Worley v. Moore

2017 NCBC 15

• Court: North Carolina Business Court
• Decided: February 28, 2017
• Docket: 15-CVS-1316
• Status: Published

Opinion

Worley v. Moore, 2017 NCBC 15.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF COLUMBUS 15 CVS 1316

DENNIS WORLEY, STERLING ) KOONCE, FLYING A LIMITED ) PARTNERSHIP L.P., JOSEPH W. ) FORBES, JR., KENNETH CLARK, ) JAMES BOGGESS, JOEL WEBB, ) JAIMIE LIVINGSTON, JAMES E. ) BENNETT, JR., DAVID MINER, ) RONALD ENGLISH, and MDF, LLC, ) ) Plaintiffs, ) ) v. ) OPINION AND ORDER ON ) DEFENDANTS’ MOTIONS TO DISMISS ROY J. MOORE, PIERCE J. ) ROBERTS, DAVID BROWN, ) MICHAEL ADAMS, CHRISTOPHER ) BAKER, JAMES KERR, FRANK ) MCCAMANT, NEIL KELLEN, GINI ) COYLE, JOSEPH MOWERY, ) TOSHIBA CORPORATION, ALAMO ) ACQUISITION CORP., and ) STEPHENS, INC., ) ) Defendants. ) )

THIS MATTER is before the Court on the following motions: (1) Motion to

Dismiss of Defendants Roy J. Moore and Pierce J. Roberts Pursuant to Rules 12(b)(1),

12(b)(2), and 12(b)(6) (“Moore and Roberts Motion”); (2) Motion to Dismiss of

Defendants Christopher Baker, David G. Brown, and Frank McCamant Pursuant to

Rules 12(b)(1), 12(b)(2), and 12(b)(6) (“Baker, Brown, and McCamant Motion”); (3)

Defendant Michael Adams’s Motion to Dismiss Pursuant to Rules 12(b)(1) and

12(b)(6) (“Adams Motion”); (4) Defendant James Kerr’s Motion to Dismiss Pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) (“Kerr Motion”); (5) Defendant Neil Kellen’s

Motion to Dismiss Pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) (“Kellen Motion”);

(6) Motion to Dismiss of Defendants Joseph Mowery and Stephens, Inc. Pursuant to

Rules 12(b)(1), 12(b)(2), and 12(b)(6) (“Mowery and Stephens Motion”); and (7)

Defendant Alamo Acquisition Corp.’s Motion to Dismiss Pursuant to Rules 12(b)(2)

and 12(b)(6) (“Alamo Motion”) (collectively, “Motions”).

THE COURT, having considered the Motions, the affidavit evidence submitted

by Defendants, the briefs in support of and in opposition to the Motions, the oral

arguments of counsel at the hearing, and other appropriate matters of record,

concludes that the Moore and Roberts Motion, the Baker, Brown, and McCamant

Motion, the Kerr Motion, the Kellen Motion, the Mowery and Stephens Motion, and

the Alamo Motion should be GRANTED, and the Adams Motion should be GRANTED

in part and DENIED in part for the reasons set forth below.

Nexsen Pruet, PLLC, by R. Daniel Boyce and Thomas J. Ludlam, for Plaintiffs.

RuyakCherian LLP, by Arthur T. Farrell, for Plaintiffs.

Kilpatrick Townsend & Stockton LLP, by Joel D. Bush, Jason M. Wenker, Elizabeth Winters, Stephen E. Hudson, John Moye, and Adam H. Charnes, for Defendants.

McGuire, Judge.

I. FACTUAL AND PROCEDURAL BACKGROUND

1. This action arises out of an Agreement and Plan of Merger (“Merger

Agreement”) executed on January 24, 2013 by Consert, Inc. (“Consert”), Defendant

Alamo Acquisition Corp. (“Alamo”), and Defendant Toshiba Corporation (“Toshiba”). (FAC ¶ 2.)1 Pursuant to the Merger Agreement, Toshiba acquired Consert, and Alamo,

a wholly-owned subsidiary of Toshiba, was merged with and into Consert (the

“Merger”). The Merger closed on February 5, 2013. (FAC ¶ 2; Aff. Amy Mansfield Exh.

1 [hereinafter Mansfield Aff.].)

A. The Parties.

2. Plaintiffs are former shareholders of Consert, a Delaware corporation with

its headquarters in San Antonio, Texas. (FAC ¶ 2; Mansfield Aff. Exh. 1.) Before the

Merger, Plaintiffs collectively owned 36.5% of Consert’s common stock and 18% of all

classes of Consert’s stock. (FAC ¶¶ 2, 15.)

3. Toshiba is a Japanese corporation and was a party to the Merger Agreement.

(FAC ¶ 26.) Defendant Alamo was a Delaware corporation and a wholly-owned

subsidiary of Toshiba. (FAC ¶ 27.) Alamo was formed as a vehicle to facilitate the

Merger. (FAC ¶ 27.) Toshiba purchased all of the stock in, acquired, and merged

Consert into Alamo, after which time Consert became the surviving wholly-owned

subsidiary of Toshiba. (FAC ¶ 26.)

4. Defendants Roy J. Moore (“Moore”), Pierce J. Roberts (“Roberts”), David

Brown (“Brown”), Michael Adams (“Adams”), Christopher Baker (“Baker”), James

Kerr (“Kerr”), Frank McCamant (“McCamant”), and Neil Kellen (“Kellen”), are former

officers and/or directors of Consert (collectively, “O&D Defendants”). (FAC ¶¶ 17−24.)

1 Plaintiffs’ alleged facts are drawn from the First Amended Complaint filed on January 26,

2016. The First Amended Complaint is referred to herein by the acronym “FAC.” 5. Moore was Consert’s Chief Development Officer (“CDO”) from January 2008

until the Merger.2 (FAC ¶ 17; Aff. Roy J. Moore ¶ 3 [hereinafter Moore Aff.].) Moore

was also a director of Consert. Roberts was Chairman of Consert’s Board of Directors

(“Board”) and Consert’s CEO from January 2008 until the Merger in February 2013.

(FAC ¶ 16; Aff. Pierce J. Roberts, Jr. ¶ 3 [hereinafter Roberts Aff.].) Roberts and Moore

together held approximately 25% of all classes of Consert stock.

6. Brown, Adams, Baker, Kerr, and McCamant were members of the Board at

the time of the Merger in February 2013. (FAC ¶ 21; Aff. David G. Brown ¶ 5

[hereinafter Brown Aff.]; Aff. Chris Baker ¶ 6 [hereinafter Baker Aff.]; Aff. James Y.

Kerr, II ¶ 5 [hereinafter Kerr Aff.]; Aff. Frank McCamant ¶ 4 [hereinafter McCamant

Aff.].)

7. Kellen began working for Consert as a consultant in March 2012. (Aff. Neil

Kellen ¶ 3 [hereinafter Kellen Aff.].) From April 2012 until the Merger in February

2013, Kellen served as Consert’s Chief Financial Officer (“CFO”). (Kellen Aff. ¶ 3.)

8. Defendant Stephens, Inc. (“Stephens”) is the investment bank that

represented Consert in the Merger. (FAC ¶ 29.) Defendant Joseph Mowery (“Mowery”)

is the managing director of Stephens. (FAC ¶ 28.)

B. The “Scheme.”

9. Plaintiffs allege that:

Beginning on or about mid to late 2011, as part of the [O&D] Defendants’ decision to sell Consert, Defendants Roberts and Moore, acting individually and in concert with other defendants, devised and executed a scheme which included a number of activities and elements which had

2 Moore also claims to have served as Consert’s acting Chief Executive Officer (“CEO”) from

January 2013 to February 2013. (FAC ¶ 17; Moore Aff. ¶ 3.) the purpose and effect of disenfranchising certain shareholders, including Plaintiffs. Among other things, Defendants orchestrated the timing of, the negotiations related to, the terms and conditions of, and the actual sale of Consert to Toshiba in a manner and under circumstances that maximized the monetary benefits of the sale to themselves and which disregarded, compromised, and ultimately precluded, monetary returns to Plaintiffs on their investments as shareholders in Consert [(“Scheme”)].

(FAC ¶ 33.)

10. Plaintiffs allege that in furtherance of the Scheme:

a. Roberts and Moore orchestrated the removal of Plaintiff Joseph W. Forbes, Jr.

(“Forbes”) from his position as Chief Operating Officer and membership on the

Board, as well his termination from employment in the fall of 2011. Forbes was

a founder of Consert, Consert’s largest common shareholder, and was the

principal inventor of all but one of Consert’s twenty patents. Plaintiffs contend

that Defendants removed Forbes in order to conceal the Scheme from

Plaintiffs. (FAC ¶ 41.)

b. Roberts and Moore announced at a shareholders meeting on October 26, 2011

that Consert had entered into a significant contract with CPS Energy

Corporation (“CPS”) (“Consert/CPS Contract”). (FAC ¶ 42.) Plaintiffs allege

that, at this meeting, certain O&D Defendants represented to Plaintiffs that

the Consert/CPS Contract was a significant milestone in Consert’s success, but

the Consert/CPS Contract was never consummated and its non-consummation

was not disclosed to Plaintiffs prior to the Merger. (FAC ¶ 43.)

c. Plaintiffs allege that around the same time, “Defendants began the process of

relocating Consert’s [headquarters] from Raleigh, North Carolina to San Antonio, Texas. (FAC ¶ 44.) Plaintiffs contend that relocation to Texas was

completed in the first quarter of 2012. (FAC ¶ 44.) Defendants have provided

evidence that the relocation of Consert’s offices from Raleigh to San Antonio

was completed in August 2011, and that Consert conducted its business

activities from Texas thereafter. (Mansfield Aff. Exhs. 2−3; Moore Aff. ¶ 5;

Roberts Aff. ¶¶ 5−6.)

d. Roberts and Moore increased their salaries and accrued those salaries on

Consert’s books in order to receive “preferential payments for themselves”

upon consummation of the Merger. (FAC ¶ 44.)

e. Roberts, Moore, and the other O&D Defendants made loans to Consert at

exorbitant interest rates. The loans were to be paid back from the proceeds of

the Merger. (FAC ¶ 45.)

f. In January 2013, “Defendants contrived and implemented an additional

‘bridge loan’ to Consert with egregious and usurious terms intended to insure

that Defendant Moore would be guaranteed to receive nearly all of the money

that he had invested in Consert common and Series A stock, in the form of a

preferential payment at the time of sale.” (FAC ¶ 46.)

11. Plaintiffs allege that “the O&D Defendants systematically and collusively

prevented Consert’s shareholders from receiving any information about the lucrative

preferences and other payments that the O&D Defendants had orchestrated for

themselves.” (FAC ¶ 49.) 12. In April 2012, Consert retained Stephens to find a potential buyer of

Consert. (FAC ¶ 51; Aff. Joseph S. Mowery ¶ 4 [hereinafter Mowery Aff.].)

13. The Merger of Consert attracted several interested parties. Toshiba,

General Electric, and Silver Spring Networks provided Defendants with written

proposals outlining the terms on which they would consider purchasing Consert. (FAC

¶ 52.)

14. At a Board meeting on January 23, 2013, Moore proposed that Consert

accept Toshiba’s terms, and O&D Defendants unanimously approved that Consert

limit further Merger negotiations to Toshiba. (FAC ¶ 53.)

15. On January 24, 2013, Consert, Alamo, and Toshiba executed the Merger

Agreement. (FAC ¶ 32.) Moore executed the Merger Agreement on behalf of Consert

in Texas. (Moore Aff. ¶ 8.) Plaintiffs allege that O&D Defendants chose to sell Consert

to Toshiba because it was the only potential purchaser that would agree to O&D

Defendants’ terms providing for undisclosed lump sum bonuses and preferential

payments to certain executives. (FAC ¶ 72.)

C. The Shareholders Meeting.

16. On January 25, 2013, the annual shareholders meeting was held at

Consert’s headquarters in San Antonio, Texas (“Shareholders Meeting”). (FAC ¶ 69.)

Consert Shareholders, including Plaintiffs, could attend in person or by phone. (FAC

¶ 69.) Plaintiff Dennis Worley attended the Shareholders Meeting in person. Moore

and Kellen attended in person. Plaintiffs allege that Mowery attended the

Shareholders Meeting in person, (FAC ¶ 69), but Mowery provided a sworn affidavit stating that he attended by phone (Mowery Aff. ¶ 16). Moore presided over the

Shareholders Meeting. (FAC ¶ 69.)

17. At the Shareholders Meeting, Moore announced that certain Defendants had

executed a definite Merger Agreement to sell Consert to Toshiba, and that O&D

Defendants had approved the Merger Agreement. (FAC ¶ 70.) This was the first notice

Plaintiffs had received of the Merger of Consert. (FAC ¶¶ 63, 70.) The executed Merger

Agreement was not provided to the shareholders at the Shareholders Meeting. (FAC

¶ 70.)

18. Plaintiffs allege that at the Shareholders Meeting,

Defendants withheld critical information and made material misrepresentations of fact, refused to respond to or answer [the] shareholders’ written and oral questions, induced [the] shareholders to approve the Merger Agreement, and expressed the position that Plaintiffs’ approval of the sale was irrelevant since Defendants “already had sufficient votes” to push the sale through and close it immediately.

(FAC ¶ 71.)

19. Plaintiffs allege that at the Shareholders Meeting, Moore made the following

misrepresentations that were designed to induce the shareholders to consent to the

Merger:

a. “Moore represented that although common shareholders would not receive any

of the cash proceeds from the sale, that they would receive substantial cash

proceeds from the ‘earn out’ provisions of the Merger Agreement, which he

fraudulently characterized as ‘most likely to occur’ and ‘absolutely achievable.’”

(FAC ¶ 73.) b. Moore “coerced Plaintiffs” to “consent to the sale without sufficient

information, review, and consideration of their rights.” (FAC ¶ 74.)

c. “Moore stated that ‘ . . . personally, from my personal investment, . . . the bulk

of our investment is in the common. I can assure you that I care about the

common shareholders[,]’” and that Moore did not disclose that he would receive

a significant return on his investment through preference payments at the

time of Merger. (FAC ¶ 75.)

d. Moore stated that “‘[w]e signed yesterday, we will close and fund and send

checks out on the 31st’ and ‘the reality is we . . . have enough votes to pass this

transaction and make it happen’, [sic] and ‘we believe that [the deal] is in the

best interest of all shareholders.’” (FAC ¶ 74.)

20. Plaintiffs also allege that Mowery made material misrepresentations at the

Shareholders Meeting designed to induce the shareholders to consent to the Merger:

“Mowery stated that ‘at the end of the day, the combination of the upfront cash and

earn out opportunity . . . that we were able to agree to is clearly the superior

opportunity to maximize the shareholder return opportunity.’” (FAC ¶ 72.)

21. Finally, Plaintiffs allege that Defendants’ counsel attended the

Shareholders Meeting, but at Defendants’ direction, refused to respond to Plaintiffs’

substantive questions. (FAC ¶ 76.) Plaintiffs allege that Defendants had a fiduciary

duty to so respond and their refusal to respond was a part of their Scheme. (FAC ¶

76.) D. Shareholder Consent Documents.

22. On January 28, 2013, three days after the Shareholders Meeting, Consert

sent shareholders, including Plaintiffs, a Merger Information Statement (“MIS”) and

shareholder consent documents (collectively, “Consent Documents”). (FAC ¶ 77.)

Plaintiffs allege that the MIS made fraudulent representations, specifically that “[the

Board] has carefully considered whether the Merger would be in the respective best

interests of Consert and the Stockholders and have concluded that it is.” (FAC ¶ 78.)

The Consent Documents required that Plaintiffs sign the documents as a condition of

receiving any future proceeds from the earn-out provisions in the Merger Agreement,

and Plaintiffs were required to return the Consent Documents before January 31,

2013. (FAC ¶¶ 77, 79.) Each Plaintiff signed and returned the Consent Documents.

(FAC ¶ 79.)

23. Plaintiffs allege that, between the Shareholders Meeting and the closing of

the Merger, Mowery made phone calls to Plaintiffs and other shareholders, on behalf

of himself and Stephens, encouraging them to approve the Merger Agreement and

“misrepresenting that the Merger Agreement was a ‘good deal for all shareholders’

and in the ‘best interests of all.’” (FAC ¶ 80.)

24. The Merger closed on February 5, 2013 in the North Carolina offices of

Defendants’ counsel. (FAC ¶ 81.) Plaintiffs allege that:

Of the $30 million in cash merger consideration paid by Defendant Toshiba at closing, approximately $2.2 million was paid to the O&D Defendants and other Consert executives in the form of “change of control” and bonus payments. An additional $2 million was paid to the company’s advisors, including its attorneys, and Defendants Stephens Bank and Mowery. An additional $14 million was used to repay company obligations and loans, including substantial amounts to Defendants Roberts and Moore and to certain strategic investors who were represented on the Board of Directors by other O&D Defendants, at usurious interest rates for “bridge loans” made by them to Consert. The remaining approximately $9.8 million was paid to holders of Consert Series A and Series B Preferred stock, including substantial amounts to O&D Defendants and the companies they represented on the Board of Directors. Plaintiffs did not receive a penny in exchange for their shares of common stock and will not receive anything in the future due to the sham earn out provisions of the Merger Agreement.

(FAC ¶ 81.)

E. The Terms of the Merger Agreement.

25. The Merger Agreement contained earn-out provisions by which the common

shareholders were to receive cash proceeds from two post-merger events (“Earn-

Outs”). (FAC ¶ 82.) The proceeds from two post-merger events would generate

payments into an independent entity (“Shareholders Fund”), and the Shareholders

Fund would distribute the earned funds to Plaintiffs and other shareholders. (FAC ¶

82.)

26. One of the post-merger events was the performance of a contract between

Toshiba and CPS that was to be executed post-merger for the installation of hardware

and software using Consert technology (“Toshiba/CPS Contract”). (FAC ¶ 83.) The

Shareholders Fund was to receive twenty-five dollars for each meter and/or instance

of monitoring software installed under the Toshiba/CPS Contract over a five-year

period, with the total amount received by the Shareholders Fund not to exceed $25

million. (FAC ¶ 84.)

27. The other post-merger event was the resolution of a lawsuit that had been

filed by Consert against Itron, Inc. (“Itron”). (FAC ¶ 85.) Based on a formula, the Shareholders Fund was to receive a substantial portion of any recoveries received by

Consert pursuant to a settlement with Itron or entry of judgment. (FAC ¶ 85.) As

described in the Merger Agreement, the Earn-Outs had a total value of between $60

and $70 million. (FAC ¶ 86.)

28. The Earn-Outs, however, were contingent on a “trigger.” The trigger was a

requirement that (a) the Toshiba/CPS Contract had to be for the purchase of

hardware, software, and/or services with a minimum aggregate value of at least $100

million, and (b) the Toshiba/CPS Contract had to be fully executed within one year of

the closing of the Merger. (FAC ¶¶ 87−88.) Plaintiffs allege that the Earn-Outs were

“illusory and a sham” because “all Defendants knew, at the time the Merger

Agreement was executed and approved by the Board and at the time of the

[Shareholders Meeting],” that the trigger “would never occur.” (FAC ¶ 87.)3

29. Plaintiffs allege that Toshiba and CPS subsequently entered into an

agreement for less than $100 million, thereby failing to trigger the Earn-Outs. (FAC

¶ 94.) As a result, Plaintiffs allege that they have not and will not receive any proceeds

from the Earn-Outs. (FAC ¶ 98.)

30. Plaintiffs allege that Toshiba has made over 400,000 installations under the

Toshiba/CPS Contract, and the Itron lawsuit settled in February 2015, from which

Consert received approximately $60 million. Plaintiffs allege that these two events,

3 Plaintiffs seem to contradict the assertion that Defendants knew the trigger “would never

occur” by also alleging that Defendants knew only that “both earn out provisions were . . . unlikely to occur.” (FAC ¶ 90.) absent the trigger provision, would have resulted in at least $45 million being paid

out to Plaintiffs and other shareholders under the Earn-Outs. (FAC ¶¶ 95−96.)

F. The Lawsuit.

31. Plaintiffs filed their Complaint on November 9, 2015. On November 16,

2015, this case was designated a mandatory complex business case by order of the

Chief Justice of the North Carolina Supreme Court, pursuant to N.C. Gen. Stat. § 7A-

45.4(b) (hereinafter, references to the North Carolina General Statutes will be to

“G.S.”), and assigned to the undersigned Special Superior Court Judge for Complex

Business Cases by order of Chief Judge James L. Gale on November 18, 2015.

32. Plaintiffs filed the First Amended Complaint (“FAC”) on January 26, 2016.

The FAC asserts claims for breach of fiduciary duty; common law fraud; constructive

fraud; conspiracy to defraud; fraudulent inducement; violation of the North Carolina

Securities Act; unlawful taking, conversion, and unjust enrichment; and violation of

the North Carolina Unfair and Deceptive Trade Practices Act. (FAC 27−34.)

33. On February 3, 2016, Moore, Roberts, Brown, Baker, Kerr, McCamant,

Kellen, Mowery, Stephens, and Alamo filed their motions to dismiss. On February 8,

2016, Adams filed his motion to dismiss. On February 29 and March 1, 2016, Plaintiffs

filed their responses in opposition to the Motions, and the Moving Defendants

subsequently replied.

34. On February 11, 2016, Plaintiffs filed their Motion to Disqualify Certain

Defendants’ Counsel (“Motion to Disqualify”) seeking to disqualify Joel Bush and the

law firm of Kilpatrick Townsend & Stockton, LLC from representing the Moving Defendants in this case. On March 7, 2016, Moving Defendants filed their response in

opposition to the Motion to Disqualify, and Plaintiffs subsequently replied.

35. On March 24, 2016, the Court issued a Notice of Hearing, setting the

Motions and the Motion to Disqualify for hearing on April 6, 2016. The Court heard

arguments of counsel on that date.4 At the hearing, the Court informed counsel that

regardless of the Court’s decision on the Motion to Disqualify, the Court would

consider and make a determination on the Motions as briefed and argued by then-

current counsel.

36. On May 13, 2016, the Court entered its Order on Motion to Disqualify

Counsel, granting the Motion to Disqualify.

37. On May 31, 2016, all named defendants in this action (“Defendants”) filed a

Notice of Appeal to the Supreme Court of North Carolina of the Court’s Order on

Motion to Disqualify Counsel (“Appeal”).

38. On June 1, 2016, Defendants filed a motion to stay the trial court

proceedings pending the Appeal, except with respect to the Court’s consideration of

the Motions. Defendants, however, indicated they did not oppose an exception to any

stay “insofar as the Court still intends to rule on the pending motions to dismiss during

the pendency of the appeal,” as indicated at the hearing on April 6, 2016. (Defs.’ Br.

Supp. Mot. Stay 4.)

4 The Court notes that Toshiba filed its motion to dismiss on March 24, 2016, and Defendant

Gini Coyle filed her motion to dismiss on April 13, 2016. Those motions were not heard at the April 6, 2016 hearing and thus the Court does not consider them at this time. 39. On July 14, 2016, the Court entered a Stay Order granting Defendants’

motion to stay pending resolution of the Appeal. In its order, the Court noted that

Defendants did not oppose the Court ruling on the Motions. (Order Mot. Disqualify 2

n.2.)

II. ANALYSIS

40. Movants move for dismissal on three grounds: (1) pursuant to Rule 12(b)(2)

because the Court lacks personal jurisdiction over certain Defendants, (2) pursuant to

Rule 12(b)(1) for lack of subject matter jurisdiction, and (3) pursuant to Rule 12(b)(6)

for failure to state claims for which relief can be granted.

41. The Court will first address the motions to dismiss for lack of personal

jurisdiction. If the Court does not have personal jurisdiction over a Defendant, then

that Defendant must be dismissed.

A. Motions to Dismiss for Lack of Personal Jurisdiction.

42. “[T]he plaintiff bears the burden of proving, by a preponderance of the

evidence, grounds for exercising personal jurisdiction over a defendant. . . . [U]pon a

defendant’s motion to dismiss for lack of personal jurisdiction, the plaintiff bears the

burden of making out a prima facie case that jurisdiction exists.” Bauer v. Douglas

Aquatics, Inc., 207 N.C. App. 65, 68, 698 S.E.2d 757, 761 (2010) (citation omitted).

When a defendant supports his motion to dismiss for lack of personal jurisdiction with

affidavits, the plaintiff cannot rest on the unverified allegations in the complaint;

rather, the plaintiff must respond by affidavit or otherwise, setting forth specific facts

showing that the court has personal jurisdiction. Id. at 68−69, 698 S.E.2d at 761; Banc of Am. Sec. LLC v. Evergreen Int’l Aviation, Inc., 169 N.C. App. 690, 693, 611 S.E.2d

179, 182 (2005); Weisman v. Blue Mountain Organics Distribution, LLC, 2014 NCBC

LEXIS 41, at *2 (N.C. Super. Ct. Sept. 5, 2014). “An unverified complaint is not an

affidavit or other evidence.” Hill v. Hill, 11 N.C. App. 1, 10, 180 S.E.2d 424, 430 (1971).

When a defendant supports his motion with affidavits and the plaintiff does not offer

opposing evidence, the court considers the uncontroverted allegations in the complaint

and all facts in the defendant’s affidavits in determining whether the court has

personal jurisdiction. Banc of Am. Sec. LLC, 169 N.C. App. at 693−94, 611 S.E.2d at

182−83; see also Weisman, 2014 NCBC LEXIS 41, at *2 (noting that “allegations in a

complaint uncontroverted by an affidavit are still taken as true”).

43. To determine whether personal jurisdiction over a defendant exists, the

Court conducts a two-step analysis: first, personal jurisdiction must exist under the

North Carolina long-arm statute; second, the exercise of personal jurisdiction must

not violate the due process clause of the Fourteenth Amendment of the United States

Constitution. Bauer, 207 N.C. App. at 67, 698 S.E.2d at 760; Banc of Am. Sec. LLC,

169 N.C. App. at 693, 611 S.E.2d at 182. However, because North Carolina’s long-arm

statute has been interpreted to allow the exercise of personal jurisdiction to the fullest

extent allowed under the due process clause, the two-step analysis collapses into one

inquiry. Dillon v. Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629,

630−31 (1977); Brown v. Refuel Am., Inc., 186 N.C. App. 631, 633, 652 S.E.2d 389, 391

(2007).5

5 Plaintiffs contend that the long-arm statute provides a basis for personal jurisdiction over

Defendants pursuant to G.S. §§ 1-75.4(1)(d), 1-75.4(3), 1-75.4(5)(c), and 1-75.4(6)(b) and (c). 44. For a court to exercise personal jurisdiction over a non-resident defendant,

due process requires that the defendant “have certain minimum contacts with [the

forum state] such that the maintenance of the suit does not offend traditional notions

of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316

(1945) (internal quotations omitted). The defendant must purposefully avail himself

of the privilege of conducting activities in the forum state, thereby invoking the

benefits and protections of the forum state’s laws. Tom Togs, Inc. v. Ben Elias Indus.

Corp., 318 N.C. 361, 365, 348 S.E.2d 782, 786 (1986). The “relationship between the

defendant and the forum must be ‘such that he should reasonably anticipate being

haled into court there.’” Id. at 365−66, 348 S.E.2d at 786 (quoting World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). Unilateral activity within

the forum state by others who have some relationship with a non-resident defendant

is insufficient. Banc of Am. Sec. LLC, 169 N.C. App. at 695, 611 S.E.2d at 184. “Each

defendant’s contacts with the forum State must be assessed individually.” Brown, 186

N.C. App. at 638, 652 S.E.2d at 394 (quoting Calder v. Jones, 465 U.S. 783, 790 (1984)).

45. In determining whether a defendant has sufficient minimum contacts,

North Carolina courts consider “(1) the quantity of the contacts, (2) the nature and

quality of the contacts, (3) the source and connection of the cause of action to the

contacts, (4) the interest of the forum state, and (5) the convenience to the parties.”

Banc of Am. Sec. LLC, 169 N.C. App. at 696, 611 S.E.2d at 184.

For purposes of determining the existence of personal jurisdiction over the PJ Movants, the Court will assume that one or more of the provisions of the long-arm statute applies. 46. There are two types of personal jurisdiction: specific jurisdiction and general

jurisdiction. Id. Specific jurisdiction exists when a defendant purposefully directed his

activities toward the forum and the cause of action arises out of or relates to such

activities. Stetser v. TAP Pharm. Prods. Inc., 162 N.C. App. 518, 521, 591 S.E.2d 572,

575 (2004). The essential foundation of specific jurisdiction is the relationship among

the defendant, the forum state, and the cause of action. Tom Togs, Inc., 318 N.C. at

366, 348 S.E.2d at 786. The cause of action must arise out of activities defendant

purposefully directed toward the forum state. Stetser, 162 N.C. App. at 521, 591

S.E.2d at 575. A defendant can reasonably anticipate that he may be sued in a state

for injuries arising from activities that he purposefully directed toward that state. Tom

Togs, Inc., 318 N.C. at 366, 348 S.E.2d at 786.

47. General jurisdiction exists when the defendant has continuous and

systematic contacts with the forum state, even though those contacts may be

unrelated to the cause of action. Stetser, 162 N.C. App. at 521, 591 S.E.2d at 575. In

assessing whether a non-resident defendant has continuous and systematic contacts

so as to support general jurisdiction, a court examines all contacts with the forum that

occurred during the relevant time period. Sea-Roy Corp. v. Parts R Parts, Inc.,

1:94CV00059, 1995 U.S. Dist. LEXIS 21859, at *34−35 (M.D.N.C. Aug. 16, 1995). The

level of minimum contacts required to support general jurisdiction is significantly

higher than that required to support specific jurisdiction. Cambridge Homes of N.C.

L.P. v. Hyundai Constr., Inc., 194 N.C. App. 407, 412, 670 S.E.2d 290, 295 (2008);

Stetser, 162 N.C. App. at 521, 591 S.E.2d at 575. A determination of whether a defendant has such continuous and systematic contacts so as to support general

jurisdiction is based on the totality of the circumstances and depends on the facts of

each case. Stetser, 162 N.C. App. at 522−23, 591 S.E.2d at 576.

48. Moore, Roberts, Brown, Baker, Kerr, McCamant, Kellen, Mowery, Stephens,

and Alamo (collectively, “PJ Movants”) have moved to dismiss Plaintiffs’ claims

pursuant to Rule 12(b)(2) on the grounds that the Court lacks personal jurisdiction

over them, and have filed sworn affidavits in support of their motions. Plaintiffs did

not respond by affidavit or otherwise offer evidence in opposition to Defendants’

affidavits. PJ Movants contend that the unrebutted facts in the affidavits and the

uncontroverted allegations of the FAC establish that the Court lacks personal

jurisdiction over each of them because (a) they were not residents of North Carolina

at the time this lawsuit was filed, (b) they did not have continuous and systematic

contacts with North Carolina that would subject them to general personal jurisdiction,

and (c) they did not purposefully direct conduct towards North Carolina out of which

the claims in this lawsuit arose.

49. Plaintiffs rely exclusively on the allegations in the FAC in support of their

position that the Court has personal jurisdiction over Defendants. In the FAC,

Plaintiffs allege, in relevant part, as follows:

Personal jurisdiction exists over each of the Defendants in this case under the laws of North Carolina. Defendants Coyle, Kerr and Adams are residents of the State of North Carolina. Defendant Stephens Bank has a place of business and does significant business in the State of North Carolina. Consert, of which Defendants Roberts and Moore were officers and directors, and Defendants Adams, Baker, McCamant, Kellen, Kerr and Brown were directors, was headquartered and operated substantially all of its business from North Carolina from its inception in 2007 until early 2012 when the headquarters were moved to San Antonio, Texas. During the period 2007 through early 2012, Defendants Roberts and Moore, operated and managed the company from Consert’s North Carolina Headquarters. The activities complained of either took place in North Carolina or directly affected the financial and other interests of shareholder Plaintiffs who reside in North Carolina. . . . Defendants Stephens Bank and Mowery had significant contacts with Plaintiffs who reside in North Carolina and engaged in activities within North Carolina in an attempt to induce them to approve the sale of Consert. All of the Defendants have sufficient contacts with the State of North Carolina to provide this Court’s personal jurisdiction over each of them.

(FAC ¶ 30.)6

50. Plaintiffs contend that the Court should not consider whether each

individual PJ Movant engaged in conduct or activities that subject the party to

personal jurisdiction in North Carolina, but instead should consider the conduct of

Defendants collectively. More particularly, Plaintiffs contend that:

a. “[F]rom 2007 through 2011,” while Consert was headquartered in

Raleigh, Moore, Roberts, Brown, McCamant, Adams, and Kerr

“developed a collusive scheme to defraud Plaintiffs” that included taking

steps to oust Forbes from Consert. (Pls.’ Omnibus Opp’n to Certain Defs.’

Mots. Dismiss Counts I-V & on Basis of Lack of Personal Jurisdiction 14

[hereinafter “Pls.’ Omnibus Opp’n Mots. Dismiss on PJ”].) Plaintiffs

contend this conduct constituted “continuous and systematic” contacts

6 The Court notes that PJ Movants have provided evidence that Consert’s relocation was

completed in August 2011 and Consert operated its business from Texas after that time. Plaintiffs have not come forward with any opposing evidence, and therefore, for purposes of its personal jurisdiction analysis, the Court finds that Consert completed its relocation to Texas in August 2011 and operated its business from Texas thereafter. with North Carolina that confer general personal jurisdiction over the

PJ Movants (Id.);

b. “After Consert moved from North Carolina, O&D

Defendants . . . engaged in additional acts directed at NC Resident

Plaintiffs . . . to deprive NC Resident Plaintiffs of the value of their

ownership of shares in Consert by: (1) creating a series of loans with

usurious interest rates and preference terms, (ii) [sic] increasing their

salaries which were accrued as debt on Consert’s books, and (iii) [sic]

unreasonably delaying the 2012 shareholder’s meeting to conceal their

activities” (Id. 15); and

c. Moore, Mowery and “the O&D Defendants” communicated fraudulent

statements to “NC Resident Plaintiffs” and engaged in other acts and

omissions that “induced” them “to consent to the merger and forfeit their

shareholdings in Consert” (Id. 16−18). Plaintiffs argue that “[b]y

inference, all such actions were approved by, communicated by, . . . or

made on behalf of the Moving Defendants.” (Id. 16.)

51. The Court will first address Plaintiffs’ arguments that the activities of

Defendants should be considered collectively, or the activities or conduct of one

Defendant attributed to another, for purposes of establishing personal jurisdiction,

before considering the facts regarding each of the PJ Movants individually.

52. First, to the extent Plaintiffs contend that the Court has personal

jurisdiction over O&D Defendants merely because they were directors and/or officers of Consert, which was headquartered in North Carolina until August 2011, that

contention fails. It is well-established that “[t]o base personal jurisdiction on the bare

fact of a defendant’s status as, e.g., corporate officer or agent, would violate his due

process rights.” Saft Am., Inc. v. Plainview Batteries, Inc., 189 N.C. App. 579, 595, 659

S.E.2d 39, 49 (2008) (Arrowood, J., dissenting), adopted by 363 N.C. 5, 673 S.E.2d 864

(2009) (per curiam); Lulla v. Effective Minds, LLC, 184 N.C. App. 274, 280, 646 S.E.2d

129, 134 (2007); Robbins v. Ingham, 179 N.C. App. 764, 771, 635 S.E.2d 610, 615

(2006). “[P]ersonal jurisdiction over an individual officer or employee of a corporation

may not be predicated merely upon the corporate contacts with the forum.” Robbins,

179 N.C. App. at 771, 635 S.E.2d at 615. For a court to assert personal jurisdiction

over a corporate agent, he must have committed some affirmative act in his individual,

official capacity. Lulla, 184 N.C. App. at 280, 646 S.E.2d at 134; Robbins, 179 N.C.

App. at 769, 635 S.E.2d at 614.

53. In their brief, Plaintiffs appear to argue that (a) the acts of individual

Defendants may be imputed to other Defendants for purposes of establishing personal

jurisdiction, or (b) that this Court should recognize a “conspiracy” theory of personal

jurisdiction. (Pls.’ Omnibus Opp’n Mots. Dismiss on PJ 13−18.) Under a conspiracy

theory of jurisdiction, a court may have personal jurisdiction over a conspirator who

has few contacts with the forum “if substantial acts in furtherance of the conspiracy

were performed in the state and the conspirator knew or should have known that these

acts would be performed.” Stetser, 162 N.C. App. at 521, 591 S.E.2d at 575 (quoting

Hanes Cos. v. Ronson, 712 F. Supp. 1223, 1229 (M.D.N.C. 1988)). North Carolina, however, has not adopted a conspiracy theory of personal jurisdiction. Id.; Weisman,

2014 NCBC LEXIS 41, at *18. The acts of one alleged conspirator-defendant cannot

be imputed to his alleged co-conspirator defendants to establish sufficient minimum

contacts of the latter.

54. The Court also rejects Plaintiffs’ argument that the statements, acts, or

omissions of one individual Defendant may be imputed to the other individual

Defendants to establish minimum contacts. While a corporate officer or director may

be considered an agent of the corporation, there is no basis for concluding that any of

the O&D Defendants were acting as agents for one another so as to impute actions

and statements by one to another for purposes of establishing sufficient minimum

contacts of the latter. See Godwin v. Walls, 118 N.C. App. 341, 348, 455 S.E.2d 473,

479 (1995) (“While a corporate entity is liable for any wrongful act or omission of an

agent acting with proper authority, it does not follow an agent may be held liable

under the jurisdiction of our courts for acts or omissions allegedly committed by the

corporation. . . . A corporation can only act through its agents; therefore, plaintiffs may

not assert jurisdiction over a corporate agent without some affirmative act committed

in his individual official capacity.” (citation omitted)); Robbins, 179 N.C. App. at 771,

635 S.E.2d at 615−16 (rejecting plaintiffs’ argument that acts of corporate agents

should be imputed to another corporate agent for purposes of establishing sufficient

minimum contacts because the former’s acts benefitted the latter as a director and

shareholder). 55. Therefore, in assessing whether Plaintiffs have met their burden to

establish grounds to support the exercise of personal jurisdiction over each Defendant,

the Court will not impute the actions and statements of one defendant to the other

individual Defendants, nor will the Court consider the non-individualized, sweeping

allegations regarding Defendants’ and O&D Defendants’ activities; rather, the Court

will address below only those allegations pertaining to, and contacts of, the particular

Defendant at issue.

1. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Kellen.

56. Plaintiffs do not specify whether they contend the Court has general or

specific personal jurisdiction over Kellen. Kellen has resided in Texas for over ten

years. (Kellen Aff. ¶ 2.) Kellen has never resided in North Carolina, owned property

in North Carolina, paid income taxes in North Carolina, or had a bank account in

North Carolina. (Kellen Aff. ¶¶ 6−9.) Kellen has not traveled to North Carolina in at

least twenty years. (Kellen Aff. ¶ 10.) Kellen began working for Consert as a

consultant in March 2012, after Consert relocated its offices to Texas, and served as

Consert’s CFO from April 2012 until the Merger in February 2013. (Kellen Aff. ¶ 3.)

Kellen did not travel to North Carolina in connection with the Merger. (Kellen Aff. ¶

5.)

57. The Complaint does not allege any specific act, statement, or omission by

Kellen, except that he attended the Shareholders Meeting. (FAC ¶ 69.) There is no

allegation or evidence that any communications or interactions took place between

Kellen and Plaintiffs at the Shareholders Meeting or at any other time. Kellen’s mere attendance at the Shareholders Meeting in Texas was not activity purposefully

directed at North Carolina.

58. The Court concludes that Kellen does not have sufficient minimum contacts

with North Carolina to satisfy due process, and he must be dismissed for lack of

personal jurisdiction. The Kellen Motion to dismiss Kellen for lack of personal

jurisdiction should be GRANTED.

2. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Baker.

59. Plaintiffs did not make any arguments in support of the Court’s exercise of

personal jurisdiction over Baker and do not specify whether they contend the Court

has general of specific personal jurisdiction over Baker. Baker resides in Georgia and

has resided there for over ten years; he has not resided in North Carolina in the last

twenty years. (Baker Aff. ¶¶ 2, 8.) Baker has never owned property in North Carolina

or had a bank account in North Carolina. (Baker Aff. ¶¶ 9−10.) Baker was a director

of Consert from April 2012 until the Merger in February 2013. (Baker Aff. ¶ 6.) Baker

attended Board meetings in person in Texas or by phone from Georgia. (Baker Aff. ¶

7.) Baker did not travel to North Carolina in connection with his role as a director.

(Baker Aff. ¶ 7.)

60. The Complaint does not allege any specific act, statement, or omission by

Baker in furtherance of the Scheme. Plaintiffs do not allege that Baker attended the

Shareholders Meeting.

61. The Court concludes that Baker does not have sufficient minimum contacts

with North Carolina to satisfy due process, and he must be dismissed for lack of personal jurisdiction. The Baker, Brown, and McCamant Motion to dismiss Baker for

lack of personal jurisdiction should be GRANTED.

3. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over McCamant.

62. Plaintiffs did not make any arguments in support of the Court’s exercise of

personal jurisdiction over McCamant and do not specify whether they contend the

Court has general or specific personal jurisdiction over McCamant. McCamant resides

in Texas and has resided there for over fifty-five years; he has never resided in North

Carolina. (McCamant Aff. ¶¶ 2, 6.) McCamant has never owned property in North

Carolina or had a bank account in North Carolina. (McCamant Aff. ¶¶ 7, 9.)

McCamant was a director of Consert from October 2011 until the Merger in February

2013. (McCamant Aff. ¶ 4.) McCamant attended Board meetings in person in Texas.

(McCamant Aff. ¶ 5.) McCamant did not travel to North Carolina in connection with

his role as a director. (McCamant Aff. ¶ 5.)

63. The Complaint does not allege any specific act, statement, or omission by

McCamant in furtherance of the Scheme. Plaintiffs do not allege that McCamant

attended the Shareholders Meeting.

64. The Court concludes that McCamant does not have sufficient minimum

contacts with North Carolina to satisfy due process, and he must be dismissed for lack

of personal jurisdiction. The Baker, Brown, and McCamant Motion to dismiss

McCamant for lack of personal jurisdiction should be GRANTED. 4. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Kerr.

65. Plaintiffs allege that the Court has personal jurisdiction over Kerr because

he resides in North Carolina. (FAC ¶ 30.) Kerr, however, filed with the Court a sworn

affidavit stating that he has resided in Georgia since March 2014. (Kerr Aff. ¶ 2.) Kerr

concedes that he resided in North Carolina from 2008 until 2014. (Br. in Supp. Mot.

Dismiss of Def. Kerr 23.) For purposes of its personal jurisdiction analysis, the Court

finds that Kerr resided in North Carolina from 2008 until he moved to Georgia in

March 2014. The Court also finds that the paradigm forum for Kerr is Georgia since

he is domiciled there, and was domiciled in Georgia when this lawsuit was filed.

Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011) (“For an

individual, the paradigm forum for the exercise of general jurisdiction is the

individual’s domicile . . . .”).

66. Kerr was a director of Consert from 2009 until the Merger in February 2013.

(Kerr Aff. ¶¶ 4−5.) Plaintiffs do not allege any specific act, statement, or omission by

Kerr in furtherance of the Scheme. There are no allegations regarding Kerr’s

involvement with Consert during his time as a director or his role in the Merger.

Plaintiffs have failed to establish that Kerr had purposeful contacts with North

Carolina from which this action arose or to which this action relates so as to justify

the exercise of specific jurisdiction. Accordingly, the Court must examine whether

Kerr had sufficient contacts with North Carolina to support the exercise of general

personal jurisdiction. 67. There are few cases that address the time period during which a defendant

must have continuous and systematic contacts with the forum state, but the cases that

have addressed the issue have concluded that “[t]he relevant time at which to assess

whether a defendant’s contacts satisfy the continuous and systematic standard is over

a period that is reasonable under the circumstances, up to and including the date the

suit was filed.” Young v. Hair, 7:02-cv-212-F1, 2004 U.S. Dist. LEXIS 6551, at *10

(E.D.N.C. Jan. 26, 2004) (internal quotations omitted) (citing Metropolitan Life Ins.

Co. v. Robertson-Ceco Corp., 84 F.3d 560, 569−70 (2d Cir. 1996)); Harlow v. Children's

Hosp., 432 F.3d 50, 65 (1st Cir. 2005) (same); Access Telecom, Inc. v. MCI Telecomms.

Corp., 197 F.3d 694, 717 (5th Cir. 1999) (same).

68. The Court must determine the relevant time for assessing Kerr’s contacts

with North Carolina under the circumstances involved in this lawsuit. Defendants

began the process of the Merger in April 2012 when Consert hired Stephens to explore

a Merger of Consert. The Merger closed on February 5, 2013. This action was filed on

November 9, 2015. Keeping in mind that whether a defendant has continuous and

systematic contacts is to be based on the totality of the circumstances, rather than a

mechanical formula, the Court finds that the relevant time period for assessing Kerr’s

contacts with North Carolina is from April 2012 to November 9, 2015.

69. Kerr had continuous and systematic contacts with North Carolina during

the relevant period from April 2012 until March 2014 when he lived in the State. Kerr

ceased having continuous contacts when he moved to Georgia roughly 19 months

before this lawsuit was filed. Plaintiff has not shown that Kerr has had any contacts with North Carolina after March 2014, and Kerr was a resident of Georgia at the time

this action was filed.

70. The Court finds that Kerr’s contacts with North Carolina ceased in March

2014, and Kerr did not have any contacts with North Carolina thereafter. Accordingly,

Kerr’s contacts with North Carolina were not “continuous” throughout the relevant

period. While Kerr lived in North Carolina when the Merger was negotiated and

closed, Kerr’s contacts with North Carolina during the relevant time period did not

remain continuous and systematic so as to justify the exercise of general jurisdiction

over him. Therefore, Kerr must be dismissed for lack of personal jurisdiction. The Kerr

Motion to dismiss Kerr for lack of personal jurisdiction should be GRANTED.

5. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Brown.

71. Plaintiffs did not make any arguments in support of the Court’s exercise of

personal jurisdiction over Brown, and do not specify whether they contend the Court

has general or specific personal jurisdiction over Brown. Brown has resided in

Wyoming since January 2015, and before that resided in California for over twenty

years. (Brown Aff. ¶¶ 2−3.) Brown never owned property in North Carolina or had a

bank account in North Carolina. (Brown Aff. ¶¶ 11−12.) From 2008 to 2014, Brown

traveled to North Carolina from time to time to visit his children who were enrolled

at Duke University. (Brown Aff. ¶ 7.) In addition, Brown is an investor in a Texas-

based limited partnership that owns data centers in North Carolina. (Brown Aff. ¶

13.) In 2013, Brown’s share of the partnership’s North Carolina income was $218, and

he paid taxes on that amount to the State of North Carolina. (Brown Aff. ¶ 13.) 72. Brown was a director of Consert from 2008 until the Merger in February

2013. (Brown Aff. ¶ 5.) From 2008 to 2011, Brown attended Board meetings in Raleigh

in person or by telephone phone from California. (Brown Aff. ¶ 6.) There are no facts

that show Brown had any contacts with North Carolina in connection with his role as

a director after Consert relocated to Texas in August 2011.

73. In the FAC, Plaintiffs do not allege any specific act, statement, or omission

by Brown in furtherance of the Scheme. There are no allegations regarding Brown’s

involvement with Consert during his time as a director or his role in the Merger.

Brown did not travel to North Carolina in connection with the Merger. (Brown Aff. ¶

9.) The Court concludes that Brown had no purposeful contacts with North Carolina

from which this action arises or to which this action relates so as to justify the exercise

of specific jurisdiction.

74. The Court also concludes that, based on the totality of the circumstances,

Brown’s contacts with North Carolina during the relevant time period were not so

continuous and systematic so as to satisfy the higher level of minimum contacts

required to support the exercise of general jurisdiction. Therefore, Brown must be

dismissed for lack of personal jurisdiction. The Baker, Brown, and McCamant Motion

to dismiss Brown for lack of personal jurisdiction should be GRANTED.

6. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Moore.

75. Plaintiffs contend that the Court has general jurisdiction over Moore based

on his participation in developing the Scheme and removing Forbes as COO and a

director of Consert while Consert was still headquartered in North Carolina in the “Summer and Fall of 2011.” (Pls.’ Omnibus Opp’n Mots. Dismiss on PJ 14.) Plaintiffs

have not alleged that Moore was ever present in, or traveled to, North Carolina after

Consert relocated to Texas in 2011.

76. Moore, on the other hand, provided evidence that he has resided in Florida

since 2000. (Moore Aff. ¶ 2.) Moore is registered to vote in Florida and has a Florida

driver’s license. (Moore Aff. ¶ 2.) Moore has never resided in North Carolina, owned

property in North Carolina, paid income taxes in North Carolina, or had a bank

account in North Carolina. (Moore Aff. ¶¶ 9−12.) Moore did not travel to North

Carolina in connection with the Merger. (Moore Aff. ¶¶ 6−7.)

77. The Court finds that Moore’s alleged activities in the fall of 2011 related to

developing the Scheme and removing Forbes from Consert were not continuous and

systematic contacts with North Carolina sufficient to establish general personal

jurisdiction over Moore. Thus, the Court does not have general personal jurisdiction

over Moore.

78. Plaintiffs also apparently contend that the Court has personal jurisdiction

over Moore because of his role in the Merger, and particularly in securing the

shareholders’ approval of the Merger. Plaintiffs allege Moore made

misrepresentations to Plaintiffs, including Plaintiffs who lived in North Carolina,

during the Shareholders Meeting. (Pls.’ Omnibus Opp’n Mots. Dismiss on PJ 16.)

Plaintiffs contend that these communications to North Carolina Plaintiffs amounted

to purposeful contacts with North Carolina so as to establish sufficient minimum

contacts. (Id. 16−18.) 79. Here, there is nothing that connects Moore’s statements at the Shareholders

Meeting to North Carolina other than the seven shareholder-plaintiffs who resided in

North Carolina. The Shareholders Meeting was held in Texas and multiple

shareholders from various different locations attended the meeting in person or by

phone.7 Plaintiffs in this case are residents of North Carolina, Tennessee, Illinois,

Texas, Florida, and Oklahoma. The statements Moore made at the Shareholders

Meeting were not statements directed at North Carolina; rather, they were statements

directed to shareholders, including Plaintiffs, seven of whom are residents of North

Carolina and five of whom are residents of five other states. To conclude that Moore’s

statements at the Shareholders Meeting constitute activity purposefully directed at

North Carolina would require the corresponding conclusion that such statements also

constitute activity purposefully directed at Tennessee, Illinois, Florida, Oklahoma,

and any other state in which a shareholder who attended the Shareholders Meeting

resided. See Bank of Am., N.A. v. Corporex Cos., LLC, 3:13-cv-691-RJC, 2014 U.S.

Dist. LEXIS 102670, at *13 (W.D.N.C. July 28, 2014) (“[T]he fact that Defendants

directed their actions against a party in North Carolina is not sufficient, standing

alone, to confer jurisdiction over the parties where no other facts exist to support such.

To rule otherwise would be to risk exercising personal jurisdiction for torts wherever

a plaintiff happened to be located because that is where the injury would be felt most

strongly.”).

7 Plaintiffs have alleged that “the [Shareholders Meeting] was available for shareholders,

including Plaintiffs, to attend in person or by telephone,” but do not allege that any of the Plaintiffs other than Worley attended the meeting or actually heard Moore’s alleged statements. (FAC ¶¶ 69, 76.) 80. Plaintiffs also argue that after Consert moved out of North Carolina, Moore

and the other O&D Defendants “engaged in additional acts directed at NC Resident

Plaintiffs . . . to deprive NC Resident Plaintiffs of the value of their ownership of shares

in Consert” including making usurious loans to Consert, increasing their salaries and

accruing the salaries as debt, and delaying the 2012 shareholders meeting. (Pls.’

Omnibus Opp’n Mots. Dismiss on PJ 15.) Plaintiffs claim that at the time they took

these actions, “O&D Defendants knew that most of Consert’s shareholders resided in

North Carolina.” (Id.) Such knowledge, however, does not make Moore’s activities

purposeful contacts directed at North Carolina. See Burger King Corp. v. Rudzewicz,

471 U.S. 462, 474−75 (1985) (“Although it has been argued that foreseeability of

causing injury in another State should be sufficient to establish such contacts there

when policy considerations so require, the Court has consistently held that this kind

of foreseeability is not a “sufficient benchmark” for exercising personal jurisdiction.”).

81. The above activities were not purposefully directed at North Carolina so as

to confer personal jurisdiction over Moore in this Court. At the time of all of the above

acts, Consert was a Delaware corporation headquartered in Texas. The fact that seven

North Carolina plaintiffs contend that they were affected in North Carolina by these

activities does not transform Moore’s activities into ones purposefully directed at

North Carolina. The Supreme Court recently addressed the nature of the contacts

required to exercise specific jurisdiction over a non-resident defendant in Walden v.

Fiore, 134 S. Ct. 1115, 1121 (2014). The Court explained that “however significant the

plaintiff’s contacts with the forum may be, those contacts cannot be ‘decisive in determining whether the defendant’s due process rights are violated.’ . . . [O]ur

‘minimum contacts’ analysis looks to the defendant’s contacts with the forum State

itself.” Id. at 1122. With regard to whether injury to a plaintiff within the forum state

was sufficient to establish a defendant’s minimum contacts, the Court held:

Calder [v. Jones, 465 U.S. 783 (1984)] made clear that mere injury to a forum resident is not a sufficient connection to the forum. Regardless of where a plaintiff lives or works, an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State. The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant’s conduct connects him to the forum in a meaningful way. Id. at 1125. Moore’s conduct connected to the Merger, even if it impacted certain

Plaintiffs who live in North Carolina, was not purposefully directed at this State.

82. In light of the foregoing, the Court concludes that Plaintiffs have failed to

establish Moore has sufficient minimum contacts with North Carolina to satisfy due

process, and he must be dismissed for lack of personal jurisdiction. The Moore and

Roberts Motion to dismiss Moore for lack of personal jurisdiction should be

GRANTED.

7. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Roberts.

83. Plaintiffs contend that the Court has general jurisdiction over Roberts based

on his participation in developing the Scheme and removing Forbes as COO, and as a

director of Consert while Consert was still headquartered in North Carolina in the

“Summer and Fall of 2011.” (Pls.’ Omnibus Opp’n Mots. Dismiss on PJ 14.) Roberts

did not travel to North Carolina in connection with the Merger. (Roberts Aff. ¶¶ 8−9.)

Roberts admits he traveled to North Carolina for one day in January 2012 to close Consert’s Raleigh office. (Roberts Aff. ¶ 7.) Plaintiffs do not allege that Roberts was

present in North Carolina at any time after January 2012.

84. Roberts filed an affidavit establishing that he has resided in Florida since

1998. (Roberts Aff. ¶ 2.) Roberts has never resided in North Carolina, paid income

taxes in North Carolina, or had a bank account in North Carolina. (Roberts Aff. ¶¶ 11,

13−14.) Roberts also owns approximately two acres of undeveloped land in Burnsville,

North Carolina. (Roberts Aff. ¶ 12.)

85. It is clear that Roberts is domiciled in Florida and Florida is the paradigm

forum with general jurisdiction over Roberts. The Court finds that Robert’s alleged

activities in the fall of 2011 related to developing the Scheme and removing Forbes

from Consert were not continuous and systematic contacts with North Carolina

sufficient to establish general personal jurisdiction over Moore.

86. The Court also finds that Roberts’s ownership of a piece of undeveloped land

in North Carolina, without more, is insufficient for the Court to conclude that Roberts

has purposefully availed himself of the privilege of conducting activities in North

Carolina. The nature and quality of the contact created by the ownership of a single

piece of undeveloped property are not sufficient to confer general jurisdiction over

Roberts. Banc of Am. Sec. LLC, 169 N.C. App. at 696, 611 S.E.2d at 184. In addition,

there is no connection between the cause of action in this lawsuit and the piece of

property. A finding that mere ownership of land subjects a non-resident defendant to

jurisdiction with respect to any and all claims asserted against him is contrary to the

courts’ disfavor of broad constructions of general jurisdiction. Daimler AG v. Bauman, 134 S. Ct. 746, 753, 757−58 (2014) (discussing the strict territorial approach to

personal jurisdiction taken in Pennoyer v. Neff, 95 U.S. 714 (1878) and noting that

“[s]pecific jurisdiction has been cut loose from Pennoyer’s sway, but [the Court] ha[s]

declined to stretch general jurisdiction beyond limits traditionally recognized”). The

Court concludes that it does not have general personal jurisdiction over Roberts based

on his alleged activities in the fall of 2011 and his ownership of undeveloped land.

87. With respect to specific jurisdiction, Plaintiffs do not allege Roberts had any

contacts with North Carolina from which this action arises or to which this action

relates.8 Based on the record, Roberts’s only contact with North Carolina that was

related to his role as a director was his one day-trip to Raleigh in January 2012, to

close Consert’s office, which was unrelated to Plaintiffs’ claims in this case. The FAC

does not allege any other act, statement, or omission by Roberts.

88. The Court concludes that Plaintiffs have failed to establish Roberts has

sufficient minimum contacts with North Carolina to satisfy due process, and he must

be dismissed for lack of personal jurisdiction. The Moore and Roberts Motion to

dismiss Roberts for lack of personal jurisdiction should be GRANTED.

8. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Mowery.

89. Plaintiffs do not specify whether they contend the Court has general or

specific personal jurisdiction over Mowery. Mowery has resided in Arkansas for

twenty-five years. (Mowery Aff. ¶ 2.) Mowery has never resided in North Carolina and

8 Plaintiffs allege that Roberts doubled his salary in April 2012, and accrued the increased

salary on Consert’s books to create preferential payments upon completion of the Merger. (FAC ¶ 44.) This conduct admittedly occurred in Texas. (Id.) does not own property in North Carolina. (Mowery Aff. ¶¶ 18−19.) There is no

allegation or evidence that Mowery has ever visited North Carolina.

90. Mowery is the managing director of Stephens, which is headquartered in

Little Rock, Arkansas. (Mowery Aff. ¶ 3.) In April 2012, after Consert had relocated

its headquarters to San Antonio, Texas, Consert engaged Stephens to provide

investment banking services in connection with attempting to find a buyer for Consert.

(Mowery ¶¶ 4−5.) Mowery directly supervised and managed Stephens’s engagement

with Consert and was Consert’s primary contact at Stephens. (Mowery Aff. ¶ 6.)

Mowery did not travel to North Carolina in connection with Stephens’s engagement

with Consert. (Mowery Aff. ¶ 21.) Mowery attended, in person and by phone, meetings

held in Texas with representatives of Consert and Toshiba to discuss potential terms

of a proposed transaction and the terms of the Merger. (Mowery Aff. ¶¶ 10, 12.)

Mowery attended Board meetings conducted in Texas on July 25, 2012, October 24,

2012, November 27, 2012, and January 15, 2013, in person and by phone, to update

the Board on the status of the Merger. (Mowery Aff. ¶ 11.)

91. Mowery attended the Shareholders Meeting. Plaintiffs contend that at the

Shareholders Meeting, Mowery made misstatements of fact designed to induce the

shareholders to consent to the Merger. For the same reasons Moore’s statements

during the Shareholders Meeting do not constitute activity purposefully directed at

North Carolina, Mowery’s statements during the Shareholders Meeting do not

constitute such purposefully directed activity for purposes of establishing sufficient

minimum contacts. 92. Plaintiffs also allege that between the Shareholders Meeting and the close

of the Merger, Mowery “made calls to Plaintiffs and other shareholders encouraging

them to approve the Merger Agreement” and “misrepresenting that the Merger

Agreement was a ‘good deal for all shareholders’ and in the ‘best interests of all.’” (FAC

¶ 80.) Plaintiffs, however, do not allege to which Plaintiffs or other shareholders

Mowery made phone calls, or whether any of those phone calls were made to residents

of North Carolina. In his affidavit, Mowery states that “[o]n or about January 29, 2013,

I spoke by telephone with Plaintiff Joseph Forbes about the terms of the Merger. I

participated in the call from my office in Little Rock, Arkansas. To the best of my

recollection, the call with Mr. Forbes lasted roughly thirty minutes.” (Mowery Aff. ¶

17.) Plaintiffs allege that Forbes is a resident of North Carolina, and for purposes of

its personal jurisdiction analysis, the Court will assume Mowery called Forbes while

Forbes was in North Carolina. Plaintiff has not established that Mowery made any

other phone calls to North Carolina or to North Carolina residents. Bauer v. Douglas

Aquatics, Inc., 207 N.C. App. 65, 68, 698 S.E.2d 757, 761 (2010) (“[T]he plaintiff bears

the burden of proving, by a preponderance of the evidence, grounds for exercising

personal jurisdiction over a defendant.”).

93. Even construing Plaintiffs’ allegation in the light most favorable to

Plaintiffs, Mowery’s phone call to Forbes does not establish sufficient contacts with

North Carolina for this Court to exercise personal jurisdiction over Mowery.

Generally, personal jurisdiction may not be based solely on an individual’s phone calls

to a party located in the forum state. Alacrity Renovation Servs., LLC v. Long, No. 3:16-cv-00206-FDW-DSC, 2016 U.S. Dist. LEXIS 101735, at *21 (W.D.N.C. Aug. 3,

2016) (phone calls to plaintiff in North Carolina do not constitute sufficient minimum

contacts with North Carolina “unless the parties had an extensive, substantive, or

continuing relationship that tied their behavior to the forum state”); Protocol, LLC v.

Henderson, 18 F. Supp. 3d 689, 701 (M.D.N.C. 2014) (noting that communications to

a party in the forum state are generally not purposeful contact with the forum state

and placing limited weight on the phone calls between defendant and North Carolina

plaintiff); Springs v. Ally Fin., Inc., No. 3:10-CV-311-RJC-DCK, 2010 U.S. Dist. LEXIS

123233, at *27−28 (W.D.N.C. Oct. 14, 2010) (stating that phone calls do not provide a

basis for personal jurisdiction because they are not tantamount to physical presence);

WLC, LLC, 454 F. Supp. 2d at 436−37 (referring to defendants’ e-mails and phone

calls to North Carolina plaintiff and stating “that an exchange of communications

between two parties, one of whom is located in the forum state, in furtherance of a

contract, will not generally constitute purposeful contact with the forum state for

purposes of jurisdiction”); Miller v. Szilagyi, 221 N.C. App. 79, 92−93, 726 S.E.2d 873,

883 (2012) (“[P]hone calls, like contracts, do not automatically establish the necessary

minimum contacts with this State for the establishment of personal

jurisdiction. . . . Plaintiff has not demonstrated how the correspondences from the

[defendants] to Plaintiff in North Carolina constituted a purposeful availment by the

[defendants] of the privilege of conducting activities within the forum State, thus

invoking the benefits and protection of its laws.” (internal quotations omitted)). 94. Moreover, Mowery did not purposefully direct his activity at North Carolina.

“Due process requires that a defendant be haled into court in a forum State based on

his own affiliation with the State, not based on the random, fortuitous, or attenuated

contacts he makes by interacting with other persons affiliated with the State.”

Walden, 134 S. Ct. at 1123. Mowery contacted Plaintiffs because of their status as

shareholders of Consert, a Delaware corporation with its principal place of business

in Texas. Seven shareholder-plaintiffs happened to be North Carolina residents, but

the other five shareholder-plaintiffs are located in five different states. See Alacrity

Renovation Servs., LLC, 2016 U.S. Dist. LEXIS 101735, at *22 (concluding

communications between defendant and plaintiff in North Carolina are insufficient to

establish minimum contacts because such communications are contacts with persons

who reside in North Carolina, not contacts with North Carolina itself); Protocol, LLC,

18 F. Supp. 3d at 701 (noting that defendant’s communications to plaintiff “were

directed at North Carolina only because [plaintiff] happened to be located there”);

WLC, LLC, 454 F. Supp. 2d at 438 (“[I]t appears that the contacts between Defendants

and North Carolina arose merely because Plaintiff is located in North Carolina and

not because Defendants purposely directed their activities towards the State of North

Carolina.”); Sea-Roy Corp., 1995 U.S. Dist. LEXIS 21859, at *32 (“[I]t is necessary to

distinguish between a defendant’s acts which are aimed at a plaintiff who is located

in a forum and those which are aimed at the forum itself: only those acts in the second

category constitute purposeful and deliberate contact with the forum which makes it fair and reasonable for the forum to exercise personal jurisdiction.” (internal

quotations omitted)).

95. Mowery has never resided in North Carolina and his participation in the

Merger took place entirely outside of North Carolina. On similar facts, North Carolina

courts have declined to exercise specific jurisdiction over a defendant. See Curvcraft,

Inc. v. J.C.F. & Assocs., Inc., 84 N.C. App. 450, 452, 352 S.E.2d 848, 849 (1987) (no

specific jurisdiction when defendant resided outside of the state and “never traveled

to North Carolina in connection with th[e] contract” that was the focus of the

complaint); see also WLC, LLC, 454 F. Supp. 2d at 432 (no specific jurisdiction when

the vast majority of the work on the consulting agreement at issue had taken place in

Mississippi and other states, not North Carolina); Weisman v. Blue Mt. Organics

Distrib., LLC, 2014 NCBC LEXIS 41, *16 (N.C. Super. Ct. 2014) (declining to exercise

specific jurisdiction when all activity related to relevant transaction “occurred entirely

in Virginia”); Cameron-Brown Co. v. Daves, 83 N.C. App. 281, 285−87, 350 S.E.2d 111,

114−16 (1986) (no specific jurisdiction over defendant when negotiations over contract

at issue occurred in South Carolina; defendant was a South Carolina resident; and

defendant’s only contact with North Carolina was mailing payments to North Carolina

office pursuant to the contract).

96. Based on the foregoing, Mowery did not have sufficient minimum contacts

with North Carolina to confer personal jurisdiction over him in this Court. The

Mowery and Stephens Motion to dismiss Mowery for lack of personal jurisdiction

should be GRANTED. 9. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Stephens.

97. Plaintiffs appear to contend that the Court has both specific and general

personal jurisdiction over Stephens. Plaintiffs allege that Stephens “is a corporation

having its principal place of business in Little Rock, Arkansas and an office at 101 S.

Stratford Road, Winston-Salem, North Carolina.” (FAC ¶ 29.) Plaintiffs allege that

Stephens “had significant contacts with Plaintiffs who reside in North Carolina and

engaged in activities within North Carolina in an attempt to induce them to approve

the [S]ale[,]” but the only specific activity attributed to Stephens are Mowery’s alleged

phone calls to unnamed “Plaintiffs and other shareholders.” (FAC ¶¶ 30, 80.)

98. Defendants submitted affidavit evidence that Stephens is an Arkansas

corporation headquartered in Little Rock. (Mowery Aff. ¶ 3.) During the engagement

by Consert, Mowery “supervised a team of investment bankers and analysts within

Stephens who were working on the merger transaction.” (Mowery Aff. ¶ 13.) All of the

Stephens employees who worked on the Merger were based in Little Rock, Arkansas.

(Id.) No one on Stephens’s investment banking team traveled to North Carolina in

connection with Stephens’s engagement with Consert. (Mowery Aff. ¶ 21.)

99. Stephens has retail branch offices in Winston-Salem and Charlotte, North

Carolina, which provide wealth management services. (Mowery Aff. ¶ 14.) Stephens

does not employ corporate finance investment bankers who perform the type of

services provided during the Consert engagement in North Carolina. (Mowery Aff. ¶

14.) None of Stephens’s North Carolina employees worked on the Merger. (Mowery

Aff. ¶¶ 13−14.) 100. Stephens’s only contacts with North Carolina related the Merger were

Mowery’s. The Court already has determined that Mowery did not have sufficient

minimum contacts with North Carolina to satisfy due process. Therefore, the Court

concludes that Stephens does not have sufficient minimum contacts with North

Carolina from which this action arises or to which this action relates to support the

exercise of specific jurisdiction.

101. General jurisdiction requires a “significantly higher” level of contacts with

the forum state than specific jurisdiction. Cambridge Homes of N.C. L.P. v. Hyundai

Constr., Inc., 194 N.C. App. 407, 412, 670 S.E.2d 290, 295 (2008). General jurisdiction

over a foreign corporation exists “when [its] affiliations with the State are so

continuous and systematic as to render [it] essentially at home in the forum State.”

Daimler AG, 134 S. Ct. at 754 (internal quotations omitted) (quoting Goodyear Dunlop

Tires Operations, S.A., 564 U.S. at 919). The paradigm forums for the exercise of

general jurisdiction over a corporation are the corporation’s place of incorporation and

principal place of business. Id. at 760. Only in an exceptional case may a corporation’s

contacts with another state be so continuous and systematic so as to render it

essentially at home there. Id. at 761 n.19; Brown v. Lockheed Martin Corp., 814 F.3d

619, 627 (2d Cir. 2016) (stating that “Daimler established that, except in a truly

exceptional case, a corporate defendant may be treated as essentially at home only

where it is incorporated or maintains its principal place of business” and noting that

at least three other circuits agree with such interpretation); Hutton v. Hydra-Tech,

Inc., 1:14-cv-888, 2016 U.S. Dist. LEXIS 135497, at *10 (M.D.N.C. Sept. 30, 2016); Ricks v. Armstrong Int’l, Inc., No. 4:14-CV-37-BO, 2014 U.S. Dist. LEXIS 86600, at *6

(E.D.N.C. June 24, 2014).

102. The “textbook case” for exercising general jurisdiction over a foreign

corporation is Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952). The

defendant in Perkins was a Philippine mining company. The company’s president

ceased mining operations due to World War II and “moved to Ohio, where he kept an

office, maintained the company’s files, and oversaw the company’s activities.” Id. at

756 (citing Perkins, 342 U.S. at 448). The Supreme Court held that Ohio courts had

general jurisdiction over defendant “because ‘Ohio was the corporation’s principal, if

temporary, place of business.’” Id. (quoting Keeton v. Hustler Magazine, Inc., 465 U.S.

770, 780, n.11 (1984)).

103. Here, Stephens is an Arkansas corporation with its principal place of

business in Little Rock, Arkansas, and Arkansas is the paradigm forum with general

jurisdiction over Stephens. Nevertheless, Plaintiffs appear to contend that the Court

has personal jurisdiction over Stephens because it “has a place of business and does

significant business in the State of North Carolina.” (FAC ¶ 30.) Plaintiffs, however,

have not provided evidence, argued, or even alleged that the nature or amount of

business Stephens conducts in North Carolina would render Stephens “essentially at

home” in this State for purposes of asserting general personal jurisdiction. Weisman,

2014 NCBC LEXIS 41, at *12 (evidence that defendant-company “received only 3.6%

of its total sales volume from North Carolina” was “insufficient to support general

jurisdiction over [it]”); Occidental Fire & Cas. Co. v. Cont’l Ill. Nat’l Bank & Tr. Co., 689 F. Supp. 564, 568 & n.1 (E.D.N.C. 1988) (finding no general jurisdiction

existed when the defendant’s loan activity in the forum state exceeded $100

million); Ash v. Burnham Corp., 80 N.C. App. 459, 461−62, 343 S.E.2d 2, 3−4

(1986) (holding that the defendant’s sales to North Carolina customers, comprising

0.5% of its total annual sales, was insufficient to support jurisdiction).

104. Even considering that Stephens has two retail offices in North Carolina,

Plaintiffs have failed to show that Stephens’s contacts with North Carolina satisfy the

demanding standard for exercising general jurisdiction over a foreign corporation. See

Brown, 814 F.3d at 628−29 (concluding that defendant’s contacts with the forum state

did not render it essentially at home there where defendant leased the same building

in the state for over fifteen years and ran operations at three other leased locations in

the state); Cutcher v. Midland Funding, LLC, No. ELH-13-3733, 2014 U.S. Dist.

LEXIS 68768, at *21 (D. Md. May 19, 2014) (concluding that plaintiff failed to make a

prima facie showing that defendants’ contacts with Maryland are so continuous and

systematic such that defendants are essentially at home in Maryland where plaintiff

merely alleged that defendants maintain a place of business in Maryland and conduct

business in Maryland).

105. The Court concludes that Plaintiffs have failed to establish Stephens’s

contacts with North Carolina are so continuous and systematic that it is essentially

at home in North Carolina. The Mowery and Stephens Motion to dismiss Stephens for

lack of personal jurisdiction should be GRANTED. 9. Plaintiffs have not established by a preponderance of the evidence that the Court has personal jurisdiction over Alamo.

106. Plaintiffs make no specific argument regarding this Court’s personal

jurisdiction over Alamo. The FAC does not allege that Alamo had any corporate

existence beyond acting as a temporary vehicle for completing the Merger, does not

allege that Alamo had any employees or agents, and does not allege that Alamo

engaged in any specific act, statement, or omission in furtherance of the Scheme.

107. Alamo contends that it “was merged ‘with and into’ Consert and

‘disappeared’ as a separate legal entity on February 1, 2013. Given that Alamo no

longer has a corporate existence, it must be dismissed pursuant to N.C. R. Civ. P.

12(b)(2).” (Alamo’s Br. Supp. Mot. Dismiss 5.) Alamo provided evidence that it was

merged with and into Consert, and that Consert was the surviving corporation.

(Mansfield Aff. Exh. 1; Pellissier Aff. ¶ 4.) Plaintiffs allege that Consert was merged

into Alamo, but concede that Consert was the surviving corporation. (FAC ¶¶ 2, 26.)

Plaintiffs, however, have not presented evidence to rebut Alamo’s evidence that it no

longer has a corporate existence, and Plaintiffs made no specific argument regarding

Alamo’s current corporate status in its brief opposing the Alamo Motion.

108. Delaware law applies to the question of whether Alamo, a Delaware

corporation, continues to have a legal existence. Bluebird Corp. v. Aubin, 188 N.C.

App. 671, 680, 657 S.E.2d 55, 63 (2008) (“States normally look to the State of a

business’ incorporation for the law that provides the relevant corporate governance

general standard of care.”); Akande v. Transamerica Airlines, Inc., No. 1039-VCP,

2007 Del. Ch. LEXIS 68, at *63 (Del. Ch. May 25, 2007) (“[T]he existence or nonexistence of a Delaware corporation is governed by Delaware law.”); Beals v. Wash.

Int’l, Inc., 386 A.2d 1156, 1161 (Del. Ch. 1978) (“In resolving questions centering on

corporate existence . . . , it should be kept in mind that corporations exist only by

legislative act.”).

109. Under Delaware law, two Delaware corporations may be merged into a

single corporation, which may be one of the constituent corporations. Del. Code Ann.

tit. 8, § 251(a); Cigna Health & Life Ins. Co. v. Audax Health Sols., Inc., 107 A.3d 1082,

1097 n.57 (Del. Ch. 2014). When two corporations merge, the merged corporation’s

identity is merged into the surviving corporation and the merged corporation ceases

to exist; only the surviving corporation maintains its corporate existence. Del. Code

Ann. tit. 8, § 259(a); Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d

62, 86 (Del. Ch. 2013) (“[U]nder section 259, the corporation that was merged into the

second corporation cease[d] to exist.” (internal quotations omitted) (second alteration

in original)); Beals, 386 A.2d at 1161 (“Since by statute, corporate existence is

terminated on the date of merger, a corporation ceases to exist on merger for all

purposes . . . .” (citation omitted)); Argenbright v. Phx. Fin. Co., 187 A. 124, 126 (Del.

Ch. 1936) (“When a . . . merger has taken place under the statute, the old corporations

have their identity absorbed into that of the new corporation or the one into which

they were merged.”).

110. As a result, when a merger becomes effective upon the filing of the merger

agreement or a certificate of merger with the Secretary of State, the merged

corporation lacks the capacity to sue or be sued. Nat’l Union Fire Ins. Co. v. Stauffer Chem. Co., C.A. No. 87C-SE-11, 1991 Del. Super. LEXIS 269, at *7−8 (Del. Sup. Ct.

July 15, 1991) (dismissing a corporate defendant who had merged into another

corporation at the time the action was filed because the merged corporation lacked the

capacity to be sued); see Del. Code Ann. tit. 8, § 251(c).

111. Here, Alamo was formed in Delaware on January 23, 2013 and merged into

Consert pursuant to Del. Code Ann. tit. 8, § 251. (Mansfield Aff. Exh. 1.) A certificate

of merger was filed with the Delaware Secretary of State on February 1, 2013. (Id.)

Once the certificate of merger was filed, Alamo ceased to exist.

112. This action was filed on November 9, 2015, which was after Alamo’s

existence ended. Alamo lacks the capacity to be sued and must be dismissed. Rankin

v. Food Lion, 210 N.C. App. 213, 216−17, 706 S.E.2d 310, 313 (2011) (affirming

summary judgment where the defendants submitted an affidavit establishing, inter

alia, that two of the corporate defendants no longer existed and a third was “not a

legal entity”); Deal v. Cape Fear Valley Hosp., No. 5:09-CT-3066-D, 2011 U.S. Dist.

LEXIS 10375, at *10−11 (E.D.N.C. Feb. 2, 2011) (dismissing claims on Rule 12(b)(2)

grounds where defendant’s affidavit established that the entity sued by plaintiff did

not exist); Thomas v. Kerr Drug Stores, Inc., No. 74-36-CIV-8, 1975 U.S. Dist. LEXIS

16872, at *2 n.1 (E.D.N.C. June 10, 1975) (“Defendant Kerr Wholesale, Inc. . . . no

longer exists as a corporate entity, its full functions having been absorbed by Kerr

Drugs Stores, Inc. The case must therefore be dismissed as to the former party.”). 113. The Court concludes that at the time this lawsuit was filed, Alamo did not

have a legal existence as a corporation and could not be sued. The Alamo Motion to

dismiss Alamo for lack of personal jurisdiction should be GRANTED.9

B. Adams Motion.

114. In the FAC, Plaintiffs make claims against Adams for: (1) breach of fiduciary

duty; (2) common law fraud; (3) constructive fraud; (4) conspiracy to defraud; (5)

fraudulent inducement; and (6) unfair and deceptive trade practices. (FAC 27−31, 34.)

Plaintiffs, however, have not made any specific allegations regarding Adams in the

FAC other than the allegations identifying him as a Defendant. (FAC ¶ 21.)

115. Adams is a resident of North Carolina and accordingly has not moved to

dismiss for lack of personal jurisdiction. Instead, Adams moves to dismiss under Rule

12(b)(1) for lack of subject matter jurisdiction, contending that all of Plaintiffs’ claims

are derivative claims of Consert and Plaintiffs lack standing to bring direct claims

against Adams.

116. Alternatively, Adams moves to dismiss under Rule 12(b)(6) for failure to

state a claim upon which relief can be granted.

1. Plaintiffs’ claims are not derivative and the Court has subject matter jurisdiction over the claims.

117. A court shall dismiss the action when it appears that the court lacks subject

matter jurisdiction. N.C. Gen. Stat. § 1A-1, Rule 12(h)(3). A defect in subject matter

jurisdiction may be raised by a party or by the court sua sponte. Conner Bros. Mach.

9 In addition, even if Alamo had the capacity to be sued, Plaintiffs have alleged no facts and

provided no evidence that Alamo had contacts with North Carolina that would establish that this Court has personal jurisdiction over Alamo. Dismissal is also mandated on that basis. Co. v. Rogers, 177 N.C. App. 560, 561, 629 S.E.2d 344, 345 (2006). “A motion to dismiss

for lack of subject matter jurisdiction is not viewed in the same manner as a motion to

dismiss for failure to state a claim upon which relief can be granted.” Tart v. Walker,

38 N.C. App. 500, 502, 248 S.E.2d 736, 737 (1978). A 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); Tart, 38 N.C. App.

at 502, 248 S.E.2d at 737.

118. Adams contends that all of Plaintiffs’ claims against him are derivative

claims belonging to Consert and can only be asserted by or on behalf of Consert. (Br.

Supp. Adams’s Mot. to Dismiss 6.)

119. Adams concedes that “[g]iven that Consert is a Delaware corporation, the

substantive laws and requirements of Delaware regarding derivative claims apply to

Plaintiffs’ action.” (Br. in Supp. Adams’s Mot. to Dismiss 6 n.6); see also Scott v.

Lackey, 2012 NCBC LEXIS 60, at *14 (N.C. Super. Ct. Dec. 3, 2012) (“North Carolina

courts look to the laws of the state in which the company is incorporated to determine

the procedural prerequisites and whether the claim is derivative or individual.”

(internal quotations omitted)). Adams incorrectly contends, however, that Plaintiffs’

claims are derivative because “both Delaware and North Carolina apply the same

standard for derivative claims and their procedural prerequisites.” (Br. in Supp.

Adams’s Mot. to Dismiss 6 n.6.) Based on this erroneous position, Adams contends

that in order for Plaintiffs to maintain direct claims against him, they must fit within the “special duty” or “separate and distinct injury” exceptions under Barger v. McCoy

Hillard & Parks, 346 N.C. 650, 488 S.E.2d 215 (1997).

120. Delaware law is different from North Carolina law and recognizes an

individual shareholder’s right to bring direct claims against directors and officers

under certain circumstances. Under controlling Delaware law, whether a claim is

direct or derivative turns on two questions: “(1) who suffered the alleged harm (the

corporation or the suing stockholders, individually); and (2) who would receive the

benefit of any recovery or other remedy (the corporation or the stockholders,

individually)?” Tooley v. Donaldson, Lufkin, & Jenrette, Inc., 845 A.2d 1031, 1033

(Del. 2004).

121. Under Delaware law, it is well-settled that “[a] stockholder who directly

attacks the fairness or validity of a merger alleges an injury to the stockholders, not

the corporation, and may pursue such a claim even after the merger at issue has been

consummated.” Parnes v. Bally Entm’t Corp., 722 A.2d 1243, 1245 (Del. 1999); N.J.

Carpenters Pension Fund v. infoGROUP, Inc., C.A. No. 5334-VCN, 2011 Del. Ch.

LEXIS 147, at *41 & n.69 (Del. Ch. Sept. 30, 2011) (citing Parnes, 722 A.2d at 1245).

Parnes, a Delaware Supreme Court decision finding that Plaintiffs’ allegations

constituted an actionable direct claim on similar facts, is instructive. In Parnes, a

shareholder alleged that the corporation’s directors breached their fiduciary duties by

entering into a merger that allegedly was the result of unfair dealing and resulted in

an unfair price. Parnes, 722 A.2d at 1244. The Supreme Court of Delaware reversed

the Court of Chancery’s dismissal, finding that the alleged unfairness of the merger terms, a result of alleged self-dealing, was a direct claim. Id. at 1246; see also In re

Ply Gem Indus., Inc., C.A. No. 15779-NC, 2001 Del. Ch. LEXIS 84, at *16 (Del. Ch.

June 26, 2001) (“The attack on [the CEO]’s conduct during the course of the merger

negotiations, and the board’s acquiescence in it, is a challenge by Plaintiffs to the

fairness of the merger process. Accordingly, Parnes dictates that Plaintiffs’ claims

must be treated as individual claims and not as derivative claims.”).

122. Here, Plaintiffs allege that O&D Defendants engaged in conduct that was

designed to ensure that they received benefits from the Merger, but that Plaintiffs did

not. Plaintiffs allege that O&D Defendants misrepresented and omitted material facts

to Plaintiffs to induce them to agree to the Merger. Plaintiffs allege that O&D

Defendants’ misconduct resulted in O&D Defendants receiving substantial benefits

from the Merger, while Plaintiffs received nothing.

123. Under Parnes and its progeny, the allegations of the FAC are a challenge by

Plaintiffs to the fairness of the merger process that render Plaintiffs’ claims direct

claims, rather than derivative claims. The Adams Motion to dismiss for lack of subject

matter jurisdiction should be DENIED.

2. Adams’s Rule 12(b)(6) Motions to Dismiss.

124. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court reviews

the allegations of the complaint in the light most favorable to the plaintiff. The Court’s

inquiry is “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.” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App. 669, 670, 355 S.E.2d 838, 840 (1987). The Court construes the complaint liberally and accepts all allegations as

true. Laster v. Francis, 199 N.C. App. 572, 577, 681 S.E.2d 858, 862 (2009).

125. Dismissal of a claim pursuant to Rule 12(b)(6) is proper “(1) when the

complaint on its face reveals that no law supports [the] claim; (2) when the complaint

reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when

some fact disclosed in the complaint necessarily defeats the . . . claim.” Oates v. JAG,

Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985); see also Jackson v. Bumgardner,

318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986). Otherwise, “a complaint should not be

dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to

no relief under any state of facts which could be proved in support of the claim.” Sutton

v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166 (1970) (emphasis omitted).

126. The Court is not required “to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.” 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). A “trial court can reject allegations that are contradicted by the

documents attached, specifically referred to, or incorporated by reference in the

complaint.” Laster, 199 N.C. App. at 577, 681 S.E.2d at 862. The Court can also ignore

a party’s legal conclusions set forth in its pleading. McCrann v. Pinehurst, LLC, 225

N.C. App. 368, 377, 737 S.E.2d 771, 777 (2013).

a. Breach of Fiduciary Duty/Constructive Fraud.

127. Plaintiffs make claims for breach of fiduciary duty and constructive fraud

against all O&D Defendants, including Adams. In their briefs, Plaintiffs and Adams argued and applied North Carolina law; however, under the internal affairs doctrine,

Delaware law applies to Plaintiffs’ claims against Adams for breach of fiduciary duty

and constructive fraud. Bluebird Corp. v. Aubin, 188 N.C. App. 671, 680, 657 S.E.2d

55, 63 (2008); Tong v. Dunn, 2016 NCBC LEXIS 52, at *2 (N.C. Super. Ct. July 8,

2016) (applying Delaware law to former shareholders’ breach of fiduciary duty claim

against former directors).

128. In order to establish a claim for breach of fiduciary duty under Delaware

law, a plaintiff must show that (1) a fiduciary duty exists, and (2) the fiduciary

breached that duty. Estate of Eller v. Bartron, 31 A.3d 895, 897 (Del. 2011).

129. Here, the allegations of the FAC are sufficient to state a claim for breach of

fiduciary duty against Adams. There is no question that Adams, as a director of

Consert, owed fiduciary duties to Plaintiffs as shareholders of Consert. In re Nine Sys.

Corp., C.A. No. 3940-VCN, 2014 Del. Ch. LEXIS 171, at *87 (Del. Ch. Sept. 4, 2014)

(“Directors of Delaware corporations owe fiduciary duties of care and loyalty to the

corporation and its stockholders.”). Plaintiffs have alleged facts that, taken as true,

are sufficient to show Adams breached his fiduciary duties. The duty of loyalty

requires that a director act in the best interests of the corporation and its

shareholders. Id. A director must put the interests of the shareholders above his own

self-interest. Id. at *88. Plaintiffs allege that O&D Defendants, including Adams, put

their financial and pecuniary interests above those of Plaintiffs in order to maximize

O&D Defendants’ return on the Merger. The Adams Motion to dismiss the breach of

fiduciary duty claim should be DENIED. 130. Under Delaware law, “[c]onstructive fraud is simply a term applied to a

great variety of transactions, having little resemblance either in form or nature, which

equity regards as wrongful, to which it attributes the same or similar effects as those

which follow from actual fraud[.]” In re Wayport, Inc., 76 A.3d 296, 327 (Del. Ch. 2013).

Constructive fraud exists to prevent wrongdoing by someone in a special position of

confidence or trust, such as a fiduciary. Carsanaro v. Bloodhound Techs., Inc., 65 A.3d

618, 643 (Del. Ch. 2013). “[Delaware] corporate case law has thrown this concept [of

constructive fraud] around in a not particularly precise way, but always in a context

in which the court is examining whether directors have complied with their fiduciary

duties.” Id. (quoting Parfi Holding AB v. Mirror Image Internet, Inc., 794 A.2d 1211,

1236 (Del. Ch. 2001), rev’d on other grounds, 817 A.2d 149 (Del. 2002)).

131. As the Court has concluded that the allegations of the FAC are sufficient to

state a claim for breach of fiduciary duty, it follows that the allegations are also

sufficient to state a claim for constructive fraud at the 12(b)(6) stage. The Adams

Motion to dismiss Plaintiffs’ constructive fraud claim should be DENIED.

b. Common Law Fraud/Fraudulent Inducement.

132. Plaintiffs allege claims for fraud and fraudulent inducement against all

Defendants, including Adams. Plaintiffs allege that “Defendants made numerous false

statements of material fact, misrepresentations of material fact and concealed

material facts from Plaintiffs” with “the intent and purpose of inducing Plaintiffs to

forego their lawful rights as shareholders in Consert and consent to the sale and

redemption of their stock in Consert.” (FAC ¶¶ 109, 126.) Adams contends that Plaintiffs have not alleged the fraud claims with sufficient particularity as required

by Rule 9(b). Adams also contends that Plaintiffs’ fraud claims should be dismissed

because Plaintiffs have failed to allege that they relied on, and could not have

reasonably relied on, Defendants’ misrepresentations.

133. The parties have not discussed which state’s substantive law applies to the

fraud claims, but make their arguments based on North Carolina. Generally, North

Carolina applies a lex loci to determine the law that governs tort claims such as fraud.

Harco Nat’l Ins. Co. v. Grant Thornton LLP, 206 N.C. App. 687, 692, 698 S.E.2d 719,

722–23 (2010) (“Our traditional conflict of laws rule is that matters affecting the

substantial rights of the parties are determined by lex loci, the law of the situs of the

claim . . . . For actions sounding in tort, the state where the injury occurred is

considered the situs of the claim.” (quoting Boudreau v. Baughman, 322 N.C. 331, 335,

368 S.E.2d 849, 853−54 (1988))); Camacho v. McCallum, 2016 NCBC LEXIS 81, at *17

(N.C. Super. Ct. Oct. 25, 2016) (“The place of the injury is the state where the injury

or harm was sustained or suffered—the state where the last event necessary to make

the actor liable or the last event required to constitute the tort takes place, and the

substantive law of that state applies.”). Here, Plaintiffs make no allegation of any

specific misrepresentation or concealment by Adams. Instead, the fraud claims are

based primarily on misrepresentations and omissions made by Moore and Mowery at

the Shareholders Meeting in Texas. Plaintiffs do not allege that Adams attended or

participated in the Shareholders Meeting, and allege that only Worley out of the North

Carolina-resident Plaintiffs attended the Shareholders Meeting. (FAC ¶ 76.) Nevertheless, Plaintiffs argue that injury to the interests of North Carolina-resident

Plaintiffs from Moore and Mowery’s misrepresentations occurred in North Carolina.

Accordingly, the Court will apply North Carolina law to Plaintiffs’ fraud claims.

134. In North Carolina, “[t]o allege a claim for fraud, a plaintiff must plead: (1)

[a] [f]alse representation or concealment of a material fact, (2) reasonably calculated

to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting

in damage to the injured party.” Birtha v. Stonemor, N.C., LLC, 220 N.C. App. 286,

296, 727 S.E.2d 1, 9 (2012) (internal quotations omitted).10

135. Under North Carolina conflict of laws rules, procedural rights are

determined by lex fori, the law of the forum. Boudreau, 322 N.C. at 335, 368 S.E.2d at

853−54. Accordingly, Rule 9(b) applies to Plaintiffs’ claims for common law fraud and

fraudulent inducement.

136. Rule 9(b) requires a party pleading fraud to allege the “time, place and

content of the fraudulent representation, identity of the person making the

representation and what was obtained as a result of the fraudulent acts or

representations.” Terry v. Terry, 302 N.C. 77, 85, 273 S.E.2d 674, 678 (1981). “Mere

generalities and conclusory allegations of fraud will not suffice.” Sharp v. Teague, 113

10 The elements of a claim for common law fraud are essentially identical under the laws of

Texas and North Carolina. Burleson State Bank v. Plunkett, 27 S.W.3d 605, 612 (Tex. App. 2000) (“To prevail on a common-law fraud claim, a plaintiff must establish (1) the defendant made a material representation, (2) the representation was false, (3) the defendant either knew the representation was false when made or made it recklessly without any knowledge of its truth and as a positive assertion, (4) the defendant made the representation with the intention that it be acted upon, (5) the representation was in fact relied upon, and (6) damage to the plaintiff resulted.”). N.C. App. 589, 597, 439 S.E.2d 792, 797 (1994) (quoting Moore v. Wachovia Bank &

Tr. Co., 30 N.C. App. 390, 391, 226 S.E.2d 833, 835 (1976)).

137. Regardless of which state’s substantive law applies, Plaintiffs have failed to

satisfy the pleading requirements of Rule 9(b). The FAC does not allege the time,

place, or content of any misrepresentation or omission by Adams. Instead, Plaintiffs

only allege specific misrepresentations by Moore and Mowery. Otherwise, Plaintiffs

generally allege that Defendants made misrepresentations.

138. Plaintiffs cannot rely on allegations of fraudulent misrepresentations by a

group of defendants to support their fraud claims. Julian v. Wells Fargo Bank, N.A.,

2012 NCBC LEXIS 32, at *22 (N.C. Super. Ct. May 22, 2012). In Julian, the court

held:

Plaintiffs’ allegations do not support claims of fraud or fraudulent inducement against Wells Fargo for several reasons. First, Plaintiffs’ pleading of these claims does not conform to the specificity requirements of Rule 9(b). The Complaint does not allege the identity of an individual officer, employee, or agent of the bank who made any deceptive or misleading representation to Plaintiffs. In fact, Plaintiffs’ allegations of fraud and fraud in inducement fail to specifically name Wachovia. Rather, Plaintiffs seek to incorporate Wells Fargo as a defendant in these claims through vague, general references to “Defendants’ [collective] fraudulent misrepresentations . . . [and] inducements.” These conclusory allegations do not meet the particularity requirements of Rule 9(b).

Id. at *21−22.

139. Plaintiffs instead argue that because Adams was a member of the Board,

which they allege acted in concert with each other and the other defendants, the

allegations that Moore and Mowery made fraudulent misrepresentations should be

sufficient to satisfy the particularity requirements of Rule 9(b) with respect to Adams. (Pls.’ Omnibus Opp’n Mots. to Dismiss Counts I−V 21−22.) Plaintiffs cite Phillips and

Jordan, Inc. v. Bostic, 2009 NCBC LEXIS 3 (N.C. Super. Ct. June 2, 2009) in support,

which states

a plaintiff “must identify the particular individuals who dealt with him when he alleges that he was defrauded by a group or association of persons.” In particular, even if a plaintiff “may not be privy to the workings of a group of defendants who have acted in concert to defraud him, . . . [it] can at least identify the particular defendants who allegedly dealt directly with him,” and it can also “designate the occasions on which affirmative misstatements were made to [it]—and by whom[.]”

Id. at *14−15 (alterations in original) (citation omitted) (first quoting Coley v. N.C.

Nat’l Bank, 41 N.C. App. 121, 125, 254 S.E.2d 217, 219 (1979); then quoting Trussell

v. United Underwriters, Ltd., 228 F. Supp. 757, 774 (D. Colo. 1964)).

140. To the extent that Phillips and Jordan, Inc. can be read to support the

proposition that plaintiff satisfies the particularity requirements of Rule 9(b) and

states a claim for fraud against an individual member of a group, such as a corporate

director, by simply alleging that another member of the group made specific

misrepresentations, the Court declines to extend such reasoning to the facts of this

case. Here, Plaintiffs have not made any specific allegations regarding Adams—

Plaintiffs have simply alleged that Adams was a member of the Board at the relevant

time. The FAC does not allege that Adams took any specific actions as a director in

support of the alleged fraudulent misrepresentations by Moore or Mowery. In fact,

Plaintiffs do not even allege that Adams was present at or participated in the

Shareholders Meeting at which Moore and Mowery allegedly made the

misrepresentations. 141. The Court concludes that the allegations of the FAC do not satisfy the

particularity requirements of Rule 9(b). The Adams Motion to dismiss the fraud claims

should be GRANTED.

c. Unfair and Deceptive Trade Practices.

142. Plaintiffs allege a claim against all Defendants, including Adams, for

violation of the North Carolina Unfair and Deceptive Trade Practices Act (“Act”).

Again, Plaintiffs have not alleged any specific conduct by Adams individually that

constituted an unfair or deceptive act.

143. To state a claim under the Act, “plaintiff must show: (1) defendant

committed an unfair or deceptive act or practice, (2) the action in question was in or

affecting commerce, and (3) the act proximately caused injury to the plaintiff.” Dalton

v. Camp, 353 N.C. 647, 656, 548 S.E.2d 704, 711 (2001).

144. Adams contends that Plaintiffs’ claim should be dismissed because it is

based exclusively on activity that occurred within Consert, and not activities involving

other market participants. In White v. Thompson, 364 N.C. 47, 53, 691 S.E.2d 676,

680 (2010), the North Carolina Supreme Court held:

Our prior decisions have determined that the General Assembly did not intend for the Act’s protections to extend to a business’s internal operations. . . . [T]he Act is not focused on the internal conduct of individuals within a single market participant, that is, within a single business. To the contrary, . . . the General Assembly intended the Act’s provisions to apply to interactions between market participants. As a result, any unfair or deceptive conduct contained solely within a single business is not covered by the Act. Accord Alexander v. Alexander, 792 S.E.2d 901, 904 (N.C. Ct. App. 2016) (quoting

White, 364 N.C. at 52, 691 S.E.2d at 679); Powell v. Dunn, 2014 NCBC LEXIS 3, at *8

(N.C. Super. Ct. Jan. 28, 2014).

145. The facts in Powell are similar to the facts of this case. In Powell, plaintiffs

were former common shareholders and defendants were former directors and

preferred shareholders. Powell, 2014 NCBC LEXIS 3, at *2. The corporation merged

with another corporation, and plaintiffs filed suit alleging that defendants breached

their fiduciary duties to plaintiffs by structuring the merger to the preferred

shareholders’ benefit and to the common shareholders’ detriment.

146. The court in Powell held that defendants’ alleged unfair or deceptive conduct

was not in or affecting commerce; “[r]ather, the alleged breaches of fiduciary duty owed

to the common shareholders and the misrepresentations complained of were matters

internal to [the company] and did not concern the company’s interaction with other

market participants in its regular, day-to-day activities.” Id. at *11. The indirect

involvement of an investment bank and other potential purchasers did not provide a

basis for the Court to conclude the conduct was in or affecting commerce. Id. at *10.

147. Here, Plaintiffs allege that Defendants’ conduct was unfair and deceptive

because they structured the Merger to benefit themselves and to the Plaintiffs’

detriment. Such conduct is wholly within Consert, a single business, and is not in or

affecting commerce. The Adams Motion to dismiss Plaintiffs’ claim for violation of the

Act should be GRANTED. d. Conspiracy to Defraud.

148. As a fourth count, Plaintiffs allege that “Defendants agreed, colluded and

conspired among themselves, and each intentionally performed one or more actions in

furtherance of an illegal scheme to defraud Plaintiffs, which scheme or artifice

included fraudulent inducement, constructive fraud, and common law fraud.” (FAC ¶

121.)

149. The Court will apply North Carolina law to Plaintiffs’ claim for conspiracy

to defraud. Stetser v. TAP Pharm. Prods. Inc., 165 N.C. App. 1, 16, 598 S.E.2d 570,

581 (2004) (“[T]he substantive law of the state where the injury occurred would be

applied to the plaintiffs’ claims for . . . civil conspiracy and tortious concert of action.”).

150. It is well-settled that there is no independent cause of action for conspiracy.

Toomer v. Garrett, 155 N.C. App. 462, 483, 574 S.E.2d 76, 92 (2002). “[O]ur law

nevertheless permits one defrauded to recover from anyone who facilitated the fraud

by agreeing for it to be accomplished.” Neugent v. Beroth Oil Co., 149 N.C. App. 38,

53, 560 S.E.2d 829, 838−39 (2002) (citing Nye v. Oates, 96 N.C. App. 343, 346−47, 385

S.E.2d 529, 531 (1989)). “The elements of facilitating fraud are: (1) that the defendants

agreed to defraud plaintiff; (2) that defendants committed an overt tortious act in

furtherance of the agreement; and (3) that plaintiff suffered damages from that act.”

Id. To state a claim for civil conspiracy, “[t]he pleader must . . . allege the facts from

which the alleged conspiracy may be inferred and the alleged unlawful acts agreed

upon.” Thomas & Howard Co. v. Am. Mut. Liability Ins. Co., 241 N.C. 109, 115, 84

S.E.2d 337, 341 (1954). “[A]llegations that the plaintiff sustained a loss ‘by the dishonesty and/or fraud’ of one or more of its defendant employees, and that the

individual defendants acted ‘in collusion and/or conspiracy’ with each other are mere

conclusions, and not sufficient.” Id.; Kirby v. Reynolds, 212 N.C. 271, 284, 193 S.E.

412, 420 (1937) (“There is no direct or circumstantial allegation in the complaint to

show any conspiracy between [defendants] to injure plaintiff. The allegations in the

pleadings, ‘their wanton, willful, malicious, and unlawful combine, conspiracy,

confederation, and agreement to injure this plaintiff,’ etc., are not borne out by the

long details of the pleadings, and were merely conclusions of the pleader and not

considered on a demurrer.”).

151. The FAC alleges that Defendants “agreed, colluded and conspired among

themselves . . . to defraud Plaintiffs, which scheme or artifice included fraudulent

inducement, constructive fraud, and common law fraud” (FAC ¶ 121), but does not

allege any facts explaining how Adams was involved in the conspiracy or that Adams

entered into an agreement with the other Defendants. The FAC generally states that

“Defendants Roberts and Moore, acting individually and in concert with other

defendants, devised and executed a scheme . . . which had the purpose and effect of

disenfranchising certain shareholders, including Plaintiffs.” (FAC ¶ 33.) In addition,

under the heading “Defendants’ Illegal and Fraudulent Scheme,” the FAC alleges that

“Defendants Roberts and Moore . . . devised a scheme to sell Consert to a third party

in a manner that would illegally maximize the returns on their personal investments

in Consert, and the investments of certain other officers, directors, and investors” to

Plaintiffs’ detriment. (FAC ¶ 40.) There are no allegations that Adams took any action in furtherance of the Scheme, or that Adams received any benefit from the Scheme,

from which the Court can infer a meeting of the minds between Adams and any other

Defendants.

152. Plaintiffs allegation that “Defendants agreed, colluded and conspired among

themselves . . . to defraud Plaintiffs” is a legal conclusion and, with regard to Adams,

is not supported by any facts that show his agreement to the alleged conspiracy.

Jackson v. Blue Dolphin Commc’ns of N.C., L.L.C., 226 F. Supp. 2d 785, 791 (W.D.N.C.

2002) (“[T]he Plaintiff has failed to allege any facts that support an agreement among

the Defendants. Her allegation that Defendants “conspired” is conclusory and relies

only upon suspicion and conjecture. Because of the conclusory nature of the allegation,

the Plaintiff has failed to state a claim upon which relief may be granted.”). The Adams

Motion to dismiss Plaintiffs’ civil conspiracy claim should be GRANTED.

III. CONCLUSION

153. For the foregoing reasons, the Court hereby ORDERS as follows:

a. The Court GRANTS the Kellen Motion and DISMISSES Defendant

Kellen for lack of personal jurisdiction.

b. The Court GRANTS the Baker, Brown, and McCamant Motion and

DISMISSES Defendants Baker, Brown, and McCamant for lack of

personal jurisdiction.

c. The Court GRANTS the Kerr Motion and DISMISSES Defendant Kerr

for lack of personal jurisdiction. d. The Court GRANTS the Moore and Roberts Motion and DISMISSES

Defendants Moore and Roberts for lack of personal jurisdiction.

e. The Court GRANTS the Mowery and Stephens Motion and DISMISSES

Defendants Mowery and Stephens for lack of personal jurisdiction.

f. The Court GRANTS the Alamo Motion and DISMISSES Defendant

Alamo for lack of personal jurisdiction.

g. The Court GRANTS in part and DENIES in part the Adams Motion.

The Court DISMISSES Plaintiffs’ claims against Defendant Adams for

common law fraud, fraudulent inducement, unfair and deceptive trade

practices, and conspiracy to defraud with prejudice. The Court DENIES

the Adams Motion as to Plaintiffs’ claims against Defendant Adams for

breach of fiduciary duty and constructive fraud.

This the 28th day of February, 2017.

/s/ Gregory P. McGuire Gregory P. McGuire Special Superior Court Judge for Complex Business Cases