Can you file a Motion for Summary Judgment too soon? The Plaintiffs in Wright v. LoRusso, 2023 NCBC 34 did exactly that, and were called out by Business Court Judge Conrad for violating Business Court Rules.
The Plaintiffs, members of an LLC called Cinch.Skirt, alleged that Defendant LoRusso, the majority member of the LLC, had improperly distributed cash from the LLC to herself. This alleged misconduct formed the basis for a dozen direct and derivative claims against LoRusso.
Plaintiffs filed a motion for partial summary judgment as to one of the twelve claims. This claim was for a declaratory judgment that LoRusso’s alleged improper distributions triggered a buy-sell event under the LLC’s Operating Agreement.
Judge Conrad outlined a number of defects in the Motion. First, the Motion had a timing problem, being filed before the close of discovery.
He said:
Courts rarely enter summary judgment before the end of discovery. A basic premise of modern civil litigation is that all parties deserve a full and fair opportunity to pursue discovery that is germane to the dispute. A motion for summary judgment is premature “when discovery procedures, which might lead to the production of evidence relevant to the motion, are still pending and the party seeking discovery has not been dilatory in doing so.”
Id. at ¶3 (quoting Conover v. Newton, 297 N.C. 506, 512 (1979))(emphasis added).
Another stumbling block for the Plaintiffs lay in their status as Plaintiffs. As such, they carried the burden of proof on their Motion. Judge Conrad stated that courts rarely “enter summary judgment in favor of the party having the burden of proof.” Op. ¶4 (quoting Blackwell v. Massey, 69 N.C. App. 240, 243 (1984)). All that the Plaintiffs offered were their own affidavits and an unsworn letter from an expert witness. The expert witness said that the Defendant had received more than $100,00 in excess distributions. The Court said that the letter was “unsworn, inadmissible, and cannot be considered for summary judgment.” Op. ¶6. As for the Plaintiffs’ affidavits, they said that the Defendant had improperly distributed LLC funds to herself, but they said that they did not know the “amounts or dates” of the payments. The Defendant, disputed this via her own affidavit stating that she had received only legitimate compensation.
This was inadequate to carry Plaintiffs’ burden of proof. Not only did they have to establish that there were no genuine issues of material fact, they also had to show that there were “no gaps in their proof; that no inferences inconsistent with his recovery arise from the evidence; and that there is no standard that must be applied to the facts by the jury.” Op. ¶4. Judge Conrad said that “they simply had not put forward the kind of airtight case that could support entry of summary judgment.” Op. ¶5. He said that “cross-examination will be essential here.” Op. ¶7.
The Plaintiffs also drew criticism from Judge Conrad for attempting to solve their factual problems by filing what they referred to as a “Supplemental Brief” referencing additional evidence they learned during discovery after the Motion had already been filed. The Judge refused to consider the additional material, stating that “[t]hese new matters, if anything, confirm that the motion was premature. The Court declines to consider the reply brief and the untimely arguments and evidence within it. See BCR 7.7 (‘[T]he Court may decline to consider issues or arguments raised by the moving party for the first time in a reply brief.’).” Op. ¶9.
The denial of the deficient motion was not the only criticism that Judge Conrad levelled at the Plaintiffs. In an Order entered the same day as the Opinion, Judge Conrad pointed to prior Business Court Rule violations by the Plaintiffs. He said “the Plaintiffs have failed to comply with procedural rules throughout this case, wasting judicial resources and unnecessarily prolonging the litigation.” Order ¶5. The newest Rule violation was of BCR 7.5 and 7.8. Plaintiffs had violated BCR 7.8 by filing summary judgment briefs of more than 7,500 words and by failing to include pinpoint cites to the supporting evidence, as required by that Rule.