USA Trouser, S.A. De C v. v. Williams

USA Trouser, S.A. de C.V. v. Williams, 2016 NCBC 54.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF GUILFORD 14 CVS 790

USA TROUSER, S.A. de C.V., )
)
Plaintiff, )
)
v. )
)
JAMES A. WILLIAMS; ) ORDER & OPINION
NAVIGATORS INSURANCE )
COMPANY; and NAVIGATORS )
MANAGEMENT COMPANY, INC., )
)
Defendant. )
)

{1} THIS MATTER is before the Court on three motions to dismiss: (1)
Defendant James A. Williams’s Motion to Dismiss Plaintiff’s Amended Complaint
(“Williams’s Motion to Dismiss”); (2) Defendant Navigators Insurance Company’s
Motion to Dismiss (“Navigators Insurance’s Motion to Dismiss”); and (3) Defendant
Navigators Management Company, Inc.’s Motion to Dismiss (“Navigators
Management’s Motion to Dismiss”). For the reasons expressed below, Williams’s
Motion to Dismiss is GRANTED in part and DENIED in part, Navigators
Insurance’s Motion to Dismiss is GRANTED, and Navigators Management’s Motion
to Dismiss is GRANTED.
Law Offices of Matthew K. Rogers, PLLC by Matthew K. Rogers, and Nexsen
Pruet, PLLC by Christine L. Myatt for Plaintiff USA Trouser, S.A. de C.V.
Bradley Arant Boult Cummings LLP by Dana C. Lumsden and Katherine M.
Kliebert for Defendant James A. Williams.
Cozen O’Connor by Tracy L. Eggleston and Angelo G. Savino (pro hac vice)
for Defendants Navigators Insurance Company and Navigators Management
Company, Inc.
Gale, Chief J.
I. INTRODUCTION

{2} Plaintiff USA Trouser, S.A. de C.V. (“USA Trouser”) brings multiple
claims against Defendants James A. Williams (“Williams”), Navigators Insurance,
Company (“Navigators Insurance”) and Navigators Management Company, Inc.
(“Navigators Management”). The claims arise out of a relationship between USA
Trouser and International Legwear Group, Inc. (“ILG”), a company for which
Williams served as CEO and director and for which Navigators Insurance provided
director and officer liability insurance. In part, USA Trouser seeks to compel
Navigators Insurance and Navigators Management to pay the amount of a default
judgment entered against ILG in USA Trouser’s favor in a prior federal action.
{3} USA Trouser is a Mexican textile company that had contracted to
supply socks to ILG for resale in the United States. USA Trouser claims that ILG,
without disclosing its dire financial situation, induced USA Trouser to continue
supplying socks to ILG on credit. ILG ultimately sold many of its assets, delivered
the proceeds to its secured creditors, and failed to honor its commitments to pay
USA Trouser. USA Trouser sued ILG and three individuals that had served as
ILG’s directors or officers in the United States District Court for the Western
District of North Carolina. USA Trouser obtained a default judgment against ILG,
and claims against the individual defendants in that action were either dismissed
by summary judgment or settled. Williams was not a party to that action.
{4} In this action, USA Trouser brings similar claims against Williams to
those that it brought in the federal case. USA Trouser also brings claims against
Navigators Insurance and Navigators Management that are related to the
insurance companies’ actions during the federal case and after the entry of default
judgment against ILG. Williams asserts that USA Trouser’s fraud claim is not
adequately alleged and that the rest of the claims against him are barred by
collateral estoppel. Navigators Insurance asserts that USA Trouser does not have
standing to bring its claim, and even if it did, ILG’s policy does not cover the
liability established by the default judgment. Navigators Management asserts that
it has no contractual obligation to USA Trouser.
{5} For the reasons expressed below, the Court limits certain claims but
allows them to proceed against Williams, dismisses USA Trouser’s claims against
Williams for actual fraud, negligent misrepresentation, fraudulent and/or negligent
failure to perform statutory duties, and conspiracy to defraud, and dismisses all
claims against Navigators Insurance and Navigators Management.

II. LEGAL STANDARD

{6} Under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure
(“Rules”), the Court assumes the facts alleged in USA Trouser’s First Amended
Complaint to be true and views them in the light most favorable to USA Trouser.1
See Tarrant v. Freeway Foods of Greensboro, Inc., 163 N.C. App. 504, 508, 593
S.E.2d 808, 811 (2004). Because the First Amended Complaint refers to and
depends on certain documents, the Court may consider those documents without
converting the Rule 12(b)(6) motions into motions for summary judgment. See
Schlieper v. Johnson, 195 N.C. App. 257, 261, 672 S.E.2d 548, 551 (2009). USA
Trouser may not recover if the First Amended Complaint lacks sufficient facts to
support its claims or discloses a fact that necessarily defeats its claims. See Pinney
v. State Farm Mut. Ins. Co., 146 N.C. App. 248, 253, 552 S.E.2d 186, 190 (2001).

III. THE PARTIES

{7} USA Trouser is a Mexican sock and hosiery manufacturing company
with a principal place of business in Mexico.
{8} Navigators Insurance is a New York company that has offices in New
York City, New York, and Stamford, Connecticut, Navigators Insurance and that
provides director and officer (“D&O”) liability insurance to North Carolina
residents.

1 Williams did not oppose USA Trouser amending its complaint to state its fraud and conspiracy-to-

defraud claims with greater specificity, subject to his right to challenge the claims after amendment.
The Court permitted USA Trouser to amend his fraud-based claims. USA Trouser then filed a
substantially altered Second Amended Complaint on May 11, 2015. Williams moved to strike the
Second Amended Complaint on the basis that the amendments exceeded the Court’s grant of
permission to USA Trouser to stating the fraud claims with greater specificity. The Court has today
granted Williams’s motion to strike by separate order and considers only the First Amended
Complaint when ruling on the pending motions in this Order & Opinion.
{9} Navigators Management is a New York company that has places of
business in New York City, New York, and Stamford, Connecticut, and that is
registered to do business in North Carolina.
{10} Williams is or was a resident of Guilford County, North Carolina, and
was formerly a director, the president, and the CEO of ILG.
{11} ILG was a Virginia corporation that had its principal place of business
in North Carolina before it was dissolved in 2012. Williams remains ILG’s
registered agent in North Carolina.

V. BACKGROUND

A. General Background

{12} USA Trouser manufactured and shipped socks to ILG, and ILG resold
the socks to Walmart and Payless Shoes.
{13} Williams became ILG’s CEO in September 2010. John Sanchez
(“Sanchez) was ILG’s chief financial officer and Bill Sheely (“Sheely”) was ILG’s
chief operating officer.
{14} ILG purchased D&O liability insurance from Navigators Insurance,
and Navigators Insurance issued policy number PH10DOL616113IV (the “ILG
Policy”), which insured ILG for the period of December 31, 2010, through December
31, 2017.
{15} ILG was in breach of its loan agreements with CapitalSource Finance,
LLC (“CapSource”) and was operating under a forbearance agreement with
CapSource when Williams became ILG’s CEO. ILG’s financial position declined
after Williams became CEO, and by February 2011, ILG was in default of at least
one of its forbearance covenants. CapSource notified ILG on March 8, 2011, that it
would no longer continue to fund ILG’s operations. ILG and its officers did not
disclose ILG’s financial situation to USA Trouser.
{16} By the end of May 2011, ILG was behind in its payments to USA
Trouser for shipments that ILG had already received. Sanchez and Sheely traveled
to Mexico to meet with USA Trouser executives on June 2, 2011, at which time they
promised that ILG would make minimum weekly payments of $100,000.00 to pay
down past-due invoices and that ILG would pay the additional amount necessary to
cover new invoices. ILG did not honor this promise.
{17} On July 18 or 19, 2011, Williams told ILG employees that ILG was
unable to meet its financial obligations and that CapSource would not continue to
finance ILG. On August 11, 2011, Williams signed an asset-purchase agreement to
sell all of ILG’s assets. The asset-purchase agreement specified that the asset
purchaser would not assume any of ILG’s contractual liabilities. USA Trouser
received no proceeds from the sale of ILG’s assets. The Virginia State Corporation
Commission terminated ILG’s corporate existence on April 30, 2012.

B. The Federal Lawsuit and the ILG Default Judgment

{18} On September 6, 2011, USA Trouser initiated a lawsuit in North
Carolina superior court (the “ILG Lawsuit”) against ILG, Sheely, Sanchez, and the
former chairman of ILG’s board of directors, Scott Andrews (“Andrews”). USA
Trouser brought eight claims: (1) breach of contract, (2) breach of fiduciary
duty/constructive trust, (3) fraud/fraudulent concealment/negligent
misrepresentation, (4) unfair and deceptive trade practices, (5) breach of implied
covenants of good faith and fair dealing, (6) fraudulent and/or negligent failure to
perform statutory duties, (7) conversion, and (8) fraudulent conveyance. See USA
Trouser, S.A. de C.V. v. Int’l Legwear Grp. Inc., No. 1:11-cv-00244-MR-DLH, 2012
U.S. Dist. LEXIS 177456, at *1–2 (W.D.N.C. Dec. 13, 2012), aff’d in part, vacated in
part, and remanded sub nom. USA Trouser, S.A. de C.V. v. Andrews, 612 F. App’x
158 (4th Cir. 2015), reh’g denied, No. 14-402 (4th Cir. July 17, 2015). On September
21, 2011, the case was removed to the United States District Court for the Western
District of North Carolina. See id. at *2.
{19} ILG, Andrews, Sanchez, and Sheely each submitted the claims brought
against them to Navigators.
{20} Navigators engaged Bradley Arant Boult Cummings LLP (“Bradley
Arant”) to represent all of the defendants in the ILG Lawsuit and initially paid for
the defense of all of the defendants.
{21} On December 27, 2011, with ILG’s authorization, Bradley Arant moved
to withdraw as ILG’s counsel. The district court granted the motion and directed
ILG to retain new counsel within ten days. When ILG failed to comply, the district
court struck ILG’s Answer. The district court entered default against ILG on
February 2, 2012, and the ILG Lawsuit continued against the individual
defendants.
{22} USA Trouser and the individual defendants filed cross-motions for
summary judgment in the ILG Lawsuit on September 4, 2012.
{23} On December 13, 2012, United States District Judge Martin Reidinger
issued an opinion on the various motions for summary judgment (“District Court
Order”). See Int’l Legwear Grp., Inc., 2012 U.S. Dist. LEXIS 177456. In that
opinion, he denied USA Trouser’s motions for summary judgment in their entirety;
granted summary judgment in favor of Andrews and dismissed all claims against
him; denied summary judgment on USA Trouser’s claims against Sanchez and
Sheely for fraud and unfair-and-deceptive trade practices based on fraud; and
granted summary judgment in favor of Sanchez and Sheely, dismissing the non-
fraud-based claims brought against them. Id. at *36–37.
{24} Later, Sanchez and Sheely made an offer of judgment to USA Trouser,
which USA Trouser accepted, resulting in entry of judgment against Sanchez and
Sheely in the amount of $277,185.82. Navigators Insurance paid the judgment.
{25} On March 25, 2014, the district court entered default judgment against
ILG totaling $1,993,856.48. See USA Trouser, S.A. de C.V. v. Int’l Legwear Grp.,
Inc., No. 1:11-cv-00244-MR-DLH, 2014 U.S. Dist. LEXIS 39271, at *35–37
(W.D.N.C. Mar. 25, 2014). In that order, Judge Reidinger found that USA Trouser
was entitled to damages of $655,256.16 on its breach of contract and fraud claims
and that the damages arising from ILG’s “fraudulent and deceptive acts” should be
trebled to $1,965,768.48 under N.C. Gen. Stat. § 75-16 (2015). Id. at *26–27. Judge
Reidinger also awarded $27,858.00 in attorneys’ fees and $230.00 for costs. Id. at
*37.
{26} On April 29, 2015, USA Trouser appealed the District Court Order’s
dismissal of all claims against Andrews.

C. Proceedings in the Present Action and Further Developments in the ILG
Lawsuit.

{27} USA Trouser filed its original Complaint in this action on
June 2, 2014, initially bringing claims against only Williams.
{28} On June 20, 2014, USA Trouser sent Navigators a letter demanding
that Navigators pay the default judgment plus any accrued post-judgment interest.
Navigators received the demand letter on June 23, 2014. Navigators has not
responded to the demand letter and has not paid the default judgment.
{29} The case was designated as a complex business case on July 3, 2014,
and assigned to the undersigned on July 7, 2014.
{30} USA Trouser filed its First Amended Complaint on August 14, 2014,
bringing the following claims against Williams: (1) breach of fiduciary duty and
constructive fraud, (2) fraud, (3) fraudulent concealment, (4) negligent
misrepresentation, (5) conspiracy to defraud, and (6) fraudulent and/or negligent
failure to perform statutory duties. The First Amended Complaint also added
Navigators Insurance and Navigators Management as Defendants, alleging claims
against them for conspiracy to defraud, bad-faith claims-settlement practices, and
unfair-and-deceptive trade practices (“UDTP”).
{31} Williams’s filed his motion to dismiss on September 15, 2014.
Navigators Insurance and Navigators Management filed their motions to dismiss on
October 17, 2014.
{32} The Court heard argument on the motions to dismiss on April 9, 2015.
On April 21, 2015, the Court issued an Order permitting USA Trouser to amend its
First Amended Complaint to state its fraud-based claims with greater particularity
(“Amendment Order”).
{33} On May 5, 2015, the Fourth Circuit issued its opinion on USA
Trouser’s appeal of the District Court Order (“Fourth Circuit Opinion”), vacating
Judge Reidenger’s dismissal of USA Trouser’s fiduciary duty and constructive trust
claims, but affirming Judge Reidinger’s dismissal of all of USA Trouser’s other
claims. Andrews, 612 Fed. App’x at 162.2
{34} USA Trouser filed its Second Amended Complaint in the present
action on May 11, 2015.
{35} Williams filed his Motion to Strike on May 15, 2015, arguing that the
Second Amended Complaint exceeded the scope of any amendment the Court
allowed by the Amendment Order.
{36} On October 7, 2015, two weeks before the remaining claims in the ILG
Lawsuit were scheduled for trial in federal court, USA Trouser moved to remand
those claims to North Carolina state court, to dismiss those claims with prejudice,
or alternatively to consolidate the federal action with the present action before this
Court. See USA Trouser, S.A. de C.V. v. Int’l Legwear Grp., Inc., No. 1:11-cv-00244-
MR-DLH, 2015 U.S. Dist. LEXIS 145517, at *2 (W.D.N.C. Oct. 27, 2015), appeal
docketed, No. 16-1144 (4th Cir. Feb. 11, 2016). Judge Reidinger denied USA
Trouser’s motion in its entirety on October 27, 2015. See id.
{37} Then, on October 30, 2015, the parties represented to the federal court
that the remaining claims in the ILG Lawsuit had been settled, at the same time
filing a memorandum of understanding (“MOU”) that indicated that the parties also
intended to settle the claims brought against Williams in this action. See USA
Trouser, S.A. de C.V. v. Andrews, No. 1:11-cv-00244-MR-DLH, 2016 U.S. Dist.
LEXIS 3038, at *1 (W.D.N.C. Jan. 11, 2016). A dispute arose regarding the parties’
performance under the agreement, and Andrews filed a motion to enforce the MOU.
See id. Judge Reidinger granted that motion on January 11, 2016. Id. at *4–5.

2 Andrews subsequently petitioned the Fourth Circuit to rehear his appeal, and that petition was

denied on July 17, 2015. See Andrews, No. 14-402.
USA Trouser then appealed that ruling and several others to the Fourth Circuit,
where the appeal is still pending as of the date of this Order & Opinion.
{38} All motions have been fully briefed and are ripe for decision.

IV. ANALYSIS

{39} The Court first addresses the motions made by Navigators Insurance
and Navigators Management and then addresses Williams’s Motion to Dismiss.
{40} USA Trouser makes three claims against Navigators Insurance and
Navigators Management: (1) conspiracy to defraud, (2) bad-faith claims-settlement
practices, and (3) UDTP. Navigators Management and Navigators Insurance have
made separate motions to dismiss the claims.

A. Navigators Management’s Motion to Dismiss

{41} Navigators Management’s Motion to Dismiss, brought pursuant to
Rule 12(b)(6), argues that USA Trouser’s claims for bad-faith claims-settlement
practices and UDTP should be dismissed because Navigators Management was not
a party to the ILG Policy, nor did it have any role in issuing the ILG Policy.
Navigators Management also argues that the only other claim against it, conspiracy
to defraud, has not been pleaded with adequate specificity to meet the requirements
of Rule 9(b).
{42} USA Trouser has not responded to Navigators Management’s
argument that it did not issue the ILG Policy, had no role in issuing the ILG Policy,
and was not a party to the ILG Policy. Rather, both in pleading and in briefing,
USA Trouser mostly groups together its allegations against the two Navigators
entities, referring to both simply as “Navigators.” Although the First Amended
Complaint alleges a relationship between Navigators Insurance and Navigators
Management, USA Trouser fails to plead or argue any basis as to why this
relationship leads to Navigators Management’s liability for bad-faith claims-
settlement practices or UDTP. Accordingly, Navigators Management’s Motion to
Dismiss should be granted as to those claims on this ground alone.
{43} Alternatively, the grounds that the Court discusses below, which
justify the dismissal of all claims against Navigator’s Insurance, including the claim
for conspiracy to defraud, would also inure to the benefit of Navigator’s
Management. Hereafter, the Court refers to Navigators Insurance and Navigators
Management collectively as “Navigators.”

B. Navigators Insurance’s Motion to Dismiss

1. Conspiracy to Defraud

{44} To successfully plead a conspiracy claim, a plaintiff must allege “an
agreement between two or more individuals to do an unlawful act or to do a lawful
act in an unlawful way.” Muse v. Morrison, 234 N.C. 195, 198, 66 S.E.2d 783, 784
(1951) (quoting State v. Dalton, 168 N.C. 204, 205, 83 S.E. 693, 694 (1914)). With
respect to USA Trouser’s conspiracy-to-defraud claim against Navigators, USA
Trouser alleges the following in its First Amended Complaint:
228. Navigators conspired with ILG’s officers and directors to commit
fraud on the court by intending to cause default to be entered
against ILG purportedly for non-payment of legal fees, when
Navigators intended to pay for the defense of co-defendants and
when the ILG Policy covered ILG with regard to the acts and
omissions of ILG’s officers including Williams, and Navigators
conspired to dissolve ILG without disposing of contingent or
known liabilities of which Navigators was aware or reasonably
should’ve been aware.
...
230. Navigators are conspiring with Williams to avoid paying the
[Default] Judgment despite facts that already establish liability of
both be established and Trouser is entitled to attorney fees as
damages relating thereto.
231. Navigators Insurance is conspiring with Navigators Management
to avoid paying the Judgment in violation of North Carolina law.
(First Am. Compl. ¶¶ 228, 230–31.) It is not clear whether USA Trouser predicates
its conspiracy claim on constructive fraud, actual fraud, or fraudulent concealment,
however “[a] claim for conspiracy to defraud cannot succeed without a successful
underlying claim for fraud.” Jay Grp., Ltd. v. Glasgow, 139 N.C. App. 595, 599, 534
S.E.2d 233, 236 (2000).
{45} A constructive-fraud claim requires “(1) facts and circumstances
creating a relation of trust and confidence; (2) which surrounded the consummation
of the transaction in which the defendant is alleged to have taken advantage of the
relationship; and (3) the defendant sought to benefit himself in the transaction.”
Marketplace Antique Mall, Inc. v. Lewis, 163 N.C. App. 596, 599, 594 S.E.2d 121,
124 (2004). To establish a claim for actual fraud, a plaintiff must show “(1) that
defendant made a false representation or concealment of a material fact; (2) that
the representation or concealment was reasonably calculated to deceive him; (3)
that defendant intended to deceive him; (4) that plaintiff was deceived; and (5) that
plaintiff suffered damage resulting from defendant’s misrepresentation or
concealment.” Jay Grp. Ltd., 139 N.C. App. at 599, 534 S.E.2d at 236 (emphasis
omitted) (quoting Claggett v. Wake Forest Univ., 126 N.C. App. 602, 610, 486
S.E.2d 443, 447 (1997)). A fraud claim that is based on the concealment of a
material fact requires that the defendant have a duty to disclose that fact. See
Griffin v. Wheeler-Leonard & Co., 290 N.C. 185, 198, 225 S.E.2d 557, 565 (1976).
{46} Because USA Trouser alleges only that Navigators was involved in a
civil conspiracy directly related to events that occurred during and after the ILG
Lawsuit, the Court examines that timeframe and the circumstances surrounding
the ILG Lawsuit to determine if the elements of a claim for fraudulent
representation, fraudulent omission, or constructive fraud have been adequately
pleaded.
{47} Viewing the facts in the light most favor to USA Trouser, the Court
concludes that USA Trouser has not alleged facts that support that ILG, Williams,
or Navigators owed a duty to disclose to USA Trouser any material facts pertaining
to the ILG litigation, or that Navigators had any role, involvement in, or knowledge
of ILG’s dissolution. USA Trouser alleges no statements made by any of the
Defendants during the relevant period upon which a claim for affirmative fraud
might rest. Accordingly, USA Trouser has failed to adequately allege the
underlying fraudulent conduct required to state a claim for conspiracy to defraud
against Navigators and these claims must be dismissed.

2. Bad-Faith Claims-Settlement Practices and UDTP Claims

{48} Navigators’s primary argument is that USA Trouser’s claims were not
covered by the ILG Policy. Additionally, Navigators asserts that North Carolina,
except in limited circumstances not present in this case, does not recognize a cause
of action for UDTP brought by a third-party to an insurance contract against the
liability insurer of an opposing party. The Court concludes that USA Trouser’s
UDTP claim against Navigators is not recognized in North Carolina and should
therefore be dismissed.3
{49} USA Trouser seeks to assert both a claim under section 58-63-15(11) of
the General Statutes and a UDTP claim. A violation of section 58-63-15(11)
constitutes an unfair and deceptive trade practice under section 75-1.1 as a matter
of law. See Gray v. N.C. Ins. Underwriting Ass’n, 352 N.C. 61, 70–71, 529 S.E.2d
676, 682–83 (2000). North Carolina does not recognize a standalone private action
against an insurance company for violations of section 58-63-15(11). See Country
Club of Johnston Cty, Inc. v. U.S. Fid. & Guar. Co., 150 N.C. App. 231, 246, 563
S.E.2d 269, 279 (2002).
{50} USA Trouser asserts that it may maintain its UDTP claim against
Navigators because it was placed in privity of contract with Navigators as a result
of securing a default judgment against ILG. The Court must reconcile two cases
from the North Carolina Court of Appeals to determine whether USA Trouser may
bring its claim. See Murray v. Nationwide Mut. Ins. Co., 123 N.C. App. 1, 472
S.E.2d 358 (1996); Wilson v. Wilson, 121 N.C. App. 662, 468 S.E.2d 495 (1996).
{51} In the first case, Wilson v. Wilson, an injured third party to a
tortfeasor’s insurance contract brought a UDTP claim against the tortfeasor’s

3 The Court need not consider circumstances from other cases where a judgment creditor may have

taken steps to bring a claim in the right of the policyholder, such as requesting assignment or
initiating other legal proceeding. The Court also need not reach the issue of whether the policy’s
insuring provisions extend to the liability on which the default judgment is based.
insurer, before judgment in the underlying action between the injured third party
and the tortfeasor, for bad-faith refusal to settle. 121 N.C. App. at 663, 468 S.E.2d
at 496. Proceeding on the earlier version of North Carolina’s UDTP statute, in
determining that “a private right of action under [section 58-63.15] and [section 75-
1.1] may not be asserted by a third-party claimant against the insurer of an adverse
party,” the North Carolina Court of Appeals noted that the plaintiff was a third-
party stranger to the insurance contract and was not in privity with the insured.
Id. at 665, 468 S.E.2d at 497. The court further noted that most states that have
considered this issue have not allowed that type of claim. Id. at 665–66, 468 S.E.2d
at 497–98. The court of appeals summarized the two primary reasons for its
decision:
First, allowing such third-party suits against insurers would encourage
unwarranted settlement demands, since plaintiffs would be able to
threaten a claim for an alleged violation of [section 58-63-15(11)] in an
attempt to extract a settlement offer.
...
Second, allowing a third-party claim against the insurer of an adverse
party for violating [section 58-63-15(11)] may result in a conflict of
interest for the insurance company. Upon defending its insured, the
insurer has a duty to act diligently and in good faith to its insured.
The insurer has a duty to safeguard the interests of its insured.
Allowing a third-party action because of a violation of [section 58-63-
15(11)] would require the insurer to also act in the best interests of the
party adverse to its insured. Such a result would likely put the insurer
in a position of conflict with its insured—the party adverse to the third
party.
Id. at 666–67, 468 S.E.2d at 498.
{52} That same year, in Murray v. Nationwide Mutual Insurance Co., the
court of appeals created a carve-out to the Wilson prohibition on third-party UDTP
claims against insurers. See 123 N.C. App. at 14–16, 472 S.E.2d at 365–66. In
Murray, the plaintiff obtained a judgment against a tortfeasor for injuries resulting
from a car accident and then, after the tortfeasor’s insurer repeatedly placed
conditions on its payment of the judgment, pursued a claim against the insurer
based on section 58-63-15(11). Id. at 4–7, 472 S.E.2d at 359–61. There was no
dispute in Murray that the claim underlying the judgment fell within the insuring
provisions of the insurance contract.
{53} The court of appeals held that the Wilson rule, which prohibits a
UDTP action against an insurer by a stranger to the insurance contract, did not
preclude the Murray plaintiff’s claim because the Murray plaintiff was an intended
third-party beneficiary of the insurance contract, placing the plaintiff in contractual
privity with the insurer. Id. at 14–15, 472 S.E.2d at 365–66.
{54} In reaching this result, the court of appeals, recited the well-settled
rule in North Carolina that a party injured in an automobile accident is an intended
third-party beneficiary of the tortfeasor’s automobile insurance policy, which is
issued with the express contemplation that the mandatory liability insurance
coverage inures to the benefit of other motorists. Id. at 15, 472 S.E.2d at 366; see
also Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 440–41, 238 S.E.2d 597,
603–04 (1977) (holding that a car-accident victim’s rights against an insurer are
statutory and become absolute when the victim is injured by the insured).
Accordingly, the judgment claimant in Murray was deemed to have sufficient
privity of contract as an intended third-party beneficiary to assert a claim arising
under the insurance contract. See Murray, 123 N.C. App. at 15, 472 S.E.2d at 366
(“Therefore, the instant plaintiff is in contractual privity with [the insurer], and for
this reason alone, is not bound by the third-party restrictions set forth in Wilson.”);
see also Prince v. Wright, 141 N.C. App. 262, 269–70, 541 S.E.2d 191, 197 (2000)
(noting that a third party generally cannot directly sue the insurer of an opposing
party unless that third party is an intended beneficiary of the insurance contract).
The court of appeals noted that its holding was strengthened by the fact that the
conduct underlying the UDTP claim occurred post-judgment. Id. at 16, 472 S.E.2d
at 366.
{55} Murray’s reliance on a finding that the claimant had rights as an
intended third-party beneficiary comports with general contract doctrine, which
allows a third party to bring suit on a contract if the party shows “(1) the existence
of a contract between two other persons; (2) that the contract was valid and
enforceable; and (3) that the contract was entered into for his direct, and not
incidental, benefit.” Raritan River Steel Co. v. Cherry, Bekaert & Holland, 79 N.C.
App. 81, 86, 339 S.E.2d 62, at 66 (1986) (quoting Leasing Corp. v. Miller, 45 N.C.
App. 400, 405–06, 263 S.E.2d 313, 317 (1980)), rev’d on other grounds, 322 N.C. 200,
367 S.E.2d 609 (1988). Anyone for whose direct benefit a liability insurance policy
is issued may maintain an action directly against the insurer for any loss suffered.
Carolina Transp. & Distrib. Co. v. Am. Alliance Ins. Co., 214 N.C. 596, 601, 200 S.E.
411, 414 (1938).
{56} However, it does not follow that everyone seeking benefits under an
insurance policy qualifies as an intended third-party beneficiary, even where a
judgment against an insured has been obtained. To qualify as an intended third-
party beneficiary, “[i]t is not enough that the contract, in fact, benefits the [third
party], if, when the contract was made, the contracting parties did not intend it to
benefit the [third party] directly.” Country Boys Auction & Realty Co. v. Carolina
Warehouse, Inc., 180 N.C. App. 141, 146, 636 S.E.2d 309, 313 (2006) (quoting
Holshouser v. Shaner Hotel Grp. Props., 134 N.C. App. 391, 399–400, 518 S.E.2d 17,
25 (1999)). North Carolina courts have determined that certain parties are
intended third-party beneficiaries of certain types of insurance contracts as a
matter of law, because those parties were intended to benefit from the insurance.
See, e.g., Chantos, 293 N.C. at 440–41, 238 S.E.2d at 604 (holding that the
automobile insurance required by the Financial Responsibility Act is intended for
the direct benefit of the injured victims); Carolina Transp. & Distrib. Co., 214 N.C.
at 601, 200 S.E. at 414 (holding that an insurance policy covering goods held by a
common carrier in a bailor–bailee-type relationship is intended for the direct benefit
of the owner of the insured goods).
{57} The express terms of an insurance policy may also convey a right to a
third party to bring an action on the contract. See Hall v. Harleysville Mut. Cas.
Co., 233 N.C. 339, 340, 64 S.E.2d 160, 161 (1951) (permitting a third party to bring
a claim against the insurer of an adverse party when the terms of the insurance
policy allowed a third-party cause of action to be brought against the insurer after
the third party has first obtained a judgment against the insured).
{58} Applying these principles, the Court concludes that USA Trouser was
neither the insured nor an intended third-party beneficiary of the ILG Policy. The
Court is not aware of a policy justification that would require a court to deem that a
company’s general liability or D&O liability insurance coverage inures to the direct
benefit of injured trade creditors like USA Trouser. The policy considerations
pertaining to automobile liability insurance policies do not apply in this commercial
context.
{59} The Court concludes that USA Trouser’s UDTP claim against
Navigators is not a recognized claim in North Carolina.

C. Williams’s Motion to Dismiss

{60} Williams’s Motion to Dismiss is brought pursuant to Rules 9(b) and
12(b)(6). Williams first disputes whether USA Trouser has alleged a minimal basis
on which to pierce ILG’s veil so as to impose personal liability on him for the default
judgment entered against ILG. Williams further argues that the following claims
against him are, in any event, barred by collateral estoppel: (1) breach of fiduciary
duty, (2) constructive fraud, (3) fraudulent concealment, (4) negligent
misrepresentation, and (5) fraudulent and/or negligent failure to perform statutory
duties. Alternatively, Williams argues USA Trouser has failed to plead its fraud
claim with sufficient particularity to inform Williams of the basis of the claim made
against him and that the doctrine of intracorporate immunity bars USA Trouser’s
conspiracy-to-defraud claim. Finally, Williams seeks to dismiss the UDTP claim
against him because it is derivative of the other claims that should be dismissed.

1. USA Trouser Has Failed to Allege a Basis on Which to Impose Personal
Liability on Williams for the Default Judgment Against ILG.

{61} USA Trouser has not directly responded to Williams’s assertion that it
has failed to plead a basis for piercing ILG’s corporate veil. “The doctrine of
piercing the corporate veil is not a theory of liability. Rather, it provides an avenue
to pursue legal claims against corporate officers or directors who would otherwise be
shielded by the corporate form.” Green v. Freeman, 367 N.C. 136, 146, 749 S.E.2d
262, 271 (2013). USA Trouser argues that the default judgment against ILG
collaterally estops Williams from disputing his liability for USA Trouser’s claims
and alternatively that Williams is responsible for the liability established by the
default judgment as a tortfeasor.
{62} USA Trouser argues that the default judgment against ILG estops
Williams from arguing against his liability, even though Williams was not a party
to the federal action in which the default judgment was entered. The collateral
estoppel doctrine does not permit the liability established by the default judgment
against ILG to be imputed to Williams without Williams first having had an
opportunity to defend against that liability. See Rymer v. Estate of Sorrells, 127
N.C. App. 266, 269, 488 S.E.2d 838, 840 (1997) (noting that nonmutual, offensive
collateral estoppel applies where “a plaintiff seeks to foreclose a defendant from
relitigating an issue that the defendant has previously litigated unsuccessfully in
another action against a different party”); see also Sartin v. Macik, 535 F.3d 284,
289 (4th Cir. 2008) (holding that, under North Carolina law, a default judgment
does not have collateral estoppel effect, even though it might have res judicata
effect). Even if the corporation’s liability has been established by judgment, if the
officer’s liability to the injured party has not already been established, the injured
party cannot assert collateral estoppel against the officer based on the judgment
against the corporation. See State Farm Mut. Auto. Ins. Co. v. Holland, 324 N.C.
466, 471, 380 S.E.2d 100, 103 (1989).
{63} USA Trouser separately argues that it has alleged a basis for finding
Williams liable for the judgment because ILG and Williams were joint tortfeasors.
An officer of a corporation may be held individually liable for his own torts. Forbes
v. Par Ten Grp., Inc., 99 N.C. App. 587, 596, 394 S.E.2d 643, 648 (1990). The
injured party may hold either the corporation or the officer liable for the wrongful
acts or omissions an officer acting within the scope of his authority, or the party
may hold them both liable as joint tortfeasors. Id. But a determination that a
corporation is liable does not necessarily also indicate that the corporation’s officer
committed a separate tort for which personal liability should be imposed against the
officer. See Holland, 324 N.C. at 471, 380 S.E.2d at 103 (noting that collateral
estoppel did not establish a defendant’s joint and several liability where the
defendant’s liability had never been established because he was not a party to the
earlier action and had not been made a third-party defendant by the original
defendant). USA Trouser must first prove that Williams committed a tortious act.
Id. Without more, the entry of default judgment against ILG does not meet the
required showing.
2. Collateral Estoppel Bars or Limits Most of USA Trouser’s Claims Against
Williams.

{64} Williams argues that collateral-estoppel effect of the District Court
Order precludes USA Trouser’s claims for breach of fiduciary duty, constructive
fraud, fraudulent concealment, negligent misrepresentation, and fraudulent or
negligent failure to perform statutory duties against him individually. The basis of
Williams’s argument was undercut, in part, when the Fourth Circuit Opinion
vacated Judge Reidinger’s grant of summary judgment on certain of USA Trouser’s
claims that are based on a finding that ILG’s directors owed USA Trouser a limited
duty.
{65} Williams acknowledges that the Fourth Circuit Opinion precludes his
ability to rely on collateral estoppel regarding USA Trouser’s claims for breach of
fiduciary duty, fraud, and constructive fraud, as well as the UDTP claim to the
extent that it relies on those underlying claims. On the other hand, it is difficult to
discern the scope of USA Trouser’s various arguments. It appears that USA
Trouser seeks to avoid Williams’s defensive use of collateral estoppel through an
effort to distinguish Thomas M. McInnis & Associates, Inc. v. Hall, the case in
which the North Carolina Supreme Court adopted nonmutual collateral estoppel.
318 N.C. 421, 428, 349 S.E.2d 552, 557 (1986). USA Trouser also argues that the
ILG Lawsuit should have no preclusive effect on USA Trouser’s claims against
Williams because he remained ILG’s CEO and president for nine months after USA
Trouser filed its complaint in the federal action. Finally, USA Trouser alleges that
it did not have a full and adequate opportunity to litigate the issues in the ILG
Lawsuit and that Judge Reidinger’s opinion was flawed as to both the law and the
facts of the federal case. As a result, USA Trouser argues, it should not be estopped
from litigating those issues in this matter. The Court has fully considered USA
Trouser’s arguments as the Court understands them, and finds them to be without
merit.

a. General Principles Regarding Collateral Estoppel

{66} The doctrine of collateral estoppel serves to prevent relitigation of
issues that were actually litigated and necessary to the outcome of a prior-litigated
action. Id. at 428, 349 S.E.2d at 557. The doctrine applies where issues that have
been fully litigated in a federal court are presented in a subsequent state court
action. Nicholson v. Jackson Cty. Sch. Bd., 170 N.C. App. 650, 654–55, 614 S.E.2d
319, 322 (2005). The party asserting collateral estoppel bears the burden of proving
that the elements of collateral estoppel have been met. Powers v. Tatum, 196 N.C.
App. 639, 642, 676 S.E.2d 89, 92 (2009).
To carry this burden, the moving party must show: (1) a prior suit
resulting in a final judgment or decree; (2) between identical parties or
those in privity; (3) involving one or more identical issues; (4) that the
specific issue was litigated and necessary to the prior judgment; and
(5) that the specific issue was actually determined.
Id.
{67} It is now well established in North Carolina that the parties to the two
actions need not be identical when estoppel is asserted defensively. See Mays v.
Clanton, 169 N.C. App. 239, 241, 609 S.E.2d 453, 455 (2005).

b. Williams Has Met His Initial Burden of Proving the Elements of
Collateral Estoppel.

{68} The Court concludes that Williams has met his burden of establishing
the required elements of collateral estoppel.
{69} First, the District Court Order as to the individual defendants became
a final order when Judge Reidinger entered default judgment against ILG, resolving
all remaining claims. See Fed. R. Civ. P. 54(b); N.C. R. Civ. P. 54(b).
{70} Second, even though Williams was not a party to the ILG Lawsuit,
USA Trouser had a full and fair opportunity during the ILG Lawsuit to litigate the
issues related to any liability of ILG’s officers and directors. See Mays, 169 N.C.
App. at 241, 609 S.E.2d at 455 (noting that application of nonmutual collateral
estoppel is proper, even by a party that was not a party or in privity with a party in
the prior action, when the party against whom collateral estoppel is asserted had a
full and fair opportunity to litigate the same issues). USA Trouser cannot avoid
application of estoppel by arguing in this separate action that it did not have fair
opportunity to litigate in the federal action. “An issue is ‘actually litigated,’ for the
purposes of collateral estoppel or issue preclusion, if it is properly raised in the
pleadings or otherwise submitted for determination and is in fact determined.”
Propst v. N.C. Dep’t Health & Human Servs., 234 N.C. App. 165, 168, 758 S.E.2d
892, 895 (2014) (quoting Williams v. Peabody, 217 N.C. App. 1, 6, 719 S.E.2d 88, 93
(2011)). Judge Reidinger’s discussion and findings regarding the nature of the
business relationship between USA Trouser and ILG are too numerous to recount,
but they make clear that issues USA Trouser now raises against Williams were
actually litigated.
{71} Third, USA Trouser is attempting to relitigate issues in this action
that are identical to those presented to Judge Reidinger, solely because Williams
was not a defendant in the ILG Lawsuit. Many of USA Trouser’s claims in this
matter against Williams hinge on an alleged duty between ILG and its directors
and officers, and USA Trouser. The issues that Judge Reidinger and the Fourth
Circuit decided related primarily to the duty, or lack of duty, owed by ILG’s
directors and officers to USA Trouser. See Andrews, 612 Fed. App’x. at 160–61;
Int’l Legwear, 2012 U.S. Dist. LEXIS 177456, at *22–26. Those issues were
necessary to the District Court Opinion, and were “in fact, determined” by Judge
Reidinger. Propst, 234 N.C. App. at 168, 758 S.E.2d at 895 (citation omitted).
Though the Fourth Circuit subsequently determined that certain of USA Trouser’s
claims should instead proceed to trial, such a holding does not prevent Judge
Reidinger’s decision from having a preclusive effect as to other issues underlying
USA Trouser’s claims. See Thomas M. McInnis & Assocs., 318 N.C. at 431, 349
S.E.2d at 558.
{72} Neither can USA Trouser avoid the preclusive effect of the District
Court Order by arguing that the district court erred in its decision. Even if a
judgment contains errors of fact or law, the judgment maintains its collateral-
estoppel effect until it is reversed or vacated. See State v. Summers, 351 N.C. 620,
623, 528 S.E.2d 17, 20 (2000) (“[W]hen a fact has been agreed upon or decided in a
court of record, neither of the parties shall be allowed to call it in question, and have
it tried over again at any time thereafter, so long as the judgment or decree stands
unreversed.” (alteration in original) (quoting King v. Grindstaff, 284 N.C. 348, 355,
200 S.E.2d 799, 804 (1973))).
{73} USA Trouser’s argument that Williams remained CEO and President
for nine months after USA Trouser filed its complaint is irrelevant to the estoppel
effect of the federal judgment, at least to the extent that USA Trouser’s claims are
predicated on actions taken by Williams and ILG before USA Trouser filed its
complaint in the ILG Lawsuit. Any allegations against Williams that are based on
actions that have occurred since that time relate to a conspiracy claim arising from
Navigators’s failure to pay the default judgment, but the Court has dismissed that
claim for other reasons.
{74} Having concluded that Williams has met his burden of proving the
elements of collateral estoppel, the Court now analyzes each claim individually to
determine that collateral estoppel serves to limit certain claims and bar others.

c. USA Trouser’s Breach-of-Fiduciary-Duty and Constructive-Fraud
Claims Must Be Limited as to Their Potential Scope.

{75} USA Trouser’s claims for breach of fiduciary duty and constructive
fraud both rely on Williams owing a fiduciary duty to USA Trouser. See Dalton v.
Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001) (“For a breach of fiduciary
duty to exist, there must first be a fiduciary relationship between the parties.”);
Highland Paving Co., LLC v. First Bank, 227 N.C. App. 36, 42, 742 S.E.2d 287, 292
(2013) (noting that, to establish constructive fraud, the plaintiff must show that the
defendant owes the plaintiff a fiduciary duty, breached that duty, and sought to
benefit himself in the transaction).
{76} In the District Court Order, Judge Reidinger noted that, “[a]t best,
USA Trouser was an unsecured creditor of ILG,” and that “[g]enerally, corporate
directors do not owe a fiduciary duty to creditors of the corporation.” Int’l Legwear
Grp., Inc., 2012 U.S. Dist. LEXIS 177456, at *22. Judge Reidinger continued,
noting that courts have recognized an exception to that general rule and have found
that directors owe a fiduciary duty to creditors under circumstances amounting to a
dissolution of the corporation. Id. at *23. However, Judge Reidinger next found
that ILG’s directors and officers were “prosecuting ILG’s business in good faith,”
and that a consideration of those actions superseded other factors that indicated
that ILG was dissolving. See id. at *23–24 (quoting Keener Lumber Co. v. Perry,
149 N.C. App. 19, 31, 560 S.E.2d 817, 825 (2002)). Judge Reidinger further found
that, even if Sanchez, Sheely, and Andrews owed a fiduciary duty to USA Trouser,
there was no breach of that duty, because they were permitted to prefer ILG’s
secured creditors over USA Trouser, which was an unsecured creditor. Id. at *24–
25. On these bases, Judge Reidinger dismissed USA Trouser’s claims for breach of
fiduciary duty and constructive fraud, which were based on the existence of a
fiduciary duty. Id. at *26.
{77} On appeal, the Fourth Circuit found that “genuine issues of material
fact remain concerning whether ILG was winding-up or dissolving and, thus,
whether a creditor–director fiduciary relationship existed.” Andrews, 612 F. App’x.
at 161. The Fourth Circuit agreed with Judge Reidinger that the forced liquidation
of ILG’s assets and distribution of the proceeds to ILG’s primary lender could not
form the basis of any breach. Id. The Fourth Circuit then noted that summary
judgment on USA Trouser’s constructive fraud claim was inappropriate because
USA Trouser might be able to provide evidence that the directors owed a director–
creditor fiduciary duty, and Judge Reidinger had dismissed the claim for lack of
that duty. Id. at 161. The Fourth Circuit affirmed the remainder of Judge
Reidinger’s order. Id. at 162.
{78} The effect of the two federal judgments serves to limit any fiduciary
duty that Williams might owe to USA Trouser to such a duty that might exist if
USA Trouser can prove that ILG was in the process of winding-up or dissolution.
The Fourth Circuit did not address whether specific actions by the directors
constituted breaches of the director–creditor fiduciary duty, but it did determine
that one action could not constitute breach:

[T]he forced liquidation of ILG’s assets and distribution of the proceeds
to ILG’s primary lender could not form the basis of a breach because,
“even after the fiduciary duty arises, directors of a corporation may
prefer secured creditors over unsecured creditors” by paying all debts
to the former before paying any debts to the latter.

Id. at 161 (quoting Keener Lumber, 149 N.C. App. at 33, 560 S.E.2d at 827).
Therefore, USA Trouser’s breach of fiduciary duty and constructive fraud claims in
this matter have not been finally adjudicated in the ILG action and might survive
beyond estoppel, but those claims are limited to the extent of USA Trouser’s ability
to prove that ILG was in the process of winding up or dissolution, which may create
a creditor–director fiduciary relationship between Williams and USA Trouser.
Further, ILG’s decision to pay its secured creditors before paying USA Trouser, as a
matter of law, cannot now constitute a breach of that duty.

d. USA Trouser’s Fraudulent Concealment Claim Survives but Must Be
Limited to the Same Degree as Its Breach of Fiduciary Duty and
Constructive Fraud Claim.

{79} To state a claim for fraudulent concealment, USA Trouser must show
that that there is a relationship of trust and confidence between the parties and
that Williams has failed to disclose all material facts. Stamm v. Salomon, 144 N.C.
App. 672, 680, 551 S.E.2d 152, 157–58 (2001).
{80} USA Trouser’s fraudulent-concealment claim in this action is
presented in a different-enough manner from the fraudulent-concealment claim in
the ILG Lawsuit so as to prevent the Court from dismissing the claim due to
collateral estoppel.
{81} Judge Reidinger dismissed USA Trouser’s fraudulent-concealment
claim on two grounds: (1) that Andrews, Sanchez, and Sheely did not owe a
fiduciary duty to USA Trouser, and (2) that USA Trouser did not act in reliance on
any failure to disclose by Andrews, Sanchez, or Sheely related to the sale of ILG’s
sock inventory to a third party. Int’l Legwear Grp., Inc., 2012 U.S. Dist. LEXIS
177456, at *30. Even though the Fourth Circuit vacated Judge Reidinger’s holding
that the officers owed no fiduciary duty, it nevertheless upheld Judge Reidinger’s
dismissal of USA Trouser’s claim for fraudulent concealment, because there was no
evidence of an action taken in reliance of a breach of that duty. Andrews, 612 Fed.
App’x. at 162. In the present action, USA Trouser’s fraudulent concealment claim is
premised on William’s concealment of ILG’s financial status from USA Trouser.
USA Trouser alleges that it would have stopped shipping socks to ILG had it known
of ILG’s tenuous financial status. Neither Judge Reidinger nor the Fourth Circuit
decided this issue, and as such, it was not “actually determined” so as to preclude
the claim based on collateral estoppel. Powers, 196 N.C. App. at 642, 676 S.E.2d at
92.
{82} Therefore, Williams’s Motion to Dismiss is DENIED as to USA
Trouser’s fraudulent concealment claim, but proof of the existence of a duty upon
which a concealment claim may be pursued must be limited to the same degree as
USA Trouser’s breach-of-fiduciary-duty and constructive-fraud claims.

e. USA Trouser’s Claim of Fraudulent and/or Negligent Failure to
Perform Statutory Duties Is Barred by Collateral Estoppel.

{83} In support of its claim for “fraudulent and/or negligent failure to
perform statutory duties,” USA Trouser alleges, inter alia, that Williams failed to
perform his duties as a CEO, failed to inform himself regarding ILG’s financial
status, failed to schedule meetings of director or shareholders, and failed to wind
down the business in an orderly manner. In support, USA Trouser states that
Williams was in breach of sections 55-7-01, 55-14-05, and 55-14-06 of the North
Carolina General statutes, as well as “applicable or equivalent Virginia statutes.”
(First Am. Compl. ¶¶ 251–52.)
{84} In the District Court Order, Judge Reidinger held that USA Trouser
lacked standing to bring a claim of failure to perform statutory duties, as ILG’s
officers and directors owed a statutory duty to ILG rather than to USA Trouser.
Int’l Legwear Grp., 2012 U.S. Dist. LEXIS 177456, at *32. Judge Reidinger then
dismissed USA Trouser’s claims for failure to perform statutory duties against
Andrews, Sanchez, and Sheely. Id. This holding is binding against USA Trouser,
which is therefore collaterally estopped from arguing that it has standing to bring a
further claim for fraudulent and/or negligent failure to perform statutory duties.
Irrespective of the collateral estoppel effect of the District Court Order, this Court
independently reaches the same legal conclusion as Judge Reidinger regarding this
claim.

3. USA Trouser Has Failed to Adequately Allege in Support of Its Negligent
Misrepresentation and Fraud Claims that Williams Made an Affirmative
Representation to USA Trouser.

{85} Outside the context of collateral estoppel, Williams argues that USA
Trouser has failed to allege that he made an affirmative representation on which
USA Trouser may base a fraud or negligent misrepresentation claim.
{86} To plead a fraud claim, the essential elements include the following:
“(1) [a] false representation . . . of a [past or existing] material fact, (2) reasonably
calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive,
(5) resulting in damage to the injured party.” Hardin v. KCS Int'l, Inc., 199 N.C.
App. 687, 696, 682 S.E.2d 726, 733 (2009) (third alteration in original) (quoting
Phelps-Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C. App. 427, 437,
617 S.E.2d 664, 670 (2005)). It is well established that allegations of fraud must be
pleaded with greater particularity than other claims. See N.C. R. Civ. P. 9(b); see
also Terry v. Terry, 302 N.C. 77, 84, 273 S.E.2d 674, 678 (1981). A plaintiff may
meet this burden by “alleging time, place and content of the fraudulent
representation, identity of the person making the representation and what was
obtained as a result of the fraudulent acts or representations.” Terry, 302 N.C. at
85, 273 S.E.2d at 678.
{87} To successfully plead a negligent misrepresentation claim, a complaint
must allege that “(1) a party justifiably relie[d], (2) to his detriment, (3) on
information prepared without reasonable care, (4) by one who owed the relying
party a duty of care.” Walker v. Town of Stoneville, 211 N.C. App. 24, 30, 712
S.E.2d 239, 244 (2011) (quoting Simms v. Prudential Life Ins. Co. of. Am., 140 N.C.
App. 529, 532, 537 S.E.2d 237, 240 (2000)). In contrast to a fraudulent concealment
claim or other claim based on a failure to disclose, and similar to a claim of actual
fraud, “[f]or [a] negligent misrepresentation claim, the Court . . . must inquire
whether there has been an adequate allegation of an actual, affirmative
representation.” Loftin v. QA Invs., LLC, No. 03 CVS 16882, 2015 NCBC LEXIS 44,
at *25–26 (N.C. Super. Ct. Apr. 30, 2015).
{88} The First Amended Complaint is devoid of allegations that Williams
personally made any affirmative representations to USA Trouser, at most alleging
that “Williams led Trouser to believe ILG was financially sound and would be for
the future.” (First. Am. Compl. ¶ 81.) Such an allegation does not meet the
heightened pleading requirements of an actual fraud claim. Further, even under
the liberal Rule 12(b)(6) standard, when construing that statement in the light most
favorable to USA Trouser, this allegation does not give Williams “notice of the
transaction, occurrences, or series of transactions or occurrences, intended to be
proved showing that [USA Trouser] is entitled to relief” for its negligent
misrepresentation claim. N.C. R. Civ. P. 8(a)(1).
4. USA Trouser’s Civil Conspiracy Claim Against Williams Should Be
Dismissed.

{89} To state a claim for civil conspiracy, USA Trouser must plead that
there was an agreement between Williams and someone else to do a wrongful act,
that there was an act committed in furtherance of the agreement, and that USA
Trouser suffered damage from the act. Pleasant Valley Promenade v. Lechmere,
Inc., 120 N.C. App. 650, 657, 464 S.E.2d 47, 54 (1995). However, the doctrine of
intracorporate immunity, which is well established in North Carolina law, generally
prohibits making a conspiracy claim against a corporation and its agents because
“claiming that a corporation has conspired with its agents, officers, or employees . . .
is ‘tantamount to accusing a corporation of conspiring with itself.’” Kingsdown, Inc.
v. Hinshaw, No. 14 CVS 1701, 2015 NCBC LEXIS 30, at *35 (N.C. Super. Ct. Mar.
25, 2015) (quoting State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 184 N.C.
App. 613, 625, 646 S.E.2d 790, 799 (2007)).
{90} There is a narrow exception to this prohibition that applies in
instances where the alleged conspirator “has an ‘independent personal stake in
achieving the corporation’s illegal objective.’” Kingsdown, 2015 NCBC LEXIS 30, at
*36 (quoting Buschi v. Kirven, 775 F.2d 1240, 1252 (4th Cir. 1985)). But an interest
in the general profitability of the corporation is insufficient to establish that a party
has an independent personal stake in the corporation’s illegal objective. Garlock v.
Hilliard, No. 00 CVS 1018, 2000 NCBC LEXIS 6, at *17–18 (N.C. Super. Ct. Aug.
22, 2000).
{91} The allegations upon which USA Trouser premises its conspiracy claim
against Williams may fairly be grouped into two categories: (1) actions that
Williams undertook in concert with ILG and its other officers and directors to an
end that ultimately harmed USA Trouser, and (2) actions that Williams undertook
with Navigators to avoid paying the default judgment that USA Trouser obtained in
the ILG Lawsuit. The Court concludes that the doctrine of intracorporate immunity
bars claims based on the first category of allegations. Any conspiracy claim based
on the second category of allegations should fail for the same reasons that the Court
has determined that the conspiracy claim against Navigators fails.

5. The Court Must Defer Its Ruling on any UDTP Claim, but any Such
Claim Must Be Limited to the Same Extent as the Underlying Claims on
Which the UDTP Claim Rests.

{92} USA Trouser’s UDTP claim is predicated on the actions underlying its
other claims. Because the Court has found that several of USA Trouser’s other
claims, though limited, survive Williams’s Motion to Dismiss, USA Trouser’s UDTP
claim should also survive. C.f. Trantham v. Michael L. Martin, Inc., 228 N.C. App.
118, 125, 745 S.E.2d 327, 333 (2013) (indicating that conduct that constitutes a
breach of fiduciary duty and constructive fraud is also sufficient to support a UDTP
claim).

V. CONCLUSION

{93} In conclusion, Navigators Management’s Motion to Dismiss and
Navigators Insurance’s Motion to Dismiss are GRANTED. All claims against
Navigators Management and Navigators Insurance are DISMISSED WITH
PREJUDICE.
{94} Williams’s Motion to Dismiss is GRANTED IN PART and DENIED IN
PART. The following claims against Williams are DISMISSED WITH
PREJUDICE:
1. Actual fraud;
2. Negligent misrepresentation;
3. Fraudulent and/or negligent failure to perform statutory duties; and
4. Civil conspiracy.
USA Trouser’s other claims are limited as described above.
IT IS SO ORDERED, this the 21st day of July, 2016.

/s/ James L. Gale l
James L. Gale
Chief Special Superior Court Judge
for Complex Business Cases