Court Opinion

ID: 1017949
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:12:38.809689+00
Date Added: 2024-06-11T15:27:19.808187
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 04-2146

SUN CHEMICALS TRADING CORPORATION, a/k/a Sum
Kimya Gida Sanayi Ve Tickaret A.S.; AHMET
CULLU,

                                             Plaintiffs - Appellants,

           versus

SGS CONTROL SERVICES, INCORPORATED,

                                               Defendant - Appellee,

           and

CBP RESOURCES, INCORPORATED; PASTERNAK, BAUM,
AND COMPANY, INCORPORATED,

                                                           Defendants.

Appeal from the United States District Court for the Middle
District of North Carolina, at Durham. William L. Osteen, District
Judge. (CA-01-425-1)

Argued:   September 21, 2005             Decided:    December 13, 2005

Before WILKINSON and WILLIAMS, Circuit Judges, and Robert J.
CONRAD, Jr., United States District Judge for the Western District
of North Carolina, sitting by designation.

 Affirmed by unpublished per curium opinion.
ARGUED: Charles Elwood Soechting, Stephen Rolfe Walker, O’QUINN,
LAMINACK & PIRTLE, Houston, Texas, for Appellants. James Robert
Fox, BELL, DAVIS & PITT, P.A., Winston-Salem, North Carolina, for
Appellee. ON BRIEF: Jennifer R. Tillison, Kevin Dubose, ALEXANDER,
DUBOSE, JONES & TOWNSEND, L.L.P., Houston, Texas, for Appellants.
Alexander P. Ryan, BELL, DAVIS & PITT, P.A., Winston-Salem, North
Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                                2
PER CURIUM:

     Mr. Ahmet Cullu (“Cullu”) and Sun Chemicals Trading Corp.

(“Sun”) appeal the district court's order dismissing their claims

against SGS Control Services (“SGS”) for breach of contract, fraud,

breach of express warranty, breach of the implied warranties of

merchantability and fitness for a particular purpose, unfair and

deceptive trade practices, and negligent infliction of emotional

distress. For the below-stated reasons, we affirm the district

court’s   Rule   12(b)(6)    dismissal   of   the   Plaintiffs’   complaint

against SGS.

                                    I.

     In February 1998, Sun, though its president and principal

shareholder Cullu, contracted with CBP Resources, Inc. (“CBP”) for

the purchase of 3,500 metric tons of feed grade ‘yellow grease.’

Pasternak, Baum & Co., Inc. (“Pasternak”) brokered the purchases

between Sun and CPB. During contract negotiations, Cullu informed

CBP and Pasternak that the yellow grease was to be exported to

Turkey, and that Muslims in Turkey were prohibited under the Sharia

from consuming pork and pork-derived products. To this end, the

purchase order contracts specified that the yellow grease could not

contain any lard.

     CBP independently retained SGS to test the yellow grease for

the presence of lard.       SGS tested the yellow grease, and provided

                                     3
thereafter its “No Lard” certification stating the yellow grease

“tested negative for the presence of lard.”        CBP issued notarized

affidavits informing Sun that “the feed fat blend ... does not

contain any lard, pork, or pig derived fat.”

        After the yellow grease was exported to Turkey, concerns

arose that the grease was contaminated with lard.       Cullu requested

that CBP and SGS provide additional assurances that the yellow

grease did not contain any lard. SGS refused to provide additional

assurances because no definitive test existed to conclusively

determine the presence of lard.

      Sun and Cullu (collectively, the “Plaintiffs”) brought suit

against CBP, SGS, and Pasternak. The suit alleged claims of breach

of contract, fraud, breach of express and implied warranties,

unfair and deceptive trade practices, and infliction of emotional

distress. The Plaintiffs alleged damages of $10 million, and made

a demand for treble damages “and/or punitive damages for fraud.”

By consent order and pursuant to the terms of the purchase order

contracts, Sun and Cullu, CBP, and Pasternak agreed to arbitrate

their claims.      SGS declined to participate in the arbitration.

Before arbitration, Pasternak settled with the Plaintiffs for

$77,500.

     A three-judge arbitration panel (the “panel”) held eight days

of   evidentiary   hearings,   receiving   live   testimony,   deposition

transcripts, affidavits, and documentary evidence.             On July 9,

                                    4
2003, the panel issued a final award in favor of the Plaintiffs.

As to Sun, the panel found that it had suffered no direct damages

because it was able to sell the yellow grease for a profit.

However,    the    panel   concluded        Sun   suffered     incidental    and

consequential damages as a result of CBP's breach because “it was

reasonably foreseeable that Sun would suffer the loss of its entire

business in the sale of poultry feed in Turkey if its product were

contaminated by pork.”         Sun was awarded $300,000 “for anticipated

lost profits,” which the panel trebled to $900,000 under North

Carolina’s Unfair and Deceptive Trade Practices Act.                 The panel

also found Sun had failed to carry its burden of proof in its fraud

claim, and therefore found in favor of CBP.

     As    to   Cullu,   the    panel   determined    “the    actions   of   CBP

constitute[d] a negligent misrepresentation” that damaged Cullu,

and it found that conduct to be “actionable under Section 552 of

the Restatement (Second) of Torts.” The negligent misrepresentation

arose because “CBP provided inaccurate information for the guidance

of Sun and Mr. Cullu[,]...[it] failed to exercise reasonable care[,

and]...Sun and Mr. Cullu justifiably relied upon the information.”

As a result of CBP’s “negligent conduct” the arbitrators awarded

Cullu $150,000 for the loss in value of Sun.                 The panel further

awarded Cullu $2,731 for past and future medical expenses that

“were reasonably related to the temporary damage to Mr. Cullu's

reputation and the loss of Sun, which were themselves proximately

                                        5
caused by the negligent conduct of CBP.”          The panel also found that

“CBP's negligent misrepresentation also damaged the reputation of

Mr. Cullu,” but that the damage was temporary, and thus awarded

$1.00 for the “unquantifiable temporary damage.” The panel trebled

the amount awarded to Cullu, and then reduced the award by the

$77,500 received in the Pasternak settlement, leaving a net award

to Cullu of $380,696.

     The panel also found that CBP would bear both the compensation

and expenses of the arbitrators, totaling $57,439.28, and the

administrative    fees     and   expenses   of   the   American    Arbitration

Association, totaling $37,500.

     As    to   Cullu’s    remaining   claims    of    fraud     and   negligent

infliction of emotional distress, the arbitration panel found that

Cullu had failed to carry his burden of proof, and therefore found

in favor of CBP.

        After the arbitration concluded, SGS moved to dismiss Sun and

Cullu's complaint against it pursuant to Rule 12(b)(6) of the

Federal Rules of Civil Procedure. SGS argued that North Carolina’s

“one-satisfaction” doctrine precluded any further recovery by Sun

or Cullu, and that the doctrine of collateral estoppel precluded

re-litigation of damages.        The district court agreed with SGS. The

court    dismissed   the    Plaintiffs’     claims     against    SGS,   finding

"[u]nder the detailed arbitration award [Sun and Cullu] have made

                                       6
a recovery for all of the injuries they assert against SGS in this

action."1

                                       II.

          On appeal, Sun and Cullu contend that the district court

erred when it found that Sun and Cullu already had recovered at

arbitration for all of the injuries they asserted against SGS in

this action.

     We review de novo a decision of the lower court on a motion to

dismiss pursuant to Rule 12(b)(6). Brooks v. City of Winston-Salem,

N.C., 85 F.3d 178 (4th Cir. 1996).           Dismissal under Rule 12(b)(6)

is appropriate when, accepting as true the well-pleaded facts in

the complaint and viewing them in the light most favorable to the

plaintiffs, the court finds with certainty that a plaintiff would

not be entitled to relief under any set of facts that could be

proved in support of the claim. See id.

     It     is   well-settled   that   North   Carolina   law   precludes   a

plaintiff from recovering more than one-satisfaction for the same

injury, caused by different parties.             “Both reason and justice

decree that there should be collected no double compensation, or

even overcompensation, for any injury, however many sources of

     1
      Because the district court dismissed the Plaintiffs’ actions
on 12(b)(6) grounds, it did not reach the merits of Defendant’s
collateral estoppel argument. Likewise, we need not and do not
reach the collateral estoppel issue.

                                       7
compensation there may be .... Any amount paid by anybody, whether

they be joint tort-feasors or otherwise, for and on account of any

injury or damage, should be held for a credit on the total recovery

in any action for the same injury or damage.”   Holland v. Southern

Public Utilities Co., Inc., 208 N.C. 289, 292, 180 S.E. 592, 593-94

(1935). See also Chemimetals Processing, Inc. v. Schrimsher, 140

N.C. App. 135, 138, 535 S.E.2d 594 (2000)(holding that it is

well-settled that although a plaintiff is entitled to full recovery

for its damages, it is not entitled to a double recovery for the

same loss or injury); Chisholm v. UHP Projects, Inc., 205 F.3d 731,

738 (4th Cir. 2000)(holding the rule is an equitable doctrine that

operates to reduce a plaintiff's recovery from the non-settling

defendant to prevent the plaintiff from recovering twice from the

same assessment of liability).

     As did the district court, we too find the reasoning in

Chemimetals persuasive. In Chemimetals, the plaintiff sued its

corporate president for breach of contract, breach of fiduciary

duty, and unfair and deceptive trade practices arising from the

president's scheme to divert company assets to himself.      After

settling with the president, the corporation initiated a second

action against its board of directors and accountants on the same

factual allegations, alleging theories of negligence, including

breach of duty of care and breach of fiduciary duty in failing to

notice the former president's unlawful acts. Id. at 137. The North

                                 8
Carolina Court of Appeals held that the plaintiff’s second action

was barred, even though the defendants committed separate acts of

wrongdoing, because the defendants’ actions concurrently caused the

plaintiff to suffer the same injuries for which it already had been

fully compensated through the settlement agreement:

     [The plaintiff] has suffered but one injury in this
     case--monetary loss due to the purported diversion of
     profits and labor from [the plaintiff] by [the
     plaintiff's president]. Under the facts as alleged by
     [the plaintiff], all actions in the course of events
     leading to financial demise of [the company] were
     concurrent. [The plaintiff's] monetary loss, which was
     the injury created by [the president's] scheme, is the
     same injury caused by the alleged failure of the board of
     directors and CPAs to notice [the president's] unlawful
     acts. That only one injury occurred is in no way altered
     by the fact that the board of directors and CPAs may have
     been guilty of separate wrongdoing.

Id. Thus, as the plaintiff had not demonstrated any remaining

damages for which it had not been compensated, the court in

Chemimetals found that the trial court properly entered summary

judgment against the plaintiff.

     Likewise, the Plaintiffs in the instant case have alleged

nearly identical claims against CBP, Pasternek, and SGS, seeking

recovery for losses arising from Sun's financial collapse.   While

CBP, SGS and Pasternak may have all committed separate acts of

wrongdoing, the resulting injuries suffered by Sun and Cullu, are

the same. Thus, we find the Plaintiffs recovered at arbitration all

the damages to which they were entitled.

     First, a review of the arbitration panel’s decision shows that

                                  9
the Plaintiffs were compensated “for all of their compensable

injuries by way of the arbitration award.” The panel determined

that Sun suffered no direct damages, and found that it sustained

only consequential and incidental damages. These damages were

awarded to Sun in the form of lost future profits, and were trebled

pursuant to North Carolina's Unfair and Deceptive Trade Practices

Act. The panel also awarded damages to Cullu to compensate him for

his personal losses associated with Sun's financial collapse, as

well for injury to his reputation and certain medical expenses.

These damages also were trebled. The panel reduced the total award

to Cullu by the pre-arbitration settlement with Pasternek, and then

awarded Cullu those fees associated with the costs of arbitration.

Further, the panel held that the Plaintiffs had failed to carry

their burden of proof for their claims of fraud and emotional

distress, and found in favor of CBP on those claims. According to

the panel, the award was made “in full settlement of all claims

submitted to this Panel in this arbitration proceeding.”

     It is unpersuasive that the Plaintiffs sought between $9 and

$85 million from the arbitration panel, but did not recover those

sums.   As the district court correctly pointed out “[f]requently,

litigants do not receive the full damage verdict or judgment they

seek. A ‘disappointing’ result does not entitle a litigant to seek

damages for the same injuries from another defendant in the hopes

of a better recovery.” Sun Chemical Trading Corp. v. CBP Resources,

                                10
Inc., 2004 WL 1777582, at *5 (M.D.N.C. July 29, 2004).

     For these reasons, we find that the Plaintiffs have alleged no

theory of compensatory damages against SGS that has not already

been considered and/or awarded by the arbitration panel.2 Thus, the

Plaintiffs are not entitled to further compensation from SGS.

     Second, we do not find persuasive the Plaintiffs’ contention

that, because North Carolina’s one-satisfaction rule generally is

inapposite to punitive damages, they ought to be able to pursue an

action against SGS for punitive damages.

     Punitive damages are generally disfavored by the law, and

should be allowed only when they can properly promote the dual

purposes of punishment and deterrence. See Ratner v. Sioux Natural

Gas Corp., 719 F.2d 801 (5th Cir. 1983). To this end, the North

Carolina Supreme Court has held “a party may not recover punitive

damages for tortious conduct and treble damages for a violation of

Chapter 75 based on that same conduct.”    United Laboratories, Inc.

v. Kuykendall, 335 N.C. 183, 191, 437 S.E.2d 374, 379 (1993)

(citing   Ellis v. Northern Star, 326 N.C. 219, 227-28, 388 S.E.2d

127, 132 (1990)).

     In the instant case, the Plaintiffs seek punitive damages

against SGS based on the same conduct and injuries for which the

     2
      The district court has issued a thorough analysis detailing
the nature of the arbitration award in CBP’s subsequent action
against SGS. See CBP Resources, Inc. v. SGS Control Services, Inc.,
2005 WL 1166730 (M.D.N.C. May 17, 2005).

                                11
arbitration panel separately awarded Sun and Cullu treble damages

against CBP.   The Plaintiffs, however, have cited no case that

authorizes the trebling of damages against one defendant and

punitive   damages   against   a   subsequent   defendant,   when   both

defendants may be liable for common damages arising from a single

indivisible harm.

     Thus, we find that allowing the Plaintiffs to recover treble

damages from CBP, and punitive damages from SGS, for the same

wrongful conduct and injuries, would contravene North Carolina’s

one-satisfaction rule, as well as the North Carolina Supreme

Court’s holding in Kuykendall.

     As explicated above, under North Carolina law plaintiffs are

not entitled to more than one satisfaction for the same injuries,

“regardless of how many claims or bases of liability they may

assert, or how many defendants they may pursue.” Sun Chemical, 2004

WL 1777582, at *5. Thus, we find that by virtue of the arbitration

award, the Plaintiffs have received a full and complete recovery

for their damages, and therefore are prohibited from seeking

additional recovery from SGS.

                                   III.

     In conclusion, for the reasons stated in this opinion, we hold

the district court did not err when it dismissed Sun’s claims

against SGS pursuant to Rule 12(b)(6).

                                    12
     AFFIRMED

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