Chisum v. Campagna
| Decision Date | 07 November 2017 |
| Docket Number | 16 CVS 2419 |
| Citation | 2017 NCBC 100 |
| Parties | DENNIS D. CHISUM, individually and derivatively on behalf of JUDGES ROAD INDUSTRIAL PARK, LLC; CAROLINA COAST HOLDINGS, LLC; AND PARKWAY BUSINESS PARK, LLC, Plaintiff, v. ROCCO J. CAMPAGNA; RICHARD J. CAMPAGNA; JUDGES ROAD INDUSTRIAL PARK, LLC; CAROLINA COAST HOLDINGS, LLC; and PARKWAY BUSINESS PARK, LLC, Defendants. |
| Court | Superior Court of North Carolina |
Whitfield Bryson & Mason LLP, by Matthew E. Lee, Esq. and Jeremy R. Williams, Esq. and Sigmon Law, PLLC, by Mark R Sigmon, Esq. for Plaintiff Dennis D. Chisum.
Shipman & Wright, LLP, by Gregory M. Katzman, Esq., Cory W. Reiss, Esq., Gary K. Shipman, Esq. and James T. Moore Esq. for Defendants Rocco and Richard Campagna.
Gregory P. McGuire Special Superior Court Judge.
THIS MATTER comes before the Court on Defendants' Motion to Dismiss (Rules 12(b)(6) and 9(b)) ("Motion"). (ECF No. 49.2.) Defendants seek dismissal of the Plaintiff's First, Second, Eleventh, Thirteenth, and Fourteenth claims for relief contained in the Amended Complaint. (ECF No. 28.)
THE COURT, having considered the Motion, the briefs and exhibits filed in support of and in opposition to the Motion, the arguments of counsel at the hearing, and other appropriate matters of record, concludes that the Motion should be GRANTED, in part, and DENIED, in part, for the reasons set forth below.
1. The Court previously set out the procedural background of this matter in its Opinion and Order on Cross-Motions for Partial Summary Judgment, entered on July 20, 2017 (ECF No. 138; Chisum v. Campagna, 2017 NCBC LEXIS 62, *3-5 (N.C Super. Ct. July 20, 2017).), and herein states only those procedural facts necessary to an understanding of the Motion.
2. The Court does not make findings of fact on motions to dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (hereinafter the Rules of Civil Procedure will be referred to as "Rule(s)" and the General Statutes will be referred to as "G.S."). The Court only recites those facts included in the complaint that are relevant to the Court's determination of the Motion. See, e.g., Concrete Serv. Corp. v. Inv'rs Grp., Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). The Court also may consider documents which are the subject of the plaintiff's complaint and to which the complaint specifically refers, even when such documents are submitted by the defendant. Oberlin Capital, L.P. v. Slavin, 147 N.C.App. 52, 60, 554 S.E.2d 840, 847 (2001).
3. This action arises out of a dispute regarding Plaintiff Dennis D. Chisum's ("Plaintiff") ownership interest in three limited liability companies ("LLC"): Judges Road Industrial Park, LLC ("Judges Road"), Carolina Coast Holdings, LLC ("CCH"), and Parkway Business Park, LLC ("Parkway") (hereinafter, these three LLCs will be collectively referred to as "the Chisum/Campagna LLCs"). Plaintiff and Defendants Rocco Campagna ("Rocco") and Richard Campagna ("Richard") (collectively, "the Campagnas") formed the Chisum/Campagna LLCs in the 1990s to develop commercial real estate in and around Wilmington, North Carolina. Plaintiff is a member, but not a manager, of each of the Chisum/Campagna LLCs. Plaintiff alleges that Rocco "and/or" Richard Campagna "served as managers of each of the Chisum/Campagna LLCs" at all times relevant to this matter. (ECF No. 28 at ¶¶ 12, 69.)
4. Plaintiff and the Campagnas entered into written Operating Agreements for each of the Chisum/Campagna LLCs. The Operating Agreements for Judges Road and CCH give the managers of those LLCs authority to request that members make contributions of additional capital beyond their initial contributions ("capital call"). A capital call initiated by the managers must subsequently be approved by the majority of the members. (Id.) The Operating Agreement for Parkway does not provide for managers to request a capital call, but instead provides that "a majority of the Members . . . may request that the Members make additional contributions of capital to the Company." (ECF No. 28, Ex. C at § 7.1(b).)
5. The Operating Agreement for Judges Road provides that when a member fails to pay a capital call (hereinafter, "non-contributing member"), and another member (hereinafter, "contributing member") elects to make the payment for the non-contributing member, the contributing member "purchase[s] . . . additional capital ownership, " and Judges Road credits the contributing member with one additional Capital Unit for each $1, 000.00 contributed. This, in turn, increases the number of Capital Units held by the contributing member, and the total number of issued and outstanding Capital Units in Judges Road. Each member's adjusted Membership Interest is then determined by dividing the number of Capital Units held by the member by the new aggregate number of outstanding Capital Units held by all members. As a result, the contributing member's Membership Interest proportionally increases, and the non-contributing member's Membership Interest proportionally decreases. "Section 8.1(b) of the Operating Agreement of Judges Road . . . does not permit a member's Membership Interest to be diluted to zero, or extinguished, by failure to contribute capital in response to a capital call." Chisum v. Campagna, 2017 NCBC LEXIS 62, at *28.
6. Beginning in 2007 and continuing into 2012, Richard, or "the Campagnas, "[1] directed unnecessary "sham" capital calls for the Chisum/Campagna LLCs. (ECF No. 28 at ¶¶ 26-29, 35.) Plaintiff alleges that there was no legitimate purpose for the capital calls. (ECF No. 28 at ¶ 29.) Richard "knew [Plaintiff] would not be able to meet the demand for funds." (ECF No. 28 at ¶ 28.) Plaintiff alleges that the purpose of the capital calls was to diminish, and eventually eliminate Plaintiff's ownership interest in the Chisum/Campagna LLCs. (ECF No. 28 at ¶¶ 30-35, 51, 56, 71(a), 112, 143, 150, 151.) Plaintiff alleges that an unspecified number of these "sham" capital calls occurred: "[i]n or around 2007" (ECF No. 28 at ¶ 26); on October 4, 2010 (ECF No. 28 at ¶ 56); and in July 2012. (ECF No. 28 at ¶¶ 47, 51.)
7. Plaintiff did not provide the funds required by the capital calls, and in lieu thereof assigned percentages of his ownership interest to the Campagnas in various installments. (ECF No. 28 at ¶¶ 27, 32.) As a result of Plaintiff's assignments, Plaintiff's interest in each of the Chisum/Campagna LLCs was diminished as follows:
8. In connection with the capital calls, the Campagnas "specifically represented to [Plaintiff] that the capital calls . . . were necessary for the operation of the Chisum/Campagna LLCs, " (ECF No. 28 at ¶ 129), and "fraudulently concealed and misrepresented information that they had a duty to disclose." (ECF No. 28 at ¶ 32.) Plaintiff does not allege that he asked to inspect the books and records of the Chisum/Campagna LLCs in response to the capital calls, or that he was prevented from discovering that the capital calls were unnecessary to the operation of the Chisum/Campagna LLCs. Plaintiff alleges that he did not discover the nature of the Campagnas' conduct until March of 2016 when Plaintiff learned that the Campagnas had sold a mini-storage facility owned by Judges Road. (ECF No. 28 at ¶¶ 38, 43.)
9. In July 2012, the Campagnas held a meeting of the members of the Chisum/Campagna LLCs. (ECF No. 28 at ¶ 47, Ex E.) Plaintiff did not receive notice of the meeting. (ECF No. 28 at ¶ 47.) At the meeting, the Campagnas purported to amend section 8.1(b) of the Operating Agreement for Judges Road[2] to permit a member's interest to be "diluted" to 0% and extinguished if the member failed to contribute in response to a capital call. (ECF No. 28 at ¶¶ 49-50, Ex. E.) Plaintiff did not execute the amendment in writing as required by the Operating Agreement, and thus the "proposed amendment was invalid." (ECF No. 28 at ¶ 48.)
10. Nevertheless, the Campagnas "began conducting themselves and the companies as if the proposed amendment[ ] [was] in force." (ECF No. 28 at ¶ 48.) The Campagnas made capital calls and "supposedly exercised their rights under the proposed amendment[ ] to dilute [Plaintiff] out of the Chisum/Campagna LLCs." (ECF No. 28 at ¶ 51.)
12. Plaintiff made a written demand on the Chisum/Campagna LLCs to take suitable action to...
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