The Daniel Group, Inc. v. American Sales & Marketing, Inc.

Decision Date15 December 2016
Docket Number16 CVS 889
CourtSuperior Court of North Carolina

2016 NCBC 97



No. 16 CVS 889

Superior Court of North Carolina, Wake

December 15, 2016

Law Offices of Laurie J. Meilleur, PLLC by Laurie J. Meilleur, Esq. for Plaintiff The Daniel Group, Inc.

Ellis & Winters LLP by Kelly Margolis Dagger, Esq. for Defendants American Sales and Marketing, Inc. and Donald P. Licata.


Gregory P. McGuire Special Superior Court Judge.

THIS MATTER comes before the Court upon Defendants American Sales and Marketing, Inc.'s, and Donald P. Licata's Motion to Dismiss Plaintiff's Amended Complaint ("Motion") pursuant to Rules 9(b) and 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)"). The Court heard oral arguments on the Motion. The Motion is now ripe for determination by the Court.

THE COURT, having considered the Motion, briefs in support of and opposition to the Motion, the oral arguments of counsel for the parties, and other appropriate matters of record, FINDS AND CONCLUDES that the Motion should be GRANTED, in part, and DENIED, in part, for the reasons stated below.


1. Plaintiff The Daniel Group, Inc. ("Plaintiff") is engaged in the business of manufacturer representation. As a manufacturer's representative, Plaintiff assists manufacturers in marketing and selling their products to retail stores within contractually-defined territories. (Am. Compl. ¶ 3.) Adam McCarthy ("McCarthy") has been the President, sole shareholder, and sole board member of Plaintiff at all times relevant to the Motion.

2. Defendant American Sales & Marketing, Inc. ("American Sales") also is engaged in the business of manufacturer representation. Defendant Donald Licata[1]("Licata") is the President, sole shareholder, and sole board member of American Sales (collectively, Licata and American Sales will be referred to as "Defendants").

3. In 2004, Plaintiff purchased the assets of another manufacturer representation company, Performance Sales, Inc. ("Performance"). Among the assets Plaintiff purchased was the assignment of a 2002 "Manufacturer's Sales Representative Agreement" ("Sales Agreement") between Performance and M Corporation[2] under which Performance acted as a sales representative for M Corporation's "Cellular Innovations products" to certain mass merchant retailers in the states of Alabama, Georgia, Mississippi, North Carolina, South Carolina and Tennessee. (Id. ¶¶ 16-18, Exh. B.) The Sales Agreement was terminable at-will by either party. After assignment of the Sales Agreement, Plaintiff began acting as M Corporation's sales representative in 2004.

4. In 2006, Plaintiff and Defendants entered in an oral agreement under which Defendants acted as sales representatives for certain of Plaintiff's clients ("Oral Agreement") (Am. Compl. ¶ 24.) Plaintiff alleges that the terms of the of the Oral Agreement were as follows:

a. "Defendants would serve as an independent contractor and agent in the capacity of a Sales Representative for Plaintiff as the principal
b. Plaintiff was responsible for assigning its client manufacturers to Defendants
c. Plaintiff would reimburse some out-of-pocket expenses incurred by Defendants, e.g. expenses related to certain trade show travel and trade show admissions costs.
d. Defendants' sole source of income and/or revenue from any work relating to or from Plaintiff's manufacturing clients, was to be a split of one half of all commissions paid to Plaintiff by its manufacturing clients, which clients were assigned to Defendants by Plaintiff.
e. Plaintiff would provide Defendants with administrative support.
f. Plaintiff would introduce Defendants to Plaintiff's clients as well as Plaintiff's retail account contacts and leads.
g. Defendants were free to represent other manufacturers that were not clients of Plaintiff and Plaintiff would not expect any commissions earned by Licata individually or as an agent of AMS and subsequently American Sales."
h. The agreement was terminable at will upon notice."

(Id.¶ 25.)

5. Under the Oral Agreement, Plaintiff assigned Defendants to promote M Corporation's products within Plaintiff's territory as set out by the Sales Agreement. Among the retailers to whom Defendants promoted M Corporation's products were Family Dollar, Dollar General, and Variety Wholesalers. (Id. ¶¶ 17, 19, and 26.)

6. Defendants were highly successful in selling M Corporation's products on behalf of Plaintiff. On August 12, 2015, Licata sent an email directly to an official of M Corporation requesting that M Corporation pay directly to Defendants a non-commission-based bonus. (Am. Compl. ¶ 29.) Plaintiff alleges that this request was in violation of the Sales Agreement and the Oral Agreement. (Id. ¶ 29.)

7. Upon discovering that Licata had requested the bonus, on September 3, 2015, McCarthy sent to Licata a written Sales Representative Agreement (the "Proposed Representative Contract"). (Id. ¶30, Exh. E.) Through the Proposed Representative Contract, Plaintiff "attempted to put into writing most of the terms and conditions of [the parties'] verbal agreement as well as some additional terms including a non-compete agreement." (Id.) The Proposed Representative Contract also contained non-solicitation and confidentiality covenants. (Id.) Licata never signed the Proposed Representative Contract.

8. On October 1, 2015, McCarthy sent Licata an email inquiring about the still-unsigned Proposed Representative Contract. (Am. Compl., Exh. F.) On October 2, 2015, Licata responded, "adam (sic) still under review by my lawyer. will (sic) let you know .. thanks don (sic)." (Id.) McCarthy emailed Licata again on October 15, 2015, asking "[I]t has been 5 weeks since I sent out the rep contract, can you please give me an update on when your attorney will have this review?" Licata replied the next day that, due to the Jewish holidays in September and a trial that went longer than expected, his lawyer had not yet finished reviewing the Proposed Representative Contract. (Id.) Approximately two weeks later on October 30, 2015, Licata notified Plaintiff that Defendants were terminating the Oral Agreement effective immediately. (Id., Exh. C.)

9. Plaintiff alleges that, "between September 3, 2015, and October 30, 2015, while acting as an agent of Plaintiff, Defendants solicited Plaintiff's client, M Corporation, with respect to territories that had been contracted to Plaintiff for approximately eleven (11) years." (Am. Compl. ¶ 35.) On November 18, 2015, M Corporation and Plaintiff signed a revised Manufacturer's Sales Representative Agreement in which M Corporation removed Family Dollar, Dollar General, and Variety Wholesalers from Plaintiff's territory. Shortly thereafter M Corporation entered into an agreement with Defendants to represent M Corporation's products with the Family Dollar, Dollar General, and Variety Wholesalers accounts formerly serviced by Plaintiff. (Amended Compl. ¶ 23.)

10. On January 25, 2016, Plaintiff filed its initial Complaint alleging nine claims for relief: (1) breach of the Oral Agreement; (2) breach of fiduciary duty; (3) breach of the implied covenant of good faith and fair dealing; (4) unfair and deceptive trade practices in violation of G.S. § 75-1.1; (5) fraud; (6) tortious interference with the Sales Agreement; (7) misappropriation of trade secrets in violation of G.S. § 66-152 et seq.; (8) punitive damages; and (9) declaratory relief.

11. On March 2, 2016, this case was 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) (hereinafter, references to the North Carolina General Statutes will be to "G.S."), and on March 3, 2016, assigned to the undersigned Special Superior Court Judge for Complex Business Cases.

12. On April 11, 2016, Defendants moved to dismiss the Complaint under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. The Court scheduled a hearing on the matter for Tuesday, May 24, 2016. On May 22, 2016, Plaintiff filed an Amended Complaint. While the Amended Complaint did not alter any of the nine claims for relief in the original Complaint, it rendered Defendants' motion to dismiss the original Complaint moot. Houston v. Tillman, 234 N.C.App. 691, 695, 760 S.E.2d 18, 20 (2014) (finding that plaintiff's amendment of the complaint rendered any argument concerning the original complaint moot).

13. On June 22, 2016, Defendants filed the Motion. Plaintiff subsequently responded to the Motion, and Defendants replied.


14. Defendants seek to dismiss the Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. When ruling on a Rule 12(b)(6) motion to dismiss, the Court must determine "whether the complaint, when liberally construed, states a claim upon which relief can be granted on any theory." Benton v. W. H. Weaver Constr. Co., 28 N.C.App. 91, 95, 220 S.E.2d 417, 420 (1975). Such a motion should be granted only: "(1) when the complaint on its face reveals that no law supports plaintiff's claim; (2) when the complaint on its face reveals the absence of fact sufficient to make a good claim; (3) when some fact disclosed in the complaint necessarily defeats plaintiff's claim." Jackson v. Bumgardner, 318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986). The Court treats the well-pleaded allegations in a complaint as true and admitted in analyzing a Rule 12(b)(6) motion to dismiss. Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970). While facts and permissible inferences set forth in the complaint are analyzed in a light most favorable to the plaintiff, un-warranted conclusions of law or deductions of fact will not be deemed admitted. Ford v. Peaches Entm't...

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