Maurer v. Slickedit, Inc.

Maurer v. SlickEdit, Inc., 2006 NCBC 1

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISION

WAKE COUNTY 04 CVS 10527

JILL L. MAURER,

Plaintiff,

ORDER AND OPINION

v.

SLICKEDIT, INC., ANDRE BOISVERT,

ERICA H. BOISVERT, J. CLARK MAURER,

and HOWARD H. LEWIS,

Defendants.

O, what a tangled web we weave,

When first we practise to deceive!

– Sir Walter Scott, “Marmion” (1808)

{1} This matter comes before the Court on Defendant Andre Boisvert’s post-trial motions for

judgment notwithstanding the verdict or in the alternative for a new trial and upon Plaintiff Jill Maurer’s

motion for liquidated damages under the North Carolina Wage and Hour Act, which was set aside for later

determination prior to trial.

{2} After considering the briefs and oral arguments of each party and for the reasons below, the Court

GRANTS Defendant Boisvert’s motion for judgment notwithstanding the verdict and Plaintiff’s claim

against SlickEdit, Inc. for liquidated damages under the North Carolina Wage and Hour Act. Defendant

Andre Boisvert’s motion, in the alternative, for a new trial is denied.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Mark A. Ash and J.

Mitchell Armbruster for Plaintiff Jill L. Maurer.

Womble Carlyle Sandridge & Rice, PLLC, by Pressly M. Millen and Melody C.

Ray-Welborn for Defendants SlickEdit, Inc., Andre Boisvert, Erica H. Boisvert, J. Clark

Maurer, and Howard H. Lewis.

I.

{3} Plaintiff filed her Amended Complaint in this action on July 30, 2004, asserting eight claims: (1)

breach of fiduciary duty, (2) unfair and deceptive trade practices, (3) oppression, (4) constructive fraud,

(5) fraud, (6) civil conspiracy, (7) unjust enrichment, and (8) rescission and reformation. Plaintiff filed an

Amended Complaint on September 29, 2004, asserting the same claims and a ninth claim for slander.

{4} This Court ruled on defendants’ motion to dismiss on May 16, 2005. The Court dismissed six of

plaintiff’s claims and allowed the claims for fraud, slander, and rescission and reformation to continue.

After defendants filed their motion to dismiss but before this Court’s ruling, plaintiff moved to amend her

complaint. The Court granted the motion, and plaintiff filed her Second Amended Complaint on May 31,

2005, adding two new claims against Defendant SlickEdit, Inc.: (1) breach of employment contract and

(2) recovery of unpaid wages under the North Carolina Wage and Hour Act. (“Wage & Hour Act”).

{5} Following cross-motions for summary judgment, this Court ruled in favor of plaintiff on the claim

for breach of contract but dismissed plaintiff’s slander claim against Clark Maurer and ruled that the

rescission and reformation claim was moot. Plaintiff was awarded $240,212 in damages on her claim

against the corporation for unpaid bonus payments. The Wage & Hour Act claim against the corporation

was held open for later determination, and the fraud claims against Erica and Andre Boisvert proceeded to

trial. No claims remained against Clark Maurer, and the claims against Howard Lewis had been dismissed

by plaintiff.

{6} A nine-day trial commenced on August 22, 2005. At the close of plaintiff’s evidence, defendants

moved for a directed verdict pursuant to Rule 50. The motion was denied. At the close of the defendants’

case in chief, defendants again moved for a directed verdict, and that motion was denied. The case was

submitted to the jury on the fraud claims against Erica Boisvert and Andre Boisvert. The jury returned a

verdict in favor of Erica Boisvert and against Andre Boisvert, awarding plaintiff actual damages of

$452,500 and an additional $1,130,000 in punitive damages.

{7} Following the verdict, Defendant Andre Boisvert filed a Rule 50(b) motion for judgment

notwithstanding the verdict and, in the alternative, a motion for new trial under Rule 59. The parties also

filed briefs on the Wage & Hour Act issue that had been held open prior to trial.

{8} The parties have been through two mediations and received repeated reminders from the Court

that their inability to resolve their disputes in a businesslike manner threatened the long term viability of

the company over which they were litigating.

II.

A.

{9} This case is the quintessential corporate domestic drama fanned by the flames of a bitter divorce,

unbounded egos among the actors, and an abundance of deceit. It is at once a morality play, a lesson in

the benefit of written contracts, and a classic example of the dangers of executive hubris.

{10} Plaintiff Jill L. Maurer is a resident of Wake County, North Carolina. Plaintiff is currently a

42.5% shareholder of SlickEdit, Inc. and served as its Chief Executive Officer until her termination in

April 2004. She and Defendant Clark Maurer started and built the Company together. Mr. and Ms.

Maurer legally divorced on February 14, 2003. Their divorce is inextricably intertwined with the

corporate manipulations giving rise to the claims at issue.

{11} Defendant SlickEdit, Inc. (“Slick Edit”, “the Company”) is a corporation organized under the laws

of Virginia, with its principal place of business in Morrisville, Wake County, North Carolina.

{12} Defendant J. Clark Maurer is a resident of Wake County, North Carolina. Mr. Maurer is a 42.5%

shareholder of SlickEdit, the Chief Technology Officer of SlickEdit, and a member of the Company’s

Board of Directors. He designed the software that is the main product of the Company. Prior to trial, the

claims against Clark Maurer were dismissed.

{13} Defendant Andre Boisvert is a resident of Wake County, North Carolina. Mr. Boisvert is an 11%

shareholder of SlickEdit and Chairman of the Company’s Board of Directors. He is also a consultant or

officer in several other businesses driven by the creation, production, or marketing of computer software.

{14} Defendant Erica H. Boisvert is a resident of Wake County, North Carolina. Ms. Boisvert serves as

President and Chief Operating Officer of SlickEdit and is a member of the Company’s Board of

Directors. Ms. Boisvert is a 2.5% shareholder of SlickEdit. She is married to Andre Boisvert.

{15} Howard H. Lewis is a resident of Wake County, North Carolina. Mr. Lewis is a 1% shareholder

o f SlickEdit and a member of the Company’s Board of Directors. He was formerly an officer at

SlickEdit. The claims against Mr. Lewis were dismissed prior to trial.

B.

{16} Jill and Clark Maurer married in December 1987. In early 1988, the two incorporated their

company, MicroEdge Inc., later to become SlickEdit, in Virginia. All of the stock was issued to Clark

Maurer and remained in his ownership until December 2001. The Company released its first product in

1988—an editor for programmers known as SlickEdit, which was intended to work on multiple computer

platforms. The software was developed by Clark. Clark Maurer licensed the rights to the software to the

Company on August 5, 1992, in exchange for an 8% royalty on all revenues the Company derived from

the product’s use. The royalties were paid to him individually until the license was terminated in 2001 and

the intellectual property rights were transferred to the Company.

{17} In the late 1990s, as the “tech bubble” grew, Jill and Clark decided to explore the possibility of

selling the Company. They hired Paul Rasmussen to help them with those efforts and executed a written

agreement documenting his role in selling the Company. That document explicitly stated that Mr.

Rasmussen was to help sell the Company and based his compensation in part upon the price paid on a

successful sale. After engaging in dialogue with many potential purchasers, including substantial

discussions with 10 to 15 of them, Mr. Rasmussen was unable to present SlickEdit with an acceptable deal

—partly because, as he testified at trial, Jill Maurer’s expectations as to the value of the Company were

unreasonably high. The agreement with Mr. Rasmussen was terminated in 1999. Soon after that, the

“tech bubble” burst, and technology and software companies quickly began to lose their luster with

investors.

{18} In 2000, Jill Maurer met Andre Boisvert at a meeting for potential investment in another

company. The two discussed SlickEdit and the possibility of Andre Boisvert becoming an advisor to the

Company. Jill Maurer spoke with SlickEdit’s attorney, Larry Robbins, who encouraged her to follow

through with those discussions. Andre Boisvert was brought on as a consultant. The parties disagree as to

why SlickEdit hired Mr. Boisvert. Jill Maurer claims that Mr. Boisvert was hired to help sell the

Company. All others involved in the case who testified on the matter, including Clark Maurer, testified

that their understanding was that he was brought in to help grow the Company.

{19} Later that same year, Mr. Boisvert joined the SlickEdit Board of Directors. He became Chairman

of the Board of Directors in 2001. In June 2000, Andre’s wife, Erica Boisvert, was hired as the Chief

Financial Officer for a spin-off company called NewTek, Inc. NewTek was designed to spin out a product

similar to SlickEdit that would be used in a mainframe environment. Erica also initially did some

accounting work for both NewTek and SlickEdit. When NewTek failed to get off the ground, Erica

transitioned into full time employment at SlickEdit. Initially her role was to help with accounting matters,

including getting the Company’s books into compliance with General Accepted Accounting Principles

(“GAAP”).[1] Ms. Boisvert was promoted to Chief Operating Officer in January 2004. She eventually

was named Chief Financial Officer of SlickEdit.

{20} Jill Maurer testified that in the fall of 2001 she realized that her marriage was not working—a fact

that she confided in Erica Boisvert. Jill told Erica that she was considering leaving Clark. They discussed

the disruptive impact that a divorce between the co-founders could have on the Company. The two talked

with Andre about cleaning up the Company’s documents in order to avoid conflict over the relative

relationship between the Maurers and the Company.

{21} Nearly ten years earlier, Clark Maurer had signed an agreement that provided for an 8% royalty

payment on all revenues derived from the use of SlickEdit software. On December 31, 2001, at the advice

of Mr. Boisvert, he signed another document terminating that agreement and transferring ownership rights

to the software to SlickEdit. In return, both Clark and Jill Maurer signed employment agreements with

SlickEdit which included, in addition to base salary, a provision for each to receive an annual bonus of 4%

of the Company’s licensing revenue. Clark and Jill Maurer separated the same day. They legally

divorced on February 14, 2003. After the divorce, both continued to work at the Company, but Jill’s time

was reduced due to her childcare responsibilities.

{22} On January 1, 2002, Stock Purchase Agreements were issued, giving Andre and Erica Boisvert

shares of company stock. Andre Boisvert acquired 50,000 shares of newly-issued treasury shares for a

promissory note in the amount of $90,500, giving him a 1% interest in the Company. Erica Boisvert

acquired 125,000 shares of newly-issued treasury shares for a promissory note in the amount of $226,500,

giving her a 2.5% interest in the Company.

{23} On July 1, 2002, Andre Boisvert acquired another 500,000 shares—giving him an additional 10%

share of the Company—for a promissory note in the amount of $905,000. This transaction was completed

with unanimous approval of the Board of Directors. Plaintiff’s expert, Randy Whitt, testified that the price

paid was fair market value. Jill Maurer claims that the impetus behind the transaction was a conversation

with Mr. Boisvert in which he stated that he “needed more motivation” to sell the Company. Following

the January and July 2002 transactions, Clark and Jill Maurer each owned approximately 42.5% of the

Company. In September 2002, the Board of Directors voted unanimously to forgive a portion—nearly

50%—of Andre Boisvert’s debt to the Company. Jill Maurer testified that her reason for supporting that

decision was again to provide the additional motivation Mr. Boisvert wanted in order for him to market

the Company.

{24} In early April 2004, Jill Maurer requested an estimate of SlickEdit’s first quarter financials. She

needed money for taxes. She got Clark to agree to a tax-free distribution to be made to both herself and

Mr. Maurer to meet tax obligations including those derived from ownership of SlickEdit. The other

shareholders received distributions as well. The Boisverts were particularly upset about the way in which

Jill engineered the dividend and the cash flow of the Company.

{25} Following a vote of the Board of Directors, plaintiff, herself a member of the Board, was

terminated “without cause” as an employee of SlickEdit on April 20, 2004. The Company continued to

pay plaintiff her base salary for six months following her termination. It discontinued her bonus

payments, which were much greater than her salary, on April 30, 2004. The cessation of those payments

is the basis of Jill Maurer’s claim under the Wage & Hour Act.

{26} It is hard to conceive of a more dysfunctional corporate family than the officers, directors, and

shareholders of SlickEdit. Clark Maurer had all of the stock originally issued in his name, and the royalty

contract provided all of the income to him. Jill Maurer and the Boisverts rearranged the corporate

structure to suit Jill when she knew she wanted a divorce but didn’t tell Clark. The Boisverts likely took

advantage of both Clark and Jill and manipulated both of them. Based on statements of the Boisverts,

Clark thought Jill had taken advantage of him in the separation agreement by hiding the value and amount

of jewelry she had purchased. Clark got even with Jill by terminating her employment and bonus. Jill

retaliated by suing Clark, Erica, and Andre. Clark Maurer appeared incapable of any independent thought

—being first manipulated by Jill and then by the Boisverts.

{27} Jill wanted the Company sold so she could cash out her interest at the highest price and complete

her divorce from Clark. She still does. Clark and the Boisverts, on the other hand, derived greater value

by keeping the Company going. The Company would be less marketable and less valuable without Clark,

who created the software. If Jill and Clark could ever agree on anything, they have voting control.

Absent their agreement, the minority shareholders hold the balance of power.[2]

III.

WAGE & HOUR ACT

{28} The Court first addresses plaintiff’s claim for liquidated damages under the Wage & Hour Act.

Having prevailed on the breach of contract claim at summary judgment, plaintiff now seeks to recover

liquidated damages under the Wage & Hour Act for SlickEdit’s failure to continue her bonus payments

following her termination. N.C.G.S. §§ 95-25.1 et seq.

{29} The Wage & Hour Act was adopted with the following public policy in mind:

The wage levels of employees, hours of labor, payment of earned wages, and the well-

being of minors are subjects of concern requiring legislation to promote the general welfare

of the people of the State without jeopardizing the competitive position of North Carolina

business and industry.

N.C.G.S. § 95-25.1(b). With regard to payment of earned wages, the Act specifically requires employers

to pay their employees “all wages and tips accruing on the regular payday.” N.C.G.S. § 95-25.6. Any

employer who fails to pay wages owed on the date they become due is liable to the employee for unpaid

wages, plus interest. N.C.G.S. § 95-22.22(a). Furthermore, unless the employer demonstrates that its

failure to pay the wages owed was in good faith, the Court may, in its discretion, “award liquidated

damages in an amount equal to the amount found to be due.” N.C.G.S. § 95-22.22(a1).

{30} At issue is whether the Wage & Hour Act applies here and, if so, whether plaintiff is entitled to

liquidated damages. SlickEdit contends that plaintiff should not be entitled to recover liquidated damages

for two reasons: (1) the Wage & Hour Act is inapplicable because the bonus payments here do not qualify

as “wages,” as defined under the Act, and (2) SlickEdit’s decision to discontinue the bonus payments was

made in good faith. In applying the Act, this Court must construe it liberally. N.C.G.S. § 95-22.25.

{31} First, SlickEdit argues that the Wage & Hour Act does not apply because the bonuses do not

constitute “wages” under the Act. The Act defines “wages” as “compensation for labor or services

rendered by an employee whether determined on a time, task, piece, job, day, commission, or other basis

of calculation.” N.C.G.S. § 95-25.2(16). The definition section of the Act also declares that wages shall

include “sick pay, vacation pay, severance pay, commissions, bonuses, and other amounts promised when

the employer has a policy or a practice of making such payments.” Id. (emphasis added).

{32} Despite the fact that the Act explicitly defines wages to include bonuses, SlickEdit argues that the

bonus owed here is not in fact a “wage” but instead a “recharacterized royalty.” (Def. SlickEdit’s

Memorandum Regarding Wage and Hour Act and Breach of Contract Issues, at 7.) (“SlickEdit Wage &

Hour Act Brief”). Consequently, SlickEdit argues, the bonus is not compensable under the Wage & Hour

A c t . Id. To assert that the bonus payments here did not constitute “wages” is more than a bit

disingenuous. SlickEdit made a consistent, deliberate business decision to pay the bonus as wages. It

reported the bonus payments as wages in Jill Maurer’s W-2 forms from 2002 to 2004, and it withheld

Social Security and Medicare taxes from her bonus compensation. Moreover the bonus provision was

created in plaintiff’s Employment Agreement as compensation expressly given in consideration for

services provided by plaintiff under the Agreement. Now, after years of representing the payments under

the bonus provision as wages and treating them as such, SlickEdit has made an about-face in an attempt to

avoid the consequences of its failure to honor its agreement with the plaintiff.

{33} The following is uncontroverted. The Boisverts convinced the Maurers that the ownership of the

intellectual property needed to be in the corporation. By doing so, the Maurers lost their primary income

stream, thus requiring that it be replaced by a bonus. Since the royalty was unrelated to an employment

term but continued as long as the intellectual property was used, it makes sense that the employment

contract provided that the replacement bonus based on net revenues would continue beyond termination.

{34} Jill Maurer and Erica Boisvert, the two people clearly responsible for the agreements, both knew

what Clark Maurer did not: Jill wanted a divorce and wanted to ensure, before Clark knew about the

divorce, that she got her half of the royalty stream. The employment contract took care of that need before

Clark knew what was coming. Mr. Robbins, SlickEdit’s attorney, did not know of the divorce plans, so it

is not surprising that he did not know that someone had changed his form employment agreement to

accomplish equitable distribution of the income stream from the intellectual property.

{35} While it is clear that this bonus arrangement was a substitute for royalty payments, that doesn’t

discount the fact that the Company explicitly chose the use of a bonus provided for in an employment

contract and reported the bonus as wages for all tax purposes. It converted the royalty to a bonus which

was part of the employment agreement for both Jill and Clark.

{36} SlickEdit likens the bonus payments to other forms of post-payment employment such as pensions

and retirement benefits, which, it argues, are not covered by the Act. In support of this proposition,

SlickEdit cites an unreported North Carolina Court of Appeals decision, Whitley v. Horton, which

SlickEdit contends adopted a rule that the Wage & Hour Act does not cover forms of compensation that

continue to be paid post-employment. (SlickEdit Wage & Hour Act Brief, at 7.) (citing Whitley v. Horton,

No. COA 03-1459 (N.C. App. Feb. 15, 2005)). Such a broad characterization of that decision, however,

fails to acknowledge the import of the factual context in which that decision was rendered.

{37} In Whitley, the trial court found that the plaintiff employees and defendant employer had agreed to

an employment term of 60 days, which was cut short when the employer closed its business before the 60-

day period had run. Whitley, No. COA 03-1459. The employer ceased payment of the employees’ wages

when the business closed, and the trial court held that the failure to pay the employees’ weekly salary for

the unworked days constituted a violation of the Wage & Hour Act. Id. The Court of Appeals reversed

the trial court’s holding on the ground that the employer had already paid the employees’ salaries for time

actually worked and that the unpaid wages corresponded to work that had not been performed. Id.

{38} Here, however, SlickEdit does not contend that the bonus payments are tied to work that has not

yet been performed. More appropriately the payments are tied to a history of service to the corporation,

dating back to its earliest days. It is utterly inconsistent for SlickEdit to have expressly provided in the

employment agreement that the bonus payments would survive any termination to Ms. Maurer’s

employment and then to argue that those payments are necessarily tied to her continued performance

under that contract. SlickEdit purposefully and consistently treated the bonus payments as wages and

intentionally chose not to tie those payments to future performance by Ms. Maurer under her employment

contract. It cannot now successfully argue that the bonus payments are not wages.

{39} SlickEdit argues that even if the bonus payments constitute “wages” under the Wage & Hour Act,

liquidated damages are inappropriate here because the Company acted in good faith. The Wage & Hour

Act states that if “the employer shows to the satisfaction of the court that the act or omission constituting

the violation was in good faith and that the employer had reasonable grounds for believing that the act or

omission was not a violation of this Article, the court may, in its discretion” reduce the amount of

liquidated damages or award none at all. N.C.G.S. § 95-25.22 (a1). The burden is on the employer to

demonstrate good faith in its decision not to continue paying wages. Hamilton v. Memorex Teltex Corp.,

118 N.C. App. 1, 15, 454 S.E.2d 278, 286 (1995). Even if the employer demonstrates good faith, the trial

court may still award liquidated damages. Id. If the employer fails to show good faith, however, the trial

court has no discretion to reduce the amount of liquidated damages awarded. Id.

{40} While Ms. Maurer received millions of dollars from SlickEdit in the years before the dispute

arose, it is clear that termination of her employment coupled with cessation of the bonus payments created

enormous leverage to force her to sell her minority stake at a discounted value. She was a single mother

with custody of two children, both of whom required more than normal care. The loss of all of her income

stream from the Company put her in a difficult position. It is also undisputed that Clark was angry with

Jill over the divorce settlement. The Boisverts were angry with her for engineering the dividend behind

their backs and interfering with their management of the Company. It was a situation ripe for retaliation.

{41} SlickEdit claims that it showed good faith by acting on the advice of its legal counsel after

contacting him to determine its legal obligations under Ms. Maurer’s employment agreement. After

SlickEdit’s attorney, Larry Robbins, advised the Company that the issue of continuing bonuses under the

contract was ambiguous, the Company decided to continue making the payments until the end of the

month in which Ms. Maurer was fired.

{42} The Court finds SlickEdit’s argument that it acted in good faith by relying on the advice of its

attorney unpersuasive. During discovery, SlickEdit invoked the attorney-client privilege when plaintiff

attempted to solicit from Mr. Robbins his reasons for advising SlickEdit to terminate Jill Maurer’s bonus.

That stance was never abandoned and Mr. Robbins’s deposition testimony was never revised until

SlickEdit filed affidavits of Mr. Robbins, Mr. Millen, and Mr. Boisvert in support of its good faith

argument.

{43} Moreover, every witness who has been asked to look at the employment agreement has reached

the conclusion that the bonus payments should have continued post-termination. Maurer v. SlickEdit,

2005 NCBC 4, ¶23. Larry Robbins himself, when asked about the provision at deposition, said that the

bonus payments should have continued after Ms. Maurer was fired, and it is telling that SlickEdit amended

Clark Maurer’s employment agreement shortly after that deposition by removing the bonus survival

clause. (Plaintiff’s Memorandum Regarding Wage and Hour Act and Breach of Contract Damages, at 8-9

& Exh. 1.) (“Plaintiff’s SlickEdit Wage & Hour Act Brief”) (citing SlickEdit’s Mar. 11, 2005 Board

minutes). Furthermore, even after the Court held, in its August 12, 2005 Order, that the employment

agreement required continued bonus payments, SlickEdit has continued to withhold the payments.

{44} SlickEdit’s argument that liquidated damages should be reduced because it acted in good faith is

rejected, and plaintiff’s request for liquidated damages equal to the amounts owed is, in the exercise of the

Court’s discretion, granted. Even if there was good faith on the part of the corporate defendant, the Court

would still exercise its discretion to award liquidated damages. Ms. Maurer was unfairly denied the bonus

payments to which she was entitled.

IV.

JUDGMENT NOTWITHSTANDING THE VERDICT

A.

Legal Standard

{45} Rule 50(b) of the North Carolina Rules of Civil Procedure provides, in relevant part as follows:

Whenever a motion for a directed verdict made at the close of all the evidence is denied or

for any reason is not granted, the submission of the action to the jury shall be deemed to be

subject to a later determination of the legal questions raised by the motion. Not later than

10 days after entry of judgment, a party who has moved for a directed verdict may move to

have the verdict and any judgment entered thereon set aside and to have judgment entered

in accordance with his motion for a directed verdict; . . . [T]he motion shall be granted if it

appears that the motion for directed verdict could properly have been granted. A motion

for a new trial may be joined with this motion, or a new trial may be prayed for in the

alternative. If a verdict was returned the judge may allow the judgment to stand or may set

aside the judgment and either order a new trial or direct the entry of judgment as if the

requested verdict has been directed.

N.C.G.S. § 1A-1, Rule 50(b)(1).

{46} The rules that apply in ruling on a directed verdict also apply when deciding on a motion for

judgment notwithstanding the verdict—the motion is technically a renewed motion for directed verdict.

Harvey v. Norfolk, 60 N.C. App. 554, 556, 299 S.E.2d 664, 666 (1983).

Judgment notwithstanding the verdict should be granted only when the evidence is

insufficient as a matter of law to support the verdict. Where the evidence admitted at trial,

taken in the light most favorable to the non-moving party with all reasonable inferences

drawn in his favor, is sufficient to support the verdict, it should not be set aside.

Beal v. K. H. Stephenson Supply Company, Inc., 36 N.C. App. 505, 507, 244 S.E.2d 463, 465 (1978).

{47} The Court may properly grant a motion for judgment notwithstanding the verdict where the

evidence presented by the non-moving party is insufficient to support the verdict. Brokers, Inc. v. High

Point City Bd. of Educ., 33 N.C. App. 24, 234 S.E.2d 56 (1977). To withstand a motion for directed

verdict, the party opposing the motion must provide actual proof:

of such a character as reasonably to warrant the inference of the fact required to be

established, and not merely sufficient to raise a surmise or conjecture as to the existence of

the essential fact. . . . “[E]vidence which merely shows it possible for the fact in issue to be

as alleged, or which raises a mere conjecture that it was so, is an insufficient foundation for

a verdict and should not be left to the jury.” . . . “Judges are no longer required to submit a

case to the jury merely because some evidence has been introduced by the party having the

burden of proof, unless the evidence be of such a character as that it would warrant the jury

to proceed in finding a verdict in favor of the party introducing such evidence.”

Lee v. Stevens, 251 N.C. 429, 433, 111 S.E.2d 623, 627 (1959) (quoting Byrd v. Express Co. , 139 N.C.

273, 51 S.E. 851 (1905)). The motion should be denied if there is “evidence more than a scintilla to

support plaintiff’s prima facie case in all its constituent elements.” Clark v. Moore , 65 N.C. App. 609,

610, 309 S.E.2d 579, 580 (1983).

{48} This case presents an unusual interplay between the burdens of proof in fraud claims and punitive

damage claims. Fraud must be proved by a preponderance of the evidence. Oliver v. Hecht, 207 N.C.

481, 486, 177 S.E. 399, 402 (1934). Recovery of punitive damages requires “clear and convincing”

evidence. N.C.G.S. § 1D-15(a). It is a distinction with a difference. It makes sense to require a person

seeking the extraordinary damages sanctioned by punitive award to establish that right by clear and

convincing evidence while only having to establish the underlying claim by a preponderance of the

evidence. That is true even though the underlying claim is a fraud claim. It may be that in most fraud

cases the evidence which established fraud is so clear that it also reaches the level to support punitive

damages. However, there can be situations—and this could be one of them—where the plaintiff could

recover on a fraud claim and not be entitled to recover punitive damages. That is certainly the situation

the pattern jury instructions contemplate. N.C.P.I. -- Civil 800.00; N.C.P.I. -- Civil 810.96. For that

reason, the Court will first examine the evidence to support the underlying fraud claim and then apply the

clear and convincing standard to the punitive damages claim.

B.

{49} Defendant Andre Boisvert bases his motion for judgment notwithstanding the verdict on the

grounds that the jury could not have reasonably found that plaintiff established the required elements of

fraud. In fraud cases, the trial court may only grant a motion for judgment notwithstanding the verdict if

the plaintiff fails to present evidence supporting her prima facie case “in all its constituent elements.”

Rowan County Bd. of Educ. v. United States Gypsum Co., 332 N.C. 1, 16, 418 S.E.2d 648, 658 (1992).

{50} In North Carolina, a prima facie claim of fraud consists of the following elements:

(a) that defendant make a representation relating to some material past or existing fact; (b)

that the representation was false; (c) that when he made it defendant knew it was false or

made it recklessly without any knowledge of its truth and as a positive assertion; (d) that

the defendant made the false representation with the intention that it should be acted on by

the plaintiff; (e) that the plaintiff reasonably relied upon the representation and acted upon

it; and (f) that the plaintiff suffered injury.

Bolick v. Townsend Co., 94 N.C. App. 650, 652, 381 S.E.2d 175, 176 (1989) (quoting Myers & Chapman,

Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 374 S.E. 2d 385 (1988)) (emphasis omitted). Defendant

Andre Boisvert focuses on elements (a) (false representation), (e) (reasonable reliance), and (f)

(damages). The Court will address each separately. Before doing so, it is important to note what plaintiff

does not claim to be the underlying misrepresentation: plaintiff concedes that any claim based on the debt

reduction is derivative and not the subject of this suit. (Tr. 925.)

1. False Representation

{51} Andre Boisvert claims that Jill Maurer failed to present sufficient evidence at trial of a false

representation. To satisfy the false representation element, a certain level of specificity is required. North

Carolina courts uniformly require that the representation be “definite and specific”. Harding v. Southern

Loan & Ins. Co., 218 N.C. 129, 10 S.E.2d 599, 601 (1940). See also Horack v. Southern Real Estate Co.,

150 N.C. App. 305, 313, 563 S.E.2d 47, 53 (2002). Requiring this heightened level of specificity allows

courts to distinguish “mere puffing, guesses, or assertions of opinions from representations of material

facts.” Rowan County Bd. of Educ., 332 N.C. at 17, 418 S.E.2d at 659.

{52} Andre Boisvert complains that the evidence here of a misrepresentation on the part of Mr.

Boisvert, submitted exclusively in the form of the plaintiff’s own testimony, does not give any indication

that a specific or definite promise was made. Ms. Maurer testified at trial that in 2000 Mr. Boisvert was

brought on board as an advisor on the possible sale of the Company:

Q. Did you – from that point forward, over the next, you know, month or so, did you

and Mr. Boisvert talk about the possibility of him becoming an advisor to you?

A. We did. Andre and I ended up on the Board of Directors of [another] company

together, and were able to talk to each other, got to know each other. And it was – I had

been unsuccessful at selling the company. I was also looking at going into the mainframe

market, which I didn’t really know much about.

Q. Let me stop you, I’m sorry.

A. Yeah.

Q. Did – did Mr. Boisvert agree to advise you and Clark in the possible sale of the

company?

A. He did. He started by saying that – that we probably needed investors. He looked

at the financials. We didn’t really – our goal was to sell the company, and he told me that –

but I had been frustrated, because we tried to sell the company and it didn’t work.

***

Q. Well what – what did he want in exchange for agreeing to be an advisor to you in

the possible sale of the company?

A. He wanted one percent of the company.

Q. When you say one percent, does that mean stock? Is that what he was talking

about?

A. Stock, right, that he gain, he’d get paid when the company was sold.

***

Q. Did you and Clark talk between yourselves . . . about whether to agree to associate

Mr. Boisvert as an advisor for purposes of selling the company?

A. We did.

Q. And did you and Mr. Maurer agree with Mr. Boisvert at that time, that he should –

that his request for ownership of stock should be honored?

A. We did.

(Tr. 142-44.) Ms. Maurer also testified that she and Mr. Boisvert again discussed his role in the Company

in July 2002:

Q. Let’s go up to July 2002. Did you have any discussion with Mr. Boisvert in about

July 2002 about why the company wasn’t selling?

A. I did. It was very important to me at this time that it did. I was on my own with the

children. We – we had separated and it was important – it was important to me to sell the

company.

Q. What was Mr. Boisvert’s response to your questions about why the company

wasn’t selling?

A. He said that he wasn’t motivated enough to sell the company, that he wanted – that

in order for him to be motivated, he would need 10 percent of the company as opposed to

one percent.

(Tr. 224.)

{53} The extent of Jill Maurer’s testimony is that Andre Boisvert promised to be “an advisor in the

possible sale of the company” and that in July 2002 he told her that, in order to be motivated to sell the

Company, he would need 10% of the Company. Mr. Boisvert argues that this testimony falls far short of

demonstrating a specific or definite promise. Reading all of the evidence in a light most favorable to the

plaintiff, the Court is inclined to agree.

{54} There was little evidence presented here as to any of the terms of Mr. Boisvert’s promise. First,

no representation was made that a sale would or should take place by any particular date. Jill Maurer

herself testified that “we did not have an exact date in mind. We had the sense, you know, we – I certainly

did not think it would take four years. I – I didn’t think it would take that long.” (Tr. 588.) Second, Ms.

Maurer testified that Mr. Boisvert never promised to sell to a particular type of company. (Tr. 600.)

{55} Furthermore, plaintiff presented no evidence that Mr. Boisvert promised to try to sell the

Company for any particular price. On cross examination, Ms. Maurer’s testimony as to the intended price

was as follows:

Q. Now he – and he never promised that he would – he would sell it for a particular

price, right?

A. Not necessarily for a particular price, we discussed sort of a range of prices.

Q. Did he promise you he’d sell it within that range?

A. He promised that he would try to sell within that range.

Q. What was that range?

A. The number that we had talked about was 20 million, and I don’t remember at the

time if we had said, you know, like 15 to 25, I don’t really remember.

***

Q. But he never promised you that he could sell it for $20,000,000, did he?

A. He said that he had the capabilities, that he was – he – you know, that he was one of

the best people that we could have to – to work to help us do that.

Q. But that’s different than promising to sell it for $20,000,000, right?

A. He promised to actively try to sell to [sic] for that.

Q. Well –

A. You know, if you’re trying to say did he absolutely guarantee that he could do that,

he didn’t do that. He definitely said that he had the capabilities to do it.

(Tr. 588-89.) According to plaintiff’s own testimony, Mr. Boisvert never stated that he would sell for a

particular price or even within a given price range other than that he “had the capabilities” to sell the

Company somewhere in the $20,000,000 range. [3]

{56} At best, plaintiff bases her claim of fraud on a side agreement between herself and Andre Boisvert

that he would work as “an advisor in the possible sale of the company”—a promise that was neither

reduced to writing nor reflected in any corporate documents, including Mr. Boisvert’s stock purchase and

consultant agreements. According to the plaintiff herself, there was no agreement as to any time frame

within which the sale should take place, or that Mr. Boisvert would sell for a particular price or range of

prices, other than that he “had the capabilities” to do so.

{57} An alleged promise is not definite and specific if there is no evidence of the terms of the

agreement. See Horack v. Southern Real Estate Co., 150 N.C. App. 305, 313, 563 S.E.2d 47, 53 (2002).

In Horack, the plaintiff was a commercial real estate broker who sued his former employer and another

broker who had been one of his co-workers at that company. The plaintiff claimed that he was defrauded

when the broker failed to honor an alleged agreement to share the commission from a transaction on which

he had worked when he was still with the company. The trial court ruled in favor of the broker on his

motion for directed verdict, and the North Carolina Court of Appeals affirmed that decision on the ground

that the plaintiff had failed to demonstrate that the misrepresentation was definite or specific. In so

holding, the Court noted that “[t]here was no evidence detailing the terms of plaintiff’s commission on the

. . . transaction under the alleged separate agreement, especially those terms concerning the amount of that

commission.” Horack, 150 N.C. App. at 313, 563 S.E.2d at 313.

{58} Here, as in Horack, there is little clarity as to the terms of the alleged promise. There is no

evidence that Mr. Boisvert was to sell the Company by a certain date. There is no evidence that he

represented that he could or would sell the Company for a given price or an amount within a specified

price range. There is no indication as to whether the alleged promise was contingent on Mr. Maurer’s

approval of a general plan to sell the Company or of any specific transaction—which all agree would be

required in order to sell the Company. Plaintiff’s testimony indicates that Mr. Boisvert agreed to “advise”

SlickEdit in its efforts to sell the Company and that he stated that he was “capable” of selling the

Company within a certain price range. Even ignoring the mountain of evidence—in the form of Company

documents and the testimony of every other person involved in SlickEdit management—that consistently

indicates that Mr. Boisvert was brought in for purposes other than to sell the Company, plaintiff’s

evidence fails to demonstrate that a definite and specific representation was made by Andre Boisvert

which might serve as the basis for a fraud claim.

2. Reasonable Reliance

{59} Even had plaintiff offered sufficient proof of false representation, Defendant Boisvert argues, Ms.

Maurer failed to establish that she reasonably relied and acted on that misrepresentation. For a fraud claim

to be actionable, a plaintiff must prove that she reasonably relied on the false representation to her

detriment. See Wall v. Fry, 162 N.C. App. 73, 78, 590 S.E.2d 283, 286 (2004). Generally, the issue of

whether the complainant relied reasonably on another’s false representation is a question for the finder of

fact. Olivetti Corp. v. Ames Bus. Sys., Ins., 319 N.C. 534, 544, 356 S.E.2d 578, 584 (1987).

{60} In order to properly address this issue, it is helpful for the Court to consider separately the specific

points in time at which the plaintiff alleges the false representations were made: 1) the initial hiring of

Andre Boisvert in 2000; 2) the second issuance of stock to Andre Boisvert in July 2002; and 3) SlickEdit’s

decision in September 2002 to reduce Mr. Boisvert’s debt by half.

{61} With regard to the initial hiring, plaintiff’s evidence failed to indicate any reliance whatsoever on

the part of Jill Maurer. Ms. Maurer alleges that Andre Boisvert first represented that he would help to sell

SlickEdit in 2000 when he was hired as a consultant. It should first be noted that Ms. Maurer was not yet

a shareholder at SlickEdit at the time, so she was not even in a position to rely detrimentally on the

promise.

{62} Furthermore, Ms. Maurer’s actions, when contrasted with an earlier effort to sell SlickEdit, show a

failure to actually rely on such a promise by Andre Boisvert. At the time of the alleged promise, SlickEdit

had recently ended an engagement with Paul Rasmussen under which Mr. Rasmussen was helping to sell

the Company. Mr. Rasmussen had been brought on as an advisor to SlickEdit, and a written contract was

executed explicitly stating that his responsibility was to sell the Company. That agreement stated that

Rasmussen would be compensated at an hourly rate and that he would receive a commission on a scale of

2-6% upon the completion of a successful sale.

{63} In relying on the agreement with Mr. Rasmussen, plaintiff knew exactly what to do, and she did

just that. She reduced the promise and the terms of the agreement to writing. Here, however, instead of

acting in reliance on Mr. Boisvert’s promise, she acted altogether inconsistently with such an agreement.

Rather than reducing the alleged promise to writing, Jill Maurer, on behalf of the Company, had

consulting and restricted stock purchase agreements executed which failed altogether to state that Mr.

Boisvert was being brought in to help sell the Company. Those agreements, signed by the plaintiff

herself, instead point to a different role for Mr. Boisvert—to help grow the Company.

{64} Likewise, plaintiff has failed to establish reasonable reliance as to the issuance of a 10% share of

the Company in July 2002. Plaintiff’s own expert, Randy Whitt, testified that the $1.81 per share

valuation, reflected in the promissory note that was given in exchange for the 10% share, was an

appropriate price. (Tr. 844.) This was based on his determination that the corporation at the time was

valued at approximately $9,000,000. (Tr. 827-28, 850-59.) Had Mr. Boisvert’s role been to sell the

Company and had the corporation sold at that time at its fair market value, he would have received

nothing for his services. It would have been patently unreasonable for Ms. Maurer to rely on an alleged

promise by Andre Boisvert to work to sell the Company with full knowledge that he would receive no

compensation for doing so.

{65} This leaves only the decision by the Company in September of 2002 to reduce Andre Boisvert’s

debt to the Company by half. Ms. Maurer’s reliance on this occasion was far from reasonable. Ms.

Maurer was unreasonable in relying on a secret agreement with Mr. Boisvert and affirmatively

misrepresenting to the Board why the debt forgiveness was being sought. Ms. Maurer put forward the

motion at the September 23, 2002 board meeting, and she testified at trial that her reason for doing so was

to provide more motivation for Mr. Boisvert to sell the Company. No mention is made in the minutes

from that board meeting, however, that that objective was ever stated as the basis for the debt

forgiveness. In any event, Ms. Maurer does not claim that promise is the one upon which she is suing for

fraud. See supra ¶ 71.

{66} Throughout the entirety of Ms. Maurer’s relationship with Mr. Boisvert, it would have been

unreasonable for her to rely on a side agreement with Andre Boisvert that was inconsistent with the

mission of the corporation and the goals of the majority of SlickEdit’s Board of Directors. A fraud

claimant cannot reasonably rely on a promise with full knowledge that the promisor is without the power

to carry out the promise. See Horack, 150 N.C. App. at 313, 563 S.E.2d at 53 (holding that the plaintiff

could not have reasonably relied on the defendant’s misrepresentations where she was aware that the

defendant did not have the authority to fulfill the promise).

{67} Jill Maurer was fully aware that neither she nor Andre Boisvert had the power to sell the Company

without approval of the other directors. Ms. Maurer herself testified that were the Company to be sold,

such sale would have to be approved by Clark Maurer. (Tr. 597.) Clark Maurer testified that after the

engagement with Paul Rasmussen failed, his understanding was that in order to consider selling the

Company at some point in the future, the business would have to grow first (Tr. 726.) He further testified

that his understanding was that Andre Boisvert was brought in to do just that, stating that SlickEdit “didn’t

bring [Andre] in to sell the company at any point in time.” Similarly, Howard Lewis—the only member

of the Board of Directors other than the Maurers and the Boisverts—testified that the corporation’s

primary strategy at the time was to grow. Ms. Maurer, herself an officer and director at SlickEdit, was no

doubt aware that Andre Boisvert owed fiduciary duties of due care, loyalty, and candor to the Company

which would obligate him to work to execute the goals of the corporation and not her own personal

wishes. [4]

{68} Ultimately, it was simply unreasonable for Jill Maurer to rely on an alleged promise to sell the

Company where there was no agreement as to target price, target time frame, strategy to take in

accomplishing that task, compensation for doing so, or even the power to carry it out. The Court therefore

concludes that plaintiff failed to introduce sufficient evidence of reasonable reliance to support the verdict.

3. Damages

{69} Andre Boisvert also argues that the verdict is not supported by competent evidence of actual

damages recoverable in a direct action. Proof of actual damages is an essential element of a claim of

fraud. See Piedmont Inst. of Pain Mgmt. v. Staton Found., 157 N.C. App. 577, 589-90, 581 S.E.2d 68, 76-

77 (2003) (citing Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 568, 374 S.E.2d 385,

391 (1988)).

{70} Again, it is helpful for the Court to consider separately the specific points in time at which the

plaintiff alleges the false representations were made: 1) the initial hiring of Andre Boisvert in 2000; 2) the

second issuance of stock to Andre Boisvert in July 2002; and 3) the corporation’s decision in September

2002 to reduce Mr. Boisvert’s debt by half. In 2000, when Andre Boisvert received the first 1% of

SlickEdit stock, Ms. Maurer was not a shareholder and therefore was not in a position to be damaged,

either directly or indirectly by the transaction.

{71} The third event, the forgiveness of half of Mr. Boisvert’s debt, cannot serve as the basis for

damages here. The Court previously ruled, in its May 16, 2005 Order, that a claim on any injury arising

out of that event would belong to the corporation and not to the plaintiff individually. Maurer v. SlickEdit,

Inc., 2005 NCBC 1, ¶63. The parties themselves stipulated that, if wrongful, the debt forgiveness resulted

in injury to the corporation and not to the plaintiff herself. Plaintiff’s counsel acknowledged this both

before the jury at trial and during oral arguments on the post-trial motions. (Tr. 925.) (“I think the loan

forgiveness claim, if we have that claim, yeah, it’s derivative, just like Mr. Millen said.”.) The Court also

instructed the jury that the forgiveness of the promissory note could not serve as the basis for an award of

damages.

{72} Only the second event—the sale of a 10% interest in SlickEdit in July, 2002—remains. As to that

event, plaintiff claims that she was harmed when her percentage ownership of SlickEdit diminished to

42.7% as a result of SlickEdit’s decision to issue 500,000 treasury shares to Andre Boisvert on July 1,

2002. As is always the case when a corporation issues new shares of stock, all of SlickEdit’s shareholders

at the time, including Jill Maurer, Clark Maurer, Erica Boisvert, and Howard Lewis, saw a dilution in their

percentage ownership when those shares were issued.

{73} Courts that have awarded damages for dilution of ownership percentage have done so where the

recipient paid less than the actual value of the stock. See, e.g., Stone v. Martin, 85 N.C. App. 410, 355

S.E.2d 255 (1987) (affirming the trial court’s cancellation of the defendant director’s stock where the trial

court found he caused the corporation to issue shares of stock to himself for no consideration); US v.

NASD, Inc., 422 U.S. 694, 708 n. 17 (1975) (“The existing shareholders’ equity interests were diluted

because the incoming investors bought into the fund at less than the actual value of the shares at the time

of purchase.”); Rosenbaum v. McAllister, 64 F.3d 1439, 1446 (10th Cir. 1995) (stating that “to the extent

the corporation received less than fair value for the shares sold to the class members it diluted the value of

the stock held by the other common shareholders”).

{74} While all of SlickEdit’s shareholders experienced a loss of percentage ownership, none lost value

as a result of the transaction because the shares were given in exchange for an amount equal to the actual

value of those shares. In exchange for the 500,000 shares, Andre Boisvert gave the corporation a

promissory note in the amount of $905,000 plus interest. Plaintiff’s expert witness testified that the

$905,000 amount, based on a per share valuation of $1.81, was fair market value.

{75} Therefore the amount given by Mr. Boisvert was equal to the value of the stock received. Even if

the transaction was caused by a fraudulent misrepresentation by Mr. Boisvert, there were no actual

damages to either SlickEdit or its shareholders, because equal value was added to the corporation and

indirectly to the shareholders, including Jill Maurer. As the value given was equal to the value received,

there are no pecuniary losses on which to base a claim for damages. See Wall v. Fry, 162 N.C. App. 73,

78-79, 589 S.E.2d 283, 286-87 (2004) (affirming dismissal of the plaintiff’s fraud claim where the value

received in the allegedly fraudulent transaction was equal to the value given).

{76} Even if the transaction had caused damages to SlickEdit directly and to its shareholders indirectly,

however, plaintiff would not be the proper party to recover. The transaction complained of here was

between the corporation and one of its board members. Any resulting injury would have been to the

Company directly, and a claim for damages on that injury would properly be brought by the Company

itself—not one of its minority shareholders. See Aubin v. Susi, 149 N.C. App. 320, 560 S.E.2d 875 (2002)

(holding that a minority shareholder cannot maintain a fraud action for her own individual recovery

without “a showing that she has sustained ‘a loss peculiar to herself’” and affirming dismissal of the

plaintiff’s fraud claim because she failed to show a sustained loss different from that sustained by the

corporation) (quoting Outen v. Mical, 118 N.C. App. 263, 266, 454 S.E.2d 883, 885 (1995)). [5] The Court

therefore must conclude that the plaintiff failed to present sufficient evidence of actual damages to support

the verdict.

{77} The problem confronting the Court is that the only possible sustainable case of fraud that the

evidence discloses is based upon a claim which is derivative and based upon a conspiracy to deceive the

other directors and shareholders. The evidence supported a finding that Andre Boisvert promised Jill

Maurer that if his debt were reduced he would work to sell the Company and that he did not intend to do

so at the time he made the promise.[6] Neither Jill Maurer nor Andre Boisvert disclosed that deal to the

other shareholders and directors. Instead Jill made the motion based upon Andre’s past contributions to

the Company and the other directors—all of whom were opposed to selling the Company—went along. It

was the Company which lost the asset, not the shareholder, and Jill Maurer was affected in precisely the

same way that all the other shareholders were affected. Jill had no incentive to vote for the debt reduction

—other than to support her personal interest in seeing the Company sold. Defendant Andre Boisvert’s

motion for judgment notwithstanding the verdict should be granted.

C.

{78} In North Carolina, punitive damages may only be awarded if the plaintiff proves compensatory

damages and the jury finds the presence of one of the following aggravated factors relating to the injury

for which compensatory damages were awarded: (1) fraud, (2) malice, or (3) willful or wanton conduct.

N.C.G.S. § 1D-15(a). The existence of the aggravating factor must be proved by clear and convincing

evidence. N.C.G.S. § 1D-15(b). The clear and convincing standard is greater than the general

preponderance of the evidence standard—it requires evidence “which should ‘fully convince.’” Schenk v.

HNA Holdings, Inc., 613 S.E.2d 503, 508 (2005) (quoting In re Smith, 146 N.C. App. 302, 204, 552

S.E.2d 184, 184 (2001)).

{79} Here, the jury found that the evidence of fraud on the part of Andre Boisvert warranted an award

of punitive damages in this case. The Court finds that the evidence presented to support this conclusion is

far from clear and convincing.

{80} Plaintiff testified at trial that an agreement was struck between her and Andre Boisvert in 2000

whereby Mr. Boisvert would work to sell the Company. She also testified that that agreement was

reinforced when a 10% stock interest was issued in July 2002 to provide “more motivation” for Mr.

Boisvert to sell the Company. Neither agreement was reduced to writing nor was either confirmed by

evidence of action on the part of either party in conformity with such an agreement.

{81} Jill Maurer’s former husband and SlickEdit co-founder Clark Maurer testified that he had no

knowledge that such an agreement ever even existed. Mr. Maurer and Howard Lewis, SlickEdit’s

President at the time of the 2002 stock issuance, both testified that their understanding was that Andre

Boisvert was being compensated for his efforts to help grow the Company. Neither Mr. Maurer nor Mr.

Lewis was under the impression that Mr. Boisvert’s role in the Company was to position it for sale.

{82} The Company’s attorney, Larry Robbins, who drafted the Stock Purchase Agreements, also had no

knowledge of any such agreement. Robbins was told, and it was his understanding, that the Company’s

strategy was to grow the Company. At trial, Robbins testified as follows:

Q. Did Ms. Maurer tell you, in this year 2000 time period, that she had invited Mr. Boisvert to

join the board in order for him to sell the company?

A. No.

Q. Let me expand on the question, the time period and question. Did she tell you at any time

from the year 2000 to the time that she was terminated by SlickEdit in April 2004, that Mr.

Boisvert had agreed to sell the company for her?

A. No.

***

Q. [W]as it your understanding in this year 2000 time period, that the overall strategy that was

being discussed was a growth strategy?

A. Yes, sir.

(Tr. 951, 953.)

{83} The Restricted Stock Purchase Agreements themselves, which were executed by Ms. Maurer on

behalf of the Company, specifically state that Mr. Boisvert’s “relationship with the company is important

for its growth.” Plaintiff’s Exh. 21 (Restricted Stock Purchase Agreement) (emphasis added). The

consultant agreements, executed between SlickEdit and Andre Boisvert in January 2002 and July 2002,

state that Mr. Boisvert’s duties were to “[a]ssist senior management in identifying key strategic alliance

partners” and, once those partners were identified, to “assist senior management in getting these key

alliance partners to license SlickEdit’s technology either under a VAR or OEM agreement.” Plaintiff’s

Exh. 10 (Agreement for Individual Consultant, Exh. A); Plaintiff’s Exh. 11 (Agreement for Individual

Consultant, Exh. A). Even though the second of these agreements was signed by both Jill Maurer and

Andre Boisvert and executed in the same month as the second alleged promise, no mention is made of any

duty on the part of Mr. Boisvert to work to sell the Company.

{84} Paul Rasmussen, who had previously been engaged by the Maurers to help sell SlickEdit, testified

that he spoke with Ms. Maurer concerning Mr. Boisvert’s role at SlickEdit at the time the initial

agreement was made with Mr. Boisvert. His testimony as to that conversation was as follows:

Q. After your engagement ended, did you ever have occasion to speak with Ms. Maurer

concerning some dealings that she was beginning to have with Andre Boisvert?

A. Yes. Yes. I did. I -- I did have a conversation with -- with Jill about Andre, that

she was considering bringing Andre in and she -- she knew that I knew him and not well,

but I knew of him. And she told me that she was bringing him in for strategic reasons. The

intent was not to sell the company, it was just for strategic reasons, and some of the things

that they wanted to do and expand the business and so on.

Q. Do you recall her specifically telling you that her intent in bringing Mr. Boisvert

into the company was not to sell the company?

A. She said they had changed their mind. They weren’t going to sell the company and

there were strategic things they wanted to do to grow the company.

Q. Did she ever, at any time, tell you that her reason for bringing him to the company

was to sell the company?

A. Nope.

(Tr. 1159-60.)

{85} Another factor that makes it difficult to find clear and convincing evidence to support a punitive

damage claim is the exoneration of Erica Boisvert by the jury. The jury had to find that there was no

fraud in any of the transactions involving her. The one conversation she had no part of was the one

between Andre and Jill on debt reduction. The jury did not find any long running conspiracy between

Erica and Andre to defraud Jill.

{86} There is simply no clear and convincing evidence that a valid agreement under which Andre

Boisvert would work to sell the Company ever existed, and there is an abundance of evidence to the

contrary. While the plaintiff herself claims that such an agreement was reached, she presented no

evidence whatsoever indicating a target sale date or that a price target was ever discussed. Other than the

plaintiff’s own testimony, there is no evidence that Andre Boisvert was hired by SlickEdit to help sell the

Company. All other evidence, including agreements executed by the plaintiff and testimony from every

person involved in acquiring and retaining Mr. Boisvert’s services, points to the conclusion that Andre

Boisvert was brought on board for strategic purposes—to help grow the Company, not to market it for

sale. Plaintiff’s evidence of fraud on the part of Andre Boisvert falls far short of being clear and

convincing, and for that reason, Defendant Boisvert’s motion for judgment notwithstanding the verdict,

insofar as it relates to the punitive damages award, should be granted.

{87} In summary, the following factors, most of them uncontroverted, militate against a finding of clear

and convincing evidence:

1) The jury verdict exonerating Erica Boisvert;

2) Plaintiff’s expert’s testimony that the fair market value of the Company was 9 million dollars

rather than 20 million dollars;

3) The animosity between the Maurers, which made any agreement on management of the

Company problematic;

4) The necessity for Clark Maurer, who was the creative force behind the design of the software,

to agree to any sale;

5) The written Company minutes, unobjected to by plaintiff, which referred to the plans to grow

the Company;

6) The testimony of non-party witnesses like Mr. Robbins and Mr. Rasmussen that they were told

that the plan was to grow the Company;

7) The contrast between the written brokerage agreement with Rasmussen and the oral agreement

relied upon by plaintiff;

8) The secretive nature of the agreement between Jill and Andre;

9) The lack of any financial incentive for Andre Boisvert to work to sell the Company until the

debt reduction;

10) The financial benefit to the Boisverts of Erica remaining employed by the Company;

11) The absence of any offers for the Company prior to the tech bubble bursting and the change in

the market after the bubble burst;

12) Plaintiff’s inability to specify a timeframe, price, or other conditions of sale which Andre

Boisvert was obligated to fulfill; and

13) The absence of any evidence that this one product Company which competes against free open-

source products could be sold at all.

{88} Even if the appellate courts were to find that Jill Maurer had a direct claim for the fraudulent

inducement of her support for Andre’s debt reduction, there remain two troubling aspects of the jury

verdict. First, the award of actual damages of $452,500 gives the full compensation to Jill and all of the

other shareholders and the corporation do not recoup any of their loss. Second, the award of punitive

damages to Jill for Andre’s reneging on a secret agreement concealed by Jill from the other shareholders

and directors rewards equally reprehensible conduct on her part. This Court has trouble sustaining an

award of punitive damages under those circumstances. To do so is to reward conduct that amounts to a

breach of fiduciary duty. Also, where the party injured knows that she is participating in a secret deal

purposely hidden from other shareholders and directors, there cannot be clear and convincing evidence of

reasonable reliance required to sustain punitive damages.

{89} Finally, where, as here, a director proposes corporate action for which she has a personal interest

or agenda, there exists a duty of loyalty and a duty of candor to the corporation and the other directors to

disclose the personal interest. In this case, Jill Maurer failed to comply with that duty. Undoubtedly, she

believed Clark could be persuaded to sell if both she and Andre were influencing him, but there was a duty

to disclose her agreement and self-interest when she made the motion to reduce Andre’s debt. Her failure

to comply with her duty of loyalty and candor should bar her from recovering punitive damages. It would

also serve as a bar to a claim for fraud based on the debt reduction. Even if the fraud claims were

sustained, this Court would conclude that plaintiff did not meet her burden of proof of clear and

convincing evidence on the punitive damage claim.

{90} If directors A and B conspired to usurp a corporate opportunity and A later declined to give B her

share of the profit from the usurped opportunity, would the courts of North Carolina enforce the

agreement made in breach of the fiduciary duties of A and B? The Court does not believe they would.

This situation is no different; an award of punitive damages would be contrary to public policy.

V.

NEW TRIAL

{91} Defendant Boisvert, as an alternative to his motion for judgment notwithstanding the verdict, has

moved for a new trial under Rule 59 of the North Carolina Rules of Civil Procedure. Under N.C.G.S. §

1A-1, N.C. R. Civ. P. 50(c)(1), if a motion for judgment notwithstanding the verdict is granted, “the Court

shall also rule on the motion for new trial, if any, by determining whether it should be granted if the

judgment is thereafter vacated or reversed, and shall specify the grounds for granting or denying the

motion.” See Cox v. Steffes, 161 N.C. App. 237, 246, 587 S.E.2d 908, 914 (2003).

{92} Andre Boisvert argues that certain objectionable evidence introduced at trial “distorted and

overwhelmed the trial proceedings in a way that plainly influenced the jury’s verdict.” (Defendants Brief

in Support of Post-Trial Motions, at 21.) Specifically, Mr. Boisvert complains about the following

categories of evidence: evidence of plaintiff’s termination, Mr. Boisvert’s role in the termination, the

forgiveness of Mr. Boisvert’s debt to the Company, his past dealings with another company (CIP),

personal information concerning the plaintiff and Clark Maurer, and Mr. Boisvert’s alleged attempt to

corrupt a designated witness.

{93} The Court has determined that if the jury verdict is upheld by the appellate court, Mr. Boisvert’s

asserted grounds for new trial should be denied. The Court has carefully reviewed Mr. Boisvert’s asserted

grounds for new trial and believes that they are without merit. The parties to this drama have woven a

mesh of deception, intrigue, domestic squabble, corporate infighting, greed, and oral agreements that

made it impossible to understand the claims and defenses without seeing the whole picture. Thus,

evidence of plaintiff’s termination, Mr. Boisvert’s role in it, the forgiveness of his debt, the Maurer’s

domestic dispute, and the Boisverts’ involvement therein are relevant parts of the overall picture. Mr.

Boisvert’s past dealings with CIP and the disagreements between the shareholders of that Company were

an unfortunate sideshow, but not prejudicial. The fact that Mr. Boisvert was unwise and arrogant enough

to contact a witness for the plaintiff without consulting his own counsel is not grounds for a new trial.

{94} Finally the Court notes the issue of plaintiff’s counsel’s conduct concerning contact with a

sequestered witness. [7] Although the Court finds that conduct improper, it was not sufficiently prejudicial

to warrant a new trial.

VI.

CONCLUSION

{95} This case presents a classic example of how not to run a corporation. Defendant Andre Boisvert

probably did mislead Jill Maurer about what he would do for her personal interests. His

misrepresentations do not rise to the level of actionable fraud, at least as would support a claim by her

directly as opposed to the corporation. She has not established any damages or reasonable reliance. Even

if there exists a sustainable fraud claim, the evidence was not of a clear and convincing nature to support

punitive damages.

{96} The Court exercises its discretion to invoke liquidated damages under N.C.G.S. § 95-22.22(a1). It

is difficult to find that anyone involved in this dispute has acted in “good faith”. Certainly, the decision to

cut off all of Mrs. Maurer’s income was not made in good faith. Even if it was made in good faith, the

Court’s decision would be the same.

{97} The posture of this case prevents the Court from reaching an equitable solution to the disputes

between the parties. The ideal, equitable, and just result here would be for Mr. Boisvert to turn his stock

back to the corporation and to have his debt cancelled. If the corporation, or a majority of its shareholders,

wished to employ Mr. Bosivert for any purpose it could do so with a written contract spelling out his

duties and compensation. He could choose not to be affiliated with the Company in any way—a wise

course in the Court’s view. Unfortunately, the Court has not found a sound legal basis for invoking that

kind of equitable relief given the posture of the case. It would welcome any opportunity provided by the

appellate courts.[8]

{98} The Court has considered another possibility—ordering a remittitur reducing the award to plaintiff

to $184,875. That would represent Jill Maurer’s 42.5% of the $435,000 debt reduction. It would

compensate her for her ownership percentage of the debt reduction. It would eliminate the punitive

damages for the reasons cited in this opinion. It would have the benefit of making Andre Boisvert pay

damages to her for misleading her about his intent without permitting her to recover actual damages that

belong to the corporation or other shareholders, and it would not allow her to recover punitive damages in

a situation where she may have breached her fiduciary duty to the corporation. The problem is that her

claim for that fraud is derivative—as her counsel has conceded.

{99} The parties have failed in two attempts at mediation. If the appellate courts find that there is a

valid fraud claim on the record in this case, this Court does not believe a new trial is warranted. Even

after the appellate process has run its course years from now, this corporation will remain adrift until the

parties reach some agreement about its future and their respective roles in it.

{100} Based upon the foregoing, it is hereby ORDERED, ADJUDGED and DECREED:

1. Plaintiff’s claim for liquidated damages under the North Carolina Wage and Hour Act is

GRANTED and Defendant SlickEdit shall pay liquidated damages equal to the total

amount owed under plaintiff’s Employment Agreement.

2. Defendant Andre Boisvert’s motion for judgment notwithstanding the verdict on plaintiff’s

fraud claim is GRANTED. Judgment is hereby entered dismissing plaintiff’s claim for

fraud against Andre Boisvert.

3. Defendant Andre Boisvert’s motion for judgment notwithstanding the verdict on plaintiff’s

punitive damages claim is GRANTED. Judgment is hereby entered dismissing plaintiff’s

claim for punitive damages.

4. Alternatively, Defendant Andre Boisvert’s motion for a new trial is DENIED.

IT IS SO ORDERED, this the 3d day of February 2006.

[1] Ms. Boisvert testified that when she began work on cleaning up the company’s books, she discovered that the company had

a significant cash problem. In January 2001, for instance, Erica discovered that the company was left with less than one month of

operating capital after Jill Maurer wired a substantial sum of money from the company to her personal account.

[2] Even if the verdict against Andre Boisvert is upheld and paid, Andre, Erica, and Howard Lewis will control over 14% of

the Company’s outstanding shares. Erica Boisvert will remain as CEO. Andre, Clark, and Howard will still control the Board of

Directors, and Clark will remain the Chief Technology Officer and architect of the software product.

[3] Mrs. Maurer knew that there had been no interest in buying the company in the twenty million dollar range when it was

listed with Mr. Rasmussen. In the interim the tech bubble had burst and technology companies had lost their luster. She agreed to

sell Mr. Boisvert stock at fair market value—valuing the entire company at $9,000,000. It is not reasonable to rely on a promise to

sell at more than double fair market value. There is no evidence in this record that the company could be sold, much less that it

could be sold at a price far in excess of fair market value.

[4] While it was clear to everyone that Jill Maurer wanted the Company sold for personal reasons, this record is devoid of any

evidence that she disclosed her agreement with Andre Boisvert—to reduce his corporate debt in return for his promise to sell the

Company—with any other director or shareholder. It was an undisclosed side deal.

[5] A recent case out of the Delaware Supreme Court drew a distinction between direct and indirect harm in determining

whether a case is direct or derivative or direct in nature. In Tooley v. Donaldson Lufkin & Jenrette, Inc., the Court adopted a ‘direct

harm’ approach, ruling that “the stockholder must allege something other than an injury resulting from a wrong to the

corporation.” 845 A.2d 1031, 1035 (Del. 2004). The Court also looked at whether the resulting relief should properly go to the

corporation or the individual owners. Id. at 1036. For a discussion of the “direct harm” approach and its subsequent application in

other jurisdictions, see Daniel S. Kleinberger, Direct Versus Derivative and the Law of Limited Liability Companies, 58 Baylor L.

Rev. (forthcoming Winter 2006) (manuscript at 46-48). Under such an analysis, plaintiff’s fraud claim would clearly fail here as

the alleged injury was to the corporation directly, and Ms. Maurer has not presented evidence of any injury other than that flowing

indirectly from harm to the corporation. While the Court finds such an analysis instructive, it does not base its decision today on

the Tooley “indirect harm” approach. The Court leaves consideration of the merits of theTooley approach for another day.

Had SlickEdit opted to bring suit against Mr. Boisvert (or had plaintiff brought a derivative action on behalf of the

corporation), perhaps a more appropriate and equitable remedy, rather than allowing the shareholders to recover individually,

would be to require Mr. Boisvert to turn his shares back in to the corporation in return for the cancellation of the promissory note.

That, of course, is beyond the scope of this Order.

[6] If that was the conclusion reached by the jury, the Court concurs in that finding. AndreBoisvert’s testimony on this issue

is significant. He could not testify as to why Jill Maurer made the motion or any conversation about it, leaving the jury with only

her explanation of what happened. There was evidence to support a finding that he did not intend to keep the promise. His wife

derived all of her income from managing the company—an income likely to be lost in a sale. Shortly after the debt forgiveness,

Andre Boisvert engineered Jill’s termination, and his wife was one of the principal beneficiaries of that move. He expressly voted

to grow the company rather than sell it, and there had been no change in circumstances in the interim.

It should be clear, even from a cold record, that AndreBoisvert made a terrible witness. He was arrogant, argumentative,

evasive, unresponsive at times, and there was every reason for the jury to doubt his credibility. The Court is convinced that he did

get Jill Maurer to support reducing his debt on the promise he would support her personal interest in trying to sell the company. He

was smart enough to know that the value of his shares would not exceed the debt he owed for them unless his debt was

substantially reduced. In obtaining the debt reduction, he was insuring that he would get something if the Company were sold at

fair market value. Jill Maurer had no incentive to vote for the reduction other than her personal interest in selling the Company.

The Court believes, as it appears the jury believed, that AndreBoisvert did make that promise and failed to fulfill it and that

there was evidence to support a finding that he never intended to fulfill it. That is not a claim upon which Jill Maurer may recover

—at least not in the amount found by the jury. It is also a claim that places her in breach of her fiduciary duty to the corporation,

and, as discussed above, it is a claim upon which no reasonable reliance could be found because it would have placed Andre

Boisvert in breach of his fiduciary duty as a director.

[7] On August 24, the third day of trial, plaintiff called two witnesses who had previously worked with Mr.Boisvert. Prior to

their testimony, the Court granted defense counsel’s motion for a sequestration order under N.C. Rule of Evidence 615. The

second witness, Peter Bull, was excused from the courtroom while the first, Jesper Vork, testified. Following Mr. Vork’s

testimony, the Court took a brief recess, during which plaintiff’s counsel, Mark Ash, encountered Mr. Bull in the hallway. Mr. Ash

handed Mr. Bull some documents that were discussed during Mr. Vork’s cross-examination and suggested, “You should take a

look at these.” Giving a sequestered witness documents he had not seen before and which had been used in the questioning of the

prior witness was improper.

[8] Clearly, the parties could reach such a result by settlement. (Alternatively, he could transfer to Jill her pro rata share of his

stock which was debt free.) Such a settlement would remove any windfall to Mr. Boisvert and leave the Company to be managed

by its directors in the best interests of all the shareholders and the other constituents (such as employees) interested in the welfare

of the company. The company would get back the stock issued by it. Neither Mr. Boisvert nor anyone else who benefited from

the reduction in his debt approved under false pretenses would be rewarded.