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Independent Warehouse v. Kim

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

September 28, 2017

SAMUEL KIM, Defendant.



         This matter is before the Court on plaintiffs motion to dismiss defendant's amended counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure [DE 16]. The matter has been fully briefed and is ripe for ruling. For the reasons discussed below, the motion to dismiss is granted in part and denied in part.


         Plaintiff produces and sells tobacco in Pitt County, North Carolina. Defendant and plaintiff entered into an Asset Purchase Agreement relating to a tobacco production enterprise in 2014. Plaintiff agreed to sell office equipment, intellectual property, and a federal tobacco permit, as well as loose tobacco, to defendant. In 2015, defendant stopped making payments, and plaintiff sued in state court. That case was settled, though the parties decided to keep doing business together. They committed to a settlement agreement that still contemplated the transfer of the equipment, intellectual property, and the tobacco permit, as well as the sale of tobacco.

         In early 2017, defendant again stopped making payments. Plaintiff again sued defendant in state court, alleging $100, 000 in damages. Defendant removed the case to federal court on the basis of diversity jurisdiction and filed several counterclaims, which are the subject of plaintiff s motion to dismiss. Defendant's counterclaims arise out of the purported transfer of the federal tobacco permit. Such permits are governed by the Department of the Treasury's Alcohol and Tobacco Tax and Trade Bureau ("TTB"). Defendant alleges four separate counterclaims against plaintiff: breach of contract, unjust enrichment, actual fraud, and unfair and deceptive trade practices.


         Plaintiffs motion to dismiss the counterclaims is made under Rule 12(b)(6) of the Federal Rules of Civil Procedure. A Rule 12(b)(6) motion tests the legal sufficiency of the complaint. Papasan v. Allain, 478 U.S. 265, 283 (1986). When acting on a motion to dismiss under Rule 12(b)(6), "the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). A complaint must allege enough facts to state a claim for relief that is facially plausible. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, " and mere recitals of the elements of a cause of action supported by conclusory statements do not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint must be dismissed if the factual allegations do not nudge the plaintiffs claims "across the line from conceivable to plausible." Twombly, 550 U.S. ait 570.

         However, the Court need not accept a complaint's "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement." Nemet Chevrolet Ltd. v., Inc., 591 F.3d 250, 255 (4th Cir. 2009). Although complete and detailed factual allegations are not required, "a plaintiffs obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions." Twombly, 550 U.S. at 555 (citations omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

         I. Defendant's Breach of Contract Claim

         Defendant sufficiently alleges facts such that the breach of contract claim is not dismissed. In North Carolina, the elements of a breach of contract are the presence of a valid contract, the breach of the terms of that contract, and damages. Supplee v. Miller-Motte Bus. Coll., Inc., 768 S.E.2d 582, 590 (2015).

         In his complaint, defendant alleges that plaintiff and defendant entered into two contracts: an Asset Purchase Agreement, followed by the Settlement Agreement after their first dispute. Defendant alleges that the Section 1.1 of the contract, which reads, "Seller hereby agrees to sell, transfer, convey, assign and deliver to Buyer... the federal tobacco permit" was a contract to transfer the existing federal tobacco permit in plaintiffs name to defendant. Defendant further alleges that the permit was never transferred, and so he suffered damages by paying for something he never received.

         Plaintiff and defendant's dispute appears to boil down to one question: what their contract to "transfer" a tobacco permit means. Plaintiff argues in its motion that their contract was in fact to "maintain the tobacco permit and sell tobacco to Defendant" until the TTB approved defendant's application, and defendant's status with the TTB was a risk defendant agreed to bear. However, plaintiff has failed to show why the word "transfer, " which is used in the Agreement, in all settlement materials from the previous lawsuit, and in its motions before this Court, should be understood to mean something other than the actual transfer of the existing permit.

         Defendant has pled sufficient facts to show that a contract to transfer a permit, where the permit is never transferred, could constitute a breach of contract. Defendant ...

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