COA: Right to Representation by Out of State Counsel Is Not A Substantial Right

Today the COA held that a denial of appellant's request to be represented by out-of-state counsel does not affect a substantial right and thus an interlocutory appeal of such a denial is not allowable. The case is Dance v. Manning.

Dance brought claims against Defendants related to her alleged wrongful discharge from the Pitt County Sheriff's Department. Dance filed a voluntary dismissal of the first suit alleging these claims. In that case she was represented by a Maryland attorney who was admitted pro hac vice. Dance refiled the lawsuit and moved to have the Maryland attorney again admitted pro hac vice. The trial court denied this motion.

The COA held that in this situation the right to be represented by an attorney of the Plaintiff's choice was not a substantial right. Here, there was no ongoing litigation in which the Maryland attorney had been involved, and the attorney had no recognized expertise in that type of case. Here the “litigation was still in its infancy, and plaintiffs’ counsel does not hold any unique expertise that cannot be found elsewhere in our state bar.” The COA further held that the denial of the motion did not serve as a revocation of the attorney's pro hac vice admission in the suit that was voluntarily dismissed, because when a plaintiff files a voluntary dismissal, “it [is] as if the suit had never been filed.” Thus, any orders from the first lawsuit had no applicability to the second suit.

COA: Corporate Agent Can Invoke Arbitration Agreement Between Corporation and Plaintiff

Today the COA held that an agent of a corporation can invoke an arbitration agreement in a lawsuit against him in his individual capacity, even though he was not a party to the agreement. The case is Ellison v. Alexander.

Plaintiffs claimed that Defendant was the CEO and director of a company known as The Elevator Channel, and that he induced them to invest in that company by misrepresenting certain material facts about his personal background (his education, experience, etc) and other matters. The stock purchase agreement signed by Plaintiffs provided that all disputes arising from the agreement would be subject to arbitration. The trial court denied Alexander's motion to compel arbitration.

The COA reversed and held that a valid arbitration provision existed. The COA first concluded that because the stock purchase agreement spelled out the terms and
conditions under which Plaintiffs invested in the Company, their claims were connected to the agreement. The COA then held that the arbitration clause of the stock purchase agreement was enforceable even though he was not an individual signatory of the agreement. Because his alleged liability arose from his actions as an agent of the corporate signatory to the arbitration agreement, he was not precluded from enforcing the provisions of the arbitration clause contained in that document.

COA Opinions

Today the Court of Appeals issued 14 opinions. Most of the opinions appear to be criminal in nature, but if there any opinions of note, we will let you know. The Court of Appeals' next opinion release date is November 2, 2010.

Supreme Court Cases

Today the North Carolina Supreme Court issued 17 opinions and issued rulings in a variety of other matters. The next anticipated petition release date for the Supreme Court is November 5, 2010.

Inconspicuous Cognovit Warning Precludes Enforcement of Foreign Judgment

In Gardner v. Tallmadge, a divided panel of the Court of Appeals determined that a foreign judgment could not be enforced in North Carolina because - in the majority's opinion - the Ohio court that originally issued the judgement lacked the necessary subject matter jurisdiction to do so.

In March 2004, Defendant Bruce Tallmadge entered into a "demand cognovit promissory note" with Plaintiff Michael Gardner. A cognovit agreement in "which the debtor consents in advance to the holder's obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor's behalf, of an attorney designated by the holder." Pursuant to the cognovit agreement, after an alleged breach of the terms of the note Gardner filed a verified complaint against Tallmadge, an attorney appointed by Gardner to represent Tallmadge entered answer that confessed judgment in favor of Gardner, and, less than two weeks after complaint was filed a judgment was entered against Tallmadge.

Gardner subsequently initiated an action to confirm the judgment in Rockingham County. Tallmadge challenged the enforcement action on several grounds, including that the Ohio court lacked subject matter jurisdiction. The Honorable L. Todd Burke entered an order "recognizing and giving full faith and credit to the Ohio judgment[.]" Tallmadge appealed Judge Burke's order.

The majority opinion, authored by Judge Linda Stephens and joined by Judge Robert N. Hunter, Jr., reversed Judge Burke's opinion on the ground that the Ohio court did not have subject matter jurisdiction to enter the original judgment. The majority's conclusion was based upon Ohio statutes and case law that render cognovit agreements invalid and deprive courts of jurisdiction to enforce them unless the agreement contains warning language that is "in such type size or distinctive marking that it appears more clearly and conspicuously than anything else on the document[.]"

According to the majority, the warning language regarding the cognovit agreement in the did not meet the standard required by Ohio law:

In the present case, the warning language in the Note appears directly below the
space provided for Defendant’s signature, as mandated by Ohio Rev. Code Ann. §
2323.13(D). The warning language appears in all-capital letters. However, the
Note’s page headings and the introductory phrases “FOR VALUE RECEIVED” and “IN
WITNESS WHEREOF” are also written in all-capital letters in the same font size
as the warning language and, thus, are equally conspicuous. Furthermore, the
most prominent, conspicuous, and distinctive markings on the Note are the title
and the eight subject headings which not only appear in all-capital letters of
the same font size as the warning, but are underlined as well. Thus, the title
and the subject headings appear more clearly and conspicuously than the warning
language.

In the majority's opinion, the failure to make the cognovit warning language more conspicuous than anything else in the loan agreement deprived the Ohio courts of subject matter jurisdiction to enter a judgment. The Ohio court's lack of subject matter jurisdiction meant that North Carolina's courts could not enforce the judgment.

Although he found that the case presented "a number of troubling issues," Judge Sanford L. Steelman., Jr. dissented from the majority opinion because "the conspicuous nature of the cognovit warning is not one of them." Judge Steelman determined that the language regarding the cognovit agreement complied with Ohio law because it "is clearly the most conspicuous portion of the document." Judge Steelman's opinion that the warning language complied with Ohio law was based upon an Ohio Court of Appeals decision that declared an argument very similar to the majority's reasoning to not only be incorrect, but "specious."

Court of Appeals Opinions

Yesterday the North Carolina Court of Appeals published fourteen opinions. The Court of Appeals will next release opinions on October 19, 2010. The Supreme Court is expected to release opinions this Friday.