The Year Ahead In The North Carolina Business Court

The Business Court's plate is pretty full as we move into the new year of 2009.  This post summarizes the dispositive motions pending before the Court that are fully briefed and ready for a ruling.

These cases cover a broad range of issues, summarized by general categories below, including: class actions, construction law, derivative actions, breach of fiduciary duty/unfair competition, jurisdiction, partnership, securities fraud, shareholder/member disputes, trademark law, trusts, and uniform commercial code. 

As you read on, a few disclaimers.  First, this only covers dispositive motions.  There are certainly other, non-dispositive motion pending.  Second, I may have missed some.  And third, these summaries are deliberately short.  I'm not trying to cover all of the issues that might be included in a dispositive motion filing, just trying to give you a general idea of rulings that may be coming down in the next several months.  That's involved a quick look at the briefs.  And on that note, a number of the cases involves multiple issues and don't fall exclusively into one category.

Each summary includes a link to the Business Court electronic file.

Class Actions

Clark v. Alan Vesture Auto Group, Inc.: This is a putative class action against an automobile dealer for allegedly misleading financing practices.  Pending are a motion to dismiss two defendants because of insufficiency of service of process, and a motion for summary judgment.  One issue is whether the Court should consider the dispositive motion before discovery and at the same time as its ruling on the class certification motion. 

Construction Law

Miller & Long Co., Inc. v. Intracoastal Living, LLC: The issues in this construction law case involve collection on a payment bond and enforcement of a claim of lien.

Wachovia Bank N.A. v. Superior Construction Corp.: The issue in this construction law case is the priority of Wachovia’s deed of trust versus a previously filed mechanics lien, where the lienholder had accepted some payment on its lien and executed a partial waiver of lien.

RJM Plumbing, inc. v. Superior Construction Corp: Motion for summary judgment by subcontractor on claim for breach of contract

Derivative Actions

Esquire Trade & Finance, Inc. v. Diversified Senior Services, Inc.: This case raises derivative action issues, including whether the allegations of the complaint were improperly broader than the demand which had been made, the effect of findings by a special litigation committee, whether plaintiff was owed a “special duty” as a preferred shareholder which entitled him to make direct claims against the corporation, and whether fiduciary duty claims were barred by the two year statute of repose of GS §55-7-48.

Garrett v. Parton: Motions to dismiss a derivative claim made by taxpayer on behalf of the City of Roanoke to recover money invested in a music theater, on the basis of standing.

Lancaster v. Harold K. Jordan and Co.: This is another derivative action case, involving whether the plaintiffs, members of the limited liability company plaintiff, had standing to bring claims on behalf of the LLC. The case raises the usual issues of whether the Defendant owed a “special duty” to the Plaintiffs, and whether Plaintiffs had injury “separate and distinct” from that of the LLC.

Mitchell, Brewer, et al v. Brewer: This dispute involves the breakup of a law firm that was a limited liability company, including whether plaintiffs were entitled to maintain the action as a derivative action, in part because they had withdrawn as members of the limited liability company, and whether they were entitled to pursue an action against the individual members of the LLC.

Revolutionary Concepts, Inc. v. Clements Walker PLLC: This isn't a derivative action in the true sense of the term, but it does raise the issue of when a shareholder has standing to maintain an action for an injury to the corporation.  The more interesting issue in this case is whether the Business Court lacks subject matter jurisdiction over a malpractice claim involving a patent because federal courts have exclusive jurisdiction over patent matters.

Webb v. Royal American Company: Motion to dismiss derivative claim against lender to limited liability company, issues include whether an adequate demand was made or whether plaintiff had established demand futility, and whether claims were barred by exculpatory provisions in loan agreement.

Fiduciary Duty/Unfair Competition Cases

Edgewater Services, Inc. v. Epic Logistics, Inc.: This is a dispute between competing third party logistics companies in the transportation industry including claims involving trade secrets, joint venture, tortious interference with contract by hiring an employee subject to non-compete, tortious interference with prospective economic advantage, and unfair and deceptive trade practices.

Griffin Management Corp. v. Carolina Power and Light Co.: Plaintiff, a supplier of personnel to Progress Energy and Duke Energy, alleges a destruction of its business through actions by those companies and plaintiff's competitor. Defendant has moved for summary judgment. It's hard to tell what issues are before the court, because virtually every filing in the case made under seal.

Sony Ericsson Mobile Communications USA, Inc. v. Motorola, Inc.: This case involves a motion to dismiss a negligent misrepresentation claim on the ground that it was barred by the economic loss doctrine, and claims for tortious interference with contract and unfair and deceptive practices claims.

SCR-Tech LLC v. Evonik Energy Services LLC: This is a motion to dismiss claims for breach of fiduciary duty and usurpation of corporate opportunity, including issues whether claims were barred by a release, whether the defendant’s fiduciary duties continued after the termination of his employment, and whether those claims were barred by the statute of limitations. Not yet fully briefed is a jurisdictional motion whether there can be jurisdiction over a corporate defendant based on the actions of a subsidiary.

Jurisdiction

Speedway Motorsports International, Ltd. v. Bronwen Energy Trading, Ltd.: Choice of law and choice of forum are the issues in this case, in which one defendant argues that the case should be dismissed because the parties agreed to resolve matters in Geneva, under Swiss law; and another party argues that its agreement called for the application of French law, to be decided in a French forum where proceedings are already pending. There are also pending motions to dismiss for lack of jurisdiction, and to dismiss claims for conversion (of money), as well as fraud, negligent misrepresentation, and unfair and deceptive practices.

Miscellaneous

Allen v. Land Resource Group of North Carolina, LLC: Various motions to dismiss challenging the sufficiency of the pleading of claims of fraud and negligent misrepresentation with respect to sales of lots in property development, as well as claims under the Interstate Land Sales Full Disclosure Act.

Azalea Garden Board & Care, Inc. v. Vanhoy: Motions for summary judgment by two defendants regarding contract for sale of nursing home.  Issues include whether defendants could be personally liable for breach under the Statute of Frauds, given that they had not signed the purchase agreement, whether plaintiff breached its representation and warranty that it could convey clear and marketable title, and whether contract contained a liquidated damages provision.  On point of the liquidated damages provision, plaintiff's argument is the opposite of what ordinarily sees -- it contends that if it is limited to the recovery allowed by that provision, its recovery will be too low and the the limited recovery therefore will act as an unenforceable penalty.

Crockett Capital Corp. v. Inland American Winston Hotels, Inc.: The issue here is whether a whether a development agreement was a binding contract or an “agreement to agree.”

General Electric Capital Corp. v. Royal American Co., L.L.C.: This case involves the propriety of impleader and a third party complaint.

JDH Capital, LLC v. Flowers: The issues include the binding effect of a letter of intent, whether a joint venture existed, and the legal effect of oral statement “we have a deal.”

L'Heureux Enterprises, Inc. v. Port City Java, Inc.: Motions for summary judgment on claims for negligent misrepresentation and fraud in connection with sale of franchise, which involve the impact of the defendant's Uniform Franchise Offering CIrcular.

Latigo Investments II, LLC v. Waddell & Reed Financial, Inc.: This case raises an issue of pre-incorporation liability, whether the defendants could be personally liable as a result of signing an agreement on behalf of an entity which was never incorporated. Also issues involving lack of damages, and fraud and negligent misrepresentation.

Reid Point, LLC v. Stevens: This is a motion for partial summary judgment on a promissory note, with issues whether there were conditions to payment or setoff was otherwise appropriate. There is also an issue whether summary judgment can be granted before the close of discovery.

Stratton v. RBC Centura Banks, Inc.: The facts of this case are terrifically interesting. Plaintiff found a certificate for six shares of stock in the Bank of Manteo, issued in 1927, in her deceased mother’s closet fifty-five year later. She alleges that after various bank mergers, she holds more than 14,000 shares in the Royal Bank of Canada and her shares are worth $600,000, and that she is furthermore entitled to millions of dollars in unpaid dividends. The motion for summary judgment is based on equitable estoppel, judicial estoppel, laches and the statute of limitations. There is a great story here about the history of the bank, its mergers, and the life of Plaintiff’s mother’s on the Outer Banks.

Stroock, Stroock & Lavan v. Dorf: Issues are validity of arbitration award against stockholder who was not party to arbitration agreement with corporation, enforceability of that award, and applicability of the Federal Arbitration Act.

The Pantry, Inc. v. CITGO Petroleum Corp.: Issue of contractual interpretation of pricing mechanism in agreement for the purchase of gasoline/ethanol mixture.

Partnership

EHP Land Co. v. Bosher: The issue here is the valuation of a partnership interest, including the interpretation of the term “inventory” in the partnership agreement. There is also a standing issue, involving whether a partner which has withdrawn from a partnership has standing to seek dissolution of the partnership.

Securities Fraud

Wicks v. Moody: This case involves a claim for securities fraud under the North Carolina Securities Act, and whether plaintiff adequately pled loss causation. There is a further issue whether plaintiff is entitled to make the claim because he still holds his shares and has therefore not suffered a loss. Another issue is whether the Court can take judicial notice, on a motion to dismiss a securities fraud case, of stock prices, press releases, and other publicly available information without converting the motion to one for summary judgment. A cross motion by a third party defendant involves the issue whether an indemnification provision requires that party defendant to indemnify for matters which occurred before the agreement was signed, and whether a claim for contribution can proceed without allegations of scienter.

Shareholder/Member Disputes

Fayetteville Imaging Associates, Inc. v. National Imaging Affiliates, Inc.: Issues including breach of fiduciary duty, internal affairs doctrine, duty of majority shareholder to minority, and pleading fraud with particularity.  The Motion asserts that Tennessee law applies.

Medicus Healthcare, LLC v. Nazemetz: Motion to dismiss unfair and deceptive practices claim, and fraud and conspiracy claims against lawyers who advised LLC with regard to termination of purchase interest of plaintiff.

Oakeson v. TBM Consulting Group, Inc.: This is a minority shareholder dispute, raising the common issue of whether a case that is basically for breach of contract claims can be made into a tort-based cause of action. There are also issues of breach of fiduciary duty, conspiracy, unfair and deceptive practices, and whether there is an independent claim for breach of the covenant of good faith and fair dealing.

Palles v. Hatteras Investment Partners LLC: This is a motion to dismiss claims by a former employee under his employment agreement and limited liability company agreements, including unfair and deceptive trade practices, fraud, negligent misrepresentation, and wrongful interference with contract, including the argument that breach of contract claims cannot be made into tort claims.

Trademark Law

Windsor Jewelers, Inc. v. Windsor Fine Jewelers, LLC: This case involves a motion to dismiss based on the prior action pending doctrine and raises the issue that the doctrine should not apply when the court in which the prior action was filed lacked jurisdiction, and that the first filed case did not involve “substantially similar” issues and parties. These issues revolve around trademark law.

Trusts

Ruth Cook Blue Living Trust v. Blue: The issue here is whether Defendants, who had the right under a trust agreement to buy shares of stock, but no right to distributions of income or principal on those shares, were “beneficiaries” of the trust who could claim a breach of fiduciary duty.

Uniform Commercial Code

Leiber v. Arboretum Joint Venture, LLC: This case raises commercial paper issues involving actual and apparent authority, conversion of checks by an allegedly unauthorized agent, and liability of drawee and drawer banks for payment over claimed unauthorized endorsements of checks.  In addition to the Motion on the principal claims, Bank of America and Wachovia are slugging it out here on who should end up holding the bag in the event of an adverse ruling on the agency question.

Robertshaw Controls Co. v. Moll Industries, Inc.: This case involves the termination of a supplier agreement, including whether defendant had the right to do so and whether defendant provided reasonable notice of termination as required under Uniform Commercial Code. There is also a jurisdictional issue whether the defendant, which owned 100% of the stock of the co-defendant, could be subject to personal jurisdiction in NC under an alter ego/piercing the corporate veil theory, and whether defendant’s decision to close its North Carolina plant could be tortious interference with contract.


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