McFee v. Presley
| Decision Date | 11 July 2022 |
| Docket Number | 21 CVS 18665 |
| Citation | 2022 NCBC 33 |
| Parties | JACQUELINE S. MCFEE and SAVAGE MCFEE, INC., Plaintiffs, v. WILLIAM C. PRESLEY; BILL T. STACKS; SABR LEME, INC.; C. PRESLEY PROPERTIES, LLC; STACKS HOLDING, INC.; and CPP INTERNATIONAL, LLC, Defendants. |
| Court | Superior Court of North Carolina |
2022 NCBC 33
JACQUELINE S. MCFEE and SAVAGE MCFEE, INC., Plaintiffs,
v.
WILLIAM C. PRESLEY; BILL T. STACKS; SABR LEME, INC.; C. PRESLEY PROPERTIES, LLC; STACKS HOLDING, INC.; and CPP INTERNATIONAL, LLC, Defendants.
No. 21 CVS 18665
Superior Court of North Carolina, Mecklenburg
July 11, 2022
Terpening Law PLLC, by William R. Terpening, Tomi M. Suzuki, and Shaefer A. Shepard, for Plaintiffs Jacqueline S. McFee and Savage McFee, Inc.
Johnston, Allison &Hord, P.A., by Kimberly J. Kirk and Katie D.B. Burchette, for Defendants William C. Presley and C. Presley Properties, LLC.
No counsel appeared for Defendants Bill T. Stacks, Sabr Leme, Inc., Stacks Holding, Inc., and CPP International, LLC.
ORDER AND OPINION ON WILLIAM C. PRESLEY AND C. PRESLEY PROPERTIES, LLC'S MOTION TO DISMISS
Adam M. Conrad, Special Superior Court Judge
1. Jacqueline McFee is a former member and employee of CPP International, LLC ("CPP"). This is the latest in a string of lawsuits against CPP and others designed to reclaim and enforce her rights to intellectual property that she created while working for the company. In relevant part, McFee alleges that her colleague, William Presley, defrauded her out of her membership interest and unfairly exploited her intellectual property. Presley, together with a related entity called C. Presley Properties, LLC, has moved to dismiss the complaint under North Carolina Rule of Civil Procedure 12(b)(6). (See ECF No. 22.) For the following reasons, the Court GRANTS the motion in part and DENIES it in part.
I.
BACKGROUND
2. The Court does not make findings of fact on a motion to dismiss. The following background assumes that the allegations of the complaint are true and also draws from documents referred to in the complaint.
3. McFee is an artist and designer by trade. She met Presley long ago, worked with him for a year or two, and stayed friendly afterward. When Presley bought an interest in CPP and became its president in 1998, he convinced McFee to join him there, at first in a part-time role and later as full-time lead designer. (See Compl. ¶¶ 14-21, ECF No. 3.)
4. McFee alleges that her hiring was a turning point for CPP. Until that time, the company had made and sold only basic office supplies. McFee organized a creative department and introduced a raft of new products based on her unique designs. These products enjoyed immediate success. So did CPP, whose value quadrupled. (See Compl. ¶¶ 22-24, 26, 29.)
5. In 2008, CPP rewarded McFee with membership rights and a ten percent ownership interest.[1] Around the same time, McFee signed a written employment
agreement, which promised her quarterly royalties for products based on her designs as well as the right to verify the royalty amount by inspecting and auditing CPP's records. The agreement also promised that CPP would assign to McFee all the intellectual property related to her designs once the company had stopped using them. Presley added his personal assurance that he would protect her intellectual property rights. (See Compl. ¶¶ 28, 33-35; Defs.' Ex. A 2-3, 8-9, ECF No. 22.2.[2])
6. In 2012, at Presley's prodding, McFee agreed to alter her compensation. Presley informed her-falsely, she alleges-that CPP was performing poorly and that all senior management would take a pay cut. Relying on Presley's representations, McFee signed an amendment that gave her an annual salary but eliminated the royalty and inspection rights contained in her original employment agreement. (See Compl. ¶¶ 36-38; Defs.' Ex. A 32.)
7. A year later, again at Presley's prodding, McFee abandoned her membership interest. Presley convinced McFee that doing so was in CPP's best interests, representing that the company was worthless and that he and all the other owners would forfeit their interests too. In fact, CPP had significant value in part because it possessed the intellectual property related to McFee's designs. Also, Presley later acquired complete ownership of CPP-increasing his stake rather than giving it up. McFee alleges that she did not know the truth because "Presley told her that CPP
was worthless and denied her access to books and records." (See Compl. ¶¶ 39, 4143, 46, 47.)
8. The work environment at CPP grew increasingly hostile from then on. Presley promoted his friend Bill Stacks, and the two began making key managerial decisions without consulting McFee and other senior employees. Then CPP cut McFee's pay again. McFee protested to Presley that she was being marginalized. They clashed one final time in May 2015, and he fired her. (See Compl. ¶¶ 55-57, 60, 63, 64.)
9. A wave of litigation followed. In April 2016, McFee sued CPP in federal court for copyright infringement stemming from the use of her designs. (See Compl. ¶ 68.) The court dismissed her claim because she did "not have ownership of the intellectual property rights" at issue. McFee v. CPP Int'l, 2017 U.S. Dist. LEXIS 21462, at *8 (W.D. N.C. Feb. 15, 2017). The court further noted that CPP's failure to assign copyrights and related intellectual property to McFee might have been a breach of her employment agreement but declined jurisdiction over that issue. See id. at *8-9.
10. So, in October 2017, McFee sued CPP for breach of contract in state court. For reasons that are not clear, CPP did not answer or make an appearance in that second lawsuit. As a result, in February 2020, the presiding superior court judge entered a default judgment, which included an award of damages and an assignment of intellectual property to McFee. (See Compl. ¶¶ 68, 69.)
11. While that lawsuit was pending, CPP ceased doing business. Presley and Stacks sold some of CPP's assets in October 2017 to a company called Pacon and the rest of its assets in March 2019 to a company called Bay Sales. McFee did not receive any of the proceeds from either sale. McFee believes that Bay Sales has infringed the copyrights assigned to her via the default judgment against CPP, and she has since sued one of its subsidiaries in federal court. (See Compl. ¶¶ 70, 73, 75, 81-84, 89, 96.)
12. This is McFee's fourth and most recent lawsuit. She alleges that Presley fraudulently induced her to abandon her membership interest and then schemed to steal her intellectual property and her share of the proceeds of CPP's asset sales. The complaint includes claims for breach of fiduciary duty, constructive fraud, fraud, fraudulent transfer, conversion, unjust enrichment, and unfair or deceptive trade practices under N.C. G.S. § 75-1.1.[3]
13. Presley has moved to dismiss all claims under Rule 12(b)(6). The Court held a hearing on 30 June 2022, and the motion is now ripe.
II.
LEGAL STANDARD
14. A motion to dismiss "tests the legal sufficiency of the complaint." Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation marks omitted). Dismissal is proper when "(1) the complaint on its face reveals that no law supports the plaintiff's claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats
the plaintiff's claim." Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (citation and quotation marks omitted). The Court must treat all well-pleaded allegations as true and view the facts and permissible inferences in the light most favorable to the nonmoving party. See, e.g., Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019). The Court may also consider documents, such as contracts, that are the subject of the complaint. See, e.g., Oberlin Capital, L.P. v. Slavin, 147 N.C.App. 52, 60 (2001).
III.
ANALYSIS
15. McFee believes that she was swindled out of her membership in CPP, her intellectual property rights, and her share of the proceeds from CPP's asset sales. Presley contends that her allegations are missing key elements and therefore do not state an actionable claim. He also contends that most of her claims are time-barred. The Court begins with Presley's challenges to specific elements of the asserted claims before turning to questions of timeliness.
A. Breach of Fiduciary Duty and Constructive Fraud
16. Breach of fiduciary duty and constructive fraud are related, though distinct, causes of action. Essential to each is the existence of a fiduciary relationship. See, e.g., Azure Dolphin, LLC v. Barton, 2017 NCBC LEXIS 90, at *23-24 (N.C. Super. Ct. Oct. 2, 2017), aff'd, 371 N.C. 579 (2018); Brown v. Secor, 2017 NCBC LEXIS 65, at *18-19 (N.C. Super. Ct. July 28, 2017). A fiduciary relationship exists when a person places special confidence in a party who "is bound to act in good faith and in the best
interest of the" person reposing the confidence. Lynn v. Fannie Mae, 235 N.C.App. 77, 81 (2014).
17. Presley argues that the complaint does not adequately allege the existence of a fiduciary relationship. Generally, a manager of an LLC owes a fiduciary duty to the company but not to its members, and members do not owe fiduciary duties to the company or to each other. See, e.g., Kaplan v. O.K. Techs., L.L.C., 196 N.C.App. 469, 474 (2009). According to Presley, this means that he did not owe a fiduciary duty to McFee in his roles as member, manager, or officer of CPP.
18. In response, McFee points to the rule that, "under special circumstances, a director of a corporation stands in a fiduciary relationship to a shareholder or director in the acquisition of the shareholder's stock." Lazenby v. Godwin, 40 N.C.App. 487, 494 (1979). For example, "where the parties do not have equal access to the necessary information, a duty to disclose exists." Id. at 495. McFee contends that she has alleged special circumstances giving rise to a fiduciary relationship, including that Presley had control over CPP's finances and superior access to its financial information.
19. Because the case that McFee cites comes from the...
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