EMRICH ENTERS. LLC v. HORNWOOD, INC., 2023 NCBC 86

Emrich Enters. LLC v. Hornwood Inc., 2023 NCBC 86.
STATE OF NORTH CAROLINA
WAKE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
19 CVS 5659
EMRICH ENTERPRISES, LLC,
individually and derivatively on
behalf of TRIANGLE AUTOMOTIVE
COMPONENTS, LLC,
Plaintiff,
v.
HORNWOOD, INC.,
Defendant,
v.
TRIANGLE AUTOMOTIVE
COMPONENTS, LLC,
Defendant and
Nominal Defendant.
ORDER AND OPINION ON
HORNWOOD’S MOTION FOR
JUDGMENT NOTWITHSTANDING
THE VERDICT AND MOTION FOR
NEW TRIAL
1. THIS MATTER is before the Court following the 24 April 2023 filing of
Defendant Hornwood, Inc.’s Rule 50(b) Motion for Judgment Notwithstanding the
Verdict (the “JNOV Motion”), (ECF No. 310), and Defendant Hornwood, Inc.’s Rule 59
Motion for a New Trial (the “Motion for New Trial”), (ECF No. 309).
2. After a seven-day trial beginning on 3 October 2022 and concluding on
11 October 2022, the jury found, in relevant part, that Defendant Hornwood, Inc.
(“Hornwood”) breached fiduciary duties it owed to Emrich Enterprises, LLC
(“Emrich”) and Triangle Automotive Components, LLC (“Triangle”) by threatening to
cease manufacturing fabric for Triangle, breaching Section 4.4 of the Triangle
Operating Agreement, breaching Section 3(a) of the Triangle Joint Venture
Agreement, and engaging in self-interested transactions with Triangle. Upon the

jury’s findings, and after further briefing from the parties regarding the form of
judgment, the Court entered its Order on Pre-Judgment Motion and Final Judgment
(the “Final Judgment Order”) on 14 April 2023. (See ECF No. 307 [“Final J.”].)
Pursuant to Rules 50 and 59 of the North Carolina Rules of Civil Procedure (the
“Rule(s)”), Hornwood now seeks judgment notwithstanding the jury’s verdict and a
new trial.
3. For the reasons set forth below, the Court GRANTS in part and DENIES
in part the JNOV Motion, and DENIES the Motion for New Trial.
Ellis & Winters LLP, by Andrew P. Carter, Michelle A. Liguori,
Jonathan D. Sasser, Thomas H. Segars, and Jeffrey S. Warren, for
Plaintiff Emrich Enterprises, LLC.
Moore & Van Allen PLLC, by Mark A. Nebrig, Raquel Macgregor
Pearkes, and Kaitlin M. Price, for Defendant Hornwood, Inc. and
Defendant and Nominal Defendant Triangle Automotive Components,
LLC.
Robinson, Judge.
I. FACTUAL AND PROCEDURAL BACKGROUND1
4. Emrich and Hornwood are the only members of Triangle. (Second Am.
Verified Compl. ¶ 1, ECF No. 116 [“Second Am. Compl.”].)2
1 The factual background of this litigation is set forth in greater detail in the Court’s Order
and Opinion on Emrich’s Motion for Summary Judgment and Defendants’ Motion for
Summary Judgment entered by the Court on 15 February 2022. (ECF No. 202.)
2 Emrich’s Second Amended Complaint is verified and therefore was received and treated by
the Court as an affidavit. Page v. Sloan, 281 N.C. 697, 705 (1972) (“A verified complaint may
be treated as an affidavit if it (1) is made on personal knowledge, (2) sets forth such facts as
would be admissible in evidence, and (3) shows affirmatively that the affiant is competent to
testify to the matters stated therein.”).

5. Emrich is a North Carolina limited liability company and is the minority
member of Triangle. (Second Am. Compl. ¶ 14.) Emrich’s members are John Emrich
and Martha Miller. (Second Am. Compl. ¶ 105.)
6. Hornwood is a North Carolina corporation and is the majority member of
Triangle. (Second Am. Compl. ¶ 16.) Hornwood manufactures fabric for a wide
variety of applications, including the automotive headliner Triangle uses in its
products. (Second Am. Compl. ¶¶ 5, 20.) Hornwood’s principals are its CEO, Chuck
Horne, and its President, Wesley Horne. (Second Am. Compl. ¶ 7.)
7. Emrich, Hornwood, and nonparty Bondtex, Inc. (“Bondtex”) formed
Triangle in 2006 in order to supply headliner fabric to automobile companies. (Second
Am. Compl. ¶ 15.) At its inception, Triangle was established as a vertically
integrated company: Hornwood produced the fabrics, Bondtex laminated those
fabrics onto foam backing, and Emrich was tasked with obtaining business for
Triangle. (See generally Joint Venture Agreement, ECF No. 323.12 [“Joint Venture
Agt.”].)
8. In February 2006, Emrich, Hornwood, and Bondtex entered into an
operating agreement (the “Operating Agreement”) that governed Triangle’s
operations. (Operating Agreement, ECF No. 323.11 [“Op. Agt.”].)
9. Section 3.4 of Triangle’s Operating Agreement provides, in relevant part,
3.4 Limitation on Liability. No Member of the Company shall be
liable to the Company for monetary damages for an act or omission in
such Member’s capacity as a Manager, except as provided in the [LLC]
Act for (i) acts or omissions which a Member knew at the time of the acts
or omissions were clearly in conflict with the interests of the Company;
(ii) any transaction from which a Member derived an improper personal

benefit; or (iii) acts or omissions occurring prior to the date this provision
becomes effective. If the [LLC] Act is amended to authorize further
elimination of or limitations on the liability of Members as Mangers,
then the liability of Members of the Company shall be eliminated or
limited to the fullest extent permitted by the Act so Amended.
(Op. Agt. § 3.4.)
10. Further, Section 4.4 of Triangle’s Operating Agreement provides, in
relevant part,
4.4 Other Activities of Members and Managers. No Member may
engage in or possess an interest in other business ventures of any nature
or description, independently or with others, which are competitive with
the activities of the Company, without first offering an interest in such
activities to the Company and each other Member.
(Op. Agt. § 4.4.)
11. In September 2017, unbeknownst to the rest of Triangle’s members,
Hornwood engaged in discussions with Borgstena, a foreign manufacturer of
automotive textile products, including of the kind made by Triangle. (Second Am.
Compl. ¶ 77.) Over the following months, Hornwood and Borgstena executed a
nondisclosure agreement in order to proceed with joint product development. (Second
Am. Compl. ¶ 78.) Hornwood’s principals, Chuck and Wesley Horne, visited
Borgstena’s manufacturing facility in Portugal, and Borgstena’s principals likewise
visited Hornwood’s North Carolina facility. (Second Am. Compl. ¶¶ 81, 83.)
Hornwood and Borgstena discussed the possibility of Hornwood manufacturing
automotive textile products for automobile companies with whom Borgstena had a
relationship, including the same types of products Triangle produced. (Second Am.
Compl. ¶ 84.)

12. In 2018, Bondtex withdrew from Triangle with the consent of the members,
leaving Triangle with two members: the majority member, Hornwood, and the
minority member, Emrich. (Second Am. Compl. ¶¶ 43, 45, 50.)
13. On 10 June 2019, Hornwood informed Emrich by letter that it was losing
money in its work with Triangle, and that Hornwood was going to increase the
amount it charges Triangle for fabric manufacturing. (Second Am. Compl. ¶ 139.)
Hornwood also added general and administrative expenses (“G&A”) to the amount it
charged Triangle. (Second Am. Compl. ¶ 145.)
14. This action commenced on 29 April 2019 with the filing of Emrich’s Verified
Complaint. (Verified Compl., ECF No. 3 [“Compl.”].) A trial by jury was held in Wake
County from 3 October to 13 October 2022 (the “Trial”). (See ECF No. 207.)
Hornwood filed both its Rule 50(b) JNOV Motion and its Rule 59 New Trial Motion
on 24 April 2023. Following the briefing period, a hearing on the motions was held
on 16 August 2023 (the “Hearing”). (See ECF No. 348.)
15. Following the Hearing, the Court entered a scheduling order which
instructed counsel to file supplemental briefs on issues raised at the Hearing. (See
ECF No. 349.) In accordance with the scheduling order, the parties timely filed
opening and response briefs.
16. The motions are ripe for determination.

II. ANALYSIS
17. The Court first addresses Hornwood’s JNOV Motion, including the
arguments provided in the supplemental briefing, and then turns to Hornwood’s
Motion for New Trial.
A. The JNOV Motion
18. A motion for JNOV
provides the trial court with an opportunity to reconsider the question
of the sufficiency of the evidence after the jury has returned a verdict
and permits the court to enter judgment in accordance with the movant’s
earlier motion for a directed verdict and notwithstanding the contrary
verdict actually returned by the jury.
Primerica Life Ins. Co. v. James Massengill & Sons Constr. Co., 211 N.C. App. 252,
256–57 (2011) (quotation marks omitted). A motion for judgment notwithstanding
the verdict tests the sufficiency of the evidence to take the case to the jury and support
a verdict for the non-movant. Id. at 257. “The party moving for judgment
notwithstanding the verdict, like the party seeking a directed verdict, bears a heavy
burden under North Carolina law.” S. Shores Realty Servs. v. Miller, 251 N.C. App.
571, 578 (2017) (quoting Taylor v. Walker, 320 N.C. 729, 733 (1987)).
19. A JNOV motion should be denied “if there is more than a scintilla of
evidence supporting each element of the non-movant’s claim.” Hewitt v. Hewitt, 252
N.C. App. 437, 442 (2017). “A scintilla of evidence is defined as very slight
evidence[,]” S. Shores Realty Servs., 251 N.C. App. at 578, and “[t]he trial court must
construe the evidence in the light most favorable to the non-movant and resolve all

evidentiary conflicts in the non-movant's favor[,]” Morris v. Scenera Research, LLC,
368 N.C. 857, 861 (2016).
1. Triangle’s Fiduciary Duty Claims Against Hornwood
20. At trial, the jury found that Hornwood breached fiduciary duties it owed
to Triangle under Triangle’s Operating Agreement by (1) working with Borgstena,
(2) threatening to cease manufacturing for Triangle, and (3) concealing its work with
Borgstena. (Verdict (Phase One), Issue Nos. 1B, 1D–1E, ECF No. 269 [“Verdict 1”].)
For each of the three breaches, the jury awarded Triangle nominal damages of $1.00.
(Verdict 1, Issue Nos. 2B, 2D–2E.) Hornwood now seeks JNOV on all of Triangle’s
breaches of fiduciary claims on the basis that Section 3.4 of Triangle’s Operating
Agreement eliminates Hornwood’s liability for such duties.
21. Hornwood contends that Section 3.4 eliminates its liability to Triangle for
a violation of the duty of care, and following the 2014 amendment to the LLC Act,
that it also eliminates Hornwood’s liability to Triangle for a violation of the duty of
loyalty. (Br. Supp. Mot. JNOV 8–9, ECF No. 320 [“JNOV Br. Supp.”].)
22. As a preliminary matter, Emrich argues that Hornwood failed to raise
Section 3.4 as an affirmative defense in either the pleadings or at summary judgment,
and therefore Hornwood forfeited the right to now raise that issue. (Resp. Opp. Mot.
JNOV 3, ECF No. 334 [“JNOV Br. Opp.”].)
23. Rule 8(c) provides that a party must affirmatively set forth any matter
constituting an avoidance or affirmative defense. N.C.G.S. § 1A-1, Rule 8(c). “An
affirmative defense is a defense that introduces a new matter in an attempt to avoid

a claim, regardless of whether the allegations of the claim are true.” Williams v. Pee
Dee Elec. Mbrshp. Corp., 130 N.C. App. 298, 301–02 (1998). “Failure to raise an
affirmative defense in the pleadings generally results in a waiver thereof.” Robinson
v. Powell, 348 N.C. 562, 566 (1998) (noting that, under certain circumstances, a party
may raise an affirmative defense for the first time at summary judgment). Rule 8(c)
requires only a “short and plain statement of any matter constituting an avoidance
or affirmative defense sufficiently particular to give the court and the parties notice
of the transactions, occurrences, or series of transactions or occurrences, intended to
be proved.” N.C.G.S. § 1A-1, Rule 8(c).
24. Hornwood responds that Section 3.4 is not an affirmative defense, but
rather part of the inquiry into whether Hornwood owed fiduciary duties to Triangle
in the first place. (JNOV Br. Supp. 8.) Hornwood further contends that, even if
Hornwood’s Section 3.4 argument is considered an affirmative defense, it was timely
raised. (Reply Mem. Supp. Mot. JNOV 12, ECF No. 345 [“Reply”].) In its affirmative
defenses contained in its Answer to Second Amended Complaint, Affirmative
Defenses, and Restated Counterclaim, Hornwood alleged that Plaintiff’s claims are
“barred, in part, because Hornwood did not owe Plaintiff any fiduciary duties
. . . [and] because the express terms of the parties’ agreements contradict Plaintiff’s
assertions . . . [and] because Plaintiff’s claims . . . violate the North Carolina Limited-
Liability Company Act and the [Triangle] Operating Agreement.” (Answer Sec. Am.
Compl. 30–31, ECF No. 127.) Further, Hornwood raised this issue at the directed
verdict stage. (See generally Trial Tr. Vol. 6, ECF No. 351.1 [“Trial Tr.”].)

25. In so doing, all parties were put on sufficient notice of Hornwood’s intended
arguments. Accordingly, Hornwood has not waived its argument regarding
Section 3.4 of Triangle’s Operating Agreement.
26. The Court now addresses the merits. Emrich asserts that the evidence, and
specifically Section 4.4 of Triangle’s Operating Agreement, supports the jury’s finding
that Hornwood owed fiduciary duties to Triangle in spite of Section 3.4.
27. Specifically, Emrich argues that the jury could have reasonably concluded
based on the evidence at trial that the parties intended, through Section 4.4, to carve
out an exception to Section 3.4. (JNOV Br. Opp. 8.) The Court disagrees.
28. “An operating agreement is a contract[,]” and should be interpreted under
North Carolina’s established rules of contract construction. Klos Constr., Inc. v.
Premier Homes & Props., LLC, 2020 NCBC LEXIS 85, at *25 (N.C. Super. Ct. July
21, 2020) (quoting N.C. State Bar v. Merrell, 243 N.C. App. 356, 370 (2015)). When a
court interprets a contract, “its primary purpose is to ascertain the intention of the
parties at the moment of its execution.” Land v. Scarborough, 284 N.C. 407, 409–410
(1973). It is well-settled that “[w]here the language of a contract is plain and
unambiguous, the construction of the agreement is a matter of law; and the court . . .
must construe the contract as written[.]” Happ v. Creep Pointe Homeowner’s Ass’n,
215 N.C. App. 96, 103 (2011).
29. In Klos Construction, this Court analyzed a similar limitation of liability
provision. 2020 NCBC LEXIS 85, at *23. The Court determined that the language
of that limitation of liability provision was “unambiguous on its face” and reflected

the parties’ intent to “automatically extend the limitation of liability to the extent the
Act permits such limitation.” Id. at *27. The Court also analyzed the impact of the
2014 amendment to the LLC Act. Id. at *28. The 2014 amendment replaced Chapter
57C with Chapter 57D, which states in relevant part that an LLC manager’s duty of
loyalty is “subject to the operating agreement.” Id. (citing N.C.G.S. § 57D-3-
21(b)(iii)). Therefore, Chapter 57D “permits parties to an operating agreement to
waive a manager’s duty of loyalty.” Id. (quoting Pender Farm Dev. v. NDCO, LLC,
2018 NCBC LEXIS 189, at *38 (N.C. Super. Ct. Mar. 12, 2018).
30. The Court in Klos Construction found that since the execution of the
operating agreement at issue, the Act was “amended to authorize action further
eliminating or limiting the liability of Managers by way of allowing an operating
agreement to waive an LLC manager’s duty of loyalty.” Id. (internal marks omitted).
As such, the Court concluded that the limitation of liability provision in the operating
agreement was “automatically amended” and the duty of loyalty for the LLC’s
managers was waived. Id. at *29.
31. Here, Section 4.4 imposes a contractual duty upon Triangle’s members to
offer a right of first refusal to Triangle prior to engaging in competitive activities.
This duty is far narrower than the fiduciary duties typically owed by managers of an
LLC, which were waived in Section 3.4. Due to the applicability of Section 3.4, the
Court concludes that no evidence presented at Trial, however slight, supports the
jury’s finding that Hornwood owed, and breached, fiduciary duties to Triangle.

32. The record is clear that Hornwood properly preserved its defense that, by
contract, the parties waived any claim that Hornwood was bound by any fiduciary
duty of loyalty. As such, the Court concludes that the evidence presented, even when
viewed in the light most favorable to the non-moving party, does not support the
jury’s award on this issue.
33. Because the jury’s determination on this point was legally
unsubstantiated, the judgment as it relates to this issue is unsupportable. Therefore,
the Court GRANTS in part Hornwood’s JNOV Motion in this regard, and AMENDS
the Final Judgment accordingly.
2. Hornwood’s Self-Interested Transactions
34. The jury found that Hornwood was engaged in self-interested transactions
that were not inherently fair to Triangle. (Verdict 1, Issue No. 5.) For that conduct,
the jury awarded Triangle compensatory damages of $165,605.00. (Verdict 1, Issue
No. 6.) Hornwood seeks JNOV on these issues.
35. As discussed earlier, the Court concludes that, due to the applicability of
Section 3.4, there was no evidence presented at trial, however slight, supporting the
jury’s finding that Hornwood owed, and breached, fiduciary duties to Triangle,
including those found by the jury in Issue No. 5. (See supra ¶ 33.) Therefore, the
Court GRANTS in part Hornwood’s JNOV Motion in this regard, and AMENDS the
Final Judgment accordingly.
36. In making its decision, the jury answered Issue 10 in the affirmative,
concluding that Hornwood breached Section 3(a) of the Joint Venture Agreement by

charging Triangle for general and administrative expenses. (Verdict 1, Issue No. 10.)
Immediately following Issue 10, the jury was directed to consider Issue 11 if they
answered “Yes” to Issue 10. As such, the jury answered Issue 11, which asked the
jury “[w]hat amount of damages, if any, is Triangle entitled to recover from Hornwood
for breach of the Joint Venture Agreement.” (Verdict 1, Issue No. 11.) In its answer
to Issue No. 11, the jury awarded damages totaling $165,605.00. (Verdict 1, Issue
No. 11.) Following the conclusion of trial and review of the verdict form, the Court
concluded that Issues 6 and 11 awarded duplicative damages in the amount of
$165,605.00. (Final J. ¶ 30.) As a result, the amount of damages awarded under
Issue 11 was stricken in the Final Judgment Order.
37. As the Court now grants Hornwood’s JNOV Motion on Issues 5 and 6, the
damages awarded under Issue 11 that were initially stricken as duplicative should
be reinstated. For that reason, the Court AMENDS the Final Judgment to reinstate
Issue 11. (Verdict 1, Issue Nos. 10–11.)
38. The Court now turns to whether JNOV should be granted in Hornwood’s
favor on Issue 11, given that Hornwood had no legitimate reason to move for JNOV
on Issue 11 following the entry of the Final Judgment Order. The threshold question
becomes whether Hornwood properly preserved its right to seek JNOV on Issue 11
by moving for a directed verdict on this issue at trial.
39. A party may seek a directed verdict at the close of the opposing party’s
evidence. See N.C.G.S. § 1A-1, Rule 50(a). The motion for a directed verdict must
“state the specific grounds therefor” a way of giving notice to the other party of

possible defects and an opportunity to cure. Id.; see also Garrison v. Garrison, 87
N.C. App. 591, 595–96 (1987). If the trial court does not grant a directed verdict, the
party may renew its motion after the jury returns its verdict but may not assert new
grounds, which, if permitted, would defeat the notice function of the “specific grounds”
requirement. See N.C.G.S. § 1A-1, Rule 50(b)(1). Thus, “[t]o have standing after the
verdict to move for JNOV, a party must have made a directed verdict motion at trial
on the specific issue which is the basis of the JNOV.” Plasma Ctrs. of Am., LLC v.
Talecris Plasma Res., Inc., 222 N.C. App. 83, 87 (2012) (citation omitted).
40. Upon review of the record, the Court concludes that Hornwood properly
moved for directed verdict as to each of the claims against it which preserved its
ability to seek JNOV on Issue 11. See Trial Tr. Vol. 6 at 40:2–4 (stating that
“[Hornwood is] moving on all claims for directed verdict”).) The Court notes that, at
the close of Emrich’s evidence, and again at the close of all the evidence, there were
no specific “issues” before the Court, such as Issue 11 as to damages. As such, while
not specifically referring to Issue 11, Hornwood’s directed verdict motions as to each
of Emrich’s claims sufficiently preserved its ability to move for JNOV.
41. Having concluded that Hornwood preserved its right to seek JNOV
regarding Issue 11, the Court now turns to whether JNOV should be granted for it as
to that Issue.
42. After review of the supplemental briefing by all parties on this issue, the
Court finds that the jury’s conclusion that Hornwood owed Triangle $165,605.00 for
its breach of the Triangle Joint Venture Agreement by charging Triangle for general

and administrative expenses is well-supported based on the evidence presented at
trial. Most of the arguments presented by Hornwood in its supplemental briefing
center on arguments that are best left to be argued in a motion for new trial, and as
such, the Court refrains from addressing those here.3
43. Accordingly, Hornwood’s JNOV Motion is DENIED in part as to Issue 11.
Given that Issue 11 was originally ruled duplicative and stricken in the Final
Judgment Order, and later reinstated after the deadline for post-trial motions had
passed, Hornwood had no legitimate reason to include Issue 11 in its Motion for New
Trial. As a result, the Court will allow Hornwood leave to move for new trial as to
Issue 11 within thirty days after entry of this Order.
3. Emrich’s Direct Claims Against Hornwood
44. At Trial, the jury found that Hornwood, as majority member of Triangle,
breached fiduciary duties it owed to Emrich by working with Borgstena and
threatening to cease manufacturing for Triangle. (Verdict 1, Issue Nos. 3C, 3E.) The
jury awarded nominal damages of $1.00 for Hornwood’s work with Borgstena, and
compensatory damages of $5,000.00 for Hornwood’s threat to cease manufacturing.
(Verdict 1, Issue Nos. 4C, 4E.) Hornwood seeks judgment notwithstanding the
verdict on all Emrich’s direct claims against Hornwood.
3 The Court ordered supplemental briefing on four issues, the last of which being “[i]f
Defendants are entitled to pursue a motion for judgment notwithstanding the verdict as to
issue number 11, should the Court grant the motion?” (ECF No. 349.) However, in the
briefing, Defendants specifically titled their argument as “[t]he Court should grant a new
trial for Hornwood on Issue 11.” (Hornwood’s Suppl. Br. 6, ECF No. 350.)

i. Standing to Bring Direct Claims
45. Members of an LLC, like shareholders of a corporation, “generally may not
bring individual actions to recover what they consider their share of the damages
suffered by the corporation.’ ” Green v. Freeman, 367 N.C. 136, 142 (2013) (quoting
Barger v. McCoy Hillard & Parks, 346 N.C. 650, 660 (1997). However, a member can
bring a direct claim for a breach of fiduciary duty if “(1) ‘the wrongdoer owed [them]
a special duty’ or (2) they suffered a personal injury ‘distinct from the injury sustained
by . . . the corporation itself.’ ” Id. (quoting Barger, 346 N.C. at 660).
46. Hornwood first argues that any duty it owes to Emrich is indistinguishable
from the duty Hornwood owes to Triangle. (JNOV Br. Supp. 13.) The Court
disagrees. The issues are separate and distinct and must be separately considered.
47. Second, Hornwood relies on this Court’s decision in Timbercreek Land &
Timber Co., LLC v. Robbins, to argue that no special duty was owed to Emrich, and
as a result, Emrich cannot bring this claim against Hornwood. 2017 NCBC LEXIS
64 (N.C. Super. Ct. July 28, 2017). Hornwood contends that based on Timbercreek,
the only duty Hornwood owed to Emrich was with respect to Triangle’s business, and
thus, no special duty was owed to Emrich. (JNOV Br. Supp. 11.)
48. Emrich pointedly disagrees with Hornwood’s interpretation of Timbercreek,
arguing that Timbercreek does not address whether fiduciary duties that the
controlling member of an LLC owed to the minority members of the LLC support a
direct claim under the special duty exception. (JNOV Br. Opp. 11.) Instead, Emrich

argues that Timbercreek focuses on whether the sole member of an LLC could bring
a direct claim against a third-party manager of the LLC. (JNOV Br. Opp. 11.)
49. The Court agrees with Emrich that Hornwood’s reliance on Timbercreek is
misplaced. Our courts have held that “minority shareholders in a closely held
corporation who allege wrongful conduct and corruption against the majority
shareholders in the corporation may bring an individual action against those
shareholders, in addition to maintaining a derivative action on behalf of the
corporation[.]” Norman v. Nash Johnson & Sons’ Farms, Inc., 140 N.C. App. 390, 405
(2000). As such, Emrich can bring a direct claim against Hornwood for wrongful
conduct while maintaining a derivative action on behalf of Triangle.
50. Finally, Hornwood also contends that there is no evidence that Emrich
suffered a distinct injury that was personal to Emrich. (JNOV Br. Supp. 13.)
Hornwood argues that the only damages alleged by Emrich are its own share of lost
profits as an owner of Triangle, and lost profits to the company are not evidence of a
personal injury to Emrich, separate and distinct from the injury to Triangle. (JNOV
Br. Supp. 13–14.)
51. Emrich disagrees, arguing that it suffered distinct injuries for Hornwood’s
concealment of its work with Borgstena and breach of Section 4.4, and the jury agreed
by awarding damages in differing amounts to Emrich and Triangle for the same
conduct. (JNOV Br. Opp. 12, 14.) The Court agrees.

52. Accordingly, the Court concludes that Emrich, as a minority member of
Triangle, had standing to bring direct claims against Hornwood, the majority
member.
ii. Hornwood’s Threat to Stop Manufacturing
53. The jury found that Hornwood breached fiduciary duties to both Triangle
and Emrich by threatening to stop manufacturing fabric for Triangle. (Verdict 1,
Issue Nos. 1D, 3E.) For those breaches, the jury awarded Triangle nominal damages
of $1.00, and awarded Emrich compensatory damages of $5,000.00. (Verdict 1, Issue
Nos. 2D, 4E.) The Court has already concluded that, by operation of Section 3.4,
Hornwood does not owe fiduciary duties to Triangle. As a result, the Court need only
address Emrich’s direct claim in this regard.
54. The Joint Venture Agreement states, in relevant part, that “Hornwood
primarily assumes the responsibilities for the manufacturing of fabric and invoicing,
factoring and internal accounting.” (Joint Venture Agt. ¶ 5(d.)(1).) Further, the Joint
Venture Agreement provides that “[t]he relationships between the parties shall be
limited to the performance and completion of the work in accordance with the terms
of this Agreement.” (Joint Venture Agt. ¶ 10(a.).)
55. Hornwood contends that the obligation to manufacture for Triangle is
derived from contract, not fiduciary duties. (JNOV Br. Supp. 14.) Hornwood argues
that there is “no legal support that a contractual obligation of an LLC member
automatically becomes a fiduciary obligation,” and as such, there is no evidence to

support that Hornwood had any duty to Emrich regarding manufacturing for
Triangle. (JNOV Br. Supp. 14, 15 n.8.)
56. Emrich’s response to this contention focuses on the duty Hornwood owed to
Triangle under the Joint Venture Agreement, not the duty owed to Emrich. (JNOV
Br. Opp. 14–15.)
57. Therefore, the Court determines that there was no fiduciary relationship
formed by the enactment of the Joint Venture Agreement, and as such, there was no
fiduciary duty owed to Emrich through the performance, or lack thereof, of the Joint
Venture Agreement.
58. Accordingly, Hornwood’s JNOV Motion is GRANTED in part as to
Emrich’s direct claim in this regard.
4. Breach of Contract by Hornwood’s Work with Borgstena
59. The jury found that Hornwood breached Section 4.4 of the Triangle
Operating Agreement, (Verdict 1, Issue No. 7A), and for that breach, the jury found
that Emrich was entitled to $145,542.06 in damages, and Triangle was entitled to
$309,006.50 in damages, (Verdict 1, Issue Nos. 8A, 9A).
60. Hornwood seeks judgment notwithstanding the verdict on these issues,
contending that Hornwood had no duty to disclose its business dealings with
Borgstena, and even if Hornwood did have such a duty, it argues there was not
sufficient evidence at trial that Hornwood’s involvement with Borgstena amounted
to competition with Triangle. (JNOV Br. Supp. 15–16.) Hornwood also contends that
Section 4.4 of the Operating Agreement “does not prohibit planning or taking steps

in anticipation of engaging in business with another company.” (JNOV Br. Supp. 17.)
Hornwood argues that the trial evidence disclosed that it had no obligation to
communicate everything regarding Triangle’s own fabric development to Emrich, and
therefore there was insufficient evidence to support the jury’s finding that Hornwood
had a duty to inform Triangle about its dealing with Borgstena. (JNOV Br. Supp. 16.)
61. Emrich rebuts these arguments, contending there was ample evidence
presented at Trial that Hornwood engaged in activities in furtherance of competition
with Triangle. (JNOV Br. Opp. 18.)
62. The Court determines that Hornwood breached its contractual duty to offer
a right of first refusal to Triangle through its dealings with Borgstena. When
Hornwood entered into a non-disclosure agreement with Borgstena, it concealed the
opportunity to work with Borgstena from Triangle, and by continuing to work and
offer business advantages to Borgstena, it engaged in competitive activities.
63. The Court determines that there was ample evidence at Trial of Hornwood’s
breach of Section 4.4 to support the jury’s finding of breach.
64. Accordingly, Hornwood’s JNOV Motion is DENIED in part as to Emrich’s
direct and derivative claim for breach of Section 4.4 of the Operating Agreement.
5. Triangle’s Punitive Damages
65. Based on the jury’s findings and awards in the first phase of Trial,4 a second
phase commenced in which the jury was directed to consider the issue of punitive
damages. Following arguments and instruction by the Court regarding the standards
4 The punitive damages phase of trial as to Triangle proceeded as a result of the jury’s
answers to Issues 1B, 1D, 1E, and 5.

applicable to consideration of the issues submitted regarding Emrich’s claims both
directly and derivatively for punitive damages, the jury answered Issue Number 20
in the affirmative finding that Triangle was entitled to recover from Hornwood for its
misconduct. (Verdict (Phase Two) Issue No. 21, ECF No. 271 [“Verdict 2”].) The jury
answered Issue Number 21 finding that Triangle was entitled to recover $236,294.90
from Hornwood for punitive damages. (Verdict 2, Issue No. 21.)
66. Based on the Court’s determination regarding Hornwood’s JNOV Motion,
Triangle’s only surviving claims are breach of contract claims. Punitive damages may
not be awarded for breach of contract in the absence of an identifiable tort. See Cash
v. State Farm Mut. Auto. Ins. Co., 137 N.C. App. 192, 200 (2000) (stating that, “in
order to sustain a claim for punitive damages, there must be an identifiable tort
which is accompanied by or partakes of some element of aggravation”); N.C.G.S. § 1D-
15(d) (“Punitive damages shall not be awarded against a person solely for breach of
contract.”). The Court has herein determined that the jury’s findings in Issues 1B,
1D, 1E, and 5, the only ones that would properly support a judgment for punitive
damages, are not supported by the evidence.
67. Therefore, there is no proper legal basis for the punitive damages awarded
to Triangle. Accordingly, the Court GRANTS in part Hornwood’s JNOV Motion to
the extent it seeks judgment notwithstanding the verdict on Issue Numbers 20
and 21.

B. Motion for New Trial
68. Hornwood has alternatively brought a Rule 59 Motion for New Trial. (See
ECF No. 309.) Hornwood raises four awards of damages that it believes the Court
should vacate, or alternatively, order a new trial to reevaluate, which are: (1)
Emrich’s derivative claim for breach of Section 4.4; (2) Emrich’s direct claim for
breach of Section 4.4; (3) Emrich’s direct claim for damages based on Hornwood’s
threat to cease manufacturing for Triangle; and (4) Triangle’s claim based on
Hornwood’s price increase. (Br. Supp. Mot. New Trial 1, ECF No. 321 [“New Trial
Br. Supp.”].)
69. Rule 59(a) provides that “[a] new trial may be granted to all or any of the
parties on all or part of the issues” on several different grounds; however, the Court
should only do so where upholding the verdict would result in a miscarriage of justice.
See In re Will of Buck, 350 N.C. 621, 628 (1999); see also Strum v. Greenville
Timberline, LLC, 186 N.C. App. 662, 666 (2007) (finding that denying a Rule 59
motion for new trial was not an abuse of discretion even where the jury’s verdict was
inconsistent because the inconsistencies were surplusage).
70. The decision to grant a new trial is entirely within the trial court's
discretion. However, this “discretion [] ‘must be used with great care and exceeding
reluctance.’ ” Shaw v. Gee, 2018 NCBC LEXIS 109, at *15 (N.C. Super. Ct. Oct. 19,
2018) (quoting Buck, 350 N.C. at 626). “It is well settled that a verdict should be
liberally and favorably construed with a view of sustaining it, if possible . . . .” Strum,
at 665 (quoting Guy v. Gould, 202 N.C. 727, 729 (1932)). The Court has discretionary

power to set aside a verdict when it would be unjust to let it stand; and, if no question
of law or legal inference is involved in the motion, his action in so doing is not subject
to review on appeal in the absence of a clear abuse of discretion. Chisum v.
Campagna, 2019 NCBC LEXIS 28, at *50 (N.C. Super. Ct. Apr. 25, 2019) (quoting
Seaman v. McQueen, 51 N.C. App. 500, 505 (1981)).
71. Rule 59(a)(7) permits a new trial to be granted for “[i]nsufficiency of the
evidence to justify the verdict.” The term “insufficiency of the evidence” means that
the verdict is against the greater weight of the evidence. Buck, 350 N.C. at 624
(citation omitted). “It is the jury’s function to weigh the evidence and to determine
the credibility of witnesses.” Anderson v. Hollifield, 345 N.C. 480, 483 (1997). A new
trial is improper if the jury’s determination of a “fact-intensive question” was
“reasonable” and did not “amount to a ‘substantial miscarriage of justice.’ ” Chalk v.
Braakman, 2019 N.C. App. LEXIS 263, at *16 (2019) (quoting Justus v. Rosner, 371
N.C. 818, 825 (2018)).
72. As stated above, the Court found that Hornwood’s JNOV Motion should be
granted for Emrich’s claim based on Hornwood’s self-interested transactions, and
Emrich’s non-contract based direct claims. (See supra §§ II.A.2, II.A.3.) As a result,
the damages awarded in Issues 4E and 6 are improper. Therefore, the Court will
address the remaining claims raised in this Motion for New Trial.
73. Hornwood moves to amend the final judgment award of $309,006.50
awarded to Triangle and $145,542.06 awarded to Emrich and Triangle for
Hornwood’s breach of Section 4.4 of the Operating Agreement, (see Verdict 1, Issue

Nos. 8A, 9A), arguing that this award (1) is inconsistent with the jury’s award of
nominal damages to Triangle for similar conduct, (2) is unsupported by the greater
weight of the evidence, and (3) excessive, (New Trial Br. Supp. 7–17).
74. Emrich disagrees, contending that the award is consistent and reasonably
supported by the evidence presented at trial. (Resp. Opp. Mot. New Trial 7, 10, ECF
No. 333 [“New Trial Br. Opp.”].)
75. First, the Court agrees with Emrich that the award is not inconsistent,
given that Hornwood bases its argument of inconsistency on two separate claims: a
claim for breach of fiduciary duty and a breach of a contractual duty within the
Operating Agreement. As a result, the verdict and final judgment award is not
inconsistent given that the jury could have relied on different evidence when
awarding damages for the separate claims.
76. Additionally, the Court does not need to understand “exactly how the jury
reached its overall figure.” Blakeley v. Town of Taylortown, 233 N.C. App. 441, 449
(2014). As such, the Court agrees that the jury could have reasonably concluded,
based on the evidence presented, that awards of $309,006.50 to Triangle and
$145,542.06 to Emrich were appropriate. As a result, the Court concludes that the
verdict is not against the greater weight of the evidence.
77. Therefore, the Motion for New Trial, or Alternatively to Amend Final
Judgment, is DENIED.

III. CONCLUSION
78. For the foregoing reasons, the Court hereby GRANTS in part and DENIES
in part the JNOV Motion as follows:
a. The JNOV Motion is GRANTED as it relates to Triangle’s Fiduciary
Duty Claims Against Hornwood;
b. The JNOV Motion is GRANTED as it relates to Emrich’s claims for
self-interested transactions;
c. The JNOV Motion is GRANTED as it relates to Emrich’s Direct
Claim based on Hornwood’s Threat to Stop Manufacturing;
d. The JNOV Motion is GRANTED as it relates to Triangle’s Punitive
Damages Claim; and
e. Except as herein stated, the JNOV Motion is DENIED.
79. The Court will allow Hornwood leave, if it so chooses, to file a Motion for
New Trial as it relates solely to Issue 11 within thirty days of entry of this Order.
(See supra ¶ 43.)
80. With the exception of its ruling as to Issue 11, (see supra ¶¶ 68–77), the
Court hereby DENIES the Motion for New Trial, or Alternatively, to Amend Final
Judgment.
81. As a result of its rulings herein, the Final Judgment previously entered
herein is modified and amended to award Triangle and Emrich the following
damages:

a. $165,605.00 awarded to Triangle, pursuant to Issue 11, (see supra
¶ 37);
b. $309,006.50 awarded to Triangle, pursuant to Issue 9A; and
c. $145,542.06 awarded to Emrich, pursuant to Issue 8A.
82. As a further result of the Court’s ruling herein, the Court DEFERS ruling
on the following pending motions: (1) Plaintiff Emrich Enterprises, LLC’s Motion for
Determination of Substantial Benefit, (ECF No. 277), (2) Plaintiff Emrich
Enterprises, LLC’s Motion for Costs, (ECF No. 311), and (3) Defendants’ Motion for
Costs, (ECF No. 317).
IT IS SO ORDERED, this the 14th day of December, 2023.
/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases