Opinion
No. 1:99CV00390
August 16, 2002
MEMORANDUM OPINION and ORDER
This case is back before the court on Plaintiff's Motion to Alter or Amend Judgment and/or in the Alternative, Motion to Amend Complaint. The underlying case involves a dispute between Plaintiff Tolaram Polymers, Inc. ("Tolaram") and Defendants Shell Chemical Company and Shell Oil Company ("Shell") over contract negotiations. This court granted summary judgment to Defendants on September 26, 2001. Tolaram raises several issues in its motion. The facts are adequately considered in the summary judgment opinion and will not be rehashed here.
I. Proximate Cause
Plaintiff objects to the court's determination that the misrepresentations made by Defendants could not have been the proximate cause of Plaintiff's injury. (Mem. Op. at 19.) Plaintiff asserts that this argument was first raised by Defendants in their reply brief and Plaintiff had no chance to respond. Defendants' proximate cause argument directly responded to a quotation used by Plaintiff in its response brief, and the court finds nothing improper in the way the argument was raised. However, the court must evaluate Plaintiff's proximate cause argument.
To recover for negligent misrepresentation, the alleged misrepresentation must be the proximate cause of the plaintiff's injury. Helms v. Holland, 478 S.E.2d 513, 517 (N.C.App. 1996); Alva v. Cloninger, 277 S.E.2d 535, 540 (N.C.App. 1981). Plaintiff claims that certain employees of Defendants, mainly Epperson, misrepresented their authority to enter a contract and those misrepresentations caused Plaintiff to forego other opportunities, proximately causing its injury. Defendants counter that even if Epperson misrepresented his authority, that is not the proximate cause of Plaintiff's injury; an agreement was never reached because the project cost too much.
Plaintiff agrees that the deal was likely not consummated because it was too expensive. Plaintiff has produced evidence that Shell was experiencing poor financial performance during the time the deal was being negotiated yet negligently permitted its employees to negotiate and provide assurances to Plaintiff that a deal would be reached. Plaintiff's argument assumes that because of this poor performance, Shell knew before the end of negotiations that an agreement would not be possible or would only be possible at a lower cost. There is simply no evidence to support such an assumption. Plaintiff would have a jury speculate that no agreement between the parties was possible because of other factors that affected Shell's decision. "[I]t is the duty of the court to withdraw the case from the jury when the necessary inference is so tenuous that it rests merely upon speculation and conjecture." Sylvia Develop. Corp. v. Calvert County, Maryland, 48 F.3d 810, 818 (4th Cir. 1995) (citations omitted).
The notion that Shell was somehow financially crippled is belied by Plaintiff's own statement in its reply brief that "[d]uring the time of this dispute, Shell's annual reports indicate that it had $5 billion in cash on hand despite tough economic times for the petroleum industry." (Pl.'s Reply Br. at 2.)
In addition, as stated in the memorandum opinion, Shell was free to withdraw from negotiations with Tolaram at any time. If we accept Tolaram's theory of the case, Shell's representative negligently misrepresented his authority to contract, and Tolaram reasonably relied on those misrepresentations. If true, this means that Shell could not withdraw from the deal based on the misrepresentations of Epperson without being liable, i.e., it could not withdraw because Epperson lacked authority to contract. Shell was not precluded from withdrawing for any other reason, including changed financial circumstances.
II. Capital Premises
Plaintiff argues that the court misunderstood the significance of the capital expenditure required by Shell to convert the Asheboro Plant to produce PTT. Plaintiff claims that there was no stated limit to how much capital Shell would invest, and that the capital premises spoken about were merely estimates and not hard limits. Further, Plaintiff claims the capital premises had little impact on the negotiations between Tolaram and Shell.
First, even accepting that there were no set capital limits for the conversion project, Tolaram knew that the project involved not only the negotiations between it and Shell, but also negotiations between Shell and a third party over the conversion of the plant. Knowing this, Tolaram elected to continue negotiations with Shell without insisting on protections for Tolaram. Second, whether Shell was willing to enter an agreement at all was dependant on the entire project as a whole, and a large part of that would be initial capital expenditures. Tolaram knew, or should have known, that even if Shell got a "sweetheart" deal on the tolling agreement from Tolaram, if Shell could not meet its other targets, the deal might be abandoned. Reliance by Tolaram on statements about the capital premises was not justified.
III. Significance of the Buhler Deadline
Tolaram suggests that the court may have misunderstood the significance of the Buhler deadline. Plaintiff should not mistake an adverse ruling for misunderstanding. The court understood the significance of the Buhler deadline and concluded that since Tolaram knew that Epperson had to have approval to enter the agreement with Tolaram prior to the expiration of the Buhler option, any reliance past that point could not be justified. Since reliance is not justified, subsequent alleged misrepresentations regarding Epperson's authority are not relevant. Further, the issue of damages was never reached, and therefore Tolaram's expert report on damages is irrelevant. Damages must be proven only after liability is established; Tolaram failed to establish liability.
IV. Epperson's Alleged Neglgent Misrepresentations and Justifiable Reliance
Next, Plaintiff accuses the court of overlooking several of the misrepresentations allegedly made by Epperson and of usurping the jury's role in deciding the facts. In its brief in opposition to summary judgment, Tolaram listed seven statements made by Epperson. (Pl's. Br. Opp'n Summ. J. at 14.) The court condensed the list into two general categories, and then addressed each category. (Mem. Op. at 6-7.) The court then concluded that even if these statements were negligently made, it was clear that reliance by Tolaram was not justified. (Mem. Op. at 8.) In such circumstances, it is proper for the court to decide the case rather than a jury. APAC-Carolina, Inc. v. Greensboro-High Point Airport Auth., 431 S.E.2d 508, 517 (N.C.App. 1993) (upholding summary judgment because there was no justifiable reliance by plaintiff).
To avoid further confusion, numbers one through six on Plaintiff's list fall into the second category, i.e., alleged misrepresentations of Epperson's authority, and number seven makes up the first category, i.e., alleged misrepresentations of the consequences of exceeding the capital premises.
Tolaram quotes a different part of the memorandum opinion stating that Epperson only made statements regarding "Shell's intention and willingness to contract." (Mem. Op. at 14.) Admittedly, this may be an over generalization of the facts as alleged by Plaintiff. However, it was stated in the context of showing the difference between statements made by Epperson and those made by professionals, who owe a higher duty of care.
Plaintiff is correct in pointing out that the court may have taken one of its employee's deposition statements out of context. (Mem. Op. at 17 n. 5.) However, the fact remains that Tolaram knew at least one day before the Buhler option expired that others at Shell would play a role in approving the project. Therefore, Prabhu was not justified in relying on Epperson's statements of sole authority.
V. North Carolina Law Governing Negligent Misrepresentation and Duty to Disclose
Plaintiff objects to the court's application of North Carolina law but raises no new issues. The court's memorandum opinion speaks for itself. To put it bluntly, Plaintiff's claim attempts to broaden the scope of the tort of negligent misrepresentation in North Carolina, something the court is reluctant to do. See, e.g., Broussard v. Meineke Discount Muffler Shops, 155 F.3d 331, 348 (4th Cir. 1998) ("[A]s a federal court exercising concurrent jurisdiction over this important question of state law we are most unwilling to extend North Carolina tort law farther than any North Carolina court has been willing to go.").
Plaintiff does assert that Shell and Tolaram were not "completely at arm's length at the time of Epperson's statements." (Pl's. Br. at 15.) Plaintiff never argued this point before now and cites no law in support of this contention. The court will not consider it.
The court did not, as Plaintiff alleges, distinguish Olivetti Corp. v. Ames Bus. Sys., 356 S.E.2d 578 (N.C. 1987), on the basis of the pre-existing distribution contract but on the nature of the misrepresentations. "The alleged misrepresentations that Plaintiff objects to are much different than those in Olivetti." (Mem. Op. at 15.)
VI. Unfair and Deceptive Trade Practices
Plaintiff claims that the court misapplied North Carolina law with respect to its unfair and deceptive trade practices claim. N.C. GEN. STAT. § 75 ("Chapter 75"). Had it successfully shown negligent misrepresentation, Plaintiff would likely have succeeded on its Chapter 75 claim. See Gilbane Bldg. Co. v. Federal Reserve Bank of Richmond, 80 F.3d 895, 903 (4th Cir. 1996). This court stated that since Plaintiff failed to establish negligent misrepresentation, Plaintiff must show some conduct by Defendants that was "immoral, unethical, oppressive, unscrupulous, or substantially injurious." Id. at 902 (citation omitted). Plaintiff did not meet this burden.
The court did not suggest that some type of oral agreement is necessary for a Chapter 75 claim. The court merely analogized the case at bar to Computer Decisions, Inc. v. Rouse Office Mgmt., 477 S.E.2d 262 (N.C.App. 1996). There, on more compelling facts than those presented here, the court held that the mere intentional breach of an oral agreement did not as a matter of law violate Chapter 75. Here, since there was no negligent misrepresentation, at most there was an intentional breach of an unenforceable oral agreement, which obviously cannot support a chapter 75 claim.
Plaintiff cites J.M. Westall Co. v. Windswept View of Asheville, Inc., 387 S.E.2d 67 (N.C.App. 1990), for the proposition that "the defendant in Westall did essentially the same thing Shell did — it induced the plaintiff to enter into a contract with a third party by making a false statement. The defendant was not held to have breached a contract, it was held to have violated Chapter 75." (Pl.'s Br. at 17.) However, in Westall, the parties did not dispute that the alleged misrepresentations violated Chapter 75, but rather contested whether they affected commerce as required by the statute. Westall, 387 S.E.2d at 74. Therefore, Westall does not support Plaintiff's point.
Plaintiff asserts that the passage of time after a breach of contract when coupled with the failure to pay an undisputed debt may result in a viable Chapter 75 claim. This argument is puzzling and clearly contrary to North Carolina case law. See, e.g., Branch Banking and Trust Co. v. Thompson, 418 S.E.2d 694, 700 (N.C.App. 1992) and cases cited therein ("It is well recognized, however, that actions for unfair or deceptive trade practices are distinct from actions for breach of contract, and that a mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action under (Chapter 753."). The agreement was to pay the engineering fees; failure to pay was breach. Continued failure to pay is not a substantial aggravating circumstance that would justify the extraordinary remedy of treble damages provided for under Chapter 75. See Bartolomeo v. S.B. Thomas, Inc., 889 F.2d 530, 535 (4th Cir. 1989). If Plaintiff's theory is correct, it is difficult to see how any breach of contract would not automatically amount to a Chapter 75 claim. Plaintiff's citation of Garlock v. Henson, 435 S.E.2d 114 (N.C. 1993), is not appropriate as precedent. There, the court found that the refusal to pay, coupled with the denial of the sale and forgery of a bill of sale, amounted to a Chapter 75 violation. Id. It was not simply the passage of time that converted the claim.
Plaintiff makes several arguments based on what the court "apparently" found regarding the agreement for Shell to pay the engineering fees. The only thing the court found with respect to this claim was that taking all of Plaintiff's facts as true and drawing all reasonable inferences in its favor, Plaintiff only alleged facts to support a breach of contract claim, not a Chapter 75 claim. This is unquestionably a matter of law for the court to decide. Forbes v. Par Ten Group, Inc., 394 S.E.2d 643, 650-51 (N.C.App. 1990) ("Whether defendants committed the alleged acts is a question of fact for the jury and, if so, whether the proven facts constitute an unfair or deceptive trade practice is a question of law for the court." (citation and internal quotations omitted)). Plaintiff further suggests that it is inconsistent for the court to find that the facts alleged only support a breach of contract claim rather than a Chapter 75 claim and then not rule in Plaintiff's favor on the breach of contract claim. Breach of contract was never asserted in the complaint, and the court simply refused to render judgment on a claim not properly raised.
VII. Motion to Amend the Complaint
Finally, Tolaram has made a motion to amend the complaint to assert a breach of contract claim. The court has been unable to find any Fourth Circuit precedent for granting a motion to amend after an adverse summary judgment ruling. Other circuits have examined the issue and concluded that a post summary judgment motion to amend would not be viewed favorably when a party knew the underlying facts throughout the proceedings and neglected to amend the complaint before the judgment was entered. See. e.g., Bethany Pharmacal Co. v. QVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001); Royal Ins. Co. of America v. Southwest Marine, 194 F.3d 1009, 1016-17 (9th Cir. 1999); Viernow v. Euripides Dev. Corp., 157 F.3d 785, 800 (10th Cir. 1998).
Similarly here, Plaintiff knew the operative facts underlying the complaint and could have added a breach of contract claim before judgment. Plaintiff amended the complaint once to add the Chapter 75 claim, and offers no reason why it neglected to add a breach of contract claim. The cases cited by Plaintiff in support of its motion both involve motions to amend filed before judgment was entered. See Edwards v. City of Goldsboro, 178 F.3d 231 (4th Cir. 1999) (finding that the district court abused its authority by not granting the plaintiff's motion to amend that had been filed before the defendant's motion to dismiss was granted); Jacobs v. Central Transport, Inc., 891 F. Supp. 1088, 1093-94 (E.D.N.C. 1995) (granting plaintiff's motion to amend the complaint to conform to the evidence made after the close of evidence at trial but before judgment was rendered). On these facts, the court sees no reason to grant Plaintiff a third bite at the apple.
For the reasons set forth above,
IT IS ORDERED that Plaintiff's Motion to Alter or Amend Judgment and/or in the Alternative, Motion to Amend Complaint [69] is hereby denied.