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What Does the Supreme Court of North Carolina Consider To Be a “Substantial Right”?

Those familiar with North Carolina appellate jurisprudence are well aware that what constitutes “a substantial right” for the purposes of conferring jurisdiction over an interlocutory order is an issue that is routinely addressed, oftentimes at length, in North Carolina appellate opinions.   So it was interesting to see the Supreme Court of North Carolina’s opinion in Krawiec v. Manly (released last Friday) in which the Court invoked substantial right jurisdiction over an interlocutory order from the North Carolina Business Court (under N.C.G.S. 7A-27(a)(3)(a)) without any jurisdictional discussion whatsoever.

 

Manly involved contract claims as well as a number of tort and statutory claims arising from a dispute between competing dance studios in Mecklenburg County.  The Defendants all filed motions to dismiss the Plaintiffs’ complaint in its entirety pursuant to Rule 12(b)(6).  The Business Court granted in full the motions of one group of Defendants and granted in part the motions of another group of Defendants, leaving claims for breach of contract, fraudulent misrepresentation, unjust enrichment, and punitive damages to proceed to discovery as against those Defendants.  The Plaintiffs appealed (directly to the Supreme Court based on the Business Court Modernization Act signed into law in 2014) from the Business Court’s order dismissing certain of their claims, including those for tortious interference with contract, misappropriation of trade secrets, unfair and deceptive trade practices, and civil conspiracy.

 

The order dismissing some claims but not others was clearly interlocutory—“it [was] made during the pendency of an action and [did] not dispose of the case but requires further action by the trial court in order to finally determine the entire controversy.” Cagle v. Teachy, 111 N.C.App. 244, 247, 431 S.E.2d 801, 803 (1993).  The Plaintiffs argued in their principal brief, relying mainly on the Court of Appeals opinion in Fox v. Wilson, 85 N.C. App. 292, 354 S.E.2d 737 (1987), that the Business Court’s interlocutory order affected a substantial right because the Plaintiffs had the right “to have determined in a single proceeding” the issues of whether they had been damaged by some or all of the Defendants when the claims against the Defendants arose out of the same series of transactions.  The Plaintiffs also asserted that they had a substantial right to have all issues of liability tried by the same jury and the right to avoid potentially inconsistent verdicts in separate trials.  For their part, the Defendants did not address the issue of whether jurisdiction over the interlocutory order was appropriate and instead only argued the merits of the case and why the Business Court’s order should be affirmed.

 

The Supreme Court apparently agreed that the interlocutory order affected a substantial right, but the only evidence of that determination is found in the very first sentence of the opinion in which the Court stated “Appeal pursuant to N.C.G.S. s. 7A-27(a)(3)(a)…”  Beyond that, there was no discussion as to why the particular circumstances of this interlocutory order affected a substantial right such that the Court would have jurisdiction over the appeal.  Is this surprising?  Perhaps not.  The last few interlocutory Business Court orders that the Supreme Court has addressed have received similarly sparse jurisdictional analysis.  In March, the Supreme Court dismissed appeals from interlocutory Business Court orders in three related cases (see here, here, and here) with the following succinct statement: “Appellants have failed to demonstrate grounds for appellate review under N.C.G.S. 7A-27(a)(3) (2017). The appeals in this matter are therefore dismissed.”  Similarly, in December 2017 in an appeal from an interlocutory Business Court order allowing the disqualification of a party’s counsel, the Supreme Court invoked jurisdiction in the same manner as it did in Manly, simply stating at the outset that it was an “appeal pursuant to N.C.G.S. s. 7A-27(a)(3),” with no further discussion as to why the order appealed from affected a substantial right.  See here.

 

What should we make of this apparent trend, if anything?  Has the Supreme Court affirmatively decided not to put analysis in its opinions as to whether an interlocutory order from the Business Court affects a substantial right?  Is the Supreme Court’s substantial right jurisdiction different in some way than the Court of Appeals’ substantial right jurisdiction?  Leave your thoughts and comments below.   

 

–Patrick Kane

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