NC Biz Court: Fiduciary duty claims stand in healthcare company dispute

Some claims, including breach of fiduciary duty, were sufficiently pleaded to survive Rule 12(b)(6), while others failed as a matter of law, including a standalone claim for specific performance, which is an equitable remedy rather than an independent cause of action, the North Carolina Business Court has ruled, issuing a mixed ruling on multiple motions to dismiss arising from a dispute among the members, managers, and former officers of three affiliated healthcare companies.

The court dismissed some claims, allowed others to proceed, and noted that the litigation involved competing factual narratives that could not be resolved at the pleading stage.

The case stems from a breakdown in the relationship between the principals of Highlights Healthcare, LLC, Empyrean Hospice, LLC, and HLRE, LLC. The companies alleged that former executive Douglas Abell, along with other defendants, breached fiduciary duties by using confidential information to establish competing businesses, soliciting employees and investors, misappropriating trade secrets, accessing company computer systems, and executing unauthorized promissory notes for his own benefit. They also sought specific performance of agreements requiring Abell and another former executive, James Magee, to sell their ownership interests back to the companies. Abell and Magee responded with counterclaims and third-party claims, alleging that majority owner Larry Graham improperly exercised unilateral control over the companies, engaged in self-dealing, fostered a hostile workplace driven by his religious beliefs, wrongfully terminated them, and attempted to force them to surrender their ownership interests without fair compensation.

Addressing the companies’ claims, the court first held that specific performance could not stand as an independent cause of action because it is an equitable remedy rather than a standalone claim. That claim was dismissed without prejudice, allowing the companies to seek specific performance later if they prevail on an underlying contractual claim. The court, however, declined to dismiss the companies’ breach of fiduciary duty claim against Abell. It concluded that the complaint plausibly alleged Abell owed fiduciary duties to the companies while serving as chief executive officer and general counsel and that he breached those duties by allegedly diverting confidential information, pursuing competing business opportunities, and engaging in self-interested conduct. The court also rejected the argument that the claim failed because the companies had not alleged actual damages, explaining that under both North Carolina and Delaware law, the possibility of nominal damages is sufficient to support a fiduciary duty claim at the pleading stage.

The opinion also addressed numerous additional claims and counterclaims asserted by both sides, as well as third-party claims against Graham and Knox Hill Investments. Applying the Rule 12(b)(6) standard, the court repeatedly noted that it was required to accept well-pleaded factual allegations as true and that many of the parties’ disputes turned on sharply conflicting factual accounts unsuitable for resolution on a motion to dismiss. The court also criticized the parties’ extensive use of “group pleading,” observing that broadly lumping parties together without identifying who committed specific acts obscured the claims and complicated judicial review.

Highlights Healthcare LLC v. Abell (Lawyers Weekly No. 020-067-26, 95 pp.) (Mark A. Davis, J.) 2026 NCBC 67. Villmer Caudill, PLLC, by Bo Caudill, Precious McLaughlin, Brittney Slade, and Nicholas Williams, for Plaintiffs Highlights Healthcare, LLC, Empyrean Hospice, LLC, and HLRE, LLC. Spilman Thomas & Battle, PLLC, by Emily Merritt, Jeffrey Patton, and James Simon, for Defendants Douglas J. Abell, Jr., James Magee, Sean J. O’Reilly, Michael Stanley, and Cher Abell. TLG Law, by Sean McLeod and David Redding, for Third-Party Defendants Larry Graham and Knox Hill Investments, LLC. North Carolina Business Court