The issue here was the timeliness of Plaintiff’s claim against the estate of one of the defendants.  The Plaintiff had failed to serve that defendant’s personal representative with notice of his claim within the 90 day period prescribed in N.C. Gen. Stat. §28A-19-3(a).

The Plaintiff argued that it was excused from the notice requirement because the personal representative had a duty to notify it of the 90-day claim period.  In order to carry that burden, however, the Plaintiff needed to show that the personal representative had actual knowledge of the claim.  The Court that there was no such evidence, based on the affidavit of the personal representative denying such knowledge. The Court held that the personal representative had "no affirmative duty to shift through all the work files accumulated during [the decedent’s} career to determine whether any one of them could possibly be the basis of an unsatisfied claim that could be asserted against the estate."

The Court also rejected Plaintiff’s argument that its breach of contract claim was subject to the ten year statute of limitations of N.C. Gen. Stat. §1-47(2) because the contract had been signed under seal.  It found, as a matter of law, that the contract had not been signed under seal.

Full Opinion

The Court found a shareholders agreement between the parties to be poorly drafted and ambiguous, determined that it would need to consider extrinsic evidence in order the properly interpret the agreement, and denied the parties’ cross-motions for summary judgment. 

Full Opinion

Claims against the lender which had financed an acquisition gone awry were barred by the exculpatory provisions of a subordination agreement.  Georgia law applied, and Georgia law permits one contracting party to waive all recourse in the event of breach by the other.  The exculpatory provision was valid and an absolute defense to plaintiffs’ claims, and the Court granted the Defendant’s Motion to Dismiss.

Plaintiffs did not have a claims for the breach of the duty of good faith and fair dealing, because the assertion of valid rights under an enforceable agreement does not give rise to such a claim just because the assertion of those rights adversely impacts the parties against whom the rights are asserted. 

The tortious interference with contract claim made the the Plaintiffs was also dismissed.  Although Plaintiffs had plead all of the elements of that claim, the face of the complaint demonstrated that there was a valid business justification for the Defendant’s actions.  A lender exercising its rights to collateral under a standard commercial financing arrangement ordinarily has justification for its actions, and the plaintiff make something more than conclusory allegations about justification. 

The Court also rejected a facilitation of fraud claim, holding "[t]o the extent Plaintiffs’ theory is that a commercial lender would agree to defraud a seller of a business by making a loan to the purchaser which the lender agreed in advance would be put in default and that the purchasers of the business would pledge their own assets and provide personal guarantees of the loan knowing it was going into default, such a theory is simply not sustainable."

Plaintiff were also not entitled to proceed on their claim for marshalling of assets, because such a claim is inapplicable where a superior creditor has a right to certain assets.

There was no fiduciary duty under the loan agreement.  The lender had not stepped into the shoes of the majority shareholders by exercising its rights under the loan agreement. 

The Court granted leave to the Plaintiffs, however to make derivative claims against the lender.  It permitted Plaintiffs to assert these claims because a receiver had been appointed for the corporation and he had stated that he would not pursue claims for economic reasons.

Full Opinion

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss

The Court found that an out-of-state lawyer who had assisted a pro se litigant in preparing her Answer had engaged in the unauthorized practice of law.  N.C. Gen. Stat. Sec. 84-2.1, which defines the "practice of law," includes "preparing or aiding in the preparation of any petitions or orders in any probate or court proceeding" and "assisting in any legal work."  The unauthorized practice of law is a Class 1 Misdemeanor.

The Court declined to strike the Answer, since doing so would "unfairly penalize the [defendant] for the conduct of [her] attorney."  But the Court ruled that the defendant could not file further papers in the case unless she agree to proceed on a true pro se basis or she retained a licensed attorney to represent her. 

On the merits of the case, the Court deferred ruling on the defendant’s motion to dismiss, finding that the Affidavit in support of her motion was not in proper form.  The Court held that North Carolina law requires "strict compliance with the requirement that an affidavit be properly sworn."  Compliance with the federal statute permitting a declaration to be signed "under penalty of perjury" (under 29 U.S.C. §1746) was not sufficient. 

Full Opinion

Burgess v. Vitola, 2008 NCBC 7 (N.C. Super. Ct. March 26, 2006)(Diaz)

Bueche v. Noel, March 25, 2008 (Diaz)(unpublished)

The Business Court decided two cases this week involving what it found to be the unauthorized practice of law.  In the first, Bueche v. Noel, the Court held that a pro se defendant could not file an Answer on behalf of a corporation, because "a corporation must be represented by counsel and cannot appear pro se."  The Court struck the Answer filed by the defendant.

In the second case, Burgess v. Vitola, the issue was whether an out-of-state attorney who had apparently ghost written an Answer for a defendant had engaged in the unauthorized practice of law.

The defendant involved was Dr. Entezam, a California dentist sued by the plaintiff for allegedly trespassing on his computer through an unwanted advertisement.  (Whether those advertisements subjected the defendants to jurisdiction in North Carolina was the subject of an earlier post).  Dr. Entezam filed an Answer under her own pro se signature which had clearly been drafted by a lawyer.   

Continue Reading There Won’t Be Any Unauthorized Practice Of Law In The Business Court

 I’m a business litigator in North Carolina, with Brooks Pierce McLendon Humphrey & Leonard, LLP.

I grew up in New York, went to college there (at Union College in Schenectady), and then came to North Carolina to law school at UNC-Chapel Hill. I clerked for United States District Judge Frank Bullock of the U.S. District Court for the Middle District of North Carolina after graduating, and then joined Brooks Pierce.

My practice involves most anything flowing from what is usually a failed business relationship, including disagreements over contracts, shareholder disputes, securities cases, class actions, professional malpractice, and covenants not to compete.

I am a big believer in the use of technology in litigation, both in preparing cases and presenting them at trial, and I speak frequently on that subject.

I write this blog for a few reasons, the main one being I have fun doing it. I track the cases in the North Carolina Business Court, our equivalent of the Delaware Court of Chancery, and try to report on decisions of that Court the day they are issued. I try to be as prompt with the business related decisions from the North Carolina Court of Appeals and Supreme Court.

Brooks Pierce has offices in Greensboro and Raleigh  We have more than 80 lawyers who practice throughout North Carolina and beyond.  You can see more of a bio for me, and other lawyers in my firm, at the Brooks Pierce website.