{"cached_at":"2026-11-03T11:48:54.760916+00:00","cl_docket_id":"68980541","docket":{"resource_uri":"https://www.courtlistener.com/api/rest/v4/dockets/68980541/","id":68980541,"court":"https://www.courtlistener.com/api/rest/v4/courts/ncwb/","court_id":"ncwb","original_court_info":null,"idb_data":null,"clusters":[],"audio_files":[],"assigned_to":null,"referred_to":null,"bankruptcy_information":null,"absolute_url":"/docket/68980541/sullivan-v-global-care-administrators-inc/","date_created":"2024-07-26T05:05:06.935007-07:00","date_modified":"2025-03-20T01:44:40.126851-07:00","source":1,"appeal_from_str":"","assigned_to_str":"Ashley Austin Edwards","referred_to_str":"","panel_str":"","date_last_index":"2024-07-29T03:40:32.703701-07:00","date_cert_granted":null,"date_cert_denied":null,"date_argued":null,"date_reargued":null,"date_reargument_denied":null,"date_filed":"2024-06-10","date_terminated":null,"date_last_filing":"2024-07-28","case_name_short":"Sullivan","case_name":"Sullivan v. Global Care Administrators, Inc.","case_name_full":"","slug":"sullivan-v-global-care-administrators-inc","docket_number":"24-03028","docket_number_core":"24003028","docket_number_raw":"24-03028","docket_number_source":0,"federal_dn_office_code":"","federal_dn_case_type":"","federal_dn_judge_initials_assigned":"","federal_dn_judge_initials_referred":"","federal_defendant_number":null,"pacer_case_id":"212539","cause":"","nature_of_suit":"","jury_demand":"","jurisdiction_type":"","appellate_fee_status":"","appellate_case_type_information":"","mdl_status":"","filepath_ia":"","filepath_ia_json":"","ia_upload_failure_count":null,"ia_needs_upload":true,"ia_date_first_change":"2024-07-26T05:05:06.929054-07:00","date_blocked":"2024-07-26","blocked":true,"appeal_from":null,"parent_docket":null,"tags":[],"panel":[]},"parties":[],"entries":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/397589608/","id":397589608,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/68980541/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/406764895/","id":406764895,"tags":[],"absolute_url":"/docket/68980541/5/sullivan-v-global-care-administrators-inc/","date_created":"2024-07-26T05:05:07.472620-07:00","date_modified":"2024-07-31T01:12:39.074263-07:00","sha1":"2df4a584b0e548c6f0d69fd8a9a9fa660bb15634","page_count":40,"file_size":985999,"filepath_local":"recap/gov.uscourts.ncwb.212539/gov.uscourts.ncwb.212539.5.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.ncwb.212539/gov.uscourts.ncwb.212539.5.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 1 of 40\n\n FILED & JUDGMENT ENTERED\n Christine F. Winchester\n\n\n July 26 2024\n\n\n Clerk, U.S. Bankruptcy Court\n Western District of North Carolina\n _____________________________\n J. Craig Whitley\n United States Bankruptcy Judge\n\n\n\n\n UNITED STATES BANKRUPTCY COURT\n FOR THE WESTERN DISTRICT OF NORTH CAROLINA\n CHARLOTTE DIVISION\n\nIn re: )\n )\n GLOBAL CARE ) Case No. 23-30160\n ADMINISTRATORS, INC. ) Chapter 11\n )\n Debtor. )\n____________________________________)\n )\n )\n KEVIN SULLIVAN, )\n )\n Plaintiff. )\n ) Adversary Proceeding\n v. ) No. 24-3028\n )\n GLOBAL CARE )\n ADMINISTRATORS, INC. and )\n C. TIMOTHY RODENBUSH, )\n )\n Defendants. )\n____________________________________)\n\n\n MEMORANDUM OPINION\n\n\n\n THIS CASE is before the Court on the following matters:\n\n1. Objection of Global Care Administrators, Inc. (\u201cGCA\u201d or \u201cDebtor\u201d) to the Proof of\n\nClaim filed by Kevin Sullivan (\u201cSullivan\u201d). Proof of Claim No. 2, Case No. 23-30160 (July 20,\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 2 of 40\n\n\n\n2023).\n\n2. The trial of Sullivan\u2019s prepetition state law action against GCA and C. Timothy\n\nRodenbush (\u201cRodenbush\u201d) seeking damages pursuant to the North Carolina Wage and Hour Act,\n\nN.C. GEN. STAT. \u00a7\u00a7 95-25.1, et seq. (the \u201cNCWHA\u201d) and alternatively for breach of contract.\n\nKevin Sullivan v. Global Care Administrators, Inc. and C. Timothy Rodenbush, North Carolina\n\nGeneral Court of Justice, Superior Court Division, Mecklenburg County, Case No. 20-CVS-\n\n10528. This case was removed to this Court and is now Adv. No. 24-03028 (the \u201cAdversary\n\nProceeding\u201d).\n\n3. The Bankruptcy Administrator\u2019s Motion to Dismiss the Chapter 11 Case. Case No. 23-\n\n30160, Doc. 31 (July 5, 2023).\n\n4. GCA\u2019s Amended Motion for Authority to Sell Property Free and Clear. Case No. 23-\n\n30160, Doc. 90 (Apr. 16, 2024).\n\n5) The Debtor\u2019s Proposed Chapter 11 Disclosure Statement. Case No. 23-30160, Doc. 49\n\n(Oct. 22, 2023).\n\n Pursuant to a stipulation between the parties, it was agreed that GCA\u2019s objection to\n\nSullivan\u2019s proof of claim and Sullivan\u2019s state court claims against GSA and Rodenbush arise\n\nunder a common nexus of operative facts and should be tried together in this bankruptcy court,\n\nvia bench trial.1 Case No. 23-30160, Doc. 94 (Apr. 17, 2024). By further consent of the parties,\n\nthe other aforementioned case matters were continued and will be recalendared.\n\n The evidentiary hearing on the claim objection and the trial were conducted on April 30\n\nthrough May 1, 2024, based on a consolidated record. Sullivan was represented by Richard B.\n\nFennell and John Burric of James, McElroy & Diehl, P.A.; Rodenbush by Sara R. Lincoln of\n\n1\n To procedurally support disposition of the Sullivan claims against Rodenbush, the Parties filed an agreed notice of\nremoval of the State Court Action to this Court. This occurred on June 10, 2024 and thereafter the State Court\naction was denominated Adv. No. 24-3028.\n\n\n 2\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 3 of 40\n\n\n\nLincoln Derr PLLC and Michael Martinez of Grier Wright Martinez, PA; and the Debtor by John\n\nC. Woodman of Essex Richards.\n\n STATEMENT OF THE CASE\n\n Sullivan, a former Chief Executive Officer (\u201cCEO\u201d) of the Debtor, seeks actual and\n\nliquidated damages, costs and attorney\u2019s fees against his former employer on the contention that\n\nGCA failed to pay Sullivan his deferred salary in violation of the NCWHA. These damages total\n\napproximately $185,000. Alternatively, but under the same reasons, Sullivan alleges the Debtor\n\nbreached his contract of employment.\n\n Sullivan asserts the same claims against Rodenbush, an indirect shareholder and lender of\n\nGCA. Sullivan maintains Rodenbush, who manages an entity referred to as 105 Canada, went\n\nbeyond the scope of rights as the Debtor\u2019s largest lender and effectively controlled GCA. Under\n\nthis theory, Sullivan alleges that Rodenbush is an employer of Sullivan under the NCWHA and\n\njointly liable with the Debtor to Sullivan for his damages. As GCA is utterly insolvent,\n\npractically, Sullivan is looking to Rodenbush for recompense.\n\n The Defendants reject Sullivan\u2019s claims. They first argue that Sullivan was a \u201cbona fide\n\nexecutive\u201d of GCA. At $50,000/year, they argue Sullivan was paid more than minimum wage\n\nand therefore Sullivan\u2019s claim fall outside the reach of the NCWHA.\n\n The Defendants further deny any agreement to pay Sullivan the $150,000 salary he\n\nclaims, much less to annually defer $100,000.00 of that sum. The Debtors admit that on October\n\n15, 2019, GCA deferred payment of executive salaries because the Debtor was in dire financial\n\nstraits and 105 Canada was unwilling to advance further monies without a stipulation that the\n\nloan proceeds would not fund executive salaries. However, such deferral was agreed to by the\n\naffected executives (including Sullivan), who were both principals and equity holders of the\n\n\n\n\n 3\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 4 of 40\n\n\n\nDebtor. Further, it was then agreed that executive compensation could resume whenever GCA\n\ngenerated revenues or obtained other investment monies with which to pay these salaries.\n\nHowever, no such funds were ever generated, GCA failed and later went into bankruptcy. Given\n\nthe failure of the condition, the Debtor claims there was no breach of the deferral agreement.\n\n For Rodenbush\u2019s part, he denies being or acting as Sullivan\u2019s employer. He claims he\n\nhad no control over GCA, Sullivan, its operations, or the payment of Sullivan\u2019s salary. As to the\n\nbreach of contract count, Rodenbush argues that he was not party to any contract with Sullivan\n\nand cannot be liable for any alleged breach.\n\n Finally, and to the extent that any deferred salary is owing to Sullivan, the Debtor\n\nsuggests that either the salary should be recharacterized as equity under applicable Fourth Circuit\n\nprecedent, or else treated as excessive compensation and deemed constructively fraudulent.\n\n Having heard the evidence presented as well as the arguments of counsel, this Court\n\nmakes the following findings of fact and conclusions of law.\n\n FINDINGS OF FACT\n\n The Debtor was formed in 2017 as a Delaware corporation. Over its brief, three-year\n\nlifespan, GCA operated from an office located in Mecklenburg County, North Carolina. GCA\n\nwas a small startup firm which, at its peak, had but 6-7 employees. The majority of employees\n\nwere principals of the concern who directly or indirectly held stock in the Debtor.\n\n GCA was envisioned by its founders to develop and then market a \u201chealthcare\n\nintelligence platform,\u201d i.e., software for use in healthcare administration (\u201cthe Software\n\nPlatform\u201d). The Software Platform was intended to revolutionize the processing and reporting of\n\ndata related to healthcare costs, claims, and analytics, enabling hospitals and healthcare providers\n\nto capture small billings.\n\n\n\n\n 4\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 5 of 40\n\n\n\n GCA was founded by Mark Bodner (\u201cBodner\u201d), Isaac Montanya (\u201cMontanya\u201d) and Scott\n\nGuilfoyle (\u201cGuilfoyle\u201d). Bodner originally conceived the software and was the creative force\n\nbehind the Debtor. As Sullivan put it, Bodner was the \u201cmad scientist\u201d who made GCA possible.\n\nBodner originally held the title of CEO and Chief Innovation Officer. Guilfoyle was also a tech\n\nexpert who worked for CGA, chaired the Debtor\u2019s Board of Directors, and served as President of\n\nthe Debtor\u2019s subsidiary, Global Care Analytics (\u201cAnalytics\u201d). Montanya appears to have served\n\nas Vice President and Secretary of GCA and perhaps as its Chief Marketing Officer.2\n\n In recognition of the startup\u2019s limited financial resources and as a part of their\n\ncontribution to the enterprise (ie., \u201csweat equity\u201d), Bodner, Guilfoyle, Montanya, and later\n\nSullivan (the \u201cCharlotte Principals\u201d) worked for modest salaries.3 If the business proved as\n\nsuccessful, their upside lay in the equity interests that each held in GCA.\n\n GCA operated under the supervision of a Board of Directors (\u201cthe Board\u201d). Bodner and\n\nGuilfoyle comprised the original Board. Later, the Board was expanded such that it usually had\n\nfive to seven members, with each board member having equal voting power. In time, Sullivan\n\nand Rodenbush would be appointed to the Board.\n\n GCA\u2019s Initial Finances.\n From the beginning, GCA was undercapitalized, financially stressed, and almost certainly\n\ninsolvent.\n\n As envisioned by its founders, CGA had a three-step funding plan: Step 1: obtain seed\n\ninvestors to get the company moving, Step 2: obtain \u201cSeries A\u201d capital investment, meaning\n\noutside investment of greater amount, and Step 3: obtain \u201cSeries B\u201d investment, a second round\n\n\n2\n See Defendant\u2019s Trial Exhibit 39, p. 28, \u00b6\u00b6 30 & 33; Montanya et.al. v. Global Care Administrators, et.al., 18-\nCVS-20318. This exhibit was not admitted at trial, but judicial notice is taken of the Answer and Counterclaim filed\nin that state court action. In short, this is what GCA and Sullivan then alleged. The truth of their statement is not\nmaterial to the present dispute.\n3\n For example, as of 2018, Bodner was making only $50,000 per year.\n\n\n 5\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 6 of 40\n\n\n\nof outside investment or an infusion of venture capital.4 The hope was that by the point the\n\nSoftware platform would be finished, and the company would attain profitability. Although not\n\ndirectly stated at trial, the parties\u2019 contemporaneous communications reveal a shared belief that\n\nGCA might possibly be sold or other investors brought in, permitting the principals to realize\n\nlarge profits on their equity interests.\n\n Sullivan is Recruited by GCA.\n In early 2018, Sullivan was recruited by Bodner to join GCA. Sullivan was sought out\n\ndue to his extensive prior experience in the healthcare industry. Such expertise was particularly\n\nneeded because GCA was already experiencing operational and revenue problems. Initially,\n\nSullivan declined employment due time constraints arising from his existing business interests.\n\nHowever, Sullivan did agree to come on board in March of 2018 as a consultant and a board\n\nmember.\n\n 105 Canada and Rodenbush Become Involved with GCA.\n Rodenbush is a retired businessman and a resident of Canada. 105 Canada is an\n\ninvestment company indirectly owned by a Rodenbush family trust and operated by Rodenbush.\n\nIn early 2018, Rodenbush was seeking investment opportunities having recently sold a business.\n\nRodenbush\u2019s attorney introduced him to Montanya, who was seeking funding sources for GCA.\n\nThe two men met at Rodenbush\u2019s home in Vancouver. After hearing Montanya\u2019s pitch,\n\nRodenbush was interested in GCA.\n\n Further discussions gave shape to the original 105 Canada loan and investment. On\n\nMarch 14, 2018, 105 Canada and GCA entered into a \u201cGCA Convertible Loan Agreement\u201d\n\n(\u201cLoan Agreement\u201d). Under the Loan Agreement, 105 Canada initially advanced the sum of\n\n$300,000 to GCA. It was agreed that if the Debtor achieved certain performance milestones,\n\n\n4\n See Scott Guilfoyle\u2019s email to Rodenbush dated June 30, 2018.\n\n\n 6\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 7 of 40\n\n\n\nadditional sums could be advanced to it, up to a cap of $1.5 million. These milestones included\n\nreporting requirements by the Debtor to 105 Canada relating to the former\u2019s financial\n\nperformance, sales activities, etc.\n\n Reflecting the financial realities of a startup business without a marketable product, and\n\nthe fact that that Bodner and Montanya were both GCA employees and principals in the\n\nbusiness, the Loan Agreement contained a pay cap: the salaries of Bodner (CEO) and Montanya\n\n(the Vice President) could not exceed $10,000 per month each ($120,000 annually).\n\n Thus, the Rodenbush transaction was structured as debt, with 105 Canada originally\n\nacting as lender to GCA.5 However, 105 Canada also acquired a 6% equity interest in GCA.\n\nThe Loan Agreement provided that 105 Canada could convert its loans to equity in the future, at\n\nthe price of $1,500 per share.\n\n Sullivan\u2019s Role with GCA Expands.\n On June 21, 2018, Sullivan signed an employment agreement to become GCA\u2019s\n\nPresident and Chief Operating Officer (\u201cEmployment Agreement\u201d) (\u201cCOO\u201d). Technically, the\n\nEmployment Agreement was signed by Bodner, not GCA. However, this appears but a\n\nscrivener\u2019s error.6 Clearly, Sullivan was hired by GCA to work on a part-time basis under\n\nBodner, its then CEO. Rodenbush was not involved in the Sullivan hire. He learned of it when\n\nit was later announced by Bodner.\n\n The Employment Agreement stipulates that COO Sullivan would be paid a salary of\n\n$50,000 for his first year of work and that his compensation would be renegotiated in subsequent\n\nyears. However, Sullivan maintains this was not his full compensation: he says he had a side\n\n\n5\n It appears that the Charlotte Principals (Bodner, Montanya, Guilfoyle, and later Sullivan) viewed 105 Canada as a\n\u201cSeries A\u201d capital investor.\n6\n An almost identical agreement employing Guilfoyle as President of Analytics, the Debtor\u2019s subsidiary, at a\n$50,000 per year salary also treats Bodner as the employer. Both were thereafter treated as employees of the two\ncompanies, not of Bodner.\n\n\n 7\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 8 of 40\n\n\n\ndeal with Bodner/GCA. His real salary was $150,000 per year, with $50,000 paid and $100,000\n\ndeferred. That deferral, Sullivan contends, was required by Rodenbush given GCA\u2019s financial\n\nstruggles.7 As detailed below, the alleged $150,000 salary and deferred compensation lie at the\n\ncore of the present dispute.\n\n Sullivan Manages GCA.\n Technically Bodner remained CEO of GCA until March of 2019, when Sullivan replaced\n\nhim. However, this was a small business where titles and actual duties did not always coincide.\n\nA review of the texts and emails between the parties reflects that even as COO, Sullivan was\n\nopenly and actively operating GCA.\n\n In GCA\u2019s case, \u201coperations\u201d largely translated to attempting to (1) develop the Software\n\nPlatform and (2) to raise additional funds by which to develop that software. Because GCA had\n\nlittle operating revenue, GCA\u2019s expenses were primarily funded by investment dollars and loans,\n\nmost provided by 105 Canada.\n\n As COO, Sullivan\u2019s day-to-day control of GCA is reflected in the fact that shortly after\n\nhe was hired, he retained a new Certified Public Accountant for the company. By his own\n\ntestimony, in his first months on the job, Sullivan sought to understand why the Company was\n\nspending $140,000 a month but producing little revenue from its existing hospital clients for\n\nwhom it provided \u201ckey management insights\u201d via its existing software. He says he quickly\n\nrealized that GCA had one dominant customer who was not paying its bills. The hospital in\n\nquestion owed GCA $571,000.\n\n After that review, Sullivan began changing GCA\u2019s business model and customer base.\n\nHe hired a new Chief Technology officer. While GCA was a small business with limited\n\n\n7\n As discussed in further detail, the evidence does not show any such deferment agreement with Rodenbush making\nany such promises.\n\n\n 8\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 9 of 40\n\n\n\noperations, and one in which all of the principals (including Rodenbush) had a say, in terms of\n\nthe day-to-day operations, Sullivan was clearly GCA\u2019s \u201cshot caller.\u201d\n\n Montanya litigation.\n On May 14, 2018, Montanya was terminated from his employment with GCA. Sullivan\n\ntestified that he urged Bodner to terminate Montanya because he \u201cfound that Montanya was not\n\ndoing anything,\u201d only \u201ccollecting a bunch of money and living off of the money that was coming\n\ninto the company\u201d while producing nothing of value. Sullivan further testified that Montanya\n\nwas using company money for personal expenses.\n\n After his termination, Montanya filed a lawsuit against the Debtor and several of the\n\ncompany principals, including Sullivan. The lawsuit was eventually settled.\n\n The Restructuring Agreement.\n By early Summer of 2018, GCA desperately needed a further cash infusion from 105\n\nCanada. This quickly put Sullivan at odds with Rodenbush, given the 105 Canada was neither\n\nreceiving the required financial reporting from GCA nor its interest payments on its then-\n\noutstanding debt.\n\n These tensions increased when Rodenbush learned of a plan by Sullivan and GCA\u2019s other\n\nCharlotte Principals to restructure GCA and place its software in a separate legal entity. Such an\n\naction would potentially dilute 105 Canada\u2019s equity interest in GCA and place its loans at risk.\n\n Given all, 105 Canada/Rodenbush balked at providing further advances to GCA. In a\n\nrunning email conversation with Sullivan and Guilfoyle, between June 29 and July 5, 2018,\n\nRodenbush suggested that if GCA required further funds, Bodner and Sullivan should consider\n\ninvesting their own money.\n\n That suggestion did not sit well with Sullivan. In a June 29, 2018 reply to Rodenbush, he\n\ndeclared the lending relationship to be \u201coff the rails.\u201d Sullivan arrogantly informed Rodenbush\n\n\n\n 9\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 10 of 40\n\n\n\nthat they were not \u201cequals in this relationship,\u201d referring to their respective roles in GCA.\n\nRodenbush was simply there to provide operational funds to GCA. By contrast, Sullivan and the\n\nother Charlotte Principals were providing their expertise to grow this startup business and\n\nproviding services to its customers. In short, Rodenbush was but a lender; whereas Sullivan,\n\nGuilfoyle, et.al, were running the business.\n\n A contemporaneous email from Guilfoyle to Rodenbush reflects the same perspective.\n\nRuling out making the requested personal investment in GCA, Guilfoyle tells Rodenbush that\n\n\u201cmy investment would be all my time at extremely low arbitrary compensation to see what we\n\ncould create.\u201d And finally, in a follow-up email to Rodenbush sent July 2, 2018, Sullivan\n\nreiterates Guilfoyle\u2019s view of what their contribution to GCA was to be: their time and expertise.\n\n The extrinsic evidence confirms the Charlotte Principals\u2019 mindset and that GCA was\n\noperated by them, not Rodenbush. Rodenbush had never been to the Debtor\u2019s offices, nor would\n\nhe ever. Unlike the Charlotte Principals, Rodenbush was never employed by GCA. And unlike\n\nthemselves, he was not one of its officers. Apart from the many communications with the\n\nCharlotte Principals, Rodenbush did not participate in the day-to-day operations of the company.\n\n Given the mindset, and the company\u2019s finances, it is unsurprising that these conversations\n\ndid not lead to accord. On November 16, 2018, 105 Canada declared a default under the Loan\n\nAgreement. GCA responded by threatening to close its doors. Such a closing, of course, would\n\nmean the loss of 105 Canada\u2019s investments in the Debtor.\n\n Eventually, this dispute was consensually resolved through a reorganization (the\n\n\u201cReorganization\u201d). The Reorganization was multifaceted, but essentially, 105 Canada converted\n\nits outstanding debt to equity as memorialized in the Loan Agreement and Shareholder\u2019s\n\nAgreement of January 26, 2019. As a result, 105 Canada became GCA\u2019s largest shareholder, but\n\n\n\n\n 10\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 11 of 40\n\n\n\nnot a majority shareholder. Beginning in October of 2019, 105 Canada held just under 20.6% of\n\nGCA\u2019s outstanding shares, whereas the Charlotte Principals held between them 42.44% (Bodner\n\n18.44%; Sullivan 12%; Guilfoyle 12%).\n\n Sullivan replaced Bodner as CEO and became a fulltime employee of GCA. No written\n\nemployment agreement memorializes Sullivan\u2019s change in status or stipulates his salary terms.\n\nThis omission is important given that the parties had agreed in the Amended Shareholders\n\nAgreement that going forward, all compensation paid to senior management (CEO, President,\n\nV.P) would require the unanimous consent of the Board. There were no Board records submitted\n\nat trial that show approval of Sullivan\u2019s compensation.\n\n Finally, as a part of the deal, Rodenbush was elected to the GCA Board. Thus, as of\n\nMarch 9, 2019, the Board consisted of Bodner, Montanya,8 Mike Cushing, Guilfoyle, Sullivan\n\nand Rodenbush. As one of six directors, Rodenbush did not control the Board. In fact,\n\nRodenbush abstained from board votes which may have been perceived as self-serving to 105\n\nCanada. However, after Rodenbush became a board member, he and Sullivan regularly\n\ncorresponded about GCA matters, particularly regarding its persistent financial needs.\n\n The Reorganization only temporarily alleviated the Debtor\u2019s financial problems. With\n\nfew other revenues and no new investors,9 GCA remained dependent upon cash infusions from\n\n105 Canada. In February of 2019, 105 Canada had injected another $500,000 in GCA.\n\nHowever, by early April of 2019, Sullivan was again informing Rodenbush the company would\n\nneed more funds in order to continue operating for another 60-90 days. On this occasion,\n\nRodenbush again suggests that the Charlotte Principals share with him in the burden of funding\n\nGCA. Ultimately, they did not. 105 Canada advanced another $450,000 to GCA under a Note\n\n8\n Apparently, Montanya remained on the Board after his termination.\n9\n Rodenbush testified that the other principals, including Sullivan, were unwilling to invest additional monies in the\nDebtor.\n\n\n 11\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 12 of 40\n\n\n\ndated April 18, 2019 to avoid a shutdown.\n\n Reflecting GCA\u2019s dire financial situation, in a \u201cState of the Union\u201d email dated April 24,\n\n2019, Sullivan apprises the Principals and others that [they]\u2019ve \u201ccut expenses to bare minimum\n\nuntil we generate some revenue and or raise some additional capital.\u201d However, Sullivan passed\n\non potentially good news, as well: efforts were underway to raise another $4 million from\n\n\u201cSeries B\u201d (meaning, outside) investors. In this, Sullivan was referring to Merge, an outside\n\nentity, whom GCA hoped would invest in the company.\n\n Five months later\u2014in October of 2019\u2014this had not happened. There was still hope that\n\nMerge would provide $4 million in funding in exchange for a 10% equity stake in GCA. With\n\nthis, all concerned (including Rodenbush) believed that the Debtor would be able to complete the\n\nSoftware Platform and to go operational. However, with GCA still experiencing severe financial\n\ndifficulties, a \u201cbridge loan\u201d would be needed to tide it over until the Merge deal closed.\n\n To this end, on November 15, 2019, Sullivan emailed Rodenbush about GCA\u2019s need for\n\n$90,000 to cover that month\u2019s expenses. Rodenbush replied that he would not have further\n\ninvestment monies available until the first of December. Given that, Rodenbush asked Sullivan\n\nwhether the senior executives might defer payment of their own salaries until other monies (other\n\nrevenues or third-party investment dollars) were secured. Rodenbush couched this as a\n\nsuggestion: \u201cI don\u2019t want that to be the focus or perceived as it being acting unreasonably.\u201d\n\n Hearing this, Sullivan commented to the Corporate Secretary, \u201c[Rodenbush] sounds\n\nnervous.\u201d But to Rodenbush, Sullivan responded that the company\u2019s payroll was due on\n\nNovember 30, so a delay in making the bridge loan might be a problem. Sullivan ignored the\n\nsuggestion to defer salary. However, this time, Rodenbush did not budge from his condition.\n\n Sullivan cites the loan condition as evidence that Rodenbush controlled GCA, within the\n\n\n\n\n 12\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 13 of 40\n\n\n\nmeaning of the Wage and Hour Act. However, given that those involved were GCA principals\n\nholding equity interests in GCA, the condition is better understood as Rodenbush saying to his\n\npeers, \u201cIf I\u2019m going to put more skin in this game, you should too.\u201d\n\n In the end, Sullivan and company agreed to Rodenbush\u2019s condition for the bridge loan\n\nwith each hoping that the Merge deal would soon close10 and provide GCA with sufficient\n\ncapital to finally complete the Software Platform and to pay them.\n\n Ultimately, it was the Debtor\u2019s and the executives\u2019 choice whether to accept the loan\n\ncondition. Even then, they were free to pay executive compensation out of other company\n\nfunds\u2014whether through other investments or via revenues generated by GCA. Alternatively, the\n\nexecutives could simply defer their compensation until the Merge deal closed and be repaid\n\nafterwards.\n\n This conversation reflects that all parties viewed GCA as an investment venture: one with\n\na big financial upside if the software platform was completed and proved marketable.\n\nRodenbush\u2019s role was primarily providing money; Sullivan et. al. were to continue contributing\n\ntheir expertise and labor at reduced salary levels. Hoping for a big payday, each was willing to\n\ninvest more, but held a careful eye to what the other Principals were providing. In Rodenbush\u2019s\n\ncase, he kept an eye on what the others were taking out in salary.\n\n With that agreement in mind, 105 Canada made the bridge loan. Accordingly, after\n\nOctober 15, 2019, GCA stopped paying executive salary.\n\n Unfortunately, the Merge investment did not close. Sullivan blames this on Rodenbush,\n\nbut that accusation appears to be short-sighted and unfair. At the November 14, 2019 Board\n\nmeeting, Sullivan reported Merge was now interested in investing a total of $8 million in CGA\n\n\n10\n Sullivan\u2019s request for a bridge loan that only covered November expenses reflects a shared belief that the Merge\nclosing would occur before December.\n\n\n 13\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 14 of 40\n\n\n\n($2 million upfront, and $6 million later). In return, it wanted a 20% equity position in the\n\ncompany. This was problematic: GCA had only 15% of its equity available for purchase.\n\nSullivan proposed to make 25% of GCA\u2019s equity available for sale, by creating two classes of\n\nstock. However, Rodenbush was rightfully concerned that Sullivan\u2019s proposal would dilute 105\n\nCanada\u2019s position in GCA. A further difficulty lay in the fact that Merge had not yet raised its\n\n$6 million follow-on investment.\n\n Since it could not acquire 20% of the GCA stock by the December 2019 board meeting,\n\nMerge pulled back; wanting to change its investment from $8 million to a total of $1.4 million.\n\nUltimately, the Merge investment deal did not close.\n\n A second investor had been found and then rejected by the GCA Board when it appeared\n\nthat the potential investor might be engaged in illegal money laundering activity. By January 15,\n\n2020, GCA was all out of investor prospects. Once again, the Debtor was forced to ask 105\n\nCanada/Rodenbush for another $90,000 to \u201ckeep the doors open.\u201d Lacking any other option, 105\n\nCanada continued to fund GCA.\n\n The Bodner Negotiation.\n As the Fall of 2019 passed with no outside investment and without a marketable Software\n\nPlatform, the Charlotte Principals began to regret their agreement to defer salaries. By mid-\n\nJanuary 2020, Bodner was threatening to leave GCA and to report the company to the Labor\n\nDepartment. Legalities aside, without Bodner\u2014the creator of the Software Platform\u2014there was\n\nno GCA and no way for 105 Canada to recoup the monies it had already loaned to/invested in\n\nGCA.\n\n Rodenbush spoke with Bodner about the prospect of personally retaining Bodner to work\n\nas a consultant in hopes of keeping him at GCA. To that end, Rodenbush waived the October\n\n15, 2019 pay prohibition so that GCA could pay Bodner a portion of his deferred salary. Then,\n\n\n 14\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 15 of 40\n\n\n\nin early March of 2020, Rodenbush personally agreed to pay Bodner both his back pay and\n\ncontinue paying him going forward on the condition that Bodner remain with GCA for two more\n\nyears.\n\n As a part of this agreement, Bodner surrendered his stock to GCA11 in exchange for a\n\nshare of GCA\u2019s \u201czero base collections\u201d net profits\u2014the revenue base that, under Sullivan, GCA\n\nhad moved away from. Over time, Rodenbush would personally pay Bodner $15,000-30,000 of\n\nhis deferred compensation.\n\n Sullivan claims he was not involved in these negotiations and the deal was struck\n\nnegotiated between Bodner and Rodenbush. According to Sullivan, because he was CEO, his\n\nabsence from the negotiations shows improper control of GCA by Rodenbush. Factually, this\n\ntestimony appears only partially correct. The negotiations were between Rodenbush and Bodner\n\nand the salary payments to Bodner were to be funded by Rodenbush, although they were to flow\n\nthrough GCA.\n\n On the other hand\u2014as noted below\u2014at the start of these negotiations, Sullivan had\n\nannounced his own (deferred) resignation from GCA, so Rodenbush stepping into the\n\nnegotiation cannot be seen as usurping Sullivan\u2019s authority. Nor was Sullivan excluded from\n\nthese conversations; contemporaneous emails about the Bodner proposal included Bodner,\n\nRodenbush, Sullivan, company counsel and other Charlotte Principals. Sullivan\u2019s own email\n\nreferences to the Bodner proposals reflects an understanding on his part of what was being\n\ndiscussed and done. Sullivan was not cut out from the negotiations; the Bodner proposal was\n\napproved by GCA and the departing Sullivan simply declined to sign the written agreement.\n\n\n\n\n11\n Thus, benefitting all shareholders to their interests.\n\n\n 15\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 16 of 40\n\n\n\n Sullivan Announces his own Resignation.\n In October 2019, Sullivan agreed to defer his pay pending the Merge closing or other\n\nmonies becoming available. When that closing didn\u2019t happen, Sullivan chaffed at the deal he\n\nhad made. Thus, on January 14, 2020, Sullivan sent the Board a letter stating that he intended to\n\nresign, effective 90 days hence. Sullivan says he \u201cwas sick of not getting paid . . . .\u201d Further, it\n\nappears he believed and resented that Rodenbush, and not he, controlled the company.\n\n While couched as a resignation letter, a fair reading of the document suggests Sullivan\n\ndid not really want to resign. He was attempting to use the threat of his leaving GCA to coerce it\n\n(or more realistically, Rodenbush) to pay him.\n\n The Goldsmith Investigation.\n Sometime in late 2019, Rodenbush learned from Bodner that Sullivan had caused the\n\nDebtor to abandon its \u201czero balance\u201d collection system and its focus on hospital clients. This\n\nwas GCA\u2019s only pre-existing source of revenues. Between this discovery, and GCA\u2019s failure to\n\nattract outside investments, Rodenbush feared the Debtor was about to fail. Then, he received\n\nSullivan\u2019s resignation letter.\n\n In response, Rodenbush hired George Goldsmith12 (\u201cGoldsmith\u201d) a friend, mentor, and\n\nfellow Canadian businessman, to investigate the Debtor\u2019s operations and prospects. Rodenbush\n\nwanted Goldsmith\u2019s recommendation of whether 105 Canada should invest any further monies in\n\nGCA and under what terms. Specifically, how much further investment would be required to\n\nenable GCA to finally complete the Software Platform?\n\n In late February of 2020, Goldsmith traveled to Charlotte where he met with Sullivan and\n\nseveral other company employees. Sullivan makes much of the Goldsmith visit, asserting\n\nimproper control by Rodenbush (through Goldsmith) over GCA\u2019s affairs. However, the purpose\n\n\n12\n Goldsmith is occasionally and mistakenly referred to as George Rosmir within Plaintiff and Defendant Exhibits.\n\n\n 16\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 17 of 40\n\n\n\nof Goldsmith\u2019s visit was made clear before13 and during his visit: he was there to investigate\n\nGCA\u2019s operations, not direct them. Goldsmith made it quite clear to all that he was acting on\n\nbehalf of 105 Canada, not GCA.\n\n In a lunch meeting with Goldsmith\u2014which Sullivan himself recorded and was\n\nintroduced into evidence\u2014Sullivan impressed upon Goldsmith that he, Sullivan, was running\n\nGCA and not Rodenbush. Sullivan then detailed his own importance to the venture. It appears\n\nSullivan was attempting to persuade Goldsmith that GCA needed him to survive.\n\n Sullivan leaves GCA.\n Neither the Board or Rodenbush were inclined towards Sullivan\u2019s payment and control\n\ndemands, and so on March 15, 2021, Sullivan left GCA. The next day, April 1, 2020, Sullivan\n\ndemanded payment of his deferred compensation from the Debtor. On August 5, 2020, Sullivan\n\nsued GCA and Rodenbush.\n\n GCA Struggles on.\n GCA struggled on for a time with Goldsmith pressed into service as interim CEO. But in\n\nNovember 2021, once again out of money and still with no marketable software product, GCA\n\nshut its doors. The company lay inert until at a special shareholder\u2019s meeting held on December\n\n10, 2021, when the shareholders decided to liquidate the company. Local accountant Michael\n\nBowers was designated Chief Restructuring Officer. Seeking the most economical way to wind\n\nup the company\u2019s affairs and simultaneously deal with Sullivan\u2019s pending legal action, GCA\n\nfiled Chapter 11 on March 3, 2023 (the \"Petition Date\").\n\n Sullivan\u2019s Demands.\n In his State Court Complaint, Sullivan asserted that at the time of his departure from\n\nGCA, he was owed $227,083 in unpaid wages. Recently, Sullivan filed an unsecured proof of\n\n13\n In his February 15, 2020 email to Goldsmith about this visit, Sullivan acknowledges that Goldsmith was to be\nacting on behalf of Rodenbush, not GCA.\n\n\n 17\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 18 of 40\n\n\n\nclaim against the Debtor\u2019s bankruptcy estate for $455,166.00\u2014the $227,083.00 of alleged\n\nwages, doubled per the NCWHA. Sullivan also seeks interest and attorney\u2019s fees.\n\n Defendants denied liability, and the action proceeded in State Court to the point of trial.\n\nThe Debtor\u2019s bankruptcy filing upset the trial setting and stayed the matter as to GCA.\n\n ISSUES PRESENTED\n\n To decide this case, we must answer the following questions:\n\n1. What was Sullivan\u2019s agreed salary?\n\n2. Was there an agreement between Sullivan and the Defendants to defer a portion of his\n\nsalary?\n\n3. If so, what amount of deferred compensation was owed to Sullivan as of April 1, 2020?\n\n Issues Pertaining to Count 1- The NCWHA Claim\n4. Was Sullivan an executive employee of GCA within the meaning of the Act?\n\n5. Was Rodenbush also Sullivan\u2019s \u201cemployer,\u201d as that term is defined in N.C. Gen.\n\nStat \u00a7 95-25.2(5)?\n\n Issues Pertaining to Count 2- The Breach of Contract Claim\n6. Did GCA and/or Rodenbush breach any contract with Sullivan regarding his deferred\n\ncompensation?\n\n If Sullivan succeeds on either or both Counts,\n7. What amount of damages, if any, is Sullivan entitled to recover from GCA and/or\n\nRodenbush?\n\n8. Is Sullivan entitled to recover his costs and reasonable attorneys\u2019 fees?\n\n9. If any amount is owed to Kevin Sullivan by GCA, should it be recharacterized for\n\nbankruptcy distribution purposes as equity under applicable Fourth Circuit precedent?\n\n\n\n\n 18\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 19 of 40\n\n\n\n DISCUSSION\n\n Subject matter jurisdiction lies under 28 U.S.C. \u00a7 1334(b). Reference of these matters to\n\nthis Bankruptcy Court occurred under the General Order of Reference entered by the United\n\nStates District Court for the Western District of North Carolina on July 30, 1984.\n\n Sullivan\u2019s state law claims against GCA and its objection to Sullivan\u2019s proof of claim are\n\n\u201ccore matters.\u201d Sullivan\u2019s claims against Rodenbush are \u201crelated to\u201d the bankruptcy within the\n\nmeaning of 28 U.S.C. \u00a7\u00a7 157 and 1334. Through stipulation and removal of the State Court\n\naction, Sullivan and Rodenbush have consented to a final adjudication of their dispute in\n\nbankruptcy court, subject only to appeal under 28 U.S.C. \u00a7 158.\n\nI. Sullivan\u2019s Salary and Deferred Salary (Issues 1-3).\n\n According to Sullivan, when he was hired as COO in June of 2018, he and Bodner agreed\n\nthat Sullivan\u2019s actual pay would be $150,000 per year. Of that sum, $100,000 would be deferred\n\nuntil the company obtained outside funding or until Sullivan demanded payment. Sullivan\n\nmaintains that he is owed deferred salary from June 2018 through March 15, 2020.\n\n Sullivan seeks to prove these salary claims by reference to putative GCA accounting\n\nledgers. He further testified that the Board had an agenda line item to review executive\n\ncompensation at its meetings where such records were reviewed.\n\n Sullivan seeks to further back up his assertions by reference to an October 15, 2019 text\n\nconversation between himself, Rodenbush, and Guilfoyle concerning the \u201cbridge loan.\u201d Here,\n\nRodenbush makes it a precondition to the bridge loan that none of 105 Canada\u2019s advance be used\n\nto pay executive compensation. Guilfoyle responds by remarking that he and Sullivan have been\n\ndeferring their salaries for well over a year. Guilfoyle does not quantify the amounts, and the\n\nstatement is not discussed or contradicted by Rodenbush or Sullivan.\n\n\n\n\n 19\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 20 of 40\n\n\n\n By contrast, the Defendants admitted in their State Court Answer that Sullivan \u201chad a\n\nsalary of $120,000 per year,\u201d but denied any salary deferral, save for that arising out of the\n\nOctober 15, 2019 bridge loan\u2014when Sullivan and the other senior executives agreed to defer\n\ntheir pay until other monies became available.\n\n Overlooking their judicial admission, GCA now suggests that Sullivan is owed no monies\n\nwhatsoever: (1) because his contract was with Bodner, not the Debtor, and (2) because the terms\n\nof the October 15, 2019 salary deferral have not been met\u2014GCA never obtained any further\n\noutside capital or revenue. However, should this Court find otherwise, both Defendants maintain\n\nSullivan\u2019s salary was but $50,000 per year and his pay was only deferred for five months\n\n(October 2019 to March 2020). The maximum amount he could be owed by the Debtor is\n\n$20,833.33.\n\n Obviously, the evidentiary record concerning Sullivan\u2019s pay and deferral is both\n\nincomplete and conflicting. Approaching this muddle in reverse order, we start with the fact that\n\nboth Defendants admitted in their Answer Sullivan was to be paid $120,000 per year.\n\n Just before the scheduled State Court trial, Defendants unsuccessfully attempted to\n\namend their Answer to deny that Sullivan had an agreement with GCA for a salary of either\n\namount, $120,00 or $150,000. Rather, Sullivan\u2019s salary was that found in the Employment\n\nAgreement, $50,000 per year. The Defendants argued to the State Judge that they gave an\n\nincorrect initial response in their Answer. This supposedly was because they lacked access to the\n\nbooks and records of GCA. The State Court did not find their argument convincing, and the\n\nmotion was denied.\n\n Again, before this Court, the Defendants argue for at most, a $50,000 salary figure.\n\nHowever, they fail to explain why GCA supposedly lacked this basic information about its CEO\n\n\n\n\n 20\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 21 of 40\n\n\n\nand his pay when their Answer was filed. Nor do they explain why this Court should disturb the\n\nState Judge\u2019s ruling. This Court is inclined to enforce the judicial admission against the\n\nDefendants: at a minimum, Sullivan had an annual salary of $120,000.\n\n Since the Defendants have judicially admitted the $120,000 per year compensation, we\n\nreally need not consider their ancillary arguments. However, but for the sake of a complete\n\nrecord,14 we will touch on them in passing.\n\n As to the Debtor\u2019s suggestion that because Sullivan\u2019 Employment Agreement was signed\n\nby Bodner, GCA has no liability to Sullivan, we simply do not agree. As noted, the fact that\n\nBodner and not GCA is named in the Employment Agreement appears to be a harmless\n\nscrivener\u2019s error.15 The parties\u2019 subsequent conduct makes clear Sullivan was hired by GCA in\n\nJuly 2018 to work under Bodner, its CEO at the time. CGA promoted Sullivan to CEO in\n\nJanuary of 2019 and there he remained until his resignation on March 31, 2020.\n\n GCA\u2019s second contention\u2014that Sullivan is not owed any compensation because the\n\nconditions of payment were never fulfilled\u2014also falls on fallow ground. Sullivan worked for\n\nthe Debtor. He earned his compensation, at some rate, from services performed from October\n\n2019 to March of 2020. Payment for those services was simply deferred. The liability was not\n\ncontingent upon GCA acquiring more funds. And given that GCA is in bankruptcy and will\n\nnever obtain those funds, Sullivan is clearly owed a debt by the Debtor\u2019s estate.\n\n That said, Sullivan has failed to meet his burden of proof to establish a salary of more\n\nthan the judicially admitted $120,000 rate or that any salary was deferred prior to October. 15,\n\n2019.\n\n First, and most importantly, the only written agreement pertaining to Sullivan\u2019s\n\n14\n The undersigned is retiring. Hopefully, addressing the contentions now would avoid the need for a retrial or a\nlengthy review of the evidence by my successor, should the judicial admission conclusion be rejected on appeal.\n15\n See supra note 6.\n\n\n 21\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 22 of 40\n\n\n\nemployment with GCA is the Employment Agreement, dated June 21, 2018. This agreement\n\nwas signed when Sullivan was hired as COO. It stipulates a salary of only $50,000 for\n\nSullivan\u2019s first year of work. It makes no mention of any deferred salary.16\n\n As plaintiff and a bankruptcy creditor, Sullivan has the ultimate burden of proof to\n\ndemonstrate any right to salary above the $120,00 amount as well as the existence of an\n\nagreement to defer much of that pay (prior to the acknowledged deferral period of October 15,\n\n2019 to March 31, 2020).\n\n While Sullivan says he had a side deal to pay him another $100,000 deferred, this is\n\nrather unlikely. Sullivan does not explain why he, an experienced businessman, would sign a\n\nwritten agreement promising to pay him only $50,000, if the parties\u2019 actual agreement was for\n\n$150,000. Nor does he explain why, if the majority of his pay was to be deferred, that\n\nunderstanding was not reduced to writing when the immediately payable $50,000 per year was.\n\nAfter all, according to Sullivan, both deals were reached contemporaneously when he was hired\n\nas COO.\n\n Second, GCA\u2019s Articles/bylaws required that all officer compensation be approved by the\n\nGCA Board. No evidence of any such approval was presented at trial. Even by his own parole\n\naccount, Sullivan acknowledges that his (alleged) side deal was reached with Bodner alone. It\n\ndoes not appear that the Board ever approved the additional pay or any deferral.\n\n Third, barely three months before the Employment Agreement, GCA and 105 Canada\n\nstipulated in their Loan Agreement that the compensation for key employees (Bodner, GCA\u2019s\n\nthen-CEO, and Montanya, its putative Vice President) could not exceed $120,000 annually, each.\n\n16\n One might normally assume that in March 2019, when Sullivan became CEO and went from parttime to fulltime\nwork, he would have received a pay bump. However, not even Sullivan suggests that this was the case. This and\nseveral other factors reflect that GCA was a venture undertaken by relative equals, and not the typical employee-\nemployer relationship where the employee is not an owner. The potential upside for all concerned was not in their\nwages, but in realizing on their equity interests, should the software and the Debtor prove successful.\n\n\n 22\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 23 of 40\n\n\n\nWhy, then, would GCA immediately turn around and agree to pay Sullivan\u2014who worked under\n\nBodner\u2014more than Bodner could be paid? Similarly, given GCA\u2019s dire financial condition and\n\nits dependence on loans provided by 105 Canada, why would the Debtor risk breaching the Loan\n\nAgreement by paying Sullivan more than the stipulated maximum for executive compensation?\n\nThere is no indication that the Board ever approved a deferral, nor 105 Canada.\n\n As to the Excel spreadsheets Sullivan presented to bolster his claims, these documents are\n\nundated and unverified by any other member of GCA. At best, they would have been prepared\n\nby management working under Sullivan. They may have been kept this way so Rodenbush\n\nwouldn\u2019t know about them, as this violated the Loan Agreement.\n\n As to the parties\u2019 contemporaneous communications, even if the October 15, 2019 text\n\nvaguely supports Sullivan\u2019s contentions, other texts contradict them. For example, as of July 3,\n\n2018, Sullivan and Rodenbush were at odds about financing the company and who should bear\n\nthe cost. In a communication between them, Rodenbush is asked by Sullivan to defer interest on\n\n105 Canada\u2019s loans. Rodenbush counters saying that if interest is to be deferred, it would be\n\ncontingent upon Sullivan and Guilfoyle \u201cdeferring their $50k annual salaries\u201d until the interest\n\nwas caught up. An obviously offended Sullivan replies with a diatribe, which includes a\n\nstatement that \u201cthe $50k does not impact either of our lives\u201d and that \u201cneither of us \u201cenjoy\u201d\n\nsweat equity.\u201d Sullivan does not say his compensation was actually $150,000; nor does he\n\nmention that he is deferring two thirds of that salary. Given the context, one would expect him\n\nto do so unless the Charlotte Principals were intentionally breaching the Loan Agreement by\n\npaying too high salaries and simply didn\u2019t want to tell Rodenbush.\n\n Again, in the May 2019 text exchanges between Sullivan and Rodenbush, we see\n\nRodenbush floating the idea of executives deferring their salaries \u201cuntil there\u2019s some sight of\n\n\n\n\n 23\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 24 of 40\n\n\n\nsome cash.\u201d Sullivan rejects his proposal out of hand, referencing the (large) number of hours he\n\nwas presently working at GCA. Had Sullivan been deferring two thirds of his salary, one could\n\nreasonably expect him to say so at this moment. However, Sullivan makes no mention about\n\nthis, suggesting that no salary was being deferred at the time.\n\n On this record, the only deferred compensation agreement between Sullivan and GCA\n\nappears to be the one arising out of the October 15, 2019 discussions in which 105\n\nCanada/Rodenbush conditioned further lending to GCA on these monies not being used to fund\n\nexecutive pay. GCA and the affected executives, including Sullivan, then agreed to the\n\ncondition. And from this point forward until early March 2020,17 all agree, Sullivan was not to\n\nbe paid by GCA.\n\nII. Sullivan\u2019s Alleged Deferred Compensation Claims under the NCWH (Issues 4 & 5).\n\n A deferred compensation agreement is one where the employer will pay compensation to\n\nemployees at a future date and is predominantly used to defer the payment of taxes. In re IT\n\nGroup, Inc., 448 F.3d 661, 664 (3d Cir. 2006).\n\n Under the NCWHA, an employer who fails to pay its employees\u2019 wages is liable to the\n\neffected employee for the unpaid wages or wages owed under NCWHA plus 8% interest as of\n\nthe date each amount came due. N.C. GEN. STAT. \u00a7 95-25.22(a). An employer who\n\nsatisfactorily shows that the act or omission of failing to pay the employee wages was in good\n\nfaith may be excused from paying the liquidated damages. N.C. GEN. STAT. \u00a7 95-25.22(b).\n\n Given the similarities between the NC Wage and Hour Act and the Federal Fair Labor\n\nStandards Act, state courts often turn to case authorities decided under the federal law to\n\n\n\n\n17\n Sullivan was paid a small amount, $15,000 as part of his departure.\n\n\n 24\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 25 of 40\n\n\n\ndetermine cases brought under NCWHA.18\n\n A. Being a Bona Fide Executive of the Debtor within the meaning of the\n NCWHA, Sullivan is unable to avail himself of its protections.\n The minimum wage provisions of the NCWHA are explicitly inapplicable to bona fide\n\nexecutives as defined under the FLSA. N.C. GEN. STAT. \u00a7 95-25.14(b)(4).\n\n The Fourth Circuit, adopting the Department of Labor\u2019s definition, defines a \u201cbona fide\n\nexecutive\u201d as \u201cone who earns at least $455 per week, has authority over hiring and firing,\n\nroutinely supervises at least two other employees, and\u2014most relevant here\u2014whose \u201cprimary\n\nduty is management of the enterprise in which the employee is employed.\u201d\u201d Morrison v. County\n\nof Fairfax, VA, 826 F.3d 758, 762 (4th Cir. 2016) (quoting 29 C.F.R. \u00a7 541.100).\n\n Even at his lowest possible salary ($50,000), Sullivan\u2019s annual salary equates to $962\n\nper week, exceeding the monetary threshold to be considered a bona fide executive.\n\nRodenbush\u2019s Pretrial Memorandum, Doc. 100, p. 6. At $120,000 per year, Sullivan was making\n\napproximately $2,300 per week, or five times the threshold.\n\n As to the ability to hire and fire employees, Sullivan testified about his bringing in a CPA\n\nshortly after he was retained to work for GCA. Similarly, in Sullivan\u2019s April 24, 2019 State of\n\nthe Union email he informs the GCA group that he plans on hiring a contract manager in the near\n\nfuture. Finally, Sullivan reports having fired an employee named \u201cPatricia,\u201d although he credits\n\na Mark Cushing as having \u201cactually pulled the trigger.\u201d Both acts demonstrate Sullivan\u2019s power\n\nto hire and fire GCA employees.\n\n As to management, the GCA\u2019s Bylaws give the President \u201cgeneral and active\n\n\n18\n The NCWHA is modeled after the Fair Labor Standards Act, and both utilize the same definition of \u201cemployer.\u201d\nCompare N.C. GEN. STAT. \u00a7 95-25.2(5); and 29 U.S.C. \u00a7 203(d). As such, North Carolina courts rely on the FLSA\nand cases interpreting it for guidance. E.g., Powell v. P2Enterprises, LLC, 247 N.C. App. 731, 733-34, 786 S.E.2d\n798, 800 (2016); Beckley v. Priority Auto. Grp., Inc., No. 3:21-cv-00072-RJC-DSC, 2022 U.S. Dist. LEXIS 55741,\nat *13 (W.D.N.C. Mar. 28, 2022) (Conrad, J.).\n\n\n 25\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 26 of 40\n\n\n\nmanagement of the business of the corporation\u201d and \u201cgeneral power and duties of supervision\n\nand management as defined by the Board of Directors,\u201d indicating management of the enterprise.\n\n As Sullivan made quite clear first to Rodenbush in his June 28, 2018 text and later to\n\nGoldsmith in their February 29, 2020 meeting at the restaurant, Sullivan ran GCA. His \u201cprimary\n\nduty [was] management of the enterprise . . . .\u201d\n\n In short, the Defendants have amply demonstrated that Sullivan was a \u201cbona fide\n\nexecutive\u201d under the Morrison definition. As such, he falls outside of the NCWHA and is\n\nunable to avail himself of its protections. Count 1 of the Complaint fails against both\n\nDefendants, without more.\n\n B. While GCA was undisputably Sullivan\u2019s Employer within the Meaning of the\n NCWHA, Rodenbush was not.\n All agree that GCA was Sullivan\u2019s employer within the meaning of the NCWHA. If\n\nSullivan fell within the protected class of employees under the Act (which he does not), GCA\n\nwould potentially be liable to him for his unpaid wages. However, GCA is hopelessly insolvent\n\nand is unlikely to return any meaningful dividend to general unsecured creditors.19 Thus, the real\n\nthrust of Sullivan\u2019s NCWHA claim is against Rodenbush who Sullivan also claims to be his\n\n\u201cemployer,\u201d and thus liable to him for his unpaid wages and other damages.\n\n Even if the NCWHA were applicable to Sullivan, it would not deem Rodenbush his\n\n\u201cemployer.\u201d Under the NCWHA, an \u201cemployer\u201d is \u201cany person acting directly or indirectly in\n\nthe interest of an employer in relation to an employee.\u201d N.C. GEN. STAT. \u00a7 95-25.2(5); 29 U.S.C.\n\n\u00a7 203(d).\n\n Employers may be subject to individual liability for unpaid wages. Powell v.\n\n19\n Administrative expenses in the case totaled over $10,000 before the costs of this trial. Additionally, the IRS has\nfiled a priority wage claim of $14,300.35. Both would have to be paid before any dividend was paid to the $456,866\nof general unsecured claims filed in the case. Meanwhile, the proposed sale of the Debtor\u2019s only asset, the software,\nis for the sum of $50,000.\n\n\n 26\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 27 of 40\n\n\n\nP2Enterprises, 247 N.C. App. 731, 734, 786 S.E.2d 798 (N.C. App. 2016). Intended to be\n\nconstrued broadly, the North Carolina courts both local and federal apply an \u201ceconomic reality\u201d\n\ntest. N.C. GEN. STAT. \u00a7 95-25.25; Powell v. P2Enterprises, LLC., 247 N.C. App. at 735.\n\n [The economic realities test looks to] the totality of the circumstances to\n determine whether the individual has sufficient operational control over the\n workers in question and the allegedly violative actions to be held liable for unpaid\n wages or other damages. Factors commonly relied on by courts in determining\n the extent of an individual\u2019s operational control over employees include whether\n the individual: (1) had the power to hire and fire employees; (2) supervised and\n controlled employee work schedules or conditions of employment; (3) determined\n the rate and method of payment; and (4) maintained employment records.\n\n Id. (citations and quotations omitted). None of these factors are exclusive or dispositive.\n\nRather it is the consideration of all circumstances that is most determinative. Id.\n\n Based on the aforementioned factors, the evidence confirms that Rodenbush was not in\n\nfact Sullivan\u2019s \u201cemployer.\u201d\n\n 1. Rodenbush did not maintain GCA\u2019s employment records (Factor 4).\n Starting with the most obvious evidentiary factor, it is undisputed that Rodenbush was\n\nneither an employee nor an officer of GCA. Rodenbush never even visited the GCA offices, and\n\nhe never maintained any employment records belonging to the Debtor. Factor 4 is absent.\n\n 2. The evidence does support Sullivan\u2019s contention that Rodenbush had the\n power to hire and fire employees (Factor 1).\n Sullivan testified that Rodenbush\u2019s involvement with the Debtor went beyond that of a\n\nfinancier. This much is true. In time, Rodenbush became not just GCA\u2019s lender, but a member\n\nof its board of directors and, indirectly, its largest shareholder.\n\n As to factor 1, Sullivan asserts that Rodenbush was \u201cactively involved in decisions to\n\nhire/fire employees of [the Debtor].\u201d He points to the Company\u2019s decision to fire Montanya in\n\nMay of 2018, the hiring of Gary Basra (\u201cBasra\u201d) in December of 2019, and the hiring of\n\nGoldsmith in 2020.\n\n\n 27\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 28 of 40\n\n\n\n These assertions are not factually well-founded. Sullivan first suggested that Rodenbush\n\n\u201cpressured\u201d Sullivan to fire Montanya. However, during the February 29, 2020 restaurant\n\nmeeting with Goldsmith, Sullivan states that he himself instructed Bodner to fire Montanya and\n\nthen contradicts himself saying it was ultimately Bodner\u2019s decision to terminate Montanya.\n\nEither way, Rodenbush was not the decisionmaker.\n\n Meanwhile, the decision to rehire Basra was done through a vote of the board of\n\ndirectors. Rodenbush was but one of several directors, so he obviously did not control that\n\ndecision. Further, concurrent emails exchanged between the group show that it was Sullivan\n\nwho encouraged the Board to make the Basra hire.\n\n As to Goldsmith, he was only hired by GCA after Sullivan left the company. For our\n\nNCWHA purposes, the relevant time period is when Sullivan was still employed by GCA but not\n\nbeing paid: mid-October 2019 through mid-March 2020. Goldsmith was not managing the\n\nDebtor at this time nor was Rodenbush, acting through Goldsmith.\n\n 3. Rodenbush neither supervised CGA\u2019s employees; nor did he control their\n work schedules or the conditions of their employment (Factor 2).\n Being neither an employee nor an officer of GCA, Rodenbush did not supervise\n\nemployees. He did not control their work schedules, nor did he control the conditions of the\n\nemployees\u2019 employment. Rodenbush never maintained any employment records belonging to\n\nthe Debtor, and he never had access to GCA\u2019s accounting system. Finally, Rodenbush never had\n\naccess to the Debtor\u2019s accounts, nor did he have check signing authority.\n\n Nevertheless, Sullivan accuses Rodenbush of controlling and supervising at least one\n\nemployee: himself. To this end, Sullivan cites his numerous conversations with Rodenbush\n\nabout GCA matters. At trial, Sullivan presented a number of emails and text messages between\n\nhimself and Rodenbush showing that, between June 2019 through January 2020, the two parties\n\n\n\n 28\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 29 of 40\n\n\n\ncommunicated on a weekly basis about the business.\n\n Unfortunately, these messages will not carry the evidentiary weight that Sullivan would\n\nassign to them. Certainly, there were numerous \u201cconversations\u201d between Sullivan, Rodenbush,\n\nthe other GCA principals, and even corporate council. Most of these conversations are but short\n\ntexts or emails spread out over a period of days, if not weeks. Many of these texts relate to\n\nGCA\u2019s ever present need for funding and the conditions under which Rodenbush (via 105\n\nCanada) was willing to provide. The conversations between Rodenbush and Sullivan et.al.\n\nreflect, at most, a lender\u2019s \u201cpower of the purse\u201d over its borrower. The conversations do not\n\nshow an employer\u2019s control over an employee, as contemplated by the NCWHA.\n\n Other texts are related to business and operations, but even so, they do not show\n\nRodenbush instructing Sullivan what to do or how to manage GCA. As one would expect, these\n\nconversations actually reflect the principals of a small startup company\u2014Bodner, Sullivan,\n\nGuilfoyle and Rodenbush\u2014discussing its affairs. The conversations occurring after March 9,\n\n2019, took place after Rodenbush was a board member and 105 Canada was a substantial\n\nshareholder of GCA, further legitimizing the interaction. This was not even the case of a major\n\nbank lender telling its corporate borrower how to run its business. These conversations do not\n\ntranslate Rodenbush exercising control and supervision over Sullivan or any other employee.\n\n Hoping to demonstrate that control, Sullivan suggests Rodenbush \u201cdictated how GCA\n\nshould oversee salespeople and track sales statistics.\u201d Here, Sullivan is referencing those texts\n\nand email conversations from April 2018 where Rodenbush suggests that GCA create/modify a\n\nreporting metric for use by the Debtor\u2019s salespeople.\n\n Rodenbush acknowledges that he was actively involved with the creation and\n\ndevelopment of this reporting metric. However, to provide context, one thing should be noted.\n\n\n\n\n 29\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 30 of 40\n\n\n\nAt this early point, 105 Canada was primarily a lender to GCA. Under the Loan Agreement, it\n\nwas entitled to receive financial reporting from GCA, which GCA was not providing.\n\nRodenbush made several requests for financial information, including information regarding\n\nGCA\u2019s sales leads. This is information important to 105 Canada because it would aid in\n\nassessing GCA\u2019s compliance with the Loan Agreement milestones. There is nothing\n\ndomineering or improper about a lender asking for information which it is entitled under a\n\nbargained-for loan agreement.\n\n Although such sales contact information is commonly tracked by companies, GCA\n\napparently did not have this ability. Rodenbush was familiar with such tracking systems from\n\nhis other business ventures. So, when Bodner emailed existing company reporting figures to\n\nRodenbush, the latter pointed out deficiencies in GCA\u2019s reporting and made suggestions about\n\nhow that reporting could be improved. Again, this suggestion was neither domineering nor\n\nsinister. Rather, it reflected a reality known to all small corporations: the company principals\n\ncontribute their personal business knowledge to the business. Rodenbush\u2019s suggestion to\n\nSullivan how the Debtor could obtain and provide the sales contact information does not in any\n\nway prove Rodenbush was running the company or acting as Sullivan\u2019s employer.\n\n Sullivan next suggests Rodenbush had unilateral control over the Board, giving him\n\n\u201ctotal control over the conditions of employment of GCA\u2019s employees.\u201d However, at trial,\n\nSullivan offered no explanation of Rodenbush\u2019s ability to control the Board apart from the\n\nobvious influence of a lender \u201ccontrolling the purse.\u201d\n\n Moreover, there is contrary evidence to show that Rodenbush, while an indirect lender\n\nand a board member, was neither controlling the Board nor supervising employee\u2019s work\n\nconditions and schedules. For example, Rodenbush testified that he disclosed and abstained\n\n\n\n\n 30\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 31 of 40\n\n\n\nfrom voting in any board matters which were self-serving or had the appearance. And as to the\n\nsuggestion that Rodenbush was running GCA, Sullivan again contradicts himself. In his\n\nrecorded conversation with Goldsmith, Sullivan emphasizes that he (Sullivan) is \u201cengaging in\n\nrunning the company\u201d and \u201cdoes everything for [the] company\u201d including resisting the pressures\n\nof other board members to settle the Montanya lawsuit.\n\n Although Rodenbush was involved in the Debtor\u2019s business, that involvement does not\n\nrise to the level of control and supervision of the Debtor\u2019s employee schedules and work\n\nconditions. This factor is also absent.\n\n 4. Rodenbush did not directly determine the rate and method of payment\n (Factor 3).\n There is no evidence suggesting that Rodenbush determined the rate of individual\n\nemployees pay, or the method by which employees would be paid. The most that can be said is\n\nthat through 105 Canada\u2019s agreements with GCA, it had the ability to influence what the\n\nexecutives could be paid. As to this, the 2018 Convertible Loan Agreement included specific\n\nprovisions concerning the maximum compensation and deferral of compensation to Bodner and\n\nMontanya. Later, Rodenbush made the bridge loan contingent upon none of 105 Canada\u2019s\n\nadvance going to fund executive compensation. However, neither reflects an employer\u2019s control\n\nof an employee\u2019s compensation; rather, it reflects a lender\u2019s stipulations as to the terms and\n\nconditions under which it is willing to lend to the company. And that, in the final analysis, is the\n\nnubbin of Sullivan\u2019s contentions against Rodenbush. Essentially, because GCA had no other\n\nsource of funding but 105 Canada, Sullivan views Rodenbush as personally in charge of\n\neverything at GCA, and thus his \u201cemployer\u201d under the NCWHA.\n\n We do not agree with Sullivan\u2019s characterizations. From a neutral third party\u2019s\n\nperspective, GCA was a start-up business with several principals. Each brought something\n\n\n\n 31\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 32 of 40\n\n\n\ndifferent to the table: Bodner, the software idea; Guilfoyle, the tech experience; and Sullivan, the\n\nhealthcare management expertise. As Sullivan laid it out to Rodenbush, early on Sullivan,\n\nBodner, and Guilfoyle were the principals of the business. They viewed Rodenbush was the\n\nmoney man who would provide GCA with its initial funding. Although 105 Canada was also a\n\nshareholder, the Charlotte Principals viewed Rodenbush/105 Canada as an outside lender, not a\n\nmember of management with an equal say over the Debtor\u2019s affairs.20\n\n The relationship changed somewhat after the Restructuring Agreement. 105 Canada\n\nbecame the Debtor\u2019s largest shareholder (although it still held a minority interest overall as\n\ncompared to the Charlotte Principals) and Rodenbush, a director.\n\n But the things that caused GCA to fail (and Sullivan to not be paid) were occasioned by\n\nfailures of the other principals. Bodner was not able to bring the software to completion. Under\n\nSullivan\u2019s management, other capital/revenues were not obtained, and Sullivan took the\n\ncompany away from the hospital auditing business which at least\u2014in theory\u2014could have\n\nproduced some revenue. The outside \u201cSeries B\u201d capital investments from outside entities did not\n\ncome to fruition, and GCA was unable to find funding elsewhere. All the while, GCA teetered\n\non the brink of collapse. None of this was Rodenbush\u2019s fault, but it forced 105 Canada to\n\ncontinue to lend to GCA, lest all of its prior loans/investments be lost.\n\n In recognition of this, and given that 105 Canada\u2019s loans were being spent by GCA in\n\nsignificant part to pay salaries to the Charlotte Principals, Rodenbush began placing conditions\n\non further lending. After months of unsuccessfully suggesting that the other principals\n\ncontribute money to the cause, Rodenbush makes the \u201cbridge loan\u201d on condition that 105\n\nCanada\u2019s money not be used to pay their executive salaries.\n\n\n20\n And yet, no one has suggested that the Charlotte Principals should be treated as \u201cemployers\u201d liable for unpaid\nwages.\n\n\n 32\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 33 of 40\n\n\n\n On these facts, it would be inappropriate to deem Rodenbush Sullivan\u2019s \u201cemployer.\u201d In\n\npoint of fact, there are no North Carolina cases decided under the NCWHA holding that the\n\nlender to a distressed company is an \u201cemployer\u201d of the latter\u2019s employees. This, even though the\n\nNCWHA has existed for more than 50 years. It would greatly distort the reality of the parties\u2019\n\nrelationships to now hold that Rodenbush was the \u201cemployer\u201d of the others when he wasn\u2019t\n\nrunning the business and wasn\u2019t technically even its lender.\n\n From a public policy perspective, it would appear undesirable to deem a lender, even a\n\nshareholder lender, an \u201cemployer\u201d under the NCWHA simply because it lends to a distressed\n\ncompany. If a shareholder becomes an \u201cemployer\u201d and liable for all of the company\u2019s unpaid\n\nwage claims simply because it made an advance to a floundering company, no reasonable\n\nshareholder would ever lend. This would make the company even more likely to fail. Similarly,\n\nif the lender who makes one advance and imposes conditions upon further advances is deemed\n\nan \u201cemployer\u201d liable for the wages of all company employees, no rational person would ever\n\nlend. This is undesirable because both start-up businesses and financially distressed businesses\n\nare frequently dependent upon such shareholder loans.\n\n Finally, it would be most unfair to deem Rodenbush Sullivan\u2019s \u201cemployer\u201d and\n\npersonally liable for large amounts deferred compensation when the evidence suggests he knew\n\nnothing about these arrangements. It appears that Sullivan never told Rodenbush about the\n\narrangements or GCA\u2019s breach of the contract until after the fact.\n\n Assessing the factors in totality, Rodenbush\u2019s involvement in GCA and his indirect\n\ninvestments and lending to GCA do not make him personally Sullivan\u2019s \u201cemployer.\u201d Thus, even\n\nif Sullivan was not a bona fide executive, he still could not recover from Rodenbush, under the\n\nNCWHA.\n\n\n\n\n 33\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 34 of 40\n\n\n\nIII. Breach of Contract (Issue 6).\n\n The existence of a claim is controlled by state law. Canal Corp v. Finnman (In re\n\nJohnson), 960 F.2d 396, 404 (4th Cir. 1992). \u201cUnder North Carolina law, to establish a claim for\n\nbreach of contract, a plaintiff must show \u201c(1) existence of a valid contract and (2) breach of the\n\nterms of that contract.\u201d Rector v. Nirvana Extractions, LLC., 2023 WL 4875882 at *6\n\n(M.D.N.C. 2024) (quoting Montessori Children\u2019s House of Durham v. Blizzard, 244 N.C. App.\n\n633, 781 S.E.2d 511 (N.C. Ct. App. 2016)).\n\n Contracts in writing \u201care to be construed and enforced according to their terms.\u201d\n\nGalloway v. Snell, 384 N.C. 285, 287, 885 S.E.2d 834 (N.C. 2023) (quoting Gould Morris Elec.\n\nCo. v. Atl. Fire Ins. Co., 229 N.C. 518, 520, 50 S.E.2d 295 (1948)). \u201cWhen the language of a\n\ncontract is clear and unambiguous, effect must be given to its terms, and its terms may not be\n\ncontradicted by parol[e] or extrinsic evidence.\u201d Galloway v. Snell, 384 N.C. at 287 (internal\n\ncitations omitted). \u201cAn ambiguity can exist when, even though words themselves appear clear,\n\nthe specific facts of the case create more than one reasonable interpretation of the contractual\n\nprovisions.\u201d Galloway, 384 N.C. at 287 (quoting Register v. White, 358 N.C. 691, 695, 599\n\nS.E.2d 549 (2004)). When an ambiguity exists, parole evidence may be introduced to clarify the\n\nmeaning of the contract, not contradict its terms. Galloway, 384 N.C. at 287 (quoting Root v.\n\nAllstate Ins. Co., 272 N.C. 580, 590, 158 S.E.2d 829 (1968)).\n\n A. The Debtor did not breach any contract or agreement, either with GCA or\n Sullivan.\n We have previously concluded by judicial admission that Sullivan was to be paid\n\n$120,000 per year, and that prior to October 2019 none of his salary was deferred. At best,\n\nSullivan had a side deal with Bodner, but it was not reduced to writing, not approved by the\n\nBoard, and not disclosed to 105 Canada who, undoubtedly, would have seen it as a breach of the\n\n\n\n 34\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 35 of 40\n\n\n\nLoan Agreement and the amended Shareholders agreement.\n\n Sullivan\u2019s employment agreement, such as it was, was modified by himself and GCA in\n\nOctober 2019, after 105 Canada conditioned the bridge loan upon it not being used to pay\n\nexecutive salaries. At that point, the Charlotte Principals\u2014including Sullivan and GCA\u2014agreed\n\nthat the executives would not be paid their salaries until other monies became available to the\n\ncompany. That is the only salary deferment agreement Sullivan had with anyone.\n\n Unfortunately, GCA never received any such funding, and the payment term was never\n\ntriggered. Without the condition precedent, the Debtor has not breached a contract with Sullivan\n\nbecause on the date of his departure from GCA the payment obligation was not yet triggered.\n\n B. Rodenbush has no contract with Sullivan and cannot be not liable for breach.\n Rodenbush is neither an employer of Sullivan nor a party to any employment agreement\n\nwith Sullivan. He cannot be held liable for breach of contract for a contract to which he was not\n\na party. Accordingly, Sullivan cannot recover from Rodenbush under this cause of action.\n\nCount Two fails as to both Defendants.\n\nIV. Nevertheless, with GCA in Bankruptcy, Sullivan is Entitled to an Unsecured Claim\n\nfor his unpaid wages.\n\n Although Sullivan is not entitled in the adversary proceeding to recover damages against\n\nthe Defendants under either cause of action, the fact remains that Sullivan worked for GCA from\n\nmid-October of 2019 until his March 15, 2020 departure. All agree he was not paid for his labor,\n\nalthough this did not breach a prepetition agreement, since payment was deferred until revenues\n\nwere produced or investments were made.\n\n However, GCA is now defunct and in Chapter 7 bankruptcy. There will never be any\n\nfurther revenues or investments made. That being so, equity would dictate that Sullivan have an\n\nallowed general unsecured claim for his deferred salary, lest the Estate receive a windfall for the\n\n\n 35\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 36 of 40\n\n\n\nservices he rendered. See e.g., In re Reed, 624 B.R. 155, 175 (Bankr. E.D.V.A. 2020) (creditor\n\nrecovered \u201cthe reasonable value of the services provided\u201d via quantum meruit and was allowed\n\nan unsecured claim in that amount).\n\n Thus, employing the $10,000 per month rate judicially admitted by Defendants\n\n($120,000/year), we conclude that Sullivan is owed $35,000 by GCA at the date of bankruptcy\n\n($10,000 x 5 months=$50,000-15,000= $35,000).\n\nV. The Debtor\u2019s Recharacterization/Constructive Fraudulent Transfer assertions fail.\n\n Finally, the Debtor suggests in its claim objection that any claim by Sullivan against it\n\nshould be recharacterized as equity, not debt, under Fairchild Dornier GmbH v. Official Comm.\n\nof Unsecured Creditors (In re Dornier Aviation (N. Am.), Inc.) 453 F.3d 225 (4th Cir. 2006).\n\nFurther, in its Trial Brief, the Debtor suggests that Sullivan\u2019s compensation would be\n\nconstructively fraudulent under 11 U.S.C. \u00a7 548 as interpreted by this Court in Ballantyne\n\nBrands v. Wiesehan, Jr. Ballantyne Brands. 656 B.R. 117, 140 (Bankr. W.D.N.C. 2023) (\u201cIf the\n\nguaranteed compensation was excessive, then the other payments were for no consideration.\u201d).\n\n Taking these in reverse order, the Debtor\u2019s fraudulent transfer assertion was not raised in\n\nthe State Court action/Adversary Proceeding, nor in the Debtor\u2019s Objection to Sullivan\u2019s proof of\n\nclaim. Rather, it was raised only in the Debtor\u2019s trial brief. A case may not be tried on \u201can\n\nunpleaded theory of recovery\u201d without \u201cexpress or implied consent of the parties.\u201d Pinkley, Inc.\n\nv. City of Frederick, Md., 191 F.3d 394, 401 (4th Cir. 1999); McLeod v. Stevens, 617 F.2d 1038,\n\n1040 (4th Cir. 1980). No such consent has been given. Rather, this appears to be a \u201cthrow in\u201d\n\nargument, and even if this were not so, the action doesn\u2019t lie. A constructive fraudulent transfer\n\nsuit seeks to recover monies which were paid out by the Debtor before bankruptcy. See 11\n\nU.S.C. \u00a7 548(a)(2). Here, we are fighting over monies which Sullivan was not paid. There was\n\n\n\n\n 36\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 37 of 40\n\n\n\nno transfer, and this is not a constructive fraudulent transfer case.\n\n As to the Debtor\u2019s recharacterization attempt under Dornier Aviation, it is true that under\n\nlimited circumstances a bankruptcy court may look beyond the titles used by the parties to\n\nrecharacterize debts asserted against a bankruptcy debtor\u2019s estate as equity. In re Dornier\n\nAviation, 453 F.3d at 233.\n\n The Fourth Circuit utilizes eleven factors in such inquiries, including: (1) the names\n\ngiven to the instruments, if any, evidencing the indebtedness; (2) the presence or absence of a\n\nfixed maturity date and schedule of payments; (3) the presence or absence of a fixed rate of\n\ninterest and interest payments; (4) the source of repayments; (5) the adequacy or inadequacy of\n\ncapitalization; (6) the identity of interest between the creditor and the stockholder; (7) the\n\nsecurity, if any, for the advances; (8) the corporation\u2019s ability to obtain financing from outside\n\nlending institutions; (9) the extent to which the advances were subordinated to the claims of\n\noutside creditors; (10) the extent to which the advance were used to acquire capital assets; and\n\n(11) the presence or absence of a sinking fund to provide repayments. Dornier Aviation, 453\n\nF.3d at 233 (quoting AutoStyle Plastics, 269 F.3d 726, 749-50 (6th Cir. 2001)).\n\n \u201cNone of these factors is dispositive and their significance may vary depending upon the\n\ncircumstances.\u2019\u201d Dornier Aviation, 453 F.3d at 234 (quoting Sender v. Bronze Group, Ltd. (In re\n\nHedged-Invs. Assocs., Inc.), 380 F.3d 1292, 1298-99 (10th Cir. 2004)). The analysis truly turns\n\non the objective facts around the intention surrounding the debt. See generally Roth Steel &\n\nTube Co. v. Commissioner of Internal Revenue, 800 F.2d 625, 630 (6th Cir. 1986).\n\n The Debtor suggests that Sullivan\u2019s wage claim should be construed as equity, arguing\n\nthat: (i) Sullivan had no written employment agreement (for the $150,000 salary with $100,000\n\ndeferred), (ii) the Debtor lacked the necessary resources to satisfy his compensation, (iii) the\n\n\n\n\n 37\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 38 of 40\n\n\n\nDebtor was undercapitalized and regularly required to seek funds from 105 Canada to meet its\n\nexpenses, (iv) the Debtor was unable to secure outside financing, and (v) the primary goal of\n\nSullivan\u2019s services as GCA\u2019s CEO was to take the Debtor\u2019s software and platform to market in\n\nhopes that it become profitable and be acquired, making the principals wealthy.\n\n In short, the Debtor suggests that the Company\u2019s officers, including Sullivan, should not\n\nhave been receiving compensation at all from the Debtor; rather their labor should have been\n\ntreated as sweat equity. We do not agree with GCA\u2019s position.\n\n Certainly, Sullivan was one of the principals of this startup company and his company\n\nChaotic Holdings, LLC, was a shareholder of GCA. Sullivan, Guilfoyle, and Bodner all agreed\n\nto work for GCA at a very low rate of compensation. As Sullivan points out, this was \u201csweat\n\nequity,\u201d and part of their contribution to the venture. As noted, all concerned, including\n\nSullivan, thought GCA was on the verge of creating a new, cutting-edge Software Platform that\n\nwould be widely used by hospitals and other healthcare businesses. Each saw a great deal of\n\nupside in the appreciation of their equity interests, if the Software Platform was achieved and\n\nGCA attained profitability or was otherwise sold to a third party.\n\n However, as to the portion of Sullivan\u2019s $120,000 per year salary that was deferred from\n\nOctober 15, 2019 through March 15, 2020, this is a bridge too far. The Debtor seems to be\n\nanalogizing to our decision in Ballantyne Brands and contending that as there, Sullivan\u2019s pay\n\nwas excessive. The Ballantyne Brands ruling was made based upon extensive expert testimony\n\nshowing that the salary paid to Wiesehan, Jr., Ballantyne Brands\u2019 CEO, was excessive compared\n\nto executives in like businesses, both locally and nationally. Ballantyne Brands, 656 B.R. 117,\n\n137-38. That evidence is lacking in this case, and it cannot be imported by analogy from another\n\naction. Moreover, Ballantyne Brands starts from the premise that employee compensation is\n\n\n\n\n 38\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 39 of 40\n\n\n\npresumed to be for reasonably equivalent value, until the trustee shows otherwise. Id. at 139.\n\nAgain, we have no such evidence.\n\n Finally, if GCA\u2019s ultimate contention is that the principals of a startup company should\n\nwork for free, we are unaware of any law so stating. The Debtor\u2019s recharacterization request\n\nfails.\n\n CONCLUSION\n\n In conclusion, Sullivan\u2019s salary from GCA was $120,000 per year. It appears he was\n\npaid this sum until October 15, 2019, when he voluntarily agreed to defer payment of his salary\n\nuntil GCA obtained monies other than the 105 Canada bridge loan. Regrettably, no such funds\n\nwere ever realized, and Sullivan was not paid. He was thus owed $35,000 by GCA at the filing\n\ndate.\n\n Meanwhile, while GCA was clearly Sullivan\u2019s employer, as defined under N.C. GEN.\n\nSTAT. \u00a7 95-25.2(5), Sullivan was a \u201cbona fide executive\u201d of the Debtor, meaning the NCWHA\n\nis inapplicable to his claims. Even if this were not true, Rodenbush was not Sullivan\u2019s\n\n\u201cemployer,\u201d as defined under N.C. GEN. STAT. \u00a7 95-25.2(5) and has no responsibility for any\n\nunpaid compensation owing by GCA to Sullivan. Therefore, COUNT 1 of the Complaint is\n\nDISMISSED WITH PREJUDICE.\n\n Based on its judicial admission, GCA agreed to pay Sullivan $120,000 per year. Sullivan\n\nhas failed to prove any additional compensation or deferral of salary, with one exception. In\n\nOctober 2019, and in hopes of bringing a mezzanine investor in and thereby bringing the GCA\n\nsoftware to market, Sullivan and GCA modified their Employment Agreement. Sullivan agreed\n\nto entirely defer his salary until GCA secured monies other than the 105 Canada bridge loan.\n\nBecause the funds never materialized, GCA ended up in bankruptcy. Thus, while GCA owes\n\n\n\n\n 39\n\f Case 24-03028 Doc 5 Filed 07/26/24 Entered 07/26/24 07:54:11 Desc Main\n Document Page 40 of 40\n\n\n\nSullivan $35,000 in compensation (given that it was deferred but not waived), it did not breach\n\nany agreement regarding the payment of those sums. Further, Rodenbush was not a party to any\n\ncontract with Sullivan and cannot be held liable for any breach.\n\n Accordingly, as against Rodenbush, COUNT 2 of the Complaint, is DISMISSED\n\nWITH PREJUDICE. As against GCA and its bankruptcy estate, however, Sullivan is\n\nALLOWED a general unsecured claim of $35,000, not for breach of contract, but rather\n\nsounding in quantum meruit and in recognition of his labor.\n\n The Debtor\u2019s unpled Constructive Fraudulent Transfer assertion is DENIED as is its\n\nRequest for Recharacterization of Sullivan\u2019s claim from debt to equity.\n\n Judgment will issue accordingly.\n\n\nSO ORDERED.\n\n\nThis Order has been signed electronically. United States Bankruptcy Court\nThe Judge\u2019s signature and Court\u2019s seal\nappear at the top of the Order.\n\n\n\n\n 40\n\f","ocr_status":2,"date_upload":"2024-07-27T01:14:45.500657-07:00","document_number":"5","attachment_number":null,"pacer_doc_id":"134015095206","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Other","acms_document_guid":""}],"date_created":"2024-07-26T05:05:07.390139-07:00","date_modified":"2024-07-31T01:12:39.066372-07:00","date_filed":"2024-07-26","time_filed":"07:54:11","entry_number":5,"recap_sequence_number":"2024-07-26.001","pacer_sequence_number":42,"description":"Memorandum Opinion (RE: related document(s)1 Notice of Removal filed by Plaintiff Kevin Sullivan) (mdw)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/397589605/","id":397589605,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/68980541/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/406764892/","id":406764892,"tags":[],"absolute_url":"/docket/68980541/6/sullivan-v-global-care-administrators-inc/","date_created":"2024-07-26T05:05:06.974174-07:00","date_modified":"2024-07-26T05:05:06.980758-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"6","attachment_number":null,"pacer_doc_id":"134015095215","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Other","acms_document_guid":""}],"date_created":"2024-07-26T05:05:06.957093-07:00","date_modified":"2024-07-26T05:05:06.960379-07:00","date_filed":"2024-07-26","time_filed":"07:58:55","entry_number":6,"recap_sequence_number":"2024-07-26.001","pacer_sequence_number":45,"description":"","tags":[]}],"entries_total":"https://www.courtlistener.com/api/rest/v4/docket-entries/?count=on&docket=68980541&page_size=40"}