## Facts

- AmerLink, Ltd., a log-home company, was owned and controlled by John M. Barth (“Senior”) and John M. Barth, Jr. (“Junior”).
- As AmerLink’s finances deteriorated, Junior allegedly concealed the company’s financial condition from customers, vendors, and suppliers.
- Junior allegedly falsified financial information and delivery reports and directed continued solicitation of new contracts and payments despite known financial distress.
- AmerLink filed for bankruptcy.
- In the bankruptcy case, the trustee pursued an adversary proceeding against insiders concerning alleged self-dealing transactions (including an employee stock plan-related transaction); that proceeding was resolved by settlement.
- After the bankruptcy filing, two consolidated putative class actions were filed in North Carolina state court:
  - A customer class alleging it was induced to pay for log homes that were not delivered or were delayed/defective.
  - A vendor/supplier class alleging it provided goods or extended credit it would not have provided absent the alleged misrepresentations.
- The state-court complaints asserted common-law fraud, unfair and deceptive trade practices (UDTP), civil conspiracy, and punitive damages against Senior and Junior in their individual capacities.

## Issues

1. Whether the plaintiffs lacked standing because their claims were property of the bankruptcy estate under 11 U.S.C. § 541(a) and therefore enforceable only by the bankruptcy trustee.
2. Whether the trustee’s adversary proceeding and settlement extinguished or subsumed the plaintiffs’ claims against the individual defendants.
3. Whether, to the extent reached, any claims were barred by limitations or insufficiently pleaded (including fraud, UDTP, civil conspiracy, and punitive damages).

## Decision

- The Court of Appeals held that the plaintiffs had standing to pursue claims alleging injuries that were distinct and personal to them, rather than generalized harms to the corporation or the creditor body as a whole.
- The court concluded that the trustee’s adversary proceeding and settlement, which targeted estate-wide recovery from insider transactions, did not bar creditor-specific claims based on direct misrepresentations to customers and vendors.
- The trial court’s standing-based dismissal was erroneous as to the creditor-specific claims, and the case was returned for further proceedings on those claims subject to any remaining defenses.

## Legal Principles

- Under 11 U.S.C. § 541(a), a bankruptcy estate includes causes of action belonging to the debtor; the trustee exclusively controls claims that the debtor-corporation could assert or that seek recovery for the collective benefit of creditors.
- Individual creditors may bring direct actions against third parties, including corporate insiders, when they allege a special duty owed to them or a distinct, personal injury not derivative of injury to the corporation.
- Claims framed as direct fraudulent inducement or deception in dealings with particular creditors are not automatically converted into estate property merely because the debtor is in bankruptcy or because the trustee litigated separate insider-misconduct claims.

## Conclusion

The court held that AmerLink’s bankruptcy did not deprive customers and vendors of standing to sue the company’s principals for direct, creditor-specific harms from alleged deception, and it rejected a blanket standing dismissal where the pleaded injuries were distinct from estate-wide claims prosecuted by the trustee.


Newton v. Barth, 788 S.E.2d 653 (N.C. Ct. App. 2016)