Estevez v. C&S Com., LLC, 2026 NCBC 80.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
UNION COUNTY 25CV001966-890
JULIAN ESTEVEZ and OSCAR
ESTEVEZ,
Plaintiffs,
ORDER AND OPINION ON
v. DEFENDANTS’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
C&S COMMERCE, LLC and
CAMERON CHAD CLAY,
Individually and as Sole Manager of
C&S COMMERCE, LLC,
Defendants.
1. This matter is before the Court on Defendants’ Rule 56 motion for partial
summary judgment on Plaintiffs’ third cause of action for unjust enrichment against
defendant Cameron Chad Clay and C&S Commerce, LLC, Plaintiffs’ request for
various declaratory judgments, and Plaintiffs’ request for punitive damages. (ECF
No. 50).
2. Having considered the pleadings, the competent evidence of record, the
arguments of counsel, and applicable law, the Court hereby GRANTS IN PART and
DENIES IN PART the motion for the reasons set forth below.
Vilmer Caudill, PLLC, by Brittney Slade and Sophia Pappalardo, for
Plaintiffs Oscar and Julian Estevez.
Alexander Ricks, PLLC, by Miller F. Capps and Benjamin Leighton, for
Defendants C&S Commerce, LLC and Cameron Chad Clay.
Houston, Judge.
I. BACKGROUND
3. The Court does not make findings of fact on a motion for summary judgment.
Instead, for background, the Court summarizes the material facts that appear to be
uncontested. Chalk v. Chalk, 2026 NCBC LEXIS 80, at *3 (N.C. Super. Ct. Apr. 9,
2026) (citing Vizant Techs., LLC v. YRC Worldwide, Inc., 373 N.C. 549, 551 (2020)).
4. Plaintiffs Julian and Oscar Estevez are brothers who were previously
employed by and held managerial positions at Warp Development Corporation. (ECF
No. 11, ¶¶ 7–8; ECF No. 14, ¶¶ 7–8).
5. Around October 2023, Plaintiffs, defendant Cameron Clay, and Barbara
Chambers founded defendant C&S Commerce, LLC (a North Carolina LLC) to
purchase Warp Development’s assets and to carry on Warp Development’s business,
which ultimately occurred. (ECF No. 11, ¶¶ 4, 9–10, 14; ECF No. 14, ¶¶ 4, 9, 14). At
that time, C&S’s members included Plaintiffs, Clay, and Chambers. (ECF No. 11,
¶ 13 and Ex. A at 31; ECF No. 14, ¶ 13).
6. Around 24 January 2024, approximately three months later, Plaintiffs,
Clay, and Chambers signed and entered into an operating agreement for C&S, which
the parties agree is a valid contract. (ECF No. 11, ¶¶ 11, 57 and Ex. A; ECF No. 14,
¶¶ 11, 57). Clay signed the Operating Agreement as both the manager and a member
of C&S, while Plaintiffs and Chambers all signed as members of C&S. (ECF No. 11,
Ex. A at 30).
7. The Operating Agreement lists (i) Clay as the majority owner of C&S with
a seventy percent ownership interest, (ii) Plaintiffs as collective owners of twenty percent of C&S, and (iii) Chambers as an owner of ten percent of C&S. (ECF No. 11,
¶ 13 and Ex. A at 31; ECF No. 14, ¶ 13). Clay is designated as the sole manager of
C&S, with
full and complete authority, power, and discretion to manage and
control the business of the Company, to make all decisions
regarding those matters, and to perform any and all other acts
customary or incident to the management of the Company’s
business (including without limitation hiring/firing of any/all
employees, employee wages/salaries), except only as to those acts
as to which approval by the Members is expressly required by the
Articles of Organization, this Agreement, the Act, or other
applicable law.
(ECF No. 11, Ex. A § 3.1). This includes the authority to transfer the position of
manager, unilaterally dissolve C&S, and amend or waive certain terms of the
Operating Agreement. (ECF No. 11, Ex. A §§ 3.7, 10.1(b), and 11.5).
8. The Operating Agreement was drafted by Clay’s personal attorney, who
included specific disclaimer language in the document explaining that the drafting
attorney “represents Chad Clay only and does not represent any Minority Member
[i.e., Plaintiffs or Chambers].” (ECF No. 11, ¶ 11 & Ex. A, § 11.15; ECF No. 14, ¶ 11).
9. Before signing the Operating Agreement, however, Julian possessed the
final draft of the Operating Agreement for approximately three weeks before signing
it, and Oscar possessed the draft for approximately three days before signing it. (ECF
No. 55.2 at 38:13–16; ECF No. 52.3 at 63:6–8). During that time, both Plaintiffs were
able to read and review the draft Operating Agreement, but both elected not to retain
or consult their own legal counsel. (ECF No. 55.2 at 39:5–12; ECF No. 52.3 at 61:11–
16).
10. Ultimately, Plaintiffs signed the Operating Agreement, in which they (i)
indicate that they understood that Clay’s attorney did not represent them, and (ii)
“warrant and represent that they have been informed and advise [sic] that they had
the opportunity to seek counsel of their choosing and by executing this agreement
either have or chose not to seek advice of counsel.” (ECF No. 11, Ex. A § 11.15 & at
30).
11. As part of C&S’s Operating Agreement, Plaintiffs, Clay, and Chambers
agreed that the “Manager” (i.e., Clay), would not “be liable to [C&S] for monetary
damages for an act or omission in such Person’s capacity as a Manager,” except for
“(i) acts or omissions which a Manager knew at the time of the acts or omissions were
clearly in conflict with the interests of the Company; (ii) any transaction from which
a Manager derived an improper personal benefit; or (iii) acts or omissions occurring
prior to the date this provision becomes effective” according to the North Carolina
Limited Liability Company Act, N.C. Gen. Stat. § 57D-1 et seq. (ECF No. 11, Ex. A, §
3.5).
12. Further, the parties agreed that the “Manager” and the “Majority Member”
(i.e., Clay) would not owe a fiduciary duty to “Minority Members” (i.e., Plaintiffs and
Chambers), and “the Minority Members waive[d], renounce[d], release[d] and
disclaim[ed] the right to file, bring, or maintain an action for breach of fiduciary duty
against” the Manager, the Majority Member, and “his heirs successors or assigns.”
(ECF No. 11, Ex. A §§ 3.5.1, 4.8).
13. The Operating Agreement also contains covenants not to compete with
C&S’s business, to keep confidential certain information, and to refrain from
disparaging C&S. (ECF No. 11, Ex. A, § 4.14 and 37–46). For the covenant not to
compete, the Operating Agreement provides that, within North Carolina and South
Carolina, for a period of one year “from the cessation of [Plaintiffs’] employment” at
C&S, Plaintiffs will not
(i) engage, in any way or to any extent, in or to any business or activity
if such business or activity would compete in any respect with the
Business; (ii) own, manage, control or participate in the ownership,
management or control of, or render services directly related to, any
person, corporation, partnership, proprietorship, firm, association or
other business entity primarily engaged in the Business; (iii) induce,
request or encourage, or assist or aid any third party to induce, request,
or encourage any employee, consultant, officer or director of the
Company to terminate or reduce the scope of any such relationship with
the company (provided that a general advertisement of employment not
targeted to such persons shall not be deemed a violation of this
restriction); (iv) assist in or solicit the employment of any employee,
consultant, officer or director of the Company, while any such person is
providing services to the Company or within six (6) months after any
such person ceases providing services to the Company (provided that a
general advertisement of employment not targeted to such persons shall
not be deemed a violation of this restriction); or (v) solicit, divert or
appropriate, or assist in or attempt to solicit, divert or appropriate, any
customer or supplier, of the Company for the purpose of competing with
the Business, or induce, request or encourage, or assist or aid any third
party to induce, request or encourage, any customer or supplier, of the
Company to terminate or reduce the scope of its business activity with
the Company.
(ECF No. 11, Ex. A at 37–38, 42–43).
14. The Operating Agreement’s non-disparagement and confidentiality
provisions contain substantively the same geographical and temporal restrictions.
(ECF No. 11, Ex. A at 37, 42). Under the non-disparagement provision, Plaintiffs, Clay, and Chambers agreed to refrain from “vilification of or calumny against” one
another, C&S, or its former and present employees. (ECF No. 11, Ex. A at 38, 43). As
for the confidentiality provision, Plaintiffs agreed to “maintain in confidence” and to
not “use, disclose or give to others any fact or information regarding [C&S], which is
not generally available to the public[.]” (ECF No. 11, Ex. A at 38, 43). This putative
obligation includes, but is not limited to “information and facts concerning business
plans, customers, future customers, suppliers, licensors, licensees, partners,
investors, affiliates or others, training methods and materials, financial information,
sales prospects, client lists, vendor lists, inventions or any other technical, trade or
business secret or confidential or proprietary information,” derived from C&S or from
other parties during Plaintiffs’ employment at C&S. (ECF No. 11, Ex. A at 38, 43).
15. The Operating Agreement also contains provisions that:
a. authorize the transfer of membership interests in C&S (including
Plaintiffs’ interests) under specific and limited circumstances, (see
generally ECF No. 11, Ex. A arts. VIII, IX);
b. permit the immediate transfer and forfeiture of a Minority Member’s
interest in C&S upon termination of the Minority Member’s employment
for cause (as defined in C&S’s employee handbook) or conviction of a
felony, (ECF No. 11, Ex. A art. IXA); and
c. permit termination of plaintiff Oscar Estevez’s membership interest in
C&S if he fails to obtain U.S. citizenship within four years after “the
purchase of the assets of Warp Development Corporation” or
immediately upon his deportation from the country, (ECF No. 11, Ex. A
art. IXB).
16. Between January 2024 and the filing of Plaintiffs’ complaint, on multiple
occasions, Clay asked Plaintiffs to sell him their respective minority interests in C&S.
(ECF No. 11, ¶¶ 17–20, 24–25; ECF No. 14, ¶¶ 17–20, 24–25).
17. After Plaintiffs rebuffed his requests to sell their interests in C&S, Clay
purported to terminate Julian’s and Oscar’s1 employment with C&S, though disputed
facts remain as to whether sufficient cause existed to terminate for cause and
whether an eighty percent vote of C&S’s membership was cast. (ECF No. 11, ¶¶ 25–
26, 30, 33–36 & Ex. B; ECF No. 14, ¶¶ 25–26, 30, 33–36).
18. During this process, Clay barred Plaintiffs from C&S’s property, insisting
that they sign and return a proposed membership interest redemption agreement.
(ECF No. 11, ¶¶ 27–28; ECF No. 14, ¶¶ 27–28).
19. Plaintiffs assert that Clay’s and C&S’s actions were contrary to the terms of
the Operating Agreement, that no basis existed for a for-cause termination, and that
Clay otherwise was not authorized to terminate their employment or cause forfeiture
of their shares in either his position as Manager or his position as Majority Member.
(ECF No. 11, ¶¶ 38–47).
1 Defendants contend that Oscar was not an employee when Julian was fired, (ECF No. 14,
¶ 26), but it is undisputed that Clay’s putative justification for stripping Oscar of his membership interest is pursuant to Article 9A of the Operating Agreement, (ECF No. 14, ¶ 22). Regardless of when Oscar actually was terminated, the Court’s analysis remains unchanged.
20. Plaintiffs filed suit on 4 April 2025. (ECF Nos. 3, 11). With their complaint,
Plaintiffs assert causes of action for (i) breach of contract against Clay and C&S, (ii)
breach of fiduciary duty against Clay, (iii) unjust enrichment against Clay and C&S,
and (iv) a declaratory judgment concerning certain of Plaintiffs’, Clay’s, and
Chambers’ respective rights and obligations under the Operating Agreement. (See
generally ECF No. 11). Plaintiffs also seek injunctive relief, an award of punitive
damages, and the remedy of piercing the corporate veil. (See generally ECF No. 11).
21. Defendants filed a Rule 12(b)(6) motion to dismiss on 25 June 2025, seeking
dismissal of only Plaintiffs’ request for the remedy of piercing the corporate veil and
Plaintiffs’ cause of action for breach of fiduciary duty. (ECF No. 12). The Court
thereafter granted the motion. (ECF No. 28).
II. ANALYSIS
22. Summary judgment is appropriate “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that any party is entitled
to a judgment as a matter of law.” N.C. R. Civ. P. 56(c); Morrell v. Hardin Creek, Inc.,
371 N.C. 672, 680 (2018) (quoting N.C. R. Civ. P. 56(c)).
23. Genuine issues of material fact are those that “can be maintained by
substantial evidence.” Kessing v. Nat’l Mortg. Corp., 278 N.C. 523, 534 (1971).
“‘Substantial evidence is such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion’ and means ‘more than a scintilla or a permissible inference.’” Daughtridge v. Tanager Land, LLC, 373 N.C. 182, 187 (2019) (quoting
Ussery v. Branch Banking & Tr., 368 N.C. 325, 335 (2015)).
24. When reviewing a motion for summary judgment, a court “must view the
presented evidence in a light most favorable to the nonmoving party.” Belmont Ass’n
v. Farwig, 381 N.C. 306, 310 (2022) (citation omitted). Moreover, the moving party
“ultimately has the burden of establishing the lack of any triable issue of fact.”
Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491 (1985) (citation
omitted).
25. The moving party may satisfy its burden by showing “an essential element
of the opposing party’s claim does not exist, cannot be proven at trial, or would be
barred by an affirmative defense, or by showing through discovery that the opposing
party cannot produce evidence to support an essential element of [the] claim[.]”
Dobson v. Harris, 352 N.C. 77, 83 (2000) (internal citations omitted). If the movant
satisfies its burden, “the burden shifts to the non-moving party to ‘set forth specific
facts showing that there is a genuine issue for trial.’” Lowe v. Bradford, 305 N.C. 366,
369–70 (1982) (quoting N.C. R. Civ. P. 56(e) (emphasis omitted)).
26. Here, Defendants seek summary judgment as to Plaintiffs’ unjust
enrichment cause of action, various requests for declaratory judgment, and request
for punitive damages. The Court addresses each in turn.
A. Unjust Enrichment
27. Defendants argue that, because there is undisputedly a valid contract
between the parties in the form of the C&S Operating Agreement, Defendants are entitled to summary judgment as to Plaintiffs’ alternative cause of action for unjust
enrichment. (ECF No. 51 at 6–7; ECF No. 56 at 1–5).
28. While a party may bring an unjust enrichment cause of action in the
alternative to a breach of contract cause of action when “services are rendered and
expenditures made by one party to or for the benefit of another, without an express
contract to pay,” Krawiec v. Manly, 370 N.C. 602, 615 (2018) (citation omitted); McFee
v. Presley, 2023 NCBC LEXIS 173, at *20 (N.C. Super. Ct. Dec. 28, 2023), the
undisputed existence of “an express contract precludes an implied contract [i.e., an
unjust enrichment claim] with reference to the same matter.” Vetco Concrete Co. v.
Troy Lumber Co., 256 N.C. 709, 713 (1962) (collecting cases).
29. Accordingly, summary judgment is appropriate when the undisputed
evidence of record shows “the parties have made a contract for themselves, covering
the whole subject matter” at issue. Id. at 714 (citation omitted); Catoe v. Helms
Constr. & Concrete Co., 91 N.C. App. 492, 498 (1988) (“[I]t is error to submit an
alternative implied contract claim to the jury when an express contract has been
proved.” (citation omitted)).
30. Here, the parties agree that the Operating Agreement, which is
undisputedly a valid contract, governs the operation of C&S. (ECF No. 11, ¶¶ 11, 57
and Ex. A; ECF No. 14, ¶¶ 11, 57; ECF No. 51, Ex. 1 at 3 (listing “[t]he Operating
Agreement is a valid contract” as an undisputed fact); ECF No. 52, Ex. 1 at 3 (same)).
By the Operating Agreement’s express terms, this includes termination of a member
and the transfer of that member’s interest, which are the precise issues before the Court with respect to Plaintiffs’ breach of contract action. (ECF No. 11, Ex. A arts.
VIII, IXA; ECF No. 11, ¶¶ 75–78).
31. Plaintiffs have expressly pleaded unjust enrichment in the alternative to
breach of contract, (ECF No. 11 at 12 (pleading unjust enrichment “[i]n the
[a]lternative” to breach of contract)), and it is undisputed at this point that there was,
in fact, a binding agreement between the parties, (ECF No. 11, ¶¶ 11, 57 and Ex. A;
ECF No. 14, ¶¶ 11, 57; ECF No. 51, Ex. 1 at 3; ECF No. 52, Ex. 1 at 3).
32. Accordingly, with a valid contract between the parties governing the same
subject matter encompassed by the unjust enrichment cause of action, there is no
genuine issue of material fact as to this cause of action, and summary judgment is
appropriate in favor of Defendants.2
33. Therefore, the Court GRANTS the motion as to the unjust enrichment
cause of action, and summary judgment is hereby ENTERED against Plaintiffs and
in favor of Defendants as to Plaintiffs’ unjust enrichment cause of action.
B. Defendants’ Request for Affirmative Declaratory Relief
2 To the extent that Plaintiffs attempt to rely on events not pleaded in, and occurring after
the filing of, the complaint in this action to support their cause of action for unjust enrichment, their motion to amend was already denied. (ECF No. 47). Plaintiffs may not use their responsive brief to recast the scarce allegations in the complaint or to create new causes of action. Southern of Rocky Mt., Inc. v. Woodward Specialty Sales, Inc., 52 N.C. App. 549, 553 (1981) (noting that an amendment is needed when “the evidence raises issues not pleaded” (citation omitted)); see Whitaker’s, Inc. of Sumter v. Nicol Arms, 93 N.C. App. 487, 489 (1989) (“[A] party is bound by [its] pleadings and, unless withdrawn, amended, or otherwise altered, the allegations contained in all pleadings ordinarily are conclusive against the pleader. [A party] cannot subsequently take a position contradictory to [its] pleadings.” (citations omitted)).
34. Defendants also request that the Court declare that certain challenged
provisions of the Operating Agreement are enforceable—even though Defendants
have asserted no affirmative claims in this action for such relief. (ECF No. 51 at 7–
13; see generally, ECF No. 14).
35. The plain language of Rule 56 precludes Defendants’ request. Under Rule
56, “[a] party seeking to recover upon a claim, counterclaim, or crossclaim or to obtain
a declaratory judgment” may seek summary judgment “in his favor upon all or any
part thereof.” N.C. R. Civ. P. 56(a) (emphasis added). Similarly, “[a] party against
whom a claim, counterclaim, or crossclaim is asserted or a declaratory judgment is
sought, may, at any time, move with or without supporting affidavits for a summary
judgment in his favor as to all or any part thereof.” N.C. R. Civ. P. 56(b) (emphasis
added). In each instance, a party may seek summary judgment only as to a claim,
counterclaim, crossclaim, or declaratory judgment request that has actually been
asserted in the case. N.C. R. Civ. P. 56(a)–(b).
36. Indeed, “[o]ur Court of Appeals has previously held that ‘a declaratory
judgment is a separate and independent action’ and may not be ‘commenced by a
motion in the cause.’” Woodcock v. Cumberland Cnty. Hosp. Sys., Inc., 2022 NCBC
LEXIS 3, at *13 (N.C. Super. Ct. Jan. 20, 2022) (citations omitted) (“Plaintiffs’ ability
to seek declaratory relief in this case via a motion cannot exceed the scope of the
declaratory relief actually sought in their Complaint.” (citations omitted)).
37. A plaintiff’s failure to meet its burden for a negative determination does not
necessarily mean that the defendant has separately met the burden of demonstrating its entitlement to an affirmative determination, as opposed to merely a determination
that the plaintiff has failed to meet its burden. Thus, when a plaintiff fails to meet
its burden in support of a requested declaration, the appropriate result is a
declaration that the plaintiff has failed to meet its burden as to the specific issue
raised—not an affirmative, counter-declaration in the defendant’s favor when the
defendant did not seek such relief via counterclaim. See, e.g., Sanders v. State Pers.
Comm’n, 197 N.C. App. 314, 323 (2009) (recognizing that dismissal of a plaintiff’s
requested declaratory judgment—and, thus, ruling against the plaintiff—is not the
functional equivalent of a declaratory judgment in favor of the defendant).
38. Here, with their motion, Defendants seek summary judgment for
declaratory judgments of the affirmative enforceability of the Operating Agreement,
(ECF No. 51 at 7–13), but Defendants have made no affirmative claim for any such
declaratory relief. (See generally ECF No. 14).
39. Thus, to the extent that Defendants’ motion seeks a declaration as to the
affirmative enforceability of the Operating Agreement, the Court DENIES the
motion.
C. Defendants’ Request for Summary Judgment as to Plaintiffs’
Declaratory Judgment Causes of Action
40. Separately, Defendants also contend that summary judgment is
appropriate in their favor as to each of Plaintiffs’ nine requests for declaratory
judgment as to sections 3.5, 3.5.1, 4.8, and 4.14 and articles 9, 9A, and 9B of the
Operating Agreement, as well as requests to declare that Plaintiffs “must receive
compensation in exchange for Defendants Clay and [C&S] ‘purchasing’ or ‘redeemed’ each of their membership interest” and that Plaintiffs “are permitted to inspect
[C&S’s] records and accounts including Defendant [C&S’s] financial records.” (ECF
No. 11, ¶¶ 84–95; ECF No. 51 at 7–13).
41. The North Carolina Declaratory Judgment Act provides that “[a]ny person
interested under . . . [a] written contract . . . or whose rights, status or other legal
relations are affected by a statute, municipal ordinance, contract or franchise, may
have determined any question of construction or validity arising under the
instrument, statute, ordinance, contract, or franchise, and obtain a declaration of
rights, status, or other legal relations thereunder.” N.C. Gen. Stat. § 1-254; Bizrobe
Tr. v. InoLife Techs., Inc., 2018 NCBC LEXIS 160, at *10–11 (N.C. Super. Ct. Nov.
30, 2018) (citation omitted).
i. Standing and Lack of Case or Controversy
42. Defendants first assert that Plaintiffs lack standing, or has otherwise failed
to demonstrate an actual case or controversy, as to all of Plaintiffs’ declaratory
judgment causes of action except as to sections 9A.1 and 9A.2 of the Operating
Agreement.3 (ECF No. 51 at 4, 12–14).
43. As a prerequisite to any claim for relief “[a] plaintiff must establish
standing[.]” United Daughters of the Confederacy v. City of Winston-Salem, 383 N.C.
612, 625, 652 (2022) (citation omitted). “Standing to sue means simply that the party
has a sufficient stake in an otherwise justiciable controversy to obtain judicial
3 As to the latter two, as explained above, Defendants seek declaratory relief of its own,
requesting that the Court affirmatively declare that the Operating Agreement is valid. (ECF No. 51 at 7–13; see generally, ECF No. 14). The Court has denied that request and does not further address it.
resolution of that controversy.” Pugh v. Howard, 288 N.C. App. 576, 580 (2023)
(citation omitted); Edwards v. Town of Louisburg, 290 N.C. App. 136, 140 (2023).
44. “While the statute does not expressly so provide, . . . [c]ourts have
jurisdiction to render declaratory judgments only when the pleadings and evidence
disclose the existence of an actual controversy between parties having adverse
interests in the matter in dispute.” Gaston Bd. of Realtors, Inc. v. Harrison, 311 N.C.
230, 234 (1984) (citations omitted). As a result, “an actual controversy [i]s a
‘jurisdictional prerequisite’ for a proceeding under the Declaratory Judgment Act[.]”
Id. (citations omitted).
45. While “the definition of a ‘controversy’ must depend on the facts of each
case, ‘[a] mere difference of opinion between the parties’” does not constitute a
controversy within the meaning of the Declaratory Judgment Act. Id. (quoting Town
of Tryon v. Duke Power Co., 222 N.C. 200 (1942)).
46. Absent such an actual controversy, a court lacks subject matter jurisdiction
to adjudicate a declaratory judgment request, as courts will not issue advisory
opinions or otherwise permit “litigants to fish in judicial ponds for legal advice.”
Sharpe v. Park Newspapers of Lumberton, Inc., 317 N.C. 579, 583–84 (1986) (quoting
Lide v. Mears, 231 N.C. 111, 117 (1949)).
47. For example, if there is no evidence of record that either party intends to
take action that invokes a particular provision of an agreement, a plaintiff seeking a
declaration as to that provision generally lacks standing. Sharpe, 317 N.C. at 584.
48. The Court addresses each of Plaintiffs’ requests for declaratory relief in
turn.
49. Section 3.5 of the Operating Agreement: Section 3.5 of the Operating
Agreement provides, in relevant part, that “[n]o Manager of the Company shall be
liable to the Company for monetary damages for an act or omission in such Person’s
capacity as a Manager, except as provided in the” North Carolina Limited Liability
Company Act or otherwise in the section. (ECF No. 11, Ex. A, § 3.5). Overall, section
3.5 addresses a Manager’s potential liability to C&S, as the “Company” thereunder.
(ECF No. 11, Ex. A, § 3.5).
50. With their complaint, Plaintiffs conclusorily allege that they are entitled to
a declaratory judgment that “the Operating Agreement’s paragraph 3.5 violates
North Carolina law because it purports to limit Defendant Clay’s liability as Sole
Manager of the Company for acts or omissions he takes that (a) clearly conflict with
the Company’s interests, and (b) give Defendant Clay an improper personal benefit.”
(ECF No. 11, ¶ 86).
51. However, Plaintiffs brought this action in their individual capacities and
not as a derivative suit on behalf of C&S. (See generally ECF No. 11).
52. On the competent evidence before the Court, Plaintiffs fail to identify any
basis to explain how or why they—as opposed to C&S—have an actual controversy or
dispute with Defendants with respect to Clay’s fiduciary duties that might be owed
to C&S, such that Plaintiffs lack standing to seek such declaratory relief. See generally N.C. Gen. Stat. § 1-254; Gaston Bd. of Realtors, 311 N.C. at 234; Sharpe,
317 N.C. at 583–84.
53. Further, even if Plaintiffs had standing, “[t]he court may refuse to render
or enter a declaratory judgment or decree where such judgment or decree, if rendered
or entered, would not terminate the uncertainty or controversy giving rise to the
proceeding[.]” N.C. Gen. Stat. § 1-257. Here, the Court determines that no such
judgment should be entered and alternatively dismisses the cause of action on that
basis as well.
54. Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’
request concerning section 3.5 of the Operating Agreement.
55. Sections 3.5.1 and 4.8 of the Operating Agreement: Sections 3.5.1 and 4.8
of the Operating Agreement provide in relevant part that, notwithstanding anything
else in the Operating Agreement or applicable law, the Manager and the Majority
Member (i.e., Clay) “shall not owe a fiduciary duty to the Minority Members” and that
the “Minority Members waive, renounce, release and disclaim” the right to bring suit
against him for breach of fiduciary duty. (ECF No. 11, Ex. A, §§ 3.5.1, 4.8).
56. Defendants contend that the “Court has already analyzed and upheld the
enforceability of” sections 3.5.1 and 4.8. (ECF No. 51 at 11). This is incorrect. Rather,
the Court previously dismissed Plaintiffs’ cause of action for breach of fiduciary duty
that was necessarily predicated in part on the argument that sections 3.5.1 and 4.8
are unconscionable and that defendant Clay has breached purported fiduciary duties
to Plaintiffs as “members” of C&S that they believe would otherwise exist if not for these provisions of the Operating Agreement. (ECF No. 11, ¶¶ 65–74; ECF No. 28, ¶¶
59–65).
57. In dismissing Plaintiffs’ cause of action for breach of fiduciary duty, the
Court determined that Plaintiffs had failed to plead sufficient facts to support a cause
of action for breach of fiduciary duty. Though this entailed an analysis of sections
3.5.1 and 4.8 and Plaintiffs’ unconscionability argument, the Court’s dismissal of the
breach of fiduciary duty cause of action was not a determination that, as a matter of
law, sections 3.5.1 and 4.8 are valid and enforceable. (ECF No. 28, ¶¶ 59–65);
Sanders, 197 N.C. App. at 323.
58. Considering the competent evidence of record, it is apparent that there is
an actual controversy between the parties as to the enforceability and alleged
unconscionability of sections 3.5.1 and 4.8. Accordingly, though the Court ultimately
grants summary judgment in favor of Defendants on those provisions as set forth
below, Plaintiffs have standing to seek declaratory relief as to this issue.
59. Section 4.14: Section 4.14 of the Operating Agreement incorporates the
parties’ non-compete, non-disparagement, confidentiality, and non-solicitation
provisions into the Operating Agreement. (ECF No. 11, Ex. A, § 4.14).
60. Thus, with the complaint, Plaintiffs request that the Court declare that
section “4.14 and its attached ‘Non-Compete, Confidentiality and NonDisparagement Agreements’ violate North Carolina law because it contains overly
broad restrictions.” (ECF No. 11, ¶ 89).
61. The record reflects, however, no dispute or controversy between the parties
sufficient to invoke the Court’s jurisdiction with respect to this issue. Plaintiffs have
not pleaded, nor have they otherwise identified any facts in the record, suggesting
that they or Defendants intend to take any action that might violate the terms of the
various agreements incorporated into section 4.14. (See generally ECF No. 11).
Indeed, the only reference in the complaint to section 4.14 is the request for
declaratory relief, (ECF No. 11, ¶ 89), and the record otherwise reflects no related
facts creating a dispute as to this issue.
62. With no actual controversy or dispute with Defendants with respect to this
issue, Plaintiffs lack standing to seek such declaratory relief. See generally N.C. Gen.
Stat. § 1-254; Gaston Bd. of Realtors, 311 N.C. at 234; Sharpe, 317 N.C. at 583–84.
63. Further, even if Plaintiffs had standing and despite the general preference
to avoid dismissal of declaratory judgment requests, the complaint fails to state a
claim for declaratory relief given the dearth of factual allegations in the complaint
supporting the request. See Elhulu v. Alshalabi, 2021 NCBC LEXIS 44, at *13–15
(N.C. Super. Ct. Apr. 29, 2021) (dismissing declaratory relief causes of action).
64. Plaintiffs’ conclusory assertion that they “are entitled to a judicial
declaration” as to this issue, with nothing more, fails to state a claim, such that
dismissal is appropriate ex mero motu. See N.C. R. Civ. P. 8(a)(1) (requiring a “short
and plain statement of the claim sufficiently particular to give the court and the
parties notice of the transactions, occurrences, or series of transactions or
occurrences, intended to be proved showing that the pleader is entitled to relief”); N.C. R. Civ. P. 12(b)(6); see Tuwamo v. Tuwamo, 248 N.C. App. 441, 445 (2016) (“This
Court has found that ‘[c]ourts have continuing power to supervise their jurisdiction
over the subject matter before them, including the power to dismiss ex mero motu.’”
(alteration in original) (quoting Narron v. Union Camp Corp., 81 N.C. App. 263, 267
(1986))); Maola Ice Cream Co. of N.C., Inc. v. Maola Milk & Ice Cream Co., 238 N.C.
317, 324 (1953) (“If the cause of action, as stated by the plaintiff, is inherently bad,
why permit him to proceed further in the case, for if he proves everything that he
alleges he must eventually fail in the action.” (citations omitted)).
65. Moreover, inasmuch as the Court retains discretion to “refuse to render or
enter a declaratory judgment,” the Court determines here that it is appropriate to do
so. N.C. Gen. Stat. § 1-257.
66. Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’
declaratory judgment request concerning section 4.14 of the Operating Agreement.
67. Article IX and Article IXB: Article IX of the Operating Agreement (also
referred to as Article 9 in the complaint) sets forth the provisions and mechanisms
governing “Buy-Sell Event[s]” of a Minority Member’s interest in C&S. (ECF No. 11,
Ex. A, art. IX). For example, the provisions of Article IX generally apply in the event
of a Minority Member’s death or incompetence, insolvency, bankruptcy, transfer of
an interest in a manner not otherwise provided by the Operating Agreement, uncured
material breach of the Operating Agreement, domestic proceedings, or withdrawal
from C&S in a manner not otherwise provided by the Operating Agreement. (ECF
No. 11, Ex. A, § 9.1(a)–(g)).
68. Further, Article IXB (frequently referred to as 9B) specifically provides for
the termination of Oscar Estevez’s interest in C&S if he fails to obtain United States
citizenship within a specified period or is otherwise deported. (ECF No. 11, Ex. A, §
9B.1).
69. As above, considering the competent evidence before the Court, Plaintiffs
fail to identify any allegations in the complaint, much less facts in the record,
suggesting the existence of circumstances that would invoke application of the
provisions of Article IX or IXB or indicating that any party has sought to invoke those
provisions or that any actual controversy or dispute otherwise exists as to those
provisions. See generally N.C. Gen. Stat. § 1-254; Gaston Bd. of Realtors, 311 N.C. at
234; Sharpe, 317 N.C. at 583–84.
70. In short, while a controversy exists between the parties regarding the
forfeiture or transfer of Plaintiffs’ interests in C&S under Article IXA (9A), that
Article is distinct from Articles IX and IXB and addresses transfers in the event of
termination of employment or a felony conviction. (Compare ECF No. 11, Ex. A, arts.
IX and IXB, with ECF No. 11, Ex. A, art. IXA).
71. Accordingly, with no indication in the record of an actual outstanding
controversy as to Article IX or Article IXB, dismissal is appropriate for lack of
standing. As above, the Court alternatively determines in its discretion that a
declaratory judgment as to Article IX and Article IXB is otherwise inappropriate and
would not terminate the uncertainty at issue, such that this request is appropriately
dismissed without prejudice on that basis. N.C. Gen. Stat. § 1-257.
72. Further, even if Plaintiffs had standing, the complaint fails to state a claim
for declaratory relief as to Articles IX and IXB, given the dearth of factual allegations
in the complaint supporting the request. (ECF No. 11, ¶¶ 90 (asserting that Plaintiffs
“are entitled to a judicial declaration that the Operating Agreement’s Article 9
violates North Carolina law”), 92 (asserting that Plaintiffs “are entitled to a judicial
declaration that they must receive compensation in exchange for Defendants Clay
and Company ‘purchasing’ or ‘redeeming’ each of their membership interest[s]”); see
Elhulu, 2021 NCBC LEXIS 44, at *13–15.
73. Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’
declaratory judgment request as to Article IX and Article IXB of the Operating
Agreement. (ECF No. 11, ¶ 90).
74. Articles IXA (9A) and Remaining Requests (Compensation and
Accounting/Inspection): Article IXA of the Operating Agreement concerns
termination of Minority Members’ interests in C&S in the event that they are
convicted of a felony or are otherwise terminated from their employment with C&S
and requires a vote of eighty percent or more of C&S’s members for termination of
employment, which may occur only for violations of the C&S handbook that permit
termination for cause. (ECF No. 11, Ex. A, arts. IXA, §§ 9A.1, 9A.2).
75. Here, though there are disputes between the parties as to the validity of
such actions, Clay undisputedly purported to terminate Plaintiffs’ employment with
C&S and to transfer or terminate Plaintiffs’ interests in C&S based upon the provisions of Article IXA. (ECF No. 11, ¶¶ 25–26, 30, 33–36 & Ex. B; ECF No. 14,
¶¶ 25–26, 30, 33–36).
76. The remaining bases for declaratory judgment, namely that Plaintiffs are
entitled to compensation for their membership interests and that Plaintiffs are
entitled to an accounting or inspection of C&S’s records, all relate to the dispute at
the heart of this case: whether the Operating Agreement could or did allow for the
termination of Plaintiffs and the transfer of their membership interests under Article
IXA and whether that process was followed. (E.g., ECF No. 11, ¶¶ 91, 93–94).
77. There is a sufficient controversy between the parties as to those issues to
invoke the Court’s jurisdiction for declaratory relief.
ii. Alleged Unenforceability of Sections 3.5.1 and 4.8 and
Unconscionability of Article IXA (9A) of the Operating
Agreement
78. As to Plaintiffs’ remaining causes of action, Plaintiffs seek declarations that
a. “the Operating Agreement’s paragraph 3.5.1 violates North Carolina
law because it eliminates Defendant Clay’s fiduciary duties as Sole Manager,”
(ECF No. 11, ¶ 87);
b. “the Operating Agreement’s paragraph 4.8 violates North Carolina law
because it eliminates Defendant Clay’s fiduciary duties owed to the minority
members as the Company’s majority member,” (ECF No. 11, ¶ 88); and
c. “the Operating Agreement’s Article 9A violates North Carolina law
because it imposes unreasonable and oppressive restrictions on the transfer or
sale of Julian’s and Oscar’s membership interests.” (ECF No. 11, ¶ 91).
79. Though the Court did not affirmatively declare these provisions valid in its
November 2025 Order and Opinion on Defendants’ Partial Motion to Dismiss, the
Court did address Plaintiffs’ lack of factual allegations for their conclusory pleadings.
(ECF No. 28, ¶¶ 58–65). That much remains unchanged even at the summary
judgment stage.
80. While it is undisputed that Plaintiffs signed contractual waivers of
defendant Clay’s purported fiduciary duties, Plaintiffs nonetheless contend that the
waivers in sections 3.5.1 and 4.8 are invalid, illegal, “unreasonable, unconscionable,
and against public policy.” (ECF No. 11, ¶ 72).
81. At the summary judgment stage, the Court’s analysis of the case law and
the substance of those provisions remains largely the same as in the November 2025
Order and Opinion, and the Court therefore does not repeat that analysis here. (ECF
No. 28, ¶¶ 45–65).
82. In short, the record remains devoid of evidence that creates a genuine issue
of material fact in support of Plaintiffs’ request for declaratory relief that sections
3.5.1 and 4.8 “violate[] North Carolina law[.]”(ECF No. 11, ¶¶ 87–88; ECF No. 28,
¶¶ 45–65; see also Blaylock Grading Co., LLP v. Smith, 189 N.C. App. 508, 511 (2008)
(unconscionability); Westmoreland v. High Point Healthcare Inc., 218 N.C. App. 76,
91 (2012) (unconscionability); Strategic Mgmt. Decisions v. Sales Performance Int’l,
2017 NCBC LEXIS 69, at *10 (N.C. Super. Ct. Aug. 7, 2017) (fiduciary duties).
83. Accordingly, as to Plaintiffs’ request for declaratory relief concerning
sections 3.5.1 and 4.8, the Court determines that there is no genuine issue of material fact, that judgment as a matter of law is appropriate, and that summary judgment
should be granted against Plaintiffs and in favor of Defendants with respect to those
sections. Thus, the Court GRANTS Defendants’ motion as to sections 3.5.1 and 4.8
and ENTERS summary judgment in favor of Defendants as to Plaintiffs’ request for
declaratory judgments that (i) section 3.5.1 of the Operating Agreement “violates
North Carolina law because it eliminates Defendant Clay’s fiduciary duties as Sole
Manager,” (ECF No. 11, ¶ 87), and (ii) section 4.8 of the Operating Agreement
“violates North Carolina law because it eliminates Defendant Clay’s fiduciary duties
owed to the minority members as the Company’s majority member,” (ECF No. 11, ¶
88). (See also ECF No. 28, ¶¶ 45–65).
84. Similarly, as to Article IXA (9A) of the Operating Agreement, Plaintiffs’
request is ultimately one that the Court declare the Article unconscionable. (ECF No.
11, ¶ 91).
85. As explained in the Court’s November 2025 Order and Opinion, (ECF No.
28), “public policy in North Carolina favors freedom of contract, including the ability
for parties to negotiate the scope of a company’s operating agreement . . . absent
specific factual allegations suggesting illegality, violations of public policy,
unconscionability, or unreasonableness that might render the operating agreement
unenforceable,” and Plaintiffs’ own complaint lacks “specific factual allegations
suggesting illegality, violations of public policy, unconscionability, or
unreasonableness that might render the operating agreement unenforceable.”
Estevez v. C&S Com., LLC, 2025 NCBC LEXIS 166, at *21, 23–25 (N.C. Super. Ct. Nov. 25, 2025) (dismissing breach of fiduciary duty and request for piercing the
corporate veil).
86. Now, even at the summary judgment stage, there is no genuine issue of
material fact as to the issue of unconscionability.
87. As the Court previously explained,
[a] court will find a contract to be unconscionable only when the
inequality of the bargain is so manifest as to shock the judgment
of a person of common sense, and where the terms are so
oppressive that no reasonable person would make them on the
one hand, and no honest and fair person would accept them on
the other. An inquiry into unconscionability requires that a court
consider all the facts and circumstances of a particular case, and
if the provisions are then viewed as so one-sided that the
contracting party is denied any opportunity for a meaningful
choice, the contract should be found unconscionable. . . . A party
asserting that a contract is unconscionable must prove both
procedural and substantive unconscionability. . . . [P]rocedural
unconscionability involves bargaining naughtiness in the form of
unfair surprise, lack of meaningful choice, and an inequality of
bargaining power. Substantive unconscionability, on the other
hand, refers to harsh, one-sided, and oppressive contract terms.
Id. at *22–23 (quoting Musselwhite v. Cheshire, 266 N.C. App. 166, 180 (2019)).
88. Undisputedly, as to procedural unconscionability, each Plaintiff had
multiple days to possess, review, and otherwise consider the Operating Agreement
before they signed it, (ECF No. 55.2 at 38:13–16; ECF No. 52.3 at 63:6–8), and both
Plaintiffs spent multiple hours reviewing the document before signing it, (ECF No.
55.2 at 39:5–12; ECF No. 52.3 at 61:6–8). In that time, though they voluntarily elected
not to do so, both Plaintiffs had the opportunity to consult an attorney or conduct
other independent investigation if they so desired. (ECF No. 55.2 at 39:5–12; ECF
No. 52.3 at 61:11–13). Further, although Plaintiffs are not native English speakers, they both speak English and had time to have the document translated, either by a
human, digitally, or otherwise. (ECF No. 55.2 at 39:5–12, 41:15–17; ECF No. 52.3 at
61:11–13, 61:18–20). Moreover, there is no indication that Clay forced or improperly
pressured Plaintiffs to sign the Operating Agreement or to do so on a compressed
timeline.
89. Further, even if the Operating Agreement were procedurally
unconscionable, Article IXA (9A) is not substantively unreasonable or unconscionable
where it provides for the transfer of Minority Members’ interests in C&S upon
conviction of a felony or termination from their employment with C&S while
protecting Minority Members by requiring a vote of eighty percent or more of C&S’s
members for termination of employment, which may occur only for violations of the
C&S handbook that permit termination for cause. (ECF No. 11, Ex. A, arts. IXA, §§
9A.1, 9A.2). Brandson v. PCJ Ventures, LLC, 2008 NCBC LEXIS 29, at *8–9 (N.C.
Super. Ct. Feb. 22, 2008) (“The use of mandatory buy-sell provisions helps owners of
small and closely held businesses to control the ownership of the business and thus
facilitates and encourages the use of such agreements. Such provisions have been
upheld by North Carolina courts and are allowed by statute.” (internal marks and
citations omitted)); see generally Urquhart v. Trenkelbach, 2017 NCBC LEXIS 12
(N.C. Super. Ct. Feb. 8, 2017); cf. N.C. Gen. Stat. § 57D-2-30 (outlining unenforceable
terms in operating agreements).
90. Thus, as to Plaintiffs’ request for declaratory relief concerning Article IXA
(9A), the Court determines that there is no genuine issue of material fact, that judgment as a matter of law is appropriate, and the summary judgment should be
granted against Plaintiffs and in favor of Defendants with respect to that Article. As
a result, the Court GRANTS Defendants’ motion as to Article IXA (9A) and ENTERS
summary judgment in favor of Defendants as to Plaintiffs’ request for a declaratory
judgment that Article IXA (9A) of the Operating Agreement “violates North Carolina
law because it [purportedly] imposes unreasonable and oppressive restrictions on the
transfer or sale of Julian’s and Oscar’s membership interests.” (ECF No. 11, ¶ 91).
D. Plaintiffs’ Request for Declaratory Relief as to Compensation for
Purchase/Redemption of Shares and as to Inspection of Company
Records and Accounts
91. Next, the Court determines that the two remaining declarations sought by
Plaintiffs—that they are entitled to compensation for the “purchasing” or
“redeeming” of their interest in C&S and that they are entitled to an inspection of
C&S’s records and accounts, (ECF No. 11, ¶¶ 93–94)—are duplicative of substantive
claims in the case and would serve no useful purpose in clarifying or settling the legal
relations in this action.
92. As explained above, courts have broad discretion “to decline a request for
declaratory relief when . . . the requested declaration will serve no useful purpose in
clarifying or settling the legal relations at issue[.]” Augur v. Augur, 356 N.C. 582,
588–89 (2002); N.C. Gen. Stat. § 1-257.
93. Here, Plaintiffs assert a breach of contract cause of action premised in large
part upon Defendants’ purported breach of the Operating Agreement by “[f]ailing to
follow the Operating Agreement when attempting to purchase” Plaintiffs’ interests in C&S, “[u]sing the Operating Agreement to strip” Plaintiffs of their “ownership
interest[s] in [C&S] without compensation,” “[f]ailing to follow the Operating
Agreement when firing” Plaintiffs, and “[f]ailing to provide [C&S’s] financial
information” (i.e., records and accounts) to Plaintiffs when requested. (ECF No. 11,
¶ 58(a)–(h)).
94. In short, Plaintiffs already have a substantive cause of action premised
upon the very same conduct as to which they seek declaratory relief, and the request
for declaratory relief as to those issues is duplicative of the breach of contract cause
of action on the same issues. (ECF No. 11, ¶¶ 56–64, 93–94).
95. In such cases, in its discretion, a court may appropriately dismiss or abstain
from addressing the duplicative request for declaratory relief. E.g., Augur, 356 N.C.
at 588–89 (“[S]ection 1-257 permits a trial court, in the exercise of its discretion, to
decline a request for declaratory relief when (1) the requested declaration will serve
no useful purpose in clarifying or settling the legal relations at issue . . . .”); Exencial
Wealth Advisors, LLC v. Downing, 2025 NCBC LEXIS 38, at *38 (N.C. Super. Ct.
Apr. 1, 2025) (“However, a court may dismiss a claim for declaratory judgment as
duplicative if all issues concern questions that the Court will have to resolve in
addressing the parties’ claims for breach of contract.” (citation and internal
punctuation omitted)); High Point BBC, LLC v. Arvelo, 2026 NCBC LEXIS 178, at
*17 (N.C. Super. Ct. Oct. 6, 2026); see also Port City Logistics, Inc. v. Chasewater
Logistics, LLC, No. 3:23-CV-541-RJC-DCK, 2024 WL 3841527, at *5, 2024 U.S. Dist.
LEXIS 146366, at *14 (W.D.N.C. July 17, 2024) (“Many courts have previously recognized that a declaratory judgment does not serve a useful purpose where that
purpose is only to resolve an already-existing breach of contract claim.” (citations
omitted)).
96. In the exercise of its discretion, the Court determines that resolution of
Plaintiffs’ requested declarations that they are entitled to compensation for the
“purchasing” or “redeeming” of their interest in C&S and that they are entitled to an
inspection of C&S’s records and accounts, (ECF No. 11, ¶¶ 93–94), are duplicative
and that resolution of those requests would not serve a useful purpose. Accordingly,
the Court DISMISSES WITHOUT PREJUDICE Plaintiffs’ request as to those
issues.
E. Punitive Damages
97. Finally, Defendants seek summary judgment as to Plaintiffs’ request for
punitive damages, arguing that Plaintiffs’ only remaining substantive cause of action
is their breach of contract action and that there is no evidence of tortious conduct that
otherwise supports punitive damages. (ECF No. 51 at 13–14).
98. “[P]unitive damages may not be awarded based upon the breach of a
contract in the absence of the commission of an identifiable tort.” SciGrip, Inc. v.
Osae, 373 N.C. 409, 428 (2020) (citations omitted); see also N.C. Gen. Stat. § 1D-15(d)
(“Punitive damages shall not be awarded against a person solely for breach of
contract.”). Thus, as Defendants note, “[i]t is well-settled that punitive damages are
generally not allowed for a breach of contract with the exception of breach of contract
to marry.” Cash v. State Farm Mut. Auto. Ins. Co., 137 N.C. App. 192, 200 (2000).
99. Here, Plaintiffs’ only remaining substantive cause of action is for breach of
contract, and there is no genuine issue of material fact as to purported punitive
damages, such that summary judgment in favor of Defendants is appropriate on this
issue.
100. Therefore, the Court GRANTS the motion as to Plaintiffs’ request for
punitive damages and ENTERS summary judgment against Plaintiffs and in favor
of Defendants as to Plaintiffs’ request for punitive damages.
III. CONCLUSION
101. Accordingly, the Court GRANTS IN PART and DENIES IN PART
Defendants’ motion for partial summary judgment as set forth above.
SO ORDERED, this 19th of October 2026.
/s/ Matthew T. Houston
Matthew T. Houston
Special Superior Court Judge
for Complex Business Cases