A North Carolina Superior Court judge has sided with Virginia Reid Smith in a case brought against her by a collection of companies largely controlled by her estranged husband, Fred Smith Jr. The court granted Smith’s motion to dismiss the lawsuit, effectively ending the legal action. The case centered around Smith’s divorce proceedings and a motion for a preliminary injunction she filed in that case.
The lawsuit, *Fred Smith Co. v. Smith*, was filed in Johnston County Superior Court by twenty companies, including Fred Smith Company, FSC I, LLC, and others. These companies, the plaintiffs in this case, claimed that Smith’s actions in her divorce proceedings were harming their businesses. Smith, the defendant, argued the court lacked jurisdiction and that the claims were without merit.
Background of the Case
The core of the dispute lies within Smith’s divorce from Fred Smith Jr., which began in July 2024. In the divorce case, Smith filed a motion for a preliminary injunction seeking to prevent her husband from taking actions that could diminish the value of the marital estate. This included preventing him from selling business assets, incurring new debt related to business entities, and making large transactions without her consent.
The companies involved in this lawsuit, largely owned or controlled by Fred Smith Jr., argued that Smith’s motion for a preliminary injunction in the divorce case could potentially harm their businesses. They claimed that the motion could trigger default provisions in their loan agreements, leading to financial difficulties. They sought declaratory and injunctive relief, aiming to prevent Smith from making arguments in the divorce case that could affect them. They also included claims of tortious interference with contract and conversion.
The Court’s Decision: Jurisdiction and Merits
The court’s decision hinged on two main points: jurisdiction and the merits of the claims.
Subject Matter Jurisdiction
The court found that it lacked subject matter jurisdiction over the companies’ claims for declaratory and injunctive relief. The court cited North Carolina law, specifically N.C.G.S. § 7A-244, which grants district courts exclusive jurisdiction over equitable distribution actions, like the divorce proceedings between Smith and her husband. The court reasoned that the companies’ requests for declaratory and injunctive relief were directly tied to Smith’s motion in the divorce case, and therefore, the Superior Court should not interfere with the District Court’s authority over the divorce case.
The court emphasized that the companies, as non-parties to the divorce action, were essentially attempting to exert influence over the divorce proceedings through the Superior Court. The court noted that the companies could have sought to be joined as parties in the divorce case, which would have allowed them to make their arguments directly to the district court judge.
The court also pointed out that the North Carolina General Statutes authorize a spouse to file a motion for preliminary injunction in an equitable distribution action to protect their interests in the marital estate.
The court did, however, find that it *did* have subject matter jurisdiction over the claims for monetary damages, specifically tortious interference with contract and conversion. The court held that these claims did not directly infringe on the district court’s authority over the equitable distribution matters.
Claims of Tortious Interference and Conversion
The court then addressed the merits of the companies’ claims for tortious interference with contract and conversion.
The court dismissed the tortious interference with contract claim because the companies failed to allege that Smith took any action to directly induce their lenders to take adverse action against them. The court emphasized the lack of specific allegations of “purposeful conduct, active persuasion, request, or petition” by Smith to influence the lenders.
The court also dismissed the conversion claim because the companies did not allege that Smith had acquired ownership or possession of any of their property. The court held that the conversion claim was based on Smith’s alleged assumption of ownership and management interests in the companies, which were intangible and not subject to a conversion claim under North Carolina law.
Preliminary Injunction Dismissed as Moot
Finally, since the court dismissed the entire lawsuit, it dismissed the companies’ Second Amended Motion for Preliminary Injunction as moot.
Implications of the Ruling
The court’s decision underscores the importance of respecting the jurisdictional boundaries between different court divisions in North Carolina. It reinforces the principle that the District Court has exclusive authority over equitable distribution matters in divorce cases. The ruling also clarifies the requirements for pleading claims of tortious interference with contract and conversion.
The ruling is a victory for Virginia Reid Smith, effectively ending the lawsuit brought against her by her estranged husband’s companies. It allows her divorce proceedings to continue without interference from the Superior Court.