Wirth v. Sunpath, LLC, 2017 NCBC 82.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 17 CVS 517
PETER WIRTH, Individually and as Owner of SUCCESSIONS, LLC,
Plaintiff,
v. ORDER AND OPINION ON DEFENDANTS’ MOTIONS TO SUNPATH, LLC; ALONZO A. DISMISS MORROW, II; TRACI SCOTT MORROW; and LATRICE MIGNON HOGUE,
Defendants.
1. THIS MATTER is before the Court on Defendants’ Motion to Dismiss
Pursuant to Rule 12(b)(1) (the “Rule 12(b)(1) Motion”) and Defendants’ Motion to
Dismiss Pursuant to Rule 12(b)(6) (the “Rule 12(b)(6) Motion”) (collectively, the
“Motions”) filed on April 3, 2017. Having considered the Motions, the briefs, and the
arguments of counsel at a hearing on the Motions, the Court GRANTS the Rule
12(b)(1) Motion, and DENIES the Rule 12(b)(6) Motion as untimely.
Newkirk Law Office, by Robert B. Newkirk, III, for Plaintiff.
Tuggle Duggins, P.A., by Charles K. Blackmon, Brandy L. Mills, and Benjamin P. Hintze, for Defendants.
Robinson, Judge.
I. PROCEDURAL HISTORY
2. The Court sets forth here only those portions of the procedural history
relevant to its determination of the Motions. 3. Plaintiff Peter Wirth (“Plaintiff” or “Wirth”) initiated the current action on
January 6, 2017 by filing a Complaint and a Motion to Enforce Arbitration Agreement
(the “Complaint”) against Sunpath, LLC (“Sunpath”) and Alonzo A. Morrow, II, Traci
Scott Morrow, and Latrice Mignon Hogue (collectively, the “Individual Defendants”).
(ECF No. 1.)
4. This case was designated as a mandatory complex business case by order
of the Chief Justice of the Supreme Court of North Carolina dated March 9, 2017,
(ECF No. 6), and assigned to the undersigned by order of Chief Business Court Judge
James L. Gale dated March 10, 2017, (ECF No. 7).
5. On March 14, 2017, Defendants filed their Answer. (ECF No. 8.)
6. On April 3, 2017, Defendants filed the Motions. (ECF Nos. 12, 15.)
7. The Motions have been fully briefed, and the Court held a hearing on the
Motions on June 6, 2017. The Motions are now ripe for resolution.
II. FACTUAL BACKGROUND
8. The Court does not make findings of fact on the Motions, but only recites
those facts that are relevant and necessary to the Court’s determination of the
Motions.
A. The Parties
9. Successions, LLC (“Successions”) was a certified critical access behavioral
health agency (“CABHA”) engaged in providing behavioral health treatment services
in Mecklenburg County, North Carolina. (ECF No. 1 at ¶ 17.) Wirth was the sole
owner of Successions until he sold his membership interest on July 23, 2012. (ECF No. 1 at ¶ 3; Defs.’ Br. Supp. Mot. Dismiss Rule 12(b)(1) Ex. B, ECF No. 14.)
Successions was administratively dissolved by the North Carolina Secretary of State
in 2015. (ECF No. 1 at ¶ 4.)
10. Sunpath is a limited liability company engaged in providing behavioral
health treatment services in Gaston County, North Carolina. (ECF No. 1 at ¶¶ 6,
18.) The Individual Defendants are former members of Sunpath. (See ECF No. 1 at
¶ 37.)
B. Successions and Sunpath Execute a Letter of Intent to Merge
11. On January 9, 2012, Successions and Sunpath executed a Letter of Intent
(“LOI”) contemplating that the two companies would “merge all of the tangible
properties and assets of each party relating to and necessary to run the businesses of
each.” (Compl. Ex. A at ¶¶ 2.1−2.2, ECF No. 18.)
12. The LOI set a closing date of January 9, 2012, “or at a time convenient to
all parties.” (ECF No. 18 at Ex. A, ¶ 2.2.) The parties contemplated completion of
the merger by April 30, 2012. (ECF No. 18 at Ex. A, ¶ 2.3.)
13. Pursuant to the LOI, the parties intended “to move all consumers who have
consented to such a transfer to the care of the surviving entity, which is expected to
be Sunpath, LLC or a successor[.]” (ECF No. 18 at Ex. A, ¶ 2.4.) Additionally,
“Successions or its successor” would be entitled to 40% of Sunpath’s or the new
entity’s net profits. (ECF No. 18 at Ex. A, ¶ 2.4(b).)
14. The LOI further provided that the parties were to “execute an Operating
Agreement for the new entity or execute documents to amend the Operating Agreement for the surviving entity to reflect the distribution plan outlined herein[.]”
(ECF No. 18 at Ex. A, ¶ 2.4(f).)
15. The LOI additionally states:
Successors. This Agreement inures to the benefit of and shall be binding on each of the parties hereto or any of them, their respective representatives and successors; provided however, this Agreement and the rights and obligations hereunder shall not be assignable by any Party without written consent of all Parties. Which [sic] consent will not be unreasonably withheld.
(ECF No. 18 at Ex. A, ¶ 11.5.)
16. The LOI was signed on behalf of Successions by Wirth and on behalf of
Sunpath by Defendant Latrice Mignon Hogue. (ECF No. 18 at Ex. A, 4.)
17. Plaintiff alleges that by March 2012, Successions completed the transfer of
all of its consumers to Sunpath. (ECF No. 1 at ¶ 22.) In the affidavit filed by Plaintiff,
Wirth testifies that he “believe[s] the client transfer was completed by April 30, 2012.”
(Br. Opp’n Defs.’ 12(b)(1) Mot. Ex. A, at ¶ 4, ECF No. 25.)
C. Plaintiff Sells His Membership Interest in Successions
18. On July 23, 2012, Wirth entered into a Membership Interest Purchase
Agreement pursuant to which Wirth sold his interest in Successions to two
individuals who are not parties to this action in exchange for $125,000. (ECF No. 1
at ¶ 23; ECF No. 14 at Ex. B, ¶ 1.2.) Pursuant to the agreement, the closing of this
transaction occurred on the same day as the execution of the agreement—July 23,
2012. (ECF No. 14 at Ex. B, 6–7.)
19. The Membership Interest Purchase Agreement stated:
At the Closing, Buyers will be added as Members of [Successions] with a 100% Membership Interest. Seller shall remain as a Manager of [Successions]. Ninety (90) days after the Closing, Seller shall execute an amendment to the Operating Agreement removing himself as a Manager of [Successions] after the Closing date. Buyers shall receive all profits from Company Operations, which will be reflected on all tax filings for 2012.
(ECF No. 14 at Ex. B, ¶ 1.3.)
D. Sunpath Terminates the LOI and Plaintiff Files Suit
20. On February 24, 2013, Sunpath’s prior counsel informed Successions’
counsel by mail that Sunpath was terminating the LOI, alleging that Successions
failed to fulfill its contractual obligations. (ECF No. 18 at Ex. B.)
21. Plaintiff initiated an action against Defendants on June 2, 2014 by filing a
complaint (the “2014 Complaint”) in Mecklenburg County, North Carolina, Civil
Action Number 14 CVS 10182. (ECF No. 1 at ¶ 13.)
22. On January 8, 2016, Plaintiff voluntarily dismissed the 2014 Complaint
pursuant to Rule 41(a) of the North Carolina Rules of Civil Procedure (“Rule(s)”).
(ECF No. 1 at ¶ 14.)
23. Plaintiff filed the instant action on January 6, 2017, asserting claims
individually and derivatively on behalf of Successions for breach of contract,
misrepresentation, fraudulent transfer of assets, civil conspiracy, unfair and
deceptive trade practices (“UDTP”), and enforceable arbitration. (ECF No. 1 at 5–
10.)
III. RULE 12(b)(6) MOTION
A. Legal Standard
24. Rule 12(b) of the North Carolina Rules of Civil Procedure expressly provides that a Rule 12(b)(6) motion “shall be made before pleading if a further pleading is
permitted.” N.C. Gen. Stat. § 1A-1, Rule 12(b). This Court previously held “a Rule
12(b) motion to dismiss for failure to state a claim must be filed prior to an answer[,]”
regardless of whether the answer asserts a motion to dismiss for failure to state a
claim. New Friendship Used Clothing Collection, LLC v. Katz, 2017 NCBC LEXIS
72, at *24 (N.C. Super. Ct. Aug. 18, 2017). There, defendant filed an answer asserting
a defense for failure to state a claim, and then filed a separate Rule 12(b)(6) motion
and brief three days later. Id. Because the motion and brief were filed after the
answer, this Court held that the motion was untimely. Id.
25. Additionally, Rule 7.2 of the General Rules of Practice and Procedure for
the North Carolina Business Court (“BCR”) provides that all motions “must be
accompanied by a brief” and “must be set out in a separate document.” BCR 7.2.
Where a motion is not accompanied by a required brief, the Court may summarily
deny the motion. Id.
26. However, a failure to file a Rule 12(b) motion for failure to state a claim
before filing a responsive pleading does not waive the defense, but rather the party
may raise the defense pursuant to Rule 12(h)(2). New Friendship Used Clothing
Collection, LLC, 2017 NCBC LEXIS 72, at *17. Rule 12(h)(2) provides that such a
defense, when not raised prior to filing an answer, “may be made in any pleading
permitted or ordered under Rule 7(a), or by motion for judgment on the pleadings, or
at the trial on the merits.” N.C. Gen. Stat. § 1A-1, Rule 12(h)(2). In recently
interpreting North Carolina’s Rule 12(b), this Court looked to Fourth Circuit and North Carolina federal district court decisions holding that, under the Federal Rules
of Civil Procedure, an untimely Rule 12(b)(6) motion may be construed as a Rule 12(c)
motion for judgment on the pleadings. New Friendship Used Clothing Collection,
LLC, 2017 NCBC LEXIS 72, at *21–22. This Court concluded that “a post-answer
Rule 12(b) motion to dismiss for failure to state a claim may, if appropriate, be
considered as a Rule 12(c) motion for judgment on the pleadings.” Id. at *24.
B. Timeliness of Defendants’ Rule 12(b)(6) Motion
27. Here, Defendants filed their Answer on March 14, 2017. (ECF No. 8.) In
their Fourth Affirmative Defense, Defendants asserted that Plaintiff’s Complaint is
subject to dismissal pursuant to Rule 12(b)(6) for failure to state a claim for which
relief can be granted. (ECF No. 8 at 9.) On April 3, 2017, nearly three weeks after
filing the Answer, Defendants filed their Rule 12(b)(6) Motion and accompanying
brief. (ECF Nos. 15–16.) Because Defendants did not file their Rule 12(b)(6) Motion
before they filed an answer, the Motion is untimely and should be dismissed. The
Court, in its discretion, declines to construe Defendants’ Motion as a Rule 12(c)
motion for judgment on the pleadings, and therefore denies Defendants’ Rule 12(b)(6)
Motion.
IV. RULE 12(b)(1) MOTION
28. “Standing is a necessary prerequisite to a court’s proper exercise of subject
matter jurisdiction.” Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C.
App. 110, 113, 574 S.E.2d 48, 51 (2002). Standing arguments may be presented under both Rule 12(b)(1) and Rule 12(b)(6). Fairfield Harbour Prop. Owners Ass’n, Inc. v.
Midsouth Golf, LLC, 215 N.C. App. 66, 72, 71 S.E.2d 273, 280 (2011). In determining
a motion to dismiss for lack of standing, the allegations should be taken as true and
read in the light most favorable to the non-moving party. Mangum v. Raleigh Bd. of
Adjustment, 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008). In ruling on a motion to
dismiss for lack of standing pursuant to Rule 12(b)(1), the Court may consider
matters outside the pleadings in determining whether subject matter jurisdiction
exists. Keith v. Wallerich, 201 N.C. App. 550, 554, 687 S.E.2d 299, 302 (2009).
Plaintiff has the burden of proving that he has standing to bring his claims. Neuse
River Found., Inc., 155 N.C. App. at 113, 574 S.E.2d at 51.
29. Standing refers to a party’s right to have the Court decide the merits of its
dispute. Neuse River Found., Inc., 155 N.C. App. at 114, 574 S.E.2d at 52. The
elements of standing are
(1) “injury in fact”—an invasion of a legally protected interest that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560−61 (1992)).
30. In order to have standing to assert a derivative claim on behalf of an LLC,
plaintiff must either be “a member of the LLC at the time of the act or omission for
which the proceeding is brought” or acquire his ownership interest “by operation of
law from an ownership interest that was owned by a member at that time.” N.C.
Gen. Stat. § 57D-8-01(a)(1). In addition, the member must “[make a] written demand on the LLC to take suitable action,” and then must either (i) receive notice from the
LLC that its demand was rejected, (ii) wait ninety days from the date the demand
was made, or (iii) allege that the LLC would be irreparably harmed by waiting for the
expiration of the ninety-day period. Id. § 57D-8-01(a)(2).
31. In considering whether a member of an LLC has standing to assert an
individual claim, “members of an LLC are treated like corporate shareholders and
managers are similar to directors.” Levin v. Jacobson, 2015 NCBC LEXIS 111, at
*14−15 (N.C. Super. Ct. Dec. 7, 2015); see also Russell M. Robinson, II, Robinson on
North Carolina Corporation Law § 34.04[5] (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. Therefore, whether the member must
bring the suit individually or on behalf of the LLC turns on whether the alleged
injuries were caused directly to the member or are a consequence of breaches of
fiduciary duty that harmed the LLC.” (footnote omitted)).
32. It is a well-settled principle of North Carolina law that a shareholder of a
corporation cannot pursue individual causes of action for wrongs or injuries to the
corporation. Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658, 488 S.E.2d 215,
219 (1997); Corwin v. British Am. Tobacco PLC, 796 S.E.2d 324, 338 (N.C. Ct. App.
2016). There are two exceptions: (1) when there is a special duty between the
wrongdoer and the shareholder; and (2) when the shareholder suffered an injury
separate and distinct from the injury suffered by the corporation and the other
shareholders. Barger, 346 N.C. at 658, 488 S.E.2d at 219; Corwin, 796 S.E.2d at 338. 33. For the special duty exception to apply, “the duty must be one that the
alleged wrongdoer owed directly to the shareholder as an individual”—a duty that
was personal to the shareholder and separate and distinct from the fiduciary duty
owed to the corporation. Barger, 346 N.C. at 659, 488 S.E.2d at 220. Plaintiff Wirth
does not argue that the special duty exception applies to his claims. Therefore, the
Court does not analyze his claims on that basis.
34. For the special injury exception to apply, the injury must be peculiar or
personal to the shareholder. Id. “[A] plaintiff must show that its particular injury
was ‘separate and distinct from the injury sustained by the other shareholders or the
corporation itself.’” Raymond James Capital Partners, L.P. v. Hayes, 789 S.E.2d 695,
702 (N.C. Ct. App. 2016) (quoting Barger, 346 N.C. at 659, 488 S.E.2d at 219). “An
injury is peculiar or personal to the shareholder if a legal basis exists to support
plaintiff[’s] allegations of an individual loss, separate and distinct from any damage
suffered by the corporation.” Barger, 346 N.C. at 659, 488 S.E.2d at 220 (quotation
marks omitted).
B. Wirth’s Standing
35. The Rule 12(b)(1) Motion seeks dismissal of Plaintiff’s claims on the ground
that Plaintiff lacks standing because all of the claims are derivative claims belonging
to Successions. (Defs.’ Br. Supp. Mot. Dismiss Rule 12(b)(1) at 4, ECF No. 13.)
Plaintiff contends that he has standing to bring his claims as the successor of
Successions or as a third-party beneficiary of the LOI. (Br. Opp’n Defs.’ 12(b)(1) Mot.
at 3, ECF No. 24.) 1. Plaintiff’s Derivative Claims
36. It is not clear which claims, if any, Plaintiff asserts derivatively on behalf
of Successions. The Court concludes, however, that Plaintiff lacks standing to bring
any derivative claims on behalf of Successions.
37. Plaintiff lacks standing to bring claims on behalf of Successions because
Plaintiff has not alleged that he made an appropriate demand on Successions to take
suitable action, as required by N.C. Gen. Stat. § 57D-8-01(a)(2). “A party’s standing
to bring a derivative claim depends on whether they properly meet the demand
requirement.” Petty v. Morris, 2014 NCBC LEXIS 67, at *4 (N.C. Super. Ct. Dec. 16,
2014); see also Marriott v. Chatham Cty., 187 N.C. App. 491, 494, 654 S.E.2d 13, 16
(2007) (“Standing is a necessary prerequisite to a court’s proper exercise of subject
matter jurisdiction.” (quotation marks omitted)). Although Successions was
administratively dissolved on February 2, 2015, (ECF No. 1 at ¶ 4), “[t]he dissolution
of the LLC does not prevent commencement of a proceeding by or against the LLC in
its own name,” N.C. Gen. Stat. § 57D-6-07(f). Successions must bring these claims on
its own behalf, or they must be brought by a person who was a member at the relevant
times after a proper demand.
38. Putting aside whether Plaintiff was a member of Successions at the time of
the alleged wrongdoing, because Plaintiff fails to allege that he made the requisite
pre-suit demand on Successions, Plaintiff lacks standing to bring claims as “owner of
Successions,” and the Rule 12(b)(1) Motion to Dismiss Plaintiff’s derivative claims, if
any, is granted. 2. Plaintiff’s Direct Claims
39. Plaintiff also appears to assert direct claims for breach of contract,
misrepresentation, conspiracy, fraudulent transfer of assets, and UDTP. (ECF No.
1.)
40. Because Wirth’s direct claims for misrepresentation, civil conspiracy, and
UDTP are based on wrongs to Successions, in order to have standing Wirth must
allege that (1) Defendants owed him a special duty or (2) that Plaintiff suffered an
injury separate and distinct from any injury suffered by successions. Barger, 346
N.C. at 658, 488 S.E.2d at 219.
41. Plaintiff does not allege that Defendants owed him a special duty; thus, he
only has standing to assert direct claims if he suffered a separate and distinct injury.
The Complaint alleges that “Plaintiff has suffered damages in excess of $1 million”
including “lost profit distributions[,]” “lost benefits (or the value of the benefits)[,]”
and “lost revenue due from the sale of SUNPATH[.]” (See ECF No. 1 at ¶¶ 44, 52, 60,
65, 73.)
42. Plaintiff’s factual allegations that he suffered an injury focus almost
exclusively on the transfer of clients from Successions to Sunpath, (ECF No. 1 at
¶¶ 22, 50; ECF No. 24 at 4–5), an injury to Successions. The lost profit distributions
and lost revenue from the sale of Sunpath were injuries to Successions, the party to
the LOI that was entitled to such distributions and revenue. Although Plaintiff
alleges that after Sunpath terminated the LOI, “SUNPATH terminated certain
benefits previously available to WIRTH, including healthcare coverage[,]” (ECF No. 1 at ¶ 26), neither the LOI nor anything in the record demonstrates that Wirth or
Successions was entitled to receive any benefits such as healthcare coverage.
Therefore, the Court concludes that Wirth has not alleged a separate and distinct
injury that would grant him standing to bring these direct claims. For these reasons,
Defendants’ Rule 12(b)(1) Motion should be granted as to those claims.
43. Plaintiff also asserts a direct claim for fraudulent transfer of assets,
alleging the Individual Defendants sold Sunpath to a third-party buyer, (ECF No. 1
at ¶ 37), “for inappropriate purposes, including, but not limited to, transferring the
assets so that Plaintiff would have a more difficult time in collecting on his claim of
ownership interest in Sunpath[,]” (ECF No. 1 at ¶ 55).
44. The Uniform Voidable Transactions Act (“UVTA”), formerly the Uniform
Fraudulent Transfer Act (“UFTA”), allows a creditor to bring a civil action against a
debtor for certain transfers made by the debtor. N.C. Gen. Stat. § 39A-23.7; see also
McKee v. James, 2013 NCBC LEXIS 33, at *39 (N.C. Super. Ct. July 24, 2013). Under
the UVTA, a creditor is a person who has a claim, N.C. Gen. Stat. § 39-23.1(4), which
is further defined as a “right to payment[,]” N.C. Gen. Stat. § 39-23.1(3). Thus, “[a]
plaintiff must have standing as a creditor to proceed with a claim under the UVTA.”
Transatlantic Healthcare, LLC v. Alpha Constr. of the Triad, Inc., 2017 NCBC LEXIS
21, at *21 (N.C. Super. Ct. Mar. 9, 2017).
45. Reading the facts in the record in the light most favorable to Plaintiff,
Plaintiff is not a “creditor” for purposes of the UVTA. The LOI was executed between
Successions and Sunpath and expressly provided that distributions from the surviving entity were to be distributed to Successions or its successor. (ECF No. 18
at Ex. A, ¶ 2.4(b), (d).) Because Plaintiff has not alleged sufficient facts to
demonstrate that he is the successor of Successions’ entitlement to any such
payments, any right to payment that exists under the LOI belongs to Successions.
Because Plaintiff is not a “creditor” under the UVTA, he lacks standing to bring a
direct claim for fraudulent transfer. Therefore, the Rule 12(b)(1) Motion to Dismiss
Plaintiff’s direct fraudulent transfer of assets claim is granted.
46. Defendants also challenge Plaintiff’s standing to assert a direct breach of
contract claim. (ECF No. 13 at 4–5.) “In the context of a breach of contract claim,
the parties who execute an agreement are real parties in interest and have standing
to sue.” King Fa, LLC v. Ming Xen Chen, 788 S.E.2d 646, 649 (N.C. Ct. App. 2016).
In addition, North Carolina has long recognized the right of “third-party beneficiaries
not in privity of contract to bring an action in their own name to enforce the contract
made for their benefit[.]” Vogel v. Reed Supply Co., 277 N.C. 119, 126, 177 S.E.2d
273, 278 (1970). Thus, for Plaintiff to have standing to assert a direct claim for breach
of contract, he must allege that he is either a party to the LOI or a third-party
beneficiary. Holshouser v. Shaner Hotel Grp. Props. One Ltd. P’ship., 134 N.C. App.
391, 399, 518 S.E.2d 17, 24 (1999).
47. Plaintiff was not a party to the LOI, which by its terms provides that the
agreement is between Sunpath and Successions. (ECF No. 18 at Ex. A, 1.) While
Plaintiff’s signature does appear on the LOI, he signed on Successions’ behalf, not his
own. (ECF No. 18 at Ex. A, at 4.) Plaintiff is, thus, not a party to the LOI, as “[a]n LLC is an entity distinct from its interest owners.” N.C. Gen. Stat. § 57D-2-01(a); see
also Coderre v. Futrell, 224 N.C. App. 454, 457, 736 S.E.2d 784, 787 (2012) (finding
that a company representative lacked standing to enforce an agreement where he had
signed the purchase agreement in his representative capacity); Priest v. Coch, 2013
NCBC LEXIS 6, at *10–11 (N.C. Super. Ct. Jan. 25, 2013) (dismissing a claim by an
individual plaintiff who signed the contract on behalf of a law firm).
48. Next, Plaintiff contends that he has standing to bring the breach of contract
claim because he is the successor in interest to Successions. (ECF No. 24 at 3.) As
noted above, however, Plaintiff alleges no facts to support his conclusory allegation
that he is a successor. Instead, Plaintiff argues that because Plaintiff was the sole
member of Successions and that the LOI provided that benefits would flow to
Successions “or its successor,” Plaintiff “not only could have been a ‘successor’ but was
the successor” of Successions. (ECF No. 24 at 3.) Again, Plaintiff’s factual allegations
fail to support such a contention.
49. Finally, Plaintiff argues that he has standing to enforce the LOI as a third-
party beneficiary. (ECF No. 24 at 3.) To state a breach of contract claim as a third-
party beneficiary, Plaintiff must allege: “(1) the existence of a contract between two
other persons; (2) that the contract was valid and enforceable; (3) that the contract
was entered into for his direct, and not incidental, benefit.” Hoots v. Pryor, 106 N.C.
App. 397, 408, 417 S.E.2d 269, 276 (1992). “A person is a direct beneficiary of the
contract if the contracting parties intended to confer a legally enforceable benefit on
that person.” Babb v. Bynum & Murphrey, PLLC, 182 N.C. App. 750, 753–54, 643 S.E.2d 55, 57–58 (2007) (emphasis added). When a third person seeks to enforce a
contract made between other parties, “the contract must be strictly construed against
the party seeking enforcement.” Id. Generally, in determining whether a claimant
is a third-party beneficiary, courts should look to “the intention of the parties who
actually made the contract. The real test is said to be whether the contracting parties
intended that a third person should receive a benefit which might be enforced in the
courts.” Vogel, 277 N.C. at 128, 177 S.E.2d at 279 (quotation marks omitted) (quoting
17 Am. Jur. 2d, Contracts § 304).
50. Plaintiff’s Complaint alleges that, under the LOI, “Wirth was to receive a
40% interest in any new entity or the surviving company.” (ECF No. 1 at ¶ 21.)
However, the LOI attached to the Complaint presents facts that contradict this
allegation. The LOI provided that “Successions or its successor shall be entitled to a
distribution of 40% of the net profit of the new entity or surviving company after the
merger period[.]” (ECF No. 18 at Ex. A, ¶ 2.4(b) (emphasis added).) The fact that
any benefit to Successions would have ultimately flowed to Wirth, as the sole member
of Successions at the time, does not make Wirth’s name interchangeable with
Successions and does not show that the parties intended to confer a direct benefit on
Wirth.
51. Although absent from his Complaint, Wirth argues in his brief that
Defendants ratified his position as a third-party beneficiary by paying him directly
as a member of Sunpath after Successions transferred its clients to Sunpath. (ECF
No. 24 at 4.) Wirth also submitted an affidavit stating that “[b]etween joining Sunpath and February 23, 2013, [he] was paid distributions as an owner would
receive.” (ECF No. 25 at ¶ 6.) However, in looking at the terms of the LOI, this is
insufficient to find that Sunpath and Successions intended at the time the LOI was
executed to bestow upon Wirth a legally enforceable benefit.
52. Therefore, the Court concludes that Plaintiff has not carried his burden of
demonstrating that he is an intended third-party beneficiary of the LOI.
53. Because Plaintiff can demonstrate no legally sufficient basis to assert
standing to enforce the LOI, the Rule 12(b)(1) Motion as to Plaintiff’s direct breach of
contract claim should be granted.
54. Because “[a] dismissal under Rule 12(b)(1) . . . is not a dismissal on the
merits[,]” the Court’s dismissal of Plaintiff’s claims for lack of standing is without
prejudice. Soma Tech., Inc. v. Dalamagas, 2017 NCBC LEXIS 43, at *29–30 (N.C.
Super. Ct. May 11, 2017).
V. CONCLUSION
55. For the foregoing reasons, the Court ORDERS as follows:
A. The Court GRANTS the Rule 12(b)(1) Motion as to Plaintiff’s direct
and derivative claims and dismisses these claims without prejudice.
B. The Court DENIES the Rule 12(b)(6) Motion as untimely. SO ORDERED, this the 14th day of September, 2017.
/s/ Michael L. Robinson Michael L. Robinson Special Superior Court Judge for Complex Business Cases