The North Carolina Court of Appeals ruled today on cases involving the statute of repose applicable to legal malpractice actions, fiduciary duties of trustees, and the waiver of the right to arbitration.
On the fiduciary duty issue, the Court affirmed the decision of the Business Court in Heinitsh v. Wachovia Bank on an obscure point of
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
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 found this to be the unauthorized practice of law and struck the Answer filed by the defendant.
Burgess v. Vitola, 2008 NCBC 7 (N.C. Super. Ct. March 26, 2006)(Diaz)
Bueche v. Noel, March 25, 2008 (Diaz)(unpublished)
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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
Plaintiff’s counsel violated the Rules of Professional Responsibility by contacting a former employee of the defendant, who had participated substantially in the legal representation of the defendant before his termination. The Court struck the affidavit from the witness proferred by the plaintiff, and ruled that he could not be presented by the plaintiff as a
The Court found that plaintiff was an inadequate representative to lead a derivative action. A derivative action plaintiff has fiduciary obligations to the company on whose behalf he brings a suit. This plaintiff had no experience in litigation, no involvement in the suit, and only a small stake in the company. On the point of plaintiff’s
Plaintiff’s counsel had verbal discussions with the defendant, before litigation began, about the possibility of representation against his former employer. In the course of those discussions, the defendant sent counsel an email containing confidential information about the potential litigation. Plaintiff’s counsel had never looked at the contents, and thereafter represented the employer.
Defendant moved to
Class action counsel were entitled to an award of attorneys’ fees where the settlement had created a common fund. The Court discusses various applications to an award of fees, including the lodestar method and the percentage method, and elects to take a hybrid approach which takes into account the reasonableness of the fees under the
Egelhof v. Szulik, 2008 NCBC 2 (N.C. Super. Ct. Feb. 4, 2008)(Tennille)
It’s hard to imagine a more inadequate plaintiff than Egelhof to undertake the fiduciary responsibility of being a plaintiff in a derivative action against Red Hat, a publicly traded company. Egelhof was only 24 years old, and held only a few hundred dollars of Red Hat’s stock. He had become a plaintiff in response to a solicitation on the internet. As the Court described Egelhof, "[h]e had little investing experience, no experience in litigation, no prior connection with the [his] law firm, no personal knowledge of [the corporation] and its operations, and a minor criminal record."
The Court concluded that this plaintiff "lacked any credentials to act as a fiduciary for a company in multi-million dollar litigation." Noting Egelhof’s paltry stake in Red Hat, the Court held that "[w]hile the size of ownership is not determinative of standing, a potential plaintiff’s lack of a real financial stake in the litigation is a warning sign that he or she may not be willing or able to devote the time necessary to fulfill the fiduciary obligations imposed by law on a shareholder derivative plaintiff."
These factors alone would probably not have warranted sanctions, but Egelhof was completely uninvolved in his case. He relocated, more than once, and never gave his lawyers a forwarding address. He sold his stock during the course of the lawsuit, creating a significant standing issue, but never mentioned this to his lawyers. He had never even met his lawyers until the night before his deposition and had spent a total of five hours on the case by the time he was deposed.
The Court’s sanction to Egelhof was to prohibit him from being a plaintiff in a class action or derivative action in North Carolina for the next five years. The lawyers came in for an equally harsh sanction. Continue Reading Sanctions For Derivative Action Plaintiff And His Lawyers