A losing plaintiff would be liable for the defendant’s attorneys’ fees if a bill introduced this month in the North Carolina Senate becomes law.
Other pending bills of interest to litigators include one which would change the way in which the Rules of Civil Procedure and the Rules of Evidence can be amended, legislation which
The North Carolina Business Court delivered a significant opinion on discovery sanctions today in Azalea Garden Board & Care, Inc. v. Vanhoy, 2009 NCBC 9 (N.C. Super. Ct. March 26, 2009). If you are litigating in the Business Court, you’d better read this one, which emphasizes the duty of lawyers to cooperate with one
If the filings of the parties and the rulings of the Business Court weren’t available electronically on the Business Court’s website, I wouldn’t be able to write this blog. That’s one reason I found so interesting the short Order by Judge Diaz today in the case of Clemenzi v. Freer.
The Order addressed Plaintiffs’
The Court granted a Motion opposing the designation of the case, which involved the allegedly fraudulent transfer of assets by a corporate defendant and its sole shareholder, as a mandatory complex business case. The Court ruled that the allegations did not present a material issue related to the law governing corporations. The Court found that
The Court denied an Opposition to Designation of Action as a Mandatory Complex Business case, which was based partly on the argument that the case had been pending for a year before the Notice of Designation was filed.
The Complaint had been amended, however, to state a new claim for constructive fraud. The Court observed
The Business Court provided a thorough discussion today on whether a subsidiary and its parent can conspire with one another, in BHB Enterprises, Inc. v. Waste Management of Carolinas, Inc.
Judge Diaz rejected Defendants’ argument that a parent can never be liable for the actions of its subsidiary under a conspiracy theory. But he dismissed the claim anyway, in the absence of any assertion that the subsidiary had been rendered unable to pay its debts by the action of the parent.
The Court also rejected Plaintiff’s attempt to bring an unfair and deceptive practices claim based on what was essentially a breach of contract, notwithstanding what the Court called "artful pleading."
Plaintiff runs a restaurant in Charlotte called Vinnie’s Sardine and Raw Bar. It had contracted with Waste Management of Carolinas, Inc. ("WMC"), a subsidiary of Waste Management, Inc., for waste collection and disposal services.
WMC had unilaterally increased its monthly charges to Vinnie’s, relying on contract provisions that permitted such increases under certain circumstances. Vinnie’s contested WMC’s right to raise the charges and sought to represent a class of WMC customers. Among other claims, Plaintiff asserted one for civil conspiracy, alleging that WMC and its parent were in cahoots on the unauthorized price increases.
WMC responded that that it was not possible for a parent to conspire with a wholly owned subsidiary. Judge Diaz disagreed. He stated that "the Court’s research discloses only six (6) cases addressing the doctrine of intracorporate immunity in the context of a claim for civil conspiracy under North Carolina law," and summarized all six of them. He observed that none of these cases dealt with the point "whether a parent and its wholly owned subsidiary are capable of committing a civil conspiracy under the doctrine."
Judge Diaz looked to Delaware law. Relying on Allied Capital Corp. v. GC-Sun Holdings, LP, 910 A.2d 1020 (Del. Ch. 2006), he concluded that such a claim could be made, although he reiterated the concern raised by the Allied case in permitting such claims:
"if plaintiffs were allowed to sue parent entities whenever the decision to cause a subsidiary to act in a certain manner originated with the parent, it ‘would increase litigation costs and deter the use of subsidiaries, even when there is a legitimate purpose for doing so and there is no wrong to others in being forced to look only to the subsidiary for relief.’"
The Court dismissed the claim made by Vinnie’s, stating that there was no allegation that WMC would be unable to satisfy a judgment if Plaintiff were to prevail, concluding that the civil conspiracy claim was barred by the intracorporate immunity doctrine.Continue Reading Business Court Rejects Bright Line Rule That A Subsidiary Cannot Conspire With Its Parent
The Fourth Circuit held today that the manner in which manufacturers of pest control products sold their products to consumers did not constitute illegal resale price maintenance. The decision in Valupest.com of Charlotte, Inc. v. Bayer Corp. rejected Plaintiffs’ argument that an antitrust stalwart, United States v. General Electric Co., 272 U.S. 476 (1926)
The Court of Appeals for the Fourth Circuit invalidated a covenant not to compete today, in Lampman v. DeWolff Boberg & Associates, Inc. Along the way, the Court made allusions to Ford Motor Company and Zimbabwe to illustrate the overly broad scope of the agreement.
A couple of caveats first. The opinion is unpublished
The Court denied the entry of a mandatory injunction requiring the Defendant to deliver the title to a motor vehicle to a third party purchaser.
The Court observed that “'[m]andatory injunctions are disfavored as an interlocutory remedy[]’ because, rather than maintaining the status quo (as is the case when a prohibitory injunction issues), a mandatory
It’s black letter law in North Carolina that a liquidated damages provision is enforceable, so long as it is not a "penalty." The need to make that distinction typically comes up when the Defendant believes the liquidated amount is excessive when compared to the actual damages incurred by the Plaintiff.
In Azalea Garden Board & Care, Inc. v. Vanhoy, 2000 NCBC 8 (N.C. Super. Ct. March 17, 2009), the Business Court confronted the exact opposite of the usual penalty argument. The Plaintiff asserted that a provision in the contract severely limiting its recovery was a penalty because it would only allow damages it described as being "woefully inadequate."
The provision at issue, contained in a $3.6 million contract to buy a nursing facility, said that "Buyer agrees that if he should fail or refuse to complete this transaction after timely acceptance by the seller, then any funds or deposit with the Broker will be forfeited and shall be split 50% to the broker and 50% to the seller." That provision yielded damages to the Plaintiff of only $12,500.
The Court determined this was a liquidated damages provision as a matter of law, and that it did not constitute a penalty. The Court held "Plaintiff’s argument that the liquidated damages provision is unreasonable because it is too small in light of the damages actually suffered is not persuasive." Op. Par. 30. The Opinion referenced cases from other jurisdictions reaching the same result in a situation the Court described as "rare."
The other issue resolved in the Opinion was whether Tuttle could be liable for a breach of the agreement to purchase the nursing facility even though he had not signed it. Tuttle asserted the Statute of Frauds. The Plaintiff responded that the Tuttle was part of a joint venture, that the contract had been signed by an authorized agent of the joint venture, and that it was therefore binding on Tuttle. Continue Reading A Liquidated Damages Provision Providing Inadequate Damages Isn’t A “Penalty”