United States District Court, D. South Carolina, Charleston Division
PALMETTO CIVIL GROUP LLC and JOSEPH H. JEFFERSON III, Plaintiffs,
H.G. REYNOLDS COMPANY, INC., Defendant.
C. NORTON, UNITED STATES DISTRICT JUDGE.
following matter is before the court on defendant H.G.
Reynolds Company, Inc.'s (“Reynolds”) motion
to dismiss, ECF No. 4. For the reasons set forth below, the
court grants the motion to dismiss with respect to the §
1981 claim and remands the remaining claims to state court.
Palmetto Civil Group LLC (“Palmetto”) is a
contractor, and plaintiff Joseph H. Jefferson III
(“Jefferson”) is the president and owner of
Palmetto (collectively, “plaintiffs”). Jefferson
is African-American, making Palmetto a minority-owned
business. Reynolds is a construction company. Plaintiffs
allege that in early 2013, Reynolds and Palmetto formed
“an informal joint venture, teaming, and partnership
agreement” to pursue construction contracts together.
ECF No. 1-1 at 4. Plaintiffs contend that Reynolds and
Palmetto agreed to share confidential business information,
help each other pursue construction projects, work
exclusively with each other on certain construction projects,
and assume to each other the duties of good faith, fair
dealing, honesty, confidentiality, and loyalty. Plaintiffs
allege that Reynolds specifically promised plaintiffs that
each member of this joint venture “would be afforded a
meaningful opportunity to perform and undertake a significant
and meaningful task or commercially useful function, portion
or scope of work” for any construction projects they
pursued. The parties also generally agreed that Palmetto
would be responsible for 10-15% of the project work, and
Reynolds would perform 85-90% of the work, with each
receiving a fair share of the profits.
2013, Berkeley County School District (“BCSD”)
issued a Request for Qualifications and Proposals, seeking
proposals from contractors on various projects, including the
construction of two elementary schools. Plaintiffs allege
that Reynolds invited plaintiffs to work together to submit a
proposal for one of the schools. Plaintiffs contributed to
preparing the proposal, and they allege that Reynolds
represented that plaintiffs would fully participate in the
project if it was awarded. The proposal listed Jefferson as
the “SWMBE/Local Coordinator” and further
identified Jefferson as “a Certified
DBE.” This is relevant because South Carolina
public policy favors minority businesses. See S.C.
Code. Ann. § 11-35-5210(1). Plaintiffs also participated
in the interview process, and Jefferson personally gave part
of the proposal presentation to BCSD. Reynolds was then
awarded the construction project of Bowen's Corner
Elementary (“the Project”).
funding reasons unrelated to the parties, the Project did not
begin until 2017. Plaintiffs continued to believe that they
would be working on the Project, as allegedly promised by
Reynolds, but in 2017, Reynolds engaged a nonminority
subcontractor to complete the work instead of plaintiffs.
Plaintiffs allege that to gain business, Reynolds used
plaintiffs for Jefferson's racial minority status and
Palmetto's minority or disadvantaged business status.
Plaintiffs contend that race was a motivating factor in
Reynolds's decision to fail to retain or hire plaintiffs
for the Project, Reynolds misled plaintiffs about their
involvement in the Project, and Reynolds wrongfully
terminated plaintiffs from their involvement in the Project.
filed their suit on August 7, 2018 in the Court of Common
Pleas for the County of Berkeley, South Carolina. Their
complaint alleges causes of action for (1) racial
discrimination under 42 U.S.C. § 1981; (2) promissory
estoppel; (3) quantum meruit; (4) unfair trade practices; (5)
breach of fiduciary duty; (6) breach of implied covenants of
good faith and fair dealing; (7) negligent misrepresentation;
and (8) constructive fraud. Reynolds removed the case to
federal court on September 18, 2018 pursuant to 28 U.S.C.
§§ 1331, 1367, 1441, and 1446. Reynolds contends
that the court has federal question jurisdiction over
plaintiffs' § 1981 claim and supplemental
jurisdiction over the remaining claims. Reynolds filed its
motion to dismiss on September 25, 2018. ECF No. 4.
Plaintiffs responded on October 9, 2018, ECF No. 6, and
Reynolds replied on October 16, 2018, ECF No. 7. The court
held a hearing on the motion on Friday, December 7, 2018. The
motion is now ripe for review.
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 all well-pleaded
allegations as true and should view the complaint in a light
most favorable to the plaintiff. Ostrzenski v.
Seigel, 177 F.3d 245, 251 (4th Cir.1999); Mylan
Labs., Inc., 7 F.3d at 1134. “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.
Reynolds asserts several arguments in its motion to dismiss,
the court focuses on the § 1981 claim, as the dismissal
of this claim would require the court to remand
plaintiffs' remaining claims to state court. As such, the
court will first address whether plaintiffs have sufficiently
pleaded an action under § 1981. The court finds that
plaintiffs have not, warranting dismissal of the claim and a
remand of the remaining state-law claims.
first allege that “Reynolds failed to enter into a
binding subcontract and/or binding joint venture agreement
with [plaintiffs] or allow [plaintiffs] the opportunity to
meaningfully participate in the Project in violation of 42
U.S.C. § 1981.” ECF No. 1-1 at 11. Reynolds's
argument for dismissal of the § 1981 claim is two-fold.
First, Reynolds argues that plaintiffs “fail to provide
any evidence that [Reynolds's] hiring of another
contractor was racially motivated.” ECF No. 4-1 at 6.
Then Reynolds contends that Jefferson individually has no
standing to assert a claim under § 1981 because if
Reynolds were to contract to do work on the Project, it would
contract with Palmetto as a business, not Jefferson as an
individual. Plaintiffs respond that the fact that Reynolds
hired another contractor instead of plaintiffs provides
sufficient circumstantial evidence of discrimination to
survive a motion to dismiss. Plaintiffs also argue that
Jefferson has standing because he is the sole owner and
president of Palmetto, and as such he suffered just as much
injury as Palmetto.
1981 provides that “[a]ll persons within the
jurisdiction of the United States shall have the same right
in every State and Territory to make and enforce contracts .
. . as is enjoyed by white citizens.” The Supreme Court
has interpreted this statute to “prohibit racial
discrimination in the making and enforcement of private
contracts.” Runyon v. McCrary, 427 U.S. 160,
168 (1976). Section 1981(b) defines the phrase “make
and enforce contracts” as “the making,
performance, modification, and termination of contracts, and
the enjoyment of all benefits, privileges, terms, and
conditions of the contractual relationship.” Because
§ 1981 applies to the making of contracts, the Supreme
Court has held that “a contractual relationship need
not already exist” because the statutes protects the
“would-be contractor.” Domino's Pizza,
Inc. v. McDonald, 546 U.S. 470, 475 (2006).
survive a motion to dismiss a race discrimination claim, a
plaintiff “need not plead facts sufficient to establish
a prima facie case of race-based discrimination to survive a
motion to dismiss.” Woods v. City of
Greensboro, 855 F.3d 639, 648 (4th Cir. 2017). Instead,
under the pleading standard announced in Twombly and
Iqbal, a plaintiff must allege facts “to
support a plausible claim” so that the court can
“draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. at 647
(citations omitted). The Fourth Circuit has recently applied
this pleading standard in McCleary-Evans v. Md. Dep't
of Transp., where the court held that the plaintiff, an
African-American woman, did not allege sufficient facts to
show that the defendant failed to hire her “under
circumstances giving rise to an inference of unlawful
discrimination.” 780 F.3d 582, 583-84, 588 (4th Cir.
2015). The plaintiff's complaint alleged that the people
who made hiring decisions were either male or not
African-American, and the African-American candidates were
overlooked so that white male and female candidates would be
selected for the job. Id. at 583-84. The complaint
did not contain any allegations about the qualifications of
the people who were hired. Id. at 584. The Fourth
Circuit explained that “[o]nly speculation can fill the
gaps in her complaint-speculation as to why two
‘non-Black candidates' were selected to fill the
positions instead of her” and found that while these
allegations are “consistent with discrimination,
” they “do not alone support a reasonable
inference that the decisionmakers were motivated by
bias.” Id. at 586. The Fourth Circuit
concluded that “the consequence of allowing [the
plaintiff's] claim ...