McKinnon v. CV Industries, Inc.
228 N.C. App. 190
| N.C. Ct. App. | 2013Background
- McKinnon was a long‑time CVI executive; his severance Plan A promised ‘‘shadow equity’’ benefits if he disengaged from continuous competition with CVI and CVI’s ESOP stock exceeded its 12/31/1999 price.
- McKinnon resigned in 2001 to form a venture with Frank Land after receiving a 20 Nov 2001 letter from CVI allegedly releasing him from a covenant not to acquire Land’s patents.
- In 2008 McKinnon notified CVI he would withdraw from competition and seek Plan A benefits; CVI refused, asserting McKinnon had ceased competition earlier when the stock price was below the trigger value.
- McKinnon sued (breach, fraud, Chapter 75 unfair/deceptive practices); CVI counterclaimed for breach based on the covenant but promptly withdrew the counterclaim after McKinnon’s reply referenced the 2001 letter.
- Judge Tennille granted summary judgment for CVI; this Court affirmed in McKinnon I; the Supreme Court denied discretionary review.
- Postjudgment, both parties sought attorneys’ fees and costs. Judge Gale denied McKinnon’s fee request, awarded CVI $40,000 in fees (for post‑SJ appellate work) and $16,798.36 in costs; both parties appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CVI’s counterclaim warranted Rule 11 sanctions (fees to McKinnon) | CVI knew or should have known of the 20 Nov 2001 release and thus its counterclaim was frivolous and abusive | CVI asserted it conducted a reasonable factual inquiry and did not know of the letter when it filed the counterclaim; it promptly withdrew the claim after learning of the letter | Court affirmed: no Rule 11 sanctions; counterclaim was factually and legally sufficient and not filed for improper purpose |
| Whether McKinnon preserved statutory fee claims under § 6‑21.5 and § 6‑21.5 (and § 6‑21.5 related arguments) | McKinnon sought fees under Rule 11, § 6‑21.5, and § 6‑21.5 (and § 6‑21.5 cited) | CVI opposed | Court deemed McKinnon’s statutory arguments abandoned for lack of developed briefing; denial affirmed |
| Whether § 6‑21.5 authorized CVI’s fee award for appellate fees (fees after trial SJ) | McKinnon: no fees should be awarded | CVI: entitled to fees incurred after summary judgment for continued litigation | Reversed as to § 6‑21.5: statute applies only to trial‑level fees; cannot support award of appellate fees |
| Whether § 75‑16.1 supports CVI’s fee award and whether amount is reasonable | McKinnon: trial court erred in awarding any fees; his Chapter 75 claim was not frivolous/malicious | CVI: fees are appropriate because plaintiff knew or should have known Chapter 75 claim was frivolous and continued prosecution after SJ | Remanded: § 75‑16.1 may authorize fees for appellate and trial stages, but trial court failed to make required specific findings that McKinnon knew/should have known claim was frivolous and failed to make required detailed findings to support reasonableness of the $40,000 award |
| Whether the costs award calculation was correct | McKinnon: errors in calculation | CVI: sought full costs awarded | Remanded: court miscalculated — listed allowable costs correctly but then double‑counted; trial court must correct calculation on remand |
Key Cases Cited
- McKinnon v. CV Indus., Inc., 713 S.E.2d 495 (N.C. App. 2011) (appellate decision affirming summary judgment on competition and Plan A benefits)
- Turner v. Duke Univ., 381 S.E.2d 706 (N.C. 1989) (standard of appellate review for Rule 11 sanctions under de novo review framework)
- Credigy Receivables, Inc. v. Whittington, 689 S.E.2d 889 (N.C. App. 2010) (§ 6‑21.5 review—trial pleadings must lack any justiciable issue or show continued litigation after notice)
- Hill v. Hill, 622 S.E.2d 503 (N.C. App. 2005) (§ 6‑21.5 is confined to the trial division; appellate fees are not recoverable under it)
- Shepard v. Bonita Vista Prop., L.P., 664 S.E.2d 388 (N.C. App. 2008) (§ 75‑16.1 allows fee awards for services at all stages; trial court must make detailed findings on reasonableness)
- Blankenship v. Town & Country Ford, Inc., 622 S.E.2d 638 (N.C. App. 2005) (trial court discretion on § 75‑16.1 awards; specific findings required)
- Blyth v. McCrary, 646 S.E.2d 813 (N.C. App. 2007) (definitions of frivolous and malicious; failure to make required findings mandates remand)
- Printing Serv. of Greensboro, Inc. v. Am. Capital Grp., Inc., 637 S.E.2d 230 (N.C. App. 2006) (remand required where fee award lacked findings on time, customary rate, and attorney experience)