Fourth Circuit Enforces Forum Selection Clause Requiring Litigation In Amsterdam

The Fourth Circuit today affirmed the dismissal of a personal injury action based on a forum selection provision requiring that any claims would be resolved in the courts of Amsterdam.  The case is Baker v. Adidas America, Inc.

Plaintiff, who had sued in federal court in North Carolina, argued that she was a college student without the financial means to fund a lawsuit in Amsterdam, that contingency fee arrangements were not permitted in Amsterdam, and that she wouldn't be able to pursue her claim if the forum selection clause was enforced.

The Fourth Circuit, relying on the Supreme Court's decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), held that the inconvenience of litigating in a foreign forum doesn't warrant setting aside a selection clause "where it can be said with reasonable assurance" that at the time the contract was made the parties contemplated the claimed inconvenience.  The party seeking to avoid a forum selection clause also must show that a trial in the specified forum "will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." 

The Fourth Circuit found the clause to be valid, ruling that the claimed burden of a trial in Amsterdam should have been foreseeable when Plaintiff accepted the benefits of the agreement, and that she had presumably been compensated for those burdens.

The North Carolina Business Court rejected an attack earlier this year on a forum selection clause specifying litigation in the Commercial Court of Paris, in Speedway Motorsports International Ltd. v. Bronwen Energy Trading, Ltd., 2009 NCBC 3 (N.C. Super. Ct., February 18, 2009).  The party objecting to the application of that clause said that litigation in France would deprive it "of the full scope of discovery that would otherwise be available in" the North Carolina Courts. 

In the Speedway case, Judge Diaz held that there was "no authority . . . for the proposition that merely requiring a party to litigate in a forum with substantially different discovery rules than those applied in a U.S. court is sufficient cause to override the parties' choice of forum."  He ruled that the party forced to fight its claim in France was neither "deprive[d] of its day in court" nor "without an adequate remedy."

Another issue in the Fourth Circuit decision today concerned whether Plaintiff, a professional tennis player who was a minor when the contract with Adidas was signed by her agent, had acted promptly enough to disaffirm the agreement after she attained the age of majority.  The Fourth Circuit said that she hadn't, because her agent had accepted payments from Adidas after she turned 18, and she didn't inform Adidas that she was voiding the contract until 32 months after her 18th birthday.

Accountant Who Prepared Financial Statements Didn't Need To Be Designated As An Expert Witness In Order To Testify

An accountant who had prepared financial statements did not need to be designated as an expert witness in order to provide testimony regarding those financial statements, per the Business Court's ruling in A-1 Pavement Marking, LLC v. APMI Corporation, 2009 NCBC 15 (N.C. Super. Ct. June 26, 2009).  The opinion also discusses generally accepted accounting principles ("GAAP") relevant to financial statements of consolidated entities.

The issue in A-1 was Plaintiff's calculation of a bonus due one of the Defendants, which was to be based on Plaintiff's gross profits. The Plaintiff's consolidated financial statements had eliminated a significant receivable due from a subsidiary. The Defendant asserted that his bonus would have been substantially higher with the inclusion of that receivable in the gross profit calculation, and brought a claim under the North Carolina Wage and Hour Act.

The Plaintiff moved for summary judgment, relying on an affidavit from the accountant who had prepared the financial statements on which the calculation was based.  The Defendant objected to what it termed "improper opinion testimony," and argued that the accountant had never been designated as an expert witness.

Judge Diaz rejected the argument that the accountant was an undisclosed expert who shouldn't be allowed to testify, holding:  

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The Business Court Says That Disclosing Privileged Documents Was "Just Not Smart"

If you have privileged documents, you shouldn't share them with your wife and daughter.  You should also be careful with technology, which lets you do "dumb things".  Those are the lessons of Judge Tennille's very short opinion last week in Crockett Capital Corp. v. Inland American Winston Hotels, Inc.

An executive of the Defendant had sent his wife and daughter emails which included attorney-client communications.  The reason for sending the emails to his wife was to "vent frustration" about work-related matters.  The daughter was apparently asked for grammatical advice.

The Plaintiff said that the privilege had been waived by this intentional production.  Judge Tennille determined that the privilege had not been waived, emphasizing that his decision was based on the specific circumstances before him.  Here's what he said:

Technology multiplies the opportunities for man to do dumb things and increases the speed at which he can do them.

Venting one’s frustrations about work to a spouse is an everyday occurrence.  Attaching a string of emails containing attorney client information to an email to a person’s spouse venting one’s frustration at work is just not smart. The Court does not believe it constitutes a waiver of the attorney client privilege under these circumstances.

Using a child as a grammarian with the result that attorney client privileged information is included in emails to her is just not smart. The Court does not believe it constitutes a waiver of the attorney client privilege under these circumstances.

There isn't much discussion in the opinion, so if you are looking for some law on the issue of privilege waiver, you might want to look at the briefs.  The principal brief was filed under seal, but the brief on why privilege hadn't been waived and the reply brief in support of the waiver argument are available.

I don't think Bart Simpson would carelessly share privileged documents.  Homer?  Probably.

Business Court Denies Motion For Asset Freeze And Appointment Of A Receiver

Today, in TAI Sports, Inc. v. Hall, the Business Court denied Plaintiff's' Motion for a Preliminary Injunction freezing Defendants' assets and appointing a receiver to manage the business of the Defendants.

The claim made by Plaintiff was that one of the Defendants had used his position as an officer of one of the Plaintiff's companies to misappropriate over $1 million in cash and inventory.  The Defendants had disputed the allegations.

Judge Diaz observed that the bulk of the damages sought by Plaintiff were lost profits, and that Plaintiff had not shown that it would be able to prove those with the required "reasonable certainty."  He held:

the Court notes that TAI is a relatively new enterprise, having been formed in 2005, and the record is silent on Plaintiff’s history of profitability, if any. And while North Carolina law has no per se rule precluding an award of damages for lost profits here a business has no recent record of profitability, such businesses, like established businesses, must prove such damages with reasonable certainty. . . .  Plaintiff’s evidence here falls short of proving its lost revenue or profits with reasonable certainty, and thus, Plaintiff has not shown a likelihood of success on the merits of a substantial portion of its claim.  

The Court concluded, in denying the Motion::

At bottom, this is a case where Plaintiff seeks money damages. Plaintiff is asking the Court to issue a preliminary injunction to prevent the Hall Defendants from rendering a monetary judgment against them unenforceable. Plaintiff, however, has not sustained its burden to show that it will suffer irreparable injury should the injunction not issue. Specifically, there is no evidence in this record that the Hall Defendants have fraudulently transferred assets (whether those purportedly belonging to Plaintiff or their own) to a third party or taken any other action to thwart Plaintiff’s ability to recover damages should it prevail on the claims.

Brief in Support of Motion for Preliminary Injunction

Brief in Opposition to Motion for Preliminary Injunction


Fourth Circuit Enforces Class Action Settlement Agreement

The Fourth Circuit ruled yesterday in Huttenstine v. Mast on the Defendants' effort to back out of a class action settlement to which they had agreed, and affirmed an entry of judgment against the Defendants for the full amount of the settlement.

The Defendants, who apparently had second thoughts about their deal, refused to make the $425,000 payment called for by the agreement.  They took the position that their payment was a condition precedent to the effectiveness of the settlement agreement, and that their failure to comply with the condition precedent resulted in the entire agreement being void.

The Fourth Circuit rejected that argument in an unpublished opinion, finding it to be "incomprehensible."  The Court drew a distinction between promises and conditions precedent, ruling that the obligation to make the settlement payment was a binding promise on behalf of the Defendants, not a condition precedent.  When the Defendants failed to pay, they breached their promise, and the District Court had properly entered judgment against them in the full amount of the settlement, plus interest.

The Court further observed that the Defendants were not entitled to refuse to make the payment and to then benefit from their own failure to satisfy the condition.  It held, relying on a line of North Carolina cases, that "one who prevents the performance of a condition, or makes it impossible by his own act, will not be permitted to take advantage of the nonperformance."

North Carolina Supreme Court Rulings Today

There were three North Carolina Supreme Court decisions today which are worth a mention, involving personal jurisdiction, depositions, and the North Carolina Whistleblower Act:

In the personal jurisdiction case, the Court reversed the Court of Appeals in an alienation of affections case, Brown v. Ellis.  The Court ruled that there was jurisdiction over the out-of-state defendant in North Carolina even though the defendant had "never set foot in the State of North Carolina."  The Supreme Court based jurisdiction on defendant's daily phone calls and emails to the plaintiff's wife.  The Supreme Court didn't accept defendant's protestations that these extensive communications were "the normal pleasantries associated with a friendly working relationship."

The deposition case, Rodriguez-Carias v. Nelson's Auto Salvage & Towing Service, Inc., resulted in an unfortunate 3-3 split.  Rodriguez-Carias involved the practical issue whether the court reporter for a telephone deposition needs to be in the physical presence of the deponent.  The Court of Appeals decision ruled that it was sufficient for the court reporter to be in the "vocal and aural presence" of the deponent, not his or her physical presence.  The effect of a 3-3 decision is that the Court of Appeals ruling stands, but without precedential effect.  The fact that there were three members of the Court willing to reverse this decision makes it risky to take depositions without having the court reporter at the other end of the phone line, with the deponent.

The Whistleblower decision, Helm v. Appalachian State University, reversed the Court of Appeals. Plaintiff was a Vice Chancellor at Appalachian who claimed she was fired for objecting to the issuance of a $10,000 check from the University Endowment to obtain an option to buy property for $475,000.  Plaintiff complained that there weren't funds available in her budget to exercise the option and she had blown the whistle about a "misappropriation of funds." The Court of Appeals majority affirmed the dismissal of her case, saying that the option had an "inherent, intrinsic value," and thus there had been no misappropriation to report.  The Supreme Court adopted Judge Calabria's dissent in the Court of Appeals, in which she said "while the enforceable right to purchase does have theoretical value, its value under the facts as alleged by the plaintiff does not justify the expenditure of $10,000 from the public funds."

You can find the rest of today's decisions from the Supreme Court here.

Plaintiff's Bribes Didn't Bar Its Unfair And Deceptive Practices Claim

Plaintiff's bribes to an employee of the Defendant didn't bar the Plaintiff's unfair and deceptive practices claim, per the Court of Appeals decision today in Media Network, Inc. v. Long Haymes Carr, Inc., The ruling upheld a $1.3 million jury verdict in favor of the Plaintiff, trebled by the Business Court to $3,776,085.

The bribes -- determined to be such by the jury -- included cash payments, use of a BMW, and tickets to all manner of entertainment and sporting events.  Those included everything from tickets to the circus, tickets for Broadway shows, and World Series tickets (2004, Cardinals vs. the Red Sox).

The payments were made to induce the Defendant to hire Plaintiff to participate in a lucrative advertising program for Defendant's client.  The client learned of the bribes, and conducted a confidential attorneys' eyes only investigation which confirmed the payments.  The employee was then fired by the Defendant.  Shortly after that, the Defendant terminated its contract with the Plaintiff, which Plaintiff contended had been represented to be non-cancelable.

The Plaintiff sued, making a variety of claims.  All of its claims were dismissed in pretrial rulings by the Business Court except for an unfair and deceptive practices claim.  The jury found for the Plaintiff.  It also found that the Plaintiff had bribed the employee, but that the employer had known about the bribes.  The Business Court entered judgment on the jury's verdict of more than a million dollars.  On appeal, the Defendant contended that the Plaintiff's "commercial bribery" barred its claim.  It said "since every transaction that [the Plaintiff] performed for [the Defendant] was spawned from commercial bribery, [Plaintiff] cannot recover."

The Court of Appeals disagreed.  It held that "commercial bribery has not been recognized as a defense, complete or otherwise, to unfair and deceptive trade practices in North Carolina."  It distinguished a New Jersey decision, Jaclyn, Inc. v. Edison Bros. Stores, Inc., 406 A.2d 474 (N.J. Super. 1979), in which the Court had dismissed a contract claim based on the plaintiff's bribery of an agent of the defendant who had entered into the contract in question.

The Court held that unfair and deceptive practice claims "are not subject to the same defenses as traditional contract and tort claims."  Judge Elmore ruled that "not only is the defendant's intent irrelevant when evaluating a UDTP claim, the plaintiff's intent and conduct is also irrelevant."  He that it had been error even to charge the jury on whether commercial bribery had occurred, but that the error had not affected the outcome.

This case spawned four rulings by the Business Court: an opinion on the discoverability of a settlement agreement, an opinion refusing leave to the defendant to amend its counterclaim because of undue delay (which was also affirmed by the Court of Appeals), an opinion dismissing Plaintiff's claim for damages based on diminution in value of its business (also affirmed by the Court of Appeals), and an opinion denying the successful Plaintiff's motion for attorneys' fees (also affirmed).

Can You Designate A Case From North Carolina District Court To The Business Court?

Here's a new one. Can you make a mandatory designation of a case directly from North Carolina District Court to the Business Court?  Believe it or not, there are circumstances under which you might want to do that, so the Business Court's opinion this month in Bailey Pointe Homeowners' Association v. Strong is worth knowing about.

Start from square one: The District Court has jurisdiction over matters involving $10,000 or less and the Superior Court has jurisdiction over cases exceeding $10,000 (per G.S. §7A-243).  Since the Business Court is a part of the Superior Court division of the trial courts, a case that falls under District Court jurisdiction can't be designated to the Business Court because there isn't sufficient amount in controversy to qualify for Superior Court jurisdiction.

But it happens that cases are filed in District Court which involve more than $10,000.  Or there are District Court cases in which counterclaims are made for more than that amount and which properly belong in Superior Court.  Or there might be a case filed in District Court asking for injunctive relief against a statute, for which Superior Court is the correct division under G.S. §7A-245.  In all of these circumstances, there's a mechanism in G.S. §7A-258 for transferring a case from District Court to Superior Court.

So let's say you are representing the Defendant in a District Court case which wasn't properly filed there because it involves more than $10,000, or in which you are going to counterclaim for more than $10,000, and the issues in the case otherwise make it appropriate for mandatory jurisdiction in the Business Court   Can you jump the case straight from District Court to the Business Court?

The answer is no.  In Bailey Pointe, the Plaintiff sought to designate the District Court case it had filed to the Business Court.  The designation was based on counterclaims raising corporate governance claims and seeking in excess of $10,000 in damages.  Judge Tennille held that G.S. §7A-45.4(b) says that cases are designated "by filing a Notice of Designation in the Superior Court in which the action has been filed. . . ."  So, he held, "only actions filed in or transferred to Superior Court may seek mandatory complex business designation."

In other words, you can't hopscotch directly from District Court to Business Court.  Judge Tennille denied the Notice of Designation by the Plaintiff in Bailey Pointe, and held that the only route to the Business Court for that Plaintiff was a motion to the Chief District Court Judge, per Rule 2.1 of the General Rules of Practice, to recommend that the case be designated as a complex business case. 

Business Court Dismisses Complaint Due To Discovery Violations

The Business Court today granted a Motion to Compel and delivered a harsh sanction to the Plaintiff: dismissal with prejudice of its Complaint.   The case is TelSouth Solutions, Inc. v. Voyss Liquidation Company, LLC.

Plaintiff's failure to timely respond to discovery, standing alone, might not have warranted dismissal, but It had been preceded by a string of failures to meet deadlines. 

Those began with a failure to file the Case Management Report per Rule 17, continued with a failure to respond to a counterclaim resulting in an entry of default, then a lack of compliance with the deadlines in the Case Management Order for mediator selection and cost estimates, and culminated in Plaintiff no-showing at a hearing regarding the missed deadlines. 

The failure to respond to discovery was then the straw that broke the camel's back. The due date came and went for responses to interrogatories and document requests.  Defendant's counsel followed up and asked for responses, but Plaintiff's counsel responded that he had "been traveling and [was] swamped."  The responses finally came about two months after they were due, and only after more prodding from Defendant's counsel. 

Judge Diaz observed that Rule 37 provides for a wide range of sanctions for a party who doesn't respond at all to interrogatories, including "[a]n order striking out pleadings . . . or dismissing the action or proceeding."  He said that "the Court may impose drastic sanctions for discovery violations, including dismissal of claims with prejudice when it is 'just' to do so," and that it wasn't necessary for there first to be an order directing compliance.

Plaintiff's counsel said at the Motion to Compel hearing that his inability to respond "was the result of factors beyond his client's control."  The Court held that it was true that "if a party is unable to answer discovery requests because of circumstances beyond its control, an answer cannot be compelled," but said that there was no evidence presented as to the reason that Plaintiff was unable to respond.

The Court held that "Plaintiff has demonstrated (time and again) an unwillingness to give proper attention to litigation that it initiated. In light of Plaintiff’s most recent transgression, and because the fact discovery deadline has now expired, the Court concludes, in its discretion and after considering lesser sanctions, that the appropriate sanction is dismissal of Plaintiff’s Amended Complaint with prejudice." 


Those Fax Charges Can Add Up

Given the dinosaur-like status of the fax, it was a surprise that there were two North Carolina decisions last week, one from the Court of Appeals and one from the Business Court, that involved faxes. The appellate decision is a class action case; the Business Court decision addressed the more mundane subject of how much a law firm can charge for sending a fax.

The COA decision, Blitz v. Agean, Inc., involved the Telephone Consumer Protection Act.  That federal legislation was enacted 18 years ago, when fax machines were a routine means of communication.  The TCPA outlawed the annoying practice of sending unsolicited fax advertisements.  It imposed penalties of $500 per unsolicited fax, allowed for attorneys' fees, and immediately attracted class action lawyer like moths to a flame.

The Blitz case was a purported class action on behalf of 900 individuals who had received multiple faxes from the defendant, a restaurant operator in Durham.  The Business Court had dismissed the case in a 2007 ruling, holding that individual inquiries of whether the recipients had consented to the receipt of the faxes, and whether there was a "established business relationship" between the faxer and the faxees, would predominate over the common issues.  Judge Diaz also ruled that the claims were better brought in small claims court.

The Court of Appeals reversed, ruling that the need to determine consent wasn't determinative, and that the decision on whether a TCPA class action should proceed should be made on a case by case basis.  On the point about small claims court, the appellate court said that there were circumstances under which a class member's claims might exceed the $5,000 limit of small claims jurisdiction, and that the small claims court didn't have the power to enter the injunctive relief permitted under the TCPA and requested by the Plaintiff.

The other fax related ruling last week, Estwanik v. Gudeman, was a Business Court decision on a completely different subject.  The issue was a receiver's application for fees.  The application included a charge of $301 for faxes, which was attributable to 301 pages faxed by the receiver's counsel to a lawyer in response to three subpoenas. 

The receiver's counsel had asked to send the 301 pages by email, but the lawyer requesting them had insisted on getting them via fax, the same day that the subpoenas were served.  The receiver's law firm apparently charged its standard $1.00 per page fax charge. Judge Diaz rejected the $1.00 per page fee, said it was "exorbitant," and ruled that the receiver should collect it from the attorney who sent the subpoena.

Can a lawyer charge $1.00 per page for a fax?  Maybe.  This type of charge is covered in ABA Formal Opinion 93-379 (titled Billing for Professional Fees, Disbursements and Other Expenses).  The Opinion doesn't address fax charges specifically, but says the following about the allowable charge for copying by a law firm: "no more than the direct cost associated with the service (i.e., the actual cost of making a copy on the photocopy machine) plus a reasonable allocation of overhead expenses directly associated with the provision of the service (.e., the salary of a photocopy machine operator).

The ABA Opinion goes on to say "it is impermissible for a lawyer to create an additional source of profit for the law firm beyond that which is contained in the provision of professional services themselves.  The lawyer's stock in trade is the sale of legal services, not photocopy paper, tuna fish sandwiches, computer time or messenger services."

Directors Of Corporation Facing "Deepening Insolvency" Owed Fiduciary Duties To Creditor

Directors of corporations verging on insolvency can owe fiduciary duties to creditors under certain circumstances.  Whether those duties were owed -- and whether the claim for their breach had been released as a part of the corporation's bankruptcy proceeding -- were the main issues yesterday in Phillips and Jordan, Inc. v. Bostic, 2009 NCBC 13 (N.C. Super. Ct. June 2, 2009).

The Plaintiff claimed that the Defendant directors had diverted money through "a web of sham entities" for their own personal benefit during a time when the corporation faced "deepening insolvency" and that they were liable to it under a theory of constructive fraud.

Here's how Judge Diaz described North Carolina law on the duties of directors of a corporation in financial difficulty:

In certain circumstances. . . corporate directors may owe a fiduciary duty to creditors of the corporation. The circumstances under which a director’s fiduciary obligations extend to creditors have been limited to those situations 'amounting to a "winding up" or dissolution of the corporation.'

'Once the fiduciary duty arises, a director must treat all creditors of the same class equally by making any payments to such creditors on a pro rata basis.'

Where a creditor can show constructive fraud by a director at a time when the corporation 'is in declining circumstances and verging on insolvency,' or 'where such facts establish circumstances that amount "practically to a dissolution,"' the claim is one that 'belongs to the creditor and not the corporation.'

Op. ¶¶42-45.

The Court denied the Defendants' motion to dismiss the Plaintiff's claim for constructive fraud.  It also rejected arguments that the claim had been settled as a part of the corporation's bankruptcy proceeding, ruling that "where . . . the claim arises from a purported breach of a fiduciary duty owed by a corporate director to a creditor, and where the claim, therefore, properly belongs to the creditor and not the corporation, 'it is not a part of the bankruptcy estate, and the trustee in bankruptcy does not have authority to bring [or settle the] claim.'"  

In another part of the Opinion, the Court granted a motion to dismiss a fraud claim because it failed to comply with Rule 9(b).  The Complaint, which asserted the fraud claim against a group of individuals, did not identify the specific person who made the alleged misrepresentations.  The Court allowed leave to amend.

"Reverse" Piercing The Corporate Veil Claim Rejected Based On Judicial Estoppel

You don't see a "reverse" piercing the corporate veil case very often, but the Business Court decided one yesterday in Health Management Associates, Inc. v. Yerby, 2009 NCBC 14 (N.C. Super. Ct. June 1, 2009).  The Court rejected a Plaintiff's argument that its own corporate veil should be pierced, and granted summary judgment in favor of the Defendants.

Why was the Plaintiff Health Management Associates, Inc.,  taking the position that the Court should disregard the corporate separateness between it and its wholly owned subsidiary, Louisburg H.M.A., Inc?

The parent and the subsidiary had settled a medical malpractice case brought against them and the doctors that had been involved in a surgical procedure that went very badly.  The surgery had taken place at the facility operated by the subsidiary.  The surgeon and his practice refused to participate in the settlement, but the parent (not the subsidiary) paid the settlement and obtained a release for everyone involved in the procedure, including the surgeon.

The parent and the subsidiary then sued the surgeon and his practice for contribution.  The problem for the parent was that it was simply the owner of the allegedly negligent facility operated by its subsidiary, and it therefore wasn't a joint tortfeasor entitled to contribution.  So the parent argued that the Court should pierce its own corporate veil and find it the alter ego of its subsidiary, which had been alleged to be a joint tortfeasor.

But the parent had taken a completely different position in the underlying malpractice lawsuit, responding to discovery and asserting that its subsidiary was not a "mere instrumentality," and that it did not dominate its subsidiary's finances or policies.  It had also taken the position that the subsidiary was adequately capitalized and did have its own independent corporate identity.  

Judge Jolly, relying on the doctrine of judicial estoppel, held that:

[e]ven if there was evidence of record that would support an inference that the corporate veil between HMA and Louisburg HMA could be pierced, under the facts of this action, the Plaintiffs are estopped from making such an argument by virtue of their knowingly having taken diametrically opposed positions on the corporate veil issues in the [earlier lawsuit] and in the instant action.

The Court rejected an alternative theory posited by the parent which was that it should be treated as an insurer subrogated to the claim of its "insured," the subsidiary.  Relying on N.C. Gen. Stat. §58-28-15, the Court held that an unlicensed insurance carrier was not entitled to maintain an action in the Courts of North Carolina. 

The car at the top?  It's a 1948 Tucker.  The prototype was built without a reverse gear.

Here's a link to the only brief available:

Brief in Opposition to Motion for Summary Judgment

A Message From The North Carolina Business Court About E-Discovery

There isn't much out there in the way of a road map from North Carolina's state courts on how lawyers should fulfill their obligations to produce electronically stored information. So you might want to take notice of a little bit of direction in today's Order from the Business Court in Hill v. StubHub, Inc.

By a little bit of direction, I mean exactly that.  It's only this tidbit from the last paragraph of the Order, where Judge Tennille said:

Attached hereto is an opinion from Magistrate Judge Andrew Peak in William A. Gross Construction Association, Inc. v. American Manufacturers Mutual Insurance Company.  It contains a message for counsel. 

What's the message of American Manufacturers?  Well, that case involved a dispute between parties about how a keyword search of an email database in the hands of a non-party ought to be done.  The parties disagreed on what words ought to be searched for.  One wanted narrow terms, the other broad terms, and no one had bothered to talk to the party that held the emails about what would make sense.

Instead of making any deliberate effort to resolve the issue, the parties dropped the problem in Judge Peck's lap.  He wasn't happy about being the decider, noting that he was "no keyword expert."  He said:

This case is just the latest example of lawyers designing keyword searches in the dark, by the seat of the pants, without adequate (indeed, here, apparently without any) discussion with those who wrote the emails.  Prior decisions . . . have warned counsel of this problem, but the message has not gotten through to the Bar in this District.

Judge Peck said he was delivering a "wake-up call to the Bar."  He said that "[i]t is time that the Bar -- even those lawyers who did not come of age in the computer era -- understand" what it takes to craft an appropriate keyword search.  He stressed the "need for careful thought, quality control, testing, and cooperation with opposing counsel in designing search terms . . . to be used to produce emails or other electronically stored information."

So, that's the "message" conveyed today by Hill v. StubHub. Judge Tennille told the parties that they had twenty days "to meet and confer and agree upon a word search that is carefully crafted with the appropriate keywords determined after consultation with StubHub's ESI custodians."  He also ordered the parties to "address quality control and testing in their discussions and, if the volume of documents is excessive, use of appropriate sampling methodologies."

New Cases In The North Carolina Business Court: May 2009

Eighteen new cases were designated to the Business Court during the month of May 2009.  Most are the usual disputes between members, partners, or shareholders of business organizations, but there are a few securities claims and a couple of trade secrets cases as well.

[Update: It's actually nineteen new cases, I added the Napco case, which I had overlooked, after this post was first published.]

American Acquisition, LLC v. Goldman (Mecklenburg)(Diaz): claims involving dissolution of general partnership, and general partner's refusal to distribute proceeds from sale of partnership asset based on his position that funds may be necessary to defend against potential claims.

Boone v. American Benefit Concepts, Inc. (Guilford)(Tennille): Claim by investors that defendant brokers violated the North Carolina Securities Act by inducing them to invest in a company later placed into SEC receivership (Diversified Lending Group, Inc.).

Bradley v. Bradley Farms, Inc. (Halifax)(Tennille): shareholder dispute alleging misappropriation of funds, claims for breach of fiduciary duty and dissolution.

Cartridge Limited v. JRiDevelopment Group, LLC (Alamance)(Tennille): defendants, formerly associated with plaintiff, are alleged to have stolen Plaintiff's technology for use and sale by a competing entity.

Fitte v. Rutter (Guilford)(Tennille):dispute between members of an LLC, plaintiff alleges that he has been improperly excluded from participating in the management of the LLC.

Henderson v. Manuel (Guilford)(Tennille): Claims for breach of fiduciary duty and self-dealing against member and partner in multiple business entities.

Howard Perry & Walston Realty, Inc. v. Campbell (Wake)(Jolly): Allegations of theft of trade secrets and violation of non-compete agreements against former employees of real estate brokerage firm.

InSource Business Strategies, Inc. v. Bell (Iredell)(Diaz): claims that member/manager allegedly failed to provide truthful and accurate information about the financial condition of the Plaintiffs, and improperly obtained investment in the corporation without proper board approval and usurped corporate opportunities.  Also issues of validity of board approval of asset purchase agreement due to deficiencies in notice and lack of quorum.

Mast v. Edward D. Jones & Co. (Johnston)(Jolly) claim against securities broker involving unanticipated tax consequences from rollover of insurance policies.

Napco, Inc. v. PBM Graphics, Inc. (Alleghany)(Diaz): alleged misappropriation of trade secrets involving process for manufacture of sports memorabilia cards, breach of confidentiality agreement.

Pineway Partners, LLC v. Holt Asia, LLC (Alamance)(Tennille): claims for wrongful dissolution of an LLC and breach of fiduciary duty.

Port City Java, Inc. v. Reynolds and Sutton v. Reynolds (New Hanover)(Jolly): interpretation of shareholders' agreement, counterclaims regarding breach of fiduciary duty and violation of the Stored Communications Act and the North Carolina Computer Crimes Act.

Queen City Television Services Co. v. Player (Mecklenburg)(Tennille): the Third Party Complaint seeks dissolution of a corporation based on alleged breaches of fiduciary duty.

St. George Technology, Inc. v. Watkins (New Hanover)(Jolly): alleged diversions of funds by former president of company, claims for breach of fiduciary duty, fraud, NC RICO, and unfair and deceptive practices.  Defendant claims he was released from such claims when Plaintiff purchased his stock in the company.

Tai Sports, Inc. v. Hall (Gaston)(Diaz):Claim by sports apparel company for injunctive relief to "freeze" corporate assets or appoint receivers, for accounting, for declaratory judgment concerning the ownership, use and possession of corporate assets, and for breach of cororate fiduciary duties.

Tedder v. Tedder (Dare)(Jolly): shareholder dispute (between brothers) alleging misconduct by shareholder and officer, including claims for conversion, "bogus expense reports," and excess compensation. 

Triad Group, Inc. v. Wachopvia Bank, N.A. (Yadkin)(Tennille): securities claims regarding bonds issued by plaintiff and sold by Wachovia and also claims involving an interest rate swap agreement.

Wefald v. Wake Heart and Vascular Associates, P.A. (Johnston)(Tennille):lawsuit by cardiologist forced out of medical practice, issues whether termination was "for cause" and right of corporation to redeem former employee's shares.