Defining Unfairness in “Unfair Trade Practices”

BY Matthew W. Sawchak & Kip D. Nelson

North Carolina’s “unfair or deceptive acts or practices” statute, section 75-1.1 of the North Carolina General Statutes, is a constant presence in North Carolina litigation. The statute combines two explosive ingredients: (1) a private right of action for treble damages and (2) an open-ended conduct standard.

For claims of unfair practices, the conduct standard under section 75-1.1 is open-ended to the point of dysfunction. The standard is no more than a list of adjectives—a list that does not forecast the outcome of a given case. When courts apply this list of adjectives, they usually cannot explain why the adjectives are or are not satisfied. The resulting case law is opaque. This opaqueness makes the outcome of unfairness cases unpredictable.

A solution to these problems is readily available. Section 75-1.1 is based on section 5 of the Federal Trade Commission Act. Early decisions under section 75-1.1 said expressly that courts should take guidance from the law under section 5. The courts need only follow that advice.

The law under section 5 has much to offer courts in section 75-1.1 cases. Most notably, section 5 doctrine holds that conduct is unfair only if it causes injuries that a plaintiff cannot reasonably avoid. Adding this “not reasonably avoidable” test to the unfairness doctrine under section 75-1.1 will make this form of litigation more balanced and predictable.

DOWNLOAD PDF | 90 N.C. L. Rev.2033 (2012)