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How Do You Appeal a Business Court Designation, Anyway?

A few months ago, Hanesbrands Inc. sued a former executive to recover the value of certain stock units and options because of her alleged defection to a competitor.  Hanesbrands filed a “Notice of Designation” so that the case could proceed in the North Carolina Business Court because it involves securities law and the law governing corporations.  The Chief Justice of the Supreme Court agreed and designated the case as “mandatory complex business,” proceeding before Chief Judge Jim Gale.  The executive filed an opposition to the Business Court designation, arguing, among other things, that the case involved Maryland substantive law.  Judge Gale overruled the opposition by written Order, holding that the designation was not improper just because the securities issues arise under Maryland—and not North Carolina—law.

The issue is an interesting one. The statute allows Business Court designation for “[d]isputes involving securities, including disputes arising under Chapter 78A of the General Statutes.”  N.C. Gen. Stat. § 7A-45.4.  What happens when the substantive law governing those disputes is the law of another state, or federal law?

Yesterday, the former executive appealed the “Order on Opposition” that kept the case in Business Court by noticing appeal to the Supreme Court. Now what happens?

Good question, and one to which there is no easy answer. Before the passage of the Business Court Modernization Act, an appeal from a designation decision was taken directly “to the Chief Justice of the Supreme Court.”  Now, the appeal is taken “in accordance with G.S. 7A-27(a).”  Section 7A-27(a), in turn, simply allows for an appeal “directly to the Supreme Court” from final judgments and certain interlocutory orders entered in Business Court cases.  A designation decision is not a “final judgment.”  In fact, to be immediately appealable at all, it would have to be an order that “[a]ffects a substantial right.”  N.C. Gen. Stat. § 7A-27(a)(3)(a).  Presumably the General Assembly wanted the issue of Business Court designation to be decided before the entire litigation is conducted, but the statute leaves it to the Supreme Court to decide whether the designation order “affects a substantial right.”

The lack of clarity does not end there. By statute, the procedures governing any appeal—including an appeal from a designation decision—are provided by the Rules of Appellate Procedure.  N.C. Gen. Stat. § 1-279.1.  But those procedures are detailed, and the process is slow.  Did the General Assembly really intend for appeals from designation decisions to take a year, and involve record compilation, full briefing, and oral arguments?  If not, what procedures are the parties supposed to follow?  Meanwhile, may the Business Court proceed with the case, or is the matter stayed by N.C. Gen. Stat. § 1-294?

I am hopeful that the Supreme Court will provide some answers to these questions. Stay tuned.

–Matt Leerberg

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One Response to "How Do You Appeal a Business Court Designation, Anyway?"

  • Bikash Roy
    November 13, 2015 - 3:49 pm Reply

    But why even appeal? The fact that the substantive law of Maryland is applicable probably makes it just the kind of case for which the business court was created. About the only differences between business court and regular superior court is that motion practice is more expensive because of the need for written briefs and you can’t calendar motion hearings to suit your litigation strategy. Now if the executive loses, he might have to pay the business court fee as costs! My prediction at least based on your write-up: this belong and stays squarely in business court.

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