N.C. Business Court Opinions, August 26, 2026 – September 8, 2026
By: Lauren Schantz
Spencer Creek, L.L.C. v. Linville Ridge Prop. Owners’ Ass’n, Inc., 2026 NCBC 74 (N.C. Super. Ct. Aug. 28, 2026) (Houston, J.)
Key Terms: property owners’ association; motion to dismiss; Rule 12(b)(6); breach of fiduciary duty; direct claims; injunctive relief; Rule 12(b)(7); necessary party; proper party; declaratory judgment; N.C.G.S. § 1-260; joinder; BCR 3.1; BCR 7.1; BCR 7.2
Plaintiff Farbman is the sole officer of Plaintiff Spencer Creek, L.L.C., which owns real property in the Linville Ridge development and is a member of Defendant Linville Ridge Property Owners’ Association, Inc. (the “POA”). Defendant Duffy is the president of the POA’s board of directors. Plaintiffs allege that Defendants improperly assessed homeowners for the cost of repairs following Hurricane Helene.
Plaintiffs initiated this putative class action against Defendants, asserting claims for breach of contract, declaratory judgment, breach of fiduciary duty, injunctive relief, and violations of N.C.G.S. §§ 75-1.1, -50. Although Defendants sought to dismiss the entirety of Plaintiffs’ complaint, Defendants confined the arguments in their brief to dismissal of Plaintiffs’ claims for breach of fiduciary duty and injunctive relief pursuant to Rule 12(b)(6) and dismissal of Plaintiffs’ claim for declaratory judgment for failure to join necessary parties pursuant to Rule 12(b)(7).
Breach of Fiduciary Duty. Plaintiffs contended that Defendants breached fiduciary duties they owed to POA members by levying repair assessments in violation of the POA’s Bylaws. The Court noted that Plaintiffs’ brief contained overstatements or misstatements of law, including a purported quotation from the North Carolina Planned Community Act that was a quotation from the North Carolina Condominium Act. The Court concluded that, because Plaintiffs had asserted direct rather than derivative claims, the complaint contained no allegations of a fiduciary relationship between Plaintiffs and Defendants since neither a property owners’ association nor its board members owe a de jure fiduciary duty to the association’s members. The Court granted the motion and dismissed this claim with prejudice.
Injunctive Relief. The Court reiterated that an injunction is a remedy, not a separate cause of action. The Court granted the motion and dismissed Plaintiffs’ claim for injunctive relief without prejudice to seek an injunction as a remedy.
Failure to Join Necessary Parties. Despite initiating a putative class action, Plaintiffs contended that the other POA members were not necessary parties to the litigation; Defendants contended that they were. The Court noted that, in a prior district court action involving many of the same issues, Spencer Creek was twice ordered to join all POA members as necessary parties. Instead, Spencer Creek dismissed the prior action and initiated this litigation. The Court determined that, because Plaintiffs’ declaratory judgment claim could affect the other POA members based on the Court’s potential determination of their rights and obligations under the POA’s governing documents, the other POA members were proper parties. The Court ordered Plaintiffs to join all POA members as parties to the litigation and denied Defendants’ motion to dismiss pursuant to Rule 12(b)(7) as moot.
The Court also addressed several violations of the Business Court Rules. Plaintiffs filed attachments to the complaint on Odyssey but not on the Business Court’s e-filing system as required by BCR 3.1, so the Court did not consider them in deciding the motion. Defendants’ motion was framed as both a motion to dismiss and a motion to disqualify. Because BCR 7.2 requires each motion to be filed separately, the Court chose to address the motion to dismiss. Plaintiffs purported to file a “corrected” opposition brief on the Business Court’s e-filing system without seeking leave of Court, so the Court struck the second brief pursuant to BCR 7.1.
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Menscer v. Pac. Alliance Corp., 2026 NCBC 75 (N.C. Super. Ct. Aug. 31, 2026) (Conrad, C.J.)
Key Terms: chapter 11 bankruptcy; stay; BCR 7.6; dismiss interlocutory appeal; Appellate Rule 25(a); failure to prosecute; Rule 41(b); unreasonable delay; abandonment; failure to participate
Plaintiffs asserted direct claims and derivative claims on behalf of Star Leasing, Inc. against Defendant Pacific Alliance Corporation and the four individual defendants. Nine years ago, the Court granted in part Plaintiffs’ motion for partial summary judgment. Pacific Alliance and the individual defendants timely filed a notice of appeal from the Court’s interlocutory decision. Shortly thereafter, counsel for Pacific Alliance and the individual defendants withdrew, Pacific Alliance filed for Chapter 11 bankruptcy, and the Court entered a stay. The appeal was never perfected.
After the bankruptcy proceedings concluded in January 2026, the Court held a status conference but neither Pacific Alliance nor the individual defendants appeared despite proper notice. Plaintiffs moved to dismiss the appeal and, under Rule 41(b), the claim asserted by Pacific Alliance. No responsive briefs were filed so the Court treated the motion as uncontested.
The Court concluded that Pacific Alliance and the individual defendants had abandoned the appeal and granted Plaintiffs’ motion to dismiss the appeal. The Court then concluded that Pacific Alliance had unreasonably delayed the litigation and granted Plaintiffs’ motion to dismiss, without prejudice, Pacific Alliance’s claim.
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VF Servs., LLC v. Kyndryl, Inc., 2026 NCBC Order 69 (N.C. Super. Ct. Aug. 31, 2026) (Shirley, J.)
Key Terms: arbitration; stay; declaratory judgment; injunction; choice of law; Federal Arbitration Act; substantive arbitrability; scope; delegation provision; American Arbitration Association; clear and unmistakable evidence; procedural arbitrability
Defendant provided Plaintiff with IT infrastructure services pursuant to a master services agreement. After a dispute arose regarding payment for certain services, Defendant filed a demand for arbitration asserting two claims for breach of contract. As the arbitration process got underway, Plaintiff initiated this action, seeking a declaratory judgment as to whether the demand for arbitration exceeded the scope of the agreement to arbitrate and whether certain conditions precedent to arbitration had been satisfied. Plaintiff also sought to enjoin Defendant from pursuing arbitration, including the pending arbitration, and subsequently filed a motion to stay arbitration.
The Court first concluded that, because the agreement involved commerce, the Federal Arbitration Act controlled the analysis of whether Defendant’s claims should be arbitrated. Plaintiff argued that the parties did not agree to arbitrate the underlying disputes; Defendant argued that the arbitrator, rather than the Court, must decide whether its claims are arbitrable. The Court agreed with Defendant, holding that the agreement’s express adoption of the American Arbitration Association’s rules, which delegate questions of substantive arbitrability to the arbitrator, constituted clear and unmistakable evidence that the parties intended to arbitrate questions of substantive arbitrability. The Court also determined that whether certain conditions precedent had been satisfied was a question of procedural arbitrability for the arbitrator to decide. The Court denied the motion to stay.
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Higher Tech Realty NC, LLC v. Navigate Realty, LLC, 2026 NCBC Order 70 (N.C. Super. Ct. Sept. 4, 2026) (Davis, J.)
Key Terms: preliminary injunction; former employees; temporary restraining order; breach of contract; non-competition; non-solicitation; likelihood of success on the merits; irreparable loss; restrictive covenants; joint employment doctrine; blue pencil doctrine; tortious interference with contract
Plaintiff Higher Tech Realty NC, LLC previously employed the three individual Defendants who now work for Defendant Navigate Realty, LLC, a direct competitor of Higher Tech. The three individual Defendants allegedly solicited other Higher Tech employees to resign from Higher Tech and work for Navigate in violation of their employment agreements. After sending cease and desist letters to Defendants, Higher Tech initiated this action and moved for a Temporary Restraining Order. The Court granted the motion and entered a TRO, extending it twice.
Through its preliminary injunction motion, Higher Tech sought to enjoin the individual Defendants from violating the non-competition and non-solicitation clauses of their employment agreements and to enjoin Navigate from tortiously interfering with Higher Tech’s contractual relationships.
Higher Tech alleged that individual Defendants Byerly and Conner breached the anti-solicitation clauses in their employment agreements by hiring away a particular employee, but Defendants submitted a declaration that the employee worked for an affiliate of Higher Tech. Higher Tech argued that the joint employment doctrine applied, but the Court disagreed based on the current record. Defendants presented unrebutted testimony that individual Defendant Byerly was directed to forward an email to individual Defendant Johnson. The parties presented competing evidence regarding a March 2026 dinner attended by the individual Defendants and Higher Tech employees, and the Court found the firsthand account of Defendant Johnson more persuasive. The Court concluded that Higher Tech failed to show a likelihood of success on the merits of its claim for breach of the non-solicitation clause against the individual Defendants and denied the motion as to these claims.
Higher Tech alleged that the individual Defendants also breached the non-competition clauses in their employment agreements. The Court determined that the clauses were vague and overbroad and that it could not use a “blue pencil” to enforce the remaining provisions. Because Higher Tech failed to show a likelihood of success on the issue of whether the clauses were enforceable, the Court denied the motion as to these claims.
Higher Tech alleged that Navigate poached its former employees and encouraged the individual Defendants to violate their employment agreements. The Court concluded that, based on the current record and its determination that Higher Tech was unlikely to succeed on the merits of its breach of contract claims, Higher Tech also failed to show a likelihood of success on its claim for tortious interference against Navigate. The Court denied the motion as to this claim.
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Davis v. HCA Healthcare, Inc., 2026 NCBC Order 71 (N.C. Super. Ct. Sept. 8, 2026) (Davis, J.)
Key Terms: class certification; antitrust; monopoly; N.C.G.S. § 75-1; healthcare; insurance; Rule 23 of the North Carolina Rules of Civil Procedure; predominance; indirect purchaser; pass through; motion to exclude; expert report; Rule 702 of the North Carolina Rules of Evidence; Daubert
As previously discussed here, several North Carolina residents initiated this putative class action lawsuit against Defendants, alleging that they have engaged in anticompetitive acts regarding the provision of inpatient and outpatient services in western North Carolina. Plaintiffs moved to certify a class of western North Carolina individuals or entities who paid premiums for self-insured or fully-insured products pursuant to contracts between Defendants and Blue Cross Blue Shield of North Carolina or United Healthcare, Inc. Defendants moved to exclude the report of Plaintiffs’ expert, which was filed in support of Plaintiffs’ class certification motion.
Plaintiffs contended that they satisfied the “predominance” element of class certification based on (1) Defendants’ alleged use of their marketing power to negotiate anticompetitive contracts with BCBS and United that allowed Defendants to charge higher prices for healthcare services which were “passed through” in the form of higher health insurance premiums to putative class members, and (2) Defendants’ monopoly on the provision of healthcare services in western North Carolina that resulted in an overall decrease in the quality of care the putative class members received. The Court observed that, unlike its federal counterpart, Rule 23 of the North Carolina Rules of Civil Procedure requires a showing that common issues of fact or law predominate regardless of whether the putative class action seeks monetary damages or injunctive relief.
Plaintiffs first argued that they satisfied their burden as to the “predominance” element based on the opinions of their expert. The Court disagreed, concluding that Plaintiffs’ expert based his opinions on general economic principles rather than an econometric or statistical analysis of the effects of Defendants’ alleged anticompetitive conduct on the premiums actually paid by the putative class members. The Court also concluded that the expert’s failure to use reliable economic, statistical, or other empirical methods did not satisfy the criteria for admissibility under Rule 702 of the North Carolina Rules of Evidence.
Plaintiffs next argued that they satisfied their burden of demonstrating class-wide impact through the deposition testimony of BCBS’s and United’s corporate representatives. The Court again disagreed, noting that the representatives testified about several factors that could affect premium rates generally.
The Court also rejected Plaintiffs’ argument that the putative class members were allegedly harmed by a decrease in the quality of care provided by Defendants, noting that not only is such harm individualized, but also that Plaintiffs failed to show whether any of the putative class members obtained medical care from Defendants.
The Court denied Plaintiffs’ motion for class certification without prejudice and granted Defendants’ motion to exclude those portions of Plaintiffs’ expert report that discussed the alleged pass through of class-wide harm to indirect purchasers in the form of higher premiums.
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NC4 Canterbury, LLC v. Meridian Senior Living, LLC, 2026 NCBC Order 72 (N.C Super. Ct. Sept. 8, 2026) (Davis, J.)
Key Terms: senior living; lease; default; general receivership; limited receivership; North Carolina Commercial Receivership Act
Plaintiffs own several senior living properties in North Carolina and lease the properties to the tenant Defendants pursuant to several leases. Plaintiffs initiated this action, moved for the appointment of a general receiver, and sought a preliminary injunction, alleging that the tenant Defendants breached numerous provisions of their leases.
Plaintiffs contended that the leases provide for the appointment of a receiver upon the tenant Defendants’ default. Plaintiffs alleged that the tenant Defendants have failed to pay rent, charged unauthorized management fees, refused to provide Plaintiffs with their financial statements, refused to permit audits or property inspections, and failed to report regulatory violations. Plaintiffs argued that tenant Defendants’ actions constitute gross misconduct and negligence and endanger Plaintiffs’ rents and profits from the properties.
The Court granted in part Plaintiffs’ motion and appointed a limited, rather than a general, receiver over the tenant Defendants. The Court vested management and control of the tenant Defendants and operation of the senior living facilities in the receiver. The Court delineated the powers, duties, and limitations of the receiver and the duties of the tenant Defendants.
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