Morgan v. Turn-Pro Maint. Servs., LLC, 2020 NCBC 5.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 18 CVS 1905
JOSHUA MORGAN, both Individually and Derivatively on Behalf of ALPINE WASTE SOLUTIONS, LLC,
Plaintiff,
v. ORDER AND OPINION ON MOTIONS TURN-PRO MAINTENANCE FOR SUMMARY JUDGMENT SERVICES, LLC; ROBERT SINGLETARY; and ALPINE WASTE SOLUTIONS, LLC,
Defendants.
1. THIS MATTER is before the Court upon (i) Defendant Robert Singletary’s
(“Singletary”) Motion for Summary Judgment (the “Singletary Motion”), (ECF No.
49), and (ii) Plaintiff Joshua Morgan’s (“Morgan”) Motion for Summary Judgment
(the “Morgan Motion”), (ECF No. 41), both individually and derivatively on behalf of
Alpine Waste Solutions, LLC (“Alpine” or the “Company”), in the above-captioned
case (collectively, the “Motions”).
2. Having considered the Motions, the related briefing, and the arguments of
counsel at the hearing on the Motions, the Court (i) DENIES the Singletary Motion;
and (ii) GRANTS in part and DENIES in part the Morgan Motion.
Alexander Ricks, PLLC, by Alice C. Richey, for Plaintiff Joshua Morgan, both individually and derivatively, on behalf of Alpine Waste Solutions, LLC.
Robert M. Singletary, pro se.
Bledsoe, Chief Judge. I.
FACTUAL BACKGROUND
3. The Court does not make findings of fact when ruling on a motion for
summary judgment, but “it is helpful to the parties and the courts for the trial judge
to articulate a summary of the material facts which he considers are not at issue[.]”
Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C. App. 138, 142, 215 S.E.2d 162,
165 (1975).
4. Morgan and Singletary formed Alpine in 2014 to provide trash collection
and general maintenance services for property management companies and
apartment complexes. (V. Compl. ¶ 9, ECF No. 3; Second Aff. Robert M. Singletary
¶¶ 11, 13 [hereinafter “Singletary 2nd Aff.”], ECF No. 52.)
5. Morgan and Singletary are the only two members of Alpine, and each holds
a 50% ownership interest in the Company. (V. Compl. Ex. A; Pl.’s Mot. Summ. J. Ex.
1, at ¶¶ 5–7, 37 [hereinafter “Morgan Aff.”], ECF No. 41.1; Singletary 2nd Aff. ¶ 12.)
Alpine does not have a written operating agreement, (Morgan Aff. ¶ 7; Pl.’s Mot.
Summ. J. Ex. 2, at 13:11–14:5 [hereinafter “Singletary Dep.”], ECF No. 41.2), and is
no longer in business, (Morgan Aff. ¶ 47, Ex. S; see also Singletary 2nd Aff. ¶ 30).
6. Singletary served as Alpine’s member-manager and handled the Company’s
day-to-day operations while it conducted business. (V. Compl. ¶ 10; Morgan Aff. ¶ 10;
Singletary 2nd Aff. ¶ 15; Singletary Dep. 13:11–13, 14:20–15:6.) Morgan provided
Alpine’s initial funding and had a more passive role in the Company’s operations.
(Morgan Aff. ¶ 7; Singletary 2nd Aff. ¶ 12.) 7. Alpine enjoyed some early success. In late 2015, the Company obtained
service contracts with three properties managed by Ardmore Residential, Inc.
(“Ardmore”): (1) King’s Grant Apartments, LLC, dated October 7, 2015; (2) The
Retreat at the Park, LLC, dated October 12, 2015; and (3) Howell Road, LLC, dated
October 2, 2015 (collectively, the “Ardmore Contracts”). (Morgan Aff. ¶¶ 15–17, Exs.
B–D; Singletary 2nd Aff. ¶ 17.) Building on that success, a few months later, Alpine
entered into a service contract dated March 7, 2016 with Grubb Properties, Inc.
(“Grubb Properties”) to provide services at Grubb Properties’ LangTree Lake Norman
Apartments property (the “Grubb Contract”). (Morgan Aff. ¶ 14, Ex. A; see also Index
Exhibits Referenced Second Aff. Robert M. Singletary Ex. F [hereinafter, “Index
Singletary 2nd Aff.”], ECF No. 53.)
8. Beginning in 2016, the relationship between Morgan and Singletary
deteriorated, with each suspecting the other of misusing Alpine’s assets. According
to Morgan, beginning in April 2016, Singletary caused Alpine to pay for Singletary’s
personal expenses, including groceries, meals, rent, and a personal loan to
Singletary’s brother, in the total amount of $4,987.29. (Morgan Aff. ¶¶ 28–29; see
also Morgan Aff. Exs. G (Alpine bank statements) and H (Alpine operating account
transaction list).) Morgan also claims that Singletary made false statements to
Alpine’s customers to excuse Alpine’s poor performance, including a statement that
Singletary’s “business partner” was to blame for Alpine’s failures and that “a business
partner was being removed from Alpine.” (V. Compl. ¶¶ 18–20; Morgan Aff. ¶ 30, Ex.
I.) For his part, Singletary alleges that Morgan made an unauthorized withdrawal of $1,000 from Alpine’s operating account on April 25, 2016, (Singletary 2nd Aff.
¶ 23), and failed to pay Alpine approximately $2,500 Singletary contends Morgan
owed the Company, (Singletary 2nd Aff. ¶ 24).
9. Apparently in response to this deteriorating relationship, Singletary, while
still the member-manager of Alpine, created Turn-Pro Management Services, LLC
(“Turn-Pro”) on May 13, 2016 to provide the same services as Alpine. (V. Compl.
¶¶ 21–22, 24; Morgan Aff. ¶ 31, Ex. J; Singletary 2nd Aff. ¶¶ 31–32; Singletary Dep.
75:19–25, 217:9–22.) Singletary was and remains Turn-Pro’s sole member and
manager. (V. Compl. ¶ 23; Morgan Aff. ¶ 31, Ex. J.)
10. Singletary candidly acknowledges that while acting as Alpine’s member-
manager, he transferred funds, contracts, and assets of Alpine to Turn-Pro without
Morgan’s knowledge or consent. (Singletary Dep. 54:3–25, 74:12–75:18, 77:20–23,
86:16–24, 105:9–106:2, 216:8–217:25.) For example, Singletary transferred funds
from Alpine’s operating account to Turn-Pro on May 19, 2016 and again on May 25,
2016 in the amounts of $1,200.00 and $1,750.00, respectively. (V. Compl. ¶ 25;
Morgan Aff. ¶ 33, Ex. O; Singletary Dep. 216:8–217:22.) That same month, Singletary
transferred Alpine’s “insurance polic[ies]” to Turn-Pro. (V. Compl. ¶ 27; Morgan Aff.
¶ 34, Ex. P; Singletary Dep. 217:9–22.) Most significantly, Singletary assigned
Alpine’s Ardmore and Grubb Contracts to Turn-Pro—executing assignment
documents on behalf of both Alpine and Turn-Pro—all without Morgan’s knowledge
or consent. (V. Compl. ¶ 26; Morgan Aff. ¶¶ 32, 41, Exs. K–N; Singletary Dep. 54:3–
25, 74:12–75:18, 77:20–23, 86:16–24, 217:9–22, 219:1–222:25; Index Singletary 2nd Aff. Ex. F.) As a result of Singletary’s actions, Alpine had no assets by June
2016. (Morgan Aff. ¶ 35.)
11. After the assignment of the Grubb Contract, Turn-Pro began providing
services for Grubb Properties in May and June 2016 for which Turn-Pro received
payment. Turn-Pro did not remit any of these sums to Alpine. (Morgan Aff. ¶¶ 40–
41; Singletary Dep. 105:9–106:2.) Alpine also received funds from Ardmore under the
Ardmore Contracts during this time. Although Ardmore’s payments under these
contracts were paid to Alpine, Singletary transferred the paid funds from Alpine to
Turn-Pro without consideration to Alpine. (Morgan Aff. ¶¶ 33, 41, Ex. O; Singletary
Dep. 105:9–106:2.)
12. At some point in June 2016, Morgan became aware of Singletary’s conduct,
and, on June 15, 2016, e-mailed Ardmore and Grubb Properties to advise that
Singletary’s transfers of the Ardmore and Grubb Contracts to Turn-Pro were
unauthorized and invalid. (V. Compl. ¶ 29; Morgan Aff. ¶¶ 36–38; Singletary 2nd
Aff. ¶ 35; Index Singletary 2nd Aff. Ex. D, at 13–16, Ex. E.)
13. Ardmore and Grubb Properties soon expressed confusion and frustration
over whether Alpine or Turn-Pro was to service their contracts and to which entity
they were to send their communications, complaints, and payments. (Singletary 2nd
Aff. ¶ 44; Index Singletary 2nd Aff. Ex. D, at 18, Ex. J, at 37.) Shortly thereafter,
Grubb Properties cancelled the Grubb Contract by “back-dat[ing]” a letter cancelling
the contract on May 1, 2016 as to be effective June 1, 2016, (Singletary 2nd Aff. ¶ 44;
Index Singletary 2nd Aff. Ex. F), and, on July 11, 2016, Ardmore cancelled the Ardmore Contracts, (Morgan Aff. ¶ 40, Ex. R; Singletary 2nd Aff. ¶ 43; Index
Singletary 2nd Aff. Ex. D, at 21). Ardmore also ceased consideration of a fourth
contract with Alpine—to provide services for Ardmore’s Cates Creek apartment
complex—around this same time. (Morgan Aff. ¶¶ 22, 40, Ex. R; Singletary 2nd Aff.
¶ 43; Singletary Dep. 105:1–106:13; Index Singletary 2nd Aff. Ex. D, at 21.)
14. The cancellation of the Ardmore and Grubb Contracts eliminated Alpine’s
and Turn-Pro’s primary sources of revenue, quickly leading to the deterioration of
both businesses. Morgan and Singletary thereafter exchanged demands and counter-
demands, as discussed below. Their inability to resolve their dispute ultimately led
Morgan to commence this litigation in January 2018. Shortly thereafter, on February
28, 2018, Alpine was administratively dissolved for failure to file an annual report.
(Morgan Aff. ¶ 47, Ex. S.)
II.
PROCEDURAL BACKGROUND
15. Prior to the commencement of this litigation, Morgan’s counsel sent a
Chapter 57D records and information demand (the “Records Demand”) on June 8,
2016 addressed to Singletary at 4404 Firwood Lane, Charlotte, N.C. 28209
(“Charlotte Address”), asking Singletary, as Alpine’s managing member, to permit
inspection of certain of Alpine’s records and information no later than June 22, 2016.
(V. Compl. ¶¶ 31–32, Ex. B; Singletary 2nd Aff. ¶ 33.) Singletary confirmed that
Alpine received the Records Demand, (Singletary 2nd Aff. ¶ 33), and it is undisputed that Singletary did not respond or provide the requested documents or information,
(Morgan Aff. ¶ 32).
16. On August 10, 2017, Morgan’s counsel mailed a letter (the “Demand Letter”)
by first class mail, addressed to Alpine, in care of Singletary as Alpine’s managing
member, at the Charlotte Address, (V. Compl. Ex. A; Pl.’s Reply Supp. Mot. Summ.
J. All Claims & Countercls. [hereinafter “Pl.’s Reply”] Ex. A, at ¶¶ 3–6, Ex. 1
[hereinafter “Traynum Aff.”], ECF No. 55.1), demanding that Alpine remedy certain
alleged misconduct that Morgan claimed had been “facilitated by [Singletary] with
regard to the Company[,]” (V. Compl. Ex. A; see also Morgan Aff. ¶ 46). That same
day, Morgan’s counsel sent the Demand Letter by e-mail to Singletary, again as
Alpine’s managing member, to the e-mail address rob@singletarygroup.com.
(Traynum Aff. ¶ 7, Ex. 2.) Significantly for purposes of these Motions, Singletary
contends that he, and thus Alpine, never received the Demand Letter from Morgan
in any form. (Singletary 2nd Aff. ¶¶ 7–8, 10; Br. Supp. Def.’s Mot. Summ. J. 2–3,
ECF No. 51; Aff. Robert M. Singletary [hereinafter “Singletary 1st Aff.”] ¶¶ 6–7, 9,
ECF No. 50.)
17. On January 29, 2018, Morgan filed this action, in both his individual
capacity and derivatively on behalf of Alpine, against Turn-Pro, Singletary, and
Alpine. Morgan asserted (i) derivative claims against Singletary for breach of
fiduciary duty, constructive fraud, and conversion; (ii) a derivative claim against
Turn-Pro for constructive trust; (iii) derivative claims against Singletary and Turn-
Pro for tortious interference with contract, tortious interference with prospective economic advantage, usurpation of corporate opportunities, unfair and deceptive
trade practices under N.C.G.S. § 75-1.1, and punitive damages; (iv) an individual
claim against Alpine for the exercise of information rights under N.C.G.S. § 57D-3-
04; and (v) individual and derivative claims against Alpine for judicial dissolution
under N.C.G.S. § 57D-6-02. (V. Compl. 6–16.)
18. On May 25, 2018, Singletary, for himself and on behalf of Alpine, and Alpine,
in its own name, filed their Answer to the Complaint and asserted counterclaims
against Morgan for breach of contract, breach of fiduciary duty, unfair and deceptive
trade practices under section 75-1.1, violation of N.C.G.S. § 57D-4-05, tortious
interference with contract, violation of N.C.G.S. §§ 14-453, 454, 456, and 458, and
violation of the Electronic Communications Privacy Act of 1986, 18 U.S.C. § 2510-22,
for which they sought actual and punitive damages, attorneys’ fees and costs, and
judicial dissolution of Alpine under N.C.G.S. § 57D-6-02. (Mot. Dismiss & Ans. All
Defs. & Derivative & Direct Countercls. Alpine [hereinafter “Defs.’ Mot. Dismiss”],
ECF No. 16.)
19. On January 30, 2019, Alpine withdrew its counterclaim against Morgan for
breach of fiduciary duty. (ECF No. 34.)
20. On April 4, 2019, Morgan dismissed his section 75-1.1 claim without
prejudice, (ECF No. 38), and on May 9, 2019, dismissed his claims for conversion,
usurpation of corporate opportunities, constructive trust, and for information rights
under section 57D-3-04, also without prejudice, (ECF No. 40). 21. On May 9, 2019, Morgan filed the Morgan Motion, (ECF No. 41), and on
June 10, 2019, Singletary, acting pro se, filed the Singletary Motion, (ECF No. 49).
In support of his Motion, Singletary also filed two affidavits he signed under oath, his
first on June 10, 2019, (Singletary 1st Aff.), and his second on June 11, 2019, with an
accompanying index of exhibits, (Singletary 2nd Aff.; Index Singletary 2nd Aff.).
22. After full briefing, the Court held a hearing on the Motions on July 23, 2019,
at which Morgan was represented by counsel, Singletary appeared pro se, and Turn-
Pro did not appear. 1 The Motions are now ripe for resolution.
III.
LEGAL STANDARD
23. Under Rule 56 of the North Carolina Rules of Civil Procedure (“Rule(s)”),
summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that any party is entitled
to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). “An issue is ‘genuine’ if it
can be proven by substantial evidence and a fact is ‘material’ if it would constitute or
irrevocably establish any material element of a claim or a defense.” CSX Transp.,
1 Turn-Pro was originally represented by counsel in this action, but upon proper motion, the
Court permitted Turn-Pro’s counsel to withdraw by order dated February 20, 2019. No successor counsel has appeared. As an unrepresented limited liability company, Turn-Pro was precluded from pro se participation in the hearing under well-established North Carolina law. See, e.g., LexisNexis, Div. of Reed Elsevier, Inc. v. Travishan Corp., 155 N.C. App. 205, 209, 573 S.E.2d 547, 549 (2002) (holding “a corporation must be represented by a duly admitted and licensed attorney-at-law and cannot proceed pro se”); see also, e.g., Carter v. Maximov, No. COA10-1408, 2011 N.C. App. LEXIS 1767, at *7–8 (N.C. Ct. App. Aug. 16, 2011) (dismissing appeal in part because non-attorney plaintiff could not represent corporation in litigation). Inc. v. City of Fayetteville, 247 N.C. App. 517, 521, 785 S.E.2d 760, 763 (2016) (citation
omitted). “ ‘Substantial evidence is such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion’ and means ‘more than a scintilla
or a permissible inference.’ ” United Cmty. Bank (Ga.) v. Wolfe, 369 N.C. 555, 558,
799 S.E.2d 269, 271 (2017) (quoting Ussery v. Branch Banking & Tr. Co., 368 N.C.
325, 335, 777 S.E.2d 272, 278–79 (2015)).
24. Under Rule 56, “[e]vidence presented by the parties is viewed in the light
most favorable to the non-movant.” Summey v. Barker, 357 N.C. 492, 496, 586 S.E.2d
247, 249 (2003) (citation omitted); see also Smith v. Beasley, 298 N.C. 798, 801, 259
S.E.2d 907, 909 (1979) (“It is the function of the jury alone to weigh the evidence,
determine the credibility of the witnesses and the probative force to be given their
testimony, and determine what the evidence proves or fails to prove.”). The movant
bears the burden of showing that no genuine issue of material fact exists. Liberty
Mut. Ins. Co. v. Pennington, 356 N.C. 571, 579, 573 S.E.2d 118, 124 (2002). The
moving party can meet this burden by proving that “an essential element of the
opposing party’s claim does not exist, cannot be proven at trial, or would be barred by
an affirmative defense” or by showing “through discovery that the opposing party
cannot produce evidence to support an essential element of [his or] her claim[.]”
Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835 (2000). If the moving party
meets its burden, then “the burden shifts to the nonmoving party to produce a forecast
of evidence demonstrating specific facts, as opposed to allegations, showing that he
can at least establish a prima facie case at trial.” Patel v. Scottsdale Ins. Co., 221 N.C. App. 476, 480, 728 S.E.2d 394, 397 (2012) (quoting Gaunt v. Pittaway, 139 N.C.
App. 778, 784–85, 534 S.E.2d 660, 664 (2000)).
IV.
ANALYSIS
A. Singletary’s Motion for Summary Judgment
25. Singletary moves for summary judgment on all of Morgan’s derivative
claims and opposes the Morgan Motion on those same claims on the ground that
Morgan failed to make a proper pre-suit demand as required under N.C.G.S. § 57D-
8-01(a)(2). (Def.’s Mot. Summ. J. 1, ECF No. 49.) That provision requires that prior
to asserting a derivative claim, an LLC member must have:
made written demand on the LLC to take suitable action, and either (i) the LLC notified the member that the member’s demand was rejected, (ii) 90 days have expired from the date the demand was made, or (iii) irreparable injury to the LLC would result by waiting for the expiration of the 90-day period.
N.C.G.S. § 57D-8-01(a)(2). “ ‘A party’s standing to bring a derivative claim depends
on’ compliance with ‘the demand requirement’ in N.C. Gen. Stat. § 57D-8-01(a)(2).”
Azure Dolphin, LLC v. Barton, 2017 NCBC LEXIS 90, at *20 (N.C. Super. Ct. Oct.
2, 2017), aff’d, 371 N.C. 579, 821 S.E.2d 711 (2018) (quoting Petty v. Morris, 2014
NCBC LEXIS 67, at *4 (N.C. Super. Ct. Dec. 16, 2014)).
26. Here, Singletary offers his own sworn testimony averring that he never
received the Demand Letter, either by first class mail, e-mail, or otherwise. (Br.
Supp. Def.’s Mot. Summ. J. 2–3; Singletary 1st Aff. ¶¶ 6–7, 9; Singletary 2nd Aff.
¶¶ 7–8, 10.) Singletary also offers evidence he contends shows that Morgan failed to mail the Demand Letter to his and Alpine’s correct address, asserting that Alpine
changed its address on August 4, 2017 from the Charlotte Address to an address in
Clemmons, North Carolina (“Clemmons Address”). (Br. Supp. Def.’s Mot. Summ. J.
2–3; Singletary 1st Aff. ¶¶ 6, 9; Singletary 2nd Aff. ¶¶ 7, 10.)
27. In opposition, Morgan has offered unrebutted evidence that his counsel
placed the Demand Letter in first class mail on August 10, 2017 addressed to Alpine,
in care of Singletary, at the Charlotte Address, (V. Compl. Ex. A; Traynum Aff. ¶¶ 3–
6, Ex. 1), the address reflected in Alpine’s latest annual report (filed July 1, 2016),
(Pl.’s Reply Ex. B, Ex. 1, ECF No. 55.2). Morgan also offers unrebutted evidence that
his counsel e-mailed the Demand Letter on August 10, 2017 to
rob@singletarygroup.com, (Traynum Aff. ¶ 7), the e-mail address Singletary has used
to communicate successfully with the Court in this matter.
28. The Motions require the Court to determine what constitutes proper
demand under section 57D-8-01(a)(2). Although section 57D-8-01(a)(2) specifically
requires a derivative demand on an LLC to be in writing, it does not specify the
manner in which the demand must be delivered. N.C.G.S. § 55D-33(d) deals with
service on entities through registered agents, the situation here, and provides that
“[n]othing in this section affects the right to serve any process, notice or demand
required or permitted by law to be served upon an entity in any . . . manner now or
hereafter permitted by law.” (emphasis added). Under section 57D-8-01(a)(2),
“[d]elivery is not required to be by registered or certified mail.” Miller v. Burlington
Chem. Co., LLC, 2017 NCBC LEXIS 6, at *26 (N.C. Super. Ct. Jan. 27, 2017) (emphasis added) (citing Petty, 2014 NCBC LEXIS 67, at *18). In the corporation
context, “ ‘[n]otice’ includes demand[,]” N.C.G.S. § 55-1-40(15), and “[n]otice may be
communicated . . . by electronic means[ ] or by mail or private carrier[,]” N.C.G.S. §
55-1-41(b). Against this backdrop, the Court concludes that Morgan’s demand
through first class mail and e-mail were permissible methods of delivery for purposes
of section 57D-8-01(a)(2).
29. Implicit within the statute’s language is the requirement that the written
demand be delivered, see Miller, 2017 NCBC LEXIS 6, at *26, and delivery to the
LLC must be made through its registered agent or to “a person or entity that has
authority to cause the LLC to reject the demand.” Russell M. Robinson, II, Robinson
on North Carolina Corporation Law § 34.04[5], at n.61.1 (7th ed. 2018); see also Hilco
Transp., Inc. v. Atkins, 2016 NCBC LEXIS 5, at *13 (N.C. Super. Ct. Jan. 15, 2016)
(requiring that proper demand be addressed to “someone with authority to act on
behalf of the corporation”); Petty, 2014 NCBC LEXIS 67, at *17 (concluding that “any
response . . . must be made by those with authority to act on behalf of the
corporation”).
30. The demand requirement exists to give a corporation or LLC the opportunity
“to remedy the alleged problem without resort to judicial action, or, if” resolution
requires judicial action, “to bring suit first against the alleged wrongdoers.”
Zoutewelle v. Mathis, 2018 NCBC LEXIS 95, at *18 (N.C. Super. Ct. Sept. 13, 2018)
(quoting Bridges v. Oates, 167 N.C. App. 459, 467–68, 605 S.E.2d 685, 691 (2004)).
Since demand is required to permit the LLC to take corrective action, it follows that the LLC must receive the demand to fulfill that statutory purpose. See, e.g., Kane v.
Moore, 2018 NCBC LEXIS 157, at *34–35 (N.C. Super. Ct. Nov. 26, 2018) (finding
pre-suit demand untimely based on LLC’s receipt and rejection of demand); Miller,
2017 NCBC LEXIS 6, at *27 (finding relevant receipt of demand); Petty, 2014 NCBC
LEXIS 67, at *9 (same).
31. It is undisputed that Morgan mailed and e-mailed the Demand Letter to
Singletary. Singletary, however, has filed three sworn affidavits averring that he did
not receive the Demand Letter either at his physical address or by e-mail. (Singletary
1st Aff. ¶¶ 6–7, 9; Singletary 2nd Aff. ¶¶ 7–8, 10; Third Aff. Robert M. Singletary ¶ 6
[hereinafter “Singletary 3rd Affidavit”], ECF No. 58.1.) The issue therefore is
whether Morgan’s evidence of mailing, and Singletary’s sworn denials, create a
genuine issue of material fact precluding summary judgment for either Singletary or
Morgan.
32. North Carolina recognizes that for “mail properly addressed and stamped,
the law presumes the addressee received it.” Sherrod v. Ins. Ass’n, 139 N.C. 167, 169,
51 S.E. 910, 911 (1905); see also Gore v. Myrtle/Mueller, 362 N.C. 27, 48, 653 S.E.2d
400, 413 (2007) (“[T]he law is that evidence of the mailing of a letter, properly
addressed and with proper postage, raises a rebuttable presumption that the letter
was received by the intended recipient.” (citing Beard v. S. Ry. Co., 143 N.C. 136, 140,
55 S.E. 505, 506 (1906))); Crown Cent. Petroleum Corp. v. Page-Myers Oil Co., 255
N.C. 167, 171, 120 S.E.2d 594, 598 (1961) (“[I]f the letter was written and mailed . . . ,
there is a prima facie presumption that it was received.” (citations omitted)). 33. Many courts have concluded that denial of receipt alone is insufficient to
overcome the presumption of receipt for Rule 56 purposes. See, e.g., McLaughlin v.
Astrue, 443 F. App’x 571, 574 (1st Cir. 2011) (holding that for denial of applications
for disability and supplemental security income benefits, “it is fairly well-accepted
that affidavits that merely . . . allege non-receipt within the five days [after the notice]
are not sufficient, standing alone, to rebut the presumption” (citations omitted));
Isaacson v. N.Y. Organ Donor Network, 405 F. App’x 552, 553 (2d Cir. 2011) (holding
that “[t]he mere denial of receipt does not rebut [the] presumption” at the summary
judgment stage (citation omitted)); United States v. Ekong, 518 F.3d 285, 287 (5th
Cir. 2007) (per curiam) (concluding that “[t]he addressee’s ‘bare assertion of non-
receipt’ is insufficient to rebut the assumption” (citation omitted)); Bean v. Perdue,
316 F. Supp. 3d 220, 230 (D.D.C. 2018) (concluding a plaintiff’s “bare assertion of non-
receipt . . . is not sufficient to raise a genuine dispute of fact regarding whether [the
defendant] sent the Response Letter”); Goetsch v. Shell Oil Co., 197 F.R.D. 574, 578
(W.D.N.C. 2000) (concluding that a “[p]laintiff’s affidavit, in which he simply denies
receipt of the [arbitration] notice, is insufficient to undermine the presumption of
receipt” (citation and internal quotation marks omitted)).
34. Other courts, however, have concluded to the contrary, reasoning that a
person in Singletary’s position rarely has affirmative evidence other than a denial
and is in a difficult position to prove a negative, that of non-receipt. See Lupyan v.
Corinthian Colls., Inc., 761 F.3d 314, 321–22 (3d Cir. 2014) (“[E]vidence sufficient to
nullify the presumption of receipt . . . may consist solely of the addressee’s positive denial of receipt, creating an issue of fact for the jury” because “where . . . receipt of
a letter is a contested issue, the individual recipient is forced to prove a negative[,]”
and “[t]he law has long recognized that such an evidentiary feat is next to
impossible.”); Seminiano v. Xyris Enter., Inc., 512 F. App’x 735, 735 (9th Cir. 2013)
(disagreeing with “the categorical proposition” that “a simple denial of receipt is
insufficient to rebut the presumption of receipt” because, “depending on the
circumstances, that presumption can be rebutted by a credible sworn declaration of
non-receipt.” (citation omitted)); In re Yoder Co., 758 F.2d 1114, 1118 (6th Cir. 1985)
(“Testimony of non-receipt, standing alone, would be sufficient to support a finding of
non-receipt; such testimony is therefore sufficient to rebut the presumption of
receipt.”).
35. North Carolina appears to have cast its lot with these latter courts,
concluding that “[e]vidence of nonreceipt of the letter by the addressee . . . is some
evidence that the letter was not mailed and raises a question of fact for the trier of
fact.” Wilson v. Claude J. Welch Builders Corp., 115 N.C. App. 384, 386, 444 S.E.2d
628, 629 (1994) (emphasis added) (citations omitted). In this case, the evidence
appears overwhelming that the derivative demand was delivered to Singletary. The
letter was properly addressed and both mailed and e-mailed to his current addresses,
was never returned, and was never the subject of an e-mail or post office
undeliverable message. There is no evidence that Singletary failed to receive any
other email at the rob@singletarygroup.com address or any other mail at the
Charlotte Address or the Clemmons Address through USPS mail forwarding. Nevertheless, Singletary has provided affirmative evidence of nonreceipt through his
sworn testimony, and the Court concludes North Carolina precedent holds such
evidence sufficient to raise a question of fact for the jury on that issue.
36. Accordingly, both the Singletary Motion on Morgan’s derivative claims and
the Morgan Motion seeking the entry of judgment on each of those same claims must
be denied on this ground.
B. Morgan’s Motion for Summary Judgment
37. Morgan, individually and derivatively on behalf of Alpine, seeks entry of
judgment on his remaining claims against Defendants and dismissal of all
counterclaims asserted against him. (Pl.’s Mot. Summ. J, ECF No. 41.) Morgan
currently maintains derivative claims against Singletary for breach of fiduciary duty
and constructive fraud and against Singletary and Turn-Pro for tortious interference
with contract and tortious interference with prospective economic advantage, for
which he seeks actual/compensatory and punitive damages and attorneys’ fees. (Pl.’s
Mem. Law Supp. Mot. Summ. J. All Claims & Countercls. 7–14 [hereinafter “Pl.’s
Mem. Law”], ECF No. 42.) Morgan acknowledges that his individual and derivative
claim for Alpine’s judicial dissolution is moot because Alpine has already been
administratively dissolved.
38. While the Morgan Motion on his derivative claims must be denied due to the
issue of fact concerning whether Singletary received the Demand Letter, the Court
nevertheless addresses Morgan’s claims on this Motion to narrow the issues that must be resolved by a jury at trial. Thereafter, the Court addresses the Morgan
Motion on Singletary and Alpine’s counterclaims. 2
1. Morgan’s Breach of Fiduciary Duty Claim
39. Morgan alleges that Singletary, as Alpine’s manager, breached his fiduciary
duties to Alpine by, among other things, using Alpine’s funds for personal use,
creating Turn-Pro to perform Alpine’s work for his own benefit, transferring money
from Alpine’s bank account to Turn-Pro, and transferring the Ardmore and Grubb
Contracts, as well as Alpine’s insurance policies, to Turn-Pro, which resulted in the
cancellation of Alpine’s contracts by Alpine’s customers. (Pl.’s Mem. Law 7–8.)
40. “In order to establish a claim for breach of fiduciary duty, plaintiff must
show that: (1) defendant owed plaintiff a fiduciary duty; (2) defendant breached his
fiduciary duty; and (3) the breach of fiduciary duty was a proximate cause of injury
to plaintiff.” See Miller, 2017 NCBC LEXIS 6, at *23 (citing Farndale Co., LLC v.
Gibellini, 176 N.C. App. 60, 68, 628 S.E.2d 15, 20 (2006)). A manager of an LLC owes
a fiduciary duty to the LLC. Id. (citing N.C.G.S. § 57D-3-21(b)); Kaplan v. O.K. Techs.,
L.L.C., 196 N.C. App. 469, 474, 675 S.E.2d 133, 137 (2009) (“[M]anagers of a limited
liability company . . . owe a fiduciary duty to the company[.]”). Since Singletary was
a member-manager of the Company, (V. Compl. ¶ 4; Morgan Aff. ¶ 7; Singletary 2nd
Aff. ¶ 5), Singletary owed fiduciary duties to Alpine.
41. As a fiduciary, a “manager shall discharge [his or her] duties (i) in good faith,
(ii) with the care an ordinary prudent person in a like position would exercise under
2 For ease of reference, the Court shall refer hereafter to the counterclaims asserted directly
by Alpine and derivatively by Singletary on Alpine’s behalf as “Alpine’s counterclaims.” similar circumstances, and (iii) subject to the operating agreement, in a manner the
manager believes to be in the best interests of the LLC.” N.C.G.S. § 57D-3-21(b).
Singletary, by his own admission, and Morgan, through other undisputed evidence,
have demonstrated that Singletary openly breached his fiduciary duties to Alpine
through numerous acts Singletary brazenly committed while he was the member-
manager of Alpine, including:
(1) his creation of Turn-Pro, an entity he wholly-owned, and his use of
Turn-Pro to engage in direct competition with Alpine for which Turn-
Pro received payment without consideration to Alpine and without
Morgan’s knowledge or consent, (V. Compl. ¶¶ 21–24; Morgan Aff. ¶ 31,
Ex. J; Singletary 2nd Aff. ¶¶ 31–32; Singletary Dep. 75:19–25, 217:9–
22);
(2) his transfer of the Ardmore and Grubb Contracts to Turn-Pro
without consideration to Alpine and without Morgan’s knowledge or
consent, (V. Compl. ¶ 26; Morgan Aff. ¶¶ 32, 41, Exs. K–N; Singletary
Dep. 54:3–25, 74:12–75:18, 77:20–23, 86:1–24, 217:9–22, 219:1–222:25;
Index Singletary 2nd Aff. Ex. F);
(3) his transfer of funds earned and paid to Alpine under Alpine’s service
contracts to Turn-Pro without consideration to Alpine and without
Morgan’s knowledge or consent, (Morgan Aff. ¶¶ 33, 41, 43–44, Ex. O;
Singletary Dep. 105:9–106:2, 216:8–217:22, 219:1–222:25); and (4) his transfer of Alpine’s insurance policies to Turn-Pro without
consideration to Alpine and without Morgan’s knowledge or consent, (V.
Compl. ¶ 27; Morgan Aff. ¶ 34, Ex. P; Singletary Dep. 217:9–25).
42. It is also undisputed that Singletary’s actions caused Alpine to suffer
substantial injury, including through the loss (and eventual cancellation) of the
Ardmore and Grubb Contracts, (Morgan Aff. ¶¶ 32, 40, Exs. N, R; Singletary Dep.
54:3–25; Index Singletary 2nd Aff. Ex. D, at 21), the loss of the Cates Creek
opportunity with Ardmore, (Morgan Aff. ¶¶ 22, 40, Ex. R; Singletary 2nd Aff. ¶ 43;
Singletary Dep. 108:14–25), and the loss of Alpine assets, including funds from
Alpine’s bank accounts and sums due on customer contracts later paid to Turn-Pro,
(Morgan Aff. ¶¶ 33, 41, 43, Ex. O; Singletary Dep. 105:9–106:2, 216:8–217:22, 219:1–
222:25).
43. Accordingly, should a jury conclude that Singletary received the Demand
Letter, the Court concludes that summary judgment is proper establishing
Singletary’s liability on Morgan’s claim for breach of fiduciary duty.
2. Morgan’s Constructive Fraud Claim
44. To establish constructive fraud, a plaintiff must allege facts and
circumstances “(1) which created the relation of trust and confidence, and (2) led up
to and surrounded the consummation of the transaction in which defendant is alleged
to have taken advantage of his position of trust to the hurt of plaintiff.” Head v. Gould
Killian CPA Grp., P.A., 371 N.C. 2, 9, 812 S.E.2d 831, 837 (2018) (quoting Rhodes v.
Jones, 232 N.C. 547, 549, 61 S.E.2d 725, 726 (1950)). Additionally, a plaintiff must allege that, through the defendant’s misconduct, the defendant sought to benefit
himself and the plaintiff was injured. Nelson v. Alliance Hosp. Mgmt., LLC, 2011
NCBC LEXIS 43, at *22 (N.C. Super. Ct. Nov. 22, 2011) (citation omitted); see also
Hauser v. Hauser, 252 N.C. App. 10, 16, 796 S.E.2d 391, 395 (2017) (“The primary
difference between pleading a claim for constructive fraud and one for breach of
fiduciary duty is the constructive fraud requirement that the defendant benefit
himself.” (quoting White v. Consol. Planning, Inc., 166 N.C. App. 283, 294, 603 S.E.2d
147, 156 (2004))).
45. As discussed above, Morgan has established Singletary’s breach of fiduciary
duty. To establish his claim for constructive fraud, Morgan must also show through
undisputed evidence that Singletary benefited himself through his misconduct.
Morgan more than meets his burden here because each of the listed actions
supporting breach (i.e., Singletary’s transfers of Alpine’s contracts and funds to his
wholly-owned entity Turn-Pro) directly benefited Singletary as sole owner of Turn-
Pro at the expense of Alpine. Viewing the record in the light most favorable to
Singletary, the Court concludes that, should a jury conclude that Singletary received
the Demand Letter, summary judgment should be entered establishing Singletary’s
liability for constructive fraud as a matter of law.
3. Morgan’s Tortious Interference with Contract Claim
46. To establish a claim for tortious interference with contract, a plaintiff must
prove:
(1) a valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person; (2) the defendant knows of the contract; (3) the defendant intentionally induces the third person not to perform the contract; (4) and in doing so acts without justification; (5) resulting in actual damage to the plaintiff.
Beverage Sys. of the Carolinas, LLC v. Associated Beverage Repair, LLC, 368 N.C.
693, 700, 784 S.E.2d 457, 462 (2016) (quoting United Labs., Inc v. Kuykendall, 322
N.C. 643, 661, 370 S.E.2d 375, 387 (1988)).
47. Morgan contends here that Singletary tortiously interfered with Alpine’s
Ardmore and Grubb Contracts as a matter of law. The Court agrees. It is undisputed
that those contracts were valid and binding, (Morgan Aff. ¶¶ 13–18, Exs. A–D;
Singletary 2nd Aff. ¶ 17; Index Singletary 2nd Aff. Ex. F), that Singletary knew of
them as Alpine’s member-manager, (V. Compl. ¶¶ 13, 26; Morgan Aff. ¶¶ 10, 32, 41,
Exs. I, K–N; Singletary 2nd Aff. ¶¶ 15, 17; Singletary Dep. 54:3–25, 77:20–23, 86:16–
24, 217:9–22, 219:1–222:25; Index Singletary 2nd Aff. Ex. F), that Singletary
intentionally induced Ardmore and Grubb not to perform the contracts with Alpine,
(Morgan Aff. ¶ 32, Exs. K–N; Singletary 2nd Aff. ¶ 32; Singletary Dep. 54:3–25), that
he did so to further his own interest at the expense of Alpine in violation of his legal
duties as a member-manager of Alpine, see, e.g., Childress v. Abeles, 240 N.C. 667,
675, 84 S.E.2d 176, 182 (1954) (Malice “denotes the intentional doing of the harmful
act without legal justification.”); Sellers v. Morton, 191 N.C. App. 75, 82, 661 S.E.2d
915, 921 (2008) (“A complainant must show that the defendant acted with malice and
for a reason not reasonably related to the protection of a legitimate business interest
of the defending party.”), and that Alpine suffered actual damage as a result, (V. Compl. ¶ 26; Morgan Aff. ¶¶ 32, 35, 41, 43–45, Exs. K–N; Singletary Dep. 54:3–25,
77:20–23, 86:16–24, 217:9–22, 219:1–222:25).
48. Viewing the record in the light most favorable to Singletary, the Court
concludes that, should a jury conclude that Singletary received the Demand Letter,
summary judgment is properly entered establishing Singletary’s liability on Morgan’s
claim for tortious interference with contract as a matter of law.
4. Morgan’s Tortious Interference with Prospective Economic Advantage Claim
49. “To state a claim for wrongful interference with prospective advantage, [a
plaintiff] must allege facts to show that the defendants acted without justification in
‘inducing a third party to refrain from entering into a contract with them which
contract would have ensued but for the interference.’ ” Islet Scis., Inc. v. Brighthaven
Ventures, LLC, 2017 NCBC LEXIS 17, at *23 (N.C. Super. Ct. Mar. 6, 2017) (quoting
Walker v. Sloan, 137 N.C. App. 387, 393, 529 S.E.2d 236, 242 (2000)). “Mere
expectation of a continuing business relationship is insufficient”; rather, “a plaintiff
must produce evidence that a contract would have resulted but for a defendant’s
malicious intervention.” Beverage Sys., 368 N.C. at 701, 784 S.E.2d at 463 (citing
Dalton v. Camp, 353 N.C. 647, 655, 548 S.E.2d 704, 710 (2001)).
50. The undisputed evidence shows that Ardmore directed Alpine to write a
contract for Ardmore’s Cates Creek property on June 1, 2016. (Morgan Aff. ¶¶ 22,
40, Ex. E.) The undisputed evidence further shows that Ardmore canceled the
Ardmore Contracts and ceased negotiating the Cates Creek contract just a month
later in July 2016 due to “the continuing confusion and problems with Alpine[,]” (Index Singletary 2nd Aff. Ex. D, at 21; see also Morgan Aff. ¶¶ 22, 40, Ex. R;
Singletary 2nd Aff. ¶ 43; Singletary Dep. 108:14–25), problems caused by Singletary’s
unauthorized and unilateral assignment of the Ardmore Contracts to Turn-Pro. As
a result, the undisputed evidence establishes that but for Singletary’s tortious
interference with Alpine’s Cates Creek contract negotiations, Alpine would have
successfully reached an agreement for that property with Ardmore.
51. Viewing the record in the light most favorable to Singletary, the Court
concludes that, should a jury conclude that Singletary received the Demand Letter,
summary judgment is properly entered establishing Singletary’s liability on Morgan’s
claim for tortious interference with prospective economic advantage as a matter of
law.
5. Morgan’s Claim for Actual/Compensatory Damages
52. Morgan seeks entry of judgment as to his actual/compensatory damages on
each of his affirmative claims for relief. Singletary acknowledged at his deposition
that Alpine’s future net profits on its Ardmore and Grubb Contracts, calculated over
five years, would total $439,546.95. He also acknowledged that Alpine would have
received annual revenue of $38,880.00 for the prospective Cates Creek contract, or
$194,400.00 over a five-year period. (Singletary Dep. 107:1–108:13, 113:1–114:13; see
also Morgan Aff. ¶¶ 22, 27; Pl.’s Mem. Law 12.) Morgan seeks judgment in these
total amounts, (Pl.’s Mem. Law 12), but without calculating the present value of these
income streams. Because Morgan is seeking to be paid today the full value of a net
income stream into the future, the Court concludes that judgment in the amount sought is not proper and that damages must be based on net present value after the
presentation of evidence and, if appropriate, expert testimony. Accordingly, the
Morgan Motion shall be denied to this extent.
53. Morgan also seeks damages of $4,987.29 for Singletary’s unauthorized
purchases and misuse of Alpine’s operating account. (Pl.’s Mem. Law 12.) Morgan’s
proffered evidence, however, consisting of numerous bank statements and debit card
and operating account transactions attached as Exhibits G and H to his Motion, does
not clearly identify which transactions he claims are unauthorized and why. The
Court thus denies the Morgan Motion as to these sums.
54. Finally, Morgan claims damages to Alpine of $2,950.00 for Singletary’s
unauthorized payments from Alpine to Turn-Pro. (Pl.’s Mem. Law 12.) It is
undisputed that Singletary transferred $2,950.00 via checks from Alpine’s operating
account to Turn-Pro on May 19 and 25, 2016 without Morgan’s knowledge or consent.
(Morgan Aff. ¶ 33, Ex. O; Singletary Dep. 216:8–217:22.) As such, the Court
concludes that, should a jury conclude that Singletary received the Demand Letter,
entry of judgment for Alpine in the amount of $2,950 is proper as a matter of law for
these payments.
6. Morgan’s Claim for Punitive Damages
55. Morgan also seeks entry of judgment as to punitive damages. In light of the
Court’s conclusions concerning actual/compensatory damages above, and given that
the Court concludes that a reasonable jury could, but is not required to, find that
Singletary has engaged in fraud, malice, or willful or wanton conduct sufficient to entitle Morgan and Alpine to punitive damages, the Court will deny Morgan’s motion
as to punitive damages and defer the issue of punitive damages to a jury at trial.
7. Alpine’s Counterclaims
56. Morgan also moves for summary judgment dismissing each of Alpine’s
counterclaims against him with prejudice. Like Morgan’s dissolution claim,
Singletary’s claim for judicial dissolution is moot and shall be dismissed. The Court
addresses Alpine’s other counterclaims in turn.
a. Breach of Contract
57. First, Alpine contends that Morgan breached Alpine’s operating agreement
by contacting Alpine customers and making statements to customers damaging to
Alpine. (Defs.’ Mot. Dismiss 26–28.) “The elements of a claim for breach of contract
are (1) existence of a valid contract and (2) breach of the terms of that contract.”
Brennan Station 1671, LP v. Borovsky, 821 S.E.2d 640, 645 (N.C. Ct. App. 2018)
(quoting Poor v. Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000)). Here, there
is no written operating agreement, but it is undisputed that the parties orally agreed
that Singletary and Morgan would be Alpine’s only members, that Singletary would
act as manager and manage Alpine’s day-to-day affairs, and that section 57D would
supply the operating agreement’s terms. (Morgan Aff. ¶¶ 6–7, 10); see also N.C.G.S.
§ 57D-1-03(23) (“[An] operating agreement may be in any form, including written,
oral, or implied, or any combination thereof.”).
58. The undisputed evidence requires dismissal of Alpine’s counterclaim.
Nothing in the parties’ oral agreement or in Chapter 57D prohibited Morgan from contacting Alpine’s customers, and the only evidence of Morgan’s communications
with customers does not support Alpine’s contention that such communications were
detrimental to Alpine. To the contrary, the undisputed evidence shows that Morgan’s
communications were consistent with the parties’ oral operating agreement and
intended to protect Alpine’s contracts from Singletary’s ultimately successful (and
improper) efforts to move those contracts from Alpine to Turn-Pro. As such, Alpine
has failed to offer any evidence to support its breach of contract counterclaim against
Morgan, and that claim must therefore be dismissed.
b. Section 75-1.1
59. Alpine next asserts an unfair and deceptive trade practices claim under
section 75-1.1 against Morgan for allegedly removing funds from Alpine’s checking
account, presenting false invoices to customers of Alpine, and improperly contacting
Alpine’s customers. (Defs.’ Mot. Dismiss 24–26.) N.C.G.S. § 75-1.1(a) makes plain,
however, that “[u]nfair methods of competition in or affecting commerce, and unfair
or deceptive acts or practices in or affecting commerce, are declared unlawful.”
(emphasis added). The Supreme Court of North Carolina has recognized that “any
unfair or deceptive practices . . . solely related to the internal operations of[ ] a
business will not give rise to a claim under the Act” because “ ‘[t]hey are not . . . “in
or affecting commerce[.]” ’ ” White v. Thompson, 364 N.C. 47, 52, 691 S.E.2d 676, 679
(2010) (quoting HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 594–95,
403 S.E.2d 483, 493 (1991)). 60. Alpine’s section 75-1.1 counterclaim reflects a purely internal dispute
between Alpine’s two members over the authority Singletary and Morgan had to act
on behalf of Alpine. As such, Morgan’s alleged conduct is not “in or affecting
commerce,” and Alpine’s section 75-1.1 claim must therefore be dismissed.
c. N.C.G.S. § 57D-4-05
61. Alpine also asserts a claim for violation of section 57D-4-05, (Defs.’ Mot.
Dismiss 29), which states: “No distribution may be made by an LLC if, after giving
effect to the distribution, either of the following would occur: (1) The LLC would not
be able to pay its debts as they become due in the ordinary course of business. (2) The
LLC’s total liabilities would exceed the value of the LLC’s assets.” N.C.G.S § 57D-4-
05(a). “If a distribution is made in violation of G.S. 57D-4-05, then each manager or
other company official who alone or with other company officials had the authority to
and did approve the distribution is personally liable to the LLC[.]” Id. § 57D-4-06(a).
Nevertheless, “a proceeding under this subsection is barred unless it is commenced
within two years after the distribution [at issue].” Id. (emphasis added).
62. It is undisputed that the allegedly improper distribution here occurred on
May 2, 2016, (Defs.’ Mot. Dismiss 29), and that Alpine’s answer and counterclaim
under section 57D-4-05 was first filed over two years later, on May 25, 2018, (ECF
No. 16). The counterclaim thus is time-barred and must be dismissed on this basis.
d. Tortious Interference with Contract
63. Alpine alleges that Morgan tortiously interfered with Alpine’s contracts by
inducing Alpine’s customers to terminate their contracts with Alpine. (Defs.’ Mot. Dismiss 30–31.) The Court has set forth in section IV.4.B above the elements of a
claim for tortious interference with contract under North Carolina law. Elements
three (that the defendant intentionally induced the third person not to perform the
contract) and four (that in so doing the defendant acted without justification) are of
interest here. See Beverage Sys., 368 N.C. at 700, 784 S.E.2d at 462.
64. Specifically, there is no evidence in the record that suggests that Morgan
sought to cause Alpine’s customers not to perform their contracts with Alpine. To the
contrary, it is undisputed that all of Morgan’s outreach to third parties was to induce
Alpine’s customers to perform their contracts with Alpine. Alpine has failed to proffer
evidence from which a jury could reasonably conclude that Morgan intentionally
induced a third person not to perform a contract with Alpine, requiring dismissal of
this counterclaim.
65. Moreover, there is no evidence that Morgan’s acts were anything other than
a “reasonable and bona fide attempt” to protect Alpine’s legitimate business interests,
and there is no evidence that Morgan acted through means that were unlawful, a
further, and independent, basis for dismissal. See, e.g., Peoples Sec. Life Ins. Co. v.
Hooks, 322 N.C. 216, 221, 367 S.E.2d 647, 650 (1988) (“[C]ompetition in business
constitutes justifiable interference in another’s business relations and is not
actionable so long as it is carried on in furtherance of one’s own interests and by
means that are lawful.”). e. N.C.G.S. § 14-458 – Computer Trespass
66. Alpine’s next claim for relief is for computer trespass under section 14-458
and its related provisions. This counterclaim is based on the contention that Morgan
changed Singletary’s password in May 2016 to block him from using the Alpine e-
mail account. (Defs.’ Mot. Dismiss 31–32.) N.C.G.S. § 14-458(a) provides that “it
shall be unlawful for any person to use a computer or computer network without
authority and with the intent to” disable, alter, or copy computer data. “[A] person is
‘without authority’ when . . . the person has no right or permission of the owner to
use a computer, or the person uses a computer in a manner exceeding the right or
permission[.]” Id. § 14-458(a)(6). A claim for violation of this statute must be brought
within one year of the alleged trespass. Id. § 1-539.2A(b); id. § 1-54.
67. Here, Alpine’s counterclaim was brought in May 2018, (ECF No. 16), at least
two years after the alleged statutory violation, and thus must be dismissed as time-
barred. Moreover, it is undisputed that Morgan was the administrator of the Alpine
domain and had associated authority to access all of Alpine’s e-mail accounts,
including Singletary’s. (Morgan Aff. ¶ 11.) Those undisputed facts establish that
Morgan’s alleged conduct was within his authority under the parties’ oral operating
agreement. As a result, Morgan’s conduct did not constitute a violation of section 14-
458 as a matter of law and, for this separate reason, Alpine’s computer trespass
counterclaim must be dismissed. f. 18 U.S.C. § 2510–22 – Electronic Communications Privacy Act
68. Alpine also alleges that Morgan violated the federal Electronic
Communications Privacy Act of 1986, 18 U.S.C. § 2510–22 (“ECPA”), by reviewing
Singletary’s e-mails after hacking into Singletary’s account. (Defs.’ Mot. Dismiss 25–
26, 32.) The ECPA provides “a civil remedy against any person who ‘intentionally
intercepts’ another person’s wire, oral, or electronic communications.” Abraham v.
Cty. of Greenville, 237 F.3d 386, 389 (4th Cir. 2001) (quoting 18 U.S.C. § 2511(1)(a)).
Under the ECPA, “[t]he term ‘intercept’ means the acquisition of such
communications through the use of any ‘electronic, mechanical, or other device[,]’ ”
id. (quoting 18 U.S.C. § 2510(4)), but does not apply to communications that are in
“electronic storage[,]” Steve Jackson Games, Inc. v. United States Secret Serv., 36
F.3d 457, 461–62 (5th Cir. 1994), including e-mails that have already been received,
NovelPoster v. Javitch Canfield Grp., 140 F. Supp. 3d 938, 952 (N.D. Cal. 2014); see
also United States v. Reyes, 922 F. Supp. 818, 836 (S.D.N.Y. 1996) (“Taken together,
the definitions thus imply a requirement that the acquisition of [electronic
communications] be simultaneous with the original transmission of the data.”).
69. Alpine contends here only that Morgan reviewed Singletary’s e-mails after
Singletary had received them, and there is no evidence that Morgan acquired any of
Singletary’s e-mails simultaneously with their original transmission. (Morgan Aff.
¶¶ 11, 36.) As a result, there is no evidence in the record from which a jury could
conclude that Morgan violated the ECPA, and this claim, too, must be dismissed as a
matter of law. See, e.g., NovelPoster, 140 F. Supp. 3d at 952 (“[R]eading emails that have already been received in an email account’s inbox does not constitute
‘interception’ under the statute.” (citation omitted)).
g. Punitive Damages and Costs and Attorneys’ Fees
70. Having concluded that each of Alpine’s counterclaims should be dismissed,
the Court further concludes that Alpine’s claim for punitive damages necessarily fails
and must likewise be dismissed.
71. Similarly, given the Court’s conclusions concerning the validity of Morgan’s
affirmative claims for relief, the Court concludes that Alpine’s claim for attorneys’
fees and costs under N.C.G.S. § 57D-8-05—which is based the contention that
Morgan’s action was “commenced or maintained without cause or for an improper
purpose” and included pleadings “not well grounded in fact or . . . not warranted by
existing law or a good-faith argument for the extension, modification, or reversal of
existing law”—is wholly without merit and should also be dismissed.
V.
CONCLUSION
72. WHEREFORE, based on the foregoing, the Court hereby ORDERS as
follows:
a. The Singletary Motion is DENIED.
b. The Morgan Motion seeking dismissal of each of Alpine’s counterclaims
is GRANTED, and those counterclaims are hereby dismissed with
prejudice. c. The Morgan Motion seeking judgment on his own claims is DENIED;
provided, however, that should a jury conclude that Singletary received
the Demand Letter, the Court concludes and rules as follows:
i. The Morgan Motion seeking to establish Singletary’s liability on
Morgan’s breach of fiduciary duty claim is GRANTED;
ii. The Morgan Motion seeking to establish Singletary’s liability on
Morgan’s constructive fraud claim is GRANTED;
iii. The Morgan Motion seeking to establish Singletary’s liability on
Morgan’s tortious interference with contract claim is GRANTED;
iv. The Morgan Motion seeking to establish Singletary’s liability on
Morgan’s tortious interference with prospective economic
advantage claim is GRANTED;
v. The Morgan Motion seeking to establish Singletary’s liability on
Morgan’s claim for judicial dissolution is DENIED as moot;
vi. The Morgan Motion seeking to establish Morgan’s actual/
compensatory damages on each of Singletary’s claims is
GRANTED in part, such that Morgan shall have and recover
from Singletary damages in the amount of $2,950.00 together
with post-judgment interest at the legal rate until the judgment
is satisfied, but is otherwise DENIED; and
vii. The Morgan Motion seeking to establish punitive damages as a
matter of law is DENIED. SO ORDERED, this the 15th day of January, 2020.
/s/ Louis A. Bledsoe, III Louis A. Bledsoe, III Chief Business Court Judge