Freedman v. Payne
800 S.E.2d 686
N.C. Ct. App.2017Background
- William B. Freedman and Freedman Farms sued their former criminal defense attorneys, Wayne Payne and Michael Ramos, alleging malpractice, breach of fiduciary duty, breach of contract, constructive fraud, and fraud arising out of representation in a federal Clean Water Act prosecution.
- Plaintiffs alleged defendants negotiated a secret "side‑deal" with the prosecutor promising no active prison time and no debarment from federal farm subsidies, told Freedman to keep it secret, and that Freedman falsely testified/pleaded based on those representations.
- The district court accepted a plea agreement that did not reflect the alleged side‑deal; Freedman later was resentenced and vacated a prior conviction.
- Defendants moved to dismiss; the trial court dismissed the legal malpractice claim under the in pari delicto doctrine and that dismissal was affirmed by this Court in Freedman I.
- After Freedman I, defendants moved for judgment on the pleadings on the remaining claims; the trial court granted those motions, relying on Freedman I (law of the case) and in pari delicto.
- On appeal, this Court affirmed, holding Freedman I established as law of the case that Freedman’s complaint allegations showed he was in pari delicto with defendants, barring recovery on the remaining claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether in pari delicto bars claims other than legal malpractice | Freedman argued his complaint does not establish intentional wrongdoing so in pari delicto shouldn’t bar his other tort/contract claims | Defendants argued the same factual allegations that supported dismissal of malpractice show Freedman was in pari delicto and bar all claims | Court held Freedman I established plaintiffs’ wrongdoing as law of the case; in pari delicto bars the remaining claims and dismissal affirmed |
| Whether Freedman I is binding law of the case for remaining claims | Freedman argued Freedman I addressed only malpractice and did not decide issues presented by the other claims | Defendants argued Freedman I necessarily decided that certain factual allegations showed plaintiff’s wrongdoing and that ruling binds subsequent proceedings | Court held law‑of‑the‑case applies because Freedman I decided (by necessary implication) that plaintiffs’ own wrongful conduct was established by the complaint, so that ruling controls |
| Whether differing culpability between parties defeats in pari delicto | Freedman contended his culpability was less than defendants’ so equitable defense should not apply | Defendants contended mutual fault alleged supports in pari delicto regardless of relative blame | Court rejected plaintiff’s relative‑fault argument because the complaint’s allegations show plaintiff participated in the wrongdoing, invoking the in pari delicto bar |
| Whether specific factual allegations in other counts avoid the bar | Freedman argued some claims include distinct factual elements not addressed in Freedman I | Defendants argued the key allegations relied on by Freedman I are incorporated into all counts | Court held those same allegations are part of the other counts and, under the law of the case, establish the in pari delicto bar to all claims |
Key Cases Cited
- Whiteheart v. Waller, 199 N.C. App. 281 (2009) (recognizing and explaining in pari delicto as a bar to redistributing losses among wrongdoers)
- Bean v. Detective Co., 206 N.C. 125 (1934) (illustrating the policy that courts will not assist plaintiffs who must fail because they are in pari delicto)
- Hayes v. Wilmington, 243 N.C. 525 (1956) (defining the law‑of‑the‑case doctrine and its limits—only issues actually decided or necessarily involved are binding)
- N.C.N.B. v. Virginia Carolina Builders, 307 N.C. 563 (1983) (holding a later panel may not overrule an earlier panel’s decision in the same case)
- Goldston v. State, 199 N.C. App. 618 (2009) (law of the case applies to issues decided explicitly or by necessary implication)
- CommScope Credit Union v. Butler & Burke, 790 S.E.2d 657 (2016) (standard of review for Rule 12(b)(6) and Rule 12(c) motions)
- Ragsdale v. Kennedy, 286 N.C. 130 (1974) (pleading standard: facts and permissible inferences viewed in the light most favorable to the nonmoving party)