United States District Court, W.D. North Carolina, Statesville Division
U.S. BANK NATIONAL ASSOCIATION, Plaintiff,
ROBERT T. SOFIELD, JR., DEBORAH C. SOFIELD, and SOFIELD CHILDREN'S LIMITED PARTNERSHIP, Defendants.
Richard L. Voorhees United States District Judge
MATTER IS BEFORE THE COURT on Defendants Robert T.
Sofield, Jr., Deborah C. Sofield, and Sofield Children's
Limited Partnership's (collectively the “Sofield
Parties” or “Defendants”) Motion to Dismiss
pursuant to Rules 12(b)(6) and 12(b)(7) of the Federal Rules
of Civil Procedure. (Doc. 13). Plaintiff U.S. Bank National
Association (“U.S. Bank”) filed a Memorandum in
Opposition to Defendants' Motion to Dismiss, (Doc. 14),
and Defendants filed a Reply in Support of Their Motion to
Dismiss, (Doc. 17). For the reasons stated below,
Defendants' Motion to Dismiss, (Doc. 13), is GRANTED IN
PART, DENIED IN PART, and DEFERRED IN PART.
2013, the Sofield Parties sold their equity interests in
certain companies to Justrite Manufacturing Company, LLC
(“Justrite”) pursuant to a Purchase Agreement
(“Purchase Agreement”). (Doc 1 at 3). To secure
the Sofield Parties' obligations under the Purchase
Agreement, Justrite and the Sofield Parties enlisted U.S.
Bank to hold a portion of the purchase price in escrow and
release funds over the eighteen-month period following
closing so long as specified objective criterion were
satisfied. Id. The Sofield Parties, Justrite, and U.S.
Bank signed an Escrow Agreement (“Escrow
Agreement”), (see Doc. 1-1),  and Justrite
transferred to U.S. Bank $1.5 million of the purchase price
to hold as security for the Sofield Parties' obligations
under the Purchase Agreement, (Doc. 1 at 3). The Escrow
Agreement required U.S. Bank to disburse to the Sofield
Parties $750, 000.00 of the escrowed funds, less any
“Disputed Amount, ” on the second business day
after the twelve-month anniversary of the closing date.
Id.; (see also Doc. 1-1 at 5-6). A second
disbursement, consisting of the remaining $750, 000.00 of the
escrowed funds less any Disputed Amounts, was to be released
to the Sofield Parties on the second business day after the
eighteen-month anniversary of the closing date. (Doc. 1 at 3;
see also Doc. 1-1 at 4, 6).
the Escrow Agreement, if Justrite believed that it had a
claim for indemnification under the Purchase Agreement during
the eighteen-month period after the closing date, Justrite,
to protect its interest in the funds in escrow, needed to
promptly deliver a written “Indemnification
Request” to the Sofield Parties and a “Pending
Claim Notice” to the Sofield Parties and to U.S. Bank.
(Doc. 1 at 3; see also Doc. 1-1 at 4-5). In its
Pending Claim Notice, Justrite was required to set forth the
“Claimed Amount”-i.e., the amount of money as to
which it claimed indemnification. (Doc. 1 at 3; see
also Doc. 1-1 at 4). Within a thirty-day
“Objection Period” that followed the receipt of a
Pending Claim Notice, the Escrow Agreement required the
Sofield Parties to deliver to U.S. Bank and to Justrite a
written response either agreeing that Justrite was entitled
to the Claimed Amount or disputing that Justrite was entitled
to all or a portion of the Claimed Amount, thus establishing
the “Disputed Amount.” (Doc. 1 at 3; see
also Doc. 1-1 at 4). If the Sofield Parties disputed the
Claimed Amount, then the Escrow Agreement required U.S. Bank
to release any amount that was not disputed and, further,
required the Sofield Parties and Justrite to resolve the
dispute, either through negotiations culminating in a
“Joint Letter of Direction” to U.S. Bank or by
obtaining a court order regarding the proper disbursement of
the Disputed Amount. (Doc. 1 at 4; see also Doc. 1-1
twelve-month anniversary of the Purchase Agreement, U.S. Bank
disbursed $750, 000.00 of the escrowed funds to the Sofield
Parties. (Doc. 13-1 at 4). The eighteen-month anniversary of
the Purchase Agreement closing date was March 12, 2015.
(See Doc. 1 at 3 (noting closing date of Purchase
Agreement of September 12, 2013). On March 9, 2015, Justrite
sent a “Notice of Indemnification Claim” to the
Sofield Parties, asserting a claim for breach of
representations and warranties under the Purchase Agreement.
(Doc. 1 at 4; see Doc. 1-2). Justrite also submitted
a Pending Claim Notice to U.S. Bank, requesting that U.S.
Bank not disburse any of the escrow funds because Justrite
could not yet quantify the claim amount. (Doc. 1 at 4;
see Doc. 1-3).
the notices sent by Justrite, U.S. Bank, on April 28, 2015,
disbursed the remaining escrow funds to the Sofield Parties.
(Doc. 1 at 5). Specifically, U.S. Bank issued three checks to
the Sofield Parties totaling $750, 561.91, which represented
the remainder of the escrow funds. Id.; (see
also Doc. 1-4 at 2). U.S. Bank asserts that the April 28,
2015 disbursement was “inadvertent” and that
the disbursement was done “mistakenly” and was an
“error.” (Doc. 1 at 2, 5). Subsequently, U.S.
Bank demanded the Sofield Parties return the funds,
Id. at 5; (see also Doc. 1-4 at 2), but the
Sofield Parties declined to do so because they did not
believe Justrite had a valid claim, (Doc. 1 at 5; see
also Doc. 1-5). On November 5, 2015, Justrite served on
the Sofield Parties and U.S. Bank an updated claim
quantifying the amount of the claim as being $604, 000.00
(“Disputed Funds”). (Doc. 1 at 5; see
also Doc. 1-6). On November 10, 2015, U.S. Bank served a
second demand on the Sofield Parties, seeking return of the
Disputed Funds. (Doc. 1 at 5; see also Doc. 1-7).
The Sofield Parties again declined to return any of the money
from the second disbursement because they did not believe
Justrite had a valid claim. (Doc. 1 at 5; see also
Bank's complaint against the Sofield Parties contains
three claims: (1) conversion (“Count One”); (2)
unjust enrichment (“Count Two”); and (3) a
request for a declaratory judgment with respect to U.S.
Bank's and the Sofield Parties' rights to possess the
Disputed Funds (“Count Three”). (Doc. 1 at 6-7).
Justrite is not a party to this action. The Sofield Parties
filed a motion to dismiss seeking to dismiss all three claims
under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon
which relief can be granted and seeking to dismiss the action
under Fed.R.Civ.P. 12(b)(7) for failure to join a party under
Fed.R.Civ.P. 19. (Doc. 13). In support of the Rule 12(b)(6)
aspect of their motion to dismiss, the Sofield Parties argue
that: (1) the conversion claim should be dismissed because
U.S. Bank, as escrow agent, has no ownership interest in the
allegedly converted funds, (Doc. 13-1 at 12); (2) the unjust
enrichment claim is barred by an express contract governing
the relationship between U.S. Bank and the Sofield Parties,
id at 12-13; and (3) the declaratory judgment claim
is invalid because there is no “actual
controversy” between U.S. Bank and the Sofield Parties,
id at 13-14. In response, U.S. Bank contends that:
(1) the conversion claim survives because it has an interest
in “restor[ing] and preserv[ing] the status quo until
ownership of the disputed funds can be determined, ”
(Doc. 14 at 2, 7-8); (2) the unjust enrichment claim should
survive because it “may plead equitable claims in the
alternative, ” id. at 8-10; and (3) it may
sustain its declaratory judgment claim because there is a
“live, concrete” dispute between U.S. Bank and
the Sofield Parties in that the Sofield Parties are in
possession of the Disputed Funds and U.S. Bank is entitled to
immediate possession of them, id at 10-11. In
support of their Rule 12(b)(7) basis for dismissal, the
Sofield Parties contend that Justrite is a necessary and
indispensable party under Rule 19 because the Court will need
to interpret both the Escrow Agreement and the Purchase
Agreement to render a judgment, and because any judgment by
the Court would likely subject the Sofield Parties to
conflicting legal obligations. (Doc. 13-1 at 8-12; Doc. 17 at
1-4). In response, U.S. Bank contends that Justrite is not a
necessary or indispensable party because this Court can
afford U.S. Bank complete relief on its claims without
interpreting the Purchase Agreement and without determining
Justrite's entitlement to the “Disputed
Funds.” (Doc. 14 at 4-6).
Court's jurisdiction is properly based on 28 U.S.C.
§ 1332(a). Specifically, U.S. Bank is a citizen of
Minnesota and Ohio for purposes of diversity jurisdiction,
and the Sofield Parties are residents of North
Carolina. (Doc. 1 at 2). In addition, U.S.
Bank's complaint, which seeks the return of the Disputed
Funds, satisfies the amount in controversy requirement of
§ 1332(a). See Id. at 8 .
Fed. R. Civ. P. 12(b)(6) Failure to State a Claim
12(b) of the Federal Rules of Civil Procedure provides for
the dismissal of a claim based upon a plaintiff's
“failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). A complaint must
contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.”
Fed.R.Civ.P. 8(a)(2). In evaluating a motion to dismiss, a
court must construe the complaint's factual allegations
“in the light most favorable to the plaintiff”
and “must accept as true all well-pleaded
allegations.” Randall v. United States, 30
F.3d 518, 522 (4th Cir. 1994). A court, however,
“‘need not accept the legal conclusions drawn
from the facts, '” nor “‘accept as true
unwarranted inferences, unreasonable conclusions, or
arguments.'” Giarratano v. Johnson, 521
F.3d 298, 302 (4th Cir. 2008) (quoting E. Shore Mkts.,
Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180
(4th Cir. 2000)).
Rule 8(a)(2) does not require “detailed factual
allegations, ” a complaint must offer more than
“naked assertion[s]” and unadorned “labels
and conclusions.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). In order to survive a Rule 12(b)(6) motion
to dismiss, the facts alleged must be sufficient to
“raise a right to relief above the speculative
level” and “state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 570 (2007). Requiring
plausibility “does not impose a probability requirement
at the pleading stage, ” id. at 556, but does
demand more than a “sheer possibility that a defendant
has acted unlawfully, ” Iqbal, 556 U.S. at
678. Ultimately, a claim is facially plausible when the
factual content allows for the reasonable inference that the
defendant is liable for the misconduct alleged. Id.
support of their Motion to Dismiss U.S. Bank's conversion
claim, the Sofield Parties argue that U.S. Bank does not
state a valid claim because, as an escrow agent, it has no
ownership interest in the allegedly converted Disputed Funds.
(Doc. 13-1 at 12). In response, U.S. Bank acknowledges that
it “isn't the beneficial owner of the disputed
funds, ” and that it “has no stake in who
ultimately is entitled to the funds.” (Doc. 14 at 2).
However, U.S. Bank contends that it has an interest in
“restor[ing] and preserv[ing] the status quo until
ownership of the disputed funds can be determined in whatever
manner the Sofield Parties and Justrite pursue.” (Doc.
14 at 2). The issue, then, is whether an escrow agent may
bring a conversion ...