SHAVER v. WALKER, 2023 NCBC 27

STATE OF NORTH CAROLINA
WAKE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 11080
JESSE H. SHAVER,
Plaintiff,
v.
AARON L. WALKER and VADUM,
INC.,
Defendants.
ORDER AND OPINION ON
DEFENDANTS’ MOTION
TO DISMISS
1. 	The individual parties in this case are estranged family members.
Plaintiff, 	Jesse 	Shaver, 	(“Shaver”), 	is 	suing 	his 	brother-in-law, 	Aaron 	Walker
(“Walker”) and the company Walker founded, Vadum, Inc. (“Vadum”) for, among
other things, alleged fraud. 	Shaver asserts that, at Walker’s urging, he did not
exercise vested stock options prior to their expiration date. 	Instead, Shaver alleges
he trusted Walker, his family member and CEO of Vadum, to safeguard his right to
exercise those options at a later date. Unfortunately, that later date never came, and
Shaver claims that Walker tricked him into losing his right to equity in Vadum.
2. 	Shaver filed a verified Complaint on 2 September 2022, asserting three
claims: fraud, breach of fiduciary duty and constructive fraud (pleaded together), and
negligent misrepresentation. (See ECF No. 4.)
3. 	On 16 November 2022, Walker and Vadum filed their Motion to Dismiss
(the “Motion”), (ECF No. 11). They contend that the Complaint should be dismissed
in its entirety pursuant to Rules 9(b) and 12(b)(6) of the North Carolina Rules of Civil
Procedure (“Rule(s)”) because it fails to state a claim against either of them.
Shaver v. Walker, 2023 NCBC 27.

4. 	For the reasons stated below, the Motion is GRANTED in part and
DENIED in part.
Bell, Davis & Pitt, P.A., by Joshua B. Durham, Alan M. Ruley, and
Carson D. Schneider, for Plaintiff Jesse H. Shaver.
Smith, 	Anderson, 	Blount, 	Dorsett, 	Mitchell 	& 	Jernigan, 	LLP, 	by
Jackson W. Moore, Jr. and Amelia Larrick Serrat, for Defendants
Vadum, Inc. and Aaron L. Walker.
Earp, Judge.
I. 	BACKGROUND
5. 	The Court does not make findings of fact when ruling on a motion to
dismiss. 	It recites the factual allegations in the Complaint that are relevant and
necessary to the Motion.
6. 	Both Shaver and Walker are residents of Wake County, North Carolina.
(Compl. ¶¶ 1-2, ECF No. 4.) Walker is Shaver’s brother-in-law. (Compl. ¶ 7.)
7. 	Shaver met Walker in 1992, when Shaver’s sister Emily and Walker
started dating. 	Shaver was 13 years old at the time. 	Shaver “liked Walker, looked
up to him, and began to develop a bond of trust with him.” In June 1994, Walker and
Emily were married. (Compl. ¶ 8.)
8. 	Vadum is a North Carolina corporation with a principal place of
business in Raleigh, North Carolina. It provides “engineering, science and technology
services and specializes in government defense contracts.” (Compl. ¶ 3.) Walker and
Dr. Peter Buff (“Buff”) founded Vadum in 2004. Walker was President, and Buff was
Vice-President of the company. Both were shareholders. (Compl. ¶ 9.)

9. 	In 2007, Gary Edge (“Edge”) was hired to be Vadum’s CEO. 	Edge
ultimately became a shareholder of Vadum.1 (Compl. ¶ 11.)
10. 	In March 2009, Walker allegedly “removed” Buff from the company.
Litigation followed. 	(Compl. ¶ 12.) 	The lawsuit was settled and dismissed in June
2009. 	Pursuant to the terms of the settlement, Buff redeemed his company stock.
(Compl. ¶ 13.)
11. 	In September of that year, Vadum established an Incentive Stock Option
Plan for certain employees. (Compl. ¶ 14.)
12. 	Meanwhile, Shaver was completing his education. He finished graduate
school in 2009, and in April 2010, Shaver was approached by Walker to work for
Vadum as a non-employee consultant. Walker offered Shaver the opportunity to have
an equity interest in Vadum as consideration for Shaver’s future inventions. 	The
offer was reflected in a document titled, “Form of Agreement for Non-Employees.”
(Compl. ¶¶ 15-16.)
13. 	By May 2010, Shaver had begun working part-time for Vadum, first as
an independent contractor and later as a part-time employee. 	When Shaver
subsequently became the Principal Investigator on a contract with the U.S. Army
that he drafted, however, the contract required that he transition to full-time
employee status. 	Consequently, since 3 September 2010, Shaver has worked as a
full-time employee for Vadum. (Compl. ¶¶ 17-18.)
1 The number of shares owned by Edge is not specified in the Complaint.

14. 	Shaver alleges that, over the years, he “became a valued employee of
Vadum and a close colleague of Walker.” (Compl. ¶ 46.) Among other things, Shaver
invented a new technology for Explosive Ordnance Disposal (EOD), a development
that he claims has “substantial commercial value.” (Compl. ¶ 47.) He alleges that he
has won over seventeen major contracts for Vadum from ten military customers and
has secured “millions of dollars” in contract obligations for Vadum, helping the
company to become “the second-most winning SBIR [Small Business Innovation
Research] firm in the state of North Carolina.” (Compl. ¶ 49.) Additionally, Shaver
alleges that he has “generated considerable valuable intellectual property that is now
assigned to Vadum, including SBIR Data Rights and US Patents.” (Compl. ¶ 52.)
15. 	Throughout 	these 	years, 	Shaver 	and 	Walker’s 	relationship 	grew
stronger as 	well. 	Their respective 	families 	travelled together, 	spent 	holidays
together, went to church together, hosted each other for meals and overnight stays,
worked on each other’s homes, and performed numerous acts of service for one
another. 	(Compl. ¶¶ 35-41.) 	Shaver alleges that “[t]he families had great affection
for each other, trusted each other, and turned to each other for assistance and advice
in times of need.” (Compl. ¶ 42.) In addition, Shaver alleges that he viewed Walker,
his older brother-in-law, with “respect, admiration, confidence and trust[.]” (Compl.
¶ 44.) 	He further alleges that when he became an employee of Vadum, their
relationship developed “a new dimension, where Walker was now a business superior
(employer and owner), while remaining a highly trusted elder family member and
friend.” (Compl. ¶ 45.)

16. 	According to Shaver, he accepted “below-market salary” to work at
Vadum because he trusted Walker’s promise that he would become an equity owner
in the company. (Compl. ¶ 53.)
17. 	In 2012, Shaver became a participant in the company’s Incentive Stock
Option Plan. He was granted options on 6,500 shares at an exercise price of $.30 per
share. 	A third of the options vested on 24 September 2013, another third vested a
year later, and Shaver was fully vested on 24 September 2015. 	The options had a
final exercise date of 24 September 2019. (Compl. ¶ 19.)
18. 	The Vadum Stock Option Agreement (“Agreement”) provides in part:
Amendment. 	Except 	as 	set 	forth 	in 	Section 	9(c) 	[pertaining 	to
amendments necessitated by Tax Code Section 409A], this Agreement
may 	not 	be 	modified 	or 	amended 	in 	any 	manner 	adverse 	to 	the
Participant’s interest except by means of a writing signed by the
Company and Participant.
(Compl. Ex. B.)
19. 	In addition, a memorandum addressing “commonly asked questions”
concerning the Incentive Stock Option Plan attached as an exhibit to the Complaint
warned: 	“[Y]ou should consult your own legal counsel or tax advisor prior to
exercising your option or selling the Shares. (Compl. Ex. A, (emphasis in original).)2
20. 	Shaver alleges that he is “highly educated” but that he is not trained in
financial or legal matters. (Compl. ¶ 55.) Furthermore, Shaver says that he did not
have access to Vadum’s financial information. 	It was Walker who possessed the
2 While it is attached to, and referenced in, the Complaint, there is no allegation that
Shaver actually received the memorandum that is Exhibit A.

financial information and “had complete authority and discretion to make decisions
on behalf of the company.” (Compl. ¶ 54.)
21. 	During the first few days of July 2019, as the deadline approached to
exercise his options, Shaver spoke with then-CEO Edge about exercising the options
before their September expiration date. The Complaint alleges that Edge, speaking
on behalf of Vadum, responded that:
a. 	There was no monetary benefit to exercising the options before an
initial public offering (“IPO”);
b. 	The options could not be exercised at that point, because the
“paperwork needed to be fixed;”
c. 	Shaver should not worry, because the options would not expire,
and the company would fix the situation;
d. 	Exercising the options would make tax matters too complex; and
e. 	Shaver should “trust [him].”
(Compl. ¶¶ 20-21.)
22. 	Shaver alleges that these statements were false and made “in an effort
to dissuade him from exercising the options.” (Compl. ¶ 20.)
23. 	Less than a week later, Shaver alleges that Walker made similar false
statements while at a family campsite in Falls Lake, North Carolina. (Compl. ¶ 22.)
Shaver asked Walker about exercising his vested stock options and about Edge’s
assertion that his options could not be exercised. (Compl. ¶ 22.) Walker, “individually
and on behalf of Vadum,” allegedly replied that:
a. 	There was no benefit to exercising the options before an IPO;
b. 	Shaver did not need to worry about his options expiring;

c. 	The 	tax 	paperwork 	was 	too 	complex 	for 	the 	options 	to 	be
exercised; and
d. 	[Shaver should] “[t]rust [him].
(Compl. ¶ 22.)
24. 	Shaver alleges that he reasonably relied on these statements by Walker
and Edge and that they dissuaded him from exercising his options before the
expiration date. 	Shaver further alleges that Walker and Edge’s statements “were
reasonably calculated to deceive” and “were made with the intent to deceive[.]”
(Compl. ¶¶ 24-25.) 	Absent the alleged misrepresentations, Shaver claims he would
have exercised his options, owned 6,500 shares of Vadum, and participated in
distributions based on his ownership. (Compl. ¶ 24.)
25. 	Shaver contends that he trusted Walker and Edge because of their
access to and control of information regarding Vadum’s finances—especially in light
of his own lack of access to Vadum’s information, the discretion Walker and Edge had
to make decisions regarding management matters, his own lack of training in
financial and legal matters, and both Walker and Edge’s encouragement that he
should trust them, among other reasons. (Compl. ¶¶ 25, 54-55.)
26. 	Chief among the reasons Shaver trusted Walker, however, was Shaver’s
decades-long relationship with his brother-in-law, beginning when Shaver was only
13 years old. 	(Compl. ¶¶ 25, 34.) 	In addition to his close friendship with Walker,
Shaver alleges that Walker’s role as Shaver’s employer and owner of Vadum resulted
in a power imbalance between them. (Compl. ¶ 45.)

27. 	Ultimately, 	Shaver 	did 	not 	exercise 	his 	options 	before 	their 	24
September 2019 expiration date and, consequently, he did not become a shareholder
in Vadum. (Compl. ¶ 57.) Edge left the Company in July 2020, and Walker assumed
the CEO role. 	(Compl. ¶ 20.) 	Shaver alleges that as a result of Edge and Walker’s
false statements, Walker is Vadum’s sole shareholder and maintains complete control
of the company. (Compl. ¶ 57.)
28. 	Shaver brings this suit against Walker and Vadum for: (1) fraud
(against Walker and Vadum), (2) breach of fiduciary duty and constructive fraud
(against Walker), and (3) negligent misrepresentation (against Walker, in the
alternative). (See generally Compl.)
29. 	Defendants have moved to dismiss all claims pursuant to Rules 12(b)(6)
and 9(b). (See ECF No. 11.) On 14 February 2023, the Court held a hearing on the
Motion during which all parties appeared and were heard through counsel. (See ECF
No. 23.) The Motion is now ripe for disposition.
II. 	STANDARD OF REVIEW
30. 	Dismissal of a claim 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 v. Brit. Am. Tobacco PLC,
371 N.C. 605, 615 (2018). 	Otherwise, “a complaint should not be dismissed for
insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under

any state of facts which could be proved in support of the claim.” Sutton v. Duke, 277
N.C. 94, 103 (1970) (emphasis omitted).
31. 	When deciding a motion to dismiss, the Court construes the complaint
liberally and accepts all factual allegations as true. See, e.g., Sykes v. Health Network
Sols., Inc., 372 N.C. 326, 332 (2019); Laster v. Francis, 199 N.C. App. 572, 577 (2009).
The Court, however, is not required “to accept as true allegations that are merely
conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope
Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274 (2005)
(quoting Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)). In its review, the Court
may consider documents that are the subject of the Complaint and to which the
Complaint specifically refers, including a contract. 	See, e.g., McDonald v. Bank of
N.Y. Mellon Trust Co., 259 N.C. App. 582, 586 (2018); Oberlin Capital, L.P. v. Slavin,
147 N.C. App. 52, 60 (2001).
III. 	ANALYSIS
32. 	The Court considers the sufficiency of each of Shaver’s claims in turn.
A. 	Fraud
33. 	Beginning with Shaver’s claim for fraud against Walker and Vadum, the
elements that must be alleged are: “(1) [f]alse representation or concealment of a
material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4)
which does in fact deceive, (5) resulting in damage to the injured party.” 	Forbis v.
Neal, 	361 	N.C. 	519, 	526-27 	(2007). 	“A 	subsisting 	or 	ascertainable 	fact, 	as

distinguished from a matter of opinion or representation relating to future prospects,
must be misrepresented.” Ragsdale v. Kennedy, 286 N.C. 130, 139 (1974).
34. 	In addition, the Complaint “must allege with particularity all material
facts and circumstances constituting the fraud.” Carver v. Roberts, 78 N.C. App. 511,
513 (1985). 	Rule 9(b) requires allegations of “the time, place and contents of the
fraudulent representation, the identity of the person making the representation and
what was obtained by the fraudulent acts or representations” to be pleaded with
particularity. Terry v. Terry, 302 N.C. 77, 85 (1981) (emphasis omitted).
35. 	Defendants offer three arguments to support the dismissal of Shaver’s
fraud claim: (1) the alleged misrepresentations were opinions or legal positions and
not statements of material fact, (2) Shaver’s reliance was not reasonable, and (3) an
intent to deceive is not adequately alleged. 	(See generally Defs.’ Memo. Supp. Mot.
Dismiss 3-13 [“Supp. Br.”], ECF No. 12; Reply Br. Supp. Defs.’ Mot. Dismiss 1-10
[“Reply Br.”], ECF No. 22.) The Court addresses each argument below.
i. 	Misrepresentation of Material Fact
36. 	First, 	Defendants 	contend 	that 	the 	Complaint 	fails 	to 	allege 	a
misrepresentation of material fact. 	Instead, Defendants contend that the alleged
misrepresentations were mere expressions of opinion or legal positions. (Supp. Br. 4-
6; Reply Br. 2-6.) 	Shaver retorts that each alleged misrepresentation is one of
material fact. (Pl.’s Br. Opp. Defs.’ Mot. Dismiss [“Opp. Br.”] 5-12, ECF No. 18.)
37. 	Puffery, or mere expressions of opinion or belief, do not constitute
statements of material fact. See Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332

N.C. 1, 17 (1992) (“distinguishing mere puffing, guesses, or assertions of opinions
from representations of material facts”). 	To be a statement of material fact, the
statement must be definite and specific. 	See Johnson v. Owens, 263 N.C. 754, 756
(1965) (“[t]he representation must be definite and specific”); Warfield v. Hicks, 91
N.C. App. 1, 8, disc. rev. denied, 323 N.C. 629 (1988) (a “general unspecific statement
of opinion about the potential future consequences of using beetle infested beams” did
not constitute fraud).
38. 	Similarly, statements of legal position cannot form the basis of a fraud
claim. 	See, e.g., Dalton v. Dalton, 164 N.C. App. 584, 587 (2004) (“fraud cannot be
premised upon a misrepresentation of law”); Cross v. Formativ Health Mgmt., 439 F.
Supp. 3d 616, 627 (E.D.N.C. 2020) (a “party’s statement of a legal position or an
assertion 	about 	its 	rights 	or 	position 	under 	the 	law 	is 	not 	an 	actionable
misrepresentation”).
39. 	Particularly 	when 	viewed 	in 	the 	light 	most 	favorable 	to 	the
nonmovant—as the Court must view the allegations at this stage—the statements
quoted 	in 	the 	Complaint 	are 	sufficiently 	definite 	and 	specific 	to 	constitute
representations of fact. 	Edge’s statement that there was “no monetary benefit to
exercising 	the 	options 	before 	an 	initial 	public 	offering[,]” 	similar 	to 	Walker’s
statement that “[t]here was no benefit to exercising the options before an IPO[,]” is
not presented as an opinion but rather as a flat statement about the worth of the
options at the time. 	(Compl. ¶¶ 21(a), 22(a).) 	Similarly, Edge’s statement that the
options “could not be exercised . . . because the ‘paperwork needed to be fixed’ ” is a

definitive assertion presented as fact. 	(Compl. ¶ 21(b).) 	Both men allegedly told
Shaver that the options either “would not expire” or that he “did not need to worry
about his options expiring” and that he should trust them, implicitly promising to fix
whatever needed to be fixed in order for Shaver to benefit from exercising the options.
(Compl. ¶¶ 21-22.)
40. 	Finally, the alleged statements about the exercise of the options making
tax matters “too complex” could be interpreted as a plea from both Walker and Edge
on behalf of the company for Shaver to delay making his election because of the
company’s tax situation and/or impending IPO in exchange for their promise to
protect his rights. (Compl. ¶¶ 21(d), 22(c).) These statements are neither comparable
to the type of hyperbolic language used in sales pitches nor are they statements of
opinion or legal position.
41. 	Furthermore, the facts in the alleged statements are material because
they “dissuaded Shaver from exercising his options before the stated expiration date.”
(Compl. ¶ 24.) See Keith v. Wilder, 241 N.C. 672, 675 (1955) (“A false representation
is material when it deceives a person and induces him to act.”); Davis v. Sellers, 115
N.C. App. 1, 11 (1994), disc. rev. denied, 339 N.C. 610 (1995) (material if it induces or
prevents action). 	Accordingly, the Court concludes that Shaver has adequately
alleged misrepresentations of material fact and included the particulars of those
misrepresentations.

ii. Reasonable Reliance
42. 	Defendants next argue that Shaver failed to plead facts to support his
conclusion that he reasonably relied on the alleged misrepresentations. 	To the
contrary, they argue, the circumstances pleaded establish that Shaver’s reliance was
unreasonable. (Supp. Br. 7-11; Reply Br. 6-9.)
43. 	Defendants 	highlight: 	(1) 	the 	Stock 	Option 	Agreement’s 	express
language warning participants to consult their own legal counsel and tax advisor
before exercising the option, (2) the Agreement’s conspicuous expiration date of 24
September 2019, (3) the Agreement’s condition that all modifications must be in
writing if the modification would be adverse to Shaver (as they claim is the case here),
(4) Shaver’s lack of action for two and a half months after the alleged statements were
made when, Defendants argue, an investigation could have “easily” uncovered the
truth, and (5) Shaver’s sophisticated education and work background, including his
experience writing contracts for Vadum. Defendants argue that the only conclusion
that can be drawn from the allegations is that Shaver’s reliance was unreasonable.
(See generally Supp. Br. 7-11; Reply Br. 6-9.)
44. 	Shaver responds that Walker and Edge, as owners and high-ranking
corporate officers, had access to Vadum’s information that he lacked, as well as the
power to change its Incentive Stock Option Plan, if necessary, to rectify the problems
they referenced in their statements to him. 	In contrast, Shaver argues, 	he had no
ability to investigate whether Edge and Walker were telling the truth. 	Shaver
contends that he was limited to asking the two men in charge, and he was duped by

their misrepresentations. 	(Opp. Br. 12-18.) 	Furthermore, Shaver asserts that his
past dealings with the two men—particularly Walker—gave him no reason to doubt
their statements. (Opp. Br. 15-18.)
45. 	The 	Court 	determines 	that 	the 	allegations 	could support 	a 	jury’s
conclusion 	that 	Shaver’s 	reliance 	was 	reasonable. 	Construed 	liberally, 	the
allegations 	portray 	a 	power 	imbalance 	in 	which 	Walker 	and 	Edge—Vadum’s
President and its CEO—possessed both superior knowledge and control over the
company’s financial matters, including its Incentive Stock Option Plan. A jury could
find that Shaver’s reliance on their statements, particularly when both Walker and
Edge are alleged to have urged Shaver to trust them, was reasonable. See, e.g., White
Sewing Mach. Co. v. Bullock, 161 N.C. 1, 8 (1912) (“If the fact represented is one
which is susceptible of accurate knowledge, and the speaker is or may well be
presumed to be cognizant thereof, while the other party is ignorant, and the
statement is a positive assertion containing nothing so improbable or unreasonable
as to put the other party upon further inquiry or give him cause to suspect that it is
false, and an investigation would be necessary for him to discover the truth, the
statement may be relied on.”).
46. 	While it is true that “a plaintiff must ordinarily show that he was denied
the opportunity to investigate or that he could not have learned the true facts by
exercise of reasonable diligence . . . where, as here, the parties are not on equal
footing, and a defendant possessing superior knowledge and/or experience makes a
representation without giving the plaintiff reason to suspect the representation is

false, the plaintiff may rely upon that representation.” 	Slattery v. AppyCity, LLC,
2021 NCBC LEXIS 24, at *18-19 (N.C. Super. Ct. Mar. 24, 2021) (citing Walker v.
Town of Stoneville, 211 N.C. App. 24, 34-35 (2011)) (internal quotation marks
omitted). See also Higgins v. Synergy Coverage Sols., LLC, 2020 NCBC LEXIS 6, at
*31-34 	(N.C. 	Super. 	Ct. 	Jan. 	15, 	2020) 	(“[A] 	plaintiff 	may 	justifiably 	rely 	on
representations made by a defendant with superior knowledge on a subject where the
parties are not on equal footing and nothing about the defendant’s representations
should have given plaintiff cause to suspect the veracity of the representations.”). Cf.
Johnson, 	263 	N.C. 	at 	758 	(“[A] 	seller 	who 	has 	intentionally 	made 	a 	false
representation about something material, in order to induce a sale of his property,
should not be permitted to say in effect, ‘You ought not to have trusted me. If you had
not been so gullible, ignorant, or negligent, I could not have deceived you.’ Courts
should be very loath to deny an actually defrauded plaintiff relief on this ground.”);
White Sewing Mach. Co., 161 N.C. at 8-9 (“It is no excuse for, nor does it lie in the
mouth of the defendant to aver that plaintiff might have discovered the wrong and
prevented its accomplishment had he exercised watchfulness, because this is but
equivalent to saying: ‘You trusted me; therefore, I had the right to betray you.’ ”).
iii. Intent to Deceive
47. 	Defendants argue that Shaver has failed to allege that they had the
requisite 	intent 	to 	deceive 	Shaver 	when 	Walker 	and 	Edge 	made 	the 	alleged
misrepresentations. (Supp. Br. 11-13; Reply Br. 9-10.) They contend that, as alleged,

the misrepresentations were nothing more than inadvertently unfulfilled promises.
(Supp. Br. 11-13; Reply Br. 10.)
48. 	Shaver responds by pointing to the language of Rule 9(b), which states
that “malice, intent, knowledge and other condition of mind of a person may be
averred generally.” 	N.C.G.S. § 1A-1, R. 9(b). 	In addition, he argues that the cases
cited by Defendants involve breaches of contract, a claim not brought here. Finally,
he contends that the allegations “show motive, means, opportunity and pattern.”
(Opp. Br. 18-20.)
49. 	The Court concludes that Shaver has sufficiently alleged that the
Defendants intended to deceive him. 	While failure to fulfill an obligation, standing
alone, does not support a claim of fraud, see Braun v. Glade Valley Sch., Inc., 77 N.C.
App. 83, 87 (1985), Shaver has alleged more than just broken promises. 	He has
asserted that false and misleading statements were made by Walker and Edge
purposefully in an effort to dissuade him from exercising the options. (See Compl. ¶¶
20, 24.) He has further alleged that the false statements “were reasonably calculated
to deceive” and “were made with the intent to deceive[.]” 	(Compl. ¶ 24.) 	See e.g.,
Williams v. Williams, 220 N.C. 806, 810-11 (1942) (stating that a promise made
fraudulently, that is, with no intention to carry it out, will sustain an action for fraud).
Furthermore, unlike the facts and circumstances constituting fraud, which are
required to be pleaded with particularity, general statements of malice will suffice
when stating a claim. See N.C.G.S. § 1A-1, R. 9(b) (“Malice, intent, knowledge, and
other condition of mind of a person may be averred generally.”).

50. 	Because the Court determines that Shaver has met the requirements of
Rule 9(b) and has adequately pleaded the elements of fraud, Defendants’ Motion with
respect to this claim shall be DENIED.
B. 	Breach of Fiduciary Duty and Constructive Fraud
51. 	Shaver’s second claim for relief combines breach of fiduciary duty and
constructive fraud into one count. Regardless of whether he is attempting one claim
or two, however, in both instances, Shaver must allege the existence of a fiduciary
duty and breach of that duty. McFee v. Presley, 2022 NCBC LEXIS 74, at **7 (N.C.
Super. Ct. July 11, 2022) (“Breach of fiduciary duty and constructive fraud are
related, though distinct, causes of action. 	Essential to each is the existence of a
fiduciary relationship.”). 	Additionally, constructive fraud requires the plaintiff to
allege that the defendant has taken advantage of his position of trust to benefit
himself. 	See, e.g., White v. Consolidated Planning, Inc., 166 N.C. App. 283, 294-95
(2004); Barger v. McCoy, Hillard & Parks, 346 N.C. 650, 666-67 (1997).
52. 	Unlike actual fraud, which requires that the alleged misrepresentation
be pled with specificity, “[c]onstructive fraud differs . . . in that it is based on a
confidential relationship rather than a specific misrepresentation.” 	Hunter v.
Guardian Life Ins. Co. of Am., 162 N.C. App. 477, 482 (2004) (citing Barger, 346 N.C.
at 667) (internal quotation marks omitted). Moreover, an intent to deceive is not an
essential element of the claim. 	See Clay v. Monroe, 189 N.C. App. 482, 488 (2008)
(“Intent to deceive is not an element of constructive fraud.” (quoting White, 166 N.C.
App. at 294)).

53. 	Fiduciary duties can arise as a matter of law (de jure) or from the facts
(de facto). See Hager v. Smithfield E. Health Holdings, LLC, 264 N.C. App. 350, 355
(2019) (“North Carolina recognizes two types of fiduciary relationships: de jure, or
those imposed by operation of law, and de facto, or those arising from the particular
facts and circumstances constituting and surrounding the relationship.”). 	Shaver
does not argue that he has alleged the existence of a de jure fiduciary relationship;
instead, he contends that he has alleged that a de facto fiduciary relationship arose
between Walker and himself. 	(Opp. Br. 21 n.11 (“Plaintiff does not allege a de jure
fiduciary relationship here.”).)
54. 	A de facto fiduciary relationship exists where “there has been a special
confidence reposed in one who in equity and good conscience is bound to act in good
faith and with due regard to the interests of the one reposing confidence.” 	Green v.
Freeman, 367 N.C. 136, 141 (2013). 	“Domination and influence are essential
components of a de facto fiduciary relationship.” 	Hart v. First Oak Wealth Mgmt.,
LLC, 2022 NCBC LEXIS 81, at **30 (N.C. Super. Ct. July 28, 2022). See also Abbitt
v. Gregory, 201 N.C. 577, 598 (1931) (a de facto fiduciary relationship exists where
“there is confidence reposed on one side, and resulting domination and influence on
the other”).
55. 	The “facts required to establish such a relationship are exacting[.]”
Hart, 2022 NCBC LEXIS 81, at **30. “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.” Lockerman v. South River Elec. Mbrshp. Corp., 250 N.C. App. 631, 636 (2016)
(quoting S.N.R. Mgmt. Corp. v. Danube Partners 141, LLC, 189 N.C. App. 601, 613
(2008)). Courts look to the factual circumstances of each situation to determine the
existence of a de facto fiduciary duty. 	See Highland Paving Co. v. First Bank, 227
N.C. App. 36, 42 (2013) (“Determining whether a fiduciary relationship exists
requires looking at the particular facts and circumstances of a given case.”); Kaplan
v. O.K. Techs., L.L.C., 196 N.C. App. 469, 474 (2009) (“Although our courts have
broadly defined fiduciary relationships, no such relationship arises absent the
existence of dominion and control by one party over another.”).
56. 	Defendants argue that the connection alleged between Walker and
Shaver does not rise to the level of a de facto fiduciary relationship. 	They contend
that the facts surrounding this close familial relationship, even when combined with
the employment relationship that also existed, did not result in “domination” by
Walker 	over 	Shaver 	sufficient 	to 	create 	fiduciary 	duties. 	(Supp. 	Br. 	13-19;
Reply Br. 10-14.)
57. 	On the other hand, Shaver emphasizes his fidelity to, and confidence
in, Walker. 	He stresses the allegations regarding the beneficence the families
demonstrated toward one another. 	He underscores his relative lack of control at
Vadum as Walker’s subordinate and his allegation that Walker managed and
controlled the company. (Opp. Br. 22-24; Compl. ¶¶ 35-45.)
58. 	In support of his position, Shaver argues that parallels exist between
several cases in which a de facto fiduciary relationship was found to exist and his own

case. 	See, e.g., Curl v. Key, 311 N.C. 259 (1984) (grieving siblings, aged 18 and 21,
were tricked into signing a “peace paper” that deeded their family home to a close
friend of their deceased father, who promised to help stop the harassment and
“beating[s]” inflicted by the family’s relatives); Holloway v. Holloway, 221 N.C. App.
156 (2012) (son encouraged his mother, who was living in “deteriorating living
conditions” in California, to move across the country by promising that he would take
care of her and let her live in his modular home for the rest of her life if she paid the
son’s back taxes, mortgage and other expenses, only to evict her two years later); Can-
Dev, ULC v. SSTI Centennial, LLC, 2018 NCBC LEXIS 9, at *19-20 (N.C. Super. Ct.
Jan. 25, 2018) (plaintiff allegedly ceded all control over projects to defendants,
resulting in defendants having all the financial and technical information, without
the 	ability 	to 	monitor 	the 	projects’ 	developments, 	and 	plaintiff 	lacking 	“any
mechanism [in the governing contract] to resolve disputes regarding the calculation
of amounts owed to Plaintiff”).
59. 	What is conspicuous about these cases, however, is the sheer level of
control one party was alleged to have wielded over the other, often as the result of
some infirmity or special need. In each situation, the plaintiff was dominated to the
point of being essentially helpless in the defendant’s hands. 	In the instant case,
however, Shaver and Walker are not so positioned. 	Shaver is clearly a capable
professional. (See Compl. ¶¶ 46-53.) He is also alleged to be an educated individual,
albeit without specific training in financial and legal matters, who has “personally
authored and won seven [government] contracts” worth 	“millions of dollars” and

“generated considerable valuable intellectual property that is now assigned to
Vadum, including . . . US Patents.” (Compl. ¶¶ 49, 51-52, 55.) He was afforded rights
under the Option Contract that he decided not to exercise. 	Harkening to the
Lockerman analogy, he had “cards to play.” 	See Bourgeois v. Lapelusa, 2022 NCBC
LEXIS 111, at **15 (N.C. Super. Ct. Sept. 23, 2022) (“[Plaintiff] may have been
mistreated by the other members, but it happened while he was holding—at the very
least—a card or two. In that circumstance, no de facto fiduciary duty arises.”).3
60. 	Without the existence of a fiduciary relationship, there can be no claim
for either breach of fiduciary duty or constructive fraud. 	Therefore, the Court
GRANTS the Motion, and Shaver’s second enumerated claim shall be DISMISSED
without prejudice.4
C. Negligent Misrepresentation
61. 	Shaver’s final claim, negligent misrepresentation, is asserted against
Walker as an alternative to the fraud claim.
62. 	“[T]he 	tort 	of 	negligent 	misrepresentation 	occurs 	when 	a 	party
justifiably relies to his detriment on information prepared without reasonable care
3 Plaintiff also cites McFee v. Presley, 2022 NCBC LEXIS 74 (N.C. Super. Ct. July 11, 2022).
In that case, an LLC member was swindled out of her ownership interest in the company by
a controlling member who denied her access to company records and misrepresented the
value of her interest. 	Citing the rule that “under special circumstances, a director of a
corporation stands in a fiduciary relationship to a shareholder or director in the acquisition
of the shareholder’s stock[,]” the court determined that “informational inequality along with
other special circumstances” that existed in that case could give rise to a fiduciary duty.
McFee, 2022 NCBC LEXIS 74, at **7-9 (citing Lazenby v. Godwin, 40 N.C. App. 487, 494
(1979)). Here, conversely, there is no allegation that Walker sought to acquire Shaver’s stock.
4 “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).

by one who owed the relying party a duty of care.” Raritan River Steel Co. v. Cherry,
Bekaert & Holland, 322 N.C. 200, 206 (1988). 	The tort is “highly fact-dependent,”
with particular importance on the “question of whether a duty is owed [to] a
particular plaintiff[.]” 	Marcus Bros. Textiles v. Price Waterhouse, L.L.P., 350 N.C.
214, 220 (1999) (“whether liability accrues is highly fact-dependent, with the question
of whether a duty is owed a particular plaintiff being of paramount importance”)
(citing Logan, N.C. Torts § 25.30, at 551). 	“Such a duty commonly arises within
professional relationships.” Rountree v. Chowan Cnty., 252 N.C. App. 155, 160 (2017).
63. 	The Court of Appeals summarized the claim this way:
One who, in the course of his business, profession or employment, or in
any other transaction in which he has a pecuniary interest, supplies
false 	information 	for 	the 	guidance 	of 	others 	in 	their 	business
transactions, [and thus] is subject to liability for pecuniary loss caused
to them by their justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or communicating
the information.
Rountree, 252 N.C. App. at 160 (alteration in original) (quoting Simms v. Prudential
Life Ins. Co. of Am., 140 N.C. App. 529, 534 (2000)). 	And, as is true of fraud, “[w]hen
alleging negligent misrepresentation, a plaintiff must satisfy the heightened pleading
standard . . . found in Rule 9.” Oliver v. Brown & Morrison, Ltd., 2022 NCBC LEXIS
26, at **15 (N.C. Super. Ct. Apr. 7, 2022).
64. 	Justifiable reliance in a negligent misrepresentation claim is analogous
to reasonable reliance in a fraud claim. 	See Marcus Bros. Textiles, 350 N.C. at 224
(for negligent misrepresentation, the “question of justifiable reliance is analogous to
that of reasonable reliance in fraud actions”); Bucci v. Burns, 2018 NCBC LEXIS 93,

at *4 (N.C. Super. Ct. Sept. 4, 2018) (“Justifiable reliance is an essential element of
claims for fraud . . . and negligent misrepresentation.”). Reliance is not justifiable if
a plaintiff could have learned the true facts through reasonable diligence and had the
opportunity to investigate, but failed to make reasonable inquiry. See BDM Invs. v.
Lenhil, Inc., 264 N.C. App. 282, 299 (2019); McGuire v. Lord Corp., 2020 NCBC
LEXIS 15, *14-15 (N.C. Super. Ct. Feb. 11, 2020). As is true with fraud, because it is
highly fact dependent, “the question of justifiable reliance is generally a factual issue
for the jury[.]” Ness v. Jones, 89 N.C. App. 504, 506 (1988).
65. 	Walker argues that because he owed no fiduciary duty to Shaver, he
owed him no other duty of care. 	And, as he argued with respect to Shaver’s fraud
claim, Walker contends that Shaver’s own allegations establish that Shaver’s reliance
on Walker alleged misstatements was unreasonable. 	Specifically, he contends that
Shaver was warned to consult counsel about his options, and the Stock Option
Agreement itself does not permit amendment that “in any manner [would be] adverse
to the Participant’s interest except by means of a writing signed by the Company and
Participant.” (See Compl. Ex. B; Supp. Br. 19-22; Reply Br. 14.)
66. 	The Court disagrees. 	Walker allegedly made the representations at
issue in the course of business for the purpose of guiding Shaver in a business
transaction. While he was under no duty to speak, when he chose to do so, intending
for Shaver to rely on his statements, a duty to exercise reasonable care arose. 	See
Ragsdale, 286 N.C. at 139 (“The rule is that even though a vendor may have no duty
to speak under the circumstances, nevertheless if he does assume to speak he must

make a full and fair disclosure as to the matters he discusses.”); Shaver v. N.C.
Monroe Constr. Co., 63 N.C. App. 605, 614 (1983) (“Defendants were under no duty
to speak, but once the Company spoke, it was required to make a full and fair
disclosure as to the matters discussed.”).
67. 	As for whether Shaver has alleged facts upon which a jury could
conclude that he justifiably relied on Walker’s statements, the Court first observes
that this case is factually dissimilar to cases in which the alleged misrepresentation
contradicted an express contract term. See, e.g., Boone Ford, Inc. v. IME Scheduler,
Inc., 262 N.C. App. 169, 175-76 (2018) (holding that where a representation is
controverted by the express terms of a contract, reliance unjustified as a matter of
law). In this case, Walker is alleged to have implicitly promised to use his authority
so that Shaver did not have to worry about the expiration date. 	To the extent that
fulfilling this promise would have required an amendment to the Option Agreement,
a jury could determine that it was reasonable for Shaver to believe that Walker would
honor an oral agreement. 	The contract required a written amendment only if the
change would be adverse to the Participant’s interest, and Shaver alleges that this
one was presented as an amendment that would be beneficial to him.
68. 	In short, giving Shaver the benefit of reasonable inferences, the Court
concludes that he has pleaded justifiable reliance. Whether he can prove it is a matter
for another day. See Stanford v. Owens, 46 N.C. App. 388, 395 (1980) (“it is generally
for the jury to decide whether plaintiff reasonably relied upon representations made
by defendant”).

69. 	Accordingly, the Motion with respect to Shaver’s claim for negligent
misrepresentation shall be DENIED.
IV. 	CONCLUSION
70. 	WHEREFORE, the Court hereby ORDERS as follows:
a. 	Defendants’ 	Motion 	as 	to 	Shaver’s 	claims 	for 	breach 	of
fiduciary 	and 	constructive 	fraud 	is 	GRANTED, 	and 	the
claims are hereby DISMISSED without prejudice.
b. 	Defendants’ Motion to Dismiss Shaver’s remaining claims is
DENIED.
IT IS SO ORDERED, this the 31st day of March, 2023.
/s/ Julianna Theall Earp
Julianna Theall Earp
Special Superior Court Judge
for Complex Business Cases