Pregel Am. v. Casol

1

2023 NCBC 81

PREGEL AMERICA, INC., Plaintiff, v. MARCO CASOL and TANIA SOVILLA, Defendants

No. 23 CVS 1233

Superior Court of North Carolina, Cabarrus

December 1, 2023

ORDER AND OPINION ON CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT

1. THIS MATTER is before on the Court on Plaintiff PreGel America's Motion for Partial Summary Judgment on Its Declaratory Judgment Claims ("Plaintiff's Motion")^[1] and Defendant Marco Casol's Motion for Partial Summary Judgment ("Defendant's Motion" together, the "Cross-Motions" or "Motions"), each filed under Rule 56 of the North Carolina Rules of Civil Procedure (the "Rule(s)") on 18 August 2023 in the above-captioned action.^[2]

2. Having considered the Motions, the parties' briefs in support of and in opposition to the Motions, the arguments of counsel at the hearing on the Motions, and other appropriate matters of record, the Court, in the exercise of its discretion, hereby DENIES Plaintiff's Motion and GRANTS Defendant's Motion as set forth below.

Bradley Arant Boult Cummings, LLP, by Dana C. Lumsden, Brett L. Lawrence, and Hanna E. Eickmeier, for Plaintiff PreGel America, Inc. Bell Davis & Pitt, P.A., by Edward B. Davis, Lacey M. Duskin, and Kevin J. Roak, for Defendants Marco Casol and Tania Sovilla.

Louis A. Bledsoe, III Chief Business Court Judge

I.

FACTUAL AND PROCEDURAL BACKGROUND^[3]

3. While the Court does not make findings of fact on a motion for summary judgment, "it is helpful to the parties and the courts for the trial judge to articulate a summary of the material facts which he considers are not at issue and which justify entry of judgment." Collier v. Collier, 204 N.C.App. 160, 161-62 (2010) (citation and quotation marks omitted). Accordingly, the following background, drawn from the undisputed evidence submitted by the parties, is intended only to provide context for the Court's analysis and ruling and not to resolve issues of material fact.

4. Plaintiff PreGel America, Inc. ("PreGel" or "Plaintiff") is the United States subsidiary of PreGel S.p.A., an Italian company that produces and distributes dessert pastes, powders, flavors, and ingredients.^[4] PreGel is currently governed by its Third Amended and Restated Bylaws, which were ratified in 2018 (the "Bylaws").^[5]

5. Defendant Marco Casol ("Casol" or "Defendant") and his wife Defendant Tania Sovilla ("Sovilla") are Italian citizens. PreGel hired Casol in 2003, and from 2007 until 2020, Casol served as PreGel's President and CEO.^[6] Casol also served as PreGel's Treasurer beginning in 2011.^[7] PreGel employed Sovilla as an inventory specialist from 2012 until 2019.^[8]

6. PreGel alleges that during Casol's employment, and especially during his tenure as PreGel's CEO, he and Sovilla defrauded PreGel and violated its policies in multiple ways, including by approving unauthorized salary increases for Casol,^[9]misusing corporate credit cards, personnel, and property,^[10] and misappropriating corporate funds for their personal benefit.^[11] Due to these and other alleged violations of company policy, PreGel terminated Casol's employment on 13 February 2020.^[12]

7. Shortly after Casol's termination, Plaintiff sued Casol in the United States District Court for the Western District of North Carolina, in a case captioned PreGel America, Inc. v. Casol, Case No. 3:20-CV-00470-MOC-DSC (the "Federal Action"), asserting claims for breach of contract, breach of fiduciary duty, fraud, constructive fraud, conversion, unfair and deceptive trade practices in violation of N.C. G.S. § 75-1.1, and violation of N.C. G.S. § 1-538.2.^[13]

8. The Federal Action proceeded for two years until it was dismissed for lack of subject matter jurisdiction on 10 March 2023.^[14]

9. Shortly thereafter, Casol's counsel sent a letter dated 16 March 2023 to PreGel's counsel demanding that PreGel indemnify Casol under Article Eight of the Bylaws for the litigation expenses Casol incurred in defending against the Federal Action.^[15]

10. PreGel's counsel responded to this letter on 17 April 2023, contending that Casol was not entitled to indemnification under the Bylaws because the expenses he incurred resulted from "activities which were at the time taken known or believed by him to be clearly in conflict with the best interests of the corporation."^[16]

11. On the same day, Plaintiff initiated this action, asserting substantially similar claims as in the Federal Action.^[17] Plaintiff also sought a declaration that PreGel was not required to indemnify Casol under the Bylaws for his expenses incurred in defense of the Federal Action.^[18]

12. Ten days later, on 27 April 2023, Defendants' counsel sent two letters to Plaintiff's counsel demanding indemnification under N.C. G.S. §§ 55-8-52 and 55-8-56.^[19] Plaintiff's counsel responded on 1 June 2023 rejecting this demand.^[20]

13. On 12 June 2023, Plaintiff filed an Amended Complaint, adding claims for declaratory judgment to determine that PreGel did not owe Casol indemnification either under the Bylaws or under N.C. G.S. §§ 55-8-52 and 55-8-56.^[21] Defendants filed their answer to the Amended Complaint on 18 July 2023, which included Casol's counterclaim for a declaratory judgment to determine that he is presently owed mandatory indemnification under N.C. G.S. §§ 55-8-52 and 55-8-56.^[22]

14. The Court convened a Case Management Conference (the "Conference") in the above-captioned case on 20 July 2023. At the Conference, the parties agreed with the Court that their competing declaratory judgment claims presented discrete issues that could be resolved on summary judgment prior to the resolution of the other pending claims. Accordingly, the Court established a two-phase summary judgment briefing schedule, with dispositive motions on the parties' respective declaratory judgment claims filed first, followed several months later by dispositive motions on the parties' remaining claims.^[23]

15. On 18 August 2023, the parties timely filed the Cross-Motions. PreGel's Motion asks the Court to enter summary judgment for PreGel on its declaratory judgment claims to determine that Casol is not entitled to indemnification under either the Bylaws or sections 55-8-52 and 55-8-56. Casol's Motion seeks summary judgment on his declaratory judgment counterclaim to determine that Casol is entitled to indemnification under these same statutory provisions.^[24] After full briefing, the Court convened a hearing on the Cross-Motions (the "Hearing") on 24 October 2023, at which all parties were represented by counsel. The Cross-Motions are now ripe for resolution.

II. LEGAL STANDARD

16. Under Rule 56(c), "[s]ummary judgment is appropriate 'if 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.'" Da Silva v. WakeMed, 375 N.C. 1, 10 (2020) (quoting N.C. R. Civ. P. 56(c)). "A genuine issue of material fact is one that can be maintained by substantial evidence." Curlee v. Johnson, 377 N.C. 97, 101 (2021) (cleaned up). "Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion and means more than a scintilla or a permissible inference[.]" DeWitt v. Eveready Battery Co., 355 N.C. 672, 681 (2002) (cleaned up). "An issue is material if, as alleged, facts 'would constitute a legal defense, or would affect the result of the action or if its resolution would prevent the party against whom it is resolved from prevailing in the action.'" Bartley v. City of High Point, 381 N.C. 287, 292 (2022) (quoting Koontz v. City of Winston-Salem, 280 N.C. 513, 518 (1972)). "When considering a motion for summary judgment, the trial judge must view the presented evidence in a light most favorable to the nonmoving party." Belmont Ass'n v. Farwig, 381 N.C. 306, 310 (2022) (quoting Dalton v. Camp, 353 N.C. 647, 651 (2001)).

17. "The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact." Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571, 579 (2002). The movant may meet this burden either (1) "by proving an essential element of the opposing party's claim does not exist, cannot be proven at trial, or would be barred by an affirmative defense," or (2) "by showing through discovery that the opposing party cannot produce evidence to support an essential element of [its] claim[.]" Dobson v. Harris, 352 N.C. 77, 83 (2000) (cleaned up). If the movant meets its burden, "the burden shifts to the nonmoving party to produce a forecast of evidence demonstrating that the nonmoving party will be able to make out at least a prima facie case at trial[.]" Cummings v. Carroll, 379 N.C. 347, 358 (2021) (cleaned up); see also N.C. R. Civ. P. 56(e) ("[A]n adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.").

III. ANALYSIS

A. Permissive Indemnification Under the Bylaws

18. Plaintiff's Motion first seeks summary judgment on its claim for a declaratory judgment determining that Casol is not owed permissive indemnification under the Bylaws.

19. Article 8, Part 5 of Chapter 55 provides the conditions under which a corporation may or shall indemnify its officers and directors. N.C. G.S. § 55-8-51 addresses permissive indemnification of directors, and N.C. G.S. § 55-8-57(a) provides for permissive indemnification of officers.^[25] Pursuant to these statutes, the Bylaws provide that any PreGel officer "shall have the right to be indemnified and held harmless by the...