A civil litigant may ordinarily appeal from a final judgment, but the North Carolina General Statutes also permit an appeal from “every judicial order or determination of a judge of a superior or district court, upon or involving a matter of law or legal inference, whether made in or out of session, which affects a substantial right claimed in any action or proceeding.” N.C. Gen. Stat. § 1-277(a). Thus, courts are often faced with the question of what exactly constitutes a “substantial right.” One way for an appellant to demonstrate the presence of a substantial right is to show that denying immediate review would create the possibility of inconsistent verdicts. The Court of Appeals released two opinions today that shed light on this tricky path to achieving interlocutory review.
In White v. Bald Head Island Yacht Club, the parties were fighting over a club member’s delinquent dues and forfeiture of the right to use a portion of the Bald Head Island Marina. The member filed a declaratory judgment to establish her rights, and the club brought several counterclaims. The trial court granted summary judgment in favor of the club on all of the member’s claims, and the member then sought to appeal. The Court of Appeals acknowledged that the appeal was interlocutory (as the counterclaims were still outstanding) but heard the appeal because the defendants’ “counterclaims have issues in fact common to the claim appealed, thereby creating the possibility of prejudice from inconsistent verdicts.” Thus, two facts were important: 1) the possibility of inconsistent verdicts was already in play because the counterclaims were already filed, and 2) the claims and counterclaims had overlapping facts.
In Builders Mutual Insurance Co. v. Meeting Street Builders, LLC, however, a different panel of the court reached the opposite conclusion. There, the parties were disputing insurance coverage related to the construction of certain townhomes in South Carolina. The homeowners association first brought suit in South Carolina against the developers for certain construction defects (but apparently did not bring up the issue of insurance coverage). The insurance company subsequently brought a declaratory judgment action in North Carolina and included the HOA as a defendant. The North Carolina trial court granted the HOA’s motion to dismiss for lack of personal jurisdiction. The trial court also denied the defendants’ motion to dismiss for failure to join a necessary party because the HOA was not ‘necessary,’ and the defendants appealed. As in White, the Court of Appeals noted that the appeal was interlocutory and stated that the right to avoid two trials on the same issue may be a substantial right. However, in this case the court did not find a real possibility of inconsistent verdicts. Although the HOA could hypothetically bring a declaratory judgment action in South Carolina to determine the coverage of the insurance policy, no such suit had been filed. Because “the possibility of further litigation of these issues . . . is merely speculative,” the court dismissed the appeal.
Appealing parties should remember that to demonstrate a substantial right under this rule, they must show 1) that the two matters involve overlapping facts, and 2) that the possibility of inconsistent verdicts between two cases, or even between two parts of the same case, is real and not hypothetical.