December 2010

The Option ruled on by the Business Court yesterday in NRC Golf Course, LLC v. JMR Golf, LLC, 2010 NCBC 20, said that the Plaintiff had the option to purchase a golf course for “fair market value at exercise date validated by an independent third-party appraisal." 

Plaintiff offered $750,000, which was the value for the golf course "validated"  by an appraisal from Hotel & Club Associates, Inc., but the Defendant refused to close, contending that the Option was not valid.

It’s not unusual for North Carolina courts to enforce options which leave the purchase price to be determined by appraisal, so why did this option fail?  See, e.g. Phoenix Ltd. Partnership  v. Simpson, 688 S.E.2d 717, 719-20 (N.C. App. 2009)  As the Business Court put it in the NRC case, the NRC Option "not only lack[ed] a sufficiently definite price term, but also lack[ed] a sufficient method by which to determine the price term." Op. ¶45.

What was necessary, said the Court,  was a "clear and unambiguous direction on how to arrive at a purchase price, so that the parties do not have to reach further agreement before a final price may be determined."  Op. ¶47.

The "fatal flaw" of this option was the lack of any agreed upon mechanism for selecting an appraiser or for resolving discrepancies in the fair market value opinions of different appraisers.  There was sufficient elasticity in this option, as the Court saw it, to permit the seller to unilaterally employ its own appraiser, who might have delivered a much higher opinion of the fair market value for the property than the $750,000 offered by the plaintiff-buyer.  In that event, the option contained no means for resolving the dispute over price.

The Phoenix case, mentioned above and which I wrote about a year ago, allowed buyer and seller each to choose an appraiser to determine the purchase price under the option.  In the event of a wide variance as to fair market value, the option said that the two appraisers would pick a third appraiser, and that the purchase price would be the average of the two closest appraisals.  That price determination provision wasn’t the focus of the opinion, which was the effect of a lengthy environmental clean-up of the optioned property on a "time is of the essence" provision.

That looks like the last opinion in 2010 from the Business Court, and also the last post this year from this blog.  Happy New Year, and best wishes for 2011.




Superior Court Judge Calvin Murphy has been appointed as a Business Court Judge to replace Judge Albert Diaz, who is leaving the Business Court for the Fourth Circuit Court of Appeals.  All of Judge Diaz’ pending cases were assigned to Judge Murphy by Judge Tennille in an Order signed December 23rd.

I have never appeared before Judge Murphy, who sat in Mecklenburg County, so the only information I can give you about him results from a Google search.  But If you go down the same Google road that I did, be aware that Judge Calvin Murphy, who did play basketball in college, is not the same Calvin Murphy who played point guard for the Houston Rockets.

The Mecklenburg County Bar News reported in 2005 that Judge Murphy  had been elected President of the North Carolina State Bar for the 2005-2006 term.  He described his presidency as one "focused on professionalism."  He graduated from Davidson College in 1970, then served as an intelligence officer in the military, and graduated from North Carolina Central Law School in 1977.  He serves on Davidson’s Board of Directors. He was an assistant district attorney in Charlotte from 1977 to 1982, and then had a criminal defense practice.  

Judge Murphy was originally appointed as a Special Superior Court Judge by Governor Easley in 2007.  Senator Kay Hagan had recommended Judge Murphy for a federal Western District  District Court Judgeship last year.

At that time, a former Chief Justice of the North Carolina Supreme Court, Burley Mitchell, described Judge Murphy as a "solid, proven judge[] and [an] excellent legal technician[]" with "a calm, dispassionate demeanor in court."

Judge Murphy’s most highly publicized decision involved the First Amendment protection he gave to the identities of  readers commenting on line about on line news stories.  He said that news sources did not need to disclose the commenters’  identities because they were protected by North Carolina’s "shield law."  There was a thorough discussion of that decision earlier this year on Brooks Pierce’s Newsroom Law Blog.

I found no record of any business cases decided by Judge Murphy which were appealed.  What I did find were 31 criminal law cases decided by Judge Murphy which were  appealed to  the North Carolina Court of Appeals, 

I am  looking forward to writing about Judge Murphy’s decisions while he is sitting on the Business Court.  He starts with a full caseload.

Unless you live in a cave, you know that the nomination of Judge Diaz of the Business Court to the Fourth Circuit has finally been confirmed by the Senate. The confirmation, a unanimous one, has been widely reported by North Carolina newspapers, including those in Charlotte, Greensboro, and Raleigh

This vote took quite a while.  Judge Diaz is said to have been waiting for confirmation by the Senate longer than any other nominee of President Obama.

President Obama held out Judge Diaz as an example of the type of nominee who should be confirmed in a letter sent three months ago by the President to the Senate  That letter didn’t speed up the process.  There are still thirty judicial nominees approved by the Senate Judiciary Committee awaiting an up or down vote from the full Senate. 

North Carolina Senator Kay Hagan attributed the delay on the Senate vote for Judge Diaz   "to partisan reasons having nothing to do with his qualifications."

According to the Business Court’s last Report to the General Assembly as of February 2010, Judge Diaz was handling 64 cases in the Business Court.  The Fourth Circuit’s gain is the Business Court’s loss.

The Fourth Circuit ruled today in Albemarle Corp. v. AstraZeneca UK Ltd. that it was required to interpret the forum selection clause negotiated by the parties under English law, which meant that the clause would be read as requiring litigation to be brought in an English court, even though the clause would have been  deemed permissive under American law and would have allowed the lawsuit at issue to be filed in the South Carolina court where it had in fact been filed.

The contract, which required AstraZeneca to buy an ingredient for an anesthetic from Albemarle, contained a forum selection clause which said that the contract "shall be subject to English Law and the jurisdiction of the English High Court."

In affirming the dismissal of the case, the Fourth Circuit aligned itself with six other circuits and held that "a federal court interpreting a forum selection clause must apply federal law in doing so."  Federal law on this subject is that ‘an agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion.’"

English law?  In this case it is as different from federal law as my breakfast this morning was from bangers and mash.  ‘"Under English law, when the parties designate the English High Court as an appropriate forum, the designation is mandatory and exclusive."  Thus, litigation in the High Court was required per English law.

The only issue remaining for the Court was whether it would be unreasonable to enforce the English forum selection clause, an inquiry required by a 1972 Supreme Court decision, The Bremen, 407 U.S. 1 (1972).  In The Bremen, the Supreme Court upheld an English forum selection clause "in the light of present-day commercial realities and expanding international trade" unless it could be shown that such enforcement might violate "a strong public policy" of the unselected forum in which the case had been brought.

In the Albemarle case, Judge Niemeyer rejected the argument that South Carolina had a strong public policy against the enforcement of forum selection clauses because of a state statute disfavoring such clauses.  Quoting The Bremen, he said that the federal policy enforcing such clauses made them "an almost indispensable precondition  to achievement of the orderliness and predictability essential to any international business transaction."  Id. at 13-14.

The North Carolina Business Court has previously enforced a forum selection clause specifying a foreign jurisdiction in Speedway Motorsports International Ltd. v. Bronwen Energy Trading, Ltd., 2009 NCBC 3 (N.C. Super. Ct. Feb. 18, 2009) (Diaz).