Clark v. Alan Vester Group, Inc., July 17, 2009 (Jolly)(unpublished)

The Court determined that it could rule on a dispositive motion in a putative class action before ruling on class certification.  It held "in appropriate cases it is neither unusual nor inappropriate for a court of jurisdiction to consider merits issues prior to determining class certification matters."

The Court granted summary judgment on a Fair Credit Reporting Act claim, denied it as to other claims, and did not issue an opinion stating its reasons. The Court said that the case had been assigned to it as an exceptional case under Rule 2.1 of the General Rules of Practice, not as a complex business cased under Rule 2.2, and that a written opinion therefore was not required.

In separate opinions issued the same day, the Court sanctioned the Defendants for spoliation of evidence and certified the class.

Full Opinion

Thomas Cook Printing Co. v. Subtle Impressions, Inc., 2008 NCBC 17 (N.C. Super. Ct. Oct. 24, 2008)

Following the procedure of Moody v. Sears Roebuck and Co., 664 S.E.2d 569 (N.C. App. 2008), and Judge Tennille's Order in  Moody v. Sears Roebuck and Co., 2008 NCBC 14 (N.C. Super. Ct. Aug. 6, 2008) applying that ruling, the Court approved the withdrawal of class action claims.

The Court permitted the parties to keep confidential the terms of the settlement with the individual Plaintiff.  Judge Diaz recognized that the settlement papers filed with the Court were "public records and, thus, are presumed to be available for public inspection pursuant to the North Carolina Public Records Act," but he reasoned as follows in agreeing to keep them confidential:

In Virmani v. Presbyterian Health Servs. Corp., 350 N.C. 449, 463, 515 S.E.2d 675, 685 (1999), the North Carolina Supreme Court held that  “a trial court may, in the proper circumstances, shield portions of court proceedings and records from the public[.]” 

In the absence of the class action allegations, the parties "could have settled their dispute confidentially and filed a voluntary dismissal without any oversight from this Court." 

The amount being paid, as described by Judge Diaz, was "relatively insubstantial, particularly when viewed in the context of the high-dollar business disputes typical of this Court’s docket."

The case did not implicate substantial public policy concerns.  There had not been an interest voiced by the media or the public in the Plaintiff's allegations.

Maintaining the confidentiality of the settlement was in the best interests of justice, in the absence of any prejudice to the putative class members or the public at large.

Full Opinion



Moody v. Sears, Roebuck & Co., 2008 NCBC 14 (N.C. Super. Ct. August 6, 2008)

Counsel taking a pre-certification dismissal of a class action must file a statement which includes:

(1) the reason for dismissal, (2) the personal gain received by the plaintiffs in any settlement, (3) a statement of any other material terms of the settlement, specifically including any terms which have the potential to impact class members, (4) a statement of any counsel fees paid to plaintiff’s counsel by defendants, and (5) a statement of any agreement by plaintiff(s) restricting their ability to file other litigation against any defendant. 

Op. at ¶2.  In addition, counsel for the Plaintiff is required to "file a statement either detailing any potential prejudice to putative class members or representing to the Court that no prejudice exists."  Judge Tennille indicated that the Court would "be particularly concerned about issues related to tolling of the statute of limitations."

In a case involving the dismissal of a North Carolina class action resulting from the approval of a nationwide class action settlement in another state, there is a different requirement.  Then:

counsel shall file with the Court a copy of the order approving settlement and sufficient information concerning the notice provisions so that the Court can ascertain if jurisdictional and due process issues have been addressed by the foreign court and whether North Carolina citizens have been represented in the proceeding. 

Op. at ¶4.  This filing will permit the court to "raise any concerns with the foreign court," and that "once those concerns have been addressed, the foreign court’s order will be entitled to full faith and credit whether or not this Court would have granted approval of the settlement."  Op. at ¶4.  (In a case involving an out-of-North Carolina settlement, the statement regarding the reasons for the dismissal is not necessary.)

In all cases, the Business Court will require a final accounting of the distribution of any settlement proceeds and attorneys fees.  This needs to include "the amount of money (or coupons) actually received by the class, the amount of administrative fees, and the amount of attorney fees received."  Op. at ¶6.

The Court noted two reasons for the requirement of an accounting.  First, the Court said that this would "promote greater transparency that will fill the 'informational black hole' concerning final distributions and make administration of class actions more efficient and effective and thus more beneficial to class members."  Op. at ¶8.

Second, the Court said it would use this information for other purposes, including an assessment of the qualifications of class counsel:

This Court would add to that list of benefits from transparency, the benefit of judges being able to assess the past performance, abilities and commitment of those lawyers who seek to be class counsel in other cases. A history of final results in other cases would also alert judges to scrutinize settlements proposed by defendants who have settled their class action in ways that resulted in no benefits to class members. This Court can think of no reason why the final results should not be made known to the Court and the citizens affected. 

Op. at ¶9.  The accounting information will be available on the Business Court's website.

Full Opinion,

Wilbanks v. Laboratory Corp. of America, April 15, 2003 (Tennille)(unpublished)

The Court approved a voluntary dismissal of a class action, pre-certification, without notice to class members. There was a separate class action which had been settled in California, which bound the class members. The Court determined that "[s]ending a class notice regarding dismissal of this action would be costly, time-consuming, and confusing." Court approval of the dismissal of a class action is required, even if the class has not been certified.

Full Opinion

Skirzenski v. K2, Inc., 2004 WL 5218012 (June 7, 2004)(Tennille)(unpublished)

This is a detailed Order from Judge Tennille approving settlement of a class action.

Full Opinion

MJM Investigations, Inc. v. Microsoft Corp., December 13, 2004 (Tennille)(unpublished)

The Court approved an award of attorneys' fees of $4 million to class counsel. It found the fees to be reasonable under the percentage of fund approach, the lodestar-multiplier approach, and the fee factors considered in North Carolina cases based on Rule 1.5 of the North Carolina Rules of Professional Conduct.

Full Opinion

Rankin v. Microsoft Corp., June 10, 2004 (Tennille)(unpublished)

This Motion to Intervene before the Court in this class action case against Microsoft was filed not by a potential party, but by a group of lawyers seeking to share in any fee award to plaintiff's counsel. The Court refused to allow the lawyers to intervene, because lawyers who have never been counsel of record cannot have an interest in a settlement. Allowing intervention, which would have led to a fee dispute, would have delayed implementation of the settlement.

Full Opinion

MJM Investigations, Inc. v. Microsoft Corp., August 2, 2004 (Tennille)(unpublished)

This is an unpublished order approving settlement of a class action against Microsoft Corporation.

Full Opinion

Blitz v. Agean, Inc., 2007 NCBC 21 (N.C. Super. June 25, 2007)(Diaz)

This was the second effort of this plaintiff to secure class certification of a claim under the Federal Telephone Consumer Protection Act. The Court discussed the requirements for class certification, and found that certification should be denied. The individualized inquiries that would be necessary to determine whether the faxed advertisements at issue were unsolicited, and whether there was an "established business relationship" between the sender and the recipients predominated over the common issues. The lack of any evidence of consent, or of an established relationship, was not preclusive because the Court found that it would still be required to undertake this inquiry. Plaintiff could not avoid this inquiry through the manner in which it chose to define the class. Nor was the class action device the superior means of resolving controversies of this type. The members of the class were free to go to small claims court if they desired.

Full Opinion

Moody v. Sears, Roebuck and Co., 2007 NCBC 13 (N.C. Super. May 7, 2007)(Tennille)(reversed by the North Carolina Court of Appeals)

The Court considered the dismissal of a North Carolina class action following the Illinois settlement of a nationwide class action. Court approval was required, even though the class had never been certified, but the plaintiff had attempted to dismiss its case following the settlement without leave of Court.

The Business Court had tentatively agreed to the dismissal, subject to the filing of an accounting of the settlement and its benefits to North Carolina residents. Plaintiff and class counsel sought to avoid providing the information by taking the unusual step of applying for a Writ of Mandamus from the North Carolina Court of Appeals, but were ultimately required to do so.

The accounting revealed that the distribution was paltry, totalling $66 in cash and coupons to the North Carolina claimants. The entire nationwide class had received $2,402 in cash and coupons. A settlement obtained by the Attorney General for New Jersey, however, had resulted in the payment of $125,440 to 12,544 claimants. Notwithstanding the minimal benefit for the class members, the Illinois Court had awarded fees of $1.1 million.

The Court held that "the shocking incongruity between class benefit and the fees afforded counsel and the representative leave the appearance of collusion and cannot help but tarnish the public perception of the legal profession." The class notice here, the Court found, was both poorly distributed and uninformative, did not provide sufficient time for class members to opt out, and made no mention of the million dollar fee for the lawyers. The Court held that "it is hard to imagine a more inadequate notice plan and claims process."

The Court engaged in a thorough discussion of class notice requirements, and pointed out a number of ways in which the notice was deficient and how it could have been improved. Class counsel, the Court held, has responsibility for ensuring that the notice plan is effective. The Court also expressed its distaste for settlements where class members obtain coupons, especially of small dollar amounts, instead of cash.

Another deficiency referenced by the Court was the lack of monitoring of the claims process. The Court stated that it is its practice "to monitor the claims process and to have legal notices published at the end of the case so the public can see what the class received, what expenses were incurred, and what fees were awarded to class counsel and the class representative."

The Court found that class counsel had not adequately represented the class. It also chastized the defendant, saying that "corporations . . . which settle consumer class actions must do so in a fair manner and should not employ notice and claims processes which deprive consumers of knowledge of the settlement terms or the ability to take advantage of the settlement."

The Court ruled that the Illinois dismissal was not entitled to full faith and credit. It dismissed plaintiff's claim with prejudice, but dismissed the class action allegations without prejudice, finding that the Illinois Court had been misled about the number of potential claimants, that the notice plan did not comport with due process, and absent class members had been inadequately represented. The Court made several references throughout its opinion to the Class Action Guidelines published by the National Association of Consumer Advocates.

Full Opinion

Teague v. Bayer AG, 2007 NCBC 12 (N.C. Super. Ct. May 7, 2007)(Tennille)

The Court, again, considered the issue of indirect purchaser standing. It reiterated the factors it looks to in determining whether there is such standing, as articulated in its opinion in Crouch v. Crompton Corp.

Crouch had involved one product, tires, but this case involved ethylene propylene diene monomer, which the Court observed might be used in hundreds of products. The recovery to individual consumers would therefore be miniscule, and the Court observed that "[t]he funds from these settlements are destined to end up in the hands of the lawyers, a handful of named plaintiffs, and a small number of charities selected by the approving court pursuant to the cy pres doctrine."

The Court considered the relevant market (it determined that plaintiff was a participant in a collateral market, a factor working against standing), the directness of impact (what the court termed a complex issue involving multiple distribution chains, which weighed against standing), that other indirect purchasers were likely to have been more heavily impacted (having absorbed some or all of the price increase without passing it on to plaintiff), and the daunting and complex nature of the calculation of damages (which the Court found even more complex than the calculation necessary in Crouch).

After a full analysis, the Court found that the plaintiffs lacked standing. Other defendants in the case had settled class action claims against them in other states before the Court's ruling. Plaintiffs moved for the dismissal of these defendants. The Court reviewed the terms of those settlements and ultimately determined, reluctantly, that it would approve the settlements.

The case makes clear the frustration of the Court about multi-state class actions being settled in other states where the benefits of the settlement do not flow in an appropriate way to the injured residents of this State.

Full Opinion

Brief in Support of Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

Thai Holding of Charlotte, Inc. v. Archer Daniels Midland Co., 2007 NCBC 11 (N.C. Super. May 7, 2007)(Tennille)

A multi-state class action was settled in New Mexico. As a result, funds were to made available to North Carolina for a cy pres distribution to "public and/or non-profit entities that use MSG and Nucleotides and/or products that use MSG or Nucleotides." There was no specification, however, of what entities should receive the funds, or how those entities should be selected.

The Court referenced its opinion in Teague v. Bayer AG, issued the same day, and made it clear that it expected further information. The Court later approved the settlement in a subsequent unpublished opinion and dismissed the case, ordering that a specified amount would go to specified North Carolina Food Banks.

Full Opinion

Blitz v. Xpress Image, Inc., 2006 NCBC 10 (N.C. Super. Ct. Aug. 23, 2006, amended Aug. 25, 2006)(Diaz)

Plaintiff sought damages, as the representative of a class, for violation of the Federal Telephone Consumer Protection Act. The Court found that individualized issues would predominate, and that class certification therefore was not appropriate. The individual issues were whether any class member had given the defendant "express permission" to send the advertisement, and whether any class member had an "established relationship" with the defendant. Even though the record before the Court was devoid on such matters, it held that it would still be required to conduct an individualized inquiry and the Court refused certification.

Full Opinion

Coker v. DaimlerChrysler Corp., 2004 NCBC 1 (N.C. Super. Ct. Jan. 6, 2004)(Tennille), aff'd, 172 N.C. App. 386, 617 S.E.2d 306 (2005), aff'd per curiam, 360 N.C. 398, 627 S.E.2d 461 (2006)

In this class action against an automobile manufacturer, plaintiffs claimed that the manufacturer had committed fraud by advertising the safety of its vehicles even though they did not have a brake shift interlock system. Plaintiff sought damages -- even though they had suffered no injury as yet -- and an injunction ordering a recall of the vehicles.

The Court granted summary judgment because the only loss suffered by plaintiffs was theoretical loss in the value of their vehicles, and such a claim was barred by the economic loss doctrine. Allowing such a claim would have circumvented the contract warranty frameork.

The injunctive claim for a recall was preempted by the federal scheme of the National Traffic and Motor Vehicle Safety Act of 1966. The Court further ruled that the doctrine of primary jurisdiction, which required it to defer to the administrative agency responsible for claims involving design defects in automobiles, barred it from considering this claim.

Full Opinion

In re Quintiles Transnational Corp. Shareholders Litigation, 2003 NCBC 11 (N.C. Super. Ct. Dec. 19, 2003)(Tennille)

This opinion on attorneys' fees was issued in tandem with the opinion in In re Wachovia Shareholders Litigation. Lawsuits had filed over a tender offer for the company, which led the Board of Directors to conduct an auction process which led to a higher price per share. Thereafter, class counsel and the defendant had agreed to permit the Court to set the fee, not to exceed $450,000, and the defendant had agreed not to object.

The Court considered, as it would have if there had been an objection: (1) whether the action was meritorious at the time it was filed, (2) whether there was an ascertainable benefit received by the class, and (3) whether there was a causal connection between the action and the benefit. The Court approved a fee of $450,000, although it found that there were some "close questions," particularly whether the filing of the lawsuit had been a direct cause of the increase in price paid for the company.

The Court noted that an award of fees acts as a check on management. The Court has an obligation "to balance the need for incentives for shareholders to protect their interest with the need to keep litigation costs at a level which does not inhibit merger activity."

The Court discussed, on a prospective basis, whether the law firm which did not become appointed as lead counsel could be compensated for its work. It noted that the decision of the law firm to be lead counsel would not ordinarily turn on which firm was the first to file.

It discussed the importance of making a shareholder inspection request under the North Carolina statute before rushing to the courthouse, cited substantial Delaware precedent on this point, and held that "failure to use inspection of books and records may result in a finding that the suit was not meritorious when filed."

Full Opinion

In re Wachovia Shareholders Litigation, 2003 NCBC 10 (N.C. Super. Ct. Dec. 19, 2003)(Tennille)

The Court considered an award of attorneys fees following its determination that certain termination provisions of a merger agreement were invalid. This opinion was issued in tandem with opinion in In re Quintiles Transnational Shareholders Litigation.

Fee applications were made by attorneys representing a class of shareholders, as well as attorneys representing a derivative plaintiff. The Court observed that the derivative action did not fit well in the "fast paced" context of litigation over a merger. It stated that such claims were more suited to being litigated as shareholder rights claims as opposed to corporate (derivative) claims for breach of fiduciary duty.

The Court refused to award attorneys fees in the derivative action, observing that it "was filed solely to get a piece of the litigation fee pie." It was also critical of the failure of the derivative plaintiff to seek a shortening of the statutory 90 day waiting period. Finally, the derivative action was moot, as the merger it sought to challenge had already occurred.

The Court observed, in dicta, that "the hourly rate claimed by New York counsel is astonishingly out of line with market rates."

On the class action claims, the Court determined that it could award fees, even though the litigation had not created a common fund. It then analyzed the fee request and discussed the level of specificity it expected in fee applications.

Full Opinion

Jacobs v. Physicians Weight Loss Center of America, Inc., 2003 NCBC 8 (N.C. Super. Ct. Nov. 5, 2003)(Tennille), aff'd in part and rev'd in part, 173 N.C. App. 663, 620 S.E.2d 232 (2005), cert. denied, 360 N.C. 290, 628 S.E.2d 3

This was a class action for unfair trade practices against a weight loss clinic. Plaintiffs' claim rested partly on their argument that their contracts required them to buy prescriptions from the defendant at a price higher than they would have paid at an outside pharmacy. The Court granted summary judgment on this claim, holding that the Unfair Trade Practices Act "did not eliminate caveat emptor," and that the defendant had no obligation to inform the plaintiffs that there were less expensive means to meet their goals.

The Court held that plaintiffs had stated a claim with regard to defendant's refusal to write prescriptions to be filled at outside pharmacies because this violated medical ethics. The Court determined that it had the authority to modify the previous order of class certification to limit the class to those plaintiffs who had requested -- but been refused -- written prescriptions.

Those class members also had a claim for the tort of intentional interference with a fiduciary relationship, and also for constructive fraud because of a "special relationship" between them and the plaintiff because they had provided medical background and submitted to tests. The Court rejected arguments that the weight loss clinics were "health benefit plans" subject to North Carolina insurance law. Nor were plaintiffs entitled to make a claim that defendant had improperly referred them to entities in which the defendants were investors because only the Attorney General can make such a claim.

Full Opinion


Alexander v. DaimlerChrysler Corp., 2002 NCBC 2 (N.C. Super. Ct. Feb. 19, 2002)(Tennille)

The plaintiffs moved, before class certification, to withdraw their allegations seeking class certification. The Business Court ruled that where a complaint is filed containing class action allegations and claims, those class claims may not be withdrawn, whether by voluntary dismissal, amendment to the complaint or simple failure to pursue class certification without court approval under Rule 23(c). The Court noted that class plaintiffs owe a fiduciary duty to absent class members, and class counsel owe those same fiduciary duties. The court found that notice of dismissal of the class claims would be required and required the submission of notice plans.

Full Opinion

Tomlin v. Dylan Mortgage, Inc., 2002 NCBC 1 (N.C. Super. Ct. Feb. 1, 2001)(Tennille)

This was a putative class action of sub-prime mortgage borrowers seeking recovery for what they claimed were illegal and excessive fees under North Carolina usury law. The Court certified the class after a thorough analysis of the nature of the claims, the adequacy of the proposed class representatives and their counsel, and making a specific finding as to numerosity. The Court also assessed whether class action treatment was the superior method for adjudication of the claims.

Full Opinion

In re Senergy and Thoro Class Action Settlement, 2000 NCBC 7 (N.C. Super. Ct. )(Tennille)

The determination of reasonable attorneys' fee under nationwide class action settlement is within the Court's discretion. The court considered Model Rule of Professional Conduct 1.5(b) in making its award. It rejected the percentage of fund approach given the uncertainty of the amount that might ultimately be awarded to the members of the class. Class counsel had the obligation to present time records which justified their fee request, the Court would not ask for them.

Full Opinion

Scarvey v. First Federal Savings and Loan Association, 2000 NCBC 2 (N.C. Super. Ct. )(Tennille), aff'd in part, rev'd in part, 163 N.C. App. 205, 592 S.E.2d 620 (2004)

The claims of the class plaintiff were barred by the statute of limitations. Although the statute of limitations had been tolled during the pendency of a prior class action involving the same matters, it resumed running when class certification was denied in the prior action. Tolling did not continue during the period of the appeal of the prior action. The Court adopted the "no-piggybacking" rule followed in the federal courts.

As an alternative basis for this holding, the Court found that plaintiff' was bound by the determination in the prior action that class certification was not appropriate, and that her claim for class certification was therefore barred by collateral estoppel.

Full Opinion

Pitts v. American Security Ins. Co., 2000 NCBC 1 (N.C. Super. Ct. Feb. 2, 2000)(Tennille), rev'd in part, vacated in part, 144 N.C. App. 1, 550 S.E.2d 179 (2001), aff'd per curiam, 356 N.C. 292, 569 S.E.2d 647 (2002)

The Court denied a motion for certification of a class of persons who had been extended credit by a national bank for the purpose of purchasing "force-place" insurance, because there were individual issues which made class certification inappropriate, including the need for each class member to prove reliance.

The Court also found that the plaintiff was not an adequate class representative because there were potentially counterclaims against her, and also because she had been solicited to be a plaintiff. The Court found that some of plaintiff's claims were barred by the statute of limitations, and rejected an argument of equitable tolling.

Full Opinion

Long v. Abbott Laboratories, 1999 NCBC 10 (N.C. Super. Ct. July 30, 1999)(Tennille)

The Court considered an award of attorneys' fees to class counsel, who had settled eleven separate antitrust class actions, including one in North Carolina.

The value of the settlement to the North Carolina class was slight. The Court observed that it was a cost of litigation settlement of approximately three cents on the potential dollar of liability, which resulted in a benefit of $1.23 per class member, which it characterized as a "poor result."

The Court declined to follow the lead of the other Courts which had ruled on fee awards for the settlement (which had allowed a 25% fee), and followed the hybrid approach that it had adopted in the Senergy case.   After extensive analysis, the Court awarded a fee of approximately 10%.

Full Opinion

In re Senergy and Thoro Class Action Settlement, 1999 NCBC 7 (N.C. Super. Ct. July 14, 1999)(Tennille)

Class action counsel were entitled to an award of attorneys' fees where the settlement had created a common fund. The Court discusses various applications to an award of fees, including the lodestar method and the percentage method, and elects to take a hybrid approach which takes into account the reasonableness of the fees under the Rules of Professional Responsibility.

The Court further determines that the fee award must be based on the actual benefits received by class members.

After noting issues involving "consortium litigation" by the lawyers for the class, the Court holds that "class counsel in cases similar to this would be well advised to maintain and submit to the court detailed time records which would help the court" in resolving issues regarding fees.

Full Opinion

Ruff v. Parex, Inc., 1999 NCBC 6 (N.C. Super. Ct. June 17, 1999)(Tennille)

The Court determines that class action treatment is the superior method for adjudication of claims involving synthetic stucco, after considering the urgency of the problem, judicial economy, and difficult causation issues.

The Court considers whether changed circumstances warrant decertification of the class, and determines that the class definition, as previously set by another Superior Court Judge, should be modified.

Full Opinion

Lupton v. Blue Cross and Blue Shield of North Carolina, 1999 NCBC 3 (N.C. Super. Ct. June 14, 1999)(Tennille)

A class action plaintiff may not take a voluntary dismissal of its action pursuant to Rule 41 of the North Carolina Rules of Civil Procedure without obtaining Court approval, even if the class has not yet been certified.

Full Opinion