                     IN THE COURT OF APPEALS OF NORTH CAROLINA

                                              No. COA16-1122

                                           Filed: 1 August 2017

Cumberland County, No. 06 CVS 6091

MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN; GLENN
B. ADAMS; HAROLD L. BOUGHMAN, JR. and VICKIE L. BURGE, Plaintiffs,

                    v.

COY E. BREWER, JR., RONNIE A. MITCHELL, WILLIAM O. RICHARDSON, and
CHARLES BRITTAIN, Defendants.1


          Appeal by defendants from orders entered 26 February 2013, 18 September

2015, and 19 February 2016 by Judge John R. Jolly, Jr. in Cumberland County

Superior Court. Heard in the Court of Appeals 2 May 2017.


          Everett Gaskins Hancock LLP, by E.D. Gaskins, Jr., James M. Hash and Fiona
          K. Steer, for plaintiffs-appellees.

          Ronnie M. Mitchell and Coy E. Brewer, Jr., pro se, for defendants-appellants.


          DAVIS, Judge.


          This appeal involves a number of issues surrounding the break-up of the

Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC law firm. Upon

remand of the case following our resolution of the parties’ initial appeal, the trial

court dissolved the law firm and appointed a referee to conduct an accounting and


          1   Richardson and Brittain have settled their disputes with Plaintiffs and are not parties to this
appeal.
      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                       Opinion of the Court



distribution. Ronnie M. Mitchell2 and Coy E. Brewer, Jr. (collectively “Defendants”)

now appeal from the trial court’s orders appointing a referee, adopting the report of

the referee, and granting the motion for summary judgment of Glenn B. Adams,

Harold L. Boughman, Jr., and Vickie L. Burge (collectively “Plaintiffs”) as to

Defendants’ remaining counterclaims. We affirm each of the trial court’s orders.

                         Factual and Procedural Background

       The full factual background relating to the break-up of the firm is set out in

our prior opinion. See Mitchell, Brewer, Richardson, Adams, Burge & Boughman,

PLLC v. Brewer, 209 N.C. App. 369, 705 S.E.2d 757 (hereinafter “Mitchell I”), disc.

review denied, 365 N.C. 188, 707 S.E.2d 243 (2011). Accordingly, we only discuss

below those facts relevant to the present appeal.

       This lawsuit arose out of a dispute between the members of the Mitchell,

Brewer, Richardson, Adams, Burge & Boughman, PLLC law firm, which resulted in

the firm breaking up in the summer of 2005.3 Plaintiffs subsequently formed a new

firm called Adams, Burge & Boughman, PLLC (“AB&B”), while Brewer, Mitchell,

William O. Richardson, and Charles Brittain continued to practice law together as

Mitchell, Brewer, Richardson.            In the aftermath of the break-up, numerous




       2 The complaint and the captions of the trial court’s orders incorrectly identify Mitchell as
“Ronnie A. Mitchell” rather than “Ronnie M. Mitchell.”

       3  For purposes of clarity, in this opinion we refer to the firm that existed at the time of
dissolution — Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC — as “the PLLC.”

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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court



disagreements arose between the parties regarding the ownership of certain PLLC

assets — including future profits from unresolved contingent fee cases brought into

the PLLC before the break-up.

      On 5 July 2006, Plaintiffs filed the present lawsuit in Cumberland County

Superior Court against Brewer, Mitchell, Richardson, and Brittain in which they

asserted claims for (1) an accounting to the PLLC; (2) an accounting to Plaintiffs; (3)

a “liquidating distribution”; (4) constructive fraud and breach of fiduciary duty; and

(5) unfair and deceptive trade practices. In connection with these claims, Plaintiffs

sought a judicial dissolution and winding up of the PLLC. Plaintiffs asserted these

claims both individually and derivatively on behalf of the PLLC.             Plaintiffs

subsequently amended their complaint on 1 August 2006, 23 May 2007, and 17

February 2009.

      The lawsuit was designated a complex business case pursuant to N.C. Gen.

Stat. § 7A-45.4 and assigned to the Honorable John R. Jolly, Jr. of the North Carolina

Business Court.    On 1 November 2006, Defendants moved to dismiss Plaintiffs’

complaint, and the trial court denied the motion by order entered on 8 May 2007.

Defendants subsequently filed an answer on 13 June 2007, raising multiple defenses

and asserting the following counterclaims: (1) a request for a declaratory judgment

that Plaintiffs “voluntarily and unilaterally withdrew” from the PLLC; (2) a

declaratory judgment that Plaintiffs were equitably estopped from denying that they



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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                      Opinion of the Court



had agreed to a dissolution of the PLLC pursuant to the terms of a memorandum

drafted by Brewer; (3) breach of fiduciary duty in connection with Plaintiffs’ misuse

of PLLC assets, failure to meet financial obligations of the PLLC, and failure to

account   for   fees   generated   through       PLLC        business;   (4)   conversion   and

misappropriation of PLLC assets; (5) unjust enrichment for failure to account to the

PLLC; (6) a request for imposition of a constructive trust, equitable lien, or resulting

trust; (7) breach of fiduciary duty in connection with “the defense of [a] malpractice

action[;]” (8) unjust enrichment in connection with “the defense of [a] malpractice

action[;]” (9) breach of fiduciary duty based on ultra vires acts; and (10) a request for

a statutory distribution of assets.

      On 9 January 2008, the parties each filed motions for partial summary

judgment. Plaintiffs’ motion requested judicial dissolution of the PLLC and dismissal

of Defendants’ counterclaims that were “predicated on the proposition that no such

dissolution occurred.”     Defendants’ motion requested an order declaring that

Plaintiffs had “withdrawn” from the PLLC as opposed to there having been a

dissolution of the firm. On 15 August 2008, Defendants filed a second motion for

summary judgment as to all of Plaintiffs’ claims on the grounds that the PLLC lacked

standing to bring this action on its own behalf and the individual plaintiffs lacked

standing to bring this action derivatively on behalf of the PLLC.




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      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                       Opinion of the Court



       The trial court issued an order on 31 March 2009 ruling, in part, that Plaintiffs

were equitably estopped from denying that they had withdrawn from the PLLC.

Therefore, the court held, all of the parties’ claims would be evaluated in the context

of a withdrawal by Plaintiffs from the PLLC rather than a dissolution of the PLLC.

Mitchell I, 209 N.C. App. at 375-76, 705 S.E.2d at 762-63. All of the parties appealed

to this Court from the trial court’s order.

       In Mitchell I, we affirmed in part the trial court’s order, reversed in part, and

remanded for further proceedings. With respect to the issue of standing, we held that

Plaintiffs possessed standing under N.C. Gen. Stat. § 57C-8-01(a) to assert derivative

claims on behalf of the PLLC. Id. at 382-87, 705 S.E.2d at 767-70. We further ruled

that because “withdrawal pursuant to N.C. Gen. Stat. § 57C-5-06 was not available

as a remedy at law for the parties[,]” the dismissal of Defendants’ counterclaims

premised upon an alleged withdrawal by Plaintiffs was proper. Id. at 390, 705 S.E.2d

at 772. We also held that pursuant to N.C. Gen. Stat. § 57C-6-02 dissolution of the

PLLC was necessary because there was a deadlock in its management. Id. at 390-91,

705 S.E.2d at 772.4



       4  We also rejected Defendants’ allegation in Counterclaim Two that a memorandum drafted
by Brewer (the “Brewer Memorandum”) and provided to Plaintiffs on 8 July 2005 set forth the terms
governing a dissolution of the PLLC. The Brewer Memorandum had sought to lay out the terms that
would apply to the PLLC’s break-up, including the distribution of certain PLLC assets and the
handling of PLLC liabilities. In Mitchell I, we determined that Counterclaim Two failed because,
among other reasons, there was no “indication that the plaintiffs expressly assented to the terms as
proposed by defendants” in the Brewer Memorandum. Id. at 386, 705 S.E.2d at 769 (quotation marks
omitted).

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      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court



      With respect to dissolution and the need for a liquidation and distribution, we

explained as follows:

             Here, since 14 June 2005, there has been a deadlock
             between the PLLC members as a result of their
             disagreement regarding division of profits derived from
             pending contingent fee cases when three members of the
             PLLC left the PLLC, and plaintiffs and defendants began
             practicing separate and apart beginning on 1 July 2005.
             Although there were communications between plaintiffs
             and defendants addressing the assets of the PLLC, none
             resolved this deadlock. Because the three plaintiffs were no
             longer willing to practice with defendants, the PLLC could
             “no longer be conducted to the advantage of the members
             generally[.]” See [N.C. Gen. Stat. § 57C-6-02]. Liquidation
             of the PLLC’s assets “is reasonably necessary for the
             protection of the rights or interests of the complaining
             member[s]” as the PLLC’s members have been unable to
             reach any agreement regarding profits from the disputed
             pending contingent fee cases. See id. Also, there is evidence
             that profits made by defendants since the deadlock from
             one of the disputed contingent fee cases were not
             distributed to the members or accounted for by defendants.
             Therefore, there is a potential that the PLLC’s assets are
             being misapplied. Accordingly, plaintiffs have forecast
             facts which would permit judicial dissolution pursuant to
             N.C. Gen. Stat. § 57C-6-02. As defendants had “a full and
             complete remedy at law[,]” the business court erred in not
             applying this legal remedy and instead applying the
             principles of equity to resolve the issues arising from this
             breakup.

Id.

      Thus, we determined that “because the business court improperly applied

equitable estoppel in this situation, it abused its discretion by not ordering judicial

dissolution of the PLLC.” Id. at 392, 705 S.E.2d at 773. We then concluded as follows:


                                         -6-
     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court



                    Accordingly, we reverse the business court’s
             judgment granting partial summary judgment in favor of
             defendants on the basis of equitable estoppel and remand
             to the business court for [the] granting of summary
             judgment in favor of plaintiffs on the issue of judicial
             dissolution pursuant [to] N.C. Gen. Stat. § 57C-6-02, for a
             decree of dissolution, and directing the winding up of the
             PLLC pursuant to N.C. Gen. Stat. § 57C-6-02.3 (2007).
             Given this ruling, plaintiffs’ derivative claims for an
             accounting to the PLLC (claim one), an accounting to
             plaintiffs (claim two), and a demand of liquidating
             distribution (claim three), as well as defendants’
             counterclaim for a demand for statutory distribution of
             assets (counterclaim ten), will be addressed by the business
             court in its directing the winding up of the PLLC.

Id. at 393, 705 S.E.2d at 773. Finally, we reversed the trial court’s dismissal of

Plaintiffs’ Claims Four and Five and Defendants’ Counterclaims Three through Six

and Nine on the ground that the trial court had dismissed those claims based upon

its incorrect determination that a withdrawal had occurred. Id. at 393, 705 S.E.2d at

773-74.

      Upon remand, the trial court held a hearing on 17 August 2012 in order to

consider the parties’ arguments regarding the potential appointment of a referee to

oversee accounting and distribution issues in connection with the dissolution of the

PLLC. Prior to the hearing, the parties submitted briefs setting forth their respective

positions regarding the appointment of a referee and the methodology that should be

employed in valuing disputed contingent fee engagements.




                                         -7-
      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                        Opinion of the Court



       On 26 February 2013, the trial court issued an “Opinion and Order Dissolving

Company and Appointing Special Master” (the “Reference Order”).5 In this order, the

court entered a decree of dissolution retroactively dissolving the PLLC as of 1 July

2005 (the “Dissolution Date”). The trial court noted that “[t]he parties agree that a

dissolution of the [PLLC] is required, as well as an accounting and distribution of its

assets” but that “[t]he parties dispute various aspects of the financial and accounting

records of the [PLLC] and the amounts owed by and to the respective parties.” The

court observed that “[a] primary point of contention between the parties is the

appropriate accounting method for profits derived from the contingent-fee

engagements that the [PLLC] entered into prior to dissolution but were resolved post-

dissolution by Defendants (‘Contingent Fee Engagements’).” The court stated that

               [t]he difficulty in liquidating contingent-fee engagements
               by conventional means leads inevitably to the conclusion
               that the only way in which they may be converted to value
               following dissolution is by pursuing them to resolution.
               Further, it is unrealistic to suppose that all former
               members will collaborate in order to resolve contingent-fee
               engagements following dissolution. As is often the case in
               a law-firm setting, only a few of the members, perhaps only
               one, will have been involved personally in the engagement
               prior to dissolution and possess an adequate familiarity
               with the client and the subject matter of the litigation to
               proceed with representation following dissolution.
               Therefore, the task of pursuing such engagements
               following dissolution is likely to fall to those members who
               pursued the engagements prior to dissolution, usually at

       5 The parties and the trial court use the terms “referee” and “special master” interchangeably.
For the sake of consistency, we will use the term “referee” as that is the term used in Rule 53 of the
North Carolina Rules of Civil Procedure.

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MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                           Opinion of the Court



      the affirmative direction of the client. Practically, this
      means that following dissolution an individual member or
      members will pursue the engagements using individual
      effort and skill without collaboration with former
      members.

The trial court then concluded that

      the appropriate measure of the value of the Contingent Fee
      Engagements to the [PLLC] is the reasonable value of the
      services provided by or in behalf of the [PLLC] up to the
      date of dissolution. Under the present circumstances, the
      best means by which to measure the reasonable value of
      pre-dissolution services is to determine (a) the total
      attorney hours (“Time”) expended on a particular
      Contingent Fee Engagement, both prior to and after
      dissolution, (b) the percentage of Time that was expended
      prior to dissolution and (c) the net profit ultimately
      realized from the Contingent Fee Engagement. The
      reasonable asset value to the [PLLC] of each such matter
      would be determined by the percentage of pre-dissolution
      Time expended relative to the net profit ultimately realized
      on that matter. As an example, if a total of 100 attorney
      hours were expended on a particular Contingent Fee
      Engagement and 50 of those hours were performed prior to
      dissolution, the net fee ultimately received by Defendants
      should be shared 50/50 with Plaintiffs. This method, as
      opposed to others, best accounts for the risk borne by the
      [PLLC] in initially taking on the Contingent Fee
      Engagements and also reflects the parties’ expectations at
      the time they entered into the Contingent Fee
      Engagements.

             The court therefore will direct the winding up of the
      [PLLC] in accordance with the findings and conclusions
      above. In doing so, the court observes that the reasoning
      relative to liquidation and sharing between the [PLLC] and
      Defendants of ultimate profits from Contingent Fee
      Engagements ordinarily also would hold true for any
      professional engagements (“Other Engagements”) initially


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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                    Opinion of the Court



             undertaken by the [PLLC] but completed and billed for
             post-dissolution by Defendants. This Opinion and Order is
             intended to encompass such Other Engagements.

(Footnote omitted.)

      The trial court proceeded to determine that the appointment of a referee “to

conduct an accounting of the [PLLC] as to the Contingent Fee Engagements and any

Other Engagements . . . will be in the best interest of the parties.” Accordingly, the

trial court ordered as follows:

                    [31] The [PLLC] is DISSOLVED, pursuant to G.S.
             57C-6-02. The dissolution of the [PLLC] shall be effective
             as of July 1, 2005 (“Dissolution Date”).

                   [32] The court appoints Craig A. Adams, CPA, as
             Special Master, pursuant to Rule 53. . . .

                    [33] In   undertaking     and    performing     this
             engagement, the Special Master is authorized to engage
             the professional services of other members of his
             accounting firm, at their customary and usual hourly rates,
             as he reasonably determines are needed.

                    [34] The Special Master shall take an account of the
             [PLLC] and the Defendants, consistent with the provisions
             of this Opinion and Order, and shall:

                           (a) Take control of and secure the financial
                      records, or appropriate copies thereof, of the [PLLC];

                           (b) Secure the financial records, or appropriate
                      copies thereof, of the Defendants, as they relate to
                      the Contingent Fee Engagements or any Other
                      Engagements;

                           (c) Assess the state of the financial records of


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MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                          Opinion of the Court



            the [PLLC];

                 (d) Assess the state of the financial records of
            the Defendants as they relate to the Contingent Fee
            Engagements or any Other Engagements;

                 (e) Direct and assist in the preparation of
            financial statements that state the financial
            condition of the [PLLC] with reasonable accuracy;

                  (f) Investigate and report to the court the
            nature and extent of the outstanding assets and
            liabilities of the [PLLC];

                 (g) If there are [PLLC] assets subject to
            distribution under G.S. 57C-6-05, determine and
            recommend to the court the amount in which those
            assets should be distributed to the [PLLC] using
            generally accepted accounting principles and the
            protocols established in this Opinion and Order;

                  (h) With regard to any [PLLC] assets available
            for distribution, determine and recommend to the
            court the manner and proportions of such
            distributions to the various members of the [PLLC]
            as of the date of dissolution; and

                 (i) The [PLLC] shall submit to the Special
            Master records of all attorney billable hours
            expended prior to the Dissolution Date on any
            matter pending as of the Dissolution Date. This
            record shall indicate the number of total billable
            hours attributable to the Contingent Fee
            Engagements or any Other Engagements.
            Defendants shall submit to the Special Master a
            record of all attorney hours expended on the
            Contingent Fee Engagements or any Other
            Engagements.

            [35] All parties to this civil action shall cooperate


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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court



             fully with the Special Master in the performance of his
             duties.

                    [36] The Special Master shall report his finding to
             the court as soon as practicable and may request from the
             parties or the court any further information, authority,
             direction or actions he might need from the court or parties
             in order to perform the duties reflected in this Opinion and
             Order.

                   ....

                   [38] All parties to this civil action are directed to
             cooperate with the Special Master and provide any and all
             financial information and records he might request.

                   [39] During [the] pendency of this civil action or
             unless otherwise ordered, all parties are directed not to
             destroy, remove, alter or obscure any of the financial or
             otherwise relevant records of the [PLLC].

      None of the parties filed objections to the Reference Order or to the

appointment of the Referee as provided for therein. The trial court subsequently

issued an order on 14 June 2013 providing additional specificity regarding the

materials that the parties were required to make available to the Referee. During

the course of the accounting process, the Referee conducted ex parte interviews with

the parties in order to better understand the records that had been submitted to him.

On 24 October 2014, after the Referee had completed his report but before it was filed

with the trial court, the parties were allowed to depose Sarah Armstrong — senior

manager for the Referee’s accounting firm and the report’s principal author —

regarding the accounting process and methodology that had been used.


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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                        Opinion of the Court



      The Referee subsequently filed his report (the “Referee’s Report”) with the trial

court on 13 February 2015. The report had “three primary areas of focus: profit

allocation percentages; restoration of negative capital accounts; and allocation of

contingent fees.” After explaining its determinations with respect to each of these

issues, the Referee ultimately concluded that Defendants owed a total of $358,000 to

Plaintiffs — specifically, $109,000 to Adams, $96,000 to Boughman, and $153,000 to

Burge.

      On 13 March 2015, Brewer, Mitchell, and Brittain filed “Exceptions and

Objections Regarding Report of Special Master.” Among other things, they argued

that the trial court’s prior orders related to the Referee “did not and do not clearly

define the methodology to be employed and the scope of the responsibilities and

powers of the appointed referee or special master.” They also requested that certain

findings in the Referee’s Report be submitted to a jury.

      Plaintiffs subsequently filed a motion requesting that the trial court adopt the

Referee’s Report. Following a hearing on 8 May 2015, the trial court issued its

“Opinion, Order and Judgment” (the “Adoption Order”) on 18 September 2015

granting Plaintiffs’ motion to adopt the Referee’s Report and rejecting the objections

raised by Brewer, Mitchell, and Brittain.6




      6   By the time the Adoption Order was filed, only Mitchell and Brewer remained as defendants.

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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court



      In the Adoption Order, the trial court determined that by failing to object at

the time the Reference Order was issued, Defendants had waived their right to (1)

demand a jury trial on contested issues addressed in the Reference Order; and (2)

argue that the Reference Order failed to clearly define the methodology to be

employed by the Referee and the scope of his responsibilities and powers. The court

also rejected Defendants’ various exceptions to the substantive findings of the report.

      The trial court ultimately concluded that “the Referee’s Report complies with

the Reference Order, is supported by competent evidence and that the conclusions

reached in the Referee’s Report are supported by the facts found.” Accordingly, the

trial court adopted the Referee’s Report “in its entirety as constituting the findings

and conclusions of the court” and entered judgments against Defendants in the

amount of $102,578 each.

      The trial court then explained that its ruling did “not constitute a final

disposition of this civil action, as there remain unresolved claims and counterclaims.”

The court therefore ordered the parties to file by 12 October 2015 any dispositive

motions related to those unresolved claims — namely, Plaintiffs’ Claims Four and

Five and Defendants’ Counterclaims Three through Nine.

      On that date, Plaintiffs filed a motion for summary judgment as to Defendants’

remaining counterclaims.     In support of this motion, Plaintiffs relied upon our

decision in Mitchell I as well as the trial court’s Adoption Order and the Referee’s



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      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                        Opinion of the Court



Report. Defendants submitted affidavits from Mitchell and Brewer in opposition to

Plaintiffs’ motion and also filed a cross-motion for summary judgment as to Plaintiffs’

claims for fraud and breach of fiduciary duty (Claim Four) and unfair and deceptive

trade practices (Claim Five). On 9 December 2015, Plaintiffs voluntarily dismissed

Claims Four and Five, thereby mooting Defendants’ summary judgment motion.

         On 19 February 2016, the trial court issued an “Order and Opinion” (the “Final

Order”) granting Plaintiffs’ motion for summary judgment and dismissing all of

Defendants’ remaining counterclaims. Defendants filed a timely notice of appeal to

this Court as to the Reference Order, the Adoption Order, and the Final Order.

                                             Analysis

         Defendants’ arguments on appeal fall into two main categories: (1) challenges

related to the appointment of the Referee, the accounting process utilized by the

Referee, and the trial court’s adoption of the Referee’s Report; and (2) challenges to

the trial court’s entry of summary judgment in Plaintiffs’ favor on Defendants’

Counterclaims Three through Six and Nine.7 We address each set of arguments in

turn.8



         7Defendants do not appeal the trial court’s dismissal of Counterclaims Seven and Eight, which
the court dismissed because Defendants’ brief in opposition to Plaintiffs’ motion for summary judgment
neither addressed them nor pointed to evidence that would create a genuine issue of material fact as
to them.

         8Defendants do not raise on appeal any of the substantive exceptions that they asserted below
to the findings in the Referee’s Report. Accordingly, those exceptions are waived. See N.C. R. App. P.



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      MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                          Opinion of the Court



I. Issues Related to Referee’s Report

        In addition to challenging the initial decision to appoint a referee, Defendants

also argue on appeal that the trial court “failed to define clearly the methodology to

be employed and the scope of the responsibilities and powers of the appointed

referee . . . or the means for consideration of the issues in the case.” Relatedly, they

challenge the manner in which the Referee conducted the accounting, including his

decisions not to place interviewees under oath or to compile transcripts of their

interviews as well as his use of ex parte communications with the various parties.

        In order to assess these arguments, we begin with an overview of the procedure

by which a trial court may refer matters to a referee. Pursuant to Rule 53 of the

North Carolina Rules of Civil Procedure, “(1) upon consent of the parties, (2) upon

application of one of the parties, or (3) upon its own motion, a trial court may order

that a referee determine issues of fact raised by the pleadings and evidence.” Rushing

v. Aldridge, 214 N.C. App. 23, 24, 713 S.E.2d 566, 568 (2011) (citation omitted). If

one of the parties does not consent, the court may order a reference in the following

instances:

                   a. Where the trial of an issue requires the examination
              of a long or complicated account; in which case the referee
              may be directed to hear and decide the whole issue, or to
              report upon any specific question of fact involved therein.

28(b)(6) (“Issues not presented in a party’s brief, or in support of which no reason or argument is stated,
will be taken as abandoned.”); Larsen v. Black Diamond French Truffles, Inc., 241 N.C. App. 74, 79,
772 S.E.2d 93, 96 (2015) (“[U]nder Rule 28(b)(6) of the North Carolina Rules of Appellate Procedure,
where a party fails to assert a claim in its principal brief, it abandons that issue . . . .”).

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     MITCHELL, BREWER, RICHARDSON, ADAMS, BURGE & BOUGHMAN V. BREWER

                                  Opinion of the Court




                 b. Where the taking of an account is necessary for the
            information of the court before judgment, or for carrying a
            judgment or order into effect.

                c. Where the case involves a complicated question of
            boundary, or requires a personal view of the premises.

                 d. Where a question of fact arises outside the
            pleadings, upon motion or otherwise, at any stage of the
            action.

N.C. R. Civ. P. 53(a)(2).

      A trial court’s decision to order a “compulsory reference in an action which the

court has authority to refer is a matter within the sound discretion of the court.”

Dockery v. Hocutt, 357 N.C. 210, 215, 581 S.E.2d 431, 434 (2003). When a reference

is made, “[t]he duty and powers of the referee are not inherent but are determined by

the order of the judge.” Godwin v. Clark, Godwin, Harris & Li, P.A., 40 N.C. App.

710, 713, 253 S.E.2d 598, 601 (citation omitted), appeal dismissed, 297 N.C. 698, 259

S.E.2d 295 (1979).

      After gathering the relevant facts, “[t]he referee shall prepare a report upon

the matters submitted to him by the order of reference and shall include therein his

decision on all matters so submitted.” N.C. R. Civ. P. 53(g)(1). After hearing any

exceptions to the referee’s report lodged by the parties, the court “may adopt, modify

or reject the report in whole or in part, render judgment, or may remand the

proceedings to the referee with instructions.” N.C. R. Civ. P. 53(g)(2).



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                                          Opinion of the Court



        If a reference is compulsory, a party may preserve its right to a jury trial on

issues decided by the referee by taking each of the following steps:

                   a. Objecting to the order of compulsory reference at the
              time it is made, and

                   b. By filing specific exceptions to particular findings of
              fact made by the referee within 30 days after the referee files
              his report with the clerk of the court in which the action is
              pending, and

                   c. By formulating appropriate issues based upon the
              exceptions taken and demanding a jury trial upon such
              issues. Such issues shall be tendered at the same time the
              exceptions to the referee’s report are filed. If there is a trial
              by jury upon any issue referred, the trial shall be only upon
              the evidence taken before the referee.

N.C. R. Civ. P. 53(b)(2) (emphasis added). If these requirements are satisfied, “[t]he

objecting party will then be entitled to a jury trial on the specified issues unless the

evidence presented to the referee would entitle one of the parties to a directed

verdict.” Rushing, 214 N.C. App. at 26, 713 S.E.2d at 569 (citation omitted).

        As an initial matter, Defendants have not preserved their right to have a jury

decide any matters determined by the Referee as they failed to “[o]bject[ ] to the order

of compulsory reference at the time it [was] made[.]”9 N.C. R. Civ. P. 53(b)(2)(a); see

also Gaynor v. Melvin, 155 N.C. App. 618, 621, 573 S.E.2d 763, 765 (2002) (“In order



        9 Defendants point to a footnote contained in Mitchell’s 15 August 2012 submission to the trial
court — over six months before the 26 February 2013 Reference Order was issued — stating that he
did “not desire or consent to the entry of an order of reference . . . .” We do not believe, however, that
this preliminary objection to the potential appointment of a referee satisfied Rule 53 as it was not
raised at the time the reference was made as required by Rule 53(b)(2)(a).

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to preserve the right to a jury trial where a compulsory reference has been ordered, a

party must, among other things, object to the order of reference at the time it is

made.”).

      Our decision in Godwin is instructive in addressing Defendants’ arguments —

both procedurally and substantively. In Godwin, the plaintiff contended on appeal

that “the trial court and referee did not comply with the terms of Rule 53 in that [the]

referee did not conduct hearings, examine witnesses under oath, admit exhibits into

evidence, prepare a record, make definite findings of fact and conduct an audit before

making the valuation.” Godwin, 40 N.C. App. at 713-14, 253 S.E.2d at 601. This

Court rejected these contentions on several grounds. With regard to the plaintiff’s

substantive arguments, we held that “[n]one of these procedures are required under

the statute” and noted that “[t]he trial court order did not require any of these

procedures.” Id. at 714, 253 S.E.2d at 601.

      With regard to the issue of whether the plaintiff had properly preserved its

right to challenge the procedures set forth in the reference order, we stated that “[a]t

the time the order for a compulsory reference was entered, plaintiff did not object to

the contents of the order. Plaintiff cannot now complain.” Id. Similarly, we noted

that “[d]uring the proceedings before the referee, plaintiff did not object at any time

to the procedures used.” Id.




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                                        Opinion of the Court



       Here, we similarly reject as untimely Defendants’ challenges to the scope of

the Reference Order or the manner in which the Referee carried out his duties. At

no point during the two years between the issuance of the Reference Order and the

filing of the Referee’s Report did Defendants formally object to the scope of the

Reference Order or the process by which the Referee was conducting the accounting.

The first time Defendants raised any such objections on the record was on 13 March

2015 in their Exceptions and Objections Regarding Report of Special Master.

       It is important to note that Defendants do not contend that they were unaware

of how the Referee was conducting the accounting while the process was ongoing.

Nevertheless, they waited until after the Referee’s Report was issued to object to the

procedures utilized by the Referee.10 Accordingly, Defendants’ challenges to the scope

of the Reference Order and the procedures employed by the Referee have been

waived.

       Moreover, Defendants’ arguments fail substantively as well. Our holding in

Godwin demonstrates that Rule 53 provides few hard-and-fast rules governing the

manner in which an accounting must be conducted as well as the fact that trial courts

possess broad discretion in determining how a referee is to fulfill his duties:

               Plaintiff maintains that the trial court and referee did not
               comply with the terms of Rule 53 in that [the] referee did
               not conduct hearings, examine witnesses under oath,

       10  In addition, we observe that some of Defendants’ specific arguments on appeal — such as
those relating to the Referee’s use of ex parte communications and the lack of interview transcripts —
were not even raised in their Exceptions and Objections Regarding Report of Special Master.

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                                         Opinion of the Court



               admit exhibits into evidence, prepare a record, make
               definite findings of fact and conduct an audit before making
               the valuation. None of these procedures are required under
               the statute. The trial court order did not require any of these
               procedures.

Godwin, 40 N.C. App. at 713-14, 253 S.E.2d at 601 (emphasis added).

       Moreover, Rule 53 provides that a referee conducting an accounting has

significant discretion regarding how he obtains financial information:

               When matters of accounting are in issue before the referee,
               he may prescribe the form in which the accounts shall be
               submitted . . . . [U]pon a showing that the form of statement
               is insufficient, the referee may require a different form of
               statement to be furnished, or the accounts of specific items
               thereof to be proved by oral examination of the accounting
               parties or upon written interrogatories or in such other
               manner as he directs.

N.C. R. Civ. P. 53(f)(2).11

       We are not persuaded by Defendants’ citation to Synco, Inc. v. Headen, 47 N.C.

App. 109, 266 S.E.2d 715, disc. review denied, 301 N.C. 238, 283 S.E.2d 135 (1980),

to support their argument that the Referee’s failure to require sworn testimony and

produce transcripts of his interviews was improper.                   In Synco, the trial court

appointed a referee to resolve a lawsuit involving a large number of individual

transactions between the parties related to repairs made to several apartment

complexes. Id. at 112, 266 S.E.2d at 717. The referee engaged the services of a court


       11  Indeed, Defendants acknowledge in their brief that “Rule 53 does not always require that
the referee conduct a hearing, examine witnesses, receive evidence, or make findings of fact unless the
order of reference so directs[.]”

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                                  Opinion of the Court



reporter who recorded nine days of witness testimony before the referee. However,

transcripts of the testimony were never actually prepared and entered into the record.

After the referee issued his report, the defendants filed an exception regarding the

lack of transcripts. Id. at 114, 266 S.E.2d at 718.

      On appeal, the defendants argued that the trial court had erred in adopting

the referee’s report without the production of transcripts. In our decision, we cited

Rule 53(f)(3), which provides that “[t]he testimony of all witnesses must be reduced

to writing by the referee, or by someone acting under his direction and shall be filed

in the cause and constitute a part of the record.” Id. at 113, 266 S.E.2d at 718. We

noted that “[t]he transcript requirement of Rule 53 may, however, be waived by

agreement of the parties.” Id. at 114, 266 S.E.2d at 718. We then held that because

the defendants had raised the transcript issue in their exceptions to the referee’s

report, the issue was preserved. We therefore reversed on this ground. Id. at 113-

14, 266 S.E.2d at 718.

      Synco is distinguishable on its face. That case involved nine days of testimony

before a referee that the parties and the trial court fully expected to be transcribed,

yet no transcripts were ever provided by the court reporter. Id. at 113, 266 S.E.2d at

717. Here, conversely, the trial court did not direct — and the parties did not

expressly request — that the Referee take sworn testimony from witnesses. Thus,




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                                   Opinion of the Court



the Referee possessed the authority to conduct the accounting process in the manner

he believed would be most efficient.

      In short, neither Rule 53 nor the Reference Order mandated that the Referee

conduct the accounting process in the manner that Defendants are now arguing was

required. Accordingly, for all of the reasons set out above, we are unable to conclude

that Defendants have demonstrated legal error with regard to the trial court’s

appointment of the Referee, the court’s articulation of the scope of the Referee’s

duties, the manner in which the Referee carried out those duties, or the trial court’s

adoption of the Referee’s Report. Therefore, we affirm both the Reference Order and

the Adoption Order.

II. Entry of Summary Judgment as to Defendants’ Counterclaims

      Defendants’ final argument is that the trial court erred in granting summary

judgment in favor of Plaintiffs on Counterclaims Three through Six and Nine. “On

an appeal from an order granting summary judgment, this Court reviews the trial

court’s decision de novo. Summary judgment is appropriate if the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that

any party is entitled to a judgment as a matter of law.” Premier, Inc. v. Peterson, 232

N.C. App. 601, 605, 755 S.E.2d 56, 59 (2014) (internal citations and quotation marks

omitted).



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                                   Opinion of the Court



      It is well established that “[t]he moving party has the burden of demonstrating

the lack of any triable issue of fact and entitlement to judgment as a matter of law.

The evidence produced by the parties is viewed in the light most favorable to the non-

moving party.” Hardin v. KCS Int’l, Inc., 199 N.C. App. 687, 695, 682 S.E.2d 726, 733

(2009) (internal citations omitted). We have held that “[a]n issue is ‘genuine’ if it can

be proven by substantial evidence and a fact is ‘material’ if it would constitute or

irrevocably establish any material element of a claim or a defense.”               In re

Alessandrini, 239 N.C. App. 313, 315, 769 S.E.2d 214, 216 (2015) (citation omitted).

      We agree with the trial court that Counterclaims Three through Six and Nine

fail as a matter of law.     Defendants’ answer contained the following prefatory

language introducing these counterclaims:

             If it is determined that the individual Plaintiffs did not
             withdraw [from] the [PLLC] and there was no dissolution
             upon the terms set forth in the July 8, 2005 Memorandum,
             then there has been no dissolution of the [PLLC] because
             none of the requirement[s] in G.S. § 57C-6-01 have been
             met. In the event the individual Plaintiffs are still members
             of the [PLLC], then Defendant alleges the following claims
             in the alternative[.]

(Emphasis added.)

      Similarly, Counterclaims Three through Six and Nine each individually

asserted that “[i]f it is determined that the individual Plaintiffs have not withdrawn

from the [PLLC], the individual Plaintiffs are still members of the [PLLC] and still

owe a fiduciary duty to the [PLLC] and to the Defendants . . . .” (Emphasis added.)


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                                      Opinion of the Court



       Thus, each of the counterclaims at issue in this appeal were — by their express

terms — premised upon the incorrect proposition that dissolution of the PLLC was

not required and that the PLLC, therefore, remained an ongoing entity.12 Critically,

none of these counterclaims were based upon the correct theory — that a judicial

dissolution was necessary because of the deadlock between the PLLC’s members.

This mistaken assumption that the PLLC remained in existence was further reflected

in the substantive allegations contained within each of these counterclaims.

       Counterclaim Three (“Breach of Fiduciary Duty”) alleged that

              [t]he individual Plaintiffs have breached their fiduciary
              duties to the [PLLC] and to the Defendants by, among
              other things, failing to meet their financial obligations to
              the [PLLC] through payment of a portion of the [PLLC]’s
              expenses and liabilities, failing to account for the legal fees
              they have generated on legal matters after they ceased
              practicing law with the [PLLC], and failing to pay to the
              [PLLC] and/or to the Defendants a share of such legal fees.

       Counterclaim Four (“Conversion/Misappropriation of Firm Assets”) asserted

that

              [t]he individual Plaintiffs have wrongfully converted
              and/or misappropriated assets of the [PLLC] by, among
              other things, failing to pay to the [PLLC] or to the
              Defendants their share of the [PLLC]’s expenses or
              liabilities and by failing to pay to the [PLLC] or to the
              Defendants a portion of the legal fees the individual
              Plaintiffs and/or AB&B generated from legal matters after

       12 The only counterclaim that was premised upon a dissolution theory was Counterclaim Two,
which was based upon the notion that the PLLC had dissolved in accordance with the terms of the
Brewer Memorandum. As discussed above, however, Mitchell I foreclosed Defendants’ reliance upon
that theory.

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                                  Opinion of the Court



             they ceased practicing law with the [PLLC].

       Counterclaim Five (“Unjust Enrichment”) alleged that

             [t]he individual Plaintiffs and/or AB&B have been unjustly
             enriched by failing to pay their share of the [PLLC]’s
             expenses and liabilities and by failing to pay to the [PLLC]
             or to the Defendants a portion of the legal fees the
             individual Plaintiffs and/or [sic] generated on legal matters
             after the individual Plaintiffs[ ] ceased practicing law with
             the [PLLC].

       Counterclaim Six (“Constructive Trust, Equitable Lien, and/or Resulting

Trust”) asserted that

             Defendants and the [PLLC] are entitled to a constructive
             trust, an equitable lien, and/or a resulting trust upon any
             and all fees, deposits, or property acquired by the
             individual [Plaintiffs] and/or AB&B for the individual
             Plaintiffs’ share of the [PLLC]’s expenses and liabilities
             and for Defendants’ share of the legal fees the individual
             Plaintiffs generated from legal matters after they ceased
             practicing law with the [PLLC].

       Finally, Counterclaim Nine (Breach of Fiduciary Duty/Ultra Vires Act) alleged

that

             [a]fter the individual [Plaintiffs] withdrew from the
             [PLLC], they filed a legal action against the Defendants
             without making any reasonable inquiry or investigation to
             determine whether the [PLLC] had dissolved, whether
             Defendants and/or the [PLLC] had commingled assets or
             whether there was any factual basis for their legal claims.

                   121. Had the individual Plaintiffs conducted such a
             reasonably [sic] inquiry or investigation, they would have
             determined the [PLLC] has not dissolved, that there had
             been no commingling of [PLLC] assets, and that there was


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                                         Opinion of the Court



               no basis for individual Plaintiffs[’] legal claims against
               Defendants.

       Accordingly, it is clear that Counterclaims Three through Six and Nine were

premised upon neither a withdrawal nor a dissolution having occurred. Rather, the

essence of these counterclaims was that Plaintiffs were required to pay their share of

the PLLC’s ongoing debts and liabilities based upon their continuing status as

members of the PLLC and to account for legal fees received by them since their

dispute with Defendants had occurred. However, such a legal theory is inconsistent

with our ruling in Mitchell I in which we held that a judicial dissolution was

necessary. In accordance with our decision, the trial court ordered that the PLLC be

dissolved as of 1 July 2005.

       Thus, any confusion that may have existed between the parties as to the status

of the PLLC was eliminated by our decision in Mitchell I. Nevertheless, Defendants

failed to amend their counterclaims in the aftermath of Mitchell I to reflect the reality

that the PLLC had been judicially dissolved and to reframe their claims for relief

accordingly.13




       13  Nor does the fact that Mitchell I reversed the trial court’s dismissal of Counterclaims Three
through Six and Nine mean that those claims are currently viable. Our ruling in Mitchell I on this
issue was based upon the fact that the trial court had improperly dismissed those counterclaims
pursuant to its legally incorrect ruling that a withdrawal had occurred based upon principles of
equitable estoppel. We therefore reversed the trial court’s dismissal of these counterclaims because of
this error of law. The issue of whether Counterclaims Three through Six and Nine — as pled — would
survive a subsequent order of dissolution by the trial court was not before us.

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                                  Opinion of the Court



      Moreover, it is important to note that despite the above-referenced defects with

respect to Counterclaims Three through Six and Nine, Defendants nevertheless had

a full and fair opportunity during the accounting process to seek all sums that they

claimed they were owed and to raise any issues that they felt needed to be addressed

in the accounting.    Additionally, the Referee’s Report largely encompassed the

matters raised in these counterclaims, including the accounting of legal fees

connected to matters that had originated with the PLLC but were later resolved by

the various parties after the break-up.

      The Referee’s Report focused on three primary areas: “[1] profit allocation

percentages; [2] restoration of negative capital accounts; and [3] allocation of

contingent fees[,]” which it rightly determined were “the most relevant and

significant financial components of a settlement between the Parties.” With respect

to this last category — which has been the principal source of disagreement over the

course of this litigation — the report contained an extensive analysis of the values of

contingent fee cases that had been received before dissolution but resolved afterward.

Significantly, this analysis encompassed cases that were resolved following the

break-up by both Defendants and Plaintiffs.

      Thus, the Referee’s Report contained a thorough and detailed accounting in

connection with the dissolution of the PLLC. The Defendants had an opportunity

prior to the completion of the accounting to request that the Referee consider



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                                  Opinion of the Court



additional financial matters related to the PLLC, but they did not do so. Moreover,

Defendants have not challenged on appeal the substance of the Referee’s Report.

Therefore, any issues concerning the validity of the Referee’s substantive findings are

not before us.

                                    Conclusion

      For the reasons stated above, we affirm the trial court’s orders of 26 February

2013, 18 September 2015, and 19 February 2016.

      AFFIRMED.

      Judges BRYANT and STROUD concur.




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