ITW Charlotte, LLC et al v. ITW Commercial Construction, North America

Filing 24

ORDER denying 23 Motion for Reconsideration. Signed by Chief Judge Frank D. Whitney on 12/21/2017. (chh)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
DOCKET NO. 3:17-cv-00473-FDW-DCK
ITW CHARLOTTE, LLC, ONCE, LLC,
and BURLINGAME INVESTMENTS
HOLDINGS, LLC,
Plaintiffs,
vs.
ITW COMMERCIAL CONSTRUCTION,
NORTH AMERICA, a division of
ILLINOIS TOOL WORKS, INC.,
Defendant.

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ORDER

THIS MATTER is before the Court on Defendant’s Motion for Reconsideration (Doc. No.
23). Defendant contends that this Court erred in denying Defendant’s motion to dismiss Plaintiffs’
claim for tortious interference with contract. In particular, Defendant requests reconsideration of
the Court’s denial of Defendant’s economic loss doctrine argument. For the reasons stated herein,
the Court determines that the economic loss doctrine does not bar Plaintiffs’ claim for tortious
interference with contract. Accordingly, Defendant’s Motion for Reconsideration (Doc. No. 23)
is DENIED.

I. BACKGROUND
Plaintiffs’ allegations of fact remain the same as those discussed in the Court’s previous
Order (Doc. No. 20). This action arises from the commercial lease entered into between Plaintiffs
ITW Charlotte, LLC, Once, LLC, and Burlingame Investment Holdings, LLC (collectively
“Landlord”) and Defendant, ITW Commercial Construction, North America (“CCNA”). In April
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of 2016, Landlord and CCNA entered into a lease agreement (the “Lease”) for a commercial
building (the “Building”) located at 2027 Gateway Boulevard, Charlotte, NC. (Doc. No. 1-1, p. 1).
This dispute arose after the fire suppression system (“FSS”) located in the Building was found to
be inadequate for CCNA to conduct its operations without modification.
Landlord alleges that prior to the execution of the Lease, CCNA conducted an inspection
of the Building to determine if it was satisfactory for its intended use. Id. at 2. Landlord alleges
that during the inspection CCNA had the opportunity to observe the FSS and issued no objection
to its condition. Id. CCNA admits that it was permitted to view certain visible portions of the FSS
but alleges that some of the defects in the sprinkler system were not reasonably discoverable during
the initial inspection. Id. at 65. After entering into the Lease, CCNA determined that the FSS was
insufficient for its use of the Building. Id. at 2. CCNA then sent a letter to Landlord requesting
permission to make modifications to the FSS. Id. Upon receiving Landlord’s approval, CCNA
then paid to have the proposed alterations performed. Id. at 3.
On April 27, 2017, CCNA sent a letter (the “Default Notice”) to Landlord, asserting that
Landlord had breached Section 15.02 of the Lease by failing to pay for the modifications to the
FSS. Id. Landlord rejected CCNA’s demand, arguing that it was not obligated to pay for these
modifications under the Lease and therefore no default existed. Id.
On May 13, 2017, Landlord entered in a sale agreement with a third-party. Id. at 4. This
sale agreement was conditioned upon obtaining a valid Estoppel Certificate from CCNA,
indicating that no defaults under the Lease existed. Id. On May 23, 2017, CCNA received an
Estoppel Certificate from Landlord. Id. at 67. CCNA timely executed the Estoppel Certificate,

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including in it a disclosure that Landlord was in default of the Lease. Id. As a result, Landlord was
unable to complete the conveyance of the property to the buyer. Id. at 4.
Both parties contend that the other is responsible for the cost of the modifications to the
FSS. Landlord filed this present action seeking a declaratory judgment and asserting a claim for
tortious interference with contract for CCNA’s alleged interference with Landlord’s contract to
sell the property. Id. CCNA has filed a counterclaim, also seeking a declaratory judgment and
asserting a breach of contract claim for the Landlord’s alleged breach of Section 12.02(B) of the
Lease. On August 10, 2017, CCNA filed a Motion to Dismiss Landlord’s tortious interference
claim pursuant to Rule 12(b)(6). (Doc. No. 3).
On October 20, 2017, this Court entered an Order denying Motion to Dismiss Plaintiffs’
tortious interference with contract claim (Doc. No. 20).

Defendant filed its Motion for

Reconsideration (Doc. No. 23) on November 17, 2017, arguing that the Court erred in denying
CCNA’s economic loss doctrine argument.

II. STANDARD OF REVIEW
Defendant’s Motion to Dismiss under Rule 12(b)(6) argues that Plaintiffs second cause of
action fails to state any claim upon which relief can be granted. (Doc. No. 3, p. 1). In order to
survive a 12(b)(6) motion to dismiss, a complaint must contain more than mere legal conclusions.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint must plead facts sufficient to “raise a
right to relief above the speculative level” and to demonstrate that the claim is “plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The claim is facially plausible

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when the factual content of the complaint allows the court to “draw the reasonable inference that
the defendant is liable for the misconduct.” Id. at 556.
In Iqbal, the Supreme Court articulated a two-step process for determining whether a
complaint meets this plausibility standard. First, the court identifies allegations that, because they
are no more than conclusions, are not entitled to the assumption of truth. Iqbal, 556 U.S. at 678.
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” Id. (citing Twombly, 550 U.S. at 555) (allegation that government officials adopted
challenged policy “because of” its adverse effects on protected group was conclusory and not
assumed to be true). Although the pleading requirements stated in “Rule 8 [of the Federal Rules
of Civil Procedure] mark[ ] a notable and generous departure from the hyper-technical, codepleading regime of a prior era . . . it does not unlock the doors of discovery for a plaintiff armed
with nothing more than conclusions.” Id. at 678–79.
Second, to the extent there are well-pleaded factual allegations, the court should assume
their truth and then determine whether they plausibly give rise to an entitlement to relief. Id. at
679. “Determining whether a complaint contains sufficient facts to state a plausible claim for relief
‘will . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.’” Id. “Where the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged-but it has not
‘show[n]’—‘that the pleader is entitled to relief,’” and therefore it should be dismissed. Id.
(quoting Fed.R.Civ.P. 8(a)(2)). In other words, if after taking the complaint's well-pleaded factual
allegations as true, a lawful alternative explanation appears a “more likely” cause of the
complained of behavior, the claim for relief is not plausible. Id.
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III. ANALYSIS
Defendant argues that this Court erred in denying Defendant’s motion to dismiss Plaintiffs’
claim for tortious interference with contract. (Doc. No. 23-1, p. 1). In particular, Defendant
requests reconsideration of the Court’s denial of Defendant’s economic loss doctrine argument.
Id. The Court reconsiders its ruling but ultimately reaches the same conclusion. Given the facts
alleged, and for the reasons stated below, the economic loss doctrine does not bar Plaintiffs’ claim
for tortious interference with contract.

A. Economic Loss Doctrine
North Carolina’s economic loss doctrine is a recognition of the fundamental difference
between tort and contract claims and is often viewed as a necessity in preventing open-ended tort
damages from distorting contractual relations. See Broussard v. Meineke Disc. Muffler Shops,
Inc., 155 F.3d 331, 346 (4th Cir. 1998). In general, the doctrine provides that a mere breach of
contract does not ordinarily give rise to a tort action by promisee against promisor. See e.g., Severn
Peanut Co. v. Indus. Fumigant Co., 807 F.3d 88, 94 (4th Cir. 2015). The rationale for the rule is
that “parties are free to include, or exclude, provisions as to the parties' respective rights and
remedies,” and that under some circumstances “[t]o give a party a remedy in tort . . . would permit
the party to ignore and avoid the rights and remedies granted or imposed by the parties' contract.”
Id. (quoting Moore v. Coachmen Indus., Inc., 129 N.C.App. 389, 499 S.E.2d 772, 780 (1998)).
But the economic loss doctrine is by no means an automatic bar to all tort claims arising from
conduct resulting in breach of contract claims. Courts applying North Carolina’s economic loss
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doctrine have long held that a plaintiff may pursue a tort action where there exists an independent
and identifiable tort, even if the tort also constitutes, or accompanies, a breach of contract. See
Broussard, 155 F.3d at 346 (4th Cir. 1998) (“In recognition of the fundamental difference between
tort and contract claims . . . North Carolina has recognized an ‘independent tort’ arising out of
breach of contract only in ‘carefully circumscribed’ circumstances.”); see also Newton v. Standard
Fire Insurance Co., 291 N.C. 105, 111 (1976)). Such tortious conduct must also be accompanied,
however, by a sufficient aggravating element such as fraud, malice, reckless indifference,
oppression, insult, or willfulness. See Strum v. Exxon Co., U.S.A., a Div. of Exxon Corp., 15 F.3d
327, 331 (4th Cir. 1994); see also Schumacher Immobilien Und Beteiligungs AG v. Prova, Inc.,
No. 109CV00018, 2010 WL 3943754, at *2 (M.D.N.C. Oct. 7, 2010); see also ACS Partners, LLC
v. Americon Grp., Inc., No. 3:09CV464-RJC-DSC, 2010 WL 883663, at *7 (W.D.N.C. Mar. 5,
2010).
In its Motion for Reconsideration (Doc. No. 23), Defendant contends that the dispositive
factor in determining whether Plaintiffs’ claim is barred by the economic loss doctrine is the
“origin of CCNA’s duty.” (Doc. No. 23-1, p. 6). Defendant concludes that because CCNA’s duty
to provide an Estoppel Certificate arises only out of the parties’ contract, Plaintiffs’ only remedy
is in contract, not tort. Id. Such an argument, however, fails to acknowledge the nature of
Plaintiffs’ claim. While it is true that a plaintiff must allege a duty owed to him by the defendant
separate and distinct from any duty owed under a contract in order to pursue a tort claim and breach
of contract claim arising out of the same conduct, such a duty is readily apparent in Plaintiffs’
claim. See Vanwyk Textile Sys., B.V. v. Zimmer Mach. Am., Inc., 994 F.Supp. 350, 362
(W.D.N.C.1997). Plaintiffs have asserted a claim for tortious interference with contract; without
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a doubt Defendant has a duty to refrain from interfering with another’s contractual relationships.
See Dunlap v. Cottman Transmissions Sys., LLC, 576 F. App'x 225, 226 (4th Cir. 2014) (noting
that tortious interference with contract is an intentional tort predicated on the common law duty to
refrain from interfering with another’s contractual and business relationships). Therefore, contrary
to Defendant’s contention, the relevant inquiry here is whether the alleged conduct falls within the
scope of the parties’ agreement and within the realm of contract law. See Food Lion, LLC v.
Schuster Mktg. Corp., 382 F. Supp. 2d 793, 800 (E.D.N.C. 2005). Defendant’s alleged conduct
does not.

B. Tortious Interference with Contract and the Economic Loss Doctrine
While the earliest cases invoking the principles of North Carolina’s economic loss doctrine did
so in the context of negligence and products liability, the doctrine has been applied more broadly
in recent years. See Severn 807 F.3d at 94. This Court has even applied North Carolina’s economic
loss doctrine to bar claims for tortious interference with contract. See ACS Partners, LLC v.
Americon Grp., Inc., No. 3:09CV464-RJC-DSC, 2010 WL 883663, at *8 (W.D.N.C. Mar. 5,
2010).

In ACS Partners, LLC v. Americon Group, Inc. this Court determined that the economic

loss doctrine barred the plaintiff’s tortious interference with contract claim because the claim was
neither identifiable nor distinct from the breach of contract. Id. There, however, the plaintiff failed
to allege the existence of a valid contract between plaintiff and a third party or that the defendant
intentionally induced a third party not to perform the contract. Id.
Such is not the case here. Unlike in ACS Partners, LLC v. Americon Group, Inc., here
Plaintiffs’ claim for tortious interference with contract is identifiable and distinct from a breach of
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contract claim. Plaintiffs have alleged that the Landlord entered into a valid sale agreement with
a third party buyer; that the Tenant’s refusal to execute a “valid and suitable” Estoppel Certificate
constituted an intentional inducement to the third party buyer not to purchase the Lease Premises;
and furthermore, that this conduct was “not justified” and was done solely to “compel Landlord to
pay for the FSS Modifications.” (Doc. No. 1-1, p. 4). Thus, the conduct Plaintiffs allege is not
merely a breach or a failure to perform under a contract. Accordingly, this Court determines that
Plaintiffs have alleged sufficient facts to support a plausible claim for an identifiable and
independent tort that is distinct from a mere breach a contract claim and is accompanied by
sufficient aggravating circumstances. Consequently the economic loss doctrine does not apply
and the claim survives Defendant’s Motion to Dismiss pursuant to Rule 12(b)(6).
If after discovery the evidence is inconsistent with Plaintiffs allegations, Plaintiff’s second
cause of action would be subject to dismissal at that time.

IV. CONCLUSION
IT IS THEREFORE ORDERED that Defendant’s Motion for Reconsideration (Doc. No.
23) is DENIED; for the reasons stated herein the Court determines that the economic loss doctrine
does not bar Plaintiff’s second cause of action.
IT IS SO ORDERED.
Signed: December 21, 2017

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