Merritt, Flebotte, Wilson v. Hemmings, COA08-1333.

• Decision Date: 05 May 2009
• Docket Number: No. COA08-1333.,COA08-1333.
• Citation: 676 S.E.2d 79
• Court: North Carolina Court of Appeals
• Parties: MERRITT, FLEBOTTE, WILSON, WEBB & CARUSO, PLLC, A North Carolina Limited Liability Corporation, Plaintiff, v. Aaron C. HEMMINGS, Kelly A. Stevens, and Hemmings & Stevens, P.L.L.C., A North Carolina Limited Liability Corporation, Defendants and Third Party Plaintiffs, v. Pre-Paid Legal Services, Inc., James Merritt, Daniel R. Flebotte, Joseph M. Wilson, Joy Rhyne Webb, and Heather Caruso, Third Party Defendants.

676 S.E.2d 79

MERRITT, FLEBOTTE, WILSON, WEBB & CARUSO, PLLC, A North Carolina Limited Liability Corporation, Plaintiff, v. Aaron C. HEMMINGS, Kelly A. Stevens, and Hemmings & Stevens, P.L.L.C., A North Carolina Limited Liability Corporation, Defendants and Third Party Plaintiffs, v. Pre-Paid Legal Services, Inc., James Merritt, Daniel R. Flebotte, Joseph M. Wilson, Joy Rhyne Webb, and Heather Caruso, Third Party Defendants.

No. COA08-1333.

Court of Appeals of North Carolina.

May 5, 2009.

Appeal by Defendants/Third Party Plaintiffs from judgment entered 9 June 2008 by Judge Ronald L. Stephens in Durham County Superior Court. Heard in the Court of Appeals 24 March 2009.

Glenn, Mills, Fisher & Mahoney, P.A., by William S. Mills, Durham, for Plaintiff-Appellees/Third Party Defendant-Appellees.

Crawford & Crawford, LLP, by Robert O. Crawford, III, and Heather J. Williams; and Hemmings & Stevens, P.L.L.C., by Aaron C. Hemmings and Kelly A. Stevens, Raleigh, for Defendant-Appellants/Third Party Plaintiff-Appellants.

BEASLEY, Judge.

Defendants/Third Party Plaintiffs (Aaron C. Hemmings, Kelly A. Stevens, and Hemmings & Stevens, P.L.L.C.) (hereafter Defendants) appeal from an order denying their motion to compel discovery and granting summary judgment in favor of Plaintiff-Appellees/Third Party Defendant-Appellees (Merritt, Flebotte, Wilson, Webb & Caruso, PLLC; Pre-Paid Legal Services, Inc., James Merritt, Daniel R. Flebotte, Joseph M. Wilson, Joy Rhyne Webb, and Heather Caruso) (hereafter Plaintiffs). We affirm.

The relevant facts may be summarized as follows: Defendants Aaron Hemmings and Kelly Stevens are attorneys who are licensed to practice law in North Carolina. They previously were associates at the firm of Browne, Flebotte, Wilson & Webb, (Brown, Flebotte) the predecessor of Plaintiff law firm Merritt, Flebotte, Wilson, Webb & Caruso (Merritt, Flebotte). In September 2005 Hemmings and Stevens left Brown, Flebotte to start their own law practice (Hemmings & Stevens). Defendants kept some former clients after they left Plaintiff law firm, and disputes arose among the parties about division of attorney's fees and reimbursement of client costs that had been advanced by Brown, Flebotte. These disagreements led to litigation, which ended on 24 February 2006, when the parties executed a settlement agreement that resolved the parties' claims and counterclaims, addressed disbursement of fees and repayment of costs, and provided that its terms would remain confidential and that the parties would not "intentionally or knowingly make any false statements about each other or statement[s] which would be considered defamatory, or injurious to the reputation of the other parties."

On 11 June 2007, Plaintiffs filed a new lawsuit against Defendants, asserting that Defendants had failed to pay Plaintiffs the money owed under the settlement agreement, and had improperly disbursed attorney's fees to themselves. Plaintiffs sought an accounting of the attorney's fees received in cases covered by the settlement agreement, damages for breach of contract, and an injunction requiring Defendants to retain in trust the fees and costs for cases covered by the settlement agreement.

On 24 July 2007, Defendants filed an answer denying the material allegations of Plaintiffs' complaint and asserting that Plaintiffs' "substantial and material" breaches of the parties' contract excused their non-performance and refusal to make payments owed under the settlement agreement. With their answer, Defendants also filed a counterclaim against Plaintiffs for breach of contract, slander per se, and invasion of privacy or misappropriation of likeness. Defendants alleged: (1) that after Defendants left Plaintiff law firm, the Plaintiffs' website continued to list Defendants as attorneys with the firm; (2) that Plaintiffs had made a "demand" for repayment of "fraudulent expenses", and; (3) that Plaintiffs had made "false and defamatory" statements about Defendants.

In addition, Defendants filed a third party complaint against James Merritt, Daniel R. Flebotte, Joseph M. Wilson, Joy Rhyne Webb, Heather Caruso, and Pre-Paid Legal Services, Inc. The third party complaint made essentially the same assertions as the counterclaim, and sought similar relief. Defendants later dismissed their claims against Pre-Paid Legal Services, which is not a party to this appeal. Defendants also moved for dismissal of Plaintiffs' claims for insufficiency of service of process, failure to state a claim for relief, previous dismissal of the same claims, false and scandalous allegations, res judicata and collateral estoppel; their motions to dismiss were denied by the trial court on 11 September 2007.

On 26 September 2007 Plaintiffs filed a reply to Defendants' counterclaim and an answer to Defendants' third party complaint. Plaintiffs denied the material allegations, asserted defenses, and moved for dismissal of Defendants' claims. On 28 March 2008 Defendants filed a motion to compel discovery, seeking an order compelling Pre-Paid Legal Services to respond to Defendants' interrogatories and requiring Defendant Joy Webb to answer questions about the firing of an employee. On 16 May 2008 Plaintiffs filed a motion for summary judgment on all claims and counterclaims.

On 9 June 2008 the trial court entered an order granting Plaintiffs' motions for summary judgment and denying Defendants' motion to compel discovery. The order granted summary judgment in favor of Plaintiffs, ordered Defendants to pay $256,834 for attorney's fees and $17,642.76 for costs advanced, and dismissed all of Defendants' counterclaims, defenses, and third party claims against Plaintiffs. Defendants have appealed the denial of their motion to compel discovery, the dismissal of their claims against Plaintiffs, and the entry of summary judgment in favor of Plaintiffs.

Standard of Review

Summary judgment is properly granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c)(2007). "The purpose of the rule is to avoid a formal trial where only questions of law remain and where an unmistakable weakness in a party's claim or defense exists.... `[A]n issue is genuine if it is supported by substantial evidence,' which is that amount of relevant evidence necessary to persuade a reasonable mind to accept a conclusion.... `[A]n issue is material if the facts alleged would constitute a legal defense, or would affect the result of the action, or if its resolution would prevent the party against whom it is resolved from prevailing in the action.'" Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571, 579, 573 S.E.2d 118, 123-24 (2002) (quoting DeWitt v. Eveready Battery Co., 355 N.C. 672, 681, 565 S.E.2d 140, 146 (2002); and Koontz v. City of Winston-Salem, 280 N.C. 513, 518, 186 S.E.2d 897, 901 (1972)) (citations omitted).

"The moving party bears the initial burden of coming forward with a forecast of evidence tending to establish that no triable issue of material fact exists." Briley v. Farabow, 348 N.C. 537, 543, 501 S.E.2d 649, 653 (1998) (citation omitted). "The movant may meet this burden by proving that an essential element of the opposing party's claim is nonexistent, or by showing through discovery that the opposing party cannot produce evidence to support an essential element of his claim or cannot surmount an affirmative defense which would bar the claim." Collingwood v. G.E. Real Estate Equities, 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989) (citation omitted). "When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." N.C. Gen.Stat. § 1A-1, Rule 56(e) (2007).

"When considering a motion for summary judgment, the trial judge must view the presented evidence in a light most favorable to the nonmoving party." Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001) (citations omitted). "All inferences of fact must be drawn against the movant and in favor of the nonmovant." Roumillat v. Simplistic Enterprises, Inc., 331 N.C. 57, 63, 414 S.E.2d 339, 342 (1992) (citations omitted).

"Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Rule 56(e). "A verified complaint may be treated as an affidavit if it (1) is made on personal knowledge, (2) sets forth such facts as would be admissible in evidence, and (3) shows affirmatively that the affiant is competent to testify to the matters stated therein." Page v. Sloan, 281 N.C. 697, 705, 190 S.E.2d 189, 194 (1972) (citations omitted).

"Our Supreme Court has stated that a mediated settlement agreement constitutes a valid contract between the settling parties which is `governed by general principles of contract law.'" McClure Lumber Co. v. Helmsman Constr., Inc., 160 N.C.App. 190, 197, 585 S.E.2d 234, 238 (2003) (quoting Chappell v. Roth, 353 N.C. 690, 692, 548 S.E.2d 499, 500 (2001)). In resolving the issues raised on appeal, we treat the settlement agreement as a contract.

Defendants argue first that the trial court erred by granting summary judgment in favor of Plaintiffs on the parties' claims and counterclaims for breach of contract. We disagree.

As discussed above, "[t]he party moving for summary judgment has the burden of showing that there is no triable issue of material fact." Nicholson v. American Safety Utility Corp., 346 N.C. 767, 774, 488 S.E.2d 240, 244 (1997) (citations...