United States District Court, D. South Carolina, Charleston Division
KJ Appliance Center, LLC, Kenneth Johnson, Jim Brantley, Plaintiffs,
BSH Home Appliances Corporation, Defendants.
ORDER AND OPINION
Richard M. Gergel United States District Court Judge
matter is before the Court on Defendant BSH Home Appliances
Corporation's ("BSH") Motion for Judgment on
the Pleadings (Dkt. No. 16.). For the reasons set forth
below, the Court grants in part and denies in part the
Johnson and Jim Brantley formed KJ Appliance Center, LLC
("KJ") on March 5, 2018. (Dkt. No. 1 ¶ 17.)
Previously, Johnson had worked for twenty years in the
appliance installation business in and around Charleston.
(Dkt. No. 1 ¶ 12.) Brantley had worked as a salesman in
the appliance industry for roughly twenty seven years,
including eleven years as a District Sales Manager for BSH
from 2006 to 2017. (Dkt. No. 1 ¶ 13.) Johnson and
Brantley "envisioned combining their knowledge, skills,
and experience in the appliance industry to . . .cash in on
their goodwill, contacts, and skills [in the Charleston
area]." (Dkt. No. 1 ¶ 14.) Johnson and Brantley
formulated a business plan to sell "(1) exclusively . .
. BSH products, utilizing Mr. Brantley's specific
knowledge of BSH's products, sales history, and knowledge
of BSH-specific operational procedures; (2) Mr. Johnson's
product knowledge, installation services, and connections
with builders and the construction industry generally; and
(3) both parties 20 years' experience in the Charleston
area as a source for geographical knowledge (for optimal site
selection), customer leads, and goodwill." (Dkt. No. 1
¶ 15.) Johnson pitched this idea to Trent
i Roth, BSH's District Sales Manager in
early 2018. (Dkt. No. 1 ¶ 16.) After BSH gave "the
go-ahead on the concept and instructed Mr. Johnson and Mr.
Brantley to go find a site," Johnson and Brantley
founded KJ. (Dkt. No. 1 ¶¶ 16 - 17.) On March 7,
2018, KJ entered into two Dealer Agreements (the
"Agreements") with BSH whereby KJ became an
authorized dealer of certain BSH products. (Dkt. No. 1 ¶
Agreements required KJ to establish a "bona fide
'brick and mortar'" location. (Dkt. No. 1 ¶
19.) KJ acquired such a location and Johnson and Brantley
personally guaranteed the lease for said premises. (Dkt. No.
1 ¶ ¶ 22 - 23.) On June 1, 2018, eight-six days
after entering into the Agreements with BSH, BSH terminated
the Agreements, noting that "[a]s part of BSH's
strategy to remain competitive in the future, we are
compelled to reorganize our authorized dealer relationships .
. . ." (Dkt. No. 1 ¶¶ 24 - 25.) Both
Agreements permit the parties to terminate the Agreements,
with or without cause, on thirty days written notice. (Dkt.
No. 10-1 § 13; Dkt. No. 10-2 §13.) The termination
provided KJ a thirty-day window during which to continue to
purchase BSH products. (Dkt. No. 1 ¶ 27.)
Brantley, and Johnson (collectively the
"Plaintiffs") filed the action in this Court on
March 15, 2019, against Defendant BSH. Plaintiffs brought
five causes of action: wrongful termination of the
Agreements, breach of fiduciary duty, breach of the implied
duty of good faith and fair dealing, South Carolina Unfair
Trade Practices Act ("SCUTPA") violation, and
promissory estoppel. Defendant moved for judgment on the
pleadings, and Plaintiffs oppose the motion. (Dkt. Nos. 16,
the pleadings are closed-but early enough not to delay
trial-a party may move for judgment on the pleadings."
Fed.R.Civ.P. 12(c). Rule 12(c) motions "dispose of cases
in which there is no substantive dispute that warrants the
litigants and the court proceeding further." Lewis
v. Excel Mech., LLC, 2:13-CV-281-PMD, 2013 WL 4585873,
at * 1 (D.S.C. Aug. 28, 2013) (quoting 5C Charles A. Wright
& Arthur R. Miller, Federal Practice and Procedure,
§ 1368 (3d ed. 2010)). A judgment on the pleadings is
only warranted if "the moving party has clearly
established that no material issue of fact remains to be
resolved and the party is entitled to judgment as a matter of
law." Id. at * 2 (citations omitted).
12(c) motions limit the court's review to the pleadings
and "any documents and exhibits attached to and
incorporated into the pleadings." Lewis, 2013
WL 4585873, at * 1 (citation omitted). See also A.S.
Abell Co. v. Bait. Typographical Union No. 12, 338 F.2d
190, 193 (4th Cir. 1964). Like motions to dismiss, Rule 12(c)
motions call for the pleadings to be construed in the light
most favorable to the non-moving party. Burbach Broad.
Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th
Cir. 2002). Accordingly, "[t]he court must accept all
well pleaded factual allegations in the non-moving
party's pleadings as true and reject all contravening
assertions in the moving party's pleadings as
false." Lewis, 2013 WL 4585873, at * 2
initial matter, Defendant argues that individual plaintiffs
Johnson and Brantley do not have standing under North
Carolina law to pursue the claims asserted against
North Carolina law forbids "plaintiff shareholders . . .
[from] assert[ing] claims against a third party for the loss
of their equity investment in the corporation."
Energy Inv'rs. Fund, L.P. v. Metric Constructors,
Inc., 351 N.C. 331, 335 (2000). The only two exceptions
are when a plaintiff: (1) alleges an injury "separate
and distinct" to himself; or (2) the injuries arise out
of a "special duty" running from the alleged
wrongdoer to the plaintiff. Id. Brantley and
Johnson's allegations consist of the fact that they
personally guaranteed KJ's lease, funded the deposit on
said lease, and that the termination of the Agreements harmed
Brantley and Johnson "by way of their personal
guarantees of the lease . . . ." (Dkt. No. 1
¶¶ 23, 40.) On the one hand, "[consequential
damages incurred as a result of personally guaranteeing
corporate debts do not constitute a separate and distinct
injury from that suffered by [the] corporation."
McDaniel v. Alcon Labs., Inc., No. 1:06CV472, 2007
WL 4553924, at *4 (M.D. N.C. Dec. 19, 2007) (citing
Barger v. McCoy Hillard & Parks, 346 N.C. 650,
661 (1997)). However, where there are allegations that a
defendant "induced the Plaintiffs into becom[ing]
guarantors," a "special duty" may exist.
Id. at * 4; Barger, 346 N.C. at 661-62
("separate and distinct" and "special
duty" exceptions apply to guarantors). Brantley and
Johnson make such allegations. (Dkt. No. 1 ¶ 45.)
("[BSH] affirmed to Plaintiffs prior to their entry into
the Dealer Agreements and undertaking of incidental
commitments that [BSH] would not be concerned with, react to,
would resolve competitor-dealers' complaints, comments,
or pushback relating to KJ's entry into the local
market.") Thus, Brantley and Johnson do have standing to
pursue their claims against BSH.
federal court sitting in diversity must apply the choice of
law rules of the state in which it sits. See Klaxon Co.
v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
South Carolina "adheres to the view that the parties to
a contract are to be afforded some latitude in selecting the
law that is to govern their dealings." Associated
Spring Corp. v. Roy F. Wilson & Avnet, Inc., 410
F.Supp. 967, 975 (D.S.C. 1976) (enforcing choice of law
provision). "Generally, under South Carolina choice of
law principles, if the parties to a contract specify the law
under which the contract shall be governed, the court will
honor this choice of law." Nucor Corp. v. Bell,
482 F.Supp.2d 714, 728 (D.S.C. 2007). "However, a
choice-of-law clause in a contract will not be enforced if
application of foreign law results in a violation of South
Carolina public policy." Id. Here, both
Agreements contain choice of law provisions which state the
respective "Agreement shall be ... governed by and
construed in accordance with the laws of the State of North
Carolina, without regard to North Carolina choice of law
rules, it being the intent of the parties that the internal
laws of the State of North Carolina shall govern any and all
disputes arising out of or relating to this Agreement."
(Dkt. No. 10-1 § 14.3; Dkt. No. 10-2 § 14.3.)
argue that the Court should decline to apply North Carolina
law under the "public policy exception." Defendant
argues, and Plaintiffs concede, that if North Carolina law
governs the instant claims, Plaintiffs' claims for
wrongful termination and promissory estoppel may fail.
See Allied Distribs., Inc. v. Latrobe Brewing Co.,847 F.Supp. 376, 378 (E.D. N.C. 1993) (generally, under North
Carolina law, "a supplier is free to terminate a
distributor at will, subject to any contractual
restrictions") (citing Bartolomeo v. S.B. Thomas,
Inc.,889 F.2d 530, 533 (4th Cir. 1989) (construing
North Carolina law)); Crosby v. City of Gastonia,682 F.Supp.2d 537, 547 (W.D.N.C 2010), aff'd,635 F.3d 634 (4th Cir. 2011) ("[T]he clear law in North
Carolina prohibits the use of promissory estoppel in an