Binney v. Banner Therapy Products, Inc.

• Citation: 362 N.C. 310,661 S.E.2d 717
• Decision Date: 12 June 2008
• Docket Number: No. 431A06.,431A06.
• Parties: Christina M. BINNEY, Petitioner v. BANNER THERAPY PRODUCTS, INC. and Employment Security Commission of North Carolina, Respondents.
• Court: North Carolina Supreme Court

661 S.E.2d 717

362 N.C. 310

Christina M. BINNEY, Petitioner v. BANNER THERAPY PRODUCTS, INC. and Employment Security Commission of North Carolina, Respondents.

No. 431A06.

Supreme Court of North Carolina.

June 12, 2008.

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, 178 N.C.App. 417, 631 S.E.2d 848 (2006), affirming in part, reversing in part, and remanding a judgment entered 17 November 2004 by Judge James L. Baker, Jr. in the Superior Court in Buncombe County. On 8 March 2007, the Supreme Court allowed respondent Employment Security Commission's petition for discretionary review of an additional issue. Heard in the Supreme Court 11 September 2007.

Ferikes & Bleynat, PLLC, by Edward L. Bleynat, Jr., Asheville, for petitioner-appellee.

Thomas S. Whitaker, Chief Counsel, by Sharon A. Johnston, Raleigh, for respondent-appellant Employment Security Commission of North Carolina.

HUDSON, Justice.

After being terminated by her employer, respondent Banner Therapy Products, Inc. ("Banner"), on 5 April 2003, petitioner Christina M. Binney ("Binney") sought unemployment insurance benefits under N.C.G.S. § 96-15(a) on 6 April 2003. Banner contested Binney's claim. Ultimately, the Employment Security Commission ("ESC") and then the superior court found her disqualified for benefits because of having been terminated for misconduct related to her job. The Court of Appeals reversed this determination. Binney v. Banner Therapy Prods., 178 N.C.App. 417, 631 S.E.2d 848 (2006). We reverse.

The claim was first referred to an ESC adjudicator, who determined that Binney was disqualified, and Binney appealed. An appeals referee held a hearing where both Binney and Banner presented evidence from various witnesses. On 5 November 2003, the appeals referee issued a decision finding Binney disqualified pursuant to N.C.G.S. § 96-14(2). Binney then appealed to the ESC, which relied on the evidence from the hearing before the appeals referee in making findings of fact and conclusions of law. The ESC disqualified Binney for unemployment insurance benefits after concluding that she had been fired for misconduct, consisting of asserting a personal copyright interest in Banner's catalogs and web site "in conjunction with" removing the hard drive from her work computer without authorization.

Binney petitioned for judicial review in the superior court in Buncombe County. On 17 November 2004, Judge James L. Baker, Jr. entered a judgment affirming the ESC decision, as well as all of its findings and conclusions. Binney then appealed to the Court of Appeals, challenging many of the ESC's findings of fact and conclusions of law and the superior court's judgment affirming them. On 18 July 2006, in a divided opinion, the Court of Appeals affirmed on the ESC's cross-assignment of error, reversed the superior court's decision on the merits, and remanded the matter for entry of an order reversing the Commission decision and for further remand to the Commission for additional proceedings.

The Court of Appeals considered two substantive issues: whether the ESC erred in finding and concluding that Binney's removal of the hard drive from her work computer without authorization constituted employment-related misconduct, and whether Binney's assertions of a personal copyright in her employer's catalogs and on its web site constituted work-related misconduct. The majority concluded that there was no evidence that Binney removed her hard drive for any improper purpose and that there was no formal policy against removing computer hard drives from the employer's premises. Id. at 425, 631 S.E.2d at 853. The majority also concluded that there was no evidence that Binney's assertions of a personal copyright on the employer's web site and in its catalogs were unreasonable or taken in bad faith and that the employer failed to carry its burden of proving Binney should be disqualified from receiving unemployment insurance benefits on that ground. Id. at 427-28, 631 S.E.2d at 854. However, Judge Hunter concluded that evidence of Binney's removal of the computer hard drive without authorization showed a deliberate disregard of the standards of behavior that the employer had a right to expect, and thus, Binney was properly disqualified for benefits. Id. at 431, 631 S.E.2d at 856 (Hunter, J., dissenting in part and concurring in part). The dissenting opinion did not address the matter of the personal copyright assertions. Id.

Respondent ESC filed its appeal of right based on the dissenting opinion's discussion about removal of the computer hard drive, along with a petition seeking this Court's discretionary review of the majority's ruling on the personal copyright issue. This Court allowed respondent's petition for discretionary review on 8 March 2007. Because the ESC and superior court based their conclusion of law that Binney was disqualified due to discharge for misconduct on the findings pertaining to both the copyright and hard drive issues, we address both.

Employer Banner sold rehabilitation and other health-care supplies via showroom, printed catalog, and web site listings. Binney had been an officer of the company since she, along with Thomas Maroney, Sandor Sharp and their wives, founded it in May 1997. At the time of these events, Maroney and his wife owned eighty percent of the company and Binney's share was ten percent. At the time of her termination Binney served as Banner's corporate treasurer and self-titled vice president of marketing. Banner produced its first catalog in 1997 and it indicated no copyright. In 1998, Binney added to the catalogs a notice of joint copyright for herself and Banner. From 1999 through 2003, all of Banner's catalogs carried an assertion of copyright for Binney personally, but no mention of Banner. At some point between 1998 and 2003, Sandor Sharp, part-owner and corporate secretary of Banner, noticed and asked Binney about her assertion of a personal copyright in the catalogs. Binney's explanation of her actions allayed his concerns, however, and the personal copyright apparently went otherwise unnoticed until March 2003. At that time, it quickly became a contentious issue, and after Binney removed the hard drive from her computer on 4 April 2003, Banner terminated her on 5 April 2003.

The ESC made the following pertinent findings regarding Binney's termination:

3. The claimant was discharged from this job for the following reasons: she produced catalogs and a web site for the employer that included a statement of that the claimant had a personal copyright interest in the catalogs and web site; she removed the hard drive from the computer supplied to her by the employer without being authorized to do so. . . .

. . . .

5. The claimant was responsible for the production and distribution of the employer's product catalog. The first of these catalogs was produced in mid-1997.

6. In 2001, the claimant created an internet web site for the employer.

7. On or about March 15, 2003, Thomas Maroney, vice president, discovered that the employer's web site contained the following statement: "Copyright © 2001, Christine Marie Binney, All Rights Reserved." The employer had not authorized the claimant to include such a statement on the web site.

8. The employer then discovered that the 1997, 1998/1999, 2000, 2001, 2002, and 2003 catalogs, all of which were produced by the claimant in the performance of her job, contained similar statements that asserted that the claimant had a copyright interest in the catalogs. The employer had not authorized the claimant to include such a statement in the catalogs.¹

9. The employer confronted the claimant concerning her copyright assertions. The claimant advised the employer that she had a copyright interest in the catalogs and web site; however, the claimant did not seek legal advice concerning her copyright interests prior to her discharge from employment.

10. On April 4, 2003, the employer learned that the claimant had removed the hard drive from the computer assigned to the claimant by the employer. The employer did not authorize the claimant to remove the hard drive.

The ESC then concluded:

In the present case, the Commission concludes from the competent and credible evidence and the facts found therefrom that the claimant was discharged from employment. The Commission further concludes that the claimant's assertion of a personal copyright interest in the employer's catalogs and web site, in conjunction with her unauthorized removal of the hard drive of an employer computer, showed a deliberate disregard of the standards of behavior that the employer had a right to expect of the claimant. The Commission also concludes therefore that the claimant was discharged for misconduct connected with the work.

Based upon these findings and conclusions, the ESC denied Binney's claim for unemployment insurance benefits.

In the superior court, Binney argued that the ESC's findings were premised on a misunderstanding of copyright law and the respective rights and duties of shareholders and officers in closely-held corporations, that the findings were not supported by competent evidence, and that the findings did not support the ESC's conclusion of law that she "willingly and knowingly showed a deliberate disregard of the standard of behavior that the employer had a right to expect." The superior court affirmed the ESC, finding that the ESC's findings were supported by competent evidence and thus binding on review, and that the findings in turn supported the ESC's conclusions. In the Court of Appeals, Binney challenged findings of fact 3, 5, 7, 8, 9 and 10, as well as the ESC's conclusion that these actions constituted work-related misconduct; all of these are quoted above.

The standard of review in appeals from the ESC, both to the superior court and to the appellate division, is established by statute. "In any judicial proceeding under...