Loyd v. Griffin

Decision Date23 June 2022
Docket Number20 CVS 2394
Citation2022 NCBC 30
PartiesASHTON K. LOYD, Plaintiff, v. JAMES MICHAEL GRIFFIN and GRIFFIN INSURANCE AGENCY, INC., Defendants.
CourtSuperior Court of North Carolina

Levine Law Group, P.A., by Michael J. Levine and Cathy A. Williams Austin Law Firm, by John S. Austin, and Mauney PLLC, by Gary V.

Mauney, for Plaintiff Ashton K. Loyd.

Bennett &Guthrie, PLLC, by Mitchell Hendrix Blankenship and Joshua H. Bennett, for Defendants James Michael Griffin and Griffin Insurance Agency, Inc.

ORDER AND OPINION ON DEFENDANTS' MOTION TO DISMISS SECOND AMENDED COMPLAINT

Robinson, Judge.

1. This matter is before the Court on the Defendants' Motion to Dismiss Second Amended Complaint (the "Motion") pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)"). (ECF No. 87.)

2. For the reasons set forth herein, the Court GRANTS in part and DENIES in part the Motion.

I. INTRODUCTION

3. The Second Amended Complaint asserts seven claims for relief. Moving Defendants seek to have all claims dismissed: (1) First Claim for Relief (Breach of Fiduciary Duty), brought against James Michael Griffin; (2) Second Claim for Relief (Constructive Fraud), brought against James Michael Griffin; (3) Third Claim for Relief (Conversion), brought against all Defendants; (4) Fourth Claim for Relief (Unjust Enrichment), brought against all Defendants; (5) Fifth Claim for Relief (Constructive Trust &Accounting), brought against all Defendants; (6) Sixth Claim for Relief (Alternative Remedy of Recission), brought against all Defendants, and (7) Seventh Claim for Relief (Punitive Damages), brought against all Defendants.

II. FACTUAL BACKGROUND

4. The Motion is brought pursuant to N.C. G.S. § 1A-1, Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Accordingly, the Court is limited to its review of the relevant pleading-the Second Amended Complaint-and any documents referred to in the pleading that may be properly considered. Moch v. A.M. Pappas &Assocs., LLC, 251 N.C.App. 198, 206 (2016) (citation omitted).

5. Therefore, to the extent that any party has relied on extraneous evidence to support their respective positions on the Motion, the Court has not considered that evidence. The parties' mere reference to additional documents does not automatically convert a motion to dismiss into one for summary judgment. See Estate of Belk v. Boise Cascade Wood Prods. L.L.C., 263 N.C.App. 597, 599 (2018) ("[T]he trial court is not required to convert a motion to dismiss into one for summary judgment simply because additional documents are submitted .... Where it is clear from the record, namely from the order itself, that the additional materials were not considered by the trial court, the 12(b)(6) motion is not converted into a Rule 56 motion." (internal quotation marks, brackets, and citation omitted)).

6. The Court does not make findings of fact on a motion to dismiss pursuant to Rule 12(b)(6), but only recites those factual allegations from the Second Amended Complaint that are relevant and necessary to the Court's determination of the Motion.

7. Defendant James Michael Griffin ("Griffin") is a resident and citizen of Mecklenburg County, North Carolina. (S. Am. Compl. ¶ 17, ECF No. 83.) 8. Defendant Griffin Insurance Agency, Inc. ("GIA") is a North Carolina corporation with its principal office located at 135 Gasoline Alley, Iredell County, North Carolina. (S. Am. Compl. ¶ 18.)

9. Plaintiff Ashton Loyd ("Loyd") is a resident and citizen of Iredell County, North Carolina. (S. Am. Compl. ¶ 16.)

10. Griffin formed GIA on 29 June 2001, through which he sold insurance policies as a Nationwide Mutual Insurance Company ("Nationwide") principal agent. (S. Am. Compl. ¶¶ 22, 25.)

11. On 19 November 2001, GIA issued 1500 shares representing the entirety of outstanding GIA stock to Griffin. (S. Am. Compl. ¶ 116.) On the same day, Griffin and Charles E. Moore, III ("Moore") were elected directors of GIA's board of directors, and GIA's board authorized Moore to purchase 500 shares of GIA stock; he did so on 18 February 2002. (S. Am. Compl. ¶¶ 115, 116.) Accordingly, Griffin transferred 500 shares of GIA stock to Moore, leaving Griffin with 1000 shares. (S. Am. Compl. ¶ 116.)

12. GIA adopted corporate bylaws, authorized by its Board of Directors, on 10 February 2002. (S. Am. Compl. ¶ 118.)

13. Plaintiff Loyd began selling insurance policies for Liberty Mutual Insurance Company ("Liberty") shortly after graduating college in 1992, doing so for almost ten years. (S. Am. Compl. ¶ 20.)

14. Sometime in 2002, Griffin arranged a meeting with Loyd proposing they "join forces" with the goal of Loyd succeeding Griffin as a Nationwide primary agent. (S. Am. Compl. ¶ 23.)

15. Loyd declined the initial offer but was again approached by Griffin in 2004. Loyd accepted the second offer with the understanding that he would go into business with Griffin, as partners, and Griffin would prepare Loyd to become head of GIA. (S. Am. Compl. ¶ 24.)

16. From 2004 through 2009, Loyd sold Nationwide insurance policies for GIA. Loyd was promoted[1] on 26 March 2010 via an "Agency Reorganization Plan," which installed Loyd as responsible for directing all personnel and operational decisions within various GIA locations. (S. Am. Compl. ¶¶ 27-28.)

17. On 30 June 2009, GIA redeemed Moore's 500 shares of GIA stock via a Stock Redemption Agreement. As a result, Griffin became the sole remaining shareholder. (S. Am. Compl. ¶¶ 132-33.)

18. On 31 March 2010, at the direction of Griffin, Loyd formed Loyd Insurance Agency, Inc. ("LIA"). (S. Am. Compl. ¶ 32.) Griffin and Loyd then entered into three Revenue Stream Purchase Agreements ("Revenue Agreement(s)") in March 2010, May 2012, and October 2017. (S. Am. Compl. ¶ 33.)

19. The purpose of the Revenue Agreements, according to Griffin, was to finance Loyd's purchase of GIA. (S. Am. Compl. ¶ 33.) Through the Revenue Agreements, Griffin assigned the revenue from GIA's Nationwide insurance sales at various GIA locations to Loyd. In return, Loyd executed promissory notes requiring him to pay Griffin a sum of $1,805,364.58 plus ten percent of the revenue streams from the GIA locations at Mooresville and Statesville, NC. (S. Am. Compl. ¶ 35.)

20. Loyd and Griffin also entered into an Asset Purchase Agreement ("Asset Agreement") in March 2010 through which Loyd agreed to purchase GIA property such as office equipment and fixtures at the sites covered by the Revenue Agreements. (S. Am. Compl. ¶ 37.)

21. In both the Revenue Agreements and the Asset Agreement, LIA was referred to as "LOYD INSURANCE AGENCY, INC., a North Carolina corporation d/b/a Griffin Insurance Agency." (S. Am. Compl. ¶ 39.)

22. On or about 1 July 2012, Griffin, through GIA, proposed that he and Loyd enter into a Corporate Associate Agent Agreement ("Agent Agreement") allowing LIA to act as an exclusive seller of Nationwide insurance policies under the terms of the GIA contract with Nationwide. (S. Am. Compl. ¶ 41.) The Agent Agreement also stipulated that both Loyd and LIA were independent contractors and not employees of GIA. (S. Am. Compl. ¶ 103.)

23. Under Griffin's leadership and with his permission, GIA began an agencywide practice of issuing Certificates of Insurance ("COI(s)") against Nationwide policies. GIA agents would accommodate Griffin's family members and VIP clients by issuing COIs as proof of insurance to demonstrate active insurance coverage prior to Nationwide's issuing a physical written policy. (S. Am. Compl. ¶ 50.)

24. As long as a client had "actual coverage, in a client policy somewhere," it "became the practice of nearly all GIA staff to issue COIs to such clients" upon request, and "[n]o one that did this at GIA understood this to be a violation of the law[.]" (S. Am. Compl. ¶ 51.)

25. From 2015 through 2019, nine such COIs were issued to members of Griffin's family by a GIA employee who directly reported to Griffin, despite the COIs having named as insureds individuals who were not formally insured. (S. Am. Compl. ¶ 53.)

26. In June 2018, Griffin told Loyd that he intended to cancel the Revenue Agreements and instead was going to merge GIA with LIA. (S. Am. Compl. ¶ 60.)

27. At this point, Loyd owed less than a million dollars under the Revenue Agreements and offered to accelerate his payments on those contracts in lieu of merging LIA and GIA, but Griffin rejected the offer. (S. Am. Compl. ¶ 61.)

28. On 25 June 2018, Griffin presented Loyd with two documents, the "Agreement and Plan of Merger between Griffin Insurance Agency, Inc. and Loyd Insurance Agency, Inc." (the "Merger Agreement") and the "Shareholders Agreement." (S. Am. Compl. ¶¶ 62, 66.)

29. The Merger Agreement offered Loyd an ownership interest in GIA in exchange for the merger of GIA and LIA, subject to the terms and conditions of the Shareholders Agreement. (S. Am. Compl. ¶¶ 62, 66.)

30. That same day, Loyd and Griffin-in his capacity as Trustee for the J. Michael Griffin Revocable Trust (the "Griffin Trust")[2]-signed both the Merger and Shareholders Agreements, effectuating the merger of GIA and LIA. (S. Am. Compl. ¶ 64.)

31. Even though the agreements making Loyd a shareholder of GIA were signed on 1 July 2018, the Griffin Trust did not transfer the required shares to Loyd until 1 December 2018. Also, on 1 December 2018, Andrew S. Patton ("Patton") was added as a party to the Shareholders Agreement. In all, the Griffin Trust transferred 345 shares of GIA stock to Loyd and 165 shares of GIA stock to Patton. (S. Am. Compl. ¶ 64.)

32. As of 1 December 2018, share transfer records reflect that the Griffin Trust owned 490 shares of GIA stock, Loyd owned 345 shares, and Patton owned 165 shares, for a total...

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