Supplee v. Miller-Motte Business College ( 2015 )

NO. COA14-670
NORTH CAROLINA COURT OF APPEALS
Filed: 3 February 2015
BENJAMIN SUPPLEE and MEBRITT
THOMAS,
Plaintiffs
v. New Hanover County
No. 12 CVS 3287
MILLER-MOTTE BUSINESS COLLEGE,
INC. and DELTA CAREER EDUCATION
CORPORATION,
Defendants.
Appeal by defendants from order entered 20 December 2013 by
Judge W. Allen Cobb, Jr., in New Hanover County Superior Court.
Cross-appeal by plaintiff Benjamin Supplee from order entered 31
July 2013 by Judge Phyllis M. Gorham in New Hanover County
Superior Court. Cross-appeal by Kyle J. Nutt from order entered
27 January 2014 by Judge W. Allen Cobb, Jr., in New Hanover
County Superior Court. Heard in the Court of Appeals 22 October
2014.
Shipman & Wright, LLP, by Kyle J. Nutt, for plaintiff-
appellee and cross-appellants.
Vandeventer Black LLP, by David P. Ferrell and Kevin A.
Rust, for defendant-appellants and cross-appellee.
McCULLOUGH, Judge.
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Defendants Miller-Motte Business College, Inc. and Delta
Career Education appeal the order of the trial court denying
their motions for directed verdict and judgment notwithstanding
the verdict; Plaintiff Benjamin Supplee cross-appeals from the
order of the trial court granting defendants’ summary judgment
motion, in part; Plaintiff Benjamin Supplee’s attorney, Mr. Kyle
Nutt, appeals the trial court’s order granting defendants’
motion for sanctions. Based on the reasons stated herein, we
affirm in part and reverse in part.
I. Background
On 21 August 2012, plaintiffs Benjamin Supplee (“Supplee”)
and Mebritt Thomas (“Thomas”) filed a complaint against
defendants Miller-Motte Business College, Inc. (“MMC”) and Delta
Career Education Corporation (“DCEC”). Plaintiffs alleged the
following claims: fraud/fraud in the inducement; unfair and
deceptive trade practices; negligent misrepresentation; breach
of contract by MMC; and negligence.
On 29 May 2013, defendants filed a motion for summary
judgment pursuant to Rule 56 of the North Carolina Rules of
Civil Procedure.
On 31 July 2013, the trial court entered an order, granting
defendants’ motion for summary judgment in part, and denying it
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in part. The trial court found that there were no genuine
issues of material fact on plaintiffs’ claims for fraud, unfair
and deceptive trade practices, negligence, and negligent
misrepresentation. Defendants’ motion for summary judgment on
plaintiffs’ breach of contract claim was denied.
Plaintiffs’ trials were separated with Supplee’s trial
occurring first, at the 28 October 2013 civil session of New
Hanover County Superior Court, Judge W. Allen Cobb, Jr.
presiding.1
The evidence at Supplee’s trial indicated the following:
Sometime after October 2009, Supplee met with MMC’s dean of
education, Mike Smith (“Smith”) and expressed interest in the
surgical technology (“surg tech”) program at MMC’s Wilmington,
North Carolina campus. Supplee inquired about the requirements
of the surg tech program and job prospects in the field after
graduation. The surg tech program was a two year program that
consisted of an eighteen month class component, followed by a
six month clinical component. Smith gave Supplee MMC’s college
catalog. Thereafter, Supplee met with Amy Brothers
(“Brothers”), an admissions representative for MMC. Supplee
1
Because plaintiff Benjamin Supplee is the only plaintiff who is
a party to the appeal before us, we will focus on the record
evidence relevant to Supplee’s appeal.
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testified that although Brothers was aware that he wanted to
apply to the surg tech program, Brothers encouraged him to apply
to the health information technology (“HIT”) program. Brothers
told Supplee that he could transfer to the surg tech program if
he did not like the HIT program.
During their meeting, Brothers handed Supplee a document
entitled “Career Information Profile.” The document asked
whether Supplee had “ever been convicted of a crime.” Supplee
marked “no” after asking Brothers whether “a DUI count[s]
because I knew it was on my record, I knew I had some issues in
the past and she was like, no, you’re fine.”
On 10 December 2009, Supplee received an acceptance letter
from the campus director of MMC and a congratulatory letter of
acceptance from the career services director at MMC. On 15
December 2009, Supplee and Brothers signed an enrollment
agreement for an associate degree in the HIT program. The
agreement stated that Supplee’s enrollment was “subject to all
terms and conditions set forth in the Catalog” of MMC. The
student catalog, under the heading “PROGRAM REQUIREMENTS” and
“Background Checks,” provided as follows:
Students applying for admission will be
required to have a criminal history check.
While a criminal conviction is not a per se
bar to admission, [MMC] will review any
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applicant who has been convicted of a crime
in order to determine his or her fitness for
admission, and will take into consideration
the following factors: the nature and
gravity of the criminal conviction, the time
that has passed since the conviction and/or
completion of the criminal sentence, and the
nature of the academic program for which the
applicant has applied.
(emphasis added).
In January 2010, Supplee began his courses at MMC. On 4
April 2010, after the end of the first quarter, Supplee
transferred into the surg tech program. To complete the
transfer, Supplee signed an enrollment agreement on 14 April
2010, almost identical to the HIT enrollment agreement, that
incorporated the terms and conditions of the catalog and stated
that MMC would review a student’s criminal background for
admission purposes. Defendants backdated Supplee’s start date
in the surg tech program to 20 January 2010.
On 12 October 2010, during Supplee’s first surg tech
program specific class, he was given a document by defendants
entitled “Background Check Statement of Disclosure” which
provided as follows:
Background checks will be provided as part
of the curriculum, will be held in strictest
confidence and specific information will not
be released to the clinical site unless
specifically requested by the clinical site
administrator. . . . As a student in the
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Surgical Technology Program, I am aware that
clinical sites in which I complete my
clinical rotations may require proof of a
criminal background check prior to my
acceptance at the clinical site.
Supplee and Cynthia Woolford (“Woolford”), the program director
of surgical technology at MMC, signed this document. Woolford
testified that she reviewed the “Background Check Statement of
Disclosure” with the whole class, including Supplee.
On or about 12 October 2010, Woolford provided Supplee with
the “Surgical Technology Program Student Policy Manual.” Under
the subsection entitled “Admission,” the surg tech manual stated
that “[t]he college will perform a criminal background check
upon admission to the program.” Further, it stated that
An applicant may be denied admission to the
[surg tech] program for any of the following
reasons: . . . b. Conduct not in accordance
with the standards of a Surgical
Technologist: . . . ii. Has been convicted
of or pleaded guilty or nolo contendere to
any crime which indicates that the
individual is unfit or incompetent to
practice surgical technology or that the
individual has deceived or defrauded the
public. . . . e. Due to JCAHO [Joint
Commission on Accreditation of Health
Organizations] requirements for Hospital &
Operating Rooms, Students with a felony
criminal record, larceny, or drug-related
background found on the criminal background
check will not be admitted to the clinical
sites.
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Supplee testified that he had not been advised by defendants’
representatives that a criminal background check had not been
conducted, but believed they had already conducted one.
At trial, Woolford testified that based on MMC’s written
policy, criminal background checks are “supposed to be conducted
of new applicants” during the admissions process. Ned Snyder,
the campus director for MMC in Wilmington and the regional vice
president for MMC in North Carolina, South Carolina, and
Virginia testified that MMC had the same policy, regardless of
whether the applicant was applying to the HIT or the surg tech
program. In addition, regardless of whether the applicant
answered “no” to the question of “have you ever been convicted
of crime?” on the career information profile, MMC was supposed
to run a criminal background check. Woolford testified that,
“if a student during admission had a criminal charge that would
automatically disqualify them from clinical sites,” the purpose
of the criminal background check made during admission was to
screen out any applicants who would not be able to complete the
program. Once a student was admitted, thirty days prior to
being placed at a clinical site, MMC was supposed to conduct
another criminal check in order to obtain the most recent
results. Woolford testified that MMC had a “responsibility to
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determine the type of criminal backgrounds that will prohibit
students from attending [clinical] externships.” However,
Woolford admitted that defendants did not conduct a criminal
background check on Supplee during his admissions process.
Woolford also testified that Supplee did not have a criminal
background check conducted prior to the time he started the surg
tech program.
Around May of 2011, Supplee’s class was scheduled to go to
an orientation at two clinical externship sites. Woolford
testified that thirty days prior to May 2011, Woolford ordered
the background check of Supplee. Prior to May 2011, Woolford
was not aware of any criminal background check being conducted
on Supplee. A contact at a clinical externship site informed
MMC that four students, including Supplee, were not permitted to
attend the orientation based on the results of their criminal
background checks. Supplee’s criminal background check revealed
the following: two felony charges of breaking and entering and
larceny which were dismissed in 2008; two convictions of driving
while intoxicated which occurred in 2004 and 2008, one of which
resulted in a probation violation.
Supplee testified that around 15 May 2011, he was pulled
out of class by Woolford and told by Smith, that the criminal
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background check sent to the clinical site was rejected.
Defendants “pointed to two dismissed felony charges and said
that’s why I was not being allowed to attend the orientation
site so therefore I couldn’t participate in the clinical
portion. I couldn’t -- I couldn’t finish.” Supplee testified
that “[Woolford] looked at my background and everything else
that I had on there. DUIs, traffic misdemeanors she said was
okay, that that wasn’t why I was being denied.” Defendants
presented Supplee with two options: Supplee could transfer into
any other program at MMC at no charge or Supplee could get his
felony charges expunged and reapply to the surg tech program to
work towards completion. At Woolford’s suggestion, Supplee
elected to get the two felony charges of breaking and entering
and larceny expunged. Supplee was successful in getting the
charges expunged and reapplied to MMC in December of 2011. When
Supplee attempted to reenroll, defendants informed him that
their admissions policy regarding criminal background checks had
changed, requiring a “clean record.”
On 10 January 2012, DCEC sent Supplee a “Notice of Pre-
Adverse Action” which stated the following:
During the application process for the
SURGICAL TECHNOLOGY program at [DCEC], you
authorized a review of your background and
qualifications for admission. This
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background check revealed criminal
convictions that would almost certainly
preclude participation in externship or
clinical experience position placements that
may be required to successfully complete the
program you have applied. Based on this
background check, [DCEC] rejects your
application.
On 7 November 2013, a jury returned a verdict in favor of
Supplee. The jury found that defendants entered into a contract
with Supplee, that defendants breached the contract by non-
performance, and that Supplee was entitled to recover from the
defendants in the amount of $53,481.00. Costs in the amount of
$2,298.30 were also taxed against defendants.
On 14 November 2013, defendants filed a motion for judgment
notwithstanding the verdict, or in the alternative, motion for a
new trial. On 20 December 2013, the trial court denied both
motions.
On 14 November 2013, defendants filed a motion for
sanctions and/or appropriate relief. Defendants’ motion stated
that upon the motion of plaintiffs, the trials of Supplee and
Thomas were separated; Supplee’s trial occurring during the 28
October 2013 civil session and Thomas’ trial scheduled for the
week of 18 November 2013. Defendants provided that on or about
3 November 2013, a local news station called WECT, posted a
story on its website disclosing that Supplee had prevailed on
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his breach of contract claim in the amount of $53,481.00 and
that the damages were based upon “wasted tuition and lost income
opportunities[.]” Defendants claimed that the alleged basis for
the damages of “wasted tuition and lost income opportunities”
was not a matter of public record. The news story stated that
plaintiffs’ attorney, Mr. Kyle Nutt (“Mr. Nutt”) of Shipman &
Wright, LLP, made the following statement:
the school was contractually obligated to
screen their applicants’ criminal
backgrounds to make sure all potential
students could eventually graduate from
healthcare degree programs were certain
offenses the school was aware of could
potentially prevent students from completing
required coursework at hospitals.
Mr. Nutt was also attributed to representing that “the school
offered Supplee $25,000 at the start of trial to end the matter,
but then removed the offer midway through trial.” Defendants
argue that the statements attributed to Mr. Nutt were not found
in the jury’s verdict sheet and were not a matter of public
record. Furthermore, Mr. Nutt was attributed to stating that
“his firm is representing another student going to trial over
similar claims this month” and defendants contended that this
statement was made with actual knowledge that Thomas’ claims
were scheduled to occur just two weeks after the article was
published. Based on the foregoing, defendants moved the court
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to levy sanctions against plaintiff and/or Mr. Nutt and to grant
appropriate relief based on their violation of Rule 3.6 of the
North Carolina Rules of Professional Conduct and “their public
dissemination of information that would not be admitted as
evidence at Ms. Thomas’ trial and which creates a substantial
risk of prejudicing an impartial trial.”
On 27 January 2014, the trial court entered an order on
defendants’ motion for sanctions and/or appropriate relief by
concluding that Mr. Nutt’s comments created a substantial risk
of prejudicing the Thomas jury and that Mr. Nutt’s extrajudicial
statements were in violation of Rule 3.6(a) and/or 3.3 of the
North Carolina Rules of Professional Conduct. Mr. Nutt was
sanctioned in the amount of $1,000.00 and defendants were
awarded $6,395.50 in attorneys’ fees and $20.00 in costs.
Attorneys for plaintiffs, including Mr. Nutt, filed a
motion for reconsideration, arguing that defendants waived
claims referenced in their motion for sanctions and/or
appropriate relief, that vital First Amendment considerations
required a liberal construction of the “safe harbor” provisions
contained in Rule 3.6(b) of the North Carolina Rules of
Professional Conduct, and that under such a construction, Mr.
Nutt’s statements were protected disclosures as a matter of law.
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On 11 February 2014, the trial court entered an order
denying plaintiffs’ motion for reconsideration.
On 16 January 2014 defendants filed notice of appeal; on 21
January 2014, Supplee filed notice of appeal; and, on 3 February
2014, Mr. Nutt filed notice of appeal.
II. Discussion
A. Defendants’ Appeal
Defendants raise two issues on appeal. First, defendants
argue that the trial court erred by denying their motions for
directed verdict and judgment notwithstanding the verdict
(“JNOV”). Next, defendants argue that the trial court erred by
permitting the jury to consider speculative evidence of
Supplee’s lost profits and income. We address each of these
arguments in turn.
i. Directed Verdict and Judgment Notwithstanding the Verdict
Defendants contend that the trial court erred by denying
their motions for a directed verdict and JNOV where Supplee
failed to present sufficient evidence of a breach of contract
claim. We reject defendants’ arguments and conclude there was
sufficient evidence of breach of contract by defendants in order
to submit the issue to the jury.
When considering the denial of a
directed verdict or JNOV, the standard of
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review is the same. The standard of review
of directed verdict is whether the evidence,
taken in the light most favorable to the
non-moving party, is sufficient as a matter
of law to be submitted to the jury. If
there is evidence to support each element of
the nonmoving party’s cause of action, then
the motion for directed verdict and any
subsequent motion for [JNOV] should be
denied.
Green v. Freeman, 367 N.C. 136, 140-41, 749 S.E.2d 262, 267
(2013) (citations and quotation marks omitted). Whether
defendants were entitled to a directed verdict or JNOV is a
question of law and questions of law are reviewed de novo. Id.
at 141, 749 S.E.2d at 267.
“The elements of a claim for breach of contract are (1)
existence of a valid contract and (2) breach of the terms of
that contract.” Branch v. High Rock Lake Realty, Inc., 151 N.C.
App. 244, 250, 565 S.E.2d 248, 252 (2002) (citation omitted).
Here, the parties stipulated that Supplee and defendants entered
into a contract. Therefore, the issue before the jury was
whether there was a breach of the terms of the contract.
Defendants rely on the holdings of Ross v. Creighton Univ.,
957 F.2d 410 (7th Cir. 1992) and Ryan v. Univ. of N.C. Hospitals,
128 N.C. App. 300, 494 S.E.2d 789 (1998), and contend that
Supplee’s breach of contract claim based on the failure of
defendants to conduct a criminal background check to determine
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if he was fit for admission into the surg tech program is not a
recognized cause of action.
In Ross, a student accepted an athletic scholarship to
attend Creighton University and play on its varsity basketball
team. Ross, 957 F.2d at 411. Creighton was an “academically
superior university” while the student came from an
“academically disadvantaged background” and was “at an academic
level far below that of the average Creighton student.” Id.The student attended Creighton from 1978 until 1982, maintained
a D average, and obtained 96 out of the 128 credits needed to
graduate. When he left Creighton, the student had the overall
language skills of a fourth grader and the reading skills of a
seventh grader. Id. at 412. The student filed a complaint
against Creighton, alleging that Creighton was aware of the
student’s academic limitations at admission and in order “to
induce him to attend and play basketball, Creighton assured [the
student] that he would receive sufficient tutoring so that he
‘would receive a meaningful education while at CREIGHTON.’” Id.
at 411. The student further alleged that he took courses that
did not count towards a university degree at the advice of
Creighton’s Athletic Department, that the department employed a
secretary to read, prepare, and type his assignments, and failed
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to provide him with sufficient and competent tutoring that it
had promised. Id. at 412. The student asserted claims of
breach of contract and negligence. The student argued three
separate theories of how Creighton was negligent: “educational
malpractice” for failing to provide him with a meaningful
education and preparing him for employment after college;
negligently inflicting emotional distress by enrolling him in a
stressful university environment when he was not prepared and by
failing to provide remedial programs to assist him; and,
“negligent admission” which would allow recovery when an
institution admits and then does not adequately assist an
unprepared student. Id. The district court dismissed all of
the student’s claims under Federal Rules of Civil Procedure
12(b)(6) for failure to state a claim.
The student appealed and the United States Court of Appeals
for the 7th Circuit held that the
basic legal relation between a student and a
private university or college is contractual
in nature. The catalogues, bulletins,
circulars, and regulations of the
institution made available to the
matriculant become a part of the contract. .
. . It is quite clear, however, that
Illinois would not recognize all aspects of
a university-student relationship as subject
to remedy through a contract action.
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Id. at 416 (citations and quotation marks omitted). The Ross
court explained that a breach of contract claim attacking the
general quality of an education would be precluded. Id.In order to state a claim for breach of contract, the court
in Ross held that a plaintiff “must point to an identifiable
contractual promise that the defendant failed to honor.” Id. at
417.
In these cases, the essence of the
plaintiff’s complaint would not be that the
institution failed to perform adequately a
promised educational service, but rather
that it failed to perform that service at
all. Ruling on this issue would not require
an inquiry into the nuances of educational
processes and theories, but rather an
objective assessment of whether the
institution made a good faith effort to
perform on its promise.
Id. The Ross court read the student’s complaint to
allege more than a failure of the University
to provide him with an education of a
certain quality. Rather, he alleges that
the University knew that he was not
qualified academically to participate in its
curriculum. Nevertheless, it made a
specific promise that he would be able to
participate in a meaningful way in that
program because it would provide certain
specific services to him. Finally, he
alleges that the University breached its
promise by reneging on its commitment to
provide those services and, consequently,
effectively cutting him off from any
participation in and benefit from the
University’s academic program.
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Id. Because the student’s breach of contract claim would be an
inquiry into whether Creighton “had provided any real access to
its academic curriculum at all”, the Ross court reversed the
decision of the trial court and stated that “we believe that the
district court can adjudicate [the student’s] specific and
narrow claim that he was barred from any participation in and
benefit from [Creighton’s] academic program without second-
guessing the professional judgment of the University faculty on
academic matters.” Id.In Ryan, the plaintiff was a resident who was “matched”
with the University of North Carolina Family Practice Program
(“University”) under the terms of the National Residency Program
based on their respective preferences. The plaintiff and the
University “entered into a one-year written contract that was
renewable, upon the University’s approval, each of the three
years of the residency program.” Ryan, 128 N.C. App. at 301,
494 S.E.2d at 790. The plaintiff’s residency began on 1 July
1990 and sometime during the plaintiff’s second year, problems
arose and the University planned to terminate the residency.
Id. The plaintiff used the internal appeal procedures and
executed a contract with the University at the beginning of his
third year which stated “in part that plaintiff knew he might
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graduate as much as six months later than the normal program.”
Id. The plaintiff graduated three months later than normal and
it was undisputed that the plaintiff graduated from an
accredited residency program. The plaintiff then initiated an
action against the University for breach of contract,
educational malpractice, intentional and negligent infliction of
emotional distress, civil conspiracy, tortious interference with
prospective business relationship, and self-defamation. Id.The trial court granted the University’s motion to dismiss all
claims and the plaintiff only appealed the dismissal of his
breach of contract claim against the University. Id.Relying on the holding in Ross that in order to state a
claim for breach of contract, the student “must point to an
identifiable contractual promise that the University failed to
honor,” our Court in Ryan held that although the plaintiff made
several allegations in support of his breach of contract claim
against the University, only one alleged a specific aspect of
the contract that would not involve an “inquiry into the nuances
of educational processes and theories.” Id. at 302, 494 S.E.2d
at 791. The plaintiff had alleged that the University breached
the “Essentials of Accredited Residencies” by failing to provide
a one month rotation in gynecology. Our Court held that the
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plaintiff had alleged facts sufficient to support his claim for
breach of contract based on the University’s failure to provide
that one month rotation and reversed the trial court’s order.
Id. at 303, 494 S.E.2d at 791.
Defendants argue that the present case is distinguishable
from Ross and Ryan because while Ross and Ryan permit a narrow
breach of contract claim where a university promises certain
educational services after enrollment, Supplee’s complaint does
not allege that defendants failed to provide a specific
educational service. Rather, defendants assert that Supplee’s
argument is a negligent admission case which has already been
rejected by Ross. We disagree with this characterization.
Based on Ross, Supplee’s relationship with defendants was
contractual in nature. Supplee signed two separate enrollment
agreements on 15 December 2009 and 14 April 2010 that
incorporated the terms and conditions set forth in the MMC
student catalog. The student catalog explicitly stated that
students applying for admission would be “required to have a
criminal history check” and that MMC “will review any applicant
who has been convicted of a crime in order to determine his or
her fitness for admission[.]” Therefore, the student catalog
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and the aforementioned term became a part of the contract
between defendants and Supplee. See Ross, 967 F.2d at 416.
Supplee’s claim for breach of contract pointed to this
“identifiable contractual promise that the [defendants] failed
to honor.” Ryan, 128 N.C. App. at 302, 494 S.E.2d at 791.
Supplee specifically alleged in his complaint that defendants
had “failed to order, failed to review, or ignored results from
the criminal background checks authorized by [Supplee] as part
of the admission process.” At trial, defendants conceded that
although based on defendants’ written policy, criminal
background checks were “supposed to be conducted of new
applicants” during the admissions process, defendants failed to
conduct a criminal background check of Supplee during his
admissions process in late 2009. Defendants also admitted that
Supplee did not have a criminal background check conducted prior
to the time he started the surg tech program in early 2010. Had
defendants properly conducted a criminal background check of
Supplee at admission in 2009, the results would have revealed
his two felony charges of breaking and entering and larceny
which were dismissed in 2008 and his two convictions of driving
while intoxicated which occurred in 2004 and 2008. Defendants’
failure to conduct a criminal background check prior to
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admitting Supplee was a specific aspect of the contract between
defendant and Supplee that would not involve an “inquiry into
the nuances of educational processes and theories, but rather an
objective assessment of whether the institution made a good
faith effort to perform on its promise.” Ross, 957 F.2d at 417.
Further, defendants argue that even if a contractual duty
existed, MMC could not be said to have committed a material
breach of contract. Defendants assert that because Supplee
initially applied to the HIT program and an enrollee’s criminal
background is not an “issue, concern or consideration” to
complete the HIT program, even assuming arguendo that a
contractual duty existed, a material breach could not have been
committed. We reject this argument.
It is well established that “[i]n order for a breach of
contract to be actionable it must be a material breach, one that
substantially defeats the purpose of the agreement or goes to
the very heart of the agreement, or can be characterized as a
substantial failure to perform.” Long v. Long, 160 N.C. App.
664, 668, 588 S.E.2d 1, 4 (2003) (citation omitted). “The
question of whether a breach of contract is material is
ordinarily a question for a jury.” Charlotte Motor Speedway,
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Inc. v. Tindall Corp., 195 N.C. App. 296, 302, 672 S.E.2d 691,
695 (2009).
In the case before us, evidence at trial demonstrated that
defendants were aware in October 2009 that Supplee intended to
pursue a degree in the surg tech program and were aware that
criminal background checks were necessary for the completion of
the surg tech program. Supplee testified that based on
Brother’s encouragement to enroll in the HIT program first and
her assurance that Supplee could transfer from the HIT program
into the surg tech program, Supplee initially enrolled in the
HIT program. Supplee also testified that he would not have
enrolled in the HIT program were it not for Brother’s assurance
that he would be able to transfer into the surg tech program.
Once Supplee transferred into the surg tech program on 4 April
2010, defendants backdated his start date in the surg tech
program to 20 January 2010. This evidence demonstrates that
defendants’ failure to conduct a criminal check prior to
admission into either the HIT or surg tech program substantially
defeated the purpose of the agreement or was a substantial
failure to perform.
Viewing the foregoing evidence in the light most favorable
to Supplee, there was sufficient evidence of each element of
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breach of contract to submit the issue to the jury. As such, we
hold that the trial court did not err by denying defendants’
motions for directed verdict and JNOV.
ii. Damages
In their next argument, defendants contend that the trial
court erred by admitting evidence of Supplee’s landscaping
business and the income he earned as a car salesman. Defendants
argue that this evidence of lost profits and income was
speculative and request a new trial on the issue of damages. We
find defendants’ arguments unconvincing.
Admission of evidence is addressed to
the sound discretion of the trial court and
may be disturbed on appeal only where an
abuse of such discretion is clearly shown.
Under an abuse of discretion standard, we
defer to the trial court’s discretion and
will reverse its decision only upon a
showing that it was so arbitrary that it
could not have been the result of a reasoned
decision.
Cameron v. Merisel Props., 187 N.C. App. 40, 51, 652 S.E.2d 660,
668 (2007) (citations and quotation marks omitted).
In the present case, Supplee testified that prior to
enrolling at MMC, he worked as a full-time car salesman from
August 2002 until October 2009 when he was laid off. After he
was laid off, Supplee received unemployment compensation until
the beginning of 2011. When he started school at MMC in 2010,
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Supplee began working as a school janitor. In 2011, after he
was no longer enrolled at MMC, Supplee worked as an occasional
waiter and landscaper. Supplee submitted records reflecting his
taxed Social Security earnings and taxed Medicare earnings from
1994 until 2009. Supplee also presented his 2010 tax return and
testified that he earned $727.00 in wages, salaries, tips, et
cetera and received $16,231.00 in unemployment compensation
during the period of time he was enrolled at MMC. For the year
2011, Supplee received $13,644.00 from unemployment
compensation. After leaving MMC, Supplee testified that in 2011
he worked for a landscaping company by the name of Flora
Landscape and earned $631.35 and also worked for Eddie
Romanelli’s and earned $2,048.00. Supplee further testified
that he began a landscaping business in 2012 and submitted
ledgers for the years 2012 through 2013 and testified as to his
income in 2012 and 2013.
First, relying on McNamara v. Wilmington Mall Realty Corp.,
121 N.C. App. 400, 466 S.E.2d 324 (1996), defendants argue that
evidence about Supplee’s landscaping business was inadmissible
because Supplee did not have an established history of profits;
Supplee contended that the profits he earned after he left MMC
would have been duplicated in previous years; and, Supplee made
-26-
no effort to obtain sales figures and other financial data from
similar landscaping businesses in the Wilmington area.
Specifically, defendants contend that this evidence was too
speculative.
In McNamara, the plaintiff leased a space to house a retail
custom jewelry store at a mall owned by the defendant. Id. at
402, 466 S.E.2d at 326. The parties executed a five year lease
and the plaintiff commenced his operations in August 1991. Id.
at 403, 466 S.E.2d at 326-27. In January or February 1992, the
defendant leased a space adjacent to the plaintiff’s store to an
aerobics studio and a dispute arose in regards to noise
emanating from the aerobics studio. Id. at 403, 466 S.E.2d at
327. The plaintiff stopped paying rent after April 1992 and
abandoned its leased space in December 1992. Id. The plaintiff
sued the defendant for several claims including breach of
contract. Id. at 403-404, 466 S.E.2d at 327. The trial court
granted the defendant’s motion to dismiss all claims, excluding
the breach of contract claim and a jury returned a verdict in
favor of the plaintiff in the amount of $110,000.00. Id. at
404, 466 S.E.2d at 327. On appeal, the defendant contested a
denial of a requested peremptory instruction on damages, argued
that its motions for directed verdict and judgment
-27-
notwithstanding the verdict should have been granted because the
plaintiff did not meet his burden of proof with respect to
damages, and, in the alternative, sought a new trial on the
issue of damages. Id. at 407, 466 S.E.2d at 329. At trial, the
plaintiff had confined his proof of damages solely to the issue
of lost future profits and our Court provided the following:
Damages for breach of contract may include
loss of prospective profits where the loss
is the natural and proximate result of the
breach. To recover lost profits, the
claimant must prove such losses with
“reasonable certainty.” Although absolute
certainty is not required, damages for lost
profits will not be awarded based on
hypothetical or speculative forecasts.
Id. at 407-408, 466 S.E.2d at 329 (citations and quotation marks
omitted). Our Court found that the plaintiff did not have an
established history of profits and that his evidence of lost
profits consisted solely on the testimony of Dr. Craig
Galbraith, a professor of management at the University of North
Carolina at Wilmington. Id. at 408, 466 S.E.2d at 330.
Agreeing with the defendants, our Court held that Dr.
Galbraith’s “calculations were not based upon standards that
allowed the jury to determine the amount of plaintiff’s lost
profits with reasonable certainty.” Id. at 409, 466 S.E.2d at
330. First, our Court found that Dr. Galbraith’s estimation of
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the plaintiff’s lost profits were based on the unsupported
assumption that from January 1992 until the remaining term of
the five year lease, the plaintiff’s sales would have risen in a
linear fashion to the point where they matched the average sales
of independent national jewelers. Id. Rather, he relied
exclusively on data from independent national jewelers without
ascertaining whether these jewelers bore any similarity to
plaintiff’s business.” Id. Based on the foregoing, our Court
held that Dr. Galbraith’s reliance on aforementioned data
“rendered his calculations too conjectural to support an award
of lost profits” and remanded to the trial court for a new trial
on the issue of damages. Id. at 409-12, 466 S.E.2d at 330-32.
We find the circumstances in McNamara to be readily
distinguishable from the facts of the present case. The
McNamara court dealt with lost future profits, which “are
difficult for a new business to calculate and prove.” Id. at
408, 446 S.E.2d at 330 (citation omitted). In McNamara, the
evidence to support the lost future profits of the plaintiff
were held to be too conjectural for the aforementioned reasons.
In the case sub judice, evidence regarding Supplee’s landscaping
business was based on actual income earned by Supplee during the
years 2012 and 2013. Most importantly, the evidence regarding
-29-
Supplee’s landscaping business was not used to calculate future
lost profits, but was relevant to the jury’s determination of
whether Supplee was entitled to recover consequential damages
from the defendants for breach of contract. As the trial court
instructed, the jury could find that Supplee had suffered
consequential damages which included Supplee’s investment of his
personal time as defined by his lost opportunity to earn income
during his time of enrollment. Supplee testified that had he
not been accepted and enrolled in MMC, he would have continued
working. Therefore, evidence of the history of income he earned
after his period of enrollment was relevant in the determination
of consequential damages. Accordingly, we reject defendants’
arguments that the trial court abused its discretion in
admitting this evidence.
Second, relying on Olivetti Corp. v. Ames Bus. Sys., Inc.,
319 N.C. 534, 356 S.E.2d 578 (1987), defendants argue that the
trial court erred by admitting speculative evidence of Supplee’s
past income as a car salesman when Supplee failed to produce any
evidence of any job offers he received while enrolled at MMC.
Defendants also assert that this evidence was inadmissible
because Supplee admitted he was laid off from a dealership in
2009 and did not voluntarily leave his employment to enroll in
-30-
MMC; Supplee admitted that his income was declining at the time
of his termination; Supplee testified that there was “no telling
what [he] would have done” had he not enrolled in MMC; and,
Supplee testified that after he was terminated as a car
salesman, he was not returning to an automotive sales position.
In Olivetti, the plaintiff, a manufacturer of word
processors, appealed the trial court’s determination that the
defendant, a dealer, was damaged by the plaintiff’s
misrepresentations. Id. at 544, 356 S.E.2d at 584. The trial
court found that had it not been for the plaintiff’s fraud, the
defendant would have become a dealer for another manufacturer of
a word processor. Id. The North Carolina Supreme Court held
that the trial court correctly concluded that the plaintiff made
material representations to the defendant, upon which the
defendant reasonably relied. Id. at 549, 356 S.E.2d at 587.
However, the Supreme Court held that “proof of damages must be
made with reasonable certainty” and that “in order for [the
defendant] to show that it was deprived of an opportunity to
make profits, it must first show that there was in fact such an
opportunity.” Id. at 546, 356 S.E.2d at 585-86. Because there
was no competent evidence in the record to support the finding
made by the trial court that the defendant had such an
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opportunity to make profits, the trial court’s award of damages
to the defendant was vacated. Id. at 549, 356 S.E.2d at 587.
After careful review, we find defendants’ reliance on
Olivetti misplaced. In Olivetti, the issue on appeal was
whether there was competent evidence to support the trial
court’s finding that the defendant dealer would have become a
dealer for another manufacturer had it not been for the
plaintiff’s misrepresentations. Here, the issue before our
Court is whether evidence of Supplee’s income as a car salesman
is admissible. While the defendant in Olivetti sought lost
future profits, Supplee’s evidence of his income as a car
salesman, like the evidence of Supplee’s landscaping business,
was relevant to the jury’s determination of whether Supplee was
entitled to recover consequential damages from defendants for
breach of contract. Evidence of the history of Supplee’s actual
income earned prior to enrolling at MMC was probative in the
determination of lost opportunity to earn income during his time
of enrollment. As such, we reject defendants’ argument that the
challenged evidence was speculative and hold that the trial
court did not abuse its discretion in its admission.
B. Plaintiff Supplee’s Appeal
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Supplee raises two issues on appeal. Whether the trial
court erred by (i) striking portions of his 4 June 2013
affidavit and (ii) granting defendants’ motion for summary
judgment, in part.
i. Striking Supplee’s Affidavit
Supplee argues that the trial court erred by striking
portions of his 4 June 2013 affidavit. We disagree.
“Our Court reviews the trial court’s ruling on the
admissibility of affidavits for an abuse of discretion.” Cape
Fear Pub. Util. Auth. v. Costa, 205 N.C. App. 589, 592, 697
S.E.2d 338, 340 (2010).
It is well established that a party opposing a motion for
summary judgment cannot create an issue of fact by filing an
affidavit contradicting his prior sworn testimony. Wachovia
Mortgage Co. v. Autry-Barker-Spurrier Real Estates, Inc., 39
N.C. App. 1, 9, 249 S.E.2d 727, 732 (1978). Our Court has held
that where an affidavit contains additions and changes that are
“conclusory statements or recharacterizations more favorable to
plaintiffs [that] materially alter the deposition testimony in
order to address gaps in the evidence necessary to survive
summary judgment[,]” the trial court should properly exclude
these portions of the affidavits. Marion Partners, LLC v.
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Weatherspoon & Voltz, LLP, 215 N.C. App. 357, 362, 716 S.E.2d
29, 33 (2011). “[I]f a party who has been examined at length on
deposition could raise an issue of fact simply by submitting an
affidavit contradicting his own prior testimony, this would
greatly diminish the utility of summary judgment as a procedure
for screening out sham issues of fact.” Id. at 362-63, 716
S.E.2d at 33. Furthermore, “the appellant must show not only
that the trial court abused its discretion in striking an
affidavit, but also that prejudice resulted from that error.”
Barringer v. Forsyth County, 197 N.C. App. 238, 246, 677 S.E.2d
465, 472 (2009) (citation and quotation marks omitted).
In the case before us, Supplee was deposed on 14 May 2013.
On 29 May 2013, defendants filed a motion for summary judgment.
Thereafter, on 5 June 2013, Supplee filed an affidavit. On 6
June 2013, defendants filed a motion to strike Supplee’s
affidavit in which they argued that paragraphs four through
seven, thirteen, and fifteen of Supplee’s affidavit “either
materially alter[ed] his deposition testimony or flatly
contradict[ed] his prior sworn testimony.” On 31 July 2013, the
trial court entered an order striking paragraphs four through
seven, thirteen, and fifteen “because they materially differ
-34-
from Plaintiff Supplee’s prior, sworn testimony and/or directly
conflict with Plaintiff Supplee’s prior, sworn testimony.”
Paragraphs four through seven of Supplee’s affidavit stated
the following:
4. As part of the enrollment process, I was
informed by representatives of [MMC] that
a check of my criminal background would
be performed.
5. As part of the enrollment process, [MMC]
representatives also informed me that my
acceptance into the school and any
program of study I entered would be based
upon the results of my criminal
background check.
6. I was informed by [MMC] representatives
that, in the event a conviction was found
on my record during the enrollment
process, [MMC] would determine whether or
not I was fit for admission.
7. I agreed to submit to the criminal
background check process required by
[MMC] as part of the enrollment process
to determine my eligibility for the
school and any program of study I applied
for.
During Supplee’s 14 May 2013 deposition, Supplee testified
that he revealed all the actions, conversations, and statements
made by MMC employees to the best of his recollection. He
described his meetings with MMC’s dean of education, Brothers,
and Woolford and revealed the information that was discussed
during those meetings. At no point during his deposition does
-35-
Supplee testify that he was informed by MMC representatives that
a criminal background check would be performed, that acceptance
into a program would depend on the results of that criminal
background check, that MMC would determine whether he was fit
for admission based on the results of the criminal background
check, or that he agreed to submit to the results of the
criminal background check as described in paragraphs four
through seven of his affidavit. We view paragraphs four through
seven of Supplee’s affidavit as additions that are comprised of
conclusory statements or recharacterizations that are favorable
to Supplee and that materially alter his prior deposition
testimony. Based on the foregoing, we do not find that the
trial court abused its discretion in striking these portions of
Supplee’s affidavit. Nonetheless, because the substance of
paragraphs four through seven are independently corroborated by
MMC’s “Background Checks” provision included in the student
catalog, which provided that students would be required to
submit to a criminal history check and that MMC would review any
applicant and determine their fitness for admission, we find
even assuming arguendo that the trial court abused its
discretion in striking paragraphs four through seven, Supplee
has failed to show any resulting prejudice.
-36-
Paragraphs thirteen and fifteen of Supplee’s affidavit
provided as follows:
13. Prior to my dismissal from [MMC], I was
never made aware by [MMC] that if I was
denied access to one clinical externship
facility, I would not be permitted to
apply for admission to any other clinical
externship facility.
. . . .
15. Prior to my dismissal from [MMC], I was
not aware that being denied access to a
single clinical externship facility would
immediately prohibit me from graduating
from the Surgical Technology Program.
A review of plaintiff’s deposition testimony demonstrates
that he was aware that based on the results of a criminal
background check, there “could be an issue . . . with the
clinical sites in general[.]” However, Supplee’s deposition
testimony fails to indicate that he was aware that being denied
to a single clinical externship facility would prohibit him from
applying for admission to another clinical externship facility
or would prohibit him from graduating from the surg tech
program. Thus, paragraphs thirteen and fifteen of Supplee’s
affidavit do not contradict or materially conflict with his
prior deposition testimony; nor do they contain additions and
changes that are conclusory statements or recharacterizations
more favorable to Supplee that materially alter his deposition
-37-
testimony. Yet, even if we were to find that the trial court
abused its discretion in striking paragraphs thirteen and
fifteen of Supplee’s affidavit, we hold that this error was not
prejudicial as the substance of the paragraphs were contained
within paragraph seventeen, which was not struck by the trial
court:
17. Had I known that the policies of a single
third-party clinical site could render my
investments, financial and otherwise, in
a [surg tech program] degree to be of no
value, I would not have enrolled in that
program.
Based on the foregoing, we reject Supplee’s arguments and
affirm the order of the trial court, striking portions of
Supplee’s affidavit.
ii. Summary Judgment
In his next argument, Supplee contends that the trial court
erred by granting defendants’ motion for summary judgment as to
Supplee’s claims of fraud, unfair and deceptive trade practices
(UDTP), negligent misrepresentation, and negligence.
[W]e review the trial court’s order de
novo to ascertain whether summary judgment
was properly entered. Summary judgment is
appropriate if the pleadings, depositions,
answers to interrogatories, and admissions
on file, together with the affidavits, if
any, show that there is no genuine issue as
to any material fact and that any party is
entitled to a judgment as a matter of law.
-38-
Bumpers v. Cmty. Bank of N. Va., 367 N.C. 81, 87, 747 S.E.2d
220, 226 (2013) (citation and quotation marks omitted). “When
considering a motion for summary judgment, the trial judge must
view the presented evidence in a light most favorable to the
nonmoving party.” Hamby v. Profile Prods., LLC, 197 N.C. App.
99, 105, 676 S.E.2d 594, 599 (2009) (citation omitted).
The party moving for summary judgment has
the burden of establishing the lack of any
triable issue. The movant may meet this
burden by proving that an essential element
of the opposing party’s claim is
nonexistent, or by showing through discovery
that the opposing party cannot produce
evidence to support an essential element of
his claim or cannot surmount an affirmative
defense which would bar the claim.
Folmar v. Kesiah, __ N.C. App. __, __, 760 S.E.2d 365, 367
(2014) (citation omitted).
a. Fraud
“[T]he essential elements of actionable fraud are: (1)
false representation or concealment of a material fact, (2)
reasonably calculated to deceive, (3) made with intent to
deceive, (4) which does in fact deceive, and (5) resulting in
damage to the injured party.” Harrold v. Dowd, 149 N.C. App.
777, 782, 561 S.E.2d 914, 918 (2002) (citation omitted). “An
unfulfilled promise is not actionable fraud, however, unless the
-39-
promisor had no intention of carrying it out at the time of the
promise, since this is misrepresentation of a material fact.”
McKinnon v. CV Indus., Inc., 213 N.C. App. 328, 338, 713 S.E.2d
495, 503 (2011) (citation omitted).
In the present case, there are no genuine issues of
material fact regarding Supplee’s fraud claim because Supplee
failed to present any evidence that defendants had the intent to
deceive. Ned Snyder, the campus director of MMC at Wilmington,
testified in a deposition that it was MMC’s practice to run a
criminal background check at admissions and at the clinical
experience. Woolford also testified that based on MMC’s written
policy, criminal background checks were “supposed to be
conducted of new applicants” during the admissions process.
Despite defendants’ policy, evidence demonstrated that
defendants failed to conduct a criminal background check on
Supplee prior to admissions. However, Supplee failed to present
specific evidence that at the time of contract formation between
Supplee and defendants, defendants had no intention of carrying
out its unfulfilled promise; an essential element for a
successful fraud claim. Consequently, we hold that the trial
court did not err by granting defendants’ motion for summary
judgment as to Supplee’s fraud claim.
-40-
b. UDTP
“In order to prevail under [N.C. Gen. Stat. § 75-1.1(a)]
plaintiffs must prove: (1) defendant committed an unfair or
deceptive act or practice, (2) that the action in question was
in or affecting commerce, (3) that said act proximately caused
actual injury to the plaintiff.” Canady v. Mann, 107 N.C. App.
252, 260, 419 S.E.2d 597, 602 (1992). “[W]hether an action is
unfair or deceptive is dependent upon the facts of each case and
its impact on the marketplace.” Norman Owen Trucking, Inc. v.
Morkoski, 131 N.C. App. 168, 177, 506 S.E.2d 267, 273 (1998)
(citations and quotation marks omitted).
If a practice has the capacity or tendency
to deceive, it is deceptive for the purposes
of the statute. “Unfairness” is a broader
concept than and includes the concept of
“deception.” A practice is unfair when it
offends established public policy, as well
as when the practice is immoral, unethical,
oppressive, unscrupulous, or substantially
injurious to consumers.
Mitchell v. Linville, 148 N.C. App. 71, 74, 557 S.E.2d 620, 623
(2001) (citations omitted). Furthermore, “[a] party is guilty
of an unfair act or practice when it engages in conduct which
amounts to an inequitable assertion of its power or position.”
McInerney v. Pinehurst Area Realty, Inc., 162 N.C. App. 285,
-41-
289, 590 S.E.2d 313, 316-17 (2004) (citation and quotation marks
omitted).
Our case law establishes that “[s]imple breach of contract
. . . do[es] not qualify as unfair or deceptive acts, but rather
must be characterized by some type of egregious or aggravating
circumstances before the statute applies.” Norman, 131 N.C.
App. at 177, 507 S.E.2d at 273. Breach of contract accompanied
by fraud or deception, on the other hand, constitutes an unfair
or deceptive trade practice. Unifour Constr. Servs. v.
Bellsouth Telcoms., 163 N.C. App. 657, 666, 594 S.E.2d 802, 808
(2004).
In support of his UDTP claim, Supplee first argues on
appeal that defendants “knowingly made false representations of
material fact concerning their intent to perform background
checks” and “knowingly omitted material information about the
discretion of a single clinical site to unilaterally reject a
student for any reason and prohibit the student from finishing
the program.” As previously discussed, we held that Supplee
could not establish a valid claim for fraud based on Supplee’s
failure to produce evidence that defendants intended to deceive
Supplee at the time of contract formation. A review of the
record does not reveal any evidence that defendants knowingly
-42-
made the alleged false representations or knowingly omitted
material about a clinical sites’ discretion. Necessarily,
Supplee’s UDTP claim under the theory of breach of contract
accompanied by fraud or deception must fail as Supplee has
failed to demonstrate how defendants’ breach of contract was
characterized by egregious or aggravating circumstances.
Second, Supplee argues that defendants engaged in an unfair
practice or act when it took intentional actions amounting to an
inequitable assertion of power. Supplee contends that
defendants accomplished this by immediately dismissing him from
the surg tech program once a single clinical internship site
rejected him. We disagree. In Supplee’s own deposition,
Supplee testifies as to how defendants suggested he get his
criminal record expunged and then reapply to the surg tech
program. Supplee further testified that defendants offered an
option of transferring into another MMC curriculum at no cost to
Supplee. These facts do not display an inequitable assertion of
power and do not display a practice that is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to
consumers. Rather, the case before us involves a breach of
contract based on an identifiable contractual promise that
defendants failed to honor. “There is nothing so oppressive or
-43-
overreaching about defendant[s’] behavior in breaching the
contract that would transform the case into one for an unfair
trade practice.” Coble v. Richardson Corp. of Greensboro, 71
N.C. App. 511, 520, 322 S.E.2d 817, 824 (1984). Accordingly, we
affirm the trial court’s granting of summary judgment in favor
of defendants on Supplee’s UDTP claim.
c. Negligence
Supplee argues that the trial court erred by granting
summary judgment in favor of defendants as to his negligence
claim because defendants had a duty to conduct a criminal
background check in order to determine his eligibility for
admission into and completion of the surg tech program.
In order to state a claim for negligence, a plaintiff must
show “(1) a legal duty; (2) a breach thereof; and (3) injury
proximately caused by the breach.” Bridges v. Parrish, 366 N.C.
539, 541, 742 S.E.2d 794, 796 (2013) (citation omitted). In
North Carolina State Ports Authority v. Lloyd A. Fry Roofing
Co., 294 N.C. 73, 240 S.E.2d 345 (1978), the North Carolina
Supreme Court held that “[o]rdinarily, a breach of contract does
not give rise to a tort action by the promisee against the
promisor.” Id. at 81, 240 S.E.2d at 350. However, the Ports
Authority Court recognized four general categories under which a
-44-
breach of contract may constitute a tort action:
(1) The injury, proximately caused by the
promisor’s negligent act or omission in
the performance of his contract, was an
injury to the person or property of
someone other than the promisee.
(2) The injury, proximately caused by the
promisor’s negligent, or wilful, act or
omission in the performance of his
contract, was to property of the
promisee other than the property which
was the subject of the contract, or was
a personal injury to the promisee.
(3) The injury, proximately caused by the
promisor’s negligent, or willful, act
or omission in the performance of his
contract, was loss of or damage to the
promisee’s property, which was the
subject of the contract, the promisor
being charged by law, as a matter of
public policy, with the duty to use
care in the safeguarding of the
property from harm, as in the case of a
common carrier, an innkeeper or other
bailee.
(4) The injury so caused was a wilful
injury to or a conversion of the
property of the promisee, which was the
subject of the contract, by the
promisor.
Id. at 82, 240 S.E.2d at 350-51 (citations omitted).
We hold that none of the four general exceptions set forth
in Ports Authority apply to the facts at hand. Rather, this
negligence cause of action is analogous to the claim brought
forward by the plaintiff in Ross. See Ross, 957 F.2d at 415(the plaintiff alleged that a university owed him a duty “to
-45-
recruit and enroll only those students reasonably qualified and
able to academically perform” at the university). As held in
Ross, we also hold that recognizing Supplee’s cause of action, a
“negligent admission” claim, would present difficult “problem[s]
to a court attempting to define a workable duty of care.” Id.Addressing Supplee’s “negligent admission” claim would require
subjective assessments as to the requirements for admission into
the surg tech program, requirements for completion of the surg
tech program, requirements of the clinical sites, and the
results of Supplee’s criminal background check. Because
“[r]uling on this issue would . . . require an inquiry into the
nuances of educational processes and theories,” we reject his
claim and affirm summary judgment in favor of defendants on this
issue. Id. at 417.
d. Negligent Misrepresentation
Lastly, Supplee argues that the trial court erred by
granting summary judgment in favor of defendants on the issue of
negligent misrepresentation. We do not agree.
“The tort of negligent misrepresentation occurs when a
party justifiably relies to his detriment on information
prepared without reasonable care by one who owed the relying
-46-
party a duty of care.” Howard v. County of Durham, __ N.C. App.
__, __, 748 S.E.2d 1, 7 (2013) (citation omitted).
Under general principles of the law of
torts, a breach of contract does not in and
of itself provide the basis for liability in
tort. Ordinarily, an action in tort must be
grounded on a violation of a duty imposed by
operation of law, and the right invaded must
be one that the law provides without regard
to the contractual relationship of the
parties, rather than one based on an
agreement between the parties. A failure to
perform a contractual obligation is never a
tort unless such nonperformance is also the
omission of a legal duty.
Hardin v. York Memorial Park, __ N.C. App. __, __, 730 S.E.2d
768, 775-76 (2012) (citations and quotation marks omitted).
The allegations in Supplee’s complaint and the evidence
before the trial court demonstrate that Supplee’s claim is that
defendants failed to conduct a criminal background check prior
to admissions and Supplee’s damages were caused by the
aforementioned failure. The duty that defendants had to conduct
a criminal background check arose under the terms of the
contract between the parties and not by operation of law
independent of the contract. As such, the breach of that
contractual duty cannot provide the basis for an independent
claim of negligent misrepresentation. Therefore, we hold that
the trial court did not err by granting summary judgment in
-47-
favor of defendants on Supplee’s claim for negligent
misrepresentation.
C. Mr. Nutt’s Appeal
On appeal, Mr. Kyle Nutt argues that the trial court erred
by granting defendants’ motion for sanctions. We agree.
“[A] Superior Court, as part of its inherent power to
manage its affairs, to see that justice is done, and to see that
the administration of justice is accomplished as expeditiously
as possible, has the authority to impose reasonable and
appropriate sanctions upon errant lawyers practicing before it.”
In re Small, 201 N.C. App. 390, 394, 689 S.E.2d 482, 485 (2009)
(citation omitted). We review our court’s inherent authority to
impose sanctions for an abuse of discretion. Couch v. Private
Diagnostic Clinic, 146 N.C. App. 658, 663, 554 S.E.2d 356, 361
(2001). “In reviewing a trial court’s findings of fact, our
review is limited to whether there is competent evidence in the
record to support the findings.” In re Key, 182 N.C. App. 714,
717, 643 S.E.2d 452, 455 (2007) (citation omitted).
Rule 3.6 of the North Carolina Rules of Professional
Conduct provides as follows:
(a) A lawyer who is participating or has
participated in the investigation or
litigation of a matter shall not make
an extrajudicial statement that the
-48-
lawyer knows or reasonably should know
will be disseminated by means of public
communication and will have a
substantial likelihood of materially
prejudicing an adjudicative proceeding
in the matter.
(b) Notwithstanding paragraph (a), a lawyer
may state:
(1) the claim, offense or defense
involved and, except when prohibited by
law, the identity of the persons
involved;
(2) the information contained in a
public record;
(3) that an investigation of a matter
is in progress;
(4) the scheduling or result of any
step in litigation;
(5) a request for assistance in
obtaining evidence and information
necessary thereto[.]
N.C. Revised R. Prof’l. Conduct Rule 3.6(a) and (b). The
comment section to Rule 3.6 states that a “relevant factor in
determining prejudice is the nature of the proceeding involved.
Criminal jury trials will be most sensitive to extrajudicial
speech. Civil trials may be less sensitive.” N.C. Revised R.
Prof’l. Conduct Rule 3.6 cmt.
North Carolina Rules of Professional Conduct Rule 3.3,
entitled “Candor Toward the Tribunal,” provides that “[a] lawyer
shall not knowingly . . . make a false statement of material
fact or law to a tribunal or fail to correct a false statement
-49-
of material fact or law previously made to the tribunal by the
lawyer[.]” N.C. Revised R. Prof’l. Conduct Rule 3.3(a)(1).
On 27 January 2014, the trial court entered an order on
defendants’ motion for sanctions and/or appropriate relief. The
trial court made the following pertinent findings of fact:
7. . . . Plaintiffs moved pursuant to
Rule 42 for an order granting each
Plaintiff a separate trial.
8. In that motion, [Mr. Nutt] represented,
among other things, that: (1) the
respective Plaintiffs had “vastly
different” criminal records; (2) the
charges that “led to each Plaintiffs’
dismissal were entirely different”; (3)
the Plaintiffs’ damages “were different
in amount, time period, and nature”;
(4) there were “significant factual
differences” between the Plaintiffs’
respective breach of contract claims;
(5) Supplee “has decided to appeal the
Court’s Summary Judgment Order”; (6)
Thomas, “due to the greatly different
factual difference in her case and
desire to reach a final adjudication in
a more timely manner, has expressed her
intent to proceed directly to trial”;
and (7) it would be “prejudicial and
inconvenient for Plaintiff Thomas to be
forced to wait for the outcome of the
appeal of Plaintiff Supplee’s
distinctly separate case.” . . . .
. . . .
11. Mr. Nutt [] moved to have Supplee’s
claim tried first, despite representing
to this Court that Thomas desired to
have her claim adjudicated in a more
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timely manner. The Honorable Phyllis
M. Gorham . . . permitted Supplee’s
trial to proceed before Thomas’ trial.
12. Supplee’s breach of contract claim came
on for trial on October 28, 2013,
before the undersigned Superior Court
Judge. Thomas’ trial was scheduled for
November 18, 2013, which was also to be
heard by the undersigned[.]
13. The jury returned a verdict in favor of
Supplee on November 1, 2013, in the
amount of $53,481. . . .
14. The jury’s verdict sheet did not
identify the basis for the award (i.e.,
whether damages were awarded based on
evidence of tuition paid, lost wages,
or some combination thereof).
15. On or about November 3, 2013, WECT
posted a story on its website
disclosing that Mr. Supplee had
prevailed on his breach of contract
claim in the amount of $53,481, and
that the damages were based upon
“wasted tuition and lost income
opportunities[.]” . . . .
16. The alleged basis for the damages,
“wasted tuition and lost income
opportunities[,]” is not a matter of
public record.
17. Mr. Nutt acknowledged to this Court
that he supplied the information to
WECT for the article.
18. Mr. Nutt was reported in the article as
stating that “the school was
contractually obligated to screen their
applicants’ criminal backgrounds to
make sure all potential students could
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eventually graduate from healthcare
degree programs w[h]ere certain
offenses the school was aware of could
potentially prevent students from
completing required coursework at
hospitals.”
19. The specific statements attributed to
Mr. Nutt by WECT were not found on the
jury’s verdict sheet.
20. Mr. Nutt also informed WECT that “the
school offered Supplee $25,000 at the
start of trial to end the matter, but
then removed the offer midway through
trial.”
21. The settlement amount and withdrawal of
the offer was an inadmissible
settlement communication, and was
likewise not a matter of public record.
22. In the WECT article, Mr. Nutt stated
that “his firm is representing another
student going to trial over similar
claims this month.”
. . . .
24. Mr. Nutt represented to WECT that
Thomas’ case was “similar” to Mr.
Supplee’s claims, while Mr. Nutt
represented and has maintained before
this Court that the two Plaintiffs
present divergent and distinct fact
patterns that necessitated two trials.
. . . .
29. Mr. Nutt’s comments created a
substantial risk of prejudicing the
Thomas jury, and were in violation of
Rule 3.6(a) of the North Carolina Rules
of Professional Conduct.
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30. Partially as a result of Mr. Nutt’s
comments to the news media, Defendants
settled Thomas’ case and avoided a
trial, did not pursue their
counterclaim against Thomas[.]
Based on the foregoing, the trial court concluded that Mr.
Nutt had violated Rule 3.6 of the North Carolina Rules of
Professional Conduct “by making extrajudicial statements to the
news media” and that Mr. Nutt “knew or reasonably should have
known that the extrajudicial statements he made would be
disseminated by means of public communication and would have a
substantial likelihood of materially prejudicing an adjudicative
proceeding in the matter.” The trial court also concluded that
Mr. Nutt either violated Rule 3.6 or Rule 3.3, or both, when he
either misrepresented the difference in the plaintiffs’ claims
or knew or should have known that their cases were not
“similar.”
First, Mr. Nutt argues that his statements made to the
media, excluding his statement concerning the settlement offer
made to Supplee, were protected by the “safe harbor” provisions
of Rule 3.6(b). Here, the trial court found in findings of fact
numbers fifteen through nineteen that Mr. Nutt’s extrajudicial
comments included stating the basis of the damages awarded by
the jury and stating that the defendants were contractually
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obligated to screen their applicants’ criminal backgrounds to
ensure all potential students could successfully complete
healthcare degree programs. The trial court found that these
statements were not a matter of public record. After thoughtful
review, we find that the jury’s award of damages and the amount
of damages were clearly a matter of public record. Mr. Nutt’s
extrajudicial statement stating that the basis of damages was
“wasted tuition and lost income opportunities” qualifies under
Rule 3.6(b), as it pertained to Supplee’s claim. Supplee’s
claim against defendants were specifically for damages based on
expenses spent to enroll and participate in classes at MMC and
for “forsaken income-earning opportunities.” These claims,
contained in Supplee’s 21 August 2012 complaint, were matters of
public record. Mr. Nutt’s statement that defendants were
“contractually obligated to screen their applicants’ criminal
backgrounds” also involves the claim involved in the present
case, and therefore, are among the subjects a lawyer may state
extrajudicially. Thus, we hold that the trial court abused its
discretion by finding that the aforementioned statements were
sanctionable under Rule 3.6.
We now address the trial court’s finding of fact number
twenty through twenty-one regarding Mr. Nutt’s extrajudicial
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statement that defendants made Supplee a $25,000 settlement
offer at the start of the trial, which was later removed midway
through the trial. The trial court found that this statement
was an inadmissible settlement communication and not a matter of
public record. Rule 3.6 requires that a lawyer “who is
participating or has participated in the investigation or
litigation of a matter” may not make an extrajudicial statement
that he knows “will have a substantial likelihood of materially
prejudicing an adjudicative proceeding in the matter.” N.C.
Revised R. Prof’l Conduct Rule 3.6(a). (emphasis added). Here,
the trial court found that Mr. Nutt’s statements were made on 3
November 2013, two days after a jury returned a verdict in favor
of Supplee. Therefore, we conclude that Mr. Nutt’s
extrajudicial statement could not have had a substantially
likelihood of materially prejudicing Supplee’s proceeding as it
had already concluded and find that the trial court abused its
discretion in finding that this statement violated Rule 3.6.
Next, Mr. Nutt argues that the trial court erred by
entering finding of fact number thirty and we agree. Finding of
fact number thirty provided that partially based on Mr. Nutt’s
extrajudicial statements, defendants settled in Thomas’ case and
avoided a trial. We find nothing in the record to support this
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finding. Mr. Nutt merely stated in his statements to the media
that “his firm was representing another student going to trial
over similar claims this month” and did not identify Thomas by
name. Additional information about Thomas’ claims would have
been a matter of public record.
Lastly, Mr. Nutt asserts that the trial court erred by
finding that his extrajudicial statements violated Rule 3.3 of
the North Carolina Rules of Professional Conduct. Here, the
trial court based its finding of a violation of Rule 3.3 on the
fact that while Mr. Nutt represented to the trial court that
Supplee’s and Thomas’ cases “present[ed] divergent and distinct
fact patterns that necessitated two trials[,]” Mr. Nutt
represented to the media that Thomas’ case was “similar” to
Supplee’s claims. We conclude that these two representations
are not contradictory and do not constitute a “false statement”
under Rule 3.3. It is clear from the record that Supplee and
Thomas’ 21 August 2012 joint complaint alleged the same legal
claims against defendants and that after the 31 July 2013
summary judgment order, the only claim at issue in both Supplee
and Thomas’ trials was breach of contract. Mr. Nutt’s
representations to the media that Supplee and Thomas had similar
claims and Mr. Nutt’s representations to the trial court that
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Supplee and Thomas’s cases had “divergent and distinct fact
patterns” are not mutually exclusive. Stating that two cases
have similar claims as well as “divergent and distinct fact
patterns” does not represent a lack of candor toward the
tribunal in violation of Rule 3.3.
Based on the foregoing, we hold that the trial court abused
its discretion by holding that Mr. Nutt either violated Rule 3.6
or Rule 3.3, or both, and reverse the trial court’s 27 January
2014 order on defendants’ motion for sanctions.
III. Conclusion
We affirm the 20 December 2013 order of the trial court
denying defendants’ motions for directed verdict and judgment
notwithstanding the verdict and hold that the trial court did
not abuse its discretion by admitting evidence of Supplee’s
landscaping business and income earned as a car salesman. We
hold that the trial court did not abuse its discretion by
striking portions of Supplee’s affidavit and affirm the 31 July
2013 order of the trial court granting defendants’ motion for
summary judgment, in part. We reverse the 27 January 2014 order
on defendants’ motion for sanctions.
Affirmed in part; reversed in part.
Judges CALABRIA and STEELMAN concur.