Opinion
No. 1:99CV36
August 22, 2000.
George Ward Hendon, Marjorie C. Redding, Adams, Hendon, Carson, Crow, Saenger, PA, Asheville, NC, for plaintiffs.
Craig R. Baldauf, Thomas W. Murrell, III, Smith Helms Mulliss Moore, L.L.P., Charlotte, for Vitalink Pharmacy Services, Inc., Team Care Hendersonville, defendants.
Keith E. Coltrain, Ogletree, Deakins, Nash, Smoak and Stewart, Raleigh, NC, for Mohr Partners, Inc., third-party plaintiff.
Keith E. Coltrain, Ogletree, Deakins, Nash, Smoak and Stewart, Raleigh, NC, for Mohr Partners, Inc., defendant.
John C. Cloninger, John C. Hensley, Jr., Mary E. Euler, Cloninger, Lindsay, Hensley, Searson Arcuri, Asheville, NC, for Beverly-Hanks Associates, Inc., Robert A. Boylan, Jr., third-party defendants.
Thomas W. Murrell, III, Smith Helms Mulliss Moore, L.L.P., Charlotte, for Vitalink Pharmacy Services, Inc., Team Care Hendersonville, third-party plaintiffs.
MEMORANDUM AND ORDER
THIS MATTER is before the Court on Plaintiff's and Defendants' timely filed objections to the Memorandum and Recommendation of United States Magistrate Judge Max O. Cogburn, Jr. Pursuant to standing orders of designation and 28 U.S.C. § 636, the Defendants' motions for summary judgment were referred to the Magistrate Judge for a recommendation as to disposition. The Court notes that Defendant NeighborCare Pharmacy Services, Inc., successor in interest to Vitalink Pharmacy Services, Inc., as well as Defendant NeighborCare TCI, Inc., d/b/a NeighborCare Hendersonville, successor in interest to Team Care, Inc., d/b/a Team Care Hendersonville, have both filed Chapter 11 Bankruptcy Petitions and have cases pending in the United States Bankruptcy Court for the District of Delaware. However, because the motions and objections of both parties were filed and fully briefed prior to the bankruptcy filings, the Court will render a decision on the dispositive motions. Accordingly, the Court adopts the recommendation of the Magistrate Judge in part and will grant the Defendants' motions for summary judgment.
I. STANDARD OF REVIEW
The Court reviews de novo those portions of a Magistrate Judge's Memorandum and Recommendation to which specific objections are filed. 28 U.S.C. § 636(b). "The district judge must not be a rubber stamp" and "has a duty to reject the Magistrate Judge's recommendation unless, on de novo reconsideration, he or she finds it justified." 12 Wright Miller, Federal Practice and Procedure § 3070.2 (1997). Those parts of a Magistrate Judge's Memorandum and Recommendation to which no specific objections are filed are given careful review. Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982).
Summary judgment is proper when the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317 (1986).
II. FACTUAL AND PROCEDURAL BACKGROUND
Between March and May 1998, discussions took place between Vitalink Pharmac Services, Inc. ("Vitalink") and Plaintiff Stephen D. Rice, a developer of industrial real estate, regarding Vitalink's possible lease of Unit C of Plaintiff's Airport Business Center ("ABC") for a pharmacy operation. Acting on behalf of Vitalink were George Methvin, a local Vitalink manager associated with Defendant Hendersonville Team Care, and Andrew Taguwa, an agent for independent brokers Mohr Partners, Inc. ("Mohr Partners"). Third Party Defendant Robert A. Boylan, Jr., an agent for the Asheville brokerage firm, Beverly-Hanks Associates, Inc. ("Beverly-Hanks"), acted on behalf of the Plaintiff. Exhibit D, Deposition of Robert A. Boylan, attached to Defendant Mohr Partners' Motion for Summary Judgment, filed April 17, 2000, at 14. On or about March 10, Methvin allegedly did a walk-thru of the property and faxed over a proposed floor plan to Boylan. Id., at 18.
Shortly thereafter, Boylan allegedly received a proposal from Vitalink for leasing the space. Id., at 27, 35. Plaintiff alleges that during this period the parties contemplated Vitalink would begin leasing the space on May 1, 1998, and take possession on June 1, 1998. Id., at 31, 131-32, 153. On March 19, 1998, Boylan faxed Taguwa a copy of a letter drafted by Plaintiff which stated Plaintiff was preparing to perform work on the ABC Space. The fax also stated tha if Boylan had any potential tenants who wanted to move in by June 1, 1998, Plaintiff needed the first month's check and a signed lease within 14 days. Id., at 38; Exhibit 6, Letter dated March 19, 1998 and attached fax transmittal sheet, attached to Defendant Mohr Partners' Motion. Plaintiff never received a signed lease or check from Vitalink. Boylan Deposition, at 40; Exhibit B, Deposition of Stephen D. Rice, attached to Defendant Mohr Partners' Motion, at 60-61. On April 3, 1998, Taguwa sent a letter which instructed Boylan that "[a] terms [of a lease] are subject to Board approval reflected through a signed lease document." Exhibit 53, Letter dated April 3, 1998 and attached fax transmittal sheet, attached to Defendant Mohr Partners' Motion. Plaintiff also received a copy of that letter. Rice Deposition, at 75-77. About April 21, 1998, Boylan sent leases by overnight mail to Vitalink for signing and on May 1, 1998, faxed final floor plans to Vitalink. Boylan Deposition, at 83, 85; Rice Deposition, at 81-85. Vitalink did not respond to these communications. But, during this time, Plaintiff alleges that Taguwa and Methvin stated that although the legal department needed to review documentation of the agreement, "the deal is a go. . ." and that the legal approval of the lease documents was merely a "rubber stamp." Boylan Deposition, at 40-42, 69, 75, 121-22, 129. Taguwa denies making this statement or anything to its effect. Exhibit E, Deposition of Andrew W. Taguwa, attached to Defendant Mohr Partners' Motion, at 73.
Apparently neither of these documents were addressed to any specific person a Vitalink's corporate headquarters and they were not sent to Taguwa or Methvin.
Based upon these alleged assurances that the deal was done, Plaintiff entered into an ora agreement with general contractor Jim Allen Construction Company ("Jim Allen") to perform upfit work to Unit C according to specifications allegedly approved by Vitalink. Rice Deposition, at 131-33. It is undisputed that Boylan never received a signed lease or requested or received a letter of intent or an indemnity agreement from Vitalink to cover the upfit work. Boylan Deposition, at 21, 40, 42-43.
It is typical practice in the commercial real estate business to get a signed lease document, letter of intent, or indemnity agreement before concluding that a deal is done. Exhibit C, Deposition of George W. Beverly, Jr., attached to Defendant Mohr Partners' Motion, at 5.
Jim Allen began upfit work on Unit C according to specifications supplied by Plaintiff on May 1, 1998. On May 26, 1998, Plaintiff wrote a letter to Boylan stating he still had not received a signed lease or a rent check which were allegedly due on May 1, 1998. Rice Deposition, at 106, 116; Exhibit 15, Letter dated May 27, 1998, attached to Defendant Mohr Partners' Motion.
On May 27, Boylan wrote a letter to Vitalink's corporate counsel stating that he had just been made aware of a merger including Vitalink and that the upfit could not continue without Vitalink's immediate response. Boylan Deposition, at 97-99; Exhibit 16, Letter dated May 27, 1998, attached to Defendant Mohr Partners' Motion. Vitalink's response was that there was no lease agreement. Boylan Deposition, at 106. Subsequently, on June 2, 1998, Plaintiff instructed Jim Allen to find a sensible stopping point on the Unit C upfit. Jim Allen stopped work on June 12, 1998, when the upfit of Unit C was approximately 70 percent complete. Jim Allen then sought payment from Plaintiff in the amount of $50,116.40 for the work already performed.
On April 27, 1998, Vitalink had publically announced a merger with another corporation.
After Plaintiff refused to make payment, Jim Allen sued him in Henderson Count Superior Court for $50,116.40. Plaintiff filed an answer denying liability. Plaintiff, who admits that he has never personally made payments to Jim Allen for the upfit work performed on Unit C, is no longer the owner of the ABC space. That property was transferred to MMR Properties, LLC ("MMR"), a limited liability company of which Plaintiff is the sole shareholder. MMR made approximately $25,000 in payments to Jim Allen in 1999 and Plaintiff has not reimbursed MMR for those payments.
In this action, Plaintiff asserts causes of action for breach of contract, negligen misrepresentation, and unfair and deceptive trade practices. Plaintiff seeks to recover $50,116.40 for the cost of the upfit of Unit C and approximately $12,000 for the future removal of the structures. Treble damages are sought by Plaintiff on his claim of unfair and deceptive trade practices. Plaintiff's Complaint, at ¶¶ 35-37. Once this case was underway, Defendants brought third-party claims for indemnity and contribution against Beverly-Hanks and Boylan. The Third-Party Defendants moved for summary judgment and that motion is before this Court as well.
Although Mohr Partners and Vitalink (with Hendersonville Team Care) are separate parties with their own counsel, they have adopted each other's briefs and exhibits and essentially raise the same arguments in this matter. Thus, to simplify matters, the Court will collectively refer to them as `Defendants.'
III. DISCUSSION
1. Motion to Amend
The Magistrate Judge recommended the Court allow Plaintiff to amend the Complaint to join MMR as an indispensable party. Defendants object and contend they would be unduly prejudiced and would require additional discovery prior to trial. However, because this order dismisses all claims against the Defendants, those concerns are moot. Therefore, in the interest o avoiding duplicative litigation in the future, the Court adopts the Magistrate Judge's recommendation and will grant the Plaintiff's request for MMR to be added as a party plaintiff to this action. Fed.R.Civ.P. 19.
2. Breach of Contract
The Plaintiff objects to the Magistrate Judge's recommendation that the Statute of Frauds is a bar to Plaintiff's claim for breach of contract. In stating his objections, the Plaintiff reiterates the argument that promissory estoppel renders the Statute of Frauds inapplicable in this case. In support of this theory, Plaintiff continues to rely Campbell v. Virginia Metal Indus., Inc., 708 F.2d 930 (4th Cir. 1983). However, as Defendants and the Magistrate Judge note, Campbell has been expressly rejected by the courts of North Carolina. Home Electric Co. of Lenoir, Inc. v. Hall Underdown Heating Air Condition Co., 86 N.C. App. 540, 358 S.E.2d 539 (1987), aff'd, 322 N.C. 107, 366 S.E.2d 441 (1988); Clark Trucking of Hope Mills, Inc. v. Lee Paving Co., 109 N.C. App. 71, 426 S.E.2d 288, rev. denied, 333 N.C. 790, 431 S.E.2d 21 (1993). The Court declines to accept the Plaintiff's invitation to adopt the reasoning o Campbell in favor of the clear controlling law of North Carolina. Because promissory estoppel may not be used as an affirmative cause of action in this state, the Court finds that the Statute of Frauds bars Plaintiff's claim for breach of contract. Computer Decisions, Inc. v. Rouse Office Management of North Carolina, Inc., 124 N.C. App. 383, 388, 477 S.E.2d 262, 265 (1996). That claim is hereb dismissed.
3. Negligent Misrepresentation
The Defendants object to the Magistrate Judge's recommendation that summary judgmen should be denied on Plaintiff's negligent misrepresentation claim. The Magistrate Judge correctly notes that justifiable reliance is an essential element of a claim for negligent misrepresentation. APAC-Carolina, Inc. v. Greensboro-High Point Airport Authority, 110 N.C. App. 664, 431 S.E.2d 508, rev. denied, 335 N.C. 171, 438 S.E.2d 197 (1993). The Defendants have made an ample evidentiary showing that a professional developer such as Plaintiff was not reasonable to rely upon an alleged oral promise in light of standard industry practice and prevailing lease law. Rice Deposition, at 75, 86, 88; Taguwa Affidavit, at ¶¶ 4-5; Exhibit 13, attached to Defendant Mohr Partner's Motion. Thus, the burden shifts to the Plaintiff to show that a genuine issue for trial exists. Fed.R.Civ.P. 56(c); Celotex Corp., supra. However, Plaintiff has not produced evidence from which a reasonable jury could conclude that Plaintiff was justified in relying on the alleged verbal statement, "it's a done deal." Consequently, the Court will grant Defendants' motion for summary judgment on Plaintiff's negligent misrepresentation claim.
More specifically, the Court finds that the parties in this case were both sophisticated and experienced in commercial real estate deals. They were well aware that long term leases require written contracts, that realtors do not normally have authority to bind their principals, and that letters of intent or indemnity are standards means of protecting a party prior to incurring expenses such as the upfitting of lease space. Boylan Deposition, at 25; Beverly Deposition, at 5.
In addition, Defendant Mohr Partners raises other issues concerning Plaintiff's negligent misrepresentation claim, including contributory negligence and actual reliance. However, because the negligent misrepresentation claim is hereby dismissed, those concerns are moot and will not be addressed in this opinion.
4. Unfair and Deceptive Trade Practices
The Magistrate Judge recommended that the Court grant Defendants' motions for summary judgment on the issue of Plaintiff's claim for unfair and deceptive trade practices. N.C. Gen. Stat. § 75-1.1. To recover under North Carolina's Unfair and Deceptive Trade Practices Act, a plaintiff must prove that the conduct in question was "unfair," which is broader than and includes the concept of "deception." Opsahl v. Pinehurst Inc., 81 N.C. App. 56, 69, 344 S.E.2d 68, 76 (1986) (quoting Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 263, 266 S.E.2d 610, 621 (1980)). "`A practice is unfair when it offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.'" Id. Whether the conduct was unfair or deceptive is a legal issue for the court. Ellis v. Northern Star Co., 326 N.C. 219, 388 S.E.2d 127 (1990).
In order to establish a violation of the statutory prohibition against unfair or deceptive acts or practices, a plaintiff must show (1) an unfair or deceptive act or practice, (2) which is in or affects commerce, and (3) which proximately caused injury. N.C. Gen. Stat. § 75-1.1(a); Gray v. Boylan Deposition, at 25, 60-61, 74-75, 85-86, 98, 119, 124, 154; Beverly Deposition, at 5; N.C. Ins. Underwriting Ass'n, 529 S.E.2d 676, 680 (N.C. June 16, 2000). The Court need no address the second and third elements of the claim because Plaintiff has failed to allege conduc which is unfair or deceptive.
After a thorough review of the record in this case, the Court agrees with the Magistrate Judge that Plaintiff has failed to allege conduct which is unfair or deceptive. At best, the Cour finds that Plaintiff has alleged a situation of mutual misunderstanding between the parties. In Cockman v. White, 76 N.C. App. 387, 333 S.E.2d 54 (1985), the North Carolina Court o Appeals held that a misunderstanding between the plaintiffs and defendants did not give rise to a claim for deceptive trade practices. Id. Despite Plaintiff's attempt to distinguish Cockman, the Court finds the reasoning of that case applicable to the instant situation. Furthermore, the Cour again notes the level of sophistication and experience on the part of both parties in this case.
Viewed against this backdrop, the Court is not able to find that the alleged conduct was either unfair or deceptive. See e.g., Spartan Leasing, Inc. v. Pollard, 101 N.C. App. 450, 400 S.E.2d 476 (1991) (holding that sophisticated businessmen could not have been mislead about the nature of a guarantee agreement); United States Dev. Corp. v. Peoples Federal Savings Loan Ass'n, 873 F.2d 731 (4th Cir. 1989) ("A sophisticated real estate developer such as appellant could not possibly have been deceived by [defendant's] insistence upon and use of the unilateral right of withdrawal."); United Roasters, Inc. v. Colgate-Palmolive, 649 F.2d 985 (4th Cir. 1981) (a breach of contract, even if intentional, does not amount to an unfai and deceptive trade violation without a showing of substantial aggravating circumstances).
Consequently, the Court will adopt the Magistrate Judge's recommendation and will dismiss Plaintiff's claim for unfair and deceptive trade practices.
5. Third-Party Defendants
Because all of Plaintiff's claims against the Defendants are hereby dismissed, the Defendants' third-party claims against Beverly-Hanks and Boylan are no longer viable and will be dismissed.
IV. ORDER
IT IS, THEREFORE, ORDERED, that the Plaintiff's Motion to Amend the Complain is ALLOWED, and MMR Properties, LLC, is JOINED as a party plaintiff in accordance with Rule 19 of the Federal Rules of Civil Procedure.
IT IS FURTHER ORDERED that the motions for summary judgment filed by Defendants Vitalink and Mohr Partners are ALLOWED as to all of Plaintiff's claims.
IT IS FURTHER ORDERED that the Third-Party Complaints against Third-Part Defendants Beverly Hanks Associates, Inc., and Robert A. Boylan, Jr., are moot and are therefore DISMISSED.
A Judgment dismissing this matter in its entirety is filed herewith.
V. JUDGEMENT
For the reasons set forth in the Memorandum and Order filed herewith, IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that the motions for summary judgment filed by Defendants Vitalink Pharmacy Services, Inc., and Mohr Partners, Inc., are ALLOWED, and Plaintiffs' claims are hereby DISMISSED WITH PREJUDICE in their entirety.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Third-Party Complaint against Third-Party Defendants Beverly-Hanks Associates, Inc., and Robert A. Boylan, Jr., is hereb DISMISSED.