N.C. Business Court Opinions, May 10, 2023 – May 23, 2023

Trail Creek Invs. LLC v. Warren Oil Holding Co., 2023 NCBC 36 (N.C. Super. Ct. May 9, 2023) (Davis, J.)

Key Terms: environmental liabilities; motion to strike; Rule 12(b)(6); breach of fiduciary duty; constructive fraud; statute of limitations; negligent misrepresentation; economic loss rule; fraud; Rule 9(b); breach of contract; breach of confidentiality agreement; obstruction of justice; civil conspiracy; rescission; N.C. Securities Act; primary liability; secondary liability

In 2016, Plaintiff Trail Creek Investments purchased Warren Oil Company LLC and related entities pursuant to an equity interest purchase agreement (“EIPA”). After subsequently discovering serious environmental compliance issues with the companies, Plaintiffs brought suit against the sellers (and certain individuals involved in the sale) alleging numerous claims based largely on Defendants’ failure to disclose the environmental liabilities prior to the sale. Defendants moved to dismiss.

The Court first addressed Plaintiffs’ motion to strike certain exhibits which Defendants had submitted in support of their motion to dismiss. The Court granted the motion as to exhibits that were not expressly referenced in the Complaint but denied it as to those that were.

Statute of Limitations. Defendants contended that several of Plaintiffs’ claims were barred by their statutes of limitations. However, because a dispute of fact existed as to when Plaintiffs knew, or should have known, the key facts upon which the claims were based, the Court denied dismissal on this basis.

Breach of Fiduciary Duty. Plaintiffs alleged that the individual Defendants, each of whom were connected to Warren Oil prior to the sale and subsequently served on its board, breached their fiduciary duties as board members by failing to disclose the environmental liabilities. Because Warren Oil’s operating agreement was not attached to the complaint, the Court relied on the default rule that LLC managers owe a fiduciary duty to the LLC and determined that Plaintiffs had sufficiently alleged the existence of a fiduciary duty and a breach thereof.

Constructive Fraud. Having determined that Plaintiffs had adequately alleged breach of fiduciary duty, the Court turned to the “personal benefit” prong of constructive fraud and determined that, while Plaintiffs’ allegation that the individual Defendants had gained the benefit of continued employment and bonuses was insufficient, their allegation that two of the individuals had received portions of released escrow funds was sufficient to sustain the claim as to them.

Negligent Misrepresentation. The Court granted dismissal on this claim, concluding that it was barred by the economic loss rule. The claim arose from Defendants’ allegedly false representations of environmental compliance that were expressly contained in the EIPA – the breach of which also formed the basis for Plaintiffs’ breach of contract claim.

Fraud. The Court also dismissed the fraud claim, determining that many of the allegations were too general to satisfy Rule 9(b). Among other deficiencies, the complaint frequently attributed statements and actions to “Defendants” collectively rather than attributing them to specific persons and was impermissibly vague as to the specifics of the misrepresentations and omissions.

Rescission. The Court dismissed the rescission claim because rescission is a remedy not a standalone claim. However, it declined, at this stage, to bar Plaintiffs from seeking rescission as a remedy if warranted.

Securities Act. Plaintiffs asserted claims for violation of the N.C. Securities Act under theories of both primary and secondary liability. The Court dismissed the primary liability claim because Plaintiffs failed to plead the circumstances with the particularity required by rule 9(b). Consequently, the Court also dismissed the secondary liability claim because it must be accompanied by a primary liability claim.

Breach of Confidentiality Agreements. Plaintiffs claimed that Defendants breached two confidentiality agreements by disclosing confidential information to third parties whose interests were adverse to Plaintiffs’ interests. The Court granted Defendants’ motion to dismiss as to this claim because the claim was devoid of any details of the alleged breach.

Obstruction of Justice. The Court determined that Plaintiffs’ bare-bones allegations that “Defendants” obstructed justice by deleting and destroying emails was insufficient to state a claim.

Civil Conspiracy.  The Court dismissed this claim because the Plaintiffs failed to make clear which of the numerous Defendants were alleged to have engaged in a conspiracy.

Breach of Contract. Plaintiffs’ breach of contract claim was based, in part, on Defendants’ failure to indemnify Plaintiffs as required by the EIPA. Defendants sought a ruling from the Court as to the correct construction of the EIPA’s indemnification provisions. However, because Plaintiffs had since moved to amend their complaint to add allegations relevant to this issue, the Court elected to defer ruling on the issue at this time.


Preston v. HomeTrust Bancshares, Inc., 2023 NCBC Order 30 (N.C. Super. Ct. May 10, 2023) (Robinson, J).

Key Terms: putative class action; voluntary dismissal; Rule 41(a)(1); Rule 23(c)

After filing a putative class action in February 2023, Plaintiff filed a notice of voluntary dismissal without prejudice pursuant to Rule 41(a)(1). The Court noted that where, as here, dismissal is sought before a class is certified, Rule 23(c) requires the trial court to conduct a limited inquiry into the circumstances of the dismissal to determine (1) whether the parties have abused the class-action mechanism for personal gain, and (2) whether the dismissal will prejudice absent putative class members. Because it was unclear from the filing whether the decision to dismiss the action was a unilateral decision by Plaintiff or the result of negotiation with Defendant’s agents or others, the Court directed the Plaintiff to file a statement explaining her decision in conformity with the elements previously set forth set forth in Rickenbaugh v. Power Home Solar, LLC.


By: Natalie Kutcher and Grace Kinley


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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 05/24/23 in Business Court Blast