Regency Ctrs. Acquisition, LLC v. Crescent Acquisitions, LLC, 2018 NCBC 7.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF MECKLENBURG 17 CVS 11354
REGENCY CENTERS ACQUISITION, LLC,
Plaintiff, ORDER AND OPINION ON v. DEFENDANT’S MOTION TO DISMISS CRESCENT ACQUISITIONS, LLC,
Defendant.
THIS MATTER comes before the Court upon Defendant’s Motion to Dismiss
(N.C. R. Civ. P. 12(b)(6)). (“Motion”, ECF No. 10.) Defendant seeks dismissal of the
claims asserted against it in the Complaint (ECF No. 1): equitable estoppel by fraud,
tortious interference with prospective economic advantage, unfair and deceptive
trade practices under N.C. Gen. Stat. § 75-1.1(a) (hereinafter, references to the North
Carolina General Statutes will be to “G.S.”), and recovery in quantum meruit.
THE COURT, having considered the Motion, the briefs and exhibits filed in
support of and in opposition to the Motion, certain documents referenced in the
Complaint, the arguments of counsel at the hearing, and other appropriate matters
of record, concludes that the Motion should be GRANTED for the reasons set forth
below.
McGuireWoods LLP, by Mark E. Anderson, Esq. and Tracey S. DeMarco, Esq., for Plaintiff Regency Centers Acquisition, LLC.
Troutman Sanders LLP, by Kiran H. Mehta, Esq. and Sarah Ash, Esq., for Defendant Crescent Acquisitions, LLC.
McGuire, Judge. I. FACTS AND PROCEDURAL BACKGROUND
1. The Court does not make findings of fact on motions to dismiss under
Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. G.S. § 1A-1, Rule 12(b)(6)
(hereinafter the North Carolina Rules of Civil Procedure will be referred to as
“Rule(s)”). The Court only recites those facts included in the Complaint that are
relevant to the Court’s determination of the Motion. See, e.g., Concrete Serv. Corp. v.
Inv’rs Grp., Inc., 79 N.C. App. 678, 681, 340 S.E.2d 755, 758 (1986). The Court also
may consider documents to which the Complaint specifically refers, even when such
documents are submitted by the defendant. Oberlin Capital, L.P. v. Slavin, 147 N.C.
App. 52, 60, 554 S.E.2d 840, 847 (2001).
2. Plaintiff Regency Centers Acquisition, LLC is a leading national
landlord and development partner and has for many years maintained a development
relationship with Whole Foods Market Group, Inc. (“Whole Foods”). (ECF No. 1 at
¶ 3.) Plaintiff currently “owns and/or manages twenty-three (23) shopping centers in
which Whole Foods is the anchor tenant.” (Id. at ¶ 3.) In North Carolina, Plaintiff
served as the developer for one Whole Foods store, and is the landlord for two
shopping centers of which Whole Foods is the anchor tenant. (Id. at ¶ 4.)
3. Defendant Crescent Acquisitions, LLC is a North Carolina-based land
developer with “expertise in multi-family development.” (Id. at ¶¶ 2, 8.)
4. In June 2010, Plaintiff began searching for a suitable location to develop
a new Whole Foods store in Charlotte, North Carolina. (Id. at ¶ 5.) Plaintiff “invested
significant time and resources to identify an appropriate location for the proposed development.” (Id. at ¶ 6.) Plaintiff ultimately decided to pursue the development on
property located in the uptown area of Charlotte, North Carolina (hereinafter the
“Charlotte Project”). (Id.)
5. “The cost of land required any potential retail development to be a part
of a mixed-use development, with the retail portion only a minority use of the
development.” (Id. at ¶ 7.) Accordingly, Plaintiff needed a mixed-use development
partner to lead the construction and development. (Id.) Plaintiff had recent
experience working with Defendant on a residential development project in Raleigh,
North Carolina.” (Id. at ¶ 8.) At the time, however, Defendant “did not have a retail
development platform, any experience in developing vertically integrated, grocery
anchored mixed-use projects” and had not previously developed property for Whole
Foods. (Id.) Nevertheless, Plaintiff decided to partner with Defendant on the
Charlotte Project. (Id. at ¶ 9.)
6. On August 22, 2014, Plaintiff and Defendant entered into a Letter of
Intent (“LOI”) for the Charlotte Project. (Id.; LOI, ECF No. 12.2.) The LOI provides
“[t]he general terms upon which Regency would be willing to purchase” the Charlotte
Project once development of the property was completed. (ECF No. 12.2 at p. 1.) The
LOI provides that Defendant would purchase the property for the Charlotte Project
and would “perform all development services, including construction of the Whole
Foods premises.” (ECF No. 1 at ¶ 10.) The parties, however, “understood that
[Plaintiff] was responsible for managing all aspects of Whole Foods’ involvement in the project, including site approval, negotiation of the letter of intent and the lease,
and design of the retail component of the proposed development.” (Id.)
7. The LOI further provides that Plaintiff would purchase the retail
component of the Charlotte Project from Defendant upon its completion. (Id.) Plaintiff
alleges that the LOI provides that “[Plaintiff] would purchase the retail component
in exchange for approximately $17.25 million.” (Id.) The LOI, however, does not
contain the $17.25 million figure. Instead, the LOI provides that the commercial
retail component of the Charlotte Project would consist of 40,000 square feet of
grocery retail area which Plaintiff would purchase for $365.00 per square foot, and
an additional 7,500 square feet of other retail area which Plaintiff would purchase for
$340.00 per square foot.1 (ECF No. 12.2 at pp. 1, 2.)
8. The LOI also contains the following provisions:
The foregoing sets forth the general terms and conditions upon which Regency would be interested in purchasing the Property. It is not an offer nor is it a binding agreement, but merely an expression of Regency’s interest. If the foregoing general terms and conditions are acceptable to you, please indicate such in the space provided below and return to us. We will then forward it to our attorneys to prepare and forward to you a contract which reflects these understandings. Neither of us shall be bound until an acceptable Purchase and Sale Agreement can be executed by each of us;
and,
It is expressly understood and agreed by both parties that the foregoing proposal constitutes an outline for discussion
1 The $17.25 million figure apparently is based on a calculation, albeit with a minor math
error, using the proposed square footage of the retail component times the price per square foot contained in the LOI: (40,000 x $365 = $14,600,000) + (7,500 x $340 = $2,550,000) = $17,150,000. purposes only with respect to purchasing the above- referenced property and does not create any contractual rights or obligations on the part of either party. Significant additional terms and conditions of the purchase agreement are yet to be negotiated and neither party is obligated to continue such negotiations. In no event shall any contractual rights or obligations exist until such time as a purchase agreement is fully executed and delivered by both parties. Accordingly, the parties agree not to rely on the terms of this letter and that any obligation incurred, funds spent and business opportunities lost are at each party’s sole risk.
(Id. at p. 6 (italics in original).)
9. In addition, the LOI contemplates a potential second phase of retail
development as part of the Charlotte Project. The LOI contains a paragraph titled
“Phase II” which provides “[Defendant] contemplates the Property being developed
in two Phases . . . . Therefore, [Plaintiff] shall have a one-time right of first offer to
purchase any Phase II Retail at cost plus 15% . . . .” (Id. at p. 5.)
10. After executing the LOI Plaintiff and Defendant began negotiating the
terms of the Purchase and Sale Agreement (“PSA”). (ECF No. 1 at ¶ 14.) The parties
exchanged several drafts of the PSA, with each party making changes to the terms of
the drafted PSA. (Id.) Plaintiff, however, alleges that in the drafts exchanged between
the parties the purchase price of $17.25 million “always remained the same.” (Id.)
11. Simultaneously with the negotiation of the PSA, Plaintiff negotiated
and agreed upon the terms of a lease with Whole Foods (“Whole Foods Lease”). (ECF
No. 1 at ¶¶ 12, 15.) “At Whole Foods’ request,” the landlord on the Whole Foods Lease
was changed from Plaintiff to Defendant “in a late draft of the lease.” (Id. at ¶ 15.) It is standard industry practice “[i]n multi-party commercial development projects . . .
to execute a lease agreement that lists a master developer as the initial landlord
during the project’s construction phase, where the completed commercial project is
intended to be sold to the development partner.” (Id. at ¶ 11.)
12. On December 24, 2014, Defendant and Whole Foods executed the Whole
Foods Lease. (Id. at ¶ 15.) Plaintiff was not a signatory to the Whole Foods Lease. (Id.
at ¶ 16.) The Whole Foods Lease contains the following provision:
Notwithstanding anything to the contrary set forth herein, Tenant hereby acknowledges that Landlord intends to sell the Retail Unit(s) to Regency Centers, L.P., a Delaware limited partnership, or affiliate (“Regency”) upon the completion of construction by Landlord of the Final Initial Landlord Work and the Tender Date (the “Planned Assignment”). Effective as of the Planned Assignment, Regency shall assume Landlord’s obligations under this Lease which accrue after the date of such Planned Assignment, and the named Landlord hereunder shall be released from any liability under this Lease which accrues after the date of such Planned Assignment, and Tenant agrees to look solely to Regency as Landlord for the performance of such subsequently accruing obligations.
(Id.) 13. On January 5, 2015, Plaintiff requested that Defendant confirm that
Plaintiff’s $17.25 million purchase-price offer was a “market offer,” and also indicated
that Defendant would require Plaintiff to purchase Phase II as a condition of the sale.
(Id. at ¶¶ 18–19.) On January 28, 2015, Defendant followed up this request with an
email to Plaintiff that stated, in relevant part, as follows:
When we first entered into LOI discussions with you on [the Charlotte Project] it was not yet clear what the final program would be on-site. Since that time we have entirely redesigned the site, received better input on pricing, negotiated the final specifications for Whole Foods and solidified our plans for the phase two development. As we have successfully navigated that process, our economics for the investment have continued to be squeezed.
As a result of the erosion of economics and our progress in our internal investment process, we need to address two questions in order to proceed with our deal with you. First, we need to ensure that we have a deal on both the phase one Whole Foods and the phase two retail. Second, we need something to support the fact that your offer for the overall retail component is in alignment with market.
(B. Collins Jan. 28, 2015 email, ECF No. 12.3.)
14. In response to Defendant’s requests, Plaintiff engaged Dr. Howard Biel,
“a reputable mid-Atlantic developer, to assess the deal and provide an opinion
regarding market substantiation[.]” (ECF No. 1 at ¶ 22.) On February 13, 2015,
Plaintiff provided Dr. Biel’s assessment to Defendant. (Id. at ¶ 23; Chain of emails
re: H. Biel opinion, ECF No. 12.4.) Plaintiff alleges that Dr. Biel “confirmed that the
agreed-upon $17.25 million purchase price was consistent with the market price.”
(ECF No. 1 at ¶ 23.) Defendant did not respond to Dr. Biel’s assessment or engage in
any further negotiations with Plaintiff regarding the purchase price for the Charlotte
Project. (Id. at ¶ 25.)
15. On December 10, 2015, Defendant notified Plaintiff that its Broker
Opinion of Value (“BOV”)2 for Phase I of the Charlotte Project was $25.5 million. (Id.
at ¶ 28; Email re: BOV, ECF No. 12.5.) On January 6, 2016, without waiting for
Plaintiff to respond to the BOV, Defendant broke ground on the Charlotte Project.
2 Also sometimes referred to as a “broker price opinion” or “comparative market analysis.”
See G.S. §93A-82. (ECF No. 1 at ¶ 29.) As of the filing of this lawsuit, Plaintiff and Defendant have not
come to an agreement on the purchase price, and the parties have not signed a
finalized PSA. (Id. at ¶ 30.)
16. On June 16, 2017, Plaintiff filed this lawsuit making claims for:
equitable estoppel by fraud, alleging that Defendant engaged in fraud by inducing
Plaintiff to perform development work and negotiate the Whole Foods Lease by
falsely representing, up until January 2015, that Defendant would sell Phase I of the
Charlotte Project to Plaintiff for $17.25 million (Count I); tortious interference with
prospective economic advantage, alleging that Defendant interfered with Plaintiff’s
right to enter into a lease agreement directly with Whole Foods (Count II); unfair and
deceptive trade practices in violation of the Unfair and Deceptive Trade Practices Act,
G.S. § 75-1.1(a) (“UDTPA”), alleging that Defendant’s fraud and interference with
Plaintiff’s relationship with Whole Foods were deceptive (Count III); and,
alternatively, recovery in quantum meruit, alleging that Plaintiff should be
compensated for its services in the development of the Charlotte Project (Count IV).
17. On June 29, 2017, this matter was designated to the North Carolina
Business Court pursuant to G.S. § 7A-45.4. (Designation Order, ECF No. 3.) On July
5, 2017, the case was assigned to the undersigned by Order Chief Business Court
Judge James L. Gale. (Assignment Order, ECF No. 5.)
18. On August 11, 2017 Defendant filed the Motion and a Memorandum of
Law in Support of its Motion to Dismiss (Corrected Memo. Supp. Mot. to Dismiss,
ECF No. 12.) On September 7, 2017, Plaintiff filed its amended Memorandum in Opposition to the Motion. (Memo. Opp. Mot. to Dismiss, ECF No. 14.) On September
25, 2017, Defendant filed its Reply Brief in Support of its Motion to Dismiss (Reply
Supp. Mot. to Dismiss, ECF No. 18.) On November 8, 2017, the Court held a hearing
on the Motion. The Motion is now ripe for disposition.
II. ANALYSIS
A. Rule 12(b)(6) standard
19. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court’s
inquiry is “whether, as a matter of law, the allegations of the [C]omplaint, treated as
true, are sufficient to state a claim upon which relief may be granted under some
legal theory, whether properly labeled or not.” Harris v. NCNB Nat’l Bank, 85 N.C.
App. 669, 670, 355 S.E.2d 838, 840 (1987). North Carolina is a notice pleading state.
See, e.g., Feltman v. City of Wilson, 238 N.C. App. 246, 252, 767 S.E.2d 615, 620 (2014)
(quoting Wake Cty. v. Hotels.com, L.P., 235 N.C. App. 633, 646, 763 S.E.2d 477, 486
(2014)). “Under notice pleading, a statement of claim is adequate if it gives sufficient
notice of the claim asserted to enable the adverse party to answer and prepare for
trial, to allow for the application of the doctrine of res judicata, and to show the type
of case brought.” Id.
20. Dismissal of a claim pursuant to Rule 12(b)(6) is proper “(1) when the
complaint on its face reveals that no law supports plaintiff’s claim; (2) when the
complaint reveals on its face the absence of fact sufficient to make a good claim; [or]
(3) when some fact disclosed in the complaint necessarily defeats the plaintiff’s claim.” Oates v. JAG, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985). In deciding
a motion to dismiss, the Court must construe the Complaint liberally and accept all
well-pleaded allegations as true. Laster v. Francis, 199 N.C. App. 572, 577, 681 S.E.2d
858, 862 (2009). The Court, however, is not required “to accept as true allegations
that are merely conclusory, unwarranted deductions of fact, or unreasonable
inferences.” Good Hope Hosp., Inc. v. N.C. Dep’t of Health & Human Servs., 174 N.C.
App. 266, 274, 620 S.E.2d 873, 880 (2005). In addition, the Court may consider
documents that are the subject of Plaintiff’s Complaint and to which the Complaint
specifically refers, including a contract that forms the subject matter of the action.
Oberlin Capital, L.P., 147 N.C. App. at 60, 554 S.E.2d at 847.
21. Defendant seeks dismissal of all of Plaintiff’s claims. The Court will
analyze each claim individually, but first discusses the significance of the LOI in
deciding the Motion.
B. Plaintiff does not seek to enforce the LOI, but instead ignores the LOI
22. As a preliminary matter, the Court notes that unlike most of the
reported cases involving attempts to enforce terms contained in letters of intent, in
this action Plaintiff does not contend that the LOI is a binding contract. This is
consistent with the reported cases in North Carolina, which have held that LOI’s of
the type entered into between the parties to this action—those that are expressly non-
binding and contemplate a more detailed future agreement between the parties—
usually are not binding agreements. E.g., JDH Capital, LLC v. Flowers, 2009 NCBC
LEXIS 8, at *15 (N.C. Sup. Ct. Mar. 13, 2009) (finding that the letter of intent at issue was not a binding contract because it, inter alia, stated on its face that it was a “letter
of intent and that it is not binding,” “contemplate[d] the execution of a more complete
agreement,” and contained “no language inferring an intent to be bound”) (citing
Durham Coca-Cola Bottling Co. v. Coca-Cola Bottling Co. Consolidated, 2003 NCBC
3, at *PP 37, 46 (N.C. Super. Ct. Apr. 28, 2003).)); see also Boyce v. McMahan, 22 N.C.
App. 254, 258, 206 S.E.2d 496, 499 (1974) (holding that the agreement at issue was
“made [ ] subject to a more detailed agreement at some specific date to be agreed to
by the parties hereto” and was therefore not a binding contract (internal quotation
marks omitted)).
23. As was the case in the above-cited decisions, the LOI in this action
contains explicit language stating that the parties will not be bound by its terms
unless and until the parties execute a PSA. (ECF No. 12.2 at p. 6.) The LOI provides
that “[i]t is not an offer nor is it a binding agreement, but merely an expression of
[Plaintiff]’s interest . . . . Neither of us shall be bound until an acceptable [PSA] can
be executed by each of us.” (ECF No. 12.2 at p. 6.) The LOI also states that
“[s]ignificant additional terms and conditions of the [PSA] are yet to be negotiated
and neither party is obligated to continue such negotiations. In no event shall any
contractual rights or obligations exist until such time as a [PSA] is fully executed and
delivered by both parties.” (Id (italics omitted).)
24. Although Plaintiff does not allege that the terms of the LOI create a
binding contract, Plaintiff contends that Defendant bound itself to a purchase price
of $17.25 million prior to the parties executing a final PSA, and attempts to fashion claims for equitable estoppel, tortious interference, unfair trade practices, and
quantum meruit out of this contention. Plaintiff does not argue that the LOI language
is ambiguous, or does not reflect the parties’ intentions. In fact, Plaintiff ignores the
LOI and seeks to have the Court ignore it as well. This is not supported by North
Carolina decisions. Rather, courts should not “ignore an initial agreement between
the parties that fails to include binding language and specifically states that the
agreement is non-binding until a definitive agreement is reached.” JDH Capital, 2009
NCBC LEXIS 8, at *24.3 This “is particularly true where the business arrangement
being negotiated is one in which a comprehensive agreement is both normal and
advisable,” such as a complex real estate development project. Id. Each of Plaintiff’s
claims must be analyzed against the backdrop of the terms of the LOI that governed
the parties’ relationship regarding the Charlotte Project.
C. North Carolina does not recognize a cause of action for equitable estoppel by fraud and Plaintiff has not alleged breach of an oral contract
25. Plaintiff’s first claim is titled “Equitable Estoppel by Fraud.” (ECF No.
1 at p. 9; ¶¶ 33–38.) Plaintiff appears to allege that at or around the time that the
parties executed the LOI, Defendant agreed that the price Plaintiff would pay for the
retail component of the completed Charlotte Project was $17.25 million. (Id. at ¶ 34.)
Plaintiff alleges that “at some point between August 2014 and January 2015,
3 InJDH Capital, the court granted summary judgment to the defendants and dismissed the plaintiff’s claims for breach of the letter of intent, quantum meruit, negligent misrepresentation, fraud, and unfair trade practices, and denied the plaintiff’s motion to amend to state a claim for breach of an oral contract on the grounds of futility. 2009 NCBC LEXIS 8. [Defendant] determined that it would not sell the property to [Plaintiff] for the
previously agreed-upon $17.25 million purchase price,” but Defendant nonetheless
“represented to [Plaintiff] that the agreement stood strong . . . with the intention of
inducing [Plaintiff] to continue its development work on the [Charlotte Project].” (Id.
at ¶ 35.) Plaintiff alleges it relied on Defendant’s representations in negotiating the
Whole Foods Lease. (Id. at ¶ 36.)
26. Defendant argues that the claim for equitable estoppel by fraud should
be dismissed because North Carolina does not recognize equitable estoppel as an
affirmative cause of action. (ECF No. 12 at p. 9.) Defendant is correct. See, e.g.,
Herring v. Volume Merchandise, Inc., 252 N.C. 450, 453, 113 S.E.2d 814, 816 (1960)
(“Estoppels are protective only, and are to be invoked as shields, and not as offensive
weapons.”); Home Elec. Co. of Lenoir, Inc. v. Hall & Underdown Heating & Air
Conditioning Co., 86 N.C. App. 540, 543, 358 S.E.2d 539, 541 (1987), aff’d, 322 N.C.
107, 366 S.E.2d 441 (per curiam) (“North Carolina case law has not approved the
doctrine [of estoppel] for affirmative relief.”); Laschkewitsch v. Legal & General
America, Inc., 247 F. Supp. 3d 710, 721 (E.D.N.C. Mar. 23, 2017) (“North Carolina
courts, however, do not recognize estoppel as an affirmative cause of action.”);
Krawiec v. Manly, 2016 NCBC 7, 2016 WL 374734, at *12 (N.C. Super. Ct. Jan. 22,
2016) (“[T]he doctrine of equitable estoppel is not a basis for an affirmative claim for
relief. Rather, the doctrine provides a defense to bar enforcement of opposing claims
or affirmative defenses.”). 27. Because the existing law of North Carolina does not support an
affirmative cause of action for equitable estoppel by fraud, Defendant’s motion to
dismiss Plaintiff’s attempt to bring an affirmative claim for equitable estoppel by
fraud should be GRANTED, and Plaintiff’s purported claim should be dismissed with
prejudice.
28. To salvage its first claim, Plaintiff argues that the claim should be
treated as a claim for breach of “an oral contract for the sale of land,” and that it
alleges equitable estoppel by fraud in anticipation of Defendant asserting a defense
of statute of frauds. 4 (ECF No. 14 at pp. 8–10.) Plaintiff apparently contends that the
Complaint would support a claim that Defendant orally agreed to a $17.25 million
purchase price, and that this oral agreement stands separate from the other terms of
the LOI and can be enforced despite the failure of the parties to enter into a final
PSA. The Court is not persuaded by Plaintiff’s argument.
29. “The elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of [the] contract.” McLamb v. T.P. Inc., 173 N.C.
App. 586, 588, 619 S.E.2d 577, 580 (2005). It is well-established that:
[A] valid contract between two parties can only exist when the parties assent to the same thing in the same sense, and their minds meet as to all terms. This assent, or meeting of the minds, requires an offer and acceptance in the exact terms and that the acceptance must be communicated to the offeror. If the terms of the offer are changed or any new ones added by the acceptance, there is no meeting of the minds and, consequently, no contract.
4 The Complaint does not expressly allege that Defendant orally accepted the purchase price
nor make any reference to the existence of an oral agreement. Normile v. Miller, 313 N.C. 98, 103, 326 S.E.2d 11, 15 (1985) (internal citations and
quotation marks omitted). An acceptance that contains new or differing terms from
the offer is not truly acceptance, but a counter-offer. Id. Acceptance must be
communicated to the offeror in some form sufficient to manifest the offeree’s intent
to be bound to the exact terms of the offer. Executive Leasing Associates, Inc. v.
Rowland, 30 N.C. App. 590, 592, 227 S.E.2d 642, 644 (1976). The Complaint does not
allege facts that would support an offer, or acceptance, of the $17.25 million purchase
price so as to form a separate contract for that single term.
30. First, Plaintiff does not allege that the LOI was, itself, an offer to
purchase for $17.25 million. In fact, that figure is not contained in the LOI. The LOI
cannot be an offer because the terms of the LOI are incomplete and expressly
contemplate the need for further negotiations before the parties could reach a valid
and binding final agreement. (ECF No. 12.2 at p. 6.) Both parties made changes to
the drafts of the PSA, and a final agreement as to all terms had not been reached
when negotiations ceased. (ECF No. 1 at ¶ 30.)
31. To the extent Plaintiff contends that the $17.25 million offer was
contained in a draft PSA exchanged with Defendant, such contention is unsupported
by the allegations. Plaintiff does not allege that any term contained within the drafts
of the PSA was ever expressed in such a way that the receiving party could have
understood them to be an offer which the other party could accept to create a contract
that would be discrete and separate from the other terms of the draft PSA. Therefore, Plaintiff has not adequately alleged an offer, oral or otherwise, to create a binding
contract regarding the $17.25 million purchase price.
32. Plaintiff also has not sufficiently alleged that Defendant orally accepted
the $17.25 million purchase price. Beyond the statement that Plaintiff and Defendant
“agreed that [Defendant] would sell the commercial property . . . to [Plaintiff for
$17.25 million” (ECF No. 1 at ¶ 34), Plaintiff does not plead any specific facts in
support of Defendant’s alleged oral acceptance of the purchase price, such as the date
of the acceptance or the identity of Defendant’s representative who orally accepted.
33. The Court is not required to accept Plaintiff’s conclusory claim that the
parties formed an “oral contract” in the absence of some factual allegations to support
such a conclusion. E.g., Stanback v. Stanback, 297 N.C. 181, 204, 254 S.E.2d 611, 626
(1979) (“[D]espite the liberal nature of the concept of notice pleading, a complaint
must nonetheless state enough to give the substantive elements of at least some
legally recognized claim or it is subject to dismissal under Rule 12(b)(6).”); Skinner v.
Reynolds, 237 N.C. App. 150, 156, 764 S.E.2d 652, 657 (2014) (repeating the Stanback
standard and holding that because “[p]laintiff does not support these conclusory
allegations with alleged facts” the claim for libel per se cannot survive a 12(b)(6)
motion to dismiss). Accordingly, the Complaint does not allege the formation of a valid
oral contract between the parties.
34. Finally, in JDH Capital, the trial court was faced with a similar
argument by the plaintiff that the court framed as “whether [an] unenforceable Letter
of Intent may be converted into an enforceable agreement by an oral agreement.” 2009 NCBC LEXIS 8, at *23. The court stated that to find the existence of an oral
contract would “require[] the [c]ourt to ignore the plain language of the Letter of
Intent, which calls for the execution of a detailed final agreement of the type generally
associated with similar real estate development projects.” Id. Similarly, in this case,
Plaintiff simply cannot escape the express terms of the LOI by means of claiming an
oral contract.
35. Therefore, to the extent Plaintiff purports to state a claim for breach of
oral contract in the Complaint, Defendant’s motion to dismiss should be GRANTED,
and the claim should be dismissed without prejudice.5
D. The allegations do not support Plaintiff’s claim that Defendant induced Whole Foods to not enter into a lease with Plaintiff
36. Plaintiff’s second claim is for tortious interference with prospective
economic advantage. (ECF No. 1 at p. 10; ¶¶ 39–43.) Plaintiff alleges that Defendant
“falsely represent[ed], through the signed LOI and other written and verbal
representations to Plaintiff and Whole Foods, that [Defendant] intended to sell the
completed Whole Foods facility to [Plaintiff] for $17.25 million.” (Id. at ¶ 42.) Plaintiff
alleges that, absent Defendant’s false representation, “Whole Foods would not have
signed the lease agreement with [Defendant] and would have entered into the lease
agreement directly with [Plaintiff].” (Id.)
5 While the Complaint does not contain allegations that support the existence of an oral contract, the Court does not wish to foreclose Plaintiff from alleging a claim for breach of oral contract, if such claim exists and Plaintiff chooses to refile a complaint against Defendant. Therefore, this claim is dismissed without prejudice. 37. “In order to state a claim for wrongful interference with prospective
advantage, the plaintiffs must allege facts to show that the defendants acted without
justification in inducing a third party to refrain from entering into a contract with
them which would have ensued but for the interference.” Radcliffe v. Avenel
Homeowners Ass’n, 2016 N.C. App. LEXIS 824 at *46, 789 S.E.2d 893, 911 (2016)
(citing Walker v. Sloan, 137 N.C. App. 387, 393, 529 S.E.2d 236, 242 (2000)); Gupton
v. Son-Lan Dev. Co., 205 N.C. App. 133, 142-43, 695 S.E.2d 763, 770 (2010) (same).
“[U]nlawful interference with the freedom to contract is actionable” when it
maliciously “prevent[s] the making of a contract . . . with design to injure the plaintiff,
or gain some advantage at [plaintiff’s] expense.” Coleman v. Whisnant, 225 N.C. 494,
506, 35 S.E.2d 647, 656 (1945).
38. “[T]he inducement required to establish a claim for intentional
interference with prospective economic advantage requires purposeful conduct
intended to influence a third party not to enter into a contract with the claimant.”
KRG New Hill Place, LLC v. Springs Investors, LLC, 2015 NCBC LEXIS 20, at *15
(N.C. Sup. Ct. Feb. 27, 2015). It is not enough that the defendant’s actions caused a
third-party to decide not to enter into a contract with the plaintiff. Id. at *16–17
(holding that defendant’s failure to complete infrastructure work on plaintiff’s
property, which led a third-party to back out of an agreement with plaintiff to develop
the residential component of the property, was not purposeful action intended to
influence the third-party, and therefore insufficient to establish inducement). 39. Plaintiff has not alleged that Defendant engaged in any purposeful
action towards Whole Foods that influenced Whole Foods not to enter into a lease
with Plaintiff. To the contrary, Plaintiff alleges that Whole Foods requested that
Defendant, instead of Plaintiff, be listed as the landlord in the Whole Foods Lease,
and that it is “common industry practice” and the “industry standard” for the master
developer to be listed as the landlord on the lease executed with retail tenants during
the construction phase of a land development project. (ECF No. 1 at ¶¶ 11, 15.) In
addition, Plaintiff does not allege that Defendant made any representations directly
to Whole Foods in connection with the execution of the LOI or the negotiation of the
Whole Foods Lease. Rather, Plaintiff “manag[ed] all aspects of Whole Foods
involvement in the project, including site approval, negotiations of the letter of intent
and the lease, and design of the retail component of the proposed development.” (ECF
No. 1 at ¶ 10 (emphasis added).) The facts alleged do not support Plaintiff’s claim that
Defendant induced Whole Foods to enter into the Lease Agreement with Defendant
instead of Plaintiff.
40. Because Plaintiff’s allegations do not support a claim of intentional
interference, Defendant’s motion to dismiss Plaintiff’s tortious interference with
prospective economic advantage claim should be GRANTED and the claim should be
dismissed with prejudice. E. Since Plaintiff’s other claims are dismissed and it has failed to allege any other unfair or deceptive conduct, the UDTPA claim should be dismissed
41. In support of its claim for violation of the UDTPA, Plaintiff alleges that
Defendant falsely represented that it would sell the retail component of the Charlotte
Project to Plaintiff for $17.25 million for the purpose of obtaining the Whole Foods
Lease knowing that, once the Whole Foods Lease was executed, Defendant would not
sell the retail component to Plaintiff. (ECF No. 1 at ¶¶ 48–49.) Plaintiff alleges that
this “bait-and-switch” tactic is an unfair or deceptive trade practice as defined in G.S.
§ 75-16. (ECF No. 1 at ¶ 50.)
42. “To establish a prima facie case of unfair and deceptive trade practices,
a plaintiff must show that (1) the defendant committed an unfair or deceptive act or
practice, (2) the act was in or affecting commerce, and (3) the act proximately caused
injury to the plaintiff.” White v. Consol. Planning, Inc., 166 N.C. App. 283, 303, 603
S.E.2d 147, 161 (2004); see also Combs & Assocs. v. Kennedy, 147 N.C. App. 361, 373–
74, 555 S.E.2d 634, 642 (2001). “A mere breach of contract, even if intentional, is not
an unfair or deceptive act under Chapter 75.” Bob Timberlake Collection, Inc. v.
Edwards, 176 N.C. App. 33, 42, 626 S.E.2d 315, 323 (2006) (citing Bartolomeo v. S.B.
Thomas, Inc., 889 F.2d 530, 535 (4th Cir. 1989) and Skinner v. E. F. Hutton & Co.,
Inc., 314 N.C. 267, 275, 333, S.E.2d 236, 241 (1985)). In order for a breach of contract
to provide the basis for a claim for unfair or deceptive trade practices, “a party must
show substantial aggravating circumstances attending the breach.” Bob Timberlake,
176 N.C. App. at 42, 626 S.E.2d at 323. Whether an act or practice is unfair or deceptive is ultimately a question of law for the Court. Songwooyarn Trading Co. v.
Sox Eleven, Inc., 213 N.C. App. 49, 56, 714 S.E.2d 162, 167 (2011).
43. Plaintiff’s claim for unfair and deceptive trade practices again relies on
the allegation that Defendant breached an agreement to sell the retail component of
the Charlotte Project to Plaintiff for $17.25 million, and falsely represented to
Plaintiff that it would sell the property for this price. The Court has dismissed
Plaintiff’s claims for equitable estoppel by fraud, breach of oral contract, and
interference with prospective economic advantage, based on the same alleged
conduct. Plaintiff has not alleged any other conduct that would support a claim that
Defendant engaged in unfair or deceptive practices.
44. Since Plaintiff’s underlying claims have been dismissed, its claim for
violation of the UDTPA also should be dismissed. See, e.g., B&F Slosman v.
Sonopress, Inc., 148 N.C. App 81, 89, 557 S.E.2d 176, 182 (2001) (“The essence of
plaintiff’s [UDTPA] claim is that defendant committed fraud and breached an alleged
lease. Having determined that plaintiff has failed to make a prima facie case with
respect to each of these claims, we likewise conclude plaintiff has not established a
claim for unfair and deceptive business practices.”); Combs & Assocs. v. Kennedy, 147
N.C. App. 362, 374, 555 S.E.2d 634, 642 (2001) (“[P]laintiff's claim that defendants
engaged in unfair and deceptive trade practices rests with its claims for
misappropriation of trade secrets, tortious interference with contracts and civil
conspiracy. Having determined that the trial court properly granted summary judgment on each of these claims, we likewise conclude that no claim for unfair
and deceptive trade practices exists.”).
45. In its brief, Plaintiff appears to argue that the allegations in the
Complaint would support a claim for fraudulent misrepresentation sufficient to
sustain a cause of action for unfair trade practices. (ECF No. 14 at pp. 16–17.) “Proof
of fraud would necessarily constitute a violation of the prohibition against unfair and
deceptive acts.” Hardy v. Toler, 288 N.C. 303, 309, 218 S.E.2d 342, 346 (1975).
46. The Court disagrees with Plaintiff’s argument. A claim for fraud
requires that Plaintiff plead “the time, place and content of the fraudulent
representation, identity of the person making the representation and what was
obtained as a result of the fraudulent acts or representations.” Bob Timberlake, 176
N.C. App. at 39, 626 S.E.2d at 321 (quoting Terry v. Terry, 302 N.C. 77, 85, 273 S.E.2d
674, 678 (1981) (internal quotations omitted)). “Mere generalities and conclusory
allegations of fraud will not suffice.” Sharp v. Teague, 113 N.C. App. 589, 597, 439
S.E.2d 792, 797 (1994) (quoting Moore v. Wachovia Bank & Trust Co., 30 N.C. App.
390, 391, 226 S.E.2d 833, 835 (1976)). When a section 75-1.1 claim is based on
allegations of deceptive conduct, such allegations must be pleaded with particularity.
See, e.g. Topshelf Mgmt. v. Campbell-Ewald Co., 117 F. Supp. 3d 722, 731, 215 U.S.
Dist. LEXIS 100910, at *21 (M.D.N.C. Aug. 3, 2015) (“Rule 9(b) applies to section 75-
1.1 claims alleging detrimental reliance on false or deceptive representations . . . this
claim also lacks sufficient particularity under Rule 9(b) and will be dismissed.”); Hilco
Transp., Inc. v. Atkins, 2016 NCBC LEXIS 5, at fn. 5 (N.C. Super. Ct. Jan. 15, 2016). 47. Plaintiff does not allege the specific dates or specific content of any
misrepresentations made by Defendant, nor the identity of the person or persons
making such representations. Plaintiff vaguely alleges only that between the “Fall
2014” and January 2015 Defendant “represented to [Plaintiff] that the agreement [to
sell the property for $17.25 million] stood strong.” (ECF No. 1 at ¶ 46.) Plaintiff has
not pleaded fraudulent misrepresentation with adequate specificity, and the
Complaint fails to allege a claim for unfair trade practices in violation of the UDTPA.
48. Defendant’s motion to dismiss Plaintiff’s claim for unfair or deceptive
trade practices should be GRANTED and the claim should be dismissed without
prejudice.6
F. Plaintiff’s claim for quantum meruit fails because the allegations do not support a claim that Plaintiff had an expectation of compensation
49. Finally, “in the alternative to recovery” under its first three claims,
Plaintiff seeks to recover on a theory of quantum meruit (unjust enrichment) for
services it provided in relation to the Charlotte Project. (ECF No. 1 at p. 12; ¶¶ 51–
55.) Plaintiff alleges that in connection with the Charlotte Project, it identified the
property to be developed, recruited Defendant to the development team, contributed
to the site plan and architectural design, and secured and negotiated the lease with
6 While the allegations of the Complaint does not allege with sufficient particularity the
time, content of, or person who made fraudulent misrepresentations that would support a claim for deceptive trade practices, the Court does not wish to foreclose Plaintiff from providing such particularity if such claim exists and Plaintiff chooses to refile a complaint against Defendant. Therefore, this claim is dismissed without prejudice. Whole Foods. (Id. at ¶ 52.) Plaintiff also alleges that Defendant knew that Plaintiff
“was acting with the expectation of compensation.” (Id. at ¶ 53.)
50. “Quantum meruit operates as an equitable remedy based upon a quasi
contract [sic] or a contract implied in law which provides a measure of recovery for
the reasonable value of services rendered in order to prevent unjust enrichment.” Ron
Medlin Constr. v. Harris, 364 N.C. 577, 589, 704 S.E.2d 486, 488 (2010) (internal
quotation marks omitted). “To recover in quantum meruit, plaintiff must show: (1)
services were rendered to defendants; (2) the services were knowingly and voluntarily
accepted; and (3) the services were not given gratuitously.” Envtl. Landscape Design
Specialist v. Shields, 75 N.C. App. 304, 306, 330 S.E.2d 627, 628 (1985).
51. “In addition, ‘quantum meruit claims require a showing that both
parties understood that services were rendered with the expectation of
payment.’” Wing v. Town of Landis, 165 N.C. App. 691, 693, 599 S.E.2d 431, 433
(2004) (quoting Scott v. United Carolina Bank, 130 N.C. App. 426, 429, 503 S.E.2d
149, 152 (1998)). This does not mean that the plaintiff alone had an expectation of
compensation, but that the defendant understood that it was expected to compensate
the plaintiff for the services. Twiford v. Waterfield, 240 N.C. 582, 585, 83 S.E.2d 548,
551 (1954) (“The quantum meruit must rest upon an implied contract. It must be
made to appear that at the time the services were rendered, payment was intended
on the one hand and expected on the other.”) (internal citation and quotation marks
omitted); see also Snow v. East, 96 N.C. App. 59, 63, 384 S.E.2d 689, 692 (1989) (to
similar effect). 52. While Plaintiff contends that it had an “expectation of compensation,”
and that Defendant understood Plaintiff’s expectation, Plaintiff alleges only that its
expectation was that Defendant “would sell Plaintiff the . . . property . . . for $17.25
million.” (ECF No. 1 at ¶ 53.) Plaintiff does not allege that it expected Defendant to
compensate it for any of its efforts in developing the Charlotte Project or for securing
the lease with Whole Foods, or that Defendant expected to pay Plaintiff for those
efforts. Again, the plain language of the LOI belies such expectations, stating
expressly that “the parties agree . . . that any obligation incurred, funds spent and
business opportunities lost are at each party’s sole risk.” (ECF No. 12.2 at p. 6.)
53. Plaintiff argues that in JDH Capital, cited supra, this Court
“affirmatively found that the value of procuring a lease is recoverable against a party
to a failed letter of intent.” (ECF No. 14 at p. 18.) Plaintiff contends that since it
assisted Defendant in entering into the Whole Foods Lease, it should be compensated
for the value of providing that service. (Id.)
54. Plaintiff mischaracterizes JDH Capital. In that case, the trial court held
that Plaintiff could not recover for the services it provided in the development of the
property, including identifying and introducing the defendant to Lowes Foods as a
potential anchor tenant, because “[p]laintiff ha[d] failed to establish an expectation
that it would be paid for any service.” JDH Capital, 2009 NCBC LEXIS 8 at *26. The
court further explained that
Parties enter into letters of intent because they have unresolved issues. They understand that there are risks involved because of the clear possibility that no final agreement may be reached. [Plaintiff] is a sophisticated developer. It drafted the Letter of Intent. It knew that there were risks involved. It knew that [defendant] had reservations and specific desires with respect to her property. At no time did [plaintiff] indicate to [defendant] that she would be expected to pay for any service it provided if a final agreement was not reached. It could have contracted for that protection. Moreover, there is no evidence in this record that [defendant] believed she would have to compensate [plaintiff] if a final agreement was not reached. [Plaintiff] was free at any point to decline performance of any service until it received an agreement to be paid. [Plaintiff] could have eliminated the risks, but it chose not to do so.
Absent some evidence of expectation of payment, there can be no claim for quantum meruit. Otherwise, parties would be unable to enter into letters of intent because they would never know what liabilities they might incur if a final deal was not reached.
Id. 8 at *26–27.
55. In JDH Capital, the court addressed the additional question of whether
the plaintiff could prove the “reasonable value” of services it provided if the plaintiff
were able to recover in quantum meruit. The Court stated in dicta that had the
plaintiff secured a lease with Lowes Foods as an anchor tenant for the development
“a different outcome may have resulted” because the lease would provide a basis for
determining the reasonable value of a service. Id. at *30. Plaintiff’s reliance on this
language is misplaced. In addition to the fact that the language is dicta, Plaintiff
suffers from the same fundamental deficiency as the plaintiff in JDH Capital: it
cannot allege that it had an expectation of compensation in the face of the express
language of the LOI. In fact, the LOI in this case not only states that a binding
agreement is conditioned on reaching a final PSA, it has language not present in the letter of intent in JDH Capital expressly stating that all “funds spent” and “business
opportunities lost” are at each party’s “sole risk.” (ECF 12.2 at p. 6.)
56. In conclusion, the Complaint fails to allege facts that would support that
Plaintiff had an expectation of compensation for the efforts it undertook on the
Charlotte Project. To the contrary, the existence of the LOI as written “necessarily
defeats the plaintiff’s claim” for recovery under quantum meruit. Oates v. JAG, Inc.,
314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985). As a result, Defendant’s motion to
dismiss Plaintiff’s claim for recovery under quantum meruit should be GRANTED,
and the claim should be dismissed with prejudice.
III. CONCLUSION
THEREFORE, IT IS ORDERED that Defendant’s Motion is GRANTED, and
all of Plaintiff’s claims are DISMISSED, as follows:
1. Plaintiff’s first claim for Equitable Estoppel by Fraud is DISMISSED with
2. To the extent that Plaintiff attempts to state a claim for Breach of Oral
Contract in this Complaint, such claim is DISMISSED without prejudice.
3. Plaintiff’s second claim for Tortious Interference with Prospective Economic
Advantage is DISMISSED with prejudice.
4. Plaintiff’s third claim for Unfair and Deceptive Trade Practices under section
75-1.1 is DISMISSED without prejudice.
5. Plaintiff’s fourth claim for Recovery in Quantum Meruit is DISMISSED with
prejudice. This, the 24th day of January, 2018.
/s/ Gregory P. McGuire Gregory P. McGuire Special Superior Court Judge for Complex Business Cases