United States District Court, W.D. North Carolina, Charlotte Division
ORDER GRANTING MOTION TO DISMISS
C. Mullen, United States District Judge.
MATTER COMES before this Court on Defendant Avior,
Inc.'s (“Defendant”) Motion to Dismiss for
Failure to State a Claim (Doc. No. 2). Plaintiff Global
Hookah Distributors, Inc. (“Plaintiff”) responded
to the Motion (Doc. No. 6). Defendant submitted a reply brief
(Doc. No. 7). As such, this matter is ripe for disposition.
is a distributor of tobacco products and accessories. (Compl.
¶ 5). Defendant is a company that provides automated tax
filings and other taxation services. (Id. ¶ 6).
Defendant sells a tobacco tax compliance service, known as
“Tobtax Compliance, ” to help tobacco companies
handle transaction data, file necessary returns, and acquire
needed licenses in various jurisdictions. (Id.
¶¶ 7-12). Defendant advertises these services on
its website, stating that they, inter alia,
“ensure tax compliance, eliminate tax errors and
penalties, ” and help businesses “quickly expand
to new regions, transaction types, or products.”
(Id. ¶¶ 49-50).
of 2017, Plaintiff and Defendant began discussions for
Defendant to provide its tax services in the twenty-three
states in which Plaintiff is licensed. (Id. ¶
11). During negotiations, an employee of Defendant stated
that it would be able to “do license renewals for
[Plaintiff], and also get new licenses.”
(Id. ¶ 14). The employee further said that
Defendant “can renew licenses for [Plaintiff]” in
states that allow it, and in those that do not, Defendant
could “provide everything [Plaintiff would] need”
to renew itself. (Id.).
August 1, 2017, Plaintiff and Defendant entered into an
agreement for one year of Defendant's Tobtax Compliance
service, for which Plaintiff paid Defendant a lump sum of
$10, 998.87. (Id. ¶¶ 16-22). Plaintiff
uploaded tax data into Defendant's tax software system,
accessible to either party through its web account.
(Id.). Plaintiff also granted Defendant access to
various state tax and licensing online accounts in order to
file Plaintiff's taxes and meet license renewal
alleges that Defendant failed to perform the contract. It
failed to timely file returns or remit payments in eight
states, resulting in penalties charged to Plaintiff.
(Id. ¶ 23-24). Defendant paid these penalties
out of Plaintiff's accounts. (Id. ¶ 25).
Defendant's failure to timely file renewals led to two
states withholding Plaintiff's license, and one state
terminating Plaintiff's license. (Id. ¶
26). Defendant withdrew money from its account in excess of
written authorizations and “in amounts inconsistent
with [its] corresponding tax returns.” (Id.
¶ 27). Defendant attempted to raise the price of its
services, and then terminated its services and locked
Plaintiff's accounts in July of 2018, prior to the
expiration of the contract. (Id. ¶¶
28-29). Closing Plaintiff's accounts left Plaintiff
unable to renew its licenses or file tax returns on its own
behalf, a problem it was unable to rectify by contacting
Defendant. (Id. ¶¶ 31-39). Ultimately,
Plaintiff had to contact state governments itself to rectify
the issue and had to “identify another provider to
perform these services in the future.” (Id.
January 9, 2019, Plaintiff sued on four causes of action in
North Carolina Superior Court: (1) breach of contract; 2)
fraudulent inducement; 3) conversion; and 4) violation of the
North Carolina Unfair and Deceptive Trade Practices Act
(“UDTPA”). Defendant timely removed the action to
this Court and filed a Rule 12(b)(6) motion challenging
Plaintiff's second and fourth claims.
STANDARD OF REVIEW
faced with motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, the Court must
“accept as true all well-pleaded allegations and . .
.view the complaint in a light most favorable to the
plaintiff.” Mylan Labs., Inc. v. Matkari, 7
F.3d 1130, 1134 (4th Cir. 1993). The Court “assume[s]
the veracity” of these facts, and “determine[s]
whether they plausibly give rise to an entitlement to
relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). However, the Court “need not accept as true
unwarranted inferences, unreasonable conclusions, or
arguments.” E. Shore Mkts., Inc. v. J.D. Assocs.
LLP, 213 F.3d 175, 180 (4th Cir. 2000). The complaint
must be supported by “sufficient factual matter,
accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft, 556 U.S. at
678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). “Threadbare recitals of a cause of
action's elements, supported by mere conclusory
statements, do not suffice.” Id. (citation
Plaintiff's Fraud in the Inducement Claim
sued for fraud in the inducement, claiming that Defendant
willfully posted statements on its website with the intent to
deceive customers and to induce it to purchase
Defendant's services. It also alleges that Defendant
falsely represented that it could renew Plaintiff's
licenses. Defendant argues that this claim is captured in
full by Plaintiff's breach of contract claim, and thus
requires a separate non-contractual duty, one that Plaintiff
does not show. Additionally, Defendant argues that Plaintiff
does not allege enough facts to show that it made a material
misrepresentation of fact separate from puffery, that it knew
its statements were false, or that it never intended to carry
out the contract.
state a claim for fraud under North Carolina law, a plaintiff
must allege: (1) that the defendant made a representation of
some material past or existing fact; (2) that the
representation was false; (3) that the defendant knew it was
false when made; (4) that the defendant intended the
plaintiff to act on the assertion; (5) that the plaintiff
reasonably relied on the assertion and then acted upon it;
(6) and that the plaintiff was then injured. Myers &
Chapman, Inc. v. Thomas G. Evans, Inc., 374 S.E.2d 385,
391 ( N.C. 1988). Rule 9(b) of the Federal Rules of Civil
Procedure states that when “alleging fraud . . . a
party must state with particularity the ...