Title: Binney v. Banner Therapy Prods., Inc.

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

CHRISTINA M. BINNEY, Petitioner v. BANNER THERAPY PRODUCTS, INC.
and EMPLOYMENT SECURITY COMMISSION OF NORTH CAROLINA, Respondents 
No. 431A06
FILED: 12 JUNE 2008
Unemployment Compensation–misconduct related to job–copyright assertion–hard drive
removal
The Court of Appeals erred by reversing the superior court affirmation of an Employment
Security Commission decision denying unemployment compensation to the officer of a company
who had been terminated because she claimed a personal copyright in the company’s catalog and
had taken home a hard drive from a company computer.  In order to show that the employee was
terminated for misconduct related to her job, the employer needed only to present evidence that
she showed willful disregard of the employer’s interest through deliberate violations or disregard
of standards of behavior which the employer had the right to expect. The standard of review is
whether any competent evidence supports the Commissions findings; the Court of Appeals
misapplied the standard of review to the extent that it made its own assessment of the facts. 
N.C.G.S. § 96-14(2).
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of
a divided panel of the Court of Appeals, 178 N.C. App. 417, 631
S.E.2d 848 (2006), affirming in part, reversing in part, and
remanding a judgment entered 17 November 2004 by Judge James L.
Baker, Jr. in the Superior Court in Buncombe County.  On 8 March
2007, the Supreme Court allowed respondent Employment Security
Commission’s petition for discretionary review of an additional
issue.  Heard in the Supreme Court 11 September 2007.
Ferikes & Bleynat, PLLC, by Edward L. Bleynat, Jr. for
petitioner-appellee.
Thomas S. Whitaker, Chief Counsel, by Sharon A. Johnston,
for respondent-appellant Employment Security Commission of
North Carolina.
HUDSON, Justice.
After being terminated by her employer, respondent Banner
Therapy Products, Inc. (“Banner”), on 5 April 2003, petitioner
Christina M. Binney (“Binney”) sought unemployment insurance
benefits under N.C.G.S. § 96-15(a) on 6 April 2003.  Banner
contested Binney’s claim.  Ultimately, the Employment Security
Commission (“ESC”) and then the superior court found her
disqualified for benefits because of having been terminated for
misconduct related to her job.  The Court of Appeals reversed
this determination.  Binney v. Banner Therapy Prods., 178 N.C.
App. 417, 631 S.E.2d 848 (2006).  We reverse.  
The claim was first referred to an ESC adjudicator, who
determined that Binney was disqualified, and Binney appealed.  An
appeals referee held a hearing where both Binney and Banner
presented evidence from various witnesses.  On 5 November 2003,
the appeals referee issued a decision finding Binney disqualified
pursuant to N.C.G.S. § 96-14(2).  Binney then appealed to the
ESC, which relied on the evidence from the hearing before the
appeals referee in making findings of fact and conclusions of
law.  The ESC disqualified Binney for unemployment insurance
benefits after concluding that she had been fired for misconduct,
consisting of asserting a personal copyright interest in Banner’s
catalogs and web site “in conjunction with” removing the hard
drive from her work computer without authorization. 
Binney petitioned for judicial review in the superior court
in Buncombe County.  On 17 November 2004, Judge James L. Baker,
Jr. entered a judgment affirming the ESC decision, as well as all
of its findings and conclusions.  Binney then appealed to the
Court of Appeals, challenging many of the ESC’s findings of fact
and conclusions of law and the superior court’s judgment
affirming them.  On 18 July 2006, in a divided opinion, the Court
of Appeals affirmed on the ESC’s cross-assignment of error,
reversed the superior court’s decision on the merits, and
remanded the matter for entry of an order reversing the
Commission decision and for further remand to the Commission for
additional proceedings.  
The Court of Appeals considered two substantive issues: 
whether the ESC erred in finding and concluding that Binney’s
removal of the hard drive from her work computer without
authorization constituted employment-related misconduct, and
whether Binney’s assertions of a personal copyright in her
employer’s catalogs and on its web site constituted work-related
misconduct.  The majority concluded that there was no evidence
that Binney removed her hard drive for any improper purpose and
that there was no formal policy against removing computer hard
drives from the employer’s premises.  Id. at 425, 631 S.E.2d at
853.  The majority also concluded that there was no evidence that
Binney’s assertions of a personal copyright on the employer’s web
site and in its catalogs were unreasonable or taken in bad faith
and that the employer failed to carry its burden of proving
Binney should be disqualified from receiving unemployment
insurance benefits on that ground.  Id. at 427-28, 631 S.E.2d at
854. However, Judge Hunter concluded that evidence of Binney’s
removal of the computer hard drive without authorization showed a
deliberate disregard of the standards of behavior that the
employer had a right to expect, and thus, Binney was properly
disqualified for benefits.  Id. at 431, 631 S.E.2d at 856
(Hunter, J., dissenting in part and concurring in part).  The
dissenting opinion did not address the matter of the personal
copyright assertions.  Id.
Respondent ESC filed its appeal of right based on the
dissenting opinion’s discussion about removal of the computer
hard drive, along with a petition seeking this Court’s
discretionary review of the majority’s ruling on the personal
copyright issue.  This Court allowed respondent’s petition for
discretionary review on 8 March 2007.  Because the ESC and
superior court based their conclusion of law that Binney was
disqualified due to discharge for misconduct on the findings
pertaining to both the copyright and hard drive issues, we
address both.
Employer Banner sold rehabilitation and other health-care
supplies via showroom, printed catalog, and web site listings. 
Binney had been an officer of the company since she, along with
Thomas Maroney, Sandor Sharp and their wives, founded it in May
1997.  At the time of these events, Maroney and his wife owned
eighty percent of the company and Binney’s share was ten percent. 
At the time of her termination Binney served as Banner’s
corporate treasurer and self-titled vice president of marketing. 
Banner produced its first catalog in 1997 and it indicated no
copyright.  In 1998, Binney added to the catalogs a notice of
joint copyright for herself and Banner.  From 1999 through 2003,
all of Banner’s catalogs carried an assertion of copyright for
Binney personally, but no mention of Banner.  At some point
between 1998 and 2003, Sandor Sharp, part-owner and corporate
secretary of Banner, noticed and asked Binney about her assertion
of a personal copyright in the catalogs.  Binney’s explanation of
her actions allayed his concerns, however, and the personal
copyright apparently went otherwise unnoticed until March 2003. 
At that time, it quickly became a contentious issue, and after
Binney removed the hard drive from her computer on 4 April 2003,
Banner terminated her on 5 April 2003.
The ESC made the following pertinent findings regarding
Binney’s termination:
3.  The claimant was discharged from this job
for the following reasons:  she produced
catalogs and a web site for the employer that
included a statement of that the claimant had
a personal copyright interest in the catalogs
and web site; she removed the hard drive from
the computer supplied to her by the employer
without being authorized to do so . . . .
. . . .
5.  The claimant was responsible for the
production and distribution of the employer’s
product catalog.  The first of these catalogs
was produced in mid-1997.
6.  In 2001, the claimant created an internet
web site for the employer.
7.  On or about March 15, 2003, Thomas
Maroney, vice president, discovered that the
employer’s web site contained the following
statement:  “Copyright © 2001, Christine
Marie Binney, All Rights Reserved.”  The
employer had not authorized the claimant to
include such a statement on the web site.
8.  The employer then discovered that the
1997, 1998/1999, 2000, 2001, 2002, and 2003
catalogs, all of which were produced by the
claimant in the performance of her job,
contained similar statements that asserted
that the claimant had a copyright interest in
the catalogs.  The employer had not
authorized the claimant to include such a
1  Finding 8 contains one minor error, which does not affect
the conclusion of law on the issues before us:  the 1997 catalog
did not contain a copyright assertion, and the 1998/1999 catalog
contained the assertion of a joint copyright between Binney and
Banner. 
statement in the catalogs.1
9.  The employer confronted the claimant
concerning her copyright assertions.  The
claimant advised the employer that she had a
copyright interest in the catalogs and web
site; however, the claimant did not seek
legal advice concerning her copyright
interests prior to her discharge from
employment.
10.  On April 4, 2003, the employer learned
that the claimant had removed the hard drive
from the computer assigned to the claimant by
the employer.  The employer did not authorize
the claimant to remove the hard drive.
The ESC then concluded:
In the present case, the Commission
concludes from the competent and credible
evidence and the facts found therefrom that
the claimant was discharged from employment. 
The Commission further concludes that the
claimant’s assertion of a personal copyright
interest in the employer’s catalogs and web
site, in conjunction with her unauthorized
removal of the hard drive of an employer
computer, showed a deliberate disregard of
the standards of behavior that the employer
had a right to expect of the claimant.  The
Commission also concludes therefore that the
claimant was discharged for misconduct
connected with the work.
Based upon these findings and conclusions, the ESC denied
Binney’s claim for unemployment insurance benefits.
In the superior court, Binney argued that the ESC’s findings
were premised on a misunderstanding of copyright law and the
respective rights and duties of shareholders and officers in
closely-held corporations, that the findings were not supported
by competent evidence, and that the findings did not support the
ESC’s conclusion of law that she “willingly and knowingly showed
a deliberate disregard of the standard of behavior that the
employer had a right to expect.”  The superior court affirmed the
ESC, finding that the ESC’s findings were supported by competent
evidence and thus binding on review, and that the findings in
turn supported the ESC’s conclusions.  In the Court of Appeals,
Binney challenged findings of fact 3, 5, 7, 8, 9 and 10, as well
as the ESC’s conclusion that these actions constituted work-
related misconduct; all of these are quoted above.
The standard of review in appeals from the ESC, both to the
superior court and to the appellate division, is established by
statute.  “In any judicial proceeding under this section, the
findings of fact by the Commission, if there is any competent
evidence to support them and in the absence of fraud, shall be
conclusive, and the jurisdiction of the court shall be confined
to questions of law.”  N.C.G.S. § 96-15(i) (2007).  The General
Assembly amended subsection (i) in 1989 to replace the phrase “if
there is evidence to support them” with the present standard “if
there is any competent evidence to support them.”  See Act of
July 5, 1989, ch. 583, Sec. 12, 1989 N.C. Sess. Laws 1465, 1465
(emphasis added); see also Williams v. Burlington Indus., Inc.,
318 N.C. 441, 448-49, 349 S.E.2d 842, 846-47 (1986) (interpreting
the standard of review under the previous provisions of §
96-15(i)).
This Court has held that “[o]rdinarily a claimant is
presumed to be entitled to benefits under the Unemployment
Compensation Act, but this is a rebuttable presumption with the
burden on the employer to show circumstances which disqualify the
claimant.”  Intercraft Indus. Corp. v. Morrison, 305 N.C. 373,
376, 289 S.E.2d 357, 359 (1982) (citations omitted).  An employee
is disqualified for unemployment benefits when she has been
discharged for misconduct connected with her work.  N.C.G.S. §
96-14(2) (2007).  The statute further provides, in pertinent
part:
Misconduct connected with the work is defined
as conduct evincing such willful or wanton
disregard of an employer’s interest as is
found in deliberate violations or disregard
of standards of behavior which the employer
has the right to expect of his employee, or
in carelessness or negligence of such degree
or recurrence as to manifest equal
culpability, wrongful intent or evil design,
or to show an intentional and substantial
disregard of the employer’s interests or of
the employee’s duties and obligations to his
employer.
Id.  Violation of an employer’s work rules is misconduct, unless
“the evidence shows that the employee’s actions were reasonable
and were taken with good cause.”  Intercraft Indus. Corp., 305
N.C. at 375, 289 S.E.2d at 359 (citations omitted).  In the
absence of a specific rule violation, “‘[m]isconduct’ may consist
in deliberate violations or disregard of standards of behavior
which the employer has the right to expect of his employee.” 
Hagan v. Peden Steel Co., 57 N.C. App. 363, 365, 291 S.E.2d 308,
309 (1982) (citing In re Collingsworth, 17 N.C. App. 340, 194
S.E.2d 210 (1973)).  
In its appeal to this Court based on the dissent, the ESC
argues that the Court of Appeals disregarded the standard of
review set out in N.C.G.S. § 96-15(i) and disregarded competent
evidence in the record supporting the ESC’s finding of fact
regarding Binney’s removal of the hard drive.  Finding of fact
10, quoted above, concerns Binney’s unauthorized removal of the
hard drive from her company computer to take home with her for
the weekend. 
The Court of Appeals opinion cited the correct standard of
review from the statute:  whether “any competent evidence”
supports the finding.  Binney, 178 N.C. App. at 425, 631 S.E.2d
at 853.  The majority opinion then states that finding 10 lacks
any support because “the employer admitted that the company had
no policy [regarding removing hard drives] at all.”  Id.  Maroney
testified that Binney had never asked permission to remove her
computer hard drive and that neither he nor any other officer
would have approved such a request.  That the employer had no
policy on removing hard drives does not contradict the finding
that the “employer did not authorize the claimant to remove the
hard drive,” and we conclude that competent evidence in the
record supports this finding.  To the extent that the majority
made its own assessment of the facts (e.g., determining that
Binney believed she had the authority to remove the hard drive),
in lieu of analyzing whether any evidence supported the findings
the ESC actually made, we agree that the Court of Appeals
misapplied the statutory standard of review.
In its appeal to this Court based on our grant of
discretionary review, the ESC again argues that the Court of
Appeals disregarded the standard of review set out in N.C.G.S. §
96-15(i) and disregarded competent evidence in the record in
support of the ESC’s findings of fact regarding Binney’s
assertion of a personal copyright interest.  The Court of Appeals
cited the pertinent language from the statute, correctly noting
that the standard of review was whether there was “any competent
evidence” to support the ESC’s findings.  178 N.C. App. at 422,
631 S.E.2d at 851.  However, the majority opinion does not
specify any particular finding that was not supported under this
standard.  Instead, the Court noted that the record did not
contain any evidence that Binney acted unreasonably or in bad
faith.  Id. at 427, 631 S.E.2d at 854.
In the Court of Appeals, Binney purported to challenge
findings of fact 3, 5, 7, 8 and 9, concerning Binney’s assertion
that she retained a personal copyright interest in the company
web site and printed catalogs.  Each of these findings is
supported by competent evidence in the record.  Maroney and Sharp
both testified that Binney never told them she was claiming a
personal copyright in the web site and that the placement of the
copyright on the web site would not have been authorized by any
of the company’s officers.  Maroney also testified that the
copyright assertions in the 2000-2003 catalogs were not
authorized by him or the other company officers or shareholders. 
The Court of Appeals erred in disregarding this competent
evidence which supported findings 3 through 9.  The Court of
Appeals noted that the record contained no evidence about whether
Binney acted unreasonably or in bad faith.  No evidence was
required, since the ESC did not make a finding on that issue. 
Again, we agree that the Court of Appeals misapplied the standard
of review of the findings the ESC actually made.
The majority opinion held that the findings did not support
the ESC’s conclusion that Binney must be disqualified from
receiving benefits because they did not establish that Binney
acted unreasonably or in bad faith.  However, under N.C.G.S. §
96-14(2), Banner needed only to present evidence that Binney
showed “willful . . . disregard of an employer’s interest as is
found in deliberate violations or disregard of standards of
behavior which the employer has the right to expect of his
employee.”  Here, the ESC only concluded that these two issues
combined to result in deliberate disregard of the standards
Banner had a right to expect of Binney.
The transcript and other evidence indicate that in March
2003, Binney overheard Thomas Maroney, Banner’s vice president,
and (along with his wife) owner of eighty percent of Banner’s
stock, discussing the possible sale of Banner with a prospective
buyer.  This possibility appeared to create tension between
Binney and Maroney and Banner’s other corporate officers.   In
mid-March 2003, Maroney discovered the statements in Banner’s
catalogs and web site asserting that Binney retained a personal
copyright interest in them.  According to the transcript, this
discovery led to a heated confrontation between Maroney and
Binney at the Banner offices.  Maroney testified that the company
had not authorized Binney to include such statements in the
catalogs or on the web site. 
Binney testified that on Friday, 4 April 2003, as she was
preparing to leave work for a weekend out of town, a customer
requested a meeting with her the following Monday morning.  To
facilitate her preparations for the meeting, Binney decided to
remove the hard drive from her work computer and take it home
with her, a quicker method than transferring the needed data onto
discs.  On Saturday, 5 April 2003, Banner learned that Binney had
removed the hard drive from her work computer when Maroney, his
wife, and Sharp met with a computer consultant to review the
company’s computer system.  Maroney and Sharp each testified that
they had never authorized Binney to remove the hard drive and
would not have authorized her to do if she had made such a
request.  They also testified that Binney’s hard drive contained
several pieces of critical business information that were not
kept on Banner’s servers. 
Both Maroney and Binney testified to the tension and
mistrust between Binney and the other shareholders and officers
at Banner, created in part by the discovery of her personal
copyright on the web site and in the catalogs in March 2003.  The
removal of the hard drive on 4 April 2003 took place only days
after Binney and Maroney had a heated confrontation over the
copyright issue and other matters.  Whether Binney believed in
good faith that she had a personal copyright interest in the
materials is irrelevant; she never asked for nor received
permission to assert a personal claim on the company’s property
by including the copyright statements.  In fact, the transcript
reveals that her only justification for doing so was a “personal
decision.”  We conclude that the findings support the conclusion
that Binney’s assertion of a personal copyright on the company
web site and in its printed catalogs, without the employer’s
prior knowledge or authorization, satisfies the requirements of
N.C.G.S. § 96-14(2).  
In this context, both Binney’s removal of the hard drive and
her assertion of the copyright without seeking and receiving
permission to do so support the conclusion that her conduct
evidenced a deliberate disregard “of standards of behavior which
the employer has the right to expect of his employee.”  See
N.C.G.S. § 96-14(2).  We hold that the ESC properly found and
concluded that work-related misconduct was the basis of Binney’s
termination.  Thus, the ESC’s decision to deny unemployment
benefits to Binney was correct, and the Court of Appeals erred in
reversing the superior court’s affirmance of the ESC’s decision. 
We reverse the Court of Appeals as to this issue and instruct
that court to reinstate the judgment of the trial court.  The
Court of Appeals’ decision regarding the ESC’s cross-assignment
of error is not before this Court, and that court’s decision as
to that issue remains undisturbed.
REVERSED.