Woodcock v. Cumberland Cnty. Hosp. Sys., Inc.

Woodcock v. Cumberland Cnty. Hosp. Sys., Inc., 2022 NCBC 68.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
GUILFORD COUNTY SUPERIOR COURT DIVISION
21 CVS 5216

MICHAEL G. WOODCOCK,
Individually and Derivatively on
behalf of Fayetteville Ambulatory
Surgery Center Limited Partnership,

Plaintiff,

v.

CUMBERLAND COUNTY
HOSPITAL SYSTEM, INC.; CAPE
FEAR VALLEY AMBULATORY
SURGERY CENTER, LLC; ORDER AND OPINION ON
SURGICAL CARE AFFILIATES, DEFENDANTS’ MOTIONS FOR
LLC; and NATIONAL SURGERY
CENTERS, LLC, PARTIAL JUDGMENT ON THE
PLEADINGS
Defendants, [PUBLIC] 1
and

FAYETTEVILLE AMBULATORY
SURGERY CENTER LIMITED
PARTNERSHIP,

Nominal
Defendant.

THIS MATTER is before the Court on two separate Motions (“Motions,” ECF

Nos. 79, 89). First, Defendants Cumberland County Hospital System, Inc. (“CCHS”)

and Cape Fear Valley Ambulatory Surgery Center, LLC (“CFVASC”) jointly filed a

Motion for Partial Judgment on the Pleadings on 21 June 2022. (ECF No. 79.)

Second, Surgical Care Affiliates, LLC (“SCA”) and National Surgery Centers, LLC

1 Recognizing that this Order and Opinion cites and discusses the subject matter of
documents that the Court has allowed to remain filed under seal in this action, the Court
elected to file this Order and Opinion under seal on 3 November 2022. The Court then
permitted the parties an opportunity to propose redactions to the public version of this
document. The parties did not propose any redactions. Accordingly, the Court now files the
unredacted, public version of this Order and Opinion.
(“NSC”) also jointly filed a Motion for Partial Judgment on the Pleadings on 11 July

2022. (ECF No. 89.)

THE COURT, having considered the Motions, the briefs of the parties, 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, for the reasons set forth below.

Douglas S. Harris for Plaintiff Michael G. Woodcock.

K&L Gates LLP by Marla T. Reschly, Susan K. Hackney, and Daniel D.
McClurg for Defendants Cumberland County Hospital System, Inc. and
Cape Fear Valley Ambulatory Surgery Center, LLC.

Bradley Arant Boult Cummings LLP by Jonathan E. Schulz and
Christopher C. Lam for Defendants Surgical Care Affiliates, LLC and
National Surgery Centers, LLC.

Davis, Judge.

INTRODUCTION

1. This action relates to the ownership and operation of Fayetteville

Ambulatory Surgery Center Limited Partnership (“FASC”), which operates an

ambulatory surgery center in Fayetteville, North Carolina. (Compl. Ex. 1, at pp. 6–

7, ECF No. 3.2.)

2. As discussed in more detail below, the key issue in this case stems from

the parties’ disagreement over the validity of a 1 April 2019 sale by NSC of its 100%

equity ownership interest in CFVASC (the general partner of FASC) to CCHS (a

former limited partner of FASC). (Compl. ¶ 17, ECF No. 3 (sealed), ECF No. 15.) 2

2 In this opinion, this sale is referred to as the “April 2019 Transaction.”
3. Although discovery in this case has been ongoing for quite some time,

the Motions presently before the Court—as set out above—are motions for partial

judgment on the pleadings pursuant to Rule 12(c) of the North Carolina Rules of Civil

Procedure.

FACTUAL AND PROCEDURAL BACKGROUND

4. “The Court does not make findings of fact on a Rule 12(c) motion for

judgment on the pleadings.” Blusky Restoration Contrs., LLC v. Brown, 2022 NCBC

LEXIS 124, at *4 (N.C. Super. Ct. Oct. 20, 2022). Rather, the Court recites only those

allegations in the pleadings and matters of record that are relevant and necessary to

the Court’s determination of the Motions.

5. Although the limited partnership agreement controlling FASC has been

amended several times, the version of the agreement relevant to this dispute is dated

1 October 1995 and entitled “Second Amended and Restated Limited Partnership

Agreement.” (Compl. Ex. 1 [hereinafter “1995 LP Agreement”].)

6. At the time the 1995 LP Agreement was executed, FASC was comprised

of CFVASC—then known by its former name of NSC Fayetteville, Inc. (“NSC

Fayetteville”)—as the general partner along with twelve limited partners. (1995 LP

Agreement, at Sched. A.) NSC Fayetteville was a wholly owned subsidiary of NSC,

which, in turn, was a wholly owned subsidiary of SCA. (Compl. Ex. 3, ECF No. 3.4;

Compl. Ex. 4 [hereinafter “Equity Purchase Agreement”], at p. 1, ECF No. 3.5
(sealed).) Among the twelve limited partners were Plaintiff Michael Woodcock and

CCHS. 3 (1995 LP Agreement, at Sched. A.)

7. At some point in time, NSC and SCA made known their intent to sell

the equity in NSC Fayetteville. (Compl. Ex. 5 [hereinafter “Contribution

Agreement”], at p. 1, ECF No. 3.6 (sealed).) Woodcock and CCHS separately engaged

in negotiations with NSC and SCA in an effort to acquire NSC Fayetteville. (Compl.

Ex. 2, ECF No. 3.3; Compl. Ex. 6, ECF No. 3.7.) NSC and SCA ultimately decided to

sell the equity in NSC Fayetteville to CCHS, precipitating the April 2019

Transaction. (Equity Purchase Agreement, at p. 1.)

8. The April 2019 Transaction actually comprises two distinct, but related,

agreements that were both entered into on 1 April 2019. First, CCHS conveyed all of

its then-owned limited partner shares to NSC Fayetteville by means of a written

agreement titled “Contribution Agreement” (Compl. Ex. 5, ECF No. 3.6 (sealed)),

which purported to divest CCHS of its limited partner status in FASC. (Compl. ¶ 17.)

NSC Fayetteville, CCHS, and NSC were the signatories on the Contribution

Agreement. (Contribution Agreement, at pp. 4–6.)

9. By virtue of the Contribution Agreement, NSC Fayetteville was to

remain the owner of the limited partner shares it already held and to also become the

owner of the limited partner shares that it was receiving from CCHS. In addition,

the Contribution Agreement stated as follows:

3 Woodcock is a medical doctor in Cumberland County, North Carolina. (1995 LP Agreement,
at Sched. A.) CCHS is a North Carolina non-profit corporation that has surgical centers and
operating rooms also located in Cumberland County. (Compl. ¶ 3.)
Immediately following the consummation of the Conveyance in
accordance with the terms and conditions contained herein, [CCHS] has
agreed to purchase from [NSC], and [NSC] has agreed to sell to [CCHS],
all of the [NSC Fayetteville] Equity owned by [NSC] for the
consideration and on the terms and subject to the conditions set forth in
that certain Equity Purchase Agreement, by and among the Parties,
dated as of the Effective Date (the “Purchase Agreement”). Immediately
following the Conveyance and the consummation of the transactions
contemplated by the Purchase Agreement, [CCHS] will (a) directly own
all of the [NSC Fayetteville] Equity and (b) indirectly, through its
ownership of the [NSC Fayetteville] Equity, own (i) all of the General
Partner Units of FASC and (ii) 56.09986239 Limited Partner Units of
FASC.

(Contribution Agreement, at p. 1.)

10. Immediately thereafter, a second document, the “Equity Purchase

Agreement,” was executed. (Compl. Ex. 4, ECF No. 3.5 (sealed).) The signatories on

the Equity Purchase Agreement were, once again, NSC Fayetteville, CCHS, and

NSC. (Equity Purchase Agreement, at pp. 26–28.)

11. The Equity Purchase Agreement stated that CCHS was purchasing

from NSC 100% of the equity of NSC Fayetteville. (Equity Purchase Agreement, at

p. 1.) The agreement further provided that CCHS would “(a) directly own one

hundred percent (100%) of the Equity of [NSC Fayetteville] and (b) indirectly,

through its ownership of [NSC Fayetteville], own (i) one hundred percent (100%) of

the ‘General Partner Units’ of FASC and (ii) 43.6574805% of the ‘Limited Partner

Units’ of FASC[.]” (Equity Purchase Agreement, at p. 1.)

12. On 17 April 2022, NSC Fayetteville was renamed CFVASC.

13. In this lawsuit, Woodcock challenges the validity of the April 2019

Transaction and argues that CCHS “does not have lawful authority to own 100% of

[CFVASC] or to exercise any authority over [CFVASC].” (Compl. ¶ 146.)
14. Essentially, Woodcock contends that the April 2019 Transaction

breaches various provisions of the 1995 LP Agreement and that the methods utilized

to effectuate the transaction were purposefully crafted to sidestep certain terms

contained within the 1995 LP Agreement. (Compl. ¶¶ 18–29.)

15. The same factual background underlying this lawsuit was the subject of

a prior lawsuit filed by Woodcock (along with several of the other limited partners of

FASC) against CCHS and CFVASC. See Woodcock v. Cumberland Cty. Hosp. Sys.,

Inc., Case No. 2019-CVS-8790 (Guilford Cty. N.C. Super. Ct.) (the “Prior Lawsuit”).

The Prior Lawsuit was voluntarily dismissed without prejudice by Plaintiffs pursuant

to Rule 41 of the North Carolina Rules of Civil Procedure on 24 November 2020. (Id.,

Pls.’ Voluntary Dismissal Without Prejudice Pursuant to Rule 41(a)(1), ECF No. 85.)

16. On 11 May 2021, Woodcock, Carol Wadon, Camille Wahbeh, and George

Demetri (all limited partners of FASC) filed the Complaint in the present action

against CCHS, CFVASC, SCA, and NSC. 4 The Complaint asserted a combination of

claims brought both individually and derivatively on behalf of FASC. (Compl. ¶¶ 12–

146.)5

17. After an initial stay of this action, (ECF No. 42), each of the named

Defendants filed an answer to the Complaint on 23 September 2021. (ECF Nos. 45–

46.)

4 FASC was named as a nominal Defendant.

5 On 19 September 2022, Plaintiffs Wadon, Wahbeh, and Demetri voluntarily dismissed all

of their claims, leaving Woodcock as the sole remaining Plaintiff in this action. (ECF No.
108.)
18. Woodcock filed a Motion for Declaratory Judgment on 8 November 2021

(ECF No. 49), which was subsequently denied without prejudice by the Court on 20

January 2022. (ECF No. 75.)

19. On 21 June 2022, CCHS and CFVASC filed a Motion for Partial

Judgment on the Pleadings, seeking the dismissal of all of Woodcock’s individual

claims against them as well as dismissal of the fourth claim for relief in the

Complaint, which purported to assert an alternative derivative claim for breach of

contract against CFVASC. (Defs. CCHS, Inc. and CFVASC, LLC’s Mot. Partial J.

Pleadings, ECF No. 79.) In support of their Motion, CCHS and CFVASC attached

the Contribution Agreement and the Equity Purchase Agreement. (See Defs. CCHS,

Inc., and CFVASC, LLC’s Br. Supp. of Mot. Partial J. Pleadings [hereinafter “CCHS

& CFVASC Br. Supp.”], ECF No. 80; CCHS & CFVASC Br. Supp. Ex. A, ECF No.

81.1; CCHS & CFVASC Br. Supp. Ex. B, ECF No. 81.2.)

20. Subsequently, on 11 July 2022, Defendants SCA and NSC filed a

separate Motion for Partial Judgment on the Pleadings, seeking dismissal of the

individual claims asserted against them as well as of Woodcock’s standalone claim

for punitive damages designated as the sixth claim for relief in the Complaint. (Defs.

SCA, LLC’s and NSC, LLC’s Mot. Partial J. Pleadings, ECF No. 89.)

21. On 6 October 2022, the Court held a hearing on the Motions, which are

now ripe for resolution.

LEGAL STANDARD

22. Rule 12(c) is intended “to dispose of baseless claims or defenses when

the formal pleadings reveal their lack of merit and is appropriately employed where
all the material allegations of fact are admitted in the pleadings and only questions

of law remain.” Dicesare v. Charlotte-Mecklenburg Hosp. Auth., 376 N.C. 63, 70

(2020) (cleaned up). In deciding a Rule 12(c) motion, “the trial court is required to

view the facts and permissible inferences in the light most favorable to the nonmoving

party, with all well pleaded factual allegations in the nonmoving party’s pleadings

being taken as true and all contravening assertions in the movant’s pleadings being

taken as false.” Id. “All allegations in the nonmovant’s pleadings, except conclusions

of law, legally impossible facts, and matters not admissible in evidence at the trial,

are deemed admitted by the movant for purposes of the motion.” Ragsdale v.

Kennedy, 286 N.C. 130, 137 (1974).

23. “An exhibit, attached to and made a part of the pleading,” Wilson v.

Crab Orchard Dev. Co., 276 N.C. 198, 206 (1970), and documents that are “the subject

of the action and specifically referenced in the complaint,” Erie Ins. Exch. v. Builders

Mut. Ins. Co., 227 N.C. App. 238, 242 (2013), are properly considered on

a Rule 12(c) motion. Where a document is attached, “[t]he terms of such exhibit

control other allegations of the pleading attempting to paraphrase or construe the

exhibit, insofar as these are inconsistent with its terms.” Wilson, 276 N.C. at 206.

24. “Subject matter jurisdiction is the indispensable foundation upon which

valid judicial decisions rest,” In re T.R.P., 360 N.C. 588, 590 (2006), and “has been

defined as ‘the power to hear and to determine a legal controversy; to inquire into the

facts, apply the law, and to render and enforce a judgment,’ ” High v. Pearce, 220

N.C. 266, 271 (1941) (citations omitted). “[T]he proceedings of a court without
jurisdiction of the subject matter are a nullity.” Burgess v. Gibbs, 262 N.C. 462, 465

(1964) (citation omitted).

25. “As the party invoking jurisdiction, plaintiff has the burden of

establishing standing.” Queen’s Gap Cmty. Ass’n v. McNamee, 2011 NCBC LEXIS

37, at *4 (N.C. Super. Ct. Sept. 23, 2011) (cleaned up). In determining the existence

of subject matter jurisdiction, the Court may consider matters outside the pleadings.

Emory v. Jackson Chapel First Missionary Baptist Church, 165 N.C. App. 489, 491

(2004) (citation omitted). “However, if the trial court confines its evaluation [of

standing] to the pleadings, the court must accept as true the [claimant]’s allegations

and construe them in the light most favorable to the [claimant].” Munger v. State,

202 N.C. App. 404, 410 (2010) (quoting DOT v. Blue, 147 N.C. App. 596, 603 (2001)).

ANALYSIS

26. At the outset, it is important to emphasize what is (and is not) at issue

with regard to Defendants’ Motions. 6 The present Motions do not ask the Court to

rule on the key legal issue in this lawsuit—that is, whether the April 2019

Transaction was legally invalid based on impermissible conflicts with the substantive

provisions of the 1995 LP Agreement—or on the bulk of Woodcock’s damages claims

flowing from that question. Instead, Defendants’ Motions raise limited issues that

can collectively be divided into three categories. First, Defendants seek dismissal of

all of Woodcock’s individual claims as set out in the Complaint on the ground that he

6 As noted above, the Court is addressing two discrete motions—each filed by a different set

of Defendants. Nevertheless, due to the significant overlap between the arguments raised in
the respective motions, the Court deems it appropriate to analyze them together.
lacks standing to assert them individually. Second, Defendants seek dismissal of

Woodcock’s fourth claim for relief— designated as an alternative derivative claim for

breach of contract against CFVASC—on the ground that it fails to state a valid claim

for relief. Finally, Defendants seek dismissal of Woodcock’s sixth claim for relief,

which is a claim for punitive damages. The Court will address each issue in turn.

I. Standing

27. The bulk of Defendants’ arguments concern the issue of standing.

Defendants contend that because all of Woodcock’s claims in this action are premised

upon allegations of injury to FASC itself as a result of Defendants’ actions, all of these

claims must be brought derivatively. For this reason, Defendants seek judgment on

the pleadings as to the individual claims Woodcock has asserted in Claims One, Two,

Three, Five, Eight, and Eleven as set out in the Complaint. 7

28. Our Court of Appeals has succinctly summarized the standing principles

applicable to a suit involving limited partners in a partnership as follows:

The general rule of partner standing to sue individually is stated in
Energy Investors: “It is settled law in this State that one partner may
not sue in his own name, and for his benefit, upon a cause of action in
favor of a partnership.” 351 N.C. at 336–37, 525 S.E.2d at 445 (citation
and quotation marks omitted). The rule includes a cause of action
against other partners in the partnership, Jackson v. Marshall, 140 N.C.
App. 504, 508, 537 S.E.2d 232, 235 (2000), disc. review denied, 353 N.C.
375, 547 S.E.2d 10 (2001), as well as a cause of action against an
unrelated third party, Energy Investors, 351 N.C. at 336–37, 525 S.E.2d
at 445. “The only two exceptions to this rule are: (1) a plaintiff alleges
an injury ‘separate and distinct’ to himself, or (2) the injuries arise out
of a ‘special duty’ running from the alleged wrongdoer to the plaintiff.”

7 Each of these claims has been asserted both individually and derivatively, except for Claim

Eleven (a claim for declaratory judgment) which appears to have been only brought
individually. Defendants have not challenged Woodcock’s standing to assert his derivative
claims.
351 N.C. at 335, 525 S.E.2d at 444 (emphasis added) (recognizing the
two exceptions in a suit brought by a limited partner and citing Barger
v. McCoy Hillard & Parks, 346 N.C. 650, 660, 488 S.E.2d 215, 220
(1997), which recognized the same two exceptions in a suit brought by
shareholders in a corporation).

Gaskin v. J.S. Procter Co., LLC, 196 N.C. App. 447, 451 (2009).

29. An injury is “separate and distinct” when it is “peculiar or personal” to

the plaintiff. See Barger, 346 N.C. at 659. “An injury is peculiar or personal to the

[plaintiff] if ‘a legal basis exists to support plaintiffs’ allegations of an individual loss,

separate and distinct from any damage suffered by the [entity.]’ ” See id. (quoting

Howell v. Fisher, 49 N.C. App. 488, 492 (1980), disc. rev. denied, 302 N.C. 218 (1981)).

30. To maintain an individual claim for injuries arising from a “special

duty,” a plaintiff “must allege facts from which it may be inferred that defendants

owed plaintiffs a special duty. The special duty may arise from contract or otherwise.”

Id. Moreover, it is crucial that the “special duty” is “one that the alleged wrongdoer

owed directly to the [plaintiff] as an individual.” Id. Furthermore, the plaintiff must

show “that defendants owed a duty to plaintiffs as [limited partners] and was

separate and distinct from the duty defendants owed the [partnership].” Id.

31. In sum, “[u]nless plaintiff, as a limited partner, alleged facts sufficient

to fit into one of these two exceptions, his claims are derivative and he has no standing

to bring this action as an individual, non-derivative claim.” Jackson v. Marshall, 140

N.C. App. 504, 508 (2000).

32. In the present case, Woodcock maintains that he possesses standing to

assert the individual claims at issue because Defendants’ acts in connection with the

April 2019 Transaction violated his voting rights as a limited partner in FASC.
33. This Court has previously addressed the extent to which claims alleging

a violation of a plaintiff’s voting rights on company matters can be brought

individually. See Bennett v. Bennett, 2019 NCBC LEXIS 19 (N.C. Super. Ct. Mar. 15,

2019); 759 Ventures, LLC v. GCP Apt. Investors, LLC, 2018 NCBC LEXIS 82 (N.C.

Super. Ct. Aug. 13, 2018). 8

34. 759 Ventures involved a management dispute between the two member-

managers of an LLC. 759 Ventures, 2018 NCBC LEXIS 82, at *1. The plaintiff owned

a two-thirds membership interest in the company, and the defendant owned the

remaining one-third. Id. at *2. The parties agreed to serve as co-managers with

equal rights and authority to manage the LLC. Id. The plaintiff alleged that the

defendant had breached the LLC’s operating agreement by excluding the plaintiff

from management decisions. Id. at *8. Specifically, the plaintiff contended that a

distribution authorized by the defendant—without the plaintiff’s approval—

amounted to a deprivation “of its rights to participate equally in [the LLC’s]

management, to approve management decisions, and to veto distributions to [the

LLC’s] members.” Id. at *9. In response, the defendant argued that the plaintiff

lacked standing to bring a claim for breach of the operating agreement individually

and that any such claim must be brought derivatively. Id. at *8.

35. This Court stated that “[t]he answer ‘turns on whether the alleged

injuries were caused directly to’ [the plaintiff individually] or instead ‘are a

consequence of breaches of fiduciary duty that harmed’ [the LLC].” Id. (quoting

8 Although both Bennett and 759 Ventures arose in the context of limited liability companies

(LLCs), the standing principles discussed therein apply equally here.
Robinson on North Carolina Corporation Law § 34.04[5] (7th ed. 2017)). We

concluded that the plaintiff had standing to pursue its individual claim for breach of

the operating agreement because the

alleged injuries are [plaintiff’s] and [plaintiff’s] alone. The right to exert
management authority and the right to vote on key management
decisions are rights possessed by [plaintiff], either as a manager of [the
LLC] or as its majority member. The deprivation of those rights is a
harm unique to [plaintiff], not one felt by [the LLC].

Id. at *9. The Court added that the plaintiff sought “to enforce its own rights under

the Operating Agreement and to remedy its own injuries, not those of [the LLC].” Id.

at *11. However, we noted that not “all claims asserted by a member or manager of

an LLC for breach of its operating agreement are inherently [individual,]” and that

“[t]o the extent the relevant term in an operating agreement gives rise to a duty owed

to the company, a claim for breach of that duty is one belonging to the company, and

not generally to its members or managers.” Id. at *10–11.

36. In Bennett, the plaintiffs brought individual claims alleging that the

defendants had breached fiduciary duties owed to them by seizing control of the LLC

without the authorization of its members and then engaging in a series of acts to

consolidate their control. Bennett, 2019 NCBC LEXIS 19, at *12. The defendants

sought dismissal of the plaintiffs’ individual claims on standing grounds. Id. This

Court rejected the defendants’ argument, ruling that the plaintiffs’ alleged injuries

were “separate and distinct” from those of the LLC. Id. at *14. We stated that “[a]t

root [the plaintiffs] allege that [the defendants] seized managerial control without

authorization and took actions on behalf of [the LLC] against the wishes of the
majority of its members. If so, the effect was to deprive dissenting members of their

voting rights.” Id.

37. Here, Woodcock’s response to Defendants’ standing argument is that the

April 2019 Transaction violated his voting rights as a limited partner because the

Contribution Agreement and the Equity Purchase Agreement could not lawfully have

been executed under the terms of the 1995 LP Agreement without a prior vote of the

limited partners authorizing these transactions. Based on the principles set forth in

759 Ventures and Bennett, the Court must carefully review both the specific claims

asserted by Woodcock at issue and the pertinent provisions of the 1995 LP Agreement

in order to determine whether they do, in fact, sufficiently impact his voting rights so

as to confer standing upon him to assert these claims individually. The Court deems

it advisable to consider Claims One, Two, Three, and Five together as they all stem

directly from the April 2019 Transaction. The Court will then separately address

Claim Eight and then Claim Eleven.

Claims One, Two, Three, and Five

38. Claim One asserts a claim for breach of contract against CCHS and

CFVASC. (Compl. ¶¶ 12–37.) Woodcock alleges that CCHS and CFVASC breached

the 1995 LP Agreement by the act of entering into the Equity Purchase Agreement

and the Contribution Agreement. (Compl. ¶ 13.)

39. In Claim Two, Woodcock asserts that through their participation in the

April 2019 Transaction, SCA and NSC tortiously interfered with a contractual

relationship—specifically, the contractual relationship established by the 1995 LP

Agreement—by inducing CFVASC to violate that Agreement. (Compl. ¶¶ 38–54.)
40. Claim Three similarly alleges that CCHS tortiously interfered with a

contractual relationship by virtue of its role in the April 2019 Transaction. (Compl.

¶¶ 55–62.)

41. Finally, in Claim Five, Woodcock alleges that NSC, SCA, and CCHS—

through their roles in the April 2019 Transaction—engaged in a civil conspiracy by

inducing CFVASC to violate its fiduciary and contractual duties. (Compl. ¶¶ 72–82.)

42. In opposing Defendants’ standing arguments, Woodcock attempts to rely

on two separate provisions of the 1995 LP Agreement—Sections 19.1 and 14.3—in

order to show that his claimed injury stems from a denial of his voting rights so as to

confer standing upon him to assert these claims not only derivatively but also

individually.

43. Section 19.1 of the 1995 LP Agreement provides as follows:

This Agreement may be modified or amended at any time by a writing
signed by the General Partner and by Two-Thirds in Interest of the
Limited Partners; provided however, that, without the express, written
consent of each Partner affected thereby, no such modification or
amendment shall change the interest of any Partner in the capital,
profits, losses or cash distributions of the Partnership or its rights of
contribution or withdrawal with respect thereto.

(1995 LP Agreement, at p. 40 (emphasis added).)

44. Woodcock relies on the first clause of Section 19.1 in his standing

argument. Although his Complaint is not a model of clarity, Woodcock does not

appear to be alleging that the 1995 LP Agreement was actually amended or modified

by the execution of the Contribution Agreement and Equity Purchase Agreement.

Instead, his argument can be summarized as follows: (1) the terms of the

Contribution Agreement and Equity Purchase Agreement conflict with various
substantive provisions of the 1995 LP Agreement; (2) for this reason, pursuant to

Section 19.1, the Contribution Agreement and Equity Purchase Agreement could only

be given legal effect if two-thirds of the limited partners had previously voted to

amend the 1995 LP Agreement in a way that would permit the April 2019

Transaction to occur; and (3) by nevertheless executing these two documents without

first obtaining a successful two-thirds vote and by proceeding to act as if they were

legally effective, Defendants have deprived Woodcock of his right to vote on these

issues.

45. The Court is unable to agree. Woodcock’s argument, which is somewhat

circular, is too attenuated to support his ultimate conclusion. As Defendants note,

the acceptance of Woodcock’s logic would mean that any violation of the 1995 LP

Agreement could be construed as an infringement of his voting rights.

46. Woodcock’s argument under Section 14.3 fails for an even more basic

reason. The introductory paragraph to Section 14.3 provides as follows:

In addition to other acts expressly prohibited or restricted by this
Agreement or by the Partnership Act, and in order to eliminate or limit
any actual or potential conflicts of interest between the General Partner
and the Partnership or the Limited Partners, the General Partner shall
have no authority to make any decision or take any action to act on
behalf of the Partnership with respect to any of the following matters
unless such decision or action within the scope of the following matters
has been approved in writing by Two-Thirds in Interest of the Limited
Partners[.]

(1995 LP Agreement, at p. 17 (emphasis added).) Section 14.3 then goes on to list 22

matters (separately enumerated as subparts (a)–(v)) that are prohibited. (1995 LP

Agreement, at pp. 17–21.)
47. However, as quoted above, the opening paragraph of Section 14.3

expressly limits the scope of that section to actions taken by CFVASC—i.e., the

General Partner—“on behalf of the Partnership[.]” (1995 LP Agreement, at p. 17

(emphasis added).)

48. The specific acts that Woodcock alleges in Claims One, Two, Three, and

Five were taken “on behalf of” FASC are the execution of the Contribution Agreement

and the Equity Purchase Agreement. However, because both of those documents are

contained in the record, the Court does not have to rely on Woodcock’s allegations

concerning their contents. It is clear from the face of the Contribution Agreement

and Equity Purchase Agreement themselves that FASC was not a party to those

Agreements. Moreover, the signature pages show that NSC Fayetteville (as the

General Partner was known at that time) signed the Agreements on its own behalf.

There is simply no indication that NSC Fayetteville was intending to sign on behalf

of the partnership itself.

49. Thus, Woodcock’s reliance on Section 14.3 is misplaced. Accordingly,

Claims One, Two, Three, and Five are DISMISSED without prejudice with regard to

the individual claims contained therein. 9

Claim Eight

50. The Court reaches a different conclusion with regard to whether

Woodcock’s individual claim contained in Claim Eight withstands Defendants’ Rule

12(c) motion.

9 The Court’s ruling does not affect the derivative claims contained in Claims One, Two,

Three, and Five, which remain viable.
51. Claim Eight consists of a tortious interference with contractual

relationship claim against SCA. (Compl. ¶¶ 98–108.) However, unlike Claims One,

Two, Three, and Five, Claim Eight is not based on the Contribution Agreement and

the Equity Purchase Agreement.

52. Although the allegations set out in the Complaint in support of Claim

Eight are not entirely free from ambiguity, this claim is premised on a document

allegedly executed in 2008 entitled “Cash Management Agreement,” which Woodcock

contends was the device that SCA used to: (1) induce CFVASC to breach Section 10.1

of the 1995 LP Agreement (which relates to FASC’s recordkeeping and bookkeeping

policies); (2) cause CFVASC to commingle FASC funds with those of SCA and allow

SCA to make unauthorized withdrawals of FASC funds; (3) induce CFVASC to ignore

or violate its various contractual duties under Section 14.3 of the 1995 LP Agreement;

and (4) cause CFVASC to ignore the rights of FASC’s limited partners, including

Woodcock’s right to vote on any modification or amendment to the 1995 LP

Agreement.

53. The Complaint asserts that “the 2008 Cash Management Agreement

was signed by one SCA employee on behalf of SCA and signed by another SCA

employee on behalf of the General Partner [(i.e., CFVASC)] allegedly to bind FASC[.]”

(Compl. ¶ 101 (emphasis added).)

54. Unlike the Contribution Agreement and Equity Purchase Agreement,

the Cash Management Agreement is not contained in the record presently before the

Court. As such, the Court is bound by Plaintiff’s allegations regarding the document

as set out in the Complaint.
55. Giving Claim Eight its most charitable reading, it appears to allege that

(1) the Cash Management Agreement was signed on behalf of CFVASC—as FASC’s

General Partner—in order to bind FASC itself, thereby implicating the initial

paragraph of Section 14.3 of the 1995 LP Agreement; and (2) various provisions of the

Cash Management Agreement violated one or more of the enumerated subparts of

Section 14.3.

56. Out of an abundance of caution, the Court therefore concludes that

Woodcock’s allegations in Claim Eight are sufficient to confer standing upon him to

assert this claim individually as well as derivatively.

57. Accordingly, Defendants’ Motion is DENIED as to Claim Eight.

Claim Eleven

58. Finally, to the extent that Defendants are also seeking judgment on the

pleadings as to Woodcock’s individual claim seeking a declaratory judgment in Claim

Eleven, the Court concludes that standing exists with regard to this claim.

59. In Claim Eleven, Woodcock seeks a declaration from the Court that the

acts of the Defendants as alleged in the Complaint violated the 1995 LP Agreement.

60. In Epic Chophouse, LLC v. Morasso, 2019 NCBC LEXIS 55 (N.C. Super.

Ct. Sep. 3, 2019), this Court addressed the issue of whether the plaintiffs, as parties

to an LLC’s operating agreement, could maintain an individual claim seeking a

declaration as to the proper interpretation of the agreement. We held that such a

claim was proper because “[b]y statute, parties to a contract have standing to seek

this type of declaratory relief. See N.C.G.S. § 1-254. This right is personal to [the
LLC’s members] and distinct from [the LLC’s] own right, also as a party to the

operating agreement, to seek declaratory relief.” Id. at *13.

61. Therefore, to the extent that Defendants’ Motions also seek judgment on

the pleadings on standing grounds as to Woodcock’s request individually for a

declaratory judgment in Claim Eleven, the Motions are DENIED.

II. Breach of Contract Against CFVASC (Fourth Claim for Relief)

62. In addition to the standing arguments contained in their Motions,

Defendants also seek dismissal of Woodcock’s derivative claim for breach of contract

against CFVASC in Claim Four, which is premised on an alternative theory of

liability.

63. However, the Court need not address Defendants’ argument on this

issue in any detail because at the 6 October 2022 hearing, counsel for Woodcock stated

that he does not oppose this portion of Defendants’ Motion.

64. Therefore, Claim Four in the Complaint is DISMISSED with prejudice.

III. Punitive Damages (Sixth Claim for Relief)

65. The final issue raised in Defendants’ Motions concerns Claim Six, which

purports to state a separate claim for punitive damages against Defendants.

Defendants seek dismissal of this claim because North Carolina does not recognize

an independent cause of action for punitive damages.

66. Defendants are correct that “punitive damages are a remedy rather than

a standalone cause of action.” Halikierra Cmty. Servs. LLC v. N.C. HHS, 2021 NCBC

LEXIS 27, at *25 (N.C. Super. Ct. Mar. 25, 2021); see also Collier v. Bryant, 165 N.C.
App. 419, 434 (2011) (“Punitive damages are available, not as an individual cause of

action, but as incidental damages to a cause of action.”).

67. Therefore, Claim Six is DISMISSED without prejudice to Woodcock’s

right to seek punitive damages as a remedy for its remaining claims to the extent

such damages are otherwise recoverable under North Carolina law. Halikierra, 2021

NCBC LEXIS 27, at *25.

CONCLUSION

THEREFORE, IT IS ORDERED as follows:

1. Defendants CCHS and CFVASC’s Motion for Judgment on the Pleadings

as to the individual claims contained within Claims One, Three, and Five

in the Complaint is GRANTED, and these claims are DISMISSED

without prejudice.

2. Defendant CFVASC’s Motion for Judgment on the Pleadings as to Claim

Four of the Complaint is GRANTED, and this claim is DISMISSED with

prejudice.

3. Defendants CCHS and CFVASC’s Motion for Judgment on the Pleadings

as to the individual claim contained within Claim Eleven in the Complaint

is DENIED.

4. Defendants SCA and NSC’s Motion for Judgment on the Pleadings as to the

individual claim contained within Claim Two in the Complaint is

GRANTED, and this claim is DISMISSED without prejudice.
5. Defendant SCA’s Motion for Judgment on the Pleadings as to the

individual claim contained within Claim Eight in the Complaint is

DENIED.

6. Defendants’ NSC and SCA’s Motion for Judgment on the Pleadings as to

Claim Six in the Complaint is GRANTED without prejudice to Plaintiff’s

right to seek punitive damages as a remedy for his surviving claims to the

extent permitted by law.

SO ORDERED, this the 7th day of November, 2022.

/s/ Mark A. Davis
Mark A. Davis
Special Superior Court Judge for
Complex Business Cases