Fred Smith Co. v. Smith

Fred Smith Co. v. Smith, 2025 NCBC 70.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF
JUSTICE
JOHNSTON COUNTY SUPERIOR COURT DIVISION
25CV004428-500
FRED SMITH COMPANY, a North
Carolina Corporation; FSC I, LLC, a
North Carolina Limited Liability
Company; FSC RANCH, LLC, a North
Carolina Limited Liability Company;
FSC RANCH II, LLC, a North Carolina
Limited Liability Company; WALTON
FARMS, LLC, a North Carolina
Limited Liability Company; RWAC
RENTAL, LLC, a North Carolina
Limited Liability Company; RWAC
RENTAL III, LLC, a North Carolina
Limited Liability Company; RWAC
RENTAL IV, LLC, a North Carolina
Limited Liability Company; RWAC
RENTAL VI, LLC, a North Carolina
Limited Liability Company; RWAC
RENTAL VII, LLC, a North Carolina
Limited Liability Company; MINGO
CREEK INVESTMENTS II, LLC, a
North Carolina Limited Liability
Company; MINGO CREEK
INVESTMENTS III, LLC, a North ORDER AND OPINION ON
Carolina Limited Liability Company; DEFENDANT’S MOTION TO
BLACK & GOLD INVESTMENTS II,
LLC, a North Carolina Limited DISMISS THE COMPLAINT
Liability Company; LIONS SPRING
HOUSING ASSOCIATES, LLC, a
North Carolina Limited Liability
Company; BLACKWOLF RUN III-2,
LLC, a North Carolina Limited
Liability Company; RIVERWOOD
RANCH TOWNHOMES, LLC, a North
Carolina Limited Liability Company;
LIONSGATE TOWNHOMES, LLC, a
North Carolina Limited Liability
Company; SMITH-EDWARDS, LLC, a
North Carolina Limited Liability
Company; RGC 2, LLC, a North
Carolina Limited Liability Company;
SANS SOUCI FARM, LLC, a North
Carolina Limited Liability Company,

Plaintiffs,
v.
VIRGINIA REID SMITH,
Defendant.
THIS MATTER is before the Court on Defendant Virginia Reid Smith’s

Motion to Dismiss the Complaint (“Motion to Dismiss” or the “Motion,” ECF No. 19).

Having considered the Motion, the parties’ briefs and other submissions, the

arguments of counsel, the applicable law, and all other appropriate matters of record,

the Court concludes that the Motion to Dismiss should be GRANTED for the reasons

set forth below.

K&L Gates, LLP, by A. Lee Hogewood, III, Robert B. Womble, Daniel Drew
McClurg, and Derek Sutton, for Plaintiffs Fred Smith Company; FSC I, LLC;
FSC Ranch, LLC; FSC Ranch II, LLC; Walton Farms, LLC; RWAC Rental,
LLC; RWAC Rental III, LLC; RWAC Rental IV, LLC; RWAC Rental VI, LLC;
RWAC Rental VII, LLC; Mingo Creek Investments III, LLC; Black & Gold
Investments II, LLC; Lions Spring Housing Associates, LLC; Blackwolf Run
III-2, LLC; Riverwood Ranch Townhomes, LLC; Lionsgate Townhomes, LLC;
Smith-Edwards, LLC; RGC 2, LLC; and Sans Souci Farm, LLC.

McGuireWoods LLP, by Ryan Park, for Defendant Virginia Reid Smith.

Davis, Judge.

INTRODUCTION

1. In this case, the Court reaffirms the well-established rule in North

Carolina that a Superior Court judge lacks the authority to interfere with proceedings

in an equitable distribution action pending in District Court.

FACTUAL AND PROCEDURAL BACKGROUND

2. “The Court does not make findings of fact on the Motions. Rather, the

Court recites the allegations asserted in the Complaint that are relevant to the

Court’s determination of the Motions.” Pridgen v. Carlson, 2025 NCBC LEXIS 89, at

*2 (N.C. Super. Ct. July 25, 2025).
3. Defendant Virginia Reid Smith (“Mrs. Smith”) is a resident of New

Hanover County, North Carolina. (Compl., ECF No. 3, ¶ 105.)

4. Mrs. Smith married non-party Fred J. Smith, Jr. (“Mr. Smith”) on 9

November 1980. (Compl. ¶ 112.) Mr. and Mrs. Smith separated on or about 14 July

2024. (Compl. ¶ 113.)

5. Following their separation, Mrs. Smith initiated a lawsuit against Mr.

Smith in New Hanover County District Court seeking an equitable distribution of the

marital estate (the “ED Action”) on 18 July 2024. (Compl. ¶ 114; see also Smith v.

Smith, New Hanover Cnty. Dist. Ct. File No. 24CVD002733-640.)

6. In the ED Action, Mrs. Smith has alleged that since their separation Mr.

Smith has taken certain actions with respect to various businesses he owns or

otherwise controls that have significantly diminished the value of the marital estate.

(See generally Compl. Ex. A.)

7. On 23 June 2025, Mrs. Smith filed a motion for preliminary injunction

(the “PI Motion”) in the ED Action seeking, among other things, to enjoin Mr. Smith

from “disposing, transferring, wasting, hiding, converting, selling, pledging,

assigning, or in any manner alienating any marital or divisible assets[.]” (Compl.

¶ 129; Compl. Ex. A at 1.)

8. The PI Motion further stated the following:

[Mr. Smith] should be ordered to notify [Mrs. Smith] in writing of any
proposed sale of a business entity, assignment of any membership
interest, or any proposed refinance of any debt associated with a
business entity, asset, or interest as soon as he learns of any prospective
sale, assignment, or refinance. [Mr. Smith] should be ordered not to
proceed with any such transaction without [Mrs. Smith’s] written
consent or entry of any order of the Court permitting the same.

[Mr. Smith] should be enjoined from authorizing or proceeding forward
with any transactions in excess of one hundred thousand dollars
whether individually or associated with any business entity in which he
has management control without [Mrs. Smith’s] written consent or
entry of a Court order.

[Mr. Smith] should be ordered to obtain [Mrs. Smith’s] written consent
or entry of a Court order prior to further encumbering any stock or other
assets in [Mr. Smith’s] individual name or associated with any business
entity in which he has management control.

[Mr. Smith] should be ordered to provide [Mrs. Smith] with all
documents relating to potential sales or new loan agreements/refinances
in a timely manner, including closing statements, loan applications, and
sales contracts. [Mr. Smith] should be ordered not to proceed with the
transaction without [Mrs. Smith’s] written consent or entry of any order
of the Court permitting the same.

(Compl. Ex. A ¶¶ 14–17.)

9. The Plaintiffs in the present lawsuit consist of twenty companies who

are largely controlled—either directly or indirectly—by Mr. Smith. (Compl. ¶¶ 9–

100.)

10. Plaintiff Fred Smith Company (“FSC”) is a North Carolina corporation

that maintains its principal place of business in Johnston County, North Carolina.

(Compl. ¶¶ 2–3.) Mr. Smith is the sole shareholder and current President of FSC.

(Compl. ¶¶ 5–6.)

11. Plaintiffs FSC I, LLC; FSC Ranch, LLC; FSC Ranch II, LLC; Walton

Farms, LLC; RWAC Rental, LLC; RWAC Rental III, LLC; RWAC Rental IV, LLC;

RWAC Rental VI, LLC; RWAC Rental VII, LLC; Mingo Creek Investments III, LLC;

Black & Gold Investments II, LLC; Lions Spring Housing Associates, LLC; Blackwolf
Run III-2, LLC; Riverwood Ranch Townhomes, LLC; Lionsgate Townhomes, LLC;

Smith-Edwards, LLC; RGC 2, LLC; and Sans Souci Farm, LLC (together with FSC,

“Plaintiffs”) are limited liability companies organized under North Carolina law that

maintain their principal places of business in Johnston County, North Carolina.

(Compl. ¶¶ 9–10, 14–15, 19–20, 24–25, 29–30, 34–35, 39–40, 44–45, 49–50, 54–55,

59–60, 64–65, 69–70, 74–75, 79–80, 84–85, 89–90, 94–95, 99–100.)

12. The following is a description of the ownership and management of each

of these entities:

a. FSC is the sole owner and manager of FSC I, LLC. (Compl.

¶¶ 12–13.)

b. Mr. Smith and one of his children are the owners of FSC Ranch,

LLC, and Mr. Smith is the manager. (Compl. ¶¶ 17–18.)

c. Mr. Smith is the sole owner and manager of FSC Ranch II, LLC.

(Compl. ¶¶ 22–23.)

d. Mr. Smith and FSC are the owners of Walton Farms, LLC, and

FSC is the manager. (Compl. ¶¶ 27–28.)

e. Mr. Smith is the sole owner of RWAC Rental, LLC, and FSC is

the manager. (Compl. ¶¶ 32–33.)

f. Mr. Smith and FSC are the owners of RWAC Rental III, LLC, and

FSC is the manager. (Compl. ¶¶ 37–38.)

g. Mr. Smith and FSC are the owners of RWAC Rental IV, LLC, and

FSC is the manager. (Compl. ¶¶ 42–43.)
h. Mr. Smith and FSC are the owners of RWAC Rental VI, LLC, and

FSC is the manager. (Compl. ¶¶ 47–48.)

i. Mr. Smith and FSC are the owners of RWAC Rental VII, LLC,

and FSC is the manager. (Compl. ¶¶ 52–53.)

j. Mr. Smith, one of his children, and FSC are the owners of Mingo

Creek Investments II, LLC, and FSC is the manager. (Compl.

¶¶ 57–58.)

k. Mr. Smith and FSC are the owners of Mingo Creek Investments

III, LLC, and FSC is the manager. (Compl. ¶¶ 62–63.)

l. Mr. Smith is the sole owner and manager of Black & Gold

Investments II, LLC. (Compl. ¶¶ 67–68.)

m. FSC is the sole owner and manager of Lions Spring Housing

Associates, LLC. (Compl. ¶¶ 72–73.)

n. Mr. Smith, one of his children, and FSC are the owners of

Blackwolf Run III-2, LLC, and FSC is the manager. (Compl.

¶¶ 77–78.)

o. Mr. Smith and one of his children are the owners of Riverwood

Ranch Townhomes, LLC, and FSC is the manager. (Compl.

¶¶ 82–83.)

p. Mr. Smith, one of his children, and FSC are the owners of

Lionsgate Townhomes, LLC, and Mr. Smith is the manager.

(Compl. ¶¶ 77–78.)
q. FSC, along with individuals and entities associated with non-

party Randy L. Edwards, are the owners of Smith-Edwards, LLC.

(Compl. ¶ 92.) Mr. Smith and Edwards are the managers.

(Compl. ¶ 93.)

r. Mr. Smith is the sole owner and manager of RGC 2, LLC. (Compl.

¶¶ 97–98.)

s. Mr. Smith is the sole owner and manager of Sans Souci Farm,

LLC. (Compl. ¶¶ 102–103.)

13. FSC operates as an “enterprise shared services company” and provides

document management, accounting, cash management, leadership, and governance

function services to many of the other Plaintiffs. (Compl. ¶ 4.)

14. Plaintiffs, collectively, are involved in multiple lines of business,

including the ownership, management, and operation of golf and athletic clubs;

agriculture; farming; ranching; forestry; and the ownership, development, and rental

of residential and commercial real estate. (Compl. ¶¶ 11, 16, 21, 26, 31, 36, 41, 46,

51, 56, 61, 66, 71, 76, 81, 86, 91, 96, 101–102.) A substantial portion of Plaintiffs’ day-

to-day business involves the financing, purchase, and sale of real property and cattle.

(Compl. ¶ 153.)

15. To facilitate Plaintiffs’ business operations, Plaintiffs have entered into

a wide range of complex secured and unsecured lending relationships with state-

chartered, federally chartered, and other financial lending institutions. (Compl.

¶¶ 119, 155, 173.)
16. Collectively, Plaintiffs are parties to lending agreements valued at more

than $120 million. (Compl. ¶ 155.)

17. Plaintiffs allege that nearly all of their existing loan agreements are

subject to fixed interest rates that are significantly lower than current market rates

and contain similar default provisions under which the lender may accelerate

payment of the loan. (Compl. ¶¶ 174–175, 182, 202, 206, 248.)

18. After learning of Mrs. Smith’s PI Motion in the ED Action, Plaintiffs

formed a belief that the relief sought in the PI Motion implicated certain default

provisions contained in their lending agreements, thereby creating the possibility

that they would face serious financial consequences if the PI Motion was ultimately

granted. (Compl. ¶¶ 183, 207.) Plaintiffs also concluded that they had an obligation

to inform their lenders of the pendency of the PI Motion despite their fear that this

information would trigger—or at least risk triggering—a default event. (Compl.

¶¶ 202, 248; see also Compl. ¶¶ 186, 216.)

19. Accordingly, Plaintiffs informed their lenders of the existence of the PI

Motion. (Compl. ¶¶ 201, 249.)

20. Plaintiffs’ counsel also engaged in various written communications with

Mrs. Smith’s counsel in the ED Action to explain Plaintiffs’ concerns regarding the

risk of harm the PI Motion posed to them and to request that Mrs. Smith withdraw

the PI Motion. (Compl. ¶¶ 251, 253, 256; see generally Compl. Ex. B.)
21. In a 9 July 2025 letter to Plaintiffs’ counsel—and in a subsequent 21

July 2025 email—Mrs. Smith’s attorney in the ED Action stated that Mrs. Smith

would not be withdrawing the PI Motion. (See Compl. Ex. B.)

22. Shortly thereafter, on 25 July 2025, Plaintiffs initiated the present

lawsuit by filing a Complaint in Johnston County Superior Court seeking declaratory,

injunctive, and monetary relief against Mrs. Smith. (ECF No. 3.) In their first three

claims, Plaintiffs seek a combination of declaratory and injunctive relief aimed at

barring Mrs. Smith from making any arguments in connection with her PI Motion in

the ED Action that would affect Plaintiffs. In their fourth and fifth claims for relief,

Plaintiffs assert claims against Mrs. Smith for tortious interference with contract and

conversion, respectively.

23. Currently, Plaintiffs are not parties to the ED Action. Rather, Mr.

Smith and Mrs. Smith remain the sole parties to that proceeding. (Compl. ¶ 116; see

also Compl. Ex. B, at 1.) However, after the present lawsuit was filed, Mrs. Smith

filed a motion in the ED Action seeking to join Plaintiffs as parties. (ECF No. 20.6.)

That motion is currently pending before the District Court.

24. On 29 July 2025, this matter was designated as a mandatory complex

business case and assigned to the undersigned. (ECF Nos. 1–2.)

25. That same day, Plaintiffs filed a Motion for Preliminary Injunction in

this case. (ECF No. 6.) 1

1
On 28 August 2025, Plaintiffs filed an Amended Motion for Preliminary Injunction (ECF
No. 28), which was followed by a Second Amended Motion for Preliminary Injunction on 20
October 2025. (ECF No. 36.)
26. On 28 August 2025, Mrs. Smith filed the present Motion seeking the

dismissal of this action pursuant to Rules 12(b)(1) and (6) of the North Carolina Rules

of Civil Procedure. (ECF No. 23.)

27. The Motion to Dismiss came on for a hearing before the Court on 28

October 2025, at which Plaintiffs and Mrs. Smith were each represented by counsel.

28. The Motion to Dismiss is now ripe for resolution.

LEGAL STANDARD

29. A motion brought under Rule 12(b)(1) challenges a court’s jurisdiction

over the subject matter of the claimant’s claims. N.C. R. Civ. P. 12(b)(1). “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 “a

court’s legal authority to adjudicate the kind of claim alleged.” In re McClatchy Co.,

LLC, 386 N.C. 77, 85 (2024) (cleaned up). “[T]he proceedings of a court without

jurisdiction of the subject matter are a nullity.” Burgess v. Gibbs, 262 N.C. 462, 465

(1964) (cleaned up).

30. 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). However, “if the trial

court confines its evaluation to the pleadings, the court must accept as true the

plaintiff’s allegations and construe them in the light most favorable to the plaintiff.”

Munger v. State, 202 N.C. App. 404, 410 (2010) (quoting Dep’t of Transp. v. Blue, 147

N.C. App. 596, 603 (2001)).
31. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court

reviews the allegations in the complaint in the light most favorable to the plaintiff.

See Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017). The Court’s

inquiry is “whether, as a matter of law, the allegations of the complaint . . . are

sufficient to state a claim upon which relief may be granted under some legal

theory[.]” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App. 669, 670 (1987). The

Court accepts all well-pled factual allegations in the relevant pleading as true. See

Krawiec v. Manly, 370 N.C. 602, 606 (2018). The Court is not, however, required “to

accept as true allegations that are merely conclusory, unwarranted deductions of fact,

or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. Dep’t Health and Hum.

Servs., Div. of Facility Servs., 174 N.C. App. 266, 274 (2005) (cleaned up).

32. Furthermore, the Court “can reject allegations that are contradicted by

the documents attached, specifically referred to, or incorporated by reference in the

complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016)

(cleaned up). The Court may consider these attached or incorporated documents

without converting the Rule 12(b)(6) motion into a motion for summary judgment.

Id. (cleaned up). 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 Cap., L.P. v. Slavin, 147

N.C. App. 52, 60 (2001) (cleaned up).

33. Our Supreme Court has observed that “[i]t 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. Brit. Am. Tobacco

PLC, 371 N.C. 605, 615 (2018) (cleaned up). This standard of review for Rule 12(b)(6)

motions is the standard our Supreme Court “routinely uses . . . in assessing the

sufficiency of complaints in the context of complex commercial litigation.” Id. at 615

n.7 (cleaned up).

ANALYSIS

34. In the Motion to Dismiss, Mrs. Smith seeks dismissal of this action in

its entirety pursuant to Rules 12(b)(1) and (6).

35. With respect to her Rule 12(b)(1) argument, Mrs. Smith asserts that this

Court lacks subject matter jurisdiction over Plaintiffs’ claims because the District

Court in the ED Action has exclusive jurisdiction over all matters related to equitable

distribution and that the adjudication of Plaintiffs’ claims would require this Court

to become involved in the determination of what is—and is not—marital property.

36. With regard to Plaintiffs’ claims for tortious interference and

conversion, Mrs. Smith asserts that those claims are also subject to dismissal

pursuant to Rule 12(b)(6) because Plaintiffs have failed to allege that Mrs. Smith has

taken any action beyond filing the PI Motion, which cannot by itself give rise to

liability grounded in tort.

37. The Court will address each of Mrs. Smith’s arguments in turn.
I. Rule 12(b)(1)

38. As noted above, subject matter jurisdiction refers to the “legal power and

authority of a court to make a decision that binds the parties to any matter properly

brought before it.” Catawba Cnty. ex rel. Rackley v. Loggins, 370 N.C. 83, 88 (2017)

(cleaned up). It is “a threshold requirement for a court to hear and adjudicate a

controversy brought before it,” In re M.B., 179 N.C. App. 572, 574 (2006) (cleaned up),

which “cannot be conferred by consent or waiver [or] . . . create[d] [] where it does not

already exist,” Burgess v. Burgess, 205 N.C. App. 325, 327–28 (2010) (cleaned up).

39. Chapter 7A of the North Carolina General Statutes governs the

jurisdiction and powers of North Carolina’s trial courts, and N.C.G.S. § 7A-244 states

as follows with respect to the subject matter jurisdiction of our District Courts:

The district court division is the proper division without regard to the
amount in controversy, for the trial of civil actions and proceedings for
annulment, divorce, equitable distribution of property, alimony,
child support, child custody and the enforcement of separation or
property settlement agreements between spouses, or recovery for the
breach thereof.

N.C.G.S. § 7A-244 (emphasis added).

40. “Equitable distribution is the process by which a court divides property

belonging to a married couple based upon a variety of statutory factors.” Smith v.

Rodgers, 263 N.C. App. 662, 668 (2019) (citing N.C.G.S. § 50-20(c)).

41. It is well settled that District Courts possess exclusive authority over

equitable distribution proceedings. See Watson v. Joyner-Watson, 263 N.C. App. 393,

395 (2018) (“The district court exercises subject matter jurisdiction over civil actions

and proceedings for . . . equitable distribution of property.” (cleaned up)); see also
Guiliano v. Strickland, 2024 NCBC LEXIS 95, at *6 (N.C. Super. Ct. July 16, 2024)

(“The District Court division has exclusive jurisdiction over all equitable distribution

claims.”).

42. Plaintiffs argue that this Court nevertheless possesses subject matter

jurisdiction over their claims in this case because Plaintiffs are separate and legally

distinct entities from Mr. Smith and—as non-parties to the ED Action—are entitled

to bring this case in Superior Court to protect their interests.

43. Mrs. Smith, conversely, contends that Plaintiffs are seeking an end run

around the District Court’s exclusive jurisdiction over the ED Action by asking this

Court to improperly interfere with her pending PI Motion in that proceeding.

44. In addressing the parties’ respective contentions under Rule 12(b)(1),

the Court deems it appropriate to analyze Plaintiffs’ declaratory and injunctive

claims separately from their claims for monetary damages.

A. Claims for Declaratory and Injunctive Relief

45. The District Court’s exclusive jurisdiction over equitable distribution

actions logically extends to all motions made in the course of those proceedings. See

Garrison v. Garrison, 90 N.C. App. 670, 672 (1988) (holding that “[t]he district court

did not lose jurisdiction to equitably distribute the marital property” when a “special

proceeding seeking partition of the marital property was filed in the office of the clerk

of superior court”); see also Tripp v. Tripp, 2011 N.C. App. LEXIS 2168, at *4 (N.C.

Ct. App. Oct. 4, 2011) (unpublished) (noting that “[o]nce a party invokes the
jurisdiction of the District Court for equitable distribution, the District Court has

exclusive jurisdiction over the property” at issue (cleaned up)).

46. Plaintiffs’ claims for declaratory and injunctive relief are—on their

face—inextricably intertwined with the ED Action. Specifically, with respect to these

three claims, the Complaint states in pertinent part as follows:

Each of the Plaintiff Entities is a separate and distinct entity, properly
organized or formed under the NC BCA and the NC LLCA (as
applicable).

Based on the substantial harm already imposed by [Mrs. Smith] on
Plaintiff Entities and the imminent, additional harm that would result
from [Mrs. Smith’s] pursuit of [Mrs. Smith’s] PI Motion and [Mrs.
Smith’s] threatened TRO Motion, Plaintiff Entities’ allegations present
an actual, genuine, existing and justiciable controversy.

The Plaintiff Entities request a declaratory judgment that each of and
every one of the Plaintiff Entities are separate and distinct entities from
one another, from Mr. Smith, and from [Mrs. Smith] and that as such,
none of the Plaintiff Entities may be combined, consolidated, merged, or
pierced, in whole or in part, through the grant of injunctive or other
relief in the ED Proceeding.

...

The Plaintiff Entities request a declaratory judgment that each of and
every one of the Plaintiff Entities is entitled to continue as separate and
distinct entities from one another, from Mr. Smith, and from [Mrs.
Smith], and that as such, none of the Plaintiff Entities may be inhibited,
enjoined, limited, or otherwise deprived of their ongoing autonomous
governance and management, in whole or in part, through the grant of
injunctive or other relief in the ED Proceeding.

...

[Mrs. Smith’s] PI Motion threatens the independence and operations of
each of the Plaintiff Entities.

[Mrs. Smith’s] PI Motion (even pending) requires disclosure and
potential default by the Plaintiff Entities under and pursuant to the
numerous lending relationships described above.
...

Plaintiff Entities ask this Court to enjoin [Mrs. Smith] from any and all
actions, including the filing of motions in the ED Proceeding that (a)
seek to impair the independent and separate existence of any of the
Plaintiff Entities; (b) limit the autonomous governance and operations
of any of the Plaintiff Entities; [and] (c) are in derogation of or challenge
the declarations requested in the First and Second Claims for Relief set
forth above.

Plaintiff Entities ask this Court for a mandatory injunction directing
and requiring [Mrs. Smith] to remove all references and requests set
forth in [Mrs. Smith’s] PI Motion that seek the imposition of judicially
sanctioned limitations upon or directions or control of the actions,
duties, obligations or disclosures of any of the Plaintiff Entities in any
respect.

(Compl. ¶¶ 273–275, 279, 281–282, 284–285.)

47. Not only do these allegations demonstrate that the source of Plaintiffs’

alleged harm is Mrs. Smith’s PI Motion in the ED Action, but they also make

abundantly clear that Plaintiffs’ requested remedy is that this Court make rulings

that limit Mrs. Smith’s ability to argue her PI Motion before the District Court in the

manner she sees fit to do so.

48. Thus, each of Plaintiffs’ three claims for declaratory and injunctive relief

are expressly based on a motion—and related proceedings—that are currently

pending before the District Court in the ED Action.

49. The Court concludes that it lacks subject matter jurisdiction over these

claims for at least four reasons.

50. First, Plaintiffs candidly admit that they have been unable to find any

North Carolina case law supporting the proposition that a judge in one lawsuit has

the authority to prevent a litigant from making an argument in a separately pending
second lawsuit before a different judge in connection with a motion that the party has

filed in the second lawsuit.

51. Indeed, it is axiomatic that if a litigant objects to the propriety of a

motion that has been made by a party to a lawsuit, the objection should be made to

the presiding judge in the case in which the motion was made. The objection should

not be made to a different judge in a different lawsuit.

52. The application of this commonsense principle is even more compelling

where—as here—the lawsuit in which the motion was filed involves a subject matter

that one division of our trial courts has been given exclusive jurisdiction over by the

General Assembly.

53. Second, North Carolina’s General Statutes expressly authorize a

spouse—such as Mrs. Smith—to file a motion for preliminary injunction in an

equitable distribution action for the purpose of protecting his or her interests in the

marital estate. Specifically, N.C.G.S. § 50-20(i) states in relevant part as follows:

Upon filing an action or motion in the cause requesting an equitable
distribution or alleging that an equitable distribution will be requested
when it is timely to do so, a party may seek injunctive relief . . . to
prevent the disappearance, waste, or conversion of property alleged to
be marital property, divisible property, or separate property of the party
seeking relief.

N.C.G.S. § 50-20(i).

54. Plainly, this statutory provision gives a spouse in Mrs. Smith’s position

the right to petition the District Court for an order seeking to preserve the status quo

of the couple’s marital property and to prevent its disappearance, waste, or

conversion during the pendency of the equitable distribution proceeding.
55. When questioned on this subject by the Court at the 28 October hearing,

counsel for Plaintiffs conceded that (1) § 50-20(i) empowers the District Court in the

ED Action to issue a preliminary injunction if it believes that Mr. Smith is, in fact,

improperly concealing, wasting, or converting marital property; and (2) the PI

Motion—as a whole—is therefore not improper. Instead, Plaintiffs’ counsel clarified

that Plaintiffs’ position is that only certain specific portions of the relief requested in

the PI Motion are improper.

56. Indeed, a review of the PI Motion reveals that it also encompasses other

types of potential transactions by Mr. Smith—that is, transactions having nothing to

do with his ownership or management of Plaintiffs—that Mrs. Smith contends would

result in the diminution of marital assets.

57. Nonetheless, Plaintiffs maintain that the PI Motion is improper to the

extent it requests that the District Court:

[e]nter a preliminary injunction restraining [Mr. Smith] from disposing,
transferring, wasting, hiding, converting, selling, pledging, assigning, or
in any manner alienating marital or divisible assets, including but not
limited to the following:

a. Restraining [Mr. Smith] from assigning, transferring, or
selling any assets or interests in business entities to third
parties without [Mrs. Smith’s] written consent or entry of
an order of the Court permitting the same;

b. Prohibiting [Mr. Smith] from refinancing/incurring
additional debt associated with any business entity in
which [Mr. Smith] has management control without [Mrs.
Smith’s] written consent or entry of an order of the Court
permitting the same;

c. Enjoining [Mr. Smith] from authorizing or proceeding
forward with any transactions in excess of one hundred
thousand dollars whether individually or associated with
any business entity in which he has management control
without [Mrs. Smith’s] written consent or entry of an order
of the Court permitting the same;

d. Restraining [Mr. Smith] from further encumbering any
stock or other assets (or authorizing any business entity to
further encumber any assets) without [Mrs. Smith’s]
written consent or entry of an order of the Court permitting
the same;

...

f. Ordering [Mr. Smith] to provide an accounting of all
distributions he has received from North State Bank and
an accounting of all transactions in excess of one hundred
thousand dollars that were initiated by [Mr. Smith]
individually, or on his behalf, or initiated on behalf of any
business entity in which [Mr. Smith] has management
control since January 1, 2023.

(Compl. Ex. A, at 8–10.)

58. Although these portions of the PI Motion do not expressly request that

the District Court take any action directly against Plaintiffs, Plaintiffs nevertheless

contend that the PI Motion would, as worded, effectively give Mrs. Smith veto power

over their business operations and interfere with the fiduciary duties and obligations

that Mr. Smith owes to them.

59. But Plaintiffs’ arguments simply amount to a belief that Mrs. Smith has

sought overly broad relief in the PI Motion and that her legitimate interests in

protecting the status quo as to the marital estate could be achieved by a more

narrowly crafted motion.

60. The District Court is not only fully competent to resolve that issue but

has also been granted the exclusive jurisdiction to do so by our General Assembly.
61. Third, Plaintiffs’ contention that their rights cannot be protected in the

ED Action because Mr. Smith is the only defendant in that proceeding rings hollow.

62. As noted above, there is currently a motion by Mrs. Smith to join

Plaintiffs as additional parties to the ED Action that is pending in District Court.

(See ECF No. 20.6.) Nevertheless, Plaintiffs have not consented to that motion—even

though becoming parties to that case would enable them to make the same arguments

to the District Court judge in the ED Action (who will be the ultimate decisionmaker

on Mrs. Smith’s PI Motion) that they are making here.

63. As a result, it is difficult to escape the conclusion that Plaintiffs are

trying to have their cake and eat it too by simultaneously (1) attempting to exercise

the type of input over the resolution of the PI Motion that only a party to the ED

Action would have, while (2) avoiding being subject to the jurisdiction of the District

Court, thereby escaping any ensuing disadvantages they believe they would suffer

from actually becoming parties to the ED Action.

64. Fourth, the existing decisions from North Carolina’s appellate courts

that are most analogous to the present case have uniformly held that a Superior

Court judge lacks the authority to interfere with a District Court’s resolution of a

separately pending equitable distribution action.

65. In Hudson v. Hudson, our Court of Appeals addressed similar

jurisdictional arguments in the context of a motion to dismiss for lack of subject

matter jurisdiction. 145 N.C. App. 631 (2001).
66. In that case, Susan Hudson (“Mrs. Hudson”) had initiated an equitable

distribution proceeding in District Court following her separation from her husband,

Fitzgerald Hudson (“Mr. Hudson”). Id. at 632. During the equitable distribution

proceeding, the District Court determined that Mr. Hudson had an ownership

interest in a business entity—Hudson International, Inc. (“HII”)—as well as “final

direction and control” over HII “in his capacities as general partner and chief

executive officer.” Id. The District Court further found that prior to their separation,

Mr. Hudson had used marital assets to build a second residence, known as

“Southerly,” which he titled to HII as part of a “calculated effort to divest [Mrs.

Hudson] of her marital property rights.” Id. at 632–33. HII subsequently filed a

complaint for declaratory relief in Superior Court requesting a declaration that

“Southerly” was the sole property of HII and that neither Mrs. Hudson nor Mr.

Hudson had an ownership interest in it. Id. at 633.

67. The Court of Appeals affirmed the trial court’s dismissal of the Superior

Court action under Rule 12(b)(1), framing the issue as “whether section 7A-244

divests the superior court of jurisdiction to enter a declaratory judgment concerning

alleged marital property, where a previously filed domestic action concerning that

same property is pending in the district court.” Id. at 635. The Court of Appeals

held that because the District Court had determined marital assets were used to

purchase “Southerly” and that “Southerly” had been titled to HII for the purpose of

depriving Mrs. Hudson of the marital estate, the District Court had obtained
exclusive jurisdiction to determine the nature of—and potentially divide—the

property. Id. at 636–37.

68. The Court of Appeals explained its reasoning as follows:

Plaintiffs argue that . . . they were not parties to the [District Court]
action when it was filed and therefore are not bound by that action in
relation to the declaratory judgment action. Plaintiffs further argue
that section 7A-244 is inapplicable in the present case, because by its
plain language, section 7A-244 does not mandate that declaratory
judgment actions concerning marital assets must be filed in district
court, nor does it prohibit the filing of such actions in superior court.
With plaintiffs’ arguments, we disagree.

...

[W]e conclude that it is irrelevant in the present case whether or not
section 7A-244 lists declaratory judgment actions as actions for which
the district court is the proper division. Section 7A-244 instructs
litigants that the “proper division” for the specified domestic related
actions is the district court. § 7A-224. By its plain language, when the
actions listed therein are erroneously filed in superior court and no other
such action has been previously filed in district court, the superior court
may, upon a parties’ motion, transfer that action to the proper division—
the district court, via section 7A-258 of our General Statutes. See
N.C.G.S. § 7A-258 (stating that any party may move to transfer civil
actions “to the proper division when the division in which the case is
pending is improper” under the rules specified in Chapter 7A). This is
not the situation presented by the present case.

Rather, . . . where, as here, an action listed in section 7A-244 has been
previously filed in district court and another action relating to the
subject matter of the previously filed action is then filed in superior
court, the district court’s jurisdiction over the subject matter has already
been invoked by the parties to the first action. It follows that the
superior court does not have jurisdiction in the subsequently filed
action, irrespective of the parties to the first action.

Because the Superior Court . . . was divested of subject matter
jurisdiction in the case sub judice, it properly dismissed the action
without prejudice. . . . We note that dismissal of such actions without
prejudice further allows litigants to then intervene in the pending
district court action by virtue of Rule 24 of our Rules of Civil Procedure.
See N.C. R. Civ. P. 24(a). Because plaintiffs sub judice have been made
parties to the [District Court] action, the above noted procedure
pursuant to Rule 24 is unnecessary, as other joinder and pleading
options are now available to them via our Rules of Civil Procedure.

Hudson, 145 N.C. App. at 637–38.

69. In Burgess v. Burgess, the Court of Appeals addressed whether the

District Court’s exclusive jurisdiction over equitable distribution proceedings

encompassed a shareholder derivative action brought by one spouse against the other

spouse. 205 N.C. App. at 325.

70. The wife had brought a lawsuit for equitable distribution against her

husband. Id. at 326. The couple each owned a fifty percent interest in Burgess &

Associates, Inc. (“B&A”), and while the husband served as B&A’s sole director and

president, the wife had requested that the District Court grant her “exclusive

possession and full use” of B&A. Id. While the equitable distribution case was

pending, the wife brought a shareholder derivative action on behalf of B&A in

Superior Court against the husband requesting (1) an inspection of B&A’s records;

(2) an accounting; (3) damages for the husband’s alleged breach of fiduciary duties;

and (4) an order divesting the husband of his shares of B&A. Id. Relying on Hudson,

the husband sought to have the shareholder derivative action dismissed for lack of

subject matter jurisdiction, but the trial court denied the motion. Id. at 326.

71. In affirming in part and reversing in part the trial court’s ruling, the

Court of Appeals explained which claims could and could not be brought in Superior

Court while a related equitable distribution claim was pending in District Court.

Under the broad scope of our equitable distribution statutes, it is clear
that [the wife’s] equitable claim for divestiture of [the husband’s] shares
is squarely addressed in her equitable distribution action. [The wife]
has already invoked the powers of the district court to divide the shares
of Burgess & Associates, and [the wife] may not use her shareholder suit
as an end-around to obtaining sole ownership of the company. To the
extent the trial court allowed [the wife] to pursue an equitable
divestiture of [the husband’s] shares in her shareholder derivative suit,
we reverse the trial court’s order.

...

By contrast, [the wife’s] derivative claim in her shareholder suit does
not concern the division of marital property, and instead she asserts a
separate claim for relief, outside the scope of section 50-20 and on behalf
of the corporation, in superior court. Burgess & Associates is a separate
legal entity, recognized as distinct from the holders of its shares, Troy
Lumber Co. v. Hunt, 251 N.C. 624, 627 (1960); and though [the wife] and
[the husband] are in the midst of their divorce, the company continues
to exist as a corporation owned and managed by its shareholders. This
legal principle entitles [the wife] to bring a shareholder derivative suit
“in the right of” Burgess & Associates in order to assert the corporation’s
rights, and recover damages on behalf of the corporation for [the
husband’s] alleged breaches of the duties of good faith and due care.
N.C.G.S. § 55-7-40.1(1). As part of this cause of action, [the wife] is
entitled to relief that she is barred from seeking in the equitable
distribution action: a jury trial.

Burgess, 205 N.C. App. at 330–31.

72. Most recently, in Baldelli v. Baldelli, our Court of Appeals held that

although the Superior Court possessed subject matter jurisdiction over one spouse’s

claim for breach of fiduciary duty against the other spouse, such a claim was required

to be held in abeyance until a final resolution of equitable distribution proceedings

between the parties that were pending in District Court. 249 N.C. App. 603 (2016).

73. In Baldelli, the husband and wife had formed a number of business

entities throughout their marriage—including Travel Resorts of America, Inc.

(“TRA”); Trident Designs, LLC (“Trident Designs”); Travel Resorts of North Carolina,

LLC (“TRNC”); Derby Investment Company, LLC (“Derby Investment”); and Trident
Capital, LLC (“Trident Capital”). Id. at 604. Subsequently, the husband and wife

separated, and each filed an equitable distribution action in District Court. Id. The

parties agreed that TRA and Trident Designs were marital property and joined them

as parties to the equitable distribution proceeding. Id. However, although the wife

claimed that TRNC, Derby Investment, and Trident Capital were also marital

property, the husband disagreed, and those entities were not made parties to the

District Court litigation. Id. While the equitable distribution action was pending,

the wife—individually and on behalf of TRA and Trident Designs—filed a lawsuit in

Superior Court against the husband, TRNC, Derby Investment, and Trident Capital

asserting several claims, including one for breach of fiduciary duty. Id.

74. On appeal, the Court of Appeals concluded that the trial court had erred

in dismissing the wife’s breach of fiduciary duty claim for lack of subject matter

jurisdiction. Id. at 605.

In the case before us, Plaintiffs allege, inter alia, breach of fiduciary duty
against Defendant for which Plaintiffs claim damages in excess of
$25,000.00. If Plaintiffs prevail in this breach of fiduciary duty claim,
they will collect from Defendant’s separate property, which is a remedy
not available to them in the district court equitable distribution action.
Although it is possible that the equitable distribution action could
resolve the issues underlying Plaintiffs’ claim for breach of fiduciary
duty, it is also possible that the equitable distribution action will leave
these issues unresolved or, as stated above, leave Plaintiffs without the
full remedy that would be provided in the superior court action. . . .

[B]ecause the parties and subject matter of Plaintiffs’ breach of fiduciary
duty claim are closely related—when not identical—to the parties and
the subject matter to be decided in a portion of the district court action,
and because there is a clear interrelationship between the issues in both
actions, we do not believe it is in the interest of judicial economy or
clarity for both of these actions to proceed simultaneously. To allow both
actions to proceed concurrently would be to invite conflict between the
resolution of interrelated issues in the two actions.
...

We hold that Plaintiffs’ breach of fiduciary duty claim in this case should
be held in abeyance by the superior court until the district court
equitable distribution action is resolved. Concerning Plaintiffs’
additional superior court claims, they are similar in that though the
underlying issues might be resolved in the equitable distribution action,
we cannot say for certain that unresolved issues would not remain.

Id. at 607–09.

75. Hudson, Burgess, and Baldelli are helpful in articulating key principles

that apply where a lawsuit is filed in Superior Court that bears a close relationship

to an existing equitable distribution proceeding in District Court between the same

(or similar) parties. But the Court’s lack of subject matter jurisdiction over Plaintiffs’

declaratory and injunctive claims in the present case is far more glaring than in any

of those cases.

76. In the present case, Plaintiffs are overtly asking this Court to enter an

order expressly telling Mrs. Smith what she can and cannot argue in a statutorily

authorized motion that she filed in the ED Action, which is currently pending before

the District Court. It is difficult to imagine a more blatant form of interference with

the ED Proceeding than that sought by Plaintiffs here.

77. This is not merely a scenario in which there exists some degree of

overlap between the case pending in Superior Court and the case pending in District

Court. Rather, this is a situation where the expressly stated purpose of the

declaratory and injunctive claims asserted in the Superior Court action is to interfere

with the District Court’s disposition of a motion currently pending before it.
78. The granting of such relief under any circumstances would be

unprecedented, but it would be even more extraordinary in a case like this one, where

the subject matter of the proceeding before the District Court is one for which the

General Assembly has granted that court exclusive jurisdiction.

79. Finally, it is important to emphasize that Plaintiffs have ways to protect

their interests that they claim are at risk. Most basically, Plaintiffs can consent to

be joined in the ED Action, which would give them a direct right to make the same

arguments that they make here to the ultimate decisionmaker on Mrs. Smith’s PI

Motion—that is, the District Court. See Hudson, 145 N.C. App. at 638.

80. Alternatively, they can rely on the commonality of interests between

them and Mr. Smith—in avoiding disruption to the loan agreements between

Plaintiffs and their lenders—and allow Mr. Smith’s counsel in the ED Action to make

these same arguments.

81. Moreover, any ruling in the ED Action can be appealed to the Court of

Appeals, accompanied by a motion to stay the District Court’s order. See, e.g.,

Campbell v. Campbell, 241 N.C. App. 227, 230–31 (2015) (granting interlocutory

review of the District Court’s entry of a preliminary injunction where “the trial court

exerted significant control over [the company’s] assets, operations, and management

structure in order to effectuate a business plan while [the company] was not a party

to the [equitable distribution] action”).
82. However, the one thing that Plaintiffs cannot do is precisely what they

seek to do in the present case—that is, use this Court as a vehicle to gain some degree

of control over the proceedings in the ED Action from afar.

83. Accordingly, Mrs. Smith’s Motion is GRANTED pursuant to Rule

12(b)(1) with respect to Plaintiffs’ claims for declaratory and injunctive relief, and

those claims are DISMISSED without prejudice. See Holton v. Holton, 258 N.C. App.

408, 415 (2018) (noting that “a dismissal under Rule 12(b)(1) must be made without

prejudice, since a trial court without jurisdiction would lack authority to adjudicate

the matter” (cleaned up)).

B. Claims for Monetary Damages

84. However, the Court reaches a different conclusion under Rule 12(b)(1)

with respect to Plaintiffs’ claims for tortious interference with contract and

conversion.

85. Although these two claims are factually related to the ED Action, they

do not pose the obvious jurisdictional defects discussed above that bar Plaintiffs’

declaratory and injunctive claims. Namely, these two claims do not seek to directly

interfere with ongoing proceedings in the ED Action or otherwise impinge on the

District Court’s authority over equitable distribution matters.

86. Burgess and its progeny support the conclusion that the District Court’s

exclusive authority over equitable distribution actions does not preclude Plaintiffs

from bringing these types of tort claims against Mrs. Smith in Superior Court seeking

(1) monetary damages from her separate (non-marital) property; and (2) a jury trial
(if they desire one). See Burgess, 205 N.C. App. at 332 (recognizing that “if successful

in prosecuting her derivative suit for breach of the duties of good faith and due care,

[plaintiff] may obtain a judgment . . . from a jury verdict” and that such an award

“would be against [defendant] in his individual capacity[,]” which could be enforced

“against [defendant’s] separate property”); see also Baldelli, 249 N.C. App. at 607

(noting that “[i]f [p]laintiffs prevail in this breach of fiduciary duty claim, they will

collect from [d]efendant’s separate property, which is a remedy not available to them

in the District Court equitable distribution action”); see also BIOMILQ, Inc. v.

Guiliano, 2023 NCBC LEXIS 24, at *46 (N.C. Super. Ct. Feb. 10, 2023) (denying a

motion to hold the Superior Court case in abeyance because “[plaintiff] would not be

entitled to the relief it seeks . . . in the District Court [a]ction” for unfair and deceptive

trade practices).

87. Therefore, Mrs. Smith’s Motion to Dismiss Plaintiffs’ claims for tortious

interference with contract and conversion pursuant to Rule 12(b)(1) is DENIED. 2

II. Rule 12(b)(6)

88. Alternatively, Mrs. Smith seeks dismissal of Plaintiffs’ claims for

tortious interference with contract and conversion under Rule 12(b)(6).

89. The Court will address Mrs. Smith’s arguments as to each of these

claims in turn.

2 For the reasons set out below, however, the Court finds that dismissal of Plaintiffs’ tort

claims is nonetheless proper—albeit pursuant to Rule 12(b)(6) rather than Rule 12(b)(1).
A. Tortious Interference with Contract

90. Our Supreme Court has articulated the following elements applicable to

a tortious interference with contract claim:

(1) a valid contract between the plaintiff and a third person which
confers upon the plaintiff a contractual right against a third person; (2)
the defendant knows of the contract; (3) the defendant intentionally
induces the third person not to perform the contract; (4) and in doing so
acts without justification; (5) resulting in actual damage to plaintiff.

United Lab’ys, Inc. v. Kuykendall, 322 N.C. 643, 661 (1988) (cleaned up).

91. In support of Plaintiffs’ claim for tortious interference with contract, the

Complaint alleges as follows:

At all relevant times, [Mrs. Smith] knew that Plaintiff Entities had
agreements with lenders that encumbered the Plaintiff Entities and
their assets with debt.

[Mrs. Smith’s] actions including bringing [Mrs. Smith’s] PI Motion have
been and are made without justification.

[Mrs. Smith’s] actions have been or are imminently preventing
performance of the contractual obligations in Plaintiff Entities’ lending
arrangements.

Plaintiffs have been damaged by the actions of [Mrs. Smith] described
in this Complaint in an amount to be proved at trial in excess of $5
million as of the date of this Complaint and such damages are increasing
so long as [Mrs. Smith’s] PI Motion is pending.

(Compl. ¶¶ 287–290.)

92. The Court finds that Plaintiffs’ tortious interference with contract claim

fails for several reasons.

93. Perhaps most basically, there are no allegations in the Complaint that

Mrs. Smith has engaged in any conduct to actually induce Plaintiffs’ lenders to take

any adverse action against Plaintiffs with respect to their existing loan agreements.
94. This Court has previously held that “[t]o sufficiently plead inducement,

there must be allegations of purposeful conduct, active persuasion, request, or

petition.” Se. Anesthesiology Consultants, PLLC v. Charlotte-Mecklenburg Hosp.

Auth., 2019 NCBC LEXIS 107, at *19 (N.C. Super. Ct. Dec. 13, 2019) (cleaned up).

95. Here, Plaintiffs do not allege that Mrs. Smith has taken any action to

directly contact or interact with their lenders. To the contrary, the Complaint alleges

that Plaintiffs were the ones who alerted their lenders to the existence of Mrs. Smith’s

PI Motion. The only conduct attributable to Mrs. Smith is that she filed the PI Motion

in the ED Action—a motion that, once again, is expressly authorized by N.C.G.S. § 50-

20(i).

96. The absence of allegations of specific acts of inducement by Mrs. Smith

renders this claim fatally defective. See, e.g., Prometheus Grp. Enters., LLC v. Gibson,

2023 NCBC LEXIS 42, at *28 (N.C. Super. Ct. Mar. 21, 2023) (observing that the

plaintiff “short shrift[ed] the requirement that it plead that [defendant] intentionally

induced [a third party] to breach the [contract]” by alleging intentional inducement

“in conclusory fashion” and “[w]ithout supporting facts”).

97. Furthermore, Plaintiffs have likewise failed to allege any facts to

support the conclusory allegation that Mrs. Smith filed the PI Motion in the ED

Action without justification. “A party acts ‘without justification’ when he acts with

malice and his actions are not reasonably related to the protection of a legitimate

business interest. . . . To sufficiently allege that a party acted without justification,

the complaint must provide a factual basis to support the claim of malice.” Urquhart
v. Trenkelbach, 2017 NCBC LEXIS 12, *15–16 (N.C. Super. Ct. Feb. 8, 2017) (cleaned

up).

98. Here, the Complaint is devoid of any allegations that Mrs. Smith was

even aware that filing the PI Motion might have an adverse effect on Plaintiffs’

lending agreements before she filed it. Without such knowledge, it is unclear how

Mrs. Smith could have filed the PI Motion for the purpose of inducing Plaintiffs’

lenders to take any action regarding those agreements. See Wells Fargo Ins. Servs.

USA, Inc. v. Link, 2018 NCBC LEXIS 42, at *44 (N.C. Super. Ct. May 8, 2018)

(dismissing a claim where plaintiff alleged that the defendant “acted ‘without

justification,’ but d[id] not plead facts supporting a claim that [defendant] acted with

malice or for any improper purpose, nor that [defendant] was motivated by anything

other than an interest in successfully competing against [plaintiff]” (cleaned up)),

aff’d per curiam, 372 N.C. 261, 285 (2019) see also Lendingtree, LLC v.

Intercontinental Cap. Grp., Inc., 2017 NCBC LEXIS 54, at *14 (N.C. Super. Ct. June

23, 2017) (holding that “general allegations of malice are insufficient as a matter of

pleading” (cleaned up)).

99. The Court further notes that Plaintiffs have not cited any cases from our

appellate courts that have allowed a claim for tortious interference with contract to

survive based on allegations even remotely similar to those pled here.

100. Finally, as counsel for Mrs. Smith noted at the 28 October hearing,

allowing such a claim to go forward would raise troubling public policy implications.
Parties to an equitable distribution proceeding should not face the specter of tort

liability simply by filing a motion authorized under N.C.G.S. § 50-20(i).

101. Although motions brought pursuant to § 50-20(i) must, of course, be

made in good faith and in compliance with Rule 11 of the North Carolina Rules of

Civil Procedure, policy concerns would be implicated if a spouse filing such a motion

was placed at risk of liability in tort any time the District Court ultimately denied

the motion in whole or in part. See Found. Bldg. Materials, LLC v. Conking &

Calbrese, Co., 2024 NCBC LEXIS 40, at *16 (N.C. Super. Ct. Mar. 4, 2024) (noting

that public policy requires that “a party who seeks redress by filing a lawsuit [be]

immune from claims that are based solely on the pursuit of that lawsuit” (cleaned

up)).

102. Therefore, for all of these reasons, Mrs. Smith’s Motion to Dismiss is

GRANTED as to Plaintiffs’ claim for tortious interference with contract pursuant to

Rule 12(b)(6), and that claim is DISMISSED with prejudice.

B. Conversion

103. Plaintiffs’ conversion claim fares no better.

104. “There are, in effect, two essential elements of a conversion claim:

ownership in the plaintiff and wrongful possession or conversion by the defendant.”

Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 523

(2012) (cleaned up).

105. In support of Plaintiffs’ conversion claim, the Complaint alleges as

follows:
[Mrs. Smith’s] actions including bringing [Mrs. Smith’s] PI Motion
constitute an actual and imminent unauthorized assumption and
exercise of right of ownership over Plaintiff Entities and their property.

[Mrs. Smith’s] actions including bringing [Mrs. Smith’s] PI Motion have
deprived and are wrongly depriving Plaintiff Entities of their property.

Plaintiffs have been damaged by the actions of [Mrs. Smith] described
in this Complaint in an amount to be proved at trial in excess of $5
million as of the date of this Complaint and such damages are increasing
so long as [Mrs. Smith’s] PI Motion is pending.

(Compl. ¶¶ 293–295.)

106. These allegations are insufficient for several reasons.

107. Most basically, Plaintiffs have not alleged that Mrs. Smith has actually

acquired ownership over—or possession of—any property belonging to Plaintiffs.

108. Indeed, as counsel for Plaintiffs essentially conceded at the 28 October

hearing, the facts of this case do not fit within the bounds of North Carolina’s existing

case law on conversion.

109. Moreover, to the extent that the conversion claim is based on Mrs.

Smith’s alleged assumption of ownership and management interests in Plaintiffs,

those interests are intangible and cannot be the subject of a conversion claim. See

McFee v. Presley, 2022 NCBC LEXIS 74, at *13–14 (N.C. Super. Ct. July 11, 2022)

(dismissing conversion claim because “[m]embership in an LLC is [ ] an intangible

interest” and “North Carolina does not recognize a claim for conversion of intangible

interests” (cleaned up)); Tiller v. Phillips, 2025 NCBC LEXIS 141, at *54, *56 (N.C.

Super. Ct. Oct. 15, 2025) (holding that “ownership and control over [membership]

interests in” a business are “intangible and not subject to a conversion claim” absent
allegations that “a membership certificate or other tangible manifestation of the

membership interest was taken” (cleaned up)).

110. For these reasons, Mrs. Smith’s Motion to Dismiss pursuant to Rule

12(b)(6) is GRANTED as to Plaintiffs’ claim for conversion, and this claim is

DISMISSED with prejudice.

III. Plaintiffs’ Second Amended Motion for Preliminary Injunction

111. As noted above, since the Motion to Dismiss was filed, Plaintiffs have

filed a Second Amended Motion for Preliminary Injunction in the present case.

112. However, because the Court’s rulings herein dismiss this lawsuit in its

entirety, Plaintiffs’ request for a preliminary injunction is moot. See N.C.

Acupuncture Licensing Bd. v. N.C. Bd. of Physical Therapy Exam’rs, 2016 NCBC

LEXIS 33, at *9 n.2 (N.C. Super. Ct. Apr. 26, 2016) (concluding that “[t]he Court’s

ruling on [d]efendants’ [m]otions . . . dismissing [p]laintiff’s claims renders” plaintiff’s

motion for a preliminary injunction moot (cleaned up)); see also State ex rel. Edmisten

v. Fayetteville St. Christian Sch., 299 N.C. 351, 357–58 (1980) (holding that a

preliminary injunction “lasts no longer than the pendency of the action” (cleaned up)).

113. Accordingly, Plaintiffs’ Second Amended Motion for Preliminary

Injunction is DISMISSED as MOOT.
CONCLUSION

THEREFORE, IT IS ORDERED as follows:

1. Mrs. Smith’s Motion to Dismiss pursuant to Rule 12(b)(1) is GRANTED

as to Plaintiffs’ claims for declaratory and injunctive relief (Claims 1, 2,

and 3), and those claims are DISMISSED without prejudice;

2. Mrs. Smith’s Motion to Dismiss pursuant to Rule 12(b)(6) is GRANTED

as to Plaintiffs’ claims for tortious interference with contract and

conversion (Claims 4 and 5), and those claims are DISMISSED with

prejudice; and

3. Plaintiffs’ Second Amended Motion for Preliminary Injunction is

DISMISSED as MOOT.

SO ORDERED, this the 14th day of November 2025.

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