Archive for the ‘Business Court Blast’ Category
By: Lauren Schantz
Implus Footcare, LLC v. Vore, 2025 NCBC 55 (N.C. Super. Ct. Sept. 11, 2025) (Davis, J.)
Key Terms: BCR 7.4; motion to amend; Rule 15; undue delay; unfair prejudice and bad faith; legal futility; judicial economy; moot; motion to dismiss; Rule 12(b)(6); breach of contract; novation; plain wording; non-solicitation; confidentiality; blue pencil; failure to brief arguments; unfair and deceptive trade practices; N.C.G.S. § 75-1.1; substantial aggravating circumstances; implied covenant of good faith and fair dealing; ambiguous; misappropriation of trade secrets; security measures; tortious interference with contract; legitimate business competition; specific knowledge; actual harm; civil conspiracy; statute of frauds; affirmative defense; tortious interference with economic advantage; abuse of process
This suit arose from a dispute between two competitors within the footcare accessories and shoe care industry. Plaintiff IM Group Holdings Corporation is the parent company of Plaintiff Implus Footcare, LLC, which designs and distributes footwear accessories and shoe care products. Implus employed Defendant Todd Vore as its president and Defendants H.B. Shoes Co. and The Mike Hale Company (“MHC”) as independent contractor sales representatives. Implus terminated its sales representative agreements (“SRAs”) with H.B. and MHC after Vore left Implus in 2020.
Implus alleged that Vore, H.B., and MHC continued to receive confidential financial information about Implus after their departures and used it to compete with Implus through Vore’s new company, Defendant Blue San, LLC. Implus alleged that at the time it entered into new SRAs with H.B. and MHC in 2024, they had already entered into similar agreements with Blue San and, at Vore’s urging, H.B. and MHC repudiated the 2024 SRAs with Implus.
Vore alleged that Blue San expanded into the footwear accessories and shoe care industry when Implus began experiencing market and financial distress. H.B. and MHC joined Blue San as sales representatives pursuant to oral agreements. Blue San alleged that Implus tried to hinder Blue San’s entry into the market by luring away H.B. and MHC and initiating this lawsuit.
Defendants moved to dismiss the Second Amended Complaint, Implus moved to dismiss Blue San’s counterclaims, and, before the Court decided the motions to dismiss, Plaintiffs moved to file a Third Amended Complaint that added additional claims and defendants.
Motion to Amend. Vore and Blue San argued that the Court should deny Plaintiffs’ motion to amend based on undue delay, unfair prejudice and bad faith, and legal futility. The Court disagreed, concluding that (1) there was no undue delay due to the unique procedural posture of the case and because the request was based on recently acquired discovery; (2) the amendments were not made in bad faith and would not result in unfair prejudice; (3) the legal sufficiency of the new claims was better suited to later motions practice; and (4) the addition of the new claims to the current lawsuit would promote judicial economy. The Court granted the motion. Although the filing of an amended complaint usually moots a prior complaint, the Court concluded that, in the interest of judicial economy, it could still decide defendants’ pending motions to dismiss because the amended complaint did not assert new material allegations related to the claims at issue in the motions.
Defendants H.B. and MHC’s Motion to Dismiss
Breach of Contract–Prior SRAs. Implus argued that H.B. and MHC violated the confidentiality provisions of their prior SRAs by sharing misdirected reports from former customers with Vore and Blue San after their termination. H.B. and MHC argued that the 2024 SRAs novated the prior SRAs—including the confidentiality provisions. The Court could not conclude from the plain wording of the 2024 SRAs that the parties intended a novation of the prior SRAs and denied the motion as to this claim.
Breach of Contract–2024 SRAs. Implus alleged that H.B. and MHC breached the non-solicitation and confidentiality provisions of the 2024 SRAs. Because counsel for Implus conceded that the non-solicitation provisions were overbroad and Implus failed to raise the blue pencil doctrine in its briefs, the Court dismissed this portion of the claim with prejudice. The Court concluded that the confidentiality provision was not overly broad or unenforceable and denied the motion as to this portion of the claim.
Unfair and Deceptive Trade Practices. The Court concluded that Implus sufficiently alleged substantial aggravating circumstances accompanying a breach of contract and denied the motion as to this claim.
Defendants’ Vore and Blue San’s Motion to Dismiss
Breach of Contract–Implied Covenant of Good Faith and Fair Dealing. IMGH alleged that Vore breached the implied covenant of good faith and fair dealing in his stockholders agreement by failing to inform Implus of his association with Blue San. The Court disagreed, determining that this was an obligation the parties could have (and did not) include in the agreement. The Court dismissed the claim with prejudice.
Breach of Contract–Confidentiality. Implus alleged that Vore breached the confidentiality provision of the stockholders agreement by sharing Plaintiffs’ confidential information with Defendants. The Court denied the motion as to this claim, because either the allegations in the complaint were sufficient or the language in the agreement was ambiguous.
Misappropriation of Trade Secrets. The Court agreed with Vore and Blue San that Implus failed to plead that adequate measures were taken to safeguard the secrecy of the alleged trade secret information and granted the motion, dismissing this claim with prejudice.
Tortious Interference with Contract. Implus alleged that Vore and Blue San interfered with (1) the confidentiality provisions of the prior and 2024 SRAs by asking H.B. and MHC to forward customer reports containing Implus’s confidential information to them, and (2) the term and service provisions of the 2024 SRAs by inducing H.B. and MHC to repudiate the 2024 SRAs. Vore and Blue San contended that (1) they were engaging in legitimate business competition; (2) Implus failed to allege they had specific knowledge of the provisions; and (3) Implus suffered no actual harm. The Court disagreed with Vore and Blue San and denied their motion to dismiss these claims.
Unfair and Deceptive Trade Practices. Because Implus sufficiently pleaded claims for tortious interference with contract, Implus also sufficiently pleaded its UDTP claim. The Court denied the motion to dismiss this claim.
Civil Conspiracy. Implus alleged that Blue San engaged in a conspiracy with H.B. and MHC to breach the SRAs. The Court disagreed, determining that (1) the basis of the underlying torts cannot also serve as the basis of a conspiracy to commit those torts; (2) complying with a request does not demonstrate a common scheme or objective; and (3) North Carolina does not recognize a claim for conspiracy based on a breach of contract claim. The Court dismissed the claim with prejudice.
Implus’s Motion to Dismiss
Tortious Interference with Contract. Blue San alleged that Implus induced H.B. and MHC to breach their contracts with Blue San. Implus argued that these contracts were invalid under the statute of frauds, but the Court determined that, as an affirmative defense, the statute of frauds is not properly considered at the Rule 12(b)(6) stage. Implus also contended that it was engaged in legitimate business competition by hiring H.B. and MHC, but the Court concluded that Blue San sufficiently alleged that Implus’s interference with H.B. and MHC’s oral employment agreements did not reflect legitimate competition. The Court denied the motion as to this claim.
Tortious Interference with Prospective Economic Advantage–H.B. and MHC. Should Blue San’s oral agreements with H.B. and MHC be unenforceable, Blue San argued that it would have entered into contracts with them but for Implus’s interference. Implus moved to dismiss on the same grounds as those argued regarding the tortious interference with contract claim and the Court denied Implus’s motion for the same reasons.
Tortious Interference with Prospective Economic Advantage–Prospective Customers. In response to allegations that that Implus interfered with contracts with Blue San’s potential customers, Implus argued that it was engaged in legitimate business competition and that the allegations failed to allege that the customers would have entered into contracts with Blue San “but for” Implus’s conduct. The Court concluded that Blue San adequately pleaded that Implus’s actions were anti-competitive rather than legitimate business tactics. The Court further concluded that Blue San adequately alleged that Implus’s conduct interfered with Blue San’s ability to contract with one of the alleged prospective customers but not the other. The Court denied Implus’s motion with respect to the first prospective customer, but granted it as to the second prospective customer and dismissed that portion of the claim with prejudice.
Abuse of Process. Blue San argued that after initiating this action, Implus improperly sent document preservation letters to Blue San’s principals to intimidate them. However, since Blue San conceded at the hearing that the letters were routine, the Court rejected this basis for an abuse of process counterclaim. Blue San argued that Implus improperly sought assurances from B.H. and MHC related to the 2024 SRAs in an email to their attorney, but the Court determined both that the email was sent prior to the issuance of process and the demands themselves did not support an abuse of process counterclaim. Blue San argued that Implus used the complaint to make demands of Vore for relief in addition to those sought in the complaint. The Court rejected this argument, noting a lack of persuasive legal authority and that the demands were made through counsel. The Court dismissed the counterclaim with prejudice.
Unfair and Deceptive Trade Practices. Because Blue San sufficiently pleaded claims for tortious interference with contract and economic advantage, Blue San also sufficiently pleaded its UDTP claim. The Court denied the motion as to this counterclaim.
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BioSkryb Genomics, Inc. v. AClarity Genomics, Inc., 2025 NCBC 56 (N.C. Super. Ct. Sept. 18, 2025) (Conrad, J.)
Key Terms: genomics; motion to strike; BCR 7.4; answer and counterclaim; frivolous; malicious; bad faith; Rule 12(f); irrelevant; Rule 8(a)(1); short and plain statement; prejudice
Plaintiff BioSkryb Genomics, Inc. sued its former officer and director, Defendant Jason West, for using its trade secrets to compete with BioSkryb in West’s newly formed company, Defendant AClarity Genomics, Inc. BioSkryb moved to strike over 60 paragraphs of Defendants’ answer and counterclaim, contending that the information contained in these paragraphs was irrelevant to Defendants’ counterclaim and served only to harass and embarrass BioSkryb. The Court denied the motion. The challenged allegations provided the background and related history of the dispute (from West’s perspective) and posed no real prejudice to BioSkyrb. Further, the Court could not say that they had no possible bearing on the litigation.
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Law Off. of Ashley-Nicole Russell, P.A. v. McLawhorn Legal Servs., PLLC, 2025 NCBC Order 66 (N.C. Super. Ct. Sept. 10, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(5); intellectual property; computer trespass
Plaintiffs initiated this action on 14 August 2025, asserting various claims arising from a soured business relationship between the owners of a family law practice in Raleigh. Defendants timely filed a notice of designation, seeking designation pursuant to N.C.G.S. § 7A-45.4(a)(5). The Court agreed with Defendants that designation pursuant to this section was proper because Plaintiffs’ claims, particularly their computer trespass claim, were predicated on Defendants’ alleged improper use of Plaintiffs’ intellectual property and unauthorized access of Plaintiffs’ computer networks. The Court designated the case as a mandatory complex business case.
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Mayes v. Nat’l Collegiate Athletics Ass’n, 2025 NCBC Order 67 (N.C. Super. Ct. Sept. 11, 2025) (Houston, J.)
Key Terms: college football; NCAA; temporary restraining order; irreparable harm; undue delay; likelihood of success on the merits
Plaintiff Mitchell Mayes sought a temporary restraining order enjoining the NCAA from enforcing a provision of the NCAA Bylaws that limits student-athletes to participating in no more than four seasons of college athletics over a five-year period. Mayes acknowledged that he had participated in four competitive seasons but argued his participation in the 2021–2022 season was in error and that he was entitled to a waiver under the NCAA Bylaws. Mayes contended that he would be irreparably harmed if he was not permitted to continue playing college football. The NCAA argued that Mayes unduly delayed in seeking injunctive relief, could not establish irreparable harm, and failed to show a likelihood of success on the merits. The Court agreed with the NCAA and denied the motion.
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Holly Springs Chamber of Commerce, Inc. v. Holly Springs Half Marathon, 2025 NCBC Order 68 (N.C. Super. Ct. Sept. 19, 2025) (Robinson, C.J.)
Key Terms: order on designation; transfer District Court to Superior Court; N.C.G.S. § 7A-45.4(d)(1); untimely
Plaintiff Holly Springs Chamber of Commerce, Inc. initiated this action in Wake County District Court on 10 March 2025. Defendant Holly Springs Half Marathon filed a Motion to Transfer to Superior Court Division on 26 March 2025, followed by an answer and counterclaim on 10 April 2025. The Wake County Superior Court granted Defendant’s motion to transfer on 2 September 2025, and Plaintiff filed a notice of designation ten days later. The Court determined that the notice of designation was untimely because it was not filed contemporaneously with the Complaint as required by N.C.G.S. § 7A-45.4(d)(1). Accordingly, the action was not properly designated as a mandatory complex business case.
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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.
Posted 09/23/25
By: Ashley Oldfield
Shively v. ACI Learning Holdings, LLC, 2025 NCBC 51 (N.C. Super. Ct. Aug. 27, 2025) (Robinson, C.J.)
Key Terms: Rule 12(b)(6); motion to dismiss; Rule 12(b)(2); personal jurisdiction; due process; specific jurisdiction; minimum contacts
This suit arose out of the termination of Plaintiff Shively’s employment with Defendant ACI Learning Holdings and Shively’s execution of and attempt to enforce the provisions of a severance agreement (“SAR”). Shively alleges that the ACI Defendants and the Boathouse Defendants (related entities) failed to purchase his equity interests in ACI pursuant to the SAR. The ACI Defendants moved to dismiss under Rule 12(b)(2), and the Boathouse Defendants moved to dismiss under Rules 12(b)(2) and 12(b)(6).
Personal Jurisdiction. The Boathouse Defendants contended that North Carolina’s long-arm statute did not subject them to jurisdiction in this action because they were not parties to the SAR. The Court disagreed, concluding that although the Boathouse Defendants had not signed the SAR, based upon the evidence before the Court, they had assented to it because one of their managing members had negotiated the SAR with Shively and the SAR included a provision that the “Company and/or Boathouse” agreed to buy Shively’s equity interests. Subsequent correspondence between the parties also showed that Boathouse understood itself to be a party to the SAR. Accordingly, the long-arm statute applied to the Boathouse Defendants. All Defendants contended that they lacked minimum contacts with North Carolina such that the Court’s exercise of personal jurisdiction would offend due process. Although some factors weighed against the exercise of personal jurisdiction, the Court ultimately concluded that Defendants had sufficient minimum contacts with North Carolina because the SAR had a substantial connection to North Carolina in that Defendants offered the SAR to Shively, who they knew to be a North Carolina resident, and Shively performed his obligations under the SAR while in North Carolina. Thus, the Court denied the motions to dismiss under Rule 12(b)(2).
Failure to State a Claim. The Boathouse Defendants argued that the complaint should be dismissed as to them because they were not parties to the SAR and could not be held liable for the breach thereof. The Court disagreed and denied the motion, concluding that the complaint sufficiently alleged facts supporting the conclusion that the Boathouse Defendants were parties to the SAR.
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Carolina Med. Partners, PLLC v. Shah, 2025 NCBC 52 (N.C. Super. Ct. Aug. 28, 2025) (Conrad, J.)
Key Terms: Rule 12(b)(6); motion to dismiss; statute of limitations; breach of fiduciary duty; constructive fraud; breach of contract; fraudulent inducement; breach of settlement agreement; wrongful interference with prospective contract; unjust enrichment; intentional infliction of emotional distress
The Patels and Shah are all physicians who used to practice together at Palmetto Medical Group and who shared interests in several other medical businesses. After their relationship deteriorated in 2021, they mediated their disputes and executed a Practice Separation Agreement which resolved some disputes and created a special litigation committee to investigate potential derivative claims that each side wished to bring. Shortly after, the Patels sued Shah and Palmetto Medical Group for breaching the Practice Separation Agreement, which lead to another partial settlement. The special litigation committee then finished its work and concluded that derivative claims were not in Palmetto Medical Group’s best interests. Two additional lawsuits followed and the three actions were consolidated. Shah and Palmetto Medical Group moved to dismiss all eleven claims asserted by the Patels.
Statute of Limitations. The Court concluded that Defendants’ argument that many of the claims were time-barred was premature because discovery was necessary to determine whether the statute of limitations was tolled due to the parties’ agreement that the claims would not be asserted while they engaged in mediation.
Breach of Fiduciary Duty and Constructive Fraud. The Court rejected Shah’s argument that these claims should be dismissed because the special litigation committee rejected them—the special litigation committee dealt with potential derivative claims, not direct claims, and, in any event, the committee’s report was outside the pleadings. The Court also was not persuaded that the Patels lacked standing since Shah did not dispute that he owed a fiduciary duty to the Patels and the complaint alleged that Shah had taken actions to benefit himself at the Patels’ expense. Lastly, the complaint’s allegations that Shah had unfairly rigged the distributions were sufficient to show bad faith and resulting harm. Accordingly, the Court declined to dismiss these claims.
Breach of Shareholder Agreement. The complaint alleged two claims for breach of the Palmetto Medical Group’s shareholder agreement: 1) that Shah manipulated the bonus formula to reduce the Patels’ bonuses; and 2) that the Patels were not reimbursed for professional expenses and not compensated for locum work and director-related services. The Court found both claims adequately pleaded and denied dismissal of both.
Fraudulent Inducement. The Court dismissed this claim because 1) it was not pleaded with adequate specificity under Rule 9(b); 2) the alleged misrepresentations were based on Shah’s opinions and the complaint did not allege that Shah did not honestly hold those opinions; and 3) the complaint did not allege in a nonconclusory way that the Patels were denied the opportunity to investigate or could not have learned the truth through reasonable diligence.
Breach of Settlement Agreement. The Court dismissed this claim, which was based on Shah’s alleged failure to make best efforts to convince a lender to release the Patels from certain personal guaranties. Although the complaint alleged that Shah did not make his best efforts, it did not allege that the lender would have released the guaranties even if Shah had done so.
Wrongful Interference with Prospective Contract. The Court declined to dismiss this claim, finding that the Patels had adequately alleged that Shah had interfered with the Patels’ relationships with patients by rerouting patients’ phone calls to make appointments with the Patels to Shah’s own answering service.
Unjust Enrichment. The Court dismissed this claim because the Patels did not allege that they had conferred a benefit on Shah.
Breach of Partnership Agreement. The Court declined to dismiss this claim because the complaint adequately alleged that Shah had made distributions in violation of the agreement and that the Patels were harmed by being deprived of their right to vote on distributions.
Breach of Operating Agreement. The Court dismissed this claim because the agreement at issue did not impose any obligations on Shah personally and therefore the Patels couldn’t maintain a claim against him for breaching the agreement.
Intentional Infliction of Emotional Distress. The Court dismissed this claim because the complaint’s allegations that Shah had berated Shephali Patel about her fitness as a wife, mother, doctor, and business owner did not satisfy the “extreme and outrageous conduct” element of the claim.
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Castillo v. RRD Fin., LLC, 2025 NCBC 53 (N.C. Super. Ct. Sept. 3, 2025) (Houston, J.)
Key Terms: judgment on the pleadings; partnership; joint venture; UDTPA; in or affecting commerce; internal conduct; negligent misrepresentation; BCR 7.2; BCR 7.5; BCR 7.8; incorporated briefing
Defendant RRD operates a network of used car dealerships. Defendants Eskandari and Algood are members and managers of RRD. Plaintiffs were previously employed as general managers of RRD dealerships; however, in December 2022 the parties negotiated and executed an operating agreement to document their partnership (or joint venture). During negotiations, certain representations were made to Plaintiffs regarding their compensation and Defendants’ provision of working capital and other assistance. Disputes eventually arose between the parties and Plaintiffs filed suit asserting that Plaintiffs had been wrongfully cast out of the partnership and deprived of information and profits. Defendants moved for judgment on the pleadings on the claims for violation of the UDTPA and negligent misrepresentation.
Pursuant to BCR 7.2, 7.5, and 7.8, the Court summarily denied Defendant Algood’s motion because he failed to submit substantive briefing in support of the motion, instead relying on the briefing submitted by the other Defendants.
As to the other Defendants, the Court granted judgment on the pleadings in their favor on the UDTPA claim because, as pleaded, the dispute was internal to a single business enterprise and therefore was not in or affecting commerce.
The Court also granted judgment on the pleadings on the negligent misrepresentation claim because Plaintiffs failed to plead the claim with the requisite particularity. There were no individualized, direct allegations of misrepresentation by Defendant Eskandari. As to Defendant RRD, the allegations did not specify the substance of the misrepresentation, who misrepresented it, or when or where it was misrepresented. Further, the purported intentional misrepresentations regarding compensation and financial support were promises or statements of intent, which could not form the basis of a negligent misrepresentation claim.
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Water.io Ltd v. Sealed Air Corp., 2025 NCBC 54 (N.C. Super. Ct. Sept. 5, 2025) (Conrad, J.)
Key Terms: breach of contract; sale of goods; UCC; consequential damages; N.C.G.S. § 25-1-305; common law; limitation of liability; waiver; estoppel
In this action, Plaintiff (the seller) alleged that Defendant (the buyer) wrongfully terminated a contract for the sale of goods, which delayed Plaintiff’s planned IPO and decimated its valuation. Defendant moved for partial summary judgment, arguing that Plaintiff could not recover the decline in valuation as damages for breach of contract because such damages are consequential damages (which Plaintiff conceded) and 1) the UCC bars sellers from recovering consequential damages for breach of contract; and 2) the parties’ contract contained a limitation-of-liability clause precluding liability for consequential damages.
The Court agreed with both points and granted summary judgment in Defendant’s favor that Plaintiff could not recover consequential damages from the alleged breach of contract. The plain terms of the UCC disallowed consequential damages as a remedy for sellers and the common law could not “add back” what the UCC’s drafters chose to leave out. The parties’ contract also precluded the recovery of consequential damages. That Defendant had made its own demand for damages in the pleadings (which it denied were consequential in nature) did not waive Defendant’s right to enforce the limitation-of-liability clause against Plaintiff.
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Piedmont NC LLC v. Walker & Assocs., Inc., 2025 NCBC Order 62 (N.C. Super. Ct. Sept. 3, 2025) (Robinson, C.J.)
Key Terms: order on designation; conditional designation; supplement; extension of time; clerk of court; N.C.G.S. § 7A-45.4(a)(9)
Plaintiffs initiated this action on 24 June 2025 asserting, inter alia, a claim for breach of contract, and contemporaneously filed a notice of designation, conditionally seeking designation pursuant to N.C.G.S. § 7A-45.4(a)(9), which permits designation in certain actions if all parties consent. Where a party files a conditional NOD, the party has thirty days after service to file a supplement to the conditional NOD that reflects the required consent. On 26 August 2025, Plaintiffs filed a motion with the clerk of court to extend the time to file the supplement, which was granted by the clerk and purported to extend Plaintiffs’ time to file the supplement to 29 August 2025. Plaintiffs filed the supplement on 29 August 2025.
The Court deemed the supplement untimely and therefore found that designation was improper. Plaintiffs filed the supplement after more than thirty days had passed from the filing of the conditional NOD. Further, while the Court may extend the time to file a supplement, Plaintiffs’ motion to extend was ineffective because it was untimely filed and sought an extension from the clerk of court, rather than the Court.
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Moore v. Brooks, 2025 NCBC Order 63 (N.C. Super. Ct. Sept. 4, 2025) (Houston, J.)
Key Terms: BCR 4; amendment to BCRs; stipulation of extension of time to file brief
Citing BCR Rule 4(e), the parties filed a stipulation purporting to extend a defendant’s deadline to file a reply brief in support of his pending motion to dismiss. BCR 4.1(e) previously provided that parties could enter into binding stipulations as permitted by Rule 6(b) of the Rules of Civil Procedure. However, BCR 4.1 and 4.2 have been recently amended to provide that parties may not act unilaterally to extend deadlines which have been set or modified by an order of the Court, but that parties may stipulate to extend a deadline to respond to a pleading. The Court determined that under either version of BCR 4, parties do not have the ability to extend briefing deadlines without a Court order. In its discretion, though, the Court construed the stipulation as a motion for extension of time and granted the requested extension.
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Tax Mgmt. Assocs., Inc. v. Bourgeault, 2025 NCBC Order 64 (N.C. Super. Ct. Sept. 4, 2025) (Conrad, J.)
Key Terms: preliminary injunction; trade secret; likelihood of success on the merits; allegations made upon information and belief; irreparable harm
Plaintiff initiated this action alleging that Defendant Bourgeault, a former employee, had taken its confidential information and trade secrets and was using them to compete against it. Plaintiff also moved for a preliminary injunction barring Defendants from interfering with its clients and using its trade secrets.
The Court denied the motion, concluding that Plaintiff had not shown a likelihood of success on the merits or irreparable harm. Many of Plaintiff’s key allegations were made upon information and belief, which are insufficient to warrant a preliminary injunction. Further, Bourgeault’s sworn declaration rebutted these allegations. In addition, Plaintiff’s delay in seeking injunctive relief weighed against a finding of irreparable harm.
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WP Church, LLC v. Whalen, 2025 NCBC Order 65 (N.C. Super. Ct. Sept. 5, 2025) (Davis, J.)
Key Terms: preliminary injunction; breach of operating agreement; competition; likelihood of success on the merits; speculation; irreparable harm; restaurant
The parties in this action are all entities or individuals connected to 5Church, a South Carolina LLC formed to operate a restaurant in Charleston. 5Church’s operating agreement purports to limit the ability of any “holder” to invest in, own, or control another person operating a restaurant within 25 miles of a restaurant operated by 5Church. Beginning in 2019, affiliates of one of 5Church’s members began purchasing and developing property for mixed-use developments. Plaintiff initiated this action and sought a preliminary injunction, asserting, inter alia, that certain defendants’ involvement with the mixed-use developments was in violation of the operating agreement because of the likelihood that they would lease space to a restaurant.
The Court denied the motion for a preliminary injunction, concluding that Plaintiff had not shown a likelihood of success on the merits or irreparable harm. As no restaurants currently operated at either development, Plaintiff’s claim was based on mere speculation. Moreover, the mere lease of space to a restaurant was not necessarily a breach of the operating agreement.
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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.
Posted 09/09/25
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.
Posted 08/26/25
By: William H. Scott and Ashley Oldfield
Vincelette v. Court, 2025 NCBC 38 (N.C. Super. Ct. July 30, 2025) (Brown, J.)
Key Terms: Rule 12(b)(1); Rule 12(b)(6); standing; N.C.G.S. § 57D-8-08; derivative claims; civil conspiracy; fiduciary duty; declaratory judgment; conversion; advancement; specific performance; inspection rights
Plaintiff and Defendants Melissa Peirce and Kelly Court were the three members of Defendant Wellspring Nurse Source, LLC, a member-managed LLC governed by an Operating Agreement and Connecticut law. Plaintiff and Ms. Court previously sued Ms. Peirce, asserting that Ms. Peirce had defrauded and embezzled funds from Nurse Source. The prior litigation resulted in a Settlement Agreement under which Ms. Peirce’s membership interest would be bought out. However, the Settlement Agreement was never effectuated. Instead, Ms. Court and Ms. Peirce claimed to have reinstated Ms. Peirce and terminated Plaintiff from the company for cause. Plaintiff subsequently filed suit, asserting derivative claims on behalf of Nurse Source and direct claims. Defendants moved for partial dismissal pursuant to Rules 12(b)(1) and 12(b)(6).
Derivative Claims
Motions to Dismiss for Lack of Standing. Defendants sought dismissal of Plaintiff’s derivative claims for lack of standing, arguing that Plaintiff lacked standing under Connecticut law because she was not a member of Nurse Source when she filed suit. The Court disagreed, concluding that Plaintiff had adequately pleaded and provided sufficient supporting evidence of her membership in Nurse Source to withstand a motion to dismiss under either Rule 12(b)(1) or 12(b)(6).
Plaintiff’s Claim for Declaratory Judgment. The Court dismissed Plaintiff’s claim for a declaratory judgment to the extent it was duplicative of her claim for breach of the Settlement Agreement. However, the Court denied dismissal of the claim to the extent it was based on the validity of Ms. Peirce’s reinstatement and reimbursement of her benefits as Plaintiff had adequately pleaded the existence of an actual controversy regarding these issues.
Breach of Fiduciary Duty. Defendants argued that this claim should be dismissed because Plaintiff failed to allege any injury to Nurse Source. The Court disagreed and denied the motion, finding that Plaintiff’s allegations that Defendants’ decision not to exercise its rights under the Settlement Agreement to rid Nurse Source of Ms. Peirce were sufficient to allege injury to Nurse Source where Ms. Peirce was alleged to have previously defrauded and embezzled funds from Nurse Source.
Breach of Contract. Plaintiff alleged that Ms. Peirce and Ms. Court breached the Settlement Agreement by refusing to carry out its terms. The Court dismissed the claim as to Ms. Court because she was not a party to the Settlement Agreement but otherwise denied dismissal.
Injunctive Relief/Specific Performance. The Court dismissed the claim for injunctive relief because there is no standalone claim for injunctive relief but, in its discretion, declined to dismiss the claim for specific performance of the Settlement Agreement.
Civil Conspiracy. The Court denied dismissal of Plaintiff’s civil conspiracy claim, finding that Plaintiff had adequately alleged the existence of a conspiracy between Ms. Court and Ms. Peirce, the timeframe and purpose of the conspiracy, the steps taken to carry out the conspiracy, and the resulting injury.
Direct Claims
Declaratory Judgment. Plaintiff requested a declaratory judgment regarding four issues relating to her alleged termination from Nurse Source. The Court dismissed the claim as to the first issue, finding it duplicative of her direct claim for breach of contract, but otherwise denied dismissal, concluding that the other issues would not necessarily be determined through the breach of contract claim.
Conversion. Plaintiff’s conversion claim was based on certain unauthorized transfers and cash advances taken from a third-party company, which assigned the claim to her. Defendants contended that the claim should be dismissed because 1) personal claims cannot be assigned; 2) the claim was barred by the economic loss rule; and 3) Ms. Court could not be personally liable for causing Nurse Source to convert funds. The Court rejected all three arguments, concluding that 1) tort claims involving economic loss to a company may be assigned; 2) the economic loss rule did not bar the conversion claim because, as alleged, the unauthorized transfers fell outside the parties’ contract; and 3) a LLC member may be held personally liable for torts committed when acting on behalf of the company.
Violation of Conn. Gen. Stat. § 34-255i(a). Defendants contended that Plaintiff’s claim for violation of her inspection rights under Connecticut law should be dismissed because she was no longer a member at the time she made the request. As the Court had already determined that Plaintiff adequately alleged that she remains a member of Nurse Source, the Court denied dismissal of this claim.
Breach of Operating Agreement-Indemnification and Advancement. Plaintiff alleged that the company’s refusal to advance her litigation expenses was a breach of the Operating Agreement which provides for advancement to any member in “defending any claim, demand, action, suit or proceeding.” Defendants argued that the claim should be dismissed because Plaintiff was prosecuting, not defending, claims. The Court denied dismissal, finding that Plaintiff had adequately pleaded the existence of a contract, that she had incurred expenses defending a claim, and that Nurse Source had breached the contract by refusing to advance the expenses.
Breach of Fiduciary Duty. Under Connecticut law, a member may maintain a direct action against another member for breach of fiduciary duty provided the member shows that the injury is personal to the member and not solely the result of an injury suffered by the company. The Court found that Plaintiff had adequately pleaded personal injury based on allegations that Defendants had wrongfully deprived Plaintiff of her membership rights. Thus, the Court denied dismissal.
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Orange Peel Events, LLC v. Ninja Brewing, Inc., 2025 NCBC 39 (N.C. Super. Ct. July 30, 2025) (Conrad, J.)
Key Terms: motion to dismiss; declaratory judgment; live music; lease; breach of fiduciary duty; joint venture
Plaintiff Orange Peel Events, LLC manages outdoor live music shows in and around Asheville, North Carolina. Public Interest Projects, Inc. is its sole member. In 2019, Public Interest and Defendant Asheville Brewing Properties LLC formed 75 Coxe Properties to purchase real property which they then leased to Defendant Ninja Brewing Inc, a sister company of Asheville Brewing. Ninja and Orange Peel then entered into a management agreement for use of the property as an outdoor entertainment venue. Disputes between the parties eventually arose, culminating in Ninja giving notice that it intended to terminate the management agreement with Orange Peel. Plaintiffs initiated this lawsuit, bringing both direct claims and derivative claims on behalf of 75 Coxe Properties, and Defendants counterclaimed. Both sides moved to dismiss.
Breach of Fiduciary Duty/ Misappropriation of Corporate Opportunity. The Court dismissed Plaintiffs’ claims for breach of fiduciary duty and misappropriation of corporate opportunity because no fiduciary relationship existed between the parties. Although Plaintiffs alleged that a fiduciary relationship arose through a joint venture with Defendants, the management agreement between the parties expressly disclaimed the existence of a joint venture.
Breach of Management Agreement. The Court denied Ninja’s motion to dismiss Orange Peel’s claim for breach of the management agreement, except to the extent it was based on Ninja’s termination of the agreement. Because the agreement unambiguously allowed either party to terminate it without cause, Orange Peel’s claim based on termination of the agreement failed.
Declaratory Judgment. The Court denied Ninja’s motion to dismiss Public Interest’s claim for a declaratory judgment concerning whether 75 Coxe Properties’ operating agreement required the consent of a majority in interest of the company’s membership for cash distributions as the parties’ conduct clearly indicated an actual controversy regarding this issue.
Punitive Damages. The Court denied Ninja’s and Asheville Brewing’s motion to dismiss Orange Peel’s demand for punitive damages, finding the issue premature.
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Qian v. Zheng, 2025 NCBC 40 (N.C. Super. Ct. July 31, 2025) (Brown, J.)
Key Terms: failure to respond to discovery; sanctions; Rule 37; inherent authority
This lawsuit involves a dispute between the members/managers of Defendant Halifax Safeguard Property, LLC. During the course of discovery, Plaintiffs’ counsel sought to withdraw, citing an inability to meaningfully communicate with their clients. After permitting Plaintiffs’ counsel to withdraw, the Court ordered Plaintiffs to respond to all outstanding discovery and pleadings within 60 days. When Plaintiffs failed to respond to the discovery by the deadline, the Court entered a second order providing that Plaintiffs must respond to the discovery by the end of April and that if they failed to do so, Defendants were permitted to seek sanctions. After Plaintiffs failed to meet this second deadline, Defendants moved for sanctions, requesting that the Court prohibit Plaintiffs from supporting their claims, from opposing Defendants’ defenses to their claims, and from introducing evidence regarding the same. The Court granted the motion pursuant to its inherent authority and Rule 37, concluding that Plaintiffs’ failure to participate in discovery had deprived Defendants of the opportunity to gain information about the claims against them and their defenses thereto. The Court noted that Plaintiffs’ pro se status did not excuse them from their duty to respond to discovery requests.
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Weatherspoon Fam. LLC v. Hatteras Inv. Partners, L.P., 2025 NCBC 41 (N.C. Super. Ct. July 31, 2025) (Houston, J.)
Key Terms: Rule 12(b)(1); voluntary dismissal; derivative suit; pre-suit demand; futility; N.C.G.S. § 57-D-8-04; Delaware law; Rule 15(a)
In 2021, Hatteras Evergreen Private Equity Fund, LLC (“Evergreen Fund”) exchanged its $43 million investment portfolio for preferred equity shares in The Beneficient Company Group, LLP. Defendants Hatteras Investment Partners, L.P. (“HIP”) (Evergreen Fund’s manager) and HIP’s manager spearheaded the transaction. Evergreen Fund’s investment resulted “in the loss of most, if not all, of the value of Evergreen Fund’s assets.” Thereafter, Plaintiff Weatherspoon Family LLC filed a derivative action on behalf of Evergreen Fund asserting a breach of fiduciary duty relating to the transaction. However, Plaintiff did not make a pre-suit demand to request an investigation, instead “contending that such a demand would be futile and should be excused.” Defendants and Evergreen Fund moved to dismiss. Thereafter, Plaintiff filed a notice of voluntary dismissal without prejudice, followed by a motion for leave to voluntarily dismiss the action without prejudice. The next day, Plaintiff filed an alternative motion for leave to file an amended complaint in the event the Court denied leave to dismiss.
Plaintiff’s Notice of Voluntary Dismissal Without Prejudice. Because N.C.G.S. § 57D-8-04 prohibits a derivative proceeding from being discontinued without the court’s approval, the Court struck Plaintiff’s notice of voluntary dismissal.
Plaintiff’s Motion for Voluntary Dismissal Without Prejudice. Plaintiff sought dismissal without prejudice so that Plaintiff’s counsel could pursue the litigation in Delaware with other investors. In considering whether to grant a voluntary dismissal of a derivative action, the court must weigh any legitimate corporate claims brought in the derivative suit against the corporation’s best interests. The Court concluded that Plaintiff’s lone claim for breach of fiduciary duty was not a legitimate claim under applicable Delaware law because Plaintiff had not made the required pre-suit derivative demand and had failed to adequately allege facts with sufficient particularity to demonstrate that pre-suit demand would have been futile and should be excused. The Court also concluded that dismissal without prejudice so that the same suit could be pursued in Delaware was not in Evergreen Fund’s best interest because it would involve the expenditure of additional time and resources for the purpose of pursuing a claim which as currently pleaded was deficient. Accordingly, the Court denied Plaintiff’s motion for leave to voluntarily dismiss without prejudice.
Plaintiff’s Alternative Motion for Leave to File First Amended Complaint. Because Rule 15 permits a party to amend his pleading once as a matter of right before a responsive pleading is filed and Defendants here had yet to file a responsive pleading, the Court granted Plaintiff’s motion to amend and deemed the filed amended complaint as filed as of the date of entry of the present order. The Court also denied as moot Defendants’ motion to dismiss, without prejudice to their right to respond to the amended complaint.
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Members of N.C. State Univ.’s 1983 Men’s Basketball Nat’l Championship Team v. Nat’l Collegiate Athletic Ass’n, 2025 NCBC 42 (N.C. Super. Ct. Aug. 6, 2025) (Davis, J.)
Key Terms: basketball; NCAA; NIL; motion to dismiss; continuing wrong doctrine; statute of limitations; right of publicity; Copyright Act; preemption
Plaintiffs, members of the N.C. State’s 1983 men’s basketball championship team, brought suit against the NCAA for using–without permission–their names, images, and likenesses (“NIL”) contained in game footage from the 1983 season. The NCAA moved to dismiss.
First, the Court held that the claims were barred by the statutes of limitations because Plaintiffs’ alleged injuries derived from an act taken during or before the 1983 season–namely, the required signing of the NCAA’s Student-Athlete Statement which served to verify an athlete’s eligibility to participate in NCAA sports and also authorized the NCAA to use the athlete’s name or picture. The Court rejected application of the continuing wrong doctrine.
Second, the Court concluded that the suit should be dismissed because Plaintiffs did not have a legally enforceable right. The sole basis of the lawsuit was the NCAA’s repeated use of their NIL from game footage previously broadcast. However, Plaintiffs did not have a “right of publicity” in footage of games in which they voluntarily participated.
Finally, the Court concluded that the federal Copyright Act preempted any claims because both the Subject Matter Prong and the Equivalence Prong of the test for preemption were satisfied.
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Port Trinitie Homeowners Ass’n v. Port Trinitie Ass’n, 2025 NCBC 43 (N.C. Super. Ct. Aug. 7, 2025) (Earp, J.)
Key Terms: Rule 12(b)(6); N.C.G.S. § 47A; condominium association; homeowners association; breach of governing documents; breach of fiduciary duty; ultra vires acts
This lawsuit arose from a dispute between the Condo Association and the Homeowners Association for the Port Trinitie development. The members of the two associations share use and maintenance of community facilities owned by the Condo Association. The Homeowners Association and its president initiated this lawsuit against the Condo Association and its board members, alleging various claims relating to their alleged breaches of the development’s Governing Documents. Defendants moved to dismiss all claims.
Breach of Governing Documents. The Court denied the motion to dismiss the claim for breach of the Governing Documents, finding that Plaintiffs had met the minimum pleading standards for breach of contract: the existence of a valid contract and a breach thereof.
Breach of North Carolina General Statutes. Plaintiffs alleged that Defendants’ breaches of the Governing Documents also violated the Condo Act and the Nonprofit Corporation Act. The Court dismissed the claim as to the Condo Act for lack of standing because Plaintiffs were not unit owners. The Court also dismissed Plaintiffs’ claim for inspection rights under the Nonprofit Corporation Act as Plaintiffs had not pleaded that they complied with the statutory prerequisites.
Breach of Fiduciary Duty. Plaintiffs asserted breach of fiduciary duty claims against both the Condo Association and the Individual Defendants. The Court dismissed the claim as to the Condo Association as no de jure fiduciary duty existed and Plaintiffs had not alleged the existence of a de facto duty. That the Homeowners Association only had two voting representatives on matters pertaining to the community facilities while the Condo Association had seven voting representatives did not mean that the Condo Association “held all the cards.” The Court also dismissed the claim as to the Individual Defendants because any fiduciary duty they owed was to the Condo Association and its unit owners, not to the Plaintiffs.
Actions Committed Ultra Vires. Plaintiffs asserted that the Individual Defendants were personally liable for ultra vires acts in violation of the Governing Documents. However, challenges to ultra vires acts are limited by N.C.G.S. § 55A-3-04 to actions by a member or director against the corporation to enjoin the act. Rather than seeking the relief permitted by statute, Plaintiffs’ claim appeared to simply recast their breach of contract claim. Accordingly, the Court dismissed this claim.
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State of N.C. v. E.I. Du Pont de Nemours & Co., 2025 NCBC 44 (N.C. Super. Ct. Aug. 7, 2025) (Robinson, C.J.)
Key Terms: Rule 12(b)(1); air and water contamination; N.C.G.S. § 114-2; subject matter jurisdiction; repeal; common law authority; separation of powers
The State of North Carolina, by and through the State Attorney General, initiated this action in 2020, asserting claims arising from the alleged contamination of North Carolina’s air, land, and water through operations at a chemical manufacturing facility known as Fayetteville Works. During discovery, Plaintiff asserted that it was authorized to bring suit under N.C.G.S. § 114-2(8)(a), which authorizes the AG to bring suit “in all matters affecting the public interest.” In 2024, the General Assembly repealed N.C.G.S. § 114-2(8)(a). Thereafter, Defendants moved to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction, arguing that the repeal of N.C.G.S. § 114-2(8)(a) divested the AG of authority to prosecute the case.
Power of the Attorney General to Originate & Maintain This Action. The Court first determined that N.C.G.S. § 114-2(8)(a) conferred authority on the AG to originate and maintain the action prior to the statute’s repeal. The Court next determined that under the common law, the AG had, and continues to have, the power to originate and maintain suits for the protection and defense of North Carolina’s natural resources. Lastly, the Court held that both the environmental claims and fraudulent concealment claims fell within this power.
Separation of Powers. Moving Defendants also argued that the AG lacked the ability to bring the suit except in the name of, and at the request of, the NC Department of Environmental Quality. The Court disagreed because 1) there was no clear expression limiting the AG’s common law powers to protect NC’s water and air resources; 2) while N.C.G.S. § 113-131(d) required the AG to act as attorney for NCDEQ when requested, it did not bar the AG from representing NC in natural resources cases without the NCDEQ’s explicit request; and 3) the NCDEQ was limited in the remedies it could seek.
For these reasons, the Court denied the motion to dismiss for lack of subject matter jurisdiction.
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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.
Posted 08/12/25
By: William H. Scott and Ashley Oldfield
Dapper Dev., L.L.C. v. Cordell, 2025 NCBC 33 (N.C. Super. Ct. July 15, 2025) (Brown, J.)
Key Terms: judgment on the pleadings; Rule 12(c); breach of contract; judicial estoppel; North Carolina Wage & Hour Act; N.C.G.S. § 95-25.14(b)(4); declaratory judgment; termination of membership interest; negligent/fraudulent misrepresentation; inspection of books and records; judicial dissolution
The Individual Plaintiffs and Defendant were each 25% members of Plaintiffs Dapper Development, L.L.C. and Tantalum Holdings, LLC (the “Companies”). The Companies’ Operating Agreements provide that the Companies shall be operated by Managers with each Member serving as a Manager. Following a series of disputes, Plaintiffs began to negotiate a voluntary buyout of Defendant’s membership interest in the Companies. In June 2023, Plaintiffs voted to remove Defendant from the Companies and offered a cash payment. Defendant rejected the buyout offer, extended a counteroffer, and filed suit against Plaintiffs after the counteroffer’s rejection. During continued buyout negotiations, Defendant voluntarily dismissed the Initial Lawsuit. Plaintiffs then filed suit against Defendant in April 2024. Defendant answered and asserted numerous counterclaims. Plaintiffs moved for a judgment on the pleadings on some of their claims and on many of Defendant’s counterclaims.
Defendant’s Counterclaim for Declaratory Judgment – Employment Status. Defendant asserted that there was a controversy regarding whether he was an employee of the Companies. However, because Defendant had made repeated and unqualified factual allegations in the Initial Lawsuit that he was an employee of the Companies, the Court concluded that Defendant was judicially estopped from alleging in this action that he was not an employee of the Companies. Thus, the Court dismissed this counterclaim with prejudice.
Defendant’s Counterclaim for Negligent/Fraudulent Misrepresentation. The Court dismissed Defendant’s misrepresentation counterclaim with prejudice, concluding that Defendant failed to allege facts showing reasonable reliance on Plaintiffs’ representations about his employment status, especially considering that he had been with the Companies since their formation and had participated in drafting and updating the Companies’ operating agreements.
Defendant’s Counterclaim for Violation of North Carolina’s Wage & Hour Act. The Court dismissed Defendant’s Wage & Hour Act counterclaim with prejudice, agreeing with Plaintiffs that the bona fide executive exemption of N.C.G.S. § 95-25.14(b)(4) barred Defendant’s recovery because he was a 25% owner of the Companies who was actively engaged in their management.
Declaratory Judgment: Status as Member. The parties disputed whether Defendant had been removed as a member of the Company. The Court agreed with Plaintiffs that Defendant had been removed as a member because the Operating Agreements provided that a member was terminated upon the affirmative vote of a majority of the membership interest and such a vote had occurred.
Declaratory Judgment: Status as Manager. The parties disputed whether Defendant had been removed as a Manager of the Companies. Defendant argued that because he remains a Member, he also remains a Manager because the Operating Agreements provide that each Member is a Manager. Since the Court had already determined that Defendant was not a Member, the Court found Defendant’s argument moot and granted Plaintiffs a declaratory judgment that Defendant had ceased to be a Manager.
Defendant’s Counterclaim for Inspection of Books and Records. Because the information rights provided by N.C.G.S. § 57D-3-04 are limited to members of LLCs and Defendant did not make his demand for inspection until after his membership had terminated, the Court dismissed this counterclaim.
Defendant’s Counterclaim for Judicial Dissolution. Because the Court had determined that Defendant was no longer a member of the Companies, the Court dismissed the counterclaim as Defendant lacked standing to request judicial dissolution.
Defendant’s Counterclaim for Breach of Fiduciary Duty. Defendant alleged that Plaintiffs breached their fiduciary duties as Managers to him as a Member. Since no de jure fiduciary relationship exists between Managers and Members, the Court looked to whether Defendant had pleaded the existence of a de facto fiduciary relationship based on complete domination and control. Although Defendant alleged numerous controlling actions by Plaintiffs, he also alleged facts showing that he still “held a card or two.” Thus, the Court determined that a de facto fiduciary relationship did not exist and, therefore, dismissed the claim.
Defendant’s Counterclaims for Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing: Operating Agreements. Defendant alleged that Plaintiffs had breached various provisions of the Operating Agreements. Plaintiffs sought judgment in their favor, arguing that the pleading was deficient because it did not describe the date or substance of any breach. The Court disagreed with Plaintiff and found that the breach of contract claim was adequately pleaded under the notice pleading standard. The Court also denied judgment on the ICGFFD claim for the same reasons.
Defendant’s Counterclaim for an Equitable Accounting. The Court dismissed the “claim” for an equitable accounting, but without prejudice to Defendant’s ability to seek an equitable accounting as a remedy at a later stage as permitted by law.
Defendant’s Counterclaim for Reimbursement/Contribution. Defendant sought reimbursement for payments he made to satisfy the Companies outstanding debts after he received notice of his termination. The Court was unable to conclude that Plaintiffs were entitled to judgment as a matter of law on this claim and thus denied the motion.
Declaratory Judgment: Occurrence of Triggering Event. The parties disputed whether a Triggering Event had occurred under the Operating Agreements. The Court agreed with Plaintiffs that a Triggering Event had occurred. First, under the Operating Agreements’ plain language, Plaintiffs’ June 2023 vote to terminate Defendant’s employment unambiguously constituted a Triggering Event. Second, since Defendant had taken contrary positions in the Initial Lawsuit, the Court held that the doctrine of judicial estoppel barred him from asserting in this lawsuit that a Triggering Event had not occurred.
Declaratory Judgment: Valuation Dates. The Court found that Defendant had adequately pleaded the existence of a controversy regarding the effective date for a valuation of the Companies as neither the Operating Agreements nor the Consent Order in the Initial Lawsuit clearly identified a date. Accordingly, judgment on the pleadings was denied.
Declaratory Judgment: Winston Property. The parties disputed whether any payment to Defendant in exchange for his Membership Interest was subject to setoff. The Court concluded that based on the relevant documents, Plaintiffs were entitled to a declaratory judgment that they were entitled to an offset against the purchase price of Defendant’s interest.
Plaintiffs’ Claim for Breach of Contract: Operating Agreement. Plaintiffs sought judgment on the pleadings on their claim that Defendant had breached the Operating Agreements by refusing to accept a buyout offer in June 2023. The Court denied the motion because it was unable to conclude that no material issue of fact existed and that Cordell breached the Operating Agreements by refusing to accept a buyout offer solely based on the parties’ pleadings.
Plaintiffs’ Claim for Breach of Contract: Consent Order. Since Plaintiffs did not address this claim in their brief, the Court denied Plaintiffs’ motion for judgment on the pleadings on it.
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Value Health Sols. Inc. v. Pharm Rsch. Assocs., 2025 NCBC 34 (N.C. Super. Ct. July 23, 2025) (Davis, J.)
Key Terms: Rule 12(f); motion to strike; summary judgment; statute of limitations; anticipatory repudiation; North Carolina Supreme Court
This lawsuit involves a dispute between Plaintiffs Neil Raja and Value Health Solutions Inc. (“VHS”) and Defendants Pharmaceutical Research Associates, Inc. and PRA Health Sciences, Inc. (PRA) in connection with PRA’s acquisition of VHS and its proprietary software (PSO). The Court previously entered orders dismissing certain of Plaintiffs’ claims and granting summary judgment as to Plaintiffs’ remaining claims. As summarized here, the North Carolina Supreme Court affirmed all but one of the Business Court’s rulings. The Supreme Court reversed the Court’s entry of summary judgment against Plaintiffs on the issue of PRA’s alleged breaches of Section 2.6 of the parties’ Asset Purchase Agreement and remanded for further proceedings. PRA allegedly breached Section 2.6(b)’s schedule of “Milestones” for business development; upon completing a Milestone, PRA was obligated to pay VHS set sums of money. Following supplemental discovery, Plaintiffs moved to strike Defendants’ statute of limitations affirmative defense and Defendants moved for summary judgment on three issues: 1) whether the statute of limitations barred Plaintiffs from asserting certain breaches of Section 2.6(b); 2) whether a signed agreement between PRA and third-party Takeda Pharmaceuticals constituted an External Sale under the APA; and 3) whether PRA’s internal use of PSO was an External Sale under the APA.
Motion to Strike: Defendants’ Statute of Limitations Defense. Plaintiffs argued that Defendants’ single-sentence statute of limitations affirmative defense should be stricken because it was not pleaded with the requisite specificity. The Court rejected this argument, concluding that the allegation was sufficient to put Plaintiffs on notice. Further, the Court found that Plaintiffs would not be unfairly prejudiced by allowing Defendants to pursue this defense as Plaintiffs had been on notice of it for over five years and had never previously asserted that it was insufficiently pleaded. Accordingly, the Court denied Plaintiffs’ motion to strike.
Summary Judgment: Statute of Limitations. Defendants contended that Plaintiff Raja had first learned of Defendants’ alleged breaches of contract through a conversation with PRA’s CEO in June 2015. The Court concluded that to the extent this conversation was sufficient to give rise to a claim for breach of contract at that time, the claim would be based on a theory of anticipatory repudiation. However, the evidence was clear that Plaintiffs did not treat the statements as an anticipatory repudiation at that time. Accordingly, the Court was unable to conclude as a matter of law that Plaintiffs’ claim accrued in June 2015. The Court denied Defendants’ motion for summary judgment, finding that significant questions of fact remained as to when Plaintiffs’ claim accrued.
Summary Judgment: External Sales
The Court granted Defendants’ motion for summary judgment related to External Sales. With respect to Takeda, the Court found that there was no evidence that the Takeda master service agreement was drafted to require Takeda to pay consideration to acquire and use a license of the PSO. Accordingly, the Takeda MSA was not an External Sale under the APA. With respect to PRA’s internal use of PSO to conduct research for customers, the Supreme Court had instructed that “in order for an External Sale to have occurred under the APA, a contract between PRA and its customer must have included a transfer of license for the customer to use PSO.” Since PRA had not conveyed a license to a customer, no External Sale occurred.
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Compass Tax Servs. LLC v. Karki, 2025 NCBC 35 (N.C. Super. Ct. July 23, 2025) (Robinson, C.J.)
Key Terms: counterclaim; breach of contract; material misrepresentation; fraud; breach of fiduciary duty; UDTPA; bench trial; final judgment
As summarized here, this dispute arose out of Defendant/Counterclaim Plaintiff Rabindra Karki’s sale of five Liberty Tax franchise locations to Plaintiffs/Counterclaim Defendants Compass Tax Services, LLC, Ashok Lamichhane, and Amar Shrestha pursuant to a sale Agreement. Although some payments were made under the Agreement, the full price was never paid to Karki. Karki asserted counterclaims arising from Counterclaim Defendants’ failure to pay and from Lamichhane’s conduct managing Compass Tax. The Court previously dismissed all of Plaintiffs’ claims leaving only Karki’s counterclaims for trial. Following a bench trial, the Court entered a final judgment.
Breach of Contract. The Court had previously determined that one or more of the Counterclaim Defendants failed to pay Karki under the Agreement. The only issue remaining was which of the Counterclaim Defendants were obligated to make the payments. Karki contended that Lamichhane and Shrestha were personally liable, while they contended that Compass Tax was liable. The Court concluded that Lamichhane and Shrestha were personally liable, jointly and severally, based on the evidence that they had signed the Agreement in a personal capacity and used their personal funds to make initial payments to Karki.
Fraud. The Court dismissed the fraud counterclaim with prejudice because Karki had failed to demonstrate by the greater weight of the credible evidence that Lamichhane knowingly made false promises to Karki regarding his intent to make payments pursuant to the September Agreement at the time that agreement was signed.
Breach of Fiduciary Duty. The Court dismissed Karki’s breach of fiduciary duty counterclaim against Lamichhane without prejudice. The Court first determined that, based on Lamichhane’s majority interest in Compass Tax and managerial control, Lamichhane owed a fiduciary duty to Karki–a minority member. The Court also concluded that there was ample evidence that Lamichhane had breached his fiduciary duties owed as majority and managing member. However, the evidence showed that any harm suffered as a result of Lamichhane’s actions was harm suffered by Compass Tax, not Karki. Accordingly, Karki lacked standing to bring a direct claim for breach of fiduciary duty for harm suffered by Compass Tax.
Constructive Fraud. The Court dismissed Karki’s constructive fraud counterclaim without prejudice, as the alleged harm was to Compass Tax, not to Karki.
UDTPA. The Court dismissed the UDTPA counterclaim with prejudice because the underlying tort claims had all been dismissed and, with respect to the breach of contract claim, Lamichhane’s and Shrestha’s conduct did not rise to the level of egregious or aggravating circumstances necessary to support a UDTPA claim. Further, the alleged misconduct concerned intra-corporate actions and therefore was not “in or affecting” commerce.
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Pridgen v. Carlson, 2025 NCBC 36 (N.C. Super. Ct. July 25, 2025) (Robinson, C.J.)
Key Terms: motion to dismiss; fraud; fraudulent concealment; statute of limitation; discovery rule; professional services; North Carolina Investment Advisers Act; N.C.G.S. § 78C-38(d); N.C.G.S. § 1-538.2; negligent misrepresentation
This action arises out of Plaintiff’s contention that beginning in 2007, Defendant Carlson, her investment advisor, made fraudulent statements to induce her to enter an investment advisor relationship with him and that he continued to make fraudulent statements throughout their relationship regarding his status as a registered investment advisor and the status of her investments. She further contended that the corporate Defendants—Carlson Financial and Repple—agreed to manage her investment profiles through Carlson, thereby becoming responsible for Carlson’s fraudulent acts. Plaintiff terminated her relationship with Carlson around July 2021 and filed suit on April 17, 2024. The Carlson Defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6) and Repple moved to dismiss under Rule 12(b)(6).
Statute of Limitation. Defendants argued that Plaintiff’s fraud claims should be analyzed under N.C.G.S. § 1-15(c), which provides that a cause of action for malpractice arising out of professional services accrues at the time of the occurrence of the last act of defendant giving rise to the cause of action. The Court rejected this argument, concluding that investment advisors did not fall under professional services for purposes of N.C.G.S. § 1-15(c). Instead, the Court applied N.C.G.S. § 1-52(9), which provides that causes of action for fraud do not accrue until the aggrieved party’s discovery of facts constituting fraud or mistake.
Fraudulent Inducement & Common Law Fraud
The Court denied dismissal of the claims for fraudulent inducement and common law fraud, as Defendants conceded that Plaintiff alleged these claims with sufficient particularity under Rule 9(b). The Court also found that Plaintiff met the burden to demonstrate Repple’s vicarious liability for Carlson’s conduct while he was in Repple’s employ.
Fraudulent Concealment. The Court also denied dismissal of Plaintiff’s claim for fraudulent concealment. Plaintiff’s allegations that Carlson and Carlson Financial maintained total discretionary control over her investment portfolio created a fiduciary duty where Carlson had a “duty to speak” to inform Plaintiff of the true and diminishing value of her portfolio. Because Carlson sent Plaintiff monthly account statements containing false financial information through Repple, the Court determined that Plaintiff pleaded a valid claim against Repple.
Violation of the North Carolina Investment Advisers Act. The Court denied dismissal of this claim, rejecting Defendants’ five-year statute of limitations argument. Under the IAA, no person may sue more than three years after the person discovers the facts constituting the violation, but in any case no later than five years after the rendering of investment advice, except that if the violation is concealed through fraud, the suit may be commenced not later than three years after the person discovers that the act was fraudulent. Since Plaintiff had adequately alleged fraudulent conduct and there were disputed facts regarding when Plaintiff should have discovered the fraud, the Court declined to dismiss the claim at this stage.
Negligent Misrepresentation. The Court denied dismissal, noting the need for a more developed record to determine whether the applicable three-year statute of limitations barred the claim.
Civil Liability under N.C.G.S. § 1-538.2. N.C.G.S. § 1-538.2 allows private actions based on violations of criminal statutes. However, since the discovery rules does not apply to this claim, the three-year statute of limitations of N.C.G.S. § 1-52(2) barred the claim to the extent it was based on any actions that took place before 17 April 2021.
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United Therapeutics Corp. v. Liquidia Techs., Inc, 2025 NCBC 37 (N.C. Super. Ct. July 29, 2025) (Earp, J.)
Key Terms: summary judgment; trade secrets; compilation trade secret; process trade secrets; reasonable efforts to maintain secrecy; damages; UDTPA
As summarized here and here, this dispute concerns the alleged misappropriation of trade secrets by Defendant Roscigno from his former employer Plaintiff UTC to the benefit of his new employer, Defendant Liquidia. Liquidia moved for summary judgment on UTC’s misappropriation of trade secrets and UDTPA claims, arguing that the documents at issue (the “UTC Documents”) are not a protectable compilation or process trade secret and that UTC did not engage in reasonable efforts to protect its trade secrets.
Individual Trade Secret Documents. Although UTC claimed that the “totality” of the UTC Documents constituted a trade secret, it also referenced specific information within some of the documents. The Court found that a factfinder could conclude that the UTC Documents contain individual trade secrets that UTC had identified with sufficient particularity. Liquidia also argued that UTC could not recover damages for unjust enrichment for misappropriation of individual trade secrets because its expert did not apportion damages by-document. The Court, however, was unable to conclude that UTC would be incapable of presenting evidence to allow the calculation of damages with respect to at least some of the trade secrets. Additionally, if successful on liability, UTC could obtain injunctive relief, punitive damages, or attorneys’ fees. Accordingly, the Court denied summary judgment on this basis.
Compilation Trade Secrets. Liquidia argued that UTC could not support its claim for misappropriation of a compilation trade secret because it did not present evidence regarding the effort or cost expended in compiling the information and some of the information was publicly available. The Court rejected both these arguments, noting that it would be left to the jury to decide whether Roscigno compiled the documents as a “roadmap,” as UTC argues, or whether the documents “were randomly compiled in the course of doing business,” per Liquidia’s stance. Thus, the Court denied summary judgment on this basis.
Process Trade Secret. The Court found that record evidence existed to support a conclusion that the documents at issue constitute a process trade secret. Although the UTC Documents contained some information that is publicly available, other portions of the UTC Documents were not publicly available and thus the process may constitute a trade secret. Accordingly, the Court denied summary judgment on this basis.
Efforts to Maintain Secrecy. Liquidia asserted that the trade secret claim failed because, when it comes to efforts to maintain secrecy, UTC did not distinguish between its trade secrets and other confidential information. The Court disagreed, concluding that the failure to differentiate security measures was not dispositive. The evidence of UTC’s efforts to maintain the secrecy of its information was sufficient to go to the jury.
Unfair and Deceptive Trade Practices. The Court denied Defendant’s motion related to the UDTPA claim because it was based on the surviving trade secret misappropriation claim.
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Meridian Renewable Energy LLC v. Birch Creek Dev., LLC, 2025 NCBC Order 51 (N.C. Super. Ct. July 23, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45-4(a)(1); N.C.G.S. § 7A-45-4(b)(2); N.C.G.S. § 7A-45.4(e); notice of designation; Chapter 59
As summarized here, the Court previously rejected Defendant Birch Creek Development, LLC’s attempt to designate this case as a complex business case based on Plaintiff Meridian Renewable Energy LLC’s second amended complaint. Thereafter, however, Birch Creek filed an answer with counterclaim and third-party complaint, asserting a claim for breach of fiduciary duty and declaratory relief against Pine Gate and other third-party defendants. Birch Creek contemporaneously filed a Notice of Designation, asserting that the case now met the criteria for a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(1). Meridian timely filed an opposition to designation, contending that designation was improper.
Per N.C.G.S. § 7A-45.4(a)(1), designation as a mandatory complex business case is proper for actions involving a material issue related to “[d]isputes involving the law governing corporations . . . including disputes arising under Chapters 55, 55A, 55B, 57D, and 59 of the General Statutes.” Meridian argued that Birch Creek’s third-party complaint insufficiently referenced Chapter 59 and partnership law and that on the face of the contracts at issue, no joint venture or partnership existed. The Court disagreed, concluding that the action “involves the law governing partnerships under Chapter 59 of the General Statutes,” as Birch Creek’s new breach of fiduciary duty claim named Pine Gate as a joint venture partner and sought declaratory relief concerning the existence of a partnership. Moreover, the Court declined to make a determination on the merits at this stage as to whether a joint venture existed. Accordingly, the Court overruled Meridian’s Opposition and determined that the action was properly designated as a mandatory complex business case.
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Mohr Partners, Inc. v. Elior, Inc., 2025 NCBC Order 52 (N.C. Super. Ct. July 23, 2025) (Davis, J.)
Key Terms: summary judgment; stipulation; supplemental order
As summarized here, the Court previously issued an order and opinion which granted Plaintiff Mohr Partners, Inc’s motion for summary judgment concerning its entitlement to a commission for work on the Moosic Transition from Defendant Elior, Inc. but deferred ruling on the amount of the commission that Plaintiff was due. Thereafter, the parties stipulated that Plaintiff was due $450,000 plus pre-judgment interest and post-judgment interest.
This Order supplemented the original order by entering partial summary judgment in favor of Plaintiff on the Moosic Transaction for the parties’ stipulated amount.
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In Re Asheville Eye Assocs. Data Incident Litig., 2025 NCBC Order 53 (N.C. Super. Ct. July 24, 2025) (Davis, J.)
Key Terms: pro hac vice revocation; sua sponte judicial reconsideration; habitual practice; N.C.G.S. § 84-4.1
The Court previously entered an order granting pro hac vice admission to Raina C. Borrelli in ongoing litigation, after finding that Borrelli had satisfied the requirements of N.C.G.S. § 84-4.1, the statute governing pro hac vice admissions.
Thereafter, a supplement to the motion for Borrelli’s PHV admission was filed, which provided that Borelli had been admitted pro hac vice in North Carolina fifteen times in the last five years, rather than eight times, as was stated in the original PHV motion. The supplement stated that the failure to include the seven undisclosed cases in the original PHV motion was due to an “inadvertent error.”
N.C.G.S. § 84-4.1 forbids North Carolina courts from allowing nonresident attorneys to practice in this State’s courts habitually. The Court revoked Borrelli’s pro hac vice admission, concluding that her fifteen pro hac vice admissions within five years constituted habitual practice.
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Comic Certification Serv. LLC v. CBCS Operations, LLC, 2025 NCBC Order 54 (N.C. Super. Ct. July 28, 2025) (Davis, J.)
Key Terms: comics; default; Rule 55(a)
The Court entered default under Rule 55(a) against Defendants Eli Global, LLC and Global Growth Holdings, LLC for failing to timely file an answer or plead in response to Plaintiffs’ Amended Complaint.
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In re Matter of the 2025 Ann. S’holders’ Meeting of Charles & Colvard Ltd., 2025 NCBC Order 55 (N.C. Super. Ct. July 29, 2025) (Robinson, C.J.)
Key Terms: order on designation; application for court-order shareholder meeting; contemporaneous filing requirement
On 10 July 2025, Riverstyx initiated this action by filing an Application for Court-Ordered Shareholder Meeting pursuant to N.C.G.S. § 55-7-03. One week later, it filed a notice of designation under N.C.G.S. § 7A-45.4(a). The Chief Justice issued a determination order, directing the Court to determine whether the action was properly designated. Because the NOD was not filed contemporaneously with the filing of the Application, as required by N.C.G.S. § 7A-45.4(d)(1), the Court determined that the action was not properly designated as a mandatory complex business case.
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United Therapeutics Corp. v. Liquidia Techs., Inc., 2025 NCBC Order 56 (N.C. Super. Ct. July 29, 2025)
Key Terms: expert witness; trade secrets; value from secrecy; damages apportionment; Rule 403; Rule 702; state of mind
As summarized here and here, this dispute concerns the alleged misappropriation of trade secrets by Defendant Roscigno from his former employer Plaintiff UTC to the benefit of his new employer, Defendant Liquidia. UTC retained an expert witness to support its trade secret misappropriation claim, who opined in his report as to the value that Liquidia received from the trade secrets. Liquidia moved to exclude the expert under Rules 702 and 403 of the Rules of Evidence.
Liquidia first contended that the expert’s testimony should be excluded because it was based on his speculation about the “state of mind” of Defendants and the FDA. The Court agreed with Liquidia that to the extent the expert’s conclusions regarding the value Liquidia placed on the alleged trade secrets was not based on record evidence, it should be excluded. However, given the expert’s qualifications and experience, he could opine generally on the value this type of information would have to a competitor like Liquidia. The Court also held that the expert could testify as to what the FDA actually did and said based on the documents he reviewed and could testify as to the FDA’s general practices.
Next, Liquidia asserted that the expert’s opinions with respect to the value of the documents was inherently unreliable because his analysis lacked a specific methodology and he failed to assess the independent economic value of the trade secrets on a by-category or by-document basis. With respect to the first point, the Court determined that a specific methodology is unnecessary when the expert’s testimony is based on experience. Since the expert here had extensive relevant experience, his testimony was sufficiently reliable. As to the second point, the Court acknowledged that since the expert’s testimony did not apportion damages between specific trade secrets, Liquidia may have difficulty establishing damages at trial in the event that the jury determined that not all of the alleged trade secrets were misappropriated. However, this issue was left for trial.
Lastly, Liquidia argued that the expert’s opinions regarding the independent economic value of UTC’s alleged trade secrets were irrelevant because the expert did not address their value “derived from secrecy” since some of the information was in the public domain. The Court rejected this argument, concluding that most of the information was not publicly available and a fact-finder could conclude that UTC expended significant resources developing and including the publicly available information in its drug development efforts and that Roscigno purposefully chose those documents to include in a larger compilation which he then shared.
The Court also concluded that the probative value of the expert’s opinions outweighed the danger of misleading the jury.
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.
Posted 07/29/25
By: William H. Scott and Ashley Oldfield
Action Learning Assocs., LLC v. Kenan-Flagler Bus. Sch. Exec. Educ. LLC, 2025 NCBC 30 (N.C. Super. Ct. July 2, 2025) (Davis, J.)
Key Terms: motion to dismiss; breach of contract, tortious interference with contractual relations, fraud, unfair and deceptive trade practices, conversion, misappropriation of trade secrets, constructive fraud, civil conspiracy
Plaintiff Action Learning Associates, LLC and Defendant Kenan-Flagler Business School Executive Education LLC (“KFEE”) collaborated since 2013 to develop executive learning courses for clients, including ExxonMobil. The parties codified their working agreements in an Independent Contractor Scope of Work in 2013 and an updated Master Services Agreement (“MSA”) in 2019. The parties renewed the MSA annually between 2019 and 2022, and during negotiations for the 2023 renewal, Plaintiff entered a one-year contract to renew the MSA at discounted rates. In August 2023, KFEE informed Plaintiff that there would be no future renewals of the MSA. Plaintiff filed suit asserting various claims against KFEE and several of its employees (the “Individual Defendants”) arising from the failure to renew and other alleged misconduct. Defendant moved to dismiss all of Plaintiff’s claims pursuant to Rule 12(b)(6).
Breach of Contract. The Court granted the motion with respect to the Individual Defendants because they were not parties to the contracts at issue. The Court also granted the motion to the extent it was based on KFEE’s decision not to renew the MSA as there was no contractual right to renewal. The Court rejected Plaintiff’s argument in its brief that the failure to renew was a breach of the implied covenant of good faith and fair dealing since the complaint did not allege such a claim, and, in any event, such a claim would have failed along with the claim for breach of an express contract because they were based on identical facts. However, the Court denied the motion with respect to breach of the MSA’s confidentiality and non-disclosure provisions, concluding that the allegations met the minimum pleading requirements.
Tortious Interference with Contractual Relations. Plaintiffs alleged that Defendants had tortiously interfered with the contracts between the parties and with Plaintiff’s contracts with its former facilitators. The Court dismissed both. The first theory failed because one cannot legally interfere with a contract to which it is a party and there were no allegations that the Individual Defendants had taken any actions to induce any breach. The second failed because the complaint did not contain allegations of inducement regarding the facilitators.
Fraud & Fraud in the Inducement. The Court dismissed these claims because the allegations largely failed to meet the Rule 9(b) pleading standards. The only statement that met the pleading standards was not a misrepresentation of fact or promissory representation.
Conversion. Plaintiff’s conversion claim was based on materials which it had designed for its ExxonMobil programs. The Court granted the motion with respect to the Individual Defendants because there were no allegations that they had converted anything. KFEE argued that Plaintiff’s training materials were intellectual property rights which cannot be the subject of a conversion claim. However, because KFEE’s computer servers maintain some electronic documents that Plaintiff created, the Court allowed the conversion claim relating to KFEE to continue.
Unfair & Deceptive Trade Practices. The Court dismissed the UDPTA claim against the Individual Defendants because there were no remaining predicate claims against them, but denied dismissal as to KFEE based on the surviving conversion claim.
Misappropriation of Trade Secrets. The Court dismissed the claim for misappropriation of trade secrets because the complaint failed to even come close to describing the alleged trade secrets with the requisite degree of specificity.
Constructive Fraud. The Court dismissed the constructive fraud claim because Plaintiff had failed to allege the existence of a fiduciary duty. Allegations that KFEE had obtained Plaintiff’s confidential and proprietary information pursuant to the MSA and then breached its confidentiality obligations were not sufficient to demonstrate a fiduciary duty between the parties.
Civil Conspiracy. The Court dismissed the civil conspiracy claim because the underlying tort claims had been dismissed and because the complaint failed to adequately allege an agreement to commit an unlawful act or the identity of the conspirators.
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Londry v. Stream Realty Partners, L.P., 2025 NCBC 31 (N.C. Super. Ct. July 7, 2025) (Earp, J.)
Key Terms: summary judgment, breach of contract, breach of partnership agreement, N.C.G.S. § 59-704(a), fraud, economic loss rule, unfair and deceptive trade practices; tortious interference
Plaintiff Londry worked as a real estate broker for Defendant Stream Realty Partners-Charlotte, L.P. (“Stream Charlotte”). Defendant Farrar is a minority owner of Stream Charlotte. While employed by Stream Charlotte, Londry worked on a deal for the sale of seventeen parcels of land in South Carolina (the PBC Deal). Londry left Stream Realty, formed Alpha Advisors LLC as its sole member, and closed on the PBC Deal. Farrar heard of the closing and requested an escrow agreement to hold the portion of the commission that Stream Charlotte would have received if the listing agreement had been executed while Londry was employed by Stream Charlotte. Londry and Stream Charlotte both alleged that they are entitled to the commission for the closing of the PBC Deal. Londry filed a Complaint, alleging breach of contract against Stream Charlotte and Farrar, breach of partnership agreement against Farrar, breach of fiduciary duty against Farrar, fraud against Farrar, and unfair and deceptive trade practices against all Defendants. Stream Charlotte’s answered and asserted counterclaims for breach of fiduciary duty and tortious interference with prospective business relations. Defendants moved for summary judgment on all of Plaintiffs’ claims and Plaintiffs moved for affirmative summary judgment on their claim for wrongful interference.
Breach of Contract. The Court granted Defendant’s motion for summary judgment with respect to Plaintiff’s claims of divestment of partnership and for being stripped of his title as co-market leader. The Court denied summary judgment with respect to Plaintiff’s claims for payment of commissions on outstanding deals and for the related claim for breach of the covenant of good faith and fair dealing.
Breach of Partnership Agreement. The Court denied summary judgment with respect to breach of a partnership agreement. Londry asserted that he was a partner in Stream Charlotte and that Farrar had agreed to form a general partnership within the limited partnership of Stream Charlotte. Under N.C.G.S. § 59-704(a), admission to a limited partnership requires consent from all other partners. The Court found that, due to the absence in the record of Stream Charlotte’s partnership agreement and “the mix of evidence presented,” it could not conclude as a matter of law whether Londry and Farrar had reached an enforceable partnership agreement.
Breach of Fiduciary Duty. The Court denied summary on the breach of fiduciary duty claims because the Court could not determine whether a legal partnership, and therefore an accompanying fiduciary relationship, existed between Londry and Farrar.
Fraud. The Court granted summary judgment in Defendants’ favor on Londry’s fraud claim because it was based on alleged breaches of the employment agreement and was therefore barred by the economic loss rule.
Wrongful Interference with Contract. The Court granted Defendants’ motion for summary judgment for wrongful interference with the listing agreement providing for a commission on the PBC Deal, as Plaintiff had failed to establish that Defendants’ sole motivation in seeking a commission was to injure Plaintiffs. It was reasonable to expect Defendants to pursue a commission on a deal that it had pursued for more than two years.
Unfair and Deceptive Trade Practices Act. The Court granted the motion for summary judgment with respect to the UDTPA claim because the wrongful interference claim failed and Plaintiff had not produced sufficient evidence to prove that the breach of contract was accompanied by egregious or aggravating circumstances.
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Comic Book Certification Serv. LLC v. CBCS Operations, LLC, 2025 NCBC 32 (N.C. Super. Ct. July 9, 2025) (Davis, J.)
Key Terms: motion to dismiss; breach of contract; unjust enrichment; implied covenant of good faith and fair dealing; declaratory judgment; unfair and deceptive trade practices; fraud; piercing the corporate veil; alter ego/instrumentality test; comics
Plaintiff Michael Bornstein created Plaintiff Comic Book Certification Service LLC (“CBCS”) in 2014 to provide comic book grading services to comic book collectors. Pursuant to an Asset Purchase Agreement, an Equity Equivalence Agreement (“EEA”), and a Consulting Agreement, CBCS’s assets were subsequently sold to the newly-formed CBCS Operations, which the Non-CBCS Operations Defendants managed. The various agreements required CBCS Operations to pay CBCS certain sums over time. Defendants’ payments to CBCS were initially timely paid, then late-paid, and then not paid at all. Later, CBCS Operations provided Plaintiff with a Fair Market Value Statement which indicated that CBCS had a negative EBITDA, rendering Plaintiff’s equity interest in CBCS Operations worthless. Plaintiff filed suit in 2024, alleging various claims arising from the parties’ soured business relationship. Defendants moved to dismiss most of Plaintiff’s claims.
Breach of Contract/Breach of the Implied Covenant of Good Faith and Fair Dealing.
The Court dismissed Bornstein’s individual claims for breach of the EEA and the Consulting Agreement for lack of standing, as he signed both documents in his capacity as Manager of CBCS, not in his personal capacity. As for CBCS’s claims for breach of the EEA and the Consulting Agreement, the Court denied dismissal, except to the extent the claim was based on Defendants’ intentional devaluing of CBCS’s phantom equity interest, for which there was no express contractual basis. However, the Court allowed the claim for breach of the implied covenant of good faith and fair dealing to go forward based on the intentional devaluing of the phantom equity interest.
Unjust Enrichment. The unjust enrichment claim survived as an alternative to the breach of contract claim.
Breach of Fiduciary Duty and Constructive Fraud. The Court dismissed Plaintiff’s breach of fiduciary duty and constructive fraud claims because no fiduciary relationship arose from the parties’ arms-length contractual relationship.
UDTPA. The Court denied dismissal of the UDTPA claim because Plaintiffs had adequately pleaded substantial aggravating circumstances to elevate a breach of contract to an unfair or deceptive trade practice, including “an elaborate scheme designed to help CBCS Operations avoid making required payments to Plaintiffs while secretly devaluing Plaintiffs’ phantom equity interest.”
Declaratory Judgment. Plaintiffs requested three declarations from the Court. Although the first two clearly overlapped with the subject matter of Plaintiffs’ breach of contract claims, the Court declined to dismiss them at this stage. The third requested a declaration that Defendants must comply with a TRO entered in a separate pending lawsuit. The Court dismissed the claim for this declaration as it did not have the authority to issue a ruling addressing the enforceability of an order issued by another judge in another pending case.
Piercing the Corporate Veil. The Court dismissed Plaintiffs’ veil piercing claim against the Non-CBS Operations Defendants without prejudice. Plaintiffs’ pleadings did not satisfy the instrumentality test, which allows veil piercing if the corporate entity is a mere instrumentality or alter ego of another entity or individual. The Amended Complaint was unclear as to which entities controlled which other entities and how any such control specifically related back to Defendant CBCS Operations.
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Allin v. Compassion Healthcare, Inc., 2025 NCBC Order 50 (N.C. Super. Ct. July 14, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45-4(a); timeliness of filing; clerk of court
Plaintiff filed suit on May 27, 2025, and served the Defendant with the complaint on June 5, 2025. Defendant timely served its Notice of Designation upon the Chief Justice and the Business Court on July 7, 2025, by email, but did not file the NOD with the Caswell County Clerk of Superior Court until July 9, 2025.
Per N.C.G.S. §§ 7A-45.4(c) and (d), parties must file NODs with the clerk of court within thirty days of service of a complaint, which here was July 7, 2025. Because the NOD was not filed with the clerk of court until July 9, 2025, it was untimely. Accordingly, the Business Court concluded that the action would not proceed as a mandatory complex business case under N.C.G.S. § 7A-45.4(a). This ruling was made without prejudice to the right of any party to seek designation as a mandatory complex business case as provided under N.C.G.S. § 7A-45.4.
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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.
Posted 07/15/25
By: Natalie E. Kutcher
Fin. Carrier Servs. LLC v. Kingpin Cap. Inc., 2025 NCBC 27 (N.C. Super Ct. June 19, 2025) (Conrad, J.)
Key Terms: motion to dismiss; non-compete agreement; non-solicitation agreement; misappropriation of trade secrets; UDTPA; tortious interference; fraud, injunctive relief; confidentiality agreement
Defendant Ryan McCray was employed by Plaintiff Financial Carrier Services, LLC, a factoring and financial services company for over a decade, most recently serving as Plaintiff’s Client Services Supervisor. As a condition of his employment with Plaintiff, McCray signed an employment agreement containing broad noncompetition, nonsolicitation, and confidentiality provisions. In early 2024, McCray resigned from his position with Plaintiff, and took a similar role with Defendant Kingpin Capital, Inc. Plaintiff initiated this lawsuit against McCray and Kingpin, alleging misappropriation of trade secrets, breach of contract, tortious interference with contract, unfair and deceptive trade practices, and fraud. McCray and Kingpin moved jointly to dismiss all claims pursuant to Rule 12(b)(6).
Misappropriation of Trade Secrets. The Court granted Defendants’ motion as to Plaintiff’s misappropriation of trade secrets claim, noting the complaint failed to adequately describe the trade secrets at issue with particularity. Plaintiff’s broad descriptions of its alleged trade secrets, such as “business development strategies and goals,” “knowledge of [Plaintiff’s] operations” and “business practices and plans for future business” were held to be inadequate to put Defendants on notice of the precise information allegedly misappropriated.
Breach of Contract – Noncompetition and Nonsolicitation. The Court granted Defendants’ motion as to Plaintiff’s claims against McCray for breach of the employment agreement’s noncompetition and nonsolicitation provisions. The noncompetition provision, which barred McCray from “directly or indirectly” providing financial services to any of Plaintiff’s customers within the United States, was facially overbroad and unenforceable and not subject to blue-penciling because it was not clearly drafted to be divisible. The nonsolicitation provision was likewise facially overbroad and unenforceable because, read literally, it would bar McCray from doing any financial service business with any customer of Plaintiff’s within the United States, including those customers with which he’d had minimal or no contact.
Breach of Contract – Confidentiality. The Court denied Defendants’ motion as to Plaintiff’s claim for breach of the employment agreement’s confidentiality provision. Defendants argued the Complaint failed to adequately plead a breach. Noting that breach of contract claims are not subject to heightened pleading standards, the Court determined the claim was adequately pleaded.
Tortious Interference with Contract and Unfair and Deceptive Trade Practices. Plaintiff asserted that Defendant Kingpin had tortiously interfered with the restrictive covenants in McCray’s employment agreement and had unlawfully induced Plaintiff’s customers to terminate their contract with Plaintiff. Defendants moved to dismiss, arguing that the restrictive covenants were all unenforceable and that any interference with Plaintiff’s contracts was justified. The Court dismissed the claim to the extent it was based on the noncompetition and nonsolicitation provisions of McCray’s employment agreement, which had already been determined to be unenforceable. However, since the claim for breach of the confidentiality provision remained and such breach supplied the unlawful conduct necessary to plead a tortious interference claim, the motion was otherwise denied as to this claim. Because the UDTPA claim was premised on the tortious interference claim, it survived to the same extent as the tortious interference claim.
Fraud. Plaintiff’s fraud claim was based on Defendant’s providing a materially different version of McCray’s employment agreement which Plaintiff believed to be fake. The Court dismissed this claim, concluding that Plaintiff had not alleged that it had been deceived by, relied upon, or been damaged by the disputed document.
Injunctive Relief. Noting that injunctive relief is not an independent cause of action, the Court dismissed the standalone claim for injunctive relief without prejudice to Plaintiff’s ability to seek injunctive relief at a later time if appropriate.
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Accelerando, Inc. v. Relentless Sols., Inc., 2025 NCBC 28 (N.C. Super. Ct. June 19, 2025) (Robinson, C.J.)
Key Terms: motion to dismiss; misappropriation of trade secrets; breach of contract; tortious interference with contract; unjust enrichment, unfair and deceptive trade practices
Plaintiff Accelerando Inc. is a provider of software and services to businesses that license a point-of-sale software owned by NCR Corporation. Defendant Relentless Solutions, Inc. is also an authorized provider of software and services to NCR licensees. In 2017, Plaintiff and Relentless entered into a reseller agreement, whereby Relentless was authorized to resell certain products created by Plaintiff to use with the NCR software. In 2021, three of Plaintiff’s employees, including Defendant Robert Yoder, resigned from Plaintiff’s company and began working for Relentless. Following this, several of Plaintiff’s customers left Plaintiff and began working with Relentless. Plaintiff filed suit, asserting various claims relating to Defendants’ alleged misappropriation of trade secrets. Relentless moved to dismiss all claims asserted against it pursuant to Rule 12(b)(6).
Misappropriation of Trade Secrets. The Court denied in part and granted in part the motion to dismiss the trade secret claim. Relentless argued that the Complaint failed to include sufficient facts or evidence demonstrating that Relentless possessed and used the alleged trade secrets. The Court held that the Complaint’s allegations were “minimally sufficient” at the present stage to the extent the claim was based on Customer Service Protocols taken by Dollaeye, a former employee of Plaintiff. However, the Court ruled that Plaintiff’s allegations relating to trade secrets taken by Defendant Yoder and another employee, Muller, were insufficient to support a claim. Plaintiff conceded that the confidential information taken by Yoder did not warrant trade secret protection. Additionally, the Complaint failed to allege that any trade secrets were taken by Muller and subsequently used by Relentless. Although Relentless argued that the Complaint’s allegations amounted to misappropriation by “inevitable disclosure,” a doctrine not yet recognized in North Carolina, the Court concluded that the pleadings alleged actual, rather than inevitable, disclosure of trade secrets.
Breach of Contract. The Court denied Relentless’ motion to dismiss Plaintiff’s breach of contract claim, holding that the Complaint had met the relatively low bar to state a claim for breach of contract. Specifically, the Court pointed to allegations asserting the existence of a valid contract between Plaintiff and Relentless, and Relentless’ breach of the contract by using Plaintiff’s confidential proprietary information to compete with Plaintiff.
Wrongful Interference with Contract. The Court denied Relentless’ motion to dismiss as to wrongful interference with contract, concluding that Plaintiff had adequately pleaded the claim. Because Plaintiff had alleged that Relentless had interfered with Plaintiff’s contracts through unlawful means, the Court rejected Relentless’ argument that the interference was justified.
Unfair and Deceptive Trade Practices. Because the Court had concluded that Plaintiff’s allegations were sufficient to state claims for misappropriation and tortious interference, the Court concluded that the allegations were likewise sufficient to state a UDTPA claim as to that same conduct.
Unjust Enrichment. The Court dismissed the unjust enrichment claim because, as alleged, any benefit Relentless received resulted from Relentless’ unauthorized taking of Plaintiff’s trade secrets and confidential information, not from a voluntary conferment of benefit from one party to another, as required to state an unjust enrichment claim.
Permanent Injunction. The Court granted Relentless’ motion to dismiss Plaintiff’s claim for a permanent injunction, as injunctive relief is a remedy, not an independent cause of action. The Court dismissed this claim without prejudice to Plaintiff’s ability to seek this remedy at a later time.
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Accelerando, Inc. v. Relentless Sols., Inc. 2025 NCBC 29 (N.C. Super. Ct. June 19, 2025) (Robinson, C.J.)
Key Terms: judgment on the pleadings; breach of contract; tortious interference with contract; unjust enrichment, unfair and deceptive trade practices; restrictive covenants
As described further above, this case arises following certain individuals’ resignation from Plaintiff Accelerando Inc. and subsequent employment with Defendant Relentless Solutions, Inc. In 2009, Defendant Robert Yoder began his employment with Plaintiff. At this time, Yoder executed a subcontractor agreement with Plaintiff containing noncompetition and confidentiality provisions. Yoder served as Plaintiff’s Vice President of Platform Services until his resignation in 2021. On the day of his resignation, Yoder allegedly forwarded certain information relating to two of Plaintiff’s customers to Yoder’s personal email address. Yoder subsequently began employment with Relentless. Plaintiff filed suit against both Relentless and Yoder. Yoder moved for judgment on the pleadings on all claims asserted against him.
Breach of Restrictive Covenants. The Court granted Yoder’s motion as it related to the noncompetition provision of the agreement, on the basis that the restriction was overly broad and unenforceable as a matter of law because, among other reasons, it prohibited “indirect” competition. The Court denied Yoder’s motion as it related to the confidentiality provision, noting that the pleadings adequately alleged the requisite elements for a breach of contract action.
Wrongful Interference with Contract. The Court denied Yoder’s motion as it related to Plaintiff’s claim for wrongful interference with contract. Yoder asserted that the claim failed due to Plaintiff’s failure to allege how Yoder induced the named customers to terminate their contracts with Plaintiff, or allege malice on Yoder’s behalf. The Court disagreed, finding that the Complaint adequately pleaded the elements of the claim, including that Defendants had interfered through unlawful means.
Unfair and Deceptive Trade Practices. The Court denied Yoder’s motion as it relates to Plaintiff’s claim under the NCUDTPA, noting that the survival of the tortious interference claim asserted by Plaintiff warranted the survival of its connected NCUDTPA claim.
Unjust Enrichment. The Court granted Yoder’s motion as it related to the unjust enrichment claim. As with the analysis offered above for Defendant Relentless’ motion to dismiss, the Court found that no benefit was voluntarily conferred upon Yoder by Plaintiff.
Permanent Injunction. The Court granted Yoder’s motion to dismiss Plaintiff’s claim for a permanent injunction, as injunctive relief is a remedy, not an independent cause of action. The Court dismissed this claim without prejudice to Plaintiff’s ability to seek this remedy at a later time.
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Johnson v. Hildebrandt, 2025 NCBC Order 46 (N.C. Super. Ct. June 24, 2025) (Houston, J.)
Key Terms: voluntary dismissal; pro se; motion to reopen case; show cause hearing
Plaintiff filed a putative derivative action on behalf of nominal defendants in March 2024 alleging that Defendants Hildebrandt and Johnson had engaged in corporate mismanagement and waste. Although Plaintiff was represented by counsel, in July 2024, Plaintiff, through his son, filed a pro se notice of voluntary dismissal. Though the dismissal was notarized, Plaintiff’s son stated at hearing that the notarization had taken place without Plaintiff being present and without the notary observing Plaintiff signing the document. Plaintiff’s counsel filed to reopen the case in March 2025, contending that the dismissal was unauthorized and ineffective. Because no material actions were taken in the case prior to the dismissal and no filings were made in the case following the dismissal until the motion to reopen, the Court entered an order requiring Plaintiff to show cause why the action should not be dismissed for failure to prosecute.
Following the show cause hearing, the Court held that the voluntary dismissal should be struck because 1) Plaintiff was represented by counsel and therefore could not make pro se filings; 2) Plaintiff had not obtained leave to file the dismissal, which is required for dismissal of derivative claims; and 3) there were reasonable grounds to question the authenticity of the filing. Plaintiff orally moved for a dismissal without prejudice at the show cause hearing, indicating that a resolution outside of court was expected. Finding that the dismissal was in the best interest of all interested parties, the Court granted this dismissal without prejudice.
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Rhinehart v. Howard, 2025 NCBC Order 47 (N.C. Super. Ct. June 27, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4; mandatory complex business case; contemporaneous filing
Plaintiff initiated this action in Cumberland County Superior Court on June 24, 2025. On June 25, 2025, Plaintiff filed a notice of designation. The Court determined that designation was improper because the NOD was not contemporaneously filed with the complaint, as required by N.C.G.S. § 7A-45.4(d)(1). This ruling was made without prejudice to the right of any party to seek designation of this action as a mandatory complex business case as provided under N.C.G.S. § 7A-45.4.
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G1.34 Holdings, LLC v. Chapman Grp. Inc. of SC., 2025 NCBC Order 48 (N.C. Super. Ct. June 27, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(5); intellectual property; mandatory complex business case
Plaintiff filed suit alleging claims for unfair and deceptive trade practices and tortious interference. Plaintiff timely filed a notice of designation, designating the case as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(5), which provides for designation of actions involving a material issue related to disputes involving the ownership, use, licensing, lease, installation, or performance of intellectual property.
The Court held that the case was improperly designated. After a review of the record, the Court determined that the dispute arose from a financing agreement for software development costs, not the software or intellectual property itself. Designation under § 7A-45.4(a)(5) requires the dispute to be “closely tied to the underlying intellectual property aspects” of the property at issue rather than closely tied to areas such as contract, fraud, or tort. The Court also declined to recommend the case for Rule 2.1 designation. This ruling was made without prejudice to the right of any party to seek designation of this action as a mandatory complex business case as provided under N.C.G.S. § 7A-45.4.
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In re Asheville Eye Assocs. Data Incident Litig., 2025 NCBC Order 49 (N.C. Super. Ct. July 1, 2025) (Davis, J.)
Key Terms: pro hac vice; sanctions; duty of candor; barred from practicing law in North Carolina
This Order arises from the Court’s sua sponte reconsideration of its Order granting Andrew J. Shamis pro hac vice status in this matter. Shamis, an attorney with Shamis & Gentile, P.A. in Florida, was listed as additional counsel on the complaint, “pro hac vice forthcoming.” Shamis was also listed as an attorney in two other class action cases in the state. In his various pro hac vice motions for these three cases, Shamis presented conflicting information to the Court regarding the states in which he is admitted to practice, his Florida bar license number, and his history of pro hac vice admission in North Carolina.
On May 9, 2025, Shamis’ conflicting representations were noted by Chief Judge Robinson in one of the other cases, resulting in his request for pro hac vice admission to be denied in that matter. On that same day, unaware of Shamis’ misrepresentations, the Court granted Shamis’ motion for pro hac vice admission in this case. Shamis did not alert the Court of the misrepresentations contained in his motion at this time. Three weeks later, the Court independently discovered this and noticed a hearing to determine whether reconsideration of his admission was warranted.
Three days before the hearing Shamis and local counsel filed an amended motion for Shamis to appear pro hac vice and statement in support thereof. In this amended motion and statement, Shamis disclosed for the first time that he had been admitted pro hac vice in North Carolina multiple times within the last five years. Shamis and local counsel represented that they were unaware of the inaccuracies contained in the pro hac vice motion when filed.
The Court revoked Shamis’ pro hac vice admission. Noting Shamis’ “repeated violations of clear North Carolina rules and his failure to comply with his duty of candor” the Court sanctioned Shamis, prohibiting him from practicing within the state for a period of one year. The Court further admonished local counsel for failing to bring to the Court’s attention the inaccuracies contained in Shamis’ motion.
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Posted 07/01/25
By: Austin Webber
Packard v. SEI Priv. Tr. Co., 2025 NCBC 26 (N.C. Super. Ct. June 10, 2025) (Davis, J.)
Key Terms: Rule 12(b)(6); breach of fiduciary duty; negligence; incorporated by reference; authenticity
Plaintiffs brought suit alleging claims for negligence and breach of fiduciary duty/constructive fraud arising from alleged errors related to a managed investment account. Defendant moved to dismiss the claims.
Defendant’s arguments supporting its motion to dismiss were based upon the contents of five documents, three of which were attached to the complaint and two of which were incorporated by reference in one of the three documents attached to the complaint. Defendant submitted the two incorporated documents with its motion to dismiss, along with an affidavit from the Defendant’s office manager attesting to their authenticity. The Court held it could properly consider the three documents attached to the complaint but could not consider the two documents incorporated by reference because they were neither attached to nor referenced in the complaint, the Plaintiffs never signed these documents, and, without considering the affidavit of the office manager, it was unclear whether the two incorporated documents were substantively identical to the documents provided to Plaintiffs. The Court refused to convert the Rule 12(b)(6) motion into a summary judgement motion because the relevance, admissibility, and authenticity of the two incorporated documents were appropriate subjects for discovery. When only considering only the complaint and three documents attached thereto, the Court denied Defendant’s motion to dismiss.
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800 Degrees Phillips Place LLC v. Jensen, 2025 NCBC Order 39 (N.C. Super. Ct. June 2, 2025) (Houston, J.)
Key Terms: derivative action; settlement; joint motion to approve dismissal with prejudice; members’ notice; fiduciary duties; breach of contract
Plaintiffs filed suit against Defendant, asserting direct and derivative claims arising from Defendant’s alleged breaches of his fiduciary duties and contractual obligations as manager of 800 Degrees Phillips Place LLC. Following settlement negotiations, Plaintiffs voluntarily dismissed the direct claims and the parties moved for approval of dismissal of the derivative claims. No objections to the motion by other members of 800 Degrees were received. Having considered the motion and the record (including the parties’ proposed settlement agreement) and weighing the benefits of the derivative claims against the company’s best interests, the Court granted the motion, concluding that the settlement had been reached as part of arm’s-negotiations and was in the best interest of the company.
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Russell v. McLawhorn, 2025 NCBC Order 40 (N.C. Super. Ct. June 5, 2025) (Robinson C.J.)
Key Terms: equitable motion to confirm arbitrator; arbitration; BCR 7.3; BCR 4.1; procedural matter in arbitration
The parties previously jointly selected an arbitrator to resolve certain disputes between them pursuant to the arbitration provisions of their companies’ operating agreements. After the arbitration proceeding had commenced, Plaintiff purported to unilaterally terminate the arbitration. Defendant filed a motion requesting that the Court confirm that the arbitrator had the power to continue as arbitrator to resolve the arbitration. The Court denied the motion as the interpretation of the termination language in the arbitration contract was a procedural question for the arbitrator to decide.
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Maxwell Foods, LLC v. Smithfield Foods, Inc., 2025 NCBC Order 41 (N.C. Super Ct. June 5, 2025) (Conrad, J.)
Key Terms: Daubert; specialized knowledge; expert qualification; reliable testimony; breach of contract; most-favored-nation clause; economic benefits; damages; expert witness; Rule 401; Rule 702(a)
As previously summarized here, this action arose from the parties’ disputes relating to an output contract under which Defendant agreed to buy all hogs produced by Plaintiff each month. The only issues remaining for trial are whether Defendant breached the contract’s most-favored-nation clause by giving a third-party, Prestage, better terms, and the amount of damages arising from Defendant’s breach of the output provision. Presently before the Court were the parties’ Daubert motions whereby Defendant sought to exclude the testimony of Plaintiff’s expert witness, Shaffer, and Plaintiff sought to exclude the testimony of Defendant’s expert witness, Piggott.
Defendant’s Motion: Defendant argued that Shaffer’s testimony regarding his calculation of output damages based on Prestage’s 2020 contract should be excluded because his analysis of the contract’s pricing formula ignored the requirement that Prestage supply a minimum number of hogs or risk a monetary penalty. Plaintiff countered that the volume requirements were irrelevant to the MFN clause and that Shaffer’s analysis wouldn’t have changed even if he had included it. The Court agreed with Defendant and granted its motion to exclude Shaffer’s output damages testimony based on Prestage’s 2020 contract. The Court concluded that Shaffer’s opinion was unreliable because it failed to take into account both the pricing terms and the volume requirements which were interdependent provisions and ignoring the volume requirements would put Plaintiff in a better position than it would have been in had Defendant performed.
Plaintiff’s Motion: Plaintiff argued Piggott’s testimony should be excluded because he was not qualified to testify about leanness, quality or hog genetics, hog contracts, or damages. The Court agreed that Piggott’s opinions regarding leanness, quality and hog genetics should be excluded because his opinions were merely a summation of Defendant’s position, without any application of economic principles based upon his expertise, and his opinions would not be helpful to the jury. However, the Court concluded that Piggott’s opinions pertaining to hog contracts were admissible because Piggott grounded his opinions in his training, education and experience in agricultural economics, commodity markets, and risk allocation, and Plaintiff’s arguments related to Piggott’s qualifications went to the weight of such evidence, not its admissibility. Lastly, the Court rejected Plaintiff’s argument that Piggott’s opinions on damages should be excluded because he was not a damages expert and improperly relied on assistance from a data analytics company. That Piggott is not a “damages expert” does not mean that he is unqualified to rebut the opinions of Plaintiff’s experts, and his reliance upon a data analytics company was not improper because such company worked under Piggott’s supervision.
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Evergreen Buildings Sols., LLC v. Taylor, 2025 NCBC Order 42 (N.C. Super. Ct. June 5, 2025) (Houston, J.)
Key Terms: preliminary injunction; temporary restraining order; confidential or proprietary information; covenant not to compete; covenant not to solicit
Plaintiff initiated this action, asserting various claims against two former employees, Taylor and Price, and their new employer, arising from alleged breaches of their employment agreements. Plaintiff moved for a preliminary injunction.
Breach of Contract Claim. The Court found that Plaintiff had not shown a likelihood of success on the merits of its claims relating to the non-competition, non-solicitation, and confidentiality provisions of the employment agreements because Plaintiff failed to demonstrate that these provisions were reasonable and enforceable given their expansive geographic, temporal, and subject-matter breadth, the expansive scope of the clients and other persons not to be solicited, and their prohibition on “direct or indirect” competition.
Conversion and Computer Trespass. The Court also found that Plaintiff had not shown a likelihood of success on its conversion or computer trespass claims as Plaintiff failed to provide any evidence that Taylor or Price converted or otherwise stole Plaintiff’s confidential or proprietary information or that they accessed its computers or software to download or use Plaintiff’s information for an improper purpose. The mere ability or opportunity to access allegedly confidential or proprietary information was not sufficient to support either claim.
Tortious Interference with Contract. Similarly, the Court found that Plaintiff had not shown a likelihood of success on its tortious interference claim against the remaining Defendants. Plaintiff’s conclusory allegations of wrongdoing were insufficient and the weight of the evidence showed that Defendant Integrity’s hiring of Taylor and Price to develop its business in the same markets as Plaintiff was for a legitimate business purpose.
UDTPA Claim. Plaintiff had also not shown a likelihood of success on its UDTPA claim as it had only demonstrated a possibility of success of its breach of contract claims with scant evidence of any other wrongdoing by Defendants.
Constructive Trust/Receiver and Punitive Damages. The Court noted these requests are remedies, not independent causes of action warranting injunctive relief.
Finally, the Court noted that Plaintiff’s delay of more than two years to pursue its claims against Taylor, and more than five months against Price, weighed against Plaintiff’s argument that it had been irreparably harmed.
In sum, Plaintiff’s allegations largely based on conclusory allegations, speculation, and hearsay were insufficient to show a likelihood of success on the merits of any of its claims. Further, the balance of the equities weighed against injunctive relief. Accordingly, the Court denied Plaintiff’s motion for injunctive relief.
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Janvier v. QBE Ins. Corp., 2025 NCBC Order 43 (N.C. Super. Ct. June 10, 2025) (Robinson, C.J.)
Key Terms: breach of contract; declaratory judgment; negligence; breach of fiduciary duty/constructive trust; N.C.G.S. § 7a-45.4(a)(9); mandatory complex business case
Defendants filed a Conditional Notice of Designation (“Conditional NOD”) under N.C.G.S. § 7A-45.4(a)(9), which requires, inter alia, that all parties consent to the designation. Plaintiff opposed the designation, arguing that Plaintiff (an individual serving as a limited receiver) was not a corporation, as required for designation under subsection (a)(9), and Plaintiff did not consent to the designation. As the Court explained, a Conditional NOD must be followed with a supplement indicating all parties’ consent to designation. Here, no supplement was filed and Plaintiff plainly did not consent as he had filed an opposition. Accordingly, designation was not proper. The Court did not address whether the receiver qualified as a corporation under N.C.G.S. 7A-45.4(a)(9).
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Friedmann v. Griffin, 2025 NCBC Order 44 (N.C. Super. Ct. June 16, 2025) (Davis, J.)
Key Terms: preliminary injunction; N.C.G.S. § 57D-3-20, -21; LLC; abandonment of managerial duties; Chapter 57D; bad faith
Plaintiff initiated this action against Defendant Griffin and their jointly-owned LLCs, asserting various claims, including that Griffin had violated N.C.G.S. § 57D-3-20 by denying Plaintiff company-related information and taking unilateral action in the management of the companies. Plaintiff moved for a preliminary injunction to enjoin Griffin from, inter alia, interfering with Plaintiff’s management rights.
Griffin opposed the motion, arguing that Plaintiff had abandoned his managerial duties. Although the Court agreed that a manager could potentially abandon his management duties under the default provisions of the LLC Act (which applied because the companies had no operating agreements), the Court held that too many factual issues existed regarding abandonment to deny the motion on that basis. Based on the record before it, the Court granted a preliminary injunction because Defendant’s actions of unilaterally withdrawing company funds and establishing separate personal/company bank accounts without Plaintiff’s consent or access violated N.C.G.S. § 57D-3-20, and Plaintiff showed a substantial likelihood of irreparable harm because, due to the animosity of the parties, Plaintiff’s managerial rights would be frequently and continuously violated.
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Gordon v. Gordon Recyclers, Inc., 2025 NCBC Order 45 (N.C. Super. Ct. June 16, 2025) (Davis, J.)
Key Terms: amended complaint; Rule 15; N.C.G.S. §55-7-03; futile; undue prejudice; Rule 7(b)(1)
As summarized here, this action concerns a dispute as to the rights of Plaintiff, a non-voting shareholder of Defendants, to attend the Defendants’ annual shareholder meetings. Plaintiff sought leave to file an amended complaint adding five new factual allegations and a new prayer for relief that the Court order shareholder meetings to be held. Defendant opposed the motion arguing that the proposed amendments were futile because an application for a court-ordered shareholder meeting under N.C.G.S. § 55-7-03 could only be made through a motion, not a pleading, per Rule 7. Defendants also argued that the proposed amendments were unduly prejudicial because they would disrupt the status quo and conflicted with the Court’s previous preliminary injunction order. The Court rejected both arguments and granted the motion. Rule 7 did not prevent Plaintiff from seeking its requested relief through a pleading. Further, the Court’s PI Order and the proposed amended complaint were not inconsistent, and the filing of the Amended Complaint would not disrupt or inconvenience Defendants regular annual shareholders’ meeting as Plaintiff had not yet requested the Court to order the meetings take place at a certain time of year.
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.
Posted 06/17/25
By: Lauren Schantz
Mohr Partners, Inc. v. Elior, Inc., 2025 NCBC 24 (N.C. Super. Ct. May 21, 2025) (Davis, J.)
Key Terms: amend pleadings; undue delay; prejudice; summary judgment; offensive summary judgment; real estate; exclusive representation agreement; commission; self-service; exclusive right to sell; exclusive agency; breach of contract; waiver; excused; actual damages; nominal damages, errata sheet; breach of fiduciary duty;
This action involves a dispute between a real estate broker, Plaintiff Mohr Partners, Inc., and its client, Defendant Elior, Inc., regarding Mohr’s entitlement to a commission under an Exclusive Representation Agreement (“ERA”). During the term of the ERA, Elior self-serviced certain transactions for which it did not pay Mohr a commission. Elior also refused to pay Mohr a commission for services Mohr performed on two transactions: the Moosic Transaction and the Berkeley Transaction. The parties filed cross-motions for summary judgment and Elior filed a motion for leave to amend.
Motion for Leave to Amend. Elior sought to amend its answer to assert that the ERA was not a valid contract. Because the parties had proceeded with the conduct of the case based on the premise that the ERA was valid, and the discovery period was now closed, the Court denied the motion due to undue delay and the resulting prejudice to Mohr.
Entitlement to Commission. The parties sought summary judgment on the issue of whether the ERA entitled Mohr to a commission for real estate transactions that Elior self-serviced. The Court concluded that the ERA constituted an exclusive agency agreement—which allows for self-servicing without payment of a commission—rather than an exclusive right to sell agreement because the ERA contained no language that expressly relinquished Elior’s right to self-service real estate transactions. Accordingly, Mohr was not entitled to a commission on the self-serviced transactions.
The Moosic Transaction. Elior argued that Mohr was not entitled to a commission for services performed as part of the Moosic Transaction because the real estate sale was part of a larger merger and acquisition transaction not covered by the ERA. The Court rejected this argument, noting that the ERA contained no language exempting real estate transactions that accompanied the sale of a business. Elior also argued that the Moosic Transaction was not assigned to Mohr, but the record did not support this argument. Thus, the Court concluded that Mohr was entitled to a commission for the Moosic Transaction, granted Mohr’s motion and denied Elior’s motion on this issue, and deferred ruling on the amount owed to Mohr.
The Berkeley Transaction – Breach of Contract. Mohr contended that Elior breached the ERA by failing to pay a commission for the Berkeley Transaction. Elior argued that Mohr mistakenly conveyed an unauthorized offer to a third-party and that this mistake excused Elior from paying the commission and gave rise to affirmative claims against Mohr. Although the parties agreed that a genuine issue of material fact existed as to whether Mohr’s conveyance of the offer was a breach of the ERA, Mohr argued that it was nonetheless entitled to summary judgment because Elior had waived any breach by continuing to have Mohr work on the Berkeley Transaction after the alleged breach. The Court concluded that a genuine issue of material fact existed regarding waiver, and, therefore, denied Mohr’s motion for summary judgment as to its breach of contract claim. However, the Court granted Mohr summary judgment on the issue of damages for Elior’s breach of contract counterclaim, determining that Elior had failed to offer sufficient evidence that it was entitled to actual damages. Accordingly, Elior would be limited at trial to seeking nominal damages on its breach of contract counterclaim regarding the Berkeley Transaction.
The Berkeley Transaction – Breach of Fiduciary Duty. Elior contended that Mohr, as its real estate agent, breached its fiduciary duty by conveying an unauthorized offer during negotiations. The Court denied Mohr’s motion for summary judgment on Elior’s breach of fiduciary duty counterclaim because whether Mohr’s conveyance of the offer constituted a breach of the ERA was a genuine issue of material fact for the jury to decide. The Court also concluded that Elior could only recover nominal damages on this counterclaim because Elior had failed to offer sufficient evidence that it was entitled to actual damages.
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United Therapeutics Corp. v. Roscigno, 2025 NCBC 25 (N.C. Super. Ct. May 27, 2025) (Earp, J.)
Key Terms: motion to dismiss; employment agreement; breach of contract; declaratory judgment; Rule 12(b)(1); standing; subject matter jurisdiction; justiciable controversy; intellectual property; judicial notice; redressability; equitable remedy; Rule 12(b)(6); statute of limitations
This action centers on an employment dispute. Pursuant to employment agreements, Defendant Roscigno worked for Plaintiff United Therapeutics Corporation (“UTC”), first as a clinical research scientist and then as the president of a UTC subsidiary, developing new drugs and drug delivery systems. Four years after resigning from UTC, Roscigno joined Defendant Liquidia Technologies, Inc., a direct competitor of UTC, and developed competing drugs and drug delivery systems for Liquidia. UTC filed suit against Defendants, asserting claims for trade secret misappropriation and unfair and deceptive trade practices based on alleged violations of Roscigno’s UTC employment agreements. UTC moved to amend its complaint to add claims for breach of contract and declaratory judgment, but the Court denied the request as untimely. UTC subsequently initiated this suit, and Defendants moved to dismiss the Complaint in its entirety.
Liquidia argued that the Court lacked subject matter jurisdiction over the claims asserted against it because the Complaint’s allegations only related to Roscigno’s alleged breach of his employment agreement with UTC. The Court disagreed, concluding that a justiciable controversy existed as to whether Roscigno was required to assign and transfer to UTC his interest in certain intellectual property created during his employment with Liquidia. The Court took judicial notice that Roscigno had assigned his rights in UTC’s disputed intellectual property to Liquidia.
Roscigno argued that UTC lacked standing to bring its claims because the claims are not redressable based on his transfer of his ownership rights in the intellectual property to Liquidia. The Court disagreed, determining that, at this stage, the Court could not conclude that the equitable remedies of specific performance, a constructive trust, or both may be available to Plaintiffs. The Court denied Defendants’ motion to dismiss pursuant to Rule 12(b)(1) on both grounds.
Defendants also argued that UTC’s claims were barred by a three-year statute of limitation, contending that UTC’s claim accrued when Liquidia’s patent issued listing Roscigno as an inventor. UTC argued that its breach of contract claim is predicated on Roscigno’s alleged misuse of its confidential information, and UTC did not learn of this alleged misconduct until Liquidia produced discovery in other litigation. The Court concluded that the competing views were a question of fact for the jury and denied Defendants’ motion to dismiss pursuant to Rule 12(b)(6).
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Myers v. Tier 1 Home Sols., LLC, 2025 NCBC Order 36 (N.C. Super. Ct. May 22, 2025) (Robinson, C.J.)
Key Terms: consent order; motion to dismiss; Rule 12(b)(1); Rule 12(b)(6); derivative claims; LLC; N.C.G.S. § 57D-8-04
Plaintiff Joseph Myers and Defendant Kristopher Garrett Austin are 50/50 members of Defendant Tier 1 Home Solutions, LLC. Myers brought derivative claims on behalf of Tier 1 against Austin and direct claims against all Defendants. After Defendants moved to dismiss all claims, the parties agreed to the dismissal of the derivative claims and submitted a proposed consent order. Pursuant to N.C.G.S. § 57D-8-04, the Court concluded that the continuance of the derivative proceeding was not in Tier 1’s best interests and that the discontinuance of the claims would not substantially affect the interests of the members. Therefore, the Court granted the motion to dismiss the derivative claims with prejudice.
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Helix Mech., LLC v. Element Serv. Grp. Mech., LLC, 2025 NCBC Order 37 (N.C. Super. Ct. May 29, 2025) (Robinson, C.J.)
Key Terms: designation; N.C.G.S. § 7A-45.4(a)(4); N.C.G.S. § 7A-45.4(a)(5); breach of contract; trademark; intellectual property; material issues
This action arises out of an alleged breach of contract for the purchase of a commercial HVAC business. Defendants sought to designate this matter under N.C.G.S. § 7A-45.4(a)(4) and (a)(5), contending that the action involved a dispute involving trademark law and/or the ownership or use of intellectual property. The Court determined that designation pursuant N.C.G.S. § 7A-45.4(a)(4) was improper because the allegations of the Complaint did not implicate trademark law and required only the application of contract law principles. The Court also determined that designation pursuant N.C.G.S. § 7A-45.4(a)(5) was improper because the material issues were tied to the alleged breach of contract rather than the underlying intellectual property aspects of the intellectual property involved. Accordingly, the matter was not designated as a mandatory complex business case.
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BioGas Corp. v. NC Biogas Dev., LLC, 2025 NCBC Order 38 (N.C. Super. Ct. June 2, 2025) (Robinson, C.J.)
Key Terms: show cause; civil contempt; consent order; motion for sanctions; willful; N.C.G.S. § 5A-23; N.C.G.S. § 5A-21; purge conditions; joint and several liability; judgment; interim award; voluntary dismissal; attorneys’ fees; N.C.G.S. § 6-21.2
Counterclaim Defendants BioGas Corp. and S. Anwar Shareef were ordered to show cause why the Court should not hold them in civil contempt for violation of a consent order that enjoined Counterclaim Defendants from entering into any contract regarding a particular project without first consulting and obtaining written consent from Counterclaim Plaintiff NC Biogas Development, LLC (“NCBD”) during the pendency of the action.
The Court concluded that Counterclaim Defendants did not have the ability to comply with the consent order because the contracts had already been signed without NCBD’s approval. The Court, with the consent of BioGas Corp., Shareef, and Counterclaim Defendant NC BioGas, LLC, entered judgment against the Counterclaim Defendants for an interim award in an amount equal to the amount in dispute in the Counterclaim Plaintiffs’ first counterclaim. The Court directed Counterclaim Plaintiffs to file a voluntary dismissal as to that counterclaim because the Court’s judgment granted the relief sought. The Court permitted Counterclaim Plaintiffs to seek attorneys’ fees to the extent allowed by law.
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.
Posted 06/03/25
By: Ashley Oldfield
Mary Annette, LLC v. Crider, 2025 NCBC 23 (N.C. Super. Ct. May 13, 2025) (Conrad, J.)
Key Terms: quiet title; bench trial; ambiguous deed
The parties to this action were involved in developing certain real property as a Planned Unit Development. However, after a dispute arose regarding the management and operations of Plaintiff Mary Annette, LLC and the ownership of the property, the parties filed suit asserting numerous claims and counterclaims. At issue here was Defendant Terri Crider’s counterclaim for quiet title, in which she asserted that she had only conveyed by deed her interest in the Planned Unit Development’s common area and not her interest in the individual units.
Having previously concluded that the deed was ambiguous on this point, the Court conducted a bench trial to determine the parties’ intent and found, based on the evidence presented at trial, that Defendant Crider had not conveyed her interest in the individual units. The deed’s text and the plat referred to therein supported this conclusion, as did the circumstances surrounding the parties’ efforts to create a Planned Unit Development. Plaintiffs presented no persuasive basis to read the deed differently, testifying only to their subjective views of the transaction and the parties’ intent. Accordingly, the Court entered judgment in favor of Crider on her counterclaim for quiet title and declared that she maintained her interest in the individual units.
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Inframark, LLC v. Holder, 2025 NCBC Order 29 (N.C. Super. Ct. May 9, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(8); confidential information; trade secrets; contemporaneous filing and service; amended notice of designation
Plaintiff initiated this action asserting claims for breach of contract, tortious interference with contract, and unfair and deceptive trade practices arising from an employment dispute. Defendants timely filed a notice of designation with the Wake County Clerk of Superior Court, contending that designation was proper under N.C.G.S. § 7A-45.4(a)(8) (actions raising material issues involving trade secrets); however, the NOD did not include the necessary attachments and was not served on the Chief Justice of the Supreme Court or the Chief Judge of the Business Court until three days later when Defendants filed an Amended NOD, which was verbatim of the first NOD other than updates to the certificate of service.
The Court first noted that designation was improper on procedural grounds because 1) N.C.G.S. § 7A-45.4 does not provide for amending a NOD; and 2) Defendants’ failure to comply with the contemporaneous filing and service requirement rendered the NOD untimely. Second, although the complaint referenced trade secrets, the claims alleged only put the existence, ownership, or misuse of Plaintiff’s confidential information, not its trade secrets, in dispute. Thus, because the action did not involve a material issue relating to disputes involving trade secrets, designation was improper.
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Woodsmall v. Asheville Eye Assocs., PLLC, 2025 NCBC Order 30 (N.C. Super. Ct. May 9, 2025) (Davis, J.)
Key Terms: motion to consolidate; interim class counsel
Plaintiffs in five related actions against Asheville Eye Associates filed an unopposed motion to consolidate the actions and appoint interim class counsel. The Court granted the motion and consolidated the cases pursuant to NCRCP Rule 42(a) and ordered that any action filed in or transferred to the Court against the same Defendant and that arises out of the same operative facts as the consolidated action shall be consolidated with the same. The Court also appointed interim lead class counsel and provided that said counsel shall have the authority to speak for Plaintiffs and be responsible for coordinating activities and appearances on behalf of Plaintiffs, and that no pretrial proceedings shall be filed by any Plaintiff or any settlement negotiations conducted without interim lead class counsel’s approval. The Court stayed the action for ninety days and directed the parties to conduct a mediated settlement conference during that time period.
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Duramax Holdings LLC v. Brace, 2025 NCBC Order 31 (N.C. Super. Ct. May 14, 2025) (Robinson, C.J.)
Key Terms: order on designation; contemporaneous filing; N.C.G.S. § 7A-45.4(a)(8); N.C.G.S. § (a)(9); amount in controversy; Rule 2.1
Plaintiff filed a complaint asserting, inter alia, claims for breach of contract and trade secret misappropriation. Twelve days later, Plaintiff filed a notice of designation, contending that designation was proper under N.C.G.S. § 7A-45.4(a)(8) and (a)(9).
The Court first concluded that designation was improper because Plaintiff did not file its NOD contemporaneously with filing the complaint as required by N.C.G.S. § 7A-45.4(d)(1). Next, even if the NOD had been timely filed, designation under subsection (a)(9) was improper because there was no indication in the complaint or the NOD that the amount in controversy was at least $1,000,000 and the NOD did not indicate whether all parties consented to designation, both of which are requirements for designation under (a)(9). Lastly, the Court declined to recommend designation under Rules 2.1 and 2.2.
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Wright v. LoRusso, 2025 NCBC Order 32 (N.C. Super. Ct. May 16, 2025) (Conrad, J.)
Key Terms: motion in limine; expert testimony
The parties filed various motions in limine ahead of a June 2, 2025 trial date. Defendant moved to exclude Plaintiffs’ expert because 1) his anticipated testimony regarding tax and accounting matters did not require specialized knowledge; and 2) Plaintiffs served the expert’s final report after discovery closed. The Court denied this motion, concluding that tax and accounting matters were appropriate subjects for expert testimony and that any prejudice arising from the late-served final report could be cured by allowing Defendant to depose the expert regarding the final report prior to trial. Plaintiffs moved to exclude as irrelevant and unfairly prejudicial any testimony regarding disparaging statements Plaintiff Stansell made about Defendant. The Court denied this motion, concluding that this evidence was directly relevant to Defendant’s claim for breach of a nondisparagement clause. Lastly, Plaintiffs moved to exclude testimony relating to allegations of drug use. The Court deferred ruling on this motion until trial.
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Meridian Renewable Energy, LLC v. Birch Creek Dev., LLC, 2025 NCBC Order 33 (N.C. Super. Ct. May 16, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(1); N.C.G.S. § 7A-45.4(b)(2); amount in controversy; partnership law; joint venture; amended complaint; untimely
Plaintiff initiated this action in August 2024, asserting claims for breach of contract, breach of the duty of good faith and fair dealing, declaratory judgment, and quantum meruit. Plaintiff then amended the complaint in September 2024 and again in April 2025, asserting the same four claims but adding additional allegations. Defendant filed a notice of designation in May 2025, contending that designation was proper under N.C.G.S. § 7A-45.4(a)(1) and (b)(2). Plaintiff opposed designation, arguing that 1) the NOD was untimely and 2) the action did not implicate the N.C. Uniform Partnership Act as contended by Defendant.
The Court determined that designation under N.C.G.S. § 7A-45.4(a)(1) was improper because the NOD was not timely filed. The claims in the second amended complaint were not materially different from those asserted in the original complaint; thus, to the extent designation would have been proper under subsection (a)(1), the NOD should have been filed within thirty days of service of the original complaint.
Designation under N.C.G.S. § 7A-45.4(b)(2) was also improper. The second amended complaint’s allegation that Plaintiff “has suffered or will suffer additional damages of up to $5,100,000” was too vague to satisfy subsection (b)(2)’s requirement that the pleading demand damages equal to or in excess of five million dollars. Further, the Court did not believe that the existence of a joint venture between Defendant and a third-party or the implication of partnership law would be material issues in the case. Accordingly, the action did not satisfy the requirements for designation under subsection (b)(2).
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Max v. Duncan, 2025 NCBC Order 34 (N.C. Super. Ct. May 19, 2025) (Conrad, J.)
Key Terms: motion for preliminary injunction; adequate remedy; money damages
Plaintiffs, a group of doctors employed by Defendant ECAA, filed suit alleging that ECAA had improperly changed the timing and structure of their compensation, thereby breaching their employment agreements and the company’s operating agreement. Plaintiffs moved for a preliminary injunction to enjoin these changes to their compensation.
The Court denied the motion because the dispute concerned only contractual obligations to pay money, for which compensatory damages could provide a complete and adequate remedy. The operating agreement’s statement that money damages would not be adequate to remedy a breach of its terms did not bind the Court nor relieve Plaintiffs of their burden to show the inadequacy of money damages, which they had failed to do.
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Maxwell Foods, LLC v. Smithfield Foods, Inc., 2025 NCBC Order 35 (N.C. Super. Ct. May 20, 2025) (Conrad, J.)
Key Terms: hog farm; breach of output contract; most-favored-nation clause; motions in limine; relevance
Plaintiff sued Defendant for breach of an output contract (under which Plaintiff sold hogs to Defendant) and a most-favored-nation clause in a related letter agreement. At the summary judgment stage, the Court entered summary judgment against Defendant as to liability for breach of the output contract and narrowed Plaintiff’s claim for breach of the most-favored-nation clause to allegations that Defendant failed to offer Plaintiff changes in pricing given to Prestage Farms. Prior to trial, the parties filed various motions in limine.
The Court denied Plaintiff’s motion to exclude evidence regarding the leanness of the hogs sold, because evidence that the parties took leanness into account when establishing the fixed premium or that Defendant paid Prestage Farms a higher premium for leaner hogs was relevant to Plaintiff’s claim for breach of the most-favored-nation clause.
The Court granted Defendant’s motion to exclude evidence of its foreign ownership and financial condition, because such evidence was unfairly prejudicial and irrelevant to any issue being tried.
The Court granted Plaintiff’s motion to exclude evidence about its business strategy, affiliated businesses, and owners’ financial condition. Such evidence was not relevant to Defendant’s compliance with the most-favored-nation clause and risked unfair prejudice and confusion of the issues.
The Court granted Defendant’s motion to exclude evidence of its internal strategy discussions (referred to as Project Chuckwagon), which Plaintiff contended was relevant to show that Defendant’s alleged breach of the most-favored-nation clause was part of a scheme to force Plaintiff out of business. However, since motive and intent are not elements of a claim for breach of contract, such evidence was irrelevant.
The Court denied Plaintiff’s motion to exclude evidence of offers made by Defendant to Plaintiff between 2014 and 2018, concluding that such evidence may be relevant to Defendant’s alleged breaches and to damages, but granted Plaintiff’s motion to exclude evidence of offers Defendant made to third-party suppliers other than Prestage Farms since that evidence was irrelevant to the issues at hand.
The Court denied Plaintiff’s motion seeking to bar Defendant from offering expert testimony by lay witnesses regarding leanness, meat quality, hog genetics, and hog markets. The disputed testimony was based on the witnesses’ personal knowledge and perception of facts and therefore was not expert testimony.
Plaintiff moved to exclude the introduction of any deposition testimony at trial. Acknowledging that Defendant’s designation of more than 2400 pages of deposition testimony for use at trial was overkill, the Court deferred ruling on the motion and instead directed Defendant to disclose to Plaintiff whether it intended to call each witness on its witness list by deposition or in person.
Lastly, the Court elected to defer ruling on Defendant’s motion to exclude references to its breach of the output provision (decided at summary judgment) and consider it together with Defendant’s motion to bifurcate trial.
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.
Posted 05/20/25
By: Rachel Brinson
Yoder v. Verm, 2025 NCBC 22 (N.C. Super. Ct. May 6, 2025) (Brown, J.)
Key Terms: summary judgment; settlement agreement; 12(c) motion; collateral estoppel; breach of contract
As summarized here, this action arose from Defendants’ purported breaches of a Settlement Agreement resolving previous litigation between the parties. At issue here is Plaintiff’s motion for partial summary judgment on his claim for breach of the settlement agreement due to Defendants’ alleged failure to pay Plaintiff 36% of the appraised value of the real property at issue per the terms of the Settlement Agreement. Relying on and being bound by the Court’s previous determination as a matter of law at the 12(c) stage regarding the proper interpretation of the relevant provision of the Settlement Agreement, the Court determined that there were no material issues of fact relating to the deadlines imposed by the Settlement Agreement and that summary judgment in Plaintiff’s favor was appropriate. The Court rejected Defendants’ attempts to relitigate matters previous ruled on by the Court in its order and opinion on the 12(c) motion.
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Jones v. Nat’l Collegiate Athletics Ass’n, 2025 NCBC Order 25 (N.C. Super. Ct. April 25, 2025) (Houston, J.)
Key Terms: preliminary injunction; NCAA; college football; athletic eligibility; NIL deal; redshirt; antitrust; Chapter 75; restraint of trade; rule of reason; procompetitive effects; UNC; Duke
Plaintiffs, two college football players who have exhausted their years of athletic eligibility under the NCAA’s eligibility Bylaws, brought suit seeking 1) a declaration that the NCAA’s enforcement of the Bylaws violated North Carolina’s antitrust laws under Chapter 75; and 2) preliminary and permanent injunctive relief preventing enforcement of the Bylaws. Here, the Court addressed Plaintiffs’ motion for a preliminary injunction.
The Court denied the motion. First, Plaintiffs failed to show a reasonable likelihood of success on the merits of their claims. Under the three-step rule of reason test governing antitrust compliance, although Plaintiff had arguably shown that the Bylaws were commercial in nature and thus could be governed by Chapter 75, they failed to show that the challenged Bylaws were an unreasonable restraint on trade, particularly given the NCAA’s substantial evidence of procompetitive effects, or that legitimate competitive benefits could have been achieved by less restrictive means. In addition, Plaintiffs failed to make a sufficient evidentiary showing that the NCAA arbitrarily enforced the Bylaws. Second, Plaintiffs failed to show a likelihood of irreparable harm absent an injunction as they had known about the Bylaws their entire careers but delayed seeking injunctive relief until now. Moreover, the potential loss of NIL deals could be remedied by monetary damages. Finally, the balance of the equities weighed against injunctive relief. A preliminary injunction would upset the status quo by suspending the Bylaws otherwise applicable to the Plaintiffs who presently have exhausted their eligibility, and would, to some extent, prematurely determine the ultimate relief sought.
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Smith v. Nat’l Collegiate Athletics Ass’n, 2025 NCBC Order 26 (N.C. Super. Ct. April 25, 2025) (Houston, J.)
Key Terms: preliminary injunction; NCAA; college football; athletic eligibility; redshirt; antitrust; Chapter 75; restraint of trade; rule of reason; procompetitive effects; Duke
Raising substantially the same claims and arguments as in Jones v. National Collegiate Athletics Association (summarized above), Plaintiffs here sought a preliminary injunction preventing enforcement of the NCAA eligibility bylaws. The Court denied Plaintiff’s motion for a preliminary injunction on the same grounds as in Jones.
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DT Lulana Gardens LLC v. SDCK I LLC, 2025 NCBC Order 27 (N.C. Super. Ct. April 29, 2025) (Robinson, C.J.)
Key Terms: designation; N.C.G.S. § 7A-45.4(a)(2); securities; sale of collateral; UCC; security interest
This action arose out of a dispute between the parties related to a failed purchase of a secured promissory note and the alleged pledge of membership interests as collateral. Defendant timely filed a notice of designation, asserting that designation was proper under N.C.G.S. § 7A-45.4(a)(2)—disputes involving securities.
The Court concluded that the action did not meet the criteria for designation as a mandatory complex business case pursuant to the designation statute. Based on the complaint’s allegations, the case appeared to be a straightforward case involving a security interest under the Uniform Commercial Code and a potential breach of contract. At best, Defendant’s conclusory statement in its notice of designation showed a tangential relationship with securities, which was insufficient to warrant designation.
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Suazo v. Suazo, 2025 NCBC Order 28 (N.C. Super. Ct. May 6, 2025) (Robinson, C.J.)
Key Terms: opposition to designation; equitable distribution; N.C.G.S. § 7A-45.4(a)(1); N.C.G.S. § 7A-45.4(a)(8); amount in controversy; breach of fiduciary duty; misappropriation of trade secrets
This action arose out of a dispute between Plaintiff Gregory Suazo and Defendant Crystal Suazo regarding their jointly owned company, Reagan Madison Inc. Plaintiffs asserted various claims against Ms. Suazo and others, including claims for misappropriation of trade secrets and breach of fiduciary duty. Defendants timely filed a notice of designation under N.C.G.S. § 7A-45.4(a)(1) (claims involving the law governing corporations) and § 7A-45.4(a)(8) (disputes involving trade secrets). Plaintiffs opposed designation arguing that the case was “a divorce case with a business twist” and that the amount in controversy was less than $5 million and therefore didn’t meet the Business Court’s amount in controversy threshold.
The Court rejected both arguments. First, while the District Court has exclusive jurisdiction over all equitable distribution claims, that does not preclude the Business Court from exercising its authority to hear actions involving a material issue set forth in N.C.G.S. § 7A-45.4(a). Here, Plaintiffs claims for breach of fiduciary duty and misappropriation of trade secrets satisfied the requirements for designation under subsections (a)(1) and (a)(8), respectively. Second, the $5 million threshold referenced by Plaintiffs only applies to cases that must be designated to the Business Court under N.C.G.S. § 7A-45.4(b), i.e., “mandatory mandatory cases.” For a case to be designated under N.C.G.S. § 7A-45.4(a), the amount in controversy need only meet the requirement for a case to be in Superior Court—in excess of $25,000. Accordingly, the Court overruled Plaintiffs’ objection to designation.
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.
Posted 05/06/25
By: Natalie E. Kutcher
Atkore Int’l, Inc. v. Dinkheller, 2025 NCBC 20 (N.C. Super. Ct. April 10, 2025) (Robinson, C.J.)
Key Terms: motion to dismiss; non-compete agreement; misappropriation of trade secrets; NCUDTPA; tortious interference
Plaintiff filed suit against a former employee, Keith Dinkheller, and his new employer, National Pipe & Plastics, Inc., alleging various claims relating to Dinkheller’s alleged breaches of his confidentiality and noncompetition agreement with Plaintiff. Defendants moved to dismiss all claims pursuant to Rule 12(b)(6).
Breach of Contract – Dinkheller. The Court dismissed Plaintiff’s claim for breach of the noncompetition provision, finding that the provision was overly broad and unenforceable as a matter of law. The noncompetition provision’s time restriction (including a two-year look back period) paired with the broad definition of the “Company” (encompassing many entities beyond Plaintiff) and the far-reaching geographic restriction (which essentially covered the entire country), when considered as a whole, were not reasonably limited to protect Plaintiff’s legitimate business interests.
Tortious Interference with Contract – National Pipe. Plaintiff asserted that National Pipe intentionally induced Dinkheller to breach his restrictive covenants with Plaintiff. The Court dismissed the claim to the extent it related to the noncompetition agreement, having found that the noncompetition agreement was unenforceable as a matter of law. However, the Court denied Defendants’ motion to dismiss as to the nondisclosure provision, finding that the pleadings sufficiently alleged the requisite elements for the claim.
Breach of Fiduciary Duty and Constructive Fraud – Dinkheller. The Court granted Defendants’ motion to dismiss these claims because the complaint failed to allege that Dinkheller possessed the type of domination or control over Plaintiff required to warrant the imputation of fiduciary duties where Dinkheller was not an officer or director of Plaintiff.
UDTPA – All Defendants. The Court granted Defendants’ motion to dismiss Plaintiff’s UDTPA claim because Plaintiff did not raise any opposition to the motion in its brief, and as such, the motion was deemed unopposed.
Misappropriation of Trade Secrets – All Defendants. Plaintiff alleged that Dinkheller misappropriated its trade secrets, not only by disclosing them to his new employer, but also by disclosing them in an affidavit filed in this case. The Court found that Plaintiff had adequately identified its trade secrets and that the complained of conduct satisfied the misappropriation requirement. The Court also found the allegations that National Pipe had interfered with Dinkheller’s restrictive covenants by placing him in a position where he has disclosed and is using Plaintiff’s trade secrets was sufficient to allege the claim against National Pipe. Accordingly, the Court denied the motion to dismiss this claim.
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Jackson v. MH Master Holdings, LLLP, 2025 NCBC 21 (N.C. Super. Ct. April 16, 2025) (Earp, J.)
Key Terms: summary judgment; contract interpretation; ambiguity
As summarized here, this action was brought by the Attorney General on behalf of and in the name of Dogwood Health Trust, a nonprofit corporation, relating to an asset purchase agreement memorializing Defendant’s acquisition of Mission Health, a hospital system serving western North Carolina. Pursuant to the APA, the Attorney General was granted contractual enforcement rights under certain circumstances and filed this action alleging that Defendant violated the APA by failing to provide the requisite level of emergency and trauma care and oncology services.
Defendant moved for partial summary judgment, asking the Court to determine that the phrase “shall not discontinue the provision of [certain] services” in the APA was unambiguous and to interpret the language as a matter of law. The parties argued conflicting interpretations of the phrase based on dictionary definitions and other provisions in the APA. The Court denied Defendant’s motion, finding that not only was the phrase “shall not discontinue” ambiguous, but also that the word “services” lacked clarity. A more developed factual record was necessary to determine the parties’ true intent. As Defendant failed to establish that no genuine issues of material fact existed surrounding the interpretation of the APA’s language, the Court denied the motion.
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Jackson v. MH Master Holdings, LLLP, 2025 NCBC Order 22 (N.C. Super. Ct. April 10, 2025) (Earp, J.)
Key Terms: motion to compel; privilege; Public Records Act; N.C. Gen. Stat. § 132-1; in camera review; discovery
As summarized here, Defendant previously moved to compel Plaintiff to produce documents which were allegedly improperly withheld or redacted in response to a Rule 34 document request. Plaintiff (the Attorney General) asserted that the documents were properly withheld because they were attorney-client privileged or attorney work product. On February 28, 2025, the Court entered an order concluding that the documents were subject to the Public Records Act and that an in camera review was necessary to determine if they were protected under the Act. Having conducted the in camera review, the Court entered a second order on the motion to compel.
The Court first concluded that the statutory protection set forth in N.C.G.S. § 132-1.1(a), rather than the common law attorney-client privilege, governed the dispute. Prior to 2023, N.C.G.S. § 132-1.1(a) provided that attorney-client communications were excepted from the definition of “public records” for a period of three years from receipt of the communication and thus not subject to disclosure under the Act. In 2023, the statute was amended to eliminate the three-year limitation. Here, the document request was made after the 2023 amendment but sought documents that pre-existed the amendment. The Court concluded that the date of the records request governed and therefore, if the documents at issue otherwise qualified under the Act, they were not public records and therefore protected.
Defendant argued that many of the documents withheld by Plaintiff did not satisfy the requirements of Section 132-1.1(a), because they were documents created by or within the Attorney General’s Office, rather than communications made to the Attorney General’s Office. The Court rejected this argument, concluding that, just as communications from in-house counsel to their clients are protected by the attorney-client privilege, communications to the Attorney General from his staff attorneys are protected if the communications otherwise qualify under the Act.
Lastly, Defendant argued that the communications were not protected because they were made in the ordinary course of the Attorney General’s business and not for litigation purposes. Having conducted an in camera review of the documents, the Court largely agreed, concluding that most of the communications were not protected by the Act’s protections for attorney-client communications or attorney work product. The Court included an attachment to the order delineating which communications were protected and which were not.
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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.
Posted 04/22/25
By: Austin Webber
Rodriguez v. FastMed Urgent Care, Inc., 2025 NCBC 15 (N. C. Super. Ct. Mar. 25, 2025) (Davis, J.)
Key Terms: Rule 12(b)(6); common law negligence; emotional distress; economic injury
Plaintiff Jackelyn Rodriguez initiated this putative class action, asserting claims for violation of the N.C. Electronic Surveillance Act, negligence per se, common law negligence, and invasion of privacy against Defendant Fastmed Urgent Care, Inc., based on allegations that Defendant secretly embedded third-party technology on its website that collected and disseminated her confidential information without her consent. Defendant moved to dismiss all claims under Rule 12(b)(6).
In her brief and at the hearing, counsel for Plaintiff indicated that Plaintiff only intended to proceed on her claim for common law negligence. Accordingly, the Court dismissed the other claims with prejudice.
Regarding the common law negligence claim, the Court rejected Defendant’s argument that Plaintiff had failed to establish any legal duty that it owed its patients with regard to maintaining the privacy of health information. The Court of Appeals has unambiguously recognized that healthcare providers owe a general duty of care to patients regarding maintenance of their confidential information, the very duty Plaintiff had alleged in her complaint. The Court also rejected Defendant’s argument that Plaintiff had not adequately alleged injury. Plaintiff’s allegations that she suffered from “embarrassment, humiliation, emotional harm, and distress” were sufficient to allege emotional distress damages as there is no heightened pleading requirement in this regard. Regarding Defendant’s argument that Plaintiff’s alleged economic damages were barred by the economic loss rule, the Court determined that, first, the alleged duty of care was not dependent on any contractual duty between the parties, and second, any argument regarding the economic loss rule was premature since even if a contract existed between the parties, further factual development would be necessary to determine the contours of that relationship.
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Bourgeois v. Lapelusa, 2025 NCBC 16 (N.C. Super Ct. March 18, 2025) (Earp, J.)
Key Terms: N.C.G.S. § 1-569.22; arbitration award; motion to confirm
Defendants moved to confirm an arbitration award in which the arbitrator: (1) ruled that Defendants had not been unjustly enriched to the detriment of Plaintiff Bourgeois or The Pit Box, LLC; (2) ruled in favor of The Pit Box, LLC with respect to its counterclaims and ordered Plaintiff Bourgeois to pay compensatory damages; and (3) denied all remaining claims. The arbitrator also directed the distribution of the assets of The Pit Box, LLC, which had been judicially dissolved. Plaintiffs objected to the motion to confirm and moved the arbitrator to amend the award. The arbitrator denied the motion to amend. Because N.C.G.S. § 1-569.22 requires the court, upon motion, to enter an order confirming an arbitration award unless the award is modified, corrected, or vacated, and the Court had not received a motion to modify, correct, or vacate the award, the Court granted Defendant’s motion to confirm.
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Hose Co. v. Smith, 2025 NCBC 17 (N.C. Super. Ct. March 28, 2025) (Earp, J.)
Key Terms: Rule 12(b)(6); breach of contract; fraudulent concealment; misappropriation of trade secrets; Unfair and Deceptive Trade Practice Act; civil conspiracy; employment agreement; non-competition agreement; confidentiality; fiduciary duty.
Plaintiff The Hose Company (“THC”) initiated this lawsuit asserting various claims against Defendant Smith arising from his resignation from THC and subsequent employment in alleged violation of his non-compete agreement. Smith moved to dismiss all claims.
Breach of Contract. Having already determined that the non-compete agreement was unenforceable as a matter of law, the Court dismissed this claim with prejudice.
Fraudulent Concealment. THC’s first fraudulent concealment claim alleged that in his resignation letter, Smith affirmatively concealed the true nature of his new job in the hose industry. The Court found these allegations sufficient to state a claim for fraudulent concealment and denied dismissal of the first claim.
THC’s second fraudulent concealment claim alleged that Smith, while employed at THC, fraudulently concealed his efforts to form a competing business. However, since THC did not adequately allege the existence of a fiduciary relationship, and therefore a duty to disclose, the Court dismissed the claim.
Misappropriation of Trade Secrets. THC asserted that Smith misappropriated its customer lists and pricing information. Regarding the customer list, the Court found the compiled list of customers alluded to by THC did not identify the trade secret information with sufficient specificity, nor did THC describe the effort and cost it incurred to put the list together. Regarding the pricing information, the Court noted that THC did not provide an explanation to how the dealer network information, once released externally, is kept secret. Therefore, the Court granted Smith’s motion.
Unfair and Deceptive Trade Practice. THC’s UDTPA claim was premised on its fraud and misappropriation of trade secrets claims, along with Smith’s general unscrupulous behavior while employed by THC. Since the misappropriation claim was dismissed and since the fraud and “unscrupulous behavior” allegations involved internal conduct and were therefore not in or affecting commerce under the UDTPA, the Court dismissed this claim.
Civil Conspiracy. Because the tort claims underlying the civil conspiracy claim had all been dismissed, the Court dismissed the civil conspiracy claim as well.
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Exencial Wealth Advisors, LLC v. Downing, 2025 NCBC 18 (N.C. Super. Ct. April 1, 2025) (Brown, J.)
Key Terms: Rule 12(b)(6); breach of contract; choice of law; tortious interference with business relationship; misappropriation of trade secrets; declaratory judgment; non-solicitation; confidentiality agreement; de facto non-compete; customer and pricing lists
Plaintiff filed suit against its former employee, asserting various claims arising from Defendant’s alleged violation of confidentiality and non-solicitation provisions in his employment agreement. Defendant moved to dismiss all claims.
Choice of Law. The Court determined that Oklahoma law governed the claims for breach of the employment agreement because the agreement had an Oklahoma choice of law provision, Oklahoma has a substantial relationship to the parties, and application of Oklahoma law would not violate public policy. However, North Carolina law governed the tortious interference with business relationship and misappropriation of trade secrets claims under the lex loci test because the injury alleged was sustained in North Carolina. North Carolina law also governed the declaratory judgment claim as procedural matters are governed by the law of the forum.
Breach of Contract. The Court found that the non-solicitation provisions in the employment agreement violated Oklahoma’s public policy, because they prohibited far more than the “direct solicitation of established customers” allowed by statute.
Regarding the confidentiality provisions, Defendant argued that they acted as a de facto non-compete and were therefore void. The Court disagreed, finding that the confidentiality provisions were not so burdensome as to operate as a de facto non-compete, particularly because they were tailored to apply only to information which was not part of the public domain or of which the Defendant did not have independent knowledge. Moreover, Plaintiff had adequately alleged that Defendant had breached these provisions by storing Plaintiff’s confidential information on a personal computer and sharing it with others, including his new employer. Therefore, the Court dismissed the breach of contract claim related to the non-solicitation provisions but otherwise allowed the claim to survive.
Tortious Interference with Business Relationships. Because Plaintiff had adequately alleged that Defendant engaged in unlawful competition by violating the confidentiality provisions of his employment agreement and otherwise pleaded the necessary elements, the Court denied dismissal of this claim.
Misappropriation of Trade Secrets. The Court dismissed this claim because Plaintiff failed to allege with sufficient particularity the existence of a trade secret. Plaintiff’s identification of its potential trade secrets as “its Confidential information, manner of doing business with customers, members’ contact information, and other non-public information” were insufficient to put Defendant on notice as to the precise information allegedly misappropriated.
Declaratory Judgment. The Court dismissed the declaratory judgment claim regarding the confidentiality provisions of the employment agreement because it was duplicative of Plaintiff’s claim for breach of those provisions.
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Wolfspeed, Inc. v. Van Brunt, 2025 NCBC 19 (N.C. Super. Ct. April 2, 2025) (Robinson, C.J.)
Key Terms: Rule 12(b)(6); preliminary and permanent injunction, breach of contract; wrongful interference with contractual relationships; misappropriation of trade secrets, confidentiality; non-competition; breach of duty of loyalty; breach of fiduciary duty; UDTPA
Wolfspeed initiated this action contending that former employees Van Brunt and Allen left Wolfspeed for a competitor, Onsemi, in violation of their respective employment agreements and the restrictive covenants found therein, taking with them to Onsemi trade secret information. Wolfspeed also contends Onsemi wrongfully interfered with Van Brunt’s and Allen’s respective employment agreements by inducing them to breach the restrictive covenants found therein. Defendants moved to dismiss all claims.
Preliminary and Permanent Injunction. The Court dismissed this claim without prejudice as preliminary and permanent injunctions are remedies, not independent causes of action.
Breach of Contract against Allen. The Court denied the motion to dismiss Plaintiff’s claim for breach of the confidentiality provision in Allen’s employment agreement, finding that Plaintiff’s allegations that the agreement was enforceable and that Allen had breached it by using Plaintiff’s confidential information in concert with Van Brunt and Onsemi were sufficient to state a claim.
Breach of Contract against Van Brunt. Plaintiff asserted two breach of contract claims against Van Brunt: 1) breach of the non-competition and confidentiality provisions in his employment agreement; and 2) breach of his RSU agreements’ terms and conditions. Regarding the first, the Court determined that the non-compete provision was overly broad and unenforceable because it prohibited Van Brunt from working for a competitor in any capacity. However, breach of the non-solicitation provision was adequately pleaded based on Plaintiff’s allegations that Van Brunt retained his Plaintiff-issued laptop which contained Plaintiff’s sensitive and proprietary information and did not return it until nearly one month after he accepted employment with Onsemi. Regarding the second claim, neither side addressed the claim in their briefs and the Court found the allegations minimally sufficient.
Wrongful Interference with Contractual Relationships Against Onsemi and Allen. Plaintiff asserted two claims for wrongful interference, the first against Onsemi and Allen for inducing Van Brunt to breach his restrictive covenants and the second against Onsemi for inducing Allen to breach his restrictive covenants. Due to its ruling that Van Brunt’s non-compete was unenforceable, the Court dismissed the first claim to the extent it was premised on that provision. The Court otherwise found that the claims had been sufficiently pleaded and therefore denied dismissal.
Misappropriation of Trade Secrets. The Court found that Plaintiff had sufficiently identified its trade secrets at this stage. Regarding acts of misappropriation, the Court found that Plaintiff’s allegations (made upon information and belief) that Van Brunt retained his Plaintiff-issued laptop and accessed trade secret information or had access to such information after his employment with Onsemi commenced were minimally sufficient to state a claim for misappropriation of trade secrets against Van Brunt and Onsemi. However, since the complaint did not contain any allegations that Allen accessed, had access to, or took with him upon termination of his employment with Plaintiff, any trade secret information, the Court dismissed the claim against Allen.
Unfair and Deceptive Trade Practices. Since the UDTPA claims were predicated on the misappropriation of trade secrets claims, the Court dismissed the UDTPA claim against Allen but allowed it to survive against Van Brunt and Onsemi.
Breach of Duty of Loyalty by Van Brunt. Construing the claim for breach of the duty of loyalty as a claim for breach of fiduciary duty, the Court concluded that Plaintiff had failed to allege the existence of a fiduciary duty. As alleged, Van Brunt was a research scientist, not an officer of Plaintiff, therefore, no de jure fiduciary relationship existed. Further, Plaintiff did not plead that Van Brunt exercised any dominion or control over Plaintiff such that a de facto fiduciary relationship existed. Accordingly, the Court dismissed this claim.
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Murphy-Brown, LLC v. Ace Am. Ins. Co., 2025 NCBC Order 19 (N. C. Super. Ct. Mar. 26, 2025) (Davis, J.)
Key Terms: motion in limine; expert witnesses; qualifications; vouching; Rule 702 of the North Carolina Rules of Evidence; Rule 1.5 of the Rules of Professional Conduct; block billing; forum rate rule; Real Rate Report; legal opinion
Plaintiffs originally sued various insurers who provided them with primary and excess insurance coverage, contending that the insurers were obligated to indemnify Plaintiffs for amounts paid to settle certain nuisance actions relating to Plaintiffs’ hog farms and to reimburse Plaintiffs for their defense costs for such underlying lawsuits. The Court previously determined that Defendant Ace breached its contractual duty to defend Plaintiff in those lawsuits and is required to reimburse Plaintiff for its Defense Costs. A jury trial on the issue of the reasonable amount of Defense Costs is scheduled. Presently before the Court are the parties’ motions to exclude, either in whole or in part, the opinion testimony of the opposing side’s expert witnesses regarding the reasonableness of the Defense Costs.
Plaintiff’s Motion to Exclude Defendant’s Expert Witness (Pierce)
Qualifications. Based on Pierce’s decades of experience as a complex commercial litigator, coupled with his experience consulting on attorneys’ fees cases, the Court was satisfied that Pierce had sufficient specialized knowledge regarding billing practices within the legal industry so as to be helpful to the jury in determining the reasonableness of the Defense Costs. Plaintiff’s concerns that Pierce’s lack of experience in the specific area of hog farm litigation and North Carolina litigation goes to the weight that the jury should give his opinions, not their admissibility.
Vouching. Plaintiff argued that Pierce’s opinions were unreliable because he took information and opinions provided by a legal auditing firm and presented them as his own. The Court disagreed, finding that based on the record, it appeared that the legal auditing firm merely performed organization and computational functions and that reliance on such work was permissible. Moreover, Plaintiff would have the opportunity to cross-examine Peirce on the role the legal auditing firm played in his analysis.
Consideration of the Rule 1.5 Factors. Plaintiff next argued that Pierce’s testimony should be excluded because he ignored Rule 1.5(a) of the North Carolina Rules of Professional Conduct, which governs the reasonableness of fees in North Carolina, in forming his opinions. The Court rejected this argument as it was clear that Pierce had considered at least some of the Rule 1.5 factors and the comments to Rule 1.5 make clear that not all of the factors were necessarily relevant to every case.
Reasonableness of Hourly Rates Charged. The Court also determined that Pierce’s reliance on the “Forum Rate Rule” and the Real Rate Report issued by Wolters Kluwer did not warrant exclusion of his testimony. Although North Carolina has never adopted the Forum Rate Rule by name, it has recognized that community rates in the geographic area of the litigation are relevant to the reasonableness determination. The reliability of the Real Rate Report went to the weight, rather than the admissibility, of Pierce’s opinion and could be examined at trial.
Redacted Time Entries. Plaintiff argued that Pierce should not be allowed to opine on the reasonableness of redacted time entries because, without the redacted information, he could not have formed a reliable opinion. The Court agreed and noted that Ace had forfeited its right to complain about the redactions by failing to object to them during discovery.
Vague and Block-Billed Time Entries. The Court concluded that Pierce could offer opinions as the unreasonableness of time entries based on vagueness or block-billing as North Carolina courts have allowed challenges to the reasonableness of claimed attorneys’ fees on these bases.
Alternative Fee Arrangement Invoices. The Court prohibited Pierce from opining regarding the reasonableness of certain invoices billed under an alternative fee arrangement because Pierce had not reviewed the detailed narrative time entries for those invoices and therefore could not have formed a reliable opinion as to their reasonableness.
Opinion on Legal Issues. The Court prohibited Pierce from testifying regarding legal issues or other cases as such testimony invades the province of the court to determine the applicable law and instruct the jury accordingly. Further, to the extent Pierce’s opinions addressed coverage defenses based on policy provisions, the Court had already ruled that Ace was estopped from asserting such defenses.
Defendant’s Motion to Exclude Plaintiff’s Expert Witness (DeGeorge)
The Court held that DeGeorge was prohibited from offering opinions at trial as to legal principles and from referencing case law while testifying. However, since Defendant failed to identify any other basis to exclude DeGeorge under Rule 702, he was not otherwise excluded from testifying as an expert.
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Hose Co. v. Smith, 2025 NCBC Order 20 (N. C. Super. Ct. Mar. 27, 2025) (Earp, J.)
Key Terms: Rule 65; preliminary injunction; non-competition; breach of contract; look-back rule; restraint of trade
Plaintiff The Hose Company LLC (“THC”) moved for a preliminary injunction prohibiting Defendant Smith from violating a Noncompetition Agreement he signed while a THC employee, which provided that, during his employment and for a period of two years after termination, he would not accept employment involving the same or similar services that he provided at THC, within a defined restricted territory. On January 2, 2024, Smith had resigned from THC and accepted employment with Triosim. It is undisputed that Triosim, through its subsidiaries, is involved in the industrial hose industry and that its sales territories overlap with THC’s.
The Court began by considering the two-year time restriction in the non-compete. Smith argued that the time period was unreasonable because the language of the restriction required the Court to apply the look-back rule and add in his seven years of employment. In response, THC argued that the look-back rule did not apply because it only applies when the restriction is tied to an employee’s contact with customers, not his job duties as it was here. Although the Court agreed that the look-back rule was applicable, it determined that the rule was not determinative in this case. The look-back rule is merely a tool used to determine whether a restriction is broader than necessary to protect an employer’s legitimate business interests. Here, the passage of time did not lessen the relevance of the information at issue because Smith’s testimony established that his most recent job duties at THC encompassed the duties of his prior position. Accordingly, the Court determined that the non-compete was reasonable as to time.
Turning to the territorial restrictions, the Court determined that the noncompete was unenforceable because it contained a nationwide restriction and THC had not met its burden to show that such a broad restriction was necessary. While the “Restricted Territory” was drafted in the alternative and THC encouraged the Court to apply the blue pencil rule, the Court lacked sufficient information about THC’s business to make a reasoned choice.
Moreover, even if the time and territory were reasonable, the non-compete was unenforceable as a matter of law because its second clause, which limited the services Smith could provide, was not restricted to a particular industry or business. Although Plaintiff urged the Court to use the blue pencil rule to eliminate this second clause, the Court determined that even though the clauses were joined by “or,” they were not distinctly separable and thus the blue pencil rule could not be applied.
Because Plaintiff had not shown it was likely to succeed on the merits of its breach of contract claim, the Court denied its motion for a preliminary injunction.
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Vista Horticultural, Inc. v. Johnson Price Sprinkle PA, 2025 NCBC Order 21 (N.C. Super. Ct. April 1, 2025) (Brown, J.)
Key Terms: motion in limine; expert witnesses and opinions; professional malpractice; negligence; taxes; N.C. R. Evid. 404; N.C. R. Evid 411; N.C. R. Evid. 401; N.C. R. Evid. 403
This is an accounting malpractice case concerning Defendants alleged failure to notify Plaintiff of its obligation to pay various state sales taxes based on sales made to residents of those states. Plaintiff contends that this failure caused it to incur an unexpected tax liability of $2.1 million. Prior to trial on Plaintiff’s claims against Defendant JPS for breach of contract and against JPS and Defendant Cheng for professional negligence/malpractice and common law negligence, the parties filed various motions in limine.
Plaintiff’s Motion to Exclude Expert Opinions. Plaintiff objected to the admissibility of certain testimony and opinions by Defendants’ expert. First, the Court granted the motion with respect to any testimony regarding anyone’s state of mind or Cheng’s credibility as these were the province of the jury. Second, the Court determined that Cheng and other JPS personnel could not be identified as experts to the jury but could, if otherwise qualified as experts, testify as to whether Cheng’s conduct met the standard of care. Third, the Court denied the motion to the extent it sought to preclude the expert from testifying regarding JPS’s passing scores on previous peer review reports because such testimony did not constitute inadmissible character evidence but was instead being used to show JPS’s capabilities, quality control standards, and experience. Finally, the Court granted Plaintiff’s motion to exclude any evidence, testimony, and opinions by Defendant’s expert regarding the percentage amount by which any compensatory damages award that the jury may award to Plaintiff must be reduced because of potential income tax savings Plaintiff may realize due to potential tax deductions. While there was no North Carolina case law on point, persuasive authority from other jurisdictions applied this general rule.
Defendants’ Motion to Exclude Any Evidence or Opinions at Trial Other than as Disclosed in Discovery. Defendants sought to preclude Plaintiff’s expert from testifying that Cheng violated the standard care because, according to Defendants, the expert’s report was limited to conclusions regarding JPS. The Court disagreed, finding that Defendants received ample notice that Plaintiff’s expert intended to opine on the failures of both JPS and Cheng to meet the professional standard of care, as it was clearly stated in Plaintiff’s notice of designation of expert witness, the expert’s summary judgment affidavit, and the expert’s report.
Defendants’ Motion to Prohibit Evidence of Effect on Judgment on the Parties. Based on N.C. R. Evid. 411, the Court granted Defendants’ motion to prohibit evidence of any insurance coverage available to Defendants. Based on N.C. R. Evid. 401 and 403, the Court also granted Defendants’ motion to prohibit evidence regarding tax consequences to Plaintiff.
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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.
Posted 04/08/25
By: Lauren Schantz
Hart v. First Oak Wealth Mgmt., LLC, 2025 NCBC 11 (N.C. Super. Ct. Mar. 14, 2025) (Earp, J.)
Key Terms: summary judgment; accredited investor; (un)registered investment adviser; private equity investments; conflict of interest; regulatory agency investigation; consent order; North Carolina Investment Advisers Act; statute of limitations; discovery rule; fraud; negligent misrepresentation; constructive fraud; fiduciary relationship; nominal damages; civil conspiracy; Fifth Amendment; punitive damages
This action involves a dispute between an accredited investor and his investment advisers. Plaintiff Hart engaged Defendant DWM Advisors, LLC to provide investment advisory services. Defendant Davis was DWM’s sole member-manager and a registered investment adviser. Defendant Abolins was a part-owner and employee of DWM.
Between 2009 and 2014, Hart invested substantial sums in various private equity investments recommended by Davis. Davis—and in some cases, Abolins—directly or indirectly owned and/or managed the entities in which Hart invested. Despite assurances that the investments were performing well, Hart ultimately lost most of the money he invested.
In 2017, some of DWM’s former clients began to file suits against DWM, Davis, and Abolins, and Davis came under regulatory scrutiny. DWM sold its public investment accounts to Defendant First Oak Wealth Management, LLC in early 2017, with Abolins joining the company as an employee and Davis a consultant. Hart agreed to move his investment accounts to First Oak but was not informed that First Oak was not managing his private investments until April 2018.
Over the next few years, both state and federal regulators imposed various consent orders on Davis and First Oak, resulting in (1) Davis being permanently barred from the securities industry in South Carolina; (2) Davis being permanently barred from the securities industry nationwide; and (3) First Oak being penalized by the North Carolina Secretary of State for engaging in an unethical business practice by using Davis as an unregistered investment adviser in violation of the North Carolina Investment Advisers Act (“NCIAA”).
Hart alleged that he was not informed of these violations and, further, that Davis advised him on his private equity investments as late as 2019. Hart ultimately lost most of the money he had invested pursuant to Davis’s advice. Hart initiated this lawsuit in October 2021. Abolins and First Oak both moved for summary judgment on all claims.
Statute of Limitations. Abolins and First Oak argued that the three-year statute of limitations barred Hart’s claims for fraud, negligent misrepresentation, and violation of the NCIAA. Applying the discovery rule, which tolls the statute of limitations until a reasonable person should have discovered the fraud, the Court agreed and dismissed the claims, concluding that Hart knew or should have known of the alleged fraud more than three years before filing suit.
Constructive Fraud. The Court determined that Hart had put forth sufficient evidence from which a jury could conclude that Abolins and First Oak, as Hart’s fiduciaries, deterred him from suspecting or discovering the fraud and benefitted therefrom. As a result, a genuine issue of material fact existed as to when the ten-year statute of limitations for constructive fraud began to run. Abolins and First Oak argued that this claim should be dismissed because Hart did not suffer actual damages as a result of their actions, but the Court also concluded that Hart was entitled to at least nominal damages. Accordingly, the Court denied summary judgment on this claim.
Civil Conspiracy. The Court found that Hart had produced sufficient evidence of an agreement among Davis, Abolins, and First Oak to commit constructive fraud and, thus, support a civil conspiracy claim. The Court further concluded that a reasonable jury could infer from Davis’s invocation of the Fifth Amendment during his deposition that he engaged in such constructive fraud, both individually and as an agent for DWM and First Oak. The Court denied the motions for summary judgment as to this claim.
Punitive Damages. Because Hart could recover punitive damages on a claim for constructive fraud with or without an award of nominal damages, the Court denied Abolins’s and First Oak’s motions with respect to this relief.
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Mayer v. Goldner, 2025 NCBC 12 (N.C. Super. Ct. Mar. 17, 2025) (Conrad, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); minority shareholders; captive insurance company; reinsurance; derivative claims; self-dealing; N.C.G.S. § 55-8-09; arguments not raised in briefs; accounting; punitive damages; remedies
This action involves a dispute among the members of an LLC. Plaintiffs Mayer and Queen and Defendant Goldner are the shareholders of Nominal Defendant Sherbrooke Corporate Ltd., a captive insurance company. Sherbrooke reinsures insurance policies issued by a single carrier that provide coverage for nursing homes owned by Goldner.
Plaintiffs alleged that Goldner’s nursing homes underpaid and then stopped paying their insurance premiums to Sherbrooke. These insurance premiums were the LLC’s only source of income. Plaintiffs allege that Goldner, as the majority shareholder of Sherbrooke, subsequently removed Plaintiffs as directors and officers, seized control of the LLC, halted all of its operations, and misappropriated Sherbrooke’s assets to pay his personal legal expenses.
Plaintiffs asserted the following claims against Goldner: derivative claims for breach of fiduciary duty, constructive fraud, and unjust enrichment; a claim to remove Goldner as a director pursuant to N.C.G.S. § 55-8-09; and claims for an equitable accounting and punitive damages. Goldner moved to dismiss the majority of the Complaint pursuant to Rule 12(b)(6).
Derivative Claims. Goldner sought to dismiss the derivative claims to the extent that they were based on the nonpayment of insurance premiums to Sherbrooke, arguing that Plaintiffs improperly imputed obligations owed by his nursing homes to him. The Court denied the motion, concluding that the Complaint, taken in the light most favorable to Plaintiffs, alleged that Goldner used his dual roles to benefit himself and his nursing homes to the detriment of Sherbrooke.
Removal of Director. Although judicial removal of a director is an extraordinary remedy, the Court concluded that Goldner’s alleged wrongful conduct and the resulting impact on Sherbrooke’s operations and financial viability, as pleaded, supported a claim for removal of Goldner as a director of Sherbrooke under N.C.G.S. § 55-8-09. The Court declined to consider Goldner’s argument, raised for the first time at the hearing, that the alleged wrongful conduct was stale.
Accounting and Punitive Damages. The Court dismissed Plaintiffs’ claims for an accounting and punitive damages without prejudice because they are remedies, not independent causes of action.
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Brown v. TM Northlake Mall, LP, 2025 NCBC 13 (N.C. Super. Ct. Mar. 19, 2025) (Conrad, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); judgment on the pleadings; Rule 12(c); torts; negligence; invitees; criminal acts; third parties; foreseeability; reasonable care
These consolidated actions arise from a random act of violence. A car followed Armani Spencer and Plaintiff Bianca Brown from the parking lot of a restaurant located in the Northlake Commons shopping center to neighboring Northlake Mall. The car pulled up next to them and an unknown assailant shot into their car, killing Spencer and seriously injuring Brown. Spencer’s estate and Brown brought suit against various entities associated with Northlake Commons and Northlake Mall, alleging that they knew about the area’s history of criminal activity and negligently breached their duty to warn patrons and provide adequate security. The owner, manager, and security provider of Northlake Commons separately moved to dismiss the complaints pursuant to Rule 12(b)(6) or Rule 12(c).
The Court observed that, although a possessor of land is generally not liable for the criminal acts of third parties that injure invitees, if the criminal conduct was foreseeable, the landowner has a duty to warn its invitees.
The owner and manager of Northlake Commons argued that Plaintiffs failed to plead a claim for negligence because the criminal activity did not occur on Northlake Commons property. The Court disagreed, concluding that the allegations of the complaints showed that the shooting was the result of a series of events that originated on Northlake Commons property due to the owner’s and manager’s failure to provide adequate security for their customers.
The security provider argued that, pursuant to its contract, it was not obligated to provide security to Northlake Mall or to intervene to stop a violent attack anywhere, including on the Northlake Commons property. The Court rejected both arguments, holding that (1) the security provider may be held liable for negligence in performing its duties related to the Northlake Commons property even if the result of the security provider’s negligence occurred elsewhere, and (2) because the security provider’s contract was not before the Court, only the allegations in the complaints could be considered and they were sufficient to state a claim for the security provider’s negligence.
Accordingly, the Court denied the motions.
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Maven Advantage, Inc. v. Square One Storm Restoration, LLC, 2025 NCBC 14 (N.C. Super. Ct. Mar. 24, 2025) (Davis, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); confidential information; trade secrets; non-solicitation; non-competition; non-disclosure; misappropriation of trade secrets; breach of contract; overbroad; unenforceable; “blue pencil” doctrine; punctuation; formatting; embezzlement
Maven Advantage, Inc. initiated this lawsuit in November 2024, asserting various claims arising from alleged misappropriation and misuse of Maven’s confidential and trade secret information by its former employees (Defendants Couch and Daniels) and their new employer (Defendant Square One Storm Restoration, LLC). Maven employed Defendants Couch and Daniels as sales representatives until their resignation in October 2024. Couch and Daniels had entered into non-solicitation, non-competition, and non-disclosure agreements with Maven. In September 2024, Maven experienced a sharp decline in sales, which Maven alleged was a result of Couch and Daniels diverting clients to their new employer. Defendants moved to dismiss Maven’s claims for misappropriation of trade secrets, breach of contract, and civil embezzlement.
Misappropriation of Trade Secrets. Defendants argued that the Complaint failed to adequately identify Maven’s alleged trade secrets, and the Court agreed, concluding that the allegations were too broad. The Court also concluded that Maven’s allegation that Daniels had attempted to obtain certain information was insufficient to allege misappropriation because it did not allege that he had actually obtained the information (which in any event, was not adequately identified as a trade secret). The Court therefore dismissed the claim.
Breach of Non-Competition Provision. Maven conceded that the non-competition provision in Couch and Daniels’s employment agreements was unenforceable under North Carolina law and the Court dismissed with prejudice Maven’s breach of contract claim to that extent.
Breach of Non-Solicitation Provision. Defendants argued that all three subparts of the non-solicitation provision were overbroad and unenforceable; Maven conceded that the third subpart was overbroad but could be severed from the agreement. Applying the blue pencil doctrine, the Court concluded that, based on the formatting and punctuation used, as well as a provision in the employment agreements that specifically provided for the application of the blue pencil doctrine, the third subpart could be severed from the employment agreement. The Court determined that the remaining two subparts of the non-solicitation provision—which restricted solicitation of customers that Defendants had personal contact with and did business with—were narrowly tailored to protect Maven’s legitimate business interests and denied the motion to that extent.
Breach of Non-Disclosure Provision. The Court concluded that the allegations were sufficient to state a claim for breach of the non-disclosure provision by Couch, but insufficient to state a claim for breach of the same provision by Daniels because the complaint did not allege facts constituting an actual breach of the provision by Daniels. The Court therefore denied the motion as to Couch but granted the motion as to Daniels.
Civil Embezzlement. Maven informed the Court that it no longer intended to proceed on this claim, so the Court dismissed it with prejudice.
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Murphy-Brown, LLC v. ACE Am. Ins. Co., 2025 NCBC Order 16 (N.C. Super. Ct. Mar. 12, 2025) (Davis, J.)
Key Terms: de bene esse deposition; subpoena duces tecum; redactions; discovery; delay; untimely
As summarized here, Plaintiffs originally sued various insurers who provided them with primary and excess insurance coverage, contending that the insurers were obligated to indemnify Plaintiffs for amounts paid to settle certain nuisance actions relating to Plaintiffs’ hog farms and to reimburse Plaintiffs for their defense costs for such underlying lawsuits. Presently before the Court was Defendant’s motion to (1) take the de bene esse deposition of Plaintiff Smithfield Foods, Inc.’s Chief Legal Officer ahead of an April trial date, and (2) obtain unredacted copies of certain related invoices produced in discovery via a subpoena duces tecum.
Before joining Smithfield in 2020, the CLO represented Plaintiffs in the underlying lawsuits. During fact discovery, Defendant ACE American Insurance Company deposed three attorneys, not including the CLO, who had represented Plaintiffs in the underlying lawsuits. Plaintiffs also produced numerous attorney invoices, some of which included redactions for fees associated with certain time entries unrelated to the underlying lawsuits.
Fact discovery ended in January 2021. In October 2024, ACE notified Plaintiffs’ counsel that it intended to seek the CLO’s deposition de bene esse. Three months later, ACE attempted to domesticate and serve a subpoena duces tecum on the CLO in Virginia, where she resided, demanding that she appear for a deposition and produce unredacted copies of the invoices. ACE moved to take the de bene esse deposition of the CLO and to obtain unredacted copies of the attorney invoices in February 2025.
After considering (1) when ACE became aware that the CLO would be unavailable; (2) whether ACE knew what the substance of the CLO’s testimony would be; (3) whether the CLO was “friendly” or “hostile”; and (4) whether allowing the de bene esse deposition would unfairly prejudice Plaintiffs, the Court concluded that ACE was not entitled to take a de bene esse deposition of the CLO. The Court also denied ACE’s request for the production of the unredacted invoices as untimely, noting that ACE did not seek production of the invoices during discovery, instead waiting until just weeks before trial.
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Hedgepeth v. Cornblum, 2025 NCBC Order 17 (N.C. Super. Ct. Mar. 17, 2025) (Robinson, C.J.)
Key Terms: order on designation; amend; N.C.G.S. § 7A-45.4(a)(1); piercing the corporate veil; N.C.G.S. § 7A-45.4(c); N.C.G.S. § 7A-45.4(g); “mandatory” mandatory designation; N.C.G.S. § 7A-45.4(b)(2); Rule 8
As summarized here, the Court previously concluded that this matter was not properly designated as a mandatory complex business case under N.C.G.S. § 7A-45.4(a)(1) for both substantive and procedural reasons. Undeterred, Plaintiff filed an Amended Notice of Designation (“NOD”), again seeking designation pursuant to N.C.G.S. § 7A-45.4(a)(1)—based on the same facts as those included in the original NOD—and additionally seeking designation pursuant to N.C.G.S. § 7A-45.4(b)(2). The Court concluded once again that the matter was not properly designated as a mandatory complex business case.
Designation was procedurally improper because (1) N.C.G.S. § 7A-45.4 does not provide a procedure for amending a NOD; and (2) the NOD must be filed contemporaneously with the complaint, not two months later.
Designation was substantively improper because a veil-piercing allegation, standing alone, is insufficient to support designation under N.C.G.S. § 7A-45.4(a)(1). When a case must be designated pursuant to N.C.G.S. § 7A-45.4(b)(2)—a “mandatory” mandatory complex business case—N.C.G.S. § 7A-45.4(g) permits designation at any time. But to qualify for designation under N.C.G.S. § 7A-45.4(b)(2), the case must first qualify for designation under N.C.G.S. § 7A-45.4(a)(1)–(5) or (8) and, pursuant to Rule 8 of the North Carolina Rules of Civil Procedure, the pleading on which designation is based must state affirmatively that damages exceed $5 million. Neither requirement was met.
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Members of N.C. State Univ.’s 1983 NCAA Men’s Basketball Nat’l Championship Team v. Nat’l Collegiate Athletic Ass’n, 2025 NCBC Order 18 (N.C. Super. Ct. Mar. 25, 2025) (Davis, J.)
Key Terms: motion to stay; N.C. State University; basketball; name, image, and likeness; monopoly; anticompetitive; N.C.G.S. § 1-75.12; substantial injustice; discretion; first-filed rule; choice of forum; litigating matters of local concern;
This case involves the alleged misappropriation of former athletes’ names, images, and likenesses (“NIL”). Twelve former members of N.C. State University’s 1983 NCAA Division I men’s basketball team brought suit against the NCAA, alleging that the NCAA has had a decades-long monopoly over collegiate athletics in North Carolina. Plaintiffs allege that the NCAA has generated billions of dollars in revenue from using Plaintiffs’ NILs without compensating Plaintiffs for their use.
The NCAA moved to stay this action in its entirety pending resolution of Chalmers v. NCAA, a related putative class action brought on behalf of former college athletes nationwide pending in the U.S. District Court for the Southern District of New York. The Chalmers lawsuit was initiated after this action and, while it involves substantively similar issues, none of the Chalmers plaintiffs have a direct connection with this action nor has the class been certified.
The NCAA argued that facing suit in North Carolina will work a “substantial injustice” by forcing the NCAA to litigate similar claims in two forums, running the risk of obtaining contradictory rulings, and resulting in judicial inefficiency. Conversely, Plaintiffs contend that they will suffer “substantial injustice” if this action is stayed in favor of the Chalmers lawsuit.
Whether to grant a stay is within the discretion of the Court. The Court concluded that the following factors all weighed against the entry of a stay: (1) although there was overlap between the attorneys in both actions, there was no (current) overlap between Plaintiffs in this action and the plaintiffs in Chalmers; (2) should the first-filed rule apply, this action was filed before the Chalmers lawsuit; (3) this action involved only North Carolina law; the Chalmers action was based on federal law; (4) Plaintiffs’ choice of forum in their home state was entitled to deference; (5) should a class be certified in Chalmers, the litigation of the resulting class action could significantly delay Plaintiffs’ ability to obtain relief; and (6) North Carolina had a strong interest in litigating North Carolina claims brought by North Carolina residents who attended a North Carolina public university for alleged wrongs committed in this state.
The Court therefore denied the NCAA’s motion to stay.
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Charles Schwab & Co., Inc. v. Marilley, No. 210A24, 2025 N.C. LEXIS 162 (N.C. 2025) (per curiam)
Key Terms: motion to stay; arbitration; affirmed
As summarized here, the Business Court previously entered an order denying, in part, Defendant Peter Marilley’s motion to stay proceedings and compel arbitration because the cross-claims at issue fell outside the scope of the parties’ arbitration agreement. The Supreme Court affirmed.
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Vanguard Pai Lung, LLC v. Moody, No. 15A24, 2025 N.C. LEXIS 150 (N.C. 2025) (Dietz, J.)
Key Terms: JNOV motion; directed verdict motion; waiver of issues; affirmed
Following an adverse jury verdict, Defendants filed several post-trial motions, including a JNOV motion. As summarized here, the Business Court determined that two of the issues raised in the JNOV motion had been waived because they were not raised in Defendants’ earlier motion for a directed verdict. The Business Court also rejected Defendants’ other post-trial arguments on the merits. Defendants appealed.
Adopting the reasoning of a line of Court of Appeals cases, the Supreme Court held that while a movant may not need to state the specific grounds for a directed verdict motion in uncomplicated, single-issue cases where the grounds are obvious, in cases involving multiple defenses and theories of liability, a movant’s failure to expressly state in a directed verdict motion a specific argument or theory that forms a ground for relief waives the issue at both the directed verdict and JNOV stage. Applying this rule to the facts at hand, the Supreme Court affirmed the ruling of the Business Court. Although Defendants challenged Plaintiffs’ conversion and fraud claims at the directed verdict stage, the arguments and issues raised at the JNOV stage were different than those raised earlier. Accordingly, the Business Court was correct in determining that the new arguments and issues were waived. Acknowledging the difficulties with raising all issues at the directed verdict stage in open court during trial, the Supreme Court noted that the best practice in multi-claim, multi-defense cases is to prepare and file a written motion for directed verdict so as to provide the opposing parties and the court with notice of the specific grounds for the motion. The Supreme Court also affirmed the Business Court’s orders on the merits, for the reasons stated in the Business Court’s orders.
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The information in this article is not, nor is it intended to be, legal advice. You should
Posted 03/26/25
By: Ashley Oldfield
JT Russell & Sons, Inc. v. Russell, 2025 NCBC 7 (N.C. Super. Ct. Mar. 4, 2025 (Conrad, J.)
Key Terms: Rule 12(b)(6); derivative claims; independent panel; N.C.G.S. § 55-7-44; judicial removal of a director; N.C.G.S. § 55-8-09
As summarized here, this action involves a dispute between two branches of a family regarding their company, JT Russell & Sons. Defendant Jim Russell, a former officer and director of the company, asserted derivative counterclaims against the remaining directors for alleged misuse of company assets, as well as a direct counterclaim to remove them as directors. Upon the request of the company’s board, the Court appointed, pursuant to N.C.G.S. 55-7-44(f), an independent panel to conduct an inquiry into whether the maintenance of the derivative counterclaims was in the best interest of the corporation. Following its investigation, the panel submitted a detailed report regarding its inquiry and concluded that it was not in the company’s best interest to pursue the various derivative counterclaims. Thereafter, the company moved to dismiss the derivative counterclaims and the direct counterclaim for removal of directors.
The Court granted the motion to dismiss the derivative counterclaims. N.C.G.S. § 55-7-44 requires that a court grant a motion to dismiss a derivative proceeding if an independent, court-appointed panel determines in good faith after conducting a reasonable inquiry that the maintenance of the derivative proceeding is not in the best interest of the company. Upon review of the panel’s report, the Court concluded that these elements were satisfied and dismissal was warranted.
However, the Court denied the motion to dismiss the direct counterclaim for removal of directors. N.C.G.S. § 55-8-09 allows a court to remove a director if a shareholder shows that the director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the corporation. Limiting its review solely to the allegations in the counterclaims, the Court concluded that Jim’s allegations that the directors had unlawfully circumvented the bylaws to gain corporate control and had engaged in self-dealing were sufficient to state a claim under the statute.
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Lafayette Vill. Pub, LLC v. Burnham, 2025 NCBC 8 (N.C. Super. Ct. Mar. 4, 2025) (Davis, J.)
Key Terms: Rule 12(b)(6); existence of a fiduciary duty between LLC members; breach of fiduciary duty; constructive fraud; derivative claims; statute of limitations; accounting
This action involves a dispute between members of two LLCs. Two of the members brought suit against the third member, asserting various derivative and individual claims arising from Defendant’s alleged financial mismanagement and self-dealing. Defendant moved under Rule 12(b)(6) to dismiss the derivative and individual claims for breach of fiduciary duty and constructive fraud, as well as the claim for an accounting.
Beginning with the individual breach of fiduciary claims, the Court first concluded that the Complaint did not allege the existence of a de jure fiduciary relationship between Defendant and Plaintiffs based on Defendant’s status as a member, since as a general rule, members do not owe fiduciary duties to each other and there was no operating agreement providing otherwise. Second, the Court concluded that, at best, the complaint alleged that Defendant had exercised more power than he actually possessed over the companies and that the Plaintiffs let him do so, and that this was insufficient to establish a de facto fiduciary relationship. The complaint contained no allegations that Plaintiffs, as members with equal managerial authority, had ever called a managers’ meeting, formally voted against Defendant’s actions, or sought injunctive relief. Since the complaint failed to allege the existence of a fiduciary relationship between the members, the Court dismissed the individual breach of fiduciary duty claims.
The Court also dismissed the individual constructive fraud claims due to the absence of a fiduciary relationship and the complaint’s failure to allege any alternative factual basis for a relationship of trust and confidence between the members.
Turning to the derivative claims, the Court noted that Defendant’s argument that the claims were barred by the three-year statute of limitations was inapplicable to the constructive fraud claim because the statute of limitations for such a claim is ten years. As to the breach of fiduciary duty claim, the Court concluded that it would benefit from a more developed factual record regarding when Plaintiffs had actual or constructive knowledge of Defendant’s alleged wrongful acts. Accordingly, the motion to dismiss the derivative claims was denied without prejudice.
Finally, the Court dismissed Plaintiffs’ claim for an accounting because an accounting is a remedy, not a claim.
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Hengqin Dingsheng Zhirong Equity Inv. Fund (Ltd. P’ship) v. Li, 2025 NCBC 9 (N.C. Super. Ct. Mar. 5, 2025) (Davis, J.)
Key Terms: forum non conveniens; N.C.G.S. 1-75.12; China; motion to dismiss; motion to stay
Plaintiffs, Chinese investors and minority shareholders of a Chinese pharmaceutical research company, filed this action against three of the executives of the company, alleging that the executives improperly enriched themselves at the expense of the Plaintiffs and the company. Defendants moved to dismiss the action pursuant to Rules 12(b)(2) and 12(b)(6), or, alternatively, to stay the action on forum non conveniens grounds.
Upon consideration of the forum non conveniens factors, the Court granted the motion to stay and consequently denied the motion to dismiss as moot. First, the nature of the case, applicable law, and the respective interests of China and North Carolina all weighed strongly in favor of a stay because Chinese law would need to be applied to the case, many of the witnesses and documents would require a Chinese translator, and China had a far greater interest than North Carolina in the litigation because the case involved a dispute between Chinese investors of a Chinese company regarding actions mostly taken in China. Second, the location of witnesses and evidence weighed neither for or against a stay because witnesses and evidence were located both in China and North Carolina. Third, China provided an adequate forum for Plaintiffs to litigate their claims despite the fact that China uses a judge-led inquisitorial system, rather than the adversarial system used in the U.S. Finally, although deference is usually given to a plaintiff’s choice of forum, such deference is diminished when, as here, plaintiffs chose to bring their case outside their home forum.
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Epes Logistics Servs., Inc. v. De Piante, 2025 NCBC 10 (N.C. Super. Ct. Mar. 11, 2025) (Robinson, C.J.)
Key Terms: summary judgment; non-disclosure agreement; non-solicitation agreement; breach of fiduciary duty; breach of contract, ; injunctive relief; aiding and abetting breach of fiduciary duty; tortious interference; UDTPA; civil conspiracy; respondeat superior; declaratory judgment; failure to brief an issue
This case arose from the resignation of three employees from Plaintiff and their alleged access to, and use of, Plaintiff’s confidential information to begin their own competing business. Plaintiff brought suit alleging various claims arising from the Individual Defendant’s alleged breach of their employment agreements with Plaintiff and interference with Plaintiff’s customer relationships. Defendants asserted a counterclaim for a declaratory judgment concerning the enforceability of the non-solicitation covenants in their employment agreements. Both sides moved for summary judgment, in whole or in part.
Breach of Fiduciary Duty. Plaintiff asserted that Defendant De Piante owed it both de jure and de facto fiduciary duties and that Defendant Caron owed it de facto fiduciary duties. Because the parties heavily disputed whether De Piante was an officer of Plaintiff, the Court denied Plaintiff’s motion for summary judgment as it related to De Piante’s de jure fiduciary duty to Plaintiff. However, regarding de facto fiduciary duties, the Court determined that there was no evidence that either De Piante or Caron exercised domination and control over Plaintiff; to the contrary, the evidence showed that both worked in a specific division of Plaintiff and reported to superiors. Accordingly, the Court dismissed the claim to the extent it was based on de facto fiduciary duties.
Breach of Contract. The Court found that Plaintiff had put forth sufficient evidence that would permit a jury to conclude that the Individual Defendants had violated the confidentiality provisions of their employment agreements, including by using Plaintiff’s financial information to obtain financing for their new company. Thus, genuine issues of material fact existed, precluding summary judgment on the breach of contract claim.
Injunctive Relief. Plaintiff sought to permanently enjoin the Individual Defendants from using or disclosing its confidential information. Because the Court had already determined that there was a genuine issue of material fact as to whether the Individual Defendants breached their employment agreements by disclosing confidential information, the Court held that it would be premature to determine whether the requested injunctive relief was warranted and therefore denied Defendants’ motion for summary judgment on this claim.
Aiding and Abetting Breach of Fiduciary Duty. Because North Carolina does not recognize a claim for aiding and abetting breach of fiduciary duty, the Court dismissed this claim.
Tortious Interference with Contracts Claim against Individual Defendants. Defendants sought summary judgment on Plaintiff’s claim that the Individual Defendants had tortiously interfered with each other’s employment agreements and the confidentiality provisions found therein. Since the Court had already determined that genuine issues of material fact existed regarding the enforceability of the agreements, it rejected any argument that the tortious interference claim failed because the agreements were unenforceable. The Court was also satisfied that genuine issues of material fact existed regarding inducement. Thus, the Court denied summary judgment on this claim.
Tortious Interference with Prospective Economic Advantage Claim against Defendants. The Court granted summary judgment in Defendants’ favor on this claim because, although Plaintiff had identified specific customers it contends would have continued to do business with it but for Defendants’ conduct, Plaintiff failed to point to any specific contracts that would have ensued but for Defendants’ conduct, a required element of the claim.
UDTPA. Defendants sought summary judgment on plaintiff’s UDTPA claim arguing that it was precluded by the single market participant exclusion. The Court determined, however, that Plaintiff had forecast sufficient evidence that the alleged conduct supporting the claim involved market participants outside of Plaintiff’s organization and therefore denied the motion for summary judgment.
Civil Conspiracy. Because Defendants’ only argument in favor of summary judgment as to the civil conspiracy claim was that it should be dismissed if all other tort claims were dismissed, and other claims had survived dismissal, the Court denied Defendants’ motion for summary judgment on this claim.
Respondeat Superior against Defendant Noble. Because Defendants did not present any argument in their brief regarding this claim, the Court denied Defendants’ motion for summary judgment on the respondent superior claim.
Declaratory Judgment Counterclaim. Defendants sought summary judgment on their claim for a declaratory judgment that the non-solicitation provisions in their employment agreements were unenforceable. Because Defendants had presented sufficient evidence to support a prima facie case as to this claim and Plaintiff failed to present any argument regarding this claim in its brief in opposition to summary judgment, the Court concluded that no genuine issue of material fact existed and granted summary judgment in Defendants’ favor.
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Jackson v. MH Master Holdings, LLLP, 2025 NCBC Order 15 (N.C. Super. Ct. Feb. 28, 2025) (Earp, J.)
Key Terms: BCR 10.9; public records; work product doctrine; attorney-client privilege; anticipation of litigation; substantial need
As summarized here, the N.C. Attorney General initiated this action against Defendant, alleging that Defendant had violated certain provisions of an asset purchase agreement relating to its acquisition of a hospital system in western North Carolina. In response to Defendant’s Rule 34 document request, Plaintiff withheld or redacted various documents that he identified in a privilege log as relating to legal advice. After complying with BCR 10.9, Defendant filed a motion to compel Plaintiff to produce the documents, which Defendant contends are public records.
Because Plaintiff asserted that the majority of the documents were withheld based on the work product doctrine, the Court began by examining the interplay between the Public Records Act and the work product doctrine. Although the Act defines public record broadly, it also recognizes application of the work product doctrine to public records and incorporates the provisions of Rule 26 regarding the production of trial preparation materials. Under Rule 26(b)(3), documents prepared in anticipation of litigation are subject to the work product doctrine. Here, Defendant argued that the documents at issue were prepared in connection with the negotiation of a contract, not in anticipation of litigation. However, because there was evidence in the record that the Plaintiff anticipated litigation early on in the transaction, the Court determined that an in camera review of the documents was necessary to determine if they were prepared in anticipation of litigation.
Defendant also argued that even if the work product doctrine applied, the documents must still be produced because Defendant had a substantial need for the materials (and couldn’t get equivalent materials elsewhere) since the Attorney General was the only source of information concerning his contemporaneous understanding of potentially ambiguous language in the APA. Plaintiff responded that regardless of Defendant’s “substantial need,” the work product documents were not discoverable because they reflected the mental impressions, conclusions, opinions, and legal theories of Plaintiff’s attorneys. Once again, the Court concluded that an in camera review of the documents was needed to determine this issue.
Accordingly, the Court ordered Plaintiff to provide the documents at issue to the Court for an in camera review.
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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.
Posted 03/11/25
By: Rachel Brinson
Water.io Ltd v. Sealed Air Corp, 2025 NCBC 5 (N.C. Super. Ct. Feb. 19, 2025) (Conrad, J.)
Key Terms: motion to dismiss; breach of contract; repudiation; nonperformance; counterclaims; implied covenant of good faith and fair dealing; UDTP; N.C.G.S. § 75-1.1; Rule 12(b)(6); statute of limitations; N.C.G.S. § 1-52(1); UCC; N.C.G.S. § 25-2-725(1); contract for the sale of goods; predominate purpose test; nonconforming goods; fraudulent inducement; heightened pleading standard
This case arises out of a dispute over a contract for the development and sale of sensors for use in insulated shipping containers. Plaintiff brought suit alleging that Defendant breached their contract by repudiation and nonperformance. Defendant counterclaimed for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair or deceptive trade practices. Plaintiff moved to dismiss the counterclaims.
Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing. Because Defendant’s counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing were based on the same underlying allegations, the Court considered the two claims as one. Plaintiff moved to dismiss the claims based on the statute of limitations. The Court first determined, under the predominate purpose test, that the contract was predominately one for the sale of goods and therefore, the UCC’s four-year statute of limitations applied. Accordingly, the Court dismissed the claims to the extent they were based on alleged breaches occurring more than four years prior to the commencement of this suit, but otherwise denied the motion.
UDTP. Defendant asserted a UDTP claim based on Plaintiff’s alleged breach of contract. The Court dismissed the claim, concluding that Defendant’s allegations of fraudulent inducement were conclusory and not pleaded with sufficient particularity and therefore did not supply the necessary aggravating circumstances to support a UDTP claim based on breach of contract. Further, the Court concluded that the Parties’ dispute was essentially one regarding contractual rights and obligations, which does not support a UDTP claim.
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Barings LLC v. Fowler, 2025 NCBC 6 (N.C. Super. Ct. Feb. 13, 2025) (Conrad, J.)
Key Terms: motion to dismiss; trade secrets; confidential information; corporate raid; conspiracy; tortious interference with contract; N.C.G.S. § 75-1.1; breach of fiduciary duty
In March 2024, twenty-two members of Plaintiff Barings LLC’s Global Private Finance group resigned in unison to join Defendant Corinthia Global Management Limited, a fledgling competitor. In this lawsuit, Plaintiff alleges that the departing employees took its trade secrets and other confidential information at Defendant Corinthia’s direction. Plaintiff Barings also alleges that Defendant Corinthia conspired with Defendants Ian Fowler (a leader of the Global Private Finance group) and Kelsey Tucker (Barings’s former head of global operations) in orchestrating the raid. Defendants moved to dismiss all nine claims brought by Plaintiff.
Breach of Contract. Plaintiff alleges that the individual Defendants breached the restrictive covenants of their respective employment or separation agreements with Plaintiff. However, the Court found that Plaintiff failed to meet the modest pleading requirements to state a claim for breach of contract because its allegations of breaches were conclusory and not specific enough to put the Defendants on notice of the claims against them. The Court granted the motion to dismiss the breach of contract claims against the individual Defendants.
Misappropriation of Trade Secrets. Plaintiff alleged that Defendants misappropriated its trade secrets, including plans for new products, employee compensation information, and various internal policies. Applying the lex loci test, the Court determined that North Carolina law, not English law, controls this claim for present purposes. The Court found that Plaintiff had sufficiently identified its allegedly misappropriated trade secrets and properly alleged that it was harmed by the alleged misappropriations. However, the Court found that the allegations against the individual Defendants were insufficient because Plaintiff failed to specifically allege that the individual Defendants improperly acquired, used, or disclosed any trade secrets. Accordingly, the Court dismissed the claim against the individual Defendants but denied the motion as to Corinthia.
Tortious Interference with Contract. Plaintiff alleged that Defendants induced the departing employees to breach their employment agreements by misusing Plaintiff’s confidential information and soliciting its customers. Corinthia argued that any interference on its part was justifiable market competition. The Court rejected this argument because Plaintiff had adequately alleged that Corinthia misappropriated its trade secrets, which is not a lawful means of competition. Defendants also argued that it did not know about the employees’ agreements, induce the employees to breach the agreements, or cause any harm to Plaintiff. The Court disagreed, finding that Plaintiff’s allegations that Corinthia held resignation letters from the employees for months before such employees resigned, conditioned such employees’ start dates with Corinthia on the expiration of applicable restrictive periods, and returned documents containing Plaintiff’s trade secrets all supported an inference that Corinthia knew of the agreements and induced their breach to Plaintiff’s harm. Conversely, the Court again found that the allegations against the individual Defendants were conclusory and not sufficient to state a claim for tortious interference with contract. The Court granted the motion to dismiss the claims against the individual Defendants but denied it as to Corinthia.
UDTP. Since Plaintiff’s UDTP claim was predicated on its underlying misappropriation of trade secrets and tortious interference with contract claims, the Court dismissed the UDTPA claim to the same extent it had dismissed the other claims, but otherwise denied the motion to dismiss the UDTP claim.
Civil Conspiracy. Although the Court dismissed the misappropriation of trade secrets and tortious interference with contract claims against the individual Defendants, the underlying claims against Corinthia survived and Plaintiff alleged that all the Defendants conspired together to commit those torts. Thus, although the conspiracy allegations were not as particularized or comprehensive as they could be, they were sufficient to survive a motion to dismiss.
Constructive Fraud and Breach of Fiduciary Duty. These claims against Defendant Fowler survived because Plaintiff had sufficiently alleged that Fowler owed it fiduciary duties as an officer and director and that he breached those duties for his own benefit by secretly helping Corinthia raid Plaintiff’s Global Private Finance group.
Permanent Injunction. Noting that injunctions are remedies and not standalone causes of action, the Court granted the motion to dismiss the claim for permanent injunction without prejudice to Plaintiff’s ability to seek a permanent injunction as a remedy if it is successful on an underlying claim.
Breach of Stipulated Injunction Order. Corinthia argued that the claim for breach of the injunction order should be dismissed because dismissal of all other claims against Corinthia warranted termination of the injunction order and because Plaintiff did not allege any damages. The Court rejected both arguments because 1) not all claims against Corinthia had been dismissed and 2) North Carolina does not require proof of damages as an element of a breach of contract claim.
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Barings LLC v. Fowler, 2025 NCBC Order 11 (N.C. Super. Ct. Feb. 13, 2025) (Conrad, J.)
Key Terms: motion to stay; N.C.G.S. § 1-75.12(a); forum non conveniens
As summarized above, this case involves claims relating to an alleged corporate raid. Plaintiff is a Delaware LLC headquartered in North Carolina and Defendant Corinthia is chartered and headquartered in the United Kingdom. Corinthia moved to stay the case on forum non conveniens grounds pursuant to N.C.G.S. § 1-75.12, arguing that North Carolina is an inconvenient forum and that Plaintiff’s claims should be heard in England. The Court determined that the applicable factors regarding whether to grant a stay were either neutral or weighed against a stay and that Corinthia had not shown that a substantial injustice would result if the case were to proceed in North Carolina. First, Plaintiff’s choice of forum deserved great deference so this factor weighed against a stay. Second, the witnesses and sources of proof were located both in the United States and in England, so these factors were neutral. Third, the Court would likely need to apply North Carolina, Delaware, and English law, so this factor weighed slightly against a stay since the Court was best suited to apply North Carolina law and frequently applied Delaware law. The remaining factors either weighed against a stay or warranted little weight. Therefore, the Court denied Corinthia’s motion to stay.
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ECA Gen. P’Ship, LLC v. First Bank, 2025 NCBC Order 12 (N.C. Super. Ct. Feb. 18, 2025) (Robinson, C.J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a); N.C.G.S. § 7A-45.4(a)(5); timely notice of designation; intellectual property
Plaintiff filed this action, asserting various claims arising from alleged cybercrime activity. Defendants timely served their Notice of Designation but did not file it with the clerk of court, as required by N.C.G.S. §§ 7A-45.4(c) and (d). Accordingly, the Court determined, on procedural grounds, that the case was not properly designated to the Business Court.
In addition, even assuming the NOD was timely, the Court determined that designation pursuant to N.C.G.S. § 7A-45.4(a)(5) was not proper because the material issues in dispute, namely the Defendant’s security procedures and negligent conduct, were not tied to the underlying intellectual property involved, as required by section 7A-45.4(a)(5).
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Lucas v. Hopper, 2025 NCBC Order 13 (N.C. Super. Ct. Feb. 20, 2025) (Earp, J.)
Key Terms: motion to quash subpoenas; discovery dispute; close of discovery; BCR 10.9; BCR 10.4
Defendants filed objections and motions to quash subpoenas issued to third parties by Plaintiffs that would require production of documents by the subpoenaed parties after the close of the discovery period. Finding that Plaintiffs did not move to extend the discovery period and failed to comply with BCR 10.4 requiring that discovery be served with enough time so that responses are due before the close of discovery, the Court granted the motions and quashed the subpoenas as untimely.
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Implus Footcare, LLC v. Vore, 2025 NCBC Order 14 (N.C. Super. Ct. Feb. 25, 2025) (Davis, J.)
Key Terms: motion for commission; non-party subpoena; Rule 45; Massachusetts; letters rogatory; BCR 10.9; discovery dispute
Defendants sought the issuance of a commission from the Court pursuant to Rule 45(f) to compel discovery from a non-party entity located in Massachusetts. However, Defendants failed to follow BCR 10.9 prior to filing the motion for commission. The Court therefore denied the motion, without prejudice, and instructed the parties to participate in the BCR 10.9 process and to make a good-faith effort to resolve their discovery dispute.
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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.
Posted 02/25/25
By: Natalie E. Kutcher
CTS Metrolina, LLC v. Berastain, 2025 NCBC 3 (N.C. Super. Ct. Feb. 4, 2025) (Earp, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); unfair and deceptive trade practices act; tortious interference; misappropriation of trade secrets; computer trespass; N.C.G.S. 14-458(a); vicarious liability; declaratory judgment; civil conspiracy
As previously summarized here, this case arose after Plaintiff purchased the assets of a business from Defendants Berastain and Moreau in 2022. As part of the transaction, Berastain and Moreau executed confidentiality and noncompete agreements. Following Berastain and Moreau’s departure from Plaintiff, a significant number of Plaintiff’s “jobs” were deleted from a project management platform by two employees, who later became employed by Inkwell, a company formed by Berastain and Moreau. Inkwell was subsequently purchased by S&P Cap, a company formed by two brokers who participated in the CTS Metrolina purchase agreement. Inkwell, S&P Cap, Cherry and Pena moved to dismiss a number of Plaintiff’s claims pursuant to Rule 12(b)(6).
Tortious Interference with Contract Claim against Inkwell. The Court denied Inkwell’s motion to dismiss as it related to Inkwell’s interference with Berastain and Moreau’s noncompete agreement with CTS Metrolina. The Court noted the inapplicability of the intracorporate immunity doctrine, which applies to conspiracies, to this claim. The Court held that the amended complaint sufficiently alleged that Inkwell had induced Berastain and Moreau to violate their restrictive covenants with CTS Metrolina and satisfied the pleading elements for this claim. However, the Court granted Inkwell’s motion as it related to contracts with CTS Metrolina’s customers, subcontractors, and vendors. CTS Metrolina’s “mere expectation of a continuing business relationship” was insufficient to establish a claim for tortious interference.
Tortious Interference with Contract Claim against Cherry and S&P Cap. The Court granted Cherry and S&P Cap’s motions to dismiss, as the amended complaint failed to establish the existence of a valid contract between CTS Metrolina and its customers, subcontractors and vendors. As with Inkwell, the expectation of a continuing business relationship with these entities did not constitute a contract for the purposes of a tortious interference claim.
Misappropriation of Trade Secrets Claim against Inkwell, Cherry and S&P Cap. Defendants argued that the misappropriation of trade secrets claim failed because Plaintiff had failed to adequately allege the existence of a trade secret or misappropriation. The Court agreed in part, concluding that Plaintiff’s allegations regarding misappropriation of “business operation information” were too vague. However, Plaintiff’s detailed descriptions of its customer lists and subcontractor/vendor lists were adequate to allege the existence of compilation-based trade secrets and its allegations that Defendants had used the information were sufficient to allege misappropriation.
Computer Trespass Claim against Pena and Inkwell. Plaintiff alleged that Pena violated North Carolina’s Computer Trespass Statute (N.C.G.S. § 14-458(a)) by deleting its “jobs” from iRestore, a project management platform. Pena argued that these allegations failed because they did not allege that iRestore was a “computer or computer network” or that the data belonged to Plaintiff rather than iRestore. The Court disagreed, finding that the allegations were sufficient to show that iRestore operates on a “computer or computer network” and that Plaintiff’s use of the possessive “its jobs” was sufficient to allege that the data belonged to Plaintiff. Inkwell also argued that Plaintiff’s claim against it could not survive to the extent the claim sought to allege Inkwell’s liability for the violations of its employees under the doctrine of respondeat superior. The Court disagreed, concluding that the Computer Trespass Statute did not foreclose the possibility of vicarious liability under the present circumstances.
Civil Conspiracy Claim against Cherry, Pena, S&P Cap. Defendants argued that the civil conspiracy claim should be dismissed for failure to allege facts showing how, when, and why a conspiracy was formed. The Court denied the motion, finding that Plaintiff’s allegations that Berastain, Moreau, Cherry, Pena and S&P Cap agreed to unlawfully compete with CTS Metrolina, and carried out this agreement by violating the Computer Trespass Statute and the Court’s prior orders were sufficient to state a claim.
Unfair and Deceptive Trade Practices Claim against Inkwell, Cherry, Pena. The Court also denied dismissal of Plaintiff’s UDTPA claim, concluding that the alleged violation of the Computer Trespass Statute constituted an “unfair act or practice,” and, as the alleged wrongful conduct was not contained within CTS Metrolina, the conduct was sufficiently “in or affecting commerce” to support the claim.
Accounting and Constructive Trust Claims against Inkwell and S&P Cap. The Court granted dismissed Plaintiff’s claims for accounting and constructive trust, as those are remedies rather than independent claims. This dismissal was without prejudice to Plaintiff’s ability seek the imposition of either or both remedies for any surviving claims at the appropriate time.
Declaratory Judgment Claim against Inkwell and S&P Cap. The Court denied the motion to dismiss Plaintiff’s claim for declaratory judgment, which requested that the sale of IER and Inkwell to S&P Cap be declared void ab initio because it perpetuated Berastain’s and Moreau’s unlawful competition in violation of their restrictive covenants. The Court concluded that because Berastain and Moreau had entered into the restrictive covenants with Plaintiff, Plaintiff had an interest in determining whether Berastain and Moreau could profit from the sale of IER and Inkwell.
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Pro-Tops, Inc. v. Maksimenko, 2025 NCBC 4 (N.C. Super. Ct. Feb. 10, 2025) (Earp, J.)
Key Terms: Rule 12(b)(5); motion to dismiss; invalid service of process; Rule 4; sheriff; private process server
Plaintiff filed a verified complaint against Defendant Maksimenko. Plaintiff sought to effectuate service through a private process server on six different occasions without success. The personal process server contacted Maksimenko, who denied “ducking” service, and requested that the two meet at a local hardware store. On December 19, 2024, the private process server met with Maksimenko and handed him copies of the complaint and summons. Maksimenko moved to dismiss under Rule 12(b)(5) for improper service of process.
The Court granted Maksimenko’s motion to dismiss, noting that Plaintiff’s affidavit of service did not indicate service by sheriff was attempted or that the sheriff was otherwise unable to serve the summons or complaint. Citing precedent, the Court noted that “use of a private process server is limited by statute to scenarios where the sheriff is unable to fulfill the duties of a process server.” Finding that service was not properly effectuated on Maksimenko, Plaintiff’s case was dismissed.
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Wilmington Tr., N.A. v. TM Northlake Mall, L.P., 2025 NCBC Order 7 (N.C. Super. Ct. Jan. 31, 2025) (Conrad, J.)
Key Terms: motion to approve sale; receivership; bankruptcy law; objections
In 2019, TM Northlake Mall, L.P. defaulted on a loan secured by its primary asset, a property known as Northlake Mall. Plaintiff Wilmington Trust, as trustee for the noteholder, initiated this suit and moved to place TM Northlake into receivership. A general receiver was appointed with broad authority to manage Northlake Mall’s operations and advertise the property for sale. Having found a buyer and negotiated a proposed purchase agreement, the receiver moved for the Court to approve the sale of Northlake Mall.
Two objections to the receiver’s motion were filed. The first objection was filed by a party interested in purchasing the property, who objected on the basis that the receiver’s marketing campaign was deficient and the sale price of the property was below value. The first objection requested a thirty-day due diligence period, to allow the objecting party to decide if it was willing to make an offer. The second objection was filed by two plaintiffs in two premises liability lawsuits against the receiver, who objected on the basis that the sale price of the property was too low to ensure the receivership estate had sufficient assets to compensate them should they succeed in obtaining a judgment.
Noting the broad authority given to receivers under state law and looking to bankruptcy law for guidance, the Court held that the receiver’s judgment was reasonable and that a sound business justification supported the proposed sale. The Court highlighted the “striking” fact that both TM Northlake and Wilmington Trust, who both had “every incentive” to maximize the sale price, approved the proposed sale. The Court further found that the objections filed did not present compelling reasons to reject the sale. As such, the Court approved the receiver’s proposed sale of the property.
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Hedgepeth v. Cornblum, 2025 NCBC Order 8 (N.C. Super. Ct. Jan. 31, 2025) (Robinson, J.)
Key Terms: order on designation; mandatory complex business case; N.C.G.S. § 7A-45.4(a)(1); N.C.G.S. § 7A-45.4(c); contemporaneous service requirement
In this Order on Designation, the Court determined that designation under N.C.G.S. § 7A-45.4(a)(1) was not appropriate. This case arises out of a dispute relating to the assessment and collection of clubhouse dues in a planned community. Plaintiff alleges that Defendants took control of the community’s homeowner’s association for the purpose of assessing and collecting dues for their own benefit. Plaintiff sought designation based solely upon her claim to pierce the corporate veil.
Citing precedent, the Court emphasized that a claim for piercing the corporate veil on its own is insufficient to support mandatory complex business case designation under N.C.G.S. § 7A-45.4(a)(1). As Plaintiff’s other claims did not implicate the law governing corporations, partnerships, or LLCs, designation was inappropriate. The Court further noted that Plaintiff’s failure to comply with the contemporaneous service requirement of N.C.G.S. § 7A-45.4(c) rendered the designation untimely.
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Laport v. Bakkavor Foods USA, Inc., 2025 NCBC Order 9 (N.C. Super. Ct. Feb. 5, 2025) (Robinson, J.)
Key Terms: order on designation; N.C.G.S. § 7A-45.4(a)(2); securities
This case arises from a dispute following Plaintiff Laport’s departure from Defendant Bakkavor Food’s employment. Laport filed this lawsuit in Mecklenburg County against Bakkavor Foods asserting claims of fraud in the inducement, negligent misrepresentation, violation of the North Carolina Wage and Hour Act, breach of contract, breach of covenant of good faith and fair dealing, conversion of wages, unjust enrichment, quantum meruit, and unfair and deceptive trade practices against Bakkavor Foods. Among these claims, the complaint alleges that Bakkavor Foods represented to Laport that he would earn the option to own shares of Bakkavor Foods’ stock through the company’s incentive plan. Bakkavor Foods filed a timely notice of designation under N.C.G.S. § 7A-45.4(a)(2). Laport subsequently filed an objection to the designation of the case, arguing that the complaint does not assert any securities claims.
The Court overruled Laport’s objection. Though the complaint did not explicitly assert a securities claim under Chapter 78A, the Court noted that section 7A-45.4(a)(2) does not require the claim to be explicitly stated to be properly designated. While a “tangential relationship” between securities and the complaint’s allegations is insufficient to warrant designation, designation is proper when the acquisition, disposition, transfer, existence, or characteristics of the securities is at issue. Finding that Laport’s claims required a determination of whether the shares in dispute had vested under the incentive plan, the Court held that the case would proceed as a mandatory complex business case.
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Maven Advantage, Inc. v. Square One Storm Restoration, LLC, 2025 NCBC Order 10 (N.C. Super. Ct. Feb. 10, 2025) (Davis, J.)
Key Terms: preliminary injunction; non-compete; non-solicit; misappropriation of trade secrets
This case arises following Defendants William Couch and Tyler Daniels’ resignation from Plaintiff Maven Advantage’s employment. Plaintiff alleges that Couch and Daniels violated their restrictive covenant agreements with Plaintiff through their employment with Square One, who is also a named defendant. Plaintiff asserted claims of unfair and deceptive trade practices, common law unfair competition, misappropriation of trade secrets, tortious interference with contract, and tortious interference with prospective economic advantage against all three defendants, and claims against Couch and Daniels for breach of contract and against Daniels for civil embezzlement. Shortly after the suit was filed, a TRO was entered prohibiting Defendants from using confidential information and customer lists obtained from Plaintiff and from contacting or soliciting Plaintiff’s current or prospective customers using information obtained from Plaintiff. Here, the Court addressed Plaintiff’s motion for a preliminary injunction.
The Court denied Plaintiff’s request for a preliminary injunction, finding that Plaintiff failed to show a likelihood of success on the merits of its claims. In coming to this decision, the Court noted that Defendants had “meticulously rebutted” each of Plaintiff’s allegations relating to specific events of alleged misappropriation or solicitation through affidavits. The Court also acknowledged that Plaintiff’s affidavits contained hearsay, which was directly contradicted by affidavits submitted by Defendants from individuals with first-hand knowledge of the events. Though acknowledging that these findings and credibility determinations were limited in application to the preliminary injunction motion, the Court found that Plaintiff had failed to meet the high burden required to show entitlement to a preliminary injunction with the limited evidence on record at this time.
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James H.Q. Davis Trust v. JHD Properties, LLC, No. 32PA24, 2025 N.C. LEXIS 66, 2025 WL 350300 (Jan. 31, 2025) (Barringer, J.)
Key Terms: N.C.G.S. § 57D-6-02(2); judicial dissolution; “not practicable” standard
This appeal arose from the Business Court’s order on cross-motions for summary judgment, which, as summarized here, granted summary judgment in favor of plaintiffs on their claim for judicial dissolution of two LLCs. The Business Court had concluded that judicial dissolution was warranted under N.C.G.S. § 57D-6-02(2), which provides that dissolution is appropriate when it is “not practicable” to conduct the LLC’s business. The Business Court found that the “not practicable” standard had been met because the LLCs’ managers had been unable to reach agreement for at least three years, resulting in the failure of the LLCs to conduct any economically useful activity, and the LLCs’ operating agreements did not provide any mechanism to break the deadlock. The Supreme Court affirmed and held that “not practicable” means “unfeasible” and does not mean “impossible.” In determining whether it is not practicable for managers to continue operating a company, a court may consider: (1) whether the management of the company is unable or unwilling to work together to reasonably engage in or promote the purpose for which the company was formed; (2) whether there is deadlock between the managers; (3) whether the operating agreement provides a means of navigating around such deadlock; (4) whether, due to the company’s financial position, there is still a business to operate; (5) whether continuing the company is financially feasible; and (6) whether a member or manager has engaged in misconduct. Applying these factors to the present case, the Supreme Court agreed that it was not practicable for the managers to continue operating the LLCs due to the presence of managerial deadlock, the lack of an equitable means of resolving that deadlock, and the unwillingness of the managers to permit the LLCs to engage in and pursue the purpose for which they were formed.
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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.
Posted 02/11/25
By: Austin Webber
Cherry v. Mauck, 2025 NCBC 1 (N.C. Super. Ct. Jan. 21, 2025) (Conrad, J.)
Key Terms: Rule 12(b)(6); breach of contract; breach of fiduciary duty
Plaintiffs and Defendant are co-owners of two family businesses. Plaintiff commenced this action asserting claims for breach of contract and breach of fiduciary duty arising from Defendant’s alleged distribution of company cash without a majority of member approval as required by each company’s respective operating agreement. Defendant moved to dismiss both claims under Rule 12(b)(6).
Breach of Contract. The Court denied dismissal of the breach of contract claim, finding that Plaintiff’s allegations that the operating agreements of the companies were valid and enforceable, that the agreement provided that company cash can only be distributed with the approval of a majority of the members, and that Defendant breached the agreements by making distributions over the Plaintiffs’ objection were sufficient to state a claim.
Breach of Fiduciary Duty. The Court granted the motion to dismiss the breach of fiduciary duty claim because Plaintiffs’ failed to adequately allege that Defendant owed them a fiduciary duty. Defendant, as a manager and member of each company, did not owe fiduciary duties to Plaintiffs personally as members. Further, Plaintiffs had not asserted derivative claims on behalf of the companies and thus did not have standing to sue for breach of the fiduciary duties Defendant owed to the companies. Additionally, the Plaintiffs did not assert any special duty Defendant owed them or any peculiar or personal injury caused by Defendant.
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M.D. Claims Group, LLC v. Bagley, 2025 NCBC 2 (N.C. Super. Ct. Jan. 22, 2025) (Earp, J.)
Key Terms: motion to amend complaint; Rule 15; fraud; trade secret misappropriation; UDTPA; veil piercing
Plaintiff filed suit against its former employee Bagley, asserting various claims arising from Bagley’s alleged violations of his employment agreement and non-disclosure agreement and other misconduct. Plaintiff moved to amend the complaint to add various causes of action.
Breach of Contract: Plaintiff alleged that Bagley breached his employment agreement and NDA (governed by Louisiana law) when he failed to return all company property, including confidential information. Defendants argued that the NDA operates as a restraint of trade making it subject to the requirements of Louisiana law which require non-compete provisions to contain geographic and temporal restrictions. The Court disagreed with Defendants as the language of the NDA was tailored to prevent the disclosure of confidential information, not restrain trade, and any language to the contrary could be properly severed under Louisiana law. Since a breach of contract was otherwise adequately stated under Louisiana law, the Court granted the motion to amend as to this claim.
Fraudulent Concealment and Fraudulent Misrepresentation: The Court granted the motion as to Plaintiff’s proposed fraud claims. Plaintiff alleged that 1) Bagley made false representations of the company’s status in weekly management meetings and falsely told Plaintiff that Bagley Consulting was organized for his wife’s business ventures rather than his own; 2) that these representations were reasonably calculated and intended to deceive; and 3) that Plaintiff reasonably relied on the misrepresentations and was actually deceived by them. Plaintiff also alleged that a duty to disclose arose when Bagley took affirmative steps to conceal material facts from Plaintiff and that Bagley implemented a plan to sabotage Plaintiff’s business. These allegations were sufficient to state claims for fraudulent misrepresentation and concealment.
Misappropriation of Trade Secrets: The Court held that Plaintiff had adequately stated a claim for trade secret misappropriation based on the alleged misappropriation of its “Adjuster Roster,” which was a database of adjusters used to investigate claims. Plaintiff’s proposed factual allegations that the Adjuster Roster had commercial value, was subject to reasonable efforts to maintain its secrecy, was not generally available to the public, and had been developed at significant time and expense to Plaintiff were sufficient to allege the existence of a trade secret. Additionally, the allegations that Bagley had regular access to the information and was able to transfer it to his new business in the weeks before his termination were sufficient to allege misappropriation. However, Plaintiff’s broad references to “Company Materials” and “Client-related information” were not sufficient to allege the existence of a trade secret because the allegations regarding categories of information such as general/administrative information, sales trends, and generalized customer pricing information did not satisfy the particularly requirement or were not pleaded in such a manner to show that the information was compiled and maintained as confidential in a secure location. Accordingly, the motion was granted as to a misappropriation claim based on the Adjuster Roster but otherwise denied.
Violation of the Unfair and Deceptive Trade Practices Act: The Court determined that the allegations against Defendants in support of Plaintiff’s misappropriation of the Adjuster Roster were sufficient to allege a UDTPA claim and therefore the motion to amend was granted as to this proposed claim.
Veil Piercing: The Court denied the motion to amend as to veil piercing because Plaintiff’s allegations of complete domination and control were conclusory and unsupported by facts.
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Leone v. Leone, 2025 NCBC Order 1 (NC. Super. Ct. Jan. 13, 2025) (Robinson, C.J.)
Key Terms: N.C.G.S. § 7A-45.4(a)(1); opposition to designation; N.C.G.S. § 57D-3-21; N.C.G.S. § 57-D-8-01; breach of fiduciary duties
Plaintiff initiated this action against Defendant Philip Leone asserting that, as equal 50% owners/members of Cleveland Lube and Tune, LLC, Defendant breached its fiduciary, statutory and common law duties under N.C.G.S. § 57D-3-21. Defendants timely filed a notice of designation, asserting that the case meets the criteria for designation under N.C.G.S. § 7A-45.4(a)(1), which permits designation if the action involves a material dispute involving the law governing limited liability companies, including Chapter 57D. Plaintiff opposed designation.
The Court overruled Plaintiff’s opposition finding that designation was proper because Plaintiff alleged that Defendant Leone breached his statutory duties as a manager under N.C.G.S. § 57D-3-21. The Court also rejected Plaintiff’s argument that designation was improper because the action did not contain novel, extraordinary, or complex issues; as the Court has repeatedly stated, designation under N.C.G.S. § 7A-45.4(a)(1) does not require that the issue involve a claim of any particular complexity.
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Hays v. Lewis, 2025 NCBC Order 2 (N.C. Super. Ct. Jan. 21, 2025) (Conrad, J.)
Key Terms: Rule 1.9(a) of the Rules of Professional Conduct; same or substantially related matter
Plaintiff Hays and Defendant Lewis are the two member-managers of Gunnerson Enterprises, LLC, a real estate investment company. Hays initiated this action, asserting direct and derivative claims against Lewis arising from his alleged misconduct relating to Gunnerson. After Lewis engaged Rossabi Law to defend him and Gunnerson in the case, Hays filed a motion to disqualify Rossabi, based on its previous representation of Gunnerson, Hays, and Lewis in other matters. Rossabi withdrew from representing Gunnerson after it was placed in receivership but continued to represent Lewis personally.
The Court granted the motion to disqualify. Absent written consent, Rule 1.9(a) of the Rules of Professional Conduct prohibits a lawyer who has formerly represented a client in a matter from representing another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client. Here, there was no dispute that Rossabi previously represented Hays and Gunnerson or that its representation of Lewis in this case was materially adverse to the interests of Hays and Gunnerson.
The Court determined that Rossabi would have likely obtained confidential information in its prior representation of Hays (in previous matters) and Gunnerson (in the current matter and past matters), which would materially advance Defendant’s position in the current matter, including, for example, Gunnerson’s evaluation of the derivate claims and Hays’ financial condition, business strategy, assessment of the strength of her legal claims, willingness to settle claims, etc. Therefore, the Court granted the motion to disqualify and struck Lewis’s answer and certain other motions and supporting materials filed by Rossabi.
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Daedong-USA, Inc. v. KI Fin., Inc., 2025 NCBC Order 3 (N.C. Super. Ct. Jan. 21, 2025) (Davis, J.)
Key Terms: BCR 10.9 submission; discovery; relevance
In this action, Plaintiff Daedong-USA, Inc. alleged that the C-Suite Defendants and Defendant Dae Kim, who are all former executives or senior employees of Plaintiff, devised a series of self-dealing schemes that were implemented for the purpose of siphoning millions of dollars from the company. This order addressed multiple BCR 10.9 submissions by the parties.
Plaintiff’s BCR 10.9 Submission. Plaintiff sought access to, and answers to interrogatories regarding, the personal financial information of the C-Suite Defendants. Plaintiff argued that such information was necessary to determine if the C-Suite Defendants used an intermediary to conceal their personal financial interest in Defendant KI Finance, which should have been disclosed. The C-Suite Defendant objected to these requests, arguing that Plaintiff failed to articulate a basis for believing that any intermediaries were actually used, and that they had already agreed to produce documents related to any transaction they had with KI Finance, as well as all other documents related to their alleged conflict of interest transactions. The Court agreed with the C-Suite Defendants and denied Plaintiff’s discovery request for the broad personal financial information of the C-Suite Defendants.
C-Suite Defendants’ 10.9 Submission. The C-Suite Defendants sought from Plaintiff evidence relating to (1) intercompany transactions between its parent company and affiliated entities and (2) its parent company’s approval processes for decisions made by its affiliates. Regarding the intercompany transactions, the C-Suite Defendants argued that this information was relevant to their defense because the actions of the parent company contributed to the C-Suite Defendants’ business decisions on behalf of Plaintiff. Plaintiff argued such information was irrelevant to its claims because it only sought damages relating to the C-Suite Defendants’ specific misconduct. The Court agreed with Defendants but found the requests overly broad. Accordingly, the Court ordered the parties to meet and confer to agree on a narrowly-tailored set of specific topics. Regarding evidence of the parent company’s approval process, the Court concluded that the C-Suite Defendants were not entitled to discovery on this topic since their request was based on a misunderstanding of Plaintiff’s allegations.
KI Finance’s 10.9 Submission. KI Finance sought the identities of the board of directors of Plaintiff’s parent company and documents reflecting the parent company’s influence over Plaintiff’s operations. Given the minimal degree of work to produce the identity of the directors and the Court’s inability to determine this information’s relevance based on the current record, the Court ordered Plaintiff to provide the requested identities. The Court also agreed that Defendants were entitled to conduct discovery relating to the parent company’s influence over Plaintiff but determined that the discovery requests at issue were overly broad. Accordingly, the Court ordered the parties to meet and confer to agree on a narrowly-tailored set of specific topics.
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CTS Metrolina, LLC v. Berastain, 2025 NCBC Order 4 (N.C. Super. Ct. Jan. 23, 2025) (Earp, J.)
Key Terms: Rule 15; motion to amend; futility; piercing the corporate veil.
As summarized here, this action involves a dispute arising from the sale of a business and the previous owners’ alleged involvement in a competing business. Defendants Berastain and Moreau (the previous owners) previously answered the complaint and asserted counterclaims against the various CTS Entities. Here, they moved to amend their answer and counterclaims to expand the facts and add two new counterclaim-defendants, Andrew Robertson and Robertson Capital LLC. Plaintiffs opposed the motion on the basis of futility.
Defendants’ proposed amendments alleged that the CTS Entities were all dominated by Robertson, who indirectly owns them through Robertson Capital. Accordingly, Defendants sought to pierce the corporate veil on multiple levels to ultimately hold Robertson personally liable for Defendants’ claims. The Court denied the motion because the proposed amendments did not satisfy the pleading standards and were therefore futile. Defendants’ allegations regarding Robertson’s domination and control over the other entities were conclusory and without factual support.
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Greentouch USA, Inc. v. Lowe’s Cos. Inc., 2025 NCBC Order 5 (N.C. Super. Ct., Jan. 23, 2025) (Davis, J.)
Key Terms: Rule 13(h); joinder; breach of contract; indemnity; jurisdiction
As summarized here, this case relates to a supplier contract between the parties. In addition to pleading its own claims in the complaint, Plaintiff also pleaded claims that had been purportedly assigned to it by HK Greentouch. Defendants answered and asserted counterclaims against both Plaintiff and HK Greentouch for breach of contract and indemnity and alleged that the two entities were under a complete identity of control and that the agreements underlying the counterclaims were entered into by both entities. Defendants then moved to join HK Greentouch as a party under Rule 13(h) of the North Carolina Rules of Civil Procedure, which requires joinder if the purported counterclaim defendant is necessary to grant complete relief and the court can obtain jurisdiction.
The Court concluded that the presence of HK Greentouch was required for the granting of complete relief regarding Defendants’ counterclaims because the breach of contract claim would necessarily involve questions of law and fact common to Plaintiff and HK Greentouch and the indemnification counterclaim would necessarily involve a determination as to Defendants’ ability to obtain relief.
The Court also determined that Defendants’ allegations that HK Greentouch contractually consented to be subject to the jurisdiction of North Carolina’s courts was facially sufficient to satisfy Rule 13(h)’s requirement that a party can only be joined if jurisdiction of them can be obtained.
Lastly, the Court found that Defendants did not need to give notice to HK Greentouch prior to its joinder. Following joinder and service, HK Greentouch would have a full and fair opportunity to assert any arguments it may possess as to whether it should not be a party to this lawsuit, including any jurisdictional arguments. For these reasons, the Court granted the motion.
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Value Health Sols. Inc. v. Pharm. Rsch. Assocs., Inc., 2025 NCBC Order 6 (N.C. Super. Ct. Jan. 27, 2025) (Davis, J.)
Key Terms: motion for leave to file motion for summary judgment, law of the case, doctrine of “prevention.”
Plaintiffs VHS and Raja, VHS’s founder, commenced this suit in 2018, alleging various claims relating to Defendant PRA’s acquisition of VHS and its proprietary Software. The Court previously dismissed certain of Plaintiffs’ claims and later granted summary against Plaintiff on their remaining claims. As summarized here, on appeal, the North Carolina Supreme Court affirmed all but one of the Business Court’s rulings and reversed entry of summary judgment on the issue of PRA’s alleged breach of certain sections of the parties’ Asset Purchase Agreement and remanded such claim for trial. On remand, the Court entered a Supplemental Case Management Order requiring the parties to seek leave of Court prior to filing any new motions for summary judgment. Following a year of supplemental discovery, Defendants moved for leave to file motions for summary judgment on three issues: (i) whether PRA’s internal use of the Software for its customers constitutes an External Sale; (ii) whether a third-party, Takeda Pharmaceuticals, paid any consideration to PRA for a license or right to access the Software; and (iii) whether Plaintiffs are barred by the applicable statute of limitations from claiming that PRA breached the APA by conditioning certain sales of its Software upon completion of certain milestones listed in the APA. Plaintiffs opposed the motion on two grounds: the “law of the case” doctrine based on the Supreme Court’s opinion and the “prevention” doctrine.
Issue 1. The Court held that the law of the case doctrine was inapplicable to the issue of PRA’s internal use because the Supreme Court did not discuss whether PRA’s internal use of the Software could constitute an External Sale.
Issue 2. The Court also determined that the law of the case doctrine did not preclude the filing of a new motion for summary judgment on the issue of whether PRA’s contractual relationship with Takeda constituted an External Sale because the Supreme Court expressly remanded the issue with instructions for the Court to determine this very issue.
Issue 3. The Court held that the law of the case doctrine also did not apply to whether Plaintiffs’ claim that PRA breached Section 2.6(b) of the APA was barred by the statute of limitations because the Supreme Court expressly declined to address the issue since it had not been addressed by the court below.
With regards to the doctrine of prevention, which under Delaware law provides that where a party’s breach by nonperformance contributes materially to the non-occurrence of a condition of one of his duties, the non-occurrence is excused, the Court could not discern any basis by which the doctrine would apply to any of the issues raised.
Accordingly, the Court entered an order permitting Defendants to file their requested motions for summary judgment.
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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.
Posted 01/28/25
By: Lauren Schantz
Maxwell Foods, LLC v. Smithfield Foods, Inc., 2024 NCBC 89 (N.C. Super. Ct. Dec. 30, 2024) (Conrad, J.)
Key Terms: hogs; summary judgment; breach of contract; most-favored-nation clause; output contract; force majeure; Covid-19 pandemic; UCC Article 2; contract interpretation; statute of limitations; repudiation; anticipatory breach; impracticability; good-faith business judgment; offensive summary judgment
As previously summarized here, Plaintiff Maxwell Foods, LLC sold hogs to Defendant Smithfield Foods, Inc. under an output contract with a most-favored-nation (“MFN”) clause for almost three decades. Each side alleged claims for breach of contract, and each side moved for summary judgment. The parties’ arguments focused on three specific provisions: the MFN clause, the output requirement, and whether payment was based on live weight or carcass weight.
MFN Clause. Maxwell first alleged that Smithfield breached the MFN clause by offering better pricing to six of its other suppliers. The Court concluded that the phrase “major swine suppliers” referred only to those suppliers in existence at the time the contract was executed and, therefore, Smithfield was entitled to partial summary judgment on this claim as to four of the six suppliers. The Court declined to adopt Smithfield’s narrow reading of the term “economic benefits,” instead embracing Maxwell’s broader interpretation as it related to various pricing formulas. The Court concluded that Maxwell’s claim for breach of the MFN clause based on pricing terms given to one of the two remaining suppliers was untimely under the UCC’s four-year statute of limitations and granted Smithfield’s motion for summary judgment to that extent. The Court denied Smithfield’s request for summary judgment regarding Smithfield’s compliance with the MFN clause, concluding that genuine issues of material fact about whether Smithfield offered Maxwell comparable pricing terms remained. The Court also rejected Smithfield’s arguments that Maxwell relied on impermissible hindsight and that the MFN clause did not require Smithfield to pay Maxwell the price it paid to other suppliers for Maxwell’s (allegedly) lower-quality hogs.
Output Requirement. The Court granted summary judgment in favor of Maxwell as to Smithfield’s affirmative defense of force majeure, concluding that no physical, contractual, or legal limitation made it impracticable for Smithfield to comply with the contract’s output requirement during the Covid-19 pandemic. The Court also granted Maxwell’s motion as to Smithfield’s counterclaims and affirmative defense of anticipatory breach, determining that Maxwell’s decision to go out of business was based on a good-faith business judgment and did not constitute a repudiation or termination of the contract without notice. Based on the Court’s prior rulings, the Court concluded that Maxwell was entitled to offensive summary judgment on its claim against Smithfield for breach of the output provision (and denied Smithfield’s related cross-motion).
Payment for Hog Deliveries. The Court concluded that Smithfield was entitled to summary judgment on Maxwell’s breach of contract claim to the extent that Maxwell alleged that a price based on live weight constituted a breach, but the Court further concluded that Smithfield was not entitled to summary judgment on the breach of contract claim to the extent Maxwell alleged Smithfield failed to pay full price based on live weight for particular deliveries.
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Vincelette v. Court, 2024 NCBC Order 77 (N.C. Super. Ct. Oct. 8, 2024) (Bledsoe, C.J.)
Key Terms: disqualify counsel; North Carolina Rule of Professional Conduct 1.9(a); former client; confidentiality; substantially related matter; materially adverse; engagement letter; scope of representation
Plaintiff Amy Vincelette and Defendant Melissa Peirce were 50/50 owners of Wellspring Group, Inc. Vincelette and Peirce later joined with Defendant Kelly Court to start Defendant Wellspring Nurse Source, LLC. In 2020, Vincelette, on behalf of Wellspring, and Vincelette and Court, on behalf of Nurse Source, brought suit against Peirce and her husband, asserting various claims arising from the Peirces’ alleged improper transfers of Wellspring and Nurse Source’s funds (the “Prior Litigation”).
Vincelette retained Moore & Van Allen, PLLC to represent Wellspring and Nurse Source in the Prior Litigation. Vincelette also retained MVA to represent her in her capacity as owner of Wellspring and member-manager of Nurse Source. MVA and counsel for the Peirces negotiated a settlement agreement in the Prior Litigation. Pursuant to the agreement, Peirce was supposed to relinquish her ownership interests in Wellspring and Nurse Source, but Vincelette alleges that Peirce failed to relinquish her interest in Nurse Source. This litigation followed.
In this action, Vincelette brought derivative claims on behalf of Nurse Source against Court and Peirce, direct claims against Court and Peirce, and direct claims against Nurse Source. After Vincelette retained MVA to represent her in the second action, Defendants moved to disqualify MVA under North Carolina Rule of Professional Conduct 1.9(a).
Applying the three-pronged test established by the Supreme Court of North Carolina, the Court concluded that (1) the attorney-client relationship between Nurse Source and MVA in the Prior Litigation was one in which confidential information was shared; (2) this action involved matters that were substantially related to those in the Prior Litigation—namely, the alleged improper intercompany transfers by the Peirces and the settlement agreement negotiated by MVA—such that the confidential information shared in the Prior Litigation was material to this action; and (3) Vincelette’s interests were materially adverse to those of Nurse Source. The Court granted Defendants’ motion and disqualified MVA from representing Vincelette in this action.
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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.
Posted 01/14/25
By: Ashley Oldfield and Austin Webber
In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments), 2024 NCBC 83 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: receivership; N.C.G.S. § 1-507.6; Rule 12(b)(1); Rule 12(h)(3); subject matter jurisdiction
This action represents a long-running group of cases involving numerous parties. On 28 April 2016, the Court appointed a Receiver for JDPW Trust and contemporaneously approved a settlement between the Receiver and Plaintiff NFI, which settlement allowed, inter alia, NFI’s $2.1 million claim against JDPW Trust. Eight years later, Defendant Harris moved to dismiss NFI’s claim for lack of subject matter jurisdiction.
Relying on N.C.G.S. § 1-507.6, which provides that “all claims against an insolvent corporation must be presented to the receiver,” Harris argued that because NFI did not re-assert its claim after the Receiver was appointed, the Court never obtained jurisdiction over the claim and therefore the Court’s approval of the claim was void. The Court disagreed and denied the motion. There was no dispute that the Court had subject matter jurisdiction over the claim when the action was initially filed; thus, since a court retains jurisdiction once acquired, the subsequent appointment of the Receiver did not divest the Court of jurisdiction. Harris’s other contentions were similarly without merit. The Court certified the order as a final judgment pursuant to Rule 54(b) to permit immediate appellate review.
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In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments), 2024 NCBC 84 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: Rule 54(b); motion for reconsideration; clear error
This action represents a long-running group of cases involving numerous parties. Here, Defendant Harris moved for reconsideration, pursuant to Rule 54(b), of various rulings made by the Court in orders entered in 2016 and 2022. Harris argued that the rulings constituted clear error.
The Court denied the motion, concluding that Harris’s arguments were merely a repackaging of previous arguments that the Court had already considered and rejected. The Court certified the order as a final judgment pursuant to Rule 54(b) to permit immediate appellate review.
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In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments), 2024 NCBC 85 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: accounting proceeding; master in equity; right to a jury trial; North Carolina Constitution
This action represents a long-running group of cases involving numerous parties. As relevant here, the Court had previously determined that Defendant Doug Harris had breached his fiduciary duty as trustee of JDPW and ordered him to provide an accounting. After Harris filed his accounting, the Court noticed an evidentiary hearing in which it would sit as a master in equity to consider the accounting and the objections thereto. Here, the Court addressed Harris’s contention that he was entitled to a jury trial on all factual issues remaining in the cases, including in the accounting proceeding.
With regard to the accounting proceeding, the Court rejected Harris’s argument that he was entitled to a jury trial under the North Carolina Constitution. The North Carolina Supreme Court has long held that the constitutional right to a jury trial exists only where it existed at the time the Constitution was adopted in 1868. Since the right to a jury trial in an accounting proceeding did not exist in 1868, Harris did not have a constitutional right to a jury trial now.
Regarding the remaining “issues,” the Court also determined that a jury trial was not warranted because the issues raised were either irrelevant, immaterial, or had already been decided by settlement or on summary judgment. The Court certified the order as a final judgment pursuant to Rule 54(b) to permit immediate appellate review.
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In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments); In re The Foreclosure of Deed of Tr. Executed by Historic Castle McCulloch, LLC Dated September 30, 2004, 2024 NCBC 86 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: foreclosure proceeding; power of sale; deed of trust; clerk of court; valid debt; N.C.G.S. § 45-21; de novo hearing; statute of limitations; holder in due course
This action represents a long-running group of cases involving numerous parties. As relevant here, the JDPW Receiver previously initiated a non-judicial foreclosure proceeding to exercise the power of sale in a deed of trust on the Castle McCulloch Property which secured a promissory note held by JDPW. Following a hearing, the clerk of court entered an order denying foreclosure on the ground that the Receiver did not hold a valid debt. The Receiver appealed and the Court held a de novo evidentiary hearing.
The Court concluded that JDPW had satisfied the criteria to establish a prima facie right to foreclose under N.C.G.S. § 45-21. Historic Castle McCulloch LLC (“HCM”), the owner of the Castle McCulloch Property, opposed the foreclosure. HCM first argued that the 2012 payment to the bank on behalf of JDPW paid off, rather than purchased, the note. The Court found that the documentary evidence did not support this argument. HCM also argued that the foreclosure was barred by the 10-year statute of limitations for foreclosure by power of sale because the foreclosure action was not filed until more than ten years after the note transactions at issue. The Court disagreed. To qualify as a holder in due course of an instrument, the holder must take the instrument in good faith. Since the transactions involving the instruments were undertaken by Doug Harris (the initial trustee for JDPW) for the benefit of himself and his brother, rather than for JDPW’s benefit, the Court concluded that there was no holder in due course of the instruments until the Court set aside certain transactions in 2021. Thus, the commencement of the foreclosure action in 2023 was within the statute of limitations because the statute of limitations did not run while there was no good faith holder of the instruments. HCM’s remaining arguments were equitable based and therefore not properly considered in a foreclosure proceeding.
Accordingly, the Court reversed the clerk of court and authorized the foreclosure to proceed. The Court certified the order as a final judgment pursuant to Rule 54(b) to permit immediate appellate review.
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In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments); In re The Foreclosure of Deed of Tr. Executed by Historic Castle McCulloch, LLC Dated September 30, 2004, 2024 NCBC 87 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: accounting; master in equity; breach of duty as trustee; damages; final judgment
This action represents a long-running group of cases involving numerous parties. As relevant here, the Court had previously determined that Defendant Doug Harris had breached his fiduciary duty as trustee of JDPW and ordered him to provide an accounting. Harris thereafter filed his accounting, which effectively stated that while he was trustee, JDPW did not hold any funds or property, had no receipts or income, and made no disbursements. The JDPW Receiver and the Nivison Parties objected to the accounting, contending that Harris failed to account for four notes obtained by JDPW. The Court conducted an evidentiary hearing in which it sat as a master in equity to consider the accounting and the objections thereto.
The Court entered findings of fact as follows: 1) that in 2012, JDPW, acting through its trustee Doug Harris, purchased four notes (the CM Note and the CCSEA Notes) from the bank, which purchase was funded by a loan from the Nivison Parties; 2) that Doug Harris never intended to (and made no effort to) collect on the notes for the benefit of JDPW, but instead intended to use his position as trustee of JDPW over the notes, the other instruments, and the collateral for the benefit of his brother and his brother’s companies; 3) that Doug Harris thereafter transferred the CM Note and related documents and collateral to his brother, pursuant to which JDPW lost all rights thereto but remained obligated on the loan from the Nivison Parties; and 4) that Doug Harris failed to account for these transactions in his accounting. The Court concluded that Doug Harris’s actions described above were a breach of his duty to JDPW, that these actions damaged JDPW, and that Doug Harris failed to properly account for JDPW’s assets during the time he was trustee. The Court adopted one of the Receiver’s proposed damages theories and entered judgment against Doug Harris for approximately $7 million. The Court certified the order as a final judgment pursuant to Rule 54(b) to permit immediate appellate review.
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In re Se. Eye Ctr. (Pending Matters); In re Se. Eye Ctr. (Judgments); In re The Foreclosure of Deed of Tr. Executed by Historic Castle McCulloch, LLC Dated September 30, 2004, 2024 NCBC 88 (N.C. Super. Ct. Dec. 19, 2024) (Bledsoe, C.J.)
Key Terms: summary judgment; notice pleading; aiding and abetting breach of fiduciary duty; agency relationship
This action represents a long-running group of cases involving numerous parties. Here, the Court addressed the Castle McCulloch Defendants’ motion for summary judgment on paragraph 504 of the JDPW Receiver’s 8th cross claim and the Receiver’s motion for summary judgment on several of JDPW’s cross claims which purportedly sought to hold the Castle McCulloch Defendants liable for Doug Harris’s breach of fiduciary duty as trustee of JDPW.
Regarding JDPW’s fourth and sixth cross claims, which sought relief based on Doug Harris’s breach of duty as trustee, the Court denied summary judgment because those cross claims failed to mention the Castle McCulloch Defendants and therefore failed to put them on notice of their potential liability.
Regarding paragraph 504 of JDPW’s eighth cross claim, which sought to hold the Castle McCulloch Defendants liable for aiding and abetting Doug Harris’s breach of duty, the Court granted the Castle McCulloch Defendants’ motion and dismissed the claim with prejudice. First, North Carolina does not recognize a claim for aiding and abetting a breach of fiduciary duty. And second, notwithstanding the Receiver’s arguments to the contrary, the allegations that the Castle McCulloch Defendants aided Doug Harris and accepted benefits from his breach were not sufficient to allege an agency relationship by which liability could attach to the Castle McCulloch Defendants.
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Cherry v. Mauck, 2024 NCBC Order 75 (N.C. Super. Ct. Dec. 18, 2024) (Conrad, J.)
Key Terms: preliminary injunction; breach of contract; LLC operating agreement; unauthorized distribution; unclean hands
This case arose out of management disputes in two family businesses, AJAL Investments, LLC and C-Gas, LLC. As relevant here, in 2013 and pursuant to the companies’ operating agreements, Plaintiff Jay Cherry and Defendant Armistead Mauck agreed that the companies would make regular distributions to their families. However, after Armistead continued making distributions after Jay withdrew his consent, Plaintiffs filed suit and moved for a preliminary injunction seeking to bar Armistead from making future distributions and to force him to return the unauthorized distributions.
The Court granted the motion. The Court held that Plaintiffs were likely to succeed on the merits of their claim for breach of the companies’ operating agreements. Both operating agreements gave the members the right to decide when and whether to distribute company cash, and absent approval of a majority of the members, the managers of each respective company had no authority to make distributions. The Court rejected Armistead’s argument that majority approval to distribute company cash was established in 2013, and that the parties must continue distributing company cash accordingly until a vote of the majority of members altered this arrangement. As the Court explained, consent at one time is not consent for all time; under the operating agreements, Plaintiffs had the right to veto any proposed distributions at any time.
The Court also held that Plaintiffs had shown a likelihood of irreparable harm because without an injunction, Armistead would continue to make unauthorized distributions depriving Plaintiffs of their contractual rights to participate in management decisions. Additionally, the nature of such unauthorized distributions was of such a continuous and frequent recurrence that no reasonable redress could be had in a court of law. Lastly, the Court held that the grant of an injunction outweighed any potential harm to Armistead. While Plaintiffs may have unclean hands based on other conduct, the harm caused was not personal to Armistead, and the defense of unclean hands is only available to a party injured by the alleged wrongful conduct.
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Gordon v. Gordon Recyclers, Inc., 2024 NCBC Order 76 (N.C. Super. Ct. Dec. 18, 2024) (Davis, J.)
Key Terms: preliminary injunction; irreparable harm; shareholder meeting; notice of meeting; non-voting shareholder rights; articles of incorporation; bylaws; N.C.G.S. § 55-2-06
Plaintiff is a non-voting minority shareholder in Defendants GRI and GII. After Defendants refused to provide Plaintiff with either notice of, or the opportunity to attend, shareholders’ meetings, Plaintiff brought suit seeking a judgment declaring his rights as a shareholder regarding meetings. Plaintiff moved for a preliminary injunction enjoining Defendants from holding shareholder meetings unless they provided notice to Plaintiff and allowed him to attend.
Defendants opposed the injunctive relief arguing that their bylaws made clear that only voting shareholders are entitled to notice and attendance regarding shareholder meetings. Because N.C.G.S. § 55-2-06(b) only allows bylaws to contain provisions which are “not inconsistent with law or the articles of incorporation,” the Court began by examining the articles of incorporation and bylaws of each company. Regarding GRI, although the bylaws only required that notice of meetings be given to voting shareholders, the articles of incorporation provided that the rights of shareholders were identical in all respects, except as to voting. Accordingly, since the articles of incorporation provided non-voting shareholders the same right to receive notice of, and attend, meetings as a voting shareholder, any provision in the bylaws purporting to take away such right could not be given effect. In contrast, since GII’s articles of incorporation did not provide for identical rights among shareholders and its bylaws were not otherwise inconsistent with law, the bylaw provision requiring notice only to voting shareholders controlled. Thus, Plaintiff had shown a likelihood of success on the merits as to GRI, but not as to GII.
The Court next determined that Plaintiff had met his burden to show irreparable harm. Plaintiff’s receipt of the desired information regarding GRI’s financial condition was not a valid substitute for attending shareholders’ meetings. And, once Plaintiff was denied the right to attend the next meeting, that right would be gone forever.
Lastly, the Court concluded that the balancing of the equities weighed in favor of injunctive relief and dispensed with any bond requirement. Plaintiff had shown that a denial of his right to attend GRI shareholders’ meetings during the pendency of the litigation would irreparably deprive him of a right he appeared entitled to possess and GRI failed to show any harm it would incur as a result of an injunction.
For the foregoing reasons, the Court granted the injunction as against GRI.
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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.
Posted 12/31/24
By: Rachel Brinson, Ashley Oldfield, and Natalie Kutcher
Howard v. IOMAXIS, LLC, 2024 NCBC 76 (N.C. Super. Ct. Nov. 27, 2024) (Earp, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); Rule 12(b)(2); Rule 12(b)(1); specific jurisdiction; corporate successors; successor jurisdiction; standing; breach of contract; breach of covenant of good faith and fair dealing; fraud; UVTA
As previously summarized here, this action involves a dispute between the Ronald E. Howard Revocable Trust (a purported 51% economic interest holder in IOMAXIS) and the IOMAXIS members regarding the Trust’s right to the economic benefits from its interest. The Court considered the Defendants’ motions to dismiss challenging the Court’s jurisdiction over two of the parties, the Plaintiffs’ standing, and the sufficiency of the claims pleaded.
12(b)(2)
The Court first addressed Burleson and Five Insight’s motion to dismiss for lack of personal jurisdiction. The burden was on Plaintiff to establish the Court’s personal jurisdiction over the parties by a preponderance of the evidence.
Burleson. Determining that jurisdiction over Burleson depended on his own contacts with North Carolina, whether in his individual or corporate capacity and utilizing the Calder effects test, the Court concluded that the nature of Burleson’s contacts, the connection between those contacts and the harm the Plaintiff, a North Carolina trust, allegedly suffered and continues to suffer, and North Carolina’s interest in protecting its citizens from tortious acts, were sufficient to satisfy due process requirements and to subject Burleson to the jurisdiction of the Court. The Court denied Burleson’s motion to dismiss on personal jurisdiction grounds.
Five Insights. Five Insights contended that the Court lacked jurisdiction over it because it is a Delaware limited liability company without systematic or continuous connections to North Carolina. Plaintiffs responded that the Court had specific jurisdiction over Five Insights because each of IOMAXIS’s owners traded his ownership interest for an ownership interest in Five Insights, effectively making Five Insights IOMAXIS’s successor-in-interest. Therefore, Plaintiffs argued, IOMAXIS’s contacts with the state of North Carolina should be imputed to Five Insights.
Holding that Five Insights exercised control over IOMAXIS’s assets and was profiting from them to the exclusion of the North Carolina Trust, the Court determined Five Insights was subject both to personal jurisdiction under a successor theory and based on the factors of the Calder effects test. The Court therefore denied its motion to dismiss based on personal jurisdiction.
12(b)(1)
Because the Court considered matters outside the pleadings in reaching its decision on the motion to dismiss for lack of standing, the Court analyzed the motion pursuant to Rule 12(b)(1) rather than 12(b)(6). In short, Moving Defendants argued that the Trust lacked standing to sue because (a) newly discovered evidence establishes that the Texas Operating Agreement, not the North Carolina Operating Agreement, controlled, and (b) the Estate’s transfer of Mr. Howard’s interest to the Trust in accordance with the terms of Mr. Howard’s Will was not ratified by Buhr, IOMAXIS’s manager, in accordance with the Texas Operating Agreement. With respect to the N.C. Operating Agreement, the Moving Defendants’ standing argument reprises arguments the Court had previously considered and rejected. The newly discovered evidence did not change that result. Accordingly, the Court denied the motion to dismiss challenging Plaintiff’s standing, determining that Plaintiff had sufficiently alleged standing based on the evidence currently before the Court.
12(b)(6)
Breach of Buy-Sell Agreement. Finding that failure to timely exercise the purchase option in the N.C. Operating Agreement terminated the buy-sell provision and therefore such a provision could not then be breached, the Court held that Plaintiffs failed to state a claim to the extent Plaintiffs alleged that IOMAXIS and/or its members breached the buy-sell provisions of the N.C. Operating Agreement by failing to give timely notice of their election to exercise an option to purchase Mr. Howard’s interest. The Court granted the motion to this extent, but denied it with respect to the alleged breach by IOMAXIS to retain RSM to value Mr. Howard’s interest pursuant to the N.C. Operating Agreement.
Good Faith and Fair Dealing. The Court further found that Plaintiffs’ allegations that IOMAXIS failed to pay distributions to the Trust as an economic interest holder and instead improperly paid the Trust’s share of distributions to the IOMAXIS Defendants supported a claim for breach of the implied covenant of good faith and fair dealing in the N.C. Operating Agreement.
Fraudulent Concealment. IOMAXIS argued that the Trust’s fraudulent concealment claim should be dismissed because (1) the Trust has not sufficiently alleged a duty to disclose or detrimental reliance; and (2) the Trust lacks standing to assert fraud claims because they are derivative in nature. Plaintiffs responded that this Court has already determined that the fraudulent concealment claim is direct, not derivative, and that the allegations in the Second Amended Complaint sufficiently plead both a duty to disclose and detrimental reliance. Finding that Plaintiffs alleged that the Trust had been harmed, not IOMAXIS itself or other defendants claiming an interest in IOMAXIS, and that Plaintiffs sufficiently pleaded a duty to disclose, the Court denied the motion to dismiss the fraudulent concealment claim.
UVTA. Since there were no allegations that any of the IOMAXIS Defendants or Five Insights were located in North Carolina when an allegedly voidable transfer was made or obligation incurred, the Court found that the allegations did not establish that they were debtors under the North Carolina UVTA and therefore dismissed the claim (except as to Defendant Spade because the complaint alleged he was a North Carolina resident during the relevant period).
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VIP Universal Med. Ins. Grp., Ltd v. Trinity Comput. Servs., Inc., 2024 NCBC 77 (N.C. Super. Ct. Dec. 5, 2024) (Earp, J.)
Key Terms: motion for judgment on the pleadings; Rule 12(c); breach of contract; software agreement; negligence; punitive damages; attorneys’ fees; declaratory judgment
The parties entered into a contract wherein Defendant was to provide a certain on-line clinical workflow system to Plaintiff in exchange for payment. Dissatisfied with many aspects of Defendant’s software services, Plaintiff terminated the contract and filed this action. Following the hearing on Defendant’s motion for judgment on the pleadings, Plaintiff voluntarily dismissed certain claims, leaving the Court only to determine the claims set forth below.
Negligence, Punitive Damages, Attorneys’ Fees. Plaintiff conceded it did not assert a claim for negligence therefore the Court denied the motion as moot. Since Plaintiff had voluntarily dismissed its tort claims, the Court found any claims for punitive damages without merit. Lastly, the Court denied Defendant’s motion with respect to Plaintiff’s request for attorneys’ fees finding dismissal premature.
Declaratory Judgment. Plaintiff’s declaratory judgment claim sought a declaration that the Termination Fee set forth in the contract was not owed because (1) Defendant materially breached the contract and (2) it was an unenforceable penalty and not a permissible liquidated damages clause. The Court determined that the plain language of the contract established that the Termination Fee is triggered only when Defendant has not breached the agreement, but Plaintiff nevertheless wishes to be released from its contractual obligations. The Court found that Plaintiff stated a claim for declaratory judgment to the extent it seeks a declaration that the Termination Fee is not owed due to Defendant’s material breach of contract and denied Defendant’s motion related thereto. However, finding that the Termination Fee provision was not intended to be a liquidated damages provision at all, let alone an unenforceable one, the Court granted Defendant’s motion relating to the declaratory judgment claim to that extent.
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Stein v. MH Master Holdings, LLLP, 2024 NCBC 78 (N.C. Super. Ct. Dec. 6, 2024) (Earp, J.)
Key Terms: motion to dismiss; attorneys’ fees; sovereign immunity; Rule 12(b)(2); personal jurisdiction; waiver of sovereign immunity; advisory opinion; declaratory judgment; defensive mirror
The Attorney General brought this action on behalf of and in the name of Dogwood Health Trust, a nonprofit corporation, relating to an asset purchase agreement memorializing Defendant’s acquisition of Mission Health, a hospital system serving western North Carolina. Pursuant to the APA, the Attorney General was granted contractual enforcement rights under certain circumstances and filed this action alleging that Defendant violated the APA by failing to provide the requisite level of emergency and trauma care and oncology services. Defendant filed counterclaims seeking opposite declaratory judgments. Plaintiff moved to dismiss the counterclaims for lack of jurisdiction on sovereign immunity grounds and moved to dismiss Defendant’s request for attorneys’ fees pursuant to Rule 12(b)(6).
Defendant argued sovereign immunity did not apply because the Attorney General brought this action as a third-party beneficiary to the APA rather than in his official capacity as North Carolina’s chief law enforcement officer. The Court disagreed, finding that Mr. Stein has been sued in his official capacity and was entitled to sovereign immunity, unless that immunity had been waived. Finding no express waiver of sovereign immunity, the Court analyzed an implicit waiver of sovereign immunity by the State becoming a signatory to a private contract. Finding that the State has not undertaken an obligation that it was trying to avoid by claiming immunity from suit in this case, the Court found no implicit waiver of immunity resulting from the contract. The Court also rejected Defendant’s arguments that sovereign immunity was waived because the claims at issue sought declarations of the parties’ rights and obligations under the APA. The Court determined that the Defendant’s declaratory judgment counterclaims were mere denials of Plaintiff’s claims and attempts to elicit improper advisory opinions from the Court. The Court granted Plaintiff’s motion to dismiss Defendant’s counterclaims on the basis of sovereign immunity and lack of in personam jurisdiction.
Plaintiff also sought dismissal of Defendant’s request for attorneys’ fees pursuant to Rule 12(b)(6); however, the Court determined that the issue was not ripe for determination at this stage of the proceedings and denied dismissal.
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Window World of Baton Rouge, LLC v. Window World, Inc.; Window World of St.
Louis, Inc. v. Window World, Inc., 2024 NCBC 79 (N.C. Super. Ct. Nov. 26, 2024) (Bledsoe, C.J.)
Key Terms: cross motions for summary judgment; choice of law; declaratory judgment; franchisee; franchise agreement; licensing agreement; recission; franchise disclosure laws; fraud; continuing wrong doctrine; Franchise Rule; negligent misrepresentation; Federal Trade Commission Act; contract reformation; unfair and deceptive trade practices; N.C.G.S. § 75-1.1; lex loci; fraudulent transfer; N.C.G.S. §§ 39-23.4(a)(1) and 39-23.4(a)(2); piercing the corporate veil; damages calculations
Plaintiffs, franchisees of Defendant Window World (“WW”) brought suit in 2015, alleging, inter alia, WW’s fraudulent concealment of information relating to its status as a franchise. Defendants sought summary judgment on Plaintiffs’ causes of action for two declaratory judgments regarding the agreements between the parties, fraud, and negligent misrepresentation. Plaintiffs, in their cross-motion, sought offensive summary judgment on their negligent misrepresentation and fraud-based claims.
Fraud. Plaintiffs allege that WW failed to disclose, and in fact concealed, information from Plaintiffs to induce them to operate as Window World franchisees, assume debt owed by prior franchisees, continue to operate as WW franchisees, pay substantial amounts advertising WW trademarks, and make purchases from various suppliers. Plaintiffs contended WW committed fraud in at least five distinct ways:
(1) grossly misrepresenting the royalties or ‘rebates’ Plaintiffs would pay through WW-designated suppliers to WW to do business as WW dealers;
The Court granted summary judgment in favor of Defendants as to those Plaintiffs which failed to provide substantial evidence of a false representation of a material fact relating to the rebate amount. As to the other Plaintiffs, the Court found that they had met their burden to survive summary judgment by providing substantial evidence to support a conclusion that WW misrepresented the rebate amounts these Plaintiffs would pay to Window World, that such misrepresentations were material and intentional, and that a reasonable factfinder could conclude Plaintiffs were harmed in an amount equal to the difference between the rebates promised and the rebates paid. The Court also denied summary judgment based on the statute of limitations finding that a genuine issue remained regarding when Plaintiffs discovered the fraud.
(2) falsely promising that Plaintiffs would receive best pricing on the products they purchased from WW-designated suppliers;
Similarly to the previous theory, the Court granted summary judgment against those Plaintiffs who failed to forecast substantial evidence that Defendants made a false representation concerning best pricing. The Court otherwise denied the cross-motions for summary judgment on this theory, finding triable issues of fact. The Court also largely denied Defendants’ motion related to the statute of limitations finding that Plaintiffs provided substantial evidence that most of them did not discover the facts constituting fraud as it relates to best pricing until after the lawsuit was filed.
(3) knowingly concealing material facts it was legally-bound to disclose under franchise and other law;
Considering the continuing wrong doctrine’s impact on the statute of limitations, the Court found, as it did at the motion to dismiss stage, that Plaintiffs provided substantial evidence to support a finding that many of WW’s wrongful acts are demonstrably continued wrongs, most particularly WW’s repeated breaches of its pricing and rebate promises. Thus, Defendants’ motion on statute of limitation grounds was denied. The Court otherwise denied the cross-motions as well; although Plaintiffs provided substantial evidence that WW made incomplete and inaccurate disclosures, material issues of fact remained.
(4) falsely disclaiming application of franchise law in the licensing agreements it presented to Plaintiffs to sign after June 2008; and
The Court granted Defendants’ motion as it pertained to this theory because the facts were clear that the disclaimer did not factor into any Plaintiff’s decision to join or remain a part of the Window World system since they all conceded that they either did not read the Licensing Agreements, did not seek legal advice, or did not understand what it meant to be a franchisee.
(5) in 2009, misrepresenting increases in the already-fraudulent rebates Plaintiffs paid.
The Court granted Defendants’ motion as it pertained to this theory because Plaintiffs failed to produce substantial evidence explaining what injury purportedly follows from the alleged misrepresentation.
Negligent Misrepresentation. The Court dismissed this claim because it was solely based upon a failure to disclose information and not on an affirmative misrepresentation, as required to state a negligent misrepresentation claim. The Court further rejected Plaintiffs’ arguments in their briefing that their fraud theories applied to their negligent misrepresentation claim because they did not assert those affirmative misrepresentation theories in any of their three complaints.
Declaratory Judgment. Plaintiffs sought two declaratory judgments: first, that all prior written Licensing Agreements between the parties were null, invalid, and unenforceable against Plaintiffs; and second, that they have the right to continue to operate on the same terms established by the parties’ course of dealings that existed independent of any prior written Licensing Agreements or Franchise Agreement.
Plaintiffs alleged several theories for their first D/J claim: 1) that the written agreements were unenforceable because the object of the agreement was illegal and the enforcement of them would be against public policy as expressed in the Franchise Disclosure Rule; 2) they were unenforceable because they were induced by fraud; and 3) they were unenforceable because they arose from adhesionary contracts. The Court disagreed with Plaintiffs’ first theories, concluding that a violation of the disclosure requirements of the Rule did not provide the basis to render a subsequent agreement void as illegal or contrary to public policy, because to do so would essentially allow a plaintiff to circumvent the bar on private actions to enforce the FTCA and create a private right of action under section 5. Regarding the second theory, the Court had already determined that genuine issues of material fact existed regarding whether Plaintiffs were fraudulently induced to contract with WW. Regarding the third theory, the Court concluded that there were competing proofs concerning procedural and substantive unconscionability regarding the Licensing Agreements that could not be resolved on summary judgment and must be resolved by a jury. Accordingly, the Court granted Defendants’ motion and dismissed the first declaratory judgment claim to the extent it was based on Plaintiffs’ illegality and public policy theories, but otherwise denied it.
As to the second D/J claim, the Court denied summary judgment because genuine issues of material fact existed at least regarding whether the written agreements were null, invalid, and unenforceable because they were induced by WW’s fraud.
Reformation and Injunction. Plaintiffs sought various injunctive relief and to reform the prior Licensing Agreements and Franchise Agreements to reflect the actual meeting of the minds between the parties as reflected in the parties’ course of dealings. Defendants argued that the written agreements were enforceable as a matter of law and controlled the parties’ relationship. The Court found that Plaintiffs offered sufficient evidence to show at least a genuine issue of material fact as to each element of their claim for reformation and injunction and denied Defendants’ motion for summary judgment on these claims.
Breach of Contract. Finding sufficient evidence of the parties’ competing views that either the written agreements or the oral agreements and course of dealings formed the contract between the parties and sufficient evidence of Defendants’ breach of the contractual best pricing promise, the Court denied Defendants’ motion for summary judgment on the breach of contract claims except as to the Jones/Shumate Plaintiffs, which it granted.
Breach of Covenant of Good Faith and Fair Dealing. The Court denied Defendants’ motion on Plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing in the same manner and to the same extent as the Court denied Defendants’ motion on Plaintiffs’ breach of contract claim, and granted them to the same extent as against the Jones/Shumate Plaintiffs.
Unjust Enrichment. Defendants argued that they were entitled to summary judgment on Plaintiffs’ unjust enrichment claim due to the existence of an express contract. However, since Plaintiffs had provided substantial evidence that the written Licensing Agreements were induced by Window World’s fraud and thereby void and unenforceable and since genuine issues of material fact remained concerning whether a valid contract, whether it be oral or written, was in effect between the parties, the Court determined summary judgment was inappropriate.
Unfair and Deceptive Trade Practices. Applying the lex loci test and finding that Plaintiffs failed to provide evidence of injury or business operations in North Carolina as required to prevail on a NC UDTP claim, the Court granted summary judgment for Ms. Whitworth and Defendants, and denied summary judgment for Plaintiffs, on Plaintiffs’ section 75-1.1 claim.
Fraudulent Transfer. Plaintiffs alleged that WW transferred all its intellectual property assets, including but not limited to WW trademarks, to an insider, WWI, with the intent to hinder, delay or defraud Plaintiffs, and other current or future creditors and therefore that Plaintiffs were entitled to avoidance of WW’s transfers to WWI to the extent necessary to satisfy Plaintiff’s claims. Finding that the Non-Tolling Plaintiffs’ fraudulent transfer claims were barred by the statute of repose and not permitting those Plaintiffs to raise a new theory of their fraudulent transfer claim at the summary judgment stage, the Court entered summary judgment against the Non-Tolling Plaintiffs on their fraudulent transfer claims under section 39-23.4(a)(1).
As to the Tolling Plaintiffs fraudulent transfer claims, the Court found that they had provided sufficient evidence to permit a reasonable jury to conclude that the 2010 Transfer was made with intent to hinder, delay, or defraud any creditor of the debtor and thus in violation of section 39-23.4(a)(1). The Court further determined that a genuine dispute of material fact remained as to whether WW received a reasonably equivalent value in exchange for the 2010 Transfer and whether WW’s remaining assets were ‘unreasonably small’ at the time of the transfer. Thus, the Court denied the cross motions for summary judgment on the Tolling Plaintiffs’ fraudulent transfer claims under sections 39-23.4(a)(1) and (2).
Alter Ego/Piercing the Corporate Veil. Plaintiffs contended that 1) Window World and Window World I were alter egos; and 2) they were entitled to pierce the corporate veil between Ms. Whitworth and Window World. Finding that Plaintiffs had produced sufficient evidence at the summary judgment stage to sustain their claim that Window World and WWI were alter egos, the Court denied the parties’ cross-motions on Plaintiffs’ claim that Window World and WWI are alter egos and on the Tolling Plaintiffs’ claims against WWI under sections 39-23.4(a)(1) and (a)(2).
Finding that Plaintiffs failed to product substantial evidence of complete domination over Window World or the other disputed transactions by Ms. Whitworth, and that Defendants offered undisputed evidence that she did not have complete dominion over Window World, the Court granted Defendants’ motion and dismissed Plaintiffs’ veil piercing claim against Ms. Whitworth. Accordingly, the Court found that the Tolling Plaintiffs’ claims against Ms. Whitworth under sections 39-23.4(a)(1) and (a)(2) claims were time-barred by the applicable statute of repose.
Plaintiffs’ Damages Calculations. The Court denied Plaintiffs’ offensive summary judgment motion on their alleged rebate overpayment and best pricing damages because they had not met their burden of proof and shown no gaps or inconsistencies in their evidence. Plaintiffs’ testimony varied significantly concerning the rebate and best pricing representations and how Plaintiffs understood those representations.
Defendants’ Counterclaims. Plaintiffs sought summary judgment on each of Defendants’ counterclaims seeking declarations regarding the Licensing Agreements. Having already determined the existence of genuine issues of material fact precluding summary judgment for any party on the validity and enforceability of the Licensing Agreements, the Court denied Plaintiffs’ summary judgment motion on Defendants’ counterclaims.
WW’s and Ms. Whitworth’s Additional Defenses. Determining that Defendants did not address Plaintiffs’ arguments with respect to Defendants’ affirmative defenses that Plaintiff attacked in its summary judgment briefing, the Court granted Plaintiffs’ motion with respect thereto.
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Pathos Ethos, Inc. v. Braintap Inc., 2024 NCBC 80 (N.C. Super. Ct. Dec. 9, 2024) (Davis, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); Rule 12(b)(1); subject matter jurisdiction; exclusive jurisdiction; Del. Code Ann. tit. 8, § 205; Delaware Court of Chancery; UDTPA; Securities Exemption; breach of contract; aggravating circumstances
Plaintiff Pathos Ethos, Inc. and Defendant Braintap Inc. entered into various contracts wherein Pathos was to perform certain product development and software engineering services related to Braintap’s mobile application. Disputes arose among the parties and Pathos brought this action. Here, the Court considered the Plaintiff’s and Third-Party Defendant’s motions to dismiss challenging Braintap’s counterclaims and third-party claims for lack of subject matter jurisdiction. Plaintiff also moved to dismiss Defendant’s counterclaim for unfair and deceptive trade practices pursuant to Rule 12(b)(6).
12(b)(1). Braintap is a Delaware corporation and Pathos and Third-Party Defendant, Zaldastani, Braintap’s former CEO, argued that the Court lacks subject matter jurisdiction over Braintap’s claims for declaratory judgment and breach of fiduciary duty because Delaware’s Court of Chancery possesses exclusive jurisdiction over such claims pursuant to Del. Code Ann. tit. 8, § 205. Pathos and Zaldastani argued that Braintap’s claims are subject to § 205(e) because they require a judicial determination as to the alleged invalidity of corporate acts by a Delaware corporation within the scope of § 205(a). The Court found that the Delaware statute was inapplicable because (1) no claims were brought under the statute or Delaware law in general, (2) the statute itself indicates the Court of Chancery’s exclusive jurisdiction only over claims brought in Delaware courts, and (3) exclusive jurisdiction in Delaware would violate the Full Faith and Credit Clause of the Constitution. Thus, the Court denied the motions to dismiss based on lack of subject matter jurisdiction.
12(b)(6). The Court found that Braintap’s UDTP claim failed to the extent it was based on the alleged issuance to Pathos of shares or equity in Braintap because securities transactions are not in or affecting commerce for purposes of the UDTPA. Furthermore, the remainder of the claim failed because it concerned Pathos’s performance of its various contracts with Braintap, and there were no allegations of substantial aggravating circumstances as required to sustain an action under the UDTPA.
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Talley v. Earth Fare 2020, Inc., 2024 NCBC 81 (N.C. Super. Ct. Dec. 12, 2024) (Robinson, J.)
Key Terms: new trial; JNOV; Rule 59(a); inconsistent affirmative defenses; unjust enrichment; breach of contract; Wage and Hour Act; jury instructions; misstatement of law
After a trial, the jury found against Plaintiff on his breach of contract and Wage and Hour Act claims but found for Plaintiff on his unjust enrichment claim. Defendants moved for JNOV on the unjust enrichment claim and Plaintiff moved for JNOV, or alternatively a new trial, on his breach of contract and WHA claims.
Defendants’ JNOV Motion. At trial, the jury found that Defendant Hulsing was unjustly enriched by the services rendered by Plaintiff and awarded Plaintiff $195,000 to be paid by Hulsing. Defendants sought JNOV on the unjust enrichment claim, arguing that Hulsing could not be unjustly enriched by Plaintiff’s services because Plaintiff was expressly employed to perform those very tasks. Plaintiff argued that since Defendants had asserted in their answer that Plaintiff was not employed by Defendants, they should be judicially estopped from taking an inconsistent position now. The Court rejected this argument because Defendants were permitted under Rule 8(e)(2) to assert inconsistent affirmative defenses. Nevertheless, the Court determined that the jury’s verdict was sufficiently supported by evidence that Plaintiff rendered services to Hulsing with the expectation that he would receive additional compensation separate from his base salary. Accordingly, Defendants’ JNOV motion was denied.
Plaintiff’s JNOV Motion. At trial, the jury found that Defendants did not enter into any agreement with Plaintiff and therefore did not reach Plaintiff’s WHA claim. Plaintiff sought JNOV on his breach of contract and WHA claims arguing that there was conclusive evidence at trial of an agreement between the parties. The Court disagreed, finding that the jury’s conclusion to the contrary was well supported by the evidence presented. Thus, Plaintiff’s JNOV motion was denied.
Plaintiff’s Motion for a New Trial. Plaintiff argued that he was entitled to a new trial on his breach of contract claim because 1) there was insufficient evidence to support the verdict against Plaintiff; 2) the jury was likely confused by Defendants’ counsel’s misstatement of law during closing arguments; and 3) the Court did not include Plaintiff’s requested instruction to the jury. The Court rejected all three arguments. First, there was sufficient evidence to support the jury’s conclusion that either there was no additional agreement or even if there was, it was not breached. Second, Plaintiff’s failure to specify or properly document an objection to Defendants’ closing argument precluded his requested relief on this basis. Third, although the Court did not give the exact instruction Plaintiff requested, the instruction given to the jury was, in substance, the same. Plaintiff also sought a new trial on his WHA claim, contending that the Court gave an incorrect instruction on the law because the WHA does not require the employee to prove the existence of a contract for the employee to be entitled to unpaid wages. The Court disagreed, concluding that plaintiff was justly compensated for the work he contracted to perform and the jury determined that there was no other agreement for additional compensation.
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Mary Annette, LLC v. Crider, 2024 NCBC 82 (N.C. Super. Ct. Dec. 13, 2024) (Conrad, J.)
Key Terms: summary judgment; misrepresentation; fraud; reasonable reliance; reformation; breach of contract; merger; quiet title; conversion
This case arose out of disputes concerning the creation, ownership, and management of Plaintiff Mary Annette, LLC, which was formed to develop a resort property as a planned unit development. The parties in this action are Mary Annette’s three entity-members and their principals. Defendants’ counterclaims are primarily based on allegations that Plaintiffs deceived Defendant Terri Crider regarding the creation and funding of Mary Annette and breached various oral agreements. Plaintiffs moved for summary judgment on Defendants’ counterclaims.
Intentional Misrepresentation and Fraud. Defendants based their fraud counterclaim on two alleged misrepresentations relating to the funding to buy a third-party’s interest in the property and pay for the development. However, because the undisputed evidence established that Terri was fully aware of the funding terms at the time she signed the closing documents, she could not have reasonably relied on any earlier, contrary representations. Further, Plaintiffs’ alleged statement that “they would make things right” was not sufficiently definite to support a fraud claim. Accordingly, the Court granted summary judgment against Defendants on their fraud counterclaim.
Reformation. The Court also granted summary judgment against Defendants on their reformation claim, which sought to reform Mary Annette’s operating agreement regarding the allocation of membership interests. The undisputed evidence showed that Terri received a copy of the agreement and had a free and fair opportunity to review it, but ultimately signed without reading it. Thus, there was no basis for reformation.
Breach of Contract. Defendants alleged that Plaintiffs breached an oral contract regarding 1) funding the development and dividing the proceeds; 2) Terri’s right to rent the individual units until they were sold; and 3) who would hold title to the real property. Regarding the funding and proceeds, the Court determined that these were plainly within the subject matter of the operating agreement and therefore any oral agreement with different terms would have merged into the operating agreement pursuant to its merger clause. The remaining issues, however, were outside the subject matter of the operating agreement or were not foreclosed by the merger clause. Therefore, summary judgment was denied in part and granted in part on this claim.
Quiet Title. Defendants sought to quiet title to the individual units that make up the development. Having already determined in a previous order that the ownership of the units was a live issue in the case with genuine issues of material fact, the Court denied summary judgment on this claim.
Conversion. Defendants alleged conversion of personal property that Terri used in her vacation rental business. Because Plaintiffs presented no evidence to support summary judgment, the motion was denied as to this claim.
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Window World of Baton Rouge, LLC v. Window World, Inc.; Window World of St.
Louis, Inc. v. Window World, Inc., 2024 NCBC Order 71 (N.C. Super. Ct. Nov. 27, 2024) (Bledsoe, C.J.)
Key Terms: motion to seal; trade secrets; confidential and proprietary business information
The Window World Defendants filed various motions seeking to seal or partially seal certain documents and exhibits that were filed in connection with the parties’ summary judgment motions and allegedly containing (i) trade secrets; (ii) other confidential and proprietary business information; (iii) sensitive personal and family matters; (iv) inadvertently produced banking information; and (v) other miscellaneous exhibits.
The Court denied as moot the motions as to those exhibits which WW no longer wished to seal and which no other party or interested non-party sought to maintain under seal. The Court deferred ruling on the motions as to those exhibits which WW no longer wished to seal but which other parties or interested non-parties did seek to maintain under seal. The Court contemporaneously entered orders addressing those parties’ and interested non-parties’ motions to seal. Turning to the remaining exhibits and documents, the Court considered each of the above-mentioned categories of information and granted the motions, determining that sealing was appropriate as to each.
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Wilmington Tr. v. TM Northlake Mall, L.P., 2024 NCBC Order 72 (N.C. Super. Ct. Dec. 10, 2024) (Conrad, J.)
Key Terms: receivership; personal liability; immunity; leave to maintain claims
Spinoso Real Estate Group has served as the general receiver for Defendant in this action since 2021. The receivership order provides that no one may sue Spinoso with respect to the receivership absent the Court’s permission. Nevertheless, earlier this year, two non-parties sued Spinoso, in its official and personal capacity, in Mecklenburg County Superior Court without getting the Court’s permission. After Spinoso moved to dismiss their claims on that basis, they moved for leave to maintain their claims. Spinoso opposed the motion.
The Court denied the motion with regards to their claims for ordinary negligence and premises liability against Spinoso in its personal capacity because the receivership order expressly immunized Spinoso from personal liability for all but gross negligence.
The Court otherwise granted the motion because the claimants had no other way to seek relief since a claims process had yet to be established and any delay may jeopardize their right to seek relief in the future due to the statute of limitations. Further, the tort actions were recently designated to the Business Court, eliminating the possibility that the claimants would have an unfair advantage over other claimants by litigating in a different forum.
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Window World of Baton Rouge, LLC v. Window World, Inc; Window World of St. Louis, Inc. v. Window World, Inc., 2024 NCBC Order 73 (N.C. Super. Ct. Dec. 12, 2024) (Bledsoe, C.J.)
Key Terms: Rule 54(b); Rule 60; sua sponte; amendment of previous order
This matter was before the Court sua sponte pursuant to Rules 54(b) and 60 to reconsider certain portions of the Court’s recently-filed order on the parties cross-motions for partial summary judgment (summarized above). The Rules allow a judge to correct or otherwise revise an order prior to entry of final judgment. After careful review, the Court determined it was necessary to amend certain paragraphs to clarify that Plaintiffs had advanced multiple theories of breach of contract liability and to reflect that all of those theories would proceed to trial except for certain Plaintiffs’ claims based on the superior wholesale pricing theory and the undisclosed C pricing theory.
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Howard v. IOMAXIS, LLC, 2024 NCBC Order 74 (N.C. Super. Ct. Dec. 17, 2024) (Earp, J.)
Key Terms: receivership; extension; N.C.G.S § 1-507.30(b)
As summarized here, this case arises from a dispute between the Ronald E. Howard Revocable Trust (a purported 51% economic interest holder in IOMAXIS) and members of IOMAXIS regarding the Trust’s right to economic benefits from its interest. During discovery, allegations relating to the propriety of certain transfers made by IOMAXIS were raised by the Trust. A receiver was appointed by the Court on January 25, 2024 and tasked with investigating the whereabouts of certain assets, the reason for their transfers, and maintaining the status quo of IOMAXIS’ financial affairs. The receiver filed a motion to (i) extend the term of the receivership and (ii) compel production of information.
The Court granted the motion in full. The Court noted that the six reports filed by the receiver during the initial receivership detailed that the receiver had been unable to obtain the information sought from IOMAXIS in a timely manner, or had failed to receive the information at all. The receiver further reported that it was unable to complete its Court-assigned duties as a result of the general uncooperativeness of IOMAXIS’ representatives. IOMAXIS countered that it was the receiver, rather than IOMAXIS, who refused to cooperate. The Court noted that regardless of “where the fault lies,” the receiver’s duties had yet to be fulfilled, and millions of dollars in transfers from IOMAXIS remained unaccounted for. The receiver further raised concerns about the management of IOMAXIS, which warranted further investigation of the company.
The Court extended the receivership on a month-to-month basis, to be revisited after six months. At the end of that six-month period, the receiver shall either: (a) file a final report and request discharge; or (b) file a status report identifying the reasons the receivership should be continued. The Court further ordered the IOMAXIS parties to fully comply with N.C.G.S § 1-507.30(b), and reasonably cooperate with the receiver in the administration of the receivership. The Court enjoined the IOMAXIS parties from knowingly interfering with the receiver’s duties. Lastly, the Court ordered the IOMAXIS parties to provide the receiver with certain information and documents requested by the receiver, which had yet to be produced.
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Philip Morris USA, Inc. v. N.C. Department of Revenue, 2024 N.C. LEXIS 972, 2024 WL 5101173 (2024) (Barringer, J.)
Key Terms: reversed; contested tax case; N.C.G.S. § 105-130.45; cigarettes; export credits; “credit allowed”; statutory interpretation
As summarized here, the Business Court previously held that N.C.G.S. § 105-130.45, which governs certain tax credits available to manufacturers of cigarettes for exportation (“Export Credits”), unambiguously limited the amount of Export Credit which could be generated in any one year to $6 million. Accordingly, the Business Court found that Philip Morris had improperly claimed excess Export Credits, carried forward from 2005 and 2006, on its 2013 and 2014 tax returns. Philip Morris appealed.
The Supreme Court reversed and remanded. The Court held that the use of “credit allowed” in subsections (b) and (c) was inconsistent and created an ambiguity. Considering the term’s technical use and understanding, the Court adopted an interpretation of “credit allowed” in subsection (c) as the amount of credit which may be claimed in a tax year. Employing the “whole text” canon, the Court determined the plain meaning of “credit allowed” in subsection (b) to be the amount of credit which may be generated in a tax year. Further, the Department’s current contrary position was inconsistent with its prior representations and actions, which Philip Morris was entitled to rely on.
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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.
Posted 12/18/24
By: Ashley Oldfield
Miller v. RedGoose, LLC, 2024 NCBC 74 (N.C. Super. Ct. Nov. 26, 2024) (Davis, J.)
Key Terms: motion to dismiss; fraud; computer trespass; N.C.G.S. § 14-458; tortious interference with contract, UDTP
Plaintiff Miller initiated this suit against his former employer, Defendant RedGoose, alleging claims under the N.C. Wage and Hour Act and for breach of contract. RedGoose counterclaimed, alleging that following Miller’s resignation from Defendant RedGoose, he agreed to assist during a transition period to ensure that other employees were aware of the location of key client information stored on the company’s computer system. However, Miller instead used his continued access to the computer system to sabotage RedGoose’s business and to access proprietary information which he then used to compete. Miller moved to dismiss several of the counterclaims.
Fraud. Miller argued that the fraud claim should be dismissed because RedGoose’s allegations failed to show a causal connection between Miller’s misrepresentation (that he would assist RedGoose in order to ensure continuous service to its client, when in reality he had no intention of doing so and instead sought to use his computer access for his own purposes) and the harm RedGoose allegedly suffered. The Court concluded that Miller read the claim too narrowly—RedGoose alleged that Miller’s representation was for the purpose of inducing its clients to leave and follow him to his new business. This was sufficient to allege a causal connection between the injury and Miller’s misrepresentation.
Computer Trespass. Miller argued that RedGoose’s computer trespass claim under N.C.G.S. § 14-458 failed because RedGoose voluntarily gave him access to its computer systems. The Court rejected this argument, concluding that RedGoose’s allegations that Miller had exceeded his authorized use was sufficient to plead a claim under the statute.
Tortious Interference with Contract. Miller argued that the tortious interference claim failed because 1) RedGoose failed to sufficiently identify the contracts allegedly interfered with; and 2) RedGoose didn’t allege that he was subject to a restrictive covenant and therefore failed to allege that he acted without justification. The Court found neither argument persuasive. First, RedGoose’s allegations regarding the contracts was sufficient to satisfy the notice pleading standard. Second, the Court noted that a competitor cannot escape liability by arguing that he acted with justification where the competitor competed through unlawful means. Here, RedGoose’s allegations that Miller fraudulently obtained continued access to its computer systems was sufficient to allege unlawful methods of competition.
UDTP. Miller argued that the UDTP claim should be dismissed because 1) RedGoose merely alleged that Miller breached a contract which is insufficient to give rise to a UDTP claim; and 2) RedGoose failed to adequately plead that Miller’s acts were in or affecting commerce because they took place within an employment relationship. The Court rejected these arguments as well. First, RedGoose’s allegations regarding fraud, embezzlement, tortious interference, etc. went far beyond a mere breach of contract claim and, in any event, some of the claims automatically served as a predicate for a UDTP claim to proceed. Second, the Court was satisfied that the allegations that Miller had induced RedGoose’s clients to leave RedGoose and follow him were sufficient to satisfy the “in or affecting commerce” element.
Accordingly, the Court denied Miller’s motion to dismiss.
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BioGas Corp. v. NC BioGas Dev., LLC, 2024 NCBC 75 (N.C. Super. Ct. Nov. 26, 2024) (Robinson, J.)
Key Terms: declaratory judgment; breach of contract; breach of fiduciary duty; negligence; economic loss rule; implied covenant of good faith and fair dealing; duty to mitigate
This case arose from a lending relationship where Defendants provided funding through various promissory notes to Plaintiffs related to multiple biogas projects. This funding and related conduct lead to other agreements, many of which Plaintiffs contend Defendants breached by failing to satisfy various duties. Defendants, in turn, contended that Plaintiffs are the ones who breached the agreements, including by failing to pay the promissory notes. Both sides moved for summary judgment, in whole or in part, as to Plaintiffs’ claims and Defendants’ counterclaims.
The Court first addressed those claims which hinged on the question of who had a legal ownership interest in the Monroe Project. Because no evidence was presented which definitively stated who held legal title to the Monroe Project, the Court denied summary judgment on the claims dependent on such a determination.
The Court next addressed Plaintiffs’ requests for declarations regarding the duties and obligations owed by Defendants in relation to the various agreements entered into between them. Plaintiffs first sought a declaration that Defendants owed them an implied duty of good faith and fair dealing under certain agreements. The Court granted the declaration in part, declaring that several of the agreements at issue contained an implied covenant of good faith and fair dealing as a matter of law. However, the Court refused to grant such a declaration regarding the remaining agreements because Plaintiffs had not asserted a breach of contract claim based on those agreements and therefore summary judgment would be inappropriate as it would not be determinative of any legal issue in the case. Plaintiffs also sought a declaration that Defendants had a duty to mitigate their damages relating to their counterclaim for breach of contract as to certain promissory notes. Because North Carolina law generally recognizes a duty to mitigate damages, the Court granted the requested declaration. Lastly, Plaintiffs sought a declaration that, if Defendants prevailed on certain of their counterclaims, they should be limited to nominal damages. The Court denied the request for such a declaration, as many facts remained in dispute as to the damages allegedly sustained by Defendants.
Finally, the Court addressed Defendants’ motion for summary judgment on Plaintiffs’ claims for breach of contract, breach of fiduciary duty, and negligence, and on Defendants’ claim for breach of contract related to the promissory notes. Regarding Plaintiffs’ breach of contract claim, Plaintiffs alleged that Defendants breached five separate agreements. However, because Plaintiffs did not present any evidence of Defendants’ breach of four of the agreements, the Court summarily dismissed the claim to the extent it was based on those agreements. As to the fifth agreement, the Court concluded that a genuine issue of material fact existed as to whether Defendant Leyline had breached the implied covenant of good faith and fair dealing by failing to pursue Plaintiffs’ offer to purchase the Tillamook Project. Accordingly, the Court denied summary judgment on this basis. Regarding the breach of fiduciary duty and negligence claims, Defendants sought summary judgment on the basis that the claims were barred by the economic loss rule because the injury and damages alleged arose solely under an agreement between the parties. The Court agreed and granted summary judgment to Defendant on these claims. Lastly, the Court granted summary judgment in Defendants’ favor as to Plaintiffs’ liability on Defendants’ claim for breach of the promissory notes as there was no dispute that the promissory notes were in default. However, the Court denied summary judgment as to damages because an issue of fact remained as to whether Defendants mitigated their damages and whether set-off was available.
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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.
Posted 11/26/24
By: Natalie E. Kutcher
Honeywell Safety Prods. USA, Inc. v. SVS LLC, 2024 NCBC 71 (N.C. Super. Ct. Nov. 14, 2024) (Conrad, J.)
Key Terms: motion to dismiss; Rule 12(b)(6); repudiation; UCC; N.C.G.S. § 25-2-609; adequate assurance
This case arises from Honeywell’s agreement to supply nitrile gloves to S2S Global. Following Honeywell’s decision to change suppliers, a dispute arose between the parties relating to the quality of the nitrile gloves. In April 2024, S2S Global ceased accepting the gloves and requested a termination of the supply contract. Honeywell refused and sent S2S Global a demand for assurance that S2S Global would honor its contractual obligation. S2S Global subsequently cancelled all purchase orders for the gloves, recalled all gloves sold to its end users, and communicated its intent to notify regulatory authorities of the recall. However, S2S Global communicated to Honeywell that it “remains ready to purchase” gloves which conform to their supply contract. Honeywell sent a second demand for assurance, in addition to a request to S2S Global’s parent company, Premier, to honor its payment guarantee.
After failing to receive assurance from S2S Global or payment from Premier, Honeywell filed the present lawsuit against Defendants, alleging S2S Global’s wrongful repudiation of the contract and Premier’s breach of the guarantee. S2S Global and Premier moved to dismiss the lawsuit under Rule 12(b)(6) on the basis that S2S Global did not “unequivocally state that it can’t or won’t perform” under the contract. The Court rejected this argument, noting that the agreement was governed by North Carolina’s UCC, which allows one party to demand adequate assurance from another when reasonable grounds for insecurity exist. Based upon the pleadings contained in the complaint, the Court held that Honeywell had adequately pleaded that: (i) reasonable grounds for insecurity existed; (ii) Honeywell made a demand for adequate assurance; and (iii) S2S Global failed to give adequate assurance. An allegation that S2S Global affirmatively and unequivocally renounced the contract wasn’t necessary to state a claim.
The Court additionally rejected Defendants’ arguments, made for the first time in their reply brief, that the claim failed because the complaint didn’t expressly cite section 25-2-609 or sufficiently allege that Honeywell’s demand for assurance was reasonable or that S2S Global’s attempted assurance was inadequate. The Court found these arguments untimely, and in any event, unpersuasive. The Court denied the motion in full.
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Whalen v. Tuttle, 2024 NCBC 72 (N.C. Super. Ct. Nov. 19, 2024) (Conrad, J.)
Key Terms: motion to strike; motion to dismiss; Rule 12(b)(6); breach of settlement agreement; breach of operating agreement; breach of oral contract; UDTPA; fraud
This case arises from a dispute between two investors in several restaurant businesses, including CU SOBE, LLC. Defendant Tuttle met Plaintiff Whalen in 2018 when he was a patron at Whalen’s restaurants. Tuttle expressed interest in investing in Whalen’s future restaurant endeavors and eventually made five investments in Whalen’s restaurants. In 2022, the parties entered into an oral agreement for Tuttle to provide a $2 million investment in twenty installment payments towards a new restaurant Whalen was opening, to be owned and operated by Plaintiff CU SOBE. In exchange for these payments, Tuttle would receive 25% of CU SOBE. Tuttle was unable to make the first installment payment when due, so the parties amended the agreement to provide Tuttle a two-month extension on the condition that CU SOBE would have the right to accelerate the unpaid balance at any time. After CU SOBE exercised this acceleration right, tensions grew between the parties, as Whalen accused Tuttle of making disparaging remarks to Whalen’s other investors and engaging in disruptive behavior at several restaurants. A fight for control over CU SOBE ensued, as Tuttle attempted to fire a lawyer retained by Whalen to represent CU SOBE.
The parties mediated their dispute, resulting in a settlement agreement. Whalen and CU SOBE filed the present lawsuit, asserting that Tuttle had breached the settlement agreement and engaged in misconduct relating to CU SOBE’s funding and operations. Tuttle moved to strike certain allegations from the complaint and dismiss all claims.
Motion to Strike: Tuttle sought to strike allegations two groups of allegations in the complaint: 1) those alleging that he engaged in disruptive behavior at the restaurants, on the basis that such allegations were irrelevant to the claims; and 2) those alleging that he disparaged and defamed Whalen, on the grounds that the allegations were conclusory and insufficient to satisfy the heightened pleading standard for defamation. The Court rejected both arguments, noting that while the allegations were not necessarily sufficient to state a claim for relief, Tuttle had failed to show that they have “no possible bearing upon the litigation.” In its discretion, the Court denied the motion.
Breach of Settlement Agreement: The Court dismissed the claim for breach of the settlement agreement, concluding that the allegations were too conclusory to state a claim. While the complaint alleged that Tuttle had materially breached the settlement agreement by repudiation “as evidenced by his words and conduct,” it failed to identify which material term Tuttle allegedly breached or any actions or inaction which constituted the failure to perform or repudiation.
Breach of Oral Contract: Tuttle moved to dismiss the claim for breach of the oral contract on the basis that CU SOBE lacked standing to enforce the agreement, as it did not exist at the time the contract was formed and was not a party thereto. The Court rejected this argument, noting that CU SOBE had been formed long before the oral agreement was amended and was a party to the amended agreement. Tuttle further argued that the claim should be dismissed, as the subsequent settlement agreement contained a general release. As questions relating to the settlement agreement’s enforceability remained, the Court found a dismissal on this basis was premature and denied dismissal.
Breach of CU SOBE’s Operating Agreement: Tuttle argued that this claim should be dismissed because he never assented to the terms of the operating agreement at issue, thereby invalidating the contract. The Court held that the complaint sufficiently alleged that Tuttle was a party to the operating agreement by showing that Tuttle was a member of the company, received a printed copy of the operating agreement, and agreed to be bound by its terms. The Court also pointed to the statutory default rule, which holds that “[a] person who becomes an interest owner is deemed to assent to, and is bound by . . . and is otherwise deemed to be a party to, the operating agreement.” N.C.G.S. § 57D-2-31(b). As such, dismissal was denied.
Fraudulent Inducement: Tuttle moved to dismiss Whalen’s fraud claim on the basis that the pleadings did not satisfy the heightened pleading standards for fraud. Specifically, Tuttle noted that the complaint did not allege that he made any specific representation. The Court granted Tuttle’s motion, noting that the complaint “does not come close to meeting the heightened standard.”
UDTPA: Because Whalen’s claims for fraud and breach of the settlement agreement had been dismissed and none of the remaining claims could support a UDTPA claim, the Court dismissed this claim. The Court further noted that the alleged misconduct all involved internal company disputes or extraordinary events and thus did not satisfy the “in or affecting commerce” requirement.
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McCarron v. Howell, 2024 NCBC 73 (N.C. Super. Ct. Nov. 19, 2024) (Davis, J.)
Key Terms: Rule 12(b)(6); breach of fiduciary duty; constructive fraud; fraudulent transfer; civil conspiracy; facilitation of fraud; UDTP; alter ego
After obtaining a monetary judgment in a prior lawsuit against Defendant Risk Solutions, Plaintiff brought the current action asserting that the owner and director of Risk Solutions, Harold Howell, fraudulently transferred the assets of the company to newly formed companies for the purpose of preventing McCarron from being able to collect on the judgment. Defendants (Howell, Risk Solutions, and the two newly formed companies) moved to dismiss all claims.
Breach of Fiduciary Duty. The Court determined that the complaint’s allegations that 1) Howell owed a fiduciary duty to Plaintiff as a judgment creditor of Risk Solutions based on the dissolution and insolvency of the company for which Howell served as a director, 2) Howell breached that duty by transferring the assets of Risk Solutions to other entities, and 3) Plaintiff suffered a resulting injury, were sufficient to state a claim. Further, Plaintiff’s failure to allege that he was treated differently than other creditors in the same class was not a bar to his standing because the claim at issue was based on an injury personal to him as an individual creditor.The Court dismissed the claim against Risk Solutions though, since there was no basis by which a corporation owes a fiduciary duty to its creditors.
Constructive Fraud. This claim survived against Howell because the complaint contained sufficient allegations that Howell’s breach of fiduciary duty was undertaken for his personal benefit. The claim was dismissed as to Risk Solutions for the same reasons as the fiduciary duty claim was dismissed against it.
Fraudulent Transfer. The Court dismissed this claim because it was not pleaded with the requisite Rule 9(b) specificity regarding what assets were transferred, which Defendant received any specific transfer, when the transfers were made, or what consideration, if any, was received for the transfers.
Facilitation of Fraud/Civil Conspiracy. The Court dismissed these claims, which were essentially the same, because 1) the underlying fraudulent transfer claim had been dismissed and thus there was no wrongful act; and 2) Plaintiff had alleged that the three Defendant companies had no separate existence apart from Howell, which equated to a non-existent conspiracy of one.
UDTP. The UDTPA claim against Howell survived based on the surviving breach of fiduciary duty and constructive fraud claims against him. The UDTP claims against the three Defendant companies were dismissed because there were no surviving claims against them and no other acts were alleged which could form the basis of a UDTP claim against them.
Alter Ego. Plaintiff alleged that Howell was the alter ego of the three Defendant companies and thus he should be able to pierce the corporate veil and hold Howell liable for the companies’ wrongful acts. However, because all claims against the companies were dismissed, piercing the corporate veil was not applicable.
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Value Health Sols. Inc. v. Pharm. Rsch. Assocs., Inc., 2024 NCBC Order 67 (N.C. Super. Ct. Nov. 6, 2024) (Davis, J.)
Key Terms: choice of law; jury waiver; public policy; Rule 38, Rule 39; N.C.G.S. § 22B-10
This case arises from Defendant’s acquisition of Plaintiff and its proprietary software. The asset purchase agreement entered into between the parties provided that: (i) the APA would be construed in accordance with Delaware law; and (ii) each party waived its right to a trial by jury. Despite both sides’ request for a trial by jury in their initial pleadings, Defendants moved to enforce the contractual jury trial waiver under Delaware law, notwithstanding North Carolina law (N.C.G.S. § 22B-10) deeming contractual jury trial waivers unconscionable and unenforceable.
Defendants argued that, since Delaware law did not prohibit contractual waivers of a jury trial, the North Carolina statute should not apply. Plaintiffs, on the other hand, argued that North Carolina’s Constitution, statutes, and case law all protect a party’s right to a jury trial as a fundamental right. The Court determined that, while Delaware law may govern substantive issues here, the right to a jury trial was a procedural issue governed by North Carolina law and therefore the waiver was unenforceable.
The Court also determined that, even if the contractual jury waiver had been enforceable, Defendants had waived their rights to enforce the provision by: (i) filing two responsive pleadings containing jury demands; (ii) failing to expressly withdraw their request for a jury trial; and (iii) failing to move to strike Plaintiffs’ jury demand. Pursuant to Rules 38 and 39 of the North Carolina Rules of Civil Procedure, a demand for trial by jury may not be withdrawn without the consent of the parties, and once a case is designated as a jury matter, it remains on the jury docket absent a withdrawal of the demand.
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State of N.C. v. MV Realty PBC, LLC, 2024 NCBC Order 68 (N.C. Super. Ct. Nov. 8, 2024) (Davis, J.)
Key Terms: discovery dispute; timeliness, BCR 10.9; BCR 10.4
This order arises from Plaintiff’s submission pursuant to Business Court Rule 10.9 of alleged deficiencies in Defendants’ production of documents. In March 2024, the Court issued an Amended Case Management Order, providing that all fact discovery in the case would close on September 30, 2024. On July 1, 2024, Plaintiffs noticed a deposition and issued a document subpoena to a factual witness in the case. The subpoena required the witness to produce documents by July 18, 2024. On that date, Defendants served an objection to certain document requests in the subpoena on the basis that the documents were protected by the work product privilege. The parties conferred multiple times during August and September of 2024, but were unable to resolve their dispute over the documents.
Plaintiffs filed its submission under BCR 10.9 on October 11, 2024, eleven days after the discovery deadline provided under the Amended Case Management Order. The Court interpreted BCR 10.4 as requiring that any discovery disputes be brought to the Court’s attention via the BCR 10.9 process before the applicable discovery deadline. Thus, since Plaintiff had been aware of Defendants’ objections since July 18, 2024, but had failed to submit the discovery issue to the Court until after the discovery deadline had passed, Plaintiff’s submission was untimely.
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Mauck v. Cherry Oil Co., 2024 NCBC Order 69 (N.C. Super. Ct. Nov. 8, 2024) (Davis, J.)
Key Terms: attorneys’ fees; block billing; reasonableness of rates; clerical work; redacted billing entries
As summarized here and here, this suit arose from a dispute over the ownership and management of a family business, Cherry Oil. This order arises from Plaintiffs’ filing of a costs application, seeking reimbursement for $65,761.73 in costs and attorneys’ fees incurred in obtaining a court-ordered inspection of corporate documents. Cherry Oil filed a brief in opposition to Plaintiffs’ costs application. The Court reviewed the invoices submitted on the following grounds:
Reasonableness of Rates: Taking judicial notice of the rates customarily charged by local attorneys, the Court determined that the rate of one of the paralegals, billing at $275 per hour, was unreasonable. The Court, in its discretion, reduced the hourly rate for the paralegal to $225 per hour. One timekeeper, labelled as “AMM,” was not identified by Plaintiffs. As the Court was not provided information on this person’s role in the litigation or information to determine a reasonable rate for that role, the Court held that no fees would be awarded for that timekeeper’s entries.
Window of Time for Billing Entries: Cherry Oil argued that the applicable window of time for calculating fees should begin on the date work on Plaintiffs’ supplemental complaint was initiated, and end on the date of the hearing which resulted in the inspection order. The Court found the first argument unduly restrictive, as the filing of the supplemental complaint “did not occur in a vacuum.” Rather, the Court held that under the unique circumstances of this case, the “start date” for Plaintiffs’ recoverable costs occurred when Cherry Oil formally denied Plaintiffs’ document inspection request. This date was chosen as it marked the point in which Plaintiffs became aggrieved shareholders pursuant to N.C.G.S. § 55-16-04. However, the Court agreed that costs incurred after the hearing on the inspection order should be excluded.
Redacted Entries and Block Billing: The Court rejected Cherry Oil’s objection to Plaintiffs’ redacted entries, on the basis that the Court had been given the opportunity to review unredacted copies of the invoice in camera. The Court further analyzed the submitted invoices for block billing, and after extensive review of which tasks within those blocks were recoverable, reduced Plaintiffs’ recoverable fees accordingly.
Excess and Duplicative Billing and Client Consultations: Cherry Oil objected to Plaintiffs’ fees to the extent that they reflect: (i) time entries from attorneys who have not made a formal appearance in the case; (ii) multiple attorneys working on the same task; and (iii) time spent conducting client communications and internal attorney conferences. The Court noted Cherry Oil cited no caselaw in support of the proposition that attorneys’ fees may only be awarded for those attorneys who have appeared formally in the proceedings. The Court further noted that there is no per se rule against more than one attorney working on the same task, nor against recovery for communications with clients. However, the Court clarified that “merely ministerial” calls to clients are not recoverable. The Court conducted a review of the records submitted and reduced or disallowed any non-recoverable entries accordingly.
Billing for Clerical Work: Noting that “merely clerical” tasks are not recoverable, the Court reviewed the billing entries attributable to paralegals and found some, but not all, of their entries were for clerical tasks. The Court excluded the entries for clerical tasks from Plaintiffs’ recovery.
Lastly, Cherry Oil argued that Plaintiffs’ recovery should be reduced “based on the Plaintiffs’ limited success” of the claims alleged. Of the twenty-two categories of documents Plaintiffs sought to inspect, the Court ultimately determined that Plaintiffs were only entitled to inspect one. After analyzing the relationship between the costs requested to the prevailing claim, the Court exercised its discretion to reduce Plaintiffs’ fees by thirty-five percent (35%). The Court ultimately awarded Plaintiffs $29,198.98.
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Whalen v. Tuttle, 2024 NCBC Order 70 (N.C. Super. Ct. Nov. 19, 2024) (Conrad, J.)
Key Terms: motion to seal; public access; settlement agreement
In connection with his motion to dismiss, summarized above, Defendant moved to seal a copy of the settlement agreement attached to his motion as an exhibit. Plaintiffs also moved to seal portions of their brief in opposition to Defendant’s motion which discussed the agreement. Both parties argued the document and references thereto should be sealed because the agreement contained a confidentiality clause. After noting that the confidentiality provision alone was insufficient to warrant sealing, the Court provided the parties an opportunity to submit supplemental briefings on the issue. Defendant declined to do so, while Plaintiff Whalen submitted a supplemental brief arguing that information in the settlement agreement, namely the settlement amount, the payment schedule, and the percentage of his ownership in certain entities, warranted sealing, or at least redaction.
The Court rejected the parties’ arguments, noting that the presumption in favor of public access was strong, whereas the parties’ countervailing interest was weak. The Court noted that Defendant provided no substantial interest in keeping the agreement’s contents confidential, while Whalen’s “vague assertions” that disclosure could result in competitive harm failed to warrant sealing. Holding that the parties had failed to rebut the public’s presumptive right of access, the Court denied the motion and ordered the documents to be unsealed.
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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.
Posted 11/20/24
By: Lauren Schantz
Egan v. Buena Vista, Inc., 2024 NCBC 69 (N.C. Super. Ct. Oct. 9, 2024) (Earp, J.)
Key Terms: motion to enforce settlement agreement; criminal prosecution; representations of counsel; contract formation; attorney communications with client; authority to settle; sanctions; BCR 7.2
Plaintiff Michael Egan and Defendant Timothy Anderson are shareholders in Defendant Buena Vista, Inc. Two years ago, Egan was arrested and charged with embezzlement from Buena Vista. Egan subsequently sued Anderson and Buena Vista alleging that he had been excluded from the business and not received distributions. While the criminal and civil cases were pending, Egan’s counsel communicated to Defendants’ counsel that Egan would dismiss the case upon receipt of $25,000 and a dismissal of the criminal charges. Defendants’ counsel accepted the offer and contacted Egan’s criminal attorney regarding the disposition of the criminal charges.
The DA would not agree to dismiss the charges but offered Egan a deferred prosecution. Defendants confirmed that this outcome was acceptable and that they would not seek restitution in the criminal matter. Egan’s counsel agreed to Defendants’ counteroffer and then represented to the Court that the matter had been settled.
The parties exchanged a draft settlement agreement, which Egan’s counsel forwarded to Egan’s criminal attorney for review. When Egan’s criminal attorney expressed concern about conditioning the settlement of the civil case on the outcome of the criminal case, Egan’s counsel forwarded an opinion he received from ethics counsel at the State Bar to Egan’s criminal attorney and Defendants’ counsel.
Defendants executed the settlement agreement and Defendants’ counsel sent the agreement and $25,000 to Egan’s counsel. After sending several communications to his client, Egan’s counsel learned that Egan refused to sign the settlement agreement because the criminal charges had not been dismissed. Egan’s counsel then filed a notice of dismissal without prejudice, explaining his misunderstanding of his client’s position. A year later, Egan initiated this action, alleging the same facts as those in the prior action.
Defendants moved to enforce the settlement agreement, strike the complaint, and impose sanctions. Egan opposed the motions, arguing no agreement had been reached. The Court concluded that the correspondence between Egan’s counsel and Defendants’ counsel constituted a valid settlement agreement and, because Egan had given his attorney authority to settle the case, Egan was bound by his attorney’s representations to Defendants’ counsel and the Court that the case was settled.
The Court concluded that Egan’s claims were barred based on the terms of the settlement agreement and dismissed the case but declined to impose sanctions. The Court also reminded counsel to set out each motion in a separate document in compliance with BCR 7.2.
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Bui v. Phan, 2024 NCBC 70 (N.C. Super. Ct. Oct. 22, 2024) (Conrad, J.)
Key Terms: motion to dismiss; LLC; member; manager; breach of operating agreement; declaratory judgment; individual claim; derivative claim; standing; injury; actual controversy; BCR 7.2
This case involves a dispute between the two 50/50 member-managers of Golden Rooster, LLC: Plaintiff Bui and Defendant Phan. Phan moved to dismiss Bui’s claims for breach of Golden Rooster’s operating agreement and declaratory judgment, arguing that Bui lacked standing to assert the claims because they were derivative, rather than individual claims.
Breach of Operating Agreement. The Court denied dismissal of this claim, holding that Bui, as a member of Golden Rooster, had standing to sue individually to enforce rights granted to her under the LLC’s operating agreement: namely, Bui’s right as a manager to participate in the management of Golden Rooster. The Court also disagreed with Phan’s argument that Bui suffered no injury, concluding that, in addition to potential financial harm, Bui’s loss of managerial rights is itself a recognized injury entitling her to nominal damages.
Declaratory Judgment. The Court also denied dismissal of this claim, concluding that Bui had standing to seek declaratory relief because the parties had an actual, genuine controversy regarding the interpretation of Golden Rooster’s operating agreement and its application to Phan’s actions.
The Court declined to consider an additional ground for dismissal that Phan raised in her motion but failed to address in her brief as required by BCR 7.2.
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Culverhouse-Steadman v. Gömböc Ventures, LLC, 2024 NCBC Order 63 (N.C. Super. Ct. Oct. 11, 2024) (Bledsoe, C.J.)
Key Terms: designation; LLC; operating agreement; declaratory judgment; contract
Gömböc Ventures, LLC is comprised of six members, five of whom are parties to this action. Plaintiff Culverhouse-Steadman sought injunctive relief as well as a declaratory judgment that first interpreted the amendment provisions of Gömböc’s prior operating agreement and then determined the enforceability of the amended operating agreement based on Defendants’ alleged noncompliance with the amendment provisions in the prior operating agreement. Plaintiff sought to designate the action as a mandatory complex business case pursuant to N.C.G.S. § 7A-45.4(a)(1); however, the Court declined to designate the matter because resolution of the claims required only the application of contract law principles and did not implicate the law governing LLCs.
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Elhulu v. Alshalabi, 2024 NCBC Order 64 (N.C. Super. Ct. Oct. 14, 2024) (Conrad, J.)
Key Terms: BCR 10.9; Rule 45; quash; subpoena; non-party; discovery dispute
Plaintiffs served a non-party with a subpoena pursuant to Rule 45 of the North Carolina Rules of Civil Procedure. The non-party moved to quash, but the Court held the motion in abeyance and directed the non-party to comply with the pre-filing requirements for discovery disputes in BCR 10.9. After consultation, the parties reached a compromise on all but three requests: bank account statements, any emails having anything to do with Defendants, and documentation of any ownership interest the non-party held in an entity in which Defendant Alshalabi also held an interest. The Court concluded that the requests were overly broad, quashed the subpoena as to the three requests, and otherwise denied the motion to quash as moot.
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Brakebush Bros., Inc. v. Certain Underwriters at Lloyd’s of London – Novae 2007 Syndicate Subscribing to Pol’y No. 93PRX17F157, 2024 NCBC Order 65 (N.C. Super. Ct. Oct. 16, 2024) (Davis, J.)
Key Terms: reptile theory; golden rule; motion to exclude; expert opinions; Rules of Evidence; Daubert; motion in limine; admissibility; weight; relevance; prior insurance claims; agency; probative value; discovery disputes; prior lawsuits; disclosure of witnesses; lay opinion testimony; expert reports
As summarized here, this case arose out of an insurance coverage dispute following a fire at a chicken processing plant. The Court previously denied Brakebush’s motion for summary judgment. In anticipation of trial, the Court resolved the parties’ eighteen pre-trial motions.
Defendants moved to exclude Plaintiffs’ expert, arguing that (1) the expert was unqualified as an expert on the subject matter; (2) his opinions were unreliable due to his failure to conduct an independent investigation; and (3) his opinions “parroted” those of Brakebush representatives. The Court denied the motion, concluding that (1) the expert was qualified based on his work experience; (2) the expert could rely on information provided by others in forming his opinions; and (3) Defendants failed to show the expert’s opinions simply “vouched” for those of Brakebush representatives.
Plaintiffs moved to prohibit Defendants’ experts from (1) testifying about Brakebush’s motivations for filing its insurance claim; (2) testifying as to their experiences with prior, unrelated fire insurance claims at Plaintiff House of Raeford Farms’ other facilities; and (3) offering duplicative testimony. The Court granted the motion, determining that (1) expert testimony regarding a party’s state of mind, intent, or motive was improper; (2) any probative value associated with evidence of Raeford’s prior insurance claims for the purpose of contrasting them with the instant insurance claim was substantially outweighed by the danger of undue prejudice; and (3) an expert may not offer opinions that simply repeat the opinions of another expert.
The Court then disposed of the various motions in limine in summary fashion as follows:
Plaintiffs’ First Motion: Granted; evidence of prior insurance claims lacked probative value and/or was outweighed by the likelihood of undue prejudice.
Plaintiffs’ Second Motion: Denied; Court declined to determine as a matter of law whether certain consultants were acting as Defendants’ agents.
Plaintiffs’ Third Motion: Granted in part and denied in part; evidence of prior discovery disputes was irrelevant to resolution of factual issues but may be used for impeachment.
Plaintiffs’ Fourth Motion: Denied; terms of an Asset Purchase Agreement admissible, relevant, and not outweighed by danger of unfair prejudice.
Defendants’ First Motion: Granted; evidence of prior claims, lawsuits, or complaints alleging improper handling of claims by Defendants was inadmissible because it lacked relevance and its probative value was outweighed by danger of unfair prejudice.
Defendants’ Second Motion: Granted; evidence of parties’ financial condition was inadmissible.
Defendants’ Third Motion: Granted; witnesses not previously identified and disclosed during discovery may not testify.
Defendants’ Fourth Motion: Granted; expert witnesses not previously identified and disclosed during discovery may not testify.
Defendants’ Fifth Motion: Granted; expert witnesses may not offer opinions not previously disclosed in discovery.
Defendants’ Sixth Motion: Granted; parties may not use documentary evidence of damages not previously identified and disclosed in discovery.
Defendants’ Seventh Motion: Granted in part and denied in part; parties may not make “reptile theory” or “golden rule” arguments, but the Court will rule on the admissibility of evidence of “general safety rules” at trial.
Defendants’ Eighth Motion: Granted; parties may not introduce deposition testimony not identified pursuant to the Pre-Trial Scheduling Order.
Defendants’ Ninth Motion: Denied; the Court will rule on the admissibility of lay witnesses offering opinion testimony at trial.
Defendants’ Tenth Motion: Granted in part and denied in part; parties may not admit evidence that inaccurately represents information, but motion was phrased too broadly to grant in its entirety.
Defendants’ Eleventh Motion: Denied; the Court will rule on the admissibility of evidence relating to USDA regulations at trial.
Defendants’ Twelfth Motion: Granted; expert report may not be admitted into evidence in its entirety, but statements and exhibits may be used for impeachment or to show how the expert formed his opinions.
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Health Logix, LLC v. US Radiology Specialists, Inc., 2004 NCBC Order 66 (N.C. Super. Ct. Oct. 18, 2024) (Bledsoe, C.J.)
Key Terms: designation; opposition; intellectual property; software; contract
Health Logix provided radiology software services to US Radiology pursuant to a contract. Prior to its expiration, the parties engaged in negotiations to extend the term of the contract. Health Logix executed an amendment extending the term of the contract and, relying on US Radiology’s representation that it would likewise execute the amendment, expended additional time and resources. But US Radiology did not sign the amendment, instead informing Health Logix that the contract would expire at the end of the current term.
Health Logix initiated this lawsuit, asserting claims against US Radiology for declaratory judgment and anticipatory repudiation/breach of contract. US Radiology filed a Notice of Designation, contending that designation as a mandatory complex business case was proper pursuant to N.C.G.S. §§ 7A-45.4(a)(5), (a)(9), and (b)(2). After the case was designated to the Business Court, Health Logix opposed designation.
The Court concluded that designation under Section 7A-45.4(a)(5) was improper because Health Logix’s claims neither required an examination of nor were closely tied to the intellectual property aspects of the software at issue; instead, resolution of the lawsuit required only the application of contract principles. As a result, designation under N.C.G.S. § 7A-45.4(b)(2) was also improper and US Radiology refused to consent to designation pursuant to N.C.G.S. § 7A-45.4(a)(9). The Court therefore allowed the opposition.
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.
Posted 10/22/24
By: Ashley Oldfield
Dapper Dev., L.L.C., Cordell, 2024 NCBC 63 (N.C. Super. Ct. Sept. 25, 2024) (Bledsoe, C.J.)
Key Terms: Rule 12(b)(6); breach of contract, breach of consent order; duty of good faith and fair dealing; declaratory judgment
The Individual Plaintiffs and Defendant were the sole members and managers of two companies. After the Individual Plaintiffs’ attempt to negotiate a buyout of Defendant’s interest failed, the Individual Plaintiffs voted to terminate Defendant from the companies and remove him as a member and manager pursuant to the companies’ operating agreements. Defendant disputed the effect of the vote and this litigation followed. Defendant moved to dismiss pursuant to Rule 12(b)(6).
Breach of Contract. Plaintiffs alleged that Defendant breached the companies’ operating agreements by 1) refusing to accept a buyout offer in breach of Section 10; and 2) causing the bank to freeze the companies’ funds in breach of Article 5. Defendant argued that 1) Section 10’s buyout provision was only triggered if he had been terminated as an employee and Plaintiffs did not (and could not) allege that he was an employee; and 2) Plaintiffs had not pleaded the claim for breach of Article 5 with enough detail. The Court rejected both arguments. Plaintiffs had alleged termination of Defendant’s employment which allowed for a reasonable inference that he was an employee. With regards to breach of Article 5, Plaintiffs had alleged the existence of valid agreements, the provision breached, the facts constituting the breach, and the resulting damages. Nothing further was required.
Declaratory Judgment. Plaintiffs sought a determination of the rights, duties, and liabilities as between them and Defendant under the operating agreements. The Court concluded that Plaintiffs’ allegations that Defendant was terminated as both a member and manager of the companies were sufficient to establish the existence of an actual controversy and survive the pleadings stage.
Breach of Consent Order. In response to Plaintiffs’ claim that he had breached the terms of a consent order entered in previous litigation between the parties, Defendant argued that the consent order was not a legal contract and had no legal effect following the voluntary dismissal of the prior lawsuit. The Court rejected this argument because, under North Carolina law, a consent order which recites the parties’ agreement but does not adjudicate any rights is enforceable through a breach of contract action.
Breach of Duty of Good Faith and Fair Dealing. Of the twelve separate allegations underlying Plaintiffs’ breach of duty claim, the Court held that six of them were sufficient to state a claim because they showed that Defendant had taken actions which injured Plaintiffs’ right to receive the benefit of the agreement. The remaining allegations, however, merely involved Defendant’s assertion of his rights under the operating agreements, and, therefore, did not support the claim. Accordingly, the motion was granted as to those allegations but otherwise denied.
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Auto Provisions, LLC v. G1.34 Holdings, 2024 NCBC 64 (N.C. Super. Ct. Sept. 25, 2024) (Robinson, J.)
Key Terms: Rule 12(b)(6); breach of contract; duty of good faith and fair dealing; unjust enrichment; conversion
Plaintiff Auto Provisions and Defendant G1.34 formed Plaintiff Recon Partners for the purpose of developing and marketing proprietary software for auto dealerships. After the business relationship between Auto and Defendant deteriorated, Plaintiffs filed this lawsuit. Defendant answered and asserted nine counterclaims arising largely from Plaintiffs’ alleged breaches of Recon’s operating agreement and their failure to pay back a loan and other funds extended to Recon by Defendant. Plaintiffs moved to dismiss most of the counterclaims.
Breach of Contract and Duty of Good Faith and Fair Dealing. Noting the low bar for pleading a breach of contract claim, the Court held that Defendant had adequately pleaded Recon’s breach of a loan agreement, as Defendant had pleaded the existence of a valid contract and the breach thereof. Likewise, the Court held that Defendant had adequately pleaded Auto’s breach of Recon’s operating agreement, by pleading the existence of a valid contract, the satisfaction of all conditions precedent to performance, and the breach of Auto’s obligations. Because the claims for breach of the duty of good faith and fair dealing were based on the same facts as the adequately pleaded breach of contract claims, they survived as well. Accordingly, the motion to dismiss was denied as to each of these claims.
Unjust Enrichment. Plaintiffs contended that Defendant’s unjust enrichment claim, which was based on allegations that Recon would be unjustly enriched by retaining certain wrongfully held monies, should be dismissed because all parties agreed that the operating agreement was a valid and enforceable contract which barred an unjust enrichment claim. The Court disagreed. In support of their assertion that all parties agreed as to the validity of the operating agreement, Plaintiffs cited to their complaint and their answer to the counterclaims; however, at the 12(b)(6) stage, the Court could not consider those documents. Further, it appeared that Plaintiffs disputed the validity of the loan agreement at issue. Thus, the unjust enrichment claim, which was pleaded in the alternative, could proceed.
Conversion. Defendant asserted that Plaintiffs converted the loan and other funds provided to Recon by Defendant, as well as the value of certain software. The Court dismissed the claim to the extent it was based on the nonpayment of the loan and other funds, because the failure to pay a debt does not constitute conversion. The Court also dismissed the claim as to the value of the software, because it was undisputed that Defendant had no ownership interest in the software, and, therefore, a claim for conversion could not lie.
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Vitaform, Inc. v. Aeroflow, Inc., 2024 NCBC 65 (N.C. Super. Ct. Sept. 25, 2024) (Bledsoe, C.J.)
Key Terms: Rule 12(c); collateral estoppel; trade secrets; fraud
In a previous action between the parties, Plaintiff asserted various claims, including claims for misappropriation of trade secrets, Lanham Act violations, fraud, and unfair and deceptive trade practices, against Defendants. In that action, the Court entered a summary judgment order which dismissed many of the claims and made a number of determinations regarding Defendants’ knowledge of Plaintiff’s alleged trade secret. The remaining fraud-related claims were set for trial; however, the parties voluntarily dismissed the suit shortly before the trial was set to begin. Eleven months later, Plaintiff filed the present action, asserting the same claims that were pending for trial in the prior action. Defendants moved for judgment on the pleadings, contending that Plaintiff could not establish proximate cause on any of its claims due to the collateral estoppel effect of the Court’s findings in the summary judgment order in the previous action.
The Court denied the motion. Although it agreed that collateral estoppel barred Plaintiff from relitigating factual issues previously determined, the Court concluded that its previous findings did not necessarily preclude Plaintiff from establishing proximate cause and actual damages arising from Defendants’ alleged conduct.
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A Distrib. Co. v. Mood Product Grp. LLC, 2024 NCBC 66 (N.C. Super. Ct. Sept. 26, 2024) (Robinson, J.)
Key Terms: Rule 12(b)(6); hemp; Lanham Act; passing off; reverse passing off; unfair and deceptive trade practices; common law unfair competition; conversion; unjust enrichment;
This action arose out of a business arrangement whereby Plaintiff GFF grew and delivered hemp product to Plaintiff ADC, which ADC then supplied to Defendant Mood for sale on Mood’s website. In connection with the transactions, GFF provided to ADC, who then provided to Mood, Certificates of Analysis regarding the composition of the GFF-grown hemp products. Plaintiffs filed suit alleging seven claims relating to Mood’s alleged alteration and use of the Certificates. The claims between ADC and Mood were ordered to arbitration. Mood then moved to dismiss all of GFF’s claims.
Standing. Mood challenged GFF’s standing, arguing that GFF’s principal, not GFF itself, held the required USDA license to grow hemp, and, therefore, GFF did not have standing to bring claims relating to the license or the Certificates. The Court disagreed, determining that GFF’s allegations that the license was GFF’s through its principal were sufficient to demonstrate standing.
Common Law Unfair Competition. GFF asserted that Mood violated unfair competition principles by fraudulently altering GFF’s Certificates and leveraging GFF’s license and the Certificates to sell product, thereby deceiving and endangering the consuming public. The Court dismissed this claim with prejudice because common law unfair competition claims are limited to claims between business competitors and the complaint showed that GFF and Mood were grower and seller, respectively, not business competitors.
Violation of the Lanham Act. GFF alleged that Mood violated the Lanham Act by committing both reverse passing off and passing off relating to GFF’s license and Certificates. The Court dismissed the claim as to reverse passing off because the complaint did not allege that Mood represented that any of the goods it sold were Mood’s own goods. However, it denied dismissal of the claim as to passing off, finding that GFF had sufficiently alleged that Mood had represented its own goods or services as GFF’s.
Unfair and Deceptive Trade Practices. The UDTPA claim survived to the same extent as the Lanham Act claim survived.
Conversion. GFF alleged that Mood converted GFF’s Certificates by altering them to show Mood as the owner of the testing results for GFF’s hemp. The Court dismissed the claim with prejudice because 1) Mood came into possession of the Certificates lawfully when ADC emailed copies of them to Mood, and GFF did not allege that it had demanded, and been denied, their return; and 2) GFF did not allege that it no longer had access to the original Certificates and thus had not shown that it was wrongfully deprived of access to them.
Unjust Enrichment. GFF alleged that a benefit had been conferred on Mood by its fraudulent use of GFF’s Certificates. The Court, however, dismissed the claim with prejudice because the complaint alleged that any benefit obtained by Mood was taken by Mood, not conferred upon Mood by GFF.
Punitive Damages/Attorneys’ Fees. Because attorneys’ fees and punitive damages are remedies rather than standalone claims, the Court dismissed these claims without prejudice to GFF’s ability to seek them as remedies if warranted.
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Greentouch USA, Inc. v. Lowe’s Cos., 2024 NCBC 67 (N.C. Super. Ct. Oct. 2, 2024) (Davis, J.)
Key Terms: Rule 12(b)(6); conversion; economic loss rule; defamation; tortious interference with existing contract; tortious interference with prospective economic advantage; unfair and deceptive trade practices; punitive damages
Plaintiff designed and supplied various fixtures and furniture to Defendant Lowe’s pursuant to a three-year supplier contract. However, after the relationship took a “cattywampus turn” during the COVID-19 pandemic, Plaintiff filed suit alleging various claims arising from Lowe’s purported efforts to undermine and destroy Plaintiff to enable it to take over product manufacturing itself or find cheaper vendors. Defendants moved to dismiss a number of the claims under Rule 12(b)(6).
Conversion. Plaintiff alleged that Lowe’s converted two categories of property: 1) property that Lowe’s wrongfully declared defective and then re-sold to third parties; and 2) over a dozen freight containers of products that Lowe’s received but refused to pay for. Defendants argued that the conversion claim was based on matters within the scope of the parties’ contract, and, therefore, it should be dismissed under the economic loss rule. The Court concluded that dismissal under the economic loss rule would be premature at this stage. The contract was not attached to the complaint, and without it, the Court was unable to determine whether Plaintiff’s allegations were fully capable of being redressed through its pending breach of contract claim.
Defamation. Plaintiff alleged that Defendants made defamatory statements regarding Plaintiff’s financial condition. The Court, however, dismissed the claim because in each instance, Plaintiff either failed to specifically identify the speaker or failed to describe the statements themselves with sufficient particularity.
Tortious Interference with Existing Contract. This claim was based on Plaintiff’s allegations that Defendants intentionally induced a third-party to repudiate its existing services contract with Plaintiff. Defendants argued that the claim failed because it lacked specificity and failed to allege a lack of justification. The Court rejected both arguments. Plaintiff’s allegations satisfied the notice pleading standard and were rife with statements that Defendants intentionally and maliciously interfered with Plaintiff’s contractual relationships for the purpose of destroying its business.
Tortious Interference with Prospective Economic Advantage. The Court concluded that Plaintiff’s allegations that 1) Defendants were aware of Plaintiff’s efforts to enter into a supplier relationship with a specific third-party; 2) Defendants maliciously induced that third-party not to enter into such a relationship; and 3) the third-party would have entered into a supplier relationship with Plaintiff absent Defendants’ interference, were sufficient to survive the 12(b)(6) motion.
Violation of the UDTPA. Because Plaintiff’s tortious interference claims survived dismissal, the UDTPA claim survived as well.
Punitive Damages. Because punitive damages are a remedy rather than a standalone claim, the Court dismissed this claim without prejudice to Plaintiff’s ability to seek punitive damages as a remedy if warranted.
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Knowles v. Conerly, 2024 NCBC 68 (N.C. Super. Ct. Oct. 3, 2024) (Earp, J.)
Key Terms: Rule 12(c); breach of contract; statute of frauds; unjust enrichment; constructive trust; declaratory judgment; reformation of will; quiet title; easement; latent ambiguity; estate administration; non-claim statute
Plaintiffs are renters of lots in a mobile home park previously owned by Defendant Sea Manor Enterprises, LLC. Plaintiff contend that during his life, William Powell, the sole member and manager of the LLC, agreed that he would arrange for the mobile home park and certain access rights to be conveyed to Plaintiffs and that he later executed a codicil to effect that agreement. However, following Mr. Powell’s death, Plaintiffs were informed that Mr. Powell’s church had inherited his membership interest in the LLC and now owned the mobile home park. This lawsuit followed. Defendants moved for judgment on the pleadings.
Breach of Contract (against LLC). Plaintiffs alleged that 1) they entered into an oral agreement with the LLC whereby it would arrange for the Plaintiffs to receive title to the mobile home park and access rights to certain docks; 2) that this agreement was memorialized in a codicil by Mr. Powell acting in his capacity as manager of the LLC; 3) that the LLC breached the agreement by failing to ensure that the mobile home park and certain access rights were conveyed to Plaintiffs; and 4) they were damaged as a result. The Court found that these allegations sufficiently stated a claim for breach of contract. Defendants argued that the statute of frauds nonetheless barred the claim because the codicil did not sufficiently identify the property to be conveyed. The Court disagreed, concluding that the description of the property was not patently ambiguous and could potentially be clarified by reference to external evidence.
Breach of Contract and Unjust Enrichment (against Estate). Plaintiffs alleged that 1) they had an agreement with Mr. Powell whereby he would ensure that they received a right of access to certain docks in exchange for their improvements to the docks, and 2) if the codicil failed to accomplish this agreement, then Mr. Powell was in breach. The Court concluded, however, that the claim was barred by the non-claim statute for estate administration, N.C.G.S. 28A-19-3(b)(1)(2), because it was not timely filed. Plaintiffs’ unjust enrichment claim, which was based on Mr. Powell being unjustly enriched by Plaintiffs’ improvement of the docks, was barred on the same basis.
Breach of LLC’s Operating Agreement (against Church). Plaintiffs alleged that the codicil served as the LLC’s operating agreement and that the Church, as the LLC’s manager, breached it by not conveying the mobile home park and the access rights to Plaintiffs. The Court disagreed and concluded that, while the codicil may direct the disposition of some of the LLC’s property, it could not be considered a document that governs the affairs of the LLC, i.e., its operating agreement. Thus, this claim was dismissed with prejudice.
Declaratory Judgment. Plaintiffs requested a declaratory judgment that the codicil conveys ownership of the LLC and easement rights to Plaintiffs, or alternatively, that the codicil is ambiguous and was executed my Mr. Powell under a mistaken belief of its effect. The Court determined that Plaintiffs had sufficiently stated a declaratory judgment claim and that issues of fact regarding Mr. Powell’s intent and the legal effect of the codicil remained and required discovery.
Reformation of Will. Plaintiffs contended that the codicil was ambiguous and should be reformed to conform to Mr. Powell’s intent. Because reformation is a remedy rather than a claim, the Court dismissed this claim without prejudice to Plaintiff’s ability to pursue reformation as a remedy if warranted.
Unjust Enrichment/Constructive Trust. Plaintiffs alleged the Church had been unjustly enriched by receiving the mobile home park and therefore, a constructive trust should be imposed over the property. But because a constructive trust is a remedy, not a claim, the Court dismissed the claim but without prejudice to Plaintiffs’ right to pursue a constructive trust as a remedy, if warranted.
Quiet Title. Plaintiffs sought to quiet title to a purported easement they contend is identified in the codicil. The description in the codicil, although ambiguous on its face, suggested that extrinsic evidence may be able to provide the missing detail regarding the location of the easement. Accordingly, dismissal was not appropriate at this stage.
Alter Ego. Plaintiffs alleged that the LLC was an alter ego of Mr. Powell and that the veil between them should be pierced to make the LLC liable for his actions. However, because Plaintiffs did not allege that Mr. Powell engaged in fraud or used the LLC to perpetrate dishonest or unjust acts, the Court dismissed the claim with prejudice.
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Griffin v. Advisors Fin. Ctr., L.L.P., 2024 NCBC Order 60 (N.C. Super. Ct. Aug. 13, 2024) (Bledsoe, C.J.)
Key Terms: BCR 10.9 dispute; expert disclosures; deposition
After Plaintiff objected to Defendants’ efforts to depose Plaintiff’s experts prior to Defendants’ expert disclosure deadline, the parties submitted a BCR 10.9 dispute summary to the Court. Plaintiff argued that requiring her experts to be deposed now may result in her experts having to be re-deposed and, further, that this was litigation by ambush. The Court found that neither the case management order, the Rules of Civil Procedure, nor the Business Court Rules required that expert depositions occur after all parties had disclosed their experts and produced expert reports. Further, it was common practice for a party opposing the party with the burden of proof to take the opening expert’s deposition prior to disclosing its own expert. Lastly, Plaintiff’s concern that her expert may have to be re-deposed was unfounded because the CMO provided that each expert is subject to a single deposition and therefore any attempt to conduct a second deposition would have to be approved by the Court. Accordingly, the Court ordered Plaintiff to make her expert witnesses available for deposition prior to the Defendants’ expert disclosure deadline.
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Murphy-Brown, LLC v. Ace Am. Ins. Co., 2024 NCBC Order 61 (N.C. Super. Ct. Sept. 25, 2024) (Davis, J.)
Key Terms: hog farm; insurance coverage; indemnification; defense costs; reasonableness of attorneys’ fees; burden of proof
As summarized here, Plaintiffs sued various insurers who provided them with primary and excess insurance coverage contending that the insurers were obligated to indemnify Plaintiffs for amounts paid to settle certain nuisance actions relating to Plaintiffs’ hog farms and to reimburse Plaintiffs for their defense costs for such underlying lawsuits. Presently before the Court was the parties’ request that the Court resolve three legal issues prior to trial: 1) which party bears the burden of proving the reasonableness of Plaintiffs’ defense costs in the underlying lawsuits; 2) whether Defendant may conduct a “line-by-line” challenge to the billing entries of Plaintiffs’ attorneys in the underlying lawsuits; and 3) whether the jury may be informed of the Court’s prior determination that Defendant breached its duty to defend Plaintiffs in the underlying lawsuits.
Regarding the first issue, the Court found no controlling precedent but adopted the majority view in other jurisdictions that once a party has shown that it incurred and paid the defense costs at issue, the costs are presumed reasonable and the burden shifts to the opposing party to rebut that presumption.
As to the second issue, the Court declined to restrict Defendant’s ability to challenge the reasonableness of Plaintiff’s defense costs as it sees fit, provided it does so consistent with Rule 1.5 of the Rules of Professional Conduct which govern the reasonableness of attorneys’ fees.
Lastly, the Court held that the jury could be informed of the Court’s previous determination that Defendant breached its duty to defend Plaintiffs in the underlying lawsuits because that information was relevant to the jury’s understanding of what they were being asked to decide.
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CRH E., LLC, Berastain, 2024 NCBC Order 62 (N.C. Super. Ct. Oct. 7, 2024) (Earp, J.)
Key Terms: preliminary injunction; extraordinary relief; third-party; likelihood of success on the merits; irreparable harm
As summarized here, this action involves a dispute arising from the sale of a business and the previous owners’ alleged involvement in a competing business. The former owners, Counterclaim-Plaintiffs Berastain and Moreau, moved for a preliminary injunction enjoining 1) a third-party, Robertson Real Estate, from selling certain real property, and 2) the Counterclaim-Defendants from transferring funds associated with such a sale or otherwise transferring tangible assets outside the regular course of business. Berastain and Moreau asserted that Robertson Real Estate was co-owned by individuals connected with the Counterclaim-Defendants and that the real property at issue may be necessary to satisfy any judgment they obtained in the present litigation
The Court denied the motion. First, Berastain and Moreau had not shown a likelihood of success on the merits. Since the third-party LLC was not a party to the action, there were no claims pending against it to evaluate for purposes of determining whether Berastain and Moreau were likely to prevail on the merits. As to the Counterclaim-Defendants, Berastain and Moreau failed to present any evidence, as opposed to mere speculation, that the Counterclaim-Defendants had threatened or were about to dispose of any property with the intent to defraud them. Second, Berastain and Moreau also failed to provide sufficient evidentiary support that they were about to suffer irreparable harm.
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Posted 10/09/24
