Piazza v. Kirkbride, 040516 NCCA, COA 15-48

Docket Nº:COA 15-48
Attorney:Poyner Spruill LLP, by Steven B. Epstein & Andrew H. Erteschik Attorney for Plaintiff-Appellees. Smith Moore Leatherwood, LLP, by Matthew Nis Leerberg & Mark A. Finkelstein, and The Law Office of Michael Lee Frazier, by Michael Lee Frazier, Attorneys for Defendant-Appellant Gregory Brannon and De...
Judge Panel:MCGEE, Chief Judge concurs. TYSON, Judge, concurring in part, dissenting in part.
Case Date:April 05, 2016
Court:Court of Appeals of North Carolina




No. COA 15-48

Court of Appeals of North Carolina

April 5, 2016

Wake County, No. 12 CVS 14344.

Poyner Spruill LLP, by Steven B. Epstein & Andrew H. Erteschik Attorney for Plaintiff-Appellees.

Smith Moore Leatherwood, LLP, by Matthew Nis Leerberg & Mark A. Finkelstein, and The Law Office of Michael Lee Frazier, by Michael Lee Frazier, Attorneys for Defendant-Appellant Gregory Brannon and Defendant-Appellee David Kirkbride.


Following a trial by jury in Wake County Superior Court with Judge G. Bryan Collins presiding, Defendant-Appellant Gregory Brannon appeals from a 13 March 2014 final judgment awarding monetary damages and order awarding attorney fees and costs, and a 11 April 2014 order denying Brannon's motion for judgment notwithstanding the verdict or in the alternative a new trial. Heard in the Court of Appeals 12 August 2015.

Defendant Gregory Brannon ("Brannon") appeals following a jury verdict finding him liable to Plaintiffs Lawrence Piazza ("Piazza") and Salvatore Lampuri ("Lampuri") (together "Plaintiffs") under the North Carolina Securities Act ("NCSA"), N.C. Gen. Stat. § 78-56(a)(2). The court awarded monetary damages to Piazza for $150, 000.00 and to Lampuri for $100, 000.00 plus interest at the legal rate. To this amount the court also assessed attorney fees of $123, 804.00 and court costs of $8, 493.79. We affirm.

I. Standard of Review

On appeal, Brannon seeks review of the following legal issues: (1) Whether the Plaintiffs sufficiently pled and proved the statutory elements of NCSA section 78A-56(a)(2) securities fraud including a duty to prove scienter? (2) Whether the North Carolina Pattern Jury Instruction detailing the Director Safe Harbor provision, N.C. Gen. Stat. § 55-8-30(b) should have been given? (3) Whether the jury verdict was inconsistent? In the event that this Court reverses any of these legal issues, then Brannon argues he is entitled to a new trial and to have this Court vacate the award of attorney fees and costs.

All Brannon's legal arguments are raised in the context of his Rule 50(a) motion for directed verdict, Rule 60 motion for judgment notwithstanding the verdict, and Rule 59(a) motion for new trial. Each motion is predicated upon similar facts and the similar legal premise that the verdict was "contrary to law." Brannon's appeal suggests that we review his first and second arguments under the de novo standard of review and review his third argument for an abuse of discretion. Brannon contends that all of his arguments should be reviewed under the abuse of discretion standard.

Our analysis of Brannon's appeal leads to the conclusion that all his arguments surround the issue of whether or not the trial court's decisions were "errors of law" which would entitle him to a new trial. We review questions of law de novo with the following caveat.

"While an order for new trial pursuant to Rule 59 which satisfies the procedural requirements of the Rule may ordinarily be reversed on appeal only in the event of 'a manifest abuse of discretion, ' when the trial court grants or denies a new trial 'due to some error of law, ' then its decision is fully reviewable." Chiltoski v. Drum, 121 N.C.App. 161, 164, 464 S.E.2d 701, 703 (1995) (quoting Garrison v. Garrison, 87 N.C.App. 591, 594, 361 S.E.2d 921, 923 (1987)), disc. review denied, 343 N.C. 121, 468 S.E.2d 777 (1996). Our Court has used a similar standard of review when addressing jury instruction issues. "On appeal, this Court considers a jury charge contextually and in its entirety. The charge will be held to be sufficient if it presents the law of the case in such manner as to leave no reasonable cause to believe the jury was misled or misinformed. The party asserting error bears the burden of showing that the jury was misled or that the verdict was affected by an omitted instruction. Under such a standard of review, it is not enough for the appealing party to show that error occurred in the jury instructions; rather, it must be demonstrated that such error was likely, in light of the entire charge, to mislead the jury." Hammel v. USF Dugan, Inc., 178 N.C.App. 344, 347, 631 S.E.2d 174, 178 (2006) (citations and quotation marks omitted).

With regard to the argument that the verdict was inconsistent, we review the issue under the abuse of discretion standard. When a jury returns a verdict answering several issues, and an irreconcilable repugnance among the issues makes them "so contradictory as to invalidate the judgment, the practice of the Court is to grant a new trial . . . ." Palmer v. Jennette, 227 N.C. 377, 379, 42 S.E.2d 345, 347 (1947). However, "[i]t is well settled that a verdict should be liberally and favorably construed with a view of sustaining it, if possible . . ." Strum v. Greenville Timberline, LLC, 186 N.C.App. 662, 665, 652 S.E.2d 307, 309 (2007) (quoting Guy v. Gould, 202 N.C. 727, 729, 164 S.E. 120, 121 (1932)). "'The trial judge has the discretionary power to set aside a verdict when, in his opinion, it would work injustice to let it stand; and, if no question of law or legal inference is involved in the motion, his action in so doing is no subject to review on appeal in the absence of a clear abuse of discretion.'" Seaman v. McQueen, 51 N.C.App. 500, 505, 277 S.E.2d 118, 121 (1981) (quoting Selph v. Selph, 267 N.C. 635, 637, 148 S.E.2d 574, 575–76 (1996)).

II. Facts

A. Background

Brannon and Piazza first met at Chicago Medical School in 1986. Piazza went on to practice medicine as an ophthalmologist in Maine, and Brannon established his own practice as an OB/GYN in North Carolina. In the early 1990s, Brannon and Piazza invested in a start-up software company, Arckosian Entertainment. Arckosian produced a large online role-playing game, and was founded by Robert Rice ("Rice"), who also served as a president and director for the company. Arckosian closed in 1997, and Rice started several other businesses. During a stint at one company, Z Reality, Rice worked with David Kirkbride ("Kirkbride"), who previously practiced real estate and corporate law in Raleigh, North Carolina.

Brannon met John Cummings ("Cummings") during a medical appointment in 2006, when he served as the prenatal OB/GYN for Cummings's wife. Brannon and Cummings found that they had common interests in investment opportunities, as Cummings had previously worked at an investment group that Brannon had invested in. The two continued to be friends and business acquaintances after Cummings's wife gave birth.

In 2007 Rice and Kirkbride founded Neogence Enterprises ("Neogence"), which Rice described as his "brain child." Neogence developed augmented reality ("AR") applications for smartphones. Augmented reality is a method to display three-dimensional graphics over a video stream, like the yellow first-down line that appears on screen during a televised football game. The augmented reality application that Neogence developed was called Mirascape. Neogence developed Mirascape to allow smartphone owners to use their phone's camera to scan different areas around them, which would uncover social media posts, photos, restaurant reviews, and other information that would appear on the smartphone's screen.

Rice served as the CEO of Neogence, and focused on developing technology and growing funding for the company. Kirkbride helped with fundraising efforts, investing $75, 000.00 himself, and sharing multiple responsibilities as Neogence's co-founder. During Neogence's infancy, Rice talked to Brannon about various business challenges, and sought advice and encouragement. Rice talked to Kirkbride about adding Brannon to the Neogence board of directors, and they agreed to add Brannon. Together, Rice, Kirkbride, and Brannon formed Neogence's initial board of directors.

In 2009, Brannon hosted an event at his home to promote Neogence and introduced Cummings to Rice and Kirkbride. A few weeks after the introduction, Rice and Kirkbride talked to Cummings about joining Neogence as an executive, which he did, joining as the Chief Sales Officer.

Brannon raised money by introducing potential Neogence investors to Rice. Neogence received money from "angel investors, " and in exchange, issued convertible promissory notes to the investors.1 These notes set out a specific maturity date, at which time the investor could choose to either recoup his money with interest, or convert that value into a percentage of Neogence stock.

One such angel investor was Brannon's medical school friend, Piazza. Brannon called Piazza in January 2010, to tell him about investment opportunities in Neogence. Piazza invested in Neogence in two installments, a $13, 900.00 investment on 5 February 2010, and a $36, 100.00 investment on 26 February 2010. Piazza received convertible promissory notes for both investments, with each note set to mature on 30 September 2010.

Another angel investor, Lampuri, worked as the vice president of operations at his family-owned construction company. Lampuri and his wife, Kristen, became acquainted with Brannon through his services as an OB/GYN. The couple used Brannon as an OB/GYN during the birth of their first child, and again in February 2010 when Kristen was pregnant with their second child. During prenatal appointments on 17 February 2010 and 16 March 2010, Lampuri accompanied his wife to Brannon's office, and into the examination room. During both examinations, Brannon discussed Neogence investment opportunities with Lampuri, telling him about the company's Mirascape software.

B. Cummings's 30 April 2010 Meeting in New York City

On 29 April 2010, Cummings...

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