I did not front end load Part I of the Newsletter on the March 2026 Opinions from the Business Court with the interesting to write about Opinions.

This edition contains a number of Opinions I enjoyed writing about. Those include: Treece v. Advisors Excel, LLC, 2026 NCBC 26 (Conrad, J.), (which makes important points about how to properly plead a trade secrets claim in the Business Court); Stansell v. LoRusso, 2026 NCBC 24 (Conrad, J. (which involved a particularly despicable plaintiff who ended up getting his financial comeuppance); Britcher v. Assurance Group, LLC, 2026 NCBC 29 (Davis, J.)(a Civil Procedure lesson on compulsory counterclaims); Stoutt v. Perez Duran, 2026 NCBC 27 (Conrad, J.).(a case about a “dirt business”?!); Hart v. DWM Advisors, LLC, 2026 NCBC 28 (Houston, J.)(a case highlighting the steps that must be taken between an entry of default and the entry of a default judgment); and PCS Phosphate Co. v. Jacobs Eng’g Grp., Inc., 2026 NCBC 21 (Houston, J.)(a lesson in the need for precision in contract drafting and the importance of avoiding “group pleading.”)

The next edition of this Newsletter will focus on the Orders of Significance from March 2026. I don't plan to write about all of those Orders, but only the ones that are of interest to me and I think that will be of interest or value to you.

Thanks again for reading. Remember you can communicate with me through [email protected]. It would be nice to hear from any of you. The silence so far has been deafening.

if you practice regularly in the business Court, you know that trade secrets claims must be pled with particularity. The judges of the Business Court are particularly scrupulous about this.

Last month, in Treece v. Advisors Excel, LLC, 2026 NCBC 26 (Conrad, J.), Judge Conrad ripped apart an attempted trade secrets complaint for its lack of particularity.

Plaintiff Treece said he had negotiated the sale of his company through one of the Defendant’s platforms. Plaintiff did not specify the nature of his business. He alleged that he had sold his business and its related client list for what he'd contended was "far less than its true value.” Op. ¶11. He claimed that loss in his expected sale price was due to the defendant's failure to protect his customer list, which he said was a trade secret which he claimed to “protect vigilantly.” Op. ¶12.

Plaintiff said that he knew that his claimed trade secret had been released into the wild because he had been approached by a nonparty (a person named Tolley) who displayed Plaintiff's full client list to him on the nonparty’s laptop. All that plaintiff alleged in its complaint regarding Tolley was that he was not employed by or an owner of the Defendant and that he "never would have had access to Plaintiff's clients.” Op. ¶9.

As for how this Tolley had gained access to the secret list, plaintiff only alleged conclusorily that Tolley “knew ‘key employees at Advisors Excel’ and, in turn, passively assert[ed] that Tolley ‘was improperly given the Client List.’ Op. ¶10

Plaintiff did not specify who he believe[d] who had provided the list to Tolley and instead conclusorily assert[ed] that Tolley “could have been one of many” people to whom his client list was purportedly disclosed. Id.

After reciting those skimpy fact regarding the misappropriation claim, Judge Conrad observed that a trade secrets “complaint must ‘set forth with sufficient specificity the acts by which the alleged misappropriation occurred.’ Op. ¶22.

He also said that a “complaint that makes general allegations in sweeping and conclusory statements, without specifically identifying the trade secrets allegedly misappropriated, is insufficient to state a claim for misappropriation of trade secrets.” Op. ¶23.

He also took Plaintiff to task for failing to make allegations “of reasonable efforts to maintain secrecy" for the alleged trade secrets. Op. ¶26. Plaintiff said that he had "protected [the list] vigilantly,“ but he had offered no facts describing how he did so.

Even plaintiff's allegations that the client list was a "trade secret” were wanting in specificity. Simply calling something a trade secret isn't enough to make out a viable claim under the North Carolina Trade Secret Protection Act.

What's the takeaway from this Opinion? It's that when you're making a trade secrets claim, you must not only allege with specificity the details of your trade secret, you must also allege with specificity how the trade secret was misappropriated and the steps you took to protect it from disclosure.

The legal battle between Jekson USA and James White continued in Jekson USA, Inc. v. White, 2026 NCBC 25 (Davis,. J.). This Opinion focused on Defendant’s counterclaims. Judge Davis sifted through a variety of claims that the Defendant was attempting to bring against his former employer.

You might remember from my earlier post on this case that Jekson and White were locked in a dispute over whether White had agreed to the terms of a covenant not to compete and confidentiality agreement at the outset of his employment. White had not signed the Employment Agreement containing the restrictions until several weeks after beginning his employment. He contended that the restrictive provisions had not been a part of his original terms of employment.

Judge Davis had to sift through a cornucopia of counterclaims brought by the former employee in this Opinion. They included claims ranging from breach of contract, unfair or deceptive trade practices, as well as claims for punitive damages, misappropriation of likeness, and identity theft. Op. ¶17.

Considering Documents Outside the Pleadings, A “Fundamental Concept”

Before getting to the substantive claims, Judge Davis had to deal with five documents that the defendant had attached to his response brief (but not to his Counterclaim) and whether they could be properly considered at the Motion to Dismiss stage. Why was that an issue? Because:

Op. ¶29 (quoting Vanguard Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 38, at ¶20).

Judge Davis parsed through the five documents and and determined that three of them could properly be considered and two could not. The three that were excluded had not been attached to the counterclaim and had not been referenced within it (they were a letter and two emails). The two that passed muster were the Employment Agreement which was the subject of the litigation (and which had been specifically mentioned in the Counterclaim and a document which had been filed with the North Carolina Secretary of State. Judge Davis held that he could consider the public filing because it was discussed in the counterclaim and because "the court may take judicial notice of a public agency's website.” Op. ¶33 (emphasis added).

Breach of Contract Counterclaim

Having disposed of this arcane pleading issue, Judge Davis moved on to consider the breach of contract counterclaim. White contended that he had entered into a verbal agreement to work for Jekson for a specified salary, as well as a monthly car stipend and a yearly car maintenance stipend, health insurance coverage for his entire family and reimbursement for use of his personal cell phone.

White alleged that Jekson had breached its obligations under the verbal agreement. Judge Davis, recognizing that the parties were light years apart on the nature of their contractual relationship, said that "the court need not wait into that dispute at the pleading stage." He therefore denied the motion to dismiss White's breach of contract claim

Quantum Meruit Claim

White asserted a quantum meruit claim for the amounts he contended were owed to him by Jekson. Jekson correctly pointed out that a quantum meruit claim cannot exist where the parties relationship is governed by contract. Op. ¶44.

But the quantum meruit claim nevertheless survived, because Judge Davis observed that “Under North Carolina case law, a party is permitted to plead in the alternative both a claim for breach of contract and a quantum meruit claim.”

Fiduciary Relationships Rarely Exist in Employment Relationships

White was also attempting to assert a claim for constructive fraud against his former employer. Such a claim is based upon a fiduciary relationship.

Proving a fiduciary relationship between an employer and his employee is pretty much a nonstarter in North Carolina. Judge Davis held that:

Our Supreme Court has held that a fiduciary relationship rarely exists in the employment context. See Dalton v. Camp, 353 N.C. 647, 652 (2001) (finding that a fiduciary relationship in the employment context is rare and requires a showing of “improper influences or domination” between employer and employee);

Op. ¶50.

Judge Davis dismissed the contractor fraud claim with prejudice.

Fraudulent Inducement Claim Also Dismissed

White's claim against Jekson for fraudulent inducement was also dismissed, though without prejudice. The claim failed because White had failed to allege the circumstances constituting fraud with the particularity required by Rule 9(b) of the North Carolina Rules of Civil Procedure.

Unfair and Deceptive Trade Practices Claim Meets a Similar Fate

White's claim against Jekson for unfair and deceptive trade practices was based upon his argument that the attempted enforcement of the noncompetition provision and other restrictive covenants against him were not enforceable because those provisions were intended to stifle competition and destroy his subsequent business endeavors. Op. ¶59.

It is pretty clear that disputes between an employer and its employee that include disputes based upon the alleged breach of the noncompetition agreement "do not typically give rise to UDTP liability.” Op. ¶60 (citing Kinesis Advert., Inc. v. Hill, 187 N.C. App. 1, 21 (2007)

Punitive Damages

Don't try to bring a claim for punitive damages. There is no such claim. It is a remedy.

Here’s what Judge Davis said:

North Carolina courts have repeatedly held that “a claim for punitive damages is not a stand-alone claim.” Aldridge v. Metro. Life Ins. Co., 2019 NCBC LEXIS 116, at *146 (N.C. Super. Ct. Dec. 31, 2019) (cleaned up). Rather, punitive damages are an appropriate remedy “to punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts.”

Op. ¶81 (emphasis added).

Dismissal of that claim does not mean that White cannot seek to recover punitive damages. The dismissal was without prejudice "to White's ability to seek punitive damages at a later stage of this litigation as a remedy to the extent is entitled to do so under applicable North Carolina law.

Specificity Required for Claims of Identity Theft and Misappropriation of Name Or Likeness

if you've slogged through my summary of this stultifyingly boring Opinion, the treatment of the claims for identity theft and misappropriation of name or likeness may have made the slog worthwhile.

These claims were based on White's allegations that Jekson had taken out multiple credit cards in his name, possibly subjecting him to liability on the significant balances outstanding.

If proven, these allegations could “potentially state a valid claim for identity theft.” Op. ¶68 (emphasis added). But White could not get past the motion to dismiss stage since he had not pleaded the claims with sufficient particularity. Identity theft claims are subject to the heightened specificity requirements of North Carolina Rules of Civil Procedure 9(b).

The same did not hold true for the misappropriation of name or likeness claim. Judge Davis said that “[u]nlike a claim for identity theft, claims for misappropriation of name or likeness do not appear to be subject to a heightened pleading standard under North Carolina law.” Op. ¶76.

If I ever get to the point of not writing about the cases I don’t find interesting enough to write about, this Jekson Opinion would be at the top of the list.

If you’ve read this far, thanks for sticking it out.

if that headline doesn't get you revved up to read the opinion in Stansell v. LoRusso, 2026 NCBC 24 (Conrad, J.), I don't know what will.

The most despicable Plaintiff (to me and surely anyone reading this Opinion) is Jody Stansell, a minority member of the Defendant LLC, LoRusso Ventures, LLC. This case, pending in the Business Court for nearly 6 years, was brought by Stansell on a derivative basis against the LLC. I’ll frequently refer to Mr. Stansell as Mr. Despicable in discussing this case. This Judgment was handed down following a bench trial in February 2026.

From the outset of the case, Mr. Despicable was in hot water with the Court. Judge Conrad entered many orders faulting Stansell on his co-Plaintiffsthe Plaintiffs (two of whom had settled before a previously scheduled trial) “for delays, procedural miscues, rule violations, and failures to comply with orders.” Op. ¶2.

Stansell was at one point represented by counsel, but counsel withdrew upon the settlement by Stansell’s co-plaintiffs. Thereafter, Stansell proceeded pro se and failed to comply with the pretrial scheduling order and to appear at various pretrial hearings. Among his failings, Stansell did not offer a list of witnesses or any exhibits he intended to introduce at trial.

That led to Defendant LoRusso filing a Motion in Limine to bar Stansell from offering any exhibits at trial or calling any witnesses not previously identified. Consistent with his past performance, Stansell did not respond to the Motion in Limine and Judge Conrad treated it as an uncontested motion and granted it.

Stansell further flouted the Court’s rules and procedures by failing to appear at the pretrial conference. He finally appeared midway through the conference and Judge Conrad informed him that he would not allow him to offer any evidence other than his own testimony.

Judge Conrad prefaced his Findings of Fact following the bench trial with this statement:

Readers be warned: these findings of fact contain references to vulgarities and coarse language not typically found in judicial opinions. These references are, unfortunately, necessary to understand the relevant events and to provide context and support for the Court’s judgment.

Mr. Despicable and Defendant Krista LoRusso were co-members of LoRusso Ventures, LLC. The LLC was the manufacturer and vendor or of an easy-to-install bedskirt or mattress cover fknown as the “cinch skirt” or use in the hotel industry, .” LoRusso owned a 96% interest in the LLC and was its only Manager. Mr. Despicable owned the remaining 4%.

The parties worked together for a few years. Ms. LoRusso "became dissatisfied with Stansell's performance, cooperativeness, reliability, and responsiveness.” Op. ¶27. She terminated his employment. She also cut off his access to the company's email and computer systems.

At that point, “Stansell lashed out and began a sustained effort to ruin LoRusso Ventures’ business and LoRusso’s personal life.” Op. ¶29. I’m not particularly concerned about becoming a target of a vendetta from Mr. Despicable due to this post, but I will even so confine my description of his "sustained effort" to destroy the business of LoRusso Ventures and LoRusso's personal life to the words used by Judge Conrad. He said that:

Stansell wrote that he was “determined to make [LoRusso] hurt”; that he “want[ed] her to never recover from this”; that “[t]here will be no mercy from this moment on”; that “[i]t’s easier for [him] to just destroy the company at this point”; that he would “make [LoRusso’s] life a nightmare and use [his] member status and the courts and every social media slut shame possible is coming”; and that he wanted “her in jail,” “want[ed] those kids t[a]ken from her,” and “wanted [LoRusso] begging for mercy . . . .” (LoRusso’s Exs. 4, 9, 13.)

Op. ¶31. If you think that was bad, it got worse. Much worse:

Stansell sent a group text message about LoRusso in which he stated that he had a vision that he was “going to cut that ugly ass cunt into pieces and feed her to the sharks only after I have tied her to a tree and poked a nearby bees nest which I’d did after I pulled each of her fingernails out and poured lemon juice on them, and after I started with a tongue lashing letting her know what a lieing, no good, immoral piece of shit she is. I am excited!”

Op. ¶32. Wow! Could Stansell’s behavior get even more despicable? Well, “[a]t trial, Stansell laughed after reading this quote aloud during his testimony.” Op. ¶32 (emphasis added).

That's not all. Mr. Despicable also attempted to interfere in a custody battle between Mrs. Lorusso and her former husband. Stansell contacted the attorney representing her former spouse “for the purpose of ‘provid[ing] [him] with ammunition to take her kids away.” Op. ¶33.

Stansell also stated in an email that he had contacted or would be contacting the Federal Bureau of Investigation and the Mecklenburg County District Attorney to pursue criminal charges against LoRusso.” Op. ¶6 & n.1.

Is there more to this case than the lurididity of Mr. Despicable’s written statements? Yes, keep reading.

Tortious interference with Contract

LoRusso had asserted a counterclaim against Stansell for tortious interference with contract. The LLC had contractual relationships with two prominent hotel chains (IHG and LaQuinta) to provide its cinch skirts to them.

LoRusso Ventures had been selected to provide products for several Holiday Inn Express hotels. Holiday Inn Express is one of IHG's brands. Stansell had ordered large quantities of custom fabric for LoRusso Ventures’ obligations to Holiday Inn Express.

Stansell did little to cover his tracks in interfering with this contract. He had told others, through text, that he "will make sure IHG doesn't happen.”

He went on to describe a plan to “cancel our purchase ready program and [Request for Proposals] with IHG” and to tell IHG that LoRusso Ventures was “not capable of signing a new contract with current management structure and account structure any longer.” He added that his plan “stops this game cold and I will find something else to do before I let her have it,” referring to IHG’s business. (LoRusso’s Exs. 11, 12, 15; see also LoRusso’s Ex. 11 (“All I am doing is informing IHG that due to impossible clause, we must withdrawal from RFP . . . It’s over and done”). Op. ¶45.

LoRusso Ventures had been told by IHG that it had been “selected for the program rollout”and invited to a meeting for suppliers. A few days later, without any explanation, IAG told the LLC that it would not be included in the program. Op. ¶¶47-48.

Judge Conrad found that Stansell had tortiously interfered with the contractual relationship with IHG. Stansell had left an equally obvious written trail of breadcrumbs for his interference with the contractual relationship with LaQuinta, and Judge Conrad found for LoRusso on that claim as well.

Defamation claims

LoRusso also sued Stansell for defamation. He had repeatedly told persons involved in the hotel industry that Lorusso was a "thief’, “felon," and an "embezzler.” Op. ¶97. Words of that type are considered defamation per se, where malice and damages are presumed by proof of publication and no further evidence is required as to any resulting injury. Op ¶96.

Stansell's only defense to these claims were that they were true,. Judge Conrad readily rejected that defense, saying it was not supported by any credible evidence. Op. ¶98.

Big Damages for LoRusso

Judge Conrad awarded substantial damages against Stansell on LoRusso's counterclaims. He ordered Stansell to pay $308,000 in compensatory damages on the tortious interference claims plus $200,000 in punitive damages. He further ordered the payment of $100,001 in compensatory damages on Lorusso's counterclaims for breach of contract and defamation per se. If you're wondering about that odd one dollar amount on the breach of contract claim, that was for violation of a term of the Operating Agreement governing the LLC. Mrs. Lorusso had not attempted to show that she had suffered actual damages resulting from those reaches the operating agreement that she was intelligent nominal damages. The court order accordingly ordered one dollar for those damages. Op. ¶¶87-88.

The punitive damages were determined by Judge Conrad to be “appropriate when considering the purposes of punitive damages, namely ‘to punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similarly wrongful acts.” N.C.G.S. § 1D-1. Op. ¶77.

All told, that is $608,001 in damages awarded in favor of Mrs. Lorusso. I hope she recovers every penny of it including the prejudgment interest specifically provided for by Judge Conrad. Given that the case had been pending for six years before the judgment was rendered, the interest alone will be substantial.

The Assurance Group (“TAG”) is fighting on two fronts with its former insurance agents. In one of the cases, TAG is the Plaintiff. That one is Assurance Group v. Shackelford, 2026 NCBC 23 (Davis, J.)(which I’ve written about before). In this one, Britcher v. Assurance Group, LLC, 2026 NCBC 29 (Davis, J.), TAG is the Defendant.

The Britcher case involves TAG’s Motion to Dismiss the claims of one of the twenty-one agents suing TAG in that case . Her name is Lorrainna Passe. Ms. Passe is also a Defendant in the Shackelford case.

Both the TAG-Plaintiff case and the TAG-Defendant case involve the Independent Agent Agreement (the “IAA”) entered into by Ms. Passe with TAG. TAG is suing Passe For violations of the IAA, and Passe is suing in the Britcher action to have the IAA declared unenforceable.

Compulsory Counterclaim

The ruling on the Motion to Dismiss is basically a straightforward application of rule 13(a) of the North Carolina Rules of Civil Procedure, which says:

A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

N.C. R. Civ. P. 13(a).

The application of the rule involves consideration of the following factors:

(1) whether the issues of fact and law are largely the same; (2) whether substantially the same evidence is involved in each action; and (3) whether there is a logical relationship between the two actions. There must be not only a common factual background but also a logical relationship in the nature of the actions and the remedies sought.

Op. ¶25 (quoting Hailey v. Allgood Constr. Co., 95 N.C. App. 630, 632 (1989)).

Application of Rule 13 is not Discretionary

Passe did not really contest that all the factors necessitating a compulsory counterclaim were met, but instead made the somewhat novel object argument that it didn’t really make a difference in this situation because the same Business Court Judge was assigned to both cases. Judge Davis, who is handling both cases, rejected that argument because Passe did not offer any authority showing that the application of rule 13(a) is discretionary rather than mandatory. Op. ¶35.

To Stay or Dismiss?

Once he had determined that the claim brought by Passe was a compulsory counterclaim, Judge Davis had two choices. The first was to dismiss her claim with leave to file a compulsory counterclaim in the TAG-Plaintiff case or to stay her claim in the TAG-Defendant case until that case had been finally determined.

Relying on appellate authority that the option to stay Passe’s claim “should be reserved for unusual circumstances,” (OP. ¶27) Judge Davis dismissed her claim without prejudice to her ability to reassert them as a counterclaim in the first filed TAG-Plaintiff action.

Hart v. DWM Advisors, LLC, 2026 NCBC 28 (Houston, J.) involves the Plaintiff’s Motion for Entry of a Default Judgment against the Defendants who had failed to respond to his Complaint. When I first scanned Judge Houston’s twenty-three page Opinion, I was wondering why it took him so many words to enter a default judgment against non-responding Defendants following the Entry of Default.

I had to refresh myself on the provisions of Rule 55 of the North Carolina Rules of Civil Procedure to understand why. The Entry of Default is only the first step to a Default Judgment. The North Carolina Superior Court Judges’ Benchbook, published by the NC Institute of Government (who knew that there was such a thing and that it was available on line?), details the steps that a Superior Court Judge must dance through before entering a default judgment as well as the restrictions upon the Judge in doing so.

Even though the Defendants had essentially admitted the allegations of the Complaint against them by failing to respond to it, Judge Houston was still required to determine whether those allegations had stated a claim for relief. Op ¶45.

Briefly put, the case involved claims by “a North Carolina [individual] ``with no background or expertise in securities, finance, or investment planning,” who contracted with Defendants to help him invest his personal funds.” Op. ¶5. The plaintiff ultimately lost more than $600,000 through investments with the Defendants.

The Defendants’ misrepresentations and omissions regarding their investment qualifications were overwhelming:

Judge Houston spent little time in entering a default judgment in favor of Plaintiff on his claims for fraud and constructive fraud. He spent more time considering the claims for violation of the North Carolina Investment Advisers Act, N.C. Gen.. Stat. §78C-1

Claims Under the North Carolina Investment Advisers Act

Under the NCIAA, [i]t is unlawful for any person who receives, directly or indirectly, any consideration from another person for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise, (1) [t]o employ any device, scheme, or artifice to defraud the other person, [or] (2) [t]o engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the other person. Op. ¶51 (N.C. Gen. Stat. § 78C-8(a)(1)–(2)).

The Act provides for both primary and secondary liability. After determining that the plaintiff had pleaded claims under the act with the necessary particularity required by Rule 9(b), Judge Houston entered judgment in plaintiff's favor on this claim

Negligent Misrepresentation

Plaintiff did not fare as well on his claim for negligent misrepresentation. Although Judge Houston found that he had adequately pleaded that claim, he denied it because "intentional conduct generally cannot also be negligent conduct.” Op. ¶58.

Furthermore, Judge Houston observed that plaintiff could not recover twice for the same harm. Op ¶61. He dismiss that claim without prejudice.

Claims Under The North Carolina Racketeer Influenced and Corrupt Organizations Act

The RICO claim brought by Plaintiff was also dismissed without prejudice. I won’t spend much time talking about the RICO statute or this cla. Judge Houston based his dismissal on a previous ruling by Judge Theall in a related case, Hart v. First Oak Wealth Mgmt., LLC, 2022 NCBC 41.

There, Judge Theall held that the Defendant’s argument that:

the [similar] misconduct alleged is not the sort of activity that the General Assembly intended to constitute a violation of the N.C. RICO Act claim. . . . As observed by the Court of Appeals in Gilmore [Gilmore v. Gilmore, 229 N.C. App. 347, 356 (2013)], the alleged wrongful conduct must involve something other than “fraud in the sale of securities.” The Gilmore court further held that “the General Assembly did not intend that an investor’s claim to recoup money lost through a failed financial venture with no larger criminal scope could be the basis of a RICO claim, and . . . that conduct is not within the scope of the N.C. RICO Act.”

Hart v. First Oak Op. ¶165 (emphasis added). Judge Houston followed the reasoning of Judge Theall and dismissed the RICO claim without prejudice.

There is no Such Thing as an Action for Civil Conspiracy

Judge Houston also awarded a default judgment against the Defendants on Plaintiff's claim for civil conspiracy. Even so, this did nothing to enhance Plaintiff's damages.

The reason for that is that “accurately speaking, there is no such thing as a civil action for conspiracy. . . . The gist of the civil action for conspiracy is the act or acts committed in pursuance thereof—the damage—not the conspiracy or the combination.” Op. ¶68 (quoting Reid v. Holden, 242 N.C. 408, 414–15 (1955)) (emphasis added)

Amount of the Judgment

The ultimate result of the opinion was a default judgment in Plaintiff's favor for $628,916.87, with pre-judgment interest to run at the rate of 8% from October 1, 2021 (the date the action was instituted) and continuing until the judgment is paid in full. I hope that the Plaintiff sees every dollar of that amount.

I try to extract something of value out of every Business Court Opinion, but it is awfully hard with Stoutt v. Perez Duran, 2026 NCBC 27 (Conrad, J.). The decision didn’t even warrant a written Opinion under N.C. Gen. Stat. §7A-45.3 because it denied (didn’t grant) a Motion to Dismiss.

But as for the value in this Opinion, what is a “dirt business?” Well, one of the Defendants “owned a large piece of vacant land that he hoped to put to use. He approached [the Plaintiff], who suggested allowing third parties to dump loads of dirt on the land in exchange for a fee.” Op. ¶2.

That’s all I’ve got to offer on this one.

The Opinion in PCS Phosphate Co. v. Jacobs Eng’g Grp., Inc., 2026 NCBC 21 (Houston, J.) is for the most part a warning about contract drafting sprinkled with admonitions about Complaint drafting. I’m searching for a shorthand term to describe the contractual imbroglio between Plaintiff PCS Phosphate and PCS Administration on the one hand and Defendant Jacobs on the other, but so far the best publishable option I’ve been able to come up with is a “hot mess.” Whatever you call it, it’s bad.

The lawsuit is over a written contract between PCS Administration (another named Plaintiff) and Defendant Jacobs Engineering. Defendant Jacobs was to provide engineering services in connection with the construction of an anhydrous hydrogen fluoride plant to be operated by PCS Phosphate. The Complaint refers to PCS Administration and PCS Phosphate collectively as “PCS”. They are separate entities.

What is anhydrous hydrogen fluoride?

It’s not really necessary to know what anhydrous hydrogen fluoride is for purposes of understanding this Opinion, but suffice to say that it is “[i]t is a very poisonous, colorless gas or liquid that dissolves in water to yield hydrofluoric acid.” Hydrofluoric acid? That has wide applications in industry, like glass manufacturing and use in pharmaceuticals.

I really don't want this to become a newsletter about chemistry (because I would be woefully unqualified to write anything about that subject), but what about the relationship between phosphate and anhydrous hydrogen fluoride (“AHF”)? The AHF is a byproduct of phosphate production produced by PCS Phosphate.

[Note: I try to be 100% accurate in writing this Newsletter. Knowing very little about chemistry, I fact checked the preceding two paragraphs with my father-in-law, who has a PhD in chemistry and has taught college chemistry. He verified that I got my explanation of AHF and phosphate correct. Thank you, Ben!]

The PCS plaintiffs had entered into a separate contract with another company, Arkema, Inc., through which Arkema would “purchase the AHF produced at the AHF Plant once operational for a period of up to thirty years.” Op. ¶21.

The plant was scheduled to go online in 2022. Arkema touted its "innovative partnership” with the PCS companies’ parent company in a 2020 press release. It said that it was investing $150 million in the venture. The plant was not fully operational by the targeted opening date The PCS Plaintiffs say that they will never be able to earn a profit on the sale of the AHF produced at the delinquently delivered plant. Op. ¶24.

Is PCS Entitled to Make a Breach of Contract Claim Against Defendant Jacobs?

The first hurdle that PCS Phosphate faced in its breach of contract claim against Defendant Jacobs was that it was not a named party in the agreement on which its claims rested and that it had not signed that agreement. Only PCS Administration was a named party and a signatory to the agreement with Defendant Jacobs.

Turning to a basic principle of first year contract law, Judge Houston stated that:

The general rule is that one who is not a party to a contract may not maintain an action for its breach.’ Matternes v. City of Winston-Salem, 286 N.C. 1, 12 (1974); Chicago Title Ins. Co. v. Holt, 36 N.C. App. 284, 288–89 (1978) (‘Subject to certain exceptions not relevant here, one who is not a party to a contract may not maintain a claim for relief for its breach.’ (citations omitted)).

Op. ¶36 (emphasis added)

Judge Houston dismissed the breach of contract claim brought by PCS Phosphate on the written agreement between PCS Administration and Jacobs Engineering

Purchase Orders Save the Day for PCS Phosphate

The Byzantine structure of the PCS Administration-Jacobs Engineering Agreement gave PCS Phosphate somewhat of an argument that it was entitled to sue Defendant Jacobs for breach of contract.

In a 2018 Amendment to the agreement, PCS Phosphate was specifically identified as a “Company Affiliate.” The Amendment provided that:

[e]ach of the Company Affiliates may purchase Services from [Jacobs] hereunder for their own account on the same terms and conditions as are applicable to [PCS Administration] by issuance of a Purchase Order including the notation referencing this Agreement on each Purchase Order . . . . ” To facilitate such an arrangement, PCS Administration and Jacobs agreed that the terms of the “Agreement shall apply to such Company Affiliate with respect to such [future] Purchase Order” only “[f]ollowing acceptance of a Company Affiliate’s Purchase Order.

Op. ¶13.

PCS Phosphate did issue purchase orders to Defendant Jacobs which the Defendant accepted. Judge Houston held that his dismissal of the primary breach of contract claim might “prove to be a distinction with little difference.” He ruled that:

inasmuch as PCS Phosphate asserts a breach of contract cause of action arising from its purchase orders issued to Jacobs, PCS Phosphate has adequately stated a claim for breach of contract.

Op. ¶43.

Is it Really a Distinction with Little Difference?

I am loath to disagree with a Business Court, Judge, especially in a publicly available way, but I don't agree that the dismissal of the breach of contract claim by PCS Phosphate on the Jacobs Engineering Agreement and the survival of the breach of purchase order claim by PCS Phosphate is a distinction with “little difference.”

Why not? Because the Jacobs Engineering Agreement, to which PCS Phosphate was not a party and on which it is not entitled to pursue a breach of contract claim, contains a variety of express warranties, like:

a. Jacobs’s services would effect a complete and operable Scope of Work capable of meeting the testing, performance and operating requirements to the extent such are specifically set forth in the Scope of Work;

b. Jacobs would perform the Services in accordance with the standard of care, skill and diligence expected of Persons performing services of a similar type and nature and in an efficient and workmanlike manner;

c. Jacobs would use its best skill and attention consistent with the best quality and the generally accepted professional standards of the engineering profession;

d. Jacobs would perform the Services in the most expeditious and economical manner consistent with the interest of [PCS] and in accord with the Standard of Care, which shall be defined as those professional standards of care, diligence and skill prevailing among major engineering firms engaged in similar Services under similar conditions and in similar locations; and

e. Jacobs’s documents would be complete in detail and suitable for construction by a competent construction, and be free from material defects and deficiencies.

Op. ¶61 (quoting terms of the Agreement).

PCS Phosphate does not get the benefit of those express warranties, however. Judge Houston held that:

Since PCS Phosphate is not a party to, or direct beneficiary of, the PCS Administration-Jacobs Agreement, it may not sue to enforce warranties or other contract terms under that particular agreement.

Op. ¶66

The loss of the ability to sue on those express warranties is more than a distinction with little difference. If I were representing PCS Phosphate, I would rather have those in my back pocket during discovery and trial. Having them there might make more than “a little difference.”

A Few More Tidbits from this Opinion

Jacobs took a run at trying to persuade the court that the complaint was deficient because the purchase orders were not attached to it. Judge Houston's reaction to this was the state that quote there is no heightened pleading standard for a breach of contract claim.” Op. ¶48 (emphasis added). He further said that the "notice-pleading standard does not require a plaintiff to attach a written contract to, or specifically identify its terms in, a complaint. Op. ¶48-49.

There is also an interesting sidelight to this Opinion about the economic loss rule. Defendant Jacobs argued that the economic loss rule barred the Plaintiffs’ cause of action against it for professional negligence.


Judge Houston disagreed. He first said that: “North Carolina’s economic loss rule requires negligence claims to be based upon the violation of an extra-contractual duty imposed by operation of law[.]” Crescent Univ. City Venture, LLC v. Trussway Mfg., Inc., 376 N.C. 54, 55 (2020).” Op. ¶79. He went on to say that “North Carolina recognizes an extra-contractual duty imposed by law on certain professional service providers—“and engineers in particular”—who are “are ‘professionals’ with special knowledge and skill and corresponding professional duties because of that knowledge and skill.” Wright Constr. Servs. v. Hard Art Studio, PLLC, 275 N.C. App. 972, 975 (2020).” Op. ¶83 (emphasis added).

Defendant Jacobs also moved to dismiss Plaintiffs’ claim for recovery of consequential damages and lost profits on the basis that the written agreement contained limitations on liability including precluding recovery of such damages.

Judge Houston rejected that argument, holding that “[u]ltimately, a request for damages is not a cause of action but is a request for a remedy incidental to a cause of action. Op. ¶97. He said further that “Plaintiffs are not required at this stage to further plead the specific details of their alleged damages, nor are they required to plead a cause of action for gross negligence or willful misconduct to potentially recover damages under the contracts.

He further ruled that [a]t the Rule 12(b)(6) stage, Jacobs is not entitled to what would amount to a premature declaratory judgment or advisory opinion as to potential damages that Plaintiffs might or might not be able to prove.” Op. ¶101

A Final Note on Judge Houston’s Dislike of Group Pleading

The Complaint’s collective reference to PCS Phosphate and PCS Administration as a single “PCS” caused Judge Houston to attack the complaint with a scalpel to separate out the valid claims brought by PCS Administration and the dismissible claims brought by PCS Phosphate.

He took multiple opportunities to chide PCS for the group pleading in its complaint. He said, for example:

Judge Houston has previously dismissed cases for precisely the pleading misstep of group pleading. See, e.g., Baker v. Hobart Fin. Grp., Inc., 2023 NCBC 24.(ordering a second amended complaint to be filed due to group pleading issue); Britcher v. Assurance Grp., LLC, 2025 NCBC 68 (same). He did not take that step here.

If you’ve had a Business Court case assigned to Judge Houston, I would fly speck your complaint or counterclaim to make sure that you haven't purposely or inadvertently engaged in group pleading. Better yet, avoid it altogether.