The plaintiff claimed that the defendant caused its business to fail. The defendant asserted plaintiff’s business had failed because he used illegal drugs, had extramarital affairs, and because he "had a propensity to sleep and fish during the day."

When the defendant sought to question the owner of the plaintiff about these matters at his deposition, he took the Fifth Amendment. The defendant claimed it was entitled to a complete dismissal of plaintiff’s claims as a result, but the Court determined that dismissal was not the appropriate remedy. Instead, the Court prohibited the plaintiff from presenting testimony about these matters at trial, and indicated that it would instruct the jury that it was entitled to draw an adverse inference from plaintiff’s refusal to testify.

In a companion case, the plaintiff asserted that the defendant had tortiously interfered with a contract which it had to distribute die-cast race cars by the defendant selling those cars directly to plaintiff’s customer. The Court held that interference with contract is justified if motivated by a legitimate business purpose, as when the parties are competitors.

The Court also dismissed plaintiff’s conspiracy claim  There had been no illegal act, because "suppliers are free to contract with whomever they please and structure the distribution chain accordingly." Nor was there any claim for unfair and deceptive trade practices. The Court held that the defendant "merely took measures to protect its own business interests that happened to be detrimental to [the plaintiff’s financial condition. Every business transaction impacts a party either through its participation in or through its exclusion from the deal. Absent the presence of an act that violates moral, ethical, or legal standards, the courts cannot punish a business solely because a transaction financially harms another entity. That is competition. An unfair trade practice requires more than a negative impact on a party."

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The law of North Carolina requires a disclosure by an automobile manufacturer when a repurchased vehicle (a lemon) is re-sold. Failing to do so constitutes "lemon laundering." Plaintiffs claimed that the manufacturer was responsible for policing its dealers to make sure that they made the required disclosures when the dealers sold a car that they knew had been repurchased. The Court found that so long as the manufacturer disclosed the fact of the repurchase to its dealers, it had no liability under the statute if the dealers then failed to make the required disclosure.

Nor was there any claim against the manufacturer for negligence or for unfair and deceptive practices. There was no statutory action against the dealers for then failing to disclose to the purchasing consumer, because the statute expressly stated that it did not create an action against dealers. Plaintiffs were, however, entitled to proceed against the dealers for unfair and deceptive practices.

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In this class action against an automobile manufacturer, plaintiffs claimed that the manufacturer had committed fraud by advertising the safety of its vehicles even though they did not have a brake shift interlock system. Plaintiff sought damages — even though they had suffered no injury as yet — and an injunction ordering a recall of the vehicles.

The Court granted summary judgment because the only loss suffered by plaintiffs was theoretical loss in the value of their vehicles, and such a claim was barred by the economic loss doctrine. Allowing such a claim would have circumvented the contract warranty frameork.

The injunctive claim for a recall was preempted by the federal scheme of the National Traffic and Motor Vehicle Safety Act of 1966. The Court further ruled that the doctrine of primary jurisdiction, which required it to defer to the administrative agency responsible for claims involving design defects in automobiles, barred it from considering this claim.

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This opinion on attorneys’ fees was issued in tandem with the opinion in In re Wachovia Shareholders Litigation. Lawsuits had filed over a tender offer for the company, which led the Board of Directors to conduct an auction process which led to a higher price per share. Thereafter, class counsel and the defendant had agreed to permit the Court to set the fee, not to exceed $450,000, and the defendant had agreed not to object.

The Court considered, as it would have if there had been an objection: (1) whether the action was meritorious at the time it was filed, (2) whether there was an ascertainable benefit received by the class, and (3) whether there was a causal connection between the action and the benefit. The Court approved a fee of $450,000, although it found that there were some "close questions," particularly whether the filing of the lawsuit had been a direct cause of the increase in price paid for the company.

The Court noted that an award of fees acts as a check on management. The Court has an obligation "to balance the need for incentives for shareholders to protect their interest with the need to keep litigation costs at a level which does not inhibit merger activity."

The Court discussed, on a prospective basis, whether the law firm which did not become appointed as lead counsel could be compensated for its work. It noted that the decision of the law firm to be lead counsel would not ordinarily turn on which firm was the first to file.

It discussed the importance of making a shareholder inspection request under the North Carolina statute before rushing to the courthouse, cited substantial Delaware precedent on this point, and held that "failure to use inspection of books and records may result in a finding that the suit was not meritorious when filed."

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The Court considered an award of attorneys fees following its determination that certain termination provisions of a merger agreement were invalid. This opinion was issued in tandem with opinion in In re Quintiles Transnational Shareholders Litigation.

Fee applications were made by attorneys representing a class of shareholders, as well as attorneys representing a derivative plaintiff. The Court observed that the derivative action did not fit well in the "fast paced" context of litigation over a merger. It stated that such claims were more suited to being litigated as shareholder rights claims as opposed to corporate (derivative) claims for breach of fiduciary duty.

The Court refused to award attorneys fees in the derivative action, observing that it "was filed solely to get a piece of the litigation fee pie." It was also critical of the failure of the derivative plaintiff to seek a shortening of the statutory 90 day waiting period. Finally, the derivative action was moot, as the merger it sought to challenge had already occurred.

The Court observed, in dicta, that "the hourly rate claimed by New York counsel is astonishingly out of line with market rates."

On the class action claims, the Court determined that it could award fees, even though the litigation had not created a common fund. It then analyzed the fee request and discussed the level of specificity it expected in fee applications.

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Plaintiff sought to enforce the stock repurchase provisions of a shareholders agreement with two former employees, the defendants. The Court found, however, that the price to be paid ($5 for stock with a book value of more than $36,000), and the circumstances under which the defendants had signed the agreement, rendered the transaction unconscionable. The Court further found, however, that there was no mandatory buyback obligation of the plaintiff.

The Court granted summary judgment on plaintiff’s claims that the defendants had violated fiduciary duties through their post-termination activities. As low level employees, defendants had no fiduciary duties as a result of their employment.

Nor had defendants violated any trade secret obligations by bidding on a contract where bidding was open to the public.

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This was a class action for unfair trade practices against a weight loss clinic. Plaintiffs’ claim rested partly on their argument that their contracts required them to buy prescriptions from the defendant at a price higher than they would have paid at an outside pharmacy. The Court granted summary judgment on this claim, holding that the Unfair Trade Practices Act "did not eliminate caveat emptor," and that the defendant had no obligation to inform the plaintiffs that there were less expensive means to meet their goals.

The Court held that plaintiffs had stated a claim with regard to defendant’s refusal to write prescriptions to be filled at outside pharmacies because this violated medical ethics. The Court determined that it had the authority to modify the previous order of class certification to limit the class to those plaintiffs who had requested — but been refused — written prescriptions.

Those class members also had a claim for the tort of intentional interference with a fiduciary relationship, and also for constructive fraud because of a "special relationship" between them and the plaintiff because they had provided medical background and submitted to tests. The Court rejected arguments that the weight loss clinics were "health benefit plans" subject to North Carolina insurance law. Nor were plaintiffs entitled to make a claim that defendant had improperly referred them to entities in which the defendants were investors because only the Attorney General can make such a claim.

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This is the third of a series of cases involving Sunbelt, this one involving the successful plaintiff’s request for attorneys’ fees pursuant to N.C.G.S. §75-16.1.

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