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Biz appeal is nixed after wrong court named

The losing side in a recent decision by the North Carolina Business Court may not be able to appeal the court’s decision because its notice of appeal mistakenly referenced the state’s Court of Appeals instead of the Supreme Court, which now hears appeals of cases from the Business Court.

Zloop, a bankrupt electronic-waste-recycling corporation, alleges that its assets were looted by two of the company’s former directors. Besides suing those directors, it sued the law firm Parker Poe Adams & Bernstein and two of its attorneys for legal malpractice, breach of fiduciary duty and aiding and abetting.

On Feb. 16, Business Court Judge James Gale granted summary judgment to the firm and its attorneys, finding that the directors’ fraud benefitted Zloop by allowing it to temporarily remain in business, and so their acts were imputed to the company. As a result, the company’s claims against the firm were barred by the doctrine of equal fault.

Zloop filed a notice of appeal within the required 30-day window. However, in that notice, it said that it “hereby gives notice of appeal to the North Carolina Court of Appeals.” Until recently, that would have been the proper court to name. But since the legislature passed the Business Court Modernization Act in 2014, appeals of Business Court decisions have gone directly to the state’s Supreme Court.

Parker Poe moved to dismiss the appeal for failure to comply with the state’s appellate procedure rules, and on April 30 Gale granted the motion. (The Business Court still had jurisdiction because the record had not been finalized.) Gale also denied Zloop’s request for permission to file an amended notice of appeal, concluding that the Business Court did not have jurisdiction to allow one.

Although the Court of Appeals has suggested that appellate courts may have discretionary authority to allow an appeal to proceed even if the notice of appeal didn’t entirely comply with the state’s appellate rules, the Business Court has previously held that it is not vested with such discretion and is required to strictly construe those rules, Gale wrote.

Gale noted that his February ruling “addressed significant issues that would present matters of first impression before the Supreme Court of North Carolina, [and] both parties were aware that any appeal from the judgment would be before the Supreme Court.”

The decision doesn’t necessarily mean that the appeal is dead, because the Supreme Court has the power to suspend or vary the requirements of any appellate rule in order to prevent manifest injustice to a party. But the company will now have to seek such an exception before it can have its appeal heard, whereas losing parties in Business Court cases ordinarily have an automatic right to appeal to the Supreme Court.

Gavin Reardon of Rossabi Reardon Klein Spivey in Greensboro represented Zloop. He said that the case presented some unusually wonky questions about the rules of appellate procedure.

“Unfortunately, Judge Gale did the best he could and we don’t agree with it, but it’s in a murky area that really requires the Supreme Court to clarify, what is the authority of the trial court in areas where Rule 3(d) is concerned, and what does jurisdiction in those cases really mean?” Reardon said, referring to the specific appellate rule on what needs to appear in a notice of appeal.

Robert Fuller of Robinson Bradshaw in Charlotte represented Parker Poe and its attorneys.

“We believe Judge Gale applied longstanding North Carolina precedent and made the correct decision when he granted the motion to dismiss appeal,” Fuller told Lawyers Weekly.

The five-page decision is Zloop Inc. v. Parker Poe Adams & Bernstein LLP (Lawyers Weekly No. 020-025-18). The full text of the opinion is available online at nclawyersweekly.com.

Follow David Donovan on Twitter @NCLWDonovan


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