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Sinclair and Associates of Greenville, LLC v. CresCom Bank

United States District Court, D. South Carolina, Charleston Division

November 17, 2016




         This matter is before the court on defendants Antler Road, LLC, Crescent Homes SC, LLC, Park Investors, LLC, Jamin Hujik, and Edward M. Terry's (“SCUPTA defendants”) motion to dismiss and defendant Edward M. Terry's (“Terry”) separate motion to dismiss. For the reasons stated below, the court grants the SCUPTA defendants' motion and denies Terry's motion.

         I. BACKGROUND[1]

         Plaintiff Sinclair and Associates of Greenville, LLC (“Sinclair”) is a design firm engaged in the business of providing engineering, land surveying, and project management services, with particular expertise in the area of pool design and engineering. Compl. ¶¶ 5, 7. In or around 2004, Sinclair contracted with Summerville Homes, LLC (“Summerville Homes”), the then-owner of the Baker Plantation subdivision in North Charleston, South Carolina, to prepare civil engineering and architectural plans and technical drawings for a pool and amenities center at Baker Plantation (the “Works”). Id. ¶¶ 31, 32. Sinclair then prepared and sealed the Works, and licensed the Works to Summerville Homes. Id. ¶¶ 33, 40. This license granted a non-transferable, limited right to use the Works in connection with Summerville Homes's construction of the amenities center and pool at Baker Plantation. Id. ¶¶ 39-41. However, Sinclair never sold the Works or any interest therein to any party. Id. ¶ 39.

         Summerville Homes never began construction on the pool and amenities, and instead, conveyed the Baker Plantation property to defendant CresCom Bank (“CresCom”) via a deed in lieu of foreclosure. Id. ¶¶ 47, 48. Around the time of this transaction, CresCom somehow obtained a copy of the Works.[2] Id. ¶ 49. CresCom subsequently conveyed the Baker Plantation property and the Works to defendant Antler Road, LLC (“Antler Road”). Id. ¶¶ 57, 58, 61. In December 2011, defendant Jamin Hujik, the vice president of CresCom, and Terry, the manager of Antler Road and president of Crescent Homes SC, LLC (“Crescent Homes”), each asked Sinclair whether it would be willing to release its copyrights in the Works. Id. ¶¶ 12, 14, 64-67, 76-79. On both occasions, Sinclair stated that it would be willing to do so in exchange for payment, but none of the defendants ever accepted this offer. Id. ¶¶ 65, 77-79. In fact, Terry personally rejected the offer on December 29, 2011, stating that the Works were not worth the amount Sinclair requested. Id. ¶ 79.

         Despite never having paid for the Works, Antler Road subsequently used the Works to construct the pool and amenities center at Baker Plantation. Id. ¶¶ 81, 82. After purchasing the Baker Plantation property from Antler Road, Crescent Homes also used the Works in this manner. Id. ¶¶ 83, 84, 91. At some point, either Antler Road or Crescent Homes provided defendants Park Investors, LLC (“Park Investors”) and Robert E. Sample (“Sample”) with copies of certain portions of the Works, which Park Investors used to construct the amenities center and Sample used to create derivative plans for the pool. Id. ¶¶ 95-110. Sample's derivative plans were later used to obtain a construction permit for the pool from the Department of Health and Environmental Control. Id. ¶ 112. At all times relevant to this action, the various defendants were aware that either Antler Road or Crescent Homes planned to use the Works in this manner and that neither Antler Road nor Crescent Homes had the right to so use the Works. Id. ¶¶ 62, 68-76, 80, 85, 90, 91, 99-101, 106-109. Crescent Homes now markets the Baker Plantation subdivision using the pool and amenities center, id. ¶ 117, and all defendants have profited from their use or conveyance of the Works. Id. ¶ 118.

         On February 17, 2016, Sinclair filed the instant action bringing claims for direct copyright infringement, contributory copyright infringement, and conversion against all defendants, and a claim for violation of the South Carolina Unfair Trade Practices Act, SC Code §§ 39-5-10, et seq. (“SCUPTA”) against the SCUPTA defendants. On April 4, 2016, the SCUPTA defendants filed a motion to dismiss Sinclair's SCUPTA claim, and on April 5, 2016, Terry filed a motion to dismiss all claims against him. Sinclair filed responses to both motions on April 21, 2016. The motions are now ripe for the court's review.

         II. STANDARD

         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for “failure to state a claim upon which relief can be granted.” When considering a Rule 12(b)(6) motion to dismiss, the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011). But “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). On a motion to dismiss, the court's task is limited to determining whether the complaint states a “plausible claim for relief.” Id. at 679. Although Rule 8(a)(2) requires only a “short and plain statement of the claim showing that the pleader is entitled to relief, ” “a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “Facts pled that are ‘merely consistent with' liability are not sufficient.” A Soc'y Without a Name v. Va., 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at 678).


         A. SCUPTA Defendants Motion to Dismiss

         The SCUPTA defendants argue that Sinclair's SCUPTA claim must be dismissed because the complaint fails to allege that the SCUPTA defendants' conduct has the potential for repetition, and thus, Sinclair has failed to allege conduct adversely affecting the public interest. SCUPTA Defs.' Mot. 3-6. In response, Sinclair argues that it has alleged a potential for repetition, and even if it has not, the SCUPTA defendants' actions had a number of adverse impacts on the public interest beyond their potential repetition. Pl.'s SCUPTA Resp. 7-9.

         The SCUPTA prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Health Promotion Specialists, LLC v. S.C. Bd. of Dentistry, 743 S.E.2d 808, 815 (S.C. 2013) (quoting S.C. Code § 39-5-20(a)) (emphasis omitted). The SCUPTA also provides for a private right of action, when a plaintiff shows that: “(1) the defendant engaged in an unfair or deceptive act in the conduct of trade or commerce; (2) the unfair or deceptive act affected the public interest; and (3) the plaintiff suffered monetary or property loss as a result of the defendant's unfair or deceptive act(s).” Id. at 816 (quoting Wright v. Craft, 640 S.E.2d 486, 498 (S.C. Ct. App. 2006) (alterations omitted). It is well established that “[t]he act is not available to redress a private wrong where the public interest is unaffected, ” Bracken v. Simmons First Nat. Bank, No. 6:13-cv-1377, 2014 WL 2613175, at *6 (D.S.C. June 9, 2014) (quoting Bessinger v. Food Lion, Inc., 305 F.Supp.2d 574, 582 (D.S.C. 2003), aff'd sub nom. 115 F. App'x 636 (4th Cir. 2004)) (internal quotation marks omitted). Consequently, the act does not reach “unfair or deceptive act[s] or practice[s] that affect[] only the parties to a trade or a commercial transaction.” Id. (quoting Noack Enterprises, Inc. v. Country Corner Interiors of Hilton Head Island, Inc., 351 S.E.2d 347, 349-50 (S.C. Ct. App. 1986)).

         A plaintiff may show that an unfair or deceptive act or practice adversely affects the public interest by demonstrating a potential for repetition. Bahringer v. ADT Sec. Servs., Inc., 942 F.Supp.2d 585, 594 (D.S.C. 2013). Potential for repetition is generally demonstrated in one of two ways: “(1) by showing the same kind of actions occurred in the past, thus making it likely they will continue to occur absent deterrence; or (2) by showing the [defendants]'s procedures create a potential for repetition of the unfair and deceptive acts.” Id. (quoting Wright, 640 S.E.2d at 498). However, these are not the only methods of proving a potential for repetition, and a potential for repetition is not the only method of proving a threat to the public interest. See Daisy Outdoor Advert. Co. v. Abbott, 473 S.E.2d 47, 51 (S.C. 1996) (explaining that “[s]ometimes, the potential for repetition or other adverse impact on the public interest will be apparent, ” and “declin[ing] to hold . . . that [similar past occurrences and defendant's procedures] are the only means for showing potential for repetition/public impact”) (emphasis added). Ultimately, the public interest prong of the SCUPTA analysis is flexible enough that “each case must be evaluated on its own merits.” Id. Still, the requirement “must be proved by specific facts.” Jefferies v. Phillips, 451 S.E.2d 21, 23 (S.C. Ct. App. 1994). “Without proof of specific facts disclosing that members of the public were adversely affected by the unfair conduct or that they were likely to be so affected, the result is a ‘speculative claim of adverse public impact [] that will not suffice under the [SCUPTA].'” Bracken, 2014 WL 2613175, at *7 (quoting Jefferies, 451 S.E.2d at 23).

         1. Potential for Repetition

         Sinclair first argues that the complaint alleges a potential for repetition by alleging that “the [SCUPTA defendants] engaged in the business of developing Baker Plantation and are engaged in the development or construction business in South Carolina.” Pl.'s SCUPTA Resp. 7. This allegation is clearly insufficient. It does not provide any indication that the SCUPTA defendants took similar actions in the past or that any of “the [SCUPTA defendants'] procedures create a potential for repetition.” Bahringer, 942 F.Supp.2d at 594 (emphasis added). To the extent Sinclair suggests that a defendant's continued engagement in commercial activity presents a potential for repetition, its argument is unduly speculative. “The mere proof that the actor is still alive and engaged in the same business is not sufficient ...

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