The Court granted the defendant’s motion to stay the action so that a related action pending in New York could proceed, pursuant to N.C.G.S. §1-75.12. The Court considered the following factors: "(1) the nature of the case, (2) the convenience of the witnesses, (3) the availability of compulsory process to produce witnesses, (4) the relative ease of access to sources of proof, (5) the applicable law, (6) the burden of litigating matters not of local concern, (7) the desirability of litigating matters of local concern in local courts, (8) convenience and access to another forum, (9) choice of forum by the plaintiff, and (10) all other practical considerations."

Although the plaintiff had filed the North Carolina action first, and the Court recognized that the plaintiff’s choice of forum was entitled to substantial weight, it was persuaded to enter the stay because there had been a consent to jurisdiction in New York by the plaintiff, and the New York court had a greater ability to compel the appearance of other parties and witnesses.

Full Opinion

The Court refused to allow the defendant to amend its answer to add counterclaims. It found that the defendant had known of the facts relating to the counterclaim for nearly a year before seeking leave to amend, and that defendant had unduly delayed in seeking an amendment. It found that the plaintiff would be prejudiced because allowing the amendment would require additional discovery and a modification of the deadlines for dispositive motions.

Full Opinion

Plaintiff had settled up with a co-defendant, who had been dismissed from the action. A remaining defendant sought discovery of the settlement agreement, but the plaintiff objected on the grounds of Rule 408. The Court ordered production of the settlement agreement, noting that many courts allow discovery of settlement agreements when they are relevant to the settling parties’ bias or credibility. It made no difference that the parties to the settlement agreement had agreed to keep it confidential.

Full Opinion

This case concerned the right of a limited partner to bring a derivative action against two partnerships. As one partnership was a North Carolina entity, and the other a Delaware entity, the Court considered the law of both states. The law of both states excuses demand in the event of futility in the case of a partnership.

Corporate management is entitled to the opportunity to pursue alternative remedies and to avoid unnecessary litigation. The reasons that demand would be futile must be alleged with particularity. The argument by the plaintiffs was that there was no general partner on which to make a demand, because the general partner had filed for bankruptcy.

The Court held, however, that the plaintiffs were required to invoke the provisions of the partnership agreement to have new management appointed, and to then make demand on that new management. The Court dismissed the case without prejudice.

Full Opinion

The Court considered yet another derivative action plaintiff who had failed to make the demand required under Delaware law. The Court held that the plaintiff had failed to establish demand futility based on his claim that the outside directors were insufficiently disinterested to have properly considered a demand.

Plaintiff’s claim that one of the outside directors had engaged in insider trading did not establish that the director faced a "substantial likelihood" of liability. Membership on the company’s audit committee did not impair the ability of other directors to consider a derivative claim. The disinterest of the directors was also not impeached by their receipt of compensation from the company. The Court also rejected claims that the directors were interested because they had approved, permitted, or participated in the alleged wrongs" as well as other arguments which it rejected in its opinion in the Pozen case.

The Court ended its opinion by chastizing the plaintiff for not making a books and records inspection request before filing his complaint.

Full Opinion

Defendant’s counsel had formerly been a lawyer at the law firm of the plaintiff. Plaintiff moved to disqualify him as counsel. Although the firm-changing lawyer had only been minimally involved in the matter before his departure, the Court held that an important factor to be considered was the subjective belief of the client whether the lawyer had represented him. Given that the lawyer had been one of only three in his old firm, the Court found the client’s belief about representation to be reasonsable when coupled with the lawyer’s acutal involvement. This warranted disqualification. The Court also "inferred" that the lawyer had had access to his former client’s confidential information, and found that to be another basis for disqualification.

Full Opinion

The Court addressed the "at issue" exception to the attorney-client privilege in this case. The Court held that the advice of counsel becomes at issue "where the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney client communication." It held that the defendant had not put its attorneys’ advice at issue merely because the attorney’s advice was relevant. Plaintiff’s motion to compel was denied.

Full Opinion

The Court began this final installment of the Maurer (2005 NCBC 1; 2005 NCBC 4) saga with a bit of ominous poetry: "O, what a tangled web we weave, When first we practise to deceive."

The first issue it addressed was whether bonus payments which the company had withheld from a terminated shareholder/employee were "wages" within the North Carolina Wage and Hour Act. If they were, the Court was entitled to award liquidated damages as a result of the company’s failure to pay. The Court rejected a blanket rule that payments to be made following termination of employment could not be "wages," and was persuaded by the company’s own treatment of the bonus payments as such by making withholdings for Social Security and Medicare.

The Court found that the company had not acted in good faith in withholding the payments, and that it had done so in order to pressure the plaintiff into selling her stock. The Court refused to consider the company’s argument that it had acted on the advice of its counsel, since the company had invoked the attorney-client privilege at the lawyer’s deposition. It awarded plaintiff liquidated damages on this aspect of her claim.

The Court was not so generous, however, on plaintiff’s fraud claim, on which she had prevailed at trial. It granted judgment notwithstanding the verdict on this claim, holding that the alleged misrepresentation by a defendant that he would arrange for a sale of the company if he was hired and given stock was not definite and specific enough to support a claim for fraud, and that plaintiff could not have reasonably relied upon it.

Plaintiff could not recover for dilution of her ownership when one of the individual defendants purchased additional stock, because there can be damages for dilution of ownerhip only when the recipient pays less than the actual value of the stock. The Court also set aside the jury’s award of punitive damages, and held that there could be cases where a plaintiff prevailed on a fraud claim (which requires proof by a preponderance of the evidence) but would not be entitled to punitive damages (which require proof by clear and convincing evidence).

The Court was critical of plaintiff’s failure to disclose a secret "side deal" with one of the defendants, which it termed a breach of her fiduciary duty.

Full Opinion

The Court dismissed a series of shareholder derivative actions due to plaintiffs’ failure to make the required demand under Delaware law. Since the shareholders did not attack a specific action of the board, the Court undertook to determine "whether any of the directors were rendered ‘interested’ by any of the conduct alleged and, if so, whether the disinterested directors were nonetheless capable of acting independently from those interested directors." (If a specific action of the board had been under attack, the Court would have analyzed whether there was a "a reasonable doubt that either: (1) a majority of the directors [was] incapable of acting in a disinterested and independent manner or (2) the transaction was not a result of a valid exercise of business judgment.").

The Court rejected the argument that four of the directors of the company were "interested" because of their service on the company’s audit committee. The Court held that "[a]udit committees of publicly traded companies are required to have independent and disinterested directors comprise the committee. It makes no sense to require audit committees to be made up of independent and disinterested directors and then find them not to be independent and disinterested because they are on the audit committee."

The Court also rejected what it referred to as "blanket allegations" that the directors participated in or approved the alleged misconduct. The directors were entitled to rely upon management’s assessment of the safety and efficacy of the company’s products" in the absence of specific language to the contrary.

The Court also ran through, and rejected, a series of arguments in support of futility that had been rejected by the Delaware Courts, including (a) that the directors would be forced to sue themselves, (b) that the directors would not sue themselves because this would open them up to further litigation, (c) that the directors had an interest in the suit being derivative because they would have no insurance coverage for a direct claim, and (d) that the directors were interested because they had stock options.

The Court also considered the independence of the directors. It held that allegations that some of the directors were beholden to members of the compensation committee, which determined whether they would be compensated for their service, were insufficient. It held that allegations of business, professional, and personal relationships would not affect independence, in the absence of facts showing that "’the non-interested director would be more willing to risk his or her reputation’ than to jeopardize his relationship with the person with whom he is allegedly entangled."

In a footnote, the Court once again referenced its belief that shareholders should make books and records inspection requests before filing such actions. It quoted Beam v. Stewart, 833 A.2d 961, 981 (Del. Ch. September 30, 2003) for the propositiong that “it is troubling to this Court that, notwithstanding repeated suggestions, encouragement, and downright admonitions over the years both by this Court and by the Delaware Supreme Court, litigants continue to bring derivative complaints pleading demand futility on the basis of precious little investigation beyond perusal of the morning newspapers”.

Full Opinion

The Court refused to reconsider its decision that plaintiffs were not entitled to make an unfair and deceptive practices claim. It had previously found that such claims could not be made due to the extensive regulatory scheme surrounding the matters at issue.

The Court did reconsider, however, its determination that the plaintiffs were not entitled to damages under N.C.G.S. §133-28, which allows a governmental entity which enters into a contract which "is or has been the subject of a conspiracy" to recover damages. It held that this would be an issue for trial.

Full Opinion