Key Business Court Decisions

The New Judge Is Not The Old Judge, Even If He Inherits The Case

Where a matter is transferred to the Business Court, the judge taking over the case is not considered the same judge for purposes of reconsidering orders entered by the prior judge.  Price v. Carlson, 2018 NCBC 133 (J. Bledsoe).   Just like matters in the General Court of Justice of Superior Court, the moving party must prove the circumstances have changed.

Plaintiffs and Defendants are all shareholders of G2 Telecom, Inc., (“Company”) a Delaware corporation.  In September 2018, Plaintiffs filed suit in the General Court of Justice, Superior Court Division in Moore County against Defendants, contending Defendants had breached the Shareholders Agreement and, in doing so, intended to inflict irreparable harm on Plaintiffs.  Plaintiffs sought and obtained an ex parte temporary restraining order against Defendants from Judge James Webb.  Judge Webb later entered a preliminary injunction after a hearing in which Defendants were present and presented evidence.  Judge Webb’s PI Order precluded Defendants from taking a number of actions, including violating any of the Company’s By-Laws.  The Company’s By-Laws provided that only the Board of Directors could terminate an officer.  The Board was compromised only of Plaintiffs and Defendants, with each having only one vote.  Following entry of the PI Order, Defendants filed a Notice of Designation, transferring the matter to the Business Court.  Defendants thereafter terminated Plaintiffs’ employment and filed a motion to vacate Judge Webb’s PI Order.

While acknowledging that the decision of one Superior Court judge cannot be overruled by a different Superior Court judge absent a change in circumstances, Defendants argued that, because the Business Court had taken over the case, it was as though the original judge still had the case and no change of circumstances need be shown. The Business Court disagreed. Distinguishing the case of Wachovia Bank v. Harbinger Capital, 201 N.C. App. 507, 687 S.E.2d 487 (2009)(business court judge able to revisit Superior Court judge’s preliminary injunction absent changed circumstances), the Business Court recognized the cause of the change in judiciary, in this case, was from Defendant’s own action to file a Notice of Designation.  (Opinion, ¶15).  As a result, the Court determined Defendants needed to show a change of circumstances before the Business Court could revisit Judge Webb’s PI Order.  Because Defendants presented no such evidence, Judge Webb’s PI Order remained.

The Court then addressed Defendants’ termination of Plaintiffs and whether, because Plaintiffs were officers, Defendants’ unilateral termination violated the By-Laws and thus the PI Order.  While the Court recognized that, pursuant to Delaware law, Defendants could not unilaterally terminate Plaintiffs from their positions as officers, the By-Laws gave officers “additional authority and duties incident to his office.”  (Opinion, ¶27).  The Court found Delaware law gave a company president to hire and fire employees, and thus Defendant-President’s decision to terminate Plaintiffs from their positions as ordinary employees did not violate the Company’s By-Laws. Yet, the Court found, Plaintiffs were still employed as officers and directors of the Company.  Id.

A company that seeks immediate injunctive relief in a matter that might be transferred to the Business Court would do well to try and obtain a favorable decision in the regular Superior Court before the transfer occurs.  Such action would then guarantee the continuation of the favorable preliminary result, absent a change in circumstances.  And for any Delaware corporations acting in North Carolina, it is now clear that the company’s president has the recognized right to hire and fire employees.

 

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