Mitchell, Brewer, Richardson, Adams, Burge & Boughman v. Brewer
254 N.C. App. 706
| N.C. Ct. App. | 2017Background
- Partners in Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC split in 2005; Plaintiffs (Adams, Boughman, Burge) formed a new firm and Defendants (Brewer, Mitchell, et al.) continued practicing together.
- Plaintiffs sued in 2006 seeking dissolution, accountings, liquidating distribution, and tort claims; defendants counterclaimed on alternative theories including that plaintiffs had withdrawn rather than caused a dissolution.
- On appeal in Mitchell I the Court of Appeals held judicial dissolution under N.C. Gen. Stat. § 57C-6-02 was required due to member deadlock and remanded for winding up and accounting.
- The trial court (on remand) entered a Reference Order dissolving the PLLC effective July 1, 2005, and appointed a Rule 53 referee to account for firm assets, especially allocation of contingent-fee matters resolved after dissolution.
- The referee issued a detailed report allocating contingent-fee value based on pre-dissolution hours and net profit; the trial court adopted the report over defendants’ objections and entered judgment against defendants.
- Plaintiffs later moved for summary judgment on remaining counterclaims; the court granted it and dismissed defendants’ counterclaims that were premised on the PLLC remaining intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of appointing a referee and scope of reference | Reference and accounting appropriate; Referee had discretion under Rule 53 | Reference unclear; referee exceeded scope and used improper procedures (ex parte interviews, unsworn testimony) | Affirmed: trial court acted within discretion; defendants waived procedural objections by not timely objecting to the reference and Rule 53 permits flexible procedures |
| Admissibility/recording of referee interviews and transcripts | Not required by Reference Order or Rule 53 here; parties had opportunity to depose report author | Referee erred by not taking sworn testimony or producing transcripts | Affirmed: no requirement in this case; Synco distinguished because transcript there was expected but not produced |
| Methodology for valuing contingent-fee engagements | Court’s time-based percentage-of-hours approach fairly measures pre-dissolution value | Methodology undefined/incorrect; issues should be jury questions | Affirmed: methodology was within court’s discretion; defendants waived jury demand by not objecting when reference was ordered |
| Summary judgment on counterclaims (breach of fiduciary duty, conversion, unjust enrichment, constructive trust, ultra vires) | After accounting, these defenses/counterclaims fail because they rest on premise that PLLC continued in existence | Counterclaims alleged plaintiffs remained members and owed ongoing fiduciary duties and liabilities | Affirmed: counterclaims premised on PLLC still existing conflicted with Mitchell I and the court’s dissolution; defendants failed to replead after remand and offered no triable issues |
Key Cases Cited
- Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer, 209 N.C. App. 369 705 S.E.2d 757 (N.C. Ct. App.) (mandating judicial dissolution and remanding for winding up and accounting)
- Godwin v. Clark, Godwin, Harris & Li, P.A., 40 N.C. App. 710 253 S.E.2d 598 (N.C. Ct. App.) (Rule 53 allows broad discretion in how a referee conducts an accounting)
- Rushing v. Aldridge, 214 N.C. App. 23 713 S.E.2d 566 (N.C. Ct. App.) (procedures for preserving jury trial when compulsory reference ordered)
- Synco, Inc. v. Headen, 47 N.C. App. 109 266 S.E.2d 715 (N.C. Ct. App.) (transcript requirement under Rule 53 may be waived; reversal where transcript was expected but not produced)