Davis v. McHatton, 2026 NCBC 72.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
JOHNSTON COUNTY 26CV002571-500
JAMES DAVIS,
Plaintiff,
v. ORDER AND OPINION
ON MOTION TO DISMISS
JONATHAN MCHATTON; J&J
FUNERAL SERVICES, LLC; and
J&J MONUMENT SALES, LLC,
Defendants.
The Armstrong Law Firm, P.A., by L. Lamar Armstrong, Jr., for Plaintiff
James Davis.
Parker Poe Adams & Bernstein LLP, by Corri Ann Hopkins and Hailey
Klabo, for Defendant Jonathan McHatton.
No counsel has appeared for Defendants J&J Funeral Services, LLC and
J&J Monument Sales, LLC.
Conrad, Chief Judge.
1. This Court receives a steady diet of cases in which one member of an LLC
claims that another has wrongfully usurped corporate control. This is such a case.
James Davis and Jonathan McHatton are equal members and managers of J&J
Funeral Services, LLC and J&J Monument Sales, LLC (both North Carolina LLCs).
According to Davis, McHatton has taken complete, unilateral control of both
companies and is using that control to enrich himself at Davis’s expense. On that
basis, Davis sued to dissolve the companies and to appoint a receiver to protect his
rights. (See, e.g., Compl. ¶¶ 2, 3, 5, 14, 15, 17–19, 21, 32, 39, 40, ECF No. 3.)
2. McHatton’s motion to dismiss the complaint in its entirety is now pending.
(ECF No. 10.) The motion is fully briefed, and an oral hearing would not aid the
Court’s decision. See BCR 7.4 (“The Court may rule on a motion without a hearing.”).
3. Turning to Davis’s dissolution claim, a member of an LLC may seek judicial
dissolution either when “it is not practicable to conduct the LLC’s business in
conformance with the operating agreement and” governing statutes, N.C.G.S.
§ 57D-6-02(2)(i), or when “liquidation of the LLC is necessary to protect the rights
and interests of the member,” id. § 57D-6-02(2)(ii). In the latter circumstance, “the
court will not order dissolution if after the court’s decision the LLC or one or more
other members elect to purchase the ownership interest of the complaining member
at its fair value in accordance with any procedures the court may provide.” Id.
§ 57D-6-03(d). Davis is pursuing dissolution of J&J Funeral Services and J&J
Monument Sales under both statutory subsections, as well as ancillary declaratory
relief.
4. McHatton moves to dismiss this claim on two grounds. Neither has merit.
5. McHatton argues, first, that Davis failed to allege facts adequate to show
that it is not practicable to conduct the LLCs’ business under the operating
agreements and governing statutes, as required by section 57D-6-02(2)(i). The Court
disagrees. As alleged, Davis and McHatton have equal membership rights and
managerial authority, but McHatton has excluded Davis from management.
According to the complaint, McHatton has unilaterally changed the passwords for
financial accounts, increased his own compensation, altered pricing for the companies’ services, and diverted the companies’ assets and staff to other business
ventures. Plus, McHatton allegedly uses company funds to pay for many of his
personal expenses. (See, e.g., Compl. ¶¶ 14, 18–21.) These allegations, which the
Court must take as true, compare favorably with those held to be sufficient to state a
claim for dissolution under section 57D-6-02(2)(i) in past cases. See Highlights
Healthcare, LLC v. Abell, 2026 NCBC LEXIS 147, at *88–89 (N.C. Super. Ct. July 23,
2026) (collecting cases); see also Sykes v. Health Network Sols., Inc., 372 N.C. 326,
332 (2019) (noting that courts must take well-pleaded allegations as true in
connection with a motion to dismiss for failure to state a claim).
6. McHatton’s second argument is nonsensical. He starts by representing that
he would buy Davis’s interests, as allowed by section 57D-6-03(d), to avoid a
dissolution under section 57D-6-02(2)(ii). He then goes on to argue that his intention
to buy Davis’s interests deprives the Court of subject matter jurisdiction over the
claim. This argument sorely misunderstands the statute. It will suffice to note that
a purchase of Davis’s interests must proceed “in accordance with any procedures the
court may provide.” N.C.G.S. § 57D-6-03(d) (emphasis added). Plainly, the Court has
jurisdiction to “provide” the “procedures” for the purchase.
7. Accordingly, the Court denies the motion to dismiss the claim for judicial
dissolution.
8. It follows that Davis’s receivership claim survives as well. Trial courts have
broad statutory and inherent authority to appoint a receiver in connection with an
action to dissolve an LLC. This is particularly true where, as here, one member alleges pervasive misconduct by another. See, e.g., N.C.G.S. § 57D-6-04(a) (stating
that a court “may appoint one or more persons to serve as a receiver to manage the
business of the LLC pending the court’s decision on dissolution and if dissolution is
decreed by the court to wind up the LLC”); Id. § 1-507.24(a) (“A receiver may be
appointed under this Article by the filing of a civil action by a creditor or other party
in interest in which the sole relief requested is the appointment of a receiver or is
combined with, or is ancillary to, a civil action that seeks . . . other relief.”); Lowder
v. All Star Mills, Inc., 301 N.C. 561, 577 (1981) (noting that the appointment of a
receiver is “a proper remedy in cases where there is fraud or gross misconduct in the
management of the corporation”).
9. McHatton objects that Davis has not shown that he is likely to succeed on
his claim for judicial dissolution and that it is rarely appropriate to appoint a receiver
for solvent businesses like those at issue. But these arguments are premature. Davis
has not yet moved to place J&J Funeral Services or J&J Monument Sales into
receivership. If he does, he will have to satisfy appropriate legal standards. For now,
it is enough to conclude that Davis’s complaint meets threshold pleading
requirements. See, e.g., Elhulu v. Alshalabi, 2021 NCBC LEXIS 95, at *9 (N.C.
Super. Ct. Oct. 19, 2021) (“For now, the Court concludes only that Plaintiffs’
allegations do not necessarily defeat or foreclose the appointment of a receiver.”).
10. For all these reasons, the Court DENIES McHatton’s motion to dismiss. SO ORDERED, this the 12th day of August, 2026.
/s/ Adam M. Conrad
Adam M. Conrad
Chief Business Court Judge