To prove fraud under North Carolina law, the plaintiff must establish that the defendant (1) made a false representation of material fact, (2) knew it was false or made it with reckless disregard of its truth or falsity, and (3) intended that the plaintiff rely upon it. In addition, the plaintiff must be injured by reasonably relying on the false representation.
Defendant aired a show about plaintiff's unsanitary food handling practices based on the undercover reporting of two of its reporters. Plaintiff sued on the basis of unfair trade practices, fraud, and breach of contract because the reporters gained access at plaintiff's store based on false resumes and concealed their employment with defendant. Plaintiff won a minimal amount of damages at the trial court level, but the trial court ruled that it could not recover any damages based on loss of stock value or revenue as a result of the story's publication, because those damages could not be directly linked to the fraud committed by the defendants. Both parties appealed, with plaintiff claiming that the restricted damages should be awarded, and the defendant claiming that they had not committed fraud at all.
Were defendant's reporters were guilty of committing fraud on the plaintiff?
In finding that the reporters did not commit fraud upon the plaintiff, the Court held that then contract they signed upon employment stated that either party could terminate employment at any time for any reason. Thus, plaintiff had to assume the risk of the reporters' early departure at the time of employment, and the circumstances under which they were hired were irrelevant. Further, in finding that defendant could not be held liable for any stock damage or loss of revenue, the Court found that the claims made on the defendant's program were true, and thus not defamatory, regardless of how they got the information. In order to receive punitive damages, the statements had to meet the New York Times standard of "actual malice" in publishing something with a reckless disregard for its truth. In this case, the plaintiff failed to sustain this burden of proof.