April 2008

The answer to the question above is probably you, if you are reading this blog.

So, you might be interested in a powerpoint presentation that Judge Jolly and Judge Diaz made at the 2006 Conference of Superior Court Judges, on the Unfair and Deceptive Practices Act. 

It seems like a claim under that statute is part and parcel of nearly every business case filed in North Carolina.

There are some good "Practical Pointers" about the statute at the end of the presentation, including the one in the box at the bottom. (The Meineke case referenced is Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998), in which the Fourth Circuit threw out a $590 million unfair and deceptive practices verdict).

Notwithstanding my selection of excerpt from the powerpoint, this is by no means an anti-unfair and deceptive practices presentation.  It outlines a number of fact patterns that make out a UDPA claim, and has a good discussion of the respective roles of judge and jury in the trial of such claims and other useful information.


Warren v. Eli Research, Inc., April 28, 2008 (Diaz)(unpublished)

Inconsistent allegations in the Complaint doomed the claim for fraudulent inducement by one of the Plaintiffs in this case. 

That Plaintiff, Hittle, alleged that the Defendant had promised her an annual salary of $150,000, guaranteed for 12 months, but that it had no intention of fulfilling this promise when made.  The Defendant booted Hittle only a few months after she began employment.

What led to the granting of Defendant’s Motion to Dismiss were Hittle’s allegations in the Complaint that she had begun her employment, worked for three months, been paid for that work, and that she was terminated for "financial reasons."

The Court held "it is patently inconsistent for Hittle to allege, on the one hand, that Defendant never intended to pay the wages promised, and on the other, that Defendant in fact performed in part and that it failed to complete performance for reasons unrelated to its intent."  The Court held that partial performance of a contract demonstrates a party’s intention to fulfill the promise at the time it was made, undermining Hittle’s claim on its face.

Continue Reading Fraud In The Inducement Claim Dismissed Due To “Patent Inconsistency” In Complaint

Each year, the United States Chamber Institute for Legal Reform rates the "Lawsuit Climate" for business in each of the fifty states.  The Institute just released its 2008 Report.  North Carolina ranked 21st overall, down from a ranking of 16th in 2007 and 10th in 2006.

The rankings are based on a survey of several hundred in-house counsel.  A respondent could grade the judicial system in a number of states on a scale from "A" to "F," so long as he or she professed to be "somewhat familiar" with the courts of those states. 

North Carolina’s 21st place ranking is based on the responses of 58 lawyers in the survey group who said that they met the standard of being "somewhat familiar" with North Carolina’s courts.   (I wonder if these in-house counsel are satisfied if the lawyers representing them are "somewhat familiar" with their cases when they go to court).

The rating factors included things like:

  • overall treatment of tort and contract litigation
  • treatment of class action suits and mass consolidation suits
  • judges’ competence

North Carolina’s grade and ranking on each of the rating factors is here.  The State ranked highest overall in treatment of punitive damages (11th), and lowest in treatment of "non-economic damages" (37th). 

What state came in first?  Delaware, for the seventh year in a row.  Last?  West Virginia.

The Fourth Circuit Court of Appeals is going to require that all briefs be electronically filed, beginning June 1, 2008.  E-filing has been optional since April 1st. 

In order to e-file, you need to go through Fourth Circuit training, and you have to register for an "Appellate Filer Account."  The training is required even if you are already authorized to e-file documents in the District Courts.  Detailed instructions from the Fourth Circuit on this whole process are here and also summarized in the rest of this post.

At some point during the registration, you’ll need to have a PACER account.  If you don’t have one, or your firm doesn’t have one, you’ll need to register for that. 

You can register here at any time for the Appellate Filer Account, but your Account won’t become active until after you’ve completed the training.  If you don’t take the training and complete the process within a week after your registration for the Appellate Filer Account, you’ll have to re-register for the Account.  It probably makes more sense to train first and register after.

On the training, you can sign up for live training here.  That’s happening in Raleigh on May 21st and 22nd; in Charlotte on June 10th; and in Greensboro on June 18th and 19th.  The live training takes about two and a half hours. 

On-line training is also available. Information on that is available here.  What you need to do is to watch the Electronic Learning Modules for "Filing an Appearance of Counsel" and "Filing a Motion to Seal," then take the "Policies and Procedures Review," which is a 10 question quiz based on the CM/ECF User Manual, and then submit the On-Line Training Certification Form.  (I’ve heard that this takes about half an hour, so it’s faster than the live training). 

The Court has adopted new Rules concerning e-filing.

Her v. Davis, April 16, 2008 (Diaz)(unpublished)

This opinion appeared yesterday on the Business Court website.  It’s not a Business Court case (it’s actually a car accident case), but it presents a good lesson on what it takes to properly oppose a Motion for Summary Judgment.

The issue was whether Defendant’s insurance carrier had accepted a settlement offer from Plaintiff’s counsel before the lawsuit was filed, thus barring the lawsuit from proceeding.

The Defendant presented an Affidavit from the insurance carrier stating that a lawyer representing the Plaintiff had offered to settle the case for $10,000, and that the carrier had accepted the offer.

Plaintiff disputed this, but didn’t present any Affidavit in support of her position.  Instead, Plaintiff tried to rely upon her own responses to Requests for Admission served by the Defendant, in which she said that the true facts were that it was Defendant’s carrier who had made the $10,000 offer, and that her lawyer had rejected it. 

The Court held that "while admissions of a party-opponent are not hearsay, ‘a party may not utilize his own admissions at trial.’"  Since evidence that would not be admissible at trial may not be considered on a Motion for Summary Judgment, there was no competent evidence contradicting Defendant’s properly supported factual position.  The Court also refused to rely on letters presented by Plaintiff’s counsel containing unsworn facts.

As the Court put it, "the bottom line is that neither Plaintiff nor any member of the firm representing Plaintiff have submitted Affidavits refuting the facts set forth" in the Affidavit submitted by Defendant.  On the record before it, the Court granted Defendant’s Motion for Summary Judgment and found that the case had been settled on the terms described by the Defendant.

Today, Judge Tennille issued a very short order in Azalea Garden Board & Care, Inc. v. Vanhoy, granting a defendant’s Motion to Compel production of a settlement agreement entered into between the plaintiff and another defendant. 

I’m mentioning the case only because this is an issue that recurs with some frequency.  There’s often a non-party which might have been a defendant but for a pre-litigation settlement, or a co-defendant, like in Azalea Garden, who settles during the course of the litigation.  It seems pretty clear that the terms of such a settlement are discoverable, even if a confidentiality provision is included. 

The Order was limited to the discoverability of the agreement, and expressly states that it was not a ruling on the admissibility of evidence.

There was a more detailed opinion, by Judge Diaz, on the discoverability of settlement agreements in Media Network, Inc. v. Mullen Advertising, Inc., 2006 NCBC 6 (N.C. Super. Ct. April 21, 2006).


Regions Bank v. Regional Property Development Corp., 2008 NCBC 8 (N.C. Super. Ct. April 21, 2008) (Diaz)

The Business Court ruled today that a member of a North Carolina LLC could not sue the LLC’s lender for aiding and abetting a breach of fiduciary duty, because that claim was derivative, not direct.

Here are the facts: The LLC had defaulted on its loan.  The Bank then sold the loan to the other members of the LLC.  The Defendant asserted in a counterclaim that the Bank had done so knowing that the other LLC members would use their ownership of the defaulted loan as leverage to obtain a substantial cash distribution to which they were not entitled.

The Court relied on “[t]he well-established general rule . . . that shareholders cannot pursue individual causes of action against third parties for wrongs or injuries to the corporation that result in the diminution or destruction of the value of their stock.”   That principle applies "equally to suits brought by members of a limited liability company."

The unlawful distribution claim was "just another way of saying that the Individual Members wrongfully diverted Company assets."  That was a derivative claim belonging to the Company, not to its members.  The Motion to Dismiss the Counterclaim was therefore granted.

The Court did not resolve a parallel ground for the Motion to Dismiss: whether North Carolina still recognizes a claim for aiding and abetting a breach of fiduciary duty in light of the United States Supreme Court’s decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994).  That question has come before the Business Court a number of times in recent years, but has not been resolved by North Carolina’s appellate courts.

Brief In Support Of Motion To Dismiss

Brief In Opposition To Motion To Dismiss

Supplemental Brief In Support Of Motion To Dismiss

Supplemental Brief In Opposition To Motion To Dismiss

Pursuant to Rule 30(e) of the North Carolina Rules of Civil Procedure, a deponent can make substantive changes to her deposition transcript during the thirty day review period, so long as the deponent signs "a statement reciting such changes and the reasons given . . . for making them."  The deponent will, however, be subject to cross-examination on the original answers, which may be used for impeachment or any other relevant purpose. 

If a deponent wants an extension of the thirty day period allowed by Rule 30(e) of the Rules to read and sign a deposition, that extension must come from the Court, not from the court reporter.

Full Opinion

Brief In Support Of Motion To Strike

Brief In Opposition To Motion To Strike

Reply Brief In Support Of Motion To Strike

The plaintiff corporation claimed that the defendant, one of its former directors, had made false statements which interfered with its initial public offering.  The director claimed that he was entitled to defend claims made against him for breach of fiduciary duty based on the business judgment rule.  The Court held that "such conduct, even if well-motivated, does not constitute the type of ‘business decision’ the business judgment rule is meant to insulate."

In determining choice of law, the Court looked to the place of the corporation’s incorporation, per the internal affairs doctrine. 

The Court allowed fiduciary duty claims to proceed against a former employer.  The Court noted that "an employer-employee relationship is not generally a fiduciary relationship," but held that this determination involved a fact-intensive inquiry, and denied a Motion to Dismiss. 

The Court dismissed unfair and deceptive practices claims against the defendants.  It held that all of plaintiff’s claimed injuries related to the failed IPO, and that "the IPO, which is clearly a securities transaction, is beyond the scope of Chapter 75."

The Court let stand claims for aiding and abetting breach of fiduciary duty.

Full Opinion

Bowen’s Brief in Support of Motion to Dismiss

Atwood’s Brief in Support of Motion to Dismiss

Voyager’s Brief in Opposition to Motion to Dismiss