STEVEN EARL ELLIOTT, Plaintiff v. ENKA-CANDLER FIRE AND RESCUE DEPARTMENT, INC., Defendant

14983July 5, 2011No. No. COA10-1219

Plaintiff WinEnka-Candler Fire and Rescue Department, Inc.$310,885.76 awarded

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Case Details

Citation: 213 N.C. App. 160
Judge(s): Judges BRYANT and ELMORE concur.
Procedural Posture — the stage the case had reached: summary judgment
State: North Carolina
Circuit: 4th Circuit

Related Laws

No specific laws identified for this ruling.

Claim Types

Breach of Contract

Outcome

Fire chief prevailed on breach of contract claim. Trial court properly granted summary judgment finding the employment agreement enforceable (supported by consideration and serving a public purpose) and awarding damages for unpaid severance.

Excerpt

STEVEN EARL ELLIOTT, Plaintiff v. ENKA-CANDLER FIRE AND RESCUE DEPARTMENT, INC., Defendant No. COA10-1219 (Filed 5 July 2011) 1. Employer and Employee— employment agreement and extension — consideration by employee — giving up at will status There was consideration in an employment agreement and its extension where a fire chief who was already in the job gave up his employment at will status and his right to leave at any time before the dates specified in the agreements. 2. Public Officers and Employees— fire chief — employment agreements — public purpose — balanced budget A town’s employment agreements with its fire chief served a public purpose in that the town was able to retain its fire chief for a significant period of time without fear that another municipality would lure him away. The contract did not call for payment regardless of whether the chief performed his public service duties, but for salary and benefits to continue only if defendant terminated plaintiff without cause. Furthermore, despite the statutory requirement that local budgets be balanced, there is no authority for the proposition that a municipality can evade payment of severance pay or breach of contract damages by simply not budgeting for them. 3. Public Officers and Employees— employment contract— terminated fire chief — summary judgment Summary judgment was properly entered for plaintiff in an employment action against a town by a former fire chief where defendant did not show that the contract lacked consideration or violated public policy and defendant did not present any evidence that plaintiff was not performing his duties adequately under the agreements. 4. Civil Procedure— motion for relief or new trial — notice of summary judgment The trial court did not abuse its discretion by denying defendant’s motion for relief or for a new trial where plaintiff contended that it had not been provided with sufficient notice of defendant’s motion for summary judgment. Appeal by defendant from judgment entered 13 May 2010 and order entered 26 May 2010 by Judge James L. Baker, Jr. in Buncombe County Superior Court. Heard in the Court of Appeals 23 February 2011. The Bidwell Law Firm, by Paul Louis Bidwell and Jessica A. Waters, for plaintiff-appellee. The Sutton Firm, P.A., by April Burt Sutton, for defendant-appellant. GEER, Judge. Defendant Enka-Candler Fire and Rescue Department, Inc. appeals from the trial court’s grant of summary judgment to plaintiff Steven Earl Elliott, a former employee of defendant. Defendant had entered into a contract with plaintiff that provided for a specific term of employment and continued payment of salary and benefits if defendant terminated the contract prior to the end of the contract term. Defendant primarily argues on appeal that the contract between the parties is unenforceable as a matter of law because (1) there was no consideration flowing from plaintiff to defendant, and (2) the contract violated public policy. We disagree. Plaintiff, who had been employed at will by defendant, relinquished his at-will status when he agreed to work for defendant for a definite term. In making this promise, plaintiff gave up the right to terminate his employment at any time. This detriment to plaintiff constituted consideration for defendant’s promise. Additionally, because this contract secured plaintiff’s services as Fire Chief for a specified period at a specified rate, we conclude that the employment contract served a public purpose and did not otherwise violate public policy. Since the contract was enforceable and since defendant did not present any evidence that plaintiff breached the contract, the trial court properly granted summary judgment to plaintiff. We also find defendant’s remaining arguments unpersuasive and, therefore, affirm. Facts Plaintiff began working as Fire Chief for defendant in 1996 as an at-will employee. On 20 July 2004, the parties entered into an Employment Agreement. The Employment Agreement stated that “the parties desire to provide for a contract that runs from June 1, 2004 through October 31, 2008, for the retention of [plaintiff] as the Chief of [defendant] . . . .” Under the terms of the Employment Agreement, plaintiff would remain Fire Chief with his current salary and benefits. The Employment Agreement further provided that in the event defendant terminated plaintiffs employment, defendant would pay plaintiff the balance of his salary and provide all benefits through the end of the contract, as if plaintiff had remained a full-time employee. Approximately two years later, on 17 April 2006, the parties executed an Extension Agreement. The Extension Agreement extended the termination date of the Employment Agreement from 31 October 2008 to 31 October 2013. All the other terms of the Employment Agreement were to remain in full force and effect under the Extension Agreement. Defendant subsequently terminated plaintiffs employment as Fire Chief on 3 March 2008. On 15 April 2009, plaintiff filed suit against defendant alleging breach of contract based on defendant’s failure to comply with the provisions of the Employment Agreement for payment of salary and benefits following termination. On 17 June 2009, defendant filed an answer and asserted several affirmative defenses, including unclean hands, accord and satisfaction, failure of consideration, and violation of public policy. On 24 March 2010, defendant moved for summary judgment pursuant to Rule 56 of the Rules of Civil Procedure. Plaintiff later filed his own motion for summary judgment on 6 April 2010. The trial court heard the motions on 10 May 2010. In an order entered 13 May 2010, the trial court determined that there were no genuine issues of material fact as to plaintiff’s claims against defendant, defendant’s affirmative defenses, or the amount of damages to which plaintiff was entitled. The court concluded that plaintiff was entitled to summary judgment as a matter of law and entered an order (1) denying defendant’s motion for summary judgment, (2) granting plaintiff’s motion for summary judgment, and (3) awarding plaintiff $310,885.76 plus prejudgment interest and costs. On 14 May 2010, the day after summary judgment was entered, defendant filed, pursuant to Rules 59 and 60 of the Rules of Civil Procedure, a motion for relief from judgment or, in the alternative, to set aside the judgment and order a jury trial. The trial court entered an order denying defendant’s motion on 26 May 2010. Defendant timely appealed to this Court from both the summary judgment order and the order denying defendant’s motion for relief or a new trial. I Defendant first contends that the trial court erred in denying its motion and granting plaintiff’s motion for summary judgment because the Employment and Extension Agreements are unenforceable for lack of consideration. Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C.R. Civ. P. 56(c). When appropriate, summary judgment may be rendered against the moving party. Id,. “It is well established that in an action for breach of contract, [a party’s] promise must be supported by consideration for it to be enforceable.” Labarre v. Duke Univ., 99 N.C. App. 563, 565, 393 S.E.2d 321, 323, disc. review denied, 327 N.C. 635, 399 S.E.2d 122 (1990). Consideration sufficient to support a contract consists of “ ‘any benefit, right, or interest bestowed upon the promisor, or any forbearance, detriment, or loss undertaken by the promisee.’ ” Lee v. Paragon Group Contractors, Inc., 78 N.C. App. 334, 337-38, 337 S.E.2d 132, 134 (1985) (quoting Brenner v. School House, Ltd., 302 N.C. 207, 215, 274 S.E.2d 206, 212 (1981)), disc. review denied, 316 N.C. 195, 345 S.E.2d 383 (1986). “Consideration is the ‘glue’ that binds parties together, and a mere promise, without more, is unenforceable.” Id. at 338, 337 S.E.2d at 134 (quoting In re Foreclosure of Owen, 62 N.C. App. 506, 509, 303 S.E.2d 351, 353 (1983)). In this case, defendant first argues that there was no consideration flowing from plaintiff to defendant. Defendant points to the fact that plaintiff was working for defendant when the Employment and Extension Agreements were executed and that the Agreements provided for no change in plaintiff’s duties, pay, or benefits. Defendant, however, overlooks the critical fact that by entering into the Employment Agreement, plaintiff relinquished his status as an at-will employee. In North Carolina, “in the absence of an employment contract for a definite period, both employer and employee are generally free to terminate their association at any time and without any reason.” Salt v. Applied Analytical, Inc., 104 N.C. App. 652, 655, 412 S.E.2d 97, 99 (1991) (emphasis added), cert. denied, 331 N.C. 119, 415 S.E.2d 200 (1992). See also Still v. Lance, 279 N.C. 254, 259, 182 S.E.2d 403, 406 (1971) (holding that where employee’s contract contained no provision concerning duration of employment or means by which it may be terminated, such contract was terminable at will of either party irrespective of quality of performance by other party); Gravitte v. Mitsubishi Semiconductor Am., Inc., 109 N.C. App. 466, 472, 428 S.E.2d 254, 258 (“[T]he general rule is that, absent an employment contract for a definite period of time, both employer and employee are generally free to terminate their association at any time and without reason.” (emphasis added)), disc. review denied, 334 N.C. 163, 432 S.E.2d 360 (1993). Here, the uncontradicted evidence shows that, by entering into the Employment and Extension Agreements, plaintiff promised to work for defendant through 2008 and then through 2013. In making this promise — which he was not required to make — plaintiff gave up his right to leave his employment with defendant at any time, for any or no reason, without notice to defendant. Although when discussing at-will employment, courts more typically focus on the benefits to the employer, at-will status can be of significant value to an employee as well. For example, employees with especially desirable skills or excellent reputations may be highly sought after by other employers. An employer, by entering into a contract for a specific term with such an employee, ensures that no other employer will be able to lure that employee away for higher pay or better benefits. On the other hand, the employee, by entering into the contract, foregoes the opportunity to accept other more lucrative job offers. Thus, the promise by plaintiff, in this case, to forego at-will employment constituted consideration. See Swenson v. Legacy Health Sys., 169 Or. App. 546, 552, 9 P.3d 145, 148 (2000) (“As a matter of law, the promise of an at-will employee to continue in an employer’s service for some specified future period of time constitutes consideration for an additional benefit promised by the employer.”). In reaching this decision, we find the case of Bennett v. Eastern Rebuilders, Inc., 52 N.C. App. 579, 279 S.E.2d 46 (1981), persuasive. In Bennett, the plaintiff was employed as a lead person on the defendant’s production line. Id. at 580, 279 S.E.2d at 48. Her position fell under a union contract giving her substantial job security. Id. The defendant persuaded the plaintiff to accept a promotion, which would result in the loss of her union protection and resulting job security, in exchange for the defendant’s promise that she would not be fired if she did not work out as a supervisor but would instead be demoted to her former position as a lead person. Id. Although Bennett is to some extent factually opposite from this case — in that the plaintiff in Bennett gave up job security (through her union membership), whereas here plaintiff gave up his right to leave his employment — the rationale of Bennett is applicable. The Court in Bennett noted as a general matter that “an agreement between an employee and her employer concerning the manner in which her job could be terminated constitutes an enforceable agreement.” Id. at 581, 279 S.E.2d at 48. As for the question of consideration, the Court observed that “[a]mple consideration for defendant’s bargained for agreement to demote plaintiff rather than fire her may be found in her agreement to give up her union position and the job security that went with it.” Id. at 582, 279 S.E.2d at 49. Thus, in Bennett, sufficient consideration was found when an employee gave up her union status and the rights that accompanied it. Here, plaintiff analogously gave up his at-will status and the rights arising from that status. Contrary to defendant’s argument that there was no consideration flowing from plaintiff, Bennett shows that plaintiff’s giving up his freedom to leave his position constituted ample consideration for the Employment and Extension Agreements. Defendant’s reliance on Franco v. Liposcience, Inc., 197 N.C. App. 59, 676 S.E.2d 500, aff’d per curiam, 363 N.C. 741, 686 S.E.2d 152 (2009), is misplaced. In Franco, the plaintiff was hired as an at-will employee. Id. at 63, 676 S.E.2d at 502. The plaintiff contended, however, that a letter from the defendant to the plaintiff formed a contract that precluded termination of his employment except for cause. Id., 676 S.E.2d at 502-03. This Court held that although the letter contained evidence of consideration flowing from the defendant to the plaintiff, the letter “did not increase or diminish [the plaintiff’s] pay, duties, rights, or anything else that could be deemed consideration flowing from [the plaintiff] to [the defendant].” Id., 676 S.E.2d at 503. The Court, therefore, affirmed the trial court’s grant of summary judgment to the defendant, noting that “mere continued employment by the employee is insufficient” to constitute consideration. Id. Defendant overlooks the key distinction between Franco and this case. The decision in Franco was based on the lack of any evidence that the plaintiff gave something or gave up something in return for the defendant’s promise; he just continued working. Here, by contrast, the uncontradicted evidence showed plaintiff did give up something — his right to leave at any time before the dates specified in the Employment and Extension Agreements. Thus, Franco is inapplicable. The trial court, in this case, properly concluded that the Employment and Extension Agreements were supported by consideration. II Defendant also contends that the Employment and Extension Agreements are unenforceable because they violate North Carolina public policy. In support of this argument, defendant first points to a portion of Article V, Section 2 of the North Carolina Constitution: (7) Contracts. The General Assembly may enact laws whereby the State, any county, city or town, and any other public corporation may contract with and appropriate money to any person, association, or corporation for the accomplishment of public purposes only. Defendant claims that the “nature of the subject employment agreements contemplates payment to the plaintiff, a private individual, regardless of whether his public service duties are performed. To find the subject employment agreements enforceable directly contradicts the constitutional limitation on contracts ‘for the accomplishment of public purposes only.’ ” (Quoting N.C. Const, art. V, § 2.) Our courts have established “[t]wo guiding principles ... for determining that a particular undertaking by a municipality is for a public purpose: (1) it involves a reasonable connection with the convenience and necessity of the particular municipality; and (2) the activity benefits the public generally, as opposed to special interests or persons[.]” Madison Cablevision, Inc. v. City of Morganton, 325 N.C. 634, 646, 386 S.E.2d 200, 207 (1989) (internal citation omitted). With respect to the first prong, we note that the general duties of a Fire Chief include preserving and caring for fire apparatus, having charge of fighting and extinguishing fires and training the fire department, seeking out and having corrected all places and conditions dangerous to the safety of the city and its citizens from fire, and making annual reports to the council concerning these duties. N.C. Gen. Stat. § 160A-292 (2009). In view of these responsibilities, we hold that the employment and retention of a qualified Fire Chief to execute these duties does involve a reasonable connection with the convenience and necessity of a municipality. We further hold, as to the second prong, that the employment of a Fire Chief benefits the public generally — not just the Fire Chief or special interests — because the Fire Chief is responsible for maintaining the “safety of the city and its citizens from fire.” Id. (emphasis added). By contracting to retain plaintiff for an extended period of time, defendant ensured that it would, for several years, have the service of a qualified Fire Chief without fear that the Fire Chief would leave defendant for a better opportunity. We, therefore, hold that the Employment and Extension Agreements in this case do serve a public purpose. Defendant further argues that the public purpose requirement is violated when a governmental body pays a private individual regardless whether he performs his public service duties. If, however, plaintiff had failed to perform his duties under the Agreements and defendant was entitled to discharge him for cause, then he would not have been paid. See Menzel v. Metrolina Anesthesia Assocs., 66 N.C. App. 53, 59, 310 S.E.2d 400, 403-04 (1984) (noting that where termination clause in parties’ contract provided that defendant would pay plaintiff two months’ severance pay if defendant terminated contract, plaintiff’s breach of contract would not trigger severance pay provisions of contract). The effect of the Agreements is that only if defendant terminates plaintiff without cause will defendant then have to pay plaintiff salary and benefits through the end of the contract, effectively severance pay. Again, we emphasize that defendant’s giving plaintiff job security and promising severance pay in the event that plaintiff was terminated without cause was in furtherance of a public benefit: defendant was able to retain a Fire Chief for a significant period of time without fear that another municipality would lure him away. Defendant next points to N.C. Gen. Stat. § 159-8(a) (2009), which provides: Each local government and public authority shall operate under an annual balanced budget ordinance adopted and administered in accordance with this Article. A budget ordinance is balanced when the sum of estimated net revenues and appropriated fund balances is equal to appropriations. ... It is the intent of this Article that... all moneys received and expended by a local government or public authority should be included in the budget ordinance. Therefore, notwithstanding any other provision of law, no local government or public authority may expend any moneys, regardless of their source . . . , except in accordance with a budget ordinance .... Defendant points to an affidavit of Donna Clark, the Buncombe County Finance Director, which defendant alleges shows that defendant “made no provisions in its budget for payment of salary and benefits to the plaintiff once he was no longer employed by the Defendant.” Defendant cites no authority, however, for the proposition that a municipality can evade payment of severance pay or breach of contract damages by simply not budgeting for them. Nor do we know of any such authority. Defendant further relies on Leete v. County of Warren, 341 N.C. 116, 462 S.E.2d 476 (1995), to support its argument that the Employment and Extension Agreements violate public policy. In Leete, a group of taxpayers filed an action to enjoin the Warren County Board of Commissioners from

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Burley v. U.S. Foods, Inc.

14983Apr 2014

VINCENT BURLEY, Employee, Plaintiff v. U.S. FOODS, INC., EMPLOYER, and INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Carrier and GALLAGHER BASSETT SERVICES, INC., Third Party Administrator, Defendants No. COA13-860 Filed 1 April 2014 Workers’ Compensation — subject matter jurisdiction — contract modification — last act analysis The Industrial Commission erred in a workers’ compensation case by concluding that it did not have subject matter jurisdiction. A modification to plaintiff employee’s contract was approved by defendant U.S. Foods Inc. in Charlotte. N.C.G.S. § 97-36 extended subject matter jurisdiction to plaintiff’s claim since the final binding act occurred in North Carolina. Judge DILLON dissenting. Appeal by plaintiff from opinion and award entered 28 June 2013 by the North Carolina Industrial Commission. Heard in the Court of Appeals 12 December 2013. The Sumwalt Law Finn, by Vernon Sumwalt, Mark T. Sumwalt, and Lauren Hester, for Plaintiff-Appellant. McAngus, Goudelock & Courie, P.L.L.C., by Raymond J. Williams, III, for Defendants-Appellees. HUNTER, JR., Robert N., Judge. Vincent Burley (“Plaintiff’) appeals from the 28 June 2013 opinion and award of the Full Commission of the North Carolina Industrial Commission (the “Commission”), which concluded that the Commission did not have subject matter jurisdiction to hear Plaintiffs claim. Plaintiff argues the Commission had subject matter jurisdiction because a modification to his contract was approved by defendant U.S. Foods Inc. (“U.S. Foods”) in Charlotte. We agree and reverse the Commission’s opinion and award. I. Facts & Procedural History On 8 July 2011, Plaintiff filed a claim for benefits with the Commission seeking compensation for a back injury suffered while working for U.S. Foods as a truck driver. U.S. Foods denied that North Carolina has jurisdiction over Plaintiff’s claim, but admitted liability under the Georgia Workers’ Compensation Act and is. currently paying Plaintiff disability compensation under Georgia law. The matter came on for a hearing before Deputy Commissioner Philip A. Baddour, III (“Dep. Comm. Baddour”) on 17 April 2012 and a written order was filed oh 13 December 2012. The evidence presented at the hearing tended to show the following facts. Plaintiff is a resident of Augusta, Georgia and was a 39-year-old truck driver at the time of his 13 December 2012 hearing before the Commission. In 1993, Plaintiff graduated from truck driving school in Charleston, South Carolina, and obtained his commercial driving license from this course of study. Plaintiff has been a truck driver since graduating from this program. U.S. Foods supplies and delivers food to restaurants, schools, sports venues, hotels, and many other types of businesses. U.S. Foods operates many distribution centers nationwide to supply “hundreds of thousands of customers” with its food products. Plaintiff testified that U.S. Foods hired him as a delivery truck driver in May 2000. Plaintiff completed his initial hiring paperwork, including a driver’s application, medical exam, and written driving exam, in Fort Mill, South Carolina. Plaintiff completed additional pre-hiring paperwork, including a road-test in Columbia, South Carolina and a drug-screening in Georgia. After completing his initial paperwork, U.S. Foods offered Plaintiff employment, and Plaintiff accepted the written offer. Plaintiff signed this paperwork in Fort Mill, South Carolina and was employed at-will. Plaintiff drove a planned route as part of his employment. The route was concentrated around the Augusta area, with stops in Georgia and South Carolina. Plaintiffs truck and trailer were stowed every day at a drop yard in Augusta. Plaintiffs route did not involve travel in North Carolina nor was his truck ever dropped in North Carolina. U.S. Foods merged with another company, PYA Monarch, and the Columbia drop yard, where Plaintiff was assigned, was dissolved in 2002. Plaintiff testified that U.S. Foods offered to transfer supervision of his employment to either their Charlotte division or their Lexington, South Carolina division after the merger. Plaintiff chose to work for the Charlotte division because U.S. Foods arranged for his loaded delivery truck to be delivered near his Augusta home. Had Plaintiff chosen the Lexington division, he would have been required to drive his personal vehicle to retrieve his loaded truck in Lexington. Plaintiffs transfer to the Charlotte division was thereafter approved by U.S. Foods’s human resources department in Charlotte. Plaintiffs job title and responsibilities did not change after he was transferred to the Charlotte division from the Columbia division. Plaintiff stated that he was working the “same job, just a different division,” although Plaintiff made deliveries to different customers and drove a different route. Plaintiff was also switched from an hourly weight-based pay system to a component pay system. As a result, Plaintiff saw his pay increase from $400 to $500 a week under the weight-based system to between $900 and $1,400 per week under the component system. Plaintiff worked continuously for U.S. Foods for nine years, was never terminated or laid off, and never completed re-hiring paperwork during this period. Plaintiff injured Ms back on 23 September 2009 while lifting a case of liquid milk during a delivery to a Some Drive-In in Evans, Georgia. U.S. Foods terminated Plaintiff’s employment on 1 October 2009. U.S. Foods’s Charlotte division Transportation Manager Alton Abernathy (“Mr. Abernathy”) also testified at the 17 April 2012 hearing. Mr. Abernathy stated that upon the merger of U.S. Foods and PYA Monarch, U.S. Foods “went to all the drivers [in the Columbia drop yard] that were being displaced . .. and offered them jobs” if they transferred branches. If Plaintiff rejected the transfer, he would have received a severance package. Mr. Abernathy further described the different pay systems between the Charlotte and Columbia divisions: Plaintiff’s component pay system paid his commission on “pieces and stops and miles with a base and safety pay” rather than Plaintiff’s prior pay system, which was based on weight carried. Mr. Abernathy also described the Charlotte division’s accommodations for its drivers, noting that the branch delivered drivers’ loads to fifteen different sites, including Plaintiff’s drop site in Augusta. Plaintiff’s transfer was approved and signed by three individuals: Doug Jolly, U.S. Foods’s Transportation Manager at its Fort Mill division; Kim DaM, a human resources officer at U.S. Foods; and Mel Smith, who provided final approval from the human resources department. U.S. Food’s human resources department has been located in Charlotte smee 4 December 2000, and both Kim DaM and Mel Smith worked m the Charlotte office. Lastly, U.S. Foods’s Human Resources Coordinator, Rebecca Reed (“Ms. Reed”), testified at the hearing. Ms. Reed discussed the terms of Plaintiff’s mitial hiring contract, notmg that U.S. Foods could modify the terms of Plaintiff’s employment under the contract. After hearing the foregoing evidence, Dep. Comm. Baddour concluded that the a modified contract does not constitute a contract “made” m North Carolma for purposes of the relevant jurisdiction granting statute, N.C. Gen. Stat. § 97-36 (2013). Dep. Comm. Baddour also concluded that the final act to create Plaintiff’s employment contract did not occur m North Carolina. Accordingly, Dep. Comm. Baddour ordered that Plaintiff’s claim be denied for lack of subject matter jurisdiction. Plaintiff appealed to the Commission on 13 December 2012. The Commission heard the case on 22 May 2013 and issued an opmion and order on 28 June 2013 affirming Dep. Comm. Baddour’s order. Plaintiff timely filed written notice of appeal with tMs Court on 2 July 2013. II. Jurisdiction & Standard of Review Plaintiffs appeal from the Commission’s opinion and award lies of right to this Court pursuant to N.C. Gen. Stat. § 7A~29(a) (2013). Accord N.C. Gen. Stat. § 97-86 (2013). The only issue on appeal is whether the Industrial Commission had subject matter jurisdiction over Plaintiffs claim. At present, whether the Commission has subject matter jurisdiction over Plaintiff’s case depends on whether a contract for employment was consummated in North Carolina pursuant to N.C. Gen. Stat. § 97-36. See Parker v. Thompson-Arthur Paving Co., 100 N.C. App. 367, 369, 396 S.E.2d 626, 628 (1990) (“The jurisdiction of the Industrial Commission is limited by statute.”). Plaintiff argues that (i) because U.S. Foods’s Charlotte division approved Plaintiff’s transfer to oversight by the Charlotte division from the Columbia division, Plaintiffs contract was modified and (ii) because the “last act” of approving the modification occurred in Charlotte, the contract of employment was made in North Carolina. “Appellate review of an award from the Industrial Commission is generally limited to two issues: (i) whether the findings of fact are supported by competent evidence, and (ii) whether the conclusions of law are justified by the findings of fact.” Chambers v. Transit Mgmt., 360 N.C. 609, 611, 636 S.E.2d 563, 555 (2006). “However, as to ajurisdictional question, this Court is not bound by the findings of fact of the lower tribunal. This Court has the duty to make its own independent facts as to jurisdiction.” Lentz v. Phil’s Toy Store,_N.C. App._,_, 747 S.E.2d 127, 130 (2013); see also Lucas v. Li’l Gen. Stores, 289 N.C. 212, 218, 221 S.E.2d 257, 261 (1976). The Commission concluded as amatter of law that Plaintiffs contract was not modified and that the last act necessary to create Plaintiffs original contract was made out of state, depriving the Industrial Commission of subject matter jurisdiction to hear Plaintiff’s case. “Conclusions of law by the Industrial Commission are reviewable de novo by this Court.” Bond v. Foster Masonry, Inc., 139 N.C. App. 123, 127, 532 S.E.2d 583, 585 (2000). “Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the lower tribunal.” Craig v. New Hanover Cnty. Bd. of Educ., 363 N.C. 334, 337, 678 S.E.2d 351, 354 (2009) (quotation marks and citation omitted). III. Analysis a. Contract Modification Under Section 97-36 A contract modification is not explicitly referenced in Section 97-36, which grants the Commission subject matter jurisdiction over certain accidents that occur out of state. N.C. Gen. § 97-36 provides [w]here an accident happens while the employee is employed elsewhere than in this State and the accident is one which would entitle him or his dependents or next of kin to compensation if it had happened in this State, then the employee or his dependents or next of kin shall be entitled to compensation (i) if the contract of employment was made in this State. Plaintiff argues that common law rules concerning modifications of contract apply. See Lineberry v. Town of Mebane, 219 N.C. 257, 258, 13 S.E.2d 429, 430 (1941) (“The common law, to the extent therein provided, is modified. Except as so modified it still prevails.”); N.C. Gen. Stat. § 4-1 (2013) (declaring portions of the common law not in conflict with the general statutes remain in full force). We agree with Plaintiff and have consistently applied common law rules of contract to claims filed under the Workers’ Compensation Act. See, e.g., Hollowell v. N.C. Dep’t of Conservation & Devel., 206 N.C. 206, 208, 173 S.E. 603, 604 (1934); Hojnacki v. Last Rebel Trucking, Inc., 201 N.C. App. 726, 689 S.E.2d 601, 2010 WL 10963 at *3-4 (2010) (unpublished) (applying common law principles of contract law, such as offer and acceptance, to a claim filed under the Workers’ Compensation Act). This Court has held that a lapse in employment and subsequent rehiring via a “last act” made in North Carolina created a contract that was “made” in North Carolina for jurisdictional purposes under Section 97-36. Baker v. Chizek Transp., Inc., 210 N.C. App. 490, 711 S.E.2d 207, 2011 WL 904271 at *4-5 (2011) (unpublished). Similarly, under the common law of contracts, a modification to the terms of a contract may create a new underlying contract that was “made” in North Carolina. See, e.g., Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 457, 400 S.E.2d 476, 480 (1991) (holding that an addendum letter was a new contract because it modified a prior lease agreement). Section 97-36 also employs the phrase “employment contract,” which encompasses a broader scope of employment than “contract of hire,” a phrase that covers only the initial hiring of an individual. Compare N.C. Gen. Stat. § 97-36 with N.C. Gen. Stat. § 97-2(2) (2013) (using “contract of hire”). This broader expanse includes a contract modification, providing a basis for a contract being “made” in North Carolina under Section 97-36. The dissent cites Larson’s Workers’ Compensation Law § 143.03(4) (2011) for the proposition that when “a contract has achieved an identifiable situs, that situs is not changed merely because the contract is modified in another state.” While we acknowledge that Larson’s is a learned treatise in this field, we must construe Section 97-36 using the long-standing canons of construction in this state which require a plain language approach to interpreting Section 97-36. This Court’s precedent identifies that a modified contract containing the required formation elements is a new contract. See, e.g., NRC Golf Course, LLC v. JMR Golf LLC,_N.C. App._,_, 731 S.E.2d 474, 480 (2012) (“Parties to a contract may agree to change its terms; but the new agreement, to be effective, must contain the elements necessary to the formation of a contract.” (emphasis added)). Like other newly formed contracts, a modified contract may be made in this state. The General Assembly crafted Section 97-36 with a full view that the phrase “employment contract” contemplated both contracts of hire as well as modifications of existing contracts which, by long-standing precedent, are new agreements. See id,.; compare N.C. Gen. Stat. § 97-36 with N.C. Gen. Stat. § 97-2(2) (using “contract of hire”). As such, we do not interject our own view of the legislature’s intended meaning and instead apply existing precedent and the plain language of Section 97-36 to this question of first impression. See Correll v. Div. of Soc. Servs., 332 N.C. 141, 144, 418 S.E.2d 232, 235 (1992) (“The legislative purpose of a statute is first ascertained by examining the statute’s plain language.”). Further, while the Larson’s passage cites other state court decisions for the notion that a situs is not changed by contract modification, other jurisdictions have recognized explicitly that a contract modified within state borders confers jurisdiction. See, e.g., Kilburn v. Grande Corp., 287 F.2d 371, 373-74 (5th Cir. 1961) (holding that Louisiana had jurisdiction over a modified contract of employment where the original employment contract was formed in Texas, but additional consideration for employment was negotiated in Louisiana); Kuzel v. Aetna Ins. Co., 650 S.W.2d 193, 195-96 (Tex. App. 1983) (holding Maryland had jurisdiction where the original contract of hire was formed in Texas, but a later contract modification was agreed to in Maryland). The Commission held that modification of an existing contract does not fall within the scope of a contract “made” in Section 97-36. The lack of a bar against such use, this Court’s precedents recognizing common law contract principles, and use of the phrase “employment contract” in Section 97-36 require a different result. Accordingly, a modification of an employment contract may be a proper basis to find a contract is “made” within North Carolina under Section 97-36. b. Whether Plaintiff’s Contract was Modified Our next inquiry is whether Plaintiff’s contract was actually modified under common law contract principles. The same tests for formation of contract apply to whether a modified contract is enforceable. NRC Golf Course, _N.C. App. at_, 731 S.E.2d at 480 (“Parties to a contract may agree to change its terms; but the new agreement, to be effective, must contain the elements necessary to the formation of a contract.” (quotation marks and citation omitted)); Corbin v. Langdon, 23 N.C. App. 21, 26, 208 S.E.2d 251, 254 (1974). The three requisite elements to form an enforceable contract are offer, acceptance, and consideration. Cap Care Grp., Inc. v. McDonald, 149 N.C. App. 817, 822, 561 S.E.2d 578, 582 (2002). Consequently, we must consider whether each element exists to determine whether a modified employment contract was formed between Plaintiff and U.S. Foods. “It is essential to the formation of any contract that there be mutual assent of both parties to the terms of the agreement so as to establish a meeting of the minds.” Harrison v. Wal-Mart Stores, Inc., 170 N.C. App. 545, 550, 613 S.E.2d 322, 327 (2005) (quotation marks and citation omitted); see also Wooten v. S.R. Biggs Drug Co., 169 N.C. 64, 68, 85 S.E. 140, 142 (1915) (holding that “the one thing without which a contract cannot be made ... is the assent of the parties to the agreement, the meeting of the minds upon a definite proposition”). As such, a contract modification must also have an offer of modified terms and acceptance on those terms. Corbin, 23 N.C. App. at 26, 208 S.E.2d at 255. At-will contracts may also be modified by the parties to form a new contract. Arndt v. First Union Nat. Bank, 170 N.C. App. 518, 526, 613 S.E.2d 274, 280 (2005) (“The employer, in an at will relationship, can modify, unilaterally the future compensation to be paid to an employee. If the employer modifies the terms of an [employee] at will; and, the employee knows of the change, the employee is deemed to have acquiesced to the modified terms, if he continues the employment relationship.”). Here, Mr. Abernathy testified that the company met with displaced drivers after its merger with PYA Monarch. Mr. Abernathy said the company offered its displaced drivers jobs with the subsuming branches. U.S. Foods extended its offer for its employees to transfer branches at a company safety meeting in Charlotte. The alternative to transferring branches was to receive a severance package from U.S. Foods. Thus, Plaintiff had a choice: he could accept a transfer or he could cease employment and receive a severance package. This fundamental choice qualifies as a new offer under the traditional definition of a contract. Plaintiff accepted the offer. At the Charlotte meeting where his new terms of employment were proposed, Plaintiff negotiated the details of his transfer with his supervisor. Specifically, Plaintiff requested that his trailers be dropped near his home in Augusta. Plaintiff also completed paperwork at the Charlotte safety meeting to accept the transfer, although U.S. Foods’s Charlotte human resources department had to approve the transfer before it was “official.” From the foregoing, it is clear Plaintiff accepted a new offer modifying his existing at-will employment agreement. Finally, there must also be consideration in support of the modified contract. Clifford v. River Bend Plantation, Inc., 312 N.C. 460, 466, 323 S.E.2d 23, 27 (1984) (“It is established law that an agreement to modify the terms of a contract must be based on new consideration or on evidence that one party intentionally induced the other party’s detrimental reliance.” (citation and quotation marks omitted)). “Consideration sufficient enough to support a contract consists of any benefit, right, or interest bestowed upon the promisor, or any forbearance, detriment, or loss undertaken by the promisee.” Fairfield Harbour Prop. Owners Ass’n, Inc. v. Midsouth Golf, LLC, 215 N.C. App. 66, 75, 715 S.E.2d 273, 282 (2011) (quotation marks and citation omitted). This Court does not typically consider the adequacy of consideration, as “inadequate consideration, as opposed to the lack of consideration, is

Plaintiff Win

Tong v. Dunn

14983Dec 2013

SIU S. TONG, et al., Plaintiffs v. DAVID DUNN, TIMOTHY KRONGARD, ED MASI, SOPHIA WONG and JANET WYLIE, Defendants No. COA12-1261 Filed 17 December 2013 1. Appeal and Error — motion to dismiss appeal — denied Defendants’ motion to dismiss the appeal under Hill v. West, 177 N.C. App. 132, was denied by the Court of Appeals. Hill has been repeatedly limited to its specific, unusual facts, which were not present here. 2. Collateral Estoppel and Res Judicata — claim splitting— federal and state actions — separate wrongs The trial court erred in an action by the founder of a company arising from a merger by concluding that the doctrines of claim-splitting and res judicata applied. A separate wrong was asserted in the federal action and in this case; plaintiff’s claims in the federal action involved claims arising out of his position as an employee while the current action involved a wrong inflicted upon plaintiff in his capacity as a common shareholder. Appeal by plaintiff from order entered 25 May 2012 by Judge James L. Gale in Orange County Superior Court. Heard in the Court of Appeals 9 April 2013. Poyner Spruill LLP, by Steven B. Epstein and Andrew H. Erteschik, for plaintiff-appellant. Kilpatrick Townsend & Stockton LLP, by John M. Moye, for defendants-appeUees. GEER, Judge. Plaintiff Siu S. Tong appeals from an order granting judgment on the pleadings to defendants David Dunn, Timothy Krongard, Ed Masi, Sophia Wong, and Janet Wylie on Mr. Tong’s claim for breach of fiduciary duty. Defendants contended and the trial court agreed that Mr. Tong’s claim in this case was barred by res judicata because the claim in this case arose from the same set of operative facts as the claims in Mr. Tong’s earlier employment action. We hold that the order is contrary to our Supreme Court’s holding in Bockweg v. Anderson, 333 N.C. 486, 428 S.E.2d 157 (1993), and, therefore, reverse and remand. Facts Mr. Tong was the founder of Engineous Software, Inc. (“Engineous”). During the events that gave rise to this action, Mr. Tong continued to be a key employee of Engineous, a common shareholder of Engineous, and a member of the Board of Directors of Engineous elected to represent the common shareholders. The common shareholders collectively owned a minority interest in the company. In Spring 2006, the Engineous Board of Directors, amajority of which were preferred shareholders, hired Wachovia Bank to explore opportunities to sell Engineous. Ultimately, Dassault Systems S.A. (“Dassault”) offered $35-40 million for Engineous. Although Mr. Tong believed that Dassault’s offer was not in the best interests of the common shareholders, the Board ultimately agreed to a merger with Dassault in which Dassault acquired Engineous for approximately $40 million and merged Engineous into ENG Acquisition, Inc. (“ENG”), a wholly-owned subsidiary of Dassault. On 11 July 2011, Mr. Tong filed suit in Wake County Superior Court against Dassault, Engineous, Dassault Systemes Simulia K.K. formerly known as Engineous Japan, Inc., Janet Wylie, Edward Masi, Tim Krongard, David Dunn, Sophia Wong, and Charles Johnson. This action was ultimately removed to federal court (“the federal action”). In an amended complaint, Mr. Tong alleged that the individual defendants knew that the proposed merger agreement between Engineous and Dassault made Mr. Tong’s continued employment a condition of Dassault purchasing Engineous. On 10 June 2008, however, Mr. Tong resigned from the Engineous Board of Directors because of his concerns regarding the manner in which the proposed sale of Engineous to Dassault would affect the common shareholders. On 13 June 2008, three days before the execution of the merger agreement, Engineous, acting through defendant Krongard with the knowledge and consent of the other individual defendants (all of whom were members of Engineous’ Board of Directors), promised Mr. Tong a payment of at least $300,000.00 (the “carve-out payment”) if he would execute an employment agreement agreeing to continue to work for Dassault after the merger. The amended complaint alleged that Mr. Krongard knew that Mr. Tong would have to also sign a release agreement in order to receive the carve-out payment, but Mr. Krongard intentionally or negligently, with the knowledge and consent of the other individual defendants, failed to inform Mr. Tong of that requirement. Mr. Tong asserted that Mr. Krongard’s offer of the carve-out payment without mention of the required release was intended to fraudulently induce Mr. Tong into signing an employment agreement with Dassault. Further, Mr. Tong alleged that Engineous and the individual defendants knew that he would likely exercise his rights as a minority shareholder to challenge the sale. On 16 June 2008, Mr. Tong signed the employment agreement with Dassault. On the same day, after Mr. Tong signed the employment agreement, Engineous and Dassault signed the merger agreement. The merger agreement required that Mr. Tong, as well as certain other Engineous employees, have active and valid employment agreements with Dassault at the time the merger closed in order for the deal to be consummated. On 8 July 2008, the shareholders approved the merger agreement. Mr. Tong did not vote in favor of the merger agreement and preserved his rights as a common shareholder to object to the merger. On 14 July 2008, however, defendant Janet Wylie, the CEO of Engineous, notified Mr. Tong for the first time that in order to receive the $300,000.00 carve-out payment, he would have to sign a release extinguishing any claims he had as a common shareholder to challenge the sale of Engineous. Because Mr. Tong refused to sign the release, he was not paid the $300,000.00 carve-out payment. On 21 July 2008, the merger closed and other Engineous executives who had signed employment contracts and releases were paid the promised carve-out payments. The federal amended complaint further alleged that Mr. Tong complied with his employment agreement by commencing work for Dassault. Mr. Tong alleged, however, that Dassault breached the employment agreement by not paying him performance bonuses and by undermining Mr. Tong’s ability to earn compensation specified in the agreement as part of an incentive plan. The amended complaint alleged that Dassault terminated Mr. Tong’s employment on 13 January 2010, but refused, in breach of the terms of the employment agreement, to pay reasonable business expenses and severance pay. Dassault also failed to pay a Japanese retirement allowance that Mr. Tong alleged was due for his service as a director of Engineous Japan, Inc. Mr. Tong asserted claims in the federal action against the individual defendants (defendants Krongard, Wylie, Masi, Dunn, Wong, and Johnson) and Engineous for fraudulent inducement and negligent misrepresentation based on Mr. Tong’s having been induced to sign the employment agreement in exchange for $300,000.00 without being told that receipt of the sum was conditioned on his signing a release of his claims as a common shareholder. Mr. Tong also alleged a claim for breach of contract against Engineous for failure to pay the $300,000.00 and against Dassault for tortious interference with the agreement to pay Mr. Tong $300,000.00. In addition, Mr. Tong sued Dassault for breach of the employment agreement, violation of the North Carolina Wage and Hour Act, and breach of contract and/or quantum meruit for failure to pay the Japanese retirement allowance. Mr. Tong stated in his amended complaint that he consented to arbitrate the claims brought against Dassault for breach of contract and violation of the Wage and Hour Act. On 20 July 2011, 10 days after he filed his first lawsuit, Mr. Tong and 47 other plaintiffs, all common shareholders of Engineous, filed this action in Orange County Superior Court against individual defendants David Dunn, Timothy Krongard, Ed Masi, Sophia Wong, and Janet Wylie, all of whom were preferred shareholders of Engineous and members of Engineous’ Board of Directors. Also joined as a defendant was ENG in its own capacity and as the successor to Engineous. The Orange County Superior Court complaint alleged that the individual defendants owed the common shareholders a fiduciary duty, which included a duty to maximize the value to all shareholders, including the common shareholders, in connection with Dassault’s acquisition of Engineous. The complaint alleged that “[t]he Individual Defendants breached these duties by knowingly and recklessly placing their own interests above those of all shareholders, self-dealing, and failing to adequately oversee the Engineous[] officers, failing to maximize the value of the sale of Engineous, thereby actually and proximately causing Mr. Tong and the other Common Shareholders to suffer damages in an amount to be proven at trial.” The complaint further asserted a claim for aiding and abetting these breaches of fiduciary duty against ENG. In support of these claims, plaintiffs alleged that Mr. Tong agreed to work with Mr. Krongard and Wachovia Bank to explore opportunities to sell Engineous. Although Mr. Tong’s efforts resulted in four well-known potential buyers expressing interest, with two of them entering a bidding process, the board of directors cut off Mr. Tong’s interactions with the potential buyers. The complaint further alleged that during board meetings, statements were made reflecting that certain board members were placing their own interests ahead of the common shareholders. Mr. Tong refused to sign board minutes for one of the key board meetings because, the complaint alleged, of “the omission of many statements and the failure to acknowledge the apparent agreement between the preferred board members that their individual interests should and would drive the decision making process going forward (casting aside the common shareholders’ interests).” The board and Engineous’ executive management then attempted to block Mr. Tong’s interaction with the potential buyer, Dassault, so as to limit the flow of information to Mr. Tong and the other common shareholders. Although board members recognized that Engineous was not in a strong position to sell and although Mr. Tong urged the board to wait until after the roll out of Engineous’ new enterprise product because it would likely significantly improve the company’s sale value, the board refused to wait. The board members justified that refusal by expressing concern about a potential cash flow shortage in the future, and yet awarded substantial executive bonuses to company officers, including the individual defendants. The complaint further alleged that the preferred stock board members, including the individual defendants, voted to set aside funds to reward employees and executives who supported the merger that favored preferred shareholders and to buy general releases from certain key employees. Dassault initially made an offer of $35 million to $40 million for Engineous. Mr. Dunn, a member of the board representing preferred shareholders, proposed that the board accept the sale price, while Mr. Tong proposed that the board wait for a competing offer from Siemens. Mr. Tong expected that an additional bidder would offer a higher price. The complaint alleged that the board, however, showed little interest in attempting to negotiate a higher sale price, but rather were more interested in proceeding to a closing that would benefit the preferred shareholders. The complaint alleged that Mr. Krongard stated that particular terms offered by Dassault -- including the speed at which the preferred shareholders would collect the sale proceeds, the size of the escrow, and the timing of the closing - were of paramount importance. Those terms did not, however, assist the common shareholders or protect the value of the common shareholders’ interests in Engineous. In addition, according to the complaint, throughout the merger and acquisition process, the individual defendants Ms. Wylie and Mr. Krongard interfered with Mr. Tong’s right, as a director representing common shareholders and as a common shareholder himself, to interact with participants and gather information about ongoing developments. Dassault acquired Engineous by merger with ENG for approximately $40 million. The complaint alleged that several board members made false representations to common shareholders to represent that the deal accorded with their fiduciary responsibilities when, in fact, the individual defendants “were considering their own self-interest first.” The complaint also asserted that had defendants acted in accord with their fiduciary responsibilities, the ultimate valuation of Engineous would have been higher which would have benefitted the common shareholders. Further, according to the complaint, “in closing this transaction in the manner described above, and as they did, the Defendants were not acting in the best interests of the Company and all its shareholders, but rather in their own self-interest, causing harm to Mr. Tong and the Common Shareholders.” As relief, the Orange County complaint sought a declaration that the Engineous board’s actions constituted breaches of fiduciary duty. The complaint also sought compensatory damages suffered as a result of defendants’ wrongdoing. The individual defendants filed an answer dated 19 September 2011. Defendant ENG filed a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure on 29 September 2011. In the federal action, on 7 October 2011, Mr. Tong filed a stipulation of dismissal with prejudice of his claims against Engineous and the individual defendants for fraudulent inducement to contract and negligent misrepresentation, as well as his claims against Engineous for breach of contract and against Dassault for tortious interference with the contract to pay the carve-out payment. On 24 October 2011, the individual defendants in the Orange County action filed an amended answer adding an affirmative defense that “[p]laintiff Tong’s claims against the Individual Defendants are barred by the doctrines of res judicata and claim splitting, given that Plaintiff Tong filed a prior action against the Individual Defendants . . . and that action was dismissed with prejudice.” The answer contended that “[u] nder the doctrines of res judicata and claim splitting, the prior disposition of the Federal Action operates as a bar on Plaintiff Tong’s present action against the Individual Defendants, and thus Plaintiff Tong’s claims are subject to dismissal as a matter of law.” The individual defendants then moved for judgment on the pleadings as to Mr. Tong’s claims on 30 November 2011. The trial court granted ENG’s motion to dismiss on 26 March 2012. On 25 May 2012, the trial court also granted the individual defendants’ motion for judgment on the pleadings as to Mr. Tong’s claims. The court concluded “that issues Tong now seeks to litigate in the Present Action were raised by the pleadings in the [federal action] and res judicata applies. Rather than asserting different injuries arising from independent successive acts, Tong complains that Individual Defendants set out on a concerted course of action designed to complete the Merger, including buying Tong’s consent through false pretenses and at the same time extinguishing the rights of common shareholders, including Tong’s. While other shareholders . . . were not party to the [federal action] and are not then subject to res judicata, Tong’s claims are barred by his dismissal of the [federal action] with prejudice.” On 5 August 2012, the remaining plaintiffs other than Mr. Tong filed a notice of voluntary dismissal without prejudice. Mr. Tong filed a notice of appeal from the order granting judgment on the pleadings on 7 August 2012. Motion to Dismiss Anneal We first address defendants’ motion to dismiss Mr. Tong’s appeal. Defendants contend that this Court must dismiss the appeal under Hill v. West, 177 N.C. App. 132, 627 S.E.2d 662 (2006). This Court has, however, repeatedly limited Hill to the specific, unusual facts present in that case. The circumstances present in Hill are not found in this case and, therefore, Hill is not controlling here. In Hill, the plaintiffs filed a negligence action arising out of a traffic accident. Id. at 133,627 S.E.2d at 662-63. The trial court entered an order granting two defendants’ Rule 12(b)(6) motion to dismiss and a subsequent order granting summary judgment to three other defendants, with claims against one defendant remaining unresolved. Id. at 133-34, 627 S.E.2d at 663. This Court dismissed the plaintiffs’ appeal from the partial summary judgment order as interlocutory, noting in addition that the plaintiffs had failed to include a statement of grounds for appellate review in violation of the Rules of Appellate Procedure. Id. at 133, 627 S.E.2d at 663. On remand, the trial court entered a consent order that purported to be a voluntary dismissal pursuant to Rule 41(a)(1) of the Rules of Civil Procedure of the claims against the remaining defendant. Hill, 177 N.C. App. at 135, 627 S.E.2d at 664. The order, however, included a special provision stating that the trial court “ ‘specifically order[ed], with the consent of all parties, that if this case is remanded for trial, all claims against [the remaining defendant] may be reinstated as the Plaintiffs deem necessary and that the prior dismissals without prejudice will not be pled as a bar to said claims.’ ” Id. In other words, contrary to Rule 41(a)(1), the claims against the remaining defendant could be reinstated at any time without regard to the one-year limitation contained in Rule 41(a)(1). When the plaintiffs then appealed the summary judgment order a second time, this Court first noted that the plaintiffs had again violated the Rules of Appellate Procedure by failing to include a statement of the grounds for appellate review. Hill, 177 N.C. App. at 134, 627 S.E.2d at 633. Relying on Viar v. N.C. Dep’t of Transp., 359 N.C. 400, 402, 610 S.E.2d 360, 361 (2005), the Court found no basis for suspending the Rules of Appellate Procedure under Rule 2. Hill, 177 N.C. App. at 134, 627 S.E.2d at 663-64. The Court then pointed out, in addition, that the unique consent order was a “manipulation of] the Rules of Civil Procedure in an attempt to appeal the 2003 summary judgment that otherwise would not be appealable” and was not a final judgment within the meaning of Rule 54 of the Rules of Civil Procedure. Id. at 135, 627 S.E.2d at 664. Based on both the appellate rules violation and the attempt to manipulate the Rules of Civil Procedure, this Court dismissed the second appeal. Id. at 136, 627 S.E.2d at 664. In subsequent cases, this Court has declined to dismiss appeals under Hill under circumstances identical to those in this case. In Curl v. Am. Multimedia, Inc., 187 N.C. App. 649, 654, 654 S.E.2d 76, 80 (2007), this Court limited Hill’s holding “to the facts of that case,” noting that “Hill did not attempt to distinguish its holding from the significant body of case law holding contra” and that “the holding in Hill was apparently based in part on the appellants’ ‘manipulative’ behavior and failure to follow the Rules of Appellate Procedure[.]” See also Goodman v. Holmes & McLaurin Attorneys at Law, 192 N.C. App. 467, 472, 665 S.E.2d 526, 530 (2008) (declining to dismiss appeal based on Hill even though appeal followed voluntary dismissal without prejudice of claims surviving trial court’s order because plaintiff followed Rules of Appellate Procedure). This Court also rejected an identical argument based on Hill in Duval v. OM Hospitality, LLC, 186 N.C. App. 390, 651 S.E.2d 261 (2007). This Court explained: “The stipulation of dismissal did not contain any additional language purporting to give plaintiff any time beyond that permitted by Rule 41(a)(1) to pursue her claim against Days Inn. The procedural posture of this case does not

Plaintiff Win

Estate of Vaughn v. Pike Electric, LLC

14983Nov 2013

THE ESTATE OF GARY VAUGHN, TAMMY VAUGHN, ADMINISTRATRIX, Plaintiff v. PIKE ELECTRIC, LLC, PIKE ELECTRIC, INC., and KENNETH SHALAKO PENLAND, Defendants No. COA13-448 Filed 19 November 2013 1. Appeal and Error — interlocutory orders and appeals— denial of motions to dismiss — substantial right — Workers’ Compensation Act exclusivity provision The denial of a motion to dismiss under N.C.G.S. § 1A-1, Rule 12(b)(1) and the exclusivity provision of the Workers’ Compensation Act in a negligence case affected a substantial right and were immediately appealable. Further, the denial of defendants’ N.C.G.S. § 1A-1, Rule 12(b)(6) motions to dismiss were immediately appeal-able as affecting a substantial right to the extent that they involved the trial court’s jurisdiction over this matter. 2. Workers’ Compensation — Woodson employer exception— failure to allege intentional misconduct The trial court’s order denying defendant Pike Electric’s motions to dismiss under N.C.G.S. § 1A-1, Rules 12(b)(1) and 12(b)(6) in a negligence case was reversed. Plaintiff offered no basis to believe that Pike Electric was aware of, intended, or was substantially certain that defendant Penland’s actions on that day would result in decedent’s death. Plaintiff failed to allege uncontroverted evidence of defendant Pike Electric’s intentional misconduct. 3. Workers’ Compensation — Pleasant co-employee exception— willful, wanton, and reckless negligence The trial court’s order denying defendant Penland’s motions to dismiss under N.C.G.S. § 1A-1, Rules 12(b)(1) and 12(b)(6) in a negligence case was affirmed. An employee may exhibit willful, wanton, and reckless negligence either when he intentionally injures a coworker or when he does so with manifest disregard to the consequences of his actions. Defendant Penland’s alleged direction to send decedent up a utility pole despite decedent’s severe lack of training and expertise was sufficient to create an inference that Penland was manifestly indifferent to the consequences of his actions under either Rule 12(b)(1) or Rule 12(b)(6). Appeal by Defendants from order entered 25 February 2013 by Judge Gary M. Gavenus in Rutherford County Superior Court. Héard in the Court of Appeals 11 September 2013. Podgomy Law, P.A., by George Podgomy, Jr., and Price, Smith, Hargett, Petho & Anderson, by Richard L. Anderson, for Plaintiff. Roberts & Stevens, P.A., by F. Lachicotte Zemp, Jr. and Robin A. Seelbach, for Defendants Pike Electric, LLC and Pike Electric, Inc. Bennett & Guthrie, P.L.L.C., by Richard V. Bennett, Roberta King Latham, and Joshua H. Bennett, for Defendant Kineth Shalako Penland. STEPHENS, Judge. Factual and Procedural Background This case arises from the death of Gary Vaughn (“Decedent”). He was electrocuted on 29 October 2009 while working as a groundman for Defendants Pike Electric, LLC and Pike Electric, Inc. (collectively, “Pike Electric”) and died as a result of that injury. Almost three years later, on 4 October 2012, Decedent’s surviving spouse and the administratrix of his estate, Tammy Vaughn (“Plaintiff’), filed a negligence complaint against Pike Electric and Decedent’s supervisor, Defendant Kineth Penland (“Penland”), in Rutherford County Superior Court. In her complaint, Plaintiff alleges the following: 10. . . . Decedent was employed by Pike Electric as a groundman. As a groundman, . . . Decedent assisted foremen, linemen[,] and other employees of Pike Electric who worked on... overhead distribution lines .... 11. [Groundmen]... were neither trained nor permitted to perform work on poles with energized lines . .. due to the risk of electrocution and/or death inherent in such work. 13. On the morning of October 29, 2009,... Decedent was employed as a groundman in a crew overseen by Penland [, which had been] instructed to retrofit transformers on overhead power lines.... 14. As a groundman, the duties to be performed by . . . Decedent during this work were prescribed and circumscribed by the Pike Electric [work methods and safety manuals]. These duties did not include working on power lines; especially work on energized power lines. 15. [At the time of his death, Decedent had been employed as a groundman for less than two months] and had not received any training or job assessment during that period of time. [Defendants] knew that... Decedent had received no training to perform the work required of a lineman. 16. Defendants knew that . . . Decedent had ... no previous experience with power line distribution and transmission and had worked as a truck driver prior to being employed by... Pike Electric. 17. Defendants knew that. . . Decedent had received no training as a lineman and... was not [permitted to] climb [] poles or work[] on or near energized lines or equipment____ 18. Retrofitting transformers is an inherently dangerous activity as it involves de-energizing the transformer by disconnecting the stinger from the primary line, replacing the lightning arrester, installing guy sticks, installing a fused cutout[,] and re-energizing the transformers. 19. . . . Defendants knew that undertaking such a task required specific training and experience and that instructing a novice groundman such as ... Decedent to perform such work was certain to result in death or serious injury. 20. ... Penland instructed... Decedent to climb the utility pole [that] was supporting [the] overhead power lines . . . and to begin the work of retrofitting the transformer. 21. The power lines that Penland instructed ... Decedent to work on were high voltage distribution lines. They were energizedf,] uninsulated[,] and carried 7200 volts of electricity. 22. Defendants knew that [groundmen] such as Decedent were not qualified, nor permitted, to undertake any of those dangerous activities. 23. Nevertheless,... Decedent was... instructed to use a “shotgun” stick to de-energize the pole. This involved the dangerous step of removing the hotline clamp from the primary line which would leave the primary line exposed. This is a task reserved for [a] trained and experienced lineman. 24. Defendants knew that . . . Decedent had neither the training nor experience to safely carry out such a task[,] yet instructed him to do so regardless. 25. . . . Decedent was not supervised nor provided with adequate personal protective equipment while undertaking the tasks assigned to him. 26. Shortly after... Decedent climbed the utility pole, the remaining crewman heard a loud noise from the top of the pole and turned to see . . . Decedent hanging limp from the utility pole. 27. The other members of. . . Decedent’s crew were then forced to perform a pole[-]top rescue of... Decedent. 28. Resuscitation efforts were attempted[,] but [Decedent] did not survive his injuries. 29. As the foreman and/or employee in charge on October 29, 2009, Penland’s duties and responsibilities were prescribed by . . . OSHA regulations and [the Pike Electric safety manual]. These duties included... ensuring that all lines to be worked on were de-energized, . . . all employees followed applicable safety rules, and ... all of the employees in the work crew possessed the necessary information and work skills ... to perform the work carefully. 30. . . . Defendants knew, or should have known, that groundmen and other untrained and inexperienced employees were . . . instructed to perform the inherently dangerous activities reserved for trained linemen. 33. ... OSHA determined that Defendant Pike Electric had previously been cited by North Carolina OSHA for violations ... in North Carolina as well as in other states where [it provides] similar services. 34. . . . Pike [Electric] . . . was aware that employees such as . . . Decedent were being placed in[] hazardous situations that were substantially certain to cause injury or death. 35. . . . [Pike Electric] was cited for [ten] serious safety violations in the [S]tate of Georgia in 2001 following the fatal electrocution of an employee while upgrading an electrical system. 37. ... [Pike Electric] was cited for safety violations in the [S]tate of Florida in 2003 following [an employee injury] after [the injured employee] contacted] an energized power line. 38. Following [an] investigation [in this case], OSHA issued citations to [Pike Electric because]: a. ... An employee classified as a groundmanf, i.e., Decedent,] was allowed to perform work as a lineman for which he had not been trained[; and] b. ... [Decedent] was working in close proximity to 7200 volts . . . without wearing insulating gloves or... sleeves. Defendants Pike Electric and Penland moved to dismiss Plaintiffs complaint in December of 2012 under Rules 12(b)(1) and 12(b)(6) of the North Carolina Rules of Civil Procedure and section 97-10.1 (“the exclusivity provision”) of the North Carolina Workers’ Compensation Act (“the Act”). Pursuant to those rules, Defendants asserted that the trial court lacked subject matter jurisdiction to proceed with the case and that Plaintiff had failed to state a claim on which relief could be granted. The motions were heard on 18 February 2013 and, one week later, denied. Defendants appeal. Discussion Defendants appeal the trial court’s order denying their motions to dismiss under Rules 12(b)(1) and 12(b)(6). On both motions, we reverse as to Pike Electric and affirm as to Penland. I. Appellate Jurisdiction Defendants’ appeal is interlocutory. It is well settled that an order denying a motion to dismiss made pursuant to the exclusivity provision of the Act and either Rule 12(b)(6) or Rule 12(b)(1) is interlocutory. Trivette v. Yount, _ N.C. App. _, _, 720 S.E.2d 732, 734 (2011) (“[T]he trial court’s order denying Defendant’s motion to dismiss pursuant to Rule 12(b)(1) ... is interlocutory.”) [hereinafter Trivette I\, affirmed in part, reversed in part on other grounds, and remanded, 366 N.C. 303, 735 S.E.2d 306 (2012); Block v. Cnty. of Person, 141 N.C. App. 273, 276, 540 S.E.2d 415, 418 (2000) (“[A] denial of a motion pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) is an interlocutory order from which no appeal may be taken immediately.”) (citation, brackets, certain punctuation, and internal quotation marks omitted). “An order is interlocutory if it is made during the pendency of an action and does not dispose of the case [, ] but requires further action by the trial court in order to finally determine the entire controversy.” Trivette I,_N.C. App. at _, 720 S.E.2d at 734. Generally, a party cannot immediately appeal from an interlocutory order. Davis v. Davis, 360 N.C. 518, 524, 631 S.E.2d 114, 119 (2006). “The rationale behind [disallowing the immediate appeal of interlocutory orders] is that no final judgment is involved in such a denial and the movant is not deprived of any substantial right that cannot be protected by a timely appeal from a final judgment which resolves the controversy on its merits.” Block, 141 N.C. App. at 276-77, 540 S.E.2d at 418. Because the trial court’s denial of Defendants’ motions to dismiss did not finally dispose of Plaintiff’s claims in this case, it is interlocutory and, therefore, not generally subject to immediate appellate review. Nevertheless, an interlocutory order may be reviewed on appeal when either “(1) . . . there has been a final determination as to one or more of the claims and the trial court certifies that there is no just reason to delay the appeal, [or] (2) ... delaying the appeal would prejudice a substantial right.” Milton v. Thompson, 170 N.C. App. 176, 178, 611 S.E.2d 474, 476 (2005). Because the trial court did not certify that there was no just reason to delay Defendants’ appeal, review is proper only if the delay would affect a substantial right. We hold that it would. A. Denial of Defendants’ Motions to Dismiss Under Rule 12(b)(1) As Pike Electric points out, our Supreme Court has determined that the denial of a motion to dismiss under Rule 12(b)(1) and the exclusivity provision of the Act affects a substantial right “and will work injury if not corrected before final judgment____” See Burton v. Phoenix Fabricators & Erectors, Inc., 362 N.C. 352, 661 S.E.2d 242 (2008) (remanding to the Court of Appeals for consideration of the merits of an appeal that was brought on the denial of the defendant’s Rule 12(b)(1) motion to dismiss the plaintiff’s negligence action under the exclusivity provision of the Indiana workers’ compensation statute). Therefore, Defendants’ appeal as to that element of the denial of their respective motions to dismiss — Rule 12(b)(1) — is proper. B. Denial of Defendants’ Motions to Dismiss Under Rule 12(b)(6) In footnote 2 of his brief, Penland states that his argument “will focus [exclusively] on the trial court’s ruling regarding [his motion to dismiss] pursuant to Rule 12(b)(6).” However, he goes on to attempt to preserve review of the denial of his motion to dismiss under Rule 12(b) (1) “should this Court determine that the trial court erred in dismissing his action under [Rule 12(b)(1)].” This is impermissible. Defendant’s ipse dixit statement is not sufficient to preserve appellate review. Rule 28(b)(6) of the North Carolina Rules of Appellate Procedure states that, in order to preserve an issue for appellate review, a party must offer “reason or argument” in support of that issue. If not, the issue will be deemed abandoned. N.C.R. App. P. 28(b)(6). Because Penland intentionally omitted any reason or argument that the trial court erred in dismissing his motion under Rule 12(b)(1), that issue is deemed abandoned. Nevertheless, we elect to review the denial of Penland’s motion to dismiss as a jurisdictional matter under Rule 12(b)(1). Lee v. Winget Rd., LLC, 204 N.C. App. 96, 98, 693 S.E.2d 684, 687 (2010) (“[A]n appellate court has the power to inquire into jurisdiction in a case before it at any time, even sua sponte.”) (citation and internal quotation marks omitted). In their briefs, Defendants state that their appeals of the trial court’s denial of their motions to dismiss pursuant to Rule 12(b)(6) are properly before this Court under Burton. This is incorrect. The Supreme Court’s opinion in Burton allowed appellate review of the trial court’s denial of a motion to dismiss as affecting a substantial right pursuant to Rule 12(b)(1) and the exclusivity provision of another state’s workers’ compensation act. Id. It did not address whether jurisdiction was present for an appeal of the denial of a motion to dismiss under Rule 12(b)(6). Indeed, neither Pike Electric nor Penland has cited any case allowing review of the denial of a motion to dismiss under Rule 12(b)(6) and the exclusivity provision of the Act on grounds that such denial affects a substantial right. After reviewing the case law, we are unable find a decision of either appellate court addressing the validity of an interlocutory appeal from the denial of a motion to dismiss under Rule 12(b)(6) and the exclusivity provision. Accordingly, whether the trial court’s denial of a motion to dismiss under Rule 12(b)(6) and the exclusivity provision of the Act is immediately appealable as affecting a substantial right is a matter of first impression. As discussed above, our Supreme Court has determined that the denial of a motion to dismiss under Rule 12(b)(1) and the exclusivity provision of the Act is immediately appealable as affecting a substantial right. In this case, Defendants limit their arguments regarding the trial court’s denial of their motions to dismiss under Rule 12(b)(6) to the issue of jurisdiction, arguing that Plaintiff failed to state a claim upon which relief may be granted because the superior court did not have jurisdiction to determine her claim since it arose under the exclusivity provision of the Act. Importantly, Defendants do not argue on appeal that Plaintiff failed to state a claim upon which relief can be granted pursuant to North Carolina tort law. Because the Supreme Court has determined that the denial of a motion to dismiss for lack of jurisdiction under the exclusivity provision of the Act affects a substantial right, we conclude that the denial of Defendants’ Rule 12(b)(6) motions to dismiss is immediately appealable as affecting a substantial right to the extent that those motions were asserted pursuant to the exclusivity provision of the Act. Accordingly, to the extent that they involve the trial court’s jurisdiction over this matter, we review Defendants’ appeals on the merits. II. Standard, of Review “The standard of review on a motion to dismiss under Rule 12(b) (1) for lack of jurisdiction is de novo.” Dare Cnty. v. N.C. Dep’t of Ins., 207 N.C. App. 600, 610, 701 S.E.2d 368, 375 (2010) (citations and internal quotation marks omitted). Under Rule 12(b)(6), [t]he motion to dismiss . . . tests the legal sufficiency of the complaint. In ruling on the motion the [factual] allegations of the complaint must be viewed as admitted, and on that basis the court must determine as a matter of law whether the allegations state a claim for which relief may be granted. Stanback v. Stanback, 297 N.C. 181, 185, 254 S.E.2d 611, 615 (1979) (citations omitted). On a motion to dismiss under Rule 12(b)(6), the court is not, however, required to accept mere conclusory allegations, unwarranted deductions of fact, or unreasonable inferences as true. Strickland, v. Hedrick, 194 N.C. App. 1, 20, 669 S.E.2d 61, 73 (2008) (citation and internal quotation marks omitted); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 167 L. Ed. 2d 929, 934 (2007) (“While a complaint attacked by a [Federal] Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions^ Indeed,] a formulaic recitation of the elements of a cause of action will not do[.]”) (citations, internal quotation marks, and brackets omitted). III. Analysis The exclusivity provision of the Act states that “the rights and remedies [provided to] the employee, his dependents, next of kin, or personal representative shall exclude all other rights and remedies of the employee ... as against the employer at common law or otherwise on account of... injury or death.” N.C. Gen. Stat. § 97-10.1 (2011). The social policy behind [this provision] is that injured workers should be provided with dignified, efficient^] and certain benefits for work-related injuries and that the consumers of the product are the most appropriate group to bear the burden of the payments. The most important feature of the typical workers’ compensation scheme is that the employee and his dependents give up their common law right to sue the employer for negligence in exchange for limited but assured benefits. Consequently!,] the negligence and fault of the injured worker ordinarily is irrelevant. Pleasant v. Johnson, 312 N.C. 710, 712, 325 S.E.2d 244, 246-47 (1985). Under the exclusivity provision, a worker is generally barred from bringing an action in our courts of general jurisdiction against either his employer or a co-employee. Id. at 713, 325 S.E.2d at 247. Instead, the worker must pursue his or her action before the North Carolina Industrial Commission. In cases involving intentional injury by an employer or co-employee, however, our Supreme Court has stated that the worker may bring suit at common law. Id. Over time, this rule has been applied to two different circumstances. First, when a worker wishes to maintain an action against his employer, our Supreme Court has directed us to ask (a) whether the worker suffered injury or death and (b) whether the employer intentionally engaged in misconduct knowing that such conduct was substantially certain to cause serious injury or death. Woodson v. Rowland, 329 N.C. 330, 340-41, 407 S.E.2d 222, 228 (1991). If the answer to both questions is “yes,” then the worker “or the personal representative of the estate],] in [the] case of death, may pursue a civil action agains

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