McFee v. Presley
| Docket Number | 21 CVS 18665 |
| Decision Date | 28 December 2023 |
| Parties | JACQUELINE S. MCFEE and SAVAGE MCFEE, INC., Plaintiffs, v. WILLIAM C. PRESLEY; BILL STACKS; SABR LEME, INC.; C. PRESLEY PROPERTIES, LLC; STACKS HOLDING, INC.; and CPP INTERNATIONAL, LLC, Defendants. |
| Court | Superior Court of North Carolina |
Terpening Law P.L.L.C., by William R. Terpening and Tomi M Suzuki, and Allan Law Firm, PLLC, by Albert P. Allan, for Plaintiffs Jacqueline S. McFee and Savage McFee, Inc.
Johnston, Allison &Hord, P.A., by Kimberly J. Kirk and Katie D. Burchette, for Defendants William C. Presley and C Presley Properties, LLC.
No counsel appeared for Defendants Bill Stacks, Sabr Leme, Inc. Stacks Holding, Inc., and CPP International, LLC.
1. For over a decade, Jacqueline McFee was CPP International, LLC's lead designer. CPP fired her in 2015. Shortly after, she sued it in federal court and then again in state court to reclaim and enforce intellectual property rights in artistic designs that she created while working for the company. The first suit ended in dismissal, but the second suit produced a $7 million default judgment after CPP had gone out of business.
2. This lawsuit is the third in the trilogy. Here, McFee has sued not only CPP but also some of its former officers and their personal holding companies. Among the defendants is William Presley, a past president of CPP. McFee alleges that Presley tricked her into assigning her intellectual property rights to CPP during her employment and that he fraudulently conveyed CPP's assets to avoid paying her judgment. Presley denies all of this and faults McFee for having waited years to bring claims that he contends are stale under governing statutes of limitations.
3. McFee and Presley have filed cross-motions for summary judgment.[1] For the following reasons, the Court GRANTS Presley's motion and DENIES McFee's motion.
4. The Court does not make findings of fact when ruling on motions for summary judgment. The following background, drawn from the evidence submitted by the parties, provides context for the Court's analysis and ruling only.
5. In its heyday, CPP manufactured and sold all sorts of stationery, office products, and school supplies. It is now dissolved and out of business.
6. Presley joined CPP in 2000 and soon became its president, CEO, and part owner (though he held his Class A membership interest indirectly through other entities). He recruited McFee, a friend and former colleague, to work for CPP. She agreed to become CPP's lead designer. (See Presley Dep. 17:3-4, 22:1-23:17, 27:128:4, ECF No. 148.3.)
7. In 2008, McFee became a Class B member of CPP with a ten percent interest. Class B members could not vote on company matters. Nor did they receive regular distributions. But they had broad rights to inspect CPP's books and records and received annually a balance sheet, a statement of income or loss, and a statement of cash flow. McFee acknowledges that she never exercised her inspection rights and typically did not review the financial information received from the company. (See Presley Aff. Ex. 3 §§ 5.1, 6.1, 7.2, 7.3, ECF No. 147.4 ["Op. Agrmt."]; McFee Dep. 108:7-15, ECF No. 148.2.)
8. At the same time that McFee obtained her membership interest, she also entered into a written employment agreement. Most relevant here is section 12, which deals with intellectual property rights related to the designs that McFee created during her employment. She agreed that all intellectual property arising from her work would be the "sole and exclusive property" of CPP and assigned to the company the worldwide right to "license, sell or otherwise control" it. But she retained an option to reclaim rights to her designs either when CPP stopped selling or distributing them or two years after it stopped producing them. According to McFee, Presley falsely promised then and later that he would protect her rights and ensure that CPP reassigned them to her when the time came. (See Terpening Aff. Ex. E § 12, ECF No. 153.5; McFee 2d Aff. ¶¶ 10-13, ECF No. 166.1.)
9. Over the next few years, CPP considered selling its business, but those efforts fizzled by 2012. This seems to have been the turning point in McFee's relationship with Presley. In mid-2012, she agreed to amend her employment agreement and reduce her compensation. Then, at the start of 2013, she and the other Class B members abandoned their membership interests. According to McFee, Presley tricked her into doing so by falsely representing that CPP was performing so poorly that it had become worthless. Further salary reductions followed, and in 2015, CPP fired McFee. (See Terpening Aff. Exs. F-H, ECF Nos. 153.6-.8; McFee 2d Aff ¶¶ 9, 18, 20; McFee Dep. 112:16-21, 118:11-13.)
10. After CPP let her go, McFee made a formal request for reassignment of the rights to her designs. Presley refused, so McFee sued CPP in federal court in April 2016. She claimed that CPP had breached her employment agreement by refusing to reassign her rights and that its continued use of her designs amounted to copyright infringement. At that point, Presley agreed to reassign the rights to some designs but not many others that McFee believed were rightfully hers. (See Terpening Aff. Exs. L, M, ECF Nos. 153.12, 153.13.) The federal court concluded that McFee did "not have ownership of the intellectual property rights" at issue, dismissed her copyright claim with prejudice, and dismissed her other claims without prejudice to her right to refile in state court. McFee v. CPP Int'l, 2017 U.S. Dist. LEXIS 21462, at *8, *10 (W.D. N.C. Feb. 15, 2017).
11. McFee sued CPP in state court in October 2017. This time, she claimed not only that CPP had breached her employment agreement but also that it had defrauded her by promising to reassign the rights to her designs when it never truly intended to do so. In February 2020, McFee obtained a default judgment in the state action against CPP, which included an award of damages and an assignment of intellectual property to her as of the date of the judgment. (See Terpening Aff. Exs. O, P, ECF Nos. 153.15, 153.16.)
12. Several key events occurred while the state action was pending. On the day after McFee filed her complaint in that case, CPP sold assets from its arts and crafts division to a company called Pacon for roughly $11 million. CPP then paid some of the proceeds to its secured lender (Wells Fargo), distributed some to Presley, and kept the rest as capital. At the end of 2017, Presley stepped down as president and transferred his membership in CPP to Bill Stacks for a nominal sum. Business continued under Stacks's direction but began to decline rapidly, and within eighteen months or so, CPP was defunct. In 2019, it defaulted on a line of credit from Wells Fargo. After the default, Wells Fargo foreclosed on assets used as collateral and sold them to a company called Bay Sales. (See Terpening Aff. Ex. C, ECF No. 153.3; Presley Aff. Ex. 13, ECF Nos. 147.14, 181.3; Defs.' Exs. 4, 6, 7, ECF Nos. 148.5, 148.7, 148.8, 181.1; Stacks Dep. 24:15-18, ECF No. 153.25.)
13. In this action, McFee has sued Presley for fraud, unjust enrichment, breach of fiduciary duty, and constructive fraud. She also claims that the asset sale to Pacon and the foreclosure sale to Bay Sales were fraudulent transfers under N.C. G.S. §§ 39-23.4(a)(1) and 39-23.5(b), for which she seeks to pierce CPP's veil to hold Presley liable. (Am. Compl., ECF No. 98.)
14. Discovery has closed. Both McFee and Presley have moved for summary judgment on all claims. (See ECF Nos. 148, 154.) Their motions have been fully briefed, and the Court held a hearing on 11 October 2023. The motions are ripe for decision.
15. Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. R. Civ. P. 56(c). In ruling on a motion for summary judgment, the Court must consider the evidence in the light most favorable to the nonmoving party, drawing all inferences in the nonmoving party's favor. See, e.g., Morrell v. Hardin Creek, Inc., 371 N.C. 672, 680 (2018).
16. The moving party "bears the initial burden of demonstrating the absence of a genuine issue of material fact." Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571, 579 (2002). If the moving party carries this burden, the opposing party "may not rest upon the mere allegations or denials of his pleadings," N.C. R. Civ. P. 56(e), but must instead "come forward with specific facts establishing the presence of a genuine factual dispute for trial," Liberty Mut. Ins. Co., 356 N.C. at 579. "An issue is 'genuine' if it can be proven by substantial evidence and a fact is 'material' if it would constitute or irrevocably establish any material element of a claim or defense." Lowe v. Bradford, 305 N.C. 366, 369 (1982) (quoting Bone Int'l, Inc. v. Brooks, 304 N.C. 371, 374-75 (1981)).
17. "When the party with the burden of proof moves for summary judgment, a greater burden must be met." Almond Grading Co. v. Shaver, 74 N.C.App. 576, 578 (1985). The moving party "must show that there are no genuine issues of fact, that there are no gaps in his proof that no inferences inconsistent with his recovery arise from the evidence, and that there is no standard that must be applied to the facts by the jury." Parks Chevrolet, Inc. v. Watkins, 74 N.C.App. 719, 721 (1985); see also Kidd v. Early, 289 N.C. 343, 370 (1976). For that reason, it is "rarely . . . proper to enter summary judgment...
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