conference of nc superior court judges recent decisions don cowan smith moore llp 16 june 2006 1
TRANSCRIPT
Conference of NCSuperior Court Judges
Recent Decisions
Don Cowan
Smith Moore LLP
16 June 2006
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LIABILITY
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Motor Vehicles
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Osetek v. Jeremiah(NC 2006) (1)
Issue:
When the plaintiff introduced medical bills totaling $15,554.30, whether the trial court should have instructed the jury as to the mandatory presumption on the issue of medical damages in N.C.G.S. § 8-58.1?
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FACTS
The plaintiff was stopped at a stop sign when she was struck in the rear by the defendant’s vehicle.
The plaintiff introduced evidence of medical bills totaling $15,554.30. The plaintiff’s treating chiropractor testified about the plaintiff’s injuries.
The trial court granted the plaintiff’s motion for a directed verdict on the issue of contributory negligence.
The jury found the defendant negligent and awarded the plaintiff $600.
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1. G.S. § 8-58.1 does create a rebuttable mandatory presumption as to the reasonableness of medical expenses.
2. The parties did not stipulate to the plaintiff’s medical expenses, therefore, this was “an issue” for the jury to decide.
3. The defendant’s rebuttal evidence questioned the relationship between the medical expenses and the accident.
4. The trial judge properly refused to give the mandatory presumption on the issue of medical damages.
HELD: Affirmed
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Hofecker v. Casperson (NC 2005) (2)
Issues:
1. When the defendant’s vehicle struck the plaintiff as the plaintiff was walking along the highway at night and the defendant testified that the plaintiff was wearing dark clothing and “came out of nowhere and walked directly into the path of my car,” whether the trial court properly granted the defendant’s motion for summary judgment on the issue of contributory negligence?
2. When the evidence indicated that the plaintiff was struck while located in the roadway, whether this fact without additional evidence that the defendant was negligent in the operation of his vehicle or could have avoided the accident is sufficient to defeat the defendant’s motion for summary judgment on the issue of last clear chance?
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FACTS
The plaintiff was walking home from work on 1 November 2001 at about 6:55 p.m. and was wearing dark clothes. There were no street lights in the area.
The defendant testified that he “caught a glimpse” of the plaintiff and that the plaintiff “came out of nowhere, walked directly into the path of my car.”
The trial court granted the defendant’s motion for summary judgment on contributory negligence and last clear chance.
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1. The evidence was clear that the plaintiff was walking on the highway with his back to traffic.
The accident happened on an unlighted road and the plaintiff was wearing dark clothing.
At the plaintiff’s deposition, he admitted that he would not have seen the headlights on the defendant’s vehicle because “they were coming behind you.”
Since the defendant first saw the plaintiff when the plaintiff was in front of the defendant’s car and the defendant had no opportunity to avoid hitting the plaintiff, the plaintiff was contributorily negligent as a matter of law.
HELD: Affirmed
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2. The plaintiff’s evidence opposing summary judgment did not forecast any facts showing that the defendant was negligent in the operation of his vehicle, such as speeding, not keeping a proper lookout or should have seen the plaintiff. Even if the plaintiff was struck while in the road, this is not sufficient to deny the defendant’s motion for summary judgment on last clear chance.
HELD: Affirmed (Cont’d.)
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Ligon v. Matthew Allen Strickland (NC App 2006) (4)
Issues:
1. When the plaintiff testified that he was walking along the side of the road when he was struck by the defendant’s vehicle, but the plaintiff’s evidence also included testimony by the investigating highway patrolman that the plaintiff was in the road at the time he was struck, whether the trial court should have submitted the issue of contributory negligence to the jury?
2. When the defendant testified that he swerved in the road to avoid hitting an animal, whether an instruction of sudden emergency should have been given, and, if so, whether the sudden emergency instruction should state that the doctrine applies when the driver is confronted with imminent danger to himself or others?
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FACTS
The plaintiff alleged that he was walking along the side of the road at night when he was struck by the defendant’s vehicle.
The plaintiff was wearing dark clothing. He testified that he heard a “whoosh,” then recalled nothing until he woke up in the hospital.
Before the accident, the plaintiff had been to a ball game and drank a bottle of beer. His blood alcohol level at the hospital was .08.
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FACTS (Cont’d.)
The defendant testified that he saw an animal in the road. When he swerved to avoid the animal, he went off the road and struck a fence. The defendant continued driving. When he arrived at home and told his father what had happened, the defendant and his father returned to the scene of the accident and saw the plaintiff in the fence.
The plaintiff told the investigating highway patrolman that he was “in the roadway” at the time he was hit.
The trial court refused the defendant’s request to instruct on contributory negligence.
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1. The trial court should have instructed on contributory negligence. Although the plaintiff denied that he was in the road at the time he was hit, the plaintiff called the highway patrolman as a witness and relied on his testimony to establish the defendant’s negligence.
The jury should have had the opportunity to determine whether the plaintiff was in the road at the time he was hit. When combined with the plaintiff’s intoxication and the fact that he was wearing dark clothes while walking along the road at night, contributory negligence was for the jury.
2. The trial judge modified the sudden emergency instruction, N.C.P.I. – Div. 101.15 to state that it did not apply “if only a non-human animal is in danger.” At the time of the new trial, the instruction should focus on whether the driver was “suddenly and unexpectedly confronted with imminent danger to himself or others.”
HELD: Reversed and new trial ordered
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Croom v. Humphrey(NC App 2006) (6)
Held:
When N.C.G.S. § 20-150(d) prohibits crossing the centerline of a highway at a curve and the defendant’s lane was marked with a broken yellow line, the defendant was permitted to pass if he could do so safely. “Centerline” as used in the statutes means a “solid yellow line,” which indicates that passing from the adjacent lane is forbidden.
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Oakes v. Wooten (NC App 2005) (7)
Issues:
1. Even though the plaintiff had the green light when entering the intersection, whether the trial court should have instructed on contributory negligence based on failure to keep a proper lookout and failure to exercise reasonable care?
2. Whether the trial court properly sanctioned the defendant for failing to admit the defendant’s motor vehicle violations, agency and that the defendant’s negligence was the sole proximate cause of the plaintiff’s injuries?
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FACTS
The plaintiff testified that he exited I-85 onto south Main Street in Graham and entered the intersection on a green light.
The defendant testified that she failed to stop for the red light and collided with the plaintiff’s car.
Based on the plaintiff’s testimony that he “surveyed the intersection” before entering it and did not see the defendant, the trial court refused to instruct on contributory negligence.
The jury awarded the plaintiff $119,000.
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1. The trial judge properly refused to instruct on contributory negligence.
Taking the evidence in the light most favorable to the defendant, the evidence fails to show that the plaintiff could have done anything to avoid the accident or that there was anything to put the plaintiff on notice that the defendant would fail to stop at the red light.
The defendant testified that she was not traveling at a high rate of speed and did not enter the intersection until the plaintiff had turned in front of her.
HELD:
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2. The trial court abused its discretion in sanctioning the defendant.
At the time the plaintiff submitted the requests to admit, discovery had not begun.
The defendant had no facts upon which to consider the requests to admit relating to the plaintiff’s injuries and contributory negligence.
At the time of the defendant’s response, “reasonable grounds existed to believe that they might prevail on some matters denied.”
HELD: (Cont’d.)
Premises
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Herring v. Food Lion, L.L.C.(NC 2006) (10)
Issue:
When plaintiff injured his knee on a stock cart at defendant’s store, but presented no evidence as to who placed the cart in its position, how long it had been in that position and if the defendant knew or should have known of its position, whether the trial court properly granted the defendant’s motion for a directed verdict?
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FACTS
The plaintiff was pushing a shopping cart at the defendant’s store. The plaintiff stopped at the meat counter and walked to a soft drink display.
After picking up a bottle, the plaintiff turned to walk back to his shopping cart.
The plaintiff’s knee struck a stock cart. The plaintiff testified that he did not see the cart and that it was “hidden.”
The stock cart was lower than the plaintiff’s knee.
The plaintiff left the store without reporting the injury.
The trial court granted the defendant’s motion for a directed verdict.
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1. On the issue of negligence, the plaintiff produced no evidence concerning who placed the cart in its position, when it was placed there or how long it remained in that position.
2. Vendors at the store had access to the stock cart.
3. There was also no evidence as to how long the stock cart had been in the position and whether the defendant knew or should have known of its position.
HELD: Affirmed
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Grayson v. High Point Development(NC App 2006) (11)
Issue:
When it had snowed for two days at plaintiff’s place of employment and plaintiff knew that the parking lot where her car was parked was covered with ice, whether the owner of the parking lot had a duty to warn the plaintiff of the hazardous conditions at the parking lot?
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FACTS
The plaintiff was employed at Belk’s at the Oak Hollow Mall in High Point.
A heavy snow had fallen on 25 and 26 January 2004.
As the plaintiff left work and was walking to her car in the parking lot, she slipped on ice and fell.
At her deposition, the plaintiff testified that she knew the condition of the parking lot and had told another employee that “somebody’s going to get killed out there.”
The trial court granted the defendant’s motion for summary judgment.
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There is no duty to warn the plaintiff of conditions of which she was aware and of which she had superior knowledge to the defendant.
“A landowner is under no duty to protect a visitor against dangers either known or so obvious and apparent that they reasonably may be expected to be discovered.”
HELD: Affirmed
27
Bailey v. Handee Hugo’s Inc. (NC App 2005) (12)
Issue:
When the adjuster for the defendant’s liability insurance company misrepresented the identity of the owner of the premises where the plaintiff fell, but the identity of the owner could have been found in the records of the Register of Deeds, whether the trial court properly dismissed the action for failure to name the correct defendant?
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FACTS
The plaintiff fell and was injured at Handee Hugo’s on 18 April 2001.
The plaintiff was contacted by an adjuster for Federated Mutual Insurance Company and told that the Federated insureds were Handee Hugo’s and Sampson-Bladen, the operator of the store.
Suit was filed on 29 March 2004 against Handee Hugo’s and Sampson-Bladen.
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FACTS (Cont’d.)
The defendant filed a motion to dismiss on the grounds that the store was leased and operated by United Energy.
On 19 July 2004, the plaintiff filed a motion to amend to add United Energy as an additional defendant.
The trial court denied the plaintiff’s motion to amend and allowed the defendant’s motion to dismiss.
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1. Hatcher v. Flockhart Foods (NC App 2003) and equitable estoppel did not apply.
2. In Hatcher, there was “active misrepresentation” as to the insured and there was no public record as to the responsible party.
3. In the present case, a search of the Register of Deeds would have identified the owner of the store.
4. Although the Court of Appeals found “the misrepresentation reprehensible,” dismissal was affirmed.
HELD: Affirmed
31
Wallen v. Riverside Sports Center(NC App 2005) (13)
Issue:
Whether defendants/landowners had a duty to exercise reasonable care concerning trees on their property that was next to a navigable river?
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FACTS
Defendants owned boat ramp on the Cape Fear River.
Plaintiff was in a boat and using the boat ramp to get off the river as a storm approached.
While the plaintiff was waiting at the boat ramp, a tree fell on the plaintiff causing injuries that rendered the plaintiff a paraplegic.
The plaintiff’s expert testified that the tree that fell was extensively decayed and showed evidence of the decay through many dead branches.
The trial court granted the defendants’ motion for summary judgment.
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1. The defendants had a duty to exercise reasonable care concerning natural conditions such as trees on their land.
2. The defendants were liable “only if they had actual or constructive notice of a dangerous natural condition existing upon their land.”
3. The tree that fell on the plaintiff had “broken off” once before the date of the plaintiff’s injury and showed signs of decay.
4. There was a genuine issue of material fact on the issue of the defendants’ negligence.
HELD: Summary judgment reversed.
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Freeman v. Food Lion(NC App 2005) (15)
Issues:
1. Whether Food Lion/owner of store had duty to warn the plaintiff of hidden dangers?
2. Whether the plaintiff’s failure to plead that the individual defendant was the agent or employee of the corporate defendants barred the plaintiff from making this argument on appeal?
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FACTS
The plaintiff was shopping at the Food Lion store when she was struck by a buffing machine operated by Robinson who was wearing ear phones.
Robinson had previously knocked down orange cones at the front of the store.
The plaintiff sued Food Lion, Budget Services (the company contracting with Food Lion to maintain the floors), Frank’s Floor Care (the company contracting with Budget Services to maintain the floors) and Amron Janitorial (the employer of Robinson).
The trial court granted the motions for summary judgment of all defendants.
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1. As to the plaintiff’s argument on appeal that Robinson was the agent or employee of the defendants, this relationship had not been pleaded in the complaint. The plaintiff may not make a different legal argument on appeal that was not made in the pleadings or before the trial court.
2. Since neither Budget Services nor Frank’s Floor Care owned or operated the store, they had no duty to the plaintiff and may not be held liable under a theory of premises liability.
HELD: Summary judgment reversed as to Food Lion; affirmed as to all other defendants.
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3. As owner of the store, Food Lion had a duty to keep the premises safe and warn the plaintiff of hidden dangers. There were genuine issues of material fact as to whether: (a) Food Lion warned the plaintiff of the buffing; (b) Food Lion used ordinary care in providing safe premises; (c) the buffing machine presented an obvious danger; and (d) a reasonably prudent person should have noticed the buffing machine and avoided the collision.
HELD: Summary judgment reversed as to Food Lion; affirmed as to all other defendants. (Cont’d.)
Employment
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Little v. Omega Meats I, Inc.(NC 2005) (17)
Issue:
Whether defendant is liable for assault committed by independent contractor of defendant?
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FACTS
Omega Meats sold meat products through independent contractor salesmen.
The salesmen rented refrigerator trucks and attempted to sell the meat door to door.
Omega did not supervise the salesmen and did not identify areas for meat to be sold.
Smith, an independent contractor salesman, had been convicted of robbery and kidnapping. He served a prison sentence for these crimes. Omega did not conduct a background check on Smith before he was employed.
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FACTS (Cont’d.)
Smith parked his refrigeration truck in the driveway next to the plaintiffs’ house. He broke into the plaintiffs’ house and assaulted the plaintiffs.
The trial court granted Omega’s motion for a directed verdict at the close of the plaintiffs’ evidence.
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1. Omega owned no duty to the plaintiffs.
2. Smith was not in the plaintiffs’ home as a result of any activities on behalf of Omega.
3. Employers do not owe a legal duty to “victims of their independent contractors’ intentional torts that bear no relationship to the employment.”
4. Even if Omega were negligent in hiring Smith, Smith’s employment “did not advance his criminal endeavor in any manner.” The result would have been the same if Smith had not been driving an Omega truck.
HELD: Affirmed.
INSURANCE
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Motor Vehicle
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Hernandez v. Nationwide Mutual Ins. Co.,
(NC App 2005), review denied (20)
Issue:
When Nationwide’s insured was driving a car she was purchasing, but title to the car had not been transferred to the insured, whether the car was a “non-owned” vehicle that was not furnished for the regular use of the insured, and, therefore, the vehicle was insured?
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FACTS
Ms. Norris, the Nationwide insured, was in the process of purchasing a 1997 Blazer, when she was involved in an automobile accident with the plaintiff.
All paperwork for the purchase of the Blazer had been completed, but title to the Blazer had not been transferred to the insured.
The trial court granted the plaintiff’s motion for summary judgment finding that Nationwide had coverage.
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1. Under G.S. § 20-72(b), all cars which are not owned are insured except those furnished for the regular use of the insured or his relative.
2. Because at the time of the accident, the Blazer was not furnished for the insured’s regular use and title had not been transferred, the Nationwide exclusion did not apply. There was coverage for the accident.
HELD: Affirmed.
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McGuire v. Draughon(NC App 2005) (22)
Issue:
When the defendant drove a Ford Explorer two or three times a week that was owned by her mother-in-law, whether the Explorer was furnished for the regular use of the defendant, and, therefore, there was no coverage?
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FACTS
At the time of the accident, Mollie Draughon was operating her mother-in-law’s Ford Explorer.
Mollie Draughon and her husband lived next door to Betty Draughon. The Explorer was always parked in the common driveway between the two houses. Mollie and her husband had 3 keys to the Explorer and did not have to ask for permission to use it.
Mollie Draughon testified that she drove the Explorer two or three times a week to run errands, go to work and take Betty Draughon to places she needed to go.
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FACTS (Cont’d.)
Mollie Draughon and her husband were insured by Farm Bureau. The Farm Bureau policy excluded coverage for vehicles furnished for the insured’s regular use.
The trial court granted Farm Bureau’s motion for summary judgment finding no coverage.
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1. Factors to be considered in determining whether a vehicle is furnished for the regular use of the insured are: (1) availability of the vehicle to the insured; and (2) frequency of use by the insured.
2. “Where an insured driver has the unrestricted use and possession of an automobile, the certificate of title for which is retained by another, the car is ‘furnished for the regular use of’ the insured driver.”
3. Mollie Daughon’s use of the Explorer was “consistent as well as continuing.”
4. Regular use does not require daily use.
HELD: Affirmed.
Underinsured/Uninsured
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Sawyers v. Farm Bureau Ins.(NC 2005) (24)
Issue:
When the plaintiff was involved in a motor vehicle accident in Florida with an uninsured motorist and brought suit in Florida against the uninsured motorist and the plaintiff’s uninsured carrier, but the carrier was dismissed from the Florida action for lack of jurisdiction, whether the carrier was bound in a suit in North Carolina by the Florida judgment against the uninsured motorist under N.C.G.S. § 20-279.21(b)(3) because the uninsured carrier had been served with a copy of the summons and complaint in the Florida action?
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FACTS
The plaintiff was a passenger in a car involved in an automobile accident in Florida on 10 August 1996.
The driver of the other vehicle was uninsured.
The plaintiff was covered by an uninsurance policy with Farm Bureau.
Suit was brought in Florida against the uninsured driver and Farm Bureau. Service on Farm Bureau was through the North Carolina Commissioner of Insurance.
Farm Bureau was dismissed from the Florida suit for lack of jurisdiction.
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FACTS (Cont’d.)
Judgment was entered in Florida for the plaintiff against the uninsured motorist for $200,000.
The present suit against Farm Bureau was to enforce the Florida judgment under N.C.G.S. § 20-279.21(b)(3) providing that the insurer shall be bound by a final judgment if the insurer had been served with a copy of the summons and complaint.
The trial court granted Farm Bureau’s motion for summary judgment.
The Court of Appeals reversed on the grounds that Farm Bureau had been served in the Florida action and was bound by the judgment.
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1. Since Farm Bureau was dismissed from the Florida action for lack of jurisdiction, Farm Bureau was never a party in the Florida lawsuit.
2. In order for N.C.G.S. § 20-279.21(b)(3) to apply, Farm Bureau would have to have been a party to the Florida action.
3. The “mere providing of notice of the action” is not sufficient for Farm Bureau to be bound.
4. Based also on lack of jurisdiction over Farm Bureau in Florida, the action was also barred by the three-year statute of limitations since the accident occurred on 10 August 1996 and suit was not brought in North Carolina against Farm Bureau until 11 April 2002.
HELD: Trial court affirmed
Life
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Duncan v. CUNA Mutual Ins. Society(NC App 2005) (27)
Issues:
1. Whether the toxicity findings in an autopsy report were sufficient to exclude coverage under a life insurance policy that provided an exclusion for voluntary use of a drug except as prescribed by a physician?
2. Whether affidavit relying on hearsay, non-first-hand facts was sufficient to deny summary judgment?
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FACTS
Decedent was insured under life insurance policy with CUNA that excluded coverage for “voluntary use of any drug . . . except as prescribed by a physician.”
The decedent was found in his living room. The autopsy report indicated that the cause of death was “methadone toxicity.”
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FACTS (Cont’d.)
In opposition to CUNA’s motion for summary judgment, the decedent’s estate presented the affidavit of a substance abuse counselor stating that the decedent had been counseled for alcohol and substance abuse. The affidavit did not contain “first-hand information” about the decedent’s use of methadone.
The trial court granted CUNA’s motion for summary judgment.
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1. The autopsy report established that the cause of death was methadone toxicity. When CUNA presented the autopsy report, the burden shifted to the decedent to demonstrate an issue of fact concerning the use of the drug being prescribed by a doctor.
2. The counselor’s affidavit was not sufficient to defeat summary judgment because it was not based on “first-hand information.”
HELD: Affirmed.
The affidavit did not meet the requirements of Rule 701 because it was based on hearsay and offered opinions that were not of an expert.
Exclusion for Intentional Acts
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Allstate v. Lahoud(NC 2005) (29)
Issues:
1. When insured pleaded guilty to charge of taking indecent liberties with a minor, whether plea established that coverage was excluded under policy provision excluding coverage for any intentionally harmful act of the insured?
2. Whether insured’s affidavit contending that his conduct was unintentional or negligent was sufficient to deny summary judgment to Allstate?
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FACTS
Insured was charged with taking indecent liberties with a nine-year old.
The State allowed the insured to plead guilty in exchange for a suspended sentence, an apology and payments of therapy bills for the child.
The present declaratory judgment action arose when the child and his parents filed a civil action for sexual assault.
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FACTS (Cont’d.)
The plaintiff’s policy excluded coverage for “any intentionally harmful act or omission of an insured.”
The trial court granted Allstate’s motion for summary judgment.
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1. The insured pleaded guilty and apologized to the child and his family.
The guilty plea “established that the defendant had the intent to commit the act.”
2. “A nonmovant may not generate a conflict simply by filing an affidavit contradicting his own sworn testimony where the only issue raised is credibility.”
The insured could defeat summary judgment on the issue of his intent by evidence “other than his own affidavit or deposition contradicting his own testimony.”
HELD: Affirmed.
Independent Insurance Adjusters
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Koch v. Bell, Lewis & Associates, Inc.(NC App 2006) (31)
Issue:
Whether a third-party, non-insured may sue an independent insurance adjuster for negligence and unfair and deceptive trade practices?
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FACTS
The home of the plaintiffs had synthetic stucco applied by Quality Stucco Systems. When the plaintiffs discovered that the stucco was defective, a claim was filed against Quality.
Quality was insured by Southern Guaranty Insurance.
Bell, Lewis was the adjuster for Southern Guaranty.
Bell, Lewis told the plaintiffs that Southern Guaranty would pay for the cost of repairs, but only if the repair work was done by Quality.
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FACTS (Cont’d.)
The plaintiffs agreed. The plaintiffs were paid $10,000 and signed a general release.
The repair work by Quality was also defective.
The plaintiffs sued Quality, Southern Guaranty and Bell, Lewis for negligence and unfair and deceptive trade practices.
The trial court dismissed all claims against all defendants.
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1. Independent adjusters owed no duty to the plaintiffs who were not the insureds of Southern Guaranty, therefore, there was no claim for negligence.
2. Since North Carolina does not recognize a cause of action for unfair and deceptive trade practices by a third-party against an insurance company of the adverse party, the claims for unfair and deceptive trade practices were properly dismissed.
3. The general release applied to all claims, past and future, arising from the acts of Quality, therefore, this was an additional reason supporting dismissal.
HELD: Affirmed
Unfair and DeceptiveTrade Practices
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Page v. Lexington Ins. Co. (NC App 2006) (32)
Issues:
1. Whether alleging violations of claims practices under N.C.G.S. § 58-63-15(11) as grounds for a claim under N.C.G.S. § 75-1.1 is sufficient to withstand a 12(b)(6) motion?
2. When the claim under N.C.G.S. § 75-1.1 is based on breach of the insurance contract and failure to handle the plaintiffs’ claim properly, whether the claim is governed by the four-year statute of limitations applicable to unfair and deceptive trade practice claims?
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FACTS
An underground sewer line on the plaintiffs’ property ruptured on 21 February 2001 and caused property damage and personal injury to the plaintiffs.
The plaintiffs filed a claim with the defendant. When the claim was not settled, suit was filed on 28 July 2004 alleging breach of contract, bad faith and unfair and deceptive trade practices.
The claim for unfair and deceptive trade practices listed violations of the claims procedures in N.C.G.S. § 58-63-15(11).
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FACTS (Cont’d.)
The trial court dismissed the claims for breach of contract and bad faith due to the three-year statute of limitations.
The trial court dismissed the unfair and deceptive trade practices claims on two grounds: (1) insufficient pleading of the Chapter 75 claim; and (2) the three-year statute of limitations applicable to the underlying facts rather than the four-year period for unfair and deceptive trade practices.
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1. Alleging violations of the claims handling procedures in N.C.G.S. § 58-63-15(11) is also a violation of N.C.G.S. § 75-1.1 without showing frequency or general business practice.
2. The unfair and deceptive trade practices claim is different and separate from the breach of contract claims. The unfair and deceptive trade practices claim is governed by the four-year statute of limitations.
HELD: Reversed
Attorney-Client Privilege
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Nationwide Mutual Fire Ins. Co. v. Bourlon(NC 2005) (35)
Issues:
1. When an insurance company retains an attorney for its insured, whether the attorney has an attorney-client relationship with the insurance company and the insured?
2. Whether the attorney may have privileged communications with the insured about coverage to which the insurance company is not entitled to access?
79
Issues (Cont’d.):
3. Whether suit by the insured alleging bad faith and negligent representation by the attorney retained by the insurance company waives any privilege?
4. Whether the attorney for the insurance company should turn over his complete file to the insurance company?
80
FACTS
Nationwide insures Bourlon under homeowners’ policy with limits of $300,000.
Axarlis sues Bourlon alleging that one of Bourlon’s dogs bit him. Claims alleged are malicious prosecution, abuse of the criminal process, and assault.
Nationwide retains Lee Patterson to defend Bourlon.
Nationwide tells Bourlon that policy excludes coverage for malicious prosecution and assault.
81
FACTS (Cont’d.)
Jury awards Axarlis $321,000 in compensatory and punitive damages, including $150,000 in punitive damages for the malicious prosecution claim.
Post-trial, Axarlis offers to settle for $236,000. Nationwide will contribute $200,000 if Bourlon will pay $36,000. Bourlon refuses to contribute to settlement.
Nationwide settles the covered claims with Axarlis. Axarlis and Bourlon reach a separate settlement of the malicious prosecution claim.
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FACTS (Cont’d.)
Bourlon requests a copy of his file from Patterson.
Nationwide files the present declaratory judgment claim for a determination that it has no coverage for the malicious prosecution claim settlement.
Bourlon counterclaims for bad faith, refusal to settle, and unfair and deceptive trade practices.
Trial court rules that Nationwide did not have coverage for the malicious prosecution claim.
83
FACTS (Cont’d.)
Nationwide deposes Bourlon on the remaining claims. During Bourlon’s deposition, his counsel instructs him not to answer questions concerning his communications with Patterson.
Trial court rules: (1) no attorney-client relationship between Patterson and Nationwide; (2) there is attorney-client relationship between Patterson and Bourlon; and (3) Patterson breached the attorney-client relationship with Bourlon by giving his file to Nationwide.
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1. There was a tripartite attorney-client relationship in which Patterson represented Bourlon and Nationwide.
2. Any communications between Patterson and Bourlon relating to “the defense for which the insurer has retained the attorney” are not privileged under the “common interest” doctrine. Communications between Bourlon and Patterson about the malicious prosecution claim would be privileged (such that Nationwide would not be privy to any communications).
HELD:
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3. Any communications between Bourlon and Patterson that did not relate to the underlying action are privileged. “Communications that relate to the issue of coverage are not discoverable because the interests of the insurer and the insured with respect to the issue of coverage are always adverse.”
4. Bourlon, however, waived this privilege by allegations of bad faith and negligent representation by Patterson.
5. Because there may have been communications in Patterson’s file that were privileged as to Nationwide, Patterson should have submitted his file to the trial court in camera for the trial judge to determine whether there were privileged documents in the file.
HELD (Cont’d.):
Commercial General Liability
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Bond/Tec, Inc. v. Scottsdale Ins. Co.(NC App 2005) (40)
Issue:
When defendant insurance company relies on policy provision excluding coverage if the insured voluntarily agrees to make payment, whether the insurer is also required to show prejudice from the actions of the insured?
88
FACTS
The plaintiff entered into a roofing contract with the Newton-Conover Schools.
As a result of the failure of temporary roofing, rain leaked into one of the schools and caused damage.
The president of the plaintiff told the school system that he “would pay for the damage out of his own pocket.”
The defendant denied liability based on the policy provision that “No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligations, or incur any expense, . . . without our consent.”
The trial court granted the defendant’s motion for summary judgment.
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1. As a matter of first impression, the insurer is required to show prejudice before relying on the voluntary payments exclusion.
2. The prejudice requirement must relate to the ability to investigate or defend the claim.
HELD: Reversed
PRACTICE AND PROCEDURE
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Jurisdiction
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Charter Medical, Ltd. v. Zigmed(NC App 2005) (41)
Issue:
When defendant entered into contract with North Carolina resident and the contract initially provided for manufacture, shipment and installation of the defendant’s product at the plaintiff’s facility in New Jersey, with shipment subsequently changed to occur in North Carolina, whether the act of entering the contract with the North Carolina resident was sufficient to establish the minimum contacts needed for due process?
93
FACTS
The plaintiff sent the defendant a proposal for purchase and shipment of a blood bag manufacturing machine to the plaintiff’s North Carolina office.
The plaintiff modified the proposal and agreed that the machine would be installed in New Jersey.
The parties later agreed that the machine would be shipped to the plaintiff’s facility in North Carolina. Four technicians employed by the defendant installed the machine in North Carolina.
Although the trial court found jurisdiction under the long-arm statute, N.C.G.S. § 1-75.4(5)(e), the trial court dismissed the action because the defendant did not have minimum contacts to satisfy due process.
94
1. “The mere act of entering a contract with a forum resident does not provide the necessary contacts when all elements of the defendant’s performance are to occur outside the forum.”
2. The defendant did not attempt to benefit by entering the market in North Carolina.
3. Although part of the plaintiff’s damages related to installation of the machine in North Carolina, most of the plaintiff’s damages arose from allegations that the machine was defective when shipped from New Jersey.
HELD: Affirmed
95
The defendant’s “passive” website containing general information about the company but not allowing purchases and not “specifically targeting North Carolina residents” did not subject the defendant to personal jurisdiction in North Carolina.
HELD:
Havey v. Valentine(NC App 2005) (43)
96
1. Appellate review of issues involving personal jurisdiction are limited to whether the findings of fact by the trial court are supported by competent evidence in the record.
2. The trial court is not required to make findings of fact.
3. If the trial court does not make findings of fact, the appellate court “must assume that the trial judge made factual findings sufficient to support” the decision in favor of the plaintiff.
HELD:
Banc of America Securities, LLC v.Evergreen International Aviation, Inc.
(NC App 2005) (45)
Statutes and Periodsof Limitation and
Repose
97
98
Whittaker v. Todd (NC App 2006) (47)
Issues:
1. When the defendant guaranteed his work “for as long as you own the home,” whether the plaintiff’s action for property damage was barred by the six-year statute of repose?
2. In order for the defendant to obtain dismissal based on the six-year period of repose, whether the defendant is required to plead the period of repose as an affirmative defense?
99
FACTS
The plaintiff contracted with the defendant in 1991 to replace the roof on the plaintiff’s house.
The defendant guaranteed the work “for as long as you own the home.”
The plaintiff noticed in 2003 that part of the roof had not been sealed and that water damage had caused part of the roof to rot.
Suit was filed on 11 November 2003 in small claims court.
After the defendant’s appeal to district court, the district court granted the defendant’s motion to dismiss based on the six-year period of repose in G.S. § 1-50(a)(5).
100
1. Since the suit was for money damages and not breach of warranty, the defendant’s “guarantee” did not apply and the six-year period of repose applied.
2. Complying with the period of repose is a condition precedent to the right to file the claim, therefore, the plaintiff was required to establish compliance with G.S. § 1-50(a)(5). The defendant was not required to plead the period of repose as an affirmative defense.
HELD: Affirmed
101
Fraud is an exception to the running of the real property statute of repose in G.S. § 1-50(a) (5)e. Fraud is not an exception to the running of the products liability statute of repose in G.S. § 1-50(a) (6).
HELD:
Jack H. Winslow Farms, Inc. v. Dedmon,
(NC App 2005), review denied (48)
Res Judicata andCollateral Estoppel
102
103
Nicholson v. Jackson County School Bd.(NC App 2005) (53)
Issues:
1. When plaintiff has notice of hearing on a motion, appears at the hearing and does not object, whether the plaintiff waives any defects in the notice of the hearing?
2. When plaintiff fails to appeal a prior superior court order finding that the plaintiff did not request a hearing on the issue of his discharge within the statutory period, whether the present action for breach of contract relating to the plaintiff’s discharge was barred by res judicata and collateral estoppel?
104
FACTS
Plaintiff alleged that he was wrongfully terminated as principal and denied a hearing as required by statute.
The school board conducted a hearing, then informed the plaintiff that he would be terminated unless he requested a hearing within 14 days.
The plaintiff did request a hearing, but it was after the 14-day period had expired.
On appeal to the superior court, the trial judge denied the plaintiff’s motion to remand for a hearing before the school board. The plaintiff did not appeal this order.
105
FACTS (Cont’d.)
The present suit was filed in district court for breach of contract, wrongful termination and failure to follow proper administrative procedures.
Because the relief requested was more than $10,000, the defendant moved to transfer to superior court. The defendant also filed a motion to dismiss based on res judicata and collateral estoppel.
The defendant gave notice of the hearing on the motion to dismiss at the same time as the motion to transfer was to be heard.
The trial court granted the motion to transfer to superior court, then granted the motion to dismiss.
106
1. When a party has notice of a hearing, then appears at and participates in the hearing without objection, that party waives any defects in the notice of the hearing and the right to request a continuance.
2. The prior superior court order related to the same issues pending in the present suit, therefore, the present suit was barred.
The focus of the prior superior court hearing was the plaintiff’s termination by the board and his claim that he was denied a proper hearing. Because the present suit is based on the same contentions, it is barred by res judicata and collateral estoppel.
HELD: Affirmed.
Pro Hac Vice Admission
107
108
In re Cole (NC App 2006) (55)
Issues:
1. Whether the trial court abused its discretion in denying the motion to be admitted pro hac vice?
2. Whether the trial court properly imposed sanctions for the plaintiffs’ failure to attend a noticed deposition when the defendants had not previously obtained an order compelling discovery under Rule 37(d)?
109
FACTS
The plaintiffs retained Jones to represent them in relation to the foreclosure of their house in Elizabeth City.
Jones was licensed to practice law in Virginia.
Jones appeared before the Clerk and requested a continuance of the hearing because he had not been able to associate North Carolina counsel.
The continuance was granted.
110
FACTS (Cont’d.)
Jones then filed a complaint contesting the foreclosure and a motion to be admitted pro hac vice.
A hearing on these motions was continued.
Jones then moved for a preliminary injunction and also requested that the injunction and foreclosure motions be heard on 8 March 2004.
The Clerk denied the motion to continue and ordered foreclosure.
111
FACTS (Cont’d.)
Jones filed an appeal from the order and also filed a second action on behalf of the plaintiffs.
The defendants noticed the depositions of the plaintiffs.
Counsel for the defendants refused to allow the depositions to be continued.
The plaintiffs did not appear at the times noticed for their depositions.
112
FACTS (Cont’d.)
The defendants filed a motion for sanctions.
The plaintiffs then filed a pro se complaint.
The trial court denied Jones’ motion to be admitted.
When the trial court denied the plaintiffs’ motion for a continuance, the plaintiffs took a voluntary dismissal without prejudice.
The trial court also fined Jones $5,000 for the unauthorized practice of law and imposed sanctions against the plaintiffs for failure to appear at their depositions.
113
1. The trial judge did not abuse his discretion in denying Jones’ motion to be admitted pro hac vice.
Jones had filed several motions and law suits and appeared before the Clerk without associating North Carolina counsel or being admitted to practice.
2. “An order directing compliance with discovery is not a prerequisite to sanctions under Rule 37(d).” The plaintiffs did not move for a protective order. The trial court did not abuse its discretion in imposing sanctions.
HELD: Affirmed
Service
114
115
Saliby v. Conners(NC App 2005) (59)
Issue:
Whether the affidavit of the defendant’s father stating that he told the deputy sheriff that the defendant did not live at the residence where service was attempted was sufficient to defeat the deputy sheriff’s affidavit of service under Rule 4(j)(1)(a)?
116
FACTS
Suit was filed for injuries received in an automobile accident.
The deputy sheriff served the summons and complaint on the defendant’s father at a residence in Wake County.
Although the father accepted the summons and faxed it to his son in Texas, the father’s affidavit in support of the defendant’s motion to dismiss stated that the father told the deputy sheriff that his son had moved and accepted a new job in Texas.
117
FACTS
The deputy sheriff filed a return indicating that service was completed.
The trial court granted the defendant’s motion to dismiss.
118
1. The deputy sheriff’s return of service “indicates legal service under Rule 4(j)(1)(a), which results in a presumption of valid service of process.”
2. “More than a single contradictory affidavit is required to show improper service.”
HELD: Reversed.
119
Carpenter v. Agee(NC App 2005) (60)
Issue:
When the plaintiff filed an affidavit of service by certified mail and a copy of the signed return receipt, whether the defendant’s affidavit stating that he had not resided at the address shown in the plaintiff’s affidavit since 2002 was sufficient to defeat service?
120
FACTS
Suit was filed for injuries received in an automobile accident.
The summons and complaint were sent by certified mail to the defendant at an address in San Bernadino, California.
The return receipt was signed by the defendant’s mother at the address to which the summons and complaint were mailed.
121
FACTS (Cont’d.)
The plaintiff filed an affidavit of service by certified mail and attached the signed return receipt.
The defendant moved to dismiss and included his affidavit stating that he had not lived at the address since 2002.
The trial court granted the defendant’s motion to dismiss.
122
1. “By filing a copy of the signed return receipt, along with an affidavit that comports with N.C.Gen.Stat. § 1-75.10, the plaintiff is entitled to a rebuttable presumption of valid service.”
2. “Defendant’s single affidavit does not rebut the presumption.”
3. The affidavit merely states that the defendant did not reside at the address. The affidavit does not discuss whether his mother was authorized to accept service for him.
HELD: Reversed.
Rule 9(b) - Alleging Fraud
123
124
Bob Timberlake Collections, Inc. v. Edwards
(NC App 2006) (62)Held:
1. When the defendant’s counterclaim alleging fraud did not identify the representatives of the plaintiff conveying the false information and did not allege specifically where or when the statements were made, the trial court properly dismissed the counterclaim for fraud because they were not pleaded with the particularity required by Rule 9(b).
125
Held: (Cont’d.)
2. When the defendant’s counterclaim alleging unfair and deceptive trade practices stated only that the plaintiff’s conduct “constitutes unfair and deceptive trade practices” and that such conduct involved commerce, the trial court properly dismissed the counterclaim because there was also no allegation that the conduct was “immoral, oppressive, unscrupulous or substantially injurious to consumers” and there was no allegation that the breach of contract was accompanied by “substantial aggravating circumstances.”
Rule 11 - Sanctions
126
127
Hill v. Hill(NC App 2005) (63)
HELD:
1. The trial court properly entered sanctions under Rule 11 and G.S. § 6-21.5 totaling $116,276.69 because “there was insufficient evidence to establish a factual basis to prove any claims of fraud.” Inquiry by the plaintiff’s attorney would have produced evidence that there were no grounds for the fraud allegations.
2. Only the appellate court may award sanctions for frivolous appeals.
128
3. Sanctions for conduct during discovery may be awarded under Rule 11 because they relate to the insufficiency of the complaint.
4. Sanctions for fees and expenses during discovery may be awarded after the hearing on the motion for summary judgment because the plaintiff’s Rule 11 violations were not determined until the summary judgment hearing.
HELD: (Cont’d.)
129
Issues:
1. When the trial court dismisses all claims of the plaintiff pursuant to Rules 37 and 41, whether the standard of appellate review is for abuse of discretion?
2. Whether the trial court properly considered the plaintiff’s invoking of the Fifth Amendment privilege against self incrimination in dismissing the complaint?
Melton v. Tindall Corp. (NC App 2005) (65)
130
FACTS
After jury in another case found the defendant liable in the collapse of a pedestrian walkway at the Lowe’s Motor Speedway, the trial judge ruled that the issue of liability had been established in all cases by collateral estoppel.
The plaintiff in the present case alleged lost profits and diminution in future earning capacity arising from his self employment as a general contractor. The plaintiff had built one house as a general contractor.
131
FACTS (Cont’d.)
Despite discovery requests, motions to compel and an order compelling production of the plaintiff’s income tax returns, the returns were not produced until a second deposition of the plaintiff. This return had no information about the one house constructed.
When the plaintiff was asked about this house and the failure to identify it on his tax return, he invoked the Fifth Amendment privilege against self-incrimination.
The trial judge dismissed all claims under Rules 37 and 41.
132
1. A trial judge’s imposition of sanctions under Rule 37 is reviewed on appeal for abuse of discretion.
1. “A civil plaintiff who invokes the Fifth Amendment to thwart discovery subjects his claim to dismissal.”
HELD: Affirmed.
133
HELD:
Baker v. Speedway Motorsports, Inc.(NC App 2005) (65)
1. When the plaintiff did not identify an expert as required by the court’s scheduling order, the trial judge did not abuse his discretion in excluding the expert’s testimony.
1. When the plaintiff did not produce her medical records concerning previous medical treatment for her back, the trial judge did not abuse his discretion in precluding the plaintiff from introducing evidence that her back injury was caused by the pedestrian walkway collapse.
Rule 13(a) – Compulsory
Counterclaims
134
135
Issue:
In dispute arising out of construction contract, when contractor filed a suit for breach of contract and contractor was granted summary judgment by trial court, whether subsequent suit by owner for breach of the construction contract was a compulsory counterclaim in the previous suit, and, therefore, barred?
Jonesboro United Methodist Church v. Mullins-Sherman(NC 2005) (70)
136
FACTS
Batten entered into a contract with the plaintiff to construct a fellowship hall.
Disputes arose about the quality of Batten’s work.
The church sent a check for $101,000 to Batten accompanied by a letter indicating that the check was “to satisfy the construction relationship.”
The church then rescinded the letter and agreement to resolve the differences.
137
FACTS (Cont’d.)
Batten filed suit in Forsyth Superior Court seeking $101,000 in damages. The trial court granted Batten’s motion for summary judgment, the Court of Appeals affirmed and the Supreme Court denied review.
The present suit was brought by the church in Lee County Superior Court for breach of contract.
Batten filed a motion for judgment on the pleadings on the basis that the present Lee County claims were compulsory counterclaims in the Forsyth County action.
The trial court denied Batten’s motion and the Court of Appeals affirmed.
138
1. Both the Forsyth and Lee County actions involved allegations about whether Batten had performed the construction in a satisfactory manner.
2. Because the federal and state versions of rule 13(a) are identical, the court relied on federal cases for its analysis of whether counterclaims were compulsory. The court found: (1) issues of law and fact in both suits were almost the same; (2) the same evidence related to both suits; and (3) there was a logical relationship between the two suits.
HELD: Reversed.
Discovery
139
140
Miller v. Forsyth Memorial Hosp., Inc.(NC App 2005) (72)
Held:
When the plaintiff moved to compel documents to be produced by the defendant that were identified in the defendant’s privilege log, and the trial court denied the plaintiff’s motion to compel, and the plaintiff did not make an offer of proof or put other information in the record concerning the documents requested, the Court of Appeals had no basis to review the trial court’s denial of the motion to compel. The plaintiff could have requested that the trial court review the documents in camera and then seal the documents for appellate review.
141
Armstrong v. Barnes,(NC App 2005), review denied (73)
Issues:
1. Whether a discovery order involving a statutory privilege is appealable?
2. Although testimony concerning the defendant’s drug use occurred before a hospital board and is protected by a statutory privilege, when the defendant has independent knowledge of the same facts, whether the privilege applies?
142
FACTS
The complaint alleged medical malpractice arising from the defendant’s delivery of the plaintiff’s child in February 2000.
During the deposition of the defendant, the defendant’s attorney objected and instructed the defendant not to answer questions about his history of drug abuse.
143
FACTS (Cont’d.)
The defendant then moved for a protective order, but the trial court ordered the defendant to answer questions about his drug use.
The defendant had a history of drug use before delivery of the plaintiff’s child. In order to obtain credentialing at the hospital, the defendant had to appear before the hospital’s board, which required the defendant to submit to drug abuse monitoring. The defendant relapsed during this period and began using drugs again.
144
1. Although the discovery order was interlocutory, it involved assertion of a statutory privilege and was immediately appealable.
2. N.C.Gen.Stat. § 90-21.22 protects peer review agreements such as physicians health programs. The trial court, therefore, should have granted the defendant’s motion for a protective order as to matters privileged under the statute.
HELD: Affirmed.
The defendant, however, had independent knowledge of his drug abuse. Although this was the same evidence before the credentialing hearing, the defendant was the “original source” of the evidence and could not use the statute “to shield himself from answering deposition questions regarding the details of his drug abuse merely because he disclosed those details during the credentialing committee proceedings.”
Class Actions
145
146
When plaintiffs sought to recover only future damages and did not allege “concrete and particularized and actual or imminent” injury and did not request recovery for personal injury or property damage, the trial court properly granted the defendant’s Rule 12(c) motion for judgment on the pleadings.
HELD:
Coker v. DaimlerChrysler Corp.,(NC 2006) (75)
Arbitration
147
148
Pineville Forest Homeowners v. Portrait
(NC App 2006) (80)Held:
1. The decision about whether a matter is subject to arbitration is a matter of law for the trial court.
2. Appellate review of the trial court’s decision is de novo.
3. In order to conduct appellate review, the trial judge’s order must include “findings which sustain its determination regarding the validity and applicability of the arbitration provisions.”
4. The trial judge’s order must include whether “a valid agreement to arbitrate exists between the parties.”
149
Ellen v. A.C. Schultes, (NC App 2005), petition for disc. review filed (81)
Issue:
When construction subcontracts contained a clause requiring all controversies arising out of or related to the subcontract to be settled by arbitration, whether a complaint alleging sexual harassment, unfair and deceptive trade practices and interference with prospective business advantage arising from the failed purchase of the plaintiff by the defendant was subject to arbitration?
150
FACTS
The individual plaintiffs were shareholders in Atlantic Coast Construction & Utility (ACCU).
ACCU entered into agreements with Schultes for the construction of projects awarded to Schultes. Each of the five construction project contracts contained a provision requiring arbitration of all controversies arising out of or related to the subcontract.
There were negotiations for the purchase of ACCU by Schultes, but those negotiations were not successful.
151
FACTS (Cont’d.)
Schultes then filed a complaint requiring arbitration of all claims arising out of the five subcontracts. The trial court ordered arbitration of all claims.
The present complaint alleged unfair and deceptive trade practices, tortious interference with prospective business advantage and sexual harassment by an officer of Schultes against one of the shareholders of ACCU.
The trial court denied Schultes’ motion to require arbitration of the present claims.
152
1. The trial court must first determine whether the present dispute is covered by the “substantive scope” of the agreement to arbitrate, then determine whether the parties had a valid agreement to arbitrate.
2. In the present case, the plaintiffs are not seeking benefits from the five subcontracts.
3. The present claims of unfair and deceptive trade practices and tortious interference with contract do not depend upon the five subcontracts.
4. Therefore, the plaintiffs cannot be required to arbitrate the present claims.
HELD: Affirmed.
153
Issue:
When the plaintiff and defendant entered into a contract requiring arbitration, whether the agreement extended to an agent of the defendant, thereby barring suit against the agent?
Brown v. Centex Homes(NC 2005) (83)
154
FACTS
The plaintiffs worked with Ms. Kroening to purchase a home owned by Centex.
The plaintiffs asked Ms. Kroening whether there were any plans to develop the adjoining wooded area. Ms. Kroening replied that there were no plans to develop the area.
At the time of these discussions, a shopping center with a Wal-Mart store had been approved for the wooded area adjoining the home that was purchased by the plaintiffs.
155
FACTS (Cont’d.)
The contract for the purchase of the home contained an arbitration clause.
When the plaintiffs sued Centex and Ms. Kroening, the trial court granted the motion of Centex to compel arbitration. However, since Ms. Kroening was not a party to the arbitration agreement, the trial court denied her motion to compel arbitration.
156
1. Although Ms. Kroening did not sign the contract, “her status as an agent of Centex affords her the right of arbitration.”
2. The basis of the plaintiffs’ claims relate to Ms. Kroening’s representation as an agent of Centex. In order to recover against Centex, the plaintiffs must show that Ms. Kroening was acting as the agent of Centex.
HELD: Reversed.
157
1. An order denying arbitration is immediately appealable because a substantial right may be lost if appellate review is denied.
2. When defendant’s initial answer did not contain a demand for arbitration and defendant engaged in discovery including interrogatories, requests for documents and defendant’s subsequent amended answer contained a demand for arbitration, defendant waived the right to arbitration.
HELD:
Moose v. VersaillesCondominium Association
(NC App 2005) (84)
Rule 68 – Offers of Judgment
158
159
Ennis v. Henderson(NC App 2006) (85)
Held:
The trial court has no authority and no discretion under Rule 68 or Rule 6(b) to extend the ten-day period for acceptance of an offer of judgment. Unlike complaints and discovery, offers of judgment do not require a response from the adverse party. If the offer is not accepted within ten days, it is automatically rescinded by Rule 68.
G.S. §§ 6-18, 6-19 and 6-20 – Court Costs
160
161
Morgan v. Steiner (NC App 2005) (87)
Held:
1. On appellate review of the award of court costs, the Court of Appeals determines first whether the costs are identified in G.S. § 7A-305(d). If the costs are not identified in Chapter 7A, the Court then determines whether the costs are “common law costs.” If so, the standard of review on appeal is abuse of discretion.
2. Deposition costs – although these costs are not listed in Chapter 7A, they are common law costs permissible under G.S. § 6-20.
162
3. Medical records – It was error to award these costs. They are not identified in Chapter 7A. There is no common law ground to allow.
4. Expert witnesses at trial – These costs may be awarded under G.S. § 7A-305(d) if the witness is under subpoena. The statute limits the number of expert witnesses to two testifying on the same issue. The trial court erred by allowing fees for meeting with counsel before trial and reviewing records.
5. Trial exhibits - There is a division among panels of the Court of Appeals. These costs are not identified in Chapter 7A and there is no common law basis to award.
HELD: (Cont’d.)
G.S. § 97-10.2(j) – Workers’ Compensation
Liens
163
164
Helsius v. Robertson (NC App 2005) (88)
Issue:
Whether the trial court properly exercised its discretion and “reasoned choice” when it extinguished the employer’s workers’ compensation lien?
165
FACTS
The plaintiff was injured in the course and scope of his employment.
The employer paid workers’ compensation benefits of $53,128.40.
The plaintiff recovered the limits of the tortfeasor’s liability insurance policy of $30,000 and his underinsurance policy of $20,000 for a total recovery of $50,000.
The trial court extinguished the employer’s lien.
166
1. The trial court made extensive findings of fact and conclusions of law as suggested by Allen v. Rupard.
2. The trial judge considered the plaintiff’s injuries and expenses, future medical treatment, permanent injury and total recovery.
3. The trial judge properly evaluated: (1) the employer paid only two-thirds of the lost wages; (2) no payment for secondary employment; (3) workers’ compensation did not pay for pain and suffering; and (4) allowing recovery for the lien would eliminate the separate recovery from the insurance companies.
HELD: Affirmed
167
Childress v. Fluor Daniel, Inc.(NC App 2005) (90)
Issue:
Whether the superior court had jurisdiction under G.S. § 97-10.2(j) to set the amount of the workers’ compensation lien?
168
FACTS
The plaintiff received an award from the Industrial Commission of $20,000 for each of three internal organs damaged by exposure to asbestos.
On the plaintiff’s appeal to the Court of Appeals, the Court held that the Industrial Commission did not have jurisdiction to address distribution of the award and the interests of third parties until there had been a final award.
The plaintiff then filed a motion in the superior court to distribute the settlement proceeds and reduce the defendants’ lien. The trial court held that it did not have jurisdiction.
169
Pursuant to G.S. § 97-10.2(j), the superior court, in its discretion, determines whether to order any reduction in the workers’ compensation lien.
In a separate proceeding under G.S. § 97-10.2(f)(1), the Industrial Commission then issues an order specifying to whom and in what amounts the funds will be distributed to satisfy the workers’ compensation lien, if any.
Therefore, G.S. § 97-10.2(j) “explicitly gives [the superior court] jurisdiction over settling the amount of the lien.”
HELD: Reversed.
G.S. § 66-152 – Trade Secrets
170
171
Sunbelt Rentals v. Head & Engquist(NC App 2005) (91)
Issues:
1. Whether compilation of business information such as customer pricing, employee salaries, budget information and business organization which is protected, not known outside the business, competitively valuable, and developed at considerable cost may constitute a trade secret under N.C.G.S. § 66-152?
172
Issues: (Cont’d.)
2. When the plaintiff introduced evidence that the defendant (a) knew or should of known of the trade secret and (b) had the opportunity to acquire or disclose the trade secret without the consent of the owner, whether this was sufficient evidence of misappropriation of the trade secrets?
173
Issues: (Cont’d.)
3. When the plaintiff’s evidence established that its former employees were used by the defendant to solicit current employees and customers of the plaintiff and this conduct resulted in a loss of business to the plaintiff, whether this was sufficient evidence to establish a claim under Chapter 75?
174
FACTS
Sunbelt and H & E were competitors in the market for construction equipment, particularly aerial work platforms.
Sunbelt purchased BPS Equipment.
Hepler and Kline were employed by BPS. After BPS was acquired by Sunbelt, Hepler and Kline went to work for H & E.
175
FACTS (Cont’d.)
Hepler and Kline recruited former managers of BPS to work for H & E performing the same responsibilities they had done at BPS.
Sunbelt sued H & E for violations of the North Carolina Trade Secrets Act and the North Carolina Unfair Trade Practices Act.
The trial court entered judgment for Sunbelt for $5 million, then trebled that amount under G.S. § 75-16 and awarded the plaintiff attorneys’ fees of $1.2 million.
176
1. Compilation of business information such as customer information, pricing, employee salaries, budget information and business organization may constitute a trade secret when such information is (a) not generally known outside the business; (b) protected within the company; (c) competitively valuable; (d) developed at significant cost; and (e) difficult to duplicate or acquire.
2. Proof of misappropriation of a trade secret is established by “substantial evidence” showing that the defendant (a) knew or should have known of the trade secret; and (b) had the opportunity to acquire or disclose it without the consent of the owner.
HELD: Affirmed
177
3. Evidence sufficient to support an award under Chapter 75 is established by: (a) the defendant had no customers in the geographic area until recruiting managers of the plaintiff; (b) during the period involved, the defendant generated $3.7 million in new business with a corresponding loss to the plaintiff; (c) the defendant solicited key personnel from the plaintiff; and (d) the defendant’s conduct “devastated rather than competed with” the plaintiff.
4. The trial court properly permitted the plaintiff’s economic expert to testify when the expert’s opinion as to damages was based on (a) lost profits and (b) lost market share resulting from the defendant’s “accelerated entry” into the market.
HELD: Affirmed (Cont’d.)
G.S. § 75-1.1 – Unfair and Deceptive Trade Practices
178
179
Willen v. Hewson(NC App 2005) (94)
Issues:
1. When the plaintiffs specifically inquired about a material fact relating to the sale of land and the defendant concealed the true facts in responding, whether this was sufficient to establish fraud?
2. Whether the sale of one residence for profit was a sufficient basis for a Chapter 75 claim?
180
FACTS
The plaintiffs purchased land and a house from the defendant for $938,165.
During the pre-purchase negotiations, the plaintiffs told the defendant that they intended to raise their four small children on the property.
When the plaintiffs were told by the defendant’s niece that there had been problems on the property with trespass and vandalism, they inquired about this of the defendant.
The defendant denied that these problems existed.
181
FACTS (Cont’d.)
After the plaintiffs moved onto the property, they had continuing problems with vandalism and trespass and learned that these problems had existed for several years.
The trial court found that the defendant was aware of the history of trespass and vandalism and withheld these facts from the plaintiffs.
The trial court also found that this conduct constituted unfair and deceptive trade practices.
Judgment was entered for $322,753 and attorneys’ fees of $55,000.
182
1. Even if there is no duty to disclose information, when the defendant does respond, the answer must be “a full and fair disclosure of the matters he discloses.”
The information about trespass and vandalism was a material fact which the defendant deliberately concealed.
The plaintiffs would not have purchased the property if they had known the true facts.
2. The sale of the property constituted a claim under Chapter 75. The defendant was not selling her own residence. She had purchased the property two months earlier for $685,000 and was “motivated by the potential for profit.”
HELD: Affirmed
183
Johnson v. Colonial Life & Acc. Ins. Co. (NC App 2005) (96)
Issues:
1. When the aggravating factors submitted to the jury as a basis for the Chapter 75 claim are also conduct which constitutes breach of contract, whether it is proper to find that the aggravating factors are a part of unfair and deceptive trade practices and treble the breach of contract damages?
2. Whether prejudgment interest may be added to the breach of contract damages before trebling under Chapter 75?
184
FACTS
The plaintiff sued his former employer for termination of the employment without cause.
The jury returned a verdict for the plaintiff and awarded $537,887 for breach of contract.
The jury found two of three aggravating factors relating to the breach of contract.
On the plaintiff’s claim for intentional infliction of emotional distress, the jury awarded $1,075,774.
185
FACTS (Cont’d.)
On motion of the plaintiff, the trial judge ordered that the two aggravating factors found by the jury established the defendant’s unfair and deceptive trade practices and entitled the plaintiff to treble damages and attorneys’ fees.
Judgment was entered for: Breach of contract - $537,887
Prejudgment interest on the breach of contract claim - $297,561.01
Adding the breach of contract claim and prejudgment interest, then trebling - $2,506,344.06
Total award, including, also intentional infliction of emotional distress and COBRA violations - $4,138,276.92
186
1. The trial judge properly found that the breach of contract aggravating factors constituted unfair and deceptive trade practices. The aggravating conduct was part of the continuing breach of contract by the defendant.
The Court of Appeals agreed with the general statement that “a mere breach of contract, even if intentional, is not sufficiently unfair or deceptive” on which to base a Chapter 75 claim.
“The jury returned the verdict finding aggravating factors . . . to be present. Mr. Johnson presented evidence that false accusations were deceptively made against him as a pre-text forming the basis of termination and the jury agreed. Therefore, where the jury found that there was a breach of contract accompanied by aggravating factors, it was proper for the judge to conclude as a matter of law that a claim under N.C.Gen.Stat. § 75-1.1 had been satisfied.”
HELD:
187
2. It was error to add prejudgment interest to the breach of contract claim before trebling under Chapter 75.
N.C.G.S. § 75-16 provides that the amount to be trebled is that fixed by the verdict. Therefore, the amount to be trebled is only the “actual damages awarded for the breach of contract that was found to be an unfair trade practice.”
HELD: (Cont’d.)
188
3. It was error to submit the claim for intentional infliction of emotional distress to the jury.
The plaintiff’s evidence for this claim was that “threats” and “accusations” were made to the plaintiff about losing his job and health insurance. Although the comments made were “insulting and offensive” to the plaintiff, they were not so “agregious as to go ‘beyond all possible bounds of decency.’”
4. COBRA claims are within the exclusive jurisdiction of the federal courts. It was error to submit this claim to the jury.
HELD: (Cont’d.)
189
“The mere establishment of a subsidiary corporation for the purpose of limiting the parent corporation’s liability is not per se an unfair and deceptive trade practice under Chapter 75.”
HELD:
Excel Staffing Service, Inc. v.HP Reidsville, Inc.
(NC App 2005) (99)
Jury Instructions –Peculiar Susceptibility,N.C.P.I. – Civ 102.20
190
191
Hughes v. Webster (NC App 2006) (101)
Issues:
1. If the defendant’s negligent acts would have breached a duty to a person of ordinary susceptibility, whether an instruction on peculiar susceptibility should be given to the effect that the defendant is liable for all damages to the plaintiff notwithstanding the fact that the plaintiff’s damages were unusually extensive because of the plaintiff’s peculiar susceptibility?
2. Whether the trial court properly excluded the plaintiff’s expert from testifying when (a) the expert’s opinions changed after he was deposed and there was no supplemental disclosure; and (b) the expert was testifying outside his area of experience and basing his opinion on the report of another expert?
192
FACTS
The parties stipulated that the defendant pharmacist filled the plaintiff’s prescription with the wrong drug.
The only issue tried was whether the plaintiff was injured by the defendant’s negligence.
The plaintiff was hospitalized three times before the prescription error was discovered.
During the first hospitalization, the plaintiff sustained damage to his heart and suffered a stroke.
The trial judge refused to instruct on peculiar susceptibiity.
The jury awarded the plaintiff $50,000.
193
1. When an instruction on peculiar susceptibility is warranted, failure to so instruct is reversible error.
Generally, when the defendant’s conduct would not have resulted in injury to an ordinary person, the defendant is not liable for injury to a person of peculiar susceptibility unless the defendant was on notice of the condition.
However, if the defendant’s conduct was a breach of duty to a person of ordinary susceptibility, then the defendant is liable for all damages “notwithstanding the fact that these damages were unusually extensive because of peculiar susceptibility.”
There was evidence that an ordinary person would have been injured by the toxic effects of the drug given in error to the plaintiff.
HELD: Reversed
194
There was also evidence that the plaintiff’s heart damages and stroke were caused by a “hypersensitive drug reaction.”
An instruction on peculiar susceptibility should have been given.
2. The trial judge properly excluded the plaintiff’s expert. The expert’s opinion on causation changed between the time of his deposition and trial. Since the pretrial order required disclosure of all expert opinions, the opinion was correctly excluded.
Additionally, the expert conceded that he was testifying in an area in which he was not an expert and was basing his opinion on the report of another expert.
HELD: Reversed (Cont’d.)
Evidence – Experts
195
196
NC Dept. of Transp. v. Haywood County
(NC 2006) (105)Held:
When the defendant’s experts had experience in appraising real property, but could not articulate the method used to arrive at their opinions and stated that the opinions were based on feelings and personal opinions, the trial judge’s decision to exclude the experts was “neither arbitrary not the result of an unreasoned decision” and was not an abuse of discretion.
197
Banks v. Dunn (NC App 2006) (106)
Held:
1. Where the factual issue was whether water flowed downhill and will carry loose material in its flow, expert evidence was not required.
2. The flooding in the plaintiff’s yard did not involve a “scientific principle more complex than the truism that water flows downhill and will carry loose material with it.”
3. Unlike Davis v. City of Mebane, the present case did not involve a large scale water project, the interaction of water currents, the calculation of water flow rates and the boundary of a 100 year flood plain.
198
Van Reypen Associates, Inc. v. Teeter, review allowed,
(NC App 2006) (108)
Issue:
In allowing the defendant’s motion for summary judgment, whether the trial court:
1. Properly considered an affidavit of the defendant stating his speed at the time of the accident; and
2. Properly excluded the opinion of the plaintiff’s expert as to the speed of the defendant’s vehicle at the time of the collision?
199
FACTS
The plaintiff alleged that excessive speed of the defendant caused a collision.
The defendant moved for summary judgment. In support of the defendant’s motion for summary judgment, the defendant’s affidavit was attached in which the defendant stated that he was driving 35 mph at the time of the accident.
200
FACTS (Cont’d.)
In opposition to the defendant’s motion for summary judgment, the plaintiff attached the affidavit of David Brown, a professional engineer. Brown stated that it was his expert opinion that the defendant was traveling 48 mph at the time of the accident and that the defendant’s negligence was the cause of the accident.
The trial court granted the defendant’s motion for summary judgment.
201
1. It was proper to consider the defendant’s affidavit as to his speed.
Even though the defendant was an interested witness, there was nothing in his affidavit “inherently suspect and the facts contained in the affidavit were not peculiarly within his knowledge.”
Nothing in the affidavit raised a question about the defendant’s credibility.
HELD: Affirmed
202
2. The trial court properly excluded the opinions of the plaintiff’s expert engineer as to the defendant’s speed at the time of the collision.
“It has long been the rule in North Carolina that ‘one who did not see a vehicle in motion will not be permitted to give an opinion as to its speed.’”
HELD: Affirmed (Cont’d.)
203
State v. Edwards (NC App 2005) (109)
Held:
1. In a trial for first-degree murder, the trial court did not abuse its discretion when it refused to let the defendant’s expert psychiatrist testify about conversations the psychiatrist had with the defendant.
2. Although such evidence may be admissible under Rule 705, the State did not examine the expert about the basis for his opinion.
204
Held: (Cont’d.)
3. The excluded conversations related to the defendant’s remorse, but this was not relevant to the issue of the defendant’s ability to premeditate and deliberate.
4. The trial court allowed the expert to testify about the matters relied upon in reaching his opinion, excluding only the defendant’s words.
205
State v. Bunn (NC App 2005) (110)
Held:
1. In a trial for possession of intent to sell marijuana and cocaine, the trial court properly permitted the State’s expert to testify concerning the opinions of non-testifying experts relied upon by the testifying expert.
2. “Testimony as to information relied upon by an expert when offered to show the basis for the expert’s opinion is not hearsay.”
3. “An expert may properly base his or her opinion on tests performed by another person, if the tests are of the type reasonably relied upon by experts in the field.”
206
Elliott v. Muehlbach (NC App 2005) (111)
Issue:
When the plaintiff’s expert did not personally observe the conditions about which he expressed an opinion, whether the trial court abused its discretion in permitting the expert to testify?
207
FACTS
The plaintiff sought to enjoin as a nuisance the operation of an ATV racetrack.
At the hearing on the plaintiff’s motion for a preliminary injunction, the plaintiff’s expert, Dr. Noral Stewart, testified as an expert in acoustics and noise control.
The defendant objected to the opinion of Dr. Stewart because he had not personally heard any of the sounds about which he expressed an opinion.
The court granted the plaintiff’s motion for a preliminary injunction.
208
Rule 703 requires only that the matters relied upon by the expert be “of a type reasonably relied upon by experts in the particular field.”
Dr. Stewart testified that he: (1) viewed the track; (2) reviewed photographs of the area; (3) listened to recordings of the sound made by the ATVs; and (4) discussed the racetrack with several of the plaintiffs.
Defendant offered no evidence that this “was an inadequate basis under Rule 703.”
These questions go to the weight of the testimony rather than admissibility.
HELD: Affirmed