WRIGHT v. LORUSSO, 2023 NCBC 64

STATE OF NORTH CAROLINA
MECKLENBURG COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
20 CVS 10612
NANCY WRIGHT; GREG WRIGHT;
and JODY STANSELL, individually
and as members of LORUSSO
VENTURES, LLC d/b/a
CINCH.SKIRT,
Plaintiffs,
v.
KRISTA LORUSSO, individually and
as a member-manager of LORUSSO
VENTURES, LLC d/b/a
CINCH.SKIRT,
Defendant,
v.
LORUSSO VENTURES, LLC d/b/a
CINCH.SKIRT,
Nominal
Defendant.
ORDER AND OPINION ON
DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT
1. 	This case arises from a dispute among the members of a company called
Cinch.Skirt. 	Plaintiffs 	Nancy 	Wright, 	Greg 	Wright, 	and 	Jody 	Stansell 	are
Cinch.Skirt’s minority members. They accuse Defendant Krista LoRusso of abusing
her position as the majority member and have asserted more than a dozen direct and
derivative claims against her. LoRusso has moved for summary judgment on most of
their claims. 	For the following reasons, the Court GRANTS in part and DENIES
in part the motion.
Miller Law Firm, PLLC, by W. Stacy Miller, and the Law Office of
Matthew I. Van Horn, PLLC, by Matthew Ivan Van Horn, for Plaintiffs
Nancy Wright, Greg Wright, and Jody Stansell.
Wright v. LoRusso, 2023 NCBC 64.

Leonard G. Kornberg, P.A., by Leonard Gary Kornberg, for Defendant
Krista LoRusso.
Higgins & Owens, PLLC, by Sara W. Higgins, for Nominal Defendant
LoRusso Ventures, LLC.
Conrad, Judge.
I.
BACKGROUND
2. 	The Court does not make findings of fact when ruling on a motion for
summary judgment. The following background, drawn from the evidence submitted
by the parties, provides context for the Court’s analysis and ruling only.
3. 	Cinch.Skirt is a North Carolina limited liability company that makes and
sells an easily removable bed skirt for use in hotels and similar businesses. LoRusso
founded the company in early 2017 and was, at first, its only member and manager.
Later that year, at LoRusso’s invitation, the Wrights and Stansell signed a purchase
agreement to acquire minority interests. From then until now, Cinch.Skirt has had
four members, with LoRusso holding a seventy-six percent interest, the Wrights
jointly holding a twenty percent interest, and Stansell holding the remaining four
percent interest. (See LoRusso Aff. ¶ 2, ECF No. 169; Purchase Agrmt., ECF No. 67.)
4. 	An operating agreement governs Cinch.Skirt’s internal affairs. Any action
taken by members requires a supermajority vote, defined as “over eighty percent” of
the ownership interests in the company. The agreement also names LoRusso as the
sole “initial manager” but restricts her authority in various ways, including by
requiring 	supermajority 	member 	approval 	to 	declare 	bankruptcy, 	dissolve 	the
company, start a new line of business, make loans to any member or manager, and

more. 	Members have the right, again by a supermajority vote, to elect additional
managers and to remove a manager. (See Op. Agrmt. §§ 2.4, 2.6, 2.7, 2.7* , Ex. A, ECF
No. 67.)1
5. 	At an annual meeting in April 2019, Cinch.Skirt’s members unanimously
agreed to establish a series of new internal operating procedures, including how to
handle order placement, hiring an outside accountant, and holding weekly member
meetings about the financial status of the business. 	They also unanimously agreed
to divide up “member roles” by specified “job descriptions”: LoRusso became “Product
Development, Supply Chain & Manufacturing Manager”; Stansell became “Sales
Manager”; Greg Wright became “Financial Manager”; and Nancy Wright took an
“Advisory” role. The parties now dispute the intent of these member roles. LoRusso,
on one hand, contends that the members became service providers or employees. The
Wrights and Stansell, on the other hand, contend that the members elected Stansell
and Greg Wright to serve as managers of the LLC alongside LoRusso. (See Def.’s Ex.
8, ECF No. 168.1; Def.’s Ex. 11, ECF No. 214.1.)
6. 	In December 2019, the members held a second meeting to reaffirm the
actions approved the previous April and to take further measures. 	They agreed,
among other things, that expenditures of $1,000 or more would require supermajority
approval, that Cinch.Skirt would provide insurance benefits to each member, and
1 The operating agreement contains two sections numbered 2.7. 	The first is entitled
“Restrictions on Authority of Managers.” 	The second is entitled “Term of a Manager and
Replacement.” 	To distinguish these provisions, this opinion will cite the former as (Op.
Agrmt. § 2.7) and the latter as (Op. Agrmt. § 2.7*).

that LoRusso and Stansell would coordinate their sales and manufacturing efforts.
(See Def.’s Ex. 10, ECF No. 168.1.)
7. 	According to the Wrights and Stansell, LoRusso reneged on the agreements
reached in April and December 2019 and abused her position as majority member.
They allege that LoRusso routinely misused company funds for personal purposes,
withheld financial information, interfered with the other members’ job duties,
purported to terminate Stansell as “Sales Manager” unilaterally, and effectively
excluded the minority members from the business. Based on these allegations, they
have asserted a mix of direct and derivative claims against LoRusso for fraud,
negligent misrepresentation, breach of contract, breach of fiduciary duty, unjust
enrichment, and punitive damages. 	(See, e.g., LoRusso Dep. 53:9–23, 95:9–25, ECF
No. 189.1; see also 2d Am. Compl., ECF No. 65.)2
8. 	LoRusso has moved for summary judgment on some, but not all, of the
claims asserted against her. 	(See ECF No. 186.) 	LoRusso’s motion has been fully
briefed, and the Court held a hearing on 11 September 2023. The motion is ripe for
decision.
II.
LEGAL STANDARD
9. 	Summary 	judgment 	is 	appropriate 	when 	“the 	pleadings, 	depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that any party is
2 LoRusso has asserted counterclaims of her own for breach of contract, computer trespass,
and similar causes of action. These counterclaims are not at issue in the pending motion.

entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). In ruling on a motion
for summary judgment, the Court must consider the evidence in the light most
favorable to the nonmoving party, drawing all inferences in the nonmoving party’s
favor. See, e.g., Morrell v. Hardin Creek, Inc., 371 N.C. 672, 680 (2018).
10. 	The moving party “bears the initial burden of demonstrating the absence of
a genuine issue of material fact.” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571,
579 (2002). The moving party meets its burden “by proving that an essential element
of the opposing party’s claim is nonexistent, or by showing through discovery that the
opposing party cannot produce evidence to support an essential element of his claim.”
DeWitt v. Eveready Battery Co., 355 N.C. 672, 681 (2002) (citations and quotation
marks omitted). 	If the moving party makes that showing, “the burden shifts to the
nonmoving party to ‘produce a forecast of evidence demonstrating that the nonmoving
party will be able to make out at least a prima facie case at trial.’ ” 	Cummings v.
Carroll, 379 N.C. 347, 358 (2021) (quoting DeWitt, 355 N.C. at 682). The nonmoving
party “may not rest upon the mere allegations or denials of his pleading, but his
response, by affidavits or as otherwise provided in this rule, must set forth specific
facts showing that there is a genuine issue for trial.” N.C. R. Civ. P. 56(e).
III.
ANALYSIS
11. 	The second amended complaint includes seventeen claims for relief, dubbed
as “counts.” 	LoRusso’s motion for summary judgment purports to challenge counts

three through ten, thirteen, and sixteen.3 	Her brief in support, however, does not
mention count thirteen (unjust enrichment) or count sixteen (punitive damages) at
all. 	The Court therefore denies her motion as to those counts without further
analysis. Having done so, the Court now turns to the parties’ arguments concerning
counts three through ten.
A. Fraud and Negligent Misrepresentation
12. 	Counts three through six include a pair of direct claims for fraud and
negligent misrepresentation and an identical pair of derivative claims. These claims
are based on allegations of self-dealing and misuse of company funds—for example,
that LoRusso made personal charges on company credit cards, lent company funds to
her boyfriend, and improperly paid herself a distribution of $89,000 and reclassified
it as a loan for tax purposes.
13. 	Fraud 	has 	five 	“essential 	elements”: 	(a) 	a 	false 	representation 	or
concealment of a material fact, (b) calculated to deceive, (c) made with intent to
deceive, (d) that did in fact deceive, and (e) that resulted in damage to the injured
party. 	Rowan Cnty. Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1, 17 (1992). 	The
claimant must show not only that he actually relied on the misrepresentation but
also that his reliance was reasonable. See Forbis v. Neal, 361 N.C. 519, 527 (2007).
14. 	“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.” Dallaire v. Bank of Am., N.A., 367 N.C. 363,
3 She also challenged counts one and two, and the parties have since stipulated to the
dismissal of those claims. (See ECF No. 219.)

369 (2014) (citations and quotation marks omitted). Just as fraud requires a showing
of reasonable reliance, negligent misrepresentation requires an analogous showing of
justifiable reliance. 	See Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 350
N.C. 214, 224 (1999); see also Value Health Sols., Inc. v. Pharm. Rsch. Assocs., Inc.,
2023 N.C. LEXIS 585, at *22 (Sept. 1, 2023).
15. 	LoRusso’s opening brief challenges only the allegations concerning the
$89,000 payment. 	She contends that the Wrights and Stansell now admit that she
earned the payment legitimately as part of her salary. 	Nancy Wright testified, for
example, “that was her salary, and she deserved it.” (N. Wright Dep. 160:2–11, ECF
No. 168.4.) 	Likewise, when asked whether the payment “was her income,” Stansell
testified, “[w]e all know that.” (Stansell Dep. 128:15–17, ECF No. 168.3.)
16. 	In response, the Wrights and Stansell object on a procedural ground: that
LoRusso failed to comply with Business Court Rule 7.5, which requires a party to
provide pinpoint citations to supporting evidence when possible. But this is incorrect.
LoRusso’s brief cites specific passages from several deposition transcripts to support
her argument. There is no violation of Rule 7.5.
17. 	On the merits, the Wrights and Stansell offer no argument or evidence.
They 	do 	not 	dispute 	the 	legitimacy 	of 	the 	$89,000 	payment 	or 	LoRusso’s
characterization of their testimony. Nor do they point to any evidence that LoRusso
misrepresented the nature of the payment, that they were deceived by her, or that
they reasonably or justifiably relied on any statements about the payment or how it
was classified. 	The Wrights and Stansell needed “to come forth with evidence to

controvert” LoRusso’s argument “or otherwise suffer entry of summary judgment
against” them. Econo-Travel Motor Hotel Corp. v. Taylor, 301 N.C. 200, 205 (1980).
They did not, and as a result, there is no genuine issue of material fact regarding the
$89,000 payment.
18. 	The rest of LoRusso’s arguments are untimely, having been raised for the
first time in her reply brief or at the hearing. 	The Court declines to address them.
See BCR 7.2 (“A party should therefore brief each issue and argument that the party
desires the Court to rule upon and that the party intends to raise at a hearing.”); 7.7
(“[T]he Court may decline to consider issues or arguments raised by the moving party
for the first time in a reply brief.”).
19. 	Accordingly, LoRusso is entitled to summary judgment to the extent that
the claims for fraud and negligent misrepresentation are based on the $89,000
payment. The Court denies her motion as to these claims in all other respects.4
B. Breach of Contract
20. 	Counts seven and eight are direct and derivative claims for breach of
contract. 	Together, the claims allege as many as twenty breaches of the purchase
agreement, the operating agreement, and other agreements reached during member
meetings in 2019. LoRusso moves for summary judgment across the board.
21. 	Purchase Agreement. 	The Wrights and Stansell allege that LoRusso
breached the purchase agreement by failing to obtain patent protection for the
4 It is perhaps worth noting that a misuse of company funds alone does not necessarily entail
fraud or negligent misrepresentation. At trial, the Wrights and Stansell will need to show
not only that LoRusso misused funds but also that she made misrepresentations about her
actions and that they reasonably or justifiably relied on those misrepresentations.

company’s lead product. As LoRusso correctly observes, though, she is not a party to
that agreement, having signed it only as a representative of Cinch.Skirt. 	(See
Purchase Agrmt. 1.) Given that she is “not a party to the contract, as a matter of law
[she] cannot be held liable for any breach that may have occurred.” Canady v. Mann,
107 N.C. App. 252, 259 (1992); see also Nationwide Mut. Ins. Co. v. Chantos, 293 N.C.
431, 438 (1977) (“It is a fundamental principle of contract law that parties to a
contract may bind only themselves and that the parties to the contract may not bind
a third person who is not a party to the contract in absence of his consent to be
bound.”). The Court therefore grants LoRusso’s motion as to the alleged breaches of
the purchase agreement.
22. 	Operating Agreement. Although not a party to the purchase agreement,
LoRusso is a party to Cinch.Skirt’s operating agreement. See N.C.G.S. § 57D-2-31(b)
(stating 	that 	an 	interest 	holder 	is 	“deemed 	to 	be 	a 	party 	to[] 	the 	operating
agreement”). 	The second amended complaint alleges at least ten breaches of that
agreement, which LoRusso denies.
23. 	Little needs to be said about LoRusso’s argument that “there is no evidence
in the record to survive Summary Judgement [sic] regarding” the breaches alleged in
“¶ 176(a), (c), (d), (e), (f), (g), (i), (j), (k)” of the second amended complaint. (LoRusso
Br. in Supp. 15, ECF No. 187.) That single sentence—with no reference to the record
and no legal argument—is facially insufficient to meet her “initial burden” as the
moving party to show “the absence of a genuine issue of material fact.” Liberty Mut.
Ins., 356 N.C. at 579.

24. 	LoRusso argues in more depth that she did not breach the operating
agreement when she terminated Stansell from his position within Cinch.Skirt
without consulting the other members (which is alleged in paragraph 176(h) of the
second amended complaint). 	Her position is that Stansell was a “Member-Service
Provider” as defined in section 2.11 and that she had authority as manager to
terminate him at any time. 	(See Op. Agrmt. § 2.11 (“In the absence of a separate
written 	agreement 	to 	the 	contrary, 	the 	Manager 	may 	terminate 	such 	service
agreement at any time upon notice to such Member-Service Provider.”).) 	Stansell
disagrees. 	He contends that the members unanimously elected him to serve as a
manager in April 2019 and that a supermajority vote was required to remove him
from that position. 	(See Op. Agrmt. § 2.7* (“The Members shall have the power by
the action or vote of a SuperMajority in Interest Members to remove a Manager
. . . .”).)5
25. 	Whether Stansell was a manager or a Member-Service Provider is a question
for the finder of fact. 	The minutes from the April 2019 meeting are ambiguous,
stating that members “agreed upon” certain “member roles” and that Stansell would
serve as “Sales Manager.” 	(Def.’s Ex. 8.) 	The phrase “member roles” could suggest
that Stansell became a Member-Service Provider, as LoRusso contends. But the title
5 The Wrights and Stansell also argue that they were managers of Cinch.Skirt under the
statutory default rule that “[a]ll members by virtue of their status as members are managers
of the LLC.” N.C.G.S. § 57D-3-20(d). This is plainly incorrect. The statute makes clear that
an operating agreement may depart from the default rule and that “those persons designated
as managers in, or in the manner provided in, the operating agreement will be managers.”
Id. 	Here, the operating agreement provides that LoRusso is “the initial manager[]” and
allows the members to elect additional managers. (Op. Agrmt. §§ 2.6, 2.7*.)

“Sales Manager” could suggest that the members elected Stansell to serve as a
manager. 	Indeed, Nancy Wright testified that the members voted to create “a
triumvirate of managers with roles” matching “their expertise” and with “each of
them being a manager of the LLC.” 	(N. Wright Dep. 50:7–19.) 	The Court cannot
weigh the credibility of this testimony in deciding a motion for summary judgment;
that is the role of the jury.
26. 	The Court therefore denies LoRusso’s motion as to the alleged breaches of
the operating agreement.
27. 	Oral Agreements. 	The second amended complaint refers to two alleged
oral agreements among the members of Cinch.Skirt in April 2019 and December
2019. As alleged, LoRusso breached these agreements by, among other things, failing
to share profits, failing to provide health insurance, and interfering with the other
members’ performance of their company duties.
28. 	LoRusso argues that these agreements are invalid because section 9.10 of
the operating agreement states that Cinch.Skirt “shall have no oral operating
agreements.” 	(Op. Agrmt. § 9.10.) 	This is unpersuasive for two reasons. 	First,
LoRusso does not explain why unanimous agreements reached during a properly
noticed member meeting are prohibited “oral operating agreements” under section
9.10 as opposed to permissible member actions under section 2.4. 	(Compare Op.
Agrmt. § 9.10, with Op. Agrmt. § 2.4.) 	Second, some evidence suggests that the
members memorialized their oral agreements in writing, arguably satisfying section
9.10 assuming it applies. (See Def.’s Exs. 8, 10; see also Def.’s Ex. 9, ECF No. 168.1.)

LoRusso is therefore not entitled to summary judgment with respect to the April 2019
and December 2019 agreements.
C. Breach of Fiduciary Duty
29. 	Counts nine and ten are claims for breach of fiduciary duty. Count nine is a
direct claim based on allegations that LoRusso, as Cinch.Skirt’s majority member,
owes a fiduciary duty to the other members. Count ten is a derivative claim based on
allegations that LoRusso, as Cinch.Skirt’s manager, owes a fiduciary duty to the
company.
30. 	Again, although LoRusso’s motion challenges counts nine and ten in their
entirety, her brief is more limited. She ignores count ten, other than to concede that
she owes a fiduciary duty to Cinch.Skirt in her role as manager. 	Accordingly, the
Court denies her motion as to count ten.
31. 	As to count nine, LoRusso argues that she does not owe a fiduciary duty
individually to the Wrights and Stansell. The Court agrees.
32. 	“The law does not favor claims by one LLC member against another for
breach of fiduciary duty.” Strategic Mgmt. Decisions, LLC v. Sales Performance Int’l,
LLC, 2017 NCBC LEXIS 69, at *10 (N.C. Super. Ct. Aug. 7, 2017). 	That is because
members of an LLC “are like shareholders in a corporation in that members do not
owe a fiduciary duty to each other or to the company.” Kaplan v. O.K. Techs., L.L.C.,
196 N.C. App. 469, 473 (2009).
33. 	True, “in some circumstances, a holder of a majority interest who exercises
control over the LLC owes a fiduciary duty to minority interest members.” Vanguard

Pai Lung, LLC v. Moody, 2019 NCBC LEXIS 39, at *17 (N.C. Super. Ct. June 19,
2019) (citations and quotation marks omitted). 	But control does not necessarily go
“hand in hand with a majority interest in an LLC.” Strategic Mgmt. Decisions, 2017
NCBC LEXIS 69, at *12. 	Because an LLC is a creature of contract, members have
the freedom to allocate rights and responsibilities as they wish. 	And minority
members may negotiate to add key protections in the operating agreement: special
voting rights, access to information, limits on transfers of interests, and more.
“Especially where the members have bargained for comprehensive terms to govern
their relationship, the imprudent imposition of fiduciary duties could ‘undermine the
contractual nature of an Operating Agreement.’ ” 	Id. at *11 (quoting HCW Ret. &
Fin. Servs., LLC v. HCW Emp. Benefit Servs., LLC, 2015 NCBC LEXIS 73, at *47
n.102 (N.C. Super. Ct. July 14, 2015)).
34. 	LoRusso’s seventy-six percent interest in Cinch.Skirt gives her a numerical
majority but not a controlling majority. 	The operating agreement makes clear that
“[a]ny action to be taken by the Members” must “be made by the Members holding a
SuperMajority In Interest,” which is defined as more than eighty percent. 	(Op.
Agrmt. § 2.4, Ex. A.) In some cases, even a supermajority is not enough: unanimity
is needed to amend the operating agreement and to call for a loan or capital
contribution from a member. 	(See Op. Agrmt. §§ 3.2, 3.4, 9.3.) 	Together, these
provisions prevent LoRusso from taking any member action unilaterally. See Claudio
v. 	Sellers, 	2019 	N.C. 	App. 	LEXIS 	288, 	at 	*8 	(N.C. 	Ct. 	App. 	Mar. 	26, 	2019)
(unpublished) (“Defendant Wilson—although numerically a majority [member]—by

definition of the operating agreement was not a majority [member] and did not owe
a fiduciary duty based on the operating agreement.”).
35. 	The Wrights and Stansell insist that LoRusso is Cinch.Skirt’s controlling
member because she is also its manager. 	In some cases, managerial authority
demonstrates control. 	See, e.g., Vanguard Pai Lung, 2019 NCBC LEXIS 39, at *19
(citing comprehensive “managerial control” as “one of the clearest attributes of a
controlling member of an LLC”). 	Not here, though. 	The operating agreement
carefully circumscribes LoRusso’s powers as manager. 	Although she has authority
over many aspects of Cinch.Skirt’s day-to-day business, (Op. Agrmt. § 2.6), she cannot
unilaterally decide to start a new line of business, sell material assets of the company,
or pay a salary or lend company funds to any member or manager (including herself),
(Op. 	Agrmt. 	§ 2.7(b), 	(d), 	(g), 	(h)). 	These 	actions 	require 	the 	approval 	of 	a
supermajority 	of 	the 	members. 	Similarly, 	a 	supermajority 	must 	approve
extraordinary 	actions 	like 	amending 	the 	articles 	of 	organization, 	declaring
bankruptcy, dissolving the company, and issuing new ownership units and admitting
new members. (See Op. Agrmt. § 2.7(a), (c), (e), (f).)
36. 	A number of other provisions give added protection to minority members.
The rules for when and how to make distributions of company cash are well defined,
and no member has “priority over any other” when it comes to obtaining a return of
capital and related economic rights. 	(Op Agrmt. §§ 3.3, 5.1–5.4.) 	In addition, each
member may, at his or her own expense, inspect company records and demand an
audit by independent accountants. (See Op. Agrmt. § 9.1.)

37. 	Given the wide-ranging protections for minority members in the operating
agreement, no reasonable jury could conclude that LoRusso has the sort of controlling
authority needed to create a fiduciary relationship among Cinch.Skirt’s members.
The Wrights and Stansell have effective veto power over any action requiring a
member vote as well as a significant check on many powers of the manager. 	They
also have economic and informational rights that promise transparency and maintain
balance between minority and majority interests. 	Imposing fiduciary duties on
LoRusso above and beyond her contractual duties “would be inconsistent with the
parties’ bargain and with this State’s policy of ‘giv[ing] the maximum effect to the
principle of freedom of contract and the enforceability of operating agreements.’ ”
Strategic 	Mgmt. 	Decisions, 	2017 	NCBC 	LEXIS 	69, 	at 	*14 	(quoting 	N.C.G.S.
§ 57D-10-01(c)).
38. 	Finally, some of the misconduct alleged in count nine took place before the
Wrights and Stansell became members of Cinch.Skirt. 	(See, e.g., 2d Am. Compl.
¶ 191(b).) 	At that point, the parties were simply in an arm’s-length relationship,
which is not fiduciary in nature. 	See, e.g., Dallaire v. Bank of Am., N.A., 367 N.C.
363, 368 (2014).
39. 	Absent a fiduciary relationship, there can be no breach of fiduciary duty.
See, e.g., Dalton v. Camp, 353 N.C. 647, 651 (2001). 	The Court therefore grants
LoRusso’s motion for summary judgment as to count nine.

IV.
CONCLUSION
40. 	For all these reasons, the Court GRANTS in part and DENIES in part
LoRusso’s motion for summary judgment.
a. 	The Court GRANTS the motion as to counts three through six to the
extent based on the alleged $89,000 payment but DENIES the motion
as to those counts in all other respects.
b. 	The Court GRANTS the motion as to counts seven and eight to the
extent based on the purchase agreement but DENIES the motion as to
those counts in all other respects.
c. 	The Court GRANTS the motion as to count nine but DENIES the
motion as to count ten.
d. 	The Court DENIES the motion as to counts thirteen and sixteen.
SO ORDERED, this the 19th day of September, 2023.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases