Total Merch. Servs. v. TMS NC, Inc.

• Decision Date: 29 July 2022
• Docket Number: 21 CVS 5801
• Citation: 2022 NCBC 42
• Parties: TOTAL MERCHANT SERVICES, LLC, Plaintiff, v. TMS NC, INC. AND CHRISTOPHER COLLINS, Defendants.
• Court: Superior Court of North Carolina

2022 NCBC 42

TOTAL MERCHANT SERVICES, LLC, Plaintiff,
v.
TMS NC, INC. AND CHRISTOPHER COLLINS, Defendants.

No. 21 CVS 5801

Superior Court of North Carolina, Wake

July 29, 2022

Councill, Gunnemann &Chally, LLC, by Joshua P. Gunnemann, and Ellis &Winters LLP, by Thomas H. Segars and Jeremy Falcone, for Plaintiff Total Merchant Services, LLC.

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Hatcher Legal, PLLC, by Nichole M. Hatcher and Erik P. Lindberg, for Defendants TMS NC, Inc. and Christopher Collins.

ORDER AND OPINION ON PLAINTIFF'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIMS AND DEFENDANTS' MOTION FOR LEAVE TO AMEND

Louis A. Bledsoe, III Chief Business Court Judge

1. THIS MATTER is before the Court upon Plaintiff Total Merchant Services, LLC's ("Plaintiff" or "TMS") Motion to Dismiss Defendant TMS NC, Inc.'s ("TMS NC") Counterclaims (the "Motion to Dismiss")^[1] under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)") filed 8 April 2022 and Defendants TMS NC and Christopher Collins' ("Collins") Amended Motion for Leave to File Amended Counterclaims and Add Additional Parties (the "Motion to Amend")^[2] under Rule 15 filed 17 May 2022 (together, the "Motions").

2. Having considered the Motions, the related briefs, the arguments of counsel at the hearing on the Motions, and other appropriate matters of record, the Court hereby GRANTS in part and DENIES in part the Motions.

I.

PROCEDURAL BACKGROUND

3. TMS initiated this action in Wake County Superior Court on 28 April 2021, asserting various claims and seeking a preliminary injunction.^[3] Before the Motion for Preliminary Injunction was heard, Defendants removed the case to the United States District Court for the Eastern District of North Carolina, Western Division, on 8 June 2021.^[4] The case was later remanded to the Superior Court of North Carolina on 16 December 2021 upon the federal court's conclusion that the case had been improperly removed and the federal court's resulting imposition of sanctions against Defendants.^[5]

4. On 9 June 2021, Defendant Collins filed his Answer and Motion to Dismiss,^[6] and Defendant TMS NC filed its Answer with Counterclaims and Third-Party Claims (separately, the "Original Answer" or the "Original Counterclaim(s)").^[7]

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5. On 8 April 2022, Plaintiff filed the Motion to Dismiss^[8] simultaneously with its Answer to Counterclaims and Third-Party Claims.^[9] 6. On 5 May 2022, Defendants filed a Motion for Leave to Amend Counterclaims and Add Additional Parties.^[10] The Court summarily denied Defendants' motion without prejudice because Defendants failed to comply with Business Court Rules 7.2 and 7.3 in presenting the motion.^[11]

7. On 17 May 2022, Defendants filed the Motion to Amend^[12] along with Defendants' proposed Amended Answer and Counterclaims (the "Amended Answer and Counterclaims," separately, the "Amended Answer" or the "Amended Counterclaim(s)").^[13] to both page number and paragraph number where appropriate (for example: "Orig. Countercls. at 18 ¶ 37").

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8. After full briefing, the Court held a hearing on the Motion to Dismiss and the Motion to Amend on 15 June 2022 (the "Hearing"), at which all parties were represented by counsel.^[14]

9. The Motions are now ripe for resolution.

II.

LEGAL STANDARD

10. When a party seeks leave of court to amend a pleading, "leave shall be freely given when justice so requires." N.C. R. Civ. P. 15(a). "A motion to amend is addressed to the sound discretion of the trial [court]" and is reviewable only for abuse of discretion. House of Raeford Farms, Inc. v. Raeford, 104 N.C.App. 280, 282 (1991). A motion to amend may be denied for "(a) undue delay, (b) bad faith, (c) undue prejudice, (d) futility of amendment, and (e) repeated failure to cure defects by previous amendments." Id. at 282-83.

11. "The futility standard under Rule 15 is essentially the same standard used in reviewing a motion to dismiss under Rule 12(b)(6)[.]" Simply the Best Movers, LLC v. Marrins' Moving Sys., 2016 NCBC LEXIS 28, at *5 ( N.C. Super. Ct. Apr. 6, 2016). When considering a motion to dismiss under Rule 12(b)(6), the Court views the allegations in the pleading at issue "in the light most favorable to the non-moving party[,]" Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5 (2017) (quoting Kirby v. N.C. Dep't of Transp., 368 N.C. 847, 852 (2016)), and "determine[s] whether the allegations of the complaint, if treated as true, are sufficient to state a claim upon

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which relief may be granted under some legal theory[,]" Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting CommScope Credit Union v. Butler &Burke, LLP, 369 N.C. 48, 51 (2016)).

12. "[T]he [pleading] is to be liberally construed, and the trial court should not dismiss the [pleading] unless it appears beyond doubt that [the] [pleader] could prove no set of facts in support of his claim which would entitle him to relief." State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 444 (2008) (quoting Meyer v. Walls, 347 N.C. 97, 111-12 (1997) (fourth alteration in original)). Dismissal of a pleading under Rule 12(b)(6) is proper only: "(1) when the [pleading] on its face reveals that no law supports [the] claim; (2) when the [pleading] reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when some fact disclosed in the [pleading] necessarily defeats the . . . claim." Oates v. JAG, Inc., 314 N.C. 276, 278 (1985).

13. Where, as here, a motion for leave to amend a pleading is made while a motion to dismiss the original pleading is pending, the Court may deny the motion to amend on grounds of futility if the amended claims fail to state a claim under Rule 12(b)(6) and thereafter consider the motion to dismiss the claims as originally asserted. See, e.g., Walker v. Sloan, 137 N.C.App. 387, 402-03 (2000) (affirming the denial of an oral motion to amend during the hearing on a motion to dismiss, in part, for futility, and also affirming the dismissal, in part, of the original complaint); Beau Rivage Homeowners Ass'n v. Billy Earl, L.L.C., 163 N.C.App. 325, 328 (2004)

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(affirming trial court's decision to deny motion to amend and grant motion to dismiss original complaint).

III.

ANALYSIS

14. Defendants seek leave to file an Amended Answer and Counterclaims that would:

(i) omit six Original Counterclaims-Civil Conspiracy (Count III), Accounting (Count V), Negligent Interference with Prospective Economic Advantage (Count X), Intentional Interference with Contractual Relations (Count XI), RICO (Count XII), and RICO (Count XII [sic]) (the "Omitted Counterclaims");^[15]

(ii) add three affirmative defenses-Unclean Hands (Ninth Affirmative Defense), Indemnification (Tenth Affirmative Defense), and Substantial Performance (Eleventh Affirmative Defense)-as well as new factual allegations in support of certain existing affirmative defenses and amended prior admissions (together, the "New Affirmative Defenses");^[16]

(iii) recast North American Bancard Holdings, LLC and North American Bancard, LLC (the "NAB Defendants")^[17]-who had been named as

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third-party defendants pursuant to Rule 14 in the Original Counterclaims-as counterclaim defendants pursuant to Rule 13 on all of Defendants' remaining counterclaims against Plaintiff;^[18] and

(iv) reassert five Original Counterclaims-Breach of Contract (Count I), Breach of the Covenant of Good Faith and Fair Dealing (Count II), Unjust Enrichment (Count III), Unfair and Deceptive Trade Practices (Count IV), and Declaratory Judgment (Count V) but supported by new and additional allegations (the "Reasserted Counterclaim(s)").^[19]

15. The Court will address each of these categories of proposed amendments in turn.

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A. The Omitted Counterclaims

16. Defendants' Amended Answer and Counterclaims effectively dismisses the Omitted Counterclaims, so Plaintiff, predictably, does not object to this aspect of the Motion to Amend. Accordingly, the Court grants the Motion to Amend to this extent and hereby orders that Defendants may file an Amended Answer and Counterclaims that does not include the Omitted Counterclaims and is otherwise substantially in the form attached to Defendants' brief in support of its Motion to Amend at ECF No. 112.2, as modified by the Court's rulings in this Order and Opinion.

B. The New Affirmative Defenses

17. Plaintiff objects to the New Affirmative Defenses on procedural grounds, correctly noting that Defendants seek leave to amend their Original Counterclaims but fail to highlight to the Court in their briefing that they also seek to add new affirmative defenses and additional supporting allegations in their Amended Answer.^[20] Plaintiff also contends that Defendants have unduly delayed this action by waiting over a year to assert the New Affirmative Defenses, requiring that this aspect of Defendants' Motion to Amend be denied.^[21]

18. While the Court is troubled by Defendants' lack of candor in its briefing, the Court nonetheless concludes that Plaintiff has not been unfairly prejudiced by

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Defendants' briefing on the Motion to Amend, that Defendants' delay in seeking to assert its New Affirmative Defenses is not undue in these circumstances, and that justice otherwise is served by permitting Defendants to assert the New Affirmative Defenses in this action. The Court therefore grants the Motion to Amend with respect to the New Affirmative Defenses and hereby orders that Defendants may file an Amended Answer and Counterclaims that includes the New Affirmative Defenses and is otherwise substantially in the form attached to Defendants' brief in support of its Motion to Amend at ECF No. 112.2, as modified by the Court's rulings in this Order and Opinion.

C. Recasting the NAB Defendants as Counterclaim Defendants

19. Plaintiff objects to Defendants' recasting the NAB Defendants as...