Wednesday, July 17, 2024

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Wings to Go owners at odds over management, expenses


The partners in a popular chicken wings franchise in Burlington are having a major legal squabble over who’s in charge that has led to several lawsuits, as well as pending criminal charges against the company’s now-former president.

James Bernard Upchurch, Jr., 55, white male, of 1509 Harriet Drive in Burlington, has been charged with felony corporate malfeasance and felony embezzlement of more than $100,000 from the Wings to Go (WTG Burlington) franchise at 3421 South Church Street in Burlington. He was arrested by the Burlington police department in late April of this year and released on a $100,000 unsecured bond, according to the court file, which gives no indication that the case has been presented to an Alamance County grand jury.

Both Upchurch and his former business partners filed in Alamance County superior court in May 2020.

Upchurch accused his former business partners in WTG Burlington of orchestrating an “illicit coup” to remove him as the company’s president, sole officer, and general manager.

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His former partners contended in their lawsuit that, during his three years as president of WTG Burlington, Upchurch allegedly misused tens of thousands of dollars in company funds for personal expenses such as hotels and restaurants, entertainment, air travel, and private school tuition, in addition to multiple transfers to his personal bank accounts. Upchurch had served as president of WTG Burlington from 2015 until 2017, based on annual reports filed with the Secretary of State’s office.

WTG Burlington was formed in 2015 and had six shareholders, who are identified as: Brett DeVries; Michael Glick; Kelly Glick, who the court file lists as Michael Glick’s wife and as a defendant but not as a shareholder); Luann Maner; Corbin Sapp; Arthur “Duke” Thomas; and Upchurch, according to the court file. Upchurch held 40 percent interest in the company; none of the shares owned by his five partners constituted a majority interest, according to the lawsuit filed by Upchurch.

Shortly after they formed WTG Burlington, Upchurch and his fellow business partners executed a stockholders’ agreement that gave him the option to buy out his fellow shareholders, though the agreement contained a stipulation requiring more than $300,000 in business loans to be fully repaid, according to his lawsuit, which was later transferred to the N.C. Business Court.

Upchurch claimed that his partners in WTG Burlington formed a plan to remove him from his positions in late 2019 and began meeting in secret, without providing him the proper notice required under the company’s bylaws and state law, according to his suit. “The coup culminated in the election of new officers and directors – and thus, the removal of Upchurch from his positions – at a properly noticed shareholder meeting in January 2020,” according to a counterclaim that Upchurch filed in response to a motion to dismiss filed by his former business partners.

DeVries and Sapp subsequently filed new annual reports with the Secretary of State’s office listing their positions as president and secretary, respectively, Upchurch alleged. “Notwithstanding total lack of any corporate authority,” Sapp was appointed secretary and DeVries was appointed president of WTG Burlington in November 2019, based on two resolutions confirming their appointment that were dated October 31, 2019, though minutes from shareholders’ meetings did not reflect that change until January 28 of the following year, Upchurch claimed in his suit.

Upchurch sued his former business partners to obtain an unspecified award for compensatory and punitive damages under three alleged claims for relief: breach of contract by Sapp and Maner, who rejected Upchurch’s offers to buy their shares, which the former president of WTG Burlington attributed to his unwillingness to agree to “other terms and conditions” not included in the original shareholders’ agreement. Upchurch also lodged additional claims of unfair/deceptive trade practices and breach of fiduciary duty against all five of his former partners in the company.

Sapp and Maner countered that Upchurch would need to repay $300,000 in outstanding loans before he could exercise his option to purchase their shares, as required by the original shareholders’ agreement.

Upchurch was ultimately replaced as general manager of WTG Burlington by Jason M. Cox, a commercial real estate developer who owns several properties in downtown Graham through DBD/Monroe and several other LLCs, according to documents filed with the Secretary of State and Alamance County Register of Deeds.

By “spearheading the ouster” and replacing him with Cox – who was never listed as a defendant in the civil suit – DeVries’ actions constituted self-serving and deceptive trade practices that violated state law, as well as DeVries’ fiduciary duty to WTG and its shareholders, Upchurch asserted in his suit. He characterized his replacement, Cox, as “an individual whose real estate license was suspended in 2014 while he was broker-in-charge of East Coast REO, LLC in Graham, after a finding of ‘improper, fraudulent, and dishonest dealing,’” while also acknowledging that his former business partners have accused him of similar misdeeds, according to Upchurch’s suit, which also alleges that the remaining partners in WTG Burlington have failed to pay creditors, including $45,000 charged to an American Express company credit card.

In all, the former partners alleged in their lawsuit that Upchurch charged $290,000 in personal expenses to two company credit cards and converted $136,414 for his personal use, according to the lawsuit that WTG Burlington filed in superior court to recover for improper personal expenses that were charged to the company and recorded as “loans to shareholder.”

WTG partners awarded judgment against company’s former president
From July 28, 2015 until June 30, 2019, some of the expenses that Upchurch allegedly recorded as loans to shareholder included: Tuition for The Burlington School; room charges at Comfort Inn, Red Roof Inn Burlington, Sleep Inn (Florida), Main Stay Suites (Greer, South Carolina), Quality Inn (Florida); Mattress Firm in Burlington; Amazon; payment on credit cards through Ally Bank; Lyft and Uber rides in California; transfers to personal accounts and another business in Burlington that Upchurch owns; Dillard’s; Buster’s Billiards; The Verdict in Graham; Danny’s Café; Stainback Florist; $312 for demolition on an investment property on Davis Street in Burlington; Bojangles; Country Club Lanes; Sling T.V.; Town Tavern in Blowing Rock; The Bridge Tender in Wilmington; DaVinci’s Table; Banner Elk Winery; LongHorn Steakhouse; Ticketmaster in Los Angeles; the ABC store in Burlington; Chick-fil-a; Hooter’s in Jacksonville, Florida; rounds of golf at multiple country clubs; McDonald’s; Chili’s ; Grove Park Inn in Asheville; Mykonos Grill in Burlington; Applebee’s; Flip Flops Bar & Grill in Myrtle Beach; i-Tunes; Netflix; airline tickets; and multiple transfers to a personal account, according to dozens of pages of alleged, improper charges and purchases that are included with the lawsuit filed by WTG Burlington.

As of June 30, 2019, WTG Burlington’s liabilities totaled $294,932; its equity totaled $210,772; and net income totaled $50,427, according to the court file. The complaint that WTG Burlington filed against Upchurch in May 2020 alleged that Upchurch loaned himself hundreds of thousands in corporate funds for travel, dining, and entertainment – without telling the other shareholders – and those loans were “on demand” as of April 22, 2020, according to that lawsuit file.

The net total of loans that Upchurch made to himself between January 1, 2017 and October 2, 2019 (shortly before his removal as president and general manager of WTG Burlington) totaled $156,328.13, based on an affidavit signed on February 3, 2021 by Kevin Stuart, an accountant with Stout, Stuart, McGowan & King in Burlington.

That case was referred for mediation; and in March of this year, WTG Burlington was awarded a judgment of $155,520, plus 8 percent annual interest from May 11, 2020. As of March 23, 2021, the balance on the judgment totaled $169,733.32, according to that court file.

Judge Adam M. Conrad, a special superior court judge for the N.C. Business Court, granted the former partners’ motion to dismiss Upchurch’s lawsuit last fall. In his order, Conrad noted that, “Upchurch remains the largest shareholder of WTG Burlington.”
Though Upchurch has claimed he’s “ready, willing, and able to exercise his option to buy the shares of Sapp and Maner, which would give him a majority interest.’’

Repayment of $300K in business loans required to buy out partners in WTG Burlington
However, repayment of the $300,000 in business loans referenced in the shareholder’s agreement “is a condition precedent that must occur” before Upchurch could exercise his option to purchase their shares, Conrad noting in dismissing his claim of breach of contract against Sapp and Maner.

Conrad dismissed the claim of unfair or deceptive trade practices that Upchurch had lodged against all of his former business partners, concluding that all of the “alleged wrongdoing” related to that claim is an internal dispute among WTG Burlington shareholders. That claim specifically related to Upchurch’s allegation that his fellow shareholders met without proper notice, removed him as general manager, acted without legal authority as company officers, and failed to pay WTG Burlington’s creditors.

“At bottom, this is a dispute among shareholders [that] concerns the internal operations of a single market participant” that doesn’t affect commerce and is unsupported by the portion of state law intended to address unfair or deceptive trade practices, Conrad wrote in his order dismissing that claim, as well.

The special superior court judge dismissed Upchurch’s third and final argument that his former business partners were collectively majority shareholders who “acted in concert” and breached their fiduciary duty, based on a separate brief that Upchurch filed in the N.C. Business Court. “As a general rule, shareholders do not owe a fiduciary duty to each other or to the corporation,” Conrad wrote in granting the defendants’ motion to dismiss the final claim of breach of fiduciary duty.

Upchurch was represented for his lawsuit against his former partners by William Woodward Webb of the Edmisten & Webb Law firm in Raleigh. The defendants were represented by Brooks, Pierce, McLendon, Humphrey & Leonard law firm in Greensboro and by Oertel, Koonts & Oertel in Burlington.

Upchurch is currently scheduled to appear in Alamance County district court for the pending felony charges on October 1.

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