Wirth v. Sunpath, LLC

 Wirth v. Sunpath, LLC, 

.


STATE OF NORTH CAROLINA                      IN THE GENERAL COURT OF JUSTICE
                                                  SUPERIOR COURT DIVISION
MECKLENBURG COUNTY                                       17 CVS 517

PETER WIRTH, Individually and as
Owner of SUCCESSIONS, LLC,

                        Plaintiff,

v.
                                                  ORDER AND OPINION ON
                                                 DEFENDANTS’ MOTIONS TO
SUNPATH, LLC; ALONZO A.
                                                        DISMISS
MORROW, II; TRACI SCOTT
MORROW; and LATRICE MIGNON
HOGUE,

                        Defendants.


     1.      THIS MATTER is before the Court on Defendants’ Motion to Dismiss

Pursuant to Rule 12(b)(1) (the “Rule 12(b)(1) Motion”) and Defendants’ Motion to

Dismiss Pursuant to Rule 12(b)(6) (the “Rule 12(b)(6) Motion”) (collectively, the

“Motions”) filed on April 3, 2017. Having considered the Motions, the briefs, and the

arguments of counsel at a hearing on the Motions, the Court GRANTS the Rule

12(b)(1) Motion, and DENIES the Rule 12(b)(6) Motion as untimely.

          Newkirk Law Office, by Robert B. Newkirk, III, for Plaintiff.

          Tuggle Duggins, P.A., by Charles K. Blackmon, Brandy L. Mills, and
          Benjamin P. Hintze, for Defendants.

Robinson, Judge.

                            I.       PROCEDURAL HISTORY

     2.      The Court sets forth here only those portions of the procedural history

relevant to its determination of the Motions.
   3.      Plaintiff Peter Wirth (“Plaintiff” or “Wirth”) initiated the current action on

January 6, 2017 by filing a Complaint and a Motion to Enforce Arbitration Agreement

(the “Complaint”) against Sunpath, LLC (“Sunpath”) and Alonzo A. Morrow, II, Traci

Scott Morrow, and Latrice Mignon Hogue (collectively, the “Individual Defendants”).

(ECF No. 1.)

   4.      This case was designated as a mandatory complex business case by order

of the Chief Justice of the Supreme Court of North Carolina dated March 9, 2017,

(ECF No. 6), and assigned to the undersigned by order of Chief Business Court Judge

James L. Gale dated March 10, 2017, (ECF No. 7).

   5.      On March 14, 2017, Defendants filed their Answer. (ECF No. 8.)

   6.      On April 3, 2017, Defendants filed the Motions. (ECF Nos. 12, 15.)

   7.      The Motions have been fully briefed, and the Court held a hearing on the

Motions on June 6, 2017. The Motions are now ripe for resolution.

                          II.   FACTUAL BACKGROUND

   8.      The Court does not make findings of fact on the Motions, but only recites

those facts that are relevant and necessary to the Court’s determination of the

Motions.

   A.      The Parties

   9.      Successions, LLC (“Successions”) was a certified critical access behavioral

health agency (“CABHA”) engaged in providing behavioral health treatment services

in Mecklenburg County, North Carolina. (ECF No. 1 at ¶ 17.) Wirth was the sole

owner of Successions until he sold his membership interest on July 23, 2012. (ECF
No. 1 at ¶ 3; Defs.’ Br. Supp. Mot. Dismiss Rule 12(b)(1) Ex. B, ECF No. 14.)

Successions was administratively dissolved by the North Carolina Secretary of State

in 2015. (ECF No. 1 at ¶ 4.)

   10.    Sunpath is a limited liability company engaged in providing behavioral

health treatment services in Gaston County, North Carolina. (ECF No. 1 at ¶¶ 6,

18.) The Individual Defendants are former members of Sunpath. (See ECF No. 1 at

¶ 37.)

   B.     Successions and Sunpath Execute a Letter of Intent to Merge

   11.    On January 9, 2012, Successions and Sunpath executed a Letter of Intent

(“LOI”) contemplating that the two companies would “merge all of the tangible

properties and assets of each party relating to and necessary to run the businesses of

each.” (Compl. Ex. A at ¶¶ 2.1−2.2, ECF No. 18.)

   12.    The LOI set a closing date of January 9, 2012, “or at a time convenient to

all parties.” (ECF No. 18 at Ex. A, ¶ 2.2.) The parties contemplated completion of

the merger by April 30, 2012. (ECF No. 18 at Ex. A, ¶ 2.3.)

   13.    Pursuant to the LOI, the parties intended “to move all consumers who have

consented to such a transfer to the care of the surviving entity, which is expected to

be Sunpath, LLC or a successor[.]” (ECF No. 18 at Ex. A, ¶ 2.4.) Additionally,

“Successions or its successor” would be entitled to 40% of Sunpath’s or the new

entity’s net profits. (ECF No. 18 at Ex. A, ¶ 2.4(b).)

   14.    The LOI further provided that the parties were to “execute an Operating

Agreement for the new entity or execute documents to amend the Operating
Agreement for the surviving entity to reflect the distribution plan outlined herein[.]”

(ECF No. 18 at Ex. A, ¶ 2.4(f).)

   15.      The LOI additionally states:

         Successors. This Agreement inures to the benefit of and shall be binding
         on each of the parties hereto or any of them, their respective
         representatives and successors; provided however, this Agreement and
         the rights and obligations hereunder shall not be assignable by any
         Party without written consent of all Parties. Which [sic] consent will
         not be unreasonably withheld.

(ECF No. 18 at Ex. A, ¶ 11.5.)

   16.      The LOI was signed on behalf of Successions by Wirth and on behalf of

Sunpath by Defendant Latrice Mignon Hogue. (ECF No. 18 at Ex. A, 4.)

   17.      Plaintiff alleges that by March 2012, Successions completed the transfer of

all of its consumers to Sunpath. (ECF No. 1 at ¶ 22.) In the affidavit filed by Plaintiff,

Wirth testifies that he “believe[s] the client transfer was completed by April 30, 2012.”

(Br. Opp’n Defs.’ 12(b)(1) Mot. Ex. A, at ¶ 4, ECF No. 25.)

   C.       Plaintiff Sells His Membership Interest in Successions

   18.      On July 23, 2012, Wirth entered into a Membership Interest Purchase

Agreement pursuant to which Wirth sold his interest in Successions to two

individuals who are not parties to this action in exchange for $125,000. (ECF No. 1

at ¶ 23; ECF No. 14 at Ex. B, ¶ 1.2.) Pursuant to the agreement, the closing of this

transaction occurred on the same day as the execution of the agreement—July 23,

2012. (ECF No. 14 at Ex. B, 6–7.)

   19.      The Membership Interest Purchase Agreement stated:

         At the Closing, Buyers will be added as Members of [Successions] with
         a 100% Membership Interest. Seller shall remain as a Manager of
         [Successions]. Ninety (90) days after the Closing, Seller shall execute
         an amendment to the Operating Agreement removing himself as a
         Manager of [Successions] after the Closing date. Buyers shall receive
         all profits from Company Operations, which will be reflected on all tax
         filings for 2012.

(ECF No. 14 at Ex. B, ¶ 1.3.)

   D.       Sunpath Terminates the LOI and Plaintiff Files Suit

   20.      On February 24, 2013, Sunpath’s prior counsel informed Successions’

counsel by mail that Sunpath was terminating the LOI, alleging that Successions

failed to fulfill its contractual obligations. (ECF No. 18 at Ex. B.)

   21.      Plaintiff initiated an action against Defendants on June 2, 2014 by filing a

complaint (the “2014 Complaint”) in Mecklenburg County, North Carolina, Civil

Action Number 14 CVS 10182. (ECF No. 1 at ¶ 13.)

   22.      On January 8, 2016, Plaintiff voluntarily dismissed the 2014 Complaint

pursuant to Rule 41(a) of the North Carolina Rules of Civil Procedure (“Rule(s)”).

(ECF No. 1 at ¶ 14.)

   23.      Plaintiff filed the instant action on January 6, 2017, asserting claims

individually and derivatively on behalf of Successions for breach of contract,

misrepresentation, fraudulent transfer of assets, civil conspiracy, unfair and

deceptive trade practices (“UDTP”), and enforceable arbitration. (ECF No. 1 at 5–

10.)

                            III.   RULE 12(b)(6) MOTION

   A.       Legal Standard

   24.      Rule 12(b) of the North Carolina Rules of Civil Procedure expressly provides
that a Rule 12(b)(6) motion “shall be made before pleading if a further pleading is

permitted.” N.C. Gen. Stat. § 1A-1, Rule 12(b). This Court previously held “a Rule

12(b) motion to dismiss for failure to state a claim must be filed prior to an answer[,]”

regardless of whether the answer asserts a motion to dismiss for failure to state a

claim. New Friendship Used Clothing Collection, LLC v. Katz, 

, at *24 (N.C. Super. Ct. Aug. 18, 2017). There, defendant filed an answer asserting

a defense for failure to state a claim, and then filed a separate Rule 12(b)(6) motion

and brief three days later. 

 Because the motion and brief were filed after the

answer, this Court held that the motion was untimely. Id.

   25.    Additionally, Rule 7.2 of the General Rules of Practice and Procedure for

the North Carolina Business Court (“BCR”) provides that all motions “must be

accompanied by a brief” and “must be set out in a separate document.” BCR 7.2.

Where a motion is not accompanied by a required brief, the Court may summarily

deny the motion. Id.

   26.    However, a failure to file a Rule 12(b) motion for failure to state a claim

before filing a responsive pleading does not waive the defense, but rather the party

may raise the defense pursuant to Rule 12(h)(2). New Friendship Used Clothing

Collection, LLC, 

, at *17. Rule 12(h)(2) provides that such a

defense, when not raised prior to filing an answer, “may be made in any pleading

permitted or ordered under Rule 7(a), or by motion for judgment on the pleadings, or

at the trial on the merits.” N.C. Gen. Stat. § 1A-1, Rule 12(h)(2). In recently

interpreting North Carolina’s Rule 12(b), this Court looked to Fourth Circuit and
North Carolina federal district court decisions holding that, under the Federal Rules

of Civil Procedure, an untimely Rule 12(b)(6) motion may be construed as a Rule 12(c)

motion for judgment on the pleadings. New Friendship Used Clothing Collection,

LLC, 

, at *21–22. This Court concluded that “a post-answer

Rule 12(b) motion to dismiss for failure to state a claim may, if appropriate, be

considered as a Rule 12(c) motion for judgment on the pleadings.” Id. at *24.

   B.     Timeliness of Defendants’ Rule 12(b)(6) Motion

   27.    Here, Defendants filed their Answer on March 14, 2017. (ECF No. 8.) In

their Fourth Affirmative Defense, Defendants asserted that Plaintiff’s Complaint is

subject to dismissal pursuant to Rule 12(b)(6) for failure to state a claim for which

relief can be granted. (ECF No. 8 at 9.) On April 3, 2017, nearly three weeks after

filing the Answer, Defendants filed their Rule 12(b)(6) Motion and accompanying

brief. (ECF Nos. 15–16.) Because Defendants did not file their Rule 12(b)(6) Motion

before they filed an answer, the Motion is untimely and should be dismissed. The

Court, in its discretion, declines to construe Defendants’ Motion as a Rule 12(c)

motion for judgment on the pleadings, and therefore denies Defendants’ Rule 12(b)(6)

Motion.

                          IV.    RULE 12(b)(1) MOTION

   A.     Legal Standard

   28.    “Standing is a necessary prerequisite to a court’s proper exercise of subject

matter jurisdiction.” Neuse River Found., Inc. v. Smithfield Foods, Inc., 

, 

 (2002). Standing arguments may be presented under
both Rule 12(b)(1) and Rule 12(b)(6). Fairfield Harbour Prop. Owners Ass’n, Inc. v.

Midsouth Golf, LLC, 

, 

, 280 (2011). In determining

a motion to dismiss for lack of standing, the allegations should be taken as true and

read in the light most favorable to the non-moving party. Mangum v. Raleigh Bd. of

Adjustment, 

, 

 (2008). In ruling on a motion to

dismiss for lack of standing pursuant to Rule 12(b)(1), the Court may consider

matters outside the pleadings in determining whether subject matter jurisdiction

exists. Keith v. Wallerich, 

, 

 (2009).

Plaintiff has the burden of proving that he has standing to bring his claims. Neuse

River Found., Inc., 

, 

.

   29.      Standing refers to a party’s right to have the Court decide the merits of its

dispute. Neuse River Found., Inc., 

, 

. The

elements of standing are

         (1) “injury in fact”—an invasion of a legally protected interest that is (a)
         concrete and particularized and (b) actual or imminent, not conjectural
         or hypothetical; (2) the injury is fairly traceable to the challenged action
         of the defendant; and (3) it is likely, as opposed to merely speculative,
         that the injury will be redressed by a favorable decision.

 (quoting Lujan v. Defenders of Wildlife, 

, 560−61 (1992)).

   30.      In order to have standing to assert a derivative claim on behalf of an LLC,

plaintiff must either be “a member of the LLC at the time of the act or omission for

which the proceeding is brought” or acquire his ownership interest “by operation of

law from an ownership interest that was owned by a member at that time.” N.C.

Gen. Stat. § 57D-8-01(a)(1). In addition, the member must “[make a] written demand
on the LLC to take suitable action,” and then must either (i) receive notice from the

LLC that its demand was rejected, (ii) wait ninety days from the date the demand

was made, or (iii) allege that the LLC would be irreparably harmed by waiting for the

expiration of the ninety-day period. Id. § 57D-8-01(a)(2).

   31.    In considering whether a member of an LLC has standing to assert an

individual claim, “members of an LLC are treated like corporate shareholders and

managers are similar to directors.” Levin v. Jacobson, 

, at

*14−15 (N.C. Super. Ct. Dec. 7, 2015); see also Russell M. Robinson, II, Robinson on

North Carolina Corporation Law § 34.04[5] (7th ed. 2016) (“A derivative action on

behalf of an LLC will be governed by essentially the same rules that apply to a

derivative action on behalf of a corporation. Therefore, whether the member must

bring the suit individually or on behalf of the LLC turns on whether the alleged

injuries were caused directly to the member or are a consequence of breaches of

fiduciary duty that harmed the LLC.” (footnote omitted)).

   32.    It is a well-settled principle of North Carolina law that a shareholder of a

corporation cannot pursue individual causes of action for wrongs or injuries to the

corporation. Barger v. McCoy Hillard & Parks, 

, 

 (1997); Corwin v. British Am. Tobacco PLC, 

 (N.C. Ct. App.

2016).   There are two exceptions: (1) when there is a special duty between the

wrongdoer and the shareholder; and (2) when the shareholder suffered an injury

separate and distinct from the injury suffered by the corporation and the other

shareholders. Barger, 

, 

; Corwin, 

.
   33.    For the special duty exception to apply, “the duty must be one that the

alleged wrongdoer owed directly to the shareholder as an individual”—a duty that

was personal to the shareholder and separate and distinct from the fiduciary duty

owed to the corporation. Barger, 

, 

. Plaintiff Wirth

does not argue that the special duty exception applies to his claims. Therefore, the

Court does not analyze his claims on that basis.

   34.    For the special injury exception to apply, the injury must be peculiar or

personal to the shareholder. 

 “[A] plaintiff must show that its particular injury

was ‘separate and distinct from the injury sustained by the other shareholders or the

corporation itself.’” Raymond James Capital Partners, L.P. v. Hayes, 

 (N.C. Ct. App. 2016) (quoting Barger, 

, 

). “An

injury is peculiar or personal to the shareholder if a legal basis exists to support

plaintiff[’s] allegations of an individual loss, separate and distinct from any damage

suffered by the corporation.” Barger, 

, 

 (quotation

marks omitted).

   B.     Wirth’s Standing

   35.    The Rule 12(b)(1) Motion seeks dismissal of Plaintiff’s claims on the ground

that Plaintiff lacks standing because all of the claims are derivative claims belonging

to Successions. (Defs.’ Br. Supp. Mot. Dismiss Rule 12(b)(1) at 4, ECF No. 13.)

Plaintiff contends that he has standing to bring his claims as the successor of

Successions or as a third-party beneficiary of the LOI. (Br. Opp’n Defs.’ 12(b)(1) Mot.

at 3, ECF No. 24.)
          1.       Plaintiff’s Derivative Claims

   36.    It is not clear which claims, if any, Plaintiff asserts derivatively on behalf

of Successions. The Court concludes, however, that Plaintiff lacks standing to bring

any derivative claims on behalf of Successions.

   37.    Plaintiff lacks standing to bring claims on behalf of Successions because

Plaintiff has not alleged that he made an appropriate demand on Successions to take

suitable action, as required by N.C. Gen. Stat. § 57D-8-01(a)(2). “A party’s standing

to bring a derivative claim depends on whether they properly meet the demand

requirement.” Petty v. Morris, 

, at *4 (N.C. Super. Ct. Dec. 16,

2014); see also Marriott v. Chatham Cty., 

, 

(2007) (“Standing is a necessary prerequisite to a court’s proper exercise of subject

matter jurisdiction.” (quotation marks omitted)).         Although Successions was

administratively dissolved on February 2, 2015, (ECF No. 1 at ¶ 4), “[t]he dissolution

of the LLC does not prevent commencement of a proceeding by or against the LLC in

its own name,” N.C. Gen. Stat. § 57D-6-07(f). Successions must bring these claims on

its own behalf, or they must be brought by a person who was a member at the relevant

times after a proper demand.

   38.    Putting aside whether Plaintiff was a member of Successions at the time of

the alleged wrongdoing, because Plaintiff fails to allege that he made the requisite

pre-suit demand on Successions, Plaintiff lacks standing to bring claims as “owner of

Successions,” and the Rule 12(b)(1) Motion to Dismiss Plaintiff’s derivative claims, if

any, is granted.
            2.    Plaintiff’s Direct Claims

      39.   Plaintiff also appears to assert direct claims for breach of contract,

misrepresentation, conspiracy, fraudulent transfer of assets, and UDTP. (ECF No.

1.)

      40.   Because Wirth’s direct claims for misrepresentation, civil conspiracy, and

UDTP are based on wrongs to Successions, in order to have standing Wirth must

allege that (1) Defendants owed him a special duty or (2) that Plaintiff suffered an

injury separate and distinct from any injury suffered by successions. Barger, 

, 

.

      41.   Plaintiff does not allege that Defendants owed him a special duty; thus, he

only has standing to assert direct claims if he suffered a separate and distinct injury.

The Complaint alleges that “Plaintiff has suffered damages in excess of $1 million”

including “lost profit distributions[,]” “lost benefits (or the value of the benefits)[,]”

and “lost revenue due from the sale of SUNPATH[.]” (See ECF No. 1 at ¶¶ 44, 52, 60,

65, 73.)

      42.   Plaintiff’s factual allegations that he suffered an injury focus almost

exclusively on the transfer of clients from Successions to Sunpath, (ECF No. 1 at

¶¶ 22, 50; ECF No. 24 at 4–5), an injury to Successions. The lost profit distributions

and lost revenue from the sale of Sunpath were injuries to Successions, the party to

the LOI that was entitled to such distributions and revenue. Although Plaintiff

alleges that after Sunpath terminated the LOI, “SUNPATH terminated certain

benefits previously available to WIRTH, including healthcare coverage[,]” (ECF No.
1 at ¶ 26), neither the LOI nor anything in the record demonstrates that Wirth or

Successions was entitled to receive any benefits such as healthcare coverage.

Therefore, the Court concludes that Wirth has not alleged a separate and distinct

injury that would grant him standing to bring these direct claims. For these reasons,

Defendants’ Rule 12(b)(1) Motion should be granted as to those claims.

   43.    Plaintiff also asserts a direct claim for fraudulent transfer of assets,

alleging the Individual Defendants sold Sunpath to a third-party buyer, (ECF No. 1

at ¶ 37), “for inappropriate purposes, including, but not limited to, transferring the

assets so that Plaintiff would have a more difficult time in collecting on his claim of

ownership interest in Sunpath[,]” (ECF No. 1 at ¶ 55).

   44.    The Uniform Voidable Transactions Act (“UVTA”), formerly the Uniform

Fraudulent Transfer Act (“UFTA”), allows a creditor to bring a civil action against a

debtor for certain transfers made by the debtor. N.C. Gen. Stat. § 39A-23.7; see also

McKee v. James, 

, at *39 (N.C. Super. Ct. July 24, 2013). Under

the UVTA, a creditor is a person who has a claim, 

(4), which

is further defined as a “right to payment[,]” 

(3). Thus, “[a]

plaintiff must have standing as a creditor to proceed with a claim under the UVTA.”

Transatlantic Healthcare, LLC v. Alpha Constr. of the Triad, Inc., 

, at *21 (N.C. Super. Ct. Mar. 9, 2017).

   45.    Reading the facts in the record in the light most favorable to Plaintiff,

Plaintiff is not a “creditor” for purposes of the UVTA. The LOI was executed between

Successions and Sunpath and expressly provided that distributions from the
surviving entity were to be distributed to Successions or its successor. (ECF No. 18

at Ex. A, ¶ 2.4(b), (d).)     Because Plaintiff has not alleged sufficient facts to

demonstrate that he is the successor of Successions’ entitlement to any such

payments, any right to payment that exists under the LOI belongs to Successions.

Because Plaintiff is not a “creditor” under the UVTA, he lacks standing to bring a

direct claim for fraudulent transfer. Therefore, the Rule 12(b)(1) Motion to Dismiss

Plaintiff’s direct fraudulent transfer of assets claim is granted.

   46.    Defendants also challenge Plaintiff’s standing to assert a direct breach of

contract claim. (ECF No. 13 at 4–5.) “In the context of a breach of contract claim,

the parties who execute an agreement are real parties in interest and have standing

to sue.” King Fa, LLC v. Ming Xen Chen, 

 (N.C. Ct. App. 2016).

In addition, North Carolina has long recognized the right of “third-party beneficiaries

not in privity of contract to bring an action in their own name to enforce the contract

made for their benefit[.]” Vogel v. Reed Supply Co., 

, 126, 

, 278 (1970). Thus, for Plaintiff to have standing to assert a direct claim for breach

of contract, he must allege that he is either a party to the LOI or a third-party

beneficiary. Holshouser v. Shaner Hotel Grp. Props. One Ltd. P’ship., 

, 

 (1999).

   47.    Plaintiff was not a party to the LOI, which by its terms provides that the

agreement is between Sunpath and Successions. (ECF No. 18 at Ex. A, 1.) While

Plaintiff’s signature does appear on the LOI, he signed on Successions’ behalf, not his

own. (ECF No. 18 at Ex. A, at 4.) Plaintiff is, thus, not a party to the LOI, as “[a]n
LLC is an entity distinct from its interest owners.” N.C. Gen. Stat. § 57D-2-01(a); see

also Coderre v. Futrell, 

, 

 (2012) (finding

that a company representative lacked standing to enforce an agreement where he had

signed the purchase agreement in his representative capacity); Priest v. Coch, 

, at *10–11 (N.C. Super. Ct. Jan. 25, 2013) (dismissing a claim by an

individual plaintiff who signed the contract on behalf of a law firm).

   48.    Next, Plaintiff contends that he has standing to bring the breach of contract

claim because he is the successor in interest to Successions. (ECF No. 24 at 3.) As

noted above, however, Plaintiff alleges no facts to support his conclusory allegation

that he is a successor. Instead, Plaintiff argues that because Plaintiff was the sole

member of Successions and that the LOI provided that benefits would flow to

Successions “or its successor,” Plaintiff “not only could have been a ‘successor’ but was

the successor” of Successions. (ECF No. 24 at 3.) Again, Plaintiff’s factual allegations

fail to support such a contention.

   49.    Finally, Plaintiff argues that he has standing to enforce the LOI as a third-

party beneficiary. (ECF No. 24 at 3.) To state a breach of contract claim as a third-

party beneficiary, Plaintiff must allege: “(1) the existence of a contract between two

other persons; (2) that the contract was valid and enforceable; (3) that the contract

was entered into for his direct, and not incidental, benefit.” Hoots v. Pryor, 

, 

 (1992). “A person is a direct beneficiary of the

contract if the contracting parties intended to confer a legally enforceable benefit on

that person.” Babb v. Bynum & Murphrey, PLLC, 

, 753–54, 

, 57–58 (2007) (emphasis added). When a third person seeks to enforce a

contract made between other parties, “the contract must be strictly construed against

the party seeking enforcement.” 

 Generally, in determining whether a claimant

is a third-party beneficiary, courts should look to “the intention of the parties who

actually made the contract. The real test is said to be whether the contracting parties

intended that a third person should receive a benefit which might be enforced in the

courts.” Vogel, 277 N.C. at 128, 177 S.E.2d at 279 (quotation marks omitted) (quoting

17 Am. Jur. 2d, Contracts § 304).

   50.    Plaintiff’s Complaint alleges that, under the LOI, “Wirth was to receive a

40% interest in any new entity or the surviving company.” (ECF No. 1 at ¶ 21.)

However, the LOI attached to the Complaint presents facts that contradict this

allegation. The LOI provided that “Successions or its successor shall be entitled to a

distribution of 40% of the net profit of the new entity or surviving company after the

merger period[.]” (ECF No. 18 at Ex. A, ¶ 2.4(b) (emphasis added).) The fact that

any benefit to Successions would have ultimately flowed to Wirth, as the sole member

of Successions at the time, does not make Wirth’s name interchangeable with

Successions and does not show that the parties intended to confer a direct benefit on

Wirth.

   51.    Although absent from his Complaint, Wirth argues in his brief that

Defendants ratified his position as a third-party beneficiary by paying him directly

as a member of Sunpath after Successions transferred its clients to Sunpath. (ECF

No. 24 at 4.)   Wirth also submitted an affidavit stating that “[b]etween joining
Sunpath and February 23, 2013, [he] was paid distributions as an owner would

receive.” (ECF No. 25 at ¶ 6.) However, in looking at the terms of the LOI, this is

insufficient to find that Sunpath and Successions intended at the time the LOI was

executed to bestow upon Wirth a legally enforceable benefit.

   52.    Therefore, the Court concludes that Plaintiff has not carried his burden of

demonstrating that he is an intended third-party beneficiary of the LOI.

   53.    Because Plaintiff can demonstrate no legally sufficient basis to assert

standing to enforce the LOI, the Rule 12(b)(1) Motion as to Plaintiff’s direct breach of

contract claim should be granted.

   54.    Because “[a] dismissal under Rule 12(b)(1) . . . is not a dismissal on the

merits[,]” the Court’s dismissal of Plaintiff’s claims for lack of standing is without

prejudice. Soma Tech., Inc. v. Dalamagas, 

, at *29–30 (N.C.

Super. Ct. May 11, 2017).

                                 V.   CONCLUSION

   55.    For the foregoing reasons, the Court ORDERS as follows:

          A.    The Court GRANTS the Rule 12(b)(1) Motion as to Plaintiff’s direct

                and derivative claims and dismisses these claims without prejudice.

          B.    The Court DENIES the Rule 12(b)(6) Motion as untimely.
SO ORDERED, this the 14th day of September, 2017.



                              /s/ Michael L. Robinson
                             Michael L. Robinson
                             Special Superior Court Judge
                               for Complex Business Cases