Urquhart v. Trenkelbach

2017 NCBC 11

• Court: North Carolina Business Court
• Decided: February 8, 2017
• Docket: 15-CVS-3055
• Status: Published

Opinion

Urquhart v. Trenkelbach, 2017 NCBC 11.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF MECKLENBURG 15 CVS 3055

CHRISTOPHER J. URQUHART and ) INTERCON SUCCESSION, INC., ) ) Plaintiffs and ) Counterclaim ) Defendants, ) ) v. ) ORDER & OPINION ON DEFENDANTS’ ) MOTION TO DISMISS PURSUANT TO CURTIS L. TRENKELBACH, ) RULE 12(b)(6) individually; INTERCON BUILDING ) COMPANY, LLC; and INTERCON ) BUILDING CORPORATION OF ) NORTH CAROLINA, ) ) Defendants and ) Counterclaim Plaintiffs. ) )

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

Pursuant to Rule 12(b)(6) (“Motion”). After considering the Motion, the briefs, and

the arguments of counsel, the Court GRANTS IN PART AND DENIES IN PART the

Motion.

Hamilton Stephens Steele & Martin, PLLC, by Adam L. Horner and Laura G. Barringer, for Plaintiffs.

Johnston Allison & Hord, P.A., by Patrick E. Kelly and Michael J. Hoefling, for Defendants.

Gale, Chief Judge. I. FACTUAL BACKGROUND

2. The Court does not make findings of fact on a motion to dismiss, but

recites only the facts that are relevant to the Court’s determination of the Motion.

Those facts are accepted as true solely for purposes of the Motion, and all reasonable

inferences are construed in Plaintiffs’ favor.

3. On January 15, 2007, Plaintiff Christopher J. Urquhart (“Urquhart”)

began working for Defendant InterCon Building Corporation of North Carolina

(“IBC”), a construction company that builds commercial buildings. (Am. Compl. ¶ 14.)

Defendant Curtis L. Trenkelbach (“Trenkelbach”) is IBC’s sole owner and

shareholder. (Am. Compl. ¶ 13.) Urquhart and Trenkelbach entered into an oral

agreement that Urquhart would gradually buy out Trenkelbach’s ownership in IBC

(the “Succession Plan”).1 (Pls.’ Resp. Br. Opp’n to Defs.’ Mot. Dismiss Pls.’ Third,

Sixth, and Seventh through Thirteenth Claims 1.)

4. Urquhart and Trenkelbach formed Defendant InterCon Building

Company, LLC (“InterCon”), a North Carolina limited liability company, to facilitate

carrying out the Succession Plan. (Am. Compl. ¶ 16.) Urquhart also formed Plaintiff

InterCon Succession, Inc. (“IS”), a North Carolina corporation for which Urquhart is

the sole owner and shareholder. (Am. Compl. ¶¶ 17–18.)

1 Paragraph 15 of the Amended Complaint refers to the Succession Plan as an agreement

that Urquhart would gradually buy out Trenkelbach’s ownership interest in InterCon. (See Am. Compl. ¶ 15.) However, the Memorandum of Agreement and other documents refer to the Succession Plan as an agreement regarding ownership in IBC. (See Defs.’ Mot. Dismiss, Answer, Affirmative Defenses, Countercls., and Third-Party Compl. Ex. B (“Mem. Agreement”), at 1.) The agreement was that Urquhart’s or IS’s interest in InterCon would increase as IBC’s interest in InterCon decreased. 5. On January 1, 2010, Urquhart, Trenkelbach, IBC, and InterCon

executed InterCon’s Operating Agreement, as well as a Memorandum of Agreement

that summarizes the Succession Plan. (Am. Compl. ¶ 19.) Urquhart and Trenkelbach

each executed an employment agreement with InterCon. (Am. Compl. ¶ 19.)

Subsequent references to the Employment Agreement in this Order & Opinion refer

to Urquhart’s Employment Agreement.

6. The Operating Agreement identifies IBC, Urquhart (or Urquhart’s

Corporation),2 and Trenkelbach as InterCon’s three members, each of which was

required to make an initial capital contribution. (Defs.’ Mot. Dismiss, Answer,

Affirmative Defenses, Countercls., and Third-Party Compl. Ex. C (“Operating

Agreement”) § 5.1; Operating Agreement App. A ¶ 15.)

7. Urquhart and Trenkelbach were both InterCon employees and member–

managers. (Operating Agreement § 6.5; see also Am. Compl. ¶ 23.) Trenkelbach,

through IBC, has ultimate control of InterCon in that he decides “any dispute

between the parties over a company matter.” (Am. Compl. ¶ 29; see Operating

Agreement § 6.3(c).)

2 Urquhart’s corporation, IS, was not a member of InterCon at the time the Operating Agreement was executed. However, the parties anticipated that Urquhart would assign his membership interest to IS. Therefore, each time the Operating Agreement refers to Urquhart as a member, it states “Urquhart (or Urquhart’s Corporation).” (See Operating Agreement App. A ¶ 15; see, e.g., Operating Agreement §§ 7.1, 13.1–.3.) While there is nothing in the record that indicates if or when Urquhart assigned his ownership interest to IS, the Court assumes for purposes of this Motion that Urquhart did transfer his ownership interest to IS, that Defendants do not contend that this transfer triggered any obligation for Urquhart to sell his interest in InterCon to IBC, and that Urquhart remained a member of InterCon at all times during his employment with InterCon. 8. Section 6.6 of the Operating Agreement provides that Trenkelbach and

Urquhart can be removed from InterCon only “for cause,” which is defined to include

six specific acts, including termination of employment. (Operating Agreement

§ 6.6(a)(vi); see also Am. Compl. ¶ 25(f).)

9. The Operating Agreement also provides that IBC has an option to

purchase Urquhart’s or IS’s ownership interest in InterCon upon the occurrence of

any of three triggering events: (1) Urquhart is terminated for cause, as defined by his

Employment Agreement, (2) Urquhart is terminated for any reason other than for

cause (except death), or (3) Urquhart or IS transfers or attempts to transfer any

portion of their membership interest. (Operating Agreement § 13.1(a)–(c).) The

purchase price varies depending on whether Urquhart’s termination is for cause or

without cause. (See Operating Agreement § 13.3(a)–(b).)

10. Urquhart’s Employment Agreement specifies that his employment with

InterCon will terminate upon his (1) death, (2) resignation, (3) termination due to a

disability, or (4) termination for cause. (Defs.’ Mot. Dismiss, Answer, Affirmative

Defenses, Countercls., and Third-Party Compl. Ex. A (“Employment Agreement”)

¶ 14; see also Am. Compl. ¶ 32.) Urquhart’s Employment Agreement lists eleven

categories of events which allow him to be terminated for cause, including but not

limited to violation of InterCon’s policies, rules, and regulations, intentional

misconduct in connection with working for InterCon, misconduct outside of work that

harms InterCon or its reputation, and removal as a manager under section 6.6 of the Operating Agreement. (Employment Agreement ¶ 14(b)(vi), (ix)–(x); see also Am.

Compl. ¶ 33.)

11. The Memorandum of Agreement memorialized the Succession Plan.

(Mem. Agreement 1.) InterCon was created and used to facilitate Urquhart’s “over-

time succession” of Trenkelbach’s ownership of IBC by liquidating IBC’s ownership

interest in InterCon. (Mem. Agreement 1.) The Memorandum of Agreement depicts

how, over a nine- to ten-year period, IBC’s interest in InterCon would decrease, and

correspondingly, Urquhart’s or IS’s interest in InterCon would increase. (Mem.

Agreement 1; see Mem. Agreement Ex. A.)

12. From 2010 through 2014, Urquhart continued his employment with

InterCon, and continued as a co-manager–member with Trenkelbach. (Am. Compl.

¶ 34.) During that time, InterCon’s revenues grew by approximately 400%. (Am.

Compl. ¶ 34.)

13. On January 15, 2015, Urquhart was advised by letter that his

employment with InterCon was being terminated for cause because of a “loss of trust

and confidence and harsh behavior.” (Am. Compl. ¶ 48.) Trenkelbach, on behalf of

IBC, then attempted to exercise the purchase option, which he contends was triggered

by the termination, and offered to calculate and pay the purchase price using the

without-cause termination formula if Urquhart would sign a separation agreement.

(Am. Compl. ¶¶ 49–51.) Urquhart refused to sign the separation agreement and

refused Trenkelbach’s tender of that purchase price. Urquhart contends that he was

not properly terminated, either for cause or for any reason permitted by the Operating Agreement or the Employment Agreement, and that as a result, no

purchase-option trigger event occurred, and he remains an InterCon member. (Am.

Compl. ¶¶ 52, 56–58.) Defendants contend that Urquhart was terminated for cause,

is no longer an InterCon member, is obligated to sell his interest at a price determined

by the Operating Agreement buy-out formula for a for-cause termination, and has

only the rights in InterCon that existed on the date that his employment was

terminated.

II. PROCEDURAL HISTORY

14. Plaintiffs filed their original Complaint and a notice of designation on

February 13, 2015. The action was designated as a mandatory complex business case

on February 16, 2015, and assigned to the undersigned on February 17, 2015.

15. On February 19, 2015, Urquhart made a written demand to InterCon to

take action to address Trenkelbach’s alleged wrongs.

16. On May 29, 2015, Defendants moved to dismiss Plaintiffs’ tortious

interference with contract claim and unfair or deceptive trade practices claim.

17. On November 10, 2015, after obtaining leave of court, Plaintiffs filed an

Amended Complaint, asserting both individual claims by Urquhart and IS, as well as

derivative claims on behalf of InterCon. The various claims are in some instances

against only Trenkelbach, individually. The Amended Complaint includes the

following claims: (1) Urquhart’s claim for breach of contract against Trenkelbach and

InterCon; (2) Plaintiffs’ claim for breach of the implied covenant of good faith and fair

dealing against Trenkelbach and InterCon; (3) Plaintiffs’ claim for tortious interference with contract against Trenkelbach; (4) Plaintiffs’ claim for declaratory

judgment against InterCon and IBC; (5) Plaintiffs’ claim for unjust enrichment

against all Defendants; (6) Plaintiffs’ claim for unfair or deceptive trade practices

against all Defendants; (7) Urquhart’s demand for accounting, information, and pro

rata recovery as to InterCon (the “accounting claim”); (8) Urquhart’s claim against

Trenkelbach for constructive fraud, breach of fiduciary duty, breach of the duties of

good faith and fair dealing, and breach of loyalty, brought both individually by

Urquhart and derivatively on behalf of InterCon; (9) Urquhart’s claim for unjust

enrichment against Trenkelbach, brought both individually and derivatively; (10)

Urquhart’s claim for constructive trust against Trenkelbach and IBC, brought both

individually and derivatively; (11) Urquhart’s claim for conversion against

Trenkelbach and IBC, brought both individually and derivatively; (12) Urquhart’s

claim for embezzlement against Trenkelbach and IBC, brought both individually and

derivatively; and (13) Urquhart’s claim for punitive damages against Trenkelbach

and IBC, brought both individually and derivatively.

18. On January 11, 2016, Defendants filed the Motion, which addresses four

individual claims: (1) Plaintiffs’ tortious interference with contract claim, (2)

Plaintiffs’ unfair or deceptive trade practices claim, (3) Urquhart’s accounting claim,

and (4) Urquhart’s embezzlement claim. The Motion also seeks to dismiss all

derivative claims on the grounds that Urquhart is not an InterCon member with

standing to bring derivative claims. 19. On May 11, 2016, Defendants filed their Motion for Discovery Sanctions,

which will be addressed by a separate order.

20. On August 25, 2016, the Court heard argument on both pending

motions. On August 26, 2016, Urquhart voluntarily dismissed the individual and

derivative embezzlement claims without prejudice.

21. The Motion is ripe for determination.

III. LEGAL STANDARD

22. When ruling on a motion to dismiss pursuant to Rule 12(b)(6) of the

North Carolina Rules of Civil Procedure, the Court decides “whether, as a matter of

law, the allegations of the complaint, treated as true, are sufficient to state a claim

upon which relief may be granted under some legal theory.” Crouse v. Mineo, 189

N.C. App. 232, 237, 658 S.E.2d 33, 36 (2008) (quoting Harris v. NCNB Nat’l Bank of

N.C., 85 N.C. App. 669, 670, 355 S.E.2d 838, 840 (1987)). The Court must treat the

factual allegations in the complaint as true, but is not bound by any “allegations that

are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.”

Strickland v. Hedrick, 194 N.C. App. 1, 20, 669 S.E.2d 61, 73 (2008) (quoting Good

Hope Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274,

620 S.E.2d 873, 880 (2005)). The Court should dismiss the complaint if it determines,

based on the face of the complaint, “that no law supports plaintiff’s claim,” that there

are insufficient facts to establish plaintiff’s claim, or that “some fact disclosed in the

complaint necessarily defeats plaintiff’s claim.” Jackson v. Bumgardner, 318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986) (citing Oates v. JAG, Inc., 314 N.C. 276, 278, 333

S.E.2d 222, 224 (1985)).

23. The Court “may . . . consider documents which are the subject of a

plaintiff's complaint and to which the complaint specifically refers even though they

are presented by the defendant.” Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52,

60, 554 S.E.2d 840, 847 (2001). Here, in addition to considering the Amended

Complaint, the Court can consider the Operating Agreement, the Memorandum of

Agreement, and the Employment Agreement in resolving the Motion.

IV. ANALYSIS

A. Plaintiffs’ Unfair or Deceptive Trade Practices Claim Fails Because the Alleged Acts Were Not In or Affecting Commerce.

24. Plaintiffs contend that Defendants engaged in unfair or deceptive trade

practices (“UDTP”) by wrongfully terminating Urquhart, diverting InterCon funds

for Trenkelbach’s personal use, and frustrating Urquhart and Trenkelbach’s

Succession Plan. (Am. Compl. ¶ 100(a)–(g).) To prevail on a UDTP claim, Plaintiffs

must establish that “(1) [D]efendant[s] committed an unfair or deceptive act or

practice, (2) that the action in question was in or affecting commerce, [and] (3) that

said act proximately caused actual injury to plaintiff.” Canady v. Mann, 107 N.C.

App. 252, 260, 419 S.E.2d 597, 602 (1992). Defendants contend that Plaintiffs’ UDTP

claim must fail because the Amended Complaint does not sufficiently allege the first

and second elements.

25. “Plaintiff[s] must first establish that [D]efendants’ conduct was ‘in or

affecting commerce’ before the question of unfairness or deception arises.” HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 592, 403 S.E.2d 483, 492 (1991).

The Court determines whether the alleged deceptive acts are “in or affecting

commerce” as a matter of law. See Walker v. Fleetwood Homes of N.C., Inc., 362 N.C.

63, 71, 653 S.E.2d 393, 399 (2007).

26. For purposes of a UDTP claim, commerce is defined as “all business

activities.” N.C. Gen. Stat. § 75-1.1(b) (2015). “‘Business activities’ is a term which

connotes the manner in which businesses conduct their regular, day-to-day activities,

or affairs, such as the purchase and sale of goods, or whatever other activities the

business regularly engages in and for which it is organized.” HAJMM Co., 328 N.C.

at 594, 403 S.E.2d at 493. “Although this statutory definition of commerce is

expansive, [section 75-1.1] is not intended to apply to all wrongs in a business

setting.” Id. at 593, 403 S.E.2d at 492. The analysis used to determine whether

alleged acts are “in or affecting commerce” focuses on whether the conduct involves

either “(1) interactions between businesses, [or] (2) interactions between businesses

and consumers.” White v. Thompson, 364 N.C. 47, 52, 691 S.E.2d 676, 679 (2010).

Acts are not “in or affecting commerce” if they are restricted to internal corporate

matters. See id.

27. The North Carolina Court of Appeals recently construed the two North

Carolina Supreme Court opinions that have addressed whether disputes between an

employer and employee may constitute a UDTP claim. See Alexander v. Alexander,

___ N.C. App. ___, 792 S.E.2d 901, 904–06 (2016) (discussing White, 364 N.C. at 49–

54, 691 S.E.2d at 677–80 and Sara Lee Corp. v. Carter, 351 N.C. 27, 29, 519 S.E.2d 308, 309 (1999)). White v. Thompson is often cited in cases where the employer claims

that an employee’s actions are not governed by section 75-1.1 because “unfair or

deceptive conduct contained solely within a single business is not covered by [section

75-1.1].” 364 N.C. at 53, 691 S.E.2d at 680. However, White does not draw a bright-

line rule that excludes claims from section 75-1.1 solely because they arise from an

employer–employee relationship. Id. As the Court of Appeals noted in Alexander, an

employee may be liable under section 75-1.1 if the employee’s alleged deceptive acts

“involve ‘outside businesses,’ ‘distinct corporate entities,’ or the interruption of a

‘commercial relationship’ between two market participants.” Alexander, 792 S.E.2d

at 906 (discussing Sara Lee Corp., 351 N.C. at 29, 519 S.E.2d at 309 and Songwooyarn

Trading Co. v. Sox Eleven, Inc., 213 N.C. App. 49, 714 S.E.2d 162 (2011)).

28. Sara Lee Corp. v. Carter is the leading case recognizing that a UDTP

claim can arise from an employment relationship. 351 N.C. at 34, 519 S.E.2d at 312.

In Sara Lee, the North Carolina Supreme Court held that the employee’s fraudulent

actions were in or affecting commerce because the employee was selling products to

his employer from his separately owned business, which constituted typical “buyer-

seller relations in a business setting” between distinct corporate entities. 351 N.C.

at 33, 519 S.E.2d at 312. In contrast, in White, the Supreme Court held that the

employee’s alleged deceptive actions were not “in or affecting commerce” because the

employee had “deceptively interacted only with his partners,” meaning the “conduct

occurred completely within the . . . partnership.” 364 N.C. at 54, 691 S.E.2d at 680. 29. Contrasting White and Sara Lee, the Court of Appeals in Alexander held

that a defendant’s unlawful acts were not in or affecting commerce where the

defendant used company funds to pay for his own personal expenses, because the

payments that he made to himself were “more properly classified as the

misappropriation of corporate funds within a single entity rather than commercial

transactions between separate market participants ‘in or affecting commerce.’”

Alexander, 792 S.E.2d at 905.

30. The Court concludes that Defendants’ alleged acts, which form the basis

for Plaintiffs’ UDTP claim, are more analogous to the actions in White and Alexander

and were not in or affecting commerce. Urquhart’s termination involved solely

internal conduct that occurred within InterCon. Likewise, even if Trenkelbach

wrongfully diverted InterCon funds, that act was not in or affecting commerce,

because the alleged activity was confined to acts of an owner and one single entity.

31. Finally, even if Defendants prevented the completion of the Succession

Plan, that act was not in or affecting commerce because the Succession Plan is an

internal agreement between managing members of InterCon, and violations of that

agreement, if any, occurred completely within the internal affairs of the corporation.

The Court concludes that Plaintiffs mischaracterize the facts when they contend that

the Succession Plan must be considered a sale of a company in commerce because the

relationship between Urquhart and Trenkelbach was no more than “a fictitious

relationship that would not exist but for plaintiff and defendants’ buyer-seller

relationship.” Gress v. Rowboat Co., 190 N.C. App. 773, 777, 661 S.E.2d 278, 282 (2008) (holding that the presumption against UDTP claims between employers and

employees does not apply when the employer–employee relationship was formed after

the parties entered into a written purchase agreement and solely for the purpose of

the plaintiff–buyer observing the company’s operations).

32. In sum, while Plaintiffs may ultimately succeed on their other claims,

they have not sufficiently stated a UDTP claim as a matter of law because, as alleged,

the unfair or deceptive acts were not in or affecting commerce.

B. Plaintiffs’ Tortious Interference With Contract Claim Must Be Dismissed Because the Amended Complaint Does Not Provide a Basis for Finding that Trenkelbach Acted With Malice or Without Justification.

33. The elements of a claim for tortious interference with contract are

(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 plaintiff.

Privette v. Univ. of N.C. at Chapel Hill, 96 N.C. App. 124, 134, 385 S.E.2d 185, 190

(1989) (quoting United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375,

387 (1988)).

34. The Court notes that both Trenkelbach and Urquhart are parties to the

Operating Agreement and the Memorandum of Agreement. Therefore, Plaintiffs

cannot maintain a tortious interference with contract claim against Trenkelbach for

either of those contracts, because a person cannot interfere with his own contract.

See, e.g., Wagoner v. Elkin City Schs.’ Bd. of Educ., 113 N.C. App. 579, 587, 440

S.E.2d 119, 124 (1994) (explaining that the plaintiff could not maintain an action against two of the defendants for tortious interference with contract because the

defendants were parties to the contract (first citing Smith v. Ford Motor Co., 289 N.C.

71, 87, 221 S.E.2d 282, 292 (1976); then citing Elmore v. Atl. Coast Line R.R. Co., 191

N.C. 182, 187, 131 S.E. 633, 636 (1926))).

35. The Amended Complaint also fails to state a tortious interference claim

based on the Employment Contract because it fails to demonstrate that Trenkelbach

acted without justification. A party acts “without justification” when he acts with

malice and his actions are “not reasonably related to the protection of a legitimate

business interest.” Privette, 96 N.C. App. at 134, 385 S.E.2d at 190 (quoting Smith,

289 N.C. at 94, 221 S.E.2d at 292). The pleading standards for a tortious interference

with contract claim are strict. To sufficiently allege that a party acted without

justification, the complaint must provide “a factual basis to support the claim of

malice.” Pinewood Homes, Inc. v. Harris, 184 N.C. App. 597, 605, 646 S.E.2d 826,

833 (2007). A general allegation of malice is insufficient. See id. “A motion under

Rule 12(b)(6) should be granted when the complaint reveals that the interference was

justified or privileged.” Peoples Sec. Life Ins. Co. v. Hooks, 322 N.C. 216, 220, 367

S.E.2d 647, 650 (1988). “[T]he complaint must admit of no motive for interference

other than malice.” Filmar Racing, Inc. v. Stewart, 141 N.C. App. 668, 674, 541

S.E.2d 733, 738 (2001); see also, e.g., Bochkis v. Med. Justice Servs., Inc., No. 16 CVS

6434, 2016 NCBC LEXIS 90, at *13 (N.C. Super. Ct. Nov. 23, 2016) (dismissing the

plaintiff’s tortious interference claim where the complaint demonstrated that defendant’s interference was justified because the defendant was seeking to protect

its trade secrets).

36. In Privette v. University of North Carolina at Chapel Hill, the plaintiff

made numerous allegations that the defendants, who were directors at the university

lab for which plaintiff worked, “began a pattern of har[]assment against [him],”

encouraged other employees “to make false accusations” against him, and “conspired

to terminate [his] employment with the University.” 96 N.C. App. at 127, 385 S.E.2d

at 187. The plaintiff also alleged that the defendants “conspired to make [plaintiff’s]

work area appear to be in much worse condition than the other work areas,” and then

informed him “that because he had failed to properly clean a ‘surgery table’ he ‘would

be terminated.’” Id. The court explained that the complaint also alleged that the

defendants were directors of the lab and that those allegations “show[ed] that both

[defendants] had an interest in [e]nsuring proper work procedures at the Center and

as such, had a legitimate professional interest in the plaintiff’s performance of his

duties.” Id. at 134, 385 S.E.2d at 191. The Court of Appeals then held that the

tortious interference claim should be dismissed because the “complaint on its face

admits that [the defendants] had a proper motive for their actions.” Id.

37. Here, the Amended Complaint alleges the following:

 “Trenkelbach used improper means or methods without

justification to interfere with the Operating Agreement. . . .” (Am.

Compl. ¶ 86.)  Trenkelbach interfered with Urquhart’s contracts so that he could

“regain[] full ownership of [InterCon]” because InterCon “has

nearly quadrupled its revenues in the past two years alone.” (Am.

Compl. ¶ 60.)

 Trenkelbach is a manager–member of InterCon and “any dispute

between the parties over a company matter shall be decided by

Trenkelbach.” (Am. Compl. ¶ 29; see also Am. Compl. ¶¶ 20, 23.)

 Urquhart was provided with a letter “explaining that the reason

for his termination ‘with cause’ was a loss of trust and confidence

and harsh behavior.” (Am. Compl. ¶ 48.)

38. These allegations may ultimately afford Plaintiffs some recovery, but

they are not sufficient to demonstrate the necessary malice for a tortious interference

with contract claim. Similar to Privette, the Amended Complaint contains

allegations that support an inference that Trenkelbach acted with a legitimate

business interest when he terminated Urquhart, because he took action to support

his own interest in, and management responsibility for, InterCon.

39. In sum, while Plaintiffs may ultimately prove that Urquhart’s

termination lacked a proper basis, Plaintiffs’ claims are not actionable through a

tortious interference with contract claim, which would require Plaintiffs to

demonstrate that Trenkelbach had no business motive for terminating Urquhart

other than malice. See Filmar Racing, Inc., 141 N.C. App. at 674, 541 S.E.2d at 738. 40. Having found the Amended Complaint deficient, the Court need not

address Defendants’ contention that Trenkelbach is a non-outsider entitled to

qualified immunity from any tortious-interference claim.

C. Urquhart Sufficiently Alleged Standing to Assert the Derivative Claims and Seek an Accounting.

41. Defendants’ attack on the derivative claims presented in the Amended

Complaint is limited to the contention that Urquhart has no standing to bring

derivative claims because only a member of InterCon can bring a derivate claim.

42. N.C. Gen. Stat. § 57D-8-01 provides that “a member may bring a

derivative action” if “the member was a member of the LLC at the time of the act or

omission for which the proceeding is brought” and other prerequisites have been met,

such as a written demand. N.C. Gen. Stat. § 57D-8-01(a)(1) (2015) (emphasis added).

This provision has been construed to require that the derivative plaintiff be a member

both at the time of the act and at the time the suit is filed. See Alford v. Shaw, 327

N.C. 526, 534, 398 S.E.2d 445, 449 (1990) (explaining that a derivative plaintiff who

attempts to sue a corporation must have been a shareholder at the time the

underlying act occurred and at the time the complaint was filed); Russell M.

Robinson, II, Robinson on North Carolina Corporation Law § 34.04[5], at 34-27 (7th

ed. 2016) (“A derivative action on behalf of an LLC will be governed by essentially the

same rules that apply to a derivative action on behalf of a corporation.”).

43. The parties dispute whether Urquhart’s employment was validly

terminated, leading to IBC’s proper exercise of its purchase option and Urquhart’s

loss of membership in InterCon. Accordingly, the determination whether Urquhart has standing to bring derivative claims must await resolution of the disputed

termination issue.

44. Likewise, Urquhart’s accounting claim must be resolved through

subsequent proceedings. Defendants’ challenge to Urquhart’s accounting claim rests

solely on the issue whether Urquhart is a member of InterCon. Therefore, the Court’s

ruling is limited to that issue and does not further address the question whether a

member of an LLC, like a partner in a general partnership, may bring an accounting

claim. Urquhart’s claim for a pro rata recovery is alleged as part of his accounting

claim and depends upon his status as a member of InterCon, thus the Court does not

address that claim at this time.

V. CONCLUSION

45. Based on the reasons explained above, the Court holds as follows:

1) The Motion is GRANTED as to Plaintiffs’ claim of unfair or

deceptive trade practices, and that claim is DISMISSED WITH

PREJUDICE.

2) The Motion is GRANTED as to Plaintiffs’ claim of tortious

interference with contract, and that claim is DISMISSED WITH

3) The Motion is DENIED as to Urquhart’s accounting claim and the

derivative claims. IT IS SO ORDERED, this the 8th day of February, 2017.

/s/ James L. Gale James L. Gale Chief Business Court Judge