Never Give Up? Never Surrender? Probably Bad Advice In The Business Court

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Section 6-21.5 of the North Carolina General Statutes is the closest thing the State has to "loser pays." It allows for the award of attorneys' fees to a prevailing party "if the court finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading."

The plaintiff in Jacobson v. Walsh, 2014 NCBC 2, decided by Judge Murphy this week, didn't ever give up on his claims for breach of fiduciary duty and fraudulent concealment (which depended on there being a fiduciary duty) even though he had virtually conceded those claims at his deposition. As a result, the Judge awarded fees in an amount to be determined to one of the Defendants.

Why?  The Plaintiff based his fiduciary duty claim against one of the Defendants on his "past investment experiences" with that Defendant (Walsh), as he had alleged in the Complaint.  But at his deposition, the Plaintiff said that he had no prior dealings at all with Defendant Walsh, and that his contrary allegation in the Complaint was "an oversight."  He even conceded at his deposition that there was no fiduciary relationship between him and Walsh.

Notwithstanding those concessions, the Plaintiff did not dismiss his fiduciary duty claim. Judge Murphy concluded that "the losing party persisted in litigating the case after a point where he should reasonably become aware that the pleading he filed no longer contained a justiciable issue." Op. ¶94 (quoting Sunamerica Fin. Corp. v. Bonham, 328 N.C. 254, 258, 400 S.E.2d 435, 438 (1991)).

So how much will Walsh recover in attorneys' fees?  That remains to be determined.  Walsh was directed to submit an accounting of the the fees "reasonably incurred in defending against" the fiduciary duty and fraudulent concealment claims.  Op. ¶97.  Since there were multiple claims in the Complaint which were dismissed in the Order, the fees attributable to the fiduciary duty claim and the fraudulent concealment claim will be only a portion of the fees charged by Walsh's lawyers.

If you are wondering, this isn't the first time that the Business Court has socked an unduly persistent plaintiff with attorneys' fees per Section 6-21.5.  Judge Gale did that in an Order in McKinnon v. CV Industries, Inc., which I wrote about in June 2012.