# Gallaher v. Ciszek

> North Carolina Business Court · November 4, 2022 · 2022 NCBC 67

URL: https://www.frixlaw.com/law-library/cases/11058774

## Case

- **Court:** North Carolina Business Court
- **Decided:** November 4, 2022
- **Citations:** 2022 NCBC 67
- **Precedential status:** Published
- **Opinion:** Opinion by Louis A. Bledsoe, III
- **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/11058774

## How later opinions describe it (automated extraction)

- noting that “North Carolina law has consistently held that to remove an employer-employee relationship from the employment[-]at[-]will doctrine, the contract must specify a definite term of employment[ ]” and concluding that a performance-based bonus did not create a definite …
- holding that an employment contract that set a yearly salary and provided for yearly pay adjustments, but which had no specified end date, created at-will employment
- holding that “[e]mployment contracts which are terminable at will may be modified at any time by either party with the continuance of the relationship serving as the consideration for the modification[ ]”
- stating that “judicial estoppel is to be applied in the sound discretion of our trial courts[ ]” and that ”[i]f a trial court believes that justice would not be served by judicially estopping a party’s factual contention, it may decline to do so[ ]”

## Opinion text

Gallaher v. Ciszek, 2022 NCBC 67.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
CUMBERLAND COUNTY 19 CVS 5780

KEITH JAMES GALLAHER, HUGH
SCOTT CAMERON, II, AND
KRISTEN B. COGGIN,
ORDER AND OPINION ON
Plaintiffs, PLAINTIFFS’ MOTION FOR PARTIAL
SUMMARY JUDGMENT AND
v. DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT
THOMAS ARTHUR CISZEK and
CAPE FEAR NEONATOLOGY AND
SERVICES, P.A., a North Carolina
Professional Association, FINAL JUDGMENT

Defendants.

1. THIS MATTER is before the Court upon Plaintiffs Keith James Gallaher

(“Gallaher”), Hugh Scott Cameron, II (“Cameron”), and Kristen B. Coggin’s (“Coggin”)

(each a “Plaintiff” and, collectively, the “Plaintiffs”) Partial Motion for Summary

Judgment (“Plaintiffs’ Motion”), (ECF No. 69), and Defendants Thomas Arthur

Ciszek (“Ciszek”) and Cape Fear Neonatology Services, P.A.’s (“Cape Fear Neo” or the

“Practice”) (together, “Defendants”) Motion for Summary Judgment (“Defendants’

Motion”), (ECF No. 73), (together with Plaintiffs’ Motion, the “Motions”) in the above-

captioned case.

2. After considering the parties’ briefs in support of and in opposition to the

Motions, the appropriate evidence of record, and the arguments of counsel at the

hearing held on the Motions, the Court hereby GRANTS each Motion in part,

DENIES each Motion in part, and ENTERS FINAL JUDGMENT against

Defendants as provided herein.
Player McLean, LLP, by James A. McLean, III and Lonnie M. Player,
Jr., for Plaintiffs Keith James Gallaher, Hugh Scott Cameron, II, and
Kristen B. Coggin.

Hutchens Law Firm, by H. Terry Hutchens and Natasha M. Barone, for
Defendants Thomas Arthur Ciszek and Cape Fear Neonatology Services,
P.A., a North Carolina Professional Association.

Bledsoe, Chief Judge.

I.

FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

3. While findings of fact are not necessary or proper on a motion for summary

judgment, “it is helpful to the parties and the courts for the trial judge to articulate a

summary of the material facts which he considers are not at issue and which justify

entry of judgment.” Collier v. Collier, 204 N.C. App. 160, 161–62 (2010) (citation and

quotation marks omitted). Therefore, the Court limits its factual recitation to the

undisputed material facts necessary to decide the Motions and not to resolve issues

of material fact.

4. Cape Fear Neo was established in 1985 by Ciszek, a neonatologist, and

provided neonatology services to Cumberland County Hospital System, Inc.

(“CCHS”), which owns and operates Cape Fear Valley Medical Center (“CFVMC”)

(together, the “Hospital”). 1 Cape Fear Neo staffed the Hospital’s Neonatology

1 (Pls.’ Mot. Partial Summ. J. Ex. 1, ECF No. 69.2; Pls.’ Mot. Partial Summ. J. Ex. 62 Dep.

Thomas Ciszek, dated Nov. 9, 2021, at 9:4–8 [hereinafter “Ciszek Dep.”], ECF No. 69.63; Pls.’
Mot. Partial Summ. J. Ex. 2 Independent Contractor Agreement 1 [hereinafter “Hosp.
Agreement”], ECF No. 69.3.) For ease of reference, Ciszek’s deposition also appears on the
Court’s electronic docket as Exhibit 21 to the Index of Materials in Support of Defendants’
Intensive Care Unit (“NICU”) in Fayetteville, North Carolina, from 1 January 1986

through 30 April 2019, pursuant to an Independent Contractor Agreement with the

Hospital (the “Hospital Agreement”). 2 At all relevant times, payments made

pursuant to the Hospital Agreement were Cape Fear Neo’s “only source of revenue.” 3

5. Gallaher executed an employment contract with Cape Fear Neo on 1

February 1990 (the “Gallaher Contract” or “Gallaher’s Contract”). 4 Gallaher’s

Contract set his salary and provided for a bonus, calculated as a percentage of the

bonuses paid to the other two doctors then at Cape Fear Neo. 5 Gallaher’s Contract

also contained a non-competition clause and renewed automatically at one-year

intervals unless either side submitted a notice of termination, which could be with or

without cause. 6 Though not accounted for in his original employment contract, Cape

Fear Neo also began paying into a profit-sharing plan on Gallaher’s behalf. 7 In

Brief in Support of Defendants’ Motion for Summary Judgment (“Defendants’ Index of
Materials”) at ECF No. 75.

2 (Hosp. Agreement 1; Ciszek Dep. 64:19–24.)

3 (Ciszek Dep. 79:16–18.)

4 (Pls.’ Mot. Partial Summ. J. Ex. 5 Employment Contract 1 [hereinafter “Gallaher Emp.

Cont.”], ECF No. 69.6.) For ease of reference, Gallaher’s Contract also appears on the Court’s
electronic docket as Exhibit 1 to Defendants’ Index of Materials.

5 (Gallaher Emp. Cont. ¶ 10.) While the bonus formula was later amended, (see Pls.’ Mot.
Partial Summ. J. Ex. 7 First Amendment to Employment Contract [hereinafter “Gallaher
Am. Emp. Cont.”], ECF No. 69.8), the original contract provided for a bonus calculated as
11.11% of any bonus paid to Ciszek, (see Gallaher Emp. Cont. ¶ 10(b)).

6 (Gallaher Emp. Cont. ¶¶ 21, 23.)

7 (Pls.’ Mot. Partial Summ. J. Ex. 66 Aff. Keith James Gallaher, MD, dated Feb. 17, 2022, at

¶ 10 [hereinafter “Gallaher Aff.”], ECF No. 69.67.)
January 1991, Cape Fear Neo amended Gallaher’s Contract to provide for a bonus

equal to the bonuses paid to each of the other doctors at the Practice. 8 Lastly, and

not accounted for in either the original contract or the later amendment, Gallaher’s

salary steadily increased over the years. 9

6. Cameron joined Cape Fear Neo in July 2005 and executed an employment

contract with the Practice on 23 February 2006 (the “Cameron Contract” or

“Cameron’s Contract”). 10 Cameron’s Contract included provisions similar to those of

Gallaher’s Contract: a one year, automatically renewing term of employment; a 90-

day notice period for termination without cause; a non-competition agreement; and

other covenants pledging to use his utmost knowledge and skill in his employer’s and

patients’ best interests. 11 Cameron’s Contract also provided for his participation in

Cape Fear Neo’s profit-sharing plan. 12

8 (Pls.’ Mot. Partial Summ. J. Ex. 63 Dep. Keith James Gallaher, M.D., dated Nov. 22, 2021,

at 51:17–53:14 [hereinafter “Gallaher Dep.”], ECF No. 69.64.) For ease of reference,
Gallaher’s deposition also appears on the Court’s electronic docket as Exhibit 17 to
Defendants’ Index of Materials.

9 (Pls.’ Mot. Partial Summ. J. Ex. 12 [hereinafter “Salary and Bonus Chart”], ECF No. 69.13.)

10 (Pls.’ Mot. Partial Summ. J. Ex. 64 Dep. Hugh Scott Cameron, II, M.D., dated Nov. 22,

2021, at 14:4–11, 47:8–48:12 [hereinafter “Cameron Dep.”], ECF No. 69.65.) For ease of
reference, Cameron’s deposition also appears on the Court’s electronic docket as Exhibit 19
to Defendants’ Index of Materials.

11 (See Pls.’ Mot. Partial Summ. J. Ex. 8 Employment Contract ¶¶ 1, 3, 24, 26 [hereinafter

“Cameron Emp. Cont.”], ECF No. 69.9.) For ease of reference, Cameron’s Contract also
appears on the Court’s electronic docket as Exhibit 3 to Defendants’ Index of Materials.

12 (Cameron Emp. Cont. ¶¶ 10, 17.)
7. Like Gallaher’s, Cameron’s compensation varied from the terms set out in

his contract within his first year of employment. 13 Ciszek was not active in the

practice for part of 2006, 14 and his absence increased Cameron’s workload. As a

result, Cameron’s compensation steadily increased, and he received a greater share

of the communal “bonus pool.” 15

8. Coggin joined Cape Fear Neo in 2012. 16 Her employment contract also

provided for an automatically renewing one-year term, a 90-day without cause

termination clause, a covenant not to compete, pledges to use her knowledge and skill

in Cape Fear Neo’s and her patients’ best interests, participation in Cape Fear Neo’s

profit-sharing plan, compensation in the form of an annual salary, and bonus

eligibility beginning in the second year of employment and based on a specified

percentage of the common “bonus pool.” 17

13 (Cameron Dep. 22:15–23:13; Pls.’ Mot. Partial Summ. J. Ex. 67 Aff. Hugh Scott Cameron,

II, MD, dated Feb. 17, 2022, at ¶¶ 11, 13 [hereinafter “Cameron Aff.”], ECF No. 69.68.)

14 (Ciszek Dep. 100:22–01:10; Cameron Dep. 22:15–20.)

15 (Cameron Dep. 22:15–23:10; Cameron Aff. ¶¶ 12–13.) Plaintiffs’ employment contracts do
not expressly provide for payments from a “bonus pool.” The contracts instead use that term
as short-hand for the total compensation actually paid to certain named practitioners in
excess of their collective standard salaries. (See Pls.’ Mot. Partial Summ. J. Ex. 11
Employment Contract ¶ 10(b) [hereinafter “Coggin Emp. Cont.”], ECF No. 69.12; Cameron
Emp. Cont. ¶ 10(b).) For ease of reference, Coggin’s 1 August 2012 Employment Contract
(the “Coggin Contract” or “Coggin’s Contract”) also appears on the Court’s electronic docket
as Exhibit 4 to Defendants’ Index of Materials.

16 (Pls.’ Mot. Partial Summ. J. Ex. 68 Aff. Kristen B. Coggin, MD, dated Feb. 18, 2022, at ¶ 7

[hereinafter “Coggin Aff.”], ECF No. 69.69.)

17 (See Coggin Emp. Cont. ¶¶ 1, 3, 10, 17, 24, 26.)
9. Each Plaintiff’s employment contract provided a method for calculating

bonuses. Gallaher’s bonus was equal to the amount paid to Ciszek, while Coggin’s

and Cameron’s bonuses were calculated as a fraction of the total bonuses paid to the

other practitioners, and would increase over time. 18 However, the bonuses in practice

soon deviated from the prescribed procedure. In practice, Ciszek and Cape Fear Neo’s

accountant, Lawrence Blake (“Blake”), conferred with each other, assessed the

financial standing of the Practice, and then determined the gross amount to be

divided equally among the physicians who were not in their initial three years of

employment or absent from the Practice. 19

10. According to Blake’s unrebutted testimony, during the first five or six

months of each year, Cape Fear Neo would use its gross income to pay its larger

expenses, including taxes and contributions to the profit-sharing plan. 20 Around May

or June and at the end of each subsequent month, Blake and Ciszek would review the

amount of money the Practice had in its account, forecast the Medicaid payment

schedule, and then determine whether there was enough surplus cash to pay out

bonuses. 21 Blake and Ciszek typically left a reserve of $100,000 in the Practice’s

18 (See Gallaher Am. Emp. Cont. 2 (amending ¶ 10 of the original contract, and paginated as

page 72); Cameron Emp. Cont. ¶ 10; Coggin Emp. Cont. ¶ 10.)

19 (Pls.’ Mot. Partial Summ. J. Ex. 61 Dep. Lawrence William Blake, dated June 10, 2021, at

19:22–20:14, 21:7–21 [hereinafter “Blake Dep.”], ECF No. 69.62; Gallaher Aff. ¶¶ 14–15;
Cameron Aff. ¶ 14; Coggin Aff. ¶¶ 12–13.) For ease of reference, Blake’s deposition also
appears as Exhibit 20 to Defendants’ Index of Materials.

20 (Blake Dep. 19:13–21, 23:4–8.)

21 (Blake Dep. 19:22–20:5.)
account after bonus payments were made. 22 By 2017, Cape Fear Neo had calculated

bonus payments this way for thirty-five years. 23 Cape Fear Neo paid bonuses every

year until 2018, but those bonuses were never expressly guaranteed by the

physicians’ employment contracts. 24

11. In or around 2016, Ciszek began discussing his retirement from Cape Fear

Neo, but his intentions did not become widely known until late 2017 or early 2018. 25

On 8 June 2018, Plaintiffs, Ciszek, Blake, and an attorney hired by Cameron met to

resolve the details of Ciszek’s retirement from the Practice (the “June 2018

Meeting”). 26 The exact events of the June 2018 Meeting are unclear, but the meeting

became contentious and ended with Ciszek declaring that Plaintiffs were not

shareholders of Cape Fear Neo, but instead mere employees, and that he could and

would reduce their salaries to their respective original contract rates. 27

22 (Blake Dep. 20:5–6.)

23 (Blake Dep. 22:5–10.)

24 (See Salary and Bonus Chart; Gallaher Emp. Cont. ¶ 10(b); Gallaher Am. Emp. Cont. 2

(amending ¶ 10 of the original contract, and paginated as page 72); Cameron Emp. Cont. ¶
10(b); Coggin Emp. Cont. ¶ 10(b).)

25 (Cameron Aff. ¶ 19; Gallaher Dep. 19:01–25, 21:11–19; Pls.’ Mot. Partial Summ J. Ex. 65

Dep. Kristen Boswell Coggin, M.D., dated Dec. 1, 2021, at 31:8–14 [hereinafter “Coggin
Dep.”], ECF No. 69.66; Gallaher Aff. ¶ 20.)

26 (Blake Dep. 54:2–55:20; Gallaher Aff. ¶ 24; Coggin Aff. ¶¶ 19–20; Cameron Aff. ¶ 22.)

27 (Blake Dep. 61:22–62:4; Gallaher Aff. ¶¶ 23, 25; Cameron Aff. ¶¶ 19, 21, 23; Coggin Aff.

¶¶ 17, 21.)
12. After the June 2018 Meeting, the work environment at Cape Fear Neo began

to deteriorate. 28 Cameron and Coggin began pursuing employment with other

medical providers. 29

13. In or around September 2018 and acting pursuant to his duties as the

Medical Director of the CFVMC neonatology department, Gallaher informed the

Hospital’s CEO, Michael Nagowski (“Nagowski”), that a number of Cape Fear Neo’s

physicians might be departing and that the Hospital’s NICU could face possible

staffing gaps as a result. 30 To avoid any lapses in NICU staffing, Nagowski began

working with Plaintiffs to hire Coggin and Cameron as Hospital employees so the

NICU would have continued coverage. 31

14. Meanwhile, the Hospital Agreement between CCHS and Cape Fear Neo was

set to renew on 1 May 2019. 32 On 21 December 2018, however, the Hospital sent a

letter to Cape Fear Neo and Plaintiffs indicating that it would not renew its current

contract with Cape Fear Neo, but would instead review the contract for “revision and

modernization.” 33

28 (See Blake Dep. 55:25–57:19.)

29 (Cameron Dep. 28:12–29:16; Coggin Dep. 53:19–25.)

30 (Gallaher Dep. 15:17–16:8, 16:21–18:12; Gallaher Aff. ¶¶ 30–31; Pls.’ Mot. Partial Summ.

J. Ex. 50 Gallaher’s Resps. Defs.’ First Set Interrogs. & Reqs. Produc. Docs. 6–7 [hereinafter
“Gallaher Resp. Interrogs.”], ECF No. 69.51.)

31 (Gallaher Aff. ¶ 32.)

32 (Ciszek Dep. 79:9–13; Hosp. Agreement 1.)

33 (Pls.’ Mot. Partial Summ. J. Ex. 31 [hereinafter “Hosp. Cont. Nonrenewal Notice”], ECF

No. 69.32.)
15. On 25 January 2019, each Plaintiff executed an employment contract with

the Hospital 34 and tendered a Notice of Termination of Contract to Cape Fear Neo

later that day. 35 In their termination notices, Plaintiffs pledged to work through 30

April 2019 to comply with the ninety-day notice period in their employment

contracts. 36

16. The following week, on 31 January 2019, Gallaher, Coggin, and Cameron

received their paychecks for the second half of January 2019. Instead of receiving

their prevailing bi-monthly rate of pay—$12,600.00 (Gallaher), $10,725.00

(Cameron), and $9,433.33 (Coggin)—Plaintiffs were paid $3,958.34 (Gallaher),

$8,333.34 (Cameron), and $8,333.34 (Coggin), amounts reflecting the salary rate each

Plaintiff received when he or she was first hired by Cape Fear Neo. 37 Attached to

each reduced paycheck was a twelve-word memo (the “Memo”) that said, in its

34(Pls.’ Mot. Partial Summ. J. Ex. 40 Physician Employment Agreement 1 [hereinafter
“Gallaher Hosp. Emp. Cont.”], ECF No. 69.42; Pls.’ Mot. Partial Summ. J. Ex. 42 Physician
Employment Agreement 1 [hereinafter “Cameron Hosp. Emp. Cont.”], ECF No. 69.43; Pls.’
Mot. Partial Summ. J. Ex. 44 Physician Employment Agreement 1 [hereinafter “Coggin Hosp.
Emp. Cont.”], ECF No. 69.45.)

35 (Pls.’ Mot. Partial Summ. J. Ex. 37 [hereinafter “Gallaher Termination Notice”], ECF No.

69.38; Pls.’ Mot. Partial Summ. J. Ex. 38 [hereinafter “Cameron Termination Notice”], ECF
No. 69.39; Pls.’ Mot. Partial Summ. J. Ex. 39 [hereinafter “Coggin Termination Notice”], ECF
No. 69.40.) For ease of reference, each of Plaintiffs’ termination notices also appear as
Exhibits 10–12 to Defendants’ Index of Materials.

36(See Gallaher Termination Notice; Cameron Termination Notice; Coggin Termination
Notice.)

37 (Ciszek Dep. 83:12–85:12; Pls.’ Mot. Partial Summ. J. Ex. 33 [hereinafter “Gallaher
Paystubs”], ECF No. 69.34; Cameron Aff. ¶¶ 33–34; Pls.’ Mot. Partial Summ. J. Ex. 35
[hereinafter “Coggin Paystubs”], ECF No. 69.36; Pls.’ Mot. Partial Summ. J. Ex. 36
[hereinafter “Paystub Memo”], ECF No. 69.37.)
entirety: “Compensation has been adjusted to meet the terms of your employment

agreement.” 38 The Memo was the only written notice that any Plaintiff received

about his or her reduced compensation. 39

17. Also beginning that January, Cape Fear Neo stopped paying into the profit-

sharing plan to which it had historically contributed on Plaintiffs’ behalf. 40

Additionally, Cape Fear Neo did not pay a bonus to any physician of Cape Fear Neo,

including Ciszek, in 2018 or 2019. 41

18. Plaintiffs did not consent to the reduction of their salaries, the suspension

of their profit-sharing contributions, or the withholding of their bonuses, but they

nevertheless continued to work for Cape Fear Neo until 30 April 2019 to comply with

the ninety-day notice provision in their employment contracts. 42 Plaintiffs believed

that they had both a contractual and an ethical obligation to remain with Cape Fear

Neo and care for the infants in the Hospital’s NICU. 43

38 (Paystub Memo; see Ciszek Dep. 85:18–25.)

39 (Gallaher Aff. ¶ 39; Cameron Aff. ¶ 33; Coggin Aff. ¶ 32.)

40 (Gallaher Aff. ¶ 41; Cameron Aff. ¶ 35; Coggin Aff. ¶ 34.)
The profit-sharing plan to which
Cape Fear Neo contributed was essentially a retirement plan and was a component of the
benefit package Plaintiffs received when they entered into their employment contracts with
the Practice. (See Gallaher Aff. ¶ 10; Cameron Emp. Cont. ¶¶ 10, 17; Coggin Emp. Cont. ¶¶
10, 17.)

41 (Salary and Bonus Chart; Gallaher Aff. ¶¶ 34–35, 42; Cameron Aff. ¶¶ 29–30, 36; Coggin

Aff. ¶¶ 29, 35.)

42 (Gallaher Aff. ¶¶ 39–43; Cameron Aff. ¶¶ 33–37; Coggin Aff. ¶¶ 33–36.)

43 (Gallaher Aff. ¶ 40; Cameron Aff. ¶ 34; Coggin Aff. ¶ 33.)
19. Plaintiffs became Hospital employees on 1 May 2019 and are still employed

by the Hospital. 44 Cameron and Coggin work full-time, and Gallaher works part-

time. 45 Since 1 May 2019, neither Cape Fear Neo nor Ciszek has provided

neonatology services to the Hospital. 46

B. Procedural History

20. The Court recites only those portions of the procedural history that are

relevant to its determination of the Motions.

21. Plaintiffs filed the Complaint initiating this action on 24 September 2019.47

In relevant part, the Complaint asserts claims against Cape Fear Neo and Ciszek for

violations of the North Carolina Wage and Hour Act (“NCWHA”) and against Cape

Fear Neo for breach of contract. 48 Plaintiffs additionally argue that the Court should

pierce Cape Fear Neo’s corporate veil and hold Ciszek personally liable on both

claims. 49

22. On 16 December 2019, Defendants answered the Complaint and originally

asserted several affirmative defenses and counterclaims. 50 Defendants’ affirmative

44 (See Gallaher Hosp. Emp. Cont. 1; Cameron Hosp. Emp. Cont. 1; Coggin Hosp. Emp. Cont.

1; Gallaher Aff. ¶ 43; Cameron Aff. ¶ 37; Coggin Aff. ¶ 36.)

45 (Gallaher Aff. ¶ 45; Cameron Aff. ¶ 39; Coggin Aff. ¶ 38.)

46 (Ciszek Dep. 101:24–102:6.)

47 (Compl., ECF No. 3.)

48 (Compl. ¶¶ 48, 54.)

49 (See Compl. ¶ 58.)

50(See Mot. Dismiss, Answer Compl. & Countercls. [hereinafter “Defs.’ Answer &
Countercls.”], ECF No. 4.)
defenses included an allegation that Plaintiffs’ claims are barred by the doctrine of

judicial estoppel. 51 Defendants’ counterclaims included claims for breach of contract,

misappropriation of trade secrets, and wrongful interference with existing and

prospective business relations. 52 On 14 February 2020, Defendants voluntarily

dismissed their counterclaim for misappropriation of trade secrets. 53 On 16 October

2020, this Court granted Plaintiffs’ motion to dismiss Defendants’ counterclaim for

wrongful interference with business relations. See Gallaher v. Ciszek, 2020 NCBC

LEXIS 124, at *16–17 (N.C. Super. Ct. Oct. 16, 2020).

23. On 21 February 2022, Plaintiffs filed their Motion for Partial Summary

Judgment. 54 Plaintiffs’ Motion seeks the following relief: (1) the dismissal of

Defendants’ counterclaim for breach of contract; (2) entry of judgment on Plaintiffs’

claim for breach of contract; (3) entry of judgment on Plaintiffs’ claim for violation of

the NCWHA; and (4) a determination that Defendant Ciszek is jointly and severally

liable with Cape Fear Neo for Plaintiffs’ damages through piercing the Practice’s

corporate veil. 55

51 (Defs.’ Answer & Countercls. 8.)

52 (Defs.’ Answer & Countercls. 12–16.)

53 (Voluntary Dismissal Without Prejudice, ECF No. 27.)

54 (Pls.’ Mot. Partial Summ. J. [hereinafter “Pls.’ Mot. Summ. J.”], ECF No. 69.)

55 (Pls.’ Mot. Summ. J. Prayer for Relief ¶¶ 1, 2, 11, 12.)
24. On 21 February 2022, Defendants filed their Motion for Summary

Judgment, seeking summary judgment on Plaintiffs’ and Defendants’ remaining

claims. 56

25. The Motions were fully briefed, and the Court held a hearing on the Motions

on 12 April 2022 (the “Hearing”), at which all parties were represented by counsel.

26. On 31 August 2022, the Court ordered supplemental briefing concerning

whether Plaintiffs’ claim(s) based on unpaid profit-sharing plan contributions were

pre-empted by the federal Employment Retirement Income Security Act, 29 U.S.C.

§ 1001 et seq., and therefore must be dismissed. 57 In connection with that briefing,

on 29 September 2022, Plaintiffs withdrew their affirmative claims for relief to the

extent those claims were based on unpaid retirement plan contributions. 58

27. The Motions are now ripe for determination.

II.

LEGAL STANDARD

28. Summary judgment is proper only “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that any party is entitled to

judgment as a matter of law.” N.C. R. Civ. P. 56(c). An issue is genuine if it is

56 (Defs.’ Mot. Summ J. 1, ECF No. 73.)

57 (Order Suppl. Br. Mots. Summ. J. ¶ 3, ECF No. 83.)

58 (Pls.’ Resp. Defs.’ Suppl. Br. 3, ECF No. 88 (“Plaintiffs hereby withdraw any affirmative

claim for relief, sounding in breach of contract or otherwise, based on unpaid Plan
contributions.”).)
“supported by substantial evidence,” and “an issue is material if the facts alleged

would constitute a legal defense, or would affect the result of the action, or if its

resolution would prevent the party against whom it is resolved from prevailing in the

action[.]” DeWitt v. Eveready Battery Co., 355 N.C. 672, 681 (2002) (citation and

quotation marks omitted). All of the “[e]vidence presented by the parties is viewed

in the light most favorable to the non-movant.” Summey v. Barker, 357 N.C. 492, 496

(2003).

29. The moving party “bears the initial burden of demonstrating the absence of

a genuine issue of material fact.” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571,

579 (2002). “Once the party seeking summary judgment makes the required showing,

the burden shifts to the nonmoving party to produce a forecast of evidence

demonstrating specific facts, as opposed to allegations, showing that he can at least

establish a prima facie case at trial.” Gaunt v. Pittaway, 139 N.C. App. 778, 784–85

(2000). “The nonmoving party, in [its] response, ‘must set forth specific facts showing

that there is a genuine issue for trial. If he does not so respond, summary judgment,

if appropriate, shall be entered against him.’ ” Hopkins v. MWR Mgmt. Co., 2017

NCBC LEXIS 92, at *7 (N.C. Super. Ct. Oct. 3, 2017) (quoting N.C. R. Civ. P. 56(e)).
III.

ANALYSIS

A. Cross-Motions on Plaintiffs’ Claims for Breach of Contract and Violation of
the North Carolina Wage and Hour Act

1. Breach of Contract Claim

30. The Court first addresses the parties’ cross-motions on Plaintiffs’ claim that

Cape Fear Neo breached Plaintiffs’ individual employment contracts by unilaterally

reducing Plaintiffs’ wages and withholding bonuses.

31. Under North Carolina law, a successful claim for breach of contract requires

(1) a valid contract and (2) a breach of that contract’s terms. See Poor v. Hill, 138

N.C. App. 19, 26 (2000). “A breach discharges further performance only if the breach

was material.” Chesson v. Rives, 2016 NCBC LEXIS 92, at *34 (N.C. Super. Ct. Nov.

30, 2016); see also Crosby v. Bowers, 87 N.C. App. 338, 345 (1987). “A material breach

is ‘one that substantially defeats the purpose of the agreement or goes to the very

heart of the agreement, or can be characterized as a substantial failure to perform.’ ”

Chesson, 2016 NCBC LEXIS 92, at *34 (quoting Supplee v. Miller-Motte Bus. Coll.,

Inc., 239 N.C. App. 208, 220 (2015)). In other words, a term is material if it is such

“an indispensable part of what both parties intended[,] . . . the contract would not

have been made with the covenant omitted.” Wilson v. Wilson, 261 N.C. 40, 43 (1964).

32. “The provisions of a written contract may be modified or waived by a

subsequent parol agreement, or by conduct which naturally and justly leads the other

party to believe the provisions of the contract are modified or waived[.]” Childress v.

C.W. Myers Trading Post, Inc., 247 N.C. 150, 154 (1957); see also Yamaha Int’l Corp.
v. Parks, 72 N.C. App. 625, 628 (1985) (“Notwithstanding contract provisions to the

contrary, . . . a written contract may be modified by a subsequent parol agreement,

which may be either express or implied by the conduct of the parties.”). “The critical

elements are mutual assent to the modification, and consideration or a substitute

supporting it.” Altman v. Munns, 82 N.C App. 102, 105 (1986).

33. Defendants concede that Plaintiffs had valid employment contracts with

Cape Fear Neo that had been modified over the years, but Defendants deny that Cape

Fear Neo has breached those contracts for various reasons discussed below. 59

a. Cape Fear Neo’s Failure to Pay Salaries

34. Both sides seek summary judgment on Plaintiffs’ breach of contract claim

premised on Cape Fear Neo’s failure to pay Plaintiffs their wages as established by

their modified employment contracts.

35. Defendants contend that Cape Fear Neo’s unilateral reduction of Plaintiffs’

salaries was not a breach of Plaintiffs’ employment contracts because Plaintiffs were

at-will employees who acquiesced to the reduction by continuing to work at Cape Fear

Neo after their salaries were reduced. 60 Plaintiffs contend that they have rebutted

the presumption of at-will employment and that Defendants’ unilateral reduction of

their salaries breached their contracts as a matter of law. 61

59 (Defs.’ Br. Opp’n Pls.’ Mot. Summ. J. 9–10 [hereinafter “Defs.’ Br. Opp’n”], ECF No. 79.)

60 (Apr. 12, 2022 Hr’g Tr. 74:1–20 [hereinafter “Tr.”], ECF No. 90.)

61 (See Resp. Br. Opp’n Defs.’ Mot. Summ. J. 11–12 [hereinafter “Pls.’ Br. Opp’n”], ECF No.

78.)
36. “North Carolina is an employment-at-will state[,]” Young v. Bailey, 368 N.C.

665, 668 (2016), and “both private and public employees may be classified as ‘at-will’

employees.” McCallum v. North Carolina Coop. Extension Serv. of N.C. State Univ.,

142 N.C. App. 48, 56 (2001).

37. The employment at-will doctrine provides that “in the absence of a

contractual agreement between an employer and an employee establishing a definite

term of employment, the relationship is presumed to be terminable at the will of

either party[.]” Kurtzman v. Applied Analytical Indus., Inc., 347 N.C. 329, 331 (1997);

see also Wuchte v. McNeil, 130 N.C. App. 738, 740 (1998) (“An employee is presumed

to be an employee-at-will absent a definite term of employment or a condition that

the employee can be fired only ‘for cause.’ ”). Thus, “in the absence of an employment

contract for a definite period, both employer and employee are generally free to

terminate their association at any time and without any reason.” Salt v. Applied

Analytical, Inc., 104 N.C. App. 652, 655 (1991).

38. The doctrine has limits, however, and a party can rebut the presumption of

at-will employment in three ways:

First, . . . parties can remove the at-will presumption by specifying a
definite period of employment contractually. Second, federal and state
statutes have created exceptions prohibiting employers from
discharging employees based on impermissible considerations such as
the employee’s age, race, sex, religion, national origin, or disability, or
in retaliation for filing certain claims against the employer. . . . Finally,
this Court has recognized a public-policy exception to the employment-
at-will rule.

Kurtzman, 347 N.C. at 331 (cleaned up).
39. Plaintiffs contend that they have rebutted the presumption of at-will

employment because their employment contracts provided for a definite term of one

year. 62 It is undisputed, however, that each employment contract was terminable by

either party at any time without cause and did not contain a definite termination

date for the term of any Plaintiff’s employment. Instead, each contract stated that

the term of employment would be for one year and would then continue, year by year,

until terminated by either party with or without cause. 63

40. North Carolina law makes clear that contracts that do not specify a date for

the end of an employee’s employment, such as those here, are of indefinite duration.

See, e.g., Ausley v. Bishop, 133 N.C. App. 210, 219 (1999) (“[A]n employment contract

where the compensation is specified at a rate per year, month, week or day, but where

the duration of the contract is not specified, is for an indefinite period.” (cleaned up));

Wilkerson v. Carriage Park Dev. Corp., 130 N.C. App. 475, 477–78 (1998) (“Even

where an employment contract specifies compensation at a yearly, monthly, weekly,

or daily rate, this Court has held that if the term of service is not specified, the

contract is for an indefinite period.”); Higgins v. Synergy Coverage Sols., LLC, 2020

NCBC LEXIS 6, at *20 (N.C. Super. Ct. Jan. 15, 2020) (holding that employment until

the sale of defendant company was for an indefinite term).

62 (Pls.’ Reply Defs.’ Br. Opp’n 3, ECF No. 80.) Plaintiffs do not offer argument or evidence
to support either of the other two exceptions to the presumption of at-will employment, so
the Court will confine its analysis to the first exception.

63 (Gallaher Emp. Cont. ¶ 21; Coggin Emp. Cont. ¶ 24; Cameron Emp. Cont. ¶ 24.)
41. North Carolina law is likewise clear that an employment contract of

indefinite or permanent duration creates at-will employment, even if, as here,

compensation is set at a regular specified rate. See, e.g., Hogan v. Forsyth Cty. Club

Co., 79 N.C. App. 483, 497 (1986) (“North Carolina adheres to the common law

doctrine that employment contracts of indefinite duration are terminable at will.”);

see also, e.g., Wilkerson, 130 N.C. App. at 477 (noting that “North Carolina law has

consistently held that to remove an employer-employee relationship from the

employment[-]at[-]will doctrine, the contract must specify a definite term of

employment[ ]” and concluding that a performance-based bonus did not create a

definite term); Freeman v. Hardee’s Food Sys., Inc., 3 N.C. App. 435, 438–39 (1969)

(holding that an employment contract that set a yearly salary and provided for yearly

pay adjustments, but which had no specified end date, created at-will employment).

The Court therefore concludes that each Plaintiff’s employment contract was

terminable at-will as a matter of law. 64

42. Having reached this conclusion, the Court must next consider whether Cape

Fear Neo could unilaterally modify Plaintiffs’ at-will employment contracts.

Defendants argue that they could; Plaintiffs argue that they could not. 65

64 Indeed, Plaintiffs took advantage of the at-will nature of their employment when they

tendered their resignations to Cape Fear Neo without cause. (See Gallaher Termination
Notice (Gallaher’s resignation “without cause”); Cameron Termination Notice (Cameron’s
resignation “without cause”); Coggin Termination Notice (Coggin’s resignation “without
cause.”).)

65 (See Tr. 21:24–22:4; 72:5–74:23.)
43. “A contract, or ‘any modification to an existing contract,’ must be supported

by consideration.” Addison Whitney, LLC v. Cashion, 2017 NCBC LEXIS 23, at *24

(N.C. Super. Ct. Mar. 15, 2017) (quoting RoundPoint Mortg. Co. v. Florez, 2016 NCBC

LEXIS 18, at *46 (N.C. Super. Ct. Feb. 18, 2016)). “An offer of employment ‘may serve

as consideration’ when the employee makes a promise at the beginning of the

employment relationship ‘as a part of the initial employment terms.’ ” Id. at *24

(quoting RoundPoint Mortg., 2016 NCBC LEXIS 18, at *47). However, “[i]f the

agreement is entered into after the creation of the employment relationship, it must

be supported by new consideration beyond the promise of continued at-will

employment.” Id. at *24–25. 66

44. Here, there is no evidence that Cape Fear Neo provided any new

consideration to Plaintiffs beyond their reduced salaries in exchange for Plaintiffs’

pledge to work during the notice period. 67 As a result, the Court concludes that Cape

Fear Neo’s reduction in Plaintiffs’ salaries without Plaintiffs’ consent breached

Plaintiffs’ modified employment contracts as a matter of law.

66 RoundPoint Mortgage relied upon the Supreme Court of North Carolina’s holding in Kadis

v. Britt, 224 N.C. 154, 161–63 (1944) (finding that consideration consisting of the continuance
of at-will employment, which by its very nature may be taken away without cause, was
illusory and cannot constitute consideration), but recognized that the North Carolina Court
of Appeals appears to have held to the contrary forty years later in Fraver v. N.C. Farm
Bureau Mut. Ins. Co., 69 N.C. App. 733, 738 (1984) (holding that “[e]mployment contracts
which are terminable at will may be modified at any time by either party with the
continuance of the relationship serving as the consideration for the modification[ ]”). See
RoundPoint Mortg., 2016 NCBC LEXIS 18, at *47–49 (noting that “[o]ther courts have also
described consideration of the type discussed in Kadis as illusory and found that it cannot
constitute consideration[,]” and citing Henley Paper Co. v. McAllister, 253 N.C. 529, 533
(1960) and McLamb v. T.P. Inc., 173 N.C. App. 586, 591 (2005) for this proposition).

67 (See Pls.’ Br. Supp. 12–14; Defs.’ Br. Supp. 4.)
45. But having found breach, the Court must next consider whether Plaintiffs

waived that breach by continuing to work during the notice period, as Defendants

contend. 68 Our Supreme Court has held that, under North Carolina law:

a party may waive the breach of a contractual provision or condition
without consideration or estoppel if[:] (1) [t]he waiving party is the
innocent, or nonbreaching party, and (2) [t]he breach does not involve
total repudiation of the contract so that the nonbreaching party
continues to receive some of the bargained-for consideration . . . , and (3)
[t]he innocent party is aware of the breach, and (4) [t]he innocent party
intentionally waives his right to excuse or repudiate his own
performance by continuing to perform or accept the partial performance
of the breaching party.

Wheeler v. Wheeler, 299 N.C. 633, 639 (1980).

46. The Court considers each Wheeler element in turn to determine whether

Plaintiffs waived their breach of contract claim.

47. First, it is undisputed that Plaintiffs did not breach their employment

agreements. Even though Cape Fear Neo unilaterally reduced their salaries, the

evidence shows that each Plaintiff completed working his or her ninety-day notice

period. 69

48. Second, there is no dispute that Plaintiffs received some of the bargained-

for consideration under the modified contracts—i.e., salary payments at the original

contract rate rather than no payments at all 70—so the breach was not a total

repudiation of each Plaintiffs’ employment contract.

68 (See Tr. 74:17–20.)
Defendants advanced their waiver argument for the first time at the
Hearing without objection from Plaintiffs.

69 (Gallaher Aff. ¶ 40; Cameron Aff. ¶ 34; Coggin Aff. ¶ 33.)

70 (Gallaher Aff. ¶¶ 39–40; Cameron Aff. ¶¶ 33–34; Coggin Aff. ¶¶ 32–33.)
49. Third, the evidence establishes as a matter of law that Plaintiffs were aware

of the breach because each Plaintiff has acknowledged receiving the Memo attached

to the 31 January 2019 paychecks and thereafter accepted the reduced salary

payments. 71

50. Fourth, there is no dispute that Plaintiffs continued to work for Cape Fear

Neo after the Practice breached their employment contracts. 72 Although Plaintiffs

contend that they believed they were contractually obligated to work the remainder

of their ninety-day notice periods and felt ethically responsible to continue caring for

the infants in the NICU, 73 they knowingly accepted Cape Fear Neo’s partial

performance in the face of Cape Fear Neo’s plain breach 74 when that material breach

excused their further performance as a matter of law.

51. Based on the above, the Court therefore concludes that Plaintiffs waived

Defendants’ reduced-salary-based breach of Plaintiffs’ employment contracts as a

matter of law. As a result, the Court concludes that Defendants’ motion for summary

judgment on Plaintiffs’ breach of contract claim based on reduced salary payments

should be granted and Plaintiffs’ claim dismissed with prejudice.

71 (Gallaher Aff. ¶¶ 39–40; Cameron Aff. ¶¶ 33–34; Coggin Aff. ¶¶ 32–33.)

72 (Gallaher Aff. ¶ 40; Cameron Aff. ¶ 34; Coggin Aff. ¶ 33.)

73 (Gallaher Aff. ¶ 40; Cameron Aff. ¶ 34; Coggin Aff. ¶ 33.)

74 (See Gallaher Paystubs; Cameron Aff. ¶ 34; Coggin Paystubs.)
b. Cape Fear Neo’s Withholding of Bonus Payments

52. Defendants’ Motion also seeks dismissal of Plaintiffs’ claim that Defendants

breached their contracts by not paying bonuses in 2018 or 2019. Plaintiffs contend

that shortly after May or June of each year, it was Cape Fear Neo’s pattern and

practice to pay out bonuses on a monthly basis until the end of the year, and Cape

Fear Neo’s failure to pay these bonuses in both 2018 and 2019 breached Plaintiffs’

modified employment contracts. 75

53. Defendants, however, have correctly pointed out that despite Cape Fear

Neo’s alleged pattern and practice, bonuses were not automatically guaranteed, but

instead depended upon prospective evaluations made by Blake and Ciszek and then

were calculated as a proportion of the bonus paid to Ciszek. 76 According to Blake’s

undisputed testimony, Cape Fear Neo would pay its larger expenses out of its gross

income during the first five or six months of each year. 77 Then, at the end of each

month after May or June of a particular year, Blake and Ciszek would review the

amount of money the practice had in its account, forecast the Medicaid payment

schedule and any other debts that could come due, and then determine whether there

was surplus cash that could be paid out as bonuses. 78

75 (See Pls.’ Br. Opp’n 8–11.)

76 (Defs.’ Br. Supp. 12.)

77 (Blake Dep. 19:13–21, 23:4–8.)

78 (Blake Dep. 19:22–20:5.)
54. If any bonus was in fact paid, Gallaher’s Contract provided that his bonus

would be 11.11% of the bonus paid to Ciszek. 79 Gallaher’s Contract was later

amended to provide for a bonus calculated as equal in amount to the bonus received

by Ciszek. 80 Coggin’s and Cameron’s Contracts provided that any bonuses paid to

them would be calculated as fractions of the total “bonus pool” ranging from 1/12 to

3/15. 81 Therefore, the record evidence is undisputed that Gallaher’s bonus depended

on Ciszek receiving a bonus, while Coggin’s and Cameron’s bonuses depended on

Cape Fear Neo generating a “bonus pool” to be split among the practitioners.

55. The question thus becomes whether Plaintiffs’ employment contracts gave

them a right to bonuses for the years in dispute. The Court concludes that they did

not.

56. It is undisputed that neither Ciszek nor anyone else in the Practice received

a bonus in 2018 or 2019. 82 Since Ciszek did not receive a bonus, Gallaher, by his own

admission, was not entitled to a bonus under his employment contract. 83 Similarly,

79 (Gallaher Emp. Cont. ¶ 10(b).)

80 (Gallaher Am. Emp. Cont.) The amendments altered only the language that controlled
bonuses. (See Gallaher Am. Emp. Cont. 3 (providing that“[e]xcept as amended [here], the
[original] Employment Contract . . . shall remain in full force and effect[,]” and paginated as
page 73).) The Court therefore refers to the original Gallaher Contract in its discussions of
all issues other than the claims related to bonuses.

81 (Coggin Emp. Cont. ¶ 10(b); Cameron Emp. Cont. ¶ 10(b).)

82 (See Ciszek Dep. 76:18–22, 80:2–22 (“Q: [I]n 2018 I believe there were no bonuses that were

paid out from the practice to any of the practitioners. Is that correct? A: That’s probably
correct if it doesn’t say there were.” (emphasis added)); Blake Dep. 39:23–40:1, 52:11–14,
79:25–80:2; Tr. 20:7–8, 83:2–4.)

83 (Gallaher Dep. 53:5–18 (“Q: And, again, if Dr. Lowe and Dr. Ciszek didn’t get any bonus,

then you would not be entitled to any bonus either. Is that correct? A: Correct.”).)
it is undisputed that Cape Fear Neo’s total “bonus pool” in 2018 and 2019 was $0. 84

As a result, Coggin and Cameron acknowledge that they were not entitled to bonuses

under their employment contracts for those years either. 85

57. Nevertheless, Plaintiffs contend that they were entitled to bonuses in 2018

and 2019 because Defendants developed a pattern and practice of paying bonuses

when Defendants had sufficient cash on hand. 86 Plaintiffs argue that, according to

Cape Fear Neo’s tax returns, the Practice had year-end cash assets in excess of

$200,000 in 2018 and $400,000 in 2019. 87 Plaintiffs contend that Cape Fear Neo was

therefore obligated to pay them bonuses according to the policy and practice it had

adopted because it had the funds to do so. 88

58. The record is undisputed, however, that even if Plaintiffs prevail in showing

a pattern and practice of bonus payments, those bonuses were always paid in the

exercise of Cape Fear Neo’s discretion and the amount of any such bonus, when paid,

was determined by Plaintiffs’ respective employment contracts. Under those

84 As noted above, the “bonus pool” is the contracts’ short-hand for the salaries actually paid

to certain named practitioners in excess of their collective standard salaries. (See Coggin
Emp. Cont. ¶ 10(b); Cameron Emp. Cont. ¶ 10(b).) The Practice paid no bonus to any
practitioner for the periods in dispute. (See Ciszek Dep. 76:18–22, 80:2–22.) Therefore, the
“bonus pool” for these periods was $0.

85 (Coggin Dep. 72:9–73:8 (“Q: So was it your understanding that if Dr. Ciszek didn’t receive

a bonus, that you didn’t get a bonus? A: Yes.”); Cameron Dep. 75:11–15 (“Q: [I]f you received
under this agreement three-ninths of what Ciszek’s [sic] and Gallaher and I guess Carter
received, what’s three-ninths of zero? A: Zero.”).)

86 (Pls.’ Br. Opp’n 9–10.)

87 (Pls.’ Mot. Summ. J. Exs. 21–22, ECF Nos. 69.22–.23.)

88 (Pls.’ Br. Supp. 18–21.)
contracts, the amount Plaintiffs received was tied to the bonus amount Defendants

elected to pay Ciszek and the funds they chose to make available for the “bonus pool”

after Blake and Ciszek forecasted Cape Fear Neo’s Medicaid payment schedule and

other debts for the upcoming period. 89 Accordingly, because those amounts were each

$0 in 2018 and 2019 after Blake and Ciszek conducted their review—a review that

occurred both years 90—Plaintiffs’ claim for breach based on Cape Fear Neo’s alleged

pattern or practice of paying bonuses necessarily fails.

2. Violation of the North Carolina Wage and Hour Act Claim

59. Both parties seek summary judgment on Plaintiffs’ claim that Cape Fear

Neo violated the NCWHA by failing to pay Plaintiffs their full salaries from 31

January 2019 through 30 April 2019 and their earned bonuses for 2018 and 2019.

60. The NCWHA governs the state-level wage and hour requirements for North

Carolina employers and the corresponding rights of covered employees. See N.C.G.S.

§ 95-25.1 et seq. Among other things, it includes requirements for minimum wages,

overtime compensation, wage payment, and certain benefits. The statute covers all

North Carolina employers and permits employees to file lawsuits to recover wages

owed based on an employer’s violation of the wage payment provisions. See id. § 95-

25.22.

61. In construing the NCWHA or any other statute, “interpretation properly

begins with an examination of the plain words of the statute.” Correll v. Div. of Soc.

89 (See Gallaher Am. Emp. 2 Cont. (paginated as page 72); Cameron Emp. Cont. ¶ 10(b);

Coggin Emp. Cont. ¶ 10(b); Blake Dep. 21:7–23:25.)

90 (Ciszek Dep. 79:24–80:22; Blake Dep. 52:11–14, 67:16–68:9, 79:15–82:6.)
Servs., 332 N.C. 141, 144 (1992). “If the statutory language is clear and unambiguous,

the court eschews statutory construction in favor of giving the words their plain and

definite meaning.” State v. Beck, 359 N.C. 611, 614 (2005). “Whatever may be the

views and purposes of those who procure the enactment of a statute, the Legislature

contemplates that its intention shall be ascertained from its words as embodied in it.”

Abernethy v. Bd. of Comm’rs, 169 N.C. 631, 640 (1915).

62. The NCWHA defines “wages” to include “compensation for labor or services

rendered by an employee whether determined on a time, task, piece, job, day,

commission, or other basis of calculation, and . . . includes . . . bonuses[ ] and other

amounts promised when the employer has a policy or a practice of making such

payments.” N.C.G.S. § 95-25.2(16). The statute requires that employers inform their

employees in writing or in a posted notice at least one pay period before any decrease

in promised wages takes effect. See id. § 95-25.13(3). The law prohibits employers

from retroactively decreasing wages. Id.

63. “[G]iving the statutory language its natural and ordinary meaning, the

[NCWHA] requires” that

[o]nce the employee has earned the wages and benefits . . . , the
employer is prevented from rescinding them, with the exception that for
certain benefits such as . . . bonuses . . . an employer can cause a loss or
forfeiture of such pay if he has notified the employee of the conditions
for loss or forfeiture in advance of the time when the pay is earned.

Narron v. Hardee’s Food Sys., Inc., 75 N.C. App. 579, 583 (1985), overruled on other

grounds by J & B Slurry Seal Co. v. Mid-South Aviation, Inc., 88 N.C. App. 1 (1987);

see also Moore v. Data Sys. Network Corp., No. COA00-1515, 2002 N.C. App. LEXIS
2107, at *20 (N.C. Ct. App. Aug. 20, 2002) (unpublished) (“An employer may change

the wages and benefits offered at any time, so long as the employer notifies its

employees, in writing or through a posted notice maintained in a place accessible to

its employees, of such changes in promised wages prior to the time of such changes.”)

a. Cape Fear Neo’s Failure to Pay Salaries

64. Plaintiffs first contend that Cape Fear Neo violated the NCWHA by failing

to pay Plaintiffs their full salaries from 1 January 2019 through 30 April 2019. 91

Plaintiffs’ claim turns on whether the Memo that accompanied the 31 January 2019

paycheck to each Plaintiff satisfied the NCWHA’s notice requirement for subsequent

pay periods. Defendants contend that it did; 92 Plaintiffs argue that it did not. 93

65. The parties nevertheless appear to agree, and the Court concludes based on

the undisputed facts of record, that an NCWHA-qualifying notice did not precede

Cape Fear Neo’s 31 January 2019 reduced salary payments to Plaintiffs. 94 Cape Fear

Neo’s failure to tender this required notice plainly violated section 95-25.13(3). The

Court therefore shall enter judgment for Plaintiffs against Cape Fear Neo under

section 95-25.22(a) in the amount of the unpaid salary withheld by the Practice from

91 (See Br. Supp. Pls.’ Mot. Summ. J. 16–18 [hereinafter “Pls.’ Br. Supp.”), ECF No. 70.)

92 (See Defs.’ Br. Supp. Defs.’ Mot. Summ. J. 11–12 [hereinafter “Defs.’ Br. Supp.”], ECF No.

74.)

93 (See Pls.’ Br. Supp. 16–18.)

94 Defendants conceded this point at the Hearing. (See Tr. 58:5–8; see also Defs.’ Br. Supp.
11–12.)
each Plaintiff’s paycheck based on the Plaintiff’s prevailing rate of pay on 31 January

2019, plus interest at the legal rate from the date that amount first came due. 95

66. The Court further concludes that Cape Fear Neo’s January 31 notice, stating

“Compensation has been adjusted to meet the terms of your employment

agreement,” 96 when considered with Plaintiffs’ contemporaneous receipt of the

January 31 salary payments at the rates in their original employment agreements,

put Plaintiffs on notice that each would receive salary payments thereafter consistent

with those original agreements. As a result, the Court concludes that the Memo

provided the requisite notice under the NCWHA for all future salary payments and,

therefore, the Court shall dismiss Plaintiffs’ NCWHA claim with prejudice to the

extent that it is based on reduced salary payments after 31 January 2019.

67. Having determined that judgment should issue as to the January 31

payments, the Court next considers whether liquidated damages, costs, and

attorneys’ fees should be assessed against Cape Fear Neo under the NCWHA.

68. The NCWHA provides that the court shall award liquidated damages in an

amount equal to the “unpaid amounts due . . . plus interest at the legal rate set forth

95 It is undisputed that the salary payments Plaintiffs received from Cape Fear Neo on 11

January 2019 and on 31 January 2019 were as follows: (i) Gallaher $12,600.00 (January 11);
$3,958.34 (January 31), (see Gallaher Paystubs); (ii) Cameron $10,725.00 (January 11);
$8,333.34 (January 31), (see Cameron Aff. ¶¶ 33–34); and (iii) Coggin $9,433.33 (January 11);
$8,333.34 (January 31), (see Coggin Paystubs). Judgment shall therefore be entered for each
Plaintiff in the amount of the difference between these two payments as follows: Gallaher
$8,641.66; Cameron $2,391.66; and Coggin $1,099.99, each plus interest at the legal rate from
31 January 2019.

96 (Paystub Memo.)
in [N.C.]G.S. 24-1, from the date each amount first came due[,]”unless the employer

carries its burden to show that its violations were “in good faith” and that it had

“reasonable grounds for believing [that its actions were lawful].” N.C.G.S. § 95-

25.22(a), (a1); see, e.g., Morris v. Scenera Research., LLC (Morris I), 2012 NCBC

LEXIS 29, at *14–15 (N.C. Super. Ct. May 14, 2012) (“Defendants bear the burden of

proving their good faith and reasonable grounds for believing that their acts did not

violate the [NCWHA].”), rev’d on other grounds, 229 N.C. App. 31 (2013), rev’d in part,

368 N.C. 857 (2016). “In the absence of such proof, the statute directs the court to

grant damages in an amount equal to the unpaid wages owed. The issue of good faith

is for the trial court’s determination.” Morris I, 2012 NCBC LEXIS 29, at *15.

69. In addition, under N.C.G.S. § 95-25.22(d), the trial court “may, in addition

to any judgment awarded plaintiff, order costs and fees of the action and reasonable

attorneys’ fees to be paid by the defendant.”

70. As to liquidated damages, the Court concludes that Defendants have failed

to offer evidence from which a factfinder could conclude that that Cape Fear Neo’s

violations were in good faith and that it had reasonable grounds for believing that its

actions were lawful. To the contrary, while the parties may have had a legitimate

dispute over their respective contract rights under Plaintiffs’ agreements with Cape

Fear Neo, it is undisputed that Plaintiffs were Cape Fear Neo employees subject to

the NCWHA and that absent conforming written notice, Cape Fear Neo had no legal

right to reduce Plaintiffs’ January 31 salary payments under the clear, unambiguous

language of the NCWHA. Accordingly, the Court shall order Cape Fear Neo to pay
liquidated damages to Plaintiffs under section 95-25.22(a1) in the amount of the

unpaid salary payments identified above.

71. After careful deliberation, however, the Court declines to exercise its

discretion to order Cape Fear Neo to pay the costs and fees of this action, including

Plaintiffs’ reasonable attorneys’ fees under section 95-25.22(d). Plaintiffs succeeded

in establishing only one of the seven alleged NCWHA violations on which they sued,

and the Court concludes, in the exercise of its discretion, that ordering Cape Fear Neo

to pay Plaintiffs their fees and costs is neither reasonable, fair, nor in the interests of

justice in the circumstances of this case.

b. Cape Fear Neo’s Withholding of Bonus Payments

72. Defendants also seek to dismiss Plaintiffs’ claim for failure to pay bonuses

in 2018 and 2019, contending that Plaintiffs were not entitled to any bonuses during

the disputed period. 97 The Court agrees with Defendants.

73. The NCWHA defines the term “wage” to include bonuses. N.C.G.S. § 95-

25.2(16). As noted above, under N.C.G.S. § 95-25.13(3),

[o]nce the employee has earned the wages and benefits under this
statutory scheme, the employer is prevented from rescinding them, with
the exception that for certain benefits such as commissions, bonuses and
vacation pay, an employer can cause a loss or forfeiture of such pay if he
has notified the employee of the conditions for loss or forfeiture in
advance of the time when the pay is earned.

Narron, 75 N.C. App. at 583. The statute therefore “permit[s] an employer to make

changes in an employee’s benefits, but the change applies only to those benefits

accruing after written notice is given [to] the employee or notice is posted in a place

97 (Defs.’ Supp. 12–13.)
accessible to the employees.” Moses H. Cone Mem’l Health Servs. Corp. v. Triplett,

167 N.C. App. 267, 273 (2004) (cleaned up). Although the NCWHA forbids reducing

wages, including bonuses, without notice, “wage reduction” in this context has been

interpreted to mean attempted withholding of an earned bonus, or a retroactive

change to the formula by which an already earned bonus was calculated. 98

74. The Court recognizes that the Supreme Court of North Carolina held that

whether a bonus is “calculable” was a question of fact in Morris v. Scenera Research,

LLC (Morris III), 368 N.C. 857, 862–63 (2016). However, there are critical

distinctions between this case and Morris. There, the employee was indisputably

entitled to $5,000 when the employer made a patent application, and another $5,000

if the patent issued. Morris II, 229 N.C. App. at 35. The employee argued that,

because there were 150 patent applications pending when he left the employer, and

his patent applications historically had a 90% success rate, he was entitled to

$675,000, the amount he would receive if 90% of the 150 outstanding patents issued.

Morris III, 368 N.C. at 863.

75. The Supreme Court held that whether the bonus was calculable was a

question of fact that was properly submitted to the jury because the employee

produced a formula based on a contractually guaranteed bonus for a specific sum, but

the parties disagreed on whether that formula was properly applied. Id. at 863–64.

98 See, e.g., Morris v. Scenera Research, LLC (Morris II), 229 N.C. App. 31, 35, 40–42 (2013)

(enforcing employee’s right to earned bonus under the NCWHA), rev’d on other grounds, 368
N.C. 857 (2016); Arndt v. First Union Nat’l Bank, 170 N.C. App. 518, 520, 524–25 (2005)
(same); Triplett, 167 N.C. App. at 272–73 (2004) (holding that the NCWHA did not protect
an employee’s bonus because the bonus had not accrued and was therefore not quantifiable).
Here, in contrast to Morris and to other cases that have found NCWHA violations

based on the withholding of bonuses, there was no contractual bonus formula. 99 The

payment of any bonus was within Ciszek’s discretion and was not guaranteed. 100 As

such, no bonus was capable of calculation. Neither Plaintiffs’ contracts nor the

pattern and practice they allege changes the discretionary nature of the bonus

payments or requires that a bonus be made in a particular amount. In contrast to

Morris, there is no factual dispute over the application of a particular proposed

formula that a jury could properly resolve.

76. The Court therefore concludes that Plaintiffs were not entitled to receive

bonuses in 2018 and 2019 under their contracts, and Ciszek’s decision not to pay

bonuses did not constitute an impermissible retroactive change to Plaintiffs’ bonus

rights within the meaning of the statute. As a result, Plaintiffs’ NCWHA bonus claim

must be dismissed.

B. Piercing the Corporate Veil

77. Both parties seek summary judgment on Plaintiffs’ right to seek relief

against Ciszek by piercing Cape Fear Neo’s corporate veil. Plaintiffs contend that

Ciszek completely dominated Cape Fear Neo and caused it to breach Plaintiffs’

employment contracts which, they allege, is the direct cause of the harm they

suffered. 101 Defendants argue instead that Plaintiffs’ admissions regarding their

99 Cf. Morris II, 229 N.C. App. at 35, 40–42; Arndt, 170 N.C. App. at 520, 524–25.

100 (See Blake Dep. 21:22–22:2; Gallaher Dep. 53:5–18; Cameron Dep 75:11–15; Coggin Dep.

72:9–73:8.)

101 (Pls.’ Br. Opp’n 14–16.)
involvement in the operations of the Practice fatally undermine their claim that

Ciszek exerted complete and total control over all actions taken by the Practice. 102

78. “The general rule is that in the ordinary course of business, a corporation is

treated as distinct from its shareholders.” Green v. Freeman, 367 N.C. 136, 144–45

(2013) (quoting State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 438

(2008)). 103 “Disregarding the corporate form is not to be done lightly[ ] but is reserved

only for an extreme case where necessary to serve the ends of justice[.]” Kerry

Bodenhamer Farms, LLC v. Nature’s Pearl Corp., 2017 NCBC LEXIS 27, at *12 (N.C.

Super. Ct. Mar. 27, 2017) (cleaned up). Consequently, “[a] court’s decision to pierce

the corporate veil, thereby proceeding beyond the corporate form, is a strong step:

Like lightning, it is rare and severe.” S. Shores Realty Servs. v. Miller, 251 N.C. App.

571, 583 (2017) (cleaned up).

79. “It is well recognized that courts will . . . ‘pierce the corporate

veil’ . . . whenever necessary to prevent fraud or to achieve equity.” Glenn v. Wagner,

313 N.C. 450, 454 (1985). But it has also been observed that piercing the corporate

veil “is among the most confusing [doctrines] in corporate law.” Frank H. Easterbrook

& Daniel R. Fischel, Limited Liability and the Corporation, 52 U. Chi. L. Rev. 89, 89

(1985). North Carolina has therefore adopted the “instrumentality rule” to guide

102 (Defs.’ Br. Supp. 14–17.)

103 Under North Carolina law, professional corporations such as Cape Fear Neo are subject

to the same “duties, restrictions, and liabilities” as other corporations. See N.C.G.S. § 55B-
3. That Cape Fear Neo is a professional corporation, rather than a traditional corporation,
does not affect the veil-piercing analysis.
courts in this “critical area of jurisprudence.” See Ridgeway Brands Mfg., 362 N.C.

at 440. The rule applies if the corporation “had no separate role of its own,” and a

dominant shareholder exercised “actual control” to “operate[ ] the [corporation] as a

mere instrumentality or tool.” Glenn, 313 N.C. at 457. If the instrumentality rule

applies, the “separate identities of parent and subsidiary or affiliated corporations

may be disregarded.” Id. at 453.

80. Furthermore, while Glenn dealt with piercing the corporate veil to hold a

corporate parent liable, the same analysis applies when a plaintiff seeks to impose

liability on a dominant shareholder. See, e.g., Ridgeway Brands Mfg., 362 N.C. at

440–43 (explaining that piercing doctrine predates Glenn and covers dominant

shareholders, and applying the instrumentality rule to a dominant shareholder).

Thus, when a corporation is operated as a mere alter ago of its dominant shareholder,

“the corporate entity will be disregarded . . . whether the sole or dominant

shareholder is an individual or another corporation.” Henderson v. Sec. Mortg. &

Finance Co., 273 N.C. 253. 260 (1968).

81. Moreover, piercing the corporate veil is not a theory of liability. See Green,

367 N.C. at 146. “Rather, it provides an avenue to pursue legal claims against

corporate officers or directors who would otherwise be shielded by the corporate

form.” Id. Control of a corporation alone is insufficient to pierce the veil. See, e.g.,

Waff Bros., Inc. v. Bank of N.C., N.A., 289 N.C. 198, 210 (1976) (“[t]he mere fact that

all of the outstanding shares of stock of each of two corporations are owned by one

individual, who is the chief executive officer of each corporation, does not necessarily
destroy the corporate entities so as to make the two corporations and the sole

stockholder one and the same person in contemplation of the law.”). Instead, the

party that seeks to disregard the corporate form must also establish an independent

claim on which to hold the controlling person or entity liable. See, e.g., B-W

Acceptance Corp. v. Spencer, 268 N.C. 1, 8–9 (1966) (recognizing that where control

exists “there must be additional circumstances showing fraud, actual or constructive,

or agency[ ]” to hold a parent liable for its subsidiary’s contracts) (citing Whitehurst

v. FCX Fruit & Vegetable Serv., Inc., 224 N.C. 628, 637 (1944)).

82. Under the instrumentality rule, a party must demonstrate three elements

to pierce the corporate veil:

(1) Control, not mere majority or complete stock control, but complete
domination, not only of finances, but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its
own; and

(2) Such control must have been used by the defendant to commit fraud
or wrong, to perpetrate the violation of a statutory or other positive legal
duty, or a dishonest and unjust act in contravention of plaintiff’s legal
rights; and

(3) The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.

Glenn, 313 N.C. at 454–55.

83. Glenn also includes a list of nine factors courts may consider in determining

whether the requisite control described in the first element exists: inadequate

capitalization, non-compliance with corporate formalities, complete domination and

control of the corporation, excessive fragmentation into multiple entities, non-
payment of dividends, insolvency of the corporation, siphoning of funds by the

dominant shareholder, non-functioning of other officers or directors, and absence of

corporate records. Id. at 455, 458. The Glenn court cautioned, however, that these

factors were not exhaustive and that the presence or absence of any particular factor

is not dispositive. See id. at 458.

84. Applying these factors here, the Court notes first that the evidence is

undisputed that Ciszek was the sole shareholder, officer, and director of Cape Fear

Neo at the time of the January 31 payments. 104 It is also undisputed that Ciszek had

the sole authority to cause Cape Fear Neo to make salary payments to Plaintiffs, 105

and that Ciszek ordered Cape Fear Neo to make the reduced January 31 payments

without proper notice to Plaintiffs under the NCWHA. Thus, with respect to this

specific transaction, Ciszek acted for, and maintained complete domination and

control over Cape Fear Neo. See Glenn, 313 N.C. at 455 (requiring the “complete

domination . . . of policy and business practice in respect to the transaction attacked

so that the corporate entity as to this transaction had at the time no separate mind,

will or existence of its own[ ]” for veil piercing (emphasis added)). The Court thus

concludes that the undisputed evidence shows that Ciszek used Cape Fear Neo as a

mere instrumentality for purposes of this transaction.

104 (Pls.’ Mot. Summ. J. Ex. 60 Defs.’ Resp. Pls.’ First Req. Admis., 3–4 [hereinafter “Ciszek’s

Resp. RFA”], ECF No. 69.61.)

105 (See Ciszek’s Resp. RFA 3–4; Ciszek Dep. 83:20–85:25; Blake Dep. 44:1–20, 82:23–83:18.)
85. Next, the undisputed evidence further shows both that Ciszek prepared the

Memo accompanying the January 31 payment and instructed Blake to make the

payment in the reduced amount, 106 and, as discussed above, the payment was made

without proper notice in violation of the NCWHA. The violation of a

“statutory . . . duty” satisfies the second element of the Glenn test. Glenn, 313 N.C.

at 455; see also Henderson, 273 N.C. at 260 (permitting piercing when “the

corporation is so operated . . . in violation of the declared public policy or statute of

the State” (emphasis added)); Becker v. Graber Builders, Inc., 149 N.C. App. 787, 791

(2002) (holding “viol[ation] [of] the North Carolina Building Code” sufficient to meet

the wrongdoing prong of the instrumentality rule). Ciszek’s violation of the NCWHA

therefore establishes the second element of the instrumentality rule.

86. Finally, the evidence establishes as a matter of law that it was Ciszek’s use

of his domination and control that caused Cape Fear Neo to pay Plaintiffs the reduced

January 31 payments 107 and proximately caused Plaintiffs to suffer the loss of salary

that forms the basis for their NCWHA claims.

87. Based on the above, therefore, the Court concludes that Plaintiffs have

shown that they are entitled to pierce Cape Fear Neo’s corporate veil as a matter of

law to impose personal liability on Ciszek for Cape Fear Neo’s violation of the

NCWHA in making the reduced January 31 payments without proper notice. 108

106 (See Ciszek Dep. 83:20–85:25; Blake Dep. 44:1–20, 82:23–83:18.)

107 (See Ciszek Dep. 83:20–85:25; Blake Dep. 44:1–20, 82:23–83:18.)

108 Although alleging that both “Defendants” are liable on their NCWHA claim, (Compl. ¶¶

48–50), Plaintiffs have not pleaded or argued any basis for Ciszek’s individual liability under
88. In reaching this conclusion, the Court has considered but rejects Defendants’

contention that Plaintiffs’ January-31-based NCWHA claim should be barred by

judicial estoppel. 109 Our Supreme Court has described judicial estoppel as follows:

Broadly speaking, judicial estoppel prevents a party from acting in a
way that is inconsistent with its earlier position before the court. This
equitable doctrine, which may be invoked in a court’s discretion, is
inherently flexible and requires weighing of relevant factors. It is
limited to assertions of fact in civil proceedings and does not require an
intent to deceive the court, though such intent may nevertheless be a
consideration supporting invocation of the doctrine. While many factors
can affect a court’s decision whether to invoke the doctrine, three
frequently considered aspects of a case are whether: (1) the party’s
subsequent position is clearly inconsistent with its earlier position; (2)
judicial acceptance of a party’s position might threaten judicial integrity
because a court has previously accepted that party’s earlier inconsistent
position; and (3) the party seeking to assert an inconsistent position
would derive an unfair advantage or impose an unfair detriment on the
opposing party as a result.

Powell v. City of Newton, 364 N.C. 562, 569 (2010) (cleaned up).

89. Defendants argue that judicial estoppel should apply because Plaintiffs

alleged in an earlier, subsequently-dismissed action between the parties that

Plaintiffs were shareholders who operated Cape Fear Nero “as an equal partnership

with respect to corporate decision-making and division of corporate revenues[ ]” 110

the NCWHA other than through piercing Cape Fear Neo’s corporate veil. In particular,
Plaintiffs have not pleaded or argued that Ciszek is directly liable under the NCWHA as an
“employer” under the statute. See N.C.G.S. § 95-25.2(5) (defining “employer”); Powell v.
P2Enterprises, LLC, 247 N.C. App. 731, 734 (2016) (applying “economic reality” test to
determine individual liability under the NCWHA). Therefore, the Court does not consider
Ciszek’s individual liability under the NCWHA and instead resolves Ciszek’s NCWHA
liability for the January 31 payments solely based on its veil piercing analysis.

109 (See Defs.’ Br. Supp. 7–11.)

110 (Defs.’ Br. Opp’n 3 (quoting Index Materials Supp. Defs.’ Supp. Ex. 15 Pet. Declaratory J.

¶ 28, ECF No. 75).)
and now inconsistently assert in this action that Ciszek “exercised total domination

and control over the business and financial affairs of [the Practice.]” 111 While the

Court recognizes that the allegations in the two lawsuits conflict, no party in this

action disputes that Ciszek was the sole shareholder, officer, and director of the

Practice in January 2019, 112 or that Ciszek caused the Practice to make reduced

salary payments to Plaintiffs on 31 January 2019 in violation of the NCWHA. 113

90. Accordingly, the Court declines to exercise its discretion to apply judicial

estoppel. See, e.g., Whitacre P'ship v. BioSignia, Inc., 358 N.C. 1, 33 (2004) (stating

that “judicial estoppel is to be applied in the sound discretion of our trial courts[ ]”

and that ”[i]f a trial court believes that justice would not be served by judicially

estopping a party’s factual contention, it may decline to do so[ ]”) (quoting with

approval Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 365 (3d

Cir. 1996) (“[Judicial estoppel] is not meant to be a technical defense for litigants

seeking to derail potentially meritorious claims, especially when the alleged

inconsistency is insignificant at best and there is no evidence of intent to manipulate

or mislead the courts.”)).

111 (Defs.’ Br. Opp’n 4 (quoting Compl. ¶ 20).)

112 (Ciszek’s Resp. RFA 1–3.)

113 (See Ciszek Dep. 83:20–85:25; Blake Dep. 44:1–20, 82:23–83:18.)
C. Cross-Motions on Defendants’ Counterclaim for Breach of Contract

91. Both sides seek summary judgment on Defendants’ counterclaim for breach

of contract based upon Plaintiffs’ alleged violations of Paragraphs 1, 2, 3, and the

Non-Compete Clauses in their respective employment agreements. 114

92. In a breach of contract action, “the complaint must allege the existence of a

contract between plaintiff and defendant, the specific provisions breached, the facts

constituting breach, and the amount of damages resulting to plaintiff from such

breach.” Cantrell v. Woodhill Enters., Inc., 273 N.C. 490, 497 (1968) (emphasis

omitted).

93. “When the language of the contract is clear and unambiguous, construction

of the agreement is a matter of law for the court, and the court cannot look beyond

the terms of the contract to determine the intentions of the parties.” Asheville Mall,

Inc. v. F.W. Woolworth Co., 76 N.C. App. 130, 132 (1985) (cleaned up). “The contract

is to be interpreted as written, and enforced as the parties have made it[.]” State v.

Philip Morris USA Inc., 363 N.C. 623, 632 (2009) (cleaned up). “Since the object of

construction is to ascertain the intent of the parties, the contract must be considered

as an entirety. The problem is not what the separate parts mean, but what the

114(See Pls.’ Br. Supp. 26–42; Defs.’ Br. Supp. 17–24.) Paragraphs 1, 2, and 3 of each
Plaintiff’s employment contract are almost identical. (See Gallaher Emp. Cont. ¶¶ 1–3;
Cameron Emp. Cont. ¶¶ 1–3; Coggin Emp. Cont. ¶¶ 1–3.) The Non-Compete Clauses,
however, appear at Paragraph 26 of the Cameron and Coggin Contracts, (see Cameron Emp.
Cont. ¶ 26; Coggin Emp. Cont. ¶ 26), but at Paragraph 23 of the Gallaher Contract, (see
Gallaher Emp. Cont. ¶ 23). The Court will reference these latter paragraphs collectively as
the “Non-Compete Clauses.” The Court also notes that Defendants did not seek to base their
breach of contract counterclaim on Paragraphs 1 and 2 of the employment contracts until the
Hearing. Plaintiffs responded to those newly made contentions during the Hearing, and the
Court elects to consider them here.
contract means when considered as a whole.” Jones v. Casstevens, 222 N.C. 411, 413–

14 (1942) (citation omitted).

94. The Court addresses each alleged contract breach in turn.

1. Alleged Violations of Paragraph 1

96. Plaintiffs’ employment contracts with Cape Fear Neo contained the

following provision:

Employer hereby employs Employee on the terms hereinafter provided
on the understanding that Employee will devote his[/her] utmost
knowledge and best skill to the care of such patients as shall be entrusted
to him[/her] under general rules from time to time promulgated by
Employer through its Board of Directors. 115

97. At the Hearing, Defendants contended that Plaintiffs failed to provide their

“utmost knowledge and best skill to the care of [their] patients” because they sought

employment with the Hospital while they were still employed by Cape Fear Neo. 116

The Court disagrees. Paragraph 1 of Plaintiffs’ employment contracts is

unambiguous, relates only to Plaintiffs’ provision of medical care, and does not

restrict Plaintiffs from seeking employment with future employers, including the

Hospital. Because Defendants have not offered evidence suggesting that Plaintiffs

failed at any time to devote their utmost knowledge and skill to the care of the

patients at Cape Fear Neo, Defendants’ counterclaim for breach of this paragraph

necessarily fails and must be dismissed.

115 (Coggin Emp. Cont. ¶ 1 (emphasis added); Cameron Emp. Cont. ¶ 1 (emphasis added).)

Gallaher’s Contract is slightly different, substituting “first party” for “Employer” and “second
party” for “Employee.” (See Gallaher Emp. Cont. ¶ 1.)

116 (Tr. 32:20–33:22.)
2. Alleged Violations of Paragraph 3

98. Paragraph 3 of Plaintiffs’ employment contracts with Cape Fear Neo states

as follows:

Employee hereby pledges his[/her] active and industrious practice of
his[/her] profession in Employer’s interest, his[/her] faithful adherence
to the principles of ethics applicable to his[/her] profession, his[/her]
compliance with those terms and conditions of the Independent
Contractor Agreement between Cumberland County Hospital System,
Inc. and Employer, . . . and his[/her] careful avoidance of all personal
acts, habits and usages which might injure in any way, directly or
indirectly, the professional or personal reputation of Employer or any
person employed by it[.] 117

99. Defendants contend that Plaintiffs failed to uphold their pledge to engage in

“active and industrious practice” in Cape Fear Neo’s interest and instead pursued

personal actions that injured Cape Fear Neo’s professional reputation by negotiating

future employment contracts with Nagowski and the Hospital. 118 Defendants argue

that because the Hospital was Cape Fear Neo’s only client, the Hospital’s hiring of

Plaintiffs eliminated the Hospital’s need for Cape Fear Neo’s neonatologists and

thereby caused the Hospital not to renew its contract with the Practice. Defendants

contend that this effectively put Cape Fear Neo out of business. 119 Based on this

chain of events, Defendants contend that Plaintiffs violated Paragraph 3 of their

employment contracts. The Court disagrees.

117 (Gallaher Emp. Cont. ¶ 3; Coggin Emp. Cont. ¶ 3; Cameron Emp. Cont. ¶ 3.)
Here again,
Gallaher’s Contract contains minor differences in terminology that do not affect the
interpretation of this paragraph.

118 (See Defs.’ Br. Supp. 24.)

119 (See Defs.’ Br. Supp. 24.)
100. Like Paragraph 1, Paragraph 3 is unambiguous. The paragraph addresses

Plaintiffs’ commitment to provide competent, quality medical care and to act

professionally and ethically as Cape Fear Neo employees. Defendants’ contention

that Paragraph 3 restricted Plaintiffs from entering contracts with the Hospital is

found nowhere in its language and is contrary to the paragraph’s plain meaning,

particularly when the paragraph is considered as a whole. Indeed, only the last

clause of Paragraph 3 even arguably has any connection to Defendants’

counterclaims, but this clause appears in context with three other provisions that are

clearly limited to job performance. 120 The doctrine of noscitur a sociis, “a rule of

construction applicable to all written instruments[,]” State v. Emery, 224 N.C. 581,

583 (1944), in which “the meaning of a doubtful word may be ascertained by reference

to the meaning of words with which it is associated[,]” Gardner v. Reidsville, 269 N.C.

581, 591 (1967), counsels the Court to read the last provision similarly. Because

Defendants have failed to offer evidence from which a reasonable factfinder could

conclude that the provisions of Paragraph 3 have been breached, the Court concludes

that Defendants’ counterclaim for breach of that paragraph must be dismissed.

120 As noted above, Paragraph 3 of each contract contains four clauses, that the employee will:

first, pledge his or her “active and industrious practice” of medicine in Cape Fear Neo’s
interest; second, adhere to medical ethics; third, comply with another agreement that deals
with medical regulatory and licensure requirements; and fourth, avoid “all personal acts,
habits, and usages” which might injure “the professional or personal reputation of [Cape Fear
Neo] [.]” (Gallaher Emp. Cont. ¶ 3; Cameron Emp. Cont. ¶ 3; Coggin Emp. Cont. ¶ 3.)
3. Alleged Violations of Paragraph 2 and the Non-Compete Clauses

101. Defendants allege that Plaintiffs breached Paragraph 2 of their contracts by

engaging in other gainful employment while they were employed at Cape Fear Neo. 121

They similarly allege that Plaintiffs breached the Non-Compete Clause in each

employment contract “by soliciting employment from [the Hospital] during the term

of their employment with [the Practice].” 122

102. Paragraph 2 of each Plaintiffs’ contract provides in relevant part as follows:

“Employee agrees to devote to the employment his[/her] entire time and endeavor,

and pledges himself[/herself] not to engage in any other gainful occupation during

normal working hours without the prior consent of Employer’s Board of Directors.” 123

103. Defendants contend that Plaintiffs breached this provision by

communicating with Nagowski and “hammering out” contracts with the Hospital

before their employment with Cape Fear Neo ended. 124 The undisputed evidence

shows, however, that Plaintiffs did not begin to work or perform any services as

121 Defendants abandoned their claim for breach of Paragraph 2 and the Non-Compete
Clauses at the Hearing to the extent that it was based on Plaintiffs’ conduct after their
employment terminated on 30 April 2019. (Tr. 30:22–31:11.) See, e.g., Carter v. Clowers, 102
N.C. App. 247, 250 (1991) (“A [defendant] is free to abandon an alleged or potential
[counterclaim] against another party at any time.”); Danielson v. Cummings, 300 N.C. 175,
179 (1980) (upholding a voluntary dismissal under Rule 41 based on the “very strong
tradition in this State equating oral notice in open court with written notice filed with the
clerk[ ]”).

122 (Defs.’ Br. Supp. 21.)

123 (Gallaher Emp. Cont. ¶ 2; Coggin Emp. Cont. ¶ 2; Cameron Emp. Cont. ¶ 2.)
Here again,
Gallaher’s Contract contains minor differences in terminology that do not affect the
interpretation of this paragraph.

124 (Defs.’ Br. Supp. 22–23.)
Hospital employees until their employment with Cape Fear Neo ended on 30 April

2019. 125 As a result, Defendants have failed to offer evidence from which a reasonable

factfinder could conclude that any Plaintiff breached Paragraph 2 of his or her

contract prior to 30 April 2019, and Defendants’ counterclaim based on this alleged

conduct must therefore be dismissed.

104. Defendants’ counterclaim for alleged breach of the Non-Compete Clauses

fares no better. Gallaher’s non-compete provided as follows:

[Employee] hereby agrees that during the term of this Agreement and
for a period of one (1) year after the termination of his employment with
[Employer], he will not engage in the practice of neonatology, nor be an
officer, director, shareholder or employee of a corporation, nor an owner,
investor or employee of any other business in competition with the
business of [Employer] in Cumberland County, North Carolina, or any
other county within the geographical area under the supervision and
control of the Cardinal Health Agency as of the date of this
Agreement. 126

105. Coggin’s and Cameron’s non-competes are identical and very similar to

Gallaher’s:

Employee hereby agrees that during the term of this Employment
Contract and for a period of one (1) year after the termination of his[/her]
employment with Employer, he[/she] will not engage in the practice of
neonatology, nor be an officer, director, shareholder, member, partner,
other type of owner or employee of a corporation, limited liability
company or partnership, nor an owner, investor or employee of any other
business in competition with the business of Employer in Cumberland
County, North Carolina . . . or any other counties within the current or
potential geographical service area of [Employer] as of the date of this
Employment Contract. 127

125 (See Gallaher Hosp. Emp. Cont. 1; Cameron Hosp. Emp. Cont. 1; Coggin Hosp. Emp. Cont.

1; Gallaher Aff. ¶ 43; Cameron Aff. ¶ 37; Coggin Aff. ¶ 36; Tr. 36:7–18.)

126 (Gallaher Emp. Cont. ¶ 23.)

127 (Coggin Emp. Cont. ¶ 26; Cameron Emp. Cont. ¶ 26.)
106. Defendants argue that Plaintiffs breached these provisions by discussing

employment and signing contracts with the Hospital while they were still working

for Cape Fear Neo. 128 Again, the Court disagrees.

107. Defendants offer no evidence that Plaintiffs engaged in the practice of

neonatology with any other organization in competition with Cape Fear Neo or began

working as an employee of the Hospital until after their employment with Cape Fear

Neo had concluded. The fact that Plaintiffs initiated communications and signed

contracts with the Hospital concerning their future employment does not violate the

plain terms of any Plaintiff’s Non-Compete Clause.

108. Moreover, contrary to Defendants’ contention, the fact that Plaintiffs’

decision to initiate discussions and sign contracts with the Hospital may have been a

factor in the Hospital’s independent decision not to renew Cape Fear Neo’s contract

with the Hospital is not evidence that any of the Plaintiffs engaged in the practice of

neonatology, began working for the Hospital prior to 30 April 2019, or engaged in

competition against Cape Fear Neo in violation of their non-compete agreements.

109. Based on the above, the Court concludes that Defendants’ counterclaim for

breach of Plaintiffs’ Non-Compete agreements necessarily fails and must therefore be

dismissed.

128 (See Defs.’ Br. Supp. 17–21.)
IV.
CONCLUSION

110. WHEREFORE, the Court, for the foregoing reasons, hereby ORDERS as

follows:

a. Plaintiffs’ Motion for Partial Summary Judgment is GRANTED and

Defendants’ Motion for Summary Judgment is DENIED as to (i)

Plaintiffs’ claim for violation of the NCWHA to the extent that it is based

on Cape Fear Neo’s 31 January 2019 salary payments to Plaintiffs and

as to piercing Cape Fear Neo’s corporate veil to impose liability on

Ciszek for Cape Fear Neo’s NCWHA violation; and (ii) Defendants’

counterclaim for breach of contract; therefore:

(1) JUDGMENT IS HEREBY ENTERED against Cape Fear Neo

for violation of the NCWHA, and Plaintiffs shall have and recover

from Cape Fear Neo for such violation, including liquidated

damages, as follows:

(a) Gallaher $17,283.32;

(b) Cameron $4,783.32;

(c) Coggin $2,199.98;

plus interest at the legal rate from 31 January 2019 until the

judgment is satisfied;

(2) JUDGMENT IS HEREBY ENTERED against Ciszek for Cape

Fear Neo’s liability for violating the NCWHA and therefore
Ciszek shall be liable, jointly and severally, with Cape Fear Neo

for the judgment entered herein against Cape Fear Neo; and

(3) Defendants’ counterclaim for breach of contract is hereby

DISMISSED with prejudice.

b. Defendants’ Motion for Summary Judgment is GRANTED and

Plaintiffs’ Motion for Partial Summary Judgment is DENIED as to

Plaintiffs’ claims for breach of contract and for violation of the NCWHA

to the extent that those claims are based on Defendants’ alleged failure

to pay Plaintiffs’ salaries after 31 January 2019 and to pay Plaintiffs

bonuses; therefore:

(1) Plaintiffs’ claim for breach of contract based on Defendants’

alleged failure to pay Plaintiffs’ salaries after 31 January 2019 is

hereby DISMISSED with prejudice;

(2) Plaintiffs’ claim for breach of contract based on Defendants’

alleged failure to pay Plaintiffs bonuses in 2018 and 2019 is

hereby DISMISSED with prejudice;

(3) Plaintiffs’ claim for violation of the NCWHA based on Defendants’

alleged failure to pay Plaintiffs’ salaries after 31 January 2019 is

hereby DISMISSED with prejudice; and

(4) Plaintiffs’ claim for violation of the NCWHA based on Defendants’

alleged failure to pay bonuses in 2018 and 2019 is hereby

DISMISSED with prejudice.
c. Having now adjudicated all remaining claims in this action through

summary judgment, the Court enters this Order and Opinion as its

FINAL JUDGMENT in this action.

SO ORDERED, this the 4th day of November, 2022.

/s/ Louis A. Bledsoe, III
Louis A. Bledsoe, III
Chief Business Court Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11058774. Public record. Not legal advice.