N.C. Business Court Opinions, August 13, 2025 – August 26, 2025
Elhulu v. Alshalabi, 2025 NCBC 45 (N.C. Super. Ct. Aug. 13, 2025) (Conrad, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); fraudulent concealment; duty to disclose; RICO; predicate acts
Plaintiffs are three individuals who invested nearly $1 million in a medical laboratory company, Omni Holding Group, LLC. In the original complaint, Plaintiffs alleged that Omni’s founder, Alshalabi, induced them to invest these funds in Omni as part of a fraudulent scheme. Alshalabi was subsequently tried and convicted of Medicare and Medicaid fraud. Plaintiffs amended their complaint to include fraudulent concealment and RICO claims against a fellow-member of Omni, Ishnineh. Ishnineh had attended the meeting where Alshalabi solicited Plaintiffs’ investment, but the complaint did not allege that Ishnineh participated in the solicitation or communicated with Plaintiffs at any point. Ishnineh moved for a dismissal of both claims pursuant to Rule 12(b)(6).
The Court granted Ishnineh’s motion in full. As to the fraudulent concealment claim, the complaint did not allege that Ishnineh had a duty to disclose nor did it allege facts giving rise to a duty to disclose. This was fatal to the claim.
The Court also dismissed Plaintiffs’ RICO claim. Plaintiffs alleged mail fraud, wire fraud, and money laundering as the predicate acts for a pattern of racketeering. The allegations of mail fraud and wire fraud were comprised of the same allegations used in the fraudulent concealment claim, and as such, were insufficiently pleaded. As only one act remained (money laundering) the complaint failed to meet the requirement of establishing a pattern of unlawful activity.
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Qian v. Zhang, 2025 NCBC 46 (N.C. Super. Ct. Aug. 15, 2025) (Brown, J.)
Key Terms: Rule 12(b)(6); motion to dismiss; breach of fiduciary duty; self-dealing; de facto fiduciary relationship; de jure fiduciary relationship; general partnership; limited partnership; demand futility; N.C.G.S. § 59-1001; N.C.G.S. § 59-1003; mismanagement; business judgment rule; Declaratory Judgment Act; discretion; breach of contract; injunction
Defendant Halifax Safeguard Property, LLC is the General Partner of Nominal Defendant Carolina Sawmills, LP. Pro se plaintiffs Jian Qian, Jiangang Jiao, and Lina Li, along with Individual Defendants Lijia Zheng, Yawei Zheng, Fang Lin, and Haoyu Qi, are limited partners of CSLP, members of Halifax, and members of Halifax’s nine-member management committee. The Intervenors consist of two Halifax members and thirty-three CSLP limited partners. Plaintiffs initiated this action against Defendants for their alleged mismanagement of CSLP funds. The Intervenors asserted claims against Plaintiffs and Defendants for alleged mismanagement and self-dealing. Halifax and the Individual Defendants moved to dismiss the Intervenors’ Complaint.
Breach of Fiduciary Duty: Self-dealing. The Intervenors contended that Halifax, Plaintiffs, and the Individual Defendants breached fiduciary duties owed to CSLP and its limited partners by engaging in self-dealing.
Halifax conceded that it owed a de jure fiduciary duty to both CSLP and its limited partners, but argued that the claim was derivative in nature, the Intervenors failed to make a pre-suit demand, and the allegations were insufficient to rebut the business judgment rule. The Court disagreed, concluding that the Intervenors sufficiently pleaded demand futility under N.C.G.S. § 59-1003 and included allegations of financial self-dealing to rebut the business judgment rule. Halifax’s motion was denied.
The Court granted the Individual Defendants’ motion, determining that (1) where an LLC is the general partner of a limited partnership, members of the LLC do not have a de jure fiduciary relationship with the limited partnership or its limited partners; and (2) the Intervenors did not sufficiently plead the existence of a de facto fiduciary relationship between the Individual Defendants and CSLP. The Court declined to consider the Intervenors’ veil-piercing argument because it was not alleged in the Complaint.
Breach of Fiduciary Duty: Mismanagement. The Intervenors contended that Halifax, Plaintiffs, and the Individual Defendants breached fiduciary duties owed to CSLP and its limited partners by mismanaging CSLP funds. Halifax again argued for dismissal based on demand futility and the business judgment rule, but the Court again denied Halifax’s motion, declining to consider extrinsic evidence that contradicted the allegations in the Complaint and concluding that the Intervenors included sufficient allegations of bad faith. The Court granted the Individual Defendants’ motion for the same reasons discussed above and dismissed the claim with prejudice.
Declaratory Judgment. The Intervenors sought a declaration on the effectiveness of an amendment to CSLP’s Limited Partnership Agreement. The Court denied Halifax’s motion to dismiss this claim because Halifax sought to apply the incorrect legal standard to a Rule 12(b)(6) motion. The Court also denied the Individual Defendants’ motion, as the Intervenors had adequately pleaded a genuine controversy and the Court was unable to definitively state at this stage that the declaratory judgment claim would serve no useful purpose in clarifying legal relations.
Breach of Contract and Breach of Fiduciary Duty. The Intervenors alleged that Halifax’s mismanagement of CSLP funds constituted both a breach of the Limited Partnership Agreement and a breach of fiduciary duty. Halifax argued that other provisions of the Limited Partnership Agreement permitted CSLP to reimburse Halifax for expenses, but the Court concluded that this argument was premature and denied Halifax’s motion as to both claims.
Preliminary and Permanent Injunction. Halifax and the Individual Defendants moved to dismiss this claim because injunctions are remedies, not independent causes of action. The Court agreed and granted the motions, noting the decision had no impact on the Intervenors’ pending Motion for Preliminary Injunction.
Appointment of Receiver. The Intervenors moved to have a receiver appointed for Halifax and CSLP based on the alleged mismanagement by Halifax’s management committee. The Individual Defendants sought dismissal of this claim because they were not the entity over which the Intervenors sought a receivership, and Halifax contended that the Intervenors failed to include allegations necessary for the appointment of a receiver. But the Court concluded dismissal of this claim was premature and denied the motions.
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State of N.C. v. TikTok Inc., 2025 NCBC 47 (N.C. Super. Ct. Aug. 19, 2025) (Conrad, J.)
Key Terms: TikTok; unfair or deceptive trade practices; motion to dismiss; personal jurisdiction; failure to state a claim; 47 U.S.C. § 230(c)(1); publisher immunity; First Amendment
The State of North Carolina sued the owners and operators of TikTok for unfair or deceptive trade practices, alleging that they designed TikTok to be highly addictive to minors and then undertook a deceptive publicity campaign to convince parents and children that the app was safe. ByteDance moved to dismiss the complaint for lack of personal jurisdiction and for failure to state a claim.
The Court denied the motion to dismiss based on lack of personal jurisdiction, concluding that Defendants’ extensive, purposeful contacts with North Carolina–incuding marketing TikTok in North Carolina, cultivating ongoing relationships with in-state users, and collecting data from in-state users–from which the State’s claim arose, were sufficient to establish specific jurisdiction.
Turning to the Rule 12(b)(6) motion, the Court rejected ByteDance’s argument that it was immune from suit pursuant to 47 U.S.C. § 230(c)(1), which immunizes a provider of an internet platform from liability for any legal claim that treats it as a publisher or speaker of third-party content. The State did not seek to hold ByteDance liable for monitoring, altering, or removing content, or for failing to do those things. Instead, the State’s unfairness theory was based on allegations that ByteDance purposely designed TikTok to be addictive, and its deception theory was based on allegations that ByteDance misrepresented its safety features. Thus, 47 U.S.C. § 230(c)(1) did not apply.
ByteDance also asserted that the State’s claim violated the First Amendment by seeking to muzzle its editorial discretion to select, organize, and display videos and by attempting to regulate the adoption and enforcement of content moderation standards. Based on the pleadings, the Court disagreed. As alleged, TikTok’s features did not “express” any particular viewpoint; instead, they present content based on an algorithm designed to induce compulsive use. Further, the First Amendment does not protect TikTok’s alleged misrepresentations regarding its safety features.
Lastly, ByteDance argued that its actions were neither unfair nor deceptive. The Court rejected this argument as well. The State’s allegations that ByteDance designed TikTok to exploit minors’ immaturity and induce addictive, compulsive use were sufficient to allege unfair conduct. Moreover, the complaint identified numerous specific false and misleading statements which were sufficiently particular to satisfy the pleading standards for deceptive conduct.
For all of these reasons, the Court denied the motions to dismiss.
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Deleuran v. Thompson, 2025 NCBC 48 (N.C. Super. Ct. Aug. 22, 2025) (Brown, J.)
Key Terms: motion to dismiss; Rule 12(b)(1); Rule 12(b)(6); Chapter 55; derivative action; standing; pre-suit demand; extraordinary circumstances; separate injury; individual claims
Plaintiff initiated this action, alleging that Defendant engaged in various unauthorized and wrongful conduct related to the operation and distribution of funds from Living Well Behavioral Health, Inc., of which Plaintiff and Defendant are the sole and equal owners. Defendant moved to dismiss all claims pursuant to Rules 12(b)(1) and 12(b)(6).
Derivative Claims. Defendant moved to dismiss all derivative claims for lack of standing because Plaintiff failed to allege that a written demand was made upon Living Well as required by N.C.G.S. § 55-7-42. The Court found that Plaintiff’s demand upon Defendant was insufficient to satisfy the statutory pre-suit demand requirement because it was not made upon the corporation. Accordingly, the Court dismissed Plaintiff’s derivative claims without prejudice.
Individual Claims. The Court further held that Plaintiff could not proceed with the majority of her claims individually because she failed to allege the existence of a special duty or that she suffered a personal injury, separate and distinct from that allegedly suffered by the corporation. Plaintiff’s allegations regarding the imbalance of access to and influence over the corporation by Defendant were not sufficient to meet the extraordinary circumstances required to impose fiduciary duties between fifty-percent owners. However, the Court held that Plaintiff adequately alleged an individual injury to herself separate from the corporation in her claim asserting that Defendant breached N.C.G.S. § 55-16-02 by refusing to allow Plaintiff access to the books and records of the corporation. Thus, Plaintiff’s claim for breach of the Business Corporation Act survived but all other individual claims were dismissed with prejudice.
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Qian v. Zhang, 2025 NCBC 49 (N.C. Super. Ct. Aug. 22, 2025) (Brown, J.)
Key Terms: judgment on the pleadings; Rule 12(c); pro se; general partnership; limited partnership; receiver; breach of fiduciary duty; de facto fiduciary relationship; de jure fiduciary relationship
As summarized above, the Court previously granted in part and denied in part Halifax’s and the Individual Defendants’ motions to dismiss the Intervenors’ Complaint. Here, Individual Defendants Lijia Zheng, Yawei Zheng, and Fang Lin seek dismissal of pro se plaintiffs Jian Qian, Jiangang Jiao, and Lina Li’s claims to appoint a receiver and for breach of fiduciary duty.
Appointment of Receiver. The Individual Defendants argued that this claim should be dismissed because they were not the entity over which Plaintiffs sought a receivership, but the Court concluded that it was premature to foreclose the appointment of a receiver and denied the motion.
Breach of Fiduciary Duty. Plaintiffs alleged that the Zhengs, as General Manager and Operating Manager of Halifax, breached a fiduciary duty they owed to Plaintiffs and CSLP’s other limited partners. The Court first concluded that, where the LLC is the general partner of a limited partnership, the members of the LLC—i.e., the Zhengs—did not have a de jure fiduciary relationship with the limited partnership or its limited partners, including Plaintiffs. The Court also determined that Plaintiffs did not sufficiently plead the existence of a de facto fiduciary relationship. The Court granted the motion and dismissed this claim with prejudice.
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Oak Grove Techs., LLC v. Seventh Dimension, LLC, 2025 NCBC 50 (N.C. Super. Ct. Aug. 22, 2025) (Houston, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); government contract; defense contract; breach of contract; fraud; unfair and deceptive trade practices
This matter is before the Court on Plaintiff’s and Third-Party Defendants’ motion to dismiss Defendants’ amended counterclaims and third-party complaint. Plaintiff Oak Grove Technologies, LLC and Defendant Seventh Dimension, LLC are defense contractors. Defendant, with the advice of Plaintiff, bid on and was awarded a contract with the U.S. Army Special Operations Command. Defendant subcontracted a portion of the contract to Plaintiff.
Defendants assert purported counterclaims for breach of the ARSOF Subcontract, breach of the EOS Subcontract, declaratory judgment, tortious interference with prospective business relationships, tortious interference with contractual relations, fraud and fraudulent inducement, negligent misrepresentation, defamation, unfair and deceptive trade practices, and punitive damages
Breach of the ARSOF Subcontract. The Court analyzed eleven claims of breach of the ARSOF Subcontract by Plaintiff and applying the plain, unambiguous language standard to the language of the subcontract and noting the low bar for notice pleading, found that most of the claims for breach of contract were sufficient to survive the motion to dismiss, except for those which Defendant failed to plead facts sufficient to demonstrate a breach.
Breach of EOS Subcontract. The Court found that Defendants’ barebones allegations failed to allege sufficient facts constituting the breach to put Plaintiff on notice of the nature of the claims for breach of the EOS Subcontract and therefore dismissed those claims. The Court also found that Defendants’ catchall, generalized allegation of breaches to be proven through discovery was insufficient to put Plaintiff on notice of such breaches.
Declaratory Judgment. The Court held that Defendants’ declaratory judgment claim relating to its ability to reduce Plaintiff’s rates presents a genuine controversy entitling the parties to a declaration of rights. However, the Court found that the declaratory judgment claim relating to the ARSOF Subcontract’s language requiring identification of a replacement employee was duplicative of a breach of contract claim which the Court had dismissed; therefore the Court dismissed the corresponding declaratory judgment claim as moot.
Tortious Interference with Contractual Relations. The Court dismissed this claim because Defendant did not allege that the Plaintiff induced a third-party not to perform under its contract with Defendant or that Defendant suffered actual pecuniary harm from such interference.
Fraud, Fraudulent Inducement, and Negligent Misrepresentation. The Court dismissed the fraud-based claims for several reasons. Defendants’ allegations regarding what Plaintiff told them about the government contract and Defendants’ reliance on such information were not sufficient to support Defendants’ fraud claims because Plaintiff did not prevent Defendants from reading the contract themselves and Defendants’ reliance on Plaintiff’s statements regarding the government’s requirements and procedures was not justified. Defendants’ allegations relating to Plaintiff’s statements that it would be a good partner were conclusory and furthermore, the statements by Plaintiff were non-actionable statements of intent rather than statements of fact. The fraud-based claims against the individual Third-Party Defendants failed for the same reasons.
N.C. Gen. Stat. § 75-1.1 et seq. (UDTP). The Court held that the UTDP failed to the extent it relied on the dismissed fraud-based claims. The Court further found that the counterclaims asserted no specific allegations of wrongdoing against certain of the Third-Party Defendants and therefore dismissed the claim as to those individuals. However, Defendants had sufficiently alleged that one of the Third-Party Defendants defamed Defendants, which was sufficient to support a UDTPA claim. Thus, the Court declined to dismiss the UDTP claim based on the allegations of defamation but otherwise dismissed the UDTP claim because the conclusory allegations failed to support it.
Punitive Damages. Finding that punitive damages is a remedy not a stand-alone cause of action, the Court dismissed it ex mero motu.
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Olds v. Olds, 2025 NCBC Order 57 (N.C. Super. Ct. Aug. 13, 2025) (Robinson, C.J.)
Key Terms: order on designation; opposition to designation; voluntary dismissal; gamesmanship
Plaintiff Davis Olds opposed Defendants’ Notice of Designation after voluntarily dismissing his claim for judicial dissolution upon which the designation was based. The Court reiterated that once a case has been properly designated, a party cannot divest the Court of its ability to hear the case by dismissing the claim(s) that served as the basis for proper designation. Accordingly, the Court overruled the opposition and determined that the case should proceed as a mandatory complex business case.
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Moore v. Brooks, 2025 NCBC Order 58 (N.C. Super. Ct. Aug. 13, 2025) (Houston, J.)
Key Terms: motion to compel arbitration; authenticity of exhibits; evidentiary support; BCR 7.5; BCR 7.11
Defendant Winthrop Intelligence, LLC moved to compel arbitration contending that Plaintiffs’ claims were subject to an arbitration clause contained in several relevant operating agreements. Winthrop relied upon a number of exhibits, including the purported operating agreements containing the arbitration provisions, attached to its motion to compel arbitration but failed to authenticate the exhibits by affidavit or otherwise. Winthrop, as the moving party, bore the burden of proof to present competent evidence of the existence of an agreement to arbitrate. The Court found that due to the unauthenticated exhibits, which were contested by Plaintiffs, there was no competent evidence in the record of any agreement to arbitrate between the parties and therefore denied the motion to compel arbitration. The Court did not grant Winthrop leave to submit authenticating evidence in support of the motion because Winthrop had multiple opportunities to do so during briefing on the motion and failed to comply with BCR 7.5 requiring all materials including supporting affidavits to be filed with the motion and thus waived its right to file the supporting material.
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Sugarbranch Dev., LLC v. Burbank Fin. Partners, LLC, 2025 NCBC Order 59 (N.C. Super. Ct. Aug. 14, 2025) (Robinson, C.J.)
Key Terms: order on designation; contemporaneous filing requirement; service on Chief Justice and Chief Judge
Defendants filed a notice of designation with the Mecklenburg County Clerk of Superior Court but failed to contemporaneously serve the NOD on the Chief Justice of the North Carolina Supreme Court and Chief Judge of the North Carolina Business Court as required by the designation statute, N.C.G.S. § 7A-45.4(c). The Court held that the contemporaneous filing and service requirements of the designation statute are mandatory and Defendants’ failure to comply with them rendered the NOD untimely. The Court declined to designate the action as a mandatory complex business case.
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State of N.C. v. TikTok Inc., 2025 NCBC Order 60 (N.C. Super. Ct. Aug. 19, 2025) (Conrad, J.)
Key Terms: motion to seal; TikTok; Apple; sensitive data; embarrassing allegations
Plaintiff, the State of North Carolina, moved to file its complaint against Defendants, the owners and operators of TikTok, under seal at the request of the Defendants and other nonparties including Apple Inc. The Court was not convinced by Apple’s arguments that certain paragraphs of the complaint detailing the number of downloads of TikTok from the Apple App Store from 2018 to 2023, the total amount of in-app payments, and general allegations regarding Defendants’ advertisement of TikTok in the App Store was sensitive, protected information. The Defendants sought to redact more than a third of the complaint but the Court found that the information was not unusually sensitive or of competitive value as the data was several years old. The Court also did not find that the complaint’s allegations describing TikTok’s algorithm were specific or detailed enough to warrant sealing. Finally, the Court found that the public interest outweighed Defendants’ concerns regarding disclosure of TikTok employees’ names and job titles, as well as potentially embarrassing allegations regarding TikTok’s safety procedures. The Court denied the motion to seal.
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Highlights Healthcare, LLC v. Abell, 2025 NCBC Order 61 (N.C. Super. Ct. Aug. 21, 2025) (Davis, J.)
Key Terms: preliminary injunction; motion to strike; affidavits; personal knowledge; reply brief; matters newly raised; allegations made upon information and belief; success on the merits; irreparable harm
Plaintiffs initiated this action against two former employees (Abell and Magee), asserting that they had misappropriated Plaintiffs’ confidential information and trade secrets and were using them to unlawfully compete in violation of certain restrictive covenants. Plaintiffs moved for a preliminary injunction to enforce the restrictive covenants and prevent the disclosure of their proprietary information. Defendants moved to strike the affidavit of Third-Party Defendant Graham, Plaintiffs’ manager, in support of Plaintiff’s reply brief in support of the motion for PI.
Motion to Strike. The Court struck the portions of Graham’s affidavit which addressed matters that were not newly raised in the Defendants’ response brief, as well as the portions purporting to state facts which had been alleged upon information and belief in Plaintiff’s Amended Complaint that Graham verified.
PI Motion. The Court denied the PI Motion. First, Plaintiffs had not shown a likelihood of success on the merits of their claims given that a significant portion of their allegations were made upon information and belief. Further, Defendants had submitted detailed affidavits in opposition to the PI Motion that the Court found sufficient to rebut the allegations of the complaint for purposes of the PI Motion. Second, Plaintiffs failed to demonstrate that they would suffer irreparable harm if the preliminary injunction was not granted because the competing companies Plaintiffs were concerned about had either never been formed or had already opened and therefore, the prospect of its opening could not be avoided by issuance of a preliminary injunction.
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N.C. Department of Revenue v. Philip Morris USA, Inc., No. 242A23, 2025 N.C. LEXIS 683 (N.C. 2025) (Allen, J.)
Key Terms: contested tax case; constitutionality of statute; as-applied challenge; facial challenge; subject matter jurisdiction; Office of Administrative Hearings; separation of powers; franchise tax; N.C.G.S. § 105-241.17
At issue in this appeal was whether the Office of Administrative Hearings is required to dismiss a contested tax case for lack of jurisdiction when the taxpayer alleges that the statute at issue is unconstitutional as applied to the specific taxpayer. As summarized here, the Business Court previously determined that dismissal is required under these circumstances. The Supreme Court affirmed. Although N.C.G.S. § 105-241.17 is ambiguous as to whether all constitutional challenges should be dismissed or just facial challenges, a contrary interpretation would unnecessarily create separation-of-powers problems. Accordingly, the Supreme Court held that N.C.G.S. § 105-241.17 does not grant the OAH subject matter jurisdiction over as-applied constitutional challenges to tax statutes.
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Cutter v. Vojnovic, No. 229A24, 2025 N.C. LEXIS 689 (N.C. 2025) (Barringer, J.)
Key Terms: judgment on the pleadings; motion to strike; summary judgment; tortious interference; oral partnership; general partnership; derivative claims; standing; statutory interpretation; affidavit; expert report; profits and losses; N.C.G.S § 59-48(1); indicia of partnership
As summarized here and here, Plaintiff initiated this action alleging that he and Defendant had entered into a common law partnership agreement in relation to the purchase of a restaurant business (Jib Jab) and that Defendant’s closing of the purchase of the business without Plaintiff’s participation gave rise to numerous claims. Following a number of adverse decisions by the Business Court, Plaintiff appealed to the N.C. Supreme Court.
First, the Court affirmed judgment on the pleadings against Plaintiff on his tortious interference claim because the complaint’s allegations merely tracked the elements of the claim and did not include the necessary supporting facts. The Court also affirmed dismissal of Plaintiff’s derivative claims on behalf of the alleged partnership because the N.C. Uniform Partnership Act does not authorize one general partner to assert a derivative claim against another general partner.
Next, the Court affirmed the Business Court’s order granting in part Defendants’ motion to strike portions of Plaintiff’s summary judgment affidavit. Rather than setting forth specific facts, the stricken paragraphs were based on Plaintiff’s beliefs, opinions, conclusory statements, and legal conclusions, which do not create a genuine issue of material fact to survive summary judgment. The Court also affirmed the Business Court’s decision to exclude Plaintiff’s purported expert report because Rule 56 does not provide for unsworn expert reports to be considered at summary judgment.
Turning to the summary judgment motions, the Court affirmed summary judgment in favor of Defendants on the partnership-dependent claims. The Business Court had concluded that no partnership existed because the parties didn’t agree to share losses jointly or to the terms to obtain financing for the Jib Jab purchase. The Court disagreed that an explicit agreement on how to share losses is required to form a partnership because the statutorily provided default is that shared losses match shared profits. Nevertheless, summary judgment was proper because the undisputed evidence demonstrated that the parties never agreed upon the terms to obtain financing, which was a material term of the purported partnership agreement. The Court also noted that the evidence revealed no indicia of partnership, such as a registered partnership name, partnership tax returns, or partnership bank accounts.
Lastly, the Court affirmed summary judgment against Plaintiff on his tortious interference with prospective economic advantage claim because Plaintiff failed to produce evidence that he could have purchased Jib Jab but for Defendant’s interference.
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The information in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.