IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA15-746

Filed: 2 August 2016

Caldwell County, No. 14 CVS 1250

RAYMOND JAMES CAPITAL PARTNERS, L.P., Plaintiff

v.

HAZEL HAYES, Defendant

Appeal by plaintiff from order entered 23 February 2015 by Judge Robert C. 

Ervin in Caldwell County Superior Court. Heard in the Court of Appeals 2 December 

2015.

Sigmon, Clark, Mackie, Hanvey & Ferrell, P.A., by Forrest A. Ferrell and Amber 

Reinhardt Mueggenburg, for plaintiff-appellant.

Tin, Fulton, Walker & Owen, PLLC, by Sam McGee, for defendant-appellee.

CALABRIA, Judge.

Raymond James Capital Partners, L.P. (“plaintiff”) appeals from an order 

granting Hazel Hayes’ (“defendant”) motion to dismiss all claims asserted against 

her. We affirm.

I. Background

Plaintiff was a majority shareholder of Albion Medical Holdings, Inc.

(“Albion”), a closely held corporation. Defendant was a minority shareholder of 

Albion. Greer Laboratories, Inc. (“Greer”)—a North Carolina corporation and whollyowned subsidiary of Albion—employed defendant for approximately forty-five years. 
RAYMOND JAMES CAPITAL PARTNERS V. HAYES

Opinion of the Court

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In 2005, defendant became Assistant Controller of Greer. Her job responsibilities 

included “performing monthly bank reconciliations, maintaining the general ledger, 

reviewing accounting entries and maintaining physical possession over Greer’s 

manual checks.”

In 2013, Albion, and by extension, Greer, were sold pursuant to a Stock 

Purchase Agreement. A business valuation method known as EBIDTA (Earnings 

Before Interest, Taxes, Depreciation, and Amortization) was used to calculate the 

purchase price. Albion was sold for 13.5 times the trailing twelve-month EBITDA. 

In addition, any excess cash of Albion was to be allocated to shareholders in the form 

of dividends or a pre-closing distribution. After the sale occurred, defendant 

continued to work as Greer’s Assistant Controller until she retired in September 

2014.

Soon after defendant’s retirement, Greer uncovered evidence that indicated 

she had issued manual checks to herself and falsely recorded the funds as payments 

to banks and vendors in the general corporate ledger. After being confronted with 

this evidence, defendant allegedly admitted to embezzling funds from Greer 

beginning in May 2013; however, the results of an internal investigation suggested

that the fraudulent check scheme dated back to 2004. 
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Opinion of the Court

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Consequently, on 7 November 2014, plaintiff filed a verified complaint1 against 

defendant in Caldwell County Superior Court. Plaintiff alleged claims of 

embezzlement, conversion, fraud, breach of fiduciary duty, constructive fraud, unfair 

and deceptive trade practices, and a violation of North Carolina’s Racketeer 

Influenced and Corrupt Organizations Act (“RICO”). According to plaintiff’s 

allegations, defendant embezzled approximately $839,878.00 from Greer. The 

verified complaint also contained a motion for a temporary restraining order and a 

preliminary injunction. The trial court subsequently entered a preliminary 

injunction against defendant prohibiting her from, inter alia, selling, conveying, or 

liquidating her assets in order to protect plaintiff’s “ability to collect upon any 

judgment it obtain[ed] in th[e] case.” Defendant responded by filing an answer and 

motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil 

Procedure for failure to state a claim based, in part, on plaintiff’s lack of standing to 

bring individual claims against defendant. After a hearing on the Rule 12(b)(6)

motion, the trial court entered an order on 23 February 2015 granting defendant’s 

motion to dismiss as to all claims. Plaintiff appeals. 

II. Standard of Review

 

1 Greer also filed an action against defendant in Caldwell County but a settlement was 

eventually reached in that case. For reasons not contained in the record, none of Albion’s shareholders

were parties to that action.
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Plaintiff contends the trial court erred in granting defendant’s motion to 

dismiss under Rule 12(b)(6) for failure to state any claim upon which relief could be 

granted. We disagree.

The standard of review of an order granting a 12(b)(6) 

motion is whether the complaint states a claim for which 

relief can be granted under some legal theory when the 

complaint is liberally construed and all the allegations 

included therein are taken as true. On a motion to dismiss, 

the complaint’s material factual allegations are taken as 

true. Legal conclusions, however, are not entitled to a 

presumption of validity. Dismissal is proper when one of 

the following three conditions is satisfied: (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. 

Wells Fargo Bank, N.A. v. Corneal, __ N.C. App. __, __, 767 S.E.2d 374, 377 (2014) 

(citation omitted). Ultimately, this Court “conducts a de novo review of the pleadings 

to determine their legal sufficiency and to determine whether the trial court’s ruling 

on the motion to dismiss was correct.” Page v. Lexington Ins. Co., 177 N.C. App. 246, 

248, 628 S.E.2d 427, 428 (2006) (citation, quotation marks, and brackets omitted). 

III. Shareholder Actions
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Plaintiff, as a shareholder of Albion, seeks to bring individual causes of action 

against defendant, a former officer of Greer,2 to recover for losses related to plaintiff’s

investment and the reduction of certain dividends as well as pre-distribution 

payments to which it was purportedly entitled. 

Under North Carolina law, corporate officers with discretionary authority 

must discharge their duties in good faith, with due care, and in a manner they believe 

to be in the corporation’s best interests. N.C. Gen. Stat. § 55-8-42(a) (2015); see also

id. § 55-8-30(a) (2015) (same with respect to corporate directors). When these 

fiduciary duties are breached, the issue of whether the resulting injuries should be 

litigated in an individual or a derivative action arises. “A derivative proceeding is a 

civil action brought . . . in the right of a corporation, . . . while an individual action is 

. . . [brought] to enforce a right which belongs to [a plaintiff] personally.” Morris v. 

Thomas, 161 N.C. App. 680, 684, 589 S.E.2d 419, 422 (2003) (citation and internal 

quotation marks omitted). “Shareholders . . . of corporations generally may not bring 

individual actions to recover what they consider their share of the damages suffered 

by the corporation.” Barger v. McCoy Hillard & Parks, 346 N.C. 650, 660, 488 S.E.2d 

215, 220-21 (1997) (citations and quotation marks omitted). A similar, “wellestablished general rule is that shareholders cannot pursue individual causes of 

 

2 We note that defendant does not concede that she was actually an officer of Greer. The trial 

court also questioned plaintiff’s characterization of defendant as a corporate officer. In any event, 

since the essence of the verified complaint is that defendant was an officer and that she owed specific 

fiduciary duties to plaintiff, we assume for purposes of this appeal that defendant was an officer. 
RAYMOND JAMES CAPITAL PARTNERS V. HAYES

Opinion of the Court

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action against third parties for wrongs or injuries to the corporation that result in the 

diminution or destruction of the value of their stock.” Id. at 658, 488 S.E.2d at 219 

(citations omitted). Since the loss of an investment “ ‘is [typically] identical to the 

injury suffered by’ the corporate entity as a whole[,]” claims arising from injuries to 

the corporation are properly asserted in derivative suits. Green v. Freeman, 367 N.C. 

136, 144, 749 S.E.2d 262, 269 (2013) (citation omitted); Russell M. Robinson, II, 

Robinson on North Carolina Corporation Law § 17.01 et seq. (7th ed. 2015)

(explaining that corporate shareholders may normally enforce a claim that belongs to 

the corporation only through a derivative suit brought on behalf of the corporation). 

A suit against corporate officers or directors for breach of fiduciary duty is 

“[o]ne of the clearest examples of a derivative action. . . .” Id. at § 17.02[1]. As 

explained by the United States Supreme Court, shareholder derivative suits exist to 

remedy “those situations where the management through fraud, neglect of duty or 

other cause declines to take the proper and necessary steps to assert the rights which 

the corporation has.” Meyer v. Fleming, 327 U.S. 161, 167, 90 L. Ed. 595, 600 (1946).

The general prohibition against individual shareholder suits is 

understandable, for “the duties, the breaches of which constitute the ground of 

action, are duties to the corporation, considered as a legal entity, and not duties to 

any particular [share]holder.” Coble v. Beall, 130 N.C. 533, 536, 41 S.E. 793, 794 

(1902). Thus, “any damages [recovered from derivative suits] flow back to the 

corporation, not to the individual shareholders bringing the action.” Green, 367 N.C. 
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at 142, 749 S.E.2d at 268. Furthermore, the procedural requirements for derivative 

suits protect shareholders and the corporation itself by avoiding a “multiplicity of 

lawsuits,” by limiting “who should properly speak for the corporation[,]” and by 

preventing “self-selected advocate[s] pursuing individual gain rather than the 

interests of the corporation or the shareholders as a group, [from] bringing costly and 

potentially meritless strike suits.” Norman v. Nash Johnson & Sons’ Farms, Inc., 

140 N.C. App. 390, 396, 537 S.E.2d 248, 253 (2000) (citation and internal quotation 

marks omitted). Given these principles, a shareholder generally has no standing to 

bring individual actions against a corporation. Standing, which “is a necessary 

prerequisite to a court’s proper exercise of subject matter jurisdiction[,]” generally 

refers “to a party’s right to have . . . the merits of [its] dispute” decided by a judicial 

tribunal. Neuse River Found., Inc. v. Smithfield Foods, Inc., 155 N.C. App. 110, 113, 

574 S.E.2d 48, 51-52 (2002) (citations omitted).

Nevertheless, a “shareholder may maintain an individual action against a 

third party for an injury that directly affects the shareholder, even if the corporation 

also has a cause of action arising from the same wrong,” under two circumstances: 

(1) where “the wrongdoer owed [the shareholder] a special duty[,]” and (2) where the 

shareholder suffered a personal injury—one that is “separate and distinct from the 

injury sustained by the other shareholders or the corporation itself.” Barger, 346 N.C. 

at 659, 488 S.E.2d at 219 (citation omitted). Accordingly, an evaluation of [plaintiff’s] 

standing in this matter requires an analysis of: (1) [plaintiff’s] alleged injury, and (2) 
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the relationship between [plaintiff] and defendant[] with respect to each claim.” 

Energy Investors Fund, L.P. v. Metric Constructors, Inc., 351 N.C. 331, 335, 525 

S.E.2d 441, 444 (2000).

A. Special Duty

All of plaintiff’s claims for relief are based on the same core of operative facts, 

to wit: that defendant recorded false transactions in Greer’s ledger and 

misappropriated corporate funds for her own personal gain. However, plaintiff 

insists that Albion existed merely as a holding company for its subsidiaries, which 

included Greer.3 Based on this characterization, plaintiff argues that defendant owed 

it a “special duty” individually. Specifically, plaintiff contends that “[d]ue to 

[d]efendant’s position, authority[,] and familiarity with the financial affairs of Greer, 

[she] owed a heightened duty to shareholders [of Albion] to act in good faith and with 

due care with regards to said financial affairs.” We disagree. 

In Barger, our Supreme Court explained and illustrated the special duty 

exception as follows:

The special duty may arise from contract or otherwise. To 

support the right to an individual lawsuit, the duty must 

be one that the alleged wrongdoer owed directly to the 

 

3 We note that plaintiff asks us to ignore the corporate form relevant to this case. As the trial 

court pointed out, the duties that defendant allegedly owed would run to the shareholders of Greer, 

which was Albion itself. According to the trial court, the duties would not run to defendants as 

shareholders of Albion. Plaintiff has not cited any case law supporting the general proposition that 

North Carolina courts disregard the separate existence of a parent corporation and its wholly-owned 

subsidiary. Apart from cases presenting circumstances that would justify veil piercing or a conclusion 

that a wholly-owned subsidiary was its parent’s agent, the trial court’s analysis appears to be sound. 

In any event, for purposes of this appeal, we assume that any duties defendant may have owed to 

Greer flowed directly to the shareholders of Albion.
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Opinion of the Court

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shareholder as an individual. The existence of a special 

duty thus would be established by facts showing that 

defendants owed a duty to plaintiffs that was personal to 

plaintiffs as shareholders and was separate and distinct 

from the duty defendants owed the corporation. A special 

duty therefore has been found when the wrongful actions 

of a party induced an individual to become a shareholder; 

when a party violated its fiduciary duty to the shareholder; 

when the party performed individualized services directly 

for the shareholder; and when a party undertook to advise 

shareholders independently of the corporation.

Id. at 659, 488 S.E.2d at 220 (citations omitted). The Barger Court then explained: 

“This list is illustrative; it is not an exclusive list of all factual situations in which a 

special duty may be found.” Id. Despite this qualification, the special duty exception 

clearly requires an articulation of some duty owed to a plaintiff that is distinct from 

the general fiduciary duties directors and officers owe to the corporation. 

In the instant case, the special, or heightened, duties identified by plaintiff do 

not support its purported right to seek individual recovery in a direct action against 

defendant. The verified complaint alleges that (1) shareholders in a closely held 

corporation owe a fiduciary duty to one another, and (2) officers owe a fiduciary duty 

to shareholders. Unfortunately for plaintiff, the former is a misstatement of North 

Carolina corporation law and the latter fails to meet the threshold set out in Barger. 

“As a general rule, shareholders do not owe a fiduciary duty to each other or to 

the corporation.” Freese v. Smith, 110 N.C. App. 28, 37, 428 S.E.2d 841, 847 (1993) 

(citation omitted). However, “[a]n exception to this rule is that a controlling

shareholder owes a fiduciary duty to minority shareholders.” Kaplan v. O.K. Techs., 
RAYMOND JAMES CAPITAL PARTNERS V. HAYES

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L.L.C., 196 N.C. App. 469, 473, 675 S.E.2d 133, 137 (2009). To that end, our courts 

have extended special protections to minority shareholders in closely held 

corporations. See, e.g., Norman, 140 N.C. App. at 407, 537 S.E.2d at 260 (noting that 

North Carolina’s “cases have consistently held that majority shareholders in a close 

corporation owe a ‘special duty’ and obligation of good faith to minority 

shareholders”). However, plaintiff was not a minority shareholder of Greer; it was a 

majority shareholder in Albion.

Furthermore, while corporate officers generally “owe a fiduciary duty to the 

corporation and [its] shareholders[,]” T-WOL Acquisition Co. v. ECDG South, LLC,

220 N.C. App. 189, 208, 725 S.E.2d 605, 617 (2012) (emphasis added), the breach of 

that duty rarely creates an individual cause of action. See Keener Lumber Co. v. 

Perry, 149 N.C. App. 19, 26, 560 S.E.2d 817, 822 (2002) (“Under North Carolina law, 

directors of a corporation generally owe a fiduciary duty to the corporation, and where 

it is alleged that directors have breached this duty, the action is properly maintained 

by the corporation rather than any individual creditor or stockholder.”) (citation 

omitted). As the commentary to section 55-8-30 explains, the prior version of the law 

“provided that officers and directors stand in a fiduciary relation ‘to the corporation 

and its shareholders,’ ” but the amended version does not reference a fiduciary duty

to shareholders. Our Supreme Court has recognized that this amendment was 

intended “ ‘to avoid an interpretation [of section 55-8-30] . . . that would give 

shareholders a direct right of action on claims that should be asserted derivatively[.]’ ” 
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Green, 367 N.C. at 141, 749 S.E.2d at 268 (quoting N.C. Gen. Stat. § 55-8-30 (2011)). 

When the fiduciary duties of due care, loyalty, and good faith are breached, a 

shareholder may sue the offending director or officer in a derivative action. N.C. Gen. 

Stat. § 55-7-41 (2015). 

Here, all of plaintiff’s causes of action are based upon defendant’s violation of 

her core fiduciary duties to the corporation (Greer). As a result, plaintiff has failed 

to allege any duty that was individualized or otherwise “special.” Absent from the 

verified complaint is any allegation that plaintiff was a party to a contract with 

defendant that created distinct duties personal to plaintiff, or that defendant induced 

plaintiff to become a shareholder. There is also no allegation that defendant advised 

or dealt with plaintiff outside of the officer-shareholder relationship. In fact, there is 

no indication that plaintiff and defendant had particular dealings with each other in 

any context. Green, 367 N.C. at 143-44, 749 S.E.2d at 269 (holding that the special 

duty exception did not apply where “the most contact plaintiffs had with [the 

defendant] was seeing her a handful of times and saying nothing more than “ ‘hello’ ”). 

Although the Barger scenarios are not exclusive, this case does not present a situation 

where the recognition of a special duty would be proper or justified.

In sum, plaintiff has not “set forth any allegations which, even taken as true, 

support a special duty between it and defendant[].” Energy Investors, 351 N.C. at 

336, 525 S.E.2d at 444.

B. Separate and Distinct Injury
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Plaintiff next argues that its injuries were “separate and distinct” from those 

suffered by Greer and that, therefore, its individual claims fall under the second 

Barger exception. Once again, we disagree.

To proceed under the second, special injury exception to the general rule 

against individual actions, a plaintiff must allege an injury “peculiar and personal” 

to itself as a shareholder. Barger, 346 N.C. at 659, 488 S.E.2d at 220. Specifically, a 

plaintiff must show that its particular injury was “separate and distinct from the 

injury sustained by the other shareholders or the corporation itself.” Id. at 659, 488 

S.E.2d at 219. 

As to plaintiff’s claim for embezzlement, the verified complaint contains the 

following statements of injury and damages:

28. [Defendant’s] actions as set forth herein resulted in the 

diminution in value of Albion’s stock and the decrease in 

the purchase price of Albion.

29. [Defendant’s] actions as set forth herein further 

resulted in the decrease in the value of excess cash 

available for distribution either as dividends or a preclosing distribution to [plaintiff] and the other shareholders

of Albion.

(Emphasis added). The verified complaint is replete with virtually identical 

allegations as to each of plaintiff’s additional causes of action. Plaintiff’s arguments 

on appeal are also consistently couched in terms of injuries sustained by it and “the 

shareholders.” Thus, by plaintiff’s own account, it has not suffered a unique, personal 

injury. Given the nature of its allegations at the trial level and its arguments on 
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appeal, plaintiff has failed to show that its injury is separate and distinct from that 

suffered by other shareholders. 

Furthermore, the heart of plaintiff’s verified complaint is that it and Albion’s

other shareholders received inadequate—or more precisely, reduced—payments 

based upon the diminution of the value of their shares. Yet the alleged reduction in 

distributions or dividends is directly tied to a decrease in Albion’s shares: plaintiff 

ultimately lost the full benefit of its investment only because Albion’s shares in Greer

lost value. Consequently, any reduced payments received by plaintiff were likewise 

received by all other shareholders. 

Nevertheless, plaintiff contends that its injury is separate and distinct from 

that suffered by Greer because Greer was never entitled to “(1) the multiplied amount 

constituting the purchase price pursuant to the Stock Purchase Agreement, (2) the 

pre-closing distribution amount, or (3) yearly dividends.” This argument ignores that 

the allegedly embezzled funds were taken directly from Greer’s corporate coffers. As 

a result, plaintiff is simply positing a distinction without a difference: plaintiff’s 

claims for reduced payments are based upon its ownership of shares, and these claims 

derive from the same underlying injury suffered by the corporation itself. Since 

plaintiff’s losses are inextricably linked to the value of its investment, the appropriate 

reasoning is as follows: (1) defendant’s embezzlement of Greer’s funds reduced the 

value of all shares held in Albion and (2) caused Greer and Albion to be purchased for 

a reduced price, which (3) resulted in plaintiff’s and the other shareholders’
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diminished compensation after the sale. Consequently, plaintiff’s injury for reduced

payments is the functional equivalent of a claim for diminution of the value of shares 

held by all of Albion’s shareholders. See, e.g., Energy Investors, 351 N.C. at 336, 525 

S.E.2d at 444 (finding no individualized injury where the plaintiff’s “injury [was] the 

loss of its investment, which is identical to the injury suffered by other limited 

partners and by the partnership as a whole”); Barger, 346 N.C. at 659, 488 S.E.2d at 

220 (“The only injury plaintiffs as shareholders allege is the diminution or destruction 

of the value of their shares as the result of defendants’ negligent or fraudulent 

misrepresentations of TFH’s financial status. This is precisely the injury suffered by 

the corporation itself.”). Thus, plaintiff has failed to allege any injury that is separate 

and distinct from the harm suffered by Greer or all of Albion’s shareholders 

collectively.

IV. Conclusion

Plaintiff’s individual claims, derivative in nature, do not fall under either one 

of the Barger exceptions to the general rule prohibiting individual shareholder suits.

Therefore, plaintiff lacks standing to maintain a direct action seeking individual 

recovery against defendant. Accordingly, the trial court properly granted defendant’s 

motion to dismiss all claims against her.

AFFIRMED.

Judges ELMORE and ZACHARY concur.