Major Changes to Appellate Rules This Week

On October 1, some major changes to the North Carolina Rules of Appellate Procedure go into effect. While the changes touch on various areas, including electronic transcripts, pro hac vice admissions and secured leave, perhaps the most notable change is the abolishment of assignments of error. Repeat visitors to this blog will surely remember our covering a number of appeals dismissed due to assignments of error deemed faulty for one reason or another. I suspect no one will miss that. I might, however, miss the court's very visual comparison of overbroad assignments to hoop skirts... To see a redline of the rules and check out the changes, click here.

Blog Calendars Back This Week

Good morning. Our blog calendars are on their way back to the site. Look for them this week.

Judge Ann Marie Calabria Retiring from NC COA

The N&O reports that N.C. Court of Appeals Judge Ann Marie Calabria won't seek re-election when her term expires in 2010.

COA: Filed Rate Doctrine Bars UDTP Claims Related to Workers' Comp Rates Set by Rate Bureau

Today, in Stutts v. Travelers, the COA held that the "filed rate doctrine" applied and barred Plaintiff's claims of unfair and deceptive trade practices against his workers' comp insurer. Plaintiff applied for a workers' comp insurance policy through the NC assigned risk plan. The NC Rate Bureau assigned defendants as plaintiff's servicing insurance carrier. Plaintiff excluded himself from coverage under the policy, and did not have any employees for the policy periods of 2003 and 2004. In 2005, Plaintiff was injured on the job, and filed a workers' comp claim under his policy with defendants. Defendants denied coverage because Plaintiff had ddeclined to cover himself. Defendants did, however, return some premium to Plaintiff because he had no employees in 2003 and 2004.

Plaintiff filed suit against defendants alleging unfair and deceptive trade practices and demanding a return of his entire premium balance. He also filed a complaint with the Rate Bureau, which was dismissed.

The COA held that Plaintiff's suit was barred by the filed rate doctrine, which provides that "a plaintiff may not claim damages on the ground that a rate approved by a regulator as reasonable is nonetheless excessive because it is the product of unlawful conduct." The COA specifically noted that this doctrine applies to UDTP claims.

Plaintiff also argued that a risk of loss did not attach where the insured Plaintiff had no employees and was not covered himself, and thus there was thus no consideration for the insurance contract. The COA rejected this argument, holding that because Plaintiff might have hired employees during the covered period, a risk of loss did in fact attach.

COA Majority: Assignment of Promissory Note Also Assigns Associated Guaranty

Today the COA majority held that a guaranty executed contemporaneously with a promissory note "follows" the Note where the Note is later assigned to a party but the guaranty is not. The case is Self-Help Ventures Fund v. Custom Services.

Self-Help, a Certified Development Company, made a loan to Custom Services through the US Small Business Administration's 504 loan program. The individual defendants guaranteed the promissory note securing the loan. Self-Help assigned and delivered the Note and guaranties to the US Small Business Administration ("SBA"). The SBA later reassigned and delivered the Note to Self-Help, but did not the reassign guaranties to it.

Custom Services and the guarantors defaulted on the loan. Defendants argued that Self-Help was not a party in interest and could not enforce the guaranties because the SBA only assigned the Note back to Self-Help and did not execute a separate assignment of the guaranties.

The COA majority held that a transfer of a promissory note also operates as an assignment of an associated guaranty, even where the note is not referenced in the assignment. The majority further held that Self-Help was a real party in interest because it was the assignee of the Note, relying on N.C.R. Civ. P. 17(a) and the fact that the guaranty contracts contained a clear promise to repay and clearly spelled out any assignee's right to collect from the guarantors. The COA also noted that because the Note and guaranties were executed contemporaneously, they should be construed together.

Judge Wynn dissented, explaining that because the SBA did not explicitly assign the guaranty back to Self-Help, Self-Help was not the assignee and could not enforce the guaranties. Judge Wynn pointed out the unique structure of the SBA 504 loan program, which involves investors who purchase interests in debenture pools that fund the 504 loans. Judge Wynn thus noted that Self-Help and the SBA "undoubtedly shared the same interest in repayment" but were separate entities, and the guaranties had to be expressly assigned back to Self-Help in order for them to be enforced.

Belatedly Filed Record ≠ Dismissal, Executed Settlement Agreement = Enforceable

In Hardin v KCS Int’l, Inc., the NC COA ruled today that an appeal should not be dismissed just because the record was filed late. The Court then also held that a plaintiff who had entered into a settlement agreement couldn't pursue claims that he had released.

In this case, the plaintiff bought a defective yacht. When the manufacturer and seller refused to refund the plaintiff's money or give him a new boat, he sued. After the plaintiff sent discovery but before responses were received, the parties entered into a settlement agreement. The agreement contained a broad release of all claims in any way related to the boat dispute though didn't require dismissal of the action until all the repairs to the plaintiff's boat had been completed. Repairs were done, but the plaintiff wasn't satisfied and pursued his suit. At that point, the plaintiff found out that his boat had been in a collision with a tree when it was shipped from the manufacturer to NC. The manufacturer and seller moved to enforce the settlement agreement, and the trial court did. The COA affirmed.

The first issue the COA addressed was a motion to dismiss the appeal because the record was filed somewhat belatedly. The Court made clear that, while not an insignificant Appellate Rules violation, it also was not jurisdictional. The Court pointed out that the Supreme Court clarified , in Dogwood, that nonjurisdictional rules violations shouldn't normally lead to dismissal. So here, the COA chose taxing the appellant's lawyer with the printing costs, not dismissal.

On the merits, the COA, applying the summary judgment standard of review, held that the trial court was right to enforce the settlement agreement. First, the plaintiff had failed to either plead with sufficient particularity or show evidence of fraud as a basis for setting aside the settlement agreement. The Court noted in particular that fraud requires that the plaintiff wouldn't have been able to discover the problems through reasonable diligence. In this case, however, simple civil discovery would have gotten the job done. But the plaintiff instead chose to enter into a settlement agreement before the civil discovery responses rolled in, and the other side otherwise had no duty to disclose.

Second, the plaintiff claimed lack of consideration supporting the settlement agreement. However, resolving the law suit was itself the consideration for the settlement agreement. The Court also rejected the plaintiff's rescission argument that because the manufacturer failed to take all steps required by the settlement agreement, the agreement should be jettisoned. Rather, if the steps taken weren't sufficient, the plaintiff could enforce the settlement agreement or seek damages for its breach.

No Liability For Failing To Require / Install Seat Belts

In Biggers v Bald Head Island, the NC COA held today that the Village of Bald Head Island could not be held liable for failing to pass a law requiring that golf carts used in the village include seat belts. Likewise, the cart owner and rental agency could not be held liable for renting the cart without belts.

The (sad) facts of the case: While vacationing on Bald Head Island, where golf carts are commonly used to get around, a 6-year-old boy stood up in a moving cart and fell out. As a result of the fall, the boy suffered traumatic brain injuries that ultimately led to his death. The boy's parents and estate sued, their claims sounding in negligence (as opposed to products liability). The trial court granted summary judgment, and the plaintiffs appealed.

On appeal, the COA unanimously affirmed. The Court held that the Village couldn't be held negligent for failing to pass seat belt laws, that deciding what laws to pass/not pass is a legislative decision and not for the courts. The cart's owner and the business that rented it also could not be held liable, since there was, apparently, no duty to install seat belts in a product, a golf cart, that isn't made with them and does not typically have them, and the duty that did exist was met insofar as the golf cart was well-maintained and insured.

Barbara Milano Keenan's 4th Circuit Nomination Sent To Senate

The White House announced yesterday that the President has nominated Barbara Milano Keenan to the 4th Circuit and has sent the nomination to the Senate. Keenan currently serves as a Virginia Supreme Court Justice and has since 1991.

Hello + Today's COA Cases

Hi, folks, nice to be with you again. The COA filed 20 published opinions this morning--7 criminal, the rest civil. Look for more from us on these cases later today.

Oral Arguments in Citizens United v. FEC

Yesterday, Citizens United v. FEC, a case challenging restrictions upon political spending by corporations, was reargued before the United States Supreme Court. A copy of the transcript can be found here and the audio can be found here. Observers of the Supreme Court believe that this case may result in sweeping changes to the law related to political advocacy by corporations.

Court of Appeals Discusses the Use of Pleadings and Discovery in Support of Summary Judgment

In Asheville Sports Properties v. The City of Asheville, the plaintiff brought suit to recover funds spent on repairing damage that occurred when two sink holes developed on its property. The plaintiff contended that the city was liable for the repair costs because the City had a duty to maintain and repair the pipes.

In the course of affirming the trial court's decision to grant summary judgment for the City, Court of Appeals provided guidance to the bench and bar on what materials a trial court may properly consider when deciding a motion for summary judgment. The Court of Appeals held that in order to rely upon statements contained in a verified pleading, the pleading must demonstrate that the individual verifying the pleading had personal knowledge of the facts contained in the allegations and that the individual is competent to testify to those facts. Statements contained in a verified pleading that are made "upon information and belief" should not be considered by the trial court in deciding a motion for summary judgment.

Additionally, the Court of Appeals also held that a party may not rely upon its own unsworn responses to requests for production of documents to support a motion for summary judgment.

North Carolina Court of Appeals Decisions

Yesterday, the North Carolina Court of Appeals issued opinions in 27 matters. I hope to get notes up on some of the decisions shortly.

I apologize for getting to these opinions a day late, but I was out of the office for the last few days on business.