# Pitts v. LStar Development Group, Inc.

> District Court, E.D. North Carolina · September 16, 2021

URL: https://www.frixlaw.com/law-library/cases/10251827

## Case

- **Court:** District Court, E.D. North Carolina
- **Decided:** September 16, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10251827

## How later opinions describe it (automated extraction)

- reversing in part the district court’s decision to grant the defendant's motion to dismiss because the plaintiffs claims were time-barred and remanding for discovery so the district court could determine if any or all of plaintiffs claims were equitably tolled

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

NO. 5:20-CV-525-FL

WILLIAM HAMPTON PITTS, PATRICK )
SULLIVAN, and RACHEL )
VRADENBURGH, )
)
Plaintiffs, )
)
ORDER
v. )
)
LSTAR DEVELOPMENT GROUP, INC. )
and KYLE V. CORKUM, )
)
Defendants. )

This matter is before the court upon defendants’ partial motion to dismiss (DE 13), pursuant
to Federal Rule of Civil Procedure 12(b)(6).1 The issues raised have been briefed fully, and in this
posture are ripe for ruling. For the following reasons, defendants’ motion is denied.
STATEMENT OF THE CASE
Plaintiffs commenced this action October 5, 2020, and filed the operative amended
complaint October 21, 2020, asserting claims under the Fair Labor Standards Act (“FLSA”) and
the North Carolina Wage and Hour Act (“NCWHA”) against their alleged former employers,
defendant LStar Development Group, Inc. (“LStar Development”), and its majority shareholder,
president, and director, defendant Kyle Corkum (“Corkum”). Plaintiffs William Hampton Pitts
(“Pitts”) and Rachel Vradenburgh (“Vradenburgh”) also assert breach of contract claims against

1 Also pending are plaintiffs’ partial motion for summary judgment (DE 21), plaintiffs’ motion to seal (DE
27), defendants’ motion to deny or defer consideration of plaintiffs’ motion for partial summary judgment (DE 33),
plaintiffs’ motion to strike (DE 43), and plaintiffs’ motion to amend their statement of facts (DE 48), which will be
addressed by separate order.
defendant LStar Development, and plaintiff Patrick Sullivan (“Sullivan”) asserts a claim for
quantum meruit against defendant LStar Development. Plaintiffs request equitable tolling of the
applicable statute of limitations from May 1, 2020, until August 27, 2020, and seek damages for
unpaid wages; overtime compensation; liquidated and statutory damages; as well as fees, costs,
and interest.

Defendants filed the instant partial motion to dismiss on December 4, 2020, arguing that
they are exempt from the minimum wage and overtime provisions of the NCWHA; the FLSA
preempts the breach of contract and quantum meruit claims; and plaintiffs’ claims for damages
accruing prior to October 5, 2018, are time-barred. Plaintiffs responded in opposition January 8,
2021.
STATEMENT OF FACTS
The facts alleged in plaintiffs’ amended complaint may be summarized as follows.
Defendant LStar Development formed in 2011 as a vehicle to conduct business operations, employ
personnel, and provide management services for LStar Management, LLC (“LStar Management”),

a real estate management and development company. (Am. Compl. ¶¶ 4-5). Defendant Corkum
is the majority shareholder of LStar Management and defendant LStar Development, and he also
serves as president and director of defendant LStar Development. (Id. ¶ 6). Until March 26, 2020,
defendants allegedly employed plaintiffs as follows: plaintiff Pitts served as chief operating
officer, plaintiff Vradenburgh served as vice president of human resources, and plaintiff Sullivan
served as an at-will employee. (Id. ¶¶ 17, 21, 24, 48).
During plaintiffs’ employment, defendant Corkum allegedly mismanaged defendant LStar
Development’s and LStar Management’s funds, causing a cash shortage that prevented defendant
LStar Development from discharging its payroll obligations. (Id. ¶ 33). In particular, defendant
Corkum allegedly transferred $325,000.00 of LStar Development’s funds to his personal friend
Andrew Wells (“Wells”), so that Wells could purchase a dental practice, instead of applying the
funds towards their intended purpose, LStar Management’s Union Point project. (Id. ¶ 32).
Moreover, in April 2017, defendant Corkum allegedly told defendant LStar Development’s
accounting department that a Union Point project vendor required a payment to be made through

a certain attorney. (Id.). Based on this instruction, LStar Development wired $310,000.00 to the
attorney and $55,000.00 to a bank account owned by defendant Corkum’s spouse. (Id.). Plaintiffs
allege that defendant Corkum used those funds for his personal benefit, and defendant LStar
Development was required to make a subsequent payment to the vender for $365,825.00. (Id.).
Plaintiffs also allege that defendant Corkum arranged for Global Premier Soccer Real
Estate Massachusetts, LLC (“Global Premier”) to loan him $410,050.02, instead of making a
$500,000.00 capital contribution to its joint venture with LStar Management. (Id.). When the
joint venture’s creditor required proof of Global Premier’s capital contribution, defendant Corkum
allegedly instructed defendant LStar Development to pay Global Premier $410,050.02. (Id.).

Although defendant Corkum told LStar Development’s accounting department that the payment
was a loan for the joint venture, plaintiffs allege that it was used to pay off the personal loan that
Global Premier made to defendant Corkum. (Id.).
On June 16, 2017, defendant Corkum allegedly instructed the accounting department at
defendant LStar Development to wire $252,593.07 to KVC Builders, LLC and to treat the payment
as loan to himself, which he would repay “by next Friday.” (Id.). According to plaintiffs, the
funds were used to pay for construction work on defendant Corkum’s personal residence, and he
never repaid defendant LStar Development. (Id.). Later, in July 2017, defendant Corkum
allegedly instructed defendant LStar Development to wire $50,000.00 to John Walker (“Walker”),
an attorney, as payment for services. (Id.). When defendant LStar Development’s accounting
department subsequently contacted Walker for an invoice and tax document, Walker allegedly
indicated that the funds were not payment for services, but rather a pass-through payment on behalf
of defendant Corkum. (Id.). Finally, defendant Corkum caused defendant LStar Development to
loan him $750,000.00, so that he could purchase a $6,900,000.00 residential property. (Id.).

Defendant Corkum allegedly fail to repay $100,000.00 of the loan amount. (Id.).
Overall, defendant Corkum’s expense reports and company credit card records allegedly
reveal that defendant Corkum failed to reimburse defendant LStar Development “and/or” LStar
Management for at least $750,000.00 in personal charges. (Id.). In addition, defendant Corkum
allegedly caused defendant LStar Development and LStar Management to pay more than
$3,300,000.00 for his personal debts. (Id.). As a result, defendant LStar Development experienced
a cash shortage and failed to pay plaintiffs’ salaries on the regular scheduled payday of May 25,
2018. (Id. ¶¶ 33-34). Defendant Corkum allegedly reassured plaintiffs that they would be paid
once defendant LStar Develop received management fees. (Id. ¶ 34). However, on the next

regularly scheduled payday of June 8, 2018, defendant LStar Development allegedly failed to pay
plaintiffs again. (Id. ¶ 36). Defendant LStar Development briefly resumed regular salary payments
on June 22, 2018, but began missing salary payments again on August 31, 2018, and allegedly
failed to make up the missed salary payments from May 25 and June 8, 2018. (Id. ¶ 37).
In August 2018, LStar Management, through its minority shareholder Steven Vining
(“Vining”), instituted a lawsuit against defendant Corkum, seeking to remove him as an officer,
director, and manager of LStar Management and its affiliate companies, due to his alleged financial
mismanagement. (Id. ¶ 38). Because of the lawsuit, defendant LStar Development allegedly failed
to pay the plaintiffs any wages from August 31, 2018, until March 1, 2019, and again between
April 26, 2019, and June 7, 2019. (Id. ¶ 39). Defendant LStar Development paid plaintiffs a
portion of their salaries during the periods of March 1, 2019, through April 12, 2019, and June 7,
2019, through March 20, 2020. (Id. ¶ 40). Plaintiffs were reassured that they would receive their
salary payments once the lawsuit terminated and defendant LStar Development received sufficient
profit participation fees. (Id. ¶ 42).

On March 9, 2020, the United States District Court for the Eastern District of North
Carolina appointed a receiver for LStar Management, which had a significant adverse impact on
LStar Development’s financial condition and ability to pay its employees. (Id. ¶¶ 46-47).
Plaintiffs were terminated from their employment at defendant LStar Development on March 26,
2020. (Id. ¶ 48). In their termination letters, defendant LStar Development stated: “Due to the
economic circumstances the company has been forced to work through over the last two years,
you are owed a significant amount of back wages . . . This termination does not negate the
Company’s obligation to pay what is due for work services rendered.” (Id. ¶ 49).
At a March 26, 2020, meeting of defendant LStar Development’s board of directors,

defendant Corkum allegedly caused a board resolution to be passed that removed Vining and
plaintiff Sullivan from their positions as officers of defendant LStar Development. (Id. ¶ 52).
Following the board meeting, defendant Corkum exercised sole and exclusive management control
of defendant LStar Development, and allegedly refused to pay plaintiffs’ salaries for work
performed through March 26, 2020. (Id. ¶¶ 52-54).
Additional facts pertinent to the instant motion will be discussed in the court’s analysis.
COURT’S DISCUSSION
A. Standard of Review
“To survive a motion to dismiss” under Rule 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. In evaluating whether a claim is stated, “[the] court accepts all well-

pled facts as true and construes these facts in the light most favorable to the plaintiff,” but does not
consider “legal conclusions, elements of a cause of action, . . . bare assertions devoid of further
factual enhancement[,] . . . unwarranted inferences, unreasonable conclusions, or arguments.”
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations
omitted).
B. Analysis
1. NCWHA Exemptions
Defendants seek dismissal of plaintiffs’ NCWHA claims, on grounds that defendant LStar
Development is exempted from the NCWHA.

The NCWHA sets forth certain “exemptions” to claims in the context of plaintiffs subject
to the FLSA, as follows:
The provisions of [§] 95-25.3 (Minimum Wage) [and §] 95-25.4 (Overtime) . . . do
not apply to: (1) Any person employed in an enterprise engaged in commerce or in
the production of goods for commerce as defined in the [FLSA] . . . .

N.C. Gen. Stat. § 95-25.14(a).
Here, plaintiffs allege that defendant LStar Development is engaged in commerce within
the meaning of the FLSA. (See Am. Compl. ¶ 12). Taking plaintiffs’ allegation as true, the
exemption set forth in North Carolina General Statute § 95-25.14(a) applies to plaintiffs’ NCWHA
claims for minimum wage and overtime. Nevertheless, plaintiffs argue that they assert their
NCWHA claims for minimum wage and overtime, in the alternative to their FLSA claims, in the
event that their employment is not covered by the FLSA. Pleading claims in the alternative is
proper at this stage of the case. See Fed. R. Civ. P. 8(d)(2); see also Blount v. Carlson Hotels,
Inc., No. 3:11-CV-452-MOC-DSC, 2012 WL 1021735, at *5 (W.D.N.C. Mar. 1, 2012) (rejecting
argument that plaintiff’s NCWHA overtime claim must be dismissed because plaintiff “is

permitted at this early stage of the proceedings to plead her NCWHA claims in the alternative to
her FLSA claims”). Accordingly, defendants’ motion to dismiss is denied in this part.
Regardless of whether plaintiffs’ employment is covered by the FLSA, the NCWHA does
not exempt plaintiffs’ “pay day” claims, asserted under North Carolina General Statute §§ 95-25.6
and 95-25.7, to the extent those claims are separate and distinct from plaintiffs’ FLSA minimum
wage and overtime claims. See N.C. Gen. Stat. § 95-25.14(a); see also Lima v. MH & WH, LLC,
No. 5:14-CV-896-FL, 2019 WL 2602142, at *16 (E.D.N.C. Mar. 8, 2019). Accordingly,
defendants’ motion to dismiss must be denied in this part with respect to plaintiffs’ pay day claims.
2. FLSA Preemption

Defendants seek to dismiss plaintiffs Pitts’s and Vradenburgh’s breach of contract claims
and plaintiff Sullivan’s quantum meruit claim, on grounds that they are precluded under a theory
of obstacle preemption.2 Defendants rely exclusively upon Anderson v. Sara Lee Corp., 508 F.3d
181 (4th Cir. 2007).
In Anderson, plaintiffs sought to enforce their rights under the FLSA by bringing state
common law claims for breach of contract, negligence, and fraud against their employer, but they
did not assert any claims under the FLSA or the NCWHA. 508 F.3d at 183-84. In considering

2 Defendants do not argue that the FLSA preempts plaintiffs’ NCWHA claims.
whether the FLSA preempted the plaintiffs’ state law claims, the United States Court of Appeals
for the Fourth Circuit first observed that “[w]ithout doubt, [plaintiffs’] state claims essentially
require the same proof as claims asserted under the FLSA itself.” Id. at 194. Then, because
“Congress prescribed exclusive remedies in the FLSA for violations of its mandates”, the Fourth
Circuit concluded that plaintiffs’ “FLSA-based contract, negligence, and fraud claims are

precluded under a theory of obstacle preemption.” Id. at 193-94. The Fourth Circuit further
explained that “its conclusion [wa]s consistent with the rulings of several district courts deeming
state claims to be preempted by the FLSA where those claims have merely duplicated FLSA
claims.” Id. at 194 (citations omitted).
Following the Fourth Circuit’s decision in Anderson, several courts within this circuit,
including this one previously, have concluded that the FLSA does not preempt state law claims
directed at wages that are not covered by the FLSA, such as compensation for work below forty
hours per week and at a rate above federal minimum wage. See, e.g., Martinez-Hernandez v.
Butterball, LLC, 578 F. Supp. 2d 816, 820 (E.D.N.C. 2008) (“The first and third claims set forth

above are separate and distinct from plaintiffs’ FLSA claims. They invoke neither the minimum
wage nor the overtime provisions of the FLSA. As such, they are not preempted by the FLSA.”);
Epps v. Scaffolding Sols., LLC, No. 2:17-CV-562, 2019 WL 11254781, at *2 (E.D. Va. Jan. 4,
2019) (“[T]he FLSA does not preempt any and all state law wage claims. Instead, claims for
unpaid work below forty hours per week and at a rate above minimum wage are left for state
contract law. Therefore, contract claims remain cognizable under state law if they are based on
employment contracts with terms that are more generous than the guarantees in the FLSA.”
(internal quotations and citations omitted) (emphasis in original)); Hanson-Kelly v. Weight
Watchers Int’l, Inc., No. 1:10CV65, 2011 WL 2689352, at *5 (M.D.N.C. July 11, 2011) (“[U]nlike
in Anderson, Plaintiffs here are not seeking overtime pay or asserting that they received less than
the federal minimum wage in their Second Claim, alleging unpaid wages under Section 95–25.6
of the NCWHA; rather, they are seeking unpaid wages for time they actually worked. Thus,
Plaintiffs’ NCWHA unpaid wage claim is not preempted by the FLSA.”). This conclusion is
consistent with Anderson because, in seeking to recover unpaid wages for work below forty hours

per week and at a rate above federal minimum wage, a plaintiff would not be seeking a state law
remedy for an FLSA violation, but rather a state law remedy for a state law violation.
Here, plaintiffs Pitts and Vradenburgh assert breach of contract claims based on
defendants’ alleged failure to pay their respective salaries of $300,000.00 and $150,000.00, as
required by their employment contracts. (Am. Compl. ¶¶ 73-74). Likewise, plaintiff Sullivan
asserts a quantum meruit claim, based on defendants’ alleged failure to pay his salary of
$300,000.00, under an alleged implied in law contract. (Id. ¶¶ 22, 76-81). Plaintiffs’ salaries
exceeded the federal minimum wage, and therefore, plaintiffs are not seeking to enforce their rights
under the FLSA through state law claims. Accordingly, the FLSA does not preempt plaintiffs

Pitts’s and Vradenburgh’s breach of contract claims and plaintiff Sullivan’s quantum meruit claim,
and defendants’ motion to dismiss is denied in this part.
Defendants also argue that the FLSA preempts plaintiffs’ fifth “claim”, which is a request
that the court equitably toll the statute of limitations on from May 1, 2020, to August 27, 2020.
(Am. Compl. ¶ 91). Although this portion of the complaint contains no reference to state law,
defendants argue that plaintiffs are seeking to use state law to override the statute of limitations
under the FLSA. (Mem. (DE 14) at 7). However, as explained in plaintiffs’ response, plaintiffs
are seeking equitable tolling under federal law. (Mem. (DE 20) at 12-13). Accordingly, that part
of defendants’ motion, seeking to dismiss this request on the basis of FLSA preemption, is denied.
See generally Anderson, 508 F.3d at 191 (“Federal law may preempt state law under the
Supremacy Clause . . .”) (emphasis added) (citations omitted)).
3. Quantum Meruit
Defendants seek to dismiss plaintiff Sullivan’s quantum meruit claim, on grounds that an
express contract precludes recovery for quantum meruit.

Quantum meruit, also known as unjust enrichment, “operates as an equitable remedy based
upon a quasi[-]contract or a contract implied in law which provides a measure of recovery for the
reasonable value of services rendered.” Ron Medlin Const. v. Harris, 364 N.C. 577, 580 (2010)
(internal quotations omitted) (quoting Whitfield v. Gilchrist, 348 N.C. 39, 42 (1998); Potter v.
Homestead Pres. Ass’n, 330 N.C. 569, 578 (1992)). If “there is a contract between the parties the
contract governs the claim and the law will not imply a contract.” Booe v. Shadrick, 322 N.C.
567, 570 (1988). Thus, the existence of an express contract precludes recovery for unjust
enrichment and in quantum meruit. Gilchrist, 348 N.C. at 42 (“Only in the absence of an express
agreement of the parties will courts impose a quasi contract or a contract implied in law in order

to prevent an unjust enrichment.”); Booe, 322 N.C. at 570.
Here, plaintiff Sullivan allegedly worked for LandQuest, LLC, a corporate predecessor of
defendant LStar Development, until defendant LStar Development’s formation, at which time
“Plaintiff Sullivan was made an at-will employee of [defendant LStar Development] at the same
salary and with the same title he had held at LandQuest.” (Am. Compl. ¶ 21). Then, in February
2016, defendant “Corkum orally informed Plaintiff Sullivan of a raise in his annual salary to
$300,000 per year.” (Id. ¶ 22). Plaintiff Sullivan’s paystubs issued between February 2016 and
April 2018 reflected bi-weekly payments consistent with an annual salary of $300,000.00, and
defendant LStar Development’s books and records reflected the same. (Id. ¶¶ 22-23).
Although a close question, the court cannot conclude, on these allegations alone, that an
express contract was formed—that is, that a definite “offer [was] communicated, [was] complete,
and [was] accepted in its exact terms.” Yeager v. Dobbins, 252 N.C. 824, 828 (1960). Defendants
may raise this argument again at a later stage of this case, after further development of the record.
However, at this preliminary stage, the court will not assume the existence of an express contract.

Accordingly, defendants’ motion to dismiss is denied in this part.
4. Statute of Limitations
Defendants move to dismiss plaintiffs’ NCWHA and FLSA claims for damages accruing
prior to October 5, 2018, on grounds that they are barred by the statute of limitations.
“Ordinarily, a defense based on the statute of limitations must be raised by the defendant
through an affirmative defense, see Fed. R. Civ. P. 8(c), and the burden of establishing the
affirmative defense rests on the defendant.” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th
Cir. 2007). “[A] motion pursuant to Rule 12(b)(6) invites an inquiry into the legal sufficiency of
the complaint, not an analysis of potential defenses to the claims set forth therein.” Brockington

v. Boykins, 637 F.3d 503, 506 (4th Cir. 2011). Dismissal under Rule 12(b)(6) based on affirmative
defenses “is appropriate when the face of the complaint clearly reveals the existence of a
meritorious affirmative defense.” Id.; Brooks v. City of Winston-Salem, N.C., 85 F.3d 178, 181
(4th Cir. 1996).
With respect to plaintiffs’ FLSA claims, the statute of limitations is two years, “except that
a cause of action arising out of a willful violation may be commenced within three years after the
cause of action accrued.” 29 U.S.C § 255(a). Plaintiffs allege that defendants’ FLSA violations
were willful, (Am. Compl. ¶¶ 57-61), and they commenced this action on October 5, 2020.
Accordingly, the amended complaint does not clearly reveal a meritorious statute of limitations
defense to all alleged damages accruing before October 5, 2018.7 Defendants’ motion to dismiss
is denied in this part.
The statute of limitations for plaintiffs’ claims under the NCWHA is two years. See N.C.
Gen. Stat. § 95-25.22(f). In support of equitable tolling, plaintiffs allege that they were delayed
in asserting their claims because defendants “refused to engage in pre-litigation mediation for
several months.” (Am. Compl. § 90). Viewing the facts in light most favorable to plaintiffs, the
amended complaint does not clearly reveal a meritorious statute of limitations defense. See Cruz
v. Maypa, 773 F.3d 138, 146-47 (4th Cir. 2014) (reversing in part the district court’s decision to
grant the defendant's motion to dismiss because the plaintiffs claims were time-barred and
remanding for discovery so the district court could determine if any or all of plaintiffs claims were
equitably tolled). Accordingly, defendants’ motion to dismiss is denied in this part.
CONCLUSION
Based on the foregoing, defendants’ partial motion to dismiss (DE 13) is DENIED.
SO ORDERED, this the 16th day of September, 2021.

nited States District Judge

3 Defendants do not address the plausibility of plaintiffs’ allegations on willfulness in briefing.
12

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