The place where a a trial court’s jurisdiction over a case on appeal meets the competing jurisdiction of the appellate court over that same case is is a busy intersection.  It is often hard to tell when the trial court no longer has the jurisdiction to make rulings in a case that has been appealed. That power was the issue in two rulings from Business Court Judge Robinson, one in a published Opinion, in SED Holdings, LLC v, 3 Star Properties, LLC, 2016 NCBC 62, and the other in an unpublished Order in that case which followed several weeks later.

The General Rule And Its Exception

The "general rule", as observed by Judge Robinson, is that "an appeal divests the lower court of jurisdiction."  Op. ¶33.  So you would think that once an appeal is filed (and docketed) that the trial court is powerless.  But, that’s not so:

the lower court nonetheless retains jurisdiction to take action which aids the appeal, and to hear motions and grant orders, so long as they do not concern the subject matter of the suit and are not affected by the judgment appealed from.


In the situation before Judge Robinson  last month in the SED case there were two separate appeals pending.  Neither were appeals from rulings of the Business Court, but were from rulings of the Superior Court for Durham County, made during the extended period of time before the case was designated to the Business Court.

Appeal Number One 

Appeal #1 is a long running appeal.  At the time of Judge Robinson’s ruling the Court of Appeals had affirmed the trial court’s grant of a preliminary injunction and its denial of a Motion to Dismiss.  Those appellate rulings were the subject of a PDR (a Petition for Discretionary Review) pending before the NC Supreme Court.

Appeal Number Two

Appeal #2 was filed this year, and has yet to be ruled on by the COA.  It is an appeal of several orders issued by the trial court holding the Defendants in civil contempt for not complying with the injunction that was the subject of Appeal #1. The Defendants are arguing that the trial court lacked jurisdiction to find them in contempt while the first appeal was pending.

Did The Business Court Still Have Jurisdiction Given The Two Appeals?

Whether the Business Court still had the authority to deal with the Plaintiff’s Motion that he enter a mandatory injunction against a recently added Defendant (Charles A. Brown & Associates, PLLC) was the question faced by Judge Robinson.  Did he have any jurisdiction over the case with the two pending appeals? 

Appeal #2 was pretty easy to knock down as an impediment to the Business Court’s jurisdiction.  Judge Robinson said that:

the issues presently before it are not embraced within the issues presently before the Court of Appeals in the [Appeal #2] and, thus, do not divest this Court of subject matter jurisdiction to consider and decide the Motion relating to newly added defendant Charles A. Brown.

Op. ¶32.

The Effect of A Petition for Discretionary Review On A Trial Court’s Jurisdiction

But the rulings that were the subject of Appeal #1 were fundamental to a North Carolina court having jurisdiction over the entire case, since they concerned the validity or invalidity of a forum selection clause dictating that the case be litigated in Harris County, Texas.  The ruling from the Court of Appeals in Appeal #1 had affirmed the trial court’s ruling that the forum selection clause was invalid.

The NC Supreme Court hadn’t ruled on the PDR before Judge Robinson’s first ruling.  I’ve observed in the past that your chances of getting the state supreme court to grant a PDR are on the same level as finding a four leaf clover.

Judge Robinson said:

with regard to Defendants’ filing of the PDR, the Court concludes that, absent a motion to stay filed with and granted by the appropriate court, the filing of a petition for discretionary review with our State’s highest court, by itself, does not divest the trial court of jurisdiction to consider matters after the Court of Appeals has determined a matter on appeal and has issued its mandate.

Op. ¶26.  By the way, what is the "appropriate court" in which to file a Motion to Stay?  Rule 8 of the North Carolina Rules of Appellate Procedure, titled "Stay Pending Appeal" says that:

After a stay order or entry has been denied or vacated by a trial court, an appellant may apply to the appropriate appellate court for a temporary stay and a writ of supersedeas in accordance with Rule 23.

Judge Robinson probably assumed that the NC Supreme Court would do the expected thing and deny the PDR.  Or he might have felt bound to follow the mandate from the Court of Appeals affirming the trial court’s ruling that the forum selection clause calling for litigation to take place in Texas was invalid..  An "inferior court must follow the mandate of an appellate court in a case without variation or departure."  In re RAH, 641 S.E.2d 404, 407 (2007). 

But a few weeks after Judge Robinson delivered the published Opinion in 2016 NCBC 62, the NC Supreme Court did the nearly unthinkable and granted the PDR.  That made all the difference to Judge Robinson.  He held that the Business Court had been "divested of jurisdiction to proceed with the Injunction Hearing" because of the granting of the PDR.  Order ¶10.  That sua sponte reversal from Judge Robinson came in an unpublished Order.

So what Should You Do If You Don’t Want The Trial Court To Rule Because Of Your Pending PDR?

So what do these rulings mean about the vitality of an NC Superior Court’s jurisdiction in a case that is the subject of a pending PDR?  That if you want the Superior Court to refrain from ruling in your case in which a PDR is pending, that you should move for a stay "in the appropriate court" or argue that the PDR will be granted and that the Superior Court therefore no longer has jurisdiction and should not move forward in the case until the NC Supreme Court has made its ruling.  It’s probably safer to request a stay given the four leaf clover nature of the granting of PDRs.

You might be wondering whether this case has been "over-appealed." Maybe it has.  In addition to the two appeals already pending, the Defendant has also appealed from Judge Robinson’s ruling in 2016 NCBC 62.  That’s the third appeal.  Even before that, it had filed a Petition for Rehearing in the COA following the Court of Appeals’ decision.  (Good grief Charlie Brown).

But given that the successful PDR is likely to generate an opinion from the NC Supreme Court on the validity of a forum selection clause, all those appeals might be worthwhile.  Maybe the Appellants will ultimately be successful.

This week, I published a post on this blog in which I suggested that a case involving $5 million in controversy could be designated to the Business Court without the Court having to analyze the nature of the claims before it to see if they met any of the bases for mandatory jurisdiction contained in G.S. §7A-45.4.

That was wrong, and it provoked a torrent of controversy directed to me.  Well, probably not a torrent to you, but a torrent to me: an email and a phone call from Business Court Chief Judge Gale and an email from an eminent attorney friend in Raleigh.  I’m glad that Judge Gale looks at my blog (I think that Judge Bledsoe, Judge McGuire, and Judge Robinson look at it too), but I’m unhappy that I might have said anything on this blog that generated a phone call from Judge Gale and which could have steered anyone in the wrong direction.

Let me start by saying that you shouldn’t rely on my blog for legal advice or its accuracy.  There is a disclaimer buried somewhere in this blog which says exactly that.

Notwithstanding that disclaimer, I’m pretty serious about getting it right with this blog.  So let’s look at the part of the statute governing designations to the Business Court which I didn’t describe correctly on Monday: G.S. §7A-45.4(b)(2).  It says:

An action described in subdivision (1), (2), (3), (4), (5), or (8) of subsection (a) of this section in which the amount in controversy computed in accordance with G.S. 7A-243 is at least five million dollars ($5,000,000) shall be designated as a mandatory complex business case by the party whose pleading caused the amount in controversy to equal or exceed five million dollars ($5,000,000).

So the statute is pretty clear that an amount in controversy of more than $5 million, standing alone, isn’t enough to make a case mandatory for designation to the Business Court.

The case still has to fall within the grounds set forth in G.S. Section 7A-45.4(a)(1), (2), (3), (4), (5), or (8).  So when I suggested in my last post that Judge Gale didn’t have to analyze whether the Complaint in Southeastern Automotive, Inc. v. Genuine Parts Co. 2016 NCBC 61 qualified as an intellectual property case because more than $5 million was in controversy, I was not right.


The Business Court doesn’t often discuss its interpretation of the statutory bases for a designation to the Court, all of which are contained in G.S. sec. 7A-45.4.  So its published Order this month in Southeastern Automotive, Inc. v. Genuine Parts Co. 2016 NCBC 61, is worth noting.

The issue in Southeastern Automotive was whether the Complaint qualified for designation to the Business Court under G.S. §7A-45.4(a)(5), which says that a party may designate as a complex business case:

Disputes involving the ownership, use, licensing, lease, installation, or performance of intellectual property, including computer software, software applications, information technology and systems, data and data security, pharmaceuticals, biotechnology products, and bioscience technologies.

The statute, before the amendments effective October 1, 2014, mentioned only "disputes involving ‘[i]ntellectual property law, including software licensing disputes." Op. 19 (referencing former version of G.S. §7A-45.4(a)(5)). 

The Southeastern Complaint did not directly raise issues regarding the ownership of intellectual property. It centered around the Defendant’s acquisition of the Plaintiff, and Plaintiff’s claims that it had not been fully compensated in the sale.  The shortfall, according to the Plaintiff, was caused by the inadequate operation of Defendant’s software programs with respect to the inventory which the Plaintiff had sold.

Judge Gale saw the 2014 amendment as expanding the Court’s role in intellectual property lawsuits.  He held:

The Court concludes that the 2014 amendment to section 7A-45.4(a)(5) expanded the scope of disputes within the statute’s purview to include a dispute that involves a material issue regarding the use or performance of intellectual property, including computer software and data, without requiring a dispute regarding ownership of the intellectual property or another dispute that may require application of principles of the body of law known as intellectual property law.

Order 20.

In the end, this analysis by Judge Gale was unnecessary, as the amount in controversy, per the Southeastern Complaint, was in excess of five million dollars.  That made this a case in which designation would be mandatory regardless of whether it was requested by one of the parties.  Order 4 (referencing G.S. §7A-45.4b)(2)).

I frequently look at the Orders from the Chief Judge of the Business Court on challenges to designations (the Chief Judge handles all of the Oppositions to Designation) and don’t find much to write about as they usually say nothing more than something like "the allegations in the Complaint fall within the mandatory jurisdiction of the Business Court,"  I collected a number of those unpublished Orders in this 2008 post.

That said, every once in a while the Business Court says something significant about the scope of its mandatory jurisdiction.  For example, in its unpublished Order in  Sonic Automotive, Inc. v. Mercedes-Benz USA, LLC, the Court spoke about its broad approach to designations involving antitrust matters (per G.S. §7A-45.4(a)(3).  

You can "wind up" a partnership without having to liquidate all of its assets and terminating its existence.  So ruled Judge McGuire last week in Hardin v. Lewis, 2016 NCBC 55.  But that may not be true for all partnerships.  This case involved a law firm partnership which was continuing to operate its practice after one of its partners left to start her own law firm.

The lawsuit concerned the amount due to the Plaintiff from her former partners for the value of her partnership share (along with a host of other claims on which the Court will rule later).  Her withdrawal had constituted a dissolution of the partnership as a  matter of law (Op. ¶4). She had also requested the winding up of the partnership.

What Is "Winding Up"?

North Carolina’s Uniform Partnership Act seems to dictate that winding up is the final stage in the existence of a partnership.  Section 59-60 of the General Statutes says that: "[o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed."  N.C.G.S. §59-60.

That is consistent with the definition often given to "winding up":

The last phase in the dissolution of a partnership or corporation, in which accounts are settled and assets are liquidated so that they may be distributed and the business may be terminated.

The Free Dictionary.

That a winding up ending in liquidation was not required of their law partnership was particularly good news for the Defendants in Hardin, as they were the remaining partners in the law firm which Plaintiff had left.  They had continued to practice law without their departing partner, and filed a Certificate of Amendment with the NC Secretary of State to change the name of the firm to delete Plaintiff’s name.

Judge McGuire found support for his ruling that the old partnership would not have to liquidate as a part of its winding up in decisions from other states, observing that:

a number of courts have concluded that a ‘winding up’ is technically effected when an outgoing partner is compensated for their interest in the dissolving partnership, without any strict requirement that the dissolving partnership be liquidated.

Op. ¶18.

Judge McGuire said that given "the potential disruption to the representation of [the law firm’s] current clients that would result from a liquidation of the Firm’s assets" that an accounting and settling of accounts between the partners as of the date of the dissolution, with the new partnership continuing in business was the appropriate means of a "winding up."  Op. ¶19.

Law Firms Should Have Written Partnership Agreements In Place To Avoid Cases Like This

The Business Court has been called upon before to adjudicate breakups of law firms, like in Walters & Zimmerman, PLLC v. Zimmerman and in Mitchell, Brewer, Richards, Adams, Burge & Boughman, PLLC v. BrewerIn the Mitchell case, the Court struggled with the issue of how a withdrawing partner should be compensated for fees generated from a contingent fee engagement after the withdrawal.

in every one of these kind of cases in the  Business Court, the partnership (or the PLLC) did not have a written agreement regarding the relationship of its partner/members, which led to significant dispute.  If you are a lawyer practicing with one or more other lawyers, put your agreement in writing and avoid having to get a Business Court Judge to resolve your disagreement.

Even though the Defendants in the Hardin case didn’t have to liquidate their firm and shut down their practice, they still have to deal with the annoyance of having a Receiver overseeing their practice while the amount to be paid to the Plaintiff for her partnership interest is determined.  And they have to bear the cost of the Receiver.

How does your appeal get dismissed when you’ve appealed to the "right", "appropriate", or "correct" court?  In other words, your appeal was to the Court with jurisdiction over your appeal.  It happened in the NC Court of Appeals this week.

The Date That Your Case Was Designated To The Business Court Is Critical To Your Appeal

For some context, you’ll remember the NC Court of Appeals decision in Christenbury Eye Center P.A. v. Medflow, Inc., in which the COA dismissed an appeal from a Business Court ruling because the proper appellate court to hear that case was not it, but the NC Supreme Court.  That was because the case was designated to the Business Court after October 1, 2014, when G.S. § 7A-27(a)(2), became effective.  That statute specifies that appeals of the Business Court’s final judgments will go to the NC Supreme Court. 

Since the Christenbury appeal was from a case designated to the Business Court after the October 1, 2014 effective date of the statute, it was to the "wrong" Court. the NCCOA concluded that the case should have been appealed to the NC Supreme Court and it lacked jurisdiction to hear the appeal.

But in Grasinger v. Williams, this week, the NCCOA dismissed an appeal from a Business Court decision which was properly appealed to it, the "correct" Court.  This case was designated to the Business Court before the effective date of the statute, so there was no appeal directly to the NC Supreme Court under the new Section 7A-27(a)(2).

So, why did the COA dismiss this appeal?  Because there was nothing in the Record on Appeal showing the date that the case was designated to the Business Court.  In other words, there was no way to tell whether the case was designated to the Business Court before October 1, 2014 (in which case the appeal would go to the COA) or after that date (in which case the appeal would go to the NC Supreme Court).  Judge Calabria said:

[w]ithout the precise date upon which this action was designated as a mandatory complex business case, we cannot determine with certainty whether jurisdiction lies with this Court or our Supreme Court. . . .  In the instant case, because plaintiff-appellants failed to include the designation approval or a designation order in the record on appeal and failed to note the date of designation in their brief, they have failed to confer jurisdiction on this Court and we dismiss.

Op. at 9.

Show The Designation Date In Your Record On Appeal

She said that the party appealing from a case designated as a complex business case, "bears the burden of showing the actual designation date"  Op. at 9.  In order to carry that burden in an appeal from a Business Court case designated before October 1, 2014, the appealing party:

must include in the record a copy of the dated designation and explicitly note the date of designation in the statement of grounds for appellate review portions of their brief in order to confer jurisdiction on this Court.

Op. at 9.

The COA rejected the argument that since the Amended Complaint (in the Record on Appeal) showed a filing date of November 6, 2013, the designation to the Business Court must have followed no more than thirty days later (if the statutory procedure for designation was followed), and would have been designated to the Business Court well before the effective date of the statute requiring appeals be made to the NC Supreme Court.  Judge Calabria outlined a possible set of events by which a designation could be entered beyond the thirty day period specified by the statute.  Op. at 7.

Couldn’t The COA Have Taken Judicial Notice Of The Date Of Designation?

The COA also was not willing to take the few minutes it took me to find the Grasinger Designation Order in the readily accessible case file on the Business Court’s website.  The Designation Order bears a date of October 25, 2013, putting the Business Court’s decision squarely within the COA’s jurisdiction.  Could the COA have done the same thing that I did?  Sure, the NC Supreme Court has said that "this Court may take judicial notice of the public records of other courts within the state judicial system." Alpine Motors Corp. v. Hagwood, 233 N.C. 57, 62 S.E.2d 518 (1950).

In fact, if the North Carolina Rules of Evidence apply to the Court of Appeals, judicial notice might have been mandatory.  Rule 201(d) says: "When mandatory.– A court shall take judicial notice if requested by a party and supplied with the necessary information."  Of course, the Appellant in Grasinger probably had no idea that the COA would focus so squarely on the date of the designation, and that it would be unwilling to spend a couple of minutes on the Business Court’s website to satisfy itself that it had jurisdiction over the appeal.  The Appellant  therefore had no opportunity to request that the COA take judicial notice of the readily available Designation Order.

To be fair, as Judge Calabria pointed out, "it is not the duty of this Court to construct arguments for or find support for [an] appellant’s right to appeal[.]" (quoting Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C. App. 377, 380, 444 S.E.2d 252, 254 (1994).

The Court then dictated a mandatory procedure for those appealing opinions in case designated to the Business Court before October 1, 2014: they must include the Designation Order in the Record on Appeal, and state the date of designation in the statement of grounds for appellate review in their brief.  Op. at 9. 

This Dismissal Looks Like A One-Off

Should we be worried about a deluge of dismissals from the COA because Appellants didn’t specify the date their case was designated to the Business Court?  Apparently not.  I thought that there couldn’t be that many cases that old around still on appeal, but I checked and there were more than ten.  I looked at most of the Records on Appeal in those cases, and found that each either included the Designation Order or a statement reflecting the date of designation. So it’s unlikely that there will be any more dismissals of this type from the COA.

Be Careful With Your Records On Appeal Going Forward Anyway

But in case the NC Supreme Court is as unwilling as the COA to check the Business Court website to determine whether a case was designated after October 1, 2014, it’s a good idea to follow the instruction from the Grasinger opinion in appeals to the NC Supreme Court.

                                                           *     *     *  

I would have missed this decision but for my colleague Dan Smith, who circulated an email this week around Brooks Pierce about this decision.  (This is the second time that I owe a thank you to Dan)  And, of course, I was "scooped" again by the North Carolina Appellate Practice Blog, which wrote about this decision a couple of days ago.  I am reconciling myself to being much slower than I used to be.  I don’t like it.

You will remember the North Carolina Attorney General’s lawsuit against Western Sky Fin’l, LLC. It generated an opinion from the Business Court last year in which Judge McGuire enjoined the Defendants from making further high interest loans in violation of North Carolina’s usury laws.  The Defendants had claimed that as an American Indian related business, they were exempt from North Carolina’s usury laws regarding their lending operations.

Judge McGuire signed off this week on a Final Judgment in State ex rel. Cooper v. Western Sky Fin’l, LLC resolving the case, based upon the consent of all parties.

If you have questions about the terms of the Final Judgment, here are some answers:

  • Can Western Sky make any more loans in North Carolina?  No.  Western Sky and the other Defendants are permanently enjoined from offering loans in North Carolina, unless they obtain a license to do so. (¶4)
  • Can Western Sky collect on its outstanding loans?  No, Western Sky is enjoined permanently from collecting on any loans that it has already made.  (¶4) It must adjust any outstanding loans to a "zero balance." (¶5)
  • Can Western Sky’s North Carolina borrowers get refunds of the excessive interest they paid to Western Sky? Yes, the Defendants are required to put $9,025,000 in an escrow account to provide refunds to North Carolina consumers who borrowed money from Western Sky.  (¶8)  The $9,025,000 is due within ten days of the date of entry of the Final Judgment.  The refund amount to  be paid to each eligible Borrower is based on the amount of interest paid by each borrower to Western Sky in excess of the maximum of 16% interest allowed by NC law. (¶10).  But the refund amount apparently is not equal to the full amount of usurious interest paid.
  • How will the refund process be handled? The refund process is to be administered by a company called Dahl Administration.  The Defendants must cover Dahl Administration’s fees and expenses up to $100,000.  Dahl Administration is required to notify all borrowers who may be entitled to a refund with a "Notification of Refund Eligibility" within sixty days. Any Borrower accepting a refund is required to sign a Release of the Defendants.
  • Does Western Sky have to pay anything else?  Yes, the Defendants must pay $250,000 to North Carolina "for the State’s costs and attorneys’ fees." (¶7).
  • My inability to pay back my loan from Western Sky has hurt my credit, what can be done about that?  The Defendants are required, within sixty days, to contact Equifax and Experian (two of the major credit reporting agencies in the U.S.) and to request that they remove any reporting regarding Western Sky’s loans to North Carolinians. (¶6)
  • What If another State reaches a better settlement with Western Sky?  It is possible that another State might strike a better deal than the one obtained by the North Carolina Attorney General.   (There are multiple lawsuits pending against Western Sky in other States).  But the Final Judgment protects (in 20) against any other State obtaining a more favorable settlement.  A more favorable settlement is defined in the Final Judgment as a settlement that requires the Western Sky Defendants to pay restitution of more than $9,025,000 to borrowers in any other State and that amount is more than 40% of the amount of usurious interest collected in that other State.  (I guess that 40% figure means that Western Sky is only going to have to repay 40% of the highly excessive interest it charged,)
  • What If Western Sky sold my loan, am I still covered by the Final Judgment?  It looks like the Final Judgment doesn’t cover loans which Western Sky sold on the secondary market.  Although the Final Judgment extends to the "successors" and "assignees" of the Defendants, the Final Judgment says that "[f]or the avoidance of doubt, the terrms ‘successors’ and ‘assignees’ do not apply to parties not subject to this Final Judgment that purchased loans from Defendants." Final Judgment 1.

If I had needed to borrow money from Western Sky, and was despairing about the vicious debt cycle its loan had thrown me into, I would consider this a pretty good resolution by the Attorney General.  The AG’s office issued a Press Release regarding the case yesterday.

You have a case set for trial in a state trial court.  You are tenth on the trial calendar, but the nine cases in front of you have crumbled and settled over the weekend.  Plus, your most important witness is gone from your state based on your guess that the case wouldn’t be reached for trial.  You’ve been hobbled by an Order granting a Motion in Limine excluding some of your evidence from trial. Even worse, the statute of limitations ran on your claims while your case was pending.  And you really aren’t ready (or don’t want) to try this case anyway.

Wouldn’t it be nice to wipe the slate clean and get a fresh start?  Well, you can do that in North Carolina, but probably in no other court.  If you are admitted to practice law in North Carolina, you know that in NC state court a plaintiff can dismiss his case "by filing a notice of dismissal [per Rule 41 of the NC Rules of Civil Procedure] at any time before the plaintiff rests his case." 

That is a much more generous allowance of the voluntary dismissal right than anywhere else.  In federal court (and under the Rules in many other states), by contrast, a voluntary dismissal must be filed much sooner: "before the opposing party serves either an answer or a motion for summary judgment."

The "Safety Net" Of Rule 41

The North Carolina Supreme Court (relying on North Carolina’s civil procedure expert, Gray Wilson) has said that:

The Rule 41(a) voluntary dismissal “has salvaged more lawsuits than any other procedural device, giving the plaintiff a second chance to present a viable case at trial.” 2 G. Gray Wilson, North Carolina Civil Procedure § 41-1, at 32 (2d ed. 1995). Many plaintiffs have used “this rule to cure an unforeseen defect in a claim that did not become apparent until trial . . . . The rule also offers a safety net to plaintiff or his counsel who are either unprepared or unwilling to proceed with trial the first time the case is called.” 2 G. Gray Wilson, North Carolina Civil Procedure § 41-1, at 33.

Brisson v. Santoriello, 351 N.C. 589, 597, 528 S.E.2d 569, 572-573 (2000).

The longer period of time in which a plaintiff can take a voluntary dismissal (without the permission of the opposing party) is not the "distinct" feature of the North Carolina Rule which Judge Bledsoe referenced last week in  BBB&T BOLI Plan Trust v. Massachusetts Mutual Life Ins. Co., 2016 NCBC 34 at ¶17 .  That feature is the extension of the statute of limitations governing your claims.  The Rule says that so long as your dismissed lawsuit was timely filed, "a new action based on the same claim may be commenced within one year after such dismissal."  That’s true even if the statute of limitations has expired at the time of the voluntary dismissal.

When Has A Plaintiff "Rested His Case"?

The words "rests his case" has a trial connotation to me.  When the Plaintiff has presented all of his documents and witnesses and turns the presentation of evidence over to the Defendant, he has rested his case.

But you can actually "rest your case"  much sooner than that, at least for Rule 41 purposes.  Defending your position in a summary judgment hearing means that you have rested your case within the meaning of Rule 41(a)(1)(i).  Op. ¶27 (citing Maurice v. Hatterasman Motel Corp., 38 N.C. App. 588, 591-92, 248 S.E.2d 430, 432-33 (1978)).  In fact, anytime that a plaintiff is facing a dispositive motion, he rests his case by "advanc[ing] its arguments about the merits of [his] case. . . ." Op. ¶28.

In the case before the Business Court last week, Plaintiff BB&T Trust filed its voluntary dismissal about three weeks before its trial was set to begin  During the course of the case (three years ago), Judge Murphy had denied a Motion to Amend in which the Trust tried to add additional theories of liability.  Shortly before trial, Judge Gale granted a Motion in Limine prohibiting the Trust from presenting evidence relating to those theories of liability that were the subject of its unsuccessful Motion to Amend.

So, can a voluntary dismissal be filed by a Plaintiff to avoid a Court’s adverse ruling, or has he "rested his case" by contesting the ruling?

Bad Faith Dismissals Are Not Allowed

The NC Supreme Court said in the Brisson decision that a voluntary dismissal must "not be done in bad faith."  351 N.C. 597, 528 S.E.2d 569, 573.

Judge Bledsoe rejected the argument that the BB&T Trust’s dismissal was taken in "bad faith."  He said that:

allowing Brisson’s bad faith exception to subject all voluntary dismissals to judicial scrutiny would undermine the intent of Rule 41(a) by creating unnecessary barriers for plaintiffs who wish to abandon their claims.

Op. ¶21.

So what makes out a "bad faith" dismissal?  It’s a pretty narrow circumstance, and is limited to the situation where "the initial complaint fails to conform with the rules of pleading and merely seeks to take advantage of the savings provision"  Op. ¶2.  The rationale for that limitation " is that where an initial complaint does not conform with the rules of pleading, a plaintiff should not be entitled to the “safety net” of Rule 41(a)’s [statute of limitations] savings provision after dismissal."  Op. ¶26.

Defendant MassMutual took a run at arguing that "bad faith" had to be determined on a case by case basis, and that the Plaintiff had acted in bad faith by waiting three years after the rejection of its Motion to Amend to take its voluntary dismissal.  Judge Bledsoe said that he would not extend the bad faith exception "so far beyond precedent,"  and that finding Plaintiff”s dismissal to be in bad faith "would defeat Rule 41(a)’s broad function as a ‘safety net.’"  Op. ¶26.

The Opinion makes it clear that an unfavorable ruling on a "non-dispositive motion" (like the ruling on the Defendant”s Motion in Limine) does not mean that a Plaintiff unsuccessfully contesting such a Motion has "rested his case."  Op. ¶29.

My "Unsecured Leave"

I’m going to be out of the country for the next couple of weeks.  For the first time, I’m not carrying a laptop with me, so don’t look for anything from my blog until near the end of the month.



The Business Court last month resolved a clash between North Carolina’s "Seed Law" and the Uniform Commercial Code, in Kornegay Family Farms, LLC v. Cross Creek Seed, Inc., 2016 NCBC 30.  The Plaintiff in the Kornegay case is one of eight Plaintiffs in the Business Court suing Defendant Cross Creek Seed for selling them certified tobacco seed that produced "abnormal tobacco crops." Op. 2.

The Plaintiffs are seeking millions of dollars in damages for their inadequate crops.  They will be limited to recovering the amount they paid for their seed if the limitation of damages clause placed on each container of seed is enforceable.  North Carolina’s Seed Law may invalidate that limitation.

North Carolina’s Seed Law

I had no idea that North Carolina has a "Seed Law."  It is codified in G.S. §106-277 to -277.34.  North Carolina was one of the first states in the country to enact a Seed Law (in 1891), but now almost every state has one.  The North Carolina law imposes penalties for the sale of mislabeled seed (in G.S. §106-277.24).

The purpose of the statute "is to regulate the labeling, possessing for sale, sale and offering or exposing for sale or otherwise providing for planting purposes of agricultural seeds and vegetable seeds; to prevent misrepresentation thereof. . . . "  N.C. Gen. Stat. §106-277.

The Public Policy Of The Seed Law

The NC Supreme Court held many years ago that the Seed Law represents a declaration of North Carolina’s public policy that a seller of seed cannot enforce a limitation of remedy  that limits a buyer’s recovery to the purchase price of the seed if the seed was mislabeled.  Op. 5.  It said that the Seed Law:

has declared the policy of North Carolina to be one of protecting the farmer from the disastrous consequences of planting seed of one kind, believing he is planting another. To permit the supplier of seed to escape all real responsibility for its breach of contract by inserting therein a skeleton warranty, such as was here used, would be to leave the farmer without any substantial recourse for his loss.

Gore v. George J. Ball, 279 N.C. 192, 208, 182 S.E.2d 389, 398 (1971).  The Gore Court held that It is a violation of North Carolina’s public policy to attempt to limit the damages of the purchase of mislabeled seed to the purchase price.

That decision involved a sale of seed before North Carolina adopted the Uniform Commercial Code. If a seller of mislabeled seed after the UCC came into effect can’t limit a buyer’s damages to the cost of the seed, that runs counter to Section 2-719 of the UCC (N.C. Gen. Stat. §25-2-719), which says that a seller can limit a buyer’s damages "by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts."

Judge Gale resolved the question of whether the UCC should yield to the Seed Law in this way:

  • The official comment to G.S. Section 25-2-719 says that "a limitation of remedies that purports to modify or limit the UCC’s remedial provisions ‘in an unconscionable manner’ is unenforceable.
  • Both the UCC and the Seed Law have been amended by the NC Legislature since the Gore decision was handed down.  Since "the legislature is always presumed to act with full knowledge of prior and existing law [so] where it chooses not to amend a statutory provision that has been interpreted in a specific way, we may assume that it is satisfied with that interpretation."  Op. 30 (quoting Polaroid Corp. v. Offerman, 349 N.C. 290, 303, 507 S.E.2d 284, 294 (1998).  [Do any of you believe that?]
  • The specific takes precedence over the general.  "Where a local non-UCC statute governs a specific point, it prevails over a general provision of the UCC.  Op. 31 (quoting 1 Lary Lawrence, Lawrence’s Anderson on the Uniform Commercial Code §1-102:18 (3d ed. 2002)).

Judge Gale ruled that "Gore does not allow Cross Creek to enforce its limitation of remedies against Plaintiffs if the seed sold to Plaintiffs was mislabeled."  Op. ¶38.

 Would The Limitation Of Remedy Clause Have Been Enforceable Without The Seed Law?

Many courts have addressed the validity of limitation of remedy clauses when a sale of seed was involved.  Many of those courts have refused to enforce them, either on the ground that they "failed of their essential purpose" or because they were unconscionable.  See, e.g., Schmaltz v. Nissen, 431 N.W.2d 657, 662 (S.D.1988)(limitation was unconscionable); Latimer v. William Mueller & Son, Inc., 149 Mich.App. 620, 637, 386 N.W.2d 618 (1986)(same); Lutz Farms v. Asgrow Seed Co., 948 F.2d 638, 646 (10th Cir. 1991)(both unconscionable and failed of its essential purpose); Nomo Agroindustrial SA de CV v. Enza Zaden North America, Inc., 492 F. Supp2d 1175, 1185 (D. Ariz. 2007)(limitation of remedy clause was unenforceable because it was both unconscionable and failed of its essential purpose).

Judge Gale said that it was unnecessary to reach the unconscionability/failure of essential purpose argument given that the Seed Law prohibited the enforcement of the limitation of remedy clause.  Op. 8.

Judge Gale On The Appeal Of His Opinion

One of the most interesting things about Judge Gale’s Opinion is his direct request to the North Carolina Supreme Court to consider an appeal of his decision.  He acknowledges that any appeal would be interlocutory and therefore not appealable (Op. 33) and that he cannot certify it for immediate appeal per Rule 54(a) of the NC Rules of Civil Procedure (because that Rule applies only to "final judgment[s] as to one or more but fewer than all of the claims or parties).  Id.

A quick appellate resolution of the Seed Law v. UCC issue makes sense.  Judge Gale said:

[w]ithout the ability to seek immediate appellate review of this Order & Opinion, the parties in each of these eight cases must await a final answer on a significant and controlling threshold issue until after a final, appealable judgment, which cannot be entered until complex fact and expert discovery are completed.  That discovery is likely to be long, burdensome, and expensive.

Op. 35.



It’s possible to get an NC state court to enjoin a party from pursuing parallel litigation in another American state.  But what about enjoining a party before an NC court from pursuing a parallel case in another country?

The NC Business Court grappled with that international issue late last month in O’Brien v. TCG Consulting Partners, LLC, 2016 NCBC 25.  It turns out that there is no NC appellate decision regarding this issue, so Judge Bledsoe was in somewhat uncharted waters.

O’Brien, the Plaintiff, was seeking to enjoin Defendant TCG from proceeding with a lawsuit against him in the London Mercantile Court to collect on a Promissory Note.  In the North Carolina lawsuit (filed a month before the London action), O’Brien was seeking a declaratory judgment that he owed nothing on the Note.

One Hundred Years Ago, O’Brien Might Have Gotten An Injunction

Judge Bledsoe, looking to a case cited by O’Brien in support of his position, observed that a North Carolina federal district court decision affirmed by the Fourth Circuit more than a hundred years ago, United Cigarette Machine Co v. Wright, 156 F. 244 (C.C.E.D.N.C. 1907), aff’d, 193 F. 1023 (4th Cir. 1912) had held that:

[I]]t appears to be well established that courts of equity can, and in a proper case ought to and will, restrain litigants in a foreign court. . . . [It is] a duty of a court of equity to restrain litigants in a foreign state or country. . . where the matter is fully litigated in the court to which the application for injunctive relief is made.

Op. ¶17.

That venerable case did not guide the Court’s decision.  Its old age did it in.  Judge Bledsoe said that the hundred year old decision had been issued "when North Carolina’s international commerce was limited and considerations of international comity had not yet gained widespread judicial support."  Op. ¶17.

Today, Federal Courts Apply Two Different Approaches To This Issue

More modern federal decisions relied on by the Business Court — from other Circuits — have applied different legal standards in deciding whether a court should enjoin an international proceeding.  One is the "liberal approach," which gives only "modest weight" to the interest of the foreign court.  Op. ¶21.

The other approach — the "conservative approach," says that "injunctions restraining litigants from proceeding in courts of independent countries are rarely issued" and gives substantial deference to the principle of international comity.  Op. ¶22.

The Plaintiff Will Have To Fight The Same Issue In Two Courts

The Fourth Circuit hasn’t decided which approach to follow (Op. ¶22 & n.3) and Judge Bledsoe didn’t need to choose between them.  He ruled that an injunction wouldn’t be appropriate under either the liberal approach or the conservative approach.  Op. ¶24.

If you are thinking that it is unfair to make Mr. O’Brien to fight about the validity of the Note on two continents, it’s really not.  O’Brien is a British citizen and a resident of England.  Op. ¶27.  His assets are located there,  Id.  Moreover, there was nothing in TCG’s British lawsuit which could be considered harassment, even though it was filed after the Business Court lawsuit had begun.  TCG had warned O’Brien that it intended to file its London lawsuit before O’Brien sued it in North Carolina.  Op. ¶26.

As for the additional expense that O’Brien will face in being involved in two lawsuits involving the same issue, Judge Bledsoe said:

Although the Court is sympathetic that O’Brien may incur additional expense in litigating these two actions simultaneously, the Court does not find that the additional expense should cause the Court to deviate from the general rule of international comity that, absent some ‘irreparable miscarriage of justice,’ courts should be hesitant to enjoin a party from proceeding in an international forum.

Op. ¶27.

Silver Lining?

It’s worth noting that the Rule in the London Mercantile Court regarding attorneys’ fees and costs is that they are paid by the losing party.  Mercantile Court Guide Rule 15.  So if Mr. O’Brien is confident that he can prove that the Note he signed is invalid, he may actually be better off in that Court.  The "Promissory Note" (which is contained in an email), has no provision regarding the payment of attorneys’ fees.


The road to an appellate court can be lined with unanticipated obstacles,  You can avoid them if you follow the NC Rules of Appellate Procedure and you keep up with changes in the law regarding appeals.  Or you might retain a lawyer who is certified as an appellate specialist by the North Carolina State Bar’s Board of Legal Specialization

Two cases decided last week (one from the Business Court, the other from the NC Court of Appeals) resulted in dismissals of appeals because the Appellant didn’t follow the Rules or didn’t know about a change in the law. The first appellant was proceeding pro se.  The second was represented by a lawyer.  So a dismissal of an appeal can really happen to anyone, lawyer or not.

The  NC Business Court case (Velleros v. Patterson) involved the appealing party not  properly filing his Notice of Appeal with the clerk for the county where the case had originated before designation to the Business Court, although that wasn’t the only reason for the dismissal.  (Anyone reading this blog is aware that the appeal of a Business Court decision requires the filing of a paper copy of the Notice of Appeal in the County where the case originated, in addition to an electronic filing in the Business Court).

The appealing party, not represented by a lawyer, had also done nothing to prepare the Record on Appeal required by Rule 9 of the NC Rules of Appellate Procedure.  (a record on appeal is a compilation of the documents filed in the trial court which are necessary to a consideration of the appeal)

Judge McGuire dismissed the appeal because the Record on Appeal hadn’t been prepared.  Wait a second!  (Or as my brother-in-law says: Whoa! Whoa! Whoa!)  Can a trial court dismiss an appeal because the appealing party has violated a Rule of Appellate Procedure?  Isn’t that power limited to the appellate court?

There Is No Appeal Pending Until The Record On Appeal Is Docketed

The appellate rules contemplate that the power to dismiss an appeal is limited to the appellate court after the appeal is filed.  Appellate Rule 25(a), says that "after an appeal has been filed in an appellate court, motions to dismiss are made to that court."  Even if the Notice of Appeal had been properly filed the case would not have been in the hands of the COA without the Record on Appeal having been filed, An appeal isn’t fully before an appellate court until the appeal has been "docketed."  Craver v. Craver, 298 N.C. 231, 258 S.E.2d 357 (1979)(" until a record on appeal is filed and docketed, there is nothing pending before the appellate division.")

So the action of filing a Notice of Appeal isn’t enough to take the case out of the jurisdiction of the trial court and into the grasp of the appellate court.

And what is this "docketing" thing?  It relates directly to the Record on Appeal.  "Docketing" is dealt with in Appellate Rule 12(b), which says:

Docketing the Appeal.  At the time of filing the record on appeal, the appellant shall pay to the clerk the docket fee fixed pursuant to N.C.G.S. § 7A-20(b), and the clerk shall thereupon enter the appeal upon the docket of the appellate court. . . . An appeal is docketed under the title given to the action in the trial division, with the appellant identified as such. The clerk shall forthwith give notice to all parties of the date on which the appeal was docketed in the appellate court.

A Trial Court Has The Jurisdiction To Dismiss An Appeal Before It Has Been Docketed

So "when an appeal has not yet been docketed with the appellate court, the trial court retains jurisdiction over the case" and it can consider a Motion to Dismiss the appeal.  Order ¶2 (citing Carter v. Clements Walker PLLC, 2014 NCBC 12 at 7).  (I wrote about the Clements decision a few years ago).  Judge McGuire dismissed the Velleros case in an unpublished Order. because the Record on Appeal hadn’t been filed.

This Appellant was proceeding without a lawyer.  It’s a bad idea to appear in the Business Court without a lawyer,  it’s even a worse idea to go pro se in an appellate court.

Make Sure You Appeal To The Right Court

But even a lawyer can make a mistake that can be fatal to an appeal.  The Order dismissing the Velleros appeal came on the heels of a decision from the NC Court of Appeals this week dismissing an appeal from a Business Court decision, Christenbury Eye Center P.A. v. Medflow, Inc.

Why? The party appealing (represented by a lawyer) had filed its Notice of Appeal in the wrong Court.  It was filed in the NC Court of Appeals, not the NC Supreme Court.  Because you read this blog or the NC Appellate Practice Blog (or you pay for a subscription to NC Lawyers Weekly), you’ve known since last year that the NC Legislature amended the General Statutes to provide that appeals of "final judgments" of the Business Court are taken to the NC Supreme Court, and no longer to the NC Court of Appeals.  N.C. Gen. Stat. §7A-27-(a)(2).

But the Plaintiff appealing Chief Business Court Judge Gale’s final judgment in Christenbury Eye Center P.A. v. Medflow, Inc., didn’t know about that change in the law.  That’s an understandable mistake, as almost all civil appeals in North Carolina must go to the NC Court of Appeals and don’t go directly to the NC Supreme Court.

What is particularly interesting about the Christenbury ruling is that the decision to dismiss the appeal wasn’t even the result of a Motion to Dismiss by the Appellee pointing out the jurisdictional problem.  The Court of Appeals apparently raised the issue on its own volition.  It said that:

If an appealing party has no right of appeal, an appellate court on its own motion should dismiss the appeal even though the question of appealability has not been raised by the parties themselves.” 

Op, at 4 (quoting Hyatt v. Town of Lake Lure, 191 N.C. App. 386, 390, 663 S.E.2d 320, 322 (2008).

But understandable or not, and lack of a Motion to Dismiss or not, there was no mercy from the COA for the Appellant in Christenbury.  Judge Davis held that "we lack jurisdiction over Christenbury’s appeal, and as a result, the appeal must be dismissed."  Op. at 5.

The change regarding appeals from the Business Court going to the NC Supreme Court instead of the Court of Appeals applies only to cases designated to the Business Court on or after October 1, 2014. The Christenbury case was designated to the Business Court on October 29, 2014, so the change was applicable to it.

Update: The Plaintiff filed an Amended Notice of Appeal, this time appealing to the NC Supreme Court, after the decision by the NC COA dismissing its appeal.  Judge Gale dismissed that revised appeal in an Order on June 14, 2016, saying that he had "no discretion to allow Plaintiff to amend its appeal" and that only the appellate courts had that discretion.

(Note: I wouldn’t have been aware of the Christenbury decision if my Brooks Pierce colleague Daniel F.E. Smith hadn’t brought it to my attention.  Thanks, Dan).

(Another Note:  I have mentioned the NC Appellate Practice Blog at least twice in this post.  I am a huge fan of that blog, which does a great job of writing about what can be the "traps" of appealing an NC Business Court case (and does it way better and more thoroughly than this blog).  Today, Beth Scherer, a frequent author of that blog, wrote about the interesting appeal from the Business Court of four consolidated cases, one of which was designated to the Business Court before the effective date of the statute requiring appeals from the Business Court to go to the NC Supreme Court (October 1, 20014) and was therefore supposed to be appealed to the NC Court of Appeals, while the other three cases were designated after October 1, 2014 and were to be appealed to the NC Supreme Court.  Beth flagged that issue several months ago and today wrote about how the NC Supreme Court resolved whether it should consider the appeal of just three of the cases or consider all four.)