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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the
print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
STATE OF NORTH CAROLINA, ex rel. ROY COOPER, Attorney General of
North Carolina, Plaintiff, v. RIDGEWAY BRANDS MANUFACTURING, LLC,
a North Carolina corporation; RIDGEWAY BRANDS, INC.; JAMES C.
HEFLIN; FRED A. EDWARDS; and CARL B. WHITE, Defendants
Filed: 17 July 2007
1. Appeal and Error_appealability_dismissal of claims against one defendant_avoiding
two trials on same issue_substantial right
An order dismissing claims against oen defendant affected a substantial right and was
immediately appealable despite being interlocutory where the liability of codefendants depended
upon this defendant's joint and several liability, so that plaintiff faced the possibility of having to
undergo two trials on the same issue.
2. Statutes of Limitation and Repose_amended complaint_expired statute of
limitations_no relation back
The statute of limitations expired as to any claims against defendant Heflin for penalties
under N.C.G.S. § 66-291(c) arising from failure to make the escrow deposit required of cigarette
manufacturers, and an amended complaint which added him as a defendant did not relate back.
The trial court correctly dismissed the claim for penalties for failure to pay the 2004 escrow
deposit, but this dismissal has no effect on other claims.
3. Corporations_piercing the corporate veil_allegations sufficient
The allegations in plaintiff's complaint were sufficient to state a claim for piercing the
corporate veil, and the trial court erred by granting defendant's motion to dismiss under N.C.G.S.
§ 1A-1, Rule 12 (b)(6).
4. Unfair Trade Practices--cigarette manufacturing_statutory requirements--not
covered by unfair practices statute
The trial court did not err by dismissing plaintiff's claim under the Unfair and Deceptive
Trade Practices Act arising from the statutory obligation of cigarette manufacturers under
N.C.G.S. § 66-291. That statute provides an extensive remedy for failure to comply with its
obligations; it was not the legislature's intent to extend the scope of Chapter 75 to include
noncompliance with N.C.G.S. § 66-291.
5. Corporations_civil conspiracy_independent personal stake of corporate agent
The trial court erred by dismissing plaintiff's claim for civil conspiracy for failure to state
a claim upon which relief could be granted. While an allegation that a corporation is conspiring
with its agents, employees, or officers is tantamount to accusing a corporation of conspiring with
itself, an exception exists if the corporate agent has an independent personal stake in achieving
the corporation's illegal objective, as here.
Judge WYNN concurring in part and dissenting in part.
Appeal by the State of North Carolina from order entered 9
December 2005 by Judge Donald L. Smith in Wake County Superior
Court. Heard in the Court of Appeals 12 December 2006.
Attorney General Roy Cooper, by Special Deputy Attorneys
General Richard L. Harrison, Karen E. Long, and Melissa L.
Trippe, for plaintiff-appellant State of North Carolina.
Poyner & Spruill LLP, by J. Nicholas Ellis and Timothy W.
Wilson, for defendant-appellees, Ridgeway Brands
Manufacturing, LLC and James C. Heflin.
When the dismissal of a suit affects the plaintiff's right to
avoid two trials on the same issue, the plaintiff's appeal is not
interlocutory. When a plaintiff fails to amend his complaint to
add a party defendant until after the expiration of the applicable
statute of limitations as to that defendant, the claim cannot
relate back to circumvent the statute of limitations. When the
allegations in a plaintiff's complaint, taken as true, are
sufficient to state a claim for piercing the corporate veil, the
trial court's grant of defendant's motion to dismiss is improper.
Further, when the application of both N.C. Gen. Stat. . 75-1.1 and
N.C. Gen. Stat. . 66-291 creates overlapping supervision,
enforcement and liability in a particular area of law, the
rationale of Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162
(4th Cir. 1985), and Skinner v. E. F. Hutton & Co., 314 N.C. 267,
333 S.E.2d 236 (1985), precludes the application of N.C. Gen. Stat.
. 75-1.1 to cases of noncompliance with N.C. Gen. Stat. . 66-291.
Finally, when the allegations in a plaintiff's complaint, taken as
true, are sufficient to state a claim for civil conspiracy,
including the allegation that a corporate agent has an independent
personal stake in achieving a corporation's illegal objective, the
trial court's grant of defendant's motion to dismiss is improper.
In November 1998, the State of North Carolina (plaintiff)
entered into a Master Settlement Agreement (MSA) with major
domestic cigarette manufacturers. Cigarette manufacturers in North
Carolina were required to either sign the MSA or comply with the
provisions of N.C. Gen. Stat. . 66-291, which obligated cigarette
manufacturers to deposit funds into a qualified escrow account for
sales of cigarettes in North Carolina.
Because the trial court dismissed the claims against James C.
Heflin (Heflin) under N.C. Gen. Stat. . 1A-1, Rule 12(b)(6), we
treat the allegations in the complaint as true.
The complaint sets
forth the following allegations.
In early 2001, Heflin formed the corporation later named
Ridgeway Brands Manufacturing, LLC (Ridgeway). Heflin was an
owner and member-manager of Ridgeway, which was located in
Stantonsburg, North Carolina, and sold tobacco products largely to
Ridgeway Brands, Inc. (Brands). Brands was a Kentucky
corporation, distributing tobacco products for sale in North
Carolina and other states. Fred A. Edwards (Edwards) and Carl B.
White (White) were owners and active managers of Brands. Heflin,
Edwards and White dominated and controlled [Ridgeway] to further
[their] own objectives and those of [Brands][.]
In late 2002, Heflin, Edwards and White hired Lee Welchons
(Welchons) as the general manager of Ridgeway. Welchons had
extensive experience in tobacco manufacturing and was familiar with
both the payment obligations of manufacturers pursuant to the MSA
and North Carolina escrow statutes. In early 2003, Heflin, Edwards and White announced the merger
of Ridgeway and Brands. The merger, although never formally
completed, was accomplished de facto between Ridgeway and Brands.
In early 2003, Brands became the sole purchaser of cigarettes
manufactured by Ridgeway, and Ridgeway became a corporation
without a separate mind, will or existence of its own[,] . . .
operated as a mere shell to perform for the benefit of [Heflin] .
. . Ridgeway [Brands], Edwards [and] White.
Heflin, Edwards and White exhibited control over Ridgeway in
the following ways: (1) establishing the pricing structure of
cigarettes that Ridgeway sold to Brands; (2) ignoring Welchon's
advice that the pricing structure was grossly inadequate to
satisfy North Carolina's escrow statute requirements; (3) on one
occasion, forbidding Welchons to shut down a cigarette line for
repairs; (4) determining in which states cigarettes manufactured by
Ridgeway would be sold; (5) making hiring decisions for Ridgeway;
(6) directing money intended for Ridgeway to Heflin, White, Edwards
and Brands; (7) excessively fragmenting Ridgeway; (8) directing the
movement of funds to prevent the payment of statutory escrow
obligations; (9) disposing of almost all assets of Ridgeway; (10)
directing Welchons to send information regarding the value of the
equipment, spare parts, and inventory owned by Ridgeway to an
employee of Swift Transportation (Swift), by whom Heflin had
previously been employed; (11) hiring attorneys, Michelle Turpin
and Victor Schwartz, in 2004 to assist Ridgeway with its finances;
(12) making payments to the attorneys in excess of $1 million,
[without] financial records of how that money was spent; (13)
directing, with Schwartz's aid, the destruction of Ridgeway's paperrecords, computer hard drives, and tape back-ups; (14) keeping no
corporate financial records or grossly inadequate corporate
records; and (15) informing Welchons that Ridgeway would not file
bankruptcy because Heflin did not want anybody looking back to see
what was going on and track the money back to where it came from.
Rather than become a participating manufacturer under the MSA,
Ridgeway elected to comply with N.C. Gen. Stat. . 66-291. In April
2003, Ridgeway made its first escrow deposit of $1,220,313.60, as
required by N.C. Gen. Stat. . 66-291(b), for sales of cigarettes in
North Carolina during 2002. However, in 2003, Ridgeway sold at
least 70.6 million cigarettes in North Carolina, which required a
deposit of approximately $1.3 million into the escrow account
before 15 April 2004. Ridgeway failed to make this deposit. In
2004, Ridgeway sold at least 17 million cigarettes in North
Carolina, and despite being notified multiple times by the State of
their escrow obligation, Ridgeway again failed to make the required
deposit before 15 April 2005. In fall 2004, Ridgeway stopped
manufacturing cigarettes, and no escrow was ever deposited by
Ridgeway for cigarettes sold during 2003 and 2004.
On 4 May 2004, plaintiff instituted this action seeking to
recover from Ridgeway the escrow deposit due in 2004, civil
penalties, and also seeking an injunction prohibiting Ridgeway from
selling cigarettes in North Carolina for two years. On 19 October
2005, plaintiff filed an amended complaint. This complaint added
claims for the escrow deposit due in 2005, together with civil
penalties arising from the failure to make the deposit. It further
sought to impose liability upon defendants Brands, Edwards, White
and Heflin under a piercing the corporate veil theory. Claims werealso made against defendants under the North Carolina Unfair and
Deceptive Trade Practices Act and for civil conspiracy.
On 25 October 2005, Ridgeway and Heflin moved to dismiss
plaintiff's amended complaint. On 9 December 2005, Judge Smith
granted the motion to dismiss in part, dismissing the claims for
piercing the corporate veil, unfair and deceptive trade practices,
and conspiracy as to both Ridgeway and Heflin. The order further
dismissed the claims for civil penalties as to Heflin. From this
order, plaintiff appeals only as to the dismissal of its claims
 We must first determine whether plaintiff's appeal is
interlocutory and whether it is properly before this Court. This
appeal concerns only Heflin, not the other defendants. The trial
court did not certify the judgment pursuant to N.C. Gen. Stat. §
1A-1, Rule 54(b) (2005). Therefore, we must first determine
whether this appeal affects a substantial right. We conclude it
The right to avoid two trials on the same or overlapping
issues . . . constitute[s] a substantial right[.] Draughon v.
Harnett Cty. Bd. of Educ., 158 N.C. App. 705, 707, 582 S.E.2d 343,
345 (2003); see also Green v. Duke Power Co., 305 N.C. 603, 290
S.E.2d 593 (1982); Liggett Group v. Sunas, 113 N.C. App. 19, 437
S.E.2d 674 (1993). Similarly, the dismissal of plaintiff's claim
against Heflin affects a substantial right to have determined in
a single proceeding the issues of whether [plaintiff] has been
damaged by the actions of one, some or all defendants, especially
since [plaintiff's] claims against all of them arise upon the sameseries of transactions. Fox v. Wilson, 85 N.C. App. 292, 298, 354
S.E.2d 737, 741 (1987).
In the instant case, since the liability of Edwards, White,
and Brands depends on Heflin's joint and several liability,
plaintiff faces the possibility of having to undergo two trials on
the same issue. We therefore address the merits of this appeal.
Standard of Review
A motion to dismiss under N.C. Gen. Stat. § 1A-1, Rule
tests the legal sufficiency of the complaint.
Grant Constr. Co. v. McRae, 146 N.C. App. 370, 373, 553 S.E.2d 89,
91 (2001) (citation omitted).
On appeal, our standard of review
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[.] Bowman v. Alan Vester
Ford Lincoln Mercury, 151 N.C. App. 603, 606, 566 S.E.2d 818, 821
(2002) (quotation omitted). The complaint should be liberally
construed, and the court should not dismiss the complaint unless it
appears beyond doubt that [the] plaintiff could prove no set of
facts in support of his claim which would entitle him to relief.
I: Liability pursuant to Piercing the Corporate Veil
In its first argument, plaintiff contends that the trial court
erred by granting Heflin's N.C. Gen. Stat. . 1A-1, Rule 12(b)(6)
motion to dismiss plaintiff's claim for piercing the corporate
veil. We agree. However, we must first address the argument in
Heflin's brief that N.C. Gen. Stat. . 1-54(2) bars plaintiff from
collecting penalties in connection with past due escrow payments
from Heflin under a theory of piercing the corporate veil, becauseplaintiff's amended complaint does not relate back to the original
complaint. We agree in part.
A: Statute of Limitations
 On 4 May 2004, plaintiff filed suit against Ridgeway for
Ridgeway's failure to make escrow payments due on 15 April 2004.
Plaintiff filed suit within one year of Ridgeway's failure to make
the 15 April 2004 escrow payment, which was within the applicable
statute of limitations. See N.C. Gen. Stat. .. 1-54(2) and 66-
291(c) (2005) . On 19 October 2005, plaintiff amended its complaint
to include Ridgeway's failure to make escrow payments due on 15
April 2005 and to bring an action against Heflin, alleging a theory
of piercing the corporate veil. Heflin contends that the statute
of limitations had expired as to him, since the complaint was
amended to add him as a party defendant more than one year after
Ridgeway's failure to make the escrow payment due on 15 April 2004,
and that the amended complaint does not relate back to the original
[I]t is well-established law that if a plaintiff does not
name the party responsible for his alleged injury before the
statute of limitations runs, his claim will be dismissed. Estate
of Fennell v. Stephenson, 354 N.C. 327, 332, 554 S.E.2d 629, 632
(2001). However, in certain circumstances, a complaint may relate
back with respect to a party defendant added after the applicable
limitations period[.] Franklin v. Winn Dixie Raleigh, Inc., 117
N.C. App. 28, 39, 450 S.E.2d 24, 31 (1994). The law regarding
[w]hether a complaint will relate back to an added party hinges
upon whether that new defendant had notice of the claim so as not
to be prejudiced by the untimely amendment. Id. N.C. Gen. Stat. . 1A-1, Rule 15(c), allows the relation back
of claims in amended complaints in certain circumstances:
A claim asserted in an amended pleading is
deemed to have been interposed at the time the
claim in the original pleading was interposed,
unless the original pleading does not give
notice of the transactions, occurrences, or
series of transactions or occurrences, to be
proved pursuant to the amended pleading.
Id. In Callicutt v. Motor Co., 37 N.C. App. 210, 212, 245 S.E.2d
558, 560 (1978), this Court explained Rule 15(c):
If the effect of the proposed amendment is
merely to correct the name of a party already
in court, clearly there is no prejudice in
allowing the amendment, even though it relates
back to the date of the original complaint. .
. . On the other hand, if the effect of the
amendment is to substitute for the defendant a
new party, or add another party, such
amendment amounts to a new and independent
clause (sic) of action and cannot be permitted
when the statute of limitations has run.
Id. (citing Kerner v. Rackmill, 111 F. Supp. 150, 151 (M.D.P.A.
1953)). In the second scenario, in which the amended complaint
actually add[s] another party, our Supreme Court has been
reluctant to conclude that a party added in an amended complaint
can ever have adequate notice. Id.; see also Estate of Fennell,
354 N.C. at 332, 554 S.E.2d at 632; Crossman v. Moore, 341 N.C.
185, 459 S.E.2d 715 (1995). The Court explained that while Rule
15 of the North Carolina Rules of Civil Procedure permits the
relation-back doctrine to extend periods for pursuing claims, it
does not apply to parties. Estate of Fennell, 354 N.C. at 334-5,
554 S.E.2d at 633-4 (citing Crossman, 341 N.C. at 187, 459 S.E.2d
at 717). The Court set forth the rationale for this rule:
When [an] amendment seeks to add a
party-defendant or substitute aparty-defendant to the suit, the required
notice cannot occur. As a matter of course,
the original claim cannot give notice of the
transactions or occurrences to be proved in
the amended pleading to a defendant who is not
aware of his status as such when the original
claim is filed. We hold that this rule does
not apply to the naming of a new
party-defendant to the action. It is not
authority for the relation back of a claim
against a new party.
Crossman, 341 N.C. at 187, 459 S.E.2d at 717. This is true even
when a proposed amendment join[s] a partner as an individual
defendant in an action against his partnership . . . even though
the partner was fully aware of the action and participated in its
defense. 1 G. Gray Wilson, North Carolina Civil Procedure . 15-
12, at 315 (1995) (citing Crossman, 341 N.C. 185, 459 S.E.2d 715).
In light of Crossman, we hold that the statute of limitations
expired as to any claims against Heflin for penalties under N.C.
Gen. Stat. . 66-291(c) arising from the failure to make the 2004
escrow deposit. We thus affirm the trial court's dismissal of the
claim for penalties arising out of the failure to pay the 2004
escrow deposit. However, the dismissal of this claim has no effect
upon plaintiff's claims for payment of the 2004 escrow deposit.
See Miller v. C. W. Myers Trading Post, Inc., 85 N.C. App. 362,
368, 355 S.E.2d 189, 193 (1987) (holding that N.C. Gen. Stat. .
1-54(2) was inapplicable to an action not constituting a penalty
or forfeiture and the purpose of which was not punitive); see
also N.C. Gen. Stat. § 1-52(2) (2005).
Further, at the time of the filing of the amended complaint,
which named Heflin as a party to this action, the one-year statuteof limitations had not expired as to any penalties arising from the
failure to make the 2005 escrow deposit.
B: Piercing the Corporate Veil
 North Carolina courts will pierce the corporate veil
where an individual exercises actual control over a corporation,
operating it as a mere instrumentality[.] Becker v. Graber
Builders, Inc., 149 N.C. App. 787, 790, 561 S.E.2d 905, 908 (2002)
(citation omitted). The North Carolina Supreme Court set forth the
instrumentality rule as follows:
[When a] corporation is so operated that it is
a mere instrumentality or alter ego of the
sole or dominant shareholder and a shield for
his activities in violation of the declared
public policy or statute of the State, the
corporate entity will be disregarded and the
corporation and the shareholder treated as one
and the same person, it being immaterial
whether the sole or dominant shareholder is an
individual or another corporation.
Henderson v. Finance Co., 273 N.C. 253, 260, 160 S.E.2d 39, 44
(1968). Liability may be imposed on an individual controlling a
corporation as an instrumentality when the individual had:
(1) Control, not mere majority or complete
stock control, but complete domination,
not only of finances, but of policy and
business practice in respect to the
transaction attacked so that the
corporate entity as to this transaction
had at the time no separate mind, will or
existence of its own; and
(2) Such control must have been used by the
defendant to commit fraud or wrong, to
perpetrate the violation of a statutory
or other positive legal duty, or a
dishonest and unjust act in contravention
of plaintiff's legal rights; and
(3) The aforesaid control and breach of duty
must proximately cause the injury or
unjust loss complained of.Glenn v. Wagner, 313 N.C. 450, 455, 329 S.E.2d 326, 330 (1985).
Factors to consider in determining whether to pierce the
corporate veil include: (1) inadequate capitalization; (2)
non-compliance with corporate formalities; (3) complete domination
and control of the corporation so that it has no independent
identity; and (4) excessive fragmentation of a single enterprise
into separate corporations. Id. at 455, 329 S.E.2d at 330-31
(citing generally, Robinson, North Carolina Corporation Law §§
2-12, 9-7 to -10 (3d ed. 1983)).
The question for this Court is whether the allegations in
plaintiff's complaint are sufficient to state a claim for piercing
the corporate veil.
Plaintiff alleges that Heflin: (1) overwhelmingly dominated
and controlled [Ridgeway] to the extent [Ridgeway] had no separate
identity[;] (2) used that control to set the pricing structure
so as to violate N.C. Gen. Stat. . 66-291(b); and (3) that Heflin's
aforesaid control and statutory violation proximately caused unjust
capital loss to the escrow fund established by N.C. Gen. Stat. .
66-291(b). Plaintiff specifically alleged that Heflin
deliberately ignored the advice of Ridgeway's general manager,
who warned that the pricing structure was grossly inadequate to
satisfy the statutory obligations of the [North Carolina] escrow
payment [statute]. Plaintiff alleged that Heflin, Edwards and
White were responsible for setting the pricing structure for the
sale of cigarettes, which was well below the minimum necessary
level to pay the statutory obligations[.] Further, they set this
pricing structure to have an unfair advantage over similarlysituated competitors . . . with no intention of paying their
statutory obligations[.] Moreover, plaintiff contended that
Heflin, Edwards and White took money out of [Ridgeway] and left
[Ridgeway] in disarray[;] that Ridgeway was inadequately
capitalized and excessively fragment[ed][;] that no corporate
financial records or grossly inadequate corporate records existed
for [Ridgeway][;] and that Ridgeway failed to follow corporate
formalities[.] Accordingly, we hold that the allegations in
plaintiff's complaint are sufficient to state a claim for piercing
the corporate veil. See, e.g., Becker, 149 N.C. App. at 790, 561
S.E.2d at 908.
We reverse the trial court as to this assignment of error.
II: Unfair and Deceptive Trade Practices
 In its second argument, plaintiff contends that the trial
court erred by dismissing its claim for relief under N.C. Gen.
Stat. . 75-1.1 (2005), the Unfair and Deceptive Trade Practices
Act. We disagree and affirm the trial court.
N.C. Gen. Stat. . 75-1.1 states, in pertinent part, the
(a) Unfair methods of competition in or
affecting commerce, and unfair or
deceptive acts or practices in or
affecting commerce, are declared
(b) For purposes of this section, "commerce"
includes all business activities, however
denominated, but does not include
professional services rendered by a
member of a learned profession.
Id. To establish a prima facie claim for unfair and deceptive
trade practices, the plaintiff must show: (1) Heflin committed an
unfair or deceptive act or practice; (2) the action in question was
in or affecting commerce; and (3) the act proximately caused injury
to the plaintiff. Pleasant Valley Promenade v. Lechmere, Inc., 120
N.C. App. 650, 664, 464 S.E.2d 47, 58 (1995).
Heflin contends that its failure to perform its obligation
under N.C. Gen. Stat. . 66-291 does not provide a cause of action
under N.C. Gen. Stat. . 75-1.1, basing his argument upon the
rationale of Lindner v. Durham Hosiery Mills, Inc., 761 F.2d 162,
166 (4th Cir. 1985), in which the Fourth Circuit held that N.C.
Gen. Stat. . 75-1.1 did not apply to securities transactions. The
court reasoned that the North Carolina legislature would [not]
have intended . 75-1.1, with its treble damages provision, to apply
to securities transactions which were already subject to pervasive
and intricate regulation under the North Carolina Securities Act
and other federal acts. Id. at 167. The court stated that [t]he
presence of other federal or state statutory schemes may limit the
scope of . 75-1.1. Id.
In Skinner v. E. F. Hutton & Co., 314 N.C. 267, 268, 333
S.E.2d 236, 237 (1985), our Supreme Court cited Lindner as
persuasive authority, holding that securities transactions are
beyond the scope of [N.C. Gen. Stat. . 75-1.1.] Id. The Court in
Hajmm Co. v. House of Raeford Farms, 328 N.C. 578, 403 S.E.2d 483
(1991), expanded the exception established by Skinner, holding that
. 75-1.1 did not apply to a corporation's refusal to redeem
revolving fund certificates issued by the corporation. The Courtreasoned that the extension of the scope of . 75-1.1 in this
context would create overlapping supervision, enforcement, and
liability in [an] area [that] is already pervasively regulated by
state and federal statutes and agencies. Id. at 593, 403 S.E.2d
at 493. The Court explained that there is enough legislative
apparatus already in place . . . without also applying [. 75-1.1].
In the instant case, N.C. Gen. Stat. . 66-291 (2005) provides
that: Any tobacco product manufacturer selling cigarettes to
consumers within the State . . . shall either elect to [b]ecome
a participating manufacturer . . . under the Master Settlement
Agreement or [p]lace into a qualified escrow fund by April 15 of
the year following the year in question the following amounts[:] .
. . For each of 2003 through 2006: $.0167539 per unit sold. Id.
N.C. Gen. Stat. . 66-291(c) provides the remedy for failure to
comply with the aforementioned statute: [t]he Attorney General may
bring a civil action on behalf of the State against any tobacco
product manufacturer that fails to place into escrow the funds
required under this section. Id. N.C. Gen. Stat. . 66-291(c)
further provides that the noncompliant manufacturer has fifteen
days to place such funds into escrow as shall bring it into
compliance. Id. If the violation was a knowing violation, the
court may impose the following civil penalty:
[A]n amount not to exceed fifteen percent
(15%) of the amount improperly withheld from
escrow per day of the violation and in a total
amount not to exceed three hundred percent
(300%) of the original amount improperly
withheld from escrow[.]
Id. We hold that N.C. Gen. Stat. . 66-291 is analogous to the
regulations discussed in Lindner, 761 F.2d 162, Skinner, 314 N.C.
267, 333 S.E.2d 236, and Hajmm Co., 328 N.C. 578, 403 S.E.2d 483.
N.C. Gen. Stat. . 66-291 itself provides an extensive remedy for
failure to comply with the escrow obligation. Because the presence
of other statutory schemes may limit the scope of N.C. Gen. Stat.
. 75-1.1, we conclude that extension of the scope of N.C. Gen. Stat
. 75-1.1 in this context would create unnecessary and overlapping
supervision, enforcement, and liability[.] Hajmm Co., 328 N.C. at
593, 403 S.E.2d at 493. We conclude that it was not the
legislature's intent to extend the scope of Chapter 75 to include
noncompliance with N.C. Gen. Stat. . 66-291. [T]here is enough
legislative apparatus already in place . . . without also applying
the Act. Id. We affirm the trial court's dismissal of this
III: Civil Conspiracy
 In its third argument, plaintiff contends that the trial
court erred by granting Heflin's N.C. Gen. Stat. . 1A-1, Rule
12(b)(6) motion to dismiss the claim for civil conspiracy in
plaintiff's amended complaint. We agree.
The elements of a civil conspiracy are: (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. Privette v. University of North
, 96 N.C. App. 124, 139, 385 S.E.2d 185, 193 (1989). The doctrine of intracorporate immunity holds that, since at
least two persons must be present to form a conspiracy, a
corporation cannot conspire with itself, just as an individual
cannot conspire with himself. Buschi v. Kirven
, 775 F.2d 1240,
1251-52 (4th Cir. 1985). An allegation that a corporation is
conspiring with its agents, officers or employees is tantamount to
accusing a corporation of conspiring with itself. Id.
the grant of immunity is not destroyed by suing the agent in his
individual capacity. Id.
However, an exception to the
doctrine exists if the corporate agent has an independent personal
stake in achieving the corporation's illegal objective. Id.
(citing Greenville Publishing Co., Inc., v. Daily Reflector, Inc.
496 F.2d 391, 399 (4th Cir. 1974)).
In the instant case, the complaint alleged:
Defendants shared an understanding, either
expressed or implied, to enter into an
agreement to underprice the cigarettes made by
Defendant [Ridgeway] and distributed and sold
by [Brands] so that [Ridgeway] would be unable
to deposit sufficient escrow to cover sales in
violation of N.C. Gen. Stat. . 66-291 and
would deprive the State of North Carolina of a
fund against which it could execute judgments
against Defendant [Ridgeway].
Defendants shared an understanding, either
express or implied, to enter into an agreement
to unfairly and deceptively underprice the
cigarettes made by Defendant [Ridgeway] and
distributed and sold by [Brands] so that
[Ridgeway] would be unable to deposit
sufficient escrow to cover sales in violation
of N.C. Gen. Stat. . 66-291 and deprived the
State of a fund against which it could execute
We again note that the complaint should be liberally construed,
and the court should not dismiss the complaint unless it appearsbeyond doubt that [the] plaintiff could prove no set of facts in
support of his claim which would entitle him to relief.
151 N.C. App. at 606, 566 S.E.2d at 821
Plaintiff's complaint alleges that an agreement existed
between Heflin, Edwards and White, to violate, pursuant to a common
scheme, the corporation's escrow obligation under N.C. Gen. Stat.
. 66-291, which caused injury to plaintiff by depriv[ing]
[plaintiff] of a fund against which it could execute judgments.
See generally Privette,
96 N.C. App. 124, 385 S.E.2d 185.
we conclude that the benefit accruing to Heflin
from his conspiracy was not merely the benefit associated with the
profitability of the corporations, Ridgeway and Brands.
Plaintiff's complaint supports the theory that Heflin had an
independent personal stake in achieving the corporation's illegal
objective, because plaintiff alleged that Heflin directe[d]
monies intended to [Ridgeway] to either . . . Edwards, White,
[Brands] or [Heflin][.] Plaintiff further alleged that, in 2004,
Heflin told Welchons that [Ridgeway] was not going to file for
bankruptcy because [Heflin] and others did not want anybody looking
back to see what was going on and track the money back to where it
came from. After this comment, Welchons considered the creation
of financial records and the hiring of attorneys Schwartz and
Turpin to be a cover-up to hide activities. Ridgeway made
payments in excess of $1 million to Turpin and Schwartz, of which
none was ever accounted for or returned to [Ridgeway][.] Welchons,
the general manager of Ridgeway, was never told how the money was
spent. Plaintiff alleged that Heflin and others disposed ofalmost all assets of [Ridgeway] and siphon[ed] off funds to
themselves. We hold that the foregoing is sufficient to support
the theory that Heflin had an independent personal stake in
achieving the corporation's illegal objective. Buschi,
We reverse the trial court's order granting Heflin's N.C. Gen.
Stat. . 1A-1, Rule 12(b)(6) motion to dismiss as to the claim for
For the reasons discussed above, we affirm in part, reverse in
part, and remand this case to the trial court for further
proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART.
Judge HUNTER concurs.
Judge WYNN concurring in part and
dissenting in part.
WYNN, Judge, concurring in part and dissenting in part.
I concur with the majority in concluding that this appeal
presents the possibility of two trials on the same issue, as well
as the majority's holding to reverse the trial court's granting of
Mr. Heflin's Rule 12(b)(6) motion on the State's claim for piercing
the corporate veil and to affirm the trial court's dismissal of the
State's UDTP claim. However, I would reverse the trial court's
dismissal of the State's claim for civil penalties, and I would
affirm the trial court's dismissal of the State's claim of civil
conspiracy. From those portions of the majority opinion, I
therefore respectfully dissent.
First, I disagree with the conclusions of the majority's
analysis as to the issue of the State's claim for civil penalties
against Mr. Heflin, relating to the non-payment of the 2004
As cited by the majority, our Supreme Court has established
the rule that a new party-defendant may not be named in the
amendment of a complaint, as the North Carolina Rules of Civil
Procedure are not authority for the relation back of a claim
against a new party. See, e.g., Crossman v. Moore, 341 N.C.
185, 187, 459 S.E.2d 715, 717 (1995). The instant case, however,
also involves a claim by the State to pierce the corporate veil
of Ridgeway, a claim which we allow to go forward by reversing
the trial court's granting of Mr. Heflin's Rule 12(b)(6) motion.
If the State subsequently succeeds on its claim to pierce
the corporate veil, Mr. Heflin would not be a new party-
defendant, as a jury would therefore have concluded that he is
the alter ego of Ridgeway. As such, the lack of his name in the
original complaint would essentially be immaterial with respect
to the question of notice, the Supreme Court's primary concern in
disallowing the relation-back doctrine as to newly named parties.
See id. (As a matter of course, the original claim cannot give
notice of the transactions or occurrences to be proved in the
amended pleading to a defendant who is not aware of his status as
such when the original claim is filed.).
I find the reasoning in Strawbridge v. Sugar Mountain
Resort, Inc., 243 F. Supp. 2d 472 (W.D.N.C. 2003), to bepersuasive and applicable to the case at hand. In Strawbridge,
the Western District Court held that the filing of an action
against a corporation stopped the limitation period from running
with respect to alter egos of the corporation. Id. at 476-77. I
believe this approach to be more consistent with the idea of what
an alter ego means, in that the corporate entity will be
disregarded and the corporation and the shareholder treated as
one and the same person[.] Henderson v. Security Mortgage &
Finance Co., Inc., 273 N.C. 253, 260, 160 S.E.2d 39, 44 (1968)
Thus, I would conclude that the State's claim for civil
penalties, and whether it was filed after the expiration of the
applicable statute of limitations, hinges on whether the State
can successfully pierce the corporate veil and establish that Mr.
Heflin and Ridgeway are alter egos. Given that this case is
before us on review of a Rule 12(b)(6) motion, and we have held
that the State can proceed with its claim to pierce the corporate
veil, I would likewise reverse the trial court's order dismissing
the State's claim for civil penalties.
Next, although I agree with the majority that intracorporate
immunity should not apply in this case, I do not believe that the
State's complaint alleged sufficient facts to show a civil
conspiracy in this case. I would therefore affirm that portion
of the trial court's order that dismissed the State's claim for
civil conspiracy. To state a claim for civil conspiracy, there must be proof
of an agreement between two or more persons to do an unlawful act
or a lawful act in an unlawful manner. Dove v. Harvey
, 168 N.C.
App. 687, 690, 608 S.E.2d 798, 800-01 (2005), disc. review
, 360 N.C. 289, 628 S.E.2d 249 (2006). Here, the State's
complaint referred only to Defendants shar[ing] an
understanding, either expressed or implied, to enter into an
agreement[.] Although the State argues that this allegation
should be sufficient in light of North Carolina's adoption of
notice pleading, this Court has also noted that the evidence of
the agreement must be sufficient to create more than a suspicion
or conjecture in order to justify submission to a jury. Id
690-91, 608 S.E.2d at 801 (citation and quotation omitted). I do
not believe the State's complaint meets this burden.
The State's complaint includes no factual allegations to
support the notion of an agreement or conspiracy among Mr.
Heflin, Mr. Edwards, and Mr. White to underprice the cigarettes
for the express purpose of avoiding its statutory obligations to
pay into the qualified escrow account. Even were all the facts
of the complaint taken as true, its allegations are insufficient
to create more than a suspicion or conjecture of an actual
agreement among the parties; accordingly, they fail to state a
claim for civil conspiracy. I would therefore affirm the trial
court's dismissal of the State's claim for civil conspiracy.
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