North Carolina Business Court Spotlight

Disclaimer: The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of the Court, its judges, or Wake Forest University School of Law.  

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North Carolina Business Court Update: November 26, 2017

Sloan v. Inolife Techs., Inc.

“Know when to hold em, when to fold em” 

To be a success in the legal realm, confidence is key. Attorneys must be confident in their endeavors to protect or pursue client’s interests. However, there is a fine line between being confident and being overconfident. When an attorney crosses this line, his or her clients may be faced with having to foot the bill for their adversary’s attorneys’ fees. Special Superior Court Judge Michael Robinson decided this was the case in Sloan v. Inolife Techs., Inc.where he granted the Defendant’s Motion for Attorneys’ Fees pursuant to N.C. Gen. Stat. § 75-16.1.

Pertinent Facts

On March 7, 2017, Plaintiffs filed a complaint asserting a claim for unfair and deceptive trade practices (“UDTP”) against Defendants. The complaint alleged that Defendants stole Plaintiff’s stock in violation of N.C. Gen. Stat. § 75-1.1. Three days later, counsel for Defendants e-mailed the Plaintiff requesting they voluntarily withdraw their UDTP claim on the basis that it is “well established that claims involving securities cannot support a Chapter 75 claim.” In support of this contention, Defendant’s cited eight North Carolina cases that held securities transactions cannot be a basis for a UDTP claim. Additionally, the email stated that Defendants would seek to recover their attorneys’ fees incurred in defending against Plaintiffs’ UDTP claim under section 75-16.1, if Plaintiffs did not dismiss the claim within a week. On March 14, 2017, counsel for Plaintiff responded by stating there was nothing frivolous about the claim, and they would not be dismissing it. Accordingly, on April 6, Defendants filed their Motion for Attorney’s Fees. Eleven days later, Plaintiff’s voluntarily dismissed without prejudice their UDTP claim.

Judgment

Judge Robinson’s analysis was guided by section 75-16.1, which allows reasonable attorney’s fees upon a presiding judge’s finding that the Plaintiff knew, or should have known, the action was both frivolous and malicious. Judge Robinson found that, although Plaintiff’s counsel may not have known the claim was frivolous due to the well-settled securities exception at the time the Complaint was filed, they knew or should have known by March 14 – the date they responded to Defendants letter requesting they withdraw the UDTP claim. Additionally, Judge Robinson found that Plaintiff’s counsel knew or should have known that continuation of the claim following the receipt of Defendants March 10th letter was malicious because it was done without just cause. Accordingly, by citing McKinnon v. CV Indus., Inc., Judge Robinson held Defendant was entitled to attorney fees because Plaintiff knew or should have known their UDTP claim was frivolous and malicious.

Conclusion

Confidence is a major virtue for attorneys, and, as evident in counsel for Plaintiff’s March 14 response letter, Plaintiff’s counsel certainly did not lack in this regard. In the letter he stated, “[t]here is nothing frivolous and malicious about the claim. In plain English, I am eagerly awaiting to learn why the Defendants believe that they can commit larceny and theft with impunity.” Additionally, counsel for Plaintiff justified his decision not to dismiss the UDTP claim after receiving Defendant’s request because he was confident Defendant was bluffing and doubted they would actually file, let alone be successful on, a Motion for Attorneys’ Fees. These statements surely are indicative of his zeal and confidence behind his client’s claim; however, they came at a time where it would have been wiser to swallow his pride and admit defeat. In the words of Kenny Rogers, “you got to know when to hold ’em, know when to fold ‘em, know when to walk away and know when to run.”

 

North Carolina Business Court Update: October 17, 2017

McKinney v. G4S

On Wednesday, September 20, 2017, Wake Forest University’s Business Courtroom had the special privilege of hosting the U.S. Court of Appeals for the Fourth Circuit as they heard oral arguments for the case of McKinney v. G4S. The case came before the Fourth Circuit after McKinney appealed a district court order granting G4S’s Rule 56 motion for summary judgment on his claims for hostile work environment, retaliation, and intentional infliction of emotional distress. The Fourth Circuit bench seemed most concerned with G4S’s affirmative defense in respect to McKinney’s hostile work environment claim.

Pertinent Facts

In May 2013, John McKinney, an African-American man, complained to his employer, G4S Government Solutions, Inc., (“G4S”) after a coworker presented him with a hangman’s noose and used a white sheet to mimic a Ku Klux Klan hood. McKinney also informed G4S that he had been experiencing harassment since 2011 and that a Confederate flag that was on display had offended him. In response, the coworker was fired, the Confederate flag was removed, and the president of G4S visited with McKinney where he gave him his personal number so he could contact him at any time. In addition, G4S conducted an investigation into the matter by interviewing over 30 employees where one informed them that the noose had surfaced once back in 2009.

Judgment Below

In the district court, G4S conceded that McKinney had made out a prima facie case for hostile work environment but asserted the Faragher/Ellerth affirmative defense, which the court determined G4S was entitled to as a matter of law. Under this affirmative defense, an employer may escape liability by establishing that: (1) the employer exercised reasonable care to prevent and promptly correct harassing behavior; and (2) that the plaintiff failed to take advantage of the preventative or corrective opportunities that the employer provided.

Conclusion

The facts created an uphill battle for McKinney’s counsel in their attempts to prove G4S did not satisfy the elements of the Faragher/Ellerth affirmative defense. McKinney argued, however, that he had no duty to report the prior harassment because G4S already knew or should have known about it. In support of this, McKinney first pointed to “the elephant in the room,” which was that the fact that G4S knew the noose in question had “surfaced in 2009” and “prevention of racial harassment 101 requires, or so a jury may find, that nooses be removed from the workplace once they are found.” The bench jumped on this claim by asking, “who found the noose and why should the company be liable for it? Once it was found wasn’t it immediately removed?” In addition, McKinney said G4S should have known because there had been a confederate flag on display since the 1980s. The bench once again jumped on McKinney’s claim by asking, “Once [the flag] was reported wasn’t it removed right away” and “Does just the presence of the Confederate flag, which may well be offensive, does that impose an affirmative duty on the part of the employer?”

These two follow up questions very likely were the daggers in the heart of McKinney’s claim because it revealed that he could not establish G4S had any knowledge of harassment prior to his complaint in 2013. Since McKinney could not establish this fact, the Fourth Circuit will likely uphold the district courts ruling. Looking forward, this case is a great example of how businesses should handle these types of hostile environment claims. As Judge Duncan noted, “it could be argued that these facts are a model for employers on how to react.” Any report of harassment should be dealt with swiftly by employers, leaving no room for a hostile work environment claim.

Editor’s Note: the Fourth Circuit issued its decision on October 19, 2017.  Judge Duncan wrote the unpublished opinion and affirmed the district court’s judgment, granting summary judgment in favor of G4S on all counts.  

Introduction to the North Carolina Business Court

Thanks to the addition of the newest North Carolina Business Court last January, Wake Forest Law became one of few law schools in the nation to house a working court. The courtroom, which sits atop of Worrell Professional Center in room 3206, is the most technologically advanced courtroom in North Carolina. As Special Superior Court Judge for Complex Business cases Michael Lindsay Robinson stated, “Wake Forest is the only courtroom in North Carolina that will be able to have a paperless trial….[I]t’s the courtroom of the future.” In addition to opening the door to greater opportunities for the unified North Carolina court system so that it may serve its citizens, its business owners and the international business community, the addition of the courtroom is also an immense resource to the Wake Forest Law community. As Dean Suzanne Reynolds noted, “The opportunity to observe great lawyers from across the state and region arguing before Judge Robinson will enrich our students’ experience.”

Starting this Fall 2017 semester, utilizing this resource will become easier than ever as Wake Forest’s Journal of Business and Intellectual Law (“JBIPL”) is proud to bring you  blog updates on the decisions of the North Carolina Business Court. Throughout the semester these blogs will offer an overview of the Court’s various decisions and provide analytical insights on how they might shift the framework of business law in the state.

For this first blog, the aim will be to provide our readers with a brief overview of the North Carolina Business Court and to give some tips to those wishing to make the trek up to the third floor to watch the law in action.

What is the Business Court? 

The North Carolina Business Court is an administrative division of the General Court of Justice. It handles cases involving complex and significant issues of corporate and commercial law. The cases are designated by North Carolina Supreme Court Chief Justice Martin to Judge Robinson who oversees all aspects of the case from the time of designation through trial or other resolution.  For more information on the Court, please visit its website and, for students, stay tuned to your “WHTW” emails courtesy of SBA for updates on the upcoming docket. Also, to learn more about Judge Robinson and the “I like Mike club” visit here.

Tips and Pointers

Before you go: As previously mentioned, the cases before the court involve complex and significant issues (emphasis added). To get the most out of your visits to the courtroom, and to save yourself from feeling like you are listening to a foreign language, try to familiarize yourself with the specific issues before the court that day by visiting here.

Attire: There is no formal dress requirement so feel free to dress casually. Coming right from class in jeans and a tee is fine. Do keep in mind that you are a representation of the Wake Forest community, so if the sun is out one day and you decide to let the guns out, it might be a good idea to sit that one out.

Entering: Feel free to stay for as long or short as you please. Judge Robinson has no problem with you coming and going at your discretion. Do keep in mind that the entrance to the courtroom comes from behind the stand so it may be awkward at times to enter if an attorney is in the middle of an argument. To avoid this, watch the monitor outside the courtroom before entering so you can come in at a more appropriate time.

JBIPL is excited to begin this new segment to its blog this semester, and we hope you will enjoy the updates we plan to provide from the North Carolina Business Court.  Stay tuned for the latest and greatest happenings on all things business law!

Ralph D’Agostino is a second-year law student at Wake Forest University School of Law. He holds a Bachelor of Arts in Economics from Syracuse University. He is currently a North Carolina Business Court blogger for the Journal of Business & Intellectual Property Law at Wake Forest University.