Former NC SCT Justice Webb Passes Away

Former Justice Webb, who served 12 years on the NC Supreme Court, passed away yesterday. Here's an article about his interesting life. A graduate of Columbia law school school, he practiced law in NY City, then in Wilson with Gov. Jim Hunt; he then became a trial judge, a Court of Appeals judge, and a Supreme Court justice.

COA Excuses Rule Violations

Today the Court of Appeals (COA) held that various violations of Appellate Rule 7 --regarding the preparation of the transcript – didn’t warrant dismissal of the appeal. The case is Lawrence v. Sullivan.

Appellant failed to file and serve written documentation of the transcript arrangement, as required by Appellate Rule 7(a)(1). The court reporter failed to produce the transcript within the 60-day deadline, as required by Rule 7(b), and the record contained no explanation of the court reporter's delay. Appellant didn’t seek (under Rule 7(b)) an extension of time for the court reporter to produce the transcript, even though the court reporter warned plaintiff before the 60-day deadline expired that the transcript wouldn’t be produced on time. The appellee thus argued that the proposed record on appeal wasn't timely served.

The COA deemed the Rule 7 violations to be nonjurisdictional failures that weren't egregious enough to warrant dismissal of the appeal. The COA reiterated its case law holding that "[i]f the court reporter fails to certify that the transcript has been delivered within the sixty-day period permitted by Appellate Rule 7(b), the thirty-five day period within which an appellant must serve the proposed record on appeal does not begin to run until the court reporter does certify delivery of the transcript. To hold otherwise would allow a delay by a court reporter, whether with or without good excuse, to determine the rights of litigants to appellate review."

The COA, however, offered this warning to appellant's counsel: "we strongly stress to plaintiff's attorney the importance of following the appellate rules and urge him to remember that 'when a court reporter fails to deliver a transcript within the time allowed by the appellate rules, the better practice is that appellant request an extension of time from the appropriate court.'"

COA Decisions Today

The NC Court of Appeals released 18 published opinions today. Seven are criminal cases; the other 11 are civil. More on these cases later.

NC COA LETS LITIGATION LOAN CASE PROCEED

In Odell v. Legal Bucks, LLC, the NC COA let the plaintiff proceed with usury, Consumer Finance Act and UDTPA claims against defendant Legal Bucks, a business that makes loans to litigants based on reviews of their cases' merits.

In Odell, the plaintiff in a personal injury case had financial difficulties and entered into an agreement with defendant Legal Bucks, whereby plaintiff received a $3000 loan and had to repay it from her recovery in her PI suit. Plaintiff ultimately settled her suit -- but instead of repaying Legal Bucks, she sued them, for, among other things, illegal gaming, champerty and maintenance, violations of the Consumer Finance Act, and unfair and deceptive trade practices. The trial court dismissed plaintiff's claims on dispositive motions, and plaintiff appealed.

The COA affirmed in part and reversed in part. The COA affirmed the dismissal of the illegal gaming claim. The COA held that the agreement here wasn't a bet because the parties desired the same outcome, that plaintiff recover, as opposed to taking opposite sides of an uncertain event. And the agreement was also not a wager because the plaintiff had interests in the suit other than just the possibility of a gain or loss, namely, her legal rights as to the other parties in the PI suit. Therefore, the gaming claim failed.

The COA also affirmed the dismissal of the champerty and maintenance claims. The COA noted that NC law, as opposed to that in other states, requires interfering in a lawsuit for a lender's involvement to become champertous. Here, the evidence indicated that Legal Bucks didn't interfere in the case but rather simply had a financial interest, not enough for these claims to proceed.

Plaintiff's usury claim, however, was allowed by the COA to go forward. The COA held that the plaintiff satisfied the 4 usury elements, 1) a loan or forbearance, 2) an understanding that the money owed would be repaid, 3) payment or agreement to pay interest at a rate higher than that allowed by law, and 4) the lender's corrupt intent to receive more interested that the legal rate.

Plaintiff's claim under the Consumer Finance Act also was allowed to roll forward. The Consumer Finance Act mandates that lenders of small loans ($10 K or less) charging interest rates above the legal rate be licensed by the Commissioner of Banks. Plaintiff alleged that Legal Bucks had no license.

And the COA let plaintiff proceed with her unfair and deceptive trade practices claim. Legal Bucks had disclosed the loan terms. But the COA held that Legal Bucks didn't disclose that the loan agreement violated the Consumer Finance Act, and that therefore the agreement had the capacity to deceive (i.e., the purported illegality was not disclosed). And further, the COA said that the loan agreement violated NC public policy to protect borrowers through interest laws.

As an aside, Legal Bucks made a motion for dismissal or other sanctions based the appellant's violations of the rules of appellate procedure. The COA declined to assess any penalty for what it called "stylistic" violations.

COA Says Voluntary Dismissal Without Prejudice Can Convert Interlocutory Order Into Appealable Final Judgment

Today in Goodman v. Holmes & McLaurin the Court of Appeals (COA) declined to dismiss an interlocutory appeal from an order granting and denying in part a Rule 12(b) motion to dismiss. The reason: after the order came down, the plaintiff voluntarily dismissed without prejudice the claims the trial court didn't dismiss, thus converting the interlocutory order into a final judgment, the COA said.

In moving to dismiss the appeal as interlocutory, the defendant naturally relied on Hill v. West, 177 N.C. App. 132, 627 S.E.2d 662 (2006) for the proposition that the voluntary dismissal without prejudice of the surviving claims cannot be used to render a partial dismissal order immediately appealable. After all, Hill said, in what appeared to be an alternative holding, that the plaintiffs couldn't convert a partial summary judgment into an appealable final judgment by dismissing the surviving claims without prejudice, because the plaintiffs remained at liberty to re-file their voluntarily dismissed claims. (Hill said, "If we were to entertain an appeal under these circumstances, an appeal would be possible from every interlocutory ruling which disposes of one or more claims as to one or more parties by taking a dismissal without prejudice as to the other parties and claims and later refiling the action. This was never intended by the General Assembly and will not be permitted.") But today the COA held that this portion of Hill was not controlling.

COA Holds That Equitable Defenses Don't Apply To Statute of Repose

Today in Goodman v. Holmes & McLaurin the Court of Appeals held that equitable defenses (e.g., equitable estoppel) don't toll a statute of repose unless the legislature specifically says so. This case involved the 4-yr statute of repose for professional malpractice actions.

COA Holds That No Class Notice Required For Involuntary Dismissal Of Class Action

In Kitchin v. Halifax County today, Plaintiffs argued the trial court erred by dismissing their class action lawsuit because notice was not given to members of the class before dismissal. They invoked Rule 23(c), arguing that its notice requirement applies not only to voluntary dismissals, but also to dismissals granted by the trial court. The COA disagreed, relying on a 70-year-old Fourth Circuit case, holding that Rule 23(c) requires notice only if the class action is voluntarily dismissed.

COA Issues Significant Arbitration Waiver Decision

Today the Court of Appeals (COA) issued a significant arbitration decision: the Court held that if a defendant loses a motion to compel arbitration, the defendant's failure to take an immediate interlocutory appeal may result in a waiver of the right to arbitration. The case is Gemini Drilling & Foundation, LLC v. Nat'l Fire Ins. Co. of Hartford.

Generally interlocutory orders aren't immediately appealable. An established exception, however, concerns an order denying a motion to compel arbitration. It's immediately appealable. Yet, even when an interlocutory order is immediately appealable, that doesn't mean it must be appealed immediately. Rather, it means the loser has the option to appeal immediately, or to defer the appeal until after the final judgment has issued.

That's what the defendant did in today's case. After losing its motion to compel arbitration, it decided to litigate and to wait to appeal until after a final judgment was entered against it on the merits. Then, on appeal, it contended that the trial court erred in denying the motion to compel arbitration. By failing to take the immediate appeal and instead litigating the case in court, the defendant waived its right to arbitrate the dispute, the COA held. Here's the relevant part of the COA's analysis:

"[A]fter Judge Jolly denied defendant's motion to compel arbitration, defendant actively litigated this dispute by seeking multiple extensions, engaging in discovery, and participating in a full bench trial. Plaintiff has been prejudiced by defendant's conduct: Plaintiff engaged in a trial that, although it occurred in a single day, was long enough to produce a 189-page transcript, twenty-seven exhibits, and five witnesses. Defendant delayed this trial through its requests for extensions, and the trial concluded fourteen months after Judge Jolly's denial of the motion to compel arbitration and twenty-three months after plaintiff filed its initial claim. Now, three years have passed since Judge Jolly entered his order and four since plaintiff filed this suit." Quoting the Second Circuit, the COA said that the objectives of the Federal Arbitration Act "would be defeated if a party could reserve its right to appeal an interlocutory order denying arbitration, allow the substantive lawsuit to run its course (which could take years), and then, if dissatisfied with the result, seek to enforce the right to arbitration on appeal from the final judgment."

The COA cautioned that it wasn't holding categorically that a defendant must immediately appeal such an interlocutory order to avoid a finding of waiver. "The determination arose from defendant's conduct and plaintiff's resulting prejudice, not merely from defendant's failure to immediately appeal Judge Jolly's order," the COA stressed. But the COA's analysis raises the risk of waiver in most cases in which a trial court denies a motion to compel arbitration. After all, if the defendant doesn't immediately appeal, the defendant will end up participating in the litigation in court--conducting discovery, filing motions, etc.--and thus will be subject to the type of waiver analysis applied by the COA today.

Hence the cautionary rule of today's case: if you lose a motion to compel arbitration, appeal immediately.

COA: No Sanctions Warranted For Rule Violations

Today in Yorke v. Novant Health, Inc. the Court of Appeals (COA) refused to dismiss an appeal (or issue any other sanction) despite several appellate rule violations. The appellant didn't timely settle the record on appeal (it was settled months beyond the deadline prescribed by the rules). The Court deemed this untimeliness a nonjurisdictional violation--i.e., the timeline in Rule 11(c)for settling the record on appeal isn't necessary to vest the COA with jurisdiction. And although the Court deemed it a substantial violation, the Court declined to impose sanctions.

The Court in Yorke also held that, in an appeal from a final judgment, the Court (per G.S. 1-278) can review an interlocutory order that was not enumerated in the notice on appeal, so long as: (1) the appellant timely objected to the order; (2) the order wasn't immediately appealable; and (3) the order involved the merits and necessarily affected the judgment. To be on the safe side, however, an appellant should identify in the notice of appeal each underlying order the appellant wishes to challenge on appeal.

In a separate case today, Kitchin v. Halifax County, the COA held that the appellant violated Rule 10(c) regarding the statement of assignments of error, but declined to dismiss or impose any other sanction.

COA Reiterates That Expert Fees Aren't Mandatory Costs

Today in Bennett v. Equity Residential, ERP Operating Ltd. P'Ship, the Court of Appeals reiterated that when a plaintiff voluntarily dismisses her case, Rule 41(d) doesn't require that the defendant's expert witness fees be assessed against the plaintiff as costs. They may be taxed at the trial court's discretion (if the expert is subpoenaed), but they aren't mandatory costs.

COA Frees Man Convicted of Kidnapping, Burglary, Etc.

In a case today involving the constitutional right to a speedy trial, the Court of Appeals tossed out the conviction of a man sentenced to more than 60 years in prison--for kidnapping, burglary, assault and battery, robbery with a dangerous weapon, and attempted first-degree sex offense, among other charges--holding that the State unfairly delayed his trial (for about five years). "Given the length of the delay, defendant's repeated efforts to expedite his trial, the overwhelming evidence that the delay could have been avoided if the State had exercised even the slightest care during the course of this prosecution, and the fact that this delay actually prejudiced defendant at trial," the Court ruled against the State, vacating the convictions and dismissing all charges with prejudice. A story from the N&O is here. (And for those who are curious, the panel couldn't plausibly be characterized as a liberal one: Judges McCullough, Tyson, and Stroud presided.)

COA Rejects Suit To Obtain Share Of Pope Estate

Today, in a dispute concerning Raleigh's prominent Pope family, the Court of Appeals ruled that Jane Forbes Pope, the widow of John W. Pope, Jr., is not entitled to a share of the money that her late husband transferred to the Pope family trust, which later transferred the funds to the John William Pope Foundation upon his death. The case is In re Estate of Pope. It's the first appellate case applying the State's Elective Share Act. (And it's a victory for my Raleigh colleagues Sarah Buthe and Johnny Loper, who represented the Foundation and the trustees of the Pope family trust.)

COA Decisions Today

The Court of Appeals issued 26 published decisions today. Only three are criminal cases. More on these decisions later.