Dismissed Employee Did Not Have Public Policy Claim

Today, in Eglinton v. Blue Ridge Bone & Joint Clinic, P.A., the Business Court dismissed Plaintiff's claim that he had been dismissed from his employment in violation of the public policy of North Carolina. 

Plaintiff, a doctor who had been employed by the Defendant medical practice, alleged that he had been forced to resign his employment while he was disabled and seeking medical treatment.  He asserted that the Defendant's "conduct in demanding an unnecessary resignation agreement of a disabled employee while he was in a vulnerable state . . . offends the public policy of the State of North Carolina."

Judge Diaz disagreed and granted Defendant's Motion to Dismiss.  He held:

While Plaintiff’s original and amended pleadings assert that he was disabled and seeking medical treatment at the time he was purportedly coerced by BRBJ into resigning from employment, Plaintiff does not allege facts sufficient to show that he met the criteria for disability under any relevant statute, nor does he allege that BRBJ discriminated against him on the basis of any such disability. Cf. Baucom v. Cabarrus Eye Ctr., P.A., No. 1:06CV00209, 2007 U.S. Dist. LEXIS 25101, at *19–22 (M.D.N.C. Apr. 4, 2007) (dismissing claim alleging wrongful termination where Plaintiff failed to allege facts sufficient to demonstrate disability under state or federal law or that Defendant discriminated against plaintiff on the basis of any such disability). 

Defendant's Brief In Support Of Motion To Dismiss

Plaintiff's Brief In Opposition To Motion To Dismiss

Defendant's Reply Brief In Support Of Motion To Dismiss


 

Aiding And Abetting Breach Of Fiduciary Duty: Alive Or Dead?

Does North Carolina recognize a claim for aiding and abetting breach of fiduciary duty?  The North Carolina Court of Appeals shed a little bit of light on the question this week., but it wasn't very illuminating.

The linchpin for this frequently made claim has been the twenty year old case of Blow v. Shaughnessy, 88 N.C. App. 484, 364 S.E.2d 444 (1988), in which the Court of Appeals recognized the tort.  It held simply that "a cause of action on this theory has been recognized by federal courts in securities fraud cases based on violations of section 10(b) of the Securities Exchange Act of 1934."

But six years after Blow was decided, in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), the United States Supreme Court held that there was no liability for aiding and abetting under the securities laws, thus eviscerating the underpinning of the Blow case. 

Since then, the North Carolina Business Court has expressed doubt about the continuing vitality of claims for aiding and abetting breach of fiduciary duty.  Judge Diaz noted the issue most recently in Regions Bank v. Regional Property Development Corp., 2008 NCBC 8 and in Battleground Veterinary Hospital, P.C. v. McGeough, 2007 NCBC 33; and Judge Tennille wrote on the subject in Sompo Japan Insurance Inc. v. Deloitte & Touche, LLP, 2005 NCBC 2.  In none of these cases, however, did the Business Court dismiss the claim on the basis that it is not recognized in North Carolina.

This week, the Court of Appeals decided the case of Hinson v. Jarvis, in which it made a passing reference to Blow which might be interpreted as giving some life to that case.  In a footnote, the Court stated:

In addition to the cases discussed in this section, plaintiffs also rely on Blow v. Shaughnessy, 88 N.C. App. 484, 364 S.E.2d 444 (1988). That case, however, involved the imposition of liability on a defendant that encouraged a third party to breach his fiduciary responsibility -- a securities law violation -- owed to the plaintiff. Id. at 489, 364 S.E.2d at 447. This case, however, does not involve any fiduciary relationship between Mr. Jarvis and plaintiffs. We therefore find Blow distinguishable from the instant case.  

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This Blog Is The "Blawg Of The Day"

I'm glad to report that this blog was selected today as the "Blawg of the Day" by inter alia.

If you haven't looked at inter alia, it is a great resource about legal research on the internet, as well as for its daily "Blawg of the Day."  Tom Mighell, a Texas lawyer who publishes inter alia, also writes the Internet Legal Research Weekly newsletter.

 

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Valuation Of Railroad Company's Shares Presented Issues Of Material Fact

This Business Court case concerns the valuation of shares of the Aberdeen and Rockfish Railroad Company, a North Carolina short-line railroad.  Judge Jolly granted in part, and denied in part, the Defendants' Motion for Summary Judgment, on May 20, 2008, in In The Matter Of The Ruth Cook Blue Living Trust.

The shares at issue were held by a Trust.  The Trust Agreement provided that upon the death of the settlor (Mrs. Blue), the shares were to be offered to the members of her family "at the value established by the accounting firm engaged by the Railroad as of December 31 of the year preceding my death."

The Trustees (the Plaintiffs) and the family members entitled to buy the shares (the Defendants) were at odds about their value.  The Court ruled, on summary judgment, that the word "value" meant "'fair market value' of the Railroad shares as the same would be viewed by the Trust, as prospective seller, and the Blue family, as prospective purchasers."  The term "value" did not mean the fair market value of the shares if they had been offered to the general public.

The Defendants argued that a valuation report done by the Railroad's accounting firm shortly before Mrs. Blue's set the value for the shares.  The Court noted, however, that this report had been prepared "for the limited purpose of determining the fair market value between a willing buyer and a willing seller in the general marketplace of a minority interest of a share of the Railroad's common stock for gift and estate tax purposes."   The Court found that there were material issues of fact whether this valuation, which incorporated a significant discount for the lack of marketability of the shares, reflected the intent of Mrs. Blue.  (There were similar issues raised by the Classic Coffee Concepts case earlier this year.)

The Court granted summary judgment, however, on the issue of whether the accounting firm issuing the report was in fact the proper firm to perform the valuation.  It found that it was.  Then, the Court rejected an argument by the Plaintiffs that they were entitled to challenge the methodology of the accounting firm.   It held "the court notes that since Ruth Cook Blue is deemed to have embraced the expertise of [the accounting firm] by virtue of paragraph 8.01 of the Trust Agreement, it is likely that criticism of [the accounting firm's] valuation methodology would be of limited probative value, if it would be admissible at all."

The Court also allowed an amendment to the Complaint which, if not allowed, might have been determinative of the valuation  issue.   

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Compliance With Business Court Rule 18.6 Is Essential Before Filing A Discovery Motion

The Business Court is serious about lawyers complying with their meet and confer obligations before filing discovery motions. 

This week, in Wicks v. Moody, the Court denied the Plaintiff's Motion for a Protective Order because of counsel's failure to comply with the certification requirements of Business Court Rule 18.6.  Judge Tennille held that "this reason alone is sufficient for the Court to deny Plaintiff's motion."

This isn't the first case in which the Business Court has summarily denied a discovery motion for this reason.  In a July 2007 case, International Legwear Group, Inc. v. Legassi International Group, the Court struck a Motion to Compel, even though the moving party had attached substantial correspondence showing an effort to resolve the issues.  Judge Diaz held:

while the Motion contains a 23-page attachment purporting to summarize the various discussions of the parties relating to their discovery dispute, it does not contain the certificate of compliance contemplated by Business Court Rule 18.6(a). The purpose of the certificate is to have the moving party succinctly set out what was done to resolve the dispute short of judicial intervention—the Court has no interest in, nor should it be burdened with, sifting through 23 pages of correspondence to determine whether the parties have complied with its rules.

In Latigo Investments II, LLC v. Waddell & Reed Financial, Inc., a January 2008 case, the Court held that the Rule 18.6 applies even when the discovery at issue is being sought from a non-party. 

North Carolina Business Court Rule 18.6(a) says that "the Court will not consider motions and objections relating to discovery unless moving counsel files a certificate that, after personal consultation and diligent attempts to resolve differences, the parties are unable to reach an accord. The certificate shall set forth the date of the conference, the names of the participating attorneys, and the specific results achieved. It shall be the responsibility of counsel for the movant to arrange for the conference and, in the absence of an agreement to the contrary, the conference shall be held in the office of the attorney nearest to the Court where the case was originally filed. Alternatively, at any party’s request, the conference may be held by telephone."

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A Claim For Misappropriation Of Trade Secrets Must Be Plead With "Sufficient Particularity"

The Court of Appeals affirmed yesterday a 12(b)(6) dismissal of a claim under the North Carolina Trade Secrets Protection Act, in Washburn v. Yadkin Valley Bank and Trust Co. 

In Washburn, the Defendant had made a counterclaim charging that the Plaintiffs, former employees, had misappropriated its trade secrets.  The trade secrets the Defendant referenced in its Complaint were its "business methods; clients, their specific requirements and needs; and other confidential information."

The Court held that the Defendant was under an obligation to identify the trade secrets involved with "sufficient particularity to enable [the opposing party] to delineate that which he is accused of misappropriating and a court to determine whether misappropriation has or is threatened to occur." 

The Court characterized Defendant's allegations as "broad and vague," and "general and conclusory."  It affirmed the trial court's dismissal of the claims.

The case was summarized on the North Carolina Appellate Blog.  That's an excellent resource which reports promptly on civil decisions by the North Carolina Supreme Court and Court of Appeals and the Fourth Circuit Court of Appeals.

Right To Discovery Regarding Expert Witness Trumps Attorney-Client Privilege

This short Order has a valuable nugget on the discoverability of communications between lawyers and their expert witnesses.

One of the Defendants moved to compel discovery from the Plaintiff to obtain documents exchanged between the Plaintiff's lawyers and their expert. 

The expert, however, was also the President of the client and the central fact witness.  Plaintiff resisted production on the grounds of attorney-client privilege. 

It made no difference to the Court that the expert was also the client.  It held:

"Plaintiff’s assertion of the attorney client privilege to shield discovery of any communications with counsel involving his expert opinions is misplaced. Expert witnesses are subject to specific rules of discovery under the North Carolina Rules of Civil Procedure. N.C.R. Civ. P. Rule 26(b). Generally, the facts known to and the opinions held by an expert are discoverable as well as the materials the expert relied upon in coming to his or her opinion. See id. at Rule 26(b)(4), 26(b)(1). If [the expert's] opinions are based upon any information supplied to him by counsel that information is discoverable and Plaintiff is required to make disclosures of that information."

There are no cases cited in the Court's Order, but Defendant's Brief contains references to a number of cases on the issue of discovery of communications between attorneys and their expert witnesses.

The earlier post on this case, Azalea Garden Board & Care v. Vanhoy, involved an issue of discoverability of settlement agreements.

Business Court Rules On How To Count Days For Filing A Response

Gateway Management Services, Inc. v. Advanced Lubrication Technology, Inc., 2008 NCBC 11 (N.C. Super. Ct. May 5, 2008)(Tennille)

When you have an additional three days to respond to a filing served by mail, and the response period ended on a weekend or holiday, do you start counting the three days on the holiday or weekend day, or do you start from the first business day after the expiration of the response period?

The North Carolina Business Court answered this counting question, and another important time calculation question, today in the Gateway Management case.  (You can click on the case name at the top to see the opinion).

The issue was the timeliness of Plaintiff's Reply to Defendant's Counterclaim.  The Plaintiff said that the right method of counting was to count first the thirty day response time allowed by Rule 12(a), and that if the thirtieth day fell on a weekend or holiday, to count the three days from the first following business day.  (Note: this is exactly the right way to count under the comment to the 2005 amendments to Federal Rule of Civil Procedure 6(d), which is worded differently than the North Carolina Rule).

The Court disagreed with the Defendant on when to start counting the three days for service by mail.  Here's what it held:

"The correct formula for the computation of a time period during which a filing is required is as follows: number of days allowed under applicable statute + three days under Rule 6(e) + any weekend or holiday under Rule 6(a). The Court notes that the three days under Rule 6(e) is added to the end of the time period allowed by statute regardless of whether that time period ends on a Saturday, Sunday, or legal holiday. It is at the end of the additional three days that Rule 6(a) applies."

The Court also dealt with another time calculation issue: when to start counting the time for a response when the document to which the response is due is e-filed, but the party who has to respond has not yet registered to e-file and no Order requiring e-filing has yet been entered.   Even though this might be a rare situation, there's potential danger here, so you might want to keep reading.

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A Notice Of Designation To The Business Court Is A General Appearance For Jurisdictional Purposes

Covenant Equipment Corp. v. Forklift Pro, Inc., 2008 NCBC 10 (N.C. Super. Ct. May 1, 2008)(Tennille)

A service of process issue and a covenant not to compete issue in one decision from the Business Court.  It doesn't get any more exciting than this.  But, seriously, this is a significant procedural decision from the Court, please read on.  (As always, there is a link to the full opinion above).

On the service issue, the delivery of the Complaint to one of the Defendants, Carnie, had not been made in precise compliance with Rule 4 of the North Carolina Rules of Civil Procedure.  The Sheriff had left the Summons and Complaint at Carnie's house in South Carolina, but had not delivered it personally to Carnie and had not left it with another person at the residence.  According to Carnie's Affidavit, the papers had been "left stuck in a crack between my doors" by a Deputy Sheriff with the last name of "Fudge."

The Court overruled the Motion to Dismiss for insufficiency of service of process because it found that Carnie had evaded service.  Looking at federal decisions, Judge Tennille ruled that leaving the Summons and Complaint at Carnie's residence was adequate service given Carnie's efforts to evade proper service.

But the groundbreaking part of the the decision on the service issue was the Court's ruling that Carnie had waived his objection to service because he had filed a Notice of Designation of the case to the North Carolina Business Court.  Judge Tennille held that "the filing of a Notice of Designation in an action constitutes a general appearance for the purpose of personal jurisdiction."  Thus, the objection to the sufficiency of service was waived.

The Court's decision goes beyond service of process.  Most significantly, if you are representing a Defendant planning to move to dismiss for lack of personal jurisdiction, you will waive that argument by filing a Notice of Designation to the Business Court.  To keep it alive, the Notice of Designation must contain an objection to personal jurisdiction.  Carnie's Notice did not.

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A Notice Of Designation To The Business Court Must Be Actually Filed Within Thirty Days Of Service Of The Complaint To Be Timely

Ikerd v. Greenwood, 2008 NCBC 9 (N.C. Super. Ct. April 30, 2008)(Tennille)

Yesterday, the Business Court provided more clarification on the requirements for making a timely designation of a case to the Business Court. 

It held that a Notice of Designation must be actually filed in the county in which the case originated within thirty days of receipt of service of the Complaint in order to be timely, not just served within that time frame.

One of the defendants in the Ikerd case had faxed his Notice of Designation to the Chief Justice of the North Carolina Supreme Court and to the Chief Judge of the Business Court less than thirty days after he had been served with the Complaint.  But he didn't file the Notice of Designation with the Clerk of Court of Catawba County until more than thirty days after he'd been served. 

Judge Tennille held that this was not a timely Notice of Designation under the terms of N.C. Gen. Stat.Sec. 7A-45.4(b), which allows a defendant to designate an action as a complex business case "by filing a Notice of Designation in the Superior Court in which the action has been filed and simultaneously serving the notice" on opposing counsel, the Chief Judge of the Business Court, and the Chief Justice within thirty days after receipt of service of the Complaint.

"Filing" means actual filing within thirty days in the Court in the County in which the case was filed.  And in counting the thirty days, the Court also held that a defendant doesn't get to count an additional three days if the Complaint was served by mail. 

The full procedure for designating a case to the North Carolina Business Court is described here