N.C. Business Court Opinions, June 17, 2026 – June 30, 2026
By: Amanda Reader, Romney Harris, and Ashley Oldfield
Covenant Clearinghouse LLC v. D.R. Horton, Inc, 2026 NCBC 56 (N.C. Super Ct. June 19, 2026) (Houston, J.)
Key Terms: Rule 12(b)(6); Rule 12(b)(7); declaratory judgment; breach of contract; declaration; real property; N.C.G.S. Chapter 39(A); transfer fee covenant; horizontal privity; touch and concern; under oath; necessary parties; proper parties
This case involves a recorded Declaration of Covenant with respect to certain real property. Plaintiff, the designated trustee under the Declaration at issue, sought declaratory judgments that the Declaration’s provision requiring payment of a 1% capital recovery fee on future property transfers remained valid, that a 2012 termination of the Declaration was ineffective because it was not executed under oath as required by the Declaration, and asserted a breach of contract claim against Defendant for allegedly selling lots without paying the fee. Defendant moved to dismiss under Rules 12(b)(6) and 12(b)(7).
Rule 12(b)(6)
Declaratory Judgment Claims. Defendant moved to dismiss Plaintiff’s declaratory judgment claims relating to the validity of the Declaration and purported termination thereunder pursuant to rule 12(b)(6) and asserted various arguments related to the enforceability of the Declaration. However, the Court emphasized that a motion to dismiss a declaratory judgment action is rarely appropriate unless there is no genuine controversy between the parties to be determined. Here, Defendants arguments go to the merits of Plaintiff’s declaratory judgment claims rather than asserting that no actual controversy exists; thus, the Court denied the motion to dismiss Plaintiff’s claims for declaratory relief.
Breach of Declaration. Defendant also moved to dismiss Plaintiff’s claim for breach of the declaration based on substantially the same arguments they made with respect to the declaratory judgment claims focusing on the validity and enforceability of the Declaration. Defendant argued that the Declaration was invalid pursuant to N.C.G.S. § 39A–1 et seq.’s prohibition against transfer fee covenants. However, the Court determined that the Declaration was recorded in February 2010 and on its face, N.C.G.S. § 39A–1 et seq. applies only to transfer fee covenants recorded after July 1, 2010. The Court therefore denied Defendant’s motion to dismiss the breach of declaration claim based on Defendant’s public policy arguments. Defendant further argued that Plaintiff’s claim for breach of the Declaration failed because the restrictive covenants in the Declaration did not satisfy the requirements of covenants running with the land of horizontal privity and touch and concern. The Court determined that accepting the well pleaded allegations of the complaint as true, as it must at the motion to dismiss stage, Defendant’s arguments were not enough to satisfy the Court that Plaintiff could not prove any set of facts that would support its claim for relief. The Court denied the motion to dismiss to the extent it was premised on these arguments. Finally, Defendant asserted that the Termination validly terminated any obligations Defendant might otherwise have under the Declaration, therefore invalidating Plaintiff’s claim for breach. Exploring the nuances of notarial requirements and the common usage of the phrase “under oath,” the Court determined that the Complaint sufficiently pleaded that the purported termination was not signed under oath as required by the Declaration and therefore denied Defendant’s motion to dismiss to the extent it relied on the termination’s effectiveness.
Rule 12(b)(7)
Without conclusively determining whether the parties at issue were necessary parties, in the exercise of its discretion, the Court granted Defendant’s Rule 12(b)(7) motion in part and required the lot owners, the beneficiaries, and the original declarants to be joined as proper parties as their interests could be affected by a ruling on the Declaration’s validity and the termination. The Court ordered Plaintiff to file an amended complaint adding the proper parties within thirty days.
*******
Healthcare Found. of Wilson v. DLP Healthcare, LLC, 2026 NCBC 57 (N.C. Super Ct. June 23, 2026) (Conrad, J.)
Key Terms: Rule 12(b)(6); breach of contract; implied covenant of good faith and fair dealing; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; tortious interference with contract; Delaware law; valuation agreement; put option
This suit arose from a dispute between the members of a hospital holding company over the valuation of Plaintiff’s minority interest in the company. As alleged, Plaintiff exercised a contractual put option requiring Defendant DLP Healthcare to purchase its membership interest, but Defendants halted the appraisal process after learning the valuation would require a significantly higher purchase price than anticipated. Plaintiff asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, tortious interference with contract. Defendants moved to dismiss all claims under Rule 12(b)(6).
Breaches of Contract. Plaintiff alleged that DLP Healthcare 1) breached the parties’ agreement establishing December 31, 2024 as the appraisal valuation date by renouncing that date; and 2) breached the put agreement and the operating agreement by encouraging or directing Plaintiff’s manager (the parent company of DLP Healthcare) to instruct the appraiser not to issue the final appraisal. Applying North Carolina law to the first and Delaware law to the second, the Court denied dismissal of these claims. Plaintiff had adequately alleged the existence of a separate agreement establishing December 31, 2024 as the appraisal valuation date, despite Defendants’ argument that no mutual assent existed, which was a question of fact for the trier of fact. Further, Plaintiff had demonstrated that it could potentially prove facts in support of its claims that Defendant breached the put agreement, operating agreement, and implied covenant of good faith and fair dealing.
Breach of Fiduciary Duty and Aiding and Abetting Breach of Fiduciary Duty. The Court also denied dismissal of Plaintiff’s direct and derivative claims for breach of fiduciary duties as well as the direct aiding and abetting claim. Applying Delaware law, the Court concluded Plaintiff plausibly alleged that Plaintiff’s manager breached its duty of loyalty by stopping the appraisal process to benefit its affiliate, DLP Healthcare, at Plaintiff’s expense. The Court further concluded Plaintiff sufficiently alleged knowing participation by DLP Healthcare and adequately pleaded damages resulting from the delayed completion of the put transaction.
Tortious Interference with Contract. The Court dismissed Plaintiff’s derivative claim for tortious interference with contract with prejudice because Plaintiff failed to allege facts showing that the appraiser’s delay in issuing the final appraisal was a breach of its engagement agreement or that the holding company suffered a cognizable injury from the delayed appraisal.
*******
Olds v. Olds, 2026 NCBC 58 (N.C. Super Ct. June 25, 2026) (Shirley, J.)
Key Terms: Rule 12(b)(6); uniform transfers to minors act; conversion; constructive fraud; fraudulent conveyance; uniform voidable transactions act; unfair and deceptive trade practices; defamation; qualified privilege; piercing the corporate veil;
Plaintiff, the beneficiary of a UTMA account, sued his father and an LLC he controlled after Defendant allegedly transferred more than $1 million from the UTMA account into the LLC shortly before Plaintiff turned 21 and refused to return the funds or produce company records unless Plaintiff signed a confidentiality agreement.
Conversion. Plaintiff alleged Defendant transferred more than $1 million from the UTMA account into an LLC he controlled without Plaintiff’s knowledge or consent to retain control over the funds. Plaintiff further alleged Defendant refused to return the funds, permit Plaintiff to withdraw from the LLC, or provide information regarding Plaintiff’s ownership interest. The Court held these allegations sufficiently stated a claim for conversion.
Fraud-Based Claims. The Court dismissed Plaintiff’s claims for fraud, common law fraud, fraudulent misrepresentation, and fraud in the inducement. Plaintiff failed to identify which statements were false with the particularity required by Rule 9(b). The Court also rejected Plaintiff’s concealment theory because the Complaint alleged Defendant disclosed the transfer of the funds, Plaintiff identified no duty requiring advance disclosure, and failed to allege reliance or damages arising from Defendants’ refusal to provide LLC records.
Constructive Fraud. The Court allowed the constructive fraud claim to proceed only insofar as it was based on Defendant’s transfer and continued control of the UTMA funds. It dismissed the claim to the extent it relied on Defendant’s alleged misrepresentations or concealment of material facts.
Fraudulent Conveyance. The Court dismissed Plaintiff’s fraudulent conveyance claim, holding the transferred funds were custodial property—not Defendant’s personal assets—and therefore were not “assets” under the Uniform Voidable Transactions Act.
Unfair and Deceptive Trade Practices. The Court dismissed Plaintiff’s claim under N.C.G.S. § 75-1.1. The Court concluded the claim failed for the same reasons as Plaintiff’s fraud claims and further held the alleged conduct did not occur “in or affecting commerce” because it concerned the internal affairs of an LLC rather than marketplace activity.
Piercing the Corporate Veil; Punitive Damages; Statement of Sum Certain. The Court dismissed Plaintiff’s veil-piercing and punitive damages claims without prejudice because neither is an independent cause of action. It denied Defendants’ motion as to Plaintiff’s statement of sum certain, construing it as a request for damages.
Defamation Counterclaim. The Court granted in part and denied in part Plaintiff’s motion to dismiss Defendant’s defamation counterclaim. The Court held Defendant sufficiently alleged actual malice to defeat a defense of qualified privilege. With respect to Defendant’s allegations that Plaintiff had made “numerous statements” to unidentified third parties concerning Defendant’s allegedly fraudulent conduct, the Court dismissed the claim because the allegations were too vague to allege defamation per se and Defendant did not allege the special damages necessary for a claim of defamation per quod. The Court allowed the counterclaim to proceed based on Plaintiff’s statements to Wofford College and emails sent on March 2 and 3, 2025, concluding the alleged statements were pleaded with sufficient particularity and that at least some constituted verifiable factual assertions rather than non-actionable opinion.
*******
Zhang v. CapitalNexus, LLC, 2026 NBCB 59 (N.C. Super Ct. June 25, 2026) (Conrad, J.)
Key Terms: Rule 12(b)(6); EB-5 immigration program; derivative claims; Rule 23(b); fraud; breach of contract; inspection rights, conspiracy; negligent misrepresentation; breach of fiduciary duties; tortious interference with contract; declaratory judgment; N.C.G.S. § 75-1.1
Plaintiffs, two Chinese citizens, invested over a million dollars in Northlake Hotel in connection with the federal EB-5 immigration program, which allows foreign citizens to apply for permanent residency in the U.S. if they invest in a business that creates jobs for American workers. In short, Northlake Hotel would be owned by Avivar, with MJM Group (owned by the Mittals) as its majority member and Charlotte Harris as its minority member. Charlotte Harris’s general partner was CapitalNexus (closely held by Tony Zhang) and its limited partners included Plaintiffs and other investors. Unbeknownst to Plaintiffs, Defendants engaged in a series of transactions and restructurings and Avivar eventually filed chapter 11 bankruptcy. Although Northlake Hotel was sold during the bankruptcy, neither Charlotte Harris nor the Plaintiffs received any return. Plaintiffs initiated this action alleging numerous claims relating to their lost investments and the potential effect Defendants’ actions would have on their EB-5 petitions. Defendants moved to dismiss all claims.
Derivative Claims. The Court dismissed all of the derivative claims without prejudice because Plaintiffs failed to verify their amended complaint as required by Rule 23(b). Rule 23(b)’s verification requirement for derivative actions applies not only to corporations but also to limited partnerships and other entities with a legal identity separate from their owners.
Breach of Contract Claims. Plaintiffs alleged three breach of contract claims. The Court dismissed the claims based on the Investment Summary and Investment Memo, holding that, on the face of the documents, the Summary was not a contract and the Memo was not a guarantee; thus there could be no breach of contract. As to the Partnership Agreement, the Court concluded that Plaintiffs had standing to enforce it, but nonetheless dismissed the claim to the extent it was asserted against individuals or entities who were not parties to Partnership Agreement. The Court also denied dismissal of Plaintiffs’ claim, as third-party beneficiaries, for breach of the operating agreements. The Court rejected Defendants’ arguments that Plaintiffs lacked standing, that the claim was barred by the statute of limitations, and that any alleged breach could not have affected Plaintiffs’ permanent residency applications.
Fraud-based Claims. Plaintiffs asserted fraud-based claims based on 1) allegations that they were wrongfully induced to invest in Charlotte Harris; and 2) allegations that Northlake Hotel’s financial status and Avivar’s bankruptcy proceeding were concealed from them, thereby preventing them from intervening on Charlotte Harris’s behalf. With respect to wrongful inducement, the Court dismissed the claim to the extent it was based on alleged representations which were contrary to the express terms of the offering documents or which were based on group pleading. However, the Court denied dismissal as to specific representations made by Tony and CapitalNexus. The Court also dismissed the claim with respect to Avivar’s bankruptcy proceeding because any injury was to the partnership as a whole, not to the Plaintiffs individually, and thus Plaintiffs did not have standing.
Fiduciary Duty-based Claims. Plaintiffs alleged that Tony and the Mittals had breached fiduciary duties owed to Charlotte Harris by engaging in self-dealing and other misconduct. The Court dismissed these claims for lack of standing because the duties owed were to Charlotte Harris, not the Plaintiffs individually, and there were no allegations of a separate, distinct injury to Plaintiffs.
Tortious Interference with Contract. The Court dismissed this claim because the complaint alleged only conclusory assertions that Sterling (another member of Avivar) and the Mittals had intentionally induced Tony not to perform under the Investment Memo, Investment Summary, and Partnership Agreement.
UDTPA Claim. The Court dismissed the UDTPA claim because it was based on conduct internal to the partnership and related businesses and therefore was not in or affecting commerce.
Civil Conspiracy. The Court denied dismissal of this claim because claims remained upon which a conspiracy claim could be based and, as alleged, the intracorporate immunity doctrine did not apply because at least one independent party, Sterling, was involved.
Inspection Rights. Because Plaintiff had adequately alleged that it made an inspection demand to CapitalNexus which was refused, the Court denied dismissal of this claim. CapitalNexus’s argument that it had fulfilled its statutory and contractual obligations was a question for a later stage.
Declaratory Judgment. The Court denied dismissal of this claim, concluding that Plaintiffs had adequately alleged an actual controversy regarding CapitalNexus’s position as general partner of Charlotte Harris and the status of Plaintiffs’ capital accounts and partnership rights.
*******
Dougherty v. Bojangles Rests., Inc., 2026 NCBC 60 (N.C. Super Ct. June 29, 2026) (Earp, J.)
Key Terms: Rule 12(b)(6); data breach; negligence; negligence per se; breach of implied contract; unjust enrichment; invasion of privacy; unfair and deceptive trade practices; declaratory judgment; injunctive relief
Plaintiffs, former employees of Bojangles, brought this putative class action asserting various claims against Bojangles arising from an alleged data breach involving employees’ and former employees’ personal information. Plaintiffs alleged that Bojangles failed to implement reasonable cybersecurity measures and delayed notifying affected individuals for approximately eight months, thereby causing damages.
Negligence per se. The Court dismissed Plaintiffs’ this claim with prejudice because it was based on alleged violations of the Federal Trade Commission Act and HIPAA, which are not public safety laws and therefore cannot support a negligence per se claim.
Negligence. The Court declined to dismiss Plaintiffs’ negligence claim, concluding that, under North Carolina’s liberal notice-pleading standard, Plaintiffs had 1) adequately alleged that Bojangles had a duty to exercise reasonable care in safeguarding employee information and to provide a timely notice of breach; and 2) sufficiently pleaded causation and damages by alleging that the data breach caused them, or would cause them, harm and to suffer damages, including fraudulent debit card charges, increased spam and scam activity, the expenditure of substantial time and money monitoring their accounts, exposure of their personal information on the dark web, and emotional distress.
Breach of Implied Contract. The Court denied dismissal of this claim, holding that Plaintiffs had adequately alleged an implied agreement that, in exchange for providing sensitive personal information as a condition of employment, Bojangles would employ reasonable cybersecurity measures to protect that information.
Unjust Enrichment. The Court denied dismissal of this claim, concluding that Plaintiffs’ allegations that they reasonably understood that, in exchange for receiving Plaintiffs’ personal information, Bojangles would use adequate data security measures to protect the information.
Invasion of Privacy. The Court dismissed Plaintiffs’ invasion of privacy claim, concluding that the complaint did not allege Bojangles itself intruded upon Plaintiffs’ private affairs, but instead alleged unauthorized access by third-party cybercriminals.
Unfair and Deceptive Trade Practices. The Court denied dismissal of this claim, concluding that the allegations of Bojangles’ failure to implement reasonable security measures in violation of their common law and statutory duties were sufficient to allege unfair conduct under the UDTPA.
Declaratory Judgment. The Court concluded that Plaintiffs had adequately alleged an actual controversy based on allegations that Bojangles continues to have possession of Plaintiffs’ personal information and still fails to have adequate security measures.
To subscribe, email aoldfield@rcdlaw.net
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.