Zagaroli v. Neill
2017 NCBC 101
N.C. Bus. Ct.2017Background
- Pete Zagaroli (Plaintiff) worked on renovating historic mills and alleges he partnered with James Clayton Neill (Clay) and Rick Berry to develop projects including Hollar Mill and to form Reclamation, LLC to reclaim materials and make furniture.
- Plaintiff claims he was promised a $1,000/week salary and a 30% ownership interest (often as an "unnamed" partner) but was underpaid and owed back wages; Reclamation ceased operations by 2015.
- Plaintiff sued asserting (inter alia) breach of fiduciary duty (fraud/constructive fraud), self-dealing/misappropriation of corporate opportunities, quasi-contract/unjust enrichment, breach of contract, Wage and Hour Act violations, and defamation.
- Defendants moved under Rule 12(c) to dismiss the Second (corporate opportunities), Third (quasi-contract), and Fifth (Wage and Hour Act) claims; Plaintiff moved to amend the complaint to add parties and claims.
- The Court denied judgment on the pleadings as to the quasi-contract and Wage and Hour Act claims but granted judgment on the pleadings as to the Second Claim (self-dealing/misappropriation) and dismissed it with prejudice.
- The Court denied Plaintiff’s motion to amend (both Rule 15(a) and 15(d)), finding undue delay, dilatory motive, prejudice to defendants, and futility (particularly as to proposed defamation claims lacking pleaded special damages).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether quasi-contract / unjust enrichment claim is barred by existence of express contract | Zagaroli may recover in quasi-contract for renovation/construction work despite pleading express agreements | Defendants: express agreements preclude implied-contract recovery | Court: Denied 12(c); pleading quasi-contract in this posture is permissible (alternative pleading allowed) |
| Whether Plaintiff is an "employee" under the NC Wage & Hour Act for unpaid $1,000/week claim | Zagaroli: alleged economic dependence and salary promises; may be an employee despite claimed ownership | Defendants: Plaintiff was a partner/owner and thus not an employee as a matter of law | Court: Denied 12(c); employee status is fact-intensive and cannot be resolved on the pleadings |
| Whether misappropriation of corporate/partnership opportunities claim can be asserted individually | Zagaroli: alleges special duties and individualized harm from self-dealing; seeks individual relief | Defendants: claim is derivative (belongs to Reclamation) and Plaintiff failed to make mandatory pre-suit demand | Court: Granted 12(c); Second Claim dismissed with prejudice as to opportunities of LLC (derivative) and as to partnership opportunities the claim duplicates fiduciary-duty allegations and seeks improper individual relief |
| Whether Plaintiff may amend to add defendants, defamation and other claims | Zagaroli: newly discovered facts from depositions and a recorded meeting justify adding parties and slander claims | Defendants: amendment is untimely, dilatory, prejudicial, and proposed defamation claims are conclusory and fail to plead special damages | Court: Denied motion to amend (undue delay, dilatory motive, prejudice, and futility for defamation claims) |
Key Cases Cited
- Ragsdale v. Kennedy, 286 N.C. 130 (N.C. 1974) (Rule 12(c) standard: movant must clearly establish no material fact in dispute)
- Booe v. Shadrick, 322 N.C. 567 (N.C. 1988) (express contract precludes quasi-contract relief)
- Steelman v. Hirsch, 473 F.3d 124 (4th Cir. 2006) (general partners not employees under FLSA; partnership attributes weigh against employee status)
- Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017) (use economic realities test to determine FLSA employee status)
- Barger v. McCoy Hillard & Parks, 346 N.C. 650 (N.C. 1997) (shareholder/member generally must bring derivative claims; special-duty and special-injury exceptions)
- Meiselman v. Meiselman, 309 N.C. 279 (N.C. 1983) (misappropriation of corporate opportunities is derivative; injury is to the corporation)