STEPHENS, Judge.
This case concerns a dispute regarding compensation and ownership rights between Plaintiff Robert Paul Morris ("Morris") and his employer, Scenera Research, LLC ("Scenera"), for inventions developed by Morris during his employment with Scenera. On 25 September 2009, Morris filed a complaint against Scenera and its chief executive officer, Ryan C. Fry ("R. Fry") — collectively, "Defendants" — in Wake County Superior Court, alleging violations of the North Carolina Wage and Hour Act ("WHA") and the Retaliatory Employment Discrimination Act ("REDA") as well as claims for fraud, unjust enrichment, and breach of contract. R. Fry is the son of Stan Fry ("S. Fry"), who founded Scenera under the name "IPAC, LLC."
On 6 October 2009, Defendants filed notice of removal to the United States District Court for the Eastern District of North Carolina. Sixteen months later, on 16 February 2011, the District Court remanded the case for lack of subject matter jurisdiction to Wake County Superior Court, where it was designated a complex business case and assigned to the Honorable James L. Gale of the North Carolina Business Court ("the business court"). Defendants filed their second amended answer and counterclaims on 31 March 2011, denying Morris's material allegations and, inter alia, seeking declaratory judgments that Morris: (1) was not entitled to rescind any patent ownership assignment he had already made to Scenera, (2) was obligated to assign ownership of unassigned inventions to Scenera, and (3) had resigned his employment and was not entitled to further bonus payments. Scenera also asserted claims that Morris breached his fiduciary duties and breached his obligation to continue assigning patents to Scenera.
On 24 October 2011, Morris moved for partial summary judgment, and Scenera moved for summary judgment. Morris sought to dismiss certain of Scenera's counterclaims and defenses, and Scenera sought to have the business court declare that Morris was "hired to invent" and, thus, that Scenera owned the rights to the inventions Morris had developed while working there. Scenera also sought to dismiss Morris's claims of fraud, unjust enrichment, and retaliatory discrimination. The business court addressed those motions on 4 January 2012 and described the background facts as follows:
In that context, the business court denied Morris's motion for partial summary judgment in its entirety. It granted Scenera's motion on the question of whether Morris was "hired to invent"
The remaining claims — Morris's breach of contract, WHA, and REDA claims plus Scenera's patent ownership and breach of assignment counterclaims
At the close of all the evidence, the business court granted Defendants" motion for directed verdict on the issue of patent ownership and denied Defendants" motion for directed verdict as to Morris's WHA and REDA claims.
The jury reached a unanimous verdict on 15 February 2012, awarding Morris: (1) $210,000 in patent bonuses for patent applications filed or patents issued between 1 January 2008 and 17 June 2009
On 14 May 2012, the business court issued its judgment on the jury award and Morris's motion for supplemental relief, declining to treble Morris's $390,000 in damages under REDA, but granting $450,000 for all attorneys' fees and $210,000 in liquidated damages under the WHA because "Defendants [did not] demonstrate[ ] good faith or reasonable grounds for a belief that their failure to pay application and issuance bonuses accruing during the period of January 1, 2008 through July 10, 2009 was not a violation of the [WHA]." The court also declared that: (1) "Scenera is the owner of each of the inventions, patent applications, and patents identified in ... Morris's [c]omplaint [because o]wnership of those inventions vested in Scenera at the time of invention"; (2) Morris shall assign any unassigned patent applications to Scenera; and (3) Scenera will not recover any damages for its patent ownership and breach of assignment counterclaims. On 30 May 2012, Defendants moved for judgment notwithstanding the verdict ("JNOV") or, in the alternative, for a new trial. The business court denied that motion on 27 June 2012. Both parties appealed.
Defendants make three arguments on appeal. First, they contend that the business court erred in denying their motions for directed verdict on Plaintiff's WHA and REDA claims and for JNOV. Second, Defendants contend the business court erred by awarding $210,000 in liquidated damages under the WHA. Third, Defendants assert that, if the business court's judgment is reversed, its grant of attorneys' fees should be vacated. We find no error.
"The standard of review of directed verdict [or JNOV] 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." Davis v. Dennis Lilly Co., 330 N.C. 314, 322, 411 S.E.2d 133, 138 (1991) (citations omitted); Tomika Invs., Inc. v. Macedonia True Vine Pentecostal Holiness Church of God, Inc., 136 N.C. App. 493, 498-99, 524 S.E.2d 591, 595 (2000). "[A n]on-movant's evidence which raises a mere possibility or conjecture cannot defeat a motion for directed verdict. If, however, the non-movant shows more than a scintilla of evidence, the court must deny the motion." McFetters v. McFetters, 98 N.C. App. 187, 191, 390 S.E.2d 348, 350, disc. review denied, 327 N.C. 140, 394 S.E.2d 177 (1990) (citation omitted); see also Norman Owen Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 172, 506 S.E.2d 267, 270 (1998) ("The [JNOV] motion should be denied if there is more than a scintilla of evidence supporting each element of the non-movant's claim.").
In support of their argument that the business court should have granted their motions for directed verdict and JNOV, Defendants assert that Morris presented "no evidence" that he "earned [the $675,000 in issuance] bonuses under Scenera's bonus policy...." We disagree.
"[T]he [WHA] requires an employer to ... pay those wages and benefits due when the employee has actually performed the work required to earn them. Once the employee has earned the wages and benefits under this statutory scheme, the employer is prevented from rescinding them," but for certain unrelated exceptions. Kornegay v. Aspen Asset Grp., LLC, 204 N.C. App. 213, 229-30, 693 S.E.2d 723, 735-36 (2010) (citation omitted; emphasis in original). Defendants argue that Morris failed to present evidence that he "earned" the issuance bonuses under Scenera's policy because: (1) Scenera was only obligated to pay issuance bonuses after the patents issued, (2) the patents had not issued when Morris left, (3) Morris still had "a significant amount of additional work" to do after the initial patent application in order to ensure that the patents actually issued,
In response, Morris points to his testimony that:
He also cites to the testimony of Mona Singh ("Singh"), who worked for Scenera as an inventor. Singh agreed with the statement that "whatever bonuses applied to [an] agreement became earned and due at the time the patent was filed." Morris also calls our attention to evidence that his right to the issuance bonuses was not conditioned on continued employment with Scenera. Specifically, he notes that the bonus plans among Scenera's employees varied with each individual and cites to his testimony that no one ever told him he had to remain an employee to be entitled to an issue bonus. Morris supports this point with Singh's testimony that she
After reviewing the testimony presented at trial and considering the evidence in a light most favorable to Morris, we conclude that Morris presented more than a scintilla of evidence in support of his position that he "earned" the $675,000 in issuance bonuses under Scenera's bonus policy. Indeed, the conflicting evidence offered by the parties is enough, on its own, to allow the matter to go to the jury. See Citrini v. Goodwin, 68 N.C. App. 391, 396, 315 S.E.2d 354, 359 (1984) ("[Defendant] introduced evidence of novation which
Defendants next assert that, "[e]ven if Morris had earned the issuance bonuses" under the WHA, the business court should have granted their motions for directed verdict and JNOV because the bonuses were not "calculable" at the time of trial. We disagree.
Section 95-25.7 of the WHA provides the following instruction regarding "[p]ayment to separated employees": "Employees whose employment is discontinued for any reason shall be paid all wages due.... Wages based on bonuses ... shall be paid on the first regular payday after the amount becomes calculable when a separation occurs." N.C. Gen.Stat. § 95-25.7 (2011). At trial, Morris argued that the amount of money owed by Scenera in issuance bonuses was "calculable" because 150 patent applications were pending with the U.S. Patent and Trademark Office ("the patent office") at the end of his employment. Having previously testified that approximately 90% of the patents he submitted to the patent office had successfully issued in the past,
Before discussing the merits of Defendants' second argument, we address their preliminary contention that the business court erred in submitting the question of "whether the issuance bonuses are presently calculable" to the jury. Defendants contend this is a question of law, not fact, and should have been decided by the judge. Though this argument is not an element of Defendants' appeal of the denial of their motions for directed verdict and JNOV, it was properly preserved by objection. Accordingly, we address it here as a predicate matter.
Outside the presence of the jury, the following exchange occurred between the business court (here, "THE COURT") and counsel for Morris (here, "MR. BROCK"):
Regarding the different duties of the judge and jury, our Supreme Court has stated that "[t]he judge lays down and explains the law, and the jury is under [the] obligation to accept and apply the law as thus explained." State v. Fogleman, 204 N.C. 401, 405, 168 S.E. 536, 538 (1933). The determination of the weight of the evidence and the resulting facts from the evidence is the exclusive province of the jury. Id.; see also Sneed v. Lions Club of Murphy, N.C., Inc., 273 N.C. 98, 101, 159 S.E.2d 770, 772 (1968) ("It is the province of the court to determine whether the evidence, circumstantial, direct, or a combination of both, considered in the light most favorable to the plaintiff, is sufficient to permit a legitimate inference of the facts essential to recovery; and it is the province of the jury to weigh the evidence and to determine what it proves or fails to prove.") (citations omitted).
In this case, the business court asked the jury to determine whether it could calculate the amount of issuance bonuses owed to Morris in order to answer the larger question of whether the WHA applied to enforce payment of those wages. Though the business court characterized this question as a potential "legal issue" in its colloquy with Mr. Brock, we hold that "whether bonus compensation is "calculable" under the WHA" is a question of fact. Section 95-25.7 of the WHA requires the decision-making entity to evaluate the evidence presented at trial, apply its logical reasoning, and, in doing so, determine if such evidence is sufficient to characterize the amount of earned bonuses as "presently calculable." This requires a weighing of the evidence and, thus, falls in a jury trial within the exclusive purview of the jury. See Fogleman, 204 N.C. at 405, 168 S.E. at 538 (1933); cf. Ferguson v. Ferguson, 55 N.C. App. 341, 347, 285 S.E.2d 288, 292 ("Whether plaintiff committed an unconscionable act and whether her actions were more egregious than those of defendants[ ] are questions of material fact to be decided by a jury and not by the court."), disc. review denied, 306 N.C. 383, 294 S.E.2d 207 (1982). Accordingly, we hold that the question of calculability under the WHA was properly presented to the jury for review. Cf. Meachan v. Montgomery Cnty. Bd. of Ed., 47 N.C. App. 271, 278, 267 S.E.2d 349, 353 (1980) ("If the evidence in a particular case raises a permissible inference that [the elements of equitable estoppel exist], ... estoppel is a question of fact for the jury....").
Even though this question was properly before the jury, Defendants argue that "there is no evidence that the issuance bonuses were calculable" because "[t]he amount of each bonus will not be calculable unless and until such time as the [patent office] disposes of a pending application." They note that many of Morris's patents had been pending for eight years at the time of the trial and point out that it is difficult to know whether a particular patent will issue and, if it does, when that issuance will occur. Based on those circumstances, Defendants contend "there was no evidence [at trial] that [Morris's historic] success rate on the 150 pending [patent] applications would be the same as for applications that previously received a final [patent office] determination." (Emphasis in original). We disagree.
The term "calculable" is not defined in the WHA or in our case law. See N.C. Gen.Stat. § 95-25.2 (2011) (defining terms used in the WHA); see also Kornegay, 204 N.C.App. at 230, 693 S.E.2d at 736. In such a circumstance, when the language of a statute is clear and unambiguous, we apply its plain and definite meaning. Fowler v. Valencourt, 334 N.C. 345, 348, 435 S.E.2d 530, 532 (1993). Because we find that the language of section 25.7 of the WHA
In its 14 May 2012 judgment, in response to Morris's motion for supplemental relief, the business court granted $210,000 in liquidated damages to Morris for Defendants" failure to pay application and issuance bonuses between 1 January 2008 and 10 July 2009. Defendants argue that the business court erred in granting those damages because Scenera "acted with both subjective good faith and an objectively reasonable belief that it was not violating the [WHA.]" We are unpersuaded.
Section 25.22(a1) of the WHA provides:
N.C. Gen.Stat. § 95-25.22(a1) (2011) (emphasis added). At trial,
Kornegay, 204 N.C.App. at 241, 693 S.E.2d at 742 (citations, quotation marks, and brackets omitted).
A court's determination regarding whether an employer has made a showing of good faith and objective reasonableness is reviewed under a de novo standard. See id. at 245, 693 S.E.2d at 745. The findings of fact in support of that determination are reviewed under a competent evidence standard. Id. If a trial court properly determines that an employer failed to make a showing of good faith and objective reasonableness under those standards, then it has no discretion and must award liquidated damages to the employee. Hamilton v. Memorex Telex Corp., 118 N.C. App. 1, 15, 454 S.E.2d 278, 285, disc. review denied, 340 N.C. 260, 456 S.E.2d 830 (1995). If, however, the trial court properly determines that the employer established good faith and objective reasonableness, we review its decision regarding whether to award liquidated damages for abuse of discretion. Kornegay, 204 N.C.App. at 241, 693 S.E.2d at 742. "Abuse of discretion results where the court's ruling is manifestly unsupported by reason or is so arbitrary that it could not have been the result of a reasoned decision." State v. Hennis, 323 N.C. 279, 285, 372 S.E.2d 523, 527 (1988).
In granting Morris's motion for supplemental relief, the business court made the following determination:
(Emphasis added). Accordingly, the court's conclusion that Defendants failed to establish good faith and objective reasonableness appears to turn on its finding that any change in the agreement to pay wages to Morris was not reduced to writing until June of 2009.
Defendants do not contest the validity of the business court's finding that Scenera failed to reduce any change in Morris's pay to writing until June of 2009. Rather, they refer to the court's determination as "flawed" and argue that, as a matter of policy, any failure to properly notify employees under the WHA should not "justify the award of liquidated damages" because that would mean "every failure to properly notify employees of changes in wages would automatically entitle [those employees] to liquidated damages, a result inconsistent with the plain text of [section 95-22.22(a1) ]." (Emphasis in original). We disagree.
As Morris notes in his brief, the WHA requires every employer to "[n]otify employees, in writing or through a posted notice..., at least 24 hours prior to any changes in promised wages." N.C. Gen.Stat. § 95-25.13(3). Failure to do so is a violation of the Act. Here, the business court cited to Defendants' failure to provide written notice of the change in Morris's bonus plan as support for its determination that Defendants failed to act in good faith and with objective reasonableness. While that failure does not and could not result in "automatic" liquidated damages, it constitutes a violation of the Act and, as such, may be used as evidence that the employer acted unreasonably or without good faith.
Lastly, Defendants contend that, if this Court reverses the business court's judgment on any of the grounds discussed above, we should vacate its award of attorneys' fees. Because we find no error regarding the business court's judgment on Defendants' first and second issues on appeal, we need not address this third argument.
Morris makes five arguments on appeal. First, he contends that the business court erred by failing to add liquidated damages to the jury's award of patent bonuses for the pending patents. Second, he asserts that the business court erred by failing to award treble damages under REDA. Third, he argues that the business court erred by reducing the attorneys' fees award. Fourth, he claims that he is "entitled to elect between rescinding the patent assignments or accepting the award of patent bonuses and liquidated damages." Fifth, he argues — in the alternative to his fourth argument — that the business court erred in granting Defendants' motions for summary judgment and directed verdict on patent ownership. We find no error on the first two arguments, reverse the business court's judgment in part under the third argument, remand in part on the third and fourth arguments, and do not address the fifth argument.
Morris contends that the business court erred in failing to grant liquidated damages in response to the jury's award of issuance bonuses for the 150 patents pending with the patent office. He argues that Scenera did not establish that it acted with good faith and objective reasonableness under section 95-25.22(a1) of the WHA when it denied the bonuses on the belief that "Morris was required to be employed at the time the patents issued in order to receive his bonuses." For that reason, Morris contends that the business court was required to award liquidated damages under the Act. We disagree.
In its 14 May 2012 opinion, the business court determined that Scenera made a proper showing of good faith and objective reasonableness as to its failure to pay the issuance bonuses. As noted above, we review the court's findings under a competent evidence standard. See Kornegay, 204 N.C.App. at 245, 693 S.E.2d at 745. If those findings are based on competent evidence, we review the court's conclusion that the employer acted in good faith and with objective reasonableness de novo. See id. If we conclude that the business court correctly determined that the employer acted in good faith and with objective reasonableness, we review the court's award of liquidated damages for abuse of discretion. See id. at 241, 693 S.E.2d at 742. If the court did not correctly determine that Scenera acted in good faith and with objective reasonableness, then it necessarily erred, and liquidated damages must be awarded. See N.C. Gen.Stat. § 95-25.22(a1); Hamilton, 118 N.C.App. at 15, 454 S.E.2d at 285.
Under section 95-25.22(a1) of the WHA, a court may decline to award liquidated damages in its discretion if the employer shows that it acted in good faith and with reasonable grounds for believing that it was not in violation of the WHA. N.C. Gen.Stat. § 95-25.22(a1). In declining to award liquidated damages to Morris, the business court made the following determination:
In challenging the business court's determination, Morris argues that Defendants' failure to pay these bonuses was not objectively reasonable because (1) the WHA has "clear and explicit requirements and prohibitions" regarding an employer's obligation to give notice of any grounds for the "loss or forfeiture of a bonus" and (2) Scenera failed to provide Morris with such notice.
This argument ignores the business court's finding that Defendants failed to pay
A willful violation of the retaliatory discrimination section of REDA requires the trial court to treble damages under that Act. N.C. Gen.Stat. § 95-243 (2011). Morris asserts that the business court erred in declining to treble his $390,000 jury award under REDA because the jury rejected Defendants' alternative contentions that Morris had "effectively resigned" or that Defendants would have terminated him even if he had not made the disputed wage claims. Accordingly, Morris reasons, Defendants' violation of REDA was "willful" as a matter of law. We disagree.
In pertinent part, Section 95-243 of REDA states:
N.C. Gen.Stat. § 95-243 (emphasis added). In order to determine whether Defendants' violation of REDA was "willful," we must first determine the meaning of that term.
"Willful" is not defined under REDA. The business court, in its 14 May 2012 judgment, described "the relevant question" on the issue of Defendants' willfulness as "whether Defendants acted in conscious and intentional disregard of or indifference to Morris's rights when terminating his employment." However, the North Carolina appellate courts have neither defined the term "willful" nor set a standard for reviewing a trial court's finding of willfulness under section 95-243. Accordingly, we may "look to federal decisions for guidance." See Abels v. Renfro Corp., 335 N.C. 209, 218, 436 S.E.2d 822, 827 (1993) (noting that the appellate courts may "look to federal decisions for guidance in establishing evidentiary standards and principles of law to be applied in discrimination cases") (citation omitted).
In McLaughlin v. Richland Shoe Co., 486 U.S. 128, 108 S.Ct. 1677, 100 L.Ed.2d. 115 (1988), the United States Supreme Court addressed a three-year exception to the general two-year statute of limitations for "willful" violations of the Fair Labor Standards Act
The United States Court of Appeals for the Eleventh Circuit has determined that the issue of "willfulness" under the ADEA is a question of fact for the jury. Formby v. Farmers & Merchants Bank, 904 F.2d 627, 632 (11th Cir.1990)
Under certain circumstances, a party may waive or forfeit its right to have a jury decide questions of fact. Sykes v. Belk, 278 N.C. 106, 123, 179 S.E.2d 439, 449 (1971). Here, Morris waived his right to have the issue of willfulness decided by the jury because he explicitly concurred with the business court's suggestion that the issue of Scenera's "willfulness" under REDA was for the court to decide. Accordingly, we review the business court's factual determination that Scenera did not "willfully" violate REDA under the competent evidence standard used for a trial court's findings of fact made during a bench trial. See generally In re Estate of Archibald, 183 N.C. App. 274, 276, 644 S.E.2d 264, 266 (2007) ("The standard of review on appeal from a judgment entered after a non-jury trial is whether there is competent evidence to support the trial court's findings of fact and whether the findings support the conclusions of law....") (citations and quotation marks omitted).
In determining that Defendants did not willfully terminate Morris's employment, the business court relied on the following "key evidence":
[Morris's attorney] suggested terms for such an agreement. He also indicated that he would initiate legal recourse to collect the unpaid bonuses if they had not been paid by July 13, 2009.
Morris argues that the court erred in finding that Scenera did not act willfully by citing to: (1) Morris's testimony that Scenera's general counsel informed him that he should "quit" and stated "you know, we can't fire you" when Morris refused to quit; (2)
Defendants respond by pointing out that: (1) Scenera's general counsel "flatly denied making [the] statement [alleged by Morris that `we can't fire you']," and the business court was not required to rely on that statement as evidence of willfulness even if it had been made; (2) Morris's counsel testified that he suggested "look[ing] at terminating formal employment and set[ting Morris] up as an independent contractor" in his early July message to Scenera; and (3) R. Fry believed that Morris was intentionally "not going to do [his] job" because of difficulties resulting from negotiations with Scenera.
After a thorough review of the record on appeal, we find that there is competent evidence to support the business court's determination that Scenera did not willfully violate REDA. Though the jury rejected Defendants' argument that Morris "effectively resigned," it made no statement regarding Scenera's belief on the issue of Morris's employment status. Further, Defendants have offered evidence, supra, that Scenera held a good faith belief that it was not in violation of REDA. Therefore, we find that the evidence presented at trial and summarized in the business court's 14 May 2012 judgment is competent to support the conclusion that Scenera did not know or show reckless disregard as to whether its conduct was prohibited by REDA. Accordingly, the business court did not err in declining to treble Morris's $390,000 REDA damage award.
In its May judgment following the jury trial, the business court determined that "Morris should recover attorneys' fees as a successful litigant, but [that] the total fees and expenses sought should, in part, be allocated among the claims on which he was successful and those on which he was not." Morris was successful on all ten of the issues submitted to the jury and on Scenera's counterclaims, but failed on the questions of fraudulent inducement, unjust enrichment, and whether he was "hired to invent," which the business court resolved on summary judgment. For that reason, the court granted $450,000 in attorneys' fees instead of the $800,000 requested by Morris.
As the business court notes in its judgment, sections 95-25.22(d) of the WHA and 95-243(c) of REDA provide that the trial court "may" award reasonable costs and expenses, including attorneys' fees, to the plaintiff. N.C. Gen.Stat. §§ 95-25.22(d), -243(c). Interpreting subsection 25.22(d) of the WHA, we have held that "[a] trial court's decision [regarding] whether or not to award attorneys' fees ... is reviewed for abuse of discretion." Kornegay, 204 N.C.App. at 247, 693 S.E.2d at 746; Fulk v. Piedmont Music Ctr., 138 N.C. App. 425, 435, 531 S.E.2d 476, 482 (2000) ("[W]here, as here[,] the Act applies, the court in its discretion may award plaintiff attorney[s'] fees."). Because subsection 243(c) of REDA similarly provides that a trial court "may award [attorneys' fees] to the plaintiff," we hold that a court's decision to grant attorneys' fees under that section is similarly reviewed for abuse of discretion. See N.C. Gen.Stat. § 95-243(c) (emphasis added); see also Kornegay, 204 N.C.App. at 247, 693 S.E.2d at 746. "An abuse of discretion occurs when the trial court's ruling is so arbitrary that it could not have been the result of a reasoned decision." Sowell v. Clark, 151 N.C. App. 723, 727, 567 S.E.2d 200, 202 (2002) (citation and quotation marks omitted).
On appeal, Morris argues that the business court erred by allocating among legal claims — and thereby reducing his award of attorneys' fees — because (1) claims that arise from a common nucleus of operative fact should not be allocated; (2) the business court "failed to make any findings of fact or offer any conclusions of law on whether Morris's claims and Defendants' counterclaims [arose] from a common nucleus of operative fact[ ]"; and (3) the parties' claims did, in fact, arise from a common nucleus of operative fact. We agree with Morris's first two
Morris bases his argument on three of our opinions: (1) Hamilton, 118 N.C. App. 1, 454 S.E.2d 278; (2) Okwara v. Dillard Dep't Stores, Inc., 136 N.C. App. 587, 525 S.E.2d 481 (2000); and (3) Whiteside Estates, Inc. v. Highlands Cove, LLC, 146 N.C. App. 449, 553 S.E.2d 431 (2001), dismissed as moot and disc. review denied, 356 N.C. 315, 571 S.E.2d 219-20 (2002). First, in Hamilton, we concluded that "the trial court did not err in refusing to reduce the [trial court's award of] attorneys' fee award to account for [certain members of a class of plaintiffs] who prevailed only on [their] contract claim[s]" because "the attorneys' work was not divisible between the [WHA] claims and [those] contract claims." Hamilton, 118 N.C. App. at 17, 454 S.E.2d at 286 (citing Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) and noting that the reasoning of the federal courts, while not binding on us, is instructive). Second, in Okwara, we affirmed "the trial court's conclusion that no apportionment of fees was necessary" because "plaintiff's claims arose from a common nucleus of operative fact[ ]" and were thus "inextricably interwoven." Okwara, 136 N.C.App. at 596, 525 S.E.2d at 487 (quotation marks omitted). In so holding, we relied on and described the Supreme Court's opinion in Hensley as follows:
Id. at 595, 525 S.E.2d at 486-87 (citations and brackets omitted). Lastly, in Whiteside Estates, we determined that the trial court was not required to apportion attorneys' fees because "all of [the] plaintiff's claims [arose] from the same nucleus of operative fact[ ] and each claim was `inextricably interwoven' with the other claims...." Whiteside Estates, 146 N.C.App. at 467, 553 S.E.2d at 443 (citing Okwara, 136 N.C.App. at 596, 525 S.E.2d at 487). These cases are controlling when considering the question of whether an award of attorneys' fees may be allocated under the WHA or REDA.
The Hensley opinion, which provided the rationale for each of the cases discussed above, concerns a federal statute allowing for attorneys' fees in civil rights cases. Like the WHA and REDA, that statute provides that the trial court, "in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs...." 42 U.S.C. § 1988(b) (2006) (emphasis added). Interpreting that statute, the Hensley Court provided the following instruction:
Hensley, 461 U.S. at 440, 103 S.Ct. at 1943, 76 L.Ed.2d at 54-55. In reviewing the business court's allocation of attorneys' fees under the WHA and REDA, we must follow our opinions in Whiteside Estates, Hamilton, and Okwara and employ the rationale laid down in Hensley. See In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989).
In his brief, Plaintiff points out that the trial court failed to make any findings of fact or conclusions of law regarding whether his claims arose from a common nucleus of operative fact. He argues that his claims are related nonetheless because "[e]very claim asserted in the [c]omplaint and [a]mended [c]omplaint by Morris arises out of his claim for patent bonuses, Defendants' refusal to
The business court's 14 May 2012 judgment provided no authority for its determination that Morris's award of attorneys' fees "should, in part, be allocated among the claims on which he was successful and those on which he was not." Though the court stated in its judgment that it "considered the holdings in Whiteside Estates ... and Hamilton [,]" it made no findings regarding whether Morris's claims were sufficiently related to preclude the allocation of attorneys' fees and did not address the legal standard relied upon in those decisions. Rather, the court's discussion is limited to the reasonableness of the fees overall. Therefore, we are unable to review the court's decision to allocate among Morris's claims in accordance with Hamilton, Okwara, and Whiteside Estates. See also Hensley, 461 U.S. at 440, 103 S.Ct. at 1943, 76 L.Ed.2d at 54-55. Accordingly, we reverse the business court's award of attorneys' fees and remand to the trial court for further findings of fact and conclusions of law regarding whether Morris's claims arose from a common nucleus of operative fact and, thus, whether he is entitled to all of his attorneys' fees.
Morris next argues that "the trial court erred in its summary judgment order by foreclosing Morris's right to elect between money damages or rescission of the patent assignments" and requests that this Court remand this case "to the trial court with instructions that Morris is entitled to elect between his WHA [damages] award[ ] or rescission of his patent assignments." We agree.
The remedy of rescission "implies the ... abrogation of [a] contract [by the party seeking it] and a restoration of the benefits [received] from the other party." Brannock v. Fletcher, 271 N.C. 65, 74, 155 S.E.2d 532, 541 (1967) (citation and quotation marks omitted).
Id. at 74-75, 155 S.E.2d 532 (citations and quotation marks omitted; italics in original).
Before addressing the merits of Morris's argument, we consider Defendants' contention that Morris waived his right to argue rescission on appeal because he did not raise that issue below. In support of this contention, Defendants allege that Morris "never sought rescission in the trial court" and "[h]is complaint did not include a claim for rescission ... nor did he plead rescission as an affirmative defense in his answer to Scenera's counterclaims." This is incorrect.
Morris's complaint, though it does not explicitly mention the word "rescission," asserts in its "[b]reach of [c]ontract" section that: (1) the parties entered into a contract whereby Morris would receive $10,000 for each patentable invention developed at Scenera, $5,000 for patent applications filed and $5,000 for patents issued; (2) Scenera breached the contract by refusing to pay those bonuses; and (3) Morris is owed, inter alia, "specific restitution in the form of the rights and ownership of the patent applications and patents" and "damages in excess of $10,000." In addition, both Defendants
The substance of Morris's argument is that he is entitled to elect between the remedies of (1) damages for Scenera's breach of the WHA, which were awarded in the total amount of $885,000 at trial, or (2) rescission of the patent-bonus agreement ("PBA")
Defendants offer three "independent reasons" that Morris's argument is without merit. First, Defendants contest the existence of the PBA and argue that no summary judgment evidence supports the existence of a separate, patent-bonus agreement between Morris and Scenera. Second, Defendants alternatively argue that the breach was not material because (a) the breach only existed for eighteen months and (b) the parties had already agreed on a fee of $5,000 for each patent application filed and patent issued, meaning that the damages award was an adequate remedy alone. Third, Defendants assert that ownership of each invention vested in Scenera "immediately upon its discovery" because Morris was "hired to invent" by Scenera and, thus, Morris was "legally bound to execute patent assignments as part of his employment duties." We are unpersuaded.
First, as Morris notes in his reply brief, the record before the business court on summary judgment included "ample evidence" of the existence of the PBA. Indeed, the affidavit provided by Morris in opposition to Scenera's motion for summary judgment describes the agreement between Morris and S. Fry in detail. Further, Morris stated in his 2010 deposition in the Eastern District of North Carolina action that "[he] had [his] own agreement and own payment [while he was an employee with Scenera]. It was 5 and 5. And that was established before these were drawn up."
Second, Scenera's failure to pay Morris under the PBA constitutes a prima facie material breach of that agreement. In Wilson, our Supreme Court described the breach requirement for rescission as follows:
Wilson, 261 N.C. at 43, 134 S.E.2d at 242-43 (citations and quotation marks omitted). Scenera's obligation to pay Morris for the patents submitted to and issuing from the patent office was a covenant on which the oral contract between the two parties depended. Failure to fulfill that covenant constitutes a material breach. The fact that Scenera failed to pay bonuses to Morris for eighteen months is relevant only to the extent that it provides a cap on the number of times Defendants breached; it does not affect the materiality of those breaches. Similarly, the adequacy of money damages is not relevant to the materiality of the breach. Our Supreme Court made it clear in Wilson that a party may "elect" to rescind an agreement when there is a material breach of this nature. Id.
Third, the business court's determination in its memorandum opinion that Morris was "hired to invent" is inapposite. As Morris notes in his reply brief, the "hired to invent" doctrine works to vest employers with intellectual property rights in those inventions made by their employees when those employees were hired to invent and compensated for their work. See Speck v. N.C. Dairy Foundation, Inc., 311 N.C. 679, 687, 319 S.E.2d 139, 144 (1984) ("It matters not in what capacity the employee may originally have been hired, if he be set to experimenting with the view of making an invention[ ] and accepts pay for such work, it is his duty to disclose to his employer what he discovers in making the experiments, and what he accomplishes by the experiments belongs to the employer.") (citing Houghton v. United States, 23 F.2d 386, 390 (4th Cir.1928)) (emphasis added). Morris was not compensated for the patents submitted to and issuing from the patent office between 1 January 2008 and 17 June 2009. Accordingly, Scenera's failure to pay those bonuses constituted a material breach of that contract and entitled Morris to sue for either rescission or damages. Because the jury granted damages for Scenera's breach, we direct the trial court to allow Morris to elect between the remedies of damages or rescission. See, e.g., Mapp v. Toyota World, Inc., 81 N.C. App. 421, 426-27, 344 S.E.2d 297, 301 (1986) ("[W]e hold that plaintiff should be allowed to elect her remedy after the jury's verdict.... [I]t would be manifestly unfair to require plaintiffs ... to elect before the jury has answered the issues and the trial court has determined whether to treble the compensatory damages found by the jury[. Therefore,] such election should be allowed in the judgment.") (emphasis in original).
Alternative to his fourth argument, Morris contends that the business court erred in granting Scenera's motions for (1) summary judgment on whether Morris was "hired to invent" and (2) directed verdict on ownership of the unassigned patents. Because we have remanded this case on the question of election of remedies between rescission and damages, we need not address this final argument.
NO ERROR in part, AFFIRMED in part, REVERSED in part, and REMANDED in part for further judgment.
Judges McGEE and HUNTER, ROBERT C., concur.
4 William Dwight Whitney, The Century Dictionary and Cyclopedia 3123 (15th ed.1906).