The Business Court handed down ten Orders of Significance in March 2026, After weeding out the four Orders involving designation issues, that left six for me to write about. This Newsletter covers all five of those, The sixth, Assurance Group, LLC v. Shackelford, 2026 NCBC 24 (Davis, J.), slipped through my quality control system and landed in the February orders newsletter. To make up for that, I am including an April Order in this Newsletter.

That April Order, Anderson v. Triad Radiology Assocs., PLLC, 2026 NCBC Order 34, contains another admonition from Judge Houston to out-of-state lawyers about getting admitted pro hoc vice before appearing in the Business Court.

Beyond that, there is an order that every lawyer who considers him or herself an expert at drafting Employment Agreements containing restrictive covenants should read (S&R Comput. Assocs., Inc. v. Hampel, 2026 NCBC Order 25).

And other interesting stuff, of course.

Eagle eyed readers probably noticed the word “Bonus” up at the top of this post. More on that next month.

There are few things more disheartening than being handed an Employment Agreement drafted by your partner (who is sure that he has tied up the signing employee tighter than a tick) and told to go to court and get an injunction or restraining order against the employee who signed it, but coming back empty handed after having your ears boxed by the Judge hearing your argument.

That’s undoubtedly the situation behind the scenes with Judge Houston's Order in S&R Comput. Assocs., Inc. v. Hampel, 2026 NCBC Order 25, in which he refused to grant injunctive relief against the Defendant employees who had left the Plaintiff, their former employer, to set up a competing business. The Defendants were supposedly bound up by a variety of restrictive covenants, including noncompetition and nonsolicitation provisions.

Judge Houston found fault with the breadth of a number of the restrictions. First, the noncompetition provision attempted to bar the Defendants from being involved with "any business that is the same or similar to [Plaintiff’s' Business within seventy-five miles” of Plaintiff's home location. He said that the restrictive covenant did not specify any factors to determine whether another entity was “similar” to Plaintiff's operations. Those might have included “the industry, the number of employees, the location, the style of building in which it operates, the name, or any other factor that Plaintiff would contend denotes a ‘similar’ entity.” Op. ¶10. The use of the words “directly or indirectly” in the non-compete provision were also a kiss of death. Judge Houston observed that those three words often resulted in the covenant being “determined to be facially overbroad.” Op. ¶46. I’ve previously counseled that those words should never be included in the terms of a covenant not to compete.

The noncompetition provision also attempted to prohibit the Defendants from offering any "services” to any customer or client of Plaintiff's "regardless of whether the services provided relate in any way to the [Defendants’] duties during their employment with Plaintiff. Op. ¶11.

The nonsolicitation provision also went too far. It said that the Defendants could not take “any action which action or inaction might be disadvantageous” to the Plaintiff. That was so “regardless of the context and regardless of whether the action or inaction is in any way related to the Individual Defendants’ employment or relationship with Plaintiff,” which Judge Houston found overly broad and objectionable. Op. ¶13.

The Court Refused to “Blue-Pencil” the Restrictions

Perhaps the drafter of this Employment Agreement thought he was insulating himself from the overbreadth of the restrictions by including a severability provision in each of the restrictions. They said that:

Op. ¶9 (emphasis added).

Judge Houston turned down the opportunity to “blue pencil"¹ the overly broad restrictions he said that:

Op. ¶70 (emphasis added)

If you are not familiar with the concept of claim and delivery (more commonly known in other states as replevin), the North Carolina General Statutes provide for it as a prejudgment remedy. N.C. Gen. Stat. §1-472 et seq. If a Plaintiff is pursuing a claim for conversion, the claim and delivery statute permits him to obtain immediate possession of the personal property at issue. A claim and delivery matter is typically decided upon by the Clerk of Court. It is such a routine matter that all it takes is the completion of a form provided by the Administrative Office of the Courts and a hearing before the Clerk.

The property at issue in Highlights Healthcare, LLC v. Abell, 2026 NCBC Order 28 (Davis, J.) was a laptop computer. It been used by the Defendant while employed by the Plaintiff. Plaintiff contended that it had provided Defendant Abell with the laptop in connection with this employment and that it was the owner of the laptop. The Defendant took the position that the laptop had been given to him as a gift and that he was its rightful owner.

Both sides presented Affidavits supporting their positions. Judge Davis found the Defendant's written testimony to be more credible than the Plaintiffs’ in resolving the Motion before him. Op. ¶37. That point aside, Judge Davis also said that “caselaw from our Supreme Court suggests that a trial court cannot resolve factual disputes regarding ownership of the subject property in a claim and delivery proceeding. Op. ¶51.

Irreparable Harm

Even if Plaintiff had been successful in persuading Judge Davis that it was entitled to claim and delivery, it would not have helped it at all in getting injunctive relief against the Defendant making use of the Laptop (putting aside that injunctive relief would have been totally unnecessary at that point, since the Laptop would be out of the Defendant’s possession).

“Irreparable harm” was already totally nonexistent. There was absolutely no danger of the Defendant using the Laptop for improper purposes. Plaintiff had “bricked” the Laptop, meaning that the Defendant could not access any programs or files stored on the Laptop’s hard drive. Op. ¶9.

So what was the point of continuing to try to get an injunction?

I've never really thought about it this way, but rule 12(f) of the North Carolina Of Civil Procedure is really the mirror image of Rule 12(b)(6). What you say?

Well, I learned from the case of Moore v. Brooks, 2026 NCBC Order 30 (Houston, J.) that rule 12(f) is the appropriate vehicle for moving to dismiss a defensealthough the Rule is styled as "Motion to Strike”. It says that “the judge may order stricken from any pleading any insufficient defense or any redundant, irrelevant, immaterial, impertinent, or scandalous matter.’

NCRCP 8 (General Rules of Pleading) also has some interplay here it says in part that ““[a] party shall state in short and plain terms his defenses to each claim asserted and shall admit or deny the averments upon which the adverse party relies.” Although the Rule adopted the concept of "notice pleading”, the pleading party must still provide “a short and plain statement of any matter constituting an avoidance or affirmative defense sufficiently particular to give the court and the parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved.” )p. ¶13 (quoting N.C. R. Civ. P. 8(c)).

What does it take to have a defense stricken pursuant to Rule 12(f)? Judge Houston said that

a defense that is “conclusory,” “contextually [in]comprehensible,” ”not well-grounded in fact,’ ‘speculative,’ or otherwise devoid of any factual support may be stricken pursuant to Rule 12(f), since such a defense will ordinarily fail to give a party sufficient notice of the nature of the defense as required by Rule 8.” Op. ¶17.

Before you start locking and loading to fire off a Motion to Strike, bear in mind that “[u]ltimately, “Rule 12(f) motions are viewed with disfavor and are infrequently granted,” op. ¶19 (quoting Daily v. Mann Media, Inc., 95 N.C. App. 746, 748–49).

Judge Houston then waded through the viability of the five defenses raised by the Defendant in what he referred to as his “deficient shotgun pleading approach” Op. ¶22.

Which Defenses were Stricken?

The six defenses raised by the Defendant were,

Of those defenses, Judge Houston granted the Motion to Strike as to four of them, denied it as to one of them, and did not address the sixth due to it being withdrawn by the Defendant.

The stricken defenses included the defense of lack of subject matter jurisdiction, failure to join a necessary party, standing, and failure to plead fraud and duress with particularity. Each of those defenses failed to provide any detail about the basis for the claimed defense or were otherwise wholly conclusory and therefore failed to provide sufficient notice of the defense per Rule 8.

The striking of these defenses does not mean that the Defendant has lost the ability to raise them subsequently in the lawsuit. Subject matter jurisdiction “is not waivable and can be raised at any time.” Op. ¶21. As to the necessary party defense, Judge Houston said that the Defendant would later "be permitted to raise ‘a defense of failure to join a necessary party’ in a subsequent pleading per NCRCP 12(h)(2).²

the only defenses which were not stricken were the defense of failure to join necessary party and the failure to state a claim upon which relief can be granted.

I was personally particularly relieved at the denial of the Motion as to the 12(b)(6) defense. As a lawyer who routinely included as the first defense in his Answer to dozens (hundreds?) of Complaints that “the Complaint should be dismissed pursuant Rule 12(b)(6) because of its failure to state a claim upon which relief could be granted” I was concerned that I would have been chronically in violation of the Business Court Rules by not immediately briefing my motion to dismiss/defense (see below).

The 12(b)(6) defense was saved by the applicable Rule of Civil Procedure. That Rule says that “[a] defense of failure to state a claim upon which relief can be granted, a defense of failure to join a necessary party, and an objection of failure to state a legal defense to a claim may be made in any pleading permitted or ordered under Rule 7(a), or by motion for judgment on the pleadings, or at the trial on the merits.”

Business Court Rules, and “Defenses” vs. “Motions”

if you are a martinet of the Business Court Rules, you might be thinking that these defenses were really motions, and that they were therefore in violation of BCR 7.2. That rule says that “[e]ach motion must be set out in a separate document” and . . . must be accompanied by a a brief.” Op. ¶6.

That thought leads to the distinction between a “motion” and a “defense” which Judge Houston set out:

“A motion is ‘a written or oral application requesting a court to make a specified ruling or order.’” Holland v. Holland, 299 N.C. App. 362, 365 (2025) (quoting Motion, Black’s Law Dictionary (12th ed. 2024)). Op. ¶7.

A defense, on the other hand “in the civil context, however, generally refers to “[a] Defendant’s stated reason why the plaintiff . . . has no valid case.” Defense, Black’s Law Dictionary (12th ed. 2024).” Op. ¶8.

These were defenses, labelled as such, and not motions required to be accompanied by a brief.

Brady v. Cobin L. Grp., PLLC, 2026 NCBC Order 33 (Davis, J.) is a dispute between Plaintiff Corbin and his former law firm, the Defendant..

Brady was moving for a Preliminary Injunction against his old law firm to force it adjust the way it had handled his relationships with his past clients. Brady wanted an order requiring the Defendants to provide him with the contact information for all clients to whom he had" provided significant legal services and/or had significant client contact during his tenure at the firm, and to notify all such clients of his departure and their right to counsel of their choice and to cease their interference with his ability to comply with the State Bars notification requirements. Op. ¶20.

It's a bad sign whenever a Court starts its analysis of a party’s right to a preliminary injunction with this line:

Op. ¶30. And that was true for the plaintiff in this case.

Plaintiff's claim that he was being irreparably harmed by the Defendant's actions were woefully unsupported. He said that his current clients were having difficulty obtaining his contact information after his departure from the old Firm despite them contacting the Defendant for his new contact information. Op. ¶39. The only evidence he presented in support of this contention was a Declaration from one client saying that ”she initially experienced difficulty in obtaining Brady's new contact information despite contacting the Defendant. ¶39.

Brady also felt short on his contention that he was at risk of being disciplined by the State Bar for not contacting his former clients about his departure from the Defendant Judge Davis observed that Brady had not received any actual notice that any such disciplinary action was being considered and that the record was devoid of any evidence suggesting that his concerns in this regard were justified. Op. ¶40.

Move with Haste on a Motion for Injunctive Relief

But what really did in Brady in on his motion for injunctive relief was the “lack of urgency” that he had shown in pursuing the preliminary injunction. He did not file the amended motion for the injunction until six months after the lawsuit was commenced 11 months after he was terminated by the law firm.

Judge Davis admonished that:

This Court has repeatedly held that when ruling on a motion for preliminary injunction, “[a] key factor is the haste with which the moving party seeks injunctive relief.”

Op. ¶43 (emphasis added).

Brady was also hindered in his argument that he was facing imminent irreparable harm by his previous decision to ask the court to cancel a previously scheduled hearing on a motion for injunctive relief based on his desire to file an Amended Complaint. Op. ¶23, 42.

if you are a member of a board of directors of a corporation, a derivative action can be a pesky thing. You have a disgruntled shareholder demanding that the corporation file a lawsuit (probably against a fellow director or an officer of the corporation) which you believe to be unwarranted.

What can you do to head off would you believe to be an unwarranted lawsuit? You can ignore the demand, but after 90 days the shareholder basically has a green light to proceed on his own with the lawsuit. N.C. Gen. Stat. §55-7-42(2).

A safer option is to ask the Court to appoint a Special Litigation Committee (or a “panel of one or more individuals”) to investigate the validity of the claim. The derivative action statute says that:

N.C. Gen. Stat. §55A-7-40(c).

The corporation did exactly that in Becker v. Bridges Experience, Inc., 2026 NCBC Order 31 (Earp, J.). The corporation involved, Bridges Experience, asked the court to appoint Mr. Sam Duffort to investigate the derivative claims and to stay the corporation's deadline to answer or otherwise respond to the complaint until 30 days after the special committees determination.” Op. ¶4.

The Court determined Mr. Duffort to be independent and appointed him to investigate the claims. He thereafter “filed a 108-page report in which he concluded that maintaining Plaintiffs’ derivative claims would not be in the company’s best interest..” Op. ¶9.

That was not the end of Plaintiffs’ efforts to pursue their derivative claims. The derivative action statute provides pursuers of derivative claims with the right to challenge the determination of a special litigation committee or a Panel appointed by the Court. N.C. Gen. Stat. §55-7-44(d). In order to do so, the plaintiff must “allege with particularity facts establishing that the requirements of subsection (a) of this section have not been met.”

Note: North Carolina's derivative action statute was amended effective October 2025. Some of the links to the General Statutes in my discussion of this case are no longer in effect. Here is the full text of North Carolina's amended statute regarding derivative actions (you’ll have to scroll down to page 15 of that 18 page attachment to get to G.S. §55-7-44, sorry).

This matter was before Judge Earp on Plaintiffs’ motion to be allowed 90 days to conduct discovery in order to:

Op. ¶14. The statute does provide the right to challenge the determination of a special committee, but it says that “the plaintiff shall allege with particularity facts establishing that the requirements of subsection (a) of this section have not been met.” Those requirements are that the investigation was made in good faith, after conducting a reasonable inquiry. and a determination that the maintenance of the derivative proceeding is not in the best interest of the corporation.

Judge Earp recognize that" there could well be cases in which would be appropriate” to allow discovery directed to the issues of independence, good faith, and the reasonableness of the inquiry, but ultimately found that the plaintiffs and not alleged the basis for their discovery with the to clarity required by the statute.

When is a Special Committee Inquiry “Reasonable”?

Judge Earp did provide some guideposts for determining the reasonableness of a Special Litigation Committee inquiry. She said that courts had “examined factors such as ‘whether the committee engaged independent counsel to assist in the investigation’ and ‘whether the committee reviewed the testimony of or interviewed directors, officers, and employees.’ ” Op. ¶29.

Mr. Duffort had retained an “experienced law firm” to provide legal counsel and assistance with his investigation and report. He had also interviewed multiple shareholders and employees of the company. As to Plaintiffs’ complaint that other individuals should have been interviewed, Judge Earp said that “[t]he court can find no requirement in the statute that [an independent committee] must waste time and money conducting redundant interviews.” Op. ¶36 (quoting Madvig v. Gaither, 461 F. Supp. 2d 408 (W.D.N.C. 2006).

Good Faith

In determining whether a special committee has acted in "good faith,” Judge Earp said that “a court is to look to ‘the spirit and sincerity with which the investigation was conducted, rather than the reasonableness of its procedures [or] the basis for its conclusions.’ ” Op. ¶39 (quoting Borchardt v. King, No. 1:10CV261, 2011 U.S. Dist. LEXIS 158615, at *34-35 (M.D.N.C. May 4, 2011)

She found no reason to conclude that Mr. Duffort had not acted "honestly, conscientiously, fairly, and with undivided loyalty to the corporation. Op ¶39.

Independence

Plaintiffs were a bit late in challenging the independence of Mr. Duffort. They had not objected to his appointment to the special committee and they did not contest his independence until following their Motion for discovery. Judge Earp said that there was "no convincing evidence before the Court Mr. Duffort was not independent Op. ¶43”

One thing that I know for sure about Judge Houston is that he does not like out of state lawyers appearing and handling Motions in his courtroom or even signing off on pleadings in cases he is handling without first being properly admitted pro hac vice. He issued a strong statement on that subject in February, in Lexington Ins. Co. v. State of N.C., 2026 NCBC Order 3 (Houston, J.), and he amplified it more recently, in Anderson v. Triad Radiology Assocs., PLLC, 2026 NCBC Order 34.

In the Lexington case, Judge Houston said that unadmitted attorneys should not even allow their names to appear on a document filed with the court. He also condemned the device of using the words “pro hac vice forthcoming.”

He said that acting in a North Carolina case without being properly admitted pro hac vice” may result in sanctions and denial of any eventual pro hac vice application, in the Court’s discretion, as well as lead to criminal penalties. Lexington ¶12.

In the Triad Radiology case, Judge Houston was faced with a motion to have an Oklahoma lawyer appointed as interim lead counsel in a class action. That attorney had not moved for pro hac vice admission, but Judge Houston said that “[c[ommon sense dictates that attorneys who are not admitted to practice before the Court should not be designated as lead counsel for a putative class, even on an interim basis. Op. ¶54.

He saved his harshest words, however, for a North Carolina licensed attorney applying to be co-interim lead counsel who had made multiple filings in the case together with out-of-state attorneys who had not been admitted pro hac. He said of her:

Op. 56. Ouch! It is worth mentioning that Attorney X has an outstanding bio detailing her experience as lead counsel in class actions. Judge Houston nevertheless denied her motion to be appointed interim lead counsel.