Pittman v. Grand Strand Entertainment, Inc.

• Decision Date: 11 April 2005
• Docket Number: No. 25969.,25969.
• Citation: 611 S.E.2d 922,363 S.C. 531
• Court: South Carolina Supreme Court
• Parties: Ben R. PITTMAN, on behalf of himself and all other shareholders of Grand Strand Entertainment, Inc., Appellant, v. GRAND STRAND ENTERTAINMENT, INC., d/b/a Legends In Concert of Myrtle Beach, John Stuart and Legends in Concert, Inc., Defendants, of Whom John Stuart is, Respondent.

611 S.E.2d 922

363 S.C. 531

Ben R. PITTMAN, on behalf of himself and all other shareholders of Grand Strand Entertainment, Inc., Appellant, v. GRAND STRAND ENTERTAINMENT, INC., d/b/a Legends In Concert of Myrtle Beach, John Stuart and Legends in Concert, Inc., Defendants of Whom John Stuart is, Respondent.

No. 25969.

Supreme Court of South Carolina.

Heard February 3, 2005.

Decided April 11, 2005.

C. Scott Masel, of Newby Pridgen Sartip & Masel, of Myrtle Beach, for Appellant.

Henrietta U. Golding, of McNair Law Firm, of Myrtle Beach, for Respondent.

Chief Justice TOAL.

This case was certified for review pursuant to 204(b), SCACR. The underlying litigation began when Appellant Ben R. Pittman (Pittman) brought an action against Grand Strand Entertainment, Inc., d/b/a Legends In Concert of Myrtle Beach, Respondent John Stuart (Stuart), and Legends In Concert, Inc., seeking injunctive relief and damages for misappropriation of corporate opportunity and breach of contract. The parties resolved all claims involving the corporations in arbitration. Following arbitration, however, Pittman pursued claims against Stuart as an individual. Eventually, both Pittman and Stuart moved for summary judgment, and the court granted summary judgment in favor of Stuart. Pittman appeals. We affirm.

FACTUAL/PROCEDURAL BACKGROUND

In 1994, Pittman and Stuart began making plans to open a live musical show, named "Legends in Concert," in Myrtle Beach, South Carolina. Stuart, president and sole shareholder of Legends In Concert, Inc. (Legends), a Nevada corporation, created and produced the show. Pittman, a stockbroker and entrepreneur who had an interest in the entertainment business, offered to raise the capital needed to open the show in Myrtle Beach.¹

To raise the capital, Pittman formed a corporation named Grand Strand Entertainment, Inc. (Grand Strand). Through a public offering of stock, the corporation would raise money to open and run the show.² The corporation was formed in January 1995, with Pittman as its sole incorporator.

On March 26, 1995, Grand Strand and Legends entered into a licensing agreement.³ The purpose of the agreement was to give Grand Strand licensing and intellectual property rights to produce the Myrtle Beach show, in exchange for raising capital to fund the show's opening and operation. More specifically, the agreement provided that Grand Strand would "raise between $500,000 and $1,000,000 dollars to develop, stage, open, and operate the show ... for a minimum of a one year run."

The parties signed the agreement even though it contained deadlines that were to be met before the date the agreement was signed. The agreement included, in part, the following terms:

a) [Legends] shall commence operation in Myrtle Beach by planning, staging rehearsing and opening [the show] through supplying its own lighting, equipment and technical support, personnel, acts, talent and through accepting preliminary cash receipts from Grand Strand in the amount of $200,000 on or before March 30th, by payment of $100,000.00 on or before March 10th and the balance by March 30th.

b) Grand Strand will promptly register its SCOR offering and raise sufficient funds to complete capitalization of [the show] which shall include all pre-production opening costs and ongoing operating expenses, and in any event, shall not be less than $300,000.00 but is likely to be $1,000,000.00....

c) Grand Strand will register the SCOR offering to finance the Myrtle Beach operation on or before June 1, 1995, in order to fully capitalize [the show] by not later than August 31st, 1995.

d) In the event that Grand Strand fails to perform or does not perform in a timely fashion, Legends shall have the right to continue to operate the Myrtle Beach production as a production of [Legends]....

(Emphases added). The agreement also gave Legends the right to terminate the agreement if Grand Strand materially breached any of the terms.

Just two days after the agreement was signed, the show opened. At this time, Grand Strand had yet to pay Legends any money as outlined in the agreement. Therefore, Legends, not Grand Strand, funded all pre-production costs and was solely responsible for financing the show's opening. But according to Pittman, Stuart told him not to worry about the dates in the licensing agreement; Stuart just wanted Pittman to facilitate the SCOR in order to raise capital. In response to a conversation they apparently had about the missed deadlines, Pittman sent Stuart a fax, dated March 28, 1995, which provided as follows:

Since you have asked me not to concentrate on the $200,000 since we got the show open without it and the license was so long in the making, I will now go ahead and concentrate on the SCOR offering ASAP per you [sic] request.... As you said Sunday about the license agreement when I wanted to make sure the $200,000 was not an issue ..., this is all a matter of trust and I really do trust you and hope that the same always applies to me.

The SCOR offering never occurred. Grand Strand did, however, issue Stuart 120,000 shares of stock. On April 17, 1995, a week after the stock was issued, Stuart sent a letter to the bank where Grand Strand maintained its accounts, authorizing the bank to honor drafts made by certain Legends personnel in Nevada. Stuart signed the letters as Chief Executive Officer of Grand Strand, even though he was never officially elected or named as a director or the CEO.

Finally, on April 26, 1995, Stuart sent Pittman a letter declaring Grand Strand in breach of the licensing agreement. Accordingly, Stuart terminated the agreement with Grand Strand. The letter also explained that Legends would continue operating the Myrtle Beach show, without the assistance of Grand Strand or Pittman.

In response, Pittman brought a derivative action on behalf of himself and all other shareholders of Grand Strand, seeking injunctive relief and damages for misappropriation of corporate opportunity and breach of contract. The circuit court stayed the action pending the submission of claims against Grand Strand and Legends to arbitration, as required under the licensing agreement. The court also ruled that Pittman's claims against Stuart, in his individual capacity, were not included in the arbitration agreement and thus could be pursued in an independent legal action following arbitration.

The arbitrator awarded judgment in favor of Legends on the claim for injunctive relief and dismissed all other claims. In addition, the arbitrator awarded Pittman $15,400 for services rendered and costs advanced. Finally, the arbitrator provided that "[t]his Award is in full settlement of all claims (and counterclaims) submitted by either party against the other in this arbitration."

Following arbitration, the circuit court lifted the stay, allowing Pittman to pursue his remaining claims against Stuart in his individual capacity. Stuart subsequently filed a motion for summary judgment based on res judicata and collateral estoppel, claiming that the parties agreed that all claims, including Pittman's claims against Stuart, were to be resolved in arbitration. The court denied Stuart's motion, finding that the parties never made such an agreement.

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