The North Carolina Business Court recently issued a decision involving a substantial HOA special assessment and claims against the Association and individual Board members. In Brock v. Kyryk, 2026 NCBC 62, which was decided on July 8, 2026, the Court dismissed the owners’ complaint.
The case arose after Hurricane Helene caused significant damage to roads and common-area infrastructure in The Settings of Black Mountain. The Board estimated repair costs at approximately $2.7 million and approved a special assessment of $3,970 per lot to help fund the repairs.
Several owners challenged the assessment process and later sued for breach of fiduciary duty, negligent misrepresentation, and injunctive relief.
Our firm was not involved in the case. Also, the decision was entered at the motion-to-dismiss stage, and the plaintiffs did not respond to the motion. Even so, the opinion provides several useful reminders.
A Derivative Claim Must Belong to the Association
The plaintiffs described the lawsuit as a derivative action brought on behalf of the Association. However, the Court found that the complaint alleged injuries to the individual owners and did not identify a substantive recovery being sought for the Association.
A lawsuit does not become derivative merely because the complaint cites the derivative action statute. The claim must seek to enforce a right belonging to the Association and obtain relief for the Association.
Board Duties Generally Run to the Association
The owners also alleged that the individual Board members breached fiduciary duties owed directly to them.
The Court noted that North Carolina nonprofit directors are required to act in the best interests of the nonprofit corporation, not in the individual interests of its members. The relationship between an Association and its members is also generally contractual, rather than fiduciary, unless additional facts establish a special fiduciary relationship.
The Court further noted that additional allegations would have been necessary to overcome the business judgment rule.
Misrepresentation Claims Require Reliance and Harm
The plaintiffs alleged that the meeting notice contained inaccurate information concerning an SBA loan and was intended to discourage owners from voting against the special assessment.
The Court dismissed the negligent misrepresentation claim because the complaint did not identify an owner who actually relied on the statement, explain why any reliance was reasonable, or show that the statement changed the outcome of the assessment vote.
An inaccurate or disputed statement does not automatically create liability. A plaintiff must still establish actual and reasonable reliance, causation, and resulting damages.
An Injunction Is a Remedy, Not a Separate Claim
The plaintiffs also asserted a separate claim for injunctive relief.
The Court dismissed that claim because an injunction is a remedy, not an independent cause of action. A party seeking an injunction must first establish a valid underlying legal claim.
What the Decision Does Not Decide
The complaint alleged that owners were permitted only one vote each, regardless of the number of lots they owned, and that certain proxy votes were not counted.
The Court did not decide whether those voting procedures complied with the Declaration, Bylaws, or applicable law. Instead, the Court focused on whether the claims asserted in the complaint were legally sufficient.
The full opinion is available from the North Carolina Business Court at:https://www.nccourts.gov/documents/business-court-opinions/brock-v-kyryk-2026-ncbc-62