N.C. Business Court Opinions, February 15, 2023 – February 28, 2023
Conservation Station, Inc. v. Bolesky, 2023 NCBC 14 (N.C. Super. Ct. Feb. 17, 2023) (Robinson, J.)
Key Terms: entry of default; good cause; motion to dismiss; 12(b)(6); pro se litigant
After Plaintiff filed suit in Wake County Superior Court, Defendant Bolesky, appearing pro se, filed a motion to dismiss, which was denied. The matter was subsequently designated to the Business Court. When Bolesky still had not filed an answer nearly two months after designation,
Plaintiff filed a motion for entry of default, a copy of which was delivered to Bolesky by mail. When Bolesky did not respond by the deadline, the Court ordered Plaintiff to provide the Court with information regarding Bolesky’s involvement in the case. Following a review of this information, the Court entered default against Bolesky.
Bolesky then moved to set aside the entry of default and to dismiss under Rule 12(b)(6). In his motion, Bolesky stated his failure to timely respond was due to his “excusable ignorance of the law and deadlines for filings as a Pro Se litigant.” The Court denied Bolesky’s motion to set aside, concluding that Bolesky had failed to show the necessary good cause. The Court highlighted that Bolesky was put on notice of Plaintiff’s motion for entry of default when he received a copy in the mail and was specifically advised of this during a case management conference a few days later. The Court noted that Bolesky “was bound, as a pro se litigant, to be aware of and abide by the Rules of Civil Procedure and to comply with filing deadlines.”
The Court also denied Bolesky’s motion to dismiss, as Bolesky had previously filed a motion to dismiss which had been heard and decided by the Wake County Superior Court.
Intersal, Inc. v. Wilson, 2023 NCBC 15 (N.C. Super. Ct. Feb. 23, 2023) (Earp, J.)
Key Terms: pirate ship; breach of contract; summary judgment; media rights; affirmative defense; law of the case doctrine; judicial estoppel; collateral estoppel
This dispute arises from a series of agreements between Plaintiff and the North Carolina Department of Natural and Cultural Resources (“DNCR”) covering the discovery, promotion, and preservation of two ships that sunk off the North Carolina coast in the eighteenth-century. In the mid-1990s, DNCR issued Plaintiff permits to search for the Queen Anne’s Revenge (“QAR”), the flagship of the infamous pirate Blackbeard, and the El Salvador, a Spanish merchant vessel. The wreckage sites of the QAR and El Salvador were located in 1996 and 1998, respectively.
In 1998, Plaintiff and DNCR entered into an agreement regarding the research and preservation of the QAR’s artifacts (the “1998 Agreement”). After fifteen years, the working relationship between Plaintiff and the DNCR hit stormy seas. Plaintiff filed a petition with the Office of Administrative Hearings (“OAH”) related to the numerous disputes between the parties, resulting in a new agreement in 2013 (the “2013 Agreement”). In the 2013 Agreement, which expressly superseded the 1998 Agreement, Plaintiff relinquished its rights to any coins or precious metals recovered from the QAR in exchange for a “more streamlined” renewal process for its El Salvador Permit and the right to certain promotion/media opportunities with respect to the QAR project. Less than a week after the execution of the 2013 Agreement, the DNCR participated with the U.S. Coast Guard in raising five of the QAR’s cannons. The DNCR failed to inform Plaintiff of this event, denying Plaintiff the opportunity to film the event or place restrictions upon third-party media companies in attendance. DNCR subsequently published media without Plaintiff’s watermark and allowed access to the QAR site without seeking Plaintiff’s consent. In 2015, the DNCR terminated Plaintiff’s El Salvador permit.
Plaintiff filed suit against DNCR and other state agencies (“Defendants”) in 2015 for breach of both the 1998 Agreement and the 2013 Agreement. After a dismissal of Plaintiff’s claims and subsequent partial reversal and remand by the North Carolina Supreme Court, both parties moved for summary judgment. Plaintiff moved for partial summary judgment seeking: (1) to establish as a matter of law that two of Defendants’ affirmative defenses were barred; and (2) a declaratory judgment that Defendants breached specific paragraphs of the 2013 Agreement relating to media access and rights. Defendants moved for summary judgment on Plaintiffs’ two breach of contract claims.
The Court granted Plaintiff’s motion in part, determining that Defendants’ second affirmative defense (that the 2013 Agreement was illegal and void as against public policy) and ninth affirmative defense (to the extent Defendants contend the terms of the 2013 Agreement are unenforceable) were barred by the law of the case doctrine and judicial estoppel, as the Supreme Court had already affirmed the trial court’s determination that the 2013 Agreement was a novation of the 1998 Agreement, and neither party had challenged the validity of the 2013 Agreement before the Supreme Court. The Court also granted Plaintiff’s request for a declaratory judgment in part, but only in relation to DNCR’s posting on the internet of non-commercial media of the QAR after the effective date of the 2013 Agreement.
The Court partially granted Defendants’ motion for summary judgement on Plaintiff’s first breach of contract claim insofar as Plaintiff’s claims asserted breaches of the 2013 Agreement for DNCR’s production of media in response to public records requests predating the 2013 Agreement’s effective date. Defendant’s motion for summary judgment on Plaintiff’s second breach of contract claim, which related to the termination of the El Salvador permit, was granted based on collateral estoppel, as an OAH administrative judge had previously determined that renewing the permit was not in the State’s best interest.
Mary Annette, LLC v. Crider, 2023 NCBC 16 (N.C. Super. Ct. Feb. 23, 2023) (Conrad, J.)
Key Terms: motion to dismiss; breach of contract; operating agreement; breach of fiduciary duty; controlling member; UDTPA; in or affecting commerce; fraud; reformation
This lawsuit arises out of disputes relating to the creation, ownership, and management of Mary Annette, LLC (“MA”). MA’s operating agreement named three one-third members: Twilight Developments, Inc., Ozzie 1, LLC, and Mountain Girl Ventures, LLC. The lawsuit originated when MA filed a complaint against Terri Lynn Crider, the sole owner of Mountain Girl, alleging that Crider improperly held herself out to be an officer and agent of MA, then refused to hand over company records and accounts. The lawsuit was later expanded to incorporate all MA members MA, as well as those members’ owners in their individual capacity. Crider and Mountain Girl asserted seven counterclaims, which Plaintiffs moved to dismiss in full.
The Court summarily denied Plaintiffs’ motion to dismiss the quiet title and conversion counterclaims, as Plaintiffs had failed to advance any arguments directed to those counterclaims.
The Court also denied Plaintiffs’ motion to dismiss the breach of contract counterclaim, as Plaintiffs’ arguments focused solely on the operating agreement and failed to properly address the existence of an oral agreement alleged by Defendants. The Court declined to consider Plaintiffs’ argument that the operating agreement’s merger clause extinguished any pre-existing oral argument, as the argument had not been previously presented to the Court and was therefore untimely.
The Court granted Plaintiffs’ motion as to the fiduciary duty counterclaim, as Defendants failed to allege that Plaintiffs owed them a fiduciary duty. Although Defendants argued that a controlling member may owe fiduciary duties to minority members, the counterclaim’s allegations showed that Defendant Mountain Girl was the controlling member of MA, not the other way around.
The Court denied Plaintiffs’ motion to dismiss the fraud counterclaim, due to the scattershot, conclusory, and undeveloped nature of Plaintiffs’ arguments. Plaintiffs had failed to cite specific statements in their arguments claiming lack of specificity or failure to allege misrepresentation. Moreover, Plaintiffs’ arguments regarding the economic loss rule and lack of standing suggested a misunderstanding of the allegations and were inapplicable.
As to Defendants’ counterclaim to reform the operating agreement, the Court dismissed the counterclaim as to Crider, since she was not a party to the operating agreement but denied it as to Mountain Girl as Plaintiffs “raise[d] no arguments as to why Mountain Girl’s claim should be dismissed.”
Lastly, the Court dismissed the section 75-1.1 counterclaim, because the alleged misconduct concerned either the capitalization of MA or matters of internal governance and was therefore not in or affecting commerce.
MarketPlace 4 Ins., LLC v. Vaughn, 2023 NCBC 17 (N.C. Super. Ct. Feb. 24, 2023) (Davis, J.)
Key Terms: judgment on the pleadings; restrictive covenants; misappropriation of trade secrets; UDTPA; tortious interference with contract; tortious interference with prospective economic advantage; computer trespass; vicarious liability
Plaintiff, which owns and operates independent insurance agencies, acquired all assets of the Gilliam Agency (including restrictive covenants between it and its employees), another insurance company, through an asset purchase agreement (the “APA”). Certain Gilliam Agency employees became employees of Plaintiff after the acquisition, including Defendant Jeffrey Vaughn. Less than a year later, Vaughn resigned and began working for Defendant Guidelight Insurance Solutions, Inc. Upon discovering that Vaughn was accessing Plaintiff’s computer database and using Plaintiff’s confidential information to solicit its customers, Plaintiff filed suit against Vaughn and Guidelight, basing its claims against Guidelight largely on a theory of vicarious liability. Defendants each filed separate motions for judgment on the pleadings, seeking dismissal of all claims against them.
Breach of Contract (Vaughn). Plaintiff’s breach of contract claims were based on restrictive covenants in an agreement entered into between Vaughn and his former employer, the Gilliam Agency. Because restrictive covenants transferred pursuant to an asset purchase agreement begin to run from the date of execution of the asset purchase agreement, the Court dismissed Plaintiff’s breach of contract claims to the extent they were based on breaches of non-solicitation covenants that occurred after the one-year restricted period of the covenants expired. The Court also determined that the two non-solicitation provisions were overbroad because they encompassed customers of Nationwide that had never done business with the Gilliam Agency. The Court dismissed the claim as to the first provision, but deferred a final decision on the second because it was potentially subject to blue-pencilling. Lastly, as to Vaughn’s alleged breaches for disclosure of confidential information, the Court dismissed the claim to the extent it was based on Vaughn’s alleged disclosure of Plaintiff’s confidential information, because the APA only permitted Plaintiff to enforce the confidentiality provisions relating to information that belonged to the Gilliam Agency.
Misappropriation of Trade Secrets (Vaughn). Vaughn argued that Plaintiff had failed to sufficiently allege the existence of trade secrets, reasonable protective measures, or actual misappropriation. After comparing Plaintiff’s allegations to existing caselaw, the Court rejected Vaughn’s arguments and denied dismissal.
Computer Trespass (Vaughn). The Court denied the motion as to this statutory claim, determining that Plaintiff had adequately alleged that Vaughn had accessed its computer database without authority and had done so with the requisite intent.
Tortious Interference with Contract (Vaughn). Vaughn argued that this claim should be dismissed because 1) Plaintiff did not allege that any of its customers actually breached their contracts; and 2) any interference was justified because Vaughn was acting as a business competitor. As to the first argument, the Court explained that actual breach is not a required element of the claim; the plaintiff must merely allege wrongful interference. As to the second, the Court emphasized that the “without justification” is satisfied where, as here, the complaint alleges defendant’s interference involved unlawful means, such as misappropriation of trade secrets. Accordingly, dismissal of this claim was denied.
Tortious Interference with Prospective Economic Advantage (Vaughn). The Court dismissed this claim as Plaintiff did not allege the loss of any specific contractual opportunity.
UDTPA (Vaughn). The Court denied the motion as to this claim, based on the survival of Plaintiff’s claims for misappropriation of trade secrets and tortious interference with contract.
Tortious Interference with Contract (Guidelight). As for the direct claim, the Court granted dismissal because the complaint did not allege any inducement by Guidelight itself, rather than by Vaughn. The Court, however, denied dismissal of the vicarious liability claim, determining that Plaintiff had sufficiently alleged that Guidelight ratified Vaughn’s actions by not taking any action against him when it learned of his conduct.
Tortious Interference with Prospective Economic Advantage (Guidelight). The Court dismissed the direct claim because Plaintiff did not allege that Guidelight caused the loss of any specific contractual opportunity. The Court also dismissed the vicarious liability claim since the underlying tort claim against Vaughn had failed.
UDTPA (Guidelight). Because the Court determined that the UDTPA claim against Vaughn survived and the law allows for vicarious liability for unfair and deceptive trade practices, the Court denied dismissal of this claim.
Misappropriation of Trade Secrets (Guidelight). Pointing to persuasive caselaw from other jurisdictions, the Court rejected Guidelight’s argument that North Carolina does not permit vicarious liability principles to be applied to statutory claims unless authorized by the legislature. Thus, this claim premised on vicarious liability survived.
Computer Trespass (Guidelight). Lastly, the Court declined to recognize a vicarious liability claim for computer trespass because the text of N.C.G.S. § 14-458, a criminal statute, suggested a legislative intent to limit civil liability to the specific persons who intentionally violated the statutory provisions. As the statute only applies to the trespass itself, and not the improper use of information accessed through the trespassing, the Court dismissed Plaintiff’s claim against Guidelight.
Futures Grp, Inc., v. Brosnan, 2023 NCBC ORDER 11 (N.C. Super. Ct. Feb. 24, 2023) (Earp, J.)
Key Terms: advancement
This order follows the Court’s prior order granting partial summary judgment and ordering advancement. Following the parties’ inability to agree on the amount of the advanceable expenses already incurred or a procedure for ongoing advancements, the Court issued this order outlining the advancement procedure, and limiting the scope of advanceable expenses.
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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.