United States District Court, E.D. North Carolina, Western Division
PRODIGIOUS VENTURES, INC., Plaintiff.
YBE HOSPITALITY GROUP, LLC, YBE ENTERPRISE, LLC, YBE OXFORD. LLC, and YBE MILLEDGEVILLE, LLC, Defendants,
TRAVIS E. KELLEY, Counterclaim Defendant,
JAMES BUTLER and JOHN TYE HILL, Counterclaim Plaintiffs.
C. FOX, Senior United States District Judge.
the court is the motion for partial summary judgment pursuant
to Rule 56 of the Federal Rules of Civil Procedure tiled by
YBE Enterprise, LLC, YBE Hospitality Group. LLC, YBE
Milledgeville LLC, YBE Oxford, LLC, James Butler and John Tye
Hill ("Movants"). [DE 58]. On February 23, 2017,
United States Magistrate Judge Robert B. Jones, Jr. issued a
Memorandum and Recommendation ("M&R")
recommending the court deny Movants' motion. [DE 86]. On
March 9, 2017, Movants objected in part to the M&R and
requested an oral argument. [DE 87]. Plaintiff did not file
an objection to the M&R nor did it respond to
Movants' objection. For the reasons that follow, the
court adopts the M&R and denies Movants' motion.
M&R provides the relevant factual allegations and
applicable law. This court presumes the parties'
familiarity with the M&R and summarizes here only the
background essential to the resolution of the pending motion.
matter stems from a financial advisor-client relationship
that began in 2005 between Travis Kelley of Providence Group
Sports and Entertainment, LLC ("Providence
Group") the financial advisor - and Butler and
Hill - the clients. In 2007, Butler and Hill expressed to
Kelley their interest in investing in a Golden Corral
restaurant franchise. Ultimately, Butler and Hill formed YBE
Enterprise, LLC, YBE Milledgeville. LLC and YBE Oxford, LLC -
managed by YBE Hospitality Group, LLC (collectively, the
"YBE Entities") - for the purpose of owning and
operating Golden Corral franchises in Georgia and Alabama.
The YBE Entities engaged Prodigious Ventures, Inc.
("Prodigious") - of which Kelley is the president,
sole shareholder and CEO - to provide business consulting
services pursuant to service agreements entered in 2007 and
2010 despite Prodigious' lack of prior restaurant
Prodigious provided the YBE Entities administrative
management services in exchange for an initial fee of $8, 500
during a restaurant's developmental period and thereafter
3% of the monthly gross revenues regardless whether a
restaurant turned a profit. Each service agreement was for a
seven year term. Although the service agreements did not
include an express early termination clause, each provided
that the seven-year "period may vary according to any
changes or modifications requested by" the YBE
Entities. The service agreements covered
Movants' Golden Corral franchises in Centerville, Georgia
(opened in 2009), Oxford, Alabama (opened in 2010) and
Milledgeville, Georgia (opened in 2011).
March 2012, YBE Hospitality and Prodigious entered into a
Management Agreement, which covered the three existing
restaurants plus two proposed restaurants. The Management
Agreement provided inter alia that it replaced the
Centerville. Oxford and Milledgeville service
agreements. The material terms remained identical to
those provided in the prior service agreements, with two
exceptions. First, as for the two proposed restaurants, the
Management Agreement was for a five year term only. Second,
the Management Agreement is silent as to the modification of
the seven or five year terms.
2013, YBE Hospitality terminated the Management Agreement due
to Prodigious' numerous alleged performance deficiencies.
See Termination Notice [DE 15-1]. Ultimately,
Prodigious made over S800.000 in management fees between 2009
and 2012. During that same time period, while Butler and Hill
collectively invested more than $1.7 million into the Golden
Corral franchises, the YBE Entities lost money overall.
2014. Prodigious initiated this contract action in state
court. The YBE Entities removed the action to this court.
Prodigious alleges claims for breach of contract and unfair
and deceptive trade practices against the YBE Entities.
Movants assert counterclaims for breach of contract against
Prodigious, breach of fiduciary duty and constructive fraud
against Kelley, and conversion and unfair and deceptive trade
practices against Prodigious and Kelley.
Federal Magistrates Act requires a district court to make a
de novo determination of any part of the magistrate
judge's recommendation to which objection is made.
See 28 U.S.C. § 636(b); Fed.R.Civ.P. 72(bX3);
see also Orpiano v. Johnson, 687 F.2d 44, 47 (4th
Cir. 1982). Absent a specific and timely objection, the court
reviews only for clear error on the face of the record and
need not give any explanation for adopting the M&R.
Diamond v. Colonial Life & Accident Ins. Co.,
416 F.3d 310, 315 (4th Cir. 2005); Camby v. Davis,
718 F.2d 198, 200 (4th Cir. 1983). Upon careful review of the
record, "the court may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the
magistrate judge." 28 U.S.C. § 636(b)(1).
court reviewed the M&R, the record and Movants'
objections. As for those portions of the M&R to which
Movants made no objection, the court is satisfied that there
is no clear error on the face of the record.
raise two objections to the M&R. Movants argue first that
Judge Jones erroneously determined a genuine issue of
material fact exists as to whether Kelley breached his
fiduciary duty to Hill and Butler. Second, Movants disagree
with Judge Jones' conclusion that Kelley's admission
regarding the modification provision contained in the initial
service agreements does not provide an alternative basis for
allowing summary judgment on Prodigious' breach of