Emrich Enters. v. Hornwood, Inc.
| Decision Date | 15 February 2022 |
| Docket Number | 19 CVS 5659 |
| Citation | 2022 NCBC 11 |
| Court | Superior Court of North Carolina |
| Parties | EMRICH ENTERPRISES, LLC, individually and derivatively on behalf of TRIANGLE AUTOMOTIVE COMPONENTS, LLC, Plaintiff, v. HORNWOOD, INC., Defendant, and TRIANGLE AUTOMOTIVE COMPONENTS, LLC, Defendant and Nominal Defendant. |
Ellis & Winters LLP by Michelle Liguori, Emily Melvin, Jonathan D. Sasser, and Thomas H. Segars, for Plaintiff Emrich Enterprises, LLC.
Moore & Van Allen PLLC by Mark A. Nebrig and Kaitlin Price, for Defendant Hornwood, Inc. and Defendant and Nominal Defendant Triangle Automotive Components, LLC.
ORDER AND OPINION ON EMRICH ENTERPRISES, LLC'S MOTION FOR SUMMARY JUDGMENT AND DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [PUBLIC] [1]
Michael L. Robinson Special Superior Court Judge.
1. THIS MATTER is before the Court on cross motions for summary judgment filed by Emrich Enterprises, LLC ("Plaintiff's Motion") and Hornwood, Inc. and Triangle Automotive Components, LLC ("Defendants' Motion") (collectively, the "Motions") pursuant to Rule 56 of the North Carolina Rules of Civil Procedure (the "Rule(s)").
2. For the reasons set forth herein, the Court GRANTS Plaintiff's Motion and GRANTS in part and DENIES in part Defendants' Motion.
3. Plaintiff Emrich Enterprises, LLC ("Emrich") and Defendant Hornwood, Inc. ("Hornwood") are the only members of Defendant Triangle Automotive, LLC ("Triangle"). Emrich brings this action, at least in part, as a derivative suit based on Hornwood's alleged breach of Triangle's governing documents and of Hornwood's fiduciary duties owed directly to Emrich and derivatively to Triangle.
4. The Court does not make findings of fact when ruling on motions for summary judgment. "[T]o provide context for its ruling, the Court may state either those facts that it believes are not in material dispute or those facts on which a material dispute forecloses summary adjudication." Ehmann v. Medflow, Inc., 2017 NCBC LEXIS 88, at *6 ( N.C. Super. Ct. Sept. 26, 2017).
5. Emrich is a North Carolina limited liability company and is the minority member of Triangle.[2] (Br. Supp. Defs.' Mot. Summ. J. Ex. 16, ECF No. 147.17 [ ]; Second Am. Compl. ¶ 14.)
6. Hornwood is a North Carolina corporation and is the majority member of Triangle. (Second Am. Compl. ¶ 16.) As members of Triangle, Emrich and Hornwood are also managers of Triangle for all purposes. (Second Am. Compl. Ex. 1, § 3.1, ECF No. 116.1 ["Op. Agreement"].)
7. Triangle, originally founded in 2006 by Emrich, Hornwood, and non-party Bondtex, Inc. ("Bondtex"), is a North Carolina limited liability company that supplies headliner fabric to automobile companies. (Op. Agreement 1, Second Am. Compl. ¶¶ 15, 23-25.) When Triangle was founded, its three members focused on pursuing business opportunities that involved supplying automotive headliner fabrics. (Second Am. Compl. ¶ 21.)
8. Bondtex eventually withdrew from Triangle in 2018. (See Second Am. Compl. ¶¶ 43, 45, 50.)
9. On 28 February 2006, Emrich, Hornwood, and Bondtex entered into an operating agreement to govern Triangle's operations (the "Operating Agreement"). (See Op. Agreement.)
10. Section 4.4 of the Operating Agreement provides that "[n]o Member may engage in or possess an interest in other business ventures of any nature or description, independently or with others, which are competitive with the activities of [Triangle], without first offering an interest in such activities to [Triangle] and each other Member." (Op. Agreement § 4.4.)
11. Section 8.1 of the Operating Agreements reads as follows:
Restrictions on Transfer. Without the prior written consent of a Majority in Interest of the Disinterested Members (which consent may be given or withheld in their sole discretion) . . . no Member may voluntarily or involuntarily Transfer, or create or suffer to exist any Encumbrance against, all or any part of such Member's record or beneficial interest in the Company.
(Op. Agreement § 8.1 (emphasis in original).) Section 2 of the Operating Agreement defines "Transfer" as to "sell, assign, transfer, lease, or otherwise dispose of property, including without limitation, an interest in the Company." (Op. Agreement § 2.)
12. The Operating Agreement further provides that all decisions with respect to the management of the business and affairs of Triangle shall be made by action of a majority interest of the members. (Op. Agreement § 3.1.) The Operating Agreement does not address, either to create or disclaim, fiduciary duties. (See Op. Agreement.)
13. On 28 April 2006, Emrich, Hornwood, and Bondtex entered into a separate joint venture agreement (the "Joint Venture Agreement"). (Second Am. Compl. Ex. 2, ECF No. 116.2 ["Joint Venture Agreement"].)
14. Upon founding Triangle, Emrich, Hornwood, and Bondtex agreed to a division of responsibilities that were then documented in the Joint Venture Agreement. (Second Am. Compl. ¶ 30; Joint Venture Agree. § 5(d).) Hornwood assumed responsibility for the manufacturing of fabric, invoicing, and internal accounting. (Joint Venture Agreement § 5(d)1.) Bondtex assumed responsibility for the lamination, cutting, storage, and distribution of laminated product. (Joint Venture Agreement § 5(d)2.) Emrich assumed responsibility for the sales and marketing of Triangle's products and customer service.[3] (Joint Venture Agreement § 5(d)3.)
15. Section 3(a) of the Joint Venture Agreement provides that "[e]ither party shall invoice the Joint Venture, with terms of 75 days, the cost it incurs in providing fabric, laminating, cutting and packaging for the completion of the services." (Joint Venture Agreement § 3(a).)
16. In 2015, Triangle sued one of its former sales agents, Suminoe Textile America ("Suminoe") for alleged misconduct (the "Bondtex Lawsuit"). (Second Am. Compl. ¶ 43.) Before the initiation of the lawsuit, Suminoe acquired ownership of Bondtex. (Second Am. Compl. ¶ 43.) In September 2018, the Bondtex Lawsuit was settled. (Second Am. Compl. ¶ 45.) As part of the settlement, Emrich and Hornwood consented to Bondtex's withdrawal from Triangle. (Second Am. Compl. ¶ 50.) Triangle received significant cash proceeds from the settlement. (
17. After Bondtex withdrew from Triangle, Emrich and Hornwood, as the two remaining members of Triangle, hired C.H. Mueller ("Mueller") as a contract laminator to perform lamination services that had previously been performed by Bondtex. (Second Am. Compl. ¶ 53.) Additionally, Hornwood began to perform Triangle's customer-service responsibilities that had previously been performed by Bondtex. (Second Am. Compl. ¶¶ 30, 52.)
18. At Triangle's formation, the Operating and Joint Venture Agreements provided that Triangle would pay Emrich a commission of three to five percent on Triangle's sales. (Second Am. Compl. ¶ 131.) In January 2013, the parties agreed to adjust Emrich's commission to two percent. (Second Am. Compl. ¶ 132.)
19. After the settlement of the Bondtex Lawsuit, John Emrich, a principal of Emrich, suggested to Chuck Horne, Hornwood's CEO, that Triangle approach Borgstena[4] regarding a possible joint development, sales, and supply agreement between the two entities. (Second Am. Compl. ¶¶ 10, 90.) In September 2018, Chuck Horne emailed Borgstena regarding this potential agreement; however, Borgstena declined the offer. (Second Am. Compl. ¶ 90.)
20. Unbeknownst to Emrich, a year earlier, in September 2017, Borgstena had contacted Chuck Horne to discuss the possibility of Hornwood making seating and headliner fabric in the United States for a major automobile manufacturer. (Second Am. Compl. ¶ 77.) In pursuit of such a relationship, and without notice to Emrich, Chuck Horne emailed Borgstena a "company profile" for Hornwood. (Second Am. Compl. ¶ 77.)
21. In furtherance of a potential relationship, in November 2017, Hornwood and Borgstena executed a nondisclosure agreement so that they could negotiate an agreement for joint product development. (Second Am. Compl. ¶ 78.) Hornwood did not alert Emrich about the existence of the nondisclosure agreement or Hornwood's discussions with Borgstena. (Second Am. Compl. ¶ 78.)
22. In February 2018, Chuck Horne and his son Wesley Horne[5] visited Borgstena's manufacturing facility in Portugal. (Second Am. Compl. ¶ 83.) Neither the Hornes, nor Borgstena notified Emrich that such a meeting was taking place, and the Hornes did not invite anyone from Emrich to accompany them on the trip. (Second Am. Compl. ¶ 81.)
23. After the Hornes' meeting in Portugal with Borgstena personnel, Hornwood and Borgstena representatives engaged in weekly discussions regarding potential joint product-development. (Second Am. Compl. ¶ 83.)
24. In May 2018, Borgstena representatives came to North Carolina and met with the Hornes at Hornwood's facility. (Second Am. Compl ¶ 83.) Again, no one from Hornwood told anyone from Emrich about the meeting prior to or at the time it occurred. (Second Am. Compl. ¶ 83.)
25. During their meeting, Hornwood and Borgstena discussed the possibility of Hornwood manufacturing automotive textile products for two automobile manufacturers with whom Borgstena had a relationship. (Second Am. Compl. ¶ 84.) Later, in January 2019, Hornwood told Borgstena about an opportunity for the two manufacturers to jointly purchase a textile plant in North Carolina. (Second Am. Compl. ¶ 93.)
26. Hornwood's product-development efforts with Borgstena involved the same types of fabrics that Hornwood manufactures for Triangle, including the manufacturing of warp-knit headliner...
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