By: Natalie E. Kutcher
Apex Health, Inc. v. Atrium Health, Inc., 2026 NCBC 10 (N.C. Super. Ct. Feb. 11, 2026) (Earp, J.)
Key Terms: motion to amend; Rule 15; breach of contract; unfair and deceptive trade practices; futility; undue delay; undue prejudice; fraudulent inducement; bad faith
Plaintiffs Apex Health, a provider and operator of Medicare Advantage health plans, and its affiliates filed suit against Defendant Atrium Health. In February 2021, Apex and Atrium executed an LOI to create a co-branded Medicare Advantage plan for Atrium’s patients. The parties entered into an agreement formalizing their arrangement on May 13, 2021. As efforts were underway to market the plan, Apex alleged that Atrium began to distance itself from the plan, failed to treat it as a “preferred plan” for its patients, and ultimately caused the plan to fail.
Apex filed suit on May 23, 2024, asserting a claim for breach of contract against Atrium. The parties subsequently submitted three joint motions to extend the discovery deadlines, which the Court granted. On November 6, 2025, Apex moved to amend the Complaint to add a claim for unfair and deceptive trade practices against Atrium.
The Court’s analysis included the following three considerations: (i) futility of the amendment; (ii) undue delay and undue prejudice; and (iii) bad faith. The Court concluded that the amendment was futile, as the UDTPA claim was grounded in fraudulent inducement, but the proposed amendment to the Complaint failed to meet the pleading requirements for fraud. The Court further held that amending the Complaint at this time would cause undue delay and prejudice, noting the significant amount of time that had passed since the lawsuit was filed. The Court did not find bad faith, but noted that it was Apex’s responsibility to use the discovery period efficiently and seek the Court’s intervention if Atrium presented obstacles or delays to the discovery process, which it did not. The Court denied Apex’s motion with prejudice.
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WP Church, LLC v. Whalen, 2026 NCBC 11 (N.C. Super. Ct. Feb. 11, 2026) (Davis, J.)
Key Terms: motion to dismiss; nominal defendant; Rule 12(b)(1); Rule 12(b)(6); derivative claims; pre-suit demand; demand futility; self-dealing; misappropriation; conflict of interest transaction; business judgment rule; economic loss rule
As previously summarized here and here, Plaintiff WP Church sued Defendant Whalen, the sole manager of 5Church Charleston, derivatively on behalf of 5Church based on Defendant’s alleged self-dealing and misappropriation of 5Church’s assets. Defendant filed a motion to dismiss Plaintiff’s Complaint pursuant to Rules 12(b)(1) and (6), alleging that Plaintiff failed to comply with the mandatory pre-suit demand requirements before initiating a derivative action, and that Plaintiff failed to state a valid claim for relief against Defendant because his actions were within the authority granted to him under 5Church’s operating agreement.
At the outset, the Court sua sponte raised the question of whether the Complaint was subject to dismissal on the basis that it failed to name 5Church as a nominal defendant. The Courted determined that South Carolina law applied because 5Church was a South Carolina entity and, under South Carolina law, the absence of 5Church as a nominal defendant did not deprive the Court of subject matter jurisdiction.
The Court next analyzed whether Plaintiff’s pre-suit demand was substantively defective. The Court determined that Plaintiff’s letter sufficiently set out Plaintiff’s allegations against Defendant and demanded that Defendant initiate a lawsuit on behalf of 5Church to prosecute these wrongdoings. The Court further noted that, even if the demand was found to be deficient, South Carolina law provides futility as a basis for excusing compliance with the pre-suit demand. As Defendant was the manager of the company and also the sole individual alleged to have committed these wrongful acts, the Court held that any demand would have been presumably futile. As such, the Court denied Defendant’s motion to dismiss pursuant to Rule 12(b)(1).
The Court next considered Defendant’s motion to dismiss the Complaint pursuant to Rule 12(b)(6). The Court was unpersuaded by Defendant’s argument that his actions fell within the purview of his managerial authority, noting that Defendant failed to cite any provision of the operating agreement permitting him to enter into a conflict-of-interest transaction and, if one existed, South Carolina law would not permit such a provision to be given effect. The Court also rejected Defendant’s argument that the business judgment rule applied to the situation, as Defendant stood on both sides of the transactions. Lastly, the Court rejected Defendant’s argument that the economic loss rule applied, noting that South Carolina law strictly limits the application of the rule to products liability context. As such, the Court denied Defendant’s motion to dismiss under Rule 12(b)(6).
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Weatherspoon Fam. LLC v. Hatteras Inv. Partners, L.P., 2026 NCBC 12 (N.C. Super. Ct. Feb. 11, 2026) (Houston, J.)
Key Terms: motion to dismiss; Rule 12(b)(1); derivative lawsuit; pre-suit demand; futility; breach of fiduciary duty; particularity
As previously summarized here, Plaintiff sued Defendants derivatively on behalf of Nominal Defendant Hatteras Evergreen Private Equity Fund, LLC, asserting a claim for breach of fiduciary duty based on Defendants’ decision to exchange shares in Evergreen’s investment portfolio for preferred equity shares in another company, resulting in a significant loss to Evergreen’s assets. Defendants and Evergreen moved to dismiss Plaintiff’s amended complaint pursuant to Rule 12(b)(1) on the basis that Plaintiff failed to make a pre-suit demand prior to initiating a derivative lawsuit.
The Court granted the motion without prejudice. Analyzing the demand requirements under Delaware law, which governs Evergreen, the Court held that Plaintiff failed to plead with particularity facts which would excuse Plaintiff from making a pre-suit demand. The Court determined that Plaintiff failed to adequately plead that the manager of Evergreen received a material personal benefit from the alleged misconduct that is the subject of the litigation demand. The Court further concluded that Plaintiff’s allegations failed to demonstrate a substantial likelihood of liability for breach of fiduciary duty, or that Defendants lacked independence from another person or entity receiving material benefits. As such, the Court determined that Plaintiff lacked standing to bring the derivative lawsuit, and dismissed the action without prejudice.
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Town of Carrboro v. Duke Energy Corp., 2026 NCBC 13 (N.C. Super. Ct. Feb. 12, 2026) (Davis, J.)
Key Terms: motion to dismiss; Rule 12(b)(1); Rule 12(b)(6); climate change; issue of first impression; federal preemption; nonjusticiability; political question doctrine
Plaintiff filed this lawsuit asserting claims against Defendant for public nuisance, trespass, negligence, and gross negligence. Plaintiff alleged that Defendant has known for decades about the harmful effects of fossil fuel emissions but has undertaken a series of campaigns to downplay its dangers. Plaintiff alleged that increased carbon emissions have resulted in climate change and consequently damaged Plaintiff in terms of increased municipal spending to repair roads and infrastructure. Defendant moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6).
The Court noted that “[i]t would be a vast understatement to say that this case presents an issue of first impression under North Carolina law.” Although the Court first considered whether Plaintiff’s claims were subject to federal preemption, the Court ultimately did not need to make a final determination on this issue, as the issues presented in the lawsuit were subject to the political question doctrine.
The Court considered the following three factors recently established by the Supreme Court of North Carolina to determine the nonjusticiability of an issue: whether the issue has (1) a textually demonstrable commitment of the matter to another branch; (2) a lack of judicially discoverable and manageable standards; or (3) the impossibility of deciding a case without making a policy determination of a kind clearly suited for nonjudicial discretion. Finding that all three factors mandated the invocation of the political question doctrine, the Court granted Defendant’s motion to dismiss pursuant to Rule 12(b)(1) for lack of standing and dismissed Defendant’s motion to dismiss pursuant to Rule 12(b)(6) as moot.
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Mezcalito Apex, Inc. v. Murillo, 2026 NCBC 14 (N.C. Super. Ct. Feb. 17, 2026) (Robinson, C.J.)
Key Terms: Tex-Mex; motion to dismiss; Rule 12(b)(6); breach of contract; misappropriation of trade secrets; unfair and deceptive trade practices; confidentiality agreement; injunctive relief
This case arises out of a dispute between Plaintiff, a Tex-Mex restaurant, and its former senior-level employee, Defendant Murillo. Plaintiff alleged that, after leaving his employment with Plaintiff, Defendant moved to Missouri, where he worked for another Tex-Mex restaurant and subsequently became a 25% owner in that restaurant. Plaintiff further alleged that Defendant made a series of changes to the Missouri restaurant’s menus and other elements that “copied” Plaintiff’s restaurant.
After Plaintiff filed suit against both Defendant and the Missouri restaurant, the Missouri restaurant settled with Plaintiff by terminating Defendant’s employment and reversing the changes made to their restaurant, among other terms. Defendant moved to dismiss Plaintiff’s claims for breach of Defendant’s confidentiality agreement, misappropriation of Plaintiff’s trade secrets, unfair and deceptive trade practices, and preliminary and permanent injunction pursuant to Rule 12(b)(6).
Breach of Contract. The Court denied Defendant’s motion to dismiss the breach of contract claim, finding that Plaintiff sufficiently pled the elements of a valid contract and Defendant’s breach thereof.
Misappropriation of Trade Secrets. The Court granted Defendant’s motion to dismiss Plaintiff’s misappropriation of trade secrets claim, holding that: (1) menus and the presentation of food and drinks cannot constitute trade secrets, as they are within the public view; and (2) the remaining trade secrets were not identified with sufficient particularity under the NCTSPA. The Court further determined that Plaintiff’s allegation that Defendant had used, or will inevitably use or disclose the trade secrets, was insufficient to support the claim.
Unfair and Deceptive Trade Practices. The Court likewise granted Defendant’s motion to dismiss Plaintiff’s UDTPA claim, which relied upon the trade secret claim.
Preliminary and Permanent Injunction. Noting that injunctive relief is an ancillary remedy, and not an independent cause of action, the Court granted Defendant’s motion to dismiss this claim.
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PCS Phosphate Co. v. Jacobs Eng’g Grp., Inc., 2026 NCBC 15 (N.C. Super. Ct. Feb. 19, 2026) (Houston, J.)
Key Terms: motion to transfer; Rule 12(b)(3); forum non conveniens; choice of law provision; venue provision; N.C.G.S. § 22B–2; public policy; motion to dismiss
Plaintiffs PCS Phosphate Company, Inc. and PCS Administration (USA), Inc., both Delaware corporations, maintain their principal places of business in North Carolina. Defendant Buss Chemtech AG is a Swiss company, with its principal place of business in Switzerland. In 2019, Plaintiffs and Buss entered into an agreement, whereby Buss agreed to provide engineering services, equipment, and support for Plaintiffs’ project in North Carolina. The agreement contained choice of law and venue provisions, indicating that New York law would govern any disputes and designating the Southern District of New York as the venue for any such disputes. Plaintiffs filed suit against Buss in North Carolina, asserting claims for breach of contract, breach of warranty, negligent misrepresentation, and professional negligence.
Buss moved to transfer venue to the Southern District of New York under Rule 12(b)(3) or, in the alternative, dismiss Plaintiffs’ lawsuit for forum non conveniens. Plaintiffs argued that (1) a state court action could not be “transferred” to federal court; (2) the choice of law and venue provisions were void and unenforceable under N.C.G.S. § 22B–2 because the agreement pertained to the improvement of real property situated within North Carolina; and (3) as the agreement involved improvements to real property in North Carolina, this state was the most convenient forum for the dispute.
The Court denied Buss’s motion to transfer under Rule 12(b)(3), holding that the agreement was subject to N.C.G.S. § 22B–2, rendering the choice of law and venue clauses unenforceable as a matter of public policy. The Court also denied Buss’s motion to dismiss on the basis of forum non conveniens. Buss’s argument for forum non conveniens primarily rested on two points: (1) that the Court should deny jurisdiction on the basis of the choice of law and venue clauses; and (2) that a North Carolina judgment would be unenforceable in Switzerland. The Court summarily dismissed Buss’s first argument, as the clauses were found to be unenforceable. Noting that two of the three parties to the present dispute resided in North Carolina, the dispute centered around services to be performed in North Carolina, and other factors, the Court refused to dismiss the lawsuit on the basis of forum non conveniens.
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Jones v. Bull & Bear Invs. LLC, 2026 NCBC Order 18 (N.C. Super. Ct. Feb. 13, 2026) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(1); N.C.G.S. § 7A-45.4(a)(7); N.C.G.S. § 7A-45.4(c); timeliness; service of notice; landlord-tenant
Plaintiff Jones initiated this lawsuit on January 23, 2026 by filing a complaint against Defendant Bull & Bear Investments LLC in Guilford County Superior Court. In the complaint, Plaintiff asserted claims against Defendant for unlawful interference and coercion under the Fair Housing Act, voidable contract/duress, and unfair and deceptive trade practices. Ten days later, Plaintiff filed a Notice of Designation, seeking designation of this action as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(1) and (a)(7). Eight days after the filing of the NOD, Plaintiff emailed copies of the NOD to Business Court and Superior Court personnel, in addition to various state agencies, in an attempt to effectuate service.
The Court determined that Plaintiff’s designation was untimely. Noting that, under N.C.G.S. § 7A-45.4(d)(1), a notice of designation must be filed contemporaneously with a complaint, the Court observed that Plaintiff’s notice was not filed until ten days after the initial filing. The Court further noted that Plaintiff had failed to properly effectuate service on the Chief Justice of the Supreme Court of North Carolina and the Chief Judge of the Business Court under N.C.G.S. § 7A-45.4(c).
The Court also held that designation was not appropriate under N.C.G.S. § 7A-45.4(a)(1), as the dispute was essentially a landlord-tenant dispute which did not implicate the laws governing limited liability companies. The Court noted that designation under N.C.G.S. § 7A-45.4(a)(7) was inappropriate because that subsection has been repealed since October 2014.
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Brock v. Kyryk, 2026 NCBC Order 19 (N.C. Super. Ct. Feb. 23, 2026) (Robinson, C.J.)
Key Terms: opposition to designation; N.C.G.S. § 7A-45.4(e); derivative action; homeowners’ association; N.C.G.S. § 7A-45.4(a)(1); breach of fiduciary duty; North Carolina Planned Community Act; Chapter 55A; complexity; venue
Plaintiffs, members of a homeowners’ association, initiated a derivative lawsuit against Defendants, members of the association’s board, on 2 September 2025 (“First Action”). Defendant Taylor timely filed a notice of designation and, after the case was designated as a mandatory complex business case, Plaintiffs timely filed an opposition (“First Opposition”). Before the Court ruled on the First Opposition, Plaintiffs purported to voluntarily dismiss the First Action without prejudice on 1 December 2025. Taylor timely filed her response to the First Opposition the next day.
Plaintiffs filed another lawsuit on 11 December 2025, asserting similar claims against Defendants (“Second Action”). Taylor timely filed a notice of designation and, after the Second Action was designated to the Business Court, Plaintiffs again timely filed an opposition (“Second Opposition”). Taylor timely filed a response. The Court struck Plaintiffs’ voluntary dismissal of the First Action and stayed the Second Action.
Defendants argued that designation as a mandatory complex business case was proper under N.C.G.S. § 7A-45.4(a)(1), noting that the claim for breach of fiduciary duty asserted by Plaintiffs in both the First Action and Second Action was premised on fiduciary duties owed by nonprofit board members under Chapter 55A. The Court agreed, additionally noting that both complaints included derivative claims pursuant to N.C.G.S. § 55A-7-40.
The Court determined that none of Plaintiffs’ arguments had merit, holding that (1) case complexity has no bearing on designation; (2) the Business Court regularly hears disputes involving homeowners’ associations and their members; (3) the North Carolina Planned Community Act requires homeowners’ associations to exist as nonprofit corporations and further requires association officers and board members to exercise fiduciary duties described in Chapter 55A; (4) whether the case may be handled by a “regular” Superior Court Judge has no bearing on designation; and (5) once a case is designated to the Business Court, venue remains the county of origin and the assigned Business Court Judge is commissioned as a Superior Court Judge for that county. The Court overruled the Oppositions.
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Posted 02/24/26
By: Lauren Schantz
Child Care Inc. v. LJ Schs. (Carolina), Inc., 2026 NCBC 8 (N.C. Super. Ct. Feb. 6, 2026) (Brown, J.)
Key Terms: cross-motions for summary judgment; asset purchase agreement; breach of contract; breach of the duty of good faith and fair dealing; declaratory judgment; clear and unambiguous; arms-length negotiations; extrinsic evidence; illusory; dictionaries; part and parcel
This action arises out of a dispute over the interpretation of a provision in an Asset Purchase Agreement. Pursuant to the APA, LJ Schools purchased childcare facilities and other assets from Plaintiffs. The purchase price included a contingent payment of up to $6 million to be calculated based on a specified formula. The APA gave LJ Schools the sole discretion to determine the specific variables in the formula. At the end of the relevant period, Plaintiffs contended that they were owed the full $6 million; LJ Schools determined that Plaintiffs were owed nothing.
Plaintiffs sued LJ Schools, asserting claims for breach of contract, breach of the duty of good faith and fair dealing, and declaratory judgment. The parties filed cross-motions for summary judgment on all claims. The sole issue before the Court was to determine the amount of the contingent payment Plaintiffs were entitled to under the APA, which depended upon the meaning and interpretation of a single term.
LJ Schools’s Motion for Summary Judgment.
Breach of Contract. The Court first concluded that the terms of the APA were clear and unambiguous and the result of arms-length negotiations between the parties, making the consideration of extrinsic evidence unnecessary. Plaintiffs argued that the provision granting LJ Schools sole discretion to determine the specific variables in the relevant formula made the APA illusory. The Court disagreed, holding that LJ Schools was limited by the implied covenant of good faith and fair dealing when exercising its discretion. The Court further concluded that LJ Schools properly exercised its discretion to define and interpret an undefined term through the use of dictionaries. Plaintiffs failed to put forth any evidence of bad faith by LJ Schools, so the Court determined that LJ Schools was entitled to summary judgment on this claim.
Breach of the Duty of Good Faith and Fair Dealing and Declaratory Judgment. Because these claims were part and parcel of Plaintiffs’ breach of contract claim, the Court concluded that LJ Schools was entitled to summary judgment on these claims.
Plaintiffs’ Motion for Summary Judgment. Because Plaintiffs’ motion was based on the same claims and arguments, the Court denied it in its entirety.
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Hughes v. JBS Ventures, LLC, 2026 NCBC 9 (N.C. Super. Ct. Feb. 9, 2026) (Brown, J.)
Key Terms: judgment on the pleadings; Rule 12(c); LLC; membership interest; statute of limitations; conflict of laws; declaratory judgment; N.C.G.S. § 1-253; constructive trust; judicial dissolution; N.C.G.S. § 57D-6-02; standing; subject matter jurisdiction; breach of fiduciary duty; constructive fraud; choice-of-law; internal affairs doctrine; economic loss doctrine
This action arises out of a dispute over membership interests in an LLC. According to the operating agreement for JBS, Plaintiff Hughes would acquire a 23% interest in JBS after making specified capital contributions in cash. Rather than making cash payments, Hughes alleged that equivalent amounts were deducted from his monthly distributions. For five years, JBS treated Hughes as a member of the LLC. In 2019, Joseph Lenihan, the manager and majority member of JBS, informed Hughes that Hughes had no interest in JBS due to his failure to make the required cash payments.
Three years later, Lenihan caused JBS to sell its primary project and, in connection with a separate lawsuit, the Business Court ordered $6 million of the sale proceeds to be held in trust. Lenihan died a few months later. Two years after Lenihan’s death, Hughes sued JBS, Lenihan’s estate, the trust established by the Court and its trustee, and a minority member of JBS, asserting claims for declaratory judgment, constructive trust, and judicial dissolution of JBS. Hughes later amended his Complaint to add a claim for breach of fiduciary duty/constructive fraud. Defendants moved to dismiss Hughes’ Amended Complaint pursuant to Rule 12(c), contending that Hughes’ claims were barred by the statute of limitations and/or the economic loss doctrine.
Declaratory Judgment. The Court concluded that, because Hughes sought a declaratory judgment as to his rights under JBS’s operating agreement, the three-year statute of limitations for breach of contract applied to his declaratory judgment claim. The Court further concluded that Hughes’ declaratory judgment claim accrued, at the latest, in 2019 when Lenihan informed him that he had no interest in JBS. The Court therefore determined that the declaratory judgment claim was barred by the statute of limitations and granted Defendants’ motion to dismiss this claim.
Constructive Trust. Although claims for a constructive trust have a ten-year statute of limitations, the Court determined that Hughes’ constructive trust claim arose from the operating agreement and was properly subject to the three-year statute of limitations for breach of contract. Because this claim also accrued in 2019, the constructive trust claim was barred by the statute of limitations and the Court dismissed this claim.
Judicial Dissolution. Because JBS is a Georgia LLC, the Court concluded that it did not have subject matter jurisdiction over Hughes’ claim for judicial dissolution pursuant to Georgia law and dismissed this claim.
Breach of Fiduciary Duty/Constructive Fraud. The Court determined that the three-year statute of limitations for breach of contract applied to this claim because the underlying allegations arose from Hughes’ alleged membership interest in JBS based on the company’s operating agreement. The Court further concluded that the economic loss doctrine precluded Hughes from recovering in tort for breach of fiduciary duty or constructive fraud, since both the alleged misconduct and potential remedy therefor were based on the terms of JBS’s operating agreement. The Court granted Defendants’ motion as to this claim.
The Court dismissed all claims with prejudice, except for Plaintiff’s claim for judicial dissolution, which was dismissed without prejudice.
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Longville v. Benitez Nogueras, 2026 NCBC Order 8 (N.C. Super. Ct. Jan. 29, 2026) (Conrad, J.)
Key Terms: motion to seal; settlement; redact; public documents; embarrassment; reputational harm
After reaching a settlement, the parties jointly moved to seal several documents. The Court denied the motion because the documents had been filed publicly for months and the risk of embarrassment and/or reputational harm did not warrant sealing.
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Barings LLC v. Fowler, 2026 NCBC Order 9 (N.C. Super. Ct. Jan. 29, 2026) (Conrad, J.)
Key Terms: motion to compel; BCR 10.9; privilege; discovery deadline; extraordinary cause; untimely; BCR 10.4(a); disproportionate; overly burdensome; motion to reconsider; motion for leave to amend; interlocutory order; Rule 54(b); dismissal with prejudice; facially defective claims; manifest injustice; ruling on the merits; Rule 15(a)
As summarized here, Barings sued its competitor, Defendant Corinthia Global Management Limited, and two former employees, alleging that the former employees orchestrated a mass exodus of Barings employees who then joined Corinthia and used Barings’s trade secrets and confidential information to compete with Barings. Barings filed two motions to compel Corinthia to produce certain documents and a motion to reconsider and for leave to amend its complaint.
First Motion to Compel. The Court denied Barings’s motion to compel Corinthia to produce documents withheld on the basis of privilege as untimely under BCR 10.4(a) because the motion was made weeks after the close of fact discovery, granting it would require reopening discovery, and Barings did not demonstrate extraordinary cause for its delay. That the motion to compel was filed prior to the Court’s deadline for the submission of BCR 10.9 discovery disputes did not exempt it from the timeliness and other procedural requirements of the BCRs or previous Court orders.
Second Motion to Compel. Barings sought to push back the date range for Corinthia’s document production at the end of the discovery period. The Court denied the motion, concluding that the request was disproportionate to the needs of the case and overly burdensome for Corinthia at this late stage of the case.
Motion to Reconsider and for Leave to Amend. Barings moved the Court to reconsider its earlier ruling on its former employees’ motion to dismiss, modify the order to dismiss claims without prejudice rather than with prejudice, and grant Barings leave to amend its complaint for a third time. The Court denied the motion, concluding that (1) Barings failed to cure any facially defective claims asserted against the former employees when it filed an amended complaint and was not entitled to a third attempt; (2) a denial of Barings’s motion would not result in manifest injustice; (3) because a dismissal with prejudice is a ruling on the merits, Barings cannot seek leave to amend under Rule 15(a); and (4) Barings unreasonably delayed seeking leave to amend.
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WP Church, LLC v. Whalen, 2026 NCBC Order 10 (N.C. Super. Ct. Jan. 29, 2026) (Davis, J.)
Key Terms: restaurants; disqualification; inherent authority; sua sponte; derivative action; dual representation; N.C. R. Prof. Cond. 1.7; concurrent conflict of interest; N.C. R. Prof. Cond. 1.13; self-dealing; misappropriation; conflict of interest transaction; filings stricken
As previously summarized here, Plaintiff WP Church sued Defendant Whalen, the sole manager of 5Church Charleston, derivatively on behalf of 5Church based on Whalen’s alleged self-dealing and misappropriation of 5Church’s assets. 5Church then filed a third-party complaint and crossclaims against WP Church and others. Since the initiation of the lawsuit, the same law firm represented both Whalen and 5Church.
The Court, pursuant to its inherent authority, sua sponte directed the parties to submit briefs to determine whether Rules 1.7 and 1.13 of the Rules of Professional Conduct permitted the same firm to represent both Whalen and 5Church in this derivative action. The Court concluded that dual representation in a derivative action of a company and its principal(s) was permissible unless claims of serious wrongdoing, such as fraud, theft, self-dealing, or conflict of interest transactions, were asserted against a director or manager.
Whalen and 5Church argued that disqualification was improper, contending that they were not given proper notice of the grounds for disqualification, the declaration submitted by their law firm permitted dual representation, and plaintiffs in derivative actions should not be able to obtain disqualification by using “buzzwords” to describe director or manager wrongdoing. The Court found that each of these arguments lacked merit.
The Court concluded that, based on the numerous, well-pleaded allegations of self-dealing and misappropriation of 5Church’s assets asserted against Whalen, a single law firm could not represent both Whalen and 5Church. The Court then struck all filings made on behalf of 5Church, dismissed WP Church’s motion to dismiss 5Church’s third-party complaint as moot, and directed the parties to file a copy of this order with the Supreme Court of North Carolina once the appeals previously noticed by 5Church and Whalen were docketed.
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Charles Schwab & Co. v. Marilley, 2026 NCBC Order 11 (N.C. Super. Ct. Jan. 30, 2026) (Earp, J.)
Key Terms: interpleader; Uniform Transfer to Minors Act; sanctions; Rule 11; attorneys’ fees; N.C.G.S. § 6-21.5; crossclaim; Rule 7(a); Rule 8; preponderance of the evidence; factually insufficient; legally insufficient; improper purpose; complete absence of justiciable facts
As previously summarized here, Charles Schwab & Co. initiated this interpleader action to determine the ownership of funds it held in a brokerage account. The Court granted Ms. Marilley’s summary judgment motion, declaring her the rightful owner of the disputed funds to the exclusion of her father, Mr. Marilley, and dismissing Charles Schwab from the lawsuit. Ms. Marilley then moved for attorneys’ fees as a sanction under Rule 11 and pursuant to N.C.G.S. § 6-21.5.
Mr. Marilley argued that he should not be subject to sanctions or liable for attorneys’ fees because he did not assert any claims in the litigation. The Court disagreed, noting that Rule 11 and N.C.G.S. § 6-21.5 apply to any “pleading,” including an answer to a crossclaim, and emphasizing that it was Mr. Marilley’s refusal to recognize Ms. Marilley’s sole ownership of the disputed funds that gave rise to the action.
Rule 11 Sanctions. The Court determined that, based on a preponderance of the evidence, (1) Mr. Marilley lacked a reasonable belief that his wholesale denials of entire paragraphs of Ms. Marilley’s amended crossclaim were well-grounded in fact at the time he filed his answer; (2) he lacked a legally sufficient basis to assert any claim of ownership over the disputed funds; (3) his claim of ownership to the disputed funds was improper; and (4) Mr. Marilley intended to use such improper claim to harass Ms. Marilley and cause her unnecessary delay and needless cost. Because Mr. Marilley had an improper purpose for filing an answer that was both factually and legally insufficient, the Court concluded that Mr. Marilley had violated Rule 11 and that payment of Ms. Marilley’s attorneys’ fees incurred as a result of Mr. Marilley filing his answer was an appropriate sanction.
Attorneys’ Fees Under N.C.G.S. § 6-21.5. The Court concluded that Mr. Marilley reasonably should have known that no justiciable issue remained for him to litigate after the Court’s entry of its 8 October 2025 order and, in its discretion, awarded Ms. Marilley attorneys’ fees for all fees incurred since the entry of that order.
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Brady v. Cobin L. Grp., PLLC, 2026 NCBC Order 12 (N.C. Super. Ct. Jan. 30, 2026) (Davis, J.)
Key Terms: leave to amend; law firm; Rule 15; freely given when justice so requires; futility; declaratory judgment; subject matter jurisdiction; North Carolina Rules of Professional Conduct; North Carolina State Bar; joinder of necessary parties; N.C.G.S. § 1-260
This matter arises from an employment dispute between an attorney and his former firm. Plaintiff Brady sold his membership interest and goodwill in Defendant Cobin Law Group to Defendant Cobin pursuant to certain agreements. Brady then entered into an employment agreement with Cobin Law Group. After raising concerns about the firm’s accounting practices, Brad’s employment was terminated. Brady sued Cobin Law Group and Cobin for breaches of the various agreements, among other claims. After Defendants filed a partial motion to dismiss, answer, and counterclaims, Brady moved to amend his complaint under Rule 15.
Defendants opposed Brady’s motion based on futility. Defendants first contended that the Court lacked subject matter jurisdiction to hear Brady’s two declaratory judgment claims because they concerned the North Carolina Rules of Professional Conduct, which fell under the purview of the North Carolina State Bar. The Court disagreed, rejecting Defendants’ argument that the North Carolina State Bar had concurrent jurisdiction over these claims and noting that the parties agreed to make compliance with certain of the Rules of Professional Conduct a contractual obligation under the employment agreement.
The Court rejected Defendants’ argument that joinder of all of Brady’s clients for the past 20 years as necessary parties was required. The Court also disagreed with Defendants’ assertion that Brady’s declaratory judgment claims improperly sought judicial declarations as to disputed facts and concluded instead that Brady properly sought judicial declarations of the application of law to facts. The Court declined to address Defendants’ final argument that certain claims failed as a matter of law, determining that a fuller record and more extensive briefing was necessary.
The Court granted Brady’s motion for leave to amend.
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Fortune Brands Innovations, Inc. v. Bleser, 2026 NCBC Order 13 (N.C. Super. Ct. Feb. 4, 2026) (Robinson, C.J.)
Key Terms: order on designation; mandatory complex business case; amended complaint; N.C.G.S. § 7A-45.4(a)(8); misappropriation of trade secrets; new material issue; untimely; procedural shortcomings; breach of fiduciary duty; N.C.G.S. § 7A-45.4(a)(1); contemporaneous service; N.C.G.S. § 7A-45.4(c)
As previously discussed here, the Court concluded that Plaintiff Fortune Brands’s attempt to designate this matter as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(1) in October 2025 was untimely because the Notice of Designation was not filed contemporaneously with its complaint.
Fortune Brands filed an amended complaint in December 2025, adding claims for misappropriation of trade secrets and breach of fiduciary duty. Defendant Bleser sought to designate the matter as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(8) based on the misappropriation of trade secrets claim. The Court determined that Bleser’s basis for designation rested on the same conduct and facts as those set forth in the original complaint. Because the amended complaint did not raise a new material issue on which to base designation, the Court concluded that Bleser’s Notice of Designation, filed more than 30 days after the original complaint, was untimely.
The Court then addressed additional procedural shortcomings: (1) when the Court determined that Fortune Brands’s designation was untimely in October 2025, Bleser still had sufficient time to seek designation based on the original complaint and failed to do so; (2) since Bleser did not seek designation based on the newly-asserted breach of fiduciary duty claim, the Court declined to consider it as a basis for designation; and (3) Bleser filed his Notice of Designation prior to 5:00 P.M. but he did not email the Notice of Designation to the Chief Business Court Judge and the Chief Justice of the Supreme Court of North Carolina until after 5:00 P.M., thereby failing to comply with the requirement for contemporaneous service in N.C.G.S. § 7A-45.4(c).
The case was not designated as a mandatory complex business case.
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Brock v. Kyryk, 2026 NCBC Order 14 (N.C. Super. Ct. Feb. 5, 2026) (Houston, J.)
Key Terms: strike; notice of voluntary dismissal; putative derivative proceeding; N.C.G.S. § 55A-7-40; North Carolina Nonprofit Corporation Act; Rule 41
Although Plaintiffs purported to dismiss all claims asserted in this matter by filing a notice of voluntary dismissal, the action was brought pursuant to N.C.G.S. § 55A-7-40, the statute governing derivative proceedings in the North Carolina Nonprofit Corporation Act. Because a derivative proceeding may only be dismissed with approval of the Court, Plaintiffs’ purported dismissal of the action was ineffective under Rule 41. The Court struck Plaintiffs’ purported notice of voluntary dismissal and reopened the case.
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Mary Annette, LLC v. Crider, 2026 NCBC Order 15 (N.C. Super. Ct. Feb. 5, 2026) (Houston, J.)
Key Terms: motion to withdraw; limited appearance; Gen. R. Practice Super. & Dist. Cts. 12, 16; ex parte communications; scope of representation; BCR 3.6; BCR 6.4; BCR 7.3; N.C. R. Prof. Conduct 1.1, 1.2(c), 3.5(a)(3); general appearance; unprofessional; North Carolina State Bar
Counsel purported to make a limited appearance on behalf of Defendant Gina Crider for the purpose of filing a motion to dismiss. The action was later designated as a mandatory complex business case and the Court provided all counsel of record with instructions for practicing before the Business Court through its law clerk. Counsel responded that she no longer represented Ms. Crider. The Court, again through its law clerk, informed Counsel that she was welcome to file a motion to withdraw, but until the Court permitted her to withdraw, she would remain counsel of record consistent with Rule 16 of the General Rules of Practice for the Superior and District Courts. Counsel responded by sending an ex parte email to the Senior Court Coordinator, complaining about the Court’s instructions.
When Counsel finally filed a motion to withdraw, the motion (1) failed to comply with the consultation requirement of BCR 7.3; (2) failed to reflect Counsel’s consultation with her client regarding the motion; (3) failed to provide service information for Ms. Crider; (4) failed to comply with the formatting requirements of BCR 3.6; and (5) demonstrated that Counsel failed to comply with N.C. R. Prof. Conduct 1.1. The Court requested that Counsel file a supplemental or amended motion; Counsel again responded by sending the Senior Court Coordinator an ex parte email complaining about the Court’s instructions.
The Court reiterated that while an attorney may agree with a client to limit his or her scope of representation, once an attorney makes a general appearance before the Court, the attorney may not withdraw as counsel of record without leave of the Court. The Court denied Counsel’s motion without prejudice and directed her to file a compliant motion to withdraw. The Court admonished Counsel for her improper and unprofessional conduct and directed Counsel to cease ex parte communications with the Court. The Court indicated that the North Carolina State Bar would be notified of the order.
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Tanger Props. Ltd. P’ship v. ACE Am. Ins. Co., 2026 NCBC Order 16 (N.C. Super. Ct. Feb. 9, 2026) (Davis, J.)
Key Terms: appeal; motion to stay; automatic stay; N.C.G.S. § 1-294; interlocutory order; substantial right; choice-of-law; due process; discretionary stay
As previously summarized here, Tanger Properties sued its insurers, Defendants ACE American Insurance Company and Liberty Mutual Fire Insurance Company, for denying coverage related to losses associated with the COVID-19 pandemic. Tanger Properties subsequently filed an Amended Complaint, adding allegations and claims. Defendants moved to dismiss Tanger Properties’ Amended Complaint on the basis that Georgia, not North Carolina, law applied. The Court denied the motion and Defendants appealed. Defendants then moved to stay all proceedings pending their interlocutory appeal.
Automatic Stay. Defendants argued that the Court’s ruling on the choice-of-law issue would result in a denial of their due process rights and, thus, impact a substantial right. The Court disagreed, determining that the Court’s ruling did not raise due process concerns and did not affect a substantial right because Defendants’ choice of law argument was more akin to a defense, which would be protected on appeal from a final judgment. Accordingly, the automatic stay of N.C.G.S. § 1-294 was not triggered.
Discretionary Stay. After determining that Defendants failed to demonstrate either the potential for substantial prejudice absent a stay or a substantial likelihood of success on the merits of their appeal, the Court declined to enter a discretionary stay.
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Wright v. LoRusso, 2026 NCBC Order 17 (N.C. Super. Ct. Feb. 9, 2026) (Conrad, J.)
Key Terms: pro se; summary judgment; injunctive relief; accounting; disgorgement; attorneys’ fees; remedies; sanctions
Shortly before this matter was scheduled for trial, pro se Plaintiff Jody Stansell filed a motion in which he sought multiple forms of relief. The Court denied Stansell’s motion for summary judgment and request for emergency injunctive relief as untimely, duplicative, and without merit. Stansell made a request for an accounting, a claim he had voluntarily dismissed earlier in the litigation. The Court concluded that Stansell’s requests for disgorgement and attorneys’ fees were premature because they were remedies to which he might be entitled should he prevail at trial, and that his request for sanctions was baseless. The Court denied the motion in its entirety.
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Posted 02/10/26
