Wednesday, September 19, 2012, 10:53 PM

COA: UDAP Claim Must Be Independent from Breach of Contract Claim or Must Have Substantial Aggravating Circumstances

Yesterday the Court of Appeals made clear that an unfair and deceptive acts or practices claim must be based on acts standing separate and apart from a breach of contract claim or, if based upon a breach of contract, a Chapter 75 claim must be accompanied by “substantial aggravating circumstances." The case is SunTrust Bank v. Bryant/Sutphin Properties et al.

Plaintiff SunTrust and Defendants Bryant/Sutphin Properties, LLC (“BSP”) and Donal Sutphin entered into a Commercial Note and loan agreement whereby plaintiff would provide defendant BSP funds to finance a real estate development project. SunTrust sued defendants for breaching the terms of the agreements based on an alleged failure to pay. Defendants claimed that SunTrust's action of placing a hold on certain accounts so that no funds could be withdrawn disrupted their business and the real estate project. Defendants claimed that the reezing of accounts was an unfair and deceptive act or practice, regardless of whether it was a breach of the loan or account agreement between the parties. The matter went to trial and the jury found that neither SunTrust or defendants breached any of the agreements, but found SunTrust liable for unfair or deceptive acts or practices. The damages were trebled as to defendant BSP.

The Court of Appeals found that Defendants' Chapter 75 claim could not be separated from the breach of contract claim, and that SunTrust did nothing "extracontractual" that could constitute an unfair or deceptive act. The Court further noted that while placing a hold on bank accounts without prior notice may have been surprising to defendants and may have disrupted their business, it was not “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers," as required by Chapter 75.

The Court also noted that without an independent CHapter 75 claim based upon some
conduct outside the scope of the contracts, an award for such a claim could only be entered if the jury found a breach of contract accompanied by “[s]ubstantial aggravating circumstances.” Because the jury did not find a breach of contract, there could be no Chapter 75 violation.

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