McKEE v. JAMES

 McKee v. James, 

.

STATE OF NORTH CAROLINA                 IN THE GENERAL COURT OF JUSTICE
                                             SUPERIOR COURT DIVISION
COUNTY OF ROBESON                                   09 CVS 3031

LANNESS K. McKEE and LANNESS
K. McKEE, JR.,


                      Plaintiffs,

v.

HUNTINGTON JAMES, JOHNNIE                        ORDER AND OPINION
MARSHBURN, and COCONUT
HOLDINGS, LLC,


                      Defendants,

v.

LANNESS K. McKEE & COMPANY,
INC.,

                   Nominal Defendant.


     {1}   THIS MATTER is before the Court upon Defendant Huntington

James’s (“James”) Motion for Summary Judgment, Defendant Coconut

Holdings, LLC’s (“Coconut Holdings”) Motion for Summary Judgment, and

James’s Motion to Exclude Plaintiffs’ Expert Witnesses’ Affidavits and

Testimony (“Motion to Exclude Expert Testimony”) (collectively, the

“Motions”).

     {2}   The Court, having considered the Motions, affidavits and supporting

briefs, as well as the arguments of counsel at the September 25, 2014 hearing

in this matter, hereby GRANTS James’s Motion for Summary Judgment,

GRANTS Coconut Holdings’s Motion for Summary Judgment, and, in light of

these rulings, DENIES as moot James’s Motion to Exclude Expert Testimony.
   Brazil & Dunn, by K. Scott Brazil and Chad W. Dunn, and The Foster Law
   Firm, P.A., by Jeffrey B. Foster, for Plaintiffs.

   Poyner Spruill, LLP, by Joshua B. Durham and Jason B. James, for
   Defendant Huntington James.

   Bell, Davis & Pitt, P.A., by Edward B. Davis and Andrew A. Freeman, for
   Defendant Coconut Holdings, LLC.

Bledsoe, Judge.

                                        I.
                                 BACKGROUND

   {3}   The facts and procedural background of this case are recited in detail

in McKee v. James, 

 (N.C. Super. Ct., July 24, 2013),

http://www.ncbusinesscourt.net/opinions/2013_NCBC_38.pdf. The pertinent

background for purposes of resolving the present Motions is set forth below.

   {4}   Plaintiff Lanness K. McKee (“Lanness”) formed Lanness K. McKee &

Co., Inc. (“McKee Craft” or “the Company”), a Fairmont, North Carolina-based

company, more than forty years ago “for the purpose of building top-of-the-line

boats for government and recreational use.” (Compl. ¶ 8.) Lanness’s son,

Plaintiff Lanness K. McKee, Jr. (“Key”), later joined McKee Craft and became

its President in 1989. (Lanness Dep. 66:14–68:3, Mar. 16, 2011.)

   {5}   For decades, McKee Craft serviced a broad client base, comprised of

businesses, government agencies, and recreational boaters, and was a well-

respected brand in the boating industry. (Compl. ¶¶ 10, 12; Marshburn Dep.

16:20–25, Sept. 15, 2010.) The Company was known for producing “unsinkable
boats” through use of a unique “pressure foam filled construction” design.

(Compl. ¶¶ 14—16.)

   {6}     In early 2007, James contacted McKee Craft seeking an “unsinkable”

boat for his personal use. (Compl. ¶ 19.) When McKee Craft agreed to build

his boat as requested, James remarked that he was glad he would not need to

take the “drastic step” of buying his own boat manufacturer to construct a

suitable boat. (Pls.’ Ex. 4.)

   {7}     McKee Craft’s financial condition had begun to deteriorate in the

years preceding James’s initial contact with the Company. Though Company

sales peaked at approximately $9.2 million in 2004, sales thereafter decreased

each year from 2005 to 2007. (Pls.’ Ex. 14.). McKee Craft was also short on

cash, a problem that caused it to fall behind on its payments to vendors, who

in turn began to withhold parts and materials critical to the Company’s

operations, thereby hindering the Company’s production and thus contributing

to a growing backlog of orders.1 (Key Dep. 79:23–25, Oct.14—15, 2013; Pls.’

Ex. 13.2). The Company’s cash flow problems ultimately forced it to halt

production of James’s boat in February 2007. (James Aff. ¶ 4.)

   {8}     Soon thereafter, in April 2007, James and Key began discussing the

possibility of James making a cash contribution to McKee Craft in exchange


1 Plaintiffs attribute McKee Craft’s cash flow problems to the Company’s “unprecedented sales”

prior to James’s engagement with the Company. (Compl. ¶ 20; Pls.’ Br. Opp. James Mot. S.J.,
p. 4.) This assertion is directly contradicted by Key’s deposition testimony that sales declined
in 2005, 2006 and 2007. (Key Dep. 44:1–46:6.)

2 Plaintiffs’ Exhibit 13 sets forth thirty-two (32) of McKee Craft’s “Known Problems & Issues”

as of August 2007.
for an ownership interest in the Company. (James Aff. ¶ 5.) James reviewed

McKee Craft’s financial statements, signing a Confidentiality Agreement in

the process (Pls.’ Ex. 6.), and visited the Company’s facilities, taking notes that

included: “How much would it cost to start from scratch?” (Pls.’ Ex. 3.)

   {9}     In an email to Key dated April 18, 2007, James outlined three

“options” for them to explore: (i) James could “simply pay McKee Craft to build

the boat that [he wanted] and then go on [his] way”; (ii) James could start his

own boating company and pay McKee Craft to build boats for his new company;

or (iii) James could “purchase a portion or all of the company’s shares or make

an ‘investment’ by personally guaranteeing the company’s debts so that the

banks would leave the company alone and give it time to pay off those

balances.” (Pls.’ Ex. 5.)

   {10} On May 30, 2007, the parties executed a Temporary Share Purchase

Agreement (“TSPA”), which provided that James would make a $300,000

equity investment in McKee Craft by May 31, 2008 in exchange for an

approximate 20% stake in the Company.3 (Compl. ¶ 35; Pls.’ Ex. 9.). Rather

than delay his investment for up to a year as permitted under the TSPA, James

provided the full $300,000 contribution on the effective date of the TSPA (i.e.,




3 Prior to execution of the TSPA, all of McKee Craft’s stock was held by Plaintiffs and other

members of the McKee family. (Pls.’ Ex. 9.)
May 30, 2007),4 and McKee Craft used the funds to pay its vendors. (Key Dep.

205:16–215:4.)

   {11} As contemplated in the TSPA, the parties subsequently executed a

Common Stock Purchase Agreement (“CSPA I”), a more detailed agreement

concerning James’s investment and ownership interest in McKee Craft, on

August 6, 2007.5 (Pls.’ Ex. 104) The parties were represented by counsel in

negotiating CSPA I, which included a merger clause specifying that CSPA I

represented “the entire agreement and understanding of the parties relating

to the subject matter [t]herein and merge[d] all prior discussions and

agreements between them, including the [TSPA].” (Frazier Aff. ¶ 3; Pls.’ Ex.

104, p. 14.)

   {12} Notwithstanding James’s initial investment, McKee Craft’s cash flow

problems persisted, prompting James to extend numerous loans to McKee

Craft in an attempt to keep the Company afloat. (James Aff. ¶ 21.) The

undisputed evidence shows that James loaned the Company $78,000.00 on

June 19, 2007; $50,000.00 on August 7, 2007; $48,000.00 on August 17, 2007;

$124,000.00 on August 24, 2007; $10,000.00 on November 27, 2007; and

$50,000.00 on January 10, 2008. (James Aff. ¶ 21, p. 60, 186–90.)




4 Because of the company’s immediate need for cash, James provided $50,000 of the $300,000

to McKee Craft on May 23, 2007, prior to execution of the TSPA (James Aff. ¶ 9.), and the
remaining $250,000 on May 30, 2007, the day the TSPA was executed. (James Aff., p. 185;
Key Dep. 205:16–215:4.)

5 CSPA I had an effective date of May 30, 2007.   (Frazier Aff. ¶ 4.)
      {13} Having substantially increased his investment in McKee Craft,

James indicated to Key that the January 10, 2008, $50,000 loan was the “final

straw” and that if McKee Craft needed additional funds, he would need to

renegotiate his interest in the Company. (James Aff. ¶¶ 21–22, p. 60.). James

also made a note to himself around this time concerning the liquidation value

of the Company’s inventory. (Pls.’ Ex. 20.)

      {14} On February 6, 2008, the parties executed a Consolidated Share

Purchase Agreement (“CSPA II”), which left James holding 88.65% of McKee

Craft’s outstanding stock. (Frazier Aff. Ex. 7, p. 3.) James paid $8,582.50 for

the newly acquired McKee Craft shares, the equivalent of $1 per share.

(Frazier Aff. Ex. 6, p. 1.) Plaintiffs allege that they agreed to this arrangement

based in part on James’s purported promises that, among other things, he

would hire advisors to help “turnaround” McKee Craft’s business and would

retain Plaintiffs as McKee Craft employees.        (Compl. ¶¶ 48—57.)      These

purported promises are not reflected in CSPA II, however, as James

specifically declined Key’s request to include them in the agreement. (James

Aff., p. 148–51; Key Dep. 261:20–267:23; Frazier Aff. Ex. 6.) The parties were

represented by counsel in executing CSPA II, which includes a merger clause

nearly identical to the merger clause set forth in CSPA I. (Frazier Aff. Ex. 6, p.

4.)

      {15} Following execution of CSPA II, James placed Key in charge of

government sales and hired Defendant Johnnie Marshburn (“Marshburn”), a
former McKee Craft consultant, to serve as the Company’s controller. (Key

Dep. 93:22–95:2; Marshburn Dep. 13:6–23:12, 46:16–49:2.)        McKee Craft’s

financial condition remained bleak, however, as the Company was not immune

to the ailing economy of 2008, the detrimental effects of which caused

numerous other boat manufacturers, i.e., companies in McKee Craft’s line of

business, to cease operations around this time. (Vickers Dep. 195:10–197:6,

Mar. 17, 2011; Wilkerson Dep. 23:12–24:25, Oct. 16, 2013; James Aff. ¶ 32.)

Key has acknowledged the damage caused to McKee Craft by the economic

recession. (James Aff., p. 153.)

   {16} James formed several new entities, including Coconut Holdings and

Marine Contract Manufacturing (“MCM”), between February and April 2008.

(James Dep. 143:11–148:6.)         James established and capitalized Defendant

Coconut Holdings specifically to acquire real estate in Lumberton to be used

for new McKee Craft facilities, though the plan ultimately fell through. (James

Dep. 144:8—12.) James also formed MCM in order to build boats for McKee

Craft and to serve as backup facilities in the event creditors foreclosed on

McKee Craft’s plant. (James Dep. 147:2—25.) Plaintiffs allege that James

formed these entities as part of a plan to start a new boating company –

without Plaintiffs – using McKee Craft’s historic assets.

   {17} James ceased McKee Craft’s business operations sometime between

June and August 2008.        (James Dep. 148:24—149:6.)       James cites the

“[w]orldwide economic meltdown, high fuel prices,” and unanticipated debt
obligations as factors that contributed to this decision.   (James Dep. 143:11—

144:3.) He also laid off most of McKee Craft’s employees, including Key,

explaining to them that his financial exposure had far exceeded what he had

expected based on his initial discussions with Key. (James Dep. 143:11–144:3;

James Aff., p. 121–124, 128.)

   {18} Key subsequently attempted to reacquire James’s McKee Craft

shares and to repay the money that James had loaned to the Company, but he

was unable to secure adequate funding to do so. (James Aff., p. 127, 129, 131–

158) In an email to James dated February 13, 2009, Key states as follows:

      I appreciate what you have done, and I stand behind my
      conviction that I will get funded next week. I never wanted you
      or anyone to lose any money with McKee Craft. In hindsight the
      market conditions now may have caused major problems as we
      are seeing now.

(James Aff., p. 153.)

   {19} By May 2009, James had begun the process of winding up McKee

Craft. Through counsel, James contacted Country Boys Auction & Realty

(“Country Boys”) to schedule an auction for the sale of McKee Craft’s boat

molds and plugs, the Company’s primary and most valuable remaining assets.

(Shannon Hoff Dep. 60:22—65:21, Aug. 23, 2011.) Following an advertising

campaign, which Plaintiffs contend failed to provide adequate notice to

prospective buyers, Coconut Holdings purchased the McKee Craft boat molds

and plugs for $40,000 at an auction held July 30, 2009. (Pls.’ Ex. 68.)
    {20} Coconut Holdings subsequently acquired ownership of the McKee

Craft trademarks, which had been excluded from the auction, for a purchase

price of $1,000. (Pls.’ Ex. 76 at 79:8–81:19.)

    {21}    Coconut Holdings continues to own the McKee Craft trademarks,

but does not use them. (Pls.’ Ex. 76 at 49:25–50:3.)

    {22} Since winding up McKee Craft, James has used the historic McKee

Craft boat molds to build boats through a separate entity, MHM Marine

(“MHM”). (Pls.’ Ex. 74, p. 56:8—56:16.) It is unclear based on the submissions

of record whether MHM continues to do so.

    {23}   On August 27, 2009, Plaintiffs filed their original Complaint in this

action, asserting numerous claims for relief against James and Marshburn.6

Plaintiffs’ claims against James allege, in essence, that McKee Craft was a

valuable and successfully operating company before James, through

misrepresentations, broken promises, and other alleged deceitful conduct,

acquired and looted the Company, leaving Plaintiffs “broke and destitute.”

(Pls.’ Br. Opp. James Mot. S.J., p. 2.)

    {24} This action was subsequently designated a mandatory complex

business case and assigned to this Court (Murphy, J.) on October 26, 2009. The

case was reassigned to the undersigned on July 2, 2014.




6 Because Marshburn has not moved for summary judgment, the Court will not discuss
Plaintiffs’ claims against him except to the extent necessary to resolve the present Motions.
   {25} Plaintiffs filed a Second Amended Complaint7 (hereinafter, the

“Complaint”) on October 13, 2010, joining Coconut Holdings as a Defendant

and McKee Craft as a Nominal Defendant to this action. The Complaint

asserts direct claims as well as derivative claims brought by Plaintiffs on

behalf of McKee Craft in their capacity as McKee Craft shareholders.

   {26} The Court (Murphy, J.) has dismissed many of Plaintiffs’ claims

through Orders previously entered in this action. McKee v. James, No. 09 CVS

03031 (N.C. Super. Ct., April 14, 2010) (denying Plaintiffs’ request for

injunctive relief); McKee v. James, No. 09 CVS 03031 (N.C. Super. Ct., June

10, 2010) (granting in part and denying in part Defendant’s first motion to

dismiss); McKee v. James, 

 (N.C. Super. Ct., July 24, 2013)

(granting in part and denying in part James’s second Motion to Dismiss).

   {27} Still pending before the Court are Plaintiffs’ claims against James for

breach of contract (direct), fraud (direct), breach of fiduciary duty (direct and

derivative), gross mismanagement (derivative), civil conspiracy (direct and

derivative), conversion (derivative), unfair and deceptive trade practices

(“UDTP”) (direct and derivative), unjust enrichment (derivative), and punitive

damages.      Also pending are Plaintiff’s claims against Coconut Holdings,

consisting of the same claims that remain pending against James, but which

are premised upon a “piercing the corporate veil” theory of recovery.8



7 Plaintiffs had previously filed a First Amended Complaint on June 15, 2010.


8 As noted above, the Court will not address Plaintiffs’ claims against Marshburn.
   {28} On January 31, 2014, both James and Coconut Holdings moved for

summary judgment with respect to Plaintiffs’ remaining claims against them

pursuant to Rule 56 of the North Carolina Rules of Civil Procedure. That same

day, James also moved pursuant to Rule 702 of the North Carolina Rules of

Evidence to exclude certain testimony proffered by four of Plaintiff’s purported

expert witnesses.

   {29} The Court held a hearing on these matters on September 25, 2014.

                                        II.
                                   ANALYSIS

                                        A.
                     James’s Motion for Summary Judgment

   {30} James seeks an order granting summary judgment in his favor and

dismissing Plaintiffs’ remaining claims against him with prejudice. The

Court will examine the merits of James’s Motion for Summary Judgment

with respect to each of Plaintiff’s claims, in turn, below.

                                 Legal Standard

   {31}   Summary judgment is proper “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and that any party

is entitled to a judgment as a matter of law.” N.C.G.S. § 1A-1, Rule 56(c) (2014).

The party moving for summary judgment may prevail on its motion by

demonstrating (1) that an essential element of the plaintiff’s claim is

nonexistent; (2) that the plaintiff is unable to produce evidence to support an
essential element of the claim; or (3) that the plaintiff cannot surmount an

affirmative defense that bars the claim as a matter of law. Hash v. Estate of

Henley, 

, 

 (2008). The movant’s

contentions are to be “carefully scrutinized while those of the opposing party

are indulgently regarded.” DeCarlo v. Gerryco, Inc., 

, 

, 373 (1980).     The party opposing summary judgment may not,

however, “rest upon the mere allegations or denials of his pleading, but his

response, by affidavits or as otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue for trial.” N.C.G.S. § 1A-1,

Rule 56(e) (2014).

                           Breach of Contract (Direct)

   {32} “The elements of a claim for breach of contract are (1) existence of a

valid contract and (2) breach of the terms of that contract.” Poor v. Hill, 

, 

 (2000).

                                    TSPA II

   {33} Plaintiffs predicate their breach of contract claim primarily upon

James’s alleged failure to honor a number of promises that he purportedly

made in connection with TSPA II. (Compl. ¶¶ 105—07.) Specifically, Plaintiffs

contend that they relinquished their McKee Craft stock, and thus a controlling

interest in the Company, in reliance on James’s purported promises to do the

following:

      [i]    Provide funding for the expansion of [McKee Craft];
      [ii]    Pay the creditors of the Company pursuant to agreements
              reached with those creditors;

      [iii]   Provide continuing employment of the Plaintiffs by the
              Company at a salary commensurate with the skill and
              knowledge level of the Plaintiffs and their years of service
              building the Company;

      [iv]    Provide continuing health insurance benefits to the
              Plaintiffs;

      [v]     Protect the assets of the Company and transfer the stock of
              the Company back to the Plaintiffs at such time as the
              Company was realizing the rewards of the new government
              contracts and sales;

      [vi]    Continue to honor the warranty obligation of the Company
              to its customers; and

      [vii]   Protect the Plaintiff’s [sic] personal property which was
              pledged to secure debts of the Company.

(Compl. ¶ 107.) Plaintiffs allege that James breached every one of these

promises to Plaintiffs’ detriment.

   {34} Where a contract is reduced to writing, “[p]arol testimony of prior or

contemporaneous negotiations inconsistent with [the] written contract, or

which tends to substitute a new or different contract for the one evidenced by

the writing, is incompetent.” West Jefferson v. Edwards, 

, 

 (1985).       Our Supreme has explained the parol

evidence rule as follows:

      A contract not required to be in writing may be partly written and
      partly oral. However, where the parties have deliberately put
      their engagements in writing in such terms as import a legal
      obligation free of uncertainty, it is presumed the writing was
      intended by the parties to represent all their engagements as to
      the elements dealt with in the writing. Accordingly, all prior and
       contemporaneous negotiations in respect to those elements are
       deemed merged in the written agreement. And the rule is that, in
       the absence of fraud or mistake or allegation thereof, parol
       testimony of prior or contemporaneous negotiations or
       conversations inconsistent with the writing, or which tend to
       substitute a new and different contract from the one evidenced by
       the writing, is incompetent.

 (quoting Neal v. Marrone, 

, 

 (1953)).

   {35} A merger clause reinforces the parol evidence rule by “creat[ing] a

rebuttable presumption that the writing represents the final agreement

between the parties.” Zinn v. Walker, 

, 

 (1987)). “Generally, in order to effectively rebut the presumption, the

claimant must establish the existence of fraud, bad faith, unconscionability,

negligent omission or mistake in fact.” 

 North Carolina courts have also

declined to enforce merger clauses where doing so “would frustrate and distort

the parties’ true intentions and understanding regarding the contract[.]” 

, 361 S.E.2d at 318—19 (citing Loving Co. v. Latham, 

,

 (1974), wherein the court held that “to permit the standardized

language in the printed forms, . . . to nullify the clearly understood and

expressed intent of the contracting parties would lead to a patently unjust and

absurd result” (ellipsis in original)).

   {36} Here, the alleged breaches are based on oral representations made by

James prior to CSPA II, the parties’ written agreement which encompasses the

subject matter of James’s purported promises but which is devoid of any

reference to such promises. CSPA II also includes a merger clause specifying
that CSPA II represents the parties’ entire agreement concerning the

transaction in question, namely, James’s purchase of a controlling interest in

McKee Craft. Any promises made by James or Plaintiffs prior to CSPA II have

thus been superseded by CSPA II, and are therefore irrelevant, absent a

showing of fraud or other grounds to rebut the presumption that CSPA II

represented the parties’ final agreement.

   {37} Plaintiffs insist that they never would have relinquished their McKee

Craft shares at a price of $1 per share absent James’s purported promises, that

they were defrauded into doing so, and that failure to construe James’s

promises as part of CSPA II “would frustrate and distort the parties’ true

intentions and understanding regarding [their agreement.]” See Zinn, 

, 361 S.E.2d at 318—19.

   {38} The undisputed evidence before the Court reveals neither evidence of

fraud in connection with CSPA II nor evidence that Plaintiffs’ intentions

concerning CSPA II would be “frustrated” if James’s purported promises are

excluded from CSPA II. To the contrary, the undisputed evidence indicates

that Plaintiffs understood what they were giving up in executing CSPA II and

also understood that James’s promises were not part of that agreement.

Specifically, Plaintiffs, who were represented by counsel in the transaction,

acknowledged that they were not “capable and willing to provide or secure

sufficient equity or debt financing to solve the Corporation’s severe financial

need” and that McKee Craft’s “common stock [was] worth only a nominal
amount.” (Frazier Aff. Ex. 7, pg. 1.) The evidence also reveals that Key, on the

advice of counsel, sought inclusion of James’s purported promises in CSPA II,

but James specifically refused. (James Aff., p. 148–51; Key Dep. 261:20–

267:23.)

   {39} Zinn v. Walker, 87 N.C App. 325, 

 (1987), the case cited

by Plaintiffs in support of their contention on this issue, is easily distinguished

from the present case.      Zinn involved three contemporaneously executed

contracts, the third of which set forth boilerplate language containing a merger

clause. 

, 

. The court determined that because the

parties intended the three contracts to be construed as a single agreement,

neither the parol evidence rule nor the merger clause in the third contract

precluded evidence concerning the earlier contracts. 

 at 332—33, 361 S.E.2d

at 318—19. Here, in contrast, the parties knew that James’s earlier promises

were not integrated into CSPA II – and therefore could not have intended for

them to be part of the agreement – because Key requested their inclusion and

James specifically rejected them. Although there is no need to inquire further,

the Court additionally notes that, unlike the boilerplate provisions of the

contract in Zinn, the contract here, CSPA II, consisted of provisions carefully

negotiated by counsel on both sides of the transaction. See Huttenstine v.

Mast, 

, 803—04 (E.D.N.C. 2008) (distinguishing a contract

that had been “extensively negotiated between counsel of the parties” from the

“preprinted boilerplate provisions” at issue in Zinn in concluding that the court
was “compelled to give effect to the [contract’s] merger clause” under the

circumstances).   Accordingly, the Court finds no basis to circumvent the

parties’ bargained-for merger clause in the instant case and concludes that

CSPA II supersedes any purported promises made by James prior to that

agreement.

                        McKee Craft’s Cash Flow Plan

   {40} The Court also finds no merit in Plaintiffs’ contention that James

breached a promise to contribute $1.35 million to McKee Craft in connection

with a cash flow plan drafted by a Company consultant in February 2008. The

undisputed evidence shows that the cash flow plan was not part of any contract

between the parties and does not reflect whether James’s personal funds were

to serve as the source of the contribution. (Pls.’ Ex. 103.) James in fact

procured a $1.4 million line of credit for McKee Craft in March 2008, after Key

had struggled for some time to obtain a loan on the Company’s behalf. (Pls.’

Ex. 49.) Moreover, Key could not recall in his deposition testimony any amount

that James had failed to pay McKee Craft (Key Dep. 205:16–215:4.), and

Jennifer Shumpert, McKee Craft’s in-house accountant, testified only that the

“cash flow plan . . . showed approximately $1.5 million cash injection” and that

she “believe[d] Hunt James was going to invest $1.5 million once he obtained

a majority interest.” (Shumpert Aff. ¶ 4.) There is no evidence, in other words,

that James breached any promise made in connection with the $1.35 million

contribution contemplated by the cash flow plan.
                          Confidentiality Agreement

   {41} Plaintiffs further contend that James breached the Confidentiality

Agreement that he signed in April 2007, when he was considering his initial

investment in McKee Craft, because “from the very beginning” he intended to

use the information he gathered on McKee Craft to form his own boat

manufacturing company. (Pls.’ Br. Opp. James Mot. S.J., p. 33.) Plaintiffs

specifically cite only the Confidentiality Agreement itself in support of this

contention, and the Court, having reviewed the record, finds no evidence to

suggest that James actually used any of the information acquired in his initial

investigation of McKee Craft in violation of the Confidentiality Agreement.

Accordingly, this contention is without merit.

                              TSPA and CSPA I

   {42} Plaintiffs contend that James also breached the TSPA and CSPA I.

Citing neither specific evidence of James’s alleged breaches of these

agreements nor authority to support their position, Plaintiffs sweepingly aver

that these agreements “presumed and included in their intent that James

would (a) give his best efforts to McKee Craft and not some competing

enterprise; (b) invest heavily in the company to cause its turnaround; [and] (c)

provide the company with his expertise and [that of] others.” (Pls.’ Br. Opp.

James Mot. S.J., p. 33.) It is undisputed, however, that the TSPA did not

include these “presumed” terms; that CSPA I superseded the TSPA; that CSPA

I did not include these terms; and that CSPA I included a merger clause
specifying that CSPA I represented “the entire agreement and understanding

of the parties relating to the subject matter [t]herein and merge[d] all prior

discussions and agreements between them, including the [TSPA].” (Frazier

Aff. ¶ 3; Pls.’ Ex. 104, p. 14.) Plaintiffs’ contention that the proffered terms

should be implied into these agreements is thus without merit.9

    {43} The Court notes the allegations in Plaintiffs’’ Complaint that James

breached the TSPA when he “delayed in delivering part of the [$300,000]

capital he had promised in exchange for the [McKee Craft] shares.” (Compl. ¶

37.) These allegations are contradicted by the record evidence, which reveals

that James provided the full $300,000 contribution by May 30, 2007, one day

prior to the May 31, 2007 deadline imposed by the TSPA. Key in fact conceded

the timeliness of this contribution in his deposition testimony and, as noted

above, was unable to identify any payment that James had delayed or withheld

from the Company. (Key Dep. 205:16–215:4.) Indeed, Key was unable to

reconcile his testimony with the allegations set forth in paragraphs 37 through

40 of the Complaint, which assert that James delayed the $300,000

contribution; that “[i]n the meantime, accounts payable began to stack up,

resulting in crippling interest and penalties owed to creditors”; that “James

purposely slowed the investment of capital to create a perilous financial

condition for the company”; and that “[a]s a result of [James’s] failure to

provide the promised capital, [McKee Craft] would need to seek bankruptcy re-


9 The Court also declines, to the extent it is argued, to read these terms into CSPA II for the

same reasons.
organization or another source of capital.” (Compl. ¶¶ 37—40.) The Court

accordingly finds no evidentiary support for Plaintiffs’ contentions concerning

James’s alleged breaches of the parties’ shareholder agreements.

                             Additional Promises

   {44} Plaintiffs vaguely allude to other contracts “supported by the

consideration” that James also purportedly breached. (Pls. Br. Opp. James

Mot. S.J., p. 33.) Plaintiffs have failed to identify such contracts, however,

much less evidence that would create an issue of material fact concerning

whether they were breached. See Charlotte Motor Speedway, LLC v. Cnty. of

Cabarrus, 

 (N.C. Ct. App. 2013), review allowed, 

 (N.C. 2014) (providing that “claims for breach of contract . . . necessarily

hinge on the threshold issue of whether a valid contract actually existed

between [the parties]”).

   {45} Accordingly, in light of the foregoing, the Court GRANTS James’s

Motion for Summary Judgment with respect to Plaintiffs’ breach of contract

claim and DISMISSES this claim with prejudice.

                                 Fraud (direct)

   {46} A plaintiff must establish the following elements in order to prevail

on a fraud claim:

      (1) that the defendant made a representation of a material past
      or present fact; (2) that the representation was false; (3) that it
      was made by the defendant with knowledge that it was false or
      made recklessly without regard to its truth; (4) that the defendant
      intended that the plaintiff rely on the representation; (5) that the
      plaintiff did reasonably rely on it; and (6) injury.
Braun v. Glade Valley Sch., Inc., 

, 

(1985) (citing Johnson v. Phoenix Mutual Life Ins. Co., 

, 

 (1980)). Whereas “a mere promissory representation will not support

an action for fraud[,] . . . a promissory misrepresentation may constitute actual

fraud if the misrepresentation is made with intent to deceive and with no

intent to comply with the stated promise or representation.” 

 (citations

omitted).

   {47} Plaintiffs predicate their fraud claim in part upon James’s purported

promises discussed above in connection with Plaintiffs’ breach of contract

claim. Having dismissed Plaintiffs’ breach of contract claim, supra, Plaintiffs’

fraud claim likewise fails to the extent that it relies on those same purported

promises.     To the extent Plaintiff contends that James induced them to

relinquish their McKee Craft shares through representations that did not rise

to the level of promises, the Court finds that Plaintiffs are unable to show that

their   reliance     on    such    representations        was    reasonable      under     the

circumstances.10          Indeed, James and Plaintiffs engaged in numerous

discussions, wherein James made many representations to Plaintiffs, and Key,

likewise, made many representations to James, concerning, for instance,

McKee Craft’s potential for growth when he and James began discussing



10 Plaintiffs contend that reliance is not a necessary element of fraud when the underlying

allegations concern the defendant’s failure to disclose information (Pls.’ Br. Opp. James Mot.
S.J., p. 35–36.) This contention is irrelevant for purposes of the present analysis, however, as
the Court (Murphy, J.) has previously dismissed Plaintiffs’ fraudulent concealment claim.
McKee, 

, at ¶¶ 50–57.
James’s investment in the Company. The precise contours of the parties’

arrangement, however, were carefully negotiated, reduced to writing, and

clearly defined in the parties’ three shareholder agreements – the TSPA, CSPA

I, and CSPA II.      Though Plaintiffs may have been induced into these

agreements by their desire to save McKee Craft, there is no indication that

they were defrauded into entering them. As discussed above, Plaintiffs were

represented by counsel and were cognizant of the fact that the parties’

negotiated, written agreement, CSPA II, neglected to formalize some of the

assurances that they had requested. (Frazier Aff. Ex. 7 at 1.) The Court

concludes, therefore, that any reliance by Plaintiffs on James’s pre-CSPA II

representations concerning the subject matter of that agreement, the breadth

of which encompasses the alleged misrepresentations of which Plaintiffs now

complain, was unreasonable as a matter of law. See, e.g., Johnson v. Owens,

, 

 (1965) (“When the circumstances are

such that a plaintiff seeking relief from alleged fraud must have known the

truth, the doctrine of reasonable reliance will prevent him from recovering for

a misrepresentation which, if in point of fact made, did not deceive him.”);

Broussard v. Meineke Disc. Muffler Shops, 

, 341 (4th Cir. 1998)

(“[I]f a plaintiff had an alternative source for the information that is alleged to

have been concealed from or misrepresented to him, his ignorance or reliance

on any misinformation is not reasonable.”).
   {48} Plaintiffs additionally support their fraud claim with allegations that

James intentionally misrepresented himself as an experienced, sophisticated

investor, who sought to use his resources and experience to restore McKee

Craft to profitability, when in fact James intended all along to take control of

the Company, plunder its value and assets, and then use those assets to start

a new boat manufacturing company, leaving Plaintiffs in his wake. Plaintiffs

have put forth no evidence, however, to support this theory. To the contrary,

and to the extent that these representations are not subsumed within the

subject matter of CSPA II, the undisputed evidence shows that James invested

substantial time and resources in McKee Craft, an established but faltering

company, in the midst of an economic recession. The evidence indicating that

James marketed himself as willing and able to turnaround McKee Craft’s

business, but then failed to do so, at most reflects puffery, not actionable fraud,

and as such provides no grounds for Plaintiffs’ requested relief. Plymouth

Cnty. Ret. Ass’n v. Primo Water Corp., 

 (M.D.N.C.

2013) (“[S]tatements that consist of nothing more than indefinite statements

of corporate optimism, also known as ‘puffery,’ are immaterial as a matter of

law.” (Citation and quotation marks omitted)); Hillson Partners Ltd. P’ship v.

Adage, Inc., 

, 211 (4th Cir. 1994) (affirming dismissal of fraud claim

because statements in question consisted of “puffing statements” upon which

“[n]o reasonable investor would rely”); Howard v. Haddad, 

(4th Cir. 1992) (affirming dismissal of fraud claim because the alleged

misrepresentations constituted “puffery” and not material statements of fact).

   {49} Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ fraud claim and DISMISSES this claim

with prejudice.

                  Breach of Fiduciary Duty (direct and derivative)

   {50} Plaintiffs contend that James, as McKee’s Craft majority shareholder,

breached duties owed to them, as minority shareholders, and also breached

duties owed to the Company itself.

   {51} “A claim for breach of fiduciary duty requires the existence of a

fiduciary relationship.” White v. Consol. Planning, Inc., 

, 

 (2004) “[I]n North Carolina majority shareholders

owe a fiduciary duty and obligation of good faith to minority shareholders as

well as to the corporation.” Loy v. Lorm Corp., 

, 

 (1981). Our Supreme Court has explained as follows:

      The devolution of unlimited power imposes on holders of the
      majority of the stock a correlative duty, the duty of a fiduciary or
      agent, to the holders of the minority of the stock, who can act only
      through them -- the duty to exercise good faith, care, and diligence
      to make the property of the corporation produce the largest
      possible amount, to protect the interests of the holders of the
      minority of the stock, and to secure and pay over to them their
      just proportion of the income and of the proceeds of the corporate
      property. The controlling majority of the stockholders of a
      corporation, while not trustees in a technical sense, have a real
      duty to protect the interests of the minority in the management
      of the corporation, especially where they undertake to run the
      corporation without giving the minority a voice therein. This is so
      because the holders of a majority of the stock have a community
      of interest with the minority holders in the same property and
      because the latter can act and contract in relation to the corporate
      property only through the former. It is the fact of control of the
      common property held and exercised, and not the particular
      means by which or manner in which the control is exercised, that
      creates the fiduciary obligation on the part of the majority
      stockholders in a corporation for the minority holders. Actual
      fraud or mismanagement, therefore, is not essential to the
      application of the rule.

Gaines v. Long Mfg. Co., 

, 344—45, 

 (1951).

   {52} “[M]inority shareholders in a closely held corporation who allege

wrongful conduct and corruption against the majority shareholders in the

corporation may bring an individual action against those shareholders, in

addition to maintaining a derivative action on behalf of the corporation.”

Norman v. Nash Johnson & Sons’ Farms, Inc., 

, 

 (2000).

                 Competing Entities & Country Boys Auction

   {53} Plaintiffs contend that James breached fiduciary duties to McKee

Craft by forming competing entities, which, in essence, diverted James’s

attention and resources away from McKee Craft. Plaintiffs primarily take

issue with Coconut Holdings, describing it as an “alter ego” of James’s that

“was formed in order to continue the improper conduct and specifically to

purchase, for a small percentage of their true value, the molds and plugs of

[McKee Craft].” (Compl. ¶ 121.)

   {54} James explained in his deposition testimony that he formed Coconut

Holdings with the specific objective of using the entity to acquire new facilities

for McKee Craft in Lumberton. James further testified that he formed another
entity, MCM, essentially as a prophylactic measure, to provide alternate

facilities in the event that creditors moved to foreclose on McKee Craft’s plant,

as the Company was heavily encumbered with debt. There is no evidence, only

allegations, to suggest that James’s formation of these other entities harmed

McKee Craft. Similarly, there is no evidence to suggest that James used the

McKee Craft assets in operating any business other than that of McKee Craft

until November 2009, after McKee Craft had ceased operations and sold its

assets in liquidation.

   {55} With respect to Coconut Holdings’s purchase of the McKee Craft

assets at the July 30, 2009 auction, Plaintiffs assert that James, through

counsel Shannon Hoff, intentionally provided inadequate notice of the auction

in order to suppress advertising, minimize bidders, and essentially ensure that

James, through Coconut Holdings, would be able to purchase the assets well

below market price.

   {56} The undisputed evidence reveals that Ms. Hoff contacted Country

Boys in May 2009 to set up an auction at which the McKee Craft boat molds

and plugs would be sold in furtherance of James’s plan to wind up the

Company, and that although Country Boys advised that it needed forty-five

(45) days to advertise the auction, Ms. Hoff did not give the final go ahead to

begin advertising until approximately one week before the auction.

Nevertheless, advertisements placed online, including on Auction Zip, “the

largest directory of live auction listings in the United States,” in addition to
advertisements placed in eight North Carolina newspapers, garnered

“approximately 80 to 100 phone calls from potential bidders inquiring about

the boat molds and plugs.”       (Mike Gurkins Aff. ¶¶ 3–7.)          Indeed, the

undisputed evidence reveals that approximately twenty people attended the

auction and that, among these twenty people, at least four submitted bids for

the molds and plugs. (Gurkins Aff. ¶¶ 7–8; Marshburn Dep. 129:7–130:20).

   {57} Plaintiffs complain that the $40,000 paid by Coconut Holdings for the

McKee Craft assets represented only “a small percentage of their true value[.]”

(Compl. ¶ 121.) Even ignoring the fact that Coconut Holdings’s bid prevailed

over the bids of several others at the auction, however, there is no indication,

based upon the undisputed evidence before the Court, that $40,000 was an

unexpectedly low bid under the circumstances. Plaintiffs offer Key’s deposition

testimony that the McKee Craft boat molds were assigned a liquidation value

of $250,000 in September 2006, but this valuation fails to take into account the

obvious and crushing impact of the 2008 recession on the boating industry.

(Key Dep., 163:4—164:13.).

   {58} Plaintiffs’ only evidence concerning the value of the assets in question

at the time of the July 30, 2009 auction consists of an affidavit from William

Holseberg, in which Mr. Holseberg, who has been in the boating business for

more than twenty-five (25) years, represents that he would have paid

“substantially more” than $40,000 for the molds had he been aware of the

auction. (Pls.’ Ex. 92, p. 2.) This attempt by Plaintiffs to create a genuine issue
of material fact must fail, however, as simply tendering an affidavit from one

individual who claims that he would have paid “substantially more” for the

assets does nothing to show that Coconut Holdings’s $40,000 bid was below

(liquidation) market value, much less that the bid – which, again, prevailed

over several other bidders at an auction attended by twenty people – was so

unreasonably low that James breached a duty to the Company in conducting

the sale. Accordingly, the Court finds that Plaintiffs have failed to produce the

requisite forecast of evidence to support this contention.

                        Bank of America Line of Credit

   {59} Plaintiffs contend that James breached duties owed to McKee Craft

and Plaintiffs when he obtained a $1.4 million loan from Bank of America on

behalf of the Company, instead of personally contributing the $1.35 million

contemplated in the Company’s February 2008 cash flow plan. (Pls.’ Br. Opp.

James Mot. S.J., p. 29.) The undisputed evidence reveals, however, that James

and Key discussed the $1.4 million loan and Key did not object; that Key had

previously tried to obtain loans on behalf of the Company without success; and

that the cash flow plan neither required that the contemplated $1.35 million

contribution derive from James’s personal funds nor became part of any

contract between the parties. Accordingly, Plaintiffs’ contention is without

evidentiary support.
                        James’s Right of First Refusal

   {60} Plaintiffs next contend that James breached a fiduciary duty to the

Company by “[u]sing [his] right of first refusal to block other deals so [that he

could] raid the corporate assets . . . .” (Pls. Br. Opp. James Mot. S.J., p. 30.)

Plaintiffs, however, have failed to produce evidence of any deals that James

purportedly blocked using his right of first refusal.         Accordingly, this

contention is without merit, irrespective of whether conduct of the nature

alleged would constitute a breach of fiduciary duty.

                              Government Sales

   {61} Plaintiffs next contend that James breached a fiduciary duty to the

Company by “cancel[ing] lucrative orders for boats for no apparent reason.”

(Pls. Br. Opp. James Mot. S.J., p. 30.) There is no evidence, however, that

James ever cancelled any sales order. To the contrary, Rowland Turner, who

worked with Key on McKee Craft’s government contracts, stated in his

deposition testimony that “[t]here were no government orders cancelled”

during his employment with the Company. (Turner Dep. 53:11—53:18, Oct.

17, 2013.)

                  Plaintiffs’ Employment with McKee Craft

   {62} Plaintiffs contend that James breached a fiduciary duty to them when

he terminated their employment with McKee Craft.

   {63} Minority shareholders may have a reasonable expectation of

continued employment with the company. Clark v. B.H. Holland Co., Inc., 

 (E.D.N.C. 1994) (citing Meiselman v. Meiselman, 

, 

 (1983)). The question of whether such

expectation is reasonable constitutes a question of fact not appropriately

resolved on a motion for summary judgment “unless ‘it is perfectly clear that

no issue of fact is involved and inquiry into the facts is not desirable to clarify

the application of the law.’” Clark, 

 (quoting Pierce v. Ford

Motor Co., 

 (4th Cir. 1951)).

   {64} Here, it is “perfectly clear” that Plaintiffs did not have a reasonable

expectation of continued employment with McKee Craft. James explicitly

declined to provide such an assurance in CSPA II, which governed the parties’

arrangement following James’s acquisition of a majority interest in McKee

Craft.     This contention accordingly fails for reasons detailed above in

connection with Plaintiffs’ breach of contract claim.

   {65} The Court has reviewed Plaintiffs’ remaining contentions in support

of their breach of fiduciary claim and finds them to be without evidentiary

support.    Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ breach of fiduciary duty claims and

DISMISSES these claims with prejudice.

                        Gross Mismanagement (derivative)

   {66} Plaintiffs cite no evidence to support their gross mismanagement

claim specifically and instead rely on the same allegations discussed above in

connection with their breach of fiduciary duty claims. The Court found no

merit in these contentions, supra, and finds no merit in them here as well.
   {67} Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ gross mismanagement claim and

DISMISSES this claim with prejudice.

                            Conversion (derivative)

   {68} “Conversion is defined as ‘an unauthorized assumption and exercise

of the right of ownership over goods or personal chattels belonging to another,

to the alteration of their condition or the exclusion of an owner’s

rights.’” Gallimore v. Sink, 

, 

 (1975)

(citations omitted) (emphasis added).

   {69} Plaintiffs’ predicate their conversion claim upon allegations that

James sold McKee Craft’s assets “below market price, and corporate assets

went missing[.]”   (Pls.’ Br. Opp. James Mot. S.J., p. 38.)    The Court has

addressed and rejected Plaintiffs’ contention concerning the propriety of the

July 30, 2009 auction at which the McKee Craft assets were sold, supra, and

Plaintiffs fail to identify any evidence to support their assertion that James

converted McKee Craft assets that “went missing.”

   {70} Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ conversion claim and DISMISSES this

claim with prejudice.

                        Unjust Enrichment (derivative)

   {71} “Under North Carolina law, a plaintiff demonstrates unjust

enrichment by showing that ‘it conferred a benefit on another party, that the

other party consciously accepted the benefit, and that the benefit was not
conferred gratuitously or by an interference in the affairs of the other party.’”

WJ Global LLC v. Farrell, 

 (E.D.N.C. 2013) (citation

omitted).

   {72} The Court finds, upon thorough review, that Plaintiffs’ evidence fails

to disclose any benefit conferred on James by McKee Craft that would support

a claim for unjust enrichment.

   {73} Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ unjust enrichment claim and DISMISSES

this claim with prejudice.

                     Civil Conspiracy (Direct and Derivative)

   {74} Plaintiffs allege that James, Marshburn, and Coconut Holdings

“formed a conspiracy to shut down McKee Craft and raid the assets.” (Pls.’ Br.

Opp. James Mot. S.J., p. 40.); Compl. ¶¶ 161–66.)          James contends that

summary judgment is appropriate because “Plaintiffs are wholly unable to

point to any actual agreement between James and Marshburn.” (James Br.

Supp. Mot. S.J., p. 31.)

      A threshold requirement in any cause of action for damages
      caused by acts committed pursuant to a conspiracy must be the
      showing that a conspiracy in fact existed. The existence of a
      conspiracy requires proof of an agreement between two or more
      persons. Although civil liability for conspiracy may be established
      by circumstantial evidence, the evidence of the agreement must
      be sufficient to create more than a suspicion or conjecture in order
      to justify submission to a jury.

Henderson v. LeBauer, 

, 

(1991) (citations omitted).
   {75} Plaintiffs offer in-house accountant Shumpert’s affidavit, in which

Ms. Shumpert states that “Marshburn told me . . . that he was hired to shut

down McKee Craft.” (Shumpert Aff. ¶ 8.). Ms. Shumpert clarified in her

deposition, however, that Marshburn’s statement reflected in her affidavit was

based upon his suspicion alone and not on any statement or particular pattern

of behavior by James (Shumpert Dep. 44:17–45:20, Oct. 16, 2013.)

   {76} Plaintiffs allege that James and Marshburn made a concerted effort

to exclude Key from certain aspects of McKee Craft’s operations, concerning,

for example, the hiring of Company employees, (Pls.’ Ex. 50), and access to the

Company’s accounting software.       (Lewis Dep. 37:15–25, Oct. 16, 2013.)

Mashburn testified in his deposition, however, that he and James never

discussed excluding Key from Company information or management decisions.

(Marshburn Dep. 50:8–18.)

   {77} The Court finds Plaintiffs’ evidence insufficient to create more than a

suspicion or conjecture that there existed the requisite agreement between

James and Marshburn to demonstrate the existence of a civil conspiracy and

support submission of this claim to a jury. Accordingly, the Court GRANTS

James’s Motion for Summary Judgment with respect to Plaintiffs’ civil

conspiracy claim and DISMISSES this claim with prejudice.

          Unfair and Deceptive Trade Practices (Direct and Derivative)

   {78} North Carolina’s Unfair and Deceptive Trade Practices Act (“the Act”)

targets “unfair or deceptive acts or practices in or affecting commerce[.]”

N.C.G.S. § 75-1.1(a) (2014). Although the Act broadly defines “commerce” to
include “all business activities, however denominated,” N.C.G.S § 75-1.1(b)

(2014), our Courts have held that the Act “is not intended to apply to all wrongs

in a business setting.” HAJMM Co. v. House of Raeford Farms, Inc., 

, 

 (1991).

   {79} To establish the “commerce” requirement, the defendant’s conduct

“must affect commerce in a commercial setting, . . . not in a private relationship

type setting such as corporate governance issues, . . . securities transactions, .

. . or disputes arising from employment[.]” In re Brokers, Inc., 

 (Bankr. M.D.N.C. 2008) (citations omitted). “Matters of internal corporate

management . . . do not affect commerce as defined by Chapter 75 and our

Supreme Court.” Wilson v. Blue Ridge Elec. Membership Corp., 

, 

; see also White v. Thompson, 

,

 (2010) (explaining that the Act applies to “(1) interactions

between businesses, and (2) interactions between businesses and consumers”).

   {80} At an earlier stage of these proceedings, this Court (Murphy, J.)

observed the following with respect to Plaintiffs’ UDTP claims:

      Although many of Plaintiffs’ allegations in the Complaint relate
      to the internal dispute between the shareholders and the sale of
      stock in McKee Craft, Plaintiffs also allege other actions as the
      basis of their claims, including that James improperly (1)
      informed government purchasers that their orders would not be
      filled, (2) directed staff to stop honoring warranty claims of the
      corporation, (3) sold or gave away boats already manufactured for
      other entities, and (4) auctioned the molds and plugs used to build
      boats to Coconut Holdings “for less than reasonable or fair market
      value.” (V. 2nd Am. Compl. ¶¶ 64–65, 72, 151.) These allegations
      fall outside of the internal dispute and stock sale, and involve
      interactions with other commercial businesses.          Therefore,
      accepting the allegations as true, the Court concludes that James’
      alleged acts were “in or affecting commerce.” Furthermore,
      because these acts partially form the basis for Plaintiffs’
      underlying tort claims and, thus, may offend established public
      policy, see Marshall v. Miller, 

, 

 (1981), the Court concludes that Plaintiffs have sufficiently
      pled a claim for unfair and deceptive trade practices.

McKee, 

.

   {81} Reviewing now the evidence brought forward to support Plaintiffs’

allegations, the Court finds that the undisputed evidence of record does not

reveal a dispute between McKee Craft and another business or consumers at

large, but rather a dispute between Plaintiffs and James as co-owners of

McKee Craft.      Plaintiffs’ evidence, in other words, fails to support the

allegations that permitted Plaintiffs to maintain their UDTP claim at the

motion to dismiss stage of these proceedings.       Additionally, the Court’s

dismissal of Plaintiffs’ claims, supra, has extinguished the “underlying tort

claims” that this Court (Murphy, J.) previously determined were supportive of

Plaintiffs’ UDTP claim.

   {82} Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ UDTP claim and DISMISSES this claim

with prejudice.

                              Punitive Damages

   {83} The Court has dismissed all of Plaintiffs’ claims for which

compensatory damages are recoverable, supra.       Absent a viable claim for

compensatory damages, there can be no basis for a punitive damages award.

Springs v. City of Charlotte, 

 (N.C. Ct. App. 2012) (“To
justify an award of punitive damages, the claimant must prove that the

defendant is liable for compensatory damages . . . .’”); N.C.G.S. § 1D-15 (2014)

(providing that “[p]unitive damages may be awarded only if the claimant

proves that the defendant is liable for compensatory damages . . .” (emphasis

added)).   Accordingly, the Court GRANTS James’s Motion for Summary

Judgment with respect to Plaintiffs’ punitive damages claim and DISMISSES

this claim with prejudice.

                                      B.
               Coconut Holdings’s Motion for Summary Judgment

   {84} Coconut Holdings has also moved for summary judgment with respect

to all of Plaintiffs’ claims against it.   Plaintiffs’ claims against Coconut

Holdings derive from, and are thus contingent upon, Plaintiffs’ claims against

James, in that they seek to hold Coconut Holdings liable for James’s conduct

under a piercing the corporate veil theory. Because the Court has dismissed

Plaintiffs’ claims against James, however, there remains no basis for recovery

against Coconut Holdings.       Accordingly, the Court GRANTS Coconut

Holdings’s Motion for Summary Judgment, and DISMISSES Plaintiffs’ claims

against Coconut Holdings with prejudice.

                                      C.

                  James’s Motion to Exclude Expert Testimony

   {85} The Court concludes, in light of its dismissal of Plaintiffs’ claims

against both James and Coconut Holdings, supra, that there is no need to

inquire into the merits of James’s Motion to Exclude Expert Testimony.
Having reviewed the contested testimony, however, the Court notes that

admission of such testimony would not alter the conclusions reached above.

                                     III.
                               CONCLUSION
   {86} For the foregoing reasons, the Court hereby GRANTS James’s

Motion for Summary Judgment, GRANTS Coconut Holdings’s Motion for

Summary Judgment, and DENIES as moot James’s Motion to Exclude

Expert Testimony.


      SO ORDERED, this the 31st day of December, 2014.