After a six-day jury trial including evidence of “no show” jobs, questionable “friends and family” payroll slots, and allegations of fraud and embezzlement, a Mecklenburg County jury returned a $3-million-plus verdict for the plaintiffs in Vanguard Pai Lung, LLC v. Moody, 2023 NCBC 44. But in deciding a JNOV motion, the Business Court focused mostly on what didn’t happen at trial.
The disputes centered on the management and operations of Vanguard Pai Lung, LLC’s business as a manufacturer and seller of high-speed circular knitting machines. Vanguard alleged that its former president and CEO, William Moody, had used his position “to carry out a long-running scheme of self-dealing and other misconduct designed to benefit himself, his family, and friends.” Id. ¶ 3. The jury considered 36 submitted issues and sided with plaintiffs, making significant awards for fraud, embezzlement, and constructive fraud against Moody, as well as additional sums against companies he controlled that the jury found were his alter egos. Id. ¶ 11.
Judge Conrad observed that a JNOV moving party “bears a heavy burden,” and that it is a carefully constrained one, at that, because such a motion “is essentially a renewal of an earlier motion for directed verdict.” Id. ¶¶ 15-16. As the Court noted:
“[T]o have standing after the verdict to move for JNOV, a party must have made a directed verdict motion at trial on the specific issue which is the basis of the JNOV.”
Id. ¶ 15, citing Plasma Ctr.s of Am., LLC v. Talecris Plasma Res., Inc., 222 N.C. App. 83, 87 (2012). Even where a JNOV motion navigates these procedural guideposts, the Court reminded that it should be denied where there is “more than a scintilla of evidence” to support the verdict. Id. ¶ 16, citing Morris v. Scenera Rsch., LLC, 368 N.C. 857, 861 (2016).
The Court emphasized that the “renewal” standard – doing the same thing over and hoping for a different result – was critical. In denying JNOV on the jury’s fraud verdict, for instance, the Court found the defendants hadn’t adequately preserved their argument about the underlying value of machinery contributed to the company where its directed verdict motion only addressed alleged representations about agreeing to have those items appraised. Id. ¶¶ 19-20. The Court similarly rejected JNOV on the jury’s conversion award where defendants’ motion went “far beyond what Moody raised at trial” in his directed verdict motion. Id. ¶ 27.
The Court did grant a motion to unseat the jury’s Chapter 75 decision, ostensibly based on evidence that Moody shrouded a “self-dealing lease agreement” he executed on behalf of Vanguard, on the one hand, and a company he controlled, on the other. Defendants challenged the jury’s verdict on grounds that the activity was not “in or affecting commerce” (N.C.G.S. § 75-1.1) because it didn’t reflect business relationships undertaken “with other market participants.” Id. ¶¶ 37-38.
Judge Conrad agreed, consistent with the Business Court’s now-regular admonitions about Chapter 75 claims based on intra-company interactions that can’t fairly be said to be involving other market actors. We’ve written about these issues here and here.
When conduct is internal to a single market actor, as opposed to involving another, continues to be a case-by-case analysis with thorny features. Here, the Court found that a lease Moody caused Vanguard to enter with an outside entity was actually an “interaction among the principals of Vanguard” because the other party was merely an alter ego of Moody. Thus, as the Court put it, “Moody used the entity to extract cash from Vanguard while concealing it from Pai Lung and his fellow managers” such that is was tantamount to Moody cutting a Vanguard check to himself. Id. ¶¶ 39-41.
- The framing and execution of motions for directed verdict takes on added importance because of the role they take in defining the scope of a viable JNOV motion.
- The Court adds an interesting fact pattern to the list of scenarios it has found constitute activity internal to a single market actor. Here, Vanguard conducted business through a lease with another market actor but could not avail itself of Chapter 75 because, unknown to it, the company was actually doing business with an entity later determined to be the alter ego of one of its own officials.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.