The Defendant failed to file its Notice of Designation to the Business Court within the thirty days of its receipt of either the Complaint or the Amended Complaint, as required by N.C. Gen. Stat. §7A-45.4. The Court denied designation of the case as a mandatory complex business case due to the untimely filing, noting that the case could still be designated as a 2.1 case.
See this post for other cases involving challenges to the Court’s mandatory jurisdiction.
The Court threw out a securities fraud case that would otherwise have been within the scope of its mandatory jurisdiction because there were already two cases pending in Wake County making similar claims. One of those cases had already received a Rule 2.1 designation as an exceptional case. The Court found that it would be more efficient if discovery in the cases was coordinated, and that inconsistent rulings would be avoided, and recommended that the case receive a 2.1 designation.
See this post for other cases involving challenges to the Court’s mandatory jurisdiction.
Bueche v. Noel, April 17, 2008 (Diaz)(unpublished)
How extensively can a deponent change her deposition testimony during her post-deposition review of the transcript? Pretty extensively, it turns out, according to an opinion yesterday from the Business Court.
In Bueche v. Noel, a non-party deponent made fifteen pages of changes and additions to her deposition testimony on errata sheets. The defendant moved to strike the changed and added testimony. Among other things, the defendant argued in its brief that the deponent had used the deposition as a "take home exam" to write answers on which its counsel had no opportunity to cross-examine her. (Links to the briefs are at the bottom of this post)
The federal courts are split on the scope of a deponent’s right to correct or add to her deposition answers, as demonstrated by the parties’ briefs. There was no North Carolina appellate court precedent on the issue.
The Court looked to Rule 30(e) of the North Carolina Rules of Civil Procedure, which authorizes changes "in form or substance" to the deposition testimony, so long as the deponent signs "a statement reciting such changes and the reasons given . . . for making them." The Court held that a deponent has the freedom to make any type of correction, whether as to form or substance, so the changes and additions were allowed.
The new testimony didn’t replace the previous testimony, however. The Court held that the original answers would remain part of the record and could be used for impeachment or any other relevant purpose. The Court also permitted the defendant to reopen the deposition on the limited subjects of the corrections made on the errata sheet, the reasons for those changes, and any reasonable follow-up questions.
The Court also ruled on another first impression issue of North Carolina deposition procedure:
Voyager Pharmaceutical Corp. v. Bowen, April 15, 2008 (Jolly)(unpublished)
Voyager, a company engaged in pharmaceutical research directed at slowing or halting Alzheimer’s disease, was attempting a $100 million public offering in 2005. It alleged in its Complaint that it was unable to complete the IPO due to the actions of one of its directors, Bowen, and one of its employees, Atwood. It made a variety of claims, including claims for breach of fiduciary duty.
The allegations as to what Bowen had done are pretty interesting. Here’s how the Court characterized some of them:
While Voyager’s management was in the 4:30 p.m. conference with Hambrecht, Bowen was in a hospitality suite in the Marriott Marquis Hotel that had been set up to accommodate Voyager’s shareholders. (Compl. ¶ 66.) There, Bowen told one or more shareholders that the IPO was not going to proceed because "God had told him so," and because Voyager had refused to add "the glorification of God" to its mission statement. (Compl. ¶ 66.) Bowen also told the shareholders present that day that any further attempts to complete the IPO would fail until his demands were met, including giving credit to God in Voyager’s mission statement. (Compl. ¶ 66.) Bowen also asked one of the shareholders whether he would be willing to serve as a director of Voyager "when I regain control of the Company." (Compl ¶ 66.) Bowen also falsely told one or more shareholders that there was a problem with the Phase I data that had not been resolved and also falsely stated that when he raised this issue with management, management had locked him out of his office. (Compl. ¶ 68.)
The Court first confronted the issue of choice of law on Voyager’s claims for breach of fiduciary duty. The Court noted that there was little guidance in North Carolina as to the proper application of the internal affairs doctrine. It determined that it would apply the law of Delaware, the state of Voyager’s incorporation, to those claims.
It then rejected Bowen’s argument that his actions were protected by the business judgment rule. It held:
Today, in Nucor Corp. v. Prudential Equity Group, LLC, the Court of Appeals affirmed the 12(b)(6) dismissal of a claim for libel per se against a securities firm.
The firm had published a report about the plaintiff which stated that antitrust lawsuits against the company were possible, and that the company needed to give up its "monopoly dreams."
The Court held that in order for words to be libelous per se, they "must be susceptible of but one meaning and of such nature that the court can presume as a matter of law that they tend to disgrace and degrade the party or hold him up to public hatred, contempt or ridicule, or cause him to be shunned and avoided." The words must be defamatory on their face, "stripped of all insinuations, innuendo, colloquium and explanatory circumstances."
The Court ruled that the publication did not assert any illegal or wrongful conduct on the part of the company. It further ruled that it could not consider the explanatory circumstances offered by the plaintiff to determine whether the words at issue were libelous. The Court further found that it needed to consider the document as a whole, and that the "overall import" of the publication was not defamatory of the company. It therefore affirmed the trial court’s dismissal.
The Court also ruled that plaintiff could not base an unfair and deceptive practices claim as to the report on the alleged breach of a confidentiality agreement by an employee of the defendant, because that was a mere breach of contract without any "substantial aggravating circumstances."
A panel of the Court of Appeals split today on the legal standard for when a corporate officer can be subject to personal jurisdiction based on contacts created through his or her capacity as an officer.
In Saft America, Inc. v. Plainview Batteries, Inc., the Court reversed the trial court’s determination that there was jurisdiction over the defendant’s president, who had conceded visiting plaintiff’s factory in North Carolina. The Court held that "personal jurisdiction over an individual officer or employee of a corporation may not be predicated merely upon the corporate contacts with the forum." The majority ruled that all of the president’s actions were in his official capacity as a corporate officer, not in his individual capacity, and reversed the trial court’s finding of jurisdiction.
Judge Arrowood dissented, so this issue may be headed for clarification by the North Carolina Supreme Court. Here is the key quote from the dissent:
Continue Reading Court Of Appeals Splits On Personal Jurisdiction Over Corporate Officer
Ross v. Autumn House, Inc., February 26, 2008 (Tennille)(unpublished)
If you are a plaintiff filing a Complaint, and you want to designate your case to the Business Court, when is the deadline for filing your Notice of Designation?
The answer is in the statute, it says: "[t]he Notice of Designation shall be filed: (1) By the plaintiff or third-party plaintiff contemporaneously with the filing of the complaint . . . in the action." N.C. Gen. Stat. § 7A-45.4(d)(1).
In this unpublished case, the plaintiff filed its Complaint on December 6, 2007, and its Notice of Designation on January 3, 2008, 28 days later. Per the Autumn House case, that is a contemporaenous filing which meets the requirement of the statute.
Judge Tennille relied on guidelines about the designation process filed on the Business Court website. Those guidelines say that a plaintiff must file its Notice of Designation within 30 days of the filing of the Complaint. Plaintiff had met that requirement, and the Court determined that the Notice was timely.
If you are wondering about the definition of "contemporaneously," the American Heritage Dictionary defines the word as "happening during the same period of time." The definition in Webster’s Revised Unabridged Dictionary is more strict. It defines the word to mean "at the same time with some other event."
Thanks to Ben Norman, a lawyer at Brooks Pierce who clerked for Judge Tennille, for telling me about this case.
Note that Autumn House was essentially overruled in August 2012.
In case you missed it, you should read The New North Carolina Business Court, an article written by Judge Diaz and Jordan Sykes, one of the Judge’s former law clerks.
The Article highlights certain Rules of the Court which are "often overlooked." It is certainly worth reading for that reason alone, because overlooking is not advisable and can lead to undesired consequences.
By the way, the Business Court Rules which are on this blog in the menu bar to the left are hyperlinked. That means you can click back and forth between the table of contents and the Rules themselves. So, you don’t have to scroll all the way back to the top to get back to the table of contents when you need to look at a different Rule, or all the way down in order to find the Rule that you are looking for from the table of contents. These Rules can be downloaded to your hard drive if you want to do that.
This article appeared in the Spring 2008 issue of the North Carolina State Bar Journal. The article is the property of the North Carolina State Bar, and is being "reprinted" here with its permission.
Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer, April 9, 2008 (Jolly)(unpublished)
This is the second opinion from the Court in this case involving the dissolution of a law firm. The principal issue is whether the plaintiffs, who left the law firm, are entitled to the proceeds of contingent fee cases resolved after their departure from the firm. The earlier decision is summarized here.
Today, the Court denied the entry of a preliminary injunction preventing the defendants from distributing to themselves the proceeds from those cases. Here is the key quote from the Court: "The Plaintiffs have not made a convincing showing that they either are likely to sustain irreparable loss unless the injunction is issued, or that such relief is necessary for the protection of their rights during the course of litigation. Plaintiffs’ contentions in this regard are implausible. Their claim for an accounting will not be affected by the issuance or denial of the injunction sought; and their claims for money damages are adequately provided for at law, and are weak grounds for the issuance of an injunction."
As with all of these posts, you can click on the case name above to see the full opinion. I may start including the briefs of the parties in these posts, I’ve done that below.
Congratulations to my partners, Jim Phillips and Charles Marshall, who happen to represent the defendants in this case.