Nc Bioremediation, LLC v. Sea Winds, LLC

2015 NCBC 94
CourtNorth Carolina Business Court
DecidedOctober 15, 2015
Docket15-CVS-107
StatusPublished

This text of 2015 NCBC 94 (Nc Bioremediation, LLC v. Sea Winds, LLC) 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
Nc Bioremediation, LLC v. Sea Winds, LLC, 2015 NCBC 94 (N.C. Super. Ct. 2015).

Opinion

NC Bioremediation, LLC v. Sea Winds, LLC, 2015 NCBC 94.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF DARE 15 CVS 107

NC BIOREMEDIATION, LLC, ) Plaintiff, ) ) v. ) ) SEA WINDS, LLC; SEA WINDS 2, LLC; ) ORDER ON MOTION FOR SEA WINDS 3, LLC; SEA WINDS 4, LLC; ) RULE 11 SANCTIONS SEA WINDS 5, LLC; SEA WINDS 6, LLC; ) SEA WINDS 7, LLC; SEA WINDS 8, LLC; ) RANDY M. SAUNDERS; FREDERICK D. ) SUTER; RACHEL N. POWELL, and ) MARGRET P. BLAKELY, ) Defendants. )

THIS MATTER comes before the Court on Defendants Sea Winds, LLC; Sea Winds 2,

LLC; Sea Winds 3, LLC; Sea Winds 4, LLC; Sea Winds 5, LLC; Sea Winds 6, LLC; Sea Winds

7, LLC; Sea Winds 8, LLC; Randy M. Saunders; Frederick D. Suter; Rachel N. Powell; and

Margret P. Blakely's ("Defendants") Motion for Rule 11 Sanctions ("Motion for Sanctions").

On August 7, 2015, the Court held a hearing on the Motion for Sanctions.

THE COURT, having considered the Motion for Sanctions, briefs in support of and

opposition to the Motion for Sanctions, the arguments of counsel, and other appropriate

matters of record, FINDS and CONCLUDES, solely for the purpose of deciding the Motion

for Sanctions, as follows.

PROCEDURAL BACKGROUND

1. On February 25, 2015, Plaintiff filed its Complaint in this matter on behalf of

NC Bioremediation, LLC "by and through its Member-Manager John A. Mauney."1 The

Complaint asserts claims for Accounting of Profits, Civil Conspiracy, Money Owed, Breach of

Fiduciary Duty, Conversion, Constructive Fraud, and Unfair and Deceptive Trade Practices

1 Compl., introductory paragraph. in violation of N.C. Gen. Stat. § 75-1.1 (hereinafter, references to the General Statutes will

be to "G.S."). The Complaint was signed by attorneys Brice M. Bratcher ("Bratcher") and J.

Denton Adams ("Adams"), and is verified by John A. Mauney ("Mauney") as "corporate

manager of NC Bioremediation, LLC."

2. In the Complaint, Plaintiff alleges that it entered into a business relationship

with Defendants Randy M. Saunders ("Saunders"), Frederick D. Suter ("Suter"), Rachel N.

Powell ("Powell"), and Margret P. Blakely ("Blakely") (collectively, "Individual Defendants")

to purchase a hotel and timeshare in Dare County, North Carolina. This business venture

was incorporated as Sea Winds, LLC ("Sea Winds"), with Plaintiff, Saunders, Suter, Powell

and Blakely each holding membership interests in the LLC. In the course of its operation,

Sea Winds acquired title to additional lots in Dare County. These lots were transferred to the

numbered Sea Winds entities named in this action.2 Plaintiff alleges that a number of these

properties were sold and that Sea Winds received proceeds in excess of $7,000,000.00 from

these sales. Sea Winds has made distributions to Saunders, Suter, Powell, and Blakely, on

account of their membership interest in Sea Winds, but has made no distribution to Plaintiff.

In this action, Plaintiff seeks to recover the distributions it contends were improperly

withheld by Sea Winds and additional damages arising out of the conduct of Defendants.

3. On June 10, 2015, Defendants filed the Motion for Sanctions pursuant to Rule

11 of the North Carolina Rules of Civil Procedure ("Rule(s)"). In the Motion for Sanctions,

Defendants contend that:

John A. Mauney, by representing himself to be corporate manager and a member of Plaintiff NC Bio, is engaging in a fraud upon the Court, and by seeking monetary compensation to which he is not entitled, is the true party- in-interest as to this Complaint and is aware that the allegations contained therein are not well grounded in fact, that claims are not warranted by law, and has engaged counsel to file the complaint herein for the improper purpose

2 The Complaint does not allege whether each of the members of Sea Winds were also members of the

numbered Sea Winds entities. of harassing the Defendants and subjecting them to the costs of litigation in an effort to obtain funds to which he has no rightful claim.3

Defendants also contend that Bratcher and Adams "should be sanctioned . . . for failing to

take the minimal steps necessary to confirm the factual representations of John A. Mauney

before signing off on the complaint after receiving actual notice that those representations

were false."4 Defendants seek dismissal of the lawsuit and an order requiring Mauney and

Plaintiff's counsel, Bratcher and Adams, to pay Defendants' reasonable attorneys' fees.

FACTS

4. In support of and opposition to the Motion for Sanctions, the parties have

submitted a number of affidavits and other evidence. The record evidence tends to show the

following facts.5

5. Mauney alleges that in March of 2001, he and James L. Overton ("Overton")

"agreed to form NC Bioremediation."6 NC Bioremediation, LLC's Articles of Incorporation

were filed with the North Carolina Secretary of State ("Secretary of State") on March 19,

2001, and were signed by Mauney as "Organizer."7 Several annual reports filed on behalf of

NC Bioremediation, LLC from 2002 through 2009 list Mauney as the registered agent for the

LLC, but list Overton as the sole member and manager.8 None of the reports filed with the

Secretary of State prior to early 2015 list Mauney as a member of NC Bioremediation, LLC.

6. Mauney was a licensed North Carolina attorney at the time that NC

Bioremediation was formed. 9 Mauney claims that "Overton was identified as the member of

3 Mot. Sanctions ¶ 10. 4 Id. ¶ 22. 5 The Court recites these facts for purposes of this Motion for Sanctions only. 6 Mauney Aff. ¶ 3. 7 Mot. Sanctions Ex. 5. 8 Id. Ex. 6. 9 On July 15, 2013, Mauney was disbarred by the North Carolina State Bar for a number of violations

of the Rules of Professional Conduct. In the Order of Discipline, the Disciplinary Hearing Commission NC Bioremediation, LLC because I was acting as the attorney for the Sea Winds entities in

a transactional nature."10 Mauney apparently wished to sidestep his ethical obligations under

the Rules of Professional Conduct by representing the Sea Winds members while holding an

undisclosed financial interest in NC Bioremediation.11 Nevertheless, Mauney alleges that

he "held an option to exercise [an] ownership interest in NC Bioremediation."12 Mauney

contends that he exercised the option to acquire an ownership interest in NC Bioremediation

"in writing to Mr. Overton in 2008."13 Plaintiff's counsel admit that they do not have a copy

of the alleged written exercise of this option, or any other documentary evidence stating that

Mauney in fact owns a membership interest in NC Bioremediation. On February 28, 2013,

Plaintiff was administratively dissolved by the Secretary of State for failing to file annual

reports.

7. On August 28, 2014, Bratcher sent a letter to Saunders stating that Bratcher

had "been retained by NC Bioremediation" regarding the payments due to Plaintiff by Sea

Winds for the sales of various properties.14 Defendants contend that Saunders replied to

Bratcher's letter and advised him, inter alia, that it there was no proof Mauney had a

membership interest in NC Bioremediation, that as an alleged 50% owner Mauney would not

have authority to file a lawsuit on Plaintiff's behalf, that Overton had stated in emails that

Mauney was not a 50% owner of NC Bioremediation, and that Mauney had acted as the

found that Mauney, on multiple occasions, "made demonstrably false statements under oath" at a deposition.

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Bluebook (online)
2015 NCBC 94, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nc-bioremediation-llc-v-sea-winds-llc-ncbizct-2015.