Technik v. Winwholesale Inc.,
2012 NCBC 5.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 10 CVS 15709
STEVEN A. TECHNIK,
Plaintiff,
v.
ORDER AND OPINION
WINWHOLESALE INC., CHARLOTTE
WINNELSON CO., RONALD
BOHANNON and JOHN DOES 1-4,
Defendants.
Richard H. Tomberlin for Plaintiff Steven A. Technik.
Womble Carlyle Sandridge & Rice, PLLC by Meredith J. McKee and John E.
Pueschel, and Sebaly Shillito + Dyer by Toby J. Henderson for Defendants.
Murphy, Judge.
{1} THIS MATTER is before the Court upon Defendants’ Motion to
Dismiss Plaintiff’s Amended Complaint. Defendants argue that Plaintiff’s Amended
Complaint should be dismissed because it fails to: (1) follow the statutory
requirements to bring a claim for a court-ordered inspection of corporate records; (2)
allege any conduct that would result in a breach of fiduciary duty; (3) allege the
existence of any contract necessary to bring a claim for breach of contract; or (4)
allege any factual basis that would support a claim for unfair and deceptive trade
practices under N.C. Gen. Stat. § 75-1.1.
{2} The issues for resolution by the Court have been fully and thoroughly
briefed by the parties. The Court, therefore, decides the Motion without a hearing
pursuant to Rule 15.4 of The General Rules of Practice and Procedure for the North
Carolina Business Court.
{3} Having considered the Amended Complaint, the Motion, and the briefs
and submissions of the parties, the Court GRANTS Defendants’ Motion to Dismiss
in part and DENIES the Motion in part.
I.
PROCEDURAL HISTORY
{4} On August 18, 2010, Plaintiff Steven Technik filed a Verified
Complaint on behalf of Nominal Defendant Charlotte Winnelson Co. (“Charlotte
Winnelson”), alleging direct and derivative claims against WinWholesale, Inc.
(“WinWholesale”), Ronald Bohannon, and John Does 1-4 (collectively,
“Defendants”). (Verified Compl. ¶¶ 46-74.) Plaintiff filed a Verified Amended
Complaint on October 29, 2010. (Am. Compl. 16.)
{5} This case was transferred to the North Carolina Business Court as a
mandatory complex business case on September 20, 2010, and subsequently
assigned to me. (Designation Order 1; Assignment Order 1.)
{6} Defendants filed their Motion to Dismiss on December 1, 2010, to
which, Plaintiff responded in opposition on December 21, 2010. Defendants replied
on January 10, 2011. (Defs.’ Mot. to Dismiss, Answer and Countercls. 15; Pl.’s
Resp. to Defs. Mot. to Dismiss 10; Defs. Reply in Supp. of Mot. to Dismiss 10.)
II.
FINDINGS OF FACT
{7} Charlotte Winnelson was organized under the laws of the State of
Delaware on or about July 21, 1999 and has its principal place of business in
Charlotte, North Carolina. (Am. Compl. ¶¶ 2, 12.)
{8} Plaintiff alleges that Charlotte Winnelson is one of several interrelated
wholesale distribution companies existing under the umbrella of Defendant
WinWholesale and referred to as the “Win Group of Companies.” (Am. Compl. ¶
14.)
{9} Each individual company of the “Win Group” is a separate corporation
with its own shareholders, one of which serves as president and manages the day- to-day operations of the company. (Am. Compl. ¶ 15.)
{10} Plaintiff was the original president of Charlotte Winnelson. (Am.
Compl. ¶ 13.) At the time Plaintiff established Charlotte Winnelson, he invested
approximately $35,000 in return for 30% of the company’s shares, with the
remaining shares distributed as follows: 30% – Myrtle Beach Winnelson, 5% – Mike
Ward, 5% – Aubrey Bell, and 30% – WinWholesale. (Am. Compl. ¶ 19.)
{11} At the time Plaintiff was negotiating his investment in Charlotte
Winnelson, he alleges that it was represented to him that if he ever wanted to leave
Charlotte Winnelson, or sell his shares, WinWholesale would buy the shares back
using a “book value” set forth in annual reports at the time of his departure. (Am.
Compl. ¶ 20.) The purchase price would also include a “premium in recognition of
the ‘growing concern’ value of the shares . . . .” (Am. Compl. ¶ 20.)
{12} Plaintiff contends that the buy-back policy represented to him at the
formation of Charlotte Winnelson had been in place at WinWholesale and its
predecessor, Primus, since the 1980’s. (Am. Compl. ¶ 23.) Plaintiff alleges that
sometime during 2001-2003, Primus amended the process for valuation and buy-back of shares within its standard Procedure Manual. (Am. Compl. ¶ 23.)
{13} On or about May 30, 2007, WinWholesale entered into a “Voting Trust
Agreement” with Myrtle Beach Winnelson that increased WinWholesale’s interest
in Charlotte Winnelson to just over 50%. (Am. Compl. ¶ 28; see also Pl.’s Am.
Compl. Ex. D.)
{14} After their acquisition of a majority stake in Charlotte Winnelson,
WinWholesale asked Plaintiff to resign from his positions on the Board of Directors
and as President of Charlotte Winnelson. (Am. Compl. ¶ 35.) Plaintiff refused to
comply. (Am. Compl. ¶ 35.) The corporate resolutions by which WinWholesale
purportedly accomplished Plaintiff’s termination are each signed by WinWholesale’s
representative Bruce E. Anderson, and dated April 29, 2010, the day Plaintiff was
asked to resign. (Am. Compl. ¶ 39; see also Pl.’s Am. Compl. Ex. E.)
III.
STANDARD OF REVIEW
{15} On a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina
Rules of Civil Procedure, the question for the court is “‘whether, as a matter of law,
the allegations of the complaint, treated as true, are sufficient to state a claim upon
which relief may be granted under some legal theory.’” Block v. County of Person,
141 N.C. App. 273, 277,
540 S.E.2d 415, 419 (2000) (quoting Harris v. NCNB Nat’l
Bank,
85 N.C. App. 669, 670,
355 S.E.2d 838, 840 (1987)).
{16} “The complaint must be liberally construed, and the court should not
dismiss the complaint unless it appears beyond a doubt that the plaintiff could not
prove any set of facts to support his claim which would entitle him to relief.” Id. at
277-78, 540 S.E.2d at 419.
{17} In considering a motion to dismiss for failure to state a claim upon
which relief can be granted, “‘the well-pleaded material allegations of the complaint
are taken as admitted; but conclusions of law or unwarranted deductions are not
admitted.’” Pinewood Homes, Inc. v. Harris, 184 N.C. App. 597, 613,
646 S.E.2d
826, 837 (2007) (quoting Sutton v. Duke,
277 N.C. 94, 98,
176 S.E.2d 161, 163
(1970)).
IV.
IV.
ANALYSIS
A.
DEMAND FOR ACCOUNTING
{18} Pursuant to Section 55-16-04 of the North Carolina General Statutes,
Plaintiff seeks to have the Court order “a full accounting of all records of Charlotte
Winnelson . . . from January 1, 2007 through the date of this request . . . .” (Am.
Compl. ¶ 52.)
{19} A shareholder is entitled to inspect and copy records of a corporation
when the shareholder makes a written demand (1) in good faith and for a proper
purpose, (2) describing with reasonable particularity the records he desires to
inspect,1 and (3) the requested records are directly connected to the stated purpose
1
“Under the ‘reasonable particularity’ requirement, a shareholder should make more
meaningful statements of purpose and the desired records when ‘feasible.’ Whether a
for inspection.2 N.C. Gen. Stat. § 55-16-02(c) (2010). The written demand must be
made “at least five business days before the date on which [the shareholder] wishes
to inspect and copy.”
N.C. Gen. Stat. § 55-16-02(b).
{20} If, after making a qualifying written demand for inspection, the
corporation refuses to allow the shareholder access to the requested records within
a reasonable time, the shareholder may apply to the court for an order to permit
copying and inspection of the records sought. N.C. Gen. Stat. § 55-16-04(b) (2010).
{21} Section 55-16-02(c)’s inspection requirements are conditions precedent
to court-ordered inspection. See N.C. Gen. Stat. § 55-16-04(b).
{22} Although Plaintiff refers to a demand for records in his Amended
Complaint, he does not allege that he made a qualifying demand under Section 55-
16-02(b) and (c), or that the corporation refused such a demand. (Am. Compl. ¶ 43.)
{23} The Court’s focus in addressing this claim is upon the demand itself.
As amended, the Complaint is void of any allegations identifying the purpose of the
request, alleging that it was made in good faith, showing that Plaintiff identified
the requested documents with reasonable particularity, or claiming that Charlotte
Winnelson refused to provide an opportunity for inspection. Furthermore, the scope
of Plaintiff’s request is far too broad. Plaintiff’s request for “all records of Charlotte
Winnelson, including . . . all shareholder records[,] . . . and all accounting records of
the corporation,” fails to correlate his demand to the purpose for inspection, or
shareholder has described his purpose or the desired records with reasonable particularity
necessarily depends upon the facts and circumstances of each case.” Parsons v. Jefferson-Pilot Corp., 333 N.C. 420, 429,
426 S.E.2d 685, 691 (1993). The Parson court went on to
find that when construing the reasonably particularity requirement of Section 55-16-02(c),
it is helpful to consider the interpretation of the “reasonable particularity” requirement
within Rule 34(b) of the Federal Rules of Civil Procedure. Interpretations of Rule 34(b)
have found that when determining whether the requirement has been met “the goal is that
the designation be sufficient to apprise a man of ordinary intelligence what documents are
required.” 8 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 2211,
at 628-31 (1970).
2
“To determine whether a shareholder’s demand meets the requirements of N.C.G.S. § 55-
16-02(c), the trial court must focus upon the demand itself, not upon the shareholder’s
subsequent pleadings or motions filed in an attempt to compel inspection under N.C.G.S. §
55-16-04(b).” Parsons v. Jefferson-Pilot Corp.,
106 N.C. App. 307, 323,
416 S.E.2d 914, 923
(1992), aff’d in part and rev’d in part,
333 N.C. 420,
426 S.E.2d 685 (1993).
provide sufficient guidance so that a person of ordinary intelligence would know
what documents were being requested. (Am. Compl. ¶ 52.)
{24} Absent a written demand that meets the statutory requirements of
Section 55-16-02, Plaintiff’s request for a court order to inspect corporate documents
is not ripe for determination. For the reasons given, the Court hereby GRANTS
Defendants’ Motion to Dismiss with respect to this claim.
B.
BREACH OF FIDUCIARY DUTY
1.
CHOICE OF LAW
{25} “Under North Carolina law, if a derivative claim is asserted against a
foreign corporation[,] the courts of this state look to the laws of the state in which
the company is incorporated to determine the procedural prerequisites and whether
the claim is derivative or individual.” Maurer v. SlickEdit, Inc., 2005 NCBC 1 ¶ 26
(N.C. Super. Ct. May 16, 2005) http://www.ncbusinesscourt.net/opinions/2005%20
NCBC%201.htm; see also
N.C. Gen. Stat. § 55-7-47 (2010). Charlotte Winnelson is
incorporated under the laws of the state of Delaware, thus Delaware law applies to
Plaintiff’s derivative claims and provides the basis for determining which of
Plaintiff’s claims are derivative or direct. (Am. Compl. ¶ 2.)
{26} Under Delaware law, “[t]o determine whether [plaintiff] states a
derivative or an individual cause of action, [the Court] must look to the nature of
the wrongs alleged in the complaint rather than plaintiff’s designations or stated
intention.” Weinberger v. Lorenzo, 1990 Del. Ch. LEXIS 169, at *6 (October 11,
1990). When reviewing the complaint, a court must ask two questions: (1) “Who
suffered the alleged harm and [(2)] who would receive the benefit of any recovery or
other remedy?” Feldman v. Cutaia,
951 A.2d 727, 732 (Del. 2007) (quoting Tooley v.
Davidson, Lufkin, & Jenrette, Inc.,
845 A.2d 1031, 1033 (Del. 2004)).
If the corporation alone, rather than the individual stockholder,
suffered the alleged harm, the corporation alone is entitled to recover,
and the claim . . . is derivative. Conversely, if the stockholder suffered
harm independent of any injury to the corporation that would entitle
him to an individualized recovery, the cause of action is direct.
Id.
{27} The Feldman court went on to say:
Where all of a corporation’s stockholders are harmed and would
recover pro rata in proportion with their ownership of the corporation’s
stock solely because they are stockholders, then the claim is derivative
in nature. The mere fact that the alleged harm is ultimately suffered
by, or the recovery would ultimately inure to the benefit of, the
stockholders does not make a claim direct . . . . In order to state a
direct claim, the plaintiff must have suffered some individualized
harm not suffered by all of the stockholders at large.
Id. at 733. While the distinction between derivative and direct claims is important
when evaluating the sufficiency of the pleadings, it is entirely possible “[u]nder
Delaware law, . . . for the same set of facts to generate both a direct claim and a
derivative claim.” MCG Capital Corp. v. Maginn, 2010 Del. Ch. LEXIS 87, at *47
(Del. Ch. May 5, 2010) (citing Gentile v. Rossette,
906 A.2d 91, 100 n.19 (Del.
2006)).
{28} Count II of Plaintiff’s Amended Complaint (Breach of Fiduciary
Duties) appears to be an olio of allegations describing conduct that gives rise to both
direct and derivative claims. Plaintiff alleges that Charlotte Winnelson’s Board of
Directors was under the complete domination of WinWholesale and, accordingly,
WinWholsale “owed fiduciary duties of good faith, loyalty and due care to Charlotte
Winnelson and the members of Charlotte Winnelson, including [Plaintiff].” (Am.
Compl. ¶ 56.) In addition, Plaintiff argues that WinWholesale owed fiduciary duties
to Charlotte Winnelson, its minority shareholders, and Plaintiff because of its
status as a majority shareholder. (Am. Compl. ¶ 57.) Lastly, Plaintiff alleges that
his termination as President, and removal as a Member of the Board of Directors,
was not approved by Charlotte Winnelson’s Board of Directors, and that he was
“excluded from . . . [subsequent] Board [and] shareholder meetings.” (Am. Compl.
¶¶ 40, 44.)
{29} Plaintiff’s allegations concerning WinWholesale’s acquisition of a
majority stake in Charlotte Winnelson, WinWholesale’s domination and control over
Charlotte Winnelson, Plaintiff’s termination as President and CEO, WinWholesale’s
mismanagement of the transition from Plaintiff to his successor, Defendant
Bohannon’s breach of fiduciary duties to Charlotte Winnelson, and the drop in
Charlotte Winnelson’s share value suggest that Charlotte Winnelson and its
shareholders were owed fiduciary duties by WinWholesale and/or Bohannon, that
both Charlotte Winnelson and each shareholder suffered harm, and that both
Charlotte Winnelson and its shareholders would benefit from any potential
recovery. Plaintiff does not claim that he suffered individualized harm because he
was owed the same duties as any other shareholder and, under Feldman, would be
entitled to recover in pro rata proportion. Accordingly, Plaintiff’s claims based on
the duties of WinWholesale and Brohannon to Charlotte Winnelson and its
shareholders are derivative in nature. See Tooley, 845 A.2d at 1033.
{30} On the other hand, Plaintiff’s allegations that he was excluded from
shareholder meetings indicate that he was prevented from exercising his right to
vote as a shareholder. If true, under Tooley, Defendants’ actions would constitute
violations of individual shareholder rights, cause harm to Plaintiff individually, and
only be recoverable by Plaintiff. Accordingly, these allegations constitute direct
claims. Id.
2.
Derivative Claims
{31} The presence of both direct and derivative claims within Count II of
Plaintiff’s Amended Complaint requires the Court to look at each independently.
With regard to Plaintiff’s derivative claims, in addition to the pleading
requirements listed above, under both Delaware and North Carolina law, in order
“to survive a motion to dismiss, ‘a plaintiff must allege well pleaded facts to
overcome the presumption [of the business judgment rule].’” Parnes v. Bally Entm’t
Corp., 722 A.2d 1243, 1246 (Del. 1999); accord Green v. Condra,
2009 NCBC 21 ¶ 96
(N.C. Super. Ct. August 14, 2009), http://www.ncbusinesscourt.net/opinions/2009
_NCBC_21.pdf.
{32} The business judgment rule is “‘a presumption that in making a
business decision the directors of a corporation acted on an informed basis, in good
faith and in the honest belief that the action taken was in the best interests of the
company.’” Gantler v. Stephens, 965 A.2d 695, 705-06 (Del. 2009) (quoting Aronson
v. Lewis,
473 A.2d 805, 812 (Del. 1984)); accord Green,
2009 NCBC 21 ¶ 94. At a
minimum, “to overcome the presumption of the business judgment rule, the burden
is on the plaintiff to show the defendant directors failed to act (1) in good faith, (2)
in the honest belief that the action taken was in the best interest of the company or
(3) on an informed basis.” Krim v. Pronet,
744 A.2d 523, 527 (Del. Ch. 1999); accord
Winters v. First Union Corp.,
2001 NCBC 08 ¶ 17 (N.C. Super. Ct. August 14,
2001), http://www.ncbusinesscourt.net/opinions/2001%20 NCBC%2008.htm (stating
that the board’s decisions will be entitled to a presumption of reasonableness unless
Plaintiff makes “specific allegations of bad faith or inattentiveness.”).
{33} The Amended Complaint alleges that: (1) WinWholesale wanted a
controlling interest in Charlotte Winnelson; (2) WinWholesale obtained this
interest, unbeknownst to Plaintiff, by entering into a voting trust with another
shareholder; (3) Plaintiff’s termination from his position as President of Charlotte
Winnelson was done in bad faith and was not in the best interest of Charlotte
Winnelson; (4) the transition from Plaintiff to the new president was mismanaged;
and (5) the above mentioned decisions caused Charlotte Winnelson to lose value.
(Am. Compl. ¶¶ 24, 28, 34-49.)
{34} The allegations listed above do not constitute specific facts supporting
Plaintiff’s conclusory allegations that Defendants’ actions were “not done in good
faith.” (Am. Compl. ¶ 49.) Generally, Plaintiff’s allegations are that WinWholesale
wanted a controlling interest in Charlotte Winnelson, obtained it through a voting
agreement, fired Plaintiff, and mismanaged the transition from Plaintiff to his
successor resulting in a loss in value to Charlotte Winnelson. While Plaintiff
summarily states that this was done in bad faith, except for the mismanagement
assertion, generally what Plaintiff describes is in fact routine conduct for directors
engaged in fundamental business decision making. None of the facts alleged by
Plaintiff support his assertion that the Board of Directors acted in bad faith, on an
uninformed basis, or without the best interests of the company in mind.
Accordingly, Plaintiff’s derivative claims for breach of fiduciary duty fail to
overcome the business judgment rule and should be dismissed.
3.
Direct Claims
{35} Unlike derivative claims, direct claims do not implicate the business
judgment rule. When assessing whether a direct claim has met the pleading
requirements of 12(b)(6), “[t]he complaint must be liberally construed, and the court
should not dismiss the complaint unless it appears beyond a doubt that the plaintiff
could not prove any set of facts to support his claim which would entitle him to
relief.” Block, at 277-78, 540 S.E.2d at 419. Here, Plaintiff alleges that after his
termination, while still a shareholder, he was “excluded from . . . Board . . . [and]
shareholder meetings.” (Am. Compl. ¶ 44.) Plaintiff’s allegations that Defendants
prevented him from exercising his shareholder right to vote sufficiently allege
harms to his voting rights as a shareholder. Accordingly, the Complaint states a
claim for which relief can be granted. See Tooley,
845 A.2d at 1033; see also
Grayson v. Imagination Station, Inc.,
2010 Del. Ch. LEXIS 169 at *14 (Del. Ch. Aug.
16, 2010).
{36} For these reasons, the Court hereby GRANTS Defendants’ Motion to
Dismiss in part as to Plaintiff’s derivative based claim for breach of fiduciary duties,
and DENIES Defendants’ Motion to Dismiss with respect to Plaintiff’s direct claim.
C.
BREACH OF CONTRACT
{37} “The elements of a claim for breach of contract are (1) existence of a
valid contract and (2) breach of the terms of that contract.” Poor v. Hill, 138 N.C.
App. 19, 25,
530 S.E.2d 838, 843 (2000) (internal citations omitted).
{38} The elements of a valid contract are “offer, acceptance, consideration,
and mutuality of assent to the contract’s essential terms.” Media Network, Inc. v.
Mullen Adver., Inc., 2007 NCBC 01 ¶ 65 (N.C. Super. Ct. Jan. 19, 2007), http://
www.ncbusinesscourt.net/opinions/2007%20NCBC%201.pdf (citing Cap Care
Group, Inc. v. McDonald,
149 N.C. App. 817, 822,
561 S.E.2d 578, 582 (2002)).
{39} The essence of any contract is the mutual assent of both parties to the
terms of the agreement so as to establish a meeting of the minds. See Pike v.
Wachovia Bank & Trust Co., 274 N.C. 1, 11,
161 S.E. 2d 453, 462 (1968). In North
Carolina, “the parties ‘must assent to the same thing in the same sense, and their
minds must meet as to all the terms. If any portion of the proposed terms is not
settled, or no mode agreed on by which they may be settled, there is no agreement.’”
Boyce v. McMahan,
285 N.C. 730, 734,
208 S.E.2d 692, 695 (1974) (quoting Croom v.
Goldsboro Lumber Co.,
182 N.C. 217, 220,
108 S.E. 735, 737 (1921)). “A party may
not enforce a purported contract that omits the ‘nature and extent of the service to
be performed, the place where, and the person to whom it is to be rendered, and the
compensation to be paid.’” Media Network, Inc.,
2007 NCBC 01 ¶ 74.
{40} The Amended Complaint alleges that when Plaintiff was considering
investing in Charlotte Winnelson in 1999, representations were made to him that if
he were ever to leave Charlotte Winnelson, or want to sell his shares:
WinWholesale would immediately buy back the shares using the ‘book
value’ of the shares at the time he left the company as a basis for
determining their value, which would include a premium in
recognition of the ‘going concern’ value of the shares – e.g., that the
selling shareholder would not only be giving up his or her interest in
the current value of the assets of the company, but also the right to
receive future profits and dividend checks.
(Am. Compl. ¶ 20.)
{41} The Amended Complaint goes on to allege that, after Plaintiff’s
investment, the company policy of repurchasing shares was reflected in comments
made by WinWholesale’s President in The Spirit, a WinWholesale corporate
publication, and that this policy had been in place since at least 1980, but was not
formalized until 2001-2003 when shareholders were notified of the modifications.
(Am.Compl. ¶¶ 21-23.)
{42} While Plaintiff does allege that someone made representations to him
about a share buy-back program, nothing in the Amended Complaint specifically
alleges who made the representations, what position the speaker held, or whether
that person was authorized to bind Defendants in a contract negotiation. Even if
the Court were to accept that the person who made the representations to Plaintiff
was an agent of WinWholesale, the contract, as pled, would be unenforceable for
lack of mutual assent.
{43} Here, Plaintiff has alleged that, under the purported contract, the
value of his shares would be calculated using the “book value,” and that he would
receive a “premium,” to compensate him for “the ‘going concern’ value of the shares,”
and loss of right to future profits and dividend checks. (Am. Compl. ¶ 20.) While
the Court might be able to find that the “book value” could be calculated by
assessing the current value of the assets of the company divided by the number of
shares issued, there are no allegations in the Amended Complaint that detail the
parties’ agreement on how the “premium” would be determined. (Am. Compl. ¶ 20.)
The omission of how compensation was to be paid, under North Carolina law,
renders the contract unenforceable. See Media Network, Inc., 2007 NCBC 01 ¶ 74
(dismissing a claim for breach of contract where the number, location, and date of
advertisement postings was not agreed to by the parties).
{44} Accordingly, the Court GRANTS Defendants’ Motion to Dismiss with
respect to this claim.
D.
UNFAIR AND DECEPTIVE TRADE PRACTICES
{45} “To establish a prima facie claim for unfair trade practices, the
defendants must show: (1) plaintiff committed an unfair or deceptive act or practice,
(2) the action in question was in or affecting commerce, . . . and (3) the act
proximately caused injury to defendants.” Gress v. Rowboat Co., 190 N.C. App. 773,
776,
661 S.E.2d 278, 281 (2008) (citing Pleasant Valley Promenade v. Lechmere,
Inc.,
120 N.C. App. 650, 664,
464 S.E.2d 47, 58 (1995)); see also
N.C. Gen. Stat. § 75-
1.1(a) (2010).
{46} “A practice is unfair if it is unethical or unscrupulous, and it is
deceptive if it has a tendency to deceive.” Dalton v. Camp, 353 N.C. 647, 656,
548
S.E.2d 704, 711 (2001) (citing Polo Fashions, Inc. v. Craftex, Inc.,
816 F.2d 145, 148
(4th Cir. 1987)). “The determination as to whether an act is unfair or deceptive is a
question of law for the court.”
Id. (citing Gray v. N.C. Ins. Underwriting Ass’n,
352
N.C. 61, 68,
529 S.E.2d 676, 681 (2000)).
{47} “[E]mployer-employee relationships do not fall within the intended
scope of [the Unfair and Deceptive Trade Practices Act (“UDTPA”)].” Buie v. Daniel
International, 56 N.C. App. 445, 448,
289 S.E.2d 118, 119-20 (1982), disc. review
denied,
305 N.C. 759,
292 S.E.2d 574 (1982). Moreover, “‘actions for unfair or
deceptive trade practices are distinct from actions for breach of contract . . . .’ Thus,
[a] ‘plaintiff must show substantial aggravating circumstances attending [a] breach
[of contract] to recover under the [UDTPA].’” Watson Elec. Constr. Co. v. Summit
Cos., LLC,
160 N.C. App. 647, 657,
587 S.E.2d 87, 95 (2003) (quoting Eastover
Ridge, L.L.C. v. Metric Constructors, Inc.,
139 N.C. App. 360, 367-68,
533 S.E.2d
827, 832-33 (2000)).
{48} The North Carolina Supreme Court has held:
[T]he [North Carolina] General Assembly did not intend for the
[UDTPA’s] protections to extend to a business’s internal operations.. As
we determined in HAJMM Co.. and Dalton, the [UDTPA] is not focused
on the internal conduct of individuals within a single market
participant, that is, within a single business. To the contrary, as we
observed in Bhatti and Sara Lee, the General Assembly intended the
[UDTPA’s] provisions to apply to interactions between market
participants. As a result, any unfair or deceptive conduct contained
solely within a single business is not covered by the [UDTPA].
White v. Thompson, 364 N.C. 47, 53,
691 S.E.2d 676, 680 (2010).
{49} Plaintiff has failed to make sufficient allegations in his Amended
Compliant of unfair or deceptive practices. While Plaintiff directs the Court to
allegations of conspiracy and an unfair take-over of the company, those allegations
are conclusory and the Amended Complaint does not provide facts to support
Plaintiff’s assertions. Accordingly, Plaintiff has failed to meet the first requirement
of the UDTPA. See N.C. Gen. Stat. § 75-1.1(a) (2011).
{50} Even if the Court concluded that Plaintiff had sufficiently alleged
unfair or deceptive acts, the Amended Complaint does not allege actions that affect
commerce. This case centers on Plaintiff’s termination as president of Charlotte
Winnelson and the alleged failure of Defendants to honor a buy-back arrangement
reached when Plaintiff initially invested in Charlotte Winnelson. As was the case
in Maurer v. SlickEdit, Inc., here Plaintiff’s claims only “attempt to create liability
for matters of the internal operations of a corporation [and] . . . relate to the
internal corporate affairs of [Charlotte Winnelson].” Maurer, 2005 NCBC 1 ¶ 40.
Because the matters herein involve internal governance rather than extramural
commerce, the Court concludes as a matter of law that the actions in question were
not in or affecting commerce. As such, Plaintiff’s Complaint fails to allege sufficient
facts to support a cause of action for violation of the UDTPA.
{51} The Court, therefore, GRANTS Defendants’ Motion to Dismiss with
respect to this claim.
IV.
CONCLUSION
{52} The Court GRANTS Defendants’ Motion to Dismiss with respect to
Count One (Demand for Accounting), Count Three (Breach of Contract) and Count
Four (Unfair and Deceptive Trade Practices); and GRANTS Defendants’ Motion to
Dismiss, in part, as to Plaintiff’s derivative claims for Breach of Fiduciary Duty, and
DENIES Defendants’ Motion to Dismiss with respect to Plaintiff’s direct claims for
Breach of Fiduciary Duty.
{53} Wherefore, the Court hereby DISMISSES Plaintiff’s claim for Demand
for Accounting, without prejudice; DISMISSES Plaintiff’s claims for Breach of
Contract and Unfair and Deceptive Trade Practices, with prejudice, and
DISMISSES Plaintiff’s derivative claims for Breach of Fiduciary Duty, with
prejudice.
SO ORDERED,
ORDERED this the 13th day of January, 2012.
