Last Friday, the Supreme Court of North Carolina affirmed the Court of Appeals decision in Green v. Kearny, __ N.C. App. __, 739 S.E.2d 156 (2013) per curiam, and thus judicially sanctioned a literal interpretation and application of Rule 54(b) of the North Carolina Rules of Civil Procedure that the Court of Appeals conceded “may seem, at first glance, to be anomalous.” Green v. Kearny, __ N.C. __ (Oct. 4, 2013). An understanding of the ramifications of this ruling is important for any North Carolina practitioner.
The basic (and incredibly unfortunate) facts underlying the Green case are that the main plaintiff was a pedestrian who was struck by a motor vehicle and was determined to be dead by medical personnel who arrived at the scene of the accident. The plaintiff was ultimately transported to the morgue and was placed in a refrigeration drawer. He remained in the drawer until a State Trooper asked to examine the body to determine the direction from which he was struck by the vehicle, at which point it was discovered that the plaintiff was actually still alive. The plaintiff was alleged to have suffered severe permanent injuries.
On May 28, 2008, the plaintiff, through a guardian ad litem, brought a lawsuit relating to the incident against a number of defendants. Plaintiff’s parents joined as co-plaintiffs in the suit, alleging a cause of action against all of the defendants for negligent infliction of emotional distress. It is the parents’ claim that is the focus of the Rule 54(b) issue.
On February 3, 2009, the defendants moved for summary judgment against the parents’ sole claim for negligent infliction of emotional distress. On March 12, 2009, the trial court entered orders granting summary judgment on those motions for summary judgment. Significantly, the parents did not seek appellate review of those orders.
Thereafter, the case was stayed pending appellate review of one defendant’s appeal of a denial of a motion to dismiss based on sovereign immunity. After the Court of Appeals filed an opinion holding that the motion to dismiss should have been granted by the trial court, the defendants moved for summary judgment on the remaining claim of the remaining plaintiff (the injured pedestrian). On December 20, 2010, the trial court entered orders granting defendants’ motions for summary judgment.
The defendants subsequently moved for an award of costs, and the trial court entered an order taxing costs against all plaintiffs. On appeal, the plaintiffs challenged the authority of the trial court to tax costs against the injured pedestrian’s parents to the extent the defendants had incurred those costs after summary judgment had been entered against the parents on their negligent infliction of emotional distress claim. The plaintiffs argued that after the trial court entered summary judgment on the parents’ claim, the parents were no longer parties to the case and the trial court thus lacked authority to tax costs against them that were incurred after they were no longer parties. The Court of Appeals disagreed, stating:
Plaintiffs’ assumption that [the parents] were not parties after the entry of the summary judgment order is contrary to the explicit language of N.C. Gen. Stat. § 1A–1, Rule 54(b), which provides, in pertinent part, that:
When more than one claim for relief is presented in an action . . . or when multiple parties are involved, the court may enter a final judgment as to one or more but fewer than all of the claims or parties only if there is no just reason for delay and it is so determined in the judgment. Such judgment shall then be subject to review by appeal or as otherwise provided by these rules or other statutes. In the absence of entry of such a final judgment, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties and . . . in the absence of entry of such a final judgment, any order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties. (emphasis added).
As a result, N.C. Gen.Stat. § 1A–1, Rule 54(b) directly states that when, as in this case, the trial court has not certified an order granting summary judgment with respect to fewer than all claims or all parties for immediate appellate review, the order in question does not “terminate the action as to any of the . . . parties.” Moreover, “‘in the absence of entry of such a final judgment, any order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.’” Bumpers v. Cmty. Bank of N. Va., 364 N.C. 195, 199, 695 S.E.2d 442, 445 (2010) (quoting Rule 54(b)). “Although the primary purpose of [Rule 54(b)] is to preserve the right of a party to appeal from a final judgment, [N.C. Gen.Stat. § 1A–1,] Rule 54(b) unmistakably defines the effect of a nonfinal order on the status of parties in a multi-party case” and compels the conclusion “that [the parents] remained [ ] parties to the case subsequent to the Court’s nonfinal [partial summary judgment] order.” Dooley v. United Technologies Corp., 152 F.R.D. 419, 424 (D.D.C.1993). Thus, since [the parents] “never requested the [trial] court to issue a final judgment as to [them],” “under the plain language of Rule 54(b), [they] remained [ ] part[ies] to the action,” Knox v. Lederle Labs., 4 F.3d 875, 878 (10th Cir.1993), and remained liable for costs incurred throughout the pendency of this case.
In a dissenting opinion, Judge Steelman indicated that in order to avoid potential liability for costs incurred after the parents’ claim was dismissed, the parents would have had to either voluntarily dismiss their claims with prejudice or ask the court to certify the summary judgment order against them as final. Judge Steelman found both of these options to be unpalatable; the majority felt otherwise. The Court of Appeals specifically stated that had the parents taken a voluntary dismissal with prejudice after their claims were dismissed, that would have “explicity indicated that [the parents] no longer had party status in the case.” Similarly, while Judge Steelman opined that asking for Rule 54(b) certification under such circumstances would encourage piecemeal, interlocutory appeals, the majority noted that while Rule 54(b) certification allows a party to take an appeal, it does not require them to do so. Thus, a plaintiff seeking to avoid potential liability for costs after being dismissed from the case could seek Rule 54(b) certification and then simply not appeal.
The Court of Appeals finished its analysis of the trial court’s authority to tax costs against the parents by stating:
The trial court’s decision to allow the imposition of liability for costs upon parties against whom summary judgment was granted long before the entry of a judgment finally resolving all claims brought by all plaintiffs against all defendants may seem, at first glance, to be anomalous. However, given the literal language of N.C. Gen.Stat. § 1A–1, Rule 54(b), which explicitly provides that the entry of an interlocutory order like the one at issue here does “not terminate the action as to any of the claims or parties” involved, absent a certification of finality, and given the fact that the trial court retained the authority under N.C. Gen.Stat. § 1A–1, Rule 54(b) to revise, or even to reverse, such an interlocutory order until the entry of a final judgment, we are compelled to hold that the trial court did not commit an error of law by taxing costs incurred after the entry of an order granting summary judgment in Defendants’ favor with respect to the negligent infliction of emotional distress claims asserted against them by [the parents] against all Plaintiffs.
With the Supreme Court of North Carolina affirming the majority opinion from the Court of Appeals, North Carolina law is now settled that if a party is dismissed entirely from a case but that case continues on in litigation with other parties, the dismissed party may be liable for costs incurred after the point of its dismissal. The Court of Appeals opinion in Green sets out plainly the options that a dismissed party has to avoid such a result: file a voluntary dismissal with prejudice after the court orders a dismissal with prejudice or seek Rule 54(b) certification from the trial court that the judgment is “final” (and then either pursue an interlocutory appeal or choose not to appeal). North Carolina practitioners must be cognizant of this rule, lest their clients end up being unexpectedly taxed with costs years after they believe their case to be over.