Lau v. Constable

2022 NCBC 34
CourtNorth Carolina Business Court
DecidedJuly 11, 2022
Docket16-CVS-4393
StatusPublished

This text of 2022 NCBC 34 (Lau v. Constable) is published on Counsel Stack Legal Research, covering North Carolina Business Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lau v. Constable, 2022 NCBC 34 (N.C. Super. Ct. 2022).

Opinion

Lau v. Constable, 2022 NCBC 34.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION FORSYTH COUNTY 16 CVS 4393

GREGORY LAU and VENT TECH CORPORATION,

Plaintiffs, ORDER AND OPINION ON v. DEFENDANT ROBERT MARTIN’S MOTION TO DISMISS FOR LACK OF DOUGLAS CONSTABLE; ROBERT SUBJECT MATTER JURISDICTION MARTIN; TIFFANY WILLARD; and JENNIFER CONSTABLE,

Defendants.

1. THIS MATTER is before the Court on Defendant Robert Martin’s

(“Defendant” or “Martin”) Motion to Dismiss for Lack of Subject Matter Jurisdiction

(the “Motion” or “Motion to Dismiss”) pursuant to North Carolina Rule of Civil

Procedure (“Rule(s)”) 12(b)(1). (ECF No. 206.) For the reasons stated below, the

Motion is GRANTED in part and DENIED in part.

Terpening Law PLLC, by William R. Terpening and Shaefer A. Shepard, for Plaintiff Vent Tech Corporation.

Blanco Tackabery & Matamoros, P.A., by Chad A. Archer, Peter J. Juran, and Elliot A. Fus, for Defendant Robert Martin.

Earp, Judge.

I. INTRODUCTION

2. The gravamen of the Amended Complaint in this case is that, for years,

funds were embezzled from Plaintiff Vent Tech Corporation (“Vent Tech” or the

“Company”) with the knowledge and participation of Martin, formerly the Company’s

President. On 31 December 2012, the majority of the Company’s assets were sold to VL Acquisition, LLC (the “Purchaser”) pursuant to the terms of an Asset Purchase

Agreement (“APA”). The issue before the Court with respect to the current Motion is

whether the Company sold its right to pursue its claims against Martin in this

transaction such that it no longer has standing to pursue those claims and, therefore,

this Court lacks subject matter jurisdiction over them. For the reasons stated below,

the Court determines that some, but not all, of Vent Tech’s claims must be dismissed

because the Company no longer has standing to bring them.

II. FACTUAL BACKGROUND

3. “When reviewing a motion to dismiss for lack of subject matter

jurisdiction pursuant to Rule 12(b)(1), a trial court may consider and weigh matters

outside the pleadings.” Munger v. State, 202 N.C. App. 404, 410 (2010) (quoting DOT

v. Blue, 147 N.C. App. 596, 603 (2001). And, when the Court considers the pleadings,

it must “view the allegations [of the complaint] as true and the supporting record in

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

Adjustment, 362 N.C. 640, 644 (2008). Accordingly, the following facts are stated only

for purposes of deciding the present Motion.

4. Vent Tech is a closely-held entity organized under the laws of North

Carolina. (Am. Compl. [hereinafter “Compl.”] ¶ 8, ECF No. 110.) It was established

to design, manufacture, and sell medical devices, many of which were produced in

China and shipped to the Company’s North Carolina plant for assembly. (Compl.

¶ 15.) Former Plaintiff Gregory Lau (“Lau”) has been the majority shareholder of the

Company at all relevant times. (Compl. ¶ 7.) 5. Martin is a resident of North Carolina. He has an extensive business

background, served as the Company’s President at all relevant times, and was a

minority shareholder in the Company prior to October 2009. (Compl. ¶ 10.) He

remained on the Company’s payroll until the asset sale in December 2012, at which

time he accepted a position with the Purchaser. (Compl. ¶ 22; Martin Aff. ¶ 39, ECF

No. 161.)

6. As President, Martin had ultimate responsibility for all aspects of the

Company’s business, including accounting and record-keeping, as well as for

overseeing the Company’s other executives and employees. (Compl. ¶ 25.) Vent Tech

alleges that in reality, however, Martin exercised very little oversight over the affairs

of the Company, which allowed it to be “pillaged” by the Company’s former Chief

Financial Officer and minority shareholder, Douglas Constable (“Constable”).

(Compl. ¶ 26.)

7. In addition to Lau’s physical distance from the Company’s United States

operations, Lau does not have the same level of expertise in the industry or in

financial accounting that Martin possesses. (Compl. ¶ 29.) Martin represented to

Lau, who resides in China, that he would manage United States operations so that

Lau could focus his attention on overseas production. (Compl. ¶ 27.)

8. As a result of Martin’s control over the operations of the Company, Lau’s

own lack of expertise, and Martin’s alleged representations to Lau, Lau was unaware

that money was being stolen from the Company. (Compl. ¶¶ 27, 29–30.) 9. On or around 31 December 2012, most of the Company’s assets were sold

to the Purchaser, a Michigan limited liability company. (Compl. ¶ 32.) Following the

sale, Lau was the sole remaining shareholder of the Company. (Compl. ¶ 33.)

10. The APA executed by both the Company and the Purchaser contains a

choice of law provision. It states that the APA “shall be governed by and construed

in accordance with the laws of the State of Michigan, without giving effect to any

choice or conflict of law provision or rule under the State of Michigan or any other

jurisdiction that would cause the application of the laws of any jurisdiction other than

the State of Michigan.” (APA, at § 12.9, ECF No. 208.1.)

11. Pursuant to the APA, “the Buyer agree[d] to purchase from the Seller

and the Seller agree[d] to sell, transfer, convey and deliver to the Buyer, all the assets,

properties and rights of the Seller used or useful in the Business as of the Closing (as

defined in Section 2.2 hereof), of whatever kind or nature . . ., other than the items

set forth on Schedule 1.1 hereto (the ‘Excluded Assets’).” (APA, at § 1.1 (emphasis in

original).) Section 1.1(k) of the APA includes, in the list of assets purchased, “claims,

causes of action, choses in action, rights of recovery and rights of set-off of any kind[.]”

(APA, at § 1.1(k).)

12. Schedule 1.1 enumerates the Excluded Assets as follows:

1. GMC Delivery Van (Ventlab Health Services) 2. All real estate and permanent fixtures thereto in China 3. Honda Odyssey van 4. All equipment used exclusively in Sellers’ Discovery Chemscience business 5. Laptop Computers . . . 6. All Amounts Due from employees, amounting to approximately $ 81,000 and subject to change prior to closing. 7. All Investments in Discovery Chemscience

(APA, at Sch. 1.1, ECF No. 208.2 (emphasis added).)

13. Section 3.25(w) of the APA provides: “Except as set forth in Schedule

3.25, no Employee owes any sum to the Seller.” (APA, at §3.25(w) (emphasis in

original).)

14. Schedule 3.25w, titled “Employee Loans,” further describes the

Excluded Assets:

There are a number of employees who owe various amounts to Seller. Those receivables do not convey to Buyer as a part of this transaction in any way, (sic) and are listed as Excluded Assts on Schedule 1.1.

(APA, at Sch. 3.25w, ECF No. 208.3.)

15. After the sale, on or about 10 May 2013, the Purchaser, believing that

there were financial irregularities in the Company’s books, advised Lau of its concern

that Constable was responsible. (Compl. ¶ 35.) As a result, Lau conducted an

investigation and discovered significant misuse of Company funds occurring over a

period of years. (Compl. ¶ 36.)

16. In fact, Vent Tech alleges that it was Constable’s misuse of Company

funds and misrepresentations that led to the sale of the Company to Purchaser in

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