United States District Court, M.D. North Carolina
SUPERIOR PERFORMERS, INC. d/b/a NATIONAL AGENTS ALLIANCE, Plaintiff and Counter Defendant,
JERROD EWING, MYLES JERDAN, DOMONIQUE RODGERS, MATTHEW SMITH, TODD SMITH, SEAN RUGGERIO (McCOY), MICHAEL KILLIMETT, WILLIAM MARTIN, JOSHUA THOUNE, TRAVIS GEORGE, MIKE WINICK, MICHAEL COE, ROBERT JONES, KRISTOPHER KRAUSE, NICK THEODORE, FAMILY FIRST LIFE, LLC, PAUL E. McCLAIN, ANDREW C. TAYLOR, JACK YIU, JIM GLASCOTT, JAIME CUAMATZI, WATHERA CUAMATZI, KIM REABER, BOBBY REABER, DENNIS RAUSSEER, JARROD M. FLATAU, RAYMOND MANALUS, ISRAEL WIZENFELD, and LISA M. ESTEP, Defendants and Counter Claimants, STEPHEN DAVIES, CHRIS LONG, MICHAEL OWENS, ANDY ALBRIGHT, JASON CAREY, JUSTIN TRIPP, ADAM KATZ, TAWNY CAREY, and PRO DATA RESEARCH, LLC, Counter Defendants.
MEMORANDUM OPINION AND ORDER
JAMES A. BEATY, District Judge.
This matter is currently before the Court on the Motion to Dismiss the Amended Counterclaims [Doc. #48] filed by Plaintiff Superior Performers, Inc. ("Plaintiff" or "NAA") and Counterclaim Defendants Andy Albright, Stephen Davies, Michael Owens, Jason Carey, Tawny Carey, Adam Katz, Chris Long, Justin Tripp, Pro Data Research, LLC, and K.I.T. Marketing, LLC (the "Albright Group"). Defendants have filed a Response in Opposition to the Motion [Doc. #50], to which, the Plaintiff and the Albright Group (collectively "the Movants") have filed a Reply [Doc. #51]. For the reasons discussed below, the Court will grant in part and deny in part the Movants' Motion to Dismiss.
This case is one of several related cases brought by Plaintiff in an attempt to, among other things, enforce restrictive covenants contained in the agent and management agreements entered into by current and former NAA agents and managers. In this particular case, Plaintiff asserted breach of contract claims based on alleged violations of the non-solicitation clauses, as well as claims for breach of contract based on other parts of the agent and managerial agreements. Other claims that Plaintiff alleged in this action include claims for tortious interference with business relationships, unfair and deceptive trade practices, unfair competition, civil conspiracy, and wiretapping.
In response to Plaintiff's Amended Complaint, Defendants filed a combined Answer, Counterclaim, and Third-Party Complaint, in which all Defendants, other than Family First Life ("FFL"), asserted counterclaims against Plaintiff and asserted third-party claims against the Albright Group. The Defendants asserted that these claims arose out of the Movants' alleged operation of a "pyramid scheme, " and their actions related to such scheme, which included the "unlawful churning and twisting of insurance policy-holders' insurance polices." Defendants claimed that Plaintiff and the Albright Group are liable for fraudulently inducing Defendants into such scheme. Based on these alleged actions Defendants asserted a total of 12 claims against Plaintiff and the Albright Group. First, Defendants asserted a claim for declaratory judgment, requesting that the Court find that the agent and management agreements are void and unenforceable for lack of consideration, among other arguments. Second, Defendants asserted a claim for rescission of the management and agent agreements based on multiple theories. Third, Defendants asserted a claim for fraud based upon the opposing parties' alleged fraudulent statements and omissions concerning various aspects of Defendants' employment with NAA. Fourth, Defendants also asserted a claim based upon the opposing parties' alleged misrepresentation and suppression concerning various aspects of Defendants' employment with NAA. Fifth, Defendants asserted a claim specifically against Plaintiff for breach of the duties of loyalty, due care, good faith, and fair dealing in relation to the management and agent agreements. Sixth, Defendants asserted a claim for breach of contract against Plaintiff in relation to the management and agent agreements. Seventh, Defendants asserted a breach of contract claim against both Plaintiff and the Albright Group for the alleged breach of oral and implied contracts or agreements concerning alleged claims and promises made by such parties in relation to Defendants' employment with NAA. Eighth, Defendants asserted a claim for defamation against both Plaintiff and the Albright Group concerning alleged statements about Defendants in their trade and business. Ninth, Defendants asserted a claim of conversion against the Plaintiff based on Plaintiff's alleged wrongful withdrawal of funds from Defendants' bank and credit accounts. Tenth, Defendants asserted a claim for unfair and deceptive trade practices against Plaintiff and the Albright Group, based on their alleged fraud and misrepresentations. Eleventh, Defendants asserted a claim for tortious interference with business or contractual relations against Plaintiff and the Albright Group. Twelfth, Defendants asserted a claim for civil conspiracy against the Movants based on the allegation that they acted in concert in committing the above violations. Defendants also asserted a separate claim for punitive damages based on the alleged foregoing actions.
The Movants filed Motions to Dismiss the Counterclaim and Third-Party Complaint [Docs. #29 & #31] for improper joinder of the Albright Group and because the Movants alleged that it was impossible to distinguish the claims made against Plaintiff versus the clams made against the Albright Group. The Court denied the Motion to Dismiss based on those arguments, and found that the Albright Group were proper Counterclaim Defendants. As a result, the Court directed the Defendants to file an Amended Answer and Counterclaim and assert its claims against the Albright Group as counterclaims, rather than third-party claims. The Defendants complied with the Court's order, and filed an Amended Answer and Counterclaim Complaint asserting its claims against all Movants as counterclaims.
The Movants have now filed a Motion to Dismiss the Answer and Counterclaim Complaint. In this Motion, the Movants are now arguing that Defendants' counterclaims, other than their claim for declaratory judgment, should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. Additionally, the Movants argue that the Defendants' claim for declaratory judgment should be dismissed as redundant of the affirmative defenses pled by Defendants. For the reasons stated below, the Court will grant in part and deny in part, Movants' Motion to Dismiss the Answer and Counterclaim Complaint.
Initially, the Court will address Defendants' argument that this is a successive Motion to Dismiss barred by the Federal Rules of Civil Procedure. Upon addressing this argument, the Movants' two arguments in favor of dismissal will then be addressed in turn.
A. Successive Motion to Dismiss
Defendants argue that this Court should not consider any argument presented in the Movants' Motion to Dismiss, as it is a successive motion brought pursuant to Rule 12(b)(6) and as such, it is barred by the Federal Rules of Civil Procedure. As to successive motions brought pursuant to Rule 12 of the Federal Rules of Civil Procedure, Rule 12(g)(2) states, "Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion." Fed.R.Civ.P. 12(g)(2). The exceptions in Rule 12(h) concern when such motions are made in the form of a motion for judgment on the pleadings, or those contained in the parties' pleadings. Accordingly, the exceptions do not apply in this case.
Courts, however, have interpreted the bar on successive Rule 12 motions "permissively and have accepted subsequent motions on discretionary grounds." F.T.C. v. Innovative Marketing, Inc., 654 F.Supp.2d 378, 383 (D. Md. 2009) (citations omitted) (considering a successive motion to dismiss in light of new law). This reading is said to comport "with the general spirit of the rules" and promote "the interests of efficiency." Id . (citations omitted). Specifically, concerning the interests of efficiency, courts have recognized that "[u]nder Rule 12(h) [a 12(b)(6) argument] could be raised in a judgment on the pleadings or at trial[.]" Dart Drug Corp. v. Corning Glass Works, 480 F.Supp. 1091, 1095 n. 3 (D. Md. 1979). Accordingly, "it is far more efficient to treat the arguments prior to more extensive discovery." Id.
Initially, the Court notes that the Movants do not contest that this is a successive Motion to Dismiss that is typically bared by Rule 12(g). Instead, the Movants only argue that in the interests of efficiency, the Court should consider the Motion to Dismiss on the merits. While the Court in no way approves of the Movants' apparent piecemeal litigation method in this case, the interests of judicial efficiency do strongly favor considering the Movants' successive Motion to Dismiss in this instance. As stated above, this case is one of several cases that were filed in this Court involving the same or similar subject matter. In the consolidated case, Case Number 1:13CV1149, a similar Motion to Dismiss the Counterclaims for failure to state a claim was filed. As this Court has now considered those arguments in Case Number 1:13CV1149, it would be more efficient to also consider the same arguments raised in this action, rather than wait to consider such arguments on a Motion for Judgment on the Pleadings. Accordingly, the Court will address the Movants' arguments on the merits below, and will decline to deny this Motion to Dismiss on procedural grounds.
B. Declaratory Judgment
The Defendants' first counterclaim is one for declaratory judgment. In this claim, Defendants assert that the agent and management agreements should be found void and unenforceable. The Movants, however, briefly argue that this claim is redundant of the defenses asserted by Defendants and as such, it should be dismissed. In support of their argument, the Movants cite one unpublished case from the Middle District of Florida. See Sembler Family P'ship, No. 41, Ltd. v. Brinker Florida, Inc., No. 8:08CV1212-T-24 MAP, 2008 WL 5341175, at *1 (M.D. Fla. Dec. 19, 2008) (dismissing declaratory judgment counterclaim when it was duplicative of the main action).
Pursuant to Fourth Circuit precedent, a district court, in its discretion, may decline to entertain a declaratory judgment claim for "good reason." Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc. 386 F.3d 581, 594 (4th Cir. 2004). "[A] district court is obliged to rule on the merits of a declaratory judgment action when declaratory relief will serve a useful purpose in clarifying and settling the legal relations in issue, ' and will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.'" Id . (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937)).
In this instance, the declaratory judgment claim may resolve and clarify the issue of whether valid and enforceable agreements exist for purposes the Movants' defenses to Defendants' counterclaims. Additionally, it may serve to terminate the Plaintiff's breach of contract claim against Defendants, as a void and unenforceable contract would not be subject to a claim for breach of contract. Accordingly, while such claim may be redundant of Defendants' affirmative defenses, the Court will, in its discretion, deny Movants' Motion to Dismiss Defendants' declaratory judgment claim at this stage of the litigation based on the Movants' brief argument.
C. Failure to State a Claim
In reviewing a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), the Fourth Circuit has directed that courts "take the facts in the light most favorable to the plaintiff, ' but [they] need not accept the legal conclusions drawn from the facts, ' and [they] need not accept as true unwarranted inferences, unreasonable conclusions, or arguments.'" Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000)). "To survive a motion to dismiss, a [claim] must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id . "Where a [claim] pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of "entitlement to relief."'" Id . (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955) (citations omitted). Thus, dismissal of a claim is proper where a plaintiff's factual allegations fail to "produce an inference of liability strong enough to nudge the plaintiff's claims across the line from conceivable to plausible.'" Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 256 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 683, 129 S.Ct. 1937).
The Movants argue that Defendants have failed to state a claim as to all claims other than Defendants' claim for declaratory judgment, which as stated above, they argue should be dismissed as redundant. The Court will address each of the 11 other claims, in addition to Defendants' claim for punitive damages in turn.
1. Rescission - Second Count
The Defendants' second counterclaim seeks the rescission of Defendants' agent and management agreements that are at issue in Plaintiff's case-in-chief. Defendants assert that they are entitled to rescission of these agreements because the agreements were the result of material misrepresentations and omissions, duress, and because such agreements are unconscionable contracts of adhesion. The Movants assert that the claim for rescission must be dismissed because Defendants have failed to meet the pleading standards for any of these theories under which the Defendants base their claim for rescission.
The Court initially notes that rescission itself is not a cause of action but rather, rescission is an equitable remedy. See Marriott Financial Services, Inc. v. Capitol Funds, Inc., 217 S.E.2d 551, 560-64 (N.C. 1975) (analyzing a claim for the equitable remedy of rescission based on mistake or fraud). Accordingly, in order to state a claim for the remedy of rescission, Defendants must have stated a plausible underlying claim for such relief. See Synovus Bank v. Okay Properties, LLC, No. 1:11CV330, 2012 WL 3745280, at *8 (W.D. N.C. August 28, 2012) (finding that because the defendants' counterclaim for rescission was based on fraud, the defendants must have stated a plausible claim for fraud). Movants first argue that Defendants are not entitled to rescission for fraud because Defendants failed to meet the pleading standards for fraud. As this Court will more fully address below as to Defendants' specific fraud claim, the Court finds that Defendants have in fact adequately pled their claim of fraud against Plaintiff. Accordingly, because Defendants have adequately pled fraud, they may maintain their claim for rescission of the agent and management agreements based on such theory.
The Movants next argue that Defendants failed to adequately plead duress, and therefore are not entitled to rescission of the agreements based on such theory. North Carolina allows a party to avoid contractual obligations under a contract if the party entered into such contract under duress. In re Maco Homes, Inc., No. 95-2938, 95-2939, 1996 WL ...