Bigelow Corp v. Hounds Town U.S., LLC
| Docket Number | 3:23-CV-00134-FDW-SCR |
| Decision Date | 02 August 2023 |
| Parties | BIGELOW CORPORATION and SARAH BIGELOW, Plaintiffs, v. HOUNDS TOWN USA, LLC, and ELEVATE DESIGN AND BUILD, LLC, Defendants. |
| Court | U.S. District Court — Western District of North Carolina |
THIS MATTER is before the Court on Defendant Hounds Town USA LLC's (“HTU”) Motion to Dismiss for Failure to State a Claim, (Doc. No. 2), HTU's Motion to Deny Joinder of Elevate Design and Build, LLC (“Elevate”), (Doc. No. 8), and HTU's Motion to Dismiss Plaintiffs' Amended Complaint for Failure to State a Claim, (Doc. No. 10). The motions have been fully briefed and are ripe for review. For the reasons set forth below, HTU's first Motion to Dismiss is DENIED AS MOOT; HTU's Motion to Dismiss the Amended Complaint is GRANTED; and HTU's Motion to Deny Joinder is DENIED AS MOOT. As such Plaintiffs' Amended Complaint is DISMISSED WITH PREJUDICE as against HTU, and it is DISMISSED WITHOUT PREJUDICE to Plaintiffs refiling a new action in state court as against Elevate.
Plaintiffs Sarah Bigelow (“Mrs. Bigelow”) and Bigelow Corporation (“Bigelow Corp.,” and collectively with Mrs. Bigelow, “Plaintiffs”), filed their Amended Complaint on March 23, 2023. Therein, Plaintiffs assert nine claims against Defendant HTU surrounding Plaintiffs' effort to open a Hounds Town franchise.
HTU is a franchisor of doggie daycares across the United States. (Id. at 2). Plaintiffs sought to open a Hounds Town franchise in North Carolina. (Id.). During the franchise information disclosure phase, Plaintiffs relayed to HTU's management team, including Mike Gould (“Mr. Gould”), HTU's owner, that they generally did not have any construction experience, and specifically, that they did not have any franchise location construction experience. (Id.). Mr. Gould informed Plaintiffs of HTU's buildout process, during which a franchisor can either serve as their own project manager or hire a private constructor to build out a franchise. (Id. at 2). Mr. Gould identified Edward Bharath (“Bharath”), owner of Maruthi Enterprise, LLC, as HTU's construction manager and, on numerous occasions, advised Plaintiffs that using Bharath as their contractor was an exceptional idea due to Plaintiffs' lack of construction experience. (Id. at 2-3).[2] Plaintiffs allege that in reliance on these representations, they executed a Franchise Agreement (“Agreement”) with HTU on May 29, 2020. (Id.).
On or around February 20, 2021, Plaintiffs-without making any further inquiries into Bharath-executed a construction contract with Bharath to build out the Franchise Location. (Id. at 3). Plaintiffs contend they contracted with Bharath based upon HTU's recommendations. (Id.) Plaintiffs admit that at the time they contracted with Bharath, they contemporaneously learned Bharath did not have a North Carolina general contractor's license and would need to hire a licensed contractor to perform the work. (Id.). From March 29 to July 1, 2021, Plaintiffs experienced “myriad, critical construction issues with Bharath,” including but not limited to:
(1) obtaining proper permits from Union County; (2) repeated permit denials due to Bharath not being in compliance with county building codes and regulations; (3) fraudulent, falsified contractor bids; (4) cost overruns; (5) fraudulent overpricing; (6) excessive and unexplained construction delays; (7) cost overruns; (8) overpayment for materials and broken promises for reimbursement; and (9) professional incompetence.
(Id. at 4). In May 2021, Plaintiffs sought to terminate the Franchise Agreement with Defendant but did not actually do so. (Doc. No. 11, p. 4). Instead, later that same month, Plaintiffs entered into a second construction contract with Shaheid Hasan, Chief Executive Officer of Elevate. (Doc. No. 6, p. 4). Mr. Hasan is the North Carolina licensed contractor that Bharath allegedly retained to perform the buildout construction. (Id.) In August 2021, Plaintiffs learned of at least three other North Carolina franchisees who, upon Mr. Gould's recommendation, hired Bharath as their construction manager and have since suffered construction and financial issues. (Id. at 5).
On May 27, 2022, Plaintiffs terminated their contract with Elevate, alleging Elevate breached its contract by (1) not completing the construction buildout by the contracted due date; (2) construction incompetency; (3) failure to schedule and pass building inspections with Union County Building Code Enforcement; and (4) failure to obtain a certificate of occupancy by the contracted due date. (Id. at 4). HTU then terminated the Franchise Agreement with Plaintiffs in October 2022. (Id.). Plaintiffs claim the actions of HTU, Elevate, and Bharath, caused them significant delays and financial losses related to the opening of the Franchise Location, which did not open for over two years after the execution of the Franchise Agreement. (Id. at 5).
On January 19, 2023, Plaintiffs filed their Complaint in the Union County Superior Court. (Doc. No. 1-1). On March 1, 2023, Defendant filed a Notice of Removal to this Court based on complete diversity of citizenship jurisdiction under 28 U.S.C. § 1332, and then filed a Motion to Dismiss for Failure to State a Claim. (Docs. Nos. 1, 2). On March 23, 2023, Plaintiffs filed their Amended Complaint, asserting the following nine causes of action: (1) breach of contract against all defendants; (2) unjust enrichment against all defendants; (3) punitive damages against HTU; (4) unfair and deceptive trade practices against HTU; (5) piercing the corporate veil, alter ego, and mere instrumentality against HTU; (6) fraud against HTU; (7) negligent misrepresentation against HTU; (8) negligence against HTU; and (9) negligent infliction of emotional distress against HTU. (Doc. No. 6, pp. 6-10). Defendant now moves to dismiss Plaintiff's Amended Complaint with prejudice, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. No. 10). Defendant also moves to Deny Joinder of Elevate Design and Build, LLC, pursuant to 28 U.S.C. § 1447(e). (Doc. No. 8). Plaintiffs filed Responses in Opposition to both motions on May 4, 2023, and Defendant filed Replies to both Responses on May 11, 2023. (Doc. Nos. 16, 17, 18, 19).
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a motion may be dismissed for failure to state a claim upon which relief can be granted. A Rule 12(b)(6) inquiry is limited to determining if the pleader's allegations constitute “a short and plain statement of the claim showing the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a 12(b)(6) motion to dismiss, Plaintiff's “complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists only when the factual content allows a court to draw the “reasonable inference” that the defendant is liable for the misconduct. Iqbal 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). The Court must draw all reasonable factual inferences in favor of the party asserting the claim. Priority Auto Grp., Inc. v. Ford Motor Co., 757 F.3d 137, 139 (4th Cir. 2014).
In a Rule 12(b)(6) analysis, the Court must separate facts from legal conclusions, as mere conclusions are not entitled to a presumption of truth. Iqbal, 556 U.S. at 678. Importantly, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. However, well-pled factual allegations are entitled to a presumption of truth, and the court should determine whether the allegations plausibly give rise to an entitlement to relief. Id. at 679.
HTU has moved to dismiss all of Plaintiffs' claims with prejudice, pursuant to Rule 12(b)(6), arguing the terms of the Franchise Agreement bar each of Plaintiffs' claims. However, Plaintiffs' response in opposition focuses entirely on the validity and applicability of the Franchise Agreement and its terms. Specifically, Plaintiffs argue that HTU's Motion must be denied for three reasons: (1) the Franchise Agreement was fraudulently induced and is thus void; (2) whether the Franchise Agreement terms contradict Plaintiffs' claims involves questions of fact more appropriately resolved at trial or on a motion for summary judgment; and (3) HTU cannot “show that Plaintiffs' Amended Complaint clearly reveals on its face that Plaintiffs' claims are time barred.” (Doc. No. 16, p. 1).
As a preliminary matter, the Court notes that Plaintiffs' explicit failure to address all but one of HTU's grounds for dismissal is troubling. In a footnote in their Memorandum in Opposition, Plaintiffs explain:
Plaintiffs do not address HTU's arguments concerning breach of contract, negligent misrepresentation, negligence, negligent misrepresentation [sic], negligent infliction of emotional distress, unjust enrichment, piercing the corporate veil and punitive damages ([Doc. 11] at 9, 10, 13, 14, 15) because Plaintiffs do not need to resort to these legal theories to prevail on this Motion to Dismiss. Plaintiffs, however, do not concede HTU's arguments regarding their inapplicability.
(Doc No. 16, p. 5). The Fourth Circuit has made clear that a “party waives an argument . . . by failing to develop its argument-even if its brief takes a passing shot at the issue.” Grayson O Co. v. Agadir Int'l LLC, 856 F.3d 307, 316 (4th Cir. 2017) (internal quotation marks and alterations omitted) (quoting Brown v. Nucor Corp., 785 F.3d 895, 923 (4th Cir. 2015) (quoting Belk, Inc. v. Meyer Corp., 679 F.3d 146, 152 n.4 (4th Cir. 2012)...
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