Tort/Negligence – Breach of Fiduciary Duty – Corporate & Shareholder’s Claims

Timbercreek Land & Timber Co., LLC v. Robbins (Lawyers Weekly No. 020-071-17, 22 pp.) (Michael Robinson, J.) 2017 NCBC 64

Holding: Plaintiffs allege that (1) plaintiff Hooper lacked knowledge about the timber business but funded plaintiff Timbercreek relying entirely on defendant Robbins – who had such knowledge – to manage Timbercreek, (2) Robbins formed a competing business, (3) Robbins directed business opportunities to his competing business, and (4) Robbins’ business used Timbercreek’s equipment to compete with Timbercreek. While these allegations are sufficient to state a breach of fiduciary duty claim on behalf of Timbercreek, they do not state such a claim on behalf of Hooper.

Defendants’ partial motion to dismiss is granted as to Hooper’s claims of breach of fiduciary duty and constructive trust. The motion is denied as to Timbercreek’s claims of breach of fiduciary duty and constructive trust.

The complaint does not allege that Robbins, through misrepresentations or otherwise, induced Hooper to form and become a member of Timbercreek. Likewise, the complaint does not allege that Robbins induced Hooper to become a guarantor of Timbercreek’s debt. Therefore, the complaint fails to allege that Robbins induced Hooper to become a member or guarantor so as to create a special duty between Hooper and Robbins.

Any duty arising out of Robbins’ superior knowledge of the timber business is also owed to Timbercreek; it is not unique to Hooper. Accordingly, any duty to Hooper is not distinct from the general fiduciary duties Robbins owed to Timbercreek to act in good faith, with the care of an ordinary prudent person, and in Timbercreek’s best interests.

To the extent plaintiffs argue that Hooper has suffered a special injury because he personally guaranteed Timbercreek’s obligations, this argument is unavailing. The loss of one’s investment, regardless of amount, is identical to the injury suffered by the LLC.

Since Robbins did not breach any fiduciary duty to Hooper, Hooper’s constructive trust claim also fails.

However, the allegations which support Timbercreek’s breach of fiduciary duty claim also state a claim that Robbins took advantage of his fiduciary relationship in order to benefit himself. Therefore, Timbercreek has stated a constructive fraud claim.

Motion granted in part and denied in part.