Ashley River v. Ashley River Properties

• Decision Date: 21 June 2007
• Docket Number: No. 4260.,4260.
• Citation: 648 S.E.2d 295
• Court: South Carolina Court of Appeals
• Parties: ASHLEY RIVER PROPERTIES I, LLC; Emerald Investments, LLC; and Stuart L. Longman, Appellants, v. ASHLEY RIVER PROPERTIES II, LLC; and Kriti Ripley, LLC, Respondents.

648 S.E.2d 295

ASHLEY RIVER PROPERTIES I, LLC; Emerald Investments, LLC; and Stuart L. Longman, Appellants, v. ASHLEY RIVER PROPERTIES II, LLC; and Kriti Ripley, LLC, Respondents.

No. 4260.

Court of Appeals of South Carolina.

Heard June 6, 2007.

Decided June 21, 2007.

Richard S. Rosen and Daniel F. Blanchard, III, both of Charleston, for Appellants.

William C. Cleveland, III, and David B. McCormack, both of Charleston, for Respondents.

ANDERSON, J.:

Ashley River Properties I, LLC, Emerald Investments, LLC, and Stuart Longman (collectively "Appellants") appeal the dismissal of their action to vacate or modify an arbitration award previously rendered in New York and to judicially dissolve Ashley River Properties II, LLC, for lack of subject matter jurisdiction. Appellant Longman contends the circuit court erred in dismissing the causes of action as they pertain to him, because he avers he signed the operating agreement in a limited capacity. We affirm.

FACTUAL/PROCEDURAL BACKGROUND

On December 29, 2003, Longman, Emerald, and Kriti Ripley, LLC ("Kriti") entered into an operating agreement to form Ashley River Properties II, LLC, a South Carolina limited liability company. Emerald retained 70% ownership in the company while Kriti owned the remaining 30%. Longman signed the agreement as Emerald's manager. In addition, he signed personally but in a limited capacity with respect to sections 3.9 (Emerald Member's Representations) and 3.10 (Indemnification).

The cover page to the operating agreement states, "THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT, SECTION 15-48-10 ET SEQ. OF THE CODE OF LAWS OF SOUTH CAROLINA." The agreement contains the following pertinent provisions:

12.4 Governing Law. The Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina regardless of the residence or domicile, now or in the future, of any party hereto and notwithstanding any conflicts of laws.

12.5 Consent to Jurisdiction. Except as otherwise required by law, the parties to this Agreement hereby agree that the courts of the State of New York shall have sole and exclusive jurisdiction over any matter arising from the interpretation, purpose, effect, or operation of this Agreement, and with regard to all matters associated with operation of the Company's business. Except as otherwise required by law, the parties consent to venue in New York County, New York, and waive any rights they may have to assert jurisdiction or venue in any other court, administrative forum, or other adjudicative body.

. . . .

12.18 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be submitted to binding arbitration in accordance with the requirements of the American Arbitration Association (or successor thereto) (the "AAA"). All arbitration proceedings shall be conducted in New York County, New York.... The arbitrators shall be directed to apply the governing law of this Agreement in rendering their decision.

(Emphasis added).

In March 2005, Kriti and Ashley River Properties II initiated arbitration proceedings against Longman and Emerald alleging breach of the operating agreement stemming from a development containing a marina and condominiums located in Charleston, South Carolina, known as Ripley Light Yacht Club Marina and Condominiums. Longman objected to his inclusion in the arbitration, asserting that he signed the agreement in limited joinder only.

On July 11, 2005, the New York arbitration panel issued a written order holding it had jurisdiction over Longman. On October 31, 2005, the arbitrators rendered their final arbitration decision, requiring, inter alia, that Emerald relinquish its voting rights in Ashley River Properties II and Kriti was to have the right to purchase Emerald's interest in Ashley River Properties II. The order stated: "This Award is in full settlement of all claims and counterclaims submitted in this arbitration. All other claims and counterclaims in this proceeding are denied ... except ones pertaining to a final accounting in connection with the use of Ashley River Properties II, LLC, funds by Emerald and Longman."

Pending the outcome of the arbitration proceeding, Kriti and Ashley River Properties II filed a lawsuit in the United States District Court for the Southern District of New York seeking to enforce the right to control Ashley River Properties II. After the first arbitration award was issued, Emerald filed its own lawsuit in the Southern District of New York contesting whether Kriti made a proper tender for the interest awarded in the first decision from the arbitrators. Both lawsuits were assigned to the same judge. Appellants' New York counsel filed a motion to dismiss the federal action for lack of subject matter jurisdiction. A few days later, Appellants' counsel informed the court the parties had agreed to dismiss the federal court actions with prejudice because of lack of subject matter jurisdiction.

Appellants filed the current action in the Court of Common Pleas for Charleston County on November 9, 2005. An amended complaint was filed on December 30, 2005, seeking to: (1) vacate or modify the arbitration award previously rendered in New York; and (2) judicially dissolve Ashley River Properties II. Additionally, Ashley River Properties I desired a declaration of rights under the operating agreement as a good faith third party purchaser, because it was not a party to the original contract.

The circuit court severed the claims of Ashley River Properties I from the remaining causes of action. Ashley River Properties II and Kriti (collectively "Respondents") moved to dismiss based primarily on the argument that South Carolina courts lack subject matter jurisdiction over the dispute. Respondents asserted that New York courts have exclusive jurisdiction over the dispute pursuant to the law of South Carolina and the operating agreement. The circuit court granted Respondents' motion to dismiss, finding the claims should have been brought in New York. Additionally, the circuit court found the claim to judicially dissolve Ashley River Properties II addressed an issue already decided by the arbitrators and was therefore not properly before the court.

STANDARD OF REVIEW

Under Rule 12(b)(6), SCRCP, a defendant may move for dismissal based on a failure to state facts sufficient to constitute a cause of action. Flateau v. Harrelson, 355 S.C. 197, 201, 584 S.E.2d 413, 415 (Ct.App. 2003) (citing Baird v. Charleston County, 333 S.C. 519, 511 S.E.2d 69 (1999)). A trial judge in the civil setting may dismiss a claim when the defendant demonstrates the plaintiff has failed to state facts sufficient to constitute a cause of action in the pleadings filed with the court. Williams v. Condon, 347 S.C. 227, 553 S.E.2d 496 (Ct.App.2001). "Generally, in considering a 12(b)(6) motion, the trial court must base its ruling solely upon allegations set forth on the face of the complaint." Doe v. Marion, 361 S.C. 463, 469, 605 S.E.2d 556, 559 (Ct.App.2004), aff'd 645 S.E.2d 245, 2007 WL 1321978; accord Stiles v. Onorato, 318 S.C. 297, 457 S.E.2d 601 (1995); see also Brown v. Leverette, 291 S.C. 364, 353 S.E.2d 697 (1987) (noting trial court must dispose of a motion for failure to state a cause of action based solely upon the allegations set forth on face of complaint); Williams, 347 S.C. at 233, 553 S.E.2d at 499 (finding trial court's ruling on 12(b)(6) motion must be bottomed and premised solely upon allegations set forth by plaintiff).

"A motion to dismiss under Rule 12(b)(6) should not be granted if facts alleged and inferences reasonably deducible therefrom would entitle the plaintiff to relief on any theory of the case." Flateau, 355 S.C. at 202, 584 S.E.2d at 415; see Gentry v. Yonce, 337 S.C. 1, 522 S.E.2d 137 (1999); see also Baird, 333 S.C. at 527, 511 S.E.2d at 73 (declaring that if the facts and inferences drawn from the facts alleged on the complaint would entitle the plaintiff to relief on any theory, then the grant of a motion to dismiss for failure to state a claim is improper); McCormick v. England, 328 S.C. 627, 494 S.E.2d 431 (Ct.App.1997) (concluding a motion to dismiss cannot be sustained if the facts alleged in complaint and inferences reasonably deducible therefrom would entitle the plaintiff to relief on any theory of the case). In deciding whether the trial court properly granted the motion to dismiss, this court must consider whether the complaint, viewed in the light most favorable to the plaintiff, states any valid claim for relief. See Gentry, 337 S.C. at 5, 522 S.E.2d at 139; see also Cowart v. Poore, 337 S.C. 359, 523 S.E.2d 182 (Ct.App.1999) (explaining that looking at facts in light most favorable to plaintiff, and with all doubts resolved in his behalf, the court must consider whether the pleadings articulate any valid claim for relief).

The complaint should not be dismissed merely because the court doubts the plaintiff will prevail in the action. Toussaint v. Ham, 292 S.C. 415, 357 S.E.2d 8 (1987). The trial court's grant of a motion to dismiss will be sustained only if the facts alleged in the complaint do not support relief under any theory of law. Tatum v. Medical Univ. of S. C., 346 S.C. 194, 552 S.E.2d 18 (2001); see also Gray v. State Farm Auto Ins. Co., 327 S.C. 646, 491 S.E.2d 272 (Ct.App.1997) (stating motion must be granted if facts and inferences reasonably deducible from them show that plaintiff could not prevail on any theory of the case).

"Dismissal of an action pursuant to Rule 12(b)(6) is appealable." Williams, 347 S.C. at 233, 553 S.E.2d at 500. Upon review of a dismissal of an action pursuant to Rule 12(b)(6), the appellate court applies the same standard of review implemented by the trial court. Id.

LAW/ANALYSIS

Appellants appeal the dismissal of their action for lack of subject matter jurisdiction. Appellant Longman...