United States District Court, M.D. North Carolina
CARPET SUPER MART, INC., ARTHUR C. JORDAN, JR., and JOYCE J. MOBLEY, Plaintiffs,
BENCHMARK INTERNATIONAL COMPANY SALES SPECIALIST, LLC, DARA SHAREEF, and BRIAN LOCKLEY, Defendants.
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., DISTRICT JUDGE
before this court is Defendants' Motion to Dismiss
Complaint or in the Alternative, Motion for Summary Judgment.
(Doc. 6.) Defendants have also moved for sanctions. (See Doc.
13.) Defendants ask this court to dismiss Plaintiffs'
request for a declaratory judgment and Plaintiffs' claims
for fraud and misrepresentation and unfair and deceptive
trade practices for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6). Defendants further ask this court to
impose sanctions on Plaintiffs' counsel for allegedly
filing a complaint that lacks factual support, has no chance
of success under existing precedent, and was brought for an
improper purpose. For the reasons that follow, this court
finds that Defendants' motion to dismiss should be
granted in full and that Defendants' motion for sanctions
should be denied.
FACTUAL & PROCEDURAL BACKGROUND
Carpet Super Mart, Inc. (“Carpet”) is a North
Carolina corporation that “was engaged in the business
of commercial and residential sales and installation of
carpet and flooring products.” (First Amended Complaint
(“First Am. Compl.”) (Doc. 21) ¶ 17.)
Plaintiffs Arthur C. Jordan, Jr. (“Jordan”) and
Joyce J. Mobley (“Mobley”) were the owners of
Carpet. (Id. ¶ 18.) Plaintiffs entered into a
listing agreement with Defendant Benchmark International
Company Sales Specialist, LLC (“Benchmark”) on
May 27, 2014, pursuant to which Benchmark agreed to provide
certain services to facilitate the potential sale of
Carpet's business. (Id. ¶¶ 19, 25;
Doc. 21-1.) Defendants Dara Shareef and Brian Lockley are
each employed by Benchmark. (Id. ¶¶ 9-10.)
listing agreement (titled “Terms of Engagement”)
states that “upon the closing of a Transaction, Client
will pay Benchmark a Transaction Fee equal to 5% of the
Transaction Value subject to a minimum Transaction Fee of
$100, 000.” (Doc. 21-1). The listing agreement does not
define any capitalized terms, but states that “[t]his
agreement is made subject to Benchmark's Standard Terms
and Conditions which are incorporated herein by
reference.” (Id. (emphasis added).) The
Standard Terms and Conditions contain a lengthy definition of
“Transaction Value” that provides, in part, that
the “magnitude shall be based on the total benefit
received by Client and any related parties pursuant to the
Transaction regardless of the form of . . .
consideration” and lists several examples of non-cash
benefits that may be used for this calculation. (Doc. 21-2.)
allege that they did not receive the Standard Terms and
Conditions before signing the listing agreement but did
receive this document at some later time. (See First Am.
Compl. (Doc. 21) ¶¶ 24-25, 39-40.) Prior to and
following the signing of the listing agreement, and up until
the final agreement to sell Carpet's business, Jordan and
Mobley repeatedly sought to clarify how the commission fee
would be calculated. (Id. ¶¶ 21, 27, 50.)
Each time, Jordan and Mobley were told by Benchmark employees
that the fee was five percent of the sale price.
obtained a potential buyer for Carpet in the fall of 2017 and
the parties entered into a final agreement for the sale of
Carpet's business. (Id. ¶¶ 48-54.)
After the final sale agreement was signed, Benchmark sought a
commission equal to five percent of the total value of the
buyer's lease with Carpet's former landlord, which
presumably produced an amount greater than five percent of
the sale price. (See Id. ¶¶ 58-59.)
filed their initial Complaint in Guilford County Superior
Court and Defendants subsequently removed the case to this
court. (See Doc. 1-2.) Defendants moved to dismiss the
Complaint and submitted a memorandum in support of their
motion. (See Doc. 8.) Plaintiffs responded,
(Pls.' Resp. to Defs.' Mot. to Dismiss
(“Pls.' Resp. Br.”) (Doc. 16)), and
Defendants replied, (Doc. 17.) Defendants then moved for Rule
11 sanctions and filed a memorandum, (Defs.' Mem. in
Supp. of Rule 11(c)(2) Mot. for Sanctions (“Defs.'
Sanctions Mem.”) (Doc. 14)), to which Plaintiffs
responded, (Doc. 18), and Defendants replied, (Doc. 19.)
court previously entered an order, (Doc. 20), granting
Plaintiffs' motion to amend their Complaint, (Doc. 15),
to withdraw their Civil RICO claim. Therefore, the First
Amended Complaint, (Doc. 21), is now the operative pleading
and this court will refer to that document as the Complaint.
Plaintiffs bring the following claims: (1) a request for
declaratory judgment that the contractual commission is five
percent of the sale price (or $188, 600.00), (2) fraud and
misrepresentation, and (3) unfair and deceptive trade
practices. (First Am. Compl. (Doc. 21) ¶¶ 63-68,
STANDARD OF REVIEW
Standard on Motion to Dismiss
survive a motion to dismiss, a complaint must contain
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 other words, the plaintiff must plead facts that
“allow the court to draw the reasonable inference
that the defendant is liable” and must demonstrate
“more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678.
ruling on a motion to dismiss, this court must accept the
complaint's factual allegations as true. Iqbal, 556 U.S.
at 678. Further, “the complaint, including all
reasonable inferences therefrom, [is] liberally construed in
the plaintiff's favor.” Estate of
Williams-Moore v. All. One Receivables Mgmt., Inc., 335
F.Supp.2d 636, 646 (M.D. N.C. 2004) (citation omitted).
Despite this deferential standard, a court will not accept
legal conclusions as true, and “[t]hreadbare recitals
of the elements of a cause of action, supported by mere
conclusory statements, [will] not suffice.” Iqbal, 556
U.S. at 678.
Jurisdiction and Applicable Law
court has jurisdiction over this case pursuant to 28 U.S.C.
§ 1332. The parties are diverse. (See Id.
¶¶ 1-4, 11, 13.) In a declaratory judgment action,
“the amount in controversy is measured by the value of
the object of the litigation.” Hunt v. Wash. State
Apple Advert. Comm'n, 432 U.S. 333, 347 (1977).
Here, the object of the litigation is the commission fee that
Benchmark is owed for procuring a buyer. Plaintiffs concede
the value of this fee is at least $188, 600.00, (see First
Am. Compl. (Doc. 21) ¶ 68), while Defendants assert they
are owed a higher amount. Therefore, the amount in
controversy here is at least $188, 600.00 and this court may
exercise diversity jurisdiction. See Dixon v.
Edwards, 290 F.3d 699, 710-11 (4th Cir. 2002) (finding
that the amount in controversy for a declaratory judgment
action seeking to invalidate a contract was equal to the
value of services rendered under the contract).
federal court sitting in diversity jurisdiction applies the
relevant substantive law of the state in which the court
sits, while applying federal procedural law. Erie R.R.
Co. v. Tompkins, 304 U.S. 64, 72-73, 79-80 (1938);
Hanna v. Plumer, 380 U.S. 460, 465-66 (1965). In
contract disputes, courts apply the law of the state where
the parties entered into the contract or where delivery was
made. Mut. Life Ins. Co. of N.Y. v. Johnson, 293
U.S. 335, 339 (1934); see also Roomy v. Allstate Ins.
Co., 256 N.C. 318, 322-23, 123 S.E.2d 817, 820 (1962)
(holding that the law of the state where a contract is
entered into governs its interpretation). Here, the Complaint
alleges that the contract was signed and delivered in North
Carolina. (First Am. Compl. (Doc. 21) ¶ 25.)
court, sitting in diversity jurisdiction, “appl[ies]
the operative state law as would the highest court of the
state” whose law governs. Liberty Mut. Ins. Co. v.
Triangle Indus., Inc., 957 F.2d 1153, 1156 (4th Cir.
1992). If the state's highest court has not addressed an
issue, then a “state's intermediate appellate court
decisions constitute the next best indicia of what state law
is although such decisions may be disregarded if the federal
court is convinced by other persuasive data that the highest
court of the state would decide otherwise.”
Id. (quoting 19 Charles A. Wright, Arthur R. Miller
& Edward H. Cooper Federal Practice and Procedure §
4507, at 94- 95 (1st ed. 1982)) (internal quotation marks