Corporate – LLC Membership – Unjust Enrichment – Intellectual Property – Labor & Employment – Contract

Plaintiff – a former employee and minority owner of defendant CPP International, LLC – alleges that she was fraudulently induced to give up her membership interest in CPP shortly before it was sold for millions of dollars, much of which was attributable to plaintiff’s designs. Since defendants Bill Stacks, Sabr Leme, Inc., Stacks Holding, Inc., and CPP International, LLC (defaulting defendants), have not responded to plaintiffs’ complaint, they are deemed to have admitted allegations that plaintiff McFee conferred her intellectual property and her share of the proceeds of the sale of CPP’s assets on the defaulting defendants, that she did not confer those benefits officiously, that they were not gratuitous, and that the defaulting defendants consciously accepted them. The complaint further alleges that the sale of CPP’s assets “resulted in millions of dollars of income to CPP” and that the conferred benefits are measurable: “10 percent of the net sale proceeds and the designs [McFee] created while at CPP.”

The court grants default judgment to plaintiffs on their claims for unjust enrichment (all defaulting defendants) and fraudulent transfer (defendant CPP). Plaintiffs’ motion for default judgment is denied as to their claims for breach of fiduciary duty, constructive fraud, conversion, and unfair trade practices.

It is deemed admitted by the defaulting defendants that McFee was induced by fraud to amend her employment agreement with CPP and to abandon her membership interest in CPP.

In addition, the complaint alleges that McFee conferred a direct benefit on CPP and an indirect benefit on Stacks, Stacks Holding, and Sabr Leme. It is sufficient for a plaintiff to prove that it has conferred some benefit on the defendant, without regard to the directness of the transaction.

With respect to McFee’s claims of breach of fiduciary duty and constructive fraud against Stacks, the complaint does not sufficiently allege that a fiduciary relationship existed between Stacks and McFee. As an officer, Stacks owed a fiduciary duty to the company but not to its members, former members, or employees. And McFee has not alleged any other facts to show she was in a fiduciary relationship with Stacks.

McFee’s conversion claim fails because her intellectual property rights, her membership interest, and her expectancy interest in proceeds from the sale of CPP’s assets are all intangible interests that are not subject to a claim for conversion.

Te conduct at issue relates to internal disputes involving CPP, its officers and McFee (an employee and minority owner). Such internal disputes are not in or affecting commerce. McFee’s claim under G.S. § 75-1.1 fails.

The complaint alleges facts sufficient to state a claim for fraudulent transfer against CPP. The complaint alleges that McFee was a creditor of CPP; that CPP was on notice of McFee’s claim from McFee’s filing of a federal action in 2016 and state action in 2017; that CPP transferred substantially all its assets; that CPP and its principals concealed the transfer from McFee; and that defendants transferred the assets with the intent to hinder, delay, and defraud McFee. Taking these allegations as admitted, the court grants the motion for default judgment against CPP on the fraudulent transfer claim.

Plaintiffs also seek a default judgment against Stacks, Stacks Holding, and Sabr Leme. But there are no allegations that plaintiffs were creditors of Stacks, Stacks Holding, or Sabr Leme either before or after the alleged transfers. The complaint alleges only that McFee was a creditor of CPP. As stated above, her claim is based in part on her 2016 and 2017 lawsuit against CPP, in which McFee subsequently obtained a judgment. Additionally, the complaint fails to show any improper transfers made by those defendants, as opposed to CPP. The court denies the motion for default judgment as to the claims for fraudulent transfer against Stacks, Stacks Holding, and Sabr Leme.

Motion granted in part, denied in part.

McFee v. Presley (Lawyers Weekly No. 020-073-22, 14 pp.) (Adam Conrad, J.) William Terpening, Tomi Suzuki, Shaefer Shepard and Albert Allan for plaintiff; Kimberly Kirk and Katie Burchette for defendants William Presley and C. Presley Properties, LLC; no counsel for defendants Bill Stacks, Sabr Leme, Inc., Stacks Holding, Inc., and CPP International, LLC 2022 NCBC 73