Court Opinion

ID: 4108860
Source: CourtListenerOpinion
Date Created: 2016-12-20 13:10:30.793237+00
Date Added: 2024-06-11T07:46:09.252877
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                No. COA15-1334

                             Filed: 20 December 2016

Guilford County, No. 14 CVS 8130

DR. ROBERT CORWIN AS TRUSTEE FOR THE BEATRICE CORWIN LIVING
IRREVOCABLE TRUST, on Behalf of a Class of Those Similarly Situated, Plaintiff,

            v.

BRITISH AMERICAN TOBACCO PLC; REYNOLDS AMERICAN, INC.; SUSAN M.
CAMERON; JOHN P. DALY; NEIL R. WITHINGTON; LUC JOBIN; SIR NICHOLAS
SCHEELE; MARTIN D. FEINSTEIN; RONALD S. ROLFE; RICHARD E.
THORNBURGH; HOLLY K. KOEPPEL; NANA MENSAH; LIONEL L. NOWELL III;
JOHN J. ZILLMER; and THOMAS C. WAJNERT, Defendants.

      Appeal by Plaintiff from Order and Opinion entered 6 August 2015 by Chief

Special Superior Court Judge for Complex Business Cases James L. Gale in Guilford

County Superior Court. Heard in the Court of Appeals 27 April 2016.

      Mullins Duncan Harrell & Russell PLLC, by Alan W. Duncan and Stephen M.
      Russell, Jr.; and Block & Leviton LLP, by Jason M. Leviton, pro hac vice, for
      Plaintiff-Appellant.

      Robinson & Lawing, LLP, by H. Brent Helms; and Cravath, Swaine & Moore
      LLP, by Gary A. Bornstein, pro hac vice, for Defendant-Appellee British
      American Tobacco p.l.c.

      Womble Carlyle Sandridge & Rice, LLP, by Ronald R. Davis, W. Andrew
      Copenhaver, and James A. Dean; and Jones Day, by Robert C. Micheletto, pro
      hac vice, for Defendant-Appellees, Reynolds American, Inc., Susan M. Cameron,
      John P. Daly, Sir Nicholas Scheele, Martin D. Feinstein, Ronald S. Rolfe, and
      Neil R. Withington.

      Moore & Van Allen PLLC, by James P. McLoughlin, Jr., Mark A. Nebrig, and
      Johnathan M. Watkins, for Defendant-Appellees, Luc Jobin, Holly K. Koeppel,
      Nana Mensah, Lionel L. Nowell, Richard E. Thornburgh, Thomas C. Wajnert,
      and John J. Zillmer.
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      INMAN, Judge.

      In this case of first impression, reviewing the sufficiency of the pleadings to

state a claim for relief, we hold that a minority shareholder which owns shares eight

times greater than any other shareholder, is the sole source of equity financing for a

transformative corporate transaction, has a contractual right to prohibit the issuance

of shares and the sale of intellectual property necessary for the transaction, and

which pledges support for the transaction contingent on terms more favorable to it

than to other shareholders may owe a fiduciary duty to other shareholders who claim

they were harmed by the transaction. We also hold that claims for diminished share

value and diluted voting power, as alleged in this case, cannot be the basis for a direct

claim against a board of directors.

      Dr. Robert Corwin (“Plaintiff”), acting as trustee for the Beatrice Corwin Living

Irrevocable Trust, on behalf of a Class of Shareholders so similarly situated, appeals

from an Order and Opinion in favor of Defendants—British American Tobacco PLC

(“Defendant-Shareholder” or “BAT” or “British American”) and Reynolds American,

Inc. (“Defendant-Corporation” or “RAI” or “Reynolds”) and Susan M. Cameron, John

P. Daly, Neil R. Withington, Luc Jobin, Sir Nicholas Scheele, Martin D. Feinstein,

Ronald S. Rolfe, Richard E. Thornburgh, Holly K. Koeppel, Nana Mensah, Lionel L.

Nowell III, John J. Zillmer, and Thomas C. Wajnert (collectively “Defendant-

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                         CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

Directors” or “Reynolds Board of Directors”) dismissing Plaintiff’s claims for breach

of a fiduciary duty and aiding and abetting a breach of fiduciary duty.

         This appeal presents three issues: (1) whether a minority shareholder may be

a controlling shareholder, and thus, owe a fiduciary duty to other shareholders; (2)

whether a shareholder is permitted to bring a direct suit against a board of directors

for the loss of value and voting power of the shareholder’s shares; and (3) whether a

shareholder may bring a claim for aiding and abetting a breach of fiduciary duty

against a corporation based on the actions of the corporation’s board of directors.

After careful review, we hold that a minority shareholder may in certain

circumstances control a corporation, and thus, owe the other shareholders a fiduciary

duty. We also hold that Plaintiff does not have standing to bring a direct suit against

the corporation’s board of directors for his shares’ loss of value and voting power

alone.    Finally, we hold that without an underlying claim against the board of

directors for a breach of fiduciary duty, Plaintiff cannot assert a claim of aiding and

abetting for breach of a fiduciary duty against the corporation. Accordingly, we

reverse and remand the trial court’s order in part and affirm the trial court’s order in

part.

                          Factual and Procedural History

         This dispute arises out of a merger (the “Transaction”) between Reynolds and

Lorillard, Inc. (“Lorillard”), funded in part by an equity financing share purchase by

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                       CORWIN V. BRITISH AM. TOBACCO PLC

                                 Opinion of the Court

Defendant-Corporation’s largest shareholder, British American. The following facts

are alleged in Plaintiff’s Amended Complaint and are accepted as true for purposes

of our review.

      In 2004, R.J. Reynolds Tobacco Company acquired British American’s U.S.

subsidiary, Brown & Williamson, and formed a successor entity, Reynolds American

Inc., in which British American took a forty-two percent stake. In connection with

this acquisition, British American and Reynolds adopted a Governance Agreement

(the “Governance Agreement”) on 30 July 2004. The Governance Agreement included

a standstill provision (“the Standstill provision”), which prevented British American

from increasing its percentage ownership in Reynolds for ten years, until 30 July

2014. The Governance Agreement also limited British American’s ability to control

Reynolds by: (1) permitting British American to designate no more than five of the

thirteen board members of Reynolds, (2) requiring British American to vote its shares

in favor of any board candidates selected by a Corporate Governance and Nominating

Committee, comprised solely of non-British American designees, and (3) requiring

non-British American designees to approve of any entrance into a contract between

British American and Reynolds or any of their subsidiaries.        The Governance

Agreement also provided contractual rights to British American, including granting

British American the right to prohibit the sale or transfer of certain intellectual

property, veto amendments to the Articles of Incorporation and By-laws and

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

adoptions of any takeover defenses, and approve the issuance of equity securities in

an amount of five percent or more of the voting power of outstanding shares. The

Governance Agreement terminates when British American’s ownership share in

Reynolds reaches one-hundred percent, drops below fifteen percent, or if a third party

acquires a majority stake in Reynolds.

      In or around September 2012, the Reynolds board of directors, together with

Reynolds senior management, began contemplating a merger with Lorillard as a

means of alternative strategic growth. Before approaching Lorillard, the president

and chief executive officer and a director of Reynolds met with representatives of

British American to discuss, among other things, the potential merger.         On 15

November 2012, Reynolds formally expressed to Lorillard its interest in a merger,

and negotiations ensued.

      Throughout the negotiations process, British American insisted that it would

support the Transaction only on terms that would allow it to maintain its forty-two

percent ownership in Reynolds.      British American also insisted—and Reynolds

agreed—that neither British American nor Reynolds would seek to amend the

Governance Agreement in connection with the Transaction. The Standstill provision

in the Governance Agreement was scheduled to expire on 30 July 2014; without

changing that provision or extending the expiration date, Reynolds ultimately could

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                       CORWIN V. BRITISH AM. TOBACCO PLC

                                    Opinion of the Court

not prevent British American from taking control of Reynolds through the purchase

of the remaining fifty-eight percent of Reynolds’s outstanding shares.

      In February 2014, Lorillard expressed concerns over the proposed terms of the

Transaction and sought an additional ownership percentage for the Lorillard

shareholders following the merger. Reynolds directors not designated by British

American (the “Other Directors”) expressed that any additional equity provided to

Lorillard should come from a reduction of British American’s ownership as opposed

to a reduction of the non-British American shareholders’ ownership. However, the

Other Directors acknowledged that British American’s ownership share would not be

decreased without British American’s consent.

      By March 2014, the Lorillard Board of Directors determined the proposed

terms did not reflect a “merger-of-equals,” decided not to proceed with the

Transaction, and terminated the related discussions with Reynolds. Reynolds senior

management then explored the possibility of acquiring Lorillard at a premium. With

British American as the equity financing source, Reynolds and Lorillard reopened

negotiations for the Transaction.

      In July 2014, the Reynolds Board of Directors unanimously approved the

Transaction. Lorillard’s shares were to be purchased for a price per share of $50.50

in cash, plus 0.2909 shares of Reynolds stock. The cash portion of the Transaction

was financed by the sale of Reynolds stock to British American at a price of $60.16

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

per share for a total of approximately $4.7 billion. This price was $3.02 less than the

fair market value of the shares on the date of approval by the Reynolds Board of

Directors. This sale assured that British American would maintain its forty-two

percent ownership share in the remaining company following the Transaction.

      When the Transaction closed in June 2015, Reynolds stock was publicly

trading at $72 per share, or $11.84 greater per share than the price British American

paid for its additional stock as part of the Transaction.      The post-closing value

constituted a profit of approximately $920 million for British American, a profit no

other shareholder enjoyed.

      Plaintiff filed suit in August 2014 in Guilford County Superior Court, just after

the Reynolds Board of Directors approved the Transaction. The case was assigned to

the North Carolina Business Court (“trial court”) with Chief Special Superior Court

Judge for Complex Business Cases James L. Gale presiding. Following Reynolds’s

filing of a Form S-4 (the “Proxy Statement”) with the Securities and Exchange

Commission describing the Transaction, Plaintiff filed its First Amended Class

Action Complaint (“Amended Complaint”), which is the operative pleading at issue

on appeal.

      The Amended Complaint alleged two theories seeking relief, “Fairness Claims”

and “Disclosure Claims.” The Fairness Claims alleged that British American and

Defendant-Directors breached their fiduciary duties to the Public Shareholders, and

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

the Disclosure Claims alleged that Defendant-Directors breached their duties of

candor by failing to disclose certain material facts in the Proxy Statement. The

Fairness Claims also included an aiding and abetting a breach of fiduciary duty claim

against Reynolds for the actions of Defendant-Directors.

      In December 2014, Defendants moved to dismiss the case pursuant to Rule

12(b)(6) of the North Carolina Rules of Civil Procedure. The parties settled the

Disclosure Claims in a Memorandum of Understanding filed in January 2015.

However, the Fairness Claims remained pending.

      Following a hearing, in an Order and Opinion entered 6 August 2015, the trial

court dismissed Plaintiff’s Fairness Claims. The trial court held that (1) the Amended

Complaint did not sufficiently plead facts necessary to establish British American as

a controlling shareholder, and consequently did not sufficiently plead that British

American owed a fiduciary duty to the other shareholders; (2) regardless of whether

Plaintiff had standing to bring a direct suit against Defendant-Directors, Plaintiff’s

Amended Complaint failed to overcome the Business Judgment Rule and therefore

the claim against Defendant-Directors did not survive; and (3) because the underlying

fiduciary duty claims had been dismissed, the aiding and abetting claim against

Reynolds necessarily failed.

      Plaintiff timely appealed.

                                       Analysis

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      Plaintiff contends that the trial court erred in granting Defendants’ motions to

dismiss under Rules 12(b)(1) and 12(b)(6) for lack of standing and failure to state a

claim upon which relief may be granted. After careful examination of the Amended

Complaint and documents incorporated therein, we reverse the trial court’s order

dismissing Plaintiff’s claim against British American and affirm the trial court’s

dismissal of Plaintiff’s remaining claims.

      A. Standard of Review

                     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, 238 N.C. App. 192, 195, 767 S.E.2d 374, 377 (2014)

(quoting Guyton v. FM Lending Servs., Inc., 199 N.C. App. 30, 33, 681 S.E.2d 465,

469 (2009)). We review the pleadings de novo to determine whether Plaintiff has

stated a claim for which relief can be granted. Burgin v. Owen, 181 N.C. App. 511,

512, 640 S.E.2d 427, 429 (2007) (citation omitted).

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                            CORWIN V. BRITISH AM. TOBACCO PLC

                                        Opinion of the Court

      Included in the pleadings reviewed for purposes of deciding a motion to dismiss

are documents attached to and incorporated by reference in the plaintiff’s complaint.

N.C. Gen. Stat. § 1A-1, Rule 10(c) (2015) (“A copy of any written instrument which is

an exhibit to a pleading is a part thereof for all purposes.”). In this case, incorporated

documents include the Governance Agreement and the Proxy Statement. Central to

the parties’ dispute is the interpretation of these documents.

      B. Minority Shareholder Liability

      1. Controlling Shareholder

      Plaintiff’s claim raises an issue of first impression in North Carolina: whether

and under what circumstances a minority shareholder can be classified as a

“controlling shareholder” owing a fiduciary duty to other shareholders.1 We hold that

a minority shareholder exercising actual control over a corporation may be deemed a

“controlling shareholder” with a concomitant fiduciary duty to the other shareholders.

      In North Carolina, an individual shareholder generally does not owe a

fiduciary duty to the corporation or to the other shareholders. Freese v. Smith, 110

N.C. App. 28, 37, 428 S.E.2d 841, 847 (1993) (citation omitted). “An exception to this

rule is that a controlling shareholder owes a fiduciary duty to minority shareholders.”

Kaplan v. O.K. Techs., LLC, 196 N.C. App. 469, 473, 675 S.E.2d 133, 137 (2009)

(citation omitted) (comparing members of a limited liability company to shareholders

      1   Neither party challenges the application of North Carolina law.

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

of a corporation); Freese, 110 N.C. App. at 37, 428 S.E.2d at 847 (“[I]t is well

established that a controlling shareholder owes a fiduciary duty to minority

shareholders.”).

      North Carolina courts have held that shareholders owning a controlling

number of shares in a corporation owe a special duty to other shareholders in the

same corporation. In Gaines v. Long Mfg. Co., 234 N.C. 340, 67 S.E.2d 350 (1951),

the North Carolina Supreme Court upheld a minority shareholder’s ability to sue

majority shareholders for breach of a fiduciary duty arising from a disputed corporate

transaction. The court explained:

      The holders of the majority of the stock of a corporation have the power,
      by the election of directors and by the vote of their stock, to do everything
      that the corporation can do. Their power to . . . direct the action of the
      corporation places them in its shoes and constitutes them the actual, if
      not the technical, trustees for the holders of the minority of the stock. . .
      . It is the fact of control of the common property held and exercised, and
      not the particular means by which or manner in which the control is
      exercised, that creates the fiduciary obligation on the part of the
      majority stockholders in a corporation for the minority holders.

Gaines, 234 N.C. at 344-45, 67 S.E.2d at 353-54 (first alteration in original) (quoting

Am. Jur., Corporations, sections 422 and 423, pp 474-76) (emphasis added).

      Gaines relied on a North Carolina Supreme Court decision holding: “ ‘the

directors of these corporate bodies are to be considered and dealt with as trustees in

respect to their corporate management, and []this same principle has been applied to

a majority, or other controlling number, of stockholders in reference to the rights of

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                            CORWIN V. BRITISH AM. TOBACCO PLC

                                         Opinion of the Court

the minority . . . when they are as a body in the exercise of this control, in the

management and direction of corporate affairs . . . .’ ” Id. at 345, 67 S.E.2d at 353

(emphasis added) (quoting White v. Kincaid, 149 N.C. 415, 63 S.E. 109, 111 (1908)).

The Court in White reasoned that a fiduciary duty arises when a “controlling number

of stockholders are exercising their authority in dictating the action of the directors,

thereby causing a breach of fiduciary duty.” White, 149 N.C. at 420, 63 S.E.2d at 111

(internal quotation marks omitted).2

       Our courts have not previously classified a numerical minority shareholder,

acting alone in either a closely held or publicly traded company, as a “controlling

shareholder” for the purpose of imposing a fiduciary duty. However, this Court has

held that individual minority shareholders working in concert as a majority to

exercise control over a corporation to the detriment of the other shareholders could

be held liable as fiduciaries. Loy v. Lorm Corp., 52 N.C. App. 428, 278 S.E.2d 897

(1981). In Loy, this Court held the trial court erred in directing a verdict for the

defendants—three shareholders with an aggregate seventy-five percent interest in a

corporation—who were sued by the fourth shareholder after transferring corporate

assets to another corporation owned solely by the defendants themselves. Id. at 435,

       2   Before it was incorporated in Gaines, the holding in White was dicta, because the court in
White, reviewing an order restraining the dissolution of the defendant corporation, concluded that the
plaintiff had failed to produce evidence sufficient to support his claim. White, 149 N.C. at 422-23, 63
S.E. at 111.

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

278 S.E.2d at 902-03. The court in Loy looked beyond the percentage of shares owned

by each of the three defendants to consider the control each of them derived from

their concerted action. Id.

      No North Carolina appellate court decision or statute has determined if and

when a single minority shareholder can become a “controlling shareholder” with an

accompanying fiduciary duty. So we consider other authorities.

      North Carolina courts often look to Delaware courts for guidance regarding

unsettled business law issues. Energy Investors Fund, L.P. v. Metric Constructors,

Inc., 351 N.C. 331, 334, 525 S.E.2d 441, 443 (2000) (following Delaware courts’

proposition “that shareholders and limited partners hold similar positions within

their respective entities[]”); Ehrenhaus v. Baker, 216 N.C. App. 59, 88, 717 S.E.2d 9,

28 (2011) (finding “the Delaware courts’ articulation of the non-disclosure principle

persuasive[,]” and adopting this articulated principle in North Carolina).

      Delaware decisional law allows a minority shareholder who exercises actual

control over a corporation or a corporation’s affairs to be classified as a “controlling

shareholder.” However, this law includes the rebuttable presumption that a minority

shareholder does not control a corporation or a challenged corporate transaction. “[A]

shareholder who owns less than [fifty percent] of a corporation’s outstanding stocks

does not, without more, become a controlling shareholder of that corporation, with a

concomitant fiduciary status.” Citron v. Fairchild Camera and Instrument Corp., 569

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                       CORWIN V. BRITISH AM. TOBACCO PLC

                                 Opinion of the Court

A.2d 53, 70 (Del. 1989) (first alteration in original) (emphasis added) (internal

quotation marks and citations omitted).      It therefore becomes necessary for the

plaintiff to “allege domination by a minority shareholder through actual control of

corporate conduct.” Id.; see also Kahn v. Lynch Commc’n Systems, Inc., 638 A.2d

1110, 1115 (Del. 1994) (holding that a minority shareholder with an approximate

forty-three percent interest in a company exercised control sufficient to impose a

fiduciary duty).

      When determining if a shareholder has exercised control over a corporation,

our courts and Delaware courts have considered, among other things, the

shareholder’s percentage of voting shares, the relationship between the shareholder

and the corporation, the shareholder’s ability to appoint directors, and the

shareholder’s ability to affect the outcome of particular transactions.    See, e.g.,

Kaplan, 196 N.C. App. at 473, 675 S.E.2d at 137; Kahn, 638 A.2d at 1113-15; and

Williams v. Cox Commc’ns, Inc., 2006 Del. Ch. LEXIS 111 *1, *22 (Del. Ch. June 5,

2006). The plaintiff in Kahn appealed from a final judgment in which the Delaware

Chancery Court concluded a minority shareholder owed a fiduciary duty to the

plaintiff, but that the evidence did not demonstrate that the defendant breached this

duty. Kahn, 638 A.2d at 1111-12. The Delaware Supreme Court, affirming the

Chancery Court, held that a minority shareholder whose designated director told the

other board members that “[y]ou must listen to us. We are 43 percent owner. You

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

have to do what we tell you[,]” and persuaded the board members to abandon their

opposing votes in a “watershed vote,” was a controlling shareholder who owed a

fiduciary duty to the other shareholders. Id. at 1114 (first alteration in original).

      A review of secondary authorities supports treating a minority shareholder as

a “controlling shareholder” under certain circumstances. Black’s Law Dictionary

defines a controlling shareholder as “[a] shareholder who can influence the

corporation’s activities because the shareholder either owns a majority of outstanding

shares or owns a smaller percentage but a significant number of the remaining shares

are widely distributed among many others.” Black’s Law Dictionary 1586 (10th ed.

2014) (emphasis added). The American Law Institute, in its Principles of Corporate

Governance, applies the following definition:

                   (a) A “controlling shareholder” means a person [§
             1.28] who, either alone or pursuant to an arrangement or
             understanding with one or more persons:

                           (1) Owns and has the power to vote more than
                    50 percent of the outstanding voting equity
                    securities [§ 1.40] of a corporation; or

                           (2) Otherwise exercises a controlling influence
                    over the management or policies of the corporation or
                    the transaction or conduct in question by virtue of the
                    person’s position as a shareholder.

                   (b) A person who, either alone or pursuant to an
             arrangement or understanding with one or more other
             persons, owns or has the power to vote more than 25
             percent of the outstanding voting equity securities of a
             corporation is presumed to exercise a controlling influence

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

             over the management or policies of the corporation, unless
             some other person, either alone or pursuant to an
             arrangement or understanding with one or more other
             persons, owns or has the power to vote a greater percentage
             of the voting equity securities. A person who does not,
             either alone or pursuant to an arrangement with one or
             more other persons, own or have the power to vote more
             than 25 percent of the outstanding voting equity securities
             of a corporation is not presumed to be in control of the
             corporation by virtue solely of ownership of or power to vote
             voting equity securities.

American Law Institute, Principles of Corporate Governance § 1.10 (1994) (emphasis

added). We note that the American Law Institute applies the presumption of control

at a lower threshold, i.e., when a shareholder owns twenty-five percent of the

corporation. Id. This is in contrast to our precedents and the decisions by Delaware

courts in which control is presumed only where the shareholder holds a numerical

majority interest.

      Defendants argue that Gaines and our other precedents support the bright line

rule that a “controlling shareholder” must have a numerical majority of the

outstanding shares. However, these decisions hold only that a majority shareholder

is presumed to be a “controlling shareholder.” See Gaines, 234 N.C. at 344-45, 67

S.E.2d at 353-54; Kaplan, 196 N.C. App. at 473-74, 675 S.E.2d at 137. We find

persuasive Delaware’s rule that a minority shareholder exercising actual control over

a corporation or a corporation’s affairs may be classified as a “controlling

shareholder.”

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      At the pleading stage, we must accept as true all of Plaintiff’s allegations

without regard to whether Plaintiff can produce evidence to support those allegations.

But we begin with the general presumption that a minority shareholder is not in

control of a corporation’s conduct. Cirton, 569 A.2d at 70; see Kaplan, 196 N.C. App.

at 473-74, 675 S.E.2d at 137; Freese, 110 N.C. App. at 37-38, 428 S.E.2d at 847-48.

This presumption may be rebutted if a plaintiff alleges facts from which it is

reasonable to infer that a minority shareholder exercised actual control over the

corporation’s actions. Kahn, 638 A.2d at 1113-14; see Gaines, 234 N.C. at 344-45, 67

S.E.2d at 353-54; White, 149 N.C. at 420, 63 S.E.2d at 111.

      When tested by a motion to dismiss pursuant to Rule 12(b)(6), a plaintiff’s

complaint for a claim based upon shareholder liability must allege specific facts

demonstrating or allowing for the reasonable inference of actual control by that

shareholder. “The bare conclusory allegation that a minority stockholder possessed

control is insufficient. Rather, the Complaint must contain well-pled facts allowing

for a reasonable inference that the minority stockholder ‘exercised actual domination

and control over . . . [the] directors.’ ” In re Morton’s Restaurant Grp., Inc., 74 A.3d

656, 664-65 (Del. Ch. 2013) (alterations in original) (citations omitted).

      Plaintiff argues that the Amended Complaint is not subject to dismissal

because it alleges a “nexus of facts” that allows for a reasonable inference of corporate

control by British American. Plaintiff relies on Williams v. Cox Commc’ns, Inc., 2006

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                         CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

Del. Ch. LEXIS 111 *1, *22 (Del. Ch. June 5, 2006), an unpublished decision by the

Chancery Court of Delaware, to support the “nexus of facts” standard. The court in

Williams noted that with respect to claims alleging wrongful control by corporate

shareholders, the line between whether certain actions amount to influence or control

“is highly contextualized and is difficult to resolve based solely on the complaints[,]”

and that while “[n]o single allegation in [the] plaintiff’s complaint is sufficient on its

own . . . [t]he complaint succeeds because it pleads a nexus of facts all suggesting that

the [defendants] were in a controlling position and that they exploited that control

for their own benefit.” Id. at *23-24. This Court and the North Carolina Supreme

Court routinely dismiss the precedential value of unpublished decisions. But absent

any North Carolina precedent on the issue, we find the analysis in Williams helpful.

We likewise agree that a complaint alleging minority shareholder liability should

survive a 12(b)(6) motion to dismiss if it pleads a “nexus of facts” allowing for a

reasonable inference that the minority shareholder exercised actual control over

material corporate affairs.

      2. Sufficiency of the Pleadings

      After careful review of the Amended Complaint and all inferences that may be

drawn from its allegations, we hold that Plaintiff has pleaded facts sufficient to allow

for a reasonable inference that British American exercised actual control over the

Transaction and thus owed a fiduciary duty to Plaintiff.

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      To plead most civil claims in North Carolina, a complaint must contain “[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. Gen. Stat. § 1A-1, Rule 8(a)(1) (2015). “Thus, a complaint is sufficient where no

insurmountable bar to recovery appears on the face of the complaint and the

complaint’s allegations give adequate notice of the nature and extent of the claim.”

Pastva v. Naegele Outdoor Advers., Inc., 121 N.C. App. 656, 659, 468 S.E.2d 491, 493

(1996) (internal quotation marks and citations omitted).

      The purpose behind this pleading standard, generally referred to as notice

pleading, “is to resolve controversies on the merits, after an opportunity for discovery,

instead of resolving them based on the technicalities of pleadings.” Ellison v. Ramos,

130 N.C. App. 389, 395, 502 S.E.2d 891, 895 (1998) (citation omitted). Therefore,

“[p]leadings must be liberally construed to do substantial justice, and must be fatally

defective before they may be rejected as insufficient.” Fournier v. Haywood Cnty.

Hosp., 95 N.C. App. 652, 654, 383 S.E.2d 227, 228-29 (1989) (citing Smith v. N.C.

Farm Bureau Mut. Ins. Co., 84 N.C. App. 120, 123, 351 S.E.2d 774, 776 (1987)).

      The North Carolina legislature has designated several matters in which

heightened pleading requirements must be met. N.C. Gen. Stat. § 1A-1, Rule 9

(2015).   These matters include, among others, claims asserting capacity, fraud,

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                          CORWIN V. BRITISH AM. TOBACCO PLC

                                     Opinion of the Court

duress, mistake, and libel and slander. Id. For these delineated situations, the

legislature sought to provide guidance in areas “which have traditionally caused

trouble when no codified directive existed.” N.C. Gen. Stat. § 1A-1, Rule 9 N.C. cmt.

(2015). Absent a specific designation by statute or precedent, we see no reason to

adopt a stricter pleading standard for suits against minority shareholders for a

breach of a fiduciary duty. North Carolina’s pleading standard requires a plaintiff to

plead facts sufficient to overcome the presumption that a minority shareholder is not

in control of a corporation’s conduct. A complaint against a minority shareholder

must therefore allege facts from which a trier of fact could reasonably infer that the

minority shareholder exercised actual control over the corporation.

       To survive a 12(b)(6) motion to dismiss, a complaint for breach of fiduciary duty

claim must allege, in addition to the existence of a fiduciary relationship, a breach of

that duty. Toomer v. Branch Banking & Trust Co., 171 N.C. App. 58, 70, 614 S.E.2d

328, 337 (2005) (internal quotation marks and citations omitted) (“To state a claim

for breach of fiduciary duty, a plaintiff must allege that a fiduciary relationship

existed and that the fiduciary failed to act in good faith and with due regard to [the]

[plaintiff’s] interests.”) (second alteration in original).

       a. Limitations Preventing British American from Controlling Reynolds

       Defendants argue that Plaintiff’s Amended Complaint disclosed facts that

necessarily defeated his claim—the limitations on British American’s control of

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

Reynolds contained within the Governance Agreement. The Governance Agreement

provides, inter alia:

      British American has the right to designate only five of the thirteen directors

       on the Reynolds Board of Directors, with the number of directors designated

       by British American decreasing incrementally if British American’s ownership

       drops below certain thresholds. Additionally, three of the directors designated

       by British American must be independent as defined by the rules of the New

       York Stock Exchange.

      With respect to the eight directors which it cannot designate, British American

       must vote all of its shares in favor of any Board of Director candidates selected

       by a committee comprised solely of directors not designated by British

       American.

      A majority of the directors not designated by British American must approve

       Reynolds’s entrance into any contract involving Reynolds and its subsidiaries

       and British American and its subsidiaries.

      The Standstill provision prevented British American from purchasing

       additional shares in Reynolds until 30 July 2014.

       b. Circumstances Allowing British American to Control Reynolds

       Plaintiff asserts that events and circumstances surrounding the Transaction,

including those described in the Proxy Statement, allowed British American to

                                          - 21 -
                         CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

exercise actual control over the Transaction notwithstanding the terms of the

Governance Agreement.       Plaintiff cites the following allegations to support this

assertion: (1) British American’s outsized shareholding constituted a de facto veto

power over any matter put to a shareholder vote—British American owned a forty-

two percent stake of the voting shares, while the next largest block was five percent;

(2) the Governance Agreement’s granting to British American “veto power,” in the

form of contractual rights to prohibit the issuance of shares and the divestment of

intellectual property necessary for the Transaction; (3) deal terms allowing British

American to profit at the expense of—and to the exclusion of—the non-British

American shareholders; and (4) the failure by the Other Directors to counter British

American’s control over the Transaction.

       Our review has identified the following specific facts alleged or contained in

the Governance Agreement or Proxy Statement from which a reasonable trier of fact

could infer that British American exercised actual control over Reynolds with respect

to the Transaction:

      In late 2012, the Reynolds Board of Directors considered a merger with

       Lorillard. Representatives of British American “expressed their support, on

       behalf of BAT as an RAI shareholder, for approaching Lorillard with an

       indication of interest.”

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                     CORWIN V. BRITISH AM. TOBACCO PLC

                               Opinion of the Court

   With the support of British American, Reynolds approached Lorillard and

    discussions between the two corporations ensued.

   In January 2013, British American’s representatives reiterated, in discussions

    with the Reynolds Board of Directors, British American’s support for the

    Transaction conditioned upon deal terms including British American

    maintaining its forty-two percent ownership of the surviving company

    following the merger.

          BAT’s representatives also stated that decisions as to
          whether and how to pursue a business combination
          between RAI and Lorillard were to be made by the RAI
          board of directors, but that BAT, in its capacity as a
          substantial financing source and holder of contractual
          approval rights, would cooperate with combining the
          companies only on transactional terms and with an
          execution strategy of which it approved.

   Negotiations between Reynolds, Lorillard, and British American continued

    throughout the following months. Included among the negotiated terms was,

    “at the insistence of BAT, that neither BAT nor RAI would seek any changes

    in the governance agreement in connection with the possible acquisition of

    Lorillard.”

   On 18 January 2014, the Reynolds Board of Directors met with, among others,

    representatives of Lazard, Reynold’s financial advisors. “A representative of

    Lazard . . . introduce[ed] an alternative approach [to the Transaction] in which

    cash available as consideration would be distributed on a pro rata basis to

                                      - 23 -
                     CORWIN V. BRITISH AM. TOBACCO PLC

                                Opinion of the Court

    Lorillard shareholders and to RAI shareholders other than BAT.” The Lazard

    representatives also reported on discussions between

          [Reynolds] management and Lazard, on the one hand, and
          BAT and its financial advisors, on the other, during which
          the parties discussed potential solutions that would be in
          the best interests of RAI shareholders other than BAT and
          continue to meet the objectives of both Lorillard and BAT.
          These discussions included the possibility that BAT and/or
          RAI shareholders other than BAT could have decreased
          post-closing ownership interest in the combined company.

    Following this meeting, the Other Directors discussed with Reynolds’s outside

    legal advisors their fiduciary duties.

   The Other Directors reached a consensus “that RAI shareholders other than

    BAT should receive at least 30% of the equity ownership of the combined

    company and receive a pro rata portion of the cash distribution.” The Other

    Directors also discussed the need to engage independent legal counsel.

   During a meeting on 12 February 2014 between the Other Directors and legal

    and financial advisers for Reynolds as well as independent counsel for the

    Other Directors, “[t]here was extensive discussion regarding the consideration

    to be received by RAI shareholders other than BAT and BAT’s willingness to

    move from its initial position regarding post-transaction equity ownership.”

   On 18 February 2014, the Reynolds Board of Directors discussed a counter-

    proposal by Lorillard seeking a higher percentage of post-transaction

    ownership. “The Other Directors considered the impact of increased ownership

                                       - 24 -
                       CORWIN V. BRITISH AM. TOBACCO PLC

                                 Opinion of the Court

    for Lorillard shareholders on RAI shareholders other than BAT[,]” and

    “expressed their preference that any additional equity to Lorillard

    shareholders come from decreased ownership by BAT.”

   By 20 February 2014, British American indicated, consistent with its earlier

    position that it “was not prepared to extend the standstill covenant in the

    governance agreement in connection with the proposed business combination

    transaction . . . .”

   On 13 March 2014, the Lorillard Board of Directors, fearing the Transaction

    was not a “merger-of-equals,” determined not to proceed and terminated

    discussions.

   Reynolds’s senior management then considered acquiring Lorillard at a

    premium—i.e., purchasing Lorillard—as opposed to the previous “merger-of-

    equals” approach.      Reynolds’s Board of Directors began discussions with

    Lazard and Lorillard concerning this newly structured approach to the

    Transaction. This Transaction was to be funded by equity financing from

    British American, by which British American would purchase Reynolds shares

    and maintain its forty-two percent interest in the remaining company

    following the acquisition.

   On 17 June 2014, Jones Day—legal counsel for Reynolds—received a draft

    subscription and support agreement from British American proposing the

                                        - 25 -
                      CORWIN V. BRITISH AM. TOBACCO PLC

                                Opinion of the Court

    terms of equity financing for the new Transaction. In the subscription and

    support agreement, British American pledged to vote its shares in favor of the

    Transaction, regardless of whether the Reynolds Board of Directors

    recommended proceeding with the Transaction.

   On 2 July 2014, Moore & Van Allen—independent legal counsel for the Other

    Directors—reviewed the proposed subscription and support agreement. Moore

    & Van Allen “requested that BAT’s draft provision for an unconditional

    commitment to vote the shares of RAI common stock it beneficially owned in

    favor of the transaction (regardless of any change in recommendation of the

    RAI board of directors) be deleted.”

   On 5 July 2014, Representatives of Lorillard notified Jones Day

          that Lorillard was insistent, as a condition of proceeding,
          on having a commitment from BAT to vote the shares of
          RAI common stock it beneficially owned in favor of the
          transaction even if the RAI board of directors changed its
          recommendation of the transaction. [BAT’s legal counsel]
          advised Jones Day that BAT would consider this demand
          but would not give such a commitment over the objections
          of the Other Directors. The Other Directors agreed to
          accept that commitment.

    The Proxy Statement does not provide any explanation regarding how or why

    the Other Directors determined to depart from the advice of their independent

    legal counsel in this respect.

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                         CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

      On 9 July 2014, “several news media speculated that BAT was seeking to

       acquire the remaining outstanding shares of RAI common stock that it did not

       currently own.”

      On 14 July 2014, the Reynolds Board of Directors unanimously approved the

       Transaction.

       The information summarized above is but a drop in the bucket of the detailed

financial and historical data included within the Proxy Statement and endemic to

corporate mergers and acquisitions. A multitude of inferences can be drawn from

this information. However, our task is to consider whether the facts alleged allow for

any reasonable inference that can support Plaintiff’s claim.

       When reviewing a 12(b)(6) motion, “the complaint must be liberally construed

and should not be dismissed for insufficiency unless it appears to a certainty that the

plaintiff is entitled to no relief under any state of facts which could be proved in

support of the claim.” Zenobile v. McKecuen, 144 N.C. App. 104, 110, 548 S.E.2d 756,

760 (2001). Plaintiff’s Amended Complaint alleged facts that support the reasonable

inference that British American exercised actual control over Reynolds’s Board of

Directors’ approval of the Transaction, despite the restrictions of the Governance

Agreement.

       This is a close case, even under the liberal standard of notice pleading. We

acknowledge that one reasonable inference to be drawn from the events and

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                         CORWIN V. BRITISH AM. TOBACCO PLC

                                    Opinion of the Court

circumstances is that the Other Directors believed that the Transaction was valuable

enough to all shareholders that it was worth proceeding even on terms that

disproportionately enriched British American. Another reasonable inference could

be that the Other Directors did not seek funding for the Transaction from any other

source because they had investigated prospects and determined that funding on the

same or better terms was not available elsewhere. It is also reasonable to infer that

British American earned the increased value of the shares it purchased by incurring

the financial risk inherent in the Transaction, a risk not incurred by other

shareholders. However, these possible inferences do not preclude other reasonable

inferences that support Plaintiff’s claim that British American was a controlling

shareholder with an accompanying fiduciary duty.

      Defendants note that the strategic advantages British American enjoyed, such

as its role as equity financer of the Transaction, have been dismissed by our courts

as insufficient to establish a fiduciary duty. Kaplan, 196 N.C. App. at 474-77, 675

S.E.2d at 137-39 (holding that the plaintiff did not allege sufficient control of a limited

liability company by a forty-one percent owner who was the company’s sole source of

financing).   Defendants also argue that British American’s contractual rights to

prohibit the issuance of shares and transfer of intellectual property necessary to

complete the Transaction do not constitute control. See Superior Vision Servs. v.

ReliaStar Life Ins. Co., 2006 Del. Ch. LEXIS 160 *1, *19-20 (Del. Ch. Aug. 25, 2006)

                                           - 28 -
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

(holding the defendant’s exercise of its contractual right to prevent the distribution

of dividends did not render it a “controlling shareholder” with an accompanying

fiduciary duty). But unlike the facts alleged in any of the cases relied upon by

Defendants, Plaintiff’s Amended Complaint alleged a combination of facts which in

the aggregate support a reasonable inference of actual control.

      Defendants urge us to follow the Delaware Chancery Court’s decision in

Thermopylae Capital Partners, L.P. v. Simbol, Inc., 2016 Del. Ch. LEXIS 15 *1 (Del.

Ch. Jan. 29, 2016), which distinguished potential control from actual control and held

that potential control is insufficient to impose a fiduciary duty. In Thermopylae, the

plaintiff’s complaint failed to allege “the number of directors at the time of the

transaction, their identity, facts showing control by [the defendant], and details

regarding the terms of the transaction itself[.]” Id. at *44-45. In contrast, Plaintiff’s

Amended Complaint alleges detailed facts, which we hold allow for the reasonable

inference that British American exercised actual control over the Transaction.

      Defendants also contrast the circumstantial allegations in this case with more

explicit facts shown in cases upholding controlling shareholder liability. For example,

Plaintiff has not alleged that any director designated by British American told other

directors, “[y]ou have to do what we tell you.” Cf. Kahn, 638 A.2d at 1114. However,

the lack of more explicit facts at the pleading stage, before a plaintiff can obtain

                                          - 29 -
                         CORWIN V. BRITISH AM. TOBACCO PLC

                                    Opinion of the Court

discovery, is not fatal if less than explicit facts allow for a reasonable inference of the

essential elements of the claim.

      Here, Plaintiff’s allegations allow for a reasonable inference that the Other

Directors agreed to the terms of the Transaction dictated by British American at the

expense of other shareholders in order to avoid the risk of a corporate takeover by

British American. The Amended Complaint alleged not only that British American

conditioned its support for the Transaction on terms disfavoring the other

shareholders, but that the Other Directors capitulated to British American’s terms

against the advice of their independent legal counsel.          The aggregate of these

allegations along with the size of British American’s shareholding, British American’s

contractual rights under the Governance Agreement, the impending expiration of the

Standstill provision, and the lack of explanation surrounding the Other Director’s

decision to abandon advice by their independent legal counsel allows for the

reasonable inference of actual control.

      We conclude these allegations comprise a sufficient nexus of facts from which

it is reasonable to infer that British American exercised actual control over the

Transaction and the actions taken by the Other Directors. Therefore, Plaintiff has

sufficiently pleaded that British American is a controlling shareholder with a

concomitant fiduciary duty owed to Plaintiff, as a non-British American minority

shareholder.

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                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      Having established that the Amended Complaint alleged facts sufficient to

support the reasonable inference that British American owed a fiduciary duty to

Plaintiff, we next consider whether the Amended Complaint includes allegations

sufficient to establish, for the purposes of withstanding a 12(b)(6) challenge, that

British American breached this duty and did not act in good faith with regard to

Plaintiff’s interests. We hold it does.

      The relevant facts alleged include: conflicts of interests between British

American and the non-British American shareholders noted by Reynolds’s Board of

Directors, the Other Directors’ failure to obtain outside financial advice to resolve the

conflicts, British American’s potential pressuring of the Other Directors to act

contrary to the interests of the non-British American shareholders, and British

American’s purchase of Reynolds stock below the fair market value on the closing

date of the Transaction. These facts allow for a reasonable inference that British

American breached its fiduciary duty to the other shareholders by acting contrary to

their interest for its own pecuniary gain.

      We conclude that Plaintiff alleged a nexus of facts that permits the reasonable

inference that British American controlled the conduct of Reynolds for its pecuniary

benefit to the detriment of the other shareholders. We do not hold that Plaintiff has

presented evidence sufficient to prove that British American was a controlling

shareholder, to prove that British American breached a fiduciary duty, or even

                                          - 31 -
                         CORWIN V. BRITISH AM. TOBACCO PLC

                                    Opinion of the Court

sufficient to raise disputed issues of fact in this regard. We simply hold the Amended

Complaint alleges facts sufficient, if proven true, to allow for the reasonable inference

that British American exercised actual control over the Transaction and breached its

fiduciary duty to the other shareholders.           Whether Plaintiff is able to produce

evidence necessary to support his claims is a question to be answered after discovery.

       Accordingly, we reverse the trial court’s dismissal of Plaintiff’s claim against

British American pursuant to Rule 12(b)(6).

       3. Standing

       The general rule in North Carolina is that a shareholder may not bring suit

against third parties except in a derivative action on behalf of the corporation. Barger

v. McCoy Hillard & Parks, 346 N.C. 650, 658, 488 S.E.2d 215, 219 (1997). There are

two exceptions to this rule: when a plaintiff can show either (1) the defendant owed

the plaintiff a special duty, or (2) the plaintiff suffered an injury separate and distinct

from other shareholders. Barger, 346 N.C. at 658-59, 488 S.E.2d at 219-20. A

fiduciary duty may constitute a “special duty” when owed directly to a party. See id.

at 658-59, 488 S.E.2d at 220.

       Here, Plaintiff’s standing to bring a direct claim against British American

turns on whether Plaintiff’s Amended Complaint has alleged a special duty and thus

a claim for relief. Because the Amended Complaint included allegations sufficient to

                                           - 32 -
                         CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

support the conclusion that British American owed a fiduciary duty, Plaintiff has

standing to bring a direct claim against British American.

      C. Claims against Boards of Directors

      Plaintiff next contends the trial court erred by dismissing his claim against

Defendant-Directors for breach of fiduciary duty. The trial court did not determine

whether Plaintiff had standing to sue Defendant-Directors, but instead dismissed

Plaintiff’s claims on the merits. We hold that Plaintiff does not have standing and

therefore affirm the trial court’s dismissal on this alternative ground.

      “The well-established general rule is that shareholders cannot purse individual

causes of action against third parties for wrongs or injuries to the corporation that

result in the diminution or destruction of the value of their stock.” Barger, 346 N.C.

at 658, 488 S.E.2d at 219 (citations omitted). Such third parties include the directors

of a corporation. See Green v. Freeman, 367 N.C. 136, 141, 749 S.E.2d 262, 268 (2013).

“The General Assembly has expressly indicated its intent ‘to avoid an interpretation

[of N.C. Gen. Stat. § 55-8-30] . . . that would give shareholders a direct right of action

on claims that should be asserted derivatively’ and to avoid giving creditors a

generalized fiduciary claim.” Id. (quoting N.C. Gen. Stat. § 55-8-30 N.C. cmt. (2011)).

Two exceptions to this rule allow shareholders to bring direct actions against either

a third party or the directors: (1) “if the shareholder can show that the wrongdoer

owed him a special duty or [(2)] that the injury suffered by the shareholder is separate

                                          - 33 -
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

and distinct from the injury sustained by the other shareholders or the corporation

itself.” Barger, 346 N.C. at 658-59, 488 S.E.2d at 219 (citations omitted).

      To establish the first exception, a plaintiff “must allege facts from which it may

be inferred that defendants owed plaintiffs a special duty. The special duty may arise

from contract or otherwise.” Id. at 659, 488 S.E.2d at 220 (citation omitted). The

North Carolina Supreme Court has recognized as illustrative of a special duty, “when

a party violate[s] its fiduciary duty to the shareholder.” Id. (citing FTD Corp. v.

Banker’s Trust Co., 954 F. Supp. 106, 109 (S.D.N.Y. 1997)). However, North Carolina

has established that a director’s fiduciary duty is owed to the corporation itself and

not to the shareholders individually. Estate of Browne v. Thompson, 219 N.C. App.

637, 640-41, 727 S.E.2d 573, 576 (2012).            Because the legislature intended

shareholders to bring derivative actions, as opposed to direct actions, and a directors’

fiduciary duty is to the corporation generally and not the shareholder individually, a

shareholder’s action against a director should be brought derivatively unless he or

she can allege facts that the director owed him or her a special duty beyond that of

the general fiduciary duty to the corporation. Barger, 346 N.C. at 660, 488 S.E.2d at

220 (“Plaintiffs have alleged no facts from which it may be inferred that defendants

owed plaintiffs in their capacities as shareholders a duty that was personal to them

and distinct from the duty defendants owed the corporation.”).

                                          - 34 -
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

      Under the second exception, a plaintiff must “present evidence that they

suffered an injury peculiar or personal to themselves.” Green, 367 N.C. at 144, 749

S.E.2d at 269 (citing Barger, 346 N.C. at 661, 488 S.E.2d at 221). “An injury is

peculiar or personal to the shareholder if ‘a legal basis exists to support plaintiffs’

allegations of an individual loss, separate and distinct from any damage suffered by

the corporation.’ ” Barger, 346 N.C. at 659, 488 S.E.2d at 220 (quoting Howell v.

Fisher, 49 N.C. App. 488, 492, 272 S.E.2d 19, 23 (1980)). The general diminution of

stock value is not considered an injury “peculiar or personal” as it is felt by the

corporation itself.   Green, 367 N.C. at 144, 749 S.E.2d at 269 (“The loss of an

investment is identical to the injury suffered by the corporate entity as a whole.”)

(internal quotations and citations omitted).

      Here, Plaintiff asserts standing to bring his claim against Defendant-Directors

under the second exception.       Plaintiff frames his injuries as the inadequate

compensation for the stock sold to British American and the dilution of voting power

that resulted from this sale of shares to British American. Plaintiff argues these

injuries were suffered uniquely by Plaintiff and the other non-British American

shareholders, and thus satisfies the “peculiar or personal” requirement. We disagree.

      Plaintiff’s claimed injury from the inadequate compensation is the exact loss

contemplated by the legislature when it drafted the requirement that plaintiffs must

assert derivative claims where the injury is felt by the corporation itself. This injury

                                          - 35 -
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                   Opinion of the Court

does not satisfy the “peculiar or personal” requirement, and therefore standing for

Plaintiff’s direct claim may not be based on this injury.

      Plaintiff’s alternative framing for the injury, i.e., the dilution of voting power,

requires further consideration, but ultimately is not sufficient to satisfy the “peculiar

or personal” requirement. Recognizing such dilution as a basis for standing to sue

directly could allow any minority shareholder who opposes an equity financing

agreement to bring a direct suit against the corporation’s directors. Such injury is at

its core a diminution of value of the stock held. While it is less directly felt by the

corporation itself, it is felt generally by the shareholders and is thus not peculiar or

personal to any one shareholder. Therefore, we hold that a dilution of voting power,

standing alone, is an insufficient injury to base standing for a shareholder’s direct

claim against a board of directors.

      Because we hold that Plaintiff has failed to allege facts necessary to establish

either exception to the general rule requiring actions against the directors to be

brought derivatively, we affirm the trial court’s dismissal of Plaintiff’s claim.

      D. Claims against Corporation

      Plaintiff’s final issue on appeal challenges the trial court’s dismissal of his

claim against Reynolds for aiding and abetting a breach of fiduciary duty.

      The validity of an aiding and abetting a breach of fiduciary duty claim brought

against a corporation for the actions of its directors is unsettled in North Carolina.

                                          - 36 -
                        CORWIN V. BRITISH AM. TOBACCO PLC

                                  Opinion of the Court

Bottom v. Bailey, 238 N.C. App. 202, 211-12, 767 S.E.2d 883, 889 (2014). However,

we need not address this issue today, because Plaintiff lacks standing to bring the

underlying breach of fiduciary duty claim as against Defendant-Directors. See, e.g.,

Id. at 211, 767 S.E.2d at 889. Accordingly, we hold the trial court did not err in

dismissing Plaintiff’s claim of aiding and abetting a breach of fiduciary duty with

respect to Reynolds.

                                    Conclusion

       Plaintiff’s Amended Complaint, taken as true, supports the conclusion that

British American acted as a “controlling shareholder,” and therefore owed Plaintiff,

as a minority shareholder, a fiduciary duty. The Amended Complaint, however, failed

to establish that Defendant-Directors owed Plaintiff a special duty or that Plaintiff’s

injury was separate and distinct, and therefore Plaintiff failed to establish standing

to bring a direct claim against Defendant-Directors. Because the complaint failed to

plead the underlying fiduciary duty against Defendant-Directors, Plaintiff’s claim

against Reynolds for aiding and abetting a breach of fiduciary duty must also fail.

Accordingly, the trial court erred in dismissing Plaintiff’s claim against British

American but did not err in dismissing Plaintiff’s claims against Defendant-Directors

and Reynolds. Therefore, we reverse and remand the trial court’s order dismissing

Plaintiff’s claim against British American and affirm the trial court’s order

dismissing Plaintiff’s claims against the Director Defendants and Reynolds.

                                         - 37 -
             CORWIN V. BRITISH AM. TOBACCO PLC

                     Opinion of the Court

REVERSED AND REMANDED IN PART AND AFFIRMED IN PART.

Judges ELMORE and MCCULLOUGH concur.

                            - 38 -