “that a
violation of [N.C. Gen. Stat.] § 58-54.4 as a matter of law
constitutes an unfair or deceptive trade practice in violation
of [N.C. Gen. Stat.] § 75-1.1.” 343 S.E.2d at 179. Thus we
believe    Pearce   is   distinguishable   from    the   present
circumstances.


                                          15
      Appellants argue, however, that Mr. Everitt’s failure to

disclose the addition of the employment contingency provision to

the Pearsons was so unscrupulous as to qualify as an unfair

trade practice under the UDTPA. In support of this proposition,

they cite South Atlantic, in which this court found that the

defendant’s failure to disclose pertinent information was “the

essence of unscrupulous behavior” and “sufficiently egregious to

constitute an unfair trade practice.” 284 F.3d at 538. Yet this

characterization        was   based    on   a    finding     that    the     defendant

“deliberately withheld the information” from the claimant. Id.

(italics in original). As Mr. Everitt was not found to have

acted deliberately in this case, his conduct does not rise to

the     level   of   unscrupulousness           observed     in    South     Atlantic.

Accordingly, the district court properly ruled in favor of Mr.

Everitt on the Pearsons’ UDTPA claim.


                                         V.

      For the foregoing reasons, we conclude that the district

court did not err in ruling against the appellants on their

fraud    and    UDTPA    claims.      Accordingly,         the    judgment    of   the

district court is

                                                                             AFFIRMED.




                                         16
GREGORY, Circuit Judge, concurring in part and dissenting in
part:

     Faced      with    what    it    suggests    is   an   incoherent       statutory

scheme, the majority rewrites North Carolina law to require that

a plaintiff alleging a UDTPA violation prove that the defendant

engaged in intentionally deceptive conduct.                    North Carolina law

is clear, however, that a UDTPA plaintiff need only show that

the defendant’s conduct was objectively egregious, irrespective

of that defendant’s subjective knowledge or intent.                      Because the

district court found facts sufficient to establish that Everitt

misrepresented         the   contents     of     the   final      contract    to   the

Pearsons    in    an    objectively      egregious      way,      the   Pearsons   are

entitled to judgment in their favor on the UDTPA claim. 1                            I

therefore respectfully dissent.


                                          I.

     The UDTPA, as applied and interpreted by the North Carolina

courts,    is    not   nearly    as    “nebulous”      as   the    majority   claims.

Several things about the statute are, in fact, perfectly clear.

A defendant commits an unfair trade practice when that defendant


     1
       As to the Pearsons’ fraud claim, though I believe that the
Pearsons adduced evidence sufficient to prove that Everitt acted
with the requisite intent to defraud, the district court did not
clearly err in crediting Everitt’s testimony to the contrary. I
therefore concur in the majority’s conclusion as to the fraud
claim in Part III.



                                          17
“engages in conduct which amounts to an inequitable assertion of

its power or position.”                    Johnson v. Phoenix Mut. Life Ins. Co.,

266   S.E.2d        610,     622       (N.C.    1980).           Likewise,      a    defendant’s

subjective      belief          or     intent       does   not    determine         whether    that

defendant’s conduct is deceptive; rather the effect that conduct

would    have       on    the    average        person      does.          Pearce    v.    American

Defender Life Ins. Co., 343 S.E.2d 174, 180 (N.C. 1986).                                      North

Carolina      courts        do       not     require       a     plaintiff      seeking       UDTPA

recovery      to     prove       a   defendant’s           intent     to    deceive       precisely

because       the        statute       was      designed         to   provide        redress     to

plaintiffs whose fraud claims were not cognizable due to the

difficulty inherent in proving a defendant’s subjective state-

of-mind.       Marshall v. Miller, 276 S.E.2d 397, 400 (N.C. 1981).

When a court considers whether the “egregious or aggravating

circumstances,” Dalton v. Camp, 548 S.E.2d 704, 711 (N.C. 2001),

necessary to sustain a UDTPA claim are present, it is clear that

it must do so by evaluating those circumstances objectively.

        The North Carolina Supreme Court illustrated this objective

inquiry in Pearce.                   There, the decedent, an Air Force pilot,

purchased and signed a life insurance policy, which excepted

death in an airplane accident from coverage.                                Pearce, 343 S.E.2d

at 176.        When the decedent later inquired whether his family

would    be    covered          were    he     to    die    in    a   training       accident,   a

representative responded, in good faith, that his family would

                                                    18
be covered by the policy so long as he did not die in an act of

war.    Id.    The decedent later died in a training accident, and

the    insurance   company    refused    to   pay,   citing   the      contract’s

express provision.       Id.     The court in Pearce found that even

though there was no evidence that the insurance company intended

to deceive the decedent, the company could still be liable under

the UDTPA because the effect of the representative’s letter was

to mislead a reasonable person as to the insurance contract’s

meaning.      Id. at 181.      Thus, while there was clearly an honest

misunderstanding     between    the   insurance      representative      and   the

decedent, that misunderstanding was sufficiently egregious and

the insurance company was sufficiently at fault to trigger UDTPA

liability.

       The evidence found by the trial court here surely supports

a stronger UDTPA claim than that found by the court in Pearce.

The district court here found that the Pearsons never agreed to

the    contingency   clause    with   Everitt.       It   found   no   objective

evidence that Everitt ever mentioned the clause at any of their

meetings.     It determined that the clause was not included in the

first two drafts written by Everitt’s lawyer and reviewed by

Pearson and concluded that when the clause was added, it was

buried in an unaltered paragraph, with no indication that any

change had been made.



                                        19
     Worse       still,     the   court      found    that   rather   than    send   the

revised agreement to the Pearsons via overnight, Federal Express

delivery     —    the     means    by       which    the   parties    had    previously

communicated — Everitt tried, but failed, to fax the revised

agreement    to     the    Pearsons.          The    court   found    that   Everitt’s

attempt failed because he dialed the Pearsons’ voice number, not

their fax number, and yet somehow did not realize that the fax

did not go through. 2         And despite all of this, when it came time

to close the sale, Everitt simply said “yes” when asked whether

the contract Curtis Pearson was about to sign was the same one

to which they had previously agreed.

     This        behavior     from      a     sophisticated     businessman      falls

squarely within the definition of unfair and deceptive conduct

contemplated by UDTPA. 3             As the purchase agreement’s drafter,


     2
       As anyone        who has mistakenly tried to fax a document to a
voice number can        attest, the fax machine’s obnoxious response to
this error makes        it nearly impossible for a reasonable person to
believe that the        fax was successfully transmitted.
     3
       These facts clearly distinguish this case from Carcano v.
JBSS, LLC, 684 S.E.2d 41 (N.C. Ct. App. 2009), upon which the
majority relies heavily.   In Carcano, the plaintiffs alleged a
UDTPA violation after a joint venture with the plaintiffs
failed, in part, because the business entity was never
incorporated. Id. at 50-51. The court held that the defendants
did not abuse their position, and consequently did not violate
the UDTPA, because they too did not know about the failure to
incorporate and were injured, as well.    Id.  Carcano therefore
applies to a situation in which a third-party sabotages the
business dealings of a plaintiff and defendant.     It does not
apply to a situation like this one, in which it is the defendant
(Continued)
                                              20
Everitt had a duty to inform the Pearsons of any changes he made

to the agreement after they had reviewed and agreed to it. By

not taking the reasonable steps necessary to inform the Pearsons

of the new provision and then subsequently enforcing it, Everitt

unquestionably      “engage[d]    in   conduct    which      amount[ed]   to    an

inequitable assertion of [his] power or position.”                  Johnson, 266

S.E.2d at 622.      The myriad ways in which he failed in this area

render his conduct far more egregious than the conduct that led

to   the   honest    misunderstanding        between   the    two    parties   in

Pearce.       See 343 S.E.2d at 176.          This, when coupled with the

evidence at trial suggesting that Everitt attempted to cover up

his failures by instructing his consultant and lawyer on how to

describe    the   incident   in   subsequent     legal    proceedings,     makes

this   case    precisely   the    “near-miss”    fraud    scenario     that    the

North Carolina legislature sought to redress through the UDTPA.

Marshall, 276 S.E.2d at 400.            In my view, the district court

erred by finding otherwise.


                                       II.

       The majority eschews any objective analysis of Everitt’s

behavior.      Despite acknowledging at the outset that good faith



who causes the harm and abuses his position by failing to
reasonably disclose material information of which he is aware
and the plaintiff is not.



                                       21
is not a defense under the UDTPA, Maj. Op. at 13, it instead

ultimately        concludes      that    because            Everitt       did        not     act

intentionally,       his    conduct     is    insufficiently            aggravating           or

egregious to implicate the UDTPA.                  See Maj. Op. at 15 (“As Mr.

Everitt was not found to have acted deliberately in this case,

his    conduct    does     not   rise   to    the      level      of   unscrupulousness

observed     in    South     Atlantic.”).              In   so    doing,        it    accepts

Everitt’s oversimplistic dichotomy of deliberate versus innocent

conduct.    Surely this choice is false.

       “Aggravating”       is    defined      simply         as    that     which          makes

something worse.         Webster’s New International Dictionary 41 (3d

ed.    1981).      And     “egregious”       is    defined        as    “extraordinary,”

“extreme,” or “flagrant.”             Id. at 727.            Neither of these words

suggest, by definition, any requirement that an actor must act

with    specific     intent      in   order       to    engage     in     aggravated          or

egregious conduct.          That conduct, like Everitt’s here, need only

be beyond that which a reasonable person would consider to be

acceptable behavior.

       Likewise, the pages of the federal and regional reporters

are filled with cases in which a defendant, acting with naïve

and innocent intent, commits a wrong for which that defendant is

held criminally or civilly liable.                 A child places one bullet in

a gun.     He points it at a friend’s side and pulls the trigger

multiple   times     before      shooting     and      killing     that     friend.           No

                                         22
matter that the child did not intend to kill anyone or believe

that he would; his conduct was still so objectively egregious

and    aggravated      that     he        was    convicted        of    murder.          See

Pennsylvania v. Malone, 47 A.2d 445, 446-49 (Pa. 1946).

       Everitt’s     conduct       here    created      a   similarly      unacceptable

risk   that   the    Pearsons       would       be   harmed   and      misled,    even    if

Everitt honestly did not intend to do so.                     Based on the district

court’s factual findings, it is clear that at every stage of the

negotiations Everitt failed to make clear to the Pearsons that

he intended to, or that he in fact had, inserted the termination

provision into the contract.                    This was not a case in which

contracting    parties        misunderstood          one    another      because     their

revised agreement got lost in the mail or because each party

ascribed a different meaning to a specific term than did the

other one.         No reasonable person in Everitt’s position could

have    believed     that     he     had    revealed        the     revised-contract’s

provision     to    the     Pearsons.            Viewed     objectively,         Everitt’s

conduct was so far outside the mainstream of business behavior —

even typical, yet improper business behavior — that his victims

ought to receive redress through the UDTPA.


                                           III.

       The North Carolina courts and legislature have seen fit to

impose liability, including treble damages, on individuals or


                                            23
corporations that deceive or misrepresent others in the course

of business transactions.                 It is clear that the law applies

where    a     party      abuses      its    position         relative    to      another,

notwithstanding         the    offending       party’s        innocent   intentions    or

good faith.       Though we may think the law unduly harsh or unwise,

so    long   as    it     is    not    preempted         by    federal   statutory     or

constitutional provisions, we are bound to apply it in the same

way   that   a    state      court    would.        We   are    not   free   to   engraft

additional provisions that have been explicitly rejected by the

state’s highest court.

      Consequently, I would find Everitt liable under the UDTPA

and   remand      to   the     district     court    with      instructions    to   enter

judgment in the Pearsons’ favor.                  I respectfully dissent.




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