Gaston Cap., LLC v. Kellar, 2026 NCBC 71.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
GASTON COUNTY 25CV006056-350
GASTON CAPITAL, LLC; GASTON
CAPITAL FUND V, LLC; GASTON
CAPITAL INCOME FUND II, LLC
f/k/a GASTON CAPITAL FUND VI,
LLC; GASTON CAPITAL
HEALTHCARE FUND, LLC;
GASTON CAPITAL PARTNERS
LLLP; MKM & CO.; THE
WILLIAM GASTON FUND, LLC;
THE WILLIAM GASTON INCOME
FUND, LLC; DONALD DOCTOR;
DANIEL SASSANO; LARRY ORDER AND OPINION ON
WIDNER; SASSANO LE, LLC; DEFENDANTS’ PARTIAL MOTION TO
and SASSANO ENDEAVORS, LLC, DISMISS AND PLAINTIFFS’ MOTION
Plaintiffs, FOR LEAVE TO AMEND
v.
FRANZ W. KELLAR;
ORTHOMEDFLEX, LLC;
BIOMEDFLEX, LLC; PRONUVIS,
LLC; PRONUVIS (NC), LLC;
KINEMAX ENGINEERING, PLLC;
AURUM MATRIX LLC; LITTLE
ENGINE, LLC; HAROLD
CROWDER; and RENOVO LIFE,
LLC,
Defendants.
THIS MATTER is before the Court on Defendants’ Partial Motion to Dismiss
(“Motion to Dismiss,” ECF No. 10) and Plaintiffs’ Motion for Leave to File First
Amended Complaint (“Motion to Amend,” ECF No. 26) (collectively, the “Motions”).
The Court concludes that the Motions should be GRANTED in part and DENIED in
part.
Troutman Pepper Locke LLP by William J. Farley, III and Jenna M.
White for Plaintiffs Gaston Capital, LLC, Gaston Capital Fund V, LLC,
Gaston Capital Income Fund II, LLC f/k/a Gaston Capital Fund VI,
LLC, Gaston Capital Healthcare Fund, LLC, Gaston Capital Partners,
LLLP, MKM & Co., The William Gaston Fund, LLC, The William
Gaston Income Fund, LLC, Donald Doctor, Daniel Sassano, Larry
Widner, Sassano LE, LLC, and Sassano Endeavors, LLC.
Alexander Ricks, PLLC by Miller F. Capps and Michael L. Wilson for
Defendants Franz W. Kellar, Orthomedflex, LLC, Biomedflex, LLC,
Pronuvis, LLC, Pronuvis (NC), LLC, Kinemax Engineering, PLLC,
Aurum Matrix, LLC, Little Engine, LLC, Harold Crowder, and Renovo
Life, LLC.
Davis, Judge.
INTRODUCTION
1. This case involves a dispute arising from a series of loans made between
2013 and 2025 by a group of private equity companies to fund biomedical research.
FACTUAL AND PROCEDURAL BACKGROUND
2. The Court does not make findings of fact in connection with a motion to
dismiss under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure and
instead recites those facts contained in the complaint (and in documents attached to,
referred to, or incorporated by reference in the complaint) that are relevant to the
Court’s determination of the motion. See, e.g., Window World of Baton Rouge, LLC
v. Window World, Inc., 2017 NCBC LEXIS 60, at *11 (N.C. Super. Ct. July 12, 2017).1
3. Defendant Franz Kellar is a North Carolina-based engineer who
develops and markets medical device products through his companies OrthoMedFlex,
LLC (“OrthoMedFlex”), BioMedFlex, LLC (“BioMedFlex”), ProNuVis, LLC
1 As discussed below, the Court has elected to address in this Opinion both Defendants’ motion to dismiss Plaintiffs’ original Complaint and Plaintiffs’ motion seeking leave to file their proposed amended complaint. The factual allegations cited herein are to Plaintiffs’ proposed amended complaint.
(“ProNuVis”), ProNuVis (NC), LLC (“ProNuVis (NC)”), Aurum Matrix, LLC
(“Aurum”), Kinemax Engineering, PLLC (“Kinemax”), Dynamic Balancer Systems,
LLC (“DB Systems”), Spectral–Flush Anchor Systems, LLC (“Spectral”), and Renovo
Life, LLC (“Renovo”) (collectively, the “Kellar Entities”). (Am. Compl., ECF No. 26.1,
¶¶ 4–6, 8–10, 35, 52–53.) 2
4. Plaintiffs Gaston Capital, LLC (“Gaston Capital”), Gaston Capital Fund
V, LLC (“Capital Fund V”), Gaston Capital Income Fund II, LLC f/k/a Gaston Capital
Fund VI, LLC (“Capital Fund VI”), Gaston Capital Healthcare Fund, LLC
(“Healthcare Fund”), Gaston Capital Partners, LLLP (“Capital Partners”), MKM &
Company (“MKM”), The William Gaston Fund, LLC (“WG Fund”), The William
Gaston Income Fund, LLC (“WG Income Fund”), Sassano LE, LLC (“Sassano LLC”),
and Sassano Endeavors, LLC (“Sassano Endeavors”) are private equity companies
doing business in North Carolina. (Am. Compl. ¶¶ 22–29.)
5. Plaintiffs Donald Doctor, Daniel Sassano, and Larry Widner are all
North Carolina residents. (Am. Compl. ¶¶ 30–32.)
6. Defendant Harold Crowder is a North Carolina resident and was the
sole managing member of Defendant Little Engine, LLC (“Little Engine”), a North
Carolina limited liability company that was administratively dissolved on 24 July
2025. (Am. Compl. ¶¶ 44–45.)
2 OrthoMed, BioMedFlex, ProNuVis (NC), Kinemax, Aurum, and Renovo are all North Carolina limited liability companies. DB Systems, Spectral, and ProNuVis are Delaware limited liability companies. All of the entities do business in North Carolina. (Am. Compl. ¶¶ 36–44).
7. At all relevant times, Kellar relied on third-party investors (such as
Plaintiffs) to provide capital in the form of investments or loans 3 to fund his
development and marketing of medical devices. (Am. Compl. ¶¶ 54–55.)
8. Plaintiffs allege that they have collectively paid out over $10 million to
the Kellar Entities for this purpose as reflected in a series of contracts evidencing the
transactions. (Am. Compl. ¶¶ 88–89.) 4
9. Most recently, Kellar’s focus has been on developing devices for ligament
repair procedures—specifically the Dynamic Balancer and the Flush Anchor
(collectively, the “Devices.”) (Am. Compl. ¶¶ 8–10.)
10. Plaintiffs allege “Kellar represented that Plaintiffs’ capital
contributions could be repaid, at least in part, through future capitalization of the
[D]evices, thereby suggesting that the Kellar Entities would own the intellectual
rights to the [D]evices.” (Am. Compl. ¶ 80.)
11. Plaintiffs assert that Kellar nevertheless proceeded to transfer or assign
the intellectual property rights in the Devices to Little Engine, and then
“orchestrated the further transfer and/or assignment of those rights to DB Systems
and Spectral.” (Am. Compl. ¶ 83.)
3 The Court notes that throughout the Amended Complaint, Plaintiffs use the term “investments” to reference both loan transactions and purchases of equity stakes in the Kellar Entities.
4 Although none of these contracts are attached to any of the pleadings that have been filed
by the parties, Plaintiffs’ original and Amended Complaint—as discussed in more detail below—identify all of the contracts that are relevant to this case and—for virtually all of them—list the lender, the debtor, the amount of the loan, the date the promissory note was executed, and the applicable maturity date. (Am. Compl. ¶ 89.)
12. According to Plaintiffs, Kellar did so for the purpose of keeping the
Devices (and the money they generated) separate from the financial obligations owed
by the Kellar Entities to Plaintiffs. (Am. Compl. ¶¶ 147–51.)
13. On 26 June 2025, a Notice of Default was sent on behalf of Plaintiffs
Gaston Capital, Capital Fund V, Capital Fund VI, Healthcare Fund, Capital
Partners, MKM, WG Fund, and WG Income Fund to Defendants. (Am. Compl. ¶ 71.)
This notice of default demanded payment of $10,340,873.31. (Am. Compl. ¶ 72.)
14. On 27 August 2025, a Notice of Default and Demand for Payment was
sent to Kellar and OrthoMedFlex in the amount of $418,750 on behalf of Plaintiff
Widner. (Am. Compl. ¶¶ 74–75.)
15. Plaintiffs initiated this action on 23 October 2025 by filing a Complaint
in Gaston County Superior Court (ECF No. 3). In the Complaint, Plaintiffs asserted
claims for (1) breach of written contract, (2) breach of oral contract, (3) unjust
enrichment/quantum meruit, (4) account stated, (5) unfair and deceptive trade
practices (“UDTP”), (6) constructive fraud, (7) breach of fiduciary duty, (8) fraudulent
misrepresentation/fraudulent inducement, and (9) civil conspiracy.
16. On 24 October 2025, this case was designated as a complex business case
and assigned to the undersigned. (ECF Nos. 1–2).
17. Defendants filed a partial Motion to Dismiss on 30 January 2026. (ECF
No. 10.)
18. Plaintiffs filed a Motion to Amend on 27 March 2026. The proposed
Amended Complaint primarily seeks to add two new Defendants—DB Systems and
Spectral—to this lawsuit and to include them in the claim for civil conspiracy. 5
19. The Motions came on for hearing on 27 May 2026 at which all parties
were represented by counsel.
20. The Motions have been fully briefed and are now ripe for resolution.
LEGAL STANDARD
21. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court
reviews the allegations in the complaint in the light most favorable to the plaintiff.
See Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017). The Court’s
inquiry is “whether, as a matter of law, the allegations of the complaint . . . are
sufficient to state a claim upon which relief may be granted under some legal
theory[.]” Harris v. NCNB Nat’l Bank of N.C., 85 N.C. App. 669, 670 (1987). The
Court accepts all well-pled factual allegations in the relevant pleading as true. See
Krawiec v. Manly, 370 N.C. 602, 606 (2018). The Court is therefore not required “to
accept as true allegations that are merely conclusory, unwarranted deductions of fact,
or unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. HHS, Div. of Facility
Servs., 174 N.C. App. 266, 274 (2005) (cleaned up).
22. Furthermore, the Court “can reject allegations that are contradicted by
the documents attached, specifically referred to, or incorporated by reference in the
5 At the 27 May hearing on the Motions, Plaintiffs’ counsel stated that Plaintiffs also seek to
add DB Systems and Spectral as Defendants to the claim for unjust enrichment/quantum meruit. (Hrg. Tr. at 4.)
complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198, 206 (2016)
(cleaned up). The Court may consider these attached or incorporated documents
without converting the Rule 12(b)(6) motion into a motion for summary judgment.
Id. (cleaned up). Moreover, the Court “may properly consider documents which are
the subject of a plaintiff’s complaint and to which the complaint specifically refers
even though they are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147
N.C. App. 52, 60 (2001) (cleaned up).
23. Our Supreme Court has held “that dismissal pursuant to Rule 12(b)(6)
is proper when (1) the complaint on its face reveals that no law supports the plaintiff’s
claim; (2) the complaint on its face reveals the absence of facts sufficient to make a
good claim; or (3) the complaint discloses some fact that necessarily defeats the
plaintiff’s claim.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (cleaned
up).
ANALYSIS
I. Motion to Amend
24. Rule 15 of the North Carolina Rules of Civil Procedure states in
pertinent part as follows:
A party may amend his pleading once as a matter of course at any time
before a responsive pleading is served or, if the pleading is one to which
no responsive pleading is permitted and the action has not yet been
placed upon the trial calendar, he may so amend it at any time within
30 days after it is served. Otherwise, a party may amend his pleading
only by leave of court or by written consent of the adverse party; and
leave shall be freely given when justice so requires.
N.C. R. Civ. P. 15(a).
25. Our Supreme Court has held that “[t]here is no more liberal canon in
the [R]ules than that leave to amend shall be freely given when justice so requires.”
Vaughan v. Mashburn, 371 N.C. 428, 434 (2018) (cleaned up). “This liberal
amendment process under Rule 15 complements the concept of notice pleading
embodied in Rule 8 and reflects the legislature’s intent that decisions be had on the
merits and not avoided on the basis of mere technicalities.” Id. (cleaned up).
26. Nevertheless, “the [R]ules still provide some protection for parties who
may be prejudiced by liberal amendment.” Henry ex rel. Estate of Henry v. Deen, 310
N.C. 75, 82 (1984) (cleaned up). “Reasons justifying denial of an amendment include:
(1) undue delay, (2) bad faith, (3) undue prejudice, (4) futility of amendment, and (5)
repeated failure to cure defects by previous amendments.” Howard v. IOMAXIS,
LLC, 2021 NCBC LEXIS 116, at *17 (N.C. Super. Ct. Dec. 22, 2021) (cleaned up).
“The burden is upon the opposing party to establish that [it] would be prejudiced by
the amendment.” Vitaform, Inc. v. Aeroflow, Inc., 2021 NCBC LEXIS 79, at *11 (N.C.
Super. Ct. Sept. 16, 2021) (cleaned up).
27. Motions to amend are “addressed to the discretion of the trial court.”
Vaughan, 371 N.C. at 433 (cleaned up).
28. In addition to adding DB Systems and Spectral as additional
Defendants, the proposed Amended Complaint also contains new supporting
allegations for several of Plaintiffs’ claims for relief.
29. The Court concludes that the Motion to Amend should not be denied on
the ground of undue delay. It is undisputed that Plaintiffs filed their Motion to Amend within the deadline for amendments to the pleadings set by the Case
Management Order. Moreover, Defendants have failed to make a persuasive showing
that the Motion to Amend should be denied on the basis of unfair prejudice or bad
faith.
30. Defendants’ only remaining ground for opposing the Motion to Amend
is on the basis of futility. “The futility standard under Rule 15 is essentially the same
standard used in reviewing a motion to dismiss under Rule 12(b)(6) but provides the
Court liberal discretion to find that an amendment lacks futility.” Simply the Best
Movers, LLC v. Marrins’ Moving Sys., Ltd., 2016 NCBC LEXIS 28, at *5–6 (N.C.
Super. Ct. Apr. 6, 2016) (cleaned up). “[A] motion to amend is not futile when the
allegations of the [amendment], treated as true, are sufficient to state a claim upon
which relief may be granted under some legal theory, whether properly labeled or
not.” Howard v. IOMAXIS, LLC, 2023 NCBC LEXIS 159, at *15 (N.C. Super. Ct.
Nov. 29, 2023) (cleaned up). On the other hand, “[a] motion for leave to amend is
futile and appropriately denied when the proposed amendment could not withstand
a motion to dismiss for failure to state a claim.” Insight Health Corp. v. Marquis
Diagnostic Imaging of N.C., LLC, 2016 NCBC LEXIS 77, at *6 (N.C. Super. Ct. Oct.
7, 2016) (cleaned up).
31. There is a substantial overlap between the arguments made by
Defendants in their partial Motion to Dismiss as to Plaintiffs’ original Complaint and
the futility-related arguments made by them in their brief opposing the Motion to
Amend.
32. Given that the parties have had a full and fair opportunity to address
all of these issues both in their briefing and at the 27 May hearing, the Court, in the
exercise of its discretion and with the agreement of all parties, finds that
considerations of judicial economy support the Court’s consideration of both pending
Motions together. (Hrg. Tr. at 3–4.) See Gateway Mgmt. Servs. v. Carrbridge
Berkshire Grp., Inc., 2018 NCBC LEXIS 45, at *8 (N.C. Super. Ct. May 9, 2018)
(“Although an amended pleading would ordinarily moot a pending motion to dismiss,
the Court will consider Defendants’ Motions to Dismiss as to the Amended Complaint
because Defendants and Plaintiff both addressed the sufficiency of the Amended
Complaint in their respective briefs and at the hearing.”).
33. For the reasons set out below, Plaintiffs’ Motion to Amend is GRANTED
in part and DENIED in part.
II. Motion to Dismiss
34. Defendants only seek dismissal of Plaintiffs’ claims for breach of written
contract (in part), breach of fiduciary duty, constructive fraud, fraudulent
misrepresentation/fraudulent inducement, and civil conspiracy. Therefore, the Court
will limit its analysis to those claims.
A. Breach of Written Contract
35. “The elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of that contract. The elements of a valid contract
are offer, acceptance, consideration, and mutuality of assent to the contract’s
essential terms.” Davis v. Woods, 286 N.C. App. 547, 561 (2022) (cleaned up).
36. The statute of limitations serves as the legal basis for Defendants’
motion seeking dismissal of portions of Plaintiffs’ breach of contract claims. The
limitations period for a breach of contract claim in North Carolina is three years
pursuant to N.C.G.S. § 1-52(1).
37. “A statute of limitations defense may be properly asserted in a Rule
12(b)(6) motion to dismiss if it appears on the face of the complaint that such a statute
bars the claim.” He Chi v. N. Riverfront Marina & Hotel LLLP, 2023 NCBC LEXIS
89, at *35 (N.C. Super Ct. July 27, 2023) (cleaned up).
38. Under North Carolina law, “the statute of limitations . . . begins on the
date of maturity of the loan[ ] unless the note holder . . . has exercised his or her right
of acceleration.” Real Time Resols., Inc. v. Cole, 293 N.C. App. 632, 636 (2024)
(cleaned up).
39. At the 27 May hearing, Plaintiffs’ counsel acknowledged that (1) the
transactions referenced in paragraph 89 of the Amended Complaint consisted of all
of the written contracts that form the basis for their breach of contract claim; (2) all
of the transactions identified in paragraph 89 (except for the transaction listed in
subpart (v)) consisted of loans evidenced by promissory notes; and (3) the applicable
maturity date for virtually all of these promissory notes is set out in paragraph 89.
(Hrg. Tr. at 6.)6
6 Counsel for Plaintiffs also acknowledged that none of these loans were secured by collateral
and that, as a result, Plaintiffs are properly classified as unsecured creditors. (Hrg. Tr. at 7).
40. Defendants argue that the statute of limitations bars Plaintiffs’ breach
of contract claim as to any of the promissory notes referenced in paragraphs 89(a)-(u)
with a stated maturity date of more than three years from the initial filing of this
lawsuit on 23 October 2025. The promissory notes falling into this category are those
identified in paragraphs 89(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o)
and (t).
41. Plaintiffs concede that Defendants would be correct on this issue unless
the applicable limitations period was waived or tolled. In that regard, Plaintiffs make
two arguments. First, they contend that many of the promissory notes at issue
contained language serving to waive the statute of limitations as a defense. Second,
Plaintiffs argue that Defendants are prevented from asserting the statute of
limitations as a defense based on the doctrine of equitable estoppel. The Court will
address each of these arguments in turn.
42. With regard to their waiver argument, Plaintiffs assert that two
different contractual provisions were used in some of the promissory notes and that
each provision (despite the differences in their wording) effectively served to waive
Defendants’ right to assert a timeliness defense. The first of these provisions is
quoted in paragraph 65 of the Amended Complaint as follows:
The promissory notes that Healthcare Fund and Gaston Capital
executed in favor of ProNuvis (NC) and OrthoMedFlex, respectively,
provide that, among other things, “[t]he right to plead any and all
statutes of limitations as a defense to any demands hereunder is hereby
waived to the fullest extent permitted by law.”
(Am. Compl. ¶ 65.)
43. Defendants do not contest the fact that such language would be
sufficient to waive a statute of limitations defense. (Hrg. Tr. at 47.) See, e.g., Musarra
v. Bock, 200 N.C. App. 780, 784 (2009) (“An explicit waiver of the statute of limitations
is effective under the laws of . . . North Carolina[.]”); see also Franklin v. Franks, 205
N.C. 96, 97–98 (1933) (“The general rule is that a party may either by agreement or
conduct estop himself from pleading the statute of limitations as a defense to an
obligation.”) (cleaned up).
44. Of the promissory notes listed in paragraph 89, only the promissory
notes identified in subparts (a) and (b) are alleged to (1) contain this waiver language;
(2) concern loans made by either Healthcare Fund or Gaston Capital to ProNuvis
(NC) or OrthoMedFlex; and (3) contain maturity dates earlier than 23 October 2022. 7
Defendants’ Motion to Dismiss is therefore DENIED as to Plaintiffs’ breach of
contract claim with regard to these two promissory notes.
45. The second type of waiver provision Plaintiffs seek to rely on is quoted
in paragraph 66 of the Amended Complaint, which states as follows:
The promissory notes that WG Fund and Doctor executed in favor of
OrthoMedFlex and Aurum, respectively . . . provide that “[u]pon default
the holder of this Note may employ an attorney to enforce the holder’s
rights and remedies[.] . . . The failure to exercise any such right or
remedy shall not be a waiver or release of such rights or remedies to
exercise any of them another time.”
(Am. Compl. ¶ 66.)
7 At the 27 May hearing, Plaintiffs’ counsel acknowledged that the promissory notes referenced in paragraphs 89(a) and (b) were the only ones that contained this first waiver provision. (Hrg. Tr. at 31).
46. But this language, conversely, is not sufficient to waive a statute of
limitations defense. See, e.g., Kiernan Family Draper, LLC v. Hidden Valley Health
Ctrs., 2021 Utah LEXIS 113, at *P32 (2021) (“[A]n antiwaiver provision may not
circumvent the statute of limitations for contract claims. So although a party may
not have waived a contractual right by [accepting late payments], the statute of
limitations may still bar it from recovering for harm caused by a breach of that
right.”). Therefore, the inclusion of this second type of waiver provision in some of
the promissory notes at issue does not serve as a bar to Defendants’ statute of
limitations defense to Plaintiffs’ breach of contract claim as to those notes.
47. Finally, with regard to Plaintiffs’ equitable estoppel argument,
Plaintiffs argue in response to the Motion to Dismiss that Defendants made
representations intended to induce Plaintiffs to postpone filing suit on the overdue
promissory notes.
48. “Equitable estoppel may be invoked, in a proper case, to bar a defendant
from relying upon the statute of limitations.” Duke Univ. v. Stainback, 320 N.C. 337,
341 (1987). The doctrine is rooted in notions of “fair play.” Id. (cleaned up); see also
Jordan v. Crew, 125 N.C. App. 712, 720 (1997) (“In order for equitable estoppel to bar
application of the statute of limitations, a plaintiff must have been induced to delay
filing of the action by the misrepresentations of the defendant.”).
49. Equitable estoppel has three essential elements: “(1) conduct on the part
of the party sought to be estopped which amounts to a false representation or
concealment of material facts; (2) the intention that such conduct will be acted on by the other party; and (3) knowledge, actual or constructive, of the real facts.”
Friedland v. Gales, 131 N.C. App. 802, 807 (1998) (cleaned up). In addition, the party
claiming estoppel “must have (1) a lack of knowledge and the means of knowledge as
to the real facts in question; and (2) relied upon the conduct of the party sought to be
estopped to his prejudice.” Id. (cleaned up). “[T]he conduct of both parties must be
weighed in the balances of equity and the party claiming the estoppel no less than
the party sought to be estopped must conform to fixed standards of equity.” Gaston–
Lincoln Transit, Inc. v. Md. Cas. Co., 285 N.C. 541, 549 (1974).
50. Critically, however, under North Carolina law the “[f]acts supporting
equitable estoppel must be pled with particularity and demonstrate that Defendants’
representations delayed Plaintiffs from filing suit.” He Chi, 2023 NCBC LEXIS 89,
*57.
51. Here, the Amended Complaint never expressly alleges that Kellar (or
any other representative of Defendants) made specific statements or representations
seeking to delay Plaintiffs from initiating litigation. Instead, Plaintiffs have merely
made conclusory statements such as the following:
Kellar represented that Plaintiffs’ capital contributions could be repaid,
at least in part, through future capitalization of the Dynamic Balancer
and/or the Flush Anchor, thereby suggesting that the Kellar Entities
would own the intellectual property rights to the devices.
Kellar never intended to repay Plaintiffs’ capital contributions.
Kellar concealed from Plaintiffs the transfers and/or assignments of the
intellectual property rights in the Dynamic Balancer and the Flush
Anchor.
(Amd. Compl. ¶¶ 80, 82, 86.)
52. These assertions are simply insufficient to plead equitable estoppel.
53. Therefore, the Court concludes that the portion of Plaintiffs’ breach of
contract claims based on the promissory notes identified in subparts (c), (d), (e), (f),
(g), (h), (i), (j), (k), (l), (m), (n), (o), and (t) of paragraph 89 are time-barred and are
therefore DISMISSED with prejudice.
B. Fraudulent Misrepresentation/Fraudulent Inducement
54. Plaintiffs assert fraud-based claims on theories of both fraudulent
misrepresentation and fraudulent concealment. The Court will discuss each in turn.
(1) Fraudulent Misrepresentation
55. To prevail on a claim for fraudulent misrepresentation, a plaintiff must
show: “(1) [a] [f]alse representation or concealment of a material fact, (2) reasonably
calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive,
(5) resulting in damage to the injured party.” Forbis v. Neal, 361 N.C. 519, 526–27
(2007). Additionally, the tort of fraudulent misrepresentation requires a showing of
actual damages. Id.; see also Speller v. Speller, 273 N.C. 340, 343 (1968) (“In order to
establish fraud, there must be a showing of actual loss, injury or damage.”); Hawkins
v. Hawkins, 101 N.C. App. 529, 532 (1991) (requiring actual damages for fraudulent
misrepresentation).
56. In North Carolina, a fraudulent misrepresentation claim is a species of
fraud and must be pled with particularity. N.C.R. Civ. P. 9(b). A claimant must allege
the “time, place, and content of the fraudulent representation, identity of the person making the representation, and what was obtained as a result of the fraudulent acts
or representations.” S.N.R. Mgmt. Corp., v. Danube Partners 141, LLC, 189 N.C.
App. 601, 610 (2008) (cleaned up).
57. Here, Plaintiffs’ allegations fail to meet this standard of particularity.
The Amended Complaint alleges a business relationship between the parties from at
least 2013 through 2023 yet fails to provide any specific dates on which the
misrepresentations were made. Nor does the Amended Complaint state with
specificity the precise misrepresentations that existed or to whom they were made.
58. Indeed, the Amended Complaint does not even expressly allege that
there was ever a specific representation made that the intellectual property rights to
the Devices would never be transferred to other entities.
59. For all of these reasons, Defendants’ Motion to Dismiss is GRANTED
as to Plaintiffs’ fraudulent misrepresentation theory, and this claim is DISMISSED
with prejudice.
(2) Fraudulent Concealment
60. A claim for fraudulent concealment must show “(1) . . . concealment of
a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive,
(4) which does in fact deceive, (5) resulting in damage to the injured party.” Tillery
Envtl. LLC v. A&D Holdings, Inc., 2018 NCBC LEXIS 13, at *19–20 (N.C. Super. Ct.
Feb. 9, 2018) (cleaned up).
61. In addition, the claimant must also allege that the party who failed to
disclose material facts owed the claimant a duty to disclose. Hardin v. KCS Int’l, Inc.,
199 N.C. App. 687, 696 (2009) (cleaned up).
62. Although fraudulent concealment is by its very nature difficult to plead
with particularity, this Court has previously held that a fraudulent concealment
claim must comply with Rule 9(b) by specifically pleading:
(1) the relationship between plaintiff and defendant giving rise to the
duty to speak; (2) the event that triggered the duty to speak or the
general time period over which the relationship arose and
the fraud occurred; (3) the general content of the information that was
withheld and the reason for its materiality; (4) the identity of those
under a duty who failed to make such disclosures; (5) what the
defendant gained from withholding the information; (6) why the
plaintiff’s reliance on the omission was reasonable and detrimental; and
(7) the damages the fraud caused the plaintiff.
Tillery Envtl. LLC, 2018 NCBC LEXIS 13, at *21–22.
63. In essence, Plaintiffs’ fraudulent concealment theory in this case is that
(1) Defendants solicited money from Plaintiffs to advance development of the two
Devices; (2) Plaintiffs were led to believe that the ultimate sale of the Devices would
serve as the basis for Plaintiffs to be repaid; (3) Defendants concealed the fact that
the companies who were the recipients of Plaintiffs’ loans would not be the owners of
(or would not remain the owners of) the intellectual property rights for the Devices,
and (4) as a result of this concealment, other entities controlled by Kellar (namely
Little Engine, DB Systems, and Spectral) are now able to reap financial benefits
flowing from these Devices without any corresponding duty to satisfy Defendants’
obligations to Plaintiffs pursuant to the loans.
64. Although Plaintiffs will be required to support this claim with far more
specificity in order to survive summary judgment, construing their allegations in the
light most favorable to them as required by Rule 12(b)(6), they have arguably pled a
valid claim for relief on this theory. Moreover, in their briefing, Defendants focus on
Plaintiffs’ affirmative misrepresentation theory and barely reference Plaintiffs’
allegations of fraudulent concealment.
65. Accordingly, the Motion to Dismiss is DENIED as to Plaintiffs’
fraudulent concealment claim.
C. Breach of Fiduciary Duty
66. It is well-settled that “[t]o establish a claim for breach of fiduciary duty,
a plaintiff must show that: (1) the defendant owed the plaintiff a fiduciary duty; (2)
the defendant breached that fiduciary duty; and (3) the breach of fiduciary duty was
a proximate cause of the injury to the plaintiff.” Sykes v. Health Network Sols., Inc.,
372 N.C. 326, 339 (2019) (cleaned up). Thus, in order “to make out a claim for breach
of a fiduciary duty, plaintiff[] must first allege facts that, taken as true, demonstrate
that a fiduciary relationship existed between the parties.” Id. at 339–40.
67. A fiduciary relationship is generally found to exist when “there has been
a special confidence reposed in one who in equity and good conscience is bound to act
in good faith and with due regard to the interests of the one reposing confidence.”
Dallaire v. Bank of Am., N.A., 367 N.C. 363, 367 (2014) (cleaned up). “North Carolina
recognizes two types of fiduciary relationships: de jure, or those imposed by operation
of law, and de facto, or those arising from the particular facts and circumstances constituting and surrounding the relationship.” Hager v. Smithfield E. Health
Holdings, LLC, 264 N.C. App. 350, 355 (2019) (cleaned up).
68. North Carolina courts have long held that no fiduciary relationship
exists when the parties are in a debtor-creditor relationship. See, e.g., Sec. Nat’l Bank
of Greensboro v. Educators Mut. Life Ins. Co. 265 N.C. 86 (1965) (“There was no
fiduciary relationship: the relation was that of debtor and creditor.”); Branch Banking
& Trust Co. v. Thompson, 107 N.C. App. 53, 61 (1992) (“[T]he mere existence of a
debtor-creditor relationship between the parties does not create a fiduciary
relationship.”); McNew v. Fletcher Hosp., Inc., 2022 NCBC LEXIS 109, at *17 (N.C.
Super. Ct. Sept. 20, 2022) (“The billing relationship is instead one of debtor and
creditor, which our courts have made clear is not a de jure fiduciary relationship.”).
69. Furthermore, the Amended Complaint does not contain any allegations
suggesting that the dealings between the parties were similar to those in other cases
in which our courts have found the existence of a fiduciary relationship. “The
standard for finding a de facto fiduciary relationship is a demanding one: [o]nly when
one party figuratively holds all the cards—all the financial power or technical
information, for example—have North Carolina courts found that the special
circumstances of a fiduciary relationship has arisen.” Lockerman v. S. River Elec.
Membership Corp., 250 N.C. App. 631, 636–37 (2016) (cleaned up).
70. Accordingly, because the Court finds that no fiduciary relationship
existed between Plaintiffs and Defendants, Defendants’ Motion to Dismiss Plaintiffs’ breach of fiduciary duty claim is GRANTED, and this claim is DISMISSED with
prejudice.
D. Constructive Fraud
71. Our Supreme Court has recognized that the elements of a constructive
fraud claim largely overlap with the elements of a claim for breach of fiduciary duty.
See Chisum v. Campagna, 376 N.C. 680, 706–07 (2021). “[A] cause of action for
constructive fraud [requires] (1) a relationship of trust and confidence, (2) that the
defendant took advantage of that position of trust in order to benefit himself, and (3)
that plaintiff was, as a result, injured.” White v. Consol. Planning Inc., 166 N.C. App.
283, 294 (2004) (cleaned up). “The primary difference between pleading a claim for
constructive fraud and one for breach of fiduciary duty is the constructive fraud
requirement that the defendant benefit himself.” Id.
72. Here, for the same reasons set out above, Plaintiffs have failed to
adequately plead the existence of a fiduciary relationship between the parties.
Therefore, Defendants’ Motion to Dismiss is GRANTED, and Plaintiffs’ constructive
fraud claim is DISMISSED with prejudice.
E. Civil Conspiracy
73. Finally, Defendants seek the dismissal of Plaintiffs’ claim for civil
conspiracy.
74. In order to state a claim for conspiracy, a plaintiff must allege “(1) an
agreement between two or more individuals; (2) to do an unlawful act or to do a lawful
act in an unlawful way; (3) resulting in injury to plaintiff inflicted by one or more of the co-conspirators; and (4) pursuant to a common scheme.” Piraino Bros. LLC v. Atl.
Fin. Grp., Inc., 211 N.C. App. 343, 350 (2011) (cleaned up).
75. It is well established that
[t]here is no independent cause of action for civil conspiracy. Only where
there is an underlying claim for unlawful conduct can a plaintiff state a
claim for civil conspiracy by also alleging the agreement of two or more
parties to carry out the conduct and injury resulting from that
agreement.
Toomer v. Garrett, 155 N.C. App. 462, 483 (2002) (cleaned up).
76. Here, Plaintiffs are essentially alleging that Defendants Kellar, Little
Engine, Crowder, DB Systems, and Spectral entered into a conspiracy to facilitate
the transfer of the intellectual property for the Devices away from the entities that
had a contractual relationship with Plaintiffs and into separate companies.
77. At the 27 May hearing, Plaintiffs’ counsel represented that at least one
of the predicate claims for the civil conspiracy cause of action is Plaintiffs’ UDTP
claim—one as to which Defendants have not sought dismissal. Am. Air Filter Co. v.
Price, 2017 NCBC LEXIS 55, at *68 (N.C. Super. Ct. June 26, 2017) (finding that a
UDTP claim which survives dismissal can serve as the requisite underlying tort for
a civil conspiracy claim). 8
78. Therefore, Defendants’ Motion to Dismiss the civil conspiracy claim is
DENIED. Furthermore, the portion of Plaintiffs’ Motion to Amend seeking the
addition of DB Systems and Spectral as new Defendants is GRANTED.
8 Moreover, Plaintiffs’ fraudulent concealment claim also potentially serves as a predicate
claim for a UDTP claim.
CONCLUSION
THEREFORE, it is ORDERED as follows:
1. Defendants’ Motion to Dismiss is GRANTED with prejudice as to the portion
of Plaintiffs’ claim for breach of written contract based on the promissory notes
identified in subparts (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), and (t)
of paragraph 89 of the Amended Complaint.
2. Defendants’ Motion to Dismiss is GRANTED with prejudice as to Plaintiffs’
fraudulent misrepresentation claim, breach of fiduciary duty claim, and
constructive fraud claim.
3. Defendants’ Motion to Dismiss is otherwise DENIED.
4. Plaintiffs’ Motion to Amend is GRANTED, and Plaintiffs shall file an
Amended Complaint by 5 August 2026. However, because the Court has now
dismissed Plaintiffs’ claims for breach of fiduciary duty and constructive fraud
in their entirety along with their theory of fraud premised on fraudulent
misrepresentation, the Amended Complaint shall not include those claims for
relief.
SO ORDERED, this the 30th day of July 2026.
/s/ Mark A. Davis
Mark A. Davis
Special Superior Court Judge for
Complex Business Cases