Talisman Software, Sys. & Servs., Inc. v. Atkins

Talisman Software, Sys. & Servs., Inc. v. Atkins, 2015 NCBC 104.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF DURHAM 14 CVS 5834

TALISMAN SOFTWARE, SYSTEMS & )
SERVICES, INC., )`
Plaintiff, )
) OPINION AND ORDER
v. )
)
CHARLES ATKINS, )
Defendant. )

THIS CAUSE was designated a mandatory complex business case by Order of the

Chief Justice of the North Carolina Supreme Court pursuant to N.C. Gen. Stat. § 7A-45.4(b)

(hereinafter, references to the North Carolina General Statutes will be to “G.S.”), and

assigned to the undersigned Special Superior Court Judge for Complex Business Cases.

THIS MATTER comes before the Court upon Plaintiff’s Motion to Dismiss Defendant’s

Counterclaims (“Motion to Dismiss”) pursuant to Rule 12(b)(6) of the North Carolina Rules

of Civil Procedure (“Rule(s)”). On July 20, 2015, the Court held a hearing on the Motion.

THE COURT, having reviewed the Motion to Dismiss, the briefs in support of and in

opposition to the Motion to Dismiss, the arguments of counsel at a hearing, and other

appropriate matters of record, CONCLUDES as follows.

Robinson Bradshaw & Hinson, P.A., by Adam K. Doerr, Esq. and Stephen M. Cox,
Esq., for Plaintiff.

Charles A. Atkins, appearing pro se.

McGuire, Judge.

PROCEDURAL HISTORY

1. On December 16, 2014, Plaintiff Talisman Software, Systems & Services, Inc.

(“Talisman Software”) filed its Verified Complaint against Defendant Charles Atkins

(“Atkins”). Atkins is the former President and CEO of Talisman Software. Plaintiff’s action
was designated No. 14 CVS 5834 by the Clerk of Superior Court of Durham County. The

Complaint alleges claims against Atkins for Breach of Fiduciary Duty, Conversion, Breach of

Contract, Constructive Trust, and Fraudulent Misrepresentation. Plaintiff’s claims in this

lawsuit arise from Atkins tenure as President and CEO, and from the resolution of a prior

lawsuit filed by Atkins against Talisman Software’s directors, Robert Gresham Gray (“Gray”)

and Adam Kantor (“Kantor”).1

2. On February 16, 2015, Atkins filed his Verified Defenses, Answer and

Counterclaims. Atkins alleged counterclaims against Talisman Software, and purported to

bring claims against Gray, Kantor, and Talisman Environmental Services Limited (“TES”)2

(collectively, “Counterclaim Defendant(s)”3) Atkins attempts to allege claims for breach of

fiduciary duties, declaratory judgment, constructive fraud, breach of contract, unjust

enrichment, civil conspiracy, conversion, and constructive trust. Atkins also seeks a

Preliminary Injunction restraining the Counterclaim Defendants from “taking any actions

which would damage the Talisman Companies or the value of the shareholders[’] interests.”4

3. On April 6, 2015, Talisman Software filed its Motion to Dismiss and a

memorandum in support. On May 11, 2015, Atkins filed Defendant’s Motion to Dismiss

Plaintiff’s Complaint and Answer to Plaintiff’s Motion to Dismiss Defendant’s Counterclaims.

4. The Motion to Dismiss has been fully briefed and argued and is ripe for

determination.

Talisman Software Systems & Services, Inc. and Charles Atkins v. Robert
1 The prior lawsuit was

Gray and Adam Kantor, Durham Co. No. 14 CVS 2136. That lawsuit was subsequently designated
to this Court.
2 At the hearing on the Motion to Dismiss, Atkins conceded that he had not served Gray, Kantor or

TES with process.
3 The purported claims against Gray and Kantor, who are not Plaintiffs in this lawsuit, are best

characterized as third-party claims and not counterclaims. Nevertheless, for ease of reference the
Court uses the collective “Counterclaim Defendants”).
4 Countercl. ¶ 44. In the Second Defense contained in his Verified Defenses, Answer and

Counterclaims, Atkins defines “the Talisman Companies” to refer collectively to Talisman Software
and TES.
FACTUAL ALLEGATIONS

In his counterclaims, Atkins alleges that:

5. In 2008, Atkins and Richard Grogan (“Grogan”) formed Talisman Software.5

On June 12, 2009, a certificate of incorporation for Talisman Software was filed with the

State of Delaware. Talisman Software subsequently registered to do business in North

Carolina.6

6. Gray expressed an interest in investing in Talisman Software,7 and on June 9,

2010, Atkins, Grogan, and Gray negotiated and formed TES as a parent holding company.

On June 9, 2010, Atkins, Grogan, TES, and three other business entities entered into a

“Shareholders Agreement.”8 Talisman Software was not a party to the Shareholders

Agreement. The Shareholders Agreement provided, inter alia, that Atkins’s and Grogan’s

interests would control 50% of the shares of TES, and that Gray’s interests would control

50% of the shares TES.9

7. TES owns 100% of Talisman Software, and TES controls and is responsible for

voting all shares of Talisman Software.10 On June 9, 2010, Talisman Software and Atkins

entered into an Employment Agreement under which Atkins became the President and CEO

of Talisman Software.

8. Gray later gained control of TES in violation of the Shareholders Agreement.

Atkins and Grogan have protested Gray’s improper actions, but Gray “continues to act in bad

5 Id. ¶ 7.
6 Id. ¶ 9.
7 Id. ¶ 11.
8 Id. ¶ 11, Exh. 2
9 Id. ¶ 12.
10 Countercl. ¶ 6.
faith, with unclean hands in an ultra vires manner that is contrary to the best interests of

the shareholders.”11

9. Gray also “improperly and in contravention of the Shareholder Agreements

(sic) purported to obtain control of the board of [Talisman Software] by appointing himself

and his assistant, Adam Kantor as the only two directors of [Talisman Software].”12

10. In early 2014, Gray and Kantor attempted to remove Atkins as President and

CEO of Talisman Software.13 Atkins alleges that since that time Gray and Kantor “have

taken steps to loot the assets of [Talisman Software]” and that “funds of [Talisman Software]

have and will continue to be improperly transferred out of the country until they are ordered

to comply with the terms of the Shareholder Agreements (sic).”14

11. On February 26, 2014, Atkins brought suit in Durham County Superior Court

(14 CVS 2136) against Gray and Kantor as the directors of Talisman Software (“First

Lawsuit”). During the course of the First Lawsuit, Atkins returned to Talisman Software

certain money he had transferred out of its accounts, and agreed to resign as President and

CEO of Talisman Software. Atkins’s claims in the First Lawsuit ultimately were dismissed

without prejudice.

12. On December 16, 2014, Talisman Software filed this lawsuit against Atkins

alleging that Atkins misappropriated approximately $75,000 from Talisman Software that

Atkins did not return as part of the resolution of the First Lawsuit.

ANALYSIS

Atkins’s Failure to Serve Counterclaims on Gray, Kantor, and TES

11 Id. ¶¶ 16 – 17 (emphasis in original).
12 Id. ¶ 21.
13 Id. ¶ 23.
14 Id. ¶¶ 24-25.
13. Atkins purports to bring claims against Gray, Kantor, and TES, but concedes

that he has not properly served them with process. “It is well established that a court may

obtain personal jurisdiction over a defendant only by the issuance of summons and service of

process by one of the statutorily specified methods.” Glover v. Farmer, 127 N.C. App. 488,

490 (1997). “Absent valid service of process, a court does not acquire personal jurisdiction

over the defendant and the action must be dismissed.” Id.; see also G.S. § 1A-1, Rule 4.

14. Based upon Atkins’s concession that he has not effectuated service on anyone

other than Talisman Software, the Court concludes that Gray, Kantor, and TES are not

properly before the Court, and that any claims against them should be DISMISSED without

prejudice.

Rule 12(b)(6) Legal Standard

15. A Rule 12(b)(6) motion to dismiss tests “whether, as a matter of law, the

allegations of the complaint, treated as true, are sufficient to state a claim upon which relief

may be granted under some legal theory, whether properly labeled or not.” Harris v. NCNB

Nat’l Bank, 85 N.C. App. 669, 670 (1987) (citation omitted). The allegations should be

construed liberally, and the court should not dismiss the complaint unless “it appears certain

that [the claimant] could prove no set of facts which would entitle [it] to relief under some

legal theory.” Fussell v. N.C. Farm Bureau Mut. Ins. Co., 364 N.C. 222, 225 (2010). Dismissal

under Rule 12(b)(6) is proper when one of the following conditions is met: “(1) when the

complaint on its face reveals that no law supports plaintiff’s claim; (2) when the complaint

reveals on its face the absence of fact sufficient to make a good claim; (3) when some fact

disclosed in the complaint necessarily defeats the plaintiff’s claim.” Oates v. JAG, Inc., 314

N.C. 276, 278 (1985) (citations omitted).

Breach of Fiduciary Duty.
16. Atkins’s first counterclaim is for “Breach of Fiduciary Duty Against Gray and

Kantor.” The Court has dismissed Gray and Kantor based on Atkins’ failure to serve them.

Accordingly, to the extent Atkins alleges this claim against Talisman Software, Talisman

Software’s Motion to Dismiss Atkins’s first counterclaim for breach of fiduciary duty should

be GRANTED. To the extent Atkins asserts this claim against Gray and Kantor, who are

not properly before the Court, this claim should be DISMISSED without prejudice.

Declaratory Judgment

17. Atkins’s second counterclaim for declaratory judgment specifically requests:

[t]hat the Court determine whether the constitution of the Boards of the
Talisman Companies is lawful and appropriate[;] whether the appointment of
Gray and Kantor as directors of Talisman was lawful and proper; whether the
actions taken by [Gray and Kantor] in their capacity of officers and directors
of the Talisman Companies were valid and proper; and the various and
respective rights, authority and obligations of the parties.15

18. As a preliminary matter, the Court notes that to the extent Atkins defines the

“the Talisman Companies” as including TES, TES is not a party to this lawsuit and this Court

has no jurisdiction over TES. Accordingly, to the extent Atkins seeks a declaration regarding

the rights or relations between himself and any entity other than Talisman Software,

Atkins’s second counterclaim for declaratory judgment should be DISMISSED without

prejudice. Further, to the extent Atkins seeks a declaration regarding the appointment of

and the actions taken by Gray and Kantor, who are not properly before the Court, Atkins’s

second counterclaim for declaratory judgment should be DISMISSED without prejudice

19. Talisman Software contends that Atkins’s counterclaim seeking a declaratory

judgment against it must be dismissed because Atkins is not a shareholder of Talisman

Software and therefore lacks standing to assert the claim. Under North Carolina law, a

declaratory judgment is a statutory remedy that grants a court the authority to “declare

15 Id. ¶ 11.
rights, status, and other legal relations” when an “actual controversy” exists between parties

to a lawsuit. G.S. § 1-253; Pine Knoll Shores v. Carolina Water Serv., Inc., 128 N.C. App.

321, 321 (1998).

20. A party must have standing to bring a declaratory judgment action.

Beachcomber Prop., LLC v. Station One, Inc., 169 N.C. App. 820, 823-24 (2005). The burden

of proving that standing exists rests on the party seeking the declaratory judgment. Id. In

order to have standing, one must be a real party in interest, meaning that he will benefit

from or be harmed by the outcome of the case and by substantive law has the legal right to

enforce the claim in question. Id. (citing Energy Investors Fund, L.P. v. Metric Constructors,

Inc., 351 N.C. 331, 337 (2000)). A party must prove three requirements to establish standing:

(1) “injury in fact” – an invasion of a legally protected interest that is (a)
concrete and particularized and (b) actual or imminent, not conjectural or
hypothetical; (2) the injury is fairly traceable to the challenged action of the
defendant; and (3) it is likely, as opposed to merely speculative, that the injury
will be redressed by a favorable decision.

Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 114 (2002) (quoting

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

21. In this case, Atkins must prove that he has standing to bring a declaratory

judgment claim against Talisman Software. The declarations Atkins seeks are actually

directed primarily at determining the rights and legal relations as between Atkins, Gray and

Kantor with regard to the Shareholders Agreement. Although Atkins was a party to the

Shareholders Agreement, Talisman Software was not a party to that agreement.

Accordingly, any injury Atkins may have suffered as a result of violation of the Shareholders

Agreement is not “fairly traceable to the challenged action of [Talisman Software].” Neuse

River Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. at 114.
22. Atkins also lacks standing to pursue declaratory relief against Talisman

Software regarding alleged actions taken by Gray and Kantor as directors. Atkins is not a

direct shareholder of Talisman Software.16 Atkins fails to identify any other basis for the

Court to enter a declaratory judgment regarding the relations between Talisman Software

and its directors. Accordingly, Atkins does not have a legally protected interest in Talisman

Software, one of the central requirements for standing in a declaratory judgment ruling.

Beachcomber Prop. 169 N.C. App. at 823-24.

23. Consequently, Atkins has failed to satisfy his burden of showing he has

standing to bring an action for a declaratory judgment. Therefore, Talisman Software’s

Motion to Dismiss Atkins’s second counterclaim for declaratory judgment should be

GRANTED.

Constructive Fraud

24. In his third counterclaim for constructive fraud, Atkins alleges that “a

relationship of trust and confidence existed between [himself] and the Counterclaim

Defendants,”17 who used their positions to cause him “to provide services to Counterclaim

Defendants without fair market compensation . . .”18 To the extent that Atkins alleges this

counterclaim against Gray, Kantor, and TES, it should be DISMISSED without prejudice.

Only the counterclaim against Talisman Software remains. Talisman Software contends

that Atkins’s counterclaim for constructive fraud fails as a matter of law and should be

dismissed because Talisman Software did not owe Atkins a fiduciary duty.

25. A cause of action for constructive fraud must allege (1) the existence of a

relationship of trust and confidence, (2) the defendant took advantage of that relationship to

16 Atkins claims to be a shareholder in TES, which owns Talisman Software. At the hearing,
however, Atkins conceded he is not a shareholder of Talisman Software.
17 Countercl. ¶ 13.
18 Id. ¶ 14.
benefit himself, and (3) the plaintiff was consequently injured. Kingsdown, Inc., v. Hinshaw,

2015 NCBC LEXIS 30, *24 (N.C. Super. Ct. 2015) (citing White v. Consol. Planning, Inc., 166

N.C. App. 283, 294 (2004)). Accordingly, “[t]he existence of a fiduciary relationship is an

element of a constructive fraud claim.” Id. (citing White, 166 N.C. App. at 294-95; Keener

Lumber Co. v. Perry, 149 N.C. App. 19, 28 (2002) (holding that a constructive fraud claim

“must show (1) the existence of a fiduciary duty, and (2) a breach of that duty.”)).

26. In North Carolina, while directors and officers of a corporation generally owe

a fiduciary duty to the corporation, Keener Lumber Co. v. Perry, 149 N.C. App. 19, 26 (2002)

(citing Underwood v. Stafford, 270 N.C. 700, 703 (1967); emphasis in original), a corporation

does not owe a reciprocal fiduciary duty to its directors and officers. Kingsdown, Inc., v.

Hinshaw, 2015 NCBC LEXIS at *27, n. 9 (in North Carolina, a corporation does not owe a

fiduciary duty to its officers).

27. Here, Atkins is a former officer of Talisman Software, but Talisman Software

did not owe Atkins a fiduciary duty as the corporation’s officer. Without a fiduciary duty,

Atkins has no claim for constructive fraud against Talisman Software. Kingsdown, 2015

NCBC LEXIS at *26 (“Having failed to show that a fiduciary relationship existed with

[plaintiff], the Court concludes that [defendant’s] claim for constructive fraud fails as a

matter of law and should be dismissed with prejudice.”); Maurer v. SlickEdit, Inc., 2005

NCBC LEXIS 2, *31 (N.C. Super. Ct. 2005). Accordingly, Talisman Software’s Motion to

Dismiss Atkins’ third counterclaim for constructive fraud should be GRANTED.

Breach of Contract

28. Atkins alleges that Counterclaim Defendants breached the “Talisman

Companies shareholder agreement (sic), by-law agreement, subscription agreement, and
other fundamental constitutional corporate documents.”19 To the extent that Atkins alleges

this counterclaim against Gray, Kantor, and TES, it should be DISMISSED without

prejudice. Only the claim against Talisman Software remains. Talisman Software contends

that it is not a party to any of the alleged agreements, and accordingly, cannot be held liable

for breach of contract. In his counterclaims and in response to the Motion to Dismiss, Atkins

has failed to identify any shareholder, subscription, or by-law agreements between himself

and Talisman Software.20 Having failed to allege that Talisman Software was a party to the

shareholder agreement, by-law agreement, or subscription agreement, Talisman Software’s

Motion to Dismiss Atkins’s fourth counterclaim for breach of contract should be GRANTED.

Unjust Enrichment

29. Atkins’s fifth counterclaim is for “unjust enrichment/contract implied at law.”

Atkins alleges that he “directly and through related consulting companies rendered a series

of services to Counterclaim Defendants,” which they voluntarily accepted and for which

Atkins expected to be paid, and that the Counterclaim Defendants were unjustly enriched

thereby.21 Atkins, however, does not allege what specific “services” he rendered or to which

Counterclaim Defendants he rendered such services. Talisman Software contends that it had

an actual employment contract with Atkins, and that the existence of that contract bars

Atkins’s counterclaim for unjust enrichment as a matter of law.

30. To the extent that Atkins’s asserts this counterclaim against Gray, Kantor,

and TES, this counterclaim against should be DISMISSED without prejudice as Gray,

19 Id. ¶ 16.
20 The shareholder agreement and other documents attached to Atkins’s counterclaims show that

Talisman Software was not a party to the shareholder agreement, by-law agreement, or the
subscription agreement.
21 Countercl. ¶¶ 20-23.
Kantor, and TES are not properly before the Court. Only the claim against Talisman

Software remains.

31. A claim for unjust enrichment:

Is neither in tort nor contract but is described as a claim in quasi contract or a
contract implied in law. A quasi contract or a contract implied in law is not a
contract. The claim is not based on a promise but is imposed by law to prevent
an unjust enrichment. If there is a contract between the parties the contract
governs the claim and the law will not imply a contract.

Booe v. Shadrick, 322 N.C. 567, 570 (1988); see also Delta Envtl. Consultants of N.C., Inc. v.

Wysong & Miles Co., 132 N.C. App. 160, 165 (1999) (citing Booe and holding that the

existence of a contract precludes a claim for unjust enrichment).

32. An employment contract may be express or implied-in-fact. Archer v.

Rockingham Cnty., 144 N.C. App. 550, 557 (2001). When an employee serving under an

express contract continues his employment after the term of that contract expires, an implied

contract is created.

[W]hen, upon the expiration of a contract of employment for a definite term,
the employee continues to render the same services as he rendered during the
term of the contract without expressly entering into any new agreement, it will
be presumed that he is serving under a new contract having the same terms
and conditions as the original one and provisions and restrictions forming
essential parts of the original contract, even though collateral to the
employment itself, continue in force.

George v. LeBeau, 455 F.3d 92, 94 (2d. Cir. 2006); see also 30 C.J.S. Employer—Employee §

32 (“As a general rule, where one enters into the service of another for a definite period and

continues in the employment after the expiration of that period without any new contract,

the presumption is that the employment is continued on the terms of the original contract.”);

1 Williston on Contracts § 4:23 (4th ed.) (“[S]hould the parties continue their relation after

the expiration of the first period, another contract, implied in fact, would arise for another

similar period.”). The North Carolina Supreme Court has held:
[A] contract implied in fact arises where the intent of the parties is not
expressed, but an agreement in fact, creating an obligation, is implied or
presumed from their acts. Such an implied contract is as valid and enforceable
as an express contract. Except for the method of proving the fact of mutual
assent, there is no difference in the legal effect of express contracts and
contracts implied in fact.

Creech v. Melnik, 347 N.C. 520, 526-527 (N.C. 1998) (citing Snyder v. Freeman, 300 N.C.

204, 217, 266 S.E.2d 593, 602 (1980)).

33. On June 9, 2010, Atkins entered into a written Employment Agreement with

Talisman Software to serve as its President and CEO for a salary of $250,000.22 The

Employment Agreement provided that it would extend to August 31, 2010, and again to

October 30, 2010, while the parties attempted to negotiate a “replacement employment

agreement.”23 Atkins claims that the written Employment Agreement “terminated on

October 30, 2010,”24 and there is no allegation that the parties ever entered into a new written

employment agreement. Nevertheless, Atkins continued to serve as President and CEO of

Talisman Software following the termination date in the original contract between the

parties. Atkins alleges that he was “the sole employee and the sole executive management

officer of Talisman,”25 and that he continued acting “pursuant to the authority granted to him

as CEO and President of Talisman” at various points in 2014, including as late as March 10,

2014.26 Atkins continued to work for Talisman until he resigned at the conclusion of the First

Suit in March 2014.27

See Ex. B to Atkins’s Ex. 4. In Atkins’s counterclaims, he does not allege a breach of his
22

Employment Agreement against Talisman Software.
23 Id.
24 Atkins’ Br. in Opp. 12.
25 Countercl. ¶ 24.
26See, e.g. Answer ¶¶ 19, 42, and 47.
27See Answer ¶ 66, at 20 (quoting Defendant’s resignation letter, which states that he is “hereby
resigning as an employee of [Plaintiff] effective as of March 31st, 2014”); see also Order ¶ 2, Durham
County Case No. 14-CVS-2136 (N.C. Super. Ct. Mar. 6, 2014) (providing that “Mr. Atkins shall remain
an employee of Talisman, subject to the management direction and control of Mr. Gray and Mr. Kantor,
in their roles as directors of the company, and receive an annualized salary of $250,000 . . . .”
34. The Employment Agreement between Talisman Software and Atkins’s

precludes his claim for unjust enrichment. Delta Envtl. Consultants of N.C., 132 N.C. App.

at 165. Accordingly, Talisman Software’s Motion to Dismiss Atkins’s sixth counterclaim for

unjust enrichment should be GRANTED.

Conversion

35. In his seventh counterclaim, Atkins alleges that “Counterclaim Defendants

have wrongfully converted the Talisman Companies’ property and assets by unlawfully

assuming and exercising a right of ownership without legitimate authority.”28 The

allegations appear to be directed at Gray and Kantor, who already have been dismissed. To

the extent Atkins asserts this counterclaim against Gray, Kantor, and TES, it should be

DISMISSED without prejudice.

36. Accordingly, only the claim against Talisman Software remains. The

allegations do not explain how Talisman Software could have converted any property of the

“Talisman Companies,” and Talisman Software clearly could not have converted its own

property. In his Brief, Atkins argues that he owns 25% of the stock in TES, and suggests

that he should be allowed to bring an action against “the majority shareholders.”29 As

previously noted, however, Atkins is not a shareholder in Talisman Software, and TES is not

a party to this lawsuit. Therefore, the seventh counterclaim fails to allege facts supporting

a claim for conversion against Talisman Software, and Talisman Software’s Motion to

Dismiss Atkins’s seventh counterclaim for conversion should be GRANTED.

Constructive Trust

37. In addition, Atkins alleges a counterclaim for constructive trust (which he also

has labeled as his seventh counterclaim). Atkins alleges that Gray and Kantor breached

28 Countercl. ¶ 30.
29 Atkins Br. in Opp. 15-16.
fiduciary duties and engaged in misconduct regarding assets of the “Talisman Companies”

and that “[t]he Talisman Companies is (sic) entitled to establishment of a constructive trust

over all funds . . . diverted and misappropriated by . . . Gray and Kantor.”30

38. A constructive trust, under North Carolina law, is:

a duty, or relationship, imposed by courts of equity to prevent the unjust
enrichment of the holder of title to, or of an interest in, property which such
holder acquired through fraud, breach of duty or some other circumstance
making it inequitable for him to retain it against the claim of the beneficiary
of the constructive trust.

Wilson v. Crab Orchard Dev. Co., 276 N.C. 198, 211 (1970). Gray and Kantor are not parties

to this lawsuit, and Atkins has not alleged facts that would support imposition of a

constructive trust in this case. Therefore, as Gray and Kantor are not properly before the

Court, this claim should be DISMISSED without prejudice. To the extent Atkins asserts this

counterclaim against Talisman Software, Talisman Software’s Motion to Dismiss Atkins’s

counterclaim for constructive trust should be GRANTED.

Civil Conspiracy

39. Atkins’s sixth counterclaim is for civil conspiracy. Atkins alleges that

“Counterclaim Defendants entered into an agreement between themselves and/or other third

parties to breach their fiduciary duties with Atkins and related entities and shareholders and

to engage in unfair or deceptive practices in violation of N.C. Gen. Stat. § 75-1.1.”31 Atkins

alleges that they “committed overt acts in furtherance of this agreement” and as a result,

Atkins suffered damages.32 As Gray, Kantor, and TES are not properly before the Court,

Atkins’s civil conspiracy counterclaim against them is DISMISSED without prejudice. Only

the civil conspiracy counterclaim against Talisman Software remains.

30 Countercl. ¶¶ 33–42.
31 Id. ¶ 25.
32 Id. ¶¶ 26, 27.
40. There are three elements of a claim for civil conspiracy: (1) two or more persons

agree to do a wrongful act; (2) those persons commit an overt act in furtherance of the

agreement; and (3) the plaintiff is harmed as a result. Kingsdown, 2015 NCBC LEXIS at

*34. (citing Pleasant Valley Promenade v. Lechmere, Inc., 120 N.C. App. 650, 657 (1995)).

An independent cause of action for civil conspiracy is not recognized in North Carolina.

Toomer v. Garrett, 155 N.C. App. 462, 483 (2002). “Only where there is an underlying claim

for unlawful conduct can a plaintiff state a claim for civil conspiracy . . . .” Id.

41. All of Atkins’s claims that could provide the underlying “unlawful act” to

support a claim of civil conspiracy have been dismissed. Accordingly, the Court concludes

that Atkins’s civil conspiracy counterclaim against Talisman Software fails, and Talisman

Software’s Motion to Dismiss Atkins’s sixth counterclaim for civil conspiracy should be

GRANTED.

42. Talisman Software further argues that to the extent Atkins’s conspiracy claim

attempts to state a claim for unfair or deceptive trade practices under G.S. § 75-1.1, it is also

subject to dismissal because it fails to allege conduct “in or affecting commerce.”

43. This statute targets “unfair or deceptive acts or practices in or affecting

commerce[.]” G.S. § 75-1.1(a)(2014). While the statute “broadly defines “commerce” to

include ‘all business activities, however denominated,’ our Courts have long held that the

statute ‘is not intended to apply to all wrongs in a business setting.’” Kingsdown, 2015 NCBC

LEXIS at *28 (quoting HAJMM Co. v. House of Raeford Farms Inc., 328 N.C. 578, 593 (1991)).

“To establish the “commerce” requirement, the defendant’s conduct must affect commerce in

a commercial setting, . . . not in a private relationship type setting such as corporate

governance issues, . . . securities transactions, . . . or disputes arising from employment[.]”

McKee v. James, 2014 NCBC LEXIS 74, *40, (N.C. Super. Ct. 2014) (internal citation

omitted). “In short, the statute applies to ‘(1) interactions between businesses, and (2)
interactions between businesses and consumers.’” Kingsdown, 2015 NCBC LEXIS at *28

(quoting White v. Thompson, 364 N.C. 47, 52 (2010)). In addition, our Courts “have

consistently held that the employer/employee relationship does not fall within the intended

scope and purpose of [G.S. §75-1.1].” Kinesis Adver., Inc. v. Hill, 187 N.C. App. 1, 21 (2007).

44. Here, the conduct which Atkins complains is the same sort of conduct he

alleges in support of his counterclaim for breach of fiduciary duty. This conduct arises out of

Atkins’s employment as President and CEO of Talisman Software and only implicates

internal business disputes. Atkins has failed to allege in what manner Talisman Software’s

alleged conduct affects commerce or how this conduct gives rise to a cognizable claim under

G.S. § 75-1.1. Accordingly, the Court concludes that to the extent that Atkins attempts to

allege a claim for unfair and deceptive trade practices under G.S. § 75-1.1 against Talisman

Software, Talisman Software’s Motion to Dismiss should be GRANTED.

THEREFORE, IT IS ORDERED, based upon the foregoing FINDINGS and

CONCLUSION, that:

45. Talisman Software’s Motion to Dismiss is GRANTED as to Defendant Atkins’s

First, Second, Third, Fourth Fifth, Sixth, and Seventh Counterclaims for Breach of Fiduciary

Duty, Declaratory Judgment, Constructive Fraud, Breach of Contract, Unjust Enrichment,

Civil Conspiracy, Conversion, and Constructive Trust, to the extent that Atkins asserts these

Counterclaims against Talisman Software.

46. Any claims Atkins asserts against Gray, Kantor, and TES are not properly

before the Court, as Atkins conceded that he has not effectuated service on anyone other than

Talisman Software, and should be DISMISSED without prejudice.
This the 18th day of November, 2015.

/s/ Gregory P. McGuire
Gregory P. McGuire
Special Superior Court Judge
for Complex Business Cases