Ehmann v. Medflow, Inc., 2022 NCBC 55.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 15 CVS 3098
EUGENE K. EHMANN; N. WILLIAM SCHIFFLI, JR.; and THAD A. THRONEBURG,
Plaintiffs,
v.
MEDFLOW, INC., GREG E. ORDER AND OPINION ON LINDBERG; ELI GLOBAL, LLC; ELI DEFENDANTS’ MOTION TO DISMISS RESEARCH, LLC; ELI EQUITY, LLC; [Public] 1 SNA CAPITAL, LLC; SOUTHLAND NATIONAL HOLDINGS, LLC; SOUTHLAND NATIONAL INSURANCE CORPORATION; DJRTC, LLC; AND MEDFLOW HOLDINGS, LLC,
Defendants.
1. THIS MATTER is before the Court on Defendants’ Motion to Dismiss (the
“Motion”) filed by Defendants Medflow, Inc., Greg E. Lindberg, Eli Global LLC, Eli
Research LLC, Eli Equity LLC, SNA Capital, LLC, Southland National Holdings,
LLC, Southland National Insurance Corporation, 2 DJRTC, LLC, and Medflow
1 Recognizing that this Order and Opinion cites and discusses the subject matter of documents that the Court has allowed to remain under seal in this action, and out of an abundance of caution, the Court filed this Order and Opinion under seal on 12 September 2022 pending consultation with the parties regarding proposed redactions. (See ECF No. 434.) On 23 September 2022, the parties notified the Court that, after conferring, all parties agree there is no material in this Order and Opinion that requires sealing. Accordingly, the Court now files this public version of this Order and Opinion. 2 Defendant Southland National Insurance Corporation separately filed a motion to dismiss the direct claims asserted against it (“SNIC’s Motion”), (ECF No. 387), after filing the instant Motion and brief. SNIC’s Motion is redundant and not properly before the Court. Accordingly, the Court declines to separately consider SNIC’s Motion. Holdings, LLC (collectively “Defendants”). (Defs.’ Mot. Dismiss, ECF No. 120
[“Mot.”].) The Motion requests the Court dismiss the Second Amended Complaint
(the “Complaint”) filed by Plaintiffs Eugene K. Ehmann, N. William Schiffli, Jr., and
Thad A. Throneburg. 3
2. For the reasons set forth herein, the Court hereby GRANTS IN PART and
DENIES IN PART the Motion.
Caudle and Spears, P.A., by Harold C. Spears and Christopher P. Raab, for Plaintiff
Fox Rothschild LLP by Matthew N. Leerberg, Troy D. Shelton and Matthew W. Krueger-Andes, for Defendants
Condon Tobin Sladek Thornton Nerenberg PLLC, by Aaron A. Tobin, pro hac vice, Kendal B. Reed, pro hac vice, and Jared T.S. Pace, pro hac vice, for Defendants
Robinson, Judge.
I. INTRODUCTION
3. Plaintiff Thad Throneburg (“Plaintiff”) served as Chief Executive Officer of
Defendant Medflow, Inc. (“Medflow”) during which time Medflow was acquired by
Defendant Greg E. Lindberg (“Lindberg”) through various companies Lindberg
directly or indirectly owned. Shortly after Medflow’s acquisition, Plaintiff requested
from Medflow certain payments which became due under Plaintiff’s employment
agreement. Medflow did not make such payments and instead placed Plaintiff on
“paid vacation.” This action followed.
3 Subsequent to the filing of the Second Amended Complaint (ECF Nos. 118 and 119), Plaintiffs Eugene K. Ehmann and N. William Schiffli, Jr. dismissed their claims against Defendants, leaving Thad A. Throneburg as the sole remaining Plaintiff in this action. 4. The Complaint makes the following claims directly against all Defendants:
Wage and Hour Act violation (count two); retaliatory employment discrimination
(count three); tortious retaliation (count four); fraudulent transfer (count five); and
unfair and deceptive trade practices (count seven). Against Medflow only, the
Complaint directly alleges breach of contract (count one), fraud (count six), and
replevin (count twelve). The Complaint’s claim for successor liability (count eight)
seeks to extend Medflow’s liability to Medflow Holdings. Claims for alter ego (count
nine) and civil conspiracy (count ten) seek to extend Medflow’s liability to all other
defendants. Count eleven requests a constructive trust remedy. (Second Am. Compl.
¶¶ 74–92.)
II. FACTUAL BACKGROUND
5. The Court does not make findings of fact on a motion brought pursuant to
Rule 12(b)(6) but instead recites only those facts included in the complaint relevant
to the Court’s determination of the motion.
A. The Parties
6. Defendant Medflow is a North Carolina corporation providing electronic
medical records software and related services specialized for the eye care industry.
(Second Am. Compl. ¶¶ 27–28.)
7. Plaintiff is a North Carolina attorney and served as Medflow’s CEO from 1
January 2005 to November 2007 when he sold his ownership interest in Medflow and
returned to active law practice. (Second Am. Compl. ¶¶ 124–25.) Plaintiff was rehired by Medflow as interim CEO on 10 December 2014. (Second Am. Compl. ¶
127.)
8. Lindberg is a resident of Durham County, North Carolina and is the
manager, president, or chairman of at least 101 entities who designate their principal
offices as 2222 Sedwick Road, Durham, North Carolina. (Second Am. Compl. ¶ 17.)
9. Lindberg is the owner, directly or indirectly, of Defendants Eli Global, LLC
(“Eli Global”), Eli Research, LLC (“Eli Research”), Eli Equity, LLC (“Eli Equity”),
SNA Capital, LLC (“SNA”), Southland National Holdings, LLC, Southland National
Insurance Corporation (“SNIC”), DJRTC, LLC (“DJRTC”) and Medflow Holdings,
LLC (collectively, with Medflow, the “Entity Defendants”). (Second Am. Compl. ¶¶
40, 45, 49, 63, 67, 82, 85.)
10. Lindberg is also the owner, directly or indirectly, of nonparty Eli India, LLC
(“Eli India”). (Second. Am. Compl. ¶¶ 87–89.)
B. The Employment Agreement
11. Plaintiff was appointed interim CEO of Medflow for a 90-day period
beginning on 10 December 2013. (Second Am. Compl. ¶ 137.) During that time,
Plaintiff and Medflow leadership developed a three-year strategic plan for Medflow
and decided that Plaintiff should stay on as Medflow’s CEO should another suitable
CEO not be found. (Second Am. Compl. ¶ 138.) Thereafter, Plaintiff executed a three-
year written employment agreement with Medflow on or before 8 July 2014 (the
“Employment Agreement”). (Second Am. Compl. ¶ 144.)
12. The Employment Agreement contains the following relevant provisions: a. A three-year term as Medflow’s CEO from 1 March 2014 until 28
February 2017;
b. An Annual Base Salary in the amount of $360,000 per year;
c. Upon the occurrence of a “Change of Control” of Medflow, Plaintiff
becomes entitled to a Change of Control Payment equal to his
Annual Base Salary “grossed up” by taxes and paid in a lump sum
(“Change of Control Payment”); and
d. Severance benefits in the event Medflow terminates the
Employment Agreement without cause or Plaintiff terminateshis
Employment Agreement for “Good Reason” as defined in the
Employment Agreement. Upon either occurrence, Plaintiff
becomes entitled to his Annual Base Salary and insurance
benefits for a period of 36 months which, in the event of a Change
of Control are “grossed up” by taxes and paid in a lump sum
(“Severance Benefits”).
(Second Am. Compl. ¶ 164.) Medflow’s obligations to Plaintiff under the
Employment Agreement are secured by a security interest in certain of Medflow’s
assets including accounts software, general intangibles, and the proceeds of the
foregoing (the “Encumbered Assets”). (Second Am. Compl. ¶ 165.) C. Lindberg Acquires Medflow
13. As of 31 August 2014, all issued and outstanding shares of Medflow were
subject to the Amended and Restated Shareholders’ Agreement dated August 31,
2005 (“Shareholders’ Agreement”). (Second Am. Compl. ¶ 232.)
14. The Shareholders’ Agreement granted a right of first refusal to Medflow,
and right of second refusal to other Medflow shareholders before any shareholder
could sell Medflow shares to a third party. (Second Am. Compl. ¶ 235.)
15. As of 31 August 2014, Dominic James Riggi (“Riggi”) was owner of 30% of
all issued and outstanding shares of Medflow (the “Riggi Shares”) and was a party to
the Shareholders’ Agreement. (Second Am. Compl. ¶¶ 29–30, 233–34.)
16. On 29 August 2014, Riggi formed DJRTC. On 1 September 2014, Riggi
transferred the Riggi Shares to DJRTC. (Second Am. Compl. ¶ 242.)
17. On 8 September 2014, Riggi and SNA entered an agreement under which
SNA purchased DJRTC at a price of $2,704,620.53. This transfer caused Lindberg to
become the indirect owner of the Riggi Shares without Riggi having first offered such
shares to Medflow and other Medflow Shareholders. (Second Am. Compl. ¶ 242–43.)
18. On 10 September 2014, DJRTC notified Medflow that SNA “now beneficially
owns all of the [Riggi] Shares[,]” and that DJRTC wished to become a party to the
Shareholders’ Agreement. (Second Am. Compl. ¶ 252.)
19. Medflow determined that the transfer of the Riggi Shares to SNA was null
and void due to its non-compliance with the Shareholders’ Agreement. (Second Am.
Compl. ¶¶ 266, 269.) 20. SNA and DJRTC never cured their breach of the Shareholders’ Agreement
described in paragraph 17, supra. (Second Am. Compl. ¶ 268.)
21. At a Medflow shareholders meeting on 18 September 2014, Lindberg stated
to Plaintiff that he would (i) leave Plaintiff in place as CEO, (ii) offer Plaintiff an
employment contract, and (iii) give Plaintiff and other senior employees
independence in operating Medflow. (Second Am. Compl. ¶ 658.)
22. Also on 18 September 2014, SNA made a tender offer directly to all non-
Riggi shareholders to purchase their shares in Medflow. (Second Am. Compl. ¶ 260.)
23. Davlong Business Solutions, LLC (“Davlong”) owned approximately 40% of
all outstanding shares of Medflow (the “Davlong Shares”) prior to 18 December 2014.
Between 18 December 2014 and 16 January 2015, Eli Global and Davlong entered
into a Stock Purchase Agreement whereby Davlong agreed to sell, and Eli Global
agreed to buy, the Davlong Shares. (Second Am. Compl. ¶ 33.)
24. Eli Global transferred the Davlong Shares to DJRTC effective 16 January
2015. (Second Am. Compl. ¶ 34.)
25. Through exchanges of Medflow stock by DJRTC and Eli Global, “Change of
Control” of Medflow as defined in the Employment Agreement occurred no later than
16 January 2015. (Second Am. Compl. ¶ 336.)
26. Because of Lindberg’s ownership of SNA, Lindberg “owned, directly or
indirectly, all or a controlling interest in all outstanding shares of Medflow” as of 16
January 2015. (Second Am. Compl. ¶ 37.) D. Plaintiff Requests Change of Control Payment
27. Following Lindberg’s acquisition of Medflow, on 16 January 2015, the
Change of Control payment became due to Plaintiff. (Second Am. Compl. ¶¶ 164,
420–31, 609–22.)
28. Plaintiff requested the Change of Control payment on 22 January 2015, and
Lindberg became aware of the content of the Employment Agreement on 23 January
2015 when they were provided to him by Eli Global employee Sandi White. (Second
Am. Compl. ¶¶ 348, 356.)
29. When Plaintiff followed-up with Lindberg about the Change of Control
payment, Lindberg informed Plaintiff that “we will review” the request for such
payment. (Second Am. Compl. ¶¶ 366–67.)
30. On 27 January 2015, Lindberg’s employee Vishal Kumar wrote to Lindberg,
“[a]s you are aware, Sandi [White] is working to get new entity and its bank so that
we can strip out [Medflow] assets, people (the ones we want to) and operations
there . . . Hoping there are no more skeletons out there.” (Second Am. Compl. ¶ 361.)
Lindberg replied “[g]ood [o]n the movement of the assets to newco, we will time that
carefully . . . please prepare for it then will give everyone heads up when timing is
right.” (Second Am. Compl. ¶ 362.)
31. On 8 February 2015, Lindberg sent an email to Plaintiff containing a
proposed Termination Agreement in which he offered Plaintiff “at will” employment
as CEO of Medflow Holdings at his current Annual Base Salary in exchange for
termination of the Employment Agreement. (Second Am. Compl. ¶ 393.) 32. On 9 February 2015, Plaintiff replied to Lindberg that the proposed new
employment agreement was much less favorable than his current Employment
Agreement and requested payment of the Change of Control Payment by 16 February
2015. (Second Am. Compl. ¶ 403.)
33. Also on 9 February 2015, Plaintiff perfected his security interest in the
Encumbered Assets by filing financing statements with the North Carolina Secretary
of State. (Second Am. Compl. ¶ 492.)
34. On 10 February 2015, Lindberg held a meeting with Plaintiff at Medflow’s
Charlotte office and stated that he was concerned, among other things, with the
inside dealing arising from the Employment Agreement. (Second Am. Compl. ¶ 409.)
Lindberg then stated that Medflow was putting Plaintiff on “paid vacation” while
Lindberg “sorted through” these concerns. (Second Am. Compl. ¶ 410.)
35. Plaintiff never received his Change of Control or Severance payments.
(Second Am. Compl. ¶¶ 612–14.) Plaintiff then filed written complaints with the
Wage and Hour Bureau of the North Carolina Department of Labor. (Second Am.
Compl. ¶ 616.) The Commissioner of Labor issued to Plaintiff right-to-sue letters
against Lindberg, Eli Global, Eli Research and Medflow. (Second Am. Compl. ¶¶
628–35.)
E. Transfer of Medflow’s Assets
36. Following Lindberg’s acquisition of Medflow, software and intellectual
property owned by Medflow was shared and used by developers for other companies with Medflow receiving no, or inadequate, consideration for such use. (Second Am.
Compl. ¶ 563.)
37. Between 5 March 2015 and 5 May 2015, Medflow transferred cash directly
to Medflow Holdings in the total amount of $375,000 with Medflow receiving no, or
inadequate, consideration. (Second Am. Compl. ¶ 504–05.)
38. On 12 March 2015, Medflow transferred $116,500 to Anderson Tobin, PLLC,
which identified itself as counsel for Eli Global on 13 February 2015. (Second Am.
Compl. ¶ 506.)
39. From 11 February 2015 to 18 March 2015, Medflow Holdings deposited in
its bank account over $280,000 in accounts receivable owed to Medflow. (Second Am.
Comp. ¶ 512.)
40. On 11 February 2015, Defendants caused a UCC financing statement to be
filed with the North Carolina Secretary of State giving notice of a security interest
granted to SNIC in all or substantially all of the assets of Medflow Holdings. (Second
Am. Compl. ¶ 538.)
41. On or about 16 February 2015, all of Medflow’s employees, except for
Plaintiff, Ehmann, and Schiffli, were transferred to Medflow Holdings or terminated.
(Second Am. Compl. ¶ 516.)
42. Eli India employee Satya Gottumukkala emailed Lindberg to confirm that
Gottumukkala would leave Medflow’s bank accounts in place; that all new
transactions would be done through the Medflow Holdings bank account at Wells
Fargo; and that all accounts receivable and accounts payable would be through the Medflow Holdings account at Wells Fargo—to which Lindberg responded “[s]ounds
good.” (Second Am. Compl. ¶ 519.)
III. PROCEDURAL BACKGROUND
43. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motion. An extensive review of the procedural
history of this case may be found at Ehmann v. Medflow, Inc., 2020 NCBC LEXIS
46 at *12–20 (N.C. Super. Ct. Apr. 9, 2020).
44. Plaintiff initiated this action on 18 February 2015 with the filing of its
Complaint. (ECF No. 1.) This action was designated as a mandatory complex
business case on 19 February 2015 and assigned to the Honorable Judge James L.
Gale on 20 February 2015. (ECF Nos. 4–5.)
45. Plaintiff filed the Amended Complaint on 21 April 2015 (ECF No. 40) and
the Second Amended Complaint on 2 December 2015 (ECF No. 118).
46. Defendants filed the Motion pursuant to Rule 12(b)(6) on 4 December 2015.
(ECF No. 120.)
47. The Motion has been fully briefed. (Defs.’ Br. Supp. Defs.’ Mot. Dismiss,
ECF No. 121 [“Br. Supp.”]; Pl.’s Br. Resp. Defs.’ Mot. Dismiss, ECF No. 124 [“Br.
Resp.”]; and Defs.’ Reply Br. Defs.’ Mots. Dismiss, ECF No. 127 [“Reply Br.”].)
48. On 13 September 2016, Judge Gale issued an order denying the Motion
“insofar as it attacks Plaintiffs’ claims for breach of contract.” (Order Defs.’ Mot.
Dismiss 1, ECF No. 182 [13 Sept. 2016 Or.”].) 49. On 10 May 2021, this matter was reassigned from Judge Gale to the
undersigned. (Reassignment Or., ECF No. 402.)
50. On 16 September 2021, Plaintiffs Eugene K. Ehmann and N. William
Schiffli, Jr. filed notices of voluntary dismissal with prejudice of all of their claims
against the Defendants in this action. (See Not. Vol. Dismissal with Prejudice —
Ehmann, ECF No. 406; Not. Vol. Dismissal with Prejudice — Schiffli, ECF No. 407.)
Consequently, Throneburg is the only plaintiff remaining in this action.
51. The remainder of the Motion is ripe for resolution.
IV. LEGAL STANDARD
52. “On a Rule 12(b)(6) motion to dismiss, the question is whether, as a matter
of law, the allegations of the complaint, treated as true, state a claim upon which
relief can be granted.” Fischer Inv. Capital, Inc. v. Catawba Dev. Corp., 200 N.C.
App. 644, 649 (2009). “[T]he complaint is to be liberally construed, and the trial court
should not dismiss the complaint unless it appears beyond doubt that the plaintiff
could prove no set of facts in support of his claim which would entitle him to relief.”
State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 444 (2008).
53. “[W]hen ruling on a Rule 12(b)(6) motion, a court may properly consider
documents which are the subject of a plaintiff’s complaint and to which the complaint
specifically refers.” Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60 (2001).
Furthermore, a court “can reject allegations that are contradicted by the documents
attached, specifically referred to, or incorporated by reference in the complaint.”
Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016) (quoting Laster v. Francis, 199 N.C. App. 572, 577 (2009)). “The question before us 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, whether properly
labeled or not.” Gant v. NCNB Nat. Bank, 94 N.C. App. 198, 199 (1989).
V. ANALYSIS
54. Defendants move to dismiss all of Plaintiff’s claims. As previously noted,
Judge Gale’s 13 September 2016 order denied Defendants’ attempt to obtain
dismissal of Plaintiff’s claim for breach of contract. The Court therefore addresses
each of the remaining claims.
A. Piercing the Corporate Veil
55. Plaintiff seeks a judgment permitting him to pierce Medflow’s corporate veil
and obtain monetary relief from Lindberg, Eli Global, and other Defendants. (Second
Am. Compl. ¶¶ 679–684.)
56. The general rule is that a corporation is distinct from its shareholders.
Ridgeway Brands Mfg., LLC, 362 N.C. at 438. “[A] corporation’s separate and
independent existence is not to be disregarded lightly.” Dep’t of Transp. v. Airlie
Park, Inc., 156 N.C. App. 63, 68 (2003). In determining whether to pierce the
corporate veil and hold a shareholder or director of a corporation personally liable to
the corporation's creditors, North Carolina applies the “instrumentality
rule.” See Acceptance Corp. v. Spencer, 268 N.C. 1, 8 (1966).
57. Pursuant to the instrumentality rule, a plaintiff is required to prove three
elements: first, complete domination by a third party over a company such that it has no separate mind from the third party named as a defendant; second, that the
domination has been used to commit a fraud or wrong against the plaintiff; and third,
that the fraud or wrong caused injury or unjust loss to the plaintiff. Glenn v. Wagner,
313 N.C. 450, 455 (1985).
58. Factors bearing on whether the three prongs of the instrumentality rule are
satisfied include: inadequate capitalization, lack of compliance with corporate
formalities, complete domination and control of the corporation such that it has no
independent identity, and excessive fragmentation. Estate of Hurst v. Moorehead I,
LLC, 228 N.C. App. 571, 578 (2013). However, no single factor is determinative.
“Rather, it is a combination of factors which . . . suggest that the corporate entity
attacked had ‘no separate mind, will or existence of its own’ and was therefore the
‘mere instrumentality or tool’ of the dominant corporation.” Glenn v. Wagner, 313
N.C. 450, 458 (1985). Additional factors identified by North Carolina courts include:
“non-payment of dividends, insolvency of the debtor corporation, siphoning of funds
by the dominant shareholder, non-functioning of other officers or directors, [and]
absence of corporate records.” Id. at 458.
59. Defendants raise three arguments for dismissal of Plaintiff’s veil-piercing
claim. First, Defendants contend that “alter ego liability extends only to stockholders
of a corporation[,]” (Br. Supp. 6), a contention which our Supreme Court has
expressly rejected. Glenn v. Wagner, 313 N.C. 450, 457–58 (1985) (“[A]lthough the
instrumentality rule has, until now, been tailored to deal with ‘dominion and control’
as evidenced in a parent-subsidiary or sole dominant shareholder situation, the [instrumentality] rule is not limited to factual situations or resulting legal analysis
afforded by those cases.”) The mere fact that the Entity Defendants are not
shareholders of Medflow does not preclude application of the instrumentality rule —
“[f]ocus is upon reality, not form.” Id. at 458. Thus, when the facts warrant, the
instrumentality rule may be used to extend liability to affiliated entities, as Plaintiff
seeks to do here.
60. Second, Defendants assert that Plaintiff’s veil piercing claim merely recites
the elements of the instrumentality rule and lacks sufficient facts to survive a motion
to dismiss. (Br. Supp. 7–8.) “Mere recitations of the elements of a veil piercing claim
and the factors alleged to show control, without supporting factual allegations, are
‘bare legal conclusions’ not entitled to any deference in considering a motion to
dismiss.” Estate of Chambers v. Vision Two Hospitality Mgmt., LLC, 2013 NCBC
LEXIS 49, at *12 (N.C. Super. Ct. Nov. 21, 2013).
61. Plaintiff alleges that (i) “all of the [Entity D]efendants . . . are members of a
single enterprise owned (directly or indirectly) and wholly dominated and controlled
by Lindberg,” (Second Am. Compl. ¶ 26); (ii) Lindberg turned over Medflow’s
financial system, computer network, and documentation to certain Entity Defendants
and Nonparty Affiliates, (Second Am. Compl. ¶ 481); (iii) Lindberg caused Medflow
to become undercapitalized by forming Medflow Holdings and “strip[ping] out assets,
people . . . and operations [from Medflow][,] (Second Am. Compl. ¶¶ 360–62); and (iv)
“Medflow’s software and intellectual property is being co-mingled with software
development and intellectual property of MDOffice, IOPracticeware, ODOffice . . . with Medflow receiving no or inadequate consideration[.] (Second Am.
Compl. ¶ 564.) These factual allegations permit an inference that Entity Defendants
were “mere instrumentalit[ies] or tool[s]” of Lindberg which had “no separate mind,
will or existence of their own.” Glenn, 313 N.C. at 458.
62. Further, Plaintiff alleges that Lindberg used Entity Defendants to (1)
prevent Plaintiff from obtaining the payments owed under the Employment
Agreement, (Second Am. Compl. ¶ 679), and (2) transfer assets from Medflow to other
Defendants and non-party entities to defraud Plaintiff from obtaining certain
Medflow assets based on his security interest. (Second Am. Compl. ¶¶ 359, 646.)
63. Accordingly, the Complaint alleges sufficient facts that could show
Lindberg’s “complete domination” over the Entity Defendants and that Lindberg’s
domination “proximately caused [Plaintiff’s] injury” by violating “[Plaintiff’s] legal
rights” under the Employment Agreement. See Glenn, 313 N.C. at 454–55.
64. Third, Defendants argue that “all equities weigh in favor of respecting the
corporate Defendants’ separate legal existences.” (Br. Supp. 8.) Defendants base this
argument on their contention that the Employment Agreement is “egregiously
inequitable” and that Plaintiff should not receive the equitable benefit of veil piercing
as a result. (Br. Supp. 8.) However, because Judge Gale’s 13 September 2016 Order
dismissed the Motion “insofar as it attacks Plaintiff[’s] claims for breach of
contract[,]” the Court declines to reconsider this argument concerning the
Employment Agreement’s validity. (See 13 Sept. 2016 Or. 1.) 65. Therefore, the Court denies the Motion to the extent it seeks dismissal of
Plaintiff’s veil piercing claim.
B. Civil Conspiracy
66. Plaintiff seeks to hold all Defendants liable for each other’s acts based on a
theory of civil conspiracy. (Second Am. Compl. ¶¶ 685–688.) It is well-established
that North Carolina law does not recognize an “independent cause of action for civil
conspiracy.” Sellers v. Morton, 191 N.C. App. 75, 83 (2008) (citation and quotation
marks omitted); see also Dove v. Harvey, 168 N.C. App. 687, 690 (2005) (“The charge
of conspiracy itself does nothing more than associate the defendants together and
perhaps liberalize the rules of evidence to the extent that under proper circumstances
the acts and conduct of one might be admissible against all.” (citing Shope v. Boyer,
268 N.C. 401, 405 (1966))). Rather, “[o]nly where there is an underlying claim for
unlawful conduct can a plaintiff state a claim for civil conspiracy by also alleging the
agreement of two or more parties to carry out the conduct and injury resulting from
that agreement.” Sellers, 191 N.C. App. at 83 (citation and quotation marks omitted).
67. Therefore, under North Carolina law, “a complaint sufficiently states a
claim for civil conspiracy when it alleges (1) a conspiracy, (2) wrongful acts done by
certain of the alleged conspirators in furtherance of that conspiracy, and (3) injury as
a result of that conspiracy.” Krawiec v. Manly, 370 N.C. 602, 614 (2018).
68. Defendants argue two grounds for dismissal of Plaintiff’s conspiracy claim:
first, that the intracorporate immunity doctrine bars the claim, (Br. Supp. 9), and
second, that the Complaint fails to allege “that Defendants agreed to do anything, much less a ‘wrongful act.’ ” (Br. Supp. 10.) In response, Plaintiff submits three
reasons that intracorporate immunity does not apply: (1) “the alleged conspiracy
involved unrelated co-conspirators including James Riggi[,]” (Pl.’s Resp. 24), (2)
North Carolina law does not extend the intracorporate immunity doctrine to
commonly-owned affiliates, (Pl.’s Resp. 24), and (3) the “independent personal stake”
exception enables the conspiracy claim to proceed (Pl.’s Resp. 24).
69. The intracorporate immunity doctrine holds that “ ‘there can be no
conspiracy’ between a corporation and its agents.” Vanfleet v. City of Hickory, 2020
NCBC LEXIS 40, *15 (N.C. Super. Ct. March 30, 2020) (quoting Chrysler Credit Corp.
v. Rebhan, 66 N.C. App. 255, 259 (1984). If, however, the alleged conspiracy involves
parties outside of the corporate family, intracorporate immunity does not apply. See
State ex. Rel. Cooper v. McClure, 2004 NCBC LEXIS 7, at **40–41 (N.C. Super. Ct.
Dec. 14, 2004). Defendants argue that, because Plaintiff “go[es] to great lengths in
the Complaint to show that the Defendants are affiliated entities commonly owned
by Lindberg[,]” intracorporate immunity applies to the Defendants and “necessarily
defeats [Plaintiff’s] conspiracy claim and mandates dismissal.” (Br. Supp. 9.)
70. As an initial matter, the Complaint does not sufficiently claim that Riggi, or
any other non-affiliate, was a conspirator to breach Plaintiff’s Employment
Agreement and defraud Plaintiff of the benefits thereof — the underlying claim upon
which Plaintiff’s conspiracy claim is based. The Complaint alleges that Lindberg,
SNA, and Eli Global conspired with Riggi in “August 2014 or early September 2014”
to breach the Shareholders Agreement in order to acquire Medflow. (Second Am. Compl. ¶ 237.) The Complaint further alleges that Lindberg, through entities in his
control, successfully acquired Medflow “no later than January 16, 2015.” (Second Am.
Compl. ¶ 336.) Critically, the Complaint states that “Lindberg . . . first became aware
of the [Employment Agreement] on Friday, January 23, 2015[,]” after Lindberg’s
acquisition of Medflow. (Second Am. Compl. ¶ 356.) Taking the allegations of the
Complaint as true, any conspiracy between Lindberg, Entity Defendants, and Riggi
could not have been formed before 23 January 2015 because Lindberg was ignorant
of the Employment Agreement prior to that date. The Complaint itself contains no
allegations that Riggi had any role in subsequent actions to breach the Employment
Agreement. Instead, the Complaint states that “Lindberg, along with the other
[D]efendants and Nonparty Affiliates as directed by him” devised a plan in breach of
the Employment Agreement.” (Second Am. Compl. ¶ 359.) The Complaint fails to
adequately allege that “outsiders,” including Riggi, were co-conspirators to breach the
Employment Agreement. Therefore, application of the intracorporate immunity
doctrine is not doomed on that basis.
71. Plaintiff next argues that under North Carolina law, intracorporate
immunity does not extend to commonly-owned affiliates. In North Carolina, the
intracorporate immunity doctrine has been applied to officers, directors, and wholly
owned subsidiaries. Other jurisdictions have further extended the doctrine to
commonly-owned affiliates. See Dunlap v. Cottman Transmissions Sys., LLC, 576
Fed. Appx. 225, 227 (4th Cir. 2014) (“The intracorporate immunity doctrine originates
in antitrust laws and holds that a corporation cannot, with certain exceptions, conspire with its officers, wholly-owned subsidiaries, and commonly-owned
affiliates.”) (emphasis added). In the absence of guiding law in North Carolina, the
Court chooses to follow the Fourth Circuit’s reasoning that intracorporate immunity
applies to commonly-owned affiliates. Id.
72. Third, Plaintiff argues that the independent personal stake exception to
intercorporate immunity applies. “[A]n exception to the [intracorporate immunity]
doctrine exists if the corporate agent has an ‘independent personal stake in achieving
the corporation's illegal objective.’ ” State ex rel. Cooper v. Ridgeway Brands Mfg.,
LLC, 184 N.C. App. 613, 625 (2007) (citing Buschi v. Kirven, 775 F.2d 1240, 1252 (4th
Cir. 1985). Plaintiff argues that Defendants had a personal stake in breaching the
Employment Agreement because “Defendants are . . . personally liable under the
[North Carolina Wage and Hour Act] for payment of [Plaintiff’s] wages, Change of
Control Payments, and Severance.” (Pl.’s Resp. 24.)
73. This Court has previously observed that “[t]his ‘independent personal stake’
exception must not be interpreted in too broad a manner[.]” Garlock v. Hilliard, 2000
NCBC LEXIS 6, **17 (N.C. Super. Ct. Aug 22, 2000) (quoting Selman v. Am. Sports
Underwriters, Inc., 697 F. Supp. 225, 238—39 (E.D. Va. 1988). An independent
personal stake must be “wholly separable from the more general and indirect
corporate benefit always present under the circumstances surrounding virtually any
alleged corporate conspiracy.” Id.
74. Personal liability under the North Carolina Wage and Hour Act is not
“wholly separable” from the corporate benefit Defendants obtained. The benefit to Defendants both personally and corporately was the avoidance of wages, Severance,
and Change of Control payments owed to Plaintiff under the Employment
Agreement. Because the independent personal stake exception is inapposite to this
case, the Court concludes that the intracorporate immunity doctrine applies to
75. The Court therefore grants the Motion to the extent it seeks dismissal of
Plaintiff’s claim for civil conspiracy.
C. Successor Liability
76. Plaintiff alleges that Medflow Holdings is the successor in interest to
Medflow because (1) Medflow Holdings, by accepting Medflow’s assets as part of a
scheme to defraud Plaintiff, also assumed all of Medflow’s liabilities; and (2) the
transfer of Medflow’s assets to Medflow Holdings was a de facto consolidation or
merger of the two companies. (Second Am. Compl. ¶¶ 674–677.) Although the Motion
requests dismissal of the Complaint in its entirety, Defendants concede that Medflow
Holdings is “Medflow[’s] . . . successor,” and make no argument relating to successor
liability. (Br. Supp. 2.) Accordingly, the Court deems any argument by Defendants
regarding successor liability to be waived.
77. The Court therefore denies the Motion to the extent it seeks dismissal of
Plaintiff’s claim of successor liability against Medflow Holdings. D. Wage and Hour Act
78. Plaintiff alleges violations of the North Carolina Wage and Hour Act
(“WHA”) directly against all Defendants on the grounds that each Defendant is an
“employer” under the WHA. (Second Am. Compl. ¶¶ 609–19, 622.)
79. Defendants argue for the dismissal of Plaintiff’s claim under the WHA
because (1) the Employment Agreement is unenforceable, (2) Plaintiff was placed on
leave in February 2015 and “performed no work” for Medflow during that time, and
(3) the non-Medflow Defendants are not “employers” of Plaintiff under the WHA. (Br.
Supp. 13–14, Reply Br. 2.)
80. Because Judge Gale’s 13 September 2016 Order dismissed the Motion
“insofar as it attacks Plaintiff[‘s] claims for breach of contract[,]” the Court declines
to reconsider the Employment Agreement’s enforceability, the very same issue Judge
Gale ruled upon, and addresses only Defendants’ second and third arguments. (See
13 Sept. 2016 Or. 1.)
81. Pursuant to the WHA, an “employer shall pay every employee all wages and
tips accruing to the employee[.]” N.C.G.S. § 95-25.6. “For the purposes of [the WHA,]
‘wage’ includes sick pay, vacation pay, severance pay, commissions, bonuses, and
other amounts promised when the employer has a policy or a practice of making such
payments.” Id. § 95-25.2(16).
82. The Complaint alleges that Plaintiff’s Employment Agreement with
Medflow provided that, in exchange for Plaintiff’s employment as CEO, Medflow
would pay him an Annual Base Salary and, under certain circumstances, Change of Control Payments and Severance. (Second Am. Compl. ¶¶ 164, 336, 420–31; Exs. 6–
8.) Upon Lindberg’s acquisition of Medflow, the change of control and severance
payments allegedly became due, Medflow did not make such payments, and Lindberg
put Plaintiff on “paid vacation” beginning on 10 February 2015. (Second Am. Compl.
¶¶ 407–410, 609–22.) Accordingly, the Complaint alleges facts sufficient to show that
Plaintiff was owed wages, Change of Control payment, and Severance under the
Employment Agreement.
83. The remaining issue is whether the non-Medflow Defendants are
“employers” of Plaintiff. The WHA defines an “employer” broadly to include “any
person [or commercial entity] acting directly or indirectly in the interest of an
employer in relation to an employee.” Id. § 95-25.2(5); see Powell v. P2Enterprises,
LLC, 247 N.C. App. 731, 734 (2016) (noting that “the term ‘person’ includes
individuals as well as commercial entities[.]”). Courts liberally construe the term
“employer” and employ the “economic reality” test, which considers factors including
whether the person had the power to hire and fire, whether the person supervised
and controlled employee schedules, whether the person determined the rate and
method of payment, and whether the person maintained employment
records. Powell, 247 N.C. App. at 735. Although Plaintiff’s only direct employer was
Medflow, the Complaint contains allegations that all Defendants, under Lindberg’s
shared control, indirectly controlled Plaintiff’s working conditions, account and
payroll functions, and responsibility for disbursement of funds. (Second Am. Compl.
¶¶ 482–85, 611.) 84. Plaintiff’s allegation that his salary, Change of Control payments, and
Severance constitute wages as defined under the WHA, along with his allegation that
Defendants wrongfully failed to make such payments and placed Plaintiff on “paid
vacation,” is sufficient to state a claim for relief against all Defendants under § 95-
25.2(16).
85. Therefore, the Motion is denied to the extent it seeks dismissal of Plaintiff’s
claims under the WHA.
E. Retaliatory Employment Discrimination
86. Plaintiff alleges violations of the North Carolina Retaliatory Employment
Discrimination Act, N.C.G.S. § 95-240 (“REDA”) against all Defendants on the
grounds that Defendants are “persons” as defined in REDA. (Second Am. Compl. ¶¶
623–37.)
87. REDA prohibits “any retaliatory action against an employee because the
employee in good faith does or threatens to . . . [f]ile a claim or complaint” with
respect to the various statutory employment rights. REDA’s purpose is “to prevent
employer retaliation from having a chilling effect upon an employee’s exercise of”
their statutory rights. Whitings v. Wolfson Casing Corp., 173 N.C. App. 218, 222
(2005).
88. Defendants argue that Plaintiff was terminated for “patent self-dealing in
violation of [his] fiduciary duties, not because [he] sought to exercise any legitimate
right.” (Br. Supp. 14.) Plaintiff, conversely, contends he was terminated because he
exercised his legally protected rights by filing a wage complaint with the U.S. Department of Labor following Defendants’ refusal to pay the sums owed under the
89. In order to state a claim under REDA, a plaintiff must show that he (1)
“exercised his rights” as listed under N.C.G.S. § 95-241(a); (2) “suffered an adverse
employment action;” and (3) the “adverse employment action” was a “retaliatory
action . . . taken because” the employee exercised his statutory rights. Wiley v. UPS,
Inc., 164 N.C. App. 183, 186 (2004). REDA “does not prohibit all discharges of
employees . . . it prohibits only those discharges made because the employee exercises
his compensation rights.” Morgan v. Musselwhite, 101 N.C. App. 390, 393 (1991).
90. The exercise of one’s rights under the Wage and Hour Act is a legally
protected activity under REDA. See § 95-241(a)(1)(b). Here, the Complaint alleges
that, prior to filing this action, Plaintiff filed complaints with the Wage and Hour
Bureau of the North Carolina Department of Labor and was issued right-to-sue
letters therefrom. (Second Am. Compl. ¶¶ 616, 628–35.) The right-to-sue letters
granted Plaintiff a right to pursue REDA claims against Medflow, Lindberg, Eli
Global, and Eli Research, but no other Defendants. (Compl. Ex. 48, ECF No. 118.24.)
The Complaint also alleges that Defendants fired Plaintiff in retaliation for Plaintiff’s
attempt to exercise his compensation rights under the Employment Agreement.
(Second Am. Compl. ¶¶ 629–31.) Thus, the Complaint satisfies the pleading
requirements for a claim under REDA.
91. Defendants assert “[Plaintiff was] terminated not for asserting rights . . .
but because [he] disregarded [his] fiduciary obligations and engaged in furtive, self- dealing conduct that harmed Medflow.” (Br. Supp. 15.) This dispute about the
reasons for termination, however, is factual, and factual allegations in the Complaint
are to be “treated as true[.]” See Fischer Inv. Capital, Inc., 200 N.C. App. at 649. And
as explained in paragraph 64, supra, the Court declines to consider argument
regarding the Employment Agreement’s validity as such was ruled upon in the 13
September 2016 Order.
92. Taking Plaintiff’s allegations as true, the Complaint sufficiently alleges that
Plaintiff engaged in statutorily protected activity and was terminated therefor.
However, because Plaintiff failed to obtain right-to-sue letters as to Eli Equity, SNA,
Southland National Holdings, Inc., SNIC, DJRTC, and Medflow Holdings, Plaintiff’s
REDA claims against such defendants cannot proceed. Accordingly, the Court grants
the Motion as to the REDA claims against Eli Equity, SNA, Southland National
Holdings, Inc., SNIC, DJRTC, and Medflow Holdings. Except as herein granted, the
Motion is denied.
F. “Tortious Retaliation”
93. Plaintiff alleges “tortious retaliation” against all Defendants on the grounds
that Plaintiff’s attempt to receive the payments owed him under the Employment
Agreement was “a substantial factor in [Defendants’] acting . . . to take the
retaliatory actions described herein.” (Second Am. Compl. ¶¶ 643.) Defendants
assert that Plaintiff’s claim for “tortious retaliation” should be dismissed because
North Carolina law recognizes no such claim. (Br. Supp. 15–16.) North Carolina does
not recognize an independent cause of action for “tortious retaliation,” but does recognize a claim for wrongful discharge. Ridenhour v. Inter'l Bus. Mach. Corp., 132
N.C. App. 563, 568–69 (1999). Wrongful discharge applies when an employee is fired
“(1) for refusing to violate the law at the employer[’]s request, (2) for engaging in a
legally protected activity, or (3) based on some activity by the employer contrary to
law or public policy.” Considine v. Compass Grp. USA, Inc., 145 N.C. App. 314, 321–
22 (2001). In North Carolina, however, “[t]he tort of wrongful discharge arises only
in the context of employment at will.” Claggett v. Wake Forest Univ., 126 N.C. App.
602, 611 (1997). Employment is “at will” unless the relationship is governed by a
contract “establishing a definite term of employment.” Kurtzman v. Applied
Analytical Indus., 347 N.C. 329, 331 (1997). Breach of contract, not wrongful
termination, “is the proper claim for a wrongfully discharged employee who is
employed for a definite term.” Wagoner v. Elkin City Sch. Bd. of Educ., 113 N.C. App.
579, 588 (1994).
94. The Complaint alleges Plaintiff was discharged after trying to exercise his
compensation rights under the Employment Agreement and was therefore subject to
“tortious retaliation.” (Second Am. Compl. ¶¶ 641–44.)
95. Though not properly labeled, the Complaint attempts to allege a claim for
wrongful discharge, so the claim should not be dismissed on the basis asserted by
Defendants. See Considine, 145 N.C. App. at 321–22; Gant, 94 N.C. App. at 199.
However, the Complaint reveals that Plaintiff was not an employee at will; rather,
Plaintiff was a contract employee under the Employment Agreement. (Second Am.
Compl. ¶ 144, Exs. 6–8.) Thus, wrongful discharge “is [not] the proper claim”; breach of contract is instead. See Wagoner, 113 N.C. App. at 588. And Plaintiff has pled
breach of contract.
96. Accordingly, the Motion is granted as relates to the claim of wrongful
discharge.
G. Uniform Voidable Transactions Act
97. Plaintiff alleges violations of the Uniform Voidable Transactions Act
(“UVTA”) against all Defendants. (Second Am. Compl. ¶¶ 645–656.)
98. The UVTA, formerly the Uniform Fraudulent Transfer Act, allows a creditor
to bring a civil action against a debtor for certain transfers made by the
debtor. N.C.G.S. § 39-23.7; see also McKee v. James, 2013 NCBC LEXIS 33, at *39
(N.C. Super. Ct. July 24, 2013). Under the UVTA, a creditor is a person who has a
“right to payment[.]” N.C.G.S. § 39-23.1(3)–(4). 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., 2017 NCBC LEXIS 21, at *21
(N.C. Super. Ct. Mar. 9, 2017).
99. Defendants assert that the Complaint contains (i) “wholly conclusory”
allegations regarding the transfer of Medflow assets and (ii) Plaintiff has no “right to
payment” because the Employment Agreement is unenforceable.
100. Here, the Complaint alleges that Plaintiff’s Employment Agreement
established a right to payment of an annual base salary, Severance Benefits, and the
Change of Control Payment. (Second Am. Compl. ¶¶ 149, 164–66.) The Complaint
further alleges specific facts regarding the transfer of Medflow’s assets to other Lindberg entities, including other Defendants, to “hinder, delay, or defraud” Plaintiff,
(Second Am. Compl. ¶¶ 490–530, 646.), with the ultimate goal of “mak[ing] any claim,
judgment or lien in favor of [Plaintiff] against Medflow uncollectible.” The Complaint
alleges specific facts regarding cash transfers from Medflow to Medflow Holdings
made without adequate compensation (Second Am. Compl. ¶ 504). Thus, the
Complaint alleges the necessary elements for fraudulent transfer because the
Complaint alleges (i) Plaintiff had a “right to payment” from Medflow under the
Employment Agreement and (ii) Defendants transferred Medflow assets with “intent
to hinder, delay, or defraud” Plaintiff. See N.C.G.S. § 39-23.4(a).
101. Therefore, the Court denies the Motion regarding the UVTA claim.
H. Fraud
102. Plaintiff brings a claim of fraud against Medflow for representations made
to Plaintiff prior to Lindberg’s acquisition of Medflow and following Plaintiff’s request
for payment under the Employment Agreement. To plead a claim of fraud, Plaintiff
must allege “(1) a false representation or concealment of a material fact, (2)
reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in
fact deceive, and which (5) results in damage to the injured party.” Town of Belhaven
v. Pantego Creek, LLC, 250 N.C. App. 459, 469 (2016) (citation omitted).
103. Rule 9(b) requires that a claim for fraud be pled with
particularity. N.C.G.S. § 1A-1, Rule 9(b). “[I]n pleading actual fraud[,] the
particularity requirement is met by alleging time, place and content of the fraudulent
representation, identity of the person making the representation and what was obtained as a result of the fraudulent acts or representations.” Terry v. Terry, 302
N.C. 77, 85 (1981). A plaintiff must also plead facts to support his allegation that the
representation was false or untrue. Harrold v. Dowd, 149 N.C. App. 777, 783 (2002).
“Mere generalities and conclusory allegations of fraud will not suffice.” Id.
104. The Complaint cites representations made by Lindberg to Plaintiff on two
separate dates as the basis for its fraud claim. The first representations were made
on 18 September 2014 when Lindberg assured Plaintiff that Lindberg would,
following acquisition of Medflow: (i) leave Plaintiff in place as CEO, (ii) offer Plaintiff
an employment contract, and (iii) give Plaintiff independence in operating Medflow.
(Second Am. Compl. ¶ 658.) The second representation was made by Lindberg on 30
January 2015 when Lindberg told Plaintiff that “we will review” Plaintiff’s request
for Change of Control Payments. (Second Am. Compl. ¶ 29.)
105. Defendants assert that the 18 September 2014 representations were “true
when made” because Lindberg was not aware of the Employment Agreement’s terms
until 23 January 2015. (Br. Supp. 18–19.) The Court agrees, and thus the 18
September 2014 representations cannot serve as the basis of a prima facie fraud
claim.
106. Not so with Lindberg’s representation that he “would review” the request
for Change of Control Payments. The Complaint alleges that on 27 January 2015,
three days prior to telling Plaintiff he would review the Change of Control payment
request, Lindberg was already preparing to create a new entity to “strip out assets,
people (the ones we want to) and operations” from Medflow. (Second Am. Compl. ¶ 361.) That Lindberg had allegedly already taken steps to drain Medflow of assets
while telling Plaintiff his request would be reviewed supports an inference that
Lindberg’s representation was false, reasonably calculated to deceive, and intended
to deceive Plaintiff. The Complaint also alleges that Plaintiff’s failure to perfect his
security interest in the Encumbered Assets was the “result of the . . .
representation[].” See Harrold, 149 N.C. App. at 782; see also Ragsdale, 286 N.C. at
139.
107. The Court concludes that Plaintiff has adequately alleged a claim of fraud.
Accordingly, the Motion is denied to the extent it seeks dismissal of the fraud claim.
I. Unfair and Deceptive Trade Practices
108. Plaintiff alleges violations of the Unfair and Deceptive Trade Practices Act,
N.C.G.S. §§ 75-1.1, et. Seq. (“UDTPA”) against all Defendants. To state a claim for
violation of the UDTPA, a plaintiff must show that: (1) the defendant committed an
unfair or deceptive act; (2) the act affected commerce; and (3) the act proximately
caused injury to the plaintiff. N.C.G.S. § 75- 1.1 (2021); Gress v. Rowboat, 190 N.C.
App. 773, 776 (2008). The proper inquiry “is not whether a contractual relationship
existed between the parties, but rather whether the defendants’ allegedly deceptive
acts affected commerce.” Prince v. Wright, 141 N.C. App. 262, 268 (2000).
Determining whether a trade practice is unfair or deceptive depends upon the facts
of each case and the impact the practice has on the market. Pan American World
Airways, Inc. v. United States, 371 U.S. 296, 307–08 (1963). 109. Defendants argue for dismissal of the UDTPA claim because Plaintiff seeks
remedies solely relating to his employment relationship with Medflow and thus any
unfair or deceptive acts did not “affect commerce.” (Reply Br. 8.)
110. “As a general rule, there is a presumption against unfair and deceptive
practice claims as between employers and employees.” Gress, 190 N.C. App. at 776.
The general rule may not apply, however, where “the claimant [makes] a showing of
business-related conduct that is unlawful or of deceptive acts that affect commerce
beyond the employment relationship.” Id. at 776–77.
111. Here, while Plaintiff seeks remedies pursuant to an employment
relationship with Medflow, the claims alleged include a scheme of fraudulent transfer
between multiple companies, including Medflow, Medflow Holdings, and SNIC. The
fact that such companies were each indirectly owned by Lindberg is no barrier. See
Songwooyarn Trading Co. v. Sox Eleven, Inc., 213 N.C. App. 49, 57 (2011) (Finding a
defendant’s actions were “ ‘in or affecting commerce’ and constituted unfair or
deceptive acts or practices[,]” because “multiple companies [were] involved[,]” where
the companies shared a majority owner.). The facts alleged with respect to Plaintiff’s
UVTA claim creates the foundation that satisfies the requirements under the
UDTPA.
112. Accordingly, the Court denies the Motion to the extent it seeks dismissal of
Plaintiff’s claim under the UDTPA. J. Constructive Trust
113. Plaintiff brings a claim of constructive trust. (Second Am. Compl. ¶¶ 689–
692.) However, a constructive trust is not a standalone claim for relief or cause of
action. See Weatherford v. Keenan, 128 N.C. App. 178, 179 (1997). Accordingly, for
purposes of clarity, the Court grants Defendants' motion to dismiss to the extent it
seeks dismissal of the purported cause of action for a constructive trust. The Court
renders this decision without prejudice to Plaintiff’s ability to pursue the equitable
remedy of a constructive trust to the extent one or more other claims for relief may
justify such a remedy. See Roper v. Edwards, 323 N.C. 461, 464
(1988) (describing constructive trust as an equitable remedy “to prevent the unjust
enrichment of the holder of . . . an interest in[] property which such holder acquired
through fraud”).
K. Replevin and Conversion
114. Finally, the Complaint alleges that Medflow converted and must return
Ehmann’s personal cell phone number. (Second Am. Compl. ¶ 694.) Defendants
argue that Ehmann cannot demonstrate ownership of the phone number because the
Complaint states that Ehmann allowed the phone number to become affiliated with
Medflow, and that Medflow has since paid for use of the phone number. (Br. Supp.
23.) However, subsequent to the filing of the Motion and the briefing of this matter,
Ehmann voluntarily dismissed all of his claims against Defendants in this case. As
a result, the Court deems the claims of replevin and conversion to no longer be before it, and the Motion is denied as moot to the extent it seeks dismissal of the replevin
and conversion claims.
VI. CONCLUSION
115. For the foregoing reasons, the Court hereby GRANTS IN PART and
DENIES IN PART the Motion as follows:
A. The Motion is DENIED as to the claim for piercing the corporate veil;
B. The Motion is GRANTED as to the claim for civil conspiracy;
C. The Motion is DENIED as to the claim for successor liability;
D. The Motion is DENIED as to the claim for violation of the WHA;
E. The Motion is GRANTED in part and DENIED in part as to the claim for
violation of REDA;
F. The Motion is GRANTED as to the claim for “tortious retaliation;”
G. The Motion is DENIED as to the claim for violation of the UVTA;
H. The Motion is DENIED as to the claim for fraud;
I. The Motion is DENIED as to the claim for violation of the UTDPA;
J. The Motion is GRANTED as to the claim for constructive trust;
K. The Motion is DENIED AS MOOT to the claim for replevin and conversion.
SO ORDERED, this the 12th day of September, 2022.
/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases