Mitchell v. Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC
| Decision Date | 31 March 2009 |
| Docket Number | 06 CVS 6091 |
| Citation | 2009 NCBC 10 |
| Parties | MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN, PLLC; GLENN B. ADAMS; HAROLD L. BOUGHMAN; JR.; and VICKIE L. BURGE, Plaintiffs v. COY E. BREWER, JR.; RONNIE A. MITCHELL; WILLIAM O. RICHARDSON; and CHARLES BRITTAIN, Defendants |
| Court | Superior Court of North Carolina |
Everett Gaskins Hancock & Stevens, LLP, by E.D. Gaskins, Jr., Esq. and Louis Wooten, Esq. for Plaintiffs Mitchell Brewer Richardson Adams Burge & Boughman, PLLC, Glenn B. Adams, Harold L. Boughman, Jr. and Vickie L. Burge.
Brooks Pierce McLendon Humphrey & Leonard, LLP, by Jim W. Phillips, Jr., Esq. and Charles F. Marshall, Esq. for Defendants Coy E. Brewer, Jr., Ronnie A. Mitchell, William O. Richardson and Charles Brittain.
[1] This civil action arises out of the breakup of a law firm organized as a professional limited liability company ("PLLC"). It presents, among other things, the question of whether members of the PLLC, through words and actions, withdrew from the law firm or whether there was a dissolution of the firm pursuant to the North Carolina Limited Liability Company Act, N.C. Gen. Stat. § 57C-1-01 et seq. (the "Act") (respective Sections of the North Carolina General Statutes are cited herein as "G.S."). This question appears to be one of first impression in North Carolina, and is material to determining a member's distributional share after departure from the PLLC.
[2] This matter comes before the court for hearing upon the respective parties' motions for summary judgment (the "Motion(s)") pursuant to Rule 56, North Carolina Rules of Civil Procedure ("Rule(s)"), and applicable provisions of the Act.
[3] After considering the arguments; briefs; depositions and other discovery materials, all of which are deemed to be before the court for purposes of determining the Motions; submissions of counsel and other appropriate facts and matters of record, as discussed below, the court concludes that the Motions should be GRANTED in part and DENIED in part.
[4] This civil action was filed in Cumberland County Superior Court. It was designated a complex business case by Order of the Chief Justice of the North Carolina Supreme Court, pursuant to G.S. 7A-45.4(b), dated July 14, 2006; and was assigned to the undersigned Special Superior Court Judge for Complex Business Cases, by Order of the Chief Special Superior Court Judge for Complex Business Cases, dated July 25, 2006.
[5] Plaintiffs filed their Amended Complaint ("Complaint") on August 2, 2006. The Complaint was amended again by Order dated May 21, 2007. Defendants filed their Answer and Counterclaims ("Answer") on June 13, 2007. Pursuant to a Revised Consent Order Modifying Case Management Order ("Revised CMO"), dated September 6, 2007, Plaintiffs and Defendants filed their respective Motions for Partial Summary Judgment on January 9, 2008. On August 15, 2008, Defendants filed a second dispositive Motion, their Motion for Summary Judgment, by which they seek dismissal of all claims as to all Defendants (the court will refer to Defendants' Motion for Partial Summary Judgment filed on January 9, 2008, and Defendants' Motion for Summary Judgment filed on August 15, 2008, collectively in the singular as Defendants' "Motion"). Thereafter, the Complaint was amended again by Order dated February 13, 2009 (for purposes of the Motions all amendments are deemed incorporated into the Complaint).
[6] The court CONCLUDES that the following material facts exist without substantial controversy and are pertinent to the issues raised by the Motions:1[]
[7] Plaintiff Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC (the "Firm"), is a North Carolina PLLC2[] that maintains its principal place of business in Cumberland County, North Carolina.
[8] Plaintiff Glenn B. Adams ("Adams") is an individual residing in Cumberland County, North Carolina.
[9] Plaintiff Harold L. Boughman, Jr. ("Boughman") is an individual residing in Cumberland County, North Carolina.
[10] Plaintiff Vickie L. Burge ("Burge") is an individual residing in Cumberland County, North Carolina.
[11] Defendant Coy E. Brewer ("Brewer") is an individual residing in Cumberland County, North Carolina.
[12] Defendant Ronnie A.3[] Mitchell ("Mitchell") is an individual residing in Cumberland County, North Carolina.
[13] Defendant William O. Richardson ("Richardson") is an individual residing in Cumberland County, North Carolina.
[14] Defendant Charles Brittain ("Brittain") is an individual residing in Cumberland County, North Carolina.
[15] At times material, each of the individual Plaintiffs and Defendants was licensed to practice law in North Carolina, and they collectively comprised all the members4[] ("Member(s)") of the Firm.
[16] On June 14, 2005, the Firm's Members met to discuss the Firm's economic performance. Brewer began by describing what he saw as a decline in the Firm's gross revenues in the individual Plaintiffs' practice areas, which consisted primarily, but not exclusively, of hourly billing transactional work. At some time during the discussions that followed, Plaintiff Adams physically stood up and announced that he was leaving the firm. Among others, his specific words were, "I am out of here." When asked by Defendant Mitchell not to leave the meeting, Plaintiff Adams stated he was not just walking out of the meeting, but rather "[he] meant out of the firm." Plaintiff Adams in fact left the meeting room. Shortly after Adams left the room, the Plaintiff Boughman also announced that he "no longer wanted to be a part of this firm and that [he was] leaving." He, too, left the meeting room. During the next two weeks, both Adams and Boughman physically returned to work at the Firm while making preparations to form a new law firm. On or about June 25, 2005, Plaintiff Burge informed Defendant Mitchell that she, too, was leaving the Firm and going to join Adams and Boughman in a new law practice.
[17] On or about June 30, 2005, Plaintiffs Adams, Burge and Boughman ceased practicing law with Brewer, Mitchell, Richardson and Brittain (the Firm's "Breakup").
[18] On June 14, 2005, Plaintiff Adams sent an e-mail message to Brewer and other members of the Firm. The message concerned his share of revenue and compensation, and referred to his "leaving the firm."5[]
[19] On or about July 7, 2005, the individual Plaintiffs executed articles of organization for a PLLC law firm entity by the name of Adams, Burge & Boughman ("AB&B"). On the same day, they signed an application for a certificate of registration for a PLLC that was submitted to the North Carolina State Bar. They contemporaneously began the practice of law under the AB&B name.
[20] Shortly after the Breakup, Plaintiff Burge prepared two forms of proposed letters to be sent to Firm clients. One of the draft letters, 6[] which was undated, stated that the individual Plaintiffs had "withdrawn" from the Firm as of June 30, 2005. The other draft letter, 7[] dated July 12, 2005, stated that the individual Plaintiffs were "terminating their employment" with the Firm. These letters were approved by Defendant Mitchell, but were not sent to clients.
[21] The Firm initially was organized in October 2000. The Articles of Organization ("Articles") for the Firm do not contain any provisions dealing with issues of withdrawal or dissolution by or between the various Members. The Members never executed a written document formally designated as an operating agreement. Further, they never executed a written agreement specifically reflecting consent or agreement of the Members as to whether the Breakup was to constitute (a) withdrawal from the Firm by the individual Plaintiffs or (b) dissolution of the Firm.
[22] Following the Breakup, the individual Plaintiffs practiced law together in the new law firm of AB&B. Some clients who had then-unresolved contingent fee engagements with the Firm continued such matters with the Firm (the "Contingent Fee Case(s)"). Other clients who had then-unresolved contingency fee engagements with the Firm retained AB&B to handle their cases.
[23] In late June 2005, after the Breakup, Adams and Brewer met to discuss the individual Plaintiffs' interest in the Firm. Brewer was designated to speak on behalf of Defendants, and Adams was designated to speak on behalf of the individual Plaintiffs. They agreed that the individual Plaintiffs could remain in the Firm's offices until they secured new office space. They did not agree on the value of Plaintiffs' interest in the Firm.
[24] Defendant Brewer subsequently undertook to perform an "accounting" of the Firm's financial status. In a July 8, 2005 memorandum to the Firm's Members (The "Brewer Memo"), 8[] Brewer presented the results of this accounting. The Brewer Memo repeatedly references the Breakup as a "withdrawal" from the Firm by the individual Plaintiffs. It was captioned with the legend: "Re: Winding up of affairs; dissolution of partnership."
[25] The Brewer Memo included a proposed allocation of existing debts and obligations of the Firm and a proposed final distribution to the Plaintiffs. Among other things, the Brewer Memo addressed payment of the Firm's lines of credit and other Firm obligations as of July 1, 2005, a cash distribution of $25, 000 or more to each individual Plaintiff, and a proposal that Plaintiffs retain their then-current cases without remitting to the Firm any fees subsequently recovered in those cases. The Brewer Memo also proposed that the individual Plaintiffs would not receive any share of then-unresolved Contingent Fee Cases remaining with the Firm, on the theory that the individual Plaintiffs had withdrawn from the Firm as of July 1, 2005, and that the value of unresolved Contingent Fee Cases could not reasonably be ascertained as of that date. Checks reflecting the proposed cash distributions were cut and delivered to the...
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