A land investment company can move forward with a lawsuit against an Orange County mining company that may have exaggerated the dangerous effects that its blasting would have on a proposed subdivision nearby, the North Carolina Court of Appeals has ruled in a case of first impression.
The ruling reverses a trial court’s dismissal of a lawsuit filed by Cheryl Lloyd Humphrey Land Investments Co. against Rescoe Products and Piedmont Minerals Company that accuses them of overstating the hazards of their operations so they could buy a piece of adjoining property at a below-market price.
Braddock Park Homes planned to buy property from CLHLIC and build 118 townhomes in two phases in Hillsborough, pending approval from the town. During planning board meetings, representatives of Rescoe and Piedmont allegedly opposed the project, pointing to the dangers that fly rock, air blasts, and ground vibrations from blasting of a mine could have on potential residents.
The town approved both phases of the subdivision. Braddock paid $3.485 million for the 41 acres for Phase I but ultimately decided to pull out of Phase II of development, as its contract allowed, citing Rescoe’s and Piedmont’s statements about the dangers of building homes next to the mine.
CLHLIC sued, alleging tortious interference with prospective economic damage, and claiming that the statements were made maliciously, intentionally and without justification, but an Orange County judge granted a motion to dismiss the suit.
Rescoe and Piedmont raised several defenses, but the appeals court found none of them persuasive. It first argued that the suit was barred by the Noerr-Pennington doctrine, articulated by the U.S. Supreme Court, which generally shields private entities from liability for any anticompetitive effects that might result from their attempts to influence the passage or enforcement of laws.
But, unlike the trial court, the appeals court found that the Noerr-Pennington doctrine did not apply to CLHLIC’s suit. Judge Chris Brook, writing for a unanimous panel in a July 16 opinion, noted that the parties in the case were not business competitors, and CLHLIC was not alleging any harm resulting from a restraint of competition. As such, CLHLIC’s failure to specifically allege that the case fell within an exception to the Noerr-Pennington doctrine was not a defect in its complaint.
The defendants also contended that because North Carolina law regards blasting as an “ultrahazardous” activity–it is, in fact, the only activity regarded as such–it was literally impossible for the companies to overstate the dangers related to blasting.
No court had previously considered the issue, but Brook found that the defendants misunderstood the purpose of the “ultrahazardous” designation, which is to relieve plaintiffs of the burden of proving that a blasting company breached its duty to take reasonable care rather than to insulate blasting companies from legal liability for alleged fraud or misrepresentations.
“It does not follow that simply because no amount of reasonable care eliminates the risk of serious harm from blasting it is impossible, as a matter of law, to overstate the risks of harm from blasting,” Brook wrote. “The former principle is a proposition stating the rationale for imposing strict liability for injuries resulting from blasting; it does not mean that the dangers inherent in the activity cannot be described – or mis-described. And it does not mean that an injury resulting from such mis-description, as is alleged in this case, is not actionable.”
The court also held that the fact that Braddock exercised its right to back out of the deal, rather than declining to enter into a contract, was not a meaningful distinction that precluded CLHLIC from bringing a suit for tortious interference with prospective economic advantage. Whitfield Gibson and Charles Steel of Manning Fulton and Skinner in Raleigh represented the plaintiffs. Abbey Krysak represented Rescoe and Piedmont Minerals. Neither side’s attorney could be reached for comment on the ruling.
The 25-page opinion is Cheryl Lloyd Humphrey Land Investment Co. v. Rescoe Products, Inc. (Lawyers Weekly No. 011-180-19). The full text of the opinion can be found at nclawyersweekly.com.
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