Ameristone Tile LLC v. Ceramic Consulting Corporation Inc et al

Filing 34

ORDER granting in part and denying in part 5 Motion to Dismiss; granting 15 Motion to Dismiss Signed by Honorable Patrick Michael Duffy on August 19, 2013.(kspa, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION

Ameristone Tile, LLC ,

)
)
Plaintiff,
)
)
v.
)
)
Ceramic Consulting Corporation, Inc.;
)
Mario Klappholz; Scott Alpert; Floors
)
2000, Inc.; and Jason Jones,
)
)
Defendants.
)
____________________________________)

Case No.: 2:13-cv-00670-PMD
ORDER

This matter is before the Court upon two motions to dismiss for lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), for improper venue pursuant to
Rule 12(b)(3), and for failure to state a claim pursuant to Rule 12(b)(6). The first motion was
brought by Defendants Ceramic Consulting Corporation, Inc. (“Ceramic”), Mario Klappholz
(“Klappholz”), and Scott Alpert (“Alpert”), (collectively, “Ceramic Defendants”), and the second
motion was brought by Defendants Floors 2000, Inc. (“Floors 2000”) and Jason Jones (“Jones”),
(collectively, “Floors Defendants”). For the reasons that follow, the Court grants in part and
denies in part the Ceramic Defendants’ motion and grants the Floors Defendants’ motion.
BACKGROUND1
Ameristone is a South Carolina limited liability company headquartered in Mt. Pleasant,
South Carolina. Ameristone is in the business of developing and selling porcelain and ceramic
tile products. Ameristone develops tile products with its manufacturing partners, incurring
1

The statement of facts is drawn from Ameristone’s Complaint, as these facts must be treated as true for purposes of
Rule 12(b)(6).

1

product development costs in doing so, and then sells those products to retailers. In May 2010,
Ameristone entered into an Agent Contract Agreement (“Agent Agreement”) with Ceramic, in
which Ceramic agreed to act as Ameristone’s exclusive sales agent for a very large territory,
including fifteen states and twenty-five islands and nations in the Caribbean (the “Territory”).
Notably, South Carolina is not part of the Territory. Under the Agent Agreement, Ameristone
relied exclusively on Ceramic to sell its products within the defined Territory, and Ameristone
was precluded from selling its own products by any other means in that Territory.
In September 2011, Ceramic’s sales agent Scott Alpert informed Ameristone about a
“large volume” sales opportunity at Lowe’s Home Improvement Warehouse (“Lowe’s”). This
new opportunity was a “stocking program,” under which Lowe’s would select various tiles to be
stocked in 250 Lowe’s stores initially, with potential for expansion to 1,750 Lowe’s stores
nationwide. Alpert requested samples of Ameristone’s products for submission to Lowe’s for
this program. In response, Ameristone’s President, Mark Campbell, began the work necessary to
develop tiles for the Lowe’s submission. Ameristone incurred approximately $14,000 in hard
costs, traveling to visit two of its manufacturers in Spain—Gayafores and Tau Ceramica—to
develop and produce tile samples for the Lowe’s submission. Once the samples were completed
and approved by Ameristone, the manufacturer stamped its insignia on the back of the tile,
signifying its origin in accordance with industry practice.
Defendant Floors 2000, a tile distributor, was working with Ceramic and Ameristone at
the time of the Lowe’s submission, and it was Floors 2000’s employee, Defendant Jason Jones,
who received Ameristone’s tile samples and presented them to Lowe’s for the stocking program.
In all, Ameristone provided eighteen (18) tile samples to Floors 2000 for the Lowe’s submission.
In early January 2012, Ameristone’s exclusive agent, Defendant Alpert, informed Ameristone
2

that eight (8) of the Ameristone samples had made the second cut in the Lowe’s selection
process, including Ameristone’s Daino sample from the Gayafores plant in Spain and
Ameristone’s Breccia sample from the Tau Ceramica plant in Spain. In late February 2012,
however, Alpert called Ameristone’s Mark Campbell at his office located in South Carolina and
told him that none of the Ameristone tiles had been selected for the Lowe’s submission.
To the contrary, however, two of Ameristone’s tile samples were selected by Lowe’s—
the Breccia and Daino—but, unbeknownst to Ameristone and without Ameristone’s permission
or consent, Ameristone’s exclusive agents Defendants Alpert and Klappholz contacted the
Atlanta, Georgia office of Ege Ceramics (“Ege”) and arranged to have Ege replicate and produce
the two Ameristone tile samples to fill the Lowe’s order. Defendants Alpert and Jones traveled
to the Ege factory in Turkey to approve the samples for production. By April 2012, Ege had
shipped approximately two million square feet of the copied Ameristone product for placement
in Lowe’s, equaling $1,900,000 of the $2,489,000 opening order. In June 2012, Defendant
Alpert again told Ameristone’s Mark Campbell via a telephone call to him in South Carolina that
it was too bad that Lowe’s did not select any Ameristone products, and he mentioned that
Lowe’s had selected two other products Floors 2000 had submitted, which products were being
manufactured in Turkey.
Ameristone’s Mark Campbell reviewed a document, given to Ege by Ceramic, that listed
the stores to which Lowe’s planned to distribute the copied tiles.

This list included several

South Carolina stores, including store #1004 in Myrtle Beach. In August 2012, Ameristone’s
Mark Campbell purchased the copied Daino and Breccia tiles—renamed Galini and Lisano—
from Lowe’s store # 1004 in Myrtle Beach, South Carolina.

3

ANALYSIS
I.

Motions to Dismiss for Lack of Personal Jurisdiction under Rule 12(b)(2)
Defendants Klappholz, Alpert, Jones, and Floors 2000 have moved to dismiss for lack of

personal jurisdiction pursuant to Rule 12(b)(2).

Defendant Ceramic has not made such a

motion.2
A. Legal Standard under Rule 12(b)(2)
When personal jurisdiction is challenged by the defendant, the plaintiff has the burden of
showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997).
When the court addresses the issue of jurisdiction on the basis of motion papers and supporting
legal memoranda without an evidentiary hearing, “the burden on the plaintiff is simply to make a
prima facie showing of a sufficient jurisdictional basis in order to survive the jurisdictional
challenge.” Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). “[T]he court must take all
disputed facts and reasonable inferences in favor of the plaintiff.” Carefirst of Md., Inc. v.
Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). In deciding the jurisdictional
issue, the court may consider pleadings, affidavits, and other evidentiary materials. Magic
Toyota, Inc. v. Se. Toyota Distribs., Inc., 784 F. Supp. 306, 310 (D.S.C. 1992).
“[T]o validly assert personal jurisdiction over a non-resident defendant, two conditions
must be satisfied.” Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d
209, 215 (4th Cir. 2001). First, the exercise of jurisdiction must be authorized by the long-arm
statute of the forum state, and second, the exercise of personal jurisdiction must not “overstep the

2

In the Agent Agreement entered into by Ceramic and Ameristone, there is a forum selection clause that states:
“This contract shall be governed, construed and interpreted in accordance with the law of the State where
[Ameristone] holds its headquarters, in Mt. Pleasant, South Carolina, U.S.A. The parties consent to the exclusive
jurisdiction of the courts of the considered State and/or the United States District Court for the District of the State
where [Ameristone] holds its headquarters for any disputes arising hereunder.” Agent Agreement ¶ 6.2, dkt. 5-1.

4

bounds” of Fourteenth Amendment due process. Anita’s New Mexico Style Mexican Food, Inc.
v. Anita’s Mexican Foods Corp., 201 F.3d 314, 317 (4th Cir. 2000). South Carolina’s long-arm
statute has been construed to extend to the outer limits allowed by the Due Process Clause.
Foster v. Arletty 3 Sarl, 278 F.3d 409, 414 (4th Cir. 2002). Thus, the scope of the court’s inquiry
is whether defendants have “certain minimum contacts” with the forum, such that “maintenance
of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945) (citations omitted).
A defendant has minimum contacts with a jurisdiction if “the defendant’s conduct and
connection with the forum State are such that he should reasonably anticipate being haled into
court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Under this
standard, “it is essential in each case that there be some act by which the defendant purposefully
avails itself of the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).

In

determining the existence of minimum contacts, the court is mindful that it must draw all
reasonable inferences from both parties’ pleadings, even if they conflict, in the Plaintiff’s favor.
See, e.g., Precept Med. Prods., Inc., v. Klus, 282 F. Supp. 2d 381, 385 (W.D.N.C. 2003)
(explaining that “for the purposes of a Rule 12(b)(2) motion, the Court will accept the Plaintiff’s
version of disputed facts”).
The analytical framework for determining whether minimum contacts exist differs
according to which species of personal jurisdiction—general or specific—is alleged.

See

generally ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 623-24 (4th Cir. 1997). When a
cause of action arises out of a defendant’s contacts with the forum, a court may seek to exercise
specific jurisdiction over a defendant that purposefully directs activities toward the forum state
5

and the litigation results from alleged injuries that arise out of or relate to those activities.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). However, when the cause of
action does not arise out of the defendant’s contacts with the forum, general jurisdiction may be
exercised upon a showing that the defendant’s contacts are of a “continuous and systematic”
nature. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984).
B. Application of the legal standard to the Defendants
Plaintiff all but concedes that Defendants Klappholz, Alpert, Jones, and Floors 2000 are
not subject to general jurisdiction in South Carolina. Indeed, upon review of the record, the
Court concludes that these Defendants were not engaged in “substantial” or “continuous and
systematic” activities in South Carolina such as to subject them to general jurisdiction in the
State. Thus, the Court will have jurisdiction over these Defendants only if Defendants’ contacts
were sufficient to subject them to specific jurisdiction in South Carolina.
The Fourth Circuit has applied a three-part test when evaluating the propriety of
exercising specific jurisdiction: (1) whether and to what extent the defendant purposely availed
itself of the privileges of conducting activities in the forum state, and thus invoked the benefits
and protections of its laws; (2) whether the plaintiff’s claims arise out of those forum-related
activities; and (3) whether the exercise of jurisdiction is constitutionally “reasonable.” Nolan,
259 F.3d at 215-16 (citing Helicopteros, 466 U.S. at 414-16, and Burger King, 471 U.S. at 472,
476-77).
The Supreme Court has made clear that an out-of-state party’s contract with a party based
in the forum state cannot “automatically establish sufficient minimum contacts” in the forum
state. Burger King, 471 U.S. at 478. Instead, the court must perform an individualized and
pragmatic inquiry into the surrounding facts of the disputed contractual relationship to determine
6

“whether the defendant purposefully established minimum contacts within the forum.” Id. at
479. Although the test for purposeful availment can be somewhat imprecise, significant factors
typically include: (a) whether the defendant maintains offices or agents in the forum state; (b)
whether the defendant owns property in the forum state; (c) whether the defendant reached into
the forum state to solicit or initiate business; (d) whether the defendant deliberately engaged in
significant or long-term business activities in the forum state; (e) whether the parties
contractually agreed that the law of the forum state would govern disputes; (f) whether the
defendant made in-person contact with the resident of the forum state in the forum state
regarding the business relationship; (g) the nature, quality, and extent of the parties’
communications about the business being transacted; and (h) whether the performance of
contractual duties was to occur within the forum. Consulting Eng’rs Corp. v. Geometric Ltd.,
561 F.3d 273, 278 (4th Cir. 2009). Underlying these factors is the central question of whether
each defendant has performed purposeful acts in the forum state such that the defendant has
created a substantial relationship with the forum state. See Diamond Healthcare of Ohio, Inc. v.
Humility of Mary Health Partners, 229 F.3d 448, 451 (4th Cir. 2000).
1. Ceramic Defendants
In an affidavit, Mark Campbell, President of Ameristone, sets forth the following facts to
establish that Defendants Klappholz and Alpert purposely availed themselves of the privileges of
conducting activities in South Carolina.

Ameristone’s first contact with Ceramic was a

telephone call from Alpert to Campbell in Campbell’s South Carolina office, in which Alpert
informed Campbell that Ceramic was interested in representing Ameristone products. After
several meetings with Klappholz and Alpert at a national ceramic trade show, followed by two
weeks of negotiations by telephone and email from his South Carolina office, Campbell executed
7

the Agent Agreement. Klappholz signed the Agent Agreement as President of Ceramic on May
21, 2010, mailed it to Campbell in South Carolina, and Campbell signed it in South Carolina as
President of Ameristone on May 28, 2010. Shortly thereafter, Klappholz arranged an in-person
meeting with Campbell in Mount Pleasant, South Carolina, in which Campbell made an in-depth
presentation of the Ameristone product line.

Additionally, after entering into the Agent

Agreement, Campbell spoke to Klappholz one to two times per week and spoke or emailed with
Alpert numerous times each day from his office in South Carolina. Moreover, the majority of
Ameristone’s obligations under the Agent Agreement were carried out by Campbell from his
office in South Carolina.
Campbell further avers that in September 2011, Alpert contacted him at his South
Carolina office to inform him of the Lowe’s stocking program and to request samples of
Ameristone’s products for submission to Lowe’s. Campbell agreed to provide products, traveled
to Spain to meet with the manufacturers, but conducted the vast majority of the work from his
office in South Carolina. Over the next month, Campbell was in daily communication from
South Carolina with Alpert regarding preparations for the Lowe’s submission, and Klappholz
was copied on most of the communications and participated in some of the conversations. Both
Alpert and Klappholz knew that the Breccia and Daino tiles were part of the Lowe’s submission.
Alpert informed Campbell by telephone at his office in South Carolina that the Lowe’s
presentation had gone well, and a few weeks later Alpert informed Campbell in South Carolina
that eight of the Ameristone samples had been selected as part of a “second cut,” including the
Breccia and Daino. In late February 2012, after several inquiries by Campbell, Alpert told
Campbell by telephone at his South Carolina office that none of the Ameristone tiles had been
selected for the Lowe’s program.
8

In May 2012, Campbell learned that Klappholz and Alpert had contacted the Atlanta,
Georgia office of Ege Ceramics, a Turkish tile manufacturer, in March 2012 to inquire about
production of two tiles for a large volume order. The Ameristone Breccia and Daino tile
samples were sent to Ege by Jason Jones and either Alpert or Klappholz. Alpert and Jones later
traveled to a factory in Turkey to approve production of the recreated Ameristone samples. In
June 2012, Campbell asked Alpert again about the Lowe’s submission, and Alpert told him via a
telephone call to Campbell’s South Carolina office that it was too bad Lowe’s did not select any
Ameristone products and that Lowe’s had chosen two products submitted by Floors 2000 that
were being manufactured in Turkey. Klappholz and Alpert were aware that the Turkish tiles
would be sold in Lowe’s stores in South Carolina. In fact, Campbell purchased the copied tiles
at a Lowe’s store in Myrtle Beach, South Carolina, in August 2012. The same tiles are also sold
at the Lowe’s store in Mount Pleasant, South Carolina.
Based on the Complaint and Campbell’s affidavit, Defendant Alpert had the following
contacts with South Carolina: (1) he reached into South Carolina and initiated the business
relationship by calling Campbell at his South Carolina office and proposing that Ceramic
represent Ameristone as an exclusive agent; (2) he maintained almost daily email and telephone
contact with Campbell regarding Ameristone’s business, particularly during the month-long
preparation for the Lowe’s presentation; (3) in September 2011, he contacted Campbell in South
Carolina to tell him about the Lowe’s stocking program and to request Ameristone samples for
submission; (4) he informed Campbell in South Carolina that the Lowe’s presentation had gone
well and that eight of Ameristone’s samples had made the “second cut”; (5) in February 2012, he
told Campbell in South Carolina by telephone that none of the Ameristone samples had been
selected; and (6) in June 2012, he told Campbell in South Carolina by telephone that it was too
9

bad that none of the Ameristone tiles had been selected but that two Turkish-made tiles presented
by Floors 2000 had been selected. According to Alpert’s Declaration, Alpert also had one inperson meeting with Campbell in South Carolina around May 2012 in which Alpert and
Campbell discussed Ceramic’s business relationship with Ameristone in general, but did not
discuss the Lowe’s program.

Finally, most of Ameristone’s obligations under the Agent

Agreement and in preparation for the Lowe’s presentation were carried out in South Carolina.
Thus, Alpert reached into South Carolina to initiate the business relationship in general and
specifically to solicit Ameristone’s participation in the Lowe’s program; he made in person
contact with Campbell at least once to discuss the business relationship; he maintained almost
daily communication with Campbell, who was located in South Carolina, regarding the
relationship and the Lowe’s program;3 and he knew Ameristone was to perform its contractual
duties mainly in South Carolina.

Under these facts, the Court concludes that Alpert

“purposefully established minimum contacts within the forum.” Burger King, 471 U.S. at 479;
see CFA Inst. v. Inst. of Chartered Fin. Analysts of India, 551 F.3d 285, 294-97 (4th Cir. 2009)
(finding personal jurisdiction where foreign defendant (1) reached into the forum state to initiate
business with plaintiff, (2) corresponded and collaborated with plaintiff over an extended period,
and (3) made in-person contact with plaintiff twice).
The Court also concludes that Defendant Klappholz purposely established minimum
contacts within South Carolina.

According to the Complaint and Campbell’s affidavit,

3

Defendants Alpert and Klappholz argue that their frequent communications with Campbell cannot be a basis for
personal jurisdiction because they communicated with him via his cell phone and email without knowing where he
was located at the time of those communications. In his supplemental affidavit, Campbell avers that during the
period of preparation for the Lowe’s presentation, he had almost daily telephone conversations in his office, mostly
from or to his land line in South Carolina, with both Alpert and Klappholz, both of whom called him on his cell
phone and land line frequently. Drawing all reasonable inferences in favor of Plaintiff and resolving factual disputes
in Plaintiff’s favor, as the Court must at this stage of litigation, the Court finds that these daily communications are a
relevant factor to consider in the personal jurisdiction analysis.

10

Klappholz had the following contacts with South Carolina: (1) Klappholz mailed a signed Agent
Agreement to Campbell in South Carolina; (2) Klappholz arranged and attended an in-person
meeting with Campbell in South Carolina to see a presentation of the Ameristone product line;
(3) Klappholz spoke to Campbell, who was in South Carolina, one to two times per week after
entering into the Agent Agreement; (4) Klappholz was copied on most communications and
participated in some conversations regarding the Lowe’s program; and (5) Klappholz knew that
Ameristone was to perform its contractual duties mainly in South Carolina.

Although

Klappholz’s contacts with South Carolina are not as extensive as Alpert’s, the Court finds that he
did have sufficient minimum contacts relating to the business relationship with Ceramic to
satisfy prong one of the test.
Defendants Alpert and Klappholz argue that specific personal jurisdiction is lacking
under the second prong of the test because Ameristone’s claims do not arise out of their contacts
with South Carolina.

The Court disagrees.

Ameristone’s claims against these individual

Defendants arise from their role as agents for Ameristone in general and specifically related to
the Lowe’s submission and presentation of Ameristone’s tiles. Despite the fact that Alpert knew
that the Breccia and Daino tiles were Ameristone products, Alpert communicated directly to
Campbell in South Carolina that none of Ameristone’s tiles had been selected by Lowe’s.
Ameristone contends that this communication was the negligent misrepresentation alleged in
Ameristone’s Complaint. Campbell later saw the Ameristone Breccia and Daino tiles at the
offices of Ege Ceramics in Atlanta, Georgia, and was told by Ege’s representative that both
Klappholz and Alpert contacted him regarding replicating these tiles for the Lowe’s stocking
program. Campbell avers that these tiles indeed were copied, reproduced, sold, and distributed
to Lowe’s. According to Ameristone, these actions, in which Alpert and Klappholz were directly
11

and personally involved, injured Ameristone in South Carolina and form the basis for
Ameristone’s claims for conspiracy, conversion, unfair trade practices, breach of fiduciary duty,
breach of contract, and breach of contract accompanied by fraudulent acts. Finally, Ameristone
maintains that Alpert and Klappholz knew Ameristone was based in South Carolina and that the
loss of profits from the Lowe’s program would injure Ameristone in South Carolina. Upon
review of the record, the Court concludes that Ameristone has met its burden of showing that its
claims arise out of Defendants Klappholz and Alpert’s contacts with South Carolina.
The final prong of the three-part test requires the Court to determine whether jurisdiction
is constitutionally “reasonable.” In making this determination, the Court evaluates “the burden
on the defendant, the forum State’s interest in adjudicating the dispute, the plaintiff’s interest in
obtaining convenient and effective relief, the interstate judicial system’s interest in obtaining the
most efficient resolution of controversies, and the shared interest of the several States in
furthering fundamental substantive social policies.” Nolan, 259 F.3d at 217 (quoting Burger
King, 471 U.S. at 477). “More generally, [the Fourth Circuit’s] reasonableness analysis is
designed to ensure that jurisdictional rules are not exploited in such a way as to make litigation
so gravely difficult and inconvenient that a party unfairly is at a severe disadvantage in
comparison to his opponent.” Id. (internal quotation marks omitted).
The Court finds that there is nothing unreasonable about subjecting Defendants
Klappholz and Alpert to jurisdiction in South Carolina. “[B]ecause modern transportation and
communications have made it much less burdensome for a party sued to defend himself in a
State where he engages in economic activity, it usually will not be unfair to subject him to the
burdens of litigating in another forum for disputes relating to such activity.” Burger King, 471
U.S. at 474 (internal quotations omitted). Although it may be inconvenient for Defendants to
12

litigate this case in South Carolina, the inconvenience is not so grave as to offend constitutional
due process principles, especially because these Defendants, as employees and agents of
Defendant Ceramic, likely will be called upon to testify in this forum on behalf of Ceramic.
Moreover, Plaintiffs have an interest in litigating the dispute in South Carolina, and South
Carolina undoubtedly has an interest in deterring the type of conduct alleged here. In sum, given
Defendants’ contacts with the forum state, the court finds that “maintenance of the suit does not
offend traditional notions of fair play and substantial justice.” Int’l Shoe Co., 326 U.S. at 316
(internal quotations omitted). Accordingly, the Court concludes that it has personal jurisdiction
over both Defendant Alpert and Defendant Klappholz and denies their motion to dismiss
pursuant to Rule 12(b)(2).
2. Floors Defendants
In a supplemental affidavit, Campbell sets forth the following facts to establish that
Defendants Jones and Floors 2000 purposely availed themselves of the privileges of conducting
activities in South Carolina. At Alpert’s request, Ameristone sent a Daino tile sample to Jones of
Floors 2000 in Florida in August 2011. In September 2011, Alpert informed Campbell that
Jones of Floors 2000 would make the presentation to Lowe’s and had requested specific
Ameristone samples, including the Daino, for the presentation. In preparation for the Lowe’s
presentation, Campbell had several phone conversations from his office in South Carolina with
Jones and Alpert. Through Ceramic, Campbell gave Floors 2000 and Jones authority to sell
Ameristone products to Lowe’s at specific price points. In the Atlanta office of Ege Ceramics,
Campbell saw Ameristone tile samples signed by Jones and learned that Jones had traveled with
Alpert to Turkey to approve production of the copied Daino and Breccia samples. Finally,
Ameristone points to Floors 2000’s contacts unrelated to the Lowe’s stocking program, including
13

that Floors 2000 had a resident salesperson in South Carolina until September 2011 and that
Floors 2000 purchased a significant amount of Ameristone products in the years and months
preceding the filing of this action. Ameristone sent Floors 2000 invoices totaling $390,087.69
between December 2010 and February 2013, and Floors 2000 paid that amount by check mailed
to Ameristone’s headquarters in South Carolina.
Ameristone has not met its burden of establishing that the Court has personal jurisdiction
over the Floors Defendants. There simply is no evidence that the Floors Defendants reached into
South Carolina to initiate a business relationship with Ameristone, made in-person contact with
Ameristone in South Carolina, entered into or negotiated a contract with Ameristone, or engaged
in extensive communications with Ameristone.

The record suggests that Jones’s

communications with Campbell were limited to several phone conversations during the lead-up
to the Lowe’s presentation and to communications about unrelated Ameristone tiles that Floors
2000 carried between 2011 and 2013. It is unclear if Jones ever initiated any of these calls.
Ameristone did not directly authorize the Floors Defendants to represent it in the Lowe’s
presentation; instead, it gave authorization via Ceramic. Finally, that Floors 2000 mailed at least
one check to South Carolina to pay Ameristone for tiles purchased from Ameristone between
December 2010 and February 2013 is insufficient to establish purposeful availment.

See

Helicopteros, 466 U.S. at 418 (holding that “mere purchases, even if occurring at regular
intervals, are not enough to warrant a State’s assertion of in personam jurisdiction over a
nonresident corporation in a cause of action not related to those purchase transactions”).
Moreover, Ameristone has not established that its claims arise out of the Floors
Defendants’ contacts with South Carolina. Ameristone’s claims against the Floors Defendants
include negligent misrepresentation, interference with a contractual relationship, civil
14

conspiracy, conversion of Ameristone’s assets and goodwill, and unfair trade practices. These
claims seem to arise out of the Floors Defendants’ contacts with Florida, Georgia, North
Carolina, and Turkey. Upon this record, the Court concludes that Ameristone has not met its
burden of showing that Defendants Floors 2000 and Jones purposefully established minimum
contacts within the forum or that Ameristone’s claims arise out of forum-related activities. See
Nolan, 259 F.3d at 216. Accordingly, the Court grants the Floors Defendants’ motion to dismiss
for lack of personal jurisdiction pursuant to Rule 12(b)(2).4
II.

Klappholz and Alpert’s Motion to Dismiss for Improper Venue under Rule
12(b)(3)
“When a defendant objects to venue under Rule 12(b)(3), [the] plaintiff bears the burden

of establishing that venue is proper.” Butler v. Ford Motor Co., 724 F. Supp. 2d 575, 586
(D.S.C. 2010). A plaintiff must make “only a prima facie showing of proper venue in order to
survive a motion to dismiss” made under Rule 12(b)(3). Aggarao v. MOL Ship Mgmt. Co., Ltd.,
675 F.3d 355, 366 (4th Cir. 2012). In assessing whether there has been a prima facie venue
showing, the court must view the facts in the light most favorable to the plaintiff and may
consider evidence outside the pleadings. Id. at 365-66. A case filed in an incorrect venue must
be dismissed, or, if in the interests of justice, transferred to a district in which it could have been
brought. 28 U.S.C. § 1406(a).
In general, a civil action may be brought in:
(1) a judicial district in which any defendant resides, if all defendants are residents
of the State in which the district is located; (2) a judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the action is situated; or (3) if
there is no district in which an action may otherwise be brought as provided in
4

The Court does not reach the Floors Defendants’ alternative arguments that this action should be dismissed due to
improper venue or failure to state a claim. Furthermore, the Court denies Ameristone’s request for limited discovery
into whether the Floors Defendants may be subject to the Court’s general personal jurisdiction.

15

this section, any judicial district in which any defendant is subject to the court’s
personal jurisdiction with respect to such action.
28 U.S.C. § 1391(b).
Ameristone argues that venue is proper because a substantial part of the events or
omissions giving rise to its claims occurred in South Carolina. Alpert solicited Ameristone
directly in South Carolina to enter into a business arrangement with Ceramic, and Ameristone
negotiated and signed the Agent Agreement in South Carolina. Ameristone carried out its
obligations under the Agent Agreement from South Carolina, except for the occasional visit to its
manufacturing partners in Spain. Alpert contacted Ameristone in South Carolina to solicit
Ameristone’s involvement in the Lowe’s program and to give and get updates about the
submission process, and Klappholz was included in many of these communications. Although
the sample tiles were manufactured in Spain, Ameristone did the majority of the work that went
into putting the Lowe’s submission together—including coordinating the manufacturing, pricing,
and shipping of the samples—from its South Carolina office. Alpert informed Campbell, who
was in South Carolina, that Lowe’s had not selected any Ameristone tiles. Finally, the tiles that
Ameristone alleges were stolen by Klappholz and Alpert and replicated under different names
were sold at Lowe’s stores in South Carolina.
Klappholz and Alpert, however, argue that venue in South Carolina is improper and
emphasize that (1) they live and work in Florida; (2) they planned Ceramic’s business and
participation in the Lowe’s stocking program from Florida; (3) the Territory did not include
South Carolina; (4) the tiles at issue were not manufactured in South Carolina; (5) the tiles
wound up in South Carolina only incidentally; and (6) Klappholz and Alpert each made only one
visit to South Carolina in connection with the Agent Agreement.
16

The Court concludes that Ameristone has made a prima facie showing that venue is
proper in South Carolina. Ameristone’s claims against Klappholz and Alpert arise from their
roles as Ameristone’s agents as well as the parties’ participation in the Lowe’s program.
Ameristone conducted a substantial part of its obligations with regard to that program in South
Carolina. Furthermore, Alpert contacted Ameristone in South Carolina to solicit Ameristone’s
participation in the program and to receive and provide updates related to the program.
Klappholz was a party to many of these communications. The alleged misrepresentation by
Alpert occurred during a phone conversation with Campbell in South Carolina. From these facts,
the Court is satisfied that a substantial part of the events or omissions giving rise to Ameristone’s
claim occurred in South Carolina. See Gateway Gaming, LLC v. Custom Game Design, Inc.,
C.A. No. 8:06-01649-HMH, 2006 WL 2781043, at *5 (D.S.C. Sept. 25, 2006) (finding venue
proper based on contract negotiations via telephone and email from the plaintiff in South
Carolina to the defendant in Texas and on plaintiff’s performance of its obligations in South
Carolina); Figgie Int’l, Inc. v. Destileria Serrales, Inc., 925 F. Supp. 411, 412-13 (D.S.C. 1996)
(finding venue proper over Puerto Rican defendant where plaintiff’s base of operations for the
negotiation of the contract and for coordination of the engineering, manufacturing, and shipping
of the equipment took place in South Carolina). Accordingly, the Court denies Defendants
Klappholz and Alpert’s motion to dismiss pursuant to Rule 12(b)(3).
III.

Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6)
“A motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief

can be granted is a challenge to the legal sufficiency of a complaint, as governed by Rule 8.”
Federal Trade Comm’n v. Innovative Mktg., 654 F. Supp. 2d 378, 384 (D. Md. 2009); see
Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss
17

under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or
the applicability of defenses.”) Under the Federal Rules of Civil Procedure, 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). Additionally, under Rule 9(b), in alleging fraud or mistake, “a party
must state with particularity the circumstances constituting fraud or mistake.” Finally, “[i]f an
item of special damage is claimed, it must be specifically stated.” Id. 9(g).
“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. at 678.
Moreover, “[d]etermining whether a complaint states 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. at 679. The Supreme Court has explained that “the tenet that a court must
accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions,”
and that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. at 678. “When there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief.” Id. at 679. Thus, “[i]n ruling on a 12(b)(6) motion, a 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 Cnty, Md., 684
F.3d 462, 467 (4th Cir. 2012) (internal quotations omitted). Furthermore, “a court may consider

18

documents attached to the complaint or the motion to dismiss so long as they are integral to the
complaint and authentic.” Id.
A. Counts I - III
The Ceramic Defendants contend that Ameristone has failed to state a claim in any of the
causes of action pled against them in the Complaint. Having reviewed the pleadings, the parties’
memoranda, and the Agent Agreement attached to Defendants’ motion,5 the Court finds that
Count I of the Complaint—a claim for breach of contract against Defendant Ceramic—
sufficiently alleges the three elements of a breach-of-contract claim, including damages.
Accordingly, the Court concludes that Count I states a claim for relief that is plausible on its
face. As for Count II, Ameristone concedes that its claim for breach of the covenant of good
faith and fair dealing is not a separate cause of action under South Carolina law, but instead is
subsumed under the breach of contract claim. See RoTec Servs., Inc. v. Encompass Servs., Inc.,
597 S.E.2d 881, 884 (S.C. Ct. App. 2004) (concluding that “the implied covenant of good faith
and fair dealing is not an independent cause of action separate from the claim for breach of
contract”). Accordingly, the Court grants Defendants’ motion to dismiss Count II. With regard
to Count III—a claim for breach of contract accompanied by fraudulent acts—the Court agrees
with the Ceramic Defendants that this claim should be dismissed as against Klappholz and Alpert
because they were not parties to the Agent Agreement, and thus Ameristone cannot show that
they breached the contract. However, the Court concludes that Count III is more than sufficient
to withstand the heightened pleading requirements of Rule 9(b) as against Defendant Ceramic.

5

As this action arose from the Agent Agreement, the contract is integral to the Complaint and can be considered
without converting this motion into one for summary judgment. See Kensington Volunteer Fire Dep’t, Inc., 684
F.3d at 467.

19

Accordingly, the Court denies Ceramic’s motion as to Counts I and III, dismisses Count II in
full, and dismisses Count III as against Klappholz and Alpert.
B. Count IV
In Count IV, Ameristone alleges that Defendants Ceramic, Klappholz, and Alpert each
breached their fiduciary duty to Ameristone.

These Defendants argue that Ameristone’s

allegations do not justify the imposition of a fiduciary duty on the Ceramic Defendants because
the contractual relationship created by the Agent Agreement did not create a special relationship
similar to those that have been held to create a fiduciary duty under South Carolina law. “A
confidential or fiduciary relationship exists when one imposes a special confidence in another, so
that the latter, in equity and good conscience, is bound to act in good faith and with due regard to
the interests of the one imposing the confidence.” Island Car Wash, Inc. v. Norris, 358 S.E.2d
150, 152 (S.C. Ct. App. 1987). The question of whether a fiduciary duty exists is a question of
law for the court. Hendricks v. Clemson Univ., 578 S.E.2d 711, 715 (S.C. 2003). “Historically,
[South Carolina courts have] reserved imposition of fiduciary duties to legal or business settings,
often in which one person entrusts money to another, such as with lawyers, brokers, corporate
directors, and corporate promoters.” Id. at 716. “The facts and circumstances must indicate that
the one reposing the trust has foundation for his belief that the one giving advice or presenting
arguments is acting not in his own behalf, but in the interests of the other party.” Burwell v. S.C.
Nat’l Bank, 340 S.E.2d 786, 790 (S.C. 1986).
In the Complaint, Ameristone alleges that under the Agent Agreement, Ceramic was
Ameristone’s sole exclusive sales agent in the Territory, Ameristone could not appoint any other
agent to sell its products in the Territory, and Ameristone itself could not sell its products
directly or indirectly within the Territory. Thus, Ameristone alleges that it relied exclusively on
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Ceramic to act as its sales agent. Ameristone further alleges that Ceramic and its salespersons
acted as Ameristone’s exclusive agents in the Lowe’s program. Moreover, under the Agent
Agreement, Ameristone was to share confidential information with Ceramic and its agents, and
Ceramic was to keep such information and design specifications confidential.

The Court

concludes that based on the allegations in the Complaint, Ameristone has pled facts sufficient to
state a claim that a fiduciary relationship existed and that it was breached. Accordingly, the
Court denies the Ceramic Defendants’ motion to dismiss Count IV.
C. Count V
Next, the Ceramic Defendants argue that Ameristone failed to state a claim in Count V
for negligent misrepresentation.

Defendants specifically argue that Ameristone did not

sufficiently plead the final element of the claim for negligent misrepresentation—i.e., that
plaintiff suffered a pecuniary loss as a proximate result of its reliance on defendant’s
representation. However, the Court concludes that Count V is more than sufficient to withstand
the heightened pleading requirements of Rule 9(b). See Pitten v. Jacobs, 903 F. Supp. 937, 951
(D.S.C. 1995) (noting that claims for negligent misrepresentation are subject to the heightened
pleading requirements of Rule 9(b)). Accordingly, the Court denies the Ceramic Defendants’
motion to dismiss Count V.
D. Count VII6
The Ceramic Defendants next contend that the Court should dismiss Count VII’s civil
conspiracy claim. In order to state a claim for civil conspiracy, Ameristone was required to
plead that two or more persons joined together for the purpose of injuring Ameristone, causing
special damage to Ameristone. City of Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 677 S.E.2d
6

Count VI is a claim against only the Floors Defendants. Because the Court has granted the Floors Defendants’
motion to dismiss for lack of personal jurisdiction, the Court does not address Count VI.

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574, 579 (S.C. 2009). To sufficiently plead special damages, Ameristone had to allege “that the
acts in furtherance of the conspiracy were separate and independent from other acts alleged in
the complaint” and resulted in damages beyond those alleged in other causes of action. AJG
Holdings LLC v. Dunn, 708 S.E.2d 218, 222-23 (S.C. Ct. App. 2011); see Springer v. Pelissier,
No. 6:10-cv-01303-JMC, 2011 WL 2601895, at *2 (D.S.C. July 1, 2011) (“The plaintiff must
also plead damages suffered as a result of the conspiracy that go beyond damages alleged in
other causes of action.”).
Upon review of the Complaint and the parties’ arguments, the Court concludes that
Ameristone failed to plead in Count VII any special damages beyond those alleged in other
counts of the Complaint. In the civil conspiracy count, Ameristone alleges that as “a direct and
proximate result of Defendants’ conspiracy to steal, replicate, manufacture, and sell
Ameristone’s products, Plaintiff has incurred special damages.”

Complaint ¶ 69, dkt. 1.

However, Ameristone also alleges that it incurred “special damages” in Count IV’s breach of
fiduciary duty claim, Count V’s negligent misrepresentation claim, and Count IX’s unfair trade
practices claim. Because Ameristone failed to articulate any special damages beyond those
alleged in other counts of the Complaint, the Court dismisses Count VII.
E. Count VIII
Next, the Ceramic Defendants challenge the sufficiency of Count VIII, which alleges a
cause of action for conversion of Ameristone’s assets and goodwill. South Carolina courts
define conversion as “the unauthorized assumption in the exercise of the right of ownership over
goods or personal chattels belonging to another to the exclusion of the owner’s rights.” Moseley
v. Oswald, 656 S.E.2d 380, 382 (S.C. 2008). Conversion is a wrongful act that may arise by the
illegal use or misuse, or by a wrongful taking or detention, of another’s personal property.
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Hawkins v. City of Greenville, 594 S.E.2d 557, 566 (S.C. Ct. App. 2004). “To establish the tort
of conversion, the plaintiff must establish either title to or right to the possession of the personal
property.” Moseley, 656 S.E.2d at 382. Intangible rights are normally not the proper subject for
a conversion claim. Gignilliat v. Gignilliat, Savitz & Bettis, L.L.P, 684 S.E.2d 756, 763 (S.C.
2009). The South Carolina Supreme Court recently held that, to the extent that certain intangible
rights may properly be the object of a suit for conversion, the tort of conversion “should be
limited to intangible property rights that are identified with some document,” such as a stock
certificate, promissory note, or bond. Id.; see 18 Am. Jur. 2d Conversion § 7 (2004).
Upon review of the Complaint and the pleadings, the Court concludes that Ameristone
has sufficiently pled a cause of action for conversion of its assets. Ameristone specifically pled
that the Daino and Breccia tile samples were its business assets and property, thus pleading that
it had title over the property.

Furthermore, Ameristone alleges that Defendants, without

Ameristone’s knowledge or permission, delivered the tile samples to Ege so that Ege could
replicate the tiles, thus wrongfully exercising the right of ownership over the tiles to the
exclusion of Ameristone’s rights. However, the Court agrees with Defendants that Ameristone
has not sufficiently pled a cause of action for conversion of goodwill, as there is no allegation
that the “goodwill” specified in the Complaint—i.e., the “favorable consideration of current and
potential customers associated with Ameristone products”—is identified with a document.
Complaint ¶ 72; see Gignilliat, 684 S.E.2d at 763. Accordingly, the Court denies Defendants’
motion to dismiss Count VIII as to the claim for conversion of Ameristone’s assets, but grants
the motion as to the claim for conversion of Ameristone’s goodwill.

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F. Count IX
Finally, the Ceramic Defendants contend that the Court should dismiss Count IX, which
alleges a violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”). SCUTPA
prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce.” S.C. Code Ann. § 39–5–20(a). Trade or commerce includes
“the advertising, offering for sale, sale or distribution of any services and any property . . . and
any other article, commodity or thing of value.” Id. § 39–5–10(b). To state a SCUTPA claim,
the plaintiff must allege “(1) that the defendant engaged in an unlawful trade practice, (2) that the
plaintiff suffered actual, ascertainable damages as a result of the defendant’s use of the unlawful
trade practice, and (3) that the unlawful trade practice engaged in by the defendant had an
adverse impact on the public interest.” Havird Oil Co. v. Marathon Oil Co., 149 F.3d 283, 291
(4th Cir. 1998). “Under South Carolina law, unfair or deceptive acts have an adverse impact
upon the [public] if those acts have the potential for repetition.” Bessinger v. Food Lion, Inc.,
305 F. Supp. 2d 574, 581 (D.S.C. 2003). Potential for repetition can be demonstrated by either
“showing the same kind of actions occurred in the past, thus making it likely they will continue
to occur absent deterrence” or “showing the company’s procedures created a potential for
repetition of the unfair and deceptive acts.” Singleton v. Stokes Motors, Inc., 595 S.E.2d 461,
466 (S.C. 2004). “[T]he plaintiff in a SCUTPA action is required only to allege and prove those
facts sufficient to demonstrate potential for repetition; at that point, [the] plaintiff has proven an
adverse effect on the public interest sufficient to recover under the SCUTPA.” Liberty Mut. Ins.
Co. v. Emp. Res. Mgmt., Inc., 176 F. Supp. 2d 510, 516 (D.S.C. 2001). “However, conduct that
affects only the parties to the transaction and not the public interest provides no basis for a
SCUTPA claim.” Bessinger, 305 F. Supp. 2d at 581.
24

In its Complaint, Ameristone alleges that “Defendants’ acts have the potential for
harmful effects to the public interest because they are capable of repetition.” Complaint ¶ 79.
However, beyond this conclusory statement, Ameristone provides no specific facts
demonstrating that the Defendants have conducted the same kind of actions in the past or that
their procedures or business practices created a potential for repetition in the future. Without
more, the Court concludes that Ameristone has failed to allege facts to establish an adverse effect
on the public interest sufficient to recover under the SCUTPA. See Ethox Chem., LLC v. CocaCola Co., No. 6:12–cv–01682–TMC, 2013 WL 41001, at *3 (D.S.C. Jan. 3, 2013) (finding
insufficient to establish adverse effects on public interest the allegation that “Coca–Cola has
been accused of engaging in unfair methods of competition and deceptive business practices” in
the past and that “there is a legitimate threat that Coca–Cola will continue to engage in unfair
practices and repeat its deceptive business practices, and, as a result, Coca–Cola’s actions
adversely affect the public interest”). Accordingly, the Court dismisses Count IX’s SCUTPA
claim.
CONCLUSION
For the foregoing reasons, it is ORDERED that the Floors Defendants’ motion to dismiss

pursuant to Rule 12(b)(2) for lack of personal jurisdiction is GRANTED without prejudice. It is
further ORDERED that the Ceramic Defendants’ motion to dismiss is DENIED IN PART and
GRANTED IN PART. Specifically, the Court denies the Ceramic Defendants’ motion to
dismiss pursuant to Rules 12(b)(2) and 12(b)(3). The Court further denies their motion to
dismiss Counts I, IV, and V, as well as Count III’s claim against Ceramic and Count VIII’s claim
for conversion of assets. However, the Court dismisses with prejudice Count II in full and Count

25

III as against Klappholz and Alpert. The Court dismisses without prejudice Counts VII and IX,
as well as Count VIII’s claim for conversion of goodwill.
AND IT IS SO ORDERED.

August 19, 2013
Charleston, SC

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