N.C. Business Court Opinions, March 12, 2025 – March 25, 2025
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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