Hamby v. Profile Products, L.L.C., 507A06.

• Decision Date: 09 November 2007
• Docket Number: No. 507A06.,507A06.
• Citation: 652 S.E.2d 231
• Parties: Lennie and Bonnie HAMBY v. PROFILE PRODUCTS, L.L.C., Terra-Mulch Products, L.L.C., Roy D. Hoffman, and Electric Service Group, Inc.
• Court: North Carolina Supreme Court

652 S.E.2d 231

Lennie and Bonnie HAMBY v. PROFILE PRODUCTS, L.L.C., Terra-Mulch Products, L.L.C., Roy D. Hoffman, and Electric Service Group, Inc.

No. 507A06.

Supreme Court of North Carolina.

November 9, 2007.

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, 179 N.C.App. 151, 632 S.E.2d 804 (2006), dismissing as interlocutory an appeal from an order entered on 23 June 2005 by Judge Nathaniel J. Poovey in Superior Court, Caldwell County. On 16 November 2006, the Supreme Court allowed defendant's petition for discretionary review as to additional issues. Heard in the Supreme Court 10 April 2007.

Jones Martin Parris & Tessener Law Offices, P.L.L.C., by John Alan Jones and G. Christopher Olson, Raleigh; and Carter G. Bishop, for plaintiff-appellees.

Womble Carlyle Sandridge & Rice, P.L.L.C., by Burley B. Mitchell, Jr. and Sarah L. Buthe, Raleigh; and Joseph W. Moss, Greensboro, for defendant-appellant Profile Products, L.L.C.

Shumaker, Loop & Kendrick, L.L.P., by William H. Sturges, Charlotte; Kennedy, Covington, Lobdell & Hickman, L.L.P., by William G. Scoggin, Raleigh; and Alston & Bird, L.L.P., by H. Bryan Ives, III, Charlotte, for North Carolina Citizens for Business and Industry and North Carolina Associated Industries, amici curiae.

NEWBY, Justice.

This case presents the issue of whether the exclusivity provision of the Workers' Compensation Act protects the member-manager of a limited liability company ("LLC") with respect to an employee's injuries arising out of employment with the LLC. We hold that the exclusivity provision applies when a member-manager is conducting the business of an employer LLC. Accordingly, we reverse the Court of Appeals.

I. BACKGROUND

This action arises from injuries sustained by plaintiff Lennie Hamby ("Hamby") while working for defendant Terra-Mulch Products, L.L.C. ("Terra-Mulch"). Hamby was hurt when he fell into an auger pit while processing wood chips at Terra-Mulch's plant in Conover, North Carolina. Hamby and his wife ("plaintiffs") sued Terra-Mulch, Profile Products, L.L.C. ("Profile"), Roy D. Hoffman ("Hoffman"), and Electric Service Group, Inc. ("ESG").

Plaintiffs allege ESG was negligent in its performance of contracted electrical work, rendering certain safety equipment inoperable. Profile, Terra-Mulch, and Hoffman filed cross-claims against ESG alleging breach of contract and breach of warranty and seeking contribution in the event plaintiffs recovered damages.

Plaintiffs allege Hoffman, a plant manager and Hamby's co-employee, "breached his duty of care" by "engag[ing] in misconduct which was willful and wanton" and "demonstrat[ing] a manifest indifference to and reckless disregard for the rights and safety" of the plant workers, directly and proximately causing Hamby's injury.

In their complaint, plaintiffs describe Terra-Mulch as "a wholly-owned subsidiary of Profile Products" and assert that "Profile Products controls and directs Terra-Mulch with respect to operation of the business" and "dominates and controls Defendant Terra-Mulch and is the alter ego of Defendant Terra-Mulch." Plaintiffs allege that Profile and Terra-Mulch collectively failed to provide a safe work site for the inherently dangerous work performed by Hamby and that they thus "engaged in misconduct which was grossly negligent, willful and wanton, and substantially certain to lead to death or serious injury with respect to operation of the plant."

Pursuant to Rule 56 of the North Carolina Rules of Civil Procedure, ESG moved for summary judgment on all claims and cross-claims. Profile, Terra-Mulch, and Hoffman also moved for summary judgment on all claims asserted against them on grounds that plaintiffs' exclusive remedy is for workers' compensation benefits under Chapter 97 of the North Carolina General Statutes and thus the North Carolina Industrial Commission has exclusive jurisdiction over the claims at issue. In support of their motion, these defendants submitted, inter alia, the affidavit of Stephen Ade, Vice President and Chief Financial Officer for Profile, in which he stated: "Terra-Mulch Products, L.L.C. has at all relevant times been a limited liability company the sole member and manager of which has been Profile Products, L.L.C." The "Single Member Operating Agreement of Terra-Mulch Products, LLC," dated 24 August 1999 and adopted by Profile, designates Profile as the "sole member" of Terra-Mulch and further states, under the paragraph labeled "Management": "All decisions relating to the management, conduct and control of the business of the Company shall be made by the Member."

On 6 June 2005, the trial court heard arguments on all defendants' summary judgment motions. By orders filed on 23 June 2005, the trial court granted summary judgment for Terra-Mulch and Hoffman, but denied summary judgment for Profile and ESG. Profile appealed to the Court of Appeals, which, in a divided opinion, dismissed Profile's appeal as interlocutory because Profile "failed to show a substantial interest which would be lost if this appeal is dismissed." Hamby v. Profile Prods., L.L.C., 179 N.C.App. 151, 158, 632 S.E.2d 804, 809 (2006). Specifically, the majority found that plaintiffs were actually alleging a gross negligence claim based on Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991) against employer Terra-Mulch; a willful, wanton, and reckless negligence claim based on Pleasant v. Johnson, 312 N.C. 710, 325 S.E.2d 244 (1985) against co-employee Hoffman; and an ordinary negligence claim against "third party" Profile. Hamby, 179 N.C.App. at 157, 632 S.E.2d at 808. Because the claims were different as to each defendant, the majority concluded that there was no risk of inconsistent verdicts. Id. The dissent contended that "[a]s the sole member-manager of Terra-Mulch, Profile could only be found liable to plaintiffs in the superior court under a Woodson claim, which plaintiffs acknowledged does not exist" and thus the exclusivity provision of the Workers' Compensation Act protected Profile. Id. at 165, 632 S.E.2d at 813 (Tyson, J., dissenting). As such, the dissent would have allowed the interlocutory appeal and reversed the trial court's denial of Profile's motion for summary judgment. Id. at 165-66, 632 S.E.2d at 813.

II. ANALYSIS

Profile's appeal from the trial court's denial of its motion for summary judgment is interlocutory because the trial court's order "does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy." Veazey v. City of Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950). An interlocutory order is immediately appealable if the trial court certifies that: (1) the order represents a final judgment as to one or more claims in a multiple claim lawsuit or one or more parties in a multi-party lawsuit, and (2) there is no just reason to delay the appeal. N.C.G.S. § 1A-1, Rule 54(b) (2005). Here, the trial court did not certify this appeal for review. Absent a Rule 54(b) certification, an interlocutory order may be reviewed if it will injuriously affect a substantial right unless corrected before entry of a final judgment. Harris v. Matthews, 361 N.C. 265, 269, 643 S.E.2d 566, 569 (2007) (citing Goldston v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990)).

This Court has recognized that a substantial right is affected if the trial court's order granting summary judgment to some, but not all, defendants creates the possibility of separate trials involving the same issues which could lead to inconsistent verdicts. See Bernick v. Jurden, 306 N.C. 435, 439, 293 S.E.2d 405, 408 (1982). Profile argues that if the case continues without its appeal being heard, plaintiffs' claims against Terra-Mulch will proceed before the Industrial Commission while plaintiffs' claims against Profile will proceed in civil court, even though the facts and issues before each tribunal would be the same. Specifically, Profile argues that its liability is inseparable from that of Terra-Mulch because Profile was conducting Terra-Mulch's business. Plaintiffs assert, and the Court of Appeals agreed, that the issues in each proceeding would be different because plaintiffs alleged different claims against Terra-Mulch and Profile: gross negligence as to the former and ordinary negligence as to the latter.

Preliminarily, we note that plaintiffs did not cross-assign error to the trial court's grant of summary judgment for Terra-Mulch on grounds that the exclusive remedy plaintiffs have against Terra-Mulch is under the Workers' Compensation Act. Plaintiffs' complaint, amended three times, asserts all claims against Terra-Mulch and Profile jointly, and none of these claims allege ordinary negligence as to those defendants. Before the trial court, the Court of Appeals, and this Court, plaintiffs have argued that Profile's liability is based on ordinary negligence, not gross negligence. The pivotal question presented by this case is whether, as a matter of law, plaintiffs are able to assert an ordinary negligence claim in civil court against Profile, the member-manager of the employer Terra-Mulch. To answer that question and, in so doing, determine whether the trial court's order creates the risk of inconsistent verdicts, we must decide whether Profile, like Terra-Mulch, is entitled to the protection of the exclusivity provision of Chapter 97.

The concept of exclusivity is found in two sections of the Workers' Compensation Act. N.C.G.S. § 97-9 requires employers to secure payment of compensation to their employees in accordance with the Act and states: "[W]hile such security remains in force, [the employer] or those conducting his business shall only be liable to any employee for personal injury or death by accident to the extent and in the manner herein specified." N.C.G.S. § 97-9 (2005). A subsequent section of Chapter 97 specifically excludes other...