The opinion
Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer,
2013 NCBC 14
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF CUMBERLAND 06 CVS 6091
MITCHELL, BREWER, RICHARDSON, )
ADAMS, BURGE & BOUGHMAN; GLENN )
B. ADAMS; HAROLD L. BOUGHMAN, JR. )
and VICKIE L. BURGE, ) OPINION AND ORDER
Plaintiffs ) DISSOLVING COMPANY
) AND APPOINTING SPECIAL MASTER
v. )
)
COY E. BREWER, JR., RONNIE A. )
MITCHELL, WILLIAM O. RICHARDSON, )
and CHARLES BRITTAIN, )
Defendants )
THIS MATTER comes before the court upon a directive from the North Carolina
Court of Appeals to (a) grant summary judgment in favor of Plaintiffs on the issue of
judicial dissolution, pursuant to N.C. Gen. Stat. § 57C-6-02 (hereinafter, all references
to the North Carolina General Statutes will be to "G.S."); (b) enter a decree of
dissolution and (c) direct the winding up of Mitchell, Brewer, Richardson, Adams, Burge
& Boughman, PLLC ("Company"); and
THE COURT, after considering the procedural posture of this action, appropriate
matters of record and the ends of justice, and consistent with the directive from the
North Carolina Court of Appeals, FINDS and CONCLUDES the following:
Everett Gaskins Hancock, LLP by E.D. Gaskins, Jr., Esq. for Plaintiffs.
Coy E. Brewer, Esq., Ronnie A. Mitchell, Esq., William O. Richardson, Esq. and
Charles Brittain, Esq., Pro Se.
PROCEDURAL BACKGROUND
[1] On February 1, 2011, the North Carolina Court of Appeals entered an
Opinion and Order ("Opinion") on the parties' appeal of this court's March 31, 2009
Order on the parties' respective motions for summary judgment. Mitchell, Brewer,
Richardson, Adams, Burge & Boughman, PLLC v. Brewer, 209 N.C. App. 369 (2011).
The Opinion affirmed in part and reversed in part this court's March, 31, 2009 Order.
The Opinion remanded the action for further proceedings, with specific instructions to
enter a decree of dissolution of the Company and direct the winding up of the
Company, pursuant to G.S. 57C-6-02.3. The Opinion also provided that "[P]laintiffs'
derivative claims for an accounting to [the Company] (claim one), an accounting to
[P]laintiffs (claim two), and a demand of liquidating distribution (claim three), as well as
[D]efendants' counterclaim for a demand for statutory distribution of assets
(counterclaim ten), will be addressed by the business court in its directing the winding
up of [the Company]."
[2] On March 5, 2012, Plaintiffs filed a Motion for Partial Summary Judgment
("Plaintiffs' Motion"), requesting that this court enter partial judgment in Plaintiffs' favor
on certain accounting claims and counterclaims. Plaintiffs requested a distribution of
the Company's assets of approximately $79,395 total, payable to individual Plaintiffs
Glenn Adams, Harold Boughman and Vickie Burge. Plaintiffs cited the Opinion as
authority for this court to proceed with handling certain accounting matters in
conjunction with the dissolution and winding up of the Company.
[3] On June 12, 2012, this court held a hearing on Plaintiffs' Motion. At that
time, the court denied Plaintiffs' Motion in open court. Also at that hearing, the court
informed the parties that it would proceed by entering an order dissolving the Company
and directing its winding up. The court also informed the parties that it would appoint a
referee ("Special Master") to perform an accounting of the Company in order to
determine the amount of its assets, if any, and how to distribute the assets to the
parties according to the protocols set forth by this court. Lastly, the court informed the
parties that they would be required to compensate the Special Master, including the
payment of an upfront retainer fee, for services rendered in this matter.
[4] The parties agree that a dissolution of the Company is required, as well as
an accounting and distribution of its assets. In fact, both parties have made formal
demands for a statutory distribution in their pleadings. The parties dispute various
aspects of the financial and accounting records of the Company and the amounts owed
by and to the respective parties.
Contingent Fee Engagements
[5] In order to properly direct the winding up of the Company, the court must
first address the appropriate manner in which to account for certain contingent-fee
engagements of the Company. A primary point of contention between the parties is the
appropriate accounting method for profits derived from the contingent-fee engagements
that the Company entered into prior to dissolution but were resolved post-dissolution by
Defendants ("Contingent Fee Engagements"). As discussed in more detail below,
Plaintiffs contend that all profits from the Contingent Fee Engagements, regardless of
when and by whom they were realized, are the property of the Company and subject to
a proportional distribution among the Company's former members according to their
respective ownership interests in the Company's profits, as agreed by them from time to
1
time. Defendants argue that this result would be inequitable and that any portion of
profits of the Contingent Fee Engagements that are attributable solely to Defendants'
post-dissolution efforts should not be shared with Plaintiffs.
[6] On August 24, 2012, the court entered an Order on Additional Briefing,
requesting that the parties file memoranda in support of their respective positions as to
how to account for profits derived from the Contingent Fee Engagements. Specifically,
the issue, as framed by the court, was whether such "fees should be categorized in
their entirety (a) as assets of [the Company] or (b) as assets of the [n]ew [f]irm(s) with a
quantum meruit accounting owed to [the Company] for legal work on the [c]ases prior to
[d]issolution." It appears to the court that this issue is a matter of first impression in
North Carolina. Briefing on this issue was completed by the end of September 2012,
and the issue is ripe for determination.
DISCUSSION
Plaintiffs' Argument
[7] Plaintiffs take the position that all profits derived from the Contingent Fee
Engagements are the property of the Company and must be distributed in their entirety
among the Company's former members. Plaintiffs primarily base this contention upon
previous findings by this court, and the court of appeals, that the Contingent Fee
Engagements were (a) the property of the Company at the time of dissolution and (b)
subject to liquidation and distribution in accordance with the North Carolina Limited
Liability Company Act ("Act"). Plaintiffs quote this court's language in its Order on
Defendant's Motion to Dismiss in which the court described the duties of LLC managers
1
Paragraph 14 of the Supplemental Amended Complaint alleges that as of the dissolution date, the
respective members were entitled to share in Company net profits as follows: Coy Brewer – 19%, Ronnie
2
upon dissolution:
The Act provides that upon dissolution, unless otherwise
agreed, an LLC such as the [the Company] continues in
existence while its managers, or others charged with winding
up the affairs of the LLC, have a statutory duty to (a) obtain
"[a]s promptly as reasonably possible . . . the fair market
value for the [LLC's] assets," and (b) distribute the net
balance of those assets to the LLC's Members, and others.
G.S. 57C-6-04(b), 05(3). The requirement that the fair
market value of an LLC asset be obtained "as promptly as
reasonably possible," and the mechanics of how that is
achieved, must be viewed relative to the business the LLC
conducts and the types of assets it holds. The court can find
no reason why law firm Engagements, such as the
Contingent Fee Cases, are not capable of being liquidated in
a manner consistent with these statutory requirements.
[8] Accordingly, Plaintiffs argue that it was the duty of Defendants to pursue
the Contingent Fee Engagements on behalf of the Company following dissolution in
order to wind up the affairs of the Company. Plaintiffs read G.S. 57C-6-04(b) to
contemplate that where the assets of an LLC cannot readily be liquidated at the time of
dissolution, there is a duty imposed upon the LLC's former managers "to carry on the
3
firm's unfinished business in order to realize fair market value for its assets."
Specifically, Plaintiffs contend that the duty imposed by 57C-6-04(b) requires
Defendants to "pursue to conclusion the [C]ontingent [F]ee [Engagements] in process
as of the dissolution date."4 Plaintiffs argue that all post-dissolution efforts of
Defendants to conclude the Contingent Fee Engagements constitute their "winding up"
under the Act, and that Defendants must "account [to Plaintiffs] for any proceeds
Mitchell – 19%, William Richardson – 19%, Glenn Adams – 12.3333%, Harold Boughman – 10.6668%,
Vicki Burge – 10.6668% and Charles Brittain – 9.3111%.
2
It should be noted that Plaintiffs and Defendants were all managers of the Company, as the Company
was a member-managed limited liability company.
3
Pl. Br. Acct. Method. ("Plaintiffs' Brief") 3.
4
Id.
5
derived from [those efforts]." Plaintiffs' approach to this winding up issue has been
accepted in some jurisdictions and loosely has been referred to as the unfinished
business method of winding up ("Method"). See, e.g., Sullivan, Bodney & Hammond v.
Bodney, 16 Kan. App. 2d. 208, 820 P.2d 1248 (Kan. App. 1991); Ellerby v. Spiezer, 138
Ill. App.3d 77, 485 N.E.2d 413 (1985); Jewel v. Boxer, 156 Cal. App. 3d 171, 203 Cal.
Rptr. 13 (1984). Plaintiffs urge this court to adopt the Method and contend that the
Method is "the case law embodiment of the partnership principles codified in North
Carolina law through the LLC Act and North Carolina's version of the Uniform
Partnership Act . . . ."6
[9] Finally, Plaintiffs argue that a quantum meruit accounting is inappropriate
under the present circumstances, contending that (a) quantum meruit is an equitable
remedy and the Act provides an adequate remedy at law; (b) a quantum meruit
recovery is contrary to the plain language and meaning of the Act, which requires that
managers account to the LLC for profits derived from liquidating transactions and (c)
Defendants' post-dissolution efforts will be difficult to quantify because Defendants did
not keep adequate time records related to the Contingent Fee Engagements following
dissolution.7
Defendants' Argument
[10] The primary objection raised by Defendants to Plaintiffs' proposed
accounting methodology is that its application will produce inequitable results under the
5
Id. 5. In support of this contention, Plaintiffs rely upon G.S. 57C-3-22, -6-04 and G.S. 59-48, -51 and -60.
6
Plaintiffs' Brief 5.
7
The court's conclusions reflected in this Opinion and Order are not based upon an application of
quantum meruit principles. Rather, as discussed infra the court reaches its conclusions pursuant to
relevant provisions of the Act.
8
present circumstances. Defendants contend that a literal application of the Method
would require a division and distribution of profits from the Contingent Fee
Engagements that does not appropriately account for the extent to which the
Contingent Fee Engagements were handled exclusively by Defendants following
dissolution.
[11] Defendants do not take the position that Plaintiffs and the Company have
no claim to any portion of the profits from the Contingent Fee Engagements. Rather,
Defendants acknowledge that the Contingent Fee Engagements were assets of the
Company at the time of dissolution and that any profits derived therefrom are subject to
distribution to some extent. Defendants argue that any distributions to be made in
accordance with the Act should "consider the appropriate rights and methodology in
effecting a distribution."9
[12] Defendants urge this court to adopt an accounting methodology that
recognizes the extent to which post-dissolution profits from the Contingent Fee
Engagements are the product of Defendants' individual skill, effort and diligence.10
Defendants argue that the Company only has a cognizable property interest in the
value that accrued and is attributable to the Contingent Fee Engagements prior to
dissolution, given that any value that accrued to the Contingent Fee Engagements
following dissolution is due solely to Defendants' efforts.11 Accordingly, Defendants
contend that they should be required to remit to the Company only the value of net
profits ultimately derived from the Contingent Fee Engagements less those profits that
8
Defendants Coy E. Brewer, Ronnie M. Mitchell and Charles Brittain have each submitted briefs on their
own behalf. For present purposes the court will consider the arguments contained in each of the briefs
collectively.
9
Def. Mitchell Mem. Valu. Dist. Meth. (Mitchell Brief) 10.
10
Id. 11.
12
are attributable exclusively to Defendants' post-dissolution efforts.
[13] Defendants find support for their position in those North Carolina cases
that have attempted to value contingent-fee engagements as an asset prior to
settlement or verdict. Defendants contend that the present circumstances are
analogous to situations in which a firm or attorney is hired on a contingent-fee basis
13
and later the engagement is terminated by the client. Under such circumstances,
North Carolina courts have held that the departing attorney is entitled to a quantum
meruit recovery for the reasonable value of the services provided to the client prior to
termination of the engagement, but not to a charging lien against the amount ultimately
recovered. See, e.g., Mack v. Moore, 107 N.C. App. 87, 91-92 (1992).14
[14] Defendants use Mack to demonstrate their contention that North Carolina
law recognizes a distinction between the value of a contingent-fee engagement as an
asset in the hands of a lawyer prior to settlement or verdict and the fee ultimately
derived from the engagement. Thus, Defendants argue, the value of the Contingent
Fee Engagements as an asset of the Company is equivalent to the reasonable value of
the services actually performed by the Company prior to dissolution, not the fee
ultimately realized from the engagement.15
The Act
[15] The court notes that the plain language of the Act supports the broad
contention that a manager tasked with winding up the affairs of a dissolved LLC must
hold any profits derived from the liquidation of the LLC in trust for the LLC, and by
11
Id.
12
Id. 6.
13
Id. at 4.
14
In Mack, profits ultimately were realized from the engagement.
15
Id.
extension, the LLC's former members. G.S. 57C-6-04(b), 57C-3-22(e). Further, the
plain language of the Act supports the contention that upon dissolution the former
members of the LLC are entitled to a distribution of their proportional share of any
profits of the LLC, including those profits that are derived by virtue of the liquidation of
the LLC's assets. G.S. 57C-6-05(3).
[16] The arguments presented by the parties here, however, cannot be
resolved solely by reference to these broad principles. Instead, the appropriate
accounting for the Contingent Fee Engagements turns on considerations that are not
directly addressed by the Act. This court recognized this possibility in its previous order
denying Defendants' Motion to Dismiss, stating:
This matter has potential to present a host of related,
complex issues that are not now before the court. For
example, what are the various duties, vis-à-vis the Firm and
the Defendants' New Firm, of Defendant Members who
undertake to manage to their conclusion Contingent Fee
Cases that follow Defendants to Defendants' New Firm; and
how, if at all, would profits or losses realized from a
Contingent Fee Case ultimately resolved by the Defendants'
New Firm be shared between the Firm and the Defendants'
New Firm? Would it be on a quantum meruit basis or
otherwise? Further, since the theory underlying the parties'
respective positions is not limited to Contingent Fee Cases,
how would other Engagements be accounted for between
the various Members of the Firm in the context of either
withdrawal or dissolution?
[17] The Act does not specifically address whether a former manager who
personally undertakes to conclude a personal-service engagement of a dissolved LLC
is necessarily and exclusively acting to wind up and liquidate the affairs of the dissolved
LLC. The Act only indicates that where those actions would be considered winding up
or liquidation, the Act's provisions related to the safeguarding of profits are applicable.
Clearly, not all post-dissolution efforts by former members can appropriately be
considered winding up or liquidating the LLC. Similarly, the Act does not specifically
address whether all profits derived from the post-dissolution resolution of personal-
service engagements of a dissolved LLC are "profits of the limited liability company,"
without regard for the effort and skill expended by individual members following
dissolution. The Act only dictates that where post-dissolution profits may be deemed
"profits of the limited liability company" they are subject to distribution to the former
16
members.
Liquidating the Contingent Fee Engagements
[18] The Act provides that the affairs of an LLC are to be wound up using a
typical liquidation process. The Act, however, does not define "liquidation." The court
accepts the definition, propounded in Black's Law Dictionary and elsewhere, that
liquidation is "the act of converting assets into cash." By definition then, liquidation
under the Act is the process of converting that which is an asset of an LLC into cash to
be distributed to members under G.S. 57C-6-05(3). In order to fit within the Act's
definition of liquidation, the asset being converted to value must in the first place be an
asset of the LLC. The extent to which the Contingent Fee Engagements may
appropriately be considered assets of the Company is at the heart of the parties'
dispute here. The Contingent Fee Engagements unquestionably were an asset of the
16
In concluding that the Act does not specifically contemplate some of the issues raised in the present
case, the court notes that G.S. 57C-10-05 allows that in cases not provided for within the Act, the rules of
law and equity shall govern. Therefore, the court will consider the equitable arguments raised by
Defendants only to the extent necessary to resolve those issues that are not directly addressed by the Act.
Company at the time of dissolution. The more difficult question is whether the value
that accrued to the Contingent Fee Engagements following dissolution may also be said
to be an asset of the Company.
[19] The court notes that a contingent-fee engagement cannot be "liquidated"
in the conventional sense of the term. It cannot easily be shopped to purchasers,
placed on the open market or assigned a fair-market price. The only way in which a
contingent-fee engagement may be converted into tangible value is by ultimately
reaching a favorable settlement or verdict in the matter. Even then, the monetary value
of a contingent-fee engagement is unknowable prior to settlement or verdict. How
much of any realized fee actually is profit (or loss) to an attorney depends on how long
and how expensive litigation of the engagement to a conclusion ultimately proves to be.
In light of these uncertainties, a contingent-fee engagement cannot readily be
"collected," "disposed [of]," "discharged" or "distributed" at the time of winding up as
described in G.S. 57C-6-04(b).17
[20] The difficulty in liquidating contingent-fee engagements by conventional
means leads inevitably to the conclusion that the only way in which they may be
converted to value following dissolution is by pursuing them to resolution. Further, it is
unrealistic to suppose that all former members will collaborate in order to resolve
contingent-fee engagements following dissolution. As is often the case in a law-firm
setting, only a few of the members, perhaps only one, will have been involved
personally in the engagement prior to dissolution and possess an adequate familiarity
with the client and the subject matter of the litigation to proceed with representation
17
The parties here assume that the "value" at issue results from the profitable resolution of a Contingent
Fee Engagement. They do not address how they would account for an adverse verdict or other negative
following dissolution. Therefore, the task of pursuing such engagements following
dissolution is likely to fall to those members who pursued the engagements prior to
dissolution, usually at the affirmative direction of the client. Practically, this means that
following dissolution an individual member or members will pursue the engagements
using individual effort and skill without collaboration with former members.
[21] A strict application of the Method urged by Plaintiffs does not account
appropriately for the fact that at least a portion of the value ultimately derived by fees
from contingent-fee engagements is the product of a former member's individual skill
and effort following dissolution. As an example, under the Method, an attorney-member
who had expended only a few hours on a contingent-fee engagement prior to
dissolution and subsequently pursued the engagement for many years would be forced
to divide any fee realized in the matter with his former members without regard for the
extent to which the fee was the product of the attorney's post-dissolution individual
effort. Conversely, if in pursuing the engagement without collaboration from the former
members, the attorney expended years of effort and enormous out-of-pocket expenses
only to receive no fee in the matter the attorney could, and likely would, make a
18
demand on the former members to share in all his losses.
[22] Further, a contingent-fee engagement, as an asset, is a contract to
perform personal services. Where attorneys organize themselves as a limited liability
company for the purpose of providing personal services to clients, there can be no
distinction drawn between that which is an asset of the LLC and that which is a product
of an individual member's personal skill and effort. It is therefore true, absent an
result in a contingent-fee case in which substantial out-of-pocket expenses had been incurred during the
course of the engagement and cannot be recovered from the client.
agreement to the contrary, that a member in a law firm LLC has the right to share – at
the agreed percentage or other sharing protocol – in the profits of all engagements of
19
the firm regardless of the member's actual involvement in particular engagements.
This right, however, flows from the relationship of the attorneys as co-members of the
LLC and the fact that profits from the law firm's engagements are the property of the
LLC. Following dissolution, the same principle need not apply. In effect, dissolution
should end the right of members to share in the future profits of their fellow members'
personal-service engagements. Accordingly, profits attributable to the continued
provision of post-dissolution personal services by individual former members should not
accrue to the LLC.
[23] Based on the foregoing and under the circumstances of this action, the
court declines to adopt the Method advanced by Plaintiffs and concludes that the better
approach is one recognizing that:
"The rule of law is well settled, by the weight of authorities,
that neither partner of a dissolved firm is entitled to
compensation for services rendered in winding up the
partnership affairs unless it is expressly agreed otherwise or
can be fairly implied from the circumstances. It seems,
however, that the rule should not be extended beyond the
requirement of merely winding up the partnership affairs by
collecting its outstanding claims, paying debts and
distributing the surplus among the members, and that when
it appears that time, skill and labor have been expended by
a partner in the continuance of partnership business, which
inure to the general benefit, he ought to receive, from the
profits from his skill and labor, a reasonable compensation,
varying according to the nature of the business, the
difficulties and results of the undertaking, and its necessity
or desirability." Lamb v. Wilson, 92 N.W. 167, 168 (Neb.
1902).
18
This is true in so far as those losses would be losses of the LLC under the Method and therefore
chargeable against liquidating distributions required to be made under G.S. 57C-6-05(3).
19
See discussion at paragraphs 24 through 30 of this court's Order on Defendants' Motion to Dismiss
pursuant to Rules 12(b)(1) and 12(b)(6), dated May 8, 2006.
[24] The court concludes that it was Defendants' duty to pursue in good faith
the Contingent Fee Engagements to conclusion following dissolution as part of winding
up the affairs of the Company. However, the efforts by Defendants to pursue the
Contingent Fee Engagements should only be considered liquidation of a Company
asset to the extent that those efforts served to realize the value that accrued to the
Contingent Fee Engagements as of the dissolution date. Any portion of net profits of
the Contingent Fee Engagements attributable exclusively to Defendants' post-
dissolution efforts cannot properly be said to be an asset of the Company. Therefore, it
is only that portion of the net fee ultimately derived from the Contingent Fee
Engagements that accrued prior to dissolution which Defendants should be required to
distribute to former members in accordance with G.S. 57C-6-05(3).
[25] The court is persuaded, based upon the analogous holding of Mack and
other similar cases, that the appropriate measure of the value of the Contingent Fee
Engagements to the Company is the reasonable value of the services provided by or in
behalf of the Company up to the date of dissolution. Under the present circumstances,
the best means by which to measure the reasonable value of pre-dissolution services is
to determine (a) the total attorney hours ("Time") expended on a particular Contingent
Fee Engagement, both prior to and after dissolution, (b) the percentage of Time that
was expended prior to dissolution and (c) the net profit ultimately realized from the
Contingent Fee Engagement. The reasonable asset value to the Company of each
such matter would be determined by the percentage of pre-dissolution Time expended
relative to the net profit ultimately realized on that matter. As an example, if a total of
100 attorney hours were expended on a particular Contingent Fee Engagement and 50
of those hours were performed prior to dissolution, the net fee ultimately received by
Defendants should be shared 50/50 with Plaintiffs. This method, as opposed to others,
best accounts for the risk borne by the Company in initially taking on the Contingent
Fee Engagements and also reflects the parties' expectations at the time they entered
into the Contingent Fee Engagements.20
[26] The court therefore will direct the winding up of the Company in
accordance with the findings and conclusions above. In doing so, the court observes
that the reasoning relative to liquidation and sharing between the Company and
Defendants of ultimate profits from Contingent Fee Engagements ordinarily also would
hold true for any professional engagements ("Other Engagements") initially undertaken
by the Company but completed and billed for post-dissolution by Defendants. This
Opinion and Order is intended to encompass such Other Engagements.
SPECIAL MASTER
[27] The court is convinced, based upon the materials submitted to the court
and the arguments of counsel, and pursuant to Rule 53, North Carolina Rules of Civil
Procedure ("Rule(s)"), that appointment of a referee ("Special Master") to conduct an
accounting of the Company as to the Contingent Fee Engagements and any Other
Engagements (collectively the "Accounting") will be in the best interest of the parties.
[28] The court understands that Craig A. Adams, CPA ("Adams") of the
accounting firm of Adams, Martin & Associates, P.A., is willing to accept appointment
20
The court recognizes that there are other potential methodologies for determining the respective fiscal
interests of the parties in setting the value of professional engagements undertaken by the Company and
completed post-dissolution by one or more of the Defendants. Some of those would consider individual
attorney hourly rates from time to time for each of the member attorneys. Some would attempt to weigh
individual experience and expertise or other such subjective criteria. Without a detailed discussion of
those various approaches, but after due consideration of each, the court concludes that other approaches
as Special Master in this matter. The court concludes that Adams is conversant with
law firm accounting, is exceptionally qualified to perform the Accounting and that it is in
the best interests of justice and the parties to this matter that he be appointed Special
Master forthwith. The court further concludes that an hourly fee of $255 per hour is fair
and reasonable compensation for the time expended by the Special Master in dealing
with the accounting in this matter, in addition to an initial administrative fee of $500.
[29] To conduct the Accounting, the Special Master will need complete access
to books and records of the Company and those of Defendants that relate to the
Contingent Fee Engagements or any Other Engagements.
[30] It is important that records of all the parties and the Company be
preserved and maintained for purposes of this litigation.
NOW THEREFORE, it hereby is ORDERED that:
[31] The Company is DISSOLVED, pursuant to G.S. 57C-6-02. The
dissolution of the Company shall be effective as of July 1, 2005 ("Dissolution Date").
[32] The court appoints Craig A. Adams, CPA, as Special Master, pursuant to
Rule 53. The Special Master shall charge an hourly fee of $255 per hour for his
services relative to this matter, and further shall be entitled to an initial administrative
fee of $500.
[33] In undertaking and performing this engagement, the Special Master is
authorized to engage the professional services of other members of his accounting firm,
at their customary and usual hourly rates, as he reasonably determines are needed.
[34] The Special Master shall take an account of the Company and the
are so speculative, problematical or difficult of proof that they are not appropriate for further examination.
Accordingly, no further discussion in that regard is necessary here.
Defendants, consistent with the provisions of this Opinion and Order, and shall:
(a) Take control of and secure the financial records, or appropriate
copies thereof, of the Company;
(b) Secure the financial records, or appropriate copies thereof, of the
Defendants, as they relate to the Contingent Fee Engagements or any Other
Engagements;
(c) Assess the state of the financial records of the Company;
(d) Assess the state of the financial records of the Defendants as they
relate to the Contingent Fee Engagements or any Other Engagements;
(e) Direct and assist in the preparation of financial statements that
state the financial condition of the Company with reasonable accuracy;
(f) Investigate and report to the court the nature and extent of the
outstanding assets and liabilities of the Company;
(g) If there are Company assets subject to distribution under G.S. 57C-
6-05, determine and recommend to the court the amount in which those assets
should be distributed to the Company using generally accepted accounting
principles and the protocols established in this Opinion and Order;
(h) With regard to any Company assets available for distribution,
determine and recommend to the court the manner and proportions of such
distributions to the various members of the Company as of the date of
dissolution; and
(i) The Company shall submit to the Special Master records of all
attorney billable hours expended prior to the Dissolution Date on any matter
pending as of the Dissolution Date. This record shall indicate the number of total
billable hours attributable to the Contingent Fee Engagements or any Other
Engagements. Defendants shall submit to the Special Master a record of all
attorney hours expended on the Contingent Fee Engagements or any Other
Engagements.
[35] All parties to this civil action shall cooperate fully with the Special Master
in the performance of his duties.
[36] The Special Master shall report his finding to the court as soon as
practicable and may request from the parties or the court any further information,
authority, direction or actions he might need from the court or parties in order to perform
the duties reflected in this Opinion and Order.
[37] Pursuant to Rule 53(d), and on or before April 1, 2013, each individual
party litigant in this matter shall provide a retainer fee ("Retainer") to the Special Master
in the amount of $5,000. For time expended in dealing with the Accounting, the Special
Master shall charge his authorized hourly fee, which in addition to the one-time
administrative fee provided for herein shall be deducted from the Retainer on a monthly
basis. To the extent the Special Master's fee for services rendered exceeds the
Retainer the Special Master shall provide equal monthly invoices to the parties, to be
paid within thirty days of the invoice date. The parties shall be responsible to
compensate the Special Master until his obligations as set forth by this Opinion and
Order are fulfilled. Pursuant to Rule 53(d), at the conclusion of this matter the court will
take into account such advancements in the final fixing of costs and will make pro rata
adjustments between the parties as the court then deems proper.
[38] All parties to this civil action are directed to cooperate with the Special
Master and provide any and all financial information and records he might request.
[39] During pendency of this civil action or unless otherwise ordered, all parties
are directed not to destroy, remove, alter or obscure any of the financial or otherwise
relevant records of the Company.
[40] This Order shall remain in force and effect until further order of this court.
This the 26th day of February, 2013.