Burgess v. Am. Express Co.â

Burgess v. Am. Express Co., 2007 NCBC 22

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF POLK 07 CVS 40

C. BURGESS,

Plaintiff,

v. ORDER & OPINION

AMERICAN EXPRESS CO., EXPERIAN
INFORMATION SOLUTIONS, INC.,
INNER CONCEPTS, INC., CINGULAR
WIRELESS, LLC, TARGET STORES,
INC., WAL MART ASSOCIATES, INC.,
AIS NETWORK, INC., CLICKSPRING,
LLC, RINGTONE.COM, LLC, EBAY, INC.,
PUREVIDEO NETWORKS, INC.,
VARIOUS, INC., FRISCHMAN
ENTERPRISES, INC., AVIS BUDGET
CAR RENTAL, LLC, VONAGE AMERICA,
INC., OFFICE DEPOT, INC., CITIGROUP
CORPORATE, THE CREDO GROUP,
INC., INTERNET BRANDS, INC., J.G.
WENTWORTH & CO., INC.,

Defendants.

Charles Burgess, Plaintiff, pro se.

McAngus, Goudelock & Courie, PLLC by John E. Spainhour for Defendant
American Express Co.

Diaz, Judge.

{1} This matter is before the Court on the cross-motions of pro se Plaintiff
Charles Burgess (“Burgess”) and Defendant American Express Co. (“AMEX”) for
sanctions pursuant to Rule 11 of the North Carolina Rules of Civil Procedure (“Rule
11”). For the reasons stated below, the Court DENIES Burgess’s Motion for
Sanctions and GRANTS AMEX’s Motion for Sanctions.
I.
FINDINGS OF FACT
{2} Burgess filed his Complaint on 13 February 2007.
{3} On 1 March 2007, Burgess amended his Complaint, and on 5 March 2007,
Burgess purported to amend his Complaint a second time.1
{4} In his Amended Complaint, Burgess alleges that Defendants AIS Network,
Inc. and Clickspring, LLC illegally placed programs on his computer that facilitated
the receipt of unwanted “pop-up” advertisements. (Am. Compl. ¶¶ 26–28, 46.) He
further alleges that AMEX and various other Defendants used these programs to
illegally place unwanted “pop-up” advertisements on his computer (Am. Compl. ¶¶
29–30, 32–33, 38–40, 49–50, 52, 55–56), and that these “pop-up” advertisements,
and the programs that facilitated them, have invaded and damaged his computer
(Am. Compl. ¶¶ 27, 34–36, 40, 49, 51).
{5} On 21 March 2007, AMEX filed a Notice of Designation of Action as
Mandatory Complex Business Case (the “Notice of Designation”) under section 7A–
45.4 of the North Carolina General Statutes.
{6} That same day, AMEX filed an offer of judgment pursuant to Rule 68(a) of
the North Carolina Rules of Civil Procedure allowing judgment to be had against it
for $1.00 “for all damages, attorneys’ fees taxable as costs, and the remaining costs
accrued at the time the Offer is filed.” (Offer of J. 2.)
{7} On 22 March 2007, the Chief Justice of the North Carolina Supreme Court
designated this matter a mandatory complex business case, and on 26 March 2007,
Judge Ben Tennille, the Chief Special Superior Court Judge for Complex Business
Cases, assigned this case to me.
{8} On 26 March 2007, Burgess filed an Opposition to Notice of Designation
pursuant to Business Court Rule 3.3.

1 On 14 May 2007, the Court entered an Order striking Burgess’s Second Amended Complaint for

failure to comply with Rule 15 of the North Carolina Rules of Civil Procedure. (Order, May 14,
2007.)
{9} On the same day that he filed his objection to litigating in the Business
Court, Burgess filed a Motion for Sanctions under Rule 11 alleging that AMEX filed
its offer of judgment and Notice of Designation frivolously and in bad faith. (See
Pl.’s Mot. Sanctions.)
{10} As to his Rule 11 Motion, Burgess alleges, among other things, that:
(1) AMEX and its counsel filed the $1.00 offer of judgment
“solely for purposes of extorting the Plaintiff into a ridiculous
settlement” (Pl.’s Mot. Sanctions 1);

(2) AMEX’s decision to remove the case to the North Carolina
Business Court was “totally unsupported by facts and not
supported by the frivolous pleading of counsel for [AMEX]”
and “[t]hat the motivation behind the Removal to Business
Court is to get the case in a Court in Charlotte where counsel
for [AMEX] resides and thereby prejudice the Plaintiff who
will then have to travel to a location outside his home” (Pl.’s
Mot. Sanctions 2); and

(3) “counsel for [AMEX] is trying to extort a settlement from the
Plaintiff in a perverted effort to impress his wealthy client
and fatten his own pocket by using devious and illegal
means” (Pl.’s Mot. Sanctions 2).

{11} On 4 April 2007, and again the next day, counsel for AMEX requested that
Burgess withdraw his Rule 11 Motion, but Burgess refused. (Pl.’s Reply Mot.
Sanctions Ex. C, D.)
{12} On 13 April 2007, AMEX filed a response to Burgess’s Motion for
Sanctions.
{13} That same day, AMEX filed a Motion for Sanctions against Burgess,
alleging that Burgess’s Motion for Sanctions violated Rule 11. (See Def.’s Mot. Rule
11 Sanctions.)
{14} On 17 April 2007, Judge Tennille entered an order overruling Burgess’s
objection to the Notice of Designation. (See Order, Apr. 17 2007.)
{15} On 19 April 2007, Burgess filed a response to AMEX’s Motion for
Sanctions.
{16} On 12 June 2007, the Court heard oral arguments on the cross-motions for
sanctions.

II.
CONCLUSIONS OF LAW
A.
RULE 11 STANDARD
{17} Rule 11 of the North Carolina Rules of Civil Procedure states:
Every pleading, motion, and other paper of a party represented by
an attorney shall be signed by at least one attorney of record in his
individual name, whose address shall be stated. A party who is not
represented by an attorney shall sign his pleading, motion, or other
paper and state his address. . . . The signature of an attorney or
party constitutes a certificate by him that he has read the pleading,
motion, or other paper; that to the best of his knowledge,
information, and belief formed after reasonable inquiry it is well
grounded in fact and is warranted by existing law or a good faith
argument for the extension, modification, or reversal of existing
law, and that it is not interposed for any improper purpose, such as
to harass or to cause unnecessary delay or needless increase in the
cost of litigation. . . . If a pleading, motion, or other paper is signed
in violation of this rule, the court, upon motion or upon its own
initiative, shall impose upon the person who signed it, a
represented party, or both, an appropriate sanction, which may
include an order to pay to the other party or parties the amount of
the reasonable expenses incurred because of the filing of the
pleading, motion, or other paper, including a reasonable attorney's
fee.

N.C. R. Civ. P. 11.
{18} In analyzing whether a pleading, motion, or other paper meets the first
certification requirement under Rule 11, the Court “must determine: ‘(1) whether
the [party] undertook a reasonable inquiry into the facts and (2) whether the
[party], after reviewing the results of his inquiry, reasonably believed that his
position was well grounded in fact.’” Kohler Co. v. McIvor, 177 N.C. App. 396, 402,
628 S.E.2d 817, 822 (2006) (quoting McClerin v. R-M Indus., Inc., 118 N.C. App.
640, 644, 456 S.E.2d 352, 355 (1995)).
{19} “In determining whether sanctions are warranted under the legal
sufficiency prong of the rule, the Court must first determine the facial plausibility of
the paper.” Mack v. Moore, 107 N.C. App. 87, 91, 418 S.E.2d 685, 688 (1992) (citing
Bryson v. Sullivan, 330 N.C. 644, 661, 412 S.E.2d 327, 336 (1992)).
{20} If the pleading, motion, or other paper is not facially plausible, “then the
second issue is (1) whether the alleged offender undertook a reasonable inquiry into
the law, and (2) whether, based upon the results of the inquiry, [the alleged
offender] formed a reasonable belief that the paper was warranted by existing law,
judged as of the time the paper was signed.” Id. “If the court answers either prong
of this second issue negatively, then Rule 11 sanctions are appropriate.” Id. (citing
Bryson, 330 N.C. at 661–62, 412 S.E.2d at 336).
{21} Even if a pleading, motion, or other paper is well grounded in fact or law,
however, “it may still violate Rule 11 if it is served or filed for an improper purpose.”
McIvor, 177 N.C. App. at 404, 628 S.E.2d at 823–24 (quoting Brooks v. Giesey, 334
N.C. 303, 315, 432 S.E.2d 339, 345–46 (1993)).
{22} Under Rule 11:

an objective standard is used to determine whether a paper has been
interposed for an improper purpose, with the burden on the movant to
prove such improper purpose. . . . In this regard, the relevant inquiry
is whether the existence of an improper purpose may be inferred from
the alleged offender’s objective behavior. . . . An improper purpose is
any purpose other than one to vindicate rights . . . or to put claims of
right to a proper test.

Mack, 107 N.C. App. at 93, 418 S.E.2d at 689 (internal quotations and citations
omitted).
{23} “[T]he Rule 11 movant’s subjective belief that a paper has been filed for an
improper purpose is immaterial in determining whether an alleged offender’s
conduct is sanctionable.” Id. (citing Taylor v. Taylor Prods., Inc., 105 N.C. App. 620,
632, 414 S.E.2d 568, 576–77 (1992)).
{24} Finally, the burden is on the movant to show an improper purpose, id., and
“[t]here must be a strong inference of improper purpose to support imposition of
sanctions.” Bass v. Sides, 120 N.C. App. 485, 488, 462 S.E.2d 838, 840 (1995) (citing
Mack, 107 N.C. App. at 93–94, 418 S.E.2d at 689).
B.
BURGESS’S MOTION FOR SANCTIONS
{25} Under Business Court Rule 15.2, “[a]ll motions, unless made orally during
a hearing or a trial, shall be in paper writing or electronic form and shall be
accompanied by a brief . . . .” BCR 15.2 (2006).
{26} Under Business Court Rule 15.11, a “motion unaccompanied by a brief
may, in the discretion of the Court, be summarily denied.” BCR 15.11 (2006).
{27} Because Burgess’s Motion for Sanctions was unaccompanied by a separate
brief, that is sufficient grounds to DENY it.
{28} Even considering the merits, Burgess’s Motion for Sanctions still fails.
{29} Burgess’s Motion attacks two papers filed by AMEX: (1) the $1.00 offer of
judgment filed pursuant to Rule 68 of the North Carolina Rules of Civil Procedure,
and (2) the Notice of Designation of this matter as a complex business case. The
Court discusses each of these in turn.
1.
AMEX’S OFFER OF JUDGMENT
{30} Rule 68 provides in relevant part:
At any time more than 10 days before the trial begins, a party
defending against a claim may serve upon the adverse party an
offer to allow judgment to be taken against him for the money or
property or to the effect specified in his offer, with costs then
accrued.

If within 10 days after the service of the offer the adverse party
serves written notice that the offer is accepted, either party may
then file the offer and notice of acceptance together with proof of
service thereof and thereupon the clerk shall enter judgment.

An offer not accepted within 10 days after its service shall be
deemed withdrawn and evidence of the offer is not admissible
except in a proceeding to determine costs.
If the judgment finally obtained by the offeree is not more favorable
than the offer, the offeree must pay the costs incurred after the
making of the offer.

N.C. R. Civ. P. 68(a).
{31} Rule 68 makes no attempt to define the contours of a valid offer of
judgment, other than to say that it must be for money, property, or in the case of
injunctive or other relief, “to the effect specified in [the] offer.” Id.
{32} Our Court of Appeals has made clear, however, that “[t]he purpose of Rule
68 is to encourage settlements and avoid protracted litigation.” Scallon v. Hooper,
58 N.C. App. 551, 554, 293 S.E.2d 843, 844 (1982); accord Aikens v. Ludlum, 113
N.C. App. 823, 824, 440 S.E.2d 319, 320 (1994).
{33} Viewed in that context, it is difficult to see how a $1.00 offer of judgment
tendered at the very inception of the litigation promotes the Rule’s purpose, given
that it has “little if any chance of seriously opening negotiations or of settling a
case.” Century 21 Today, Inc. v. Tarrant, No. 240696, 2003 Mich. App. LEXIS 2762,
at *2 (Mich. Ct. App. Oct. 28, 2003).
{34} Thus, I find that AMEX’s $1.00 offer of judgment was not intended to
promote a settlement but instead was a tactical maneuver intended to trigger the
cost-shifting mandate of Rule 68 in the event of a defense verdict.
{35} The question raised by Burgess’s Motion is whether this tactic is subject to
sanctions under North Carolina law. I conclude that it is not.
{36} The North Carolina cases shed no light on what constitutes a proper offer
of judgment for purposes of Rule 68, and I have found few cases from other
jurisdictions that address the issue. Perhaps this is because, while it may be simple
to determine the bona fides of an offer of judgment at the margins, it becomes a
subjective exercise when the offer lies somewhere within the extremes. See Warr v.
Williamson, 195 S.W.3d 903, 908 (Ark. 2004) (Imber, J., concurring) (asking
rhetorically whether a $200,000 offer of judgment would be a bona fide offer in a
case “where millions of dollars are at stake”).
{37} Moreover, that an offer of judgment may not be bona fide—in the sense
that it does not promote the purpose of Rule 68—does not mean that the offeror
should be subject to Rule 11 sanctions. After all, AMEX’s offer of judgment does
satisfy the literal requirement of Rule 68(a), even if the amount offered is only
$1.00.
{38} Further, a defendant who is convinced that a case lacks merit should not
be required to offer a substantial sum to obtain the benefit of the statute. See
O’Neil v. Wal-Mart Stores, Inc., 602 So. 2d 1342, 1344 (Fla. Dist. Ct. App. 1992)
(reversing award of attorneys fees to a defendant and remanding to trial court for
determination of whether $1.00 offer of settlement was “unreasonably rejected”
under Florida Rules of Civil Procedure).
{39} Whether AMEX would be entitled to recover its costs in this case pursuant
to Rule 68 remains an open question. See Warr, 195 S.W.3d at 907 (declining to
make such an award in the face of a $1.00 offer of judgment); Tarrant, 2003 Mich.
App. LEXIS 2762, at *2 (reaching the same result “in the interests of justice”); see
also Delta Airlines, Inc. v. August, 450 U.S. 346, 354 (1981) (holding that the plain
language of the federal version of Rule 68 exempts cases from its cost-shifting
mandate where a judgment is entered in favor of the defendant).
{40} What is clear is that the law in North Carolina regarding Rule 68 offers of
judgment is far from settled. As a result, I “cannot say that [AMEX’s offer of
judgment] was made for an improper purpose or that a reasonable inquiry into the
issue of what offer is required to trigger an award of costs under Rule 68 at the time
the offer was made would have shown that it was implausible.” Warr, 195 S.W.3d
at 908 (affirming trial court’s decision not to impose Rule 11 sanctions based on
defendant’s $1.00 offer of judgment).
{41} Accordingly, the Court DENIES Burgess’s Motion for Sanctions as to
AMEX’s offer of judgment.
2.
AMEX’S NOTICE OF DESIGNATION
{42} As to Burgess’s claim that AMEX’s Notice of Designation violates Rule 11,
my colleague Judge Ben Tennille overruled Burgess’s objection to removal of this
case to the North Carolina Business Court on 17 April 2007. In his order, Judge
Tennille stated:
The Complaint on its face raises issues involving Internet advertising.
That issue falls squarely within the definition of N.C. Gen. Stat. § 7A-
45.4(a)(6) which covers material issues related to the Internet and
electronic commerce. It also involves issues that would have
implications for use of the Internet by others, both consumers and
advertisers, who are not parties to this lawsuit.

(Order, Apr. 17, 2007.)
{43} I agree, and also note that this case is particularly suited to management
by a single judge given that Burgess originally sued twenty defendants.
{44} Accordingly, I find absolutely no merit in Burgess’s request for Rule 11
sanctions based on AMEX’s Notice of Designation.
C.
AMEX’S MOTION FOR SANCTIONS
{45} The Court reaches a different conclusion as to AMEX’s Motion for Rule 11
Sanctions.
{46} As noted earlier, Rule 11 imposes on an attorney or party a duty of
reasonable inquiry, both as to the facts and the law set out in the paper, and a
separate obligation not to file papers for an improper purpose. A breach of the
certification as to any one of these three prongs is a violation of the Rule. Bryson v.
Sullivan, 330 N.C. 644, 655, 412 S.E.2d 327, 332 (1992).
{47} As to that portion of Burgess’s Rule 11 Motion attacking AMEX’s offer of
judgment, I decline to enter sanctions.
{48} Burgess’s filings in this case are prone to hyperbole, and this particular
paper is no exception. For example, Burgess complains in his Motion that AMEX
and his counsel filed the $1.00 offer of judgment “solely for purposes of extorting the
Plaintiff into a ridiculous settlement” (Pl.’s Mot. Sanctions 1), and that counsel for
AMEX made the offer “in a perverted effort to impress his wealthy client and fatten
his own pocket by using devious and illegal means” (Pl.’s Mot. Sanctions 2).
{49} While a $1.00 offer of judgment does little to promote the purpose of Rule
68, the Court is hard-pressed to find anything perverse, devious, or illegal about it.
Moreover, it is difficult to fathom how AMEX’s offer of judgment could extort a
settlement, given that, by the plain terms of Rule 68, Burgess was free to ignore it
and prosecute his claim.
{50} Nevertheless, because I do not believe that a $1.00 offer of judgment
promotes the purpose of Rule 68, I do not fault Burgess for seeking sanctions on
that basis.
{51} I will, however, sanction Burgess for that portion of his Rule 11 Motion
targeted at AMEX’s Notice of Designation.
{52} I find that Burgess undertook no reasonable inquiry as to the relevant
facts on this issue. In his Motion, Burgess argues that AMEX’s “motivation behind
the Removal to Business Court is to get the case in a Court in Charlotte where
counsel for American Express resides and thereby prejudice the Plaintiff who will
then have to travel to a location outside his home.” (Pl.’s Mot. Sanctions 2.)
{53} But, had Burgess made any reasonable inquiry into the matter before
filing his Motion, he would have discovered that the Court’s policy is to hear all
pretrial and trial proceedings in a mandatory complex business case in the county
where the case originates unless the parties agree otherwise. 2 See The NC
Business Court Frequently Asked Questions, http://www.ncbusinesscourt.net/FAQ/
business_court_frequently_asked_.htm (last visited June 19, 2007) (“It has
consistently been the policy of the [North Carolina Business] Court to try each case

2 Because the Polk County courthouse is closed for renovations, the Court heard these matters in

Henderson County pursuant to Rule 7(b)(4) of the North Carolina Rules of Civil Procedure, which
provides that “[a] motion in a civil action filed with the superior court clerk of a county that is in a
superior court district consisting of more than one county . . . may be heard in any county in that
superior court district.”
in the county in which it is filed unless there are other standard reasons for a
change of venue.”)
{54} I also conclude that Burgess filed his Rule 11 Motion as to the Notice of
Designation for an improper purpose. As I have already discussed, on its face, the
Notice of Designation satisfies the requirements of section 7A–45.4 of the North
Carolina General Statutes for mandatory designation of complex business cases.
That same statute provides a remedy for a party who objects to designation of a case
as mandatory complex business. N.C. Gen. Stat. § 7A–45.4(e) (2005).
{55} Here, Burgess pursued his remedy, but instead of waiting for a decision on
his objection to the Notice of Designation, he filed a separate Rule 11 Motion on the
same day.
{56} I also note that AMEX’s counsel twice asked Burgess to withdraw his Rule
11 motion, but Burgess refused to do so. (Pl.’s Reply Mot. Sanctions Ex. C, D.)
{57} Chief Judge Tennille overruled Burgess’s objection to the Notice of
Designation on 17 April 2007. (See Order, Apr. 17, 2007.) Burgess did not appeal
that ruling to the Chief Justice of the North Carolina Supreme Court, as was his
right. See N.C. Gen. Stat. § 7A–45.4(e). Yet, his Rule 11 Motion remains pending
before this Court. Cf. McIvor, 177 N.C. App. at 405, 628 S.E.2d at 824 (holding that
employee did not show that an action commenced to enforce a non-compete
agreement was filed for an improper purpose because the employer dismissed its
claims within a reasonable time after the employee left his job with the competitor).
{58} “An improper purpose [under Rule 11] is ‘any purpose other than one to
vindicate rights . . . or to put claims of right to a proper test.’” Brown v. Hurley, 124
N.C. App. 377, 382, 477 S.E.2d 234, 238 (1996) (quoting Mack, 107 N.C. App. at 93,
418 S.E.2d at 689).
{59} In this case, Burgess put AMEX’s Notice of Designation to the proper test
through the procedure set out in section 7A–45.4(e) of the North Carolina General
Statutes. Viewed objectively, however, I can conceive of no proper purpose to be
served by Burgess’s filing of a separate Rule 11 Motion on the same issue. I find
instead that Burgess’s purpose was to harass AMEX, unnecessarily delay these
proceedings, and needlessly increase the cost of litigation.
{60} Accordingly, the Court will award AMEX sanctions. I direct AMEX to file
an affidavit of its reasonable fees and expenses incurred in responding to that part
of Burgess’s Motion related to the Notice of Designation. AMEX shall file its
affidavit within ten (10) days of the entry of this Order. Burgess shall have ten (10)
days from the date of service to file a response. Any reply by AMEX shall be filed
within five (5) days of the service of Burgess’s response.
{61} Finally, I recognize that Burgess appears in this case pro se. Rule 11,
however, “does not exempt pro se litigants from its operation; a pro se litigant has
the same duties under [the Rule] as an attorney.” In re Weiss, 111 F.3d 1159, 1171
(4th Cir. 1997) (applying federal bankruptcy version of Rule 11).
{62} The Court will, however, consider Burgess’s pro se status in fashioning an
appropriate sanction in this case. See Blue v. U.S. Dep’t of Army, 914 F.2d 525, 546
(4th Cir. 1990) (stating that trial court may “reflect upon equitable considerations in
determining the amount of the sanction”).

III.
CONCLUSION
{63} For the reasons stated above, the Court DENIES Burgess’s Motion for
Sanctions and GRANTS AMEX’s Motion for Sanctions.

SO ORDERED, this the 29th day of June, 2007.