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GSH of Alabama, LLC v. Southstar Financial, LLC

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

March 15, 2018

GSH OF ALABAMA, LLC, Plaintiff,
v.
SOUTHSTAR FINANCIAL, LLC, Defendant.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE.

         This matter is before the court on defendant Southstar Financial LLC's (“Southstar”) partial motion to dismiss, ECF No. 21. For the reasons set forth below, the court grants the partial motion to dismiss and dismisses GSH's second cause of action-a request for accounting-without prejudice.

         I. BACKGROUND

         GSH of Alabama, LLC (“GSH”) is an Alabama corporation that contracts with the United States government to build and deliver mobile homes to the Federal Emergency Management Agency (“FEMA”) to aid in disaster relief efforts. On or about April 4, 2016, GSH entered into a financing agreement (the “Factoring Agreement”) with SouthStar Financial, LLC (“SouthStar”), a South Carolina company. Am. Compl. ¶¶ 1- 2. The agreement, originally intended to last 36 months, allowed GSH to periodically sell its accounts to SouthStar and gave SouthStar a security interest in all of GSH's assets. Id. ¶ 4.

         After a dispute between the parties over the interpretation of the Factoring Agreement-particularly regarding the amount SouthStar owed to GSH after the purchased accounts had been paid-they reached a settlement agreement (the “Settlement”), with SouthStar agreeing to pay GSH $673, 605.00, minus its approximate legal fees and costs totaling about $25, 000.00, in exchange for complete mutual releases. Am. Compl. ¶ 6. SouthStar's counsel offered this settlement in a letter dated July 10, 2017, stating that the offer would remain open until Friday, July 14, 2017. Id. SouthStar reconfirmed this offer by a letter dated August 23, 2017, stating that the offer would remain open for the next ten days and that if not accepted, SouthStar would “refund $30, 638.41 to GSH after charging all applicable fees . . . and will consider the relationship terminated.” Id., see ECF No. 5-3, 12. GSH says that it orally accepted this settlement offer in a phone call with SouthStar on August 28, 2017, and reconfirmed by email on September 1, 2017. Id., see Wilkerson Decl., ¶¶ 2-4. GSH claims that on September 14, 2017, SouthStar advised GSH that SouthStar did not intend to abide by the settlement, and tendered a payment less than the agreed-upon consideration. Id. ¶ 8, see Wilkerson Decl. ¶ 5. GSH now seeks to have SouthStar's security interest in its assets terminated.

         GSH filed a complaint against SouthStar in this court on October 5, 2017, ECF No. 1, and then filed an amended complaint on November 16, 2017, ECF No. 19. GSH alleges that SouthStar has breached the terms of the Settlement by expressing its intention to breach and by otherwise failing to honor its terms. Am. Compl. ¶ 12. In the event that the court concludes that the parties have not entered a binding settlement agreement, GSH seeks in the alternative a full accounting from SouthStar regarding their business dealings under the Factoring Agreement. Id. ¶¶ 14-16. GSH claims that it would need further discovery to investigate SouthStar's failure to pay GSH pursuant to the terms of the Factoring Agreement if the Settlement is not enforced by the court. Id. ¶¶ 14-16. On December 11, 2017, Southstar filed a motion to dismiss GSH's second cause of action for failure to state a claim, ECF No. 21. On December 26, 2017, GSH filed a response. ECF No. 25. On January 2, 2018, Southstar filed a reply. ECF No. 26. The motion has been fully briefed and is ripe for the court's review.

         II. STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) [] does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

         A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. DISCUSSION

         GSH's first cause of action alleges that SouthStar breached the terms of the Settlement. Its second cause of action asks for an accounting of the original Factoring Agreement if the court determines that the Settlement is not valid. “The equitable remedy of ‘accounting' . . . refers to ‘an adjustment of the accounts of the parties and a rendering of a judgment for the balance ascertained to be due.” Historic Charleston Holdings, LLC v. Mallon, 673 S.E.2d 448, 453 (S.C. 2009). “[A]n accounting is designed to prevent unjust enrichment by disclosing and requiring the relinquishment of profits received as the result of a breach of a confidential or fiduciary duty.” Rogers v. Salisbury Brick Corp., 382 S.E.2d 915, 917 (S.C. 1989). An accounting is appropriate[1] in three situations: (1) “to prevent unjust enrichment by disclosing and requiring the relinquishment of profits received as the result of a breach of a confidential or fiduciary duty”; (2) “in an action involving long and complicated accounts where it would not be practicable for a jury to comprehend the issues and correctly make adjustments”; and (3) when there is a need for enhanced discovery. Id. at 916-917. The court addresses each of these scenarios in turn, finding that GSH does not qualify for an accounting under any of them.

         A. Breach of a Fiduciary Duty

         The equitable remedy of accounting originally existed to prevent unjust enrichment by one party that breached its fiduciary duty to another. Id., Smith v. Union Central Life Ins. Co., 99 S.E. 830 (S.C. 1919), Consignment Sales, LLC v. Tucker Oil Co., 705 S.E.2d 73, 77 (S.C. Ct. App. 2010), ABC Legal Servs., Inc. v. Korn Law Firm, P.A., 2015 WL 4068808, at *3-4 (D.S.C. July 2, 2015). Here, the relationship between GSH and SouthStar is one of creditor-debtor. Because there is no fiduciary relationship between the parties, GSH cannot obtain an accounting under this first prong.

         B. ...


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