This Newsletter (Number 9) is the first time that I have had to split up the monthly Opinions from the court into three separate postings. I had written the first two summaries below to be included in the last Newsletter, but I ran out of room. I am not anticipating the same problem next month, as the Court only handed down four Opinions in the month of May.

In the Opinion in Exela Pharma Scis., LLC v. REI Automation, Inc., 2026 NCBC 30 (Conrad, J.), the Business Court addressed an interesting question of the requirement that fraud be pleaded with particularity. The case was at the summary judgment stage, beyond the point where fraud claims not pleaded with particularity are ordinarily dismissed, pursuant to Rule 12(b)(6).

Plaintiff’s counsel argued that “insufficient particularity in the complaint is not a valid basis for summary judgment.” Op. ¶18. Judge Conrad, in a pithy writing style that I am becoming increasingly fond of, posed the “threshold question” as this: “is summary judgment appropriate if a complaint does not state a claim for fraud with particularity?” Op.¶19.

The answer was a resounding yes. he said that:

[a]ppellate precedent is crystal clear on this point. A complaint must allege fraud “with particularity,” and “[i]f it does not, summary judgment is proper.”

Op. ¶20 (quoting Trull v. Cent. Carolina Bank & Tr. Co., 117 N.C. App. 220, 224 (1994))(empasis added)

From there, Judge Conrad turned to a scalpel like dissection of whether the claims had been pleaded with particularity.

To set the stage for you for the nature of the fraud claims, Plaintiff Exela, a pharmaceutical manufacturer, had contracted with Defendant REI for the development of an intravenous bag filling system.

During preliminary discussions, Defendant represented that it was building a similar system for another company. When it tendered its proposal, it touted its ““ability to develop elegant, robust automation system designs” Op. ¶6.

The project failed. After an investment of $3 million by the Plaintiff. Plaintiff claimed that the defendant lacked the necessary expertise to take on the project. Its fraud claim was essentially that:

[Defendant] REI ‘knew that it lacked the expertise to fabricate’ the bag filler system ‘in a timely manner and actively concealed . . . that it had never manufactured such products before.’

Op. ¶8.

Plaintiff’s claims were for both fraud and fraudulent concealment. The essential elements of each claim are different.

Pleading Fraud vs. Pleading Fraudulent Concealment

Fraud has five “essential elements”: (a) a false representation or concealment of a material fact, (b) calculated to deceive, (c) made with intent to deceive, (d) that did in fact deceive, and (e) that resulted in damage to the injured party. Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 17 (1992). The plaintiff must show not only that it actually relied on the misrepresentation or omission but also that its reliance was reasonable. Op. ¶14.

For fraudulent concealment, the plaintiff must allege with particularity:

(1) the relationship between plaintiff and defendant giving rise to the duty to speak; (2) the event or events triggering the duty to speak and/or the general time period over which the relationship arose and the fraudulent conduct occurred; (3) the general content of the information that was withheld and the reason for its materiality; (4) the identity of those under a duty who failed to make such disclosures; (5) what the defendant gained by withholding information; (6) why plaintiff’s reliance on the omission was both reasonable and detrimental; and (7) the damages proximately flowing from such reliance.

Op. ¶16 (emphasis added).

Slicing and dicing the fraudulent concealment claim, Judge Conrad said that:

the complaint does not allege, even in a conclusory way, that REI had a duty to speak. Nor does it allege facts that might give rise to a duty to speak, such as affirmative acts of concealment. This is a glaring defect, especially so given the usual rule that parties negotiating a commercial transaction at arm’s-length have no duty of disclosure.

Op. ¶22 (emphasis added).

Judge Conrad also shredded the allegations of fraudulent misrepresentation. He said this:

Consider, first, the allegation that REI misrepresented its “design and manufacturing expertise” in the proposal. (Compl. ¶ 6.) What did REI say about its expertise? The complaint provides no detail. As our Supreme Court has made clear, “[t]here is a requirement of specificity as to the element of a representation made by the alleged defrauder.” Rowan Cnty. Bd. of Educ., 332 N.C. at 17. Were it otherwise, courts could not distinguish “mere puffing” and other nonactionable statements from true “misrepresentation of material facts.” Id. The complaint’s vague allegation that REI misrepresented its expertise is not “definite and specific” and therefore cannot support a fraud claim.

Op. ¶24 (emphasis added).

Plaintiff Couldn’t Cure its Pleading Deficiencies after the Fact

Plaintiff tried to offer a new theory in support of its fraud claims. It pointed to more specific misrepresentations made in a slide deck presented by the Defendant in support of its proposal years before. Judge Conrad was having none of this change of course. He said that “the Court will not entertain a novel theory presented for the first time at summary judgment.” Op. ¶25 (emphasis added).

An Unfulfilled Promise is not Actionable Fraud

Judge Conrad also shut down plaintiff’s last remaining allegation of fraud. That was that the defendant had “promised that it could finish the job ‘in several months.’”

The judge observed that “[a]n unfulfilled promise is not actionable fraud . . . unless the promisor had no intention of carrying it out at the time of the promise.” Op. ¶26 (quoting McKinnon v. CV Indus., Inc., 213 N.C. App. 328, 338 (2011)).

You all probably know that Judge A. Todd Brown Retired from the Business Court effective March 3, 2026. He was succeeded by A. Graham Shirley. Judge Shirley, with 10 years of experience as a Superior Court Judge elected from Wake County, was appointed to the Business Court by Chief Justice Newby to take Judge Brown’s position effective March 4, 2026.

The Opinion in Cadieu Tree Experts, Inc. v. Wiedner, 2026 NCBC 35 is Judge Shirley’s first written Opinion for the Business Court. The Cadieu case did not call upon Judge Shirley to issue any groundbreaking pronouncements of North Carolina corporate law, but it has some interesting bits to write about anyway.

Notice Pleading

First and foremost, Judge Shirley displayed himself as a true believer in notice pleading. In dealing with Plaintiffs’ Motion to Dismiss, he said that “North Carolina remains a notice-pleading state.” Op. ¶26 (emphasis added). If you need a reminder of what that means, Rule 8 of the North Carolina Rules of Civil Procedure provides that “[a] pleading which sets forth a claim for relief, whether an original claim, counterclaim, crossclaim, or third-party claim shall contain (1) A short and plain statement of the claim sufficiently particular to give the court and the parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved showing that the pleader is entitled to relief.” See Op. ¶26 (emphasis added).

I have been a little concerned lately about the Business Court’s adherence to the liberal pleading standard of NCRCP 8. There was a spate of Opinions from the Court this year involving dismissals for what the Court saw as inadequate specificity in pleading. To be fair, those decisions mostly involved claims which require require more particularity in the pleading by statute or by Rule.

Plaintiff, Cadieu Tree Experts, is suing defendants Stephanie Wiedner and Dain Wiedener for allegedly embezzling money from the Cadieu company. In her Answer and Third Party Complaint, Defendant Stephanie Wiedner fired back with claims that the supposedly embezzled funds were actually repayments she had been authorized by the Cadieus themselves to make to herself for funding the operations of Cadieu via her personal credit cards.

Defendant Stephanie Wiedner, denying the allegations of embezzlement, made counterclaims for unpaid compensation against the Cadieu company and added three additional principals of the Company (three more Cadieus — David, Luke, and Jake) as Third-Party Defendants.

Joinder of the Additional Third Party Defendants

Rule 13(h) of the North Carolina Rules of Civil Procedure permits additional parties to be brought into an action. It states that:

Additional parties may be brought in. – When the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or crossclaim, the court shall order them to be brought in as defendants as provided in these rules, if jurisdiction of them can be obtained.

NCRCP 13(h).

The Third-Party Defendants contended that a court order was necessary before they could be added as additional defendants. Judge Shirley disagreed, relying upon a previous Business Court decision, Constr. Managers, Inc. of Goldsboro v. Amory, 2019 NCBC 72 (N.C. Super. Ct., Oct. 14, 2019). Op. ¶34.

Judge Shirley on Lis Pendens

I think that we spent all of ten minutes in the first year of law school (in Property class, maybe?) sitting silently listening to a lecture on the subject of lis pendens. If you snoozed through that ten minutes, a Notice of lis pendens is a public notice filed with a County Register of Deeds warning that the property which is the subject of the lis pendens is involved in a lawsuit that could affect its title, ownership, or possession. It is permitted by N.C. Gen. Stat. sec. 1-116.

The Plaintiffs in Cadieu filed a notice of Lis pendens affecting title to the property owned by two of the Defendants, Stephanie and Dain Wiedner. The effect of that Notice was to block the access by those Defendants to a line of credit secured by the property involved.

The affected Defendants alleged that the lis pendens was filed to injure and harass them, and to jeopardize their access to the line of credit to which they needed access to defend the lawsuit.

Is there a claim for a wrongfully filed Notice of lis pendens? The short answer is “yes.” “North Carolina courts have consistently recognized that a party who files a lis pendens for improper purposes “must be liable for the legal consequences.” Op. ¶47. These Defendants did not couch their claim as such, but instead made a claim for slander of title. To make out such a claim, the claimant “must allege: “(1) the uttering of slanderous words in regard to the title of someone’s property; (2) the falsity of the words; (3) malice; and (4) special damages.” Op. ¶45 (quoting Broughton v. McClatchy Newspapers. Inc., 161 N.C. App. 20, 30 (2003); Hill v. Ewing, 296 N.C. App. 624, 629 (2024))

Filing a lis pendens “can constitute the utterance of slanderous words.” Op. ¶45. Judge Shirley concluded that the Defendants had alleged properly all the elements of such a claim.

Claims Involving A Charlotte Observer Newspaper Article

The Wiedners also brought counterclaims for negligent and intentional infliction of emotional distress, and also claims against one of the third-party defendants. The emotional distress claims revolved around an article that had appeared in the Charlotte Observer about the lawsuit. The headline of the article said that “Charlotte couple stole over $4M from wife’s employer to fuel lavish lifestyle, lawsuit says.” The Wiedners claimed that the parties had “caused” the article to appear in the paper and contended that the “public humiliation and reputational damage based on false claims” amounted to the extreme and outrageous conduct necessary to make out an emotional distress claim. Op. ¶50.

Judge Shirley rejected that claim pretty quickly. He said first that the allegations made in the Complaint were protected by absolute privilege. Op. ¶51. He went on to accept the argument of the responding parties that allowing an emotional distress claim "based on a news organizations reporting of absolutely privilege statements would open a ‘back door’ to defamation, slander, IIED and NIED claims that result from the actions of third parties like news organizations.” Op. ¶51.

Judge Shirley did not stop there in stating the reasons why the emotional distress claims should be dismissed. He said that the negligent infliction of emotional distress claim required the Wiedners to allege that a duty owed to them had been breached by the Plaintiffs and that the failure to allege such a duty was fatal to their claim. Op. ¶52. He also observed that the conduct being alleged by the Wiedners was intentional conduct, which could not satisfy the negligence element of an NIED claim.

The emotional distress claims furthermore did not allege facts that support the existence of actual severe emotional distress. That is a high standard. All that the Wiedners had claimed was that the conduct had "in fact, cause[d] severe emotional distress.” A party making that sort of claim must “must allege severe emotional distress, which has been defined as ‘any emotional or mental disorder, such as, for example, neurosis, psychosis, chronic depression, phobia, or any other type of severe and disabling emotional or mental condition which may be generally recognized and diagnosed by professionals trained to do so.’” Id. Failure to do so mandates dismissal of the claim. Op. ¶54. The Wiedners alleged none of that.

Judge Shirley did not stop there in stating the reasons why the emotional distress claims should be dismissed. He said that the negligent infliction of emotional distress claim required the Wiedners to allege that a duty owed to them had been breached by the Plaintiffs and that the failure to allege such a duty was fatal to their claim. Op. ¶52. He also observed that the conduct being alleged by the Wiedners was intentional conduct, which could not satisfy the negligence elements of an NIED claim.

Let me close out this discussion by saying that I don't think that claims for negligent infliction of emotional distress or intentional infliction of emotional distress belong in the Business Court. I'm sorry that Judge Shirley had to devote so much of his debut Opinion for the Business Court to the subject.

I don't know what possessed either the Plaintiffs or the Defendant to file their Motions for Summary Judgment in Bronson v. Burnham, 2026 NCBC 45 (Davis, J.). Just a quick skim of the 41 page Opinion shows that there was a huge gulf between each side’s interpretation of the facts and a resulting host of genuine issues of material fact barring any hope of summary judgment for either side.

This was a derivative action. All parties were members of two separate limited liability companies. The parties even disputed their respective ownership interests in the principal LLC involved in the litigation. Plaintiffs contended that the Defendant had misappropriated company assets and engaged in conflict-of-interest Transactions to the detriment of one of the LLCs (Lafayette Village Pub, LLC [the “Pub”]).

Further confounding the situation, there was no Operating Agreement for the Pub or the other LLC. Given that there was no writing concerning the operation of the companies, "the default provisions of the LLC act govern[ed] the management of the companies.” Op. ¶43. Therefore, all three of the parties were managers of the entities and had “equal rights to participate in the management of the LLC[s] and their businesses. Op. ¶43 (relying on N.C. Gen. Stat. §57D-3-20(b).

As lawyers from Fox Rothschild pointed out in discussing this case in their It's Just Business blog about the North Carolina Business Court, a Judge can only do so much to protect members of an LLC from their failure to implement an Operating Agreement as the foundation of their business relationship.

Business Judgment Rule Defense

it may be that the only ground in support of his Motion for Summary Judgment in which the Defendant really had faith was his argument that his actions were protected by the business judgment rule. That meant essentially “even if I did what you say I did," I’m, not liable for it because of the business judgment rule.

As judge Davis put it:

[i]n North Carolina, the business judgment rule creates, first, an evidentiary presumption that in making a decision, the managers acted on an informed basis and in good faith in the honest belief that their decision was in the best interest of the LLC, and second, absent rebuttal of the initial presumption, the rule creates a powerful substantive presumption that a decision by a loyal and informed manager will not be overturned by a court unless it cannot be attributed to any rational business purpose.

Op. ¶79 (quoting Emrich Enters., LLC v. Hornwood, Inc., 2022 NCBC 11).

Defendant Bronson may well have believed that his actions were taken in good faith and in the best interests of the LLC, but Judge Davis ruled that this was a question of fact for the jury. Op. ¶84.

What About Damages?

Not yet done with his efforts to obtain summary judgment, Bronson argued that the LLC had not suffered any actual injury as a result of his actions. Judge Davis ruled against him on this argument as well, stating that even though the record was unclear as to the precise amount of damages suffered by the LLC that this type of precision was not required in a breach of fiduciary duty claim at the summary judgment stage. Op. ¶86.

Furthermore, Judge Davis said that requirement of “injury” for a breach of fiduciary duty claim was not very high. He said that even the potential liability for nominal damages was sufficient to establish the validity of such a claim. Op. ¶84.

That’s it for the Opinions of April 2026. Coming next: all of the Orders of Significance of April 2026.