Corporate – Piercing the Corporate Veil – Breach of Fiduciary Duty

Plaintiffs’ rote recitations and contract-based allegations do not provide sufficient non-conclusory allegations to maintain a request for piercing the veil of Defendant corporation.

The Court granted Plaintiffs’ request to pierce the corporate veil of Defendant C&S Commerce, LLC.

Plaintiffs were previously employed by and held managerial positions at Warp Development Corporation. In 2023, Plaintiffs, the individual Defendant (Clay), and another individual (Chambers) founded Defendant C&S (a North Carolina LLC) to purchase Warp’s assets and to carry on Warp’s business, which they ultimately did. With C&S, Plaintiffs and Clay retained the same employment roles that they previously held with Warp Development. Approximately three months later, Plaintiffs, Clay, and Chambers signed and entered into an operating agreement for C&S. Clay signed the operating agreement as both the manager and a member of C&S, while Plaintiffs and Chambers all signed as members of C&S. Under the operating agreement, Clay is majority owner of C&S with a 70% ownership interest, while Plaintiffs collectively own 20%, and Chambers owns the remaining 10% of the company.

In early 2025, as part of his third attempt to purchase Plaintiffs’ interests in C&S, Clay (i) issued to Plaintiffs a proposed membership interest redemption agreement, valuing Plaintiffs’ respective individual 10% membership interests at $25,000 each ($50,000 total), and (ii) fired Plaintiffs––without cause and without an 80% vote of C&S’s membership. In the course of terminating Plaintiffs’ employment, Clay barred Plaintiffs from C&S’s property, insisting that they sign the membership interest redemption agreement and return it by mail.

Clay refused to permit Plaintiffs to inspect the company’s books and records, declined to negotiate with Plaintiffs, and instead withdrew the proposed membership interest redemption agreement. Plaintiffs asserted Defendants’ actions were contrary to the terms of the operating agreement, that no basis existed for a for-cause termination, and that Clay otherwise was not authorized to terminate their employment or cause forfeiture of their shares in either his position as Manager or his position as Majority Member.

Plaintiffs asserted causes of action for (i) breach of contract against Clay and C&S, (ii) breach of fiduciary duty against Clay, (iii) unjust enrichment against Clay and C&S, and (iv) a declaratory judgment concerning certain of Plaintiffs’, Clay’s, and Chambers’ respective rights and obligations under the operating agreement. Plaintiffs also sought injunctive relief, an award of punitive damages, and the remedy of piercing the corporate veil. Defendants sought dismissal of only Plaintiffs’ request for the remedy of piercing the corporate veil and Plaintiffs’ cause of action for breach of fiduciary duty.

Plaintiffs’ allegation Clay failed to follow the specific procedural terms of the operating agreement does not rise to the level of “noncompliance with corporate formalities” or “lack of a separate corporate identity.” Ultimately, Plaintiffs’ rote recitations and contract-based allegations do not provide sufficient non-conclusory allegations to maintain a request for piercing the veil of C&S, and the Court determined that Defendants’ motion to dismiss that request should be granted and that Plaintiffs’ request to pierce the corporate veil should be dismissed without prejudice.

Granted.

Estevez v. C&S Commerce LLC (Lawyers’ Weekly No. 020-073-25, 22 pp.) (Matthew T. Houston, J.) 2025 NCBC 73. Vilmer Caudill, PLLC, by Brittney Slade and Sophia Pappalardo, for Plaintiffs Oscar and Julian Estevez. Alexander Ricks, PLLC, by Miller F. Capps and Benjamin Leighton, for Defendants C&S Commerce LLC and Cameron Chad Clay. North Carolina Business Court