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Civil Practice – Statute of Limitations – Set-Off & Recoupment – Arbitration – Corporate – Receivership

In re Southeastern Eye Center – Pending Matters (Lawyers Weekly No. 020-054-16, 18 pp.) (Louis Bledsoe III, J.) 2016 NCBC 57

Holding: Although two of the defendant-employee’s counterclaims are denominated as claims for set-off, the court concludes that these counterclaims – for breach of the parties’ employment contract and violation of the Wage and Hour Act – are in the nature of recoupment because they arise from the same transaction as the plaintiff-employer’s claims, i.e., the parties’ employment relationship. Accordingly, these counterclaims are not subject to a statute of limitations.

The court denies defendant’s motion to dismiss. The court grants plaintiff’s motion to dismiss the employee’s counterclaims for conversion, misappropriation, violation of G.S. § 55-12-02, and failure to prosecute or investigate. The court denies plaintiff’s motion to dismiss the employee’s counterclaims for breach of the employment contract, failure to make distributions under G.S. § 55-6-40, violation of the North Carolina Wage and Hour Act, and an accounting.

The defendant-employee is also a shareholder. He has filed counterclaims for conversion, misappropriation, and wrongful disposition of corporate assets. These counterclaims clearly seek recovery of damages for injury to property or assets of the plaintiff-employer/corporation rather than to defendant individually. As such, they are derivative claims brought on behalf of plaintiff.

Plaintiff is in receivership. All claims on behalf of plaintiff are controlled by the receiver and have been settled and released. The conversion, misappropriation and wrongful disposition counterclaims are dismissed.

Defendant brings his counterclaim for failure to make distributions as a shareholder of plaintiff rather than as a former employee. As a result, this is a set-off counterclaim because it seeks a reduction in damages arising out of a transaction independent of plaintiff’s employment-based claims. Accordingly, this counterclaim is subject to a three-year statute of limitations.

It is not clear on the face of the counterclaim when the alleged distributions (to another shareholder) took place. The court cannot conclude that the allegedly wrongful distributions were made more than three years prior to the date defendant filed his counterclaims.

Defendant also seeks the imposition of a constructive trust. This counterclaim has been rendered moot by the appointment of a receiver.

Defendant alleges that the receiver has failed to prosecute and fully investigate derivative claims on behalf of plaintiff. Such a challenge may be made through proper motion in the master file of these consolidated matters.

Defendant moves to dismiss two of plaintiff’s claims that arise out of the parties’ employment relationship. However, even though the parties’ employment contract contains an arbitration clause, and even though two of plaintiff’s claims fall within the scope of the arbitration clause, the parties’ failure to seek arbitration of such claims does not divest the court of subject matter jurisdiction over those claims. Adams v. Nelson, 313 N.C. 442, 329 S.E.2d 322 (1985).

Motions granted in part, denied in part.

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