This is the third installment of The North Carolina Business Court Last Month. It is also the first time that is reporting on decisions from last month (February), not two months ago. Thank you again for reading.
In February 2026, the NC Business Court issued eleven Orders of Significance. This month's newsletter covers seven of them. I skipped one, Wright v. LoRusso, 2026 NCBC Order 17 (Conrad, J.), due to a complete lack of interest to me and you. It involved a pro se Plaintiff trying to renew claims that had previously been dismissed when he was represented by counsel. I also didn’t write about the three February Orders regarding a Designation to the Business Court, including Gamba v. Balcerzak, 2026 NCBC Order 20 (Robinson, C.J.); Brock v. Kyryk. 2026 NCBC Order 19 (Robinson, CJ.); and Jones v. Bull & Bear Invs. LLC, 2026 NCBC Order 18 (Robinson, CJ.).
I am not writing about designation orders because I think they are insignificant, but because there are so many that they deserve their own special treatment. I am contemplating a Special Edition of this newsletter devoted to the more than 100 orders on designation over the past several years from the Business Court. If that happens, it will happen a few months down the line. It should give you something to look forward to to keep checking in on this newsletter and not unsubscribing. If this policy aggrieves or annoys you, and might lead you to stop reading this newsletter, please address your complaints to management ([email protected])]
What I found most interesting in last month’s Orders were (1) the decision on how to properly present an application for attorneys’ fees in a settled class action (which I thought titling how not to properly apply for them), which is Lynch v. Eastern Radiologists, Inc., 2026 NCBC Order 21; if you’re a health care attorney, (2) the decision discussing the meaning of “competitive health care information, Davis v. HCA Healthcare, Inc., 2026 NCBC Order 24 (Davis, J.); and (3) if you are interested in what constitutes a “substantial right” warranting an automatic stay on an interlocutory appeal, Tanger Properties Limited Partnership v. Ace American Ins. Co., 2026 NCBC Order 16 (Davis, J.).
Table of Contents
How To Properly Apply To The Business Court For An Award Of Attorneys’ Fees In A Settled Class Action
Judge Houston’s Order in Lynch v. Eastern Radiologists, Inc., 2026 NCBC Order 21, serves as a Bible to lawyers seeking approval of a fee award after the settlement of a class action. Unfortunately for the lawyers in this case, they flubbed it almost completely.
Judge Houston’s Order in Lynch v. Eastern Radiologists, Inc., 2026 NCBC Order 21, serves as a Bible to lawyers seeking approval of a fee award after the settlement of a class action. Unfortunately for the lawyers in this case, they flubbed it almost completely.
The class action concerned a “putative data breach” by the Defendant radiologists. The consequences of this breach seemed inconsequential. Judge Houston wrote:
As counsel for all parties conceded during hearings before the Court, there is no evidence that any settlement class member has suffered any material harm from the purported data breach at issue in this case, such that the alleged harm is purely technical in nature at this point.
Order ¶4.
The settlement creates a common settlement fund of $3.2 million. The fund is estimated to yield a whopping $50.00 per class member. It also allows class members to apply for out-of-pocket losses of up to $5,000, outside of the common fund.
Against that $3.2 million fund, class action counsel sought an award of fees of $1.5 million. In a tart observation of those numbers, Judge Houston said that:
the drastic asymmetry between the amount of fees and expenses requested by class counsel and the putative recovery by class members gives the Court ample reason for concern that class counsel initiated and proceeded in this action not in a manner necessarily in the best interests of the settlement class but in a manner whereby class counsel could maximize the requested attorneys’ fees with the least amount of work.
Order ¶14.
He also observed that class counsel’s “public facing” work in the case consisted of the limited actions of (1) filing a complaint, (2) dealing with a motion to dismiss that was never heard because a settlement was reached before the motion was argued or resolved, (3) appearing in only two substantive hearings before the Court -- one on preliminary approval of the settlement and one on the final approval of the settlement. Order ¶ 14 & n.4. In other words, not much visible work to warrant $1.5 million in fees.
He followed that observation with reminder that Rule 1.5 of the North Carolina Rules of Professional Conduct says that “A lawyer shall not make an agreement for, charge, or collect an illegal or clearly excessive fee or charge or collect a clearly excessive amount for expenses.” Id.
Plaintiffs’ counsel attempted to justify their clearly excessive (to me) application for fees by relying on a single Declaration from one of the attorneys asserting “Plaintiffs’ counsel have ‘accrued a total lodestar of $972,391.70’ in fees through 25 September 2025.” Order ¶7.
A "lodestar," if you are not familiar with the term, is "a method of computing attorneys’ fees whereby a trial court must multiply the number of hours reasonably spent by trial counsel by a reasonable hourly rate." (from Wikipedia).
The Declaration setting forth the purported lodestar amount didn’t reference “the specific hourly rates for individual attorneys, description or itemization of the particular work performed by any individual attorney, description or itemization of the amount of time devoted by any specific attorney to a particular task, or any other non-conclusory evidence justifying an award of fees.” Order ¶9.
The attorneys also attempted to “pump up” the value of settlement by claiming that they had obtained a bulk discount for class members for membership in something called CyEx Medical Shield, a monitoring service which claims to “protect sensitive medical information with comprehensive monitoring and alerts.” CyEx supposedly charges $179 per person for a membership. Class counsel valued this membership, based on the more than 800,000 class members, at more than $1.5 million dollars (Order ¶11), although they had paid only $50,000 to obtain it. Judge Houston also noted that it was undisputed that the vast majority of the class would not use the supposed benefit and would not otherwise benefit from it.
Judge Houston did not deny the the application outright, but instead ordered class counsel to provide substantial additional information in support of their request, including:
· Attorney by attorney information showing the effective hourly rates and the hours worked with a specific description of the services performed;
· evidence showing that the hourly rates charged were consistent with standard market rates for similarly situated attorneys handling similar matters or that the rates are otherwise reasonable;
reasonable and adequate evidence supporting and justifying Plaintiffs’ lodestar calculations; and
detailed information substantiating the reasonableness and recoverability of the costs sought by Plaintiffs (they were claimed to be $27,934.06). He chided class counsel for not submitting a Bill of Costs (AOC-CV-382) as he had previously requested.
Order ¶19(a)-(e).
The Court also took issue with the Plaintiffs’ long delay in identifying a cy pres recipient.
Reading between the lines of this Order, Judge Houston was obviously tired with this fee application. He ordered, sua sponte, that the determination of fees should be referred to a Referee. The Referee? Former Business Court Judge Gregory McGuire. He will be paid $425.00 per hour for his work. Referees don’t have to write Opinions or Orders, so there is no telling how (Former) Business Court Judge McGuire might slice and dice this application.
Second Bite At Business Court Designation Fails
In Fortune Brands Innovations, Inc. v. Bleser, 2026 NCBC Order 13 (Robinson, CJ.), the Business Court rejected the second attempt to designate the case to the Court.
In its first go-round, Judge Robinson denied the Notice of Designation for being untimely. In that Order (not deemed “significant”) by the Court, the Plaintiff had not filed its Notice of Designation “contemporaneously with the filing of the complaint” as required by N.C.G.S. §7A-45.4(d)(1). That NOD was filed only one day after the filing of the Complaint.
Regardless of whether your personal definition of “contemporaneous” is “around the same time,” (like mine would be) that wasn’t the first time that the Business Court has gigged a plaintiff for being a day late with its Notice of Designation. See, e.g., BITCO Gen. Ins. Corp., 2024 NCBC LEXIS 42 (determining designation was improper when notice of designation was filed one (1) day after filing of the complaint).”
At some point after the denial of Plaintiff’s NOD, the Defendant decided that it really wanted to have the claims against it heard in the Business Court. [It had not objected to the Plaintiff’s first effort at Designation].
But this time, it was the Defendant, not the Plaintiff, who was a day late (barely). He filed his NOD in a timely way, but failed to serve it a copy of the Notice “contemporaneously . . . by email to the Chief Justice of the Supreme Court for approval of the designation of the action as a mandatory complex business case,” as required by N.C.G.S. sec. 7A-45.4(c).
How “un”contemporaneous was it? The email was sent to the Chief Justice after 5:00 p.m. on the same day that the NOD was filed. Per BCR 3.6, that was considered filed the next day (If a document is due on a date certain, then the document must be filed by 5:00 p.m. Eastern Time on that date, unless the Court orders otherwise.)
You Can’t Take a Voluntary Dismissal of a Derivative Action Without the Consent of the Court
In Brock v. Kyryk, 2026 NCBC Order 14 (Houston, J.), Plaintiff had filed what it denominated as a derivative action under the Nonprofit Corporation Act (N.C.G.S. Chapter 55A). He later filed a Voluntary Dismissal Without Prejudice purporting to dismiss all the claims he had asserted.
Not so fast, said Judge Houston. The relevant statute says that a derivative action “shall not be discontinued, dismissed, compromised, or settle[d] without the approval of the court.” N.C. Gen. Stat. §55A-7-40(d).
Judge Houston ruled that the dismissal was “impermissible and ineffective under Rule 41 of the North Carolina Rules of Civil Procedure.” Order ¶6. He struck the notice of voluntary dismissal and ordered the action to be administratively reopened.
You might be wondering (as I was) why a derivative action is subject to restrictions over a voluntary dismissal that do not apply to other lawsuits involving corporations. The answer is that a derivative action is its own special breed of lawsuit. It is not a direct action, like a shareholder suing a corporation for personal injury to him or her. It is brought by a shareholder on behalf of the corporation. The claim belongs to the corporation, and any damages or other relief go to the corporation. The requirement of court approval protects the corporation and the non-participating shareholders from collusive or unfair dismissals.
Stay on Appeal: Substantial Rights And Choice of Law
In Tanger Properties Limited Partnership v. Ace American Ins. Co., 2026 NCBC Order 16 (Davis, J.), the Defendant insurance companies (Ace and Liberty Mutual) sought a stay of all proceedings in the case while they appealed the Business Court’s denial of their Motion to Dismiss. You can find that 2025 Opinion (2025 NCBC 66) here.
The underlying case concerns Ace and Liberty’s denial of coverage for plaintiff Tanger’s claim for damages arising from loss of business at its shopping centers due to the COVID-19 pandemic.
The insurance policies had no choice of law provision. They also didn’t contain an exclusion for losses caused by a virus. Plaintiff Tanger seems to have a pretty good claim if North Carolina law applies. This is because the North Carolina Supreme Court held in in North State Deli, LLC v. Cincinnati Insurance Co., 386 N.C. 733 (2024) that under an all-risk policy with no virus exclusion, “a reasonable person in the position of the insured would understand the [businesses’] policies to include coverage for business income lost when virus-related government orders deprived the policyholder [businesses] of their ability to physically use and physically operate property at their insured business premises.” Id. at 746.
Order ¶9.
The Defendant insurers had argued heartily at the Motion to Dismiss stage that North Carolina law should not apply. The choice of law issue was critical to Plaintiff’s claim and the Defendants’ defense, because “North Carolina is the only jurisdiction across the country whose courts have interpreted similar policy provisions as providing coverage for the type of claims asserted by Tanger. Op. ¶34 (emphasis added).
Judge Davis ruled in his Opinion denying the motion to dismiss that North Carolina law applied to Plaintiff’s claims.
The Defendants appealed Judge Davis’ Opinion, arguing that the more favorable law of Georgia applied, as they had at the Motion to Dismiss stage. (A federal court in Georgia has ruled that there is no coverage for restaurants forced to close as a result of COVID) Henry’s Louisiana Grill, Inc. et al. v. Allied Ins. Co. of Am., No. 1:20-cv-2939-TWT (N.D. Ga. Oct. 6, 2020). They also moved for the entry of an automatic stay of all proceedings in the Business Court during the pendency of the appeal pursuant to G. S. §1 – 294.
If you read last month’s Newsletter (and the case of WP Church, LLC v. Whalen, 2026 NCBC 4), you’ll be aware that section 1 – 294:
stays all further proceedings in the court below upon the judgment appealed from, or upon the matter embraced therein. However, this rule is not without exceptions. When a party appeals from a non-appealable interlocutory order, the appeal does not deprive the trial court of jurisdiction and thus the court may properly proceed.
Order ¶19.
Since the choice of law ruling was an interlocutory order which didn’t fully dispose of the case, the “general rule” was that it wasn’t immediately appealable. That meant that the automatic stay of section 1 – 294 did not kick in.
The Defendants argued that the choice of law ruling affected a “substantial right,” thereby allowing their appeal. [N.C.G.S. Sec.7A-27(a)(3)(a) provides that a party can appeal an interlocutory Order from the Business Court if it affects a substantial right.
Judge Davis disagreed that his choice of law ruling had affected a "substantial right.” He noted that our appellate courts have never held that a choice-of-more ruling affects a substantial right.” Order Par. 31. He observed that
a substantial right is one that “is effectively lost if a case is erroneously permitted to go to trial,” Mitchell v. Forsyth, 472 U.S. 511, 526 (1985), whereas a defense can be “fully and adequately protected” on appeal from a final judgment.
Order ¶31. Judge Davis said that since the Defendant Insurers would still be able to assert the choice of law defense on an appeal from a final judgment, a substantial right was not affected. Order ¶32.
A Familial Relationship Does Not Create a Fiduciary Duty
The question whether the relationship between an uncle and his nephew gives rise to a fiduciary duty came before the Business Court in 2026 NCBC Order 24 (Davis, J.).
The issue arose in the context of the Plaintiff's Motion to Amend its Complaint. Defendant Shackelford, a former employee of the plaintiff insurance marketing organization, was under fire in the original complaint for allegedly poaching the Plaintiff’s “Agents, employees, and clients, and [for] misappropriat[ing}” Plaintiff’s confidential information. Order ¶6.
The proposed amendment sought to add a claim against defendant Shackelford for breach of fiduciary duty. Judge Davis found the proposed amendment to be futile, and denied the Motion to Amend.
Plaintiff offered several justifications for why Defendant Shackelford owed it a fiduciary duty. Judge Davis rejected all of them:
First, the Defendant’s status as a former employee of the Plaintiff was not enough. Judge Davis observed that “[a]s a general proposition, ‘the relation of employer and employee is not one of those regarded as confidential’ so as to give rise to a fiduciary relationship.” Order Par. 28
Next, if the Defendant had been an officer of the plaintiff, that would have been enough to establish a fiduciary relationship. Judge Davis observed that “Under North Carolina law, a corporate officer owes a fiduciary duty to the company.” Order ¶29. (citing Green v. Freeman, 367 N.C. 136, 141 (2013) (citing N.C. Gen. Stat. § 55-8-30). But the Plaintiff stepped on itself on this argument by failing to identify Defendant Shackelford as an officer of the company in response to discovery requests.
Finally, Judge Davis rejected the argument that the Defendant’s status as the nephew of the president of the plaintiff was sufficient to create a fiduciary duty. He stated that “[I]t has long been established that the finding of a familial relationship alone does not create a fiduciary relationship.” Order ¶33.
Motion For Reconsideration Granted On A Motion To Seal Involving “Competitive Health Care Information”
It seems to me that Motions to Seal are rarely granted by the Business Court and that Motions for Reconsideration are equally rarely granted. But in Davis v. HCA Healthcare, Inc., 2026 NCBC Order 24 (Davis, J.), both of those rarities happened concurrently.
The North Carolina Rules of Civil Procedure do not specifically refer to a motion to reconsider. The motion finds its roots in Rule 54(b), which says that: any “order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liability of all the parties.”
The Business Court has applied the following standard in considering a motion for reconsideration: “motions for reconsideration will only be granted based on ‘(1) the discovery of new evidence, (2) an intervening development or change in the controlling law, or (3) the need to correct a clear error or prevent manifest injustice.’” Order Par 25 (quoting Rossabi Law PLLC v. Greater Greensboro Ent. Group, LLC, 2021 NCBC 64 (Robinson, J.)
The motion for Reconsideration was granted on the basis of a “change in the controlling law.” And here is where the case gets very dull, except possibly to healthcare attorneys. The “controlling law” applicable to a previously rejected Motion to Seal here lay in the definition of “competitive health care information as defined in G.S. §131E – 97.3. That statute provides that “competitive health care information” is “confidential and not a public record under Chapter 132 of the General Statutes.”
The statute at the time gave no specific definition to the term “competitive health care information” other than stating that it was ”information relating to competitive health care activities by or on behalf of hospitals and public hospital authorities.” [Well done, General Assembly, providing such pitiful guidance].
In granting the original Motion to Seal, Judge Davis relied on an Opinion from the North Carolina Court of Appeals in Carter-Hubbard Publishing Co. v. WRMC Hosp. Operating Corp., 178 N.C. App. 621 (2006). There, with the absence of any guidance from the General Assembly, the COA refused to give a broad interpretation to ”competitive health care information” It interpreted that term (based on a definition from a college dictionary” to be limited to the “financial terms” of a contract and any “health care information directly related to financial terms in a contract.”
The next year the General Assembly amended the statute to provide somewhat of a definition. Section131E-97.3 now says that:
(a) For the purposes of this section, competitive health care information means information relating to competitive health care activities by or on behalf of hospitals and public hospital authorities.
Order ¶33.
Against this stultifying backdrop, Judge Davis vacated his previous order dealing with Defendants’ motion to seal and moved on to consider the sealability of the documents at issue anew.
What is the competitive health care information at issue in this case that the parties are fighting so hard over? The Plaintiffs in this not yet certified class action are North Carolina residents alleging that defendant healthcare providers have engaged “in anticompetitive acts regarding provision of inpatient and outpatient services Western North Carolina.” Order ¶3.
The documents in question are for the most part the “managed care contracts” between the Defendants and commercial health insurance providers (like Aetna, Blue Cross, and Cigna). If you are unaware of what a managed care contract is, one healthcare provider defines it as “an agreement between a medical facility and an insurance company to provide patient care while the latter covers the cost of these services.” (from peregrinehealth.com). If you are ever told that a doctor who you want to see is not in your “network,” your insurance is subject to a managed care contract. The managed care contract defines the rates, terms, and conditions under which providers deliver services to patients.
The Defendants asked Judge Davis to permanently seal in their entirety more than two hundred documents constituting the managed care contracts and other documents referring to them. They claimed that every word in the documents they requested be sealed related to competitive health care activities and “thus constitutes ‘competitive health care information’ under N.C.G.S. § 131E-97.3(a).” Order ¶38.
Judge Davis disagreed. He said
N.C.G.S. § 131E-97.3 does not provide that the entirety of managed care contracts between hospitals and insurance providers or any information concerning such contracts must always be treated as confidential.
Order ¶42.
He held that many of the documents at issue contained “generalized information. . . that otherwise has little to no ‘competitive’ value, and information that is publicly ascertainable.” Order ¶44.
He also rejected the argument that if a document is not subject to North Carolina's Public Records Act that it must automatically be sealed. Order ¶47. That led him into the necessary balancing of the parties’ interests in keeping information secret against the public's right to open access to court records.” Order ¶48.
Ultimately, Judge Davis agreed that some of the documents in question might contain trade secret information. He said, however, that this did not warrant sealing the documents completely. He said:
because other portions of the information contained in the managed care contracts appear to have no independent economic value or are otherwise publicly ascertainable, the Court disagrees with the HCA Defendants’ assertion that each of the managed care contracts are in-and-of themselves trade secrets in their entirety.
Order ¶56.
He directed the parties to confer and attempt to reach an agreement to limit the number of documents for which sealing was sought and the specific portions of those documents for which sealing was appropriate. He set a deadline of March 20, 2026 for a joint status report. In the event that the parties are unable to reach an agreement, Judge Davis reserve the right to refer the sealing issue to a referee. He didn’t name the potential referee. Perhaps former Business Court Judge McGuire will have more time on his hands for this job after accomplishing the task set before him by Judge Davis in Lynch v. Eastern Radiologists, Inc. (discussed above).