ESTATE OF BROWNE v. Thompson
219 N.C. App. 637
| N.C. Ct. App. | 2012Background
- Seven Wachovia stockholders sue Wachovia, Wells Fargo, KPMG, and former Wachovia directors for alleged fraud and misrepresentation related to Wachovia's 2006 acquisition of Golden West and subsequent disclosures.
- Plaintiffs allege concealment of underwriting standards, collateral quality, and reserves, and false SEC filings and earnings calls through Sept. 2008.
- After merger with Wells Fargo, shareholders received Wells Fargo stock; plaintiffs claim they relied on defendants' representations when retaining Wachovia shares from 2005–2008.
- Trial court dismissed the complaint under Rule 12(b)(6); plaintiffs appeal.
- The court reviews de novo the trial court’s dismissal and finds no actionable theory under NC law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Barger exceptions permit holder or director/officer claims by shareholders? | Plaintiffs rely on Tooley to reject Barger. | Barger controls; no direct duties or separate injuries. | No; Barger exceptions do not apply. |
| Are holder claims cognizable in North Carolina? | North Carolina recognizes holder claims. | NC has no holder claims since duties run to the corporation/stockholders indirectly. | Holder claims not recognized in NC. |
| Are KPMG’s alleged misrepresentations actionable for negligent misrepresentation? | Reliance on auditor disclosures caused injury (holder theory). | No justifiable reliance under NC law since no sale of stock and no holder claim. | Complaint fails to state a claim against KPMG. |
| Should Delaware Tooley approach supersede NC Barger framework? | Tooley should control. | NC law controls; Barger governs. | Tooley does not apply; NC law controls. |
Key Cases Cited
- Barger v. McCoy Hillard & Parks, 346 N.C. 650 (1997) (two exceptions to no-direct-action rule; special duty or separate injury)
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (Delaware law; used to challenge Barger approach (not adopted))
- Cabaniss v. Deutsche Bank Secs., Inc., 170 N.C. App. 180 (2005) (discusses holder claims context; NC law controls)
- Rivers v. Wachovia Corp., 665 F.3d 610 (4th Cir. 2011) (recognizes no holder claims under NC law)