Eli Global, LLC v. Heavner

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-186
Filed: 6 December 2016
Durham County, No. 15 CVS 2638
ELI GLOBAL, LLC and GREG LINDBERG, Plaintiffs
v.
JAMES A. HEAVNER, Defendant
Appeal by plaintiffs from orders entered 24 July 2015 and 13 August 2015 by
Judge Orlando F. Hudson, Jr. in Durham County Superior Court. Heard in the Court
of Appeals 24 August 2016.
Smith Moore Leatherwood, LLP, by Matthew Nis Leerberg and Kip David
Nelson, and Anderson Tobin, PLLC, by Kendal B. Reed (pro hac vice), for
plaintiff-appellants.
Hoof Hughes Law, PLLC, by James H. Hughes, and Hutson Law Office, P.A.,
by Richard M. Hutson, II, for defendant-appellee.
CALABRIA, Judge.
Plaintiffs appeal from the trial court’s dismissal of their action. Because
plaintiffs’ complaint stated claims for defamation and unfair and deceptive practices,
we reverse and remand.
I. Background
Greg Lindberg manages Eli Global, LLC (collectively, “plaintiffs”), which
maintains its principal office in Durham, North Carolina. Plaintiffs’ business
ELI GLOBAL, LLC V. HEAVNER
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involves purchasing and investing in other companies and their assets. James A.
Heavner (“defendant”) owns the following affiliated companies: University
Directories, LLC; Vilcom, LLC; Vilcom Interactive Media, LLC; Vilcom Properties,
LLC; and Vilcom Real Estate Development, LLC (collectively, “the UD Entities”). The
UD Entities are based in Chapel Hill, North Carolina.
In 2013, defendant retained an investment banker for the purpose of selling
the UD Entities as a going concern. Defendant and Eli Global engaged in preliminary
sale negotiations, during which Eli Global was permitted to conduct a due diligence
analysis of the companies. However, due diligence revealed that the UD Entities
were performing poorly and would require a significant capital investment in order
to become financially viable. As a result, Eli Global did not make a purchase offer.
Thereafter, another one of Lindberg’s companies, UDX, LLC (“UDX”),1
purchased and acquired from the lender-bank certain commercial loans that had been
executed by defendant and the UD Entities. As owner of the loans, UDX then
provided written notices of default and demanded payment. Since the UD Entities
were unable to pay, they filed for Chapter 11 bankruptcy protections on 24 October
2014.
That day, defendant published a press release, which stated in full:
CHAPEL HILL, N.C. October 24, 2014–University
Directories, LLC filed for protection today under Chapter
1 UDX is not a party to this action.
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11 of the Bankruptcy Code in the U.S. Bankruptcy Court
for the Middle District of North Carolina to ward off a
hostile takeover of the company.
Prior to filing the petition, University Directories had
retained an investment banker and after negotiating with
a number of potential purchasers, had chosen Eli Global,
LLC and signed a letter of intent with Greg Lindberg, Eli
Global [sic] president. University Directories’ lender,
Harrington Bank, was aware of the impending sale and
expected the loans to be paid in full at closing–a normal
course of events.
During the due diligence phase of the sales transaction,
Harrington Bank was acquired by Bank of North Carolina.
BNC immediately sold its University Directories loans and
other loans to entities related to University Directories to
UDX, LLC, a new entity created by Lindberg.
UDX LLC, having acquired the loans, suddenly and
without warning gave notice of default and disposition of
collateral, demanding ownership of University Directories
for its own operations. In addition, Lindberg and UDX,
LLC gave notice that it [sic] intended to declare other loans
in default, jeopardizing assets owned by companies related
to University Directories.
While the business court might provide relief from such a
hostile takeover, it does not do so quickly. In order to
protect the business and its employees, University
Directories made the decision to file a Chapter 11 petition,
along with its related entities obligated on the various
notes. Thus, the company will be in protective custody of
the courts so that it can continue business operations and
pursue a sale of the 40-year-old business to a qualified
buyer, thereby protecting its employees, customers, and
creditors.
University Directories is owned by James A. Heavner and
several of the company’s managers. Heavner said of the
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filing, “This Company has never missed a bank payment
and is current on every loan. We chose to take this action
with reluctance because it may cause anxiety among our
stakeholders. Yet, in 50 years of owning, operating and
selling over three dozen companies, mostly in the media
business, we have never encountered anything like this.
We will certainly litigate this matter and, in the meantime,
the courts are here to protect it. It is an extraordinary
situation when potential business partners turn out to be
predators.”
University Directories, LLC; Print Shop Management,
LLC; Vilcom LLC; Vilcom Interactive Media, LLC; Vilcom
Properties, LLC; and Vilcom Real Estate Development are
all companies in this filing and are located at 88 Vilcom
Center Drive, Suite 160, Chapel Hill, NC. James A.
Heavner is a principal of each company. University
Directories, founded in 1974, is a collegiate marketing and
media company. Vilcom Interactive Media owns and
operates WCHL, a radio station broadcasting from Chapel
Hill and “Chapelboro,” an on-line [sic] news and marketing
service. Vilcom Real Estate Development owns properties
in North Carolina and South Carolina. Print Shop
operates a retail store in Chapel Hill.
Several local media outlets, including The News & Observer, The Triangle Business
Journal, and Chapelboro, subsequently published articles based on defendant’s press
release. Defendant also told a Chapelboro writer that he “was surprised when the
potential partnership with Eli Global turned from a sale to a takeover[,]” and “[w]hat
we thought were going to be honorable purchasers of a good company turned out to
be predatory in ways none of us could have imagined.”
On 23 April 2015, plaintiffs filed a complaint against defendant, asserting
claims for defamation, libel, libel per se, slander, slander per se, and unfair and
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deceptive acts or practices. Without filing an answer, on 18 June 2015, defendant
moved to dismiss plaintiffs’ complaint for failure to state a claim upon which relief
may be granted, pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (2015). On 24 July
2015, the trial court entered an order dismissing plaintiffs’ complaint and granting
defendant’s oral motion for attorneys’ fees. See N.C. Gen. Stat. § 75-16.1 (allowing
the judge presiding over an action for unfair and deceptive acts to award “reasonable”
attorneys’ fees to the “prevailing party” upon a finding that the party asserting the
claim “knew, or should have known, the action was frivolous and malicious”). On 3
August 2015, plaintiffs filed a motion for new trial, motion for reconsideration, and
request for ruling on objections to defendant’s motion to dismiss, pursuant to N.C.
Gen. Stat. § 1A-1, Rules 59 and 60. Following a hearing, on 13 August 2015, the trial
court entered: (1) an amended dismissal order awarding additional attorneys’ fees to
defendant and including further findings of fact on that issue; and (2) an order
denying plaintiffs’ motion for new trial, motion for reconsideration, and request for
ruling on objections. Plaintiffs timely appealed from all three of the trial court’s
orders.
II. Analysis
A. Standard of Review
“A motion made pursuant to Rule 12(b)(6) tests the legal sufficiency of the
plaintiff’s complaint.” Andrews v. Elliot, 109 N.C. App. 271, 274, 426 S.E.2d 430, 432
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(1993) (citation omitted). “Dismissal under Rule 12(b)(6) is proper when on its face
the complaint reveals either no law supports the plaintiff’s claim or the absence of
fact sufficient to make a good claim, or when some fact disclosed in the complaint
necessarily defeats the plaintiff’s claim.” Id. (citation omitted). Accordingly, a
plaintiff’s complaint should not be dismissed “unless it affirmatively appears [the]
plaintiff is entitled to no relief under any state of facts which could be presented in
support of the claim.” Id. (citations and quotation marks omitted).
B. Defamation
Plaintiffs first contend that the trial court erred in dismissing their complaint
for failure to state a claim for defamation. We agree.
An action for defamation may be maintained by a person or a business entity.
See R.H. Bouligny, Inc. v. United Steelworkers of Am., 270 N.C. 160, 168, 154 S.E.2d
344, 352 (1967) (explaining that a corporation may “be injured in its credit, in its
business good will, or in its relations with its employees . . . [and] its corporate nature
is not a bar to its recovery of damages from the wrongdoer”). “In order to recover for
defamation, a plaintiff must allege that the defendant caused injury to the plaintiff
by making false, defamatory statements of or concerning the plaintiff, which were
published to a third person.” Boyce & Isley, PLLC v. Cooper, 153 N.C. App. 25, 29,
568 S.E.2d 893, 897 (2002) (citation omitted), appeal dismissed and disc. review
denied, 357 N.C. 163, 580 S.E.2d 361, cert. denied, 540 U.S. 965, 157 L. Ed. 2d 310-6-
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(2003). “[D]efamation includes two distinct torts, libel and slander.” Tallent v. Blake,
57 N.C. App. 249, 251, 291 S.E.2d 336, 338 (1982). Generally, written defamation
constitutes libel, while oral defamation is slander. Id. But “when defamatory words
are spoken with the intent that the words be reduced to writing, and the words are
in fact written, the publication is both slander and libel.” Clark v. Brown, 99 N.C.
App. 255, 261, 393 S.E.2d 134, 137 (citation omitted), disc. review denied, 327 N.C.
426, 395 S.E.2d 675-76 (1990).
North Carolina recognizes three categories of libel: (1) libel per se, which covers
publications that are “obviously defamatory”; (2) “publications which are susceptible
of two reasonable interpretations, one of which is defamatory and the other is not”;
and (3) libel per quod, which includes publications that are “not obviously defamatory,
but which become so when considered in connection with innuendo, colloquium and
explanatory circumstances.” Ellis v. Northern Star Co., 326 N.C. 219, 223, 388 S.E.2d
127, 129-30 (citation omitted), reh’g denied, 326 N.C. 488, 392 S.E.2d 89 (1990).
“Slander is actionable either per se or per quod.” Mkt. Am., Inc. v. Christman-Orth,
135 N.C. App. 143, 151, 520 S.E.2d 570, 577 (1999) (citation omitted), disc. review
denied, 351 N.C. 358, 542 S.E.2d 213 (2000).
In the instant case, the complaint alleged that defendant made the following
false statements “concerning [p]laintiffs”:
i. “In addition, Lindberg and UDX, LLC gave notice that it
[sic] intended to declare other loans in default, jeopardizing
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assets owned by companies related to University
Directories.”
ii. That [p]laintiffs attempted “a hostile takeover.”
iii. “It is an extraordinary situation when potential
business partners turn out to be predators.”
iv. “What we thought were going to be honorable
purchasers of a good company turned out to be predatory
in ways none of us could have imagined.”
v. “[I] was surprised when the potential partnership with
Eli Global turned from a sale to a takeover.”
The full press release was also included in the body of the complaint. Plaintiffs
asserted that “[i]n addition to being false, these statements are defamatory in that
they tend to impeach [p]laintiffs in their business and otherwise tend to subject
[p]laintiffs to ridicule, contempt, or disgrace.” The complaint further alleged that
defendant’s “statements especially harm and disparage [p]laintiffs due to the nature
of [p]laintiffs’ business in negotiating the purchase of other businesses and their
assets.” According to plaintiffs, defendant “intended these statements to be reduced
to writing, and such statements were in fact written” and published as a press release
“to several media outlets, . . . [which] in turn published articles based” thereon.
Plaintiffs alleged that as a result of defendant’s statements, “third parties are
deterred from negotiating and closing transactions” with them. Thus, the complaint
set forth the elements of a prima facie case for defamation. See Boyce & Isley, 153
N.C. App. at 29, 568 S.E.2d at 897.
On appeal, plaintiffs argue that defendant’s statements are actionable as
defamation per se, defamation per quod, and under the second class of libel. However,
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the complaint contained no allegation that defendant’s statements are “susceptible of
two meanings, one defamatory, and that the defamatory meaning was intended and
was so understood by those to whom the publication was made.” Renwick v. News &
Observer Pub. Co., 310 N.C. 312, 317, 312 S.E.2d 405, 408, reh’g denied, 310 N.C. 749,
315 S.E.2d 704, cert. denied, 469 U.S. 858, 83 L. Ed. 2d 121 (1984). Consequently,
plaintiffs’ complaint “failed to bring the [statements] complained of within the second
class of libel[.]” Id. at 316, 312 S.E.2d at 408 (citations omitted). We next consider
whether plaintiffs’ complaint stated a claim for defamation per se.
Whether a statement is defamatory per se is a question of law to be decided by
the trial court. See Ellis, 326 N.C. at 224, 388 S.E.2d at 130. The court must consider
the full context of the statement, viewing the words “within the four corners” of the
publication and interpreting them “as ordinary people would understand” them.
Renwick, 310 N.C. at 319, 312 S.E.2d at 410. In order to be actionable per se, the
words “must be susceptible of but one meaning and of such nature that the court can
presume as a matter of law that they tend to disgrace and degrade the party or hold
him up to public hatred, contempt or ridicule, or cause him to be shunned and
avoided.” Boyce & Isley, 153 N.C. App. at 30-31, 568 S.E.2d at 898-99 (citation
omitted). “In an action for libel or slander per se, malice and damages are deemed
presumed by proof of publication, with no further evidence required as to any
resulting injury.” Id. at 30, 568 S.E.2d at 898 (citation omitted).
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“It is well settled that false words imputing to a merchant or business man
conduct derogatory to his character and standing as a business man and tending to
prejudice him in his business are actionable, and words so uttered may be actionable
per se.” Badame v. Lampke, 242 N.C. 755, 757, 89 S.E.2d 466, 468 (1955). Our
Supreme Court has explained that
in order to be actionable without proof of special damage,
the false words (1) must touch the plaintiff in his special
trade or occupation, and (2) must contain an imputation
necessarily hurtful in its effect on his business. That is to
say, it is not enough that the words used tend to injure a
person in his business. To be actionable per se, they must
be uttered of him in his business relation. Defamation of
this class ordinarily includes charges made by one trader
or merchant tending to degrade a rival by charging him
with dishonorable conduct in business.
Id. (citations omitted); see also Ellis, 326 N.C. at 224, 388 S.E.2d at 130 (holding that
a letter accusing the plaintiff-company of committing “an unauthorized act” on behalf
of the defendant-company was libelous per se because it “impeache[d the plaintiff] in
its trade as a food broker”); Ausley v. Bishop, 133 N.C. App. 210, 215, 515 S.E.2d 72,
76 (1999) (determining that the plaintiff’s allegations that the defendant, a former
employee who “was launching his own business as an appraiser,” had engaged in theft
and loan fraud “undoubtedly had the capacity to harm [the] defendant in his trade or
profession”).
As stated in their complaint, plaintiffs’ business is “to invest in companies as
a going concern, which at times includes negotiating to purchase other businesses or
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their assets.” Indeed, Eli Global was a prospective buyer of the UD Entities before
due diligence revealed their poor financial health. Accordingly, defendant’s
characterization of plaintiffs as “potential business partners [who] turn[ed] out to be
predators” impugned them in their “special trade or occupation.” Badame, 242 N.C.
at 757, 89 S.E.2d at 468.
Defendant asserts that pursuant to this Court’s decision in Nucor Corp. v.
Prudential Equity Grp., LLC, 189 N.C. App. 731, 659 S.E.2d 483 (2008), his
statements are not defamatory per se because they do not allege any “illegal or
wrongful activity” by plaintiffs. See id. at 737, 659 S.E.2d at 487 (distinguishing Ellis
and Ausley on the grounds that those cases involved allegations of “specific wrongful
acts,” whereas “here, no specific acts on the part of [the] plaintiff have been alleged”).
In Nucor, the plaintiff-manufacturer alleged that the following statements, published
by the defendant-financial company in an email sent to investors nationwide, were
libelous per se:
Alienated customers may encourage Nippon Steel, Brazil’s
CSN or some of Nucor’s sixteen plant managers to build
new steel companies in addition to Thyssen, Severcorr, or
reborn Weirton Steel adding ten million tons. Alienated
customers may file antitrust lawsuits as has been done in
the electrode, container board OSB, or other sectors. A
clever attorney could make hay from trebled damages on
Nucor’s $2.6 billion pre-tax earnings[, and] Nucor needs to
wake up from its monopoly dreams and get back to reality
in our view.
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Id. (alteration in original). The trial court granted the defendants’ motion to dismiss,
and we affirmed on appeal.
Defendant’s reliance on Nucor is misplaced for several significant reasons.
First, not only did the Nucor publication fail to assert “any illegal or wrongful
activity” by the plaintiff, it failed to assert any statement of verifiable fact. We
explained,
as to “alienated customers” the publication notes that “[a]
clever attorney could make hay from trebled damages on
Nucor’s $2.6 billion pre-tax earnings.” We do not find any
part of this statement, which does not allege specific
wrongful conduct on the part of the plaintiff and uses such
rhetorical language as “could make hay[,]” to be
defamatory. The second statement, “Nucor needs to wake
up from its monopoly dreams and get back to reality in our
view[,]” is also an opinion statement without any alleged
facts on which we could find grounds for a claim of libel per
se.
Id. at 737-38, 659 S.E.2d at 487 (alterations in original) (internal citations omitted).
By contrast, defendant’s assertion that Lindberg and UDX “gave notice that [they]
intended to declare other loans in default, jeopardizing assets owned by companies
related to University Directories” is a statement of verifiable fact which may be
proven true or false. Cf. Daniels v. Metro Magazine Holding Co., 179 N.C. App. 533,
539, 634 S.E.2d 586, 590 (2006) (“If a statement cannot reasonably be interpreted as
stating actual facts about an individual, it cannot be the subject of a defamation suit.”
(citation, brackets, and quotation marks omitted)), appeal dismissed and disc. review
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denied, 361 N.C. 692, 654 S.E.2d 251 (2007). Although some of defendant’s remarks
may appear to express an opinion, a person “cannot preface an otherwise defamatory
statement with ‘in my opinion’ and claim immunity from liability[.]” Id.Second, in Nucor, we declined to consider paragraphs of the plaintiff’s
complaint that provided further details about the antitrust lawsuits filed in other
sectors because such “explanatory circumstances” may not be considered on a claim
for libel per se. 189 N.C. App. at 737, 659 S.E.2d at 487 (“Words which are libelous
per se do not need an innuendo, and, conversely, words which need an innuendo are
not libelous per se.” (citation omitted)). Defendant’s press release requires no such
explanation. By stating “[w]hat we thought were going to be honorable purchasers of
a good company . . . [,]” defendant clearly means that plaintiffs are not, a harmful
imputation given that plaintiffs’ particular trade is buying and investing in other
businesses. See Badame, 242 N.C. at 757, 89 S.E.2d at 468 (noting that defamation
per se in the business context “ordinarily includes charges made by one trader or
merchant tending to degrade a rival by charging him with dishonorable conduct”).
Third, viewing the Nucor publication “as a whole,” we concluded that the
“overall import of the document was not derogatory of [the] plaintiff.” 189 N.C. App.
at 738, 659 S.E.2d at 487 (observing that “[t]he publication also states that ‘We
believe Nucor is a fine company, and we are not aware of any “company-specific” flaw
or blemish.’ ”). The same cannot be said here. “One does not have to ‘read between
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the lines’ to discover the [press release’s] defamatory content.” Boyce & Isley, 153
N.C. App. at 32, 568 S.E.2d at 899 (citing Renwick, 310 N.C. at 318, 312 S.E.2d at
409).
Defendant, citing several business dictionaries for support, argues that
“predator” and “hostile takeover” are “recognized business terms” that accurately
describe plaintiffs and the parties’ business transaction; therefore, he contends that
his statements are true and cannot serve as the basis of a defamation claim.
However, defendant’s reliance on extrinsic sources is premature, given that “on a
Rule 12(b)(6) motion, the issue is not whether a plaintiff will ultimately prevail but
whether the claimant is entitled to offer evidence to support the claims[.]” Andrews,
109 N.C. App. at 275, 426 S.E.2d at 432 (citation, quotation marks, and brackets
omitted).
Viewing defendant’s remarks “within the four corners” of the press release and
“as ordinary people would understand” them, Renwick, 310 N.C. at 319, 312 S.E.2d
at 410, we do not believe that the average readers of Chapelboro and The News &
Observer would read “predator” to mean “a company that buys or tries to buy another
company that is in a weaker financial position,” as defendant contends on appeal.
Even assuming, arguendo, that readers of The Triangle Business Journal might
immediately recognize this business definition, defendant’s defamatory meaning is
nevertheless revealed by his statements that he has “never encountered anything like
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this” and “will certainly litigate this matter.” Cf. Boyce & Isley, 153 N.C. App. at 31,
568 S.E.2d at 899 (rejecting the defendants’ assertion that “the average person is
familiar with the concept of contingency fees in the context of large class-action
lawsuits” and holding that their television advertisement alleging that a political
opponent “charg[ed] . . . more [per hour] than a policeman’s salary” was defamatory
per se).
We are similarly unpersuaded by defendant’s alternative argument that his
remarks are protected as “rhetorical hyperbole,” a statement so exaggerated or
outlandish that “no reasonable reader would believe [it] to be literally true.” Craven
v. Cope, 188 N.C. App. 814, 818, 656 S.E.2d 729, 733 (2008). Defendant’s press release
was plainly intended to assuage stakeholders’ anxiety after the UD Entities filed for
Chapter 11 bankruptcies. Considering defendant’s statements in this context, their
defamatory tenor is even more evident. See Renwick, 310 N.C. at 319, 312 S.E.2d at
410.
We hold that plaintiffs stated a claim for libel and slander per se sufficient to
withstand defendant’s motion to dismiss. Notably, “[w]hether or not plaintiffs may
ultimately prevail on these claims is not a matter before this Court.” Boyce & Isley,
153 N.C. App. at 35, 568 S.E.2d at 901. At this early stage in the proceedings,
however, they have met their low burden of proving that they are “entitled to offer
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evidence to support the[ir] claims[.]” Andrews, 109 N.C. App. at 275, 426 S.E.2d at
432.
C. Unfair and Deceptive Practices
Plaintiffs next contend that the trial court erred by dismissing their claims for
unfair and deceptive practices. We agree.
N.C. Gen. Stat. § 75-1.1(a) provides that “[u]nfair methods of competition in or
affecting commerce, and unfair or deceptive acts or practices in or affecting commerce,
are declared unlawful.” A claim for unfair and deceptive practices requires proof of:
“(1) an unfair or deceptive act or practice, (2) in or affecting commerce, which (3)
proximately caused actual injury to the claimant.” Nucor, 189 N.C. App. at 738, 659
S.E.2d at 488 (quoting Craven, 188 N.C. App. at 819, 656 S.E.2d at 733). “[A] libel
per se of a type impeaching a party in its business activities is an unfair or deceptive
act in or affecting commerce in violation of [N.C. Gen. Stat.] § 75-1.1, which will
justify an award of damages . . . for injuries proximately caused.” Ellis, 326 N.C. at
226, 388 S.E.2d at 131 (citation omitted).
As previously discussed, plaintiffs stated a claim for defamation per se based
on defendant’s statements impeaching their business reputation. Regarding
plaintiffs’ claim for unfair and deceptive practices, the complaint further alleges that
defendant’s “false and defamatory statements constitute an unfair or deceptive act or
practice in or affecting commerce which proximately caused actual injury to
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[p]laintiffs in violation of section 75-1.1 of the North Carolina General Statutes.”
Because the trial court’s dismissal of this claim was predicated on its determination
that plaintiffs had failed to state a claim for defamation, we conclude that the trial
court also erred in dismissing plaintiffs’ claim for unfair and deceptive practices.
Additionally, N.C. Gen. Stat. § 75-16.1 provides that a judge presiding over an
action for unfair and deceptive practices may, in certain instances, award
“reasonable” attorneys’ fees to “the prevailing party.” Having determined that the
trial court erred by dismissing plaintiffs’ claim for unfair and deceptive practices, we
necessarily conclude that the court also erred by awarding attorneys’ fees to
defendant.
III. Conclusion
Plaintiffs’ complaint set forth the elements and necessary factual allegations
to support claims for defamation per se and unfair and deceptive practices;
therefore, the trial court erred by granting defendant’s motion to dismiss and in
awarding attorneys’ fees to defendant. Having so concluded, we need not consider
plaintiffs’ remaining arguments.
REVERSED AND REMANDED.
Judges DAVIS and TYSON concur.
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