McClure v. Ghost Town in the Sky, LLC

1

2024 NCBC 33

JILL MCCLURE, Plaintiff, v. GHOST TOWN IN THE SKY, LLC, Defendant.

No. 22 CVS 752

Superior Court of North Carolina, Haywood

May 16, 2024

McGuire Wood & Bissette, P.A., by Mary E. Euler, for Plaintiff Jill McClure.

McLean Law Firm, P.A., by Russell Lyway McLean, for Defendant Ghost Town in the Sky, LLC.

ORDER AND OPINION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND MOTION TO STRIKE

ADAM M. CONRAD SPECIAL SUPERIOR COURT JUDGE.

I. BACKGROUND

1. In this lawsuit, Jill McClure seeks to dissolve Ghost Town in the Sky, LLC. Pending is her motion for summary judgment. (See ECF No. 69.) For the following reasons, the Court DENIES her motion and GRANTS summary judgment in favor of Ghost Town in the Sky.

2. The Court does not make findings of fact when ruling on motions 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. Ghost Town in the Sky has a short history. Its founders, Alaska Presley and Coastal Development, LLC, formed the company in 2020. Their aim was to redevelop a defunct, western-themed amusement park and 250 surrounding acres in the North Carolina mountains. Presley contributed the property (which she had bought years earlier in hopes of opening a Christian amusement park), and Coastal Development promised future contributions of "cash or financing and labor for development." Each received an equal 50 percent membership interest. (See V. Compl. ¶¶ 2, 25, 30, 32, 35, ECF No. 3; V. Compl. Ex. 1 ["Op. Agrmt."] §§ 1.1, 5.1, Art. II, ECF No. 3; see also Ex. 1 to Pl.'s Ex. 12, ECF Nos. 74, 93.5.)

4. Shortly after forming Ghost Town in the Sky, Presley and Coastal Development drafted a written operating agreement to govern its affairs. They also designated Coastal Development-acting through its principal, Frankie Wood-as the managing member. Under the operating agreement, the managing member has broad authority to conduct the company's day-to-day operations. Extraordinary acts, such as declaring bankruptcy or disposing of all company assets, require "the consent of all the Members," however. (V. Compl. ¶ 31; Op. Agrmt. §§ 7.9, 7.10; Wood Aff., ECF No. 79.)

5. The record offers only a bare sketch of Ghost Town in the Sky's activities over the next couple of years. Wood began attending town meetings and lobbying local officials on zoning and related matters. He and Presley also had discussions with Storyland Studios, a design and marketing company with theme-park experience. A few potential investors expressed interest in the project, but it is unclear how serious that interest was. Throughout this period, Ghost Town in the Sky did not secure financing, earn income, or hire employees. Indeed, Presley paid most of the company's utility bills and property taxes out of her own pocket. (See 1^st McClure Aff. ¶ 4, ECF No. 26; McClure Dep. 38:12-20, 43:6-44:16, 64:7-25, 73:14- 24, ECF No. 100; Wood Dep. v.1 49:9-17; 54:22-55:13, 56:14-57:24, ECF Nos. 74, 93.5.)

6. In the spring of 2022, Presley died at age 98. She had arranged in the operating agreement that McClure, her niece, would "succeed to all of" her "Membership interest . . . with all the interests, rights and duties previously held by the decedent." McClure immediately began asking for books and records, an accounting and other financial information, and access to the property. She also expressed a willingness to sell her interest to Coastal Development. But buyout negotiations ended in an impasse. And Wood rejected McClure's other demands, claiming that she was a mere economic interest holder, not a member. (V. Compl. ¶¶ 5, 6, 46-48, 56; Op. Agrmt. § 12.4; Wood Aff. at 3.)

7. Just four months after Presley's death, McClure brought this suit to dissolve Ghost Town in the Sky and wind up its affairs under N.C. G.S. § 57D-06-02(2). She bases her claim on allegations that the company is insolvent, has virtually no income, and cannot pay its property taxes, insurance premiums, and other routine costs. She also blames Coastal Development for mismanaging the company and suppressing her rights as a member.^[1] (See V. Compl. ¶¶ 37, 38, 45-47, 87-91.)

8. The parties filed a flurry of motions right out of the gate. Ghost Town in the Sky moved to dismiss the complaint, arguing that McClure was not a member and therefore lacked standing to seek its dissolution. McClure moved for a preliminary injunction to enforce her membership rights, including informational rights granted by the operating agreement. She also moved to appoint herself as receiver to take control of Ghost Town in the Sky pending its dissolution, forecasting, in part, that restoration of her membership rights would inevitably lead to a managerial deadlock between her and Coastal Development. (See Mot. Dismiss, ECF No. 4; Mot. Prelim. Inj., ECF No. 15; Mot. Appt. Receiver, ECF No. 16.)

9. The Court denied each motion. As to Ghost Town in the Sky's motion to dismiss, the Court held that the operating agreement unambiguously conferred membership on McClure. See McClure v. Ghost Town in the Sky, LLC, 2022 NCBC LEXIS 151, at *5 (N.C. Super. Ct. Dec. 5, 2022). In the wake of that decision, Ghost Town in the Sky represented that it would treat McClure as a member and honor her membership rights. As a result, the Court denied McClure's motions without prejudice, concluding that there was "no urgent need to appoint a receiver or to enter a preliminary injunction" once her rights had been restored and that her concerns about a future management deadlock were speculative at best. (See Order on Mots. for Appt. Receiver & Prelim. Inj. 2-3, ECF No. 30.)

10. Meanwhile, there have been a few noteworthy events. In November 2022, Ghost Town in the Sky signed a contract with Storyland Studios to create a project design plan, contingent on securing financing. In March 2023, McClure called a member meeting for the purpose of removing Coastal Development as managing member. Her motion failed because Coastal Development voted against it, and the meeting was adjourned without further business. Since then, McClure and Coastal Development have quarreled over who must pay Ghost Town in the Sky's 2022 and 2023 property taxes, both of which are past due. (See Notice of Mtg. of Members, ECF No. 42; Pl.'s Ex. 9, ECF Nos. 74, 93.4; 2d McClure Aff. ¶¶ 2-4, ECF No. 84.1; see also Consent Judgment as to Maggie Valley RV Park, LLC.)

11. After discovery closed, McClure moved for summary judgment on her dissolution claim. (See ECF No. 69.) She also moved to strike certain exhibits that Ghost Town in the Sky submitted in opposition to the motion for summary judgment. (See ECF No. 85.) Following a hearing on both motions on 30 January 2024, the Court notified the parties that it intended to consider whether to enter summary judgment against McClure, as allowed by Rule 56(c) of the North Carolina Rules of Civil Procedure, and called for supplemental briefing on that question. The parties filed their briefs and additional supporting materials on 16 February 2024. The motions are now ripe for resolution.

II. MOTION FOR SUMMARY JUDGMENT

12. 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 entitled to a judgment as a matter of law." N.C. R. Civ. P. 56(c). A trial court may, "when appropriate," enter summary judgment "against the moving party." Id.; see also Brooks v. Hackney, 329 N.C. 166, 170 n.2 (1991).

13. Involuntary dissolution is an equitable remedy and an "extraordinary" one at that. Brady v. Van Vlaanderen, 2017 NCBC LEXIS 61, at *18 (N.C. Super. Ct. July 19, 2017). By statute, a trial court may dissolve an LLC only when a member shows that "it is not practicable to conduct the LLC's business in conformance with the operating agreement and [governing statutes]" or that "liquidation of the LLC is necessary to protect the rights and interests of the members." N.C. G.S. § 57D-6-02(2). And "even where a party establishes a statutory ground for dissolution," whether or not to dissolve the LLC is "left largely to the discretion of the trial court." Reid Pointe, LLC v. Stevens, 2008 NCBC LEXIS 16, at *11-12 (N.C. Super. Ct. Aug. 18, 2008).

14. Nearly all the parties' arguments center on whether it is or isn't practicable for Ghost Town in the Sky to conduct its business in conformance with its operating agreement. The phrase "not practicable" means "unfeasible" (as opposed to "impossible"). James H.Q. Davis Tr. v. JHD Props. LLC, 2022 NCBC LEXIS 153, at *13 (N.C. Super. Ct. Dec. 9, 2022). A managerial deadlock is perhaps the most common example of a circumstance in which it is unfeasible to carry on the LLC's business. See, e.g., id. at *13-14; Battles v. Bywater, LLC, 2014 NCBC LEXIS 54, at *24 (N.C. Super. Ct. Oct. 31, 2014). Absent deadlock, though, courts near and far "have been reluctant to order dissolution so long as it is possible to continue to operate the company in accordance with its certificate of organization and management agreement." Barkalow v. Clark, 959 N.W.2d 410, 420 (Iowa 2021). As the Iowa Supreme Court recently put it, there must be "a clear inability to fulfill the contracted purposes of the LLC, usually but not invariably for financial reasons." Id.; see also In re 1545 Ocean Ave., LLC, 72 A.D.3d 121, 131 (N.Y.App.Div. 2010) (holding that, absent deadlock, the member petitioning for dissolution must show that "continuing the entity is financially unfeasible").

15. No deadlock exists here: the undisputed evidence shows that Coastal Development is the sole managing member of Ghost Town in the Sky and...