COA: Party's Failure to Object to Rigorous Trial Schedule Does Not Preclude The Granting Of A New Trial

Today the COA held that Plaintiff's failure to object to the trial court's "harsh" and "unilaterally imposed" trial schedule did not preclude the court from awarding Plaintiff a new trial. The case is Boykin v. Wilson Medical Center.

Plaintiff sought damages from Defendants based on their alleged negligence. The parties' attorneys told the trial court that the trial would take at least seven days. Friday of that week was the 4th of July holiday, and the judge told the parties he wanted to finish the trial before the 4th of July. The trial ran until the late evening hours of that week and commenced early the following mornings. The jury returned a verdict in favor of Defendants, and Plaintiff moved for a new trial based on the “marathon trial schedule” and its impact upon jurors and lawyers. The trial court gave Plaintiff a new trial.

The COA held that the trial court has "traditional and inherent discretionary power" to grant new a new trial "when the ends of justice will be served," and the trial court did not abuse this discretion. Plaintiff's failure to object to the trial schedule did not prevent the trial court from granting a new trial or constitute invited error. Noting that the trial court "unilaterally imposed" the trial schedule after receiving no encouragement from the parties and a request that the trial take 7 days, the COA concluded that the rigorous trial could not be the result of any error invited by Plaintiff.

Today's COA Cases

For those whose gifts are wrapped and ornaments hung, the NC COA has provided you with holiday entertainment -- 14 published cases, 11 civil. More on some of them soon.

Webcast of 4th Circuit Nominee Hearing

For those looking for a nice, in-door activity on this cold afternoon, here you'll find a link to the webcast of the Senate Judiciary Committee's hearing for Judges Wynn and Diaz.

Review of NC 4th Circuit Nominees' Hearing...

from the N&O here.

NC Supremes Divided On Punitives Judgment Not Withstanding Verdict

In Scarborough v. Dillard's, Inc., the Supreme Court divided over the role of the court in ruling on motions notwithstanding the verdict as to punitive damages. Chief Justice Parker, writing for the majority, affirmed the trial court's entry of judgment notwithstanding the verdict in the defendant's favor as to punitive damages because punitive damages require clear and convincing evidence, which the majority held the plaintiff had not proffered.

The dissent, authored by Justice Timmons-Goodson and joined by Justice Hudson, would have, as did the Court of Appeals majority, reversed the trial court. The dissent stated that the majority conflated the burdens of production and persuasion and allowed the judge to usurp the jury's role in the persuasion equation in deciding whether the plaintiff had produced clear and convincing evidence in support of his punitive damages claim.

NC Supreme Court Affirms COA Opinion Finding That Forbearance of a Third Party Is Insufficient Consideration for Employment Contract

Today the N.C. Supreme Court affirmed per curiam a decision by a COA majority holding that a forbearance by a third party was insufficient consideration for an employment contract. The case is Franco v. Liposcience, Inc. Read the COA opinion here.

Richard Franco, Jr. was the VP of marketing at Liposcience, and his dad, Franco, Sr., was Chairman of the Board. Franco, Sr. was removed by the Board of Directors, and in connection with that removal Franco Sr. entered into a severance agreement with Liposcience through a severance letter. In December 2002 the incoming Chairman sent a "no retaliation letter" to Franco, Jr., stating that Liposcience wouldn't take any adverse employment action against him based on this relationship with Franco Sr.

Sure enough, Franco, Jr. was let go from Liposcience in February 2004. He claimed that his termination was due to his connection to his dad, who had allegedly begun making "accountability inquiries" to Liposcience employees. Franco Jr. sued Liposcience, claiming that the no retaliation letter formed a binding agreement between him and Liposcience, which Liposcience breached when they fired him.

The COA majority (Judges Wynn and Hunter) held that any promise by Liposcience that it wouldn't retaliate against Franco Jr. did not constitute any additional obligations on the part of Liposcience - Franco Jr. was already employed, and the letter didn't change any of his rights or benefits. Mere continued employment was thus insufficient consideration to form a binding agreement, and the no retaliation letter was not a valid contract.

Franco Jr. argued that consideration was supplied by Franco Sr. as a third-party beneficiary, because Franco Sr. negotiated for the no retaliation letter in connection with his severance agreement. But the COA majority noted that any promises in the no retaliation letter were not incorporated or made binding in Franco Sr.'s severance letter - the severance letter contained a merger clause but did not contain a reference to the no retaliation letter. The majority further noted that no applicable NC case law supported the notion that consideration could be found through action or lack of action by a third party, and that Franco Sr. was not a party to the action and had not sought to enforce his rights in any other lawsuit.

Judge Ervin dissented, saying that a forbearance of a third party may be sufficient to create consideration. Franco Sr. surrendered his right to pursue legal action against Liposcience related to his removal from the Board, and Judge Ervin explained that an email exchange between Franco Sr. and Liposcience showed that the severance letter referred to or included provisions of the retaliation letter. Judge Ervin reasoned that finding consideration here did not undermine the doctrine of at-will employment, but instead enforces freedom of contract. To the contrary, he explained, finding no consideration "substantially under[mines] a significant component of the bargain Franco Sr. made with Liposcience."

NC Supreme Court Opinions Today

The NC Supreme Court published 9 opinions today. More on a couple of them to follow...

NC 4th Circuit Nominee Hearings Next Week

We in NC have reason to be excited -- our 2 nominees to the 4th Circuit, Judges James Wynn and Albert Diaz, will have a hearing before the Senate Judiciary Committee next week. More here.

Fourth Circuit Speaks to Twombly

The Fourth Circuit recently provided guidance on what constitutes a legally sufficient complaint after the Supreme Court's Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) decisions.

In Francis v. Giacomelli, the Fourth Circuit recognized that the Supreme Court's Twombly and Iqbal rulings have dramatically changed the law related to Rule 12(b)(6) motions. The Court rejected the plaintiff's position that "a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) ... must be denied unless ‘it is clear that no relief could be granted under any set of facts that could be proved consistent with the [well-pleaded] allegations’ in the Complaint[.]'" After Iqbal,

the legal sufficiency of a complaint is measured by whether it meets the standards for a pleading stated in Rule 8 (providing general rules of pleading), Rule 9 (providing rules for pleading special matters), Rule 10 (specifying pleading form), Rule 11 (requiring the signing of a pleading and stating its significance), and Rule 12(b)(6) (requiring that a complaint state a claim upon which relief can be granted).

The requirements of these rules are designed to not only provide the defendant with notice of the claims against her, but also to "provide criteria for defining issues for trial and for early disposition of inappropriate complaints."

The Fourth Circuit went on to discuss that under Iqbal, courts must engage in a multi-step process to determine whether a complaint is legally sufficient. A court should first determine which portions of a complaint constitute facts entitled to the presumption of truth and those portions of the complaint that are nothing more than labels, conclusions, or a formulaic recitation of the elements of a cause of action. After making this distinction, the court must engage in a context-specific review and determine whether the facts contained in the complaint establish a claim for relief that is plausible on its face.

The "facial plausibility" standard - while lacking a concrete definition - requires the complaint to allege sufficient facts so that the court may infer more than the mere possibility of misconduct on the part of the defendant. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not ‘show[n]’ — ‘that the pleader is entitled to relief,’" as required by Rule 8."

Because members of the bench and bar are still attempting to determine the contours of the facial plausibility standard, it is likely that Francis will be just one of a number of opinions that address the impact of Twombly and Iqbal on civil litigation.

COA: County Has No Statutory Authority to Impose School Impact Fee on Land Developers

Today the COA held that a county did not have statutory authority to impose school impact fees on land developers. The case is Union Land Owners Association v. County of Union.

Union County enacted the Adequate Public Facilities Ordinance (APFO), which assessed the impact of residential development on schools and spelled out guidelines for determining whether the county would grant or deny building permits. The APFO also established procedures for calculating fees owed by residential land developers if their developments would overburden nearby schools.

The COA held that Union County had no authority to enact the APFO because it did not fall under any of the statutory powers given to the county by the General Assembly. The statute relating to the county's police power (N.C. Gen. Stat. Section 153A-121) did not provide an independent basis for the APFO, because the fees assessed in the APFO related to the county's power to regulate the development of real estate, and instead implicated the zoning and subdivision statutes.

The COA further explained that the APFO could also not have been enacted under the county's zoning powers delineated in N.C. Gen. Stat. Sections 153A-340 and 153A-341, which only allow a zoning ordinance to "restrict the height, number of stories and size of buildings and other structures, the percentage of lots that may be occupied, the size of yards, courts and other open spaces, the density of population, and the location and use of buildings, structures, and land for trade, industry, residence, or other purposes."

Finally, the COA held that the county's subdivision powers did not allow it to enact the APFO, noting that the subdivision statutes (Sections 153A-330 et seq.) do not authorize a county to adopt a land use regulation ordinance under which a developer may be forced to pay money.

The COA concluded that the General Assembly had not given the County the specific power to levy the fees detailed in the APFO, and the County could not shift its constitutional duty to fund public schools onto land developers through a impact fee.

COA: Ad Valorum Taxes Properly Assessed Against NY Corporation Maintaining Property in NC Half the Year

Today the COA held that a company that maintained property in North Carolina for half the year, had previously declared its principal place of business to be in Pender County, and that employed workers at the site could properly have taxes assessed on the property. The case is In re Amusements Rochester, Inc.

Amusements of Rochester ("ARI") claimed that its its amusement equipment (park rides and the trailers used to keep and transport them) had a tax situs in New York and not Pender County. Pender County assessed ad valorum taxes on the equipment from 2002-2007. The equipment was stored in Pender County for about six months out of the year and was moved around to different states for the rest of the year. ARI was incorporated in New York and claimed to maintain its principal office there. However, ARI listed its Pender County address as its principal place of business on its Certificate of Authority to operate in North Carolina. Further, ARI established maintenance and storage facilities in Pender County, and hired employees to work there. ARI's equipment was assessed at over $24 million for 2002-07, and the Tax Commission affirmed this assessment.

Based on N.C. Gen. Stat. § 105-304(f)(2) (“tangible personal property situated at or commonly used in connection with a business premises hired, occupied, or used by the owner of the personal property...is taxable at the place at which the business premises is situated") and ARI's own admission of its principal place of business, the COA held that ARI statutorily established its "domicile" or business situs in North Carolina. Thus, North Carolina could tax ARI's equipment as long as the same property was not being taxed in another state. ARI presented no evidence that the equipment was taxed anywhere else. The taxpayer has the burden of proving that its tangible personal property acquired a tax situs in another state, and ARI did not present sufficient evidence on this point. The COA further noted that "ARI’s continuous interstate use of its equipment" did not prevent North Carolina from taxing it.

COA: Writing Required for Accord and Satisfaction

In Hewett v. Weisser, the Court of Appeals addressed when a plaintiff's pleading of accord and satisfaction can act as a bar to the plaintiff's personal injury claims.

After a 2004 motor vehicle accident, Gerald Hewett field a negligence action against Tonya Goode, the driver of the car Hewett was riding in at the time of the accident, and Robert and Bonnie Weisser, the driver and owner, respectively, of the vehicle Goode's car collided with. Hewett sought damages for personal injuries sustained in the accident. The Weissers filed a counterclaim against Hewitt for damage to their vehicle.

Hewett moved to dismiss the counterclaim based upon the doctrine of accord and satisfaction. Hewett claimed that Bonnie Weisser accepted payment in full and satisfaction for the property damage to her vehicle.

The trial court eventually ordered summary judgment in the Weisser's favor because "plaintiff's affirmative defense of Accord and Satisfaction as to the Defendants' Weissers Counterclaim entitled the Defendants Weissers to judgment as a matter of law."

Hewitt appealed, arguing that summary judgment was improperly granted because "no release or other writing exists to document accord and satisfaction." The Weissers argued that the trial court correctly granted summary judgment in their favor because "when a plaintiff pleads settlement and release as a bar to a defendant's counterclaim, the pleading constitutes a ratification of the settlement and bars both plaintiff's and defendant's actions[.]"

The Court of Appeals rejected the Weissers' argument because, in the context of motor vehicle accidents,

a settlement as to property damage cannot “act as a bar, release, accord and satisfaction, or discharge of any claims other than the property damage claim, unless by the written terms of a properly executed settlement agreement it is specifically stated that the acceptance of said settlement constitutes full settlement of all claims and causes of action arising out of the said motor vehicle collision or accident.” N.C. Gen. Stat. § 1-540.2 (emphasis added).

The Court of Appeals held that the trial court improperly granted summary judgment for the Weissers because " without the 'written terms of a properly executed settlement agreement . . . [that] specifically stated that the acceptance of said settlement constitutes full settlement of all claims and causes of action arising out of the said motor vehicle collision or accident[,]” N.C. Gen. Stat. § 1-540.2, plaintiff’s pleading of accord and satisfaction cannot act as a bar to his personal injury claim."

COA Reverses Property Tax Commission and County For Formulaic Valuation of Business Personal Property

In In the Matter of IBM Credit Corp., the COA reversed the Property Tax Commission for signing off on Durham County's formulaic application of a schedule for valuing millions of dollars in computer equipment. Instead, the COA ruled, the County and Commission should have taken into account functional and market obsolescence in determining the equipment's value.

Durham County valued IBM's equipment according to a form schedule, U5, which was developed by the Department of Revenue and ascribed a 5-year life to computer equipment. The County's proper application of U5 was enough to get to a presumption of correctness.

But IBM rebutted the presumption, with, among other things, expert testimony on the computer market and values. IBM showed what I know to be true as I write on my 4-year-old, worth-nothing Mac -- that rapid technological changes in computers cause quick decreases in computer equipment's market value.

The burden then shifted to the County to show that its calculation method did in fact get to the equipment's true value. The County failed to meet that burden, and the Property Tax Commission, in upholding the County's valuation, failed to address key issues (i.e., what is the market value of the property being appraised) and failed to support its conclusions.

The COA noted that the Commission posited that the U5 is legal, used by all of NC's 100 counties, and was applied correctly by the County here. But a tax appeal is not simply a matter of determining whether the right government schedule was used. The COA therefore reversed and remanded, sending the case back to the Commission to get to a correct valuation.

Negligence Suit Against Employer's Affiliate Company Gets Green Light

In Van Dyke v. CMI Terex, the COA dismissed as interlocutory an appeal by a "grandparent" company of an employee killed on the job.

The deceased employee's estate brought suit against, among others, the parent corporation of the member-manager of the employee's employer. That "grandparent" company, Lane Corporation, argued that it was entitled to workers' compensation exclusivity and thus shielded from the plaintiff's negligence suit under Hamby v. Profile Products, 361 N.C. App. 630 (2007). Lane also argued that, as in Hamby, because the possibility of inconsistent verdicts existed, its interlocutory appeal was proper.

The COA disagreed. The COA noted that being a related entity is not, in itself, sufficient for workers' comp. protection, but that, to be shielded from suit for workplace injuries, the non-employer entity must conduct the employer's business. Moreover, the plaintiff did not make the same claims against "grandparent" Lane as against the employer or the parent, therefore creating no risk of inconsistent verdicts.

The COA went even further, however, than just dismissing the appeal. It said that if it were to address the merits, the outcome would be the same -- that there was a genuine issue of material fact as to whether Lane's allegedly negligent actions were taken in its own interests or in conducting the employer's business, making summary judgment improper.

NC COA Opinions Today

Now back in its historic building, the COA published 24 opinions today, 11 criminal. More on these soon.

NC COA Postpones Opinions Till Next Week

The NC COA, which is in the process of a move back to its old building, won't be filing opinions until next week.