Archive for February, 2024

N.C. Business Court Opinions, February 14, 2024 – February 27, 2024

Cutter v. Vojnovic, 2024 NCBC 7 (N.C. Super. Ct. Feb. 16, 2024) (Bledsoe, C.J.)

Key Terms: cross motions for summary judgment; motion to strike; personal knowledge; legal terms of art; common law partnership; indicia of an enforceable partnership; tortious interference with prospective economic advantage

As previously summarized here, Plaintiff filed suit alleging that he and Defendant had entered into a common law partnership agreement in relation to the purchase of a restaurant business and that Defendant’s closing of the purchase of the business without Plaintiff’s participation gave rise to numerous claims. Following dismissal of certain claims, both sides moved for summary judgment on Plaintiff’s remaining claims.

Motion to Strike. Defendants moved to strike certain portions of Plaintiff’s affidavit challenging Plaintiff’s personal knowledge of the facts alleged therein and his use of legal terms of art. The Court struck the portions of the affidavit describing Plaintiff’s opinions on available financing and investor interest in the purchased business because they without any factual support. The Court also struck Plaintiff’s use of the terms “partnership” and “misappropriation” because they were inadmissible legal conclusions. However, the Court rejected Defendants’ challenge to Plaintiff’s assertion of personal knowledge in the affidavit because such challenge went to the veracity of Plaintiff’s assertion, not its admissibility. Defendants also challenged (at the summary judgment hearing) Plaintiff’s submission of an expert report from a lawyer which opined on partnership law and its application to the case. Because the report impermissibly opined on the legal effect of the facts at hand, the Court elected to disregard it in considering the motions for summary judgment.

Cross Motions for Summary Judgment. The parties sought summary judgment on Plaintiff’s remaining claims which the Court divided into two categories: those dependent on the existence of a common law partnership and those that were not.

The Court found that a common law partnership between Plaintiff and Defendant Vojnovic did not exist because there was no mutual agreement between the parties as to how to share losses, Plaintiff never assumed any risk of loss for the partnership, and the parties never reached an agreement as to the financing for the proposed purchase of the business. Moreover, the parties never registered a partnership name, made capital contributions to a partnership entity, set up bank accounts for the purported partnership, filed partnership tax returns, or agreed on other material terms of a partnership agreement. Because the Court concluded that a partnership did not exist, it denied Plaintiff’s motion for summary judgment and granted Defendants’ motion for summary judgment as to Plaintiff’s claims for breach of the alleged partnership agreement, breach of Defendant Vojnovic’s fiduciary duty as a member of the alleged partnership, and judicial dissolution of and an accounting of the alleged partnership. The Court dismissed the claims with prejudice.

Lastly, the Court dismissed Plaintiff’s claim for tortious interference with prospective economic advantage finding that Plaintiff’s contention that he could have purchased the restaurant but for Defendant Vojnovic’s interference was supported only by speculation and conjecture, not admissible evidence. The Court concluded that Plaintiff failed to offer any competent evidence that a contract would have resulted but for the defendant’s malicious intervention and dismissed the claim with prejudice.


Stamatakos v. Carolina Urology Partners, PLLC, 2024 NCBC 8 (N.C. Super. Ct. Feb. 20, 2024) (Davis, J.)

Key Terms: motion to dismiss; motion to amend; futility; fraud; UDTP; commerce; learned profession exception

This lawsuit concerns the termination of Plaintiff Stamatakos from his employment with Defendant Carolina Urology Partners, PLLC (“CUP”). Before the Court were Plaintiff’s motion for leave to file a second amended complaint and Defendants’ partial motion to dismiss Plaintiff’s claims for fraud and unfair and deceptive trade practices.

Motion to Amend. Defendants opposed Plaintiff’s motion to amend on the grounds of futility arguing that the proposed amendments related solely to Plaintiff’s fraud claim and such additional allegations were still insufficient to state a claim for fraud. Plaintiff’s fraud claim is based on the theory that (1) Defendants desired to terminate his membership in CUP, take over his patients, and destroy his practice; and (2) they accomplished this goal via a scheme of deceptive acts intended to mask their true intentions and keep Plaintiff from exercising his rights under CUP’s operating agreement to voluntarily withdraw from CUP. Plaintiff alleges that as a result of Defendants’ fraudulent misrepresentations he was lulled into a state of complacency and thus did not exercise his rights to voluntarily withdraw. Despite Defendants’ arguments that Plaintiff’s amendment would be futile, the Court found that Plaintiff satisfied Rule 9(b) by alleging specific details with regard to the misrepresentations forming the basis for his fraud claim, including by identifying the individuals who made the alleged misrepresentations; the time, place, and manner in which the misrepresentations were made; and the benefit sought to be obtained by Defendants via the fraudulent representations. Accordingly, the Court granted Plaintiff’s motion to amend.

Motion to Dismiss. Noting that allowance of an amended complaint typically moots a pending motion to dismiss, the Court nonetheless considered the partial motion to dismiss because the proposed second amended complaint only added additional allegations of fraud and did not affect Plaintiff’s UDTPA claim. Because the Court already determined that Defendants’ futility arguments lacked merit with regard to the allegations in the proposed second amended complaint, it denied Defendants’ motion to dismiss the fraud claim. However, the Court granted the motion to dismiss the UDTP claim based on the learned profession exception. Plaintiff argued that the learned profession exception should not apply here because the action involves a business dispute rather than the provision of medical care, but citing numerous appellate decisions broadly interpreting the exception, the Court held that Plaintiff’s UDTP claim fell squarely within the learned profession exception. In reaching this determination, the Court highlighted the fact that the provision of medical care permeates every aspect of the lawsuit. The Court dismissed Plaintiff’s UDTP claim with prejudice.


Lineage Logistics, LLC v. Primus Builders, Inc., 2024 NCBC 9 (N.C. Super. Ct. Feb. 23, 2024) (Bledsoe, C.J.)

Key Terms: motion to strike; Rule 12(f); affirmative defenses; statute of limitations; motion to dismiss; BCR 7.2; third-party complaint; indemnification

As summarized here, Plaintiff Lineage filed suit against certain insurers after they refused to provide defense and indemnification coverage for a tragic incident that occurred at Lineage’s storage facility. Following motions practice and various amendments to the pleadings, Lineage moved to strike certain of Defendants’ affirmative defenses and Third-Party Defendant P3 moved to dismiss the third-party complaint.

Motion to Strike Republic’s Affirmative Defenses. In response to the motion to strike, Republic withdrew several of its asserted affirmative defenses leaving only its 12(b)(6) “motion,” statute of limitations, and N.C.G.S. § 22B-1 defenses at issue. As to the 12(b)(6) “motion,” which was included in Republic’s answer, it did not comply with the Business Court rules requiring a separate motion and supporting brief. Therefore, the Court, in consultation with counsel, elected not to strike the motion to dismiss but to take no action on it unless and until Republic filed a motion and supporting brief in compliance with BCR 7.2.

The Court granted Lineage’s motion to strike as to Republic’ statute of limitations affirmative defense finding that Lineage’s claims in its second amended complaint related back to its first amended complaint which was filed within the statutory timeline and gave Republic notice of the transactions giving rise to the subsequent claims.

Regarding Republic’s argument that N.C.G.S. § 22B-1 rendered its subcontract indemnity provision void, since the Court had previously determined this defense failed as a matter of law and Republic represented that it was included only in order to preserve the issue for appeal, the Court struck this affirmative defense as well.

Motion to Strike Primus’s Affirmative Defenses. Here again, in response to the motion to strike, Primus withdrew several of its asserted affirmative defenses, leaving only waiver and equitable estoppel to be addressed. Although Lineage argued that Primus failed to allege facts showing each of the required elements for waiver or equitable estoppel, the Court found that Primus satisfied its pleading burden under Rule 8 to put Lineage on notice of the facts supporting the affirmative defenses and therefore denied the motion to strike Primus’s waiver and equitable estoppel affirmative defenses.

Motion to Dismiss Third-Party Complaint. P3 sought dismissal of Republic’s Third-Party Complaint on several grounds. First, P3 argued that because Republic failed to timely submit a summons for issuance by the Court, the action abated and service was improper, thereby requiring dismissal of the third-party action for insufficient process and lack of personal jurisdiction. However, despite the delay in having the summons issued, the Court found that the action revived upon the issuance and service of the summons on P3. Therefore, the Court denied P3’s motion to dismiss under Rules 12(b)(2), (4), and (5).

P3 next sought dismissal of Republic’s negligence claim under Rule 12(b)(6), contending that the claim was barred by the applicable three-year statute of limitations under N.C.G.S. § 1-52 because the claim was based on P3’s alleged conduct in causing the injuries suffered on 10 January 2020 but the Third-Party Complaint was not filed until 1 November 2023. In response, Republic argued that its negligence claim was timely because it related back to Lineage’s negligence and indemnity claims in a separate lawsuit Lineage filed against P3 in January 2023 and that therefore P3 had long been on notice of the events or occurrences giving rise to Republic’s negligence claim. However, the Court found that Rule 15(c) contemplates relation back to the “original pleading” in the same action, not to a pleading in a separate action. The Court additionally noted that Republic cannot get the benefit of Rule 15(c)’s relation back provision since Republic is a newly added defendant in the present action. Accordingly, the negligence claim was barred by the applicable statute of limitations, and the Court dismissed it.

Lastly, P3 separately argued that because Lineage’s claims are grounded in contract, not tort, Republic’s third-party claims for negligence, indemnity, and contribution must be dismissed. The Court agreed. Republic’s failure to allege any underlying tortious injury or damages provided a separate ground for dismissal of its negligence claim. In addition, because there was no tort claim against Republic for which it seeks indemnity from P3, Republic’s indemnification claim did not fit the “active-passive tort-feasor framework” required to state a claim for a right to indemnity implied-in-law. The Court therefore dismissed Republic’s indemnification claim as well and dismissed the Third-Party Complaint with prejudice.


Anderson v. Hobart Fin. Grp., Inc., 2024 NCBC 10 (N.C. Super. Ct. Feb. 26, 2024) (Robinson, J.)

Key Terms: registered investment advisor; registered broker; breach of fiduciary duty; constructive fraud; N.C. Securities Act; fraud; professional negligence; UDTPA; negligent misrepresentation; statute of limitations; Rule 12(b)(6); Rule 9(b)

This action arose out of Defendants’ alleged recommendation of unsuitable investment products to Plaintiffs (including Ms. Byrnes, Mr. Tanger, Dr. Zucker, the Wilshires, the Ostranders, and the Leshocks–all older adults who were retired or near retirement), who purchased some of those investments to their financial detriment. Plaintiffs’ second amended complaint alleged seven claims, primarily relating to alleged misrepresentations and breaches of fiduciary duties, against one or more of the Defendants, which include several related entities (the “Hobart Entities”) offering investment services and three of their employees who are registered investment advisors and/or FINRA registered brokers. Defendants moved to dismiss all claims pursuant to Rules 12(b)(6) and 9(b).

Statute of Limitations. The Court first addressed Defendants’ assertion that a number of the claims were barred by the applicable statute of limitations. Beginning with Ms. Byrnes’s claim for constructive fraud, the Court determined that this claim was time-barred because the act giving rise to the claim–Defendants’ recommendation that Ms. Byrnes purchase unsuitable investments–occurred more than ten years before the action was filed.

The Court also dismissed all of Mr. Tanger’s and Dr. Zucker’s claims, except for constructive fraud, as Plaintiffs’ counsel had previously conceded that the claims were untimely.

Regarding Plaintiffs’ claim for violation of the North Carolina Securities Act, the Court could not conclude that it was time-barred because although the sales of the securities had occurred more than five years before suit was filed, Plaintiffs alleged that Defendants actively concealed their violations.

Regarding Plaintiffs’ claims for breach of fiduciary duty, fraud, and negligent misrepresentation, all of which are subject to a three-year statute of limitations which begins to run when the claimant knew, or should have known, of the facts giving rise to the claim, the Court was also unable to conclude, at this stage, that the claims were time-barred. Whether Plaintiffs could have discovered Defendants’ alleged wrongdoing in the exercise of due diligence required a more fact-intensive inquiry that was inappropriate at the 12(b)(6) stage.

As for the professional negligence claims, the Ostranders’ claim was dismissed because the last act giving rise to their claim occurred outside the three-year statute of limitations. However, the Leshocks’ claim survived under the continuing wrong doctrine based on Defendants’ reinvestment of dividends in 2020.

Rule 9(b). The Court next considered whether Plaintiffs had pleaded their fraud and negligent misrepresentation claims with sufficient particularity as required by Rule 9(b). The fraud claims of the Leshocks and the Wilshires were dismissed with prejudice because they failed to sufficiently allege either the time and place of the representation, what was obtained as a result of it, or the exercise of reasonable diligence to independently investigate the truth of the representations. In contrast, the Ostranders’ allegations adequately stated the circumstances and included their attempts to investigate the veracity of the statements; therefore, their fraud claim survived. The reasonableness of their reliance would be best determined later in the litigation. With regard to the negligent misrepresentation claim, none of the Plaintiffs’ adequately alleged what information was deficiently prepared or reasonable reliance. Thus, these claims were dismissed with prejudice.

Sufficiency of Remaining Claims. Turning to the claims for breach of fiduciary duty and constructive fraud, the Court first determined that Plaintiffs had adequately alleged the existence of a fiduciary duty. The individual defendants were all registered investment advisors who were acting in furtherance of the business of the Hobart Entities, thereby giving rise to a de jure fiduciary relationship. In addition, Plaintiffs’ allegations that they were unsophisticated, vulnerable investors who were operating with less than complete information and relied on Defendants’ repeated assurances they were acting in Plaintiffs’ best interest were sufficient to plead the existence of a de facto fiduciary relationship. Because Plaintiffs alleged breach and that Defendants benefited by receiving undisclosed or misrepresented fees and commissions, the breach of fiduciary duty and constructive fraud claims survived.

Regarding the NCSA claim, which was based on Plaintiffs’ allegations of fraud, the Court dismissed the Leshocks’ and Wilshires’ claims for the same reasons their fraud and negligent misrepresentation claims failed. The Ostranders’ NCSA claim survived, though, since their fraud claim had survived.


Johnson Bros. v. City of Charlotte, 2024 NCBC 11 (N.C. Super. Ct. Feb. 27, 2024) (Bledsoe, C.J.)

Key Terms: motion to dismiss; 12(b)(1); 12(b)(2); 12(b)(6); sovereign immunity; statute of limitations; N.C.G.S. § 1-53(a); governmental functions; proprietary functions; waiver; breach of contract; mutual mistake; breach of warranty; breach of implied covenant of good faith and fair dealing

This case involves a dispute between Plaintiff JBC, which served as the general contractor on Defendant City of Charlotte’s CityLYNX Gold Line Streetcar extension project, and the City over the City’s alleged breaches of the parties’ contract for construction of the Project. The City sought dismissal of JBC’s claims on the grounds that the claims were barred by sovereign immunity and by the applicable statute of limitations. After JBC’s voluntary dismissal of several claims and the City’s concession that JBC’s claim for violation of the Prompt Payment Act should survive, the claims subject to the motion to dismiss were (i) breach of contract, (ii) breach of expressed & implied warranties, (iii) breach of the implied covenant of good faith and fair dealing, (iv) mutual mistake, and (v) pass-through claims of subcontractors.

Sovereign Immunity. Addressing the City’s sovereign immunity defense on a claim-by-claim basis and under Rule 12(b)(2), the Court found that the City was not immune from these claims under the doctrine of sovereign immunity.

Breach of Contract and Pass-Through Claims. Utilizing the Estate of Williams test, the Court determined that the City’s provision of the streetcar system is a governmental function and therefore, absent waiver, the City would be entitled to governmental immunity against JBC’s claims. However, because JBC had adequately pleaded the existence of a valid contract with the City, such immunity was waived. The Court rejected the City’s argument that JBC’s failure to comply with the contractual procedures for recovery barred the claim under governmental immunity. Determining JBC’s compliance with conditions precedent was an inquiry into the merits of JBC’s claim and therefore not relevant to determining sovereign immunity.

Breach of Warranty. The Court found that the breach of warranty claim survived dismissal on the grounds of immunity because JBC had adequately pleaded breach of an implied warranty of plans and specifications by alleging that the City published the plans, that JBC relied on said plans in completing the project, and that as a result of the “inaccurate and inadequate” plans, JBC suffered injury.

Mutual Mistake. The City next sought dismissal of JBC’s claim for mutual mistake, arguing that since JBC’s claim for mutual mistake posits that a valid contract was never formed, and because the City’s waiver of sovereign immunity extends only to its agreements with JBC pursuant to the contract, JBC’s claim seeking to invalidate the Contract is not a claim on which the City has agreed to be sued. The Court disagreed, finding that JBC’s mutual mistake claim was not for invalidation of the contract as a whole, but for reformation of the contract. Since JBC has pleaded entry into a valid contract, it had adequately pleaded waiver of sovereign immunity for claims on that contract, including its claim for mutual mistake.

Statute of Limitations. The City also sought dismissal of JBC’s claims under Rule 12(b)(6) as barred by the two-year limitations periods set forth in N.C.G.S. § 1-53(a).

JBC responded that its claims were timely because it did not have the right to maintain a lawsuit for breach of contract until the relevant contract’s mediation process was completed, which did not occur until 27 January 2023. However, despite the contract’s mediation process requirement, under North Carolina law, absent a tolling agreement, only the applicable statute determines the limitations period and a claim for breach of contract accrues when the contract is breached. Accordingly, the Court found that JBC’s breach of contract claim accrued when the City allegedly breached the Contract.

The Court determined that the allegations of the complaint and the referenced documents demonstrated much of the conduct giving rise to JBC’s breach of contract claim occurred prior to January 31, 2021, and moreover, that JBC was aware of the conduct more than two years before it instituted this action. Therefore, the Court held that to the extent JBC’s breach of contract claim arises out of alleged breaches of the contract at issue that occurred prior to January 31, 2021, the claim is barred by the statute of limitations. Accordingly, JBC’s breach of contract claim would proceed to discovery only to the extent that it sought to recover for alleged breaches that occurred on or after January 31, 2021.

However, the Court determined that JBC’s claims for mutual mistake and breach of implied and express warranties were wholly barred by the statute of limitations because JBC’s complaint clearly demonstrated that JBC was aware of the alleged mistakes and plan inaccuracies more than two years prior to the initiation of the lawsuit.

Breach of the Implied Covenant. Lastly, the City argued that JBC’s claim for breach of the implied covenant of good faith and fair dealing should be dismissed because it is duplicative of and based on the same alleged facts as the breach of contract claim. The Court agreed and therefore denied and granted the motion to dismiss the implied covenant claim to the same extent as JBC’s breach of contract claim.

In conclusion, JBC’s remaining claims are the limited breach of contract, implied covenant of good faith and fair dealing, and pass-through claims, and the violation of the Prompt Payment Act claim. All others were dismissed with prejudice.


Johnson Bros. v. City of Charlotte, 2024 NCBC 12 (N.C. Super. Ct. Feb. 27, 2024) (Bledsoe, C.J.)

Key Terms: breach of contract; negligence; professional negligence; economic loss doctrine; Rule 12(b)(6); statute of limitations; indemnification; active-passive tort-feasor framework

This case arises from a dispute between JBC, a general contractor, and the City of Charlotte relating to the parties’ contract to extend the City’s CityLYNX Gold Line, a streetcar system. In response to counterclaims filed by the City for breach of contract and breach of warranty, JBC filed third-party claims for indemnity, negligence, and professional negligence against URS Corporation, which had provided the engineering and design plans for the project. URS moved to dismiss the third-party claims.

URS first argued that the economic loss doctrine prevented JBC’s recovery on all claims. The Court rejected this argument, noting that North Carolina’s case law recognizes a duty of care imposed upon architects for the benefit of construction contractors in the absence of contractual privity. Since JBC had alleged that it was not in privity of contract with URS and that URS owed JBC a common law duty of reasonable care, dismissal on this ground was not appropriate.

URS next argued that the applicable three-year statute of limitations barred JBC’s recovery on the negligence and professional negligence claims to the extent they were based on communications made prior to July 31, 2020. However, because these communications weren’t referenced in the third-party complaint, but were instead found in JBC’s complaint against the City, the Court declined to consider them. Looking only at the allegations in the third-party complaint, the Court was unable to conclude the claims were barred by the statute of limitations and denied the motion on this basis.

Lastly, URS argued that JBC’s indemnification claim against URS should be dismissed, as the City’s claims against JBC were not based on tort. The Court agreed. JBC’s claim did not fit the “active-passive tort-feasor framework” required to state a claim for indemnity implied-in-law. Accordingly, the indemnification claim was dismissed.


Ferguson Enters., LLC v. Wilkie, 2024 NCBC Order 15 (N.C. Super. Ct. Feb. 14, 2024) (Bledsoe, C.J.)

Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(8); trade secrets; confidential information

Plaintiff brought claims for violation of the UDTPA, tortious interference, and breach of various contracts related to an employment dispute with Defendants. Defendants sought designation as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(8), which covers material disputes related to trade secrets.

The Court found that designation was not proper because although the complaint used the words “trade secrets” it did not assert a claim for misappropriation of trade secrets and only alleged material disputes related to Plaintiff’s confidential information, not its trade secrets.


Hosie v. 8 Rivers Cap., LLC, 2024 NCBC Order 16 (N.C. Super. Ct. Feb. 7, 2024) (Davis, J.)

Key Terms: BCR 10.9; discovery; privilege dispute; attorney-client privilege; internal affairs doctrine; joint client; entity-is-the-client; holder of privilege; choice of law; fiduciary exception; selective waiver

Plaintiffs filed a summary of a discovery dispute in accordance with BCR 10.9 and alleged that Defendant was improperly withholding documents on the basis of the attorney-client privilege. The Court engaged first in a choice-of-law analysis to determine whether North Carolina or Delaware law should apply since the Defendant is a Delaware LLC and its operating agreement contains a Delaware choice of law provision. The Court concluded that North Carolina law governs the attorney-client privilege issues raised by the parties because privilege is collateral to the underlying substantive issues. The Court also rejected Plaintiffs’ argument that the internal affairs doctrine should apply.

The Court next turned to the issue of who controlled the privilege: Defendant 8 Rivers or its former CEO (Plantiff Hosie), who was involved in many of the withheld communications. Without any North Carolina appellate precedent to follow, the Court reviewed the competing approaches of the “joint client” or the “entity-is-the-client” model. The Court determined that the Supreme Court of North Carolina, if presented with the issue, would join the majority of state and federal courts who utilize the “entity-is-the-client” approach and therefore found that Defendant 8 Rivers was the exclusive holder of the attorney-client privilege.

The Court lastly considered whether any existing attorney-client privilege with regard to the withheld documents had been wholly or partially waived by Defendant 8 Rivers and found that Plaintiffs’ argument that 8 Rivers selectively disclosed certain documents that supported its position in the case, while simultaneously withholding other documents containing similar communications that could support Plaintiffs’ position was persuasive. After conducting an in camera review of a sample of the withheld and produced documents to evaluate Plaintiffs’ “selective waiver” argument, the Court determined that the attorney-client privilege had been waived with respect to certain discrete topics and ordered Defendant to produce such documents.


Charles Schwab & Co. v. Marilley, 2024 NCBC ORDER 17 (N.C. Super. Ct. Feb. 20, 2024) (Earp, J.)

Key Terms: arbitration provision; motion to stay; interpleader; Uniform Transfer to Minors Act

This case arises from a dispute relating to the ownership and release of funds formerly held in a joint brokerage account with Plaintiff by Defendants Peter and Lauren Marilley. Lauren’s grandfather opened two accounts for Lauren’s benefit during her minority. Prior to Lauren reaching adulthood, her father Peter replaced her grandfather as the custodian of the accounts and transferred the funds in the accounts to a joint account. Following Lauren’s twenty-first birthday, a dispute arose between Lauren and Peter regarding the ownership of the funds.

Pursuant to an arbitration clause contained in the client agreement between Peter, Lauren, and Plaintiff, Peter commenced an arbitration proceeding before FINRA in Florida asserting claims against Plaintiff and Lauren and seeking, among other things, a restriction on Lauren’s individual account. Plaintiff initiated the present suit by filing a Complaint for Interpleader and sought a stay of the FINRA arbitration. Lauren answered the complaint, filed cross-claims against Peter, and requested a stay of the FINRA arbitration. Peter countered by filing a motion to stay proceedings and compel arbitration.

The Court first concluded that under governing Nebraska law, the client agreement contained a valid agreement to arbitrate. Turning to the scope of the arbitration clause, the Court determined that the arbitration clause covered disputes between Plaintiff and Defendants, but not disputes between Defendants themselves. Accordingly, Peter’s claims against Plaintiff could proceed in the FINRA arbitration, and to that extent, Lauren’s motion to stay was denied. However, because the claims between Lauren and Peter were not within the scope of the arbitration agreement, the Court denied Peter’s motion to stay the state court proceedings relating to such claims. The Court granted Peter’s motion to stay Plaintiff’s interpleader suit as it related to the claims brought in the FINRA arbitration, so as to not infringe upon Peter’s arbitration claims against Plaintiff.


Design Gaps, Inc. v. Hall, 2024 NCBC Order 18 (N.C. Super. Ct. Feb. 21, 2024) (Bledsoe, C.J.)

Key Terms: notice of designation; opposition; N.C.G.S. §§ 7A-45.4(a)(4), (5), and (8); personal injury exception; misappropriation of trade secrets; common law trademark claims

This case arose out of a dispute between Plaintiff Design Gaps and its former employee, Hall, relating to Hall’s alleged breaches of restrictive covenants in a business development agreement. Defendants designated the case as a mandatory complex business case under N.C.G.S. §§ 7A-45.4(a)(4), (5), and (8). Plaintiffs opposed designation, arguing first that the case did not involve a material issue related to any of the grounds for designation and second that because their claim for tortious interference with contract sounded in tort and sought recovery for personal injury, the action fell within the exception to designation for personal injury actions found in section 7A-45.4(h). The Court rejected both arguments. Regarding the first, the complaint alleged a claim for misappropriation of trade secrets which was sufficient for designation under subsection (a)(8), despite Plaintiffs’ assertion that it was a “side issue.” In addition, the complaint also alleged common law infringement of unregistered trade dress, which was sufficient for designation under subsection (a)(4). Regarding Plaintiffs’ second argument, Plaintiff Design Gaps could not suffer “bodily or mental injuries” as a result of any tortious interference with the agreement since it was a corporate entity. Moreover, Plaintiffs primarily alleged claims for actual damages for misappropriation of proprietary information rather than claims involving “bodily or mental” personal injuries. Accordingly, Plaintiffs’ opposition was overruled.


Green v. EmergeOrtho, P.A., 2024 NCBC Order 19 (N.C. Super. Ct. Feb. 23, 2024) (Bledsoe, C.J.)

Key Terms: class action; preliminary approval of class action settlement; Rule 23; class certification

Plaintiff brought this class action against Defendant alleging that Defendant had negligently allowed an unauthorized third-party to access the personal information and medical records of numerous individuals. Plaintiff moved, pursuant to Rule 23, for an order preliminarily approving a settlement and certifying a settlement class, among other things. The Court granted the unopposed motion and set the schedule for subsequent deadlines, including a final approval hearing. The Court found the settlement, as embodied in the settlement agreement, to be fair, reasonable and adequate to the settlement class, subject to further consideration at the final approval hearing, and that it was worthwhile to provide notice of the proposed settlement to the settlement class.

By Rachel E. Brinson and Natalie Kutcher.

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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 02/28/24

N.C. Business Court Opinions, January 31, 2024 – February 13, 2024

Intersal, Inc. v. Wilson, 2024 NCBC 3 (N.C. Super. Ct. Feb. 2, 2024) (Earp, J.)

Key Terms: pirate ship; expert testimony; motion in limine; calculation of damages; Rule 702(a); Daubert standard; copyright law; hypothetical licensing model

As summarized here, this dispute arises from a series of agreements between Plaintiff and the North Carolina Department of Natural and Cultural Resources covering the discovery, promotion, and preservation of two ships that sunk off the North Carolina coast in the eighteenth century. Plaintiff alleged that Defendants breached an agreement entered between the parties in 2013 (the “2013 Agreement”), which included provisions relating to certain media rights.

To support its assertion of damages, Plaintiff sought to offer the expert testimony of Jeffrey Sedlik, a professor of licensing practices and copyright law in visual arts. Defendants moved to exclude Sedlik’s expert testimony, challenging the reliability of his opinions on the bases that: (i) the hypothetical licensing model Sedlik employed is inapplicable because the present dispute is not a copyright infringement case; and (ii) even if the hypothetical licensing model was applicable, Sedlik failed to properly apply it.

The Court concluded that Plaintiff satisfied its burden with respect to Sedlik’s damages testimony under Rule 702(a). Noting that this case is premised upon a legal right stemming from the same source as copyright law and that similar hypothetical licensing models have been embraced by other courts, the Court held that Sedlik’s hypothetical licensing model was applicable to the dispute and admissible. The Court further held that Sedlik would be permitted to offer expert testimony relating to damages incurred by Plaintiff from Defendants’ alleged breaches of the 2013 Agreement, as well as definitions of technical terms or terms of art in the image production and publication industry. However, the Court prohibited Sedlik from offering definitions of commonly used words or phrases or offering any interpretation of the 2013 Agreement or legal conclusions regarding Defendants’ liability.


Vista Horticultural, Inc. v. Johnson Price Sprinkle, PA, 2024 NCBC 4 (N.C. Super. Ct. Feb. 5, 2024) (Bledsoe, C.J.)

Key Terms: motion to amend complaint; undue delay; futility; bad faith

Plaintiff filed suit in April 2023, alleging malpractice against an accounting firm, DMJPS, PLLC, and later amended its complaint to add another accounting firm, Johnson Price Sprinkle, PA (“JPS”), as a defendant. The amended complaint asserted claims against both firms for breach of contract, professional malpractice/professional negligence, common law negligence, gross negligence, and breach of fiduciary duty. Following the exchange of discovery in late 2023, Plaintiff determined that JPS’s insurance coverage was insufficient to cover the damages alleged and moved to amend its complaint to add JPS’s lead shareholder and owner, Cheng, as a defendant. JPS opposed the motion, arguing undue delay, bad faith, and futility.

The Court first determined that there was no undue delay, as Plaintiff had acted promptly after receiving the information regarding JPS’s insurance coverage. Moreover, since the discovery period was ongoing and JPS’s counsel had conceded that Cheng’s addition as a party-defendant would not change JPS’s litigation conduct, there was no undue prejudice.

Next, the Court rejected JPS’s bad faith argument. Plaintiff’s allegations were supported by facts that must be taken as true, and the Court could not conclude that Plaintiff had engaged in bad faith conduct through the second amended complaint.

Finally, the Court addressed JPS’s futility arguments. The Court denied the addition of a disgorgement claim as Plaintiff conceded at the hearing that it no longer sought disgorgement. The Court also denied the addition of Cheng to the breach of contract claim as there were no allegations that Plaintiff had entered into a contract with Cheng, that Cheng was a third-party beneficiary of the contract, or that Cheng is JPS’s alter ego. However, the Court allowed the addition of Plaintiff’s proposed claims against Cheng for professional malpractice/professional negligence, common law negligence, gross negligence, and breach of fiduciary duty. Since Plaintiff had made no argument regarding the breach of fiduciary duty claim, the Court concluded that Plaintiff had abandoned any contention that leave to amend should be denied as to the breach of fiduciary duty claim. As to the remaining claims, they had been adequately pleaded and were not barred by the economic loss rule because an accountant, like Cheng, owed an independent duty to competently perform services apart from any duty under contract.


State of N.C. v. E.I. Du Pont De Nemours & Co., 2024 NCBC 5 (N.C. Super. Ct. Feb. 7, 2024) (Robinson, J.)

Key Terms: partial summary judgment; law of the case; assumption of liabilities; chemical manufacturing

In 2020, the State of North Carolina filed this action, bringing claims for negligence, trespass, public nuisance, and fraud against various DuPont-related entities arising from the alleged contamination of North Carolina’s air, land, and water through Defendants’ chemical manufacturing operations at Fayetteville Works. Defendants Corteva and New DuPont moved to dismiss pursuant to Rules 12(b)(2) and 12(b)(6). The Business Court denied the motion under Rule 12(b)(2) (and reserved ruling on the 12(b)(6) motion), determining that it could properly exercise personal jurisdiction over the moving defendants. Defendants appealed to the N.C. Supreme Court, which affirmed the Business Court’s ruling. Following remand, Plaintiff moved for partial summary judgment on the legal issue of whether Corteva and New Dupont contractually assumed the liabilities of Old Dupont arising from Old Dupont’s use, manufacture, and discharge of PFAS.

Plaintiff contended that the Supreme Court’s ruling that Corteva and New DuPont assumed Old DuPont’s PFAS liability was the law of the case, and as such, warranted summary judgment on the issue. The Business Court agreed. Since the Supreme Court had concluded that the agreements at issue established that Corteva and New DuPont were liable for Old DuPont’s PFAS liabilities, it had necessarily determined that Corteva and New DuPont would be held liable if, at a later point in this litigation, Old DuPont is found liable for conduct related to its use, manufacture, and discharge of PFAS. Further, given the lack of any new developments in the case, the Business Court held that the issue of Corteva and New DuPont’s assumption of the PFAS liabilities had been decided with finality for the purposes of the case.

The Court rejected Defendants’ argument that, by seeking summary judgment on the issue of assumption of liability, Plaintiff sought summary judgment on Plaintiff’s first four causes of action, which had not been asserted against Corteva and New DuPont. The Court clarified that its ruling was explicitly limited to the issue of the assumption of liability and did not address any other issues presented by the agreements or whether Old DuPont was actually liable for the alleged conduct.


Karriker v. Harpoon Holdings, L.P., 2024 NCBC 6 (N.C. Super. Ct. Feb. 12, 2024) (Conrad, J.)

Key Terms: forum-selection clause; Rule 12(b)(3); improper venue; integration clause; Delaware law

Several years ago, Plaintiff converted his membership units in a related entity into several hundred partnership units in Defendant Harpoon Holdings, LLC, thereby becoming a party to Defendant’s limited partnership agreement, which included a provision allowing Defendant to repurchase Plaintiff’s units if Plaintiff’s employment was terminated. Plaintiff later purchased seven more membership units pursuant to a subscription agreement which also permitted Defendant to repurchase the units if Plaintiff’s employment was terminated. After Plaintiff’s employment was terminated, Defendant asserted that it had the right to buy back Plaintiff’s units at cost pursuant to the limited partnership agreement. Plaintiff subsequently filed suit, demanding, among other things, payment for fair market value for all his units. Defendant moved to dismiss pursuant to Rule 12(b)(3), arguing that the subscription agreement contains a forum-selection clause designating Delaware as the exclusive jurisdiction for suits arising out of or relating to the agreement.

Because there was no dispute regarding the validity of the forum-selection clause, the Court focused on whether Plaintiff’s suit was “arising out of or relating to” the subscription agreement. Applying Delaware law, as required by the agreement’s choice-of-law clause, the Court granted Defendant’s motion to dismiss. The Court noted that the case at hand related to all of Plaintiff’s membership units, seven of which were purchased pursuant to the subscription agreement. The Court rejected Plaintiff’s argument that Defendant waived its rights under the subscription agreement when it made a pre-litigation demand to repurchase Plaintiff’s shares under the limited partnership agreement, noting that the issue of whether Defendant waived any rights granted in the subscription agreement was an issue “arising out of” the subscription agreement itself.

The Court further rejected Plaintiff’s argument that a permissive venue clause in the limited partnership agreement “conflicted” with the subscription agreement’s mandatory venue clause, finding that the permissive clause must yield to the mandatory clause. Lastly, the Court rejected Plaintiff’s argument that an integration clause contained in the limited partnership agreement superseded the provisions of the subscription agreement, as the integration clause only superseded prior agreements between the parties, not a later agreement.

The Court dismissed Plaintiff’s suit without prejudice to his right to refile his claims in an appropriate venue.


Intersal, Inc. v. Wilson, 2024 NCBC Order 12 (N.C. Super. Ct. Feb. 1, 2024) (Earp, J.)

Key Terms: Rule 702; expert witness; motion in limine; pirate ship

In its pursuit of damages for breach of contract relating to media rights over the wreckage of Blackbeard’s flagship, the Queen Anne’s Revenge (the “QAR”), Plaintiff sought to offer the expert testimony of Samuel Weiser related to (i) the viability of, and potential revenue stream from, touring exhibitions utilizing the artifacts and intellectual property related to the discovery of the QAR; (ii) the sufficiency and quality of the artifacts recovered from QAR and the corresponding video and images of the recovery operations; and (iii) the importance of intellectual property and imagery related to the QAR recovery in creating and preserving the value of the potential touring exhibitions. Defendants filed a motion in limine, challenging Weiser’s qualifications, methodology, and the inclusion of legal conclusions in his interpretations.

The Court granted Defendants’ motion in part and denied it in part. The Court granted Defendants’ motion as it related to Weiser’s testimony relating to damages resulting from commercial narrative projects that did not materialize, or legal interpretations of the settlement agreement at issue. The Court denied the remainder of Defendants’ motion, having concluded that Weiser qualified as an expert witness under Rule 702 and his methodology was reasonable.


Intersal v. Wilson, 2024 NCBC Order 13 (N.C. Super. Ct. Feb. 2, 2024) (Earp, J.)

Key Terms: Rule 702; Rule 403; expert witness; legal conclusions; motion in limine; pirate ship

In the same case as above, Defendants sought to admit Professor Deborah Gerhardt as an expert witness to counter Plaintiff’s expert witness testimony relating to damages asserted. Gerhardt produced a report responding to four questions posed by the Defendants, which concluded that: (1) intellectual property law does not provide any foundation for Plaintiff to claim exclusive rights in the narrative (commercial or not) of salvaging the Queen Anne’s Revenge (“QAR”); (2) the Court should not enforce any provision in a way that gives Intersal the exclusive right to telling the story of the QAR salvage as such an interpretation would violate constitutional and federal public policy; (3) Defendant DNCR did not place any of Intersal’s intellectual property in the public domain because Intersal has failed to identify any protectable intellectual property; and (4) Intersal does not have an ownership interest in QAR photos taken by Defendant DNCR because no express written copyright assignment existed.

Plaintiff filed a motion in limine to exclude Gerhardt’s expert testimony. The Court granted Plaintiff’s motion, on the basis that Gerhardt’s opinions were legal conclusions intended to provide a legal clarification of copyright law, rather than opinions of a factual nature. The Court noted that Gerhardt’s report was “tantamount to a well-written legal memorandum on intellectual property law,” and did not address the propriety of Plaintiff’s use of a theoretical licensing model to assess damages. As such, the Court determined that under both Rule 702 and 403, Gerhardt’s testimony should be excluded.


Vitaform, Inc. v. Aeroflow, Inc., 2024 NCBC Order 14 (N.C. Super. Ct. Feb. 5, 2024) (Bledsoe, C.J.)

Key Terms: attorneys’ fees; fee application; RPC Rule 1.5(a); block billing; hourly rates

As summarized here, the Court previously granted, in part, Defendants’ motion for attorneys’ fees, awarding Defendants their attorneys’ fees incurred in connection with prosecuting their motion for summary judgment and defending against Plaintiff’s counterclaims. As requested by the Court, Defendants subsequently submitted a fee application, supported by billing records documenting the tasks and time worked for which they sought attorneys’ fees.

The Court evaluated the fee application based on the factors set forth in Rule 1.5(a) of the Revised Rules of Professional Conduct. First, it considered the hourly rates charged (ranging from $235 to $400 per hour) and determined, based on affidavits, previous holdings of North Carolina’s state and federal courts, and its own knowledge, that the rates were reasonable and within those customarily charged in Buncombe County and in cases in the Business Court. The Court next considered the time and labor expended and, in its discretion, reduced certain entries that were block-billed, but otherwise found the time expended reasonable. Finally, the Court determined that the remaining factors of Rule 1.5(a) merited the award of the fees submitted. The Court also clarified that Defendants’ right to seek relief under Rule 41(d) of the North Carolina Rules of Civil Procedure was not affected by the Court’s fee order.


By: Natalie E. Kutcher

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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 02/13/24