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Monday, November 26, 2007, 8:56 PM

Washington Post Supports Rosenstein For Fourth Circuit

Here's an editorial from Saturday's Washington Post supporting President Bush's latest nominee for the Fourth Circuit, Maryland U.S. Attorney Rod Rosenstein, and criticizing Maryland's senators for playing politics with the nomination.

Tuesday, November 20, 2007, 8:19 PM

Fourth Circuit Issues Significant FLSA Case

Yesterday the Fourth Circuit handed down a decision in an employment class action against Sara Lee arising from the company's failure to compensate hourly employees for time spent complying with its mandatory uniform and dress policy at its Tarboro bakery (which makes cheesecakes, layer cakes, pastries, muffins, etc.). The case is Anderson v. Sara Lee Corp. The decision was written by Judge King and joined by Judges Wilkins and Niemeyer.

The action was filed in superior court, but Sara Lee removed it to the EDNC, where Judge Howard dismissed some claims under Rule 12(b)(6) and later, after discovery, granted summary judgment to Sara Lee on the remainder. The plaintiffs appealed. The Fourth Circuit disagreed with much of Judge Howard's reasoning.

First, the Fourth Circuit agreed with Judge Howard that the plaintiffs failed to state claims for conversion and unfair trade practices, and thus affirmed the Rule 12(b)(6) dismissal of those claims, because the North Carolina Supreme Court has not recognized causes of action for conversion or unfair trade practices in employer-employee disputes over unpaid wages, and there is no basis for concluding it would do so if given the opportunity. The Fourth Circuit cited the familiar line of cases holding that Chapter 75 (G.S. 75-1.1) doesn't normally cover employment disputes. While there are exceptions to that general rule (including, ironically, a case brought by Sara Lee -- see Sara Lee Corp. v. Carter, 519 S.E.2d 308 (N.C. 1999)), the exception doesn't apply in a wage dispute.

Second, the Fourth Circuit held that Judge Howard erred in dismissing the plaintiffs' fraud claim under Rule 12(b)(6). This claim alleged that Sara Lee made a false promise, at the time class members were hired, to pay them for all time compensable under the FLSA, and then concealed the compensability of time spent adhering to the uniform and dress policy. As for the element of reasonable reliance, the complaint asserted that "Class Members did not know and could not have reasonably discovered that they were entitled to compensation that was not being paid to them because of the comparative difference in power and knowledge between them and Sara Lee," and that they "reasonably relied on Sara Lee's promise to pay agreed upon hourly compensation." Judge Howard had concluded that Sara Lee's failure to compensate the workers wasn't intentional (hence no intent to deceive) but instead was, at worse, based on a misinterpretation of the Fair Labor Standards Act (FLSA). The Fourth Circuit held, however, that even if evidence ultimately may show that an FLSA violation was unintentional, such a determination shouldn't be made at the Rule 12(b)(6) stage. Cf. IntraComm, Inc. v. Bajaj, 492 F.3d 285 (4th Cir. 2007) (affirming district court's conclusion, at summary judgment stage, that employer's misclassification of employee as FLSA-exempt "was done in good faith" in view of ambiguity in applicable regulation).

Third, the Fourth Circuit held that Judge Howard erred in holding that the remaining claims -- for breach of contract, negligence, and fraud -- are not preempted by the FLSA. The Fourth Circuit held these state law claims are indeed preempted under principles of conflict preemption, because they all depend on establishing that Sara Lee violated the FLSA, either in good faith or willfully. The Court's preemption analysis is quite extensive. The key here is that the state law claims were deemed to be duplicative of an FLSA claim in the sense that the claims were predicated on violations of the FLSA's requirements. This apparently creates a circuit conflict. Certainly district courts have been all over the place on this preemption issue.

It should be noted that the Fourth Circuit rejected Sara Lee's argument that preemption should result in a final judgment for Sara Lee that would end the action. Instead the Court remanded for a dismissal without prejudice to "give the Class Members an opportunity to pursue any FLSA claims they may possess." So it appears that this action, originally filed in January 2003, is about to restart as an FLSA class action.

Womble Carlyle FLSA Blog

COA Rejects Standing To Challenge Strip Club Permit

Today in Mangum v. Raleigh Board of Adjustment the NC Court of Appeals (COA) held that a group of petitioners lacked standing to challenge a decision by the Raleigh Board of Adjustment (Board) to grant a special use permit to a "[Gentleman's]/Topless Adult Upscale Establishment."

The Board had held a hearing at which a group of nearby property owners (NPOs), including the owner of the famous Angus Barn restaurant, testified that the proposed adult establishment would have adverse secondary effects on their properties. But the Board decided to grant the special use permit. The NPOs then petitioned for certiorari, contending they were "aggrieved parties" entitled to challenge the Board's decision. See G.S. 150A-388(b) (aggrieved parties may petition for cert to contest a Board of Adjustment decision). The trial court held that they had standing and reversed the Board's decision approving the special use permit.

The COA, however, held that the NPOs were not "aggrieved parties"; thus, they had no standing to challenge to Board's decision. Under a line of COA cases, an NPO isn't an aggrieved party unless it can show some special damage distinct from the rest of the community, particularly damage effecting a reduction in the NPO's property value. Even though the NPOs in this case alleged that the proposed adult club would have adverse effects on their properties, including inadequate parking, safety and security, trash, and noise, the COA held that the NPOs failed to allege and show special damages distinct from the rest of the community. They didn't allege or submit evidence showing that the value of their properties would decrease as a result of the proposed use.

Accordingly, the COA held that the NPOs had no standing, meaning the court had no jurisdiction. Thus, the COA vacated the trial court's order and reinstated the special use permit issued by the Board. The adult club apparently will go forward.

COA Splits On Appealability Of Denial Of Motion To Dismiss

In two companion cases today styled Reid v. Cole (see here and here), the NC Court of Appeals (COA), over dissent, permitted interlocutory appeals from a trial court order which denied a motion to dismiss. The COA did so without deciding whether a substantial right was at stake, by electing in its discretion to grant a writ of certiorari. In fact, the appellants in one of the companion cases failed to file a timely notice of appeal, but the COA elected to cure that defect, too, by granting a writ of certiorari. (The majority then affirmed on the merits.)

Judge Hunter authored the majority decisions, joined by Judge Wynn.

Judge Jackson dissented. She concluded that no substantial right was implicated and there was no basis for granting a writ of certiorari in what seemingly was a garden variety interlocutory appeal.

The lesson of this case: don't forget about the writ of certiorari if you're pursuing an interlocutory appeal.

COA Decisions Today

The NC Court of Appeals released 15 published decisions today, of which 10 are civil (including two companion cases) and 5 are criminal (I count as criminal a challenge to the State's DUI-related suspension of a driver's license). There were only a couple of dissents. More on these cases later.

Rod Rosenstein Nominated To Fill 4th Circuit Seat

Click here to read a Washington Post review of Maryland U.S. Attorney Rod J. Rosenstein and his chances at confirmation. President Bush nominated Rosenstein late last week to fill a 4th Circuit vacancy.

Monday, November 19, 2007, 3:55 PM

Fourth Circuit Affirms Victory For Microsoft

Today the Fourth Circuit affirmed District Judge Motz's decision in GO Computer, Inc. v. Microsoft, an antitrust action. The suit alleged that Microsoft attempted to thwart GO's attempt to enter the PC operating system market and that Microsoft stole GO's technology. The claims date back some 20 years. The Fourth Circuit, in an opinion by Judge Wilkinson, agreed that the claims are barred by the four-year statute of limitations. The Court rejected GO's argument in support of tolling the statute of limitations. The Court reaffirmed that tolling by fraudulent concealment has no application if the plaintiff was on inquiry notice -- i.e., had notice of information which would've prompted a reasonable person to investigate. The Court rejected GO's argument that this due-diligence requirement doesn't apply unless the plaintiff could've discovered the full extent of the fraud: "Inquiry notice is triggered by evidence of the possibility of fraud, not by complete exposure of the alleged scam." The Court continued, "Fraud by its nature is something perpetrators take pains to disguise, and plaintiffs' notion that allegedly concealed fraud excuses the need for any diligence on plaintiffs' part would permit statutory periods to be tolled indefinitely, even when plaintiffs could reasonably be expected to bring suit."

Fourth Circuit Issues Another WARN Act Decision

On Friday, in Meson v. GATX Technology Services, the Fourth Circuit handed down another WARN Act decision. This one interprets the Secretary of Labor's "mobile worker" regulation used to interpret the Act's "single site of employment" concept. See 20 C.F.R. 639.3(i)(6).

Saturday, November 17, 2007, 1:19 PM


In Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC, the Fourth Circuit this week ruled no confusion between canine toys and couture. Haute Diggity Dog makes dog toys, "Chewy Vuitons," modeled after Louis Vuitton purses. Louis Vuitton sued for trademark and copyright infringement. The Fourth Circuit affirmed summary judgment for Chewy and against Louis. The Fourth Circuit held that "[t]he satire is unmistakable," and that Chewy "conveys a joking and amusing parody" and "irreverently presents haute couture as an object for casual canine destruction."

Tuesday, November 13, 2007, 5:44 PM

NC SCT Oral Argument In Rules Violation Case

Today, the Supreme Court heard oral argument in an appeal from Dogwood Dev. & Mgmt. Co. v. White Oak Transp. Co., an appeal dismissed for rules violations by a split COA, with Judge Hunter dissenting. Dogwood puts before the Court the meaning of the Supreme Court's State v. Hart and reconciling the mandatory nature of the rules and the various sanctions, including but not limited to dismissal, provided by the Rules of Appellate Procedure.

Friday, November 09, 2007, 2:02 PM

LLC Member-Manager Conducting LLC's Business Shielded By Workers' Comp. Exclusivity

In Hamby v. Profile Products, LLC, the NC SCT held today, in an opinion authored by Justice Newby, that an LLC member-manager conducting LLC business is shielded from an injured worker's negligence suit by workers' compensation exclusivity. Hamby is an important decision for LLCs, settling the question of whether member-managers who conduct LLC business are shielded from injured workers' suits like those who conduct the business of other entities like corporations. The SCT's reversal of the split COA decision in Hamby means that the member-managers of NC's over 100K LLCs won't be exposed to civil liability so as to call into question the wisdom of using the LLC as a business form.

In Hamby, an injured worker and his wife sued for injuries sustained on the job at a wood chip plant. Plaintiffs sued, among others, Mr. Hamby's employer, Terra-Mulch Products, LLC, as well as Terra-Mulch's member-manager, Profile Products, LLC. The trial court granted summary judgment for Terra-Mulch, which was shielded from such a suit by workers' compensation law, but denied summary judgment as to Profile. Profile appealed.

A split COA panel dismissed Profile's appeal as interlocutory. Crucially, the COA majority indicated that the appeal did not affect Profile's substantial right to avoid multiple trials on the same issues because Profile's issues were not identical to Terra-Mulch's issues. The COA indicated that while Terra-Mulch, the employer, was shielded by workers' compensation exclusivity except for gross negligence, Profile, Terra-Mulch's undisputed member-manager, was not similarly protected from an ordinary negligence claim, which plaintiffs purported to bring against Profile.

The SCT reversed. The SCT noted the interlocutory nature of Profile's appeal but recognized that if the extent of Profile's liability is the same as Terra-Mulch's, and if Profile is shielded by workers' compensation exclusivity like Terra-Mulch, there is indeed a risk of inconsistent verdicts on the same issues. The SCT thus answered those questions.

The SCT noted that workers' comp. law ensures that injured workers receive benefits but in turn prohibits workers from seeking more from employers through lawsuits. Workers' comp. is thus generally an injured worker's exclusive remedy as to the employer, and, critically, also as to those doing the employer's business. The "decisive question", therefore, was whether Profile was conducting Terra-Mulch's business.

To answer that question, the SCT looked to LLC law and the role of the member-manager. The SCT noted that because Terra-Mulch was a Delaware LLC, its member-manager liability was determined by Delaware law--though the SCT noted that Delaware LLC law is in accord with NC LLC law. The SCT noted that the LLC is a recent statutory creation combining elements of corporations and partnerships. Among other LLC characteristics, LLCs are run by managers, who have combined corporate officer/director authority and who may be natural persons or business entities. LLC owners are called members. And both members and managers have the power to bind and act on behalf of an LLC. Indeed, the SCT held that "when a member- manager acts in its managerial capacity, it acts for the LLC, and obligations incurred while acting in that capacity are those of the LLC. Accordingly, when a member-manager is managing the LLC's business, its liability is inseparable from that of the LLC." The SCT noted that LLCs may change such statutory defaults by contract, but noted that in this case, Terra-Mulch's operating agreement "vests full managerial powers in its member-manager Profile and does not alter Profile's limited liability."

Pursuant to applicable law and agreement, therefore, "Profile manages Terra-Mulch's business with limited liability for actions it takes as manager," i.e., Profile conducts Terra-Mulch's business -- the touchstone for workers' compensation exclusivity. Profile, therefore, like Terra-Mulch, was shielded from plaintiffs' lawsuit: "[A]s the member-manager of Hamby's employer Terra-Mulch Products, L.L.C., Profile was 'conducting [the employer's] business' within the meaning of the Workers' Compensation Act and is thus entitled to the exclusivity provided by statute." And the SCT made explicit that Profile's being a business entity rather than an individual did not at all change the analysis.

Justice Timmons-Goodson dissented. Justice Timmons-Goodson believed that the appeal was interlocutory, should not go forward, and that in any event she "cannot agree with the majority's holding granting Profile immunity on the basis of its LLC status."

NC SCT Decisions Today

The NC Supreme Court (SCT) handed down decisions and orders today.

As for the decisions (and excluding two in which discretionary review was improvidently allowed): the SCT issued 11 decisions, of which seven were criminal and four were civil. The 11 decisions produced six full or partial reversals. Justices Newby and Brady each authored three decisions. The only other non-per curiam was written by Justice Martin. The criminal decisions included a unanimous affirmance of the conviction of Michael Peterson. The civil decisions included a significant case about which Sarah will post later: Hamby v. Profile Products, LLC. (Sarah worked on the appeal with our colleague Burley Mitchell. They prevailed.)

As for the orders, the SCT granted discretionary review in two cases: one on a petition by the AG to review the grant of a new trial in a criminal case, the other a petition by a medmal plaintiff in a case where the Court of Appeals (COA) affirmed summary judgment for the defendants (an obstetrician and clinic). The case is Crocker v. Roethling, and the COA opinion is here. The case concerns expert testimony on the standard of care. The next batch of orders is scheduled to be released next month on December 7, 2007.

Thursday, November 08, 2007, 12:54 PM

NC SCT Petitions, And Perhaps Opinions, Tomorrow

The NC Supreme Court is expected to file decisions on petitions, and perhaps opinions, tomorrow.

Wednesday, November 07, 2007, 3:03 PM

Fourth Circuit: Equal Protection Clause Not A Means For Policing Economic Policy

In Van Der Linde Housing, Inc. v. Rivanna Solid Waste Authority, the Fourth Circuit underscored that governmental entities have a free hand in devising economic policies and creating differentiated fee structures as long as those don't conflict with "elemental constitutional premises."

Van der Linde was a waste services business, and Rivanna Solid Waste Authority, a governmental entity fixing waste disposal fees. The Authority, among other things, negotiated waste facility space for waste haulers like Van Der Linde and charged a fee. Van der Linde sued, claiming that it had to pay the fee while another waste company, Allied Waste Systems, was spared.

The "extremely rational basis" for the discrimination, as the Fourth Circuit pointed out, was that Allied owned a waste facility and wasn't, like Van Der Linde, a hauler using others' space that the Authority helped arrange.

Van Der Linde argued that the differentiated fees could lead to negative unintended results like the monopolization of waste collection services. But the Fourth Circuit pointed out that the "Equal Protection Clause does not require the government to pursue sound economic policy, only one that does not offend entrenched constitutional principles."

Tuesday, November 06, 2007, 9:55 PM

More Dismissals For Rule Violations

Today the Court of Appeals (COA) dismissed two civil cases for rule violations: Capps v. NW Sign Indus. of N.C., Inc. and Selwyn Village Homeowners Ass'n v. Cline & Co. Both were authored by Judge Tyson. Both were heard the same day by the same panels: Judges Tyson, Elmore, and McGee. These cases are discussed below. Also discussed below are two more rule violations cases decided today. One is the remand decision in Walsh v. Town of Wrightsville Beach, in which the panel (last year) initially dismissed for rule violations over a dissent, resulting in a Supreme Court reversal and remand for reconsideration in light of State v. Hart. Finally, we discuss a criminal case decided today in which the COA declined to dismiss for a rule violation.

Capps v. NW Sign Indus. of N.C., Inc.

Judge Tyson's majority opinion identified the following rules violations, both dealing with assignments of error:

1. The assignments of error referenced the first page of the trial court's order. This was deemed a violation of the requirement that assignments of error must include specific record record references. This subjected the appeal to dismissal.

2. Appellants' brief, after each question presented, cited all 34 assignments of error, without specifying which assignments corresponded to each question. This was deemed "sufficiently egregious to warrant dismissal."

The majority emphasized that the appellee moved to dismiss the appeal and that thereafter the appellants didn't move to amend the record to correct their assignments of error or to amend or substitute their brief to correctly identify the specific assignments of error correlating to each question presented.

Judge McGee dissented. She would impose a sanction but not dismiss the appeal. She observed that after State v. Hart was decided by the Supreme Court six months ago, the COA had declined to dismiss appeals despite multiple rules violations, including violations similar to those in Capps. See Peverall v. County of Alamance and McKinley Bldg. Corp. v. Alvis. Both Peverall and McKinley were issued over dissents by Judge Tyson, who voted to dismiss the appeals. But another post-Hart case was cited by the Capps majority today: Dogwood v. Dev. & Mgmt. Co. LLC v. White Oak Transp. Co., and it (unlike Peverall and McKinley) did dismiss an appeal for rule violations. Dogwood was authorized by Judge Tyson over a dissenting opinion.

Selwyn Village Homeowners Ass'n v. Cline & Co.

The Court's opinion identified the following rule violations:

1. Appellant's brief referenced the assignments of error after the questions presented but failed to follow those references with the pages at which the assignments of error appear in the record. "Defendant's failure to identify any assignment of error by the page where it appears in the record following the question presented . . . subjects its appeal to dismissal."

2. Appellant committed format errors at variance with the Appendices to the Rules: (a) the index to the brief didn't have a 5" line (i.e., didn't have extra 3/4" margins); (b) the captions and headings were double-spaced rather than single-spaced; and (c) the index to the appendix following the appellant's brief didn't show the pages of the brief at which the appendix was cited.

Thus, the panel deemed technical format errors sufficiently egregious to warrant dismissal. As in Capps, the panel emphasized that a motion to dismiss the appeal was filed and that appellant made no attempt to correct, amend, or substitute the brief. Interestingly, Judge McGee joined this decision even though she dissented in Capps.

Walsh v. Town of Wrightsville Beach

This case was dismissed for rules violations by a split COA in August 2006. The violations:

1. Appellant's assignment of error lacked proper references to the record.

2. Appellant's brief contained no reference to his assignment error.

Judge Hunter dissented, and six months ago the Supreme Court issued a per curiam decision reversing the COA and remanding "for reconsideration in light of our decision in State v. Hart" which was decided that same day.

Today the COA issued the remand decision in Walsh. The Court didn't discuss the rule violations or Rule 2, but instead proceeded straight to the merits. Yet the rule violations in Walsh were the same violations identified in today's Capps decision discussed above (violations of Rules 10(c)(1) and 28(b)(6)). Thus, today two different COA panels have issued what appear to be conflicting decisions. The only meaningful difference in the two cases, it appears, is this: in Capps the appellee moved to dismiss; in Walsh the appellee did not.

State v. Parker

In State v. Parker, a criminal case decided today, the appellant violated the rules by failing to include a statement of the standard of review, but the Court declined to dismiss, holding that, while violation of this rule may result in dismissal, the "Rules of Appellate Procedure allow for the imposition of less drastic sanctions, a remedy which is particularly appropriate in a criminal matter. Therefore, we elect to chastise defense counsel with an admonishment to exercise more diligence in stating the standard of review in briefs prepared for this Court."


After Hart, the COA has issued a handful of decisions in cases involving rule violations. In McKinley, Peverall, and Walsh, the panels didn't dismiss the appeals. They decided the merits. In Dogwood, Capps, and Selwyn, however, the panels voted to dismiss the appeals. Because dissents issued from the dismissals in Dogwood and Capps, the Supreme Court may have another opportunity to weigh in on this debate. Dogwood has already been briefed in the Supreme Court and is awaiting an argument date.

COA Affirms $1.8M Verdict In "Toxic Workplace" Suit

Today, in Cameron v. Merisel Properties, Inc., the Court of Appeals (COA) affirmed a jury verdict against a Cary-based computer company for mold-related illness. Defendant's building had a history of leaks and dampness. The plaintiff was employed there for two years. He contended that toxic molds in the workplace caused irreversible damage to his inner ear organ responsible for balance. The jury awarded $1.6M to him and $200k to his wife for loss of consortium. The COA rejected the defendant's challenges to the evidence of causation.

Divided COA Rejects Circumstancial Evidence Of Negligence As Too Speculative

In an interesting case today, the Court of Appeals (COA) affirmed summary judgment for the defendant in a negligence case. The case is Peerless Insurance Co. v. Genelect Serv., Inc.

The case arose from a fire at an Asheville home. The insurer (as subrogee) filed suit against defendant alleging that defendant's maintenance of a home generator caused the fire. The generator was serviced six weeks before the fire. In the six weeks between the service call and the fire, Asheville was hit by Hurricanes Frances and Ivan. Because of the hurricanes, the generator was operating during that entire period. The fire inspector found that the generator's extension/exhaust pipe was facing the ground about 2 inches into mulch. The plaintiff had an engineering company determine that heat from the exhaust could have started the fire by igniting the mulch.

The COA held that the plaintiff was alleging negligence with nothing more than mere speculation. "Once defendant produced evidence which showed that the last maintenance inspection was normal, the burden shifted to plaintiff to produce specific evidence, not speculation, that defendant's actions were responsible for the fire." The Court concluded that "the exhaust pipe being found post-fire pointed down and close to the mulch surrounding the generator is not circumstantial evidence of defendant's negligent maintenance." Why? "Between the time [defendant's] inspection was made and the time the fire investigator for Peerless investigated the fire scene, there had been two hurricanes, torrential rainfalls, fire hoses with high water pressure, firemen crawling through the window above the generator, and the fire itself. Thus, any observation that the muffler was pointed down at a 'slight angle' and covered with mulch is insufficient to submit the case to the jury. There are far too many other possible causes of the unsafe condition, and plaintiff gave no evidence to support the chosen theory that negligent maintenance occurred."

Judge Stroud dissented. She observed: "The exhaust pipe was not loose or easily moved from its position, either before or after the fire. In fact, the evidence is that the pipe was firmly secured in position by a clamp and a U- bolt. One of the inspectors after the fire had to remove the clamp and U-bolt as part of his inspection and noted that the clamp was 'secured right against the back cover of the generator.' This would indicate that the exhaust pipe had not been moved by rain, wind, fire hoses, or firemen. . . . [T]here is no evidence whatsoever that rain or wind could have changed or did change the position of the exhaust pipe, which was found firmly bolted into position. There was no evidence showing that torrential rain would result in any flow of water which might have moved the mulch around the generator."

COA Upholds $25k Attorney's Fee On $7k Jury Verdict

Today the Court of Appeals (COA) upheld a $25,000 attorney's fee award to the attorney of a plaintiff who recovered $7,000 in a jury trial. The case is Wright v. Murray.

G.S. 6-21.1 says that when a plaintiff recovers $10,000 or less in a personal injury suit, the trial court may allow plaintiff's attorney a reasonable fee upon a finding that there was an unwarranted refusal by the insurance company to settle. The purpose of this remedial statute is to provide relief for a person who has sustained injury or damage in an amount so small that a suit may not be feasible.

In this case, defendant had offered $8k in mediation and had made an offer of judgment for $8,001. The trial court found that the offer of judgment was less than judgment finally obtained because, in addition to the $7,000 verdict, the trial court had awarded $3,000 in costs.

COA Majority Narrows Immaterial Irregularity Statute Allowing Belated Tax Assessments

In In the Matter the Appeal of Tyleta W. Morgan, the COA split today over whether taxes belatedly assessed on property mistakenly not previously assessed was proper as an "immaterial irregularity" under N.C. Gen. Stat. sec. 105-394.

In Morgan, the property owners listed a residence on their tax forms, but when the residence was appraised in 1999 and 2003, it went unassessed. Then, in 2004, the county tax assessor's office assessed back taxes on the residence for 1995-2003. An appeal ensued.

N.C. Gen. Stat. sec. 105-394 states that "[i]mmaterial irregularities in the listing, appraisal, or assessment of property for taxation or in the levy or collection of the property tax ... shall not invalidate the tax imposed upon any property or any process of listing, appraisal, assessment, levy, collection, or any other proceeding...." The statute provides examples of immaterial irregularities, including "[t]he failure to list, appraise, or assess any property for taxation or to levy any tax within the time prescribed by law."

The COA majority indicated that even though a failure to list and assess within the prescribed time period was expressly listed as an immaterial irregularity, N.C. Gen. Stat. sec. 105-394 is meant to cover only cases where the tax assessment would have been valid but for a clerical or administrative error. The majority indicated that here the tax assessor's failure to timely assess the Morgan residence was not merely due to a clerical or administrative error, was therefore not immaterial, and that the failure therefore could not now be rectified.

Judge Geer dissented. Judge Geer stated that the majority was inserting language into the statute by requiring that the "failure to list, appraise, or assess any property for taxation or to levy any tax within the time prescribed by law" be due to clerical or administrative errors, whatever exactly those might be. Judge Geer acknowledged competing policy concerns, e.g., fairness to the individual tax payer versus equity in taxing all property of all taxpayers. Judge Geer underscored that the legislature, not the court, is to choose amongst those policies in crafting the law that the judiciary applies. In the end, while "it may well be troubling that a taxing authority can, under the immaterial irregularity provisions ... go back 10 years to assess property that the authority has neglected to assess in a timely fashion through no fault of the taxpayer", Judge Geer would hold that "[w]hether a County should be able to do so is ... a question for the General Assembly and not for the courts."

Lemon Case A Vehicle For Practice Reminders

In Greene v. Royster, the COA today reminded counsel of some practice pitfalls.

In Greene, plaintiff purchased from defendants, doing business as East Coast Imports, a car she was told was a 1993 Saturn with 77 K miles. Instead, plaintiff got a 1992 Saturn with 227 K miles that had been denominated a salvage-only vehicle not fit for the road. Plaintiff sued for fraud and unfair and deceptive trade practices and got a judgment and damages, including punitives, in her favor. The defendants appealed.

In the context of the defendants' appeal, the COA noted some practice pitfalls. First, the COA highlighted the defendants' reliance on language from a dissent in a case later affirmed by the Supreme Court. Second, the COA refused to review whether the punitives were unconstitutional because the constitutionality issue had not been raised before the trial court. Third, the COA highlighted the importance of knowing your standard of review. The COA stated that while 59(a)(8), seeking a new trial due to errors of law, may garner de novo review, 59(a)(5), (6), and (7), those invoked by the defendants here, are reviewed only for abuse of discretion. Fourth, the COA was unable to consider jury selection and closing arguments, bases for defendants' Rule 59 motion, because they were not in the transcripts or record. And fifth, the COA indicated that one ground for the Rule 59 motion -- that one defendant had not participated in the transaction with the plaintiff -- had been essentially waived due to the lack of a timely objection in the trial court.

Corporate Agents Can Be Reached By NC Courts For Their Corporate Acts

In Brown v. Refuel America, Inc. et al., the COA underscored that NC courts can gain personal jurisdiction over corporate agents based on their NC business conduct.

In Brown, the individual defendants were Refuel' s president and its CEO, both of whom were also directors, and neither of whom was a resident of NC. The individual defendants, among other things, came to NC on business, communicated with the plaintiff while in NC, and accepted money from plaintiff while in NC. Nevertheless, the individual defendants argued that that conduct "did not count" for personal jurisdiction purposes because the individual defendants were acting as corporate agents.

The COA disagreed and indicated that the individual defendants were not shielded as individuals by their status as Refuel officers. Instead, personal jurisdiction is individually assessed, and the individual defendants' contacts to NC here were enough to subject them to NC jurisdiction.

The COA also mentioned, at the end of its opinion, that the plaintiff had moved for dismissal and sanctions based on frivolity. The COA noted that it found the appeal to be "without merit" but nevertheless "in our discretion, we decline to impose sanctions." Scary that a losing appeal -- and that means most appeals -- without mention of more, could be subject to a frivolity sanction but for the discretionary mercy of the court.

NC COA Reiterates: Watch Tone

In Mineola Community Bank, SSB v. Everson, the NC COA returned to a recent theme we've blogged on: propriety of tone.

In Mineola, defendants were subject to a Texas judgment, which the plaintiff domesticated in NC. Defendants asserted that the NC court lacked subject matter jurisdiction because the defendants were appealing in Texas. The COA disagreed, noting that the defendants could, but failed to, seek a stay of the judgment during their Texas appeal.

More notably, the COA sanctioned the defendants, who were pro se, under Appellate Rule 34. The COA focused on the defendants' (1) "deliberate and unwarranted attack upon the personal integrity of plaintiff's counsel" who did not present to the trial court that the defendants were appealing the Texas judgment (the defendants also did not raise the issue before the trial court); and (2) an unargued assignment of error alleging that the trial court judge "committed fraud on the court by failing to uphold the doctrine of stare decisis and Rule of Law thereby failing to perform his judicial functions impartially." The COA stated that defendants' conduct could not be tolerated, even by pro se litigants, and taxed the defendants with double costs .

Today's NC Court of Appeals Decisions

The Court of Appeals issued 44 published decisions today, of which 28 are civil and 16 are criminal/juvenile delinquency. There were 6 dissents (one each by Judges McGee, Tyson, Geer, Stroud, Wynn, and Hunter).

There were two rules violation dismissals (see here and here).

And, in an unpublished case, the Court issued its remand decision in Walsh v. Wrightsville Beach. Originally the Court had dismissed this appeal for rule violations, over Judge Hunter's dissent. The Supreme Court issued a per curiam reversal and remanded for reconsideration in light of State v. Hart. In today's remand decision the Court goes straight to the merits without discussing the rule violation or Rule 2.

More on these cases later.

Friday, November 02, 2007, 3:04 PM

Tough Day of Oral Arguments for Court Of Appeals Panel

According to this article in the Virginia-Pilot, yesterday a panel of the N.C. Court of Appeals had a rough time getting through oral arguments during a special session at Elizabeth City State University, where bomb threats and construction noise prompted an evacuation and caused delays. The judges (McGee, Hunter, and Bryant) handled it graciously.

Thursday, November 01, 2007, 6:20 PM

Fourth Circuit Vacates Judgment Based On Ex Parte Hearing

Today the Fourth Circuit issued a decision vacating a judgment confirming an arbitration award because the district court reviewed the matter ex parte after allowing counsel to withdraw and refusing to continue the hearing.
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