TRAIL CREEK INVS. LLC v. WARREN OIL HOLDING CO., 2023 NCBC 36A

STATE OF NORTH CAROLINA
WAKE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 4473
TRAIL CREEK INVESTMENTS LLC
and WARREN OIL COMPANY, LLC,
Plaintiffs,
v.
(1) WARREN OIL HOLDING
COMPANY, LLC; (2) WARREN
UNILUBE HOLDING COMPANY,
INC.; (3) the ESTATE OF W. I.
WARREN, and H. LAWRENCE
SANDERSON and JAMES M.
YATES, JR., as Executors of the
ESTATE OF W. I. WARREN; (4) W.
I. WARREN 2003 IRREVOCABLE
TRUST, and H. LAWRENCE
SANDERSON, JAMES M.
YATES, JR., and REED WARREN in
their capacity as Trustees of the W. I.
WARREN 2003 IRREVOCABLE
TRUST; (5) WENDY WARREN
SPELL 2016 IRREVOCABLE
TRUST, and H. LAWRENCE
SANDERSON and JAMES M.
YATES, JR., in their capacity as
Trustees of the WENDY WARREN
SPELL 2016 IRREVOCABLE
TRUST; (6) WILLIAM IRVIN
WARREN, JR., 2016 IRREVOCABLE
TRUST, and H. LAWRENCE
SANDERSON and JAMES
M. YATES, JR., as Trustees of the
WILLIAM IRVIN WARREN, JR.
2016 IRREVOCABLE TRUST; (7)
CHRISTIAN WARREN SPELL 2016
IRREVOCABLE TRUST, and H.
LAWRENCE SANDERSON and
JAMES M. YATES, JR., in their
capacity as Trustees of the
CHRISTIAN WARREN SPELL 2016
IRREVOCABLE TRUST; (8)
GREYSON WINDHAM SPELL
2016 IRREVOCABLE TRUST, and
H. LAWRENCE SANDERSON and
JAMES M. YATES, JR., in their
capacity as Trustees of the
GREYSON WINDHAM SPELL 2016
AMENDED ORDER AND
OPINION ON DEFENDANTS’
PARTIAL MOTION TO DISMISS
AMENDED COMPLAINT AND
PLAINTIFFS’ MOTION TO
STRIKE OR EXCLUDE
CERTAIN EXHIBITS
Trail Creek Invs. LLC v. Warren Oil Holding Co., 2023 NCBC 36A.

IRREVOCABLE TRUST; (9) REED
ADELE WARREN 2016
IRREVOCABLE TRUST, and H.
LAWRENCE SANDERSON and
JAMES M. YATES, JR., in their
capacity as Trustees of the
REED ADELE WARREN 2016
IRREVOCABLE TRUST; (10)
COLBY JACKSON WARREN 2016
IRREVOCABLE TRUST, and H.
LAWRENCE SANDERSON and
JAMES M. YATES, JR., in their
capacity as Trustees of the COLBY
JACKSON WARREN 2016
IRREVOCABLE TRUST; (11)
JAIMMY ELIZABETH WARREN
2016 IRREVOCABLE TRUST, and
H. LAWRENCE SANDERSON and
JAMES M. YATES, JR., in their
capacity as Trustees of the JAIMMY
ELIZABETH WARREN 2016
IRREVOCABLE TRUST; (12) H.
LAWRENCE SANDERSON, in his
capacity as Seller Representative and
in his individual capacity; and (13)
RONNIE C. WALKER, SR.,
Defendants.
THIS MATTER comes before the Court on Defendants’ Partial Motion to
Dismiss Plaintiffs’ First Amended Complaint (“Motion to Dismiss,” ECF No. 53) and
Plaintiffs’ Motion to Strike or Exclude Certain Exhibits (“Motion to Strike,” ECF No.
64) (collectively, the “Motions”). 	THE COURT, having considered the Motions, the
parties’ briefs, the arguments of counsel, and all appropriate matters of record,
CONCLUDES that the Motions should be GRANTED, in part, and DENIED, in
part, as set forth below.
Tuggle Duggins P.A., by Denis E. Jacobson, Jeffrey S. Southerland,
Brandy L. Mansouraty, Daniel D. Stratton, and Shauna L. Baker-Karl,
for Plaintiffs.

Robinson, Bradshaw & Hinson, P.A. by David C. Wright, Stephen D.
Feldman, Melissa A. Romanzo, Andrew R. Wagner, and Emma W. Perry,
for Defendants.
Davis, Judge.
INTRODUCTION
1. 	The Amended Complaint in this case is lengthy—consisting of over 130
pages and more than 475 paragraphs. 	In essence, it asserts that Defendants
fraudulently 	failed 	to 	disclose 	substantial 	existing 	environmental 	liabilities 	in
connection with the sale of Warren Oil Company, Inc. (“Warren Oil”), Warren
Unilube, Inc. (“Warren Unilube”), and their affiliated companies to Plaintiff Trail
Creek Investments LLC (“Trail Creek”). 	Despite the voluminous nature of the
allegations, however, Defendants contend that the Amended Complaint fails to allege
facts sufficient to establish the required legal elements of the claims Plaintiffs are
asserting. For the reasons set out below, the Court finds that many, although not all,
of Plaintiffs’ claims have been inadequately pled.
FACTUAL AND PROCEDURAL BACKGROUND
2. 	The Court does not make findings of fact on a motion to dismiss
pursuant to North Carolina Rule of Civil Procedure 12(b)(6) and instead recites only
those allegations of the Complaint that are necessary to determine the Motion before
the Court. Se. Anesthesiology Consultants, PLLC v. Rose, 2019 NCBC LEXIS 52, at
*1 (N.C. Super. Ct. Aug. 20, 2019).
3. 	At the outset, the Court notes that this lawsuit involves numerous
events and a variety of “players.” 	Although the Court will strive to set out a

streamlined summary of the relevant facts and parties, that is admittedly easier said
than done.
4. 	The origin of this lawsuit lies in the sale of equity interests in Warren
Oil, Warren Unilube, and their affiliated companies (collectively the “Companies”).
(First Amended Complaint [“Am. Compl.”] ¶ 1, ECF No. 40.)1
5. 	Trail Creek “agreed to purchase the issued and outstanding equity
interests of the Companies pursuant to an Equity Interest Purchase Agreement (the
‘EIPA’).” (Am. Compl. ¶ 11.) The EIPA was dated 19 August 2016 and had a closing
date of 7 October 2016.
6. 	The sellers under the EIPA were the following parties: W.I. Warren (the
founder of the Companies, who died on 1 December 2020), certain affiliated trusts
connected to the Warren Estate, and various companies associated with the W.I.
Warren Estate. (Am. Compl. ¶ 12.) These sellers “were the owners of the issued and
outstanding equity interests of the Companies prior to Plaintiffs’ purchase of those
interests.” (Am. Compl. ¶ 13.)
7. 	The Companies “manufactured, blended, and packaged motor oils,
transmission and hydraulic fluids, automotive chemicals, gear oils, greases, and
various other oils, cleaners, and related products.” (Am. Compl. ¶ 14.)
8. 	As noted above, the buyer under the EIPA was Trail Creek, a North
Carolina limited liability company. (Am. Compl. ¶ 15.)
1 For ease of reading, the Court will often refer in this Opinion collectively to the “Companies”
or “Defendants” rather than identifying the specific entity within Defendants’ control at
issue.

9. 	As a result of the transaction, Warren Oil was converted into Warren
Oil Company, LLC—the other named Plaintiff in this lawsuit (along with Trail
Creek)—on 29 September 2016. (Am. Compl. ¶ 16.)
10. 	Although each of the persons and entities listed as sellers in the EIPA
are named as Defendants in the Amended Complaint, there are four individuals most
relevant to this case, who are identified below.
11. 	Defendant H. Lawrence Sanderson is a resident of Horry County, South
Carolina. 	Sanderson was the Chief Financial Officer of Warren Oil prior to the
EIPA’s closing. 	(Am. Compl. ¶ 19.) 	Sanderson signed the EIPA as the “Seller
Representative and as Trustee on behalf of the eight Trust Entity Defendants.” (Am.
Compl. ¶ 19.) Despite being sued by Plaintiffs in this action, Sanderson—somewhat
paradoxically—continues to serve on the Board of Representatives of Plaintiff Warren
Oil Company, LLC and is a member of the audit committee of that Board. 	(Am.
Compl. ¶ 19.) 	Sanderson is named as a Defendant individually as well as in his
capacities as co-executor of the Estate of W.I. Warren and co-trustee of various trust
Defendants. (Am. Compl. ¶ 19.)
12. 	Defendant James M. Yates, Jr. is a resident of Wake County, North
Carolina. Yates is a co-executor of the Estate of W.I. Warren, the co-trustee of various
trusts named as Defendants, and the secretary and vice-president of one of the
subsidiary companies that was sold as part of the EIPA. 	(Am. Compl. ¶ 20.) 	Yates
served as primary outside corporate counsel for the Companies, the Sellers, and the
Warren family. 	(Am. Compl. ¶ 20.) 	Yates is named as a Defendant solely in his

capacities as co-executor of the Estate of W.I. Warren and co-trustee of the various
trust Defendants. (Am. Compl. ¶ 20.)
13. 	Defendant Ronnie C. Walker, Sr. is a resident of Harnett County, North
Carolina. Walker was the chief operating officer of Warren Oil prior to the execution
of the EIPA. 	(Am. Compl. ¶ 21.) 	Walker was employed by the recently created
Warren Oil Company, LLC until 27 April 2022 and also served as an officer of the
company until 16 February 2022. Walker’s duties at Warren Oil—and subsequently
at Warren Oil Company, LLC—included environmental compliance and oversight.
(Am. Compl. ¶ 21.)
14. 	W.I. Warren served on the Warren Oil Company, LLC’s Board of
Representatives until his death on 1 December 2020. (Am. Compl. ¶ 368.) His estate
is named as a Defendant.
15. 	The events giving rise to this lawsuit principally relate to alleged
environmental problems existing at certain facilities controlled or operated by
Warren 	Oil—primarily 	at 	a 	particular 	Warren 	Oil 	facility 	in 	West 	Memphis,
Arkansas. 	Plaintiffs 	allege 	that 	Defendants 	(1) 	fraudulently 	concealed 	these
liabilities from them during the “due diligence” period preceding the actual sale of
the Companies to Trail Creek; and (2) continued their attempt to cover up these
liabilities even after the EIPA was executed.
16. 	The following is a chronological overview of the primary events—as
alleged by Plaintiffs in the Amended Complaint—that led to the initiation of this
action.

A. Acquisition and EPA Inspection of the West Memphis Facility
17. 	The specific Warren Oil facility that is most relevant to this lawsuit is
the West Memphis Facility (the “Facility”), which was acquired by the Companies in
2003. 	Around that same time period, an attorney for Warren Oil sent a letter to
company executives stating that various storage tanks at that facility had numerous
environmental 	compliance 	problems 	and 	that 	the 	Facility’s 	Spill 	Prevention,
Countermeasure, and Control Plan (“SPCC Plan”) was deficient. (Am. Compl. ¶¶ 41–
48.)2 	The attorney warned that correcting the environmental compliance issues
would be expensive and would take a significant amount of time. (Am. Compl. ¶ 49.)
18. 	In June 2007, representatives of the Environmental Protection Agency
(“EPA”) visited the West Memphis Facility and performed an inspection. (Am. Compl.
¶ 65.) 	The EPA determined that the Facility had “fail[ed] to implement adequate
SPCC and FRP plans at the Facility.” (Am. Compl. ¶ 65.)
19. 	The 	Companies—with 	Sanderson 	and 	Walker 	taking 	the 	lead—
negotiated with the EPA in an attempt to reach a resolution of these issues. 	On or
around 30 October 2007, the Companies agreed to draft an updated SPCC Plan,
which was memorialized in an email sent by the EPA on 1 November 2007 to various
company officials. (Am. Compl. ¶ 67.) The new plan contained a commitment by the
Companies to implement a systematic tank inspection program. (Am. Compl. ¶ 68.)
The Companies continued negotiating in the hope of receiving a reduced penalty from
2 Federal law mandates that companies operating facilities such as the West Memphis
Facility “create and maintain” an SPCC and Facility Response Plan (“FRP”). (Am. Compl.
¶ 47 n.8.)

the EPA stemming from any environmental compliance violations. 	(Am. Compl. ¶
69.)
20. 	On 27 March 2008, Dale Wells, who was serving at the time as the
president of Warren Unilube, sent the EPA a letter (the “Wells Letter”) stating that
the Companies agreed “to institute a tank integrity and corrosion prevention plan the
[sic] next 15 years to inspect and make necessary improvements on a prioritized
basis.” 	(Wells Letter, ECF No. 59.3.) 	The letter committed to “making these
improvements on an annualized basis of 10-12 tanks per year.” 	(Am. Compl. ¶ 72.)
The letter also included a draft SPCC plan. (Am. Compl. ¶ 73.)3
21. 	The 	EPA 	and 	the 	Companies 	ultimately 	entered 	into 	a 	Consent
Agreement and Final Order (the “CAFO”) on 18 June 2008. 	(Am. Compl. ¶ 76; see
also CAFO, ECF No. 59.1.) 	The CAFO addressed the allegations regarding the
Companies’ insufficient SPCC and FRP plans and assessed a civil penalty of
$23,700.00. 	(CAFO, at 1–5.) 	However, the CAFO made no mention of any of the
commitments regarding tank testing or corrosion prevention plans that were the
subject of the Wells Letter.
B. Defendants Attempt to Sell the Companies
22. 	Defendants began entertaining offers to purchase the equity interests in
the Companies around 2010. 	During that time, prospective buyers were able to
3 The significance of the Wells Letter is a major source of disagreement between the parties.
Plaintiffs contend that it reflected a binding commitment between the Companies and the
EPA, while Defendants, conversely, argue that it was wholly non-binding because it was not
mentioned in the consent agreement that was ultimately executed between the EPA and the
Companies.

access a “virtual data room” (the “Data Room”) that provided information about the
Companies to potential buyers. (Am. Compl. ¶ 100.) However, Plaintiffs allege that
after 	several 	potential 	buyers 	lost 	interest 	after 	learning 	of 	the 	Companies’
environmental compliance problems, Defendants began to restrict the access of
prospective purchasers to certain critical information regarding those deficiencies.
(Am. Compl. ¶¶ 108–09.)
23. 	Defendants ultimately engaged Wells Fargo Securities, LLC (“Wells
Fargo”), an investment banking firm, to help facilitate the sale of the Companies.
(Am. Compl. ¶ 98.) Around that same time, Trail Creek learned that the Companies
were for sale and contacted Wells Fargo to obtain more information. 	(Am. Compl.
¶ 122.) 	Plaintiffs allege that in mid-2016, “Defendants, through Wells Fargo,
provided [Trail Creek] with a Confidential Information Presentation. . . . 	The
[p]resentation, upon information and belief, was prepared, reviewed, and approved
by Defendants, Wells Fargo, and [defendants’ counsel]. 	The [p]resentation was
riddled 	with 	inaccuracies, 	omitted 	material 	facts, 	and 	contained 	numerous
misrepresentations.” (Am. Compl. ¶ 125.)
24. 	For example, the balance sheet provided during the presentation “did
not include the Companies’ short-term and long-term liabilities related to their
obligations to comply with certain environmental regulatory requirements, city
ordinances, and contractual commitments[.]” (Am. Compl. ¶ 127.) In addition, a slide
entitled “Legal Matters” stated that “[t]he Company is not aware of any outstanding
or anticipated legal issues.” (Am. Compl. ¶ 129.)

25. 	After the presentation, Trail Creek initiated a due diligence process.
The Data Room was reactivated by the Companies, but before doing so Defendants
removed key information regarding the existing environmental compliance issues.
(Am. Compl. ¶ 137.)
26. 	As a part of the transaction, Plaintiffs prepared a “Legal Due Diligence
Checklist” to ensure they had all necessary documents to review relating to the
Companies. (Am. Compl. ¶ 140.) Section 2.1 of the Due Diligence Checklist requested
a
[s]chedule of and documents relating to (i) any and all prior, pending or
threatened suits, actions, demands, litigations, claims, administrative
proceedings or other investigations or inquiries of any kind asserted
against or otherwise affecting the Assets [defined as the assets currently
used in the conduct of the Business as well as any other assets needed
to 	operate 	the 	Business 	in 	the 	manner 	historically 	conducted 	or
currently contemplated to be performed in the future] or the Business
[defined as the business carried out by the Company] over the past three
years and (ii) known, alleged, or suspected violations of federal, state or
local laws or regulations, including those relating to the environment
and employees.
(Am. Compl. ¶ 144.)
27. 	The Sellers’ response to this provision was that such information was
“PROVIDED IN DATA ROOM.” 	(Am. Compl. ¶ 145.) 	However, the Wells Letter,
among other things, was not present in the Data Room that was viewed by Plaintiffs.
(Am. Compl. ¶ 145.)
28. 	Plaintiffs further requested in Section 2.3 of the Diligence Checklist “all
consent decrees, judgments, other decrees or orders and settlement and similar
agreements to which the Company is a party or is bound, requiring, prohibiting, or

affecting any future Activities of the Business or use of the Assets.” 	(Am. Compl.
¶ 146.) The Sellers’ response stated, “NOT APPLICABLE.” (Am. Compl. ¶ 147.)
29. 	Plaintiffs received similar responses of “PROVIDED IN DATA ROOM”
or “NOT APPLICABLE” to requests for information regarding significant assets or
liabilities 	of 	the 	company, 	agreements 	with 	federal 	or 	regulatory 	agencies,
commitments not entered into in the ordinary course of business, and commitments
that might adversely affect the business or would otherwise “prohibit or would
prevent or impede consummation of the proposed transaction.” (Am. Compl. ¶¶ 149–
55.)
30. 	The Amended Complaint also describes a due diligence meeting on 2
August 2016 in which Sanderson was present and participated. During the meeting,
Trail Creek inquired about any ongoing “open issues” regarding environmental
compliance but was not provided with any further information on that subject. (Am.
Compl. ¶ 159.)
31. 	Plaintiffs 	engaged 	an 	environmental 	consultant 	during 	the 	due
diligence process to perform a “Phase I assessment at each of the Facilities[.]” (Am.
Compl. ¶ 161.) Despite the extensive discussions that the consultant and Trail Creek
had with Defendants, no additional disclosures were made about the Companies’
substantial environmental liabilities. (Am. Compl. ¶ 161.)
32. 	Plaintiffs 	allege 	that 	Defendants 	were 	“aware 	that 	a 	Phase 	II
[environmental] evaluation could potentially reveal the full scope of environmental

issues” and therefore “specifically restricted [Trail Creek] from conducting a Phase II
environmental assessment of the Facilities.” (Am. Compl. ¶ 168.)
33. 	Plaintiffs further assert that there were conversations in 2016 that
Sanderson and Walker had with representatives of Trail Creek in which Sanderson
and 	Walker 	“falsely 	represented 	that 	the 	aboveground 	storage 	tanks 	in 	the
Companies’ Facilities were not in need of any maintenance or repair and that the
type of fluids stored by the Companies kept the tanks corrosion free and in
operational 	condition.” 	(Am. 	Compl. ¶ 167.) 	According 	to 	Plaintiffs, 	neither
Sanderson nor Walker (who both remained in positions with the Companies even
after the EIPA was executed), ever disclosed any ongoing environmental compliance
issues to Plaintiffs. (Am. Compl. ¶ 172.)
34. 	The parties executed the EIPA on 19 August 2016, and the transaction
closed on 7 October 2016. 	Plaintiffs paid $154,999,000 in cash “together with two
notes 	in 	the 	amount 	of 	$7,500,000 	(the 	‘Escrow 	Note’) 	and 	$15,000,000 	(the
‘Subordinated Note’), and $7,500,000 in rollover equity.” (Am. Compl. ¶ 179.)
35. 	The EIPA contained a number of representations and warranties that
are 	relevant 	to 	this 	lawsuit. 	Plaintiffs 	allege 	that 	these 	representations 	by
Defendants relating to the Companies’ absence of ongoing environmental problems
were intentionally false. (Am. Compl. ¶ 220.)
36. 	The 	EIPA 	also 	contained 	indemnification 	provisions, 	the 	proper
interpretation of which is disputed by the parties in this lawsuit. These provisions,
in part, provided that Defendants would indemnify Plaintiffs for losses stemming

from 	breaches 	of, 	or 	inaccuracies 	contained 	within, 	the 	representations 	and
warranties contained in the EIPA.
37. 	Section 10.11 of the EIPA contains certain provisions relating to escrow
funds in connection with the sale of the Companies. 	These provisions, which are
relevant to various claims asserted by Plaintiffs in this action, state in pertinent part
as follows:
10.11 Escrow; Escrow Note.
(a) For purposes of securing the Sellers’ indemnification obligations
under 	this 	Agreement, 	providing 	a 	source 	of 	funds 	to 	recovered
uncollected Accounts Receivable pursuant to Section 2.4(g), and, if
applicable, providing a ready source of funds to refund a portion of the
Initial Cash Purchase Price pursuant to Section 2.4(d), on the Closing
Date the Buyer will deposit the Escrow Amount with the Escrow Agent
to be held in accordance with this Section 10.11 and the Escrow
Agreement. Upon 	the 	Buyer’s 	determination 	that 	any 	Buyer
Indemnified Party has suffered any indemnifiable Loss, the Buyer will
promptly deliver a notice of such claim to the Seller Representative and
the Escrow Agent. 	Unless within thirty (30) days after receipt of the
such notice, the Buyer and the Escrow Agent receive a written objection
from the Seller Representative disputing the claim, then, subject to the
limitations set forth in this Article 10, the Buyer will be entitled to
recover from the Escrow Amount the amount set forth in the notice of
the claim, and the Seller Representative and the Buyer will issue a joint
written instruction letter to the Escrow Agent to distribute such amount
to the applicable Buyer Indemnified Party. In the event the Seller
Representative timely objects in writing to the claim, the Escrow Agent
will make no disbursements from escrow relating to such claim unless
and until the Buyer and the Seller Representative have resolved the
claim by mutual agreement, arbitration or litigation. The Buyer and the
Seller Representative agree to act in good faith to resolve any disputed
claim.
. . .
(d) For a period of thirty-six (36) months from the Closing Date but only
following the release of the entirety of the Escrow Amount (whether to
one or more Buyer Indemnified Parties in respect of claims or to the

Sellers following the Release Date or both), the Buyer will be entitled to
set off against the Escrow Note the amount of any indemnification
obligations of the Sellers hereunder. Upon the Buyer’s determination
that any Buyer Indemnified Party has suffered an indemnifiable Loss,
the Buyer will promptly deliver a notice of such claim to the Seller
Representative. Unless within thirty (30) days after receipt of such
notice 	the 	Buyer 	receives 	a 	written 	objection 	from 	the 	Seller
Representative disputing the claim, then, subject to the limitations set
forth in this Article 10, the Buyer will be entitled to set off the amount
set forth in the notice of the claim against any amount owed by the
Buyer 	pursuant 	to 	the 	Escrow 	Note. 	In 	the 	event 	the 	Seller
Representative timely objects in writing to the claim, the Buyer may set
off any amount finally determined to be payable by the Sellers to any
Buyer Indemnified Party hereunder following final resolution of the
claim by mutual agreement, arbitration or litigation.
(EIPA, Section 10.11(a), (d).)
C. Plaintiffs Discover Environmental Compliance Issues
38. 	In or around 2018, Plaintiffs learned that there were serious unresolved
environmental compliance issues within the Companies—primarily the ones related
to the Facility—that had existed before the EIPA was executed and had never been
disclosed to Plaintiffs. 	Plaintiffs allege that all of the Companies’ other facilities
(except a facility located in Johnstown, Pennsylvania) are also “materially non-
compliant with environmental laws[.]” (Am. Compl. ¶ 90.)
39. 	As a result, Plaintiffs made several indemnification demands upon
Defendants. (See, e.g., Am. Compl. ¶¶ 289–92.)
40. 	In 2018 and 2019, Sanderson engaged in successful efforts to have the
$7.5 million Escrow Amount released in full to Defendants and $3.9 million paid out
on the Escrow Note. 	(Am. Compl. ¶ 357.) Plaintiffs allege that but for Sanderson’s
machinations, these funds “would have been held back . . . to address environmental

liabilities.” (Am. Compl. ¶ 357.) Sanderson told Plaintiffs that notwithstanding the
release, Defendants would honor their indemnity obligations and “informed Plaintiffs
that the $15 million subordinated note executed in favor of Defendants could be
subject to offset to address the indemnity obligations.” 	(Am. Compl. ¶ 357.)
Sanderson further told Plaintiffs that releasing these escrow funds “would make the
beneficiaries of the various trusts more willing to work with Plaintiffs on the
indemnification.” 	(Am. Compl. ¶ 358.) 	Based on these representations, Plaintiffs
allowed the release of the Escrow Amount on 12 April 2018 and made payments on
the Escrow Note on 27 September 2019, “but rather would have exercised [their]
recovery and set-off rights as provided in the EIPA.” (Am. Compl. ¶ 373.)
41. 	After failing to achieve a satisfactory resolution with Defendants of the
above-referenced environmental compliance issues, Plaintiffs ultimately elected to
initiate the present action and filed their original Complaint in Wake County
Superior Court on 26 April 2022. (Complaint, ECF No. 3.) This case was designated
a mandatory complex business case and assigned to the undersigned on 27 April
2022. (ECF Nos. 1, 2.)
42. 	On 27 June 2022, Defendants filed a Motion to Dismiss the Complaint.
(ECF No. 19.) However, Plaintiffs filed an Amended Complaint on 16 August 2022,
thereby mooting Defendants’ original Motion to Dismiss. (Am. Compl.)
43. 	Plaintiffs’ Amended Complaint contains the following claims: breach of
contract against all Defendants; recission against all Defendants; fraud against all
Defendants; breach of fiduciary duty against Walker, Sanderson, and the Estate of

W.I. Warren (through his co-executors Yates and Sanderson); constructive fraud
against Walker, Sanderson, and the Estate of W.I. Warren (through Yates and
Sanderson); negligent misrepresentation against all Defendants; primary liability for
violations of the North Carolina Securities Act against W.I. Warren, Warren Oil
Holding Company, LLC (“Warren Oil Holding”), and Warren Unilube Holding
Company, Inc. (“Unilube Holding”); secondary liability for violation of the North
Carolina Securities Act against W.I. Warren, Walker, and Sanderson; declaratory
judgment against all Defendants; breach of confidentiality agreements against
Sanderson; obstruction of justice against all Defendants; and civil conspiracy against
all Defendants.
44. 	Defendants filed the Motion to Dismiss that is currently before the Court
on 15 September 2022. 	(ECF No. 53.) 	In support of this Motion, Defendants
submitted twelve exhibits. (ECF Nos. 59.1–59.12.)
45. 	On 4 November 2022, Plaintiffs filed a Motion to Strike or Exclude
Certain Exhibits—the other motion currently before the Court—in which they argued
that Exhibits 4, 5, 7, 8, 9, 11, and 12 to Defendants’ Motion should be stricken. (ECF
No. 64.)
46. 	The Motions came before the Court for a hearing on 8 February 2023
and are now ripe for decision.
LEGAL STANDARD
47. 	In ruling on a motion to dismiss pursuant to North Carolina Rule of Civil
Procedure 12(b)(6), the Court reviews the allegations in the Complaint in the light

most favorable to the plaintiff. See Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370
N.C. 1, 5 (2017). The Court’s inquiry is “whether, as a matter of law, the allegations
of the complaint, treated as true, are sufficient to state a claim upon which relief may
be granted under some legal theory[.]” Harris v. NCNB Nat’l Bank, 85 N.C. App. 669,
670 (1987). 	The Court accepts all well-pleaded factual allegations in the relevant
pleading as true. See Krawiec v. Manly, 370 N.C. 602, 606 (2018). The Court is not
required, 	however, 	“to 	accept 	as 	true 	allegations 	that 	are 	merely 	conclusory,
unwarranted deductions of fact, or unreasonable inferences.” Good Hope Hosp., Inc.
v. N.C. Dep’t of Health & Human Servs., 174 N.C. App. 266, 274 (2005) (quoting Veney
v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)).
48. 	“It is well-established that dismissal pursuant to Rule 12(b)(6) is proper
when ‘(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.’ ” Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting Wood
v. Guilford Cty., 355 N.C. 161, 166 (2002)).
49. 	On a Rule 12(b)(6) motion, the Court “can reject allegations that are
contradicted by the documents attached to, specifically referred to, or incorporated by
reference in the complaint.” Moch v. A.M. Pappas & Assocs., LLC, 251 N.C. App. 198,
206 (2016) (quoting Laster v. Francis, 199 N.C. App. 572, 577 (2009)). Moreover, the
Court “may properly consider documents which are the subject of a plaintiff’s
complaint and to which the complaint specifically refers even though they are

presented by the defendant.” 	Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 60
(2001) (citing Robertson v. Boyd, 88 N.C. App. 437, 441 (1988)). 	The Court is
permitted to consider such documents without converting the Rule 12(b)(6) motion to
dismiss into a Rule 56 motion for summary judgment. Schlieper v. Johnson, 195 N.C.
App. 257, 261 (2009). However, if such documents are not specifically referenced in,
and are not the subject of, the Complaint, consideration of such documents under
Rule 12(b)(6) is improper as “[p]erhaps the most fundamental concept of motions
practice under Rule 12 is that evidence outside the pleadings cannot be considered in
determining whether the complaint states a claim on which relief can be granted.”
Vanguard v. Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *10 (N.C. Super. Ct.
June 19, 2019) (cleaned up).
ANALYSIS
I. 	Plaintiffs’ Motion to Strike or Exclude
50. 	Plaintiffs move to exclude or strike certain exhibits submitted by
Defendants in support of their Motion to Dismiss on the basis that they are
improperly before the Court at the Rule 12 stage. 	Plaintiffs contend that the
documents at issue are either not specifically referenced at all or are not the subject
of the Amended Complaint. The Court will analyze each of the applicable documents
in turn.
A. Exhibits 4 and 5
51. 	Exhibits 4 and 5 consist of the 2008 SPCC Plan and the 2008 FRP along
with supporting tables. 	Plaintiffs concede that these documents were, in fact,

specifically referenced in the Amended Complaint as having been included in the
“Data Room” created during the due diligence process but argue that the documents
did not exist in the Data Room in the same form as they appear in the Exhibits—that
is, with the supporting tables attached.
52. 	The Court concludes that it is entitled to consider Exhibits 4 and 5.
These plans were clearly referenced in the Amended Complaint and are relevant to a
number of the claims asserted by Plaintiff. Although the documents may have been
organized in the Data Room in a somewhat different way, the Court is satisfied that
the manner in which they are presented in Exhibits 4 and 5 do not materially alter
the Court’s consideration of them. 	Plaintiffs’ Motion is therefore DENIED as to
Exhibits 4 and 5.
B. Exhibit 7
53. 	Plaintiffs argue that Exhibit 7, an indemnity demand letter sent on their
behalf to Defendants on 9 April 2018, is not specifically mentioned in the Amended
Complaint 	and 	therefore 	cannot 	be 	properly 	considered 	in 	connection 	with
Defendants’ Motion. The Court agrees.
54. 	The Court has conducted a thorough review of the Amended Complaint,
and although it references generally the fact that an indemnity demand was made,
there is no specific reference to the 9 April 2018 letter itself. 	For this reason,
Plaintiffs’ Motion is GRANTED as to Exhibit 7.
C. Exhibits 8 and 9
55. 	Exhibits 8 and 9 are excerpts from the 2007 EPA Inspection Report.

56. 	Paragraph 189 of the Amended Complaint merely cites to the schedules
that are part of the EIPA that contain references to Exhibits 8 and 9. 	Accordingly,
the Court concludes that Exhibits 8 and 9 cannot be considered and therefore
GRANTS Plaintiffs’ Motion as to these Exhibits.
D. Exhibit 11
57. 	Plaintiffs also seek to exclude Exhibit 11, which is a 24 September 2019
letter from Sanderson confirming the payment of $3,894,500 to Defendants pursuant
to the terms of the Escrow Note executed in connection with the EIPA. 	The Court
concludes that this Exhibit is appropriately before the Court in connection with
Defendants’ Motion.
58. 	The Amended Complaint specifically references this letter in Paragraph
218, stating that “[p]ursuant to a letter dated September 24, 2019, signed by
Sanderson as Seller Representative and as agent and Attorney-in-Fact of the Sellers
listed on Exhibit A of the Escrow [N]ote, and as CFO and President of Unilube
Holding, the Subordinated Note ($15 million) is also available for set-off.” 	(Am.
Compl. ¶ 218.) Moreover, the release of escrow funds serves—at least in part—as a
basis for Plaintiffs’ allegations of injury in this case.
59. 	Plaintiffs’ Motion is therefore DENIED as to Exhibit 11.
E. Exhibit 12
60. 	Exhibit 12 consists of a “joinders” to the EIPA that added new sellers to
the EIPA. The Court concludes that the joinders are properly before the Court.

61. 	First, the joinders are specifically referenced in the Amended Complaint
in footnote four, which states that “[t]he two holding entities became Sellers pursuant
to Joinders to Equity Interest Purchase Agreement executed and delivered as of
October 7, 2016.” 	(Am. Compl. ¶ 12, n.4.) 	Furthermore, the Court notes that the
joinders are a part of the EIPA, and the EIPA is obviously of great importance to
Plaintiffs’ claims in this case.
62. 	Accordingly, Plaintiffs’ Motion is DENIED as to Exhibit 12.
II. 	Defendants’ Motion to Dismiss
A. Statute of Limitations
63. 	As an initial matter, Defendants contend that Plaintiffs’ claims for
fraud, negligent misrepresentation, breach of fiduciary duty, and civil conspiracy are
time-barred based on the application of the relevant statutes of limitations.
64. 	The limitations period for each of these claims is three years. 	See
Christenbury Eye Ctr., P.A. v. Medflow, Inc., 2015 NCBC LEXIS 64, at **18 (N.C.
Super. Ct. June 19, 2015), aff’d, 370 N.C. 1 (2017) (“The statute of limitations
governing a fraud claim is three years and begins to run from the time the claimant
should have discovered the facts constituting the fraud.”); Trillium Ridge Condo Ass’n
v. Trillium Links & Vill., LLC, 236 N.C. App. 478, 501 (2014) (“Breach of fiduciary
duty claims accrue upon the date when the breach is discovered and are subject to a
three year statute of limitations.”); Trantham v. Michael L. Martin, Inc., 228 N.C.
App. 118, 126 (2013) (The statute of limitations for . . . negligent misrepresentation
is three years.”); Lau v. Constable, 2017 NCBC LEXIS 10, at **20 (N.C. Super. Ct.

Feb. 7, 2017) (“The applicable statute of limitations to a civil conspiracy claim is three
years.”).
65. 	However, a statute of limitations does not begin to run until the plaintiff
has actual or constructive notice of the defendants’ wrongful acts. 	See, e.g., BDM
Invs. v. Lenhil, Inc., 2012 NCBC LEXIS 7, at **37 (N.C. Super. Ct. Jan. 18, 2012)
(quoting Jennings v. Lindsey, 69 N.C. App. 710, 715 (1984)) (“Where a person is aware
of facts and circumstances which, in the exercise of due care, would enable him or her
to learn of or discover the fraud, the fraud is discovered for the purposes of the statute
of limitations.”); see also Barger v. McCoy Hillard & Parks, 346 N.C. 650, 666 (1997)
(“[A] claim for negligent misrepresentation does not accrue until two events occur:
first, the claimant suffers harm because of the misrepresentation, and second, the
claimant discovers the misrepresentation.” (cleaned up)).
66. 	Our Supreme Court has previously addressed statute of limitations
issues raised at the Rule 12 stage, stating the following:
A statute of limitations defense may properly be asserted in a Rule
12(b)(6) motion to dismiss if it appears on the face of the complaint that
such a statute bars the claim. 	Hargett v. Holland, 337 N.C. 651, 653,
447 S.E.2d 784, 786 (1994). 	Once a defendant raises a statute of
limitations defense, the burden of showing that the action was instituted
within the prescribed period is on the plaintiff. 	Pembee Mfg. Corp. v.
Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985). A
plaintiff sustains this burden by showing that the relevant statute of
limitations has not expired. 	See Little v. Rose, 285 N.C. 724, 727, 208
S.E.2d 666, 668 (1974).
Horton v. Carolina Medicorp, 344 N.C. 133, 136 (1996).
67. 	In their respective briefs, the parties hotly debate the specific dates upon
which Plaintiffs knew, or should have known, the key facts upon which these claims

are based. 	Having carefully considered the parties’ arguments on this issue, the
Court 	CONCLUDES 	that 	dismissal 	of 	these 	claims 	based 	on 	the 	statute 	of
limitations at this time would be inappropriate. Defendants, of course, will be free to
renew this argument at the summary judgment stage at which time the Court will be
aided by the existence of a fully developed factual record. 	Defendants’ Motion to
Dismiss based on the statute of limitations is therefore DENIED.
B. Breach of Fiduciary Duty
68. 	Defendants seek dismissal of the claim in the Amended Complaint for
breach of fiduciary duty, which is asserted against Walker, Sanderson (in his
individual capacity), and the Estate of W.I. Warren (through Yates and Sanderson as
co-executors). This claim is based on the roles of Walker, Sanderson, and Warren in
connection with the newly created Warren Oil Company, LLC following the execution
of the EIPA and Plaintiffs’ allegations that their failure to disclose environmental
liabilities to the company while serving in these roles constituted a breach of their
fiduciary duty.
69. 	“It is well-settled that to establish a claim for breach of fiduciary duty,
a plaintiff must show that: (1) the defendant owed the plaintiff a fiduciary duty; (2)
the defendant breached that fiduciary duty; and (3) the breach of fiduciary duty was
a proximate cause of the injury to the plaintiff.” Lafayette Vill. Pub v. Burnham, 2022
NCBC LEXIS 104, at **14–15 (N.C. Super. Ct. Sept. 12, 2022) (cleaned up).
70. 	In the Amended Complaint, Plaintiffs allege that Sanderson served—
and, in fact, continues to serve—on the Board of Representatives for Warren Oil

Company, LLC, that Walker served as an officer of the company until on or about 16
February 2022, and that Warren served on the Board of Representatives until his
death on 1 December 2020. (Am. Compl. ¶¶ 364–69.)
71. 	Defendants initially contend that the absence in the record of the
operating agreement for Warren Oil Company, LLC makes it difficult to determine
the existence or extent of any fiduciary duties owed by these individuals to the
company. It is true that parties to a limited liability company (“LLC”) possess great
authority to structure duties owed between the parties and the company in the
company’s operating agreement any way they desire. See Barefoot v. Barefoot, 2022
NCBC LEXIS 8, at **24 (N.C. Super. Ct. Feb. 2, 2022) (“[U]nlike a corporation, an
LLC is primarily a creature of contract, and the operating agreement governs the
internal affairs of an LLC and the rights, duties, and obligations of the company
officials in relation to each other, the LLC, and the interest owners” (cleaned up)).
Here, Plaintiffs have not attached the operating agreement for Warren Oil Company,
LLC to their Complaint, so the Court is without the benefit of that document.4
Therefore, for purposes of the present motion, the Court must rely on the default rule
regarding the existence of fiduciary duties owed by persons possessing a management
role in an LLC to the company.
72. 	“Under the North Carolina Limited Liability Company Act . . . an LLC’s
managers and company officials owe fiduciary duties to the LLC to discharge their
duties in good faith, with the care of an ordinary prudent person, and in the best
4 Presumably, that document will be contained in the record at the summary judgment stage
of this case.

interests of the LLC.” Timbercreek Land & Timber Co., LLC v. Robbins, 2017 NCBC
LEXIS 64, at *12 (N.C. Super. Ct. July 28, 2017). 	The LLC Act defines a company
official as “[a]ny person exercising any management authority over the limited
liability company whether the person is a manager or referred to as a manager,
director, or officer or given any other title.” N.C.G.S. § 57D-1-03(5) (2021). 	As noted
above, the Amended Complaint alleges that Sanderson, Walker, and Warren each
served as a member of the company’s Board of Representatives or as an officer.
Therefore, subject to any contrary provisions of the operating agreement, they would
otherwise possess a fiduciary duty to Warren Oil Company, LLC.
73. 	Indeed, Defendants do not appear to be arguing that these individuals
owed no fiduciary duty to the LLC at all while serving in these capacities. 	Instead,
Defendants make a number of fact-based arguments about the scope and termination
of any such duty owed by these Defendants that the Court believes are better suited
for the summary judgment stage of this case.
74. 	Viewing 	the 	Amended 	Complaint 	in 	the 	light 	most 	favorable 	to
Plaintiffs, as the Court must do on a Rule 12(b)(6) motion, Plaintiffs have alleged that
these Defendants breached their fiduciary duty to Warren Oil Company, LLC by
failing to disclose significant environmental compliance issues to the entire Board
and that—had they done so—Warren Oil Company, LLC “would not have permitted
the release of the Escrow Amount on or about April 12, 2018 ($7.5 million, which has
been released in full) nor made payments on the Escrow Note on or about September
27, 2019 ($7.5 million, approximately $3.9 million paid), but rather would have

exercised its recovery and set-off rights as provided in the EIPA.” 	(Am. Compl. ¶
373.)
75. 	It remains to be seen, of course, whether Plaintiffs will be able to put
forth sufficient evidence in support of this claim at the summary judgment stage. But
for now the Court is satisfied that these allegations are sufficient to state a claim.
76. 	The Court therefore DENIES Defendants’ Motion to Dismiss Plaintiffs’
breach of fiduciary duty claim.
C. Constructive Fraud
77. 	Defendants also seek dismissal of the constructive fraud claim asserted
against these same three Defendants.
78. 	Our Supreme Court has held that the elements of constructive fraud
significantly overlap with the elements of breach of fiduciary duty. 	See Chisum v.
Campagna, 376 N.C. 680, 706–07 (2021). “[A] cause of action for constructive fraud
[requires] (1) a relationship of trust and confidence, (2) that the defendant took
advantage of that position of trust in order to benefit himself, and (3) that plaintiff
was, as a result, injured.” 	White v. Consol. Planning Inc., 166 N.C. App. 283, 294
(2004) (citation omitted). 	“The primary difference between pleading a claim for
constructive fraud and one for breach of fiduciary duty is the constructive fraud
requirement that the defendant benefit himself.” Id.
79. 	In 	contending 	that 	Plaintiffs’ 	constructive 	fraud 	claim 	should 	be
dismissed, Defendants repeat their arguments in favor of the dismissal of the breach
of fiduciary duty claim (which the Court has now rejected), but also add the additional

argument that Plaintiffs have failed to assert that Sanderson, Warren, or Walker
received a personal benefit from their acts that were allegedly taken in violation of
their fiduciary duties to Warren Oil Company, LLC.
80. 	Plaintiffs respond that the Amended Complaint essentially alleges two
types of personal benefits received by Sanderson, Warren, and Walker. 	First, they
assert 	that 	by 	failing 	to 	disclose 	the 	environmental 	compliance 	issues, 	these
Defendants were able to maintain their ability to purchase equity in the company
and to enjoy continued employment and bonuses. 	However, “[a] plaintiff [raising a
constructive fraud claim] must allege that the benefit sought was ‘more than a
continued relationship with the plaintiff’ or ‘payment of a fee to a defendant for work’
it actually performed.” Ironman Med. Props., LLC v. Chodri, 268 N.C. App. 502, 513
(2019) (quoting Sterner v. Penn, 159 N.C. App. 626, 631–32 (2003)). 	Therefore, this
argument lacks merit.
81. 	Second, Plaintiffs contend that the release of the escrow funds was a
benefit personal to these individuals. Although these allegations are not replete with
details, the Amended Complaint alleges that Sanderson and Warren received a
portion of the released escrow amounts. Such allegations are minimally sufficient to
satisfy the “personal benefit” prong of Plaintiffs’ constructive fraud claim, and
Defendant’s Motion to Dismiss regarding this claim is therefore DENIED as to
Sanderson and Warren.
82. 	However, the Court does not construe the Amended Complaint as
containing similar allegations against Walker. 	Therefore, the Court GRANTS

Defendants’ Motion to Dismiss the constructive fraud claim as to Walker, and this
claim is DISMISSED without prejudice.5
D. Negligent Misrepresentation
83. 	Defendants 	also 	move 	to 	dismiss 	Plaintiffs’ 	claim 	for 	negligent
misrepresentation, arguing that the economic loss rule bars such a claim. The Court
agrees.
84. 	“The tort of negligent misrepresentation occurs when a party justifiably
relies to his detriment on information prepared without reasonable care by one who
owed the relying party a duty of care.” Raritan River Steel Co. v. Cherry, Bekaert &
Holland, 322 N.C. 200, 206 (1988).
85. 	However, as this Court has recently stated,
[t]he economic loss rule “denote[s] limitations on the recovery in tort
when a contract exists between the parties that defines the standard of
conduct 	and 	which 	the 	courts 	believe 	should 	set 	the 	measure 	of
recovery.” 	Akzo Nobel Coatings, Inc. v. Rogers, 2011 NCBC LEXIS 42,
at *47–48 (N.C. Super. Ct. Nov. 3, 2011). This rule exists because “the
open-ended nature of tort damages should not distort bargained-for
contractual terms.” Artistic Southern Inc. v. Lund, 2015 NCBC LEXIS
113, at *25 (N.C. Super. Ct. Dec. 9, 2015).
USConnect, LLC v. Sprout Retail, Inc., 2017 NCBC LEXIS 37, at *13–14 (N.C. Super.
Ct. Apr. 21, 2017).
86. 	In this case, it is clear that the allegations that form the backbone of
Plaintiffs’ breach of contract claim—that the representations made in the warranties
and disclosure sections of the EIPA were not true—are the same allegations forming
5 “The decision to dismiss an action with or without prejudice is in the discretion of the trial
court[.]” First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191 (2013).

the basis of the negligent misrepresentation claim. The economic loss rule bars such
recovery on a tort theory.
87. 	Plaintiffs cite to Cummings v. Carroll, 379 N.C. 347 (2021), for the
proposition that a negligent misrepresentation claim can survive notwithstanding
the economic loss rule if it does not “rely on the relevant contractual provisions.” Id.
at 359. 	However, in that case, the source of the negligent misrepresentation claim
was a disclosure statement that was “not incorporated into the purchase contract”
from which the relevant breach of contract claim derived. Id. at 360.
88. 	Cummings is easily distinguishable from the present case. 	Here,
Plaintiffs’ 	negligent 	misrepresentation 	claim 	stems 	from 	allegedly 	false
representations 	by 	Defendants 	that 	the 	Companies 	were 	in 	environmental
compliance at the time of the sale. Such assertions of environmental compliance were
expressly contained in the representations and warranties sections of the EIPA—the
breach of which forms the basis for Plaintiffs’ breach of contract claim. As such, the
economic loss rule applies.
89. 	The Court therefore GRANTS Defendants’ Motion to Dismiss Plaintiffs’
negligent misrepresentation claim with prejudice.
E. Fraud
90. 	Defendants contend that Plaintiffs’ fraud claim asserted against all
Defendants should be dismissed, arguing that this claim—as currently pled— fails to
comply with Rule 9(b) of the North Carolina Rules of Civil Procedure.

91. 	A fraud claim requires a plaintiff to allege a “(1) false representation or
concealment of a material fact, (2) reasonably calculated to deceive, (3) made with
intent to deceive, (4) which does in fact to deceive, and (5) resulting in damage to the
injured party.” Harrold v. Dowd, 149 N.C. App. 777, 782 (2002). Rule 9(b) states, in
pertinent part, that “[i]n all averments of fraud . . . 	the circumstances constituting
fraud . . . shall be stated with particularity. 	Malice, intent, knowledge, and other
condition of mind of a person may be averred generally.” N.C. R. Civ. P. 9(b).
92. 	Defendants 	argue 	that 	the 	allegations 	of 	fraud 	in 	the 	Amended
Complaint do not contain the requisite particularity as mandated by the Rule. 	The
Court agrees.
93. 	Plaintiffs’ fraud claim is based on theories of both misrepresentation and
concealment. “With respect to fraud and misrepresentation claims, each such claim
made against a defendant must be supported by specific allegations as to that
defendant 	as 	required 	by 	Rule 	9. 	By 	way 	of 	example, 	allegations 	of
misrepresentations by a [defendant] should specify each misrepresentation, the
[specific defendant] making the misrepresentation and the plaintiff to whom the
misrepresentation was made.” 	Allen v. Land Res. Group of N.C., LLC, 2010 NCBC
LEXIS 18, at *9–10 (N.C. Super. Ct. Sept. 22, 2010).
94. 	With regard to a fraudulent concealment theory,
Rule 	9(b) 	requires 	a 	claimant 	alleging 	fraudulent 	concealment 	to
identify 	the 	person 	or 	persons 	who 	allegedly 	participated 	in 	the
concealment. 	Oberlin Capital, L.P. v. Slavin, 2000 NCBC LEXIS 8, at
*15-16 (N.C. Super. Ct. Apr. 28, 2000), aff’d, 147 N.C. App. 52, 554
S.E.2d 840 (2001). The claimant must plead specific facts that “give rise
to an inference of knowledge, intent, or reckless disregard” as to the

concealment. 	Id. at *16 (quoting Andrews v. Fitzgerald, 823 F. Supp.
356, 374 (M.D.N.C. 1993)). 	“Conclusory allegations that a defendant
acted in conspiracy with others are insufficiently specific to meet the
requirements of Rule 9(b).” Id.; see also Oberlin Capital, L.P., 147 N.C.
App. at 57, 554 S.E.2d at 845 (holding that the plaintiff “failed to allege
sufficient facts of individual participation in any wrongdoing” by three
corporate directors).
Tillery Envtl. LLC v. A&D Holdings, Inc., 2018 NCBC LEXIS 13, at *28 (N.C. Super.
Ct. Feb. 9, 2018).
95. 	Although the Court could give numerous examples of this deficiency in
the Amended Complaint, for the sake of brevity, it suffices to simply say that the
allegations relevant to Plaintiffs’ fraud claim are too general to satisfy Rule 9(b).
Among other things, the Amended Complaint frequently alleges that “Defendants”
collectively made certain statements or undertook certain acts or omissions rather
than attributing them to specific persons. Rule 9(b) does not permit such generalized
pleading. 	Moreover, 	despite 	the 	length 	of 	the 	Amended 	Complaint, 	it 	is
impermissibly vague as to the specifics of the misrepresentations and acts of
concealment that Plaintiffs contend rose to the level of fraud. These allegations—as
currently pled—fail to conform to the requirements of Rule 9(b) and its interpretive
case law as set forth above.
96. 	Therefore, Defendants’ Motion to Dismiss Plaintiffs’ claim for fraud is
GRANTED, and this claim is DISMISSED without prejudice.
F. Rescission
97. 	Defendants’ Motion to Dismiss also challenges Plaintiffs’ claim seeking
a rescission of the EIPA. 	As an initial matter, Defendants correctly assert that

rescission is a remedy rather than a claim for relief—a point that Plaintiffs concede.
Accordingly, to the extent the Amended Complaint seeks to assert a standalone claim
for rescission, that claim is DISMISSED.
98. 	Defendants further argue, however, that the allegations in the Amended
Complaint 	demonstrate 	that 	Plaintiffs 	are 	also 	not 	entitled 	to 	the 	remedy 	of
rescission.
99. 	“A court may order the rescission of an agreement that was induced by
fraud or mistake.” Green v. Condra, 2009 NCBC LEXIS 20, at **22 (N.C. Super. Ct.
Aug. 14, 2009). 	In the Amended Complaint, Plaintiffs seek to rescind the EIPA on
the basis of fraud. 	Defendants offer a number of arguments in support of their
contention that rescission should not be an available remedy in this case. 	Without
expressing any opinion on the arguments made by Defendants on this issue, the
Court deems it inappropriate to rule on this issue at the pleadings stage. 	It is
presently unknown whether Plaintiffs will successfully seek leave to amend their
fraud claim and, if so, whether any such reasserted claim will survive a future motion
for dismissal or for summary judgment. 	Defendants will be permitted to reassert
their arguments regarding the unavailability of rescission as a remedy in this case at
the appropriate time in the event that Plaintiffs continue to pursue this theory of
recovery.
G. Securities Act
100. 	The 	Amended 	Complaint 	also 	contains 	claims 	against 	certain
Defendants 	under 	the 	North 	Carolina 	Securities 	Act 	(the 	“Securities 	Act”).

Essentially, these claims assert that (1) the equity interests in the Companies sold to
Plaintiffs qualify as “securities” under the Securities Act; and (2) these interests were
sold “by means of false and misleading statements of material fact or omissions to
state material facts necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading . . . . ” (Am. Compl.
¶¶ 398–99.)
101. 	Plaintiffs assert claims under theories of both primary liability and
secondary liability under the Securities Act. Each are addressed in turn.
i. 	Primary Liability
102. 	Plaintiffs have asserted that Defendants Warren, Warren Oil Holding,
and Unilube Holding are liable for violations of two distinct provisions of the
Securities Act under a theory of primary liability—N.C.G.S. §§ 78A-8 and 78A-56(a).
103. 	N.C.G.S. § 78A-8 reads as follows:
It is unlawful for any person, in connection with the offer, sale or
purchase of any security, directly or indirectly:
(1) To employ any device, scheme, or artifice to defraud,
(2) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they are
made, not misleading or,
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person.
N.C.G.S. § 78A-8 (2021).
104. 	N.C.G.S. § 78A-56(a) reads as follows:
(a) Any person who:

(1) Offers or sells a security in violation of G.S. 78A-8(1), 78A-8(3),
78A-10(b), 78A-13, 78A-14, 78A-24, or 78A-36(a), or of any rule or
order 	under 	G.S. 	78A-49(d) 	which 	requires 	the 	affirmative
approval of sales literature before it is used, or of any condition
imposed under G.S. 78A-27(d) or 78A-28(g), or
(2) Offers or sells a security by means of any untrue statement of
a material fact or any omission to state a material fact necessary
in order to make the statements made, in the light of the
circumstances under which they were made, not misleading (the
purchaser not knowing of the untruth or omission), and who does
not sustain the burden of proof that he did not know, and in the
exercise of reasonable care could not have known, of the untruth
or omission,
is liable to the person purchasing the security from him, who may sue
either at law or in equity to recover the consideration paid for the
security, together with interest at the legal rate from the date of
payment, costs, and reasonable attorneys’ fees, less the amount of any
income received on the security, upon the tender of the security, or for
damages if the purchaser no longer owns the security. Damages are the
amount that would be recoverable upon a tender less the value of the
security when the purchaser disposed of it and interest at the legal rate
as provided by G.S. 24-1 from the date of disposition.
Id. § 78A-56(a).
105. 	Defendants argue that the claims under both provisions of the Securities
Act should be dismissed due to Plaintiffs’ failure to plead the allegations supporting
them with the degree of specificity required by Rule 9(b). 	We have previously held
that “the standards of Rule 9(b) will apply to a subsection [78A-56](a)(2) claim based
on fraud.” Tillery, 2018 NCBC LEXIS 13, at *63. Given that the language of § 78A-
8 (and Plaintiffs’ claims thereunder) are also grounded in fraud, the Court agrees

with Defendants that Rule 9(b) likewise applies to Plaintiffs’ claim under that
theory.6
106. 	Plaintiffs’ factual allegations that give rise to these claims under the
Securities Act are—for all practical purposes—the same allegations that support
their fraud claim. As discussed above, the Court has ruled that Plaintiffs’ fraud claim
will be dismissed without prejudice for failure to comply with Rule 9(b). For the same
reasons, the Court CONCLUDES that Plaintiffs’ claims for primary liability under
the Securities Act should likewise be DISMISSED without prejudice.
ii. 	Secondary Liability
107. 	Defendants also argue that dismissal is proper as to the secondary
liability claims under the Securities Act asserted in the Amended Complaint against
Warren, Walker, and Sanderson.
108. 	N.C.G.S. § 78A-56(c) establishes secondary liability under the Securities
Act, stating, in pertinent part, as follows:
(1) Every person who directly or indirectly controls a person liable under
subsection (a), (b), or (b1) of this section, every partner, officer, or
director of the person, every person occupying a similar status or
performing 	similar 	functions, 	and 	every 	dealer 	or 	salesman 	who
materially aids in the sale is also liable jointly and severally with and to
the same extent as the person, unless able to sustain the burden of proof
that the person did not know, and in the exercise of reasonable care
could not have known, of the existence of the facts by reason of which
the liability is alleged to exist.
(2) Unless liable under subdivision (1) of this subsection, every employee
of a person liable under subsection (a), (b), or (b1) of this section who
materially aids in the transaction giving rise to the liability and every
other person who materially aids in the transaction giving rise to the
6 Plaintiffs do not dispute the applicability of Rule 9(b) to claims brought under these
provisions.

liability is also liable jointly and severally with and to the same extent
as the person if the employee or other person actually knew of the
existence of the facts by reason of which the liability is alleged to exist.
N.C.G.S. § 78A-56(c).
109. 	Here, 	because 	the Court 	is 	dismissing—albeit without prejudice—
Plaintiffs’ claims premised on a theory of primary liability under the Securities Act,
it is appropriate to similarly dismiss without prejudice Plaintiffs’ claims based on a
theory of secondary liability. 	See Tillery, 2018 NCBC LEXIS 13, at *67 (“North
Carolina law . . . requires a claim for secondary liability under the [Securities Act] to
be preceded by a claim for primary liability.”).
110. 	The Court therefore GRANTS Defendants’ Motion to Dismiss as to
Plaintiffs’ claims for secondary liability under the Securities Act, and those claims
are DISMISSED without prejudice.
H. Breach of Confidentiality Agreements
111. 	Plaintiffs 	also 	assert 	a 	claim 	labelled 	“breach 	of 	confidentiality
agreements” against Defendant Sanderson. 	In this claim, Plaintiffs allege that
Sanderson entered into two confidentiality agreements in connection with his
employment 	with 	the 	Companies, 	which 	he 	subsequently 	breached 	following
execution of the EIPA by disclosing confidential information to third parties whose
interests were adverse to Plaintiffs’ interests. 	Defendants argue that even under
North Carolina’s liberal notice pleading standard, dismissal of this claim is proper
due to the lack of detail in Plaintiffs’ supporting allegations. See, e.g., Fox v. City of
Greensboro, 279 N.C. App. 301, 320 (2021) (“Under our State’s notice theory of

pleading, plaintiffs must allege facts, not mere conclusions, to support their asserted
causes of action. While the concept of notice pleading is liberal in nature, a complaint
must 	nonetheless 	state 	enough 	to 	give 	the 	substantive 	elements 	of 	a 	legally
recognized claim or it may be dismissed under Rule 12(b)(6).” (cleaned up)).
112. 	Here, 	although 	the 	claim 	alleges 	the 	existence 	of 	confidentiality
agreements entered into by Sanderson, the Amended Complaint is essentially devoid
of any details of the alleged breach. 	As such, it fails to satisfy even the low bar of
notice pleading.
113. 	Defendants’ Motion to Dismiss the breach of confidentiality agreements
claim is therefore GRANTED, and that claim is DISMISSED without prejudice.
I. 	Obstruction of Justice
114. 	Defendants seek the dismissal of Plaintiffs’ claim for obstruction of
justice on similar grounds. The Court agrees that dismissal of this claim is proper.
115. 	Our Court of Appeals has previously stated that
“[o]bstruction of justice is a common law offense in North Carolina.” In
re Kivett, 309 N.C. 635, 670, 309 S.E.2d 442, 462 (1983). “It is an offense
to do any act which prevents, obstructs, impedes or hinders public or
legal justice.” Broughton v. McClatchy Newspapers, Inc., 161 N.C. App.
20, 33, 588 S.E.2d 20, 30 (2003) (citing Burgess v. Busby, 142 N.C. App.
393, 408-09, 544 S.E.2d 4, 12, disc. review improvidently allowed, 354
N.C. 351, 553 S.E.2d 679 (2001)). 	As a result, “acts which obstruct,
impede or hinder public or legal justice . . . amount to the common law
offense of obstructing justice,” so that a complaint alleging that the
defendants engaged in such activities states a claim for relief. Henry v.
Deen, 310 N.C. 75, 87, 310 S.E.2d 326, 334 (1984); see also Grant v. High
Point Reg’l Health Sys., 184 N.C. App. 250, 255-56, 645 S.E.2d 851, 855
(2007), disc. review improvidently allowed, 362 N.C. 502, 666 S.E.2d 757
(2008) (stating that the “[p]laintiff’s complaint stated a cause of action
for common law obstruction of justice” in that it alleged “‘acts which
obstruct, impede or hinder public or legal justice and would amount to

the common law offense of obstructing justice’”) (quoting Henry, 310
N.C. at 87, 310 S.E.2d at 334).
Blackburn v. Carbone, 208 N.C. App. 519, 526 (2010).
116. 	The Amended Complaint generally alleges that “Defendants”—without
any attempt to specify which of the Defendants—obstructed justice through “mass
deletion and destruction of emails.” (Am. Compl. ¶ 466.) However, Plaintiffs do not
make any serious effort at specificity regarding, for example, the content of the emails
or the circumstances upon which they were deleted. 	These bare-bones allegations,
once again, fail to satisfy even the liberal notice pleading standard in North Carolina.
117. 	The Court therefore concludes that Defendants’ Motion to Dismiss is
GRANTED as to Plaintiffs’ claim for obstruction of justice, and this claim is
DISMISSED without prejudice.
J. Civil Conspiracy
118. 	Defendants next ask the Court to dismiss Plaintiffs’ claim for civil
conspiracy. As we have previously stated,
[c]ivil 	conspiracy 	is 	not 	an 	independent 	cause 	of 	action 	in 	North
Carolina. 	Rather, liability for civil conspiracy must be alleged in
conjunction with an underlying claim for unlawful conduct. 	Toomer v.
Garrett, 155 N.C. App. 462, 483, 574 S.E.2d 76, 92 (2002). 	To state a
claim for civil conspiracy, a plaintiff must allege: “(1) an agreement
between two or more individuals; (2) to do an unlawful act or to do a
lawful act in an unlawful way; (3) resulting in injury to plaintiff inflicted
by one or more of the conspirators; and (4) pursuant to a common
scheme.” 	Piraino Bros., LLC v. Atlantic Fin. Grp., Inc., 211 N.C. App.
343, 350, 712 S.E.2d 328, 333 (2011) (internal citations and quotations
omitted).
Global Textile Alliance, Inc. v. TDI Worldwide, LLC, 2018 NCBC LEXIS 104, at **18–
19 (N.C. Super. Ct. Oct. 9, 2018).

119. 	Here too, Plaintiffs’ allegations in support of this claim are not a model
of specificity. 	Moreover, these allegations refer generally to “Defendants” without
making any attempt to differentiate between the numerous individuals and entities
who are named as Defendants. As a result, it is unclear as to which of the Defendants
are actually being alleged to have engaged in such a conspiracy.
120. 	Therefore, Defendants’ Motion to Dismiss is GRANTED, and this claim
is DISMISSED without prejudice.
K. Breach of Contract
121. 	In their breach of contract claim, Plaintiffs assert that Defendants
breached 	the 	EIPA 	because 	“contrary 	to 	the 	Representations 	and 	Warranties
contained therein, there were material undisclosed liabilities within the [k]nowledge
of the Defendants” that Defendants knowingly concealed. 	(Am. Compl. ¶ 315.)
Plaintiffs further allege that Defendants are also in breach of the EIPA by virtue of
their refusal to indemnify Plaintiffs for their losses as required in the indemnification
provisions contained in the EIPA.
122. 	Although Defendants do not seek dismissal of Plaintiffs’ breach of
contract claim in its entirety, they do seek a ruling from the Court as to the proper
construction of the indemnification provisions at issue. 	Specifically, Defendants
argue that Plaintiffs’ claimed entitlement to indemnification for 100% of the losses
they allegedly sustained from the failure to disclose the environmental liabilities at
issue is legally incorrect. 	Defendants argue that the EIPA instead only requires

Defendants to pay 50% of Plaintiffs’ losses incurred as a result of Defendants’
concealment of “special environmental matters.”
123. 	Plaintiffs, conversely, contend that Defendants are responsible for 100%
of their losses pursuant to these indemnification provisions of the EIPA.
124. 	Since 	the 	briefing 	in 	connection 	with 	the 	pending 	Motions 	was
completed, 	Plaintiffs 	have 	filed 	a 	Motion 	for 	Leave 	to 	File 	Second 	Amended
Complaint. 	(“Motion to Amend,” ECF No. 78.) 	In the Motion to Amend, Plaintiffs
seek leave to file a new complaint containing certain additional allegations relevant
to the Court’s resolution of the parties’ dispute regarding the indemnification
provisions.
125. 	In its discretion, the Court elects to DEFER ruling on this issue at the
present time given the pending Motion to Amend. The parties shall be free to renew
their arguments regarding the indemnification issue at a later date.
CONCLUSION
THEREFORE, IT IS ORDERED as follows:
1. 	Defendants’ Motion to Strike is GRANTED as to Exhibits 7, 8, and 9 and
DENIED as to Exhibits 4, 5, 11, and 12.
2. 	Defendants’ Motion to Dismiss is GRANTED, in part, and DENIED in part
as follows:
a. 	Defendants’ Motion to Dismiss various claims based on the application
of the statutes of limitations is DENIED.

b. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for breach of fiduciary
duty is DENIED.
c. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for constructive fraud is
GRANTED as to Defendant Walker, and that claim is DISMISSED
without prejudice. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for
constructive fraud is otherwise DENIED.
d. 	Defendants’ 	Motion 	to 	Dismiss 	Plaintiffs’ 	claim 	for 	negligent
misrepresentation is GRANTED, and that claim is DISMISSED with
prejudice.
e. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for fraud is GRANTED,
and that claim is DISMISSED without prejudice.
f. 	Defendants’ 	Motion 	to 	Dismiss 	Plaintiffs’ 	claim 	for 	rescission 	is
GRANTED, 	and that 	claim is 	DISMISSED 	without 	prejudice 	to
Plaintiffs’ right to pursue rescission as a remedy to the extent such a
remedy is legally viable.
g. 	Defendants’ 	Motion 	to 	Dismiss 	Plaintiffs’ 	claims 	under 	the 	North
Carolina 	Securities 	Act 	is 	GRANTED, 	and 	those 	claims 	are
DISMISSED without prejudice.
h. Defendants’ 	Motion 	to 	Dismiss 	Plaintiffs’ 	claim 	for 	breach 	of
confidentiality 	agreements 	is 	GRANTED, 	and 	that 	claim 	is
DISMISSED without prejudice.

i. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for obstruction of justice
is GRANTED, and that claim is DISMISSED without prejudice.
j. 	Defendants’ Motion to Dismiss Plaintiffs’ claim for civil conspiracy is
GRANTED, and that claim is DISMISSED without prejudice.
k. The Court DEFERS any ruling at the present time on the issue relating
to the proper interpretation of the indemnification provisions of the
EIPA.
SO ORDERED, this the 24th day of May, 2023.
/s/ Mark A. Davis
Mark A. Davis
Special Superior Court Judge for
Complex Business Cases