As I noted in the last Newsletter, August was a slow month for the Business Court. Only four Opinions were issued. This edition covers the remaining two.

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With next edition, I am going to start implementing harsher measures for those who have ignored my gentle requests. Please subscribe now and avoid that.

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Cocktail Chatter For Appellate Lawyers

Chief Judge Conrad took the opportunity during the Summer doldrums to do a little house cleaning of his docket. In Menscer v. Pac. Alliance Corp., 2026 NCBC 75 (Conrad, C.J.), the Judge dismissed Defendants’ appeal of a nine year old Order partially granting and partially denying Plaintiffs’ Motion for Summary Judgment.

What? How had this appeal languished in appellate limbo in the Business Court for nine years?

The five Defendants (Pacific Alliance and four individual Defendants) timely filed their interlocutory Notice of Appeal with the proper Court. Thereafter, in late 2017, defendant Pacific Alliance filed for Chapter 11 bankruptcy. There was an automatic stay that lasted through the end of the bankruptcy proceedings which ended earlier in 2026. Throughout that nine years, no record on appeal was filed with the North Carolina court of Appeals. counsel for the purported Appellants were permitted to withdraw as counsel and no counsel moved in to take their place. Furthermore, two of the individuals seeking to take the appeal died in 2022.

How did the Business Court still have the jurisdiction to dismiss this appeal?

Since the record on appeal had never been docketed with the Supreme Court of North Carolina, the Business Court retained jurisdiction to decide the motion to dismiss the appeal. Op. ¶19. The Business Court has ruled on its retention of jurisdiction over appeals that have not been fully docketed before. See, e.g, Carter v. Clements Walker PLLC, 2014 NCBC 12

Has Judge Conrad really been on the Business Court since 2017, when the Opinion granting and denying the purported Appellants’ motion for summary judgment was delivered?

No, he has not. He was appointed in 2016. The Opinion on Summary Judgment was entered by former Chief Judge Robinson, who has now retired.

Dismissal for Failure to Prosecute

Are there any claims remaining in the Business Court? There were, yes. Defendant Pacific Alliance still had a claim to enforce a foreign judgment against a nominal Defendant, Star Leasing. Chief Judge Conrad dismissed that claim based on its proponent’s failure to prosecute.

A dismissal for failure to prosecute is governed by rule 41(b) of the North Carolina Rules of Civil Procedure, which says that:

(b) Involuntary dismissal; effect thereof. – For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim therein against him.

NCRCP 41 (b). The standard for such a dismissal, according to Chief Judge Conrad, is whether: the party seeking to maintain life in its claim “acted in a manner which deliberately or unreasonably delayed the matter”; “the amount of prejudice, if any, to the” moving party; and “the reason, if one exists, that sanctions short of dismissal would not suffice.” Op. ¶ 23 (quoting Greenshields, Inc. v. Travelers Prop. Cas. Co. of Am., 245 N.C. App. 25, 33 (2016)).

That standard was easily met here. Chief Judge Conrad stated that:

Pacific Alliance has unreasonably delayed the litigation of its action to enforce the foreign judgment because it has ceased to participate in the litigation in any way. As noted, Pacific Alliance abandoned its appeal, failed to respond to the pending motion to dismiss, is no longer responding to communications from other parties and the Court, and did not appear at a properly noticed conference in July 2026. Furthermore, Pacific Alliance has not retained counsel and is not permitted to represent itself in this litigation. This “goes beyond a ‘mere passage of time’ and constitutes an unreasonable delay,” amounting to an abandonment of the action.

Op. ¶25

In Which Judge Houston Holds Off On Sanctions

I have read enough Opinions and Orders from Judge Houston to know that he does not countenance lawyers who not comply with the Business Court Rules, engage in discovery misconduct, and so forth. For example:

That's why I was particularly surprised at his Opinion in Spencer Creek, L.L.C. v. Linville Ridge Prop. Owners’ Ass’n, Inc., 2026 NCBC 74, where I was fully expecting him to unload on the Plaintiff for over variety of inexplicable conduct.

What’s At Issue In The Case

The case involves an HOA assessment of $7500 on multiple property owners in order to make repairs to property following Hurricane Helene. The Plaintiff is an LLC which is an owner of a property in the subdivision (Linville Ridge Property Owners Association, Inc.) Plaintiff's attorney is the sole officer of the plaintiff LLC. Plaintiff's counsel is also a lot owner within the community..

The case is styled as a class action i(not yet certified). The Defendants are the Property Owners Association and the President of the Board

Fiduciary Duty Claim

Immediately before the Court was the Defendants’ Motion to Dismiss the breach of fiduciary duty claim. Plaintiffs rested their fiduciary duty claim on N.C. Gen. Stat. §47F-3-103(a), which they quoted as stating:

Defendants’ Board’s officers and POA’s members “shall be deemed to stand in a fiduciary relationship to the association and the unit owners and shall discharge their duties in good faith, and with that diligence and care which ordinarily prudent persons would exercise under similar circumstances in like positions.”

Op. ¶32.

The Problem for the Plaintiffs

the problem for the Plaintiffs in hanging their fiduciary duty claim on section 47F-3-103(a) is that that statute says no such thing. Plaintiffs were citing to the North Carolina Condominium Act, which was completely inapplicable to a nonprofit property owners association. The claims here are governed by the North Carolina Nonprofit Corporation Act, N.C.G.S.. § 55A-1-01

Insult to Injury

Compounding its reliance on the wrong statute, Judge Houston went on to say that:

“The Court notes that Plaintiffs’ brief contains numerous overstatements or misstatements of applicable law.”

“in at least one instance, Plaintiffs flat-out misrepresent the holding of a prior Business Court case”

The misrepresentation was that the Business Court had previously held that a “ non-profit homeowners’ board and the board’s delegated architectural review committee owed a statutory-imposed fiduciary duty to the property owners pursuant to N.C. Gen. Stat. 55A-8-30.”

That 10-year-old decision by the Business Court had held exactly the opposite: “[t]he Court finds no reasoned factual or legal basis to impose on the Board or ARC members an individual fiduciary duty to individual homeowners beyond their duty owed to the Association to implement the Covenants reasonably and in good faith. That case is Pittenger v. Gleneagles Homes Ass’n., 2020 NCBC 85, 2020 NCBC LEXIS 141.

I expected the next 12 pages of the Opinion to deal with how the Court was going to lower the boom on the Plaintiff for its missteps. But Judge Houston left the sanctions open for another day. He said the following:

The Court is profoundly troubled by Plaintiffs’ mischaracterizations, particularly when combined with other substantive issues previously addressed with counsel in this case. The Court takes under advisement the issue of potential sanctions under Rule 11 and in the Court’s inherent authority.

Op. ¶31 & n.6.

Proper Parties vs. Necessary Parties

The remainder of Judge Houston's Opinion concerns the Defendants’ Motion to Dismiss based upon Rule 12(b)(7) of the Rules of Civil Procedure. They contended that all members of the Property Owners Association needed to be added as “necessary parties.” That Rule says that an action may be dismissed for “failure to join a necessary party.”

How many necessary parties would that be? After about 10 minutes of diligent Google research, I found that the number of homeowners in the POA is not publicly available. I did discover, however, that the POA covers 1800 acres and is made up of 20 distinct neighborhoods. So we are talking about a few hundred necessary parties at least. If that ruling by Judge Houston requiring all the members of an HOA to be added to an action seems familiar to you, he did a similar thing in Covenant Clearinghouse LLC v. D.R. Horton, Inc., 2026 NCBC 56

There is a little bit of backstory to whether each individual property owner needs to be added to the lawsuit as a necessary party. Plaintiff Spencer Creek, LLC had previously filed an action in Avery County District Court in which it sought substantively the same relief requested in this action. The Superior Court Judge to whom the case was eventually assigned ordered Spencer Creek to “join all members of Linville Ridge Property Owners Association, Inc. as necessary parties in that lawsuit.” Op. ¶49 & n.10. Plaintiff Spencer Creek took a voluntary dismissal of that previously filed lawsuit instead of complying with the Superior Court’s instruction. Op. ¶56.

Plaintiff sought to make an inelegant end run around that prior ruling by filing pretty much the same lawsuit in the Business Court as a putative class action. Judge Houston dismissed the notion that this effectively made all the members of the POA parties to the lawsuit. He said that “members of the putative class (i.e., other POA members) are not currently parties to this action merely by being designated as unnamed members of a potential class.” Op. ¶57. And he added that ”a non-named class member is not a party to the class-action litigation before the class is certified.” Id.

The question of whether the members of the POA were necessary parties or proper parties was not resolved by the Court. Judge Houston determined "that they are at least proper parties” and that he would order them to be joined in his discretion.

The Court gave the Plaintiff 14 days to file an Amended Complaint joining all current and some past members of the Linville Ridge Property Owners Association, Inc. as parties. Judge Houston further ordered that if the Amended Complaint was not filed within that very short time and that if Plaintiffs had not otherwise sought voluntary dismissal of this action that the action would be dismissed in its entirety by the court pursuant to rule 41 of the North Carolina Rules of Civil Procedure.

Aftermath?

I am not trying to stir the pot here, but if this Plaintiff thinks that it can avoid the imposition of sanctions by filing a voluntary dismissal of its lawsuit, it is wrong. See, e.g., Bryson v. Sullivan, 330 N.C. 644, 412 S.E.2d 327 (1992).