Duffy v. Camp
Date Filed2022-12-20
Docket22-185
Cited0 times
StatusPublished
Syllabus
summary judgment derivative claims fiduciary duty of officer to corporation fiduciary duty of majority shareholders to minority shareholder tradename infringement conversion unjust enrichment unfair and deceptive trade practices civil conspiracy
Full Opinion (html_with_citations)
IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-836
No. COA22-185
Filed 20 December 2022
Wake County, No. 20 CVS 9418
MATTHEW DUFFY, in his individual capacity and, alternatively, in his capacity as
officer and shareholder of CAMPSIGHT STRATEGIC COMMUNICATIONS, INC.,
Plaintiff,
v.
JON CAMP and AMY SCHUSSLER a/k/a AMY JOHNSON, in their individual
capacities, and CAMPSIGHT STRATEGIES, LLC, Defendants,
CAMPSIGHT STRATEGIC COMMUNICATIONS, INC., Nominal Defendant.
Appeal by plaintiff from order entered 18 November 2021 by Judge Vince M.
Rozier, Jr., in Wake County Superior Court. Heard in the Court of Appeals 23 August
2022.
Miller Monroe & Plyler, PLLC, by Robert B. Rader, III, and Jason A. Miller,
for plaintiff-appellant.
Stubbs & Perdue, P.A., by Laurie B. Biggs, for defendants-appellees Jon Camp,
Amy Johnson, and CampSight Strategies, LLC.
ZACHARY, Judge.
¶1 Plaintiff Matthew Duffy appeals from the trial courtâs order denying his motion
for summary judgment and granting summary judgment in favor of Defendants Jon
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Camp, Amy Johnson, and CampSight Strategies, LLC. After careful review, we affirm
in part, reverse in part, and remand.
I. Background
¶2 In January 2018, Duffy, Camp, and Johnson formed CampSight Strategic
Communications, Inc. (âthe Corporationâ), with each owning an equal share of the
Corporation. Although the shareholders never executed corporate bylaws or a
shareholder agreement, Camp acted as the Corporationâs CEO and Duffy acted as its
COO, âas reflected in the [Corporation]âs filings with the North Carolina Secretary of
State.â The shareholders also decided that Duffy and Camp would equally split the
net profits of the Corporation; although Johnson had an ownership stake, she was
not employed by and did not receive wages from the Corporation.
¶3 About six months to a year after the Corporation was formed, Camp concluded
that Duffy âwas not performing his job duties.â On 27 February 2020, Camp met with
Duffy and informed him that Camp no longer wished to be in business with him.
Following this meeting, Camp sent Duffy an email restating âthe options [Camp]
proposedâ:
1. You stay on as a CampSight employee. I either pay
you a $40k/yr salary with incentives or a flat $50k/yr
salary. Incentives would be a percentage of business
brought in. No healthcare, unfortunately. I agree to
take the full tax hit for 2020.
2. You fire up Duffy Media and I hire you on as a
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contractor. We keep working together on projects,
with pay.. [sic] TBD. Could be hourly. Could be we
split projects 50/50 like we, [sic] been doing. Could
be you wind up lead in the job and pay me. Here, too,
Iâll take the 2020 tax hit.
3. We go our separate ways. You either just leave me
CampSight or we dissolve it and wish each other
well.
¶4 From that day on, Duffy was no longer involved in the day-to-day operations
of the Corporation. Communication between the parties ceased for a few weeks; Camp
asserts that during this time he nonetheless ârepeatedly requestedâ that Duffy share
his âintentions and interests regarding continuing work for the [Corporation] or for
direction on the [Corporation]âs future.â On 19 March 2020, Duffyâs counsel sent
Camp and Johnson a letter addressing their actions and ârequesting an amicable
resolution of Duffyâs ownership interest inâ the Corporation.
¶5 The next day, Camp began notifying the Corporationâs clients that he âdecided
to start working under a new LLC[,]â and once he obtained an IRS Employer
Identification Number for CampSight Strategies, LLC (âthe New Entityâ), he began
sharing it with the clients as well. Camp also informed the clients that they would
need to execute new contracts with the New Entity, and in response to one clientâs
question about canceling purchase orders from the Corporation, Camp replied: âThat
would be great. Thanks.â Camp additionally instructed the client that the âend date
of the previous contractâ was 1 March 2020. Camp and Johnson officially formed the
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New Entity on 2 April 2020.
¶6 On 29 April 2020, Duffy demanded in writing that the Corporation, Camp, and
Johnson take immediate action against the New Entity to recover damages for
violations of the Corporationâs rights and to seek any necessary emergency injunctive
relief. See N.C. Gen. Stat. § 55-7-42 (2021) (requiring that a shareholder make a
written demand upon a corporation as a prerequisite to the filing of a derivative
proceeding). Defendants rejected Duffyâs demand by letter dated 4 June 2020.
¶7 On 21 August 2020, Duffy filed a verified complaint, alleging: (1) breach of
fiduciary duty (by Camp as to the Corporation, and by Camp and Johnson âas
majority shareholdersâ as to Duffy âas minority shareholderâ); (2) common-law
tradename infringement; (3) conversion of corporate assets and opportunities; (4)
constructive trust and accounting; (5) civil conspiracy; (6) unjust enrichment; and (7)
unfair and deceptive trade practices.1 Duffy also requested injunctive relief with
regard to the tradename infringement claim, and asserted a Meiselman claim2
1 We note that, although Duffy requested that the trial court impose a constructive
trust and order an accounting as a separate claim in his complaint, âa constructive trust is a
remedy, not a cause of action, and is merely a procedural device by which a court of equity
may rectify certain wrongs.â Musselwhite v. Cheshire, 266 N.C. App. 166, 181,831 S.E.2d 367, 378
(2019) (citation and internal quotation marks omitted). Similarly, â[a]n accounting
is an equitable remedy sometimes pled in claims of breach of fiduciary duty.â Burgess v.
Burgess, 205 N.C. App. 325, 333,698 S.E.2d 666, 672
(2010). Accordingly, there is no separate
claim for a âconstructive trust and accountingâ to address; nonetheless, on remand the trial
court may elect to impose a constructive trust and order an accounting in the exercise of its
equitable power.
2 Meiselman v. Meiselman, 309 N.C. 279, 300â01,307 S.E.2d 551, 564
(1983).
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seeking involuntary dissolution of the Corporation or a mandatory buyout of his
minority ownership interest. In the event that the trial court determined that one or
more of the previous claims could not be asserted by Duffy in his individual capacity,
in the alternative, Duffy asserted all claims derivatively.
¶8 On 26 October 2020, Defendants filed their unverified answer, denying Duffyâs
claims and raising affirmative defenses together with counterclaims for: (1)
conversion; (2) breach of fiduciary duty; (3) constructive trust and accounting; and (4)
unjust enrichment. On 4 January 2021, Duffy filed his unverified reply to Defendantsâ
counterclaims, generally denying the allegations and setting forth various
affirmative defenses.
¶9 After conducting discovery, Defendants filed a motion for summary judgment
along with a memorandum of law in support of their motion on 1 October 2021. On
14 October 2021, Duffy filed a motion for summary judgment, followed by a
memorandum of law in support of his motion. The partiesâ motions for summary
judgment came on for hearing in Wake County Superior Court on 17 November 2021.
The next day, the trial court entered an order granting Defendantsâ motion, denying
Duffyâs motion, and dismissing all claims against Defendants with prejudice.
Defendantsâ counterclaims remained pending.
¶ 10 The trial court certified its order as a final judgment pursuant to N.C. Gen.
Stat. § 1A-1, Rule 54(b), determining that âthere is no just reason for delay.â Duffy
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timely filed notice of appeal.
II. Appellate Jurisdiction
¶ 11 âNot every judgment or order of the Superior Court is appealable . . . . Indeed,
an appeal can be taken only from such judgments and orders as are designated by
the statute regulating the right of appeal.â Veazey v. City of Durham, 231 N.C. 357,
362,57 S.E.2d 377, 381
, rehâg denied,232 N.C. 744
,59 S.E.2d 429
(1950). This Court
principally entertains appeals from final judgments. See N.C. Gen. Stat. § 7A-
27(b)(1)â(2). âA final judgment is one which disposes of the cause as to all the parties,
leaving nothing to be judicially determined between them in the trial court.â Veazey,
231 N.C. at 361â62, 57 S.E.2d at 381. By contrast, â[a]n interlocutory order is one
made during the pendency of an action, which does not dispose of the case, but leaves
it for further action by the trial court in order to settle and determine the entire
controversy.â Id. at 362,57 S.E.2d at 381
. Because an interlocutory order is not yet
final, with few exceptions, âno appeal lies to an appellate court from an interlocutory
order or ruling of the trial judge[.]â N.C. Consumers Power, Inc. v. Duke Power Co.,
285 N.C. 434, 437,206 S.E.2d 178, 181
(1974).
¶ 12 Nevertheless, an interlocutory order may be immediately appealed if âthe
order affects some substantial right and will work injury to [the] appellant if not
corrected before appeal from final judgment[,]â Goldston v. Am. Motors Corp., 326
N.C. 723, 726,392 S.E.2d 735, 736
(1990) (citation omitted); see also N.C. Gen. Stat.
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§§ 1-277(a), 7A-27(b)(3)(a), or if âthe trial court certifies, pursuant to [N.C. Gen. Stat.]
§ 1A-1, Rule 54(b), that there is no just reason for delay of the appeal[,]â Turner v.
Hammocks Beach Corp., 363 N.C. 555, 558,681 S.E.2d 770, 773
(2009); see also N.C.
Gen. Stat. § 1A-1, Rule 54(b).
¶ 13 âCertification under Rule 54(b) permits an interlocutory appeal from orders
that are final as to a specific portion of the case, but which do not dispose of all claims
as to all parties.â Duncan v. Duncan, 366 N.C. 544, 545,742 S.E.2d 799, 801
(2013).
Rule 54(b) provides, in relevant part:
When more than one claim for relief is presented in an
action, . . . or when multiple parties are involved, the court
may enter a final judgment as to one or more but fewer
than all of the claims or parties only if there is no just
reason for delay and it is so determined in the judgment.
Such judgment shall then be subject to review by appeal or
as otherwise provided by these rules or other statutes.
N.C. Gen. Stat. § 1A-1, Rule 54(b).
¶ 14 Thus, proper certification of an interlocutory order pursuant to Rule 54(b)
requires:
(1) that the case involve multiple parties or multiple
claims; (2) that the challenged order finally resolve at least
one claim against at least one party; (3) that the trial court
certify that there is no just reason for delaying an appeal
of the order; and (4) that the challenged order itself contain
this certification.
Asher v. Huneycutt, 2022-NCCOA-517, ¶ 14.
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¶ 15 In the instant case, the trial courtâs order granting summary judgment in favor
of Defendants is interlocutory, as it resolved all claims against Defendants but did
not dispose of Defendantsâ counterclaims against Duffy. See Veazey, 231 N.C. at 362,
57 S.E.2d at 381. Nevertheless, the trial courtâs Rule 54(b) certification is effective to
vest jurisdiction in this Court: at the time of the order, the case involved multiple
parties with multiple claims and counterclaims; the order on appeal finally resolved
all claims against Defendants; the trial court certified that âthere is no just reason
for delayâ; and Duffy appealed from the order containing this certification. See Asher,
¶ 14.
¶ 16 Accordingly, this Court has jurisdiction over Duffyâs appeal, and we proceed to
the merits of his arguments.
III. Discussion
¶ 17 On appeal, Duffy argues that the trial court erred by granting Defendantsâ
motion for summary judgment and denying his motion for summary judgment. For
the following reasons, we reverse the trial courtâs entry of summary judgment in favor
of Defendants with respect to Duffyâs derivative claims of: (1) Campâs breach of
fiduciary duty to the Corporation; (2) unjust enrichment; (3) unfair and deceptive
trade practices; and (4) civil conspiracy. We affirm the trial courtâs grant of summary
judgment on the remaining claims and remand to the trial court for further
proceedings.
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A. Standard of Review
¶ 18 The âstandard of review of an appeal from summary judgment is de novo; such
judgment is appropriate only when the record shows 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.â In re Will of Jones, 362 N.C. 569, 573,669 S.E.2d 572, 576
(2008) (citation and
internal quotation marks omitted).
When considering a motion for summary judgment, the
trial judge must view the presented evidence in a light
most favorable to the nonmoving party. If the movant
demonstrates the absence of a genuine issue of material
fact, the burden shifts to the nonmovant to present specific
facts which establish the presence of a genuine factual
dispute for trial.
Id. (citation and internal quotation marks omitted).
B. Analysis
¶ 19 Duffy contends that the trial court erred by granting Defendantsâ motion for
summary judgment and denying his motion for summary judgment. We address the
trial courtâs ruling as to each of Duffyâs claims in turn.
1. Direct or Derivative Claims
¶ 20 As an initial matter, we note that Duffy has âasserted, in the alternative,â each
claim âof the [c]omplaint on the [Corporation]âs behalf against Camp, Johnson, and
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the New Entityâ; that is, Duffy has alternatively asserted derivative claims.3 âA
derivative proceeding is a civil action brought by a shareholder in the right of a
corporation, while an individual action is one a shareholder brings to enforce a right
which belongs to him personally.â Norman v. Nash Johnson & Sonsâ Farms, Inc., 140
N.C. App. 390, 395,537 S.E.2d 248, 253
(2000) (citation and internal quotation marks
omitted), disc. review denied, 353 N.C. 378,547 S.E.2d 14
(2001); accordN.C. Gen. Stat. § 55-7-40.1
. âIt is not always easy to distinguish between a right of the
corporation and a right belonging to an individual shareholder. The same wrongful
conduct can give rise to both derivative and direct individual claims, for which courts
have sometimes allowed shareholders to maintain derivative and direct actions
simultaneously.â Norman, 140 N.C. App. at 395,537 S.E.2d at 253
(citation and
internal quotation marks omitted).
¶ 21 âAs a general rule, shareholders have no right to bring actions in their
individual names to enforce causes of action accruing to the corporation, but must
assert such claims derivatively . . . .â Id. (citation and internal quotation marks
omitted); see also Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 612,821 S.E.2d 729, 734
(2018) (â[S]hareholders generally may not bring individual actions to recover
3It is undisputed that Duffy has âcomplied with all applicable statutory requirements
and conditions precedentâ and âhas proper standing to assert derivative claims on behalf ofâ
the Corporation. See N.C. Gen. Stat. §§ 55-7-40 to -42.
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what they consider their share of the damages suffered by a corporation.â (citation
omitted)), rehâg denied, 372 N.C. 53,822 S.E.2d 648
(2019). âThere are two exceptions
to this general rule: shareholders may bring an individual action when (1) the
wrongdoer owed them a special duty or (2) they suffered a personal injury distinct
from the injury sustained by the corporation itself.â Corwin, 371 N.C. at 612,821 S.E.2d at 734
(citation and internal quotation marks omitted).
¶ 22 âThe first exception applies when the wrongdoer owes a duty that is personalâ
to the plaintiff as a shareholder, âseparate and distinct from the dutyâ that the
defendant owes to the corporation, âsuch as a fiduciary duty owed to the
stockholders.â Id. (citation and internal quotation marks omitted). For the reasons
discussed in Section III.B.2.b below, Defendants Camp and Johnson, as majority
shareholders, did not owe a special fiduciary duty to Duffy as minority shareholder.
Accordingly, Duffy may not avail himself of this exception to the general rule.
¶ 23 âThe second . . . exception applies when a plaintiff suffers an injury that is
distinct from the injury suffered by the corporation itself.â Id. at 612,821 S.E.2d at 735
(citation and internal quotation marks omitted). As discussed below, this
exception does not apply to any of the claims for which summary judgment was
inappropriate. Therefore, on remand, the trial court is to consider Duffyâs surviving
claims as comprising a derivative action, rather than an individual suit.
2. Fiduciary Duty
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¶ 24 Duffy first argues that Camp and Johnson breached their fiduciary duties:
Camp breached the fiduciary duty that he owed to the Corporation, and Camp and
Johnson, as âmajority shareholders,â breached the fiduciary duty that they owed to
Duffy, as the âminority shareholder.â The legal and factual issues at play in each of
these two claims differ.
a. Campâs Fiduciary Duty to the Corporation
¶ 25 There is no dispute that Camp, as the Corporationâs CEO, owed fiduciary
duties of loyalty and due care to the Corporation. Duffy contends that âCamp
breached his fiduciary duties of loyalty and due care when he contacted existing
clients of the [Corporation] . . . to divert certain business of the [Corporation] to the
benefit of himself and the New Entity.â Notably, however, Duffy âalleges no breach of
fiduciary duty owed to him personally in his capacity as a shareholderâ and
consequently, âthe claim is entirely derivative[.]â Allen v. Ferrera, 141 N.C. App. 284,
292,540 S.E.2d 761, 767
(2000).
¶ 26 Under the North Carolina Business Corporation Act, a corporate officer with
discretionary authority must discharge his duties:
(1) In good faith;
(2) With the care an ordinarily prudent person in a like
position would exercise under similar circumstances; and
(3) In a manner he reasonably believes to be in the best
interests of the corporation.
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N.C. Gen. Stat. § 55-8-42(a); see also Seraph Garrison, LLC v. Garrison,247 N.C. App. 115
, 119,787 S.E.2d 398, 403
(2016). â[C]orporate directors and officers act in a
fiduciary capacity in the sense that they owe the corporation the duties of loyalty and
due care.â Seraph Garrison, 247 N.C. App. at 119, 787 S.E.2d at 403. Section 55-8-
42(a)(3) âcodifies the requirement that an officer always discharge the responsibilities
of the office with undivided loyalty to the corporation. The corporate law duty of
loyalty also imposes an affirmative obligation: a fiduciary must strive to advance the
best interests of the corporation.â Id. at 120, 787 S.E.2d at 403â04 (citation and
internal quotation marks omitted).
¶ 27 Camp raises several arguments in his defense; principally, he argues that his
fiduciary duty to the Corporation ceased prior to the conduct of which Duffy
complains. Camp offers two points in time at which he contends that his fiduciary
duty to the Corporation ceased: (1) when he resigned as an officer of the Corporation
as a result of the 27 February 2020 meeting; and (2) when Duffy retained counsel.
However, when viewed in the light most favorable to Duffy under our standard of
review, In re Will of Jones, 362 N.C. at 573,669 S.E.2d at 576
, genuine issues of
material fact exist as to whether and when Campâs fiduciary duty to the Corporation
ceased.
¶ 28 As to the meeting, Camp asserts that â[i]t is undisputed that on February 27,
2020, Camp met with Duffy and told him he no longer wished to be in business with
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him, and that three options for moving forward with the business were presented,
including closing downâ the Corporation. Duffy maintains that this establishes
merely that âCamp sought to terminate his relationship with Duffyâ rather than the
Corporation. As Duffy explains, â[t]he meeting pertained to Campâs proposed
termination of Duffy as an owner of the [Corporation], not Campâs termination of
himself as an officer of the [Corporation].â Moreover, Duffy notes that, in their brief
on appeal, Defendants assert only that âthe undisputed facts show that Camp sought
to terminate his relationship with Duffy[.]â (Emphasis added). Indeed, in their reply
to Duffyâs interrogatories, Defendants explained:
Defendant Camp spoke with [Duffy] on February [27], 2020
about options for moving forward with the [Corporation] â
either closing down the [Corporation] and they would go
their separate ways or changing the structure of the
[Corporation], whereby [Duffy] would be a salaried
employee at a rate of $50,000.00. [Duffy] never responded.
As a result, [Defendant] Camp established a new company
to continue earning a living.
¶ 29 The options that Camp presented to Duffy suggest that Camp would remain in
some official capacity with the Corporation, rather than evidence Campâs resignation:
1. You stay on as a CampSight employee. I either pay
you a $40k/yr salary with incentives or a flat $50k/yr
salary. Incentives would be a percentage of business
brought in. No healthcare, unfortunately. I agree to
take the full tax hit for 2020.
2. You fire up Duffy Media and I hire you on as a
contractor. We keep working together on projects,
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with pay.. [sic] TBD. Could be hourly. Could be we
split projects 50/50 like we, [sic] been doing. Could
be you wind up lead in the job and pay me. Here, too,
Iâll take the 2020 tax hit.
3. We go our separate ways. You either just leave me
CampSight or we dissolve it and wish each other
well.
¶ 30 On appeal, Camp asserts that he âbelieved he had terminated his duties with
the [Corporation] by resigning when Duffy failed to respond to him.â However, as
Duffy correctly observes, âthe only mention of any resignation in the record is a single
allegationâ found in Defendantsâ unverified answer, in which Defendants allege that
Camp intended his cessation of âall activities on behalf ofâ the Corporation to be âhis
own resignation fromâ the Corporation. This assertion is not otherwise supported by
the record on appeal. To the extent that the trial court relied on this allegation, raised
only in Defendantsâ unverified pleading, this was improper. See 21st Mtge. Corp. v.
Douglas Home Ctr., Inc., 187 N.C. App. 770, 775,655 S.E.2d 423
, 425â26 (2007)
(reversing and remanding the trial courtâs grant of the defendantsâ motion for
summary judgment âbased on the [defendantsâ] unverified pleadingâ).
¶ 31 Thus, viewed in the light most favorable to Duffy, In re Will of Jones, 362 N.C.
at 573,669 S.E.2d at 576
, the record does not contain sufficient evidence to
definitively establish that Camp had resigned his position as an officer of the
Corporation, thereby terminating any fiduciary duty to the Corporation.
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¶ 32 Camp further alleges that his fiduciary duty to the Corporation ceased when
Duffy hired counsel after the 27 February meeting. Defendants cite Piedmont
Institute of Pain Management v. Staton Foundation, 157 N.C. App. 577,581 S.E.2d 68
, disc. review denied,357 N.C. 507
,587 S.E.2d 672
(2003), for the proposition that
it is âwell established that fiduciary relationships usually terminate when a party
hires counsel because of the adversarial relationship that exists between the parties.â
In Piedmont, this Court affirmed summary judgment where the nonmovant-
beneficiaries did ânot present[ ] any evidence creating a genuine issue of material of
fact with respect to the absence of the adversarial nature of their relationship with
[the movant-trustee] during the relevant time[.]â 157 N.C. App. at 583â84, 581 S.E.2d
at 73.
¶ 33 The North Carolina Business Court has distinguished Piedmont and other
non-corporate cases that similarly determined that a fiduciary duty was terminated
when one party hired counsel.4 In RCJJ, LLC v. RCWIL Enterprises, LLC, the
Business Court noted that the adversarial-relationship reasoning of those non-
Although â[t]he North Carolina Business Court is a special Superior Court, the
4
decisions of which have no precedential value in North Carolina[,]â Bottom v. Bailey, 238 N.C.
App. 202, 212,767 S.E.2d 883
, 889 (2014) (citation and internal quotation marks omitted),
this Court has recognized that âthe Business Court exists solely to hear complex business
cases, and as such [we] are respectful of its opinionsâ to the extent that they may prove to be
persuasive authority, Goldstein v. Am. Steel Span, Inc., 181 N.C. App. 534, 536 n.2,640 S.E.2d 740
, 742 n.2 (2007).
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corporate cases does not readily extend to cases involving fiduciary relationships
arising in the âcorporate fiduciary settingâ:
[W]hile a trustee owes a fiduciary duty directly to the
beneficiary, and spouses owe a duty to one another, a
manager owes a fiduciary duty not to the other member or
members with whom he may be in an adverse negotiation,
but to the LLC. This makes the reasoning behind those
cases relieving a trustee or spouse of fiduciary duties when
engaged in adversarial negotiations an uneasy fit in the
corporate fiduciary setting.
2016 NCBC 44, ¶ 37,2016 WL 3850403
, at *9 (N.C. Super. June 20, 2016). The RCJJ
Courtâs examples of spousal and trustee-beneficiary fiduciary duties are consonant
with our Supreme Courtâs recognition that the âcharacteristics of a fiduciary
relationship are readily apparent, for example, in the relationship of spouses . . . and
trustee and beneficiary[.]â Dallaire v. Bank of Am., N.A., 367 N.C. 363, 367,760 S.E.2d 263, 266
(2014) (citations omitted).
¶ 34 Furthermore, in Piedmont (but unlike the case at bar), there was no dispute
that the movant-appellee âhad repudiated his fiduciary duties.â 157 N.C. App. at 583,
581 S.E.2d at 73. In RCJJ, the Business Court found it âsignificant . . . that the cases
holding that a fiduciary duty can be extinguished in an adversarial setting . . . did
not hold that the fiduciary was relieved of his duties merely because the parties had
retained attorneys or were negotiating over a separation of interests.â 2016 NCBC
44, ¶ 38,2016 WL 3850403
, at *10. The Business Court thus focused on the nature of
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the relationship between the parties as a more critical factor than the mere retention
of counsel in analyzing the termination of a corporate fiduciaryâs duties:
Allowing a manager of a limited liability company to be
relieved of his fiduciary duties upon entering into adverse
negotiations for the sale of his interests in the company
would be inconsistent with the nature of those duties. In
addition, the appellate decisions do not support the
conclusion that the commencement of adversarial
negotiations and retention of attorneys relieves a fiduciary
of his duties as a matter of law. Rather, there must be a
change in the nature of the relationship between the parties
that establishes that the parties no longer are in a
relationship of confidence and trust, and that fiduciary
duties have been repudiated.
Id. ¶ 40,2016 WL 3850403
, at *10 (emphases added).
¶ 35 We find this analysis persuasive in the corporate setting presented in the
instant case. Accordingly, Campâs reliance on Piedmont in support of his contention
that his fiduciary duty ceased as a matter of law upon Duffyâs retention of counsel is
misplaced.
¶ 36 Our appellate courts do not appear to have yet addressed this question; the
Business Court in RCJJ described it as an issue of first impression. Id. ¶ 35,2016 WL 3850403
, at *8. Nonetheless, we need not resolve this question because here, the
issue of whether Campâs fiduciary duty to the Corporation ceasedâand, if so, whenâ
presents a mixed question of law and fact, for which summary judgment would only
be appropriate âif there are no genuine issues of material fact.â Stratton v. Royal Bank
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of Canada, 211 N.C. App. 78, 81,712 S.E.2d 221, 226
(2011).
¶ 37 In the case at bar, there are genuine issues of material fact: if, and when, there
was âa change in the nature of the relationship between the parties that establishe[d]
that the parties no longer [we]re in a relationship of confidence and trust,â and
whether âfiduciary duties ha[d] been repudiated.â RCJJ, 2016 NCBC 44, ¶ 40,2016 WL 3850403
, at *10.
¶ 38 Further, assuming, arguendo, that an adversarial relationship existed at the
time of the 19 March letter from Duffyâs counsel, Duffy observes that the adversarial
relationship would have been between Duffy, Camp, and Johnson as shareholders,
and not between Camp and the Corporation. Duffy retained counsel to represent him,
in his individual capacity, rather than to represent the interests of the Corporation.
Therefore, Duffyâs retention of counsel to resolve the issue of compensation for his
ownership stake in the Corporation cannot, in and of itself, support Defendantsâ
adversarial-relationship argument.
¶ 39 In sum, summary judgment is inappropriate on Duffyâs derivative claim that
Camp breached his fiduciary duty to the Corporation because Camp has not shown
that his fiduciary duty ceased as a matter of law either (1) as a result of the 27
February meeting, or (2) upon Duffyâs retention of counsel. Accordingly, the trial
courtâs order must be reversed as to this derivative claim.
b. Campâs and Johnsonâs Fiduciary Duty to Duffy
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¶ 40 Duffy also argues that Camp and Johnson, as the âmajority shareholders of the
closely[ ]heldâ Corporation, owed a fiduciary duty to Duffy, as the minority
shareholder. We disagree.
¶ 41 It is axiomatic that â[f]or a breach of fiduciary duty to exist, there must first be
a fiduciary relationship between the parties.â Dalton v. Camp, 353 N.C. 647, 651,548 S.E.2d 704, 707
(2001). Our appellate courts have defined a fiduciary relationship âas
one in which there has been a special confidence reposed in one who in equity and
good conscience is bound to act in good faith and with due regard to the interests of
the one reposing confidence[.]â Id. (citation and internal quotation marks omitted).
This definition âextends to any possible case in which a fiduciary relationship exists
in fact, and in which there is confidence reposed on one side, and resulting domination
and influence on the other.â Id. at 651, 548 S.E.2d at 707â08 (citation omitted).
¶ 42 âNorth Carolina recognizes two types of fiduciary relationships: de jure, or
those imposed by operation of law, and de facto, or those arising from the particular
facts and circumstances constituting and surrounding the relationship.â Hager v.
Smithfield E. Health Holdings, LLC, 264 N.C. App. 350, 355,826 S.E.2d 567, 571
,
disc. review denied, 373 N.C. 253,835 S.E.2d 446
(2019). There is no allegation of a
de jure fiduciary relationship between Duffy, Camp, and Johnson, so we must
determine whether âthe particular facts and circumstances constituting and
surrounding the[ir] relationshipâ as the three shareholders of the Corporation gave
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rise to a de facto fiduciary relationship. Id.
¶ 43 âAs a general rule, shareholders do not owe a fiduciary duty to each other or to
the corporation. However[,] this rule is not without exception. In North Carolina, it
is well established that a controlling shareholder owes a fiduciary duty to minority
shareholders.â Freese v. Smith, 110 N.C. App. 28, 37,428 S.E.2d 841, 847
(1993)
(citation omitted). âOnce a minority shareholder challenges the actions of the
majority, the burden shifts to the majority to establish the fairness and good faith of
its actions.â Id.
¶ 44 The circumstances under which multiple minority shareholders combine into
majority or controlling shareholders for the purposes of this de facto fiduciary duty
rule is something of an open question in North Carolina. See Corwin, 371 N.C. at 616,
821 S.E.2d at 737 (âThis Court has never held that a minority stockholder owes
fiduciary duties to other stockholders, but it has also never held that a minority
stockholder cannot owe fiduciary duties to other stockholders.â). The determinative
issue is what facts are necessary to elevate the simple majority vote of the minority
shareholders in a closely held corporation into a situation of âdomination and
influenceâ over the outvoted minority shareholder. Dalton, 353 N.C. at 651,548 S.E.2d at 708
(citation omitted).
¶ 45 Duffy relies in part on Norman for the proposition that âmajority shareholders
in a close corporation owe a âspecial dutyâ and obligation of good faith to minority
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shareholders[,]â and hence that Camp and Johnson owed a fiduciary duty to Duffy.
140 N.C. App. at 407,537 S.E.2d at 260
. Norman is inapposite to our analysis of this
issue for several reasons.
¶ 46 First, Norman arrived at this Court not on a motion for summary judgmentâ
as in the present caseâbut rather upon the trial courtâs grant of the defendantsâ
motion to dismiss. Id. at 394,537 S.E.2d at 252
. As regards the issue of whether Duffy
has shown a genuine issue of material fact concerning whether Camp and Johnson
combined into controlling shareholders, this diminishes Normanâs value as precedent
because âthe standard under which orders granting or denying summary judgment
motions and the standard under which orders granting or denying dismissal motions
are reviewed are not the same[.]â Prouse v. Bituminous Cas. Corp., 222 N.C. App. 111,
116,730 S.E.2d 239, 242
(2012), appeal withdrawn,366 N.C. 571
,737 S.E.2d 381
(2013). â[T]he essential difference between the manner in which the two types of
issues are reviewed on appeal stems from the scope of the factual information that a
reviewing court is entitled to consider . . . .â Id. Unlike a motion to dismiss, which
tests the sufficiency of the facts as pleaded by the nonmovant against the applicable
law, âthe fundamental purpose of a summary judgment motion . . . is to allow a
litigant to test the extent to which the allegations in which a particular claim has
been couched have adequate evidentiary support.â Id. at 116, 730 S.E.2d at 242â43
(citation and internal quotation marks omitted); see also Singleton v. Stewart, 280
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N.C. 460, 464, 186 S.E.2d 400, 403 (1972) (â[T]he real purpose of summary judgment
is to go beyond or to pierce the pleadings and determine whether there is a genuine
issue of material fact.â).
¶ 47 Additionally, the specific facts presented in Norman weaken its precedential
value as concerns this issue. The closely held corporation in Norman was âa
family[-]owned poultry business[,]â and the plaintiffs and individual defendants were
all ârelated to founder Nash Johnson by either blood or marriage.â Norman, 140 N.C.
App. at 393,537 S.E.2d at 252
. This is significant because, as the Norman Court
explained, â[w]hen the close relationships between the shareholders in a âfamilyâ or
closely held corporation tragically break down, the majority shareholders are
obviously in a position to exclude the minority shareholders from management
decisions, leaving the minority shareholders with few remedies.â Id. at 404,537 S.E.2d at 258
. As the Norman Court observed,N.C. Gen. Stat. § 55-14-30
âallows
shareholders to seek dissolution of a corporation and liquidation of its assets when
corporate assets are being misapplied or wasted,â but âsuch relief is not available to
shareholders who wish to retain their interests in a family business[.]â Id. at 405,537 S.E.2d at 259
(emphasis added) (citation and internal quotation marks omitted).
¶ 48 The relationship between the shareholders of the Corporation in the present
case is emphatically dissimilar to the relationships in the âfamily businessâ described
in Norman. Further unlike the instant case, the minority-shareholder-plaintiffs in
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Norman neither invited the majority-shareholder-defendants to purchase their
shares, nor did the plaintiffs seek involuntary dissolution of the family business, facts
which informed this Courtâs decision to recognize their individual claims for breach
of fiduciary duty. Id. Here, Duffy invited Camp and Johnson to negotiate âan amicable
resolution of Duffyâs ownership interest inâ the Corporation, and he asserted a
Meiselman claim in his complaint, seeking either involuntary dissolution of the
Corporation or a mandatory buyout of his minority ownership interest. We thus
conclude that Norman is inapplicable to the issue before us.
¶ 49 Duffy also relies on Loy v. Lorm Corp., in which this Court reversed the trial
courtâs entry of summary judgment and allowed a minority shareholder to pursue
relief against three fellow shareholders who together held a majority interest, served
as corporate âdirectors and officers[,]â were âfirmly in controlâ of the corporation, and
had common interests stemming from their related, jointly owned business. 52 N.C.
App. 428, 431,278 S.E.2d 897, 900
(1981). However, the three minority-shareholder-
defendants in Loy effectively conceded that they collectively owed the minority-
shareholder-plaintiff a fiduciary duty as a group of majority shareholders, and
instead challenged on appeal the plaintiffâs showing that they breached that duty. Id.
at 432â33, 278 S.E.2d at 901. This Court therefore did not have the opportunity in
Loy to address the circumstances under which a group of minority shareholders may
effectively combine into a controlling majority, thereby giving rise to a de facto
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fiduciary duty to the remaining minority.
¶ 50 Although our appellate courts have not squarely addressed the standard that
a plaintiff must meet in a case such as this, in which two minority shareholders are
alleged to have effectively become a controlling majority such that a de facto fiduciary
duty arises, we note that the Business Court has repeatedly ârefused to impose a
fiduciary duty on minority members that exercise their voting rights by joining
together to outvote a third member.â Vanguard Pai Lung, LLC v. Moody, 2019 NCBC
38, ¶ 40,2019 WL 2526461
, at *7 (N.C. Super. June 19, 2019) (collecting cases).
âThese decisions underscore the obvious difference between backing a majority
coalition and exercising majority control as of right. In the latter situation, it is the
imbalance of power inherent in the relationship between majority and minority
members that gives rise to a fiduciary duty.â Id. ¶ 41,2019 WL 2526461
, at *7.
¶ 51 We find this reasoning persuasive and applicable to the case at bar. As
Defendants argued in their memorandum of law in support of their motion for
summary judgment: âThe reason for this rule is simple â any shareholder on the
losing side of any issue or vote could simply claim the prevailing shareholders were
collectively âmajority shareholdersâ negating any and every corporate action taken by
a majority.â
¶ 52 Thus, it appears that the few cases in which a group of minority shareholders
were treated collectively as controlling or majority shareholders can be distinguished
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from the present case, as Duffy has not shown that Camp and Johnson assumed a
position of âdomination and influenceâ over him as the minority shareholder. Dalton,
353 N.C. at 651,548 S.E.2d at 708
(emphasis omitted) (citation omitted). Duffy
supports his allegation of Camp and Johnsonâs control by reference to Defendantsâ
interrogatory responses, indicating that they âdecided that the manner in which the
[Corporation] was operated would need to changeâ and âmade a final decision that
they could no longer partner withâ Duffy. However, a single decision is insufficient to
elevate this from a simple case of one minority shareholder being outvoted by two
other minority shareholdersâalbeit in a vote of great importance to the complaining
minorityâinto a situation of such âdomination and influenceâ over the minority
shareholder (Duffy) by the controlling shareholders (Camp and Johnson), id.
(emphasis omitted) (citation omitted), that âthe imbalance of power inherent in the
relationship between majority and minorityâ gave rise to a fiduciary duty prior to that
vote, Vanguard Pai Lung, 2019 NCBC 38, ¶ 41,2019 WL 2526461
, at *7.
¶ 53 Defendants also make persuasive arguments concerning the extent to which
Camp and Johnson may be treated as individuals in analyzing their supposed
fiduciary duties to Duffy as minority shareholder. With regard to Johnson,
Defendants argue that the trial courtâs order should be affirmed in that âDuffy put
forward no evidence that Johnson ever acted as a controlling shareholder.â As
Defendants observe, at deposition, Duffy ârepeatedly acknowledged that Johnson had
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no responsibilities on behalf of the [Corporation], held no title, âwasnât activeâ, and did
not participate in financial decisions.â (Citations omitted). Duffy explained during his
deposition that he and Camp generally served as the âultimate decision-makersâ for
the Corporation, with Johnson â[o]ccasionallyâ participating âin these discussions,
but not usually.â It is evident that Johnson did not exercise control over, much less
dominate, the Corporation or its affairs. Summary judgment therefore was proper as
to Johnson on this claim.
¶ 54 With regard to Campâs fiduciary duty to Duffy, Defendants assert that Camp
and Duffy âmade all of the decisions about the [Corporation] togetherâ and Duffyâs
âtestimony that they made decisions together shows they each had an equal amount
of control overâ the Corporation. Defendants also observe that âDuffy has not pointed
to any evidence of Camp acting on behalf of the [Corporation] without Duffyâs
involvement, a lack of control over [the Corporationâs] affairs, or domination by Camp
over the [Corporation]âs decision making.â Accordingly, summary judgment was also
appropriate as to Camp on this claim.
¶ 55 In short, summary judgment was improper on Duffyâs claim that Camp
breached his fiduciary duty to the Corporation, but was proper on the controlling
shareholder theory advanced by Duffy against Camp and Johnson collectively and
individually.
3. Tradename Infringement
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¶ 56 We next address Duffyâs claim of common-law tradename infringement. Our
Supreme Court has explained that â[t]he fundamental question in cases of trade-
mark or unfair competition . . . is whether the public is being misled and deceived[.]â
Carolina Aniline & Extract Co. v. Ray, 221 N.C. 269, 273,20 S.E.2d 59, 61
(1942)
(citation omitted). If so, and if the cause is that âa defendant is in effect taking . . .
advantage of the [goodwill] and business reputation that a complainant has built up
through service or advertising or in any manner regarded as lawful and proper[,]â
then the plaintiff may pursue a claim for common-law tradename infringement. Id.
at 273, 20 S.E.2d at 61â62 (citation omitted).
¶ 57 âA common law claim for trademark infringement under North Carolina law
is analyzed under essentially the same standards as a federal Lanham Act claim
regarding an unregistered trademark.â Johnson & Morris PLLC v. Abdelbaky & Boes,
PLLC, 2016 NCBC 76, ¶ 13,2016 WL 5923662
, at *4 (N.C. Super. Oct. 11, 2016). âA
trademark includes any word, name, symbol, or device used by an individual to
identify and distinguish his goods from those manufactured or sold by others and to
indicate the source of the goods.â George & Co. LLC v. Imagination Entmât Ltd., 575
F.3d 383, 392 (4th Cir. 2009) (citation and internal quotation marks omitted). âTo
establish trademark infringement, a plaintiff must prove that it owns a valid and
protectable mark, and that the defendantâs use of a reproduction, counterfeit, copy,
or colorable imitation of that mark creates a likelihood of confusion.â Id. at 393
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(citation and internal quotation marks omitted). In the present case, the latter
requirement concerning the likelihood of confusion is dispositive.
¶ 58 âA likelihood of confusion exists if the defendantâs actual practice is likely to
produce confusion in the minds of consumers about the origin of the goods or services
in question.â Id. (citation and internal quotation marks omitted). To assess whether
such confusion exists, appellate courts âlook to how the two parties actually use their
marks in the marketplace to determine whether the defendantâs use is likely to cause
confusion.â Id. (citation omitted). The United States Court of Appeals for the Fourth
Circuit examines nine factors to determine likelihood-of-confusion in trademark
infringement cases:
(1) the strength or distinctiveness of the plaintiffâs mark as
actually used in the marketplace; (2) the similarity of the
two marks to consumers; (3) the similarity of the goods or
services that the marks identify; (4) the similarity of the
facilities used by the markholders; (5) the similarity of
advertising used by the markholders; (6) the defendantâs
intent; (7) actual confusion; (8) the quality of the
defendantâs product; and (9) the sophistication of the
consuming public.
Id. (citations omitted). However, â[n]ot all of these factors are of equal importance,
nor are they always relevant in any given case.â Id. (citations and internal quotation
marks omitted).
¶ 59 Of these factors, âevidence of actual confusion is often paramount in the
likelihood of confusion analysis.â Id. (citations and internal quotation marks omitted).
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âActual confusion can be demonstrated by both anecdotal and survey evidence.
Evidence of only a small number of instances of actual confusion may be dismissed
as de minimis.â Id. at 398 (citations omitted).
¶ 60 In the instant case, Duffy has offered no evidence that Defendantsâ actual
practice likely produced confusion among customers. Duffy explains that âthe mark
at issue is âCampsightâ and a variation of the word âstrategy,â specifically âCampsight
Strategicâ as used by the [Corporation] and âCampSight Strategiesâ as used by the
New Entity, Camp, and Johnson.â However, as Defendants note, Duffy âpresented no
survey or other expert testimonyâ and âpresented no anecdotal evidence of third
parties expressing confusion.â Duffy makes arguments regarding Defendantsâ
âbrazen intent . . . to dupe the certain clients of the [Corporation] into thinking the
New Entity was an extension and continuation ofâ the Corporation and offers
examples of the âdeceptive language and meansâ by which Defendants allegedly did
this, yet offers scant evidence that Defendantsâ actual practice likely produced
confusion among customers.
¶ 61 Duffy references several emails that Defendants sent to the Corporationâs
clients in order to illustrate âCampâs deceptive description of the New Entity and its
relationship toâ the Corporation but, as Defendants note, âthese emails only show
that Camp was using the name CampSight, and not the third partyâs response to the
use of the tradename.â Defendants explain that the emails illustrate that, rather than
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using deceptive means, âCamp was not attempting to mislead anyone about his
relationship with Duffy or the [Corporation] going forward.â
¶ 62 Most conclusively for our analysis, however, is Duffyâs deposition testimony,
which belies his attempt to show actual confusion:
Q Okay, and have you talked with anyone since the
February meeting about the use of the name CampSight or
CampSight Strategies?
A Aside from my counsel, no.
Q Okay, have you talked with clients about CampSight
Strategies or the CampSight name?
A No.
Q Have you talked with anyone in the industry or
potential clients about the use of the name CampSight or
CampSight Strategies?
A Not that I recall, no.
Q Have you used, you personally or you through a new
corporation, used either of those names since the February
meeting?
A No.
Q Okay, has anyone reached out to you and said, oh, I
saw this -- I saw [Defendant Camp]âs new company
CampSight Strategies, and I thought that was CampSight
Strategic Communications?
A Not that I recall, no.
¶ 63 Duffyâs testimony that he was unaware of any actual confusion undercuts this
âmost important factorâ of the likelihood-of-confusion analysis. Id. Further, there is
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no significant evidence of customer confusion, or the likelihood of confusion, sufficient
to overcome this shortcoming as a matter of law. Accordingly, the trial courtâs grant
of summary judgment on Duffyâs tradename infringement claim is affirmed.
¶ 64 Duffy also sought injunctive relief in connection with his tradename
infringement claim. âThe purpose of a preliminary injunction is ordinarily to preserve
the status quo pending trial on the merits.â A.E.P. Indus., Inc. v. McClure, 308 N.C.
393, 400,302 S.E.2d 754, 759
(1983) (citation omitted). âThe first stage of the inquiry
is . . . whether [the] plaintiff is able to show likelihood of success on the merits.â Id.
at 401,302 S.E.2d at 760
. As we have already discussed, Duffy is unable to show that
he is likely to succeed on the merits of his tradename infringement claim.
Accordingly, the trial court properly denied Duffyâs request for a preliminary
injunction, and the trial courtâs order is affirmed as to this issue as well.
4. Conversion
¶ 65 Additionally, Duffy advances a claim for conversion of corporate assets and
opportunities. â[T]he tort of conversion is well 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 ownerâs rights.â
Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 523,
723 S.E.2d 744, 747 (2012) (citation and internal quotation marks omitted). âThere
are, in effect, two essential elements of a conversion claim: ownership in the plaintiff
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Opinion of the Court
and wrongful possession or conversion by the defendant.â Id. Importantly, âonly goods
and personal property are properly the subjects of a claim for conversion. . . .
[I]ntangible interests such as business opportunities and expectancy interestsâ are
not âsubject to a conversion claim.â Norman, 140 N.C. App. at 414,537 S.E.2d at 264
.
¶ 66 Duffy contends that âexisting contracts, orders, payments, and assets of the
[Corporation] were diverted to and for the benefit of the New Entity, Camp, and
Johnson.â Defendants respond that these assets are either âbusiness opportunities
and expectancy interests,â which are not subject to conversion, id., or âcontract
rights,â which are similarly intangible, Coca-Cola Bottling Co. Consol. v. Durham
Coca-Cola Bottling Co., 141 N.C. App. 569, 583,541 S.E.2d 157, 166
(2000), disc.
review denied, 353 N.C. 370,547 S.E.2d 433
(2001), and therefore not subject to
conversion. To the extent that the property that Duffy alleges was misappropriated
includes business opportunities, expectancy interests, and contract rights, summary
judgment was appropriate.
¶ 67 We also note that Duffy specifically alleges that âCamp contacted existing
clients of the [Corporation], providing them with the New Entityâs financial
information, and instruct[ed] said clients to refrain from certain payments and billing
to the [Corporation] until the New Entityâs information [wa]s in place.â Duffy further
contends that âCamp instruct[ed] that certain completed work be placed under new
contracts benefiting the New Entityâ and âthat existing purchase orders of the
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Opinion of the Court
[Corporation] be cance[l]ed.â To the extent that these allegations could be construedâ
in the light most favorable to Duffy, In re Will of Jones, 362 N.C. at 573, 669 S.E.2d
at 576âas concerning assets beyond ordinary âbusiness opportunities and
expectancy interests[,]â Norman, 140 N.C. App. at 414,537 S.E.2d at 264
, and instead
concerning actual, tangible funds diverted from the Corporation to the New Entity,
summary judgment was still appropriate as Duffy has failed to identify specific sums
that were allegedly converted, see Variety Wholesalers, 365 N.C. at 528,723 S.E.2d at 750
(â[T]he general rule is that money may be the subject of an action for
conversion only when it is capable of being identified and described.â (citation and
internal quotation marks omitted)); see also, e.g., Wake Cty. v. Hotels.com, LP, 235
N.C. App. 633, 653,762 S.E.2d 477, 490
(affirming the trial courtâs dismissal of Wake
Countyâs conversion claim over âa category of monies allegedly owedâ where the
county failed to establish âthe fundsâ specific source, specific amount, and specific
destinationâ), disc. review denied, 367 N.C. 799, ___ S.E.2d ___ (2014).
¶ 68 For these reasons, in sum, Duffy has not demonstrated that Defendants
wrongfully possessed any Corporation assets that âare properly the subjects of a claim
for conversion.â Norman, 140 N.C. App. at 414,537 S.E.2d at 264
. Thus, the trial
courtâs grant of summary judgment on Duffyâs conversion claim is affirmed.
5. Unjust Enrichment
¶ 69 Duffy next asserts a claim of unjust enrichment against Defendants. To make
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out a claim for unjust enrichment, the claimant âmust allege that property or benefits
were conferred on a defendant under circumstances which give rise to a legal or
equitable obligation on the part of the defendant to account for the benefits received,
but that the defendant has failed to make restitution for the property or benefits.â Id.
at 417,537 S.E.2d at 266
.
¶ 70 In Norman, this Court reversed the trial courtâs grant of a motion to dismiss
and revived an unjust enrichment claim where the plaintiff âallege[d] that the
defendants breached their fiduciary duties and received benefits for which they have
not paid, thereby injuring the [c]ompany and depriving it of such benefits.â Id. This
aptly describes Duffyâs claims in the present case: Duffy argues that âexisting
business belonging legitimately to the [Corporation] was diverted to the benefit and
profit of Camp, Johnson, and the New Entity.â Duffy reiterates his allegations that
Camp instructed clients to refrain from making certain payments or billing the
Corporation for completed work, altered existing contracts with the Corporation to
divert business to the New Entity, and instructed clients to cancel existing purchase
orders with the Corporation.
¶ 71 In addition to those allegations on behalf of the Corporation, Duffy contends
that in his individual capacity he âwas entitled to share proportionately in such
business and assets but was prevented.â However, as stated above, âshareholders
generally may not bring individual actions to recover what they consider their share
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of the damages suffered by a corporation.â Corwin, 371 N.C. at 612,821 S.E.2d at 734
(citation omitted). Here, Duffyâs asserted direct injuryâhis proportionate share of the
âbusiness and assetsâ allegedly diverted to the New Entityâis merely his share of
the injury suffered by the Corporation. Duffy has thus failed to demonstrate that he
âsuffer[ed] an injury that is distinct from the injury suffered by the corporation itselfâ
as to this claim, id. at 612,821 S.E.2d at 735
(citation and internal quotation marks
omitted), and the claim he advances for unjust enrichment may only proceed
derivatively, see Norman, 140 N.C. App. at 395,537 S.E.2d at 253
.
¶ 72 In his first set of interrogatories, Duffy asked Defendants to â[i]dentify, with
specificity, any and all assets, contracts, clients, customers, property, and/or business
opportunities diverted, transferred, and/or assigned to the New Entity from the
[Corporation] from April 2, 2020 to present.â Defendants answered: âNone.â Duffy
also asked Defendants to â[e]xplain in detail what has occurred with the 2020 work
contracts between the [Corporation] and its clients and/or customers since February
28, 2020.â Defendants answered:
In January 2020, the [Corporation] had three pending
contracts. Each contract had an agreed upon hourly rate,
but work was only to be performed on an as needed basis
or project basis when requested by the client. Any
requested work in January or February 2020 was
performed by Mr. Camp and paid to the [Corporation].
None of the contracts were long term contracts and none of
the contracts were exclusive to the [Corporation] as clients
could use any service provider other than the [Corporation]
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Opinion of the Court
without breaching the terms of the contract. If the client
never asked for additional services to be performed, then
the [Corporation] was not entitled to any compensation.
[One client] contract had a defined project for about
$8,000.00 of work. Mr. Camp performed this work at the
request of [the client] and [the client] paid approximately
$8,000 to [the New Entity].
When Mr. Duffy made it clear he intended to leave the
[Corporation], Defendant Camp informed the
[Corporation]âs three ongoing clients that the [Corporation]
could no longer do business with them. Defendant Camp
informed each of them that he and Mr. Duffy would no
longer be partners, and that he could not, in good
conscience, continue working for them. Each client
indicated an interest in having Defendant Camp continue
the video and advisement services. Defendant Camp
advised each client that he would have to establish a new
entity and contract to continue to work for them.
¶ 73 Defendantsâ denial of Duffyâs allegations in their discovery responses
demonstrates that there exists a genuine issue of material fact, thus rendering
summary judgment inappropriate as to this claim as well. See In re Will of Jones, 362
N.C. at 577,669 S.E.2d at 578
(â[M]uch of the deposition testimony and affidavits is
open to competing interpretations. Given our standard of review, however, we view
this evidence in the light most favorable to [the plaintiff] and find that he has forecast
sufficient factsâ to survive summary judgment.). The trial courtâs order is reversed
with respect to Duffyâs derivative unjust enrichment claim.
6. Unfair and Deceptive Trade Practices
¶ 74 Duffy also raises a claim against Defendants for unfair and deceptive trade
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practices. Duffy argues that âDefendantsâ conduct at issue [wa]s unfair and deceptiveâ
in that Defendants âdeceptively diverted existing business of the [Corporation] to the
New Entity and carried on said business through the New Entity.â
¶ 75 To recover under North Carolinaâs Unfair and Deceptive Trade Practices Act,
N.C. Gen. Stat. § 75-1.1, âa plaintiff must establish that: (1) [the] defendant
committed an unfair or deceptive act or practice, (2) the action in question was in or
affecting commerce, and (3) the act proximately caused injury to the plaintiff[,]â Nobel
v. Foxmoor Grp., LLC, 380 N.C. 116, 2022-NCSC-10, ¶ 11 (citation and internal
quotation marks omitted).
¶ 76 Subsection 75-1.1(b) provides that, â[f]or purposes of this section, âcommerceâ
includes all business activities, however denominated, but does not include
professional services rendered by a member of a learned profession.â N.C. Gen. Stat.
§ 75-1.1(b). With respect to this definition of âcommerce,â our Supreme Court has
repeatedly held that the âinternal operations of a single business . . . are not business
activities within the General Assemblyâs intended meaning of the term.â White v.
Thompson, 364 N.C. 47, 52,691 S.E.2d 676, 679
(2010). âAs a result, any unfair or
deceptive conduct contained solely within a single business is not covered by the Act.â
Id. at 53,691 S.E.2d at 680
. âThe determination of whether an act or practice is in or
affects commerce is one of law.â J. M. Westall & Co. v. Windswept View of Asheville,
Inc., 97 N.C. App. 71, 75,387 S.E.2d 67, 69
, disc. review denied,327 N.C. 139
, 394
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S.E.2d 175 (1990).
¶ 77 Defendants argue that summary judgment was appropriate as to this claim
because âthe entire dispute in this case centers around the internal operations of the
[Corporation], and more specifically, the desire of certain parties to no longer be in
business together.â However, Defendantsâ characterization is incorrect; Duffyâs
allegations focus heavily on the various clients to whom services had been and were
to be rendered, as well as on the New Entity as a beneficiary of the alleged unfair and
deceptive acts. Where âthere are multiple companies . . . involved,â this Court has
concluded that an individual defendantâs interruption of the commercial relationship
between those companies is âin or affecting commerceâ and may properly constitute
an unfair or deceptive act or practice under § 75-1.1. Songwooyarn Trading Co. v. Sox
Eleven, Inc., 213 N.C. App. 49, 57,714 S.E.2d 162, 168
, disc. review denied,365 N.C. 360
,718 S.E.2d 396
(2011).
¶ 78 Therefore, summary judgment was inappropriate with respect to Duffyâs
unfair and deceptive trade practices claim, and the trial courtâs order is reversed as
to this claim. Moreover, as with Duffyâs unjust enrichment claim, discussed above,
Duffy does not allege that he âsuffer[ed] an injury that is distinct from the injury
suffered by the corporation itselfâ as to this claim. Corwin, 371 N.C. at 612,821 S.E.2d at 735
(citation and internal quotation marks omitted). Accordingly, this claim must
proceed derivatively. See Norman, 140 N.C. App. at 395,537 S.E.2d at 253
.
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7. Civil Conspiracy
¶ 79 Finally, Duffy also asserts a claim against Camp and Johnson for civil
conspiracy.
¶ 80 The elements of civil conspiracy are well established:
A claim for damages resulting from a conspiracy exists
where there is an agreement between two or more persons
to do an unlawful act or to do a lawful act in an unlawful
way, and, as a result of acts done in furtherance of, and
pursuant to, the agreement, damage occurs to the plaintiff.
In such a case, all of the conspirators are liable, jointly and
severally, for the act of any one of them done in furtherance
of the agreement.
Fox v. Wilson, 85 N.C. App. 292, 301,354 S.E.2d 737, 743
(1987) (citations omitted).
¶ 81 In addition, it is equally âwell established that there is not a separate civil
action for civil conspiracy in North Carolina. Instead, civil conspiracy is premised on
the underlying act.â Piraino Bros., LLC v. Atl. Fin. Grp., Inc., 211 N.C. App. 343, 350,
712 S.E.2d 328, 333 (citations and internal quotation marks omitted), disc. review
denied, 365 N.C. 357,718 S.E.2d 391
(2011). Accordingly, recovery in a civil
conspiracy claim âmust be on the basis of sufficiently alleged wrongful overt acts. The
charge of conspiracy itself does nothing more than associate the defendants together
and perhaps liberalize the rules of evidence to the extent that under proper
circumstances the acts and conduct of one might be admissible against all.â Shope v.
Boyer, 268 N.C. 401, 405,150 S.E.2d 771
, 773â74 (1966).
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¶ 82 Here, Duffy argues that âthe conspiracy is Camp and Johnsonâs plan to form
the New Entity, move the [Corporation]âs assets and business to the New Entity, and
thereafter carry on the [Corporation]âs business through the New Entity so as to . . .
exclude Duffy and his interests as a shareholder.â He additionally alleges that âin
February and March of 2020, Camp and Johnson âdecided the manner in which the
[Corporation] was operated would need to changeâ and âmade a final decision that
they could no longer partnerâ with [Duffy].â
¶ 83 Defendants respond that Duffy cannot âuse the same alleged acts to form both
the basis of a claim for conspiracy to commit certain torts and the basis of claims for
those torts.â Jones v. City of Greensboro, 51 N.C. App. 571, 584,277 S.E.2d 562, 571
(1981), overruled on other grounds by Fowler v. Valencourt, 334 N.C. 345,435 S.E.2d 530
(1993). However, the import of Duffyâs conspiracy claim appears to be that,
through an action for damages resulting from a conspiracy, he may recover âjointly
and severally . . . for the act of any [conspirator] done in furtherance of the
agreement.â Fox, 85 N.C. App. at 301,354 S.E.2d at 743
. This would entitle Duffy to
recover damages, jointly and severally, from Johnson and the Corporation as well as
Camp for the conspiracy to commit the base tort, for which only Camp may be liable.
¶ 84 We have concluded that summary judgment is inappropriate as to Duffyâs
derivative claims for: (1) Campâs breach of fiduciary duty to the Corporation; (2)
unjust enrichment; and (3) unfair and deceptive trade practices. So too is summary
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Opinion of the Court
judgment inappropriate on the corresponding conspiracy claim, to the extent that
Duffy can show on remand that Defendants allegedly conspired to commit any of the
underlying claims.
8. Claim Abandoned on Appeal
¶ 85 Duffy makes no argument on appeal that the trial court erred by granting
summary judgment on his Meiselman claim. Therefore, this issue is deemed
abandoned. N.C.R. App. P. 28(b)(6); see, e.g., Wilkerson v. Duke Univ., 229 N.C. App.
670, 679,748 S.E.2d 154, 161
(2013).
IV. Conclusion
¶ 86 For the foregoing reasons, the trial court properly granted summary judgment
with respect to all of Duffyâs individual claims, as well as his derivative claims for: (1)
breach of fiduciary duty that Camp and Johnson, as controlling shareholders, owed
him, as a minority shareholder; (2) tradename infringement and Duffyâs concomitant
request for injunctive relief relating to that claim; and (3) conversion. We affirm the
trial courtâs order as to those claims, as well as the Meiselman claim that was
abandoned on appeal.
¶ 87 Summary judgment was inappropriate concerning Duffyâs remaining
derivative claims: (1) Campâs breach of fiduciary duty to the Corporation; (2) unjust
enrichment; (3) unfair and deceptive trade practices; and (4) civil conspiracy. The
trial courtâs order granting summary judgment in favor of Defendants is reversed as
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Opinion of the Court
to these claims. We remand to the trial court for further proceedings on these
surviving derivative claims.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
Chief Judge STROUD and Judge DIETZ concur.