North Carolina Association of Defense Attorneys NCADA Winter Seminar

Transcription

1 North Carolina Association of Defense Attorneys 2017 NCADA Winter Seminar OVERVIEW OF SELECTED OPINIONS OF THE NORTH CAROLINA APPELLATE COURTS DECIDED IN 2016 January 27, 2017 Dixie T. Wells Ellis & Winters LLP 300 N. Greene Street, Suite 800 Greensboro, NC (336) Leslie Packer Ellis & Winters LLP 4131 Parklake Ave., Suite 400 Raleigh, NC (919)

2 TABLE OF CONTENTS Page I. Evidence...1 II. Rule 9(j)...2 III. Fraud and Unfair and Deceptive Trade Practices...10 IV. Peer Review Privilege...13 V. Appellate Jurisdiction...14 VI. Arbitration...16 VII. Liability...17 VIII. Practice Tips...19 A. Trial Practice...19 B. Attorney-Client Privilege...21 C. Appellate Practice...23 i

3 TABLE OF CASES Page Alston v. Hueske, N.C. App., 781 S.E.2d 305 (2016)...2 Am. Mechanical, Inc. v. Bostic, N.C. App., 782 S.E.2d 344 (2016)...23 Berens v. Berens, N.C. App., 785 S.E.2d 733 (2016)...22 Beverage Sys. of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C. 693, 784 S.E.2d 457 (2016)...18 Blue v. Mountaire Farms, Inc., N.C. App., 786 S.E.2d 393 (2016)...17 Boyd v. Rekuc, N.C. App., 782 S.E.2d 916 (2016)...4 Bradley Woodcraft Inc. v. Bodden,, N.C. App., S.E.2d, 2016 WL (2016)...10 Epic Games, Inc. v. Murphy-Johnson, N.C. App., 785 S.E.2d 137 (2016)...16 Estate of Baldwin v. RHA Health Servs., Inc., N.C. App., 782 S.E.2d 554 (2016)...8 Estate of Ray v. Forgy, N.C. App., 783 S.E.2d 1 (2016)...13 Gause v. New Hanover Reg l Med. Ctr., N.C. App., S.E.2d, 2016 N.C. App. LEXIS 1358 (2016)...5 Hanesbrands Inc. v. Fowler, N.C., S.E.2d, 2016 WL (2016)...24 In re Hughes, N.C. App., 785 S.E.2d 111 (2016)...14 Mannise v. Harrell, N.C. App., 791 S.E.2d 653 (2016)...25 Norton v. Scotland Mem l Hosp., N.C. App., S.E.2d, 2016 WL (2016)...7 Sain v. Adams Auto Grp., Inc., N.C. App., 781 S.E.2d 655 (2016)...11 ii

4 Sessions v. Sloane, N.C. App., 789 S.E.2d 844 (2016)...21 State v. Lindsey, N.C. App., 791 S.E.2d 498 (2016)...19 State v. McGrady, 368 N.C. 880, 787 S.E.2d 1 (2016)...1 iii

5 I. Evidence In State v. McGrady, N.C., 787 S.E.2d 1 (2016), the supreme court considered whether amended Rule 702(a) of the North Carolina Rules of Evidence incorporates the standard set in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). On the state s objection, the trial court excluded the defendant s proposed expert under Rule 702(a) of the North Carolina Rules of Evidence. Id. at, 787 S.E.2d at 5. On appeal, the defendant argued that the trial court ignored the liberal standard Rule 702(a) establishes. Id. The court of appeals affirmed the trial court s holding that the 2011 amendment to Rule 702(a) effectively adopted the standard set forth in [Daubert], which allows expert testimony if the testimony is: (1) based upon sufficient facts or data, (2) the product of reliable principles and methods, (3) based upon a reliable application of the principles and methods. Id. The supreme court affirmed. The court held that the 2011 amendment adopts the federal standard for the admission of expert witness testimony articulated in the Daubert line of cases. Id. Although the supreme court had earlier expressed reservations about the Daubert standard, see Howerton v. Arai Helmet, Ltd., 358 N.C. 440, , 597 S.E.2d 674, (2004), the court said that the General Assembly has made it clear that North Carolina is now a Daubert state, McGrady, N.C. at, 787 S.E.2d at 8. The supreme court also provided guidance regarding the effect of federal cases construing Daubert, making clear that the interpretation of Rule 702(a) remains an issue of state law: [W]hen the General Assembly adopts language or statutes from another jurisdiction, constructions placed on such language or statutes are presumed to be adopted as well.... The proper interpretation of Rule 702(a) remains an issue of state law, and any future judicial gloss by the federal courts on the meaning of Federal Rule 702 will not 1

6 dictate the meaning of the North Carolina rule. Federal case law that continues to refine the Daubert standard may, of course, be helpful. But unlike Daubert, [General Electric Co. v. Joiner, 522 U.S. 136 (1997)], and [Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999)] all of which were decided before the General Assembly amended North Carolina s rule in 2011 this case law could not have been incorporated into the amended state rule. Id. at, 787 S.E.2d at 8. The supreme court further clarified that the 2011 amendment to Rule 702(a) did not change the basic structure of the inquiry under Rule 702(a). Id. at, 787 S.E.2d at 10. The court s three-step framework namely, evaluating qualifications, relevance, and reliability remains the same. Id. at, 787 S.E.2d at 10. But the amendment did change the level of rigor that our courts must use to scrutinize expert testimony before admitting it. Id. The supreme court also made clear that the 2011 amendment to Rule 702(a) did not abrogate[] all North Carolina case law interpreting that rule. Our previous cases are still good law if they do not conflict with the Daubert standard. Id. at, 787 S.E.2d at 8. II. Rule 9(j) In Alston v. Hueske, N.C. App., 781 S.E.2d 305 (2016), the court of appeals considered whether a complaint for medical negligence satisfies Rule 9(j) of the North Carolina Rules of Civil Procedure if it merely alleges that a board-certified person examined the plaintiff s medical records, and whether a plaintiff may correct Rule 9(j) errors by moving to amend the complaint or by voluntarily dismissing and refiling. The administrator of the estate of a man who died during a hospital procedure brought a medical negligence action against a nurse in charge of the man s care. Id. at, 781 S.E.2d at 307. Under Rule 9(j) of the North Carolina Rules of Civil Procedure, a plaintiff claiming medical negligence, and who is not relying on the res ipsa loquitur theory of negligence, must 2

7 include certain key allegations in the complaint: that the medical care and all medical records pertaining to the alleged negligence have been reviewed by a person who is reasonably expected to qualify as an expert witness and is willing to testify to negligence, or who the plaintiff will seek to have qualified as an expert witness and is willing to testify to negligence. N.C. Gen. Stat. 1A-1, Rule 9(j). The complaint at issue alleged that the medical records had been reviewed by a duly Board Certified [sic], and that the medical care had been reviewed by person(s) who are reasonably expected to qualify as expert witnesses. Alston, N.C. at, 781 S.E.2d at 307. The complaint was filed one week before the statute of limitations had expired. Id. at, 781 S.E.2d at 307. When the nurse challenged the sufficiency of the complaint under Rule 9(j), the administrator requested leave to amend the complaint under Rule 15(a). The trial court denied the request, reasoning that the Rule 9(j) requirements must be satisfied at the time the complaint is filed. Id. at, 781 S.E.2d at 307. The court dismissed the complaint for failing to satisfy Rule 9(j) and the administrator appealed. Id. at, 781 S.E.2d at 307. The court of appeals affirmed, holding that Rule 9(j) must be strictly construed, and its requirements must be satisfied at the time of the filing of a complaint. Id. at, 781 S.E.2d at 309. The court affirmed the trial court s conclusion that the complaint failed to satisfy the rule because it stated that a Board Certified had reviewed the medical records. Id. at, 781 S.E.2d at 310. Without knowing what type of board-certified person this refers to, the court said, it was impossible to evaluate whether the witness could reasonably be expected to qualify as an expert in this case. Id. at, 781 S.E.2d at 310. The court noted that a plaintiff can avoid this result by simply using the statutory language. Id. at, 781 S.E.2d at

8 The court also held that a plaintiff who, like the administrator, failed to comply with Rule 9(j) at the time of initial filing, may not amend the pleading under Rule 15(a), because the legislature has required strict compliance with this rule. Id. at, 781 S.E.2d at 310. Nor may a plaintiff in this situation voluntarily dismiss her complaint under Rule 41 and refile it to correct the error after the statute of limitations had run. Id. at, 781 S.E.2d at That is because, to refile after a voluntary dismissal, the action must still be commenced within the time prescribed therefor. Id. at, 781 S.E.2d at 311 (internal quotation marks omitted). The court held that [a]n action is only commenced under rule 9(j) if it has been properly reviewed by an expert at the time of filing. Id. at, 781 S.E.2d at 311. Accordingly, the court determined that the administrator s action was not filed within the prescribed statute of limitations. Id. at, 781 S.E.2d at 31. In Boyd v. Rekuc, N.C. App., 782 S.E.2d 916 (2016), the court of appeals considered whether a plaintiff who timely filed a medical malpractice complaint that lacked a Rule 9(j) certification may voluntarily dismiss and re-file that claim outside the three-year statute of limitations. Plaintiff filed a medical malpractice complaint within three years after he was last seen by the defendant physician, as required under the statute of limitations. Id. at, 782 S.E.2d at 917, 921. His complaint lacked the required expert certification under Rule 9(j) of the North Carolina Rules of Civil Procedure. Id. at, 782 S.E.2d at 917, 922. The plaintiff then voluntarily dismissed his complaint under Rule 41. Id. at, 782 S.E.2d at 917. He then refiled his complaint, this time with the required Rule 9(j) certification. Id. at, 782 S.E.2d at 917, 922. This second complaint was filed outside the original statute of limitations, but it was filed within the time allowed for re-filing after voluntary dismissal under Rule 41. Id. The 4

9 complaint also specifically alleged that the expert review required for the Rule 9(j) certification occurred prior to the running of the original three-year statute of limitations. Id. The trial court dismissed the complaint as untimely. Id. at, 782 S.E.2d at 917. The court of appeals reversed. Id. at, 782 S.E.2d at 916, 922. The court held that Rule 41 permits a medical malpractice plaintiff to re-file a complaint which was voluntarily dismissed, as long as two conditions are met: (1) the complaint was re-filed within the time allowed under Rule 41, and (2) the new complaint asserts that the Rule 9(j) expert review occurred prior to the filing of the original timely-filed complaint. Id. at, 782 S.E.2d at 917. Because the plaintiff met these conditions, his second complaint was considered timely. Id. at, 782 S.E.2d at 922. In Gause v. New Hanover Regional Medical Center, N.C. App., S.E.2d, 2016 N.C. App. LEXIS 1358 (2016), the court of appeals considered whether a plaintiff s tort claim sounded in medical malpractice or ordinary negligence for purposes of Rule 9(j). A patient presented to a hospital complaining of chest pains and was helped into a wheelchair. Id. at *2. The patient was sent for radiographs with a radiology technician. Id. The preferred radiograph technique required the patient to stand. Id. at*2-3. The technician asked whether the patient thought that she could stand for the radiographs, and she said, I think so. Id. at *3. The patient stood up, while the technician watched. Id. at *3-4. The technician turned away and began preparing the radiographs once the patient seemed stable. Id. However, after just a few seconds, when the technician turned back, the patient fell. Id. at *4. The patient suffered severe brain injuries from the fall, and required full-time care at a nursing facility. Id. The patient remained at the facility until she died fifteen months later. Id. 5

10 The patient s family filed a lawsuit against the hospital claiming ordinary negligence. Id. at *4-5. No claim was labeled as medical malpractice, and there was no Rule 9(j) certification. Id. The hospital answered, claiming lack of Rule 9(j) compliance, and the case proceeded to discovery. Id. at *5-6. After discovery, the hospital sought summary judgment for lack of Rule 9(j) compliance. Id. at *6-7. The trial court granted the motion to dismiss. Id. at *7. The court of appeals affirmed. Compliance with Rule 9(j) is necessary for claims of medical malpractice, and medical malpractice is defined by statute as a civil action for damages for personal injury or death arising out of the furnishing or failure to furnish professional services in the performance of medical, dental, or other health care by a health care provider. N.C. Gen. Stat (2)(a). The court first held that the complaint itself brought a medical malpractice claim because it included allegations about the hospital s failure to take adequate safety measures to prevent the patient from falling. Id. at * That alone required dismissal. The court further held that discovery revealed patient s claim to be for medical malpractice as well. Id. at *7-8. The plaintiffs discovery responses claimed that the hospital was negligent in the provision of its services, assessment of the patient, review of the patient s medical history, and in the taking of the radiographs. Id. at *12. The hospital s discovery responses also showed that the technician was providing professional services based on his expertise and knowledge, rather than just manual labor. Id. at * Each of those services qualify as professional services under section (2)(a) since they involve specialized knowledge and skills which are predominantly mental or intellectual, rather than physical or manual. Id. 6

11 In Norton v. Scotland Memorial Hospital, N.C. App., 793 S.E.2d 703 (2016), the court of appeals considered whether Rule 9(j) applied to a wrongful death and loss of consortium claim, whether Rule 9(j) applied to intentional infliction of emotional distress claims, and whether intentional infliction of emotional distress allegations failed to state a claim. A decedent s wife and children filed various claims against two hospitals, Scotland Memorial and Duke Hospital. Decedent was first admitted to Scotland Memorial. Id. at, 793 S.E.2d at The complaint alleged that, while at Scotland Memorial, the decedent cried out for his wife and children, but the hospital staff refused to let the family see the decedent. Id. at, 793 S.E.2d at 706. The decedent was then transferred to Duke Hospital, though it was unclear from the complaint at which hospital decedent died. Id. No one gave permission for the decedent to be removed from the ventilator. Id. At Duke Hospital, and on orders from Scotland Memorial, decedent s head was cut during the autopsy, though decedent s wife had asked that it not be cut. Id. Decedent s eyes and other organs had been removed from the body. Id. Although the decedent had previously been an organ donor, he had declined to be an organ donor when he last renewed his driver s license. Id. Decedent s wife and children brought various claims against Scotland Memorial and Duke Hospital, including a claim for wrongful death and loss of consortium. Id. The trial court dismissed the claims for (1) failing to comply with Rule 9(j), failing to state a claim under Rule 12(b)(6), and, for the wrongful death claim, for being barred by the statute of limitations. Id. The court of appeals affirmed in part and reversed in part. First, the court of appeals held that the claims for wrongful death and loss of consortium did not meet the pleading requirement of Rule 9(j), since there was no medical expert s 7

12 certification attached to the complaint. Id. at, 793 S.E.2d at 707. The wrongful death claim met the statutory definition of a medical malpractice action and the loss of consortium claim was merely derivative of the wrongful death claim. Id. Second, the court of appeals held that the Rule 9(j) standard did not apply to the claims for intentional infliction of emotional distress against either hospital. Id. at * The claim against Scotland Memorial was based on the decedent s family not being allowed to see the decedent while he was crying out in distress. Rule 9(j) did not apply to this claim, since the injuries belonged to the plaintiffs themselves (their emotional harm), and did not involve an injury to the decedent or concerning his medical treatment. Id. at * The claim against Duke Hospital was based on actions taken by Duke Hospital after decedent s death, the removal of decedent s organs. Id. at, 793 S.E.2d at Therefore, that claim did not involve the provision of medical care to which Rule 9(j) applies. Id. Finally, the court of appeals found that the intentional infliction of emotional distress claim was sufficiently pleaded against Scotland Memorial, but not Duke Hospital. Under the notice pleading standard, the refusal to let the family see the decedent could satisfy the tort. Id. at, 793 S.E.2d at 709. However, the claim based on Duke s removal of the decedent s organs had to be dismissed, since the complaint did not allege whether Duke Hospital knew or should have known about the decedent s change in status as an organ donor, or whether Duke intentionally disregarded the decedent s organ donor status. Id. at, 793 S.E.2d at In Estate of Baldwin v. RHA Health Services, Inc., N.C. App., 782 S.E.2d 554 (2016), the court of appeals considered whether a residential facility for developmentally disabled persons constituted a health care provider, such that the heightened pleading 8

13 standards for medical malpractice actions apply to a complaint alleging that the facility was negligent with respect to a resident who died allegedly as a result of its care. A woman was in the care of a residential facility for developmentally disabled persons. Id. at, 782 S.E.2d at 556. One day she began exhibiting medical symptoms which prompted the facility s staff to contact an on-call nurse and a physician s assistant to seek instructions on caring for the woman. Id. The staff followed those instructions, but the woman s condition worsened. Id. She was taken to the hospital where she died of complications from pneumonia, seizure disorder, and anoxic encephalopathy. Id. at, 782 S.E.2d at 557. The woman s estate brought suit against the residential facility, alleging negligence. Id. The residential facility moved to dismiss, arguing that the complaint failed to satisfy the heightened pleading standards for a medical malpractice action under Rule 9(j) of the North Carolina Rules of Civil Procedure. Id. The trial court granted the motion, concluding that the pleading standards of Rule 9(j) applied to this complaint because the estate s allegations relate[] to the professional services of one or more health care providers as defined by North Carolina law. Id. The estate appealed, arguing that Rule 9(j) should not apply because the residential facility is not a health care provider. Id. The court of appeals affirmed. The court analyzed the statutory definition of health care provider, as that term is defined in the medical malpractice statute, N.C. Gen. Stat Id. at, 782 S.E.2d at That definition includes persons acting at the direction or under the supervision of a person licensed to practice medicine or nursing. N.C. Gen. Stat (1)(d). The court concluded that the residential facility met this definition because, according to the complaint, the facility s staff had coordinated with an on-call nurse and a physician s assistant to address the woman s health problems leading to her death. Estate of 9

14 Baldwin, N.C. App. at, 782 S.E.2d at 559. Rule 9(j) therefore applied and the complaint was properly dismissed for failure to comply with the rule s pleading standards. Id. III. Fraud and Unfair and Deceptive Trade Practices In Bradley Woodcraft, Inc. v. Bodden, N.C. App., S.E.2d, 2016 WL (2016), the court of appeals considered whether the economic-loss rule bars fraud claims. A new homeowner signed an agreement with a contractor to renovate her home. Id. at *1. Dissatisfied with the renovation work, the homeowner raised her complaints with the contractor. Id. Following the discussion, the homeowner believed that the contractor had agreed to fix the problems. Id. Based on that belief, the homeowner used her credit card to pay the final $26,000 due. Id. The contractor, in contrast, did not believe that he had agreed to do any further work. Id. When the contractor did no further work, the homeowner disputed the $26,000 charge on her credit card. Id. The contractor sued for breach of contract. Id. at *2. The homeowner counterclaimed for breach of contract, fraud, and unfair and deceptive trade practices. Id. The case went to trial. Id. At the close of the homeowner s evidence, the contractor moved for a directed verdict on the fraud and unfair and deceptive trade practices counterclaims, citing the economic-loss rule. Id. The trial court granted the contractor s motion. Id. The court of appeals reversed and remanded for a new trial. The court acknowledged that under the economic-loss rule, when a claim involves economic losses in a contractual setting, a plaintiff cannot use tort claims to recover those economic losses. Id. at *3. The court further acknowledged that North Carolina appellate courts 10

15 often have applied the economic loss rule to bar negligence claims. Relying on its prior holding in Jones v. Harrelson & Smith Contractors, 194 N.C. App. 203, 670 S.E.2d 242 (2008), the court held, however, that while claims for negligence are barred by the economic-loss rule where a valid contract exists between the litigants, claims for fraud are not so barred. Id. at *5. A party to a contract may assert both breach of contract and fraud claims. Id. The court further held that because the homeowner s unfair and deceptive trade practices claim was factually interwoven with her fraud claim, the court could not narrowly remand as to fraud only. Id. Accordingly, the court reversed and remanded for a new trial on all issues. Id. at *6. In Sain v. Adams Auto Group, Inc., N.C. App., 781 S.E.2d 655 (2016), the court of appeals considered whether a plaintiff may state a claim for unfair or deceptive trade practices premised on misrepresentation, when the allegations of the misrepresentation are insufficient to state a claim for fraud. The plaintiffs purchased a car from a dealership. Id. at, 781 S.E.2d at 657. The car had been in an accident previously, which the dealership knew. Id. The dealership also knew that the car had sustained frame damage. Id. The dealership s salesperson told the plaintiffs that the car had not been involved in a collision that resulted in repairs exceeding 25% of the car s value. Id. at, 781 S.E.2d at 658. The plaintiffs purchased the car and signed an as is no warranty disclosure. Id. The plaintiffs later discovered significant problems with the car. Id. The plaintiffs brought suit for fraud and unfair and deceptive trade practices (UDTPA), N.C. Gen. Stat Id. The trial court granted the dealership s motion to dismiss for failure to state a claim, and the plaintiffs appealed. Id. at, 781 S.E.2d at

16 The court of appeals affirmed in part and reversed in part. Id. at, 781 S.E.2d at 664. The court reversed the dismissal on the UDTPA claim, reasoning that [i]t is a violation of the UDTPA for an employee of an auto dealership to make a statement to a customer leading the customer to believe the vehicle has not been involved in a collision, when the employee knows this to be untrue. Id. at, 781 S.E.2d at 661. The court further held that a purchaser s signing of an as is no warranty agreement is not fatal to his or her claim for violation of the UDTPA. Id. Taking the plaintiff s allegation as true, the court concluded that the salesperson s assertion that the car had not been involved in a serious accident, with the knowledge that the car had sustained frame damage, could amount to a violation of the UDTPA. Id. at, 781 S.E.2d at Nonetheless, the court held that these allegations could not sustain a claim for fraud. Id. at, 781 S.E.2d at 662. The court reasoned that the as is no warranty agreement negated the plaintiffs allegation that they relied on the alleged misrepresentation. Id. The court also held that the no warranty acknowledgment also negated any allegation that the dealership made a false representation. Id. Finally, the court held that the allegations failed to indicate that the salesperson intended to deceive the plaintiffs. Id. In sum, the court held that a car dealership s statement denying that a car had been involved in a serious collision, with the knowledge that it had sustained frame damage, could amount to a violation of the UDTPA, even if the purchaser signs an as is no warranty agreement. However, such an agreement will negate a fraud claim. 12

17 IV. Peer Review Privilege In Estate of Ray v. Forgy, N.C. App., 783 S.E.2d 1 (2016), the court of appeals considered whether a hospital sufficiently demonstrated that it was entitled to privilege protection for documents produced or considered by a medical review committee, pursuant to section 131E-95(b) of the North Carolina General Statutes, when it produced a privilege log that included each document s description, author, date, and recipient. This is a medical malpractice action alleging negligence by a hospital and a doctor. The plaintiffs filed a motion to compel discovery of all documents in the hospital s possession relating to the doctor s malpractice insurance coverage, his re-credentialing, and all records relating to queries to the National Practitioner Database by the hospital. Id. at, 783 S.E.2d at 4. The hospital filed a motion for a protective order, attaching a sealed exhibit for in camera review containing the hospital s records of the doctor. Id. An affidavit from a hospital designee reported that documents in the sealed exhibit were produced by and/or considered by the Medical Review Committees of the hospital, and as such were privileged. Id. The hospital also produced a detailed privilege log. Id. The trial court granted in part and denied in part the cross-motions, requiring the hospital to produce a portion of the sealed exhibit, while protecting a portion. Id. at, 783 S.E.2d at 5. The hospital appealed and the court of appeals allowed the interlocutory appeal because the protection of privileged information is a substantial right that might be lost absent immediate appeal. Id. at, 783 S.E.2d at 5-6. On the merits, the court of appeals reversed, holding that all documents in the sealed exhibit are protected from discovery by the privilege provisions in the state Medical Licensing Act. Id. at, 783 S.E.2d at 6-9. The act protects from disclosure the records and materials 13

18 produced by a medical review committee, along with the materials it considers, in any civil action... which results from matters which are the subject of evaluation and reviews by the committee. N.C. Gen. Stat. 131E-95(b). The plaintiffs argued that the hospital s affidavit failed to show that the medical review committee produced or considered all of the documents on the privilege log. Ray, N.C. App. at, 783 S.E.2d at 8. The court disagreed, holding that the privilege log includes enough information to conclude that the documents were produced or considered by the committee, including each document s description, author, date, and recipient. Id. at, 783 S.E.2d at 8-9. The court also noted that it had reviewed the documents at issue and had concluded that they were privileged under section 131E-95(b). Id. at, 783 S.E.2d at 9. V. Appellate Jurisdiction In In re Hughes, N.C. App., 785 S.E.2d 111 (2016), the court of appeals considered whether it has jurisdiction to hear appeals from the Industrial Commission involving constitutional challenges to state statutes, where a recent law requires such challenges to be heard by a three-judge panel in Wake County Superior Court. This appeal consolidated three cases seeking compensation under the North Carolina Eugenics Asexualization and Sterilization Compensation Program, which allows victims of forced sterilization by the state Eugenics Board to seek compensation through the Industrial Commission. Id. at, 785 S.E.2d at 112 The law that authorized the program permits compensation only for victims who were still alive as of June 30, Id. (citing N.C. Gen. Stat. 143B (1)). In each of these three cases, the claimants were the estates of victims who died before June 30, Id. The deputy commissioners therefore denied compensation, 14

19 and the claimants appealed to the Full Commission. Id. The claimants challenged the cut-off date as a violation of equal protection and due process under the state and federal constitutions. Id. at, 785 S.E.2d at 113. The Full Commission affirmed the denials of compensation, and the claimants filed an appeal with the court of appeals. Id. at, 785 S.E.2d at 112 The court of appeals dismissed the appeal for lack of jurisdiction. The court cited a state law enacted in 2014 that requires all facial challenges to the constitutionality of state statutes to be transferred to Wake County Superior Court, to be heard by a three-judge panel of that court. Id. at, 785 S.E.2d at 113 (citing N.C. Gen. Stat (a1) and 1A-1, Rule 42(b)(4)). The court held that this provision applies to cases originating in both the general courts of justice and the Industrial Commission. Id. at, 785 S.E.2d at Accordingly, the court remanded for the Industrial Commission to transfer the case to the Wake County Superior Court to hear the constitutional challenge. Id. at, 785 S.E.2d at 116. Dissenting, Judge Dillon would have held that the law requiring facial constitutional challenges to be heard in Wake County Superior Court applies only to cases originating in the general courts of justice, not in administrative agencies like the Industrial Commission. Id. at, 785 S.E.2d at 116 (Dillon, J., dissenting). He reasoned that the court of appeals is empowered to review decisions of administrative agencies upon matters of law or legal inference, and that the eugenics compensation law specifically provides for a direct appeal from the Industrial Commission to the court of appeals. Id. at, 785 S.E.2d at 117(quoting N.C. Gen. Stat. 7A-26). He would therefore have held that the court of appeals had jurisdiction to review the case. Id. 15

20 VI. Arbitration In Epic Games, Inc. v. Murphy-Johnson, N.C. App., 785 S.E.2d 137 (2016), the court of appeals considered whether the issue of substantive arbitrability must be decided by an arbitrator where the parties agreed that an arbitrator would decide the applicability of the arbitration clause in their agreement, and the agreement incorporated the rules of the American Arbitration Association (AAA). An employee entered into an employment agreement with a tech company. Id. at 139. That agreement had an arbitration clause stating that any disputes concerning the employment agreement, including the applicability of this Paragraph, shall be referred to mandatory arbitration. Id. The arbitration clause also stated that any arbitration shall be conducted pursuant to the rules of the AAA. Id. A dispute arose, and the employee demanded arbitration. Id. at 140. The employer successfully moved to enjoin arbitration in state court, arguing that the parties did not agree to arbitrate certain aspects of their agreement. Id. at 141. The employee appealed. The court of appeals reversed, holding that substantive arbitrability, or the determination as to what issues are arbitrable, was specifically reserved for the arbitrator under the terms of the parties agreement. Id. at 143. The parties agreed that the arbitrator would decide the applicability of the arbitration clause, which encompasses the determination as to what claims fall within the scope of arbitration. Id. Additionally, the agreement between the parties incorporated the rules of the AAA. Id. at 143. The rules of the AAA also require the scope of arbitration to be decided by the arbitrator. Id. at

21 VII. Liability In Blue v. Mountaire Farms, Inc., N.C. App., 786 S.E.2d 393 (2016), the court of appeals considered whether an employee could establish a Woodson claim where his employer assigned a dangerous task to a co-worker and the employee was injured when the co-worker, but not the employer, asked the employee to help with the task. The employee was injured on the job at a poultry processing plant when a co-worker lost control of a refrigerating device that expelled ammonia, severely injuring the employee. Id. at 395, 397. The co-worker had been assigned to repair the device and had asked the employee to help him. Id. at The employee brought a Woodson claim against his employer. Id. at 397. The trial court denied the employer s motion for summary judgment, and the employer appealed. Id.. The court of appeals reversed, holding that the employee could not establish the elements of a Woodson claim as a matter of law. Id Such a claim requires (1) misconduct by the employer; (2) intentionally engaged in; (3) with the knowledge that the misconduct is substantially certain to cause serious injury or death to an employee; and (4) that employee is injured as a consequence of the misconduct. Id. The court held that the employee could not establish that his employer intentionally placed him in any danger. Id. at 400. The task was assigned to a co-worker, not the employee, and the employee was placed in harm s way as a result of a request from that co-worker for help, not a request from the employer. Id. The employee also could not establish that the employer had knowledge that assigning the co-worker the task of repairing the refrigerating device was substantially certain to cause serious injury or death. Id. at 401. That is because the co-worker assigned the job of repairing 17

22 the device assured his supervisor that he could accomplish the task safely. Id. Although the employee produced evidence that the co-worker had expressed reservations about safely performing the task, there was no evidence that these misgivings were passed along to his supervisors. Id. Additionally, although there was evidence of internal deliberations within management as to whether a contractor should be hired for the repair, the mere fact that this discussion took place falls short of meeting the substantial certainty element of Woodson. Id. at 402. In Beverage Systems of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C. 693, 784 S.E.2d 457 (2016), the supreme court considered whether parties to a noncompete agreement could authorize in their agreement for a court to revise any unenforceable provisions under the blue pencil rule, rather than merely striking such provisions. A man sold the family business to a buyer and executed a covenant not to compete against the buyer in either North or South Carolina for five years. Id. at 695, 784 S.E.2d at 459. The agreement provided that, in the event a court found that the covenant s geographic restriction is unreasonable, the court was allowed to revise the geographic restriction. Id. The man s wife, who had not signed the agreement, later opened a business that competed with the buyer in the restricted territory and before the expiration of the covenant. Id. The buyer brought suit against the man, the man s wife, and her new business to enforce the covenant not to compete. Id. at 696, 784 S.E.2d at 459. The defendants argued that the noncompete agreement was unenforceable because it was overly broad in geographic scope. Id. The trial court agreed with the defendants and granted them summary judgment. Id. The court of appeals reversed. Id., 784 S.E.2d at 460. The court agreed that the geographic restriction was unreasonable. Id. The court also recognized that North Carolina 18

23 follows the strict blue pencil rule, under which a court may not rewrite unreasonable provisions but may only strike out offending provisions and enforce any divisible and reasonable portions that remain. Id. Despite this rule, the court held that the parties agreement to permit the court to rewrite an unreasonable geographic term allowed the trial court to revise the agreement. Id. at , 784 S.E.2d at 460. The supreme court reversed the court of appeals. Id. at 702, 784 S.E.2d at 463. The court first held that the geographic limitation was overly broad because the family business had never operated in major parts of both North and South Carolina. Id. at , 784 S.E.2d at 461. The court next held that a court in North Carolina has no authority, under the strict blue pencil rule to rewrite unenforceable provisions in a noncompete agreement. Id. at 699, 784 S.E.2d at 461. Moreover, parties may not agree among themselves to give a court powers that the court does not have. Id., 784 S.E.2d at 462. Therefore, the trial court could not revise the unreasonable geographic limitation, but could only strike it. Id. at 700, 784 S.E.2d at 462. Because striking the unreasonable term would eliminate the geographic limitation entirely, the covenant was unenforceable. Id. VIII. Practice Tips A. Trial Practice In State v. Lindsey, N.C. App., 791 S.E.2d 498 (2016), the court of appeals considered whether a defendant waives his right to close argument to the jury when he presents video evidence during cross-examination. The defendant was indicted and tried for habitual DWI. Id. at 498. At trial, the prosecution s only witness was the arresting officer. Id. On direct examination, the officer testified that, during a traffic stop, the defendant smelled of alcohol and failed field sobriety tests. 19

24 Id. The defendant did not call any witnesses or put on any other evidence after the prosecution presented its case-in-chief. Id. at 504. However, the defendant did cross-examine the arresting officer. Id. During cross, the defendant played a video of the entire stop that had been recorded by the officer s in-car camera. Id. The parties disputed whether playing the video would waive the defendant s right to close argument to the jury. Id. The trial court ultimately determined that playing the video constituted putting on evidence, waiving the defendant s right to close argument to the jury. Id. The court of appeals affirmed. Id. at 505. Under Rule 10 of North Carolina s General Rules of Practice, if no evidence is introduced by the defendant, the right to open and close argument to the jury shall belong to him. Id. at 504 (quoting N.C. Super. & Dist. Ct. R. 10). Under this rule, evidence is introduced when a cross-examiner either formally introduces material into evidence or presents new matter not relevant to the case. Id. But the introduction of new and relevant matter does not constitute evidence being introduced. Id. More particularly, the court explained, evidence is introduced when a party has offered [an object] as substantive evidence or so that the jury may examine it and determine whether it illustrates, corroborates, or impeaches the testimony of the witness. Id. (quoting State v. Hennis, 184 N.C. App. 536, 538, 646 S.E.2d 398, 399 (2007)). In this case, the court held, the introduction of the in-car police video constituted evidence introduced by the defendant because the video went beyond the officer s testimony and was different in nature than the officer s testimony. Id. at 505. The video was not merely illustrative since it included exculpatory statements made by the defendant and allowed the jury to make its own determinations concerning the defendant s impairment apart from the testimony of the officer. Id. 20

25 B. Attorney-Client Privilege In Sessions v. Sloane, N.C. App., 789 S.E.2d 844 (2016), the court of appeals considered whether the subject lines of s are protected by the attorney-client privilege. A discovery dispute arose. Plaintiff, as the requesting party, served discovery requests on the defendants (the withholding parties ). Id. at 850. The withholding parties objected and produced a privilege log. Id. The requesting party filed a motion to compel, seeking production of the To, From, CC, BCC, and Subject lines of all documents withheld based on privilege so that the requesting party could assess the validity of the privilege claim. Id. at 851. The trial court ordered the production of the To, From, CC, BCC, and Subject lines of documents withheld on the basis of privilege. Id. at 852. The withholding parties appealed. The court of appeals affirmed the order to produce the subject lines of s, id. at *857, stating that the question of whether subject lines of s must be protected from discovery under attorney-client privilege is a question of first impression in North Carolina, id at 856. at *12. The court held that the same five-part test [to determine whether the attorney-client privilege applies to a communication] applies for the subject line of an as it does for any communication allegedly protected under attorney-client privilege. Id. at The five-part test is as follows: (1) [T]he relation of attorney and client existed at the time the communication was made, (2) the communication was made in confidence, (3) the communication relates to a matter about which the attorney is being professionally consulted, (4) the communication was made in the course of giving or seeking legal advice for a proper purpose although litigation need not be contemplated and (5) the client has not waived the privilege. Id. at 856 (quoting In re Miller, 357 N.C. 316, 335, 584 S.E.2d 772, 786 (2003). Because the withholding parties did not produce evidence to meet their burden to show the subject lines of 21

26 the s contained privileged information, the court held that the trial court did not abuse its discretion in ordering production. Id. at 857. The court rejected the withholding parties suggestion that the trial court should have performed an in camera review of the documents. Id. There was no record evidence that the withholding parties had made a request for an in camera inspection during the proceeding or that the withholding parties had submitted the documents for inspection. Id. Finding that the trial court properly exercised its discretion, the court cautioned litigants: Id. Unless the court is given the documents to inspect, Defendants will have difficulty meeting their burden to show any specific s were prepared or obtained because of the prospect of litigation. Defendants took a strategic risk in not submitting the documents to be sealed for in camera review. In Berens v. Berens, N.C. App., 785 S.E.2d 733 (2016), the court of appeals considered whether a party to litigation who engages her friend as an agent to participate in meetings with her attorney waives the protections of attorney-client privilege and attorney work product. A mother and father were engaged in a child-custody dispute. Id. at *736. A friend of the mother, who was also an attorney, was assisting the mother in the pretrial process, but she was not representing the mother as her counsel. Id. The father issued a subpoena duces tecum to the friend seeking the friend s communications with the mother and with the mother s attorney. Id. The friend moved to quash the subpoena, and in an affidavit, she stated that she was acting as a consultant/agent on behalf of the mother and the mother s lawyer. Id. at She also produced a confidentiality agreement that she and the mother had entered, in which the friend pledged to protect the confidentiality of any information received while she was acting in a 22

27 supporting role for the mother in the child-custody matter. Id. at 737. The trial court overruled the friend s objections to the subpoena, concluding that the attorney-client privilege and work product immunity did not extend to a good friend. Id. The court of appeals reversed, holding that the attorney-client privilege and work product protections extend to communications with a client s agent within the context of the litigation. Id. at 741. Here, the friend presented evidence, through her affidavit and her confidentiality agreement with the mother, that she was the mother s agent for the purposes of the litigation. Id. The court held that the fact the agent was also a friend of the mother was irrelevant for the purposes of the agency analysis. Id. The friend s communications with the mother and the mother s attorney were protected from disclosure by the attorney-client privilege and the workproduct doctrine. Id. at C. Appellate Practice In American Mechanical, Inc. v. Bostic, N.C. App., 782 S.E.2d 344 (2016), the court of appeals considered whether a party s submission of a notice of appeal to the North Carolina Business Court through its electronic filing system complies with Rule 3 of the North Carolina Rules of Appellate Procedure. This appeal consolidated three cases appealed from the Business Court that all arose from allegations that a construction company s officers had misused loans that the company had obtained in connection with construction projects. Id. at 345. The court ruled in favor of the defendant officers in each case, in motions to dismiss or for summary judgment, and the plaintiffs sought to appeal. Id. at The plaintiffs submitted their notices of appeal through the Business Court s electronic filing system. Id. at 346. The plaintiffs did not file their notices with the clerks of court of the 23

28 counties where the actions originated before the case was designated to the Business Court. Id. The defendants moved to dismiss the appeals for failure to comply with Rule 3 of the North Carolina Rules of Appellate Procedure. Id. The Business Court granted the motions and dismissed the appeals. Id. The plaintiffs petitioned the court of appeals for a writ of certiorari to review the dismissals, which the court granted. Id. The court of appeals affirmed, holding that Rule 3 specifically requires that notices of appeal be filed with the clerk of superior court. Id. at 348 (quoting N.C. R. App. P. 3(a)). The court rejected the arguments that a notice of appeal filed with the Business Court is sufficient because the court maintains its own filing system separate from the superior court in which the action was originally filed before it was designated to the Business Court, and because the Business Court Rules encourage filing papers in its electronic filing system. Id. The court concluded that the Appellate Rules, not the Business Court Rules, control the procedures for taking an appeal, and the Appellate Rules are clear on this requirement. Id. at The court declined the plaintiffs request to excuse the procedural deficiency, concluding that it had no choice but to enforce dismissal of the appeal because Rule 3 has been deemed a jurisdictional rule. Id. 349 (citing Dogwood Dev. & Mgmt. Co., LLC v. White Oak Transp. Co., 362 N.C. 191, 197, 657 S.E.2d 361, 365 (2008)). In Hanesbrands Inc. v. Fowler, N.C., S.E.2d, 2016 WL (2016), the supreme court considered whether a litigant is entitled to an immediate appeal when a litigant unsuccessfully challenges the designation of a case to the business court as a mandatory complex business case. Plaintiff filed a complaint and simultaneously designated it as a mandatory complex business case. Id. at *1. The next day, the case received preliminary approval from the Chief 24

29 Justice. Id. Defendant filed an opposition to the designation, which was overruled by the business court. Id. Defendant appealed the overruling to the Supreme Court. Id. The supreme court dismissed the appeal as interlocutory. Id. By statute, a party may appeal directly to the supreme court from an interlocutory business court order that affects a substantial right. Id. (citing N.C. Gen. Stat. 7A-27(a)(3)(a)). A substantial right is a legal right involving a matter of substance and not procedure, and one that is entitled to the preservation and protection of the law. Id. at *2. The defendant proposed various rights requiring immediate protection. She argued that she should not be required to defend a case filed by a large corporation in a forum for disputes between businesses. Id. She also tried likening her designation opposition to a motion for change of venue. Id. The supreme court rejected both arguments, explaining that neither argument showed any injury that she would suffer without immediate review. Id. The court noted that the statutes for the business court do not create any exception for litigation with individuals. Id. at *3. In Mannise v. Harrell, N.C. App., 791 S.E.2d 653 (2016), the court of appeals considered whether the trial court acquired, or even needed, personal jurisdiction over an out-ofstate individual defending a claim for a domestic violence protective order. Plaintiff-mother and defendant-father were an unwed couple sharing custody of a child. Id. at 655. The mother sought a Chapter 50B domestic violence protective order against the father, alleging that he had abused her in front of the child. Id. Her complaint did not allege that she was a resident of North Carolina when the alleged abuse occurred or that any of the abuse occurred in North Carolina. Id. The trial court entered an ex parte protective order on September 8, Id. 25

30 The father then moved to dismiss for lack of personal jurisdiction. Id. By affidavit, he stated that he did not reside in North Carolina or take any actions in North Carolina at any time referenced in the complaint. Id. The trial court denied the motion to dismiss, concluding that the court had personal jurisdiction, because it was reasonable to infer that the threat was received over the telephone while the mother was in North Carolina. Id. at 655, 658. Alternatively, the trial court held that, even if personal jurisdiction was lacking, the motion should still be denied to the extent that the mother sought a prohibitory order rather than one requiring the father to undertake any affirmative action. Id. at The court of appeals reversed. The court of appeals determined that the trial court lacked personal jurisdiction over the father. Id. at 657. The trial court had determined that personal jurisdiction could be premised on threats communicated by the father during a single telephone conversation with the mother while she was in North Carolina. Id. at However, the complaint did not allege where the mother was at the time of the alleged telephone conversation. Id. at 659. Although the trial court found it reasonable to infer from the complaint that the mother was in North Carolina at the time, the only evidence before the trial court was the father s affidavit, which showed that the mother called the father from West Virginia. Id. The court of appeals also rejected the trial court s alternative holding that it could issue the protective order regardless of personal jurisdiction since it was prohibitive rather than affirmative. Id. at Although courts from Kentucky and New Jersey have relied upon that distinction, the court of appeals rejected it because protective orders have both legal and non-legal collateral consequences. Id. at 660. Those collateral consequences include effects on child-custody proceedings and applications for employment and professional licenses. Id. The 26