New Business Court Cases

From April 2009 through January 2010, I did a post at the beginning of each month on the new cases designated to the Business Court during the prior month. That’s been missing during my hiatus, without any outcry, but I am now resuming that service for October 2010.  There were nine new cases last month, running the usual gamut of minority shareholder claims to trade secrets claims, and breaches of fiduciary duty.

Blount Three Properties, LLC v. York Properties, Inc. (New Hanover):  Allegations that promoter and broker of shopping center development failed to make material disclosures prior to the sale of the property to the Plaintiffs

Carolinas AGC, Inc. v. Goodrich Hendry (Mecklenburg)(Diaz): claims that Defendant misappropriated Plaintiff’s confidential information and trade secrets to develop an internet database in competition with the Plaintiff.

Dugdale v. Polymer Group, Inc. (Mecklenburg)(Diaz): action by shareholder of Plaintiff to enjoin acquisition of the Plaintiff by Blackstone Group LP based on alleged breaches of fiduciary duties of the directors of Plaintiff. Plaintiff seeks class action certification.

Front Street Construction, LLC v. Colonial Bank, N.A. (Wake)(Jolly): claims that Defendant lender, acquired by BB&T, engaged in fraudulent and misleading conduct by failing to disclose that it was in financial difficulty when its loan to the Plaintiff was made, which led to it being unwilling or unable to fund the loan as represented.

Nestor v. Webb (Scotland)(Jolly): antitrust claim in which the Plaintiff alleges that the Defendants have conspired to monopolize the market in North Carolina counties for the market for kidney dialysis treatment services.

Peak Coastal Ventures, LLC v.SunTrust Bank (Forsyth)(Tennille): claim by Plaintiff that Defendant’s loan to the Plaintiff, an LLC, was not authorized by the Plaintiff as required by its operating agreement, which required majority approval by the managers of the LLC.

Thomas v. Moonracer, Inc. (Wake)(Jolly): minority shareholder claim alleging breach of fiduciary duty by the majority shareholders and seeking dissolution of the Defendant corporation.

Wilkie v. Stanley (Guilford)(Tennille): claims that Defendant violated partnership agreement

Wireless Communications, Inc. v. Epicor Software Corp. (Mecklenburg)(Diaz): claims that defendant made misrepresentations in connection with the licensing of business operations software

Only a handful of new cases were designated to the Business Court in January 2010. That may be a function of the cold weather, or perhaps it’s a different kind of chilling effect, the $1,000 fee to designate a case to the Court. In any event, here are the six new cases:

Air Systems and Equipment Co. v. Sullair Corp.: (Catawba)(Diaz): Plaintiff claims that the Defendants used its confidential trade secret information to raid its workforce and hire several of its employees in violation of the North Carolina Trade Secrets Protection Act.

Beadnell v. Coastal Communities at Ocean Ridge Plantation, Inc. (Brunswick)(Jolly): another case (there are now several in the Business Court) involving claims by residential lot buyers that the price of their lots were grossly inflated through the fraud of the developer, with the cooperation of banks and appraisers.

Connett v. Jackson National Life Ins. Co. (New Hanover)(Jolly): apparently supersecret.  The Complaint and the Notice of Designation were filed under seal.

Coremin v. McNamara (Guilford)(Tennille):issues involving LLCs and partnerships, including whether a person may claim a membership interest in a North Carolina LLC based on an oral promise. (This one was designated to the Court on December 31, 2009).

LS Mtron, Ltd. v. Escorts, Ltd. (Edgecombe)(Jolly): Plaintiff, a creditor in a receivership proceeding, seeks to subordinate the claim of a secured lender (Textron Financial) based upon the lender’s claimed knowledge of the financial fraud of its customer.

RS&M Appraisal Services, Inc. v. Alamance County (Alamance)(Tennille):dispute concerning services provided by plaintiff to Alamance County in connection with its octennial real property evaluation. Business Court jurisdiction is based on counterclaims by the County alleging conspiracy in restraint of trade and a combination in restraint of trade.

I had no idea that utility companies trim trees with saws hanging from helicopters. That’s going to make me all the more certain to look up when I hear a helicopter.

I learned this interesting tidbit from one of the new cases (with a plaintiff aptly named "Aerial Solutions") of the six designated to the North Carolina Business Court in December 2009. Those are listed below.

The total for new cases designated to the Business Court during 2009, by my count, was one hundred and eleven.

Allen Smith Investment Poperties, LLC v. Barbarry Properties, LLC (Mecklenburg)(Diaz): dispute among partners in limited partnership. Claims for breach of fiduciary duty, misappropriation of funds, and fraud.

Aerial Solutions, Inc. v. Lail (Columbus)(Jolly): unfair competition claims against former helicopter pilot for an aerial tree-trimming business, including breach of non-competition agreement and providing co-defendant with confidential information regarding Plaintiff’s "patented Aerial Power Saw."

Arky v. Variable Annuity Life Ins. Co. (Durham)(Jolly): enforceability of non-solicitation provision in registered representative agreement, including claim that customer identities and account information are trade secrets.

Mark v. Wachovia Bank, N.A. (McDowell)(Tennille): claims against real estate developers and banks asserting false and misleading sales tactics and that the parties "conspired with each other to artificially inflate the value of the subject lots through knowingly overstated appraisals."

NRC Golf Course, L.L.C. v. JMR Golf L.L.C. (Carteret)(Jolly): Dispute between the parties over terms of a lease and option to purchase a golf course.

Yodle v. WebVisible, Inc. (Mecklenburg)(Diaz):plaintiff, which says that it is "an industry leader in providing local online advertising services to business around the country," makes claims of unfair competition against a competitor including raiding of employees, theft of trade secrets, and false statements to plaintiff’s customers.

Nine  new cases were designated to the Business Court during November 2009:

Alexander Hospital Investors, LLC v. Frye Regional Medical Center, Inc. (Alexander)(Tennille): dispute between the owner of Alexander Community Hospital and its former tenant regarding the Defendant’s alleged actions in causing the facility to lose its Medicare and Medicaid certification.

American Mechanical, Inc. v. Bostic (Randolph)(Diaz): claims against officers and directors of an insolvent corporation for constructive fraud and breach of fiduciary duty to creditors. The same claims are made in the Yates Construction case, below, and are similar to claims in an already pending case in which the Court has issued an opinion on the obligations of corporate insiders in a situation of deepening insolvency.

CCE Development Corp. v. Jebara Investments, LLC (Mecklenburg)(unassigned): lawsuit regarding a like-kind exchange in which Plaintiff sought to pierce the corporate veil between the attorney handling the transaction and a related title services company. The case was immediately remanded to Superior Court by a short order in which the Court ruled that allegations seeking to pierce the corporate veil are, standing alone, not sufficient for mandatory Business Court jurisdiction.

Lee v. Coastal AgroBusiness, Inc. (Sampson)(Jolly): claims regarding an inoculant applied by Plaintiff to its peanut crop, which Plaintiff alleges caused damage to the crop. Jurisdiction is based on the Business Court’s jurisdiction over biotechnology matters.

Phelan v. Harbor Capital Management (Haywood)(Diaz): Claims by Defendant, a registered investment adiviser, against two of its former representatives who left the Defendants’ firm, including claims for breach of fiduciary duty, tortious interference, misappropriation of trade secrets, and unfair competition.

Polytec, Inc. v. Andrews (Iredell)(Diaz): claims for breach of covenant not to compete and tortious interference with contract.

Press Communications, LLC v. Wachovia Bank, N.A. (Mecklenburg)(Tennille): claims regarding interest rate swaps.

Tyson v. Tyson: minority shareholder dispute. Claims for dissolution, breach of fiduciary duty, breach of reasonable expectations, conversion, fraud, and accounting, among others.

Yates Construction Co. v. Bostic (Rockingham)(Diaz): claims against officers and directors of an insolvent corporation for constructive fraud and breach of fiduciary duty to creditors. The same claims are made in the American Mechanical case, above, and are similar to claims in an already pending case in which the Court has issued an opinion on the obligations of corporate insiders in a situation of deepening insolvency.

There were ten new cases designated to the Business Court during October 2009. They include two lawsuits against former officers and directors of Wachovia regarding the collapse of Wachovia (Browne and Harris).

Abraham v. Jauregui (Onslow)(Jolly): fraud claims by 77 plaintiffs involving coastal real estate developments.

Blackburn v. L.E. Wooten & Company (Wake)(Jolly): claims regarding alleged breach of shareholders agreement, failure to pay dividends, frustration of reasonable expectations. The claims are similar to those made in the Kwong case, below.

Browne v. Thompson (Forsyth)(Jolly): claims by holders of Wachovia stock against certain officers and directors of the bank, as well as its auditors, for securities fraud and accounting misstatements relating to the collapse of Wachovia.

Building Union Investment And Local Development Fund Of America Trust v. Bromont Investments, Inc. (Mecklenburg)(Diaz): claims arising from foreclosure of defendants’ membership and management interests in an LLC, and defendants’ alleged refusal to turn over the assets, books, and records of the LLCs involved.

Danius v. India Abroad Publications, Inc. (Mecklenburg)(Diaz): defamation lawsuit against internet news organizations based in India, who allegedly reported without basis that one of the plaintiffs had abused his wife in a dispute over her dowry, and that he had attempted to murder her.

Franklin County Board of Education v. North Carolina Department of Revenue (Wake)(Tennille): petition for judicial review of a final agency decision in a contested tax case. The issue is whether the County Board of Education is entitled to a refund of sales and use paid in connection with construction projects when the actual payment was not made directly by it, but instead by Franklin County. The Administrative Law Judge denied the Board’s refund request, ruling that the Board "cannot claim refunds of taxes which it did not pay."

Harris v. Wachovia (Mecklenburg)(Jolly): claim by Wachovia shareholder that Wachovia and its officers and directors  made incorrect statements of material fact and failed to disclose material information in connection with Wachovia’s acquisition of Golden West Financial Corporation and concerning Wachovia’s financial condition and prospects thereafter.

KLATMW, Inc. v. Electric Systems Protection, Inc. (Wake)(Tennille): allegations of breaches of asset purchase agreement, and dispute between buyer and seller regarding indemnification rights and right to escrowed funds.

Kwong v. L.E. Wooten and Co. (Wake)(Jolly): claims regarding alleged breach of shareholders agreement, failure to pay dividends, frustration of reasonable expectations. The claims are similar to those made in the Blackburn case, above.

McKee v. James (Robeson)(Diaz): minority shareholder lawsuit against persons who allegedly obtained a majority interest in the corporation based on fraudulent misrepresentations. The complaint seeks damages and dissolution of the corporation which manufactures "McKee Craft" boats, which the Complaint says are "unsinkable." That’s what everyone thought about Wachovia, too.

Eleven new cases were designated to the Business Court in September 2009, including a class action against the North Carolina Department of Revenue claiming that the taxation of retirement benefits paid to certain state employees is unconstitutional (Pendergraph).

Bankers Life and Casualty Co. v. Barnes (Mecklenburg)(Diaz): claims for misappropriation of confidential information and trade secrets and violation of covenants not to compete.

Comor Corp. v. Comor Communications, LLC (Guilford)(Tennille): derivative action.

Global Promotions Group, Inc. v. Danas, Inc. (Wake)(Jolly): designated based on allegations that BB&T and its employee improperly allowed unauthorized electronic transfers of funds from Plaintiffs’ accounts.

Holden v. Morlando (Guilford)(Tennille): derivative claims for diversion of corporate funds and claim for dissolution.

Howard v. Dunaways, (Mecklenburg)(Diaz): claim for payment of shareholder dividend allegedly wrongfully withheld.

Laney v. Corn (Gaston)(Diaz): claims for breach of franchise agreements and breach of fiduciary duty of franchisor, issues regarding liability of successor to franchisor.

Mason v. Raich (Guilford)(Tennille): complaint seeking confirmation of an arbitration award.

McDermott v. Bankers Life and Casualty Co. (Guilford)(Tennille): claims for fraud and unfair and deceptive practices involving sale by  defendants of annuity policies.

Pendergraph v. North Carolina Department of Revenue (Wake)(Jolly): lawsuit by taxpayers to have declared unconstitutional North Carolina’s taxation of retirement benefits paid by the Local Governnmental Employees’ Retirement System and the Teachers’ and State Employees’ Retirement System for persons who began participating in those plans before statutory amendments in 1989, and seeking class certification.

Presidium Retirement Advisors, Inc. v. Alliance Benefit Group Carolinas, LLC (Chatham)(Jolly): corporate governance claims, including breach of duty of directors, the election and removal of directors, and dissolution.

Sea Ranch II, Inc. v. Gusler (Dare)(Tennille): class action, filed pursuant to a settlement agreement of a case that originated in the Business Court, seeking appointment of receiver to sell a timeshare condominium.

Six new cases were designated to the Business Court in August 2009, including a case seeking class certification over charges for medical records (Toney), and a shareholder dispute pitting a father against his son (Shallcross).

Moltzon v. King (Wake)(Tennille): minority shareholder dispute in which plaintiff alleges the defendants breached their fiduciary duties by starting a competing business and forcing him out.

Oak-Bark Corp. v. French (New Hanover)(Tennille); Action by plaintiff against former employees for breach of restrictive covenants and misappropriation of trade secrets.

Shallcross v. Shallcross (Wake): Plaintiff, 89 years old and legally blind, sued his son to invalidate an irrevocable proxy allowing the son to vote his father’s shares. The father contends that the son misrepresented the nature of the proxy as being revocable.

Thompson v. Manuel (Rowan)(Tennille): allegations regarding breach of partnership agreement, breach of fiduciary duty, alter ego, and accounting.

Toney v. IOD Inc. (Wake)(Jolly): Class action against a company which provides copies of medical records, for which Plaintiffs allege it overcharged in violation of North Carolina state law.

Williams v. McAlpine (Union)(Diaz): Securities claim by investor based on alleged misrepresentations as to defendant homebuilder’s financial strength, contention that officers and members of LLC defendants are personally liable.

July was a slow month for new Business Court cases. By my count, there were only eight. One involves a hurricane (Bodie Island), another involves children’s cartoon characters (Middleton), a third involves telephone poles (Town of Murphy), and the others raise the usual allegations of corporate malfeasance and misconduct.

Bodie Island Beach Club Association, Inc. v. Wray (Dare)(Jolly): Derivative action by condominium homeowners association asserting claims for legal malpractice and breach of fiduciary duty. The claims stem from the process by which the use of the facility as a timeshare condominium was terminated following damage caused Hurricane Isabel in September 2003.

Cabrera v. Ridges at Morgan Creek, LLC: (McDowell)(Diaz):claims for false and misleading sales practices in sale of lots in a real estate development, including allegations that the defendants, which include Wachovia, Bank of America, and BB&T, were part of a joint venture or common enterprise.

Fratelli of North Carolina v. Scarfone (Guilford)(Tennille): claims for breach of fiduciary duty and self-dealing by member of LLC.

Marlabs, Inc. v. Consert, Inc. (Wake)(Jolly): claims for injunctive relief regarding agreement for development of computer software and data hosting.

McCarter Electrical Company v. Jones (Scotland)(Diaz):claims of breach of fiduciary duty and embezzlement by corporate officers and employees, theft of trade secrets, and violation of covenant not to compete.

Middleton v. Smith (Cabarrus)(Tennille): derivative action to enjoin sale of corporate assets and for appointment of a receiver. The corporate entity owns the rights to a cartoon series called "Danger Rangers" which teaches safety to children.

Town of Murphy v. Verizon South, Inc. (Cherokee)(Tennille): issues of Verizon’s obligations to Plaintiff under an agreement for the joint use of utility poles. Business Court jurisdiction is premised on, among other things, the Court’s jurisdiction over the internet and electronic commerce.

Zairy v. VKO, Inc. (Guilford)(Tennille): claims of breach of fiduciary duty and piercing the corporate veil against corporate officers, asserting that they are personally responsible for debt of insolvent corporation.

There were ten new cases designated to the North Carolina Business Court during June 2009, down from eighteen in May and fourteen in April.  The June cases are as follows:

Anderson & Associates of Virginia, Inc. v. Tuscany Development Co. (Guilford)(Tennille): whether an individual can be personally liable for the obligations of an LLC when the entity was erroneously designated in the contract documents.

Berton v. Jacobson (Wake)(Jolly):alleged misrepresentations to induce plaintiffs to invest in limited liability companies, allegations of a Ponzi scheme.  Claims under the North Carolina Securities Act, breach of fiduciary duty, fraud, negligent misrepresentation, N.C. RICO, and to pierce the corporate veil. Related to the Shareff case, below.

BB&T BOLI Plan Trust v. Massachusetts Mutual Life Ins. Co. (Forsyth)(Diaz): alleged mismanagement of $55 million securities investment by BB&T, which BB&T claims was to be reallocated into less risky investments if the value fell below a certain amount.   BB&T claims "despite knowing of the meltdown in the mortgage-backed securities market and that [the fund] was heavily investment in [mortgage backed securities] investments, [Defendant] failed to take timely steps to protect BB&T’s premiums."

Engineering Services, P.A. v. Dail (Wake)(Jolly): claims for breach of fiduciary duty and conversion by corporate officer and shareholder, counterclaim seeking dissolution of the corporation or redemption of defendant’s ownership interest.

Ferguson Fibers, Inc. v. Foster (Davidson)(Tennille): claims against former employee for unfair competition and misuse of proprietary information.

Kiser v. Shelby (Caldwell)(Diaz): claims for breach of operating agreement of LLC, breach of buy-sell agreement, breach of fiduciary duties, dissolution and misappropriation of intellectual property.

Oracle Flexible Packaging, Inc. v. Industrial Air Quality, Inc. (Forsyth)(Diaz): This is a Rule 2.1 case in which "Plaintiff seeks in excess of $31,000,000 for damages resulting from an explosion . . . at a manufacturing complex where it produced aluminum packaging materials" allegedly resulting from defendants’ design and installation of an "oily foil trim collection system."

Red Ventures, LLC v. Modern Consumer, LLC (Mecklenburg)(Diaz): alleged fraud in Plaintiffs’ acquisition of business sold by the Defendants.

Rouen v. Smith (New Hanover)(Diaz): plaintiffs allege that the defendants formed a sand mining business that was intended to include the plaintiffs as members, but failed to include them.  Also claims for usurpation of corporation opportunities and wrongful sales of member interests in the venture.

Shareff v. Lakebound Fixed Return Fund, LLC (Wake)(Jolly): alleged misrepresentations to induce plaintiff to invest in limited liability companies, claims under North Carolina Securities Act and North Carolina Investment Adviser Act and for common law fraud.  Related to the Berton case, above. 

Eighteen new cases were designated to the Business Court during the month of May 2009.  Most are the usual disputes between members, partners, or shareholders of business organizations, but there are a few securities claims and a couple of trade secrets cases as well.

[Update: It’s actually nineteen new cases, I added the Napco case, which I had overlooked, after this post was first published.]

American Acquisition, LLC v. Goldman (Mecklenburg)(Diaz): claims involving dissolution of general partnership, and general partner’s refusal to distribute proceeds from sale of partnership asset based on his position that funds may be necessary to defend against potential claims.

Boone v. American Benefit Concepts, Inc. (Guilford)(Tennille): Claim by investors that defendant brokers violated the North Carolina Securities Act by inducing them to invest in a company later placed into SEC receivership (Diversified Lending Group, Inc.).

Bradley v. Bradley Farms, Inc. (Halifax)(Tennille): shareholder dispute alleging misappropriation of funds, claims for breach of fiduciary duty and dissolution.

Cartridge Limited v. JRiDevelopment Group, LLC (Alamance)(Tennille): defendants, formerly associated with plaintiff, are alleged to have stolen Plaintiff’s technology for use and sale by a competing entity.

Fitte v. Rutter (Guilford)(Tennille):dispute between members of an LLC, plaintiff alleges that he has been improperly excluded from participating in the management of the LLC.

Henderson v. Manuel (Guilford)(Tennille): Claims for breach of fiduciary duty and self-dealing against member and partner in multiple business entities.

Howard Perry & Walston Realty, Inc. v. Campbell (Wake)(Jolly): Allegations of theft of trade secrets and violation of non-compete agreements against former employees of real estate brokerage firm.

InSource Business Strategies, Inc. v. Bell (Iredell)(Diaz): claims that member/manager allegedly failed to provide truthful and accurate information about the financial condition of the Plaintiffs, and improperly obtained investment in the corporation without proper board approval and usurped corporate opportunities.  Also issues of validity of board approval of asset purchase agreement due to deficiencies in notice and lack of quorum.

Mast v. Edward D. Jones & Co. (Johnston)(Jolly) claim against securities broker involving unanticipated tax consequences from rollover of insurance policies.

Napco, Inc. v. PBM Graphics, Inc. (Alleghany)(Diaz): alleged misappropriation of trade secrets involving process for manufacture of sports memorabilia cards, breach of confidentiality agreement.

Pineway Partners, LLC v. Holt Asia, LLC (Alamance)(Tennille): claims for wrongful dissolution of an LLC and breach of fiduciary duty.

Port City Java, Inc. v. Reynolds and Sutton v. Reynolds (New Hanover)(Jolly): interpretation of shareholders’ agreement, counterclaims regarding breach of fiduciary duty and violation of the Stored Communications Act and the North Carolina Computer Crimes Act.

Queen City Television Services Co. v. Player (Mecklenburg)(Tennille): the Third Party Complaint seeks dissolution of a corporation based on alleged breaches of fiduciary duty.

St. George Technology, Inc. v. Watkins (New Hanover)(Jolly): alleged diversions of funds by former president of company, claims for breach of fiduciary duty, fraud, NC RICO, and unfair and deceptive practices.  Defendant claims he was released from such claims when Plaintiff purchased his stock in the company.

Tai Sports, Inc. v. Hall (Gaston)(Diaz):Claim by sports apparel company for injunctive relief to "freeze" corporate assets or appoint receivers, for accounting, for declaratory judgment concerning the ownership, use and possession of corporate assets, and for breach of cororate fiduciary duties.

Tedder v. Tedder (Dare)(Jolly): shareholder dispute (between brothers) alleging misconduct by shareholder and officer, including claims for conversion, "bogus expense reports," and excess compensation. 

Triad Group, Inc. v. Wachopvia Bank, N.A. (Yadkin)(Tennille): securities claims regarding bonds issued by plaintiff and sold by Wachovia and also claims involving an interest rate swap agreement.

Wefald v. Wake Heart and Vascular Associates, P.A. (Johnston)(Tennille):lawsuit by cardiologist forced out of medical practice, issues whether termination was "for cause" and right of corporation to redeem former employee’s shares.