It is “an important and longstanding characteristic of corporate law” that a shareholder is not liable for corporate obligations. That principle led yesterday to the Business Court’s grant of summary judgment for a parent corporation, its subsidiary’s sole shareholder, in Griffin Management Corp. v. Carolina Power and Light Co., Inc. 

Plaintiff had a meter reading contract with CP&L. CP&L terminated the Plaintiff, who then sued not only CP&L, but also its parent company and sole shareholder, Progress Energy. Plaintiff said that Progress Energy was liable for the acts of its subsidiary because the two companies were engaged in a joint venture.

Judge Jolly’s opinion is chockablock with bedrock principles of the lack of shareholder liability for corporate obligations, including the following:

• “In North Carolina, a corporation is an entity distinct from its shareholders, even if all of its stock is owned by a single individual or corporation.” Op. ¶15.
• “That a parent company wholly owns the capital stock of its subsidiary and members of the board of directors of both corporations are the same, nothing else appearing, ‘is not sufficient to render the parent corporation liable for the contracts of the subsidiary.’” Op. ¶16.
• “The parent-subsidiary relationship exists, in part, to limit the liability of a corporation’s shareholders.” Op. ¶17.

The Court made short shrift of the argument that Progress Energy was in a joint venture with its subsidiary. Judge Jolly found that none of the elements of a joint venture were met, and held that “application of joint venture principles to the relationship between a corporation and its shareholder as it exists in this matter would work an end-run around the limited liability” given to corporate shareholders.

That “limited liability” is a matter of statute in North Carolina. Section 55-6-22 of the General Statues says that the shareholder of a corporation “is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct.”

It is “an important and longstanding characteristic of corporate law” that a shareholder is not liable for corporate obligations. That principle led yesterday to the Business Court’s grant of summary judgment for a parent corporation, its subsidiary’s sole shareholder, in Griffin Management Corp. v. Carolina Power and Light Co., Inc. 

Plaintiff had a meter reading contract with CP&L. CP&L terminated the Plaintiff, who then sued not only CP&L, but also its parent company and sole shareholder, Progress Energy. Plaintiff said that Progress Energy was liable for the acts of its subsidiary because the two companies were engaged in a joint venture.

Judge Jolly’s opinion is chockablock with bedrock principles of the lack of shareholder liability for corporate obligations, including the following:

• “In North Carolina, a corporation is an entity distinct from its shareholders, even if all of its stock is owned by a single individual or corporation.” Op. ¶15.
• “That a parent company wholly owns the capital stock of its subsidiary and members of the board of directors of both corporations are the same, nothing else appearing, ‘is not sufficient to render the parent corporation liable for the contracts of the subsidiary.’” Op. ¶16.
• “The parent-subsidiary relationship exists, in part, to limit the liability of a corporation’s shareholders.” Op. ¶17.

The Court made short shrift of the argument that Progress Energy was in a joint venture with its subsidiary. Judge Jolly found that none of the elements of a joint venture were met, and held that “application of joint venture principles to the relationship between a corporation and its shareholder as it exists in this matter would work an end-run around the limited liability” given to corporate shareholders.

That “limited liability” is a matter of statute in North Carolina. Section 55-6-22 of the General Statues says that the shareholder of a corporation “is not personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct.”

The march towards paperless courts continues in North Carolina. The latest step is the elimination by the Court of Appeals of paper copies of oral argument calendars.

You remember those. They came on yellow paper and listed all the cases to be heard during a particular week and the panels hearing them. The calendars also included the cases to be decided without oral argument, as permitted by Rule 30(f) of the North Carolina Rules of Appellate Procedure.

A few months ago, without fanfare, the Court of Appeals stopped sending out oral argument calendars.

That change came with the implementation in June of a new docketing system. The system will send electronic notification of oral argument hearings to attorneys who provide email addresses. The Court of Appeals will pick up counsel’s email address from the Identification of Counsel page in the Record on Appeal.

While glitches in the notification system are being worked out, the Court is providing telephone notice to counsel of oral argument hearings a week or two in advance of the hearings. If you now are worried that you might be on a calendar in November but haven’t gotten notice yet, here’s the link to the calendar for that month. If you want to see the full lineup of cases set for hearing during a particular term of court, the calendars will continue to accessible on line.

The opinions of the Court will continue to be sent via regular mail.

Judge Albert Diaz of the North Carolina Business Court was nominated today by President Obama to serve on the Fourth Circuit Court of Appeals.

Senators Kay Hagan and Richard Burr both issued glowing statements about Judge Diaz and North Carolina Court of Appeals Judge Jim Wynn, who was also nominated for the federal appellate court.

In the press release issued by the White House, President Obama said that the two Judges "have been exceptional public servants for the people of North Carolina." 

The Fourth Circuit has fifteen seats for active Judges, numbered in the order in which they were originally filled. Judge Wynn, if confirmed, will take Seat 7, formerly held by Judge J. Dickson Phillips, Jr. of North Carolina. That seat has been empty for fifteen years, longer than any other judgeship in the country.  It’s actually the second time that Judge Wynn has been nominated for that seat. He was also nominated by President Clinton in 1999.

Judge Diaz will take Seat 11 if confirmed. That seat was formerly held by Judge William Wilkins of South Carolina and is still warm, as Judge Wilkins retired only a couple of years ago, in 2007.

There were three decisions yesterday from the Court of Appeals worth a quick mention for the business litigator (and the baseball fan).

First, Fischer Investment Capital, Inc. v. Catawba Development Corp. is a piercing the corporate veil case. And not only that, a reverse piercing the corporate veil case. In a reverse piercing case, instead of a court disregarding the corporate entity to reach the assets of an individual owner, the court reaches the assets of the entity to satisfy an obligation of the individual owner. In a first impression holding, Judge Ervin rejected the argument that reverse piercing is limited to personal jurisdiction situations, and held that it also "is a recognized legal theory in North Carolina for substantive . . . purposes."

Second, in Telerent Leasing Corp. v. Boaziz, the Court allowed a recovery of attorneys fees that were more than 15% of the amount recovered by the Plaintiff, which the Defendant argued were in excess of the amount permitted by G.S. Sec. 6-21.2. The Court held this to be justified because the Plaintiff had expended attorneys’ fees pursuing recovery through "multiple actions" and in "multiple venues." Those included fees incurred in a related out of state bankruptcy proceeding.

Finally, the case involving baseball is Reese v. Mecklenburg County. The Court held that the leasing of land by Mecklenburg County to the Charlotte Knights baseball team where the team would build a baseball stadium was a proper public purpose. That was true even though the team would own the stadium during the term of the lease.