Red Fox Future, LLC v. Holbrooks

Red Fox Future, LLC v. Holbrooks, 2014 NCBC 42.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
POLK COUNTY 11 CVS 108

RED FOX FUTURE, LLC and
ANDREY MEDVEDEV,

Plaintiffs,
ORDER AND OPINION
v.

GENE S. HOLBROOKS, HOME
REALTY CO. & INSURANCE AGENCY,
INC., TONY JACKSON, and RED FOX
PROPERTIES, LLC,

Defendants.

Patla, Straus, Robinson & Moore, P.A., by Richard S. Daniels, for Plaintiffs
Red Fox Future, LLC, and Andrey Medvedev.

Tuggle Duggins, P.A., by Robert C. Cone, for Defendants Gene S. Holbrooks
and Home Realty Co. & Insurance Agency, Inc.

David Lloyd Law Office, by David A. Lloyd, for Defendants Tony Jackson and
Red Fox Properties, LLC.

Bledsoe, Judge

THIS MATTER is before the Court on Defendants Gene S. Holbrooks

(“Holbrooks”) and Home Realty Co. & Insurance Agency, Inc.’s (“Home Realty”)

(collectively, the “Holbrooks Defendants”) Motion for Award of Attorneys’ Fees and

Costs (the “Motion”) in the above-captioned case. Upon considering the Motion, the

briefs filed in support of and in opposition to the Motion, and the arguments of

counsel made at a hearing held on August 26, 2014, the Court hereby DENIES the

Motion.

I.
BACKGROUND
{1} The factual and procedural background of this case is recited in detail in

Red Fox Future, LLC v. Holbrooks, 2014 NCBC 8 (N.C. Super. Ct. March 24, 2014),

http://www.ncbusinesscourt.net/opinions/2014_NCBC_8.pdf (the “Summary

Judgment Order”). The facts pertinent for purposes of resolving the present Motion

are set forth below.

{2} Holbrooks is the owner and president of Home Realty, a North Carolina

corporation, which purchased the Red Fox Country Club (the “Club”) in 1992. Id. at

¶ 9.

{3} Plaintiff Andrey Medvedev (“Medvedev”) and Defendant Tony Jackson

(“Jackson”) formed Plaintiff Red Fox Future, LLC (“Future”) in the summer of 2009,

with the objective of purchasing the Club from the Holbrooks Defendants. Id. at ¶¶

11-12. Medvedev, a Russian businessman, had played golf at the Club but was

unfamiliar with its day-to-day business operations; Jackson, on the other hand, had

worked at the Club since 1992, including as General Manager, and had a personal

relationship with Holbrooks. Id. at ¶¶ 9-11. Plaintiffs allege that Medvedev’s

decision to invest in the Club was motivated, at least in part, by Jackson’s

knowledge of the Club and representations that he sought to invest in the venture

personally. (Compl. ¶ 8.)

{4} On August 29, 2009, Future and the Holbrooks Defendants entered into a

written agreement (the “Purchase Agreement”), pursuant to which Future agreed to

purchase the Club from the Holbrooks Defendants for $2,850,000. Summary

Judgment Order at ¶¶ 13-14. Of the total purchase price, $650,000 consisted of a
loan from the Holbrooks Defendants to Jackson. Id. at ¶ 13. Medvedev agreed to

contribute $1,620,000, and the remaining $580,000 was to derive from outside

investors. Id. at ¶¶ 13-15. The parties also agreed that neither Medvedev nor

Future would be held liable in the event that Jackson defaulted on the loan from

the Holbrooks Defendants.

{5} Future encountered difficulty in attracting the outside investors needed to

consummate its purchase of the Club. Thus, as permitted under the Purchase

Agreement, Future paid a total of $650,000 in non-refundable deposits to the

Holbrooks Defendants in order to extend the closing date to April 1, 2010.1 Id. at ¶¶

15-17. Despite the additional time, however, Future was unable to raise sufficient

funds through outside investors, and the deal fell through. Id. at ¶ 18.

{6} Soon thereafter, Jackson and the Holbrooks Defendants entered into

negotiations for Jackson’s purchase of the Club – without Medvedev or Future –

through a newly formed entity, Red Fox Properties, LLC (“Properties”). Id. at ¶ 19.

This deal also fell through, however, and the Holbrooks Defendants subsequently

listed the Club for sale at a purchase price of $2,200,000. Id.

1 The Purchase Agreement contemplated a closing date of October 15, 2009, with provisions for

extension. Id. at ¶ 15. In accordance with these extension provisions, Future remitted to the
Holbrooks Defendants a $100,000 non-refundable deposit, which, in addition to a $50,000 earnest
money deposit paid by Future prior to closing, the Holbrooks Defendants retained in exchange for an
extension of the closing date to December 10, 2009. Id. Additionally, and as prescribed under the
Purchase Agreement, Future acquired possession of the Club – assuming both the benefits and
burdens of its operations – upon this initial extension of the closing date. Id. at ¶ 16 The parties
subsequently executed an Addendum to the Purchase Agreement, pursuant to which Future paid to
the Holbrooks Defendants an additional $500,000 non-refundable deposit in exchange for further
extension of the closing date, as well as continued possession of the Club, through April 1, 2010. Id.
at ¶ 17.
{7} On April 19, 2011, Medvedev and Future (collectively, “Plaintiffs”) filed a

complaint against the Holbrooks Defendants, Jackson, and Properties, asserting

claims for fraud, unfair and deceptive trade practices, conversion, rescission,

accounting, and recovery of assets and penalties. Id. at ¶ 2. Plaintiffs predicated

their claims upon the theory that Jackson and the Holbrooks Defendants had

fraudulently induced Plaintiffs into investing in the Club through their

representations that Jackson – an individual intimately familiar with the Club’s

operations – would be indebting himself personally in order to invest in the Club as

Medvedev’s business partner in the venture. Id. at ¶ 20. More specifically,

Plaintiffs alleged that they had reasonably relied on representations by Jackson and

the Holbrooks Defendants, as memorialized in the Purchase Agreement, that

Jackson would borrow $650,000 from the Holbrooks Defendants in connection with

Future’s purchase of the Club for $2,850,000; that Jackson and the Holbrooks

Defendants, in fact, had never intended for a “real” loan to occur, but instead sought

to confer upon Jackson a $650,000 equity stake in Future without Jackson making

any initial contribution; and that Jackson and the Holbrooks Defendants had

actively concealed the true nature of this “phantom loan” from Plaintiffs in order to

induce Plaintiffs to enter into the Purchase Agreement. Id.

{8} On August 25, 2011, after filing an Answer and Counterclaims, the

Holbrooks Defendants moved to dismiss Plaintiffs’ claims in their entirety pursuant

to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. The Court entered

an order denying the Holbrooks Defendants’ Motion to Dismiss on May 8, 2012.
{9} On October 15, 2012, the Holbrooks Defendants moved for summary

judgment on all of Plaintiffs’ claims against them. Id. at ¶ 5. In support of their

motion, the Holbrooks Defendants asserted, inter alia, that Plaintiffs had failed to

introduce any evidence to support their fraud theory and that, in any event,

Plaintiffs were unable to prove that they had suffered any damages as a result of

the Holbrooks Defendants’ alleged misrepresentations because the Purchase

Agreement – which Plaintiffs’ counsel had drafted – required that the Holbrooks

Defendants close on the deal even if their loan to Jackson fell through. (Defs.’ Br.

Supp. S.J. Mot., pp. 6-11.). The Holbrooks Defendants also pointed out that all

parties had agreed and understood that Jackson would sign the $650,000

promissory note evidencing their loan to him at the time of closing. (Id.)

{10} On March 24, 2014, this Court (Murphy, J.) entered the Summary

Judgment Order, granting summary judgment in favor of the Holbrooks Defendants

and dismissing all of Plaintiffs’ claims against the Holbrooks Defendants with

prejudice. Summary Judgment Order at ¶¶ 1-2.2 The Summary Judgment Order

rejected Plaintiffs’ fraud claim on grounds that Plaintiffs were unable to prove

damages, irrespective of whether the alleged collusion between Jackson and the

Holbrooks Defendants had taken place. Id. at ¶ 30. The Summary Judgment Order

also dismissed Plaintiffs’ claims for unfair and deceptive trade practices and

2 The Summary Judgment Order also denied Plaintiffs’ request to cap the amount of damages

recoverable on the counterclaims asserted against them, Id. at ¶ 42; denied Plaintiffs’ motion for
summary judgment on counterclaims asserted against Future for breach of fiduciary duty,
constructive fraud, unfair and deceptive trade practices, punitive damages, and specific performance,
Id. at ¶¶ 47, 51, 57; dismissed with prejudice all of the counterclaims asserted against Medvedev, Id.
at ¶ 72; and granted the Holbrooks Defendants’ Motion to Exclude or Limit the Testimony of John R.
Markel, CPA, Id. at ¶ 79.
rescission, which were predicated, in part, upon Plaintiffs’ fraud claim. Id. at ¶¶ 34,

36. In addition, the Summary Judgment Order dismissed Plaintiffs’ claim for

recovery of the deposits at issue, reasoning that forfeiture of the deposits did not

constitute an impermissible penalty, but rather was part of bargained for exchanges

in which Plaintiffs not only received additional time to seek investors, but also

continued in possession of the Club’s properties and the revenue stream produced

through its operations. Id. at ¶¶ 40-41.

{11} The Holbrooks Defendants now seek an award of attorneys’ fees and costs

incurred in defending against Plaintiffs’ claims – the claims that were dismissed

with prejudice in the Court’s Summary Judgment Order. The Holbrooks

Defendants assert that they are entitled to the requested relief under each of the

following provisions: N.C. Gen. Stat. § 75-16.1; N.C. Gen. Stat. § 6-21.5; N.C. Gen.

Stat. § 1D-45; and Rule 11 of the North Carolina Rules of Civil Procedure. The

Court will address the Holbrooks Defendants’ claim for attorneys’ fees and costs

under each of these provisions, in turn, below.

II.
ANALYSIS
{12} “It is settled law in North Carolina that ordinarily attorneys fees are not

recoverable either as an item of damages or of costs, absent express statutory

authority for fixing and awarding them.” United Artists Records, Inc. v. Eastern

Tape Corp., 18 N.C. App. 183, 187, 196 S.E.2d 598, 602 (1973) (citing Bowman v.

Chair Co., 271 N.C. 702, 157 S.E.2d 378 (1967)). “Statutes that award

attorney’s fees to the prevailing party are in derogation of the common law and as a
result, must be strictly construed.” Barris v. Town of Long Beach, 208 N.C. App.

718, 722, 704 S.E.2d 285, 289 (2010) (citing Sunamerica Financial Corp. v. Bonham,

328 N.C. 254, 257, 400 S.E.2d 435, 437 (1991)).

N.C. Gen. Stat. § 75-16.1

{13} The Holbrooks Defendants contend that they are entitled to an award of

attorneys’ fees and costs under N.C. Gen. Stat. § 75-16.1. The Court may award “a

reasonable attorney fee” and litigation costs to a prevailing party in an action under

N.C. Gen. Stat. § 75-16.1, where the losing party, in “instituting the action knew, or

should have known, the action was frivolous and malicious.” N.C. Gen. Stat. § 75-

16.1(2) (2014); see also McKinnon v. CV Indus., Inc., __ N.C. App. __, __, 745 S.E.2d

343, 349-50 (2013) (“N.C. Gen. Stat. § 75-16.1 authorizes an award of attorney’s fees

to the prevailing party in a suit alleging a Chapter 75 violation . . . if the plaintiff

knew, or should have known, the action was frivolous or malicious” (citing N.C.

Gen. Stat. § 75-16.1(2)). “‘A claim is frivolous [under N.C. Gen. Stat. § 75-16.1] if a

proponent can present no rational argument based upon the evidence or law in

support of [it]. A claim is malicious [under N.C. Gen. Stat. § 75-16.1] if it is

wrongful and done intentionally without just cause or excuse or as a result of ill

will.’” Blyth v. McCrary, 184 N.C. App. 654, 663 n.5, 646 S.E.2d 813, 819 n.5

(2007) (quoting Rhyne v. K-Mart Corp., 149 N.C. App. 672, 689, 562 S.E.2d 82, 94

(2002)). An “award of attorneys’ fees under G.S. [§] 75-16.1 is within the sound

discretion of the trial judge.” Borders v. Newton, 68 N.C. App. 768, 770, 315 S.E.2d

731, 732 (1984).
{14} In support of their position, the Holbrooks Defendants assert that

Plaintiffs’ allegations concerning the loan from the Holbrooks Defendants to

Jackson were “irrelevant,” see Summary Judgment Order at ¶ 29 (stating that

“[w]hether Defendants and Jackson intended the loan to be real or not is

irrelevant”); that “Plaintiffs knew or should have known their respective claims

were frivolous, malicious, and non-justiciable”; and that Plaintiffs “produced no

evidence tending to show that either Jackson or [the Holbrooks Defendants]

intended the loan to be a sham . . . nor any evidence tending to show that the

deposit amounts were (1) not a reasonable estimate of damages which would result

from a breach or (2) not reasonably proportionate to damages actually caused by the

breach.” (Defs.’ Br. Supp. Mot., pp. 4-5.) The Holbrooks Defendants additionally

argue that Plaintiffs’ “claims for rescission and unconscionability lacked any factual

basis,” pointing out that it was Plaintiffs’ “own counsel [who] prepared the contract

at issue.” (Defs.’ Br. Supp. Mot., p. 5.)

{15} Plaintiffs respond that their fraud claim against the Holbrooks Defendants

was not frivolous or malicious at any point in these proceedings. Plaintiffs insist

that they brought their fraud claim for the sole purpose of recovering the deposits

that they had paid to the Holbrooks Defendants under the terms of the Purchase

Agreement, funds which Plaintiffs believe they were duped into paying through

Jackson and the Holbrooks Defendants’ alleged misrepresentations concerning

Jackson’s investment in the Club. Plaintiffs further contend that the evidence

produced through discovery supported their allegations that Jackson and the
Holbrooks Defendants had always intended the $650,000 loan as a “phantom loan”;

that the true purchase price sought by the Holbrooks Defendants for the Club was

$2,200,000 – i.e., the $2,850,000 purchase price as stated under the Purchase

Agreement less the $650,000 credited to Jackson through the phantom loan; and

“that, but for the Plaintiffs’ belief in and reliance upon the existence of that

personal investment in the transaction by Jackson, the Plaintiffs would have never

agreed to the Deposits which they made and thereafter lost.” (Pls.’ Br. Opp. Mot., p.

9.) Further, Plaintiffs assert that even if their fraud claim was “frivolous and

malicious,” Plaintiffs could not reasonably have been aware of this fact at any time

prior to their receipt of the Summary Judgment Order. (Id.)

{16} The Court is persuaded that the record evidence, as revealed through

discovery, demonstrates that Plaintiffs’ claims were not “frivolous” as contemplated

under N.C. Gen. Stat. § 75-16.1. The Court bases its conclusion on the evidence

that (i) the Holbrooks Defendants and Jackson contemplated a $1,798,000 contract

for Jackson’s purchase of the Club – through his recently formed entity, Properties,

and without Plaintiffs’ involvement – in May 2010, only ten days after the

Holbrooks Defendants terminated the Purchase Agreement, which, as previously

stated, had contemplated the Holbrooks Defendants’ sale of the Club to Plaintiffs

for $2,850,000; (ii) the Holbrooks Defendants entered into another sales agreement

with Jackson and Properties in July 2010, under which the purchasers were

credited with $650,000 toward the $2,348,000 stated purchase price, leaving a

balance of $1,798,000; (iii) when the Holbrooks Defendants’ sale of the Club to
Jackson and Properties fell through, the Holbrooks Defendants listed the Club for

sale in December 2010 for a purchase price of $2,200,000; and (iv) Holbrooks

refused in his testimony to explain why he had been willing to sell the Club for

significantly less than the $2,850,000 purchase price that the parties had agreed

upon under the Purchase Agreement.3 This evidence, although deemed insufficient

to withstand the Holbrooks Defendants’ motion for summary judgment, provides a

rational basis for Plaintiffs’ theory that the Holbrooks Defendants’ “true” selling

price for the Club was $2,200,000 and that the $2,850,000 selling price stated in

Purchase Agreement was merely a device intended to grant Jackson a $650,000

equity stake in the Club, while inducing Plaintiffs to contribute the bulk of the

purchase price. The Court concludes that Plaintiffs reasonably could have believed,

in light of this evidence, that a jury reasonably could have concluded that Plaintiffs

had stated a claim for which they were entitled to recovery of a damages award.4

Accordingly, the Holbrooks Defendants’ request for attorneys’ fees and costs under

N.C. Gen. Stat. § 75-16.1 is denied.

N.C. Gen. Stat. § 6-21.5

{17} The Holbrooks Defendants also contend that they are entitled to an award

of attorneys’ fees and costs under N.C. Gen. Stat. § 6-21.5, which provides that “[i]n

3 There are, of course, a number of possible explanations – such as a change in market conditions

and/or a desire to sell the Club quickly – that would reasonably justify Holbrooks’ decision to list the
Club on the market at a reduced price. Holbrooks, however, declined to offer any such explanation in
his testimony.

4 The Court notes Plaintiffs’ contention that their fraud claim was not “malicious” within the

meaning of N.C. Gen. Stat. § 75-16.1(2), which, as stated above, permits an award of costs where the
losing party’s conduct is both “frivolous and malicious.” (Emphasis added.) Having concluded that
Plaintiffs’ claims were not “frivolous,” however, the Court declines to explore any distinction between
a claim that is “frivolous” and a claim that is “malicious” under N.C. Gen. Stat. § 75-16.1.
any civil action or special proceeding the court, upon motion of the prevailing party,

may award a reasonable attorney’s fee to the prevailing party if the court finds that

there was a complete absence of a justiciable issue of either law or fact raised by the

losing party in any pleading.” N.C. Gen. Stat. § 6-21.5 (2014). “‘Complete absence

of a justiciable issue’ suggests that it must conclusively appear that such issues are

absent even giving the losing party’s pleadings the indulgent treatment which they

receive on motions for summary judgment or to dismiss.” Sprouse v. North River

Ins. Co., 81 N.C. App. 311, 326, 344 S.E.2d 555, 565 (1986) (citing Vassey v. Burch,

301 N.C. 68, 269 S.E. 2d 137 (1980)). “[B]efore a court may tax attorney fees

against a losing party under N.C.G.S. § 6-21.5 based upon the complete absence of a

justiciable legal issue, the prevailing party must provide proof that the losing party

should reasonably have been aware of the complaint’s legal deficiencies.” Bryson v.

Sullivan, 102 N.C. App. 1, 16, 401 S.E.2d 645, 656 (1991) (emphasis in original).

{18} The Holbrooks Defendants contend that they are entitled to an award of

attorneys’ fees under N.C. Gen. Stat. § 6-21.5 because “[t]he existing law on all of

plaintiffs’ theories was clearly against them” and because Plaintiffs’ claims lacked

any factual or legal support. (Defs.’ Br. Supp. Mot., p. 5.) The Court disagrees.

Plaintiffs’ complaint set forth detailed allegations concerning the circumstances

giving rise to their claims for fraud and recovery of their deposits, including, for

example, Jackson’s familiarity with the Club’s operations as its General Manager;

Jackson’s relationship with Holbrooks; and Jackson’s alleged representations to

Medvedev concerning the Holbrooks Defendants’ intent to sell the Club and the
terms of the potential sale. The entirety of the alleged scheme was laid out in

Plaintiffs’ complaint. Contrary to the Holbrooks Defendants’ contentions, Plaintiffs

were able to produce evidence through discovery to strengthen their claims, as

discussed above. The fact that the Court ultimately granted summary judgment in

Holbrooks Defendants’ favor with respect to Plaintiffs’ claims “is not ‘in itself a

sufficient reason for the court’s decision to award attorney’s fees’ under N.C.G.S. §

6-21.5.” Brooks v. Giesey, 334 N.C. 303, 311, 432 S.E.2d 339, 343 (1993) (quoting

N.C. Gen. Stat. § 6-21.5); see also Brittain v. Cinnoca, 111 N.C. App. 656, 662, 433

S.E.2d 244, 247 (1993) (denying award of attorneys’ fees under N.C. Gen. Stat. § 6-

21.5 notwithstanding dismissal of plaintiffs’ claims). Indeed, it is reasonable to

infer from Plaintiffs allegations and the evidence adduced in support thereof that

Plaintiffs were not aware of the deficiencies in their claims until their receipt of the

Summary Judgment Order, and, accordingly, the Court cannot conclude that

Plaintiffs “persisted in litigating the case after a point where [Plaintiffs] should

reasonably have become aware that the pleading [Plaintiffs] filed no longer

contained a justiciable issue.” Sunamerica Financial Corp., 328 N.C. at 258, 400

S.E.2d at 438. The Holbrooks Defendants’ request for attorneys’ fees and costs

under N.C. Gen. Stat. § 6-21.5 is, therefore, denied.5

N.C. Gen. Stat. § 1D-45

5 Having concluded that Plaintiffs’ fraud claim presents justiciable issues of law or fact, it is

unnecessary to inquire into whether Plaintiffs’ claim for recovery of penalties likewise presents
justiciable issues of law or fact. Lincoln v. Bueche, 166 N.C. App. 150, 155-56, 601 S.E.2d 237, 243
(2004) (concluding that the trial court had erroneously awarded attorneys’ fees under N.C. Gen. Stat.
§ 6-21.5 upon determining that one of the plaintiffs’ seven asserted claims presented a justiciable
issue of law or fact).
{19} N.C. Gen. Stat. § 1D-45 provides, in pertinent part, that “[t]he court shall

award reasonable attorneys’ fees, resulting from the defense against the punitive

damages claim, against a claimant who files a claim for punitive damages that the

claimant knows or should have known to be frivolous or malicious.” N.C. Gen. Stat.

§ 1D-45. The Court, however, has already concluded, supra, that Plaintiffs’ claims

were not frivolous, and the Holbrooks Defendants have not introduced any evidence

to suggest that Plaintiffs’ claims were “malicious,” or, more specifically, that they

were “‘wrongful and done intentionally without just cause or excuse or as a result of

ill will.’” Blyth, 184 N.C. App. at 663 n.5, 646 S.E.2d at 819 n.5 (quoting Rhyne, 149

N.C. App. at 689, 562 S.E.2d at 94).6 As a result, the Holbrooks Defendants’ request

for attorneys’ fees under N.C. Gen. Stat. § 1D-45 is denied.

N.C. Gen. Stat. § 1A-1, Rule 11

{20} Rule 11 of the North Carolina Rules of Civil Procedure applies to “[e]very

pleading, motion, and other paper of a party [.]” N.C. Gen. Stat. § 1A-1, Rule

11(a) (2014). “According to Rule 11, the signer certifies that three distinct things

are true: the pleading is (1) well grounded in fact; (2) warranted by existing law, ‘or

a good faith argument for the extension, modification, or reversal of existing law’

(legal sufficiency); and (3) not interposed for any improper purpose.” Bryson v.

Sullivan, 330 N.C. 644, 655, 412 S.E.2d 327, 332 (1992). “A breach of the

certification as to any one of these three prongs is a violation of the Rule.” Id.

6 The Court recognizes that Blyth addressed the “malicious” standard in the context of N.C. Gen.
Stat. § 75-16.1; however, having found no authority to indicate that the standard is otherwise, the
Court adopts this standard for “malicious” for the limited purpose of resolving the Holbrooks
Defendants’ claim under N.C. Gen. Stat. § 1D-45 in the present case.
Moreover, in determining whether to award attorneys’ fees under Rule 11,

“reference should be made to the document itself, and the reasonableness of the

belief that it is warranted by existing law should be judged as of the time the

document was signed. Responsive pleadings are not to be considered.” Id. at 656,

412 S.E.2d at 333. The question for the court is whether the plaintiffs acted with

“objective reasonableness under the circumstances” in signing the pleading in

question. Turner v. Duke University, 325 N.C. 152, 164, 381 S.E.2d 706 (1989); see

also McKinnon, __ N.C. App. at __, 745 S.E.2d at 347 (explaining that “‘Rule 11

sanctions are appropriate where the offending party either failed to conduct a

reasonable inquiry into the law or did not reasonably believe the paper was

warranted by existing law’” (quoting Ward v. Jett Props., LLC, 191 N.C. App. 605,

608, 663 S.E.2d 862, 864 (2008))).

{21} The Holbrooks Defendants contend that they are entitled to attorneys’ fees

and costs under Rule 11 because “Medvedev was well aware of the bargained-for

exchange surrounding the deposits”; because Medvedev knew, at the time he made

the deposits, that Jackson had not yet signed the promissory note evidencing the

loan to him from the Holbrooks Defendants; and because no evidence of a “phantom

loan” was ever produced. (Defs.’ Br. Supp. Mot., p. 6). The Court disagrees. A

thorough review of Plaintiffs’ complaint reveals detailed allegations predicated upon

Plaintiffs’ apparent good faith belief that the Holbrooks Defendants and Jackson

had defrauded them out of $650,000 in deposit money. Furthermore, and as

discussed in detail above, Plaintiffs’ theory of recovery was not wholly unsupported
by the evidence produced through discovery. Accordingly, this is not a case in which

the imposition of Rule 11 sanctions would further the Rule’s purpose of

“prevent[ing] abuse of the legal system[,]” Grover v. Norris, 137 N.C. App. 487, 495,

529 S.E.2d 231, 235 (2000). The Holbrooks Defendants’ request for attorneys’ fees

and costs under Rule 11 is, therefore, denied.

III.
CONCLUSION
{22} For the above stated reasons, the Holbrooks Defendants’ Motion for Award

of Attorneys’ Fees and Costs is DENIED.

SO ORDERED, this the 9th day of September, 2014.