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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
SAMMY JOHNSON AND VICI JOHNSON, Plaintiffs, v. COLONIAL LIFE &
ACCIDENT INSURANCE COMPANY, PAUL CLIFTON and FRED RAAB,
Filed: 20 September 2005
1. Contracts_employment_termination for cause_issue of fact
The trial court correctly denied summary judgment for defendant and allowed a claim for
breach of an employment contract to go to the jury where the issue was whether termination was
for cause; defendant contended that the termination was for making false or misleading
statements on claims; and plaintiff claimed that the termination was for helping policyholders fill
out claim forms. The claim was properly submitted to the jury to weigh the evidence and judge
the credibility of the witnesses. Moreover, there was sufficient evidence to support the damage
2. Unfair Trade Practices_breach of employment contract_aggravating factors
The judge properly found that the breach of an employment contract, accompanied by
aggravating factors, satisfied a claim under N.C.G.S. § 75-1.1 for unfair trade practices.
3. Unfair Trade Practices_breach of contract_continuous transaction
A defendant may not divide a breach of contract action and the conduct which aggravated
the breach when in substance there is but one continuous transaction amounting to unfair and
deceptive trade practices. The trial court here did not err by trebling the breach of contract
damages pursuant to an N.C.G.S. § 75-1.1 claim.
4. Unfair Trade Practices_trebled damages_pre-judgment interest
The damages to be trebled on an unfair trade practices claim are those fixed by the
verdict. The trial court here erred by awarding pre-judgment interest on trebled damages rather
than only on the damages awarded by the jury for breach of an employment contract.
5. Emotional Distress_intentional infliction--comments by employer_insulting and
offensive_not beyond bounds of decency
The trial court erred by submitting to the jury the issue of intentional infliction of
emotional distress. The comments made to plaintiff, though insulting and offensive, do not
constitute conduct which is so egregious as to go beyond all possible bounds of decency.
6. Jurisdiction_COBRA claim_exclusively federal
The trial court did not have subject matter jurisdiction over a COBRA claim. It is clear
that except for subsections (a)(1)(B) and (a)(1)(7) of 29 U.S.C. § 1132(c)(1) the district courts of
the United States have exclusive jurisdiction over these claims.
Appeal by defendant (Colonial) from judgment and order entered
6 April 2004 and orders entered 15 June 2004, by Judge Clifton W.Everett, Jr., in Pitt County Superior Court. Heard in the Court of
Appeals 17 August 2005.
Kennedy Covington Lobdell & Hickman, L.L.P., by John L.
Sarratt and Ann M. Anderson, for defendant appellant.
The Blount Law Firm, P.A., by Marvin K. Blount, Jr., Rebecca
C. Blount, and Harry H. Albritton, Jr.; and Brooks Pierce
McLendon Humphrey & Leonard, by Jeffrey E. Oleynik, for
Defendant (Colonial) appeals from a superior court order
awarding a jury verdict, adding interests and costs, trebling
damages and making an award under COBRA, for $4,138,276.92 plus
post-judgment interest. We affirm in part, vacate in part, reverse
in part and remand.
Plaintiff (Mr. Johnson) was a sales representative for
Colonial Life beginning in 1982 and was employed on a contractual
basis. The contract provided for termination for cause. It further
provided the acts which would give rise to termination for cause.
One of those proscribed acts was: Makes or knowingly allows to be
made false or misleading statements on any application or claim or
other document or communication submitted to Colonial.
On 29 September 1996 Mr. Johnson filed a claim giving notice
to Colonial of an eye injury received on 18 August 1996.
Colonial's evidence tended to show that a doctor's statement with
no patient name was attached to the claim form for treatment of a
facial cut. Upon investigation, Colonial found that a similardoctor's statement had been filed by another policyholder.
Colonial became suspicious that Mr. Johnson had manipulated another
policyholder's doctor's statement and submitted the statement with
his own claim. Mr. Johnson denied having ever attached a doctor's
statement to the claim that was filed in regard to his eye injury.
After the claim was filed by Mr. Johnson, a meeting was held
between Mr. Johnson and Colonial representatives to discuss
suspicions about the claim. At the meeting Mr. Johnson was accused
of attempting to steal $198.00 from Colonial, threatened with the
loss of his job, loss of medical insurance, and the filing of a
report with the fraud division of the North Carolina Insurance
Commissioner's Office. Along with the threat of losing his medical
insurance, Mr. Johnson was told to see how you take care of a wife
with a history of cancer now.
On 8 May 1997 Mr. Johnson received a letter terminating his
contract with Colonial. The letter stated that a claim had been
filed for benefits and that a report had been filed of suspected
fraudulent activity with the North Carolina Department of
Insurance. Mr. Johnson states that the accusation of filing a
fraudulent claim was not the real reason for termination of his
contract, but rather that Colonial's displeasure with Mr. Johnson's
assisting policyholders in filling out insurance claims was the
basis. Mr. Johnson was even told by Colonial representatives prior
to termination that if he did not discontinue the practice of
filling out insurance claims for policyholders that he would be
terminated and would lose his medical insurance. The Johnsons filed a complaint in the Superior Court of Pitt
County. Colonial then gave a notice of removal to federal court on
the grounds of diversity citizenship. The case was then remanded
back to superior court for lack of diversity due to the joinder of
non-diverse parties. There was no objection or motion to preserve
any of the claims in the federal court.
At trial Colonial made a motion for summary judgment as to all
claims brought by the Johnsons. The motion was deferred until the
close of the evidence upon which the trial judge entered an order
denying the motion as to the issues of (1) breach of contract, (2)
wrongful termination, (3) COBRA benefits, (4) intentional
infliction of emotional distress upon Mr. Johnson, (5) punitive
damages, (6) negligence and gross negligence, (7) violation of N.C.
Gen. Stat. § 75-1.1, (8) declaratory relief, and (9) equitable
The verdict sheet was submitted to the jury with nine issues.
In the verdict sheet the jury first had to determine whether
Colonial had breached its contract with Mr. Johnson. Upon answering
yes to this issue, the jury was then to determine the amount of
damages that Mr. Johnson was entitled to as a result of the breach.
The jury was then required to determine whether Colonial had
engaged in any of three aggravating circumstances related to the
breach of the contract.
The jury found that Colonial had breached its contract with
Mr. Johnson and that as a result he was entitled to $537,887.00.
The jury also found that Colonial had engaged in two of the threeaggravating circumstances associated with the breach. In addition,
the jury found that Colonial had intentionally inflicted emotional
distress on Mr. Johnson and awarded him $1,075,774.00 as a result.
Mr. Johnson then made a motion for trebling damages and
attorneys' fees under N.C. Gen. Stat. §§ 75-1.1 and 75-16. The
trial judge entered an order finding as a matter of law that where
the jury found that there was a breach of contract committed by
Colonial and where the jury also found that Colonial engaged in two
of three aggravating circumstances associated with the breach, that
Colonial had engaged in unfair and deceptive trade practices
entitling Mr. Johnson to treble damages.
Judgment was entered 6 April 2004 awarding $537,887.00 for
breach of contract with $297,561.02 in pre-judgment interest, these
two amounts were added together and trebled for an award of
$2,506,344.06. The amount of $1,075,774.00 was awarded for
intentional infliction of emotional distress with $414,984.68 in
pre-judgment interest, $1,900.00 for COBRA violations in respect to
Mr. Johnson with $734.00 in interest, and $73,000.00 for COBRA
violations with respect to Mrs. Johnson with $28,160.00 in
interest. Costs were also awarded in the amount of $37,380.18. The
total damages awarded were $4,138,276.92 along with any post-
Colonial then made a motion to alter or amend the judgment
based on the order trebling the pre-judgment interest on the breach
of contract award which was denied by the trial judge in order
entered 15 June 2004. Colonial also made a motion for judgmentnotwithstanding the verdict, or, in the alternative, for a new
trial, which was also denied in order entered 15 June 2004.
Colonial now appeals.
 In its first argument on appeal, Colonial contends that
the trial court erred in submitting the issue of breach of contract
to the jury and further that there is insufficient evidence to
support the damages awarded. We disagree.
Summary judgment is proper if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that any party is entitled to a judgment as
a matter of law. N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003). On a
motion for summary judgment, [t]he evidence is to be viewed in the
light most favorable to the nonmoving party. Moore v. Coachmen
Industries, Inc., 129 N.C. App. 389, 394, 499 S.E.2d 772, 775
(1998) (citation omitted). When determining whether the trial court
properly ruled on a motion for summary judgment, this court
conducts a de novo review. Va. Electric and Power Co. v. Tillett,
80 N.C. App. 383, 385, 343 S.E.2d 188, 191, cert. denied, 317 N.C.
715, 347 S.E.2d 457 (1986). The elements of a claim for breach of
contract are (1) existence of a valid contract and (2) breach of
the terms of that contract. Poor v. Hill, 138 N.C. App. 19, 26,
530 S.E.2d 838, 843 (2000).
In the instant case, Colonial motioned for summary judgment as
to all of the Johnsons' claims. Mr. Johnson claimed that thetermination of his employment contract was a breach in violation of
the terms of the contract. Both parties agreed that the contract
was valid and that termination could only be made for cause. The
question in contention was whether the termination was for cause.
Colonial contends that the reason for termination fell within the
following term of the contract: Makes or knowingly allows to be
made false or misleading statements on any application or claim or
other document or communication submitted to Colonial. Mr. Johnson
on the other hand claims that he never filed the false or
misleading claim which Colonial has accused him of doing, but
rather that this is a mere pre-text for the actual reason he was
fired. Mr. Johnson instead presented evidence showing Colonial's
dissatisfaction with his practice of helping policyholders fill out
claim forms as the reason for termination and evidence of threats
made by Colonial representatives to fire him if he did not
discontinue this practice. Where there was a genuine issue as to a
material fact, whether or not there was a breach, the claim for
breach of contract was properly submitted to the jury to weigh the
evidence and judge the credibility of the witnesses. Draughon v.
Harnett Cty. Bd. of Educ., 158 N.C. App. 705, 708, 582 S.E.2d 343,
345 (2003), (holding that summary judgment is not appropriate where
matters of credibility and determining the weight of the evidence
exist), aff'd per curiam, 358 N.C. 137, 591 S.E.2d 520, reh'g
denied, 358 N.C. 381, 597 S.E.2d 129 (2004).
Colonial also contends that there was insufficient evidence to
support the breach of contract damages found by the jury. Thegravamen of this argument is that Colonial would have preferred
that the jury accept their evidence as to mitigation instead of
accepting the evidence presented by the Johnsons. However, it is
evident after reviewing the record that there was sufficient
evidence to support the breach of contract damages awarded by the
Next, Colonial contends that the trial court erred in the
following three determinations:
A. In determining that there was a violation of N.C.
Gen. Stat. § 75-1.1. We disagree.
B. In trebling the breach of contract damages pursuant
to an N.C. Gen. Stat. § 75-1.1 claim. We disagree.
C. In trebling the pre-judgment interest before
awarding damages. We agree.
 '[I]t is well recognized . . . that actions for unfair or
deceptive trade practices are distinct from actions for breach of
contract, and that a mere breach of contract, even if intentional,
is not sufficiently unfair or deceptive to sustain an action under
N.C.G.S. § 75-1.1.' Eastover Ridge, L.L.C. v. Metric Constructors,
139 N.C. App. 360, 367-68, 533 S.E.2d 827, 832-33 (citation
omitted), cert. denied,
353 N.C. 262, 546 S.E.2d 93 (2000). Thus,
plaintiff must show 'substantial aggravating circumstances
attending the breach to recover under the Act, which allows for
treble damages.' Id.
The verdict sheet as submitted to the jury first asked the
jury to find whether there was a breach of contract. Immediatelyfollowing the breach of contract claim the verdict sheet asked the
jury to determine whether Colonial engaged in one of the following
1. Failed to adequately investigate the
allegation that Sammy Johnson submitted a
false or fraudulent claim before
submitting a fraud report to the North
Carolina Department of Justice.
2. Colonial submitted, without knowing or
having reasonable cause to believe, a
report to the North Carolina Department
of Insurance concerning Sammy Johnson.
3. Wrongfully used the accusation of a false
claim as a pretext for terminating Sammy
Johnson when there was otherwise no
cause, as defined in the contracts.
The jury returned the verdict finding aggravating factors 1 and 3
from the verdict sheet to be present. Mr. Johnson presented
evidence that false accusations were deceptively made against him
as a pre-text forming the basis of termination and the jury agreed.
Therefore, where the jury found that there was a breach of contract
accompanied by aggravating factors, it was proper for the judge to
conclude as a matter of law that a claim under N.C. Gen. Stat. §
75-1.1 had been satisfied.
 The amount to be trebled is the amount fixed by the
verdict. N.C. Gen. Stat. § 75-16 (2003). The only damages that
may be trebled are those which are proximately caused by a
violation of N.C. Gen. Stat. § 75-1.1. See Gray v. N.C. Ins.
352 N.C. 61, 529 S.E.2d 676, reh'g denied
N.C. 599, 544 S.E.2d 771 (2000). However, Where the same courseof conduct gives rise to a traditionally recognized cause of
action, as, for example, an action for breach of contract, and as
well gives rise to a cause of action for violation of G.S. 75-1.1,
damages may be recovered either for the breach of contract, or for
violation of G.S. 75-1.1 . . . . Marshall v. Miller
, 47 N.C. App.
530, 542, 268 S.E.2d 97, 103 (1980), modified and aff'd
, 302 N.C.
539, 276 S.E.2d 397 (1981).
Colonial argues that there should be a division of the breach
of contract action and the § 75-1.1 claim. However, as evidenced by
the jury verdict, the breach of contract accompanied by aggravating
factors is what gave rise to the § 75-1.1 claim. Moreover, the
court will not allow a defendant to divide the breach of contract
action and the conduct which aggravated the breach when in
substance there is but one continuous transaction amounting to
unfair and deceptive trade practices. See Garlock v. Henson,
N.C. App. 243, 435 S.E.2d 114 (1993) (holding that where there was
a breach of contract accompanied by aggravating factors that it was
proper to treble the breach of contract damages).
 Pre-judgment interest may be awarded on compensatory
damages for breach of contract. N.C. Gen. Stat. § 24-5(a) (2003).
However, according to N.C. Gen. Stat. § 75-16, inter alia,
amount of damages to be trebled are those
fixed by the verdict.
Moreover, damages for unfair and deceptive trade practices under
North Carolina law are awarded as a penalty rather than to
compensate. See Pinehurst, Inc. v. O'Leary Bros. Realty,
79 N.C.App. 51, 338 S.E.2d 918, disc. review denied and cert. denied,
N.C. 378, 342 S.E.2d 896 (1986). This Court has held that a pre-
judgment interest award should not attach to the trebled damages,
but only to the actual damages awarded for the breach of contract
that was found to be an unfair trade practice. See Sampson-Bladen
Oil Co. v. Walters
, 86 N.C. App. 173, 179, 356 S.E.2d 805, 809,
disc. review denied
, 321 N.C. 121, 361 S.E.2d 597 (1987).
The federal courts of this district have suggested that where
the North Carolina Supreme Court held in Custom Molders, Inc. v.
American Yard Products, Inc.,
342 N.C. 133, 463 S.E.2d 199 (1995),
that post-judgment interest could be added to the trebled damages,
that in turn the same reason follows for pre-judgment interest.
However, this Court is bound by our prior decisions and these
decisions can only be overcome by the North Carolina Supreme
(See footnote 1)
In the instant case, the trial judge awarded pre-judgment
interest on the trebled damages rather than the actual damages
awarded by the jury for breach of contract. This was error. Mr.
Johnson was only entitled to pre-judgment interest on the breach of
contract damages, not the damages arising out of the unfair and
deceptive practices claim. Therefore the award of damages should be
 Colonial next contends that the trial court erred in
submitting to the jury the issue of intentional infliction of
emotional distress. We agree.
The essential elements of an action for intentional
infliction of emotional distress are '1) extreme and outrageous
conduct by the defendant 2) which is intended to and does in fact
cause 3) severe emotional distress.' Waddle v. Sparks
, 331 N.C.
73, 82, 414 S.E.2d 22, 27 (1992) (citation omitted). Conduct is
extreme and outrageous when it is 'so outrageous in character, and
so extreme in degree, as to go beyond all possible bounds of
decency, and to be regarded as atrocious, and utterly intolerable
in a civilized community.' Guthrie v. Conroy
, 152 N.C. App. 15,
22, 567 S.E.2d 403, 408-09 (2002) (citation omitted). The
determination of whether conduct rises to the level of extreme and
outrageous is a question of law. Id
. at 21, 567 S.E.2d at 408.
The evidence presented at trial as to extreme and outrageous
conduct consisted of several meetings over a course of time in
which threats to Mr. Johnson were made concerning losing his job
and health insurance and accusations in regard to submitting a
false claim. These comments, although insulting and offensive to
Mr. Johnson, do not constitute conduct which is so egregious as to
go beyond all possible bounds of decency. See Guthrie
, 152 N.C.
App. at 22, 567 S.E.2d at 409 (holding that mere insults,
indignities, and threats are not extreme and outrageous acts).
Therefore, as a matter of law, the trial judge erred in submittingthe intentional infliction of emotional distress claim to the jury
where the evidence failed to show extreme and outrageous conduct.
 Lastly, Colonial argues that the trial court did not have
subject matter jurisdiction over the COBRA claim. We agree.
Lack of subject matter jurisdiction may always be raised by a
party, or the court may raise such defect on its own initiative,
even after an answer has been filed. See Jackson Co. v. Swayney
N.C. App. 629, 331 S.E.2d 145 (1985), aff'd in part and rev'd in
part on other grounds
, 319 N.C. 52, 352 S.E.2d 413, cert. denied
484 U.S. 826, 98 L. Ed. 2d 54 (1987). COBRA claims are governed by
29 U.S.C. § 1132 (2005). The code provides that as to jurisdiction:
Except for actions under subsection (a)(1)(B)
of this section, the district courts of the
United States shall have exclusive
jurisdiction of civil actions under this title
brought by the Secretary or by a participant,
beneficiary, fiduciary, or any person referred
to in section 101(f)(1)[29 USCS § 1021(f)(1)].
State courts of competent jurisdiction and
district courts of the United States shall
have concurrent jurisdiction of actions under
paragraphs (1)(B) and (7) of subsection (a) of
29 U.S.C. § 1132(e)(1) (emphasis added).
In the instant case, the COBRA action was brought under 29
U.S.C. § 1132(c)(1) to enforce the late-notice penalties. The case
was removed to federal court and then remanded in its entirety due
to lack of complete diversity jurisdiction. It is clear that except
for subsections (a)(1)(B) and (a)(1)(7) the district courts of the
United States have exclusive jurisdiction
over civil actions
brought under this section. 29 U.S.C. § 1132(e)(1) (emphasisadded). Therefore the trial court lacked subject matter
jurisdiction over the COBRA claim.
Accordingly, we affirm the trial court with respect to breach
of contract, breach of contract damages, and § 75-1.1 claim and
damages. We vacate the trial court's decision with respect to
intentional infliction of emotional distress and damages pursuant
to that claim and assertion of jurisdiction over the COBRA claim.
We reverse the trial court on the issue of trebling pre-judgment
interest and remand to the trial court to enter an amount of
damages in accordance with this opinion.
Affirmed in part, vacated in part, reversed in part, and
Judges TYSON and BRYANT concur.
In the Matter of Appeal from Civil Penalty
, 324 N.C. 373,
384, 379 S.E.2d 30, 37 (1989) (holding that [w]here a panel of
the Court of Appeals has decided the same issue, albeit in a
different case, a subsequent panel of the same court is bound by
that precedent, unless it has been overturned by a higher
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