Watching The Court

Subscribe to Watching The Court via RSS

An accountant who had prepared financial statements did not need to be designated as an expert witness in order to provide testimony regarding those financial statements, per the Business Court’s ruling in A-1 Pavement Marking, LLC v. APMI Corporation, 2009 NCBC 15 (N.C. Super. Ct. June 26, 2009).  The opinion also discusses generally accepted accounting principles ("GAAP") relevant to financial statements of consolidated entities.

The issue in A-1 was Plaintiff’s calculation of a bonus due one of the Defendants, which was to be based on Plaintiff’s gross profits. The Plaintiff’s consolidated financial statements had eliminated a significant receivable due from a subsidiary. The Defendant asserted that his bonus would have been substantially higher with the inclusion of that receivable in the gross profit calculation, and brought a claim under the North Carolina Wage and Hour Act.

The Plaintiff moved for summary judgment, relying on an affidavit from the accountant who had prepared the financial statements on which the calculation was based.  The Defendant objected to what it termed "improper opinion testimony," and argued that the accountant had never been designated as an expert witness.

Judge Diaz rejected the argument that the accountant was an undisclosed expert who shouldn’t be allowed to testify, holding:  Continue Reading Accountant Who Prepared Financial Statements Didn’t Need To Be Designated As An Expert Witness In Order To Testify

There were three North Carolina Supreme Court decisions today which are worth a mention, involving personal jurisdiction, depositions, and the North Carolina Whistleblower Act:

In the personal jurisdiction case, the Court reversed the Court of Appeals in an alienation of affections case, Brown v. Ellis.  The Court ruled that there was jurisdiction over the…

Eighteen new cases were designated to the Business Court during the month of May 2009.  Most are the usual disputes between members, partners, or shareholders of business organizations, but there are a few securities claims and a couple of trade secrets cases as well.

[Update: It’s actually nineteen new cases, I added the Napco case…

The Court of Appeals split today 2-1 on whether two partners with claims against a third partner for self-dealing and breach of opportunity could make an unfair and deceptive practices claim.  The case is White v. Thompson.  Judge Wynn wrote the majority opinion, and Judge Ervin dissented. 

The partnership was Ace Fabrication and Welding, the partners were White, Ellis, and Thompson.  Ace did several jobs for a large customer, but Thompson then secured a number of jobs from that customer on his own, without performing them with the partnership.

The other partners obtained a jury verdict on a breach of fiduciary duty claim, and were awarded damages of $138,195.  The trial court trebled the damages, but the Court of Appeals majority reversed. 

Its reasoning was that the claim was for a breach of partnership duties involving matters of internal management of the partnership, so the claim did not make out the "in or affecting commerce" requirement of a Section 75-1.1 claim.  It said that the Defendant’s activities had indeed harmed the partnership, "but had no impact in the broader marketplace."

Judge Ervin saw things completely differently.  He said:

"Impairing the ability of others to compete for work in this fashion is tantamount to unfair competition, a type of conduct which is clearly actionable" as an unfair and deceptive practice.

"The effect of such conduct was to deprive the partnership of the ability to actually perform certain specialty fabrication jobs . . . a fact which clearly implicates the ‘activities the business regularly engages in and for which it [was] organized.’"

"Depriving the partnership of the opportunity to perform these . . .  jobs inevitably affected its financial viability, producing an inevitable impact on competitive conditions in the market for the performance of . . . jobs in the area served by the partnership."

The North Carolina Business Court has faced the issue of what is "in or affecting commerce" on a number of occasions.Continue Reading Court Of Appeals Rules That Partner’s Self-Dealing Isn’t “In Or Affecting Commerce” And Isn’t An Unfair And Deceptive Practice