Matthew Bagley worked for a claims adjustment firm in Louisiana as its claims manager for nearly three years before resigning to, allegedly, improperly compete against his former employer, M.D. Claims Group. In M.D. Claims Grp., LLC v. Bagley, 2025 NCBC 2, several alleged events in the months following Bagley’s departure raised alarm with plaintiff (Id. ¶¶ 16, 19):

  • M.D. clients saying Bagley solicited business for his new gig, Bagley Consulting, while he still worked for plaintiff;
  • learning that Bagley was using report forms M.D. believed were identical to its own; and
  • discovering upon Bagley’s return of a USB drive containing 80,361 files which contained purportedly confidential information that he had these files during the four months following his exit.

The unfolding case, and the familiar fact pattern of conflict between employees and their former employers, will likely feature more disclosures about the manner of the competition and the nature of the 80,361 digital files. For instance, plaintiff claimed that Bagley formed defendant Bagley Consulting, LLC before his departure from M.D. Claims, but when asked about it, informed that it “was set up for [his] wife and her business ventures.” Id. ¶ 17.

The formation and operation of Bagley Consulting got initial consideration from the Business Court because a proposed amended complaint’s prayer for relief sought veil piercing so that Bagley and his entity could be treated as “one and the same.” As plaintiff pled it, Bagley was the sole member of an LCC that was a “mere instrumentality” which committed wrongs. Id. ¶¶ 66, 71.

As a matter of pleading, the Court denied the motion for leave to amend to the extent it sought veil piercing, noting it “is a strong step: Like lightning, it is rare and severe.” Id. ¶ 73 (quoting State ex rel Cooper v. Ridgeway Brands Mfg;, 362 N.C. 431, 439 (2008)). As Judge Earp observed, to “set aside the corporate form and the protections that go along with it,” a thorough-going analysis, as opposed to merely pleading “key words,” is required to take such a leap. Id. ¶¶ 67, 71.

A purported claim for veil piercing in North Carolina is reviewed against a well-settled, three-point test:

  1. control in the nature of “complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked”;
  2. that is used to commit fraud or wrong, or violate a duty; and
  3. proximately caused injury.

Id. ¶ 69 (quoting Cold Springs Ventures, LLC v. Gilead Scis., Inc., 2015 WL 179040, *5 (N.C. Super. Ct. Jan. 6, 2015)). Instead of conclusory pleadings, the Court reminded that it looks for allegations of inadequate capitalization, failure to meet corporate formalities, no independent identity for an entity, and “excessive fragmentation of a single enterprise into separate corporations.” Id. ¶ 70 (quoting East Mkt. St. Square, Inc. v. Tycorp Pizza IV, Inc, 175 N.C. App. 628, 636 (2006)).

The Court held that “even in a single member LLC,” simple allegations of complete domination can’t carry the day. “Common ownership and management, without more, do not equate to the kind of complete domination needed to show that one entity is another’s puppet.” Id. ¶ 71 (quoting Harris v. Ten Oaks Management, LLC, 2022 WL 2198888, *3 (N.C. Super. Ct. June 20, 2022)).

Worth Noting

  • For litigants who find themselves opposing complaint amendments on futility grounds, the Court reminds that the standard is whether, like in Rule 12(b)(6) motions, the new allegations, “treated as true,” would state a claim on which relief may be granted. Id. ¶ 29 (quoting Howard v. IOPMAXIS, LLC, 2023 WL 8319784, *5 (N.C. Super. Ct. Nov. 29, 2023)).

Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.