Source: http://twkerner.typepad.com/wilmington_north_carolina/business_litigation/
Timestamp: 2017-11-20 13:31:14
Document Index: 559326709

Matched Legal Cases: ['§ 108', '§ 108', '§ 57', '§18', '§ 55', '§ 14', '§ 75']

North Carolina Shareholder Actions, Bankruptcy, and the Statute of Limitations
In North Carolina, shareholders can sue on behalf of corporations, but only under certain conditions. In particular, there are a number of specific statements which must appear in the complaint; without them, the case will be dismissed.
In Coderre v. Futrell, No. COA 12-517, the North Carolina Court of Appeals, by affirming the dismissal of a breach of contract claim, reminds the legal and business community of the importance of basic procedural concepts, particularly standing and the statute of limitations. In this case a North Carolina corporation called NALA bought for 200 acres of land, mostly financed by a note secured by a deed of trust. When NALA failed to make payments its president tried to make a payment on its behalf. The seller rejected this payment, opting to foreclose.
The parties then made a new agreement in which the seller would assign its successful bid back to NALA upon payment. But on August 12, 2008, one day before the expiration of that agreement, NALA filed for bankruptcy. On February 11, 2011, while NALA's bankruptcy case was still pending, Coderre, one of NALA's shareholders, filed an action against the seller for breach of contract. The seller moved to dismiss for lack of standing. In response, Coderre filed an amended complaint adding NALA as a plaintiff. The seller then moved for dismissal, arguing that the statute of limitations had run on the claim.
The Court of Appeals affirmed that Coderre, as a shareholder, did not have standing to file a complaint against the seller in his individual capacity. His name was nowhere on the original purchase agreement and he did not state in his complaint that he was filing on behalf of NALA. Coderre attempted to fix this mistake by filing an amended complaint adding NALA as a plaintiff the day that defendants filed their first motion to dismiss, June 13, 2011. Coderre argued that the amended complaint relates back to the date of the initial complaint. The Court rejected this argument, stating that the initial complaint was nullified because Coderre did not have standing to bring the lawsuit, therefore there was no valid complaint to which the amended complaint could relate back to. Thus, the initial complaint could not be used to defeat defendants' statute of limitations defense to the amended complaint.
Second, the Court affirmed that the bankruptcy proceedings did not toll the statute of limitations and that the amended complaint was filed outside of the limitations period to bring a breach of contract action. NALA argued that 11 U.S.C. § 108(c), which tolls the statute of limitations by the amount of time the debtor is in bankruptcy, should apply. However, the Court noted that this section applies only to a claim against the debtor, not to a claim brought by the debtor against third parties. Instead, 11 U.S.C. § 108(a) applies, which states that “a trustee may commence a nonbankruptcy action before the later of either the expiration of the statute of limitations for such action or two years after the entry of the order for relief.” Here, the alleged breach of contract occurred on April 1, 2008, so the three-year statute of limitations would have run on April 1, 2011. The order for relief in NALA's bankruptcy action was entered on August 12, 2008, so two years after this would have been August 12, 2010. Since the later of these two dates is April 1, 2011, the complaint for breach of contract should have been filed on or before that date. NALA filed its amended complaint on June 13, 2011 and was, therefore, past the statute of limitations.
Posted at 10:57 AM in North Carolina Business Litigation, North Carolina Corporations, LLCs, and Partnerships | Permalink | Comments (0) | TrackBack (0)
Tags: business law, civil litigation, litigation, North Carolina, shareholder action, statute of limitations
North Carolina LLC members need to make absolutely certain that their operating agreements have been carefully negotiated, planned, and drafted. When North Carolina General Statutes § 57C-10-03 was enacted in 2010, the legislature made that much abundantly clear. That section provides that the terms of an operating agreement, once signed by the members of the LLC, are the beginning and end of each member's rights. Quite simply, if it isn't in the operating agreement, it does not exist. That section provides: “Except as otherwise provided in this Chapter, it is the policy of [the North Carolina Limited Liability Company Act] to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements. ”
This mirrors similar language in the Delaware LLC Act, which provides: “It is the policy of this chapter to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements. ” Del. Code §18-1101(b).
Delaware, for those who may not already know, is a “thought leader” among the nation's court systems and legislatures with regard to its approach to corporate and LLC law. Delaware is home to a great number of large US corporations who take advantage of its favorable corporate and tax laws. Many states, including North Carolina, have patterned their corporate and LLC laws after Delaware's laws. It is no surprise then that North Carolina would ultimately adopt the same principle, which guides the courts of Delaware when it comes to interpreting LLC operating agreements and determining the rights and responsibilities of LLC members.
Unfortunately, few North Carolina LLC owners bother to customize the forms they buy online or copy from books they buy at office supply stores. In an effort to save a few hundred dollars consulting a business law attorney during the formation process (because they listen to companies offering cheap business law paperwork and who scare them into thinking they'll have to pay “tens of thousands of dollars” to a bunch of “high priced lawyers”) they end up getting stuck with tens of thousands of dollars in liabilities and attorneys' fees when they find themselves in a dispute with their business partners.
North Carolina law makes it perfectly clear that while you can use whatever sort of “agreement” you want to serve as your company's operating agreement, you will also be bound by those agreements to the very last letter if and when something goes wrong.
Posted at 03:52 PM in North Carolina Business Litigation, North Carolina Corporations, LLCs, and Partnerships | Permalink | Comments (0) | TrackBack (0)
Tags: limited liability company, llc, North Carolina, North Carolina business law, north carolina llc law, operating agreement
In North Carolina, the business judgment rule applies to LLC managers. In Mooring Capital Fund, LLC v Comstock North Carolina, LLC (07 CVS 20852, Wake Co., Business Ct.), 2006 WL 46447078, 2009 NCBC 26, Judge Jolly was ruling on motions to stay, dismiss, and appoint a receiver.
In the course of issuing his ruling, the Judge opined, for what appears to be the first time in North Carolina, that, just as directors of a corporation are, the managers of an LLC are protected by the business judgment rule. “The managers of an LLC may also be entitled to the protections of the 'business judgment rule...'" Taking note of similar language found in the NC Business Corporation Act, § 55-8-30, the judge noted the corresponding portions of the North Carolina Limited Liability Company Act:
"See, e.g., G.S. 57C-3-22(d) (“A manager is not liable for any action taken as a manager, or any failure to take any action, if the manager performs the duty of his office in compliance with this section.”) and G.S. 57C-3-22(b) (“A manager shall discharge his duties as manager in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in the manner the manager reasonably believes to be in the best interests of the limited liability company. . . .”). Such language suggests application of the business judgment rule, a matter of common law in North Carolina, to limited liability companies." (emphasis added).
"The rule applies in addition to the North Carolina Business Corporation Act (the “NCBCA”), G.S. 55-1-01 to -17-05, and creates an evidentiary presumption that directors acted reasonably and fairly in discharging their corporate duties. State ex rel. Long v. ILA Corp., 132 N.C. App. 587, 601 (1999). The Long court described the business judgment rule as follows:
[It] creates, first, an initial evidentiary presumption that in making a decision the directors acted with due care (i.e., on an informed basis) and in good faith in the honest belief that their action was in the best interest of the corporation, and second, absent rebuttal of the initial presumption, a powerful substantive presumption that a decision by a loyal and informed board will not be overturned by a court unless it cannot be attributed to any rational business purpose.
Id. at 602 (quoting Russell M. Robinson, II, Robinson on North Carolina Corporation Law § 14.6 at 281 (5th ed. 1995)). "
So while it may have seemed a fairly straightforward matter to put the two together and conclude that the Business Judgment Rule should also apply to LLC managers, we now have at least one written opinion stating as much -- though bear in mind that under the local rules of certain districts, you may not be able to cite to this opinion. Hopefully however, any case in which you would need to cite to this would be taking place in the Business Court.
Posted at 11:06 AM in Business Judgment Rule, North Carolina Business Litigation, North Carolina Corporations, LLCs, and Partnerships | Permalink | Comments (0) | TrackBack (0)
NC Business Court Fee Raised to $1,000.00
As part of a statewide increase in court fees, as of September 1, 2009, the fee for removal of a case to the North Carolina Business Court is now $1,000.00. This is a sharp increase over the previous $200.00 that had been in effect prior to September 1.
Posted at 12:23 PM in North Carolina Business Litigation | Permalink | Comments (0) | TrackBack (0)
Tags: courts, law, north carolina business court
The Star-News is reporting that several North Carolina gas station owners have agreed to settle price gouging cases. The cases were brought by state Attorney General Roy Cooper after Governor Mike Easley invoked a state law prohibiting the charging of prices that are "unreasonably excessive."
The statute - N.C. Gen. Stat. § 75-38 - prohibits such prices on goods that are "consumed or used as a direct result of an emergency or which are consumed or used to preserve, protect, or sustain life, health, safety, or economic well-being of persons or their property."
In order for the law to apply, however, the Governor must first make a finding that there has been an "abnormal market disruption." This is defined in subsection (d) of the statute to include any declaration of a state of emergency or disaster is issued by the President, or the Department of Homeland Security advisory system issues a Code Red alert. Triggering events can include war, a terrorist attack, a natural disaster, power outage, or other "extraordinary adverse circumstances."
In the case of the recent September price spikes, the trigger was hurricane Gustav - and the fear that gripped the oil markets - as it moved into the Gulf.
Posted at 09:11 PM in North Carolina Business Litigation, Unfair and Deceptive Business Practices, NC 75-1.1, Wilmington, NC Local Interest | Permalink | Comments (0) | TrackBack (0)
Tags: disaster, gas, gas prices, gasoline, law, nc, north carolina, price gouging