Judge Louis Bledsoe of the North Carolina Business Court recently found himself in uncharted waters.
Plaintiff Mark O’Brien, a British citizen, had asked him to issue an injunction that would have barred TCG Consulting Partners from filing a “duplicative” lawsuit against him in England, while he pursues a suit against TCG here in North Carolina on the same issue.
But since there is no case law in the state addressing which standard courts should use when deciding whether litigants can be enjoined from proceeding in a foreign court, Bledsoe had little to go on when deciding whether to grant O’Brien’s request.
The 4th U.S. Circuit Court of Appeals provided no help. The case closest to the point being raised by O’Brien dates back to 1907, when the 4th Circuit ruled in United Cigarette Machine Co. v. Wright that “courts of equity can, and in a proper case ought to and will, restrain litigants in a foreign court.”
However, Bledsoe determined the United Cigarette ruling should not guide his decision in O’Brien’s case because the world has changed since 1907.
“The federal decision O’Brien advances here—applying federal law and issued over one hundred years ago when North Carolina’s international commerce was limited and considerations of international comity had not yet gained widespread judicial support—diminishes the persuasive authority the decision might otherwise have,” Bledsoe said in a recent order denying O’Brien’s request.
Instead, Bledsoe held that the dual lawsuits should proceed because O’Brien failed to demonstrate he would suffer the type of “irreparable miscarriage of justice” that should be required when a North Carolina court deviates from the general rule of international comity and enjoins a foreign court proceeding.
One international litigation attorney in the state said Bledsoe’s decision provides useful guidance on a question that is becoming increasingly common as more international companies and individuals move into the state.
Brooks Pierce partner Charles Baldwin, who co-authored a book on international litigation, said, “Judge Bledsoe isn’t shutting the door on the ability to enjoin a party from filing a lawsuit overseas. But he appears to be saying the bar is high and that it needs to be an extraordinary case before anyone is granted that type of injunction.”
The dispute between O’Brien and TCG stems from allegations that TCG improperly terminated O’Brien’s minority membership interest in the company.
TCG is a Charlotte-based corporate travel consulting firm that provides clients with services related to planning meetings, payments and expense management. Court records say O’Brien joined the company as a minority member in 2011 and was tasked with establishing a Europe, Middle East and Africa branch of the firm in England. Over the next four years, O’Brien allegedly grew the office to the point that it was bringing in more than $1 million in revenue annually.
But on Oct. 23, 2015, TCG’s majority member, Albert Taras, allegedly informed O’Brien over the phone that his agreement with the company was being terminated. When asked why, Taras allegedly replied, “I do not have to give you a reason.”
TCG allegedly offered O’Brien $58,000 for his stake in the company in a proposed separation agreement, but O’Brien rejected the payment and asked to see the company’s books. When the company refused, he sued TCG in North Carolina court.
O’Brien’s Nov. 19 complaint claims that the company had no legal right to terminate his minority stake and that he has lost out on compensation and commissions as a result. He alleges separate counts of constructive fraud, conversion, breach of the company’s operating agreement, and breach of obligations of good faith and fair dealing. He is also seeking access to the company’s records, a full accounting of its assets and liabilities and his allegedly unpaid compensation.
O’Brien’s complaint also makes reference to another lawsuit involving TCG. The company is suing James Drew, who once did work for TCG in England, to recover funds allegedly owed to TCG. Because O’Brien introduced Drew to Taras, Taras has allegedly claimed that O’Brien is responsible for the costs stemming from the lawsuit against Drew.
While O’Brien argues he is not responsible for Drew’s conduct, he signed an alleged promissory note emailed to him on March 19, 2014, in which he promised to pay the cost of the Drew litigation. The original amount included in the alleged promissory note was $142,000. But in a subsequent letter sent to O’Brien on Nov. 16, the company lowered the amount to $114,395.56.
O’Brien’s complaint includes a demand for a declaratory judgement saying he is not responsible for the cost of the Drew litigation.
That’s where Bledsoe’s order comes in. In TCG’s Nov. 16 letter seeking repayment of the cost of the Drew litigation, the company threatened to sue O’Brien in England if he did not pay. As a British citizen, O’Brien’s assets are located in the United Kingdom.
When O’Brien didn’t pay, TCG filed a Dec. 22 complaint against him in the London Mercantile Court. O’Brien responded by asking Bledsoe to enjoin TCG from proceeding with that action. If granted, O’Brien’s motion would effectively force the battle over whether the promissory note is enforceable to take place in North Carolina.
In the opinion supporting his order, Bledsoe notes that North Carolina case law is clear on the power of courts to block litigants from filing suit in another state. But he said federal and state courts typically apply a more rigorous standard when it comes to requests for international anti-suit injunctions.
The federal circuits are split on what that more rigorous standard should look like.
The 5th, 7th and 9th circuits have adopted what courts have referred to as the “liberal” approach to international anti-suit injunctions, which tends to define international comity more narrowly. Those circuits have granted injunctions in cases where it would avoid a “duplication of the parties and issues,” when it would prevent “vexatious or oppressive” litigation and when it would protect the moving party from undue prejudice, among other reasons.
Meanwhile, the District of Columbia, 1st, 2nd, 3rd and 6th circuits have adopted the so-called conservative approach to anti-suit injunctions, which gives more deference to international comity. That approach considers just two justifications for enjoining litigants from proceeding in a foreign jurisdiction: to protect the jurisdiction of the enjoining court and to avoid evasion of the enjoining court’s important public policies.
In O’Brien’s case, however, Bledsoe determined that issuing an anti-suit injunction was not proper under either approach. Bledsoe said the injunction should not be granted under the liberal approach because it would serve only to avoid the duplication of issues in concurrent proceedings—not to prevent the pursuit of “vexatious or oppressive” litigation. And under the conservative approach, Bledsoe found that the injunction would be improper because there is no threat to the jurisdiction of North Carolina’s courts and the action does not involve property located in the state.
“Although the Court is sympathetic that O’Brien may incur additional expense in litigating these two actions simultaneously, the Court does not find that the additional expense should cause the Court to deviate from the general rule of international comity that, absent some ‘irreparable miscarriage of justice,’ courts should be hesitant to enjoin a party from proceeding in an international forum,” Bledsoe said.
Since Bledsoe’s order, TCG has moved to have the majority of O’Brien’s case dismissed. Bledsoe has not yet issued a ruling on that motion.
Ross Fulton of Rayburn Cooper & Durham in Charlotte, who is representing TCG, said he was pleased with Bledsoe’s ruling.
“Judge Bledsoe’s ruling did not take a position either way on the liberal or conservative approach to answering the question,” Fulton said. “But either way, the U.K. litigation shouldn’t be enjoined because the case is against a British citizen whose assets are all in the U.K., who’s being sued in a British court. Our client was just choosing the forum where the assets are located.”
But O’Brien’s attorney, Jared Gardner, a name partner of Gardner Skelton in Charlotte, said he disagreed with the ruling because it will force his client to “do battle with a large organization on two different fronts.” He said the cost of litigating in both North Carolina and England would do his client irreparable harm.
The race begins
Now that the English lawsuit against O’Brien has been cleared to proceed, it will set off a race to judgment. If the English court issues a ruling on the alleged promissory note first, that decision will be brought back to North Carolina to be honored. The reverse will likely occur should the Business Court decide the matter first.
While foreign rulings are not automatically binding on U.S. courts, Brooks Pierce’s Baldwin says courts here typically honor them. North Carolina has a law on the books that requires state courts to honor foreign rulings in cases involving monetary assets, with few exceptions.
“These kinds of cases go both ways,” Baldwin said. “Sometimes it’s a party asking for the foreign proceeding to be enjoined, and sometimes it’s a foreign party asking to not allow a U.S. proceeding.”
Baldwin said he thinks Bledsoe’s opinion offered a good analysis of how various U.S. courts view the issue. But he said there will continue to be ambiguity in the law at the federal level until the U.S. Supreme Court takes up the issue.
“Bledsoe’s opinion doesn’t rule out anti-suit injunctions altogether,” Baldwin said. “Under a different set of facts, you could see a different result.”
The 10-page opinion is O’Brien v. TCG Consulting Partners (Lawyers Weekly No. 020-025-16). An opinion digest is available online at nclawyersweekly.com.
Follow Jeff Jeffrey on Twitter at @NCLWJeffrey.