LFF IV TIMBER HOLDING LLC v. HEARTWOOD FORESTLAND FUND IV, LLC, 2024 NCBC 58

STATE OF NORTH CAROLINA
ORANGE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
23 CVS 1176
LFF IV TIMBER HOLDING LLC and
LYME MOUNTAINEER
TIMBERLANDS II LLC,
Plaintiffs,
v.
HEARTWOOD FORESTLAND FUND
IV, LLC; HEARTWOOD
FORESTLAND FUND IV LIMITED
PARTNERSHIP; and HEARTWOOD
FORESTLAND ADVISORS IV, LLC,
Defendants.
ORDER AND OPINION ON
DEFENDANTS’
MOTIONS TO DISMISS
THIS MATTER is before the Court on Defendant Heartwood Forestland Fund
IV, 	LLC 	(“Heartwood 	Fund”) 	and 	Heartwood 	Forestland 	Fund 	IV 	Limited
Partnership’s (“Heartwood LP”) Motion to Dismiss Plaintiffs’ Complaint (“First
Motion,” ECF No. 31), and Defendant Heartwood Forestland Advisors IV, LLC’s
(“Heartwood GP”) Motion to Dismiss Plaintiffs’ Complaint (“Second Motion,” ECF No.
34) (collectively, the “Motions”).1
THE 	COURT, 	having 	considered 	the 	Motions, 	the 	parties’ 	briefs, 	the
arguments of counsel, the applicable law, and all appropriate matters of record,
CONCLUDES that the Motions should be GRANTED in part and DENIED in part
as set forth below.
Robinson, Bradshaw & Hinson, P.A., by Edward F. Hennessey, IV,
Garrett Steadman, and Andrew R. Wagner, for Plaintiffs LFF IV Timber
Holding LLC and Lyme Mountaineer Timberlands II LLC.
1 Both of the Motions are based on substantively identical arguments. Therefore, the Court
does not differentiate in this Opinion between the First Motion and the Second Motion.
LFF IV Timber Holding LLC v. Heartwood Forestland Fund IV, LLC, 2024 NCBC
58.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, by Michael
W. 	Mitchell 	and 	John 	E. 	Harris, 	and 	Susman 	Godfrey, 	LLP, 	by
Alexander 	Kaplan, 	Krisina 	Janaye 	Zuniga, 	Julia 	Risley, 	Geoffrey
Harrison and John McCauley, and Eversheds Sutherland LLP, by
Timothy McCaffrey, for Defendants Heartwood Forestland Fund IV LLC
and Heartwood Forestland Fund IV Limited Partnership.
Womble Bond Dickenson LLP, by Patrick Grayson Spaugh, Sarah
Motley Stone, and Peyton Poston, for Defendant Heartwood Forestland
Advisors IV, LLC.
Davis, Judge.
INTRODUCTION
1. 	This case involves claims for indemnification by the purchaser of several
large timberlands against the sellers of the property. 	In a nutshell, the purchaser
contends that the sellers overstated carbon stocking data regarding the timberlands
to a state agency in connection with a “carbon cap-and-trade” program, thereby
exposing the purchaser to millions of dollars in potential liability. 	The sellers seek
dismissal of this action in its entirety.
FACTUAL AND PROCEDURAL BACKGROUND
2. 	The Court does not make findings of fact in connection with a motion to
dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure and
instead recites those facts contained in the complaint (and in documents attached to,
referred to, or incorporated by reference in the complaint) that are relevant to the
Court’s determination of the motion. 	See, e.g., Window World of Baton Rouge, LLC
v. Window World, Inc., 2017 NCBC LEXIS 60, at *11 (N.C. Super. Ct. July 12, 2017).

3. 	Plaintiffs 	LFF 	IV 	Timber 	Holding 	LLC 	and 	Lyme 	Mountaineer
Timberlands II LLC (collectively, “Lyme”) are companies that purchase and operate
timber investment properties in several states. 	(Defs.’ Br. Supp. Mot. Dismiss Pls.’
Compl., ECF No. 32, at 5–6).
4. 	Lyme is organized under Delaware law and has its principal offices in
New Hampshire. (Compl. ¶¶ 2–3, ECF No. 3.)
5. 	Defendant Heartwood LP is also in the timberland business. 	The
company is organized as a limited partnership under North Carolina law and has its
principal address in Orange County, North Carolina. (Compl. ¶ 4.)
6. 	Prior to a merger discussed below, Defendant Heartwood GP served as
Heartwood LP’s general partner. 	(Compl. ¶ 5.) 	Heartwood GP is a limited liability
company that is organized under North Carolina law and headquartered in Orange
County. 	(Compl. ¶ 5.) 	Lyme asserts that as Heartwood LP’s general partner,
Heartwood GP is jointly and severally liable with Heartwood LP for the claims Lyme
has asserted in this action. (Compl. ¶ 5.)
7. 	At all relevant times, Heartwood GP had a single manager, The
Forestland Group, LLC (“Forestland Group”). Forestland Group is a North Carolina
limited liability company based in Orange County, North Carolina. (Compl. ¶ 6.)
8. 	On 25 October 2022, Heartwood LP merged with a company called Anew
Merger Sub IV, LLC, a Delaware limited liability company. 	The surviving entity
upon completion of the merger was Heartwood LP, which at the time was still a North

Carolina-organized limited partnership, but is now principally based in Cottonwood
Heights, Utah. (Compl. ¶ 7.)
9. 	That 	same 	day, 	Heartwood 	LP 	converted 	to 	Heartwood 	Fund, 	a
Delaware limited liability company with a mailing address in Cottonwood Heights,
Utah. 	(Compl. ¶ 8.) 	According to Lyme’s Complaint, Heartwood Fund has either
“succeeded to all liability to Lyme held by [Heartwood LP]” or “shares such liability
jointly and severally with [Heartwood LP].” (Compl. ¶ 8.)2
10. 	Prior to December 2017, Heartwood owned approximately 97,323 acres
of timberland stretching across Wyoming, McDowell, and Logan counties in West
Virginia (the “Property”). (Compl. ¶¶ 23, 32.)
11. 	On 23 March 2015, Heartwood voluntarily enrolled the Property in a
“carbon cap-and-trade” program operated by the State of California’s Air Resources
Board (“ARB”). (Compl. ¶¶ 1, 23.)
12. 	The Complaint explains, as background information, how the ARB’s
carbon cap-and-trade program is part of a larger market for “carbon offsets.” Carbon
offsets are “tradeable credits representing a reduction in emissions of one metric ton
of greenhouse gas, generally carbon dioxide.” 	(Compl. ¶ 12.) 	An emitter can use
carbon offset credits to comply with “[environmental] regulatory requirements or to
voluntarily achieve its emission reduction goals.” (Compl. ¶ 12.)
2 For ease of reading and in an effort to avoid losing the forest for the trees, this Opinion
hereafter refers to Heartwood LP, Heartwood GP, Heartwood Fund, and Forestland Group
collectively as “Heartwood.”

13. 	Timberland owners such as Heartwood are able to earn carbon offset
credits through the ARB’s cap-and-trade program “by agreeing to cap future [timber]
harvesting activity” on their properties. (Compl. ¶ 14.) Consequently, carbon offset
credits serve as valuable economic incentives to reduce a timberland owner’s carbon
footprint. (Compl. ¶ 14.)
14. 	To begin earning carbon offset credits through the ARB’s cap-and-trade
program, a timberland owner must first take several steps. 	(Compl. ¶ 15.) 	These
include (1) making “a full inventory of [the timberland owner’s] property’s carbon
stocking”; (2) allowing an ARB-approved third party to verify the accuracy of the
inventory; (3) allowing “[a] private third-party registry . . . [to confirm] . . . the
proposed carbon project’s compliance with its standards”; and ultimately, (4) seeking
registration of the timberland owner’s property as a “carbon project” with the ARB.
(Compl. ¶¶ 15–16.)
15. 	Once the ARB designates a property as a “carbon project,” it will grant
that property’s owner an “initial issuance” of carbon offset credits. 	(Compl. ¶ 16.)
According to the Complaint, “[t]he initial issuance generally represents the largest
issuance of carbon offsets, and the largest revenue event, for an ARB-administered
carbon project.” 	(Compl. ¶ 16.) 	Shortly thereafter, the carbon offset credits are
deposited into the property owner’s ARB-administered account, which is akin to a
“bank debit account for carbon offsets.” (Compl. ¶ 16.)
16. 	Participation in the ARB’s cap-and-trade program necessarily requires
a timberland owner to subject itself to the ARB’s oversight, which continues for at

least 100 years following the initial issuance of carbon offset credits. (Compl. ¶ 17.)
During that century-long period, the current owner of the carbon project property is
referred to as the Offset Project Operator (“OPO”). (Compl. ¶ 17.)
17. 	An OPO is tasked with submitting annual reports (known as “desktop
reports”), which document the levels of carbon that are stored on the subject property.
(Compl. 	¶ 18.) 	Additionally, 	every 	seven 	years, 	the 	OPO 	must 	conduct 	a
“reverification” process and submit a reverification report, which includes a complete
re-inventorying of carbon stocks. (Compl. ¶ 20.)
18. 	An OPO’s “desktop” and “reverification” reports may occasionally reflect
increases in the amount of carbon stored on the project property since the date of the
ARB’s initial issuance, in which case the ARB will issue additional carbon offset
credits to account for any increases in carbon stockage. (Compl. ¶ 19.) Conversely, if
the amount of carbon stored on the OPO’s property decreases below levels recorded
at the time of the initial issuance (or any subsequent issuances), that property will
incur a “reversal of some or all of the previous credit issuances.” (Compl. ¶ 21.)
19. 	If a reversal is caused by factors outside of the OPO’s control—such as
natural disasters that affect carbon stocks on the OPO’s property—the ARB will deem
that reversal to be “unintentional,” and may issue replacement carbon offset credits
to compensate for any losses. 	(Compl. ¶ 22.) 	However, if a reversal is caused by
factors within the OPO’s control, the ARB will consider it an “intentional” reversal
and may impose penalties, including a requirement that the OPO purchase additional
carbon offset credits in order to rectify any deficiencies. (Compl. ¶ 22.)

20. 	One type of intentional reversal (the type alleged by Lyme in this
lawsuit) is that resulting from an overstatement of carbon stocks on the property at
issue. (Compl. ¶ 22.)
21. 	In anticipation of participating in the ARB’s cap-and-trade program,
Heartwood hired a third party to begin the process of conducting an initial inventory
of the carbon stocks on its Property in 2014 (the “Initial Inventory”). (Compl. ¶ 24.)
22. 	Upon completing the Initial Inventory in 2015, Heartwood submitted an
Initial Report—which is attached as Exhibit A to Lyme’s Complaint—to the ARB.
(Compl. ¶ 25; Ex. A.) This Initial Report summarized information about the carbon
stocks present on the Property during the period of time between 23 March 2015 and
23 September 2015. 	This period is referred to as “Reporting Period 1,” or “RP1.”
(Compl. ¶ 25.)
23. 	In its Complaint, Lyme has alleged that the carbon levels listed in the
Initial Report were “significantly overstated.” (Compl. ¶ 26.)
24. 	Heartwood received its initial issuance of carbon offset credits from the
ARB on 23 May 2017, and the Property was officially enrolled as a “carbon project”
(the “Wyoming Project”). 	(Compl. ¶ 27.) 	That initial issuance of credits was based
upon the carbon levels reflected in the Initial Report.
25. 	Heartwood 	subsequently 	provided 	the 	ARB 	with 	a 	second 	report
“quantifying the purported quantity of additional carbon sequestered during the
Carbon Project’s second reporting period (“RP2”).” (Compl. ¶ 28.) RP2 encompassed
the period of time between 24 September 2015 and 23 September 2016. (Compl. Ex.

B, at 2.)3 The ARB subsequently issued additional carbon offsets to Heartwood based
upon this second report. (Compl. ¶ 28.)
26. 	All in all, the ARB issued a total of 4,765,002 carbon offset credits for
RP1 and RP2. Those credits were allegedly worth over $50 million. (Compl. ¶ 29.)
27. 	In or around 2016, Heartwood invited Lyme to purchase portions of its
timberland, including the Property encompassing the Wyoming Project. 	(Compl.
¶ 30.)
28. 	On 20 July 2017, the parties entered into a Contract for the Purchase
and Sale of Property (the “PSA”), pursuant to which Heartwood agreed to sell to Lyme
182,476 acres of timberland across West Virginia, Kentucky, and Pennsylvania,
including the land encompassing the Wyoming Project (the “2017 Transaction”).
(Compl. ¶ 31.) At or around that same time, the parties executed a series of special
warranty deeds reserving to Heartwood the rights to all carbon offset credits that
were attributable through the end of RP2, including the full initial issuance of credits
from the ARB. (Compl. ¶ 33.)
29. 	Over the following months, the parties executed several amendments to
the PSA. 	The most relevant amendment to the PSA for purposes of this lawsuit is
the Fourteenth Amendment (ECF No. 33.3), which is discussed in more detail below.
30. 	The parties officially closed the 2017 Transaction on 18 December 2017
(the “Closing Date”). (Compl. ¶ 32.)
3 The remaining reporting period referenced in the Complaint (“RP3”) lasted from 24
September 2016 until 23 September 2017. (Compl., Ex. B, at 3.)

31. 	Pursuant to the terms of the Fourteenth Amendment to the PSA and as
a part of the 2017 Transaction, Lyme and Heartwood executed a “Carbon Cooperation
Agreement” (the “Wyoming CCA”)4, with respect to the Wyoming Project. 	(Compl.
¶ 34, Ex. B.) 	The Wyoming CCA provided—among other things—that Lyme would
ultimately “step into Heartwood’s shoes” as the Wyoming Project’s OPO once certain
conditions were met. (Wyo. CCA § 2(d); Compl. ¶ 34.) Once Lyme became the OPO,
Lyme would officially become the party answerable to the ARB regarding the
Wyoming Project. (Compl. ¶ 36.)
32. 	Notably, the Wyoming CCA also contained indemnity provisions, which
are at the core of this lawsuit. (Wyo. CCA § 9.)
33. 	At some point, Lyme took over for Heartwood as OPO for the Wyoming
Project (the “OPO Change Date”).5 (Compl. ¶ 35.)
34. 	During the intervening period between the Closing Date and the OPO
Change Date, Heartwood continued to submit annual “desktop” reports to the ARB
pursuant to Section 2(b) of the Wyoming CCA. (Tr., at 13.)
35. 	Following the OPO Change Date, Lyme began submitting its own
“desktop” reports to the ARB through 2021, although—unbeknownst to Lyme—these
4 The parties also entered into a second Carbon Cooperation Agreement, (the “Buffalo CCA,”
ECF No. 33.2), in connection with another ARB carbon project pertaining to an entirely
separate property purchased by Lyme. Unlike the Wyoming CCA (which serves as the basis
for Lyme’s indemnification claims in this action), the Buffalo CCA is not at issue in this
lawsuit.
5 The precise OPO Change Date is unclear from the Complaint, although at the hearing on
the Motions the attorneys estimated that it occurred during “the second quarter of 2018.”
(Tr., at 6–7.)

reports 	were 	based 	upon 	the 	alleged 	overstatements 	contained 	in 	the 	carbon
inventories that had been previously submitted by Heartwood. (Compl. ¶ 39.)
36. 	In or around 2023, in anticipation of the next seven-year “reverification”
report, Lyme commissioned a new physical inventory of the Property (the “Updated
Inventory”). (Compl. ¶ 40.)
37. 	According to Lyme, the results of the Updated Inventory reflected
carbon stocks that were “significantly below what the annual desktop inventories had
modeled, resulting in a reversal” (the “2023 Reversal”). (Compl. ¶ 41.)
38. 	On 1 June 2023, Lyme notified the ARB of the 2023 Reversal. (Compl.
¶ 42.)
39. 	Lyme asserts that as a result of the 2023 Reversal, it has incurred—or
will incur—the following expenses and costs:
[O]ut-of-pocket legal, investigative, and other costs relating to the
Updated Inventory, the 2023 Reverification and the 2023 Reversal and
their implications; [c]osts in relation to engagement with the ARB in
respect of the 2023 Reverification and the 2023 Reversal; [c]osts to
purchase carbon offsets to resolve the 2023 Reversal; [c]osts associated
with the ongoing management of the Property based on the lower carbon
stocking (i.e. the need to maintain additional carbon stocking from new
growth moving forward or to limit harvests from what had been
represented to Lyme as acceptable harvest levels); and [c]osts in the
course of efforts to pursue as against Defendants its rights under the
[indemnification provisions of the Wyoming CCA].
(Compl. ¶ 44.)
40. 	Lyme initiated this action by filing a Complaint in Orange County
Superior Court on 20 October 2023. In its first four claims, Lyme asserted causes of
action against Heartwood for declaratory and monetary relief with respect to
Heartwood’s alleged duty to indemnify Lyme pursuant to the terms of the Wyoming

CCA for its current and future losses resulting from the reversal. (Compl. ¶¶ 47–56.)
In its fifth claim, Lyme pled a claim for unjust enrichment. (Compl. ¶ 57–60.)
41. 	This matter was designated as a mandatory complex business case and
assigned to the undersigned on 23 October 2023. (ECF Nos. 1, 2.)
42. 	Heartwood Fund and Heartwood LP filed their respective Motions on 20
December 2023.
43. 	The Court held a hearing on the Motions on 26 June 2024 at which all
parties were represented by counsel.
44. 	The Motions have been fully briefed and are ripe for resolution.
LEGAL STANDARD
45. 	In ruling on a motion to dismiss under Rule 12(b)(6), the Court may only
consider the pleading and “any exhibits attached to the [pleading,]” Krawiec v. Manly,
370 N.C. 602, 606 (2018), in order to 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., Inc., 336 N.C. 438, 442 (1994) (cleaned up). The Court
must view the allegations in the complaint “in the light most favorable to the non-
moving party.” 	Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017)
(cleaned up).
46. 	“It is well established that dismissal pursuant to Rule 12(b)(6) is proper
when ‘(1) the complaint on its face reveals that no law supports the plaintiff’s claim;
(2) the complaint on its face reveals the absence of facts sufficient to make a good

claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff’s
claim.’ ” Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting Wood
v. Guilford Cty., 355 N.C. 161, 166 (2002)).
ANALYSIS
47. 	The bulk of the arguments in Heartwood’s briefs are based on its
assertion that neither of the two indemnification provisions in the Wyoming CCA
relied upon by Lyme apply to any overstatement of carbon deposits Heartwood may
have made in its Initial Inventory. 	This is so, Heartwood argues, because the
indemnification provisions only apply to events that occurred after the Closing Date.
(Defs.’ Br. Supp. Mot. Dismiss Pls.’ Compl., at 3–4, 13–14, 24–26.)
48. 	Before delving into the specific arguments raised by the parties on this
topic, the Court will address three threshold issues.
49. 	First, 	the Court 	must 	determine 	which of 	the various 	documents
discussed by the parties in their respective briefs it is permitted to consider on the
present Motions.
50. 	In addressing a Rule 12(b)(6) motion, the Court “can reject allegations
that are contradicted by the documents attached [to], specifically referred to, or
incorporated by reference in[,] the complaint.” Moch v. A.M. Pappas & Assocs., LLC,
251 N.C. App. 198, 206 (2016) (quoting Laster v. Francis, 199 N.C. App. 572, 577
(2009)). Moreover, the Court “may properly consider documents which are the subject
of a plaintiff’s complaint and to which the complaint specifically refers even though
they are presented by the defendant.” Oberlin Capital, L.P. v. Slavin, 147 N.C. App.

52, 60 (2001) (citing Robertson v. Boyd, 88 N.C. App. 437, 441 (1988)). The Court is
permitted to consider such documents without converting the Rule 12(b)(6) motion to
dismiss into a motion for summary judgment under Rule 56. 	Schlieper v. Johnson,
195 N.C. App. 257, 261 (2009).
51. 	However, consideration of any other types of documents on a Rule
12(b)(6) motion is improper, as “[p]erhaps the most fundamental concept of motions
practice under Rule 12 is that evidence outside the pleadings cannot be considered in
determining whether the complaint states a claim on which relief can be granted.”
Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *10 (N.C. Super. Ct.
June 19, 2019) (cleaned up).
52. 	Here, neither party disputes the fact that the Court can properly
consider the PSA, the Fourteenth Amendment to the PSA, and the Wyoming CCA.
53. 	The only point of contention on this subject relates to the Buffalo CCA.
Heartwood submits that consideration of this document is proper because it was
executed at the same time as the other documents referenced in the Complaint.
(Defs.’ Reply Br. Supp. Mot. Dismiss Pls.’ Compl., ECF No. 47, at 9.) 	However,
because 	the 	Buffalo 	CCA 	is 	neither attached to 	the 	Complaint 	nor expressly
referenced therein, the Court declines to consider it in connection with the present
Motions.
54. 	Second, Heartwood contends that the Complaint is impermissibly vague
and that Lyme should be required to file a more detailed recitation of its claims.
(Defs.’ Br. Supp. Mot. Dismiss Pls.’ Compl., at 4, 12, 21–24.)

55. 	It is well-settled that North Carolina is a notice pleading state, meaning
that, as a general proposition, claims pled in a complaint
need only meet the requirements of Rule 8(a) of the North Carolina
Rules of Civil Procedure. 	See Haynie v. Cobb, 207 N.C. App. 143, 148,
698 S.E.2d 194, 198 (2010) (“The general standard for civil pleadings in
North Carolina is notice pleading.” (quoting Murdock v. Chatham Cty.,
198 N.C. App. 309, 316, 679 S.E.2d 850, 855 (2009)). Under Rule 8(a)(1),
a pleading asserting a claim must contain “[a] short and plain statement
of the claim sufficiently particular to give the court and the parties
notice of the transactions, occurrences, or series of transactions or
occurrences, intended to be proved showing that the pleader is entitled
to relief[.]” 	N.C. R. Civ. P. 8(a)(1). 	Under this “notice pleading”
standard, “a statement of claim is adequate if it gives sufficient notice
of the claim asserted to enable the adverse party to answer and prepare
for trial, to allow for the application of the doctrine of res judicata, and
to show the type of case brought.” 	Wake Cty. v. Hotels.com, L.P., 235
N.C. App. 633, 646, 762 S.E.2d 477, 486 (2014) (quoting Sutton, 277 N.C.
at 102, 176 S.E.2d at 165).
Tillery Envt’l. LLC v. A&D Holdings, Inc., 2018 NCBC LEXIS 13, at *77–78
(N.C. Super. Ct. Feb. 9, 2018).
56. 	Here, although the Complaint is quite specific in all other respects as to
the factual background of the parties’ dispute and the provisions of the Wyoming CCA
under which Lyme seeks indemnification, it is admittedly short on specifics as to the
actual overstatement by Heartwood of the carbon estimates at issue that forms the
basis for its indemnification request. The most relevant allegations in the Complaint
on this subject merely state as follows:
Upon 	information 	and 	belief, 	the 	Initial 	Inventory 	significantly
overstated the carbon stocking on the property.
. . .
The Updated Inventory indicated that carbon stocks were significantly
below what the annual desktop inventories had modeled, resulting in a
reversal[.]

(Compl. ¶¶ 26, 41.)
57. 	Lyme has also attached as Exhibit A to the Complaint the Initial Report
that was submitted to the ARB by Heartwood—a document technically captioned the
“U.S. Forest Offset Project Data Report”—which contains numerical data that
allegedly reflects the overstatements at issue. (Compl., Ex A.)
58. 	The Court finds that Lyme’s Complaint meets North Carolina’s notice
pleading standard. The Complaint (and its attachments) sufficiently put Heartwood
on notice as to the nature of Lyme’s claims and the specific provisions of the Wyoming
CCA under which it seeks indemnity.
59. 	Read 	as 	a 	whole, 	the 	Complaint 	alleges 	that 	Heartwood’s 	Initial
Inventory submitted to the ARB contained overstated carbon estimates (as set forth
in the Initial Report), that the ARB relied on those estimates in issuing carbon offset
credits to Heartwood for which it received millions of dollars, and that Lyme (as the
purchaser of the Property) will be held liable for the consequences of the 2023
Reversal 	resulting 	from 	Heartwood’s 	overstatements 	so 	as 	to 	trigger 	the
indemnification provisions of the Wyoming CCA.
60. 	We have previously observed that “stating a claim for breach of contract
is a relatively low bar.” 	Vanguard Pai Lung, LLC, 2019 NCBC LEXIS 39, at *11.
Although Lyme will, of course, have to make a more detailed showing at later stages
of this litigation, the Court concludes that its allegations are sufficient to pass muster
under Rule 12(b)(6). See, e.g., Dunn Holdings I, Inc. v. Confluent Health LLC, 2018
NCBC LEXIS 215, at *12–13 (N.C. Super. Ct. Dec. 10, 2018) (finding that when a

complaint alleges each of the elements of the claim pled therein, “it is error to
dismiss . . . [that claim] . . . under Rule 12(b)(6).”) (cleaned up).
61. 	Third, Heartwood contends that the overstatements alleged by Lyme, if
proven, would have resulted simply from pure estimates of carbon deposits by
Heartwood and that mere estimates (even if later proven to be incorrect) cannot form
the basis for the indemnification Lyme is seeking. (Defs.’ Br. Supp. Mot. Dismiss Pls.’
Compl., at 23.)
62. 	However, the Court rejects this argument as well—at least at the
current pleadings stage of this case. 	Lyme has asserted that the “estimates” were
made under oath and formed the basis for the ARB’s issuance of credits to Heartwood
worth millions of dollars. (Pls.’ Br. Responding Jointly Defs.’ Mots. Dismiss, ECF No.
43, at 21.) 	Therefore, Heartwood’s attempt to minimize the formality of the carbon
data information it provided to the ARB is not sufficient to warrant dismissal of
Lyme’s Complaint.
63. 	Having resolved these 	threshold issues, 	the 	Court 	next addresses
Lyme’s indemnification claims and then its unjust enrichment claim.
A. Indemnification Claims
64. 	The Wyoming CCA sets out various terms regarding the rights and
obligations of Heartwood and Lyme in connection with the Wyoming Project. Section
9(b) of the Wyoming CCA contains four provisions setting out the indemnity
obligations of Heartwood toward Lyme. Two of those provisions—sections 9(b)(i) and

(iii)—form the basis for Lyme’s arguments in this case. Those two provisions (along
with the introductory language of Section 9(b)) state, in relevant part, as follows:
b. 	[Heartwood] 	Indemnities. 	[Heartwood] 	shall
indemnify, defend and hold [Lyme] and [Lyme]’s affiliates and their
respective members, managers, partners, officers, directors, employees,
shareholders, 	and 	agents 	(collectively, 	the 	"[Lyme] 	Indemnified
Parties”) harmless from and against any and all liabilities, losses,
damages, claims, costs, fees, penalties, charges, assessments, taxes,
fines or expenses (including reasonable and actual attorneys' fees,
investigation costs and all other reasonable costs and expenses actually
incurred) 	(collectively, 	“Costs”) 	and 	any 	actions 	or 	proceedings 	in
connection therewith, arising out of or in connection with:
i. 	Any 	reversal 	or 	invalidation 	of 	the 	Reserved 	Carbon
Credits due to: (y) any act or omission by [Heartwood]
occurring or which should have occurred prior to the OPO
Change 	Date 	with 	respect 	to 	the 	Property; 	or 	(z)
[Heartwood]’s willful failure to carry out its obligations
under this Agreement, except to the extent such failure
results from the negligence or willful act or omission of any
of the [Lyme] Indemnified Parties;
. . .
iii. 	[Heartwood]’s breach of the representation and warranty
contained 	in 	Section 	2.e. 	of 	this 	Carbon 	Cooperation
Agreement or of any representation or warranty made by
[Heartwood] 	as 	OPO 	in 	any 	Reserved 	Offset 	Period
Submissions or any RP3 Submissions[.]
(Wyo. CCA § 9(b)(i), (iii).)
65. 	The crux of the parties’ dispute in this case largely concerns whether
Lyme is entitled to indemnity from Heartwood for losses attributable to events
occurring before the Closing Date. (Lyme says yes and Heartwood says no.)
66. 	Heartwood 	insists 	that 	the 	Wyoming 	CCA 	was 	purely 	“forward-
looking”—that is, solely intended to set out the parties’ rights and obligations from
the Closing Date until the OPO Change Date. 	(Defs.’ Br. Supp. Mot. Dismiss Pls.’

Compl., at 13–14, 24–26.) 	Lyme acknowledges that the rights and duties of the
parties during the period when Lyme was the owner of the Property yet Heartwood
remained the OPO were among the key subjects addressed in the Wyoming CCA.
Nevertheless, Lyme contends, certain provisions of the Wyoming CCA also govern
conduct 	occurring 	before 	the 	Closing 	Date 	and 	that 	the 	two 	above-quoted
indemnification provisions fall into this category. 	Lyme further asserts that when
the parties intended for a particular provision of the Wyoming CCA to apply only to
future conduct, they used specific language to make their intentions clear, but did not
do so in sections 9(b)(i) and (iii). 	(Pls.’ Br. Responding Jointly Defs.’ Mots. Dismiss,
at 13–16.)
67. 	Each party tries to put a favorable spin on the fact that the original
version of the PSA included a Schedule 9(d) that would have expressly allowed
indemnification for pre-Closing Date conduct but was ultimately deleted pursuant to
the 	Fourteenth 	Amendment 	to 	the 	PSA 	and 	replaced 	by 	the 	Wyoming 	CCA.
(Fourteenth Am. § 4.) 	Schedule 9(d) stated, in relevant part, as follows:
5. [Heartwood] shall indemnify [Lyme] and any purchaser of carbon
offsets attributable to the period prior to the Closing Date for losses
incurred 	as 	a 	result 	of 	a 	reversal 	or 	invalidation, 	and 	shall 	be
responsible for actions or obligations (including without limitation costs
incurred or resources expended by [Lyme] in connection with any ARB
investigation) arising from such reversal or invalidation, due to any act
or omission occurring or which should have occurred prior to the Closing,
or arising out of the [Heartwood] OPO Responsibilities.
(Schedule 9(d), ECF No. 43.1 (emphasis added).)
68. 	Lyme argues that the presence of Schedule 9(d) in the PSA (before the
parties ultimately decided to delete it in favor of a more comprehensive document—

the Wyoming CCA) shows that, during the parties’ relationship, there was a meeting
of the minds that pre-Closing Date conduct could trigger indemnity obligations by
Heartwood. (Pls.’ Br. Responding Jointly Defs.’ Mots. Dismiss, at 7–8.)
69. 	Heartwood, conversely, contends that the fact that the parties later
chose to delete Schedule 9(d) and to avoid using such express language in the
Wyoming CCA suggests that the parties lacked a meeting of the minds on this issue
when it mattered most—that is, at the time the Wyoming CCA was executed. (Defs.’
Reply Br. Supp. Mot. Dismiss Pls.’ Compl., at 8.)
70. 	With the parties’ respective contentions in mind, the Court must analyze
the actual language of sections 9(b)(i) and (iii). In so doing, the Court interprets the
Wyoming CCA in accordance with the usual principles of contract construction.
“[Courts] must construe [a] contract as a whole and an indemnity provision must be
appraised in relation to all other provisions.” 	WakeMed v. Surgical Care Affiliates,
LLC, 243 N.C. App. 820, 825 (2015) (cleaned up).
i. 	Section 9(b)(i)
71. 	It is well settled that a contract interpretation issue cannot be resolved
at the Rule 12(b)(6) stage where each party has shown that the provision at issue is
reasonably susceptible to materially different interpretations. 	See, e.g., Schenkel &
Schultz, Inc. v. Hermon F. Fox & Assocs., P.C., 362 N.C. 269, 273 (2008) (noting that
“[a]n ambiguity exists in a contract when either the meaning of words or the effect of
provisions is uncertain or capable of several reasonable interpretations[,]” (quoting
Register v. White, 358 N.C. 691, 695 (2004)), and holding that “[w]hen an agreement

is ambiguous and the intention of the parties is unclear . . . , interpretation of the
contract is for the jury”); WakeMed, 243 N.C. App. at 827 (reversing trial court’s
dismissal under Rule 12(b)(6) after finding a contractual provision to be ambiguous
due to the contractual language being “reasonably susceptible to either of the
interpretations asserted by the parties” (quoting Dockery v. Quality Plastic Custom
Molding, 	Inc., 	144 	N.C. 	App. 	419, 	422 	(2001)), 	and 	further 	holding 	that
“interpretation of an ambiguous contract is best left to the trier of fact”).
72. 	In accordance with these principles, the Court finds that Lyme has
offered a plausible interpretation of Section 9(b)(i) in support of its position, thereby
foreclosing the dismissal of this action under Rule 12(b)(6).
73. 	Stripped of its non-essential words, Section 9(b)(i) reads as follows: “Any
reversal . . . of the Reserved Carbon Credits due to . . . any act or omission by
[Heartwood] 	occurring . . . prior 	to 	the 	OPO 	Change 	Date 	with 	respect 	to 	the
Property . . .[.]” (Wyo. CCA § 9(b)(i).)
74. 	As even Heartwood’s counsel conceded at the June 26 hearing, if read in
a vacuum, this language encompasses Lyme’s theory of indemnity in this case. After
all, the entire basis for this lawsuit is Lyme’s contention that a reversal of the
reserved 	carbon 	credits 	previously 	issued 	by 	the 	ARB 	has 	occurred 	due 	to
Heartwood’s act of overstating the carbon stocking on the Property in its Initial
Inventory, which occurred “prior to the OPO Change Date.”
75. 	However, Heartwood argues that this language should not be read in a
vacuum. 	Instead, Heartwood asserts, the language should be construed in light of

the fact that the underlying purpose of the Wyoming CCA was to provide guidance to
the parties during the time when Heartwood was still the OPO, despite Lyme being
the 	Property’s 	owner. 	In furtherance 	of 	this argument, 	Heartwood offers 	an
alternative 	interpretation 	of 	Section 	9(b)(i) 	that 	seeks 	to 	give 	the 	phrase
“occurring . . . prior to the OPO Change Date” a more restrictive meaning—the period
of time between the Closing Date and the OPO Change Date. (Defs.’ Br. Supp. Mot.
Dismiss Pls.’ Compl., at 13–14.)
76. 	Lyme, in turn, asks the Court to adopt a “plain meaning” approach,
arguing that the phrase “occurring . . . prior to the OPO Change Date” means just
what it says and is satisfied here given that the Initial Inventory was submitted by
Heartwood on a date earlier in time than the OPO Change Date (regardless of
whether the Initial Inventory was submitted before or after the Closing Date). (Pls.’
Br. Responding Jointly Defs.’ Mots. Dismiss, at 3, 12–13.)
77. 	Heartwood makes three specific arguments as to why its proffered
construction is superior to that of Lyme.
78. 	First, Heartwood contends that certain provisions of the PSA disclaim
any warranties or representations made by Heartwood in connection with the
Property, 	which 	would 	include 	(according 	to 	Heartwood) 	any 	overstatements
contained in the Initial Inventory. (Defs.’ Br. Supp. Mot. Dismiss Pls.’ Compl., at 14–
15.)

79. 	However, 	Lyme 	counters 	this 	argument 	by 	contending 	that 	these
disclaimers only apply to misrepresentations made to Lyme, rather than to a third
party such as the ARB. (Pls.’ Br. Responding Jointly Defs.’ Mots. Dismiss, at 6.)
80. 	Additionally, Lyme points to Schedule 9(d) of the PSA which—as noted
above—expressly provided for Lyme to be indemnified for pre-Closing Date acts
committed by Heartwood. (Schedule 9(d) § 5.) Although Schedule 9(d) was ultimately
deleted from the PSA pursuant to the Fourteenth Amendment thereto upon the
parties’ agreement to instead execute the Wyoming CCA, its initial inclusion lends
credence to Lyme’s argument that the disclaimer provisions in the body of the PSA
relied upon by Heartwood were not meant to entirely preclude Lyme from seeking
indemnity from Heartwood for acts or omissions committed prior to the Closing Date.
81. 	Moreover, 	as 	Lyme 	points 	out, 	the 	concept 	of 	“reversals” 	is 	not
mentioned—much 	less 	disclaimed—in 	the 	PSA, 	yet 	it 	is 	expressly 	(indeed,
prominently) referenced in Section 9(b)(i) of the Wyoming CCA’s indemnification
provisions. (Pls.’ Br. Responding Jointly Defs.’ Mots. Dismiss, at 4–5.)
82. 	Second, Heartwood contends that Lyme’s interpretation of Section
9(b)(i) conflicts with the canon of construction that the specific controls over the
general. (Defs.’ Reply Br. Supp. Mot. Dismiss Pls.’ Compl., at 6.) See, e.g., McClure
v. Ghost Town in the Sky, LLC, 2022 NCBC LEXIS 151, at **6 (N.C. Super. Ct. Dec.
5, 2022) (discussing the traditional rule that “general terms should give way to the
specifics” in a contract) (cleaned up).

83. 	Heartwood bases this argument on the notion that the phrase “act or
omission” in Section 9(b)(i) is not as specific as the phrase “breach of . . . any
representation or warranty” found in Section 9(b)(iii). As a result, Heartwood argues,
because Lyme’s assertion that Heartwood overstated the carbon deposits, if proven,
would constitute a misrepresentation, it could only be potentially covered by Section
9(b)(iii) rather than 9(b)(i), and Section 9(b)(iii) lacks the phrase “occurring . . . prior
to the OPO Change Date.” (Defs.’ Reply Br. Supp. Mot. Dismiss Pls.’ Compl., at 6.)
84. 	However, an alternative application of this canon would be to say that,
on these facts, Section 9(b)(i) is actually more specific than Section 9(b)(iii) in that the
former is limited to losses resulting from reversals (the very type of loss Lyme is
asserting in this case) while the latter encompasses numerous other types of losses.
85. 	Similar logic defeats Heartwood’s third argument, which is that Lyme’s
proposed interpretation would render Section 9(b)(iii) superfluous. (Defs.’ Reply Br.
Supp. Mot. Dismiss Pls.’ Compl., at 7.)
86. 	Once again, a plausible interpretation of Section 9(b)(i) is that it is the
sole indemnification provision addressing losses incurred due to reversals and that
Section 9(b)(iii), in turn, covers other types of losses not attributable to reversals.
Under that interpretation, neither provision would be superfluous.
87. 	In 	sum, 	the 	Court 	concludes 	that 	Lyme 	has 	offered 	a 	plausible
competing interpretation of Section 9(b)(i). 	As a result, the Court cannot adopt one
party’s interpretation over the other at the Rule 12(b)(6) stage.

ii. 	Section 9(b)(iii)
88. 	As noted above, Section 9(b)(iii) covers breaches of “any representation
or warranty made by [Heartwood] as OPO in any Reserved Offset Period Submissions
or any RP3 Submissions.” 	(Wyo. CCA § 9(b)(iii).) 	The fifth recital in the Wyoming
CCA defines “Reserved Offset Period” as follows:
WHEREAS, the Reserved Offset Period is comprises [sic] two reporting
periods: (i) a six month period, commencing March 23, 2015 and ending
on 	September 	23, 	2015 	(“RP1”); 	and 	(ii) 	a 	twelve 	month 	period
commencing September 24, 2015 and ending on September 23, 2016
(“RP2”);
(Wyo. CCA, at 2.)
89. 	The phrase “Reserved Offset Period Submissions” is defined in Section
2(b) of the Wyoming CCA as follows:
b. 	[Heartwood] OPO Responsibilities re Reserved Offset Period.
While 	[Heartwood] 	remains 	OPO, 	[Heartwood] 	shall 	be 	solely
responsible for preparing, executing and submitting to the Offset Project
Registry 	(the 	“OPR”) 	the 	Offset 	Project 	Data 	Report 	and 	related
documentation, instruments, filings, and attestations for the Reserved
Offset Period, if any (the “Reserved Offset Period Submissions”).
(Wyo. CCA § 2(b).)
90. 	The language used in these provisions appears to support Heartwood’s
argument that Section 9(b)(iii) is forward-looking in nature. However, in light of its
determination that Lyme’s interpretation of Section 9(b)(i) is plausible, the Court
need not fully analyze the parties’ arguments regarding Section 9(b)(iii). As a result,
the Court makes no determination at the present time as to whether any ambiguity
exists as to the latter provision.
91. 	Accordingly, the Motions are DENIED as to Lyme’s indemnity claims.

B. Unjust Enrichment Claim
92. 	The Court reaches a different conclusion as to Lyme’s claim for unjust
enrichment.
93. 	In its unjust enrichment claim, Lyme contends that to the extent it
cannot recover from Heartwood under the indemnity provisions of the Wyoming CCA,
Lyme would still be entitled to equitable relief on account of Heartwood unfairly
receiving “substantial benefits” from overstating the carbon quantities that were
provided to the ARB through the Initial Inventory. (Compl. ¶¶ 57–60.)
94. 	In the Motions, Heartwood argues that an unjust enrichment claim
cannot exist where, as here, the parties agree that a legally valid express contract
existed between them. (Defs.’ Br. Supp. Mot. Dismiss Pls.’ Compl., at 26–28.)
95. 	The elements of a claim for unjust enrichment are as follows:
First, one party must confer a benefit upon the other party. . . . Second,
the benefit must not have been conferred officiously, that is it must not
be conferred by an interference in the affairs of the other party in a
manner that is not justified in the circumstances. . . . Third, the benefit
must not be gratuitous. . . . Fourth, the benefit must be measurable. . . .
Last, the defendant must have consciously accepted the benefit.
Butler v. Butler, 239 N.C. App. 1, 8 (2015) (quoting JPMorgan Chase Bank, Nat’l Ass’n
v. Browning, 230 N.C. App. 537, 541–42 (2013)).
96. 	It is clear that neither party in this case is challenging the validity of
either the PSA or the Wyoming CCA.
97. 	This Court has previously stated as follows:
The general rule of unjust enrichment is that where services are
rendered and expenditures made by one party to or for the benefit of
another, without an express contract to pay, the law will imply a promise

to pay a fair compensation therefor. The claim is not based on a promise
but is imposed by law to prevent an unjust enrichment. 	However, if
there is a contract between the parties[,] the contract governs the claim
and the law will not imply a contract.
Value Health Sols. Inc. v. Pham. Research Assocs., Inc., 2020 NCBC LEXIS 65, at *37
(N.C. Super. Ct. May 22, 2020), aff’d in part, rev’d in part on other grounds, 385 N.C.
250 (2023) (cleaned up). 	Other North Carolina courts have similarly held that “an
express contract precludes an implied contract with reference to the same matter.”
Ron Medlin Constr. v. Harris, 364 N.C. 577, 580 (2010) (quoting Vetco Concrete Co. v.
Troy Lumber Co., 256 N.C. 709, 713 (1962)). See also U.S. Bank Nat’l Ass’n v. Sofield,
No. 5:16-cv-00084-RLV-DSC, 2017 WL 256740, at *4 (W.D.N.C. June 13, 2017) (“An
implied contract and an express contract cannot co-exist[.]”); Rongotes v. Pridemore,
88 N.C. App. 363, 368 (1988) (“The unjust enrichment theory does not operate to alter
the terms of a[n] enforceable contract.”).
98. 	The Court notes that the facts of this case are particularly ill-suited for
an unjust enrichment claim. Here, as discussed in detail throughout this opinion, the
parties 	expressly 	drafted 	provisions 	in 	the 	Wyoming 	CCA 	to 	govern 	the
circumstances under which each side would be entitled to indemnification from the
other. Ultimately, either the Court or a jury will make a final decision as to whether
the indemnification provisions at issue entitle Lyme to relief. 	It would make little
sense to hold that a party unsuccessful at seeking indemnification under explicit
contractual provisions could nevertheless obtain the same relief under an equitable
theory of recovery.

99. 	Therefore, Heartwood’s Motions to dismiss Lyme’s unjust enrichment
claim are GRANTED and that claim is dismissed with prejudice.6 See Total Merch.
Servs., LLC v. TMS NC, Inc., 2022 NCBC LEXIS 83, at **35 (N.C. Super. Ct. July 29,
2022) (“[G]iven that the parties do not dispute the existence of the 2008 Agreement
and both Plaintiff and Defendants assert claims based on its alleged breach,
the . . . Original Counterclaim against Plaintiff for unjust enrichment is hereby
dismissed with prejudice.”); Krieger v. Johnson, 2014 NCBC LEXIS 13, at **8 (“A
claim for unjust enrichment is properly dismissed where the complaint reveals the
existence of a contract between the parties.”); Wrightsville Beach Prop., LLC v. Attwa,
NO. 7:23-CV-1062-FL, 2023 WL 8100189, at *9 –*10 (E.D.N.C. Nov. 21, 2023)
(distinguishing cases in which the Court “allowed an unjust enrichment claim to be
[pled] in the alternative ‘when the validity of the contract [was] in question[,]’ ”
(quoting Indep. Warehouse v. Kim, No. 4:17-CV-49-BO, 2017 WL 4322399, at *2
(E.D.N.C. Sept. 28, 2017)), from the case at bar in which “there [was] no such question
of contract validity arising from the facts alleged in the . . . complaint”).
CONCLUSION
THEREFORE, IT IS ORDERED as follows:
1. 	The First and Second Motions are DENIED with respect to Lyme’s first,
second, third, and fourth claims for relief.
6 Heartwood also argues that Lyme’s unjust enrichment claim is time-barred under the
relevant statute of limitations. 	(Defs.’ Br. Supp. Mot. Dismiss Pls.’ Compl., at 5, 28–30.)
However, this argument is moot due to the Court’s dismissal of the unjust enrichment claim
on the ground set out above.

2. 	The First and Second Motions are GRANTED with regard to Lyme’s fifth
claim for relief (unjust enrichment), and that claim is DISMISSED with
prejudice.
SO ORDERED, this the 6th day of September, 2024.
/s/ Mark A. Davis
Mark A. Davis
Special Superior Court Judge
for Complex Business Cases