North Carolina Business Litigation Lawyer & Attorney : Mack Sperling : Brooks Pierce Law Firm : Greensboro, Raleigh, Winston-Salem, Charlotte

The first round in a trademark dispute between two jewelers over the right to use the name "Windsor Jewelers" went to a WInston-Salem, North Carolina company.  Judge Diaz entered a Temporary Restraining Order  yesterday in Windsor Jewelers, Inc. v. Windsor Fine Jewelers, LLC, enjoining the Defendants from using the Windsor name for jewelry stores they had purchased in North Carolina.

Plaintiff Windsor has been operating in Winston-Salem for more than 25 years.  It has no federal trademark rights, but does have a service mark registered under the North Carolina Trademark Registration Act.  Plaintiff's only bricks and mortar location is in Winston-Salem, but it sells jewelry throughout the state, including in the Charlotte area.

The Defendant operates jewelry stores in multiple locations, and says it is one of the "Top Ten Independent Jewelers In America."  In its home state, Georgia, those stores are operated under the name "Windsor Jewelers." Defendant has used that name even longer than the North Carolina Plaintiff, but it apparently has no trademark registration. 

The dispute arose when Defendants purchased three jewelry stores in Charlotte in December 2006 and proposed to operate them under the name "Windsor Fine Jewelers." Defendants had approached the Plaintiff and offered to buy its store as well. In the course of those discussions, Plaintiff says the Defendants admitted "that it would be a conflict to expand into the North Carolina market using the 'Windsor' name without Plaintiff's permission or without" acquiring the Plaintiff. 

When the acquisition discussions broke down, Defendants offered to pay $750,000 simply to buy Plaintiff's tradename.  Plaintiff refused, and Defendants proceeded to rename their new Charlotte stores as "Windsor Fine Jewelers."

The lawsuit, and the TRO, followed.   The TRO says that:

Defendants' intent to confuse the consuming public is clear, as (notwithstanding that they have used the name Windsor Jewelers in Georgia and South Carolina) they were aware of Plaintiff's trademark registration in North Carolina when they selected Windsor Fine Jewelers as the name for their NC based stores, and indeed, attempted to purchase the Plaintiff's business and mark before announcing that they intended to change the name of their NC-based stores to Windsor Fine Jewelers.

Op. ¶3.  The TRO enjoins Defendants from use of the Windsor name in North Carolina, and also calls for all advertising materials which use the Windsor name in association with Defendants' Charlotte stores to be destroyed.

The Order itself is very short, so you'll have to look at the Briefs (linked below), if you would like to know more about the interesting state law trademark issues raised by this case.  There's a preliminary injunction hearing set for November 25th.  If that goes forward, perhaps we'll get a full opinion on some of the rarely addressed issues in the area of North Carolina trademark law.

Brief in Support of Motion for TRO

Brief in Opposition to Motion for TRO

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The Plaintiff had never signed the agreements containing the arbitration provisions which the Defendant sought to enforce, but the Business Court on November 19 nevertheless granted a Motion to Compel Arbitration in American Drywall Construction, Inc. v. Superior Construction Corp.,

The Plaintiff was a subcontractor, the Defendant was the general contractor.  The Defendant prepared three written subcontracts -- each of which contained an arbitration provision -- but Plaintiff never signed any of them.

Judge Jolly noted three key facts regarding the unsigned agreements:

First, Plaintiff had undertaken to do the work described in the subcontracts, and it was seeking payment for that work in the lawsuit.

Second, Plaintiff submitted applications for payment referencing the subcontracts. The forms completed by the Plaintiff stated that "this Application for Progress Payment is made in strict accordance with the terms of the Subcontract."

Third, the parties had signed an addendum to one of the subcontracts which said that "all terms and conditions of the Subcontract . . .are incorporated herein and by reference and shall remain in full force and effect."

The Court held:

in this civil action Plaintiff seeks payment for performance of the work done pursuant to the terms of the respective Subcontracts, while at the same time it seeks to deny the enforceability of one of the terms of the Subcontracts.  Much like the case of Real Color Displays, Inc. v. Universal Applied Techs., 950 F. Supp. 714 (E.D.N.C. 1997), Plaintiff's conduct demonstrates that it intended to be bound by the Subcontracts, including the Arbitration Clause.  In addition, Defendant's argument in favor of the enforceability of the arbitration clause is bolstered by the signed subsequent writings, which specifically relate back to and incorporate the terms of the respective Subcontracts.

Judge Jolly concluded "the facts and circumstances of the dealings between the parties clearly demonstrate that the Subcontracts were intended by the parties to be binding.  The fact that certain of the agreements were not signed does not change this result."

Brief in Support of Motion to Compel Arbitration

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Mediation often devolves into the mediator shuttling back and forth between two rooms, carrying alternating declining and increasing offers to the parties.

There are times during this ping ponging of offers when I wish the mediator was pushing harder on the other party to explain the absolute rightness of my client's position, inevitably to result in summary judgment in our favor, or explaining to me why my client and I have missed the boat in evaluating the case.  Most mediators won't do that, and dismiss the concept of informing the parties of the mediator's perception of the quality of their case or defense as being unacceptably "evaluative."

I'm prompted to write about this subject based on a one paragraph Order by Judge Tennille earlier this year in Bank of America Corporation v. Beazer Morgage Corp., granting the Joint Motion of the parties to have a "neutral evaluation" instead of a mediation.  

What is a "neutral evaluation?"  In short, it's "a process in which a third party neutral examines the evidence and listens to the disputants' positions, and then gives the parties his or her evaluation of the case."  Here's a good article on the subject, and also the American Arbitration Association's description of the procedure and how it works.  Neutral evaluation apparently led to a settlement of the Beazer case, because the parties filed a joint dismissal with prejudice a few weeks after the evaluation, in which a state court Judge in Georgia served as the neutral.

There is clear approval of alternative resolution procedures to mediation in North Carolina's statute on mediated settlement conferences. N.C. Gen. Stat. Sec. 7A-38.1:

Promotion of other settlement procedures -- Nothing in this section is intended to preclude the use of other dispute resolution methods within the superior court. Parties to a superior court civil action are encouraged to select other available dispute resolution methods. The senior resident superior court judge, at the request of and with the consent of the parties, may order the parties to attend and participate in any other settlement procedure authorized by rules of the Supreme Court or by the local superior court rules, in lieu of attending a mediated settlement conference. Neutral third parties acting pursuant to this section shall be selected and compensated in accordance with such rules or pursuant to agreement of the parties. Nothing in this section shall prohibit the parties from participating in, or the court from ordering, other dispute resolution procedures, including arbitration to the extent authorized under State or federal law.

 Id. at i.

Also, the North Carolina Rules Implementing Statewide Mediated Settlement Conferences in Superior Court Civil Actions contain a specific provision (Rule 10) permitting the parties to request the use of procedures other than mediation, including neutral evaluation (Rule 11), non-binding arbitration (Rule 12), or non-binding summary jury or non-jury trials (Rule 13).  I don't hear much about these alternative procedures being used in North Carolina even though they are specifically allowed by the Rules.

There is no special certification necessary to become a neutral evaluator.  In Mecklenburg County, for example, the Court maintains a list of approved neutrals.  You are qualified to serve if you have five years of experience as "a judge, practicing attorney, law professor, arbitrator or mediator, or have equivalent experience" and you are of "good moral character," and you "adhere to ethical standards."

The cartoon at the top is by Charles Fincher, a lawyer who is also a cartoonist.  His very funny comics and comic strips are what he calls "inside baseball" humor for lawyers.  He has a number of different cartoons and strips, which you can find at lawcomix.com.  The one I used, with his permission, is from a series of one-panel cartoons called Scribble-in-Law. 

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Today, the North Carolina Court of Appeals said that it did not have the authority to adopt the "new" standard for consideration of a Rule 12(b)(6) Motion articulated last year by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, __ U.S. __, 167 L.Ed.2d 929 (2007). 

If Twombly is to become the law of North Carolina, that is now up to the North Carolina Supreme Court.  Given the pace of appeals in North Carolina, it's going to take a while to see whether that will happen.

The Court's decision came in a rather bizarre case, Holleman v. Aiken, which was brought by a very enthusiastic fan of Clay Aiken, of American Idol fame.  Plaintiff, the author of a book about Aiken's life, claimed that Aiken and others had defamed her by saying that her book was not authorized by them and by refusing to endorse her book. Among other things, Plaintiff wanted an injunction requiring Aiken to endorse her book on his website, to write an endorsement for the back of the book, and to write an introduction to her book thanking her for writing it.

The Court affirmed the dismissal of virtually all of Plaintiff's claims, including claims for libel per se and libel per quod, notwithstanding its refusal to adopt the Twombly standard.  Judge Stroud, writing for the Court of Appeals, said that "our courts cannot be used to force celebrities or their family or friends into making endorsements for another person's profit."

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There's been a lot of publicity about North Carolina Senate candidate Kay Hagan's "lawsuit" against incumbent Senator Elizabeth Dole over a television commercial suggesting  that Hagan is "godless." 

The subject of this post is that there technically isn't a lawsuit at all, at least not yet.  The court filing by Hagan illustrates an interesting quirk of North Carolina civil procedure.  In North Carolina, you can start a legal proceeding without filing the Complaint which typically begins a lawsuit.

That's pretty unusual.  I'm not aware of any other state which has a procedure exactly like the one contained in Rule 3 of the North Carolina Rules of Civil Procedure, which lets a lawyer file a Summons to start a lawsuit and to then follow up twenty days later with a Complaint detailing the claims against the defendant. (Though North Dakota Rules of Civil Procedure 3 and 4(c) provide that you can start a lawsuit with a Summons and the Defendant can then demand that the Complaint be filed within twenty days).

The North Carolina procedure is colloquially called a "Summons without Complaint."  Our Rule 3 provides that while a lawsuit is ordinarily started with the filing of a Complaint:

A civil action may also be commenced by the issuance of a summons when

(1) A person makes application to the court stating the nature and purpose of his action and requesting permission to file his complaint within 20 days and

(2) The court makes an order stating the nature and purpose of the action and granting the requested permission.

Why would a lawyer use this procedure?  One reason might be to toll the statute of limitations, which obviously wasn't necessary given the very recent airing of the commercial, or to try to be first to the courthouse when there is a dispute over where a particular claim should be litigated, also not a particularly significant factor in the dispute between the candidates.

There is a North Carolina form for a lawsuit started without a Complaint, which is exactly what Hagan filed to initiate her claim against Senator Dole. The filing lays out the basis for the lawsuit, probably in more detail than Rule 3 requires, because the Rule requires only "preliminary notice" of the nature of the claim.  See, e.g., Morris v. Dickson, 14 N.C. App. 122, 187 S.E.2d 409 (1972). 

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Fisher v. Communications Workers of America, 2008 NCBC 18 (N.C. Super. Ct. Oct. 30, 2008).

The North Carolina Business Court decided today the first published opinion under North Carolina’s Identity Theft Protection Act, N.C. Gen. Stat. §75-60 et seq. The case, Fisher v. Communications Workers of America, also involves an interesting invasion of privacy issue.

The Plaintiffs were members of the CWA, working for AT&T at various locations. A representative of the Union posted a notice on a bulletin board at one job site which contained the social security numbers of all the Plaintiffs.

This led to three claims by the Plaintiffs: that this violated the North Carolina Identity Theft Protection Act, that it was an unfair and deceptive practice, and that it was an invasion of privacy.

The Act specifically provides that a business may not "Intentionally communicate or otherwise make available to the general public an individual's social security number."  N.C. Gen. Stat. §75-62(a)(1).  Defendants argued that the list posted on the bulletin board had not been seen by the "general public" and that it had not been posted there in order to facilitate identity theft.  The Defendants also argued that the bulletin board was used for "internal verification or administrative purposes," and that the posting was therefore exempt under N.C. Gen. Stat. §75-62(b)(2).

Judge Diaz rejected these defenses.  He held that the Act does not require that the general public actually see the social security numbers in order for there to be a violation.  He also held that the communication of the social security numbers does not need to be made either for the purpose of providing them to the general public or for the purpose of facilitating identity theft.  And as to the "bulletin board defense," Judge Diaz held that this presented a question of fact which could not be resolved on a motion to dismiss.

The Motion as to the unfair and deceptive practice claim was also denied, mainly because the Act provides that “[a] violation of [section 75-62 of the North Carolina General Statutes] is a violation of [the UDTPA].” N.C. Gen. Stat. § 75-62(d) (2007).

The Court did grant the Motion to Dismiss on the invasion of privacy claim, however.  It held that the posting of the social security numbers was "not the type of 'intentional intrusion, "physically or otherwise,"' necessary to state a claim for invasion of privacy by intrusion into seclusion."  It held that this tort requires  "a physical or sensory intrusion or an unauthorized prying into confidential personal records."

The Court also rejected the argument that the posting on the bulletin board could make out an invasion of privacy claim because it was a "public disclosure of private facts."  The Court relied on  Hall v. Post, 323 N.C. 259, 265–70, 372 S.E.2d 711, 714–17 (1988), in which the North Carolina Supreme Court held that the tort does not encompass claims which involve the publication of true but private facts.

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

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The Defendant's exercise of his Fifth Amendment right against self incrimination was the basis for the North Carolina Business Court's entry of a Preliminary Injunction on October 29th in Amacell LLC v. Bostic.

Plaintiff asserted that its former employee, a senior research scientist, had misappropriated trade secrets and violated a confidentiality agreement.  The Defendant didn't deny the misconduct alleged, but instead invoked his Fifth Amendment right against self-incrimination.

Judge Tennille drew an adverse inference as a result of the Defendant's refusal to testify and entered the Preliminary Injunction, holding:

In a civil case, adverse inferences may be drawn against a party who asserts the Fifth Amendment and remains silent.  Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (“the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them”); see Arminius Schleifmittel GMBH v. Design Indus., Inc., 2007 WL 534573 (M.D.N.C. Feb. 15, 2007) (granting injunction against defendant who asserted Fifth Amendment privilege because by asserting the privilege he rendered plaintiff’s factual presentation unrebutted). Because Bostic has not rebutted Plaintiff’s evidence, Plaintiff has established a likelihood of success on the merits of its claims for misappropriation of trade secrets and breach of his confidentiality agreement.

Order at 3.

The Business Court also dealt with the Fifth Amendment in the context of civil litigation in its opinion in Sports Quest, Inc. v. Dale Earnhardt, Inc., 2004 NCBC 3 (N.C. Super. Ct. Feb. 12, 2004), where the Court held that a plaintiff who refused to testify about certain matters could not testify about them at trial, and that it would give an adverse inference instruction.

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You've lost a case in the North Carolina Court of Appeals,  It was unanimous, 3-0.  You are talking with your client about a Petition for Discretionary Review to the North Carolina Supreme Court. 

What are your chances?  Frankly, not very good at all.  I took a look at the Supreme Court's track record this year on Petitions for Discretionary Review.  I counted 341 Petitions ruled upon on the five release dates so far this year.  Of that number, 319 were denied, and 22 were allowed.  In overall percentage terms, 94% were denied.

The numbers break a little better for civil Petitions as opposed to criminal Petitions.  There were 180 criminal Petitions, of which only 5 were granted. That's less than 3%.  There were 161 civil Petitions, of which 17 were granted.  The chances on a  civil Petition, overall, were slightly better than 10%, but eight of those were Petitions where there was a dissent in the Court of Appeals.  When you take those out of the mix because the Supreme Court was going to take the appeal as of right, the winning percentage is about 6%. 

I haven't subjected these numbers to actuarial review, but they are accurate enough for me to say that you might be better off looking for 4-leaf clovers than asking the Supreme Court to take your case on a discretionary basis.  The Court of Appeals, for all practical purposes, is the final level of review for a civil case in North Carolina.

Things are quite different if there is a dissenting opinion in the Court of Appeals and you ask the Supreme Court through a Petition for Discretionary Review to consider additional issues.  Virtually all of those Petitions were granted.

If you are proceeding ahead with a Petition despite the long odds, and are looking for a winning Petition to get some guidance in drafting your own, at the bottom of this post there are links to five of the Petitions allowed this year in civil cases. 

Petition for Discretionary Review in Mangum v. Raleigh Board of Adjustment

Petition for Discretionary Review in Pottle v. Link

Petition for Discretionary Review in Sandy Mush Properties, Inc,. v. Rutherford County

Petition for Discretionary Review in Weaver v. Sheppa

Petition for Discretionary Review in Grant v. High Point Regional Health System

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The North Carolina litigation involving Citigroup and Wells Fargo's fight for Wachovia has been dismissed with the consent of the parties.  As a part of the dismissal, Citigroup has agreed that it will not take any steps to enjoin a merger between Wells Fargo and Wachovia or interfere with a vote of the Wachovia shareholders on that merger.

Bud Baker, Wachovia's former CEO, had obtained a Temporary Restraining Order in Mecklenburg County which prohibited Citigroup from "filing or continuing any legal action against Wachovia or Wells Fargo to enforce the terms of the second paragraph of the Letter Agreement." 

The referenced second paragraph of the Agreement gave Citigroup a period of exclusivity to pursue the negotiation of a definitive agreement with Wachovia.  Citigroup claimed in litigation in New York that this provision had been breached by Wachovia with the assistance of Wells Fargo, and it had obtained a limited injunction from a Judge there.

The Joint Stipulation of Dismissal of the North Carolina action contains a commitment by Citigroup that it will not seek to prevent a shareholder vote on a Wells Fargo-Wachovia Merger.  It says:

Without waiving its rights fully to pursue monetary damages in other litigation, that Citigroup will not pursue any form of injunctive relief to seek to prevent a shareholder vote on the merger between Wachovia Corporation and Wells Fargo & Company, Inc. or pursue any kind of injunctive relief that would prevent the consummation of that merger.

Citigroup stated in a Press Release its intention to pursue damage claims against Wachovia and Wells Fargo.  It says that its "shareholders have been unjustly and illegally deprived of the opportunity the transaction created."

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