United States District Court, W.D. North Carolina, Charlotte Division
RICKY L. NELSON, Plaintiff,
STEVEN K. MONTGOMERY, Defendant.
DAVID C. KEESLER, Magistrate Judge.
THIS MATTER IS BEFORE THE COURT on "Defendant's Motion For Summary Judgment" (Document No. 36); "Defendant's Motion To Strike Affidavits Filed By Plaintiff In Opposition To Defendant's Motion For Summary Judgment" (Document No. 42); and Plaintiff's "Motion To Compel" (Document No. 48). The parties have consented to Magistrate Judge jurisdiction pursuant to 28 U.S.C. § 636(c), and these motions are now ripe for disposition. Having carefully considered the motions, the record, and applicable authority, the undersigned will grant the motion for summary judgment and deny the motions to strike and to compel.
A. Factual Background
On or about March 30, 2002, Defendant Steven K. Montgomery ("Defendant" or "Montgomery") filed "Articles Of Incorporation" with the Secretary of State of North Carolina for Commencement Specialists, Inc. ("CSI"), an all-digital commencement photography company. (Document No. 12, p.5); see also (Document No. 12-1). Defendant became the President, an employee, and the majority shareholder (with 52% of shares) of CSI. Id . Pro se Plaintiff Ricky L. Nelson, ("Plaintiff" or "Nelson") became the Vice President, an employee, and a minority shareholder (with 30.5% of shares) of CSI. Id . Plaintiff's investment in CSI was to "be non-monetary in nature and in the form of expertise, intellectual property, management and sweat equity.'" Id . The remaining shares of CSI were held by Jeffrey Moore ("Moore"), a financial management consultant with 10% of the shares, and Ralph Auletta ("Auletta"), a photography and equipment consultant with 7.5% of the shares. Id.
On or about November 5, 2005, Plaintiff was diagnosed with a life threatening illness - Viral Encephalitis, which required several days of hospitalization and extended treatment. (Document No. 12, p.8). In or about January 2006, "Plaintiff began requesting work from and participation in, the day to day operations from the CSI office in Charlotte, NC. Id . These requests were denied by CSI employees." (Document No. 12, p.8). "Between February 1, 2006 and June 30, 2006 [Plaintiff] did perform some on location site work duties for CSI of a non-administrative nature." (Document No. 12, p.9).
On August 1, 2006, Plaintiff signed a CSI "Shareholder Agreement" (Document No. 12-2), confirming, inter alia, the distribution of shares as identified above. (Document No. 12, p.9). The "Shareholder Agreement" was also executed by Montgomery, Auletta and Moore. (Document No. 12-2, p.14). Shortly thereafter, on or about August 10, 2006, Defendant removed Plaintiff from the CSI Corporate Board and appointed Eileen Montgomery, Defendant's wife. (Document No. 12, p.9). Plaintiff alleges that on or about October 4, 2006, Defendant "covertly" acquired Moore's 10% share holdings, in violation of Section 2 of the "Shareholders Agreement" and Defendant's fiduciary duties. Id . Defendant presented Plaintiff with a CSI employment termination letter (Document No. 12-3) on or about November 16, 2006. (Document No. 12, p.10).
Plaintiff contends that sometime between January 15, 2007 and June 30, 2007, Event Photography Group Incorporated ("EPG") first attempted to purchase or acquire CSI. (Document No. 12, p.10). Plaintiff further contends that Defendant "never disclosed" this information, or other subsequent attempts by EPG to purchase or acquire CSI, in "direct breach of the Defendant's Fiduciary Duties as an officer and shareholder of CSI." (Document No. 12, pp.10-11). However, the Amended Complaint also asserts that it was "well known throughout the commencement photography industry that "[i]in 2007 EPG systematically contacted every commencement photography company in the United States." (Document No. 12, p.10).
In addition, Plaintiff asserts that Defendant purposefully kept from him that CSI had relocated to a "company incubator program located at the Ben Craig Center" in early 2007. (Document No. 12, p.11). Plaintiff also asserts that on multiple occasions between January 2007 and June 21, 2008, he and/or his counsel were informed by Defendant and/or his counsel that "CSI had no value and that there had been no offers to purchase or acquire CSI." (Document No. 12, p.11-12). However, the Amended Complaint notes that CSI "had a total income in 2006 of $945, 727.65, " and that in or about 2007-2008, CSI "was grossing in excess of $1, 000, 000 annually." (Document No. 12, pp.6, 11).
Between January 26, 2007 and March 6, 2008, Defendant and/or his counsel sought to purchase Plaintiff's CSI shares, and asserted that such sale was mandatory under the "Shareholders Agreement." (Document No. 12, p.12). Following Plaintiff's repeated refusals to sell, CSI filed a "Verified Complaint" against Plaintiff in the Superior Court of Mecklenburg County on December 10, 2007. (Document No. 12-4). CSI's "Verified Complaint" asserted causes of action for: (1) breach of contract - non-compete and confidentiality agreement; (2) misappropriation of trade secrets; (3) unfair and deceptive trade practices; and (4) punitive damages. Id.
On or about April 3, 2008, CSI's state court action was sent to arbitration with the American Arbitration Association. (Document No. 12, p.13). In lieu of arbitrating or further litigating CSI's claims, CSI, Plaintiff, Defendant, and Auletta executed a "Settlement Agreement Mutual Release And Covenant Not To Sue" (Document No. 12-6) on or about June 21, 2008. Id . The Settlement Agreement provides in part:
... the Parties desire to terminate any and all business or other relationship by and/or between the CSI Parties and Nelson and desire to settle and resolve the Lawsuit and the Arbitration as well as resolve any and all further disputes between or among the CSI Parties and Nelson....
This Agreement is a compromise reached among the Parties for a complete and final settlement of all claims, differences and causes of action between or among the CSI Parties and Nelson, whether known or unknown and related in any way to the Lawsuit or to the Arbitration....
CSI shall pay settlement funds to Nelson in the amount of $38, 000.00....
Nelson shall release any and all interest he has, may have, or may at any time have had in any shares of any CSI stock and transfer and assign such shares and all stock certificates related thereto to CSI....
... Nelson, by and for himself and on behalf of any and all of his agents, ... unconditionally releases, discharges, and will forever hold harmless the CSI Parties and their agents, ... from each and every claim, cause of action, right, liability or demand of any kind or nature arising o[n] or prior to the date hereof that Nelson or any of the above had, has or might claim to have against the CSI Parties or any agents, ....
(Document No. 12-6, pp.1-3) (emphasis added).
On or about October 25, 2009, Plaintiff purportedly first learned that CSI had been sold to EPG. (Document No. 12, p.14). Plaintiff contends that EPG purchased CSI in early 2009 for two million dollars ($2, 000, 000), and that Defendant and EPG "purposefully and knowingly" delayed the finalization of the purchase agreement until Defendant had acquired Plaintiff's CSI shares. Id.
B. Procedural Background
Plaintiff filed his original "Complaint" (Document No. 1) in this Court on October 23, 2012. "Defendant's Motion For A More Definite Statement" (Document No. 7) was filed on December 21, 2012. On February 13, 2013, the Honorable Graham C. Mullen granted "Defendant's Motion For A More Definite Statement, " and ordered Plaintiff to amend his Complaint within ten (10) days. (Document No. 11). Judge Mullen specifically opined that
Any claim for fraud requires a plaintiff to "state with particularity the circumstances constituting fraud..." Fed.R.Civ.P. 9(b). A complaint that fails to allege, among other things, "the time, place and contents of the false representations..." is not stated with the requisite particularity. Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776, 784 (4th Cir. 1999). The Court finds that it would be unreasonable to require the Defendant to respond to Plaintiff's claims for constructive fraud, fraud by omission and common law fraud unless Plaintiff amends his Complaint to set forth for each cause of action a more definite statement alleging the specific representation(s) or omission(s) Plaintiff believes supports each type of fraud alleged and when each misrepresentation or omission occurred.
On February 22, 2013, Plaintiff filed his "Amended Complaint" (Document No. 12). The "Amended Complaint" asserts the following causes of action: (1) breach of fiduciary duty; (2) constructive fraud; (3) constructive trust; (4) fraud by omission; (5) common law fraud; and (6) unfair and deceptive trade practice. (Document No. 12). Defendant Steven K. Montgomery ("Defendant" or "Montgomery") filed his "Answer And Affirmative Defenses" (Document No. 13) on March 11, 2013.
Defendant's "Motion For Judgment On The Pleadings" (Document No. 14) was filed on March 27, 2013. Following the parties' "Joint Stipulation of Consent To Exercise of Jurisdiction by a United States Magistrate Judge" (Document No. 17) filed on April 19, 2013, the undersigned issued a "Pretrial Order And Case Management Plan" (Document No. 24) on May 8, 2013.
On July 24, 2013, the Court denied Defendant's "Motion For Judgment On The Pleadings." (Document No. 27). In that "Order" (Document No. 27), the undersigned specifically noted that
Plaintiff's allegations include assertions that Defendant "purposefully, " "covertly" and "fraudulently" "denied, omitted and/or concealed" certain facts from Plaintiff. (Document No. 12). For example, Plaintiff clearly alleges that Defendant: (1) covertly acquired Moore's 10% of shareholdings in violation of the "Shareholder Agreement"; (2) improperly concealed ongoing communications and/or negotiations between CSI and EPG regarding EPG's interest in purchasing CSI; and (3) secretly relocated CSI to the Ben Craig Center. Id . Viewing the "Amended Complaint" in the light most favorable to the pro se Plaintiff suggests that these facts adequately support plausible claims.
... the essence of Plaintiff's claims is that Defendant deliberately and improperly withheld critical information from Plaintiff up to and through June 21, 2008. Under the circumstances, the undersigned is satisfied that the "Amended Complaint" "contains enough facts to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal , 129 S.Ct. at 1937 (quoting Twombly, 550 U.S. at 544). Although the undersigned finds Defendant's arguments regarding the application of the "Settlement Agreement" compelling in part, dismissal of this matter prior to ...