The Business Court delivered 12 Opinions in July 2027. This Part 1 covers six of them.  It was a month chock full of interesting Opinions. Two of them are newsworthy: The case of Harris Teeter Supermarkets, Inc. v. Ace Am. Ins. Co., 2026 NCBC 68 (Robinson, C. J.) involves H-T’s effort to get insurance coverage for its obligation to pay $60 million to Kroger (its parent company). Kroger says this is H-T’s “share” of the more than $1 billion that Kroger will pay to settle 800 lawsuits against it for its role dispensing opiods and helping to fuel the opioid crisis. The other newsworthy case is Jackson ex rel. Dogwood Health Trust v. HCA Mgmt. Servs., LP, 2026 NCBC 69 (Earp, J.), In which North Carolina’s Attorney General is suing the acquiror of Mission Hospital in Asheville for allegedly breaching its obligations under an Asset Purchase Agreement to maintain certain levels of medical services which the hospital was offering at the time of the acquisition. 

The other four are worth reading about as well.  My favorite of the month is Brock v. Kyryk, 2026 NCBC 62 (Houston, J.), where Judge Houston says of Plaintiffs’ attempt to bring a derivative action that "it appears that Plaintiffs do not themselves know or understand the relief they seek.”

Read on, and please become a paying subscriber.

I don't know what's going on with the Plaintiff in FS Med. Supplies, LLC v. Tanner GAP, Inc., 2026 NCBC 61 (Houston, J.), but it is mad enough at Defendant TannerGAP to have sued it five times in courts ranging from California to North Carolina. Judge Houston denominated the cases, all of which were filed against pretty much the same Defendants for mostly identical claims, as follows:

Cases IV and V, involving the same parties and virtually the same causes of action (Op. ¶22), seem to present a textbook situation for the application of the prior pending action doctrine, compelling Judge Houston to dismiss or stay the action before him.

Let's look at the prior pending action doctrine:

[W]here a prior action is pending between the same parties for the same subject matter in a court within the state having like jurisdiction, the prior action serves to abate the subsequent action.

Op. ¶26 (quoting Eways v. Governor’s Island, 326 N.C. 552, 558 (1990).

Well, maybe this is not so “textbook” a situation. Are the North Carolina Superior Court (here the NC Business Court) and the Federal District Court for the Western District of North Carolina Courts considered to be “within the state having like jurisdiction.”? That question was resolved a long time ago. Judge Houston observed that:

As North Carolina’s appellate courts have recognized, the prior pending action doctrine applies to actions filed in both the state and federal courts of North Carolina, with no substantive distinction between the two.

Op. ¶29 (citing Eways, supra, 326 N.C. at 559-60).

What about Cases I-III? They were prior pending cases. Can't the Defendants hang their Motion to Dismiss based on the prior pending action on those? No, because those cases are no longer “pending.” For purposes of the doctrine, “[a]n action is pending ‘until its final determination by judgment.’” Op. ¶28.

How about Case IV? That's where the plot thickened. The Plaintiff argued that that case was bound to be dismissed for lack of subject matter jurisdiction given the Magistrate Judge’s Recommendation that the District Court Judge do so. That seems to be a viable argument. After all, District Court Judges seem to routinely rubberstamp the Recommendations of a Magistrate Judge.

In a show of support for the Federal Court, Judge Houston refused to take that step. He held that:

absent any ruling by the federal district court judge on the magistrate judge’s recommendation in Case IV, this Court will not simply assume that the federal court lacks jurisdiction over Case IV and proceed as if that case does not exist. Rather, that determination is for the federal court to resolve.

Op. ¶37 (emphasis added). He also observed that he did not have power to assail that determination on a collateral basis. Id.

Judge Houston dismissed the case before him. He did leave the door open for Plaintiff to file Case VI, once the dust in the Western District settled if Case IV was in fact dismissed Op. ¶43.

You don't have to be an historian of the North Carolina Business Court to know the name Sunbelt Rentals, Inc. That Company was the winner of a $16 million plus Judgment against a competitor in 2003 on its claim for unfair and deceptive trade practices. The judgment was entered by OG Business Court Judge Tennille. Sunbelt Rentals, Inc. v. Head & Enquist Equipment, LLC,., 2003 NCBC 4 (Tenille, J.) He furthermore ordered an award of $1.2 million in attorneys fees to counsel for Sunbelt. Sunbelt Rentals, Inc. v. Head & Enquist Equipment, LLC,., 2003 NCBC 6 (Tenille, J.)

You have to hope that Sunbelt banked some of that $16 million. That's because it is facing the payment of a nearly $9 million judgment against it and is locked in a dispute with the manufacturer of the defective machinery — Defendant Niagara Machine

The new Sunbelt case is Sunbelt Rentals,Inc. v. Niagara Mach., Inc., 2026 NCBC 65 (Houston, J.), in which Sunbelt is seeking to have Defendant Niagara Machine) indemnify and defend it in the lawsuit which gave rise to the almost $9 million judgment. That lawsuit involved Sunbelt's purchase of a “shot blaster” from its manufacturer, Niagara. A shot blaster is a heavy-duty industrial machine that cleans, strips, and etches concrete, steel, or asphalt surfaces

Sunbelt leased the shot blaster to two individuals who died or were injured as a result of being poisoned by carbon dioxide emitted by the shot blaster. It was their lawsuit which resulted in the $9 million judgment.

Sunbelt had acquired the shot blaster from Niagara via a written contract documented by an unsigned purchase order. The purchase order contained language in fine print at the bottom which included these words “Purchase order is subject to the terms and conditions found at at http://www.sunbeltrentals.com/purchaseterm.. The language at that link contained these words about indemnification

7. Indemnification. Seller will indemnify and hold Buyer harmless, and defend Buyer, with counsel of Buyer’s choosing, from all claims, demands, suits, actions, liabilities, damages, losses, penalties, costs and expenses, including legal fees and expenses, arising out of or relating to (a) Seller’s breach of the Order, including inaccuracy of any warranty in these Terms, (b) any defect in the Goods or any failure of the Goods to comply with the Specifications of the Order, (c) any product liability claim or failure to warn with respect to the Goods, (d) any voluntary or required recall of any Goods, and (e) any claims that the Goods or Buyer’s use or possession of the Goods infringes or misappropriates any patent, copyright, trade secret or other intellectual property right of any person or entity.

Op. ¶11.

Judge Houston spent 10 paragraphs discussing whether the indemnification provision had been incorporated by reference into the contract purchase order. That seemed pretty self-evident, especially given the Court’s reliance on Supplee v. Miller-Motte Bus. Coll., Inc., 239 N.C. App. 208, 211–12, 220 (2015). Judge Houston stated that “the North Carolina Court of Appeals concluded in Supplee that such ‘subject to’ language is sufficient to ‘incorporate[] the terms and conditions set forth in’ the referenced document or at the referenced link.” Op. ¶42.

The judge refused to accept Defendant Niagara's argument that indemnification could not be incorporated by reference because the purchase order had not been signed by it or otherwise assented to. Op. ¶44. Niagara relied upon Texas and Florida law for that proposition.

Although this Opinion is a victory for Sunbelt, be aware that it will not result in a judgment in favor of Sunbelt on its request for indemnification. The Motion came before the Business Court on Niagara's Motion to Dismiss contending that there was not a valid contract for indemnification between it and Sunbelt. Sunbelt has a ways to go before getting a Judgment for indemnification.

Don’t Bring Remedies As Causes Of Action

Another point of value in this Opinion is on Sunbelt’s cause of action for restitution. Judge Houston dismissed this claim without prejudice for the reason that it is a remedy rather than an independent cause of action. The same reason resulted in the dismissal without prejudice of Sunbelt’s claim for equitable subrogation.. The court held that Sunbelt needed to assert causes of action to which they may have been equitably subjugated rather than inserting a “claim” for equitable subordination. Op. ¶58.                    

The reason why the word share, above, is in quotation marks gets to the guts of the opinion.

You all know about the opioid crisis.  The Kroger Company, not a party to this case, was a major player in dispensing opioids at its supermarket pharmacies. More than 800 opioid lawsuits were filed against Kroger and some of its subsidiaries. Harris-Teeter, a wholly-owned subsidiary of Kroger, was specifically named in only one of those cases. That one was filed by Durham County in the United States District Court for the Middle District of North Carolina.

In December 2024, Kroger entered into a written settlement agreement to resolve all of the opioid lawsuits brought against it and its subsidiaries. This Global Settlement provided for a maximum payment of more than $1 billion to the governmental entities that had brought the lawsuits. Plaintiff Harris-Teeter was named in the Global Settlement as a “Released Entity.” Op. ¶36.

Kroger has so far made two of the 11 scheduled payments due under the global agreement. None of that payment has flowed directly from Harris-Teeter to the settlement fund.

This is in keeping with how Kroger manages the finances of H-T:

As a subsidiary of Kroger, Harris Teeter’s financials are consolidated into a centralized treasury for the larger Kroger enterprise. As part of this function, the majority of the cash across the Kroger entities is rolled up through “cash sweeps” into a centralized treasury that is used to pay the bills of the entities.

Op.f14.

Kroger internally calculated Harris-Teeter’s “share” of the settlement allocation on its percentage shares of opioids dispensed by it in jurisdictions where Kroger entities sold opioids. Op. ¶38. That share was eventually determined to be more than $60 million. Op. ¶39. That hefty obligation was recorded on Harris-Teeter’s books.

And here is the critical paragraph of Chief Judge Robinson’s Opinion:

This allocation was not made pursuant to any requirement in the Global Settlement or any terms of a separate contractual agreement between Kroger and Harris Teeter. Rather, the allocation was made as part of Kroger’s own practice, as the parent company, of allocating settlement liability to its subsidiaries.

Op. ¶40.

Harris-Teeter held approximately 26 commercial general liability policies with the Defendant insurance companies.  Each provided that the insurer would pay on behalf of Harris-Teeter those sums “in excess of the ”Retained Limit” that Harris-Teeter becomes “legally obligated to pay.” Op. ¶16 (emphasis added).

It is the rare Business Court case that turns on a single issue. But this case did that. Was Harris-Teeter “legally obligated to pay” its agreed-upon share of $60 million to Kroger?

Maybe that is one possible construction of “legally obligated to pay,” but Chief Judge Robinson did not have the flexibility to pursue that construction. He observed that the Business Court “has previously concluded that. . . The phrase ‘legally obligated to pay’ is unambiguous. Op. ¶63 (citing AP Atl., Inc. v. Crescent Univ. City Venture, LLC, 2017 NCBC LEXIS 59).  He was also constrained by the Court of Appeals opinion in Lida Mfg. Co. v. U.S. Fire Ins. Co., 116 N.C.App. 592 (1994) where the COA held that “where a third party’s settlement of the underlying claims include a covenant not to execute a confession of judgment against the insured, the insurance company’s obligations under the CGL policy were extinguished.” Op. ¶62. The settlement agreement here released Harris-Teeter from further liability. Op. ¶36.

Chief Judge Robinson entered judgment in favor of the Defendant insurance companies ruling that they owe no insurance coverage to Harris-Teeter for its internally allocated share of the settlement payments.

The case of Jackson ex rel. Dogwood Health Trust v. HCA Mgmt. Servs., LP, 2026 NCBC 69 (Earp, J.) is the second Opinion this year from the Business Court dealing with a hospital acquisition. The first was Healthcare Found. of Wilson v. DLP Healthcare, LLC, 2026 NCBC 57 (Conrad, J.) which was decided in June.

Maybe you are wondering why the Attorney General is the Plaintiff in a case involving the sale of a hospital. Why is the Attorney General sticking his nose into the sale of a not for profit hospital to a for-profit entity? Here’s your answer: A transaction involving the sale of a not for profit hospital to a for-profit entity requires notice to and the approval of the Attorney General per G.S. § 55A‑12‑02(g). Pursuant to this statutory obligation, the Attorney General’s office was involved in the negotiations over the transaction, resulting in an Asset Purchase Agreement whereby Mission Hospital of Asheville, North Carolina was acquired by HCA Healthcare, The APA gave the Attorney General the right to enforce the buyer’s obligations to the seller. Op. ¶13.

The Key Terms of The APA

The APA, reviewed by and approved by the then Attorney General Josh Stein, contained the following key terms:

In section 7.13(a) of the APA, HCA agreed that: [u]nless otherwise consented to in writing by the Advisory Board for a period of ten (10) years immediately following the Closing Date, [HCA] shall not discontinue the provision of the services set forth on Schedule 7.13(a) . . . at the Mission Hospital Campus Facility.

The Attorney General took the position that ”discontinued” meant that services had to be continued at the levels at which they were offered at the time of the acquisition. Op. ¶ 34. The Defendant’s position that it was only required to refrain from completely eliminating a service described in Schedule 7.13. Op. ¶40.

Front and center in Schedule 7.13 were two areas of service. It said the following were not to be ”discontinued.”:

Emergency and Trauma services generally consistent with the current Level II Trauma Program4 with emergency services for pediatrics and adults, ground/air medical transport services and forensic nursing services[; and]

Oncology Services – inpatient and outpatient cancer services, radiation therapy, surgery, chemotherapy, and infusion services.

Op. ¶10.

The Claimed Breaches

The transaction closed in January 2019.  The AG sued the acquiror in 2023, alleging that it had breached the terms of the APA by discontinuing the provision of certain (i) emergency and trauma services and (ii) oncology services at the Hospital.

In his Amended Complaint (filed April 2024), the Attorney General alleged specific violations of section 7.13 of the APA:

Mission Hospital’s once efficient and orderly emergency department is now significantly degraded and unable to meet patients’ needs due, in part, to staffing levels that are inadequate to meet the requirements of a Level II Trauma Program and the inconsistent offering of surgical otolaryngology services.

Op. ¶16

He also alleged that:

Mission Hospital’s oncology services have degraded since the acquisition because it has no medical oncologists to monitor initial chemotherapy treatments (“first starts”) and it has eliminated complex hematology services for adult patients with blood cancers, among other reasons.

Extrinsic Evidence Will Be Central to the Resolution of this Case

Judge Earp previously concluded in an April 2026 Order in this case that the word “discontinue” was ambiguous as a matter of law and its interpretation presented a genuine issue of material fact.  She also ruled in that decision that the ambiguity meant that “extrinsic evidence may be used to determine the parties’ intent.”  April Op. ¶23. She underscored that proposition in the July 2026 Opinion, where she said that “In the event contract language is ambiguous, the parties may introduce extrinsic evidence ‘not to contradict, but to show and make certain what was the real agreement between the parties.’” Op. ¶30.

In the July Opinion, Judge Earp considered a wealth of extrinsic evidence. Much of it was produced by the Attorney General following the Judge’s ruling on a Motion to Compel filed by the Defendant. I can only imagine the Defendant’s delight in receiving an internal communication between two lawyers on the Attorney General’s staff in which one said that “the [Mission Health] board thinks [HCA] has agreed to maintain current hospital services at current levels. That’s not what the APA says, and [HCA] says it would not have agreed to do this.” Op. ¶45 (emphasis added).

To be fair to both sides, there is a wealth of extrinsic evidence supporting both their positions. There is much there to support the Defendant's position and much to support the Attorney General position as well This will all have to be resolved at trial.

Interestingly enough, AG Jackson’s office proclaimed this Opinion in a press release as a “victory for key arguments.” I would call it a draw.

I can count on one hand the number of Opinions that I have decided not to write about this year. But add Vincelette v. Court, 2026 NCBC 64 (Shirley, J.) to that short list, though I’m kinda sorta writing about it anyway.

Why did I at first think that I wouldn’t write about it? Well for one thing, it is 57 pages and 160 paragraphs long.

Second, the Opinion contains almost nothing of interest to lawyers practicing in North Carolina. The principal issue involves the construction of an operating agreement which states that it shall be governed by Connecticut law (!). Nobody in North Carolina cares anything at all about Connecticut law.

Third, one of the principal Defendants bears the last name of Peirce which I find to be an objectionable spelling of what should properly be Pierce. I planned to attack her ancestors for violating the well accepted spelling rule of “i before e, except after c”. But after extensive research, I discovered that the “i before e ‘rule’” is no longer as widely accepted as it was when I was in elementary school in the 1960s. I also discovered that a number of famous people spell their name Peirce. Oh well, I am outraged anyway.

My fit of pique aside, the fact pattern of the case is actually quite interesting. The Plaintiff, Amy Vincellette, was a longtime business partner partner of Defendant Kelly Court. They formed an member managed LLC called Wellspring Nurse Source, LLC (“Nurse Source”). The headquarters of Nurse Source are located in Iredell County, North Carolina. Op. ¶5 But the LLC was inexplicably governed by an operating agreement which provides that it “shall be interpreted in accordance with the laws of the State of Connecticut.” Op. ¶33. Who did that?

So, continuing on with this Connecticut-centric case, Defendant Court obtained a one third ownership interest in Nurse Source, with Plaintiff and Defendant Court each owning another third. Sometime later, Plaintiff and Defendant Court sued the egregiously named Ms. Peirce for embezzlement. During the course of that litigation, Defendant Court and Plaintiff Vincellette voted to terminate Defendant Court’s employment and notified her that they were exercising their Operating Agreement rights to purchase all the ownership units owned by Ms. Peirce Pierce (I’ll just refer to her as Ms. P from now on ) for the discounted price of $125,000.

The lawsuit was settled in 2022, The Settlement Agreement called for Nurse Source to pay Defendant Peirce $125,000, the discounted price of her membership interest. Those funds were never paid. Op. ¶10

Down the line, Defendant Court executed a dramatic about-face, informing her fellow LLC member Vincellette that she was "pulling the settlement agreement.” Op. ¶11. She and Ms. P then executed an “Action by Written Consent of the Members” which purported to reinstate (the admitted embezzler of company funds) Ms. P as a Manager and employee of Nurse Source. Further adding salt to the wound, Defendants Court and Ms.P executed another ”Action by Written Consent of the Members” which purported to terminate Ms. Vincellette’s employment for cause and indicated their intention to repurchase her membership interest for 50% of the appraised value.

Now we are finally getting to one of the operative issues in the case: Was Ms. P a member of Nurse Source at the time she collaborated with backstabber Court to vote to reinstate her own employment? The answer lies in an interpretation of the Operating Agreement under Connecticut law. If you want to know the gritty details of the answer, you can read paragraphs 33 through 44 of the Opinion. If you'd rather just have the answer, the answer is that Ms. P remained a member entitled to reinstate herself as an employee of Nurse Source at the time she voted to do so. With the answer have been any different under North Carolina law? Probably not.

That's about all I want to say about Connecticut law, so let me deal with the minor points of North Carolina law dealt with in Judge Shirley's Opinion. There's really not much other than the Courts boilerplate recitation of the legal standard for summary judgment in North Carolina (which all of the Business Court Judges seem to include in their Opinions), it boils down to this:

Judge Houston granted the Motion to Dismiss by the Defendants in a derivative action in Brock v. Kyryk, 2026 NCBC 62 (Houston, J.). This followed his Order rejecting the Plaintiffs’ attempt to take a voluntary dismissal of the lawsuit without leave of court in Brock v. Kyryk, 2026 NCBC Order 14 (Houston, J.) I wrote about that Order back in February.

The July Opinion exposed more errors in the Plaintiffs’ attempt to bring a derivative action. Judge Houston in fact stated at one point that "it appears that Plaintiffs do not themselves know or understand the relief they seek.” Op. ¶42 & n.3 (emphasis added).

The principal error in Plaintiffs’ Complaint was that they were attempting to bring a derivative action based on what they were asserting as individual claims. They were attempting to bring a breach of fiduciary duty claim against the board members of the Property Owners Association of which they were members.

The facts of the case concerned the Association’s efforts to impose a special assessment on each of the property owners in the development involved in the lawsuit (The Settings of Black Mountain). The assessment was necessary to fund repairs necessary at the development due to Hurricane Helene which ravaged the Asheville, North Carolina area in 2024. The assessment was first estimated to be $1.45 million. Op. ¶14. The assessment per lot was to be $3970 per lot. Op. ¶16.

The Plaintiffs are property owners in a planned development called The Settings of Black Mountain.  The Defendants serve as members of the Association’s Board of Directors. Op. ¶10.

The claim for breach of fiduciary duty brought against the Board of Directors concerns the manner by which they conducted a property owners’ meeting. They intended to levy a special assessment on the members of the Association. The Plaintiffs attempted to delay the meeting, but the Defendants went forward. Plaintiffs also alleged that their voting rights were not properly recognized and that the Board had misrepresented the need for the special assessment.

These Were Individual Claims, Not Derivative Claims

Judge Houston’s reading of the complaint established that the Plaintiffs were suing for their individual benefit, not on behalf of the Association. But any fiduciary duty was owed by the board members to the Association, not to its individual members. Op. ¶43. Furthermore, the “relationship between members and a property owners Association it generally contractual, and not fiduciary.” Op. ¶44.

The only other claims made by the Plaintiffs were for negligent misrepresentation and for injunctive relief.

The negligent misrepresentation claim was dismissed because it was not pleaded with the required particularity. And as for the claim for injunctive relief, you all know from reading this Newsletter that “such ‘claims’ inherently fail as a matter of law because, as this Court and others have repeatedly recognized, they are not independent causes of action or claims.” Op. ¶60.