Archive for October, 2022

N.C. Business Court Opinions, October 12, 2022 – October 25, 2022

United Therapeutics Corp. v. Liquidia Techs., Inc., 2022 NCBC 59 (N.C. Super Ct. Oct. 13, 2022) (Earp, J.)

Key Terms: trade secret misappropriation; UDTPA; in or affecting commerce; Rule 12(b)(6)

Plaintiff, a biotech company, brought suit against Roscigno (a former executive) and Liquidia (a competing biotech company) for misappropriation of trade secrets and unfair and deceptive trade practices arising from Roscigno’s alleged taking of trade secrets and confidential information relating to the development of certain medical treatments. Defendants moved to dismiss all claims.

Regarding the misappropriation claim, the Court concluded that Plaintiff’s allegations describing the types of information it contended constituted trade secrets and identifying the specific documents in which the trade secrets could be found were sufficient to identify the trade secrets at issue. Moreover, the Court concluded that Plaintiff had sufficiently pleaded misappropriation based on its allegations that Roscigno had access to the trade secrets, transferred and used them after his employment ended, and carried them to Liquidia, and that Liquidia had the trade secrets in its possession as evidenced by its production of the trade secrets during discovery in separation litigation.

Regarding the UDTPA claim, Liquidia argued that because the medical treatment was not yet commercially available, the alleged misappropriation was not “in or affecting commerce.” The Court rejected this narrow interpretation of the statute, determining that allegations regarding the transfer of trade secrets between competing companies regarding the development of products that are on the market or are intended for the market satisfied the UDTPA pleading requirements.

Accordingly, the Court denied the motion to dismiss as to both claims.

 

Clue Prop. Dev., LLC v. Switzenbaum & Assocs., Inc., 2022 NCBC 60 (N.C Super. Ct. Oct. 14, 2022) (Robinson, J.)

Key Terms: Rule 12(b)(6); breach of contract; damages; defined term; Rule 12(e); more definite statement

Plaintiffs filed suit alleging numerous claims arising from agreements between the parties to purchase and transfer certain property for residential development. Defendants moved to dismiss the Complaint, or in the alternative, for a more definite statement.

Defendants sought dismissal based largely on the Complaint’s definition of “Clue” as including both Plaintiff Clue Property Development (“Clue”) and an alleged predecessor entity Cue Property Development (“CUE”), which, according to Defendants, undermined the damages allegations in Claim 4 and tainted the whole Complaint. After determining that Claim 4 had sufficiently alleged a breach of contract despite the defect in the damages allegation, the Court turned to the effect of the defined term on the Complaint as a whole. The Court held that Plaintiffs had sufficiently alleged successorship for Rule 12(b) purposes because despite not alleging specific facts showing successorship, it appeared that Plaintiffs may be able to prove some facts which would support such a finding. Thus, the Court denied the motion to dismiss the Complaint.

The Court did, however, grant the motion for a more definite statement, due to the Complaint’s failure to sufficiently identify which entity was damaged and by what conduct.

 

Chambers v. Moses H. Cone Mem’l Hosp., 2022 NCBC 61 (N.C. Super. Ct. Oct. 19, 2022) (Conrad, J.)

Key Terms: class certification; non-opt-out class; actual notice; due process; class action settlement approval; attorneys’ fees

After Plaintiff received a $14,000 bill from Defendant Moses Cone for an emergency appendectomy, Plaintiff filed suit in 2012 alleging that Defendants had overcharged him and a class of other self-pay patients who received emergency care. Following ten years of litigation, all that remained was a class declaratory judgment claim seeking a declaration that Moses Cone’s form contract included an open price term, that it may not bill self-pay patients at Chargemaster rates, and that it is entitled only to the reasonable value of its services. The parties agreed to a proposed settlement in April 2022 which provided, among other things, that each class member would receive a fifty percent reduction of his original bill. This settlement was preliminarily approved by the Court in June. After notice was given to putative class members, Plaintiff filed unopposed motions for final approval and for $75,000 in attorneys’ fees.

The Court first approved the class, finding that the requirements of Rule 23 of the North Carolina Rules of Civil Procedure were satisfied. Although not all class members received actual notice due to mailings returned undeliverable, the Court concluded that this did not violate due process under the circumstances. Moreover, given that only declaratory relief was at issue, a non-opt-out class was appropriate to avoid unnecessary inconsistencies and compromises in future litigation.

The Court also approved the settlement, finding it fair, reasonable, adequate, and in the best interests of the class, especially considering the uncertainty and expense of continued litigation.

Regarding the request for attorneys’ fees, the Court applied the eight factors identified in Rule 1.5 of the Rules of Professional Conduct and determined that $75,000 was fair and reasonable. Plaintiffs’ counsel had expended nearly 450 hours in litigating the case, which was reasonable given the length and complexity of the litigation. At counsel’s ordinary billing rates, the combined value would have been $196,670. A discounted award of $75,000 would yield an implied average rate of $168/hour, which was well within the rates customarily charged in North Carolina.

 

PHE, Inc. v. Dolinksy, 2022 NCBC 62 (N.C. Super. Ct. Oct. 19, 2022) (Davis, J.)

Key Terms: estate; executor; fiduciary duty; economic loss rule; declaratory judgment; no actual dispute

After one of its shareholders passed away, Plaintiff sought to purchase the decedent’s shares of the company from his Estate, pursuant to the terms of its Shareholders’ Agreement and the decedent’s Will. When the Estate’s executor failed to deliver the shares, Plaintiff filed suit for breach of the Shareholders’ Agreement and breach of fiduciary duty under the Will and for declaratory judgments regarding the Shareholders’ Agreement and the Will. Defendant moved to dismiss Plaintiff’s will-based claims.

In its breach of fiduciary duty claim, Plaintiff alleged that Defendant owed it a statutory fiduciary duty under N.C.G.S. § 28A-13-2, as well as a general duty to comply with the terms of the Will. In response, Defendant argued that the claim must be dismissed because 1) Plaintiff is essentially a creditor of the Estate and thus is not in the class of persons legally authorized to bring such a claim; and 2) the economic loss rule bars a tort claim because the parties’ obligations are governed exclusively by the Shareholders’ Agreement. The Court declined to address the first argument but agreed with the second—because nothing in the Will changed the relationship between the Parties established by the Agreement, the tort claim could not exist independently from the contract claim and was, therefore, barred by the economic loss rule.

For similar reasons, the Court also dismissed the will-based declaratory judgment claim. Since the Court could not identify any legally permissible construction of the Will that would alter the contractual duties under the Agreement, no actual dispute existed to warrant a declaratory judgment regarding the Will.

 

BlueSky Restoration Contractors, LLC v. Brown, 2022 NCBC 63 (N.C. Super. Ct. Oct. 20, 2022) (Robinson, J.)

Key Terms: Rule 12(c); judgment on the pleadings; merger; restrictive covenants; Delaware law; claim for punitive damages

Plaintiff BlueSky Restoration filed suit against Brown, a former employee, for allegedly breaching several agreements containing restrictive covenants. Brown counterclaimed and filed a third-party complaint against BlueSky HoldCo (BlueSky Restoration’s parent company), who, in turn, filed third-party counterclaims against Brown. Brown moved for judgment on the pleadings under Rule 12(c) as to various claims. At the outset, the Court determined that, pursuant to the choice of law provisions in the agreements, Delaware law applied to substantive issues.

First, Brown argued that the restrictive covenants in the LLC Agreement and LP Agreement were no longer enforceable due to a corporate merger, or, in the alternative, that the restrictive covenants were overbroad and unenforceable as a matter of law. Regarding merger, the Court found that there was no evidence properly before the Court on a Rule 12(c) motion which indicated that the Plaintiffs intended to release Brown from the restrictive covenants in the LLC Agreement. As to the LP Agreement, the Court rejected Brown’s merger argument based on language in certain merger documents which indicated that the LP Agreement’s restrictive covenants survived the merger. Regarding the enforceability of the restrictive covenants, the Court went through the elements under Delaware law and concluded that the covenants were not overbroad as a matter of law. Plaintiffs had sufficiently alleged that the covenants protected a legitimate economic interest, and issues of fact remained regarding the reasonableness of the time and territorial restrictions.

Second, Brown argued that the non-solicitation provision in the 2017 Agreement had expired on his last day of employment due to BlueSky Restoration’s failure to pay a required severance payment. The Court rejected this argument because the plain language of the 2017 Agreement provided that the severance payment requirement did not apply to the non-solicitation provision.

Having found that the breach of contract claims survived dismissal, the Court also denied Brown’s request for dismissal of the claims for injunctive relief and for a declaratory judgment regarding the enforceability of the LP Agreement. However, the Court granted dismissal of BlueSky Restoration’s claim for punitive damages, as punitive damages are a remedy, not a stand-alone claim.

 

Anderson v. Beresni, 2022 NCBC Order 58 (N.C Super. Ct. Oct. 25, 2022) (Davis, J.)

Key Terms: BCR 7.8; arguments incorporated by reference; nominal defendant; crossclaim

On its own motion, the Court entered an order striking Defendants’ brief in support of their motion to dismiss for violation of BCR 7.8, which prohibits incorporating by reference arguments made in another brief. The Court directed Defendants to file an amended brief within ten days. The Court also directed the parties to include in their briefs a discussion of whether a nominal defendant in a derivative action is permitted to assert a crossclaim.

 

By Ashley B. Oldfield

To subscribe to RCD’s Business Court Blast, email Ashley Oldfield at aoldfield@rcdlaw.net.

The information in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.

 

Posted 10/26/22

N.C. Business Court Opinions, September 28, 2022 – October 11, 2022

 

Philip Morris USA, Inc. v. N.C. Dep’t of Revenue, 2022 NCBC 58 (N.C. Super. Ct. Sept. 29, 2022) (Earp, J.)

Key Terms: judicial review; final agency determination; N.C.G.S. § 105-130.45; tax credit; cigarette exportation; Export Credit; generate; statutory interpretation; plain language; legislative intent

The dispute at its core is over whether N.C.G.S. § 105-130.45, the cigarette export tax credit, as amended effective 1 January 2005, limited the amount of Export Credit Petitioner Philip Morris could generate in any one year to $6 million, as Respondent, the N.C. Department of Revenue, contends. Philip Morris’ position is that the addition of the language at issue to subsection (b) was merely a reiteration of the pre-existing cap in subsection (c) of the amount of Export Credit that could be claimed annually, not a new cap on the amount of Export Credit that could be generated annually.

The relevant statutory language in subsection (b) was changed from “[t]he amount of credit allowed is computed as follows” to “[t]he amount of credit allowed may not exceed six million dollars ($6,000,000) and is computed as follows[.]” Despite Philip Morris’s arguments related to the General Assembly’s and the Department’s representations as to the impact of the amendment and its interpretation of the legislative intent, the Court focused on the plain language of the statute and found that it was unambiguous and not open to judicial construction. The Court held that a simple reading of the amended Export Credit Statute plainly indicates that the General Assembly intended to limit credit generation to six million dollars per year effective 1 January 2005. Contrary to Philip Morris’ argument, reading the new language in subsection (b), where it was placed, results in a second $6 million limitation—this one on credit generation—and not a repeat of the $6 million cap on use of the credit in subsection (c). The Court concluded that the Administrative Law Judge did not err by awarding summary judgment to the Department and that the position espoused by the Department and upheld in the final agency decision is consistent with the plain language of the statute.

 

Rizzuto v. DORFERCIM, Inc., 2022 NCBC Order 56 (N.C. Super. Ct. Sept. 30, 2022) (Bledsoe, C.J.)

Key Terms: notice of designation; N.C.G.S. § 7A-45.4(a)(5); breach of contract; intellectual property

Plaintiffs filed a notice of designation contending the case should be designated a mandatory complex business case pursuant to N.C.G.S. § 7A-45.4(a)(5). Designation is proper under subsection (a)(5) if the action involves a material issue related to intellectual property. Plaintiffs argued designation was proper because the Defendants terminated Plaintiffs’ access to a certain system containing software, trademarks, proprietary marks, and other confidential information for the relevant franchise. Despite these arguments in support of designation, the Court found that Plaintiffs’ claims were focused on the alleged breach of the franchise agreement rather than the underlying intellectual property aspects of the franchise’s software system. The Court reaffirmed that “to qualify for mandatory complex business case designation under this section, the material issue must relate to a dispute that is ‘closely tied to the underlying intellectual property aspects’ of the intellectual property at issue” and held that here, designation was improper.

 

Rybicka-Kozlowska v. Durham Nephrology Assocs., P.A., 2022 NCBC Order 57 (N.C. Super. Ct. Sept. 30, 2022) (Bledsoe, C.J.)

Key Terms: notice of designation; N.C.G.S. § 7A-45.4(a)(1); law governing corporations, partnerships, and limited liability companies; breach of contract

Defendants filed a notice of designation contending the case should be designated a mandatory complex business case pursuant to N.C.G.S. § 7A-45.4(a)(1). Designation is proper under subsection (a)(1) if the action involves a material issue related to disputes involving the law governing corporations, partnerships, and limited liability companies. Plaintiff entered into a Shareholder Agreement and Nonqualified Deferred Compensation Plan and Employment Agreement (collectively, the “Agreements”) with Defendant. Plaintiff was terminated from Defendant and alleged Defendants took actions to decrease the compensation owed to her under the Agreements. Defendants argued the dispute concerns Plaintiff’s rights as a former shareholder, therefore implicating the law governing corporations, and that their defenses to Plaintiff’s claims will require application of North Carolina’s Professional Corporation Act. The Court found, however, that the material issues of the action require only a straightforward application of contract law principles. Further, the Court reaffirmed that it may not consider any issues that may or may not be raised in a future pleading when determining whether designation is proper. Accordingly, designation was not proper in this action.

 

By Rachel E. Brinson

 

To subscribe to RCD’s Business Court Blast, email Ashley Oldfield at aoldfield@rcdlaw.net.

The information in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.

Posted 10/12/22