Wiley v. L3 Commc'ns Vertex Aerospace, LLC
251 N.C. App. 354
| N.C. Ct. App. | 2016Background
- Plaintiffs Harry Wiley and Gerald Gilman sued their former employer L3 Communications Vertex Aerospace, LLC for employment discrimination and related claims; service occurred July 17, 2014.
- L3 failed to timely respond; the clerk entered default and the trial court initially entered default judgment (Sept. 17, 2014) awarding large compensatory and punitive damages to both plaintiffs.
- L3 moved to set aside; the court vacated only the damages portion and held a jury trial on damages; the jury awarded each plaintiff substantial compensatory and $500,000 punitive damages; judgment entered Oct. 9, 2015.
- On appeal, the Court of Appeals addressed jurisdictional and procedural challenges, including (1) whether Gilman lacked standing because he failed to disclose his prepetition claims in his Chapter 13 bankruptcy, (2) whether Wiley’s arbitration agreement deprived the court of authority, (3) propriety of setting aside damages portion of default judgment, and (4) whether punitive damages were properly submitted to the jury.
- The court held Gilman lacked standing due to non-disclosure in bankruptcy and vacated his judgment; it affirmed Wiley’s compensatory damages but vacated punitive damages because the complaint failed to plead punitive relief or aggravating factors under Rule 9(k).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Gilman given pending Chapter 13 bankruptcy | Gilman continued as proper plaintiff; no challenge to standing asserted by Gilman on appeal | Gilman lacked standing because he failed to disclose his prepetition claims to the bankruptcy court, so the claims belonged to the estate | Court: Gilman lacked standing; judgment vacated for lack of subject-matter jurisdiction because claims were estate property and undisclosed in bankruptcy |
| Effect of plaintiffs’ arbitration agreement (Wiley) | Wiley proceeded in court; plaintiffs opposed arbitration defense | L3 argued the arbitration agreement stripped the court of jurisdiction and default judgment was improper | Court: Arbitration is waivable/non-jurisdictional; because L3 failed to timely invoke arbitration, court could enter default judgment; L3’s argument foreclosed by Blankenship |
| Setting aside damages portion of default judgment under Rule 60(b)(6) | Wiley argued the court abused discretion in vacating damages portion | L3 argued extraordinary circumstances justified relief: inadvertent failure to respond, large default award, and meritorious defenses | Court: Affirmed the court's discretion to set aside damages portion—large award and L3’s explanation supported relief; no abuse of discretion |
| Submission of punitive damages to jury | Plaintiffs sought punitive damages at trial (Wiley recovered punitive award) | L3 argued punitive damages were not pleaded with particularity and should not have been submitted under Rule 9(k) | Court: Vacated punitive damages award; complaint did not demand punitive damages or plead aggravating factors (fraud, malice, willful/wanton conduct) as required by Rule 9(k) |
Key Cases Cited
- Union Grove Mill. & Mfg. Co. v. Faw, 109 N.C. App. 248 (standing is jurisdictional)
- Estate of Apple ex rel. Apple v. Commercial Courier Exp., Inc., 168 N.C. App. 175 (a party without standing deprives court of subject-matter jurisdiction)
- Wilson v. Dollar Gen. Corp., 717 F.3d 337 (4th Cir.) (Chapter 13 debtor has concurrent standing with trustee but sues on behalf of the estate)
- Blankenship v. Town and Country Ford, Inc., 155 N.C. App. 161 (arbitration defense is waivable and not jurisdictional)
- Holloway v. Wachovia Bank & Trust Co., 339 N.C. 338 (North Carolina Supreme Court on pleading punitive damages prior to Rule 9(k))
- Basnight Const. Co. v. Peters & White Const. Co., 169 N.C. App. 619 (standard of review for setting aside default judgment)