USCA4 Appeal: 25-2069 Doc: 41 Filed: 06/29/2026 Pg: 1 of 14
UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 25-2069
In re: SCHLETTER, INC.,
Debtor.
------------------------------
CAROL BLACK, Plan Administrator of Liquidating Debtor, Schletter, Inc.,
Plaintiff – Appellant,
v.
DENNIS BRICE,
Defendant – Appellee.
Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Martin K. Reidinger, Chief District Judge. (3:23-cv-00457-MR)
Argued: May 6, 2026 Decided: June 29, 2026
Before WYNN, Circuit Judge, FLOYD, Senior Circuit Judge, and Adam B. ABELSON, United States District Judge for the District of Maryland, sitting by designation.
Affirmed by unpublished opinion. Judge Abelson wrote the opinion, in which Judge Wynn and Judge Floyd joined. USCA4 Appeal: 25-2069 Doc: 41 Filed: 06/29/2026 Pg: 2 of 14
Thomas Richard Fawkes, TUCKER ELLIS LLP, Chicago, Illinois, for Appellant. Charles M. Sims, O’HAGAN MEYER PLLC, Richmond, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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ABELSON, District Judge:
Schletter, Inc. (“Schletter”), a wholly-owned subsidiary of Schletter Beteiligungs,
GmbH & Co. KG (“Schletter Germany”), was a manufacturer and distributor of racks for
solar panel systems. Under the leadership of Dennis Brice, its President and CEO, Schletter
developed an upgraded system that Brice believed would be superior to existing systems.
Schletter Germany supported the strategy, but the strategy failed. Schletter was left unable
to deliver on various large contracts, and filed for Chapter 11 bankruptcy. Carol Black,
Schletter’s bankruptcy plan administrator, seeks to recover from Brice personally, alleging
his business decisions breached fiduciary duties that he owed to Schletter—duties that she
seeks to enforce on behalf of Schletter’s creditors based on Schletter later becoming
insolvent. The bankruptcy court granted summary judgment to Brice, which the district
court affirmed, holding that Brice’s relevant fiduciary duties were to Schletter Germany
rather than to the creditors of its wholly-owned subsidiary, that Black did not have a valid
claim for a breach of the duty of oversight against Brice, and that the business judgment
rule shielded Brice from liability. For the reasons provided below, we affirm the decision
of the district court.
I.
As discussed more fully below, the facts are viewed in the light most favorable to
Black, the non-moving party. Sedar v. Reston Town Ctr. Prop., LLC, 988 F.3d 756, 761
(4th Cir. 2021). But in advancing her arguments, Black may not rely on the allegations in
her complaint, Fed. R. Civ. P. 56(e), which is what she has largely attempted to do, see
Appellant’s brief at 9–14 (citing the amended complaint as factual support). The district
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court previously admonished Black about this practice. In re Schletter, Inc., Case No. 3:23-
cv-00457-MR, 2025 WL 2229568, at *2 n.3 (W.D.N.C. Aug. 5, 2025) (“In her appellant
brief before this Court, and her memorandum in response to the Defendant’s Motion for
Summary Judgment before the Bankruptcy Court, the Plaintiff heavily cites to her
Amended Complaint. Any cites to the Complaint are allegations, not evidence. The Court
will not consider any such allegations at the summary judgment stage of this case.”) (record
citations omitted). Thus, the facts below are largely taken from the evidence supplied by
Brice, but viewed in the light most favorable to Black.
Schletter, a supplier of solar panel rack systems, was incorporated in Delaware and
was a subsidiary of Schletter Germany. When Schletter filed for bankruptcy in April 2018,
Schletter Germany owned 95% of Schletter’s common stock, with the other 5% authorized
but unowned and in Schletter Germany’s treasury. 1
Schletter employed Brice as its President and CEO from May 16, 2014 to June 27,
2017. Brice reported to Schletter Germany’s board of directors and was “subject to the
control” of the board and various agreements between the parent and subsidiary. J.A. 1062.
Schletter sold a solar racking system called FS Uno that had been developed by
Schletter Germany. In 2016, Schletter, under Brice’s direction, decided to adapt the FS
Uno system to make it cheaper, lighter, and easier to install. Schletter called the revised
1 The undisputed evidence in the record establishes that Schletter’s previous CEO owned the remaining 5% of the Schletter stock until he was replaced by Brice in 2014, at which time Schletter Germany re-acquired those shares and placed them into its treasury, where they remained during all times relevant to Black’s claims.
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system G-Max. In October 2016, after about six months of analysis and investigation, Brice
and other members of Schletter’s executive team presented a G-Max “proof of concept” to
Schletter Germany’s board of directors, a presentation that included a discussion of the
potential challenges and risks associated with the project. Schletter Germany’s board
authorized Brice to proceed with the development of G-Max. During the rollout of the G-
Max project, Brice and the leadership team discussed the inherent risks associated with the
project as well as its design, testing, engineering, and manufacturing requirements. Brice
also investigated the terms of the relevant contracts and whether they would be profitable.
The G-Max project team met at least weekly to discuss the project’s progress and Brice
attended some of those meetings, where he was updated regularly on the status of the
project and the risks associated with it. Brice also kept the Schletter Germany board of
directors apprised of the progress of the G-Max project, the anticipated costs of the project,
and made clear that Schletter would be delivering G-Max to its customers before
conducting field testing.
Under Brice’s leadership, however, “the G-Max’s development, production, and
launch all failed” because Schletter could not meet “promised ambitious delivery dates,”
subjecting Schletter to “substantial liquidated damages provisions.” Schletter, 2025 WL
2229568, at *3. Brice also had not initiated “any testing on the G-Max, which further
complicated the production process and caused [Schletter] to underestimate (1) the cost of
the G-Max, (2) [Schletter’s] capacity to produce the G-Max, and (3) how difficult it would
be for customers to install the G-Max.” Id. Brice’s employment was terminated for cause
on June 27, 2017, but he was not given any specific reason for the termination.
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Schletter filed for Chapter 11 bankruptcy in April 2018. Id. On October 22, 2020,
Schletter filed this adversary proceeding against Brice (and others, the claims against
whom were later dismissed). Id. After discovery, Brice moved for summary judgment,
which the bankruptcy court granted after a hearing. Id. The bankruptcy court held that Brice
was protected by the business judgment rule and that he did not breach any fiduciary duties,
including the duty of oversight, which is commonly known as a Caremark claim. 2
Black appealed and the district court affirmed the grant of summary judgment. Id.
at *1. The district court first explained that “a wholly-owned subsidiary is to be managed
solely so as to benefit its corporate parent,” and thus Brice as the subsidiary Schletter’s
CEO primarily owed fiduciary duties to Schletter Germany, the sole shareholder. Id. at *6
(quoting Cochran v. Stifel Fin. Corp., Case No. CIV. A. 17350, 2000 WL 286722, at *11
(Del. Ch. Mar. 8, 2000), aff’d in part, rev’d in part on other grounds, 809 A.2d 555 (Del.
2002)). Although 5% of Schletter’s stock was not technically owned by Schletter Germany
during the period in which Brice made the challenged decisions and instead had been
deposited in Schletter Germany’s treasury, the district court explained that Schletter was
still wholly-owned by Schletter Germany because the latter “held all of the outstanding
stock of the” former. Id.
2 Caremark claims are named after In re Caremark International, Inc. Derivative Litigation, in which the Delaware Chancery Court held that directors and officers can be held liable under some circumstances for breaching their duty to properly oversee a corporation’s business. 698 A.2d 959, 967–72 (Del. Ch. 1996).
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Second, the district court held that Black had failed to produce evidence that would
support a Caremark claim based on Brice’s alleged breach of his duty to adequately
monitor and oversee the roll-out of the G-Max project. Id. at *7–8. The court explained
that “[t]ypical Caremark claims ‘arise from a failure to properly monitor or oversee
employee misconduct or violations of law,’” id. at *7 (quoting In re Citigroup Inc. S’holder
Derivative Litig., 964 A.2d 106, 123 (Del. Ch. 2009)), while “[t]he business judgment rule
. . . applies when a fiduciary’s business decisions are challenged,” which was the crux of
Black’s allegations, id. (citing Firefighters’ Pension Sys. of City of Kansas City v. Found.
Bldg. Materials, Inc., 318 A.3d 1105, 1139 (Del. Ch. 2024)). The district court continued
that “[w]here the facts give rise to a Caremark claim, the business judgment rule does not
apply.” Id.
Third, the district court held that there was no evidence that Brice breached any
fiduciary duties, but rather made business decisions that are subject to review under the
business judgment rule. Id. at *8.
Black timely filed a notice of appeal.
II.
Federal Rule of Bankruptcy Procedure 7056 provides that “Fed. R. Civ. P. 56
applies in an adversary proceeding,” such as the one at issue in this appeal. “On appeal
from a district court’s order affirming an order of a bankruptcy court, this court reviews
the decision of the district court de novo . . . and applies the same standard of review that
the district court applied to the bankruptcy court’s decision.” In re Wilson, 149 F.3d 249,
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251–52 (4th Cir. 1998). Just as Rule 56 governed the analyses below, it governs this
Court’s analysis.
Under Federal Rule of Civil Procedure 56, a party may move for summary judgment
on a “claim or defense—or . . . part of [any] claim or defense”—by showing that “there is
no genuine dispute as to any material fact” and that the moving party is “entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is material if proof of its
existence “might affect the outcome of the suit,” and a dispute is genuine if “the evidence
is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “[C]ourts must view the evidence in the
light most favorable to the nonmoving party and refrain from weighing the evidence or
making credibility determinations.” Sedar v. Reston Town Ctr. Prop., LLC, 988 F.3d 756,
761 (4th Cir. 2021) (quoting Variety Stores, Inc. v. Wal-Mart Stores, Inc., 888 F.3d 651,
659 (4th Cir. 2018)). The burden is on the moving party to demonstrate the absence of any
genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If
a moving party carries this burden, then the court will award summary judgment unless the
non-moving party can identify specific facts, beyond the allegations or denials in the
pleadings, that show a genuine issue for trial. Fed. R. Civ. P. 56(e). The “mere existence
of a scintilla of evidence in support of the [opposing party’s] position,” however, is
insufficient to defeat a motion for summary judgment. Anderson, 477 U.S. at 252.
All parties agree that the substantive law governing Black’s claims is Delaware law.
See Schletter, 2025 WL 2229568, at *4 (“It is undisputed that Delaware law governs the
disposition of this case.”).
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This Court has jurisdiction pursuant to 28 U.S.C. § 158(d), as Black appeals from
the district court that heard Black’s appeal from a judgment of the bankruptcy court.
III.
Black argues that the district court’s affirmance of the bankruptcy court’s grant of
summary judgment to Brice should be reversed because (A) Brice owed fiduciary duties to
Schletter’s creditors that he breached and (B) Black asserted a valid Caremark claim
rendering the business judgment rule inapplicable.
A.
Black first argues that Brice owed fiduciary duties of loyalty and care to Schletter
and, ultimately, to Schletter’s creditors, in addition to those owed to Schletter’s only
shareholder, Schletter Germany. Under Delaware law, when a solvent subsidiary is wholly-
owned by the parent, “the [fiduciaries] of the subsidiary are obligated only to manage the
affairs of the subsidiary in the best interests of the parent and its shareholders.” Anadarko
Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171, 1174 (Del. 1988); see also In re
Tropicana Ent., LLC, 520 B.R. 455, 470–71 (Bankr. D. Del. 2014) (explaining that
“Delaware law requires a subsidiary’s [fiduciaries] to manage the subsidiary with loyalty
to the parent, even if the [fiduciaries’] actions make the subsidiary less valuable” because
“wholly-owned subsidiaries are formed by parents for the benefit of the parents”) (citing
Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906 A.2d 168, 201 (Del. Ch. 2006), aff’d
sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007)). One corollary to
that rule is that, when a company is solvent, “the general rule is that [fiduciaries] do not
owe creditors duties beyond the relevant contractual terms.” N. Am. Cath. Educ.
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Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 101 (Del. 2007) (citations omitted).
The rule expressed in Anadarko and Gheewalla is not applicable when the subsidiary is
insolvent, however, because “[w]hen a corporation is insolvent . . . its creditors take the
place of the shareholders as the residual beneficiaries of any increase in value.” Id.
Black has not proffered any evidence that Schletter was insolvent at any time during
Brice’s employment. The sole evidence she points to is a report prepared by a forensic
accounting firm, BDO USA, LLC, retained by the Official Committee of Unsecured
Creditors of Schletter, Inc. But the earliest date of insolvency identified in that report is
June 30, 2017—three days after Schletter fired Brice. Therefore, there is no evidence that
the company was insolvent at the time of any of Brice’s decisions that Black challenged
though her adversary proceeding. Thus, during the relevant period, Brice owed fiduciary
duties to Schletter Germany, not to Schletter’s creditors. At oral argument, Black’s counsel
argued that given the temporal proximity between Brice’s termination and the period for
which there is evidence of Schletter’s insolvency, a reasonable factfinder could conclude
that Schletter was in the “zone of insolvency” prior to Brice’s termination. But in
Gheewalla, the Delaware Supreme Court held that “[w]hen a solvent corporation is
navigating in the zone of insolvency, the focus for Delaware directors [and officers] does
not change”; they “must continue to discharge their fiduciary duties to the corporation and
its shareholders by exercising their business judgment in the best interests of the
corporation for the benefit of its shareholder owners” and, thus, “no direct claim for breach
of fiduciary duties may be asserted by the creditors of a solvent corporation” even if it “is
operating in the zone of insolvency.” 930 A.2d at 101.
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Because there is no evidence in the record from which a reasonable factfinder could
conclude that Brice owed duties to Schletter’s creditors at the time of the decisions that
Black challenges, Black’s breach-of-fiduciary-duty claim fails as a matter of law, as the
district and bankruptcy courts correctly held.
B.
Second, Black argues that she asserted a valid Caremark claim against Brice. The
district and bankruptcy courts disagreed with Black’s assertion, as do we. To maintain a
Caremark claim, “a plaintiff must allege particularized facts supporting a reasonable
inference that either” (1) the fiduciaries “utterly failed to implement any reporting or
information system or controls,” or (2) “having implemented such a system or controls,
[they] consciously failed to monitor or oversee its operations thus disabling themselves
from being informed of risks or problems requiring their attention.” In re McDonald’s
Corp. S’holder Derivative Litig. (“McDonalds II”), 291 A.3d 652, 676 (Del. Ch. 2023)
(quoting Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006)).
Black alleges a violation of the second Caremark prong. “A plaintiff typically pleads a
prong-two Caremark claim by alleging that the board’s [or management’s] information
system generated red flags indicating wrongdoing to which the directors [or management]
failed to respond.” Id.
Black alleges that Brice ignored red flags related to the business risks of the failed
G-Max launch, rather than red flags related to corporate misconduct or violations of law.
But that claim fails for the same reason the Delaware Chancery Court rejected a similar
claim in Citigroup, 964 A.2d 106. There, the “plaintiffs’ Caremark claims [were] based on
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defendants’ alleged failure to properly monitor Citigroup’s business risk, specifically its
exposure to the subprime mortgage market” rather than “employee misconduct or
violations of law” as would be the case in a “typical Caremark case.” Id. at 123. The
Delaware Chancery Court concluded that there was no viable Caremark claim, and instead
the fiduciary’s actions were governed by “the fiduciary duty of care and the business
judgment rule” because the plaintiffs were “attempting to hold the director defendants
personally liable for making (or allowing to be made) business decisions that, in hindsight,
turned out poorly for the Company.” Id. at 124.
The Citigroup court explained that while corporate fiduciaries have “responsibilities
to implement and monitor a system of oversight,” “this obligation does not eviscerate the
core protections of the business judgment rule—protections designed to allow corporate
managers and directors to pursue risky transactions without the specter of being held
personally liable if those decisions turn out poorly.” Id. at 125. The court continued that to
allow “shareholder plaintiffs to succeed on a theory that a director is liable for a failure to
monitor business risk, the Court risks undermining the well settled policy of Delaware law
by inviting Courts to perform a hindsight evaluation of the reasonableness or prudence of
directors’ business decisions.” Id. at 126; see also In re McDonald’s Corp. S’holder
Derivative Litig. (“McDonald’s I”), 289 A.3d 343, 376 (Del. Ch. 2023) (“To plead a Red-
Flags Claim . . . a plaintiff must plead facts supporting an inference that the fiduciary knew
of evidence of corporate misconduct” and “that the fiduciary consciously failed to take
action in response” that “was sufficiently sustained, systematic, or striking to constitute
action in bad faith”) (emphasis added); Ontario Provincial Council of Carpenters’ Pension
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Tr. Fund v. Walton, Case No. 2021-0827-JTL, 2023 WL 3093500, at *33 (Del. Ch. Apr.
26, 2023) (“When directors make a business decision that carries legal risk, but which
otherwise involves legally compliant conduct, then the business judgment rule protects that
decision. The same principle applies to a board’s decision to act or not act in response to
red flags.”).
Black has not produced evidence from which a reasonable factfinder could conclude
that Brice “consciously failed to monitor or oversee its operations thus disabling [himself]
from being informed of risks or problems requiring their attention.” McDonald’s II, 291
A.3d at 676 (citation omitted). Instead, as related above, the undisputed evidence shows
that Brice kept apprised of the status of the G-Max program and that his objective was to
launch an improved product that he believed would be profitable. The risks Black alleges
Brice ignored are business risks related to his decisions on how to run Schletter. As
discussed in Citigroup, such claims do not support a Caremark claim and, instead, those
decisions are governed by the business judgment rule. 3
3 Besides arguing that the Caremark claim requires the application of a standard of review more stringent than the business judgment rule, Black also argues that a higher standard should apply because Brice was improperly beholden to Schettler Germany. But as discussed above, because Schettler was a wholly-owned subsidiary of Schettler Germany, and because there is no evidence establishing that the company was insolvent during his employment, Brice’s duties were to Schletter and Schletter Germany, not Schletter’s creditors—and thus he was obligated to follow Schletter Germany’s directives. See Firefighters’ Pension Sys., 318 A.3d at 1138 (holding that “officers are corporate agents” who owe “a duty of obedience requiring compliance with directives from the principal or from more senior agents”).
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In other words, the district court here correctly held that “[l]ike the shareholders in
Citigroup, [Black] fails to show that [Brice] knew or should have known of corporate
wrongdoing or unlawful behavior, or that [Brice] consciously disregarded some duty,” and
instead, Black “with the benefit of hindsight, asks this Court to review the adequacy of
[Brice’s] past business decision: namely, rushing the launch of the G-Max in an attempt to
quickly fulfill customers orders.” Schletter, 2025 WL 2229568, at *8. The district court
continued that “[t]his is precisely the type of case that the business judgment rule was
created to encompass” and “that the Bankruptcy Court correctly determined that the
evidence [did] not give rise to a Caremark claim.” Id. We agree with this analysis as well
as with the district court’s conclusion that Black did not produce evidence “to rebut the
business judgment rule’s presumption of good faith.” Id.
Black has neither provided evidence that would support a Caremark claim nor
provided any valid reason to view the facts through a lens other than the business judgment
rule, which, for the reasons provided by the district court, the bankruptcy court correctly
applied. See id.
IV.
For the foregoing reasons, the district court’s affirmation of the bankruptcy court’s
order granting summary judgment in Brice’s favor is affirmed.
AFFIRMED