Strates Shows v. Amusements of America
| Decision Date | 03 July 2007 |
| Docket Number | No. COA06-1363.,COA06-1363. |
| Citation | 646 S.E.2d 418 |
| Parties | STRATES SHOWS, INC., a Delaware corporation, Plaintiff, v. AMUSEMENTS OF AMERICA, INC., a New Jersey corporation; Rocky Mount Fair, Inc., a North Carolina corporation; Fair Management Inc., a Florida Corporation; Smokey Mountain Amusements, Inc., a Delaware corporation; Powers Great American Midways, a North Carolina business entity; Morris J. Vivona, Sr.; Morris J. Vivona, Jr.; Dominic A. Vivona, Sr.; Dominic A. Vivona, Jr.; John J. Vivona; Philip A. Vivona; Sebastian J. Vivona; Christopher R. Vivona; Norman Y. Chambliss, III; Margaret Scott Phipps; Robert E. Phipps; Bobby C. Mclamb; Linda J. Saunders; Michael E. Blanton; Robin Lee Turner; Deann S. Turner; Billy Joe Clark; Leslie E. Powers; and The Estate of Richard D. Janas, Defendants. |
| Court | North Carolina Court of Appeals |
Blanchard, Miller, Lewis & Styers, P.A., by E. Hardy Lewis, Raleigh, for plaintiff-appellee.
Cheshire, Parker, Schneider, Bryan & Vitale, by John Keating Wiles, Raleigh, for Amusements of America, Inc. and the Vivonas, defendants-appellants.
Tharrington Smith, LLP, by F. Hill Allen, IV, Raleigh, for Margaret Scott Phipps and Robert E. Phipps, defendants-appellants.
Smith Moore LLP, by Alan W. Duncan, Shannon R. Joseph, and S. Montaye Sigmon, Raleigh, for Norman Y. Chambliss, III and Rocky Mount Fair, Inc., defendants-appellants.
Strates Shows, Inc. ("Strates"), a Florida-based family business, performed the contract for provision of the midway at the annual North Carolina State Fair uninterrupted for more than fifty years. In 1999, Jim Graham, the long-time Commissioner of Agriculture, announced that he would not seek re-election for the 2000-2004 term. At some point after Commissioner Graham's announcement, defendant Amusements of America ("AOA"), a New Jersey based midway operator, including its principals, the individual Vivona family defendants ("Vivonas"), initiated a conspiracy with a long-time North Carolina-based business associate, defendant Norman Chambliss ("Chambliss"). The purpose of the conspiracy was to secure the State Fair midway operation contract for AOA. This conspiracy, and the illegal acts perpetrated in furtherance of it, culminated in a major public corruption scandal.
The criminal acts of defendants are numerous and complex, but include acts such as the making and accepting of bribes, money laundering, the structuring of transactions to avoid reporting requirements, state procurement conflict of interest violations, and potential election law violations. Defendant Meg Scott Phipps ("Phipps") was elected to replace Commissioner Graham, and in 2001 she set about forming a process by which the State of North Carolina would choose a midway operator for the 2002 State Fair.
Commissioner Phipps decreed the formation of a "Fair Advisory Committee" ostensibly to hear and vote on presentations made by various bidders for the midway operation. Strates presented a bid for the midway contract to the Fair Advisory Committee, along with seven other bidders, including AOA. According to an investigation of the vote taken by the committee, Strates was the choice to receive the midway contract. Commissioner Phipps did not attend any of the formal bid presentations. Rather, she was advised of the various presentations by Chambliss, and he recommended that the Commissioner choose AOA as the 2002 midway operator.
Commissioner Phipps ultimately awarded the midway contract to AOA, which was not the choice of the Fair Advisory Committee, but which had been deeply involved in the above described conspiracy. Strates challenged the Commissioner's award of the 2002 midway contract in the Office of Administrative Hearings ("OAH"), ultimately settling the action with entities who are not parties to the instant case. Based upon investigations performed by the State Bureau of Investigation, and the Federal Bureau of Investigation, several of the individual defendants including Michael Blanton, Chambliss, Bobby McLamb, Meg Scott Phipps, Linda Saunders, and M. Vivona, Jr. faced prosecutions, and subsequently pled guilty to or were convicted of various state and federal offenses.1
On 23 August 2004, Strates filed a complaint in the United States District Court for the Eastern District of North Carolina. The basis for federal subject matter jurisdiction was a single federal claim, which Strates asserted under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. Plaintiff also asserted several state claims including fraud, tortious interference with business relations and prospective economic advantage, unfair competition and unfair and deceptive trade practices, conversion, civil conspiracy, and a claim for punitive damages. Specifically, Strates sought damages based upon an alleged deprivation of the 2002 midway contract and its lost business and profits as a result, the costs in preparing Strates' bid proposal, and the legal fees and costs associated with Strates' appeal to OAH.
In an order filed 25 July 2005, Chief Judge for the Eastern District Louise W. Flanagan dismissed Strates' RICO claim for a lack of standing. Strates Shows, Inc. v. Amusements of America, Inc., 379 F.Supp.2d 817 (E.D.N.C.2005). The federal District Court specifically found that with respect to the RICO claim involving the 2002 midway contract, Strates "points to no property interest which it had in the 2002 midway contract . . . prior to" the illegal activity by defendants. Id. at 826. In addition, the court held that Strates had "not alleged an injury proximately caused by defendants' illegal activity." Id. at 828. Weighing against a finding of proximate cause was the existence of several intervening factors, including other bidders who were not involved in the conspiracy, the lack of a set procedure or criteria for the selection of the midway contract, and administrative discretion. Id. Ultimately the court held that the relationship between defendants' illegal conduct and the harm to Strates was indirect and speculative, and therefore Strates had failed to establish that any injury suffered by it was proximately caused by defendants' actions. Id. at 832. As such, plaintiff lacked standing to assert a RICO claim based upon the loss of the midway contract. Id. With respect to Strates' RICO claim seeking damages for its costs in preparing its bid, the district court held that the costs "do not meet even the cause-in-fact requirement for RICO injury[,]" and that Strates would have incurred these costs not withstanding defendants' wrongful conduct. Id. Similarly, the court held that Strates' legal fees and costs associated with appealing the contract award to OAH "do not satisfy the standing requirement of RICO." Id. at 833. The court held that "these legal fees and costs are not `direct' injury flowing from defendants' illegal conduct, but rather, at best, `indirect' injury which [Strates] did not automatically incur, but chose to incur, in mitigating the effect of defendants' conduct." Id. The district court went on to hold that "while the illegal conduct by defendants may have been the cause-in-fact of [Strates'] legal fees and costs, it was not the `proximate cause' of such fees and costs." Id. With respect to the state claims alleged, however, the district court declined to exercise supplemental jurisdiction, and dismissed them without prejudice. Id. Strates initially appealed the dismissal of the RICO claim to the United States Court of Appeals for the Fourth Circuit. However, prior to briefing in the Court of Appeals, Strates elected to proceed only on its state law claims, and filed an unopposed motion to dismiss its appeal, which was granted on 25 October 2005.
On 28 November 2005, Strates filed the instant action in Wake County Superior Court. The factual allegations and claims alleged in the state action were almost identical to the federal action, with the exception of the RICO claim which had been alleged in the federal action. In the state action, Strates alleged claims for unfair competition and unfair and deceptive trade practices, tortious interference with business relations and prospective economic advantage, civil conspiracy, fraud, as well as seeking punitive damages. On 1 February 2006, defendants AOA and the Vivonas filed a motion to dismiss based upon Rules 12(b)(1) and 12(b)(6) of our Rules of Civil Procedure, and collateral estoppel. The Phipps defendants filed a motion to dismiss on 14 March 2006, based upon a lack of standing, Rules 12(b)(1) and 12(b)(6), estoppel, and the ruling of the federal district court which held that Strates was unable to show causation and injury. Defendants Chambliss and Rocky Mount Fair, Inc. filed a motion to dismiss on 12 May 2006, based upon Rules 12(b)(1) and 12(b)(6). In an order filed 26 June 2006, the trial court denied defendants' motions. Defendants now appeal from the 26 June 2006 order denying their various motions.
On appeal, defendants argue the trial court erred in denying the various motions to dismiss where, in a fully-argued action arising out of the same alleged facts, a court of competent jurisdiction decided that Strates has not sufficiently alleged any legally cognizable injury and that its alleged injuries could not have been proximately caused by the alleged conduct of defendants.
Generally, the denial of a party's motion to dismiss is interlocutory, and thus is not immediately appealable. McCarn v. Beach, 128 N.C.App. 435, 437, 496 S.E.2d 402, 404 (1998). "An order is interlocutory if it does not dispose fully of a case, but rather requires further action by the trial court in order to finally determine the rights of all the parties involved in the controversy." Foster v. Crandell, ___ N.C.App. ___, ___, 638 S.E.2d 526, 532 (...
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