Thornton v. Johnson

• Decision Date: 07 December 2020
• Docket Number: C/A No. 6:20-cv-01449-DCC
• Parties: Eve Thornton and Eve Inc., Plaintiffs, v. Dave Alfred Johnson and Alda Inc., Defendants.
• Court: U.S. District Court — District of South Carolina

Eve Thornton and Eve Inc., Plaintiffs, v. Dave Alfred Johnson and Alda Inc., Defendants.

C/A No. 6:20-cv-01449-DCC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA GREENVILLE DIVISION

December 7, 2020

OPINION AND ORDER

This matter is before the Court on Defendants Johnson and Alda, Inc.'s Motion to Dismiss the Amended Complaint. ECF No. 16. Plaintiffs filed a Response in Opposition, and Defendants filed a Reply. ECF Nos. 17, 18.

BACKGROUND

The following statement of facts is taken from the allegations of the Amended Complaint. See ECF No. 1 at ¶¶ 1-17. From 2002 through 2011, Plaintiff Eve Thornton ("Plaintiff Thornton") wholesaled shoes for a Florida-based company called Italian Shoemakers. Her job was to seek and secure orders and contracts with national retailers. Plaintiff Thornton was and is the sole owner of Plaintiff Eve, Inc., a South Carolina corporation with its principal office in Greenville County. Plaintiff Thornton was hired by Defendant Dave Alfred Johnson ("Defendant Johnson"), who was her boss and the sole owner of Defendant Aldo, Inc.

Four months after Plaintiff Thornton was hired, she received another job offer and attempted to give her two-week notice. However, Defendant Johnson told her that if she stayed, Italian Shoemakers would increase her monthly pay by $2,000. Plaintiff Thornton already received a monthly check from Italian Shoemakers for $12,500 and was additionally supposed to receive discretionary commissions based on sales performance. She accepted the offer of additional pay and did not resign. The additional $2,000 per month, which shortly thereafter increased to $2,500 per month, was paid directly by Defendant Alda, Inc. In total, Plaintiff Thornton received two checks every month: one from Italian Shoemakers for $12,500, and one from Defendant Alda, Inc., for $2,500.

Plaintiff Thornton also received commissions between $5,000 and $26,500 each year from 2004 to 2011, for a total amount of $116,500 during that period. Commissions were paid from Italian Shoemakers to Defendant Johnson and/or Alda, from which Defendant Johnson and/or Alda was then supposed to pay Plaintiff Thornton. Plaintiff Thornton did not have access to sales reports to monitor her performance or commissions payable; only Italian Shoemakers and Defendants had access to that information. Plaintiff Thornton separated from her employment and/or agency relationship with Defendants Johnson and Alda, Inc., by 2012. She believed at that time she had been treated honestly with respect to her salaries and commissions and had no knowledge to the contrary.

In 2018, Plaintiff Thornton was tangentially involved in a lawsuit against Italian Shoemakers. In the course of her involvement she gained access for the first time to documentation showing that she had been due considerably more commission than she was actually paid. Specifically, from 2006 to 2011,¹ Plaintiff Thornton and/or Eve, Inc. was due approximately $631,392.64 in commissions and only received $116,500.Plaintiff Thornton and/or Eve, Inc. was also² due approximately $319,757.01 in commissions from 2009 that had not been properly accounted for.

Plaintiffs filed suit in this Court on April 16, 2020, alleging seven causes of action against Defendants and seeking actual, incidental, consequential, treble, and punitive damages as well as attorney's fees. Defendants' Motion is now ripe for decision.

APPLICABLE LAW

Motion to Dismiss

Rule 12(b)(6) of the Federal Rules of Civil Procedures permits the dismissal of an action if the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses . . . . Our inquiry then is limited to whether the allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (internal quotation marks and citation omitted). In a Rule 12(b)(6) motion, the court is obligated "to assume the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). However, while the Court must accept the facts in the light most favorable to the nonmoving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Id.

To survive a motion to dismiss, the complaint must state "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although the requirement of plausibility does not impose a probability requirement at this stage, the complaint must show more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the pleading "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

DISCUSSION

Statutes of Limitations

Defendants first assert that Plaintiffs' claims are subject to dismissal because they are outside the three-year statute of limitations. For the following reasons, the Court disagrees.

Plaintiffs do not dispute that a three-year statute of limitations applies to all their claims. ECF No. 17 at 7. South Carolina uses the "discovery rule," under which "the statute of limitations begins to run from the date the injured party either knows or should known, by the exercise of reasonable diligence, that a cause of action exists for the wrongful conduct." True v. Monteith, 489 S.E.2d 615, 616 (S.C. 1997) (citations omitted). This has been interpreted to mean "that the injured party must act with some promptness where the facts and circumstances of an injury place a reasonable person of common knowledge and experience on notice that a claim against another party might exist." Dean v. Ruscon Corp., 468 S.E.2d 645, 647 (S.C. 1996) (emphasis in original) (citation omitted).

The crux of Defendants' argument is that, because Plaintiffs knew or should have known the value of each sale at the time it was made, they could have calculated the commission earned on each sale and realized that Defendants' payments were deficient. See ECF No. 16-1 at 9-10. If true, this would signify that Plaintiffs "knew or should have known . . . that a cause of action exist[ed]." Monteith, 489 S.E.2d at 616.

While it may be difficult to imagine Plaintiffs were ignorant of the value of each of their sales, it is not alleged in the Amended Complaint that Plaintiffs knew how commissions were calculated. Plaintiffs' commissions were "discretionary . . . based on sales performance." ECF No. 12 at ¶ 8. Under the Rule 12(b)(6) standard this Court concludes that Plaintiffs lacked the necessary information to calculate commissions owed. See E. Shore Mkts., 213 F.3d at 180. Defendants contend that because Plaintiffs allege a violation of S.C. Code Ann. § 35-53-20, which defines "commissions" as "compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the amount of order or sales or as a specified amount of each order or sale," Plaintiffs cannot claim ignorance of the amount of commission. ECF No. 16-1 at 10-11. But it does not follow from the statutory definition that Plaintiffs knew the percentage or specified amount of their commissions, nor is such knowledge alleged in the Amended Complaint.

Defendants' argument that Plaintiffs should have noticed the substantial difference in commission payments after they ended the relationship with Alda, Inc., but continued to sell shoes on behalf of Italian Shoemakers is similarly unavailing. It improperly assumes that Plaintiffs continued to receive commissions from Italian Shoemakers after 2011 in the same percentage or specified amount as before, when neither of these factsis found in the Amended Complaint. In short, no facts alleged support any inference that Plaintiffs were or should have been aware of the deficiency in Defendants' commission payments at the time those payments were made. Cf. Maher v. Tietex Corp., 500 S.E.2d 204, 208 (S.C. 1998) (plaintiff knew or should have known that he might have a cause of action when his testimony "reveal[ed] he believed at the time of these conversations [years prior] he was not getting the bonus money to which he felt entitled"); Slusser v. Union Bankers Ins. Co., 72 S.W.3d 713, 718 (Tex. 2002) (plaintiff, a field vice president, knew or should have known of his injury once a coworker "put him on notice that UBI might be underpaying the amount of commissions due to field vice presidents").³

Finally, Defendants note that "South Carolina courts have not yet ruled if the discovery rule applies to the Sales Representatives Act," S.C. Code Ann. § 39-65-10 et seq. ECF No. 16-1 at 15. Section 15-3-530(2) creates a three-year statute of limitations for "an action upon a liability created by statute other than a penalty or forfeiture." The Supreme Court of South Carolina has previously applied the discovery rule generally to § 15-3-530, without distinguishing among subsections. See, e.g., City of Newberry v. Newberry Elec. Coop., Inc., 692 S.E.2d 510, (S.C. 2010) ("We have repeatedly held that a statute of limitations begins to run when the party either knew or should have known that some legal right had been invaded.") (citations omitted) (emphasis added). The Court therefore concludes that the discovery rule applies to Plaintiffs' claims under theSales Representatives Act and that Defendants' arguments fail for the reasons explained above.⁴

Fraud Claims

Next, Defendants argue that Plaintiffs' claims for fraud, negligent misrepresentation, and breach of contract accompanied by fraudulent act must be dismissed because they...