Present v. State of N.C.

Present v. State of N.C., 2026 NCBC 83. STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION WAKE COUNTY 26CV024512-910 SCOTT PRESENT, an individual, Plaintiff, v. ORDER AND OPINION ON DEFENDANTS’ MOTION TO STATE OF NORTH CAROLINA; DISMISS DESTIN HALL, in his official capacity as Speaker of the North Carolina House of Representatives; PHILIP E. BERGER, in his official capacity as the President Pro Tempore of the North Carolina Senate, Defendants. THIS MATTER is before the Court on Defendants’ Motion to Dismiss (“Motion to Dismiss” or “Motion,” ECF No. 3). The Court, having considered the Motion, the briefs of the parties, the arguments of counsel, and all appropriate matters of record, CONCLUDES that the Motion should be GRANTED in part and that the remaining claims should be TRANSFERRED to a three-judge panel of the Superior Court, Wake County, for the reasons set forth below. Scott Present, pro se. Ellis & Winters, LLP, by Michelle Liguori; North Carolina Department of Justice, by Michael Bulleri, for Defendants State of North Carolina, Destin Hall, and Philip Berger. Davis, Judge. INTRODUCTION 1. This case involves as-applied and facial constitutional challenges to a North Carolina statutory provision that requires shareholders of public corporations to own stock in the company for at least one year before being eligible to file a derivative lawsuit on behalf of the company. The plaintiff contends that this one- year requirement violates the Open Courts provision of the North Carolina Constitution and the Contracts Clause of the United States Constitution. FACTUAL AND PROCEDURAL BACKGROUND 2. The Court does not make findings of fact in connection with a motion to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure and instead recites those alleged facts contained in the complaint (and in documents attached to, referred to, or incorporated by reference in the complaint) that are relevant to the Court’s determination of the motion. See, e.g., Window World of Baton Rouge, LLC v. Window World, Inc., 2017 NCBC LEXIS 60, at *11 (N.C. Super. Ct. July 12, 2017). 3. Plaintiff Scott Present is a resident of Sarasota County, Florida. (Am. Compl., ECF No. 20, ¶ 3.) 4. Plaintiff is a shareholder of cbdMD, Inc. (“cbdMD”), a public corporation existing under North Carolina law. (Am. Compl. ¶ 3.) 5. On 17 March 2015, cbdMD was formed through the filing of Articles of Incorporation with the North Carolina Secretary of State. (Am. Compl. ¶ 11.) 6. On 19 December 2025, Plaintiff became a shareholder of cbdMD. (Am. Compl. ¶ 3.) 7. Plaintiff alleges that cbdMD’s Board of Directors breached their fiduciary duties by violating North Carolina law in certain respects and that his legal remedy to seek redress against the Board of Directors is to file a shareholder derivative lawsuit. (Am. Compl. ¶¶ 33–36.) 8. Plaintiff asserts that he has been unable to pursue this remedy, however, based on the requirement set out in N.C.G.S. § 55-7-48(1) that he must have been a shareholder of the company for at least one year in order to be eligible to file a derivative lawsuit. (Am. Compl. ¶ 39.) 9. On 29 June 2026, Plaintiff initiated this lawsuit by filing a pro se Complaint in Wake County Superior Court against the State of North Carolina, Destin Hall in his capacity as the Speaker of the North Carolina House of Representatives, Phil Berger in his capacity as the President Pro Tempore of the North Carolina Senate, and cbdMD. (Compl., ECF No. 1.) 10. On 27 August 2026, Plaintiff filed an Amended Complaint (ECF No. 20), which is currently his operative pleading.1 11. In his Amended Complaint, Plaintiff alleges that N.C.G.S. § 55-7-48(1) violates the Contracts Clause of the United States Constitution and the Open Courts provision of the North Carolina Constitution. (Am Compl. ¶¶ 37–66.) Plaintiff contends that this statutory provision is unconstitutional both facially and as applied to him. 12. This matter was designated as a mandatory complex business case and assigned to the undersigned on 18 August 2026. (ECF Nos. 6–7). 1 In the Amended Complaint, cbdMD was no longer named as a Defendant.  13. On 14 August 2026, Defendants filed the present Motion to Dismiss pursuant to Rules 12(b)(1) and (6) of the North Carolina Rules of Civil Procedure in which they seek dismissal of Plaintiff’s claims in their entirety. (ECF No. 3). 14. On 24 September 2026, the Court held a hearing on the Motion via Webex at which Defendants were represented by counsel and Plaintiff appeared on his own behalf. 15. The Motion has been fully briefed and is now ripe for resolution. LEGAL STANDARD 16. A motion brought under Rule 12(b)(1) challenges a court’s jurisdiction over the subject matter of the claimant’s claims. N.C. R. Civ. P. 12(b)(1). “Subject matter jurisdiction is the indispensable foundation upon which valid judicial decisions rest,” In re T.R.P., 360 N.C. 588, 590 (2006), and has been defined as “a court’s legal authority to adjudicate the kind of claim alleged,” In re McClatchy Co., LLC, 386 N.C. 77, 85 (2024) (cleaned up). “The proceedings of a court without jurisdiction of the subject matter are a nullity.” Burgess v. Gibbs, 262 N.C. 462, 465 (1964) (cleaned up). 17. In determining the existence of subject matter jurisdiction, the Court may consider matters outside the pleadings. Emory v. Jackson Chapel First Missionary Baptist Church, 165 N.C. App. 489, 491 (2004). However, “if the trial court confines its evaluation to the pleadings, the court must accept as true the plaintiff’s allegations and construe them in the light most favorable to the plaintiff.” Munger v. State, 202 N.C. App. 404, 410 (2010) (quoting Dep’t of Transp. v. Blue, 147 N.C. App. 596, 603 (2001)). 18. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court reviews the allegations in the complaint in the light most favorable to the plaintiff. See Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017). The Court’s inquiry is “whether, as a matter of law, the allegations of the complaint . . . are sufficient to state a claim upon which relief may be granted under some legal theory[.]” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App. 669, 670 (1987). The Court accepts all well-pled factual allegations in the relevant pleading as true. See Krawiec v. Manly, 370 N.C. 602, 606 (2018). The Court is not, however, required “to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. Dep’t Health and Hum. Servs., Div. of Facility Servs., 174 N.C. App. 266, 274 (2005) (cleaned up). 19. Furthermore, the Court “can reject allegations that are contradicted by the documents attached, specifically referred to, or incorporated by reference in the complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016) (cleaned up). The Court may consider these attached or incorporated documents without converting the Rule 12(b)(6) motion into a motion for summary judgment. Id. Moreover, the Court “may properly consider documents which are the subject of a plaintiff’s complaint and to which the complaint specifically refers even though they are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60 (2001) (cleaned up).  20. Our Supreme Court has held that “dismissal pursuant to Rule 12(b)(6) is proper when (1) the complaint on its face reveals that no law supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (cleaned up). ANALYSIS 21. The two types of constitutional challenges Plaintiff has asserted in this case—an as-applied challenge and a facial challenge—are treated differently under North Carolina law. As our Supreme Court has explained: Our legal system recognizes two kinds of constitutional challenges: facial and as-applied. A facial challenge to the constitutionality of a statute is an attack on the statute itself as opposed to a particular application of that statute to a particular plaintiff. To succeed on a facial challenge, the plaintiff must show there are no circumstances under which the statute might be constitutional. Alternatively, an as-applied challenge does not deny that a statute is generally enforceable. As- applied challenges represent a plaintiff’s protest against how a statute was applied in the particular context in which the plaintiff acted or proposed to act. Hoke Cnty. Bd. of Educ. v. State, 389 N.C. 198, 258 (2026) (cleaned up). 22. North Carolina law provides different procedures for the adjudication of facial and as-applied challenges. A claim asserting a facial challenge to an enactment of our General Assembly must be transferred to a three-judge panel of the Superior Court in Wake County. See N.C.G.S. § 1-267.1(a); N.C.G.S. § 1-81.1(a1); N.C. R. Civ. P. 42(b)(4). “As-applied constitutional challenges, however, may be resolved in the first instance by a single judge.” Hoke Cnty., 389 N.C. at 259. I. As-applied Challenge A. Contracts Clause 23. In his as-applied challenge, Plaintiff first asserts that § 55-7-48(1) violates the Contracts Clause of the United States Constitution. 24. “The Contracts Clause restricts the power of States to disrupt contractual arrangements.” Sveen v. Melin, 584 U.S. 811, 818 (2018). It states that “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . [.]” U.S. Const. Art. I, § 10, cl. 1. 25. North Carolina courts employ a three-part test articulated by the United States Supreme Court to determine whether a law violates the Contracts Clause. Bailey v. State, 348 N.C. 130, 141 (1998) (citing U.S. Trust Co. of N.Y v. New Jersey, 431 U.S. 1 (1977)). Under this test, the Court must determine whether (1) a contractual obligation is present; (2) the state’s actions impaired that contract; and (3) the impairment was reasonable and necessary to serve an important public purpose. Bailey, 348 N.C. at 141. 26. Here, Plaintiff asserts that § 55-7-48(1) impairs a contractual obligation existing under cbdMD’s Articles of Incorporation that requires the company’s Board of Directors to comply with North Carolina law. 27. N.C.G.S. § 55-7-48(1) states as follows: In addition to the requirements of this Part, the plaintiff in an action brought on behalf of a corporation that is a public corporation at the time of the action against one or more of its directors for monetary damages shall:  (1) Allege, and it must appear, that each plaintiff has been a shareholder or holder of a beneficial interest in shares of the corporation for at least one year[.] N.C.G.S. § 55-7-48(1). 28. However, the relevant timeline rejects Plaintiff’s argument. The current version of § 55-7-48(1) was enacted in 1995. The formation of cbdMD did not occur until 2015, and Plaintiff did not become a shareholder until 2025. As a result, Plaintiff acquired his interest in the company subject to this statutory provision and any restrictions contained therein. See Bryson City Bank v. Town of Bryson City, 213 N.C. 165, 169 (1938) (“It is also settled that the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms.” (cleaned up).) 29. Because § 55-7-48(1) was enacted before cbdMD came into existence (and before Plaintiff became a shareholder), the statute cannot be properly characterized as impairing any contractual obligation found in the Articles of Incorporation in violation of Plaintiff’s rights. See Texaco, Inc. v. Short, 454 U.S. 516, 531 (1982) (holding that a “statute cannot be said to impair a contract that did not exist at the time of its enactment”); see also Sveen, 584 U.S. at 818 (stating that the Contracts Clause concerns “pre-existing” contracts). 30. As a result, Defendants’ Motion to Dismiss as to Plaintiff’s as-applied challenge to § 55-7-48(1) based on the Contracts Clause is GRANTED, and that claim is DISMISSED with prejudice pursuant to Rule 12(b)(6).  B. Open Courts Provision 31. Plaintiff has also asserted an as-applied challenge to § 55-7-48(1) based on the Open Courts provision of the North Carolina Constitution. He contends that by denying him access to the courts of North Carolina for the purpose of bringing a derivative action until one year after he became a shareholder, his rights under that provision of our State Constitution have been violated. (Am. Comp. ¶¶ 37–52.) 32. The Open Courts provision states that “[a]ll courts shall be open; every person for an injury done him in his lands, goods, person, or reputation shall have remedy by due course of law; and right and justice shall be administered without favor, denial, or delay.” N.C. Const. art. I, § 18. Our Supreme Court has made clear that “the remedy constitutionally guaranteed must be one that is legally cognizable.” Lamb v. Wedgewood S. Corp., 308 N.C. 419, 444 (1983). 33. Under the North Carolina Constitution, shareholders have no right to bring derivative actions on behalf of a corporation. Instead, the General Assembly created such a right in the North Carolina Business Corporation Act. In so doing, the legislature qualified this right by imposing, among other conditions, the one-year requirement at issue. 34. Our Supreme Court has unambiguously held that when the General Assembly creates a right, it has the authority to impose restrictions on the exercise of that right. See Lamb, 308 N.C. at 444 (“The legislature has the power to define the circumstance under which a remedy is legally cognizable and those under which it is not”).  35. This is precisely what the General Assembly has done here. In establishing the ability of shareholders to bring derivative actions, the General Assembly defined the circumstances under which they would be authorized to do so. 36. Accordingly, Defendants’ Motion to Dismiss as to Plaintiff’s as-applied challenge to § 55-7-48(1) based on the Open Courts provision of the North Carolina Constitution is GRANTED, and that claim is DISMISSED with prejudice pursuant to Rule 12(b)(6). II. Facial Challenge 37. As noted above, Plaintiff further argues that § 55-7-48(1) is unconstitutional on its face. 38. “[W]hen a party properly advances a facial challenge to the constitutionality of a statute, the trial court lacks jurisdiction to rule on the facial challenge.” Lakins v. W. N.C. Conf. of United Methodist Church, 283 N.C. App. 385, 391 (2022). Instead, the trial court must transfer the facial challenge to a three-judge panel. Lakins, 283 N.C. App. at 391; N.C.G.S. § 1-267.1(a). 39. Rule 42(b)(4) states in pertinent part as follows: Pursuant to G.S. 1-267.1, any facial challenge to the validity of an act of the General Assembly . . . shall be heard by a three-judge panel in the Superior Court of Wake County if a claimant raises such a challenge in the claimant’s complaint or amended complaint in any court in this State . . . In that event, the court shall, on its own motion or the motion of a party, transfer that portion of the action challenging the validity of the act of the General Assembly to the Superior Court of Wake County for resolution by a three-judge panel if, after all other matters in the action have been resolved, a determination as to the facial validity of an act of the General Assembly must be made in order to completely resolve any matters in the case. The court in which the action originated shall  maintain jurisdiction over all matters other than the challenge to the act’s facial validity . . . N.C. R. Civ. P. 42(b)(4). 40. Accordingly, when a plaintiff brings both an as-applied challenge and a facial challenge, the original court should rule on all issues raised other than the facial challenge. See Leech v. State, 301 N.C. App. 21, 31 (2025) (remanding an as- applied challenge and stating that, as for the facial challenge, the trial court should “resolve all matters not contingent upon the outcome of the challenge to the act's facial validity and then transfer the case”) (cleaned up); Hull v. Brown, 279 N.C. App. 570, 573 (2021) (“[T]he transfer for the facial constitutional challenge should not happen until ‘after’ a trial on the other unaffected claims in the lawsuit.”); Holdstock v. Duke Univ. Health Sys., Inc., 270 N.C. App. 267, 281 (2020) (“The trial court also has to determine what issues, if any, are not contingent upon the outcome of the challenge to the act’s facial validity, and resolve those issues before deciding whether it is necessary to transfer the facial challenge to the three-judge panel.” (cleaned up)). 41. Defendants argue, however, that an exception to this rule exists in that the original court is authorized to dismiss a facial challenge for lack of standing, and they cite several cases for that proposition. See, e.g., Byron v. Synco Props., Inc., 258 N.C. App. 372, 381 (2018) (finding that plaintiff lacked standing to challenge facial validity of a statute when the issue related to his neighbor’s property and not his own.) However, in the cases relied upon by Defendants, the plaintiffs failed to show that they suffered any injury from the statute that they argued was unconstitutional.  42. Here, conversely, Plaintiff is alleging that he has been injured by § 55- 7-48(1) by virtue of being forced to wait until one year after becoming a shareholder before he can bring a derivative action. Thus, even though this Court has now ruled that Plaintiff’s as-applied challenge fails on its merits, that finding is not tantamount to a determination that Plaintiff never possessed a legally recognized interest sufficient to bring the facial challenge. 43. Defendants nevertheless contend that any standing Plaintiff may have originally possessed to assert the facial challenge would disappear if this Court dismisses his as-applied claims. In support of this argument, Defendants assert that upon a judicial determination that Plaintiff has no valid as-applied claim, he would then lack standing to bring a facial challenge because attacking the facial validity of a statute requires a showing that the statute can never be applied constitutionally— a showing that could no longer be made once this Court has held that the statute is not unconstitutional as applied to him. 44. However, the Court finds this argument to be circular. As Defendants’ counsel conceded at the 24 September hearing, it would mean that the original judge would necessarily be required to dismiss the plaintiff’s facial challenge (instead of transferring the facial claim to a three-judge panel) as soon as it dismissed the accompanying as-applied claim. As Defendants’ counsel acknowledged, no North Carolina case has so held. 45. Therefore, this Court finds that Plaintiff’s facial challenge to § 55-7- 48(1) should be TRANSFERRED to a three-judge panel pursuant to Rule 42(b)(4).  CONCLUSION ACCORDINGLY, IT IS ORDERED as follows: 1. Plaintiff’s claims based on his as-applied challenge to the constitutionality of N.C.G.S. § 55-7-48(1) are DISMISSED with prejudice under Rule 12(b)(6). 2. Plaintiff’s claims based on his facial challenge to N.C.G.S. § 55-7-48(1) are hereby TRANSFERRED to a three-judge panel of the Superior Court, Wake County, to be appointed by the Chief Justice of the Supreme Court of North Carolina, pursuant to N.C.G.S. § 1-267.1 and Rule 42(b)(4). 3. Counsel for Defendants are hereby DIRECTED to provide a copy of this Order and Opinion to the Wake County Trial Court Administrator. SO ORDERED, this the 3rd day of November, 2026. /s/ Mark A. Davis Mark A. Davis Special Superior Court Judge for Complex Business Cases