derivative claim in North Carolina

2015See Crouse v. Mineo, 189 N.C.

2013See Crouse, 189 N.C.

2025The test is derived from two sources: Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981), and N.C.G.S. § 55-55(c), the predecessor to N.C.G.S. § 55-7-45.

1986See Zapata Corp. v. Maldonado, 430 A.2d 779 .

2022See Norman, 140 N.C.

2013And, even if there were such a rigid rule, which again the court believes there is not, the rule should not necessarily be implemented in the context of a LLC, in no small part because of the freedom of contract granted to LLC members to obtain minority protections not available to shareholders of the closely-held corporation and because the procedural hurdles which might defeat a derivative claim on behalf of a closely-held corporation might not defeat a derivative claim on behalf of the LLC. {18} Rather than itself recounting the line of cases to which the court refers, the court references

2024See Horner, 236 N.C. at 101 .

2022See Alford, 320 N.C. at 471 (proper pre-suit demand is a “procedural prerequisite to the filing of a derivative action in North Carolina”). 75.

2018App. 671 , 680–81, 657 S.E.2d 55, 63 (2008) (affirming a trial court’s application of the internal affairs doctrine to determine that New York law governed a derivative claim against a New York corporation).

2018The Supreme Court of Delaware has recognized in In re Tri-Star Pictures, Inc., Litigation , furthermore, that voting power dilution is a harm to stockholders when the minority stockholders' voting power is decreased while the majority stockholder's power is increased. 634 A.2d 319 , 330 (Del. 1993).

2018The Supreme Court of Delaware has recognized in In re Tri-Star Pictures, Inc., Litigation, furthermore, that voting power dilution is a harm to stockholders when the minority stockholders’ voting power is decreased while the majority stockholder’s power is increased. 634 A.2d 319, 330 (Del. 1993).

2016See, e.g., Charlotte Motor Speedway, 230 N.C.

2016Alford v. Shaw, 327 N.C. 526, 531 , 398 S.E.2d 445, 447 (1990).

2016Alford v. Shaw, 327 N.C. 526, 531 , 398 S.E.2d 445, 447 (1990).

2016Id. at 307 , 307 S.E.2d at 567 (identifying as an essential element that defendant “breached a fiduciary duty owed to the corporate defendants not to usurp a corporate opportunity”).

2016Id. at 307 , 307 S.E.2d at 567 (identifying as an essential element that defendant “breached a fiduciary duty owed to the corporate defendants not to usurp a corporate opportunity”).

2016App. 249, 250 , 497 S.E.2d 446, 447 (1998) (“A statute of limitations can be the basis for dismissal on a Rule 12(b)(6) motion [only] if the face of the complaint discloses that plaintiff’s claim is so barred.”). {52} The Court likewise finds CCSEA’s argument that Defendant’s second counterclaim is an improper derivative claim without merit.

2015App. 488, 498 , 272 S.E.2d 19, 26 (1980), disc. review denied, 302 N.C. 218 , 277 S.E.2d 69 (1981) (holding that stockholders’ claims for wrongful inducement to invest is necessarily an individual rather than a derivative claim because the alleged negligence occurred before plaintiffs became stockholders). {33} Here, Plaintiffs intimate that Jacobson induced them to invest in Lakebound.

2015App. 240 , 249–50, 567 S.E.2d 781, 788 (2002) (citation omitted). {43} Having determined that Jacobson did not owe fiduciary duties to the individual Plaintiffs but that material questions of fact remain as to Jacobson’s alleged fiduciary duties to Lakebound, the Court grants Jacobson’s motion for summary judgment as to Plaintiffs’ individual claims for constructive fraud and denies both motions for summary judgment on the derivative claim for constructive fraud.

2015See, e.g., Snyder v. Freeman, 300 N.C. 204 (1980) (allowing individual claim for breach of agreement among shareholders).

2015Ct. Aug. 23, 2013) (stating that there is no “black letter rule allowing a minority shareholder to pursue an individual action against a controlling shareholder when a derivative claim would be adequate to protect the asserted rights of both the corporation and the minority owner”); Blythe v. Bell, 2013 NCBC 18 ¶¶ 17-21 (N.C.

2015App. at 475 , 675 S.E.2d at 138 (“[o]nly when one party figuratively holds all the cards -- all the financial power or technical information, for example -- have North Carolina courts found that the special circumstance of a fiduciary relationship has arisen.”). {38} As an initial matter, Jacobson contends that Plaintiffs, having failed to make a demand upon the LLC, lack standing to bring a derivative claim.

2014See N.C.G.S. § 55-7-46 (permitting court to “order the corporation to pay the plaintiff's reasonable expenses, including attorneys’ fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation”). {14} Although the North Carolina courts have not yet interpreted the term “substantial benefit” for purposes of § N.C.G.S. 57D-8-05(1), the North Carolina appellate courts have concluded that for a plaintiff to confer a “substantial benefit” on the corporation under N.C.G.S. § 55-7-46, the plaintiff “need not necessarily be the prevailing pa

2014App. 320, 326 , 560 S.E.2d 875, 880 (2002); see also 2 Plaintiff initially requested $51,878.75 in attorneys’ fees and $1,199.50 in expenses for a total award of $53,078.25.

2012CHOICE OF LAW {25} “Under North Carolina law, if a derivative claim is asserted against a foreign corporation[,] the courts of this state 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.” Maurer v. SlickEdit, Inc., 2005 NCBC 1 ¶ 26 (N.C.

2009See Corp. Comm’n of N.C. v. Merchants’ Bank & Trust Co., 193 N.C. 113, 115 , 136 S.E. 362, 363 (1927). {134} Plaintiffs allege Defendants abdicated their duties to the Company by terminating a lucrative management contract with AAA, a principal shareholder, and by issuing shares to Condra and Prevost at a discounted price, all in an attempt to avoid being unseated as Board members.

2009See Corp. Comm’n of N.C. v. Merchants’ Bank & Trust Co., 193 N.C. 113, 115 , 136 S.E. 362, 363 (1927). {134} Plaintiffs allege Defendants abdicated their duties to the Company by terminating a lucrative management contract with AAA, a principal shareholder, and by issuing shares to Condra and Prevost at a discounted price, all in an attempt to avoid being unseated as Board members.

2008See generally Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658 , 488 S.E.2d 215, 219 (1997) (stating that shareholders generally “cannot pursue individual causes of action against third parties for wrongs or injuries to the corporation that result in the diminution or destruction of the value of their stock”); see also N.C.

2008See generally Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658 , 488 S.E.2d 215, 219 (1997) (stating that shareholders generally “cannot pursue individual causes of action against third parties for wrongs or injuries to the corporation that result in the diminution or destruction of the value of their stock”); see also N.C.