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Pork Co. v. Summit Investments Southeast a Tennessee General Partnership

United States District Court, E.D. North Carolina, Southern Division

August 15, 2017

THE PORK COMPANY, Plaintiff,
v.
SUMMIT INVESTMENTS SOUTHEAST a Tennessee General Partnership, Defendant.

          ORDER

          LOUISE W. FLANAGAN United States District Judge

         This matter is before the court on defendant's motion to dismiss or, in the alternative, to transfer. (DE 12). Plaintiff responded in opposition and defendant replied. In this posture, the issues raised are ripe for ruling. For the following reasons, defendant's motion is denied.

         STATEMENT OF THE CASE

         Plaintiff commenced this action on May 12, 2017, in Dublin County Superior Court seeking a declaration under the North Carolina Declaratory Judgment Act (“NCDJA”) of plaintiff's rights under a commercial warehouse lease (the “lease”) with defendant. In particular, plaintiff seeks declarations that 1) plaintiff has neither breached the lease, nor is it in default of the lease, as defendant contends; 2) that defendant is not entitled to terminate the lease; 3) that defendant is neither entitled to take possession of the leased premises nor terminate plaintiff's right of possession of the premises; and 4) that defendant is not entitled to monetary damages. Plaintiff also asserts four breach of contract claims on grounds that defendant improperly declared plaintiff in default; demanded cures for approved or allowed modifications or alterations; and unreasonably withheld approval of modifications. In addition to declaratory relief, plaintiff seeks damages in excess of $25, 000, costs, fees, and jury trial.

         Defendant removed the action to this court on May 23, 2017, and filed the instant motion to dismiss on May 31, 2017. In its motion to dismiss, defendant asserts that plaintiff impermissibly used “procedural fencing” to file this action before defendant filed an action on May 16, 2017, against plaintiff in the United States District Court for the Eastern District of Tennessee captioned Summit Investments Southeast v. The Pork Company, Inc., No. 3:17-CV-213 (the “Tennessee case”), asserting claims of breach of contract and tort claims arising out of plaintiff's asserted defaults under the lease. Defendant seeks dismissal of the instant action pursuant to Federal Rule of Civil Procedure 12(b)(6), the NCDJA, and the court's inherent authority. Defendant seeks, in the alternative, to transfer the instant matter to the Eastern District of Tennessee pursuant to 28 U.S.C. § 1404(a). In support of the motion, defendant attaches a copy of the complaint in the Tennessee case, as well as a copy of judicial caseload statistics produced by the Administrative Office of the United States Courts.

         Plaintiff filed response to the instant motion on June 21, 2017, including as an attachment an affidavit of Salvatore Villari, Vice-President of plaintiff. Defendant replied on July 5, 2017.

         STATEMENT OF THE FACTS

         The facts alleged in the complaint, as well as the procedural history of this case and the Tennessee case, may be summarized as follows. Plaintiff is a Delaware corporation with its principal place of business in Dublin County, North Carolina. Defendant is a Tennessee general partnership that owns a 21.78 acre property in Duplin County, North Carolina, on which a commercial warehouse (the “warehouse”) is located. On April 1, 2011, plaintiff executed the lease with defendant, which allowed plaintiff to take a 69, 558 square foot portion of the warehouse at 1012 U.S. Highway 117 South, Warsaw, NC 28398, for a term of 15 years. The lease provides that “[n]o modifications or alterations to the buildings . . . are allowed without prior written consent of the Lessor which consent will not be unreasonably withheld.” (DE 12-2 at 14).[1] The lease states that the “Premises shall be only used for Food Processing, Manufacturing, Cold Storage and Warehouse purposes.” (Id. at 16). In addition, it states “[t]his Lease shall be governed by and construed in accordance with the laws of the State of North Carolina, without regards to principles of conflicts of laws.” (Id. at 17).

         The parties executed five addenda to the lease, two in 2011, two in 2014, and one in 2015. (DE 12-2 at 18-21, 26-27; 12-3 at 1-2, 4-8). “Addendum No. 3” allowed plaintiff to expand its business operations in up to approximately 35, 743 square feet of the warehouse space adjacent to the portion of the warehouse space it was already leasing (hereinafter, the “leased property” or the “premises”) (DE 12-3 at 1). Between 2011 and 2015 plaintiff presented construction plans and other information to defendant describing alterations and modifications it wanted to make, and defendant approved and/or did not object to these plans. Plaintiff has never used the premises other than for allowed uses under the lease.

         On February 17, 2017, defendant sent plaintiff a “Property Report” drawing attention to certain “maintenance issues before they become costly problems, ” and asserting that certain alterations were not approved or needed to be approved or removed, based upon an inspection of the property by a representative of defendant. (DE 1-1 at 21-44). On March 10, 2017, defendant sent a notice of default to plaintiff informing plaintiff of “deficiencies that need to be addressed according to the lease, ” referencing “unapproved alterations” set forth in the Property Report. (DE 1-1 at 18). Defendant stated “until such time as a resolution has been reached, you must cease all work on the modifications.” (Id. at 19) (emphasis in original). Defendant noted that plaintiff's lenders “need notice as to how long they have to respond to the removal of any equipment should termination be a possibility.” (Id.). Further defendant stated that it has “been marketing the facility at a value of $13, 942, 000 for a couple of years, ” and it “would be willing to help [plaintiff] with securing a reasonable mortgage wit ha [sic] credible lender if that is something that you would like us to do.” (Id.).

         In a March 27, 2017, response to defendant, plaintiff noted that it had proposed to purchase defendant's entire 21.78 acre property at an undisclosed price on March 24, 2017. (See DE 1-1 at 47). “However, ” plaintiff stated, “if the parties cannot come to an agreement on a purchase price, then we will have to address those matters raised in the Notice of Default. While we are confident we can establish [plaintiff's] actions did not breach the Lease, it is willing to work with [defendant] to address any concerns it has regarding the expansion.” (Id.). Plaintiff then outlined its plans regarding correction of items noted in the Property Report, concluding by noting that it has “incurred over $5 million in costs related to this construction and installation of new equipment.” (Id.) “Should [defendant] attempt to terminate the Lease by declaring [plaintiff] in default, ” plaintiff stated, “[plaintiff] will exercise all legal rights available to it to prevent that, as well as seek to recover any monetary damages caused by [defendant's] actions.” (Id.).[2]

         On April 14, 2017, defendant provided notice to plaintiff of additional instances of default under the lease, including that plaintiff had “materially and significantly changed the nature of the business [plaintiff] was permitted to conduct at the Premises.” (DE 1-3 at 12-13). Defendant further states: “Notice is given that unless [plaintiff] cures the instances of default within thirty (30) days of receipt of this notice as provided in Section 15 of the Lease, [defendant] will seek to enforce its remedies as provided in the Lease and at law.” (Id.).

         On April 28, 2017, plaintiff responded to the April 14, 2017, letter, asserting its position that it was not using the premises in violation of the lease terms and setting forth items that plaintiff was willing to undertake “to resolve the difference that exists between the two parties.” (DE 1-3 at 37).

         Plaintiff stated in addition “there is a significant question as to whether [defendant] has been operating in good faith with [plaintiff] regarding the Lease and whether such actions give rise to certain business torts.” (Id.). Plaintiff stated further:

While the two sides did engage in discussions regarding the purchase of the Premises, I understand that was unsuccessful. That leaves us with the path of trying to resolve the alleged default as outlined in my letter and I hope we can use this as a foundation to come to an agreement. As [defendant] has given [plaintiff] a deadline of May 14, 2017 to cure the conditions in the Itemized Default Report, we ask [defendant] to respond to this letter and [plaintiff's] proposals by May 6, 2017.

(Id.) (emphasis in original). According to defendant, it responded by telephone and then by letter dated May 10, 2017, stating it “respectfully disagree[s] with the positions you state in [the April 28, 2017] letter, ” and it “stands by the defaults listed in . . . prior letter.” (DE 12-4 at 22).

         As noted above, plaintiff filed this action on May 12, 2017, a Friday, in Dublin County Superior Court. Defendant commenced the Tennessee case on May 16, 2017, a Monday. According to the docket in the Tennessee case, on July 7, 2017, plaintiff filed in the Tennessee case a motion to dismiss or transfer the Tennessee case to this court. On July 28, 2017, defendant filed in the Tennessee case an amended complaint that asserts claims against three additional entities in addition to plaintiff, 1) Villari Bros. Foods, LLC, 2) Villari Food Group, LLC, and 3) Villari Brothers Trucking Inc. Defendant has added in the Tennessee case 1) claims for civil conspiracy, unjust enrichment, against these entities and plaintiff, and 2) claims for inducement to breach of contract and intentional interference with business relationships, and punitive damages against these entities. Defendant seeks in the Tennessee case damages in excess of $14 million, trebled, plus punitive damages in excess of $28 million, as well as trial by jury.

         Plaintiff in the Tennessee case filed on August 9, 2017, a motion for extension of time to file answer or otherwise respond and to establish new deadlines for initial disclosures and Rule 26(f) conference. Defendant filed a response in opposition to that motion in the Tennessee case on August 10, 2017, and plaintiff replied on August 11, 2017, in the Tennessee case.

         COURT'S DISCUSSION

         A. Standard of Review

         A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of the complaint but “does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A complaint states a claim if it contains “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 (2009) (quoting Bell Atl. Corp v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating whether a claim is stated, “[the] court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff, ” but does not consider “legal conclusions, elements of a cause of action, . . . bare assertions devoid of further factual enhancement[, ] . . . unwarranted inferences, unreasonable conclusions, or arguments.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted).

         “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all ...


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