Howard v. IOMAXIS, LLC, 2021 NCBC 82.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF MECKLENBURG 18 CVS 11679
KELLY C. HOWARD and FIFTH THIRD BANK, NATIONAL ASSOCIATION, AS CO-TRUSTEES OF THE RONALD E. HOWARD REVOCABLE TRUST U/A DATED FEBRUARY 9, 2016, AS AMENDED AND RESTATED,
Plaintiffs, ORDER AND OPINION ON MOTIONS TO AMEND v.
IOMAXIS, LLC; BRAD C. BOOR a/k/a BRAD C. BUHR; JOHN SPADE, JR.; WILLIAM P. GRIFFIN, III; and NICHOLAS HURYSH, JR.,
Defendants.
1. THIS MATTER is before the Court on Plaintiffs Kelly C. Howard and
Fifth Third Bank, National Association’s (“Plaintiffs”) Motion for Leave to File First
Amended Complaint (“Plaintiffs’ Motion to Amend”), (ECF No. 118), and Defendant
Nicholas Hurysh, Jr.’s (“Hurysh”) Motion for Leave to Amend and Supplement
Answer and to Add Cross-Claims and Third-Party Claims (“Hurysh’s Motion to
Amend”; together, the “Motions”), (ECF No. 96).
2. Plaintiffs seek leave to amend their Complaint to add two claims for
fraud, as well as claims for violation of the Uniform Voidable Transactions Act
(“UVTA”), for violation of the North Carolina Unfair and Deceptive Trade Practices
Act (“UDTPA”), and for imposition of a constructive trust. (Proposed First Am.
Compl. ¶¶ 193–230 [hereinafter “Pls.’ Proposed Am.”], ECF No. 118.2.) Plaintiffs also request leave to add three new defendants: Robert A. Burleson (“Burleson”), Fast
Rabbit, LLC (“Fast Rabbit”), and Global Vector, LLC (“Global Vector”). (Pls.’
Proposed Am. ¶¶ 98, 100, 102.)
3. Separately, Hurysh’s Motion to Amend seeks leave to add thirteen new
and different claims as follows: (i) breach of common law and statutory fiduciary
duties; (ii) a claim for a mandatory and prohibitory injunction; (iii) conversion; (iv) a
claim based on Meiselman v. Meiselman, 309 N.C. 279 (1983); (v) defamation; (vi)
constructive trust and accounting; (vii) constructive fraud (fraud in the inducement);
(viii) right to distributions; (ix) a claim under UDTPA; (x) derivative claims on behalf
of IOMAXIS, Fast Rabbit, and Global Vector; (xi) unjust enrichment; (xii) a claim for
declaratory relief; and (xiii) a claim for piercing the corporate veil. (See Proposed Am.
Answer, Cross-Claims, & Third-Party Compl. ¶¶ 106–205 [hereinafter “Hurysh’s
Proposed Am.”], ECF No. 96.1.) Hurysh seeks to add Fast Rabbit and Global Vector
as third-party defendants in this matter. (Hurysh’s Proposed Am. ¶¶ 2–3.)
4. Having considered the Motions, the related briefing, the arguments of
counsel at the hearing on the Motions, and other matters of record, the Court, in the
exercise of its discretion, hereby GRANTS in part and DENIES in part each
Motion.
Johnston, Allison & Hord, P.A., by Greg C. Ahlum, Parker E. Moore, David T. Lewis, and Lauren S. Martin, for Plaintiff Kelly Howard, as co- Trustee of the Ronald E. Howard Revocable Trust u/a dated February 9, 2016, as Amended and Restated.
Womble Bond Dickinson (US) LLP, by Lawrence A. Moye, and Loper Law, PLLC, by Johnny M. Loper, for Plaintiff Fifth-Third Bank, NA, as co-Trustee of the Ronald E. Howard Revocable Trust u/a dated February 9, 2016, as Amended and Restated.
Nelson Mullins Riley & Scarborough LLP, by Benjamin S. Chesson, David Allen, Anna Majestro, and Travis Bustamante, for Defendants IOMAXIS, LLC, Brad C. Boor a/k/a Brad C. Buhr, John Spade, Jr., and William P. Griffin, III.
Miller Monroe & Plyer, PLLC, by Jason A. Miller, Paul T. Flick, and Robert B. Rader, III, for Defendant Nicholas Hurysh, Jr.
Earp, Judge.
I. INTRODUCTION
The Recorded Telephone Conference Calls
5. On the morning of 13 July 2021, one day before a hearing scheduled on
the Motions, 1 counsel for Defendants IOMAXIS, LLC (“IOMAXIS”), Brad C. Boor
a/k/a Brad C. Buhr (“Buhr”), John Spade, Jr. (“Spade”), and William P. Griffin, III
(“Griffin”; together, the “IOMAXIS Defendants”) notified the Court via e-mail that a
transcript of a 22 July 2020 telephone conversation existed and that Defendant
Hurysh intended to file it with respect to another planned motion, this one for
sanctions. 2 The IOMAXIS Defendants objected on the ground that the transcript was
protected by the attorney-client privilege. The Court determined to move forward
with the hearing on the pending motions but not to permit use of the transcript absent
further review.
1 Although Plaintiff’s Motion to Appoint a Receiver, (ECF No. 106), and Motion to Compel,
(ECF No. 100), were also scheduled to be heard, they were continued during the hearing. 2 As of the date of this Order and Opinion, Hurysh has not filed a motion for sanctions. 6. All parties appeared on 14 July 2021 and were heard on Plaintiffs’
Motion to Amend and Hurysh’s Motion to Amend. The Court did not permit
argument on the content of any recorded telephone conference.
7. Subsequent to the hearing, on 3 August 2021, Hurysh filed a Motion for
In Camera Inspection and for Leave to File Affidavits, Recordings and Transcripts
Under Seal (the “Motion for Leave”), (ECF No. 156), describing the content of two
recorded telephone calls, the previously identified telephone call which occurred on
22 July 2020 (the “July 22 Call”), and a second, earlier telephone call on 17 July 2020
(the “July 17 Call”). Hurysh acknowledged that the IOMAXIS Defendants had
asserted that the attorney-client privilege protected the recordings and related
materials from disclosure. The IOMAXIS Defendants filed a Motion for Protective
Order shortly thereafter. (See Interim Ord. Regarding Tr. 17 July 2020 Call ¶ 4
[hereinafter “Interim Ord.”], ECF No. 175.)
8. Following a referral to The Honorable Michael L. Robinson to conduct
an in camera review, briefing, and a hearing on the IOMAXIS Defendants’ Motion for
Protective Order, the Court entered an Interim Order on 15 November 2021
documenting that no objection had been made by the IOMAXIS Defendants to
disclosure of one of the transcripts, that of the July 17 Call, on the basis of the
attorney-client privilege or on any other legal principle. (Interim Order ¶ 12.) 3
3 In addition, on 3 December 2021, Judge Robinson issued a second Order determining that
Hurysh could disclose the July 22 Call transcript. (Sealing Ord. Regarding Entry Ord. IOMAXIS’s Mot. Protective Ord. ¶ 3, ECF No. 176.) On 9 December 2021, the IOMAXIS Defendants appealed Judge Robinson’s Order with respect only to the July 22 Call. (Not. Appeal, ECF No. 181.) The undersigned has not reviewed and does not consider the July 22 9. The Court thereafter granted Hurysh’s Motion for Leave to file the July
17 Call transcript (and related materials) under seal, and on 16 December 2021,
Plaintiffs provisionally filed a copy of the July 17 Call transcript. (ECF No. 186.2
(under seal).) In response to an objection from the IOMAXIS Defendants, the Court
permitted further briefing as to the effect of the July 17 Call transcript, if any, on the
current Motions to Amend. (ECF Nos. 180, 184.) Plaintiff filed a supplemental brief
contending, inter alia, that a determination of the pending Motions to Amend does
not depend on the July 17 Call. (Pls.’ Suppl. Br. 7, ECF No. 186 (under seal).) The
IOMAXIS Defendants also filed a supplemental brief and argue that the July 17 Call
transcript does not impact the instant Motions. (Defs.’ Suppl. Br. 1, ECF 188 (under
seal).)
10. The Court, having considered the Motions, the proposed amendments,
the briefs and affidavits filed by the parties (with the exception of paragraph 80 of
Hurysh’s first affidavit, ECF No. 97, and paragraph 15 of Hurysh’s second affidavit,
ECF No. 109.1, both of which pertain to the July 22 Call), the 17 July 2020 transcript
of recorded telephone call, the supplemental submissions, the arguments of counsel
at the hearing, and other relevant matters of record, concludes, in its discretion, that
Hurysh’s Motion is GRANTED to the extent he seeks to amend his responses and
defenses to Plaintiffs’ Complaint, but DENIED to the extent he seeks to add new
Call with respect to the current Motions; consequently, a determination of the Motions is not affected by that appeal. See N.C.G.S. § 1-294 (“When an appeal is perfected. . . it stays all further proceedings in the court below upon the judgment appealed from, or upon the matter embraced therein, unless otherwise provided by the Rules of Appellate Procedure; but the court below may proceed upon any other matter included in the action and not affected by the judgment appealed from.” (emphasis added)). allegations, cross-claims, and third-party claims. Plaintiffs’ Motion to Amend is
GRANTED in part and DENIED in part as explained below.
II. FACTUAL AND PROCEDURAL BACKGROUND
11. This case arises from a dispute regarding Plaintiffs’ rights as economic
interest holders of a 51% interest in IOMAXIS. (See, e.g., Compl. ¶ 84, ECF No. 3.)
Ronald E. Howard (“Howard” or “Decedent Howard”) originally owned the 51%
interest (the “Howard Interest”), which passed to his Estate at the time of his death
in June 2017 before being transferred to a trust in December 2017. Plaintiffs are co-
trustees of this trust. Defendants are IOMAXIS and individuals with an interest in
IOMAXIS that may be affected by this action. (Compl. ¶¶ 1–5, 14; see Ord. & Opinion
Pls.’ Joint Mot. Enforce Mem. Settlement ¶ 6 [hereinafter “Ord. & Op. Mot. Enforce”],
ECF No. 70 (describing the factual background of this case).)
12. Plaintiffs’ original Complaint, filed on 18 June 2018, asserts a claim for
declaratory judgment with respect to the purported conversion of the North Carolina
limited liability company to a Texas limited liability company, the operating
agreement that controls, and their entitlement to distributions. Plaintiffs also assert
claims for breach of the right to receive interim distributions and for an accounting
to receive from Defendants “the requested business, financial and valuation
information of IOMAXIS.” (Compl. ¶¶ 71–97.) Among other things, Plaintiffs allege
that they are entitled to receive sufficient financial information regarding the value
of their interest in IOMAXIS at the time of Howard’s death to enable them to satisfy
federal estate tax obligations with respect to that interest. (See, e.g., Compl. ¶ 92.) 13. Defendants maintain that Plaintiffs’ entitlement to distributions and
inspection of IOMAXIS’s records turns on which operating agreement controls
Plaintiffs’ economic interest. (See, e.g., Defs.’ Br. Resp. Pls.’ Mot. Amend 3
[hereinafter “Defs.’ Br. Opp’n Pls.’ Mot.”], ECF No. 125.) They further contend that,
in any event, they have already provided sufficient information for Plaintiffs to value
their interest in IOMAXIS for estate tax purposes. (See, e.g., Defs.’ Br. Supp. Mot.
Compel IOMAXIS USA Valuation Report 2 [hereinafter “Defs.’ Br. Supp. Mot.
Compel”], ECF No. 123.)
14. Hurysh was employed by IOMAXIS as a network engineer prior to his
discharge from employment on 16 September 2020. (Hurysh Aff. ¶¶ 5, 102.) He was
also a member of IOMAXIS, Fast Rabbit, and Global Vector. (Hurysh Aff. ¶¶ 40, 43,
47.)
15. Over the more than three years that this case has been pending, the
parties have engaged in significant discovery. The process has not been without
substantial controversy, however. For example, the IOMAXIS Defendants have
refused to provide discovery related to Fast Rabbit or other entities because they
contend that doing so would require disclosure of classified information. (See, e.g.,
Pls.’ Br. Supp. Mot. Compel 2, ECF No. 101; Dep. IOMAXIS, LLC 38:21–39:7, ECF
No. 101.2; Hurysh Aff. ¶ 88.)
16. According to IOMAXIS, it has already produced more than 16,000 pages
of documents in response to Plaintiffs’ various requests. (Defs.’ Br. Supp. Mot.
Compel 2.) But Plaintiffs have raised questions regarding the authenticity and accuracy of at least some of the financial information produced, (see, e.g., Pls.’ Mot.
Compel, ECF No. 151 (seeking a forensic copy of source data to confirm information
previously provided by Defendants)), and they argue that they have yet to receive
financial information regarding the distributions they allege are owed to them, (see,
e.g., Pls.’ Br. Supp. Mot. Compel 3–4, ECF No. 153 (requesting discovery originally
sought in August 2018)).
17. Indeed, addressing discovery issues has been the subject of multiple
disputes and conferences with the Court. (See, e.g., ECF Nos. 147, 149.) The Court
has extended the deadlines in this case several times in four Case Management
Orders. (See ECF Nos. 35, 38, 48, 71.)
18. The parties have also engaged in settlement discussions and related
motion practice that have delayed the progress of this case. In September 2019, the
parties were in the process of taking discovery depositions when they engaged in an
impromptu settlement discussion, resulting in a memorandum of settlement.
Unfortunately, however, the settlement was never consummated. (See generally Ord.
& Op. Mot. Enforce.) This Court heard and addressed Plaintiffs’ Joint Motion to
Enforce the Settlement Agreement on 10 December 2019 and issued its Order and
Opinion on 1 May 2020, denying enforcement of the memorandum of settlement. (See
Ord. & Op. Mot. Enforce.)
19. The Court then entered its fifth Case Management Order in which it
provided that “[t]he parties may file motions to amend pleadings and/or add parties
so long as such motion(s) are filed prior to the expiration of the fact discovery deadline set forth herein” and that “[o]bjections to any such motion(s) must be filed within
fourteen (14) calendar days of such motion’s filing and said objections may be based
on any grounds except that of undue delay.” (Fourth Am. Case Management Ord., at
¶ IV(B)(3), ECF No. 71.)
20. Soon thereafter, Defendants and Hurysh experienced changes in counsel
(See ECF Nos. 76, 95). In response to this activity, the Court stayed discovery in
October 2020. (Scheduling Ord., ECF No. 78.)
21. Since the October 2020 stay, Hurysh has broken ranks with his fellow
defendants and filed his first affidavit discussed below, as well as his Motion to
Amend now before the Court. Plaintiffs followed suit with their own Motion to
Amend. The discovery stay has remained in place pending resolution of these
Motions.
A. Hurysh’s Affidavit
22. Hurysh filed his Motion to Amend in December 2020 along with a
lengthy affidavit (the “Hurysh Affidavit”) in which he testified that, among other
things, Buhr has misappropriated funds from IOMAXIS using separate entities,
including the company Fast Rabbit, to pay for extravagant personal expenses. (See
Hurysh Aff. ¶¶ 49–50 (“Buhr used Fast Rabbit to siphon funds out of IOMAXIS . . . by
setting up loans from IOMAXIS to Fast Rabbit and then ‘repaying’ these loans by
adding substantial mark-ups to vendor invoices and then passing them through to
IOMAXIS for payment.”).) 23. According to Hurysh, Fast Rabbit, which has since been dissolved, 4 was
formed by Buhr in 2013 as a “shell company” that served as “an intermediary, pass-
through entity between IOMAXIS and its vendors.” (Hurysh Aff. ¶¶ 47–48.) Hurysh
claims that Fast Rabbit “did not have a separate operational existence from
IOMAXIS.” (Hurysh Aff. ¶ 48.) It shared common ownership with IOMAXIS in that
Defendants Buhr, Griffin, and Hurysh himself constituted its members. (Pls.’
Proposed Am. Ex. N; see Hurysh Aff. ¶¶ 47, 52.)
24. Hurysh also suggested in his affidavit that Defendants created Global
Vector, now dissolved, 5 to divert IOMAXIS funds. (See Hurysh Aff. ¶ 100.) According
to Hurysh, Global Vector is “a shell company that Mr. Buhr formed to serve as an
unclassified, subcontractor of [IOMAXIS] that would serve as an intermediary, pass-
through entity between [IOMAXIS] and its vendors.” (Hurysh Aff. ¶ 44.) Global
Vector also shared ownership with IOMAXIS in that Buhr and Hurysh, among
others, were members. (See Hurysh Aff. ¶¶ 43–46; Pls.’ Proposed Am. ¶ 176.) Given
their overlapping ownership, Plaintiffs allege that Fast Rabbit and Global Vector are
IOMAXIS “affiliates.” (See Pls.’ Proposed Am. ¶¶ 133–35.)
25. Hurysh’s affidavit details Buhr’s alleged scheme to misappropriate
IOMAXIS funds through Fast Rabbit, Global Vector, and other entities. He attests
that in June 2020, Buhr established a plan to create yet another new company
4 Hurysh claims that Fast Rabbit was dissolved at some point without corporate authority or
Hurysh’s consent. (Hurysh Aff. ¶ 53.)
5 According to Hurysh, Global Vector was improperly dissolved in 2015. (See Hurysh Aff. ¶¶ 45–46.) through which to misappropriate funds. (Hurysh Aff. ¶ 79; see also Hurysh’s
Proposed Am. ¶ 46.)
26. Also detailed in Hurysh’s affidavit is a purported loan of approximately
$1.5 million that Buhr “unilaterally structured” from IOMAXIS to Fast Rabbit in
December 2013 (the “December 2013 Loan”). (Hurysh Aff. ¶ 64.) Hurysh testified
that Buhr “indicated that this payment would be structured as a loan to the outside
world, but that the owners would not have to pay it back.” (Hurysh Aff. ¶ 64.) Rather,
the December 2013 Loan would be paid back using “bonuses, increased salaries, and
other methods[.]” (Hurysh Aff. ¶ 64.)
27. In addition to being a member of IOMAXIS, Hurysh served as
IOMAXIS’s network engineer during this time. (Hurysh Aff. ¶ 5.) As a member and
employee, Hurysh states that he “participated in strategic planning and performed
other mission critical tasks for [IOMAXIS] . . ., including what he expected and
thought to be a meaningful role in management.” (Hurysh’s Proposed Am. ¶ 8; see
also Hurysh Aff. ¶ 101.)
28. Furthermore, as a member of Fast Rabbit, Hurysh admits that he
received “approximately $400,000.00” from the December 2013 Loan. (Hurysh Aff.
¶ 64; see also Hurysh’s Proposed Am. ¶ 37.)
29. Much of the Hurysh Affidavit describes wrongs personal to him,
including the following: that he was forced to sign an Equity Purchase Agreement
that Buhr misrepresented to him, (Hurysh Aff. ¶¶ 37–38); that joint defense counsel
represented the parties under a conflict of interest, (Hurysh Aff. ¶ 95); that the other defendants caused him to be terminated and victimized him with acts of retaliation
for his legal position, (Hurysh Aff. ¶¶ 97–102); that he has been defamed, (Hurysh
Aff. ¶ 104); that IOMAXIS has improperly assigned him legal expenses, (Hurysh Aff.
¶ 106); that separate lawsuits filed by IOMAXIS against him in Virginia and
Maryland are baseless and retaliatory, (Hurysh Aff. ¶¶ 110–11); that application of a
2020 Operating Agreement as to his interest in IOMAXIS is improper, (Hurysh Aff.
¶¶ 84–85); and that entity records have been concealed from him despite his
membership status in all three entities, (Hurysh Aff. ¶¶ 54, 108).
30. Hurysh further alleges that that he has not received the distributions to
which he is entitled as a member of one or more companies, (Hurysh’s Proposed Am.
¶ 158), that the other IOMAXIS members owe him a fiduciary duty that they have
breached, (Hurysh’s Proposed Am. ¶ 111), and that he is entitled to a pro rata portion
of Decedent Howard’s membership interest upon redemption, (Hurysh’s Proposed
Am. ¶ 163).
B. The Motions to Amend
31. On 15 September 2020, Hurysh, through counsel, made a derivative
demand on IOMAXIS, Fast Rabbit, and Global Vector. (Hurysh Aff. ¶ 100.) Hurysh
brought his Motion when the demand period expired in December 2020, in order to
pursue allegations of wrongdoing that he attributes primarily, but not solely, to Buhr.
(See generally Def. Hurysh’s Mem. L. Supp. Hurysh’s Mot. Amend [hereinafter
“Hurysh Br. Supp. Mot. Amend”], ECF No. 98.) Specifically, Hurysh seeks to
incorporate the theory set forth in his affidavit that Buhr has diverted IOMAXIS funds in the past and, that in the summer of 2020, Buhr devised a plan to continue
to divert funds. Hurysh’s Motion also seeks to amend his answers to the allegations
in Plaintiffs’ Complaint and to state new theories of liability involving Fast Rabbit
and Global Vector. (See generally Hurysh’s Proposed Am.)
32. Even though they had spotted transactions in the records produced by
IOMAXIS that prompted questions during the North Carolina Rule of Civil Procedure
30(b)(6) deposition of IOMAXIS in September 2019, Plaintiffs state that they did not
“connect the dots” and were not aware of the alleged wrongdoing outlined in Hurysh’s
affidavit until 23 December 2020, when the affidavit was filed. (See Pls.’ Reply Br.
Further Supp. Mot. Leave File First Am. Compl. 1, ECF No. 131 (“Plaintiffs move[ ]
to add new claims and new parties based on evidence first brought into light by
Defendant Hurysh.”).) Once aware, Plaintiffs filed their Motion to add claims against
the original Defendants, as well as Fast Rabbit, Global Vector, and Burleson 6 based
on Hurysh’s allegations that the IOMAXIS Defendants siphoned funds out of
IOMAXIS for their personal benefit and excluded Plaintiffs from receiving funds that
should have been distributed to them. (See generally Br. Supp. Pls.’ Mot. Leave File
First Am. Compl., ECF No. 119.)
33. Defendants IOMAXIS, Buhr, Spade, and Griffin oppose both Motions.
(See Defs.’ Br. Opp’n Pls.’ Mot.; Defs.’ Br. Resp. Mot. Amend [hereinafter “Defs.’ Br.
Opp’n Hurysh’s Mot.”], ECF No. 108.)
6 Burleson is alleged to either be or have been “a member/manager of IOMAXIS.” (Pls.’ Proposed Am. ¶ 98.) III. LEGAL STANDARD
34. Rule 15(a) of the North Carolina Rules of Civil Procedure (“Rule(s)”)
provides that leave to amend “shall be freely given when justice so requires.” N.C. R.
Civ. P. 15(a). “Reasons justifying denial of an amendment include: (1) undue delay,
(2) bad faith, (3) undue prejudice, (4) futility of amendment, and (5) repeated failure
to cure defects by previous amendments.” Window World of St. Louis, Inc. v. Window
World, Inc., 2015 NCBC LEXIS 79, at *18 (N.C. Super. Ct. Aug. 10, 2015) (citing
Martin v. Hare, 78 N.C. App. 358, 361 (1985)).
35. The Supreme Court of North Carolina has opined that “[t]here is no
more liberal canon in the rules than that leave to amend ‘shall be freely given when
justice so requires.’ ” Duke Energy Carolinas, LLC v. AG Ins. SA/NV, 2019 NCBC
LEXIS 105, at *4 (N.C. Super. Ct. Dec. 10, 2019) (quoting Vaughan v. Mashburn, 371
N.C. 428, 434 (2018)). “Rule 15 encourages trial courts to permit amendment liberally
and evinces our State’s ‘general policy of allowing an action to proceed to a
determination on the merits.’ ” Id. (quoting House of Raeford Farms, Inc. v. Raeford,
104 N.C. App. 280, 282 (1991)).
36. Still, the right to amend pursuant to Rule 15 is not unfettered. See e.g.,
Vaughan, 371 N.C. at 433 (“[A]mendments should be freely allowed unless some
material prejudice to the other party is demonstrated.” (quoting Mauney v. Morris,
316 N.C. 67, 72 (1986))). “The burden is upon the opposing party to establish that
that party would be prejudiced by the amendment.” Mauney, 316 N.C. at 72. 37. Furthermore, Rule 15(d) provides that the court may, “upon reasonable
notice and upon such terms as are just, permit [a party] to serve a supplemental
pleading setting forth transactions or occurrences or events which may have
happened since the date of the pleading sought to be supplemented[.]” N.C. R. Civ.
P. 15(d). “[T]he standards used . . . in ruling on a motion to amend or on a motion to
supplement are nearly identical.” Franks v. Ross, 313 F.3d 184, 198 n.15 (4th Cir.
2002); see, e.g., Turner v. Duke Univ., 325 N.C. 152, 164 (1989) (looking to federal law
for interpretive guidance for the North Carolina Rules of Civil Procedure).
38. “Ultimately, whether to allow an amendment rests in the trial judge’s
discretion.” KRG New Hill Place, LLC v. Springs Inv’rs, LLC, 2015 NCBC LEXIS 20,
at *8 (N.C. Super. Ct. Feb. 27, 2015) (citing House of Raeford Farms, Inc., 104 N.C.
App. at 282); see also Pender Farm Dev., LLC v. NDCO, LLC, 2020 NCBC LEXIS 110,
at *19 (N.C. Super. Ct. Sept. 25, 2020) (“Whether to grant or deny a Rule 15(d) motion
is a decision that lies within the trial court’s sound discretion.”).
39. With these rules in mind, the Court now turns to each Motion, beginning
with Plaintiffs’ Motion.
IV. ANALYSIS
A. Plaintiffs’ Motion to Amend
40. Plaintiff seeks to assert five new claims variously against the existing
Defendants and three new parties: Fast Rabbit, Global Vector, and Burleson. The
new claims are: (i) fraud against the existing Defendants, including Hurysh and the
new parties, based on the December 2013 Loan between IOMAXIS and Fast Rabbit to allegedly fund personal expenditures; (ii) fraud against the existing Defendants
and Burleson (but not Hurysh) based on a scheme to transfer funds out of IOMAXIS
and into “shell” companies; (iii) violation of both the UVTA and (iv) the UDTPA
against the existing Defendants, Fast Rabbit, Global Vector, and Burleson (but not
Hurysh) based on an alleged scheme to transfer funds out of IOMAXIS and into other
companies; and (v) a request for a constructive trust to preserve the assets acquired
through misconduct. (Pls.’ Proposed Am. ¶¶ 193–230.)
41. The Court now considers each of Plaintiffs’ proposed claims in turn.
1. Fraud Based on the December 2013 Loan
42. In the first fraud claim against all Defendants, including Hurysh and
new parties Burleson, Fast Rabbit, and Global Vector, Plaintiffs allege that Buhr and
IOMAXIS represented to Decedent Howard that the December 2013 loan “was being
made by IOMAXIS for one or more legitimate business purposes” when, in reality,
the monies were used “in a clandestine fashion” to fund the personal expenditures of
some of the members. (Pls.’ Proposed Am. ¶¶ 194–95.) 7 Plaintiffs allege that
“IOMAXIS and Defendant Buhr agreed to ‘loan’ money to entities in which Decedent
Howard held no interest so that other members of IOMAXIS . . . could use such funds
for their personal benefit.” (Pls.’ Proposed Am. ¶ 197.)
7 However, somewhat inconsistently, Plaintiffs also allege that IOMAXIS concealed the loan
from Decedent Howard and, subsequently, from Plaintiffs. (Pls.’ Proposed Am. ¶ 130.) Nevertheless, at the hearing, Plaintiffs’ counsel clarified that the fraud alleged is one of concealment rather than affirmative misrepresentation. (July 14, 2021 Hr’g Tr. 123:20–23 [hereinafter “Tr.”], ECF No. 191 (clarifying that the fraud claims involve fraudulent concealment).) 43. The Court first notes that this claim involves allegedly fraudulent
conduct that occurred prior to the assignment of the Howard Interest to Plaintiffs—
while Howard was still alive and a member of IOMAXIS. Indeed, Plaintiffs have
labeled their cause of action as “Fraud – Fast Rabbit and Global Vector,” both of which
are dissolved, and, at least with respect to Global Vector, was dissolved before
Howard’s death. (See Pls.’ Proposed Am., at “Fourth Claim for Relief.”) Thus, for
Plaintiffs to have standing to assert claims for any fraud that occurred during
Howard’s life, the claim must have passed from Howard to his Estate and thereafter
been properly assigned by the Estate to Plaintiffs.
44. There is no allegation that Decedent Howard discovered the alleged
fraud during his lifetime. To be sure, Plaintiffs argue that the claim did not accrue
until it was discovered more than three years after Decedent Howard’s passing. The
parties do not address the timing of this discovery on the viability of the claim.
Clearly, however, the Estate cannot assign a claim it does not possess. Hurst v. West,
49 N.C. App. 598, 606 (1980) (stating that an assignee can “take by transfer only what
rights and interests the assignor had at the time of the assignment” (citing Holloway
v. Depositors Nat’l Bank, 211 N.C. 227, 234 (1937))). Regardless of this conundrum,
even if a claim passed to the Estate, Plaintiffs fail to satisfy the Court that the claim
was properly assigned to the Trust.
45. The assignment from the Estate to Plaintiffs states, “Assignor hereby
transfers, assigns and conveys unto the Assignee” “[a]ll of Assignor’s membership
interest in IOMAXIS, LLC[.]” (Compl. Ex. A (emphasis added).) There is no mention of a separate tort claim, and the Court will not imply one. See Sony Ericsson Mobile
Commc’ns. United States v. Agere Sys., 195 N.C. App. 577, 579 (2009) (“The best
evidence of what parties to a written agreement intend is what they say in their
writing[.]” (citation omitted)). The operating agreement 8 defines the membership
interest that passed to the Estate as only an economic interest. (Compl. Ex. C, at Art.
IX § 1.9 (limiting an estate’s interest at a member’s death to those listed in Art. VIII
§ 1.4: “to receive and be credited or debited with its proportionate share of Profits,
Losses, Gains from Capital Transactions, Company Cash Flow, Company Sales
Proceeds, Company Refinancing Proceeds, and Distributions in liquidation.”).) The
assignment from the Estate to Plaintiffs therefore failed to include any tort claims
Howard may have had while he was living.
46. Plaintiffs subsequently filed, with the Court’s permission, a
“Confirmation of Assignment of Membership Interest in IOMAXIS, LLC” wherein the
Estate agreed with Plaintiffs that the Estate intended to, and did, transfer “all of
Decedent’s rights, privileges, claims and causes of action passing through his Estate
under his Last Will and Testament to Assignees, as Trustees of the Trust, including
all pre- and post-death claims connected and appurtenant to said ownership in
IOMAXIS, LLC, whether in contract, tort, law, equity, or otherwise.” (ECF No.
154.1.) However, such a “confirmation,” attempting after the fact to expand the
definition of “membership interest” to include “all pre- and post-death claims
connected and appurtenant to said ownership” does not itself constitute the valid
8 The Court accepts as true for purposes of this Motion Plaintiffs’ allegation that IOMAXIS
is properly a North Carolina LLC. (Compl. ¶¶ 21, 76.) assignment of a tort claim. Moreover, to the extent the “confirmation” is intended to
be an affidavit regarding the Executor’s intention at the time of the original
assignment, it is unsworn and, therefore, not competent testimony. Even if it were
competent, the language of the assignment at issue is unambiguous, leaving no room
for the Court to consider extrinsic evidence of the Executor’s intent. 9 See, e.g., Root
v. Allstate Ins. Co., 272 N.C. 580, 583 (1968) (“It is a well-recognized principle of
construction that when the language of a contract is clear and unambiguous, the court
must interpret the contract as written[.]”).
47. Thus, the Court determines that any fraud claim against Defendants
that Decedent Howard may have held during his lifetime did not transfer to Plaintiffs
by assignment. The Court concludes, therefore, that Plaintiffs’ first claim for fraud
is futile as alleged, and Plaintiffs’ Motion as to this fraud claim is DENIED.
2. Fraud Based on An Alleged Scheme to Siphon Funds
48. Plaintiffs assert a second fraud claim against IOMAXIS, Buhr, Spade,
Burleson, and Griffin. (Pls.’ Proposed Am. ¶ 202.) Specifically, the claim involves a
telephone call in July 2020 during which Buhr allegedly discussed a scheme to siphon
funds out of IOMAXIS and into shell entities. (See Pls.’ Proposed Am. ¶ 202.) Unlike
9 Absent another provision in the operating agreement, the default rule in North Carolina is
that only a member’s economic interest passes to the estate upon that member’s death, N.C.G.S. § 57D-3-02(b) (stating that the member’s “estate . . . will automatically become an economic interest owner entitled only to the economic interest attributable to the [member’s] ownership interest”), and the subsequent transfer of the economic interest may not be expanded to give the assignee membership rights, N.C.G.S. § 57D-5-02 (“The transfer of an economic interest or portion thereof does not entitle the transferee to become or exercise any rights of a member other than to receive the economic interest or the portion thereof assigned to the transferee.”). The IOMAXIS operating agreement does not override this default rule. Plaintiffs’ first fraud claim, which involved alleged conduct before Decedent Howard’s
death, the second fraud claim involves alleged conduct after Decedent Howard’s death
and after Plaintiffs held the economic interest rights. Consequently, unlike the first
fraud claim, Plaintiffs clearly have standing to assert this second claim for fraudulent
concealment. However, the IOMAXIS Defendants contend that the Court should not
permit amendment to add this claim because it is futile. The Court disagrees.
49. “[F]raudulent concealment or fraud by omission is, by its very nature,
difficult to plead with particularity.” Lawrence v. UMLIC-Five Corp., 2007 NCBC
LEXIS 20, at *9 (N.C. Super. Ct. June 18, 2007) (quoting Breeden v. Richmond Cmty.
Coll., 171 F.R.D. 189, 195 (M.D.N.C. 1997)). Plaintiffs must plead:
(1) the relationship [between the plaintiff and defendant] giving rise to the duty to speak, (2) the event or events triggering the duty to speak and/or the general time period over which the relationship arose and the fraudulent conduct occurred, (3) the general content of the information that was withheld and the reason for its materiality, (4) the identity of those under a duty who failed to make such disclosures, (5) what [the defendant] gained by withholding information, (6) why [the] plaintiff’s reliance on the omission was both reasonable and detrimental, and (7) the damages proximately flowing from such reliance.
Breeden, 171 F.R.D. at 195 (adopted by Lawrence v. UMLIC-Five Corp., 2007 NCBC
LEXIS 20, at *10).
50. Defendants contend that the proposed claim is futile because Plaintiffs
failed to allege a duty to disclose. (Defs.’ Br. Opp’n Pls.’ Mot. 16.) A duty to disclose
arises when: (1) “a fiduciary relationship exists between the parties to the
transaction”; (2) “a party has taken affirmative steps to conceal material facts from
the other”; or (3) “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.” Herrera v. Charlotte Sch. of Law, LLC, 2018 NCBC
LEXIS 35, at *38–39 (N.C. Super. Ct. Apr. 20, 2018) (quoting Hardin v. KCS Int’l,
Inc., 199 N.C. App. 687, 696 (2009)).
51. The Court concludes that Plaintiffs have pled sufficient facts to establish
a duty to disclose the alleged July 2020 plan to misappropriate funds. First, Plaintiffs
have alleged that Buhr purposefully kept this information from Plaintiffs so that
Plaintiffs would not be able to reach IOMAXIS’ assets. (See, e.g., Pls.’ Proposed Am.
¶¶ 187, 203.) Second, Plaintiffs have alleged that all Defendants against whom this
claim is asserted had knowledge of the plan, knew that Plaintiffs were unaware of it,
and concealed it from Plaintiffs. (See, e.g., Pls.’ Proposed Am. ¶¶ 192, 204.) Finally,
given Plaintiffs’ restricted access to financial records as an economic interest holder,
coupled with Defendants’ steadfast objections to providing financial information
regarding Fast Rabbit and Global Vector in discovery, Plaintiffs could not have
discovered such a plan through reasonable diligence. 10 See Herrera, 2018 NCBC
LEXIS 35, at *39.
10A review of the proposed amended pleading as a whole satisfies the Court that the reasonable reliance element has also been sufficiently pled. While “[r]eliance ‘is not reasonable where the plaintiff could have discovered the truth of the matter through reasonable diligence, but failed to investigate[,]’ ” Aldridge v. Metro. Life Ins. Co., 2019 NCBC LEXIS 116, at *110 (N.C. Super. Ct. Dec. 31, 2019) (quoting Cobb v. Pa. Life. Ins. Co., 215 N.C. App. 268, 277 (2011)), Plaintiffs have alleged that they tried to investigate but Defendants objected to those efforts during discovery in this case, (see, e.g., Pls.’ Proposed Am. ¶¶ 171–72). Moreover, Plaintiffs’ status as economic interest holders has prevented them from being able to use the tools available to a member to investigate their concerns. (See, e.g., Pls.’ Proposed Am. ¶ 203.) Thus, the Court concludes that Plaintiffs have sufficiently alleged reasonable reliance on Defendants’ omission to assert a claim for fraud. 52. Defendants also contend that Plaintiffs do not allege that Defendants
actually made good on the alleged scheme and transferred funds from IOMAXIS to
shell companies. (Defs.’ Br. Opp’n Pls.’ Mot. 16.) However, under Breeden, Plaintiffs
are not required to allege that the scheme was actually carried out in order to state a
claim for fraudulent concealment. See Breeden, 171 F.R.D. at 195. Rather, it is
sufficient that Plaintiffs have alleged that Buhr devised this scheme in order to keep
IOMAXIS funds out of Plaintiffs’ hands and then communicated this plan to the
remaining Defendants, each of whom failed to inform Plaintiffs while under a duty to
disclose this information, and that damage resulted. Here, Plaintiffs allege that, at
a minimum, these actions on the part of Defendants have increased the costs involved
in their efforts to file a federal tax return for the Howard Estate and to determine
amounts the Trust may be due. (Pls.’ Proposed Am. ¶ 206.)
53. Similarly, the Court is unconvinced by Defendants’ contention that
Plaintiffs have failed to allege that the concealed information was material because
they did not specifically allege that money actually moved out of IOMAXIS. (Defs.’
Br. Opp’n Pls.’ Mot. 17.) Plaintiffs have alleged that, at the time this call took place,
Plaintiffs were “actively discussing the preparation of a new Case Management Order
to be submitted to the Court, were scheduling depositions, and were also discussing
certain discovery issues including, without limitation, IOMAXIS’[s] objections to
Plaintiffs’ seeking of information concerning Fast Rabbit and other entities.” (Pls.’
Proposed Am. ¶ 190; see also Pls.’ Proposed Am. ¶¶ 189, 191.) Had Plaintiffs known
of Buhr’s alleged scheme to move money, whether it was actually moved out of IOMAXIS or not, it undoubtedly would have influenced their actions. See Shaw v.
Gee, 2016 NCBC LEXIS 103, at *11 (N.C. Super. Ct. Dec. 21, 2016) (“A fact is material
if, had it been known to the party, it would have influenced the party’s judgment or
decision[.]” (citation omitted)).
54. The Court determines that Plaintiffs have adequately alleged a claim
under Rule 9(b) to proceed to discovery. Therefore, Plaintiffs’ Motion is GRANTED
as to the post-assignment fraud claim.
3. UVTA
55. Plaintiffs allege their UVTA claim against IOMAXIS, Buhr, Griffin,
Spade, and Burleson based on a “plan to transfer . . . assets of IOMAXIS to
themselves, other persons, and/or holding companies controlled by one or more of the
aforementioned individual Defendants.” (Pls.’ Proposed Am. ¶ 213.) Plaintiffs
further allege that these parties “devised and carried out this plan in a concealed
manner for the stated purpose of keeping assets out of reach of Plaintiffs[.]” (Pls.’
Proposed Am. ¶ 214.) Finally, Plaintiffs allege that “even prior to the July 2020 ‘plan’
detailed . . ., Defendants caused other assets of IOMAXIS to be improperly
transferred out of IOMAXIS and into affiliated entities such as Fast Rabbit and
Global Vector.” (Pls.’ Proposed Am. ¶ 217.)
56. Defendants contend that Plaintiffs did not adequately allege that a
transfer actually took place as a result of the July 2020 call. They further contend
that Plaintiffs have failed to “explain these [prior-to-July 2020] transactions with any
specificity or allege when they occurred.” (Defs.’ Br. Opp’n Pls.’ Mot. 17–18.) 57. The Court agrees with Defendants that Plaintiffs’ pleading with respect
to alleged transfers that took place prior to the July 2020 call is too thin. Although
Plaintiffs attempt to explain some of the vagaries of their pleading by pointing to
IOMAXIS’ objections and refusal to answer their discovery requests, this explanation
only goes so far. Even under a notice pleading standard, Plaintiffs’ allegation
regarding the alleged “prior” transfers of “assets” into “affiliated entities” is devoid of
the most basic information necessary to state a claim.
58. On the other hand, Plaintiffs have alleged the specific facts pertaining
to the July 2020 scheme necessary to state a claim, including when the call occurred,
the contents of the scheme, who made and heard the plan, the goal in creating the
plan and sharing it with the other Defendants, and how the scheme has harmed
Plaintiffs. (Pls.’ Proposed Am. ¶¶ 186–92.) Furthermore, while Plaintiffs have
alleged broadly that the scheme was “carried out” without providing further detail,
the Court is satisfied, given Plaintiffs’ limited knowledge and access to information,
that Plaintiffs have adequately alleged a claim under the UVTA. See N.C.G.S. § 39-
23.1(12) (defining “transfer” as every mode “of disposing of or parting with an asset
or an interest in an asset”). 11
11 Defendants separately contend that Plaintiffs’ UVTA claim is barred by the statute of
repose to the extent it relates to transactions occurring prior to March 2017. (Defs.’ Br. Opp’n Pls.’ Mot. 18); see N.C.G.S. § 39-23.9(1) (providing that a claim for relief under the UVTA must be brought within “four years after the transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably have been discovered by the claimant” if it is alleged that the debtor made the transfer with intent to hinder, delay, or defraud its creditor). Because the Court allows Plaintiffs to add their UVTA only as to the July 2020 call, the Court does not decide this issue for purposes of this Order and Opinion. 59. Therefore, Plaintiffs’ Motion is GRANTED only as to transfers that
resulted from the alleged scheme discussed during the July 2020 telephone
conference.
4. UDTPA
60. Plaintiffs’ UDTPA claim alleges that “[a]mong other things and without
limitation, Defendant IOMAXIS . . . and its individual Defendant-Members caused at
least $1.5 million of IOMAXIS funds to be transferred to Fast Rabbit, at which point
Fast Rabbit allowed for the use of such funds for the personal benefit of select
IOMAXIS and Fast Rabbit members with the knowledge of both IOMAXIS and Fast
Rabbit.” (Pls.’ Proposed Am. ¶ 223.) Defendants contend that such allegations do not
allege conduct “in or affecting commerce” as required under a UDTPA claim. (Defs.’
Br. Opp’n Mot. 19.)
61. “N.C.G.S. § 75-1.1 declares unlawful ‘[u]nfair methods of competition in
or affecting commerce.’ ” Bhatti v. Buckland, 328 N.C. 240, 243 (1991) (quoting
N.C.G.S. § 75-1.1(a)). With the exception of professional services rendered by a
learned professional, “commerce” is broadly defined to include “all business activities,
however denominated[.]” N.C.G.S. § 75-1.1(b). However, “the [UDTPA] is not
intended to apply to all wrongs in a business setting.” HAJMM Co. v. House of
Raeford Farms, Inc., 328 N.C. 578, 593 (1991). Specifically, “[m]atters of internal
corporate management . . . do not affect commerce as defined by Chapter 75 and our
Supreme Court.” McKee v. James, 2014 NCBC LEXIS 74, at *40–41 (N.C. Super. Ct.
Dec. 31, 2014) (quoting Wilson v. Blue Ridge Elec. Membership Corp., 157 N.C. App. 355, 358 (2003)); see Dodge v. Appalachian Energy, LLC, 2021 NCBC LEXIS 52, at
*15 (N.C. Super. Ct. May 27, 2021) (dismissing a UDTPA claim as an intracompany
dispute where the complaint alleged that the defendants “breached the operating
agreement, concealed company information, misused company assets, and wrongfully
increased their interests at the expense of other members”); JS Real Est. Invs. LLC
v. Gee Real Est., LLC, 2017 NCBC LEXIS 104, at *21 (N.C. Super. Ct. Nov. 9, 2017)
(stating that “tangential involvement” of third parties does not “trigger liability”
under the UDTPA); Potts v. KEL, LLC, 2018 NCBC LEXIS 24, at *15 (N.C. Super.
Ct. Mar. 27, 2018) (noting that the involvement of third parties does not “change the
fundamental character of the dispute” when the “unfairness of [the] actions, if any,
inheres in the relationship between” the co-owners of the business (citation omitted)).
62. While the caselaw with respect to intracompany and intercompany
disputes can be confusing, the distinction lies in the nature of the second entity’s
involvement with the first. If the harm is to the second entity or to the flow of
commerce between the first and second entities, commerce is impacted. However, if
the second entity is used merely as an instrument or “shell” to facilitate harm within
the first entity, the dispute is intracorporate, and the UDTPA is not implicated. See,
e.g., JS Real Est. Invs. LLC, 2017 NCBC LEXIS 104, at *21.
63. Factually, this case falls into the latter category. Indeed, Plaintiffs
repeatedly refer to Fast Rabbit and Global Vector as “affiliates” of IOMAXIS because
of overlapping ownership interests. (Pls.’ Proposed Am. ¶¶ 135, 176.) In addition,
Plaintiffs contend that Fast Rabbit and Global Vector were “shell” entities that served no commercial purpose. (Pls.’ Proposed Am. ¶¶ 117–18, 158–60, 168–70, 177–78,
183–85.) While Fast Rabbit and Global Vector are the tools with which Defendants
allegedly carried out their improper transfers, the economic interest harmed is
completely within IOMAXIS. Therefore, on this point, Plaintiffs have not alleged
facts “in or affecting commerce.” N.C.G.S. § 75-1.1(a). See Potts, 2018 NCBC LEXIS
24, at *15–16 (dismissing the UDTPA claim even when the defendant “carried out his
mismanagement and misappropriation of [the company’s] assets by channeling
money and equipment” to another company because “the unfairness occurred in the
interaction between the company’s owners and directors”). Accordingly, the claim
fails on futility grounds, and Plaintiffs’ Motion with respect to this claim is DENIED.
5. Constructive Trust
64. Finally, as Plaintiffs’ counsel acknowledged during the hearing, (Tr.
102:3–6), the constructive trust claim is not a claim at all but is rather a request for
relief. See LLG-NRMH, LLC v. N. Riverfront Marina & Hotel, LLLP, 2018 NCBC
LEXIS 105, at *14 (N.C. Super. Ct. Oct. 9, 2018) (“[A] constructive trust is not a
standalone claim for relief or cause of action.” (citing Weatherford v. Keenan, 128 N.C.
App. 178, 179 (1997))); see Flynn v. Pierce, 2020 NCBC LEXIS 149, at *15 (N.C. Super.
Ct. Dec. 22, 2020) (dismissing a claim for constructive trust as a remedy rather than
a claim). Therefore, Plaintiffs’ request to add this “claim” is DENIED without
prejudice to Plaintiffs’ ability to pursue the equitable remedy of a constructive trust
to the extent their surviving claims justify such a remedy. See LLG-NRMH, LLC,
2018 NCBC LEXIS 105, at *14. 65. In sum, the Court, in its discretion, DENIES Plaintiffs’ Motion to
Amend as to Plaintiffs’ proposed Fourth Claim for Relief, Plaintiffs’ claim under the
UVTA to the extent it involves alleged transfers that occurred before and not as a
result of the alleged scheme discussed during the July 2020 telephone conference,
Plaintiffs’ UDTPA claim, and Plaintiffs’ claim for imposition of a constructive trust.
66. On the other hand, the Court, in its discretion, GRANTS Plaintiffs’
Motion to Amend as to Plaintiffs’ proposed Fifth Claim for Relief, and Plaintiffs’ claim
under the UVTA to the extent it involves alleged transfers that resulted from the
alleged scheme discussed during the July 2020 telephone conference.
B. Hurysh’s Motion to Amend
67. Hurysh’s proposed amendment seeks not only to change his responses
to the allegations of Plaintiffs’ Complaint but also to add cross-claims against his co-
defendants, as well as claims against new parties Fast Rabbit and Global Vector.
With respect to the additional claims, Hurysh’s Motion requests that this Court
permit him to expand the litigation to allow thirteen new claims asserted variously
against the existing defendants and two of the three new parties named by Plaintiffs,
Fast Rabbit and Global Vector. (See generally Hurysh’s Proposed Am.)
68. After careful review of all materials relevant to Hurysh’s Motion to
Amend, the Court, in its discretion, GRANTS the Motion to the extent Hurysh
amends his responses to the Plaintiffs’ allegations against him, but the Court
DENIES the Motion to the extent Hurysh seeks affirmative relief by way of cross-
claims or impleader. 69. Several considerations lead the Court to this conclusion. The gravamen
of this case involves Plaintiffs’ rights as 51% economic interest holders in IOMAXIS
following Howard’s death in June 2017. Hurysh’s rights as a minority member and,
until very recently, an employee of IOMAXIS, and his rights as a member of the now-
dissolved entities Fast Rabbit and Global Vector, are separate questions that depend
on different facts.
70. Indeed, the crux of Hurysh’s claims does not involve the Howard Interest
at all. The claims Hurysh seeks to add involve alleged harm to him personally or
harm to IOMAXIS, Fast Rabbit, and Global Vector. 12 While the facts supporting
Hurysh’s derivative claims on behalf of IOMAXIS might also have relevance, to some
degree, on Plaintiffs’ claim for distributions, Hurysh’s proposed claims focus on the
value of IOMAXIS as a whole rather than on the Plaintiffs’ specific economic interest.
Moreover, the trier of fact on Hurysh’s claims would have to tease out, among other
things, the role Hurysh played, if any, in the decisions he now criticizes. They would
have to allow for any financial benefit he may have received from them. 13 Further
complicating the matter is the fact that the IOMAXIS Defendants now contend that
Hurysh was motivated to change his position in this case at this juncture because
they refused to accede to his demand for additional financial benefit from IOMAXIS.
(See Aff. Brad C. Buhr ¶ 9, ECF No. 112.2.)
12 Defendants contend that Hurysh’s derivative demands did not satisfy statutory requirements, implicating his standing to sue and potentially making the proposed claims futile. (Defs.’ Br. Opp’n Hurysh’s Mot. 17.) The Court does not reach these issues.
13 Hurysh testified that he received a portion of the 2013 loan proceeds. (Hurysh Aff. ¶ 64.) 71. In short, Hurysh’s proposed claims seek to expand the scope of this
litigation and would involve facts and circumstances ranging far wider than the
dispute that is presently before the Court. 14 The Court is mindful of the undue
prejudice allowing such an amendment would cause the remaining parties in this
case, as they would be delayed in the progression of the case by further discovery,
motion practice, and a jury trial on issues largely unrelated to Plaintiffs’ claims. See
Window World of St. Louis, Inc., 2015 NCBC LEXIS 79, at *18 (stating that the Court
may deny a motion to amend where such amendment would result in undue
prejudice). Under the circumstances, the Court, in its discretion, DENIES Hurysh’s
Motion to Amend to add claims.
72. However, the Court, in its discretion, GRANTS Hurysh’s Motion to the
extent he seeks to amend his responses to Plaintiffs’ allegations against him, without
the addition of affirmative claims. Hurysh contends that “[a]lthough he did not
understand it at the time, the original answer was not designed to protect [his]
rights[.]” (Hurysh Br. Supp. Mot. Amend 6.) He has now changed counsel. (Ord.
Consent Mot. Withdraw & Substitute Counsel, ECF No. 76.) The Court has reviewed
Hurysh’s proposed changes to his answer and determines that allowing them will not
unduly expand the scope of this case. The Court therefore concludes that Hurysh
shall be allowed to amend his answer and affirmative defenses as he has proposed
without adding affirmative claims.
14 The Court also notes that Hurysh is presently involved in two suits related to his involvement and interest in IOMAXIS before the Maryland and Virginia courts. (See Hurysh Br. Supp. Mot. Amend 5 (describing the Maryland and Virginia lawsuits).) V. CONCLUSION
73. WHEREFORE, the Court, in its discretion, hereby ORDERS as follows:
a. Plaintiffs Motion to Amend is GRANTED in part and DENIED in
part. Plaintiffs are permitted to file a first amended complaint, in
form and content consistent with the conclusions and rulings set
forth in this Order and Opinion, no later than ten (10) days from the
entry of this Order.
b. Hurysh’s Motion to Amend is GRANTED in part and DENIED in
part. Hurysh is permitted to file an amended answer, in form and
content consistent with the conclusions and rulings set forth in this
Order and Opinion, no later than ten (10) days from the entry of this
Order and Opinion.
c. The parties shall meet and confer and submit a new Case
Management Report to the Court pursuant to Business Court Rule 9
by 5:00 P.M. on or before 14 January 2022.
IT IS SO ORDERED, this the 22nd day of December, 2021.
/s/ Julianna Theall Earp Julianna Theall Earp Special Superior Court Judge for Complex Business Cases