North Carolina statute N.C.G.S. Section 84-5 prohibits corporations and limited liability companies from practicing law in this state. This prohibition occasionally arises in the litigation context when an entity—usually domiciled in another state—serves a pro se answer (or other response) to a complaint filed in a North Carolina court. Given that a plaintiff’s goal usually is to obtain a judgment as quickly and efficiently as possible, what should the plaintiff do in this situation?
In short, the plaintiff should file a motion asking the court (i) to strike the defendant’s responsive pleading, and (ii) for entry of default and default judgment. Seeking all such relief in one motion may seem aggressive in light of the court’s inclination to have disputes decided on the merits. Fortunately, however, for plaintiffs finding themselves in this scenario, there is authority supporting the award of such relief in a single hearing.
Motion to Strike Defendant’s Responsive Pleading
LexisNexis v. Travishan Corp., 155 N.C. App. 205 (2002) provides authority for striking a corporate defendant’s pro se responsive pleading under Section 84-5. In LexisNexis, the North Carolina Court of Appeals analyzed the trial court’s denial of a plaintiff’s motion to strike a corporate defendant’s answer and counterclaim. In doing so, the court recognized three exceptions to Section 84-5: (i) a non-attorney, corporate employee may prepare legal documents; (ii) a corporation need not be represented by an attorney in Small Claims Court; and (iii) a corporation may make an appearance through an officer to avoid default. It is the third exception that would seemingly present an issue of delay for the plaintiff. If the defendant is able to avoid default under Rule 55, then the plaintiff would be forced to resort to other dispositive motions and possibly even conduct some discovery. However, the LexisNexis court held that while the “appearance” exception to Section 84-5 may encompass a defendant’s attempt to negotiate a resolution in response to being sued, it does not involve actually litigating for the defendant entity. The Court of Appeals’ reversal of the trial court’s denial of the motion to strike makes clear that a corporate defendant’s pro se filing of a responsive pleading falls outside the scope of the third exception and is properly stricken.
Entry of Default and Default Judgment
Bodie Island Beach Club v. Wray, 215 N.C. App. 283 (2011) provides authority for entering default and default judgment against a defendant entity relying on a pro se responsive pleading. In that case, the plaintiff filed a multi-count complaint against multiple defendants. One defendant, an individual, sent a letter to the plaintiff denying the allegations of the complaint. It was not clear whether the letter was intended to be on behalf of just that individual, or if it was also sent on behalf of a limited liability company defendant (“LLC-defendant”) with which the individual was affiliated. After the plaintiff moved for summary judgment, the LLC-defendant moved for leave to amend its “answer.” The trial court denied that motion and, on its own motion, entered default against the LLC-defendant. On appeal, the LLC-defendant argued that the trial court had misapplied LexisNexis in concluding that “where a corporation attempts to appear through a non-attorney, the corporation is in default.” The North Carolina Court of Appeals disagreed, holding that the LLC-defendant had failed to answer the complaint and affirming the trial court’s entry of default and denial of leave to amend. Importantly, the Court of Appeals noted that even assuming the individual defendant’s letter had been submitted on behalf of the LLC-defendant, it did not fit into one of the three exceptions to Section 84-5. In other words, the LLC-defendant’s response to the complaint amounted to a nullity, and therefore default and denial of leave to amend were proper. The Bodie Island case indicates that default cannot be avoided by a corporation’s or LLC’s submission of a responsive pleading pro se.
North Carolina Superior Court judges have demonstrated a willingness to grant motions to strike and for entry of default and default judgment, brought pursuant to Section 84-5, in their entirety. However, if a judge is inclined only to strike the responsive pleading, and allow the defendant additional time to engage counsel before entering a default judgment, the plaintiff should ask the court to (i) set a date certain—perhaps 15 days—by which the defendant must serve a responsive pleading complying with Section 84-5, and (ii) enter an order directing the clerk of court to immediately enter default and default judgment in the event the defendant fails to do so. This will eliminate the need for an additional motion and hearing. If the defendant complies with the order, the plaintiff won’t (yet) have a judgment, but at least will have a duly admitted lawyer on the other side with which to move forward in the case.