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General Assembly Amends Section 7A-27 To (Mostly) Fix The Jurisdictional Problems Created By The Business Court Modernization Act

On September 15 of this year, we blogged about how the Business Court Modernization Act’s amendment to N.C. Gen. Stat. § 7A-27 appeared to create concurrent jurisdiction in the Supreme Court of North Carolina and the Court of Appeals for certain Business Court appeals.  Two weeks later, the General Assembly quietly passed a 41-page, technical corrections bill  that included several changes to section 7A-27.  Thankfully, those changes appear to fix the concurrent jurisdiction problems we identified in that September blog post.

While we would like to take credit for these behind-the-scenes changes, no one called us beforehand!  Indeed, my fellow NCAPB blogger, Matt Leerberg, inadvertently stumbled on the correction bill last week, which set off a search into who might have been responsible for bringing the problems with section 7A-27 to the General Assembly’s attention.  Surprisingly, none of the “usual suspects” in the appellate bar that we spoke with were aware of the amendment.

The amendments may have flown under the radar because the General Assembly’s 2015 legislation has not (yet) been incorporated into the full version of section 7A-27 found on the General Assembly’s website. Rather, you must use the 2015 ratified bills PDF to cross-reference and find this most recent addition to section 7A-27.

So what does the amendment fix?  If you recall, the 2014 amendments to section 7A-27 was intended to give the Supreme Court direct appellate jurisdiction over all appeals from the Business Court.  However, the Business Court Monderization Act left untouched prior language in section 7A-27 that gives the Court of Appeals jurisdiction over appeals from interlocutory orders of a “superior court.” (Remember, the Business Court, is just a special type of “superior court”). With this new amendment, section 7A-27 now reads as follows:

Except as provided in subsection (a) or (a1) of this section, appeal lies of right directly to the Court of Appeals in any of the following cases:

The “Except as provided in subsection (a) or (a1) of this section” refers to the appeals over which the Supreme Court has direct appellate jurisdiction—including appeals from the Business Court. So at least for cases designated to the Business Court on or after October 1, 2015 [Note: the new amendment is not exactly clear as to how you apply the October 1, 2015 effective date], the concurrent appellate jurisdiction problem has been fixed.

I believe, however, that two other problems remain in section 7A-27.  First, while the Supreme Court has direct appellate jurisdiction over Business Court appeals that involve a final judgment and interlocutory appeals that affect a substantial right, missing from the Supreme Court’s direct appellate jurisdiction is the right to appellate review of “any other order or judgment of the” Business Court “from which an appeal is authorized by statute.”  This quoted language appears only in the portion of section 7A-27 giving direct appellate jurisdiction to the Court of Appeals.  To understand why this distinction is important, remember that not all grants of appellate jurisdiction are found in section 7A-27.  Rather, a small, but important, subset of statutes outside of section 7A-27 provide the right to appellate review of interlocutory orders even if those orders do not affect a substantial right.  Those “other” appellate jurisdiction statutes include, but are likely not limited to:

  • N.C. Gen. Stat. § 1A-1, Rule 54(b)—which allows a trial court judge to certify an order for immediate appellate review if it determines that the order is final as to one or more claims or parties and that there is no just reason for delay;
  • N.C. Gen. Stat. § 1-569.28 —which allows immediate appellate review of certain interlocutory arbitration orders, including orders denying motions to compel arbitration; and
  • N.C. Gen. Stat. § 1-277(b)—which allows immediate appellate review of certain orders denying motions to dismiss for lack of personal jurisdiction.

These statutes give the right to appellate review, but do not tell you to which appellate court you appeal.  To discover that answer, you must look to section 7A-27.  Section 7A-27(b)(4) authorizes appeal to the Court of Appeals of “any other order or judgment . . . from which an appeal is authorized by statute.” [If you think of other statutes that fall within section 7A-27(b)(4)’s language, please let me know in the comments below.]

Granted, the Supreme Court could decide that it has direct appellate jurisdiction over Business Court orders like the ones listed above because the interlocutory orders also affect a substantial right under section 7A-27(a)(3)(a), or because a Business Court’s Rule 54(b) certification could also be characterized as a “final judgment” appealable directly to the Supreme Court under section 7A-27(a)(2).  However, doing so would require the Supreme Court to expand these areas of law, which would likely produce unintended consequences for other types of appellate issues.  [Do we really want to complicate substantial right jurisprudence anymore?]

This problem could be avoided if the General Assembly added a subsubsection to 7A-27(a) that explicitly gave the Supreme Court direct appellate jurisdiction over “any other order or judgment [in a Business Court case] from which an appeal is authorized by statute.”

The second ambiguity was pointed out by John Noor in the comments to a prior blog post.  Section 7A-27 inconsistently describes what types of Business Court orders are appealable directly to the Supreme Court.   The bolded text, below, of section 7A-27 illustrates the difference:

(a)(2) “From any final judgment in a case designated as a mandatory complex business case pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District Courts.

(a)(3)   “From any interlocutory order of a Business Court Judge that does any of the following:” [substantial right appeals, new trial orders, etc.]

Noor, a former Business Court law clerk, noted why this difference could be important:

“While not done as frequently as it once was, Business Court Judges can and have been assigned to preside over regular superior court sessions. Judge Gale was assigned to preside over a couple of non-complex business case trials back in 2012 or 2013, Judge Murphy (former Business Court Judge residing in Charlotte) was assigned to at least one criminal and civil session of superior court in both 2011 and 2012, and Mecklenburg County regularly uses its Business Court Judge to preside over sessions of court dealing with no-show jurors. By providing a direct appeal to the Supreme Court from the types of interlocutory orders in Section 7A-27(a)(3)(a–d) simply because they are issued by a Business Court Judge, conceivably orders issued by Business Court Judges in non-complex business cases during regular superior court sessions are included. As a result, appeals from qualifying orders in non-complex business cases would have a direct right of appeal simply because they were entered by a Business Court Judge. This means litigants need to know both the provisions of Section 7A-27 and the names of each Business Court Judge to ensure they’re appealing to the appropriate court.”

A statutory amendment that made the language of subsections (a)(2) and (a)(3) consistent could fix the issues raised by Noor.

What are your thoughts on this technical fix to section 7A-27?  What about the potential inconsistencies that still remain? Any other fixes to section 7A-27 that you think are necessary?  Share your thoughts in the comments below!

–Beth Scherer

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One Response to "General Assembly Amends Section 7A-27 To (Mostly) Fix The Jurisdictional Problems Created By The Business Court Modernization Act"

  • Beth Scherer
    March 11, 2016 - 11:06 am Reply

    § 7A.45.4 (Business Court designation orders) is another order who right to appellate review arises outside of § 7A-27.

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