PACKRITE, LLC v. GRAPHIC PACKAGING INTERNATIONAL, INC.
Filing
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MEMORANDUM OPINION AND ORDER , signed by JUDGE LORETTA C. BIGGS on 8/29/2018. ORDERED that Plaintiff's Motion to Remand, (ECF No. 14 ), is DENIED. FURTHER that Defendant's Partial Motion to Dismiss the C omplaint, (ECF No. 8 ), is GRANTED. Claim III-Fraudulent Misrepresentation/ Inducement, Claim IVNegligent Misrepresentation/Detrimental Reliance, and Claim V Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1 are HEREBY DISMISSED WITHOUT PREJUDICE. (Butler, Carol)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
PACKRITE, LLC,
Plaintiff,
v.
GRAPHIC PACKAGING
INTERNATIONAL, INC.,
Defendant.
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1:17CV1019
MEMORANDUM OPINION AND ORDER
LORETTA C. BIGGS, District Judge.
Plaintiff, Packrite, LLC (“Packrite”), initiated this action in Guilford County Superior
Court, alleging five claims against Defendant, Graphic Packaging International, Inc.
(“Graphic”). (ECF No. 2.) Defendant removed the action to this Court on the basis of
diversity jurisdiction pursuant to 28 U.S.C. § 1332. (ECF No. 1.) Before the Court are
Plaintiff’s Motion to Remand, (ECF No. 14), and Defendant’s Partial Motion to Dismiss
pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, (ECF No. 8). For
the reasons that follow, the Court denies Plaintiff’s motion to remand and grants Defendant’s
partial motion to dismiss.
I.
BACKGROUND
Packrite, a North Carolina company, “is a specialized trade finisher for the corrugated
and folding carton packaging industries.” (ECF No. 2 ¶¶ 1, 4.) Graphic is a Delaware
company that manufactures “folding cartons and cardboard boxes used for packaging a variety
of food, beverage, and other consumer goods.” (ECF No. 9 at 2; ECF No. 2 ¶¶ 2, 5.)
Graphic’s principal place of business is in Atlanta, Georgia. (ECF No. 2 ¶ 2.)
Beginning in or around 2012, Graphic engaged Packrite’s services as an outsource
vendor, on an as-needed basis, to assist with fulfilling customer orders and meeting Graphic’s
manufacturing needs. (Id. ¶¶ 6, 12.) In or around August 2016, Graphic requested Packrite’s
temporary assistance “in producing the packaging for Clorox Kitty Litter,” (the “Clorox
Project”). (Id. ¶ 15.) The Clorox Project “was part of a very large contract obtained by
[Graphic]” however, Graphic “did not have the resources, equipment or capacity to undertake
the [Clorox Project] itself.” (Id. ¶¶ 16, 17.) According to the Complaint, “Packrite was initially
unwilling to assist” Graphic with the Clorox Project because Packrite also lacked the necessary
resources to assist on such a large project and, further, such assistance would limit Packrite’s
ability to pursue or obtain other business opportunities. (Id. ¶¶ 21, 22, 24.)
The Complaint alleges that representatives from Graphic told Packrite that, should
Packrite agree to assist Graphic with the Clorox Project, Graphic would then agree to enter
into a three year contract “under which Packrite would be the sole producer of [Graphic’s]
requirements of [b]eer [c]artons” (the “Beer Carton Project”).
(Id. ¶ 26.)
Graphic’s
representatives told Packrite that the Beer Carton Project would result in annual gross
revenues of approximately $10,000,000 to Packrite. (Id. ¶ 30.) Based on these representations,
Packrite agreed to assist Graphic with the Clorox Project and, in early September 2016,
Packrite began its production preparations, followed by the start of actual production in
November 2016. (Id. ¶¶ 31, 37, 40.)
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In early 2017, Graphic provided Packrite with an initial draft of the Beer Carton Project
contract, to which Packrite proposed revisions and returned to Graphic. (Id. ¶¶ 48–49; see ECF
Nos. 2-1, 2-2.) “Packrite never received any response from [Graphic regarding] its proposed
changes to the written Beer Carton [c]ontract, although discussions relating to the same
continued through approximately May, 2017.” (ECF No. 2 ¶ 50.) Ultimately, the parties never
executed a contract for the Beer Carton Project. (Id. ¶ 64.)
On October 11, 2017, Packrite filed suit against Graphic in Guilford County Superior
Court, alleging the following five claims: (1) Breach of Contract (Claim I); (2) Quantum Meruit
(Claim II); (3) Fraudulent Misrepresentation/Inducement (Claim III); (4) Negligent
Misrepresentation/Detrimental Reliance (Claim IV); and (5) Unfair and Deceptive Trade
Practices Act (“UDTPA”) under N.C. Gen. Stat. § 75-1.1 (Claim V). (ECF No. 2 ¶¶ 68–96.)
On November 8, 2017, Graphic removed the action to this Court on the basis of diversity of
citizenship, (see ECF No. 1), and subsequently filed a partial motion to dismiss Claims III, IV,
and V, (ECF No. 8). Three months later, on February 23, 2018, Packrite filed a Motion to
Remand the case to state court, contending that the removal was procedurally defective on
the grounds that Graphic failed to promptly file a copy of the notice of removal with the state
court. (See ECF No. 14.) The Court will first consider Plaintiff’s Motion to Remand.
II.
PLAINTIFF’S MOTION TO REMAND
Packrite, in its motion to remand, does not challenge that this Court has diversity
jurisdiction over the claims set forth in the Complaint. (See generally ECF Nos. 14, 15.) Rather,
Packrite contends that Graphic failed to satisfy the procedural requirements for removal. (See
ECF No. 14.) Specifically, Packrite argues that this Court should remand the action because
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Graphic failed to promptly notify the state court of removal of the action to federal court. (Id.
14 ¶ 3; ECF No. 15 at 1, 4.) In response, Graphic admits to its delay in notifying the state
court, but contends that such delay was merely a procedural defect which, standing alone, does
not warrant remand of the action to state court. (ECF No. 16 at 1, 6.) Graphic further argues
that Packrite has waived any objections to removal because it failed to raise its objection within
thirty days of receiving notice of removal, as required by statute. (Id. at 5.) The Court agrees
with Graphic.
The procedure for removal is set forth in 28 U.S.C. § 1446 which provides that a
defendant may remove any civil action by filing a notice of removal “in the district court of
the United States for the district and division within which the action is pending.” 28 U.S.C.
§ 1446(a). A removing party is also required to provide notice to opposing parties and to the
clerk of the state court promptly after filing notice of removal with the district court. Id.
§ 1446(d). Such filing “shall effect the removal and the [s]tate court shall proceed no further
unless and until the case is remanded.” Id.
Following removal, a plaintiff may object by filing a motion to remand pursuant to 28
U.S.C. § 1447(c). A motion to remand “on the basis of any defect other than lack of subject
matter jurisdiction must be made within 30 days after the filing of the notice of removal.” 28
U.S.C. § 1447(c). “Thus, § 1447(c) provides that a party who fails to note a non-jurisdictional
objection within 30 days of the notice of removal waives the objection.” Wiley v. United Parcel
Serv., 11 F. App’x 176, 178 (4th Cir. 2001). Here, Packrite received notice of removal when it
was electronically filed with this Court on November 8, 2017. (See ECF No. 1 at 4.) Then,
on February 23, 2018, 107 days after receiving notice of removal, Packrite filed its motion to
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remand. (ECF No. 14.) Packrite has, therefore, waived its right to object to removal of this
action, and its motion to remand is not properly before the Court.
However, even if this Court were to determine that Packrite had not waived its right
to object to removal, remand on the basis that Graphic failed to comply with the notice
requirements of 28 U.S.C. § 1446(d) would be improper. As previously stated, 28 U.S.C. §
1446(d) requires that “[p]romptly after the filing of” a Notice of Removal in federal court, the
defendant must provide written notice to adverse parties and must “file a copy of the notice”
with the state court. 28 U.S.C. § 1446(d) (emphasis added). The purpose of the statute’s
notice and filing requirement is to notify the state court of the removal so that it can terminate
its proceedings, avoid duplicative work, and conserve judicial resources. See White v. Hous.
Auth. for Baltimore City, No. GLR-16-1965, 2016 WL 5930834, at *1 (D. Md. Oct. 11, 2016)
(citing Delavigne v. Delavigne, 530 F.2d 598, 601 n.5 (4th Cir. 1976)). Although the statute does
not define the term “promptly,” courts have held that a delay in filing a removal notice with
the state court does not warrant remand where the statutory purpose is not undermined, and
where such delay constitutes a mere technical or procedural defect. See, e.g., Lang v. Mattison,
No. 6:13-038-DCR, 2013 WL 2103145, at *3 (E.D. Ky. May 14, 2013) (denying motion to
remand where defendants’ one-month delay in filing a notice of removal in state court was a
technical defect later cured by defendants); Bohanna v. Hartford Life & Accident Ins. Co., 848 F.
Supp. 2d 1009, 1014 (W.D. Mo. 2012) (finding that the statutory requirement was satisfied
despite a 67-day delay in filing a notice of removal in state court and that such delay did not
warrant remand); Parker v. Malone, No. CIV.A. 7:03CV00742, 2004 WL 190430, at *2 (W.D.
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Va. Jan. 15, 2004) (concluding that a 22-day delay in notifying state court did not thwart the
statutory purpose).
Here, Graphic failed to file its notice of removal with the state court until three months
after removing the case to this Court and notifying Packrite of the same. During the
intervening period, the only action taken by the state court was its issuance of a Notice of
Administrative Hearing, dated February 1, 2018, (ECF No. 16-1 at 5). In response to the
Notice of Administrative Hearing, on February 13, 2018, Graphic filed a Notice of Removal
with the state court. (Id. at 8–13.) The state court then took no further action in the case. See
Bohanna, 848 F. Supp. 2d at 1014 (denying motion to remand based, in part, on the fact that,
although there was a delay in defendant’s filing of a notice of removal in state court, “no
significant action was taken in state court during the 67-day time period such that either party
[was] adversely affected by the delay”). Thus, Graphic’s actions, while delayed, provided the
state court with the notice necessary to stay its proceedings, thereby fulfilling the purpose of
the statute. See White, 2016 WL 5930834, at *1. Further, the Court finds no discernible
prejudice to Plaintiff given that prior to, and following, Graphic’s filing of a notice of removal
with the state court, neither party made any court appearances nor filed any documents in the
state court action. In fact, both parties have been actively engaged in litigating the instant case
before this Court. (See ECF Nos. 1, 2, 4–18.)
Based on the above, the Court concludes that Packrite’s failure to seek remand of this
action to state court within the thirty days required under 28 U.S.C. § 1447(c) constitutes a
waiver of its right to object to removal. However, even assuming arguendo that this Court could
consider Packrite’s motion to remand, this Court is not persuaded by its arguments. Graphic’s
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delay was inadvertent, did not burden the state court, and was remedied without prejudice to
Packrite. The Court, therefore, concludes that the requirements of 28 U.S.C. § 1446(d) were
sufficiently fulfilled to effect removal and advance the purposes of the statute. Thus, remand
based on Graphic’s delayed filing of its notice of removal with the state court would be
inappropriate. Accordingly, Packrite’s motion to remand will be denied.
III.
DEFENDANT’S PARTIAL MOTION TO DISMISS
The Court will next consider Graphic’s Partial Motion to Dismiss Claims III, IV, and V of
the Complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.
A.
Legal Standards
1. Rule 9(b)
Where a party alleges fraud, the complaint must satisfy the pleading requirements of
Rule 9(b) of the Federal Rules of Civil Procedure. Harrison v. Westinghouse Savannah River Co.,
176 F.3d 776, 783–84 (4th Cir. 1999). Under Rule 9(b), “[i]n alleging fraud . . . a party must
state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). The alleged
“circumstances” which must be plead with particularity include “the time, place, and contents
of the false representations, as well as the identity of the person making the misrepresentation
and what he obtained thereby.” Harrison, 176 F.3d at 784 (quoting 5 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure: Civil § 1297, at 590 (2d ed. 1990)).
The primary purposes of Rule 9(b) are: (1) to give a defendant sufficient notice of the
claim(s) against him so that he may formulate a defense; (2) to forestall frivolous lawsuits; (3)
to prevent fraud actions in which all facts are learned only through discovery; and (4) to protect
a defendant’s goodwill and reputation. See id. According to the Fourth Circuit, “[a] court
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should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the
defendant has been made aware of the particular circumstances for which [it] will have to
prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those
facts.” Id. Failure to satisfy the heightened pleading requirements of Rule 9(b) subjects a fraud
claim to dismissal under Rule 12(b)(6). Id. at 783 n.5.
2. Rule 12(b)(6)
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure
“challenges the legal sufficiency of a complaint,” including whether it meets the pleading
standard of Rule 8(a)(2). Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). Rule 8(a)(2)
requires a complaint to contain “a short and plain statement of the claim showing that the
pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), thereby “giv[ing] the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (citation omitted). Because a Rule 12(b)(6) motion tests the sufficiency
of a complaint without resolving factual disputes, a district court “must accept as true all of
the factual allegations contained in the complaint and draw all reasonable inferences in favor
of the plaintiff.” Kensington Volunteer Fire Dep’t, Inc. v. Montgomery Cty., 684 F.3d 462, 467 (4th
Cir. 2012) (internal quotation marks omitted).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter . . . to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570). A complaint may fail to state a claim upon
which relief can be granted in two ways: first, by failing to state a valid legal cause of action,
i.e., a cognizable claim, see Holloway v. Pagan River Dockside Seafood, Inc., 669 F.3d 448, 452 (4th
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Cir. 2012); or second, by failing to allege sufficient facts to support a legal cause of action, see
Painter’s Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). In considering a Rule
12(b)(6) motion to dismiss, the “court evaluates the complaint in its entirety, as well as
documents attached [to] or incorporated into the complaint.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011).
B.
DISCUSSION
1. Fraudulent Misrepresentation/Inducement (Claim III)
Graphic first argues that Packrite’s fraudulent misrepresentation/inducement claim
must be dismissed because Packrite has failed to plead this claim with the particularity required
by Rule 9(b). (ECF No. 9 at 7–8.) According to Graphic, the Complaint fails to identify the
person(s) who made the alleged misrepresentations, as well as when and where such
misrepresentations were made. (Id. at 6–8.) Packrite argues, in response, that both [of its]
fraud claims1 are pled with sufficient particularity to give rise to a plausible claim for relief
under Rule 9(b).” (ECF No. 11 at 7–14.)
To state a claim for fraudulent misrepresentation or fraudulent inducement under
North Carolina law, a party must allege the following: (1) a false representation or concealment
of a material fact, (2) that was reasonably calculated to deceive, (3) that was made with the
intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party.
See Taylor v. Gore, 588 S.E. 2d 51, 54 (N.C. Ct. App. 2003) (listing the elements of fraudulent
1
Packrite contends that Claim III of the Complaint “alleges two separate, alternative claims for fraud
against [Graphic]—one based on [Graphic’s] affirmative misrepresentations (Fraudulent
Misrepresentation), and the other based on [Graphic’s] material omissions and concealment in breach
of a duty to disclose (Fraudulent Inducement).” (ECF No. 11 at 7.)
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misrepresentation); TradeWinds Airlines, Inc. v. C-S Aviation Servs., 733 S.E.2d 162, 168 (N.C. Ct.
App. 2012) (listing the elements of fraudulent inducement). Because Packrite alleges fraud, its
claim must satisfy the heightened pleading requirements of Rule 9(b). See Harrison, 176 F.3d
at 783–84.
Here, a review of the Complaint reveals that Packrite has sufficiently alleged the identity
of the individuals who made the alleged misrepresentations. In its Complaint, Packrite
specifically identified Tom Fester, Chris Berndt and/or Jeb Pfeifle as the persons who, “either
individually or collectively,” made alleged fraudulent misrepresentations to Packrite regarding
Graphic’s intention to enter into a three-year Beer Carton Project contract with Packrite.
(ECF No. 2 ¶¶ 26, 30, 35). Further, the Complaint identifies Michael Drummond and Kevin
Brown as the Packrite representatives to whom the alleged misrepresentations were made
regarding the Beer Carton Project contract. (Id. ¶ 30.) Packrite has also sufficiently alleged
the timing of the specific misrepresentations forming the basis for this claim by stating that
they were made in or around August 2016, (id. ¶¶ 26, 35.) See McCauley v. Home Loan Inv. Bank,
F.S.B., 710 F.3d 551, 559, 560 (4th Cir. 2013) (finding that plaintiff’s allegation that fraud
occurred during late summer or fall 2006 was enough to meet time requirement of Rule 9(b)).
Additionally, Packrite has sufficiently alleged the contents of the false representations—
namely, that Graphic “would . . . agree to enter into a three- (3) year contract with Packrite
under which Packrite would be the sole producer of [Graphic’s] requirements of [b]eer
[c]artons.” (Id. ¶ 26.) The Complaint also asserts that the results obtained from the alleged
misrepresentation was Packrite’s assistance with the Clorox Project. (Id. ¶¶ 28, 29, 31.)
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Despite the specific allegations outlined above, however, the Court finds that Packrite
has failed to comply with Rule 9(b)’s particularity requirements by failing to allege sufficient
facts showing Packrite’s “intent to deceive from the outset.” Krispy Kreme Doughnut Corp. v.
Advantage Grp. Enters., Inc., No. 1:08cv0092, 2008 WL 5216227, at *4 (M.D.N.C. Dec. 11, 2008)
(citing Leftwich v. Gaines, 521 S.E.2d 717, 723 (N.C. Ct. App. 1999)). Where, as here, “a plaintiff
assert[s] a fraud claim based upon the defendant’s alleged intent not to honor” a promise, “[i]n
order to satisfy the requirements of Rule 9(b),” a plaintiff “must allege specific facts which
demonstrate that at the time the agreement was made, the defendant intended not to perform
the agreement.” In re Inter-Act Elecs., Inc., No. 02-11557C-7G, 03-2035, 2004 WL 1052961, at
*3 (Bankr. M.D.N.C. Mar. 30, 2004); see Bon Aqua Int’l, Inc. v. Second Earth, Inc., No. 1:10CV169,
2013 WL 357469, at *11 (M.D.N.C. Jan. 29, 2013) (“[I]n accordance with Rule 9(b), where a
fraud claim stems from an alleged failure to fulfill an agreement, the complaint must contain
specific factual matter to permit the plausible inference that the defendant did not intend to
honor the agreement at the time it was made.”) In such cases, “the intent to deceive from the
outset provides the past or existing factual basis for a fraud claim.” Krispy Kreme Doughnut Corp.,
2008 WL 5216227, at *4 (citing Leftwich, 521 S.E.2d at 723). To plausibly allege fraud under
this theory, “the pleading party must offer external facts [alleging] that the speaker spoke
falsely when stating his intent[;] [s]uch evidence most often includes the speaker’s
contemporaneous statements to others contradicting his manifested intent or objective facts
showing that his intent could not have been truthful when made.” Id. Packrite’s Complaint
is devoid of any such allegations.
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The Complaint alleges that Graphic’s initial intent was to enter a contract with Packrite,
but that “at some point in either late 2016 or early 2017, . . . [Graphic] internally made the
decision not to enter into the Beer Carton [c]ontract with Packrite, contrary to its initial
representations to Packrite.” (ECF No. 2 ¶ 62.) There are no factual allegations, however, of
Graphic’s fraudulent intent at the time its representatives told Packrite that Graphic would enter
into a three-year contract for the Beer Carton Project. Packrite does allege that “[u]pon
information and belief,” Graphic’s representations “regarding [its] intent to enter into the Beer
Carton [c]ontract with Packrite were false when made,” (id. ¶ 35), and that “[u]pon information
and belief, [Graphic] never intended to enter into the Beer Carton [c]ontract with Packrite,”
(id. ¶ 66). Beyond these conclusory allegations, however, Packrite fails to allege any additional
facts demonstrating that at the time the statements were made, Graphic had no intention of
honoring its promise. See Strum v. Exxon Co., USA, 15 F.3d 327, 331 (4th Cir. 1994) (“Because
[the plaintiff] has done nothing more than assert that [the defendant] never intended to honor
its obligations under the . . . agreement, the district court’s dismissal of the [fraud claim] was
entirely appropriate.”); see also Meridian Invs., Inc. v. Fed. Home Loan Mortg. Corp., 855 F.3d 573,
580 (4th Cir. 2017) (stating that “conclusory allegations . . . without more, cannot defeat [a]
motion to dismiss”).
Moreover, in its Complaint, Packrite specifically alleges that: (i) “all discussions and
interactions between the parties from approximately August, 2016 until approximately May,
2017, were consistent with [Graphic’s] previously-given assurances that the long term Beer
Carton [c]ontract was in process and would ultimately be awarded to Packrite,” (ECF No. 2 ¶
39); and (ii) “independent of [Graphic’s] initial intent with respect to the Beer Carton [c]ontract, at some
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point in either late 2016 or early 2017, . . . [Graphic] internally made the decision not to enter
into the Beer Carton [c]ontract with Packrite, (id. ¶ 62 (emphasis added)). These allegations,
taken as true, “tend to disprove [Packrite’s] conjecture of intent to deceive at the time” the
alleged fraudulent misrepresentations were made. Krispy Kreme, 2008 WL 5216227, at *4 (“The
mere fact that [Graphic] ultimately failed to execute a contract does not show that it had no
intention of doing so from the start.”). The Court, therefore, concludes that Packrite has
failed to allege specific facts showing that Graphic’s representations regarding its intention to
enter into a three-year contract with Packrite were false when made; thus, the particularity
requirement of Rule 9(b) has not been satisfied. As a result, the Court will grant Graphic’s
motion to dismiss this fraud claim.
2. Negligent Misrepresentation/Detrimental Reliance (Claim V)
Graphic next argues that Packrite’s claim for negligent misrepresentation must likewise
be dismissed because it fails to satisfy the heightened pleading requirements of Rule 9(b). (See
ECF No. 9 at 10.) In response, Packrite principally argues that, under North Carolina law,
Rule 9(b)’s heightened pleading requirement “does not, and should not, apply” to its negligent
misrepresentation claim. (ECF No. 11 at 14–16.) Packrite further argues, in the alternative,
that even if Rule 9(b) was applicable to this claim, the Complaint states a plausible claim for
relief. (ECF No. 11 at 17–18.)
In support of its argument that Rule 9(b) does not apply to this claim, Packrite primarily
relies on a Fourth Circuit decision, Baltimore Cty. v. Cigna Healthcare, 238 F. App’x 914 (4th Cir.
2007). (See ECF No. 11 at 14–16.) Such reliance is misplaced given that, in Baltimore Cty., the
Fourth Circuit analyzed the negligent misrepresentation claim at issue under Maryland law. In
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that case, the Fourth Circuit found that, “[i]mportantly, a claim of negligent misrepresentation
under Maryland law does not contain an essential showing of fraud and thus the heightened
pleading requirements of Rule 9(b) do not apply.” Baltimore Cty., 238 F. App’x at 921 (emphasis
added). By contrast, Packrite’s negligent misrepresentation claim in the instant case is
governed by North Carolina law,2 under which negligent misrepresentation3 “is primarily a
fraud-based claim[,] . . . premised upon the making of a false assertion of a material fact.”
Breeden v. Richmond Cmty. Coll., 171 F.R.D. 189, 202 n.14 (M.D.N.C. 1997) (citing Vernon v.
Steven L. Mabe Builders, 430 S.E.2d 676, 679 (N.C. Ct. App. 1993), rev’d in part on other grounds,
444 S.E.2d 191 (N.C. 1994)). The Court concludes that because fraud is an element necessary
for a showing of negligent representation under North Carolina law, this claim is subject to
the heightened pleading requirements of Rule 9(b). See Topshelf Mgmt., Inc. v. Campbell-Ewald
Co., 117 F. Supp. 3d 722, 727–28 (M.D.N.C. 2015) (“Federal courts have repeatedly found
that the North Carolina tort of negligent misrepresentation sounds in fraud and have applied
Rule 9(b) to it.”) (collecting cases).
Having concluded that Rule 9(b) is applicable to Packrite’s negligent misrepresentation
claim (which is based on the same factual allegations as its fraudulent misrepresentation/
inducement claim), the Court further concludes that, for the reasons discussed in
2
See Francis v. Allstate Ins. Co., 709 F.3d 362, 369 (4th Cir. 2013) (“A federal court sitting in diversity is
required to apply the substantive law of the forum state.”).
3
Under North Carolina law, a claim for negligent misrepresentation exists where there is: (1) justifiable
reliance; (2) to a party’s detriment; (3) on information prepared without reasonable care; (4) by one
who owed the relying party a duty of care. Raritan River Steel Co. v. Cherry, Bekaert & Holland, 367
S.E.2d 609, 612 (N.C. 1988). Further, in North Carolina, a claim for negligent misrepresentation arises
“where pecuniary loss results from the supplying of false information to others for the purpose of
guiding them in their business transactions.” Driver v. Burlington Aviation, Inc., 430 S.E.2d 476, 480
(N.C. Ct. App. 1993) (emphasis omitted).
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Section III.B.1 above, Packrite has likewise failed to satisfy the heightened pleading
requirement of Rule 9(b) with respect to this claim. Graphic’s motion to dismiss Packrite’s
negligent misrepresentation claim will, therefore, be granted.
Graphic also argues, in a footnote, that while “Packrite’s Fourth Claim for Relief is
captioned ‘Negligent Misrepresentation/Detrimental Reliance,’ . . . detrimental reliance is an
element of a fraud claim,” and should be dismissed “[t]o the extent Packrite is making a claim
for detrimental reliance.” (ECF No. 9 at 10 n.4.) The Court agrees. As recently explained by
the Western District Court of North Carolina: “[t]his Court has found no legal authority in
North Carolina that would support the existence of an independent claim for detrimental
reliance.” Galloway v. Up Dish Servs., LLC, No. 1:17cv199, 2017 WL 4106245, at *2 (Aug. 30,
2017), adopted by 2017 WL 4102477 (W.D.N.C. Sep. 15, 2017). Nor has Packrite provided the
Court with any such legal authority in response to Graphic’s contention. Accordingly, the
Court finds that, to the extent that Packrite is asserting a separate claim for detrimental reliance
against Graphic, this claim will be dismissed.
3. Unfair and Deceptive Trade Practices (Claim V)
Graphic argues for dismissal of Packrite’s UDTPA claim because “Packrite’s UDTPA
allegations are identical to its fraud allegations,” and Packrite has “failed[ ] to plead its
allegations with particularity.” (ECF No. 9 at 11.) Plaintiff argues, in response, that a UDTPA
claim “is not properly subject to Rule 9(b).” (ECF No. 11 at 18.) Plaintiff further argues that
“[e]ven under the heightened standard of Rule 9(b), however, the Complaint states a valid
claim for damages” against Graphic under the UDTPA. (Id.)
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As an initial matter, a party asserting a UDTPA claim must allege: “(1) an unfair or
deceptive act or practice, (2) in or affecting commerce, and (3) which proximately caused injury
to plaintiffs.” Walker v. Fleetwood Homes of N.C., Inc., 653 S.E.2d 393, 399 (N.C. 2007) (quoting
Gray v. N.C. Ins. Underwriting Ass’n, 529 S.E.2d 676, 681 (N.C. 2000)). Where, as here, a party
raises a UDPTA claim “alleging detrimental reliance on false or deceptive representations,”
Rule 9(b) applies. Topshelf Mgmt., 117 F. Supp. 3d at 731. Under the section of the Complaint
titled “Unfair and Deceptive Trade Practices,” Packrite states:
94.
The allegations contained in the preceding paragraphs of
this Complaint [paragraphs 1–93] are incorporated herein by
reference.
95.
[Graphic’s] wrongful and unlawful actions and conduct,
as described above, constitute an unfair method of competition and
an unfair or deceptive act or practice, in an affecting commerce,
that has significantly injured, and will continue to injure, Packrite,
thereby proximately causing, and continuing to proximately
cause, damages to Packrite.
(ECF No. 2 ¶¶ 94, 95 (emphasis added).) Based on these allegations, the Court concludes that
Packrite’s UDTPA claim is “predicated on precisely the same alleged misrepresentations” as
its fraud claim. Topshelf Mgmt, 117 F. Supp. 3d at 731. Accordingly, “[t]o treat the [fraud claim
and the UDTPA claim] with two different pleading standards would permit [Packrite] to bring
a disguised fraud claim without putting [Graphic] on notice of the ‘particular circumstances’
of its [UDTPA] claim and without having to show ‘substantial prediscovery evidence’ of these
circumstances.” Id. (quoting Harrison, 176 F.3d at 784.) For this reason, as well as those
discussed with respect to Packrite’s failure to plead its fraud claim in compliance with Rule
9(b), the Court likewise finds that Packrite has failed to plead its UDTPA claim with sufficient
16
particularity. The Court will, therefore, grant Graphic’s motion to dismiss Packrite’s UDTPA
claim.
IV.
PLAINTIFF’S REQUEST TO FILE AMENDED COMPLAINT
Lastly, the Court notes that, in its Brief in Opposition to Defendant’s Partial Motion
to Dismiss, Packrite requests leave to file an amended Complaint “[s]hould this Court
conclude that the allegations in the Complaint in support of Packrite’s fraud claims lack some
measure of particularity required by Rule 9(b).” (ECF No. 11 at 14 n.1.) However, the manner
in which Packrite has sought leave to amend its Complaint violates Local Rules 7.3(a) and 15.1
which require that each motion be “set out in a separate pleading,” and that “the moving party
. . . attach the proposed amended pleading to the motion.” L.R. 7.3(a), 15.1. Accordingly, to
the extent Packrite seeks leave to amend its Complaint, it must do so consistent with this
Court’s Local Rules. See Jackson v. Beard, 828 F.2d 1077, 1078 (4th Cir. 1987) (explaining that
a district court’s local rules “have the force and effect of law, and are binding upon the parties
and the court which promulgated them.”).
For the reasons stated herein, the Court enters the following:
[ORDER FOLLOWS ON NEXT PAGE]
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ORDER
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Remand, (ECF No. 14),
is DENIED.
IT IS FURTHER ORDERED that Defendant’s Partial Motion to Dismiss the
Complaint, (ECF No. 8), is GRANTED.
Claim III—Fraudulent Misrepresentation/
Inducement, Claim IV—Negligent Misrepresentation/Detrimental Reliance, and Claim V—
Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1 are HEREBY
DISMISSED WITHOUT PREJUDICE.4
This, the 29th day of August, 2018.
/s/ Loretta C. Biggs
United States District Judge
4
See N.C. Farmers’ Assistance Fund, Inc. v. Monsanto Co., 740 F. Supp. 2d 694, 706 (M.D.N.C. 2010)
(dismissing complaint “without prejudice on the independent ground that it fails under Rule 9(b)”
(emphasis added)); Elman v. JP Morgan Chase Bank, N.A., No. PJM 10-31, 2010 WL 2813351, at *4 (D.
Md. July 13, 2010) (dismissing deceptive trade practices claim without prejudice for failure to allege with
the particularity required under Rule 9(b)). See also Williams v. Bell Helicopter Textron Inc., 417 F.3d 450,
456 (5th Cir. 2005) (holding that dismissal with prejudice as to the plaintiff’s Complaint was improper
where the basis for dismissal was failure to meet heightened pleading standard under Rule 9(b)).
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