{ "id": 4162089, "name": "ANDREW EGELHOF, Derivatively on Behalf of Red Hat, Inc., Plaintiff v. MATTHEW J. SZULIK, KEVIN B. THOMPSON, PAUL J. CORMIER, TIMOTHY J. BUCKLEY, MARK H. WEBBINK, ALEX PINCHEV, ROBERT F. YOUNG, EUGENE J. MCDONALD, F. SELBY WELLMAN, MARYE A. FOX, WILLIAM S. KAISER, DR. STEVE ALBRECHT and H. HUGH SHELTON, Defendants", "name_abbreviation": "Egelhof v. Szulik", "decision_date": "2008-11-18", "docket_number": "No. COA08-452", "first_page": "612", "last_page": "628", "citations": [ { "type": "official", "cite": "193 N.C. App. 612" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "102 N.C. App. 301", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8523600 ], "opinion_index": -1, "case_paths": [ "/nc-app/102/0301-01" ] }, { "cite": "617 S.E.2d 662", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12633744, 12633741, 12633742, 12633743 ], "year": 2005, "opinion_index": 0, "case_paths": [ "/se2d/617/0662-04", "/se2d/617/0662-01", "/se2d/617/0662-02", "/se2d/617/0662-03" ] }, { "cite": "633 S.E.2d 117", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12636413 ], "year": 2006, "pin_cites": [ { "page": "121" } ], "opinion_index": 0, "case_paths": [ "/se2d/633/0117-01" ] }, { "cite": "645 S.E.2d 766", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12638603, 12638604, 12638605 ], "year": 2007, "opinion_index": 0, "case_paths": [ "/se2d/645/0766-01", "/se2d/645/0766-02", "/se2d/645/0766-03" ] }, { "cite": "636 S.E.2d 243", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12636991 ], "weight": 2, "year": 2006, "pin_cites": [ { "page": "250" }, { "page": "250" } ], "opinion_index": 0, "case_paths": [ "/se2d/636/0243-01" ] }, { "cite": "657 S.E.2d 32", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12640435, 12640436 ], "year": 2007, "opinion_index": 0, "case_paths": [ "/se2d/657/0032-01", "/se2d/657/0032-02" ] }, { "cite": "362 N.C. 92", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 12640434, 12640435, 12640431 ], "year": 2007, "opinion_index": 0, "case_paths": [ "/se2d/657/0031-01", "/se2d/657/0032-01", "/se2d/657/0029-03" ] }, { "cite": "644 S.E.2d 379", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12638376 ], "year": 2007, "pin_cites": [ { "page": "382" } ], "opinion_index": 0, "case_paths": [ "/se2d/644/0379-01" ] }, { "cite": "400 S.E.2d 435", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1991, "pin_cites": [ { "page": "438" } ], "opinion_index": 0 }, { "cite": "328 N.C. 254", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2541066 ], "year": 1991, "pin_cites": [ { "page": "258" } ], "opinion_index": 0, "case_paths": [ "/nc/328/0254-01" ] }, { "cite": "563 S.E.2d 269", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2002, "pin_cites": [ { "page": "280", "parenthetical": "quotation omitted" }, { "page": "280", "parenthetical": "quotation omitted" } ], "opinion_index": 0 }, { "cite": "150 N.C. 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App. 602", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8899548 ], "year": 2004, "pin_cites": [ { "page": "609" } ], "opinion_index": 0, "case_paths": [ "/nc-app/164/0602-01" ] }, { "cite": "179 N.C. App. 174", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8235133 ], "year": 2006, "pin_cites": [ { "page": "178-79" } ], "opinion_index": 0, "case_paths": [ "/nc-app/179/0174-01" ] }, { "cite": "361 N.C. 351", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 3737632, 3745508, 3738951, 3747377, 3744440 ], "year": 2007, "opinion_index": 0, "case_paths": [ "/nc/361/0351-04", "/nc/361/0351-01", "/nc/361/0351-05", "/nc/361/0351-02", "/nc/361/0351-03" ] }, { "cite": "180 N.C. App. 30", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8239378 ], "weight": 2, "year": 2006, "pin_cites": [ { "page": "40" }, { "page": "40" } ], "opinion_index": 0, "case_paths": [ "/nc-app/180/0030-01" ] }, { "cite": "183 N.C. App. 267", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8202912 ], "year": 2007, "pin_cites": [ { "page": "271" } ], "opinion_index": 0, "case_paths": [ "/nc-app/183/0267-01" ] }, { "cite": "834 F.2d 81", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 10543616 ], "weight": 2, "year": 1987, "pin_cites": [ { "page": "83" } ], "opinion_index": 0, "case_paths": [ "/f2d/834/0081-01" ] }, { "cite": "432 S.E.2d 339", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1993, "pin_cites": [ { "page": "347" } ], "opinion_index": 0 }, { "cite": "334 N.C. 303", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2532594 ], "year": 1993, "pin_cites": [ { "page": "317" } ], "opinion_index": 0, "case_paths": [ "/nc/334/0303-01" ] }, { "cite": "414 S.E.2d 568", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1992, "pin_cites": [ { "page": "575" } ], "opinion_index": 0 }, { "cite": "105 N.C. App. 620", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8524731 ], "year": 1992, "pin_cites": [ { "page": "629" } ], "opinion_index": 0, "case_paths": [ "/nc-app/105/0620-01" ] }, { "cite": "500 S.E.2d 437", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1998, "pin_cites": [ { "page": "439", "parenthetical": "citing Taylor v. Taylor Prods. Inc., 105 N.C. App. 620, 629, 414 S.E.2d 568, 575 (1992), overruled on other grounds by Brooks v. Giesey, 334 N.C. 303, 317, 432 S.E.2d 339, 347 (1993)" }, { "page": "439" }, { "page": "439" }, { "page": "439" } ], "opinion_index": 0 }, { "cite": "348 N.C. 278", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1659757 ], "weight": 4, "year": 1998, "pin_cites": [ { "page": "280", "parenthetical": "citing Taylor v. Taylor Prods. Inc., 105 N.C. App. 620, 629, 414 S.E.2d 568, 575 (1992), overruled on other grounds by Brooks v. Giesey, 334 N.C. 303, 317, 432 S.E.2d 339, 347 (1993)" }, { "page": "280" }, { "page": "280" }, { "page": "280" } ], "opinion_index": 0, "case_paths": [ "/nc/348/0278-01" ] }, { "cite": "450 S.E.2d 888", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1994, "pin_cites": [ { "page": "891" } ], "opinion_index": 0 }, { "cite": "338 N.C. 445", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2520868 ], "year": 1994, "pin_cites": [ { "page": "448" } ], "opinion_index": 0, "case_paths": [ "/nc/338/0445-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 6-21.5", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 12, "pin_cites": [ { "page": "and (2)" } ], "opinion_index": 0 }, { "cite": "102 N.C. App. 301", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8523600 ], "weight": 7, "pin_cites": [ { "page": "305" }, { "page": "306" }, { "page": "306" }, { "page": "306" }, { "page": "305" }, { "page": "305" }, { "page": "305" } ], "opinion_index": 0, "case_paths": [ "/nc-app/102/0301-01" ] }, { "cite": "554 S.E.2d 356", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2001, "pin_cites": [ { "page": "365", "parenthetical": "internal quotes omitted" } ], "opinion_index": 1 }, { "cite": "146 N.C. App. 658", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11362776 ], "year": 2001, "pin_cites": [ { "page": "670", "parenthetical": "internal quotes omitted" } ], "opinion_index": 1, "case_paths": [ "/nc-app/146/0658-01" ] }, { "cite": "272 S.E.2d 834", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1981, "pin_cites": [ { "page": "840" } ], "opinion_index": 1 }, { "cite": "301 N.C. 621", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8569867 ], "year": 1981, "pin_cites": [ { "page": "630" } ], "opinion_index": 1, "case_paths": [ "/nc/301/0621-01" ] }, { "cite": "444 S.E.2d 198", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1994, "pin_cites": [ { "page": "201" } ], "opinion_index": 1 }, { "cite": "336 N.C. 543", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2534339 ], "year": 1994, "pin_cites": [ { "page": "550" } ], "opinion_index": 1, "case_paths": [ "/nc/336/0543-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 84-36", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 2007, "opinion_index": 1 }, { "cite": "386 S.E.2d 185", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1989, "pin_cites": [ { "page": "186" }, { "page": "186" } ], "opinion_index": 1 }, { "cite": "325 N.C. 699", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2491051 ], "year": 1989, "pin_cites": [ { "page": "701" } ], "opinion_index": 1, "case_paths": [ "/nc/325/0699-01" ] }, { "cite": "2005 NCBC 7", "category": "reporters:specialty", "reporter": "NCBC", "opinion_index": 1 }, { "cite": "400 S.E.2d 435", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1991, "pin_cites": [ { "page": "438", "parenthetical": "emphasis added" } ], "opinion_index": 1 }, { "cite": "328 N.C. 254", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2541066 ], "year": 1991, "pin_cites": [ { "page": "258", "parenthetical": "emphasis added" } ], "opinion_index": 1, "case_paths": [ "/nc/328/0254-01" ] }, { "cite": "574 S.E.2d 189", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2002, "pin_cites": [ { "page": "193" } ], "opinion_index": 1 }, { "cite": "155 N.C. 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Stat.", "weight": 3, "opinion_index": 1 } ], "analysis": { "cardinality": 1206, "char_count": 40099, "ocr_confidence": 0.752, "pagerank": { "raw": 1.1987338982809878e-07, "percentile": 0.5931498322875195 }, "sha256": "12aed8d65fe42f4517cbe8b813ab642ca53b2e3f29a7aa8ce535d75d1b6d9113", "simhash": "1:8b0a576c667f8c50", "word_count": 6518 }, "last_updated": "2023-07-14T16:30:29.332614+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judge McCULLOUGH concurs.", "Judge CALABRIA,dissents by separate opinion." ], "parties": [ "ANDREW EGELHOF, Derivatively on Behalf of Red Hat, Inc., Plaintiff v. MATTHEW J. SZULIK, KEVIN B. THOMPSON, PAUL J. CORMIER, TIMOTHY J. BUCKLEY, MARK H. WEBBINK, ALEX PINCHEV, ROBERT F. YOUNG, EUGENE J. MCDONALD, F. SELBY WELLMAN, MARYE A. FOX, WILLIAM S. KAISER, DR. STEVE ALBRECHT and H. HUGH SHELTON, Defendants" ], "opinions": [ { "text": "TYSON, Judge.\nAndrew Egelhof (\u201cplaintiff\u2019) and his out-of-state counsel, Jeffrey P. Fink, Brian J. Robbins, Steven R. Wedeking, and the law firm of Robbins Umeda & Fink, LLP (collectively, \u201cplaintiff\u2019s counsel\u201d) appeal from order entered, which: (1) imposed sanctions on plaintiff and plaintiff\u2019s counsel and (2) failed to award Matthew J. Szulik, Kevin B. Thompson, Paul J. Cormier, Timothy J: Buckley, Mark H. Webbink, Alex Pinchev, Robert F. Young, Eugene J. McDonald, F. Selby Wellman, Marye A. Fox, William S. Kaiser, Dr. Steve Albrecht, and H. Hugh Shelton (collectively, \u201cdefendants\u201d) attorneys\u2019 fees and expenses. Defendants cross-appeal the denial of attorneys\u2019 fees as sanctions. We affirm in part and reverse in part.\nI. Background\nOn 18 August 2004, plaintiff filed a Verified Shareholder Derivative Complaint against defendants on behalf of Red Hat, Inc. (\u201cRed Hat\u201d). Plaintiff alleged defendants: (1) engaged in insider trading; (2) breached their fiduciary duty; (3) abused their control of Red Hat; (4) grossly mismanaged Red Hat; (5) wasted valuable corporate assets; and (6) were unjustly enriched. On 29 December 2004, the case was designated as a complex business case and transferred to the special superior court for complex business cases. Defendants moved to dismiss the complaint on 27 June 2005 and alleged: (1) the complaint failed to adequately plead demand futility under Delaware law and (2) all counts should be dismissed pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 12(b)(6).\nPlaintiff amended his complaint on 21 July 2005. Defendants moved to dismiss the amended complaint on 29 September 2005. In its order filed 13 March 2006, the trial court granted defendants\u2019 motion to dismiss with prejudice \u201con the grounds that the Amended Complaint does not establish demand futility under Delaware law and because [plaintiff] is no longer a shareholder and thus lacks standing to pursue this action.\u201d Plaintiff failed to appeal the trial court\u2019s grant of defendants\u2019 motion to dismiss.\nOn 25 April 2006, defendants filed a motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11 and N.C. Gen. Stat. \u00a7 6-21.5. Defendants alleged: (1) \u201c[pjlaintiff filed his claim when it was neither well grounded in fact nor warranted by existing law[]\u201d and (2) \u201cthere was a complete absence of a justiciable issue of either law or fact raised by [p]laintiff in his pleadings.\u201d After a hearing on 9 June 2006, the trial court ordered defendants to depose plaintiff. Plaintiff was deposed on 13 July 2006. Counsel for both plaintiff and defendants were present and participated in the deposition.\nThe trial court entered its final order on defendants\u2019 motion for attorneys\u2019 fees on 4 February 2008. The trial court\u2019s order: (1) prohibited plaintiff from acting as a shareholder derivative plaintiff or a class action representative in the state courts of North Carolina for a period of five years; (2) required Mr. Fink to pay pro hac vice fees; (3) prohibited plaintiff\u2019s counsel from appearing pro hac vice in the state courts of North Carolina for a period of five years; and (4) denied defendants\u2019 motion for attorney fees and expenses. Plaintiff and plaintiff\u2019s counsel appeal. Defendants cross-appeal.\nII. Issues\nPlaintiff and plaintiffs counsel argue the trial court erred when it imposed non-monetary sanctions. On cross-appeal, defendants argue the trial court erred when it failed to award attorneys\u2019 fees.\nIII. Plaintiff\u2019s and Plaintiff\u2019s Counsel\u2019s Anneal\nPlaintiff and plaintiff\u2019s counsel argue the trial court erred when it imposed non-monetary sanctions: (1) without notice or hearing; (2) when plaintiff and plaintiff\u2019s counsel did not sign the amended complaint; and (3) were based upon unsupported findings of fact.\nA. Due Process\n\u201cNotice and an opportunity to be heard prior to depriving a person of his property are essential elements of due process of law which is guaranteed by the Fourteenth Amendment of the United States Constitution and Article 1, section 17, of the North Carolina Constitution.\u201d McDonald\u2019s Corp. v. Dwyer, 338 N.C. 445, 448, 450 S.E.2d 888, 891 (1994). \u201cIt is not adequate for the notice to say only that sanctions are proposed. The bases for the sanctions must be alleged.\u201d Griffin v. Griffin, 348 N.C. 278, 280, 500 S.E.2d 437, 439 (1998) (citing Taylor v. Taylor Prods. Inc., 105 N.C. App. 620, 629, 414 S.E.2d 568, 575 (1992), overruled on other grounds by Brooks v. Giesey, 334 N.C. 303, 317, 432 S.E.2d 339, 347 (1993)). \u201cIn order to pass constitutional muster, the person against whom sanctions are to be imposed must be advised in advance of the charges against him.\u201d Id.\nPlaintiff and plaintiff\u2019s counsel cite Gagliardi v. McWilliams for the proposition that due process requires a party to be put on notice of the type of sanctions that could possibly be ordered by the trial court. 834 F.2d 81 (3rd Cir. 1987). In Gagliardi, the United States Court of Appeals for the Third Circuit vacated the district court\u2019s order and stated:\nThe general'request for \u201cother appropriate relief\u2019 was insufficient notice to Gagliardi, who was proceeding pro se, of the possibility that his resort to the courts would be precluded without initial scrutiny by the district court. Even an experienced attorney would not have expected this type of injunctive sanction without some more specific notice.\n834 F.2d at 83.\nNeither our Supreme Court nor this Court have required a party, against whom statutory sanctions have been sought, to be put on notice of the specific type of sanctions, which may be ordered. North Carolina has consistently required only: (1) notice of the bases of the sanctions and (2) an opportunity to be heard. See Griffin, 348 N.C. at 280, 500 S.E.2d at 439; see also Wilson v. Wilson, 183 N.C. App. 267, 271, 644 S.E.2d 379, 382, disc. rev. denied, 362 N.C. 92, 657 S.E.2d 32 (2007); Dunn v. Ganoy, 180 N.C. App. 30, 40, 636 S.E.2d 243, 250 (2006), disc. rev. denied, 361 N.C. 351, 645 S.E.2d 766 (2007); Megremis v. Megremis, 179 N.C. App. 174, 178-79, 633 S.E.2d 117, 121 (2006); Zaliagiris v. Zaliagiris, 164 N.C. App. 602, 609, 596 S.E.2d 285, 290 (2004), disc. rev. denied, 359 N.C. 643, 617 S.E.2d 662 (2005).\nHere, defendants\u2019 25 April 2006 motion for attorney fees stated:\nDefendants . . . respectfully move for the entry of an order awarding to Defendants their reasonable attorneys\u2019 fees for services rendered by their attorneys in defense of this action pursuant to the following statutory authority:\na. N.C. Gen. Stat. \u00a7 1A-1 (Rule 11 of the North Carolina Rules of Civil Procedure) on the grounds that Plaintiff filed his claim when it was neither well grounded in fact nor warranted by existing law; and\nb. N.C.G.S. \u00a7 6-21.5 on the grounds that there was a complete absence of a justiciable issue of either law or fact raised by Plaintiff in his pleadings.\n(Emphasis supplied). Plaintiff subsequently submitted a memorandum of law in opposition to defendants\u2019- motion for attorneys\u2019 fees. On 9 June 2006, the trial court conducted a hearing on defendants\u2019 motion for attorneys\u2019 fees. The trial court\u2019s order filed on or about 12 June 2006 ordered defendants to depose plaintiff and stated:\nThe scope of the deposition may include, but is not limited to: (1) [plaintiff]\u2019s ownership of stock in Red Hat. . . and any other connection or involvement he may had had with Red Hat. . ., (2) his involvement with this litigation, including how he came to be involved and the extent of his knowledge of the proceedings in this litigation, (3) his involvement as plaintiff in any other shareholder derivative or class action litigation, (4) the general nature of any litigation in which he has been represented by Robbins, Umeda & Fink, (5) his connection with any lawyers, employees or agents of Robbins, Umeda & Fink, (6) any fee agreement or expectation of compensation he had with Robbins, Umeda & Fink in connection with this litigation, (7) his general work experience and educational background, (8) any criminal record which would impact his suitability to represent the corporation in this shareholder derivative action, and (9) the reasons for and timing of his selling his stock and abandoning his position in this litigation. Except as provided above he shall not be subject to examination about his personal life or finances. Nor shall he be required to disclose any substantive advice on legal issues provided in connection with his status as a shareholder derivative plaintiff by Robbins, Umeda & Fink. Any such communications that would be subject to the attorney client privilege shall not be the subject of examination.\nPlaintiff and plaintiff\u2019s counsel were given notice of the \u201cbases\u201d of the alleged sanctions against them and were given an opportunity to present arguments and testimony on their behalf. Plaintiff\u2019s and plaintiff\u2019s counsel\u2019s due process rights were fully protected. Griffin, 348 N.C. at 280, 500 S.E.2d at 439; see also Dunn, 180 N.C. App. at 40, 636 S.E.2d at 250 (where the trial court \u201cspecifically informed [the appellant] that [it] was considering imposing Rule 11 sanctions [;]\u201d \u201caccepted an affidavit\u201d from the appellant; and questioned the appellant and the other lawyers involved, this Court held the appellant \u201cwas thus given notice of the \u2018charges\u2019 against him in advancef,] . . . was given an opportunity to be heard[,] [and the appellant\u2019s] . . . due process rights were fully protected\u201d). This assignment of error is overruled.\nB. Signature on Amended Complaint\nThe only signature on plaintiff\u2019s original complaint is that of F. Lane Williamson, plaintiff\u2019s North Carolina attorney. Plaintiff\u2019s amended complaint is again signed by F. Lane Williamson and contains a verification signed by out-of-state counsel, Jeffery P. Fink, which says, \u201cI make this Verification because plaintiff is absent from the County of San Diego where I maintain my office.\u201d Plaintiff and plaintiff\u2019s counsel contend that the trial court could not enter non-monetary sanctions pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11 without their signatures on the amended complaint. We disagree.\nN.C. Gen. Stat. \u00a7 1A-1, Rule 11(a) (2005) allows the trial court to impose on the signer of the pleading, \u201ca represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred . . . .\u201d In Higgins v. Patton, this Court held \u201cthe defendants were entitled to request sanctions against the attorney, as signer of the complaint, and against both plaintiffs as represented parties, regardless of whether the plaintiffs signed the complaint.\u201d 102 N.C. App. 301, 305, 401 S.E.2d 854, 856 (1991), rev\u2019d in part by Bryson v. Sullivan, 330 N.C. 644, 656-57, 412 S.E.2d 327, 333 (1992). In Higgins, this Court also held that \u201cthe complaint meets the legal certification requirement of Rule 11. When considered in conjunction with the answer, the complaint facially presents a plausible claim for trespass.\u201d 102 N.C. App. at 306, 401 S.E.2d at 857 (citation omitted). As noted above and contrary to the dissenting opinion\u2019s assertion, defendant never asserted in their motion, or argued in any of the hearings, that plaintiff filed his complaint \u201cfor any improper purpose\u201d under either N.C. Gen. Stat. \u00a7 1A-1, Rule 11 or N.C. Gen. Stat. \u00a7 6-21.5. Bryson, 330 N.C. at 655, 412 S.E.2d at 332.\nOur Supreme Court in Bryson held that:\nin determining whether a pleading was warranted by existing law at the time it was signed the court must look at the face of the pleading and must not read it in conjunction with responsive pleadings as the Court of Appeals erroneously held in the case and in other Rule 11 opinions. E.g., Higgins v. Patton, 102 N.C. App. 301, 306, 401 S.E.2d 854, 857....\n330 N.C. at 656-57, 412 S.E.2d at 333 (emphasis supplied). Our Supreme Court further stated:\nThe legal question of whether a client whose counsel signs a pleading that violates Rule 11 but who does not himself sign the challenged pleading may be subject to sanctions under Rule 11 is not an issue arising on this appeal. The record shows that both of the plaintiffs signed the complaint. The authorities are divided on this question. ... We thus leave this question to another day.\nId. at 659, 412 S.E.2d at 334-35 (footnote omitted).\nOnly that portion of Higgins which held the complaint should be \u201cconsidered in conjunction with the answer\u201d was overturned by our Supreme Court in Bryson. Higgins, 102 N.C. App. at 306, 401 S.E.2d at 857; Bryson, 330 N.C. at 656-57, 412 S.E.2d at 333. This Court remains bound by that portion of Higgins which held that \u201cthe defendants were entitled to request sanctions against. . . both plaintiffs as represented parties, regardless of whether the plaintiffs signed the complaint.\u201d 102 N.C. App. at 305, 401 S.E.2d at 856; see also In the Matter of Appeal from Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (\u201cWhere a panel of the Court of Appeals has decided the same issue, albeit in a different case, a subsequent panel of the same court is bound by that precedent, unless it has been overturned by a higher court.\u201d (Citations omitted)). We hold that both plaintiff and plaintiff\u2019s counsel, as represented parties, were subject to sanctions pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11. Higgins, 102 N.C. App. at 305, 401 S.E.2d at 856. This assignment of error is overruled.\nC. Findings of Fact\nPlaintiff and plaintiff\u2019s counsel argue the trial court erred when it entered N.C. Gen. Stat. \u00a7 1A-1, Rule 11 non-monetary sanctions based upon unsupported findings of fact.\n1. Standard of Review\nThe trial court\u2019s decision to impose or not to impose mandatory sanctions under N.C.G.S. \u00a7 1A-1, Rule 11(a) is reviewable de novo as a legal issue. In the de novo review, the appellate court will determine (1) whether the trial court\u2019s conclusions of law support its judgment or determination, (2) whether the trial court\u2019s conclusions of law are supported by its findings of fact, and (3) whether the findings of fact are supported by a sufficiency of the evidence. If the appellate court makes these three determinations in the affirmative, it must uphold the trial court\u2019s decision to impose or deny the imposition of mandatory sanctions under N.C.G.S. \u00a7 1A-1, Rule 11(a).\nFinally, in reviewing the appropriateness of the particular sanction imposed, an abuse of discretion standard is proper because the rule\u2019s provision that the court shall impose sanctions for motions abuses concentrates the court\u2019s discretion on the selection of an appropriate sanction rather than on the decision to impose sanctions.\nTurner v. Duke University, 325 N.C. 152, 165, 381 S.E.2d 706, 714 (1989) (internal citation and quotation omitted) (emphasis original).\n2. Analysis\nAccording to Rule 11, the signer certifies that three distinct things are true: the pleading is (1) well grounded in fact; (2) warranted by existing law, \u201cor a good faith argument for the extension, modification, or reversal of existing law\u201d (legal sufficiency); and (3) not interposed for any improper purpose. A breach of the certification as to any one of these three prongs is a violation of the Rule.\nBryson, 330 N.C. at 655, 412 S.E.2d at 332.\nAs noted above, defendants\u2019 motion for attorneys\u2019 fees alleged only that \u201cPlaintiff filed his claim when it was neither well grounded in fact nor warranted by existing law . . . .\u201d Defendants did not allege that plaintiff had filed his claim \u201cfor any improper purpose.\u201d Id. In Bryson, our Supreme Court held, as stated above, that \u201cin determining whether a pleading was warranted by existing law at the time it was signed the court must look at the face of the pleading and must not read it in conjunction with responsive pleadings . . . .\u201d 330 N.C. at 656-57, 412 S.E.2d at 333.\nHere, the trial court stated in its order that \u201c[it] does not believe that the initial pleadings in this case would, standing alone, support Rule 11 sanctions.\u201d The trial court further found that \u201cwhen the combination of all the factors is considered, sanctions are warranted.\u201d Based on our Supreme Court\u2019s holding in Bryson and defendants failure to seek sanctions \u201cfor any improper purpose[,]\u201d the trial court erred when it ordered sanctions to be imposed based on matters other than a review of the face of plaintiff\u2019s amended complaint. 330 N.C. at 655-57, 412 S.E.2d at 332-33. The trial court\u2019s entry of sanctions against plaintiff and plaintiff\u2019s counsel is reversed.\nIV. Defendants\u2019 Cross-Appeal\nDefendants argue the trial court erred when it: (1) failed to rule on their motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 6-21.5 and (2) denied their motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11.\nA. N.C. Gen. Stat. \u00a7 6-21.5\nDefendants argue the trial court failed to address their motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 6-21.5 and that failure constituted reversible error. We disagree.\n1. Standard of Review\nThe decision whether to award attorney\u2019s fees is within the sound discretion of the trial court and will not be overturned absent an abuse of discretion. Martin Architectural Prods., Inc. v. Meridian Constr. Co., 155 N.C. App. 176, 182, 574 S.E.2d 189, 193 (2002). An abuse of discretion occurs when a decision is \u201ceither manifestly unsupported by reason or so arbitrary, that it could not have been the result of a reasoned decision.\u201d Country Club of Johnston Cty., Inc. v. U.S. Fidelity & Guar. Co., 150 N.C. App. 231, 248, 563 S.E.2d 269, 280 (2002) (quotation omitted).\n2. Analysis\nThe trial court\u2019s order states:\nThis matter is before the Court on Defendants\u2019 Motion for Attorneys\u2019 Fees filed after the Court granted Defendants\u2019 Motion to Dismiss. The Court has concluded that it will not award attorney fees on the basis asserted by Defendants. However, the Motion has brought to the Court\u2019s attention certain actions on the part of [plaintiff], the shareholder representative, and his out-of-state counsel which are of sufficient concern to the Court that the Court will enter non-monetary sanctions.\n(Emphasis supplied).\nBased upon the trial court\u2019s statement that \u201cit will not award attorney fees on the basis asserted by Defendants!,]\u201d it is clear that the trial court exercised its discretion and chose to deny defendants\u2019 motion for attorneys\u2019 fees pursuant to both N.C. Gen. Stat. \u00a7 1A-1, Rule 11 and N.C. Gen. Stat. \u00a7 6-21.5. The trial court did not \u201cfail[] to exercise its discretion under the statute . . . .\u201d Defendant\u2019s assertions to the contrary are overruled.\nDefendants have also failed to show that the trial court manifestly abused its discretion when it denied defendants\u2019 motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 6-21.5. Under N.C. Gen. Stat. \u00a7 6-21.5 (2005), a trial court \u201cmay award a reasonable attorney\u2019s fees to the prevailing party if the court finds there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading.\u201d When reviewing a motion brought under N.C. Gen. Stat. \u00a7 6-21.5, the trial court is \u201crequired to evaluate whether the losing party persisted in litigating the case after a point where he should reasonably have become aware that the pleading he filed no longer contained a justiciable issue.\u201d Sunamerica Financial Corp. v. Bonham, 328 N.C. 254, 258, 400 S.E.2d 435, 438 (1991).\nThe trial court, in its Order on Motion for Attorney Fees, found: (1) \u201c[d]emand futility under Delaware law .... is an area fraught with difficulty and not susceptible to bright-line tests[;]\u201d (2) \u201c[t]he test for demand futility under Delaware law is always fact specific and contextual[;]\u201d (3) \u201c[t]he application of the law is done on a case-by-case basis[;]\u201d and (4) \u201cit will not award attorney fees on the basis asserted by Defendants.\u201d\nDefendants have failed to show that the trial court\u2019s decision to deny their motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 6-21.5 was \u201ceither manifestly unsupported by reason or so arbitrary that it could not have been the result of a reasoned decision.\u201d Country Club of Johnston Cty., Inc., 150 N.C. App. at 248, 563 S.E.2d at 280 (quotation omitted). Under the applicable standard of review of the trial court\u2019s discretionary ruling, this assignment of error is overruled.\nB. N.C. Gen. Stat. \u00a7 1A-1. Rule 11\nBecause the trial court initially found \u201cthat [it] d[id] not believe that the initial pleadings in this case would, standing alone, support Rule 11 sanctions [,]\u201d it is unnecessary to remand this matter to the trial court for a determination of whether Rule 11 sanctions would be appropriate based solely on the face of the amended complaint. Bryson, 330 N.C. at 656-57, 412 S.E.2d at 333. We will treat the trial court\u2019s finding as a decision not to impose sanctions pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11 and review it according to the framework established by our Supreme Court in Turner. 325 N.C. at 165, 381 S.E.2d at 714.\nThe trial court\u2019s conclusion of law \u201cthat the initial pleadings in this case would [not], standing alone, support Rule. 11 sanctions[]\u201d is supported by its findings of fact. The trial court found: (1) \u201c[d]emand futility under Delaware law .... is an area fraught with difficulty and not susceptible to bright-line tests[;]\u201d (2) \u201cthe test for demand futility under Delaware law is always fact specific and contextual[;]\u201d and (3) \u201c[t]he [trial] [c]ourt\u2019s decision and order in Pozen was not entered until after the original Egelhof Complaint and Amended Complaint were filed; therefore [p]laintiff\u2019s counsel did not have the benefit of that decision when drafting the pleadings.\u201d\nAfter a thorough review of the record on appeal, we hold that these findings of fact are supported by sufficient evidence. Id. The trial court properly found the imposition of Rule 11 sanctions was not appropriate based solely on review of the face of the complaint. The trial court\u2019s denial of defendants\u2019 motion for attorney fees pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11 is affirmed.\nV. Conclusion\nPlaintiff and plaintiffs counsel received notice that Rule 11 sanctions were being sought against them and the statutory basis of those sanctions. N.C. Gen. Stat. \u00a7 1A-1, Rule 11(a). Plaintiff and plaintiff\u2019s counsel were provided an opportunity to be heard by and present evidence to the trial court on defendants\u2019 motion for attorneys\u2019 fees. Plaintiff\u2019s and plaintiff\u2019s counsel\u2019s due process rights were fully protected. Griffin, 348 N.C. at 280, 500 S.E.2d at 439. Both plaintiff and plaintiff\u2019s counsel, as represented parties, were subject to sanctions pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11(a). Higgins, 102 N.C. App. at 305, 401 S.E.2d at 856.\nIn determining whether plaintiff\u2019s amended complaint was well grounded in fact and warranted by existing law, the trial court failed to solely review the face of the amended complaint. Bryson, 330 N.C. at 656-57, 412 S.E.2d at 333. That portion of the trial court\u2019s order, which imposed sanctions against plaintiff and plaintiff\u2019s counsel under Rule 11 is reversed.\nContrary to defendants\u2019 assertion, the trial court exercised its discretion pursuant to N.C. Gen. Stat. \u00a7 6-21.5. Defendants failed to show the trial court manifestly abused its discretion when it denied defendants\u2019 motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7 6-21.5. The trial court properly determined that Rule 11 sanctions were not appropriate based solely on review of the face of the amended complaint. The trial court\u2019s denial of defendants\u2019 motion for attorneys\u2019 fees pursuant to N.C. Gen. Stat. \u00a7\u00a7 1A-1, Rule 11 and 6-21.5 is affirmed.\nThose portions of the trial court\u2019s order, which ordered: (1) Jeffrey P. Fink to pay \u201cthe North Carolina State Bar and the Clerk of Court of Wake County an amount equal to the amount he would have been required to pay had he properly filed a pro hac vice motion and been admitted to appear in this action[]\u201d and (2) \u201cMr. Williamson will insure that [plaintiff] receives a copy of this order[,]\u201d are not before us and are left undisturbed.\nAffirmed in Part and Reversed in Part.\nJudge McCULLOUGH concurs.\nJudge CALABRIA,dissents by separate opinion.", "type": "majority", "author": "TYSON, Judge." }, { "text": "CALABRIA, Judge,\nconcurs in part and dissents in part.\nI concur with the majority that the plaintiff and plaintiffs counsel were given appropriate notice of the basis for the sanctions that were brought against them and had an opportunity to be heard. However, I respectfully dissent from the majority\u2019s holding that the defendants must specifically allege that plaintiff filed claims \u201cfor an improper purpose.\u201d The trial court correctly imposed non-monetary sanctions under both Rule 11 and their inherent power to discipline attorneys who appear before the court. Furthermore, I agree with the defendants that the trial court erred by failing to award attorney\u2019s fees.\nI. Rule 11\nRule 11 of the North Carolina Rules of Civil Procedure states in pertinent part:\nThe signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. ... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney\u2019s fee.\nN.C. Gen. Stat. \u00a7 1A-1, Rule 11 (2007) (emphasis added)..\nThe majority states that the trial court erred by imposing sanctions \u201cbased on matters other than a review of the face of the plaintiff\u2019s amended complaint,\u201d and relies on the Supreme Court\u2019s holding in Bryson v. Sullivan, 330 N.C. 644, 412 S.E.2d 327 (1992). The Bryson Court did indeed hold that \u201cin determining whether a pleading was warranted by existing law at the time it was signed the court must look at the face of the pleading.\u201d Id. at 656-57, 412 S.E.2d at 333. The majority argues that because defendants did not allege that plaintiff filed his claim for an improper purpose, or failed to seek sanctions specifically for an improper purpose, the trial court may not consider the actions of the plaintiff beyond the pleadings. I disagree.\nAlthough the Bryson Court limits whether or not to impose sanctions under the legal sufficiency prong of Rule 11, sanctions are not limited when later filings reveal the case has become meritless. The trial court may look beyond the face of the pleading when considering whether litigation was continued for an improper purpose. \u201c[0]nce responsive pleadings or other papers are filed and the case has become meritless, failure to dismiss or further prosecution of the action may result in sanctions either under the improper purpose prong of the Rule, or under other rules, or pursuant to the inherent power of the court.\u201d Id. at 658, 412 S.E.2d at 334. The existence of an. improper purpose under Rule 11 is determined by an objective standard. Id. at 656, 412 S.E.2d at 333. The plain language of Rule 11 gives the trial court the power to impose sanctions \u201cupon its own initiative.\u201d An omission in the allegations by a party to the action cannot serve to take away the power of the court provided by Rule 11 to impose appropriate sanctions.\nIn the case sub judice, the trial judge made ample findings of fact to support a conclusion that the plaintiff and his counsel maintained their complaint for an improper purpose by continuing to litigate even when it was clear, or should have been clear, that their claim was meritless. The trial judge concluded that \u201cthe initial pleadings in this case, would, standing alone, support Rule 11 sanctions.\u201d The judge found that \u201cthe shortcomings in the Complaint... demonstrate a disregard for or lack of attention to the rules of procedure as well as court decisions and admonitions.\u201d The court also noted that plaintiffs counsel failed to notify the plaintiff of the business court\u2019s decision in In re Pozen Shareholders Litigation, 2005 NCBC 7, a case in which plaintiff\u2019s counsel also appeared before the court and one which \u201ccould have had a direct impact on [plaintiff\u2019s] case.\u201d Plaintiff\u2019s counsel also failed to communicate to plaintiff a formal request from the defense counsel \u201cthat plaintiff reconsider going forward with the litigation following the Pozen decision.\u201d They failed to do so.\nFurthermore, the trial judge found that this lack of communication led directly to plaintiff\u2019s counsel\u2019s ignorance of the fact that plaintiff sold all his shares of Red Hat and therefore completely divested himself of standing to pursue a shareholder derivative action in Red Hat\u2019s name. \u201c[T]he firm should have possessed that information and in all probability would have but for its failure to inform [plaintiff] of the developments in his case.\u201d Indeed, as the court found, plaintiff \u201cplayed no significant role in the litigation process.\u201d\nApplying an objective standard as provided in Bryson, it is clear from the trial court\u2019s findings that plaintiff and plaintiff\u2019s counsel knew, or reasonably should have known, that the claims were merit-less once plaintiff\u2019s counsel became aware of the business court\u2019s decision in Pozen. This, along with other findings of misconduct by both the plaintiff and his counsel support a conclusion that the complaint was filed and maintained for an improper purpose in violation of N.C. Gen. Stat. \u00a7 1A-1, Rule 11. Sanctions were appropriate and the trial court\u2019s decision imposing sanctions should be affirmed.\nII. Inherent Power of the Court to Discipline Attorneys\nThe trial court\u2019s authority to impose sanctions is not limited to Rule 11. Sanctions can also be ordered under a court\u2019s inherent power to deal with attorneys appearing before it. North Carolina State Bar v. Randolph, 325 N.C. 699, 701, 386 S.E.2d 185, 186 (1989). \u201c[I]t has been held repeatedly that in North Carolina there are two methods by which disciplinary action or disbarment may be imposed upon attorneys \u2014 -statutory and judicial.\u201d Id., at 701-02, 386 S.E.2d at 186. \u201cNothing contained in [the statutes creating and empowering the State Bar to discipline attorneys] shall be construed as disabling or abridging the inherent powers of the court to deal with its attorneys.\u201d N.C. Gen. Stat. \u00a7 84-36 (2007). This power includes the power to disbar attorneys appearing before it. See In re Delk, 336 N.C. 543, 550, 444 S.E.2d 198, 201 (1994).\nIn the instant case, the trial judge made several findings of fact concerning misconduct by plaintiff\u2019s counsel, most notably counsel\u2019s violation of Rule 1.4 of the Rules of Professional Conduct of the North Carolina State Bar, which mandates communication between a lawyer and his client. Plaintiff\u2019s counsel \u201cfailed to keep its client informed of significant developments in the lawsuit, including a motion for sanctions which could directly affect the client.\u201d The trial judge also found \u201cMr. Egelhof, the firm, and the individual lawyers have failed in their duties and responsibilities to each other and to the Court.\u201d\nPlaintiff\u2019s counsel argues in its brief that the court lacks the authority to prospectively prohibit out-of-state counsel from appearing in North Carolina courts pro hac vice. However, this \u201cprospective\u201d prohibition is analogous to the court\u2019s power to disbar in-state counsel appearing before it, a power which has been repeatedly affirmed in North Carolina courts. \u201cThe right to appear pro hac vice in the courts of another state is not a right protected by the Due Process Clause of the Fourteenth Amendment.\u201d In re Smith, 301 N.C. 621, 630, 272 S.E.2d 834, 840 (1981).\n\u201cThe purpose of the statutes governing an attorney\u2019s ability to be admitted pro hac vice is to afford [North Carolina] courts a means to control out-of-state counsel and to assure compliance with the duties and responsibilities of attorneys practicing in this State.\u201d Couch v. Private Diagnostic Clinic, 146 N.C. App. 658, 670, 554 S.E.2d 356, 365 (2001) (internal quotes omitted). In light of this purpose, it would be irrational to hold that the legislature intended to grant the power to \u201cprospectively prohibit\u201d licensed members of the North Carolina State Bar from appearing before North Carolina courts, but not exercise a similar power over out-of-state counsel. Therefore, I would affirm the trial court\u2019s imposition of non-monetary sanctions on plaintiff\u2019s counsel.\nIII. Defendants\u2019 Motion for Attorney\u2019s Fees\nIn affirming the trial court\u2019s failure to award attorney\u2019s fees, the majority states that \u201cit is clear that the trial court exercised its discretion and chose to deny defendants\u2019 motion for attorney\u2019s fees pursuant to both N.C. Gen. Stat. \u00a7 1A-1, Rule 11 and N.C. Gen. Stat. \u00a7 6-21.5.\u201d I agree with the majority that the trial court\u2019s decision whether or not to award attorney\u2019s fees may not be overturned absent an abuse of discretion. Martin Architectural Prods. v. Meridian Constr. Co., 155 N.C. App. 176, 182, 574 S.E.2d 189, 193 (2002). However, \u201cin deciding a motion brought under N.C.G.S. \u00a7 6-21.5, the trial court is required to evaluate whether the losing party persisted in litigating the case after a point where he should reasonably have become aware that the pleading he filed no longer contained a justiciable issue.\u201d Sunamerica Financial Corp. v. Bonham, 328 N.C. 254, 258, 400 S.E.2d 435, 438 (1991) (emphasis added). A plaintiff has \u201ca continuing duty to review the appropriateness of persisting in litigating a claim which [is] alleged [to lack a justiciable issue].\u201d Bryson, 330 N.C. at 660, 412 S.E.2d at.335 (quoting Sunamerica, supra).\nThe trial court made numerous findings of fact concerning misconduct by both plaintiff and his counsel as well as circumstances illustrating that their case was without merit. Nevertheless, the court denied any award of attorney\u2019s fees apparently because of the \u201ctiming\u201d of the litigation relative to the order dismissing the Pozen case.\nAccording to the record, the timeline began 10 November 2005 and ended 13 March 2006.\nThe Order dismissing the Pozen case was entered November 10, 2005. Defendants\u2019 reply to Plaintiff\u2019s response to the motion to dismiss [in the Egelhof case] was filed November 15, 2005. Mr. Egelhof sold his shares in Red Hat on December 31, 2005. Oral arguments on the motion to dismiss were originally scheduled for December 20, 2005, but were heard February 2, 2006, upon Plaintiff\u2019s motion. The Order dismissing Egelhof was entered March 13, 2006.\nThe court found that plaintiff\u2019s counsel had ample notice of Pozen and its impact on the instant case, since plaintiff\u2019s counsel personally represented the plaintiff in Pozen. Furthermore, the record includes a letter dated 14 November 2005 sent by defendants\u2019 counsel to plaintiff\u2019s counsel urging them to voluntarily dismiss the case in light of Pozen, in return for a waiver of any claim for fees and costs. The trial court\u2019s reliance on \u201ctiming\u201d here seems misplaced, since oral arguments on the motion to dismiss occurred nearly three months after the dismissal of Pozen, and more than a month after plaintiff divested himself of standing by selling all his stock. Plaintiff ignored defendants\u2019 counsel and persisted in litigation after it was clear that there was no justiciable issue in the case.\nThe trial court never expressly evaluated whether or not the pleading contained a justiciable issue when the plaintiff persisted in opposing defendants\u2019 motion to dismiss, or whether the plaintiff reasonably should have known. The trial court\u2019s failure to adequately address defendants\u2019 motion under N.C. Gen. Stat. \u00a7 6-21.5 is an abuse of discretion and constitutes reversible error. The case should be remanded for consideration of that issue.\nConclusion\nI would affirm the trial court\u2019s imposition of non-monetary sanctions pursuant to N.C. Gen. Stat. \u00a7 1A-1, Rule 11 and its inherent authority to discipline attorneys appearing before it. The case should be remanded for consideration of defendants\u2019 motion for attorney\u2019s fees under N.C. Gen. Stat. \u00a7 6-21.5.", "type": "concurring-in-part-and-dissenting-in-part", "author": "CALABRIA, Judge," } ], "attorneys": [ "Manning, Fulton & Skinner, P.A., by Michael T. Medford, for plaintiff Andrew Egelhof", "Womble Carlyle Sand-ridge & Rice, P.L.L.C., by Pressly M. Millen and Sean E. Andrussier, for defendants.", "Everett, Gaskins, Hancock & Stevens, L.L.P, by E.D. Gaskins, Jr. and Louis E. Wooten, III, for appellants Brian J. Robbins, Jeffrey P. Fink, Steven R. Wedeking and Robbins Umeda & Fink, L.L.P." ], "corrections": "", "head_matter": "ANDREW EGELHOF, Derivatively on Behalf of Red Hat, Inc., Plaintiff v. MATTHEW J. SZULIK, KEVIN B. THOMPSON, PAUL J. CORMIER, TIMOTHY J. BUCKLEY, MARK H. WEBBINK, ALEX PINCHEV, ROBERT F. YOUNG, EUGENE J. MCDONALD, F. SELBY WELLMAN, MARYE A. FOX, WILLIAM S. KAISER, DR. STEVE ALBRECHT and H. HUGH SHELTON, Defendants\nNo. COA08-452\n(Filed 18 November 2008)\n1. Constitutional Law\u2014 due process \u2014 sanctions\u2014notice and opportunity to be heard\nPlaintiff and plaintiffs counsel were not denied due process in the imposition of non-monetary sanctions based on their pleadings in a shareholder derivative action against corporate officers where they received notice that sanctions were being sought and of the basis of those sanctions, and were given the opportunity to present arguments and testimony on their behalf.\n2. Pleadings\u2014 sanctions \u2014 represented party \u2014 not signing pleading \u2014 subject to sanctions\nPlaintiff and plaintiffs out-of-state counsel were represented parties and were subject to Rule 11 sanctions where the original complaint was signed only by plaintiffs North Carolina attorney, and the amended complaint was signed by that attorney and contained a verification by out-of-state counsel which said that the verification was made because plaintiff was absent from San Diego, where the attorney maintained his office. The portion of Higgins v. Patton, 102 N.C. App. 301, that held that defendants could request sanctions against represented plaintiffs regardless of whether they had signed the complaint was not overturned by a later case.\n3. Pleadings\u2014 sanctions \u2014 facial reading of pleading\nThe trial court should not have ordered Rule 11 non-monetary sanctions against plaintiff and his out-of-state counsel where defendants alleged only that plaintiffs claim was not well grounded in fact and did not allege that plaintiff had filed his claim for any improper purpose; the trial court found that the initial pleadings would not alone support Rule 11 sanctions; and the court further found that sanctions were warranted when the combination of all the factors was considered. It has been held that the court must look at the face of the pleading when determining whether a pleading was warranted by existing law and must not read it in conjunction with responsive pleadings.\n4. Costs\u2014 attorney fees \u2014 justiciable issue \u2014 shareholder\u2019s derivative action\nThe trial court\u2019s statements indicate that it exercised its discretion in denying defendants\u2019 request for attorney fees pursuant to N.C.G.S. \u00a7 6-21.5, and the court did not abuse its discretion where it found that the shareholder derivative issue raised by plaintiff was difficult, fact specific and contextual.\n5. Pleadings\u2014 sanctions \u2014 supported by findings\nThe trial court\u2019s denial of Rule 11 sanctions was supported by findings concerning the difficult and case-by-case nature of the shareholder derivative issue raised in the complaint.\nJudge CALABRIA concurring in part and dissenting in part.\nAppeal by plaintiff and plaintiff\u2019s out-of-state counsel and cross-appeal by defendants from order entered on or after 4 February 2008 by Judge Ben F. Tennille in Wake County Superior Court. Heard in the Court of Appeals 25 September 2008.\nManning, Fulton & Skinner, P.A., by Michael T. Medford, for plaintiff Andrew Egelhof\nWomble Carlyle Sand-ridge & Rice, P.L.L.C., by Pressly M. Millen and Sean E. Andrussier, for defendants.\nEverett, Gaskins, Hancock & Stevens, L.L.P, by E.D. Gaskins, Jr. and Louis E. Wooten, III, for appellants Brian J. Robbins, Jeffrey P. Fink, Steven R. Wedeking and Robbins Umeda & Fink, L.L.P." }, "file_name": "0612-01", "first_page_order": 644, "last_page_order": 660 }