Piazza v. Kirkbride

• Decision Date: 10 May 2019
• Docket Number: No. 181A16,181A16
• Citation: 827 S.E.2d 479,372 N.C. 137
• Parties: Lawrence PIAZZA and Salvatore Lampuri v. David KIRKBRIDE, Gregory Brannon, and Robert Rice
• Court: North Carolina Supreme Court

372 N.C. 137
827 S.E.2d 479

Lawrence PIAZZA and Salvatore Lampuri
v.
David KIRKBRIDE, Gregory Brannon, and Robert Rice

No. 181A16

Supreme Court of North Carolina.

Filed May 10, 2019

Poyner Spruill LLP, by Steven B. Epstein and Andrew H. Erteschik, Raleigh, for plaintiff-appellees.

Smith Moore Leatherwood LLP, by Matthew Nis Leerberg and Mark A. Finkelstein, Raleigh, for defendant-appellant Gregory Brannon.

ERVIN, Justice.

372 N.C. 138

In this case, we are called upon to decide whether the Court of Appeals erred by determining that the trial court did not err by refusing to grant a new trial to a defendant who was held liable pursuant to N.C.G.S. § 78A-56(a)(2), which prohibits a person from selling securities by means of false and misleading statements of material fact. After carefully considering the record in light of the applicable law, we modify and affirm the Court of Appeals' decision to uphold the trial court's judgment.

I. Factual Background

A. Substantive Facts

Defendant Gregory Brannon¹ met plaintiff Lawrence Piazza in 1986, when they were both students at the University of Chicago Medical School. After graduating from medical school, Dr. Piazza became an eye surgeon while defendant practiced obstetrics and gynecological medicine. Defendant met Robert Rice in the early 1990s. Defendant, along with Dr. Piazza, invested in Arckosian, a start-up entity that Mr. Rice had founded that later went out of business. Following the demise of Arckosian, Mr. Rice co-founded, with David Kirkbride, a company called Z Reality. In 2006, defendant met John Cummings when Mr. Cummings accompanied his wife to a prenatal appointment. Similarly, defendant met plaintiff Salvatore Lampuri during defendant's attendance upon Mr. Lampuri's wife in connection with the birth of the couple's first child.

In 2007, Mr. Rice and Mr. Kirkbride founded Neogence Enterprises, Inc., a technology company that had developed and was attempting to market an augmented reality

827 S.E.2d 482

application for smartphones known as Mirascape. The funding upon which Neogence relied was provided by "angel investors," including Dr. Piazza, who received convertible promissory notes in connection with the making of their investments. Mr. Rice served as Neogence's Chief Executive Officer, with responsibility for fundraising and technical development, while Mr. Kirkbride assisted with Neogence's fundraising efforts. Defendant became a member of Neogence's board of directors, upon which he served with Mr. Rice and Mr. Kirkbride. In 2009, Mr. Cummings joined Neogence as Chief Sales Officer.

On 29 April 2010, Mr. Cummings attended a social event in New York at which he met an account executive from McGarry Bowen, an advertising agency that served a number of clients, including Verizon

372 N.C. 139

Wireless. The McGarry Bowen account executive invited Mr. Cummings to a meeting with Verizon that had been scheduled for the following day. At the 30 April 2010 meeting, Mr. Cummings described the work that Neogence was doing to various McGarry Bowen employees and a Verizon executive. During the course of this meeting, a McGarry Bowen account executive told Mr. Cummings that McGarry Bowen would consider using Mirascape as part of an upcoming advertising campaign in the event that Neogence was able to develop Mirascape consistently with McGarry Bowen's expectations.

After the meeting ended, Mr. Cummings discussed what had happened with defendant, Mr. Rice, and Mr. Kirkbride. On the same date, defendant e-mailed Dr. Piazza for the purpose of informing him of what had occurred during the McGarry Bowen meeting and stating that Neogence needed an additional $ 100,000.00 to $ 200,000.00 as quickly as possible to take advantage of the opportunity that had arisen during the McGarry Bowen meeting. Later that day, Mr. Rice sent an e-mail to Dr. Piazza seeking an additional $ 200,000.00 in "angel funding" relating to this "opportunity." On 28 May 2010, Dr. Piazza invested an additional $ 150,000.00 in Neogence following a meeting with Mr. Cummings and Mr. Kirkbride. In addition, defendant, Mr. Rice, and other Neogence agents discussed what had happened at the McGarry Bowen meeting with Mr. Lampuri. Subsequently, Mr. Lampuri made an investment in Neogence as well.

Unfortunately, Neogence was unable to get Mirascape to function properly in a timely manner. During the following year, Neogence began to experience financial difficulties. After failing to comply with Dr. Piazza's request that his investment be returned in accordance with the provisions of his convertible promissory notes, Neogence ceased doing business in early July 2011. Dr. Piazza eventually filed suit against Neogence to enforce the convertible promissory notes and obtained the entry of a default judgment.

B. Procedural History

On 10 October 2012, plaintiffs filed a complaint against defendant, Mr. Kirkbride, and Mr. Rice in which they sought to recover damages from defendants on the basis of allegations that defendants had committed material violations of the North Carolina Securities Act. In apt time, defendants filed responsive pleadings in which they sought dismissal of plaintiffs' complaint, denied the material allegations of plaintiffs' complaint, asserted various counterclaims and crossclaims, and raised various affirmative defenses, including, but not limited to, contributory

372 N.C. 140

negligence, failure to mitigate damages, failure to show reasonable reliance, unclean hands, and waiver and estoppel. On 25 November 2013, Judge Donald W. Stephens entered an order granting summary judgment in favor of Mr. Kirkbride and refusing to grant summary judgment in favor of defendant and Mr. Rice.

The issues between plaintiffs and the remaining defendants came on for trial before the trial court and a jury at the 10 February 2014 civil session of Superior Court, Wake County. At the conclusion of the trial, the trial court submitted the following issues to the jury for the purpose of determining whether plaintiffs were entitled to recover damages from defendant based upon a violation of N.C.G.S. § 78A-56(a)(2)² :

ISSUE 1:

827 S.E.2d 483

Did Defendant, Gregory Brannon, in soliciting the Plaintiff, Lawrence Piazza, to pay money for a security, make a statement which was materially false or misleading, or which under the circumstances was materially false or misleading because of the omission of other facts, where the Plaintiff, Lawrence Piazza, was unaware of the true or omitted facts?

ANSWER: Yes

If you answer the first issue "yes," move to the second issue. If you answer the first issue "no," move to the third issue.

ISSUE 2:

Did the Defendant, Gregory Brannon, not know and in the exercise of reasonable care, could not have known of the untruth or omission in his offer or sale of a security to the Plaintiff, Lawrence Piazza?

372 N.C. 141

ANSWER: No

No matter your verdict on the first and/or second issues, move to the third issue.

ISSUE 3:

Did the Defendant, Gregory Brannon, in soliciting the Plaintiff, Salvatore Lampuri, to pay money for a security, make a statement which was materially false or misleading, or which under the circumstances was materially false or misleading because of the omission of other facts, where the Plaintiff, Salvatore Lampuri, was unaware of the true or omitted facts?

ANSWER: Yes

If you answer the third issue "yes," move to the fourth issue. If you answer the third issue "no," move to the fifth issue.

ISSUE 4:

Did the Defendant, Gregory Brannon, not know and in the exercise of reasonable care, could not have known of the untruth or omission in his offer or sale of a security to the Plaintiff, Salvatore Lampuri?

ANSWER: No

On the other hand, in answering the same questions regarding Mr. Rice, the jury determined that Mr. Rice had not made any false or misleading statements to plaintiffs. On 13 March 2014, the trial court entered a judgment ordering defendant to pay $ 150,000.00 in compensatory damages to Dr. Piazza and $ 100,000.00 in compensatory damages to Mr. Lampuri and to pay plaintiffs $ 123,804.00 in attorney's fees and $ 8,493.79 in costs, plus interest. On 17 March 2014, defendant filed a motion for judgment notwithstanding the verdict or, in the alternative, for a new trial. On 11 April 2014, the trial court denied defendant's motion. On 21 April 2014 and 5 May 2014, defendant noted an appeal from the final judgment, the order awarding costs and attorneys' fees, and the order denying his motion for judgment notwithstanding the verdict or a new trial to the Court of Appeals.

In challenging the trial court's judgment and orders before the Court of Appeals, defendant argued that the trial court had erred by determining that plaintiffs had sufficiently established that defendant was liable

372 N.C. 142

to plaintiffs pursuant to N.C.G.S. § 78A-56(a)(2), including whether defendant was primarily or secondarily liable and whether plaintiffs were required to prove that defendant acted with scienter; declining to...