Christenbury Eye Ctr., P.A. v. Medflow, Inc.

• Decision Date: 18 August 2017
• Docket Number: No. 141PA16,141PA16
• Citation: 802 S.E.2d 888,370 N.C. 1
• Court: North Carolina Supreme Court
• Parties: CHRISTENBURY EYE CENTER, P.A. v. MEDFLOW, INC. and Dominic James Riggi

370 N.C. 1

802 S.E.2d 888

CHRISTENBURY EYE CENTER, P.A.

v.MEDFLOW, INC. and Dominic James Riggi

No. 141PA16

Supreme Court of North Carolina.

Filed August 18, 2017

Shumaker, Loop & Kendrick, LLP, Charlotte, by Frederick M. Thurman, Jr., for plaintiff-appellant.

Robinson, Bradshaw & Hinson, P.A., Charlotte, by Douglas M. Jarrell and Fitz E. Barringer, for defendant-appellee Medflow. Inc.

Moore & Van Allen PLLC, Charlotte, by Benjamin P. Fryer and Nader S. Raja, for defendant-appellee Dominic James Riggi.

NEWBY, Justice.

North Carolina law has long recognized the principle that a party must timely bring an action upon discovery of an injury to avoid dismissal of the claim. Statutes of limitations require the pursuit of claims to occur within a certain period after discovery, thereby striking the balance between one's right to assert a claim and another's right to be free from a stale claim. Here plaintiff's action arises from an unfulfilled business agreement. Plaintiff's complaint reveals, however, that plaintiff had notice of the breach of the agreement and its resulting injuries fourteen years before commencing the current action. Because plaintiff failed to pursue its claims within the statute of limitations period, plaintiff's claims are time barred. Accordingly, we affirm the trial court's order dismissing plaintiff's claims.

Jonathan D. Christenbury, M.D. founded plaintiff Christenbury Eye Center, P.A., a professional association that offers ophthalmology services. In 1998 or 1999, Dr. Christenbury approached defendant Dominic James Riggi, a consultant, about developing a software management package for plaintiff. Upon Riggi's recommendation, plaintiff purchased a generalized software platform, with the idea that Riggi and plaintiff would later customize and enhance the platform for plaintiff's practice needs and for possible sale to other physician practices and customers. Around the same time, Riggi formed defendant Medflow, Inc., a medical record software development company.

In October 1999, plaintiff and defendants entered into an "Agreement Regarding Enhancements" to the original software platform (the Agreement). The Enhancements are improvements to the software platform such as "customized screens, interfaces, forms, [and] procedures." Under the Agreement, plaintiff assigned its rights in the Enhancements to defendants. "As consideration for the assignment of rights ... [defendants] agree[d] to pay [plaintiff] a royalty of ten percent (10%) of the gross amount of all fees ... received" from any sales of the Enhancements made "on or after October 1, 1999" and to "provide [plaintiff] with a written report on a monthly basis ... includ[ing] a detailed description of the fees received from [defendants’] Customers during the prior month, along with payment to [plaintiff] of all corresponding fees due with respect to such charges for that prior month." The Agreement also required defendants to pay plaintiff "a minimum royalty in the amount of Five Hundred Dollars ($500.00) each year for the first five years after [20 October 1999]" and restricted defendants from selling the Enhancements to customers within North Carolina and South Carolina without first obtaining plaintiff's written consent.

Defendants never performed any of their obligations under the Agreement. Defendants never provided plaintiff with a single monthly report detailing the fees received from defendants’ customers nor paid any corresponding fees. Defendants failed to make the first $500 minimum royalty payment, which became due on 20 October 2000, and never paid any royalties thereafter. Defendants also allegedly sold the Enhancements to other practice groups and customers in the restricted areas of North Carolina and South Carolina without plaintiff's express consent as early as 1999.

For the next ten years, defendants allegedly continued to be in breach of the Agreement, never providing plaintiff a written sales report, never making any royalty payments, and never obtaining plaintiff's consent for restricted sales. Plaintiff, however, continued to use the software platform and received periodic software updates from Medflow affiliated service providers. During this time, plaintiff did not raise any question or concern regarding its rights to receive written reports and royalty payments, nor did it inquire about restricted sales.

Despite having never received the benefit of its bargain, plaintiff waited fourteen years before filing this action on 22 September 2014. Plaintiff's complaint asserts four claims against defendants: breach of contract, fraud, unfair and deceptive trade practices, and unjust enrichment.¹ Plaintiff alleges that "since October 1999, [defendants have] ... sold the Enhancements, and derivatives thereof, to other ophthalmologic practices, both inside and outside the restricted territory of North Carolina and South Carolina, without paying royalties to [plaintiff]," and that "[a]t no time did [defendants] ... inform [plaintiff] that [defendants] had sold further developments or modifications to the Enhancements.... [or] paid to [plaintiff] or accounted for any royalties due under the Agreement."

Defendants moved to dismiss all claims under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, asserting that North Carolina's statutes of limitations barred plaintiff's action. N.C.G.S. §§ 1-52, 75-16.2 (2015). In response, plaintiff essentially argued that the Agreement should be treated as an installment contract for limitations purposes, with a new limitations period beginning upon the failure to make each payment, thus enabling plaintiff to seek recovery on royalty payments due within the three years before the filing of its complaint. See Martin v. Ray Lackey Enters. , 100 N.C. App. 349, 357, 396 S.E.2d 327, 332 (1990) ("[W]here obligations are payable in installments, the statute of limitations runs against each installment independently as it becomes due."). Defendants asserted that under North Carolina law the Agreement should not be considered an installment contract.

Following a hearing, the trial court granted defendants’ motions to dismiss. Christenbury Eye Ctr., P.A. v. Medflow, Inc. , No. 14 CVS 17400, 2015 WL 3823817, at *8 (N.C. Super. Ct. Mecklenburg County (Bus. Ct.) June 19, 2015). The trial court determined that the allegations of plaintiff's complaint "reveal that [defendants] did not perform [their] reporting and payment obligations at least as early as October 20, 2000, when the first minimum royalty payment was due and substantially more than three years prior to when the Verified Complaint was filed." Christenbury Eye Ctr. , 2015 WL 3823817, at *4. Regardless of whether the Agreement was an installment contract, the trial court found that plaintiff's complaint revealed that "[d]efendants clearly repudiated the contract by their consistent and repeated failure to perform, placing [p]laintiff on notice that future reports and payments would not be made." Id. at *5. As a result, the trial court concluded that North Carolina's statutes of limitations barred all of plaintiff's claims. Id. at *5-8 ; see Teachey v. Gurley , 214 N.C. 288, 293, 199 S.E. 83, 87 (1938) (noting that the statute of limitations begins to run when a party repudiates "in such manner that [the adverse party] is called upon to assert his rights").²

Plaintiff thereafter improperly noticed appeal to the Court of Appeals, which dismissed the case for lack of jurisdiction. See N.C.G.S. § 7A-27(a)(2) (2015) (providing a direct right of appeal to the Supreme Court from a final judgment of the Business Court). We allowed plaintiff's petition for writ of certiorari to review the trial court's dismissal order.

We review a dismissal under Rule 12(b)(6) de novo, "view[ing] the allegations as true and ... in the light most favorable to the non-moving party." Kirby v. N.C. DOT , 368 N.C. 847, 852, 786 S.E.2d 919, 923 (2016) (quoting Mangum v. Raleigh Bd. of Adjust. , 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008) ). Dismissal is proper when the complaint "fail[s] to state a claim upon which relief can be granted." Arnesen v. Rivers Edge Golf Club & Plantation, Inc. , 368 N.C. 440, 448, 781 S.E.2d 1, 7 (2015) (alteration in original) (quoting N.C.G.S. § 1A-1, Rule 12(b)(6) (2013)). "When the complaint on its face reveals that no law supports the claim ... or discloses facts that necessarily defeat the claim, dismissal is proper." Id. at 448, 781 S.E.2d at 8 (citing Wood v. Guilford County , 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002) ).

Plaintiff premises each of its claims on allegations that defendants breached the Agreement by failing to provide written sales reports or pay royalties and by conducting unauthorized sales.³ We conclude that plaintiff's own allegations, taken as true, establish that its claims accrued at the earliest on 20 November 1999 and at the latest by 20 October 2000. Because plaintiff had notice of its injury but did not initiate its current action for almost fourteen years, all of its claims are time barred.

We have long recognized that a party must initiate an action within a certain statutorily prescribed period after discovering its injury to avoid dismissal of a claim. See Shearin v. Lloyd , 246 N.C. 363, 370, 98 S.E.2d 508, 514 (1957) ("Statutes of limitations ... require that litigation be initiated within the prescribed time or not at all."), superseded by statute , N.C.G.S. § 1-15(b) (1971), on other grounds as recognized in Black v. Littlejohn , 312 N.C. 626, 630-31, 325 S.E.2d 469, 473 (1985). "The purpose of a statute of limitations is to afford security against stale demands, not to deprive anyone of his just rights by lapse of time." Id. at 371, 98 S.E.2d at 514. This security must be jealously guarded, for "[w]ith the passage of time, memories fade or fail altogether, witnesses die or move away, [and] evidence is lost or destroyed." Estrada v. Burnham , 316 N.C. 318, 327, 341 S.E.2d 538, 544 (1986)...