United States District Court, M.D. North Carolina
SUPERIOR PERFORMERS, INC. d/b/a NATIONAL AGENTS ALLIANCE, Plaintiff,
SHAWN MEAIKE, MARC J. MEADE, BRYANT STONE, FRANK EUFEMIA, JAIME EUFEMIA, and MICHAEL SIZER, Defendants and Third-Party Plaintiffs, ANDY ALBRIGHT, WILLIAM LAMPE, STEPHEN DAVIES, K.I.T. MARKETING, LLC, ADAM KATZ, PRO DATA RESEARCH, LLC, DIANE LAMPE, NOELLE LEWANTOWICZ, and MIKE LEWANTOWICZ, Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
JAMES A. BEATY, District Judge.
This matter is currently before the Court on the Motion to Dismiss the Amended Counterclaim and Third-Party Complaint [Doc. #219] filed by Plaintiff Superior Performers, Inc. ("Plaintiff" or "NAA") and Third-Party Defendants, Andy Albright, William Lampe, Stephen Davies, Adam Katz, Diane Lampe, Noelle Lewantowicz, Michael Lewantowicz, Pro Data Research, LLC, and K.I.T. Marketing, LLC (the "Albright Group"). Defendants have filed a Response in Opposition to the Motion [Doc. #238], to which, Plaintiff and the Albright Group (collectively the "Movants") have filed a Reply [Doc. #240]. For the reasons discussed below, the Court will grant in part and deny in part the Movants Motion to Dismiss. Also before the Court is the Movants' Motion to Dismiss the Original Third-Party Complaint [Doc. #213]. As Defendants have since filed an Amended Third-Party Complaint and Counterclaim the Movants' Original Motion to Dismiss will be denied as Moot.
This case is one of several related cases brought by Plaintiff in an attempt to, among other things, enforce restrictive covenants entered into by current and former NAA agents and managers. In response to Plaintiff's Amended Complaint, Defendants filed a combined answer, in which all Defendants asserted counterclaims against Plaintiff and third-party claims against the Albright Group. The Defendants assert that these claims arise out of Plaintiff's and the Albright Group's alleged operation of "pyramid scheme, " and their actions related to such scheme, which includes the "unlawful churning and twisting of insurance policy-holders' insurance polices." Defendants claim that Plaintiff and the Albright Group are liable for fraudulently inducing Defendants into such scheme. Based on these alleged actions, Defendants assert a total of 12 claims against Plaintiff and the Albright Group and a claim for punitive damages.
First, Defendants assert a claim for declaratory judgment, requesting that the Court find that the agent and management agreements are invalid for lack of consideration among other arguments. Second, Defendants assert a claim for rescission of the management and agent agreements based on multiple theories. Third, Defendants assert a claim for fraud against both Plaintiff and the Albright Group based upon the opposing parties' alleged fraudulent statements and omissions concerning various aspects of Defendants' employment with NAA. Fourth, Defendants also assert a claim against Plaintiff and the Albright Group based upon the opposing parties' alleged misrepresentation and suppression concerning various aspects of Defendants' employment with NAA. Fifth, Defendants assert 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 assert a claim for breach of contract against Plaintiff in relation to the management and agent agreements. Seventh, Defendants assert a breach of contract claim against the Albright Group for the breach of alleged oral and implied contracts or agreements concerning the alleged claims and promises made by such parties in relation to Defendants' employment with NAA. Eighth, Defendants assert a claim for defamation against both Plaintiff and the Albright Group concerning alleged statements about Defendants in their trade and business. Ninth, Defendants assert a claim of conversion against the Plaintiff based on Plaintiff's alleged wrongful withdrawal of funds from Defendants' bank and credit accounts. Tenth, Defendants assert a claim for unfair and deceptive trade practices against Plaintiff and the Albright Group, based on their alleged fraud and misrepresentations. Eleventh, Defendants assert a claim for tortious interference with business or contractual relations against Plaintiff and the Albright Group. Twelfth, Defendants assert a claim for civil conspiracy against Plaintiff and the Albright Group based on the allegation that they acted in concert in committing the above violations. In addition to the substantive claims, Defendants also make a claim for punitive damages.
The Movants have jointly filed a Motion to Dismiss the Counterclaims and Third-Party Claims. In their Motion, the Movants argue that all claims filed by Defendants should be dismissed for improper joinder. Additionally, the Movants argue that except for Defendants' claim for declaratory judgment, all other counterclaims and third-party claims must be dismissed for failure to state a claim. In response, Defendants' argue that the Albright Group are proper Third-Party Defendants, pursuant to Rules 14, 19, and 20 of the Federal Rules of Civil Procedure, and Defendants did adequately plead their claims against the Movants. For the reasons stated below, the Court will grant in part and deny in part the Movants' Motion to Dismiss.
The Movants assert alternative theories for dismissal. First, the Movants seek dismissal of Defendants' claims based on arguments concerning improper joinder. Second, the Movants seek dismissal based on Rule 12(b)(6) for failure to state a claim. Accordingly, these issues will be discussed in turn.
A. Improper Joinder
In Case Number 1:14CV232, which is consolidated with the above-captioned case, this Court addressed the Movants' arguments concerning the joinder of the Albright Group as Third-Party Defendants in great detail. (See Mem. Op. and Ord., Case No. 1:14CV232 [Doc. #46].) In that Memorandum Opinion and Order, the Court specifically found that the individuals comprising the Albright Group in that particular case were proper Counterclaim Defendants pursuant to Rule 20 of the Federal Rules of Civil Procedure, but were not properly joined under Rule 14 or Rule 19. In so finding, the court directed the Defendants to file an Amended Answer and Counterclaim reflecting that the Albright Group were Counterclaim Defendants, rather than Third-Party Defendants.
A day after this Court entered that ruling, the Movants filed the Motion to Dismiss at issue in this action, asserting similar if not the same arguments concerning joinder that the Court had addressed in great detail a day earlier. As this Court has previously addressed the joinder arguments, any further discussion would be a waste of judicial resources. Accordingly, the Court finds that the same reasons provided in its Memorandum Opinion and Order denying the Movants' Motion to Dismiss the Third-Party Claims in Case Number 1:14CV232 for improper joinder also apply in this case. Accordingly, the Court will deny Movants' Motion to Dismiss the claims for improper joinder and finds that Defendants' claims against the Albright Group are properly before this Court pursuant to Rule 20 of the Federal Rules of Civil Procedure.
B. 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 next argue that if the Court does not dismiss the counterclaims and third-party claims for improper joinder, the Court should nevertheless, find that Defendants have failed to state a claim as to all claims other than Defendants' claim for declaratory judgment. The Court will therefore 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, which is asserted specifically against Plaintiff, 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 the 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 Defendants have in fact adequately pled their claim of fraud against Plaintiff and the Albright Group. 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 511494, at *4 (4th Cir. Sept. 10, 1996). In order to establish economic duress, a party must show:
(1) a threatened breach that the promised performance will not be received and that breach will result in irreparable injury; (2) the threat is effective because of economic power not derived from the contract itself; (3) the threatened party could not enter into a contract with a third party replacing the threatening party, i.e., the party could not obtain the goods' from another source of supply; and (4) there is no immediate legal remedy available.
G.E.B. v. QVC, Inc., 129 F.Supp.2d 856, 861 (M.D. N.C. 2000) (citing Rose v. Vulcan Materials Co., 194 S.E.2d 521, 536-37 (N.C. 1973).
After reviewing Defendants' 82 page Counterclaim Complaint, the Court finds that Defendants have not adequately pled that the agreements were entered into as a result of economic duress. Defendants assert that the only obligation Plaintiff had under the contract was to use commercially reasonable efforts to make insurance leads available to Defendants. Defendants argue that Plaintiff threatened to withhold this obligation if Defendants did not join mandatory clubs, pay for worthless training, or conduct workshops, meetings, and seminars at their own cost. Thus, Defendants are not asserting that they entered into the agreements as a result of economic duress, but rather that they were forced into doing extra-contractual activities, such as joining mandatory clubs, after they entered into the agreement. Accordingly, because Defendants have not asserted that they entered into the agreements as a result of being forced to engage in the extra-contractual activities, Defendants cannot base their claim for rescission on a theory of economic duress.
The Movants also argue that Defendants cannot assert their claim for rescission based on unconscionability of the agreements. To state a plausible claim for unconscionability, a party must assert that the agreement is both procedurally and substantively unconscionable. Tillman v. Commercial Credit Loans, Inc., 655 S.E.2d 362, 370 (N.C. 2008). "[P]rocedural unconscionability involves bargaining naughtiness' in the form of unfair surprise, lack of meaningful choice, and an inequality of bargaining power." Id . ...