Corporate – Judicial Dissolution – Shareholder Agreement

The complaint, read alongside the Shareholder Agreement, fails to state a viable claim for judicial dissolution.

We modified and affirmed the Business Court’s dismissal of plaintiffs’ judicial dissolution claim. We otherwise affirmed the Business Court on the issues appealed.

Cherry Oil is a closely held corporation that distributes propane and refined fuel in eastern North Carolina. Plaintiffs together own 34% of the company’s shares. In 2021, Plaintiffs sued to dissolve Cherry Oil under N.C.G.S. § 55-14-30(2)(ii), arguing that liquidating the corporation was “reasonably necessary” to protect their “rights or interests” as shareholders. The Business Court dismissed that claim for lack of standing under Rule 12(b)(1). We ultimately affirmed the dismissal of this claim, but on alternate grounds.

Contrary to the Business Court’s opinion, Plaintiffs had standing to bring their claim. They allege the violation of a legal right secured by N.C.G.S. § 55-14- 30(2)(ii), and they fall within the class of people the statute authorizes to sue. That is enough to establish standing in North Carolina. Even so, the Business Court was right to dismiss this claim, and we affirmed the dismissal under Rule 12(b)(6). The complaint is appropriately dismissed because it alleged the existence of a provision in the shareholder agreement that grants Plaintiffs the right to sell their shares back to Cherry Oil at fair market value— essentially the same relief they sought through judicial dissolution under N.C.G.S. § 55- 14-30(2)(ii). Exercising this provision avoids the collateral fallout that would flow from shutting down the company, firing all of its employees, and selling its assets piecemeal. Where the shareholder agreement provides this buyback option, without further factual allegations that dissolution is “reasonably necessary” to protect Plaintiffs’ rights or interests and that Plaintiffs are entitled to some form of equitable relief under the circumstances, dismissal is warranted. We therefore affirmed the Business Court’s dismissal under Rule 12(b)(6), along with its other rulings on appeal.

We did not hold that buy-out provisions in shareholder agreements defeat dissolution claims across the board. We did not limit a minority shareholder’s “reasonable expectations” to the four corners of the governing documents. And we did not suggest that dissolution is off the table when liquidation is “reasonably necessary” to protect a shareholder’s rights or interests. Instead, we simply concluded that Plaintiffs’ complaint alleges no such reasonable necessity. It fails to show why, under “all of the circumstances of the case,” Meiselman, 309 N.C. at 301, Plaintiffs are entitled to the equitable remedy of dissolution—especially when a guaranteed contractual remedy, materially equivalent in its benefits to Plaintiffs, is already underway. We therefore affirmed the Business Court’s dismissal, not for lack of standing, but for failure to state a claim under Rule 12(b)(6).

Modified and affirmed.

Mauck v. Cherry Oil Co. Inc. (Lawyers’ Weekly No. 010-035-25, 24 pp.) (Anita Earls, J.) Appealed from Lenoir County Superior Court (Mark A. Davis, J.) Williams Mullen, by Walter L. Tippett Jr. and Lewis H. Hallowell, for plaintiff-appellants. Womble Bond Dickinson (US) LLP, by Samuel B. Hartzell, Matthew F. Tilley, and Pressly M. Millen, for defendant-appellees. North Carolina Supreme Court