Colo. Bankers Life Ins. Co. v. GBIG Holdings, LLC

• Decision Date: 23 January 2023
• Docket Number: 5:22-CV-212-D
• Parties: COLORADO BANKERS LIFE INSURANCE COMPANY, and SOUTHLAND NATIONAL REINSURANCE CORPORATION, Plaintiffs, v. GBIG HOLDINGS, LLC, Defendant.
• Court: U.S. District Court — Eastern District of North Carolina

COLORADO BANKERS LIFE INSURANCE COMPANY, and SOUTHLAND NATIONAL REINSURANCE CORPORATION, Plaintiffs,
v.
GBIG HOLDINGS, LLC, Defendant.

No. 5:22-CV-212-D

United States District Court, E.D. North Carolina, Western Division

January 23, 2023

ORDER

JAMES C. DEVER, United States District Judge

On May 26, 2022, Colorado Bankers Life Insurance Company and Southland National Reinsurance Corporation (collectively, “plaintiffs”) filed a complaint against GBIG Holdings, LLC (“defendant” or “GBIG”) alleging breach of contract, conversion, embezzlement, and violations of North Carolina's Unfair and Deceptive Trade Practices Act (“UDTPA”) [D.E. 1]. On July 21,2022, GBIG moved to dismiss the conversion, embezzlement, and UDTPA claims [D.E. 13] and filed a memorandum in support [D.E. 14]. See Fed.R.Civ.P. 12(b)(6). On September 13,2022, plaintiffs responded in opposition [D.E. 16]. On September 27,2022, GBIGreplied [D.E. 17]. As explained below, the court grants GBIG's motion to dismiss the conversion, embezzlement, and UDTPA claims.

I.

This case concerns a Tax Sharing Agreement (“TSA”) between GBIG, the parent company, and its subsidiaries, plaintiffs. See Compl. ¶ 6. The TSA and associated consolidated tax return allowed GBIG and its subsidiaries, including plaintiffs, “to combine, share, or consolidate profits

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and losses in order to minimize GBIG's consolidated tax liability.” Id. at ¶ 12. The TSA created an “equitable basis for determining the tax amount to be paid by or owed to the parties to the TSA on account of their inclusion in GBIG's consolidated tax return.” Id. at ¶ 10.

Plaintiffs allege that the TSA requires “[a]ny payments or refunds due to a party by reason of amendment to, or examination of, a previously filed tax return, shall be remitted to the appropriate party no later than 45 days from the receipt of the funds or credit by GBIG.” Id. at ¶ 19 (alteration in original) (quotation omitted). “Where GBIG receives a tax refund, that tax refund amount should be distributed among the Members according to their tax share.” Id. at ¶ 20. Plaintiffs allege that in its 2019 Tax Return, GBIG used “Plaintiffs' tax losses of more than $83 million collectively to reduce its $3,058,932 tax liability to zero.” Id. at ¶ 26. Plaintiffs also allege that GBIG failed to make any payments required under the TSA to plaintiffs following the 2019 Tax Return. See id. at ¶ 27. Instead, GBIG took the funds provided by the tax return and distributed them to an affiliated entity, Global Growth. Id. at ¶ 52.

In January 2021, “Plaintiffs communicated with GBIG that the Tax Refund belonged to and was owed to Plaintiffs. Plaintiffs' representatives had numerous telephone and email communications with GBIG concerning the return of the Tax Refund and payment of the Tax Loss Receivable.” Id. at ¶ 39. During the communications, “GBIG made various excuses for its failure to pay the Tax Refund and Tax Loss Receivable between the time the Tax Return was filed” and the filing of this action. Id. at ¶ 40. Plaintiffs allege that “GBIG's excuses were made merely to delay payment of the Tax Refund and Tax Loss Receivable so that GBIG could use the funds for its own purposes.” Id., at ¶ 41. GBIG “has not paid Plaintiffs the Tax Refund” or the “Tax Loss Receivable.” Id. ¶¶ 48-49. Accordingly, plaintiffs filed this action.

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II.

GBIG concedes that plaintiffs plausibly allege a breach of contract claim, but moves to dismiss the conversion, embezzlement, and UDTPA claims under Rule 12(b)(6). See [D.E. 13]. A motion to dismiss under Rule 12(b)(6) tests the complaint's legal and factual sufficiency. See Ashcroft v. Iqbal, 556 U.S. 662,677-80 (2009); Bell Atl. Corp, v. Twombly, 550 U.S. 544, 554-63 (2007); Coleman v, Md. Court of Appeals, 626 F.3d 187,190 (4th Cir. 2010), affd. 566 U.S. 30 (2012); Giarratano v. Johnson. 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(b)(6) motion, a pleading “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F.3d at 302. In considering the motion, the court must construe the facts and reasonable inferences “in the light most favorable to the [nonmoving party].” Massey v, Ojaniit, 759 F.3d 343, 352 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549,557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 576 U.S. 155 (2015). A court need not accept as true a complaint's legal conclusions, “unwarranted inferences, unreasonable conclusions, or arguments.” Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S. at 678-79. Rather, a plaintiff's factual allegations must “nudge[ ] [its] claims,” Twombly, 550 U.S. at 570, beyond the realm of “mere possibility” into “plausibility.” Iqbal, 556 U.S. at 678-79.

When evaluating a motion to dismiss, a court considers the pleadings and any materials “attached or incorporated into the complaint.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435,448 (4th Cir. 2011); see Fed.R.Civ.P. 10(c); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159,166 (4th Cir. 2016); Thompson v. Greene, 427 F.3d 263,268 (4th Cir. 2005). A court may also consider a document submitted by a moving party if it is “integral to the complaint and there

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is no dispute about the document's authenticity.” Goines, 822 F.3d at 166. Additionally, a court may take judicial notice of public records without converting the motion to dismiss into a motion for summary judgment. See, e.g, Fed.R.Evid. 201; Tellabs, Inc, v. Makor Issues & Rts., Ltd., 551 U.S. 308,322 (2007); Philips v, Pitt Cnty, Mem'l Hosp., 572 F.3d 176,180 (4th Cir. 2009).

A.

GBIG contends that the economic loss rule bars plaintiffs' conversion claim. See [D.E. 14] 4. Plaintiffs respond that the economic loss rule does not bar their conversion claim [D.E. 16] 6-8. Under the economic loss rule, “[o]rdinarily, a breach of contract does not give rise to a tort action by the promisee against the promisor.” N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73,81,240 S.E.2d 345,350 (1978), rejected in part on other grounds by Trs. of Rowan Tech. Coll, v. J. Hyatt Hammond Assocs., Inc., 313 N.C. 230,328 S.E.2d 274 (1985); Braswell Egg Co. v. Poultry Mgmt. Sys., Inc., 481 F.Supp.3d 528, 542 (E.D. N.C. 2020); Gen. Cas. Co. of Wis. v. Murphy-Hoffinan Co,, No. 5-.20-CV-376, 2020 WL 6173547, at *2 (E.D. N.C. Oct. 21, 2020) (unpublished); CPI Corp, v. HCL Am., Inc., No. 5:17-CV-550,2019 WL 1083775, at *3 (E.D. N.C. Mar. 7,2019) (unpublished); Wilkins v. Wachovia Corp., No. 5: 10-CV-249,2011 WL 1134706, at *2 (E.D. N.C. Mar. 24, 2011) (unpublished). The economic loss rule arises because “parties to a contract do not thereby become each others' fiduciaries; [therefore,] they generally owe no special duty to one another beyond the terms of the contract[.]” Broussard v. Meineke Disc. Muffler Shops, Inc., 155F.3d331,347(4thCir. 1998) (quotation omitted); Branch...