Jcg & Assocs., LLC v. Disaster Am. USA, LLC

JCG & Assocs., LLC v. Disaster Am. USA, LLC, 

.


STATE OF NORTH CAROLINA                 IN THE GENERAL COURT OF JUSTICE
                                            SUPERIOR COURT DIVISION
BRUNSWICK COUNTY                                   19 CVS 746

JCG & ASSOCIATES, LLC; MIP 1,
LLC; JAMES BONICA; PATRICIA
BONICA; and DAVID L.
PETERSON, Trustee of the David L.
Peterson Living Trust,

          Plaintiffs and Counterclaim
          Defendants,

v.

DISASTER AMERICA USA, LLC;
DA ROOFING SYSTEMS; ESTATE
OF DONALD LEE HUSK, by and
through KATHLEEN KAREN HUSK
as executrix,

          Defendants and Third-Party     ORDER AND OPINION FOLLOWING
          Plaintiffs,                        SHOW-CAUSE HEARING
and

DISASTER AMERICA OF NORTH
CAROLINA, LLC,

          Defendant, Counterclaim
          Plaintiff, and Third-Party
          Plaintiff,

v.

TERRY WILLIAMS; and AIRWARE
TRANSPORTATION AND
LOGISTICS, LLC,

          Third-Party Defendants.


     1.    Defendants Disaster America USA, LLC, Disaster America of North

Carolina, LLC, DA Roofing Systems (collectively, “Disaster America”), and the Estate

of Donald Lee Husk have repeatedly failed to comply with the Business Court Rules

(“BCR”), the pretrial scheduling order, and other orders in this case. The Court

ordered them to show cause why they should not be sanctioned for their
noncompliance and scheduled a hearing for Defendants to appear on 9 December

2022. Defendants did not submit a brief and supporting materials in response to the

show-cause order despite a warning that the Court would view their failure to do so

“as a decision not to contest an award of sanctions.” (Order Show Cause ¶ 6, ECF No.

150.) Nor did Defendants appear at the show-cause hearing.

   2.     Having considered all relevant matters of record, the Court concludes, in the

exercise of its discretion, that justice requires the entry of sanctions against

Defendants for their misconduct. For the reasons discussed below, the Court will

strike Defendants’ answers to the complaint and amendment to the complaint; enter

default judgment; and dismiss any remaining third-party claims and defenses.

        Reiss & Nutt, PLLC, by W. Cory Reiss and Kyle J. Nutt, for Plaintiffs
        JCG & Associates, LLC, MIP 1, LLC, James Bonica, Patricia Bonica,
        and David L. Peterson, Trustee of the David L. Peterson Living Trust.

        No counsel appeared for Defendants Disaster America USA, LLC,
        Disaster America of North Carolina, LLC, DA Roofing Systems, and the
        Estate of Donald Lee Husk.

        No counsel appeared for Third-Party Defendants Terry Williams and
        Airware Transportation and Logistics, LLC.

Conrad, Judge.

                                       I.
                                FINDINGS OF FACT

   3.     These findings are tailored to the relevant procedural history leading up to

and following the Court’s show-cause order.       Prior orders describe in detail the

allegations of the complaint, as amended, and the nature of the asserted claims. See

generally JCG & Assocs., LLC v. Disaster Am. USA, LLC, 

 (N.C.

Super. Ct. Aug. 12, 2022); JCG & Assocs., LLC v. Disaster Am. USA, LLC, 

 (N.C. Super. Ct. Dec. 9, 2021); JCG & Assocs., LLC v. Disaster Am. USA,

LLC, 

 (N.C. Super. Ct. Dec. 19, 2019).

   4.    Plaintiffs JCG & Associates, LLC, MIP 1, LLC, and James and Patricia

Bonica initiated this action in April 2019, asserting numerous claims against

Disaster America, its CEO Donald Husk, and its COO Jason Husk. (See Compl., ECF

No. 2.) In addition to its answer, Disaster America asserted affirmative defenses as

well as counterclaims against MIP 1 and the Bonicas. (See Mot. Strike & Dismiss,

Affirmative Defenses, Answer, and Countercls., ECF No. 3.) Donald Husk separately

moved to dismiss the claims against him for lack of personal jurisdiction. (See Mot.

Dismiss, ECF No. 4.) After the Court denied Donald Husk’s motion to dismiss, see

JCG, 

, at *11, he filed his answer to the complaint in January

2020, (see Def. Donald Husk’s Answer Pls.’ Compl., ECF No. 41). Jason Husk never

responded to the original complaint.

   5.    In February 2020, the Court granted leave to add David L. Peterson, trustee

of the David L. Peterson Living Trust, as a plaintiff. (See Order Mot. Amend, ECF

No. 68; Amendment Compl., ECF No. 70.) Disaster America, Donald Husk, and Jason

Husk timely filed their answer to Peterson’s claims. They also asserted affirmative

defenses, counterclaims against Peterson, and third-party claims against Terry

Williams and Airware Transportation and Logistics, LLC. 1             (See Defs.’ Answer

Amended Compl., Countercl., and Third-Party Compl., ECF No. 71.)



1 Williams and Airware have never participated in this action, nor has any counsel ever made

an appearance on their behalf. Although the third-party complaint contains a certificate of
   6.    In early 2021, counsel for Disaster America, Donald Husk, and Jason Husk

moved to withdraw. (See Mot. Withdraw, ECF No. 103.) The Court granted the

motion, stayed all deadlines for a month, and directed Disaster America, Donald

Husk, and Jason Husk to promptly retain new counsel. (See Order Mot. Withdraw

¶ 8, ECF No. 109.) The Court also reminded Disaster America that “ ‘a corporation

must be represented by a duly admitted and licensed attorney-at-law’ and cannot

represent itself.”   (Order Mot. Withdraw ¶ 7 (quoting LexisNexis, Div. of Reed

Elsevier, Inc. v. TRaviSHan Corp., 

 (2002)).)

   7.    When the stay expired without an entry of appearance by new counsel, the

Court sent an e-mail, copying all counsel and unrepresented parties, that directed

Donald Husk and Jason Husk to individually create pro se user accounts for the

e-filing system. In response, Jason Husk reported that Donald Husk had died a few

weeks earlier.

   8.    The Court convened a status conference on 30 March 2021. Counsel for

Plaintiffs appeared. Jason Husk also appeared on his own behalf. But no counsel

appeared for Disaster America or the late Donald Husk. At the conference, Plaintiffs’

counsel and Jason Husk agreed to extend the discovery period by thirty days, and

Plaintiffs disclosed their intent to move to substitute Donald Husk’s estate as a party.

The Court then directed the parties to file a status report regarding the state of the

probate proceedings, the anticipated timeframe for a motion to substitute, whether




service on Williams and Airware, there is no evidence that either party was properly served
with this pleading.
any Defendant had retained or intended to retain counsel, and whether any party

wished to extend the discovery period again. The Court also ordered Jason Husk to

associate himself with the e-filing system as a pro se litigant and sent him a copy of

the relevant order via e-mail. (See Order Amending Case Management Deadlines

¶¶ 3, 5, 6, ECF No. 111.)

   9.    Plaintiffs’ counsel submitted a status report on 13 May 2021 via e-mail to

the Court’s law clerk and copying Jason Husk. No Defendant joined in that report or

submitted a separate report. Two weeks later, Plaintiffs’ counsel informed the Court

via e-mail, again copying Jason Husk, that Kathleen Husk had been appointed as

executrix of Donald Husk’s estate.

   10.   Plaintiffs then filed a motion to substitute the estate of Donald Husk, by and

through Kathleen Husk as executrix, as a party in place of Donald Husk. (See Mot.

Substitute Party 2, ECF No. 112.)       Although Plaintiffs asked Jason Husk and

Kathleen Husk for their positions, as required by BCR 7.3, neither responded. In an

interim order, the Court shortened the time to respond to the motion to substitute

and directed Plaintiffs’ counsel to serve a copy of the order on Disaster America, Jason

Husk, and Kathleen Husk and to file a certificate of service. The interim order

reiterated that the Court had instructed Jason Husk orally, via e-mail, and via court

order to associate himself as a pro se litigant and that his failure to comply was a

violation of court orders and the BCRs. The Court stated that, going forward, it would

presume that Jason Husk had received “actual or constructive notice of all documents
filed and served through the electronic-filing system.”            (Interim Order Mot.

Substitute ¶¶ 2–5, ECF No. 113.)

   11.   Plaintiffs filed the certificate of service on 8 June 2021. (See Certificate Serv.

Interim Order, ECF No. 114.) No Defendant filed a response. On 29 June 2021, the

Court granted the motion to substitute, directing Plaintiffs’ counsel to serve a copy of

the order on Kathleen Husk and to file a certificate of service, (Order Mot. Substitute

Party ¶¶ 4, 5, ECF No. 117), which Plaintiffs timely filed on 8 July 2021, (Certificate

Serv. Order, ECF No. 118). The Court further directed Kathleen Husk, if she chose

not to retain counsel, to create a user account as a pro se litigant and to associate

herself to the case in the e-filing system. The order gave any party ten days to move

to modify any case management deadlines. (See Order Mot. Substitute Party ¶ 5.)

   12.   On 19 August 2021, having heard nothing from Defendants, the Court

entered a scheduling order and notice of status conference. The Court observed that

(i) Disaster America had not retained counsel and could not proceed pro se;

(ii) discovery had closed because no party had moved to extend the discovery

deadlines; (iii) Jason Husk had not complied with the order to associate himself to

the case; and (iv) Kathleen Husk had not created a user account, filed a notice of

association, or moved for relief from using the e-filing system. The Court ordered

Kathleen Husk to create a user account and associate herself as a pro se litigant and

indicated that the Court would presume that she had received “actual or constructive

notice of all [subsequent] documents filed and served through the electronic-filing

system.” The Court also ordered each side to file a status report regarding their
availability for a hearing on a pending motion for summary judgment and directed

Jason Husk and Kathleen Husk to indicate whether they intended to retain counsel.

Once again, Plaintiffs were directed to file a certificate of service. (See Scheduling

Order and Notice Status Conf. ¶¶ 3–8, ECF No. 123.)

   13.   In compliance with the scheduling order, Plaintiffs filed both a certificate of

service, (Certificate Serv. Orders, ECF No. 124), and a status report, (Status Report

Pls., ECF No. 125). Nothing was filed by Defendants.

   14.   At the 20 September 2021 status conference, counsel for Plaintiffs appeared,

and Jason Husk appeared on his own behalf. Kathleen Husk did not appear. No

counsel appeared for Disaster America. The Court reiterated to those present the

importance of being associated with the case through the e-filing system and the risk

of missing court filings and notices.

   15.   On 4 November 2021, the Court noticed a jury trial to begin on 29 August

2022. (See Notice Jury Trial, ECF No. 129.) The Court entered a pretrial scheduling

order, reiterating that a limited liability company must be represented by counsel.

The Court also noted that many required pretrial submissions were “designed to be

prepared jointly by all the parties,” but “[i]f any party fail[ed] to cooperate . . . , the

other parties shall nonetheless prepare and file their own submissions . . . .” The

Court further advised that “failure to participate in the pretrial process or otherwise

comply with th[e] [o]rder may result in sanctions, including monetary sanctions and,
if appropriate, dismissal of claims and defenses.” (Pretrial Scheduling Order ¶¶ 15,

16, ECF No. 130.) 2

   16.   In January 2022, Jason Husk filed a voluntary petition for relief under

Chapter 7 of the United States Bankruptcy Code but did not report it to the Court.

When the Court learned of the bankruptcy proceeding, it entered a stay of all claims

against Jason Husk. The Court also directed the parties to file a status report

regarding what effect, if any, the stay should have on the other pending claims, (see

Order Regarding Automatic Stay Claims Against Def. Jason Husk ¶¶ 2, 3, ECF No.

135), but no party submitted a filing. “[G]iven the lack of communication from all

parties,” the Court stayed all proceedings, vacated the pretrial scheduling order, and

canceled the jury trial. (Order Staying All Proceedings ¶ 2, ECF No. 136; Notice

Cancellation, ECF No. 137.) Plaintiffs then reported that Jason Husk had been

discharged from bankruptcy on 15 February 2022. (See Status Report Bankruptcy

Jason Husk ¶ 1, ECF No. 138.)

   17.   In July 2022, the Court lifted the stay and dismissed all claims against Jason

Husk following his bankruptcy. The Court also issued a new pretrial scheduling

order for the remaining claims and parties. This order again stated that LLCs may




2 Plaintiffs filed two timely summary judgment motions in this action.     (See Mot. Partial
Summ. J., ECF No. 98; Mot. Partial Summ. J., ECF No. 131.) The Court granted the first
motion in part, entering judgment in favor of Plaintiffs on their claims for declaratory
judgment and on Disaster America NC’s counterclaims for breach of contract and quantum
meruit. The counterclaims were dismissed with prejudice. See JCG, 

,
at *13. The second motion was denied; in its opinion, the Court reiterated that Defendants
had not been represented by counsel nor meaningfully participated in the litigation since the
withdrawal of counsel in 2021 and that limited liability companies must be represented by
counsel in litigation. See JCG, 

, at *2–3, n.2.
not proceed pro se and warned that “failure to participate in the pretrial process or

otherwise comply with th[e] [o]rder may result in sanctions, including monetary

sanctions and, if appropriate, striking of pleadings, dismissal of claims, and dismissal

of defenses.” (Order Mot. Lift Stay ¶ 4, ECF No. 141; Pretrial Scheduling Order

¶¶ 14, 15, ECF No. 142.)

   18.   On 27 September 2022, Plaintiffs reported that Defendants had “not

respond[ed] to any correspondence sent by the Plaintiffs, [had] not compl[ied] with

any of the deadlines established by the Court’s [pretrial scheduling order], and ha[d]

made no effort to participate in the [p]re-[t]rial process.” (Status Report Pretrial

Procs. 2, ECF No. 144.) In light of Plaintiffs’ representations, the Court ordered

Defendants to file a response to Plaintiffs’ report along with supporting materials no

later than 5 October 2022. (See Order Calling for Resp., ECF No. 148.)

   19.   Nothing was filed.    As a result, on 9 October 2022, the Court ordered

Defendants to show cause why they should not be sanctioned for their repeated

noncompliance with its orders.        The Court warned Defendants that it was

“considering severe sanctions, including but not limited to striking Defendants’

answer to the amended complaint; entering default judgment; dismissing any

remaining counterclaims, third-party claims, and defenses; and awarding reasonable

costs and fees, including attorneys’ fees, that Plaintiffs incurred because of

Defendants’ failure to comply with the pretrial scheduling order.” The Court ordered

Defendants to submit a brief and supporting materials by 1 November 2022, noting

that further noncompliance would be viewed as “a decision not to contest an award of
sanctions.” (Order Show Cause ¶¶ 1, 3.) After Defendants missed this deadline, the

Court issued a notice of hearing. (See Notice Hearing, ECF No. 155; Amended Notice

Hearing, ECF No. 157.)

   20.      The Court held a show-cause hearing on 9 December 2022.            Plaintiffs’

counsel appeared on behalf of their clients. Defendants did not appear, either in

person or through counsel.

                                       II.
                               CONCLUSIONS OF LAW

   21.      Trial courts have inherent authority “to do all things that are reasonably

necessary for the proper administration of justice,” Beard v. N.C. State Bar, 

 (1987), including “the power . . . to sanction parties for failure to comply with

court orders,” Daniels v. Montgomery Mut. Ins. Co., 

 (1987). The

“power to sanction disobedient parties, even to the point of dismissing their actions

or striking their defenses, . . . is longstanding and inherent,” Minor v. Minor, 

 (1983), and the Court may address such misconduct on its own motion

or upon motion of a party, see Grubbs v. Grubbs, 

(N.C. Ct. App. Mar. 7, 2017) (unpublished). The imposition of sanctions is within the

sound discretion of the trial judge and is reviewed for abuse of discretion. See Red

Valve, Inc. v. Titan Valve, Inc., 

, at *41 (N.C. Super. Ct. Sept.

3, 2019).

   22.      Severe sanctions—such as striking a party’s answer and entering default

judgment—“are appropriate when a party . . . abuses the process at a level that is

utterly inconsistent with the orderly administration of justice or undermines the
integrity of the process.” 

 at *43 (quoting Projects Mgmt. Co. v. DynCorp Int’l LLC,

 (4th Cir. 2013)). A trial court may impose severe sanctions only

after considering less severe sanctions. See 

 at *61–62; Few v. Hammack Enters.,

Inc., 

 (1999). It is necessary to “weigh the circumstances of

each case and choose a sanction that, in the court’s judgment, ‘properly takes into

account the severity of the party’s disobedience.’ ” Out of the Box Devs., LLC v.

LogicBit Corp., 

, at *10 (N.C. Super. Ct. Mar. 20, 2014) (quoting

Patterson v. Sweatt, 

 (2001)).

   23.    Dismissal of a third-party claim is allowed under Rule 41(b) for “failure to

prosecute the claim, failure to comply with the rules of civil procedure, or failure to

comply with a court order.” 3 Krawiec, 

, at *7 (quoting McKoy

v. McKoy, 

, 552–53 (2011)); see N.C. R. Civ. P. 41(c) (“The provisions

of [Rule 41(b)] apply to the dismissal of any . . . third-party claim.”). The trial court

must consider lesser sanctions before dismissing a claim and must consider

“(1) whether the [third-party] plaintiff acted in a manner which deliberately or

unreasonably delayed the matter; (2) the amount of prejudice, if any, to the



3 Although the language of Rule 41(b) appears to contemplate that the relief provided under

this Rule is triggered only upon motion of a party, see N.C. R. Civ. P. 41(b) (“For failure of the
plaintiff to prosecute or to comply with these rules or any order of court, a defendant may
move for dismissal of an action or of any claim therein against him.”), it is clear that the
Court may also dismiss an action or individual claims pursuant to Rule 41(b) on its own
motion. See, e.g., Hebenstreit v. Hebenstreit, 

, 31 (2015) (dismissing motion
for contempt sua sponte pursuant to Rule 41(b) for plaintiff’s failure to prosecute); Rabinowitz
v. Suvillaga, 

, at *13–14 (N.C. Super. Ct. Jan. 28, 2019) (dismissing
counterclaims sua sponte pursuant to Rule 41(b) for failure to comply with court orders);
Krawiec v. Bogosavac, 

, at *5, 7–9 (N.C. Super. Ct. Aug. 16, 2018)
(dismissing action sua sponte pursuant to Rule 41(b) for plaintiffs’ failure to prosecute after
show-cause hearing).
[third-party] defendant; and (3) the reason, if one exists, that sanctions short of

dismissal would not suffice.” Brunner v. Lodge on Lake Lure, LLC, 

, at *4 (N.C. Super. Ct. Nov. 3, 2016) (quoting Wilder v. Wilder, 

 (2001)).

   24.   Plaintiffs contend that ultimate sanctions are appropriate. They ask the

Court to strike Defendants’ answers to the complaint and the amendment to the

complaint and to enter default judgment against Defendants on all claims. (See Pls.’

Mem. Supp. Sanctions 6–7, ECF No. 156.)

   25.   The Court agrees. Since the withdrawal of their counsel in February 2021,

Defendants have repeatedly disregarded the Business Court Rules, willfully

disobeyed court orders, and completely failed to participate in this litigation. This

misconduct has caused prejudice to Plaintiffs, impeded the progress of the case, and

wasted judicial resources.

   26.   Indeed, Defendants have not taken even the most basic steps necessary to

participate in this case. The Court has cautioned Disaster America over and over

that “a corporation must be represented by a duly admitted and licensed

attorney-at-law and cannot procced pro se.” LexisNexis, 

. Even

so, it has not retained counsel. Likewise, the Court has informed Kathleen Husk that

the Business Court Rules require all parties, unless excused for good cause, to use

the e-filing system, see BCR 3, and has twice ordered her to retain counsel or create
an e-filing user account and associate herself to this case as a pro se litigant. She has

yet to do either. 4

   27.    Nor have Defendants complied with any of their pretrial obligations. The

pretrial scheduling order required them to serve exhibits and witness designations,

participate in a conference with opposing counsel, jointly prepare a proposed pretrial

order, and jointly prepare tentative jury instructions. They have done none of these

things despite a warning that failure to participate would likely result in sanctions.

Such complete noncompliance is evidence of willfulness. And the persistent refusal

to respond to Plaintiffs’ communications, participate in joint filings, and file timely

responses in this matter undermines both the spirit and the letter of the Business

Court Rules. See BCR 1, 7, 12.

   28.    Moreover, Defendants have refused every invitation to explain their

conduct. The Court directed Defendants to respond to Plaintiffs’ representations that

they had not fulfilled their pretrial obligations. They did not. Given the lack of

response, the Court issued the show-cause order, directed Defendants to file a brief

and supporting materials, and made clear that failure to comply would be deemed “a

decision not to contest an award of sanctions.” (Order Show Cause ¶ 6.) Defendants

did not file a brief, submit supporting materials, or appear at the show-cause hearing.

Accordingly, the Court concludes that they have made deliberate decisions not to

comply with the show-cause order and not to contest an award of sanctions.




4 Although Jason Husk is no longer a party to this case, the Court notes that it also directed

him no fewer than five times to undertake similar actions to no avail.
   29.   By the Court’s count, some or all Defendants have failed to comply with at

least seven orders spanning some eighteen months. (See ECF Nos. 111, 117, 123,

135, 142, 148, 150.) They have also failed to file briefs in response to at least three

motions. And they have made no attempt at all to communicate with Plaintiffs or the

Court.

   30.   The Court has the inherent authority to sanction litigants who refuse to

comply with governing rules and orders. See Few, 

; Lomax v.

Shaw, 

 (1991); Out of the Box Devs., LLC, 

, at *9. In addition, the Court has inherent authority under Rule 41(b) to dismiss

third-party claims for similar reasons. See Krawiec, 

, at *7.

   31.   Here, in the exercise of its discretion, the Court concludes that sanctions are

warranted. The Court has considered lesser sanctions but finds them unsuited to the

conduct at issue. Defendants have willfully refused to comply with court orders, have

disregarded the Business Court Rules, have ignored all overtures from their

opponents and the Court, have not participated meaningfully in this case since early

2021, and show no signs that they will comply with their obligations in the future.

Their conduct has unreasonably delayed this matter and prevented the final

resolution of the claims at issue.    And Defendants were given notice that their

noncompliance with court orders and rules could result in severe sanctions, including

the striking of pleadings, dismissal of claims, dismissal of defenses, and entry of

default judgment. Lesser sanctions would neither alleviate the prejudice suffered by
Plaintiffs nor permit the orderly, just, and prompt resolution of this litigation. Only

the most severe sanctions will do.

   32.   Accordingly, the Court will dismiss Defendants’ third-party claims.

Defendants have failed to participate in this litigation since February 2021. Williams

and Airware, the third-party defendants, have never participated in this litigation.

It is a waste of judicial resources to maintain an action when neither side is

participating. This is especially so given that Defendants appear not to have served

Williams and Airware properly and, in any event, have deliberately and unreasonably

delayed final resolution of their third-party claims through their repeated failure to

comply with the pretrial scheduling order—including the failure to identify any

evidence or witnesses, prepare a proposed pretrial order, and prepare proposed jury

instructions related to the third-party claims. Defendants’ conduct “manifests an

intention to thwart the progress of the action to its conclusion.” Krawiec, 

, at *7 (quoting In re Will of Kersey, 

 (2006)). The

Court therefore concludes that lesser sanctions will not suffice and that it is

appropriate to dismiss Defendants’ third-party claims with prejudice for failure to

prosecute and for failure to comply with court orders.

   33.   In addition, the Court will strike Defendants’ answers and affirmative

defenses and enter default judgment in Plaintiffs’ favor on most remaining claims. 5


5 See, e.g., Kearney Mach. & Supply Inc. v. Shenyang Mach. Tool Co., 

, at *11 (N.D. Ala. July 6, 2022) (imposing default judgment as a sanction against a
party who took “no steps to participate in this action in good faith”); Garnier-Thiebaut, Inc.
v. Castello 1935 Inc., 

, at *23 (D. Md. Dec. 6, 2019) (imposing
default judgment as a “sanction for Defendants’ wholesale failure to participate in the
See, e.g., Om Shankar Corp. v. Sai Devs., Inc., 

, at *8–15

(2020) (unpublished) (affirming entry of default judgment as sanction).

   34.   A default judgment is appropriate only if the allegations of the complaint

are adequate to state a claim. The Court has carefully reviewed the allegations here

and concludes that they present sufficient bases to support the entry of a default

judgment. See Brown v. Cavit Scis., Inc., 

 (2013) (holding that,

for purposes of default judgment, “if any portion of the complaint presents facts

sufficient to constitute a cause of action, or if facts sufficient for that purpose fairly

can be gathered from it, the pleading will stand” (cleaned up)).

   35.   First, MIP 1, Peterson, and the Bonicas adequately state claims for fraud.

As alleged, Disaster America and its representatives falsely stated that they

possessed a North Carolina contractor’s license allowing them to restore properties

owned by MIP 1, Peterson, and the Bonicas. The allegations also show that this false

statement was reasonably calculated to deceive, made with intent to deceive, did in

fact deceive, and resulted in damages. See Rowan Cnty. Bd. of Educ. v. U.S. Gypsum

Co., 

 (1992) (listing the essential elements of fraud); (Compl. ¶¶ 71–93;

Amendment Compl. ¶¶ 211–29). Because Plaintiffs have established fraud, their

alternative claim for negligent misrepresentation is cumulative and may be

dismissed as moot.




adversary process”); Jindal Tubular USA, LLC v. Gilmore Pipe Sales, LLC, 

, at *8 (S.D. Miss. Apr. 4, 2019) (imposing default judgment as a sanction for
failure to defend or prosecute case, appear at conferences, and respond to show-cause order).
   36.   MIP 1, Peterson, and the Bonicas also state claims for constructive fraud.

As alleged, these Plaintiffs had a special relationship of trust and confidence with

Defendants who acted as their attorney-in-fact and agent regarding negotiations with

insurance carriers.    Defendants breached their duties and sought to benefit

themselves by inflating estimates and charging for work that was not performed. See

Sullivan v. Mebane Packaging Grp., Inc., 

 (2003) (stating that

constructive fraud requires the plaintiff to show “(1) facts and circumstances creating

a relation of trust and confidence; (2) which surrounded the consummation of the

transaction in which the defendant is alleged to have taken advantage of the

relationship; and (3) the defendant sought to benefit himself in the transaction”);

(Compl. ¶¶ 94–102; Amendment Compl. ¶¶ 230–37).

   37.   These three Plaintiffs also assert claims for unjust enrichment. The Court

previously declared that their contracts with Disaster America were invalid and not

enforceable.   The allegations show that these Plaintiffs conferred funds on

Defendants, that they were not conferred officiously, that the benefit was not

gratuitous, that the benefit was measurable, and that Defendants consciously

accepted the benefit. See JPMorgan Chase Bank, N.A. v. Browning, 

, 541–42 (2013) (describing the five elements necessary to make out a prima facie

case for unjust enrichment); (Compl. ¶¶ 103–07; Amendment Compl. ¶¶ 238–41).

   38.   MIP 1 separately asserts a claim for unfair debt collection practices. This

claim, too, is well grounded. As alleged, Defendants knew that their contract with

MIP 1 was void, demanded payment, and refused to release MIP 1’s personal property
until Disaster America was paid in full.        See Davis Lake Cmty. Ass’n, Inc. v.

Feldmann, 

, 295–97 (2000) (concluding that allegations of unfair

debt collection were adequate); (Compl. ¶¶ 108–12).

   39.   In addition, Plaintiffs adequately state claims for violations of N.C.G.S.

§ 75-1.1. The allegations show that Defendants deceived MIP 1, Peterson, and the

Bonicas by falsely representing that they possessed JCG’s North Carolina

contractor’s license.   This deception could and did enable Defendants to obtain

contracts with consumers, including Plaintiffs, and Defendants’ breaches of those

contracts injured Plaintiffs. See Walker v. Fleetwood Homes of N.C., Inc., 

, 71–72 (2007) (stating that a plaintiff must allege “(1) an unfair or deceptive act or

practice, (2) in or affecting commerce, and (3) which proximately caused injury to

plaintiff” to make out a claim for unfair and deceptive trade practices); (Compl.

¶¶ 113–19, 136–39; Amendment Compl. ¶¶ 242–47).

   40.   Next, JCG states a claim for trade name and trademark infringement. It

alleges that it has valid and protectable marks—its business name and general

contractor’s license number—which it has continuously and exclusively used in the

State. It also alleges that Defendants’ use of the mark is likely to cause confusion

and has caused actual confusion among consumers, such as MIP 1, Peterson, and the

Bonicas. See Johnson & Morris, PLLC v. Abdelbaky & Boes, PLLC, 

, at *13–14 (N.C. Super. Ct. Sept. 28, 2017) (identifying elements of

trademark infringement to include “valid and protectable mark” and likelihood that

use of the mark will cause confusion); (Compl. ¶¶ 120–35). This infringement is also
an unfair and deceptive practice that is in or affecting commerce under section 75-1.1.

See Ray Lackey Enters., Inc. v. Vill. Inn Lakeside, Inc., 

, at *37

(N.C. Super. Ct. Jan. 29, 2016) (treating trademark infringement as violation of

section 75-1.1).

   41.   JCG, MIP 1, and the Bonicas assert claims under the North Carolina

Racketeer Influenced and Corrupt Organizations Act.            These claims are well

grounded.    Defendants impermissibly used JCG’s general contractor’s license to

obtain contracts from MIP 1, the Bonicas, and others to perform restoration services

in the wake of Hurricane Florence and used those contracts to make false claims by

mail and electronic mail. Securing the contracts resulted in pecuniary gain for

Defendants and caused damage to property owned by MIP 1 and the Bonicas and to

JCG’s business, each of whom was an innocent person. See Gilmore v. Gilmore, 

 (2013) (establishing a claim under the North Carolina RICO Act

requires “(1) an innocent person must allege (2) an injury or damage to his business

or property (3) by reason of two or more acts of organized unlawful activity or conduct,

(4) one of which is something other than mail fraud, wire fraud, or fraud in the sale

of securities, (5) that resulted in pecuniary gain to the defendants” (cleaned up));

(Compl. ¶¶ 140–55).

   42.   The same three Plaintiffs assert a claim for civil conspiracy.        Because

Plaintiffs have adequately pleaded their underlying claims for unfair and deceptive

trade practices as well as violations of the North Carolina RICO Act, Plaintiffs have

adequately stated a claim for civil conspiracy. See Esposito v. Talbert & Bright, Inc.,


 (2007) (“It is well established that there is not a separate civil

action for civil conspiracy in North Carolina.” (citation and quotation marks

omitted)); (Compl. ¶¶ 172–78).

   43.   MIP 1 and the Bonicas have also adequately stated claims for negligence.

The complaint alleges that Defendants owed a duty of care in their performance of

restoration work and that they breached that duty, resulting in damage to the

properties. See Keith v. Health-Pro Home Care Servs., Inc., 

, 450 (2022)

(stating that negligence requires “(1) a legal duty owed by the defendant to the

plaintiff, (2) a breach of that legal duty, and (3) injury proximately caused by the

breach”); (Compl. ¶¶ 179–90).

   44.   MIP 1, JCG, and the Bonicas also seek to impose liability on the estate of

Donald Husk for the various claims above on both a theory of direct liability and on

a theory of veil piercing. The complaint alleges that the late Donald Husk exercised

complete domination and control over Disaster America’s policy and business

practices such that it was his mere instrumentality. In addition, the allegations state

that the late Donald Husk used that domination and control to appropriate JCG’s

name and general contractor’s license number to perpetrate a fraud on MIP 1 and the

Bonicas. The Court therefore concludes that MIP 1, JCG, and the Bonicas have

adequately pleaded a theory of liability based on veil piercing. See Kerry Bodenhamer

Farms, LLC v. Nature’s Pearl Corp., 

, at *12 (N.C. Super. Ct.

Mar. 27, 2017) (describing the elements of a theory of liability premised on piercing

the corporate veil); (Compl. ¶¶ 191–204).
   45.   Finally, the complaint and amendment to the complaint include a total of

four requests for punitive damages that are labeled as claims for relief. There is no

standalone claim for punitive damages. See Collier v. Bryant, 

(2011) (“Punitive damages are available, not as an individual cause of action, but as

incidental damages to a cause of action.”). The Court will therefore address punitive

damages, if necessary, in its consideration of remedies.

                                          III.
                                      CONCLUSION

   46.   For all these reasons, the Court, in the exercise of its discretion, enters

sanctions against Defendants and ORDERS as follows:

         a.   Defendants’ answers, including all affirmative defenses asserted

              therein, are STRICKEN.

         b.   Defendants’ third-party claims are DISMISSED with prejudice.

         c.   Default judgment is ENTERED as to liability on all remaining claims

              for   relief   (other   than   the   alternative   claim   for   negligent

              misrepresentation) asserted against Defendants, and this matter shall

              proceed to a determination of Plaintiffs’ damages.

         d.   The Court shall determine the amount of Plaintiffs’ damages as well as

              any other remedies to be awarded by separate order after further

              submissions as follows:

              (1)      Plaintiffs shall have through and including 3 January 2023 to

                       file (i) a brief detailing the compensatory and consequential

                       damages they claim to have suffered and any supporting
            materials, which may be in the form of affidavit testimony or

            evidence; (ii) any other materials needed to support Plaintiffs’

            requested remedies; and (iii) a proposed final default judgment.

     (2)    Defendants shall have through and including 13 January 2023

            to respond and object to Plaintiffs’ submissions.    Failure to

            respond will be deemed a waiver of the right to object and a

            waiver of any right to a hearing.

     (3)    No reply brief is permitted.

     (4)    The Court will, if necessary, schedule a hearing on these

            matters at a later date.



SO ORDERED, this the 12th day of December, 2022.



                              /s/ Adam M. Conrad
                              Adam M. Conrad
                              Special Superior Court Judge
                               for Complex Business Cases