Crescent Foods Inc. v. Evason Pharmacies Inc.
| Decision Date | 05 October 2016 |
| Docket Number | 15 CVS 1852 |
| Court | Superior Court of North Carolina |
| Parties | CRESCENT FOODS, INC., Plaintiff, v. EVASON PHARMACIES, INC., Defendant. |
THIS CAUSE, designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court pursuant to N.C. Gen. Stat. § 7A-45.4(b) (), and assigned to the undersigned Special Superior Court Judge for Complex Business Cases, comes before the Court upon Defendant Evason Pharmacies, Inc.'s Motion to Dismiss ("Defendant's Motion to Dismiss") pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)").
THE COURT, having considered Defendant's Motion to Dismiss the briefs in support of and in opposition to Defendant's Motion to Dismiss, the arguments of counsel, and other appropriate matters of record, concludes that the Defendant's Motion to Dismiss should be GRANTED, in part and DENIED, in part, for the reasons set forth below.
Everett, Womble & Lawrence, LLP by Ronald T. Lawrence, II, Esq., for Plaintiff.
The Law Office of John T. Benjamin, Jr., P.A. by John T. Benjamin, Jr., Esq. and Paula M. Shearon, Esq., for Defendant.
Gregory P. McGuire Special Superior Court Judge.
1. Plaintiff Crescent Foods, Inc. ("Plaintiff") is a North Carolina corporation that owns and operates Piggly Wiggly grocery stores, including stores in Mount Olive and Faison, North Carolina. (Compl. ¶¶ 1, 3.) Defendant Evason Pharmacies, Inc. ("Defendant") is also a North Carolina corporation, and is in the business of operating and managing pharmacies. On October 1, 2001, Plaintiff and Defendant entered into a Management Agreement ("Management Agreement" or "Agreement"), pursuant to which Defendant would manage Plaintiff's pharmacies in the Faison and Mount Olive stores. The Management Agreement expired by its own terms on April 30, 2013, and was not renewed. (Id. ¶ 4.)
2. The parties' respective rights and duties were outlined in the Management Agreement. The Agreement provided that Defendant's duties included "managing the [pharmacies], including supervision of all employees of the Store providing services thereto" and the "ordering of all the prescription drugs and health and beauty care products for the [pharmacies]." (Management Agreement ¶ 3.) Under the Agreement, Plaintiff was required to provide to Defendant "at no charge, " inter alia, the following: "the facilities and fixtures . . . necessary to operate the [pharmacies]"; "computer software required for pharmacy operations"; and, "computer equipment, printer[s], copier[s], and facsimile machine[s]." (Id. ¶ 4). The Management Agreement also provided that Plaintiff "shall employ or engage the pharmacists and other staff . . . necessary to operate the [pharmacies]" and that "[a]ny such employees shall be considered employees of the [Plaintiff] and shall participate in all employee benefits offered by the [Plaintiff] to its employees." (Id.)
3. The Management Agreement provided the following regarding Defendant's compensation for its services:
Compensation: As compensation for [Defendant's] services hereunder, [Defendant] shall be entitled to fifty percent (50%) of the Gross Profit (as defined hereinbelow) from the [pharmacies'] prescription sales calculated on a quarterly basis. For purposes of this Agreement, Gross Profit shall be calculated using the cash basis method of accounting and shall mean total gross [ ] prescription sales less the following expenses: cost of goods sold, supplies, sales taxes, and salaries, compensation (including employer contributions for employment taxes) and employee fringe benefits (such as [Plaintiff's] insurance plan and retirement plan) payable to any pharmacists and other employees required to operate the [pharmacies].
(Id. ¶ 5.)
4. Finally, the Management Agreement provided that Defendant's "relation to the [Plaintiff] . . . shall during the period or periods of its engagement and service hereunder be that of an independent contractor." (Id. ¶ 14.)
5. Defendant was a member of, and owned stock in, North Carolina Mutual Drug Company ("Mutual Drug") (Id. ¶ 10.) As a stockholder, Defendant was able to buy the prescription medications for the pharmacies from Mutual Drug at a preferred, or discounted, price. The Management Agreement specifically provided that Plaintiff agreed "to stock the [pharmacies'] prescription inventory and health and beauty care products through [Defendant's] membership in [Mutual Drug]." (Management Agreement, pmbl.) Plaintiff alleges that the reason for doing so was to take advantage of the competitive pricing offered by Mutual Drug. (Compl. ¶ 11.)
6. Mutual Drug provided quarterly and annual "rebates" to its stockholders based on the prescription drugs purchased by the stockholder. (Id. ¶¶ 12-13.) Plaintiff alleges that the amount paid to a stockholder was calculated based on the amount of prescription drugs ordered, not on the amount of stock owned in the company, and were not "dividends" paid by Mutual Drug. (Id.) Plaintiff also alleges that the rebates paid to Defendant by Mutual Drug were for prescription drugs Defendant purchased for Plaintiff's pharmacies and "should not have been kept by Defendant but should have been deposited into the accounts of the stores and accounted for in the calculation of the gross profit of each store." (Id. ¶ 12.) The rebates were a "dollar-for-dollar reduction of the 'cost of goods sold, '" and Plaintiff claims that it had a right under the Management Agreement to a 50% share of the rebates. (Id. ¶¶ 11, 16.)
7. Plaintiff further alleges that despite the provision of the Management Agreement stating that Defendant was an independent contractor of Plaintiff, the relationship created by the Agreement functioned like a partnership and created a fiduciary relationship between the parties. (Id. ¶¶ 14-17.) Plaintiff claims that Defendant had a fiduciary duty to share the rebates with Plaintiff or should have accounted for the rebates in calculating the Gross Profit. (Id.)
8. Plaintiff did not know that Defendant was receiving the rebates from Mutual Drug during the 12 years that the parties operated under the Management Agreement. (Id. ¶ 14.) Defendant did not inform Plaintiff about the rebates, or include the rebates in the calculation of Gross Profits. (Id.) Plaintiff only learned about the rebates after the expiration of the Management Agreement, when Plaintiff purchased stock in Mutual Drug and started receiving the annual rebates from Mutual Drug. (Id.)
9. On October 27, 2015, Plaintiff filed this lawsuit in the Superior Court of Wayne County. The Complaint does not separately set out causes of action in separate counts, but appears to assert the following claims: breach of contract (Id. ¶ 18); breach of fiduciary duty (Id. ¶ 19); fraud and constructive fraud (Id. ¶ 21); and unfair and deceptive trade practices (Id. ¶ 33.)
10. On November 25, 2015, Defendant filed a Notice of Designation to the North Carolina Business Court. On December 2, 2015, the Chief Justice of the North Carolina Supreme Court, issued an Order, pursuant to G.S. § 7A-45.4(b), designating this case as a mandatory complex business case, and the case was assigned to the undersigned.
11. On January 15, 2016, Defendant filed Defendant's Motion to Dismiss in which it contends that the Complaint should be dismissed in its entirety pursuant to Rule 12(b)(6). The Court held a hearing on Defendant's Motion to Dismiss and it is now ripe for determination.
12. Defendant moves to dismiss Plaintiff's claim under Rule 12(b)(6). In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Court must determine "whether, as a matter of law, the allegations of the complaint . . . 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). In making this determination, the Court must take all well-pleaded allegations of the complaint as true. Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970). Nonetheless, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Strickland v. Hedrick, 194 N.C.App. 1, 20, 669 S.E.2d 61, 73 (2008). A complaint can be dismissed under Rule 12(b)(6) if: (a) the complaint on its face reveals that no law supports plaintiffs claim; (b) the complaint reveals on its face the absence of fact sufficient to make a good claim or (c) some fact disclosed in the complaint necessarily defeats the plaintiffs claim. Mileski v. McConville, 199 N.C.App. 267, 269, 681 S.E.2d 515, 517 (2009) (citing Oates v. Jag, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985)).
13. As its first claim, Plaintiff alleges that Defendant breached the Management Agreement by failing to share the rebates Defendant received and failing to account for the rebates in determining Gross Profit. Defendant contends the breach of contract claim fails because the Management Agreement does not give Plaintiff a right to a share in the payments Defendant received from Mutual Drug. In addition, Defendant argues that the breach of contract claim is barred by the three year statute of limitations applicable to contract claims. See G.S. § 1-52(1). "The statute of limitations may provide the basis for dismissal on a motion pursuant to . . . Rule 12(b)(6) if the face of the complaint establishes that [a] plaintiff's claim is barred." Liptrap v. City of High Point, ...
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