WALL V. LANGDON

Filing 18

MEMORANDUM ORDER signed by JUDGE THOMAS D. SCHROEDER on 8/9/2016; that Wall's motion to dismiss (Doc. 12 ) is GRANTED IN PART AND DENIED IN PART in that Langdon's fourth counterclaim (regarding the application software) is dismissed without prejudice, and Wall's motion to dismiss the remaining counterclaims as well as his motion to strike and motion for judgment on the pleadings are DENIED. (Sheets, Jamie)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
STEVEN B. WALL,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
TRAJAN LANGDON,
Defendant.

15cv731

MEMORANDUM ORDER
Plaintiff

Steven

B.

Wall

brings

a

single

claim

against

Defendant Trajan Langdon for breach of contract, alleging that
while Wall performed, Langdon never paid him.

(Doc. 1 at 3.)

Langdon does not dispute the contract but denies that he owes
any

debt

and

brings

affirmative

(Doc. 8 at 1-4, 6, 9-13.)
to

dismiss

Langdon’s

defenses

and

counterclaims.

Before the court now is Wall’s motion
counterclaims,

to

strike

Langdon’s

affirmative defenses, and for judgment on the pleadings.
12.)

(Doc.

For the reasons set forth below, Wall’s motion to dismiss

will be granted in part and denied in part, and his motion to
strike and motion for judgment on the pleadings will be denied.
I.

BACKGROUND
On July 17, 2013, Wall agreed to assign his 100% membership

interest in Infinity Communications, LLC (“Infinity”) to Langdon
in exchange for a promissory note (“the Note”) for $261,000.
(Doc. 1 at 2; Doc. 8 at 18.)

Under the Note, the principal and

accrued interest were due on February 28, 2014.
1.)

(Doc. 1-3 at

Wall contends that Langdon failed to pay and has ignored

his notice of default.
Langdon’s

answer

(Doc. 1 at 2.)
admits

that

This action followed.

the

Note

is

authentic

and

served as consideration for the transfer of Wall’s interest in
Infinity.

(Doc. 8 at 7.)

make payment on the Note.

However, Langdon denies failing to
(See id. at 6-7; Doc. 1 at 2.)

He

also denies that any debt is owed based on three affirmative
defenses

and

four

counterclaims

for

alleged

breaches

agreement to transfer Wall’s interest in Infinity.
1-4, 9-13.)

of

the

(Doc. 8 at

Wall now challenges various aspects of Langdon’s

answer and counterclaims.
II.

ANALYSIS
A. Motion to Dismiss Langdon’s Counterclaims
A motion to dismiss under Federal Rule of Civil Procedure

12(b)(6)
Francis

“challenges
v.

the

Giacomelli,

legal

588

sufficiency

F.3d

186,

192

of

a

(4th

complaint.”
Cir.

2009).

Federal Rule of Civil Procedure 8(a)(2) establishes the rule for
pleadings and “requires only a short and plain statement of the
claim showing that the pleader is entitled to relief, in order
to give the defendant fair notice of what the . . . claim is and
the grounds upon which it rests.”

McCleary-Evans v. Maryland

Dep’t of Transp., 780 F.3d 582, 585 (4th Cir. 2015) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
2

Factual

allegations must be considered true and viewed in the light most
favorable to the plaintiff.

Francis, 588 F.3d at 192.

Labels

and conclusions, by contrast, are not entitled to an assumption
of

truth.

Ashcroft

v.

Iqbal,

556

McCleary-Evans, 780 F.3d at 585.

U.S.

662,

at

factual

555.

Instead,

matter

. . .

plausible

on

its

“a

to

complaint

‘state

face.’”

a

Iqbal,

Twombly, 550 U.S. at 570).

(2009);

“[A] formulaic recitation of

the elements of a cause of action will not do.”
U.S.

664

must

claim
556

Twombly, 550

contain
to

U.S.

sufficient

relief
at

678

that

is

(quoting

A claim is plausible “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. (quoting Twombly, 550 U.S. at 556).

These rules apply to counterclaims, as well as complaints.

E.I.

du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435,
440 (4th Cir. 2011).
With

these

standards

in

mind,

the

court

turns

to

the

counterclaim

for

specific contentions raised by Wall.
1. Breach of Contract: Unpaid Insurance Premiums
Wall

moves

to

dismiss

Langdon’s

first

breach of contract, which alleges that Wall failed to disclose
overdue worker’s compensation insurance premiums in the sale of
Infinity.

(Doc. 8 at 9.)

Upon taking control of Infinity,

Langdon contends, he was forced to “satisfy this outstanding
3

debt

and

obligation

in

order

to

prevent

compensation insurance policy from lapsing.”

the

workers’

(Id. at 10.)

As part of the “Agreement to Assign Membership Interest,”
which Langdon attaches to his answer and counterclaims, Wall
covenanted that “there [were] no liabilities not disclosed on
the books and records of [Infinity], and [that he] agree[d] to
indemnify

and

liabilities
contends

save

as

that

manner: “That

of

harmless
July

Wall
the

14,

breached
outstanding

[Langdon]
2013.”
this

from

(Id.

at

covenant

premiums

any

in

that

undisclosed

20.)

Langdon

the

following

were

due

to

the

workers’ compensation insurance carrier was a liability that was
not disclosed on the books and records of Infinity that [Wall]
disclosed to the [counterclaim-]Defendant Langdon.”

(Id. at 9

(emphasis added).)
Wall

argues

that

Langdon’s

inclusion

of

the

highlighted

clause renders his theory of breach invalid, because it could be
construed to allege merely that the insurance liability was not
included in whatever was disclosed to Wall, and not that the
liability was omitted from the books and records of Infinity.
(Doc. 13 at 5-7.)

Wall notes that the contract contemplates

disclosure upon request.

(Doc. 8 at 22.)

This is true, but the

counterclaim, viewed in the light most favorable to Langdon, as
it

must

be,

charges

records to Langdon.

that

Wall

(Id. at 9.)
4

in

fact

disclosed

books

and

This is sufficient at this

stage to allege that Wall concealed the liability at issue in
the books and records.

See, e.g., Bicycle Transit Auth. v.

Bell, 314 N.C. 219, 228, 333 S.E.2d 299, 305 (1985) (“In every
contract there is an implied covenant of good faith and fair
dealing that neither party will do anything which injures the
right of the other to receive the benefits of the agreement.”
(citations omitted)).

Whether the facts will bear out Langdon’s

claim remains to be seen.

Therefore, the motion to dismiss on

this ground will be denied.
2. Breach of Contract: Promissory Notes
Langdon’s

second

counterclaim

is

for

breach

of

contract

based on Wall’s execution of three promissory notes to himself
on behalf of Infinity totaling $261,429.43.

(Doc. 8 at 10.)

Wall contends these promissory notes were executed in June 2013,
approximately

one

assignment.

(Id.

liabilities

were

disclosed to him.

month
at

not

before
3.)

closing

on

Langdon

disclosed

on

the

contends

the

books

membership
that
and

these
records

(Id. at 11.)

Wall contends, in part, that this claim must be dismissed
because Langdon has failed to allege that a loss resulted from
the

alleged

failure

(Doc. 13 at 8.)

to

disclose

the

three

promissory

notes.

Ordinarily, the failure to perform a disclosure

obligation would constitute a breach such that Langdon would be
entitled to at least nominal damages.
5

See, e.g., Turner v.

Ellis, 179 N.C. App. 357, 363, 633 S.E.2d 833, 887-88 (2006);
Catoe v. Helms Const. & Concrete Co., 91 N.C. App. 492, 496-97,
372 S.E.2d 331, 335 (1988).

Accordingly, Wall has failed to

demonstrate that Langdon’s claim should be dismissed at this
early stage.
3. Breach of Contract: Wire Transfers
Langdon’s
based

on

capital

third

Wall’s
from

counterclaim

alleged

Infinity’s

is

withdrawal
bank

for
of

breach

$257,000

accounts.

(Doc.

of
in
8

contract
operating

at

11-12.)

Langdon contends that this withdrawal occurred via wire transfer
“just

before”

the

assignment

agreement

took

effect.

(Id.)

Despite the fact that these withdrawals left Infinity’s bank
accounts

with

“a

negative

balance

of

more

than

$10,000”

and

required Langdon to “infuse several hundred thousand dollars of
operating capital” into Infinity, Langdon does not assert breach
on

the

basis

of

an

undisclosed

liability.

(Id.

at

12.)

Instead, he contends that Wall breached the assignment agreement
by

“fail[ing]

to

transfer

to

the

Defendant

Langdon

the

bank

accounts of Infinity with the operating capital in place as of
the Closing Date.”
Wall
because

responds
the

(Id.)
that

assignment

Langdon’s
agreement

claim
only

must

required

be

dismissed

transfer

of

Wall’s membership interest, not the assets and liabilities of
Infinity.

(Doc. 13 at 8.)

But while Langdon was only acquiring
6

a membership interest, see Doc. 8 at 18 (“Agreement to Assign
Membership
impaired

Interest”),
that

Wall’s

interest.

alleged

Both

actions

before

and

undistributed assets belonged to Infinity.

would

after

have

the

sale,

See N.C. Gen. Stat.

§ 57D-5-01 (“An ownership interest is personal property”); N.C.
Gen. Stat. § 57D-5-02 (“The transfer of an economic interest or
portion thereof does not entitle the transferee to become or
exercise

any

economic

interest

transferee.”);

rights

of

or

a

the

Mitchell,

member

other

portion

Brewer,

than

thereof

to

receive

assigned

Richardson,

to

Adams,

the
the

Burge

&

Boughman, PLLC v. Brewer, 2007 NCBC 14, ¶ 27, 2007 WL 2570749,
at *6 (N.C. Super Ct. 2007); 6 Strong’s North Carolina Index
4th, Assignment of Membership Interests § 244 (“[A] member of a
limited liability company has no interest in specific property
of the company.”).

Every contract contains an implied covenant

of good faith and fair dealing that neither party will act so as
to deprive the other party of the benefits of the agreement.
Bell, 314 N.C. at 228, 333 S.E.2d at 305.

Absent an agreement

to the contrary, the implied covenant of good faith and fair
dealing

prohibited

capital

just

before

Wall

from

removing

transfer.

See

all

of

Maglione

the

v.

operating

Aegis

Family

Health Ctrs., 168 N.C. App. 49, 56, 607 S.E.2d 286, 291 (2005)
(“All parties to a contract must act upon principles of good
faith

and

fair

dealing

to

accomplish
7

the

purpose

of

an

agreement,

and

therefore

presuppositions
Wall’s

of

motion

counterclaim

the

to

based

each

has

contract

dismiss
on

the

a

for

duty
meeting

Langdon’s
wire

to

adhere

this

breach

transfers

the

purpose.”).
of

will

to

contract

therefore

be

denied.
4. Breach of Contract: Application Software
Langdon’s

fourth

counterclaim

is

for

breach

of

contract

based on Wall’s failure to convey certain application software.
(Doc.

8

at

13.)

Langdon

argues

that

“as

a

part

of

the

negotiations of the purchase of Infinity” he and Wall reached a
partnership agreement whereby Infinity and Wall would jointly
own certain application software.

(Id.; Doc. 16 at 8.)

The

assignment agreement, which contains a merger clause (Doc. 8 at
24),

makes

no

mention

of

any

partnership

transfer of any software (see id. at 18-26).
of

the

complaint,

the

alleged

obligation

agreement

or

the

Based on the face
arose

from

the

assignment of Wall’s interest in Infinity, which is covered by
the assignment agreement, which in turn expressly disclaims the
existence of any other agreement.

Therefore, Langdon’s claim

will be dismissed, but without prejudice in event he can allege
facts sufficient to avoid the application of the merger clause.
B. Motion to Strike Affirmative Defenses
Langdon

has

asserted

affirmative

satisfaction, estoppel, and guarantee.
8

defenses

of

accord

(Doc. 8 at 1-4.)

and
Wall

moves

to

strike

them.

(Doc.

12.)

Federal

Rule

of

Civil

Procedure 12(f) permits the court to strike “an insufficient
defense or any redundant, immaterial, impertinent, or scandalous
matter.”

Fed.

R.

Civ.

generally disfavored.

P.

12(f).

Motions

to

strike

are

Waste Mgmt. Holdings, Inc. v. Gilmore,

252 F.3d 316, 347 (4th Cir. 2001).

To be entitled to such

relief, a party must make a showing of prejudice.

E.g., Staton

v. N. State Acceptance, LLC, No. 1:13-CV-277, 2013 WL 3910153,
at *2 (M.D.N.C. July 29, 2013).

Prejudice has been found to

result where “inclusion of the defense would result in increased
time

and

expense

of

trial,

including

extensive and burdensome discovery.”

the

possibility

of

Canadian St. Regis Band of

Mohawk Indians ex rel. Francis v. New York, 278 F. Supp. 2d 313,
325 (N.D.N.Y. 2003) (emphasis and citations omitted).
Here, Wall contends that inclusion of the defenses will
cause “him to expend unnecessary time and expense.”
15.)

However, the asserted affirmative defenses are based on

the same alleged conduct as Langdon’s counterclaims.
1-4.)

(Doc. 13 at

(Doc. 8 at

For example, the first and second defenses, for accord

and satisfaction and estoppel, are principally based on the wire
transfers

discussed

above.

(Id.)

The

third

guarantee is based on the executed promissory notes.
4.)

defense

of

(Id. at 3-

Because Langdon’s breach of contract claims based on this

conduct is going forward, there will be little to no additional
9

discovery burden imposed on Wall by permitting theses defenses
to remain.

Accordingly, Wall’s motion to strike will be denied.

C. Motion for Judgment on the Pleadings
Wall

contends

that

he

is

entitled

pleadings on his breach of contract claim.

to

judgment

on

the

“The test applicable

for judgment on the pleadings is whether or not, when viewed in
the light most favorable to the party against whom the motion is
made, genuine issues of material fact remain or whether the case
can be decided as a matter of law.”

Med-Trans Corp. v. Benton,

581 F. Supp. 2d 721, 728 (E.D.N.C. 2008) (citations omitted).
Here, judgment on the pleadings cannot be granted because there
is a material dispute of fact.

Although Langdon concedes that

he executed the Note and that it is authentic, his answer denies
Wall’s contention that no payments have been made on the Note.
(Doc. 8 at 6.)

In other words, in addition to claiming the

absence of any debt on the basis of Wall’s alleged breach of
contract, Langdon has denied nonpayment.

(Id.)

Whether or not

payment has occurred is thus a disputed fact preventing this
court from granting judgment on the pleadings.
III. CONCLUSION
For the reasons stated,
IT IS THEREFORE ORDERED that Wall’s motion to dismiss (Doc.
12) is GRANTED IN PART AND DENIED IN PART in that Langdon’s
fourth

counterclaim

(regarding
10

the

application

software)

is

dismissed without prejudice, and Wall’s motion to dismiss the
remaining

counterclaims

as

well

as

his

motion

to

strike

and

motion for judgment on the pleadings are DENIED.

/s/
Thomas D. Schroeder
United States District Judge
August 9, 2016

11