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Collins Holding Corp. v. Defibaugh
Citations: 373 S.C. 446; 646 S.E.2d 147; 2007 S.C. App. LEXIS 64Docket: No. 4235
Court: Court of Appeals of South Carolina; April 16, 2007; South Carolina; State Appellate Court
Richard and Robert Defibaugh, operating as Lucky D's, appeal a trial court ruling that they violated the South Carolina Unfair Trade Practices Act (UTPA). Collins Holding Corp. cross-appeals, seeking to treble its damages. The court reverses the UTPA violation finding. Collins, which places gaming machines in various venues, employed the Defibaughs as collectors and had them sign non-compete agreements. After Richard was fired in 2001, he began leasing similar machines, and Robert joined him after leaving Collins in 2002. The Defibaughs checked for existing contracts with Collins before placing their machines but were unaware that some businesses did have exclusive contracts with Collins. Collins filed a complaint against the Defibaughs for multiple causes of action, including UTPA violation. The trial court dismissed several claims, including breach of employment contracts for Richard and a permanent injunction request, ultimately ruling in favor of the Defibaughs on the remaining claims. Collins later sought reconsideration, claiming the Defibaughs’ machines were deceptive. The trial court amended its order, finding that the Defibaughs' machines employed a "reflexive payout" technique, allowing the owner to manipulate payouts to remain within a set limit, thus misleading players. The court determined this practice adversely affected the public and resulted in ascertainable damages for Collins, calculated based on lost profits from locations where both parties' machines operated. Collins' games occasionally earned more than before the Defibaughs' machines were introduced, but these weeks were excluded from the lost profits calculation, resulting in total damages of $107,461. The trial court found the violation was not willful as Collins did not prove the Defibaughs were aware that changing the payout percentage would influence game outcomes, leading to a decision against trebling the damages. Both parties appealed. On review, the appellate court emphasized that it would not overturn the trial court's factual findings unless unsupported by evidence. The Defibaughs contended that the trial court erred in ruling that Collins suffered damages under the Unfair Trade Practices Act (UTPA). The UTPA prohibits unfair or deceptive practices in trade, allowing individuals to seek recovery for losses caused by such practices, including treble damages for willful violations. While Collins indicated some lost profits linked to the Defibaughs’ machines, it failed to demonstrate that the payout structure was the cause of revenue loss. Instead, Collins’ testimony suggested the Defibaughs' machines were simply easier and faster to play, which was the primary factor affecting Collins’ business. Consequently, the appellate court concluded that the trial court misapplied the UTPA, leading to a reversal of its decision. Other issues raised by the Defibaughs, including the nature of the 'morphing' feature, were deemed unnecessary to address since the appellate ruling was conclusive.