We focus a lot at the blog on ways in which the Business Court sets the boundaries for conduct of business within the State to provide a more settled landscape for companies to assess risks and opportunities. There are occasions, though, in which the Court is just as likely speaking to the commercial litigation bar that appears before it.
In Oak Grove Techs., LLC v. Seventh Dimension, LLC, 2025 NCBC 50, the Court dealt with a motion to dismiss between defense contractors that provide personnel, training, and other services to the Department of Defense. In granting varied relief on the complaint’s allegations, Judge Houston provided practitioners guidance on how the Court evaluates complaints and particularly those with robust exhibit sets.
Notice Pleading
As the Court often observes, the standard to plead a contract breach is a “relatively low bar” where the necessary information is limited to that needed for “the adverse party to understand its nature and basis and to file a responsive pleading.” Id. ¶ 57 (quoting Pyco Supply co. v. Am. Centennial Ins. Co., 321 N.C. 435, 442 (1998)). Yet, the leeway is not endless. For instance, the Court considered a series of relatively vague allegations cast as violations of more than 12 provisions in contracts governing the parties’ conduct. Among the claims were providing workers with inadequate security clearances, providing deficient notice of personnel changes or replacements, and improper billing.
The Court noted essential agreement with the contention that such broad assertions furnished insufficient notice of the facts underlying the alleged breaches. However, considering that a court should “consider any exhibits attached to the complaint” in assessing a motion to dismiss, it found just enough support to sustain a challenged set of claims. Id. ¶¶ 58-61 (quoting Krawiec v. Manly¸ 370 N.C. 602, 606 (2018). Yet, the Court hastened to add that “[t]his is not to say, however, that the [ ]claims are well pleaded” (Id. ¶ 61):
“. . . neither the Court nor the opposing party should be required to parse through hundreds of pages of documents slapped onto a complaint or counterclaims as exhibits without any substantive allegations or descriptions of allegations in the text[.] Simply because the Court has a fishing license does not mean that counsel need to put it to the test.”
Fraud/Negligent Misrepresentation
The Court addressed issues arising from claims that plaintiff Oak Grove had a duty to explain to defendant 7D a contract that 7D itself first entered with the government. Judge Houston noted that no duty to disclose would ordinarily arise between “sophisticated businessmen” in such a setting, but held a claim could possibly exist on the allegation that Oak Grove “voluntarily undertook to disclose information about the government’s processes and procedures[.]” Id. ¶¶ 101-102.
Yet, the claim still failed at motion to dismiss where 7D hadn’t sufficiently plead justifiable reliance on the alleged misrepresentations. 7D was required to make reasonable inquiry into the alleged misrepresentations or show that it could not have uncovered the true facts by exercise of reasonable diligence. While the Court noted allegations that Oak Grove had knowledge of the government requirements from its past engagements with the government, it held 7D to to the paces of making factual representations to show “independent inquiry or investigation” where it “knew – or should have known – the terms” of the contract “and the details of its relationship with the government” when it first signed the contract and affirmed it had the abilities to perform. Id. ¶¶ 109-11.
Worth Noting
- In declining to dismiss a request for declaratory relief, the Court noted that contentions a moving party had misinterpreted a contract provision missed the broader point of such claims. “[T]he question is not whether the plaintiff is entitled to a declaration favorable to the plaintiff ‘but whether he is entitled to a declaration of rights at all, so that even if the plaintiff is on the wrong side of the controversy, if he states the existence of a controversy which should be settled, he states a cause of suit for declaratory judgment.” Id. ¶ 75.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.