N.C. Business Court Opinions, October 9, 2024 – October 22, 2024
By: Lauren Schantz
Egan v. Buena Vista, Inc., 2024 NCBC 69 (N.C. Super. Ct. Oct. 9, 2024) (Earp, J.)
Key Terms: motion to enforce settlement agreement; criminal prosecution; representations of counsel; contract formation; attorney communications with client; authority to settle; sanctions; BCR 7.2
Plaintiff Michael Egan and Defendant Timothy Anderson are shareholders in Defendant Buena Vista, Inc. Two years ago, Egan was arrested and charged with embezzlement from Buena Vista. Egan subsequently sued Anderson and Buena Vista alleging that he had been excluded from the business and not received distributions. While the criminal and civil cases were pending, Egan’s counsel communicated to Defendants’ counsel that Egan would dismiss the case upon receipt of $25,000 and a dismissal of the criminal charges. Defendants’ counsel accepted the offer and contacted Egan’s criminal attorney regarding the disposition of the criminal charges.
The DA would not agree to dismiss the charges but offered Egan a deferred prosecution. Defendants confirmed that this outcome was acceptable and that they would not seek restitution in the criminal matter. Egan’s counsel agreed to Defendants’ counteroffer and then represented to the Court that the matter had been settled.
The parties exchanged a draft settlement agreement, which Egan’s counsel forwarded to Egan’s criminal attorney for review. When Egan’s criminal attorney expressed concern about conditioning the settlement of the civil case on the outcome of the criminal case, Egan’s counsel forwarded an opinion he received from ethics counsel at the State Bar to Egan’s criminal attorney and Defendants’ counsel.
Defendants executed the settlement agreement and Defendants’ counsel sent the agreement and $25,000 to Egan’s counsel. After sending several communications to his client, Egan’s counsel learned that Egan refused to sign the settlement agreement because the criminal charges had not been dismissed. Egan’s counsel then filed a notice of dismissal without prejudice, explaining his misunderstanding of his client’s position. A year later, Egan initiated this action, alleging the same facts as those in the prior action.
Defendants moved to enforce the settlement agreement, strike the complaint, and impose sanctions. Egan opposed the motions, arguing no agreement had been reached. The Court concluded that the correspondence between Egan’s counsel and Defendants’ counsel constituted a valid settlement agreement and, because Egan had given his attorney authority to settle the case, Egan was bound by his attorney’s representations to Defendants’ counsel and the Court that the case was settled.
The Court concluded that Egan’s claims were barred based on the terms of the settlement agreement and dismissed the case but declined to impose sanctions. The Court also reminded counsel to set out each motion in a separate document in compliance with BCR 7.2.
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Bui v. Phan, 2024 NCBC 70 (N.C. Super. Ct. Oct. 22, 2024) (Conrad, J.)
Key Terms: motion to dismiss; LLC; member; manager; breach of operating agreement; declaratory judgment; individual claim; derivative claim; standing; injury; actual controversy; BCR 7.2
This case involves a dispute between the two 50/50 member-managers of Golden Rooster, LLC: Plaintiff Bui and Defendant Phan. Phan moved to dismiss Bui’s claims for breach of Golden Rooster’s operating agreement and declaratory judgment, arguing that Bui lacked standing to assert the claims because they were derivative, rather than individual claims.
Breach of Operating Agreement. The Court denied dismissal of this claim, holding that Bui, as a member of Golden Rooster, had standing to sue individually to enforce rights granted to her under the LLC’s operating agreement: namely, Bui’s right as a manager to participate in the management of Golden Rooster. The Court also disagreed with Phan’s argument that Bui suffered no injury, concluding that, in addition to potential financial harm, Bui’s loss of managerial rights is itself a recognized injury entitling her to nominal damages.
Declaratory Judgment. The Court also denied dismissal of this claim, concluding that Bui had standing to seek declaratory relief because the parties had an actual, genuine controversy regarding the interpretation of Golden Rooster’s operating agreement and its application to Phan’s actions.
The Court declined to consider an additional ground for dismissal that Phan raised in her motion but failed to address in her brief as required by BCR 7.2.
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Culverhouse-Steadman v. Gömböc Ventures, LLC, 2024 NCBC Order 63 (N.C. Super. Ct. Oct. 11, 2024) (Bledsoe, C.J.)
Key Terms: designation; LLC; operating agreement; declaratory judgment; contract
Gömböc Ventures, LLC is comprised of six members, five of whom are parties to this action. Plaintiff Culverhouse-Steadman sought injunctive relief as well as a declaratory judgment that first interpreted the amendment provisions of Gömböc’s prior operating agreement and then determined the enforceability of the amended operating agreement based on Defendants’ alleged noncompliance with the amendment provisions in the prior operating agreement. Plaintiff sought to designate the action as a mandatory complex business case pursuant to N.C.G.S. § 7A-45.4(a)(1); however, the Court declined to designate the matter because resolution of the claims required only the application of contract law principles and did not implicate the law governing LLCs.
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Elhulu v. Alshalabi, 2024 NCBC Order 64 (N.C. Super. Ct. Oct. 14, 2024) (Conrad, J.)
Key Terms: BCR 10.9; Rule 45; quash; subpoena; non-party; discovery dispute
Plaintiffs served a non-party with a subpoena pursuant to Rule 45 of the North Carolina Rules of Civil Procedure. The non-party moved to quash, but the Court held the motion in abeyance and directed the non-party to comply with the pre-filing requirements for discovery disputes in BCR 10.9. After consultation, the parties reached a compromise on all but three requests: bank account statements, any emails having anything to do with Defendants, and documentation of any ownership interest the non-party held in an entity in which Defendant Alshalabi also held an interest. The Court concluded that the requests were overly broad, quashed the subpoena as to the three requests, and otherwise denied the motion to quash as moot.
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Brakebush Bros., Inc. v. Certain Underwriters at Lloyd’s of London – Novae 2007 Syndicate Subscribing to Pol’y No. 93PRX17F157, 2024 NCBC Order 65 (N.C. Super. Ct. Oct. 16, 2024) (Davis, J.)
Key Terms: reptile theory; golden rule; motion to exclude; expert opinions; Rules of Evidence; Daubert; motion in limine; admissibility; weight; relevance; prior insurance claims; agency; probative value; discovery disputes; prior lawsuits; disclosure of witnesses; lay opinion testimony; expert reports
As summarized here, this case arose out of an insurance coverage dispute following a fire at a chicken processing plant. The Court previously denied Brakebush’s motion for summary judgment. In anticipation of trial, the Court resolved the parties’ eighteen pre-trial motions.
Defendants moved to exclude Plaintiffs’ expert, arguing that (1) the expert was unqualified as an expert on the subject matter; (2) his opinions were unreliable due to his failure to conduct an independent investigation; and (3) his opinions “parroted” those of Brakebush representatives. The Court denied the motion, concluding that (1) the expert was qualified based on his work experience; (2) the expert could rely on information provided by others in forming his opinions; and (3) Defendants failed to show the expert’s opinions simply “vouched” for those of Brakebush representatives.
Plaintiffs moved to prohibit Defendants’ experts from (1) testifying about Brakebush’s motivations for filing its insurance claim; (2) testifying as to their experiences with prior, unrelated fire insurance claims at Plaintiff House of Raeford Farms’ other facilities; and (3) offering duplicative testimony. The Court granted the motion, determining that (1) expert testimony regarding a party’s state of mind, intent, or motive was improper; (2) any probative value associated with evidence of Raeford’s prior insurance claims for the purpose of contrasting them with the instant insurance claim was substantially outweighed by the danger of undue prejudice; and (3) an expert may not offer opinions that simply repeat the opinions of another expert.
The Court then disposed of the various motions in limine in summary fashion as follows:
Plaintiffs’ First Motion: Granted; evidence of prior insurance claims lacked probative value and/or was outweighed by the likelihood of undue prejudice.
Plaintiffs’ Second Motion: Denied; Court declined to determine as a matter of law whether certain consultants were acting as Defendants’ agents.
Plaintiffs’ Third Motion: Granted in part and denied in part; evidence of prior discovery disputes was irrelevant to resolution of factual issues but may be used for impeachment.
Plaintiffs’ Fourth Motion: Denied; terms of an Asset Purchase Agreement admissible, relevant, and not outweighed by danger of unfair prejudice.
Defendants’ First Motion: Granted; evidence of prior claims, lawsuits, or complaints alleging improper handling of claims by Defendants was inadmissible because it lacked relevance and its probative value was outweighed by danger of unfair prejudice.
Defendants’ Second Motion: Granted; evidence of parties’ financial condition was inadmissible.
Defendants’ Third Motion: Granted; witnesses not previously identified and disclosed during discovery may not testify.
Defendants’ Fourth Motion: Granted; expert witnesses not previously identified and disclosed during discovery may not testify.
Defendants’ Fifth Motion: Granted; expert witnesses may not offer opinions not previously disclosed in discovery.
Defendants’ Sixth Motion: Granted; parties may not use documentary evidence of damages not previously identified and disclosed in discovery.
Defendants’ Seventh Motion: Granted in part and denied in part; parties may not make “reptile theory” or “golden rule” arguments, but the Court will rule on the admissibility of evidence of “general safety rules” at trial.
Defendants’ Eighth Motion: Granted; parties may not introduce deposition testimony not identified pursuant to the Pre-Trial Scheduling Order.
Defendants’ Ninth Motion: Denied; the Court will rule on the admissibility of lay witnesses offering opinion testimony at trial.
Defendants’ Tenth Motion: Granted in part and denied in part; parties may not admit evidence that inaccurately represents information, but motion was phrased too broadly to grant in its entirety.
Defendants’ Eleventh Motion: Denied; the Court will rule on the admissibility of evidence relating to USDA regulations at trial.
Defendants’ Twelfth Motion: Granted; expert report may not be admitted into evidence in its entirety, but statements and exhibits may be used for impeachment or to show how the expert formed his opinions.
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Health Logix, LLC v. US Radiology Specialists, Inc., 2004 NCBC Order 66 (N.C. Super. Ct. Oct. 18, 2024) (Bledsoe, C.J.)
Key Terms: designation; opposition; intellectual property; software; contract
Health Logix provided radiology software services to US Radiology pursuant to a contract. Prior to its expiration, the parties engaged in negotiations to extend the term of the contract. Health Logix executed an amendment extending the term of the contract and, relying on US Radiology’s representation that it would likewise execute the amendment, expended additional time and resources. But US Radiology did not sign the amendment, instead informing Health Logix that the contract would expire at the end of the current term.
Health Logix initiated this lawsuit, asserting claims against US Radiology for declaratory judgment and anticipatory repudiation/breach of contract. US Radiology filed a Notice of Designation, contending that designation as a mandatory complex business case was proper pursuant to N.C.G.S. §§ 7A-45.4(a)(5), (a)(9), and (b)(2). After the case was designated to the Business Court, Health Logix opposed designation.
The Court concluded that designation under Section 7A-45.4(a)(5) was improper because Health Logix’s claims neither required an examination of nor were closely tied to the intellectual property aspects of the software at issue; instead, resolution of the lawsuit required only the application of contract principles. As a result, designation under N.C.G.S. § 7A-45.4(b)(2) was also improper and US Radiology refused to consent to designation pursuant to N.C.G.S. § 7A-45.4(a)(9). The Court therefore allowed the opposition.
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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.