United States District Court, W.D. North Carolina, Charlotte Division
J. Conrad, Jr. United States District Judge
MATTER comes before the Court on Defendants'
Motion to Dismiss, (Doc. No. 20), and the Magistrate
Judge's Memorandum and Recommendation
(“M&R”), (Doc. No. 24).
Central National Gottesman Inc. (“Plaintiff” or
“CNG”) and Defendant Nakos Paper Products, Inc.
(“Nakos”) began doing business together in
February 2014. Pursuant to agreements between the parties,
CNG delivered paper inventory to Nakos, and Nakos processed
CNG's inventory into finished product that was sold and
delivered to Nakos' end-use customers. Defendants
Christos L. Nakos (“Chris Nakos”) and Lambros C.
Nakos (“Lambros Nakos” and together with Chris
Nakos, the “Individual Defendants”) are the sole
shareholders and officers of Nakos.
2014 and 2015, Nakos failed to pay CNG for inventory
delivered by CNG to Nakos. By the end of 2016, Nakos'
past due balance had grown to $238, 657.62. As a result of
and to rectify the past due amount, Nakos and CNG agreed
that: (1) CNG would deliver CNG's inventory to Nakos
pursuant to a Bailment Agreement dated November 7, 2016; (2)
at all times, CNG was the owner of CNG's inventory
delivered to Nakos; (3) Nakos would process CNG's
inventory into finished product; (4) CNG would invoice the
end-use customers for the finished product delivered by
Nakos; (5) CNG would receive payment from the customer, and
the funds would be applied first to CNG's cost of
inventory; and (6) the remaining funds would be paid 70% to
Nakos and 30% to CNG.
in early 2017, Nakos breached the agreements by converting
CNG's inventory into finished product and directly
invoicing the end-use customers without CNG's knowledge
or consent. This breach continued through early 2018 when CNG
conducted a review and inspection of its inventory on
Nakos' premises and discovered that approximately $400,
000 of its inventory was missing.
filed its Complaint on November 28, 2018 and an Amended
Complaint on March 11, 2019. The Amended Complaint asserts
the following claims: (1) breach of contract as to Nakos; (2)
breach of the Bailment Agreement as to Nakos; (3) conversion
as to Nakos; (4) unfair or deceptive acts or practices in
violation of N.C. Gen. Stat. § 75-1.1 as to all
Defendants; (5) unjust enrichment as to Nakos; (6) tortious
interference with contract as to Chris Nakos; (7) conversion
and aiding and abetting conversion as to the Individual
Defendants; (8) fraud as to all Defendants; (9) constructive
trust as to all Defendants; (10) fraudulent transfers as to
all Defendants; (11) civil conspiracy to commit conversion
and fraud as to all Defendants; and (12) piercing the
corporate veil as to all Defendants.
moved under Rule 12(b)(6) to dismiss CNG's claims for
unfair or deceptive acts or practices as to the Individual
Defendants, tortious interference with contract as to Chris
Nakos, conversion and aiding and abetting conversion as to
the Individual Defendants, fraud as to all Defendants,
constructive trust as to all Defendants, fraudulent transfers
as to all Defendants, civil conspiracy as to all Defendants,
and piercing the corporate veil as to all Defendants. In the
M&R, the Magistrate Judge recommended that the Court
grant the motion as to all claims except the claim to pierce
the corporate veil. CNG timely filed objections to the
STANDARD OF REVIEW
district court may assign dispositive pretrial matters to a
magistrate judge for “proposed findings of fact and
recommendations.” 28 U.S.C. § 636(b)(1)(B). The
Federal Magistrate Act provides that a district court
“shall make a de novo determination of those portions
of the report or specific proposed findings or
recommendations to which objection is made.”
Id. § 636(b)(1); Camby v. Davis, 718
F.2d 198, 199 (4th Cir. 1983).
standard of review for a motion to dismiss under Rule
12(b)(6) for failure to state a claim is well known.
Fed.R.Civ.P. 12(b)(6). “A motion to dismiss under Rule
12(b)(6) ‘challenges the legal sufficiency of a
complaint,' including whether it meets the pleading
standard of Rule 8(a)(2).” Fannie Mae v.
Quicksilver LLC, 155 F.Supp.3d 535, 542 (M.D. N.C. 2015)
(quoting Francis v. Giacomelli, 588 F.3d 186, 192
(4th Cir. 2009)). A complaint attacked by a Rule 12(b)(6)
motion to dismiss will survive if it contains enough facts
“to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). Facial plausibility means allegations that
allow the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. Ashcroft
v. Iqbal, 556 U.S. 662, 663 (2009). “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. at 678.
Rule of Civil Procedure 8(a)(2) requires only “a short
and plain statement of the claim showing that the pleader is
entitled to relief.” Fed.R.Civ.P. 8(a)(2). Specific
facts are not necessary; the statement need only “give
the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Twombly, 550
U.S. at 555 (alteration in original). Additionally, when
ruling on a defendant's motion to dismiss, a court must
accept as true all of the factual allegations contained in
the complaint. Erickson v. Pardus, 551 U.S. 89,
93-94 (2007). Nonetheless, a court is not bound to accept as
true legal conclusions couched as factual allegations.
Papasan v. Allain, 478 U.S. 265, 286 (1986).
“Courts cannot weigh the facts or assess the evidence
at this stage, but a complaint entirely devoid of any facts
supporting a given claim cannot proceed.” Potomac
Conference Corp. of Seventh-Day Adventists v. Takoma Acad.
Alumni Ass'n, Inc., 2 F.Supp.3d 758, 767-68 (D. Md.
2014). Furthermore, the court “should view the
complaint in a light most favorable to the plaintiff.”
Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th
specifically objects to the M&R's conclusions
regarding CNG's claims for tortious interference with
contract as to Chris Nakos, fraud as to all Defendants,
conversion as to the Individual Defendants, and unfair and
deceptive trade practices as to the Individual
Tortious Interference with Contract as to Chris
alleges that Chris Nakos tortiously interfered with
Nakos' agreements with CNG. The Magistrate Judge
concluded that CNG fails to allege sufficient facts to
support that Chris Nakos acted outside his capacity as a
shareholder and officer of Nakos such that his actions were
not protected by the qualified privilege. CNG objects to the
Magistrate Judge's conclusion, contending that it is not
required to negate in its pleading the qualified privilege
defense and, even ...