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A Perfect Storm (Part I): How One Business Court Order’s Pathway To Appellate Review Is To Two Different Courts.

Over the past few months, we have shared several  potential problems created by the Business Court Modernization Act.  Nonetheless, we held a few potential traps close to our vest because, frankly, we were unsure if any of the unique circumstances necessary to trigger the traps would arise.  Recently, we changed our mind on the improbability of those scenarios based on an October 8 order from the North Carolina Business Court.  The facts surrounding that order convinced us to share these hidden snares with you.

As explained in a prior blog post, revised N.C. Gen. Stat. § 7A-27(a)—which  grants the Supreme Court of North Carolina direct appellate jurisdiction over Business Court appeals—applies only to “actions designated as mandatory complex business cases on or after” October 1, 2014.  See Session Law 2014-102 .  Thus, for actions designated to the Business Court before October 1, 2014, the initial appeal must be made to the North Carolina Court of Appeals—not the Supreme Court.

In In re Pike, this October 1, 2014 dividing line created two different appellate pathways for the same North Carolina Business Court orders.  In In re Pike., 2015 NCBS 90, the North Carolina Business Court awarded attorney’s fees in a consolidated class action case.  However, this Business Court case was originally filed as four separate class action lawsuits—with different “designation” dates for each lawsuit.  Those different designation dates have set up a perfect storm surrounding which appellate court has jurisdiction over any appeal—assuming the parties decide to appeal.

The first three of the four consolidated actions addressed by Chief Judge Gale’s order—Orban, Lieberg, and Beickert—involved notices of designation filed by the parties, and subsequently assigned to the Business Court, on or after October 1, 2014.  However, the fourth lawsuit—Umberger—involved a notice of designation filed on September 26 and assigned to the Business Court on September 30, 2014—i.e., before October 1, 2014.  That means that if any of Chief Judge Gale’s orders in the consolidated class action are appealed, ¾ of the parties in the litigation would need to appeal directly to the Supreme Court, while the remaining parties in the Umberg litigation would be forced to appeal the exact same order to the North Carolina Court of Appeals.  Simply fascinating!

I generally avoid dice rolling with our appellate courts. However, I cannot imagine that anyone is eager for both appellate courts to exercise concurrent jurisdiction over the same order at the same time.  So what can the parties do?  One option would be for the parties to ask the Court of Appeals to stay any appeal before it and wait for the Supreme Court to issue its opinion regarding the order.

However, I believe the easier pathway would be a “PDR Prior” (a.k.a., “Bypass Petition”) to the Supreme Court under Appellate Rule 15.  Under a strict reading of Appellate Rule 15, bypass petitions can be filed by the parties only after a case is docketed in the North Carolina Court of Appeals—meaning that the appellate record would have to be prepared and filed in both the Court of Appeals and the Supreme Court before the bypass petition could be filed.

Nevertheless, the Supreme Court recently set some precedent for entertaining a bypass petition before the docketing of the appellate record.  As we blogged about here, the Supreme Court in October 2014  sua sponte “grabbed” 5 pending Court of Appeals cases and placed them on its own docket pursuant to Appellate Rule 15.  The notices of appeal to the Court of Appeals had been filed in all five cases, but in one of the appeals, the appellate record had not yet been docketed.  See Hart v. North Carolina.

Given the procedural fluke created by the consolidation of four different actions in In re Pike, I believe the Supreme Court would entertain a bypass petition before the appellate record was docketed.  I would probably include a motion under Appellate Rule 2 and a petition for writ of certiorari, just to be safe.

Thus, this particular procedural trap—while not avoidable—is likely one that the appealing parties can escape without too much damage—especially since Chief Judge Gale essentially flagged the issue for the parties in footnote 1 of his opinion.

However, a different snare with the Business Court Modernization Act remains ready to spring–and potentially trap–some unsuspecting litigant.  And unlike the trap in In re Pike, this particular trap will more difficult to work around.  Stay tuned to tomorrow’s blog post for all the details!

–Beth Scherer

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