Kingsdown, Inc. v. Hinshaw

Kingsdown, Inc. v. Hinshaw, 2015 NCBC 28.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
ALAMANCE COUNTY 14 CVS 1701

KINGSDOWN, INCORPORATED,

Plaintiff,

v.

W. ERIC HINSHAW, REBECCA
HINSHAW, and ANNE RAY,

Defendants.

ORDER AND OPINION
ANNE RAY, ON MOTIONS CONCERNING
DEFENDANT ANNE RAY
Third-Party Plaintiff,

v.

FRANK HOOD, THOMAS I. McLEAN,
GLENDEL STEPHENSON, WILLIAM
S. PEARSON, WAYNE E. TUMLIN,
TUGGLE DUGGINS P.A., and JOHN
DOE,

Third-Party Defendants.

{1} THIS MATTER is before the Court on (i) Defendant Anne Ray’s (“Ms. Ray”)
Motion to Dismiss Plaintiff’s Amended Complaint under Rules 12(b)(6) (“Ray’s Rule
12(b)(6) Motion”) and 12(b)(3) (“Ray’s Rule 12(b)(3) Motion”), (ii) Defendant Anne
Ray’s Motion for More Definite Statement (“Ray’s Rule 12(e) Motion for More Definite
Statement”) (collectively, “the Ray Rule 12 Motions”), 1 (iii) Plaintiff Kingsdown,
Incorporated’s (“Plaintiff,” “Kingsdown” or the “Company”) Motion to Dismiss the
Counterclaims of Defendant Anne Ray, (iv) Third-Party Defendants Frank Hood,
Thomas I. McLean, Glendel Stephenson, William S. Pearson, and Wayne E. Tumlin’s

1 During the March 11, 2015 hearing in this matter, the Court ruled from the bench that it intended

to deny Ray’s Rule 12(b)(6) Motion, Ray’s Rule 12(b)(3) Motion, and Ray’s Rule 12(e) Motion for More
Definite Statement and that it would enter this formal Opinion and Order denying these motions.
(collectively, “Individual Third-Party Defendants”) Motion to Dismiss Third-Party
Complaint (“Individual Third-Party Defendants’ Motion to Dismiss Third-Party
Complaint”) and (v) Third-Party Defendant Tuggle Duggins, P.A.’s (“Tuggle Duggins”
or the “Firm”) Motion to Dismiss Third-Party Complaint (“Tuggle Duggins’ Motion to
Dismiss Third-Party Complaint”) and for Attorney’s Fees Pursuant to N.C. Gen. Stat.
§ 75-16.1 (“Tuggle Duggins’ Motion for Attorney’s Fees”).2
{2} THE COURT, having considered the parties’ Motions, briefs in support of
and in opposition to the Motions, appropriate matters of record, and the arguments
of counsel made at the March 11, 2015 hearing held in this matter, hereby DENIES
the Ray Rule 12 Motions, GRANTS Kingsdown’s Motion to Dismiss the
Counterclaims of Defendant Anne Ray, GRANTS the Individual Third-Party
Defendants’ Motion to Dismiss Third-Party Complaint, GRANTS Third-Party
Defendant Tuggle Duggins’ Motion to Dismiss Third-Party Complaint, and DENIES
Third-Party Defendant Tuggle Duggins’ Motion for Attorney’s Fees.
Tuggle Duggins P.A. by Denis E. Jacobson, Jeffrey S. Southerland, and Alan
B. Felts for Plaintiff Kingsdown, Incorporated and Third-Party Defendants
Frank Hood, Thomas I. McLean, Grendel Stephenson, William S. Pearson, and
Wayne E. Tumlin.

Smith Moore Leatherwood LLP by Robert R. Marcus, Heather C. White, Whit
D. Pierce, and Richard A. Coughlin for Defendants W. Eric Hinshaw and
Rebecca Hinshaw.

William C. Ray for Defendant Anne Ray.

2 Ms. Ray has also filed two additional motions: (1) Motion to Deny Third Party Defendants Motion to

Dismiss Third-Party Complaint of Anne M. Ray and (2) Motion to Deny Kingsdown’s Motion to Dismiss
Counterclaim and Third-Party Defendant, Tuggle Duggins Motion to Dismiss Third-Party Complaint
and Attorney Fees (the “Motions to Deny”). During the March 11, 2015 hearing in this matter, counsel
for Ray agreed that the Motions to Deny are simply responses in opposition to Third-Party Defendants’
and Kingsdown’s Motions to Dismiss Defendant Anne Ray’s claims. Hence, the Court will consider
these Motions as briefs in opposition to Kingsdown’s and Third-Party Defendants’ Motions to Dismiss
and not as separate Motions.

Also, currently pending before the Court are Defendants Eric and Rebecca Hinshaw’s (the “Hinshaw
Defendants” or “the Hinshaws”) Motion to Disqualify Kingsdown’s Counsel (the “Motion to Disqualify”)
and Kingsdown’s Motion to Strike the December 10, 2014 Affidavit of W. Eric Hinshaw, which together
will be the subject of a separate adjudication, and Kingsdown’s Motion to Dismiss the Hinshaw
Defendants’ Counterclaims, which the Court indicated at the March 11, 2015 hearing it would consider
and determine after resolution of the Motion to Disqualify.
Sharpless & Stovola, P.A. by Frederick K. Sharpless for Third-Party Defendant
Tuggle Duggins P.A.

Bledsoe, Judge.

I.

PROCEDURAL HISTORY AND BACKGROUND

{3} Kingsdown commenced this action against Eric Hinshaw (“Mr. Hinshaw”),
his wife, Rebecca Hinshaw (“Ms. Hinshaw”), and Ms. Ray on August 29, 2014 and
subsequently filed an Amended Complaint on September 2, 2014, generally alleging
that while serving as Kingsdown’s Chief Executive Officer (“CEO”) and Chairman of
the Board of Directors (the “Board”), Mr. Hinshaw breached his “duty to act in good
faith and in the best interests of Kingsdown” by “repeatedly engag[ing] in self-dealing
. . . and . . . abus[ing] his position as a fiduciary,” which “resulted in substantial
benefits for himself, [Ms.] Hinshaw, and Ms. Ray at the expense of Kingsdown.” (Am.
Compl. ¶¶ 6–7.)
{4} Specific to the Motions at issue, Kingsdown alleges that (i) Mr. Hinshaw and
Ms. Ray authorized non-business expenses for each other and Ms. Hinshaw for
reimbursement by Kingsdown (Am. Compl. ¶ 10); (ii) Mr. Hinshaw caused Kingsdown
to enter into an employment agreement with Ms. Ray “that purported to bind
Kingsdown to employ Ms. Ray and pay her an exorbitant salary until she retired from
Kingsdown” without the knowledge, approval, or authority of Kingsdown’s Board (the
“Employment Agreement”) (Am. Compl. ¶ 11); and (iii) on account of her actions, Ms.
Ray is liable to Kingsdown for breach of fiduciary duty, constructive fraud, and civil
conspiracy, and Kingsdown is entitled to a declaratory judgment declaring that the
Employment Agreement is invalid and unenforceable against Kingsdown (Am.
Compl. ¶¶ 31–46, 57–62).
{5} On October 7, 2014, Ms. Ray filed her Rule 12 Motions, seeking dismissal of
Kingsdown’s claims under Rule 12(b)(3) for improper venue or division and Rule
12(b)(6) for failure to state a claim, and an order under Rule 12(e) requiring
Kingsdown to file a more definite statement of its claims against Ms. Ray.
{6} On October 17, 2014, Ms. Ray filed an (i) Answer to Kingsdown’s Amended
Complaint, (ii) Counterclaims against Kingsdown, and (iii) Third-Party Complaint
against Third-Party Defendants Hood (individually and as an officer and director of
Kingsdown), McLean (individually and as former Board Chair of Kingsdown),
Stephenson (individually and as a director of Kingsdown), Pearson (individually and
as a director of Kingsdown), Tumlin (individually and as an officer of Kingsdown),
Tuggle Duggins and John Doe (individually and as a co-conspirator).
{7} On November 4, 2014, Ms. Ray filed an amended Answer and Counterclaim
in response to Kingsdown’s Amended Complaint. In her Counterclaim, Ms. Ray
denies all liability and generally contends that she has been a good, faithful, and loyal
employee of Kingsdown; that the Employment Agreement was fairly and properly
entered; that Kingsdown engaged in improper conduct to disparage her reputation
and attempt to force her resignation from the Company; and that Kingsdown
ultimately terminated her without provocation or cause. She asserts Counterclaims
against Kingsdown for alleged breach of contract (arising out of the Employment
Agreement), unlawful termination, blacklisting in employment, civil conspiracy,
intentional infliction of emotional distress, constructive fraud, unfair and deceptive
trade practices under N.C. Gen. Stat. § 75-1.1, defamation, negligence,
indemnification, and for declaratory judgment.
{8} On November 17, 2014, the Individual Third-Party Defendants filed their
Motion to Dismiss Ray’s Third-Party Complaint. On December 1, 2014, Kingsdown
filed its Motion to Dismiss the Counterclaims of Defendant Anne Ray. On December
10, 2014, Tuggle Duggins filed its Motion to Dismiss Third-Party Complaint and
Motion for Attorney’s Fees.
{9} The Motions before the Court have been fully briefed, and the Court held a
hearing on the Motions on March 11, 2015, at which all parties were represented by
counsel. The time for additional submissions and arguments has now expired and
the Motions are ripe for resolution.
II.

ANALYSIS

A. Ray’s Rule 12(b)(3) Motion to Dismiss Kingsdown’s Amended Complaint

{10} The parties advised the Court in the Joint Case Management Report and
reaffirmed at the March 11 hearing that Ray’s Rule 12(b)(3) Motion for improper
venue or division has been resolved and is now moot. Accordingly, the Court
concludes that Ray’s Rule 12(b)(3) Motion should be denied as moot.
B. Ray’s Rule 12(b)(6) Motion to Dismiss Kingsdown’s Amended Complaint
{11} The question for the Court on a Rule 12(b)(6) motion to dismiss is “whether,
as a matter of law, the allegations of the complaint, treated as true, are sufficient to
state a claim upon which relief may be granted under some legal theory, whether
properly labeled or not.” Harris v. NCNB Nat’l Bank, 85 N.C. App. 669, 670, 355
S.E.2d 838, 840 (1987) (citation omitted). “The complaint must be liberally construed,
and the court should not dismiss the complaint unless it appears beyond a doubt that
the plaintiff could not prove any set of facts to support his claim which would entitle
him to relief.” Block v. County of Person, 141 N.C. App. 273, 277–78, 540 S.E.2d 415,
419 (2000) (citing Dixon v. Stuart, 85 N.C. App. 338, 354 S.E.2d 757 (1987)).
{12} When the complaint fails to allege the substantive elements of some legally
cognizable claim, or where it alleges facts that defeat the claim, the complaint should
be dismissed under Rule 12(b)(6). Hudson-Cole Dev. Corp. v. Beemer, 132 N.C. App.
341, 345–46, 511 S.E.2d 309, 312 (1999) (citations omitted). In sum, Rule 12(b)(6)
dismissal is proper “when one or more of the following three conditions is satisfied:
(1) when the complaint on its face reveals that no law supports plaintiff’s claim; (2)
when the complaint reveals on its face the absence of fact sufficient to make a good
claim; (3) when some fact disclosed in the complaint necessarily defeats the plaintiff’s
claim.” Oates v. JAG, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985) (citations
omitted).
{13} Here, Ms. Ray’s arguments for dismissal are essentially based on her
contentions that Kingsdown’s allegations about her and her conduct are false, not
that they fail to state a claim as a matter of law. Her Motion contains numerous
factual assertions that contradict or add to the allegations of the Amended Complaint,
fails to discuss a single case or proposition of law, and contains numerous violations
of the Business Court Rules.3
{14} Although Ms. Ray’s procedural violations may justify summary denial under
the Rules of this Court,4 the Court has nonetheless reviewed the Motion carefully on
the merits.5 Based on that review, the Court concludes that Kingsdown’s Amended
Complaint, when viewed under the applicable standard, contains allegations
sufficient to state a claim upon which relief may be granted as to each of Kingsdown’s
claims for relief against Ms. Ray, and further, that the Amended Complaint does not
contain allegations of fact that necessarily defeat Kingsdown’s claims. Accordingly,
the Court concludes that Ms. Ray’s Rule 12(b)(6) Motion to Dismiss should be denied.
C. Ms. Ray’s Rule 12(e) Motion for More Definite Statement against Kingsdown
{15} In determining a motion for more definite statement under N.C.R.C.P. Rule
12(e), the Court considers whether “a pleading to which a responsive pleading is
permitted is so vague or ambiguous that a party cannot reasonably be required to
frame a responsive pleading.” N.C. Gen. Stat. § 1A-1, Rule 12(e) (2014). Motions for
more definite statement are not favored by the courts and are “sparingly granted
because pleadings may be brief and lacking in factual detail, and because of the

3 For example, Ms. Ray’s motion was not accompanied by a brief (violation of BCR 15.2), failed to

include a word certification (violation of BCR 15.8), and failed to provide supporting materials for her
many unsubstantiated statements of fact (violation of BCR 15.5).

4See BCR 15.11 (“A motion unaccompanied by a required brief may, in the discretion of the Court, be
summarily denied.”).

5 Ms. Ray’s counsel, who is Ms. Ray’s husband, indicated at the hearing that he has been retired from

the active practice of law since 2005 and has never previously appeared in a case in the Business
Court. In light of counsel’s representations and Ms. Ray’s subsequent compliance with the Business
Court Rules in connection with the other pending Motions, the Court elects to consider Ms. Ray’s Rule
12(b)(6) Motion on the merits and not enter a summary denial. Nevertheless, the Court reiterates
Judge Jolly’s admonition that a “party practicing before the North Carolina Business Court should
take the deadlines imposed by its orders and the rules of practice very seriously.” Estate of Capps v.
Blondeau, 2014 NCBC 24 ¶ 36 (N.C. Super. Ct. June 17, 2014),
http://www.ncbusinesscourt.net/opinions/2014_NCBC_24.pdf.
extensive discovery devices available to the movant.” Ross v. Ross, 33 N.C. App. 447,
454, 235 S.E.2d 405, 410 (1977) (citation omitted). As long as the pleading meets the
standards of N.C.R.C.P. Rule 8 (“Rule 8”) and the opposing party is adequately
notified of the nature of the claim, a motion for more definite statement will be denied.
Id. (citations omitted). See generally, e.g., Gatlin v. Bray, 81 N.C. App. 639, 644, 344
S.E.2d 814, 817 (1986) (citation omitted) (“Pleadings comply with our present concept
of notice pleading if the allegations in the complaint give [the opposing party]
sufficient notice of the nature and basis of [the] claim to file an answer, and the face
of the complaint shows no insurmountable bar to recovery.”).
{16} Ms. Ray’s arguments under Rule 12(e) are similar in form and content to
those advanced in support of dismissal under Rule 12(b)(6). She again asserts a
number of unverified or unauthenticated facts, challenges the factual accuracy of
Kingsdown’s Amended Complaint, and essentially seeks to require Kingsdown to
provide interrogatory responses in connection with twelve separate categories of
information under the guise of a request for “more definite statement.”
{17} The Court has reviewed Kingsdown’s Amended Complaint in light of Rule
8’s notice pleading requirements and finds that the allegations of the Amended
Complaint fairly notify Ms. Ray of the nature and basis of Kingsdown’s claims against
her such that she can file an answer. Accordingly, because Kingsdown’s allegations
are not so “vague or ambiguous that a party cannot reasonably be required to frame
a responsive pleading,” N.C.R.C.P. Rule 8, the Court concludes that Ms. Ray’s Rule
12(e) Motion for More Definite Statement should be denied.
D. Kingsdown’s Motion to Dismiss the Counterclaims of Defendant Anne Ray
{18} Kingsdown likewise moves under Rule 12(b)(6) to dismiss Ms. Ray’s
Counterclaims. Kingsdown seeks a dismissal without prejudice of all of Ms. Ray’s
Counterclaims because of Ms. Ray’s failure to comply with N.C.R.C.P. Rules 8 and
10, and a dismissal with prejudice of all of Ms. Ray’s claims, except for her breach of
contract and declaratory judgment Counterclaims, for failure to state a claim as a
matter of law. In sum, Kingsdown contends that Ms. Ray has pled nothing more than
a breach of contract claim; therefore, Kingsdown argues Ms. Ray’s contract-based
Counterclaims are the only claims that should go forward in this action. The Court
will address each argument in turn.
i. Violations of N.C.R.C.P. Rules 8 and 10

{19} Kingsdown contends that Ms. Ray’s Counterclaims – which feature a
lengthy, 10-page factual background narrative without numbered paragraphs –
violate both the requirements under Rule 8 that a pleading contain a “short and
plain” statement of claims with averments that are “simple, concise, and direct” and
under N.C.R.C.P. Rule 10(b) (“Rule 10”) that “[a]ll averments of claim or defense shall
be made in numbered paragraphs, the contents of each of which be limited as far as
practicable to a statement of a single set of circumstances.”
{20} The Court initially notes that most challenges to the sufficiency of a
complaint under Rule 8 are based on the lack of specific detail in the complaint, not
because the complaint is too detailed and voluminous. While the Court has not
located a North Carolina decision upholding a Rule 8 dismissal because the complaint
was too voluminous, the Court nevertheless recognizes that federal courts have held,
in certain circumstances, that dismissal of voluminous complaints may be proper
under Rule 8. 6 Based on the Court’s review of Ms. Ray’s Counterclaims here,
however, the Court cannot conclude that Ms. Ray’s allegations are so voluminous or
incomprehensible to prevent Kingsdown from discerning the nature and basis for Ms.
Ray’s Counterclaims or otherwise formulating an answer to the Counterclaims.
Accordingly, the Court does not find that Ms. Ray’s Counterclaims violate the
requirements of Rule 8.

6 See, e.g., Bell v. Lasaceli, 2009 U.S. Dist. LEXIS 32416 at *6 (W.D.N.Y., Apr. 15, 2009) (“It is well
within a district court’s discretion to deny leave to amend a prolix complaint if it is so voluminous and
incomprehensible that no claims can be gleaned from it.”); Jones v. Nat’l Commc’ns. & Surveillance
Networks, 266 F. App’x. 31, 33 (2d Cir. 2008) (summary order) (stating that dismissing, pursuant to
Rule 8, a plaintiff’s 58 page, single-spaced complaint with 87 pages of attachments, alleging over
twenty separate causes of action against more than 44 defendants was not an abuse of discretion);
Blakely v. Wells, 209 F. App'x 18, 20 (2d Cir. 2006) (summary order) (stating that “[t]he District Court
acted within the bounds of permissible discretion in dismissing the second amended complaint for
noncompliance with Rule 8(a)” because “[t]he pleading, which spanned 57 pages and contained 597
numbered paragraphs, was far from short or plain”).
{21} Ms. Ray’s violation of the straightforward requirements of Rule 10(b),
however, is indisputable, and the Court concludes that requiring Ms. Ray to re-plead
her Counterclaims in numbered paragraphs will allow for a less confusing and more
comprehensible presentation of the issues in this action. Accordingly, the Court
concludes that Ms. Ray’s Counterclaims should be dismissed without prejudice and
with leave for Ms. Ray to re-plead the Counterclaims that are not dismissed with
prejudice in this Order in compliance with Rule 10(b). In addition, although the Court
declines to dismiss the Counterclaims under Rule 8, the Court admonishes Ms. Ray
to follow the requirement under Rule 8 to advance “simple, concise, and direct”
allegations in the preparation and filing of her amended Counterclaims.
{22} The Court will now address the legal sufficiency of each of Ms. Ray’s
Counterclaims in turn.
ii. Wrongful Termination
{23} Ms. Ray contends that she was terminated “without cause or lawful
justification” for a variety of disparate reasons, including as “an attempt to quiet her
from disclosing her knowledge of the unlawful activities of the Company,” (Ray’s
Countercl. ¶ 14), because she was “friends with [Mr. Hinshaw],” (Ray’s Countercl. ¶
15), “in order to avoid payment pursuant to her employment contract,” (Ray’s
Countercl. ¶ 15), to avoid paying for her stress-related injury under the workers
compensation laws, (Ray’s Countercl. ¶ 15), and because of “the substantial monies
owed to her under the Federal Fair Labor Standards Act,” (Ray’s Countercl. ¶ 15).
Ms. Ray also makes reference to a number of state and federal laws without making
clear their relevance to her wrongful termination claim, including the North Carolina
wage and hour laws, the North Carolina Retaliatory Employment Discrimination Act,
the Consumer Financial Protection Act, Title X of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the Sarbanes-Oxley Act, and the Lilly Ledbetter Fair
Pay Act of 2009. (Ray’s Countercl. ¶ 15).
{24} Our Court of Appeals has observed:
In North Carolina, employment is generally terminable by either the
employer or employee for any reason where no contract exists specifying
a definite period of employment. This is a bright-line rule with very
limited exceptions. An at-will employee may not be terminated: (1) for
refusing to violate the law at the employers [sic] request, (2) for engaging
in a legally protected activity, or (3) based on some activity by the
employer contrary to law or public policy.

McDonnell v. Tradewind Airlines, Inc., 194 N.C. App. 674, 677, 670 S.E.2d 302, 305
(internal citations and quotation marks omitted), disc. review denied, 363 N.C. 128,
675 S.E.2d 657 (2009).
{25} Generally, notice pleading is sufficient to state a claim, but our case law
requires that wrongful discharge claims be pled with specificity. Gillis v. Montgomery
Cnty. Sheriff's Dep’t, 191 N.C. App. 377, 379, 663 S.E.2d 447, 449 (2008). To meet
this specificity requirement, a plaintiff must allege “specific conduct by a defendant
that violated a specific expression of North Carolina public policy.” Considine v.
Compass Grp. USA, Inc., 145 N.C. App. 314, 321–22, 551 S.E.2d 179, 184, aff’d per
curiam, 354 N.C. 568, 557 S.E.2d 528 (2001).
{26} Upon review of Ms. Ray’s Counterclaims, the Court concludes that Ms. Ray
has failed to plead her wrongful discharge claim with sufficient specificity to survive
Kingsdown’s motion to dismiss. Although she vaguely claims that she was
terminated to prevent her “from disclosing her knowledge of the unlawful activities
of the Company,” (Ray’s Countercl. ¶ 14), her scattershot allegations suggest a variety
of reasons for her discharge, some legally permissible and others potentially not, but
which, taken together, do not permit the Court to conclude that Ms. Ray has identified
an improper action by Kingsdown that was the “motivating” or “but for” cause of the
adverse employment action she alleges she has suffered. See, e.g., Feltman v. City of
Wilson, 767 S.E.2d 615, 621 (N.C. App. 2014) (plaintiff required to show that alleged
conduct was the “motivating” or “but for” cause of termination); Sides v. Duke Univ.,
74 N.C. App. 331, 346, 328 S.E.2d 818, 829, disc. review denied, 314 N.C. 331, 335
S.E.2d 13 (1985), overruled on other grounds by Kurtzman v. Applied Analytical
Indus., Inc., 347 N.C. 329, 493 S.E.2d 420 (1997) (plaintiff required to show
termination resulted from alleged conduct and not “for any other reason”).
{27} Accordingly, the Court concludes that Kingsdown’s Motion to Dismiss Ms.
Ray’s Counterclaim for wrongful discharge should be granted and the Counterclaim
dismissed. Although it is not clear to the Court that Ms. Ray can allege facts that
will meet the pleading requirements for a wrongful discharge claim under North
Carolina law, the Court further concludes that Ms. Ray has pled enough specific facts
in her Counterclaim to persuade the Court to dismiss her wrongful discharge claim
without prejudice and allow her an opportunity to re-plead the claim in an amended
pleading consistent with N.C.R.C.P. Rules 8 and 10.
iii. Blacklisting in Employment
{28} Ms. Ray contends that Kingsdown has prevented or attempted to prevent
her from “seeking or otherwise obtaining employment,” (Ray’s Cclaims ¶ 23), in
violation of the North Carolina blacklisting statute, N.C. Gen. Stat. § 14-355. In
particular, she claims that Kingsdown violated the statute by advising her upon her
termination that the Company intended to enforce the non-competition agreement
she signed with Kingsdown on June 28, 2002, which precluded her from working for
certain employers for a two-year period following her termination.
{29} The blacklisting statute provides as follows:
If any person, agent, company or corporation, after having discharged
any employee from his or its service, shall prevent or attempt to prevent,
by word or writing of any kind, such discharged employee from obtaining
employment with any other person, company or corporation, such
person, agent or corporation shall be guilty of a Class 3 misdemeanor
and shall be punished by a fine not exceeding five hundred dollars
($500.00); and such person, agent, company or corporation shall be liable
in penal damages to such discharged person, to be recovered by civil
action. This section shall not be construed as prohibiting any person or
agent of any company or corporation from furnishing in writing, upon
request, any other person, company or corporation to whom such
discharged person or employee has applied for employment, a truthful
statement of the reason for such discharge.

N.C. Gen. Stat. § 14-355 (2014).

{30} In order to state a claim under this statute, Ms. Ray must plead (1) that she
attempted to obtain employment with another entity; (2) that Kingsdown took
affirmative steps “by word or writing of any kind” to prevent her from obtaining
employment with that entity; and (3) that whatever statements or writing that were
made to the entity were false. Further, “[f]or the statute to be violated, the
statements to the prospective employer would have had to have been unsolicited.”
Friel v. Angell Care Inc., 113 N.C. App. 505, 511, 440 S.E.2d 111, 115, (1994) (citation
omitted); see, e.g., Holroyd v. Montgomery Cnty., 167 N.C. App. 539, 545, 606 S.E.2d
353, 358, (2004) (“The purpose of the blacklisting statute is not to prohibit employers
from communicating truthful information as to the nature and character of former
employees.”) (citation omitted).7
{31} Ms. Ray has failed to plead each of the necessary elements of her claim. She
does not allege that she has sought employment from another entity, she has not
alleged that Kingsdown has taken any action to prevent her from obtaining
employment other than to indicate to her the Company’s intent to enforce her 2002
non-competition agreement, and she has not alleged that Kingsdown has made any
communication of any kind, false or otherwise, to a prospective employer. As such,
the Court concludes that Ms. Ray’s claim is fatally deficient as a matter of law and
should be dismissed with prejudice.
iv. Intentional Infliction of Emotional Distress
{32} Under North Carolina law, the essential elements of a claim for intentional
infliction of emotional distress are “(1) extreme and outrageous conduct by the
[opposing party] (2) which is intended to and does in fact cause (3) severe emotional
distress.” Waddle v. Sparks, 331 N.C. 73, 82, 414 S.E.2d 22, 27 (1992) (citing Dickens
v. Puryear, 302 N.C. 437, 452, 276 S.E.2d 325, 335 (1981)).
{33} “Whether or not conduct constitutes extreme and outrageous behavior is
initially a question of law for the court.” Simmons v. Chemol Corp., 137 N.C. App.
319, 325, 528 S.E.2d 368, 371 (2000) (citation omitted). “To establish the essential
element of extreme and outrageous conduct, the conduct must go beyond all possible
bounds of decency and ‘be regarded as atrocious, and utterly intolerable in a civilized

7 The statute authorizes a cause of action for punitive damages only. Houpe v. City of Statesville, 128
N.C. App. 334, 351, 497 S.E.2d 82, 93 (1998) (citation omitted).
community.’” Id. (quoting Wagoner v. Elkin City Sch.’ Bd. of Educ., 113 N.C. App.
579, 586, 440 S.E.2d 119, 123 (1994)). Indeed, “mere insults, indignities, threats,
annoyances, petty oppressions, or other trivialities” will not be found to constitute
extreme and outrageous conduct. Johnson v. Bollinger, 86 N.C. App. 1, 6, 356 S.E.2d
378, 382 (1987) (quoting Briggs v. Rosenthal, 73 N.C. App. 672, 677, 327 S.E.2d 308,
311 (1985)).
{34} Significantly for this case, our appellate courts have consistently held that
“the mere firing of an employee can never be ‘extreme and outrageous’ conduct
sufficient to state a claim for intentional infliction of emotional distress.” Sims-
Campbell v. Welch, 2015 N.C. App. LEXIS 166, *11–12 (N.C. Ct. App. Mar. 3, 2015);
see also, e.g., Johnson v. Colonial Life & Accident Ins. Co., 173 N.C. App. 365, 373,
618 S.E.2d 867, 872–73 (2005) (holding threats to plaintiff concerning losing his job
and health insurance and accusations that he submitted a false claim insufficient as
matter of law); Lorbacher v. Hous. Auth. of City of Raleigh, 127 N.C. App. 663, 675–
77, 493 S.E.2d 74, 81–82 (1997) (holding plaintiff’s discharge to deflect responsibility
for deaths at apartment complex and because plaintiff disclosed defendant’s negligent
operations insufficient as matter of law). Indeed, “it is extremely rare to find conduct
in the employment context that will rise to the level of outrageousness necessary to
support a claim of intentional infliction of emotional distress.” Thomas v. Northern
Telecom, Inc., 157 F. Supp. 2d 627, 635 (M.D.N.C. 2000) (applying North Carolina
law) (citation omitted); Moody-Williams v. Liposcience, 953 F. Supp. 2d 677, 690
(E.D.N.C. 2012) (“In the context of one’s employment particularly, North Carolina
courts have been reluctant to find actionable intentional infliction of emotional
distress claims.”) (citations omitted).
{35} Ms. Ray’s allegations fall short of those necessary to state a cognizable claim
for intentional infliction of emotional distress. When viewed in the light most
favorable to Ms. Ray, her allegations consist of what she claims was her unfair and
wrongful termination by Kingsdown, her belief that she was slighted or ignored by
Kingsdown’s management from time to time, and her frustration and irritation with
having to suffer various personal inconveniences resulting from the performance of
her job and her subsequent termination by Kingsdown. (Ray’s Countercl. pp. 18–25.)8
Such conduct can hardly be said to “go beyond all possible bounds of decency” or be
seen as “utterly intolerable in a civilized community.” Simmons, 137 N.C. App. at
325, 528 S.E.2d at 371.
{36} At most, Ms. Ray’s allegations comprise the sort of “insults,” “indignities,”
“annoyances,” and “petty oppressions” that our courts have long held are insufficient
to state a claim for intentional infliction of emotional distress. Johnson, 86 N.C. App.
at 6, 356 S.E.2d at 378. See, e.g., Ausley v. Bishop, 133 N.C. App. 210, 221, 515 S.E.2d
72, 80 (1999) (extreme and outrageous conduct not found where employer refused to
certify the employee’s reports until he signed a non-competition agreement,
“contacted the police and caused embezzlement charges to be filed” against the
employee, and “relayed negative and accusatory comments to [the employee’s]
creditors and potential clients”); Hogan v. Forsyth Country Club Co., 79 N.C. App.
483, 493, 340 S.E.2d 116, 122–23 (1986) (extreme and outrageous behavior not found
where the defendant yelled and threw menus at plaintiff and interfered with her
supervision of employees). As a result, the Court concludes that Ms. Ray’s claim for
intentional infliction of emotional distress should be dismissed with prejudice.
v. Constructive Fraud
{37} A claim for constructive fraud lies where (1) a relationship of trust and
confidence exists, (2) the defendant takes advantage of that position of trust to benefit
himself, and (3) the plaintiff was consequently injured. White v. Consol. Planning,
Inc., 166 N.C. App. 283, 294, 603 S.E.2d 147, 156 (2004) (citation omitted). “[A]n
essential element of constructive fraud is that defendants sought to benefit
themselves in the transaction.” Sterner v. Penn, 159 N.C. App. 626, 631, 583 S.E.2d

8 For example, Ms. Ray complains of having to relinquish her title as Corporate Secretary, of being

excluded from office meetings, and not receiving overtime pay (Countercl. pp. 19–21), of Mr. Hood
excluding her from conversations held behind closed doors, not advising her of his whereabouts and
speaking to her abruptly (Countercl. pp. 19–21), of having to perform menial tasks like copying papers,
picking up salesmen and customer lunches, and cleaning the kitchen (Countercl. p. 20), and of having
her integrity questioned behind her back and suffering various indignities in connection with the
retrieval of her personal property and information after the termination of her employment (Countercl.
pp. 21–24).
670, 674 (2003) (quoting State ex rel. Long v. Petree Stockton, L.L.P., 129 N.C. App.
432, 445, 499 S.E.2d 790, 798 (1998)). The existence of a fiduciary relationship is an
element of a constructive fraud claim. See White, 166 N.C. App. at 294–95, 603
S.E.2d at 156; see also Keener Lumber Co. v. Perry, 149 N.C. App. 19, 28, 560 S.E.2d
817, 823 (2002) (existence of “fiduciary” relationship is essential element of a
constructive fraud claim) (citation omitted).
{38} “Although our courts have broadly defined fiduciary relationships, no such
relationship arises absent the existence of dominion and control by one party over
another.” Kaplan v. O.K. Techs., LLC, 196 N.C. App. 469, 474, 675 S.E.2d 133, 137
(2009). “Only when one party figuratively holds all the cards—all the financial power
or technical information, for example—have North Carolina courts found that the
‘special circumstance’ of a fiduciary relationship has arisen.” Crumley & Assocs., P.C.
v. Charles Peed & Assocs., P.A., 219 N.C. App. 615, 621, 730 S.E.2d 763, 767 (2012)
(quoting Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 348 (4th Cir.
1998)).
{39} Significantly for this case, the relationship of an employer and an employee
typically does not give rise to fiduciary duties. See Dalton v. Camp, 353 N.C. 647,
651–52, 548 S.E.2d 704, 708 (2001) (“Under the general rule, ‘the relation of employer
and employee is not one of those regarded as confidential.’”) (quoting King v. Atl.
Coast Line R.R. Co., 157 N.C. 44, 72 S.E. 801 (1911)); Austin Maint. & Constr., Inc.
v. Crowder Constr. Co., 742 S.E.2d 535, 542 (N.C. Ct. App. 2012) (“[I]n the absence of
some unusual set of facts that would suffice to differentiate the relationship between
[the employer] and [the employee] from other employer-employee relationships, [the
employee] did not have a fiduciary relationship with [the employer].”); Reichhold
Chems., Inc. v. Goel, 146 N.C. App. 137, 155, 555 S.E.2d 281, 292 (2001) (“[A]
fiduciary relationship will generally not be found in the workplace.”).
{40} Nevertheless, Ms. Ray contends that Kingsdown owed her a fiduciary duty
on the facts she has alleged. In particular, Ms. Ray contends that her entry into the
Employment Agreement with Kingsdown “won the absolute trust and confidence of
Ms. Ray and situated [Kingsdown] with a position of more dominant influence over
her than was previously provided during her employment career.” (Ray’s Countercl.
¶ 43.) Ms. Ray then asserts that Kingsdown took advantage of this fiduciary
relationship to “benefit itself without due regard for the interests and well-being of
Ms. Ray.” (Ray’s Countercl. ¶ 44.)
{41} The Court does not find Ms. Ray’s contentions persuasive. Indeed, that
Kingsdown offered Ms. Ray an employment contract simply emphasizes the
employment nature of the relationship and does nothing to create the special
circumstances necessary to find a fiduciary duty. Moreover, North Carolina law is
clear that “parties to a contract do not thereby become each others’ fiduciaries; they
generally owe no special duty to one another beyond the terms of the
contract . . . .” Branch Banking and Trust Co. v. Thompson, 107 N.C. App. 53, 61,
418 S.E.2d 694, 699 (1992) (citations omitted). Having failed to show that a fiduciary
relationship existed with Kingsdown, the Court concludes that Ms. Ray’s claim for
constructive fraud fails as a matter of law and should be dismissed with prejudice.
{42} Kingsdown also contends that Ms. Ray’s constructive fraud claim should be
dismissed because she has not pled that Kingsdown obtained an improper benefit
from the alleged constructive fraud. See Sterner, 159 N.C. App. at 631, 583 S.E.2d
at 674. Ms. Ray contends in response that Kingsdown received certain non-monetary
benefits – the removal of Ms. Ray as an obstacle to Kingsdown’s allegedly ongoing
illegal conduct – and certain monetary benefits – a proportional reduction in the
bonus pool – from her improper termination. The Court concludes that Ms. Ray’s
alleged benefits to Kingsdown from the alleged constructive fraud are too speculative
and conjectural to sustain her claim. For this additional reason, therefore, the Court
finds that Ms. Ray’s constructive fraud claim should be dismissed with prejudice.9

9 Ms. Ray also contends, without citing to any case law, that because she owed Kingsdown a fiduciary

duty when she served as an officer of the Company, Kingsdown necessarily owed her a fiduciary duty
as well. (See Ray Opp. Br., p. 13) (“A fiduciary duty is not a one-way street.”). Ms. Ray’s contention is
simply not the law. A fiduciary duty is owed by the party in whom special trust and confidence is
placed, not by the party who has placed that trust and confidence. See generally, e.g., Lynn v. Fannie
Mae, 760 S.E.2d 372, 375 (N.C. Ct. App. 2014) (“Fiduciary relationships are established when a special
confidence is placed in a party which is bound to act in good faith and in the best interest of the party
who reposes that confidence.”).
vi. Unfair and Deceptive Trade Practices – N.C. Gen. Stat. § 75-1.1
{43} Ms. Ray asserts a claim for unfair and deceptive trade practices under N.C.
Gen. Stat. § 75-1.1 arising out of Kingsdown’s alleged conduct toward her during her
employment and in connection with her termination. North Carolina’s statute,
however, targets “unfair or deceptive acts or practices in or affecting commerce[.]”
N.C. Gen. Stat. § 75-1.1(a) (2014). Whether an act is “in or affecting commerce” is a
question of law for the Court to decide. Hardy v. Toler, 288 N.C. 303, 310, 218 S.E.2d
342, 346–47 (1975).
{44} Although N.C. Gen. Stat. § 75-1.1 broadly defines “commerce” to include “all
business activities, however denominated,” our Courts have long held that the statute
“is not intended to apply to all wrongs in a business setting.” HAJMM Co. v. House
of Raeford Farms, Inc., 328 N.C. 578, 593, 403 S.E.2d 483, 492 (1991). To establish
the “commerce” requirement, the defendant’s conduct “must affect commerce in a
commercial setting, . . . not in a private relationship type setting such as corporate
governance issues, . . . securities transactions, . . . or disputes arising from
employment[.]” McKee v. James, 2014 NCBC 73 ¶ 79 (N.C. Super. Ct. Dec. 31, 2014),
http://www.ncbusinesscourt.net/opinions/2014_NCBC_73.pdf (emphasis added)
(quoting In re Brokers, Inc., 396 B.R. 146, 161 (Bankr. M.D.N.C. 2008)). In short, the
statute is intended to apply to “(1) interactions between businesses, and (2)
interactions between businesses and consumers.” White v. Thompson, 364 N.C. 47,
52, 691 S.E.2d 676, 679 (2010).
{45} The conduct about which Ms. Ray complains – which is the same sort of
conduct she alleges in support of her claim for intentional infliction of emotional
distress – arises out of her employment and plainly involves internal business
disputes rather than interactions with businesses or consumers. As such,
Kingsdown’s alleged conduct does not affect commerce in a commercial setting and
cannot give rise to a cognizable claim under N.C. Gen. Stat. § 75-1.1. See, e.g., Buie
v. Daniel Int’l Corp., 56 N.C. App. 445, 448, 289 S.E.2d 118, 119–120 (1982) (holding
that “employer-employee relationships do not fall within the intended scope
of G.S. 75-1.1”); Kinesis Adver., Inc. v. Hill, 187 N.C. App. 1, 21, 652 S.E.2d 284, 298
(2007) (“We have consistently held that the employer/employee relationship does not
fall within the intended scope and purpose of [N.C. Gen. Stat. § 75-1.1].”); Wilson v.
Blue Ridge Elec. Mbrshp. Corp., 157 N.C. App. 355, 358, 578 S.E.2d 692, 694 (2003)
(“Matters of internal corporate management . . . do not affect commerce.”). As a result,
the Court concludes that Ms. Ray’s claim for unfair and deceptive trade practices
under N.C. Gen. Stat. § 75-1.1 should be dismissed with prejudice.
vii. Defamation
{46} Ms. Ray’s Counterclaim for defamation is based on three sets of purported
defamatory statements: (1) statements contained in Kingsdown’s written statement
to the Equal Employment Opportunity Commission (“EEOC”) in response to Ms.
Ray’s charge of age discrimination (Ray’s Countercl. ¶¶ 54–58); (2) unspecified
statements made by Kingsdown, by and through certain of its officers and directors,
that were allegedly published in local newspapers and in Furniture Today, a trade
publication (Ray’s Countercl. ¶ 61); and (3) unspecified statements contained in
Kingsdown’s Amended Complaint in this action (Ray’s Countercl. ¶ 62).
{47} First, Kingsdown is entitled to an absolute privilege with respect to
Kingsdown’s written statements to the EEOC and the statements contained in the
Amended Complaint in this action. An EEOC investigation, such as the one initiated
by Ms. Ray here, has regularly been recognized as a quasi-judicial proceeding in
which an absolute privilege applies. See, e.g., Collins-Pearcy v. Mediterranean
Shipping Co. (USA), 698 F. Supp. 2d 730, 765 (S.D. Tex. 2010) (“Statements made to
the EEOC in the course of an investigation are absolutely privileged.”); Bernstein v.
Seeman, 593 F. Supp. 2d 630, 636 (S.D.N.Y. 2009) (“The two statements contained in
[the employer’s] submission to the EEOC and in counsel’s letter to [the employee]
cannot form the basis of a defamation claim because both statements were made
under the protection of absolute immunity.”); Shabazz v. PYA Monarch, LLC, 271 F.
Supp. 2d 797, 803–05 (E.D. Va. 2003); Stith v. Chadbourne & Parke, LLP, 160 F.
Supp. 2d 1, 8 (D.D.C 2001).
{48} Similarly, the North Carolina appellate courts have long recognized that “a
defamatory statement made in the due course of a judicial proceeding is absolutely
privileged and will not support a civil action for defamation, even though it be made
with express malice.” Jarman v. Offutt, 239 N.C. 468, 472, 80 S.E.2d 248, 251 (1954)
(citations omitted). Accordingly, Ms. Ray’s defamation claim should be dismissed
with prejudice to the extent that claim is based on Kingsdown’s statements to the
EEOC or in its Amended Complaint. Id. (noting that “doctrine of absolute privilege
confers “complete immunity”).
{49} North Carolina law is also clear that “[i]n pleading a cause of action for
defamation, a plaintiff must recount the allegedly defamatory statement either
verbatim or at least with enough specificity to allow the Court to decide if the
statement is defamatory.” Jolly v. Acad. Collection Serv., Inc., 400 F. Supp. 2d 851,
861 (M.D.N.C. 2005) (citing Morrow v. Kings Dep’t Stores, 57 N.C. App. 13, 21, 290
S.E.2d 732, 737 (1982)). Against this heightened pleading standard, Ms. Ray, in
baldly declaring that Kingsdown “defamed [her] by causing false and malicious
statements to be published against [her] in various local newspapers and in . . .
Furniture Today,” (Ray’s Countercl. ¶ 61) and without providing any further factual
detail, has failed to sustain her claim for defamation. As a result, Ms. Ray’s
counterclaim for defamation on this basis should be dismissed. Because it is not clear
that Ms. Ray cannot plead a defamation claim based on these alleged statements as
a matter of law, however, the Court dismisses her defamation claim without prejudice
to the extent it is based on allegedly defamatory statements in local newspapers and
in Furniture Today, with leave for Ms. Ray to re-plead her claim consistent with
N.C.R.C.P. Rules 8 and 10.
viii. Negligence
{50} To state a claim for negligence, Ms. Ray must allege: (1) a legal duty; (2)
failure to act in a reasonable manner in performing that duty; and (3) an injury that
was proximately caused by failing to act in a reasonable manner. Stein v. Asheville
City Bd. of Educ., 360 N.C. 321, 328, 626 S.E.2d 263, 267 (2006). A negligence claim
“necessarily fails if there is no legal duty owed to the plaintiff by the defendant.”
Bridges v. Parrish, 222 N.C. App. 320, 323, 731 S.E.2d 262, 265 (2012) (citation
omitted); see, e.g., Davis v. N.C. Dep’t of Human Res., 121 N.C. App. 105, 112, 465
S.E.2d 2, 7 (1995) (defining duty as an “obligation, recognized by the law, requiring
the person to conform to a certain standard of conduct, for the protection of others
against unreasonable risks”) (internal quotation marks omitted).
{51} Ms. Ray contends that Kingsdown’s directors owed her a legal duty as
directors of Kingsdown under N.C. Gen. Stat. § 55-8-30 and claims that “by not
properly investigating the false claims made by its management, [Kingsdown’s
Board] breached its collective and respective duty and care owed to Ms. Ray.” (Ray’s
Countercl. ¶ 68.) Ms. Ray, however, has failed to show that Kingsdown owed her the
legal duty that she claims to exist. First, Kingsdown’s directors owe a fiduciary duty
to the corporation, i.e., to Kingsdown – not to the officers, shareholders, or employees
of Kingsdown. Keener Lumber Co., 149 N.C. App. at 26, 560 S.E.2d at 822 (“Under
North Carolina law, directors of a corporation generally owe a fiduciary duty to the
corporation, and where it is alleged that directors have breached this duty, the action
is properly maintained by the corporation rather than any individual creditor or
stockholder.”) (emphasis in original) (citing Underwood v. Stafford, 270 N.C. 700, 703,
155 S.E.2d 211, 213 (1967)). Moreover, as discussed above, Kingsdown, as Ms. Ray’s
employer, did not owe a fiduciary duty to her, as Kingsdown’s employee, and Ms. Ray
has not shown the existence of any other legal duty. See, e.g., Reichhold Chems., 146
N.C. App. at 155, 555 S.E.2d at 292 (“[A] fiduciary relationship will generally not be
found in the workplace.”). Finally, although Kingsdown owes Ms. Ray a general
common law duty to “act, or to use that which he controls, as not to injure another,”
Pinnix v. Toomey, 242 N.C. 358, 362, 87 S.E.2d 893, 898 (1955), Ms. Ray has not
alleged sufficient facts to show that Kingsdown has breached that duty here.
{52} Furthermore, Ms. Ray’s negligence claim is intertwined with, if not simply
a restatement of, the breach of contract claim that underlies each of her claims in this
action. As she states in her opposition brief, “[Kingsdown] undertook an active course
of conduct (Conspiracy, Interference with Contract, etc.) which they specifically
designed in an attempt to have Ms. Ray voluntarily resign her position with
Kingsdown. Such wrongful conduct is alleged throughout Ms. Ray’s Counterclaims
and Third-Party Complaint and gives rise for the cause of action for negligence as
stated hereinabove.” (Ray Opp. Br. p. 21.)
{53} Under North Carolina law, however, “[o]rdinarily, a breach of contract does
not give rise to a tort action by the promisee against the promisor.” North Carolina
State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 81, 240 S.E.2d 345, 350
(1978) (citations omitted). Where, as here, the alleged injury from a plaintiff’s alleged
negligence – here the termination of Ms. Ray’s employment and the failure to pay the
sums due under her Employment Agreement – is the same injury resulting from the
alleged breach of contract, an action in negligence will not lie. See, e.g., Kaleel
Builders, Inc. v. Ashby, 161 N.C. App. 34, 43, 587 S.E.2d 470, 476 (2003) (“[A] tort
action does not lie against a party to a contract who simply fails to properly perform
the terms of the contract, even if that failure to properly perform was due to the
negligent or intentional conduct of that party, when the injury resulting from the
breach is damage to the subject matter of the contract.”) (internal quotation marks
and citation omitted); 161 N.C. App. at 42, 587 S.E.2d at 476 (“[N]o negligence claim
[exists] where all rights and remedies have been set forth in the contractual
relationship”).
{54} For each of these reasons, Ms. Ray’s counterclaim for negligence should be
dismissed with prejudice.
ix. Civil Conspiracy
{55} To state a claim for civil conspiracy, Ms. Ray must adequately plead the
following elements: “(1) an agreement between two or more persons to do a wrongful
act; (2) an overt act committed in furtherance of the agreement; and (3) damage to
the plaintiff.” Pleasant Valley Promenade v. Lechmere, Inc., 120 N.C. App. 650, 657,
464 S.E.2d 47, 54 (1995).
{56} Ms. Ray premises her civil conspiracy claim here on her contention that “two
or more agents of [Kingsdown] conspired together to ruin the employment status of
Ms. Ray with [Kingsdown] for their own monetary gains or other benefits,” (Ray’s
Countercl. ¶ 28), and seeks to hold Kingsdown vicariously liable for this alleged
conspiracy. (Ray’s Countercl. ¶ 27.) Under well-established principles of North
Carolina law, however, allegations like Ms. Ray’s – claiming that a corporation has
conspired with its agents, officers, or employees – is “tantamount to accusing a
corporation of conspiring with itself.” State ex rel. Cooper v. Ridgeway Brands Mfg.,
LLC, 184 N.C. App. 613, 625, 646 S.E.2d 790, 799 (2007) (citation omitted). As such,
our courts have held that the intracorporate immunity doctrine applies to bar Ms.
Ray’s claim. Id. (“The doctrine of intracorporate immunity holds that, since at least
two persons must be present to form a conspiracy, a corporation cannot conspire with
itself, just as an individual cannot conspire with himself.”) (citation omitted); see also
Maurer v. SlickEdit, Inc., 2005 NCBC 1 ¶ 61 (N.C. Super. Ct. May 16, 2005),
http://www.ncbusinesscourt.net/opinions/2005%20NCBC%201.htm (“Because
[individual] defendants . . . are officers and directors of [the corporation], they are
entitled to intracorporate immunity against plaintiff’s conspiracy claim.”); Garlock v.
Hilliard, 2000 NCBC 11 ¶¶ 25–26 (N.C. Super. Ct. Aug. 22, 2000),
http://www.ncbusinesscourt.net/opinions/2000%20NCBC%2011.htm (to similar
effect).
{57} Further, although Ms. Ray correctly notes that an exception to the doctrine
of intracorporate immunity may exist if the agent of the corporation has an
“independent personal stake in achieving the corporation’s illegal objective,” Buschi
v. Kirven, 775 F.2d 1240, 1252 (4th Cir. 1985) (citing Greenville Publishing Co., v.
Daley Reflector, Inc., 496 F.2d 391, 399 (4th Cir. 1974)), this Court has previously
observed that “[t]his ‘independent personal stake’ exception must not be interpreted
in too broad a manner or it will consume the entire intracorporate immunity
doctrine.” Garlock, 2000 NCBC 11 ¶ 27 (quoting Selman v. Am. Sports Underwriters,
Inc., 697 F. Supp. 225, 238–39 (E.D. Va. 1988) (“Certainly, under the most permissive
interpretation of its language, an employee or agent of a corporation would always
meet the exception since he would surely have an independent personal stake in the
health and profitability of the corporation. Such an interpretation is overbroad.”).
Applying these principles here, the Court finds that Ms. Ray has alleged nothing more
than the “general and indirect corporate benefit always present under the
circumstances surrounding virtually any alleged corporate conspiracy.” Id.
(quotation omitted). As such, the Court concludes that the independent personal
stake exception does not apply and that Ms. Ray’s claim for civil conspiracy should be
dismissed with prejudice.
x. Indemnification
{58} Ms. Ray contends that she is entitled to indemnification under Article VI of
Kingsdown’s Bylaws because Kingsdown’s claims arise out of the performance of her
duties as an officer of the Company. (Ray’s Countercl. ¶¶ 73–79.) Kingsdown
contends in response that Ms. Ray is not entitled to indemnification under the
language of the Bylaws and applicable law, and, in any event, that Ms. Ray’s claim is
premature because Kingsdown “has not made the determination required for Ray to
be indemnified under the Bylaws.” (Pl.’s Br. Supp. Mot. Dismiss p. 20–21.)
{59} Counsel for the Hinshaws advised at the hearing that the Hinshaws have
asserted a counterclaim for indemnification, also under Article VI of Kingsdown’s
Bylaws, which Kingsdown has moved to dismiss but which the Court has not yet
scheduled for hearing or otherwise resolved. The parties agree that Ms. Ray’s and
the Hinshaws’ respective claims for indemnification raise similar legal issues and
that Kingsdown’s motions to dismiss these Counterclaims rest on similar arguments.
Accordingly, the Court determines, in its discretion, that it will promote judicial
efficiency and economy for the Court to defer its ruling until such time as the Court
may consider together Kingsdown’s motions to dismiss both Ms. Ray’s and the
Hinshaws’ counterclaims for indemnification. As a result, the Court dismisses Ms.
Ray’s indemnification claim without prejudice with leave for Ms. Ray to re-plead her
indemnification claim consistent with the requirements of N.C.R.C.P. Rules 8 and
10(b).
E. Individual Third-Party Defendants’ Motion to Dismiss Ray’s Third-Party
Complaint

{60} Ms. Ray has asserted against the Individual Third-Party Defendants many
of the allegations, and most of the claims, she has asserted against Kingsdown. The
Court will review the legal sufficiency of each claim in turn.10
i. Wrongful Termination
{61} Ms. Ray contends that the Individual Third-Party Defendants are liable to
her for their alleged actions in causing her alleged wrongful termination by
Kingsdown.11 North Carolina law is clear, however, that a wrongful discharge claim
may only be brought against the employer, and not, as the Individual Third-Party
Defendants were here – the employer’s agents. See Sides v. Duke Univ., 74 N.C. App.
331, 343, 328 S.E.2d 818, 826–27 (1985) (employee’s wrongful discharge claim against
individual defendants properly dismissed at 12(b)(6) stage because employee alleged
she had an employment agreement with the corporate defendant, not the
individuals); see also Johnson v. North Carolina, 905 F. Supp. 2d 712, 726 (W.D.N.C.
2012) (“Pursuant to established North Carolina law, a plaintiff may only bring a
wrongful discharge action against the plaintiff’s employer, not against the employer’s
agents (such as coworkers and supervisors).”) (internal quotation marks omitted);
Iglesias v. Wolford, 667 F. Supp. 2d 573, 590 (E.D.N.C. 2009) (“Under North Carolina
law, a plaintiff may only bring a wrongful-discharge action against the plaintiff’s
employer, not against the employer’s agent.”) (citation omitted); Hooper v. North
Carolina, 379 F. Supp. 2d 804, 814 (M.D.N.C. 2005) (“The North Carolina Court of
Appeals has held . . . that an action for wrongful discharge will lie only against an
employer, and not against individual employees.”) (citing Sides, 74 N.C. App. at 343,
328 S.E.2d at 826–27). Accordingly, Ms. Ray’s third-party claim for wrongful
discharge should be dismissed with prejudice.

10 The Individual Third-Party Defendants did not specifically raise Rule 8 or Rule 10(b) as a ground

for dismissal of Ms. Ray’s Third-Party Complaint.

11 Ms. Ray admits that Kingsdown was her employer. (Third-Party Complaint p. 2–3; Third-Party
Complaint ¶¶ 15, 22, 278.)
ii. Tortious Interference with Contract
{62} Our courts have set forth the elements of a claim for tortious interference
with contract as follows: (1) a valid contract between the plaintiff and a third person
that confers upon the plaintiff a contractual right against a third person; (2)
defendant knows of the contract; (3) defendant intentionally induced the third person
not to perform the contract; (4) defendant acted without justification; and (5)
defendant’s actions resulted in actual damage to the plaintiff. United Labs., Inc. v.
Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988). The purpose of the
wrongful interference with contract tort is to afford relief “against an outsider who
knowingly, intentionally and unjustifiably induces one party to a contract to breach
it to the damage of the other party.” Childress v. Abeles, 240 N.C. 667, 674, 84 S.E.2d
176, 181 (1954) (emphasis added) (citations omitted).
{63} Ms. Ray’s claim against the Third-Party Defendants asserts that these
parties, all acting in their capacities as officers and directors of Kingsdown,
committed various wrongful acts to terminate her Employment Agreement with
Kingsdown. North Carolina law is clear, however, that a corporation’s officers and
directors acting on the corporation’s behalf are not “outsiders” to the corporation’s
contracts and thus generally cannot be held liable for tortious interference with the
corporation’s contracts. See, e.g., Wagoner, 113 N.C. App. at 587, 440 S.E.2d at 124
(“We initially note that plaintiff cannot maintain an action against the Board or
Lassiter for malicious interference of contract because the Board and Lassiter, as
superintendent of the Board, are parties to the contract.”) (citations omitted). See
also Palles v. Hatteras Inv. Partners, LLC, 08 CVS 14393 ¶¶ 39–41 (N.C. Super. Ct.
July 27, 2009) (managing member and president of LLC cannot be liable for tortious
interference with an LLC’s employee’s contract with LLC because the managers are
not “outsiders” to the contract).
{64} Our courts have recognized a narrow exception to this general rule, holding
that someone who is not an outsider to the contract may be liable for interference
with that contract if he acted “maliciously.” Smith v. Ford Motor Co., 289 N.C. 71,
221 S.E.2d 282 (1976). “It is not enough, however, to show that a defendant acted
with actual malice; the plaintiff must forecast evidence that the defendant acted with
legal malice. A person acts with legal malice if he does a wrongful act or exceeds his
legal right or authority in order to prevent the continuation of the contract between
the parties.” Varner v. Bryan, 113 N.C. App. 697, 702, 440 S.E.2d 295, 298 (1994)
(citations omitted).
{65} Here, however, Ms. Ray’s allegations make plain that the actions of the
Individual Third-Party Defendants were taken in connection with the exercise of
their duties as officers and directors of the Company. As such, Ms. Ray has not pled
that the Individual Third-Party Defendants acted with “legal malice,” and the narrow
exception discussed above does not apply to salvage Ms. Ray’s claim. See, e.g.,
Childress, 240 N.C. at 667, 84 S.E.2d at 176 (“If the outsider has a sufficient lawful
reason for inducing the breach of contract, he is exempt from liability for so doing, no
matter how malicious in actuality his conduct may be.”). Accordingly, the Court
concludes that Ms. Ray’s third-party claim for tortious interference with contract
should be dismissed with prejudice.
iii. Constructive Fraud
{66} Ms. Ray broadly claims that the Individual Third-Party Defendants
breached a fiduciary duty to her by terminating her Employment Agreement.
Although Ms. Ray alleges in conclusory fashion that she had a “special relationship
of trust” with each Individual Third-Party Defendant, (e.g., Third-Party Compl. ¶ 37),
and that each Individual Third-Party Defendant had “a position of dominant
influence,” (e.g., Third-Party Compl. ¶ 40), Ms. Ray has failed to allege facts showing
a legal relationship or any special circumstances that would create a fiduciary duty
running to her from any Third-Party Defendant under North Carolina law. See, e.g.,
Dalton, 353 N.C. at 651, 548 S.E.2d at 708 (holding that “the relation of employer and
employee is [generally] not one of those regarded as confidential”) (quotation
omitted); Highland Paving Co. v. First Bank, 742 S.E.2d 287, 292–93 (2013)
(affirming dismissal of constructive fraud claim where plaintiff’s conclusory
assertions alleged that it “placed special trust and confidence” in defendant but failed
to identify facts showing the existence of a fiduciary relationship). As such, Ms. Ray’s
third-party claim for constructive fraud should be dismissed with prejudice.
iv. Intentional Infliction of Emotional Distress; Unfair and Deceptive Trade
Practices – Violation of N.C. Gen. Stat. § 75-1.1; Negligence; and Civil
Conspiracy

{67} Ms. Ray asserts the same general conduct in support of her third-party
claims for intentional infliction of emotional distress, unfair and deceptive trade
practices, negligence, and civil conspiracy as she does in support of these same claims
against Kingsdown. Accordingly, for the same reasons set forth in the Court’s
discussion of Ms. Ray’s claims against Kingsdown, the Court concludes that Ms. Ray’s
third-party claims for intentional infliction of emotional distress, unfair and
deceptive trade practices, negligence, and civil conspiracy should be dismissed with
prejudice.
v. Defamation
{68} Ms. Ray asserts a third-party defamation claim against only Mr. Hood and
alleges the same general conduct in support of this claim as she does in support of
that same claim against Kingsdown. Accordingly, the Court concludes, for the same
reasons set forth in the Court’s discussion of Ms. Ray’s defamation claim against
Kingsdown, that Ms. Ray’s third-party claim for defamation against Mr. Hood should
be dismissed with prejudice to the extent the claim is based on statements made in
connection with the EEOC investigation arising out of her age discrimination charge
or in Kingsdown’s Amended Complaint. The Court further concludes that Ms. Ray’s
third-party claim against Mr. Hood for defamation should be dismissed without
prejudice to the extent it is based on allegedly defamatory statements in local
newspapers and in Furniture Today, with leave for Ms. Ray to re-plead her claim
consistent with N.C.R.C.P. Rules 8 and 10.
F. Tuggle Duggins’ Motion to Dismiss Ray’s Third-Party Complaint

{69} Ms. Ray has asserted against Tuggle Duggins many of the same allegations,
and most of the same claims, she has asserted against Kingsdown and all of the
allegations and claims she has asserted against the Individual Third-Party
Defendants. She bases her third-party claims against Tuggle Duggins on the alleged
conduct of Third-Party Defendant Tumlin, a partner in the Firm, and asserts that
Tuggle Duggins is vicariously liable for Mr. Tumlin’s conduct. As a result, the Court’s
analysis and conclusions concerning the Individual Third-Party Defendants’ Motion
to Dismiss Third-Party Complaint applies with equal force to Tuggle Duggins’ Motion
to Dismiss Third-Party Complaint. The Court will nonetheless address the specific
claims, as necessary, below.
i. Tortious Interference with Contract
{70} The Court’s analysis of Ms. Ray’s third-party claim for tortious interference
with contract against the Individual Third-Party Defendants applies equally to Ms.
Ray’s third-party tortious interference claim against Tuggle Duggins. In particular,
Mr. Tumlin, as Kingsdown’s attorney, was not an outsider to Ms. Ray’s Employment
Agreement, and thus, liability for tortious interference with that contract, either
directly or vicariously, cannot be extended to Mr. Tumlin or his Firm based on his
conduct. See, e.g., Rhodes, Inc. v. Morrow, 937 F. Supp. 1202, 1216 (M.D.N.C. 1996)
(an “attorney should not be considered an ‘outsider’ for the purposes of applying the
elements of [tortious interference with contract under North Carolina law]. Instead,
the attorney, as a representative of the client, is the same entity as the client within
the elements of this tort”). As a result, Ms. Ray’s third-party claim for tortious
interference with contract against Tuggle Duggins should be dismissed with
prejudice. Id. (“This tort, if applied to an attorney offering advice to a client on the
validity of a contract or the necessity of complying with an agreement, would so
restrict that attorney's ability to counsel the client as to make application of the tort,
in that instance, against public policy.”).
ii. Constructive Fraud
{71} The Court’s analysis of Ms. Ray’s third-party claim for constructive fraud
against the Individual Third-Party Defendants applies equally to Ms. Ray’s third-
party constructive fraud claim against Tuggle Duggins.
{72} In addition, as noted previously, under North Carolina law, “an essential
element of constructive fraud is that defendants sought to benefit themselves in the
transaction.” Sterner, 159 N.C. App. at 631, 583 S.E.2d at 674. Here, Ms. Ray alleges
that Kingsdown paid legal fees to Mr. Tumlin and Tuggle Duggins, and that these
payments financially benefitted Mr. Tumlin and the Firm. (Third-Party Compl. ¶
302). North Carolina courts, however, have consistently held that payment of a fee
for work is not an “improper benefit” and cannot serve as the basis for a claim of
constructive fraud. See NationsBank of N.C. v. Parker, 140 N.C. App. 106, 114, 535
S.E.2d 597, 602 (2000) (holding that “payment of a fee to a defendant for work done
by that defendant does not by itself constitute sufficient evidence that the defendant
sought his own advantage”); see also Clay v. Monroe, 189 N.C. App. 482, 488, 658
S.E.2d 532, 537 (2008) (requiring the plaintiff to allege “that the benefit sought was
more than . . . payment of a fee to a defendant for work it actually performed”)
(internal quotation marks omitted) (emphasis in original). For this additional reason,
therefore, Ms. Ray’s third-party claim for constructive fraud against Tuggle Duggins
should be dismissed with prejudice.
iii. Unfair Trade and Deceptive Trade Practices – Violation of N.C. Gen. Stat. §
75-1.1

{73} The Court’s analysis of Ms. Ray’s third-party claim for alleged violation of
N.C. Gen. Stat. § 75-1.1 against the Individual Third-Party Defendants applies
equally to Ms. Ray’s third-party unfair and deceptive trade practices claim against
Tuggle Duggins.
{74} In addition, as noted previously, N.C. Gen. Stat. § 75-1.1 targets “unfair or
deceptive acts or practices in or affecting commerce[.]” N.C. Gen. Stat. § 75-1.1(a)
(2014). In defining the “in or affecting commerce” requirement, our legislature has
provided that “‘commerce’ includes all business activities, however denominated, but
does not include professional services rendered by a member of a learned profession.”
N.C. Gen. Stat. § 75-1.1(b) (2014). “In order for the learned profession exemption to
apply, a two-part test must be satisfied. First, the person or entity performing the
alleged act must be a member of a learned profession. Second, the conduct in question
must be a rendering of professional services.” Reid v. Ayers, 138 N.C. App. 261, 266,
531 S.E.2d 231, 235 (2000) (citations omitted).
{75} Here, Ms. Ray has pled that Mr. Tumlin and Tuggle Duggins are attorneys,
(Third-Party Compl. ¶¶ 11–12), and thus they are members of a learned profession.
Reid, 138 N.C. App. at 266, 531 S.E.2d at 235 (“[A] law firm and its attorneys are
members of a learned profession.”). Moreover, the conduct of Mr. Tumlin and Tuggle
Duggins that Ms. Ray alleges in support of her unfair trade practices claim involves
the sort of professional services that are “often carried out by law firms or attorneys.”
Id.; (See, e.g., Third-Party Complaint ¶ 305 (alleging Mr. Tumlin, as “legal advisor,”
advised Board “to deny [Ms. Ray’s] employment contract”), id. p. 7 (alleging Mr.
Tumlin served as “legal advisor” to the Board).) As a result, the Court concludes that
the learned profession exemption applies to bar Ms. Ray’s claim based on the Firm’s
alleged conduct and, for this additional reason, Ms. Ray’s claim under N.C. Gen. Stat.
§ 75-1.1 should be dismissed with prejudice.12
iv. Negligence
{76} The Court’s analysis of Ms. Ray’s third-party claim for alleged negligence
against the Individual Third-Party Defendants applies equally to Ms. Ray’s third-
party negligence claim against Tuggle Duggins.
{77} In addition, the gravamen of Ms. Ray’s allegations in support of her
negligence claim against Tuggle Duggins is that Ms. Ray should recover for Tuggle
Duggins’ alleged negligence in its representation of Kingsdown. North Carolina
courts, however, allow a non-client like Ms. Ray to recover for the negligence of an
attorney in only rare and limited circumstances. See, e.g., Piraino Bros., LLC v. Atl.
Fin. Group, Inc., 211 N.C. App. 343, 349, 712 S.E.2d 328, 333 (2011) (“The Courts of
this State have held attorneys liable for actions that impact non-client third parties

12 Pursuant to N.C. Gen. Stat. § 75-16.1, the “presiding judge may, in his discretion” award a
reasonable attorney fee if “[t]he party instituting the [N.C. Gen. Stat. 75-1.1] action knew, or should
have known, the action was frivolous and malicious.” See, e.g., McKinnon v. CV Indus., 745 S.E.2d
343, 350 (N.C. Ct. App. 2013) (“A claim is frivolous if a proponent can present no rational argument
based upon the evidence or law in support of [it]. A claim is malicious if it is wrongful and done
intentionally without just cause or excuse or as a result of ill will.”) (internal citations and quotation
marks omitted). Although in this case Defendant Ray’s assertion of a claim under N.C. Gen. Stat. §
75-1.1 borders on the frivolous, the Court, in its discretion, does not find that Defendant Ray’s claim
was malicious, and thus, an award of attorneys’ fees against Defendant Ray is not warranted under
these specific circumstances. As a result, the Court concludes that Tuggle Duggins’ Motion for
Attorney’s Fees should be denied.
in only a few limited situations . . . .”). None of the limited circumstances where such
a recovery has been permitted are remotely similar to Ms. Ray’s claim here, which
arises from Mr. Tumlin and the Firm providing legal advice as outside corporate
counsel to Kingsdown in connection with the termination of Ms. Ray’s Employment
Agreement. Cf. Title Ins. Co. v. Smith, Debnam, Hibbert & Pahl, 119 N.C. App. 608,
459 S.E.2d 801 (1995) (duty applies where the attorney renders a title opinion upon
which the non-client is entitled to rely); Jenkins v. Wheeler, 69 N.C. App. 140, 316
S.E.2d 354 (1984) (duty applies where there is a complete unity of interests between
the attorney’s client and the non-client). For this additional reason, therefore, the
Court concludes Ms. Ray’s third-party claim for negligence against Tuggle Duggins
should be dismissed with prejudice.
v. Wrongful Termination; Intentional Infliction of Emotional Distress
{78} The Court’s analysis of Ms. Ray’s third-party claims for alleged wrongful
termination and alleged intentional infliction of emotional distress against the
Individual Third-Party Defendants applies equally to Ms. Ray’s third-party claims
for alleged wrongful termination and alleged intentional infliction of emotional
distress against Tuggle Duggins. As such, Ms. Ray’s third-party claims for alleged
wrongful termination and alleged intentional infliction of emotional distress against
Tuggle Duggins should be dismissed with prejudice.
vi. Violation of N.C.R.C.P. Rules 8 and 10(b)
{79} Similar to Kingsdown’s criticisms of Ms. Ray’s Counterclaims, Tuggle
Duggins contends that Ms. Ray’s Third-Party Complaint should be dismissed under
Rule 8 because it is voluminous and incomprehensible, and under Rule 10(b) because
it does not contain separately-numbered paragraphs in its lengthy background
section, as required. Because the Court has determined that each of the claims in Ms.
Ray’s Third-Party Complaint against Tuggle Duggins should be dismissed with
prejudice, the Court declines to address the Firm’s arguments for dismissal without
prejudice under Rules 8 and 10(b).
III.

CONCLUSION

{80} Based on the foregoing, the Court hereby:
a. DENIES Ray’s Rule 12(b)(3) Motion as moot;
b. DENIES Ray’s Rule 12(b)(6) Motion;
c. DENIES Ray’s Rule 12(e) Motion for More Definite Statement;
d. GRANTS Kingsdown’s Motion to Dismiss the Counterclaims of
Defendant Anne Ray, dismisses with prejudice Defendant Ray’s
Counterclaims for blacklisting in employment under N.C. Gen. Stat.
§ 14-355, intentional infliction of emotional distress, constructive
fraud, unfair and deceptive trade practices under N.C. Gen. Stat. §
75-1.1, negligence, and civil conspiracy, and dismisses without
prejudice Defendant Ray’s Counterclaims for breach of contract,
declaratory judgment, wrongful termination, indemnification, and
defamation (to the extent the defamation claim relates to alleged
statements made by Kingsdown in local newspapers and in
Furniture Today);
e. GRANTS the Individual Third-Party Defendants’ Motion to Dismiss
Third-Party Complaint, dismisses with prejudice Defendant Ray’s
third-party claims for wrongful termination, tortious interference
with contract, constructive fraud, intentional infliction of emotional
distress, unfair and deceptive trade practices under N.C. Gen. Stat.
§ 75-1.1, negligence, and civil conspiracy, and dismisses without
prejudice Defendant Ray’s third-party claim against Mr. Hood for
defamation (to the extent the claim relates to alleged statements
made by Mr. Hood in local newspapers and in Furniture Today);
f. GRANTS Third-Party Defendant Tuggle Duggins’ Motion to Dismiss
Third-Party Complaint and dismisses with prejudice Defendant
Ray’s third-party claims against Tuggle Duggins in their entirety;
and
g. DENIES Tuggle Duggins’ Motion for Attorney’s Fees.

SO ORDERED, this the 25th day of March, 2015.