Walker v. Sloan

Decision Date18 April 2000
Docket NumberNo. COA98-1541.,COA98-1541.
Citation137 NC App. 387,529 S.E.2d 236
CourtNorth Carolina Court of Appeals
PartiesBrenda W. WALKER, Stanley G. Laborde and Lawrence J. Verny, Plaintiffs, v. Maceo K. SLOAN, Justin F. Beckett, Peter J. Anderson, Morris Goodwin, Jr., Sloan Financial Group, Inc., Ncm Capital Management Group, Inc., New Africa Advisers, Inc., and American Express Financial Advisors, Inc., Defendants.

Smith Helms Mulliss & Moore, L.L.P., by J. Anthony Penry, Raleigh, and Fontana & Lanier, P.A., by Lynn Fontana, Durham, for plaintiffs-appellants.

Moore & Van Allen, PLLC, by Lewis A. Cheek and Andrew B. Cohen, Durham, for defendants-appellees Maceo K. Sloan, Justin F. Beckett, Sloan Financial Group, Inc., NCM Capital Management Group, Inc., and New Africa Advisers, Inc.

R. Jonathan Charleston for defendants-appellees Peter J. Anderson, Morris Goodwin, Jr., and American Express Financial Advisors, Inc.


Brenda W. Walker ("Walker"), Stanley G. Laborde ("Laborde"), and Lawrence J. Verny ("Verny") (collectively, "plaintiffs") instituted an action on 23 December 1998 against Maceo K. Sloan ("Sloan"), Justin F. Beckett ("Beckett"), Sloan Financial Group, Inc. ("SFG" or "SFG/NCM"), NCM Capital Management Group, Inc. ("NCM" or "SFG/NCM"), New Africa Advisers, Inc. ("New Africa"), Peter J. Anderson ("Anderson"), Morris Goodwin, Jr. ("Goodwin"), and American Express Financial Advisors, Inc. ("American Express") alleging claims for: (i) tortious interference with prospective economic advantage, (ii) unfair and deceptive trade practices, (iii) constructive fraud, (iv) fraud, (v) breach of contract, (vi) breach of fiduciary duty, and (vii) violation of the North Carolina Wage and Hour Act. On 18 February 1998, Sloan, Beckett, SFG, NCM, and New Africa (collectively, "the Sloan defendants") filed an answer and motion to dismiss plaintiffs' claims for tortious interference with prospective economic advantage, unfair and deceptive trade practices, constructive fraud, and breach of fiduciary duty under Rule 12(b)(6) of the Rules of Civil Procedure. Additionally, Anderson, Goodwin, and American Express (collectively, "the American Express defendants") moved to dismiss the claims brought against them—unfair and deceptive trade practices, constructive fraud, and breach of fiduciary duty—pursuant to Rule 12(b)(6). On 14 May 1998, the trial court heard arguments on the motions, and during the course of the hearing, plaintiffs moved for leave to amend their complaint. The court allowed plaintiffs leave to amend the claims for unfair and deceptive trade practices and breach of fiduciary duty. However, by order dated 10 June 1998, the trial court, in accordance with Rule 12(b)(6), dismissed plaintiffs' claims for tortious interference with prospective economic advantage and constructive fraud, as well as all claims asserted against New Africa.

Plaintiffs filed an amended complaint on 3 June 1998. On 16 June 1998, the Sloan defendants filed a "Renewed Partial Motion to Dismiss" plaintiffs' claims for unfair and deceptive trade practices and breach of fiduciary duty. The American Express defendants likewise moved to dismiss all claims pertaining to them. The Sloan defendants and the American Express defendants also moved to strike portions of plaintiffs' amended complaint, i.e., new allegations concerning those claims that the court had previously dismissed. In an order dated 17 July 1998, the trial court struck paragraphs 60, 65, 87 and 93 of the amended complaint and all references to those paragraphs. Then, on 17 August 1998, the trial court entered an order dismissing plaintiffs' claims for unfair and deceptive trade practices and breach of fiduciary duty. Plaintiffs filed timely notices of appeal from the 10 June, 17 July, and 17 August 1998 orders. On 6 November 1998, the trial court found that the three orders affected a substantial right, and in the alternative, certified them as final judgments pursuant to Rule 54(b) of the Rules of Civil Procedure. The amended complaint alleges that plaintiffs are senior-level offices of NCM, a registered investment advisory firm that provides investment supervisory services to its clients in exchange for a percentage of the assets under management. In 1991, Sloan, Beckett, and American Express formed SFG, a minority-owned holding company incorporated under the laws of North Carolina for the purpose of acquiring NCM from North Carolina Mutual Life Insurance Company. American Express invested approximately $7,000,000 to fund the acquisition, 60% of which consisted of personal loans to Sloan and Beckett. In connection with the capitalization of SFG/NCM, American Express purchased 40% of the stock. Sloan and Beckett purchased 43% and 17% of the stock, respectively, and both pledged their shares as collateral for the loans from American Express.

American Express elected two representatives, Anderson and Goodwin, to serve on the Board of Directors ("the Board") with Sloan and Beckett. The corporation's bylaws provided that Sloan was to maintain managing control of the company and that American Express would maintain minority voting status on the Board. However, in the event that Sloan failed to pay dividends to American Express for three years, the latter would assume voting control, but not managing control, of SFG/NCM.

In December of 1996, Anderson and Goodwin met with Rodney B. Hare, NCM's Senior Vice President of Marketing and Client Services for the Midwest Region, to discuss their concerns regarding Sloan's management of NCM. During the meeting, Hare inquired as to whether American Express would be willing to sell its share of SFG/NCM to a group of key employees. Goodwin and Anderson responded affirmatively and quoted an expected sale price for the entire company, stating that they could "persuade" Sloan to sell his interest.

On 8 and 9 January 1997, American Express conducted an extensive review of SFG/NCM, which uncovered a series of irregular investment practices that could potentially subject the company to liability. Following the review, Goodwin approached Hare and said that if an employee group was still interested in buying SFG/NCM, "we are very interested in talking to you about that." Relying on the representations of Goodwin and Anderson, a group ("the employee group") consisting of plaintiffs and five other senior-level executives of NCM was formed with the objective of procuring an equity partner to join in the buyout of SFG/NCM. On 10 March 1997, the employee group met with Sloan and presented him with a formal letter of interest regarding the purchase of SFG/NCM. The employee group sent similar letters to the remaining SFG/NCM Board members.

In anticipation of the purchase, the employee group began negotiations with two potential funding sources—the Edgar Lomax Company ("Lomax") in Springfield, Virginia, and Loomis Sayles & Company ("Loomis") in Bloomfield, Michigan. Representatives of both companies met with the SFG/NCM Board during a 21 March 1997 meeting. The Board expressed its interest in selling the company to the employee group and requested that Randall Eley of Lomax complete a standard form regarding the proposed deal, which was to be forwarded to Eley within 24 hours of the meeting. Goodwin and Anderson also prepared a letter for Sloan to send to Lomax. Sloan delayed in sending the materials, and when Lomax finally received the documents, their contents were different from what Goodwin and Anderson had drafted. Furthermore, without prior approval of the Board, Sloan communicated to Eley that he would only consider a cash deal, rather than the industry-standard installment sale.

Following the 21 March 1997 meeting, Sloan and Beckett terminated several members of the employee group, i.e., Walker, Hare, Verny, and McCaskill. Despite protests from the group, the SFG/NCM Board took no action to intervene and stop the terminations. The instability brought about by the firings impaired the employee group's negotiations with the funding sources, and as a result, they withdrew their offers to finance the purchase.

Initially, we note that the dismissal orders from which plaintiffs appeal are interlocutory, as they do not dispose of all claims between all parties. See Hudson-Cole Dev. Corp. v. Beemer, 132 N.C.App. 341, 511 S.E.2d 309 (1999)

(order is interlocutory if it does not dispose of entire controversy between the parties). Ordinarily, interlocutory orders are not immediately appealable. Id. Direct appeal may be had from an interlocutory order, however, if deferring the appeal will injure a substantial right of one or more parties. Abe v. Westview Capital, 130 N.C.App. 332, 502 S.E.2d 879 (1998).

The original and amended complaints demonstrate that plaintiffs' many claims against defendants involve related issues of fact. This Court has held that although the right to avoid multiple trials is not, itself, a substantial one, the right to prevent separate trials of the same factual issues is, indeed, a substantial right. Davidson v. Knauff Ins. Agency, 93 N.C.App. 20, 376 S.E.2d 488 (1989). The following rationale applies:

[W]hen common fact issues overlap the claim appealed and any remaining claims, delaying the appeal until all claims have been adjudicated creates the possibility the appellant will undergo a second trial of the same fact issues if the appeal is eventually successful. This possibility in turn "creat[es] the possibility that a party will be prejudiced by different juries in separate trials rendering inconsistent verdicts on the same factual issue."

Id. at 25, 376 S.E.2d at 491 (second alteration in original) (quoting Green v. Duke Power Co., 305 N.C. 603, 608, 290 S.E.2d 593, 596 (1982)). Accordingly, we conclude that the present orders of dismissal are properly before us, because they affect a substantial right of plaintiffs which might be lost if we deny immediate review. That said, we move now to our analysis of plaint...

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