Title: Bandy v. A Perfect Fit For You, Inc.

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

IN THE SUPREME COURT OF NORTH CAROLINA 
2021-NCSC-117 
No. 429A20 
Filed 29 October 2021 
SHELLEY BANDY, plaintiff and third-party defendant 
 
STATE OF NORTH CAROLINA, intervenor–plaintiff   
 
 
v. 
A PERFECT FIT FOR YOU, INC., MARGARET A. GIBSON, and RONALD 
WAYNE GIBSON, defendants 
 
v. 
 
A PERFECT FIT FOR YOU, INC., appellant/intervenor–defendant and third-party 
plaintiff 
 
v. 
 
MARGARET A. GIBSON, RONALD WAYNE GIBSON, R. WAYNE GIBSON, INC., 
and RW & MA, LLC, cross-claim and third-party defendants 
 
Appeal pursuant to N.C.G.S. § 7A-27(a)(2) from final orders entered on 6 
November 2019, 6 March 2020, 24 March 2020, 30 April 2020, 29 May 2020, 26 June 
2020, 22 July 2020, 14 September 2020, and 5 October 2020 by Judge Gregory P. 
McGuire, Special Superior Court Judge for Complex Business Cases, after the case 
was designated a mandatory complex business case by the Chief Justice pursuant to 
N.C.G.S. § 7A-45.4(b). This matter was calendared for argument in the Supreme 
Court on 6 October 2021 but determined on the record and briefs without oral 
argument pursuant to Rule 30(f) of the North Carolina Rules of Appellate Procedure. 
 
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Opinion of the Court 
 
 
 
Philip J. Mohr and Brent F. Powell for appellants A Perfect Fit For You, Inc., 
Douglas M. Goines as Receiver, and the Law Firm of Womble Bond Dickinson 
(US), LLP. 
 
No brief filed for appellees. 
 
 
EARLS, Justice. 
 
¶ 1 
 
The question before us is whether the Business Court erred in refusing to 
authorize the court-appointed receiver for the company A Perfect Fit For You, Inc. (A 
Perfect Fit) to pay fees to the law firm Womble Bond Dickinson (US), LLP (Womble) 
for services rendered by one of the firm’s attorneys, Philip J. Mohr. The Business 
Court did not refuse to authorize the receiver to pay Womble’s fees on the basis of any 
finding relating to the nature or quantity of the legal services Mr. Mohr provided. 
Instead, the Business Court refused authorization solely on the basis of its conclusion 
that Mr. Mohr and the receiver had “flagrant[ly] disregard[ed] . . . the requirements 
imposed by” a previous court order which established the process the receiver and 
Womble were required to follow when seeking authorization for fee payments.  
¶ 2 
 
Appellants argue that the Business Court abused its discretion in refusing to 
authorize fee payments based upon an assessment of the receiver’s and Mr. Mohr’s 
purported lack of compliance with a court order. In the alternative, appellants argue 
that the Business Court’s order should be construed as an order imposing sanctions 
against Womble without prior notice and an opportunity to be heard, in violation of 
Womble’s due process rights under the Fourteenth Amendment to the United States 
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Constitution and article I, section 19 of the North Carolina Constitution. In addition, 
appellants also challenge the Business Court’s denial of the receiver’s subsequent 
requests for authorization to pay fees for work performed by Womble on its appeal of 
the orders refusing to authorize fee payments for the services rendered by Mr. Mohr. 
¶ 3 
 
We hold that the Business Court’s decision to deny authorization for the 
receiver to pay Womble fees incurred for Mr. Mohr’s work was an abuse of discretion. 
In addition, the Business Court’s order could not permissibly impose monetary 
sanctions on Womble because the record indicates that the party being sanctioned 
did not have prior notice and an opportunity to be heard. Finally, it was error to deny 
the receiver’s request for permission to pay Womble’s fee-litigation fees without 
making necessary findings specifically regarding the value to the receivership, or lack 
thereof, of the work which generated these fees. Accordingly, we reverse the Business 
Court’s order refusing to authorize payment of fees to Womble for Mr. Mohr’s work 
and the relevant Business Court orders denying the receiver’s request to pay 
Womble’s fee-litigation fees and remand this case to the Business Court for further 
proceedings not inconsistent with this opinion.  
I. 
Appointment of the receiver and the services rendered by Womble. 
¶ 4 
 
In 2016, Shelley Bandy filed a complaint and ex parte request for appointment 
of a receiver over A Perfect Fit, a medical equipment company located in Carteret 
County. On the day the complaint was filed, Senior Resident Superior Court Judge 
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Benjamin G. Alford entered a temporary restraining order and an order appointing 
M. Douglas Goines as the company’s receiver. Judge Alford subsequently entered an 
order granting a preliminary injunction and appointing a receiver which provided 
that Mr. Goines would “continue as receiver, vested with full powers granted under 
statute to take possession of and manage the business, books, and profits of the 
corporation . . . until further Order of this Court.” The matter was later designated a 
mandatory complex business case and transferred to the North Carolina Business 
Court.  
¶ 5 
 
After taking over A Perfect Fit, the receiver became concerned that the 
company may have fraudulently billed nearly $12 million in claims to the Medicaid 
program. The receiver hired Womble to conduct a comprehensive audit of the 
company’s records. The audit revealed that the company lacked sufficient funds to 
pay back the $12 million the receiver believed the company had fraudulently 
obtained. Shortly thereafter, the State of North Carolina filed an intervenor 
complaint against A Perfect Fit seeking to recoup the nearly $12 million in allegedly 
fraudulent claims. In November 2017, the United States Department of Justice 
issued a “target letter” advising the company that it was the target of a federal 
criminal investigation. One month later, the United States Attorney for the Eastern 
District of North Carolina and the North Carolina Attorney’s General’s Office filed a 
civil recoupment action in federal court. The Business Court entered a stay of its 
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proceedings pending resolution of the federal matter.  
¶ 6 
 
Until the Business Court stayed proceedings, the receiver had paid Womble’s 
fees as an ordinary business expense without seeking permission from the court. 
However, on 5 March 2018, the Business Court entered an order providing that the 
receiver would henceforth be required to “submit bills for its outside counsel fees to 
the court for review on a go-forward basis.” Subsequently, counsel from Womble 
submitted invoices for work performed for the receiver on behalf of the receivership. 
The court authorized the receiver to pay the invoices and clarified that “[t]he 
Receiver, and not outside counsel, should submit the request for authorization to pay 
outside counsel’s fees and costs.” (Emphasis added.)  
¶ 7 
 
In September 2018, a hurricane caused extensive damage to A Perfect Fit’s 
storefront, ultimately causing the business to cease operations. Around that same 
time, some of the named defendants indicated they were close to reaching a tentative 
settlement with the United States Department of Justice and the State of North 
Carolina.  
¶ 8 
 
In July 2019, the Business Court entered an order calendaring a status 
conference. At the conference, the Business Court asked Mr. Mohr why the court had 
not received any invoices for work performed by Womble since 2018. Mr. Mohr 
responded that no invoices had been submitted because the parties were engaged in 
settlement negotiations which, if successful, would have eventually required court 
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approval. Mr. Mohr also noted that, pursuant to the Business Court’s previous order 
on attorney’s fees, only the receiver was authorized to submit invoices to the court. 
The receiver separately explained that he had misunderstood what the order on 
attorney’s fees required and had not intentionally failed to comply with the procedure 
it set out. During the conference, the Business Court “expressed its frustration that 
by not submitting the bills from counsel and the Receiver on a timely basis, that it 
placed a difficult burden on the Court to suddenly have to review several months of 
bills all at one time.”  
¶ 9 
 
After the status conference, the Business Court entered an order lifting its 
earlier stay of proceedings. The receiver then submitted all of Womble’s outstanding 
invoices, totaling approximately $70,600 in fees. On 6 November 2019, the court 
entered an order authorizing payment of all of Womble’s fees except for those arising 
from work performed by Mr. Mohr, finding that “the time expended by the[ ] attorneys 
[other than Mr. Mohr] was reasonably necessary to the Receiver to fulfill his duties.” 
With regard to the fees incurred for work performed by Mr. Mohr, the Business Court 
explained that it would “decline[ ] to approve payment of the $59,355.00 in legal fees 
incurred because of Mohr’s work” due to “the Receiver’s and Mohr’s flagrant disregard 
for the requirements imposed by the Order on Attorneys’ Fees [which] warrants a 
significant reduction in the fees, and that reduction should be borne by Mohr.” 
Appellants filed a timely notice of appeal.  
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¶ 10 
 
On 30 January 2020, as appellants’ initial appeal was pending before this 
Court, the receiver submitted Womble’s December 2019 invoice, which included a 
request to pay Womble’s fees for work performed on the appeal of the order refusing 
to authorize the payment of fees for work performed by Mr. Mohr. The Business Court 
subsequently entered an order approving payment of all fees incurred upon the 
finding that “the requested attorneys’ fees and expenses were incurred for services 
reasonably rendered by [Womble] to the Receiver for the benefit of Perfect Fit.”  
¶ 11 
 
On 27 February 2020, the receiver again submitted an invoice to the court, 
again including a request for authorization to pay fees for work performed by Womble 
on the fee-recoupment appeal. This time, the Business Court refused to authorize 
payment of fees incurred by Womble relating to the appeal, concluding that  
the attorneys’ fees related to the Appeal were not incurred 
for services reasonably rendered by [Womble] to the 
Receiver for the benefit of Perfect Fit. To the contrary, the 
Appeal, if successful, would benefit only [Womble] and 
would reduce the assets of Perfect Fit. The fees incurred for 
this work should be borne by [Womble], and not Perfect Fit. 
Accordingly, the Court, in its discretion, declines to 
approve payment of the $5,030.50 in legal fees incurred 
because of work done by [Womble] on the Appeal. 
The Business Court acknowledged in its order “that it previously approved the 
payment of a small amount of [Womble’s] fees for work it performed on the Appeal” 
but characterized this approval as resulting from an “inadvertent oversight.” 
Appellants filed a timely notice of appeal of this order.  
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¶ 12 
 
Thereafter, on 24 March 2020, 30 April 2020, 29 May 2020, 26 June 2020, 22 
July 2020, 14 September 2020, and 5 October 2020, the Business Court entered orders 
denying the receiver’s request for authorization to pay Womble for legal services 
performed by its attorneys relating to the fee-recoupment appeals. The present case 
encompasses the appellants’ consolidated appeals from both the initial order refusing 
to authorize the receiver to pay Mr. Mohr’s fees as well as all subsequent Business 
Court orders denying the receiver’s requests to pay fees incurred for work performed 
by Womble in relation to the fee-recoupment appeals.1 
II. 
Legal Analysis.  
A. The Business Court’s decision was an abuse of discretion because it was 
based on a legally extraneous factual finding. 
¶ 13 
 
When an attorney performs legal services for a receiver in connection with the 
receiver’s administration of a receivership, the attorney may recoup “reasonable and 
proper compensation for . . . services which require legal knowledge and skill and 
which were rendered to the receiver for the benefit of the receivership.” Lowder v. All 
Star Mills, Inc., 309 N.C. 695, 707 (1983). Still, “those employed by a receiver to assist 
in the administration of a receivership should understand that their compensation is 
subject to trial court review and approval.” Id. A trial court is vested with the 
                                            
1 On 19 October 2020, this Court allowed appellants’ motion to consolidate the various 
appeals and ordered that any subsequent notices of appeal related to any subsequent order 
denying Womble’s fees related to work performed on the appeals should be filed as a 
supplement to the record on appeal or as an appendix to the briefs. 
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discretionary authority to, in the first instance, “fix[ ] the compensation, if any, to be 
allowed for the services of an attorney for a receiver,” and a trial court’s decision on 
this issue is accorded deference on appeal. King v. Premo & King, Inc., 258 N.C. 701, 
712 (1963) (quoting 75 C.J.S. Receivers § 384a, at 1049). “[N]evertheless[, the trial 
court’s] discretion must be properly exercised and not abused, and the matter is 
discretionary only in the sense that there are no fixed rules for determining the 
proper amount, and not in the sense that the court is at liberty to award more [or 
less] than fair and reasonable compensation.” Id. 
¶ 14 
 
Put another way, a trial court’s discretion to grant or deny a receiver’s request 
for authorization to pay fees to retained outside counsel is generally limited to 
(1) determining whether outside counsel rendered “services which require legal 
knowledge and skill and which were rendered to the receiver for the benefit of the 
receivership” and (2) determining the amount which comprises “reasonable and 
proper compensation for” the services outside counsel performed. Lowder, 309 N.C. 
at 707. When a trial court enters an order granting or denying a request to pay fees 
which contains adequate factual findings supporting its conclusions on these two 
questions, the trial court’s determination is “prima facie correct,” King, 258 N.C. at 
712, and will not be disturbed on appeal absent a showing that the court’s decision 
was “manifestly unsupported by reason or . . . so arbitrary that it could not have been 
the result of a reasoned decision,” Briley v. Farabow, 348 N.C. 537, 547 (1998).  
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¶ 15 
 
In its order denying the receiver’s request to pay Mr. Mohr’s fees, the Business 
Court did not enter findings addressing either of these two questions. The Business 
Court did not find that Mr. Mohr had not rendered legal services to the receiver for 
the benefit of the receivership. Nor did the Business Court find that it would be 
reasonable and proper to provide Mr. Mohr with zero compensation for any such 
services he may have rendered. Instead, the Business Court denied the receiver’s 
request for authorization solely based upon what the court perceived to be the 
receiver’s and Mr. Mohr’s failure to adhere to the requirements of its prior order 
dictating how invoices for attorney’s fees should be submitted to the court. Absent 
any explanation as to how this finding related to the Business Court’s assessment of 
the legal services Mr. Mohr provided to the receiver, or to what would comprise 
reasonable and proper compensation for those services, this is not a permissible 
justification for denying a receiver’s request to authorize the payment of fees to 
outside counsel.  
¶ 16 
 
A trial court’s decision is necessarily an abuse of discretion when it reaches a 
conclusion based solely upon findings of fact which are irrelevant to the legal question 
the court is tasked with addressing. See Da Silva v. WakeMed, 375 N.C. 1, 5 n.2 (2020) 
(“[A]n error of law is an abuse of discretion.”); see also King, 258 N.C. at 712 (“[An 
appellate court] will not alter or modify [an order authorizing or refusing to authorize 
payment of fees] unless based on the wrong principle, or clearly inadequate or 
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excessive” (emphasis added)). In this case, by answering the question of whether 
Womble was entitled to recoup its fees for Mr. Mohr’s work solely by reference to the 
receiver’s and Mr. Mohr’s purported failure to properly submit Womble’s invoices for 
court approval—rather than by conducting an analysis of the legal work Mr. Mohr 
performed for the receiver—the Business Court’s decision constituted an abuse of 
discretion.  
B. The Business Court’s order impermissibly imposed sanctions without 
providing notice and an opportunity to be heard to the party being 
sanctioned. 
¶ 17 
 
Although the Business Court’s assessment of Mr. Mohr’s compliance with its 
prior order on attorney’s fees cannot support the court’s conclusion that Womble was 
not entitled to payment for Mr. Mohr’s work, a trial court does possess the inherent 
authority to sanction parties and attorneys for misconduct during the course of 
litigation. Under appropriate circumstances, a trial court may impose sanctions, 
including monetary sanctions, either on motion of a party or sua sponte. See, e.g., 
State v. Defoe, 364 N.C. 29, 34 (2010) (“[T]rial courts of this State have inherent 
authority to enforce procedural and administrative rules . . . .”); see also Grubbs v. 
Grubbs, No. COA16-129, 2017 WL 892564, at *14 (N.C. Ct. App. Mar. 7, 2017)) (“A 
judge’s power to admonish counsel or parties can be either sua sponte or subject to a 
motion from a party, such as a show cause motion or Rule 11 sanctions.”). Further, in 
certain cases, a trial court may sanction a party or attorney for failing to comply with 
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a prior court order governing the party’s or attorney’s conduct during litigation. See 
Daniels v. Montgomery Mut. Ins. Co., 320 N.C. 669, 674 (1987) (holding it to be “within 
the inherent power of the trial court to order plaintiff to pay defendant’s reasonable 
costs including attorney's fees for failure to comply with a court order”); see also Red 
Valve, Inc. v. Titan Valve, Inc., No. 18 CVS 1064, 2019 WL 4182521, at *17 (N.C. 
Super. Ct. Sept. 3, 2019) (ordering sanctions based upon a party’s “failure to comply 
with the legal duties imposed by the [Business] Court’s orders and applicable law, 
which individually and collectively reflect [the party’s] utter disregard for the [court’s] 
authority and the legal process”), aff’d per curiam, 376 N.C. 798, 2021-NCSC-17. 
Thus, we must also consider whether the Business Court’s order can be sustained as 
an order imposing monetary sanctions on Womble based upon Mr. Mohr’s purported 
violation of the prior order which specified how the parties should submit Womble’s 
invoices to the court.2 
¶ 18 
 
There are two legal requirements governing the trial court’s entry of an order 
imposing sanctions against a party or attorney which are relevant in this case. First, 
                                            
2 Not every court order denying a receiver’s request to pay outside counsel’s fees is 
immediately appealable. However, in this case, the Business Court’s order can reasonably be 
construed as an order imposing monetary sanctions on Womble. In addition, the Business 
Court’s order only denied the receiver’s request to pay outside counsel’s fees in part—the 
order also granted the receiver’s request to pay fees incurred by counsel for work not 
performed by Mr. Mohr, thus dissipating the pool of assets of the receivership from which 
Womble could ultimately be paid. Therefore, under these circumstances, we conclude that 
this Court has jurisdiction over the challenged orders pursuant to N.C.G.S. 7A-27(a)(2). See 
Battery Park Bank v. W. Carolina Bank, 126 N.C. 531 (1900). 
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before an order imposing sanctions against a party is entered, the party whose 
conduct is being sanctioned must be provided with notice of the basis upon which 
sanctions are being sought and an opportunity to be heard. See Griffin v. Griffin, 348 
N.C. 278, 280 (1998) (“In order to pass constitutional muster, the person against 
whom sanctions are to be imposed must be advised in advance of the charges against 
him.”); see also Egelhof ex rel. Red Hat, Inc. v. Szulik, 193 N.C. App. 612, 616 (2008) 
(explaining that “North Carolina has consistently required” that the party against 
whom sanctions have been sought be provided “an opportunity to be heard” before an 
order imposing sanctions is entered). Second, the trial court’s conclusion that 
sanctions should be imposed against a party or attorney must be “supported by its 
findings of fact, and . . . the findings of fact [must be] supported by a sufficiency of the 
evidence.” Turner v. Duke Univ., 325 N.C. 152, 165 (1989). In light of these two 
requirements, we conclude that even if we were to treat the Business Court’s order 
as an order imposing sanctions against Womble—and even if we were to assume that 
the Business Court possessed the authority to withhold authorization of payments to 
Womble as a penalty for Mr. Mohr’s conduct—the challenged order still fails to meet 
the applicable legal requirements. 
¶ 19 
 
First, at no time did the Business Court provide Mr. Mohr or Womble with 
notice that it was considering imposing sanctions based upon Mr. Mohr’s purported 
failure to comply with a court order. Although the Business Court did “express[ ] its 
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frustration” regarding what it viewed to be the receiver’s and Mr. Mohr’s tardiness 
in submitting fee invoices, the court did not provide notice to the parties that it was 
considering imposing sanctions and did not provide “notice of the bases of the 
sanctions.” Walsh v. Cornerstone Health Care, P.A., 265 N.C. App. 672, 678 (2019) 
(quoting Egelhof v. Szulik, 193 N.C. App. 612, 616 (2008)); see also Griffin, 348 N.C. 
at 280 (“The bases for the sanctions must be alleged.”). Further, the fact that Mr. 
Mohr was present at a hearing where he disputed the Business Court’s 
characterization of his conduct “without knowing in advance the sanctions which 
might be imposed does not show a proper notice was given.” Griffin, 348 N.C. at 280. 
Allowing the Business Court’s order to deprive Womble of fees its attorney earned 
without notice and an opportunity to be heard as a sanction for its attorney’s conduct 
would violate Womble’s due process rights as “guaranteed by the Fourteenth 
Amendment of the United States Constitution.” Id. (quoting McDonald’s Corp. v. 
Dwyer, 338 N.C. 445, 448 (1994)). 
¶ 20 
 
Second, the finding that Mr. Mohr “flagrant[ly] disregard[ed] . . . the 
requirements imposed by” the order on attorney’s fees is unsupported by the record 
evidence. The order Mr. Mohr purportedly violated required the receiver to submit 
invoices to the court and specifically forbade “outside counsel” from “submit[ting] the 
request for authorization to pay outside counsel fees and costs.” Although Mr. Mohr 
represented to the Business Court that he “would take the responsibility for not 
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following up with the Receiver to make sure that the Receiver understood that he had 
to submit Womble’s bills to the [Business] Court for approval,” nothing in the record 
suggests that Mr. Mohr himself undertook any action which constituted a violation 
of the Business Court’s order. Indeed, under the terms of the order he purportedly 
violated, Mr. Mohr was prohibited from doing precisely that which the Business 
Court apparently penalized him for not doing.  
¶ 21 
 
Whether construed as an order refusing to authorize the receiver to pay 
Womble’s fees or as an order imposing sanctions on Womble for Mr. Mohr’s failure to 
adhere to the requirements of a prior court order, the order is legally deficient. 
Accordingly, we reverse the order entered on 6 November 2019 and remand to the 
Business Court for further proceedings consistent with this opinion, including the 
entry of the findings and conclusions necessary to address the questions of 
(1) whether Mr. Mohr rendered “services which require legal knowledge and skill and 
which were rendered to the receiver for the benefit of the receivership” and (2) 
determining the amount which comprises “reasonable and proper compensation for” 
any such services Mr. Mohr performed. Lowder, 309 N.C. at 707.   
 
 
C. The Business Court erred in denying the receiver’s request to pay 
Womble’s fees for its fee-recoupment litigation solely on the basis that 
authorizing payment would deplete A Perfect Fit’s assets. 
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¶ 22 
 
Appellants also challenge the Business Court’s orders refusing to authorize the 
receiver to pay fees incurred by Womble in the course of prosecuting this appeal. After 
the Business Court entered an order refusing to authorize the receiver to pay 
Womble’s fees for work undertaken by Mr. Mohr, Womble and the receiver appealed. 
Subsequently, Womble’s attorneys performed work on this appeal, which they billed 
to the receiver. In turn, the receiver requested authorization from the Business Court 
to pay Womble for this work. The first time the receiver sought authorization from 
the Business Court, it was granted. On every occasion thereafter, the Business Court 
denied authorization.  
¶ 23 
 
This Court has not previously considered whether outside counsel is entitled 
to compensation for work on litigation related to the fees originally incurred for legal 
services rendered to a receiver. However, as we have previously stated, outside 
counsel retained by a receiver is only entitled to “[r]easonable and proper 
compensation” for legal services “rendered to the receiver for the benefit of the 
receivership.” King, 258 N.C. at 711 (emphasis added). The trial court’s decision to 
grant or deny a fee payment request “must rest on facts showing actual benefits.” Id. 
at 712 (quoting 75 C.J.S. Receivers § 384a, at 1049). Accordingly, a trial court’s 
decision to grant or deny a receiver’s request to pay outside counsel’s fee-litigation 
fees requires a fact-intensive inquiry. It is not susceptible to a per se rule. We express 
no opinion on the propriety of authorizing payment of fee-litigation fees as a general 
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matter. Instead, this question must be resolved in the first instance by the trial court 
on a case-by-case basis after an examination of the purpose and nature of the services 
rendered by outside counsel and their relationship to the interests of the receivership. 
¶ 24 
 
In this case, the sole factual finding supporting the Business Court’s repeated 
denials of the receiver’s requests for authorization to pay Womble’s fee-litigation fees 
was the court’s determination that these fees “were not incurred for services 
reasonably rendered by [Womble] to the Receiver for the benefit of Perfect Fit. To the 
contrary, the Appeal, if successful, would benefit only [Womble] and would reduce the 
assets of Perfect Fit.” This finding rests on the erroneous presumption that legal 
services rendered in the furtherance of any outcome which would result in the 
diminution of a receivership’s assets is necessarily contrary to the interests of the 
receivership.  
¶ 25 
 
As this Court has previously recognized, there may be circumstances under 
which an attorney’s actions benefit a receivership even without contributing to an 
increase in the receivership’s assets. See, e.g., In re Will of Ridge, 302 N.C. 375, 384 
(1981) (concluding that the trial court did not abuse its discretion in authorizing fee 
payments to outside counsel for services rendered in pursuit of an unsuccessful legal 
claim). Further, as sister courts have recognized in various contexts, applying a per 
se rule prohibiting attorneys from recouping fee-litigation fees could ultimately harm 
parties in need of able legal representation by reducing the pool of attorneys willing 
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to provide vigorous representation on critically important matters. See, e.g., In re 
Estate of Trynin, 49 Cal. 3d 868, 871 (1989) (explaining that an outright prohibition 
on awarding fee-litigation fees for representatives of decedents’ estates would 
“ultimately be deleterious to [the estates] because attorneys would be reluctant to 
perform [necessary] services . . . if the compensation awarded for their services could 
be effectively diluted or dissipated by the expense  of  defending  unjustified objections 
to their fee claims”); see also In re Estate of Bockwoldt, 814 N.W.2d 215, 223 (Iowa 
2012) (declining to impose a categorical rule against authorizing fee-litigation fee 
payments). 
¶ 26 
 
In a case where an attorney retained by a receiver pursues litigation in an 
effort to recoup fees that prove to have been extravagant or unreasonable, it is 
doubtful the attorney will be able to demonstrate that his or her efforts were for the 
benefit of the receivership. However, in a case such as this one where there has been 
no finding that outside counsel’s fees were unreasonable, the mere fact that 
authorizing the receiver to pay counsel’s fee-litigation fees will diminish the 
receivership’s assets does not itself establish that counsel’s services were not 
rendered for the benefit of the receivership. Accordingly, we conclude that the 
Business Court’s finding that payment of Womble’s fee-litigation fees “would reduce 
the assets of Perfect Fit” is insufficient to support the conclusion that the services 
Womble rendered did not benefit A Perfect Fit. We remand to the Business Court for 
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further proceedings not inconsistent with this opinion, including reconsideration of 
the applications for authorization to pay the fee-litigation fees under the proper legal 
standard. 
III. 
Conclusion 
¶ 27 
 
When a receiver seeks authorization from a trial court to pay fees for services 
rendered by outside counsel, it is within the discretion of the trial court to determine 
what comprises “reasonable and proper compensation for . . . services which require 
legal knowledge and skill and which were rendered to the receiver for the benefit of 
the receivership.” Lowder, 309 N.C. at 707. Nevertheless, in this case, the Business 
Court’s decision constituted an abuse of discretion because it denied the receiver’s 
request for authorization to pay fees to Womble for services performed by one of its 
attorneys based only upon the court’s conclusion that the attorney failed to comply 
with procedural requirements imposed by a prior court order. Moreover, while a court 
generally possesses the authority to impose monetary sanctions on an attorney for 
failing to comply with a prior court order under appropriate circumstances, the 
Business Court could not impose sanctions against Mr. Mohr and Womble without 
providing them with notice of the basis for imposing sanctions and an opportunity to 
be heard, and not on the basis of conduct which the record demonstrates did not 
violate the order Mr. Mohr purportedly disregarded. In addition, the Business Court’s 
conclusion that Womble’s efforts to recoup its fees did not benefit A Perfect Fit cannot 
BANDY V. A PERFECT FIT FOR YOU, INC. 
2021-NCSC-117 
Opinion of the Court 
 
 
 
be sustained solely upon the finding that authorizing payment of the fees would 
diminish A Perfect Fit’s assets.  
¶ 28 
 
Accordingly, we reverse the Business Court’s order entered on 6 November 
2019 in which the Business Court refused to authorize the receiver to pay fees for 
services rendered by Mr. Mohr and the Business Court’s orders entered on 6 March 
2020, 24 March 2020, 30 April 2020, 29 May 2020, 26 June 2020, 22 July 2020, 14 
September 2020, and 5 October 2020 in which the Business Court refused to 
authorize the receiver to pay Womble’s fee-litigation fees. We remand to the Business 
Court for further proceedings not inconsistent with this opinion.  
REVERSED AND REMANDED.