IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-707

No. COA22-116

Filed 1 November 2022

Catawba County, No. 20 CVS 2090

TOD COLES, Plaintiff,

v.

SUGARLEAF LABS, INC. (formerly known as Neptune Acquisition USA, Inc.), and 

NEPTUNE WELLNESS SOLUTIONS, INC., Defendants.

Appeal by Plaintiff from an order entered 17 August 2021 by Judge Gregory 

Hayes in Catawba County Superior Court. Heard in the Court of Appeals 6 

September 2022.

Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for PlaintiffAppellant.

Jackson Lewis P.C., by H. Bernard Tisdale, III, and Janean B. Dunn, for 

Defendants-Appellees.

INMAN, Judge.

¶ 1 Plaintiff-Appellant Tod Coles (“Plaintiff”) appeals from an order compelling 

arbitration and dismissing his complaint with prejudice. The parties dispute whether 

this Court has jurisdiction over this appeal. Orders compelling arbitration are 

interlocutory and are generally not immediately appealable, but a dismissal of a 

complaint with prejudice ordinarily operates as a final judgment from which a party 
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may immediately appeal. After careful review, we hold that the trial court’s dismissal 

with prejudice was in error under North Carolina law, vacate that portion of the trial 

court’s order, and remand for entry of a stay. But, because we would otherwise lack 

jurisdiction to consider Plaintiff’s appeal, we dismiss Plaintiff’s appeal without 

consideration of its merits and leave undisturbed the remainder of the trial court’s 

order compelling arbitration.

I. FACTUAL AND PROCEDURAL HISTORY

¶ 2 The record below discloses the following:

¶ 3 In 2018, Plaintiff was employed as the president of Sugarleaf Labs, LLC and 

Forest Remedies, LLC, two entities involved in the processing and sale of hemp 

products. The following year, Defendant Neptune Wellness Solutions, Inc. 

(“Neptune”) purchased Sugarleaf Labs, LLC, and Forest Remedies, LLC, through a 

newly-formed subsidiary, Defendant Sugarleaf Labs, Inc. (“Sugarleaf,” together with 

Neptune as “Defendants”). 

¶ 4 Neptune’s purchase of Plaintiff’s employers was memorialized in an Asset 

Purchase Agreement (“APA”). The APA required Sugarleaf to enter into new 

employment agreements with certain key employees, including Plaintiff. It also 

required that any disputes relating to the APA and its “Ancillary Documents”—

defined to include Plaintiff’s employment agreement with Sugarleaf—must be 

resolved through arbitration. 
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¶ 5 On 24 July 2019, after the APA was executed, Plaintiff and Sugarleaf entered 

into the contemplated employment agreement; this agreement did not include an 

arbitration provision, and Plaintiff was not a signatory to the earlier APA. However, 

the employment agreement did expressly state that it was a condition of the APA and 

that the employment agreement “include[ed] . . . the agreements and other documents 

referenced in this Agreement.” 

¶ 6 Sugarleaf eventually terminated Plaintiff’s employment, leading him to sue 

Defendants for: (1) breach of contract; (2) fraud; (3) negligent misrepresentation; (4)

Wage & Hour Act violations; (5) injunctive relief; and (6) unfair and deceptive trade 

practices. Defendants filed an answer and subsequently moved “to compel arbitration 

and dismiss, or in the alternative, stay pending arbitration.” Defendants premised 

their motion to compel arbitration on Plaintiff’s admission in his complaint that he 

was a third-party beneficiary under the APA and argued that Plaintiff could only 

enforce the employment agreement consistent with the APA’s mandatory arbitration 

provision. The motion included several exhibits, namely pertinent portions of the 

executed APA, Plaintiff’s employment agreement with Sugarleaf, and emails showing 

Plaintiff’s refusal to arbitrate. 
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¶ 7 Both parties submitted briefs to the trial court in advance of the hearing. 

Plaintiff argued that there was no evidence1 he had agreed to arbitrate any claims 

because he did not sign the APA, and any attempt to enforce the APA’s arbitration 

provision against him would be contrary to North Carolina public policy. 

¶ 8 Defendants’ brief asserted that under either the Federal Arbitration Act 

(“FAA”) or the North Carolina Revised Uniform Arbitration Act (“RUAA”), the trial 

court was required to stay the proceeding and compel arbitration. They argued that

regardless of which statute applied, North Carolina contract and agency law requires 

a third-party beneficiary seeking to enforce a contract with a mandatory arbitration 

provision to do so through arbitration. Defendants’ brief also included several 

additional documentary exhibits showing Plaintiff’s agency/third-party beneficiary 

relationship to the APA and its signatories. 

¶ 9 The trial court heard Defendants’ motion via Webex on 25 January 2021. It 

allowed Defendants’ motion from the bench, concluding that the employment 

agreement was part of the APA (and vice-versa). The trial court did not, however, 

 

1 Plaintiff challenged the competency and sufficiency of the evidence presented below

concerning the existence of an agreement to arbitrate, and he maintains that challenge on 

appeal. Because we dismiss his appeal without addressing its substance, we do not purport 

to decide whether the record includes sufficient admissible evidence to compel arbitration or 

support the trial court’s findings of fact to that effect. Goetz v. N.C. Dept. of Health & Human 

Svcs., 203 N.C. App. 421, 433, 692 S.E.2d 395, 403 (2010) (holding that appeals dismissed as 

interlocutory contain “no rulings of law which could become the law of the case”).
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expressly indicate whether it was staying the action, which typically occurs when a 

motion to compel arbitration is granted, or dismissing the action, as requested by 

Defendants’ motion. 

¶ 10 After the parties submitted dueling proposed orders, the trial court entered a 

written order compelling arbitration and dismissing Plaintiff’s complaint with 

prejudice. Plaintiff now appeals, arguing that the dismissal with prejudice is a final 

judgment or, if interlocutory, affects a substantial right. Failing that, he requests 

this Court treat his brief as a petition for writ of certiorari. 

II. ANALYSIS

¶ 11 Plaintiff asserts on appeal that the trial court’s order is immediately 

appealable as a final judgment because it dismissed his complaint with prejudice. 

Defendants maintain that the order is interlocutory, does not affect a substantial 

right, and is thus not subject to immediate appeal. See, e.g., C. Terry Hunt Indus., 

Inc. v. Klausner Lumber Two, LLC, 255 N.C. App. 8, 12, 803 S.E.2d 679, 682 (2017) 

(holding an order compelling arbitration is not immediately appealable for these 

reasons). 

¶ 12 Both parties are correct to some extent: a dismissal with prejudice is a final 

judgment, but an order compelling arbitration—properly entered—is interlocutory 

and not subject to immediate appeal as of right. Thus, by compelling arbitration and 

dismissing Plaintiff’s complaint with prejudice, the trial court entered something 
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akin to Schrodinger’s cat: an appealable unappealable order, an interlocutory final 

judgment. 

¶ 13 Faced with this quantum-state quandary, and reviewing the relevant statutes 

and caselaw, we hold that the trial court erred in dismissing Plaintiff’s complaint 

with prejudice. After compelling arbitration, the trial court was required to stay 

proceedings based on the mandatory language of the RUAA, which supplies the 

applicable procedural law in this case. We therefore vacate that portion of the order 

and remand for entry of an order staying the action pending arbitration. 

¶ 14 As for Plaintiff’s substantive arguments contending the trial court erred in 

compelling arbitration, we dismiss that portion of the appeal because our precedents 

establish that such orders are neither final judgments nor interlocutory orders 

affecting a substantial right subject to immediate appeal. Lastly, we decline in our 

discretion to treat Plaintiff’s brief as a petition for writ of certiorari on this issue.

A. Appellate Jurisdiction Generally

¶ 15 Appellate jurisdiction is a threshold issue that we must consider sua sponte. 

Akers v. City of Mount Airy, 175 N.C. App. 777, 778, 625 S.E.2d 145, 146 (2006). 

Whether this Court has jurisdiction turns largely on the nature—interlocutory or 

final—of the order from which the parties appeal. A party may always appeal from 

a final judgment, Embler v. Embler, 143 N.C. App. 162, 164, 545 S.E.2d 259, 261 

(2001), which our caselaw defines as “one which disposes of the cause as to all the 
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parties, leaving nothing to be judicially determined between them in the trial court[,]” 

Veazey v. City of Durham, 231 N.C. 357, 361-62, 57 S.E.2d 377, 381 (1950). Stated 

differently, “[a] final judgment generally is one which ends the litigation on the 

merits.” Duncan v. Duncan, 366 N.C. 544, 545, 742 S.E.2d 799, 801 (2013) (cleaned 

up).

¶ 16 Interlocutory orders differ substantially from final judgments both in their 

character and their appealability. Such orders are made “during the pendency of an 

action, which do[] not dispose of the case, but leave[] it for further action by the trial 

court in order to settle and determine the entire controversy.” Veazey, 231 N.C. at 

362, 57 S.E.2d at 381. In layperson’s terms, an interlocutory order is entered during

an ongoing court case, while a final judgment ends a lawsuit. And, unlike a final 

judgment, an interlocutory order is only appealable if the order “is final as to some 

but not all of the claims or parties, and the trial court certifies the case for appeal 

pursuant to N.C. Gen. Stat. § 1A-1, Rule 54(b),” N.C. Dept. of Transportation v. Page, 

119 N.C. App. 730, 734, 460 S.E.2d 332, 334 (1995), or if it “affects a substantial right 

of the appellant that would be lost without immediate review.” Embler, 143 N.C. 

App. at 165, 545 S.E.2d at 261 (citations omitted). This important limitation serves 

to “prevent fragmentary and premature appeals that unnecessarily delay the 

administration of justice and to ensure that the trial divisions fully and finally 
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dispose of the case before an appeal can be heard.” Bailey v. Gooding, 301 N.C. 205, 

209, 270 S.E.2d 431, 434 (1980).

B. Appealability of Orders Compelling Arbitration and Dismissals with

Prejudice

¶ 17 Our caselaw concerning the appealability of orders compelling arbitration 

establishes two key points: (1) “[a]n order compelling the parties to arbitrate is an 

interlocutory order,” Bluffs, Inc. v. Wysocki, 68 N.C. App. 284, 285, 314 S.E.2d 291, 

293 (1984); and (2) “an order compelling arbitration affects no substantial right that 

would warrant immediate appellate review,” C. Terry Hunt Indus., Inc. 255 N.C. App. 

at 12, 803 S.E.2d at 682. Thus, as an ordinary matter, a party may not immediately 

appeal an order compelling arbitration. Id.

¶ 18 Equally ordinary, however, is the principle that dismissals of lawsuits with 

prejudice are immediately appealable as final judgments adjudicating matters on the 

merits. See Doe v. Roman Catholic Diocese of Charlotte, 2022-NCCOA-288, ¶ 13 

(noting a summary judgment order dismissing a complaint with prejudice was 

immediately appealed as a final judgment); Clements v. Southern Ry. Co. ̧179 N.C. 

225, 102 S.E. 399, 400 (1920) (“[T]he allowance of a motion to dismiss is final, and of 

course appealable.”); cf. Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 79-

80, 148 L. Ed. 2d 373 (2000) (holding that an order compelling arbitration under the 

FAA and dismissing the complaint with prejudice was a final decision subject to 
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immediate appellate review under federal law without deciding whether such a 

dismissal was actually proper under the statute).

¶ 19 The order before us places the above precepts in direct tension. Thankfully, 

North Carolina’s RUAA, the FAA, and our state’s caselaw provide a ready release: a 

North Carolina state trial court may not compel arbitration and dismiss a complaint 

with prejudice. 

C. The RUAA Does Not Allow for Dismissal

¶ 20 The plain text of the RUAA does not contemplate dismissal upon entry of an 

order compelling arbitration. To the contrary, it requires, in mandatory terms, that 

“the court on just terms shall stay any judicial proceeding that involves a claim 

subject to . . . arbitration.” N.C. Gen. Stat. § 1-569.7(g) (2021) (emphasis added); see 

also State v. Johnson, 298 N.C. 355, 361, 259 S.E.2d 752, 757 (1979) (“As used in 

statutes, the word ‘shall’ is generally imperative or mandatory.”). Consistent with 

this language, we have mandated stays when reversing and remanding orders 

denying arbitration under the RUAA. See Fontana v. Southeast Anesthesiology 

Consultants, P.A., 221 N.C. App. 582, 592 729 S.E.2d 80, 88 (2012) (“[S]ince we have 

held the breach of the employment contract is subject to arbitration, the trial court 

must stay the proceedings with regard to that claim.” (emphasis added)); Ellison v. 

Alexander, 207 N.C. App. 401, 415, 700 S.E.2d 102, 112 (2010) (“[T]he trial court’s 

order denying Defendants’ motion to compel arbitration should be, and hereby is, 
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reversed and this matter is remanded to the trial court for the entry of an order 

staying all further proceedings and requiring the parties to proceed to arbitration.”).

¶ 21 Other analogous decisions further illustrate that a stay, and not dismissal, is 

the proper remedy under the RUAA. In Novacare Orthotics & Prosthetics East, Inc. 

v. Speelman, the trial court granted a defendant’s motion to dismiss on arbitrability 

grounds. 137 N.C. App. 471, 478, 528 S.E.2d 918, 922 (2000). We vacated that 

dismissal and remanded the matter for further proceedings, reasoning that 

“defendant’s motion was an application to stay litigation and compel arbitration 

pursuant to [the RUAA’s predecessor statute],” notwithstanding the fact that the 

motion sought outright dismissal of the plaintiff’s complaint. Id. And, in another 

case surveying arbitration caselaw, we described a stay as the “appropriate remedy” 

when compelling arbitration. Patel v. Scottsdale Ins. Co., 221 N.C. App. 476, 484, 728 

S.E.2d 394, 400 (2012) (“After reviewing the relevant decisions of this Court, we note 

that, in the event that a litigant initiates civil litigation on the basis of a claim that 

is subject to arbitration, the appropriate remedy is to order the parties to arbitrate 

their dispute and stay the litigation pending completion of the arbitration process.”). 

Indeed, Defendants’ own brief to the trial court in this matter acknowledged that the 

RUAA calls for a stay when compelling arbitration. 

¶ 22 Reading the RUAA to require a stay rather than dismissal is also in keeping 

with the purposes and structure of the statute. There is “a strong public policy 
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favoring the settlement of disputes by arbitration,” Johnston County, N.C. v. R.N. 

Rouse & Co., Inc., 331 N.C. 88, 91, 414 S.E.2d 30, 32 (1992), and our arbitration 

statutes serve “to provide and encourage an expedited, efficient, relatively 

uncomplicated, alternative means of dispute resolution, with limited judicial 

intervention or participation, and without the primary expense of litigation—

attorneys’ fees[,]” Nucor Corp. v. General Bearing Corp., 333 N.C. 148, 154, 423 

S.E.2d 747, 750 (1992). Notably, the RUAA itself does not allow for appeals from 

orders compelling arbitration; instead, a party contending he was wrongly ordered to 

submit his claim to arbitration may only challenge such a ruling by moving to vacate 

the award on that ground after said award has been rendered by the arbitrator and, 

should the award nonetheless be confirmed, appealing the issue after entry of that 

final judgment. N.C. Gen. Stat. §§ 1-569.28 & 1-569.23(a)(5) (listing the orders 

appealable under the RUAA—omitting orders compelling arbitration—and instead 

allowing a challenge to arbitrability by motion to vacate an award).

2

 

2 Orders denying arbitration are, by contrast, immediately appealable under the 

RUAA. N.C. Gen. Stat. § 1-569.28(a)(1); see also Prime South Homes, Inc. v. Byrd, 102 N.C. 

App. 255, 258, 401 S.E.2d 822, 825 (1991) (“[A]n order denying arbitration, although 

interlocutory, is immediately appealable because it involves a substantial right which might 

be lost if appeal is delayed.”). This is for good reason. See Katz v. Cellco P’ship, 794 F.3d 341, 

346 (2nd Cir. 2015) (“[I]t would make little sense to receive a conclusive arbitrability ruling 

only after a party has already litigated the underlying controversy.”).
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¶ 23 With these intentions in mind, it is evident that allowing orders compelling 

arbitration to be entered as final judgments would re-inject the appellate judiciary 

into the proceedings at the exact juncture that the court system is supposed to be 

stepping aside in favor of arbitration. See Henderson v. Herman, 104 N.C. App. 482, 

485, 409 S.E.2d 739, 741 (1991) (noting that, in passing the RUAA’s predecessor 

statute, “the legislature intended the courts to send certain predetermined issues to 

arbitration and then to step back until the arbitration proceeding is complete”). We 

therefore hold, consistent with the plain language and purposes of the RUAA, that a 

trial court must stay proceedings when compelling arbitration. It may not convert 

what is otherwise intended to be an unappealable interlocutory order into an 

appealable final judgment by dismissing a complaint with prejudice.

D. The RUAA’s Procedural Law Applies Even If the FAA Governs the 

Substantive Law

¶ 24 Left unanswered by the above analysis is the FAA’s role in this appeal. That 

statute contains a substantively identical provision to our RUAA that, in apparently 

mandatory terms, requires the trial court to enter a stay of those claims subject to 

arbitration. 9 U.S.C. § 3 (2022) (“[T]he court . . . upon being satisfied that the issue 

involved in such suit or proceeding is referable to arbitration under such an 

agreement, shall on application of one of the parties stay the trial of the action until 
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such arbitration has been had . . . .”).3 Ultimately, what Section 3 of the FAA 

procedurally requires is immaterial, as this Court has held that “Section 3 of the FAA 

only applies in federal district court, not in state court.” Elliott v. KB Home North 

Carolina, Inc., 231 N.C. 332, 336, 752 S.E.2d 694, 697 (2013). And because the 

procedural provision of the RUAA compelling a mandatory stay furthers the purposes 

of the FAA by favoring arbitration, the RUAA’s procedural provisions back-fill the 

gap left by Section 3 of the FAA’s inapplicability. See Blow v. Shaughnessy, 68 N.C. 

App. 1, 313 S.E.2d 868 (1984) (holding the procedural stay provision of the RUAA’s 

predecessor statute, and not Section 3 of the FAA, provide the remedy when 

compelling arbitration pursuant to an agreement governed by the FAA). 

¶ 25 The trial court’s order dismissing Plaintiff’s complaint does not comport with 

the law as set forth above. Under the RUAA, the trial court could only stay Plaintiff’s 

complaint, N.C. Gen. Stat. § 1-569.7(g), and that procedural remedy is the only one 

available even if the FAA substantively governs the arbitration agreement at issue.

We therefore vacate the portion of the order that dismisses the complaint with 

 

3 The federal circuits are presently split as to whether a trial court may dismiss a 

complaint in lieu of stay when compelling arbitration. See Katz, 794 F.3d at 345 (reviewing 

the circuit split before holding that a stay, and not dismissal, is the only appropriate 

disposition in an order compelling arbitration under the FAA). Different panels of the Fourth 

Circuit have rendered conflicting decisions on the matter. See Aggarao v. MOL Ship Mgmt. 

Co., Ltd., 675 F.3d 355, 376 n.18 (4th Cir. 2012) (noting that there is “some tension” between 

the Fourth Circuit’s various decisions regarding the availability of dismissal under Section 3 

of the FAA).
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prejudice and remand the matter for entry of an order that stays the action.

E. No Other Grounds Permit Appellate Review

¶ 26 Having held that the portion of the trial court’s order giving this Court 

jurisdiction was in error, we now dismiss the remainder of Plaintiff’s appeal. He has 

made no showing distinguishing this case from the decades of precedents holding 

orders compelling arbitration do not affect a substantial right, relying instead on 

entirely conclusory assertions without citation to caselaw or the record. See K2HN 

Construction NC, LLC v. Five D Contractors, Inc., 267 N.C. App. 207, 213-14, 832 

S.E.2d 559, 564 (2019) (observing that conclusory arguments are inadequate to raise 

an issue on appeal). 

¶ 27 We also decline to treat Plaintiff’s brief as a petition for writ of certiorari. Not 

only is making such a request absent a proper petition under Rule 21 of the North 

Carolina Rules of Appellate Procedure disfavored, Doe v. City of Charlotte, 273 N.C. 

App. 10, 23, 848 S.E.2d 1, 11 (2020), but Plaintiff has not demonstrated any basis for 

discarding the two substantial public policy considerations at play in this appeal. See 

Embler, 143 N.C. App. at 165, 545 S.E.2d at 261-62 (discussing the policy behind the 

prohibition against fragmentary interlocutory appeals); Nucor Corp. ̧333 N.C. at 154, 

423 S.E.2d at 750 (detailing the public policy rationale for favoring arbitration over 

traditional litigation).

III. CONCLUSION
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¶ 28 For the foregoing reasons, we hold the trial court erred in dismissing Plaintiff’s 

complaint with prejudice, vacate that limited portion of the order, and remand the 

matter for entry of an order that stays the litigation. We do not address the 

substantive merits of the trial court’s order and pass no judgment as to whether 

arbitration was properly ordered in this case; Plaintiff may properly raise that issue 

before the trial court in the post-award proceedings authorized by statute and upon 

appeal of that interlocutory order from a final judgment confirming the award. See 

C. Terry Hunt Indus., Inc., 255 N.C. App. at 12, 803 S.E.2d at 682 (detailing postaward challenges to arbitration under the RUAA); In re Fifth Third Bank, Nat’l Ass’n, 

216 N.C. App. 482, 487, 716 S.E.2d 850, 854 (2011) (discussing the same under the 

FAA); N.C. R. App. P. 3 (2022) (allowing a party to designate an appeal from an order 

after judgment).

VACATED AND REMANDED IN PART; APPEAL DISMISSED IN PART

Judge DILLON concurs.

Judge MURPHY concurs by separate opinion.
No. COA22-116 – Coles v. Sugarleaf Labs, Inc.

MURPHY, Judge, concurring.

¶ 29 I fully join the Majority in its result and its analysis. However, insofar as ¶¶ 

22-23 or 27, supra, could be read as even tacitly endorsing our current system or 

supporting a policy favoring arbitration, I write separately to reiterate the 

observations and critiques made in AVR Davis Raleigh, LLC v. Triangle Constr. Co., 

Inc., 260 N.C. App. 459, 463-66, 818 S.E.2d 184, 188-89 (2018) (Murphy, J., 

concurring). To the extent that I am not bound to do so, I refuse to perpetuate the 

myth that it is the policy of the People of this state to favor arbitration over jury trials.