Howard v. Iomaxis, LLC

Howard v. IOMAXIS, LLC, 2022 NCBC 76.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 18 CVS 11679

KELLY C. HOWARD and FIFTH
THIRD BANK, NATIONAL
ASSOCIATION, AS CO-TRUSTEES
OF THE RONALD E. HOWARD
REVOCABLE TRUST U/A DATED
FEBRUARY 9, 2016, AS AMENDED
AND RESTATED,

Plaintiffs, ORDER AND OPINION ON IOMAXIS
DEFENDANTS’ CONSOLIDATED
v. MOTION TO DISMISS THE TRUST’S
FIRST AMENDED COMPLAINT
IOMAXIS, LLC; BRAD C. BOOR a/k/a
BRAD C. BUHR; JOHN SPADE, JR.;
WILLIAM P. GRIFFIN, III;
NICHOLAS HURYSH, JR.; and
ROBERT A. BURLESON,

Defendants.

1. THIS MATTER is before the Court on the IOMAXIS Defendants’ 1

Consolidated Motion to Dismiss the Trust’s First Amended Complaint (“Motion”),

(ECF No. 223), pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil

Procedure (the Rule(s)).

2. Before his death, Ronald E. Howard owned a 51% interest in IOMAXIS,

LLC (“IOMAXIS” or “the Company”). The interest passed to his Estate at the time of

his death in June 2017 before being transferred to a trust in December 2017.

1 The Court refers to IOMAXIS, LLC, Brad C. Boor a/k/a Brad C. Buhr, John Spade, Jr.,

William P. Griffin, III, and Robert A. Burleson collectively as the “IOMAXIS Defendants” to
distinguish them from Nicholas Hurysh, Jr. (“Hurysh”) who is also a defendant. IOMAXIS,
LLC, the entity, is referred to as “IOMAXIS.”
Plaintiffs are co-trustees of the trust, and this case arises from a dispute regarding

the rights of the trust with respect to its interest in IOMAXIS. Defendants are

IOMAXIS and individuals with an interest in IOMAXIS that may be affected by this

action.

3. Having considered the Motion, the related briefing, and the arguments

of counsel at a hearing on the Motion, the Court hereby GRANTS in part, DENIES

in part, and STAYS in part the Motion.

Johnston, Allison & Hord, P.A., by Greg C. Ahlum, Parker E. Moore, 2
David T. Lewis, and Lauren S. Martin, for Plaintiff Kelly Howard, as co-
Trustee of the Ronald E. Howard Revocable Trust u/a dated February 9,
2016, as Amended and Restated.

Womble Bond Dickinson (US) LLP, by Lawrence A. Moye, and Loper
Law, PLLC, by Johnny M. Loper, for Plaintiff Fifth-Third Bank, NA, as
co-Trustee of the Ronald E. Howard Revocable Trust u/a dated February
9, 2016, as Amended and Restated.

Allen, Chesson & Grimes PLLC, by David Allen, Benjamin S. Chesson,
and Anna Majestro, and Nelson Mullins Riley & Scarborough LLP, by
Travis Bustamante, for Defendants IOMAXIS, LLC, Brad C. Boor a/k/a
Brad C. Buhr, John Spade, Jr., William P. Griffin, III, and Robert A.
Burleson.

Miller Monroe & Plyer, PLLC, by Jason A. Miller, Paul T. Flick, and
Robert B. Rader, III, for Defendant Nicholas Hurysh.

Earp, Judge.

I. FACTUAL AND PROCEDURAL BACKGROUND

4. The Court does not make findings of fact on a Motion to Dismiss

under Rule 12(b)(6). The following factual summary is drawn from the allegations in

2 Since the time of the Motion hearing, Parker E. Moore has withdrawn from this matter, and

Patrick E. Kelly and Kathleen D. B. Burchette have appeared as additional counsel for Kelly
C. Howard, co-trustee of the Ronald E. Howard Revocable Trust.
the First Amended Complaint (“Am. Compl.”), (ECF Nos. 3, 197) 3, including its

attached exhibits.

5. Plaintiffs allege that IOMAXIS, LLC (“IOMAXIS”) is a North Carolina

limited liability company. (Am. Compl. ¶ 8.)

6. Ronald Howard (“Decedent”) died on 12 June 2017. At the time of his

death, Decedent held a 51% membership interest in IOMAXIS. The interest passed

to his Estate. (Am. Compl. ¶¶ 1, 3, 4.)

7. On 8 December 2017, the Estate transferred all of its interest in

IOMAXIS to the Ronald E. Howard Revocable Trust (“Trust”). (Am. Compl. ¶ 5.)

8. IOMAXIS has an Operating Agreement 4 that restricts the ability of a

member to transfer, voluntarily or involuntarily, all or any part of the member’s

interest in the Company without the prior written consent of a “Majority in Interest”

of the “Disinterested Members.” 5 (OA § 8.1, Compl. Ex. C, ECF No. 3.) 6

3 The Amended Complaint, (ECF No. 197), incorporates the entirety of the initial Complaint,

(ECF No. 3).

4 Plaintiffs allege that an attempt to convert IOMAXIS from a North Carolina LLC to a Texas

LLC was unsuccessful, and they seek a declaratory judgment establishing that IOMAXIS is
a North Carolina LLC, that it is controlled by an operating agreement entered by its members
on 26 November 2001 (the “Operating Agreement”), and that a later operating agreement
(the “Texas Document”) is not controlling. For purposes of this Order and Opinion, the Court
accepts as true Plaintiffs’ allegations that the Operating Agreement is controlling.

5 A “Majority in Interest” is defined as “a combination of any Members who, in the aggregate,

own more than fifty percent (50%) of the Membership Interests of all Members.” A
“Disinterested Member” is one “who is not related . . . to either the Member whose
Membership Interest is to be transferred as provided in Article VIII or the proposed
transferee of such Membership Interest.” (OA § 1.1.)
6 The Operating Agreement is divided into Articles, and each Article contains multiple
subparts. The Operating Agreement refers to the subparts as “sections” and numbers them
9. However, the death of a member triggers several other provisions of the

Operating Agreement. First, Section 4.6 provides:

Bankruptcy or Incapacity of a Member. A Member shall cease to
have any power as a Member or a Manager, any voting rights or rights
of approval hereunder upon death . . . ; and each Member, its personal
representative, estate, or successor . . . shall have only the rights,
powers, and privileges of a transferee enumerated in Section
8.4[.]

(OA § 4.6, emphasis added.)

10. Section 8.4 defines the rights of a transferee as:

Rights of Transferee. Unless admitted to the Company in accordance
with Section 8.3, the transferee of a Membership Interest or a part
thereof shall not be entitled to any of the rights, powers, or
privileges of its predecessor in interest, except that such
transferee shall be entitled to receive and be credited or debited with its
proportionate share of Profits, Losses, Gains from Capital
Transactions, Company Cash Flow, Company Sales Proceeds,
Company Refinancing Proceeds, and Distributions in
liquidation.

(OA § 8.4, emphasis added.)

11. Second, the death of a member activates the Buy-Sell provisions in

Article IX of the Operating Agreement. (Am. Compl. ¶ 51, OA § 9.1 et seq.) Section

9.2 states that the executor “shall give notice of the [death] (the ‘Buy-Sell Notice’) to

the other Members within ten (10) days after its occurrence.” (OA § 9.2.) Section 9.3

provides that upon the occurrence of the death, each of the remaining Members “shall

have an option to purchase (the “Purchase Option”) the [Decedent’s] Membership

Interest at Closing on the terms and conditions set forth in this Article IX . . . . The

according to their Article. For example, Article IV, Section 1.6 is referenced as “Section 4.6.”
The Court adopts this numbering convention in this Order and Opinion.
Purchasing Members must give notice of their election to exercise their Purchase

Option to the [executor] and all other Members within thirty (30) days following

delivery of the Buy-Sell Notice.” (OA § 9.3.)

12. The Operating Agreement’s provision for valuing an interest subject to

the Buy-Sell provisions is Section 9.5. That section was amended in November 2004

to read:

Agreement on Valuation. The [Estate] shall offer to sell its interest
to the remaining Members . . . . The value of such interest shall be agreed
upon by the [Estate] and the remaining Members. If the [Estate] and
the remaining Members cannot agree on such price, then the [Estate]
shall deliver his/her offer in writing to the remaining Members, to which
the remaining Members must return a written notice of rejection or
acceptance within a period of ten (10) days of receipt of said written
offer. If said offer is rejected, the [Estate] must purchase the remaining
Members’ interests at the price of [the Estate’s] written offer. If said
offer is accepted, the remaining Members must purchase the [Estate’s]
interest.

(First Amendment to OA § 9.5, Compl. Ex. F, ECF No. 3.)

13. There is a time limit on post-death transfers under the Buy-Sell

provisions. The “closing” of the purchase of any interest pursuant to the Buy-Sell

provisions “shall take place on the date agreed upon by the purchaser(s) and seller,

but not later than ninety (90) days after the [death].” (OA § 9.6.)

14. Furthermore, “upon the exercise of the Purchase Option, the [Estate] . . .

will have no rights in the Company or against the Company, any Member, or any

Manager other than the right to receive payment for its Membership interest[.]” (OA

§ 9.8.)
15. However, in the event the Members do not exercise their Purchase

Option, Section 9.9 of the Operating Agreement provides:

Failure to Exercise Purchase Option . . . . [The Executor] may
transfer [the Estate’s] economic rights in the Membership
Interest of the [Decedent] to any Person; PROVIDED, HOWEVER,
that any transferee of the [Decedent’s] Membership Interest, as
provided herein, (i) shall only have those rights as specified in Section
8.4, (ii) shall not be admitted as a substitute Member without full
compliance with Section 8.3, and (iii) shall be subject to the Buy-Sell
restrictions imposed under this Article IX.

(OA § 9.9, emphasis added.)

16. Finally, Section 11.8 of the Operating Agreement provides:

Survival of Rights. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties,
their successors and assigns.

(OA § 11.8.)

17. Following Decedent’s death, his executor, K.C. Howard, requested that

IOMAXIS and its manager, Brad Buhr (“Buhr”), “provide information necessary to

complete and file an estate tax return with the Internal Revenue Service, [and to]

determine the fair value of [Decedent’s] interest and the Estate’s interest in

IOMAXIS,” among other things. (Am. Compl. ¶ 53.)

18. The Estate, IOMAXIS, and Buhr agreed to hire an appraiser. (Am.

Compl. ¶ 56.) The Estate consented to using RSM US LLP (“RSM”), the appraisal

firm requested by IOMAXIS and Buhr. RSM was then retained. (Am. Compl. ¶¶ 57–

58.)

19. Plaintiffs allege, however, that IOMAXIS and Buhr refused to provide

RSM “the information necessary to conduct a fair market value appraisal” of the
Estate’s interest in IOMAXIS. (Am. Compl. ¶ 59.) Instead, IOMAXIS and Buhr

notified the Estate that they intended to have a valuation of IOMAXIS performed by

another company, Valuation Services, Inc. (Am. Compl. ¶ 60.)

20. The Estate informed IOMAXIS and Buhr that for the Internal Revenue

Service (“IRS”) to recognize the validity of the appraisal, the Estate had to retain the

appraisal firm, and it urged IOMAXIS and Buhr to cooperate with RSM. However,

IOMAXIS and Buhr allegedly did not respond to the Estate. (Am. Compl. ¶¶ 61–62.)

21. To date, Plaintiffs allege, IOMAXIS and Buhr have not provided

Plaintiffs with “all of the requested information from which the business, financial

condition and the valuation of IOMAXIS may be ascertained.” (Am. Compl. ¶ 68.)

22. In addition, IOMAXIS has allegedly made disbursements to other

Members after Decedent’s death on 12 June 2017, but it has made no payments to

either the Estate or the Trust. (Am. Compl. ¶¶ 69, 81–83.)

23. Plaintiffs’ Amended Complaint asserts a claim for declaratory judgment

with respect to whether IOMAXIS is a North Carolina limited liability company or a

Texas limited liability company, which operating agreement controls, and Plaintiffs’

entitlement to distributions. Plaintiffs also assert a claim for breach of the right to

receive interim distributions since 12 June 2017. They claim that they require an

accounting to obtain the “business, financial and valuation information” that they

contend is necessary to be able to discharge their duties to the Trust’s beneficiaries,

for the Estate to file its tax return, and to facilitate compliance with the applicable

Buy-Sell provisions in the Operating Agreement. (Am. Compl. ¶¶ 71–97.)
24. In support of their demand for an accounting, Plaintiffs assert that

IOMAXIS and Buhr, its manager, “have a duty and obligation to act in good faith and

fair dealing.” (Am. Compl. ¶ 96.)

25. In turn, the IOMAXIS Defendants seek an order: (1) dismissing the

Trust’s claims in their entirety because Plaintiffs have failed to allege that the Trust

holds a valid interest that affords it standing; (2) denying Plaintiffs’ request that the

Court enter an Order specifically enforcing the Buy-Sell provisions contained in the

Operating Agreement; (3) dismissing any claims for personal liability against any

individual defendant; and (4) denying the request for an accounting. (IOMAXIS Defs’

Br. Supp. Consol. Mot. Dismiss [“Defs’ Br.”] 7–11, ECF No. 224.) 7

II. LEGAL STANDARD

26. “It is well established that dismissal pursuant to Rule 12(b)(6) is proper

when ‘(1) the complaint on its face reveals that no law supports the plaintiff’s claim;

(2) the complaint on its face reveals the absence of facts sufficient to make a good

claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff’s

claim.’ ” Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting Wood

v. Guilford Cty., 355 N.C. 161, 166 (2002)). This standard of review for Rule 12(b)(6)

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

7 The IOMAXIS Defendants consolidated their motion to dismiss for failure to state a claim

with Burleson’s separate motion to dismiss for lack of personal jurisdiction. The Court has
stayed a determination of Burleson’s motion, as well as further proceedings with respect to
Plaintiffs’ Fourth and Fifth claims for relief (fraud and violation of the Uniform Voidable
Transactions Act) and their demands for a constructive trust and punitive damages. (See
Order on Motion to Sever and Stay, ECF No. 283.) Consequently, only the claims asserted
by Plaintiffs in the initial complaint—for declaratory judgment, for breach of right to interim
distributions, and for an accounting—are addressed herein.
complaints in the context of complex commercial litigation.” Id. at 615 n.7 (citations

omitted).

27. When conducting its review, the Court’s inquiry is “whether, as a matter

of law, the allegations of the complaint . . . are sufficient to state a claim upon which

relief may be granted under some legal theory[.]” Harris v. NCNB Nat’l Bank, 85

N.C. App. 669, 670 (1987). And, although the Court accepts all well-pleaded factual

allegations in the relevant pleading as true, see Krawiec v. Manly, 370 N.C. 602, 606

(2018), the Court is not required “to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.” Good Hope

Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274 (2005)

(quoting Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)).

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

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

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

(quoting Laster v. Francis, 199 N.C. App. 572, 577 (2009)). The Court may consider

these attached or incorporated documents without converting the Rule 12(b)(6)

motion into a motion for summary judgment. Id. at 206.

III. ANALYSIS

A. Standing

29. The IOMAXIS Defendants first argue that the Estate’s assignment of

its economic interest to the Trust was attempted without the prior written consent of

a “Majority in Interest” of the “Disinterested Members” as required by Section 8.1 of
the Operating Agreement. Consequently, they argue, no such assignment could have

occurred. In addition, the IOMAXIS Defendants contend that the Trust’s failure to

allege with specificity the amount of its interest or that the Estate met the conditions

required for a valid transfer prevent the Trust from establishing that it has standing

to bring this action. (Defs’ Br. 7–9.)

30. Plaintiffs, on behalf of the Trust, respond that the Amended Complaint

clearly identifies an interest in IOMAXIS that was assigned to and is currently held

by the Trust. They argue that, at this juncture, Rule 8 does not require them to plead

additional specifics regarding the amount of its interest or the conditions that led to

its transfer. (Pls’ Br. Opp. IOMAXIS Defs’ Consol. Mot. Dismiss, [“Pls’ Br.”] 5–6, ECF

No. 235.) As for the prior written consent requirement in Section 8.1 of the Operating

Agreement, Plaintiffs respond that the provision only applies when the transferor is

a member, and it does not apply when the interest is held by an economic interest

holder such as the Estate. (Pls’ Br. 6–7.)

31. The Court observes that the Amended Complaint alleges that

Decedent’s interest passed to his Estate, which, in turn, passed all that the Estate

held to the Trust. (Am. Compl. ¶ 5, Ex A.) There is no allegation that the interest

was diminished either before or since its assignment to the Trust.

32. Furthermore, Article IX sets out the Buy-Sell procedure triggered by the

death of a member, and (absent breach of the agreement) it is that procedure, rather

than the more general procedures stated in Section 8.1, that governs the transfer of
the deceased member’s interest. 8 However, the transferee receives only the economic

rights specified in Section 8.4, and the transferee “shall be subject to the Buy-Sell

restrictions imposed under the Article IX.”

33. Notably, although Section 9.9 references other provisions from Article

VIII, nowhere does it reference Section 8.1 or otherwise state that a transfer pursuant

to Article IX must be approved in writing by a Majority in Interest of the

Disinterested Members. Therefore, the Court concludes that Ron Howard’s death

triggered the procedures specified in Article IX with respect to his economic rights,

and no additional written consent of the members was required for the transfer.

34. With respect to whether Plaintiffs have sufficiently pled the mechanics

of the transfer from the Estate to the Trust to establish standing, the Court

determines for the following reasons that the allegations are minimally sufficient.

35. It is clear on the face of the Amended Complaint that the Buy-Sell

process did not result in a transfer of the Estate’s interest to any of the remaining

members of IOMAXIS. Instead, Plaintiffs allege that the Estate transferred all of its

interest in IOMAXIS to the Trust.

36. What is not clear on the face of the Amended Complaint is how the

transfer occurred. But there are a limited number of possible avenues, two that

require consideration of the members’ option to purchase, and one that does not.

8 Plaintiffs argue that once deceased, a former member is no longer a member subject to the

“written consent” requirement in Section 8.1. Even if that were not true, the Court
determines that the members’ inclusion of the specific procedures in Article IX of the
Operating Agreement reflects their written consent for those procedures to govern transfers
of a deceased member’s “record or beneficial interest in the Company” and satisfies the
“written consent” requirement of Section 8.1.
37. The first scenario is that the remaining members did not exercise their

option to purchase the interest, in which case Section 9.9 permitted a transfer to “any

Person,” including the Trust. As transferee, the Trust “shall be subject to the Buy-

Sell restrictions imposed under this Article IX.” (OA § 9.9.)

38. A second scenario is that one or more of the remaining members did opt

to purchase the interest, but the process stalled because the Estate could not

formulate an offer. Plaintiffs allege that this is because IOMAXIS and Buhr, its

manager, did not provide the financial information the Estate claims was necessary

for the Estate (and now the Trust) to do so.

39. The inability to formulate an informed offer could have serious

ramifications for the Estate. Section 9.5 requires the Estate to deliver an offer in

writing to the remaining members, who have ten days to accept or reject it. If the

offer is rejected, the Estate must purchase the remaining members’ interests at the

price of its written offer. Plainly, then, the Estate is incented to value its interest

fairly and accurately, something it alleges it was prevented from doing as a result of

IOMAXIS’ refusal to provide requested financial information. However, the

IOMAXIS Defendants argue that no express provision in the Operating Agreement

requires them to provide an economic interest holder financial information, even if

that information is to value the interest.

40. The IOMAXIS Defendants are correct that no such express term exists

in the Operating Agreement. But in addition to its express terms, “[u]nder North

Carolina law, every contract contains an implied covenant of good faith and fair
dealing that neither party will do anything which injures the rights of the other to

receive the benefits of the agreement.” Cordaro v. Harrington Bank, FSB, 260 N.C.

App. 26, 38 (2018) (internal marks and citation omitted). This implied covenant is a

“basic principle of contract law that a party who enters into an enforceable contract

is required to act in good faith and to make reasonable efforts to perform his

obligations under the agreement.” Maglione v. Aegis Family Health Ctrs., 168 N.C.

App. 49, 56 (2005) (quoting Weyerhaeuser Co. v. Godwin Bldg. Supply Co., 40 N.C.

App. 743, 746 (1979)). It has been called the “spirit of the contract.” Bicycle Transit

Authority, Inc. v. Bell, 314 N.C. 219, 230 (1985) (defendant breached both the “letter

and the spirit of the contract”); accord Allen v. Allen, 61 N.C. App. 716, 720 (1983)

(party’s actions were “clear violations of both the letter and spirit of the contract”).

41. The implied covenant of good faith and fair dealing is the gap-filler that

guides the parties in their performance of the express terms of the contract. Its

central purpose is “to allow enforcement of a vague or incomplete agreement that the

ratifying parties intended to be binding, but that lacks certain terms essential to

proper contract formation.” Rezapour v. Earthlog Equity Group, Inc., 2013 U.S. Dist.

LEXIS 92124, at *11 (W.D.N.C. July 1, 2013) (citing Ultra Innovations, Inc. v. Food

Lion, Inc., 130 N.C. App. 315, 317–18 (1998)).

42. Although invisible on the page, the implied covenant of good faith and

fair dealing is an essential component of a contract. It is the foundation upon which

the agreement is built. It is a material term. See Weyerhaeuser Co., 40 N.C. App. at

746 (“Good faith and fair dealing are required of all parties to a contract; and each
party to a contract has the duty to do everything that the contract presupposes that

he will do to accomplish its purpose.” (citing 17A C.J.S. Contracts § 451, at 564

(1963))). 9

43. Accordingly, if the covenant of good faith and fair dealing was violated

by IOMAXIS and Buhr’s alleged refusal to provide information necessary to value the

Decedent’s interest, a material breach occurred, 10 and the anti-assignment provision

in Section 8.1 of the Operating Agreement (prohibiting transfers without the “prior

written consent of a Majority in Interest of the Disinterested Members”) would no

longer control. (OA § 8.1.) See, e.g., Millis Constr. Co. v. Fairfield Sapphire Valley,

Inc., 86 N.C. App. 506, 512 (1987) (“The general rule governing bilateral contracts

requires that if either party commits a material breach of the contract, the other party

should be excused from the obligation to further perform.”). In that event, the Estate

would be free to transfer its interest to the Trust without consent of the members.

44. The third scenario doesn’t depend on the Members’ option at all.

Amended Section 9.5 requires the Estate to initiate the Buy-Sell by naming its price,

without any mention of the option (“The withdrawing Member shall offer to sell its

9 After complaining that they, too, have been deprived of necessary information, Plaintiffs

reference the duty of good faith and fair dealing in their Third Claim for Relief: “Defendants
IOMAXIS and Buhr have a duty and obligation to act in good faith and fair dealing with
regard to Plaintiffs and their requests for the business, financial and valuation information
necessary for the buy-sell event under the Operating Agreement and in order to file an
accurate estate tax return.” (Am. Compl. ¶ 96.)

10 Implied covenant claims need not be paired with a breach of the express provisions of a

contract to be actionable in North Carolina. See, e.g., Richardson v. Bank of Am., N.A., 182
N.C. App. 531, 556 (2007); TAC Invs., LLC v. Rodgers, 2020 NCBC LEXIS 143, at **15 (N.C.
Super. Ct. Dec. 7, 2020); Vitaform, Inc. v. Aeroflow, Inc., 2020 NCBC LEXIS 132, at *13 (N.C.
Super. Ct. Nov. 4, 2020).
interest to the remaining Members[.]”). As with the second scenario above, if the

Estate was stymied by its inability to get the financial information necessary to make

its offer and the spirit of the agreement was violated, the Estate would be relieved of

restrictions on a transfer to the Trust.

45. Considering the totality of the allegations in the Amended Complaint

and the standard upon which the Court conducts its review for Rule 12(b)(6)

purposes, the Court determines that the allegations presented in the Amended

Complaint are sufficient to establish that the Trust has standing. While it is true

that the allegations as to which scenario led to the transfer are not made explicit, in

any of the three possible scenarios described above, the Trust becomes a transferee

of an interest in IOMAXIS, giving it standing. See Ford v. Peaches Entm’t Corp., 83

N.C. App. 155, 156 (1986) (the facts and permissible inferences set forth in the

Amended Complaint are to be treated in a light most favorable to the nonmoving

party); Pyco Supply Co., Inc. v. Am. Centennial Ins. Co., 321 N.C. 435, 443 (1988)

(denying a party his day in court because of his “imprecision with the pen” would

“elevate form over substance” and run “contrary to the purpose and intent of notice

pleading and the modern rules of civil procedure”).

B. Specific Performance of the Buy-Sell

46. The IOMAXIS Defendants next argue that Plaintiffs have not alleged a

claim on behalf of the Trust that would support their request for an order enforcing

the Buy-Sell provisions of the Operating Agreement. Specifically, the IOMAXIS

Defendants argue: (a) that the Trust has not alleged a breach of the Buy-Sell
provisions; (b) that the Trust has not alleged “definite and certain” obligations that

the Buy-Sell provisions impose on any of the IOMAXIS Defendants that could be the

subject of an order; and (c) harkening to its first argument, that the Trust has no

contractual right to compel the members to opt to purchase, thereby triggering the

Buy-Sell provisions. (Defs’ Br. 9–10.)

47. Plaintiffs respond that they have alleged a breach of the Buy-Sell

provisions in the Operating Agreement, as evidenced by the fact that the Decedent’s

interest has not been redeemed, and the appraisal process has not been followed. 11

48. “The remedy of specific performance is available to compel a party to do

precisely what he ought to have done without being coerced by the court.” Munchak

Corp. v. Caldwell, 301 N.C. 689, 694 (1981) (internal quotation marks omitted). “To

receive specific performance, the law requires the moving party to prove that (i) the

remedy at law is inadequate, (ii) the obligor can perform, and (iii) the obligee has

performed [her] obligations.” Reeder v. Carter, 226 N.C. App. 270, 275 (2013) (cleaned

up). Damages must be inadequate. See Whalehead Properties v. Coastland Corp.,

299 N.C. 270, 282 (1980).

49. Generally, “specific performance of a contract is decreed only when it is

equitable to do so.” Hutchins v. Honeycutt, 286 N.C. 314, 318 (1974). “The party

claiming the right to specific performance must show the existence of a valid contract,

its terms, and either full performance on his part or that he is ready, willing and able

11 Plaintiffs refer to Section 9.6 of the Operating Agreement, but that provision deals with

the closing of any purchase, not the value of the interest. The valuation provision is Section
9.5. (Compare OA § 9.5, with OA § 9.6.) That provision was amended in 2004 and no longer
requires the appraisal process described by Plaintiffs in their brief. (See Am. Compl. Ex. F.)
to perform.” Munchak, 301 N.C. at 694 (citing 71 Am. Jur. 2d “Specific Performance,”

§ 207 (1973)). “Specific performance will not be decreed unless the terms of the

contract are so definite and certain that the acts to be performed can be ascertained

and the court can determine whether or not the performance rendered is in accord

with the contractual duty assumed.” N.C. Med. Soc’y v. N.C. Bd. of Nursing, 169 N.C.

App. 1, 12 (2005) (quoting 12 Arthur L. Corbin, Corbin on Contracts § 1174, at 335

(2002)).

50. Here, the Court agrees with the IOMAXIS Defendants that Plaintiffs

cannot force the members to exercise the purchase option that was available to them

pursuant to Article IX following Decedent’s death. However, as discussed above, the

amended Section 9.5 does not require such an election as a precondition to the

valuation process. Indeed, Section 9.5 mandates that the Estate “shall” offer to sell

its interest to the “remaining Members” without referencing the option or even

narrowing the members to the “purchasing members.” (OA § 9.5.) Read this way, it

is the Estate that must initiate the Buy-Sell, and the Buy-Sell process occurs

regardless of whether the remaining members elect their option.

51. On the other hand, if consideration of the members’ option is not

necessary to trigger valuation of the interest, then the language of Section 9.9

(limiting transfer of the interest to a decision of the members not to elect the option)

is inconsistent. Moreover, Section 9.5 contemplates a transaction that is limited to

the Estate and the members. However, Sections 9.3 and 9.9 contemplate the

potential for a transfer to “any Person.” There is obvious discordance.
52. The Court determines, then, that the Operating Agreement with its

amended Section 9.5 is internally inconsistent, creating an ambiguity in this contract.

Plaintiffs have pled that a breach occurred when IOMAXIS and Buhr allegedly did

not provide the Estate (and now the Trust) the financial information necessary to

value Decedent’s interest in IOMAXIS. Plaintiffs have also pled that they require

information, and that legal remedies are insufficient.

53. Therefore, it is not for the Court, at this early stage and based on this

record, to rule out an interpretation of the Operating Agreement that would support

Plaintiffs’ demand for specific performance. See Dockery v. Quality Plastic Custom

Molding, Inc., 144 N.C. App. 419, 422 (2001) (“Ambiguity exists where the contract’s

language is reasonably susceptible to either of the interpretations asserted by the

parties.”); WakeMed v. Surgical Care Affiliates, LLC, 243 N.C. App. 820, 827 (2015)

(“interpretation of an ambiguous contract is best left to the trier of fact”).

54. Accordingly, the Court DENIES the IOMAXIS Defendants’ request that

it enter an order at this stage precluding the remedy of specific performance.

C. Equitable Accounting

55. The IOMAXIS Defendants also move to dismiss Plaintiffs’ demand for

an accounting. They argue that the Trust has not asserted a claim that would support

an accounting, and even if it has such a claim, the Trust has not alleged that it lacks

an adequate remedy at law. The IOMAXIS Defendants further argue that neither

Chapter 57D nor the operating agreement provides Plaintiffs with information rights.

Lastly, to the extent the Estate alleges that it requires the information to file its tax
returns, the IOMAXIS Defendants contend that the Estate is not a party to this

lawsuit and therefore has no standing to seek such a remedy. (Defs’ Br. 10–12.)

56. Plaintiffs respond that the need for an equitable accounting arises out

of the Defendants’ breach of the Operating Agreement. 12 They read the Operating

Agreement, with its amendment, to require a valuation of the economic interest, and

they argue that Defendants have thwarted their efforts to obtain the information

necessary for a reliable appraisal. (Pls’ Br. 10.)

57. While styled as a “claim,” the Plaintiffs’ request is better fashioned as a

demand for the remedy of an equitable accounting. See Gottfried v. Covington, 2014

NCBC LEXIS 26, at **16–17 (N.C. Super. Ct. June 25, 2014). Such a remedy, which

most often results when there is a breach of a fiduciary duty, is distinct from an

interest holder’s information rights afforded by statute or operating agreement.

Compare Burgess v. Burgess, 205 N.C. App. 325, 333 (2010) (“An accounting is an

equitable remedy sometimes pled in claims of breach of fiduciary duty”), with

N.C.G.S. § 57D-3-04 (statutory information rights).

58. The scope and depth of the remedy of equitable accounting depends on

the nature of the harm and the information necessary to remedy that harm. An

equitable accounting can be specific and deep, or it can be general and cover a breadth

of information. It can be as simple as an order to produce records, or it can involve

an extensive audit by a neutral third-party. Fashioning the appropriate remedy

12The Trust further alleges that it is unable to discharge its fiduciary obligations to its
beneficiaries without knowing the value of the asset it holds. (Am. Compl. ¶ 92.)
depends on the circumstances and is in the equitable powers of the Court. See, e.g.,

Alkemal Sing. Private Ltd. v. Dew Glob. Fin., LLC, 2018 NCBC LEXIS 36, at **52–

53 (N.C. Super. Ct. Apr. 19, 2018) (“The remedy of an equitable accounting may be

available when a plaintiff has asserted a valid claim for relief in equity and an

accounting is necessary to compel discovery of information regarding accounts held

exclusively by the defendant.”) (quoting Mkt. Choice, Inc. v. New England Coffee Co.,

2009 U.S. Dist. LEXIS 73627, at *35–36 (W.D.N.C. Aug. 18, 2009) (applying North

Carolina law); Watson v. Fulk, 19 N.C. App. 377, 380 (1973) (“The appropriate method

for determining the exact amount which may be due the plaintiff, if anything, is to

require the defendant, who is in possession of the essential information, to render an

accounting.”).

59. There must be a claim to support such a remedy, however. The Court

concludes, based on a review of the Amended Complaint in its entirety, that

Plaintiffs have asserted one or more such causes of action. Moreover, they have

asserted that it is information they require, not a remedy at law. Gottfried, 2014

NCBC LEXIS 26, at **16 (pleadings must allege that plaintiff lacks adequate

remedy at law).

60. Nevertheless, the Court holds that it is premature to determine whether

an equitable accounting would be an appropriate remedy in this case. 13 Cf.

Brakebush Bros., Inc. v. Certain Underwriters at Lloyd’s of London, 2021 NCBC

LEXIS 98, at **41 (N.C. Super. Ct. Nov. 1, 2021) (too early to decide on Rule 12(b)(6)

13 In some circumstances, a plaintiff may obtain the information needed to assess a claim for

damages through discovery. See, e.g., Gottfried, 2014 NCBC LEXIS 26, at **16–17.
motion whether Plaintiff would be entitled to recover consequential damages if it

ultimately prevailed); Fleming v. Horner, 2021 NCBC LEXIS 33, at *23 (N.C. Super.

Ct. April 1, 2021) (too early at Rule 12(b)(6) stage to decide whether to dismiss

punitive damages request); Aldridge v. Metro. Life Ins. Co., 2019 NCBC LEXIS 116,

at *145–46 (N.C. Super. Ct. Dec. 31, 2019) (denying a motion to dismiss to the extent

that punitive damages were sought as a remedy).

61. Accordingly, the IOMAXIS Defendants’ Motion to Dismiss the Trust’s

“claim” for equitable accounting, to the extent it is a demand for relief, is DENIED.

62. Finally, it is undisputed that the Estate is not a party to this action and

has no standing to assert a demand for relief. Therefore, the IOMAXIS Defendants’

Motion to Dismiss any demand on the part of the Estate itself for an equitable

accounting is GRANTED.

D. The Individual Defendants

63. With respect to Plaintiffs’ first three claims (declaratory judgment,

breach of the right to receive interim distributions, and accounting) Buhr, Spade,

Griffin, and Burleson (the “Individual IOMAXIS Defendants”) each move to dismiss

the claims “[t]o the extent that the Trust seeks monetary damages” from them

because the Trust has not asserted a claim for personal liability against any of them.

(Defs’ Br. 10.)

64. Plaintiffs respond that the Individual IOMAXIS Defendants have

mischaracterized the Amended Complaint. They assert that the individuals are

included in this declaratory judgment action “as a matter of statutory requirement
per N.C. Gen. Stat. § 1-253 et seq.” and only “to the extent that they have any claim

or interest in IOMAXIS, or any distributions by IOMAXIS, that would be affected by

this declaratory judgment action or any claims asserted herein.” (Pls’ Br. 9.)

65. By statute, “When declaratory relief is sought, all persons shall be made

parties who have or claim any interest which would be affected by the declaration,

and no declaration shall prejudice the rights of persons not parties to the

proceedings.” N.C.G.S. § 1-260.

66. Accordingly, the Court determines that, as to Plaintiffs’ first three

claims for relief, the individual defendants have been named because Plaintiffs seek

a declaratory judgment that could impact the individual defendants’ interests in, and

distributions from, IOMAXIS. To the extent that the Motion of Defendants Buhr,

Spade, and Griffin 14 is intended to clarify that no other relief is sought from them

individually on the first three claims, the Motion is GRANTED.

67. In making this determination, the Court does not address the viability

of Plaintiffs’ Fourth (fraud) and Fifth (Uniform Voidable Transaction Act) Claims for

Relief with respect to any defendant. Given the pendency of the IOMAXIS

Defendants’ appeal to the Supreme Court of North Carolina, this Court has stayed

all proceedings with respect to those claims and their accompanying demands. (See

Order Mot. Sever and Stay, ECF No. 283.)

14 The Court does not address the Motion as to Burleson because it is stated in the alternative

to Burleson’s motion to dismiss for lack of in personam jurisdiction. The latter motion is
stayed pending resolution of the IOMAXIS Defendants’ appeal of this Court’s earlier order.
(See ECF Nos. 198, 283.)
IV. CONCLUSION

68. WHEREFORE, the Court hereby ORDERS that the IOMAXIS

Defendants’ Consolidated Motion to Dismiss the Trust’s First Amended Complaint is

GRANTED in part, DENIED in part, and STAYED in part, as follows:

a. The IOMAXIS Defendants’ Motion to Dismiss the Trust’s

claims on the basis that the Trust lacks standing is DENIED.

b. The IOMAXIS Defendants’ Motion to Dismiss the Estate’s

demands for relief on the basis that the Estate lacks standing

is GRANTED, without prejudice.

c. The IOMAXIS Defendants’ Motion to Dismiss the Trust’s

demands for specific performance and for equitable accounting

is DENIED.

d. Except as to Burleson, the Individual IOMAXIS Defendants’

Motion to Dismiss is GRANTED with prejudice to the extent

Plaintiffs seek relief beyond that afforded by the Declaratory

Judgment Act. As to Burleson, this Motion is STAYED.

e. A determination of Burleson’s Motion to Dismiss pursuant to

Rule 12(b)(6), stated in the alternative to his Motion to

Dismiss pursuant to Rule 12(b)(2), is STAYED.

f. A determination of the balance of the IOMAXIS Defendants’

Motion to Dismiss is STAYED pending resolution of the
IOMAXIS Defendants’ appeal of this Court’s Order, (ECF No.

198).

g. The parties shall meet and confer and submit a new Case

Management Report to the Court pursuant to Business Court

Rule 9 by 5:00 P.M. on or before 5 January 2023.

IT IS SO ORDERED, this the 5th day of December, 2022.

/s/ Julianna Theall Earp
Julianna Theall Earp
Special Superior Court Judge
for Complex Business Cases