North Carolina Lawyers Weekly 9-13-21

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SEPTEMBER 13, 2021 ■ $8.50

INDIGENT DEFENSE OFFICE FIGHTS

FOR FUNDING AS CUTS CREATE CRISIS ■ BY HEATH HAMACHER hhamacher@nclawyersweekly.com The constitutional right to counsel is a right to competent and effective counsel, but in North Carolina, there are concerns that the public defense system created to defend those who can’t afford to defend themselves is failing. The executive director of the state’s Office of Indigent Defense Services (IDS), Mary Pollard, said that many lawyers stand ready and willing, but unable, to help. “People who do this work tend to have a passion for it, but you have to be able to feed your kids and pay for your health insurance and all that stuff,” Pollard said. “In a lot of counties, particularly rural areas, we’re having a really hard time finding lawyers willing to do the work for the price we’re paying them because it really doesn’t cover their overhead.” IDS was created in 2001 to oversee legal representation for North Carolinians entitled to counsel and is tasked with devising high-quality and cost-effective methods for delivering services in each judicial district, recruiting and retaining talented private appointed counsel (PAC) to represent the indigent, and providing those attorneys the resources they need to be effective. But in recent years, IDS has

No causal link needed for N.C. court to hear suit over plane crash ■ BY DAVID DONOVAN david.donovan@nclawyersweekly.com

struggled to stop the bleeding of an attorney roster that has dwindled 15 percent since 2017. Since PAC pay rates were slashed in 2011 to cope with a state budget crisis, some of the most dedicated in the field have walked away from defending the poor because they simply cannot afford to do it. “Legislators that I’ve talked with said they made really hard choices, and I understand that, but it was 10 years ago, and we’re in a different time right now,” Pollard said. “If we could offer just a little more money, we could entice people who just do private work to do a little

Public defenders handle most indigent criminal cases, but with just 17 offices statewide—about one every 3,000 square miles—there just aren’t enough public defenders to go around. This, along with conflicts that can arise if an indigent defendant has interests that conflict with those of a past or current

The estate of a North Carolina couple that died in a plane crash will be able to move forward with a lawsuit against the maker of the plane’s engine after the North Carolina Court of Appeals reversed a lower court’s ruling and found that the state’s courts could exercise personal jurisdiction over the Alabama-based company. Citing a recent ruling by the U.S. Supreme Court, the appeals court found that the company’s general efforts to serve the market in North Carolina gave the state jurisdiction, even though the specific engine at issue was initially sold in another state. Debra Dee O’Neal and Dennis Alan O’Neal, who were both experienced pilots, took off from Wilkes County Airport in March 2013 flying the singleengine plane that they owned. They had intended to fly back home to eastern North Carolina but reported an emergency not long after takeoff. Air traffic controllers attempted to divert the O’Neals to an airport in WinstonSalem, but the plane crashed near a residential neighborhood a few miles shy of the airport, killing them both. Data from the plane would later reveal that its engine had lost power after losing oil pressure. The O’Neals’ estate sued Continental Motors Inc. (CMI), the Alabama-based company that had designed and manufactured the engine on their plane, alleging that the engine was defective. Although CMI sold aircraft engines and parts in all 50 states through a network of distributors, the company argued that North Carolina’s courts

S e e Fu n d i n g P a g e 6 ►

See Casual link Page 5 ►

more indigent work, or we could open up public defender offices.”

Take a load off

Duress notice doesn’t waive 5th Amendment rights ■ BY HEATH HAMACHER hhamacher@nclawyersweekly.com A criminal defendant doesn’t forfeit their right to remain silent by giving pre-trial notice of their intent to offer the affirmative defense of duress, and prosecutors may not preemptively impeach a defendant during its case-in-chief, the North Carolina Supreme Court has unanimously ruled. The Aug. 13 ruling reversed the state’s Court of Appeals judgment affirming the convictions of Shanna Shuler for felony trafficking of methamphetamine

and possession of marijuana. On discretionary review, the high court found that a Haywood County Superior Court judge shouldn’t have admitted testimony from a police detective meant to impeach Shuler’s credibility as a witness because the state erroneously presumed that Shuler had “clearly showed” her intent to testify. “That prejudicial evidence would never become admissible if defendant ultimately decided to invoke her Fifth Amendment right not to testify,” Justice Robin Hudson wrote. In March 2017, Detective Brennan Regner and another officer responded to a disturbance call and found

Shuler behind the wheel of a car and Joshua Warren standing outside the vehicle. Warren was arrested on an outstanding warrant, and the officers spoke with Shuler and found that she had an outstanding warrant as well. Asked if she had “anything on her,” Shuler hesitantly produced a baggie of marijuana. After being told that anything illegal found on her at the jail would result in additional charges, Shuler pulled a baggie of methamphetamine from her bra. Before trial, Shuler informed the court that she See Duress Page 5 ►

INSIDE PLANES

TRAINS

AUTOMOBILES

No causal link needed for N.C. court to hear suit over plane crash

Suit against state-owned railroad stopped in its tracks

Family reaches $1.3M settlement for fatal drunk driving crash

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N O R T H C A R O L I N A L A W Y E R S W E E K LY I Se pt e m be r 13, 2021

NEWS BRIEFS New judges named in Districts 6A, 1 Norlan Graves has been appointed by Gov. Roy Cooper to serve as a superior court judge in Judicial District 6A, serving Halifax County. He will fill the vacant seat created by the retirement of Judge Alma Hinton. Graves is a Special Deputy Attorney General for the North Carolina Department of Justice. He previously served as an Assistant District Attorney for Prosecutorial District 7 and Prosecutorial District 8. Cooper has also appointed Jennifer Karpowicz Bland to serve as district court judge for Judicial District 1, which serves Camden, Chowan, Currituck, Dare, Gates, Pasquotank and Perquimans counties. Bland will be filling the vacant seat formerly held by Judge Eula Reid. Since 2008, Bland has served as an Assistant District Attorney in the District Attorney’s Office for the First Prosecutorial District. Staff reports

Bipartisan police reforms signed into law RALEIGH (AP) — A bipartisan police reform package has been signed into law by Gov. Roy Cooper, emphasizing success of enacting provisions from a task force he commissioned following George Floyd’s murder over panel recommendations left out. Backers of the legislation, which received near unanimous approval from

the General Assembly, say it will rid departments of derelict officers and give mental health assistance to others on the force. The provisions address law enforcement shortcomings during a time of national focus on racial inequity and the deaths of Black residents at the hands of police, such as Floyd last year in Minneapolis. Law enforcement groups and state House members also made recommendations contained within the new law. “We need to strive every single day to make sure that our criminal justice system works free of bias and racial discrimination. And we know that too often it falls short,” Cooper said in a billsigning ceremony on Sept. 2. The new law creates a public database to determine whether an officer’s certification has been suspended or revoked. The state also will develop a confidential database that contains “critical incident information” about when an officer has been involved in a case resulting in death or serious injury. Local agencies also will be required to collect internal data on when officers discharge weapons or are subject to citizen complaints. Officers and sheriff’s deputies will receive psychological screenings and mental health strategies and training on ethics, the use of force and “minority sensitivity.” After the protest following Floyd’s death, “we knew we had an opportunity to make our criminal justice system fairer and better at keeping people safe,” said Attorney General Josh Stein, who co-led Cooper’s task force with Supreme Court Justice Anita Earls. “To-

day, we are meeting that opportunity.” A change to how police body camera footage can be reviewed by family members also was inserted into the bill in direct response to the aftermath of the fatal shooting in April of Andrew Brown Jr. by Pasquotank County sheriff’s deputies. At the ceremony, Cooper also signed two House bills that matched identically some language in the omnibus Senate bill. One addresses mental health training requirements. The other makes it an officer’s duty to report excessive force by a colleague and to intervene when they see it. They were recommended last year by a bipartisan House study committee. Republican Rep. John Szoka of Cumberland County, who attended the ceremony, said this week these and other House bills “are important first steps to improve and support North Carolina law enforcement agencies.” Absent are Cooper task force recommendations that for now lack broader consensus, like eliminating cash bail for nonviolent criminal suspects and reinstituting a now-repealed 2009 law addressing racial bias in capital punishment cases. Stein, a Democrat, pitched a task force recommendation to decriminalize the possession of small amounts of marijuana. He said a disproportionate percentage of those convicted of such crimes are not white, even as white and Black residents in North Carolina use marijuana at the same rate. Cooper said the task force’s work is See Page 6 ►

BAR DISCIPLINE

ROUNDUP Attorney: Christie Bynum Smith Location: Greensboro Bar membership: Member since 2007 Disciplinary action: Censured on Aug. 26 Background: Smith represented a client in the purchase of a property. On the morning of the closing, a fraudster posing as the seller’s agent emailed Smith about the closing. The fraudster sent a fax containing instructions for wiring the seller’s proceeds. Smith failed to verify the fraudulent instructions with the seller or the seller’s agent before authorizing the wire from her trust account. During a subsequent grievance investigation, Smith represented to the state bar that she had spoken with the seller by telephone to verif y the instructions before wiring the funds. These statements were false, and Smith failed to verify the accuracy of her statements by checking her telephone records before making them to the bar. Previous discipline: None All information contained in the Bar Discipline Roundup is compiled and edited by Lawyers Weekly editor-inchief David Donovan. He can be reached at david.donovan@ nclawyersweekly.com.

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N O R T H C A R O L I N A L A W Y E R S W E E K LY I S ep tember 13, 2021

Family reaches $1.3M settlement for fatal crash ■ BY DAVID BAUGHER

SETTLEMENT REPORT – DRAM SHOP

The family of a man who was killed in a head-on collision will receive a $1.3 million settlement, most of it from the drinking establishment which served alcohol to the driver that struck the victim’s vehicle, the family’s attorney reports. T. Shawn Howard and Karl Gwaltney of Maginnis Howard in Raleigh and Andrew Cioffi of Raleigh represented the survivors of a Charlotte man, whose name was withheld pursuant to a confidentiality agreement. The man was transporting his elderly mother from Michigan when a drunk driver traveling the wrong way on Interstate 77 hit their car near Statesville. Both drivers were killed in the accident. The mother survived with significant injuries. “The family was devastated,” Howard said. “It took them awhile to even think about hiring counsel to pursue the case. When they eventually did, it had been almost a year, and so the trail was cold in a way.” Howard said the matter entailed a significant amount of investigative work, not just due to the time delay but also because of the death of individual liable in the accident. “When that happens, it becomes very, very diffi-

T. Shawn Howard

Karl Gwaltney

Andrew Cioffi

cult for us to find out where they were,” Howard said. Neither phone records nor credit card transactions turned up any evidence of the other driver’s activities. Ultimately, the investigation unearthed information from a co-worker that showed where she had been before the crash, and the attorneys learned that she had apparently consumed seven vodka drinks at a local establishment over the course of two hours and had a .19 blood alcohol level. Howard said the plaintiff’s expert opined that the high BAC indicated that the drinks were likely stronger than normal. The settlement included $1 million from the bar and $300,000 from the insurer for the at-fault driver.

Amount: $1.3 million Injuries alleged: Death (bilateral ankle fractures for surviving passenger) Case name: Confidential Court: Confidential Date of settlement: August 2021 Most helpful experts: Randy Durnal of Tucson, Arizona (service of alcohol) and David Eagerton of Buies Creek (toxicologist) Attorneys for plaintiff: T. Shawn Howard and Karl Gwaltney of Maginnis Howard in Raleigh and Andrew Cioffi of Raleigh Attorneys for defendants: Confidential Howard said he believed the case would have been well-received by a jury had it gone to trial. “I think it would have been a substantial verdict,” Howard said. “I think giving somebody that many alcoholic drinks when they are sitting in a bar by themselves and watching them walk out with keys in their hand is a pretty dangerous thing to do.”

UIM insurer to pay $475K over drunk driving crash ■ BY DAVID BAUGHER A Macon County jury has awarded $475,000 to a Georgia man who was seriously injured in a highway crash caused by a drunk driver. Mark Melrose and Adam Melrose of Melrose Law in Asheville said that their client, Claude Holden Rickman, was driving his pickup truck on Sept. 5, 2016 when James Paul Maddox crossed the center line and struck his vehicle. Adam Melrose—who provided all of the comments on the verdict for this story—said that liability Mark Melrose was uncontested, and so evidence of Maddox’s intoxication wasn’t allowed to be introduced at the damages-only trial that concluded on July 30, but Maddox was driving drunk and traveling at more than 100 mph when the crash happened. “It hit hard enough that the truck popped into the air, rotated, Adam Melrose and landed on the guard rail,” Melrose said. Maddox died at the scene. Melrose said that Rickman, who was 61 at the time of the crash, was rushed to the hospital. He suffered five rib fractures, a concussion, a mild traumatic brain injury with memory issues, left shoulder and neck pain, left knee pain, and loss of income due to the crash, and also required

a left hip replacement. Melrose said that Maddox’s liability insurance quickly tendered its $30,000 limit, but Rickman sued his own insurer, Georgia Farm Bureau, which had issued an underinsured motorist policy to him with a $700,000 limit. Melrose said the verdict exceeded the $350,000$450,000 Rickman had requested despite the trial taking place in a conservative venue in the western part of the state. He felt that jurors genuinely liked his client. “He is one of the most pleasant individuals I’ve ever met,” Melrose said. “He’s very hard-working, works six days a week, and he just came across as extremely authentic.” Punitive damages can’t be levied against a dead person, and Rickman’s attorneys decided not to introduce medical expenses at trial, since the relatively low admissible medical expenses of around $30,000 could have served as an anchor to drag down the jury verdict. They did introduce evidence of $100,000 in lost income for Rickman, a self-employed general contractor, buttressed by testimony from his company’s bookkeeper. Maddox’s estate wasn’t represented at trial. L. Cameron Caudle of Caudle & Spears in Charlotte represented Georgia Farm Bureau. Caudle didn’t return a call seeking comment on the verdict. Melrose said that the insurer’s highest offer had been $100,000, and it argued that Rickman hadn’t lost as much in wages as was claimed, and that his hip replacement was likely to have occurred anyway

VERDICT REPORT – MOTOR VEHICLE CRASH

Amount: $475,000 Injuries alleged: Left hip replacement, five rib fractures, concussion, mild traumatic brain injury with memory issues, left shoulder and neck pain, left knee pain, loss of income Case name: Claude Rickman v. The Estate of James Maddox Court: Macon County Superior Court Case No.: 17-CVS-620 Judge: William Long Date of verdict: July 30 Demand: $350,000-$450,000 Highest offer: $100,000 Special damages: $100,000 in lost income Insurance carrier: Georgia Farm Bureau Attorneys for plaintiff: Mark Melrose and Adam Melrose of Melrose Law in Asheville Attorney for defendant: L. Cameron Caudle of Caudle & Spears in Charlotte for Georgia Farm Bureau due to arthritis. Melrose said that Rickman’s right hip had been replaced before the accident, but he’d had no complaints of pain in his left hip until after the crash.

Suit against state-owned railroad stopped in its tracks ■ BY DAVID DONOVAN david.donovan@nclawyersweekly.com A railroad company that’s wholly owned by the state of North Carolina but operates as an independent corporation isn’t subject to the state’s Public Records Act, the North Carolina Supreme Court has ruled in a case of first impression. The Southern Environmental Law Center was seeking records from the North Carolina Railroad Co. related to a proposed light rail transit project between Orange and Durham counties that was scuttled in 2019. NCRR declined to produce the materials, claiming that the company isn’t subject to the Public Records Act. The SELC argued that the railroad is so intertwined with the state that it’s effec-

tively a state agency for public records purposes. In 2020, North Carolina Business Court Judge Michael Robinson granted the NCRR’s motion for summary judgment, concluding that lawmakers never intended for it to be subject to the PRA. The SELC appealed, and the case reached the end of the line in an Aug. 13 ruling affirming the grant of summary judgment. Justice Sam Ervin, writing for the court’s majority, said that even though the state is the NCRR’s sole shareholder and all of its directors are appointed by the governor and the General Assembly, both the General Assembly and other governmental entities have consistently treated it as a private corporation rather than a public agency or subdivision, and the state didn’t

have a sufficient degree of control over NCRR’s day-to-day operations for it to be treated as a public agency or subdivision. The NCRR was founded in 1849 as a public-private entity to deliver the capital needed to modernize the state’s economy by laying much-needed tracks across the state. Today, it owns about 317 miles of tracks and makes its revenue through a rights agreement with Norfolk Southern, giving that company’s freight trains something to choo-choo on. The state’s courts had never previously considered whether the NCRR should be subject to the PRA, but the Supreme Court cited two previous cases in which the Court of Appeals had considered similar controversies involving other public-private enti-

ties. Ervin endorsed the analytical approach of those two cases—in which the court looked at the totality of the circumstances to determine whether the government exercised so much control over an entity that it effectively functioned as a governmental agency—but also emphasized that the court’s job was, in large part, one of statutory interpretation. The court found that the NCRR’s manner of operations resembles a private corporation much more than a governmental agency, and factors arising from its corporate status—making decisions independently of any directives that it might receive from governmental officials, for instance— outweighed the benefits conferred by See Railroad Page 5 ►

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N O R T H C A R O L I N A L A W Y E R S W E E K LY I Se pt e m be r 13, 2021

10 ways to practice, promote civility in mediations ■ BY STEVEN V. MODICA Lawyers tend to limit their practice to a few areas. Nonetheless, people come to us with myriad problems—many of which fall outside our expertise. Here is some practical information to help you assist those who have employment, disability benefit, workers’ compensation and related problems. In my experience, those problems often are best resolved by the parties themselves and not by a judge or jury. For over two decades, I have served as an impartial mediator in hundreds of disputes (most arise in personal injury, civil rights, employment and breach of contract cases). I also have represented many parties who have participated in mediation during the 35 years that I have been a lawyer. Norman Feit, a distinguished former practicing attorney who now provides mediation services, offered eight useful “mediation-specific” civility standards in an article published last year in the “New York Dispute Resolution Lawyer.” Do not misuse the mediation process. Mediation should be reserved for sincere efforts to resolve disputes and not for other tactical purposes (e.g., litigation delay or for “free discovery” from an adversary). Abusing the process initially will make any later effort less likely to succeed and waste precious resources of those involved. Be polite, constructive, and efficient. All participants should strive to create the most positive atmosphere to facilitate a resolution. A combative atmosphere and difficult demeanor defeat that objective. In my experience, a resolution occurs more often

when all are polite, constructive, and keep the process moving. Be reasonable and realistic in submissions and presentations. Mediation is not a place to declare victory. The facts and legal analysis can be presented and discussed in an evenhanded manner with concessions where appropriate (e.g., risks exist, the law is not settled, fact finders may differ, etc.). Avoid lectures, personal attacks and finger-pointing. Attacking your opponent, particularly on a personal level, creates defensiveness, inspires retaliation and may lead to an abrupt end to the mediation. We can disagree without being disagreeable. If a participant disputes an opponent’s legal or factual points, the differences should be expressed on the merits without demeaning rhetoric, commentary or name-calling. Communicate in a calm manner without bitterness or criticism. While mediations can involve heated emotions, losing one’s cool stifles engagement and constructive dialogue. If temperatures or emotions rise, it is best to take a break — even to the point of suspending the process — rather than introducing emotions. Do not posture unnecessarily; do not wait until the eleventh hour to be realistic. Being civil must not supplant or compromise bona fide negotiating strategies. That said, mediations can be undermined quickly by unnecessary posturing, stratospheric/miniscule negotiating positions that have no chance of success or frustrating refusals to be realistic until the eleventh hour. Getting “real” as soon as possible creates momentum and positive energy that helps to resolve disputes. Do not make threats. Threats back

opponents into a corner and discourage compromise. Mediation is a consensual process where all participants should act in good faith. If a mediation session fails, end on good terms; do not burn the future settlement bridge. Although a mediation session may not end in a settlement, it can still be a positive experience. This can become part of a longer-term settlement opportunity unless the mediation ends on a sour note. Do not burn the future settlement bridge. It often takes multiple mediation sessions — some months or even years apart — to settle a difficult case. I have two of my own civility standards to add: Prepare your client to follow these same standards of civility. Civility in mediation applies to ALL participants in the process, not just the lawyers. Counsel your clients about these civility standards, what to expect, how to act and how to address the adverse party and their counsel. I am shocked that lawyers often do not prepare their clients to handle these issues appropriately. Civility applies to all mediations, including those conducted virtually. Using Zoom to conduct a mediation does not suspend the standards of civility (or common sense). One party in a recent case sat at her kitchen table wearing a partially opened bathrobe while smoking a cigarette and swearing repeatedly. An attorney in a recent case spent most of his time playing a game on his smart phone. Mediators are not judges; however, they should be afforded the same respect because mediation is an important and quasijudicial proceeding. Steven V. Modica is a lawyer and mediator in Rochester, New York.

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Delegating to others can help grow your practice ■ BY CHRISTOPHER F. EARLY

“In most organizations, the bottleneck is at the top of the bottle.” — Peter Drucker

If someone else can do something 70% as well as you can, delegate it. As lawyers, we tend to try to handle everything ourselves. It gives us a sense of control. The old adage, “If you want something done right, do it yourself,” is something I can certainly relate to. I found, though, that I was doing way too much and realized that trying to handle 17 things at the same time was probably not good for my productivity — or my sanity. I was getting overwhelmed and running in place. That was a huge disservice to my staff, my clients, and most importantly, myself. Something needed to change if I wanted to move forward and have a more enjoyable and rewarding practice. It became evident that delegation was necessary. Once I started delegating, I soon discovered that it was a total game changer. It was becoming obvious to

me that my practice was growing the more and more I delegated. A subtle yet powerful mind shift had occurred, and it was liberating and transformative. The bottleneck at my office was me, and I was finally getting out of the way. Of course, delegation is not possible for all tasks. Taking a deposition, trying a case, etc., are tasks that perhaps only you can do at your office. But it is amazing how much truly can be delegated once you take an honest assessment of the things you do each day that you need to stop doing immediately in order to be most productive and useful to your firm. You should not be doing $20-anhour tasks, or even $100-an-hour tasks if you can leverage your time better with higher-value work. Get the monkey off your back and delegate those tasks to someone else. After all, your professional advancement will move forward at the rate at which you can delegate. Moreover, your support staff wants to do these tasks for you. Therefore, commit to set yourself and your staff free by delegating (or delegating more than you currently are). Your staff is probably better at

doing those tasks anyway (even if they won’t tell you so), so step out of their way. If you are a solo, consider hiring a virtual assistant you can delegate to. Delegation, though, should not be confused with abdication. As lawyers, we are ultimately responsible for our clients’ cases. If our staff makes a mistake that impacts a client, we are on the hook. You, therefore, are delegating not responsibility but rather ownership of a task. But before delegating anything, always communicate the following three things to whom you are delegating: Be clear on how the work should be done. Be clear on what a successful outcome will look like. Give a hard deadline on when you need and expect the work to be done. Commit today to delegate one task you know you need to stop doing. Then, constantly look for other things to get off your plate. You will be amazed at how this shift in thinking will free up your time to work on those things that you are best at doing. Christopher F. Earley practices law in Boston attorney and concentrates his practice on the representation of the seriously injured and their families.

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N O R T H C A R O L I N A L A W Y E R S W E E K LY I S ep tember 13, 2021

RAILROAD / Principles of corporate law drove court’s ruling C o nt inu e d f r o m 3 ►

its relationship with the state. Also, several reporting requirements placed specifically upon the NCRR would be redundant if it were already considered a state agency. In addition, Ervin wrote, “the General Assembly has had multiple opportunities to define the Railroad as a governmental agency without having done so, [and] various components of state government have acted on numerous occasions in such a manner as to suggest their belief that the Railroad is a private corporate entity rather than a governmental agency or subdivision.” Justice Anita Earls, joined by Justice Robin Hudson, dissented from the court’s ruling, arguing that the substance of an entity’s actions or operations, rather than its particular form, should dictate whether the public has right to access its records, and the court’s ruling created the risk of allowing the state to sidestep the PRA’s requirements by conducting its business through a nominally private entity. Jim Cooney, Russ Ferguson, and Rebecca Fleishman of Womble Bond Dickinson represented the NCRR. The attorneys said that the ruling was an important decision because it reaffirmed some basic

Jim Cooney

Russ Ferguson

Rebecca Fleishman

principles of corporate law, in particular the principle that a corporation’s shareholders are distinct from the corporation itself. “Certainly while the Public Records Act is an important statute, at the end of the day it’s just a statute and doesn’t override other statutory provisions,” Cooney said. “For us, the case always turned on the fact that in order to apply the Public Records Act to this corporation, you were going to have to collapse the corporate identity into the shareholder’s identity, which violates a lot of fundamental corporate law principles that, frankly, are the basis for the 20th and 21st century economy.” Cooney also said that it was unrealistic that the government could skirt its obligations under the Pub-

lic Records Act by outsourcing functions to corporate entities because courts could still pierce the corporate veil and collapse the corporate identity into the shareholder’s identity if the corporate form was being used to create an inequitable outcome. Kym Hunter, Ramona McGee, and Maia Hutt represented the SELC. Hunter said that court’s opinion did reaffirm that longstanding principle that the PRA should be interpreted broadly. “Certainly we were disappointed and thought the dissent was excellent and exactly on point, but I would say that overall I think the court’s opinion does leave the door open for a broad interpretation of the Public Records Act that does include quasi-public-private entities, so that was certainly encouraging,” Hunter said. Attorneys for both sides said that it was helpful to have the Supreme Court weigh in on the issue and endorse the reasoning employed in the two earlier decisions from the Court of Appeals. The 57-page decision is Southern Environmental Law Center v. North Carolina Railroad Co. (Lawyers Weekly No 010-082-21). The full text of the opinion is available online at nclawyersweekly.com. Follow David Donovan on Twitter @NCLWDonovan

CASUAL LINK / ‘Paradigm example’ of specific jurisdiction C o nt inu e d f r o m 1 ►

didn’t have personal jurisdiction over it, since the engine in question had been manufactured in Alabama and shipped to a facility in Oregon, where it was then installed into the plane by another company and then used by another owner before the O’Neals bought the plane second-hand. After several years and exchanges of discovery, CMI moved to dismiss in 2018, and Nash County Superior Court Judge James L. Gale granted its motion in March 2020, finding that the specific acts connected to the accident upon which the estate relied didn’t support a finding that CMI had purposely availed itself of doing business in North Carolina regarding those acts. The estate appealed, and in a Sept. 7 opinion, the Court of Appeals unanimously reversed and remanded the case for further proceedings. Judge Toby Hampson, writing for the court, said there are two steps to deciding if North Carolina’s courts have personal jurisdiction over a non-resident defendant: the transaction must fall within the state’s long-arm statute, and the exercise of jurisdiction must not violate the Due Process Clause of the U.S.

Constitution’s 14th Amendment. CMI didn’t dispute the reach of the long-arm statute, so the only question was whether exercising personal jurisdiction over the company would be consistent with the Due Process Clause. As it happens, the U.S. Supreme Court discussed the very same issue in its March 2021 in Ford Motor Co. v. Montana Eight Jud. Dist. Ct., and the high court’s ruling heavily informed the Court of Appeals’ own analysis. In Ford and a companion case, the plaintiffs filed product liability lawsuits over car crashes that happened in Montana and Minnesota, respectively. The justices unanimously ruled that the connection between the suits and Ford’s activities in those states was sufficient to support specific jurisdiction in the states’ courts, even though the cars involved were made and sold elsewhere. Justice Elana Kagan, writing for the high court, said that regardless of where the specific cars involved in the crashes at issue were made and sold, Ford had systematically served markets in those states for the very vehicles that the plaintiffs allege malfunctioned and injured them. “None of our precedents has suggested that only a strict causal relation-

ship between the defendant’s in-state activity and the litigation will do,” Kagan wrote, saying that the court had “never framed the specific jurisdiction inquiry as always requiring proof of causation—i.e., proof that the plaintiff’s claim came about because of the defendant’s in-state conduct.” The Court of Appeals found the facts in the Ford cases—which Kagan called “an illustration—even a paradigm example—of how specific jurisdiction works”—to be strikingly analogous to CMI’s position. The company marketed and sold its wares across the country, and though it didn’t sell components to individual plane owners themselves, it actively maintained a business model that operated through independent distributors, some of whom were based in North Carolina. That business was extensive—from May 2010 to August 2013, CMI sold just shy of 3,000 component parts in North Carolina, with a total value just under $4 million. “Furthermore, during the time frame of the accident, CMI made it so that individuals across its international market, including those in North Carolina, could access its online database for a fee, thus drawing a benefit to itself from the ‘privilege of conducting activities’ with North

Carolina subscribers,” Hampson wrote. At the time of the crash, CMI served a market for its products in North Carolina, and one of those products allegedly malfunctioned in North Carolina, causing the accident, Hampson wrote. Applying the reasoning of Ford to the case, the sale of CMI’s product was not simply an isolated occurrence, but arose from CMI’s efforts to serve, directly or indirectly, the North Carolina market. As such, haling the company into North Carolina’s courts didn’t offend the Due Process Clause. Philip Miller of Blanchard, Miller, Lewis & Isley in Raleigh and Mike Miska of The Wolk Law Firm in Philadelphia represented the estate. Miller declined to comment on the ruling, citing the ongoing nature of the litigation. Lacey Smith, Sherri Rich Ginger, and Tim Heisterhagen of Armbrecht Jackson in Mobile, Alabama and Elizabeth Scott of Williams Mullen in Raleigh represented Continental Motors. Scott also declined to comment on the ruling because of the ongoing nature of the litigation. The 35-page opinion is Cohen v. Continental Motors, Inc. (Lawyers Weekly No. 011-166-21). The full text of the opinion is available online at nclawyersweekly.com.

DURESS / State must wait for defendant to actually testify C o nt inu e d f r o m 1 ►

planned to claim duress because Warren gave her the drugs and threatened her if she didn’t hide them. During the state’s case-in-chief, Regner testified that Shuler didn’t mention the threats to arresting officers. Shuler objected and moved for a mistrial because the question “solicited an answer highlighting [Shuler’s] silence at the scene.” The court allowed Regner’s testimony. After Shuler’s testimony the court instructed the jury on duress. Shuler was convicted on felony trafficking and misdemeanor possession. The appeals court affirmed the convictions, determining that while pre-Miranda silence may not be used as substantive evidence of guilt, it may be used to impeach the defendant by suggesting that the silence is inconsistent with statements made at trial. The appeals court

found that it would have been natural for Shuler to inform officers of Warren’s threats when she was arrested because Warren was no longer at the scene.

Well, that’s presumptuous

Prosecutors didn’t argue that a witness could be impeached prior to testifying, but asked for an exception to the rule against preemptive impeachment because Shuler “clearly showed” that she intended to testify. But the Supreme Court—citing its ruling in 1978’s State v. Looney that the purpose of impeachment is to reduce or discount witness credibility to induce the jury to give less weight to their testimony—held that Regner’s testimony couldn’t discount witness testimony that had not been given, and that the state couldn’t anticipate, based on Shuler’s pretrial notice, that she intended to testify. “A criminal defendant retains the

right to choose whether or not to testify at all times up until she actually takes the stand,” Hudson wrote. “The State’s argument … does not appropriately recognize or protect the defendant’s Fifth Amendment right to choose whether or not to testify.” The Court of Appeals didn’t address whether the error was harmless, and the parties didn’t brief the issue on appeal, so the Supreme Court remanded the case back to the Court of Appeals to consider that issue. W. Michael Spivey of Rocky Mount represented Shuler, and Attorney General Josh Stein and Assistant Attorney General Brent Kiziah represented the state. Spivey declined to comment on the ruling, citing the ongoing nature of the case, and Kiziah didn’t respond to a request for comment. Elliot Abrams of Cheshire Parker Schneider in Raleigh, who is not af-

filiated with the case but reviewed the decision at the request of Lawyers Weekly, said that the decision supports several critical principles of the criminal justice system. Abrams said that reinforcing the right to silence, the presumption of innocence, and the right to present a defense is an important step toward protecting innocent people from wrongful convictions. “Allowing the prosecutor to highlight a defendant’s pre-trial silence based on an assumption that the defendant will testify would force defendants to testify when they might not otherwise, would allow the government to shift the burden to the citizen to prove his or her innocence, and would impose substantial unwarranted costs on defendants who provide notice of an intent to present certain defenses,” Abrams said. Follow Heath Hamacher on Twitter @NCLWHamacher

6 / NEWS C o nt inu e d f r o m 2 ►

not over. Kerwin Pittman, a task force member and Raleigh criminal justice activist, said the new laws speak to the truth that all lives in North Carolina cannot matter until ensuring the lives of Black people and those in other marginalized groups matter. But these laws are “not the end-all and be-all for reimagining public safety in the state of North Carolina and creating that more equitable system,” Pittman said.

COA stops voting restoration for felons for now RALEIGH (AP) — The North Carolina Court of Appeals has blocked an order that had allowed tens of thousands of felony offenders who aren’t serving prison or jail time to immediately register to vote and cast ballots. The court agreed on Sept. 3 to halt last week’s decision by trial judges to expand when North Carolina residents convicted of felonies have the right to vote again. The plaintiffs immediately appealed the decision to the state Supreme Court. Otherwise, the stay would remain in place until the merits of pending litigation filed by civil rights groups and ex-offenders challenging state law on the restoration of voting rights is heard by the appeals court. The Court of Appeals’ decision, if left in place, means that the offenders could not vote in this fall’s municipal elections. It also likely would bring confusion, since some felons affected by last week’s trial court order almost certainly would have registered to vote by now. Voting rights groups have already started registration drives targeting the estimated 56,000 people affected by the decision. The North Carolina Constitution forbids a person convicted of a felony from voting “unless that person shall be first restored to the rights of citizenship in the manner prescribed by law.” A 1973 law laying out those restoration rules requires the “unconditional discharge of an inmate, of a probationer, or of a parolee.” The trial court order, however, said that election officials can’t deny voter registration to any convicted felon who is only on probation, parole or post-release supervision. An attorney for the plaintiffs said the trial court’s decision represented the largest expansion of North Carolina voting rights since the 1960s. “The collective will of the state is stifled when so many of our citizens are unjustifiably not able to participate in our democracy,” the plaintiffs said in a news release announcing the Supreme Court appeal. “That exclusion of our neighbors’ voices is morally and constitutionally wrong.” Last year, the same trial judges ruled felony offenders couldn’t be denied the right to vote if the reason their rights hadn’t been restored was due to unpaid fines or restitution. That small expansion of voting access remains enforceable, although the plaintiffs’ lawyers wrote to the Supreme Court that it can’t be carried out accurately by elections officials. Republican legislative leaders, some of whom were defendants in the lawsuit, were pleased with the decision. They had earlier accused the majority of the three trial judges who approved last week’s ruling of judicial activism. “The decision to block the lower court’s ruling affirms that judges can’t just replace laws they don’t like with new ones,” Sen. Warren Daniel, a Burke County Republican, said in a news release. During a four-day trial last month, the plaintiffs’ lawyers argued the current law needed to be struck down because it was racially discriminatory by disproportionately affecting Black offenders and violated the state constitution.

N O R T H C A R O L I N A L A W Y E R S W E E K LY I Se pt e m be r 13, 2021

Their witnesses included a historian who said felony disenfranchisement had origins from a Reconstruction-era effort to intentionally prevent Black residents from voting. The two judges who issued last week’s order wrote there was no denying the “insidious, discriminatory history” surrounding efforts at restoring voting rights in North Carolina. “The overwhelming and undisputed effect of this law is to disproportionately disenfranchise Black people by wide margins throughout the entire state,” plaintiffs’ lawyer Daryl Atkinson wrote in urging the Court of Appeals to keep the trial court ruling enforced. Changing the rules again “now would cause chaos” in the first round of municipal elections in October. But private attorneys for House Speaker Tim Moore and Senate leader Phil Berger said the trial court went too far with its order and that there’s no evidence the 1973 law—which actually eased obstacles for ex-felons to vote—is discriminatory in practice today. “The trial court panel has thrown (voting) rules into disarray for no discernible reason,” attorney Nicole Moss wrote this week, adding the injunction “contravenes the well-established equitable principle that courts should not change election laws on the eve of elections.”

Court rules Catholic school wrongfully fired gay substitute CHARLOTTE (AP) — A gay substitute teacher was wrongfully fired by a Roman Catholic school in North Carolina after he announced in 2014 on social media that he was going to marry his longtime partner, a federal judge has ruled. U.S. District Judge Max Cogburn ruled on Sept. 3 that Charlotte Catholic High School and the Roman Catholic Archdiocese of Charlotte violated Lonnie Billard’s federal protections against sex discrimination under Title VII of the Civil Rights Act. Cogburn granted summary judgment to Billard and said a trial must still be held to determine appropriate relief for him. “After all this time, I have a sense of relief and a sense of vindication. I wish I could have remained teaching all this time,” Billard said in a statement released by the ACLU, which represented him in court. “Today’s decision validates that I did nothing wrong by being a gay man.” Billard taught English and drama full time at the school for more than a decade, earning its Teacher of the Year award in 2012. He then transitioned to a role as a regular substitute teacher, typically working more than a dozen weeks per year, according to his 2017 lawsuit. He posted about his upcoming wedding in October 2014 and was informed by an assistant principal several weeks later that he no longer had a job with the school, according to the ruling. The defendants said that they fired Billard not because he was gay, but rather because “he engaged in ‘advocacy’ that went against the Catholic Church’s beliefs” when he publicly announced he was marrying another man, the ruling said. But Cogburn ruled that the school’s action didn’t fit into exemptions to labor law that give religious institutions leeway to require certain employees to adhere to religious teachings, nor was the school’s action protected by constitutional rights to religious freedom. “Plaintiff is a lay employee, who comes onto the campus of a religious school for the limited purpose of teaching secular classes, with no mandate to inculcate students with Catholic teachings,” Cogburn wrote. The diocese released a statement to The Charlotte Observer saying that it disagreed with the ruling and was considering how to proceed.

FUNDING / C o nt inu e d f r o m 1 ►

IDS client, necessitates the outsourcing of some cases to PACs. An IDS workload assessment confirms the problem: public defender offices need either more resources or smaller caseloads in order to effectively serve their clients. The study suggests that the state needs nearly 500 more public defenders and hundreds of support staff. Even then, PACs would remain a critical piece of indigent defense. In Forsyth County, Chief Public Defender Paul James wrote to his county legislative representatives, imploring them to support the House version of the state’s budget, which includes a $6.8 million IDS allotment. The Senate’s version includes nothing. James said the funding is critical for the administration of justice and that office is currently burdened with more than twice the recommended caseload, and it’s able to “tread water” only because most cases are “being endlessly continued.” The county’s private assigned list that once boasted 50 attorneys now stands at 15. “Our current very short list is rapidly becoming overwhelmed as well, again because the cases just keep coming and the ones assigned previously have not been able to be resolved,” James wrote. “ANYTHING that will help alleviate this situation would be greatly appreciated.” Appellate Defender Glenn Gerding said that his attorneys have received small raises but still have fallen behind salaries of private practice attorneys, and that state PAC rates are well behind those in federal criminal cases. “Specifically related to my office, appellate practice is a specialized field,” Gerding said. “It can be challenging to recruit and retain attorneys to work in our office and to serve on our appellate roster when our budget does not allow us to provide compensation commensurate with other areas of practice.”

Show me the money

According to a June press release from Gov. Roy Cooper, the state’s financial forecast shows that unprecedented resources are available to “make transformational investments” for the state. Economists in the Office of State Budget and Management and the General Assembly’s Fiscal Research Division anticipate an additional $6.5 billion in state revenues through the next two years. To restore PAC pay to where it was in 2011—adjusted for inflation and periodically increased for cost of living—the IDS requested $17 million, all of which was included in Cooper’s proposed budget, Pollard said. “At least with the House budget we would be able to make some progress,” Pollard said. “Whether it’s enough to bring enough people back into the work, I just don’t know.” Currently, PAC rates run from $55 per hour for district court cases to $90 for capital cases, down from $75 and $95, respectively, in 2011. Those wages might seem adequate in a state where the average salary for public defenders is around $25 an hour, but IDS says that many PACs net between just $10 and $20 an hour after covering necessary overhead costs. About 70 percent of PACs are solo practitioners and almost all operate without support staff. Many make hefty financial sacrifices to do the work they love. Common are tales of those who say that they can’t afford office space—or sometimes groceries—or who depend on their spouse’s income to support their work. Others simply walk away. “We do not accept indigent cases,” one attorney told IDS. “We could not cover overhead and pay our staff (let alone our attorneys) on the rates that IDS is paying.” Another said that they are often afraid to even ask to be paid for the full amount of time they spent working on a case. “If we spend more than five hours our district judge requires an affidavit, which makes us spend time to do the affidavit. So, for most attorneys I know, it’s 4.9 [hours].”

Friend or foe

If a system created to protect civil rights becomes too underfunded and overtaxed, it can pit lawyers’ financial survival against the needs of their clients, sending shockwaves throughout that system, Pollard said. The IDS’s position is that when lawyers are pressured to spend only a few hours on indigent cases, justice can be compromised, and confidence in the criminal justice system eroded. Attorneys may struggle to sufficiently communicate with clients—much less properly investigate their cases or explore diversion or alternative sentencing. Delayed trials lead to more pre-trial detention costs. James said that the backlog of district court cases in Forsyth County stands at 54,000, and the superior court is equally clogged. There hasn’t been a jury trial there since March 2020. Ineffective counsel can lead to more convictions in a state where one in four adults has a criminal record, which can create long-term barriers to housing, education, and employment. “It’s a huge responsibility,” Pollard said. “If their attorney can help them get their life back on track, minimize collateral consequences, minimize time incarcerated, and if somebody can turn it around, that’s the best possible result for everybody.” Pollard, a relative newcomer to IDS, said that before joining the agency, she didn’t realize that it provides counsel not only to adults charged with crimes, but juveniles and parents facing termination of parental rights. At the heart of the issue is not money, but people. And without funding to pay competent counsel, poor North Carolinians will pay the price. “I know a lot of folks who said, ‘We’ll fix it when we can,’” Pollard said. “If the folks who make the decisions stopped to think about the individuals affected by them, poor people in their communities … it would be better for our communities and better for our state.” Follow Heath Hamacher on Twitter @NCLWHamacher

OPINION DIGESTS / 7

N O R T H C A R O L I N A L A W Y E R S W E E K LY I S ep tember 13, 2021

Opinions N.C. SUPREME COURT

7

N.C. COURT OF APPEALS

N.C. SUPREME COURT

Domestic Relations Parent & Child – TPR – Neglect – Unstable Housing For three of the four years preceding the termination of parental rights (TPR) hearing, the respondent-mother maintained stable, appropriate housing. However, several months before the hearing, respondent moved into a studio apartment with a male coworker, her name was not on the lease, she failed to notify DSS of the move for five months, and she failed to reveal the name of her apartment mate until the TPR hearing. Although one relocation in a period of three years does not necessarily indicate instability, given the facts of this case, the trial court could find that respondent had failed to maintain stable housing. We affirm the termination of respondent’s parental rights. During the four-month period in which the TPR hearing was held, the trial court did not change respondent’s

11

N.C. BUSINESS COURT

14

unsupervised visitation with “Mark.” Even assuming this means the trial court had determined that respondent provided a safe home during the TPR hearing, the court’s finding was subject to change until its final order was entered. Because the TPR order does not continue respondent’s unsupervised visitation, the trial court did not, as respondent argues, simultaneously find that respondent could provide a safe home for Mark and that there was a likelihood of repetition of neglect. Respondent’s assertion that the trial court’s findings are “internally inconsistent” is without merit. In re M.A. (Lawyers Weekly No, 010-091-21, 24 pp.) (Robin Hudson, J.) Appealed from the District Court in Durham County (Shamieka Rhinehart, J.) Derrick Hensley for petitioner; Carrie Hanger for guardian ad litem; Peter Wood for respondent. 2021-NCSC-99

ny, the allegations set out in the petition to terminate respondent’s parental rights. However, the petition was filed 13 months before the termination of parental rights (TPR) hearing; thus, the petition’s allegations do not shed any light on respondent’s fitness to care for “Ann” at the time of the TPR hearing. The trial court erred by relying on the stale information in the petition as its only support for finding that Ann was neglected. The stale information in the petition was also insufficient to support the trial court’s findings and conclusions that Ann was dependent, that respondent had willfully failed to make reasonable progress to correct the conditions which led to Ann’s removal, and that respondent had willfully failed to pay a reasonable portion of the cost of Ann’s care. We reverse the termination of respondent’s parental rights.

Domestic Relations

Dissent

(Barringer, J.): Respondent’s arguments do not dispute the sufficiency of the evidence for the trial court’s factual finding that respondent—despite having been employed at times—had paid “zero dollars” towards the cost of Ann’s care. The trial court’s finding that re-

Parent & Child – TPR – Neglect – Likelihood of Repetition – Stale Evidence The trial court properly allowed a social worker to adopt, as her testimo-

spondent had “always remained able bodied however she has paid zero dollars of child support for [Ann] since she came into care” covers the relevant sixmonth period. The trial court further found that the amount of zero was “not a reasonable amount of child support based upon respondent-mother’s actual income [ ]or her ability to earn” and that she “willfully failed to pay.” While the trial court does not precisely name the relevant six-month period, nothing in G.S. § 7B-1111(a)(3) requires an express reference where the plain language and context of the trial court’s findings of fact address and encompass the relevant six-month period. The trial court’s binding findings of fact support its conclusion that respondent had willfully failed to pay a reasonable portion of the cost of Ann’s care. In re Z.G.J. (Lawyers Weekly No. 010-092-21, 33 pp.) (Robin Hudson, J.) (Tamara Barringer, J., joined by Paul Newby, C.J. & Philip Berger, J., concurring in part and dissenting in part) Appealed from the District Court in Iredell County (Christine Underwood, J.) Lauren Vaughan for petitioner; Stephen Schoeberle for guardian ad litem; Jeffrey Miller for respondent. 2021NCSC-102

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10 / OPINION DIGESTS Domestic Relations Parent & Child – TPR – Jurisdiction – Guardian’s Home – GAL Even though it was the Wake County District Court that granted guardianship of “Mariel” to the petitioneraunt, since the aunt resided in Robeson County when she filed the petition to terminate the respondent-mother’s parental rights, the Robeson County District Court had jurisdiction to consider the petition. We affirm the termination of respondent’s parental rights. Because respondent did not file an answer or response to the termination petitions, the trial court was not required to appoint a guardian ad litem for Mariel and “Audrey” under G.S. § 7B-1108(b). After a review of the record, we reject respondent’s argument that the trial court abused its discretion by acting under the misapprehension that it could not appoint a GAL for the children. Respondent was absent and moved for a second continuance. The record shows that the trial court remained concerned about more delay in the proceedings. After respondent indicated the only evidence that she could offer was her own testimony, which the trial court allowed by telephone, the trial court ultimately denied respondent’s motion to continue and proceeded without appointing a GAL. The record does not indicate the trial court was under a misapprehension of the law or failed to exercise its discretion. In re M.J.M. (Lawyers Weekly No. 010-093-21, 10 pp.) (Robin Hudson, J.) Appealed from the District Court in Robeson County (Brooke Clark, J.) No brief for petitioner; Dorothy Hairston Mitchell for respondent. 2021-NCSC 100

Domestic Relations Parent & Child – TPR – Post-Petition Evidence At the termination of parental rights hearing, DSS counsel objected to testimony about events that occurred after the date the termination petition was filed, stating that the standard for termination was to look at what “happened prior to the date of the filing of the action.” Nevertheless, the trial court allowed a DSS supervisor to testify about events that occurred after the filing of the termination petition. Moreover, from the trial court’s order, it is clear that the court considered evidence that arose after the date of the termination petition’s filing but determined that such evidence was unpersuasive and inadequate to overcome evidence supporting termination under G.S. § 7B-1111(a)(1) and (a)(2). We affirm the termination of respondent’s parental rights. In re K.N. (Lawyers Weekly No. 010-094-21, 18 pp.) (Paul Newby, C.J.) Appealed from the District Court in Robeson County (William Moore, J.) Edward Yeager for petitioner; Michelle FormyDuval Lynch for guardian ad litem; Benjamin Kull for respondent. 2021-NC-98

Domestic Relations Parent & Child – TPR – No-Merit Brief In this case involving domestic violence and methamphetamine use, the no-merit brief filed by respondentfather’s appellate counsel identified

certain issues relating to the termination proceeding that could potentially support an award of appellate relief, including whether the trial court had lawfully found that respondent’s parental rights in “Jacob” were subject to termination and whether the trial court had abused its discretion by determining that termination of respondent’s parental rights would be in Jacob’s best interests; counsel then explained why these potential issues lacked merit. In addition, counsel advised respondent of his right to file pro se written arguments on his own behalf and provided him with the documents necessary to do so. Respondent has not, however, submitted any written arguments for our consideration in this case. We affirm the termination of respondent’s parental rights. In re J.L.F. (Lawyers Weekly No. 010-095-21, 8 pp.) (Per Curiam) Appealed from the District Court in McDowell County (Ellen Shelley, J.) Aaron Walker for petitioner; Daniel Heyman for guardian ad litem; Leslie Rawls for respondent. 2021-NCSC-97

Domestic Relations Parent & Child – TPR – Neglect – Likely Repetition A careful review of the trial court’s valid findings of fact establishes that, while respondent-mother made some progress in satisfying the requirements of her case plan, the progress that she did make was extremely limited; that respondent had “broken up” with “Arty’s” father on at least three occasions during the pendency of the underlying neglect and dependency proceeding; that, in spite of her denial that she was still involved in a romantic relationship with Arty’s father, respondent continued to have contact with Arty’s father and allowed him to visit her new baby; that respondent was not concerned by the fact that Arty’s father had failed to complete domestic violence counseling; that, in spite of the fact that respondent had genuine love and affection for Arty, she did not grasp the severity of the difficulties that she faced in seeking to be reunited with him; that respondent minimized the problems that she faced and the significance of the steps that she needed to take in order to prevent these past difficulties from recurring; that respondent was completely dependent upon others for her housing and finances; that respondent had never had stable housing or independent means of support during the pendency of the underlying neglect and dependency proceeding; that respondent missed approximately three months of visitation with Arty; and that respondent had failed to provide any financial support for Arty during the time that he was in DSS custody. In addition, the trial court found that Arty had been adjudicated to be a neglected juvenile in 2018; that respondent had failed to show that the conditions that had led to Arty’s removal from her care had been remedied; and that there was a likelihood that the neglect that Arty had experienced would recur in the event that he was returned to respondent-mother’s care. These findings are supported by the record, and the findings support the trial court’s conclusion that Arty is a neglected juvenile. We affirm the termination of respondent’s parental rights. In re A.C. (Lawyers Weekly No. 010-096-21, 32 pp.) (Sam Ervin, J.) Appealed from the District Court in Stokes County (Marion Boone, J.) Jennifer Oakley Michaud for petitioner; James Freeman for guardian ad litem; Jeffrey

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Miller for respondent. 2021-NCSC-91

Domestic Relations Parent & Child – TPR – Substance Abuse Respondent-mother argues that there was no evidence that substance abuse was a continuing issue at the time of the termination of parental rights hearing. However, where (1) respondent stipulated that she had “an extensive history of polysubstance abuse [and] a long history of using methamphetamines, benzodiazepines, opiates, and marijuana, as well as other substances”; (2) a social worker testified that respondent had an extensive history of substance abuse and that respondent did not complete the substance abuse treatment required by her case plan; (3) the trial court observed that respondent had been referred to intensive outpatient treatment but attended only a few classes; (4) a psychologist opined that the combination of respondent’s “severe and chronic mental illness and her history of substance abuse has combined in such a way as to have a significant impact on her capacity to maintain stability and effectively parent” and (5) respondent refused drug screens and hair follicle tests on several occasions, we find there is clear, cogent and convincing evidence to support the trial court’s finding that respondent “has an extensive history of substance abuse for which she has received inadequate treatment.” We affirm the termination of respondent’s parental rights. In re A.S.D. (Lawyers Weekly No. 010-097-21, 16 pp.) (Michael Morgan, J.) Appealed from the District Court in Caldwell County (Wesley Barkley, J.) Lucy McCarl for petitioner; Matthew McGuire for guardian ad litem; David Perez for respondent. 2021-NCSC-94

Domestic Relations Parent & Child – TPR – No-Merit Brief Among other things, the respondentmother (1) did not provide her children with school necessities, (2) was left unsupervised with the children in violation of a safety plan, (3) did not schedule medical or dental appointments for the children, (4) failed to attend her scheduled mental health sessions and parenting sessions, and (5) allowed one of her children to play in a room where a gun had been left on the couch. Respondent’s counsel has filed a no merit brief, advised respondent of her right to file pro se written arguments and provided her with the documents necessary to do so; however, respondent has not submitted any written arguments to this court. Our independent review of the issues satisfies us that the trial court’s order is supported by clear, cogent and convincing evidence. We affirm the termination of respondent’s parental rights. In re J.E.H. (Lawyers Weekly No. 010-098-21, 7 pp.) (Anita Earls, J.) Appealed from the District Court in Union County (William Helms, J.) Ashley McBride for petitioner; No brief for guardian ad litem; Richard Croutharmel for respondent. 2021-NCSC-96

Domestic Relations

his substance abuse issues, as well as his continued involvement in criminal conduct and resulting incarceration, evinced a lack of reasonable progress since the children were removed from the children’s mother’s custody in May 2018. The trial court did not err in adjudicating the existence of grounds for termination pursuant to G.S. § 7B1111(a)(2) (willfully leaving the children in a placement outside the home for more than 12 months without making reasonable progress to correct the conditions leading to their removal). We affirm the termination of respondent’s parental rights. In re D.M. (Lawyers Weekly No. 010-099-21, 7 pp.) (Anita Earls, J.) Appealed from the District Court in Dare County (Amber Davis, J.) No brief for petitioner; no brief for guardian ad litem; Garron Michael for respondent. 2021-NCSC-95

Domestic Relations Parent & Child – TPR – Willfulness – Incarcerated Father – Communication Petitioners have had custody of respondents’ daughter, “Sue,” since bringing her home from the hospital after her birth. Petitioner Mr. C testified that respondent-father, who has been incarcerated since before Sue’s birth, called on Christmas and that he got on well with respondent-father. This was not evidence that respondentfather willfully determined to forgo his parental duties during the six months preceding the filing of the petition to terminate respondents’ parental rights. There is also no evidence in the record referring to a decree or custody agreement requiring payment for Sue’s care, support or education. We reverse the termination of respondent-father’s parental rights. We affirm the termination of respondentmother’s parental rights. Although it was labeled as a conclusion of law, the trial court did find that respondent-mother had willfully abandoned Sue for at least six consecutive months immediately preceding the filing of the petition. Respondent-mother admitted that, before being served with the petition in August 2019, she had not had any contact with Sue since 1 November 2018, despite knowing where petitioners lived. Respondent-mother was gainfully employed, yet she testified that she had not done anything to support Sue, financially or otherwise, and acknowledged she had not sent any letters, cards, or anything else to Sue. Nevertheless, respondent-mother maintains that “the dates and reasons for [respondent-mother’s] lack of contact [with Sue we]re not stated, explained, or resolved by the trial court in any manner.” This assertion is misplaced. The trial court need not have made any additional findings of fact, as contended by respondent-mother, to support a conclusion of law pursuant to G.S. § 7B-1111(a)(7) because the findings of fact do not identify multiple possible impediments to respondent-mother’s ability to contact and provide support to Sue. The trial court resolved the reason for respondent-mother’s lack of contact: it concluded that respondent-mother willfully abandoned Sue. Affirmed in part; reversed in part.

Dissent Parent & Child – TPR – No-Merit Brief – Insufficient Progress Respondent-father’s failure to comply with the court’s orders or to address

(Earls, J.): I dissent from that portion of the majority opinion affirming the termination of respondent-mother’s parental rights. The trial court did not make any findings assessing whether

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respondent-mother’s conduct towards Sue was willful. There is no language in these findings suggesting that the trial court examined respondent-mother’s circumstances and determined her conduct reflected a purposeful, deliberative and manifest willful determination to forgo all parental duties and relinquish all parental claims to the child. Absent such language, the only way the majority can reach its legal conclusion that respondent-mother willfully abandoned her child is by improperly finding facts in this case, which is a job reserved for the trial court. Where there is no evidence that either parent was subject to an order to pay support to petitioners or that respondent-mother willfully failed without justification to pay for Sue’s care, support and education, the trial court also erred by terminating respondentmother’s rights pursuant to G.S. § 7B1111(a)(7). In re S.C.L.R. (Lawyers Weekly No. 010-100-21, 26 pp.) (Tamara Barringer, J.) (Anita Earls, J., joined by Sam Ervin, J., concurring in part and dissenting in part) Appealed from the District Court in Cleveland County (Larry Wilson, J.) 2021-NCSC-101

Domestic Relations Parent & Child – Permanency Planning Order – Reunification Elimination – TPR – Cost of Care Although the trial court did not use the precise language of G.S. §§ 7B906.1(d)(3) and -906.2(b) when it relieved DSS of further efforts to reunify the respondent-parents with their children, the court found that “it would be contrary to the children’s health and safety and their general welfare to be returned to the home of a parent.” With respect to the respondentmother, the trial court cited her failure to obtain stable and appropriate housing or employment, her continued cohabitation with her boyfriend despite the children’s detailed accounts of his domestic violence against her, the unfavorable results of her psychological evaluation, and her apparent inability “to learn from past mistakes and ... make the necessary changes in her life to provide a safe and secure environment for the children.” The trial court’s findings of fact support its conclusions of law that reunification with either parent would be “contrary to the children’s health and safety.” We affirm the elimination of reunification from the permanent plan and the subsequent termination of respondents’ parental rights. With respect to the respondent-fa-

ther, the trial court found that he had been “in and out of prison and treatment for substance abuse” since signing his case plan on April 6, 2017; had visited the children just three times in the 20 months since they entered DSS custody; had accumulated “a child support arrearage in excess of $5,000.00”; and had not “demonstrated such stability which would warrant the children being returned to [his] care.” Additional findings in the termination orders include that, although he obtained a substance abuse assessment and attended inpatient treatment through the DART program, respondent-father (1) failed to complete an anger management assessment or parenting classes, (2) failed to secure stable housing, (3) attended fewer than one-third of the drug screens requested by DSS and refused to submit to other screens, and (4) made no “appreciable progress” on his case plan even at the time of the termination hearing in June 2020. These findings more than satisfy the requirements of G.S. § 7B-906.1(d)(1). Other findings depict respondentfather’s minimal degree of engagement with his case plan, his refusal to participate in most of the drug screens requested by DSS, and his failure to obtain stable housing. The trial court adequately addressed the purpose of § 7B-906.2(d)(2)-(4). In contesting the termination of her parental rights, respondent-mother argues the trial court was required to, but did not, find that her failure to pay the cost of the children’s care was willful. We disagree. The evidence and the trial court’s findings show respondent-mother paid nothing toward the children’s cost of care during the six-month period immediately preceding DSS’s filing of the petitions to terminate her parental rights, despite having agreed to pay $112 per month in support and having demonstrated an ability to work by multiple reported periods of employment. Respondent-mother never moved to modify or nullify the voluntary agreement, and she was thus subject to a valid order that established her ability to financially support for her children. Accordingly, the trial court did not err in finding respondent-mother’s nonpayment to be willful and in concluding that grounds existed to terminate her parental rights under G.S. § 7B-1111(a) (3). Affirmed. In re A.P.W. (Lawyers Weekly No. 010-101-21, 29 pp.) (Philip Berger, J.) Appealed from the District Court in Wilkes County (David Byrd & Jeanie Houston, JJ.) Daniel Johnson for petitioner; Michelle FormyDuval Lynch for guardian ad litem; Wendy Sotolongo, Lee Gilliam and Anné Wright for re-

spondents. 2021-NCSC-93

ingly, respondent’s argument has no merit. Affirmed in part and remanded. In re A.L. (Lawyers Weekly No. 010-102-21, 14 pp.) (Philip Berger, J.) Appealed from the District Court in Robeson County (William Moore, J.) Edward Yeager for petitioner; Maggie Blair for guardian ad litem; Anné Wright for respondent. 2021-NCSC-92

Domestic Relations Parent & Child – ICWA – State-Recognized Tribe – TPR – Rehab Attempts In this termination of parental rights case, “Arden’s” birth certificate listed the respondent-mother’s race as “American Indian,” the trial court found that Arden was a member of a state-recognized tribe, and the court ordered DSS to notify the tribe “of the need for nonsecure custody for the purpose of locating relatives or nonrelative kin for placement.” However, it does not appear from the record that the trial court complied with 25 C.F.R. § 23.107(a) by asking “each participant ... whether the participant knows or has reason to know that the child is an Indian child.” We cannot determine from the record before us whether Arden is an Indian child within the meaning of the Indian Child Welfare Act. The ICWA applies only to federally recognized tribes. The Lumbee tribe in Robeson County is state recognized but not federally recognized. If, after compliance with the ICWA, there is no reason to know that Arden is an Indian child—such as if she is only eligible for membership in the Lumbee tribe— then the trial court should enter an order to this effect and the termination of respondent’s parental rights remains undisturbed. Respondent challenges the trial court’s determination that her progress on her case plan was not reasonable. Respondent asserts that relapses for addicts are not uncommon and therefore not unreasonable under the circumstances and that, at the time of the termination of parental rights hearing, she had been sober and successfully participating in treatment for seven months. While respondent entered numerous inpatient and residential programs to address her substance abuse issues up until the time of the termination hearing, she was unable to successfully complete the majority of the programs she entered, failed to maintain sobriety for any meaningful amount of time, and regularly admitted to DSS social workers that she was abusing substances. Her continued abuse of drugs and failure to complete the vast majority of rehabilitation programs she entered demonstrates extremely limited progress at best in correcting the conditions that led to Arden’s removal. As such, despite respondent’s good intentions to seek help, respondent failed to improve her situation. Accord-

N.C. COURT OF APPEALS

Domestic Relations Equitable Distribution – Motion in the Cause – Timeliness – Absolute Divorce & Divorce from Bed & Board– Voluntary Dismissal Despite the fact that the defendantWife did not file an answer in the plaintiff-Husband’s absolute divorce action, since the trial court had not yet entered a judgment, Wife could assert an equitable distribution claim via a motion in the cause. We reverse and remand the trial court’s dismissal of Wife’s equitable distribution claim in the absolute divorce action. We affirm the trial court’s dismissal of Wife’s equitable distribution claim in the parties’ divorce-from-bedand-board action.

Background

In file No. 18 CVD 201, Husband sought child custody, and Wife counterclaimed for divorce from bed and board, child custody, child support, equitable distribution, post-separation support, alimony and attorney’s fees. Wife subsequently voluntarily dismissed all of her counterclaims. She dismissed all but the equitable distribution claim with prejudice; she dismissed the equitable distribution claim without prejudice. Meanwhile, in File No. 19 CVD 224, Husband asked for an absolute divorce. He asked that the equitable distribution claim in 18 CVD 201 “be severed and preserved.” Wife did not file an answer in 19 CVD 224. After a hearing on Husband’s claim for an absolute divorce was heard, but before judgment was entered, Wife filed motions in the cause in both actions, seeking an equitable distribution of the marital estate. The trial court granted Husband’s motion to dismiss both motions.

18 CVD 201

Wife’s voluntary dismissal of her equitable distribution claim in 18 CVD 201 was without prejudice, so she still retained the right to assert a “claim” for

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12 / OPINION DIGESTS equitable distribution until entry of an absolute divorce judgment. However, wife’s prior dismissal of her equitable distribution claim terminated the action. After the dismissal, there was no suit pending on which the court could enter a valid order. The trial court did not err in granting Husband’s motion to dismiss Wife’s motion in the cause in 18 CVD 201.

19 CVD 224

In an action for absolute divorce, the procedure for obtaining a judgment by default after entry of default is not available to bar a defendant from answering the divorce complaint even after the expiration of 30 days after service of the summons and complaint because the allegations of the complaint are “deemed to be denied” even if no answer has been filed. G.S. § 50-10(a). Wife filed her motion before entry of the absolute divorce judgment. Even though she had not filed an answer, the allegations of the absolute divorce complaint were “deemed to be denied” under § 50-10 and Wife’s right to file an answer, counterclaim, or motion prior to entry of the absolute divorce had not expired. Moreover, Wife had not filed any answer or pleading in this action before filing her motion in the cause, so there was no prior pleading for her to seek “leave of court” to amend. Wife still had the right to file an answer, counterclaim, or motion in the divorce action. The time for Wife to assert her equitable distribution claim expired only upon entry of the divorce judgment, and she filed her motion before entry of the judgment. None of the statutes addressing equitable distribution limit the particular type of pleading for “filing” or “asserting” an equitable distribution claim. An equitable distribution claim may be asserted in “a separate civil action, or together with any other action brought pursuant to Chapter 50 of the General Statutes, or as a motion in the cause as provided by G.S. 50-11(e) or (f).” G.S. § 50-21(a). When Wife filed her motion in the cause, Husband’s complaint for absolute divorce in 19 CVD 224 was pending. The absolute divorce case is an “action brought pursuant to Chapter 50 of the General Statutes.” Section § 50-21 does not limit a claim brought “together” with other Chapter 50 claims to a claim brought by a particular party. In Santana v. Santana, 171 N.C. App. 432, 614 S.E.2d 438 (2005), the equitable distribution claim was asserted by a motion. This court noted the wife’s motion was in accord with Rule 7: “N.C. Gen. Stat. § 1A–1, Rule 7(b) (2004) (‘An application to the court for an order shall be by motion which ... shall be made in writing, shall state with particularity the grounds therefor, and shall set forth the relief or order sought.).” Wife’s motion in the cause in 19 CVD 224 complied with the requirements of Rule 7 and was statutorily authorized, as it was a claim filed “together with any other action brought pursuant to Chapter 50 of the General Statutes[.]” § 50-21(a). And because it was filed before entry of the divorce judgment, Wife’s motion preserved her equitable distribution claim. Affirmed in part, reversed and remanded in part. Bradford v. Bradford (Lawyers Weekly No. 011-162-21, 22 pp.) (Donna Stroud, C.J.) Appealed from the District Court in Yancey County (Hal Harrison, J.) Jamie Stokes for plaintiff; Donald Barton for defendant. 2021-NCCOA-448

Domestic Relations Parent & Child – Visitation Prohibition – Disobedience to Court Orders – Secreting Child The trial court did not err in prohibiting visitation by the defendantMother who (1) secreted the parties’ child, “Paula,” away from the plaintiffFather for the first five and a half years of Paula’s life; (2) violated Indiana court orders and fled to Ohio to evade Indiana authorities; (3) while in Ohio, researched fake passports and countries that would not extradite her and Paula, expressed regret at not having killed Father, revealed that she had a gun, and expressed suicidal and homicidal thoughts about herself and Paula; and (4) during supervised visitation, violated several rules, including admitting a visitor, which led the visitation supervisor to worry that Mother would flee with Paula. We affirm the trial court’s order prohibiting Mother from in-person visits with Paula. Isom v. Duncan (Lawyers Weekly No. 011-163-21, 35 pp.) (Hunter Murphy, J.) Appealed from Wilkes County District Court (Robert Crumpton, J.) Steve Mansbery for plaintiff; Anné Wright for defendant. 2021-NCCOA-453

Real Property Easement – Dedication – Expert Opinion – Marketable Title Act In 1952, landowners filed a plat showing an easement between a 7.585acre tract the landowners intended to sell to the Penders and a larger tract that the landowners intended to subdivide; the easement, labeled “Country Lane,” is depicted as a 60-foot right-ofway, with 30 feet in width on either side of the boundary line. Expert opinion that the plat showed a dedication of Country Lane to the public was clearly not reliable, as it was based on plats showing subdivisions where the property lines for the lots did not extend to the center line of the streets. Moreover, the landowners could not have intended to dedicate Country Lane to the City of Charlotte, as determined by the trial court, as this area of Mecklenburg County was not annexed until the 1980’s. We reverse the trial court’s declaration that Country Lane is a public street. Otherwise, we affirm, as modified, the trial court’s declaration that the owner of each property adjacent to Country Lane has an easement appurtenant to the other parties’ lots within the Country Lane right-of-way. Although the original landowners did not refer to the 1952 plat when they subsequently sold lots in their subdivision (Country Colony), the landowners’ deed to the Penders did refer to the 1952 plat. At some point, two gravel roads were created within the Country Lane rightof-way. Plaintiffs own a Country Colony lot, and they erected a fence, which interferes with the use of Country Lane by defendant, who owns part of the 7.585-acre tract sold to the Penders in 1952. Based on Realty Co. v. Hobbs, 261 N.C. 414, 135 S.E.2d 30 (1964), and other Supreme Court jurisprudence, we hold that the conveyance of the 7.585-acre tract by the landowners to the Penders included, by implication, private easement rights in Country Lane for the benefit of the 7.585-acre tract and reserved private easement

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rights in Country Lane for the tract which would later become Country Colony for the lots fronting on Country Lane. Accordingly, when the landowners later conveyed lots in Country Colony (including Lot 10 now owned by plaintiffs), the grantees of those lots along Country Lane took subject to the appurtenant easement rights of the owner(s) of the 7.585-acre tract. Likewise, these grantees received appurtenant easement rights to the portion of Country Lane on the other side of the boundary line of the 7.585-acre tract. The trial court found, “there was no evidence that any portion of Country Lane has been abandoned by [any of the parties].” Since no party challenges this finding as erroneous, it is binding on appeal. The Marketable Title Act (the Act) provides that an owner of land takes free of nonpossessory interests that others may have but which do not appear in the owner’s chain of title going back 30 years. G.S. § 47B-2. Here, the trial court found that defendant and her family have been continuously using the gravel road since 1966 which plaintiffs blocked in 2018. Based on this finding, we conclude that defendant’s private easement rights in the portion of Country Lane on plaintiffs’ Lot 10 have not been extinguished by operation of the Marketable Title Act. We so conclude based on an exception under G.S. § 47B-3(3), which provides that the Act shall not affect or extinguish “interests [or] claims ... of any person who is in present, actual and open possession of the real property so long as such person is in such possession.” The Act does not apply because plaintiffs’ use of the gravel road within the easement was not hostile, as they have always had private easement rights to this road, as it lies within Country Lane, and the evidence showed that defendant used the road. The parties have private, appurtenant easement rights in Country Lane. No party may interfere with the easement rights in Country Lane of the other parties. Affirmed as modified in part, reversed in part, and remanded. Craig v. Neal (Lawyers Weekly No. 011-164-21, 16 pp.) (Chris Dillon, J.) Appealed from Mecklenburg County Superior Court (Louis Trosch, J.) Kenneth Davies for plaintiffs. Mary Fletcher Mullikin and Martin White for defendants. 2021-NCCOA-450

Administrative CON – Legacy Medical Care Facility – ‘Acquire or Reopen’ – Unrelated Entity G.S. § 131E-184(h) allows an entity to skip the usual intensive certificateof-need review if it intends to “acquire or reopen” a legacy medical care facility (LMCF) in the same service area as the LMCF that ceased operations. We read § 131A-184(h) to require that an entity which wishes to operate a LMCF to either already own and “reopen” that facility or to “acquire” legal ownership of the facility prior to operating it. We reverse the Administrative Law Judge’s holding that petitioner FMSH L.L.C. could not be required to acquire the physical facilities previously operated under the intervenor’s certificates of need (CONs) as a condition precedent to FMSH’s receipt of the intervenor’s (CONs).

Background

In 2018, FMSH notified the respondent-agency that it intended to reopen

a facility that the intervenor had closed in 2017. FMSH proposed that its intended reopening of the facility was exempt from the CON review process because the facility qualified as a “Legacy Medical Care Facility” (LMCF) under § 131E-184(h). At the time, FMSH had no legal interest in the facility and had not contacted the intervenor about purchasing or reopening the facility. The agency informed FMSH that its request to reopen the facility would be exempt from CON review under two conditions: (1) FMSH was required to legally acquire the facility from the intervenor; (2) FMSH would be required to reopen the facility by 24 June 2021. In a contested case hearing, the ALJ ruled that the agency did not have the authority to require FMSH to acquire a legal interest in the facility. The ALJ directed the agency to transfer the CONs from the intervenor to FMSH.

Discussion

Under § 131E-184(h), the agency “must exempt from [CON] review the acquisition or reopening of a [LMCF].” “The person seeking to operate a [LMCF] shall give the [agency] written notice of “its intention to acquire or reopen a [LMCF] within the same county and the same service area as the facility that ceased continuous operations.” The ALJ’s decision focuses, in large part, on the implicit contrast that the word “or” creates between “acquire” and “reopen.” Under the ALJ’s view, making the acquisition of a facility a condition precedent to an entity’s ability to reopen that facility (as the agency interpreted the statute) would change the plain meaning of the statutory language from “acquire or reopen” to “acquire and reopen.” We disagree. The agency’s interpretation reveals the statute’s contemplation of two distinct avenues to operating a LMCF: “acquire and operate” or “reopen and operate.” Which avenue is available to an entity stems from the entity’s legal right to the facility at the time the agency initially issued the CON. If we accept the ALJ’s interpretation, it would require us to read “acquire” to mean “obtain and not use” and read “reopen” to mean “open again and operate”; there would then be no need for the legislature to have included the word “operate” earlier in the statute. We hold that § 131E-184(h) requires an entity which wishes to operate a LMCF to either already own and “reopen” that facility or to “acquire” legal ownership of the facility prior to operating it. The statutory language shows our General Assembly intended for the LMCF exemption to function as a shortcut around the normal CON process where the circumstances inherently guarantee a substantially similar level of healthcare services would be provided to the same geographical area. The only way this can occur without additional, considerable review by the agency is if the entity who wishes to operate a closed LMCF first steps into the shoes of the LMCF’s prior operator and acquires the LMCF—a facility which previously endured scrutiny under the normal CON process and received clearance to operate. Reversed and remanded. FMSH L.L.C. v. North Carolina Department of Health & Human Services (Lawyers Weekly No. 011165-21, 17 pp.) (Jefferson Griffin, J.) Bethany Burgon, Kimberly Randolph, Marcus Hewitt and Elizabeth Sims Hedrick for respondents; FMSH L.L.C. by managing member Catherine Fleming, pro se; Frank Kirshbaum, Charles George, Denise Gunter, Chelsea Barnes, Matthew Fisher, Gary Qualls, Susan Hackney and Terrill Johnson

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Harris for amici curiae. 2021-NCCOA-451

Civil Practice Personal Jurisdiction – Airplane Manufacturer – Nationwide Sales – Subscription Database The Alabama defendant, a manufacturer of aircraft engines and parts, “markets to the flying public at large” through independent distributors, including Triad Aviation, based in North Carolina. Defendant’s North Carolina sales from May 2010 to August 2013 totaled $3,933,480.65; defendant also earned money from the 14 North Carolina subscribers to its database. Our exact fact pattern (a resident plaintiff sues a global aviation company, extensively serving the state market, for an in-state accident) effectively functions as an illustration, even a paradigm example, of how specific jurisdiction works. We reverse the trial court’s grant of defendant’s motion to dismiss for lack of personal jurisdiction.

Facts

In 2013, plaintiff’s decedents died in a plane crash near Winston-Salem when the engine of their plane lost power after losing oil pressure. Defendant had manufactured the plane’s engine in 2003 and shipped it to an Oregon company to be installed in a new plane. The Oregon company replaced defendant’s starter adapter. Decedents bought the plane used, and Air Care Aviation Services, a North Carolina company, installed a third starter adapter, which was on the engine at the time of the accident. Air Care purchased the starter adapter from an Oklahoma company. This third starter adapter had been manufactured by defendant and overhauled by the Oklahoma company. Air Care subscribed to defendant’s online database, and Air Care’s director of maintenance testified that he believed his mechanic followed the maintenance and installation procedures set forth in defendant’s manual. The claims against defendant are predicated upon two theories of liability: (1) the starter adapter had a design defect and (2) the service manual upon which Air Care allegedly relied when installing the starter adapter was defective.

Analysis

Where defendant raised the defense of lack of personal jurisdiction in a responsive pleading, defendant’s jurisdictional challenge was not waived by its limited, though protracted, engagement in discovery in this case. The trial court did not have the benefit of Ford Motor Co. v. Montana Eight Jud. Dist. Ct., ___ U.S. ___ (2021), which supplies the framework for our analysis. Defendant, by its employee’s own admission, “markets to the flying public at large ... [and has] an international market.” In fact, “from 2010 to 2013, [defendant] sold parts in all fifty United States as well as in other countries[,]” including North Carolina. Although defendant did not sell components to individual aircraft owners themselves, it actively maintained a business model that operated through independent distributors—including Triad Aviation. If aircraft owners in North Carolina needed to purchase defendant’s parts, they would do so through Triad. Furthermore, during the time frame of the accident, defendant made it so that individuals across its international market, including those in North Caro-

lina, could access its online database for a fee, thus drawing a benefit to itself from the privilege of conducting activities with North Carolina subscribers. One such North Carolina subscriber, Air Care, was in fact “expected to” rely on the information defendant provided through its subscriptions to operate on any aircrafts bearing defendant’s parts. In fact, even presuming arguendo the Air Care mechanic, did not rely on defendant’s instructions to install the starter adapter, the evidence clearly indicates the mechanic did indeed rely on defendant’s literature to operate on other components inside the decedents’ aircraft. The facts, thus, paint a clear picture: at the time of the accident, defendant “serve[d] a market for a product in the forum state” of North Carolina. Consistent with defendant’s business model, defendant’s starter adapter was overhauled by the Oklahoma company, moved to Triad (in North Carolina), then to Air Care (in North Carolina), and was finally installed in the decedents’ aircraft (in North Carolina). Thereafter, defendant’s product allegedly malfunctioned in North Carolina, causing the accident. Applying the reasoning of Ford to this case: “the sale of [defendant’s] product ... [was] not simply an isolated occurrence, but [arose] from the efforts of [defendant] to serve, directly or indirectly, the [North Carolina] market.” In fact, “from May 2010 to August 2013, [defendant] engaged in 2,948 sales of component parts with a total value of $3,933,480.65” in North Carolina, serving the North Carolina market indirectly by operating “through Triad.” Thus, “it is not unreasonable to subject [defendant] to suit in [North Carolina]” since “its allegedly defective [starter adapter] has ... been the source of injury to its owner[s][,]” the decedents. Indeed, “this exact fact pattern (a resident-plaintiff sues a global [aviation] company, extensively serving the state market ... for an in-state accident)” also effectively functions “as an illustration—even a paradigm example—of how specific jurisdiction works.” Ford. Therefore, applying Ford to the particular facts of this case, exercise of personal jurisdiction in North Carolina over defendant does not offend the Due Process Clause. Affirmed in part, reversed in part, and remanded.

Concurrence

(Tyson, J.): I concur in the result of the majority’s due process analysis. While defendant does not approach the size of Ford Motor Co., its activities “related to” North Carolina more align with the facts in Ford than those of the decoy maker in Maine selling his handcarved unique products online across state lines as memorialized in Justice Gorsuch’s concurring opinion in Ford. Furthermore, defendant supports its “online technical library” with updates and notifies its subscribers. The website is commercial in nature due to its paid subscriptions. When considered with defendant’s other contacts “related to” North Carolina and its “purposeful availment” of our forum, these contacts are sufficient to support specific personal jurisdiction. Cohen v. Continental Motors, Inc. (Lawyers Weekly No 011-166-21, 35 pp.) (Toby Hampson, J.) (John Tyson, J., concurring in part & concurring in result only in part) Appealed from Nash County Superior Court (James Gale, J.) Philip Miller and Michael Miska for plaintiff; Lacey Smith, Sherri Ginger, Timothy Heisterhagen and Elizabeth Scott for defendant; Mitchell Armbruster, Christopher Kiger

and Amelia Serrat for amicus curiae. 2021-NCCOA-449

Domestic Relations Parent & Child – Permanency Planning Order – Appeals – Interlocutory Even though, after the trial court ceased reunification as a primary plan, the respondent-Mother filed a written notice preserving her right to appeal the trial court’s order pursuant to G.S. § 7B-1001(a)(5)(a)(1), since (1) when Mother subsequently filed notice of appeal from the trial court’s 10 December 2020 review order on 6 January 2021, the 65-day period required by § 7B1001(a)(5)(a)(2) had not yet elapsed; (2) there is no indication in the appellate record that a petition to terminate Mother’s parental rights had been filed; (3) Mother did not petition this court for a writ of certiorari; and (4) the appellate record fails to affirmatively establish our jurisdiction to consider the merits of Mother’s appeal, Mother’s appeal is not properly before us. Appeal dismissed. In re A.L. (Lawyers Weekly No. 011-167-21, 5 pp.) (Valerie Zachary, J.) Appealed from Robeson County District Court (Vanessa Burton, J.) Edward Yeager for petitioner; Robert Montgomery for guardian ad litem; Peter Wood for respondent. 2021-NCCOA-452

Schools & School Boards Tort/Negligence – Duty of Care – Special Needs Student – Bus Driver – Independent Contractor – First Impression While the defendant-school board owes its students a duty of care commensurate with the students’ level of maturity, G.S. § 115C-253 allowed the school board to delegate this duty to an independent contractor. Before hiring a private school transportation company, the board researched and reviewed the private company’s reputation and safety plans, so the school board is not liable in negligence for the injuries suffered by a special needs student who was repeatedly sexually assaulted by her school bus driver. We affirm summary judgment for the school board.

Equal Protection

Since the complaint makes no factual allegations that would establish that the plaintiff-student (Lauren) was treated differently from similarly situated male students, the complaint fails to state an equal protection claim based on Lauren’s gender. Although the complaint alleges that Lauren was denied equal protection on the basis of her disability, the disabled are not a suspect or quasi-suspect class entitled to special protection under the Equal Protection Clause.

Failure to Train & Supervise

Our courts have not yet decided a failure to train claim arising under 42 U.S.C. § 1983. We look to federal decisions for guidance. Plaintiffs do not allege there were prior incidents of this kind, nor are there any factual allegations showing that the board or school officials demonstrated a deliberate indifference that was likely to lead to a contracted bus driver’s sexual abuse of a student. Plaintiffs further fail to identify any specific deficiency in training that led to a violation of Lauren’s constitutional

rights. Plaintiffs’ allegations of mere negligence with regard to training are insufficient to state a claim for municipal liability. Plaintiffs’ claim of a failure to supervise also fails. No school employee is alleged to have committed acts upon Lauren that violated her substantive due process rights to bodily integrity and to be free from sexual abuse. All factual allegations in the complaint regarding the board’s alleged supervisory liability consist of contentions that it failed to ensure YVEDDI properly trained and supervised its employees. Such allegations simply do not support a plausible conclusion that the board had actual or constructive knowledge that the bus driver was engaged in conduct that posed a pervasive and unreasonable risk of constitutional injury to Lauren.

Negligence

Where a student is a member of a vulnerable population, particularly one who possesses an IQ far below the average for her age, the state owes a duty of care relative to the victim’s maturity. However, in general, “one who employs an independent contractor is not liable for the independent contractor’s negligence unless the employer retains the right to control the manner in which the contractor performs his work.” Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991). The only exception to this rule is certain non-delegable duties, such as work involving ultra-hazardous or inherently dangerous activity. Here, the board delegated its duty to safely transport public school students pursuant to G.S. § 115C-253, which provides, “Any local board of education may ... enter into a contract with any person, firm or corporation for the transportation ... of pupils enrolled in the public schools.” There is no evidence in the record to suggest the board retained the right to control the manner in which YVEDDI would transport students such as Lauren. YVEDDI hired and controlled the drivers, owned its own vehicles, determined its routes, and set its own policies. The board researched and reviewed YVEDDI’s reputation, safety plans, and, after contracting, provided names and addresses of students to be transported, along with bell times. Therefore, the board did not exercise the degree of control over YVEDDI necessary to convert YVEDDI from an independent contractor to an employee. Nor is there any evidence to suggest that transporting students is an ultra-hazardous or inherently dangerous activity. Moreover, the statute authorizing school districts to contract for student transportation expressly indicates that this is a delegable duty. While we agree that the board should exercise the utmost standard of care while making decisions regarding its students, under our current law, the board could properly delegate any duty owed to Lauren to an independent contractor such as YVEDDI. Although no North Carolina court has considered whether the duty to transport students safely is delegable on these facts, other jurisdictions’ decisions are in accord with our ruling here. Absent guidance from our Supreme Court or our legislature, we must hold the board was not an insurer of student safety but delegated any duty it owed to Lauren pursuant to the statutory authority found in § 115C-253. We note that there is no genuine dispute as to the foreseeability of Lauren’s injury. It is undisputed that Lauren’s intellectual disabilities and medial fra-

14 / OPINION DIGESTS gility render her highly susceptible to exploitation and harm without proper monitoring and support. Because the board’s customary practice had been to provide transportation for Lauren on an exceptional students school bus staffed with a safety monitor, we emphasize that Lauren’s injury was one that could have been prevented. Affirmed.

Concurrence

(Dietz, J.): I write separately because (1) I do not agree that Lauren’s injury was “certainly” foreseeable since criminal acts are not foreseeable under tort law principles and (2) the duty of care owed to Lauren is the same whether her transportation is provided by the school itself or by a contractor. Here, the duty to provide that level of protection passed to YVEDDI under the independent contractor rule.

Concurrence

(Arrowood, J.): I write separately to express my concerns that the statute authorizing delegation of the duty to transport public school students has effectively permitted school boards to contract out of the heightened standard of care that this court has previously held them to. Osborne v. Yadkin Valley Economic Development District, Inc. (Lawyers Weekly No. 011-168-21, 33 pp.) (April Wood, J.) (Richard Dietz & John Arrowood, JJ., concurring separately) Appealed from Stokes County Superior Court (Stanley Allen & Eric Morgan, JJ.) 2021-NCCOA-454

Public Utilities Landlord/Tenant Exception – Declaratory Judgment Act – Nonjusticiable Issue Appellant Cube Yadkin Generation LLC asked the Utilities Commission whether Cube would qualify for the landlord/tenant exemption from regulation as a public utility if (1) Cube bought land near its hydroelectric generation facilities, (2) found tenants for a business park on the land, and (3) entered into leases with those tenants which included Cube’s provision of electricity to the tenants. Cube effectively asked the Utilities Commission to serve as its general counsel, advising whether its plan to purchase real property and embark on a particular business venture is a legal use of its time and resources. There is no justiciable controversy that would entitle Cube to a ruling under the Declaratory Judgment Act. We vacate the Utilities Commission’s decision (which declared that Cube00’s proposed business plan would cause it to be a public utility subject to regulation).

Concurrence

(Dietz, J.): Given the complexity of our utilities laws and regulatory regime, it may be good policy to permit the commission and its staff to issue advisory rulings to firms like Cube. But that policy question is one for the General Assembly. Cube’s request for declaratory relief through a judicial ruling under G.S. § 1-253 seeks an impermissible advisory opinion from the judicial branch and is not justiciable.

Dissent

(Jackson, J.): Based on the pleadings and record in this case there is a practical certainty that Duke Energy would have commenced litigation against Cube if Cube had obtained site control of the business park and entered leases with tenants there consistent with the terms of the proposed full-service lease

rather than first seeking a declaratory judgment from the commission. After all, this matter involved investments of potentially tens of millions of dollars. A decision in Cube’s favor would allow it to move forward with the proposal, and a decision against it would mean it could move in another direction, without the need to spend further time or money on this proposal. I would therefore hold that Cube’s petition presented a justiciable controversy. State ex rel. Utilities Commission v. Cube Yadkin Generation LLC (Lawyers Weekly No. 011-169-21, 19 pp.) (Jefferson Griffin, J.) (Richard Dietz, J., concurring) (Darren Jackson, J., dissenting) Appealed from the Utilities Commission. Dwight Allen, Britton Allen, Brady Allen and Lawrence Somers for appellees; Jim Philips, Marcus Trathen and Gisele Rankin for appellant; Daniel Higgins, Joseph Eason, Michael Youth, Brett Breitschwerdt and Tracy DeMarco for amici curiae. 2021-NCCOA-455

Criminal Practice DWI – Sentencing – Uncharged Criminal Conduct – Waiver At sentencing for defendant’s impaired-driving conviction, the trial court asked, “If I have you tested today, what are you going to test illegal for?” Defendant answered, “Just marijuana.” Since defendant did not confer with counsel, object, or assert his Fifth Amendment privilege, he has waived his Fifth Amendment argument that his sentence was based, in part, on uncharged criminal conduct. We find no reversible error in defendant’s conviction for driving while impaired. Defendant asked the trial court to instruct the jury that an Intoximeter reading of 0.08 “does not create a legal presumption of the defendant’s alcohol concentration or the defendant’s guilt … What, if anything, the evidence tends to show is for you, the members of the jury, to determine.” Instead, the trial court read the jury the relevant pattern jury instruction. Further, the trial court instructed the jurors that (1) they “are the sole judges of the weight to be given to any evidence”; (2) they “should weigh all the evidence in the case”; (3) they “should consider all the evidence”; and (4) “it is [their] duty to find the facts and to render a verdict reflecting the truth.” These statements signaled to the jury that they were free to analyze and weigh the effect of the Intoximeter evidence along with all the evidence presented during the trial. Where defendant submitted his driving record to the court without objection from the state, and where defendant had a safe driving record, the trial court erred by failing to find the statutory safe-driving mitigating factor. However, though the court required that defendant’s probation be supervised, since the trial court could not have sentenced defendant at a lower sentencing level, defendant was not prejudiced by the trial court’s failure to find his safe driving record as a mitigating factor. Finally, defendant contends that the trial court erred by sentencing defendant more harshly because defendant exercised his right to a trial by jury. Although the trial court did reference a chambers conversation where he said he would give defendant the same punishment as the district court judge if defendant “want[ed] to accept responsibility and move forward,” the judge stressed that he would be fair and impartial. It cannot be reasonably inferred from the language of the trial

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court that the sentence was imposed because defendant did not agree to a plea offer. No reversible error. State v. Guerrero (Lawyers Weekly No. 011-170-21, 19 pp.) (Jefferson Griffin, J.) Appealed from Johnston County Superior Court (Keith Gregory, J.) Kindelle McCullen for the state; John O’Hale for defendant. 2021-NCCOA-457

Criminal Practice Probation Revocation – First Impression – Superior Court Jurisdiction – Waiver of Revocation Hearing Under the plain language of G.S. § 15A-1347(b), where defendant waived his revocation hearing, and where the district court activated his sentences, the superior court lacked jurisdiction to hear defendant’s appeal. We vacate the superior court judgment and reinstate the district court judgment. State v. Flanagan (Lawyers Weekly No. 011-171-21, 12 pp.) (April Wood, J.) Appealed from Stokes County Superior Court (Angela Puckett, J.) Robert Ennis for the state; Jason Christopher Yoder for defendant. 2021-NCCOA-456

Criminal Practice Resisting an Officer – Indictment Allegations – Reason for Arrest – Surplusage The indictment alleged that defendant resisted a public officer who was attempting to take defendant into custody for processing narcotics; however, the evidence at trial showed that defendant ran from the officer after a small amount of marijuana was seized from his person. The duty the officer was carrying out, when defendant resisted, was exactly as the indictment alleged: attempting to take defendant into custody. It is immaterial whether the arrest was based on processing narcotics or possession of marijuana; the indictment’s allegations as to the reason for the arrest were mere surplusage. We find no error in defendant’s conviction for resisting a public officer. State v. Tarlton (Lawyers Weekly No. 011-172-21, 14 pp.) (Donna Stroud, C.J.) Appealed from the Superior Court in Union County (Kevin Bridges, J.) Alexander Ward for the state; Jarvis John Edgerton for defen-

dant. 2021-NCCOA-458

N.C. BUSINESS COURT

Contract Partnership – Civil Practice – Discovery – Attorney-Client Privilege – Waiver – Tort/Negligence Despite occasional references to plaintiff Tonya Haddock as defendants’ “partner,” their written independent contractor agreement said it was not to be construed as establishing anything other than an independent contractor relationship. Plaintiffs have failed to state claims insofar as they are based on a purported partnership. The court denies defendants’ motion to strike. The court denies defendants’ motion to dismiss plaintiffs’ breach of contract claims and plaintiffs’ request for a constructive trust. Defendants’ motion to dismiss is granted as to plaintiffs’ claims of breach of fiduciary duty, negligence, constructive fraud, and unfair trade practices. Although the parties have proposed a consent protective order, pursuant to which the inadvertent disclosure of privileged material would not constitute a waiver of the privilege, defendants make no representations and provide the court with no evidence regarding whether their review for privileged materials was reasonable. Consequently, the court declines to strike two paragraphs of plaintiffs’ amended complaint, which purportedly recount privileged and confidential attorneyclient communications from an internal email that defendants inadvertently disclosed in discovery. The parties agreed to work together to develop a low-income housing project in Raleigh. At the beginning of their relationship, plaintiff Tonya Haddock and defendants entered into an independent contractor agreement (ICA). Plaintiffs have alleged that Haddock performed her contractual duties but that defendants have failed to make the payments due under the ICA. Therefore, plaintiffs have stated a claim for breach of contract. However, plaintiffs’ claim for breach of fiduciary duty is entirely premised on plaintiffs’ contention that the parties established a partnership. The ICA explicitly states that “nothing in this Agreement shall be construed as creating any other relationship” than that

LEGAL EMPLOYMENT

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of an independent contractor. The ICA further states that any change to the ICA must be in writing. Although Attachment A to the ICA refers to Haddock as a “local partner” and a “local developer partner,” this vague use of the word “partner” in the attachment to the ICA and in communications between the parties does not overcome the express provisions of the ICA that its terms shall not be construed so as to create any other relationship between defendants and Haddock than that of an independent contractor.

The amended complaint makes clear that, despite Haddock’s attempts to negotiate a partnership with defendants after she was informed that defendants did not intend to partner with her for the development of the project, the parties never reached any agreement, other than as set forth in the ICA itself, on the splitting of a developer fee or the profits of the project. Failure to agree on the split of profits of any alleged partnership between the parties and failure to allege any other agreedto terms of a partnership arrangement

OPINION DIGESTS / 15 is fatal to plaintiffs’ argument that the parties formed a partnership. The conduct of and communications between the parties alleged by plaintiffs are insufficient to overcome the express language of the ICA. The ICA expressly defines the parties’ relationship: Haddock was acting as an independent contractor for defendants. Any modification to the parties’ relationship as it pertains to the project was required to be in a signed writing pursuant to the terms of the ICA. Attachment A to the ICA provides

that the parties “shall enter into a future binding agreement that specifies partnership scope[.]” No such written agreement or modification is alleged in the amended complaint or attached thereto. The amended complaint and its attachments fail to establish the existence of a partnership carried on by the parties; thus, plaintiffs’ claim based on a “breach of fiduciary duty as a partner” cannot survive defendants’ motion to dismiss. An essential element of a claim for constructive fraud is the existence of a fiduciary relationship. Plaintiffs have

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16 / OPINION DIGESTS not pleaded facts that support the existence of a fiduciary duty arising out of a partnership, and there are no further allegations that would create a fiduciary relationship between the parties; therefore, the breach of fiduciary duty claim fails. To state a claim for negligence, a plaintiff must allege the existence of a legal duty. Other than their failed allegations of the existence of a partnership, plaintiffs allege no recognizable legal duty owed by defendants to plaintiffs. Consequently, plaintiffs’ negligence claim also fails. Motions granted in part, denied in part. Haddock v. Volunteers of America, Inc. (Lawyers Weekly No. 020049-21, 26 pp.) (Michael Robinson, J.) Steven Carr, Jeffrey Ellinger and Susan Yelton Ellinger for plaintiffs; Sherrod Banks, Theodore Curtis Edwards, and Jesse Rigsby for defendants. 2021 NCBC 49

nopolistic misconduct as the basis for overlapping antitrust and G.S. § 75-1.1 claims, the failure of the antitrust claim also defeats liability under § 75-1.1. Plaintiff’s other unfair trade practices allegations amount to a mere intentional breach of contract and failure to disclose the breach. Plaintiff has failed to allege that defendant’s actions were egregious or deceptive, so plaintiff has failed to state a claim under § 75-1.1 Motion granted in part and denied in part. Maxwell Foods, LLC v. Smithfield Foods, Inc. (Lawyers Weekly No. 020-050-21, 26 pp.) (Adam Conrad, J.) Reid Phillips, Charles Coble, Eric David, Amanda Hawkins and Shepard O’Connell for plaintiff; Robert Harrington, Ethan White and Mark Hiller for defendant. 2021-NCBC 50

Contract

Unfair Trade Practices – Aggravating Circumstances – Insurance – False Certificates – Damages

Swine Output – ‘Most Favored Nation’ Clause – Antitrust – Monopsony – Insufficient Allegations In the parties’ swine output contract, the defendant-buyer assured the plaintiff-producer that the contract gave plaintiff “the same economic incentives” that the buyer gave all “other major swine suppliers” and promised to offer plaintiff “the benefit of future changes in economic benefits given said major swine suppliers during the term of this contract.” Contrary to defendant’s argument, this “most favored nation” clause is not too vague or indefinite to enforce. The court denies defendant’s motion to dismiss plaintiff’s claim for breach of the most favored nation clause; however, the court dismisses, with prejudice, plaintiff’s claim that defendant breached a duty to negotiate a new basis for determining market value. The court dismisses, without prejudice, plaintiff’s claim of unfair trade practices. The undeniable intent of the most favored nation clause was to ensure that defendant would treat plaintiff just as well as similarly situated suppliers. Clauses like this one are both common and commonly enforced. Plaintiff has alleged that “economic benefits” were understood and intended by the parties to include the pricing of hogs, the market or index that served as the base price for hogs, the market value, the average terminal price, and the grade and yield matrix. These allegations must be taken as true, and plaintiff is entitled to discovery and a chance to prove its preferred interpretation. The parties’ contract also required them to designate a new basis for determining market value when their designated spot market, the Iowa-Southern Minnesota spot market, ceased to be viable. Contrary to plaintiff’s allegations, the contract does not require the parties to negotiate the new basis in good faith; instead, it allows either party to compel arbitration to decide the new basis. Moreover, plaintiff has conceded that the bare promise to designate a new basis, unlike the agreement to arbitrate, is itself a nonbinding agreement to agree. No duty to negotiate arises from a mere agreement to agree. The contract does not impose a duty to negotiate in good faith to establish a substitute basis for determining market value. Plaintiff has not stated a claim for breach of a duty to negotiate. Plaintiff bases its unfair trade practices claim on a monopsony: defendant’s alleged monopoly buying power. However, plaintiff has not alleged all that is needed to state a valid monopsony claim. When a plaintiff alleges mo-

Tort/Negligence

Some of the claims that form the basis for defendants’ unfair trade practices counterclaim are breach of contract claims. Defendants have sufficiently alleged aggravating circumstances, such as plaintiff’s issuance of false certificates of insurance to the parties’ customers and actively concealing the extent of his fraudulent conduct, to support their counterclaim. The court denies plaintiff’s motion for judgment on the pleadings as to defendants’ counterclaims. Defendants’ counterclaims allege that plaintiff engaged in unfair and deceptive trade practices by issuing false certificates of insurance to the parties’ insurance clients. Only two of the three breach of contract counterclaims are based on this same alleged misconduct by plaintiff. Moreover, plaintiff’s alleged issuance of false certificates forms the basis for defendants’ breach of fiduciary duty and fraud counterclaims, both of which can independently support a claim for unfair trade practices. Defendants’ allegations point to more egregious activities than mere breach of contract. Defendants have sufficiently stated a counterclaim under G.S. § 75-1.1. Contrary to plaintiff’s argument, defendants have also sufficiently alleged damages. When they discovered plaintiff’s sale of false insurance certificates, defendants were attempting to sell defendant Griffin Insurance Agency, Inc. (GIA). Plaintiff is an officer and shareholder of GIA, and defendants allege that his issuance of false certificates has resulted in a decrease in the value of GIA, potential buyers rescinding or greatly reducing their offers to purchase GIA, and an investigation into GIA by the North Carolina Department of Insurance. The counterclaims also allege that plaintiff has refused to assist defendants in identifying all the false certificates in question, thereby preventing defendants from better addressing the potential liabilities arising from these certificates. Defendants have sufficiently alleged damages to support their counterclaims. Plaintiff seeks dismissal of defendants’ fraud counterclaim for failure to plead damages with particularity. However, plaintiff has not cited any controlling law – and the court’s own research has not revealed any – providing that the particularity requirement of N.C. R. Civ. P. 9(b) extends to the alleged damages for fraud. The court is unpersuaded that the damages resulting from the alleged fraud must be pled with particularity. Motion denied.

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Loyd v. Griffin (Lawyers Weekly No. 020-051-21, 17 pp.) (Michael Robinson, J.) Michael Levine, Cathy Williams, John Austin and Gary Mauney for plaintiff; Mitchell Hendrix Blankenship and Joshua Bennett for defendants. 2021 NCBC 51

Insurance Life – No Insurable Interest – Incontestability Clause – STOLI Scheme – First Impression On an issue of first impression, the court declines to dismiss a life insurance company’s challenge to a policy it issued more than two years ago—despite the policy’s two-year incontestability clause, mandated by G.S. § 5858-22(2)—when that challenge is based on the insurance company’s allegation that the policy was issued in the absence of an insurable interest, making the policy a stranger’s gamble on the insured’s life. Defendants’ motion to dismiss pursuant to N.C. R. Civ. P. 12(b)(6) is denied. Defendant LSH, Co.’s motion to dismiss for lack of personal jurisdiction is granted.

Background

In 2005, plaintiff issued a policy insuring the life of Dr. Earl Trevathan. Unbeknownst to plaintiff at the time the policy was issued in 2005 (a) Dr. Trevathan was not in the market for life insurance and was not in a financial position to afford premiums on a $2 million life insurance policy; (b) insurance broker Wesley Chesson had explained to Dr. Trevathan that a large policy could be procured on his life at no cost to him and that the policy would be sold to an investor; (c) Dr. Trevathan only allowed the policy to be procured because he would not be paying premiums and because the policy was to be sold to an investor; (d) the entity that paid the premiums on the policy, E&W, LLC, did so through a non-recourse premium finance loan to Dr. Trevathan; (e) under the terms of the loan from E&W, Dr. Trevathan was under no obligation to pay premiums on the policy; and (f) pursuant to the terms of the loan, Dr. Trevathan gave an immediate collateral assignment of the policy to E&W. Ownership of the policy has changed a couple of times. Currently, defendant Wells Fargo Bank, N.A., is the owner and beneficiary as securities intermediary for the owner of the policy, defendant LSH, Co. Plaintiff alleges the policy was void ab initio as the product of a “stranger-originated life insurance” (STOLI) scheme. Under a STOLI scheme, STOLI promoters pay all of the premiums for a policy— at no cost to the insured and with no risk to the insured—for the first two years of coverage, which is meant to coincide with the typical two-year contestability provision in a life insurance contract. In turn, the STOLI promoter receives an immediate collateral assignment of the policy. At the end of the two-year period, the insured can simply walk away from the transaction by relinquishing the policy to the STOLI promoter, or sell the policy to a different STOLI investor. The initial intent of such transactions is to create policies that are not needed for any legitimate life insurance purpose, but instead are used as a wagering device so that strangers can gamble on the insured’s life.

Discussion

Wharton v. Home Sec. Life Ins. Co., 206 N.C. 254 (1934), held that the presence of an incontestability clause in a life insurance policy did not bar a challenge to the policy by the insurer beyond the stated incontestability pe-

riod based on the lack of an insurable interest. In 1995, the General Assembly enacted G.S. § 58-58-22(2), which requires life insurance policies to include a provision precluding insurers from contesting the validity of the policy more than two years after the policy has been in force, except in the case of non-payment of premiums. Defendants contend that § 58-5822(2) abrogates Wharton. This is an issue of first impression in North Carolina. There is a split of authority in other jurisdictions as to whether challenges to the validity of life insurance policies based on the absence of an insurable interest may be made beyond the applicable incontestability period. Our Supreme Court has long deemed life insurance policies lacking an insurable interest to be invalid wagering contracts that are void as against public policy. When a contract is executed in violation of public policy, it will be deemed void ab initio and unenforceable. Our Supreme Court has never overruled Wharton; accordingly, it remains binding precedent. The General Assembly is free to change North Carolina’s public policy any time it desires to do so. The court is not convinced, however, that the mere enactment of the incontestability statute in 1995 reflects a legislative intent to abrogate the ruling in Wharton. Unless and until our General Assembly changes the public policy of North Carolina, life insurance policies that lack an insurable interest are “wagering contracts” and thus not merely voidable but rather void ab initio—that is, they never take effect. As a result, taking plaintiff’s allegations as true, the subject policy was never “in force” within the meaning of § 5858-22(2). Thus, although the policy contained a two-year incontestability clause as was statutorily required, neither that clause nor any other provision of the policy ever became legally operative. Wharton makes clear that the presence of an incontestability clause in a life insurance policy that is lacking an insurable interest from its inception does not preclude an attack on the policy’s validity even after the expiration of the contestability period. This result remains unchanged even if the incontestability clause is required by statute, where— as here—the legislature has not expressly articulated a change in North Carolina’s public policy regarding the void ab initio status of such policies. Defendants also argue the policy’s own language requires a determination that it has been in force for more than two years. However, defendants have cited no authority, and the court is aware of none, providing that parties may stipulate to the legal validity of contracts in violation of public policy. LSH, a Luxembourgian company, purchased the policy from a Florida organization. Although plaintiff cites G.S. § 1-75.4(5)(c) and (10)(b) of the long-arm statute, (1) plaintiff has not alleged the existence of any promise made by LSH to plaintiff or to a third party for plaintiff’s benefit and (2) this action does not arise out of any contract entered into by LSH. Rather, this action arises out of the circumstances under which the policy was originally issued back in 2005, well before LSH came into the picture in 2012 as a downstream purchaser. The long-arm statute does not give the court personal jurisdiction over LSH. Motions granted in part; denied in part. Columbus Life Insurance Co. v. Wells Fargo Bank, N.A. (Lawyers Weekly No. 020-052-21, 26 pp.) (Mark Davis, J.) Tracy Eggleston and Michael Broadbent for plaintiff; Zachary Buckheit, Matthew Houston, Lee Hogewood, Harry Davis and Robert Griffin for defendants. 2021 NCBC 52