Shaw v. Gee

Shaw v. Gee, 

.


STATE OF NORTH CAROLINA                      IN THE GENERAL COURT OF JUSTICE
                                                 SUPERIOR COURT DIVISION
MECKLENBURG COUNTY                                      16 CVS 3878

JAMES S. SHAW in the right of
GVEST PARTNERS, LLC, a North
Carolina Limited Liability Company,

                        Plaintiff,

v.                                                 ORDER AND OPINION ON
                                              DEFENDANT’S MOTION TO DISMISS
RAYMOND M. GEE,
                                              PLAINTIFF’S AMENDED COMPLAINT
                        Defendant.


     1.     THIS MATTER is before the Court upon Defendant Raymond M. Gee’s

(“Gee” or “Defendant”) Motion to Dismiss the Amended Complaint pursuant to Rule

12(b)(6) of the North Carolina Rules of Civil Procedure (“Rule(s)”) (the “Motion”) in

the above-captioned case.

     2.     Having considered the Motion, the briefs in support of and in opposition to

the Motion, and the arguments of counsel at the hearing on July 21, 2016, the Court

hereby DENIES the Motion.

          Weissman, Nowack, Curry & Wilco, P.C., by David L. Rusnak, and
          Robinson, Bradshaw & Hinson, P.A., by Julian H. Wright, Jr. and Stuart
          L. Pratt, for Plaintiff James S. Shaw in the right of Gvest Partners, LLC,
          a North Carolina Limited Liability Company.

          Baucom, Claytor, Benton, Morgan & Wood, P.A., by Rex C. Morgan, for
          Defendant Raymond M. Gee.

Bledsoe, Judge.
                                              I.

                   FACTUAL AND PROCEDURAL BACKGROUND

    3.    The Court does not make findings of fact on motions to dismiss under Rule

12(b)(6), but only recites those facts included in the Amended Complaint that are

relevant to the Court’s determination of the Motion.

    4.    Gvest Partners, LLC (“Gvest”) is a North Carolina limited liability company.

(Am. Compl. ¶ 2.) Plaintiff James S. Shaw (“Plaintiff” or “Shaw”) and Gee are equal

members and co-managers of Gvest. (Am. Compl. ¶ 7.)

    5.    After working together for a number of years, Shaw and Gee engaged in

discussions in April 2014 to terminate and separate the “universe of their common

business interests and opportunities,” including Gvest. (Am. Compl. ¶¶ 29–30.) To

that end, on April 24, 2014, Shaw and Gee entered into a Dissolution and Separation

Agreement (“Agreement”). In the Agreement, Shaw and Gee released each other from

certain claims relating to Gvest (the “Release”). (Am. Compl. ¶ 30.) Both Shaw and

Gee signed the Agreement “individually/personally” and “to the extent he is a

member, stakeholder, or holds an interest in any entity identified herein.” (Compl.

Ex. B, hereinafter the “Agreement”.)1

    6.    Some months prior to executing the Agreement, Gvest sought to purchase

certain real property in Sherrill’s Ford, North Carolina for development (the


1 The Amended Complaint references two exhibits, Exhibits A and B, which were attached
to the original complaint. (Am. Compl. ¶¶ 9, 30.) The Court concludes that it may consider
those exhibits without converting the Motion into one for summary judgment. See Oberlin
Capital, L.P. v. Slavin, 

, 

 (2001) (holding that a Court
ruling on a Rule 12(b)(6) motion can properly review documents specifically referenced in a
complaint, even if not attached directly to the complaint).
“Sherrill’s Ford Property,” “Sherrill’s Ford Project,” or “Project”). (Am. Compl. ¶ 14.)

Gvest ultimately did not pursue the Project. (Am. Compl. ¶ 16.) Instead, Lullwater

Holdings, LLC (“Lullwater”) purchased the Sherrill’s Ford Property after Shaw

informed Lullwater of the Project. (Am. Compl. ¶ 17.) At the closing of the Sherrill’s

Ford Property, Lullwater paid Gvest approximately $243,000 for out-of-pocket

pursuit costs Gvest incurred before terminating its pursuit of the Project. (Am.

Compl. ¶ 18.) Although Shaw, Gee, and other Gvest employees spent a considerable

amount of time and effort pursuing the Project, Gvest did not request payment for

these costs because Shaw, as a custom, did not seek fees or commissions from persons

with whom he had a preexisting business relationship, like Lullwater’s principal

here. (Am. Compl. ¶ 19.)

   7.    Unbeknownst to Shaw, however, Gee asked Lullwater to pay Gee and

another Gvest employee, Adam A. Martin (“Martin”), for the time and effort expended

by Shaw, Gee, and other Gvest employees in pursuit of the Sherrill’s Ford Project.

(Am. Compl. ¶ 22.) To avoid disclosure of the request to Shaw, Gee told Lullwater

not to disclose the payments to Shaw and requested that Lullwater make the

payments to Gee Real Estate, LLC (“GRE”), rather than to Gee, and to NAV Real

Estate, LLC (“NAV”), rather than to Martin. (Am. Compl. ¶ 24.) Gee additionally

requested that the checks designate that payment was made for the BCM Acquisition

instead of the Sherrill’s Ford Project. (Am. Compl. ¶ 24.) Lullwater adhered to Gee’s

requests and issued two checks on April 10, 2014, one in the amount of $200,000
payable to GRE, and the other in the amount of $100,000 payable to NAV

(collectively, the “Lullwater Payments”). (Am. Compl. ¶ 25.)

   8.    Shaw alleges that had he known about the Lullwater Payments, he would

have required the payments to be made to Gvest and that Gvest would have then

distributed the payments to the members of Gvest under the terms of the Operating

Agreement.2 (Am. Compl. ¶ 20.)

   9.    During Shaw’s negotiations with Gee concerning the Agreement and the

Release, Gee did not disclose the Lullwater Payments. (Am. Compl. ¶ 29.) Shaw

alleges that if Gee had disclosed the Lullwater Payments, Shaw would have made a

specific exception to the Release or otherwise addressed the Lullwater Payments in

the Agreement. (Am. Compl. ¶ 31.)

   10.   Shaw filed this action on March 3, 2016, and subsequently filed an Amended

Complaint on April 22, 2016. The Amended Complaint contains a derivative claim

for breach of fiduciary duty and seeks a declaratory judgment that the Release may

not be enforced against Shaw because it was obtained through fraud. (Am. Compl. ¶

40.)

   11.   Gee’s Motion seeks dismissal of each of Shaw’s claims under Rule 12(b)(6).

The Court held a hearing on the Motion on July 21, 2016, at which all parties were

represented by counsel. The Motion is now ripe for resolution.




2 At the hearing on the Motion, the Court received a copy of the Operating Agreement with

the consent of both Plaintiff’s counsel and Defendant’s counsel. However, the Court has not
found it necessary to rely upon or consider the Operating Agreement in its analysis and
determination of Defendant’s 12(b)(6) motion.
                                          II.

                                 LEGAL STANDARD

   12.   On a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina

Rules of Civil Procedure, the Court considers “whether the complaint, when liberally

construed, states a claim upon which relief can be granted on any theory.” Oberlin

Capital, L.P. v. Slavin, 

, 

 (2001) (emphasis in

original) (citation omitted). “[T]he complaint must provide sufficient notice of the

events and circumstances from which the claim arises, and must state allegations

sufficient to satisfy elements of at least some recognized claim.” Harris v. NCNB

Nat’l Bank of N.C., 

, 

 (1987). The Court

construes the complaint liberally and generally accepts all allegations as true. Laster

v. Francis, 

, 

 (2009).

   13.   Where the pleading refers to and depends on certain documents, the Court

may consider those documents without converting the motion into one for summary

judgment under Rule 56. Schlieper v. Johnson, 

, 

 (2009).

   14.    Dismissal under Rule 12(b)(6) is proper only “when one or more of the

following three conditions is satisfied: (1) when the complaint on its face reveals that

no law supports plaintiff’s claim; (2) when the complaint reveals on its face the

absence of fact sufficient to make a good claim; [or] (3) when some fact disclosed in

the complaint necessarily defeats the plaintiff’s claim.” Oates v. JAG, Inc., 

, 

 (1985) (citation omitted). Otherwise, “a complaint
should not be dismissed for insufficiency unless it appears to a certainty that plaintiff

is entitled to no relief under any state of facts which could be proved in support of the

claim.” Sutton v. Duke, 

, 

 (1970) (emphasis

omitted).

                                           III.

                                       ANALYSIS

   15.      Gee contends that Shaw has failed to state a claim for relief in the Amended

Complaint because the Release bars Shaw from bringing a derivative lawsuit on

behalf of Gvest as a matter of law. (Def.’s Br. Supp. Mot. Dismiss 5.) Gee further

contends that the Amended Complaint fails to sufficiently allege fraud as a bar to the

Release, (Def.’s Br. Supp. Mot. Dismiss 7), and that Shaw has ratified the Agreement

and the Release, precluding Shaw’s fraud defense, (Def.’s Br. Supp. Mot. Dismiss 10).

Finally, Gee contends, separate and apart from his Release-based argument, that

Gee’s derivative claim for breach of fiduciary duty should be dismissed because Gvest

cannot show damages resulting from the alleged breach. (Def.’s Br. Supp. Mot.

Dismiss 12.)

   A. The Release

   16.      Shaw seeks a declaratory judgment that the Release is unenforceable

against him. Under North Carolina law, “[a] release ‘operates as a merger of, and

bars all right to recover on, the claim or right of action’ covered by the release.” RCJJ,

LLC v. RCWIL Enters., LLC, 

, at *16 (N.C. Super. Ct. June 20,

2016) (citation omitted). “Releases are contractual in nature and their interpretation
is governed by the same rules governing interpretation of contracts.” Chemimetals

Processing, Inc. v. Schrimsher, 

, 

 (2000)

(citation omitted). However, a release, like other contracts, is unenforceable when it

is procured through fraud. See, e.g., Sykes v. Keiltex Indus., Inc., 

, 

 (1996) (citing Cunningham v. Brown, 

,

 (1981)).

   17.     The Agreement contains the following Release:

         The following release of rights, claims and interests is limited to Gvest
         Partners LLC and any other entity under the Gvest name: Shaw and JS
         Real Estate Investments LLC and Gee and Gee Real Estate LLC hereby
         fully, forever, irrevocably and unconditionally release and discharge
         each other from any other rights, claims or interest related to Gvest
         Partners LLC and any other entity under the Gvest name except those
         discussed in this Agreement.

(Agreement § VI.) Shaw and Gee each signed the Agreement twice; first, in their

individual capacities, and second, “to the extent [each] is a member, stakeholder, or

holds an interest in any entity identified herein.” (Agreement.)

            1. The Release’s Application to Shaw’s Derivative Claim

   18.     Gee argues that because Shaw signed the Agreement “to the extent he . . .

holds an interest in an entity identified herein,” and because Gvest is one of the

entities identified in the Release, Shaw has released all of his “ownership interests”

in Gvest as defined by N.C. Gen. Stat. § 57D-1-03, which includes “any right to bring

a derivative action.” (Def.’s Reply Supp. Mot. Dismiss 1–2.) Shaw responds in

opposition that the Release cannot be properly read to release derivative claims, but

regardless of whether the Release applies to derivative claims, Shaw claims that the
Release is unenforceable because it was procured through fraud (“Fraud Defense”).

(Pl.’s Memo. Opp. Mot. Dismiss 4–5.)

   19.   The Court employs general rules of contract construction to interpret the

Release. Chemimetals Processing, Inc., 

, 

. “The

scope and extent of the release should be governed by the intention of the parties,

which must be determined by reference to the language, subject matter and purpose

of the release.” 

 The language in the contract “must be construed to mean what

on its face it purports to mean,” Fin. Servs. of Raleigh, Inc. v. Barefoot, 

, 

 (2004) (quoting Hartford Accident & Indem. Co. v. Hood,

, 

 (1946)), and to give every word and every

provision effect, In re Foreclosure of a Deed of Trust, 

, 

 (2011) (citation omitted). When a release’s language is clear and

unambiguous, construction of the release is a matter of law for the court. TaiDoc

Tech. Corp. v. O.K. Biotech Co., 

 at *14 (N.C. Super. Ct. July

17, 2015) (quoting Piedmont Bank & Trust Co. v. Stevenson, 

,

, aff'd per curiam, 

, 

 (1986)).

   20.   The Court concludes that the plain language of the Release and the

Agreement is clear and unambiguous.            The Release, which “release[d] and

discharge[d] [Gee and Gee Real Estate LLC] from any other rights, claims or interest

related to Gvest,” was signed by Shaw “to the extent he is a member, stakeholder, or

holds an interest in any entity identified herein,” including Gvest. (Agreement.) The

Court concludes that under a plain reading of the Release, “interest” as used here
includes Shaw’s rights as a member and stakeholder in Gvest and is intended to cover

all of Shaw’s ownership interests in Gvest. Because a person’s “ownership interests”

in a North Carolina limited liability company like Gvest are defined in N.C. Gen.

Stat. § 57D-1-03 and expressly include the “right to bring a derivative action,” the

Court concludes that Shaw has released any right he has to bring a derivative action

on behalf of Gvest and has affirmed the Release by signing the Release in his capacity

as a member, stakeholder or other interest holder in Gvest.

          2. Gee’s Alleged Fraud as a Bar to the Release

   21.   Next, the Court addresses Gee’s contention that Shaw is not entitled to the

requested declaratory judgment because Plaintiff has not sufficiently alleged that

fraud bars enforcement of the Release. “[F]raud may be based on an ‘affirmative

misrepresentation of a material fact, or a failure to disclose a material fact relating

to a transaction which the party had a duty to disclose.’” Hardin v. KCS Int’l, Inc.,

, 

 (2009) (quoting Harton v. Harton, 

, 

 (1986)).

   22.   The essential elements of fraud are: “(1) False representation or

concealment of a [past or existing] material fact, (2) reasonably calculated to deceive,

(3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage

to the injured party.” 

 (alteration in the original) (citation omitted).

   23.   Gee argues that Shaw has failed to plead the necessary elements of his

Fraud Defense by not alleging any facts showing a duty to disclose and by admitting
in the Amended Complaint the immateriality of the information withheld. (Def.’s Br.

Supp. Mot. Dismiss 8; Def.’s Reply 3.)

   24.   A duty to disclose arises where either: (1) the parties to the transaction are

in a fiduciary relationship; (2) the parties are not fiduciaries and “a party has taken

affirmative steps to conceal material facts from the other”; or (3) the parties are not

fiduciaries and “one party has knowledge of a latent defect in the subject matter of

the negotiations about which the other party is both ignorant and unable to discover

through reasonable diligence.” Hardin, 

, 

(quoting Sidden v. Mailman, 

, 

, 270–71 (2000)).

   25.   Shaw acknowledges that a fiduciary relationship did not exist between

Shaw and Gee as member-managers of Gvest. See Kaplan v. O.K. Techs, LLC, 

, 

 (2009) (holding that managers do not owe a

fiduciary duty to other member-managers solely on the basis of their relationship as

a member-manager of the limited liability company); RCJJ, LLC, 

, at *28 (“Under North Carolina law, a manager does not have a fiduciary duty to

the individual members of the company.”). Shaw argues instead that he alleges facts

in the Amended Complaint showing that Gee took affirmative steps to conceal

material facts from him. A fact is material if, had it been known to the party, it would

have influenced the party’s judgment or decision in making the contract. Godfrey v.

Res-Care, Inc., 

, 75–76, 

 (2004) (citing Machine

Co. v. Bullock, 

, 

 (1912)).
   26.   Shaw argues, and the Court agrees, that the Amended Complaint asserts

specific affirmative acts that Gee took to conceal the Lullwater Payments.         In

particular, Shaw contends that Gee “secretly asked Lullwater to pay him and Martin,

in the aggregate, $300,000 for work Gvest . . . performed in pursuit of the Sherrill’s

Ford Project.” (Am. Compl. ¶ 22.) Shaw also alleges that Gee asked “Lullwater to

pay [GRE] instead of Gee, and to pay [NAV] instead of Martin” in order to ensure

Shaw was not aware of the secret payments. (Am. Compl. ¶ 24.) Shaw further

contends that Gee directed Lullwater to designate on the checks that the payments

were made in connection with the BCM Acquisition instead of the Sherrill’s Ford

Project. (Am. Compl. ¶ 24.) Shaw also alleges that Gee instructed Lullwater “not to

disclose such payments in any matter to Shaw” and made false “assurances [to Shaw]

that Gee had fully and honestly disclosed the scope and extent of [Gvest’s] business

interests and opportunities.” (Am. Compl. ¶¶ 24, 31.)

   27.   As a result, having determined that Shaw has alleged that Gee took specific

affirmative steps to conceal the Lullwater Payments, the Court must next decide

whether Shaw pleads in the Amended Complaint that the existence of, and

circumstances surrounding, the Lullwater Payments were material facts. As to that

issue, Shaw specifically alleges: “Had Gee not fraudulently failed to disclose the

Lullwater Payments, Shaw would have made the Lullwater Payments a specific

exception to the release contained in the Agreement or otherwise addressed such

payments in the Agreement.” (Am. Compl. ¶ 31.) As such, Plaintiff contends the

Lullwater Payments were material.
   28.   Defendant argues that the Lullwater Payments were not material because

the Amended Complaint alleges that Gvest “did not ask to be paid” based on Shaw’s

preexisting relationship with Lullwater’s principal and Shaw’s “custom and

practice . . . not to seek fees or commissions from persons involved with him in other

business pursuits.” (Am. Compl. ¶ 19.) Defendant’s argument, however, confuses the

legal inquiry for materiality and fails to focus on the parties’ entry into the Agreement

and Release as the transactions at issue here. Whether Shaw sought payment from

Lullwater at the time Lullwater closed on the Project is not determinative of whether

Shaw would have entered into the same Agreement and Release with Gee had he

known about the Lullwater Payments. Therefore, the Court is not persuaded by Gee’s

argument.

   29.   Here, Shaw has alleged that had he known of the Lullwater Payments and

the surrounding circumstances, he would not have agreed to the Release and the

other terms proposed in the Agreement.         At the Rule 12(b)(6) stage, the Court

concludes that these allegations of fact, taken as true, are sufficient to establish that

the existence of, and circumstances surrounding, the Lullwater Payments were

material facts. See Godfrey, 165 N.C. App at 75–76, 

 (stating an

omitted fact is material if it “would have influenced [plaintiff’s] judgment or decision

in entering the contract”); see also Lowe v. Bradford, 

, 

 (1982) (“[A] fact is ‘material’ if it would constitute or irrevocably establish

any material element of a claim or a defense[.]”). Therefore, taking the allegations of

the Amended Complaint as true, the Court concludes that Shaw has alleged facts
showing that Gee took affirmative steps to conceal material facts from Shaw, which

Gee thus had a duty to disclose, and that Shaw has otherwise pleaded the essential

elements of his Fraud Defense.3

    30.   Gee also asserts that Shaw’s claim for declaratory relief fails to meet the

particularity requirements of Rule 9(b) by not alleging the time or place of the

purported omission of material fact.        (Def.’s Br. Supp. Mot. Dismiss 7.)        North

Carolina Rule of Civil Procedure 9(b) states that “[i]n all averments of fraud, duress

or mistake, the circumstances constituting fraud or mistake shall be stated with

particularity.” N.C. R. Civ. P. 9(b). “While the facts constituting fraud must be

alleged with particularity, there is no requirement that any precise formula be

followed or that any certain language be used.” Carver v. Roberts, 

,

512–13, 

 (1985) (citing Brooks v. Ervin Constr. Co., 

, 

 (1960)). “[I]t is sufficient if, upon a liberal construction of

the whole pleading, the charge of fraud might be supported by proof of the alleged

constitutive facts.” Piles v. Allstate Ins. Co., 

, 

 (2007) (quoting Carver, 

, 

).

    31.   Based on its careful review of the Amended Complaint, the Court finds that

the particularity requirement of Rule 9(b) has been met here. In particular, as the

Court has previously concluded, Shaw has sufficiently alleged facts showing that Gee



3 Shaw further argues that Gee also owed a duty to disclose because there was a latent defect
in the subject of the negotiations that Shaw was unable to discover through reasonable
diligence. Hardin, 199 N.C. App.at 696–97, 

. In light of the Court’s
conclusion that the Amended Complaint alleges sufficient facts to support a duty to disclose,
the Court need not address Shaw’s argument under that theory.
had a duty to disclose, and failed to disclose, the Lullwater Payments, and that the

Lullwater Payments were paid to Gee through his entity GRE and not to Gvest. Shaw

has also specifically alleged that Gee failed to disclose these material facts when

Shaw and Gee discussed the “universe of their common business interests and

opportunities” in April 2014 and again when Shaw entered into the Agreement and

Release upon Gee’s assurance that “Gee had fully and honestly disclosed the scope

and extent of [Gvest’s] business interests and opportunities.” (Am. Compl. ¶¶ 24, 29,

31.)

   32.   The Court concludes that, viewed as a whole, the facts alleged are

sufficiently particular to support each required element of fraud under Rule 9(b) and

adequately put Gee on notice of the specific facts and circumstances Shaw contends

support his Fraud Defense. See generally Hudgins v. Wagoner, 

, 

 (2010) (under Rule 9(b), “[a] requirement of specificity is not

a requirement of perfect and complete specificity”); Loftin v. QA Invs. LLC, 

, at *18 (N.C. Super. Ct. Apr. 30, 2015) (“There is no precise formula

for pleading fraud.”).

          3.   Shaw’s Alleged Ratification of the Release

   33.   Gee next argues that Shaw has ratified the Release by retaining its benefits

and thus is barred from attacking the Release. (Def.’s Br. Supp. Mot. Dismiss 10.)

   34.   Our courts have long held that “if one, who has been induced by fraud and

misrepresentation to execute a release subsequently learns the true import thereof,

and knowingly takes the benefits of it, he thereby ratifies and gives it force and
effect.” Presnell v. Liner, 

, 

 (1940) (finding

plaintiff ratified contract by accepting consideration and not raising fraud challenge

until two years after contract execution). Stated differently, “[i]f the plaintiff knew

the facts and circumstances of the execution of the release and knew its provisions,

and then accepted its benefits he is thereby estopped to deny its validity.” 

 (citing

Sherrill v. Little, 

, 

 (1927)). Moreover, “[w]ith full knowledge

of its contents, [a plaintiff] cannot accept the benefits and deny the liabilities of the

instrument—he cannot ratify it in part and reject it in part.” Id.

   35.   Taking Shaw’s allegations as true, the Court concludes that the facts alleged

in the Amended Complaint do not mandate a conclusion that Plaintiff ratified the

Agreement as a matter of law. The Amended Complaint states that Shaw learned of

the Lullwater Payments after the execution of the Agreement, (Am. Compl. ¶ 26), and

Shaw does not allege facts showing that he retained any benefits flowing from the

Agreement after he discovered the Lullwater Payments. Therefore, at this stage, the

Court concludes that Shaw’s declaratory judgment claim is not barred by the doctrine

of ratification as a matter of law. See, e.g., Espinosa v. Martin, 

, 

 (1999) (“To constitute ratification as a matter of law, the

conduct must be consistent with an intent to affirm the unauthorized act and

inconsistent with any other purpose.”).

   B. Derivative Claim for Breach of Fiduciary Duty

   36.   In the alternative, Gee argues that Shaw’s claim for breach of fiduciary duty

must be dismissed because Shaw fails to allege any damage flowing from the
Lullwater Payments. (Def.’s Br. Supp. Mot. Dismiss 12.) In particular, Gee contends

that the allegations of the Amended Complaint establish that Gvest did not receive

payment for the time and effort of Shaw, Gee, and Gvest’s employees because Shaw

had a custom of not seeking such payment from business associates like Lullwater’s

principal. (Def.’s Br. Supp. Mot. Dismiss 12.) Accordingly, Gee argues that Gvest

effectively waived any claim to payment for the Sherrill’s Ford Project and, as a

result, has suffered no damages. (Def.’s Br. Supp. Mot. Dismiss 13.)

   37.     To state a claim for breach of fiduciary duty, a plaintiff must allege that (1)

a fiduciary relationship existed, (2) the duty arising from that fiduciary relationship

was breached, and (3) plaintiff suffered an injury that was proximately caused by the

defendant’s wrongful act or inaction. See Farndale Co., LLC v. Gibellini, 

, 

 (2006).

   38.     “[M]anagers of a limited liability company . . . owe a fiduciary duty to the

company.” Kaplan, 

, 

; see N.C. Gen. Stat. 57D-

3-21(b).   Subject to Chapter 57D and the limited liability company’s operating

agreement, a manager may breach his fiduciary duty when he diverts a business

opportunity that rightfully belongs to the limited liability company for his personal

gain. See generally Meiselman v. Meiselman, 

, 

(1983) (addressing defendant’s duty of loyalty to the corporation as a corporate

director and officer); RCJJ, LLC, 

, at *31–32 (holding that the

manager’s fiduciary duty to an LLC is not extinguished until the manager’s

relationship with the company ceases as provided in N.C. Gen. Stat. § 57D-3-20). “A
claim for usurpation of corporate opportunities is really a claim for breach of fiduciary

duties.” Stec v. Fuzion Inv. Capital, LLC, 

, at *28 (N.C. Super.

Ct. Apr. 30, 2012).

   39.   To determine whether a business opportunity has been usurped, a court

should consider whether “the disputed opportunity is functionally related to the

[company’s] business,” and “whether the [company] has an interest or expectancy in

the opportunity.”     Meiselman, 

, 

.         This

determination turns on the facts in a particular case. 

 at 310–11, 307 S.E.2d at

569–70 (discussing six “‘recurring circumstances’ which courts continually find

relevant in determining whether a corporate opportunity has been usurped”).

   40.   Contrary to Gee’s contention, the relevant inquiry is not whether Shaw had

a custom of not causing Gvest to ask for payments like the Lullwater Payments. (Am.

Compl. ¶ 19.)     Rather, the critical issue is whether Gvest had an interest or

expectancy in the Lullwater Payments.         Gee’s argument assumes that Gvest’s

decision not to request payment from Lullwater extinguished any interest Gvest had

in whether Gvest was paid for its time and effort on the Project. Taking Shaw’s

allegations as true, however, Gee’s assumption is misplaced. Indeed, Shaw has

alleged that the Lullwater Payments paid to Gee and Martin were compensation for

the time and effort expended by Gvest, (Am. Compl. ¶ 22), and that he “would have

required the [Lullwater Payments] . . . be made to Gvest” rather than to Gee and

Martin had he known that Gee had requested payment and that Lullwater had

agreed to pay, (Am. Compl. ¶ 20).
   41.   Taking Shaw’s allegations as true, the Court cannot conclude, as a matter

of law, that Gvest’s decision not to request payment necessarily caused Gvest to

relinquish its interest or expectancy in receiving the Lullwater Payments in the event

such payments were made. Because it is this interest or expectancy of Gvest that

Shaw has alleged that Gee misappropriated, (Am. Compl. ¶ 31), Gee’s contention that

Gvest has not alleged compensable damages is without merit. Accordingly, the Court

concludes that Gee’s motion to dismiss Shaw’s derivative claim for breach of fiduciary

duty should be denied. See SCA-Blue Ridge, LLC v. WakeMed, 

, at *26 (N.C. Super. Ct. Jan. 4, 2016) (declining to dismiss breach of fiduciary duty

claim based on usurpation of LLC’s corporate opportunities); see generally Brite v.

Penny, 

, 

 (1911) (“The law would not permit him to

act in any such double capacity to appropriate business for himself belonging

legitimately to his corporation and to reap the profits of it.”); Seraph Garrison v.

Garrison, No. COA14-1166, 

 (N.C. App. Apr. 19,

2016) (unpublished) (finding breach of fiduciary duty where defendant used proceeds

from corporate contract to benefit himself at expense of corporation).

                                          V.

                                   CONCLUSION

   42.   Based on the foregoing, the Court hereby DENIES Defendant’s Motion to

Dismiss Plaintiff’s Amended Complaint.
SO ORDERED, this the 21st day of December, 2016.


                             /s/ Louis A. Bledsoe, III
                             Louis A. Bledsoe, III
                             Special Superior Court Judge
                               for Complex Business Cases