Piazza v. Kirkbride

IN THE SUPREME COURT OF NORTH CAROLINA

No. 181A16

Filed 10 May 2019

LAWRENCE PIAZZA and SALVATORE LAMPURI

v.

DAVID KIRKBRIDE, GREGORY BRANNON, and ROBERT RICE

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of

the Court of Appeals, 246 N.C. App. 576, 785 S.E.2d 695 (2016), affirming a judgment

entered on 13 March 2014 and an order entered on 11 April 2014, both by Judge G.

Bryan Collins, Jr., in Superior Court, Wake County. On 18 August 2016, the

Supreme Court allowed defendant’s petition for discretionary review of additional

issues. Heard in the Supreme Court on 20 March 2017.

Poyner Spruill LLP, by Steven B. Epstein and Andrew H. Erteschik, for

plaintiff-appellees.

Smith Moore Leatherwood LLP, by Matthew Nis Leerberg and Mark A.

Finkelstein, for defendant-appellant Gregory Brannon.

ERVIN, Justice.

In this case, we are called upon to decide whether the Court of Appeals erred

by determining that the trial court did not err by refusing to grant a new trial to a

defendant who was held liable pursuant to N.C.G.S. § 78A-56(a)(2), which prohibits

a person from selling securities by means of false and misleading statements of

PIAZZA V. KIRKBRIDE

Opinion of the Court

material fact. After carefully considering the record in light of the applicable law, we

modify and affirm the Court of Appeals’ decision to uphold the trial court’s judgment.

I. Factual Background

A. Substantive Facts

Defendant Gregory Brannon1 met plaintiff Lawrence Piazza in 1986, when

they were both students at the University of Chicago Medical School. After

graduating from medical school, Dr. Piazza became an eye surgeon while defendant

practiced obstetrics and gynecological medicine. Defendant met Robert Rice in the

early 1990s. Defendant, along with Dr. Piazza, invested in Arckosian, a start-up

entity that Mr. Rice had founded that later went out of business. Following the

demise of Arckosian, Mr. Rice co-founded, with David Kirkbride, a company called Z

Reality. In 2006, defendant met John Cummings when Mr. Cummings accompanied

his wife to a prenatal appointment. Similarly, defendant met plaintiff Salvatore

Lampuri during defendant’s attendance upon Mr. Lampuri’s wife in connection with

the birth of the couple’s first child.

In 2007, Mr. Rice and Mr. Kirkbride founded Neogence Enterprises, Inc., a

technology company that had developed and was attempting to market an augmented

reality application for smartphones known as Mirascape. The funding upon which

Neogence relied was provided by “angel investors,” including Dr. Piazza, who received

1 We will refer to defendant Gregory Brannon as defendant throughout the remainder

of this opinion.

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convertible promissory notes in connection with the making of their investments. Mr.

Rice served as Neogence’s Chief Executive Officer, with responsibility for fundraising

and technical development, while Mr. Kirkbride assisted with Neogence’s fundraising

efforts. Defendant became a member of Neogence’s board of directors, upon which he

served with Mr. Rice and Mr. Kirkbride. In 2009, Mr. Cummings joined Neogence as

Chief Sales Officer.

On 29 April 2010, Mr. Cummings attended a social event in New York at which

he met an account executive from McGarry Bowen, an advertising agency that served

a number of clients, including Verizon Wireless. The McGarry Bowen account

executive invited Mr. Cummings to a meeting with Verizon that had been scheduled

for the following day. At the 30 April 2010 meeting, Mr. Cummings described the

work that Neogence was doing to various McGarry Bowen employees and a Verizon

executive. During the course of this meeting, a McGarry Bowen account executive

told Mr. Cummings that McGarry Bowen would consider using Mirascape as part of

an upcoming advertising campaign in the event that Neogence was able to develop

Mirascape consistently with McGarry Bowen’s expectations.

After the meeting ended, Mr. Cummings discussed what had happened with

defendant, Mr. Rice, and Mr. Kirkbride. On the same date, defendant e-mailed Dr.

Piazza for the purpose of informing him of what had occurred during the McGarry

Bowen meeting and stating that Neogence needed an additional $100,000.00 to

$200,000.00 as quickly as possible to take advantage of the opportunity that had

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arisen during the McGarry Bowen meeting. Later that day, Mr. Rice sent an e-mail

to Dr. Piazza seeking an additional $200,000.00 in “angel funding” relating to this

“opportunity.” On 28 May 2010, Dr. Piazza invested an additional $150,000.00 in

Neogence following a meeting with Mr. Cummings and Mr. Kirkbride. In addition,

defendant, Mr. Rice, and other Neogence agents discussed what had happened at the

McGarry Bowen meeting with Mr. Lampuri. Subsequently, Mr. Lampuri made an

investment in Neogence as well.

Unfortunately, Neogence was unable to get Mirascape to function properly in

a timely manner. During the following year, Neogence began to experience financial

difficulties. After failing to comply with Dr. Piazza’s request that his investment be

returned in accordance with the provisions of his convertible promissory notes,

Neogence ceased doing business in early July 2011. Dr. Piazza eventually filed suit

against Neogence to enforce the convertible promissory notes and obtained the entry

of a default judgment.

B. Procedural History

On 10 October 2012, plaintiffs filed a complaint against defendant, Mr.

Kirkbride, and Mr. Rice in which they sought to recover damages from defendants on

the basis of allegations that defendants had committed material violations of the

North Carolina Securities Act. In apt time, defendants filed responsive pleadings in

which they sought dismissal of plaintiffs’ complaint, denied the material allegations

of plaintiffs’ complaint, asserted various counterclaims and crossclaims, and raised

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various affirmative defenses, including, but not limited to, contributory negligence,

failure to mitigate damages, failure to show reasonable reliance, unclean hands, and

waiver and estoppel. On 25 November 2013, Judge Donald W. Stephens entered an

order granting summary judgment in favor of Mr. Kirkbride and refusing to grant

summary judgment in favor of defendant and Mr. Rice.

The issues between plaintiffs and the remaining defendants came on for trial

before the trial court and a jury at the 10 February 2014 civil session of Superior

Court, Wake County. At the conclusion of the trial, the trial court submitted the

following issues to the jury for the purpose of determining whether plaintiffs were

entitled to recover damages from defendant based upon a violation of N.C.G.S. § 78A-

56(a)(2)2:

ISSUE 1:

Did Defendant, Gregory Brannon, in soliciting the

Plaintiff, Lawrence Piazza, to pay money for a security,

make a statement which was materially false or

misleading, or which under the circumstances was

materially false or misleading because of the omission of

2 N.C.G.S. § 78A-56(a)(2) imposes civil liability upon anyone who:

Offers or sells a security by means of any untrue

statement of a material fact or any omission to state a material

fact necessary in order to make the statements made, in the light

of the circumstances under which they were made, not

misleading (the purchaser not knowing of the untruth or

omission), and who does not sustain the burden of proof that he

did not know, and in the exercise of reasonable care could not

have known, of the untruth or omission.

N.C.G.S. § 78A-56(a)(2) (2017).

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other facts, where the Plaintiff, Lawrence Piazza, was

unaware of the true or omitted facts?

ANSWER: Yes

If you answer the first issue "yes," move to the second issue.

If you answer the first issue "no," move to the third issue.

ISSUE 2:

Did the Defendant, Gregory Brannon, not know and in the

exercise of reasonable care, could not have known of the

untruth or omission in his offer or sale of a security to the

Plaintiff, Lawrence Piazza?

ANSWER: No

No matter your verdict on the first and/or second issues,

move to the third issue.

ISSUE 3:

Did the Defendant, Gregory Brannon, in soliciting the

Plaintiff, Salvatore Lampuri, to pay money for a security,

make a statement which was materially false or

misleading, or which under the circumstances was

materially false or misleading because of the omission of

other facts, where the Plaintiff, Salvatore Lampuri, was

unaware of the true or omitted facts?

ANSWER: Yes

If you answer the third issue "yes," move to the fourth

issue. If you answer the third issue "no," move to the fifth

issue.

ISSUE 4:

Did the Defendant, Gregory Brannon, not know and in the

exercise of reasonable care, could not have known of the

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untruth or omission in his offer or sale of a security to the

Plaintiff, Salvatore Lampuri?

ANSWER: No

On the other hand, in answering the same questions regarding Mr. Rice, the jury

determined that Mr. Rice had not made any false or misleading statements to

plaintiffs. On 13 March 2014, the trial court entered a judgment ordering defendant

to pay $150,000.00 in compensatory damages to Dr. Piazza and $100,000.00 in

compensatory damages to Mr. Lampuri and to pay plaintiffs $123,804.00 in attorney’s

fees and $8,493.79 in costs, plus interest. On 17 March 2014, defendant filed a motion

for judgment notwithstanding the verdict or, in the alternative, for a new trial. On

11 April 2014, the trial court denied defendant’s motion. On 21 April 2014 and 5 May

2014, defendant noted an appeal from the final judgment, the order awarding costs

and attorneys’ fees, and the order denying his motion for judgment notwithstanding

the verdict or a new trial to the Court of Appeals.

In challenging the trial court’s judgment and orders before the Court of

Appeals, defendant argued that the trial court had erred by determining that

plaintiffs had sufficiently established that defendant was liable to plaintiffs pursuant

to N.C.G.S. § 78A-56(a)(2), including whether defendant was primarily or secondarily

liable and whether plaintiffs were required to prove that defendant acted with

scienter; declining to instruct the jury concerning the extent to which defendant was

entitled to rely upon the director safe harbor provision set out in N.C.G.S. § 55-8-

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30(b); denying defendant’s motion for a new trial on the grounds that the verdict was

impermissibly inconsistent; and ordering defendant to pay attorneys’ fees to

plaintiffs. Piazza v. Kirkbride, 246 N.C. App. 576, 600-01, 603, 611, 614, 785 S.E.2d

695, 710-12, 717, 719 (2016). On 5 April 2016, the Court of Appeals filed an opinion

concluding that “ ‘any person’ who is a seller or offeror” of securities is liable pursuant

to N.C.G.S. § 78A-56(a). Id. at 603, 785 S.E.2d at 712. In addition, the Court of

Appeals held that “a section 78A-56(a)(2) civil plaintiff need not prove scienter,” so

that “a materially false or misleading statement or omission made in connection with

a security offer or sale is actionable even if the person making the statement or

omission did not know it was false, so long as the person was negligent under section

78A-56(a)(2),” id. at 601, 785 S.E.2d at 711, and that “a defendant does not have to

be a securities professional to be liable under the” North Carolina Securities Act, id.

at 602, 785 S.E.2d at 712. Moreover, the Court of Appeals rejected defendant’s

contention that the trial court had erred by refusing to deliver a director safe harbor

instruction given that “the jury found [defendant] liable to Plaintiffs . . . for his

individual representations, which were the product of his own acts,” rather than “his

directorial responsibilities set out by the board,” id. at 605-06, 785 S.E.2d at 713-14,

and that defendant had “waived the Safe Harbor affirmative defense” by failing to

plead it, id. at 609, 785 S.E.2d at 716. Finally, the Court of Appeals observed that “it

is not illogical or inconsistent for two [Securities Act] defendants to achieve different

results in a single action.” Id. at 611, 785 S.E.2d at 717. Although a majority of the

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Court of Appeals affirmed the challenged trial court decisions, Judge Tyson filed a

partial dissent in which he concluded that “[t]he trial court erred by failing to instruct

the jury on the Director Safe Harbor provision as [defendant] requested in light of the

evidence presented,” id. at 615, 785 S.E.2d at 719-20 (Tyson, J., concurring in part

and dissenting in part), and that the jury’s verdicts with respect to defendant’s

liability to Dr. Piazza were impermissibly inconsistent with the jury’s verdict with

respect to Mr. Rice’s liability to Dr. Piazza on the grounds that it was “extreme, legally

unsound, and patently illogical” “[t]o deem [defendant] Brannon’s statements to

[plaintiff] Piazza as ‘securities fraud,’ while acquitting [defendant] Rice, the Chief

Executive,” id. at 615, 785 S.E.2d at 720.

On 10 May 2016, defendant noted an appeal to this Court from the Court of

Appeals’ decision based upon Judge Tyson’s dissent. On 18 August 2016, this Court

allowed defendant’s petition for discretionary review with respect to additional

issues.

II. Substantive Legal Analysis

A. Inconsistent Verdicts

In seeking to persuade us to reverse the Court of Appeals’ decision, defendant

initially argues that the trial court erred by denying his motion for a new trial on the

grounds that the jury’s determinations that defendant, but not Mr. Rice, made false

and misleading statements to plaintiffs “are so contradictory as to invalidate the

judgment” given that the statements that defendant and Mr. Rice made to plaintiffs

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were essentially identical, quoting Palmer v. Jennette, 227 N.C. 377, 379, 42 S.E.2d

345, 347 (1947). In defendant’s view, the Court of Appeals erred by reconciling the

jury’s verdicts based upon the relative strength of the showings that defendant and

Mr. Rice made with respect to the reasonable care issue. Although we agree with

defendant that the logic upon which the Court of Appeals relied in upholding the trial

court’s decision to deny defendant’s new trial motion was faulty, we do not believe

that the trial court abused its discretion by rejecting defendant’s contention that the

jury’s verdicts were impermissibly inconsistent.3

“The trial judge has the discretionary power to set aside a verdict when, in his

opinion, it would work injustice to let it stand; and, if no question of law or legal

inference is involved in the motion, his action in so doing is not subject to review on

appeal in the absence of a clear abuse of discretion.” Selph v. Selph, 267 N.C. 635,

637, 148 S.E.2d 574, 575-76 (1966) (first citing Goldston v. Wright, 257 N.C. 279, 279,

125 S.E.2d 462, 463 (1962) (per curiam); then citing Walston v. Greene, 246 N.C. 617,

3 The trial court, without objection from defendant, instructed the jury that “a

statement or omission is material if the information disclosed or the information omitted

would have assumed actual significance in the deliberations of a reasonable investor” and

that “the plaintiffs do not need to prove that they relied on the false or misleading information

defendants provided, or what significance they attributed to that information.” Defendant

did not object to this instruction before the trial court or challenge it in any way before either

this Court or the Court of Appeals, and we express no opinion concerning its correctness.

Similarly, defendant has not argued before this Court that his new trial motion should have

been allowed or that he is otherwise entitled to relief because plaintiffs knew or should have

known of the “true facts” or that plaintiffs did not or should not have reasonably relied upon

defendant’s representations. “The scope of review on appeal is limited to issues so presented

in the several briefs.” N.C. R. App. P. 28(a).

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617, 99 S.E.2d 805, 805-06 (1957) (per curiam); then citing Roberts v. Hill, 240 N.C.

373, 380, 82 S.E.2d 373, 380 (1954); and then citing Pruitt v. Ray, 230 N.C. 322, 322-

23, 52 S.E.2d 876, 876-77 (1949) (per curiam)). Inconsistent verdicts in the same

actions may constitute grounds for awarding a new trial. See, e.g., Porter v. W. N.C.

R.R. Co., 97 N.C. 66, 73-75, 2 S.E. 580, 583-85 (1887) (ordering a new trial when the

jury’s answer to one question indicated that the plaintiff did not negligently

contribute to the accident that led to his death while its answer to another question

indicated that the same plaintiff was contributorily negligent). As defendant

candidly concedes, the decision concerning whether to grant a new trial on the basis

of allegedly inconsistent verdicts is one of discretion rather than one of law. For that

reason, our review of defendant’s challenge to the denial of his motion for a new trial

on the grounds that the jury’s verdicts were impermissibly inconsistent “is strictly

limited to the determination of whether the record affirmatively demonstrates a

manifest abuse of discretion by the judge.” Worthington v. Bynum, 305 N.C. 478, 482,

290 S.E.2d 599, 602 (1982) (citations omitted). An abuse of discretion has occurred

when a trial court’s discretionary decision was “manifestly unsupported by reason”;

for that reason, such a discretionary decision will not be overturned on appeal absent

“a showing that it was so arbitrary that it could not have been the result of a reasoned

decision.” White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).

The prior decisions of this Court suggest that jury verdicts should not be set

aside for inconsistency lightly. For example, we have stated “that a verdict should be

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liberally and favorably construed with a view of sustaining it, if possible.” Guy v.

Gould, 202 N.C. 727, 729, 164 S.E. 120, 121 (1932).4 Our authority to overturn a trial

court’s discretionary decision to grant or deny a new trial motion should be exercised

“with great care and exceeding reluctance,” In re Will of Buck, 350 N.C. 621, 626, 516

S.E.2d 858, 861 (1999), given our “great faith and confidence in the ability of our trial

judges to make the right decision, fairly and without partiality, regarding the

necessity for a new trial” in light of “their active participation in the trial, their first-

hand acquaintance with the evidence presented, their observances of the parties, the

witnesses, the jurors and the attorneys involved,” Worthington, 305 N.C. at 487, 290

S.E.2d at 605, and our belief that “the exercise of this discretion sets aside a jury

verdict and, therefore, will always have some tendency to diminish the fundamental

right to trial by jury in civil cases which is guaranteed by our Constitution.” In re

Buck, 350 N.C. at 626, 516 S.E.2d at 861. As a result, the relevant issue is not

whether we would have made the same decision that the trial court made in ruling

upon defendant’s new trial motion; whether we would have made different credibility

determinations, viewed the evidence differently, or reached a different result than

the jury, or whether there was other evidence upon which the jury could have relied

in resolving the liability issues submitted for its decision in this case; instead, the

4 Similarly, we have also determined that, “[w]hen a judgment has been entered on

seemingly inconsistent findings of fact, it is the duty of the reviewing court to reconcile the

findings and uphold the judgment if practicable.” Davis v. Ludlum, 255 N.C. 663, 666, 122

S.E.2d 500, 502 (1961) (citing Bradham v. Robinson, 236 N.C. 589, 593, 73 S.E.2d 555, 558

(1952)).

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issue before us is whether the trial court had a rational basis for determining that a

reasonable jury could have reached different decisions with respect to the issue of

whether defendant and Mr. Rice made false and misleading representations to

plaintiffs. A careful review of the record in light of the very deferential standard of

review applicable in this case satisfies us that the trial court did not abuse its

discretion by denying defendant’s motion for a new trial.

1. Statements to Piazza

On 30 April 2010, defendant sent the following e-mail to Dr. Piazza and a

number of other recipients:

Guys John Cummings just had a meeting in NY with

Verizon. We need $100K - $200K ASAP, in 3-4 weeks we

go back to Verizon we have an opportunity to be their

featured AR. Rob is going to send out a summary later

today. I know all of you are BUSY!!! I need you to give a

few minutes to look at this potential. THANK YOU for

your TRUST!!

Greg

John Cummings 919 601 9090 Rob Rice 919 802 5257

Dr. Piazza “became aware of the Verizon opportunity” when he received this e-mail.

A few hours later, Mr. Rice sent the following e-mail to defendant and the recipients

of defendant’s earlier communication, including Dr. Piazza:

Gentlemen,

John Cummings met with McGarry Bowen (NY Marketing

Agency) and the director of new technologies at Verizon (I

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believe that was his title) this afternoon in New York. John

can give you more details directly.

John basically laid out our strategy of “meeting consumer

demand by providing the first social media marketplace

that enables people to buy, sell, and trade virtual goods for

use in mobile and augmented reality. Mirascape allows

consumers to create and sell their own augmented reality

content and experiences for a profit.” This is important

because it dramatically distinguishes us from other

startups in the industry that are more focused on directory

AR, single-user experiences, or marketing gimmicks for the

PC.

He described our short term approach with Allied

Integrated Marketing to re-purpose QR codes and turn

traditional media into trigger/activation points for the

delivery of media, as well as the early phase of virtual

goods (dynamically linked and collectible). The next step

is the earthmarks, which allow users to upload all media

types to specific locations, share them with each other,

interact, and build influence and reputation. The next

stage of this is letting users link earthmarks and 3D media

together in waypoints, which allows for drag and drop

creation of treasure hunts, tour guides, and all sorts of

engaging promotions and experiences.

Verizon responded extremely well to this and asked how

we differentiate ourselves from others like Layar. The

answer, simply put, is that we are focusing on empowering

the user to create content, as well as building a vibrant

virtual goods marketplace, again centered on the user. Our

model is based on microtransactions and data (where I

believe the real value of this emerging industry is), while

others are focusing more on custom channels or layers that

do not support social very well or are lacking the virtual

goods. Layar may have a content store going live, letting

people sell access to custom layars (“show me the nearest

subway”), but we are the first launching a virtual goods

marketplace (tapping into one of the newest and fastest

growing multi-billion dollar markets).

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While we have been seeking $200k in additional angel

funding to meet our milestones and deliverables (June for

Allied and July for a public beta launch), we now have an

opportunity to go back to Verizon in about three weeks to

blow their minds with a demo that shows everything we

are doing with Allied, as well as all of the earthmark stuff

(and some of the early social marketplace functionality).

The opportunity here is to become the featured AR

application for Verizon, OEM’d5 on all of the DROID

smartmobiles, and leverage their marketing. Even bigger,

if we can pull this off with Verizon, it puts us squarely in

the limelight of catching the eyes of other Fortune 100

companies for marketing, promotions, and strategic

partnerships.

The challenge here, is that we have to jump to warp speed

to accelerate development . . . not only to meet our

milestones, but to WOW Verizon. This is a one-shot

opportunity. As things currently are, we are crawling

along to meeting the milestones, but there is no way we can

deliver the perfect demo for Verizon without immediate

funding. I need resources to bring on additional developers

as a strike team to do this fast, hard, and well. Not only do

we need to take the app and the website to the next level,

but we need to make it look fantastic, as well as the actual

demo/presentation . . . . This is a huge chance and

opportunity, but we can’t do it alone. We need help finding

additional angel capital that can make a decision and move

quickly.

We need $200k. That’s four people at $50k. I know we can

do this. We are perfectly positioned to take down some

phenomenal strategic partnerships and deals (on top of

what we already have done), launch on the market, blow

every other AR company completely out of the water, and

take the lead in this industry. Even beyond that,

opportunities like this emerging industry only happen once

5 The term “OEM” means that the application or software is a default application pre-

installed on the smartphone.

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a decade or so . . . unless something major happens in

biotech or nanotechnology, I don’t see any other world-

changing technologies coming of age any time soon.

Mobile, Social, Local, Virtual is the magical convergence

that we are deep in the middle of with augmented reality

and Mirascape.

I’ve attached an updated version of our pitch deck that has

some new info in it for those of you that haven’t seen one

recently.

As usual, please feel free to call or email me at any time

with any questions. Thank you for everything you have

done for us so far.

Best regards,

Robert Rice

CEO Neogence Enterprises

As an initial matter, we believe that the Court of Appeals’ emphasis upon the

extent to which defendant and Mr. Rice took reasonable care to avoid making

materially false or misleading statements to Dr. Piazza, which was the subject of the

second issue that the trial court submitted for the jury’s consideration with respect

to each defendant, as a justification for the trial court’s failure to treat the jury’s

verdicts as impermissibly inconsistent overlooks the fact that the jury found against

defendant and in favor of Mr. Rice on the basis of the “materially false and misleading

statement” issue rather than on the basis of the “reasonable care” issue. The fact

that the record would support differing treatment of defendant and Mr. Rice with

respect to the “reasonable care” issue simply sheds no light on the extent to which a

reasonable jury could have found that defendant, but not Mr. Rice, made materially

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false and misleading statements to plaintiffs. Thus, the Court of Appeals erred by

upholding the trial court’s decision to deny defendant’s new trial motion on the

grounds that defendant and Mr. Rice took differing levels of care to determine the

accuracy of the statements that they made to Dr. Piazza. Instead, any determination

of the extent, if any, to which the jury’s verdicts with respect to the “materially false

and misleading” statement issue were impermissibly inconsistent necessarily

requires a careful examination of the statements that defendant and Mr. Rice made

to Dr. Piazza and the circumstances under which those statements were made.

As defendant emphasizes, the e-mails that defendant and Mr. Rice sent to Dr.

Piazza both indicate that Mirascape had an opportunity to become Verizon’s featured,

pre-loaded augmented reality application. On the other hand, the e-mail transmitted

by Mr. Rice provided considerably more detail about the opportunity that had

allegedly arisen from the McGarry Bowen meeting than the e-mail sent by defendant.

Mr. Rice opened his e-mail by noting that Mr. Cummings had met with employees of

McGarry Bowen and Verizon and that Mr. Cummings “can give you more details

directly.” Moreover, Mr. Rice provided specific details concerning the information

that Mr. Cummings had presented at the meeting and noted that Neogence’s work

with Allied Integrated Marketing and the development of earthmarks had generated

the most interest from the attendees. Although Mr. Rice did, as defendant notes,

state that Mirascape could “become the featured AR application for Verizon, OEM’d

on all of the DROID smartmobiles,” he also mentioned the actual opportunity that

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stemmed from the McGarry Bowen meeting, which was to “leverage [Verizon’s]

marketing.” In addition, Mr. Rice stated that Neogence would first have to create a

“demo” displaying “everything we are doing with Allied, as well as all of the

earthmark stuff” before mentioning other milestones that Neogence had been

working to achieve, including a public beta launch scheduled for July 2010, and

noting that additional funding would be needed to complete both the Verizon

presentation and achieve the other pre-existing goals. A trial judge could have

reasonably determined that the jury, after studying these e-mails, had a rational

basis for concluding that defendant’s communication, which mentions only Verizon

and the opportunity “to be their featured AR,” was a materially false or misleading

statement and that the substantial additional information contained in Mr. Rice’s

communication, coupled with his open invitation for the recipients to contact him if

they had any questions, provided a sufficient basis to refrain from the making of such

a determination concerning Mr. Rice’s communication.

Our decision to uphold the Court of Appeals’ decision with respect to the

inconsistent verdict issue relating to Dr. Piazza is bolstered by information contained

in Mr. Rice’s trial testimony.6 Among other things, Mr. Rice testified that:

Q. Okay. Just below this specific language, you then go

on to say, “The opportunity here is to become the featured

AR application for Verizon -- for Verizon OEMed on all the

Droid smart mobiles and leverage their marketing.” Are

6 Unlike Mr. Rice, defendant did not testify at trial.

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these three separate possibilities that you’re discussing in

regard to Verizon?

A. I believe so. I mean, this was kind of bundled

together, but they were all possibilities. They all have

different advantages and disadvantages.

Q. Well, how are they different?

A. Well, leveraging somebody’s marketing, for

example, if I have ten dollars to go out and put up some

posters that I printed on my laptop somewhere, that’s only

going [to] get me so far. But if I have somebody, say, in a

large company and say, hey, we’re going to do this big

campaign for a new car coming out for a new movie, and

sure, we’ll stick your logo on the side and include you,

you’re basically leveraging all of those dollars to get the

exposure and kind of the brand recognition, as opposed to

what you would do on your own. That’s very different from

something where you’re, you know, being OEMed or pre-

installed on a mobile device. In that case, you’re not getting

the marketing exposure and attention, but you’re getting

distribution. So you -- you’re in front of a lot more people,

and it’s already in the hand. If I see an ad on TV, I think

oh, that’s cool maybe I’ll buy the burger or download the

app. But if it’s already in my phone or in hand, I have it

immediately. People are much more likely to play and use

it. The disadvantage of OEMing is what people call

bloatware.

Q. I’m sorry, what?

A. Bloatware. I don’t know how many times I bought a

computer or phone that had stuff on it I didn’t want. You

know, TurboTax or Norton Antivirus, whatever tools. So

you have the advantage of more distribution, but there’s

also the risk that there may be some negative, you know,

connotations that there’s more crap on my phone and get

rid of it. So there’s different advantages and disadvantages

depending on how it’s structured.

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A trial judge could have rationally determined that the jury had a reasonable basis

for concluding that Mr. Rice’s statement that Neogence might be able to “leverage

their marketing” if Neogence was able to successfully demonstrate Mirascape at a

subsequent meeting and his explanation of the benefits of “leveraging” McGarry

Bowen’s marketing efforts on behalf of Verizon, as compared to preloading Mirascape

on Verizon phones, “significantly altered the total mix of available information” to a

reasonable investor and justified a finding that Mr. Rice’s statements, taken in

context and as a whole, were not materially false and misleading, while the same

could not be said for defendant’s statements. See TSC Indus., Inc. v. Northway, Inc.,

426 U.S. 438, 449, 96 S. Ct. 2126, 2132, 48 L. Ed. 2d 757, 766 (1976) (footnote omitted)

(explaining that an omission is material in the event that there is “a substantial

likelihood that the disclosure of the omitted fact would have been viewed by the

reasonable investor as having significantly altered the ‘total mix’ of information made

available”); Ehrenhaus v. Baker, 216 N.C. App. 59, 88, 717 S.E.2d 9, 28-29 (2011)

(adopting the standard for materiality set forth in TSC Indus.), appeal dismissed and

disc. rev. denied, 366 N.C. 420, 735 S.E.2d 332 (2012). In other words, given that

including Mirascape in McGarry Bowen’s marketing efforts was the opportunity that

was actually discussed at the McGarry Bowen meeting, Mr. Rice’s reference to

“leverag[ing] their marketing” in Mr. Rice’s e-mail and his trial testimony concerning

the potential value of that opportunity could have reasonably persuaded the jury that

Mr. Rice’s statement, as a whole, was not materially false or misleading, see Latta v.

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Rainey, 202 N.C. App. 587, 599, 689 S.E.2d 898, 909 (2010) (stating that “[a]

misrepresentation or omission is ‘material’ if, had it been known to the party, it would

have influenced the party’s judgment or decision to act” (quoting Godfrey v. Res-Care,

Inc., 165 N.C. App. 68, 75-76, 598 S.E.2d 396, 402, disc. rev. denied, 359 N.C. 67, 604

S.E.2d 310 (2004))), while defendant’s failure to make a similar statement during his

own communications with Dr. Piazza might have caused a reasonable jury to reach a

contrary result.

Finally, Dr. Piazza testified that he spoke to defendant on the telephone

approximately seventy times between 30 April 2010 and 2 June 2010. According to

Dr. Piazza, these phone calls were “more often than not” placed by defendant and

included discussions of

the Verizon opportunity with me primarily . . . describ[ing]

it consistently with his e-mail, that because of a meeting

that John Cummings had in New York and McGarry

Bowen, and an opportunity to have met with a Verizon

executive for new technologies, that John had an

opportunity to explain what was going on at Neogence and

what we were doing with Mirascape, and was intrigued

enough to invite John back to Verizon to present a demo, a

demo App, an application. And if that were acceptable to

Verizon, we had an opportunity to be OEMed or featured

AR or pre-installed on every Verizon – Verizon Droid

phone.

Although Mr. Rice communicated with Dr. Piazza by e-mail on several occasions

concerning the opportunities that had been discussed at the McGarry Bowen meeting,

the e-mails evidencing these communications were primarily focused upon the steps

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Opinion of the Court

that Neogence needed to take to prepare for the upcoming meeting with Verizon and

to accomplish goals that the company had been working toward before the McGarry

Bowen meeting.7 We hold that the trial court had a rational basis for concluding that

the jury could have reasonably determined that defendant, but not Mr. Rice, made

materially false and misleading statements to Dr. Piazza based, at least in part, upon

the frequency with which defendant and Mr. Rice told Dr. Piazza that there was a

reasonable opportunity for Mirascape to be preloaded onto Verizon phones.

As a result, after carefully reviewing the record, we conclude that the jury

heard evidence from which it could reasonably conclude that defendant made more

direct, less nuanced, comments to Dr. Piazza concerning the extent to which Neogence

had the opportunity to have Mirascape preloaded onto Verizon phones than Mr. Rice

did; that defendant reiterated this contention to Dr. Piazza more frequently than Mr.

Rice did; and that Mr. Rice’s statements included more accurate descriptions of the

opportunity that had become available to Neogence than those made by defendant.

In light of this set of circumstances, we are unable to conclude that the trial court’s

decision to deny defendant’s request for a new trial on the basis of allegedly

inconsistent verdicts arising from the statements made to Dr. Piazza by defendant

and Mr. Rice, respectively, was “so arbitrary that it could not have been the result of

7 Although an examination of Dr. Piazza’s cell phone bills indicated that he and Mr.

Rice communicated via text message or telephone calls on several occasions between 2 May

2010 and 24 May 2010, the record does not contain any information concerning the nature

and content of these communications.

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Opinion of the Court

a reasoned decision,” White, 312 N.C. at 777, 324 S.E.2d at 833, or that the Court of

Appeals erred by declining to set aside the trial court’s decision to that effect. As a

result, we hold that defendant’s challenge to the Court of Appeals’ decision to uphold

the denial of his motion for a new trial on the grounds that the jury’s verdicts

concerning the relative liability of defendant and Mr. Rice to Dr. Piazza were

impermissibly inconsistent lacks merit.

2. Statements to Lampuri

Mr. Lampuri did not receive the e-mails that defendant and Mr. Rice sent out

on 30 April 2010. Instead, Mr. Lampuri first learned of the opportunity that had been

discussed at the McGarry Bowen meeting on 25 May 2010, when Mr. Lampuri and

his wife went to defendant’s office for an obstetrical appointment. As he examined

Ms. Lampuri, defendant

proceeded to have a conversation with [Mr. Lampuri] about

this exciting new opportunity that Neogence, his company

had. . . . we’ve got something really exciting going on, our

director of sales just got back from New York City at a

meeting. There were Verizon executives there, and they

were absolutely blown away by our technology that we

needed – Neogence – excuse me, Neogence needed to go

back, create this demo, come back and show Verizon, you

know, what they’ve been talking about, what they’ve been

showing about this technology and they’re going [to] get

OEMed. They’re going pre-installed on all Verizon phones.

Similarly, Ms. Lampuri testified that defendant had stated during the medical

appointment “that his company had an opportunity to be featured on Verizon phones

directly installed on the phone.”

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Opinion of the Court

Mr. Rice made statements to Mr. Lampuri concerning the opportunity that had

arisen at the McGarry Bowen meeting during a conference at the Neogence

headquarters in mid-July 2010 that was attended by Mr. Lampuri, Mr. Rice, Mr.

Cummings, and Mr. Kirkbride. At that meeting, Mr. Cummings stated

that he was in New York in a meeting with an advertising

company, and that there were Verizon executives in the

room. And they were, again, absolutely wowed by the

technology, that we need – they needed to go back, create a

demo, go back to Verizon in a couple weeks and if they – if

they wowed Verizon, I like to say, then they have the

opportunity to be preloaded, OEMed on all phones.

During the meeting, Mr. Rice said that “the deal was very much real,” that “[i]t was

a real opportunity,” and that “the funds that they were seeking were to get this demo

up and doing – up and coming to show Verizon.” At another meeting held at the

Neogence headquarters in early August, which Mr. Lampuri attended along with

other members of his family, Mr. Cummings said “the exact same thing” that he had

said at the prior meeting and Mr. Rice reiterated “that the deal was very much real.”

Defendant contends that, given defendant’s limited “interactions with [Mr.]

Lampuri” and the fact that this interaction “did not occur near in time to [Mr.]

Lampuri’s actual investment in Neogence” and given that the two meetings in which

Mr. Rice was involved occurred closer in time to the making of Mr. Lampuri’s

investment and that “the opportunity was described [to Mr. Lampuri] in similar

terms as those presented by” defendant, the jury’s verdicts that defendant, but not

Mr. Rice, had made materially false and misleading statements to Mr. Lampuri were

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Opinion of the Court

impermissibly inconsistent. A careful review of the record reflects, however, that

defendant and Mr. Rice made substantially different statements to Mr. Lampuri

concerning the nature of the opportunity that had become available to Neogence

during the McGarry Bowen meeting. Simply put, defendant told Mr. Lampuri that

Neogence had the opportunity to be preloaded onto Verizon’s phones while Mr. Rice

never made any such statement. Although the jury could have determined that Mr.

Rice’s statements during the meetings at which Mr. Lampuri was in attendance that

“the deal was very much real” constituted a reference to the same opportunity that

was described by Mr. Cummings during those meetings and by defendant during Ms.

Lampuri’s medical appointment, a reasonable jury could have also interpreted this

statement in a different manner.8 As a result of the fact that the record discloses

ample justification for a jury decision to treat defendant and Mr. Rice differently with

respect to the issue of whether either of them had made materially false and

misleading statements to Dr. Piazza and Mr. Lampuri, we hold that the Court of

Appeals correctly determined that the trial court did not abuse its discretion by

denying defendant’s request for a new trial based upon the existence of allegedly

8The jury might have also deemed it significant that the parties had stipulated to the

fact that, “[i]n mid-July 2010, [Mr.] Lampuri was invited to Neogence to preview a

demonstration of Mirascape” at which Mr. “Cummings told [Mr.] Lampuri that Neogence had

a chance for an opportunity with Mirascape to become an ‘OEM’ product for installation on

Verizon smartphones based upon his prior meeting(s) and/or conversations with Verizon

employees or agents” while entering into no similar stipulation concerning the statements

that Mr. Rice made to Mr. Lampuri.

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Opinion of the Court

impermissible inconsistencies in the jury’s verdicts with respect to the “materially

false and misleading” statement issue.

B. Safe Harbor Instruction

In his second challenge to the correctness of the Court of Appeals’ decision,

defendant contends that the trial court erred by failing to instruct the jury in

accordance with N.C.G.S. § 55-8-30(b)(1),9 which provides that a corporate director

cannot be held liable “for any action taken as a director, or any failure to take any

action,” N.C.G.S. § 55-8-30(d), if he or she “rel[ies] on information, opinions, reports,

or statements . . . prepared or presented by . . . [o]ne or more officers or employees of

the corporation whom the director reasonably believes to be reliable and competent

in the matters presented.” N.C.G.S. § 55-8-30(b)(1) (Supp. 2018). According to

defendant, the Court of Appeals should have construed the reasonable care standard

enunciated in N.C.G.S. § 55-8-30(a)(2) in pari materia with N.C.G.S. § 78A-56(a)(2)

or applied the rule of lenity to determine that the “safe harbor” defense delineated in

N.C.G.S. § 55-8-30(b) precludes a finding of liability based upon the making of

allegedly false and misleading statements pursuant to N.C.G.S. § 78A-56(a)(2), citing,

inter alia, Meza v. Division of Social Services, 364 N.C. 61, 66, 692 S.E.2d 96, 100

(2010) (reading the language of N.C.G.S. § 108A–79(k) in pari materia with Article 4

of the Administrative Procedure Act); Dellastatious v. Williams, 242 F.3d 191, 195

9 Defendant has not advanced any argument in reliance upon the common law

business judgment rule in the proceedings before this Court.

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Opinion of the Court

(4th Cir. 2001) (relying upon provisions of Virginia’s corporate governance statutes

in determining whether the defendants used reasonable care to prevent a state law

securities violation); and Vogel v. Reed Supply Co., 277 N.C. 119, 131, 177 S.E.2d 273,

281 (1970) (applying the rule of lenity in a civil case when construing a statute that

potentially imposed civil and criminal liability). In view of the fact that defendant

was a Neogence director who claimed to have merely repeated information that he

had received from Mr. Cummings and that he reasonably believed Mr. Cummings to

be reliable and competent, defendant argues that the Court of Appeals erred by

holding that he was not entitled to have the jury instructed concerning the “safe

harbor” provisions of N.C.G.S. § 55-8-30. Plaintiffs, on the other hand, argue that

defendant agreed to the trial court’s instruction concerning the circumstances under

which he could be held liable pursuant N.C.G.S. § 78A-56(a)(2) and never properly

requested delivery of the “director safe harbor” instruction to which he now claims to

have been entitled.

“This Court has long held that ‘[w]hen charging the jury in a civil case it is the

duty of the trial court to explain the law and to apply it to the evidence on the

substantial issues of the action.’ ” Yancey v. Lea, 354 N.C. 48, 52, 550 S.E.2d 155, 157

(2001) (alteration in original) (first quoting Cockrell v. Cromartie Transp. Co., 295

N.C. 444, 449, 245 S.E.2d 497, 500 (1978); then citing Superior Foods, Inc. v. Harris-

Teeter Super Mkts., Inc., 288 N.C. 213, 218, 217 S.E.2d 566, 571 (1975); and then

citing Inv. Props. of Asheville, Inc. v. Norburn, 281 N.C. 191, 197, 188 S.E.2d 342, 346

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Opinion of the Court

(1972)).10 As a result, “[i]f a party contends that certain acts or omissions constitute

a claim for relief or a defense against another, the trial court must submit the issue

with appropriate instructions if there is evidence which, when viewed in the light

most favorable to the proponent, will support a reasonable inference of each essential

element of the claim or defense asserted.” Cockrell, 295 N.C. at 449, 245 S.E.2d at

500 (first citing Vernon v. Crist, 291 N.C. 646, 231 S.E.2d 591 (1977); and then citing

Atkins v. Moye, 277 N.C. 179, 176 S.E.2d 789 (1970)).

On the other hand, “[r]equests for special instructions must be in writing,

entitled in the cause, and signed by the counsel or party submitting them.” N.C.G.S.

§ 1A-1, Rule 51(b) (2017); see also Hanks v. Nationwide Mut. Fire Ins. Co., 47 N.C.

App. 393, 404, 267 S.E.2d 409, 415 (1980) (citing King v. Powell, 252 N.C. 506, 512,

114 S.E.2d 265, 269-70 (1960), and stating that “[i]t is the duty of the party desiring

instructions on a subordinate feature of the case or greater elaboration on a particular

point to aptly tender request for special instructions”). In the event that a party fails

to “comply with the requirements of [N.C.G.S. § 1A-1,] Rule 51(b), the trial court act[s]

properly within its discretion in denying the request.” Byrd’s Lawn & Landscaping,

Inc. v. Smith, 142 N.C. App. 371, 379, 542 S.E.2d 689, 694 (2001) (citing Hord v.

Atkinson, 68 N.C. App. 346, 351, 315 S.E.2d 339, 342 (1984) (holding that the trial

court could properly refuse to instruct the jury concerning its right to consider the

10 “To the extent these cases suggest the court must apply the law to the evidence,

they have been overruled by the 1985 amendments to [N.C.G.S. § 1A-1,] Rule 51.” 2 G. Gray

Wilson, North Carolina Civil Procedure § 51-3, at 51-8 n.52 (3d ed. 2007).

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Opinion of the Court

physical evidence in a motor vehicle negligence case on the grounds that “the

plaintiff’s request went beyond the trial judge’s general duty of explaining the law

arising on the evidence with respect to the substantial features of the case” and that,

with respect to this “subordinate feature,” “the plaintiff did not comply with the

requirements of Rule 51(b)”)); see also Koutsis v. Waddel, 10 N.C. App. 731, 733-34,

179 S.E.2d 797, 799 (1971) (stating that, “[w]here the court adequately charges the

law on every material aspect of the case arising on the evidence,” “the charge is

sufficient and will not be held error for failure of the court to give instructions on

subordinate features of the case, since it is the duty of a party desiring instructions

on a subordinate feature, or greater elaboration, to aptly tender a request therefor”

(quoting 7 Strong’s North Carolina Index 2d: Trial § 33, at 329 (1968) (footnotes

omitted))). Assuming that a proper “request is made for a specific instruction, correct

in itself and supported by evidence, the trial court, while not obliged to adopt the

precise language of the prayer, is nevertheless required to give the instruction, in

substance at least,” with “the failure [to do so] constitut[ing] reversible error.” Minor

v. Minor, 366 N.C. 526, 531, 742 S.E.2d 790, 793 (2013) (first quoting Calhoun v. State

Highway & Pub. Works Comm’n, 208 N.C. 424, 426, 181 S.E.2d 271, 272 (1935); then

citing State v. Davis, 291 N.C. 1, 13-14, 229 S.E.2d 285, 293-94 (1976); and then citing

Bass v. Hocutt, 221 N.C. 218, 219-20, 19 S.E.2d 871, 872 (1942)).

The only written request for instructions that defendant submitted for the trial

court’s consideration that was at all relevant to the “safe harbor” issue consisted of a

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Opinion of the Court

verbatim recitation of N.C.P.I. Civil 807.50, a pattern jury instruction intended for

use in cases in which a director is sought to be held liable for breach of his or her duty

to the corporation and which provides that:

The (state number) issue reads:

“Was the plaintiff damaged by the failure of the

defendant to discharge his duties as a corporate director?”

On this issue the burden of proof is on the plaintiff.

This means that the plaintiff must prove, by the greater

weight of the evidence, four things:

First, that the defendant failed to act in good faith.

Good faith requires a director to discharge his duties

honestly, conscientiously, fairly and with undivided loyalty

to the corporation. Errors in judgment alone do not

constitute a failure to act in good faith; however, unless a

director honestly believes he is making a reasonable

business decision, he fails to act in good faith.

Second, that the defendant failed to act as an

ordinarily prudent person in a like position would have

acted under similar circumstances. (Unless he has actual

knowledge to the contrary, a director is entitled to rely on

information, opinions, reports or statements, including

financial statements and other financial data, if prepared

or presented by

[one or more employees of the corporation who

the director reasonably believes to be reliable and

competent in the matter(s) presented]

[[a lawyer] [a public accountant] [name other

outside advisor] as to the matter(s) the director

reasonably believes are within such [professional’s]

[advisor’s] competence]

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Opinion of the Court

[a committee of the board of directors of which

the director is not a member if he reasonably

believes the committee merits confidence].)

Third, that the defendant failed to act in a manner

he reasonably believed to be in the best interests of the

corporation.

And Fourth, that the defendant’s [acts] [omissions]

proximately caused damage to the plaintiff. Proximate

cause is a cause which in a natural and continuous

sequence produces a person’s damage and is a cause which

a reasonable and prudent person could have foreseen

would probably produce such damage or some similar

injurious result. There may be more than one proximate

cause of damage. Therefore, the plaintiff need not prove

that the defendant’s acts were the sole proximate cause of

the damage. The plaintiff must prove, by the greater

weight of the evidence, only that the defendant’s acts were

a proximate cause.

Finally, as to the (state number) issue on which the

plaintiff has the burden of proof, if you find by the greater

weight of the evidence that the plaintiff was damaged by

the failure of the defendant to discharge his duties as a

corporate director, then it would be your duty to answer

this issue “Yes” in favor of the plaintiff.

If, on the other hand, you fail to so find, then it would

be your duty to answer this issue “No” in favor of the

defendant.

(Footnotes omitted.) The parties discussed whether the trial court should instruct

the jury in accordance with defendant’s request at length during the jury instruction

conference.

When the “safe harbor” defense initially came up for discussion, defendant’s

trial counsel argued that N.C.G.S. § 55-8-30 “trumps, if you will, [N.C.G.S. § 78A-

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56(c)] and that [N.C.G.S. § 78A-56(c)] dovetails back to it” because “(c) is saying that”

“our duty is to ensure that they acted reasonably in their capacities and so forth.” In

view of the fact that “there are no pattern instructions on this,” defendant’s trial

counsel stated that he “simply went back to the breach of corporate duties with

respect to [N.C.G.S. §] 55-8-30, and this is the pattern jury instruction that came from

that” and “needs to be inserted.”

After noting that N.C.G.S. § 78A-56 “specifically is dealing with the sale of

securities as opposed to just your general obligations as a director of a corporation,”

the trial court asked defendant’s trial counsel “[w]hy does [Chapter] 55 [of the North

Carolina General Statutes] apply to this at all?” In response, defendant’s trial

counsel stated that, “of course, the allegation is” “a breach of [N.C.G.S. § 78A-

56(a)(2)],” which “talks about so long as the defendants sustain the burden of proving

that their actions were reasonable and so forth,” with N.C.G.S. § 78A-56(c)

“specifically talk[ing] about directors being responsible” “for these kinds of sales

activity” unless the director was “riding herd over and making sure [sales employees]

didn’t do something they weren’t supposed to do.” According to defendant’s trial

counsel, directors would not be liable as long as “they conduct themselves in the

manner that a reasonable—a[n] ordinary care director should do,” with N.C.G.S. §

55-8-30 being “where that is articulated.”

At that point, the trial court interjected that “my reading of” N.C.G.S. § 55-8-

30 “will place the burden [of] proof on the plaintiff,” while his “reading of [Chapter

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78A of the General Statutes] puts the burden of proof on you.” In response,

defendant’s trial counsel stated that “[t]hen what we might need to do is” provide

“something [to] read to the jury members that talks about that burden and the fact

that these defendants would be relieved from this offense if [ ] they acted accordingly”

and that “if [N.C.P.I. Civil] 807.50 imposes too harsh, perhaps we can craft

something.” When the trial court pointed out that defendant’s proposed liability-

related special instructions appeared to be an “accurate statement of the law as far

as the defenses available to [defendant] under” N.C.G.S. § 78A-56(a)(2) are concerned

“[b]ecause it accurately states that the burden of proof is on you,” defendant’s trial

counsel said “[r]ight”; noted that he “was just trying to get an option that the jury

says, okay, we find that they carry that burden of proof; therefore we can’t find them

culpable”; and added that “I’m certainly in agreement with you relative to the statute

and the reliance issues, but on the other hand, relative to the defenses of reasonable

behavior and the fact that they’re corporate directors, it certainly is my opinion that

they get off if that’s the—if that turns out to be the case.”

After agreeing that defendants “get off” “if they sustained their burden of proof

that they did not know, and in the exercise of reasonable care could not have known,

of the untruth or omission,” plaintiffs’ counsel argued that the jury simply needed

“those two elements” and suggested that “we give them one sentence of what it means

to exercise reasonable care” from N.C.P.I. Civil 800.10, which addresses the tort of

negligent misrepresentation. Once defendant’s trial counsel had agreed that a

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definition of “reasonable care” would be appropriate “because that is the standard

that is in” N.C.G.S. § 55-8-30, the trial court “rule[d] that [defendants] have the

burden of proof on that issue” and agreed with plaintiffs’ counsel that the appropriate

language would be: “First, the defendant did not know of the untruth or omission in

offering or sale of a security to the plaintiffs; or, second” “that the defendant in the

exercise of reasonable care could not have known of the untruth or omission.” At that

point, the trial court and counsel for the parties discussed the wording of the issues

to be submitted to the jury, with defendant’s trial counsel agreeing with the wording

of the “reasonable care” issue and with the placement of the burden of proof with

respect to that issue upon defendants as proposed by the trial court and plaintiffs’

counsel. At the conclusion of the day’s proceedings, the trial court agreed to prepare

a set of draft instructions and to provide them to counsel for both parties on the

understanding that “we’ll have a brief hearing Monday morning” and “get that

hammered out” so “you’ll know what the instructions are before you make your

closings.”

At the time that the proceedings convened on the following Monday, the trial

court afforded defendant’s trial counsel an opportunity “to put [his] objections [ ] on

the record” before noting that “you have submitted to the Court written requests for

instructions and I have denied those.” In response to the trial court’s invitation,

defendant’s trial counsel stated that:

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If Your Honor, please, the defendants have

requested then in the instruction from the Court that

pertains or arises out of Chapter 55 pertaining to members

of the board of directors and the various responsibilities

they have in performing their duties, and one of which that

we specifically requested related to the fact that board of

director members could rely upon statements that are

made to them and they would, therefore, not be held

responsible.

Let me find the particular reference so that I can

state this accurately. And where this comes from is

[N.C.G.S. §] 55-8[-]30, and the request that we had made

was in regard to [N.C.G.S. §] 55-8[-]30(b)(1), suggesting

that in discharging his duties, a director is entitled to rely

on information, opinions, reports, or statements including

in financial—including financial statements and other

financial data if prepared by or presented by one or more

officers of—or employees of the corporation whom the

director reasonably believes to be reliable and competent

in the matters presented.

As I said to the Court, I think that [N.C.G.S. §] 55-

8[-]30(c) is parallel to [N.C.G.S. §] 78[A]-56(c)(1) which

then goes on to say the director is not entitled to the benefit

of this section if he has actual knowledge concerning the

matter in question that makes reliance otherwise

permitted by [N.C.G.S. §] 55-8[-]30(b) unwarranted. And

then of course what that would require is the same

instructions that his Honor has anticipated which will be

that—to instruct the jury that if the director himself had

knowledge, actual knowledge, concerning the matter, then

he would not enjoy the benefit of this particular provision

of [N.C.G.S. §] 55-8[-]30(b)(1).

That is in essence, if Your Honor, please, what we

had requested of the Court and it’s our understanding that

you have denied that previously. But again, we just simply

want to put that on the record.

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Opinion of the Court

I do not have, if Your Honor, please, a copy at this

moment in time of the provisions, but I thought we had

them the other day, but I have not filed them relative to

the proposed jury instruction that I had crafted.

At the conclusion of this statement, the trial court noted that “you handed me up a

pleading that was a proposed jury instruction, and feel free to file that until you find

another copy” and ruled that “your request for jury instructions as well as your

objections to the instructions are noted for the record and are denied.” The trial court

instructed the jury with respect to the “reasonable care” defense set out in N.C.G.S.

§ 78A-56(a)(2) that:

The second issue[ ] reads: Did the defendant

Gregory Brannon not know and in the exercise of

reasonable care could not have known of the untruth or

omission in his offer or sale of a security to the plaintiff

Lawrence Piazza.

On this issue, the burden of proof is on the defendant

Gregory Brannon. This means that he must prove by the

greater weight of the evidence two things:

First, that the defendant Gregory Brannon did not

know of the untruth or omission in the offering or sale of a

security to the plaintiff Lawrence Piazza; and, second, that

the defendant Gregory Brannon in the exercise of

reasonable care could not have known of the untruth or

omission in the offering or sale of a security to the plaintiff

Lawrence Piazza.

Reasonable care means that degree of care,

knowledge, intelligence, or judgment which a prudent

person would use under the same or similar circumstances.

Thus, on this second issue on which the defendant Gregory

Brannon bears the burden of proof, if you find by the

greater weight of the evidence, first, that Gregory Brannon

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Opinion of the Court

did not know of the untruth or omission in the offering or

sale of a security to the plaintiff Lawrence Piazza; and,

second, that Gregory Brannon in the exercise of reasonable

care could not have known of the untruth or omission in

the offering or sale of a security to the plaintiff Lawrence

Piazza, then it would be your duty to answer the second

issue yes in favor of the defendant Gregory Brannon.

If on the other hand you find that the defendant

Gregory Brannon has failed to prove each of these

requirements by the greater weight of the evidence, then it

would be your duty to answer this issue no in favor of the

plaintiff Lawrence Piazza.11

Defendant’s trial counsel did not lodge any additional objections when given an

opportunity to do so at the conclusion of the trial court’s instructions to the jury.

After carefully reviewing the record, we are not satisfied that defendant

properly preserved his challenge to the trial court’s refusal to give an explicit “safe

harbor” instruction to the jury for purposes of appellate review. As an initial matter,

we believe that the “safe harbor” defense, assuming, without deciding, that it is

applicable to cases like this one,12 was a subordinate feature of the present case given

that N.C.G.S. § 78A-56(a)(2) absolves individuals alleged to have taken reasonable

care from liability for the making of materially false and misleading statements and

given that reasonable care could obviously include appropriate reliance upon

11 The trial court delivered an essentially identical “reasonable care” instruction with

respect to the issue of defendant’s liability to Mr. Lampuri.

12 We should not, of course, be understood as expressing any opinion concerning the

extent to which the trial court would have erred had defendant submitted a proper written

request for instructions concerning the director safe harbor issue for the trial court’s

consideration.

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Opinion of the Court

information supplied by other corporate officials. As this case was presented to the

jury, the extent to which defendant was or was not acting as a director when he made

the disputed statements to plaintiffs was not an essential element of plaintiffs’ claims

against defendant. Instead, both parties consented to the submission of this case to

the jury on the implicit theory that the capacity in which defendant acted when he

made the allegedly false and misleading statements was not relevant to the jury’s

liability-related decision. In light of that fact, the relevant issue was whether

defendant was able to persuade the jury that “he did not know, and in the exercise of

reasonable care could not have known, of the untruth or omissions,” N.C.G.S. § 78A-

56(a)(2), regardless of the capacity in which he was acting when he made the allegedly

false statements to plaintiffs. The trial court discussed the “reasonable care” issue in

detail in the instructions that were given to the jury, using both the relevant statutory

language and additional language drawn from the pattern jury instruction relating

to negligent misrepresentation claims, upon which the parties seemed to agree.

Given that the trial court’s instructions with respect to the “reasonable care” issue

explained the nature of the decision that the jury was required to make and the basic

legal principles that the jury was required to apply in deciding whether defendant

should be absolved from liability on “reasonable care” grounds, we are persuaded that

the requested “safe harbor” instruction, which would only become relevant if the jury

made a separate determination that defendant was acting as a director at the time

that he made the challenged statements to plaintiffs, involved a subordinate feature

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Opinion of the Court

of the case. As a result, unless defendant made an adequate written request for the

delivery of a “safe harbor” instruction, the trial court did not err by omitting any

reference to the “safe harbor” principles enunciated in N.C.G.S. § 55-8-30 from its

instructions to the jury in this case.

Moreover, we are unable to conclude that defendant submitted an adequate

written request for the delivery of a “safe harbor” instruction for the trial court’s

consideration. The written instruction that defendant submitted for the trial court’s

consideration contained a great deal of information that was totally irrelevant to the

issues that were actually before the trial court and jury in this case. In addition, even

if one overlooks the differing context that defendant’s written request for instructions

was intended to address and the extraneous material that it contained, defendant’s

proposed instruction placed the burden of proof upon plaintiffs rather than upon

defendant even though defendant’s trial counsel appears to have conceded (or at least

did not explicitly object to the trial court court’s determination) during the jury

instruction conference that defendant, rather than plaintiffs, bore the burden of proof

with respect to this issue. Moreover, defendant never appeared to acknowledge

during the jury instruction conference that, for the “safe harbor” protection to be

available to defendant, the jury would have had to make a preliminary determination

that defendant was acting as a director, rather than in some other capacity, when he

made the challenged statements to plaintiffs. As a result, for all of these reasons, we

cannot conclude that defendant submitted a sufficiently accurate written request for

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Opinion of the Court

the delivery of a “safe harbor” instruction to properly preserve the issue of the trial

court’s failure to deliver such an instruction to the jury for purposes of appellate

review.

Although defendant did attempt to clarify the nature of his request for the

delivery of a “safe harbor” instruction during the jury instruction conference, his

efforts in that regard do not suffice to overcome his failure to submit an adequate

written request for the trial court’s consideration. Instead of submitting a written

request for instructions that excluded extraneous information, required the jury to

find that defendant was acting in his capacity as a director as a prerequisite for the

availability of the “safe harbor” defense, and accurately inserted the relevant “safe

harbor” language into the context of the “reasonable care” defense recognized by

N.C.G.S. § 78A-56(a)(2), defendant simply provided the trial court with a written

request for instructions that surrounded a limited amount of potentially relevant

information with a great deal of irrelevant information and placed the burden of proof

on plaintiffs despite defendant’s trial counsel’s apparent concession during the jury

instruction conference to the contrary during the jury instruction conference.

Although defendant’s trial counsel attempted to orally explain how his requested

instruction could be modified to make it correct during the course of the charge

conference, he never submitted a proposed modification in writing. The entire

purpose of the written request requirement relating to subordinate features of the

case contained in N.C.G.S. § 1A-1, Rule 51(b) is to prevent trial judges from having

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Opinion of the Court

to do what defendant sought to have the trial court do in this case—create a new

instruction based upon general language contained in a much more extensive

instruction that needed to be changed in a number of significant ways. As a result,

for all of these reasons, we hold that the trial court was entitled to reject defendant’s

request for the delivery of a “safe harbor” instruction to the jury on the grounds that

defendant failed to submit a proper written request for such an instruction.

C. Primary Liability and Scienter

Finally, defendant argues that he is entitled to a new trial on the grounds that

the jury’s verdict finding him liable to plaintiffs pursuant to N.C.G.S. § 78A-56(a)(2)

is contrary to law given that a finding of liability under that statutory provision

requires proof that he either owned the securities that plaintiffs purchased or acted

with scienter when he solicited funds from plaintiffs for Neogence. In support of his

argument, defendant relies upon the plain statutory language, which imposes

liability upon a person who “[o]ffers or sells” that security by means of false or

misleading statements. In defendant’s view, allowing the imposition of liability

under N.C.G.S. § 78A-56(a)(2) upon a non-owner would conflict with the language in

which the statute is couched, including the provision requiring a successful plaintiff

to tender the relevant security to the defendant as a precondition for recovering the

purchase price. According to defendant, allowing recovery against a non-owner would

be “nonsensical” given that a successful plaintiff would be required to tender the

relevant security to a person from whom it was not procured.

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Opinion of the Court

In the event that plaintiffs sought to have defendant held liable for their

Neogence-related losses, defendant contends that they should have proceeded against

him pursuant to N.C.G.S. § 78A-8(2), which imposes liability on “any person, in

connection with the offer, sale or purchase of any security, directly or indirectly,” who

made fraudulent representations upon which plaintiffs relied in deciding to invest in

Neogence. In the alternative, defendant suggests that plaintiffs should have sought

to have him held “secondarily liable” as a “control person” pursuant to N.C.G.S. §

78A-56(c), an approach that would have required plaintiffs to establish Neogence’s

“primary liability” pursuant to N.C.G.S. § 78A-56(a). Defendant believes that he

“cannot be primarily liable under” N.C.G.S. § 78A-56(a)(2) in the absence of a

determination that Neogence, “[t]he only person who could be primarily liable under

the statute — and who could be a proper party to make good through the rescission

required under Section 56(a)(2),” was primarily liable.

Finally, defendant contends that a finding that he was liable to plaintiffs

pursuant to N.C.G.S. § 78A-56(a)(2) required a determination that he acted with

scienter. Defendant reaches this conclusion by reference to decisions construing

Section 12(2) of the Securities Act of 1933, upon which N.C.G.S. § 78A-56(a)(2) was

based and which requires a finding that the defendant acted with scienter in offering

or selling the securities in question, citing Pinter v. Dahl, 486 U.S. 622, 647, 108 S.

Ct. 2063, 2078, 100 L. Ed. 2d 658, 682 (1988). Although defendant acknowledges that

neither the United States Supreme Court nor this Court has definitively identified

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Opinion of the Court

the elements that had to be established for purposes of a claim asserted pursuant to

either Section 12(2) of the Securities Act or N.C.G.S. § 78A-56(a)(2), he contends, in

further reliance upon the rule of lenity, that “the jury should have been required to

find that Dr. Brannon was either a securities owner or ‘motivated at least in part by

a desire to serve his own financial interests or those of the securities owner,’ ” citing

Pinter, 486 U.S. at 647, 108 S. Ct. at 2078, 100 L. Ed. 2d at 658, and State v. Williams,

98 N.C. App. 274, 279, 390 S.E.2d 746, 749, disc. rev. denied, 327 N.C. 144, 394 S.E.2d

184 (1990), in support of this assertion.

In response, plaintiffs argue that defendant waived his right to advance this

argument on appeal given that his trial “counsel requested the very instruction” of

which he now complains and is now “complain[ing] of the action which he induced,”

quoting Frugard v. Pritchard, 338 N.C. 508, 512, 450 S.E.2d 744, 746 (1994). In

addition, plaintiffs contend that, because defendant failed to raise this argument

until after the trial had been completed, he is not entitled to advance it on appeal

from the denial of his new trial motion given that N.C.G.S. § 1A-1, Rule 59(a)(8),

limits a trial court’s authority to award a new trial to situations involving “[e]rror in

law occurring at the trial and objected to by the party making the motion”; that North

Carolina Rule of Appellate Procedure 10(a)(1) provides that an issue is not properly

preserved for purposes of appellate review absent “a timely request, objection, or

motion, stating the specific grounds for the ruling the party desired the court to make”

at trial; and that N.C. Rule App. P. 10(a)(2) prohibits a party from “mak[ing] any

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Opinion of the Court

portion of the jury charge or omission therefrom the basis of an issue presented on

appeal unless the party objects thereto before the jury retires to consider its verdict,

stating distinctly that to which objection is made and the grounds of the objection.”

In response, defendant argues that, because the issue of whether he had failed

to properly preserve his challenge to the trial court’s primary liability instructions

and failure to require a finding of scienter for purposes of appellate review was not

mentioned in the dissenting opinion at the Court of Appeals or advanced in a petition

seeking discretionary review of additional issues, plaintiffs’ non-preservation

argument is not properly before us. In addition, defendant contends that the alleged

error constitutes “a flaw that reaches beyond the instructions issued to the jury,” “is

a fundamental error,” and is “simply inconsistent with the statutory scheme.” As a

result, defendant contends that his challenge to the trial court’s primary liability

instruction and the trial court’s failure to require a finding of scienter was properly

advanced by means of a motion for a new trial in reliance upon N.C.G.S. § 1A-1, Rule

59(a)(7), which permits the trial court to award a new trial in the event that the jury’s

“verdict is contrary to law.”

During the trial,13 defendant submitted a written request for instructions in

which he asked the trial court to instruct the jury that:

13We are not persuaded by defendant’s argument that plaintiffs are not entitled to

challenge the extent to which defendant is entitled to raise his primary liability and scienter

claims for purposes of appellate review because defendant invited any error that the trial

court may have committed or waived the right to argue that issue because it was not

addressed in either the majority or dissenting opinions before the Court of Appeals. In our

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Opinion of the Court

Issue 1 reads: Did the Defendants, in soliciting the

Plaintiffs to pay money for a security, make a statement

which was materially false or misleading, or which under

the circumstances was materially false or misleading

because of the omission of other facts, where the Plaintiffs

were unaware of the true or omitted facts?

....

[A]s to this issue on which the Plaintiffs bear the burden of

proof, if you find by the greater weight of the evidence:

First, that the Defendants made a statement to the

Plaintiffs which was false or misleading, or which under

the circumstances was false or misleading because of the

omission of other facts;

Second, that the statement made by the Defendants, or the

facts omitted by the Defendants, were material;

Third, that the Plaintiffs were unaware of the true or

omitted facts prior to paying money for the security; and

Fourth, that the Defendants made such statement in

connection with soliciting the Plaintiffs to pay money for a

security,

then it would be your duty to answer this issue “Yes,” in

favor of the Plaintiffs. If, on the other hand, you find that

the Plaintiffs have failed to prove each of these

view, the extent to which an issue that is before us by means of a dissent or the allowance of

a discretionary review or certiorari petition involves invited error or has been properly

preserved for purposes of appellate review is inherently intertwined with defendant’s related

substantive claim, In re R.L.C., 361 N.C. 287, 290-91, 643 S.E.2d 920, 921-22, cert. denied,

552 U.S. 1024, 128 S. Ct. 615, 169 L. Ed. 2d 396 (2007), and is, for that reason, not the sort

of separate and independent substantive claim that the Court refused to consider in North

Carolina School Boards Ass’n v. Moore, 359 N.C. 474, 506-07, 614 S.E.2d 504, 523-24 (2005).

In view of this determination, plaintiffs’ request for certiorari review of the issue of whether

defendant invited any error that the trial court may have committed or properly preserved

his primary liability and scienter claims for purposes of appellate review is dismissed as

moot.

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Opinion of the Court

requirements by the greater weight of the evidence, then it

would be your duty to answer this issue “No,” in favor of

the Defendants.

During the charge conference, counsel for both sets of parties indicated that they had

proposed identical instructions concerning the question of whether defendants had

made false and misleading statements to plaintiffs. As a result, the trial court stated

“[s]o we all agree that that’s a good instruction as to 56(a)(2)” and instructed the jury

concerning the issue of whether defendants had made false or misleading statements

in violation of N.C.G.S. § 78A-56(a)(2) in accordance with the language that had been

requested by the parties.

This Court has “consistently denied appellate review to [parties] who have

attempted to assign error to the granting of their own requests.” State v. Wilkinson,

344 N.C. 198, 213, 474 S.E.2d 375, 383 (1996); see also State v. McPhail, 329 N.C.

636, 643, 406 S.E.2d 591, 596 (1991) (stating that a litigant “will not be heard to

complain of a jury instruction given in response to his own request” (citations

omitted)).14 Having urged the trial court to instruct the jury in exactly the manner

that it instructed that body with respect to the “false and misleading” statement

issue, defendant invited any erroneous finding of liability that might that have

resulted from those instructions. Frugard, 338 N.C. at 512, 450 S.E.2d at 746 (stating

14 The issue before the Court in Justus v. Rosner, 317 N.C. 818, 824-28, 821 S.E.2d

765, 769-72 (2018), was the appropriateness of the trial court’s decision to grant a new trial

on the grounds that the jury’s verdict was contrary to the greater weight of the evidence

pursuant to N.C.G.S. §1A-1, Rule 59(a)(7) rather than a challenge to the trial court’s

instructions to the jury.

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Opinion of the Court

that “[a] party may not complain of action which he induced”). As a result, defendant

is not entitled to relief from the trial court’s judgment and orders on the basis of his

primary liability and scienter claims.15

III. Conclusion

As a result, for all of the reasons stated above, we hold that the Court of

Appeals did not err by affirming the challenged judgment and orders. 16 As a result,

the Court of Appeals’ decision, as modified in this opinion, is affirmed.

MODIFIED AND AFFIRMED.

Justices EARLS and DAVIS did not participate in the consideration or decision

of this case.

15In light of our decision to refrain from reaching the merits of defendant’s contentions

that he could not be held liable to plaintiffs because he was not the seller of the securities in

question, that defendant could not be held primarily liable to plaintiffs, and that defendant

could not be held liable to plaintiffs in the absence of a finding of scienter, we express no

opinion concerning the merits of any of these contentions.

16In view of the fact that defendant’s challenge to the trial court’s attorneys’ fee award

rested upon his contention that he was entitled to a new trial based upon the other alleged

errors discussed in the text of this opinion and the fact that we have determined that

defendant is not entitled to relief from the trial court’s judgment and orders on the basis of

those arguments, there is no need for us to discuss the attorneys’ fee issue further in this

opinion.

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Justice NEWBY dissenting.

The majority’s message to the business community is clear: Individuals serve

as outside directors at their own peril! If a director makes an alleged misstatement

to a potential investor, no matter how minute and regardless of whether the investor

relied on it, the director may be personally liable. Today’s decision eviscerates any

protection for an outside director who uses information communicated by corporate

officers to tell others of potential investment opportunities. In fact, the majority

ratifies the outside director’s liability, even though the corporate officers who made

later-in-time statements were exonerated. While the majority’s lengthy technical

analysis may cloud its assault on fundamental business relationships, its ultimate

result will decrease the number of people willing to serve as outside directors and

severely limit start-up companies’ access to angel investor capital.

Essentially, the majority holds that an outside director can be liable to an angel

investor for repeating information he learned from corporate officers (1) even though

the angel investor vetted the information through subsequent conversations with the

corporate officers, and (2) the officers were absolved from liability for communicating

the same information. Liability arises even though the investor does not rely on the

alleged misstatement. To achieve this outcome, the majority withholds the director

safe harbor protection that should be available to an outside director. The majority

PIAZZA V. KIRKBRIDE

Newby, J., dissenting

wrongly expands potential liability under the securities fraud statute while shrinking

any protection under the director safe harbor provision. In doing so, the majority

exposes outside directors who identify potential investors, even those who are astute

and experienced angel investors, to potential liability as “sellers” for purposes of the

securities fraud statute. The liability extends here even though the outside director

does not personally benefit directly from the sale, receiving neither funds from a

direct sale of an interest nor a commission. Such an expansive reading could expose

to liability anyone who discusses a potential investment opportunity with a friend.

The majority wrongly holds that the securities fraud statute supplants director safe

harbor protection. The majority’s unwarranted analysis will have significant chilling

effects in the business community.

Furthermore, the verdicts in this case are a miscarriage of justice because of

their inconsistency regarding Rice, the Chief Executive Officer and director, and

Brannon, the outside director. Brannon’s representations to plaintiffs were not

“materially” different from those of Rice. The majority’s analysis diminishes the

required “materiality” of an alleged misrepresentation to, in effect, any

misrepresentation, no matter how “nuanced.” The majority ignores the plain fact

that, as experienced angel investors, plaintiffs thoroughly discussed the Verizon

potential with the only person actually present at the meeting, Cummings, the

director of sales. The evidence is uncontroverted that plaintiffs did not invest after

communicating with Brannon but only after multiple conversations with Cummings

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PIAZZA V. KIRKBRIDE

Newby, J., dissenting

as well as Rice and Kirkbride, another corporate officer. Through these

conversations, plaintiffs clarified the “true” nature of the Verizon opportunity. If

Rice’s statements to plaintiffs were accurate, then plaintiffs knew the “truth” about

the opportunity before investing. Because of the dangerous removal of the director

safe harbor protection and the miscarriage of justice arising from the inconsistent

verdicts, I dissent.

I. Relevant Facts

In 2007 defendants Rice and Kirkbride founded a technology start-up,

Neogence, to develop graphical software, which could be loaded onto smartphones.

Rice (the Chief Executive Officer and a director) and Kirkbride (an investor, director,

the de facto Chief Financial Officer, a licensed attorney, and later the Chief Executive

Officer) served as the initial board members. In 2009, as the corporation grew, Rice

invited Brannon, an OB-GYN physician and investor, to join the Neogence board as

an outside director.1 Brannon had originally met Rice years before, and they had

worked together on a prior venture. Kirkbride stated that Brannon was asked to

serve on the board because of, inter alia, his “abilities on strategic directions,”

including obtaining “financing, investors, et cetera.” Rice stated that Brannon “would

make introductions to people that might have an interest in what [Neogence was]

1 Generally, an “outside director” is “[a] nonemployee director with little or no direct

interest in the corporation.” Director, Black’s Law Dictionary (10th ed. 2014).

3

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Newby, J., dissenting

doing.” As Brannon characterized it, as a director he would “expos[e] this company

to friends that may want to invest into it.”

During Neogence’s initial months as a start-up corporation, the board met

informally and often. The company had elected to raise operating capital by issuing

promissory notes, which were convertible to common stock. Neogence engaged legal

counsel to draft the convertible notes and related documentation. Neogence, acting

through its board of directors, then approached various “accredited” “angel

investors”2 to obtain funding. Each director helped identify and solicit investors

throughout the ongoing fund-raising process.

In late 2009 Neogence hired John Cummings as an officer to serve as “director

of sales.” Cummings had worked for a company in which Brannon had previously

invested, and they had become business acquaintances. Cummings’s role “was

focused on sales and business development.”

In early 2010, during the process of raising capital and identifying investors,

at Brannon’s suggestion Rice reconnected with plaintiff Piazza, a previous

investment partner from a prior venture, to discuss Neogence. In February 2010,

2 An “angel investor” is “[a] person—usu[ally] an experienced and successful

entrepreneur, professional, or entity—that provides start-up or growth financing to a

promising company.” Investor, Black’s Law Dictionary (10th ed. 2014). In general, an

“accredited investor” is a person with a minimum net worth of over $1,000,000 or annual

income in excess of $200,000, 17 C.F.R. § 230.501(a)(5), (6) (2017), and is treated as “being

knowledgeable and sophisticated about financial matters,” investor, Black’s Law Dictionary

(10th ed. 2014). Herein an “accredited angel investor” is referred to as simply an “angel

investor.”

4

PIAZZA V. KIRKBRIDE

Newby, J., dissenting

Piazza loaned Neogence $50,000 in exchange for two convertible promissory notes,

convertible to Neogence stock at various points in time. Incorporated within the

promissory notes executed by Piazza was a note purchase agreement, wherein Piazza

represented that, inter alia, he “is an accredited investor,” is “able to fend for

[himself],” and “has such knowledge and experience in financial and business matters

as to be capable of evaluating the merits and risks of [his] investments, and has the

ability to bear the economic risks of [his] investments.”3 The purchase agreement

and February promissory notes are signed by Rice as CEO of Neogence. Also in

February 2010, Brannon introduced plaintiff Lampuri to Rice “as a potential

investor.”

The critical event, which led to this litigation, occurred on 30 April 2010 when

Cummings informally met with a representative from Verizon, a national

telecommunications company, and discussed Neogence’s software technology and its

development status. The meeting took place in New York at the offices of Verizon’s

marketing agency. The parties “brainstorm[ed]” about the possibility of including the

Neogence software as a smartphone application for Verizon’s upcoming summer

campaign. The Verizon representative indicated that “if [the software] lived up to

the things [Cummings] had presented in the meeting,” and Neogence was “able to

demonstrate it properly and functionally, that [Verizon’s marketing agency] would

3 The purchase agreement also discloses that the promissory notes and any

underlying securities “have not been registered under the Securities Act of 1933” and that

the sale and issuance of securities are “exempt” from such registration.

5

PIAZZA V. KIRKBRIDE

Newby, J., dissenting

consider [the software] as part of their marketing for” certain smartphones and a

“future potential business relationship” with Neogence.

Excited about this prospect, Cummings communicated the “Verizon

opportunity” to Neogence board members Rice, Kirkbride, and Brannon, noting that

if Neogence could “come back with a demo, . . . we would have a lot of possibilities of

what we could do with the company and how great that that would be for Neogence.

But the priority was to get the [software application] developed.”

That same day, Brannon quickly e-mailed several people, including Piazza,

copying Rice, stating:

Guys John Cummings just had a meeting in NY with

Verizon. We need $100K - $200K ASAP , [sic] in 3-4 weeks

we go back to Verizon we have an oppurtnity [sic] to be

their featured [software]. [Rice] is going to send out a

summary later today. I know all of you are BUSY!!! I need

you to give a few minutes to look at this potential.

(Emphasis added.) As promised, Rice followed up with the more detailed e-mail that

same evening, stating:

Gentlemen,

John Cummings met with [the marketing agency] and the

director of new technologies at Verizon (I believe that was

his title) this afternoon in New York. John can give you

more details directly.

John basically laid out our [software] strategy of meeting

consumer demand by providing the first social media

marketplace that enables people to buy, sell, and trade

virtual goods for use in mobile and augmented reality. . . .

6

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Newby, J., dissenting

....

Verizon responded extremely well to this and asked how

we differentiate ourselves from others . . . . [W]e are the

first launching a virtual goods marketplace (tapping into

one of the newest and fastest growing multi-billion dollar

markets).

While we have been seeking $200k in additional angel

funding to meet our [existing] milestones and deliverables

. . . , we now have an opportunity to go back to Verizon in

about three weeks to blow their minds with a demo that

shows everything we are doing . . . . The opportunity here

is to become the featured [ ] application for Verizon, OEM’d

on [certain smartphones], and leverage their marketing.

Even bigger, if we can pull this off with Verizon, it puts us

squarely in the limelight of catching the eyes of other

Fortune 100 companies for marketing, promotions, and

strategic partnerships.

The challenge here, is that we have to jump to warp speed

to accelerate development . . . not only to meet our

milestones, but to WOW Verizon. This is a one-shot

opportunity. As things currently are, we are crawling

along to meeting the milestones, but there is no way we can

deliver the perfect demo for Verizon without immediate

funding. . . . We need help finding additional angel capital

that can make a decision and move quickly.

We need $200k.

(Emphases added.) (Internal quotation marks omitted.)

On 1 May 2010, the next day, Piazza spoke by telephone directly with

Cummings, inquiring further about the details of his New York meeting and the

potential opportunity with Verizon. Cummings clarified that any opportunity with

Verizon was merely a possibility and that their “in” was through Verizon’s marketing

agency. Piazza testified that during that phone conversation,

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[Cummings] was very excited that he had just gotten out of

a meeting the day before, that he had held -- that was held

at [Verizon’s advertising agency], and he had met a Verizon

executive of new technologies. And that -- that particular

person was intrigued enough to invite him back to Verizon

with an app, a demo app, such that, if they liked this we

had an amazing opportunity to be on every Verizon Droid

phone as a pre-installed application, OEMed, featured AR,

I’m not sure.

Brannon was not a part of the call.

Beginning on 3 May, Rice sent a series of e-mails to Kirkbride, Brannon,

Cummings, and Piazza specifying the technology development timeline and the need

to have additional capital. On 25 May, Rice e-mailed Piazza saying,

I’ll do whatever it takes to get you on board. At this point,

I can’t move this company forward without you.

Without you investing, right now, we are going to lose our

momentum, development is going to stall, and we are likely

going to lose some people that have to deal with economic

realities of their own. If this does happen, I’ll keep fighting

and rebuild, but we will have lost our chance to be a player

in the industry this year. . . . It will take me months to

recover if we fall apart right now.

On the other hand, if you invest now, you are effectively

breathing new life back into the company, and empowering

me (and us) to stop crawling along and start running the

race. . . .

I can do all of this with your investment this week and I

can deliver. Granted some of the timelines and milestones

have shifted, and will always continue to shift as we move

forward. . . .

You know I have been completely open and transparent

with you from day one, even to my disadvantage in

negotiating, and quite frankly we are at a crossroads right

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now. We need your investment, and we need it yesterday.

Please believe in me and the team. We can’t do this

without you.

Afterwards, Rice told Kirkbride to “[d]o what you feel is necessary to close” Piazza.

On 26 May 2010, Cummings and Kirkbride flew to Maine to meet with Piazza

and further discuss the “potential of” Neogence and to solicit his “interest in making

an investment.” Brannon was not present. After visiting with Cummings and

Kirkbride and having talked with Rice, on 28 May Piazza loaned an additional

$150,000 to Neogence in exchange for a convertible promissory note.

While Lampuri had met Rice and learned of Neogence in February 2010, he

had not yet become an investor. Brannon told him in person of the potential Verizon

opportunity on 25 May 2010. Thereafter, Lampuri met with Cummings who, along

with Rice and Kirkbride, later met with Lampuri twice over the summer to discuss

his loaning funds to Neogence and the potential for its “technology [to] be used in a

number of different ways with a number of different brands,” as well as the potential

opportunity to present a demo to Verizon through its marketing agency. Lampuri

testified that he

was given a presentation that John Cummings was the

lead on, and he discussed and reiterated basically what

Greg [Brannon] had said, that he was in New York in a

meeting with an advertising company, and that there were

Verizon executives in the room. And they were, again,

absolutely wowed by the technology, that we need -- they

needed to go back, create a demo, go back to Verizon in a

couple weeks and if they -- if they wowed Verizon, I like to

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say, then they have the opportunity to be preloaded,

OEMed on all phones.

When specifically asked, “How did what John Cummings told you at that meeting

compare with what Dr. Brannon had told you on May 25th 2010 . . . ,” Lampuri

replied, “Essentially they were the exact same thing, very similar conversations,” and

“[b]oth had the same outcome that, you know, they met with a Verizon executive.”

Lampuri mentioned that in his conversation with Brannon “there was no word of

advertising,” but it was “essentially the exact same conversation.” When asked

during direct examination at trial what Rice contributed to discussions at the

meeting, Lampuri testified that Rice “said the deal was very much real. It was a real

opportunity, and the funds that they were seeking were to get this demo up and doing-

-up and coming to show Verizon.” Lampuri left Cummings’s presentations without

making an investment.

Neogence missed its anticipated July deadline to demonstrate its software to

the marketing agency and Verizon. Cummings rescheduled for “another 30, 60 days,”

ultimately for the fall of 2010. Again in August 2010, Lampuri met with Rice,

Kirkbride, and Cummings at Neogence’s headquarters. During those meetings,

Lampuri alleges he was told that Neogence was preparing “to follow through on an

opportunity Verizon had provided Neogence for Mirascape to become a featured AR

application pre-installed on all Verizon DROID smartmobiles.” Brannon did not

attend any of these meetings.

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Nonetheless, on 24 September 2010, well after the initial July deadline and

months after his 25 May 2010 conversation with Brannon, and after having spoken

with Cummings, Kirkbride, and Rice, Lampuri loaned Neogence $100,000 in

exchange for a convertible promissory note. In that note purchase agreement,

Lampuri, like Piazza, represented that he “is an accredited investor,” is “able to fend

for [himself],” and “has such knowledge and experience in financial and business

matters as to be capable of evaluating the merits and risks of [his] investments, and

has the ability to bear the economic risks of [his] investments.” The purchase

agreement is signed by Kirkbride as CEO of Neogence.

Neogence continued to miss deadlines. That fall, Cummings flew to New York

again to meet with Verizon and its advertising agency to present the software

technology, but Cummings “had to cancel the meeting while in front of the [office]

building because” the software “would not function” on his smartphone. Ultimately,

Neogence failed to create a functioning demo of its software.

Neogence went into a decline and was “having a very difficult time raising

funds.” Nonetheless, plaintiffs, as well as Brannon, invested additional money in

Neogence in 2011, well after any opportunity with Verizon had passed. By the

summer of 2011, Neogence was past due on its rent. On 7 July 2011, counsel for

Piazza sent a formal demand letter seeking repayment of Piazza’s promissory notes,

which had matured and were past due. Shortly thereafter, Neogence closed its doors

and went out of business.

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On 13 July 2011, plaintiff Piazza filed his complaint against the corporation,

Neogence Enterprises, Inc., for breach of contract stemming from Neogence’s failure

to repay his promissory notes upon their reaching maturity, seeking return of

principal plus accrued interest. Piazza obtained a default judgment.

On 10 October 2012, plaintiffs filed their complaint against defendant officers

and directors, Kirkbride, Rice, and Brannon, personally, for, inter alia, “securities

fraud” under the North Carolina Securities Act, seeking money damages for the

selling of a security by means of any untrue statement of a material fact or any

omission.4 These claims were based on alleged misrepresentations made by

defendants to plaintiffs arising from the 30 April 2010 meeting between Cummings

and Verizon. Specifically, plaintiffs complained

[t]he representations made by Brannon, Rice, and

Kirkbride to both Piazza and Lampuri regarding the

opportunity for Mirascape to become a featured AR

application pre-installed on all Verizon DRIOD

smartphones were false and misleading. At no time did

any person associated with Verizon ever discuss with John

Cummings or any other Neogence officer, director, or

employee any opportunity for Mirascape or Neogence

technology to become a featured AR application pre-

installed on all—or any—Verizon DRIOD smartphones.

Plaintiffs directed their allegations of fraudulent misrepresentation at defendants as

a group; plaintiffs did not differentiate regarding the alleged misrepresentations by

4Plaintiffs voluntarily dismissed without prejudice their other claims against all

defendants for common law fraud, negligent misrepresentation, and unfair and deceptive

trade practices.

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any individual defendant. Cummings, who was the director of sales, was not a named

defendant in the complaint even though he was the only Neogence officer at the 30

April 2010 meeting, had communicated about the meeting with the directors, and had

discussed the meeting and the potential opportunity in detail with both plaintiffs

before either plaintiff invested in the company.

Despite having spoken directly and at length with Cummings regarding the

possible opportunity with Verizon, and despite having invested money in Neogence

well after it had lost that opportunity, plaintiffs asserted that they would not have

loaned money to Neogence but for defendant directors’ “false and misleading”

representations, namely that the Neogence software potentially could “become a

featured [ ] application pre-installed on all Verizon [ ] smartphones.” Plaintiffs stated

that “[a]t all relevant times material to this action, Kirkbride, Brannon, and Rice

served on Neogence’s board of directors.”

Brannon unsuccessfully moved to dismiss plaintiffs’ claims under Civil

Procedure Rule 12(b)(6) based on plaintiffs’ representations in their promissory note

purchase agreements attesting to their ability to independently evaluate “the merits

and risks” of their investments “through simple inquiries” beforehand. Brannon

answered that, in his capacity as a director, he was entitled to rely on the statements

and representations made to the board by the director of sales, Cummings.

Specifically, Brannon answered that “[i]f the Plaintiff Piazza relied upon any

misrepresentations made by Neogence directors or officials, he would have relied

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Newby, J., dissenting

upon what was told to him by Kirkbride or Cummings on or about May 26, 2010,” the

date of the Maine solicitation meeting, just two days before Piazza loaned an

additional $150,000 to Neogence. As to Lampuri’s claims, Brannon answered that

when he

spoke with Lampuri, he stated, based upon what

Cummings reported to the Neogence board members, that

Neogence had an opportunity of becoming a featured AR

application with Verizon, but the conversation was broader

and [he] also advised Lampuri that a prototype or demo of

the software had to be created and a presentation would

need to be made to have the chan[ce] to have an

“opportunity” fulfilled . . . .

Before trial Kirkbride moved for summary judgment in his favor as a matter

of law, arguing

(1) the alleged representations of Kirkbride were true; (2)

the statements allegedly made were too contingent and

vague to be a material misrepresentation of a past or

existing fact or reasonably relied upon; (3) Plaintiffs failed

to make the required showing of a reasonable inquiry

necessary to show reasonable reliance; and (4) Mr.

Kirkbride did nothing but rely on Mr. Cummings in

repeating Mr. Cummings’ statements.

Likewise, Rice and Brannon moved for summary judgment, similarly arguing that

the representations made were “literally true”:

1. Plaintiff Piazza was equally or possibly a more

sophisticated investor than was either of the Defendants

and hence he could not have reasonably relied upon either

of them; Plaintiff Lampuri invested long after the

“opportunity with Verizon” complained of was an

immediate and/or achievable goal and hence his reliance

upon either of the Defendants with respect to emails

months before his investment is unreasonable as a matter

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of law.

2. Further, the representations allegedly made by

[Cummings, Kirkbride, Brannon, and Rice] were literally

true and insufficiently definite to be false or reasonably

relied upon as a matter of law.

3. There were no legally material

misrepresentations of fact made by either Defendant to the

Plaintiffs.

4. Plaintiffs failed to make any reasonable inquiry or

perform even minimal due diligence as to the basis or

meaning of any alleged representations made to them prior

to investing in Neogence.

On 25 November 2013, the trial court found no genuine issue of material fact

with regard to plaintiffs’ claim of securities fraud against Kirkbride and granted his

motion for summary judgment but denied the motions of Rice and Brannon. The trial

court did not give a specific reason for granting summary judgment for Kirkbride but

denying it for Rice and Brannon. The claims against Rice and Brannon proceeded to

trial.

At different stages of trial, Brannon moved to dismiss the claims against him

based on an outside director’s reliance upon representations of corporate officers

(director safe harbor). The trial court denied the motions.

At the charge conference, counsel requested pattern instruction 807.50, noting

that “this statute,” N.C.G.S. § 55-8-30 and its protections referenced in Brannon’s

answer, “needs to be inserted” in the jury instructions. The protection, described as

the “Director Safe Harbor,” states:

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(b) In discharging the duties of a director’s office, a

director is entitled to rely on information, opinions, reports,

or statements, including financial statements and other

financial data, if prepared or presented by any of the

following:

(1) One or more officers or employees of the

corporation whom the director reasonably

believes to be reliable and competent in the

matters presented.

N.C.G.S. § 55-8-30(b)(1) (Supp. 2018) (emphases added). Brannon included in his

proposed jury instructions North Carolina Pattern Instruction Civil 807.50, titled

“Breach of Duty-Corporate Director.” The proposed instruction included the following

language:

“Was the plaintiff damaged by the failure of the

defendant to discharge his duties as a corporate director?”

On this issue the burden of proof is on the plaintiff.

This means that the plaintiff must prove, by the greater

weight of the evidence . . . :

....

. . . that the defendant failed to act as an ordinarily

prudent person in a like position would have acted under

similar circumstances. (Unless he has actual knowledge to

the contrary, a director is entitled to rely on information,

opinions, reports or statements, including financial

statements and other financial data, if prepared or

presented by

[one or more employees of the corporation who the

director reasonably believes to be reliable and competent

in the matter(s) presented]

(Footnote call numbers and italics omitted.) The trial court denied the proposed

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instruction on the basis that the instruction wrongly placed the burden of proof on

plaintiffs instead of Brannon, at which time Brannon’s counsel suggested attempting

to craft a different instruction. Apparently, no special instruction incorporating the

director safe harbor protection was ultimately produced. Brannon reasserted his

request for the pattern jury instructions regarding director safe harbor, N.C.G.S.

§ 55-8-30. The trial court denied the request.

The jury received four copies of the following issue to determine whether Rice

and Brannon had made any misrepresentations to plaintiffs that would subject these

defendants to individual liability under the securities fraud statute, N.C.G.S.

§ 78A-56(a)(2):

Did Defendant, [name], in soliciting the Plaintiff, [name],

to pay money for a security, make a statement which was

materially false or misleading, or which under the

circumstances was materially false or misleading because

of the omission of other facts, where the Plaintiff, [name],

was unaware of the true or omitted facts?

The trial court instructed the jury that, “[o]n this issue, the burden of proof is on the

plaintiff.” The trial court also instructed the jury to answer: “Did the defendant

[Brannon] not know and in the exercise of reasonable care could not have known of

the untruth or omission in his offer or sale of a security to the plaintiff [name]. On

this issue, the burden of proof is on the defendant [Brannon].”

The jury found Brannon had made representations to both Piazza and Lampuri

that were materially false or misleading and that plaintiffs were unaware of the true

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facts but found that there was either no such misrepresentation on Rice’s part or that

plaintiffs were aware of the truth.5 Therefore, logically, the jury determined one of

the following: (1) Rice was truthful that Cummings met with a Verizon

representative and discussed the “opportunity” for Neogence technology “to become

the featured [ ] application for Verizon” smartphones, or (2) plaintiffs knew the

meeting did not take place or the “opportunity” did not exist.

Thus Brannon, the outside director without technical expertise, was the only

defendant held liable. The jury found Brannon liable even though Rice, Kirkbride,

and Cummings met with each plaintiff several times before either invested. The trial

court then adjudged that defendant was liable to Piazza for $150,000.00 plus

prejudgment interest of $45,000.00, that Brannon was liable to Lampuri for

$100,000.00 plus prejudgment interest of $27,333.33, and that plaintiffs could

recover, jointly and severally, from Brannon $123,804.00 in attorneys’ fees and

$8,493.79 in court costs.

5 If the jury found that either defendant had made materially false or misleading

representations to either plaintiff, the jury was also asked to determine: “Did the

Defendant, [name], not know and in the exercise of reasonable care, could not have known

of the untruth or omission in his offer or sale of a security to the Plaintiff, [name]?” The

jury answered no as to Brannon and each plaintiff, but it did not reach the question

regarding Rice because it had not found that Rice made any statement which was

materially false or misleading.

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Brannon unsuccessfully moved for “judgment notwithstanding the verdict

[JNOV] or in the alternative a new trial,” arguing, inter alia, that the verdicts as to

Rice and himself were inherently inconsistent given that

Plaintiffs’ evidence at trial tended to show that Defendant

Brannon, an unpaid director, told Plaintiffs orally the same

things that Defendant Robert Rice, a paid officer,

communicated. The jury, however, found that the

communicated information was a misrepresentation when

communicated by Defendant Brannon, but was not a

misrepresentation when communicated by Defendant Rice.

In the same motion, Brannon unsuccessfully argued that he, as a corporate director,

“was entitled to rely on the information he received from John Cummings and

repeated to plaintiffs as a matter of law under [the director safe harbor statute]” and

that the trial court erred by instructing instead “on the general standard of

reasonableness.” Given that “[o]ne of the duties of a director is seeking capital

investment in the company,” Brannon argued he “requested and was entitled to an

instruction under N.C.G.S. [§] 55-8-30(b)(1) and (b)(2),” the “specific safe harbor with

respect to the discharge of a director’s duty.” According to Brannon, “[t]he

uncontroverted evidence was that John Cummings was the only employee of

Neogence . . . who had direct knowledge of the ‘Verizon opportunity’ and that

defendants relied upon Mr. Cummings’ statements regarding this opportunity.”

Brannon argued that sufficient evidence was presented to allow the jury to conclude

that he “reasonably believed” Cummings “to be reliable and competent regarding the

Verizon opportunity.” The trial court denied the motion.

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II. Inconsistent Verdicts

The trial court abused its discretion by not granting a new trial because of

inconsistent verdicts. “The trial judge has the discretionary power to set aside a

verdict when, in his opinion, it would work injustice to let it stand; and, if no question

of law or legal inference is involved in the motion, his action in so doing is not subject

to review on appeal in the absence of a clear abuse of discretion.” Selph v. Selph, 267

N.C. 635, 637, 148 S.E.2d 574, 575-76 (1966). Therefore, an appellate court will only

disturb a trial court’s order on a Rule 59 motion when the court “is reasonably

convinced by the cold record that the trial judge’s ruling probably amounted to a

substantial miscarriage of justice.” In re Will of Buck, 350 N.C. 621, 625, 516 S.E.2d

858, 861 (1999) (quoting Anderson v. Hollifield, 345 N.C. 480, 483, 480 S.E.2d 661,

663 (1997)). North Carolina Rule of Civil Procedure 59 designates “[a]ny irregularity

by which any party was prevented from having a fair trial” as grounds for a new trial.

N.C.G.S. § 1A-1, Rule 59(a)(1) (2017). For example, when a jury renders its verdicts,

but “the answers to the issues are so contradictory as to invalidate the judgment, the

practice of the Court is to grant a new trial, or venire de novo.” Palmer v. Jennette,

227 N.C. 377, 379, 42 S.E.2d 345, 347 (1947) (citations omitted).

Both Brannon and Rice relied on the information they received from

Cummings and both made the same substantive representations to Piazza and

Lampuri regarding the Verizon opportunity. Moreover, both plaintiffs talked to

Cummings multiple times after their conversations with Brannon, providing them

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the opportunity to clarify any confusion. Neither plaintiff invested in the company

until after he spoke with Cummings.

Under the securities fraud statute, the trial court instructed the jury that, to

hold a defendant liable, it must find that (1) the defendant made “a statement which

was materially false or misleading,” and (2) the plaintiff was “unaware of the true or

omitted facts.” Only one person, Cummings, attended the meeting on 30 April 2010.

Neither defendant Rice nor defendant Brannon was present. Both plaintiffs knew

that Cummings was the only person at that meeting. Four people—Cummings, Rice,

Kirkbride, and Brannon—knew what Cummings communicated to the directors

about the meeting immediately after it occurred. The evidence indicates that

Cummings, Rice, Kirkbride, and Brannon all communicated essentially the same

message:

 A meeting occurred;

 a Verizon representative was present; and

 the Mirascape concept favorably impressed the Verizon representative,

who was open to considering it further if Neogence could produce a

working demo in a timely fashion.

The opportunity was time-sensitive, and, to meet the deadlines, the company needed

more capital to afford additional technical staff. In sum, Cummings, Rice, Kirkbride,

and Brannon all indicated that the potential opportunity was contingent on

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producing a working demo quickly. Even with a working demo, the opportunity was

still only a potential opportunity; nothing had been finalized with Verizon.

At trial Piazza, already an angel investor, testified that he first learned of the

potential opportunity with Verizon through an e-mail sent by Brannon to him and

others on 30 April 2010. Brannon copied Rice with the email. That e-mail stated, in

pertinent part, “John Cummings just had a meeting in NY with Verizon. We need

$100K - $200K ASAP , [sic] in 3-4 weeks we go back to Verizon we have an oppurtnity

[sic] to be their featured [software]. [Rice] is going to send out a summary later

today.” Piazza summarized the relevant substance of Brannon’s representations as

Neogence’s having an opportunity to present a demo to Verizon, “[a]nd if that were

acceptable to Verizon,” then there would be “an opportunity to be OEMed or featured

AR or pre-installed on every Verizon -- Verizon Droid phone.” As for his

communications with Rice, Piazza testified that on the evening of 30 April 2010, he

also received the forecast e-mail from Rice, which reiterated: “The opportunity here

is to become the featured AR application for Verizon, OEM’d on all of the DROID

smartmobiles, and leverage their marketing.”

After receiving the e-mails from Brannon and Rice, Piazza immediately talked

with Cummings about what had occurred at the 30 April 2010 meeting. Before

investing on 28 May 2010, Piazza spoke directly with Cummings, communicated with

Rice, and met in person with Cummings and Kirkbride to discuss the same Verizon

opportunity first mentioned by Brannon in the 30 April 2010 e-mail. Even though

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Cummings, Rice, Kirkbride, and Brannon communicated materially the same

message to plaintiffs, interestingly, Cummings was not a named defendant here, and

the trial court granted summary judgment to Kirkbride. Thus, the precise question

regarding inconsistent verdicts is whether Brannon communicated a materially

different message about the Verizon opportunity than Rice or whether plaintiffs had

different opportunities to become “aware of the true . . . facts.”

In evaluating these two e-mails, it is important to appreciate the dramatically

different roles of Rice and Brannon and therefore, the reasonable weight or

“materiality” of each communication: Rice was the founder and CEO of Neogence,

whereas Brannon was a physician serving as an outside board member without

technical expertise. Part of Brannon’s role as a director was to help identify potential

angel investors. Both plaintiffs knew of Brannon’s limited role. In his short 30 April

2010 e-mail, Brannon quickly summarized the possible Verizon opportunity and

asked the recipients to take time to read the more detailed e-mail to follow from Rice.

By copying Rice with the email, Brannon provided Rice had an opportunity to correct

any misstatement. Further, any ambiguities created by the Brannon e-mail were

clarified by the more detailed Rice e-mail, which Brannon referenced and urged the

recipients of his email to read.

Upon reaching its verdict regarding Piazza, to the extent that the jury found

that Brannon misrepresented that Neogence had an opportunity to become Verizon’s

featured AR software provider, the jury reached that decision in the face of evidence

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that Rice made the same express representation. Nevertheless, the majority

contends that Brannon “made more direct, less nuanced, comments” and gave less

“accurate descriptions” to Piazza “concerning the extent to which Neogence had the

opportunity to have Mirascape preloaded onto Verizon phones than Mr. Rice did.”

Because of this alleged distinction, the majority concludes that the jury could have

reasoned that Rice did not make any misrepresentations to Piazza but that Brannon

did so based on an “omission to state a material fact necessary in order to make the

statements made, in the light of the circumstances under which they were made, not

misleading.” N.C.G.S. § 78A-56(a)(2) (2017).

The majority’s distinction is one without a difference. Brannon’s e-mail

specifically stated that the more detailed (nuanced) information about the potential

opportunity would come from Rice. Brannon’s short e-mail is exactly the kind of e-

mail one would expect a busy physician to send to other busy people. Rice received a

copy of the email and, as the CEO, had the opportunity to correct any misstatement.

Furthermore, Rice’s longer, detailed communications conveyed additional

information needed by the potential investors, such as the statement that Neogence

might have an opportunity to “leverage [Verizon’s] marketing.” Regardless of the

comparative length of or detail in the e-mails, Rice expressly represented that

Neogence had a real chance “to become the featured AR application for Verizon,

OEM’d on all of the DROID smartmobiles.”

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Regarding Lampuri’s claims, Lampuri learned of the potential Verizon

opportunity from Brannon at Brannon’s medical office on 25 May 2010 when the two

had a brief conversation during a prenatal appointment for Lampuri’s wife. This

setting was not one in which a person expects to receive precise details of an

investment opportunity. According to Lampuri, Brannon represented that “our

director of sales just got back from New York City at a meeting”; “[t]here were Verizon

executives there, and they were absolutely blown away by our technology,” and

“Neogence needed to go back, create this demo, come back and show Verizon, you

know, what they’ve been talking about, what they’ve been showing about this

technology and they’re going [to] get OEMed. They’re going pre-installed on all

Verizon phones.” Afterwards, Lampuri pursued the opportunity by meeting with

Cummings, Kirkbride, and Rice at Neogence’s headquarters in July 2010 to learn the

details of the investment opportunity directly from Cummings. Cummings confirmed

the essence of Brannon’s statements. According to Lampuri, Rice “reiterated to them

that the [Verizon] deal was very much real. They were seeking funds to, you know,

create that demo and finish it so they could do--you know, give a live demo to Verizon.”

The majority argues that Rice’s representations to Lampuri were obviously

different than Brannon’s in that Rice did not specifically detail the nature of the

Verizon opportunity. Though Rice’s statements to Lampuri were comparatively

vague, they were no different than Brannon’s given the context in which they were

made. According to Lampuri’s testimony, immediately preceding Rice’s statement at

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their first meeting, Cummings had relayed that the result of his initial meeting in

New York was that Verizon was “absolutely wowed by the technology, that we need-

-they needed to go back, create a demo, go back to Verizon in a couple weeks and if

they--if they wowed Verizon, . . . then they have the opportunity to be preloaded,

OEMed on all phones.” Just before an additional interaction with Rice, Lampuri

heard from Cummings that Cummings had been in New York to meet with an

advertising agency “and it just so happened Verizon executives were in the meeting,

blown away by the technology. You guys need to go back, create this demo, come back

to us and you guys have a possibility of being our featured AR application OEMed on

all phones.”

As such, Cummings’s descriptions of the Verizon “deal” as reiterated by Rice

were substantively indistinguishable from Brannon’s representations. Indeed, the

jury heard from Lampuri that Cummings “discussed and reiterated basically what

Greg [Brannon] had said.” Rice then effectively affirmed and adopted this description

of the Verizon opportunity when he represented to Lampuri on both occasions that

the “deal” was “very much real” without offering any other information to correct or

modify Cummings’s representations. While the majority ignores the timing of the

various representations to Lampuri, it is crucial. At the time of Brannon’s May

statement, the Verizon opportunity deadline was weeks away. That deadline,

however, passed. During this critical time, Lampuri had several discussions with

Rice and Cummings. Significantly, Lampuri did not provide funds until 24

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September 2010, well past the initial deadlines, and many months after Brannon’s

alleged misrepresentation.

Also, the majority ignores the second aspect of the jury’s verdict of liability that

each plaintiff “was unaware of the true or omitted facts.” Even if there were a

“material” difference in the representations made by Rice and Brannon, neither

plaintiff can show he did not learn of the true details of the Verizon opportunity by

talking directly to the one Neogence person who was present at the meeting,

Cummings. Before plaintiffs invested in the company, both had multiple

conversations with Cummings as well as Rice and Kirkbride. These direct

conversations with these corporate officers would have corrected any possible

confusion Brannon, the physician without technical expertise and an outside board

member, may have created regarding the potential opportunity with Verizon. No

person would have reasonably relied on the statement of one absent from a meeting

after consulting with one actually present.

The timing of the investments makes clear that neither plaintiff relied on

Brannon but only invested after extensive conversations with Cummings as well as

Rice and Kirkbride. Piazza first loaned money to Neogence in February 2010, but,

after talking directly with Cummings and being visited by Rice and Kirkbride, on 28

May 2010, Piazza loaned the additional $150,000 to Neogence. Even though his in-

person communication with Brannon took place on 25 May 2010, Lampuri did not

invest until 24 September 2010, four months after his brief conversation with

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Newby, J., dissenting

Brannon and after he had spoken several times to Cummings, Kirkbride, and Rice

about the same Verizon opportunity, and well after Neogence had missed the initial

July deadline with Verizon.

Given the evidence, it is impossible to reconcile the jury’s verdicts that

Brannon made misrepresentations to plaintiffs, thus subjecting him to securities

fraud liability, while Rice made no such misrepresentations. Given the evidence, it

is likewise impossible that plaintiffs did not know of the true details of the

opportunity after discussing it with the only Neogence officer present at the 30 April

2010 meeting as well as corporate officers, Rice and Kirkbride. If Rice accurately

stated the potential opportunity, as the majority suggests, Rice would have

simultaneously informed plaintiffs of the “true” opportunity. Because these verdicts

absolve one defendant from liability and subject the other to liability based on

substantively indistinguishable statements, it would be a substantial miscarriage of

justice to allow these verdicts to stand. Therefore, the trial court abused its discretion

by denying Brannon’s motion for a new trial.

III. Director Safe Harbor Jury Instruction

The trial court erred by failing to give the requested director safe harbor jury

instruction; accordingly, Brannon is entitled to a new trial on this ground as well.

Whether a jury instruction correctly explains the law is reviewable de novo. E.g.,

Moss v. Brown, 199 N.C. 189, 192, 154 S.E. 48, 49 (1930); see also Kinsey v. Spann,

139 N.C. App. 370, 372, 533 S.E.2d 487, 490 (2000) (A motion for new trial involving

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Newby, J., dissenting

a question of law is reviewed de novo. (citation omitted)); McNeill v. McDougald, 242

N.C. 255, 259, 87 S.E.2d 502, 504 (1955). An erroneous jury instruction of the law

regarding “a substantive phase of the case is prejudicial error,” White v. Phelps, 260

N.C. 445, 447, 132 S.E.2d 902, 904 (1963) (per curiam), “even though given in stating

the contentions of the parties,” Blanton v. Carolina Dairy, Inc., 238 N.C. 382, 385, 77

S.E.2d 922, 925 (1953). An instruction placing the burden of proof on the wrong party

is prejudicial. E.g., Banks v. Shepard, 230 N.C. 86, 91, 52 S.E.2d 215, 218 (1949).

This Court has stated:

[W]hen a request is made for a specific instruction, correct

in itself and supported by evidence, the trial court, while

not obliged to adopt the precise language of the prayer, is

nevertheless required to give the instruction, in substance

at least, and unless this is done . . . the failure will

constitute reversible error.

Minor v. Minor, 366 N.C. 526, 531, 742 S.E.2d 790, 793 (2013) (alterations in original)

(quoting Calhoun v. State Highway & Pub. Works Comm’n, 208 N.C. 424, 426, 181

S.E. 271, 272 (1935)). “Accordingly, we consider whether the instruction requested is

correct as a statement of law and, if so, whether the requested instruction is

supported by the evidence.” Id. at 531, 742 S.E.2d at 793 (citing Calhoun, 208 N.C.

at 426, 181 S.E. at 272); see also Gwyn v. Lucky City Motors, Inc., 252 N.C. 123, 127,

113 S.E.2d 302, 305 (1960) (The quantum of proof required to support a requested

instruction is “more than a scintilla.”).

a. Preservation

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Newby, J., dissenting

The first question is whether Brannon preserved the safe harbor jury

instruction issue by making an adequate request to the trial court. Contrary to the

majority’s view, Brannon’s counsel plainly raised the defense before, during, and after

trial, and preserved for review the proposed jury instruction, by asserting Brannon

acted within the scope of his corporate director duties in his communications with

plaintiffs. The majority concludes that the pattern jury instruction incorrectly states

the law by placing the burden of proof on plaintiffs and, as a result, the requesting

party should have produced a special written instruction. The statute, however,

places the burden of proof on plaintiffs; thus, the requested pattern jury instruction

correctly states the law, and the trial court should have instructed the jury

accordingly.

A party may not appeal a jury instruction, or lack thereof, unless the party

objects and states the grounds of the objection, “provided that opportunity was given

to the party to make the objection out of the hearing of the jury, and, on request of

any party, out of the presence of the jury.” N.C. R. App. P. 10(a)(2). Here in

accordance with Rule 10(a)(2), Brannon did make a timely objection to the trial court’s

decision to deny the requested jury instruction at issue.

In the pretrial order, counsel defined the jury issue as, inter alia, “Were the

Plaintiffs . . . damaged by the failure of [defendant Brannon] to discharge his duties

as a corporate director? (N.C.G.S. §[ ]55-8-30).” At the close of plaintiffs’ evidence,

counsel argued for dismissal in that, “as [a] director,” Brannon is “shielded from

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Newby, J., dissenting

liability . . . in compliance with General Statute 55-8-30.” At the charge conference,

defense counsel requested the corresponding pattern instruction 807.50, noting again

that “this statute,” section 55-8-30 and its protections, “needs to be inserted” in the

jury instructions. Defense counsel included in his proposed jury instructions North

Carolina Pattern Instruction Civil 807.50, titled “Breach of Duty-Corporate Director.”

During the charge conference, defense counsel proposed N.C.P.I. Civil 807.50 to

invoke the defense for a director who relies on information provided by a corporate

officer pursuant to N.C.G.S. § 55-8-30. The trial court denied the proposed instruction

on the basis that the instruction placed the burden of proof on plaintiffs instead of on

Brannon, at which time Brannon’s counsel suggested crafting a different instruction.

Apparently, no acceptable instruction was presented.

Therefore, before the conclusion of the charge conference, Brannon renewed

his objection to the instructions and argued the propriety of the pattern jury

instructions based on N.C.G.S. § 55-8-30. The trial court noted the objection and

denied the requested jury instructions. In his post-trial motions, counsel argued that

Brannon, as a corporate director, “was entitled to rely on the information he received

from John Cummings and repeated to plaintiffs as a matter of law,” that “[o]ne of the

duties of a director is seeking capital investment in the company,” and that the trial

court erred by instructing instead “on the general standard of reasonableness.”

Brannon certainly raised, and plainly preserved, this issue for appeal. See State v.

Maske, 358 N.C. 40, 53, 591 S.E.2d 521, 530 (2004); see also N.C. R. App. P. 10(b)(2).

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Newby, J., dissenting

b. Correct Statement of the Law

The next question is whether the proposed jury instruction was a correct

statement of the law. The majority, agreeing with the trial court, holds that the

requested instruction incorrectly stated the law because of the allocation of the

burden of proof. A proper analysis requires consideration of two statutes, those

addressing the director safe harbor and securities fraud.

i. Director Safe Harbor

The statutory director safe harbor necessarily protects directors in the midst

of “[t]he growing complexity of business affairs,” which requires “directors to rely on

other corporate personnel as well as outside experts in discharging their

responsibilities.” Russell M. Robinson, II, Robinson on North Carolina Corporation

Law § 14.05 (7th ed. 2014). In recognition of the important policy of encouraging

individuals to serve as corporate directors, the General Assembly created the

statutory director safe harbor to supplement the common law protection of the

business judgment rule. Section 55-8-30 of our General Statutes, which governs the

general conduct of corporate directors, recognizes the safe harbor as a defense for a

director discharging his duties:

(a) A director shall discharge the director’s duties as

a director . . . in accordance with all of the following:

(1) In good faith.

(2) With the care an ordinarily prudent person in a

like position would exercise under similar

circumstances.

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Newby, J., dissenting

(3) In a manner the director reasonably believes to

be in the best interests of the corporation.

(b) In discharging the duties of a director’s office, a

director is entitled to rely on information, opinions, reports,

or statements, including financial statements and other

financial data, if prepared or presented by any of the

following:

(1) One or more officers or employees of the

corporation whom the director reasonably

believes to be reliable and competent in the

matters presented.

N.C.G.S. § 55-8-30(a)-(b) (Supp. 2018). “A director is not entitled to the benefit of

subsection (b),” that is relying on information provided by corporate officers, “if the

director has actual knowledge concerning the matter in question that makes reliance

otherwise permitted by subsection (b) of this section unwarranted.” Id. § 55-8-30(c)

(Supp. 2018) (emphasis added). Otherwise, “[a] director is not liable for [ ] any action

taken as a director, or any failure to take any action, if the director performed the

duties of the director’s office in compliance with this section.” Id. § 55-8-30(d) (Supp.

2018). Thus, under the statute, a director discharging his corporate duties is entitled

to rely in good faith on a corporate officer’s representation without incurring personal

liability, absent actual knowledge that the statement is false.6

6 Providing further insight into the importance of the director safe harbor statute,

North Carolina’s common law business judgment rule likewise protects corporate directors

from personal liability stemming from the performance of their corporate duties. Braswell

v. Pamlico Ins. & Banking Co., 159 N.C. 628, 631, 75 S.E. 813, 814 (1912) (“Directors of

corporations are not guarantors . . . . They do not insure the corporation against loss

arising either from their own honest mistakes or from the mistakes of subordinate

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Newby, J., dissenting

officers.”). Injured parties are generally free to sue the corporation itself, but “[d]irectors

must have the freedom to take risks and the power to manage the business without undue

interference from . . . the courts. That freedom is achieved by protection from liability for

good faith errors in judgment and deference from the courts in business decisions.” First

Union Corp. v. Suntrust Banks, Inc., Nos. 01-CVS-10075, 01-CVS-8036, CIV. A. 01-CVS-

4486, 2001 WL 1885686, at *4 (N.C. Super. Ct. Aug. 10, 2001).

Likewise, other states echo these fundamental principles embodied in the “business

judgment rule,” State ex rel. Comm’r of Ins. v. Custard, No. 06 CVS 4622, 2010 WL

1035809, at *20-21 (N.C. Super. Ct. Wake County (Bus. Ct.) Mar. 19, 2010), which operates

both procedurally and substantively, Emerald Partners v. Berlin, 787 A.2d 85, 90-91 (Del.

2001); see also In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 123 (Del. Ch.

2009) (“[I]f the directors employed a rational process and considered all material

information reasonably available—a standard measured by concepts of gross negligence”—

no personal liability extends. Moreover, “a showing of bad faith is a necessary condition to

. . . liability.”).

Substantively similar to N.C.G.S. § 55-8-30(b), the common law business judgment

rule provides directors a “safe harbor” which allows them to rely in good faith upon the

representations of their corporation’s officers. See Arthur v. Griswold, 55 N.Y. 400, 406

(1874) (“The mere fact of being a director . . . is not per se sufficient to hold a party liable for

the frauds and misrepresentations of the active managers of the corporation. Some

knowledge of . . . the act claimed to be fraudulent must be brought home to the [director]

charged.” (citation omitted)); see also, e.g., Utley v. Hill, 155 Mo. 232, 242-47, 273-76, 55

S.W. 1091, 1092-93, 1103-04 (1900) (Bank directors were not liable for deceit because they

relied in good faith on financial reports of cashier.).

Like N.C.G.S. § 55-8-30(c), absent actual knowledge of the falsity of the officer’s

representation, the business judgment rule shields directors from personal liability in this

context. See Brehm v. Eisner, 746 A.2d 244, 261-62 (Del. 2000) (en banc); see also Graham

v. Allis-Chalmers Mfg. Co., 41 Del. Ch. 78, 85, 188 A.2d 125, 130 (Del. 1963) (“[D]irectors

are entitled to rely on the honesty and integrity of their subordinates until something

occurs to put them on suspicion that something is wrong.”).

Though similar, the statutory protection is separate from the business judgment

rule and does not supplant its common law protections. State ex rel. Long v. ILA Corp., 132

N.C. App. 587, 601, 513 S.E.2d 812, 821 (1999) (“[Section 55-8-30] does not abrogate the

common law of the business judgment rule.”); see N.C.G.S. § 55-8-30 official cmt. (1991)

(“[T]he business judgment rule and the circumstances for its application are . . . developed

by the courts. . . . [S]ection 8.30 does not . . . codify the business judgment rule . . . .”). “The

possible application of the business judgment rule need only be considered if compliance

with the standard of conduct set forth in . . . section 8.30 is not established.” N.C.G.S. § 55-

8-30 official cmt. sec. 4. Therefore, “proper analysis requires examination of defendant’s

actions in light of [both] the statutory protections . . . and the business judgment rule,

either or both of which could potentially insulate him from liability.” ILA Corp., 132 N.C.

App. at 601-02, 513 S.E.2d at 821.

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Newby, J., dissenting

To assert this defense Brannon requested North Carolina Pattern Instruction

Civil 807.50, titled “Breach of Duty-Corporate Director.” The proposed instruction

included the following language:

“Was the plaintiff damaged by the failure of the

defendant to discharge his duties as a corporate director?”

On this issue the burden of proof is on the plaintiff.

This means that the plaintiff must prove, by the greater

weight of the evidence . . . :

....

. . . that the defendant failed to act as an ordinarily

prudent person in a like position would have acted under

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