N.C. Business Court Opinions, January 15, 2025 – January 28, 2025
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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