Heard in the Court of Appeals October 22, 2014
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Shipman & Wright, LLP, by Kyle J. Nutt, for plaintiff-appellee and cross-appellants.
Vandeventer Black LLP, by David P. Ferrell and Kevin A. Rust, for defendant-appellants and cross-appellee.
McCULLOUGH, Judge. Judges CALABRIA and STEELMAN concur.
Appeal by defendants from order entered 20 December 2013 by Judge W. Allen Cobb, Jr., in New Hanover County Superior Court,
No. 12 CVS 3287 Cross-appeal by plaintiff Benjamin Supplee from order entered 31 July 2013 by Judge Phyllis M. Gorham in New Hanover County Superior Court,
No. 12 CVS 3287 Cross-appeal by Kyle J. Nutt from order entered 27 January 2014 by Judge W. Allen Cobb, Jr., in New Hanover County Superior Court,
No. 12 CVS 3287
Defendants Miller-Motte Business College, Inc. and Delta Career Education appeal the order of the trial court denying their motions for directed verdict and judgment notwithstanding the verdict; Plaintiff Benjamin Supplee cross-appeals from the order of the trial court granting defendants' summary judgment motion, in part; Plaintiff Benjamin Supplee's attorney, Mr. Kyle Nutt, appeals the trial court's order granting defendants' motion for sanctions. Based on the reasons stated herein, we affirm in part and reverse in part.
On 21 August 2012, plaintiffs Benjamin Supplee (" Supplee" ) and Mebritt Thomas (" Thomas" ) filed a complaint against defendants Miller-Motte Business College, Inc. (" MMC" ) and Delta Career Education Corporation (" DCEC" ). Plaintiffs alleged the following claims: fraud/fraud in the inducement; unfair and deceptive trade practices; negligent misrepresentation; breach of contract by MMC; and negligence.
On 29 May 2013, defendants filed a motion for summary judgment pursuant to Rule 56 of the North Carolina Rules of Civil Procedure.
On 31 July 2013, the trial court entered an order, granting defendants' motion for summary judgment in part, and denying it in part. The trial court found that there were no genuine issues of material fact on plaintiffs' claims for fraud, unfair and deceptive trade practices, negligence, and negligent misrepresentation. Defendants' motion for summary judgment on plaintiffs' breach of contract claim was denied.
Plaintiffs' trials were separated with Supplee's trial occurring first, at the 28 October 2013 civil session of New Hanover County Superior Court, Judge W. Allen Cobb, Jr. presiding.
The evidence at Supplee's trial indicated the following: Sometime after October 2009, Supplee met with MMC's dean of education, Mike Smith (" Smith" ) and expressed interest in the surgical technology (" surg tech" ) program at MMC's Wilmington, North Carolina campus. Supplee inquired about the requirements
of the surg tech program and job prospects in the field after graduation. The surg tech program was a two year program that consisted of an eighteen month class component, followed by a six month clinical component. Smith gave Supplee MMC's college catalog. Thereafter, Supplee met with Amy Brothers (" Brothers" ), an admissions representative for MMC. Supplee testified that although Brothers was aware that he wanted to apply to the surg tech program, Brothers encouraged him to apply to the health information technology (" HIT" ) program. Brothers told Supplee that he could transfer to the surg tech program if he did not like the HIT program.
During their meeting, Brothers handed Supplee a document entitled " Career Information Profile." The document asked whether Supplee had " ever been convicted of a crime." Supplee marked " no" after asking Brothers whether " a DUI count[s] because I knew it was on my record, I knew I had some issues in the past and she was like, no, you're fine."
On 10 December 2009, Supplee received an acceptance letter from the campus director of MMC and a congratulatory letter of acceptance from the career services director at MMC. On 15 December 2009, Supplee and Brothers signed an enrollment agreement for an associate degree in the HIT program. The agreement stated that Supplee's enrollment was " subject to all terms and conditions set forth in the Catalog" of MMC. The student catalog, under the heading " PROGRAM REQUIREMENTS" and " Background Checks," provided as follows:
Students applying for admission will be required to have a criminal history check. While a criminal conviction is not a per se bar to admission, [MMC] will review any applicant who has been convicted of a crime in order to determine his or her fitness for admission, and will take into consideration the following factors: the nature and gravity of the criminal conviction, the time that has passed since the conviction and/or completion of the criminal sentence, and the nature of the academic program for which the applicant has applied.
In January 2010, Supplee began his courses at MMC. On 4 April 2010, after the end of the first quarter, Supplee transferred into the surg tech program. To complete the transfer, Supplee signed an enrollment agreement on 14 April 2010, almost identical to the HIT enrollment agreement, that incorporated the terms and conditions of the catalog and stated that MMC would review a student's criminal background for admission purposes. Defendants backdated Supplee's start date in the surg tech program to 20 January 2010.
On 12 October 2010, during Supplee's first surg tech program specific class, he was given a document by defendants entitled " Background Check Statement of Disclosure" which provided as follows:
Background checks will be provided as part of the curriculum, will be held in strictest confidence and specific information will not be released to the clinical site unless specifically requested by the clinical site administrator. . . . As a student in the Surgical Technology Program, I am aware that clinical sites in which I complete my clinical rotations may require proof of a criminal background check prior to my acceptance at the clinical site.
Supplee and Cynthia Woolford (" Woolford" ), the program director of surgical technology at MMC, signed this document. Woolford testified that she reviewed the " Background Check Statement of Disclosure" with the whole class, including Supplee.
On or about 12 October 2010, Woolford provided Supplee with the " Surgical Technology Program Student Policy Manual." Under the subsection entitled " Admission," the surg tech manual stated that " [t]he college will perform a criminal background check upon admission to the program." Further, it stated that
An applicant may be denied admission to the [surg tech] program for any of the following reasons: . . . b. Conduct not in accordance with the standards of a Surgical Technologist: . . . ii. Has been convicted
of or pleaded guilty or nolo contendere to any crime which indicates that the individual is unfit or incompetent to practice surgical technology or that the individual has deceived or defrauded the public. . . . e. Due to JCAHO [Joint Commission on Accreditation of Health Organizations] requirements for Hospital & Operating Rooms, Students with a felony criminal record, larceny, or drug-related background found on the criminal background check will not be admitted to the clinical sites.
Supplee testified that he had not been advised by defendants' representatives that a criminal background check had not been conducted, but believed they had already conducted one.
At trial, Woolford testified that based on MMC's written policy, criminal background checks are " supposed to be conducted of new applicants" during the admissions process. Ned Snyder, the campus director for MMC in Wilmington and the regional vice president for MMC in North Carolina, South Carolina, and Virginia testified that MMC had the same policy, regardless of whether the applicant was applying to the HIT or the surg tech program. In addition, regardless of whether the applicant answered " no" to the question of " have you ever been convicted of crime?" on the career information profile, MMC was supposed to run a criminal background check. Woolford testified that, " if a student during admission had a criminal charge that would automatically disqualify them from clinical sites," the purpose of the criminal background check made during admission was to screen out any applicants who would not be able to complete the program. Once a student was admitted, thirty days prior to being placed at a clinical site, MMC was supposed to conduct another criminal check in order to obtain the most recent results. Woolford testified that MMC had a " responsibility to determine the type of criminal backgrounds that will prohibit students from attending [clinical] externships." However, Woolford admitted that defendants did not conduct a criminal background check on Supplee during his admissions process. Woolford also testified that Supplee did not have a criminal background check conducted prior to the time he started the surg tech program.
Around May of 2011, Supplee's class was scheduled to go to an orientation at two clinical externship sites. Woolford testified that thirty days prior to May 2011, Woolford ordered the background check of Supplee. Prior to May 2011, Woolford was not aware of any criminal background check being conducted on Supplee. A contact at a clinical externship site informed MMC that four students, including Supplee, were not permitted to attend the orientation based on the results of their criminal background checks. Supplee's criminal background check revealed the following: two felony charges of breaking and entering and larceny which were dismissed in 2008; two convictions of driving while intoxicated which occurred in 2004 and 2008, one of which resulted in a probation violation.
Supplee testified that around 15 May 2011, he was pulled out of class by Woolford and told by Smith, that the criminal background check sent to the clinical site was rejected. Defendants " pointed to two dismissed felony charges and said that's why I was not being allowed to attend the orientation site so therefore I couldn't participate in the clinical portion. I couldn't -- I couldn't finish." Supplee testified that " [Woolford] looked at my background and everything else that I had on there. DUIs, traffic misdemeanors she said was okay, that that wasn't why I was being denied." Defendants presented Supplee with two options: Supplee could transfer into any other program at MMC at no charge or Supplee could get his felony charges expunged and reapply to the surg tech program to work towards completion. At Woolford's suggestion, Supplee elected to get the two felony charges of breaking and entering and larceny expunged. Supplee was successful in getting the charges expunged and reapplied to MMC in December of 2011. When Supplee attempted to reenroll, defendants informed him that their admissions policy regarding criminal background checks had changed, requiring a " clean record."
On 10 January 2012, DCEC sent Supplee a " Notice of Pre-Adverse Action" which stated the following:
During the application process for the SURGICAL TECHNOLOGY program at [DCEC], you authorized a review of your background and qualifications for admission. This background check revealed criminal convictions that would almost certainly preclude participation in externship or clinical experience position placements that may be required to successfully complete the program you have applied. Based on this background check, [DCEC] rejects your application.
On 7 November 2013, a jury returned a verdict in favor of Supplee. The jury found that defendants entered into a contract with Supplee, that defendants breached the contract by non-performance, and that Supplee was entitled to recover from the defendants in the amount of $53,481.00. Costs in the amount of $2,298.30 were also taxed against defendants.
On 14 November 2013, defendants filed a motion for judgment notwithstanding the verdict, or in the alternative, motion for a new trial. On 20 December 2013, the trial court denied both motions.
On 14 November 2013, defendants filed a motion for sanctions and/or appropriate relief. Defendants' motion stated that upon the motion of plaintiffs, the trials of Supplee and Thomas were separated; Supplee's trial occurring during the 28 October 2013 civil session and Thomas' trial scheduled for the week of 18 November 2013. Defendants provided that on or about 3 November 2013, a local news station called WECT, posted a story on its website disclosing that Supplee had prevailed on his breach of contract claim in the amount of $53,481.00 and that the damages were based upon " wasted tuition and lost income opportunities[.]" Defendants claimed that the alleged basis for the damages of " wasted tuition and lost income opportunities" was not a matter of public record. The news story stated that plaintiffs' attorney, Mr. Kyle Nutt (" Mr. Nutt" ) of Shipman & Wright, LLP, made the following statement:
the school was contractually obligated to screen their applicants' criminal backgrounds to make sure all potential students could eventually graduate from healthcare degree programs were certain offenses the school was aware of could potentially prevent students from completing required coursework at hospitals.
Mr. Nutt was also attributed to representing that " the school offered Supplee $25,000 at the start of trial to end the matter, but then removed the offer midway through trial." Defendants argue that the statements attributed to Mr. Nutt were not found in the jury's verdict sheet and were not a matter of public record. Furthermore, Mr. Nutt was attributed to stating that " his firm is representing another student going to trial over similar claims this month" and defendants contended that this statement was made with actual knowledge that Thomas' claims were scheduled to occur just two weeks after the article was published. Based on the foregoing, defendants moved the court to levy sanctions against plaintiff and/or Mr. Nutt and to grant appropriate relief based on their violation of Rule 3.6 of the North Carolina Rules of Professional Conduct and " their public dissemination of information that would not be admitted as evidence at Ms. Thomas' trial and which creates a substantial risk of prejudicing an impartial trial."
On 27 January 2014, the trial court entered an order on defendants' motion for sanctions and/or appropriate relief by concluding that Mr. Nutt's comments created a substantial risk of prejudicing the Thomas jury and that Mr. Nutt's extrajudicial statements were in violation of Rule 3.6(a) and/or 3.3 of the North Carolina Rules of Professional Conduct. Mr. Nutt was sanctioned in the amount of $1,000.00 and defendants were awarded $6,395.50 in attorneys' fees and $20.00 in costs.
Attorneys for plaintiffs, including Mr. Nutt, filed a motion for reconsideration, arguing that defendants waived claims referenced in their motion for sanctions and/or appropriate relief, that vital First Amendment considerations required a liberal construction of the " safe harbor" provisions contained in Rule 3.6(b) of the North Carolina Rules of Professional Conduct, and that under such a construction, Mr. Nutt's statements were protected disclosures as a matter of law.
On 11 February 2014, the trial court entered an order denying plaintiffs' motion for reconsideration.
On 16 January 2014 defendants filed notice of appeal; on 21 January 2014, Supplee filed notice of appeal; and, on 3 February 2014, Mr. Nutt filed notice of appeal.
A. Defendants' Appeal
Defendants raise two issues on appeal. First, defendants argue that the trial court erred by denying their motions for directed verdict and judgment notwithstanding the verdict (" JNOV" ). Next, defendants argue that the trial court erred by permitting the jury to consider speculative evidence of Supplee's lost profits and income. We address each of these arguments in turn.
i. Directed Verdict and Judgment Notwithstanding the Verdict
Defendants contend that the trial court erred by denying their motions for a directed verdict and JNOV where Supplee failed to present sufficient evidence of a breach of contract claim. We reject defendants' arguments and conclude there was sufficient evidence of breach of contract by defendants in order to submit the issue to the jury.
When considering the denial of a directed verdict or JNOV, the standard of review is the same. The standard of review of directed verdict is whether the evidence, taken in the light most favorable to the non-moving party, is sufficient as a matter of law to be submitted to the jury. If there is evidence to support each element of the nonmoving party's cause of action, then the motion for directed verdict and any subsequent motion for [JNOV] should be denied.
Green v. Freeman, 367 N.C. 136, 140-41, 749 S.E.2d 262, 267 (2013) (citations and quotation marks omitted). Whether defendants were entitled to a directed verdict or JNOV is a question of law and questions of law are reviewed de novo. Id. at 141, 749 S.E.2d at 267.
" The elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract." Branch v. High Rock Lake Realty, Inc., 151 N.C.App. 244, 250, 565 S.E.2d 248, 252 (2002) (citation omitted). Here, the parties stipulated that Supplee and defendants entered into a contract. Therefore, the issue before the jury was whether there was a breach of the terms of the contract.
Defendants rely on the holdings of Ross v. Creighton Univ., 957 F.2d 410 (7th Cir. 1992) and Ryan v. Univ. of N.C. Hospitals, 128 N.C.App. 300, 494 S.E.2d 789 (1998), and contend that Supplee's breach of contract claim based on the failure of defendants to conduct a criminal background check to determine if he was fit for admission into the surg tech program is not a recognized cause of action.
In Ross, a student accepted an athletic scholarship to attend Creighton University and play on its varsity basketball team. Ross, 957 F.2d at 411. Creighton was an " academically superior university" while the student came from an " academically disadvantaged background" and was " at an academic level far below that of the average Creighton student." Id. The student attended Creighton from 1978 until 1982, maintained a D average, and obtained 96 out of the 128 credits needed to graduate. When he left Creighton, the student had the overall language skills of a fourth grader and the reading skills of a seventh grader. Id. at 412. The student filed a complaint against Creighton, alleging that Creighton was aware of the student's academic limitations at admission and in order " to induce him to attend and play basketball, Creighton assured [the student] that he would receive sufficient tutoring so that he 'would receive a meaningful education while at CREIGHTON.'" Id. at 411. The student further alleged that he took courses that did not count towards a university degree at the advice of Creighton's Athletic Department, that the department employed a secretary to read, prepare, and type his assignments, and failed to provide him with sufficient and competent tutoring that it had promised. Id. at 412. The student asserted claims of breach of contract and negligence. The student argued three separate theories of how Creighton
was negligent: " educational malpractice" for failing to provide him with a meaningful education and preparing him for employment after college; negligently inflicting emotional distress by enrolling him in a stressful university environment when he was not prepared and by failing to provide remedial programs to assist him; and, " negligent admission" which would allow recovery when an institution admits and then does not adequately assist an unprepared student. Id. The district court dismissed ...