United States District Court, W.D. North Carolina, Charlotte Division
C. Mullen United States District Judge.
matter is before the Court upon the Plaintiff's Motion
for Summary Judgment. The Defendants have responded and
Plaintiff has filed a Reply. This matter is now ripe for
GreerWalker, LLP (“GreerWalker”) entered into an
engagement letter (“Engagement Letter”) with
Freedom Pharmaceuticals, Inc. (“Freedom”) on
March 6, 2013. (Doc. No. 1 at ¶ 11). Pursuant to the
Engagement Letter, Freedom retained GreerWalker to compile
Freedom's financial statements in connection with the
sale of Freedom's stock to a third party, Fagron Holding
USA, LLC (“Fagron”). Id. The Engagement
Letter contained an arbitration clause with regard to any
dispute between Plaintiff and Freedom relating to the
engagement, the agreement, or a breach. The individual
shareholders of Freedom, Jacob Jackson, Kasey Jackson, Deril
Lees, Robin Lees, Deril Lees, Jr., Derek Sanders, and Alyssa
Sanders (“Defendants”) were not signatories to
the Engagement Letter. (Doc. No. 1 at ¶ 13). In addition
to GreerWalker, Freedom engaged the services of Polsinelli,
P.C., a law firm, and Butcher Joseph Hayes, LLC
(“BJH”), an investment banking firm, to
effectuate the sale of Freedom to Fagron.
performed the compilation services for Freedom, and the
company and Defendants' stock were sold to Fagron on
April 17, 2013. (Id. at ¶¶ 11-14). On
December 15, 2014, the Oklahoma Tax Commission assessed
Defendants with taxes and penalties on the grounds that
Defendants were not entitled to capital gains treatment and
deductions for the sale proceeds because the closing of the
sale occurred before the third anniversary of Freedom's
incorporation. (Id. at ¶ 15).
filed two separate Demands for Arbitration with the American
Arbitration Association (“AAA”) alleging that
GreerWalker breached the standard of care in providing tax
analysis and advice to Defendants. Even though they were not
signatories to the Engagement Letter, they contend that it
was modified and expanded to include the Defendants as
filed the present Complaint with this Court (Doc. No. 1),
along with a Motion for Preliminary Injunction to Enjoin
Arbitration. After a hearing, the Court granted the
preliminary injunction. In its Order, the Court rejected
Defendants' argument that GreerWalker should be equitably
estopped from challenging arbitration, as well as
Defendants' argument that Greeralker waived judicial
determination of arbitrability. GreerWalker now moves for
summary judgment on its request for Declaratory Judgment that
there was no written arbitration agreement between
GreerWalker and the Defendants, and seeks to permanently
judgment is appropriate when the moving party submits
evidence showing “that there is no genuine dispute as
to any material fact and the movant is entitled to a judgment
as a matter of law.” Fed.R.Civ.P. 56(a). Thus, summary
judgment must be entered “[w]here the record taken as a
whole could not lead a rational trier of fact to find for the
nonmoving party . . ..” Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary
judgment is appropriate and trial is unnecessary if either
“the facts are undisputed, or if disputed, the dispute
is of no consequence to the dispositive question.”
Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1315-16
(4th Cir. 1993).
cannot rest on allegations or denials to oppose summary
judgment, but instead “must provide specific facts and
evidence, particularly when that party has the burden of
proof of an issue, ” establishing that there is an
issue of material fact in dispute. Jadali v. Alamance
Regional Medical Center, 399 F.Supp.2d 675, 681 (M.D.
N.C. 2005), aff'd 167 Fed.Appx. 961 (4th Cir.
2006). The summary judgment inquiry thus scrutinizes an
opposing party's case to determine whether the party has
“offered proof, in the form of admissible evidence,
that could carry the burden of proof” at trial.
Mitchell, 12 F.3d at 1316.
the Federal Arbitration Act, 9 U.S.C. §1, et.
seq., the question of “[w]hether a party agreed to
arbitrate a particular dispute is a question of state law
governing contract formation.” Adkins v. Labor
Ready, Inc., 303 F.3d 496, 501 (4th Cir. 2002) (citation
omitted). Because the issue presented here concerns whether
GreerWalker agreed to modify the Engagement Letter through
GreerWalker's alleged conduct in this state, North
Carolina law governs resolution of whether a new contract was
formed by modification of the Engagement Letter. ACS
Partners, LLC v. Americon Grp., Inc., No. 3:09cv464,
2010 WL 883663, *5 (W.D. N.C. March 5, 2010) (contracting
parties are presumed to adopt the law of the place of
performance as the law of the contract) (citing Cocke v.
Duke University, 131 S.E.2d 909, 913 ( N.C. 1963)).
North Carolina law, Defendants bear the burden of proving a
modification of the Engagement Letter by clear and convincing
evidence. Lambe-Young, Inc. v. Cook, 320 S.E.2d 699,
702 ( N.C. App. 1984). Contract modifications must contain
the same elements necessary for the formation of a contract
to be enforceable. Altman v. Munns, 345 S.E.2d 419,
422 ( N.C. App. 1986); Geiger v. Central Caroline
Surgical Eye Assoc., P.A., No. COA14-169, 2014 WL
4977657, *7 ( N.C. Ct. App. Oct. 7, 2014) (unpublished). The
elements necessary for the formation of a contract under
North Carolina law are “an offer and acceptance.”
Yeager v. Dobbins, 114 S.E.2d 820, 823 ( N.C. 1960).
The offer and acceptance must involve a “meeting of the
minds” on identical terms. Wooten v. S.R. Biggs
Drug Co., 85 S.E. 140, 142 ( N.C. 1915). Moreover,
“[m]utual consent is as much a requisite in effecting a
contractual modification as it is in the initial creation of
a contract.” Yamaha Int'l Corat v. Parks,
325 S.E.2d 55, 58 ( N.C. App. 1985).
regard to the first element of mutual assent, a modification
must reflect ‘an agreement between the parties that the
terms of the contract should be altered.'”
Geiger, 2014 WL 4977657, at *7 (quoting G.
Adrian Stanley & Assocs. v. Risk & Ins. Brokerage
Corp., 473 S.E.2d 345, 348 ( N.C. App. 1996)).
“Mutual assent may be shown by an affirmative statement
agreeing to modification or by ‘conduct which naturally
and justly leads the other party to believe the provisions of
the contract have been modified or waived.'”
Id. (quoting Son-Shine Grading, Inc. v. ADC
Constr. Co., 315 S.E.2d 346, 349 ( N.C. App. 1984)). The
formation of a contract cannot be based “‘upon
the impressions or understandings of one alone of the parties
to it. It is not what either thinks, but what both
agree.'” Arndt v. First Union Nat. Bank,
613 S.E.2d 274, 278 ( N.C. App. 2005) (citation omitted).
Likewise, “modification of an existing contract cannot
arise from an ambiguous course of dealing between the parties
from which diverse inferences might reasonably be drawn as to
whether the contract remained in its original form or was
changed.” Ford Motor Credit Co. v. Jordan, 168
S.E.2d 229, 233 ( N.C. 1969) (internal citation omitted).
to establish a modification of the Engagement Letter,
Defendants must present evidence that Freedom made a firm and
definite offer to modify the Engagement Letter to have
GreerWalker provide wholly new services (individual tax
advice and analysis) to wholly different parties
(Freedom's shareholders). Defendants must further offer
admissible evidence sufficient to prove that GreerWalker
accepted the offer to modify ...