N.C. Business Court Opinions, March 13, 2024 – March 26, 2024
By: Natalie E. Kutcher and Ashley B. Oldfield
Sears Farm, LLC v. Samaritan Hous. Found., Inc., 2024 NCBC 19 (N.C. Super. Ct. Mar. 19, 2024) (Davis, J.)
Key Terms: motion to dismiss; Rule 12(b)(1); Rule 12(b)(6); motion to strike; Rule 12(f); breach of contract; covenant of good faith and fair dealing
This case arises from a series of transactions between the parties relating to the financing and construction of a retirement community. Beginning in 1998, Plaintiffs began their efforts to develop a luxury retirement community. In the early 2000’s, Plaintiffs involved Defendant Samaritan Housing Foundation, to assist with securing the requisite financing for the project and ultimately own and operate the retirement community. At some point thereafter, Plaintiffs and Defendant entered into a Site Transfer Agreement whereby Plaintiffs agreed to sell the site to Defendant once Defendant secured the financing required to complete the first phase of the project. The parties later entered into a Pre-Construction Funding and Development Agreement, which was restated and amended multiple times over the following decade (the “PCFD Agreements”). As construction of the project progressed, Defendant entered into a Master Trust Indenture with Wells Fargo (the “2012 MTI”), which purported to memorialize Defendant’s obligations to repay various parties, but which Plaintiffs did not sign. The retirement community eventually filed for bankruptcy in 2018. A settlement agreement between the parties resulted from the bankruptcy proceedings.
Plaintiffs filed suit alleging eight claims against Defendant and its president, which were eventually reduced to two claims solely against Defendant: (i) breach of contract and (ii) breach of implied covenant of good faith and fair dealing. Defendant moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6), or alternatively, to strike certain allegations relating to Defendant’s president on the grounds that the allegations were irrelevant, immaterial, and scandalous.
In support of its motion, Defendant argued that (i) any contractual obligations arising from the PCFD Agreements were nullified by the execution of the 2012 MTI; (ii) Plaintiffs failed to satisfy the requisite conditions precedent to obtain standing to assert claims under the 2012 MTI; and (iii) Plaintiffs released Defendant from any remaining obligations in the bankruptcy-related settlement agreement. In response, Plaintiffs argued that they never signed the 2012 MIT, and the release of claims in the settlement agreement did not affect their rights to pursue the claims at issue. The Court denied the motion to dismiss on the basis that the numerous agreements created “too many moving parts” and too many gaps in information to warrant a dismissal at this early stage of litigation.
The Court granted Defendant’s motion to strike to the extent it related to allegations pertaining to the six claims voluntarily dismissed by Plaintiffs, but otherwise denied it.
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Golden Triangle #3, LLC v. RMP-Mallard Pointe, LLC, 2024 NCBC Order 26 (N.C. Super. Ct. Mar. 15, 2024) (Earp, J.)
Key Terms: motion in limine; expert testimony; Rule 702(a); lost profits; Daubert standard
Plaintiff, seeking damages arising out of Defendants’ alleged breaches of contract, designated two experts to testify on the issue of damages. Plaintiff’s first expert witness, David Knoble, was expected to testify about Plaintiff’s past and future damages. Plaintiff’s second expert witness, Damon Bidencope, was expected to testify on the value of the intended completed project. Defendants moved to (i) exclude all evidence of lost profits on the basis that they are inherently speculative; and (ii) exclude the opinions of Knoble and Bidencope under Rule of Evidence 702.
The Court denied Defendant’s motion. The Court rejected Defendants’ argument that evidence of lost profits was inherently speculative, highlighting that both parties have significant experience in the commercial real estate industry in the Charlotte area and the intended mixed-use development was not novel. Thus, in light of the relevant information available, Plaintiff’s damages in the form of lost profits were not impermissibly speculative. The Court also rejected Defendants’ argument to exclude the expert witnesses, finding that the proposed expert witness’ methodology passed the Daubert standard and that any issues with their methodology could be explored on cross-examination and would go to the testimony’s weight rather than its reliability.
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Davis v. Davis Funeral Serv., Inc., 2024 NCBC Order 27 (N.C. Super. Ct. Mar. 15, 2024) (Conrad, J.)
Key Terms: show cause; court deadlines; sanctions; dismissal
The factual and procedural background of this case is summarized here and here. Upon the parties’ joint motion, the Court scheduled a jury trial for March 11 on the claims and counterclaims between Davis and Davis Funeral Service to be followed by a bench trial on the damages that Tedder is entitled to recover from Davis Funeral Service. The Court subsequently issued a pretrial scheduling order which required the parties, excluding Tedder, to submit their proposed pretrial order by February 5 and their proposed verdict forms and jury instructions by February 19. The parties did not submit their pretrial order on time, and despite the Court’s warning, also missed the deadline to submit proposed verdict forms and jury instructions. The Court canceled the pre-trial hearing and the trial and directed the parties to appear and show cause why they should not be sanctioned for disregarding the Court’s orders. Finding that the parties failed to provide a satisfactory explanation for their failure to comply with the deadlines and that their conduct wasted the Court’s resources and prejudiced Third-Party Defendant Tedder, the Court dismissed Plaintiff’s complaint and Defendants’ counterclaims without prejudice.
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Intersal, Inc. v. Wilson, 2024 NCBC Order 28 (N.C. Super. Ct. Mar. 15, 2024) (Earp, J.)
Key Terms: pirate ship; attorney-client privilege; protective order; Public Records Act; Electronics Surveillance Act
As summarized here, this case arises from a series of agreements entered into between Plaintiff and Defendants relating to the rights over two sunken ships located off the North Carolina coast. Originally calendared for trial on February 19, 2024, the trial was postponed following the discovery of previously undisclosed images and recordings from a meeting in 2014.
On February 3, 2014, representatives and counsel for Plaintiff, Defendants, and Nautilus Productions, LLC met to discuss issues arising from a 2013 settlement agreement between the parties. Unbeknownst to the other parties, Nautilus’s CEO created two sound recordings of the meeting on his laptop. The recordings continued during breaks in the meeting when, at times, Defendants were left alone in the meeting room with their counsel. The recording was not disclosed to Plaintiff’s counsel until February 1, 2024, and was subsequently forwarded to Defendants’ counsel on February 7, 2024.
Defendants moved for a protective order on the basis that the recordings contained communications subject to the attorney-client privilege. Plaintiff argued that the North Carolina Public Records Act required the production of attorney-client communications from a governmental agency such as the North Carolina Department of Natural and Cultural Resources. Prior to 2023, the Public Records Act required a communication to be “by an attorney at law” and to have been made within the last three years to qualify for exemption from disclosure. The Act was amended in October 2023 to remove these two conditions. As a result, the current Act exempts from public disclosure all written communications made within the scope of the attorney-client relationship, regardless of its age. Plaintiff argued that since the recording was made in 2004, the prior version of the Act applied to the recordings, and the three-year limitation had expired.
The Court concluded that the Act did not require disclosure of the recordings because the definition of “public records” did not encompass the recordings since they were not made pursuant to law. The Court also held that since Defendants did not have possession of the recordings until February 7, 2024, the current Act applied, which eliminated the three-year limitation on attorney-client privileged communications. After an in camera review of the recording transcripts, the Court determined that certain portions of the transcript were privileged and ordered such portions to be redacted by March 22, 2024. The Court declined to rule on other grounds for the exclusion of the recordings until the parties had sufficient opportunity to conduct discovery and engage in further motions practice.
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Bradshaw v. Maiden, No. 52A23, 2024 N.C. LEXIS 155, 2024 WL 1222541 (Mar. 22, 2024) (per curiam)
Key Terms: appeal; N.C.G.S. § 7A-30(2); dissent; 12(b)(6); summary judgment; hedge fund
This suit commenced in 2014 when Plaintiffs—several investors in a hedge fund run by Defendant Maiden—brought suit against Maiden, Maiden Capital, LLC, and SS&C (the fund’s administrator) for claims arising out of Plaintiffs’ injuries from investing in the fund. In 2015, the Business Court granted a 12(b)(6) dismissal, in part, of Plaintiffs’ claim against SS&C for gross negligence. In 2020, the Business Court granted summary judgment to SS&C on Plaintiffs’ remaining claims. Once the remaining claims involving the other parties were disposed of, Plaintiffs appealed the orders dismissing their claims against SS&C. The Court of Appeals affirmed in an unpublished decision; however, Plaintiffs then appealed to the Supreme Court based on a dissent.
The members of the Court were evenly split, with three voting to affirm, three voting to reverse, and one not participating. Accordingly, the decision of the Court of Appeals was left undisturbed and stands without precedential value.
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Slattery v. Appy City, LLC, No. 218A22, 2024 N.C. LEXIS 161, 2024 WL 1222648 (Mar. 22, 2024) (Newby, C.J.)
Key Terms: entry of default; summary judgment; personal jurisdiction; service of process; general appearance; motion to claim exempt property; affirmed
This appeal arose from the entries of default and summary judgment against Defendant Barber after she failed to appear in the case. To enforce the judgment, Plaintiff served a notice of right to claim exemption on Barber; she then appeared for the first time and moved to claim exempt property. Three months later, she moved, under Rules 55 and 60, to set aside the entries of default and summary judgment, arguing that the judgment was void for lack of personal jurisdiction because she had not been served with process or appeared prior to entry of summary judgment. The Business Court denied the motion, concluding that while Plaintiff had failed to show that Barber was served, Barber had made a general appearance by moving to claim exempt property and therefore, had waived any objection to personal jurisdiction and sufficiency of service of process. Barber appealed.
The Supreme Court affirmed and held that Barber made a general appearance in the action when she moved to claim exempt property without simultaneously objecting to the Court’s personal jurisdiction. The Supreme Court’s decision was informed by the Court of Appeal’s 1991 decision in Faucette v. Dickerson, which presented similar facts. To the extent other decisions of the Court of Appeals suggest that a general appearance must be made before entry of judgment to waive objections to personal jurisdiction and sufficiency of service of process, such decisions are overruled.
Justice Riggs, joined by Justice Earls, dissented, on the basis that since the judgment was entered without personal jurisdiction over Barber, it was null and void on entry and could not be resurrected by a subsequent general appearance.
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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.