Tort: Home security company is liable for $189.7 million verdict

Where a home security company used false and deceptive practices to induce a significant number of its competitor’s customers to switch services, the jury’s $189.7 million damages’ verdict was affirmed.

Background

Vivint Smart Home Inc. is one of the nation’s largest home security companies. CPI Security Systems Inc. offers the same type of products and services in the southeast region of the country, making the two companies direct competitors in that region. CPI commenced this action against Vivint in September 2020, alleging that Vivint’s door-to-door sales representatives had used false and deceptive practices to induce a significant number of CPI customers to switch to Vivint.

A jury returned a verdict finding that Vivint (1) violated the Lanham Act, (2) violated the North Carolina Unfair and Deceptive Trade Practices Act, or UDTPA, (3) committed the common-law tort of unfair competition and (4) committed the common-law tort of tortious interference with contracts. It awarded CPI compensatory damages on the four claims totaling $49.7 million, as well as $140 million in punitive damages.

UDTPA

Vivint contends first that CPI failed to prove that it relied on the false statements that Vivint made to CPI’s customers to lure them away and therefore failed to prove a UDTPA claim. Such reliance, Vivint claims, is an essential element of a UDTPA claim.

Unfair competition is a broad concept and certainly encompasses a business’s telling damaging lies about one of its rivals to lure away its customers. A claim alleging such conduct that is brought by a business against one of its competitors does not sound in fraud but rather in other traditional common-law torts, like tortious interference with contract and unfair competition.

And such unfair competition claims do not have as an element the plaintiff’s reliance on the defendant’s lies. Rather, the plaintiff need only show that the unfair competition proximately caused its injuries. This court therefore finds no merit in Vivint’s argument that, to prove the proximate-causation element of its UDTPA claim, CPI was required to prove that it relied on the misrepresentations that Vivint made to CPI’s customers.

Compensatory damages

Vivint next contends that CPI failed to introduce evidence sufficient to support the jury’s damages award. The court again disagrees.

In instructing the jury with respect to damages, the district court made clear that the jury should “not award duplicative damages for the same conduct,” but it allowed the jury to assign damages of any category to the four claims that CPI had made, as appropriate. The verdict form, to which the parties agreed, called for a general verdict, requesting simply that the jury enter the amount it was awarding for each of CPI’s four claims.

As a result, this court must affirm the jury’s verdict if CPI’s evidence as to any combination of the four categories was, taken together, sufficient to support the jury’s award of $49.7 million. The court concludes that the evidence was indeed sufficient.

Punitive damages

Because punitive damages are not recoverable for violations of either the Lanham Act or the UDTPA, Vivint contends that the maximum punitive damages that CPI could obtain was “three times the damages the jury awarded on the unfair competition and tortious interference claims,” as those were “the only claims for which punitive damages [were] authorized.” Thus, according to Vivint, because the jury awarded $15 million for those two common-law claims, the maximum amount of punitive damages that CPI could recover was $45 million.

Under the North Carolina statute, when punitive damages are claimed in an action based on one or more eligible claims, the trial court is charged with comparing the jury’s award of punitive damages to its award of “compensation for all other damages” and reducing the punitive damages award if it exceeds the statutory maximum — “three times the amount of compensatory damages.” Accordingly, the court rejects Vivint’s argument that the district court misapplied North Carolina’s cap on punitive damages.

Bifurcation

This court has found nothing in the record from which to conclude that the district court’s denial of Vivint’s motion to bifurcate constituted an abuse of discretion. And Vivint has failed to identify any evidence that required bifurcation in order to ensure a fair proceeding. Indeed, Vivint has also failed to identify any erroneous evidentiary ruling that requires a new trial.

Reassignment

After Vivint filed a post-judgment motion, counsel for the parties were advised that the initial trial judge had recused himself because of a conflict that arose after the trial. Vivint now complains that “[t]he lack of information surrounding the reassignment led to an inference of partiality, affecting the entire proceeding.” Vivint did not object to the reassignment at the time it occurred or request any information about the conflict. This argument is merely of the tilting-at-windmills variety.

Affirmed.

CPI Security Systems Inc. v. Vivint Smart Home Inc., Case No. 24-1120, July 22, 2025. 4th Cir. (Niemeyer), from WDNC at Charlotte (Cogburn Jr.). Ellyde Roko Thompson for Appellants. Jeffrey Bryan Wall for Appellee. VLW 025-2-274. 27 pp.