DCHG Investments LLC v. IAC Greenville LLC et al

Filing 73

OPINION AND ORDER denying in part and dismissing without prejudice in part Defendants' 59 Motion for Partial Summary Judgment; denying Plaintiff's 60 Motion for Partial Summary Judgment Signed by Honorable Mary Geiger Lewis on 2/23/2017.(abuc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
GREENVILLE DIVISION
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'
'
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IAC GREENVILLE, LLC and
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INTERNATIONAL AUTOMOTIVE
'
COMPONENTS GROUP NORTH AMERICA, '
INC. d/b/a IAC Group North America, INC.,
'
Defendants.
'

DCHG INVESTMENTS, LLC,
Plaintiff,
vs.

CIVIL ACTION NO. 6:15-2013-MGL

MEMORANDUM OPINION AND ORDER
DENYING IN PART AND DISMISSING WITHOUT PREJUDICE IN PART
DEFENDANTS= MOTION FOR PARTIAL SUMMARY JUDGMENT
AND DENYING PLAINTIFF=S MOTION FOR PARTIAL SUMMARY JUDGMENT
I.

INTRODUCTION
This case centers around a commercial lease dispute. Much of the controversy between

the parties concerns the condition and repair of the roof on the subject Facility (the Facility), which
is the subject of the Lease (the Lease). Plaintiff DCHG Investments brings this action against
Defendant IAC Greenville, LLC (Defendant IACBG) and International Automotive Components
Group North America, Inc, doing business as IAC Group North America, Inc. (IACBNA),
complaining of breach of contract and seeking to pierce Defendant IACBG=s corporate veil.
Defendants allege counterclaims against Plaintiff, including breach of contract, breach of
contract accompanied by a fraudulent act, and negligence. They attempt to pierce Plaintiff=s
corporate veil. The Court has diversity jurisdiction over this matter under 28 U.S.C. ' 1332.

Pending before the Court are Defendants= and Plaintiff=s motions for partial summary
judgment.

Having considered the motions, the responses, the replies, the record, and the

applicable law, the Court will deny in part and dismiss without prejudice in part Defendants=
motion for partial summary judgment and deny Plaintiff=s motion for partial summary judgment.

II.

FACTUAL AND PROCEDURAL HISTORY
JPS Automotive, Inc. (JPS) entered into the Lease with Plaintiff commencing December

23, 2002, for the subject Facility. Thereafter, JPS and its parent, C&A, filed for bankruptcy (the
bankruptcy). On October 11, 2007, IAC 199 Blackhawk Road, LLC (IACBB) received JPS=s
interest in the Lease as a result of the bankruptcy. IACBB subsequently merged with IACBG.
IAC-G is a member-assigned LLC. IACBNA is the sole member and manager of IACBG.
The pertinent portions of the Lease, for purposes of this lawsuit, provide:
4. USE OF PREMISES AS BUSINESS. [The Facility] shall be
used and occupied by the Tenant for the purpose of warehousing and
manufacturing. The Tenant shall, at its expense, comply with all
sanitary laws, ordinances, protective covenants, and rules and orders
of appropriate governmental authorities protecting the cleanliness,
occupancy, and preservation of [the Facility] during the terms of the
Lease. [The Facility] shall . . . not be used for any illegal purposes
or in any manner to create a nuisance or trespass.
5. PRESENT CONDITION OF [THE FACILITY]. Tenant
stipulates that it has examined [the Facility] and that it is, at the time
of the Lease, in good order and repair, and in a safe, clean, and
tenantable condition.
....
9. MAINTENANCE OF PREMISES.
A.
By Landlord:
Landlord shall have no maintenance
responsibilities whatsoever with regard to [the Facility], except as
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may be necessitated by the negligence or willful misconduct of
Landlord, its agent(s), employee(s), contractor(s) or other tenant(s).y
be necessitated by the negligence or wilful

B. By Tenant: Tenant shall, at its sole expense, keep and maintain
[the Facility] and appurtenances in good and sanitary condition and
repair during the term of this Lease, including, without limitation,
the exterior of [the Facility] (including the roof, walls, foundation,
gutters, downspouts, doors and windows, and structural portions
thereof), as well as the heating, gas, electrical, plumbing, and other
similar units and systems within and serving [the Facility].
Tenant agrees to return [the Facility] in as good a condition
and repair as when possession was first taken, normal wear and
tear, and damage caused by casualty excepted.
10. ALTERATIONS AND ADDITIONAL IMPROVEMENTS.
Tenant shall make no material alterations to the building or make
other material improvements to [the Facility], without the prior
written consent of the Landlord, which such consent shall not be
unreasonably withheld.
All alterations, changes, and
improvements built, constructed, or placed on [the Facility] by the
Tenant, with the exception of personal property removable without
damage to [the Facility], shall, unless otherwise provided by written
agreement between the Landlord and Tenant, be the property of the
Landlord and remain on [the Facility] at the expiration or sooner
termination of this Lease.
ECF No. 59-7 at 5-7.
After Plaintiff filed its second amended complaint, both Defendants and Plaintiff filed
motions for partial summary judgment. The Court, having been fully briefed, is now prepared to
adjudicate these two motions.

III.

STANDARD OF REVIEW
Summary judgment is appropriate only Aif the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.@ Fed. R.
Civ. P. 56(a). In deciding whether a genuine issue of material fact exists, the evidence of the
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non-moving party is to be believed and all justifiable inferences must be drawn in his favor. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party has the burden of
proving that summary judgment is appropriate. Once the moving party makes this showing,
however, the opposing party may not rest upon mere allegations or denials, but rather must, by
affidavits or other means permitted by the Rule, set forth specific facts showing that there is a
genuine issue for trial. See Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986).
A party asserting that a fact is genuinely disputed must support the assertion by Aciting to
particular parts of materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations (including those made for purposes of the
motion only), admissions, interrogatory answers, or other materials.@ Fed. R. Civ. P. 56(c)(1)(A).
A litigant Acannot create a genuine issue of material fact through mere speculation or the building
of one inference upon another.@ Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985). Therefore,
A[m]ere unsupported speculation . . . is not enough to defeat a summary judgment motion.@ Ennis
v. Nat=l Ass=n of Bus. & Educ. Radio, Inc., 53 F.3d 55, 62 (4th Cir. 1995).
A[W]here the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, disposition by summary judgment is appropriate.@ Teamsters Joint Council
No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir. 1996). ASummary judgment is proper only
when it is clear that there is no dispute concerning either the facts of the controversy or the
inferences to be drawn from those facts.@ Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286
(4th Cir. 1987).

The court must determine Awhether the evidence presents a sufficient

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disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.@ Anderson, 477 U.S. at 251-52.

IV.

DEFENDANTS= MOTION FOR PARTIAL SUMMARY JUDGMENT
A.

Contentions of the Parties

Defendants contend Defendant IACBNA is not a party to the lease and thus cannot be held
liable for a breach of contract. According to Defendants, Plaintiff is unable to pierce IACBG=s
corporate veil to reach IACBNA. More specifically, Defendants maintain there is no viable cause
of action to pierce the corporate veil of an LLC under South Carolina law. But, even if there were,
Defendants aver Plaintiff=s attempt to pierce Defendant IAC-G=s corporate veil to reach Defendant
IACBNA is improper here.
Defendants also state Defendant IACBG is not liable for a breach of contract because the
lease fails to require Defendant IACBG to make capital improvements or replacements. Related
to this argument, Defendants urge the Court to hold Defendant IACBG cannot be liable for any
failure to return the Facility in any condition other than the condition it was in on October 11,
2007, the date IAC-B acquired its interest in the Lease from JPS, or for any damage to the facility
occurring prior to that date. Defendants avow Plaintiff is unable to prove the condition of the
facility at the time Defendant IACBG vacated it was not same as its condition on October 11, 2007,
normal wear and tear excepted.
Plaintiff takes issue with each of Defendants= contentions.

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B.

Discussion and Analysis

First, Defendants contend Defendant IACBNA cannot be held liable for a breach of contract
because it was not a party to the contract. As Plaintiff notes in its response to Defendants= motion
for summary judgment, however, Plaintiff Ahas alleged that not only were the rent payments
handled by [IACBNA], it was the party that negotiated the final oral lease extension with Plaintiff
in 2014. [IACBG] had no involvement in these negotiations, which were handled by IACBNA
employees.@ ECF No. 62 at 4 n.3 (citing ECF No. 37 & 19).

Further, according to Plaintiff,

[IACBNA] Afurther took over the shutdown process that the extension was designed to facilitate
and blurred the distinctions between itself and [IACBG] by thoroughly dominating its affairs.@ Id.
Inasmuch as there is a genuine issue of material fact on this issue, the granting of summary
judgment on this claim would be improper.
Second, Defendants argue Plaintiff is unable to pierce IACBG=s corporate veil in its attempt
to reach IACBNA. More specifically, Defendants maintain South Carolina law fails to provide a
viable cause of action to pierce the corporate veil of an LLC. But, assuming South Carolina
allowed for it, Defendants aver Plaintiff=s attempt to pierce Defendant IAC-G=s corporate veil to
reach Defendant IACBNA is inappropriate in these circumstances.
Plaintiff states Delaware, not South Carolina, law is the law that applies in this action.
And under Delaware precedent, Plaintiff insists it is able to pierce Defendant IACBG=s corporate
veil and reach Defendant IACBNA. To that, Defendants reply Athe Court need not decide whether
South Carolina or Delaware law would apply. Even if Delaware law controls, [Plaintiff=s] claim
to pierce the corporate veil must fail and summary judgment is appropriate.@ ECF No. 66 at 4.

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Because IAC—G is a Delaware limited liability company, the Court will look to Delaware law for
its determination on this issue.
Delaware law allows for the piercing of the corporate veil of an LLC such as Defendant
IACBG. See Geyer v. Ingersoll Publ=n, 621 A.2d 784, 973 (Del. Ch. 1992) (A[A] court can pierce
the corporate veil of an [LLC] where there is fraud or where a subsidiary is in fact a mere
instrumentality or alter ego of its owner.@). Such a piercing can be accomplished Aonly in the
interest of justice, when such matters as fraud, contravention of law or contract, public wrong, or
where equitable consideration among members of the corporation require it, are involved.@
Pauley Petroleum Inc. v. Cont’l Oil Co., 239 A.2d 629, 633 (Del. 1968).
The Delaware courts have cited to a Fourth Circuit opinion Dewitt Truck Brokers v. W. Ray
Flemming Fruit Co., 540 F.2d 681 (4th Cir. 1976), for a list of some of the factors a court is to
consider when deciding whether a corporate veil ought to be pierced. E.g., United States v.
Golden Acres, Inc., 702 F. Supp 1097, 1104 (D. Del. 1988). The Dewitt court supplies a nonexclusive list: inadequate capitalization, Afailure to observe corporate formalities, non-payment of
dividends, the insolvency of the debtor corporation at the time, siphoning of funds of the
corporation by the dominant stockholder, non-functioning of other officers or directors, absence
of corporate records, and the fact that the corporation is merely a facade for the operations of the
dominant stockholder or stockholders.@ Dewitt, 540 F.2d at 686-87.
The Court sees no reason to provide a Ahe-said-she-said@ enumeration of the parties=
arguments on the application of their factual allegations to the relevant law. Suffice it to say there
is a genuine issue of material facts in the evidence presented by the parties on this issue. Therefore,
the Court will also decline to grant summary judgment on this issue.
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Third, Defendants state Defendant IACBG is not liable for a breach of contract because the
Lease fails to require Defendant IACBG to make capital improvements or replacements. But, as
Plaintiff notes in its response to Defendants= motion for summary judgment, the Lease Ain fact does
envision a tenant making alterations, but requires the tenant to obtain the landlord=s consent prior
to making to significant alterations.@ ECF No. 62 at 12 n.8. Additionally, Acompliance with
governmental building codes, which would clearly be the tenant=s obligation . . . would conflict
with a rule where the tenant never has to make anything that can be construed as a capital or
structural improvement.@ Id. Further cutting against Defendants= argument is the language from
the Lease stating ATenant shall, at its sole expense, keep and maintain [the Facility] and
appurtenances in good and sanitary condition and repair during the term of this Lease, including,
without limitation, the exterior of [the Facility] (including the roof, walls, foundation, gutters,
downspouts, doors and windows, and structural portions thereof).” It is for these reasons the
Court must reject Defendants= position on this issue.
Fourth, Defendants posit Defendant IACBG cannot be liable for any failure to return the
facility in any condition other than the condition is was in on October 11, 2007, or for any damage
to the facility that was done before that date.

Defendants interpret the Bankruptcy Order

regarding JPS to say they lack any obligation as to any damage to the Facility before that date.
Plaintiff rejects this interpretation, states that a release such as this is an affirmative defense and,
based on Defendants= failure to plead the defense of release, urges the Court to decline
consideration of Defendants= argument. Plaintiff avows A[t]his failure precluded Plaintiff from
conducting discovery on this topic, such as attempting to question or depose those individuals

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involved in the bankruptcy process regarding the discussions regarding the assignment and the
obligations under the Lease.@ ECF No. 62 at 28.
So that a determination can be made on the merits of Defendants= argument, the Court will
dismiss this portion of Defendants= motion and allow the parties to conduct discovery on this issue
if the parties wish to do so.
Fifth, Defendants avow Plaintiff is unable to establish the condition of the Facility at the
time Defendant IACBG vacated it was different than its condition when Defendant IACBG
assumed the lease, normal wear and tear excepted. Given the Court=s decision above, the Court
will also dismiss this portion of Defendants= motion so the parties can conduct discovery on the
assignment of the Lease if they decide to do so.

V.

PLAINTIFF=S MOTION FOR PARTIAL SUMMARY JUDGMENT
A.

Contentions of the Parties

Plaintiff argues Defendants= counterclaim for breach of contract fails because it is based
upon duties appearing nowhere in, but directly contradicted by, the Lease. Plaintiff also states
Defendants are unable to bring a claim for breach accompanied by fraud because there exists no
evidence of false statements and, even if the statements were made, Defendants would have no
right to rely upon them. Further, according to Plaintiff, Defendants= negligence claim fails
because Plaintiff owed no duty to Defendants.
Defendants maintain these arguments lack merit.

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B.

Discussion and Analysis

First, Plaintiff asserts Defendants= counterclaim for breach of contract should be dismissed
because the claim is based upon duties that do not appear in the Lease. There are several problems
with this argument. For the sake of brevity, the Court will address just one of them.
According to Plaintiff, Athe Lease is clear that the tenant has sole responsibility for the
maintenance and repair of the facility, and that this obligation includes:
the roof, walls, foundation, gutters, downspouts, doors and
windows, and structural portions thereof), as well as the heating,
gas, electrical, plumbing, and other similar units and systems within
and serving said [Facility].
ECF No. 60-1 at 13 (quoting ECF No. 59-7 at 6). But, the Lease also provides the ALandlord shall
have . . . maintenance responsibilities . . . necessitated by the negligence or willful misconduct of
Landlord its agent(s) employee(s) contractor(s) or other tenant(s).@ ECF No. 59-7 at 6. Hence,
the Court will deny Plaintiff=s motion for summary judgment on this counterclaim.
Second, Plaintiff avows Defendants are unable to bring a claim for breach accompanied by
fraud because there exists no evidence of false statements and, even if the statements were made,
Defendants would have no right to rely upon them.
A[A] misrepresentation made in reckless disregard for the truth will support an action for
breach of contract accompanied by a fraudulent act.@ Kelly v. Nationwide Mut. Ins. Co., 298
S.E.2d 454, 455 (S.C. 1982).

In this instance, the plaintiff must prove she relied on the

misrepresentation. Id. A[T]o have a claim for breach of contract accompanied by a fraudulent
act, the plaintiff must establish three elements: (1) a breach of contract; (2) fraudulent intent
relating to the breaching of the contract and not merely to its making; and (3) a fraudulent act
accompanying the breach.@ Conner v. City of Forest Acres, 560 S.E.2d 606, 612 (S.C. 2002).
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AFraud, in this sense, assumes so many hues and forms, that courts are compelled to content
themselves with comparatively few general rules for its discovery and defeat, and allow the facts
and circumstances peculiar to each case to bear heavily upon the conscience and judgment of the
court or jury in determining its presence or absence.@ Id. (citation omitted) (internal quotation
marks omitted).
The Court declines to enumerate all the reasons the granting of summary judgment on this
issue would be improper. Defendants have brought the Court=s attention to a host of them.
Suffice it to say there exist genuine issues of material fact as to whether there are
misrepresentations and acts attributable to Plaintiff that make this claim a colorable one. Thus,
the Court will deny Plaintiff=s request for summary judgment on this counterclaim.
Third, according to Plaintiff, Defendants= negligence claim must be dismissed because
Plaintiff did not owe any contractual duty to Defendants.

As the Court has already noted,

however, the Lease states, in relevant part, the ALandlord shall have . . . necessitated by the
negligence or willful misconduct of Landlord its agent(s) employee(s) contractor(s) or other
tenant(s).@ ECF No. 59-7 at 6. This clause runs sideways into the notion the Court ought to grant
summary judgment to Plaintiff on this issue. Consequently, it will deny the request.

VI.

CONCLUSION
Therefore, based on the foregoing discussion and analysis, it is the judgment of this Court

Defendants= motion for partial summary judgment is DENIED IN PART AND DISMISSED
WITHOUT PREJUDICE IN PART and Plaintiff=s motion for partial summary judgment is
DENIED.
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The parties shall submit a joint consent amended scheduling order to the Court not later
than seven days after the Court=s filing of this Order.
IT IS SO ORDERED.
Signed this 23rd day of February, 2017, in Columbia, South Carolina.
s/Mary Geiger Lewis
MARY GEIGER LEWIS
UNITED STATES DISTRICT JUDGE

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