N.C. Business Court Opinions, December 30, 2024 – January 14, 2025

By: Lauren Schantz

Maxwell Foods, LLC v. Smithfield Foods, Inc., 2024 NCBC 89 (N.C. Super. Ct. Dec. 30, 2024) (Conrad, J.)

Key Terms: hogs; summary judgment; breach of contract; most-favored-nation clause; output contract; force majeure; Covid-19 pandemic; UCC Article 2; contract interpretation; statute of limitations; repudiation; anticipatory breach; impracticability; good-faith business judgment; offensive summary judgment

As previously summarized here, Plaintiff Maxwell Foods, LLC sold hogs to Defendant Smithfield Foods, Inc. under an output contract with a most-favored-nation (“MFN”) clause for almost three decades. Each side alleged claims for breach of contract, and each side moved for summary judgment. The parties’ arguments focused on three specific provisions: the MFN clause, the output requirement, and whether payment was based on live weight or carcass weight.

MFN Clause. Maxwell first alleged that Smithfield breached the MFN clause by offering better pricing to six of its other suppliers. The Court concluded that the phrase “major swine suppliers” referred only to those suppliers in existence at the time the contract was executed and, therefore, Smithfield was entitled to partial summary judgment on this claim as to four of the six suppliers. The Court declined to adopt Smithfield’s narrow reading of the term “economic benefits,” instead embracing Maxwell’s broader interpretation as it related to various pricing formulas. The Court concluded that Maxwell’s claim for breach of the MFN clause based on pricing terms given to one of the two remaining suppliers was untimely under the UCC’s four-year statute of limitations and granted Smithfield’s motion for summary judgment to that extent. The Court denied Smithfield’s request for summary judgment regarding Smithfield’s compliance with the MFN clause, concluding that genuine issues of material fact about whether Smithfield offered Maxwell comparable pricing terms remained. The Court also rejected Smithfield’s arguments that Maxwell relied on impermissible hindsight and that the MFN clause did not require Smithfield to pay Maxwell the price it paid to other suppliers for Maxwell’s (allegedly) lower-quality hogs.

Output Requirement. The Court granted summary judgment in favor of Maxwell as to Smithfield’s affirmative defense of force majeure, concluding that no physical, contractual, or legal limitation made it impracticable for Smithfield to comply with the contract’s output requirement during the Covid-19 pandemic. The Court also granted Maxwell’s motion as to Smithfield’s counterclaims and affirmative defense of anticipatory breach, determining that Maxwell’s decision to go out of business was based on a good-faith business judgment and did not constitute a repudiation or termination of the contract without notice. Based on the Court’s prior rulings, the Court concluded that Maxwell was entitled to offensive summary judgment on its claim against Smithfield for breach of the output provision (and denied Smithfield’s related cross-motion).

Payment for Hog Deliveries. The Court concluded that Smithfield was entitled to summary judgment on Maxwell’s breach of contract claim to the extent that Maxwell alleged that a price based on live weight constituted a breach, but the Court further concluded that Smithfield was not entitled to summary judgment on the breach of contract claim to the extent Maxwell alleged Smithfield failed to pay full price based on live weight for particular deliveries.

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Vincelette v. Court, 2024 NCBC Order 77 (N.C. Super. Ct. Oct. 8, 2024) (Bledsoe, C.J.)

Key Terms: disqualify counsel; North Carolina Rule of Professional Conduct 1.9(a); former client; confidentiality; substantially related matter; materially adverse; engagement letter; scope of representation

Plaintiff Amy Vincelette and Defendant Melissa Peirce were 50/50 owners of Wellspring Group, Inc. Vincelette and Peirce later joined with Defendant Kelly Court to start Defendant Wellspring Nurse Source, LLC. In 2020, Vincelette, on behalf of Wellspring, and Vincelette and Court, on behalf of Nurse Source, brought suit against Peirce and her husband, asserting various claims arising from the Peirces’ alleged improper transfers of Wellspring and Nurse Source’s funds (the “Prior Litigation”).

Vincelette retained Moore & Van Allen, PLLC to represent Wellspring and Nurse Source in the Prior Litigation. Vincelette also retained MVA to represent her in her capacity as owner of Wellspring and member-manager of Nurse Source. MVA and counsel for the Peirces negotiated a settlement agreement in the Prior Litigation. Pursuant to the agreement, Peirce was supposed to relinquish her ownership interests in Wellspring and Nurse Source, but Vincelette alleges that Peirce failed to relinquish her interest in Nurse Source.  This litigation followed.

In this action, Vincelette brought derivative claims on behalf of Nurse Source against Court and Peirce, direct claims against Court and Peirce, and direct claims against Nurse Source. After Vincelette retained MVA to represent her in the second action, Defendants moved to disqualify MVA under North Carolina Rule of Professional Conduct 1.9(a).

Applying the three-pronged test established by the Supreme Court of North Carolina, the Court concluded that (1) the attorney-client relationship between Nurse Source and MVA in the Prior Litigation was one in which confidential information was shared; (2) this action involved matters that were substantially related to those in the Prior Litigation—namely, the alleged improper intercompany transfers by the Peirces and the settlement agreement negotiated by MVA—such that the confidential information shared in the Prior Litigation was material to this action; and (3) Vincelette’s interests were materially adverse to those of Nurse Source. The Court granted Defendants’ motion and disqualified MVA from representing Vincelette in this action.

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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 01/14/25 in Business Court Blast