The sealing of a complaint due to confidentiality concerns is more than an administrative exercise, according to a Business Court order last week. Parties seeking to maintain a complaint under seal will face a heavy burden, and the Court signaled a willingness to revisit orders of other courts, both inside and outside North Carolina.
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We can’t say it better than Mack Sperling did about eight months ago: "If you are thinking of designating a case to the Business Court because the Complaint raises allegations that the corporate veil should be pierced, stop. Those types of allegations, without more, aren’t enough to invoke the mandatory jurisdiction of the Court. "
In
Fervent followers of the Business Court may remember the case of Wachovia Bank, N.A. v. Harbinger Capital Partners Master Fund I, L.P., which this blog has discussed before. Just over two years ago, Wachovia preemptively sued certain defendants whom it accused of trafficking in litigation and obtained an anti-lawsuit injunction against the defendants.
Mack Sperling, founder and author of this blog, is away on medical leave.
Like the cotton gin or the steam engine, Mack by himself can do the work of several people, and this blog is no exception. Jennifer Van Zant, Julia Ambrose, and John Buford, Mack’s colleagues at Brooks, Pierce, McLendon, Humphrey
North Carolina law says that "one judge may not modify, overrule, or change the judgment of another Superior Court judge previously made in the same action." In a Business Court decision last week, Phillips and Jordan, Inc. v. Bostic, the Court granted a motion for Rule 11 sanctions on a fraud claim that another Superior Court Judge had refused to dismiss on a 12(b)(6) motion. It did so over the objection of the Plaintiff that the grant of the sanctions motion would be an overruling of the first Judge’s Order on the motion to dismiss.
The procedural facts are quirky. A group of defendants (the "Bostic Defendants") had made and lost a motion to dismiss a fraud claim before the case was designated to the Business Court. After the designation, another defendant moved to dismiss the same fraud claim made in an amended complaint. That dismissal motion was granted by the Business Court on Rule 9(b) grounds.
Judge Diaz referenced in his Order facts showing the Plaintiff had not relied on the statements it claimed were misrepresentations. He said, however, that he wouldn’t consider these facts as to the fraud claim against the Bostic Defendants because that would be "a backdoor attempt . . . to re-litigate the legal sufficiency of the fraud . . . claims in the face of a prior court order denying their Rule 12(b)(6) motion to dismiss."
He nevertheless admonished Plaintiff and its counsel to "consider carefully their obligations under Rule 11 of the North Carolina Rules of Civil Procedure before . . . pursuing the fraud claim against the remaining Defendants." Plaintiff didn’t take that advice, and in August 2009 the Bostic Defendants filed their motion for sanctions. Judge Diaz "again suggested to Plaintiff’s counsel that they consider the merits of the claim alleging fraud" after the motion was fully briefed. This time, the Plaintiff took the Court’s advice and dismissed its fraud claim.
Judge Diaz went ahead and granted the motion for sanctions. He applied a standard of objective reasonableness, and said that "a legal position violates Rule 11 if it "has absolutely no chance of success under the existing precedent." He found that total lack of potential success to be present because the basis of the fraud claim was that the Plaintiff had been deprived of information necessary to make a lien claim against a construction project, but Plaintiff had in fact been able to make this very claim. The Court ruled that the claimed misrepresentation "did not deceive Plaintiff."
The Order doesn’t address why this wasn’t an end run around the principle that one Superior Court Judge can’t overrule another. The Bostic Defendants addressed this in their opening Brief. Their position was:Continue Reading One Superior Court Judge Can’t Overrule Another, Right?
If you are a lawyer headed to federal court in one of the three federal districts in North Carolina, can you take a laptop computer into the courthouse? What about a cellphone, either with or without a camera?
The answers are different in the Eastern, Middle, and Western Districts. That’s also true throughout the country
The Plaintiff in Stratton v. Royal Bank of Canada, 2010 NCBC 2 (N.C. Super. Ct. February 5, 2010) thought she had struck it rich. She had found a 1927 stock certificate in the name of her late mother for five shares of stock in the Bank of Manteo. Plaintiff’s calculation was that her mother’s
If you’ve tried cases, you’ve probably lived through this nightmare. It’s a few weeks before trial. You call your out of state client to make arrangements for your witnesses to be in the courtroom at the appointed time. But your contact tells you that the company has just fired your key witness.
What, you say? What were you thinking? How could you do that? I can’t try this case without Pete. After the initial shock has faded, you start to hope that Pete will show up voluntarily. You ask your client about that. Well, they say, it wasn’t a pretty parting. And sure enough, Pete laughs and hangs up on you when you ask him if he will come to North Carolina to testify.
Now you are in crisis mode, scrambling for a way to get this key testimony. There’s a video deposition of Pete, but all the questioning was done by opposing counsel. You probably prepped Pete before the deposition with that common advice that he shouldn’t volunteer information, so there are a lot of one word answers, terse responses, and not much presentation of the warm side of Pete. You didn’t ask a single question, counting on Pete striding confidently to the witness stand to carry your client’s banner during your direct examination. The video just isn’t going to play well.
What now? You scour the Business Court Rules. Rule 18.10 provides some hope. It says:
18.10 – Trial Preparation After the Close of Discovery. For good cause appearing
therefor, the physical or mental examination of a party may be ordered at any time prior to or during trial. Ordinarily, the deposition of a material witness not subject to subpoena should be taken during discovery. However, the deposition of a material witness who agrees to appear for trial, but later becomes unavailable or refuses to attend, may be ordered at any time prior to or during trial.
Surely the unexpected firing of Pete is good cause, and you you make a motion to take a trial deposition of Pete per Rule 18.10. Will it be granted? Every case is different, but maybe not. A motion on similar facts was denied last week in the case of Hilb Rogal & Hobbs Company v. Sellars, in which Judge Diaz prohibited the taking of a deposition two weeks before trial.
The facts in Hilb Rogal need a little development. . . .Continue Reading Problems At Trial: The Suddenly Unavailable Key Witness
If you are removing a case to federal court where there are multiple defendants, it can be a tricky business. If the defendants are served at different times, when does the thirty days for a removal under 28 U.S.C. § 1446(b) begin and end running?
There is a split in the Circuit Courts on
What is a "dynasty trust"? And what does that have to do with business litigation?
To answer the second question first, not much. But a case decided today by the North Carolina Court of Appeals, which affirms the validity of a 2007 statute which permits dynasty trusts, originated in the North Carolina Business Court.