The Business Court Opinion last month in Shaw v. Gee, 2018 NCBC 108, deals with two interesting trial procedure issues: how to preserve all your arguments for making motions for judgment not withstanding the verdict and for a new trial.
Shaw had won at trial on one of his claims (that Gee had breached his fiduciary duty), but the jury had not considered damages (finding that Shaw’s claims were barred by his “unclean hands”). Shaw moved for a judgment notwithstanding the verdict (a JNOV Motion), or alternatively, for a new trial.
JNOV Motions And Directed Verdict Motions
The problem with the JNOV Motion was that the Plaintiff hadn’t preserved the grounds stated in his earlier motion for a directed verdict. What? What does a motion during trial for a directed verdict (a DV Motion) have to do with a post-trial motion for JNOV?
Well, a JNOV Motion “is essentially a renewal of an earlier motion for directed verdict.” Op. ¶21. A DV Motion “must ‘state the specific grounds therefor’ in order to give “notice to the other party of possible defects and an opportunity to cure.” Op. ¶21.
When you renew your DV Motion vioa a JNOV Motion, you can’t rely on grounds you didn’t assert during the trial. In other words, no new grounds will be considered by the Court. Since the Plaintiff had withdrawn the only basis on which his DV Motion as to the unclean hands defense was premised, he couldn’t argue the new ground that the evidence was insufficient to support the verdict. But he did get to argue it when asking for a new trial.
Motion For A New Trial
The Motion for a new trial didn’t depend on what was said in moving for a directed verdict. But it was still denied, after Judge Conrad said that the power to grant a new trial “must be used with great care and exceeding reluctance.” Op. ¶32 (quoting In re Will of Buck, 350 N.C. 621, 626, 516 S.E.2d 858, 861 (1999)).
Shaw argued that the evidence was insufficient to support a finding that his hands were so “unclean” as to bar his fiduciary duty claim. Judge Conrad said that this was a “classic jury question” and that “substantial evidence” supported the jury’s verdict. Op. ¶¶ 38-39.
Can An LLC’s Derivative Claim Be Barred By The Unclean Hands Of An LLC Member?
The Opinion also devotes a good bit of discussion to whether a derivative claim (Shaw’s claim for breach of fiduciary duty was derivative, made on behalf of an LLC) can be barred by an individual plaintiff’s unclean hands.
That’s a question of first impression in North Carolina, but Judge Conrad did not resolve it. Instead, he ruled that Shaw had not preserved this issue. He had not objected to the instructions to the jury, which had told the jury to consider whether Shaw’s conduct, not that of the LLC, had been sufficiently unfair to bar his claim. Op. ¶53.
So maybe one day we will know the answer to that question, but not in this case.