Andrew J. Haile and Thomas Molony, both professors at Elon University School of Law, have published the first in a series of articles planned for the North Carolina Bar Association’s quarterly publication of its Business Law Section.
In their article, Haile and Molony summarize three recent decisions of North Carolina courts, one by the North Carolina Supreme Court and two by the state’s Court of Appeals.
Reviewing the N.C. Supreme Court case, State v. Ridgeway Brands Manufacturing, LLC, Haile and Molony note that it is believed to be the first decision under North Carolina law to apply the “instrumentality rule” to a limited liability company as opposed to a corporation. Under the instrumentality rule, “a corporate entity is disregarded if it is a mere instrumentality or alter ego of the sole or dominant shareholder.”
Summarizing Hospira Inc. v. AlphaGary Corp., a case heard by the North Carolina Court of Appeals that considered the extent to which a medical device maker that entered into a contract manufacturing arrangement could recover against one of the contract manufacturer’s suppliers, Haile and Molony write, “The result in this case underscores the importance of having very specific contract rights when a party purchasing contracts from a vendor wants to have recourse against a supplier that supplies to the vendor a critical component of the end product.”
In their third review, Haile and Molony explore the reasoning of the Court of Appeals in its determination in Wiggs v. Peedin, concluding that “this case is a good reminder that, whenever a business arrangement involves the sharing of profits, the arrangement should be evaluated to determine whether it might be deemed a partnership under N.C. Gen. Stat. 59-37. This is particularly important because an unintended partnership could result in unintended liability exposure.”
Haile and Molony’s article can be read in full, beginning on page nine of the Business Law Section’s April 2009 edition of “Notes Bearing Interest.”