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The one and only case summarized below (Highlights Healthcare, LLC v. Abel, 2026 NCBC 67 (Davis, J.) was the most difficult Opinion for me to write about from July 2026. The Opinion is 95 pages long! And the number of paragraphs? 303! If this isn't the longest Opinion ever delivered by a North Carolina Business Court Judge, it is certainly in the top 10. How long would it take you to read it yourself?

It took me a whole week to condense the significant legal points of Highlights Health to eight pages of blackletter law which will be useful to anyone bringing or defending a claim for breach of fiduciary duty; constructive fraud; misappropriation of trade secrets; breach of covenant of good faith and fair dealing; tortious interference with contract; unfair and deceptive trade practices and other claims raised by the parties to this case.

I have tried to write my summary of the many key points in this very long treatise of an Opinion in an easily digestible way. It is organized in outline form so that you can skim easily from topic to topic. My week of trying to digest this Opinion will take only 15 or 20 minutes of your time to read. I feel no embarrassment in asking you to pony up $5/month to continue reading my priceless insights into the NC Business Court.

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The Opinion

There are five Defendants in Highlights Healthcare, LLC v. Abell, 2026 NCBC 67: Douglas and Cher Abell, James Magee, Sean O’Reilly, and Michael Stanley.

Two of the Plaintiffs, Highlights Healthcare, LLC and Empyrean Hospice, also serve in the role as Third-Party Plaintiffs;

The Third Party Defendants are Larry Graham and Knox Hill Investments, LLC.

Judge Davis’ tome resolved three separate Motions to Dismiss. [Note that nowhere in this post do I discuss the facts giving rise to the lawsuit. They are not necessary. This post is pure law.]

I.                         Another Condemnation of Group Pleading

Have you wondered why you’ve never heard a regular old Superior Court Judge call someone out for “group pleading”? Think of the massive number of Motions that are heard during a motions week in the 100 North Carolina non-Business Court Superior Court courtrooms. None of those judges have the luxury of the time to read carefully through your pleading. But the Business Court Judges? They don’t have a motions calendar. And they have really smart, freshly minted lawyers to assist them. They will scrutinize your Complaint much more closely.

In Highlights Health, Judge Davis said:

The Court notes that its task in ruling on these Motions has been made significantly more difficult and time-consuming as a result of the parties engaging in the practice of “group pleading” by lumping together all claimants and opposing parties without specifically enumerating (1) which Plaintiff, Counterclaim-Plaintiff, or Third-Party Plaintiff is asserting a particular claim, or (2) which specific entity or individual is responsible for committing the allegedly wrongful act giving rise to that claim. The Court takes this opportunity to express its strong disapproval of this practice. Op. ¶86. Judges Conrad and Houston have frequently called out Complaints which are the products of group pleading. I won’t be surprised to see sanctions imposed soon on lawyers who file such imprecise pleadings.

If there is a hearing in the Business Court on a Motion to Dismiss a Complaint that was imprecisely drafted so that the Judge cannot tell which claims are brought against which Defendants, it often results in Plaintiff’s counsel having to concede at the hearing that some of its claims are not brought against all Defendants,

That’s what happened in this case, as Judge Davis observed: “at the 22 January hearing on the Motions, counsel for the Companies acknowledged that the Companies intended to assert only the following claims against Cher Abell: misappropriation of trade secrets, UDTP, and forgery/fraudulent inducement. (Hearing Tr., at 10–13, 52, 58, 61–62.) Accordingly, all other claims asserted against her by the Companies in the Amended Complaint are DISMISSED with prejudice. Op. ¶88 (emphasis added).

II.                     Remedies that are Improperly Brought as Causes of Action

I have frequently written about the Business Court’s dismissal of claims which are actually remedies and are therefore not cognizable as causes of action(e.g. a preliminary injunction, piercing the corporate veil, punitive damages, conspiracy, restitution, equitable subordination and a request for damages.

Now, add  another remedy which should be not be pled as a cause of action: specific performance. Judge Davis said that “specific performance is an equitable remedy as opposed to a claim for relief.”  Op. ¶¶93 (emphasis added).

III.                    Fiduciary Duty Bric-a-brac

Judge Davis made a number of interesting statements that you might want to cite in a future brief regarding fiduciary duty claims which I have pulled together under this bric-a-brac heading.

Who owes a fiduciary duty to the corporation?  “The roles of CEO and general counsel are included in the ambit of management positions that have been found to give rise to such [fiduciary] duties. Op. ¶101.

You don’t need to plead actual damages in order to state a claim under North Carolina law (or Delaware law) for a breach of fiduciary duty.  Judge Davis said that “[r]egarding Defendants’ second argument—that the Companies have failed to allege any harm resulting from Abell’s misconduct (Mr. Abell was the CEO and General Counsel of each of the Companies involved) — neither North Carolina nor Delaware courts require a plaintiff to plead actual damages in order to state a claim for breach of fiduciary duty. ¶103.

Choice of law For Breach of Fiduciary Duty and Constructive Fraud Claims : the internal affairs doctrine functions as an exception to the lex loci test that a claim for breach of fiduciary duty and constructive fraud typically direct the application of the state’s substantive law where the legal injury occurred). Op. ¶253.

The Business Judgment Rule: “It is well recognized under Delaware law that the business judgment rule does not apply to claims supported by allegations of self-dealing or bad faith. See In re Walt Disney Co. Derivative Litig., 906 A.2d 27, 52 (Del. 2006) (holding that the presumption afforded by the business judgment rule “can be rebutted if the plaintiff shows that the directors breached their fiduciary duty of care or of loyalty or acted in bad faith[ ]”.)  Op. ¶295.

An LLC can eliminate fiduciary duties for members and managers via its operating agreement: Under North Carolina law, “because an LLC is primarily a creature of contract, members of an LLC are usually free to arrange their relationship within the LLC by agreement as they wish.” Cranford, 2026 NCBC LEXIS 88, at 51 (cleaned up). As a result, “they may depart from statutory default rules, require supermajority votes for some or all company matters, and impose or eliminate fiduciary duties for members and managers.” Vanguard Pai Lung, LLC, 2019 NCBC LEXIS 39, 17–18 (cleaned up). Op. ¶277 (emphasis added).

IV.                   Constructive Fraud

Let me start this section by saying that I am not a fan of claims for constructive fraud.  It is pretty much a claim for breach of fiduciary duty. And if you have a viable fiduciary duty claim, why do you need to complicate it with a mostly duplicative constructive fraud claim? It is not going to yield you a double recovery but will double your briefing

North Carolina law vs. Delaware law on constructive fraud: North Carolina and Delaware law are not identical with respect to claims for constructive fraud. Op. ¶108.

It’s a non-starter in Delaware: It is worthy of note that the Delaware Chancery Court does not recognize a  claim for constructive fraud. “Delaware courts have repeatedly rejected the assertion that constructive fraud exists as a “separate, independent tort” where the challenged conduct ‘describ[es]’ or is ‘duplicative’ of a claim for breach of fiduciary duty.” Op. ¶114.

To the extent that North Carolina recognizes a claim for constructive fraud: “The primary difference between pleading a claim for constructive fraud and one for breach of fiduciary duty is the constructive fraud requirement that the defendant benefit himself.”   Op. ¶109

in this case: The cursorily pled constructive fraud claim in this case -- that the corporations’ General Counsel/CEO  drafted various agreements to benefit himself at the company’s expense-- slipped past the Motion to Dismiss, although Judge Davis expressed doubt as to the viability of this particular claim, stating that that “even though the plaintiff “may not be able to support this broad claim with actual proof [,]” no more is required at the pleading stage). Op. ¶111(quoting Nelson v. All. Hosp. Mgmt., LLC, 2011 NCBC LEXIS 43, at *24 (N.C. Super. Ct. Nov. 22, 2011)).

V.                     Trade Secrets Claims

Reasonable Security Measures for a Trade Secrets Claim: if there is an accepted rubric for reasonable security measures in making a trade secrets claim, this will suffice enough to survive a Motion to Dismiss: “(1) the trade secret was not known outside the business; (2) it was only disclosed to employees within [the company] on a need-to-know basis; (3) access to the information was protected by the use of confidentiality agreements; and (4) it was protected by internal access controls and password. Op. ¶152.

Do you have to plead that the misappropriation occurred in North Carolina?: As for whether the Trade Secrets Protection Act requires that a Complaint present facts that the misappropriation occurred in North Carolina, Judge Davis said that “Defendants have not cited—nor has the Court been able to locate through its own independent research—any cases from North Carolina’s appellate courts holding that a plaintiff must expressly allege that the complained-of misappropriation occurred in North Carolina in order to state a claim for misappropriation of trade secrets under the NCTSPA.” Op. ¶157. He left that proof to a more developed factual record. The Motion to Dismiss stage was too soon for this question to be resolved.

Can you Sue a Person or Entity for Aiding and Abetting the misappropriation of a Trade Secret? Short answer: No! Judge Davis refused to recognize a claim for aiding and abetting misappropriation of trade secrets Op. ¶163.

VI.                  Tortious interference with contract claims

Lodging a tortious interference with contract claim against a competitor as always struck me as a particularly odd cause of action. After all, it is in the nature of competition for one company to go after the other company’s clients.

That this type of competition cannot constitute tortious interference is true in a broad sense: “[C]ompetition in business constitutes justifiable interference in another’s business relations and is not actionable so long as it is carried on in furtherance of one’s own interests and by means that are lawful.” Peoples Sec. Life Ins. Co., 322 N.C. at 221 (cleaned up and emphasis added).” Op. ¶175.

What can constitute tortious interference with contract between competitors?: Encouraging an employee to violate the terms of his restrictive covenants with his former or current employer: “Such circumstances—wherein an employee breaches a restrictive covenant in order to advance a competitive interest—have been found by this Court to be sufficient to satisfy the “without justification” element of a tortious interference claim. Op. ¶176(citing Implus Footcare, LLC v. Vore, 2025 NCBC LEXIS 121, at *91 (N.C. Super. Ct. Sept. 11, 2025)).

Particularity in pleading is required as to the Defendant’s knowledge of the restrictive covenants: With respect to the “knowledge” element of a claim for tortious interference with contract, our Supreme Court has made clear that broad and conclusory allegations that the defendant “had knowledge and/or should have had knowledge of the existing contracts” at issue are insufficient. Krawiec, 370 N.C. at 607. Rather, the complaint must specifically allege how the defendant learned of the terms of the agreement. Op. ¶180.

“Upon Information and belief” does not suffice to make out the knowledge requirement either.:  Plaintiff in this case did not satisfy the particularity requirement as to knowledge:“[T]The only allegation in the Amended Complaint concerning O’Reilly’s and Stanley’s purported knowledge of the Restrictive Covenants states that “[u]pon information and belief, O’Reilly[ ] and Stanley were made aware of Plaintiffs’ contractual relationships with Abell and Magee[.]” Not only does this allegation fail to allege facts demonstrating how O’Reilly and Stanley obtained such knowledge but it also does not even specifically reference the Restrictive Covenants—as opposed to the various other contractual agreements that Abell and Magee entered into with the Companies. Op. ¶181.

VII.                Unauthorized access to computer systems

Plaintiff’s claim of unauthorized access to computer systems (per G.S. §1-59.2A) barely cleared the low pleading hurdle: “While the allegations in the Amended Complaint as to this issue are once again less than a model of clarity, taking the allegations as true and construing them in the light most favorable to the Companies, the Amended Complaint alleges that Abell accessed the Companies’ computer systems—without authorization—for the purpose of obtaining information, which he has subsequently used in an effort to establish a competing business. The Court is satisfied that these allegations are sufficient at the pleadings stage to allege that Abell acted with the requisite intent to alter, make a copy, or cause a copy of the Companies’ computer data to be made. See MarketPlace 4 Ins., LLC v. Vaughn, 2023 NCBC LEXIS 31, at *31–32 (N.C. Super. Ct. Feb. 24, 2023). Op. ¶189. Op, ¶189-90.

VIII.              Forgery/Fraudulent Inducement

At the 22 January hearing on the Motion, counsel for the Companies conceded that “forgery” is not a recognized civil cause of action under North Carolina law and that the claim being asserted is solely for fraudulent inducement. (Hearing Tr., at 61.)

The Court again parsed through the group pleading drafting error made by Plaintiffs and determined that only one of the Plaintiffs (Highlights) was pursuing this claim for fraudulent inducement. This wasn’t the result of a concession by counsel for the Companies clarifying that this claim was solely being asserted by by Plaintiff Highlights.

That the Plaintiff companies said they had “reasonably relied on the authenticity” of fraudulent promissory notes was insufficient to state a claim for relief. Op. ¶199.  No payments were made on these promissory notes

This claim was dismissed with prejudice.

IX.                  Implied covenant of Good Faith and Fair Dealing (Delaware law vs, North Carolina law)

Delaware law on the concept of good faith and fair dealing by is a bit messy. It has stated by the North Carolina Supreme Court in discussing Delaware law that: “the covenant of good faith and fair dealing ‘is not an equitable remedy for rebalancing economic interests after events that could have been anticipated.’ (quoting Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010). Indeed, the covenant of good faith and fair dealing should not be applied ‘to give the plaintiffs contractual protections that ‘they failed to secure for themselves at the bargaining table.’ ” Winshall v. Viacom Int’l Inc., 76 A.3d 808, 816)

This claim was dismissed with prejudice per Delaware law: “there is no gap that needs be filled in the operating agreements: “a careful reading of Highlights and Empyrean’s respective operating agreements reveals that the parties specifically bargained for the various rights and obligations of its members and the circumstances in which a member’s interests in the companies could be terminated. (See generally Am. Compl. Ex. A; Am. Compl. Ex. D; Am. Compl. Ex. E.) 221. As such, Abell and Magee cannot now invoke the implied covenant of good faith and fair dealing to demand the judicial recognition of rights that are not expressly provided for in Highlights and Empyrean’s respective operating agreements.” Op. ¶220-21

But the claim survived under North Carolina law: It is well recognized that “‘where a party’s claim for breach of the implied covenant of good faith and fair dealing is based upon the same acts as its claim for breach of contract, we treat the former claim as part and parcel of the latter,’ so that the two rise and fall together.” Op. ¶225.

 X.                     The Obligatory Unfair and Deceptive Trade Practices Claim

Chapter 75 claims do not belong in the employer-employee context: To the extent Abell and Magee’s UDTP theory is framed as a dispute in the employment context, it is well recognized that “pure employer-employee disputes are not sufficiently ‘in or affecting commerce’ to satisfy the second element of a UDTP[ ] claim.” Op. ¶232.

Employment -Related Chapter 75 claims are not in or Affecting Commerce: “Here, the issue of whether the Companies — through Graham — wrongfully acted as part of a pretextual scheme to usurp Abell and Magee’s respective ownership and management interests in each of the Companies is not “in or affecting commerce” because such a dispute purely concerns the internal management of the Companies and the parties’ respective rights and obligations as members and managers under the Companies’ respective operating agreements. See Poluka v. Willette, 2021 NCBC LEXIS 105, at *17–18 (N.C. Super. Ct. Dec. 2, 2021).” Op. ¶234

XI.                  Judicial Dissolution Claim

The factors to be considered in determining whether the management of an LLC is impracticable and warranting dissolution: Our Supreme Court has recently articulated the relevant factors that a trial court should consider in assessing whether the management of an LLC is impracticable: (1) whether the management of the company is unable or unwilling to work together to reasonably engage in or promote the purpose for which the company was formed; (2) whether there is deadlock between the managers; (3) whether the operating agreement provides a means of navigating around such deadlock; (4) whether, due to the company’s financial position, there is still a business to operate; (5) whether continuing the company is financially feasible; and (6) whether a member or manager has engaged in misconduct. James H.Q. Davis Tr. v. JHD Props., LLC, 387 N.C. 19, 29 (2025) (footnote omitted). Op. ¶238