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.
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.