Estevez v. C&S Com., LLC

Estevez v. C&S Com., LLC, 2025 NCBC 73.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
UNION COUNTY 25CV001966-890

JULIAN ESTEVEZ and OSCAR
ESTEVEZ,

Plaintiffs,
ORDER AND OPINION ON
v. DEFENDANTS’ PARTIAL MOTION TO
DISMISS
C&S COMMERCE, LLC and
CAMERON CHAD CLAY,
Individually and as Sole Manager of
C&S COMMERCE, LLC,

Defendants.

1. This matter is before the Court on Defendants’ Rule 12(b)(6) motion to

dismiss Plaintiffs’ second cause of action for breach of fiduciary duty against

defendant Cameron Chad Clay and Plaintiffs’ request to pierce the corporate veil of

defendant C&S Commerce, LLC. (ECF No. 12).

2. Having considered the complaint, the arguments of counsel, and other

relevant matters, the Court hereby GRANTS the motion for the reasons set forth

below.

Vilmer Caudill, PLLC, by Brittney Slade and Sophia Pappalardo, for
Plaintiffs Oscar and Julian Estevez.

Alexander Ricks, PLLC, by Miller F. Capps and Benjamin Leighton, for
Defendants C&S Commerce LLC and Cameron Chad Clay.

Houston, Judge.
I. BACKGROUND

3. The Court does not make findings of fact on a Rule 12(b)(6) motion to dismiss

for failure to state a claim. Instead, for background, the Court summarizes the

complaint’s factual allegations that are relevant to the Court’s decision.

4. Plaintiffs Julian and Oscar Estevez are brothers who were previously

employed by and held managerial positions at Warp Development Corporation. (ECF

No. 11, ¶¶ 1-2, 7–8).

5. Around October 2023, Plaintiffs, defendant Cameron Clay, and Barbara

Chambers founded defendant C&S Commerce, LLC (a North Carolina LLC) to

purchase Warp Development’s assets and to carry on Warp Development’s business,

which they ultimately did. (ECF No. 11, ¶¶ 9–10, 14).

6. With C&S, Plaintiffs and defendant Clay retained the same employment

roles that they previously held with Warp Development. (ECF No. 11, ¶ 15).

7. Around 24 January 2024, approximately three months later, Plaintiffs,

Clay, and Chambers signed and entered into an operating agreement for C&S. (ECF

No. 11, ¶ 11 & Ex. A). Clay signed the operating agreement as both the manager and

a member of C&S, while Plaintiffs and Chambers all signed as members of C&S.

(ECF No. 11, Ex. A at 30).

8. Under the operating agreement, Clay is the majority owner of C&S with a

seventy percent (70%) ownership interest, while Plaintiffs collectively own twenty

percent (20%), and Chambers owns the remaining ten percent (10%) of the company.

(ECF No. 11, ¶ 13). Clay is designated as the sole manager of C&S, with
full and complete authority, power, and discretion to manage and
control the business of the Company, to make all decisions
regarding those matters, and to perform any and all other acts
customary or incident to the management of the Company’s
business (including without limitation hiring/firing of any/all
employees, employee wages/salaries), except only as to those acts
as to which approval by the Members is expressly required by the
Articles of Organization, this Agreement, the Act, or other
applicable law.

(ECF No. 11, Ex. A § 3.1).

9. Clay also has authority to transfer the position of manager, unilaterally

dissolve C&S, and amend or waive certain terms of the operating agreement. (ECF

No. 11, Ex. A §§ 3.7, 10.1(b), and 11.5).

10. As part of C&S’s operating agreement, Plaintiffs, Clay, and Chambers

agreed that the “Manager” and the “Majority Member” (i.e., Clay) would not owe a

fiduciary duty to “Minority Members” (i.e., Plaintiffs and Chambers), and “the

Minority Members waive[d], renounce[d], release[d] and disclaim[ed] the right to file,

bring, or maintain an action for breach of fiduciary duty against” the Manager, the

Majority Member, and “his heirs successors or assigns.” (ECF No. 11, Ex. A §§ 3.5.1,

4.8).

11. The operating agreement also contains provisions that:

a. prohibit Minority Members from performing banking transactions for

C&S and exclude them from access to C&S’s bank accounts, (ECF No.

11, Ex. A § 4.9);
b. require quarterly financial meetings at which Minority Members are to

be provided with financial statements concerning the prior quarter,

(ECF No. 11, Ex. A § 4.10);

c. authorize the transfer of membership interests in C&S (including

Plaintiffs’ interests) under specific and limited circumstances, (see

generally ECF No. 11, Ex. A arts. VIII, IX);

d. permit the immediate transfer and forfeiture of a Minority Member’s

interest in C&S upon termination of the Minority Member’s employment

or conviction of a felony, (ECF No. 11, Ex. A art. IXA); and

e. permit termination of plaintiff Oscar Estevez’s membership interest in

C&S if he fails to obtain U.S. citizenship within four (4) years after “the

purchase of the assets of Warp Development Corporation” or

immediately upon his deportation from the country, (ECF No. 11, Ex. A

art. IXB).

(ECF No. 11, ¶ 37(a)-(e)).

12. Between January 2024 and the filing of Plaintiffs’ complaint, on at least

three occasions, Clay asked Plaintiffs to sell him their respective minority interests

in C&S. (ECF No. 11, ¶¶ 17–20, 24–25). After Plaintiffs declined to sell their interests

the first two times, Clay purportedly told them that he would “make sure their

ownership in the Company was worth nothing.” (ECF No. 11, ¶ 21).
13. In furtherance of that statement, Clay allegedly made numerous negative

comments about Plaintiffs to other employees of C&S and encouraged employees

under Plaintiffs’ supervision “not to listen to them.” (ECF No. 11, ¶¶ 22–23).

14. In early 2025, as part of his third attempt to purchase Plaintiffs’ interests

in C&S, Clay (i) issued to Plaintiffs a proposed membership interest redemption

agreement, valuing Plaintiffs’ respective individual ten percent (10%) membership

interests at $25,000 each ($50,000 total), and (ii) fired Plaintiffs––without cause and

without an eighty percent (80%) vote of C&S’s membership. (ECF No. 11, ¶¶ 25–26,

30, 33–36 & Ex. B).

15. In the course of terminating Plaintiffs’ employment, Clay barred Plaintiffs

from C&S’s property, insisting that they sign the membership interest redemption

agreement and return it by mail. (ECF No. 11, ¶¶ 27–28).

16. Though Plaintiffs requested copies of the operating agreement, amendments

to the operating agreement, and access to other books and records maintained by

C&S related to the valuation of Plaintiffs’ interests in the company, Clay refused to

permit Plaintiffs to inspect the company’s books and records, declined to negotiate

with Plaintiffs, and instead withdrew the proposed membership interest redemption

agreement. (ECF No. 11, ¶¶ 25–36 & Ex. C).

17. Plaintiffs assert that Clay’s and C&S’s actions were contrary to the terms of

the operating agreement, that no basis existed for a for-cause termination, and that

Clay otherwise was not authorized to terminate their employment or cause forfeiture
of their shares in either his position as Manager or his position as Majority Member.

(ECF No. 11, ¶¶ 38–47).

18. Plaintiffs filed suit on 4 April 2025. (ECF Nos. 3, 11). In their complaint,

Plaintiffs assert causes of action for (i) breach of contract against Clay and C&S, (ii)

breach of fiduciary duty against Clay, (iii) unjust enrichment against Clay and C&S,

and (iv) a declaratory judgment concerning certain of Plaintiffs’, Clay’s, and

Chambers’ respective rights and obligations under the operating agreement. (See

generally ECF No. 11). Plaintiffs also seek injunctive relief, an award of punitive

damages, and the remedy of piercing the corporate veil. (See generally ECF No. 11).

19. Defendants filed a Rule 12(b)(6) motion to dismiss on 25 June 2025, seeking

dismissal of only Plaintiffs’ request for the remedy of piercing the corporate veil and

Plaintiffs’ cause of action for breach of fiduciary duty. (ECF No. 12).

20. The motion has been fully briefed and is ripe for disposition.

II. ANALYSIS

21. When considering a Rule 12(b)(6) motion, the Court must determine

“whether the allegations of the complaint, if treated as true, are sufficient to state a

claim upon which relief can be granted under some legal theory.” Corwin v. Brit. Am.

Tobacco PLC, 371 N.C. 605, 615 (2018) (citation omitted).

22. The Court treats the well-pleaded factual allegations as true and views

them “in the light most favorable to the non-moving party.” Sykes v. Health Network

Sols., Inc., 372 N.C. 326, 332 (2019) (citation omitted); Christenbury Eye Ctr., P.A. v.

Medflow, Inc., 370 N.C. 1, 5 (2017). The Court must determine “whether, as a matter
of law, the allegations of the complaint, treated as true, are sufficient to state a claim

upon which relief can be granted under some [recognized] legal theory.” Forsyth

Mem’l Hosp., Inc. v. Armstrong World Indus., 336 N.C. 438, 442 (1994) (quoting Lynn

v. Overlook Dev., 328 N.C. 689, 692 (1991)).

23. Further, the Court “may properly consider documents which are the subject

of a plaintiff’s complaint and to which the complaint specifically refers” regardless of

the party presenting them. Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60

(2001) (citation omitted). 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)

(citations omitted).

24. Dismissal on a Rule 12(b)(6) motion is proper if “(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, 371 N.C. at

615 (citations omitted).

25. With their motion, defendants Clay and C&S have moved to dismiss

Plaintiffs’ request for the equitable remedy of piercing the corporate veil and their

second cause of action for breach of fiduciary duty. The Court addresses each

argument in turn.
a. Piercing the Corporate Veil

26. While Plaintiffs (appropriately) do not assert piercing the corporate veil as

a standalone cause of action, 1 they request as a remedy that the Court “pierce the

corporate veil of Defendant C&S Commerce, LLC and hold Defendant Clay liable for

all damages arising from the misconduct alleged” in the complaint. (ECF No. 11,

¶ 55).

27. Under North Carolina law, “[a] person who is an interest owner, manager,

or other company official is not liable for the obligations of the LLC solely by reason

of being an interest owner, manager, or other company official.” N.C. Gen. Stat.

§ 57D–3–30.

28. However, “a member of a limited liability company, like shareholders and

directors of corporations, may be held individually liable for the company’s obligations

through the doctrine of piercing the corporate veil.” Est. of Hurst ex rel. Cherry v.

Moorehead I, LLC, 228 N.C. App. 571, 576 (2013) (citing prior version of N.C. Gen.

Stat. § 57D–3–30 and applicable case law).

29. Piercing the corporate veil is an equitable remedy that disregards the

corporate form “to impose legal liability for a[n entity’s] obligations, or for torts

committed by the [entity], upon some other company or individual that controls and

dominates” it. Green, 367 N.C. at 145 (citation omitted).

1 “[P]iercing the corporate veil is an ancillary equitable remedy and not an independent cause

of action.” W&W Partners, Inc. v. Ferrell Land Co., LLC, 2018 NCBC LEXIS 52, at *21–22
(N.C. Super. Ct. May 22, 2018) (citing Green v. Freeman, 367 N.C. 136, 146 (2013)).
30. “Like lightning, [the remedy of piercing] is rare and severe.” Gallaher v.

Ciszek, 2022 NCBC LEXIS 131, at *33 (N.C. Super. Nov. 4, 2022) (quoting S. Shores

Realty Servs. v. Miller, 251 N.C. App. 571, 583 (2017)). As a result, piercing “is a

remedy that ‘should be invoked only in an extreme case where necessary to serve the

ends of justice.’” W&W Partners, 2018 NCBC LEXIS 52, at *22 (quoting Dorton v.

Dorton, 77 N.C. App. 667, 672 (1985)).

31. The veil-piercing inquiry is a multi-step process. First, “[t]he aggrieved

party must show that ‘the corporation is so operated that it is a mere instrumentality

or alter ego of the sole or dominant shareholder and a shield for his activities in

violation of the declared public policy or statute of the State.” Green, 367 N.C. at 145

(2013) (quoting Henderson v. Sec. Mortg. & Fin. Co., 273 N.C. 253, 260 (1968)) (noting

also that “[e]vidence upon which we have relied to justify piercing the corporate veil

includes inadequate capitalization, noncompliance with corporate formalities, lack of

a separate corporate identity, excessive fragmentation, siphoning of funds by the

dominant shareholder, nonfunctioning officers and directors, and absence of

corporate records” (citation omitted)); Loray Master Tenant, LLC v. Foss N.C. Mill

Credit 2014 Fund I, LLC, 2022 NCBC LEXIS 1, at *16-17 (N.C. Super. Ct. Jan. 11,

2022).

32. “It is not the presence or absence of any particular factor that is

determinative. Rather, it is a combination of factors which, when taken together with

an element of injustice or abuse of corporate privilege, suggest that the corporate

entity attacked had 'no separate mind, will or existence of its own' and was therefore
the 'mere instrumentality or tool' of the dominant [shareholder].” W&W Partners,

2018 NCBC LEXIS 52, at *24–25 (quoting Atl. Tobacco Co. v. Honeycutt, 101 N.C.

App. 160, 164-165 (1990)). Then,

[a]fter the fact finder determines that the corporate veil should be
pierced—in other words, that the corporate identity should be
disregarded—the next inquiry is whether a noncorporate
defendant may be held liable for her personal actions as an officer
or director. To succeed in this inquiry, plaintiffs must present
evidence of three elements:

(1) Control, not mere majority or complete stock control,
but complete domination, not only of finances, but of policy
and business practice in respect to the transaction attacked
so that the corporate entity as to this transaction had at
the time no separate mind, will or existence of its own; and

(2) Such control must have been used by the defendant to
commit fraud or wrong, to perpetrate the violation of a
statutory or other positive legal duty, or a dishonest and
unjust act in contravention of [a] plaintiff's legal rights;
and

(3) The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.

Green, 367 N.C. at 145–46 (quoting Glenn v. Wagner, 313 N.C. 450, 455 (1985)); Nicks

v. Nicks, 241 N.C. App. 487, 497 (2015); Tiller v. Phillips, 2025 NCBC LEXIS 141, at

*31 (N.C. Super. Ct. Oct. 15, 2025).

33. Because limited liability companies are permitted by statute and their

operating agreements to deviate from or dispense with many of the formalities

generally observed by corporations, the factors used in analyzing a request to pierce

the corporate veil “may be weighed differently” when considering whether to pierce
the veil of an LLC. Insight Health Corp. v. Marquis Diagnostic Imaging of N.C., LLC,

2018 NCBC LEXIS 56, at *25 (N.C. Super. Ct. Feb. 24, 2017) (citation omitted).

34. While Plaintiffs here allege that Clay failed to observe corporate formalities

and dominated and controlled C&S such that C&S had no independent identity. (ECF

No. 11, ¶¶ 48–55), “the totality of Plaintiffs’ allegations in support of their veil-

piercing theory consists of a rote recitation of the factors enunciated by North

Carolina's appellate courts.” W&W Partners, 2018 NCBC LEXIS 52, at *25.

35. Plaintiffs assert that Clay “owns, controls, and dominates” C&S; that C&S

“operated as a mere alter ego of Defendant Clay, lacking independence in decision-

making and financial operations”; that Clay “exercised complete control over the

Company, failed to observe corporate formalities, and used the Company to advance

his own personal financial interests at the expense of” Plaintiffs; and that C&S “was

so dominated by Defendant Clay that it lacks a separate legal identity.” (ECF No. 11,

¶¶ 49–53).

36. However, Plaintiffs largely do not plead facts to support these conclusory

allegations or to detail how Clay allegedly dominated C&S, operated the company as

a mere instrumentality or alter ego, or otherwise failed to observe corporate

formalities.

37. The primary example specifically identified by Plaintiffs is their contention

that “Defendant Clay did not follow the Operating Agreement’s terms when firing

Julian from Defendant Company nor did he follow the Operating Agreement’s terms

when firing Oscar from Defendant Company.” (ECF No. 11, ¶ 51).
38. However, a defendant’s failure to follow the terms of an operating agreement

(itself a contract) “is not enough” by itself to invoke the remedy of piercing. Kerry

Bodenhamer Farms, LLC v. Nature’s Pearl Corp., 2018 NCBC LEXIS 84, at *11–12

(N.C. Super. Ct. Aug. 15, 2018). Rather, “[o]ur Court of Appeals has rejected the

argument that a breach of contract, ‘in itself, can amount to a wrongdoing to meet the

second element of the [instrumentality] test.’” Id. at *11 (quoting Best Cartage, Inc.

v. Stonewall Packaging, LLC, 219 N.C. App. 429, 440 (2012)). There generally must

be “compelling factors apart from the breach itself,” such as “some indicia of

fraudulent or inequitable conduct: a showing, for example, that the puppet entity was

created for the purpose of entering into the relevant contract or used as a means to

unjustly insulate another from liability.” Id. at *12–13 (citations omitted).

39. Plaintiffs’ allegation that Clay failed to follow the specific procedural terms

of the operating agreement, while potentially providing the basis for a breach of

contract claim, does not rise to the level of “noncompliance with corporate formalities”

or “lack of a separate corporate identity,” such as commingling funds, lack of

recordkeeping, or similar issues, and there are otherwise no allegations of inadequate

capitalization, excessive fragmentation, siphoning of funds, or nonfunctioning

executives or officers. Green, 367 N.C. at 145 (citation omitted).

40. Plaintiffs in turn rely heavily on Clay’s majority ownership of C&S and,

thus, his controlling interest for voting purposes, seeking to have the Court infer

instrumentality or alter ego status. (ECF No. 15 at 6–12). But “[s]ole or common

ownership of a company does not, by itself, establish complete domination and
control; there must be a showing that the entity lacks a ‘separate mind, will or

existence of its own.’” Tiller, 2025 NCBC LEXIS 141, at *31–32 (quoting Harris v.

Ten Oaks Mgmt., LLC, 2022 NCBC LEXIS 62, at *6 (N.C. Super. Ct. June 20, 2022));

Cold Springs Ventures, LLC v. Gilead Scis., Inc., 2015 NCBC LEXIS 1, at *17–22,

33–34 (N.C. Super. Ct. Jan. 6, 2015) (determining that deciding to dissolve the entity

and directing the “day-to-day” operations of the entity, without more, were not

enough to justify piercing).

41. Ultimately, Plaintiffs’ rote recitations and contract-based allegations do not

provide sufficient non-conclusory allegations to maintain a request for piercing the

veil of C&S, and the Court determines that Defendants’ motion to dismiss that

request should be GRANTED and that Plaintiffs’ request to pierce the corporate veil

should be DISMISSED WITHOUT PREJUDICE. 2 See generally, e.g., W&W

Partners, 2018 NCBC LEXIS 52; Estate of Chambers v. Vision Two Hospitality Mgmt.,

LLC, 2013 NCBC 49 (N.C. Super. Ct. Nov. 21, 2013); Blue Ridge Pediatric &

Adolescent Med., Inc. v. First Colony Healthcare, LLC, 2012 NCBC LEXIS 52 (N.C.

Super. Ct. Oct. 3, 2012).

b. Breach of Fiduciary Duty

42. Defendants further seek dismissal of Plaintiffs’ second cause of action for

breach of fiduciary duty.

2 “The decision to dismiss an action with or without prejudice is in the discretion of the trial

court[.]” First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191 (2013) (citation omitted). The
Court determines, in the exercise of its discretion, that denial and dismissal of Plaintiffs’
request for the remedy of pierce should be without prejudice in the event that discovery
uncovers facts sufficient to support factual allegations sufficient to plead and warrant such
a drastic remedy.
43. As the basis for their breach of fiduciary duty cause of action, Plaintiffs

allege that Clay owes “fiduciary duties” to Plaintiffs and that he violated those duties

by (i) failing to follow the operating agreement in connection with the attempted

purchase of Plaintiffs’ interest in the company and firing of Plaintiffs, (ii) failing to

follow the operating agreement’s provisions with respect to terminating Plaintiffs’

ownership interest in the company, (iii) refusing to provide “financial information” to

Plaintiffs when requested, and (iv) “[e]ngaging in self-dealing.” (ECF No. 11, ¶ 68).

Plaintiffs also assert that “fiduciary duties, like the duty of good faith and fair

dealing, cannot be eliminated entirely through the Operating Agreement’s terms.”

(ECF No. 11, ¶ 71).

44. Defendants contend, among other things, that Clay owed no actionable

fiduciary duties to Plaintiffs and, alternatively, that any fiduciary duties that he

might have owed were waived by the parties’ contractual operating agreement.

i. Waiver of Fiduciary Duty Claims

45. “To establish a claim for breach of fiduciary duty, a plaintiff must show that:

(1) the defendant owed the plaintiff a fiduciary duty; (2) the defendant breached that

fiduciary duty; and (3) the breach of fiduciary duty was a proximate cause of injury

to the plaintiff.” Sykes, 372 N.C. at 339 (quoting Green, 367 N.C. at 141).

46. With limited exceptions, “the North Carolina Limited Liability Company Act

‘does not create fiduciary duties among members.’” Strategic Mgmt. Decisions v. Sales

Performance Int’l, 2017 NCBC LEXIS 69, at *10 (N.C. Super. Ct. Aug. 7, 2017)

(quoting Kaplan v. O.K. Techs., L.L.C., 196 N.C. App. 469, 473 (2009)). Thus,
members generally do not owe a fiduciary duty to other members of a limited liability

company. Id.

47. Recent case law has suggested, under some circumstances, a potential

exception to this rule—that “‘a holder of a majority interest who exercises control over

the LLC owes a fiduciary duty to minority interest members.’” Id. (citing Fiske v.

Kieffer, 2016 NCBC LEXIS 22, at *9 (N.C. Super. Ct. Mar. 9, 2016); Zagaroli v. Neill,

2016 NCBC LEXIS 106, at *18 (N.C. Super. Ct. Dec. 29, 2016)). However, “[t]he scope

of this exception, borrowed from precedents governing corporations, remains

unsettled,” and “[t]his Court has cautioned against a broad application because of the

fundamental differences between LLCs and corporations.” Lafayette Vill. Pub, LLC

v. Burnham, 2022 NCBC LEXIS 104, at *15-16 (N.C. Super. Ct. Sept. 12, 2022)

(citations omitted).

48. As explained below, this Court need not settle the scope or application of

that rule in this case:

“[A]n LLC is primarily a creature of contract” and [its] “members
are generally free to arrange their relationship however they
wish,” . . . [A]n LLC’s members could draft an operating
agreement to narrow or eliminate fiduciary duties owed by
members and managers. Or members could adopt comprehensive
rules for transfers of membership interests, thus displacing
default or background rules that might otherwise apply.

McFee v. Presley, 2022 NCBC LEXIS 74, at *8 (N.C. Super. Ct. July 11, 2022) (quoting

Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *17 (N.C. Super. Ct.

June 19, 2019)).
49. Thus, courts have frequently recognized the right of parties to an LLC

operating agreement to waive various duties, including the duty of loyalty. Klos

Constr., Inc. v. Premier Homes & Props., LLC, 2020 NCBC LEXIS 85, at *28 (quoting

Pender Farm Dev. v. NDCO, 2018 NCBC LEXIS 189, at *38 (N.C. Super. Ct. Mar. 12,

2018)); Plasman v. Decca Furniture (USA), Inc., 2016 NCBC LEXIS 80, at *36 (N.C.

Super. Ct. Oct. 21, 2016).

50. Simply stated, minority members of a limited liability company may

contractually waive fiduciary duties that might otherwise be owed by a majority

member or imposed by default under applicable law. See generally, e.g., id.; Merrell

v. Smith, 2023 NCBC LEXIS 155, at *27 (N.C. Super. Ct. Dec. 13, 2022) (“The

language of Section 4.7 [of the Operating Agreement] is evidence that members of

CBB did not owe the company a fiduciary duty of loyalty, and the Operating

Agreement did not otherwise provide for any fiduciary or fiduciary-like duties among

members and, in fact, is reasonably interpreted to renounce such duties.” (citation

omitted)); Vanguard Pai Lung, 2019 NCBC LEXIS 39, at *21 (“Thus, when the

operating agreement confers controlling authority on the majority member, [the

majority member] owes a duty not to use its control to harm the minority, assuming

no other provision disclaims such a duty.” (emphasis added)); Bennett v. Bennett, 2019

NCBC LEXIS 19, at *16-21 (N.C. Super. Ct. Mar. 15, 2019) (allegations in complaint

were insufficient to plead fiduciary duty given disclaimers in operating agreement).

51. Thus, the scope of a majority shareholder fiduciary duty is narrowly

construed and applied. Strategic Mgmt., 2017 NCBC LEXIS 68, at *10 (citing HCW
Ret. & Fin. Servs., 2015 NCBC LEXIS 73, at *47 n.102; Blythe v. Bell, 2013 NCBC

LEXIS 17, at *13-14 (N.C. Super. Ct. Apr. 8, 2013)); see also N.C. Gen. Stat. § 57D–

2–30.

52. Here, C&S’s operating agreement––signed by Plaintiffs, Clay, and

Chambers––contains two nearly identical waivers of fiduciary duties providing, in

relevant part, as follows:

3.5.1 Fiduciary Duty. Notwithstanding anything to the contrary
in the Act or North Carolina law, it is specifically understood and agreed
that as a condition of the acceptance of a Membership Interest in the
Company that the Manager shall not owe a fiduciary duty to the
Minority Members; therefore the Minority Members waive, renounce,
release and disclaim the right to file, bring, or maintain an action or
claim of any kind or description for breach of fiduciary duty against the
Managery [sic] Member, his heirs successors or assigns.

(ECF No. 11, Ex. A § 3.5.1 (located in Article III, “MANAGEMENT OF THE

COMPANY”)).

4.8 Fiduciary Duty. Notwithstanding anything to the contrary in
the Act or North Carolina law, it is specifically understood and agreed
that as a condition of the acceptance of a Membership Interest in the
Comply that the Majority Member shall not owe a fiduciary duty to the
Minority Members; therefore the Minority Members waive, renounce,
release and disclaim the right to file, bring, or maintain an action or
claim of any kind or description for breach of fiduciary duty against the
Majority Member, his heirs successors or assigns.

(ECF No. 11, Ex. A § 4.8 (located in Article IV, “RIGHTS AND OBLIGATIONS OF

MEMBERS”)).

53. Acknowledging these express waivers, Plaintiffs nonetheless contend that

the waivers are invalid, illegal, “unreasonable, unconscionable, and against public

policy.” (ECF No. 11, ¶ 72). The Court disagrees.
54. As both parties acknowledge, the duty of good faith and fair dealing

generally cannot be waived under the terms of an operating agreement. (ECF No. 13

at 18; ECF No. 11, ¶ 71).

55. Plaintiffs frame this duty of good faith and fair dealing as an unwaivable

fiduciary duty sounding in tort, (see ECF No. 11, ¶ 71), 3 while Defendants argue that

it is a contractual duty that necessarily sounds in contract, (ECF No. 13 at 18–19).

56. As this Court has previously recognized, the duty of good faith and fair

dealing is a “contractual obligation.” Klos Constr., 2020 NCBC LEXIS 85, at *33-34

(“‘The implied contractual covenant of good faith and fair dealing should not be

confused with the fiduciary duty of good faith that is one of the managers' duties

under [N.C.G.S. §] 57D–3–21.’” (quoting 1 Russell M. Robinson II, Robinson on

North Carolina Corporation Law § 34.04 n.37 (7th ed. 2019))). Plaintiffs identify no

other specific duty that they contend is unwaivable.

57. Thus, while Plaintiffs may pursue a breach of contract cause of action

arising from the alleged breach of the implied covenant of good faith and fair dealing,

to the extent that the cause of action is framed as one for breach of fiduciary duty and

that duty was contractually and expressly waived by the C&S operating agreement,

Plaintiffs fail to state a claim upon which relief can be granted.

3 Despite the allegations in their complaint, Plaintiffs in large part fail in their briefing to

engage with many of their own allegations and Defendants’ arguments. Accordingly, the
Court cites more to the allegations of the complaint at issue than to Plaintiffs’ briefing.
ii. Enforceability of Fiduciary Duty Waivers

58. Further, inasmuch as Plaintiffs contend that the waivers are in violation of

public policy, unreasonable, and unconscionable, Plaintiffs’ allegations are

unsupported and conclusory and do not align with North Carolina law. (ECF No. 11,

¶ 72).

59. To the extent Plaintiffs assert that the operating agreement’s provisions are

“unreasonable,” the North Carolina appellate courts have recognized that

[p]eople should be entitled to contract on their own terms without
the indulgence of paternalism by courts in the alleviation of one
side or another from the effects of a bad bargain. Also, they should
be permitted to enter into contracts that actually may be
unreasonable or which may lead to hardship on one side. It is only
where it turns out that one side or the other is to be penalized by
the enforcement of the terms of a contract so unconscionable that
no decent, fairminded person would view the ensuing result
without being possessed of a profound sense of injustice, that
equity will deny the use of its good offices in the enforcement of
such unconscionability.

Blaylock Grading Co., LLP v. Smith, 189 N.C. App. 508, 511 (2008) (emphasis added)

(citation and internal punctation omitted); Westmoreland v. High Point Healthcare

Inc., 218 N.C. App. 76, 91 (2012). Plaintiffs cite no case law in support of the argument

raised in their complaint, and their briefing fails to reference, much less discuss, the

purported reasonableness of the operating agreement or grounds for negating the

agreement on that basis. (See generally ECF No. 11).

60. Quite simply, public policy in North Carolina favors freedom of contract,

including the ability for parties to negotiate the scope of a company’s operating

agreement. Strategic Mgmt., 2017 NCBC LEXIS 69, at *14 (noting that imposing
duties beyond the scope of the law and the parties’ bargained-for contractual duties

“would be inconsistent with the parties’ bargain and with this State’s policy of ‘giving

the maximum effect to the principle of freedom of contract and the enforceability of

operating agreements.’” (quoting N.C. Gen. Stat. § 57D-10-01(c) (internal quotation

marks omitted))). Plaintiffs identify no case law suggesting that the parties’

bargained-for agreement is against public policy, and, in fact, Plaintiffs fail to

substantively address “public policy” in their briefing.

61. Further,

[a] court will find a contract to be unconscionable only when the
inequality of the bargain is so manifest as to shock the judgment
of a person of common sense, and where the terms are so
oppressive that no reasonable person would make them on the
one hand, and no honest and fair person would accept them on
the other. An inquiry into unconscionability requires that a court
consider all the facts and circumstances of a particular case, and
if the provisions are then viewed as so one-sided that the
contracting party is denied any opportunity for a meaningful
choice, the contract should be found unconscionable. . . . A party
asserting that a contract is unconscionable must prove both
procedural and substantive unconscionability. . . . [P]rocedural
unconscionability involves bargaining naughtiness in the form of
unfair surprise, lack of meaningful choice, and an inequality of
bargaining power. Substantive unconscionability, on the other
hand, refers to harsh, one-sided, and oppressive contract terms.

Musselwhite v. Cheshire, 266 N.C. App. 166, 180 (2019) (citation and internal

quotation marks omitted).

62. Plaintiffs make no specific allegations of procedural or substantive

unconscionability regarding the C&S operating agreement. (See generally ECF No.

11).
63. Instead, as the complaint reflects, the individual parties to the operating

agreement were sophisticated management and owner-level individuals engaged in

arm’s-length negotiations when the operating agreement was signed. (ECF No. 11,

¶¶ 8–15). Though Plaintiffs contend that the operating agreement was drafted by

Clay’s attorney, (ECF No. 11, ¶ 11), there are no allegations that they were prohibited

from reviewing and revising it or from having their own attorney of choice review it.

Instead, the complaint and its attachments reflect that Plaintiffs (i) on 24 January

2024, signed the operating agreement with both sections 3.5.1 and 4.8, (ECF No. 11,

Ex. A at 30), and (ii) confirmed that they had the opportunity to obtain counsel or

voluntarily choose not to consult counsel regarding the provisions of the operating

agreement, (ECF No. 11, Ex. A § 11.15).

64. In sum, absent specific factual allegations suggesting illegality, violations of

public policy, unconscionability, or unreasonableness that might render the operating

agreement unenforceable, Plaintiffs’ breach of fiduciary duty cause of action is

foreclosed by the plain language of the waivers and releases contained within the

C&S operating agreement.

65. Accordingly, considering the factual allegations of the complaint in the light

most favorable to Plaintiffs and further considering the unambiguous language of the

C&S operating agreement attached to the complaint, the Court determines that

Plaintiffs’ cause of action for breach of fiduciary duty and request for the remedy of

piercing the corporate veil should be dismissed.
III. CONCLUSION

66. Therefore, the Court ORDERS as follows:

a. Defendants’ motion to dismiss, (ECF No. 12), is GRANTED;

b. Plaintiffs’ request for the remedy of piercing the corporate veil is

DENIED and, in the Court’s discretion, DISMISSED WITHOUT

PREJUDICE; and

c. Plaintiffs’ cause of action for breach of fiduciary duty is DISMISSED

WITH PREJUDICE.

SO ORDERED, this 25th day of November 2025.

/s/ Matthew T. Houston
Matthew T. Houston
Special Superior Court Judge
for Complex Business Cases