A Counterclaim Bet You May Regret

Fox Rothschild LLP
Contact

Fox Rothschild LLP

Sometimes the Cards Must be Played
Out Even When the Table has Cooled

If the cards have been kind, often the better instinct is to cut and run before your luck changes. That was the plan in Aym Technologies, LLC v. Gene Rodgers, et al., (N.C. Super. Ct. March 19, 2020). The defendants got all of the plaintiff’s claims thrown out at summary judgment in an opinion we discussed here , and sought to stay their own remaining counterclaims in deference to a parallel New York action involving many of the same parties. After considering the issues at play in the two actions, the Business Court denied the motion, finding that the cases did not have the requisite “substantial or functional identity” to justify a stay. Chief Judge Bledsoe also denied the plaintiff’s motion to retroactively certify two previously decided orders for appeal under Rule 54. See Order and Opinion.

Scopia Capital Management LP and Community Based Care, LLC had earlier bested Aym’s contention that misappropriated trade secrets had allowed them to beat Aym to acquisition targets in North Carolina’s competitive Medicaid intellectual and development disability (IDD) industry. That left only the defendants’ counterclaims against Aym for fraudulent misrepresentation and unfair or deceptive trade practices in play. The defendants’ pitch for a stay in North Carolina was that the New York action also was keyed to the parties’ competition in the IDD industry. Id. ¶ 6.

Takeaways:

  • Staying a North Carolina case in deference to a foreign action won’t meet the exacting standard without substantial and meaningful overlap.
  • Ask a trial court to include Rule 54 certification in its judgment because a retroactive fix is a long shot wager.

Judge Bledsoe’s analysis of whether it would “work substantial injustice” for the remaining North Carolina claims to continue in the Business Court focused on the nature of the claims pending in each state. In New York, the claims focused on Aym’s alleged misuse of information obtained under a non-disclosure agreement to aid its own business endeavors. But the Court found notable space between those claims and the trade secret claims that animated the North Carolina action over the parties’ competing efforts to acquire IDD targets. Moreover, while both actions raised Chapter 75 unfair trade practice issues, the Court found them to be disparately motivated and relying on differing factual bases. Id. ¶¶ 8-9.

The Court acknowledged that a finding of “substantial or functional identity” between the two cases could sufficiently support a stay of the North Carolina action, but differed markedly with the assertion that the cases were “identical in most respects.” The Court noted that the New York case primarily had a breach of contract focus, and that the dueling Chapter 75 claims “did not involve a common nucleus of operative facts or rely on the same evidence.” Id. ¶¶ 10-14. In essence, the Court declined the invitation to rule that cases which generally look similar are necessarily functionally identical:

“While the New York and North Carolina Actions are founded upon the same general sequence of events, neither the Actions generally, nor the Chapter 75 Claims specifically, meaningfully overlap either chronologically or topically.”

Id. ¶ 12.

Retroactive certification of prior orders not permitted

As the defendants sought to flee the jurisdiction, the plaintiff asked the Court to certify its own, partial exit from the trial court to seek interlocutory appeal of its losses at motion to dismiss and summary judgment. Judge Bledsoe found the chronology to be fatal. In January 2020, Aym was asking the Court to certify orders from February 2018 and October 2019 without any assertion of new evidence, an intervening event, or a need to make a correction to prevent manifest injustice. Id. ¶¶ 21, 23. The Business Court stated that such a retroactive certification was simply beyond its authority under Rule 54:

“As an initial matter, North Carolina’s appellate courts do not permit trial courts to afford Plaintiff the relief it seeks – retroactive certification of previously entered orders absent material amendments triggered by appropriate motion.”

Id. ¶ 22. Aym, the Court noted, could have made a timely request to certify those rulings under Rule 54(b) by asking the Court to include that relief in its judgment. The Court noted that the alternate path for interlocutory appeal – impairment of a “substantial right” – would not have been available even if plaintiff had pled it. That’s because plaintiff’s only argument would have been that of the delay posed if defendants’ stay request had been granted. Mere delay, the Court said, could not constitute injury to a “substantial right.”

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fox Rothschild LLP | Attorney Advertising

Written by:

Fox Rothschild LLP
Contact
more
less

Fox Rothschild LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.