N.C. Business Court Opinions, August 14, 2024 – August 27, 2024
By: Lauren Schantz
ALCOF III NUBT, L.P. v. Chirico, 2024 NCBC 52 (N.C. Super. Ct. Aug. 21, 2024) (Conrad, J.)
Key Terms: failure to state a claim; fraudulent omission; duty to disclose; officer; affirmative acts; silence
Plaintiffs, investors in Avaya, Inc., brought suit against three of Avaya’s officers, alleging that the officers induced them to invest in Avaya by making misleading representations about the current and future financial condition of the company. Plaintiffs asserted a claim for fraudulent omission against Defendant Stephen D. Spears, Avaya’s former chief revenue officer, and Spears moved to dismiss for failure to state a claim.
Spears argued that he had no duty to speak and the Court agreed. The Court rejected each of Plaintiffs’ arguments, determining that (i) Spears was not liable for the acts of the company or other officers simply because he was an officer; (ii) Plaintiffs failed to allege that Spears had engaged in any specific affirmative acts to conceal information; and (iii) Spears’s alleged silence was insufficient to create a duty to disclose.
For these reasons, the Court granted Spears’s motion and dismissed Plaintiffs’ claim against him with prejudice.
*******
ALCOF IIII NUBT, L.P. v. Chirico; Brigade Cavalry Fund Ltd. v. Chirico, 2024 NCBC 53 (N.C. Super. Ct. Aug. 21, 2024) (Conrad, J.)
Key Terms: venue; forum-selection clause; exclusive forum; agency relationship; equitable enforcement
Plaintiffs, investors in Avaya, Inc., brought suit against Avaya’s officers, alleging that the officers induced them to invest in Avaya by making misleading representations about the current and future financial condition of the company. The Brigade Plaintiffs asserted claims against Defendant James M. Chirico, Avaya’s former president and chief executive officer, and Kieran J. McGrath, Avaya’s former executive vice president and chief financial officer, for negligent misrepresentation, fraudulent inducement, and related securities violations. The Canyon Plaintiffs intervened in Brigade and asserted similar claims against Chirico and McGrath. The ALCOF Plaintiffs initiated a separate lawsuit and asserted claims for negligent misrepresentation, fraudulent inducement, and fraudulent omission against Chirico and McGrath. Chirico and McGrath moved to dismiss for failure to state a claim and improper venue in both lawsuits.
Chirico and McGrath argued that, although they were not parties to Plaintiffs’ contracts with Avaya, they could nevertheless enforce the exclusive New York forum-selection clauses in the contracts as agents of Avaya. Plaintiffs, however, argued that the language of the contracts foreclosed Chirico and McGrath’s equitable rights to enforce the forum-selection clauses. The Court rejected Plaintiffs’ argument, concluding that, as non-signatory agents rather than third-party beneficiaries, Chirico and McGrath may enforce the forum-selection clauses in their principal’s (Avaya) agreement, especially because all of their alleged conduct occurred in their capacities as Avaya’s officers and agents. A contrary rule would upset the expectations of agents and signatories, undermine the purpose of forum selection clauses, and make it too easy for a plaintiff to evade forum-selection clauses by suing the agents rather than the corporation.
As a result, the Court granted Chirico and McGrath’s motions and dismissed Plaintiffs’ claims against them without prejudice to their right to refile in an appropriate venue.
*******
Vernon v. Trs. of Gaston Coll.; Archie v. Trs. of Gaston Coll.; Eppes v. Trs. of Gaston Coll., 2024 NCBC 54 (N.C. Super. Ct. Aug. 21, 2024) (Robinson, J.)
Key Terms: sovereign immunity; data breach; personal jurisdiction; waiver; unjust enrichment; unfair and deceptive trade practices; negligence; declaratory judgment; tort; State Tort Claims Act; breach of contract
Plaintiffs are former students of Gaston College, a public community college. Plaintiffs each initiated separate purported class actions in the wake of a 2023 data breach of Gaston College’s computer systems that allegedly compromised their private information. Plaintiffs each asserted claims for breach of contract, breach of implied contract, and unjust enrichment; Archie and Vernon each asserted claims for negligence and negligence per se; and Eppes asserted additional claims for declaratory judgment and unfair and deceptive trade practices. Gaston College moved to dismiss all three actions in their entirety on grounds of sovereign immunity.
The Court first determined that, as a public education institution, Gaston College was entitled to sovereign immunity from suit unless it waived such immunity. The Court then considered whether Gaston College had waived its sovereign immunity or otherwise consented to suit.
Unjust Enrichment. The Court dismissed Plaintiffs’ claims for unjust enrichment with prejudice, concluding that the State can only waive its sovereign immunity when it expressly enters into a contract.
Unfair and Deceptive Trade Practices. The Court dismissed Eppes’s UDTP claim with prejudice because the UDTPA only applies to claims against a “person, firm, or corporation” and state institutions are neither a person, firm, or corporation.
Negligence, Negligence per se, and Declaratory Judgment. The Court concluded that, although the State Tort Claims Act partially waives the State’s sovereign immunity for negligent conduct, jurisdiction over all tort claims against the State are subject to the exclusive jurisdiction of the North Carolina Industrial Commission. The Court therefore dismissed these claims without prejudice to the Plaintiffs’ right to bring those claims in the Industrial Commission.
Breach of Contract. The Court concluded that Plaintiffs sufficiently alleged claims for breach of express contract but failed to allege one or more of the elements to establish a claim for breach of implied in fact contract, and dismissed the latter claims with prejudice.
Thus, the Court granted Gaston College’s motion to dismiss as to all but Plaintiffs’ breach of express contract claims.
*******
Airtron, Inc. v. Heinrich, 2024 NCBC 55 (N.C. Super. Ct. Aug. 22, 2024) (Conrad, J.)
Key Terms: final judgment; pro se litigants; misappropriation of trade secrets; unfair and deceptive trade practices; actual damages; nominal damages; punitive damages; treble damages; attorneys’ fees; injunction
As summarized here, the Court previously sanctioned pro se Defendant Bradley Heinrich for disobeying court orders and failing to comply with discovery requests by striking his answer and entering default judgment against him as to liability on Plaintiff’s claims for misappropriation of trade secrets and unfair or deceptive trade practices.
After an evidentiary hearing, the Court entered final judgment against Heinrich. The Court concluded that Airtron was not entitled to actual damages on its trade secret claim because Airtron failed to show by a preponderance of the evidence that it lost profits as a result of Heinrich’s misappropriation; the Court did, however, award Airtron one dollar in nominal damages. The Court further concluded that Airtron was not entitled to punitive damages because it had not shown that willful and malicious misappropriation occurred, but granted Airtron’s request for treble damages under N.C.G.S. § 75-16 (for a total of three dollars). The Court denied Airtron’s request for attorneys’ fees, concluding that Heinrich’s conduct was not willful nor did he make an “unwarranted refusal” to resolve the matter since he had, in fact, previously agreed to a settlement but was just unable to obtain the necessary funds. The Court enjoined Heinrich from any further use of Airtron’s trade secrets.
*******
BIOMILQ, Inc. v. Guiliano, 2024 NCBC Order 54 (N.C. Super. Ct. Aug. 15, 2024) (Robinson, J.)
Key Terms: gatekeeper order; pro se litigants; false representations; abusive language; show cause; Rule 11 sanctions; voluminous filings; inherent authority; rule violations; violation of court orders; unauthorized practice of law
The Court’s indulgence of pro se litigants has its limits. Defendant and Counterclaim Plaintiff Shayne Guiliano finally exceeded them. Shortly after this action was initiated in March 2022, Guiliano’s counsel of record withdrew and he proceeded pro se. Guiliano retained new counsel in November 2022, but that counsel moved to withdraw a year later. Plaintiffs’ counsel opposed the motion, citing several email communications sent by Guiliano to Plaintiffs’ counsel while Guiliano was represented by counsel that contained abusive language and false accusations. The Court granted the motion to withdraw but set forth clear expectations for Guiliano’s future communications with counsel and the Court.
Guiliano’s disrespectful behavior persisted, however, even after the entry of a show cause order. Guiliano continued to use abusive and combative rhetoric in communications with counsel and the Court, impugning the integrity of the Court. He violated several Business Court Rules, filing unpermitted “responses” to Court orders and other filings, engaging in voluminous and duplicative filing, and using various tactics to circumvent word limits. Guiliano also persisted in attempting to represent the interests of Defendant and Counterclaim Plaintiff 108Labs, LLC, even when the company was represented by counsel.
The Court, through its inherent authority, determined that sanctions in the form of a gatekeeper order were warranted. Prior to filing any document in this or a related action, Guiliano must obtain the certification of an attorney licensed to practice in this State. Violations will result in the striking of the filings and may result in the dismissal of Guiliano’s claims and striking his defenses. Pursuant to Rule 11, the Court permitted the other parties to seek attorneys’ fees and costs associated with Guiliano’s misconduct.
To subscribe, email 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.