Recent Decision Highlights the Broad Scope of the Securities Exemption to the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. 75-1.1, et seq.

Author(s): Sean C. Wagner

In recent opinions, courts have demonstrated a willingness to significantly narrow the applicability of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. 75-1.1, et seq.(NCUDTPA), in the context of business disputes by broadly interpreting the applicability of the securities exemption. Like its name suggests, the securities exemption excludes securities transactions from the scope of the NCUDTPA. A recent federal court decision in Robichaud v. Engage2Excel, Inc.,et al., Case No. 5:18-CV-00086-GCM, 2019 WL 2076561 (W.D.N.C. May 10, 2019), indicates that the scope of the securities exemption is broad. The case involved allegations that, following a merger, the defendants withheld the plaintiff’s portion of the merger proceeds because plaintiff, who owned a competing business in the same industry, refused to agree to non-competition, non-solicitation, and non-disparagement provisions. The defendants moved to dismiss the NCUDTPA claim, arguing that the claim should be dismissed pursuant to the securities exemption, because the case arose from a complex securities transaction. In response, the plaintiff argued that the securities transaction was not the focus of the NCUDTPA claim, pointing out that the offensive conduct was the unfair competition in the form of refusing to pay plaintiff his portion of the merger proceeds unless he agreed not to compete with defendants. After finding that the unfair and deceptive conduct was inextricably intertwined with a securities transaction, the Court dismissed plaintiff’s NCUDTPA claim.

The complete text of the Order partially granting Defendants’ Motions to Dismiss is set forth below.

Robichaud v Engage2Excel Inc

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