Piazza v. Kirkbride
827 S.E.2d 479
N.C.2019Background
- Neogence, a startup developing an augmented-reality app (Mirascape), solicited angel funding in 2010 after a sales meeting with McGarry Bowen/Verizon; directors Rice and Brannon and officer Cummings communicated opportunities to investors Piazza and Lampuri.
- Piazza and Lampuri invested after communications from Neogence personnel; Mirascape never functioned and Neogence failed, leading to suit under N.C.G.S. § 78A-56(a)(2) (selling securities by means of materially false or misleading statements).
- At trial the jury found Brannon (outside director) liable to both plaintiffs for materially false/misleading statements and answered that he did not meet the statutory "reasonable care" defense; the jury exonerated Rice on the materially false/misleading issue.
- Defendant Brannon moved for JNOV/new trial arguing (1) the verdicts were impermissibly inconsistent (Rice acquitted, Brannon liable for substantially similar statements), (2) he was entitled to a director "safe harbor" instruction (N.C.G.S. § 55-8-30), and (3) § 78A-56(a)(2) liability requires ownership or scienter; trial court denied relief; Court of Appeals affirmed; Supreme Court granted review on limited issues.
- The Supreme Court (majority) modified and affirmed the Court of Appeals: it upheld denial of new trial for inconsistent verdicts, held Brannon failed to preserve the safe-harbor jury-instruction claim adequately, and rejected Brannon's invited-error waiver on his primary-liability/scienter argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether verdicts were impermissibly inconsistent (Brannon liable; Rice not) | Plaintiffs: jury could find different defendants differently liable based on the evidence about what each said and how they presented it | Brannon: statements were essentially identical; inconsistent results require new trial | Court: Denial of new trial not an abuse of discretion — record supported a rational basis to treat Brannon and Rice differently (differences in wording, frequency, context, and communications) |
| Whether director "safe harbor" (N.C.G.S. § 55-8-30(b)) required a specific jury instruction | Plaintiffs: the trial instructions covered the statutory "reasonable care" defense and parties agreed language; no safe-harbor instruction required | Brannon: as a director who relied on officers (Cummings), he was entitled to the safe-harbor instruction; trial court erred in refusing | Court: Brannon failed to preserve a proper written request for that specific instruction; safe-harbor was a subordinate feature and the court’s reasonable-care instructions were sufficient for preservation purposes; issue not preserved for appellate review |
| Whether § 78A-56(a)(2) requires the defendant to be seller/owner or to have acted with scienter | Plaintiffs: statute imposes liability on anyone who "offers or sells" securities by false/misleading statements; the jury instruction (agreed request) was correct | Brannon: statute should be read to require ownership or scienter (or liability under other provisions), and the instruction was legally incorrect | Court: Brannon invited the instruction he now challenges (he requested the language at trial); invited error/waiver bars relief — Court declined to decide the substantive statutory construction issues |
| Whether trial court abused discretion in attorneys' fees award tied to securities-act judgment | Plaintiffs: fees appropriate after judgment against Brannon | Brannon: fees contingent on trial errors that would entitle to new trial | Court: Because Brannon was not entitled to a new trial on reviewed issues, no separate review of fee award was necessary and fees stand |
Key Cases Cited
- Selph v. Selph, 267 N.C. 635 (N.C. 1966) (trial judge has discretion to set aside verdicts; appellate review of that discretion is narrow)
- TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (U.S. 1976) (standard for materiality: omission is material if disclosure would significantly alter the total mix of information available to reasonable investor)
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (construction of Section 12(2) and discussion of who qualifies as a seller and the typical presence of a personal financial benefit)
- White v. White, 312 N.C. 770 (N.C. 1985) (abuse of discretion standard for setting aside trial court decisions)
- Minor v. Minor, 366 N.C. 526 (N.C. 2013) (when a requested instruction is correct and supported by evidence, trial court must give it in substance)
- Latta v. Rainey, 202 N.C. App. 587 (N.C. Ct. App. 2010) (materiality defined by whether misrepresentation would have influenced party's decision)