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Freedman v. Payne

Court of Appeals of North Carolina

May 2, 2017


          Heard in the Court of Appeals 21 March 2017.

         Appeal by plaintiff from order entered 25 July 2016 by Senior Resident Judge Robert H. Hobgood in New Hanover County Superior Court No. 14 CVS 4219

          Randolph M. James, PC, by Randolph M. James, for plaintiff-appellant.

          Cranfill Sumner & Hartzog LLP, by Melody J. Jolly and Patrick M. Mincey, for defendant-appellee Wayne James Payne.

          Dickie, McCamey & Chilcote, PC, by Joseph L. Nelson, for defendant-appellee Michael R. Ramos.

          ZACHARY, Judge.

         William Barry Freedman (appellant) appeals from an order of the trial court dismissing his claims for breach of fiduciary duty, breach of contract, constructive fraud, and fraud brought against Wayne James Payne and Michael R. Ramos (defendants). On appeal, appellant argues that the trial court erred by dismissing his claims "based upon the law of the case and in pari delicto doctrines." After careful review of appellant's arguments in light of the record on appeal and the applicable law, we conclude that the trial court did not err.

         I. Background

         On 1 December 2014, appellant and Freedman Farms filed a complaint against defendants "in New Hanover County Superior Court following defendants' representation of appellant in federal district court. In the complaint, appellant alleged professional malpractice, breach of fiduciary duty, constructive fraud, breach of contract, and fraud. Freedman Farms alleged fraud and breach of contract by a third-party beneficiary." Freedman v. Payne, __ N.C.App. __, __, 784 S.E.2d 644, 646 (2016) (Freedman I). On 18 December 2014, our Supreme Court granted defendants' motion to designate the case as exceptional and assigned the case to Senior Resident Superior Court Judge Robert H. Hobgood.

         Defendants filed separate motions to dismiss the complaint pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) for failure to state a claim upon which relief could be granted. On 19 March 2015, the court entered an order concluding that defendants' motions to dismiss appellant's claim for legal malpractice "should be allowed with prejudice based on in pari delicto[.]" The trial court denied defendants' motions to dismiss the remaining claims, and certified the matter for appellate review pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b) (2015). Plaintiff appealed the dismissal of his claim of legal malpractice to this Court, which affirmed the trial court's order in Freedman I. The factual background of this case was summarized in Freedman I:

Appellant and his parents manage Freedman Farms, a multi-county farming operation in which they . . . operate several hog farms. . . . [In] December 2007, Freedman Farms discharged approximately 332, 000 gallons of liquefied hog waste . . . into Browder's Branch, a water of the United States. . . . [A]ppellant and Freedman Farms were charged with intentionally violating the Clean Water Act. Appellant retained defendants to represent him.
The trial began on 28 June 2011, and the prosecution put on evidence for five days. In appellant's complaint, he alleges that prior to the resumption of trial on 6 July 2011, defendant Ramos told appellant that the Assistant United States Attorney (AUSA) had approached him with a plea deal. . . . [A]ppellant states [that] defendant "Ramos asked AUSA Williams whether the government, in exchange for both [appellant] and Freedman Farms pleading guilty and agreeing to pay $1, 000, 000 in restitution and a $500, 000 fine, would reduce the charges against [appellant] to a misdemeanor negligent violation of the Clean Water Act." . . . [A]ppellant claims that he asked defendant Ramos to negotiate the fines and restitution to $500, 000, to take incarceration "completely off the table, " and to make AUSA Williams agree that neither appellant nor Freedman Farms would be debarred from federal farm subsidies.
Appellant further states in his complaint that when defendant Ramos returned from negotiating, he told appellant the following: the government was not interested in active time, the prosecutor agreed to "stand silent" at sentencing, appellant and Freedman Farms would avoid debarment from federal farm subsidies, and these promises were "part of a side-deal with [the prosecutor]-a wink-wink, nudge-nudge-and that [appellant] must not disclose this side-deal to the court, " as it "would cost [appellant] the chance to assure that he would not be incarcerated."
Accordingly, . . . appellant pleaded guilty to negligently violating the Clean Water Act. On 6 July 2011, the district court approved [the] plea agreement[]. Contrary to the terms of the alleged side-deal, in appellant's plea agreement, "the government expressly reserve[d] the right to make a sentence recommendation . . . and made no representations as to the effects of the guilty plea on debarment from Federal farm subsidies."
On 13 February 2012, . . . [a]ppellant was sentenced to six months in prison and six months of house arrest[.] . . . Appellant obtained a new attorney[.] . . . The district court held a resentencing hearing on 1 October 2013 in which it vacated appellant's previous conviction. Pursuant to a new plea agreement, appellant again pleaded guilty to negligently violating the Clean Water Act. The district court imposed a sentence of "five years of probation . . . and ten months going forward of home detention[.]" . . . Appellant was also required to pay the remaining restitution that Freedman Farms owed[.] . . .

Freedman I, __ N.C.App. at __, 784 S.E.2d at 646-47. Our opinion in Freedman I, which is discussed in greater detail below, held that certain allegations in appellant's complaint established that appellant had participated in the wrongdoing of which he accused defendants, and affirmed the trial court's dismissal of appellant's legal ...

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