Hughes v. Jbs Ventures, LLC

Hughes v. JBS Ventures, LLC, 2026 NCBC 9.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
GASTON COUNTY 25CVS000529-350

WILLIAM R. HUGHES,

Plaintiff,

v.

JBS VENTURES, LLC; THE
ESTATE OF JOSEPH LENIHAN, by ORDER AND OPINION ON
and through its executor James
Martin Lenihan; JOSEPH EDWARD DEFENDANTS’ MOTION FOR
LENIHAN REVOCABLE TRUST JUDGMENT ON THE PLEADINGS
dated May 1, 2019, by and through
its Trustee, Erik M. Rosenwood;
ROSENWOOD, ROSE & LITWAK,
PLLC; and CELTIC THREADS, LLC,

Defendants.

1. THIS MATTER is before the Court on Defendants JBS Ventures, LLC

(“JBS”), The Estate of Joseph Lenihan by and through its executor James Martin

Lenihan (the “Estate”), Joseph Edward Lenihan Revocable Trust dated May 1, 2019,

by and through its trustee Erik M. Rosenwood (the “Trust,” “Rosenwood” or

“Trustee”), Rosenwood Rose & Litwak PLLC (the “Firm”), and Celtic Threads LLC’s

(“Celtic”) (collectively, the “Defendants”) Motion for Judgment on the Pleadings (the

“Motion”), filed pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure

(the “Rule(s)”). 1

1 (Def.’s Mot. J. Pleadings [hereinafter “Mot.”], ECF No. 20.)
2. Having considered the Motion, the parties’ briefs in support of and in

opposition to the Motion, the relevant pleadings, the arguments of counsel, and

other appropriate matters of record, the Court hereby GRANTS the Motion.

Gray, Layton, Kersh, Solomon, Furr & Smith, P.A., by Michael L.
Carpenter and Kayla N. Butler, for Plaintiff William H. Hughes.

Rossabi Law PLLC, by Amiel J. Rossabi, for Defendant Celtic Threads
LLC.

Rosenwood, Rose & Litwak, PLLC, by Carl J. Burchette, for Defendant
Rosenwood, Rose & Litwak, PLLC.

Poyner Spruill LLP, by John Michael Durnovich and Thomas L.
Ogburn, for Defendants Joseph Edward Lenihan Revocable Trust Dated
May 1, 2019, Estate of Joseph Lenihan, and JBS Ventures LLC.

Brown, Judge.

I.

FACTUAL AND PROCEDURAL BACKGROUND

3. The Court does not make findings of fact when ruling on a motion for

judgment on the pleadings under Rule 12(c) and instead recites only those allegations

in the pleadings that are relevant and necessary to the Court’s determination of the

motion.

4. Plaintiff William R. Hughes (“Plaintiff” or “Hughes”) is a resident of San

Clemente, California. 2 Plaintiff has conducted business in Gaston County, North

Carolina, including the events at issue in the case. 3 Defendant JBS is a Georgia

2 (Amended Complaint [hereinafter “Am. Compl.”] ¶ 1, ECF No. 16.)

3 (Am. Compl. ¶ 1.)
Limited Liability Company with its principal place of business located in Gastonia,

North Carolina. 4 Defendant Estate, sued by and through its executor James Martin

Lenihan, is by operation of law a resident of North Carolina as Joseph Edward

Lenihan’s (“Lenihan”) last residence prior to his death in February 2023 was in

Gastonia, North Carolina, and the Estate is currently in probate in Gaston County,

North Carolina. 5 Executor James Martin Lenihan is a resident of California, and he

has agreed to and subjected himself to jurisdiction in the courts of North Carolina. 6

Defendant Trust, sued by and through its trustee Erik M. Rosenwood, is a trust with

its principal place of business in Gaston County, North Carolina. 7 Trustee

Rosenwood is a resident of Mecklenburg County, North Carolina. 8 Defendant Firm

is a North Carolina Professional Limited Liability Company conducting business in

North Carolina with its registered agent located in Mecklenburg County, North

Carolina. 9 Defendant Celtic is a North Carolina Limited Liability Company

conducting business in North Carolina with its registered agent located in

Mecklenburg County, North Carolina. 10

4 (Am. Compl. ¶ 2.)

5 (Am. Compl. ¶ 3.)

6 (Am. Compl. ¶ 3.)

7 (Am. Compl. ¶ 4.)

8 (Am. Compl. ¶ 4.)

9 (Am. Compl. ¶ 5.)

10 (Am. Compl. ¶ 6.)
5. On or about 6 March 2008, JBS was formed in connection with The Loray

Mill, “a large-scale urban revitalization and historic preservation project located in

Gastonia, North Carolina.” 11 JBS’ initial members included Lenihan, individually,

and Hughes Bi-Coastal, LLC, an entity owned by Plaintiff. 12 In 2012, Lenihan

became the sole owner and Manager of JBS once Hughes Bi-Coastal was removed as

a member of JBS. 13

6. In June 2013, JBS entered into a Second Amended and Restated Operating

Agreement (“Second Operating Agreement”), which stated that Plaintiff would

acquire a 23% membership interest in JBS as follows:

In consideration of the issuance by Company of his Membership
Interest, Hughes shall contribute $5,000 in cash to the Company which
Capital Contribution shall be made at the rate of $1,000 per month
commencing July 1, 2013 and continuing the first day of each month
thereafter through and including November 1, 2013. If Hughes fails to
make any installment payment of his Capital Contribution, then his
Membership Interest shall automatically be redeemed by the Company
without the payment of any consideration therefor and without any
further action on behalf of either Hughes or the Company. 14

11 (Am. Compl. ¶¶ 13, 14, 17.)

12 (Am. Compl. ¶ 13.)

13 (Am. Compl. ¶ 17; see also Ex. 1 – Manager’s Certificate, ECF No. 19.1.)

14(Ex 2. – Second Amended and Restated Operating Agreement of JBS Ventures, LLC
[hereinafter “Second Operating Agreement”] art. 3, sec 3.2, ECF No. 19.2.) The Second
Operating Agreement contains a choice-of-law provision, which states that it “shall be
governed by and construed in accordance with the laws of the State of Georgia.” (Second
Operating Agreement art. 15, sec 15.12.)
7. Plaintiff did not make a $5,000 in cash capital contribution to JBS in 2013

as required by the Second Operating Agreement. 15 Plaintiff alleges, instead, that

Lenihan represented that “$1,000 per month would be and, upon information and

belief was paid and ‘taken off the top’ of every month’s distribution allocations to

Plaintiff from JBS from July through November 2013.” 16

8. Plaintiff was a JBS employee in 2012 and 2013 and was compensated

accordingly for his time. 17 From 2014 to 2019, Plaintiff was treated as a Member of

JBS, paid a salary from JBS, and issued K-1s from JBS, under JBS’ mistaken belief

that Plaintiff had actually made his $5,000 in cash capital contribution to JBS. 18

9. Plaintiff alleges that “[i]n April of 2019, Lenihan abused his position as

majority Member and Manager of JBS to falsely assert that Plaintiff failed to make

the required capital contribution and thus was not a Member of JBS” and that

“Lenihan was aware that this assertion that Plaintiff failed to make the required

capital contribution was false and intentionally misrepresented the facts in order to

wrongfully reclaim Plaintiff’s 23% interest in JBS.” 19

10. JBS admits that Lenihan notified Plaintiff of its position in April 2019. By

letter dated 15 April 2019, JBS formally notified Plaintiff that he possessed a 0%

15 (JBS’ Answer to Am. Compl. [hereinafter “Answer”] ¶ 20, ECF No. 19.)

16 (Am. Compl. ¶ 23.)

17 (Answer ¶ 18.)

18 (Answer ¶¶ 28–29.)

19 (Am. Compl. ¶ 88.)
membership interest in JBS because Plaintiff had never made the required $5,000 in

cash capital contribution per section 3.2 of the Second Operating Agreement. 20 By

email to JBS’ counsel on 14 May 2019, Plaintiff’s attorney, Will Esser, acknowledged

receipt of the April 15 letter and replied that Plaintiff “disagrees with numerous

contentions and assertions” put forward by Lenihan, and suggested that the parties

“do mutual releases and sever all remaining business ties . . . so that they can each

move on.” 21

11. Subsequently, Lenihan, as the sole owner of JBS, transferred a 12.5%

interest in JBS to Celtic in connection with a 9 May 2019 settlement concerning the

Loray Mill project. 22 On or about 26 August 2022, JBS sold the Loray Mill project. 23

In November 2022, in connection with another Loray Mill project lawsuit, this Court

ordered that slightly over $6 million in proceeds from the sale of the project be

retained in the trust account of the Firm until further ordered by the Court. 24

12. Lenihan passed away on or about 18 February 2023, and his son, James

Martin Lenihan, was appointed Executor of his Estate. 25 The Estate has continued

to fulfill its duties as Manager of JBS to manage the affairs of JBS, wind down the

20 (Ex. 3 – 4/15/2019 Letter to Hughes [hereinafter “Letter to Hughes”], ECF No. 19.3.)

21 (Ex. 5 – 5/14/2019 Hughes Email [hereinafter “Hughes Email”], ECF No. 19.5.)

22 (Answer ¶ 46.)

23 (Am. Compl. ¶ 37.)

24 (Am. Compl. ¶ 38.)

25 (Answer ¶ 50.)
Loray entities, pay accountants to file taxes, make requisite filings, and take related

actions. 26

13. On or about 7 September 2023, Plaintiff’s counsel contacted JBS’ counsel

and claimed that Plaintiff was a member of JBS and was entitled to a share of the

proceeds from the $6 million sale of the Loray Mill project. 27 On or about 15

September 2023, JBS and the Estate filed a prior suit against Plaintiff in Gaston

County Superior Court seeking a judicial declaration on whether Plaintiff had any

legal interest in JBS. 28 Plaintiff’s counsel, however, declined to accept service of the

lawsuit, and Plaintiff did not take any actions to validate his claims for ownership of

or membership in JBS. 29 On or around 9 July 2024, the prior Gaston County lawsuit

filed by JBS and the Estate was voluntarily dismissed without prejudice with no

further resolution. 30

14. On 5 February 2025, Plaintiff filed the present lawsuit in Gaston County

Superior Court seeking a declaratory judgment against all named defendants, a

constructive trust as to the escrow funds, and the judicial dissolution of JBS under

Georgia law. 31 On 18 June 2025, Plaintiff filed an Amended Complaint that added a

26 (Answer ¶ 53.)

27 (Answer ¶ 41; Ex 6. – 9/7/2023 Hughes Email, ECF No. 19.6.)

28 (Answer ¶ 41.)

29 (Answer ¶ 41.)

30 (Am. Compl. ¶ 57.)

31 (Compl. ¶¶ 62–78, ECF No. 3.)
claim for “breach of fiduciary duty/constructive fraud.” 32 In the new claim and for the

first time, Plaintiff alleged that in April 2019, Lenihan falsely asserted and

intentionally misrepresented “that Plaintiff failed to make the required [$5,000 in

cash] capital contribution and thus was not a Member of JBS . . . in order to

wrongfully reclaim Plaintiff’s 23% interest in JBS.” 33

15. Defendants filed the current Motion on 21 July 2025, and, after full briefing,

the Court held a hearing on the Motion on 9 October 2025 at which Plaintiff and

Defendants were represented by counsel. The Motion is now ripe for resolution.

II.

LEGAL STANDARD

16. Rule 12(c) provides that “[a]fter the pleadings are closed but within such

time as not to delay the trial, any party may move for judgment on the pleadings.”

N.C. R. Civ. P. 12(c). 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) (quoting Ragsdale v. Kennedy, 286 N.C. 130, 137 (1974)).

17. However, “[g]ranting judgment on the pleadings ‘is not favored by law[.]’”

Bauman v. Pasquotank Cnty. ABC Bd., 270 N.C. App. 640, 642 (2020) (quoting

Carpenter v. Carpenter, 189 N.C. App. 755, 762 (2008)). Thus, in deciding whether to

32 (Am. Compl. ¶¶ 84–96.)

33 (Am. Compl. ¶ 88.)
grant a motion for judgment on the pleadings, “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.” Anderson Creek Partners, L.P. v. Cnty. of Harnett, 382 N.C. 1, 12 (2022)

(internal quotations omitted).

18. Under Rule 12(c), the trial court may consider “[a]n exhibit, attached to

and made a part of the [complaint],” 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). Where a document is attached to a pleading, “[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.

19. “The party moving for judgment on the pleadings must show that no

material issue of fact exists and that he is entitled to judgment as a matter of law.”

Daniels v. Montgomery Mut. Ins. Co., 320 N.C. 669, 682 (1987). Moreover, a “motion

under Rule 12(c) must be carefully scrutinized lest the nonmoving party be precluded

from a full and fair hearing on the merits.” Newman v. Stepp, 376 N.C. 300, 305

(2020) (citation and internal quotation marks omitted).
III.

ANALYSIS

20. Through their Motion, Defendants seek dismissal of all of Plaintiff’s claims

pursuant to Rule 12(c). 34 Defendants contend that all of Plaintiff’s claims accrued, at

the latest, in April 2019; that Plaintiff commenced this lawsuit nearly six years later

on 5 February 2025; and that Plaintiff’s claims, which in substance assert

membership rights under the JBS Second Operating Agreement, are subject to the

three-year statute of limitations for contract actions and therefore barred.

Defendants also contend that Plaintiff’s claims sounding in tort are barred by the

economic loss doctrine. The Court will take up each claim in turn.

21. Our Supreme Court recently affirmed that “North Carolina has long

recognized that a plaintiff must initiate an action within the statutorily prescribed

period to avoid dismissal of his claim. These statutes of limitations strike a balance

between one party’s right to assert a claim and another party’s right to be free from

a stale claim.” Taylor v. Bank of Am., N.A., 385 N.C. 783, 784 (2024). The Court

further observed that a statute of limitations generally runs inexorably from the

moment a plaintiff is injured, that “‘[a]s soon as the injury becomes apparent to the

[plaintiff] or should reasonably become apparent, the cause of action is complete and

the limitation period begins to run,’” and that “statutes of limitations operate

inflexibly and without reference to the merits of a cause of action.” Id. at 788–89, 791

(internal citations omitted).

34 (Mot. 1.)
22. In North Carolina, “[o]nce a defendant raises a statute of limitations

defense, the burden of showing that the action was instituted within the prescribed

period is on the plaintiff. A plaintiff sustains this burden by showing that the

relevant statute of limitations has not expired.” Horton v. Carolina Medicorp, Inc.,

344 N.C. 133, 136 (1996) (internal citations omitted). “‘A judgment on the pleadings

in favor of a defendant who asserts the statute of limitations as a bar is proper when,

and only when, all the facts necessary to establish the limitation are alleged or

admitted.’ In such an instance, the plaintiff bears the burden of showing that her

claim is not barred on the face of the complaint.” Groves v. Cmty. Hous. Corp., 144

N.C. App. 79, 87 (2001) (internal citations omitted).

Declaratory Judgment Against All Named Defendants

23. As an initial matter, the Court notes that North Carolina’s “traditional

conflict of laws rule is that matters affecting the substantial rights of the parties are

determined by lex loci, the law of the situs of the claim, and remedial or procedural

rights are determined by lex fori, the law of the forum.” Boudreau v. Baughman, 322

N.C. 331, 335 (1988). “Ordinary statutes of limitation are clearly procedural,

affecting only the remedy directly and not the right to recover.” Id. at 340.

Accordingly, although the Second Operating Agreement provides that it will be

governed by Georgia law, North Carolina’s statutes of limitations will be applied to

Plaintiff’s claims.

24. In their first claim for relief, Plaintiff seeks a declaratory judgment pursuant

to N.C.G.S. § 1-253, et seq., including but not limited to the following:
a. That Plaintiff holds a 23% ownership interest in JBS.
b. That following the death of Mr. Lenihan on or about February 18,
2023, Plaintiff became the sole member of JBS.
c. That, as a matter of law, a vote must be taken to appoint a new
manager of JBS.
d. That any acts taken for or on behalf of JBS after the death of Mr.
Lenihan are invalid and void because there was no manager in place
to take such actions and bind the company.
e. That, as a matter of law, a vote must be taken to determine if new
members can be admitted to JBS.
f. That Plaintiff’s interests were not properly determined,
acknowledged or protected during the distribution of funds from the
sale of the Project.
g. That Plaintiff is entitled to his share of funds distributed from the
sale of the Project.
h. That the transfer of membership interests to Celtic through the
settlement agreement was unauthorized and is invalid, or to the
extent it was valid, that it does not impact or dilute Plaintiff’s
membership interests. 35

25. Defendants contend that “Plaintiff’s claims accrued more than six years ago

and are barred by the three-year statute of limitations.” 36 Specifically, Defendants

argue that “Plaintiff seeks to assert rights arising out of an operating agreement and,

therefore, the three-year statute of limitations governing breach of contract actions

applies.” 37

Substantive Rights Plaintiff Seeks to Enforce

26. In deciding which statute of limitations should be applied to a declaratory

judgment claim, the Court is “guided by the principle that the statute of limitations

is not determined by the remedy sought, but by the substantive right asserted by

35 (Am. Compl. ¶ 70.)

36 (Br. Supp. Def.’s Mot. J. Pleadings [hereinafter “Def.’s Br.”] 7, ECF No. 21.)

37 (Def.’s Br. 7.)
plaintiffs.” Baars v. Campbell Univ., Inc., 148 N.C. App. 408, 414 (2002) (concluding

that the substantive rights at issue were governed by a three-year statute of

limitations period as opposed to a 10-year statute of limitations period for what the

plaintiff classified as a constructive fraud claim); see also Penley v. Penley, 65 N.C.

App. 711, 723 (1984) (the “substance” of the claim controls over the “form” of the claim

in determining the applicable statute of limitations), rev’d on other grounds, 314 N.C.

1 (1985); Ludlum v. State, 227 N.C. App. 92, 95 (2013) (holding that “[b]ecause

plaintiff waited too long to file his claim [based on a contract], he is barred from a

determination that he is owed any benefits at all [pursuant to that contract]” under

his declaratory judgment claim). Since Plaintiff’s declaratory judgment claim seeks

a determination of contract rights, the three-year statute of limitations for breach of

contract applies.

27. Claims that arise from operating agreements generally are substantive

contract actions which are subject to a three-year limitations period. In Chisum v.

Campagna, the plaintiff sought a declaration that he held a membership interest in

an LLC and was entitled to distributions despite the LLC’s stance that his

membership interest had been extinguished. Chisum v. Campagna, 2018 NCBC

LEXIS 78, at *12 (N.C. Super. Ct. July 27, 2018), rev’d in part on other grounds, 376

N.C. 680 (2021). This Court found that the Chisum plaintiff’s substantive rights that

he sought “to vindicate through declaratory judgment ar[o]se from Operating

Agreements,” and accordingly his claim was governed by the three-year statute of

limitations for contract actions. Id. at *13.
28. Here, Defendants argue that the entirety of the relief Plaintiff seeks in his

first claim is rooted in purported substantive rights that arise solely out of the Second

Operating Agreement and Plaintiff’s purported membership in or the management

of JBS. 38 The Second Operating Agreement is a contract, under which Plaintiff’s

purported substantive rights are created and available. See N.C. State Bar v. Merrell,

243 N.C. App. 356, 370 (2015) (“An operating agreement is also a contract.”). 39

29. Plaintiff also acknowledges that the matter before the Court for resolution

is rooted in and arises from the Second Operating Agreement. Specifically, Plaintiff

alleges that under the Agreement he would acquire a 23% membership interest in

JBS upon payment of the $5,000 in cash capital contribution and that, upon

information and belief, Plaintiff paid the capital contribution required through

deductions JBS owed Plaintiff between 1 July 2013 through 1 November 2013. 40

Neither Plaintiff’s Amended Complaint nor his brief in opposition to Defendants’

Motion identifies any other source or basis from which the substantive rights Plaintiff

seeks to enforce through a declaratory judgment emanate. Like the plaintiff in

Chisum, the “substantive rights” Plaintiff seeks to vindicate in his declaratory

judgment claim arise from a contract. 41 Chisum, 2018 NCBC LEXIS 78, at *13.

38 (Def.’s Br. 9.)

39 (See Second Operating Agreement.)

40 (Am. Resp. Br. Def.’s Mot. J. Pleadings [hereinafter “Pl.’s Br.”] 15, ECF No. 25; Am. Compl.

¶¶ 20–24.)

41 (Def.’s Br. 8–9.)
Accrual of Plaintiff’s Claims

30. Aside from the character of the claim, determining the claim’s accrual date

is critical in adjudicating whether Plaintiff’s first claim is barred by the statute of

limitations for contract actions. “A cause of action generally accrues and the statute

of limitations begins to run as soon as the right to institute and maintain a suit

arises.” Acts Ret.-Life Communities, Inc. v. Town of Columbus, 248 N.C. App. 456,

459 (2016) (quoting Penley v. Penley, 314 N.C. 1, 20 (1985)). For contract claims, the

right to sue arises at the time of the breach. Ludlum, N.C. App. at 94.

31. Here, Defendants contend that Plaintiff’s claims accrued at the very latest

when JBS notified Plaintiff through the Letter to Hughes dated 15 April 2019 that

Plaintiff had failed to make the required $5,000 in cash capital contribution and thus

his ownership in JBS was “currently 0%,” and that JBS no longer considered him a

member of JBS. 42 Defendants submit that at that point Plaintiff knew or should have

known of a right of action against JBS over his claim that he always was and

remained a 23% member of JBS. 43 Moreover, Defendants point out that Plaintiff’s

counsel crystalized the parties’ dispute over Plaintiff’s purported 23% membership in

JBS no later than May 2019, when, by email to JBS’ counsel, Plaintiff’s counsel

expressly responded to Lenihan’s counsel and stated, “I hope that your client will get

to the point of being ready to do mutual releases and sever all remaining business

ties between our clients so that they can each move on. It is my belief that would be

42 (Def.’s Br. 11; Letter to Hughes.)

43
(Def.’s Br. 11.)
the best resolution for both.” 44 Plaintiff could have filed suit within three years of his

counsel’s May 2019 acknowledgment of JBS’ stated position in April 2019 that as of

that time Plaintiff possessed a zero percent ownership in JBS and was not a member

of JBS. Instead, Plaintiff filed this suit almost six years later in February 2025.

32. Plaintiff responds to JBS’ contention by claiming that the May 2019 email

was a “random condensed email thread with no context between Plaintiff and

Lenihan’s former counsel” without a further rebuttal. 45 Plaintiff also argues that the

Letter to Hughes dated 15 April 2019 fails to comply with the notice requirements

set forth in the Second Operating Agreement. 46 Using these two points as anchors,

Plaintiff contends that his claims accrued within a three-year limitations period

beginning either in August 2022 with the Loray Project sale or in September 2023

when Plaintiff’s counsel reached out to Trustee and Firm regarding Plaintiff’s

membership status. 47

33. Critically, Defendants highlight that it was Plaintiff himself who provided

context to the email thread and alleged in his own Amended Complaint that “[i]n

April of 2019, Lenihan . . . assert[ed] that Plaintiff failed to make the required capital

contribution and thus was not a Member of JBS.” 48 Defendants also posit that

44 (Hughes Email.)

45 (Pl.’s Br. 18.)

46 (Pl.’s Br. 18.)

47 (Pl.’s Br. 19.)

48 (Am. Compl. ¶ 88; Def.’s Br. 11–12.)
Plaintiff conflates the Second Operating Agreement’s contractual notice provision

with the statute of limitations and that Defendants’ compliance with notice

requirements is immaterial to the issue at hand. 49 Putting aside the parties’

differences over notice, the statute of limitations began to run when Plaintiff “knew

or should have known” there was a breach of the Second Operating Agreement.

Chisum v. Campagna, 376 N.C. 680, 720 (2021).

34. The Court concludes that Plaintiff’s contract-based causes of action against

Defendants accrued and the statute of limitations began to run in April 2019 with

the Letter to Hughes. Plaintiff’s first claim for relief is barred by the three-year

statute of limitations governing contract actions. N.C.G.S. § 1-52(1). Accordingly,

the Court GRANTS the Motion with respect to this claim. 50

49 (Def.’s Br. 4 n. 3.)

50 The Court finds unavailing Plaintiff’s arguments that Defendants should be equitably
estopped from asserting a statute of limitations defense. Plaintiff does not assert equitable
estoppel as an affirmative cause of action. Rather, Plaintiff’s lone allegation on the face of
his Amended Complaint is that “Lenihan had complete control over monthly allocations and
represented to Plaintiff that his distribution was paid by deducting $1,000 from his
distribution between July through November 2013. Therefore, Estate and JBS should be
equitably estopped from alleging otherwise.” (Am. Compl. ¶ 89.) Defendants submit that
Plaintiff knew or should have known of a right of action against JBS regarding his alleged
23% membership interest in JBS upon Plaintiff’s receipt of the Hughes Letter in April 2019
and his counsel’s confirmation of the Hughes Letter via the Hughes Email in May 2019.
Nonetheless, Plaintiff filed his lawsuit in February 2025. North Carolina law makes clear
that “[a] party cannot rely on equitable estoppel if it ‘was put on inquiry as to the truth and
had available the means for ascertaining it.’” Wade S. Dunbar Ins. Agency, Inc. v. Barber,
147 N.C. App. 463, 470 (2001) (quoting Hawkins v. M. & J. Fin. Corp., 238 N.C. 174, 179
(1953)). The Court concludes, in these circumstances, that equitable estoppel does not apply.
Constructive Trust as to the Escrow Funds

35. In his second claim for relief, Plaintiff seeks a constructive trust over all

funds and proceeds that are the “rightful property of Plaintiff or JBS.” 51

36. Claims for constructive trusts are governed by a ten-year statute of

limitations. See Tyson v. North Carolina Nat’l Bank, 305 N.C. 136, 141 (1982); Guy

v. Guy, 104 N.C. App. 753, 755 (1991) (citing N.C.G.S. § 1-56). However, as observed

above, “the statute of limitations is not determined by the remedy sought, but by the

substantive right asserted by plaintiffs.” Baars, 148 N.C. App. at 414. Claims that

arise from operating agreements are substantively contract actions which are subject

to a three-year limitations period. Chisum, 2018 NCBC LEXIS 78, at *13.

37. Here, Defendants contend that Plaintiff’s constructive trust claim as to

escrow funds also arises under the Second Operating Agreement and, therefore, is

substantively a breach of contract action dressed as a constructive trust claim. 52

Defendants observe, relying primarily on Baars and Chisum, that Plaintiff’s claim is

clearly founded on the Second Operating Agreement, as Plaintiff seeks the imposition

of a constructive trust over his alleged entitlement to his or JBS funds “until a

determination of the management and membership of JBS is determined.” 53

51 (Am. Compl. ¶¶ 71–75.)

52 (Def.’s Br. 9.)

53 (Am. Compl. ¶¶ 63–75.)
38. Plaintiff’s disagreement with Defendants’ analysis and his recitation to ten-

year statute of limitations periods for tort-based actions are insufficient to sustain

the constructive trust claim. 54

39. Plaintiff possesses no legal entitlement to JBS funds or proceeds of those

funds if he is not a member of JBS. Plaintiff’s asserted right to a 23% membership

interest in JBS is perforce a substantive right that arises out of and is contingent on

the Second Operating Agreement. Plaintiff’s right to sue accrued and the three-year

statute of limitations began to run in April 2019 because Plaintiff “knew or should

have known” of JBS’ alleged breach. 55 Chisum, 376 N.C. at 720.

40. A constructive trust is a remedy, not a claim for relief. “[A] constructive

trust is not a standalone claim for relief or cause of action.” LLG-NRMH, LLC v. N.

Riverfront Marina & Hotel, LLLP, 2018 NCBC LEXIS 105, at *14 (N.C. Super. Ct.

Oct. 9, 2018) (citing Weatherford v. Keenan, 128 N.C. App. 178, 179 (1997)).

Accordingly, the Court will grant Defendants’ Motion to the extent it seeks dismissal

of Plaintiff’s purported assertion of a cause of action for a constructive trust.

41. Therefore, the Court concludes that Plaintiff’s second claim for relief is time-

barred by the statute of limitations period for breach of contract actions. Accordingly,

the Court GRANTS the Motion with respect to this claim.

54 (See Pl.’s Br. 15–16.)

55 (Reply Br. Supp. Def.’s Mot. J. Pleadings [hereinafter “Def.’s Reply Br.”] 3, ECF No. 26.)
Judicial Dissolution of Defendant JBS

42. In his third claim for relief, Plaintiff seeks a judicial dissolution of JBS. He

contends that JBS cannot continue its stated mission, there are disputes to the

ownership and management of the company, and it is no longer reasonably

practicable to conduct JBS’ business in accordance with the Second Operating

Agreement and applicable law. 56 Plaintiff seeks judicial dissolution of JBS under

Georgia law, specifically O.C.G.A. § 14-11-603.

43. Defendants seek dismissal of Plaintiff’s third claim, contending that

Plaintiff is not a member of JBS and therefore lacks standing to seek judicial

dissolution of JBS. 57

44. As an initial matter, no party addresses whether this Court possesses

subject matter jurisdiction to judicially dissolve JBS. A court must have subject

matter jurisdiction to exercise authority over a case or controversy. See Harris v.

Pembaur, 84 N.C. App. 666, 667 (1987). The absence of subject matter jurisdiction

requires dismissal. See N.C. R. Civ. P. 12(h)(3). In deciding whether jurisdiction

exists, the court may consider matters outside the pleadings. See Tart v. Walker, 38

N.C. App. 500, 502 (1978).

45. This Court has held that “[j]udicial dissolution of entities created under, and

granted substantial contractual freedom by, the laws of one state should be

accomplished by a decree of a court of that state.” Camacho v. McCallum, 2016 NCBC

56 (Am. Compl. ¶¶ 76–83.)

57 (Def.’s Br. 13.)
LEXIS 81, at *13–14 (N.C. Super. Ct. Oct. 25, 2016); see also Azure Dolphin, LLC v.

Barton, 2017 NCBC LEXIS 90, *14–17 (N.C. Super. Ct. Oct. 2, 2017) (same). Courts

in other jurisdictions have reached the same conclusion. See, e.g., In re Raharney

Capital, LLC v. Capital Stack LLC, 138 A.D.3d 83, 25 N.Y.S.3d 217, 217–18 (N.Y.

App. Div. 2016) (holding that New York courts lack jurisdiction to dissolve Delaware

LLC); Young v. JCR Petroleum, Inc., 188 W. Va. 280, 283 (W.Va. 1992) (“The

existence of a corporation cannot be terminated except by some act of the sovereign

power by which it was created.”); Mills v. Anderson, 238 Mich. 643, 214 N.W. 221, 223

(Mich. 1927) (“It is textbook law that the courts of one State cannot dissolve a

corporation created by another State.”).

46. North Carolina’s statutory regime governing limited liability companies

demonstrates this principle. The North Carolina General Assembly has conferred

jurisdiction on this Court to enter a decree of judicial dissolution as to domestic

entities, but not as to foreign entities. For example, the Camacho Court explained

that N.C.G.S. § “57D-6-02 applies only to an LLC formed under the North Carolina

Act.” 2016 NCBC LEXIS 81, at *11 (citing N.C.G.S. §§ 57D-1-03(13), (19)).

47. Plaintiff’s Amended Complaint cites only to Georgia statutory law, O.C.G.A.

§ 14-11-603, concerning judicial dissolution, but this statute, enacted by another

state, cannot confer jurisdiction on this Court. See O.C.G.A. § 14-11-603(a)

(permitting Georgia “court[s]” to decree dissolution of a limited liability company).

Because Georgia law “enables the formation” of limited liability companies and

governs their stakeholders’ rights and duties, a decree of judicial dissolution must
come, if at all, from the courts of that State. Azure, 2017 NCBC LEXIS 90, at *16–

17; Camacho, 2016 NCBC LEXIS 81, at *13–14; see also Valone v. Valone, 80 Va. Cir.

45, 48 (Va. Cir. Ct. Jan. 20, 2010) (holding court lacked jurisdiction to dissolve foreign

limited partnership).

48. Plaintiff’s and Defendants’ filings do not address this legal principle or

identify any authority conferring jurisdiction on this Court to dissolve a foreign

limited liability company.

49. Here, Plaintiff seeks judicial dissolution of JBS, a Georgia LLC. Only the

Georgia courts may enter a decree dissolving JBS. Therefore, Plaintiff’s judicial

dissolution claim must be dismissed for lack of subject matter jurisdiction.

Breach of Fiduciary Duty/Constructive Fraud Against Defendant Estate

50. In his fourth claim for relief, Plaintiff alleges that Lenihan as the Manager

and majority member of JBS owed a fiduciary duty to Plaintiff as a member of JBS,

which duty Lenihan violated “in April of 2019” by abusing his position of power as a

majority Member and Manager of JBS relative to Plaintiff’s efforts to “reclaim

Plaintiff’s 23% interest in JBS.” Plaintiff further alleges that Lenihan concealed his

fraud by wrongfully denying Plaintiff access to the corporate books and accounting

records and depriving Plaintiff of his rightfully earned membership interest in JBS. 58

51. North Carolina and Georgia law both require that a plaintiff claiming breach

of fiduciary duty must show (1) a fiduciary duty, (2) a breach of that duty, and (3)

injury proximately caused by the alleged breach. Sykes v. Health Network Sols., Inc.,

58 (Am. Compl. ¶¶ 84–96.)
372 N.C. 326, 339 (2019); Niloy & Rohan, LLC v. Sechler, 335 Ga. App. 507, 510 n.5

(2016). 59

52. Under both North Carolina and Georgia law, a claim for constructive fraud

requires a fiduciary or confidential relationship between the parties. See, e.g.,

Crumley & Assocs., P.C. v. Charles Peed & Assocs., P.A., 219 N.C. App. 615, 620

(2012); Thunderbolt Harbour Phase II Condo. Ass’n v. Ryan, 326 Ga. App. 580, 581–

82 (2014); see also O.C.G.A. § 23-2-58.

53. Defendants seek dismissal of Plaintiff’s fourth claim, contending that

Plaintiff’s tort claim is barred by the applicable three-year statute of limitations

governing contracts and the economic loss doctrine. 60 Plaintiff premises his

constructive fraud claim on the same conduct as the fiduciary duty claim, so where

appropriate, the Court will consider these claims together.

59 Regarding choice of law, “[t]he internal affairs doctrine is a conflict of laws principle which

recognizes that only one State should have the authority to regulate a corporation’s internal
affairs . . . because otherwise a corporation could be faced with conflicting demands.”
Bluebird Corp. v. Aubin, 188 N.C. App. 671, 680 (2008). Under the internal affairs doctrine,
claims for breach of fiduciary duty and constructive fraud are generally governed by the law
of the state of incorporation. Worley v. Moore, 2017 NCBC LEXIS 15, *67 (N.C. Sup. Ct. Feb.
28, 2017) (“under the internal affairs doctrine, Delaware law applies to Plaintiffs’ claims
against Adams for breach of fiduciary duty and constructive fraud.”). North Carolina’s
“traditional conflict of laws rule is that matters affecting the substantial rights of the parties
are determined by lex loci, the law of the situs of the claim.” See Boudreau, 322 N.C. at 335
(“For actions sounding in tort, the state where the injury occurred is considered the situs of
the claim.”); Camacho, 2016 NCBC LEXIS 81, at *17 (considering breach of fiduciary duty
claim to sound in tort). The Court concludes that Plaintiff’s tort-based claims are barred
under North Carolina’s three-year statute of limitations regardless of which state’s law
governs the substantive claims here.
60 (Def.’s Br. 13.)
54. Regarding the statute of limitations, Defendants contend that it is the

substantive rights Plaintiff seeks to enforce, not the label Plaintiff attaches to his

claim, that governs the outcome here. And that because Plaintiff’s claim for breach

of fiduciary duty/constructive fraud similarly seeks to vindicate and exercise

substantive rights Plaintiff believes he enjoys as a member of JBS—namely, a

continuing membership interest in and distributions of profits from the LLC, and

because those substantive rights arise under JBS’ Second Operating Agreement, they

are governed and barred by the three-year statute of limitations. 61

55. The Amended Complaint’s allegations make clear that Plaintiff’s claim is

rooted in and contingent on Plaintiff’s status as a member of JBS and his membership

interest in JBS. 62 Accordingly, the substantive rights that Plaintiff seeks to vindicate

are contract rights subject to the three-year statute of limitations for contract

actions. 63

56. Regarding the economic loss doctrine, Defendants argue that Plaintiff’s tort

claim is barred by the doctrine. Injuries a plaintiff claims to have suffered by a

defendant’s failure to abide by an operating agreement can be barred by the economic

loss rule under Georgia and North Carolina law. See, e.g., Gen. Elec., Co. v. Lowe's

Home Ctrs., Inc., 279 Ga. 77, 78 (2005) (“The ‘economic loss rule’ generally provides

that a contracting party who suffers purely economic losses must seek his remedy in

61 (Def.’s Br. 8–10.)

62 (Am. Compl. ¶¶ 88, 90.)

63 (Def.’s Br. 8–10.)
contract and not in tort.”); Perry v. Frigi-Temp Frigeration, Inc., 2020 NCBC LEXIS

100, at *18 (N.C. Super. Ct. Sept. 3, 2020) (concluding economic loss rule barred

breach of fiduciary duty claim where plaintiff sought enforcement of a right existing

only in contract).

57. In North Carolina, the economic loss doctrine prevents parties from

impermissibly labeling or repackaging breach of contract claims as tort claims. See

Lord v. Customized Consulting Specialty, Inc., 182 N.C. App. 635, 639 (2007). “To

state a viable claim in tort for conduct that is also alleged to be a breach of contract,

‘a plaintiff must allege a duty owed to him by the defendant separate and distinct

from any duty owed under a contract.’” Akzo Nobel Coatings, Inc. v. Rogers, 2011

NCBC LEXIS 42, at *48 (N.C. Super. Ct. Nov. 3, 2011) (internal citations omitted);

see also Asheville Contracting Co. v. City of Wilson, 62 N.C. App. 329, 342 (1983)

(holding that a claim “must be grounded on a violation of a duty imposed by operation

of law, and the right invaded must be one that the law provides without regard to the

contractual relationship of the parties.”). Even though contracting parties may have

fiduciary duties to counterparties that are separate and distinct from their

contractual duties and thus may be enforceable in tort, the economic loss rule will bar

the claim for breach of fiduciary duty if the fiduciary duty allegedly breached is a

product of the parties’ contract or the injury claimed is grounded in the subject matter

of the parties’ contract. Perry, 2020 NCBC LEXIS 100, at *17–18 (internal citations

omitted).
58. Here, Plaintiff makes two main arguments that the economic loss rule does

not apply. First, Plaintiff argues that a majority member’s duty to minority members

is a duty separate from those imposed by the Second Operating Agreement. 64 Second,

Plaintiff argues that the “Independent Tort” exception prevents his claim for breach

of fiduciary duty/constructive fraud from being barred by the economic loss rule. 65

59. Plaintiff cites to Vanguard to support his first argument. The court in

Vanguard found that it is “the imbalance of power inherent in the relationship

between majority and minority member that gives rise to a fiduciary duty,” and that

the majority member owes a duty to not leverage its control against the minority

member, if no other provision in the operating agreement disclaims the duty.

Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *20–21 (N.C. Super.

Ct. June 19, 2019). Plaintiff utilizes Vanguard to attempt to undercut Defendants’

main argument that all of Plaintiff’s claims arise from or are created by the Second

Operating Agreement and thus are subject to the three-year statute of limitations for

contract actions. 66 Plaintiff draws purported parallels between the instant case and

Vanguard and even mentions that, under Georgia law, managing members of LLCs

owe fiduciary duties to both the LLC and other company members that are

independent from their contractual duties. 67 Sechler, 335 Ga. App. at 511.

64 (Pl.’s Br. 8.)

65 (Pl.’s Br. 11.)

66 (See Pl.’s Br. 8.)

67This Court has applied the economic loss rule to fiduciary duty claims by minority
shareholders even in closely held companies with an allegedly dominant majority member.
60. Defendants respond that Plaintiff “ignores that his claims are

fundamentally contract claims,” and that determining whether a fiduciary duty ever

existed here is “a function of whether he is or ever was a member of JBS—which,

again, turns on the contract.” 68 Further, Defendants note that Vanguard does not

address the economic loss rule and that the doctrine is not even mentioned in the

decision. 69

61. To support his second argument, Plaintiff attempts to distinguish Perry from

the instant case. In Perry, the Court dismissed the plaintiff’s breach of fiduciary duty

claim because his right to a bonus was “created by and available only under

Paragraph 17 of the Agreement.” Perry, 2020 NCBC LEXIS 100, at *17–18. In other

words, Perry affirms that the economic loss rule will bar tort claims for breach of

fiduciary duty where the substantive rights sought to be enforced are found in a

controlling operating agreement, which is a contract. While Plaintiff states that he

seeks to enforce unspecified “overall membership rights” as opposed to rights

available “under a clause of the Operating Agreement” 70 as in Perry, Defendants

correctly observe that Plaintiff’s alleged injury and damages, the wrongful denial of

See, e.g., Perry, 2020 NCBC LEXIS 100, at *17–19 (rejecting Perry’s attempt to evade the
application of the economic loss rule by basing his claims on the fiduciary duty owed to him
by the majority shareholder as opposed to his duties under the Agreement.)

68 (Def.’s Reply Br. 7.)

69 (Def.’s Reply Br. 8.)

70 (Pl.’s Br. 12.)
his 23% membership interest as a member of JBS, is created by and available only

under Section 3.2 of the Second Operating Agreement. 71

62. In addition, Plaintiff contends that North Carolina courts have rarely

applied the economic loss rule to fraud claims. 72 In turn, Defendants correctly

counter that Plaintiff has not pleaded a fraud claim and that North Carolina courts

apply the economic loss rule to constructive fraud claims based on alleged breaches

of fiduciary duty. 73 See Loray Mill Developers, LLC v. Camden Loray Mill Phase 1,

LLC, 2023 NCBC LEXIS 21, at *44–46 (N.C. Super. Ct. Feb. 7, 2023); see also Perry,

2020 NCBC LEXIS 100, at *18.

63. Here, the injury Plaintiff claims to have suffered was caused by Defendants’

alleged failure to abide by the Second Operating Agreement. The rights Plaintiff

seeks to vindicate are created by contract, and the remedy Plaintiff seeks to impose

is defined by that same contract. Under North Carolina law, such a claim is barred

by the economic loss rule. See, e.g., Wilkins v. Wachovia Corp., No. 5:10-CV-249, 2011

U.S. Dist. LEXIS 30896, at *6 (E.D.N.C. Mar. 24, 2011) (applying North Carolina’s

economic loss rule to bar breach of fiduciary duty claims which arose “out of the duties

in the . . . agreement and relate to contract performance”); Haigh v. Superior Ins.

Mgmt. Grp., Inc., 2017 NCBC LEXIS 100, at *19 (N.C. Super. Ct. Oct. 24, 2017)

(dismissing breach of fiduciary duty claim where alleged wrongdoing was “a result of

71 (Def.’s Reply Br. 8.)

72 (Pl.’s Br. 13.)

73 (Def.’s Reply Br. 9; See Am. Compl.)
the parties’ contractual relationship, not as a result of a fiduciary relationship” and

would be “better resolved through contract principles, rather than general principles

of fiduciary relationships” (emphasis in original)).

64. The outcome is the same under Georgia law. As under North Carolina law,

Georgia law provides that “if the tort results from the violation of a duty which is

itself the consequence of a contract, the right of action is confined to [the contract],

except in cases where the party would have a right of action . . . independently of the

contract[.]” O.C.G.A. § 51-1-11(a). As discussed above, the alleged breaches of

fiduciary duty here are based on Defendants’ alleged breaches of the Second

Operating Agreement—specific, identified duties which arise under that contract and

not from any fiduciary relationship between the parties. As a result, Plaintiff’s claims

for breach of fiduciary duty and constructive fraud must be dismissed under both

North Carolina and Georgia law to the extent they seek recovery for JBS’ alleged

breach of provisions of the Second Operating Agreement.

65. Because Plaintiff’s breach of fiduciary duty/constructive fraud claims are

fundamentally mislabeled contract claims, his alleged 23% membership interest in

JBS as a member is created by and available only under Section 3.2 of the Second

Operating Agreement, and North Carolina (and Georgia) courts apply the economic

loss rule to bar breach of fiduciary/constructive fraud claims, the Court concludes that

Plaintiff’s fourth claim for relief is barred by the economic loss doctrine. Accordingly,

the Court GRANTS the Motion with respect to this claim.
IV.

CONCLUSION

66. Accordingly, for the reasons set forth above and in the exercise of its

discretion, the Court hereby GRANTS Defendants’ Motion for judgment on the

pleadings and ORDERS that: (a) Plaintiff’s claims for declaratory judgment and

breach of fiduciary duty/constructive fraud are DISMISSED 74 with prejudice; (b)

Plaintiff’s claim for judicial dissolution of JBS is DISMISSED without prejudice; and

(c) Plaintiff’s claim for a constructive trust is DISMISSED with prejudice.

SO ORDERED, this the 9th day of February 2026.

/s/ A. Todd Brown ________
A. Todd Brown
Special Superior Court Judge
for Complex Business Cases

74 Dismissal with or without prejudice is in the Court’s discretion. See First Fed. Bank v.
Aldridge, 230 N.C. App. 187, 191 (2013).