REPORT ON ACTIVITIES

OF THE

NORTH CAROLINA BUSINESS COURT

1996 TO 2000

 

I.                   Introduction

 

II.                Executive Summary

 

III.             Origin

 

IV.              Changes in 1999

A.     Facility

B.     Staff

C.     Technology Pilot Program

 

V.                 How Cases Get Assigned

A.     List of Closed Cases

B.     List of Active Cases

C.     Venue

 

VI.              Opinions

A.     List of Opinions

B.     Appellate Review

C.     Precedential Value

 

VII.            Development of Technology

A.     Paperless Court and E-Filing

B.      Courtroom Presentation and Videoconferencing

C.     Uses of Technology by Other Courts

 

VIII.        Funding History

 

IX.       Conclusion

 

 

 

I:         INTRODUCTION

 

            Pursuant to Section 17.18 (b) of Session Law 1999-237 (see Exhibit A attached), the following is a report to the Chairs of the Senate and House Appropriations Committees and the Chairs of the Senate and House Appropriations Subcommittees on Justice and Public Safety on the activities of the North Carolina Business Court, including the number of cases heard by the Court and the number of court sessions held outside of Superior Court District 18.

 

 

II:        EXECUTIVE SUMMARY

 

Summary Statement:

 

            During the five years since its inception, and most particularly during the past year, the business court in North Carolina has undergone dramatic changes.  The Court has been involved in eighty-two cases assigned from twenty-two counties.  Of forty-six closed cases, thirty-nine settled.  Of the thirty-six cases currently being handled by the Business Court, nine are on appeal, four have reached a settlement and three are stayed. Ten of the active cases are class action suits involving numerous class members and common, often complex, issues. 

 

            This report will review the legislative origin and development of the business court concept and the history of its operation in North Carolina.  Central to an understanding of the Business Court is an explanation of the assignment of cases to the Court, clarification of the terms “complex business” and “exceptional” and a detailed explication of benefits which the creation of the Business Court offers to the state superior court system.  The description of the current facility includes the staff and the acquisition of court and office equipment and furnishings, both of which were important to the development of a progressive court technology pilot program.

 

            To illustrate the number and scope of Business Court cases, the report includes lists of closed and current cases with counties of origin and disposition or status, a State map depicting counties from which Business Court cases have been assigned, and a list of opinions issued by the Court.   The Business Court’s use of technology, including the development of a paperless court through the electronic filing of documents, enhanced courtroom presentation equipment, videoconferencing capability, and public access to the Court calendar, docket, case file, and court opinions via the Internet, are all detailed in the following pages.

 

 

III.             Origin

 

The North Carolina Commission on Business Laws and the Economy (the “Commission”) was established by Governor Hunt in April 1994 and charged with recommending “any needed changes in existing statutes and regulations which affect the operation of businesses in North Carolina.”  With particular focus given to Chapter 55 of the North Carolina General Statutes, the Commission was to recommend any needed new statutes, rules, and regulations designed to assure that North Carolina offers a legal environment providing the flexibility and support to allow businesses to operate successfully in this state and to attract businesses to locate and incorporate here.

 

The goals for the establishment of a business court for this state, set forth in a report issued by the Commission in January 1995, are several.  First is the creation of a specialized court where complex business cases can be managed outside the current rotation system.  Second is development of a court similar to the Delaware Chancery Court in which expertise in corporate law issues can be advanced.  Third is a forum in which complex business cases can be tried expeditiously.  Fourth is a trial court that produces opinions on corporate and business law issues in order to create a body of case law for guidance on those issues.

 

To meet those specifications, the Commission recommended that the North Carolina Supreme Court amend the Rules of Practice for the Superior and District Courts rather than initiate these changes through the legislative process.  Accordingly, Rule 2.1 was amended to allow the Chief Justice to designate certain cases as complex business cases, and Rule 2.2 was adopted to allow the Chief Justice to designate one or more special superior court judges to hear those special cases. Any judge so designated would be known as a Special Superior Court Judge for Complex Business Cases and would be required to write opinions in designated cases.

 

The Rule did not define a “complex business case” and left it to trial level judges to recommend cases to the Chief Justice for designation as complex business.  In any case assigned as a complex business case, the judge is required by rule to write an opinion. The Commission recommended that the Governor appoint at least one expert in corporate law to be designated by the Chief Justice to hear complex business cases.  In the fall of 1995, the legislature appropriated the funds for an additional special superior court judge for a five-year term.  In January of 1996, Governor Hunt appointed Ben F. Tennille as a Special Superior Court Judge and Chief Justice Mitchell designated him as North Carolina’s first Special Superior Court Judge for Complex Business Cases.

 

The Legislature was asked only to approve funding for the addition of another Special Superior Court Judge.  No legislation was enacted to create a court separate from the Superior Court.

 

During the 1996 and 1997 sessions of the General Assembly, no additional funding was provided for the Business Court.  Judge Tennille worked from a home office for a time, then was temporarily supplied with an office in the Guilford County Courthouse in High Point.  The absence of staff and permanent facilities made it difficult to take on a large number of cases requiring a written opinion, so the caseload fluctuated between too heavy and too light.  The lack of a clear jurisdiction or definition of a “complex business case” also contributed to the fluctuating caseload.  Many of the cases assigned to the Business Court have been assigned as regular Rule 2.1 “exceptional” cases, not as complex business cases. The 1997 and 1998 legislative sessions appropriated funds for secretarial help, but no arrangements were made for facilities, furniture or equipment for a judge or staff.

 

  Thus, for the first three years of the Court’s existence, the Court operated without a permanent home or staff.  During this period Judge Tennille realized the necessity for and benefit which could be derived from the use of technology by the Business Court.  Funds were raised from private foundations to pay for equipment; the lack of facilities and staff, however, made realization of the project impossible. 

           

IV.       Changes in 1999

 

A.      Facility

A temporary solution for housing the facility was funded by the Joseph M. Bryan Foundation, a private foundation. The North Carolina Business Court took occupancy of the second floor of 200 South Elm Street in Greensboro on March 5, 1999.  The foundation provided funding for the Business Court’s first year lease for 3,800 square feet of office space and courtroom space in the Meyer’s Building, originally a department store that was a familiar landmark in downtown Greensboro. This structure most recently housed the U.S. Bankruptcy Court for the Middle District of North Carolina.  The layout of this space and its previous function as a courtroom and judge’s chambers offered the distinct advantage of substantial savings in renovation costs as well as a strategic location in close proximity to the Guilford County Courthouse.

 

In addition to the courtroom, the space includes three offices, a jury/library/conference room and a copy room/break room.  The equipment and furnishings for the office work area and the courtroom have been purchased, as well as most of the technological equipment for the courtroom. Private foundations paid for the furnishings for this space.  Grants from a number of foundations, including the North Carolina Bar Association, have supported technology in the facility.  The Administrative Office of the Courts’ Purchasing and Information Services departments have also provided commendable support for the purchase and installation of equipment and library materials.   Details of expenditures and sources of funds are provided later in this report.

 

The 1999 session of the General Assembly provided the funds to extend the facility lease for one additional year and the necessary funds to complete the technology pilot program.

 

B.      Judge and Staff

 

Judge Tennille graduated from the University of North Carolina School of Law with honors in 1971. He was a member of the North Carolina Law Review and Order of the Coif. He was in private law practice from 1971 until 1985 with a major North Carolina law firm, gaining experience in both business law and litigation.  In 1985 he joined the in house legal department of a Fortune 500 company as Associate General Counsel and Assistant Secretary and managed the litigation for that company for eight years. He served that company in a business capacity for two years, specializing in human resources, and attended executive education programs at the University of North Carolina and the University of Michigan business schools. He brings to the bench a broad background in business law and litigation.

 

The Administrative Office of the Courts has classified the two staff positions approved by the General Assembly such that the Business Court has an administrative assistant and a position for a law clerk, called a business court coordinator.   Both positions have been filled, and both staff members are proving to be valuable assets for the docket management and research essential to the fulfillment of the Court’s purposes.

 

Sabra Engelbrecht, the current law clerk, graduated from the University of Kansas with a bachelor’s degree in psychology, followed by a law degree from Wake Forest University School of Law in 1999.  She has been published (“The Importance of Clarifying North Carolina’s Corporate Practice of Medicine Doctrine,” Wake Forest Law Review) and also served as a senior editor of the Review. 

 

Julie Holmes is serving as the administrative assistant to the North Carolina Business Court.  She has a bachelor’s degree with a double major in English and French from Furman University and received paralegal certification with emphasis on corporate law from the National Center of Paralegal Training, an A.B.A.-approved program in Atlanta, Georgia.

 

 

 

C.     Technology Pilot Program

 

Once office space and a dedicated courtroom became available, the Business Court embarked upon a pilot project to explore the uses of advanced technology to create a paperless court.  This project is described in detail in Section VII below.

 

V.   How Cases Get Assigned

 

Procedure

Under Rule 2.1, the Chief Justice may designate any case [or group of cases] as complex business. The Rule provides that a senior resident superior court judge, chief district court judge, or presiding superior court judge may ex mero motu, or on motion of a party, recommend to the Chief Justice that a case or cases be designated as complex business. Thus, the procedure for initial designation as complex business does not differ from the procedure for having cases designated as exceptional. However, once a case is designated as complex business, it is automatically assigned to a Special Superior Court Judge for Complex Business Cases. In this respect the procedure differs from previous practice for exceptional cases in that heretofore the parties had generally agreed upon a superior court judge to hear the case as exceptional and secured his or her prior agreement to handle the case. That flexibility is not available with the complex business designation. Also, the Special Superior Court Judge for Complex Business Cases must write an opinion upon final disposition of the case. Once a case is designated as complex business, it stays with the business court for all purposes, including trial.

 

All cases will be tried in the county in which the case is filed unless venue is changed by agreement of the parties or in accordance with the General Statutes and Rules of Civil Procedure. Pretrial matters may be handled out of the county or district.  The process for appeals from a decision of the Special Superior Court Judge for Complex Business Cases does not differ from appeals from other superior court orders and judgments.

 

Definition of a Complex Business Case

 

The Supreme Court purposefully chose not to define the term “complex business case” in Rule 2.1.  It believed the absence of a definition would allow litigants to seek designation with respect to any business issue that they believed required special judicial expertise in business matters.  It also provided the court with the flexibility to respond to requests that might not have been anticipated when the rule was amended.

 

Both the Commission and the Supreme Court contemplated that cases involving significant issues under certain chapters of the North Carolina General Statutes would be designated as complex business. Those chapters include:

Chapter 55 Business Corporation Act
Chapter 55B Professional Corporations
Chapter 57C Limited Liability Companies
Chapter 59 Partnerships
Chapter 78A Securities Act
Chapter 78B Tender Offer Disclosure Act
Chapter 78C Investment Advisors Act

 

One of the key factors in assessing whether or not a case should be designated as complex business is whether the outcome will have implications for business and industry beyond the conflicts of the parties to the litigation. If a written decision on disposition of the case would provide predictability for others in the same business or industry in making their business decisions, the case will more likely be considered for designation.

 

There are also other procedural indicators of complex business cases.  Such cases may be time sensitive, paper intensive or laden with discovery disputes.  They may have complex legal and evidentiary issues, multiple parties and jurisdictions, and have a significant impact on the parties’ business, whether it be from a monetary or a corporate governance standpoint.

 

Benefits

Case Management. One of the key benefits to designation of a case or cases as complex business is the assignment of the litigation to one judge for handling of all pretrial matters, including motions and discovery.  Since the judge who handled pretrial motions will also try the case, the possibility of conflicting decisions on substantive and evidentiary matters is greatly reduced.  The most significant improvement in the management of complex business cases should occur at the pretrial stage.

 

North Carolina’s Constitution requires that its superior court judges rotate within a division.  While this rotation has numerous salutary effects, it can have debilitating effects in complex business cases.  It often results in the parties having to reeducate a new judge on every motion.  Different judges hear different stages of the litigation, and the potential for conflicting rulings exists.  Judge shopping may also occur.  It is difficult to get motions which need prompt attention calendared for hearing.  Civil matters sometimes lose their priority to criminal cases on both the motion and trial calendars.  Since terms of superior court generally last only one to two weeks, it is often difficult to find a judge who can take four to five weeks to try a complicated business case.  Judges who do accept exceptional cases under Rule 2.1 still have to fit those cases into their existing rotation.

 

Many of the case management difficulties cited above are eliminated by assigning complex business cases to one judge who is not in a rotation, but handles only civil cases and controls the calendaring of the cases on his or her docket.

 

Case management by one judge also provides more effective use of mediation and other alternative dispute resolution tools.  Having greater knowledge and understanding of the case can result in better choices in the timing and method of ADR in each case.  It can also facilitate the use of expert neutrals.

 

Similarly, case management can result in more certainty in the setting of cases for trial and a shorter wait for a trial date.  Since most cases still settle just before trial, shortening the pretrial phase and getting the case on the trial calendar can result in a more efficient and less costly disposition of cases.

 

Speed and flexibility. In many complex business cases, particularly those involving change in ownership or corporate governance issues, preliminary injunctive relief is a critical issue.  Often decisions need to be rendered before specific times such as shareholder meetings. Having a judge available to hear such cases on short notice is a significant benefit to the parties. In many cases a business simply needs an answer to an issue so it can make a decision and move on with the operation of the company.  The speed and flexibility provided by the establishment of a business court helps to meet those needs.

 

Specialization. Because a business court judge will hear only complex business cases, he will develop proficiency in handling both the substantive law and the case management issues that arise in complex cases.  Much as in the Delaware Chancery Court, each judge will acquire the level of expertise in dealing with complex cases that come with specialization, which in turn will lead to greater efficiency and predictability.

 

Predictability. The creation of a larger body of case law by requiring opinions at the trial court level should result in greater predictability for business and the bar.

 

The Difference Between Complex Business Cases under Rule 2. 1 and Summary Procedures for Significant Commercial Disputes under Rule 23.1

 

At the same time it amended Rule 2.1 and added Rule 2.2 to the General Rules of Practice, the Supreme Court also added new Rule 23.1 to the Rules of Practice. The rules exist separate and apart from each other and should not be read together. Summary Procedures can be used outside the Business Court and a case can be designated complex business without invocation of summary procedures.

 

The Commission on Business Laws and the Economy recommended that the State establish a summary procedure through which North Carolina citizens and business entities could more efficiently resolve significant commercial disputes. The Commission recommended that the availability of such a summary procedure be limited to civil actions in Superior Court where: 1) at least $500,000 is in controversy, 2) at least one party is a North Carolina citizen or corporation, and 3) all parties consent to the summary proceeding.  As a part of the consent, the parties agree to waive punitive damages and a jury trial.  It is an alternative procedure used only with the consent of all parties.

 

Rule 23.1 provides in pertinent part:

(a) The senior resident superior court judge of any superior court district, or a presiding judge unless prohibited by local rule may, upon joint motion or consent of all parties, order Summary Procedures for A Significant Commercial Dispute ("Summary Procedures") in any case within the subject matter jurisdiction of the superior court that does not include a claim for personal, physical or mental injury where 1) the amount in controversy exceeds $500,000, 2) at least one party is a North Carolina citizen, corporation or business entity (or a subsidiary of such corporation or business entity) or has its principal place of business in North Carolina; and 3) all parties agree to forego any claim of punitive damages and waive the right to a jury trial. The motion or consent for summary procedures must be filed with the court on or before the time the answer or other responsive pleading is due.

Once Summary Procedures are invoked, significant restrictions apply to filing times, pleadings allowed, motions allowed, discovery and trial. It is an alternative fast track that can result in a trial on briefs and affidavits if the parties so choose.

 

Similar procedures have been in place and available for use in Delaware for over five years and have yet to be utilized to any significant extent.

 

Summary

 

In creating a business court, North Carolina has joined the states of Delaware, New York and Illinois in recognizing the need for specialization in complex business litigation. The American Bar Association has recommended that all states adopt some form of business court.  The great burden placed upon state and federal judges by increasing criminal caseloads, combined with a growing need for fast answers in complex business disputes in today’s rapidly moving commercial and technological environment, make such courts a necessity. North Carolina has taken a leading role in development of the business court concept.

 

 

A.      List Of Closed Cases

 

           The following list shows the 46 closed cases handled to date by the Business Court. Of these cases, 39 settled: five settled after Court Opinion; one settled during trial; and one settled after jury trial. There were six judgments and one voluntary dismissal.

 

Name of Case

County of Origin

Case Number

Disposition

 

 

Adams Outdoor Limited

Partnership et al. v. The City of Charlotte, et al.

 

Mecklenburg County

 

88 CVS 9786

 

 

 

 

 

Settled

Amos   v. Southern Furniture Exhibit Building

Guilford County

 

 

96 CVS 4958

Settled

Beam v. Worldway

Mecklenburg County

96 CVS 469

 

Settled after

Court Opinion

 

 

 

 

 

Name of Case

 

County of Origin

Case Number

Disposition

James Allen Beaty, et al. v. Integon Corporation and  Integon National Insurance Company

 

Mecklenburg County

99 CVS 11540

Voluntary Dismissal

Bell, Setzer, Park and Gibson PA v. James D. Meyers

 

Mecklenburg County

97 CVS 9957

Settled

Board of Governors v. Cushman

 

Orange County

97 CVS 1429

Settled

Bradley v. US Packaging

Guilford County

95 CVS 8986

 

Judgment

Byers v. Carpenter

Wake County

94 CVS 04489

 

Settled

 

Carolina Custom  v. Tiffany Marble v. Howard Butner

v.Rudy Hoch

Guilford County

96 CVS-6511

97 CVS-6598

97 CVS-6998

99 CVS-3100

 

Settled

Case Farms v. New Hope Feeds

 

Burke County

96 CVS 309

Settled

Charlotte Copy Data v. Habbal

 

Mecklenburg County

96 CVS 694

 

Judgment

ChemiMetals v. McEneny

Mecklenburg County

95 CVS 10817

 

Settled during Jury Trial

 

Clark  v. Holland

Wake County

96 CVS 5829

 

Settled after Court Opinion

 

Crowder Construction v. Kiser

 

Mecklenburg County

 

95 CvS 14097

Judgment

Continuum Care v. Eakes Corp.

 

Warren County

96 CVS 1465

 

Settled

Exide Corporation Branches v. Keever

 

Caldwell County

95 CVS 978

Settled

Faulkner v. Tarheel Holdings

 

Lenoir County

96 CVS 281

 

Settled

Name of Case

 

County of Origin

Case Number

Disposition

 Filipowski v. High Point Bank & Trust

 

 

Guilford County

97 CVS 9317

Settled

Frazier v. Beard

Catawba County

94 CVS 2362

 

Judgment

Gaafar v. Piedmont Poultry

Wake County

96 CVS 630

 

Settled

Goings v. P.M. Mattress

Randolph County

92 CVS 785

 

Settled

Greene, et al. v. Shoemaker, et al. and Community BancShares, Inc.

 

Wilkes County

97 CVS 2118

 

 

 

Settled after Court Opinion

Hafele America Co. v. Ergonomix Armdec Pty. Ltd., et al.

 

Guilford County

97 CVS 7426

 

 

Settled

Jeffcoat v. Chicago Rawhide

 

Gaston County

95 CVS 4176

Settled

Lapedes, et al. v. Glaxo Wellcome

 

Wake County

98 CVS 12106

Settled

Long, et al. v. Abbott Labs, et al.

 

  Mecklenburg County

97 CVS 8289

Settled

Melbourne-Marsh v.

North Hills, Inc., et al.

 

Wake County

97 CVS 3212

Settled

Metric–Kvaerner  Fayetteville, et al. v. Bank of Tokyo - Mitsubishi, Ltd., et al. v. Kvaerner Investments

 

Bladen County

97 CVS 743

Settled

Molinare, et al.v. Broadway & Seymour, et al.

 

Forsyth County

96 CVS 4614

Settled after Jury Trial

Montrose Value Fund  v. Freeman

 

Durham County

96 CVS 1220

Settled

Petty v. High Point Bank & Trust

 

Randolph County

97 CVS 741

Settled

Name of Case

 

County of Origin

Case Number

Disposition

Popkin v. Popkin

Onslow County

92 CVS 2910

 

Settled

Reeve v. Triad Bank

 

Guilford County

96 CVS 4695

 

Settled after Court Opinion

 

Roberts, Thomas v.

Guy, Onslow Transit

 

Onslow County

93 CVS 1043

Settled

Robinson v. McMillen Trust  et al.

 

Guilford County

97 CVS 9042

Settled

Sayer v. State Street

Guilford County

96 CVS 6478

 

Settled

 Scott v. Sokolov

 

Durham County

96 CVS 2748

Settled after Court Opinion

 

 Shelley v. Cooper, et al.

 

Gaston County

98 CVS 1244

Settled

Smith v. NC   Motor Speedway, Inc., et al.

Mecklenburg County

97 CVS 138

 

 

Judgment

Springer-Eubank , et al. v. Four County Electric Membership Corp., et al.

 

New Hanover County

98 CVS 3194

Judgment

Thomas v. Golding Farms

Guilford County

95 CVS 7323

 

Settled

Wiggins v. Charlotte Brewing      Co.

 

Mecklenburg County

96 CVS 2537

 

Settled

Whitley v. Wallace

Rowan County

96 CVS 1795

 

Settled

 

 

 

 

B.  List of Current Cases

 

The following list shows the 36 cases that are currently being handled by the Business Court.  Of these cases, sixteen are active; nine are on appeal, two of which are on appeal after jury trial; four have reached a settlement;  and three are stayed.  In addition, one case is awaiting decision after a non-jury trial; one is partially settled; one is in mediation; and one has a jury trial pending.

 

 

 

Name of Case

County of Origin

Case Number

Status of Case

 

Biemann and Rowell v. The

 Donohoe Companies

 

  Orange County

99 CVS 9132

 

Non-Jury Trial

Decision Pending

 

Bruggers, et al.  v. Eastman Kodak Company, et al.

 

  Wake County

97 CVS 1278

Partially Settled

 

Coastal Physician  Group, Inc. v. Price Waterhouse LLP, et al.

See also Scott v. Sokolov (closed file)

 

 Durham County

99 CVS 00578

In Mediation

 

DCC Classics v. Robert Craig  & RePac

 

  Forsyth County

97 CVS 2856

Stayed

 

Dominick DeJoy, Jr.  v. Louis DeJoy and Michael DeJoy

 

Guilford County

 

 

99 CVS 12425

Active

 

DKH Corporation v.  Rankin Patterson Oil Company, Inc.

 

  Buncombe County

95 CVS 2511

On Appeal

 

Dublin v. UCR

  Johnston County

90 CVS 0304

 

Stayed

 

Ezzell, et al. v. ABT Co., Inc., et al.

 

  Onslow County

97 CVS 167

Stayed

Giduz v. Blue Cross Blue Shield of North Carolina

 

Orange County

97 CVS 917

On Appeal

 

Grossman v. Carolina Drug Inc.

  Guilford County

95 CVS   8921

95 CVS  9834

 

Active

 

Harbor Finance Partners v. PCA International, Ltd.

 

  Mecklenburg County

98 CVS 5734

Settlement Pending

Igar v. Mark Mfg. Corp.,  et    al.

 

  Guilford County

97 CVS 10198

Active

Isasi v. FYI

 

 

 

  Forsyth County

97 CVS 6692

On Appeal after

Jury Trial

 

Name of Case

 

County of Origin

Case Number

Status of Case

 

LaFar, et al. v. LaFar, et al.

 

  Gaston County

98 CVS 5006

Settlement Pending

 

Lennon and Magruder v. MedCath Incorporated

 

  Mecklenburg County

98 CVS 14327

 

Active

 

Lupton, et al. v. Blue Cross and Blue Shield of North Carolina

 

  Orange County

98 CVS 633

On Appeal

 

Massey, et al. v. City of Charlotte, et al.

  Mecklenburg County

99CVS 18764

 

 

Active

 

Moore, et al. v. NationsBank, N.A.

 

  Mecklenburg County

99 CVS 1585

Settlement Pending

 

Oberlin Capital, L.P. v. Edward W. Slavin, et al.

 

  Wake County

99 CVS 03447

Active

 

People Unlimited Consulting, Inc. v. B & A Industries, LLC, et al.

Scott Russell v. Janis  Love and Claire Russell

 

  Mecklenburg County

98 CVS 16126

Active

 

Peterson v. Robertson

 

  Forsyth County

95 CVS 3518

On Appeal

 

Pitts, et al. v. American Security Ins. Company  and Wachovia Bank of North

America, N.A.

 

  Pitt County

96 CVS  658

On Appeal

 

Praxair, Inc.  v. Airgas, Inc., et al.