The North Carolina Business Court’s decision in Qian v. Zheng (2025 NCBC 46) offers a striking look at fiduciary duty disputes, internal governance battles, and the challenges of managing immigrant investor funds. The case centers on Carolina Sawmills, L.P. (“CSLP”), a North Carolina limited partnership that raised $75.5 million from 151 Chinese investors through the EB-5 visa program. After the project’s sawmill operator, Klausner Lumber Two LLC, went bankrupt, CSLP recovered $31.5 million, sparking a legal battle over reinvestment and distribution of funds. Halifax Safeguard Property, LLC (“Halifax”), serving as CSLP’s general partner, became the focal point of allegations that its leadership mismanaged investor capital and prioritized their own interests.
The Intervenor Plaintiffs—a group of Halifax members and 33 limited partners—alleged that Halifax’s leadership engaged in a “triple repayment” loan scheme, secretly paying themselves three times the amounts they loaned to CSLP without disclosure or approval. They also claimed Halifax funneled $16.4 million into Titanium ESG, a risky startup lacking collateral or revenue, over objections from a court-appointed manager. Further allegations included reneging on promises to distribute capital and misusing more than $1 million in CSLP funds to finance internal litigation. These claims painted a picture of serious breaches of trust and governance breakdowns in an entity managing millions of dollars in immigrant investor funds.
In its August 15, 2025, opinion, the Business Court allowed many claims against Halifax to proceed, reaffirming that general partners owe fiduciary duties to limited partners as a matter of law. Judge A. Todd Brown found the allegations of self-dealing detailed enough to overcome the protections of the business judgment rule at this early stage. The court dismissed claims against individual members of Halifax’s management committee, emphasizing that they did not owe fiduciary duties directly to CSLP absent veil-piercing allegations. Claims for declaratory judgment and appointment of a receiver survived, while a standalone claim for injunctive relief was dismissed as a remedy rather than a cause of action.
At Lord & Lindley, we understand the complexities of fiduciary duty disputes—whether they involve business partners, trustees, or corporate managers. Breaches of fiduciary duty can devastate investors and families alike, and holding decision-makers accountable often requires skillful litigation. If you are facing a dispute over loyalty, transparency, or mismanagement of funds, call us at (704) 457-1010 or visit www.lordlindley.com.