NC Business Court Limits Chapter 75 in Operating Agreement Case
In Castillo v. RRD Financial LLC, 2025 NCBC 53, the North Carolina Business Court addressed an issue that comes up frequently in business breakups: when does an internal operating agreement dispute rise to the level of an unfair or deceptive trade practice under Chapter 75? The case arose out of a network of used car dealerships in which two employees—later alleged “partners”—claimed the defendants breached an operating agreement and engaged in unfair or deceptive conduct under N.C. Gen. Stat. § 75-1.1. The plaintiffs asserted claims for breach of contract, breach of fiduciary duty, accounting, unjust enrichment, misrepresentation, defamation, and violations of Chapter 75.
The dispute centered on an “operating agreement” negotiated after one plaintiff agreed to remain with the company in exchange for becoming a “partner.” Plaintiffs alleged the defendants retained control over corporate documents and accounting records and failed to provide access to records they believed they were entitled to as members of the enterprise. They argued this conduct constituted unfair or deceptive acts “in or affecting commerce” under Chapter 75.
Judge Matthew T. Houston disagreed. The Court emphasized that Chapter 75 does not apply to every business dispute—particularly disputes internal to a single business enterprise. Here, the plaintiffs expressly alleged they were partners or joint venturers in the same enterprise as the defendants. The alleged misconduct involved internal governance issues: control of corporate documents, access to accounting records, and allocation of profits. There were no allegations involving interactions between separate businesses or between businesses and consumers. Even the claim that plaintiffs were misled into entering the arrangement did not rise to the level of conduct “in or affecting commerce.” Because the dispute was internal to one business enterprise, the Court granted defendants’ motion for judgment on the pleadings as to the Chapter 75 claim.
This decision is a powerful reminder that not every breach of an operating agreement or internal business disagreement triggers treble damages under Chapter 75. North Carolina courts continue to draw a clear line between internal governance disputes and conduct affecting the broader marketplace. If your company is navigating an operating agreement dispute, partnership breakdown, or fiduciary conflict, Lord & Lindley, PLLC regularly represents businesses and business owners in complex commercial litigation in the North Carolina Business Court. Call (704) 457-1010 or visit www.lordlindley.com to learn more.