McKinnon v. CV Industries, Inc.

745 S.E.2d 343, 228 N.C. App. 190, 2013 WL 3305353, 2013 N.C. App. LEXIS 722
CourtCourt of Appeals of North Carolina
DecidedJuly 2, 2013
DocketNo. COA12-1165
StatusPublished
Cited by21 cases

This text of 745 S.E.2d 343 (McKinnon v. CV Industries, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKinnon v. CV Industries, Inc., 745 S.E.2d 343, 228 N.C. App. 190, 2013 WL 3305353, 2013 N.C. App. LEXIS 722 (N.C. Ct. App. 2013).

Opinion

DAVIS, Judge.

Plaintiff Bobby E. McKinnon (“plaintiff’ or .“McKinnon”) appeals from the trial court’s order denying his motion for attorney’s fees and awarding attorney’s fees and costs to defendant CV Industries, Inc. (“defendant” or “CVI”). Defendant cross-appeals. After careful review, we affirm in part and remand in part.

Factual Background

This case is before this Court for the second time. The facts surrounding this action are set out more fully in McKinnon v. CV Indus., Inc., _N.C. App._, 713 S.E.2d 495 (2011) (“McKinnon I”) but are summarized in pertinent part as follows:

CVI is a holding company comprised of Century Furniture, LLC (“Century”) and Valdese Weavers, LLC (“Valdese”). Plaintiff is a former employee of CVI. He became president of Valdese in 1978 and continued in various managerial and executive capacities for CVI and its subsidiaries throughout his career. Plaintiff was serving as the president and CEO of CVI in 2000 when he announced his decision to resign in order to pursue a career opportunity at Joan Fabrics and Mastercraft.

After plaintiff announced his resignation, plaintiff and CVI negotiated a severance agreement entitling plaintiff to benefits from certain incentive plans that he had obtained throughout the course of his employment with CVI. Plan A of the severance agreement provided plaintiff with a type of benefits known as shadow equity benefits “once he disengaged from continuous competition with CVI, as long as CVTs ESOP [Employee Stock Ownership Program] stock price exceeded its 31 December 1999 price of $9.90 per share [on the date plaintiff [192]*192stopped competing with CVI].” McKinnon I,_N.C. App. at_, 713 S.E.2d at 498.

The severance agreement also required plaintiff to refrain from acquiring the patents or research of Frank Land (“Land”), who was developing a fire-resistant yam funded by Valdese. When Valdese discontinued funding for Land’s research in October 2001, Land approached plaintiff about a potential joint business venture. Plaintiff requested — and obtained — a letter from CVI dated 20 November 2001 releasing him from his agreement to refrain from acquiring Land’s patents or research. He then resigned from his position to begin a joint venture with Land in late 2001.

On 23 June 2008, plaintiff notified defendant that he intended to withdraw from continuous competition with CVI and acquire his Plan A benefits. Back in March 2002, CVI had hired outside auditors to examine its financial statements. The auditors determined at that time that defendant “no longer needed to categorize Plaintiff’s Plan A benefits as a liability, since, after leaving Joan Fabrics, Plaintiff was no longer in continuous competition with CVI and at that time CVI’s ESOP price had not exceeded its 31 December 1999 value.” Id. at_, 713 S.E.2d at 499. CVI, therefore, sent plaintiff a letter informing him that it did not owe him the Plan A benefits because plaintiff had previously ceased competition with CVI at a time when CVI’s stock price was below its 31 December 1999 value.

On 11 March 2009, plaintiff filed a complaint in Catawba County Superior Court alleging that by failing to pay him the Plan A benefits under his severance agreement, defendant had (1) breached its contract with plaintiff; (2) engaged in fraud and misrepresentation; and (3) engaged in unfair and deceptive practices in violation of N.C. Gen. Stat. § 75-1.1 (“Chapter 75”) based on fraud and misrepresentation. The matter was designated a complex business case and assigned to the Honorable Ben F. Tennille.

Defendant filed an answer denying plaintiffs allegations along with a counterclaim alleging that plaintiff had breached the severance agreement by acquiring patents owned by Land. Plaintiff submitted a reply in response to the counterclaim in which he referenced the 20 November 2001 letter releasing him from his agreement to forego acquiring Land’s patents. Defendant subsequently filed an amended answer omitting its counterclaim.

After the parties engaged in discovery, defendant filed a motion for summary judgment with respect to all of plaintiff’s claims, and the motion was granted in its entirety by Judge Tennille. Plaintiff appealed, and this Court affirmed Judge Tennille’s order in McKinnon I. Plaintiff [193]*193then filed a petition for discretionary review with the Supreme Court of North Carolina, which was denied. McKinnon v. CV Indus., Inc., 365 N.C. 353, 718 S.E.2d 376 (2011).

Both plaintiff and defendant subsequently filed motions in the trial court to recover attorney’s fees and costs. After a hearing on the parties’ cross-motions, the Honorable James L. Gale1 issued an order on 11 June 2012 (1) denying plaintiffs motion for attorney’s fees; (2) awarding CVI $40,000 in attorney’s fees for fees incurred after Judge Tennille’s entry of summary judgment; and (3) awarding CVI costs totaling $16,798.36. Both parties appealed Judge Gale’s order.

Analysis

I. Denial of Attorney’s Fees to Plaintiff

Plaintiff contends that the trial court erred in determining that he was not entitled to attorney’s fees pursuant to (1) Rule 11 of the North Carolina Rules of Civil Procedure; (2) N.C. Gen. Stat. § ID-45; or (3) N.C. Gen. Stat. § 6-21.5.

A. Rule 11

Rule 11 states, in pertinent part, as follows:

Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. . . . The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information and belief formed after reasonable inquiry that it is well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

N.C. R. Civ. P. 11(a). If a pleading, motion, or paper is signed in violation of Rule 11, “the court, upon motion or upon its own initiative, shall impose ... an appropriate sanction, which may include an order to pay the other party... reasonable expenses... including a reasonable attorney’s fee.” Id.

[194]*194It is well established that analysis under Rule 11 is three-pronged, requiring the trial court to determine whether the pleading, motion, or paper is (1) factually sufficient; (2) legally sufficient; and (3) not filed for an improper purpose. In re Will of Durham, 206 N.C. App. 67, 71, 698 S.E.2d 112, 117 (2010). “A violation of any one of these requirements mandates the imposition of sanctions under Rule 11.” Dodd v. Steele, 114 N.C. App. 632, 635, 442 S.E.2d 363, 365, disc. review denied, 337 N.C. 691, 448 S.E.2d 521 (1994).

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Bluebook (online)
745 S.E.2d 343, 228 N.C. App. 190, 2013 WL 3305353, 2013 N.C. App. LEXIS 722, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckinnon-v-cv-industries-inc-ncctapp-2013.