Court Opinion

ID: 4540909
Source: CourtListenerOpinion
Date Created: 2020-06-12 12:00:21.192944+00
Date Added: 2024-06-11T08:00:22.931090
License: Public Domain

PUBLISHED

                      UNITED STATES COURT OF APPEALS
                          FOR THE FOURTH CIRCUIT

                                      No. 18-2202

ROB STAR, Derivatively and on behalf of all Nominal Defendants, Oldfield
Community Association, LLC, and Oldfield Club, LLC, and on behalf and for
Oldfield Community Association, LLC’s and Oldfield Club, LLC’s respective
members,

            Plaintiff – Appellant,

      v.

TI OLDFIELD DEVELOPMENT, LLC, TI OLDFIELD OPERATIONS, LLC, by
and through their respective Board of Directors, John Does 1-10, Individually and
as Directors between the time periods 2010-2017, including Phillip Galbreath and
I. William Stolz, III; OLDFIELD HOLDINGS GA, LLC; SF CAPITAL, LLC; SF
OPERATIONS, LLC; JAMIE D. SELBY, Individually and as Managing Member
of Elliot Group Holdings, LLC; ELLIOT GROUP HOLDINGS, LLC;
OLDFIELD COMMUNITY COUNCIL (2013-2015), including Jay Barr and
Richard Price, by and through its respective Board of Directors, John Does 11-20;
OLDFIELD CLUB (2010-2017), by and through its respective Board of Directors,
John Does 21-30, including Jay Barr, Phillip Galbreath and I. William Stolz, III;
OLDFIELD COMMUNITY ASSOCIATION (2010-2017), by and through its
respective Board of Directors, John Does 31-40, including Richard Price, Phillip
Galbreath, and I. Willian Stolz, III; BALD EAGLE PARTNERS LLC; BEP
OLDFIELD, LLC, by and through their respective Board of Directors (John Does
41-50); JAY BARR; RICHARD PRICE; WILLIAM STOLZ, III; PHILLIP
GALBREATH; OLDFIELD COMMUNITY ASSOCIATION, LLC; OLDFIELD
CLUB, LLC,

            Defendants – Appellees.

                                      No. 18-2205
ROB STAR, Derivatively and on behalf of all Nominal Defendants, Oldfield
Community Association, LLC, and Oldfield Club, LLC, and on behalf and for
Oldfield Community Association, LLC’s and Oldfield Club, LLC’s respective
members,

            Plaintiff – Appellant,

      v.

TI OLDFIELD DEVELOPMENT, LLC, by and through their respective Board of
Directors, John Does 1-10, Individually and as Directors between the time periods
2010-2017, including Phillip Galbreath and I. William Stolz, III; TI OLDFIELD
OPERATIONS, LLC, by and through their respective Board of Directors, John
Does 1-10, Individually and as Directors between the time periods 2010-2017,
including Phillip Galbreath and I. William Stolz, III; OLDFIELD HOLDINGS
GA, LLC; SF CAPITAL, LLC; SF OPERATIONS, LLC; JAMIE D. SELBY,
Individually and as Managing Member of Elliot Group Holdings, LLC; ELLIOT
GROUP HOLDINGS, LLC; OLDFIELD COMMUNITY COUNCIL (2013-
2015), including Jay Barr and Richard Price, by and through its respective Board
of Directors, John Does 11-20; OLDFIELD CLUB (2010-2017), by and through
its respective Board of Directors, John Does 21-30, including Jay Barr, Phillip
Galbreath, and I. William Stolz, III; OLDFIELD COMMUNITY ASSOCIATION
(2010-2017), by and through its respective Board of Directors, John Does 31-40,
including Richard Price, Phillip Galbreath, and I. Willian Stolz, III; BALD
EAGLE PARTNERS LLC; BEP OLDFIELD, LLC, by and through their
respective Board of Directors (John Does 41-50); JAY BARR; RICHARD PRICE;
WILLIAM STOLZ, III; PHILLIP GALBREATH; OLDFIELD COMMUNITY
ASSOCIATION, LLC; OLDFIELD CLUB, LLC,

            Defendants – Appellees.

Appeals from the United States District Court for the District of South Carolina, at
Charleston. David C. Norton, District Judge. (9:17-cv-02489-DCN)

Submitted: March 26, 2020                                       Decided: June 10, 2020

Before AGEE, THACKER, and RUSHING, Circuit Judges.

                                           2
Affirmed in part and dismissed in part by published opinion. Judge Agee wrote the opinion,
in which Judge Thacker and Judge Rushing joined.

Denise L. Savage, SAVAGE LAW, PLLC, Beaufort, South Carolina, for Appellant.
Merritt G. Abney, Matthew W. Orville, NELSON MULLINS RILEY &
SCARBOROUGH, LLP, Charleston, South Carolina, for Appellees TI Oldfield
Development, LLC; TI Oldfield Operations, LLC; SF Operations, LLC; SF Capital, LLC;
Oldfield Holdings GA, LLC; I. Williams Stolz; and Phillip Galbreath. Ian S. Ford, Ainsley
F. Tillman, FORD WALLACE THOMSON LLC, Charleston, South Carolina, for
Appellees Oldfield Club and its Post-Turnover Board of Directors. Krista M. McGuire, A.
Smith Podris, PARKER POE ADAMS & BERNSTEIN LLP, Charleston, South Carolina,
for Appellees Oldfield Community Council, LLC; Richard Price; and Jay Barr. Joseph E.
DaPore, Russell G. Hines, YOUNG CLEMENT RIVERS, LLP, Charleston, South
Carolina, for Appellees Oldfield Community Association, improperly named as “Oldfield
Community Association, LLC,” and Richard Price and John Does 31-40 in their capacity
as community-elected Board Members of the same Post-Turnover. Stephen Bucher,
BUCHER LEGAL, LLC, Mt. Pleasant, South Carolina, for Appellee Richard Price, in his
capacity as a community-elected member of the Board of Directors for Oldfield
Community Association Pre-Turnover. Matthew Tillman, WOMBLE BOND
DICKINSON (US) LLP, Charleston, South Carolina, for Appellee BEP Oldfield, LLC.
Keri M. Martin, WEINER SHEARHOUSE WEITZ GREENBERG & SHAWE, LLP,
Savannah, Georgia, for Appellee Bald Eagle Partners, LLC. Jared H. Garraux, Carmen V.
Ganjehsani, RICHARDSON PLOWDEN & ROBINSON, PA, Columbia, South Carolina,
for Appellee Oldfield Community Association, LLC, by and through its respective Board
of Directors, including Phillip Galbreath and I. William Stolz, III. Thomas C. Taylor, LAW
OFFICE OF THOMAS C. TAYLOR, LLC, Hilton Head, South Carolina, for Appellee
Jamie D. Selby, Individually and as Managing Member of Elliot Group Holdings, LLC.

                                            3
AGEE, Circuit Judge:

       After the Boards of Directors responsible for the management of Oldfield, a

residential community in South Carolina, filed lawsuits raising claims related to its

development, Rob Star, a resident, filed a derivative action alleging similar claims against

nearly identical defendants. The district court thereafter dismissed his derivative action for

failure to meet the requirements of Federal Rule of Civil Procedure 23.1 and for failure to

state a claim under Rule 12(b)(6). In the meantime, the Boards settled their lawsuits.

       For the reasons that follow, we conclude the settlements mooted Star’s claims

insofar as they were related to the ones asserted by the Boards. We therefore dismiss his

appeal as to those claims for lack of subject matter jurisdiction. And to the extent Star

asserted claims falling outside the scope of those asserted by the Boards’ Complaints, we

conclude that those claims were either also rendered moot by the settlement agreements or

were otherwise properly dismissed by the district court.

                                              I.

       To begin, we review the history of Oldfield’s development and the competing

lawsuits which grew out of events during its development.

                                             A.

       Oldfield was created in 2000 by a Declaration of Covenants, Conditions, and

Restrictions (the “Governing Documents”)—recorded by Oldfield, LLC, the original

developer—as a planned community consisting of 540 residences, a golf course, and other

                                              4
amenities. In turn, the Governing Documents created two not-for-profit limited liability

corporations to manage Oldfield, each of which is governed by its own Board of Directors.

The Oldfield Club (the “Club”) operates the golf course and recreational facilities, and

collects mandatory social dues from all members of the Oldfield community for the

maintenance of non-golf-related recreational facilities. 1 Meanwhile, the Oldfield

Community Association (the “Association”) is a homeowners’ association that conducts

all residential property duties and collects mandatory dues from property owners on a

monthly basis. A portion of the Association dues also goes to the Club for the maintenance

of non-golf facilities.

       In 2010, Oldfield, LLC sold or assigned its remaining lots and development rights

to TI Oldfield Development, LLC and TI Oldfield Operations, LLC (collectively, “TI

Oldfield”). From 2010 until 2015, TI Oldfield had the right, as declarant and sponsor under

the Oldfield Governing Documents, to appoint a majority of directors on both the three-

member Club and five-member Association Boards. During this period, TI Oldfield

appointed three members to each Board, including TI Oldfield principals William Stolz

and Phillip Galbreath.

       In 2013, TI Oldfield sold or assigned approximately 109 lots to BEP Oldfield, LLC,

and its wholly-owned subsidiary, Bald Eagle Partners, LLC (collectively, “BEP Oldfield”).

As part of this deal, TI Oldfield also conveyed certain declarant rights to BEP Oldfield.

       1
         Residents may also apply for an equity golf membership, which is accompanied
by additional golf member dues and voting rights with respect to golf facility issues.
                                           5
These included the right to appoint a member to the Association Board (but not the Club

Board) and exemption from the requirement to pay Club dues. Thus, from late 2013 until

early 2016, the Association Board consisted of one director appointed by BEP Oldfield

(Scott DeCain), two directors appointed by TI Oldfield (Stolz and Galbreath), and two

directors elected by the Oldfield community.

        In December 2015, TI Oldfield turned over control of Oldfield to the Club and the

Association (the “turnover”). In addition, its right to appoint a majority of directors on both

Boards expired (though it retained the right to appoint a minority of directors on both). In

early 2016, the Club and Association held Board elections; each has since had a majority

of Board members elected by the Oldfield community. Specifically, at turnover, the

composition of the Association’s five-director Board shifted to three community-elected

members and two TI Oldfield- and BEP Oldfield-appointed directors. 2 Similarly, the

Club’s Board increased its number of directors from three to seven, the majority of

whom—two community members and four equity golf members—are also community-

elected. 3
Barb.
2
         Further, “at the time of the next annual meeting of the [Association], in the [f]all
of 2016,” the number of directors was increased to seven, with one appointed by TI
Oldfield and six “elected by members.” J.A. 685.
       3
         In turn, the one TI Oldfield-appointed director, Galbreath, has recused himself
from Board decisions involving these lawsuits.

                                              6
       In early 2017, both community-controlled Boards filed separate lawsuits against TI

Oldfield, Galbreath, Stolz, and Jaime Selby—previously the general manager of the Club

and Association—along with certain entities affiliated with these defendants. 4 5 Both suits

alleged that the defendants in their respective actions engaged in mismanagement during

the development and operation of Oldfield prior to the turnover, asserting among other

claims breach of fiduciary duty, self-dealing, breach of contract, interference with

prospective contractual relations, tortious interference with contractual relations, civil

conspiracy and declaratory relief, negligent misrepresentation, negligent and wrongful

acts, and a cause of action for preliminary injunction and declaratory judgment. See

Complaint at 18–29, Oldfield Comm. Ass’n v. TI Oldfield Dev., LLC, No. 9:17-cv-794-

DCN (D.S.C. March 24, 2017), ECF No. 1-1 (the “Association Complaint”); see also

Complaint at 7–15, Oldfield Club v. TI Oldfield Dev., LLC, No. 9:17-cv-452-DCN (D.S.C.

Feb. 15, 2017), ECF No. 1-1 (the “Club Complaint”).

       The Association’s claims may be grouped into three categories: (1) mismanagement

of funds; (2) violation of various duties in the sale of the Greeters Store; and (3) divestment

of assets in an effort to become judgment-proof.

       The first category—mismanagement of funds—concerns the three separate

accounts that fund the Association: (1) the General Operating Fund, (2) the Capital Reserve

       4
        The Club’s suit was originally filed in state court in January 2017 (and the
Association’s in February) but both were subsequently removed to federal court by the
defendants.
      5
        The Association also named BEP Oldfield and the BEP-appointed Association
Board director, DeCain, as defendants.
                                          7
Fund (which accumulates funding for future repairs and replacement of community assets,

such as roads and sidewalks), and (3) the Community Enhancement Fund (which was “to

be used for such purposes as the Board determines to be beneficial to the general good and

welfare of Oldfield and [fall] outside the [G]eneral [O]perating budget,” J.A. 1692).

According to the Association Complaint, TI Oldfield and a number of directors failed to

appropriately manage these funds. Between 2011 and 2015, the defendants allegedly

transferred funds from the Community Enhancement Fund to the Capital Reserve Fund to

offset some of the contributions TI Oldfield was required to pay into the Capital Reserve

Fund, thereby inappropriately utilizing assets from the Enhancement Fund and creating a

shortfall to the Reserve Fund. 6 The Complaint also alleges the defendants failed to make

       6
          Specifically, the Association’s Governing Documents provided that the
Association Board could “assess owners for a Community Enhancement and Marketing
Fee,” J.A. 606, that would be incurred upon “each subsequent transfer of title to a Unit in
the Project (i.e., all resales).” J.A. 1692. “The amount of this transfer fee [was] to be
determined by the Board and . . . capped at [one percent] of the gross selling price.” J.A.
1692. These fees were then to be deposited in the Community Enhancement Fund, which
was to be “fully separate from the [O]perating and [R]eserve accounts.” Association
Complaint at 7. However, according to the Association, the defendant directors—acting at
the behest of TI Oldfield—voted to divert the fees permanently to the Capital Reserve
Fund. In sum, the Association’s Complaint alleged, “[a]ll sources used by the [d]efendants
from the [Enhancement Fund] inappropriately amounted to $480,392 between 2011 and
2015.” Id. at 9.
        Meanwhile, the Governing Documents also required “budgeting and funding into
[the Reserve Fund] amounts sufficient to meet the projected needs of capital asset
replacement.” J.A. 552–53. From 2011 to 2015, TI Oldfield was to cover the budget deficits
in this Fund. However, during this period, TI Oldfield and the defendant directors failed in
two ways to properly fund this account. First, “the amount of money by which they
wrongfully offset their obligations with the [Community Enhancement assets] was based
on inaccurate and inflated ‘projected’ [transfer fee] revenue, not the actual realized

                                             8
up a budget deficit in the General Operating Fund. In sum, according to the Association’s

Complaint, the accounts were underfunded by a total of nearly $2.5 million. In turn, the

Association Board increased member assessments by ten percent to address these deficits.

       The second category of claims concerns the sale of the Greeters Store, a building at

the entrance of Oldfield that serves a variety of community functions. In October 2016, TI

Oldfield conveyed the Store to its subsidiary, Oldfield Holdings, which four days later sold

it to Elliot Group Holdings, which was founded by Selby. Upon discovering the sale, the

Club and Association terminated Selby’s employment. According to the Association, both

Selby and TI Oldfield knew that the Club and Association had an interest in acquiring the

Store as part of the turnover. But—as the Complaint alleges—by acting on the sale of the

Store for his own gain, Selby violated the terms of his employment contract. Likewise, the

Complaint alleges, TI Oldfield and the named directors violated their obligation to act in

good faith to Club and Association members as part of sale negotiations by intentionally

failing to bring this sale opportunity to their attention.

[transfer fee] revenue.” Association Complaint at 10–11. This resulted in a Reserve
shortfall of approximately $163,532 from 2011 to 2014. Second, TI Oldfield and the
defendant directors relied on an “outdated reserve study that severely underestimated the
actual costs necessary to fully account for the [Reserve Fund’s] future expenditures” and
thereby failed to ensure “that balances would remain sufficient to cover anticipated
maintenance, repairs, and replacements of the Common Assets of the community.” Id. at
11. The Board calculated the “total shortfall to the [Reserve Fund] to be approximately
$648,454” between 2011 and 2015. Id.
                                             9
       Finally, according to the Association Complaint, TI Oldfield divested itself of

assets—such as the Greeters Store—in an attempt to become judgment-proof with respect

to any claims that would arise out of the turnover.

       The Club Complaint similarly asserts that TI Oldfield, Galbreath, and certain other

directors violated their fiduciary duties to the Club and its members by turning over the

golf and other country club facilities in deficient condition. These deficiencies included

neglected physical facilities; TI Oldfield’s limitation of “the number of certain types of

memberships to avoid reaching a number that might trigger turnover”; 7 an “artificial

limiting of certain types of memberships” that caused TI Oldfield “to turn over a club with

fewer [equity] members than contemplated by the original transfer documents” and thus

“significantly less annual revenue than contemplated,” Club Complaint at 4; 8 mismanaged

       7
         Although not specifically alleged in the Club Complaint, it appears that a number
of events could trigger turnover. As pertinent to this allegation, “192 outstanding golf
memberships” could trigger turnover, at which point Club members could vote to approve
turnover. J.A. 689; see also J.A. 674. However, an alternate triggering event was twelve
months of positive cash flow, at which point TI Oldfield—at any time and in its own
discretion—could initiate turnover; the record indicates that it was fulfillment of this
condition “during 2014” that in fact resulted in the turnover of the Club. J.A. 695. (This is
in contrast to turnover of the Association, which automatically occurred in December 2015
without community input.)
       8
         TI Oldfield had apparently guaranteed at least 250 golf memberships—both equity
and non-equity—before conveying title of Club facilities to the Club. Although such
transfer of Club facilities was to occur on or before turnover, it was not to occur “‘before
the sale of at least 250 Golf Memberships’ unless approved by [sixty-five percent] of the
Club’s equity memberships.” J.A. 957. However, as the Oldfield Community Council (the
“OCC”), a since-dissolved non-profit organization created by Oldfield homeowners to
oversee the turnover, observed, “many of the previously sold memberships ha[d] lapsed.”
J.A. 689.

                                             10
finances; the sale of the Greeters Store to Selby; and divestment of assets in an attempt to

become judgment-proof.

                                              C.

       After the Boards filed their respective lawsuits, Star, an Oldfield resident who is a

social member of the Association and club member of the Club, 9 moved to intervene in

both actions. The district court denied his motions, finding that intervention would be

improper because he had failed to demonstrate that the Boards were not adequately

representing the interests of membership in their respective actions, and that Star could

seek to protect his own individual interests by pursuing a separate lawsuit. Star then filed

a derivative action pursuant to Rule 23.1 10—which is now before us—on behalf of the Club

and Association, raising similar claims against nearly identical defendants.

       9
         That is, not an equity golf member.
       10
          This Rule outlines the requirements for the filing of a derivative suit, providing
that it “applies when one or more shareholders or members of a corporation or an
unincorporated association bring a derivative action to enforce a right that the corporation
or association may properly assert but has failed to enforce.” Fed. R. Civ. P. 23.1(a).
Nonetheless, “[t]he derivative action may not be maintained if it appears that the plaintiff
does not fairly and adequately represent the interests of shareholders or members who are
similarly situated in enforcing the right of the corporation or association.” Id.
       In turn, it sets forth a number of specific pleading requirements, providing the
complaint must:

       (1) allege that the plaintiff was a shareholder or member at the time of the
       transaction complained of, or that the plaintiff’s share or membership later
       devolved on it by operation of law;
       (2) allege that the action is not a collusive one to confer jurisdiction that the
       court would otherwise lack; and
       (3) state with particularity:

                                              11
       Star’s lawsuit was filed against TI Oldfield, BEP Oldfield, certain developer-

appointed directors, 11 and Selby. Like the Boards’ Complaints, Star’s alleged that TI

Oldfield misappropriated Oldfield’s funds by: (1) repurposing funds from the Community

Enhancement Fund to the Capital Reserve Fund, reducing TI Oldfield’s contributions to

the Reserve Fund; (2) failing to adequately fund the latter; and (3) underfunding the

General Operating Account. And like the Association Complaint, Star asserted that as the

result of a shortfall of approximately $2.5 million, the Association increased member

assessments by about ten percent. Similarly, according to Star, when TI Oldfield sold

certain lots to BEP Oldfield, it transferred only its declarant rights—but not the obligation

to pay dues to the Club—causing a shortfall in dues that was passed along to members.

       Star’s Complaint also likewise alleged that TI Oldfield wrongfully converted the

Greeters Store for its own use rather than turning it over to the Club and Association, and

conspired with Selby to sell the store to the detriment of the Club and Association. Further,

Star asserted, TI Oldfield violated the terms of transfer by turning over to the Club a golf

              (A) any effort by the plaintiff to obtain the desired action from the
              directors or comparable authority and, if necessary, from the
              shareholders or members; and
              (B) the reasons for not obtaining the action or not making the effort.

Fed. R. Civ. P. 23.1(b).
      11
         However, it did not name DeCain or any directors appointed by BEP Oldfield.

                                             12
facility with failing infrastructure, operational and funding deficits, and fewer equity

memberships sold than required to trigger a turnover. 12

       After the Club and Association moved to dismiss Star’s action, the district court

appointed a Special Master, who reviewed the claims and recommended dismissal. As to

Star’s first through seventh causes of action, the Special Master concluded they had been

asserted by the Boards in their respective actions, and the Boards were therefore “already

enforcing the rights asserted” such that the claims were duplicative. J.A. 1359. As a result,

Star’s derivative suit with respect to these claims failed to meet Rule 23.1(a)’s requirement

that such a suit may be only be brought by a shareholder or corporation member “to enforce

a right that the corporation or association may properly assert but has failed to enforce.”

Fed. R. Civ. 23.1(a) (emphasis added). And as to Star’s eighth through seventeenth causes

of action, the Special Master concluded that although they were not duplicative of the

Boards’ claims, they failed to meet Rule 23.1(b)’s demand requirement because Star failed

       12
           His Amended Complaint alleged seventeen separate causes of action, which are
listed in the order in which they were asserted in Star’s Complaint: (1) breach of fiduciary
duty; (2) negligence and negligent misrepresentation; (3) breach of contract; (4) tortious
interference with contractual relations; (5) civil conspiracy and declaratory relief; (6)
quantum meruit; (7) cause of action for preliminary injunction and declaratory judgment;
(8) civil Racketeer Influenced and Corrupt Organizations (“RICO”) claims for mail and
wire fraud; (9) unconscionable contracts subject to modification; (10) ultra vires conduct;
(11) conflicts of interest; (12) improper and undisclosed amendment of bylaws; (13) failure
to properly maintain and produce records for inspection; (14) failure to report the
commenced Club and Association actions to the South Carolina Attorney General; (15)
cause of action for appointment of a receiver; (16) a deceptive and inaccurate property
report; and (17) theft of services. J.A. 569–88.
                                              13
to “state with particularity” that he had made a pre-suit demand of the Boards. Fed. R. Civ.

P. 23.1(b)(3).

       However, the Special Master also concluded that Star had satisfied Rule 23.1 as to

a narrow portion of the breach of fiduciary duty and quantum meruit claims against TI

Oldfield and BEP Oldfield set forth in Counts One and Six—specifically, the claims related

to the agreement in which TI Oldfield sold a number of lots to BEP Oldfield and assigned

to it certain declarant rights, yet exempted it from the requirement to pay Club dues.

Nonetheless, the Special Master recommended dismissing these claims. As to the claims

against BEP Oldfield, the Special Master concluded Star had failed to state a claim under

Rule 12(b)(6). As an initial matter, the Special Master found that the fiduciary duty claim

failed because Star had not shown that BEP Oldfield owed a duty to the Club or Association

“by virtue of its purchase of lots.” J.A. 1377. And as to the quantum meruit claim—in

which Star alleged that BEP Oldfield received a benefit to the disadvantage of the Club

and Association because it had obtained the lots without having to pay Club dues—the

Special Master concluded that Star had failed to show that it was the Club or Association

that had conferred a benefit to BEP Oldfield. Rather, “BEP [had] entered into a transaction

with TI Oldfield[.]” J.A. 1379.

       As to the claims against TI Oldfield, the Special Master concluded that the Boards’

decisions not to pursue these claims was protected by the business judgment rule, which

under South Carolina law “precludes judicial review of actions taken by a corporate

governing board absent a showing of a lack of good faith, fraud, self-dealing[,] or

                                            14
unconscionable conduct.” Dockside Ass’n, Inc. v. Detyens, 362 S.E.2d 874, 874 (S.C.

1987). 13 Here, the Special Master concluded that the only colorable allegations in Star’s

Complaint “arguably applicable to business judgment are that TI Oldfield controls the

boards and their failure to seek the remedies sought by [Star] shows the [B]oards are

conflicted from bringing this action.” J.A. 1381. However, the Special Master observed,

“that TI Oldfield may appoint one, minority director to the [B]oards does not support a

finding that it controls them. That the [B]oards chose not to assert [Star’s desired remedies]

does not show bad faith.” J.A. 1381. Thus, the Special Master concluded, the business

judgment rule protected the Boards’ decisions not to pursue these claims.

       The district court adopted the recommendations and dismissed Star’s derivative

action. Star now appeals.

       Following the filing of this appeal, the Club and Association settled their respective

actions (with the exception of claims regarding two specific defendants who are not

relevant to this case). Among other terms, the settlements conveyed all sponsor and

       13
          More specifically, this rule presumes that in making a business decision, the
officers or directors of a corporation acted in an informed basis, in good faith, and in the
honest belief that the action taken was in the best interests of the company. See Aronson v.
Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds by Brehm v. Eisner, 746
A.2d 244 (Del. 2000). And since it operates as a presumption, a plaintiff must rebut that
presumption by pointing to specific instances of conduct that demonstrate the officers or
directors were acting in a culpable manner inconsistent with the presumption afforded them
by the rule. See id.
       However, it does not protect all actions taken by corporate officers and directors.
For instance, the rule does not apply “where the business decision in question is tainted by
a conflict of interest”; is so careless that it amounts to an “abdicat[ion] of [the directors’]
functions”; or “results from prolonged failure to exercise oversight and supervision.” See
F.D.I.C. v. Baldini, 983 F. Supp. 2d 772, 780 (S.D.W. Va. 2013).
                                                15
declarant rights to the Club, conveyed the Greeters Store to the Club, and paid the

Association $1.25 million. Further, the settlements ended the ongoing litigation, containing

broad releases providing that:

       The Parties hereby release and forever discharge each other and their
       respective agents, servants, representatives, legal counsel, directors, officers,
       shareholders, successors-in-interest (by merger or otherwise), assigns,
       affiliates . . . , related entities, corporate parents, corporate subsidiaries,
       employees, former employees, members, managers, administrators, and
       representatives, from any and all demands, actions, claims or rights to
       compensation, known or unknown, which they had or now have in
       connection with or in any way related to Oldfield (including actions
       occurring before or after Turnover), Turnover, the Subject Matter or any
       other matters pled or that could have been pled by the Parties against one
       another in the Civil Action.

Club Settlement Agreement at 7, Star v. TI Oldfield, No. 18-2202 (4th Cir. Dec. 21, 2018),

ECF No. 62-1 (the “Settlement Agreement”); see also Association Settlement Agreement

at 4–5, Star v. TI Oldfield, No. 18-2202 (4th Cir. Dec. 21, 2018), ECF No. 62-1 (providing

substantially the same). The Club and Association then dismissed the two actions with the

stipulation of the other parties. The dismissals were with prejudice as to all of the Club’s

and the Association’s claims except for those against Selby and Elliott Group Holdings,

which were dismissed without prejudice. 14 The Association then assigned its claims against

       14
          Star moved to enjoin the dismissals and effectuation of the settlement agreements.
The Special Master recommended the district court deny Star’s motions to enjoin the
settlement agreements, finding that the parties’ stipulations of dismissal deprived the court
of jurisdiction over the Club and Association actions (and that, even if Star had established
standing to challenge the settlement agreements, his argument for an injunction lost on the
merits). Star did not object to the report and recommendation, which the district court
adopted, denying Star’s motions to enjoin the settlements. Star did not appeal that order.
                                             16
Selby and Elliott Group Holdings to the Club, which has since litigated, settled, and

dismissed those claims in state court.

       The Boards and the defendants then moved to dismiss Star’s appeal, contending the

settlement agreements had rendered it moot.

                                              II.

       We turn first to the question of whether the settlements have mooted Star’s appeal

such that this Court lacks subject matter jurisdiction. 15 In arguing that his claims are not

moot, Star takes issue with the validity of the settlement agreements by contending they

are the results of negotiations by Boards with a conflict of interest—specifically, that they

are controlled by TI Oldfield—thereby raising issues central to the dismissal of his action.

       15
           Two preliminary matters raised by Star warrant mention. As an initial matter, Star
contends that the motions to dismiss should be denied because the Club, the Association,
and TI Oldfield failed to comply with Fourth Circuit Rule 27(a), which provides that “all
motions [in counseled cases] shall contain a statement by counsel that counsel for the other
parties to the appeal have been informed of the intended filing of the motion.” We conclude
this argument is without merit, as mootness is a jurisdictional issue that this Court must
address “irrespective [of] whether the issue was raised by the parties, when [its] jurisdiction
is fairly in doubt.” Williams v. Ozmint, 716 F.3d 801, 809 (4th Cir. 2013).
        Star’s invocation of the voluntary cessation doctrine is similarly unavailing. “[I]t is
well settled that a defendant’s voluntary cessation of a challenged practice does not deprive
a federal court of its power to determine the legality of the practice.” Deal v. Mercer Cty.
Bd. of Educ., 911 F.3d 183, 191 (4th Cir. 2018). And here, the doctrine is inapplicable
because rather than ceasing the challenged actions of their own accord, the defendants
contractually bound themselves to change their conduct through the settlements.

                                              17
       It has long been established that if “a live case or controversy ceases to exist after a

suit has been filed, the case will be deemed moot and dismissed for lack of standing.”

Pender v. Bank of Am. Corp., 788 F.3d 354, 368 (4th Cir. 2015). 16 A case “becomes moot

when the issues presented are no longer live or the parties lack a legally cognizable interest

in the outcome.” Williams, 716 F.3d at 809. “A change in factual circumstances can moot

a case on appeal, such as when the plaintiff receives the relief sought in his or her claim,

or when an event occurs that makes it impossible for the court to grant any effectual relief

to the plaintiff.” Id.

       As an initial matter, we observe that this Court has not specifically considered

whether a company’s settlement of a similar action renders a derivative action moot,

particularly when the derivative plaintiff asserts that the settlement was entered by a

conflicted board. However, we are cognizant of the (1) more general caselaw stating that

corporations own any claims arising out of injury to the corporation, and thereby have the

absolute right to resolve them (short of a conflict of interest on the part of the board), see,

e.g., Clark v. Lomas & Nettleton Fin. Corp., 625 F.2d 49, 52 (5th Cir. 1980) (observing

that the claims set forth in a derivative suit “belong not to [shareholders] but to [the

corporation]” and thus it is generally left to the corporate directors to decide “whether to

enforce corporate rights of action”); and (2) more specific, albeit limited, precedent

concluding that settlement of a corporation’s related suit may render a derivative

       16
        We have omitted internal quotation marks, alterations, and citations here and
throughout this opinion, unless otherwise noted.
                                           18
proceeding moot so long as the board is disinterested, see Salovaara v. Jackson Nat’l Life

Ins. Co., 246 F.3d 289, 296 (3d Cir. 2001) (“A corporation may enter into a settlement

despite the existence of a derivative action when doing so is in the corporation’s best

interest.”). We therefore conclude that the settlements here have rendered most of Star’s

appeal moot.

       At the outset, we agree that the Club and Association Boards “owned” the claims

against the TI Oldfield defendants 17 and had the absolute right—short of a conflict of

interest on the Boards—to resolve them in the manner they saw fit. This authority is such

that even if the Boards had declined to bring their own suits and Star’s derivative suit was

the only action pending that arose out of the allegations at issue, the Boards would generally

have the power to settle the derivative suit. After all, “courts have repeatedly held that

corporate directors are empowered to abort putative shareholder derivative suits, when it

is their business judgment that the cause ought not be enforced. Correlatively, corporate

       17
            Under South Carolina law,

       Generally, a shareholder of a corporation has no standing to assert legal
       claims based on harm to the corporation. Although the shareholder is
       indirectly harmed by any harm to the corporation, only the corporation itself
       may bring an action to redress this harm. Normally a corporation would act
       through its officers and directors, but in cases where the officers and directors
       wrongfully refuse to assert the corporation’s rights or have conflicts of
       interest, a shareholder may bring an equitable “derivative” action in the name
       of the corporation.

Bowen v. Houser, No. 3:12-cv-173-MBS, 2012 WL 2873873, at *2 (D.S.C. July 13, 2012).
“In essence, a derivative action is one in which the right claimed by the shareholder is one
the corporation could itself have enforced in court.” Id.
                                             19
directors possess inherent authority to compromise such suits.” Clark, 625 F.2d at 52; see

also Wolf v. Barkes, 348 F.2d 994, 997–98 (2d Cir. 1965) (“The corporation’s interest in

achieving a favorable settlement does not cease because derivative litigation has

begun[.]”); Kahn v. Kaskel, 367 F. Supp. 784, 789 (S.D.N.Y. 1973) (“There is nothing in

Rule 23.1 which in any way prohibits a corporation from making an out-of-court settlement

and giving a general release merely because a derivative action, brought on its behalf, is

pending in a federal court.”). “As with other management functions, however, the power

to control corporate litigation presupposes that the directors have no interest in its

exercise.” Clark, 625 F.2d at 52.

       However, this Court has not addressed the more nuanced issue of whether a

plaintiff’s derivative action on behalf of an entity is rendered moot by the entity’s

settlement of the same or similar claims in another action. In support of their respective

positions, both parties point to Clark, in which shareholders brought a derivative action on

behalf of a corporation, which the corporation subsequently settled without the plaintiffs’

knowledge. Id. at 51. The district court upheld the settlement over the plaintiffs’ objections,

but the Fifth Circuit vacated it. As an initial matter, the Fifth Circuit observed that although

corporate boards have the “inherent authority” to settle derivative actions, such authority

exists only when the boards are disinterested. Id. at 52. The court then considered the

settlement in the context of caselaw concerning the demand requirement of Rule 23.1,

which generally holds that “shareholders may sue derivatively, without first demanding

that the directors enforce the corporate cause, when the circumstances would render such

                                              20
demand a futile gesture.” Id. at 53. And because the corporation’s controlling shareholders

were defendants in the action, Clark concluded that the board was conflicted, demand

would have been futile, and thus the corporation’s directors were “incompetent . . . to

[settle] all of [the plaintiffs’] derivative claims.” Id. at 53–54. Although Clark provides

some guiding principles—namely, that settlement of derivative suits by a board is generally

permissible so long as the board is not conflicted—it is not entirely on point because the

Boards in the cases at bar settled their own respective actions.

       Salovaara offers more specific guidance. There, a shareholder appealed the district

court’s dismissal of a derivative action he had brought on behalf of a number of investment

funds against a life insurance company. On appeal, the insurance company argued the

derivative action was moot because it had since settled any outstanding claims with the

funds’ directors. 246 F.3d at 295. The insurance company observed that the funds’ directors

“voluntarily and knowingly surrendered their right to recover damages from this appeal”

and “that because none of the [funds’] officers or directors were named as defendants in

this lawsuit, there is no reason to suspect an internal conflict of interest led the [funds] to

settle this lawsuit for improper reasons.” Id. at 296. The funds agreed.

       In considering whether the appeal had been rendered moot, the Third Circuit

observed that “[a] corporation may enter into a settlement despite the existence of a

derivative action when doing so is in the corporation’s best interests” and there is no

                                              21
conflict on the part of the corporate directors entering the settlement. Id. 18 In considering

whether the settlement was in the funds’ best interest, the Third Circuit noted the insurance

company and the funds had argued that the benefits to the funds included resolution of

litigation, the limitation of any potential exposure to liability, and a recovery of $19 million.

In turn, the insurance company “maintain[ed] that it [was] not in the [funds’] best interests

to continue with this derivative suit, given the benefits it ha[d] received from the

settlement.” Id. But according to the shareholder, the insurance company had only provided

conclusory statements that the settlement was in the funds’ best interest and that this did

not necessarily demonstrate a lack of collusion on the part of the funds’ directors in

reaching the settlement. (Namely, the shareholder suggested that a single fund director had

a conflict of interest that prevented him from entering into a fair settlement agreement.)

       The Third Circuit concluded that in considering mootness, it was not required to

accept the settlement agreement at face value. Rather, it had the equitable power—“if the

circumstances so warrant”—to review the settlement while a derivative suit was pending

for reasonableness and to enjoin the corporation from entering into it, either temporarily or

permanently, if it was “not in the best interests of the company.” Id. at 297. Thus, the court

could evaluate the settlement agreement in the first instance under a deferential

       18
          This standard was derived from Wolf, 348 F.2d at 997, in which the Second Circuit
held that then-Rule 23(c) regarding notice to class members of a class action settlement did
not forbid a corporation from settling its claims out of court during the pendency of a
stockholder plaintiff’s derivative class action. Id. That court left the door open to review
the propriety of settlement agreements in situations where “the beneficiaries of the alleged
improper dealing still dominated the board of directors and plaintiffs were able to make
some proof that wrongdoing was afoot.” Id. at 998.
                                              22
“reasonableness” and “best interests of the company” approach. Id. After conducting such

a review, the court concluded that on the present facts, it did not see anything “trigger[ing]

a need for further scrutiny[.]” Id. The conflict the shareholder attributed to the single fund

director—a falling out with the shareholder—was “tenuous,” given that the director at issue

controlled less than five percent of the fund’s assets. Id. And there were no other

demonstrations of improper collusion or bad faith. Further, there were specific reasons,

noted above, as to why the settlement was in the best interests of the funds. Upon

concluding the agreement passed muster, the court dismissed the shareholder’s appeal as

moot, observing that he could “always file a new lawsuit against [the funds] if he believes

it breached a duty towards the shareholders by entering into the Settlement.” Id.

       We see no reason why Salovaara’s framework and reasoning should not apply to

the settlements at issue here—that is, why settlements that are in the best interests of the

company, entered by a disinterested board, should not moot a related derivative suit

asserting identical or similar claims arising out of the same underlying facts. As an initial

matter, it appears that the settlements are in the best interests of the Club and the

Association. Among other terms, the settlements: (1) convey all sponsor and declarant

rights to the Club; (2) convey the Greeters Store to the Club; and (3) pay the Association

$1.25 million. They also end the ongoing litigation.

       In turn, there is no evidence of collusion in the negotiation of the settlement

agreements or any cognizable conflict of interests on the part of the Boards. To the extent

Star asserts conflicted Boards, it appears that only one Board director—Galbreath, who is

                                             23
appointed by TI Oldfield—is a named defendant. (In turn, as discussed above, Galbreath

recused himself from Board decisions involving this litigation.) Cf. Clark, 625 F.2d at 51

(concluding that because controlling shareholders were defendants, the board was

conflicted). Further, it is undisputed that since 2016, the majority of each Board has been

comprised of community-elected members. Specifically, following turnover, the

Association’s Board consists of five directors, most of whom—at least three—are

community-elected. 19 In turn, the Club’s consists of seven directors, the majority of

whom—two community members and four equity golf members—are also community-

elected. The record contains no evidence that either of the Boards during the litigation or

settlement negotiation was controlled by TI Oldfield or any of the other defendants. Thus,

under both Clark and Salovaara, Star’s assertion of a conflict of interest as to either Board

is without merit, and we fail to observe anything “trigger[ing] a need for further scrutiny[.]”

Salovaara, 246 F.3d at 297; see id. (concluding allegedly conflicted director could not

demonstrate conflict of interest because he controlled less than five percent of assets). In

sum, given that the settlements appear to be in the best interests of the Club and Association

and there is no demonstration of improper collusion or bad faith, we conclude the

settlement agreements are valid and thereby moot the derivative suit insofar as Star’s

claims were covered by the scope of the Boards’ Complaints. Consequently, we lack

       19
          The record indicates the Association Board may now consist of seven directors,
but either way, it is undisputed that the majority are community-elected. J.A. 685.

                                              24
subject matter jurisdiction to consider Star’s appeal as it relates to these claims, and

therefore dismiss his appeal as to them. 20

                                              III.

                                              A.

       Although most of Star’s claims of wrongful conduct against the Club and

Association’s directors have been rendered moot by the settlement agreements, we observe

that some were arguably not covered by the scope of the Boards’ Complaints. For that

reason, we must look in the first instance to see if these claims have been otherwise

rendered moot by the settlement agreements.

       As an initial matter, we conclude that given the broad language of the release in the

settlement agreements, these claims were rendered moot. In the alternative, we affirm the

district court’s dismissal of these claims on either the basis that they failed to meet Rule

       20
          For the same reasons, we conclude the settlement of the Club’s claims against
Selby and Elliott Group Holdings in the state court action renders Star’s appeal of his
claims against those defendants moot.
       As part of the state court settlement, the Club paid an agreed-upon amount to Selby;
Selby and Elliott Group Holdings conveyed the Greeters Store to the Club; the Club
forgave Selby and Elliott Group Holding’s mortgage on the property; and the parties agreed
that any employment agreement or other obligations regarding Selby’s employment were
acknowledged to be null and void. Further, the parties fully released each other from all
related legal claims.
       Given that: (1) Star’s claims against Selby and Elliott Group Holdings were covered
by the scope of the Club’s claims; (2) the settlement agreement appears to have been in the
best interests of the Club (and obtained the very relief that Star sought—specifically,
conveyance of the Greeters Store to the Club); and (3) there has been no demonstration of
improper collusion or bad faith in reaching the agreement, we conclude the state court
settlement moots Star’s derivative suit as to Selby and Elliott Group Holdings.
                                               25
23.1’s demand requirements or that the Boards’ decision not to assert these causes of action

was protected by the business judgment rule. See Thigpen v. Roberts, 468 U.S. 27, 30

(1984) (“[W]e may affirm on any ground that the law and the record permit and that will

not expand the relief granted below.”). Finally, we conclude that a set of allegations

asserted by Star against the OCC has also been rendered moot by the settlement agreements

or fails to state a claim against the OCC.

                                             B.

       We first consider the ten claims asserted against the TI Oldfield defendants that

were not asserted by the Boards in their respective lawsuits (namely, Star’s eighth through

seventeenth causes of action). Given that these allegations stem from alleged impropriety

that related to the turnover, we conclude they are rendered moot by the broad language of

the settlements releasing any claims related to the “Turnover . . . or any other matters pled

or that could have been pled by the Parties against one another in the Civil Action.”

Settlement Agreement at 7.

       In the alternative, we agree with the Special Master’s conclusion that these claims

failed to satisfy Rule 23.1’s demand requirements and affirm the dismissal of these claims

based on that failure. See Rivers v. Wachovia Corp., 665 F.3d 610, 616 (4th Cir. 2011)

(observing that a derivative action that does not meet Rule 23.1’s requirements must be

dismissed). In evaluating a derivative claim, a federal court must determine the adequacy

of pleading under federal law but determine the sufficiency of the pre-suit demand under

the substantive law of the state of incorporation—here, South Carolina. Kamen v. Kemper

                                             26
Fin. Servs., Inc., 500 U.S. 90, 108–09 (1991). Under South Carolina law, a demand must

at a minimum identify the alleged wrongdoers, describe the factual basis of the wrongful

acts and the harm caused to the corporation, and request remedial relief. Carolina First

Corp. v. Whittle, 539 S.E.2d 402, 410 (S.C. Ct. App. 2000).

       With this standard in mind, we briefly consider why each of these non-duplicative

claims failed to satisfy Rule 23.1’s demand requirements. As an initial matter, the Special

Master concluded that Star’s eighth cause of action, his RICO claim, failed to fulfill Rule

23.1 because his demand consisted only of his motion to intervene. But as the Special

Master correctly observed, “[a] post-suit demand simply does not meet [Rule 23.1’s]

procedural prerequisite” of demand upon the Boards. In re Sapient Corp. Derivative Litig.,

555 F. Supp. 2d 259, 263 (D. Mass. 2008); see also Wencoast Rests., Inc. v. Chart Capital

Partners, L.P., No. 2:05-1650-18, 2006 WL 490101, at *3 (D.S.C. Feb. 28, 2006) (“Since

[Rule 23.1’s] demand requirement is designed to give the directors an opportunity to take

the action requested by the shareholder prior to suit, a post-suit demand likely would not

suffice. Accordingly, most of the evidence of . . . post-suit demands . . . is irrelevant.”); cf.

Kamen, 500 U.S. at 96 (“The purpose of the demand requirement is to afford the directors

an opportunity to exercise their reasonable business judgment and waive a legal right

vested in the corporation in the belief that its best interests will be promoted by not insisting

                                               27
on such right.”). 21 Similarly, with respect to his ninth cause of action—which sought

modification of the Governing Documents and transfer agreements on the basis that they

provided TI Oldfield and BEP Oldfield with control over the Boards, thereby amounting

to contracts of adhesion—the Special Master concluded Star failed to fulfill the demand

requirements because his only demand allegation was “that he demanded it by way of his

motion to intervene.” J.A. 1369. Altogether, we discern no error in the Special Master’s

analysis and affirm the dismissal of both of these claims.

       As to Star’s next five causes of action, we agree with the Special Master’s

conclusion that Star failed to make a particularized demand upon the Boards. Star’s tenth

cause of action sought “damages from various acts of ultra vires conduct of the director

Defendants.” J.A. 1369. Although he alleged “repeated demands . . . made by [him] and

other [community] members . . . to pursue certain present and former board members,” the

Special Master concluded “[t]his is not a sufficiently particularized allegation of a demand

because it does not describe the factual basis of the wrongful acts, harm to the corporation,

or relief sought.” J.A. 1369. We agree that such failure to state with particularity the harm

to the Club and Association does not meet Rule 23.1’s demand requirements. Next, Star’s

eleventh cause of action asserted a host of conflicts of interest on the part of all

defendants—such as “fail[ure] to commence breach of fiduciary duty actions against post

       21
          To the extent that Star references a RICO claim in the Club Board meeting
minutes, we also agree with the Special Master’s conclusion that this fails to satisfy Rule
23.1’s particularity requirements because it does not state the factual basis of any wrongful
acts or harm caused to the Club.
                                             28
Turnover [Club and Association] directors arising from their willful financial negligence,”

J.A. 582—in violation of S.C. Code § 33-31-831. But as the Special Master correctly

concluded, Star failed to allege that he demanded the Club or Association pursue these

claims. And we likewise conclude that Star’s twelfth cause of action—improper and

undisclosed amendment to the Club bylaws, 22 in violation of S.C. Code § 33-31-1021,

asserted against all director defendants—failed to allege that he demanded the Club or

Association take any action related to this purported amendment. 23 And as to Star’s

thirteenth cause of action, Star asserted that the directors failed to properly maintain and

produce certain records over the course of the Turnover, such as “accurate accounting of

utilization of funds by and between” the Club and Association. J.A. 535. The Special

Master concluded this claim failed to satisfy Rule 23.1 because it did not state the harm

caused to the Club or Association “from not providing an accurate accounting.” J.A. 1371.

We agree. Finally, with respect to Star’s fourteenth cause of action, he asserted that all

defendants were responsible for the alleged failure to report the Club and Association’s

actions to the South Carolina Attorney General pursuant to S.C. Code § 33-31-170.

       22
          Specifically, Star alleged that in 2013, the Club bylaws were amended so that
Club member dues could be applied to the upkeep of Club facilities, and that this
amendment was passed by the Board “without notice or an opportunity for the members to
vote on it.” J.A. 1371.
       23
           Although Star cited an email to the Club Board asking for a copy of the
amendment, as well as Board minutes stating that he wanted to bring a case related to a
pattern of fraud based on unilateral modifications to a set of unspecified documents, “[the
email did] not ask [the Club] to rescind or produce an amendment—the relief apparently
sought in this cause of action.” J.A. 1371. Given the failure to request such relief, we agree
with the Special Master’s view that the purported demand failed to meet the particularity
requirements set forth by South Carolina law.
                                             29
However, as the Special Master correctly noted, Star failed to fulfill the demand

requirement because he did not allege that he demanded the Club or Association report

their actions. For these reasons, we affirm the dismissal of these claims.

       Next, Star’s fifteenth cause of action sought the appointment of a receiver to engage

in oversight of TI Oldfield, BEP Oldfield, and the Boards to ensure “accurate accounting,

retention of assets, and credible reports of Oldfield’s operations.” J.A. 1372. The Special

Master again correctly concluded Star had failed to fulfill Rule 23.1 because the only

demand that Star alleged was through his motion to intervene, which, as discussed above,

was insufficient. Likewise, Star’s sixteenth cause of action—asserting that TI Oldfield

violated Title XIV of the Housing and Urban Development Act of 1968 (the “Interstate

Land Sales Full Disclosure Act”), 15 U.S.C. § 1701 et seq., by filing an allegedly deceptive

and inaccurate federally-mandated property report—failed to meet the demand

requirements because his only allegation of demand was made by way of his motion to

intervene. We therefore affirm the dismissal of these claims.

       Finally, as to his seventeenth cause of action, Star asserted a claim for theft of

services. This claim arose out of TI Oldfield’s use of revenue generated from non-member

utilization of Oldfield facilities (such as for weddings and golf) to breakeven on operational

funds and offset its obligation to pay deficits. In his claim, Star argued that all such funds

should have gone to the Club and Association. And although he alleged demand in the

form of emails from other community members to the Boards stating that TI Oldfield’s use

of the revenue was “illegal” and amounted to “theft of services,” he failed to cite any

                                             30
communications that he himself made. J.A. 1373. Because Rule 23.1 requires that the

named derivative plaintiff make the demand, 24 Star failed to meet Rule 23.1’s demand

requirements. In sum, to the extent these ten claims were not covered by the settlement

agreements, we affirm the district court’s dismissal of these claims for failure to satisfy

Rule 23.1. 25

       Nonetheless, even if Star’s claims had fulfilled Rule 23.1’s demand requirements,

we would alternatively conclude that the Boards’ decision not to pursue them was protected

by the business judgment rule. As noted, this rule “presumes that the board made its

decision on an informed basis, in good faith and in the honest belief that the action was

taken in the best interests of the company.” Morefield v. Bailey, 959 F. Supp. 2d 887, 897

(E.D. Va. 2013). And in South Carolina, this rule “precludes judicial review of actions

taken by a corporate governing board absent a showing of a lack of good faith, fraud, self-

       24
           Given that Rule 23.1 refers to “the plaintiff” in three instances—that “the
plaintiff” fairly and adequately represent shareholder interests; allege he was a shareholder
at the time of the transaction; and make the demand, Rule 23.1(a), (b)(1), (b)(3)(A)—these
requirements would be rendered meaningless if “the plaintiff” meant every member or
shareholder. If this were the case, any member “would always fairly and adequately
represent the shareholder” and satisfy the requirement that he or she be a shareholder at the
time of the transaction. J.A. 1374–75. Given this, the only reasonable reading of Rule 23.1
is that the named derivative plaintiff must make the demand.
        25
           The district court also correctly concluded that Star failed to show that demand
would have been futile. Under South Carolina law, the plaintiff bears the burden of alleging
particularized facts in support of the assertion that demand would have been futile.
Carolina First Corp., 539 S.E.2d at 411. South Carolina courts have concluded that
demand requirements must be rigorously enforced such that conclusory allegations that the
alleged wrongdoers “controlled the board” are insufficient to establish futility, absent
particularized facts to support it. Id. at 412. As the Special Master correctly recognized,
Star failed to allege futility at all, much less with particularity.
                                                31
dealing or unconscionable conduct.” Dockside Ass’n, 362 S.E.2d at 874. Here, the record

indicates that the only possible showing of “a lack of good faith, fraud, self-dealing or

unconscionable conduct” would stem from Star’s allegations of TI Oldfield’s control over

the Boards. Id. Nonetheless, as discussed at length previously, given that the Boards are

controlled by community-elected members, we discern no such conflict of interest or

control by TI Oldfield. Further, there is nothing in the record indicating that the Boards’

decision not to pursue these claims was made in bad faith or was the result of self-dealing

or unconscionable conduct, nor has Star offered any particularized facts indicating to the

contrary. Given this, we conclude such a decision not to pursue these claims was protected

by the business judgment rule.

                                             C.

       In addition, the Special Master concluded that Star had satisfied Rule 23.1 as to the

narrow remaining portion of the breach of fiduciary duty and quantum meruit claims

asserted against TI Oldfield and BEP Oldfield, but recommended dismissing them. As to

the causes of action against BEP Oldfield, the Special Master concluded Star had failed to

state a claim under Rule 12(b)(6). In the fiduciary duty claim, 26 Star alleged that the

       26
          To assert a breach of fiduciary duty, the plaintiff must establish the existence of
a fiduciary relationship. Steele v. Victory Sav. Bank, 368 S.E.2d 91, 94 (S.C. Ct. App.
1988). South Carolina law defines a fiduciary relationship as one “founded on trust and
confidence reposed by one person in the integrity and fidelity of another.” Id. at 93. And
to establish this relationship, “the facts and circumstances must indicate the party reposing
trust in another has some foundation for believing the one so entrusted will act not in his
own behalf but in the interest of the party so reposing.” Moore v. Moore, 599 S.E.2d 467,
472 (S.C. Ct. App. 2004).
                                               32
“transfer to BEP of only rights but no obligations [to] pay [Club] dues ‘removed an

estimated 20% of the lots from contributing dues to the [Club]’ and resulted in an increase

in dues paid by the members.” J.A. 1376. However, the Special Master observed that “even

accepting all of this,” Star had failed to allege or otherwise show that BEP Oldfield owed

a duty to the Club or Association “by virtue of its purchase of lots.” J.A. 1377. And to the

extent BEP Oldfield could appoint a director to the Association (while abstaining from

paying dues to the Club), “it [was] unclear how the appointment of a director to [the

Association] could result in a breach of fiduciary duty to pay dues to another entity,” the

Club. J.A. 1377–78. In sum, there was no allegation of any facts supporting the existence

of a fiduciary relationship between BEP Oldfield and the Club. And even accepting Star’s

allegations as true, he had only alleged that BEP Oldfield purchased lots from TI Oldfield,

received an assignment of certain rights, and appointed an Association Board director. J.A.

540–41. We agree that this fails to establish a fiduciary relationship under South Carolina

law.

       As to the quantum meruit claim 27—in which Star alleged that BEP Oldfield had

received a benefit via the transfer of the lots “to the disadvantage” of the Association and

Club because it was not required to pay Club dues—the Special Master concluded that Star

had failed to demonstrate a benefit conferred by the Club or Association upon BEP

       27
           The elements of a quantum meruit claim are: (1) a benefit conferred by the
plaintiff upon the defendant; (2) realization of that benefit; and (3) retention of the benefit
by the defendant under circumstances making it inequitable for him or her to retain it
without paying its value. Gignilliat v. Gignilliat, Savitz & Bettis, L.L.P., 684 S.E.2d 756,
764 (S.C. 2009).
                                              33
Oldfield. Specifically, the Special Master concluded, Star had failed to allege the Club or

Association “had anything to do with the purchase transaction or that BEP requested

anything from them.” J.A. 1379. Rather, BEP Oldfield had entered into a transaction with

TI Oldfield. We agree and conclude that even if the settlement agreements did not moot

these claims, Star failed to state a quantum meruit claim against BEP Oldfield: Star did not

allege that the Association or the Club were involved in the transaction; that BEP Oldfield

requested anything from either Board; or that BEP Oldfield did anything to cause the Club

to rely upon it for payment of dues or induced the Club in any way.

       The Special Master also recommended dismissing the claims against TI Oldfield

because the Boards’ decision not to pursue such causes of action against TI Oldfield to

recover the unpaid dues from BEP Oldfield was protected by the business judgment rule.

The Special Master concluded that the only colorable allegations in Star’s Complaint

“arguably applicable to business judgment are that TI Oldfield controls the [B]oards and

their failure to seek the remedies sought by [Star] shows the [B]oards are conflicted from

bringing this action.” J.A. 1381. However, the Special Master observed, “that TI Oldfield

may appoint one[] minority director to the [B]oards does not support a finding that it

controls them. That the [B]oards chose not to assert [Star’s desired remedies] does not

show bad faith.” J.A. 1381. We agree and conclude that even if the settlement agreements

did not moot these claims, Star has failed to meet his burden of demonstrating that the

Boards’ decision not to pursue these claims was not protected by the business judgment

rule. This decision is therefore shielded from further judicial review.

                                             34
                                             C.

       Finally, we consider Star’s claims against the OCC, a since-dissolved non-profit

organization created by and comprised of Oldfield homeowners to oversee the turnover.

The factual allegations Star sets forth against the OCC assert that it “took no steps to

intervene in the destructive activity” by TI Oldfield and BEP Oldfield during the turnover.

J.A. 548. TI Oldfield and the Boards argue that these brief mentions of the OCC in Star’s

Complaint fail to state any claims against OCC. They also point out that the Boards elected

not to bring any claims against the OCC, and Star has failed to allege any facts suggesting

the Boards’ decision should not be protected by the business judgment rule.

       We conclude that to the extent Star asserted claims against the OCC with the same

underlying factual allegations that were otherwise covered by either of the Boards’

lawsuits, (1) the Boards’ decision not to sue the OCC was protected by the business

judgment rule (for the same reasons discussed above) and/or (2) any claims that could have

been asserted were covered by the broad language of the settlements, which discharged

claims that could have been brought in relation to any of the parties’ “related entities.”

Settlement Agreement at 7. In the alternative, we also conclude that to the extent that Star

asserted claims that were not brought by the Club or Association, Star failed to state a claim

against the OCC, warranting dismissal under Rule 12(b)(6). Ostrzenski v. Seigel, 177 F.3d
245, 253 (4th Cir. 1999) (“[W]e may affirm the dismissal by the district court on the basis

of any ground supported by the record even if it is not the basis relied upon by the district

court.”).

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                                          ****

       To the extent Star asserted claims that were not rendered moot by the settlement

agreements, we affirm the district court’s dismissal of those claims for failure to satisfy

Rule 23.1 or to state a claim under Rule 12(b)(6). Further, to the extent the Boards could

have asserted such claims but did not do so, we conclude their decision not to pursue them

was protected by the business judgment rule.

                                           IV.

       For the reasons set forth above, we dismiss the appeal as to those claims that were

rendered moot by the settlements and affirm the dismissal of the remaining claims. We

dispense with oral argument because the facts and legal contentions are adequately

presented in the materials before this Court and argument would not aid the decisional

process.

                                            AFFIRMED IN PART; DISMISSED IN PART

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