Court Opinion

ID: 799001
Source: CourtListenerOpinion
Date Created: 2012-05-01 07:18:33+00
Date Added: 2024-06-11T17:59:47.150803
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                             No. 10-2087

PAUL D. CARTY,

                 Plaintiff - Appellant,

           v.

WESTPORT HOMES OF NORTH CAROLINA, INC.; WPNC DEVELOPMENT,
LLC; JOHN B. SCHEUMANN; STEVEN M. DUNN; CHARLES D.
SCHEUMANN,

                 Defendants - Appellees.

Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte.   Graham C. Mullen,
District Judge. (3:08-cv-507-GCM-DCK)

Argued:   January 20, 2012                 Decided:   April 30, 2012

Before DUNCAN, WYNN, and DIAZ, Circuit Judges.

Affirmed by unpublished opinion. Judge Wynn wrote the opinion,
in which Judge Duncan and Judge Diaz concur.

ARGUED: Katherine Freeman, KATHERINE FREEMAN, PLLC, Charlotte,
North Carolina, for Appellant.   Michael A. Wukmer, ICE MILLER,
LLP, Indianapolis, Indiana, for Appellees.   ON BRIEF:   Stephen
W. Kearney, Charlotte, North Carolina, for Appellant. Scott M.
Tyler, Neil T. Bloomfield, MOORE & VAN ALLEN, PLLC, Charlotte,
North Carolina; George A. Gasper, ICE MILLER, LLP, Indianapolis,
Indiana, for Appellees.

Unpublished opinions are not binding precedent in this circuit.
WYNN, Circuit Judge:

             Plaintiff     Paul     D.   Carty    brought     numerous    causes    of

action against two businesses in which he had been involved and

the    businesses’    other    owners.          The   district   court    dismissed

Carty’s suit.        Because all of Carty’s claims fail, as a matter

of law, to state a claim upon which relief can be granted, we

affirm the district court.

                                           I.

            In    September        2004,    Carty     and    Defendants    John    B.

Scheumann,       Charles      D.     Scheumann,        and     Steven     M.      Dunn

(collectively     “Individual        Defendants”)      formed    two     businesses,

Westport Homes of North Carolina, Inc. (“Westport”) and WPNC

Development, LLC (“WPNC”). *             The two businesses, which developed

and sold real estate in North Carolina, essentially employed

Carty as an officer.               Upon the formation of the businesses,

Carty and the Individual Defendants entered into two agreements:

a     Shareholders     Agreement         relating     to     Westport     (“Westport

Shareholders Agreement”), and an Operating Agreement relating to

WPNC (“WPNC Operating Agreement”).

       *
        The Individual Defendants and Westport                     and     WPNC    are
referred to collectively as “Defendants.”

                                           2
              Per    the   Westport         Shareholders    Agreement,     Carty     was

given   225    common      shares     of    the    total   1500   common    shares    of

Westport      stock.          The    Westport      Shareholders      Agreement     gave

Westport the right to purchase some or all of any shareholder’s

stock     involuntarily.              The    Westport      Shareholders     Agreement

further allowed the purchase price for such an involuntary share

transfer to be paid in all cash, or twenty percent in cash and

eighty percent in the form of a promissory note.                       Notably, such

a note would be, among other things, “subordinated to all debts

and liabilities that are owed by the Corporation to a third

party.”       J.A. 168.         The Westport Shareholders Agreement also

designated Indiana law as controlling.

              Similarly,       the    WPNC     Operating    Agreement      allowed    an

eighty-percent supermajority of WPNC’s members to involuntarily

remove a manager.             The WPNC Operating Agreement also allowed

WPNC    to    purchase,       forcibly,      the    membership     interest   of     any

member.       And,     like    the    Westport      Shareholders     Agreement,      the

purchase price for that interest could take the form of all

cash, or twenty percent in cash and eighty percent in the form

of a promissory note.               Again, such a note would be, among other

things, “subordinated to all debts and liabilities that are owed

by the Company to a third party.”                   J.A. 57.      The WPNC Operating

Agreement also designated Indiana law as controlling.                         And the

                                              3
WPNC    Operating          Agreement      included       a    clause       stating       that     the

parties had had the opportunity to seek the advice of counsel.

            In       late    2006/early         2007,    Westport          and     WPNC    removed

Carty     from       the    companies.            Specifically,            pursuant        to    the

Westport     Shareholders              Agreement         and     the         WPNC        Operating

Agreement,       a    supermajority         of       Westport’s        and       WPNC’s     owners

removed     Carty          from     his     managerial          roles        and        forced     an

involuntary purchase of his ownership interests.                                   Per the 2004

agreements, the involuntary purchases took place in the form of

twenty percent in cash and eighty percent in a promissory note

subordinated         to     all   other     debt.        Also     at       that     time,       Carty

entered    into       a     Termination         Agreement,      pursuant           to    which    he

received $75,000 for, among other things, a release of “any and

all claims, actions, causes of action or demands against the

Companies . . . .”            J.A. 220.

            In        October       2008,        Carty       filed     a     lawsuit,           which

Defendants removed to federal district court and then moved to

dismiss.     In response, Carty filed an Amended Complaint in the

district court in January 2009.                      In the Amended Complaint, Carty

stated eight causes of action: breach of the WPNC promissory

note; breach of the Westport promissory note; unjust enrichment;

constructive         fraud;       breach    of    fiduciary          duty;    a     claim       under

North    Carolina’s          Unfair       and    Deceptive       Trade       Practices           Act;

tortious    interference            with    Carty’s          agreements       with       WPNC    and

                                                 4
Westport;   and   economic    duress.         Defendants    again      moved    to

dismiss.

            In May 2010, a magistrate judge issued a memorandum

and   recommendation   that    the   motions     to    dismiss   be    granted.

Carty   filed     various     objections       to     the   memorandum         and

recommendation.      Nevertheless,       in   August    2010,    the   district

court entered an order granting the motions and dismissing the

case.   Carty appeals.

                                     II.

            On appeal, Carty argues that the district court erred

in dismissing all of his claims and in denying him leave to

further amend his complaint.          We review de novo the district

court’s dismissal.       Sucampo Pharm., Inc. v. Astellas Pharma,

Inc., 471 F.3d 544, 550 (4th Cir. 2006).              When ruling on a Rule

12(b)(6) motion to dismiss, “a judge must accept as true all of

the factual allegations contained in the complaint.”                   Erickson

v. Pardus, 551 U.S. 89, 94 (2007).            Nevertheless, to survive the

motion, a complaint must contain sufficient facts to state a

claim that is “plausible on its face.”                 Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007).              Further, “[w]e review the

district court’s denial of leave to amend the complaint for an

abuse of discretion.”        US Airline Pilots Ass’n v. Awappa, LLC,

615 F.3d 312, 320 (4th Cir. 2010) (quotation marks omitted).

                                     5
                                        A.

             As an initial matter, we note that, at the time his

employment and ownership interests were severed, Carty entered

into a Termination Agreement with Westport and WPNC.                            Pursuant

to that agreement, he received $75,000 for, among other things,

a release of “any and all claims, actions, causes of action or

demands   against     the   Companies        .   .    .        .”     J.A.    220.     The

Termination Agreement would appear to bar, at a minimum, Carty’s

claims against Westport and WPNC.                    See, e.g., Ind. Bell Tel.

Co., Inc. v. Mygrant, 471 N.E.2d 660, 664 (Ind. 1984) (noting

“the   important      policy    of   upholding                releases   in    order   to

facilitate     the    orderly   settlement           of       disputes”);     McGladrey,

Hendrickson & Pullen v. Syntek Fin. Corp., 92 N.C. App. 708,

710-11, 375 S.E.2d 689, 691 (1989) (“[A] comprehensively phrased

‘general release,’ in the absence of proof of contrary intent,

is   usually   held    to   discharge    all     .        .    .    claims   between   the

parties.”).     However, Carty alleges, among other things, that he

entered into the Termination Agreement under coercion amounting

to economic duress.         We therefore look beyond the Termination

Agreement to the individual claims to determine whether each was

properly dismissed.

                                        6
                                          B.

            With his first two causes of action, for breach of

contract, Carty contends that Westport and WPNC breached their

contracts    by   refusing    to    pay    as   required     by    the    promissory

notes.      Specifically,     Carty       alleges     that   WPNC    and    Westport

relied   upon     the    promissory     notes’      subordination         clauses     to

refuse payment but that those clauses, which are identical, are

vague, unconscionable, and invalid.

            The   notes’    subordination       provisions        state    that     “the

payment of the principal of and interest on this Note shall be

subordinated in right of payment . . . to the prior payment in

full of all debt, including debt owed to John B. Scheumann.”

J.A. 227, 232.          There is nothing vague or unclear about these

provisions.       This    Court    is   thus    not   free   to     re-write      them.

First Nat’l Bank & Trust v. Indianapolis Pub. Hous. Agency, 864

N.E.2d 340, 350 (Ind. Ct. App. 2007) (“When the language of a

contract is clear and unambiguous, the intent of the parties is

determined from the four corners of the instrument.                        In such a

situation, the terms are conclusive and we will not construe the

contract or look at extrinsic evidence, but will merely apply

the contractual provisions.”) (citation omitted); Weaver v. St.

Joseph of the Pines, Inc., 187 N.C. App. 198, 207, 652 S.E.2d

701, 709 (2007) (“When the language of the contract is clear and

unambiguous, construction of the agreement is a matter of law

                                          7
for the court, and the court cannot look beyond the terms of the

contract     to        determine        the        intentions            of      the     parties.”)

(quotation marks and brackets omitted).

            Further,           almost     identical           provisions          exist       in     the

Westport     Shareholders              Agreement             and        the     WPNC        Operating

Agreement.        Yet Carty never claimed that those agreements, or

their    subordination           clauses,      were          somehow       vague       or    unclear.

Moreover,        under        those     agreements,            which           Carty        does     not

challenge, WPNC and Westport are entitled to do precisely what

Carty is disputing here: subordinate his note to all other debt.

            Additionally, Carty does not allege that all debt, to

John Scheumann or otherwise, has been paid.                                   Indeed, Carty does

not even allege generally that “all conditions precedent have

been    performed,        have      occurred,          or   have        been    excused.”           Ind.

Trial P. R. 9.               See also N.C. R. Civ. P. 9 (“In pleading the

performance        or        occurrence       of       conditions             precedent,       it    is

sufficient to aver generally that all conditions precedent have

been performed or have occurred.”).                            Carty therefore fails to

allege    that        this    condition       precedent            in    the     notes      has     been

satisfied.

            Finally,           to   the   extent            that    Carty       claims       that     he

signed     the     WPNC       and     Westport         promissory             notes    only        under

coercion     and       that     the     notes’         subordination            language       should

therefore        be     disregarded,          that          argument          necessarily          fails

                                                   8
because a promissory note recipient need not sign the note.                See

Ind. Code § 26-1-1-201; N.C. Gen. Stat. § 25-1-201; Ind. Code §

26-1-3.1-104, cmt. 1; N.C. Gen. Stat. § 25-3-104, cmt. 1.

          In     essence,    we   agree      with   the   magistrate   judge’s

observation    in   his    memorandum       and   recommendation   that   Carty

“seeks to have terms of agreements he does not like nullified by

the Court.”      J.A. 310.        Because Carty failed to sufficiently

plead a breach of contract, we conclude that the district court

properly dismissed his first two causes of action.

                                      C.

          With his third cause of action, for unjust enrichment,

Carty   claims      that    all   Defendants        purposefully   overstated

distributions to Carty for 2006 and 2007 in Form K-1s, making

Carty’s tax liability appear greater than it should have.

          However, it is well-established that “[t]he doctrine

of unjust enrichment is based on ‘quasi-contract’ or contract

‘implied in law’ and thus will not apply here where a contract

exists between two parties.”                Atl. & E. Carolina R. Co. v.

Wheatly Oil Co., Inc., 163 N.C. App. 748, 753, 594 S.E.2d 425,

429 (2004); see also Sapp v. Flagstar Bank, FSB, 956 N.E.2d 660,

667 (Ind. Ct. App. 2011) (holding that a bank could not assert

an unjust enrichment claim against a customer arising out of the

customer’s allegedly improper withdrawal where the bank’s and

                                        9
the customer’s relationship was governed by contract).                                   Here,

several       detailed       agreements          exist     between           the    parties,

governing,      among    other      things,       the    ownership         and     employment

relationships.

              Further,      to    successfully          state    a   claim       for    unjust

enrichment,     a    plaintiff      must    allege       that    (1)    he       conferred    a

benefit   on    the     defendant,      (2)      the    benefit      was     not   conferred

officiously or gratuitously, (3) the benefit is measurable, and

(4) the defendant consciously accepted the benefit.                                    Booe v.

Shadrick, 322 N.C. 567, 570, 369 S.E.2d 554, 556 (1988); see

also Fiederlein v. Boutselis, 952 N.E.2d 847, 858 (Ind. Ct. App.

2011) (“To prevail on a claim of unjust enrichment, a claimant

must establish that a measurable benefit has been conferred on

the   defendant       under      such   circumstances           that    the      defendant’s

retention of the benefit without payment would be unjust.”).

Here, Carty has failed to allege that he paid any taxes owed by

Defendants or otherwise conferred on the Defendants any benefit.

For   these    reasons,       Carty’s    unjust         enrichment      claim       therefore

fails.

                                            D.

              With    his    fourth     cause      of    action,       for    constructive

fraud, Carty claims that the Individual Defendants made material

misrepresentations          regarding      the    subordination         clauses        in   the

                                            10
promissory notes and regarding Westport’s and WPNC’s intent and

ability to pay the notes.                Carty alleges that the Individual

Defendants had a fiduciary duty to be open with Carty due to his

minority      ownership     and     special      relationship,      and   that    he

reasonably relied on the misrepresentations to his detriment.

              Carty fails, however, to allege any specifics about

the     purported      misrepresentations.             Further,     the   Westport

Shareholders     Agreement        and   the    WPNC   Operating    Agreement     made

clear that the promissory notes would be subordinated to all

other debt.      And as already noted, Carty has made no allegation

that the Westport Shareholders Agreement and the WPNC Operating

Agreement were objects of constructive or other fraud.                      So the

promissory     notes’     being    consistent     with    the    2004   agreements—

which they are—cannot, as a matter of law, constitute fraud.

See Shortridge v. Platis, 458 N.E.2d 301, 304 (Ind. Ct. App.

1984) (“There can be no recovery in fraud for a deception by

which a person is induced to do something which he is already

bound    to   do.”).      Carty’s       constructive     fraud    claim   therefore

fails.

                                          E.

              With his fifth cause of action, Carty alleges that the

Individual Defendants breached their fiduciary duties to Carty.

Specifically, Carty alleges that, as majority owners of Westport

                                          11
and WPNC, the Individual Defendants owed Carty a fiduciary duty,

but that they acted to their benefit and Carty’s detriment in

forcing him from his ownership interest in WPNC and Westport,

causing him economic harm.        Carty contends that this constituted

a breach of the Individual Defendants’ duty of loyalty.

          Here again, the Individual Defendants’ actions fully

comport with the 2004 contracts, which expressly allowed for

involuntary    share   transfers,    i.e.,      ousting   owners    from    their

interests.    This is what happened to Carty.             Yet Carty nowhere

challenges    either   the    Westport    Shareholders     Agreement       or   the

WPNC Operating Agreement.          The Individual Defendants’ forcing

Carty from his ownership interest therefore cannot serve as the

basis for a breach of fiduciary duty claim.                    See MFP Eagle

Highlands, LLC v. Am. Health Network of Indiana, LLC, No. 1:07-

cv-0424-DFH-WGH, 2009 WL 77679, at *6 (S.D. Ind. Jan. 9. 2009)

(“Quite   simply,      [the    party]     was     completely       within       its

contractual rights to [engage in the disputed transaction], so

it was not violating other legal duties in doing so.”); Regan v.

Natural Res. Grp., Inc., 345 F. Supp.2d 1000, 1011-13 (D. Minn.

2004) (holding that terminated shareholder’s breach of fiduciary

claim must fail where shareholders’ agreement explicitly allowed

shareholder to be terminated without cause).

                                     12
                                               F.

             Carty’s         sixth     cause        of     action,         for     unfair    and

deceptive trade practices in violation of N.C. Gen. Stat. § 75-

1.1, essentially boils down to a claim that Defendants used a

straw man to qualify as general contractors in North Carolina

and     engaged        in     unspecified           “other      fraudulent          acts     and

omissions.”       J.A. 144.

             Notably, “[i]t is well recognized . . . that actions

for     unfair    or    deceptive       trade        practices        are    distinct       from

actions    for    breach       of     contract,          and   that    a    mere    breach    of

contract, even if intentional, is not sufficiently unfair or

deceptive to sustain an action under [Chapter 75].”                                   Eastover

Ridge, L.L.C. v. Metric Constructors, Inc., 139 N.C. App. 360,

367-68, 533 S.E.2d 827, 832-33 (2000) (quotation marks omitted).

To become an unfair trade practice, a breach of contract must be

“characterized          by     some     type        of     egregious        or     aggravating

circumstance . . . .”                Norman Owen Trucking, Inc. v. Morkoski,

131 N.C. App. 168, 177, 506 S.E.2d 267, 273 (1998).                                   Further,

there    exists    a        “longstanding      presumption            against      unfair    and

deceptive practices claims as between employers and employees.”

Dalton v. Camp, 353 N.C. 647, 658, 548 S.E.2d 704, 712 (2001).

And “[m]atters of internal corporate management, such as the

manner of selection and qualifications for directors, do not

affect commerce as defined by Chapter 75 and our Supreme Court.”

                                               13
Wilson v. Blue Ridge Elec. Membership Corp., 157 N.C. App. 355,

358, 578 S.E.2d 692, 694 (2003).

            Here,      there       exist        contracts,          an           employment

relationship, and corporate management issues.                         Nothing alleged

anywhere    in     Carty’s    complaint        makes    this      case      sufficiently

exceptional to jump the legal hurdles to a Chapter 75 claim.

Further,    Carty’s    “straw      man”    allegation        is   so     bald      that   it

cannot survive a motion to dismiss.                     Carty alleges no facts

relating to his straw man claim, instead relying entirely on a

formulaic    recitation       of   the    elements      of   such      a    claim.        He

therefore fails to plead sufficient facts to state a claim that

is “plausible on its face.”              Twombly, 550 U.S. at 570.                 In sum,

Carty fails to successfully plead a Chapter 75 claim.

                                          G.

            With     his     seventh      cause    of    action,           for    tortious

interference with contract, Carty contends that the Individual

Defendants “intentionally induced . . . Westport and/or WPNC[]

not to perform the contract, as described herein.”                               J.A. 145.

Carty alleges nothing more specific than this.                             Based on the

rest of the Amended Complaint, we assume that the contracts to

which Carty is referring are the Westport and WPNC promissory

notes.

                                          14
             As discussed above, Carty has failed to successfully

plead that the promissory notes have been breached.                              Under those

circumstances, there can be no tortious interference.                               See Ind.

Reg’l Recycling, Inc. v. Belmont Indus., Inc., 957 N.E.2d 1279,

1287 (Ind. App. 2011) (“The five elements necessary for tortious

interference           with    a    contractual            relationship      are:   (1)     the

existence of a valid and enforceable contract; (2) defendant’s

knowledge        of    the    existence        of     the    contract;     (3)   defendant’s

intentional           inducement       of     breach        of   the   contract;    (4)     the

absence      of       justification;           and     (5)       damages    resulting      from

defendants wrongful inducement of the breach.”); United Labs.,

Inc.   v.    Kuykendall,           322   N.C.       643,     662,   370    S.E.2d   375,    387

(1988) (same).          This claim, too, therefore fails.

                                                H.

             With       his     eighth        claim,    for      economic    duress,      Carty

alleges that Defendants prevented him from exercising his free

will regarding the promissory notes, the termination contract,

and the notice of buyout and release.                             Carty argues on appeal

that the “District Court erred when it determined that Indiana

law does not recognize claims for economic duress.”                              Appellant’s

Br. at 26.             Defendants, in turn, argue that Carty failed to

object      to    this        aspect     of     the    magistrate’s         memorandum      and

recommendation and has therefore waived this issue on appeal.

                                                15
            We agree with Defendants:            Carty’s objections to the

magistrate’s      memorandum    and    recommendation    do   not   address—or

even hint at—this argument.            It is, therefore, waived.        United

States v. Midgette, 478 F.3d 616, 621 (4th Cir. 2007) (“[A]

party . . .       waives a right to appellate review of particular

issues    by   failing    to    file    timely    objections      specifically

directed to those issues.”).

                                       I.

            Finally, the district court held that allowing Carty

to amend the Amended Complaint would be futile and therefore

denied leave to amend.          Carty argues that this constituted an

abuse of discretion.       See US Airline Pilots Ass’n, 615 F.3d at

320 (“We review the district court’s denial of leave to amend

the complaint for an abuse of discretion.”) (quotation marks

omitted).      A number of the documents attached to, and thereby

incorporated into, the complaint (which had already been once

amended   based    on   Defendants’     motions   to   dismiss)     necessarily

defeat Carty’s claims.         See Fed. R. Civ. P. 10(c) (“A copy of a

written instrument that is an exhibit to a pleading is a part of

the pleading for all purposes.”); US Airline Pilots Ass’n, 615

F.3d at 320 (“The district court does not abuse its discretion

in denying leave when amendment would be futile.”) (quotation

                                        16
marks omitted).     The district court’s refusal to allow amendment

therefore did not constitute an abuse of discretion.

                                   III.

           In sum, all of Carty’s causes of action in his Amended

Complaint fail, for one reason or another, as a matter of law.

We therefore affirm the district court’s grant of the motion to

dismiss.     We also hold that the district court did not abuse its

discretion    in   refusing   to   allow   Carty   to   again   amend   his

complaint.

                                                                  AFFIRMED

                                    17