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Breaking Appellate and Business Court News Day In The North Carolina Supreme Court

Today, the Supreme Court issued its final batch of opinions and two sets of rules amendments for 2017.  We will bring you more information in the days that come, but below are some of the highlights.

New Year, New Rules:  North Carolina Rules of Appellate Procedure amended and recodified effective 1 January 2017.

A new set of Appellate Rules will reign in the New Year. There are many revisions that we will discuss more fully in due course, including clarification regarding the filing of reply briefs in Rule 3.1 (juvenile) cases, tweaks to how words are counted for word limits in briefs, and clarifications to bring Rule 18 up-to-date with how administrative appeals are taken from the Office of Administrative Hearings.

Of importance to me, remember when we told you to stop using Courier font a few months ago?  The Supreme Court is killing Courier font in 2017.  An amendment to Rule 26(g)(1) now requires all appellate papers to be filed in “proportionally spaced fonts with serifs” (e.g., Constantia and Century).  Font sizes under this new rule can be anywhere between 12 and 14 point, but Rule 28(j) now requires everyone follow a word-count limit for briefs filed in the Court of Appeals (rather than a page limit).  I guess this means I have to give up my typewriter.

Update: My promised summary of the remaining rule changes can be found here.  Also, the day after this post, the Supreme Court adopted new Appellate Rule 31.1 governing en banc proceedings in the Court of Appeals, which you can read about here.

Appellees, Alternative Basis In Law To Support The Judgment, and Waiver, Oh My!

In February 2016, the Supreme Court of North Carolina for the first time in a long time retained an appeal based on the existence of a substantial constitutional question.  An important issue of appellate practice and procedure was lurking in the background.

In the trial court, the superior court had decided the case in the City of Asheville’s favor based on arguments 1 through 3, having no need to reach the City of Asheville’s arguments 4 and 5.  In the Court of Appeals, the City of Asheville (as the appellee) did not argue those unreached claims as an alternative basis in law to support the trial court’s judgment as permitted by Appellate Rule 10.  In reversing and remanding the decision to the trial court, the Court of Appeals said that arguments 4 and 5 had been “waived” and “not preserved” by the City of Asheville’s failure to argue them in its appellees’ brief.

Thankfully, the Supreme Court disavowed the Court of Appeals’ reading of Rule 10 in footnote 11 of its opinion issued today.

Although we need not reach the issue of whether the Court of Appeals erred by apparently holding that the City had waived the right to have the claims that it had asserted pursuant to the contract clauses and N.C.G.S. § 159-93 considered on remand by failing to assert those claims as an alternative basis for upholding the trial court’s order pursuant to Rule 10(c) of the North Carolina Rules of Appellate Procedure, we disavow that holding in order to avoid confusion in subsequent cases. Simply put, nothing in the relevant provisions of the North Carolina Rules of Appellate Procedure or any of our prior cases requires an appellee to challenge legal decisions that the trial court declined to make on the grounds that the case could be fully resolved on some other basis on appeal pursuant to Rule 10(c) of the North Carolina Rules of Appellate Procedure at the risk of losing the right to assert those claims at a later time.

Note that Rule 10 also allows an appellee, without taking an appeal, to argue actual adverse decisions of the trial court (as opposed to mere trial court silence) that deprived the appellee of an alternative basis in law to support the judgment.  This footnote does not address whether an appellee must raise those issues under Rule 10 to avoid waiver.

Hanesbrands Decision Confirms That Business Court Designations Are Not Immediately Appealable

The Business Court Modernization Act made a subtle change to how Business Court designations could be appealed.  Instead of designation challenges being appealed “to the Chief Justice of the Supreme Court,” the Act now requires such appeals be taken “in accordance with G.S. 7A-27(a).”

As we discussed a year ago, the prevailing practice before the change was for designations to be immediately appealed to the Chief Justice. After all, it would be wasteful for the entire litigation to be conducted in the Business Court, only to have a party successfully appeal years later and cast those proceedings in doubt.  We noticed then that the Business Court Modernization Act’s changes to § 7A-45.4 appeared to jeopardize this right to immediate appellate review, because the very same “G.S. 7A-27(a)” referenced in the Act also precludes immediate appeals from interlocutory orders unless they, inter alia, “affect a substantial right.”

Today, in Hanesbrands Inc. v. Fowler, the Supreme Court took the legislature at its word, read the statute literally, and held that appeals from Business Court designations do not necessarily affect a substantial right.

While the opinion perhaps leaves open the possibility that another litigant could articulate a better basis for immediate appellate review, it also suggests that the Chief Justice has the authority to designate any case as a “discretionary complex business case pursuant to Rule 2.1.” Query whether this suggests that a Business Court designation may actually never be effectively appealed, because a case that was improperly designated a “mandatory” complex business case could have been designated a “discretionary” complex business case anyway.

New Business Court Rules, Effective 1 January 2017

Finally, the Supreme Court issued an order today adopting a revised set of rules governing practice before North Carolina’s business courts.  The rules will apply to all cases designated on or after 1 January 2017.  The new “BCR” are the result of a lengthy review process conducted by the Business Court Rules Advisory Committee at the direction of Chief Judge Gale.

A summary of the changes included in the new Business Court Rules can be found here.

–Beth Scherer

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2 Responses to "Breaking Appellate and Business Court News Day In The North Carolina Supreme Court"

  • Matt Leerberg
    December 23, 2016 - 1:52 pm Reply

    Hanesbrands may not completely close the door to immediate appeals from designation orders. Consider a case that arguably fits within the exclusive purview of the Business Court under N.C. Gen. Stat. 7A-45.4(b) (i.e., certain tax and pole attachment cases and certain business cases in which $5MM or more is at stake). Such “mandatory mandatory” Business Court cases MUST be filed in the Business Court. Indeed, if it is left in regular Superior Court, that judge has a statutory obligation to stay the case sua sponte until it is properly designated. N.C. Gen. Stat. 7A-45.4(g).

    If a party believes its case fits the 7A-45.4(b) “mandatory mandatory” criteria, but the Chief Judge of the Business Court disagrees, would an appeal from the order granting an objection to the designation affect a substantial right, and be immediately appealable?

  • Beth Scherer
    December 23, 2016 - 2:06 pm Reply

    Yes, a “substantial” difference could exists between a Business Court’s decision to retain a case designated by the Chief, and a decision by the Business Court to reject a case after it had been preliminarily designated by the Chief.

    Also, what, if any authority, does the Business Court have to reject a case that the Chief Justice alternatively designates as a discretionary business court case?

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