Post 4854
The Party Alleging Fraud Must Establish A False Material Representation Or Concealment, Intent And Effect Of Deception, Resulting Damage, And Reasonable Reliance
In Jeffrey Wayne Phillips v. Creative Website Studios, et al., No. 5:23-CV-568-BO-BM, United States District Court, E.D. North Carolina, Western Division (September 28, 2026) the Court needed to rule on the order and memorandum and recommendation (“M&R”) of the Magistrate.
Jeffrey Wayne Phillips had contracted with Creative Website Studios and SR Telecommunications for website and hosting services. He alleged that defendants repeatedly billed him for hosting periods he had already paid for and later took down his website. Phillips claimed the outage prevented him from bidding on U.S. government security contracts and sought roughly $300 million in consequential damages.
LAW
Under North Carolina law, fraud requires a false material representation or concealment, intent and effect of deception, resulting damage, and reasonable reliance. Obtaining property by false pretenses similarly requires an intentionally deceptive false representation that actually deceives and obtains or attempts to obtain value.
Contract damages include losses naturally flowing from the breach and foreseeable consequential damages within the parties’ contemplation, but lost profits must be proved with reasonable certainty rather than speculation.
DISCUSSION
The court treated Phillips’s general objection as insufficiently specific but reviewed his specific objections de novo. On fraud, the invoices themselves showed overlapping hosting periods, so reasonable inquiry would have revealed the inaccurate charges and defeated reasonable reliance. Phillips identified no evidence that the billing errors — generated by several employees — were intended to deceive rather than mistakes. On consequential damages, his asserted likelihood of winning a large government security contract rested only on his own estimates and confidence..
ANALYSIS
Each challenged theory failed on an essential proof requirement. The fraud claim failed because the record foreclosed reasonable reliance; the false-pretenses claim failed for lack of evidence of deceptive intent; and the consequential-damages claim failed because the claimed government-contract profits were conjectural.
While whether a party’s reliance is reasonable is often a question for the jury, summary judgment is appropriate where the facts are so clear that they support only one conclusion.
CONCLUSION
The record supported liability for breach of contract. The court therefore adopted the magistrate judge’s claim-by-claim Rule 56(f) disposition even though defendants’ own summary-judgment motion was untimely. The court overruled Phillips’s objections and adopted the memorandum and recommendation in full. It denied defendants’ summary-judgment motion as untimely, but under Rule 56(f) granted defendants summary judgment on fraud, obtaining property by false pretenses, consequential damages, and punitive damages. the undisputed material facts are clear and support entry of summary judgment in defendants’ favor.
Plaintiffs claims of fraud are based on, at bottom, defendants’ repeatedly charging him for web hosting fees for which plaintiff had already paid .It granted Phillips summary judgment on breach of contract and allowed the parties seven days to submit evidence of direct damages, capped at $1,034.
Summary judgment was GRANTED in defendants’ favor on plaintiffs fraud claims, plaintiff s claim for obtaining property by false pretenses, the issue of consequential damages, and the issue of punitive damages, and summary judgment was GRANTED in plaintiffs favor on his breach of contract claim.
To prove fraud fraud the party alleging fraud must establish a false material representation or concealment, intent and effect of deception, resulting damage, and reasonable reliance. Fraud was proved based on the fact that the defendant repeatedly charged him for web hosting fees for which plaintiff had already paid.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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