North Carolina Lawyers Weekly
There’s no question that a defendant will face increased legal expenses and hassle when it is forced to fend off multiple lawsuits at once.
That’s why courts across the country have adopted what is known as the “prior pending action doctrine,” which requires a later lawsuit to be dismissed when the subject matter and parties are substantially similar to a prior proceeding.
But the doctrine is far from absolute. The North Carolina Court of Appeals recently took the opportunity to sketch out some of the doctrine’s limits when it comes to parallel domestic actions and breach of contract lawsuits.
The appeals court made clear in an Oct. 4 decision in Baldelli v. Baldelli that the doctrine should not apply in cases where the plaintiffs would not have the same remedies available to them in both cases. That finding overturned a lower court’s decision to throw out a lawsuit filed by Susan Baldelli against her ex-husband, Steven Baldelli, over several businesses the couple owned.
Cahill
Poyner Spruill partner Daniel Cahill, who represented Susan Baldelli and the other plaintiffs on appeal, said the appeals court’s decision helps to clarify when the prior pending action doctrine applies.
“This decision marks an expansion and reaffirmation that when you are entitled to a jury trial in Superior Court that you wouldn’t have in a District Court action, the prior lawsuit doesn’t get dismissed under the prior pending action doctrine,” said Cahill, who chairs Poyner Spruill’s litigation practice from the firm’s Raleigh office.
Opaque financials
The underlying dispute between the Baldellis grew out of Steven’s management of several businesses the couple owned.
According to court records, Steven Baldelli founded more than 20 businesses since the couple was married in 1979. Most of the businesses sold memberships in recreational vehicle parks across the United States. Other businesses created by Steven Baldelli sold Direct Satellite television service.
Steven Baldelli allegedly assembled the businesses as an intricate web of related companies and off-shore trusts that routinely made loans to one another.
However, at least one of the businesses, Travel Resorts of America, was allegedly 100 percent owned by Susan Baldelli, even though Steven Baldelli served as president of the company. Susan Baldelli played no role in TRA’s management, court records say.
That arrangement worked well enough until the couple’s marriage began to falter in 2013. Susan Baldelli began looking into the financial position of TRA.
In a Feb. 6, 2014, letter, Susan Baldelli asked her estranged husband and his accountant to provide her with information about the company’s tax reporting. That request was allegedly driven by the fact that Susan Baldelli allegedly had received far less than the $1.9 million in cash that TRA’s 2012 tax return said she had received.
The Feb. 6 letter also allegedly noted that TRA’s 2012 tax return showed the company owed a $1.2 million loan to another one of Steven Baldelli’s companies. The letter asked for the written agreement supporting the loan, as well as evidence that the $1.2 million was deposited into TRA’s bank account.
Susan Baldelli claims none of that documentation ever was provided.
Different courts
By this time, the Baldellis had filed claims for equitable distribution of their marital property in Moore County District Court. TRA and another business founded by Steven Baldelli were parties to the district court action because the couple allegedly agreed they constituted marital property. However, Susan Baldelli claimed that Derby Investment Co., yet another of Steven Baldelli’s companies, should also be considered marital property. Steven Baldelli has contested that claim.
Meanwhile, Susan Baldelli sued her estranged husband in Moore County Superior Court on Feb. 23, 2015, alleging five claims. Her amended complaint claimed breach of fiduciary duty relative to his role as TRA’s president and breach of contract against three of the companies he owned. The complaint also includes a demand for accounting and an alternate claim against Derby for quantum meruit.
Steven Baldelli moved to dismiss the complaint under the prior pending action doctrine, arguing the Superior Court did not have jurisdiction because of the ongoing domestic action in District Court. He also argued the breach of fiduciary claim should have been filed as a derivative action.
Following a lengthy hearing on Sept. 16, 2015, the trial judge granted Steven Baldelli’s motion to dismiss, citing the prior pending action doctrine.
Parallel actions allowed
On appeal, Susan Baldelli argued the trial court got it wrong because the district court action should not preclude the superior court action.
The appeals court unanimously agreed with that assessment.
Writing for the three-judge panel, Chief Judge Linda McGee said the prior pending action doctrine was not triggered because the District Court action would not be able to provide the plaintiff with the relief she requested in the Superior Court action.
McGee noted that the equitable distribution action filed in District Court would not be able to provide Susan Baldelli with the ability to collect damages from Steven Baldelli’s separate property, if she prevails on the breach of fiduciary duty claim.
Additionally, some of the actions alleged by Susan Baldelli with regard to the breach of fiduciary duty claim “will generally not be relevant to equitable distribution decisions concerning how to divide marital property,” McGee said.
McGee’s opinion went on to say, “We therefore hold that the prior pending action doctrine did not serve to divest the Superior Court of jurisdiction over plaintiffs’ breach of fiduciary duty claim, and we reverse the order of the trial court and remand for further action.”
Steven Baldelli’s attorneys, C. Ray Grantham Jr. and L. Bruce Scott of Robinson & Lawing in Winston-Salem, did not respond to requests for comment.
Travel Resorts of North Carolina, Derby Investment Co. and Trident Capital, companies founded by Steven Baldelli, were represented by Chad Bomar of the Bomar Law Firm in Clemmons. Bomar could not be reached for comment.
Surprise resolution
Despite ruling that the prior pending action doctrine had not been triggered, McGee held that it was “not in the interest of judicial economy” to allow both cases to proceed simultaneously. The panel ordered the Superior Court case to be held in abeyance pending the resolution of the district court domestic action.
Cahill said that since the appeals court issued the opinion, Susan Baldelli and Steven Baldelli have reached a settlement in the Superior Court case that resolves her claims against her estranged husband. The equitable distribution action has not yet been resolved, he said.
Either way, Cahill said he was pleased his client’s case will provide greater clarity on when and how the prior pending action doctrine applies.
“We are pleased the Court of Appeals gave us a unanimous reversal of the trial court’s ruling,” Cahill said. “And we are glad our client’s case has now been settled.”
The 10-page decision is Baldelli v. Baldelli (Lawyers Weekly No. 011-329-16). An opinion digest is available at nclawyersweekly.com.
Follow Jeff Jeffrey on Twitter @NCLWJeffrey
