Higgins v. Synergy Coverage Sols., LLC

2020 NCBC 4

• Court: North Carolina Business Court
• Decided: January 15, 2020
• Docket: 18-CVS-12548
• Status: Published

Opinion

Higgins v. Synergy Coverage Sols., LLC, 2020 NCBC 4.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 18 CVS 12548

ARLENE B. HIGGINS,

Plaintiff,

v.

SYNERGY COVERAGE ORDER AND OPINION ON SOLUTIONS, LLC; SYNERGY DEFENDANTS’ MOTION TO DISMISS HOLDINGS, LLC; SYNERGY INSURANCE COMPANY, and their PLAINTIFF’S FIRST AMENDED subsidiaries and affiliates; and COMPLAINT BRUCE A. FLACHS,

Defendants.

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

Plaintiff’s First Amended Complaint (the “Motion”) under Rule 12(b)(6) of the North

Carolina Rules of Civil Procedure (“Rule(s)”) in the above-captioned case.

2. After reviewing the Motion, the briefs in support and opposition, the First

Amended Complaint, certain documents identified and relied upon in Plaintiff’s First

Amended Complaint and submitted by Defendants in support of the Motion, and the

arguments of counsel at the hearing on the Motion (the “Hearing”), the Court hereby

GRANTS in part and DENIES in part the Motion.

Fosbinder Law Office, by Julie Fosbinder, for Plaintiff Arlene B. Higgins.

Robinson, Bradshaw & Hinson, P.A., by Pearlynn Houck, Fitz E. Barringer, and Travis Hinman, for Defendants Synergy Coverage Solutions, LLC, Synergy Holdings, LLC, Synergy Insurance Company, and Bruce A. Flachs.

Bledsoe, Chief Judge. I.

FACTUAL BACKGROUND

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

12(b)(6). Rather, the Court recites only the relevant allegations asserted in Plaintiff's

First Amended Complaint to determine the Motion.

4. This litigation arises from the termination of Plaintiff Arlene B. Higgins

(“Higgins” or “Plaintiff”) from her long-term employment with Defendant Synergy

Coverage Solutions, LLC (“Synergy Solutions” or the “Company”). Higgins alleges

that after she had been employed at Synergy Solutions for ten years, the Company

terminated her employment in breach of an oral contract to employ her until the

Company was sold, to prevent her from realizing the value of certain phantom units

that might vest if she were an employee at the time of sale. Alternatively, Higgins

argues she was terminated because of her age.

5. Synergy Solutions “operates as a managing general agent and underwriter,

providing workers compensation administrative services for certain insurance

companies[.]” (First Am. Compl. ¶ 2 [hereinafter “FAC”], ECF No. 31.) Defendant

Synergy Holdings, LLC (“Synergy Holdings”) is an insurance holding company and

the parent of Synergy Solutions and Defendant Synergy Insurance Company

(“Synergy Insurance”). Synergy Insurance is an affiliate of Synergy Solutions for

which Synergy Solutions provides workers compensation administrative services. 1

(FAC ¶¶ 2–4.)

1 Together Synergy Solutions, Synergy Insurance, and Synergy Holdings shall be referenced

hereafter as the “Synergy Defendants.” 6. At all relevant times, Defendant Bruce A. Flachs (“Flachs”) was the

“Organizer, President, Manager, and Chief Executive Officer” of Synergy Solutions,

and the “Organizer, President, Manager, and Member” of Synergy Holdings. (FAC ¶

5.)

7. Flachs and Higgins first began working together in the insurance industry

in 1993. (FAC ¶ 9.) In August 2006, Flachs recruited Higgins to become the Chief

Underwriting Officer of Synergy Solutions, a position she held until she was

terminated in July 2017. (FAC ¶¶ 1, 8.) Higgins reported directly to Flachs, and

Flachs conducted her annual performance reviews. (FAC ¶¶ 8, 18, 25–27, 35.)

8. In July 2009, Synergy Holdings adopted a “Phantom Compensation Plan”

(“Plan”) to give employees of Synergy Holdings and its subsidiaries, including

Synergy Solutions, the opportunity to receive bonus compensation for their services

in the form of a cash payout of “Phantom Units” upon the sale of Synergy Holdings if

certain conditions were met. (FAC ¶ 17; see Mem. Supp. Defs.’ Mot. Dismiss Pl.’s

FAC Ex. 1, at ¶ 9 [hereinafter the “Plan”], ECF No. 42.2.) Each grant of Phantom

Units under the Plan was governed by the terms of a Phantom “Award Agreement”

between the employee recipient and Synergy Holdings. (See Mem. Supp. Defs.’ Mot.

Dismiss Pl.’s FAC Exs. 2–5, [hereinafter “Award Agreement(s)”], ECF Nos. 42.3–

42.6.) The Plan specifically provided that the value of any Phantom Units awarded

to an employee would be paid to the employee upon the sale of 50% or more of Synergy

Holdings’s shares or upon the disposition of substantially all of the assets of that

entity. (Plan ¶¶ 6(a), 17.) The Plan further provided, however, that any Phantom Units awarded under the Plan would be “forfeited and cancelled immediately” upon

termination of the employee’s employment with Synergy Holdings or its affiliates,

“voluntarily or involuntarily, with or without cause[.]” (Plan ¶ 4(b).)

9. Higgins opted to receive four Phantom Unit awards under the Plan in lieu

of bonuses and/or salary increases during her employment. These Awards totaled

8,600 Phantom Units: 5,000 in August 2009, 600 in August 2012, 2,000 in July 2014,

and 1,000 in July 2015. (FAC ¶¶ 19, 22, 25–26.)2

10. According to Higgins, beginning in her 2009 performance review and

continuing in each review thereafter, Flachs represented “that he was continuously

pursuing and entertaining offers from third parties to purchase Synergy Holdings[.]”

(FAC ¶ 18.) Higgins also alleges Flachs told her “that her retention in her

management role was critical to the success of the company. . . . [and that] she would

benefit financially when the company would eventually sell.” (FAC ¶ 18.) According

to Higgins, she relied on Flachs’s representations in deciding to accept each award of

Phantom Units.

11. Higgins’s work responsibilities at Synergy Solutions and its affiliates

increased with her seniority at the Company. While continuing to serve as Synergy

2 Higgins also alleges that in 2006, she accepted 25,000 Class B Units of stock in Synergy

Holdings pursuant to a “Restricted Unit Plan,” which have since vested. (FAC ¶¶ 13–14.) Higgins accepted 2,500 additional Class B Units in December 2016 which were scheduled to vest on or about December 1, 2017. (FAC ¶ 28.) Higgins alleges that her Class B Units “were designated as ‘subject to repurchase’ if she left her employment.” (FAC ¶ 15.) She avers that she requested information regarding the value of her Class B Units after her termination in September 2017, which Synergy Solutions refused to provide, and that the Company stated that it was not interested in repurchasing her units due to Plaintiff’s potential litigation against the Company. (FAC ¶ 44.) Higgins does not base any claims in this action on her Class B Units. Solutions’s Chief Underwriting Officer, she took over management of the Company’s

“Premium Audit Department” in 2009, (FAC ¶ 20), and became a member of the

Board of Directors of Synergy Insurance in 2012, (FAC ¶ 24). In 2014, she was given

the additional title of Executive Vice President of Premier Markets and made

Manager over Marketing. (FAC ¶ 24.) Higgins consistently received positive

performance reviews from Flachs through July 2016. (See FAC ¶¶ 26–27.)

12. The relationship between Higgins and the Company deteriorated in 2017.

Higgins alleges that “[o]n or about May 11, 2017, without any advance notice or prior

discussion, Flachs informed Higgins of his plan to restructure the management of

[Synergy Solutions,] . . . placed two managers in the chain of command between

himself and Higgins, . . . reduced the number of employees directly reporting to

Higgins[, and] moved Higgins from her office into one of the smallest offices in the

building[.]” (FAC ¶ 31.) Two months later, on July 14, 2017, Flachs terminated

Higgins’s employment, stating in her termination letter that her “work performance

d[id] not meet the standards set forth by [Synergy Solutions].” (FAC ¶ 35.) Higgins

was fifty years old when she was terminated. (FAC ¶ 36.) Her responsibilities were

given to an employee who was thirty-nine years old. (FAC ¶ 35.)

II.

PROCEDURAL HISTORY

13. Higgins initiated this action against Defendants on September 25, 2018,

fourteen months after her termination. The case was designated as a mandatory complex business case on November 9, 2018, (Designation Order, ECF No. 1), and

assigned to the undersigned on the same day, (Assignment Order, ECF No. 2).

14. After Defendants moved to dismiss the Complaint on December 31, 2018,

(Defs.’ Mot. Dismiss, ECF No. 20), Higgins filed the First Amended Complaint as of

right on February 7, 2019, (see FAC).

15. Higgins now asserts claims against Synergy Solutions for breach of contract,

defamation, and, in the alternative, quantum meruit/unjust enrichment; and against

all Defendants for common law fraud, fraud in the inducement, constructive fraud,

violation of N.C.G.S. § 143-422.2, and violation of the North Carolina Securities Act,

N.C.G.S. § 78A-1 et seq., and, in the alternative, negligent misrepresentation.

Higgins also seeks an accounting of Synergy Holdings from the Synergy Defendants

and asserts a claim in the alternative against the Synergy Defendants for alleged

violation of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (See

FAC.)

16. Defendants filed the Motion on March 12, 2019, seeking the dismissal of all

claims asserted in the First Amended Complaint. (Defs.’ Mot. Dismiss Pl.’s FAC

[hereinafter “Mot. Dismiss FAC”], ECF No. 41.) The Motion has been fully briefed,

and the Hearing on the Motion was held on May 21, 2019, at which all parties were

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

LEGAL STANDARD

17. In ruling on a motion to dismiss for failure to state a claim under Rule

12(b)(6), the Court’s inquiry is “whether the allegations of the complaint, if treated as

true, are sufficient to state a claim upon which relief can be granted under some legal

theory.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 615, 821 S.E.2d 729, 736

(2018) (quoting CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51,

790 S.E.2d 657, 659 (2016)).

18. “It is well established that dismissal pursuant to Rule 12(b)(6) is proper

when ‘(1) the complaint on its face reveals that no law supports the . . . claim; (2) the

complaint on its face reveals the absence of facts sufficient to make a good claim; or

(3) the complaint discloses some fact that necessarily defeats the . . . claim.’ ” Id., 821

S.E.2d at 736–37 (quoting Wood v. Guilford Cty., 355 N.C. 161, 166, 558 S.E.2d 490,

494 (2002)). The Court will not grant a motion to dismiss “unless it appears to a

certainty that [the] plaintiff is entitled to no relief under any state of facts which could

be proved in support of the claim.” Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161,

166 (1970) (emphasis and citation omitted).

19. The Court construes the allegations in the pleading “in the light most

favorable to the non-moving party.” Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370

N.C. 1, 5, 802 S.E.2d 888, 891 (2017) (quoting Kirby v. N.C. Dep’t of Transp., 368 N.C.

847, 852, 786 S.E.2d 919, 923 (2016)). The Court is “not required, however, ‘to accept

as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.’ ” Good Hope Hosp., Inc. v. N.C. Dep’t of Health & Human

Servs., 174 N.C. App. 266, 274, 620 S.E.2d 873, 880 (2005) (quoting Veney v. Wyche,

293 F.3d 726, 730 (4th Cir. 2002)); see also McCrann v. Pinehurst, LLC, 225 N.C. App.

368, 377, 737 S.E.2d 771, 777 (2013) (treating plaintiffs’ factual allegations as true

but ignoring their legal conclusions). The Court may also “reject allegations that are

contradicted by the documents attached, specifically referred to, or incorporated by

reference in the complaint.” Laster v. Francis, 199 N.C. App. 572, 577, 681 S.E.2d

858, 862 (2009) (citing Schlieper v. Johnson, 195 N.C. App. 257, 265, 672 S.E.2d 548,

553 (2009)).

IV.

ANALYSIS

A. Breach of Contract (v. Synergy Solutions)

20. Higgins’s lawsuit largely rests on her allegation—stated in varying

language throughout the First Amended Complaint—that she agreed to accept

Phantom Units in lieu of bonuses and/or earned salary increases in exchange for the

Company’s express or implied promise that she would remain employed at Synergy

Solutions through the sale of Synergy Holdings, at which time the Company would

pay her the value of her Phantom Units in accordance with the Plan. (See FAC ¶¶

18, 23, 26, 38, 50–52, 78, 84, 87, 94, 96.) She contends that Synergy Solutions breached that agreement by terminating her employment before a sale could occur.

(See FAC ¶ 53.)

21. To state a claim for breach of contract in North Carolina, a plaintiff must

allege “(1) [the] existence of a valid contract and (2) [a] breach of the terms of that

contract.” Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000) (citing

Jackson v. Carolina Hardwood Co., 120 N.C. App. 870, 871, 463 S.E.2d 571, 572

(1995)). Additionally, a contract must be supported by consideration. Inv. Props. of

Asheville, Inc. v. Norburn, 281 N.C. 191, 195, 188 S.E.2d 342, 345 (1972).

Consideration for these purposes has been defined as “any benefit, right, or interest

bestowed upon the promisor, or any forbearance, detriment, or loss undertaken by

the promisee.” Elliott v. Enka-Candler Fire & Rescue Dep’t, Inc., 213 N.C. App. 160,

163, 713 S.E.2d 132, 135 (2011) (quoting Lee v. Paragon Grp. Contractors, Inc., 78

N.C. App. 334, 337–38, 337 S.E.2d 132, 134 (1985)).

22. Synergy Solutions argues that Plaintiff’s contract claim must be dismissed

on two broad grounds. First, the Company argues that the Plan and Award

Agreements are the final expression of the parties’ agreement regarding Phantom

Units and specifically disclaim Higgins’s claimed entitlement to future employment.

Second, Synergy Solutions argues that Higgins has failed to plead mutual assent and

consideration, and that the Company’s alleged promise—employment through the

time of sale of Synergy Holdings—is not sufficiently definite to overcome the

presumption of at-will employment under North Carolina law. (See Mot. Dismiss

FAC 1–2.) The Court will address each argument in turn. (1) The Plan and Award Agreements as a Final Expression of Agreement

23. As noted above, Higgins acknowledges in her First Amended Complaint that

she received four Phantom Unit awards granting her a total of 8,600 units under the

Plan. (See FAC ¶¶ 18, 19, 22, 25–26.) Defendants have attached to their Motion and

supporting brief the Plan and the Award Agreements Higgins signed as a condition

of her receipt of the Phantom Units. (See Plan; Award Agreements.) Higgins has not

objected to the Court’s consideration of the Plan or the Award Agreements on this

Motion under Rule 12(b)(6) and, to the contrary, has focused parts of her argument

on the specific terms of those documents. Accordingly, the Court concludes that it

may consider the Plan and the Award Agreements on this Motion without converting

it to one under Rule 56. See Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60–61,

554 S.E.2d 840, 847 (2001) (holding that a court may consider under Rule 12(b)(6)

“documents which are the subject of a plaintiff’s complaint and to which the complaint

specifically refers even though they are presented by the defendant[,]” including “a

contract which is the subject matter of an action” (citations omitted)).

24. Synergy Solutions argues that the terms of the Plan and the Award

Agreements bar Higgins’s claim for cash payment for her Phantom Units in exchange

for her promise of continued employment. In support, Synergy Solutions notes that

each Award Agreement contains a merger clause specifically providing that the

Agreement, “together with the Plan, contain[ ] the entire understanding between the

parties hereto with respect to the subject matter hereof, and supersede[ ] all prior

written and oral statements, including any prior representation, statement, condition or warranty.” (Award Agreements ¶ 5.) Synergy Solutions also points out that the

Plan expressly disclaims entitlement to continued employment:

No Employment Rights. Nothing in this Plan will confer upon any Participant the right to continue in the employ or service of the Company or any of its Affiliates as an employee or otherwise for any period of time or interfere with or otherwise restrict in any way the rights of the Company or any of its Affiliates to terminate a Participant’s employment or service at any time for any reason, with or without cause.

(Plan ¶ 9 (emphasis in original).) Reading these documents together, the Company

argues that any alleged prior oral representations or agreements between Higgins

and Flachs regarding Phantom Units are superseded by the Plan and the Award

Agreements, barring Higgins’s breach of contract claim. (See Mem. Supp. Defs.’ Mot.

Dismiss Pl.’s FAC 5–6 [hereinafter “Br. Supp. Mot. Dismiss”], ECF No. 42.)

25. “North Carolina recognizes the validity of merger clauses and has

consistently upheld them.” Zinn v. Walker, 87 N.C. App. 325, 333, 361 S.E.2d 314,

318 (1987) (citing cases). In particular, “merger clauses were designed to effectuate

the policies of the [p]arol [e]vidence [r]ule; i.e., barring the admission of prior and

contemporaneous negotiations on terms inconsistent with the terms of the writing.”

Id. Despite its title, “[t]he parol evidence rule is a rule of substantive law[.]” Phelps

v. Spivey, 126 N.C. App. 693, 697, 486 S.E.2d 226, 229 (1997). As explained by the

Court of Appeals:

Generally, the parol evidence rule prohibits the admission of evidence to contradict or add to the terms of a clear and unambiguous contract. Thus, it is assumed the [parties] signed the instrument they intended to sign[,] . . . [and, absent] evidence or proof of mental incapacity, mutual mistake of the parties, undue influence, or fraud[,] . . . the court [does] not err in refusing to allow parol evidence[.] Drake v. Hance, 195 N.C. App. 588, 591, 673 S.E.2d 411, 413 (2009) (quoting

Thompson v. First Citizens Bank & Tr. Co., 151 N.C. App. 704, 708–09, 567 S.E.2d

184, 188 (2002)).

26. To avoid enforcement of the merger clause, Higgins argues that she has

pleaded she entered an employment agreement with Synergy Solutions that is

separate and apart from her entry into the Award Agreements and thus not within

their “subject matter.” (Pl.’s Mem. Opp’n Defs.’ Mot. Dismiss 11–13 [hereinafter “Br.

Opp’n Mot. Dismiss”], ECF No. 44.) For support, she points to her allegations in

paragraph 18 of her First Amended Complaint, which state in part that, based on

Flachs’s representations that Higgins’s “retention in her management role was

critical to the success of the company” and that she “would benefit financially when

the company would eventually sell[,] . . . Flachs and Higgins agreed that she would

remain employed with Synergy [Solutions] for their mutual benefit through the time

of sale.” (FAC ¶ 18.)

27. Higgins ignores, however, the context in which she pleads that these specific

representations and agreements were allegedly made. Indeed, as pleaded, the alleged

oral employment agreement, and each of Flachs’s alleged verbal affirmations of that

agreement, directly preceded the Company’s offer, and Higgins’s acceptance, of a

grant of Phantom Units under the Award Agreements. (See, e.g., FAC ¶ 18 (offer and

acceptance of 2009 Phantom Units), ¶ 23 (offer and acceptance of 2012 Phantom

Units), ¶ 25 (offer and acceptance of 2014 Phantom Units), ¶ 26 (offer and acceptance

of 2015 Phantom Units), and ¶ 50 (“At each offering of Phantom Units, the statements made to Higgins by Flachs, . . . gave rise to an enforceable employment

agreement[.]”).)

28. Higgins likewise ignores her many allegations that she received these

Phantom Units and their promise of potential payout as compensation for her

continued employment. (See FAC ¶ 18 (“Flachs . . . represented to Higgins that she

would be rewarded for her . . . continued service to [Synergy Solutions] through . . . a

cash payout under its Phantom Compensation Plan, when the Company was sold.”),

¶ 23 (“Flachs also represented that his purpose in offering Phantom Units was to

keep the senior management team in place and motivated so as to increase the

company’s value, from which Higgins would benefit at the time of sale.”), ¶ 26

(“Higgins was offered and accepted 1,000 additional Phantom Units in response to

Flachs’s continued representations regarding . . . his pursuit of a sale with rewards

for Higgins.”), ¶ 52 (“Higgins’[s] employment and continued employment with

[Synergy Solutions] . . . were secured by and consideration for representation made

by Flachs that she would . . . receive a cash payment for her Phantom Units upon the

sale of Synergy Holdings[.]” (emphasis added)).)

29. Consequently, rather than plead an agreement outside the “subject matter”

of the Award Agreements as she contends, Higgins’s First Amended Complaint

specifically ties her alleged employment agreement to the offer and acceptance of

Phantom Units under those Award Agreements. As such, by her own pleading, the

alleged employment agreement is within the “subject matter” of the Award

Agreements and the Plan and is subject to the Award Agreements’ merger clause. 30. Having so concluded, the Court next turns to whether the merger clause

bars Higgins’s breach of contract claim as a matter of law. Significantly for that

inquiry, Higgins has not pleaded or argued that the Plan or the Award Agreements

are unclear or ambiguous in any respect or that they arguably recognize a right to

her continued employment. See Mancuso v. Burton Farm Dev. Co., 229 N.C. App.

531, 542–43, 748 S.E.2d 738, 746–47 (2013) (enforcing merger clause where express

contracts were “devoid of any unclear or ambiguous terms that need clarification

based upon the consideration of parol evidence”). Indeed, as Higgins acknowledges,

the Plan expressly disclaims to Higgins any “right to continue in the employ or service

of the Company or any of its Affiliates as an employee or otherwise for any period of

time[.]” (Plan ¶ 9; Br. Opp’n Mot. Dismiss 11 (“[T]he Phantom Stock Plan language

does not provide the basis for a contract claim for a term of employment[.]”).) Nor

has Higgins pleaded with requisite particularity any fraudulent or negligent

misconduct, (see infra IV.C, D), that might preclude application of the merger clause

in the circumstances here, see Zinn, 87 N.C. App. at 333, 361 S.E.2d at 318

(acknowledging that a merger clause creates a presumption that “the writing

represents the final agreement between the parties” that may be rebutted by

establishing “fraud, bad faith, unconscionability, negligent omission[,] or mistake in

fact”).

31. Instead, Higgins pleads the existence of an alleged employment agreement

that flatly contradicts the express terms of the Plan. (See Plan ¶ 9.) Like the plaintiff

in Mancuso, Higgins seeks “to establish the existence of a separate implied contract rather than to explain the proper interpretation of an express contract[.]” Mancuso,

229 N.C. App. at 543, 748 S.E.2d at 746–47. In seeking to do so, however, Higgins

“runs afoul of the legal principle that an implied contract will not be recognized in an

instance covered by an express contract.” Id., 748 S.E.2d at 747; see, e.g., Vetco

Concrete Co. v. Troy Lumber Co., 256 N.C. 709, 714, 124 S.E.2d 905, 908 (1962) (“It

is a well recognized principle that there can be no implied contract where there is

an express contract between the parties in reference to the same subject-matter.”

(quoting Morganton Mfg. & Trading Co. v. Crews, 165 N.C. 285, 290, 81 S.E. 418, 420

(1914))).

32. As a result, the parol evidence rule bars enforcement of the alleged oral

employment agreement. See, e.g., Neal v. Marrone, 239 N.C. 73, 77, 79 S.E.2d 239,

242 (1953) (finding that “parol testimony of prior or contemporaneous negotiations or

conversations inconsistent with the writing, or which tend to substitute a new and

different contract from the one evidenced by the writing, is incompetent”); Phelps-

Dickson Builders, LLC v. Amerimann Partners, 172 N.C. App. 427, 436, 617 S.E.2d

664, 670 (2005) (holding that contract with merger clause barred parol evidence of

additional terms); Peoples Serv. Drug Stores, Inc. v. Mayfair, N. V. (Micora, N. V.), 50

N.C. App. 442, 449, 274 S.E.2d 365, 369–70 (1981) (disregarding parol evidence that

varied, added to, and contradicted the express unambiguous terms of a contract with

a merger clause).

33. The Court thus concludes that the merger clause must be given effect on the

pleaded facts. The Court therefore concludes that the Plan and the Award Agreements “contain[ ] the entire understanding” between Higgins and the Company

concerning the Company’s offer and Higgins’s acceptance of Phantom Units and that

those documents “supersede[ ] all prior written and oral statements, including any

prior representation, statement, condition or warranty” concerning the offer and

acceptance of Higgins’s Phantom Units as a matter of law. (Award Agreements ¶ 5.)

Accordingly, Higgins’s claim for breach of an alleged oral employment agreement

necessarily fails and her claim for breach of contract shall therefore be dismissed with

prejudice.

(2) Definite Term and Consideration

34. As separate and independent grounds for dismissal, the Court also

concludes that the alleged agreement on which Higgins’s breach of contract claim is

based is unenforceable for failure to specify a definite term of employment and for

lack of consideration.

35. Under North Carolina law, “in the absence of a contractual agreement

between an employer and employee establishing a definite term of employment, the

relationship is presumed to be terminable at the will of either party without regard

to the quality of performance of either party.” Kurtzman v. Applied Analytical Indus.,

Inc., 347 N.C. 329, 331, 493 S.E.2d 420, 422 (1997) (citing Soles v. City of Raleigh Civ.

Serv. Comm’n, 345 N.C. 443, 446, 480 S.E.2d 685, 687 (1997)). Furthermore, while

North Carolina recognizes contracts for “permanent employment,” such contracts

“are terminable at will by either party” unless “the employee gives some special

consideration in addition to his services[.]” McMurry v. Cochrane Furniture Co., 109 N.C. App. 52, 56, 425 S.E.2d 735, 738 (1993) (quoting Sides v. Duke Univ., 74 N.C.

App. 331, 345, 328 S.E.2d 818, 828 (1985)); see Tuttle v. Kernersville Lumber Co., 263

N.C. 216, 219, 139 S.E.2d 249, 251 (1964) (distinguishing between “steady

employment, a steady job, a position of some permanence” for “which there is no

additional expression as to duration,” and employment contracts where a life term is

specifically contemplated and supported by consideration additional to an employee’s

services).

36. Defendants argue that because the sale of Synergy Holdings is an event that

may or may not occur at some unfixed time in the future, Higgins’s alleged agreement

for employment until the sale or other disposition of Synergy Holdings was for an

indefinite term, thus permitting the “pre-sale” at-will termination of Higgins’

employment and requiring dismissal of Higgins’s contract claim as pleaded here. In

opposition, Higgins contends that employment until the sale of Synergy Holdings was

for a definite term because North Carolina recognizes contracts for lifetime

employment. (See Pl.’s Surreply Mem. Opp’n Defs.’ Mot. Dismiss 5–6, ECF No. 49.)

37. A term of employment is definite if it is for a “fixed period of time capable of

exact measurement[,]” “tied to a certain date[,]” or “set at a date certain in the

future[.]” Kristufek v. Saxonburg Ceramics, Inc., 901 F. Supp. 1018, 1025 (W.D.N.C.

1995) (applying North Carolina law). “Even where an employment contract specifies

compensation at a yearly, monthly, weekly, or daily rate, [the Court of Appeals] has

held that if the term of service is not specified, the contract is for an indefinite period.”

Wilkerson v. Carriage Park Dev. Corp., 130 N.C. App. 475, 477–78, 503 S.E.2d 138, 140 (1998) (citing Freeman v. Hardee’s Food Sys., Inc., 3 N.C. App. 435, 437–38, 165

S.E.2d 39, 41–42 (1969)).

38. Higgins’s allegations here make plain that whether Synergy Holdings would

be sold and the timing of any such sale were both uncertain. Thus, the alleged oral

employment contract was for an indefinite term as a matter of law. See Kristufek,

901 F. Supp. at 1025 (holding, under North Carolina law, that an agreement that the

plaintiff “would have his job with the defendant until the plaintiff retired” did not

create a definite term); Worley v. Bayer Corp., No. COA02-196, 2002 N.C. App. LEXIS

2501, at *4–7 (N.C. Ct. App. Dec. 17, 2002) (holding that an oral agreement that

employment was only terminable upon the employee’s “failure to report a mistake or

an attempt to conceal a mistake” was not a definite term); Wilkerson, 130 N.C. App.

at 478, 503 S.E.2d at 140 (holding that contractor’s argument that the duration of his

contract “could be implied from the time necessary to construct the 500 homes [he

was contracted to build was] unpersuasive, as it [did] not address the dispositive

question of whether the parties agreed he would work for a definite term”).

39. Nor has Higgins pleaded any consideration that would bring her pleading

within the North Carolina cases enforcing promises for lifetime employment as she

contends. Higgins argues that her good work performance, her decision not to pursue

other employment opportunities, and her agreement to defer compensation for her

services by accepting Phantom Units in lieu of earned bonuses constituted

consideration sufficient to support the alleged oral employment contract. (See FAC

¶¶ 25, 52; see also Br. Opp’n Mot. Dismiss 5.) 40. Higgins, however, like any employee, had a pre-existing duty to perform her

responsibilities in good faith, Dalton v. Camp, 353 N.C. 647, 652, 548 S.E.2d 704, 708

(2001), and, in continuing in her employment, necessarily forewent other “present or

future jobs[,]” McMurry, 109 N.C. App. at 57, 425 S.E.2d at 738 (quoting Humphrey

v. Hill, 55 N.C. App. 359, 362–63, 285 S.E.2d 293, 296 (1982)). Thus, her promise to

perform those acts that she was already bound to perform does not constitute

sufficient consideration for the oral agreement. See, e.g., Franco v. Liposcience, Inc.,

197 N.C. App. 59, 63, 676 S.E.2d 500, 503 (2009) (holding “mere continued

employment by the employee is insufficient” consideration); Burton v. Kenyon, 46

N.C. App. 309, 311, 264 S.E.2d 808, 809 (1980) (holding “a promise to perform an act

which the promisor [wa]s already bound to perform [wa]s insufficient consideration”).

41. Additionally, Plaintiff’s claimed exchange of earned bonuses for Phantom

Units cannot provide consideration for continued employment here because, as

discussed above, the Plan and the Award Agreements set forth the entire agreement

of the parties with respect to Phantom Units and expressly disclaim any right to

continued employment. (See Plan ¶ 9 (stating the Plan neither confers a right to

employment, nor interferes or restricts the rights of the Company to terminate a Plan

participant’s employment at any time for any reason).)

42. Based on the foregoing, the Court concludes that Plaintiff’s breach of

contract claim should also be dismissed on each of these separate grounds. B. Quantum Meruit/Unjust Enrichment (v. Synergy Solutions)

43. Higgins alleges in the alternative to her contract claim that Synergy

Solutions was unjustly enriched by the value of her uncompensated services. (FAC

¶¶ 67–68.) Because she accepted Phantom Units in lieu of earned increases in her

salary and/or bonuses, Higgins argues that the value of her uncompensated services

for which she is entitled to payment is equal to the value of her Phantom Units. (See

FAC ¶ 67.)

44. “In North Carolina, to recover on a claim of unjust enrichment, Plaintiff

must prove: (1) that it conferred a benefit on another party; (2) that the other party

consciously accepted the benefit; and (3) that the benefit was not conferred

gratuitously or by an interference in the affairs of the other party.” Islet Scis., Inc. v.

Brighthaven Ventures, LLC, 2017 NCBC LEXIS 4, at *16 (N.C. Super. Ct. Jan. 12,

2017) (citing Se. Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 330, 572 S.E.2d 200,

206 (2002)). “The general rule of unjust enrichment is that where services are

rendered and expenditures made by one party to or for the benefit of another, without

an express contract to pay, the law will imply a promise to pay a fair compensation

therefor.” Atl. Coast Line R.R. Co. v. State Highway Comm’n, 268 N.C. 92, 95–96,

150 S.E.2d 70, 73 (1966). However, “[i]f there is a contract between the parties[,] the

contract governs the claim and the law will not imply a contract.” Booe v. Shadrick,

322 N.C. 567, 570, 369 S.E.2d 554, 556 (1988).

45. Generally, at the 12(b)(6) stage, courts decline to address unjust enrichment

claims if a breach of contract claim remains viable. See Shelton v. Duke Univ. Health Sys., 179 N.C. App. 120, 125, 633 S.E.2d 113, 116 (2006) (stating on Rule 12(b)(6)

motion that “[b]ecause we have not held the contract to be unenforceable, we do not

address [plaintiff’s unjust enrichment] argument”). In this instance, because the

breach of contract claim must be dismissed, the Court addresses Plaintiff’s claim for

unjust enrichment.

46. Higgins argues that Synergy Solutions gratuitously benefited from her

employment because the Company’s value increased during her employment, (see

FAC ¶ 68), and she did not receive the value of her Phantom Units or the increases

in salary or bonuses she would have otherwise received. Plaintiff’s apparent theory

is that she had an implied contract to be paid the value of those Phantom Units

because she gave up her right to current compensation to receive them.

47. As discussed above, however, Higgins has pleaded that she accepted the

Phantom Units in accordance with the terms of the Plan and Award Agreements, and

North Carolina law will not imply a contract where one already exists covering the

same subject matter. Atl. & E. Carolina Ry. Co. v. Wheatly Oil Co., 163 N.C. App.

748, 753, 594 S.E.2d 425, 429 (2004) (“The doctrine of unjust enrichment is based on

‘quasi-contract’ or contract ‘implied in law’ and thus will not apply . . . where a

contract exists between two parties.”). Because Higgins’s unjust enrichment claim

seeks to recover the alleged value of Phantom Units where Higgins’s rights

concerning those Phantom Units are governed by the pleaded Plan and Award

Agreements, Higgins’s unjust enrichment claim should be dismissed. 48. Furthermore, the Plan and Award Agreements make plain that any benefit

Synergy Solutions accepted from Higgins’s employment after she began accepting

Phantom Units in lieu of salary increases and/or bonuses was not gratuitous because

Higgins received what she bargained for: the opportunity to cash out her Phantom

Units if Synergy Holdings was sold before July 1, 2025, (Br. Supp. Mot. Dismiss Ex.

1, at 7, ECF No. 42.2), while she was an employee, (Plan ¶ 4), and for an amount such

that the net sale proceeds exceeded $15,000,000, (Plan ¶ 5(a)); see Champion Pro

Consulting Grp., Inc. v. Impact Sports Football, LLC, 976 F. Supp. 2d 706, 720–21

(M.D.N.C. 2013) (applying North Carolina law and dismissing unjust enrichment

claim where plaintiffs had “already been compensated for the services upon which

their unjust enrichment claim [wa]s based”); see also BDM Invs. v. Lenhil, Inc., 2012

NCBC LEXIS 7, at *65 (N.C. Super. Ct. Jan. 18, 2012) (“Without enrichment, there

can be no ‘unjust enrichment’ and therefore no recovery on an implied contract.”

(quoting Greeson v. Byrd, 54 N.C. App. 681, 683, 284 S.E.2d 195, 196 (1995))).

Higgins’s claim shall also be dismissed on this separate and independent basis.

C. Fraud, Fraudulent Inducement, and Constructive Fraud (v. Synergy Defendants, Flachs)

49. Higgins alleges that Defendants are liable for fraud, fraudulent inducement,

and constructive fraud because Flachs omitted material facts and falsely represented

that Higgins would benefit directly from the sale of Synergy Holdings and

fraudulently induced her to work for and invest in Synergy Solutions by purchasing

stock options and accepting Phantom Units in lieu of earned compensation, thereby

depriving her of the value of her Phantom Units. (See FAC ¶¶ 84–87, 103.) 50. Common law or actual fraud arises from an arm’s length transaction in

which there was “(1) [a f]alse representation or concealment of a material [past or

existing] fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4)

which does in fact deceive, (5) [and] result[s] in damage to the injured party.” Terry

v. Terry, 302 N.C. 77, 83, 273 S.E.2d 674, 677 (1981) (quoting Ragsdale v. Kennedy,

286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974)). “Additionally, [a] plaintiff’s reliance

on any misrepresentations must be reasonable.” MacFadden v. Louf, 182 N.C. App.

745, 747, 643 S.E.2d 432, 434 (2007) (quoting RD&J Props. v. Lauralea-Dilton

Enters., LLC, 165 N.C. App 737, 744, 600 S.E.2d 492, 498 (2004)).

51. To state a claim for fraudulent inducement, a plaintiff must allege:

(i) that [the] defendant made a false representation or concealed a material fact he had a duty to disclose[;] (ii) that the false representation related to a past or existing fact; (iii) that defendant made the representation knowing it was false or made it recklessly without knowledge of its truth; (iv) that defendant made the representation intending to deceive [the] plaintiff; (v) that [the] plaintiff reasonably relied on the representation and acted upon it; and (vi) [the] plaintiff suffered injury.

Harton v. Harton, 81 N.C. App. 295, 298–99, 344 S.E.2d 117, 119–20 (1986) (citing

Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 253, 266 S.E.2d 610, 615 (1980)).

52. In contrast, constructive fraud “does not require the same rigorous

adherence to elements as actual fraud.” Terry, 302 N.C. at 83, 273 S.E.2d at 677.

Rather, to sustain a constructive fraud claim, a plaintiff must allege breach of a

confidential or fiduciary relationship by pleading “facts and circumstances (1) which

created the relation of trust and confidence, and (2) [which] led up to and surrounded

the consummation of the transaction in which [the] defendant is alleged to have taken advantage of his position of trust to hurt [the p]laintiff.” Hunter v. Guardian Life Ins.

Co. of Am., 162 N.C. App. 477, 482, 593 S.E.2d 595, 599 (2004) (quoting State ex rel.

Long v. Petree Stockton, LLP, 129 N.C. App. 432, 445, 499 S.E.2d 790, 798 (1998)

(internal quotation marks omitted)). “The primary difference between pleading a

claim for constructive fraud and one for breach of fiduciary duty is the intent and

showing that the defendant benefitted from his breach of duty.” Ironman Med.

Props., LLC v. Chodri, No. COA18-108, 2019 N.C. App. LEXIS 969, at *18 (N.C. Ct.

App. Dec. 3, 2019) (citing White v. Consol. Planning, Inc., 166 N.C. App. 283, 294, 603

S.E.2d 147, 156 (2004)). “This element requires a plaintiff to allege and prove that

the defendant took ‘advantage of his position of trust to the hurt of plaintiff’ and

sought ‘his own advantage in the transaction.’ ” Id. at *18–19 (quoting Barger v.

McCoy Hillard & Parks, 346 N.C. 650, 666, 488 S.E.2d 215, 224 (1997)).

53. Defendants move to dismiss Higgins’s fraud claim for failure to allege a

definite and specific representation and reasonable reliance. (Br. Supp. Mot. Dismiss

11, 23–26.) Defendants also argue that Plaintiff’s fraudulent inducement and

constructive fraud claims must fail on the independent basis that Higgins has not

pleaded a confidential relationship or a duty owed to her by Defendants. (Br. Supp.

Mot. Dismiss 20.) Because Defendants’ arguments for dismissal focus on the

overlapping elements of these claims, the Court turns to a review of these elements.

(1) Misrepresentation of a Past or Existing Fact (Fraud & Fraudulent Inducement)

54. Defendants assert that Plaintiff’s fraud and fraudulent inducement claims

should be dismissed because Higgins has failed to allege with particularity that Defendants misrepresented a past or existing fact. Defendants contend that

Higgins’s allegations only “infer[ ] an ‘implied promise’ of continued employment” and

do not show that Flachs “actually told her that she would remain employed” until the

sale of Synergy Holdings. (Br. Supp. Mot. Dismiss 23.)

55. Under North Carolina law, “a mere promissory representation will not

support an action for fraud.” Braun v. Glade Valley Sch., Inc., 77 N.C. App. 83, 87,

334 S.E.2d 404, 407 (1985) (citing Phoenix Mut. Life Ins. Co., 300 N.C. at 255, 266

S.E.2d at 616). Nevertheless, “[a] speaker may not voice an opinion that he does not

honestly believe, intending to deceive the listener, and then assert immunity from an

action for fraud.” Potts v. KEL, LLC, 2018 NCBC LEXIS 24, at *8–9 (N.C. Super. Ct.

Mar. 27, 2018) (citing Leftwich v. Gaines, 134 N.C. App. 502, 508, 521 S.E.2d 717, 723

(1999)); see Braun, 77 N.C. App. at 87, 334 S.E.2d at 407 (“[A] promissory

misrepresentation may constitute actual fraud if the misrepresentation is made with

the intent to deceive and with no intent to comply with the stated promise or

representation.”). This is because an intentional “misrepresentation of the state of

the promisor’s mind” constitutes a misrepresentation of existing fact. Overstreet v.

Brookland, Inc., 52 N.C. App. 444, 452, 279 S.E.2d 1, 6 (1981).

56. Rule 9(b) requires “the circumstances constituting fraud” to be alleged “with

particularity.” N.C. R. Civ. P. 9(b). “The purpose of Rule 9(b) is to provide a defendant

with sufficient notice of the fraud alleged ‘in order to meet the charges.’ ” Provectus

Biopharm., Inc. v. RSM US LLP, 2018 NCBC LEXIS 101, at *63 (N.C. Super. Ct.

Sept. 28, 2018) (quoting Terry, 302 N.C. at 85, 273 S.E.2d at 678). “[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, 302 N.C. at 85, 273 S.E.2d at 678. Thus, “a pleading is

sufficiently particular ‘if, upon a liberal construction of the whole pleading, the charge

of fraud might be supported by proof of the alleged constitutive facts.’ ” Provectus

Biopharm., Inc., 2018 NCBC LEXIS 101, at *63 (quoting Carver v. Roberts, 78 N.C.

App. 511, 513, 337 S.E.2d 126, 128 (1985)).

57. Higgins’s articulation and characterization of Flachs’s alleged promise of

continued employment in the First Amended Complaint takes varying and

inconsistent forms. (See, e.g., FAC ¶ 18 (“Thus, Flachs and Higgins agreed that she

would remain employed with Synergy [Solutions] for their mutual benefit through

the time of sale.”), ¶ 52 (“The employment contract . . . included an implied promise

and term of duration that Higgins would remain employed and not be terminated,

before Synergy Holdings was sold.”), ¶ 85 (“Flachs sought Higgins’[s] continued

employment with promises that she would be retained until the Company was

sold[.]”), ¶ 94 (“[Flachs] represented to Higgins that he was pursuing a sale of the

company and that she would benefit from the sale, directly implying that Higgins

would not be terminated by [Synergy Solutions] before Synergy Holdings was sold.”).)

58. Even reading the First Amended Complaint in the light most favorable to

Higgins, the Court cannot conclude that Higgins has alleged a promissory

representation with sufficient particularity to withstand Rule 12(b)(6) scrutiny. To the contrary, at most Higgins has alleged that she inferred a promise of continued

employment. “In the absence of a misrepresentation, there can be no actionable

fraud[,]” Am. Imps., Inc. v. G. E. Emps. W. Region Fed. Credit Union, 37 N.C. App.

121, 125, 245 S.E.2d 798, 801 (1978) (citing Ragsdale, 286 N.C. at 138, 209 S.E.2d at

500), and an implied promise is not a representation, Claggett v. Wake Forest Univ.,

126 N.C. App. 602, 610, 486 S.E.2d 443, 447–48 (1997) (affirming dismissal of

fraudulent inducement claim where plaintiff alleged he relied on defendant’s “implied

promise”). Higgins’s claims for fraud and fraudulent inducement shall therefore be

dismissed to the extent they are premised upon Flachs’s alleged misrepresentations.

(2) Reasonable or Justifiable Reliance (Fraud & Fraudulent Inducement)

59. Defendants contend that Higgins’s fraud and fraudulent inducement claims

should be dismissed on the separate ground that Higgins has failed to allege

reasonable or justifiable reliance on Flachs’s alleged misrepresentations. (Br. Supp.

Mot. Dismiss 11.)

60. “[A] plaintiff may justifiably rely on representations made by a defendant

with superior knowledge on a subject where the parties are not on equal footing and

nothing about the defendant’s representations should have given plaintiff cause to

suspect the veracity of the representations.” Austin v. Regal Inv. Advisors, LLC, 2018

NCBC LEXIS 3, at *33 (N.C. Super. Ct. Jan. 8, 2018) (citing Walker v. Town of

Stoneville, 211 N.C. App. 24, 34, 712 S.E.2d 239, 246 (2011)). In other words, “when

the party relying on the false or misleading representation could have discovered the

truth upon inquiry, the complaint must allege that he was denied the opportunity to investigate or that he could not have learned the true facts by exercise of reasonable

diligence.” Hudson-Cole Dev. Corp. v. Beemer, 132 N.C. App. 341, 346, 511 S.E.2d

309, 313 (1999) (citing Rosenthal v. Perkins, 42 N.C. App. 449, 452, 257 S.E.2d 63, 66

(1979)); see Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331, 341 (4th Cir.

1998) (“[I]f a plaintiff had an alternative source for the information that is alleged to

have been concealed from or misrepresented to him, his ignorance or reliance on any

misinformation is not reasonable.”).

61. Here, Flachs’s representation that Higgins would remain employed through

the sale of Synergy Holdings and therefore benefit from that sale is directly

contradicted by the plain language of paragraph 9 of the Plan. As discussed above,

Higgins has failed to plead an oral employment agreement distinct from her

acceptance of Phantom Units through the Award Agreements, and paragraph 9 of the

Plan explicitly provides that the Plan does not create a right to continued

employment. (See Plan ¶ 9.)

62. Moreover, it was unreasonable for Higgins to rely on “vague assurances of

continued employment” by Flachs without conducting an independent investigation

into the circumstances here because such assurances do not supersede the

presumption of at-will employment under North Carolina law. See Kurtzman, 347

N.C. at 334, 493 S.E.2d at 423–24 (holding that assurances of continued employment

do not convert an at-will employment relationship to one for a definite term); see also

McMurry, 109 N.C. App. at 57–58, 425 S.E.2d at 738–39 (stating that at-will employment contracts require additional consideration to become binding for definite

term).

63. Higgins alleges that once she began to question the truthfulness of Flachs’s

statements, she made reasonable inquiries on May 15, 2017 by asking both Flachs

and Synergy Solutions’s Chief Financial Officer whether her job was in jeopardy and

was reassured by both that it was not. (FAC ¶ 88.) The 2017 assurances, however,

cannot serve as reasonable justification for Higgins’s acceptance of Phantom Units

years before in 2009, 2012, 2014, and 2015. See Sullivan v. Mebane Packaging Grp.,

Inc., 158 N.C. App. 19, 33–34, 581 S.E.2d 452, 462–63 (2003) (holding that a plaintiff

could not claim to have relied on information provided after a sale when deciding to

make that sale).

64. Furthermore, Higgins has not alleged, and could not allege in good faith,

that she was prevented from conducting her own investigation because, as a

signatory, Higgins was charged with knowledge of the contents of the Plan and Award

Agreements and their direct contradiction of her claim to continued employment. See

Biesecker v. Biesecker, 62 N.C. App. 282, 285, 302 S.E.2d 826, 828–29 (1983) (“[A]

person signing a written instrument is under a duty to read it for his own protection,

and ordinarily is charged with knowledge of its contents. Nor may he predicate an

action for fraud on his ignorance of the legal effect of its terms.” (quoting 6 N.C. Index

3d, Fraud § 5)).

65. The Court thus concludes that Higgins’s claims for fraud and fraudulent

inducement should be dismissed for failure to allege reasonable or justifiable reliance on Flachs’s alleged misrepresentations. See Hudson-Cole Dev. Corp., 132 N.C. App.

at 346–47, 511 S.E.2d at 313 (affirming dismissal of fraud claim for lack of reasonable

reliance where information was available in public record, stating that “where the

facts are insufficient as a matter of law to constitute reasonable reliance on the part

of the complaining party, the complaint is properly dismissed under Rule 12(b)(6)”);

Plasman v. Decca Furniture (USA), Inc., 2016 NCBC LEXIS 80, at *32 (N.C. Super.

Ct. Oct. 21, 2016) (dismissing fraud claim for plaintiffs’ failure to allege they “relied

on alleged misrepresentations intended to deceive either of them”); NNN Durham

Office Portfolio 1, LLC v. Highwoods Realty Ltd. P’ship, 2013 NCBC LEXIS 11, at *58

(N.C. Super. Ct. Feb. 19, 2013) (dismissing common law fraud claim because plaintiffs

could not have reasonably relied on a memorandum they never read).

(3) Confidential Relationship (Fraudulent Inducement & Constructive Fraud)

66. Defendants contend that Plaintiff’s constructive fraud and fraudulent

inducement claims, to the extent they are predicated on a material omission, must be

dismissed for failure to allege a confidential or fiduciary relationship. (Br. Supp. Mot.

Dismiss 20.)

67. “Constructive fraud arises where a confidential or fiduciary relationship

exists[.]” Watts v. Cumberland Cty. Hosp. Sys., Inc., 317 N.C. 110, 115, 343 S.E.2d

879, 884 (1986). For the purposes of a fraudulent inducement claim,

[a] duty to disclose arises where: (1) “a fiduciary relationship exists between the parties to the transaction”; (2) there is no fiduciary relationship and “a party has taken affirmative steps to conceal material facts from the other”; [or] (3) there is no fiduciary relationship and “one party has knowledge of a latent defect in the subject matter of the negotiations about which the other party is both ignorant and unable to discover through reasonable diligence.”

Hardin v. KCS Int’l, Inc., 199 N.C. App. 687, 696, 682 S.E.2d 726, 733 (2009) (quoting

Sidden v. Mailman, 137 N.C. App. 669, 675, 529 S.E.2d 266, 270–71 (2000)).

68. Higgins alleges that she and Flachs had a confidential relationship through

the twenty-four-year working relationship between them “during which time Flachs

twice hired Higgins to work in critical positions for other companies he controlled,”

by inducing Higgins to leave a secure position to work at Synergy Solutions, and

through encouraging her to invest in Synergy Solutions. (FAC ¶ 85.) Plaintiff

contends that the Synergy Defendants owed her a legal duty through Flachs as “their

CEO and control person.” (FAC ¶¶ 85, 95.)

69. North Carolina law is clear, however, that the relationship of an employer

or its supervisor to an employee is not confidential and, without more, does not give

rise to a fiduciary duty. See Dalton, 353 N.C. at 652, 548 S.E.2d at 708 (“[T]he relation

of employer and employee is not one of those regarded as confidential.” (quoting King

v. Atl. Coast Line R.R. Co., 157 N.C. 44, 62–63, 72 S.E. 801, 808 (1911))); see also

Austin Maint. & Constr., Inc. v. Crowder Constr. Co., 224 N.C. App. 401, 410, 742

S.E.2d 535, 542 (2012) (“[I]n the absence of some unusual set of facts that would

suffice to differentiate the relationship between [the employer] and [the employee]

from other employer-employee relationships, [the employee] did not have a fiduciary

relationship with [his employer].”); Reichhold Chems., Inc. v. Goel, 146 N.C. App. 137,

155, 555 S.E.2d 281, 292 (2001) (“A managerial position alone does not demonstrate the requisite domination and influence on the other required to create a fiduciary

obligation.” (internal quotation marks and citations omitted)).

70. As pleaded here, Higgins’s relationship with Defendants is contractual, and

“parties to a contract do not thereby become each other[’]s[ ] fiduciaries; they

generally owe no special duty to one another beyond the terms of the contract[.]”

Branch Banking & Tr. Co. v. Thompson, 107 N.C. App. 53, 61, 418 S.E.2d 694, 699

(1992). Furthermore, Higgins has failed to allege the sort of domination and influence

our courts have required to create a fiduciary duty between an employer and its

employee. See S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601,

613, 659 S.E.2d 442, 451 (2008) (“Only when one party figuratively holds all the

cards—all the financial power or technical information, for example—have North

Carolina courts found that the special circumstance of a fiduciary relationship has

arisen.” (quoting Broussard, 155 F.3d at 348)); see also Austin Maint. & Constr., Inc.,

224 N.C. App. at 410, 742 S.E.2d at 542 (holding that employee did not owe fiduciary

duty where only confidence reposed in him was competent performance of his

assigned duties, and he was a “relatively small cog in a very large operation”).

Accordingly, Plaintiff’s fraudulent inducement and constructive fraud claims must be

dismissed. See, e.g., Chisum v. Campagna, 2017 NCBC LEXIS 102, at *19–20 (N.C.

Super. Ct. Nov. 7, 2017) (dismissing constructive fraud claim for failure to allege

fiduciary duty); Kingsdown, Inc. v. Hinshaw, 2015 NCBC LEXIS 30, at *26 (N.C.

Super. Ct. Mar. 25, 2015) (same). D. Negligent Misrepresentation (v. Synergy Defendants, Flachs)

71. Higgins alleges a claim for negligent misrepresentation as an alternative to

her fraud and fraud in the inducement claims.

72. Like fraud-based claims, “[t]he tort of negligent misrepresentation occurs

when a party justifiably relies to his detriment on information prepared without

reasonable care by one who owed the relying party a duty of care.” Raritan River

Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 206, 367 S.E.2d 609, 612 (1988)

(citation omitted). For the purposes of assessing a negligent misrepresentation claim,

[j]ustifiable reliance is analogous to reasonable reliance in fraud actions. Reliance is not reasonable if a plaintiff fails to make any independent investigation[ ] or fails to demonstrate he was prevented from doing so. To establish justifiable reliance a plaintiff must sufficiently allege that he made a reasonable inquiry into the misrepresentation and allege that he was denied the opportunity to investigate or that he could not have learned the true facts by exercise of reasonable diligence.

Regal Inv. Advisors, LLC, 2018 NCBC LEXIS 3, at *31 (internal quotation marks,

citations, and alterations omitted).

73. For the reasons discussed above, (see supra IV.C(2)), Plaintiff’s allegations

in support of reasonable or justifiable reliance fall short. As a result, Plaintiff’s

negligent misrepresentation claim must be dismissed. See, e.g., Vigus v. Milton A.

Latta & Sons Dairy Farms, Inc., No. COA08-700, 2009 N.C. App. LEXIS 830, at *34

(N.C. Ct. App. May 19, 2009) (“If a plaintiff’s own evidence tends to show that he/she

was not justified in relying upon the misrepresentation of a defendant, then he/she is

in effect contributorily negligent[,]” and is barred from recovery (citation omitted));

Hudson-Cole Dev. Corp., 132 N.C. App. at 346–47, 511 S.E.2d at 313 (affirming dismissal of negligent misrepresentation claim for failure to allege reasonable

reliance); Value Health Sols., Inc. v. Pharm. Research Assocs., Inc., 2019 NCBC

LEXIS 70, at *32 (N.C. Super. Ct. Sept. 6, 2019) (dismissing negligent

misrepresentation and fraud claims because plaintiff did “not allege that it was

denied an opportunity to investigate the veracity of the misrepresentations or that it

could not have learned the true facts by exercising reasonable diligence”). 3

E. Defamation (v. Synergy Solutions)

74. Higgins alleges that in August 2017, following her termination, her

supervisor at Synergy Solutions told a prospective employer that Higgins was fired

for “performance reasons” with knowledge that the statement was false. (FAC ¶¶

40–41, 57–58.) Defendants argue that Plaintiff has failed to allege facts sufficient to

hold Synergy Solutions vicariously liable for the alleged acts of this unnamed

employee. (See Mot. Dismiss FAC 2.)

75. In North Carolina, the post-termination statements of an employer’s agent

about the basis for an employee’s termination are not within the agent’s scope of

employment and are therefore not attributable to the employer. See Stutts v. Duke

Power Co., 47 N.C. App. 76, 81, 266 S.E.2d 861, 865 (1980) (finding no vicarious

liability where plaintiff alleged his former manager made a false statement about his

dishonesty to prospective employers after his termination). Thus, Higgins’s

defamation claim must be dismissed on this basis.

3 In light of the above, the Court need not address Defendants’ additional arguments for

dismissal of this claim under the economic loss rule and for an alleged failure to plead a duty of care. 76. Separately, North Carolina law requires defamation claims to meet

“heightened pleading requirements.” Addison Whitney, LLC v. Cashion, 2017 NCBC

LEXIS 111, at *15 (N.C. Super. Ct. Dec. 1, 2017). Not only must a plaintiff “recite

the defamatory statement verbatim ‘or with sufficient particularity to enable the

court to determine whether the statement was defamatory[,]’ ” id. (quoting Stutts, 47

N.C. App. at 84, 266 S.E.2d at 866), but “the relevant pleading must allege ‘who said

what to whom, as well as when and where the defamatory statements were

made[,]’ ” id. (quoting Gosnell v. Reid, No. 5:14CV179-RLV, 2015 U.S. Dist. LEXIS

96878, at *21 (W.D.N.C. July 24, 2015), aff’d by Gosnell v. Catawba Cty., 646 F. App’x

318 (4th Cir. 2016)).

77. Higgins has identified the maker and recipient of the allegedly defamatory

statement simply as a “supervisor” and a “prospective employer,” respectively. Such

lack of specificity fails North Carolina’s heightened pleading requirement. See, e.g.,

Wynn v. Tyrrell Cty. Bd. of Educ., No. COA16-1130, 2017 N.C. App. LEXIS 358, at

*8–9 (N.C. Ct. App. May 16, 2017) (dismissing defamation claim that did not identify

maker or recipient of alleged statement); Addison Whitney, LLC, 2017 NCBC LEXIS

111, at *15–16 (holding allegation “that agents or employees of [the plaintiff] stated

to ‘its own customers’ and to companies that might ‘be interested in conducting

business with the Defendants that Defendants cannot be trusted to maintain the

confidentiality of the customers’ and companies’ sensitive business information’ ” was

not sufficiently particular). 78. For each of these independent reasons, Plaintiff’s defamation claim should

be dismissed.

F. North Carolina Securities Act (v. Synergy Defendants, Flachs)

79. Higgins alleges that Defendants have violated the North Carolina Securities

Act (“NCSA”) by inducing her to accept Phantom Units through misrepresentations

and material omissions. (See FAC ¶¶ 73–76.) Defendants move to dismiss because

Plaintiff has failed to allege that she was offered a security within the meaning of the

NCSA and that Defendants violated N.C.G.S. § 78A-56(a)(1) or (a)(2). (See Mot.

Dismiss FAC 2.)

(1) Phantom Units as “Securities”

80. The NCSA defines a security as:

any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit- sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract . . . ; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under a title or lease; viatical settlement contract or any fractional or pooled interest in a viatical settlement contract; or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

N.C.G.S. § 78A-2(11). Phantom stock is not listed as a security in N.C.G.S. § 78A-2,

and North Carolina courts have not addressed whether phantom stock is a security

under the NCSA.

81. This Court has previously turned to federal authority under the Securities

and Exchange Act of 1934 for guidance in interpreting the NCSA, particularly with respect to the definition of a “security.” See, e.g., Vestlyn BMP, LLC v. Balsam

Mountain Grp., LLC, 2016 NCBC LEXIS 48, at *31 (N.C. Super. Ct. June 22, 2016)

(“Recognizing the dearth of case law interpreting the NCSA, this Court previously

has found guidance in interpreting the NCSA’s definition of ‘security’ in decisions

interpreting the strikingly similar federal definition of ‘security’ found in the

Securities Exchange Act of 1934.”); NNN Durham Office Portfolio 1, LLC, 2013 NCBC

LEXIS 11, at *21–28 (relying on federal authority to determine whether tenant-in-

common interest was an “ ‘investment contract’ included in the broader definition of

‘security’ ”). Federal decisions place emphasis on “the economic realities of the

transaction . . . [and] have developed analyses for determining whether instruments

. . . exhibit the sort of economic characteristics that warrant classification as a

security.” Vestlyn BMP, LLC, 2016 NCBC LEXIS 48, at *31–32 (citing federal cases);

see Secs. & Exch. Comm’n v. Edwards, 540 U.S. 389, 393–94 (2004) (stating test for

determining whether an instrument is an investment contract (citing Secs. & Exch.

Comm’n v. W. J. Howey Co., 328 U.S. 293, 301 (1946))).

82. Analyzing the economic characteristics of an alleged security “necessarily

requires an analysis of the facts surrounding the transaction or instrument at issue[,]

and “[a]lthough this is a fact-intensive analysis, North Carolina courts have

undertaken such an analysis at the motion to dismiss stage based on the facts alleged

in the complaint.” Vestlyn BMP, LLC, 2016 NCBC LEXIS 48, at *32 (citing NNN

Durham Office Portfolio 1, LLC, 2013 NCBC LEXIS 11, at *21–28). Where a plaintiff

fails to allege sufficient facts to permit a conclusion that the instrument at issue is a security, our courts have dismissed NCSA claims under Rule 12(b)(6). See, e.g., id.

at *33–34 (granting motion to dismiss NCSA claim for failure to support conclusory

allegation that instrument was a security with factual allegations).

83. Higgins does not allege in her First Amended Complaint how the Phantom

Units she received qualify as “securities” under N.C.G.S. § 78A-2, but she argues in

her opposition brief, without citation to legal authority, that “[t]he Units may be

deemed stock, a certificate of interest or participation in a profit sharing agreement,

and/or an investment contract.” (Br. Opp’n Mot. Dismiss 33–34.) The Court

disagrees.

84. First, the First Amended Complaint, Plan, and Award Agreements do not

support Higgins’s claim that the Phantom Units are phantom stock and thus “stock”

under the NCSA. The Plan does not identify the Phantom Units as phantom stock,

and, more importantly, the Phantom Units do not track the value of Synergy

Holdings’s shares, and Phantom Unit holders are not entitled to distributions before

a Liquidity Event occurs. (See Plan ¶ 5(a) (providing calculation for determining

value of Phantom Units), ¶ 6 (setting forth payment structure under the Plan).)

85. Even if the Units could be characterized as phantom stock, several federal

courts have persuasively reasoned that phantom stock is not “stock” under federal

securities laws because it does not grant the holder equity. See Byrd v. Visalus, Inc.,

No. 17-cv-12626, 2018 U.S. Dist. LEXIS 57826, at *13–14 (E.D. Mich. Apr. 5, 2018)

(declining to categorize units referenced as “real equity” as phantom stock); Bunnell

v. Netsch, No. 3:12-CV-03740-L, 2013 U.S. Dist. LEXIS 82030, at *20–22 n.3 (N.D. Tex. June 11, 2013) (stating that phantom stock is not stock); In re Enron Corp. Secs.,

Derivative & “ERISA” Litig., 284 F. Supp. 2d 511, 530 n.2 (S.D. Tex. 2003)

(“[P]hantom stock is not actually stock.”); Estate of Hurford v. Comm’r, Nos. 23954-

04, 23964-04, 2008 Tax Ct. Memo LEXIS 276, at *5 (T.C. Dec. 11, 2008) (stating that

phantom stock is not stock).

86. Higgins does not allege, and the Plan does not provide, that the Phantom

Units represent “real equity” in Synergy Holdings. Rather, the Phantom Units are

instruments that are assigned value under a formula provided in the Plan upon the

sale of Synergy Holdings at or above a certain price. (See Plan ¶¶ 3, 5–6.) As such,

the Phantom Units are not “stock” within the NCSA.

87. Neither are the Phantom Units a participation in a profit-sharing

agreement or an investment contract. North Carolina’s administrative code defines

“investment contract” under the NCSA but not profit-sharing agreements. See 18

N.C. Admin. Code 6A.1104(8) (stating that an investment contract under N.C.G.S.

§ 78A-2(11) includes “[a]ny investment in a common enterprise with the expectation

of profit to be derived through the essential managerial efforts of someone other than

the investor” or “[a]ny investment by which an offeree furnishes initial value to an

offeror,” where that value is subject to the risks of the enterprise, the offeror makes

representations that a value additional to the initial value will accrue, and the offeree

does not exercise control over the enterprise).

88. Under federal law, courts do not distinguish between “investment contracts”

and “profit-sharing agreements” when determining whether an instrument is a security. See Int’l Bhd. of Teamsters v. Daniel, 439 U.S. 551, 558 n.11 (1979)

(“[R]espondent here does not seriously contend that a ‘certificate of interest . . . in any

profit-sharing agreement’ has any broader meaning under the Securities Acts than

an ‘investment contract.’ ” (citation omitted)); see also United Hous. Found., Inc. v.

Forman, 421 U.S. 837, 852 (1975) (stating that the “Howey test” for investment

contracts stated in W. J. Howey Co., 328 U.S. at 301, “embodies the essential

attributes that run through all of the Court’s decisions defining a security”). This

Court shall therefore treat the question of whether Higgins has alleged an investment

contract or profit-sharing agreement as a single inquiry.

89. North Carolina law does not define what constitutes an “investment” or an

“initial value” for the purposes of an investment contract, but the Howey test

employed by the federal courts is clear that the determinative inquiry “is whether the

scheme involves an investment of money in a common enterprise with profits to come

solely from the efforts of others.” W. J. Howey Co., 328 U.S. at 301 (emphasis added);

see State v. Heath, 199 N.C. 135, 138, 153 S.E. 855, 857 (1930) (“[An investment

contract has] been variously defined as the conversion of money into property from

which a profit is to be derived in the ordinary course of trade or business; an

expenditure for profits; the placing of capital to secure an income from its use.”

(emphasis added)).

90. Labor, which is all that Higgins exchanged for her Phantom Units, is

therefore not an investment for the purposes of this inquiry. See Heath, 199 N.C. at

139, 153 S.E. at 858 (holding that a “contract [that did] not contemplate the placing of [the plaintiff]’s money with the [defendants] in a way intended to secure an income

from its employment by them in the conduct of the business” was not an investment

contract or a profit-sharing agreement). The United States Supreme Court has

explained that:

[o]nly in the most abstract sense may it be said that an employee “exchanges” some portion of his labor[.] He surrenders his labor as a whole, and in return receives a compensation package that is substantially devoid of aspects resembling a security. . . . Looking at the economic realities, it seems clear that an employee is selling his labor primarily to obtain a livelihood, not making an investment.

Int’l Bhd. of Teamsters, 439 U.S. at 560.

91. For these same reasons, Higgins’s alleged forbearance in accepting salary

and commissions in exchange for Phantom Units is not an investment subject to the

NCSA. As a result, Higgins has failed to plead that the Phantom Units constitute a

“security” under the NCSA. Plaintiff’s NCSA claim must therefore be dismissed for

failure to allege an offer or sale of a security under the statute.

(2) Reasonable or Justifiable Reliance

92. Separately, Defendants argue that even if the Phantom Units constituted

securities under the NCSA, Higgins has failed to adequately plead a violation of

N.C.G.S. §§ 78A-56(a)(1) or 78A-56(a)(2). The NCSA creates primary civil liability

against:

(a) Any person who:

(1) Offers or sells a security in violation of [N.C.]G.S. 78A-8(1), 78A- 8(3),[ 4] 78A-10(b), 78A-13, 78A-14, 78A-24, or 78A-36(a), or of any rule

4 N.C.G.S. §§ 78A-8(1) and 78A-8(3) state that

[i]t is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly: or order under [N.C.]G.S. 78A-49(d) which requires the affirmative approval of sales literature before it is used, or of any condition imposed under [N.C.]G.S. 78A-27(d) or 78A-28(g), or

(2) Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission[.]

N.C.G.S. § 78A-56(a). The NCSA creates secondary liability for “[e]very person who

directly or indirectly controls a person liable under [Section 78A-56(c)].” Id. at § 78A-

56(c)(1).

93. Higgins argues that Defendants violated the NCSA because she:

entered into the phantom stock agreements because of the misrepresentations of Flachs[.] In particular, . . . Flachs made statements to Higgins concerning the value of the company and confirmed the Phantom Units were offered in lieu of compensation, and that he was pursuing a sale of the company, and made the untrue statement of material fact that she would benefit from that sale. Flachs agreed that Higgins would not be terminated by [Synergy Solutions] before Synergy Holdings was sold.

(Br. Opp’n Mot. Dismiss 35–36; see FAC ¶¶ 78–79.)

94. Defendants argue that Higgins has not pleaded a cognizable claim under

N.C.G.S. § 78A-56(a)(1) predicated on a violation of N.C.G.S. §§ 78A-8(1) or 78A-8(3)

because she has not pleaded justifiable reliance, (Reply Supp. Defs.’ Mot. Dismiss

Pl.’s FAC 8, ECF No. 48), and has not alleged that Flachs made an untrue statement

or omission of which she was unaware under N.C.G.S. § 78A-56(a)(2).

(1) To employ any device, scheme, or artifice to defraud, . . . [or] (3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. 95. As an initial matter, this Court has held that “scienter and justifiable

reliance are elements of a violation of § [78A-]8(1) or (3) . . . as those subsections of

§ [78A-]8 are clearly grounded on fraud.” NNN Durham Office Portfolio 1, LLC, 2013

NCBC LEXIS 11, at *33; see Piazza v. Kirkbride, 246 N.C. App. 576, 598, 785 S.E.2d

695, 709 (2016) (comparing section 78A-56(a)(1) to common law fraud claims); Regal

Inv. Advisors, LLC, 2018 NCBC LEXIS 3, at *41–42 (concluding N.C.G.S. §§ 78A-8(1)

and 78A-8(3) require proof of scienter and justifiable reliance).

96. Furthermore, because Higgins is charged with knowledge of the Plan and

Award Agreements, see Biesecker, 62 N.C. App. at 285, 302 S.E.2d at 828–29, Higgins

cannot claim that Defendants sold her securities “by means of an untrue statement

of a material fact” on which she reasonably relied under N.C.G.S. § 78A-56(a)(1), or

of which she had no knowledge under N.C.G.S. § 78A-56(a)(2). The Plan’s terms make

clear that there was no guarantee that Higgins would be able to cash out her Phantom

Units, that a cash out would occur only if she was employed when Synergy Holdings

was sold, and then only if the net sale proceeds exceeded $15,000,000. Plaintiff’s

NCSA claim shall therefore be dismissed on this additional basis.

G. Violation of the Age Discrimination Employment Act and Wrongful Discharge (v. Synergy Defendants, Flachs)

97. Higgins avers in the alternative that she was wrongfully terminated in

violation of the Age Discrimination Employment Act (“ADEA”), which provides that

“[i]t shall be unlawful for an employer . . . to discharge any individual . . . because of

such individual’s age[,]” 29 U.S.C. § 623(a)(1), and in violation of North Carolina

public policy as set forth in the North Carolina Equal Employment Practices Act (“NCEEPA”), which also prohibits discharge of employees based on age, N.C.G.S.

§ 143-422.2 (“It is the public policy of this State to protect and safeguard the right

and opportunity of all persons to seek, obtain and hold employment without

discrimination or abridgement on account of . . . age . . . by employers which regularly

employ 15 or more employees.”).

98. The NCEEPA does not provide a private right of action. Smith v. First

Union Nat’l Bank, 202 F.3d 234, 247 (4th Cir. 2000). “[M]ost courts have applied the

NCEEPA only to common law wrongful discharge claims or in connection with other

specific statutory remedies.” Id. (citing cases); see, e.g., Green-Hayes v. Handcrafted

Homes, LLC, No. COA14-904, 2015 N.C. App. LEXIS 504, at *1 (N.C. Ct. App. June

16, 2015) (affirming 12(b)(6) dismissal of NCEEPA claim due to absence of companion

wrongful discharge claim). “[C]laims asserting the [NC]EEPA statute as the public

policy pronouncement are analyzed in accordance with the proof scheme applicable

to federal discrimination claims[,]” Hill v. Belk Stores Servs., Inc., No. 3:06-CV-398,

2009 U.S. Dist. LEXIS 68399, at *14 (W.D.N.C. Aug. 5, 2009); here, the applicable

law is the ADEA, id; see Alderman v. Inmar Enters., Inc., 201 F. Supp. 2d 532, 546

(M.D.N.C 2002) (“In determining the parameters of an age discrimination claim

under N.C.[G.S.] § 143-422.2, [a court] should apply the same standards that apply

under the ADEA.”). Therefore, if a “[p]laintiff’s ADEA claim fails, his [state] claim

for wrongful discharge on the basis of unlawful age discrimination also fails.” Rishel

v. Nationwide Mut. Ins. Co., 297 F. Supp. 2d 854, 875 (M.D.N.C. 2003). 99. Ultimately, “[t]o succeed on an ADEA claim, [the plaintiff] ‘must prove, by

a preponderance of the evidence (which may be direct or circumstantial), that age

was the “but-for” cause of the challenged employer decision.’ ” Bodkin v. Town of

Strasburg, 386 F. App’x 411, 413 (4th Cir. 2010) (quoting Gross v. FBL Fin. Servs.,

Inc., 557 U.S. 167, 177–78 (2009)).

100. Higgins alleges her wrongful discharge claim against all Defendants and her

ADEA claim against the Synergy Defendants. Flachs moves for dismissal of

Plaintiff’s wrongful discharge claim on the basis that supervisors may not be held

liable in their individual capacity for wrongful discharge. (Br. Supp. Mot. Dismiss 32

n.10.) The Synergy Defendants move to dismiss Higgins’s claims under the ADEA

and for wrongful discharge, arguing that Plaintiff has failed to allege but-for

causation by alleging a contradictory theory for her termination—Defendants’ intent

to deprive her of the value of her Phantom Units. (See Mot. Dismiss FAC 2.)

(1) Flachs

101. As Flachs argues, “North Carolina does not recognize a claim against a

supervisor sued in an individual capacity for wrongful discharge in violation of public

policy.” Parker v. Owens, No. 3:17-cv-00720-MOC-DSC, 2018 U.S. Dist. LEXIS

38191, at *5 (W.D.N.C. Mar. 8, 2018) (citing Cox v. Indian Head Indus., Inc., 187

F.R.D. 531, 536 (W.D.N.C. 1999)); see Lorbacher v. Hous. Auth., 127 N.C. App. 663,

671, 493 S.E.2d 74, 79 (1997) (affirming dismissal of wrongful discharge claims

against individual defendants “as they were not plaintiff’s employers for the purposes

of a wrongful discharge claim”); Sides, 74 N.C. App. at 343, 328 S.E.2d at 827 (dismissing wrongful discharge claim against individual defendants as plaintiff’s

employment contract was with the corporate defendant, not her supervisors).

Plaintiff’s wrongful discharge claim against Flachs shall therefore be dismissed on

this basis.

(2) Synergy Defendants

102. Defendants argue that Higgins’s ADEA claim must be dismissed because

“Higgins’s allegation that Synergy [Solutions] fired her to prevent her from realizing

the value of her Phantom Units forecloses the conclusion that age was a ‘but-for cause’

for her termination.” (Br. Supp. Mot. Dismiss 30; see FAC ¶ 38 (alleging that Higgins

was terminated “in whole or in part, in pursuit of a plan and scheme to deprive

Higgins of the value of her Phantom Units and thereby avoid a payout to Higgins[.]”).)

At the pleading stage, the Court concludes that Plaintiff’s inconsistent allegations in

support of alternative claims are not fatal to her ADEA claim. 5

103. An ADEA plaintiff must ultimately prove that age discrimination was the

but-for cause of her termination to prevail. See, e.g., Gross, 557 U.S. at 176 (stating

that a claimant is required to “prove that age was the ‘but-for’ cause of the employer’s

adverse decision” in order to prevail on an ADEA claim); Duke v. Uniroyal, Inc., 928

F.2d 1413, 1417 (4th Cir. 1991) (“[A] plaintiff must prove, with reasonable probability,

that but for the age of the plaintiff, the employment decision adverse to the plaintiff

would not have been made. Age must have been a determining factor.”). However,

5 Although Plaintiff’s ADEA claim is under federal law, the survival of that claim is determined under North Carolina’s Rule 12(b)(6). Nevertheless, federal cases deciding ADEA claims are persuasive to the Court’s analysis, especially given the absence of North Carolina case law deciding such claims. but-for causation does not mean sole causation, Arthur v. Pet Dairy, 593 F. App’x 211,

220 (4th Cir. 2015), and several federal courts have concluded that the ultimate but-

for causation requirement “does not in any way limit a plaintiff’s ability to plead

alternative facts and alternative theories[,]” Collins v. Fulton Cty. Sch. Dist., No.

1:12-CV-1299-ODE-JSA, 2012 U.S. Dist. LEXIS 187392, at *49–50 (N.D. Ga. Dec. 26,

2012) (quoting Pearson v. Lawrence Med. Ctr., No. 5:21-cv-1064-CLS, 2012 U.S. Dist.

LEXIS 152595, at *15 (N.D. Ala. Oct. 24, 2012)); see Renfrow v. Sanborn Map Co.,

No. 4:10CV02295JCH, 2011 U.S. Dist. LEXIS 30240, at *10 (E.D. Mo. Mar. 23, 2011)

(same (citation omitted)); Ries v. Winona Cty., No. 10-1715 (JNE/JJK), 2010 U.S. Dist.

LEXIS 90914, at *30–31 (D. Minn. July 28, 2010) (same); Belcher v. Serv. Corp. Int’l,

No. 2:07-CV-285, 2009 U.S. Dist. LEXIS 102611, at *8 (E.D. Tenn. Nov. 4, 2009)

(allowing both age and gender discrimination claims to survive pleading stage

because the court did “not read [but-for causation requirement] as taking away a

litigant’s right to plead alternative theories under the Federal Rules”).

104. Thus, that Higgins alleges inconsistent reasons for her termination is not

dispositive of her claim under federal pleading standards. See Buchhagen v. ICF Int’l,

Inc., 545 F. App’x 217, 220 (4th Cir. 2013) (reversing dismissal of termination claim

because though there were “allegations in [the plaintiff]’s complaint that cut against

her claim to relief . . . [,] they d[id] not foreclose her claim to relief at th[e 12(b)(6)]

stage of the proceedings”); Craddock v. Lincoln Nat’l Life Ins. Co., 533 F. App’x 333,

334, 336 (4th Cir. 2013) (holding ADEA claim should survive 12(b)(6) dismissal where

plaintiff alleged her new manager “embarked . . . on a strategy and scheme to bring about [her] discharge . . . on the basis of either her disability or her age, or both[,]”

because the inference that defendant terminated plaintiff because of age could “be

reasonably drawn from the facts alleged”); Ray v. Amelia Cty. Sheriff’s Office, 302 F.

App’x 209, 211–12 (4th Cir. 2008) (vacating lower court’s dismissal of ADEA claim

where plaintiff alleged several possible reasons for termination because “the inclusion

of those stated reasons in [the] complaint d[id] not establish at the pleading stage

that [plaintiff wa]s not entitled to relief on her stated discrimination claim” (citing

Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002))).

105. These federal decisions are not inconsistent with North Carolina law

because our state courts recognize that, “[i]n general, alternative claims may be

asserted in the same action[.]” In re Se. Eye Ctr.-Pending Matters, 2019 NCBC LEXIS

29, at *107 (N.C. Super. Ct. May 7, 2019) (citing James River Equip., Inc. v.

Mecklenburg Utils., Inc., 179 N.C. App. 414, 419, 634 S.E.2d 557, 560 (2006)

(explaining that the rules “permit pleading in the alternative and that theories may

be pursued in the complaint even if plaintiff may not ultimately be able to prevail on

both” (internal quotation marks omitted))); see N.C. R. Civ. P. 8(e)(2) (“A party may

. . . state as many separate claims or defenses as he has regardless of consistency[.]”

(emphasis added)). Thus, the Court concludes that Higgins’s assertion of inconsistent

facts in support of alternative claims for relief does not require dismissal of her ADEA

claim under North Carolina’s Rule 12(b)(6).

106. That said, Defendants further contend that Higgins has failed to allege facts

to support the causal element of her ADEA claim, requiring dismissal. Specifically, Defendants argue that Higgins acknowledged that she was terminated for poor

performance in her First Amended Complaint, which defeats her claim, (Br. Supp.

Mot. Dismiss 7 (citing FAC ¶¶ 31, 34–35)), and that she advances only conclusory

allegations of a “pattern of discrimination[,]” which is also a fatal deficiency, (Br.

Supp. Mot. Dismiss 31).

107. Unlike federal law, North Carolina retains notice pleading, see Plasman v.

Decca Furniture (USA), Inc., 257 N.C. App. 684, 689, 811 S.E.2d 616, 621 (2018)

(noting that North Carolina is a “notice pleading” state), a lower pleading standard

than the plausibility standard used by the federal courts, see Fox v. Johnson, 243 N.C.

App. 274, 286, 777 S.E.2d 314, 323 (2015) (“[T]he higher federal plausibility pleading

standard differs from [North Carolina’s] notice pleading standard[.]”). Under notice

pleading, “pleadings should be construed liberally and are sufficient if they give

notice of the events and transactions and allow the adverse party to understand the

nature of the claim and to prepare for trial.” Estate of Savino v. Charlotte-

Mecklenburg Hosp. Auth., 822 S.E.2d 565, 572 (N.C. Ct. App. 2018) (quoting Haynie

v. Cobb, 207 N.C. App. 143, 148–49, 698 S.E.2d 194, 198 (2010)); see Swierkiewicz,

534 U.S. at 514–15 (“ ‘It may appear on the face of the pleadings that a recovery is

very remote and unlikely but that is not the test [under notice pleading].’ ” (quoting

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974))). 6

6 “[T]he policy behind notice pleading is to resolve controversies on the merits, after an opportunity for discovery, instead of resolving them based on the technicalities of pleading.” Ellison v. Ramos, 130 N.C. App. 389, 395, 502 S.E.2d 891, 895 (1998); see Sides, 74 N.C. App. at 347, 328 S.E.2d at 829 (“If [a] plaintiff can prove her allegations[,] the defendants should not be allowed to escape liability because [the] plaintiff’s attorneys did not say ‘but for.’ ”). “[A] complaint must nonetheless state enough to give the substantive elements of a legally 108. Given the lack of North Carolina decisions considering ADEA claims under

North Carolina’s Rule 12(b)(6), a review of decisions under the federal pleading

standard is instructive. While the extent to which a plaintiff must plead age-based

causal allegations at the pleading stage is less than clear under federal law, see

Shenton v. Aerojet Rocketdyne, Inc., No. 3:18-cv-00038, 2018 U.S. Dist. LEXIS

153249, at *8 n.3 (W.D. Va. Sept. 7, 2018) (noting that “[t]he Fourth Circuit has not

definitively established this point in a binding published opinion”), federal courts

facing this question have generally required a plaintiff, in addition to alleging that

she was a member of the protected class at the time of her termination, to plead facts

in support of discriminatory motive, the sufficiency of which are assessed on a case

by case basis, see, e.g., Littlejohn v. City of N.Y., 795 F.3d 297, 311 (2d Cir. 2015)

(“[W]hat must be plausibly supported by facts alleged in the complaint is that the

plaintiff is a member of a protected class, was qualified, suffered an adverse

employment action, and has at least minimal support for the proposition that the

employer was motivated by discriminatory intent.”); Herr v. Am. Kennel Club, No.

5:17-CV-00547, 2018 U.S. Dist. LEXIS 165524, at *14 (E.D.N.C. Aug. 23, 2018)

(dismissing plaintiff’s claim where there was “no indication that age played any role

in [the defendant’s] decision, let alone that it was the but-for cause of his

termination”); Tate v. Auto Truck Transp. USA, LLC, No. 3:17-cv-00296-RJC-DSC,

2018 U.S. Dist. LEXIS 138003, at *10 (W.D.N.C. Aug. 15, 2018) (dismissing ADEA

recognized claim or it may be dismissed under Rule 12(b)(6).” Lamb v. Styles, 824 S.E.2d 170, 174 (N.C. Ct. App. 2019) (quoting Raritan River Steel Co., 322 N.C. at 205, 367 S.E.2d at 612). claim for failure to plead facts showing “a nexus between [the supervisor’s

disparaging] comments and [p]laintiff’s age”). But see Gottesman v. J. H. Batten, Inc.,

286 F. Supp. 2d 604, 612 (M.D.N.C. 2003) (denying motion to dismiss ADEA claim

where plaintiff alleged that he was sixty-one, was terminated because of his age, and

was replaced by a significantly younger employee because “whether or not [a p]laintiff

is able to support his claim with evidence of discriminatory motive is more suitable

for summary judgment”).

109. Here, Higgins alleges that, at age fifty, she was terminated “in whole or in

part because of her age,” (FAC ¶¶ 36, 115, 120), supported by the following alleged

facts: (i) on June 30, 2016, during her last performance review before her termination,

she was told she had “ ‘strong knowledge’ in her areas of responsibility [and] ‘[was]

respected by [the Synergy Defendants’] carrier partners and reinsurance carriers

which g[ave] them confidence in [Synergy Solutions,]’ ” and Flachs “also

acknowledged her productivity and successful management[,]” (FAC ¶ 27); (ii) in May

2017, “without any advance notice or prior discussion,” she was demoted and two

managers with less experience were placed between Flachs and Higgins in the chain-

of-command, (FAC ¶ 31); (iii) the stated reason for her termination in July 2017 was

so that the new managers could “get done what they need[ed] to do[,]” and because

Higgins would be “in the way[,]” (FAC ¶ 35); (iv) her termination letter stated that

her work performance did not meet Synergy Solutions’s standards without further

explanation, (FAC ¶ 35); and (v) her job responsibilities were assigned to a thirty-

nine-year-old employee, (FAC ¶ 35). More broadly, Higgins further alleges that Defendants terminated six employees supposedly for cost reductions, three of whom,

“including Higgins, were fifty years of age or older and two were approximately forty

years of age.” (FAC ¶ 36.) Higgins avers that these terminations “were a part of a

pattern of termination or forced resignation of [Synergy Solutions’s] older employees

which had been effected in the five years leading up to Higgins’[s] termination.” (FAC

¶ 36.)

110. Viewing the First Amended Complaint in the light most favorable to

Plaintiff, the Court concludes that these allegations are sufficient to permit her

ADEA claim, and thus her wrongful discharge claim against the Synergy Defendants,

to survive dismissal under North Carolina’s Rule 12(b)(6). 7 See Swierkiewicz, 534

U.S. at 514 (holding, under notice pleading, that plaintiff sufficiently alleged ADEA

termination claim because complaint needed only to satisfy the requirements of

notice pleading and petitioner had done so by stating “that he had been terminated

on account of his . . . age [and by] detail[ing] the events leading to his termination,

provid[ing] relevant dates, and includ[ing] the ages . . . of at least some of the relevant

persons involved with his termination”).

7 As a matter of federal pleading, whether an employee was meeting an employer’s legitimate

and reasonable expectations at the time of discharge and whether an employer’s stated reason for termination was pretextual are generally inappropriate for resolution at the 12(b)(6) stage. See Craddock, 533 F. App’x at 335–36 (reversing district court, which dismissed ADEA claim because the allegations affirmatively showed that the plaintiff was not meeting her employer’s expectations, because the prima facie elements of an ADEA claim are “not a pleading requirement”); Blakney v. N.C. A&T State Univ., No. 1:17CV874, 2019 U.S. Dist. LEXIS 45794, at *40–41 (M.D.N.C. Mar. 20, 2019) (declining to address whether plaintiff met defendant’s reasonable expectations at 12(b)(6) stage). The Court finds these decisions persuasive for purposes of applying North Carolina’s Rule 12(b)(6) and concludes that Plaintiff has met her pleading burden on these elements on Defendants’ Motion. H. Accounting (v. Synergy Defendants, Flachs)

111. Higgins requests an accounting by Defendants of “the value of Synergy

Holdings, the value per share of units of equity ownership in Synergy Holdings, and

the value of her Phantom Units and her Class B Units, so as to enable [her] to

ascertain the value of her interests in Synergy Holdings.” (FAC ¶ 112.) Defendants

move to dismiss Plaintiff’s request for an accounting because Higgins has pleaded no

basis for it. (See Mot. Dismiss FAC 2.)

112. “The remedy of an equitable accounting may be available when a plaintiff

has asserted a valid claim for relief in equity and an accounting is necessary to compel

discovery of information regarding accounts held exclusively by the defendant.”

Alkemal Sing. Private Ltd. v. Dew Glob. Fin., LLC, 2018 NCBC LEXIS 36, at *52–53

(N.C. Super Ct. Apr. 19, 2019) (quoting Mkt. Choice, Inc. v. New Eng. Coffee Co., 5:08-

CV-90, 2009 U.S. Dist. LEXIS 73627, at *35–36 (W.D.N.C. Aug. 18, 2009) (applying

North Carolina law)). “An accounting is an equitable remedy, usually sought

pursuant to claims of constructive trust or breach of fiduciary duty.” Starling v.

Alexander Place Townhome Ass’n, Inc., No. COA09-640, 2010 N.C. App. LEXIS 488,

at *10 (N.C. Ct. App. Mar. 16, 2010) (citing Toomer v. Branch Banking & Tr. Co., 171

N.C. App. 58, 70, 614 S.E.2d 328, 337 (2005)).

113. Because the Court has determined that all claims relating to Phantom Units

must be dismissed, and because Higgins has not based any claim on her ownership

of Synergy Holdings Class B Units, (see FAC ¶¶ 13–15), Plaintiff’s accounting claim

must also be dismissed, see Toomer, 171 N.C. App. at 70, 614 S.E.2d at 337 (affirming dismissal of accounting claim where underlying claim was also dismissed); Brown v.

Secor, 2017 NCBC LEXIS 65, at *17–18 (N.C. Super. Ct. July 28, 2017) (dismissing

accounting claim along with underlying claim for declaratory judgment).

CONCLUSION

114. WHEREFORE, for the foregoing reasons, the Court hereby GRANTS in

part and DENIES in part Defendants’ Motion to Dismiss as follows:

a. The Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s claims

for breach of contract, defamation, quantum meruit/unjust

enrichment, violation of the NCSA, common law fraud and fraud in

the inducement, constructive fraud, negligent misrepresentation, and

accounting, and each of those claims is dismissed with prejudice.

b. The Court DENIES Defendants’ Motion to Dismiss Plaintiff’s ADEA

claim.

c. The Court DENIES Defendants’ Motion to Dismiss Plaintiff’s

wrongful discharge claim against the Synergy Defendants. The Court

GRANTS Defendants’ Motion to Dismiss Plaintiff’s wrongful

discharge claim against Flachs and that claim is dismissed with

d. The Court, in the exercise of its discretion, DENIES Plaintiff’s request

to amend her pleadings for a second time. SO ORDERED, this the 15th day of January, 2020.

/s/ Louis A. Bledsoe, III l Louis A. Bledsoe, III Chief Business Court Judge