A successful mediation session ends with a signed document reflecting the settlement, usually the AOC Form "Memorandum of Mediated Settlement," but is often accompanied by an agreement to draft a more comprehensive settlement agreement. 

The unpublished Court of Appeals decision this week in Santoni v. Sundown Cove, LLC is a reminder to be careful that the Memorandum accurately sets out the terms of the deal.  That’s especially so if the settlement applies to only some of the defendants or potential defendants.

In Santoni, the plaintiffs had originally sued multiple defendants, but had taken voluntary dismissals without prejudice as to two of them.  Those dismissals were taken before the mediation session.

At the mediation, the plaintiffs settled up with the remaining defendants. They executed a Memorandum of Mediated Settlement which contained the form language that they would "execute such releases as required by Defendants in a form accceptable to Defendants."  The Memorandum included handwritten language saying that they would "execute mutual releases of all existing claims."

When defendants’ counsel presented a release that specifically included the previously dismissed defendants, the plaintiffs refused to sign.  They argued that the claims against those parties were not "existing claims."  The trial court disagreed and ordered the plaintiffs to sign the settlement agreement as presented, and the Court of Appeals affirmed.  It held:

In the case at bar, the terms of the parties’ settlement, as set out in the memorandum of mediated settlement agreement, are clear and unambiguous, and the agreement must be given effect. Plaintiffs agreed to execute releases of “all existing claims” and to “execute such releases as required by Defendants in a form acceptable to Defendants[.]” A claim is defined as “[t]he aggregate of operative facts giving rise to a right enforceable by a court[,]” and “[t]he assertion of an existing right[.]” Black’s Law Dictionary 264 (8th ed. 2004). The facts giving rise to Plaintiffs’ claims were “existing” at the time the parties reached the agreement, and Plaintiffs had the right, at the time the parties reached the agreement, to assert claims against the [dismissed defendants]. That Plaintiffs had not re-filed an action against the [dismissed defendants], or instituted an action against any other person or entity, is of no moment. Plaintiffs are required to execute the proposed settlement agreement which, as Defendants drafted it, was in a form acceptable to Defendants.

You can see the full Memorandum of Settlement by clicking on the image at the top.

 

 

The  NC Court of Appeals ruled today on what it means to be a "prevailing party" under N.C. Gen. Stat. §6-21.5 so as to be entitled to recover attorneys’ fees. There was no North Carolina precedent — until now — on this issue.

The effect of the ruling may be that fees under the statute, which are allowed to a prevailing party "if the court finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading," will be awarded on an issue by issue basis.

In the case decided by the Court of Appeals, Persis Nova Construction, Inc. v. Edwards, the trial court had dismissed the claims of the plaintiff as well as the counterclaims of the defendant on motions for summary judgment.  When the defendant moved for an award of statutory fees, the Court denied the motion, reasoning that the dismissal of the claims of both parties meant that  there was no "prevailing party."

The Court of Appeals reversed. It held that a party doesn’t have to be the outright and unquestioned winner of the lawsuit in order to be entitled to fees.  The Court focused on the statute’s reference to the "losing party in any pleading," and reasoned that fees should be allowed to "a party who prevails on a claim or issue in an action."  It is not necessary for the party requesting fees to prevail in the entire action.

The Court noted that the purpose of the statute is to "discourage frivolous legal action," and said that this purpose "would be circumvented by limiting the statute’s application to the party who prevails" in the lawsuit as  a whole.

The conclusion of the Court’s opinion was as follows:

the trial court properly found that Plaintiff did not prevail on the claims set forth in its complaint and that Defendants did not prevail on the counterclaim set forth in their answer.  As a corollary, however, Defendants prevailed on Plaintiff’s claims, and Plaintiff prevailed on Defendants’ counterclaim.  Accordingly, the trial court erroneously concluded that Defendants were not prevailing parties in this action.

This means that fee petitions under the statute may start getting presented on an issue by issue basis. It means also that a plaintiff could prevail on virtually all of its claims, but still get socked for fees on the claims on which it was not successful, if that particular claim lacked a justiciable issue. 

When the dust clears after litigation is over, it is sometimes hard to tell the score and who really won.  The Persis Nova case may make it even harder.

Have you ever booked a hotel room through an online reseller like Hotels.com, Priceline, or Orbitz?  If you have, you might be interested in this post, even though you might not otherwise be interested in an issue of North Carolina state tax law.

Those companies, and other internet resellers of hotel rooms, have a significant tax dispute pending in North Carolina’s courts.  And right now, the Fourth Circuit is directly at odds with the North Carolina Business Court on the proper outcome. 

The tax problem comes up because the customer is paying these companies more than the price at which the online company purchases the hotel rooms from the hotel operator.  That’s obvious, that’s how they make a profit.  What’s not so obvious is that the online companies charge Occupancy Tax based on the full price of the room, but they only remit tax calculated at the lower price they paid to buy the room. They keep the difference, which they call a "nonitemized service fee."

This questionable practice has led to a flurry of litigation by municipalities against Hotels.com, Priceline, and other online vendors, like Orbitz and Travelocity. Four of those cases are being litigated in the North Carolina Business Court, brought by Dare County, Mecklenburg County, Wake County, and Buncombe County. Similar cases are pending throughout the country.

Last week, the online travel companies scored a big win when the Fourth Circuit affirmed the grant of a Motion to Dismiss in a case brought by Pitt County, in Pitt County v. Hotels.com, L.P.  (I read about that decision on the North Carolina Appellate Blog).  The Fourth Circuit ruling is apparently the first appellate decision in the country on this issue, but that ruling is directly at odds with a decision by Judge Diaz in the Business Court, Wake County v. Hotels.com, L.P., 2007 NCBC 35 (N.C. Super. Ct. Nov. 19, 2007).  

Continue Reading Taxing Online Travel Companies: The North Carolina Business Court And The Fourth Circuit Don’t See It The Same Way

If you have this blog in your bookmarks in Firefox or Internet Explorer, and you check it from time to time, DON’T do that.  That’s not because I don’t want you to read it, it’s just that there are two better ways to get news from this blog and just about every other blog and many websites.

The best way is to subscribe by RSS — which is easy to do and explained below — but you can also subscribe by email just by filling in your email address.  Then you’ll get an email with a link to the blog every time there is a new post.  Both these options are midway down the left side of the blog, and look like the image at the right.  Just put your email address in the box.

But if there are number of blogs and websites that you mean to check regularly  — but sometimes forget to check — the much better route is to use RSS feeds in an "aggregator" or "reader."  A reader is like a personalized newspaper that shows you a the title of posts from each of the blogs to which you subscribe, along with the first several words of the post. The image at the top of this post is from the aggregator I use, which is Google Reader. 

If you have this blog and other blogs or websites that you look at frequently set up in an aggregator, you just click on a particular entry if you want to read it, without ever having to check the website in the first place.

To set this up, just click on the orange RSS icon which is on the left side of this blog (or wherever it is on any blog or website).  It looks like the image at the right, but smaller.  Then select the aggregator that you are using or want to use, and can subscribe. You’ll have several different options. 

If you pick Google Reader, but don’t have an account set up on Google yet, it will walk you through that in about 20 seconds.  There’s also an option to add blogs to your Google home page if you prefer that.  No more remembering — or forgetting — to check. RSS, by the way, stands for "really simple syndication."

Here’s a one-minute video that explains the concept and how to use Google Reader.

https://youtube.com/watch?v=VSPZ2Uu_X3Y%26hl%3Den%26fs%3D1

 

Plaintiff sued to impose a constructive trust on property purchased by the Defendant LLC at a foreclosure sale.  It alleged that some of the members of the Defendant LLC had been members of the LLC which had defaulted on the mortgage loan in question.  Plaintiff contended that it was "inequitable for [the Defendant] to own and possibly profit from the Property." 

The Court rejected this argument and dismissed the claim.  It observed that the property "was lawfully purchased at a foreclosure sale with a valid upset bid."  There was therefore no fraud, no breach of fiduciary duty, and no inequitable circumstance that warranted the imposition of a constructive trust.

The Court also ordered the cancellation of a notice of lis pendens filed by the Plaintiff, concluding that  a lis pendens is appropriate only when the case involves an action affecting title to real property.  The Court held that "a lis pendens . . . does not properly apply to actions brought for the purpose of securing a personal money judgment. . . ."

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

This is an opinion from Judge Diaz before he joined the Business Court, in which he denied a Motion for Sanctions.

The basis for the Motion was that Plaintiff should not have taken the position that North Carolina law applied to the covenant not to compete at issue.  The Defendant worked for Plaintiff in North Carolina and the agreement gave a North Carolina address for the Defendant, but it had been signed by the Defendant in Virginia and by the Plaintiff in Wisconsin. 

The case, which was affirmed by the North Carolina Court of Appeals in an unpublished opinion, contains a good discussion of the relevant Rule 11 inquiries.  The Court found the facts of the case to be "muddled," and that they "would test the most seasoned of choice of law practitioners."  The Court found that the Plaintiff’s lawyers had made the requisite "reasonable inquiry" before deciding that North Caroiina law applied, and accordingly denied the Motion for Rule 11 Sanctions.

Full Opinion

 

 

The Court appointed a receiver to conduct the winding up of a dissolved professional corporation.  One of the reasons given by the Court was that the Member-Manager of the dissolved entity, a law firm, had a conflict due to her individual interests and the interests of her new professional corporation.

Full Opinion

The Court of Appeals decided today cases involving a non-compete, dissolution of a partnership, the public policy exception to the termination of at-will employment, the rules of professional responsibility, and the economic loss rule.  Here are quick summaries of these five cases:

Non-Compete.  In Medical Staffing Network, Inc. v. Ridgway, the Court of Appeals reversed a judgment in a non-compete case.  It found the covenant at issue to be be overly broad because it prevented the Defendant not only from competing with or soliciting customers of the Plaintiff, but also those of "any parent, division, subsidiary, affiliate, predecessor, successor, or assignee" of the Plaintiff.   The Court also decided whether a covenant not to compete in an employment agreement was superceded by a later covenant in a stock purchase agreement.  The Court concluded that the two agreements had been "executed for two distinct purposes" and that they could be enforced consistently with one another, even though there was a merger clause in the second agreement.

Arbitration and Dissolution.  In In re W.W. Jarvis & Sons, the Court held that an arbitration provision in a partnership agreement included claims for dissolution of the partnership, even though the agreement said that a withdrawing party had "the right to force . . . compulsory dissolution by court order."  The Court observed that "broad arbitration clauses contained within a partnership agreement will govern any dispute concerning the partnership amongst the parties to the agreement," and it rejected the argument that it should proceed to dissolve the partnership because that was the only possible correct result.  On that point, it held that the court could not "short-cut arbitration proceedings when only one viable arbitration conclusion is possible" and that "the purposes of arbitration would be substantially diluted if courts could freely resolve otherwise arbitrable disputes whenever a clear outcome is asserted."

Termination in Violation of Public Policy.  The Court narrowed the public policy exception to the right to terminate an at-will employee in McDonnell v. Tradewind Airlines, Inc.  It held that an at-will employment can be terminated at any time for any reason, and that "this is a bright-line rule with very limited exceptions."  The exception is available only "where (1) the public policy of North Carolina is clearly expressed within our general statutes or state constitution, or (2) potential harm to the public is created by defendant’s unlawful actions."  The termination of the Plaintiff , a flight engineer, for refusing his employer’s instruction to fly when Plaintiff said that would violate FAA regulations did not meet the exception.

Rules of Professional Responsibility.  In Sisk v. Transylvania Community Hospital, Inc., the Court reversed the disqualification of out of state counsel who had been admitted in North Carolina pro hac vice.  The disqualification had been based on alleged misconduct of the lawyers in Kentucky, but a Kentucky court had determined that the lawyers had not violated Kentucky’s ethical rules.  The Court of Appeals based its reversal on Rule 8.5 of the North Carolina Rules of Professional Conduct, which states that "a lawyer is not subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur."

Economic Loss Rule.  The Court reversed the trial court’s summary judgment on a negligence claim which had been based on the economic loss rule, in Hospira Inc. v. Alphagary Corp.  It found that there was no contractual privity between the Plaintiff and the Defendant and that the rationale of the doctrine therefore did not apply.  That rationale, according to the Court, is that parties in a direct contractual relationship "are free to include, or exclude, provisions as to the parties’ respective rights and remedies."  Since the parties in the case before the Court had no direct contractual relationship, there had been no ability to negotiate the risk of economic loss.  The Court affirmed the dismissal of claims for fraud, negligent misrepresentation, unfair and deceptive practices, and third party beneficiary breach of contract.

The lion in the picture at the top is one of the architectural details on the Court of Appeals building in Raleigh.  The photo is by Juliet Sperling.

If you are litigating business cases, or any kind of cases where you might be doing legal research, Firefox is the best internet browser and you should dump Internet Explorer and change to Firefox.  Right now.

Why should you do that, especially if it puts you in the minority of internet users?  There are probably a lot of reasons, but this post is about only two of them.  They are both "add-ons" for Firefox.  Add-ons let you customize Firefox. 

Jureeka automatically adds a hyperlnk to a court decision or a statutory reference on a web page if it can find it.  Jureeka does that by looking to the open law sources like PreCYdent, which is one of a number of ventures putting case law and statutory law in the public domain.  Another one is the Public Library of Law, which calls itself "the world’s largest free law library," and another is altlaw.com.  These sites have federal decisions and a lot of state court decisions that you would ordinarily have to go to Westlaw or LEXIS to find.

Here’s an example of why this is a useful thing: last month, I wrote a post about a decision from the Middle District of North Carolina which found jurisdiction over a defendant because of its use of metatags on its website.  In the post, I referenced a decision to the contrary from the Second Circuit.  If you were looking at that post in Firefox, with the Jureeka add-on, you would have seen the Second Circuit case with a hyperlink, looking like this:

You could just click on the hyperlink (it’s not live in this post) and save yourself the trouble of going to Westlaw or LEXIS or whatever electronic service you use for federal decisions.  And speaking of those services, the other add-on I really like is Citegenie. This takes care of something I find really annoying in Westlaw, the citation format you get when you copy a quotation from a case.  Here’s an example of a quote from a case and the citation generated by Westlaw:

Continue Reading Why Firefox Is The Best Internet Browser For Lawyers