Corporate – Breach of Fiduciary Duty – Demand Futility

Voluntary dismissal without prejudice would not be in defendant private equity growth fund’s best interests, whether to permit Plaintiff to articulate other allegations or otherwise.

The Court denied Plaintiffs’ motion in part and granted it in part.

This case was a putative derivative action arising from an undisputedly poor business deal. In late 2021, Hatteras Evergreen Private Equity Fund, LLC, a private equity growth fund with a previously diversified, $43 million portfolio of alternative assets, agreed to exchange its portfolio for preferred equity shares in The Beneficient Company Group, LLP (Ben), a startup that is not a party to this action. That transaction was spearheaded by defendants Hatteras Investment Partners, L.P. (HIP), the manager of Evergreen Fund, and HIP’s own manager, David B. Perkins. Ultimately, Evergreen Fund’s investment in Ben resulted in the loss of most, if not all, of the value of Evergreen Fund’s assets.

Among other things, Plaintiff contended that HIP and Perkins ignored numerous “red flags” in causing Evergreen Fund to transact with Ben, that they consummated the transaction due to personal interests, and that their conduct was otherwise wrongful and harmful to Evergreen Fund. Accordingly, Plaintiff filed this putative derivative action on behalf of Evergreen Fund. Before doing so, Plaintiff never made a demand on HIP, Perkins, or Evergreen Fund to investigate or otherwise assert claims arising from the issues raised by Plaintiff, instead contending that such a demand would be futile and should be excused.

Plaintiff commenced this action in Wake County Superior Court in December 2024, asserting a putative derivative claim on behalf of Evergreen Fund against Defendants for breach of fiduciary duty. Defendants and Evergreen Fund moved to dismiss the action under Rule 12(b)(1), asserting that “Plaintiff failed to meet the substantive requirements for demonstrating demand futility under Delaware law, and thus lacks standing to sue derivatively.” In short, Defendants and Evergreen Fund contended that Plaintiff failed to plead facts demonstrating that a pre-suit demand was excused before filing this putative derivative action.

Plaintiff moved for voluntary dismissal without prejudice, contending that dismissal without prejudice is in the best interests of Evergreen Fund because Plaintiff’s counsel intends to pursue the litigation through the Delaware courts with other plaintiffs-investors of Evergreen Fund so that “subject matter jurisdiction [is] not reasonably subject to challenge,” as compared to the challenge before this Court. While plaintiffs generally have the ability under Rule 41 to take a unilateral dismissal of their claims prior to resting their case, they may not do so in the context of a derivative action and instead must obtain the Court’s leave to dismiss the action.

Having determined that Plaintiff failed to adequately and particularly plead a legitimate claim, the Court nonetheless evaluated whether voluntary dismissal without prejudice would be in Evergreen Fund’s best interests, whether to permit Plaintiff to articulate other allegations or otherwise. Ultimately, the Court determined that it would not.

Granted in part, denied in part.

Weatherspoon Family LLC v. Hatteras Investment Partners LP (Lawyers’ Weekly No. 020-041-25, 28 pp.) (Matthew T. Houston, J.) 2025 NCBC 41. Malmfeldt Law Group P.C., by Paul D. Malmfeldt; Milberg Coleman Bryson Phillips Grossman, PLLC, by Matthew E. Lee, Eric G. Steber, and Jeremy R. Williams; and Silver Law Group, by Scott L. Silver, for Plaintiff Weatherspoon Family LLC. Parker Poe Adams & Bernstein, LLP, by Melanie Black Dubis, Jack K. Belk, Jr., and Corri A. Hopkins, for Defendants Hatteras Investment Partners, L.P. and David B. Perkins. Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Greg Gaught, Gabrielle E. Supak, and Jennifer K. Van Zant, for Nominal Defendant Hatteras Evergreen Private Equity Fund, LLC. North Carolina Business Court