I am already thinking ahead to commemorating the one-year anniversary of this Newsletter with a post on the Business Court's best Opinions of 2026. That will probably happen around the first of January 2027. But two of the Opinions in this issue will certainly make that list. The first one, Multifamily Select Inc. v. Williams, 2026 NCBC 82 (Shirley, J.), has a great set of facts about how two officers and directors of the Plaintiff went about breaching their fiduciary duties to their employer in setting up a competing entity, yielding a damages judgment for lost profits in excess of $1.5 million. The second concerns a Delaware corporation that fought valiantly against the Delaware choice of forum provision it included in the Agreements containing the restrictive covenants which it wished to enforce. That is IQVIA Holdings Inc. v. Panagos, 2026 NCBC 81 (Conrad, C.J.)
Unfortunately for you free subscribers, to read further in this post, you have to become a paid subscriber to my Newsletter. These two Opinion discussions alone are worth it. Please click the upgrade button below and start to pay the highly reasonable three dollars per month which I am kindly requesting.
If you're not willing to do that, you can scroll to the bottom of this post and read about the last Opinion of October 2026 for me to write about, Estevez v. C&S Com., LLC, 2026 NCBC 80 (Houston, J.). It is not in line for my Best Opinions of 2026 Newsletter, but is interesting and worthy of knowing about nevertheless:
Table of Contents
Summary Judgment For Plaintiff In A Breach Of Fiduciary Duty Case; Lost Profit Damages Of $542,000 Are Trebled
A Plaintiff That Wants to Wriggle Out of its Own Choice of Forum Clause and Stay Out of Delaware?
The Estevez Opinion: A Lot
Every single time I sat down to write about Judge Houston's Opinion in Estevez v. C&S Com., LLC., 2026 NCBC 80 (Houston, J.) I walked away each time to think about taking a different approach. There’s a lot to write about. An Operating Agreement that the plaintiffs found overly one-sided, including eliminating any fiduciary duty for the manager and the majority interest holder; issues of procedural and substantive unconscionability; declaratory judgment issues; and an unjust enrichment claim. I decided to break my discussion into bite-size chunks deal with each of those issues separately.
First, some background. The Plaintiffs were members of the Defendant LLC C&S. They had signed an Operating Agreement with a number of conditions that they wished to have determined to be unconscionable. Chief among those were a provision absolving the LLC’s manager, Defendant Clay, from any claim for breach of fiduciary duty and any damages associated with such a breach. [Can you really do that? Yes you can.]
3.5.1 and 4.8 of the Operating Agreement provided in relevant part that, notwithstanding anything else in the Operating Agreement or applicable law, the Manager and the Majority Member (i.e., Clay) “shall not owe a fiduciary duty to the Minority Members” and that the “Minority Members waive, renounce, release and disclaim” the right to bring suit against him for breach of fiduciary duty. Op.¶55.
Other provisions were equally one-sided:
Section 3.1, which gave the sole manager of the LLC (Mr. Clay) the “full and complete authority, power, and discretion to manage and control the business of the Company. This included the authority to transfer the position of manager, unilaterally dissolve the LLC, and amend or waive certain terms of the Operating Agreement.
Section 9 allowed Mr. Clay to “authorize the transfer of membership interests in C&S (including Plaintiffs’ interests, which he did) under specific and limited circumstances.” Op. ¶15 (a).
Section 9 also permitted termination of Plaintiff Oscar Estevez’s membership interest in C&S if he fails to obtain U.S. citizenship within four years after “the purchase of the assets of Warp Development Corporation (the predecessor of C& S”) or immediately upon his deportation from the country. Op. ¶15 (c);
Section 4.14 contained and attached “Non-Compete, Confidentiality and NonDisparagement Agreements” Op ¶60.
Eliminating Fiduciary Duty Claims Against Mr. Clay, the Manager and Majority Member
Notwithstanding the provisions of the Operating Agreement insulating Mr. Clay from fiduciary duty claims, Plaintiffs made such a claim.
In a previous ruling in the case, Judge Houston dismissed that claim. Estevez v. C&S Com., LLC, 2025 NCBC 73 (Houston, J.) [I will refer to the current Opinion as Estevez II]. He rejected the argument that such a provision was contrary to North Carolina law and stated again in the current Opinion that :
public policy in North Carolina favors freedom of contract, including the ability for parties to negotiate the scope of a company’s operating agreement . . . absent specific factual allegations suggesting illegality, violations of public policy, unconscionability, or unreasonableness that might render the operating agreement unenforceable.
Op. ¶85.
Procedural and Substantive Unconscionability
In Estevez II, the Plaintiffs were pushing an argument that the fiduciary duty exclusion was unconscionable. Judge Houston rejected arguments of both substantive unconscionability and procedural unconscionability.
As to the substantive issue he said that “[a] court will find a contract to be unconscionable only when the inequality of the bargain is so manifest as to shock the judgment of a person of common sense, and where the terms are so oppressive that no reasonable person would make them on the one hand, and no honest and fair person would accept them on the other.” Op. ¶ 87. These provisions did not rise to that level.
On procedural unconscionability, Judge Houston gave no deference to the fact that the plaintiffs were non-native English speakers. He pointed out that each Plaintiff had multiple days to “possess, review, and otherwise consider the Operating Agreement before they signed it,” Op. ¶88, that they had spent multiple hours reviewing it before signing it” Id., And that they had declined the opportunity to consult an attorney or to conduct other independent investigation if they so desired. Id.
The provisions of the Operating Agreement that provided for the transfer of the Plaintiffs’ interests in C&S upon conviction of a felony or termination from employment with C&S were not unconscionable either. Judge Houston endorsed such provisions, stating that:
The use of mandatory buy-sell provisions helps owners of small and closely held businesses to control the ownership of the business and thus facilitates and encourages the use of such agreements. Such provisions have been upheld by North Carolina courts and are allowed by statute.
Op. ¶89.
Declaratory Judgment Issues from Both Sides
The Defendants had requested that the court issue a declaratory judgment determining that some of the challenged provisions of the Operating Agreement were enforceable.
Judge Houston refused to consider that, observing that the Defendants had not asserted any affirmative claims for such relief. Op. ¶34. A declaratory judgment could not be entered under such circumstances as NCRCP Rule 56 expressly states that “party seeking to . . . obtain a declaratory judgment . . . may move with or without supporting affidavits for a summary judgment in his favor upon all or any part thereof.” Op. ¶35.
As Judge Houston read that Rule “a party may seek summary judgment only as to a claim, counterclaim, crossclaim, or declaratory judgment request that has actually been asserted in the case. N.C. R. Civ. P. 56(a)–(b).” Op. ¶35.
Declaratory claims may not be raised via a motion in existing case, they are rather a separate and independent action. Op. ¶36.
The Judge concluded this portion of the Opinion by stating: “[h]ere, with their motion, Defendants seek summary judgment for declaratory judgments of the affirmative enforceability of the Operating Agreement, . . . but Defendants have made no affirmative claim for any such declaratory relief.” He therefore denied the motion for a declaration that the challenged provisions of the Operating Agreement were enforceable.
That did not finish Judge Houston's handling of the declaratory judgment claims made in the case. The Plaintiffs were also seeking a declaratory judgment that they were entitled to compensation in exchange for the Defendants’ purchase or redemption of their membership interests and that they were entitled to inspect the Defendant’s financial records.
Exercising my editorial discretion, I decline to write about Judge Houston's dismissal of those claims. They are contained in paragraphs 40 through 66 of the Opinion
Unjust Enrichment
I will wrap up my discussion of the Estevez II Opinion with Judge Houston's very short discussion of my least favorite tort — unjust enrichment.
Plaintiffs, whose principal claims revolved around the Operating Agreement they probably wished they had never signed, included a claim for unjust enrichment in their Complaint.
A first-year law student could have told them that “the undisputed existence of “an express contract precludes an implied contract [i.e., an unjust enrichment claim] with reference to the same matter.”Op.¶28 (quoting Vetco Concrete Co. v. Troy Lumber Co., 256 N.C. 709, 713 (1962)).
The parties had included in a joint statement of undisputed facts that “the Operating Agreement is a valid contract.” Op. ¶30 (emphasis added). Although they had pled their unjust enrichment claim in the alternative to their breach of contract claim, Judge Houston dismissed the unjust enrichment claim, stating that the Operating Agreement governed the same subject matter encompassed by the unjust enrichment cause of action. Op. ¶32
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