NC Association of Defense Attorneys Appellate Cases of Interest

NCADA Amicus Brief Success in North Carolina Discovery Dispute

Lynette Pitt — Thu, 22 Jan 2026 17:30:00 GMT

by Patrick Cleary, Bowman and Brook, LLP

Ensuring cases are decided on the merits rather than discovery disputes is a challenge facing all North Carolina defense attorneys. And there is little guidance from the North Carolina courts about the proper scope of discovery. The North Carolina Supreme Court recently indicated its willingness to evaluate this issue.

On December 12, 2025, the North Carolina Supreme Court granted Toyota’s petition for discretionary review in the Sessoms v. Toyota Motor Corporation, et al. case (Robeson County, 21CVS3104). The petition for discretionary review arose from the trial court’s orders finding Toyota committed multiple discovery violations and imposing case-deciding sanctions against Toyota. While the North Carolina Court of Appeals panel vacated the sanctions order, it affirmed the trial court’s findings that Toyota committed discovery violations and invited the trial court to reimpose sanctions. NCADA, through its amici committee, filed an amici brief in support, which was written by Chris Kiger of Smith Anderson. NCADA’s brief focused on the proper procedure for defendants to respond to overly broad and objectionable corporate witness representative deposition notices. In addition to NCADA, the Product Liability Advisory Council (PLAC) and the US and NC Chambers of Commerce also filed amici briefs in support.

The Sessoms case arose from a two-vehicle crash. On July 12, 2021, Matthew Sessoms, who had just graduated from high school, was driving his 2013 Scion FR-S (two door sports car) on a rural road near Cerro Gordo in Columbus County. A 70,000-pound Mack Truck, driven by an NC DOT employee drove through a stop sign and onto the driver’s side of the Scion. The truck’s front bumper assembly (designed for snowplow attachment) pushed through the windshield and onto the steering column. Mr Sessoms was entrapped under the truck’s bumper and was declared deceased at the scene.

Plaintiff filed suit against four individual DOT employees, the used car dealership that sold Sessoms the Scion, and Toyota and Subaru (the Scion was the product of a joint venture of Toyota and Subaru). The claims against Toyota alleged the Scion was defectively designed, that Toyota knew the Scion was defectively designed, and that Toyota withheld this knowledge from the public. Their causes of action sounded in product liability, breach of warranty, and unfair and deceptive trade acts.

During the case, Toyota and Subaru responded to extensive and wide-ranging discovery, and produced corporate witnesses for deposition. The corporate witness depositions contained over 40 topics and 40 separate requests for production of documents. After the corporate witness depositions, plaintiff’s counsel filed a motion to compel, claiming Toyota committed multiple discovery violations. The trial court granted plaintiff’s motion and adopted their proposed order without change. The discovery order imposed wide-ranging obligations on Toyota, including having to create translations of any document produced in discovery (even if only maintained in Japanese), produce corporate witnesses for deposition in Robeson County, and waiving objections to discovery responses and corporate witness deposition notices.

Toyota worked diligently to comply with the discovery order, but plaintiff’s counsel then filed a motion to compel/motion for sanctions. Again, the trial court granted plaintiff’s motion and adopted their proposed order without change. The sanctions order held the Scion was defectively designed, that Toyota knew the Scion was defectively designed, that Toyota withheld this knowledge from the public, and Toyota engaged in unfair trade practices. The trial court also struck many of Toyota’s statutorily based affirmative defenses.

Toyota appealed the discovery order and the sanctions order to the North Carolina Court of Appeals. On December 31, 2024, the Court of Appeals (COA 24-265, 910 S.E.2d 395) held that Toyota was not required to create translations for Japanese language documents and vacated the sanctions on that basis. But the Court of Appeals affirmed the discovery order and held “[we] remand the matter to the trial court to reconsider its Sanctions Order by exercising its discretion in fashioning an appropriate sanction, if it still deems sanctions to be appropriate.”

The petition for discretionary review followed and was filed in early February 2025.

NC Supreme Court Successful Ruling - Duty to Inspect

Lynette Pitt — Wed, 01 May 2024 16:31:39 GMT

On March 22, 2024 the Supreme Court in Terry v. Pub. Serv. Co. of N.C., (28A23 - Published) upheld the trial court’s granting of Summary Judgment for the Defendant Landlord in a premises liability case.

The issue was whether there is a duty to inspect when the tenant never complains of any issues to the landlord.

The court agreed there was no duty.

Thanks to Harris, Creech, Ward & Blackerby, P.A., by A. Ruthie Sheets; and Jay C. Salsman and the NCADA for the amicus brief.

Results provided by Robert Levin, Haywood Denny & Miller

Canteen v. Charlotte Metro Credit Union Amicus

Lynette Pitt — Mon, 23 Oct 2023 19:06:48 GMT

This is a case involving a credit union's right to change customer agreements and require arbitration through email notifications. The plaintiff sued over overdraft fees, leading to a dispute about arbitration. The Court of Appeals upheld arbitration, with one judge dissenting. The case is now being appealed to the Supreme Court, and it has potential implications for various businesses, including insurance companies. NCADA joined with the NC Chamber Legal Institute in an amicus to the NC Supreme Court. Thank you to members Christopher Smith and David Ortiz with Smith Anderson for authoring the brief. Read more about case from Law 360.

Workers Compensation: Extended Benefits

Lynette Pitt — Wed, 29 Mar 2023 18:21:32 GMT

Synopsis by Eleasa H. Allen, Robinson & Lawing, LLP

On March 21, 2023, the North Carolina Court of Appeals issued its first decision on a case in which the employee is seeking extended compensation pursuant to N.C. Gen. Stat. 97-29(c): Sturdivant v. NC Dept. of Public Safety.

Key Takeaways: (1) The burden of showing a “total loss of wage-earning capacity” under 97-29(c) is the same as the employee’s burden of showing a “total disability” to receive benefits under 97-29(b); and, (2) However, the plaintiff is not entitled to a presumption that he continues to suffer from a total loss of wage-earning capacity based on a prior determination that he was totally disabled under 97-29(b).

Editor’s Note: Thank you to Joy H. Brewer & Ginny P. Lanier, Brewer Defense Group; Frances M. Clement & Kristine L. Prati, Wilson & Ratledge; and, Tracey L. Jones, Logan Shipman & Lindsay Underwood, Teague Campbell, for authoring the Amicus Curae for the NC Association of Defense Attorneys.

Luke Sbarra and Kari Swindle Obtain Defense Verdict in NC Superior Court

Thu, 27 May 2021 13:38:54 GMT

NCADA Members Luke Sbarra and Kari Swindle of Hedrick Gardner Kincheloe & Garofalo, LLP obtained a defense verdict following a jury trial commencing April 5, 2021 in Mecklenburg County, North Carolina Superior Court defending an entertainment venue and bar regarding allegations of over-service of alcohol and inadequate security when a patron attacked another patron during an altercation at the establishment.

NCADA Member, Lori Keeton Wins 4th Circuit Court Appeal

Wed, 26 May 2021 19:09:41 GMT

NCADA Member, Lori Keeton Wins 4th Circuit Court Appeal. A split Fourth Circuit panel threw out a North Carolina police officer's nearly $1.7 million trial win in a sex discrimination case against the City of Charlotte, finding there wasn't enough evidence to show that Michael Tinsley — who had a lengthy disciplinary record — was fired because he's a man. The court disagreed with the comparison by the plaintiff to a female officer's record, who was not as severely disciplined for similar acts.

This Defense Win was originally noted in Law360.

The impact of the North Carolina Supreme Court’s recent ruling in Chisum v. Campagna on construction litigation.

Thu, 29 Apr 2021 15:24:19 GMT

By Courtney Rudolph,
Hedrick Gardner Kincheloe & Garafalo, LLP

Overturning well-established precedent that breach of contract claims accrue on the date of breach, the North Carolina Supreme Court held in Chisum v. Campagna that the “discovery rule” applies to postpone the running of the three-year statute of limitations prescribed by N.C. Gen. Stat. § 1-52(1) until a plaintiff knew or should have known of the breach.ⁱ

Background

Chisum stems from a dispute between Richard and Rocco Campagna (the “Campagnas”), and Dennis Chisum, who were members of three limited liability companies—Judges Road Industrial Park, LLC (“Judges Road”), Carolina Coast Holdings, LLC (“Carolina Coast”), and Parkway Business Park, LLC (“Parkway”). Governing the LLCs were operating agreements which set forth requirements for initial capital contributions, rules for capital calls, and consequences if a member failed to make a capital call.

At a membership meeting held for Carolina Coast on October 4, 2010, the Campagnas informed Mr. Chisum that he needed to repay a personal loan that he and his wife had taken out and secured with Carolina Coast property. The Campagnas assessed a capital call in the amount of Mr. Chisum’s debt, gave him one week to pay, and warned that if he did not make the required payment, that his interest in Carolina Coast would be diluted. Mr. Chisum failed to make the contribution, and the Campagnas paid off the loan themselves. At that time, the Campagnas took over total control of Carolina Coast. In 2011, Mr. Chisum received his 2010 Schedule K-1 from Carolina Coast. It was marked “Final” and showed that his ownership interest had been reduced to zero.

Almost two years after Mr. Chisum was ousted from Carolina Coast, the Campagnas also took control of Judges Road. In June of 2012, a letter was sent giving notice of a membership meeting scheduled for July 2 and calling for capital contributions. Mr. Chisum did not attend the meeting or make the contribution. On August 27, 2012, the Campagnas contributed funds, including Mr. Chisum’s share, and assumed control over Judges Road. Mr. Chisum received a 2012 Schedule K-1 for Judges Road which showed that he had around an 18.884% ownership interest in the company. He also received a 2013 Schedule K-1 which was marked “Final” and showed that although he had an 18.884% at the beginning of the year, it had been reduced to zero by the end of the year.

After Mr. Chisum’s absence from the July 2, 2012 meeting, the Campagnas likewise considered Mr. Chisum to have relinquished his interest in Parkway and took control of the LLC. On August 27, 2013, Parkway sent Mr. Chisum his 2012 Schedule K-1, which showed that Mr. Chisum held around an 8.34% interest in Parkway. In 2014, the LLC mailed Mr. Chisum his 2013 Parkway K-1 which was labeled “Final” and revealed that Mr. Chisum had an 8.34% ownership interest at the beginning of the year, but no interest by the end of 2013.

It was not until March of 2016, when Mr. Chisum went to a storage unit facility previously owned by one of the LLCs and was told that it had been sold, that he became aware of a change in his ownership status in the LLCs.

On July 19, 2016, Mr. Chisum filed a complaint asserting multiple claims against the Campagnas for his alleged improper ousting as a member of the LLCs in breach of the operating agreements. He later amended his complaint to add derivative claims against the Campagnas on behalf of the companies. As part of the lawsuit, Mr. Chisum sought a declaration from the court that he remained a member of the LLCs and had standing to bring his derivative claims. The declaratory judgment hinged on whether Mr. Chisum had brought his claims within the three-year statute of limitations period per N.C. Gen. Stat. § 1-52(1) for breach of contract.

Trial Court

The case was tried in front of a jury in August of 2018. The trial court directed a verdict in favor of the Campagnas with respect to all of Mr. Chisum’s claims relating to Carolina Coast. This was based on the trial court’s conclusion that no reasonable juror could find that Mr. Chisum had filed his complaint within three years of when he knew or should have known that the Campagnas were in breach of the operating agreement.

The remaining claims concerning Judges Road and Parkway were submitted to the jury. Upon submission, the trial court instructed the jurors that they were to determine whether Mr. Chisum had filed his action within three years of when he knew or reasonably should have known that the Campagnas no longer considered him a member of Judges Road and Parkway. The jury returned a verdict in Mr. Chisum’s favor, concluding that he had filed his action within three years of when he discovered that the Campagnas had assumed control of the LLCs.

The Campagnas appealed the trial court’s decision to submit claims relating to Judges Road and Parkway to the jury. They argued, in relevant part, that the statute of limitations started to accrue at the moment of breach and that the evidence was undisputed that Mr. Chisum knew of the breach more than three years before initiating the lawsuit. On the other hand, Mr. Chisum appealed the directed verdict relating to the Carolina Coast claims, arguing that when he became aware or should have become aware of the breach involved a question of fact that should have been submitted to jury. The underlying issue that needed to be resolved by the Supreme Court was whether the statute of limitations started upon the date of breach or discovery.

Supreme Court

The Supreme Court held that the discovery rule applied to breach of contract claims and that N.C. Gen. Stat. § 1-52(1) began to accrue when Mr. Chisum “became aware or should have become aware of the Campagnas’ breaches of the operating agreements.”ⁱⁱ The court reasoned it would be a violation of “basic notions of fairness” for a statute of limitations to accrue against “a plaintiff who ha[d] no way of knowing that the underlying breach ha[d] occurred.”ⁱⁱⁱ

Applying that logic to Mr. Chisum’s claims related to Carolina Coast, the Supreme Court found that there was sufficient evidence to support submission to the jury on the issue of when Mr. Chisum had notice of the Campagnas’ breaches and reversed the trial court’s directed verdict.

In relation to the Judges Road and Parkway claims, the Court affirmed the trial court’s decision that the statute of limitations for a breach^iv of contract contained a discovery rule and that Mr. Chisum had filed his action within three years of actual or constructive notice of the Campagnas’ breach of the operating agreements.

Effect Moving Forward on Construction Litigation

With the injection of the discovery rule into N.C. Gen. Stat. § 1-52(1), the limitations period for all construction claims, regardless of the party bringing the action, will likely be subject to a discovery rule.

Before Chisum, North Carolina case law held that breach of contract claims accrued on the date of breach regardless of whether the plaintiff had notice of the breach. However, N.C. Gen. Stat. § 1-52(16) created an exception to this rule and tolled the three-year limitation period for certain claims until the breach is discovered.^v Specifically, the statute states that for “physical damage to claimant's property, the cause of action . . . shall not accrue until . . . physical damage to his property becomes apparent or ought reasonably to have become apparent.”N.C. Gen. Stat. § 1-52(16)(emphasis added). Strictly interpreting N.C. Gen. Stat. § 1-52(16), North Carolina courts have held that only a claimant who owns the damaged property at issue qualifies under this section and receives the benefit of the discovery rule. On the other hand, courts have found that non-owner claimants, such as general contractors, subcontractors, do not fall within the purview of N.C. Gen. Stat. § 1-52(16) and are not afforded the benefit of a discovery rule.^vi

Today, with Chisum embedding a discovery rule into N.C. Gen. Stat. § 1-52(1), even if non-owner claimants are not entitled to a discovery rule under N.C. Gen. Stat. § 1-52(16), their breach of contract claims will be tolled until they knew or should have known of the injury.

In light of Chisum, courts will potentially see an influx of litigation as non-owner claimants, encouraged by the ruling, bring claims more than three years after the construction work has been completed. Also, construction litigation will likely become more costly as it will be more difficult for defendants to get out of a case on a pre-trial motion. Prior to Chisum, the accrual of the statute was fairly straightforward—the date of breach—and, therefore, ripe for a motion to dismiss or summary judgment. However, under Chisum, determining when a plaintiff knew or should have known of a breach will involve factual issues that can only be resolved at trial.

Although a win for certain litigants, as a whole, Chisum will likely make construction litigation even more lengthy and costly moving forward.

ⁱChisum v. Campagna, __ N.C. __, 855 S.E.2d 173 (2021), reh’g denied, __ N.C. __, 855 S.E.2d 799 (2021).

ⁱⁱId. at 189.

ⁱⁱⁱId. at 188-89.

^ivSee, e.g., Pearce v. N. Carolina State Highway Patrol Voluntary Pledge Comm., 310 N.C. 445, 51, 312 S.E.2d 421, 26 (1984); Kaleel Builders v. Ashby, 161 N.C. App. 34, 34-44, 587 S.E.2d 470, 477 (2003); Jewell v. Price, 264 N.C. 459, 461-62, 142 S.E.2d 1, 3-4 (1965).

^vAlthough not discussed in this article, construction litigants should also be aware that another statutory provision contained in N.C. Gen. Stat. § 1-50(a)(5) potentially tolls the accrual of the statute of limitations until discovery for actions based “upon or arising out of the defective or unsafe condition of an improvement to real property.” However, courts inconsistently apply this statute and usually analyze cases within the framework of N.C. Gen. Stat. § 1-52(1). Regardless, with the recent ruling in Chisum, litigants will no longer need to rely on a statutory exception as they now have the benefit of the discovery rule for all breach of contract claims.

^viSee Kaleel, 161 N.C. at 43-44, 587 S.E.2d at 477 (recognizing that a cause of action for breach of contract brought by a general contract against a subcontractor was barred by the statute of limitations because the action accrued on the date of breach and the complaint had been filed more than five years after construction had ceased); see also Cape Fear Med. Ctr., LLC v. S.K. Anderson Constr. Co., No. COA06-27, 2007 WL 1246421 (N.C. Ct. App. May 1, 2007)(unpublished) (holding that N.C. Gen. Stat. § 1-52(16) did not apply because the general contractor was not the owner of the property in question and, therefore, the general contractor’s claims were barred because they were brought more than three years after work was completed).

Chapter 90 and 42 U.S.C. Section 1983: Raising the Bar for Pro Se Plaintiffs

Thu, 25 Mar 2021 20:00:39 GMT

By J. Matthew Little, Esq., Teague Campbell Dennis Gorham, LLP

In recent years, the Defense Bar has seen historic numbers of pro se prisoner filings. Along with this increase is a new litigation trend that involves coupling traditional medical malpractice claims under Chapter 90 of the North Carolina General Statutes with Federal civil rights claims under 42 USC Section 1983. Given the cap on non-economic damages in Chapter 90 and North Carolina’s broad denial of attorneys’ fees recovery for prevailing parties, plaintiffs have weaponized Section 1983. Unlike Chapter 90, this section does not impose a damages cap and, when paired with a claim under 42 USC § 1988, allows for the recovery of attorneys’ fees–thus resulting in potentially much greater damages awards for aggrieved plaintiffs who have been able to retain counsel.

Although litigants have recently relied upon Section 1983 in cases of alleged excessive use of force by law enforcement, defense attorneys are increasingly seeing it used in cases filed against jail medical staff. Specifically, inmates have used Section 1983 as a cudgel against medical providers within the prison system, claiming violations under the Eighth Amendment’s prohibition against cruel and unusual punishment.

Claims under Chapter 90 and Section 1983 can arise from the same facts, but they are legally distinct and carry different burdens of proof. While their pairing poses a unique challenge for defense attorneys representing governmental actors within North Carolina jails, pro se plaintiffs perennially struggle to meet Section 1983’s elevated standard.

Following is a breakdown of the claims, a case study to illustrate how inmate plaintiffs are using them in a medical context, and factors defense attorneys should consider when facing these claims.

NCGS Chapter 90 and the Negligence Standard

Chapter 90 houses the State’s law governing medical malpractice claims. Plaintiffs are charged with proving, by a preponderance of the evidence, that the healthcare provider involved committed a deviation from the standard of care–a standard set by care providers with the same level of skill and experience, at the same time, and within the same locale or a similarly situated community. These claims are subject to a cap on non-economic damages, and in accord with North Carolina law in almost all civil cases, plaintiffs are not entitled to recover their attorneys’ fees.

42 USC § 1983 and the Deliberate Indifference Standard

Conversely, 42 USC § 1983 allows for a federal civil rights claim based on a violation of a constitutional protection. It states:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

Jail medical staff are government actors when they are employees of a County or a Sheriff, which makes them subject to Section 1983 claims. As such, when inmates believe they were not administered proper medical care, they can bring claims under both Chapter 90 and Section 1983.

The constitutional hook in the prison context is the Eighth Amendment’s ban on cruel and unusual punishment. In the medical context, this typically involves allegations that the plaintiff was denied adequate care. The United States Supreme Court in the 1976 case Estelle v. Gamble coined the legal standard known as “deliberate indifference to a serious medical need”. This standard is much higher than the typical negligence standard required of claims under Chapter 90. First, the plaintiff must prove he or she has a serious medical need. Second, the plaintiff is burdened with proving the care provider both knew about that serious medical need and deliberately chose to ignore it. The standard involves both an objective and a subjective element. Given the number of these cases that fail to make it past 12(b)(6), this is a standard that plaintiffs consistently fail to meet.

A Two-Pronged Approach to Seeking Damages: A Case Study

As opioid addiction continues to sweep the nation, cases of overdose and withdrawal have flooded the prison system. Staggering numbers of inmates evidence signs of addiction when admitted and, because the standard of care within prisons is to provide palliative care (for instance, administering Ativan for anxiety and Phenergan for nausea), the individuals can and do suffer withdrawal. Dying from withdrawal is exceedingly rare, but nonetheless, some parties have attempted to use jail deaths as evidence of deliberate indifference under Section 1983.

In the case study, the plaintiff asserted claims against jail medical staff for negligence and gross negligence, willful and wanton negligence, common law negligence, and deliberate indifference under Section 1983, along with other claims. The core argument–raised by the representative of the deceased inmate’s estate–was that prison medical staff deliberately ignored the decedent’s withdrawal symptoms and that she became dehydrated and died as a result. However, the facts learned in discovery did not support this claim.

The Complaint painted a dire picture of a woman who was reeling from heroin withdrawal, whose health was in rapid decline and who vomited liters of fluid until she eventually coded. However, a subsequent autopsy report revealed her cause of death to be the consequences of drug abuse, not dehydration. Medical literature reveals it is very rare to die from actual dehydration. Instead, a patient suffering from dehydration can experience an electrolyte imbalance which can lead to cardiac arrhythmia. Further, patients who abuse methamphetamines often suffer from cardiac and vascular damage as a result of the toxic byproducts of manufacturing and using the drug. Because jails employ a standard of care (palliative medicines) to treat inmates who are addicted, withdrawal symptoms like plaintiff’s are inevitable and as such, are not evidence of a serious medical need or negligence by medical staff.

Even more problematic for the plaintiff, however, was the plaintiff’s failure to prove that the medical staff were indifferent to the decedent’s condition. Video footage showed the inmate walking around her cell, conversing with jail medical staff, and drinking water from a cup on the night she coded, all while she was supposedly lying in bed dying. The medical record contained notes indicating more than 30 interactions between the inmate and medical staff. This record is the opposite of deliberate indifference.

Further, upon admittance, the decedent admitted to a triage nurse that she battled a 1-gram per day heroin habit. She denied other drug abuse. However, when she passed away three days later, her toxicology report revealed traces of methamphetamine in her system. Given the short half-life of methamphetamine, the decedent must have had a large amount of the drug in her system when she was booked into the jail. Tragic those these facts are, they further eroded her claim that the medical staff’s deliberate indifference to her condition caused her death.

Most of these cases proceed similarly. In some cases, the Chapter 90 claim will survive dispositive motions, but many fail to clear the higher bar set by Section 1983. Not to mention, 1983 claims–which involve federal questions–are subject to the heightened pleading standards under Twombly-Iqbal when they are removed to federal court, and many pro se plaintiffs are simply unable to meet that standard.

Defense Considerations

Pro se inmate claims are subject to an initial review for frivolity under the Prisoner Litigation Reform Act as codified at 28 U.S.C. § 1915A(a) & (b). Recently, District Court Judges have trended toward increasing permissiveness, allowing more claims to proceed to initial pleadings and discovery. Anecdotally, rising racial tensions and the ascendancy of the Black Lives Matter movement have driven more excessive force claims–which are also 1983 claims–and possibly opened the floodgates for more acceptance of complaints lodged against government actors. However, there is no clear-cut answer as to why more of these cases seem to be surviving judicial scrutiny.

Regardless, there are a few factors defense attorneys should consider when facing 1983 claims against government actors in the prison context, particularly when they are paired with North Carolina medical malpractice claims. First, when prison staff are government actors, they are afforded various immunity defenses including governmental immunity, public official immunity in certain circumstances and qualified immunity. These defenses are relevant when counties are large enough to hire their own personnel instead of contracting with third-party, private actors. Immunity defenses are layered and complex and require defense counsel to coordinate the pleadings and discovery to raise the appropriate defense at the right time. Further, under certain circumstances the denial of a dispositive motion can allow for an immediate, non-interlocutory appeal.

Second, it is vital to develop a basic understanding of the science: how the human body responds to certain substances (and mixtures of substances), how withdrawal affects the body, and what contributes to overdose deaths. The case study is illustrative: in both, defense counsel’s command of the medical underpinnings in the case was instrumental in rebutting the plaintiff’s claims.

Finally, as in most complex litigation matters, it is crucial to develop social intelligence. Understanding the societal view of a client and the plaintiff can help counsel not only build a defense but also, meet any rebuttal and prepare for an adverse ruling. Societal trends like heightened racial tension and increased awareness of the lethality of the opioid epidemic can shift the judicial temperature and inform the inevitable biases of jurors. In heated times when government actors face heightened scrutiny, it is vital to understand how your client may be perceived and to prepare to inoculate or, in many cases, accept those perceptions.

While we cannot say with certainty how courts will trend throughout the next decade, for now, we can expect to see more and more of these claims passing muster in the federal court system. Understanding how to meet them, not only from a legal perspective but a social one, is essential.

The Painful Privilege of Preparing the Privilege Log

Thu, 25 Mar 2021 14:17:48 GMT

By Mark A. Stafford and Candace S. Friel, Nelson Mullins Riley & Scarborough, LLP

We sometimes think that the drafters of N.C. R. Civ. P. Rule 26(b)(5) sought only to test the pain thresholds of lawyers: Privilege logs are the bane of existence for most attorneys—expensive, time consuming and generally a nuisance. In practice, few of us focus on privilege logs early in the process of obtaining and reviewing client documents, but failing to do so can be dangerous.

Without using the term “privilege log,” N.C. Rule 26(b)(5) (as well as the cognate federal rule) requires that claims of attorney-client privilege, work product, and joint defense or peer review privileges must be invoked at the time of service of the discovery responses or “when the party withholds the information.” This is often made express in case management orders that require a party to serve a privilege log “contemporaneously with its objection.” E.g., Window World of Baton Rouge, LLC v. Window World, Inc., 2019 NCBC LEXIS 54, *89 (N.C. Sup. Ct. Aug. 16, 2019). Not doing so can be deemed a waiver of the privilege.

Regardless of when they are created, privilege logs can be costly undertakings. We have seen cases where a log was more than 150 pages and over 3,000 entries long. Despite the possibility of such voluminous logs, remember that if utilizing a paralegal to assist with the initial compilation of a privilege log, it is the attorney’s duty to review and ensure that privilege claims in logs meet appropriate standards. Further, early planning (such as obtaining from the client names of all their outside counsel during the relevant period, not simply counsel in the case) is critical. E-discovery software with keyword and sorting capabilities, can ameliorate the manual efforts required in entering such data as custodian, date, and recipient information. Nevertheless, in matters involving voluminous discovery, the costs of the e-discovery process can quickly approach if not exceed six figures. Often, the only “solution” to this problem is to warn the client.

When utilizing one of the popular e-discovery platforms such as Relativity or Everlaw, one can include identifying “tags” for initial reviewers to flag the privilege being asserted, as well as a non-privileged description of the nature of the document being redacted or withheld. Both documents produced in redacted form (because they are only partially privileged) and documents withheld in their entirety must be logged. For documents produced in redacted form, only the protected text should be hidden, leaving other information (such as to/from/cc/subject fields in emails) visible, all in order to allow the opposing party (and the court) to discern the basis for the claim. In addition, inclusion of all such “tags” and descriptions in the e-discovery database, while time consuming during the review, saves countless hours in the compilation of the final log, because such fields can be directly exported and incorporated into an Excel-type draft.

Under Rule 29, counsel may enter into agreements to streamline this process. For example, the parties may stipulate to specific electronically stored information (“ESI”) “protocols” to narrow the universe of potential documents. They may further agree that communications between the client and counsel of record, at least those created from the onset of the lawsuit, need not be logged. There are also times when the parties may agree that communications between in-house counsel and client employees need not be logged, though there may be resistance when in-house counsel wears multiple hats, such as serving simultaneously as compliance officer. Evans v. United Servs. Auto. Ass'n, 142 N.C. App. 18, 32, 541 S.E.2d 782, 791 (2001). Of course, those of us defending claims brought by individuals should remember that our friends in the plaintiffs’ bar are not known for making life easier for our clients.

One should be mindful that problematic tensions may exist in terms of timing—tensions that can spring upon you just as you think case scheduling and ESI procedures are nearly set: in federal courts, the Business Court, and in some superior court districts, counsel must submit proposed scheduling orders early in the case. Courts are also increasingly requiring early joint filing of proposed ESI protocols to govern the electronic production. Where the rules permit service of discovery requests in the first weeks of a case (with their resulting deadlines), you could be faced simultaneously with having to negotiate scheduling and ESI protocols (with lengthy search terms and Boolean operators), agree on narrowing custodian files to be searched, and obtain gigabytes or terabytes of client data which necessarily cannot be reviewed (under the yet-to-be-decided protocols) much less logged in a 30-day (or even 60-day) response period. There is seldom a perfect solution to this conundrum, but rather than stymie production altogether or seek repeated extensions, parties should, at a minimum, consider agreeing to permit privilege logs to be exchanged on some reasonable date after service of the written responses.

The sufficiency of descriptions on privilege logs is the primary source of disputes. This issue was recently addressed by Business Court Judge Conrad in Kelley v. Charlotte Radiology, P.A., 2019 WL 8109486 at * 4 (N.C. Sup. Ct. May 15, 2019). In Kelley, Defendant challenged the adequacy of the plaintiff’s log, arguing that the descriptions were “obtuse and uninformative.” The log contained dates, authors, and recipients, with descriptions such as “asking and answering questions re litigation engagement” and “exchange between client re information furnished to lawyer.” The Court found that this phrasing was a sufficiently “short description of the subject matter, and the type of privilege asserted.”

Judge Conrad also noted that even if the log had been inadequate, the appropriate remedy would not have been to declare a waiver but for the Court to conduct an in camera review of the challenged materials. The court stressed that Kelley’s counsel had made a “good-faith effort” to describe the materials and in fact revised his log in response to defendant’s concerns.

Not surprisingly, judges do not always apply identical philosophies on the adequacy of privilege log descriptions. For example, somewhat in contrast to Judge Conrad, Business Court Judge Bledsoe, in Window World of Baton Rouge, supra, found that entries describing communications simply as "regarding" or "related to" "legal advice" were insufficient. Judge Bledsoe observed that 95 of 150 entries included substantially similar descriptions and that “[p]resumably, all [150 Sample Log Documents] are regarding or relating to legal advice.”

Litigators should also remember that attorney-client privilege and the work product doctrine are technically distinct grounds for withholding production. While attorney-client privilege attaches only to communications where legal advice is sought, conveyed or implied and where no third party is involved, the work product doctrine protection extends to anything prepared by a party or its representative (not just attorneys) in anticipation of litigation, which is not shared with a third party, including even public materials gathered at the request of counsel, and non-substantive communications. As to work product, the date of the document is critical for invoking the doctrine, since the timing of the communication vis-à-vis the beginning of litigation is vital to meeting the doctrine’s “in anticipation of litigation” requirement. In re Summons Issued to Ernst & Young, LLP, 191 N.C. App. 668, 679, 663 S.E.2d 921, 929 (2008). The test boils down to this: But for the threat or existence of litigation, would the document have been created?

In Kelley, defendant also argued a waiver of work product immunity occurred when that particular ground was not specifically listed as to certain documents. The court rejected the contention, but only because Kelley amended the log to assert the doctrine prior to the filing of the motion to compel.

In many respects, the Kelley analysis merely reflects that strong historical propensity of North Carolina judges not to find privilege and work product waivers absent egregious neglect or a complete failure to rectify shortcomings. Again, however, practitioners should keep in mind that the approach that Judge Conrad approved in Kelley will save you only if you timely served some sort of log in the first place. Moreover, if additional responsive documents are discovered, a party should timely serve a supplemental privilege log to preserve applicable privileges.

In sum, we dare say that there has never been a lawyer who has enjoyed preparation of privilege logs—or any client who was pleased to pay for the work. To minimize the costs, one should act early in planning and beginning execution of the logging process. Further, multiple entries saying “email regarding case” simply won’t cut it, but the descriptions need not consist of wordy explanations. Finally, if you see a dispute brewing over the adequacy of your log, consider objectively whether an amendment before the court is involved is wise—standing firm until a motion to compel ruling may be necessary, but, as with most challenges the litigator faces, you should constantly be alert to the risks.

How a college party resulted in clarification to North Carolina’s economic loss rule: The Story of Crescent v. Trussway and its impact on the future of construction defect litigation.

Thu, 28 Jan 2021 18:00:56 GMT

By Christopher E, Faircloth, Esq. Hamlet & Associates, PLLC – Wilmington, NC

In 2012, a commercial developer, Crescent University City Venture, LLC (“Crescent”), contracted to have several student apartment buildings built on property it owned near the UNC Charlotte campus. Crescent hired a general contractor to construct the project, and as is common in the industry, the general contractor hired various subcontractors to provide labor and materials for the job. The subcontractor hired for the provision and installation of wood framing materials then contracted with Trussway Manufacturing, Inc. (“Trussway”), via purchase order, for the manufacture and supply of the trusses it would use to construct the apartments. In this context, “trusses” are prefabricated wooden structures used to support the floor/ceiling section between units on each level of Crescent’s apartment buildings. The purchase order provided the required specifications, and Trussway manufactured the trusses—which were eventually installed project-wide.

Fast forward to a Friday night in January 2015. The project is complete, students have moved in, and 100 or so of them went to a party in “Building C,” in an upstairs unit. Afterwards, residents of the until below reported their ceiling was cracked and sagging. Those living in the impacted units were relocated; but three-months later, residents of a unit in “Building E” reported a similar issue. After floor trusses in Buildings C and E were inspected and found to be defective, Crescent hired an engineering firm to investigate a random sampling of apartments in multiple buildings across the project. The investigation revealed defective or dangerous conditions related to numerous floor trusses project-wide. When Crescent and the general contractor could not agree on a plan or timeframe to correct the defective trusses, Crescent eventually hired a third-party contractor to conduct repairs.

Predictably, the parties found themselves in litigation involving various claims, including Crescent’s claims against the general contractor related to the defective trusses. Trussway and various other subcontractors were brought into the suit as third/fourth-party defendants, and litigation carried on for a few years. In that time, the matter was designated as a complex business case and sent to the North Carolina Business Court. Along the way, Crescent filed a separate lawsuit against Trussway asserting one claim for negligence (and nearly $8 million in damages), based on Trussway’s manufacture of the defective floor trusses.

Eventually, the cases were consolidated, the parties were realigned, and Crescent came before the North Carolina Business Court to defend against Trussway’s motion for summary judgment and argue the issue that would ultimately make it to the Supreme Court of North Carolina—as stated by the Court, “[W]hether, under North Carolina law, a commercial property owner who contracts for the construction of a building, and thereby possesses a bargained-for means of recovery against a general contractor, may nevertheless seek to recover in tort for its economic loss from a subcontracted manufacturer of building materials with whom the property owner does not have contractual privity.” Crescent Univ. City Venture, LLC v. Trussway Mfg., Inc., No. 407A19, 2020 N.C. LEXIS 1134, at *1 (Dec. 18, 2020). Or said another way, in light of North Carolina’s economic loss rule—which prohibits the use of tort law to recover purely economic losses, particularly in the context of commercial transactions—can a commercial property owner successfully sue a subcontractor for negligence based on breach of contractual duties when said owner did not contract with said subcontractor?

The Business Court said no. Crescent, as a commercial property owner, could not recover its economic losses from Trussway, a subcontractor with whom Crescent had not contracted. Applying the economic loss rule to Crescent’s negligence claim, the Business Court granted Trussway’s motion for summary judgement because there was no evidence that Trussway had breached any duty outside of duties under its contract with the framing subcontractor. Crescent appealed and eventually the question was presented to the Supreme Court of North Carolina, who after hearing one of the first virtual oral arguments in the Court’s history (https://www.youtube.com/watch?v=VZjcqWjAuG0), ultimately affirmed the Business Court’s decision, and clarified the scope of North Carolina’s economic loss rule in the commercial construction context.

In its written opinion, filed on December 18, 2020 and penned by Justice Michael Morgan, the Court began its analysis with reference to its Ports Authority opinion—a case familiar to North Carolina construction defect attorneys, as it adopted the economic loss rule in the State. See Ports Auth. v. Lloyd A. Fry Roofing Co. (Ports Authority), 294 N.C. 73 (1978). Under Ports Authority, the economic loss rule prevents a plaintiff from recovering in tort “against a promisor for his simple failure to perform his contract, even though such failure was due to negligence or lack of skill.” Ports Authority at 83.

Summarizing the historical context, the Crescent Court explained, “that the purpose of the economic loss rule is to prevent contract law from drowning in a sea of tort.” Crescent at *10 (internal quotations omitted). While the Court acknowledged a potential public policy exception to the economic loss rule for layperson homeowners (i.e., unsophisticated, noncommercial plaintiffs who purchased a defectively constructed home), those policy considerations do not apply in situations like Crescent and Ports Authority, where all parties involved are sophisticated commercial entities and the plaintiffs’ losses are purely economic. As the project owner, Crescent had a bargained for means for recovery of its economic losses related to the defective floor trusses, i.e., a breach of contract suit against the general contractor. Since Crescent already had an avenue to recover its economic losses under a contract law theory, the Court held that the economic loss rule barred Crescent from recovering the losses from Trussway under a negligence theory.

Notably, and of particular importance to defense counsel for subcontractors and general contractors, the Court here explicitly held, “[t]he lack of privity in the commercial context between a developer and a subcontractor, supplier, consultant, or other third party—the potential existence of which is readily known and assimilated in sophisticated construction contracts—is immaterial to the application of the economic loss rule.” Crescent at *13. Thus, it did not matter that there was no contract between the Crescent and Trussway, the economic loss rule would apply regardless. No recovery in tort for purely economic losses, period.

This piece of the Crescent Court’s analysis is critical, because after Crescent’s clarification on the scope and applicability of the economic loss rule, North Carolina trial courts will likely start “cracking down” on a common practice in construction litigation where the plaintiff project owner seeks negligence-based recovery directly from the general contractor’s subcontractors. Given that project owners rarely contract directly with the subcontractors, and in light of the Court’s clarification of the economic loss rule; going forward, project owners will have a difficult time recovering economic damages directly from a subcontractor. Instead, project owners must seek to recover their economic damages from the general contractor with whom it initially contracted for the construction of the project. As such, owner/developers and general contractors should consider adjusting the terms of future construction contracts to account for the impact Crescent will have on the industry.

For attorneys defending construction defect claims, Crescent could be a boom or bust, depending on whether the client is a subcontractor or general contractor. But one thing is clear—like the party in Building C that set this whole thing off—the party is over for project owners seeking to leverage negligence claims over subcontractors to extract extra funds, and for the general contractors who stood to benefit from that leverage via a smaller check to write at the end of the day. But for subcontractors defending against tort claims from project owners they never contracted with—the party just got started.

N.C. Farm Bureau v. Martin

Thu, 31 Dec 2020 16:00:56 GMT

N.C. Farm Bureau v. Martin
By: Joseph W. Fulton

This case from the N.C. Supreme Court dealt with an insurance coverage issue: resident-relatives. A mother and daughter sought UIM coverage under a personal auto policy issued to their mother-in-law/grandmother. They all lived on a family farm. The insured lived in the main house. The claimants lived in a guesthouse on the same property. The insured paid all of the expenses for the guesthouse. The Court held that the claimants were not residents of the insured’s household because they had “never lived together under the same roof . . ..” Therefore, the claimants were not insureds.

NCADA members Walter Brock, Jr., Andrew P. Flynt, and Matthew C. Burke represented N.C. Farm Bureau. Member George L. Simpson, IV filed an amicus brief on behalf of NCADA.

Read the rest of Joe's blog post!

NC Court of Appeals Further Defines Calculation of AWW for Temporary Employees

Lynette Pitt — Wed, 02 Sep 2020 20:20:34 GMT

Synopsis provided by Michael W. Ballance, Dickey, McCamey & Chilcote, PC

Luon Nay v. Cornerstone Staffing
(Court of Appeals - Unpublished – 18 August 2020

Facts: The employer Cornerstone was a staffing agency that provided employees to companies in “temp-to-perm” placements with the expectation of long-term employment. At least 95% of the positions filled by the employer were temp-to-perm positions. Plaintiff was employed by Cornerstone and on placement with a company when he injured his back in 2015. He had earned a total of $5,805.25 while working for Cornerstone. A dispute subsequently arose about how to properly calculate plaintiff’s average weekly wage (AWW).

Cornerstone claimed that plaintiff was a “temporary” employee, and as such, plaintiff’s AWW should be calculated by using Method 5 and dividing the total wages earned by 52 weeks under the decision in Tedder v. A&K Enterprises. This resulted in an AWW of $111.64. Plaintiff argued that, because he was a temp-to-perm employee with an expectation of continued employment, Method 3 should be used. This method resulted in an AWW of $419.20.

Both the Deputy Commissioner and Full Commission held that Method 5 was appropriate. Plaintiff appealed to the Court of Appeals.

Ruling: The Court of Appeals reversed the Commission and held Method 3 was correct.

Reasoning: In determining which of the five methods should be used in calculating AWW under N.C.G.S. § 97-2(5), the Court noted that there are two overriding concerns. First, the AWW should reflect what the plaintiff would have been earning had the injury never occurred. Second, the AWW must be fair and just to both parties.

The Court then distinguished this case from Tedder. In Tedder, the plaintiff was hired for a specific period of only seven weeks to fill in while an employee was undergoing surgery. There was no expectation of employment beyond seven weeks, and but for his injury, plaintiff would not have worked for the employer more than seven weeks. Therefore, it would have been unfair to the employer to pay plaintiff an AWW contemplated by a regular employee, so Method 5 was appropriate.

In this case, plaintiff worked for a temporary agency, but there was no “definitive employment end date” set with Cornerstone. Had his injury not occurred, plaintiff could have continued to work for Cornerstone indefinitely as any other at-will employee in North Carolina. Thus, Method 3 would most accurately reflect what plaintiff would have made if the injury had never occurred.

Practical Impact: This was an unpublished opinion, so the precedential authority of the case is limited. However, I think it is an interesting decision that helps further define when an employee is a “temporary” employee under the Court’s prior decision in Tedder. When deciding how to calculate the AWW of a “temporary” employee, the Court seems to be signaling that the employer’s designation of the employee as a “temp” does not necessarily control. The Court here stated there must be a “definitive employment end date” before Tedder applies and it is appropriate to use Method 5. Therefore, if your employer clients use temporary workers, it is essential to counsel them on the importance of establishing in writing the beginning and ending dates of their employment at the outset of the employment relationship. Failure to do so could result in employers paying substantially higher compensation rates to an injured worker.

#workerscomp

NCADA Files Amicus Brief in Support of Municipality

Mon, 03 Dec 2018 15:26:31 GMT

Governmental Immunity
Meinck v. City of Gastonia

In a personal injury case involving a city owned building leased to a non-profit group, the trial court granted summary judgment upon a finding of immunity. The Court of Appeals reversed finding immunity does not apply. The NC Supreme Court concluded defendant was entitled to governmental immunity and reversed the decision of the Court of Appeals and remand the case back to determine whether the immunity waiver applied. The Supreme Court noted that it is a case-by-case basis and courts should look to the purpose of the government actor’s actions when making a determination. The NCADA filed an amicus jointly with the NC League of Municipalities in support of the city’s position.

Andrew Santaniello, Clawson and Staubes, PLLC authored the amicus brief on behalf of the NCADA along with NCLM counsel.

Richard O'Neal v. Inline Fluid Power, Inc.,N.C. App. , 773 S.E.2d 574 (2015)

Lynette Pitt — Wed, 01 Mar 2017 15:29:36 GMT

This case was recently litigated at the North Carolina Supreme Court. The issue before the Supreme Court was the Industrial Commission’s authority to create the “Medical Benefits Only” section of the Form 63 (Section 2). The Form 63, Section 2 allows an employer pay medical compensation only, rather than both medical compensation and indemnity compensation, without prejudice to later deny the compensability of an employee’s claim.

Plaintiff Richard O’Neal, an employee at Inline Fluid Power and Automotive Parts Co., was delivering boxes in May 2011 when he sustained an injury by accident arising out of, and in the course of his employment. Defendants filed a Form 63, Section 2, agreeing to pay medical benefits only without prejudice to later deny Plaintiff’s claim.

Plaintiff contended that the Industrial Commission acted beyond the scope of its authority by creating Section 2, the “Medical Benefits Only” section of the Form 63. Plaintiff argued that the Form 63 “Medical Benefits Only” section allowed the employer to escape the provisions of N.C. Gen. Stat. § 97-18(d), which provide that an employer waives its right to contest the compensability of a claim if not contested within 90 days from the date the employer receives notice of the injury.

In an unpublished opinion, the North Carolina Court of Appeals held that the Industrial Commission did not exceed its authority by creating the Form 63, Section 2. The Court of Appeals held that the legislature had always provided for two distinct components under the Workers’ Compensation Act: (1) payment of medical compensation, and (2) general compensation for financial loss other than medical expenses, which includes payment to compensate for an employee’s lost earning capacity. Form 63, Section 1 concerns the payment of “Compensation” as defined in N.C. Gen. Stat. § 97-2(11) and in accordance with N.C. Gen. Stat. § 97-18(d), while Section 2 concerns the payment of “medical compensation.” The Court stated that N.C. Gen. Stat. § 97-18(d) concerns claims for “compensation” and not claims for “medical compensation.”

The Court of Appeals held that the procedure reflected in Form 63, Section 2, is both permitted by statute and allows an injured employee an opportunity to expeditiously receive medical compensation payments. As a result, the Court of Appeals concluded that the Industrial Commission did not exceed its authority when it created Form 63, Section 2.

Plaintiff filed a Petition for Discretionary Review with the Supreme Court. The Supreme Court granted Plaintiff’s Petition for Discretionary Review on the Form 63 issue. Duane Jones of Hedrick, Gardner, Kincheloe & Garofalo, LLP filed an Amicus Curiae Brief on behalf of NCADA. Following the submission of briefs and oral arguments, the Supreme Court issued an Opinion on December 21, 2016, stating that Discretionary Review was improvidently granted. This was a favorable outcome for the defense bar in that it allows employers in certain claims to continue to pay medical benefits only without prejudice to later deny the compensability of the employee’s claim.

Submitted by Viral Mehta, McAngus Goudelock & Courie

Limitation in Application of Wilkes v. City of Greenville

Lynette Pitt — Tue, 26 Jul 2016 14:30:00 GMT

Limitation in Application of Wilkes v. City of Greenville 777 S.E.2d 282, 287 (2015) Pending North Carolina Supreme Court Review

An accident occurred resulting in an admitted low back injury. Plaintiff alleged that the accident resulted in additional injuries. Plaintiff argued that Defendants’ Form 60 as to the low back resulted in a presumption that additional medical treatment for all other alleged injuries is also compensable.

Defendants argued that Parsons and its progeny, including Wilkes, deal only with claims for additional medical compensation under N.C. Gen. Stat. § 97-25; not claims for additional injury arising out of the accident itself. The Court of Appeals agreed holding “the Parsons presumption was not applicable to plaintiff's wholly separate physical injuries until defendants either admitted they were compensable or the Commission found a causal relationship exists between the accident and that specific injury”.

Henderson v. Goodyear Tire & Rubber Co., 786 S.E.2d 433 (2016)(unpublished)

Synopsis provided by Matthew Ledwith, Hedrick Gardner Kincheloe & Garofalo, LLP

Medical Malpractice Rule 9(j) Decision - Vaughan v. Marshburn

Lynette Pitt — Wed, 20 Jul 2016 15:30:00 GMT

The case arose from a medical malpractice complaint filed without the requisite boilerplate language in Rule 9(j) of the Rules of Civil Procedure which requires a plaintiff to specifically assert that “the medical care and all medical records pertaining to the alleged negligence . . . have been reviewed” by someone reasonably expected to qualify as an expert. Plaintiff had actually had a medical expert review her medical records as required by state law but did not follow the technical requirements of Rule 9(j). Plaintiff conceded that her 9(j) certification omitted the required assertion that “all medical records pertaining to the alleged negligence that are available to plaintiff after reasonable inquiry” were reviewed by the medical expert.

After the plaintiff’s statute of limitations expired, Chip Holmes, who represented the defendants, appropriately filed a motion to dismiss pursuant to Rule 12(b)(6) based on the plaintiff’s technical failures to comply with Rule 9(j). Plaintiff then sought to amend her complaint to comply with Rule 9(j). The trial court granted the defendant’s motion to dismiss and denied plaintiff’s motion to amend. Plaintiff appealed.

In a June 21, 2016 opinion, the Court of Appeals reluctantly agreed with the trial court and affirmed the trial court’s dismissal of the plaintiff’s complaint on the basis that the plaintiff’s original complaint and certification did not track the statutory language of Rule 9(j). The Court of Appeals felt “compelled by precedent to reach ‘a harsh and pointless outcome’ as a result of ‘a highly technical failure’ by [plaintiff’s trial counsel.”

However, 10 days later on July 1, 2016, the Court of Appeals withdrew its opinion dismissing the medical malpractice lawsuit in response to plaintiff’s motion. The Court of Appeals did not provide any reasoning for its decision to withdraw its opinion. It now appears that defendants can no longer rely on the technicalities of 9(j) compliance as a basis for having a case dismissed where the evidence shows that the plaintiff did in fact secure an expert review prior to the filing of the compliant.

Synopsis provided by Erin M. Young, Hall Booth Smith, P.C.

Premise Liability Decision - Blackmon v. TRI-ARC Food Systems, Inc.

Lynette Pitt — Wed, 23 Mar 2016 15:21:46 GMT

Blackmon v. TRI-ARC Food Systems, Inc., No. COA15-721, 2016 N.C. App. LEXIS 246 (March 1, 2016)

Plaintiff was injured while making a report to a police officer in front of a Bojangles. The accident occurred when an SUV struck Plaintiff’s vehicle and pinned Plaintiff between his vehicle and the police vehicle. The driver of the SUV pleaded guilty to careless and reckless driving. The Court of Appeals held that the Bojangles could not be found liable for negligent design of its parking lot because of the SUV driver’s unforeseeable criminal conduct. The Court also found that the Plaintiff was contributorily negligent for his choice to park in an unmarked spot on the roadway.

http://caselaw.findlaw.com/nc-court-of-appeals/1727630.html

Synopsis provided by Joe Budd, McAngus Goudelock & Courie, LLC

Court: We Said Four Factors, and We MEAN Four Factors

Lynette Pitt — Thu, 26 Mar 2015 19:00:00 GMT

Can we recover our attorney fees if we win a contract case? For most of my practicing career, I have had to answer that very common client question with a "no" or "probably not." In 2011, the General Assembly passed NCGS 6-21.6, which authorizes reciprocal attorney fee provisions in business contracts - so now for those of us in the business litigation field the answer to that client question may very well be "yes." Construction lawyers, though, have long been able to give at least a "maybe" answer to that question where the plaintiff's complaint seeks to enforce a lien or bond claim, under the provisions of NCGS 44A-35 that allow for the winner to recover attorneys fees (in the judge's discretion) under the right circumstances.

Whatever the statutory basis of an attorney fees award, what exactly does the judge need to include in the order regarding the reasonableness of the amount? There had been some debate about this issue before the recent Court of Appeals decision of Browns Builders Supply v. Johnson, but the opinion written by Judge Dillon has now clarified the law supporting these awards. As far as factors go, four is the number we shall count, and the number of the counting shall be four. (I have thus set up a series of jokes for Monty Python fans, which they can now gleefully perform while the rest of us read on.)

The plaintiff in Brown prevailed on its lien claim, then sought attorney fees under Chapter 44A. The trial judge awarded attorney fees and make certain findings to support the amount of the award. Arguing the findings insufficient under Supreme Court precedent, the defendant appealed. In 1995, the Supreme Court had affirmed per curiam the Court of Appeals decision in NC Department of Corrections v. Myers, requiring the amount of an attorney fees award to be justified by findings in the order as to 1) the time and labor expended by the attorney, 2) the skill required to perform the legal services, 3) the customary fee for like legal work, and 4) the experience or ability of the attorney. However, in 1992, the Supreme Court in Dyer v. State of NC had approved of an order for fees that did not include express findings about the ability of the attorney or the customary fee for like work. To resolve this tension in the precedent, Judge Dillon reasoned that given the number of decisions since 1995 applying the four-factor test outlined in Myers, this more stringent and more recent test must be the law. Because the order in Brown did not check the boxes for all four factors, the case was remanded to the trial court to make the relevant findings.

((For those readers who still have in their inbox last month's Resource, pull it back up and compare/contrast how this decision dealt with incongruent precedent versus how the Graham case about continuing trespass was decided. You will find it interesting.))

Synopsis provided by David W. Hood, Patrick Harper & Dixon, LLP

Court of Appeals Decisions are Never in Conflict With Each Other, Right?

Lynette Pitt — Thu, 26 Feb 2015 21:00:00 GMT

Well...as it turns out, sometimes one panel of the Court of Appeals sees things differently from another panel. As a general rule, the three judges hearing an appeal must respect precedent established in an earlier Court of Appeals case, even if that precedent seems flawed. It is the Supreme Court's job to overturn a bad decision by a Court of Appeals panel, not the job of a more-enlightened panel of the same Court. At times this can lead to some interesting and creative attempts by one panel to distinguish the holding of a panel from an earlier case that would otherwise seem to dictate a contrary result. In a recent Court of Appeals decision written by Judge Mark Davis, his panel was presented with a continuing trespass claim by a landowner against her neighbor resulting from an encroaching building - and a Court of Appeals decision from 2006 which seemed to require a dismissal of that claim because the plaintiff was not the property owner at the time the encroaching building was constructed.

In Graham v. Deutsche Bank National Trust Co., the Court of Appeals first issued an opinion reversing the trial court and denying relief to the plaintiff based upon the 2006 decision in Woodring v. Swieter. In Woodring, the Court of Appeals had held that even a continuing trespass claim cannot be sustained if the plaintiff were not the property owner at the time the trespass was committed. The Graham court, however, realized after the fact that there were previous Court of Appeals cases (and arguably one Supreme Court case, but that was less clear) that went the other way - that since the trespass in a continuing trespass case, well, continues, then a plaintiff can seek redress for each day of trespass that has occurred since the plaintiff became the property owner. In a rare move, the Graham court withdrew its first opinion and, upon rehearing, issued a different opinion that found for the plaintiff.

So, what did the Court do with the Woodring decision? Judge Davis cited authority that, when faced with conflicting decisions of the Court of Appeals, a panel should follow the older of the two lines of authority. In this case, that led the Court to side with the plaintiff. While both legally correct and respective of precedent, this is an interesting point given that practicing lawyers often use the exact reverse argument when dealing with apparently conflicting lines of case law - that a judge should pay attention to the most recent opinion because that reflects the more modern thinking on that legal issue!

Synopsis provided by David W. Hood, Patrick Harper & Dixon, LLP

Supreme Court Leaves Paschal Precedent in Place

Lynette Pitt — Tue, 30 Dec 2014 21:00:00 GMT

About a year ago, The Resource reported on a coverage case of particular interest to NCADA members who practice in the area of automobile insurance. The North Carolina Court of Appeals had decided a case involving whether a particular injured minor had been a resident of her grandfather's household so as to allow her to claim underinsured motorist benefits under the grandfather's policy. In that case, North Carolina Farm Bureau v. Paschal, the court had found coverage by interpreting the definition of "household" more broadly than in past decisions. Even though technically the grandfather and the injured granddaughter did not reside under the exact same roof, that court had determined that since the grandfather owned the house where she lived and acted as a parent would have, both emotionally and financially, that was enough to implicate his UIM coverage.

The Court of Appeals decision went up on a granted petition for discretionary review, but the North Carolina Supreme Court recently determined that the petition had been improvidently allowed. There are a number of coverage cases being appealed right now in which the broad holding and language of Paschal constituted the primary battleground - now parties resisting the expanded UIM coverage are going to have to try to distinguish the facts in their cases from those in Paschal since the Supreme Court did not provide any alternative thinking about this issue, as had been hoped by some.

One important fact in Paschal that could be unique was the fact that the house in which the grandfather lived and the different house in which the granddaughter lived were part of a "family compound" of adjacent properties. In addition, the fact that the grandfather played so much of a parental role because the parents themselves did not would be another possibly distinguishing factor. Any way you slice it, however, the days of deciding these coverage cases based just on how much personal stuff a claimant left at any particular house on a regular basis is gone. Instead, practitioners are going to need to delve deeper into the family dynamics, the emotional bonds between family members, and the subjective expectations and opinions of those family members in order to prepare these coverage cases for summary judgment and, as is more likely now, trial.

Synopsis provided by David W. Hood, Patrick Harper & Dixon, LLP

NC Court of Appeals Dismisses Appeal Due to Procedural Error

Lynette Pitt — Thu, 20 Nov 2014 19:00:00 GMT

The NC Court of Appeals again stressed the importance of compliance with appellate rules. On October 4, 2014 in Henderson v. Garcia Motorrad, et.al. (Stroud, J., unpublished), the North Carolina Court of Appeals dismissed an entire appeal due to a procedural compliance issue. The Court dismissed plaintiff's appeal as interlocutory because plaintiff neglected to assert in his brief that delayed appeal would impair a substantial interest. Even though the order from which plaintiff appealed was a motion to dismiss, and perhaps appeared on its face to be a "final judgment," since the dismissal order did not address the claims raised in the third-party complaint, it was deemed to be interlocutory such that plaintiff was required to take that extra step or risk a dismissal. This case is another example of a recent trend in which the Court shows strict intolerance of procedural slip-ups.

Update provided by Tara Muller, Teague Campbell Dennis & Gorham, LLP

U.S. Supreme Court clarifies the limits of Twombly/Iqbal

Lynette Pitt — Thu, 20 Nov 2014 18:30:00 GMT

Rejecting the "punctiliously stated 'theory of pleading'" applied by the district court and the Fifth Circuit, the U.S. Supreme Court in Johnson v. City of Shelby, Mississippi, ___ S.Ct. ___, 2014 WL 5798626 (2014), held that the plaintiffs need not expressly invoke Section 1983 in order to state a claim for violations of their Fourteenth Amendment due process rights. The Court quoted FRCP 8(a)(2) and explained that "[f]ederal pleading rules call for 'a short and plain statement of the claim' . . . ." And they "do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted."

Twombly and Iqbal were not on point because those two cases dealt with insufficient factual allegations to support a plausible claim for relief; whereas here the alleged pleading deficiency was the failure to invoke a specific statute or legal theory arising from sufficiently-stated facts. There was no dispute here that the plaintiffs had stated sufficient facts to support a Section 1983 claim. "Having informed the [defendant] of the factual basis for their complaint, [plaintiffs are] required to do no more to stave off threshold dismissal for want of an adequate statement of their claim."

Update provided by Mike Mitchell, Smith Anderson

Court of Appeals upholds Public Duty Doctrine

Lynette Pitt — Thu, 25 Sep 2014 19:30:00 GMT

There are many ways for a claim against a public entity to fail. Sometimes the problem is governmental or sovereign immunity. For claims against individuals working for the public, the problem may be public official immunity. When law enforcement activities are involved, the problem may well be the public duty doctrine, which basically prohibits claimants from suing police officers or similar folks who are providing protection to the general public. The idea is that cash-strapped police departments around the state would be unfairly burdened by having every quick decision they make in exigent circumstances second-guessed in court several years later by a bunch of Monday-morning quarterbacks. In a recent case arising from a hit-and-run accident in Columbus County, the court dismissed a lawsuit against the police officer which had sought money damages from his allegedly poor investigation.

The plaintiff in Inman v. City of Whiteville has been forced off the road by another driver, though there was no contact between the vehicles. While the investigating officer did question the other driver, he did not include the identity or contact information for that driver on the accident report. Since there had been no contact between the vehicles, the department had decided that no further investigation of that driver was needed. Because the identity of the at fault driver was now unknown, and because the no-contact fact prevents any claim under Uninsured Motorist Coverage, the plaintiff was left without a remedy – so of course that meant suing the police was their only remaining option.

Whatever one thinks about the sensibility of the policeman’s decision from a law enforcement point of view, the duty of a police officer to investigate car accidents is clearly the type of duty that is owed to the general public and thus the public duty doctrine operated to dismiss the suit according to the Court of Appeals. The plaintiff had not even tried to fall into one of the two recognized exceptions to the public duty doctrine, but let’s pretend that did happen so we can discuss those.

First, the doctrine does not apply if there is a “special relationship” between the claimant and law enforcement. This would apply if, for example, the claimant had been a police informant or perhaps an embedded reporter or something where the claimant could have reasonably expected a higher level of individualized protection based upon the existence of that relationship. Second, the doctrine does not apply if the claimant had been specifically promised protection by law enforcement and did not receive it, like when a person has been threatened or stalked and the police promised protection for some specific period of time. The claimant in Inman could not benefit from either of these exceptions.

Submitted by David Hood, Patrick Harper & Dixon, LLP

NC Court of Appeals Issues First Appellate Decision Interpreting & Applying Willful Misrepresentation Defense Under N.C.G.S. § 97-12.1

Lynette Pitt — Thu, 25 Sep 2014 18:30:00 GMT

On August 5, 2014, the North Carolina Court of Appeals issued an important decision in Purcell v. Friday Staffing, 2014 N.C. App. LEXIS 817. The case, which was handled by MGC attorney Sally Moran, is the first appellate decision interpreting the application of N.C.G.S. § 97- 12.1. N.C.G.S. § 97-12.1, which was enacted as part of the June 24, 2011, reforms to the North Carolina Worker’s Compensation Act, provides as follows:

No compensation shall be allowed under this Article for injury by accident or occupational disease if the employer proves that (i) at the time of hire or in the course of entering into employment, (ii) at the time of receiving notice of the removal of conditions form a conditional offer of employment, or (iii) during the course of a post-offer medical examination:

(1) The employee knowingly and willfully made a false representation as to the employee’s physical condition;

(2) The employer relied upon one or more false representations by the employee, and the reliance was a substantial factor in the employer’s decision to hire the employee; and

(3) There was a causal connection between false representation by the employee and the injury or occupational disease.

In Purcell, the plaintiff had a worker’s compensation claim for a back injury in 1999. The plaintiff underwent surgery and was ultimately assigned permanent work restrictions of no lifting greater than 20 pounds as a result of this injury. On May 28, 2010, the plaintiff applied for employment with the employer-defendant, Friday Staffing. As part of the job application process, the plaintiff completed two pre-employment questionnaires. In one of the questionnaires, the plaintiff specifically indicated that she could engage in work requiring lifting greater than 50 pounds. In responding to the second questionnaire, the plaintiff indicated that she had never filed a workers’ compensation claim, had never suffered any injury or undergone surgery and had never received treatment or consultation about back pain or possible back injuries.

Before the Court of Appeals, the plaintiff did not dispute that the first two prongs of N.C.G.S. § 97-12.1 were satisfied. Rather, the plaintiff argued that the Industrial Commission erred in finding a causal connection between her false representation and her back injury. In its decision, the Court held that when requiring a “causal connection” to satisfy the third prong of N.C.G.S. § 97-12.1, the legislature intended that a defendant show that a plaintiff’s undisclosed or misrepresented injury, condition or occupational disease increased the risk of the subsequent injury or disease. The Court found that the plaintiff’s treating physician provided unchallenged testimony that the plaintiff was at an increased risk of injury if she exceeded her work restrictions of no lifting greater than 20 pounds. The Court held that this finding, in conjunction with the Industrial Commission’s finding that the plaintiff exceeded her work restrictions as part of her employment with Friday Staffing, supported the Industrial Commission’s finding of a causal connection under the third prong of N.C.G.S. § 97-12.1. As a result, the Court upheld the Industrial Commission’s denial of benefits.

Submitted by Sally Moran and John Barringer, McAngus Goudelock & Courie

Good-bye Howerton, Hello Daubert

Lynette Pitt — Thu, 27 Feb 2014 21:00:00 GMT

Its 10-year reign is over. Howerton is no longer the standard of admissibility for expert testimony in North Carolina. Daubert is.

On January 21, the Court of Appeals issued its opinion in State v. McGrady, No. COA13-330. McGrady was a first-degree murder case in which the defendant contended that he shot his cousin in self defense. He proffered the testimony of a “use of force” expert to bolster his defense. Upon the State’s motion in limine, the trial court conducted a voir dire of the expert witness, at which time he excluded his testimony. The defendant appealed.

Writing for a unanimous panel, former NCADA President and Court of Appeals Judge Linda Stephens noted that in 2011 the legislature amended Rule 702(a) of the North Carolina Rules of Civil Procedure to conform to Federal Rule 702(a), which itself was amended to codify the standard of expert admissibility articulated in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). [The NCADA was intimately involved in drafting this amendment, with the express intent to codify the Daubert standard.]
As amended, Rule 702(a) now requires an expert’s opinions to be (1) based upon sufficient facts or data; (2) the product of reliable principles and methods; and (3) based on a reliable application of those principles and methods to the facts of the case. Judge Stephens noted that the newly amended Rule 702(a) “represents a departure from our previous understanding of Rule 702,” i.e., Howerton, “which eschewed the Supreme Court’s decision in Daubert. . . . Given the changes brought by our legislature, however, it is clear that amended Rule 702 should be applied pursuant to the federal standard as articulated in Daubert.”

Judge Stephens then articulated that standard: “an expert must first based his testimony on ‘scientific knowledge,’ which ‘implies a grounding in the methods and procedures of science,’ in order for that testimony to be admissible.” The trial court, she observed, serves as the gatekeeper to determine if the expert’s proposed testimony satisfies that requirement:

It is the trial court’s responsibility to determine “whether the expert is proposing to testify to (1) scientific knowledge” and whether that knowledge “(2) will assist the trier of fact to understand or determine a fact in issue.” In deciding whether the proffered scientific theory or technique will assist the trier of fact, the trial court may consider, among other things, (1) “whether [a theory or technique] can be (and has been) tested,” (2) “whether the theory or technique has been subjected to peer review and publication,” (3) “the known or potential rate of error . . . and the existence and maintenance of standards controlling the technique’s operation,” and (4) whether the theory or technique is generally accepted as reliable in the relevant scientific community. This inquiry is “a flexible one,” and remains reviewable under the abuse of discretion standard.

Applying this standard, and standard of review, the court affirmed the trial court’s exclusion of the defendant’s proffered “use of force” expert. In doing so, it observed that federal courts traditionally grant “a great deal of discretion” to the trial court in performing its gatekeeping function under Daubert. Judge Stephens concluded that the defendant’s expert provided scant data to support the reliability of his methodology and “provided no substantive reasons – no specific knowledge, methods, or procedures – to support those assertions.” He was not even able to cite a single specific study supporting his methodology and admitted he knew nothing about its rate of error. He also lacked medical credentials required to makes some of the judgments inherent in his opinion. The appellate panel therefore saw “no reason to conclude that the trial court was manifestly unreasonable in determining the [the expert’s] knowledge . . . was not helpful to the jury.”

McGrady and its rationale should have significant impact on the way cases involving expert testimony proceed in our state courts. Indeed, expert-intensive cases in state court will begin to resemble cases litigated in federal court, with Daubert challenges and hearings becoming the norm, rather than the exception. In the early going, defense attorneys will need to pull the laboring oar in helping superior court judges understand the contours of Daubert and its progeny, their gatekeeping function, and the discretion they enjoy in making Daubert determinations. Before long, Daubert will should begin to weed out state court cases premised on weak science, just as it does with its federal counterparts. So, good-bye and good riddance Howerton! We hardly knew ye.

Submitted by Steve Epstein, Poyner & Spruill, LLP

Asbestos Litigation Order In the News....

Lynette Pitt — Thu, 27 Feb 2014 15:00:00 GMT

WDNC Bankruptcy Judge George R. Hodges issues precedent-setting Order on January 10, 2014 in "Garlock Sealing Technologies." If you've missed it, as part of Garlock's $1 billion bankruptcy case, the Judge's order has slashed what the manufacturer owes asbestos victims after finding that the victim's lawyers abused the system.

Read More About It:

Cloud Lifted: Gasket Maker Dodges Over $1 Billion in Asbestos Liability
David Donovan, NC Lawyers Weekly, February 6, 2014

Case Sheds Light on the Murky World of Asbestos Litigation
NPR, February 4, 2014

Judge Finds Fraud and Deceit by Plaintiffs' Lawyer in Asbestos Cases
Bloomberg Businessweek, January 13, 2014

Judge Slashes Asbestos Liability in Garlock Bankruptcy to $125 Million
Forbes, January 10, 2014

Daubert Standard in North Carolina

Lynette Pitt — Thu, 30 Jan 2014 22:00:00 GMT

State v. McGrady, __ N.C. App. __, __ S.E.2d __ (Jan. 21, 2014), is the first appellate decision which provides a meaningful analysis of the North Carolina legislature's adoption of the Daubert standard for evaluating the admissibility of expert testimony. In McGrady, the trial court excluded the testimony of a defense expert in the "use of force." The defense offered the expert's testimony in support of a claim of self-defense, primarily focusing on "pre-attack" cues by the decedent that might indicate a reasonable belief by the defendant of a forthcoming assault. Although the expert testified he had special knowledge concerning "use of force," he was unable to convince the trial court that his opinions were based upon sufficient facts or data or that his methods were reliable. The Court of Appeals upheld the trial court, finding it had not abused its discretion but had correctly applied Rule 702 and Daubert in concluding that the expert's opinions were not based on reliable principles and methodologies and were merely "within the realm of common knowledge." The Court noted that while the trial court's inquiry is "flexible," valid considerations included whether the expert's theory or technique had been tested, subject to peer review, and had an established error rate. McGrady serves as a reminder that where there is "too great an analytical gap" between science and an expert's proffered opinion, such testimony is inadmissible.

Submitted by Will Latham and Phillip Brown, Womble Carlyle Sandridge & Rice

Court of Appeals Reverses on UIM Coverage Based On Household Status

Lynette Pitt — Thu, 30 Jan 2014 20:30:00 GMT

Lawyers who deal with interpretation of automobile insurance policies know that a fertile source of coverage litigation is the extent to which a family member can be considered as a member of the “household” of a named insured on a policy. This most often arises in the context of underinsured motorist coverage, where attorneys for an injured plaintiff try like the dickens to find additional potential coverage when the liability limits are not going to be enough to pay the whole claim. When children or adolescents are involved, it can often be true that they can be members of more than one household at the same time for coverage purposes.

In the recent Court of Appeals case of North Carolina Farm Bureau Mutual v. Paschal, the issue was whether a granddaughter of the Farm Bureau insured could be considered a “household” member of the grandfather even though they really did not live in the same “house.” Unlike a 1950s sitcom, family units in the real world of the 21st Century often have not only shared custody arrangements between ex-spouses, which often lead to multiple household status for injured kids, but also kids and teens that are shifting caregivers with varying degrees of responsibility and contact with them. In this case, the granddaughter lived in one house on a family farm while the grandfather generally lived in another nearby house, but the whole shebang was considered by some to be a “family farm.” Even though the grandfather did not have legal custody of the girl, he often took care of her, accompanied her to appointments, and provided for her financially. The Court of Appeals reversed the trial court’s grant of summary judgment to Farm Bureau, quoting from previous decisions which held 1) that family members need not reside under the same roof to be members of the same household, and 2) that since the term “resident” of a household is an inherently slippery term, a court should not “sprinkle sand on the ice” by construing that term in favor of the insurer.

Practice point from this decision for lawyers in similar coverage cases – look not only for facts about where the prospective insured sleeps or stays, but also the extent to which that person has physical, emotional, and financial ties to the named insured of the subject policy. This is a highly fact-specific inquiry, so dig up as many facts as you can.

Submitted by David W. Hood, Patrick Harper & Dixon, LLP

Summary Judgment Upheld in Malicious Prosecution Case

Lynette Pitt — Thu, 19 Dec 2013 21:27:09 GMT

When disaster struck Haywood County, and other mountain communities, in the form of two hurricanes in 2004, donations poured in from public and private sources throughout the state. Certain non-profit entities formed a committee to administer relief funds from several of these sources. The executive director of one of these entities, the Council on Aging, volunteered to hold a portion of these relief funds. However, when the United Way and other committee member organizations began to have questions about the status of the money and asked for its return, that same executive director refused to provide an explanation for why the funds were not immediately surrendered. The Council on Aging later terminated the executive director, and the member organizations decided to turn over their documents to local law enforcement to determine if criminal activity had taken place with respect to the missing money.

Denise Mathis, the former executive director, was later charged with embezzlement by the District Attorney - but the charges were later dropped. She then sued the organizations in question for malicious prosecution. Summary judgment was granted, after which Mathis appealed.

In the case of Mathis v. Dowling, et al., the Court of Appeals affirmed the trial court ruling by finding that the plaintiff had failed to satisfy 3 of the 4 elements of malicious prosecution.

Because the detective testified that he had conducted his own independent investigation, which ultimately led to the charges being filed, the court determined that the defendants had not procured the prosecution but had instead only rendered assistance to the detective and thus were not liable. In addition, the court found that the defendants had probable cause to deliver their investigatory materials to the detective because there was no good explanation for the missing money that would have satisfied the defendants' fiduciary obligation to determine the whereabouts of the money. Finally, the court further held that there was no demonstrated malice on the part of the defendants, as their questions regarding the whereabouts of the money were legitimate and reasonable. The upshot of this case is that just because a criminal proceeding was terminated in the plaintiff's favor does not necessarily give rise to a malicious prosecution claim. Public policy dictates that individuals and organizations cooperate with legitimate law enforcement investigations without fear that they will be hailed into court later for actions taken by the District Attorney over which they have no control.

Divided Court Upholds Application of Ten-Year Limitations Period

Lynette Pitt — Thu, 21 Nov 2013 15:00:00 GMT

Two plaintiffs from St. Louis sued a company in Moore County for failure to complete improvements to a development that would allow the plaintiffs to construct their dream home. The defendant in Davis v. Woodlake Partners raised several defenses, all of which were rejected by the trial court sitting without a jury - resulting in a $191,000 judgment for breach of contract. Two arguments were presented on appeal, one of which was fact-specific and thus of limited interest beyond the parties. The second argument focused on the statutes of repose and limitation, and the date upon which each of those two clocks would begin to run. After finding that the claim was brought within six years of the date the construction was to have been completed, and thus that the filing complied with the statute of repose, the court then considered the competing arguments for when a three-year statute of limitations would begin to run.

And here's where it gets interesting - the court said that both sides had missed the boat. Instead of worrying about when the three years would begin to run, the court said the issue was irrelevant because the ten-year statute for actions on sealed contracts applied instead. There were three separate documents that were signed, on different dates, but the Purchase Contract included the word "seal" on the signature lines - thus meaning that it, at least, was a sealed instrument. Because the court could not find any scenario under which the three documents were not intended to constitute one integrated agreement between the parties, it determined as a matter of law that the "seal" on one means a "seal" for all. A ten-year statute of limitations means no defense to the claim. Judge McGee dissented, arguing that there should be a fact issue for determination about whether the parties intended for all three documents to be under "seal". The practice point here is to pay close attention to the documents in any case which includes a contract claim - the "seal" language may not be very prominent or conspicuous, but it can loom large. Even when neither party argues that point on appeal.

Supreme Court Restricts Waivers of Right to Demand Arbitration

Lynette Pitt — Thu, 26 Sep 2013 21:30:00 GMT

A recent decision of the Supreme Court has removed one of the strongest arguments that an attorney resisting arbitration had - that the party demanding arbitration had waived the right to so demand by engaging in discovery procedures not available to the demanding party in arbitration. In the case of HCW Retirement and Financial Services v. HCW Employee Benefit Services, the Court granted discretionary review of a unanimous Court of Appeals decision upholding the trial court's denial of a motion to compel arbitration. Although there was also a dispute about whether some or all of the claims were subject to the arbitration clause, the operative issue was waiver by the time the case reached the Supreme Court. At issue was the interpretation of two Supreme Court decisions from nearly 30 years ago, Cyclone Roofing Co. v. David M. LaFave Co., 312 N.C. 224, 321 S.E.2d 872 (1984) and Servomation Corp. v. Hickory Constr. Co., 316 N.C. 543, 342 S.E.2d 853 (1986)).

The plaintiffs had argued that arbitration was waived because the defense attorney had deposed a witness under the Rules of Civil Procedure and had asked about an hour's worth of questions about the claims clearly subject to arbitration. Since one point of arbitration is to avoid the expense and delay caused by the judicial discovery process, prior decisions of the Court of Appeals had interpreted Cyclone Roofing and Servomation Corp to mean that if a party exercised a discovery device like a deposition, then a waiver had occurred. In the context of UM/UIM arbitration this was the precise result in Capps v. Virrey, 184 N.C.App. 267, 645 S.E.2d 825 (2007), where a plaintiff waived his arbitration rights by sending interrogatories, requests to produce, and requests for admission.

Rejecting this line of authority, the Supreme Court bought instead the defense argument, that under the rules of arbitration, discovery is allowable at the discretion of the arbitrators - and thus depositions or other forms of discovery are not "unavailable in arbitration." As such, the language in the earlier Supreme Court decisions would not support a waiver of the right to demand arbitration. The Court did not discuss in its opinion the Court of Appeals precedent overruled by this decision, as it need not worry about such things, but those of us in practice need to realize that what we thought the law was is just plain wrong (particularly in the area of UM/UIM arbitration where this issue often arises). This result also essentially means that there no longer is any waiver argument to make based on discovery conducted by the moving party, because in theory virtually every potential discovery device under the Rules of Civil Procedure could in fact be allowed by the arbitrators. It is hard to imagine any such waiver argument succeeding under the test now clarified by this Supreme Court decision.

Injured Workers Not Entitled to Wage Loss Benefits When Disability Caused by Economic Downturn & Not Injury

Lynette Pitt — Thu, 26 Sep 2013 20:30:00 GMT

On 30 May 2008, plaintiff sustained a work-related to his right shoulder while employed as an estimator. On 21 November 2008, plaintiff was laid off as part of a company-wide reduction in staffing due to lack of work. Plaintiff later underwent surgery on the right shoulder and defendants initiated disability benefits. When plaintiff was released with permanent restrictions, defendants attempted to terminate plaintiff's benefits via Form 24 on the grounds that plaintiff was unable to prove ongoing disability as a result of his injury. The Form 24 was denied, but defendants were able to terminate plaintiff's benefits following successful appeals before the Deputy Commissioner and Full Commission, which found that plaintiff was capable of returning to work as an estimator but for the current economic downturn affecting the construction industry as a whole. As a result, plaintiff's current wage loss was deemed unrelated to his compensable injury.

Claude Medlin v. Weaver Cooke Construction, COA 13-159 (Sept. 3, 2013)

In a split decision filed on 3 September 2013, a majority of the Court of Appeals affirmed the Full Commission Opinion and Award. Citing Hilliard, the Court held that an injured worker's incapacity to earn wages must be caused by the compensable injury. According to the majority, plaintiff was unable to establish disability resulting from his work injury. The Court focused on defendants' uncontroverted evidence that plaintiff was capable of returning to work in his regular duty pre-injury position as an estimator but for the current economic downturn. The majority also referenced Segovia, a case in which the plaintiff was laid off due to a decline in business with his benefits ultimately terminated when he could not establish that his loss of earnings was due to any disability arising from the injury.

The dissent argued plaintiff proved he was disabled under the second Russell prong because he had been unable to obtain employment after a reasonable job search. As a result, the burden shifted to defendants to establish that there were suitable jobs available that plaintiff was capable of obtaining taking into account his physical and vocational limitations. The majority disagreed with the dissent's interpretation that the second prong of the Russell test was sufficient to establish disability by itself without producing evidence of any causal connection between the inability to locate work and the work injury. A Notice of Appeal to the Supreme Court has been filed in light of the dissent.

Submitted by Joy Brewer, Brewer Defense Group.

New Rule Established for UIM Claims in Multiple Tortfeasor Cases

Lynette Pitt — Mon, 26 Aug 2013 17:00:00 GMT

In the McDowell County case of Lunsford v. Mills, the plaintiff volunteer firefighter was injured when he arrived at the scene of a tractor-trailer accident to render assistance to the driver/tortfeasor, who had injured himself by flipping his rig. As the plaintiff attempted to carry defendant Mills to safety, he was struck by a second motorist and suffered injury. The plaintiff later filed suit against both drivers, whose carriers each had counsel file answers to the complaint - as did the plaintiff's UIM carrier. The relevant coverage limits were: $1mil for the truck driver, $50,000 for the second driver, and a combined $400,000 in UIM coverage through the plaintiff's carrier.

The second driver's carrier decided to tender its $50,000 coverage to the plaintiff, which the UIM carrier decided not to match to protect its subrogation rights against that second driver's personal assets. When the plaintiff then alleged that the UIM carrier needed to pay up its limits, before adjudication of the remaining claim against the truck driver and his carrier, the UIM carrier declined under the theory that it did not have to pay anything if the truck driver was found partially negligent for the injury - because the combined liability limits on both vehicles would exceed the available UIM coverage. Later, the plaintiff settled with the truck driver and his carrier for an additional $850,000. So, the plaintiff had recovered an aggregate total of $900,000 in liability coverage.

The plaintiff was about to recover more. The trial judge ruled that the UIM carrier should have paid its limits at the time of the $50,000 tender from the liability carrier, and entered judgment against the UIM carrier for its available coverage (after the credit for the liability coverage on the second vehicle) of $350,000. The UIM carrier cried foul, claiming that now the plaintiff had recovered twice for the same loss, as the UIM carrier should have received credit for the coverage on the other vehicle.

Nope, said the Court of Appeals. The comparison is not between the available UIM coverage and the total of all liability coverage on all cars - instead an "underinsured vehicle" is established for UIM purposes as soon as the coverage ON THAT VEHICLE ALONE has been exhausted without full compensation for the plaintiff's injury. Citing dicta from an earlier case, the Court has now established a new bright-line rule. A UIM carrier can still get its money back in a case such as this, from the other at-fault driver, but only if it first pays the UIM claim to the plaintiff and then proceeds against the other driver's liability coverage in subrogation. Since the UIM carrier failed to do this in this case, the plaintiff gets to keep all the liability money AND get all the UIM money.

There is still an unanswered question about all this, however: why did the UIM carrier not get a hearing on the value of the plaintiff's claim? Perhaps in this case it was obvious (or even stipulated) that the plaintiff should recover at least $400,000 from the underinsured second driver - but in future cases that might not be obvious at all. So, practice point here is - evaluate the timing and availability of UIM coverage not on the parties as a whole, but instead as to each potentially underinsured vehicle involved in the case.

No Appeal Allowed Even if Parties Agree

Lynette Pitt — Tue, 30 Jul 2013 18:00:00 GMT

Just because you disagree with a ruling of a trial judge does not mean you get to appeal right away. This is true even if both sides to the appeal think the time is now. In the recent decision of Paradigm Consultants v. Builders Mutual, the North Carolina Court of Appeals decided that an order denying summary judgment to both parties, on claims regarding the carrier's duty to defend another suit, did not affect a substantial right and thus the appeal was not timely.

Paradigm sued their customers the Raymonds to recover amounts it claimed was due for construction work. The Raymonds counterclaimed, alleging construction defects under both contract and tort theories. Paradigm tendered defense of the counterclaim to its insurer Builders Mutual, which refused to defend Paradigm because it claimed not such a defense was not owed under the policy. After that, Paradigm settled up with the Raymonds on various terms, including an amount of damages that would be owed from Paradigm to the Raymonds for the defects. The agreement required Paradigm to pursue coverage litigation against Builders Mutual, to be funded by the Raymonds. Paradigm then filed this action against its insurer.

At the summary judgment stage, the trial court ruled that neither party was entitled to summary judgment on the coverage issues, though it did grant summary judgment on another issue. Both parties appealed, alleging that prior case law stood for the proposition that the duty to defend another action affects a substantial right and thus denial of summary judgment on that issue justifies an immediate appeal. In ruling otherwise, the Court of Appeals emphasized that the trial judge had not certified his ruling for immediate appeal pursuant to Rule 54. In addition, the Court of Appeals decided that there was no immediacy to the appeal since, unlike in previous cases, the underlying case about which the duty to defend was being litigated was no longer pending - it had been settled prior to the filing of the coverage litigation, and thus there was no good reason to expedite an appeal before final judgment.

Practice point - if the parties to a dispute want to pursue coverage litigation as a resolution to that dispute, particularly as a team, the parties had best not officially end the underlying litigation prior to filing the coverage complaint, so that the legal issue on coverage can be submitted to the appellate courts more quickly.

Court of Appeals Affirms Statute of Repose as Valid Defense for Construction Cases

Lynette Pitt — Thu, 25 Jul 2013 17:30:00 GMT

Christie v. Hartley Construction, Inc., COA12-1385 (July 16, 2013)

The North Carolina Court of Appeals issued an opinion affirming the six-year statute of repose codified at North Carolina General Statutes § 1-50(a)(5) as a valid defense for both contractors and manufacturers of products incorporated into a new building.

In 2004, the Plaintiffs (a professor at Duke Law School and his wife, a former in-house attorney for a tobacco company) contracted with a builder to construct a new residence. The certificate of occupancy for the house was issued on March 22, 2005. In late 2010, the homeowners noticed problems with moisture intrusion through the exterior finish on the house, which was a product known as "Grailcoat," which is similar to synthetic stucco. A lawsuit alleging negligence in the construction of the house and in the manufacturing of the exterior finish was filed on October 31, 2011. In an effort to avoid the statute of repose, the Plaintiffs alleged the acts of defendants constituted "willful and wanton negligence," although the only allegation was that the builder and manufacturer intentionally violated the North Carolina Building Code.

The defendants moved for summary judgment based upon the statute of repose, as suit was filed more than six years after substantial completion and the Plaintiffs did not show any evidence of willful or wanton acts of the defendants other than alleged violations of the Building Code.

The Court of Appeals summarily affirmed the trial court's order granting summary judgment, and did not entertain any of Plaintiffs' arguments on why the statute of repose should not apply. Further, with respect to the claims against the product manufacturer, since the product was incorporated into a residence, the Court held that all claims against the manufacturer for money damages were barred by the statute of repose, notwithstanding the fact that the manufacturer issued a 20 year express warranty for its product. The Court held that the only claim that could extend beyond the statute of repose was for specific performance of the warranty, and not for money damages.

NCADA member (and former director) Bill Pollock of Ragsdale Liggett PLLC in Raleigh represented the builder in this matter.

Submitted by Bill Pollock, Ragsdale Liggett PLLC

Court Finds No Fault in Default Case

Lynette Pitt — Thu, 27 Jun 2013 23:00:00 GMT

It seems so simple. If you don't file an answer, you lose. Default is entered, so you are deemed to have admitted all the allegations in the complaint. But what happens if there is to be a hearing on damages (what we used to call "default and inquiry)? What evidence and arguments are allowed by the defense in such a hearing, and which are verboten because default has been entered? In the recent decision Webb v. McJas, Inc., the Court of Appeals allowed a judgment to stand where the Superior Court Judge awarded $992.88 in damages and $506.78 in attorney fees after a hearing on default damages involving a complaint that sought $139,259.86 in compensatory damages. Did we already say that the defendant was in default?

The case arose out of a lease for a McAlister's Deli in Pitt County. After filing an amended complaint seeking the $139,259.86 in unpaid rent against an individual guarantor, judgment was eventually entered by the clerk for the full amount sought since the guarantor in question had failed to file an answer. In response to a later motion to set aside the judgment, filed by the guarantor, the trial judge set the default judgment aside but not the entry of default itself. As such, the case was scheduled for a damages hearing. After evidence was presented, another trial judge entered the much lower damages award after determining that the guarantor only guaranteed a portion of the amounts sought by the plaintiff, and that credits should apply given payments made by or on behalf of other defendants.

The plaintiff cried foul on appeal. Pointing out that the entry of default should have foreclosed any liability defenses, the plaintiff characterized the trial court's action as allowing a defaulting litigant to escape the consequences of his default status. The Court of Appeals disagreed, holding that in determining the correct amount of damages, the trial court was allowed to critically examine the evidence presented and come to the conclusion that not all the damages sought were recoverable from the guarantor as opposed to some other party. Since the documents that showed the guarantor did not guarantee the entire amount sought were attached to the complaint by the plaintiff himself, the judge could hardly ignore such evidence staring him in the face just because the defendant defaulted.

Practice point for the plaintiff: there is no need to attach all supporting documents to a collection complaint. Bare bones allegations, when admitted in default, create a cleaner record for entry of default judgment. For the defense: just because your client is in default does not mean you throw up your hands in defeat. Creative and persuasive lawyering can still be of great value to a defaulted client.

NC Association of Defense Attorneys Appellate Cases of Interest

NCADA Amicus Brief Success in North Carolina Discovery Dispute

NC Supreme Court Successful Ruling - Duty to Inspect

Canteen v. Charlotte Metro Credit Union Amicus

Workers Compensation: Extended Benefits

Luke Sbarra and Kari Swindle Obtain Defense Verdict in NC Superior Court

NCADA Member, Lori Keeton Wins 4th Circuit Court Appeal

The impact of the North Carolina Supreme Court’s recent ruling in Chisum v. Campagna on construction litigation.

Chapter 90 and 42 U.S.C. Section 1983: Raising the Bar for Pro Se Plaintiffs

The Painful Privilege of Preparing the Privilege Log

How a college party resulted in clarification to North Carolina’s economic loss rule: The Story of Crescent v. Trussway and its impact on the future of construction defect litigation.

N.C. Farm Bureau v. Martin

NC Court of Appeals Further Defines Calculation of AWW for Temporary Employees

NCADA Files Amicus Brief in Support of Municipality

Governmental Immunity Meinck v. City of Gastonia

Richard O'Neal v. Inline Fluid Power, Inc.,__N.C. App. __ , 773 S.E.2d 574 (2015)

Limitation in Application of Wilkes v. City of Greenville

Medical Malpractice Rule 9(j) Decision - Vaughan v. Marshburn

Premise Liability Decision - Blackmon v. TRI-ARC Food Systems, Inc.

Court: We Said Four Factors, and We MEAN Four Factors

Court of Appeals Decisions are Never in Conflict With Each Other, Right?

Supreme Court Leaves Paschal Precedent in Place

NC Court of Appeals Dismisses Appeal Due to Procedural Error

U.S. Supreme Court clarifies the limits of Twombly/Iqbal

Court of Appeals upholds Public Duty Doctrine

NC Court of Appeals Issues First Appellate Decision Interpreting & Applying Willful Misrepresentation Defense Under N.C.G.S. § 97-12.1

Good-bye Howerton, Hello Daubert

Asbestos Litigation Order In the News....

Daubert Standard in North Carolina

Court of Appeals Reverses on UIM Coverage Based On Household Status

Summary Judgment Upheld in Malicious Prosecution Case

Divided Court Upholds Application of Ten-Year Limitations Period

Supreme Court Restricts Waivers of Right to Demand Arbitration

Injured Workers Not Entitled to Wage Loss Benefits When Disability Caused by Economic Downturn & Not Injury

New Rule Established for UIM Claims in Multiple Tortfeasor Cases

No Appeal Allowed Even if Parties Agree

Court of Appeals Affirms Statute of Repose as Valid Defense for Construction Cases

Court Finds No Fault in Default Case

Governmental Immunity
Meinck v. City of Gastonia

Richard O'Neal v. Inline Fluid Power, Inc.,N.C. App. , 773 S.E.2d 574 (2015)