Luke v. Omega Consulting Group, Lc

• Decision Date: 06 January 2009
• Docket Number: No. COA08-521.,COA08-521.
• Citation: 670 S.E.2d 604
• Court: North Carolina Court of Appeals
• Parties: George LUKE, Plaintiff, v. OMEGA CONSULTING GROUP, LC, d/b/a Omega Consulting Group, LLC, Defendant.

670 S.E.2d 604

George LUKE, Plaintiff, v. OMEGA CONSULTING GROUP, LC, d/b/a Omega Consulting Group, LLC, Defendant.

No. COA08-521.

Court of Appeals of North Carolina.

January 6, 2009.

Appeal by defendant from order entered 23 January 2008 by Judge Michael R. Morgan in Wake County Superior Court and judgment entered 29 January 2008 by Judge Henry W. Hight in Wake County Superior Court. Heard in the Court of Appeals 9 October 2008.

Merritt, Flebotte, Wilson, Webb & Caruso, PLLC by Joy Rhyne Webb, Durham, for plaintiff appellee.

Steven A. Boyce, Winston-Salem, for defendant appellant.

McCULLOUGH, Judge.

Omega Consulting Group, LC, d/b/a Omega Consulting Group, LLC ("defendant") appeals from an order and judgment entered in favor of George Luke ("plaintiff"). Defendant contends that the trial court erred by (1) denying defendant's motion to set aside entry of default, (2) granting plaintiff's motion in limine to exclude evidence, and (3) entering judgment when the findings of fact were not supported by the evidence. For the reasons discussed herein, we affirm.

I. Background

On 7 June 2007, plaintiff filed an amended complaint against defendant, his former employer, claiming that it owed him for unpaid sales commissions. Defendant furnishes consulting services for health care providers and has its principal office in Fort Lauderdale, Florida.

In February of 2002, plaintiff began working as an independent contractor for defendant. On 15 October 2002, the parties executed a written agreement entitled "Non-Exclusive Sales Representative Agreement" ("the agreement"). The agreement provided that plaintiff's territory was North Carolina and South Carolina and that he would be compensated by a monthly retainer fee and commission on the revenues derived from any consulting contract he developed for defendant. The agreement provided that his commission payments would be equal to five percent (5%) of the gross revenues derived from any contract he initiated and closed for defendant within his territory. The term of the agreement was from 15 October 2002 to 15 October 2003. The agreement would automatically renew each year unless terminated by either party with sixty (60) days written notice of the period's termination date or otherwise extended or shortened by an addendum signed by both parties. The agreement further provided that "[i]n the event that [defendant] declines to extend this Agreement past its original Term, except for a willful violation of any of the terms and conditions of this Agreement, [plaintiff] will be entitled to receive the Commissions for the balance of the Commission Period."

On or around 30 June 2003, plaintiff was hired by defendant as an employee. On 29 September 2004, plaintiff received a letter from defendant ("the termination letter"), stating that "our relationship with you as a Regional Representative is not working out. Effective immediately, your employment with Omega is terminated." The termination letter provided that plaintiff would continue to receive commission on the revenues generated within his territory and the revenues generated from any additional contracts that he had initiated and were closed by defendant before 31 December 2004.

Plaintiff initially filed suit against defendant in August of 2005, alleging he was owed commissions on several accounts in his territory. He filed his amended complaint on 7 June 2006, and defendant was served by publication on 17 June 2006.

When defendant learned of plaintiff's lawsuit in North Carolina, it reviewed plaintiff's compensation records and consulted with its attorneys licensed in Florida. Defendant contends that when plaintiff became an employee after June of 2003, he began receiving an annual salary and his commission rate was reduced to 2.5%. During defendant's review of plaintiff's compensation records, it discovered that due to an employee error, plaintiff had continued to be paid a commission rate of 5% after being employed by defendant and as a result, had been overpaid by $32,766.70. After consulting with its Florida attorneys and determining that it did not owe plaintiff any compensation, defendant concluded that it would incur substantial costs in defending plaintiff's lawsuit. Defendant did not file a responsive pleading to plaintiff's complaint and plaintiff obtained an entry of default on 4 August 2006.

On 13 November 2006, plaintiff filed a motion for default judgment seeking $175,654.36 in damages. Defendant filed an answer and a motion to set aside entry of default on 13 December 2006. On 23 January 2007, the trial court denied defendant's motion to set aside entry of default and granted its motion for a jury trial on damages. Plaintiff's motion for summary judgment was subsequently denied.

On 11 January 2008, plaintiff filed a motion in limine to exclude the following evidence proffered by defendant: plaintiff was only entitled to a commission rate of 2.5% after July of 2003; plaintiff had been overpaid by defendant; plaintiff was not entitled to commission generated after his termination because he was terminated for poor performance; and plaintiff forfeited his commissions by willfully violating the terms and conditions of the agreement. After hearing arguments from both parties' counsel, the trial court granted the motion in limine. Both parties subsequently waived their requests for a jury trial. On 29 January 2008, the trial court filed a judgment, which contained its decision on plaintiff's motion in limine, and ordered defendant to pay plaintiff $167,771.61 in unpaid commissions and an equal amount in liquidated damages. Defendant appeals.

II. Motion to set aside entry of default

Defendant's first assignment of error is that the trial court erred in denying its motion to set aside entry of default and argues that it showed good cause to support its motion. Defendant asserts that the decision not to respond to plaintiff's complaint was based on the advice of its Florida attorneys and should not have been imputed to defendant. We find that the trial court properly denied defendant's motion and affirm.

A trial court's decision of whether to set aside an entry of default, will not be disturbed absent an abuse of discretion. Automotive Equipment Distributors, Inc. v. Petroleum Equipment & Service, Inc., 87 N.C.App. 606, 608, 361 S.E.2d 895, 896 (1987). "A judge is subject to a reversal for abuse of discretion only upon a showing by a litigant that the challenged actions are manifestly unsupported by reason." RC Associates v. Regency Ventures, Inc., 111 N.C.App. 367, 374, 432 S.E.2d 394, 398 (1993) (citation omitted).

Pursuant to Rule 55(d) of the North Carolina Rules of Civil Procedure, the trial court may set aside an entry of default for good cause. N.C. Gen.Stat. § 1A-1, Rule 55(d) (2007). "What constitutes `good cause' depends on the circumstances in a particular case, and ... an inadvertence which is not strictly excusable may constitute good cause, particularly `where the plaintiff can suffer no harm from the short delay involved in the default and grave injustice may be done to the defendant.'" Peebles v. Moore, 48 N.C.App. 497, 504, 269 S.E.2d 694, 698 (1980) (citations omitted), modified and affirmed, 302 N.C. 351, 275 S.E.2d 833 (1981). "This standard is less stringent than the showing of `mistake, inadvertence, or excusable neglect' necessary to set aside a default judgment pursuant to N.C. Gen.Stat. § 1A-1, Rule 60(b)." Brown v. Lifford, 136 N.C.App. 379, 382, 524 S.E.2d 587, 589 (2000) (citation omitted).

The defendant carries the burden of showing good cause to set aside entry of default. Granville Med. Ctr. v. Tipton, 160 N.C.App. 484, 487, 586 S.E.2d 791, 794 (2003). Our Court considers the following factors when determining if the defendant has shown good cause: "(1) was defendant diligent in pursuit of this matter; (2) did plaintiff suffer any harm by virtue of the delay; and (3) would defendant suffer a grave injustice by being unable to defend the action." Automotive Equipment Distributors, Inc., 87 N.C.App. at 608, 361 S.E.2d at 896-97. This Court "give[s] consideration to the fact that default judgments are not favored in the law.... [I]t is also true that rules which require responsive pleadings within a limited time serve important social goals, and a party should not be permitted to flout them with impunity." Howell v. Haliburton, 22 N.C.App. 40, 42, 205 S.E.2d 617, 619 (1974).

In this case, the trial court ordered an entry of default because defendant did not file an answer or attempt to defend against plaintiff's complaint. Defendant still claims that it was diligent in the matter because it consulted with its Florida attorneys and reviewed plaintiff's compensation records as soon as it became informed of plaintiff's suit in North Carolina. Defendant asserts that its decision not to respond to plaintiff's complaint was based on the advice of its out-of-state attorneys as well as its conclusion that plaintiff was not owed any further compensation. Furthermore, defendant argues that a "grave injustice" has occurred because it is now saddled with a $335,000.00 judgment when its records show that it overpaid plaintiff by $32,766.70.

The degree of attention or inattention shown by the defendant is a compelling factor in our consideration to set aside entry of default. Brown, 136 N.C.App. at 384, 524 S.E.2d at 590. In Automotive Equipment Distributors, Inc., we found that the defendant had shown good cause to justify setting aside entry of default. 87 N.C.App. at 609, 361 S.E.2d at 897. In that case, the defendant had consulted with his attorney twice about a breach of contract action and his attorney agreed to file an answer. Id. at 608-09, 361 S.E.2d at 897. Due to a family emergency, the attorney did not file a responsive pleading and the court made an entry of default. Id. at 606, 361 S.E.2d at 895. We reversed and held that the defendant had demonstrated good cause...