Int'l Indus. Corp. v. CR Brands, Inc.

• Decision Date: 15 March 2022
• Docket Number: C. A. 7:21-cv-00850-DCC
• Court: U.S. District Court — District of South Carolina
• Parties: International Industries Corporation, Plaintiff, v. CR Brands, Inc., and Rust-Oleum Consumer Brands Canada, Defendants.

International Industries Corporation, Plaintiff, v. CR Brands, Inc., and Rust-Oleum Consumer Brands Canada, Defendants.

C. A. No. 7:21-cv-00850-DCC

United States District Court, D. South Carolina, Spartanburg Division

March 15, 2022

OPINION AND ORDER

Donald C. Coggins, Jr. United States District Judge

This matter is before the Court on Defendant CR Brands, Inc.'s (“CR Brands”) Motion to Dismiss and Defendant Rust-Oleum Consumer Brands Canada's (“Rust-Oleum”) Motion to Dismiss. ECF Nos. 9, 14. Plaintiff filed Responses in Opposition, and both Defendants filed Replies. ECF Nos. 21, 26, 27, 29. The Motions are now before the Court.

BACKGROUND

The following statement of facts is drawn from the allegations of the Complaint. See ECF No. 1. For nearly 30 years prior to the events that gave rise to Plaintiff's claims Plaintiff sold and distributed Mean Green cleaning products manufactured by ChemPro, Inc. (“ChemPro”) pursuant to an agreement (“the Agreement”) entered between Plaintiff and ChemPro in 1992. ECF No. 1 at 3. The Agreement appointed Plaintiff as “the sole and exclusive distributor and export manager” of ChemPro's Mean Green products outside the continental United States. Id. Plaintiff's distributing territory was later reduced to only Canada in a February 2002 letter modifying the Agreement. Id. at 5. The Agreement stated that “[ChemPro] will not solicit sales from or grant to any other person any license or right identified herein in the territories specified . . . .” ECF No. 1-1 at 3. The initial term of the Agreement was for five years “unless sooner terminated as herein provided, by mutual agreement or by operation of law.” Id. The Agreement further stated:

Sixty (60) days before the end of the fifth year measured as completed on the end of the same day of the same month on which this Agreement begins, either party may give written notice to the other of automatic renewal of the Agreement upon the same conditions existing in the first Term as may have been amended during the Term. Otherwise, automatic renewal will take place if the aggregate sales for the first four years on the fourth anniversary date of this agreement divided by four equal to an average increase of 40% or more over the first year's sales.

Id. at 3-4. ChemPro promised that “[u]pon expiration or termination of this Agreement, [ChemPro] shall not (i) for a period of three (3) years therefrom solicit distributors of [Plaintiff]; (ii) disclose or reveal any confidences or proprietary information regarding [Plaintiff] and its operations, or customers to any person.” Id. at 7. In addition, neither party was permitted to “assign its rights or interests under this Agreement without the prior written consent of the other. Any such assignment without prior written consent shall be void from the beginning and shall create no rights in favor of the purported assignee.” ECF Nos. 1 at 4; 1-1 at 7. Notably, the Agreement states that it “shall be governed by the laws of South Carolina” and that “[t]he parties agree to submit to the jurisdiction of the courts of South Carolina in the event a dispute arises.” ECF No. 1-1 at 7.

By letter dated February 6, 2002, the parties agreed to modify the Agreement as follows: (1) Plaintiff would relinquish its exclusive distribution rights to anywhere outside of the continental United States, except that Plaintiff would retain such rights with respect to Canada, and (2) the term of the Agreement was reduced from five years to three years.

ECF Nos. 1 at 5; 1-1 at 2. Following this modification, the parties continued to render full, mutual performance of their obligations under the Agreement. ECF No. 1 at 5.

In March 2006, Allied Capital, a private equity group, acquired ChemPro, but ChemPro remained its own separate legal entity. Id. Shortly after the acquisition, Allied Capital merged ChemPro with another business in its portfolio, Redox Brands, and the resulting post-merger entity became known as CR Brands. Id. After the merger, Plaintiff and CR Brands continued to mutually render performance under the Agreement, and on multiple occasions, ratified the continuing validity of the Agreement. Id. Thereafter, CR Brands was sold to two other private equity firms, once in 2009 and again in 2012, but on both occasions, maintained its separate corporate existence and continued to render performance under the Agreement with Plaintiff. Id. at 6. Throughout each of these corporate transactions, CR Brands continued to manufacture Mean Green products and Plaintiff continued to exercise its exclusive distribution rights in Canada. Id.

On or about August 1, 2018, Plaintiff learned that CR Brands sold the Mean Green products brand to RPM International, Inc. (“RPM”), a multi-billion dollar holding company whose portfolio includes the Rust-Oleum brand of products. Id. Despite the sale, CR Brands assured Plaintiff that their relationship under the Agreement would continue. Id. Shortly thereafter, Plaintiff received correspondence from Rust-Oleum that Plaintiff no longer had any rights, exclusive or otherwise, to distribute Mean Green products in Canada. Id. at 7. When Plaintiff reminded Rust-Oleum of the existence of the Agreement with CR Brands, Rust-Oleum advised Plaintiff that it was terminating the Agreement effective December 1, 2018. Id. Plaintiff never consented to any written assignment of contractual rights to Rust-Oleum, nor did CR Brands ever send Plaintiff a letter to terminate the Agreement. Id. Simultaneously, Plaintiff was advised by longstanding Canadian customers that Rust-Oleum representatives had informed them that Plaintiff was no longer their distributor for Mean Green products and that all distribution would be accomplished by Rust-Oleum. Id. As a result, Plaintiff began losing longstanding Canadian accounts. Id.

Plaintiff filed this lawsuit on March 24, 2021, alleging causes of action for a declaratory judgment, breach of contract, common law unfair trade practices, conversion, breach of the duty of good faith and fair dealing, and tortious interference with existing contractual relations against CR Brands. ECF No. 1 at 8-17. Plaintiff alleges only one cause of action for tortious interference with existing contractual relations against Rust-Oleum. Id. at 15-17. CR Brands and Rust-Oleum move for dismissal for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and for failure to a state a claim on each of Plaintiff's causes of action pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF Nos. 9, 14.

APPLICABLE LAW

I. Federal Rule of Civil Procedure 12(b)(2)

When “a district court rules on a Rule 12(b)(2) motion without conducting an evidentiary hearing or without deferring ruling pending receipt at trial of evidence relevant to the jurisdictional issue, but rather relies on the complaint and affidavits alone, ‘the burden on the plaintiff is simply to make a prima facie showing of sufficient jurisdictional basis in order to survive the jurisdictional challenge.'” In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997) (quoting Combs, 886 F.2d at 676). “If the existence of jurisdiction turns on disputed factual questions[, ] the court may resolve the challenge on the basis of a separate evidentiary hearing, or may defer ruling pending receipt at trial of evidence relevant to the jurisdictional question.” Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). When a defendant challenges the Court's personal jurisdiction under Rule 12(b)(2) after discovery has been conducted and the relevant evidence has been presented to the Court, the plaintiff has the burden of proving that jurisdiction exists by a preponderance of the evidence. In re Celotex Corp., 124 F.3d at 628; Grayson v. Anderson, 816 F.3d 262, 269 (4th Cir. 2016). “In deciding whether the plaintiff has made the requisite showing, the court must take all disputed facts and reasonable inferences in favor of the plaintiff.” Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citing Mylan Labs, Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir. 1993)). Additionally, “‘[i]n reviewing the record before it, a court may consider pleadings, affidavits, and other evidentiary materials without converting the motion to dismiss to a motion for summary judgment.'” Magic Toyota, Inc. v. Se. Toyota Distribs., Inc., 784 F.Supp. 306 (D.S.C. 1992) (quoting VDI Techs. v. Price, 781 F.Supp. 85, 87 (D.N.H. 1991)).

A federal court may exercise personal jurisdiction over a defendant in the manner provided by state law. Fed.R.Civ.P. 4(k)(1)(A). Thus, “for a district court to validly assert personal jurisdiction over a non-resident defendant, two conditions must be satisfied. First, the exercise of jurisdiction must be authorized by the long-arm statute of the forum state, and, second, the exercise of personal jurisdiction must also comport with Fourteenth Amendment due process requirements.” Christian Sci. Bd. of Dirs. of First Church of Christ, Sci. v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001) (citing Stover v. O'Connell Assocs., Inc., 84 F.3d 132, 134 (4th Cir. 1996)).

South Carolina's long-arm statute provides as follows:

A court may exercise personal jurisdiction over a person who acts directly or by an agent as to a cause of action arising from the person's: (1) transacting any business in this State; (2) contracting to supply services or things in the State; (3) commission of a tortious act in whole or in part in this State; (4) causing tortious injury or death in this State by an act or omission outside this State if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this State;

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