A dispute between co-owners of a trampoline park in Asheville came before the Business Court, appropriately enough, on defendants’ motion to bounce plaintiffs’ claims regarding misappropriation of funds.  In Bivins v. Pacheco, 2023 NCBC 40, two couples who together owned and operated the park came to dispute upon plaintiffs’ discovery of “financial irregularities” allegedly tied to defendant Jennifer Pacheco’s work as bookkeeper for the enterprise.

A key task for the Court was deciding initial statute of limitations questions which revolved around when the alleged improprieties were discovered by the defendants. Ordinarily, the Court noted, that task is “a question reserved for the fact-finder.” ¶ 30 (citing Forbis v. Neal, 361 N.C. 519, 524 (2007). But Judge Earp noted that dismissal can still be appropriate if commended by facts on the face of the complaint.

The alleged improper transfers of funds occurred between 2015 and 2019.  Plaintiffs asserted that “[i]vestigation has shown” Pacheco “secreted thousands of dollars of money from both companies.” But the amended complaint was silent “regarding when they conducted the investigation and made the discovery.” ¶¶ 31-32. Thus, the Court had to decide how to apply those critical, missing facts to a series of statutory and case law standards that tie claim accrual to its “discovery,” whether by a “knew or should have known” standard, “actual” discovery, or when discovery should have occurred “in the exercise of due diligence.”

The Business Court held, at least at a Rule 12(b)(6) stage, that silence was golden (¶ 32):

“[O]ur Court of Appeals has held that a plaintiff’s silence with respect to the facts necessary to determine the date of discovery is not a sufficient basis for dismissal.”

Russell v. Adams, 125 N.C. App. 637, 641 (1997).  Judge Earp noted that in Russell, then Court of Appeals Judge Wynn concurred, but disagreed with the notion that a plaintiff need not plead “facts sufficient to show” when the applicable “discovery” standard was met. In considering the “becomes apparent or ought reasonably to have become apparent” standard of N.C.G.S. § 1-52(16), Judge Wynn wrote that, “Since the discovery rule . . .  provides that the cause of action will not accrue until this time, the complaint should indicate the time the injury occurred or reasonably manifested itself to plaintiff.” Id. at 642.

Standing

The Court also considered a challenge to plaintiffs’ standing to bring several of their claims as a “direct” action. The Court noted the general rule “that shareholders may not bring individual actions to recover what they consider to be their portion of the damages suffered by a corporation.” Barger v. McCoy Hillard & Parks, 346 N.C. 650, 658 (1997). Judge Earp weighed the Barger exceptions where direct shareholder claims are permitted when a “special duty” is owed or where the injury is “separate and distinct” from those suffered by other LLC members.

The Court rejected several breach claims that equally impacted the LLC’s members as plainly derivative and unavailable to the individual members. A couple of the surviving “direct” claims are worthy of note. First, plaintiffs adequately alleged a direct claim for a distinct injury where a breach was based on a specific contractual opportunity allegedly denied them to purchase the shares of Pacheco’s ex-spouse. Second, the complaint counts that sought a declaration of plaintiffs’ rights under the contract survived because “parties to an operating agreement have standing to seek an interpretation of its terms.” Bivins, ¶¶ 22-23 (citing Epic Chophouse, LLC v. Morasso 2019 WL 4166626 (N.C. Super. Ct. Sept. 3, 2019), N.C.G.S. 1-254).

Rule 9(b) Particularity

In support of their fraud claims, plaintiffs relied on information contained in redacted checks, credit card statements and a ledger attached as exhibits. The Court measured that information against Rule 9(b)’s standard requiring particular allegations of “the time, place and contents of the fraudulent representation, the identify of the person making the representation and what was obtained by the fraudulent acts or representations.” Focusing on the relevant dates of the alleged statements, the Court rejected those claims that relied on undated exhibits. Id. ¶¶ 39-40.

Takeaways

• The Business Court regularly upholds a broad leeway under North Carolina’s system of “notice” pleading afforded to plaintiffs in making defendants aware of the claims they must defend. Silence as to when “discovery” of injuries for claim accrual happens is a special breed of that leeway, but, apparently, occasionally a useful pleading tool (intentional or otherwise).

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