Beckley v. Priority Auto Group, Inc.

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

3:21-cv-00072-RJC-DSC

JAMES BECKLEY, )

)

Plaintiff, )

)

vs. )

) ORDER

)

PRIORITY AUTO GROUP, INC., )

PRIORITY AUTOMOTIVE )

HUNTERSVILLE, INC., )

DENNIS ELLMER, and )

MATTHEW ELLMER, )

)

Defendants. )

____________________________________ )

THIS MATTER comes before the Court on Defendant Priority Automotive Huntersville,

Inc.’s Motion to Dismiss for Failure to State a Claim (Doc. No. 17), Defendants Priority Auto

Group, Inc., Dennis Ellmer, and Matthew Ellmer’s Motion to Dismiss for Lack of Personal

Jurisdiction and Failure to State a Claim or, in the alternative, Transfer of Venue (the motions to

dismiss collectively, the “Motions”) (Doc. No. 18), the Magistrate Judge’s Amended

Memorandum and Recommendation (the “M&R”) (Doc. No. 27), and Defendants’ objection to

the M&R (Doc. No. 28). For the reasons stated herein the M&R is ADOPTED in part.

I. BACKGROUND

Neither party has objected to the Magistrate Judge’s statement of the factual and procedural

background of this case. Therefore, the Court adopts the facts as set forth in the M&R.

II. LEGAL STANDARD

A district court may assign dispositive pretrial matters, including motions to dismiss, to a

magistrate judge for “proposed findings of fact and recommendations.” 28 U.S.C. § 636(b)(1)(A)

& (B). The Federal Magistrate Act provides that a district court “shall make a de novo

determination of those portions of the report or specified proposed findings or recommendations

to which objection is made.” Id. § 636(b)(1)(C); Fed. R. Civ. P. 72(b)(3). However, “when

objections to strictly legal issues are raised and no factual issues are challenged, de novo review

of the record may be dispensed with.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). De

novo review is also not required “when a party makes general and conclusory objections that do

not direct the court to a specific error in the magistrate’s proposed findings and recommendations.”

Id. Similarly, when no objection is filed, “a district court need not conduct a de novo review, but

instead must ‘only satisfy itself that there is no clear error on the face of the record in order to

accept the recommendation.’” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315 (4th

Cir. 2005) (quoting Fed. R. Civ. P. 72, advisory committee note).

“When personal jurisdiction is properly challenged under Rule 12(b)(2), the jurisdictional

question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds

for jurisdiction by a preponderance of the evidence.” Carefirst of Md., Inc. v. Carefirst Pregnancy

Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). When “the district court decides jurisdiction on the

motion papers alone, the plaintiff need only make a prima facie showing of a sufficient

jurisdictional basis to prevail.” Perdue Foods LLC v. BRF S.A., 814 F.3d 185, 188 (4th Cir. 2016).

“When determining whether a plaintiff has made the requisite prima facie showing, the court must

take the allegations and available evidence relating to personal jurisdiction in the light most

favorable to the plaintiff.” Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016).

The standard of review for a motion to dismiss under Rule 12(b)(6) for failure to state a

claim is well known. Fed. R. Civ. P. 12(b)(6). “A motion to dismiss under Rule 12(b)(6)

‘challenges the legal sufficiency of a complaint,’ including whether it meets the pleading standard

of Rule 8(a)(2).” Fannie Mae v. Quicksilver LLC, 155 F. Supp. 3d 535, 542 (M.D.N.C. 2015)

(quoting Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009)). A complaint attacked by a

Rule 12(b)(6) motion to dismiss will survive if it contains enough facts “to state a claim to relief

that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial

plausibility means allegations that allow the court to draw the reasonable inference that defendant

is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). “Threadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not

suffice.” Id. at 678.

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Specific facts are not

necessary; the statement need only “give the defendant fair notice of what the . . . claim is and the

grounds upon which it rests.” Twombly, 550 U.S. at 555. Additionally, when ruling on a motion

to dismiss, a court must accept as true all of the factual allegations contained in the

complaint. Erickson v. Pardus, 551 U.S. 89, 93–94 (2007). Nonetheless, a court is not bound to

accept as true legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265,

286 (1986). “Courts cannot weigh the facts or assess the evidence at this stage, but a complaint

entirely devoid of any facts supporting a given claim cannot proceed.” Potomac Conference Corp.

of Seventh-Day Adventists v. Takoma Acad. Alumni Ass’n, Inc., 2 F. Supp. 3d 758, 767–68 (D.

Md. 2014). Furthermore, the court “should view the complaint in a light most favorable to the

plaintiff.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).

III. DISCUSSION

The Magistrate Judge recommended granting the Motions in part and denying them in part

as follows. First, the M&R concluded that this Court has personal jurisdiction over Defendants

Priority Auto Group, Inc, (“PAG”), Dennis Ellmer (“D. Ellmer”), and Matthew Ellmer (“M.

Ellmer”). Next, it considered Plaintiff’s North Carolina Wage and Hour Act (NCWHA) claims

and concluded: (1) Plaintiff alleged sufficient facts that individuals D. Ellmer and M. Ellmer were

Plaintiff’s employers; (2) Plaintiff alleged sufficient facts that PAG and Priority Automotive

Huntersville, Inc. (“PAH”) are a “single enterprise”; (3) Plaintiff stated a plausible claim that

Defendants failed to timely pay wages pursuant to N.C. Gen. Stat. § 95-25.6; (4) Plaintiff stated a

plausible claim that Defendants failed to provide twenty-four-hours written notice before changing

his wage plan pursuant to N.C. Gen. Stat. § 95-25.13(3); and (5) Plaintiff did not sufficiently allege

a claim for unlawful deductions from wages and recommended dismissal of this claim only. Next,

the M&R concluded Plaintiff stated claims for fraudulent inducement and negligent

misrepresentation. Finally, it recommended denying Defendants’ motion to transfer venue to the

Eastern District of Virginia.

Defendants objected to all of the Magistrate Judge’s conclusions, except the recommended

dismissal of Plaintiff’s NCWHA claim for unlawful deductions from wages. Plaintiff did not

object. A party’s failure to make a timely objection is accepted as an agreement with the

conclusions of the Magistrate Judge. See Thomas v. Arn, 474 U.S. 140, 149–50 (1985). No

objection having been filed to the M&R’s conclusion that Plaintiff did not sufficiently allege a

claim for unlawful deductions from wages and recommended dismissal, and the time for doing so

having passed, the parties have waived their right to de novo review of this issue. Nevertheless,

this Court has conducted a full review of the M&R and other documents of record and, having

done so, hereby finds that the recommendation of the Magistrate Judge as to the NCWHA unlawful

deduction from wages claim is, in all respects, in accordance with the law and should be approved.

The Court now turns to the Defendants’ objections.

A. Personal Jurisdiction

A district court may properly assert personal jurisdiction over a nonresident defendant only

if (1) jurisdiction is authorized by the long-arm statute of the state in which the district court sits,

and (2) assertion of that jurisdiction is consistent with constitutional due process. Universal

Leather, LLC v. Koro Ar, S.A., 773 F.3d 553, 558 (4th Cir. 2014). “North Carolina’s longarm

statute is construed to extend jurisdiction over nonresident defendants to the full extent permitted

by the Due Process Clause.” Christian Sci. Bd. of Dirs. of the First Church of Christ, Scientist v.

Nolan, 259 F.3d 209, 215 (4th Cir. 2001). Thus, in North Carolina, the two-prong test collapses

into a single inquiry as to whether the exercise of jurisdiction over a defendant is consistent with

due process. Id.

“A court’s exercise of jurisdiction over a nonresident defendant comports with due process

if the defendant has ‘minimum contacts’ with the forum, such that to require the defendant to

defend its interests in that state ‘does not offend traditional notions of fair play and substantial

justice.’” Carefirst of Md., Inc., 334 F.3d at 397 (quoting Int’l Shoe Co. v. Washington, 326 U.S.

310, 316 (1945)). There are two types of personal jurisdiction: general and specific. Sneha Media

& Entm’t, LLC v. Associated Broad. Co. P, 911 F.3d 192, 198 (4th Cir. 2018). General jurisdiction

allows a court to reach nonresident defendants on the basis of contacts unrelated to the action if

those contacts are “continuous and systematic.” ALS Scan, Inc. v. Digital Serv. Consultants, Inc.,

293 F.3d 707, 712 (4th Cir. 2002). On the other hand, specific jurisdiction exists when “the

defendant purposely established minimum contacts in the forum state such that it should

reasonably anticipate being haled into court there on a claim arising out of those contacts.” Id.

“The inquiry whether a forum State may assert specific jurisdiction over a nonresident

defendant focuses on the relationship among the defendant, the forum, and the litigation.” Walden

v. Fiore, 571 U.S. 277, 283–84 (2014) (quotation marks omitted). In order to establish specific

jurisdiction over a nonresident defendant, a plaintiff must show (1) the defendant purposefully

availed itself of the privilege of conducting activities in the forum state; (2) plaintiff’s claims arise

out of those activities directed at the forum state; and (3) the exercise of personal jurisdiction would

be constitutionally reasonable. Consulting Eng’rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th

Cir. 2009).

The first factor, purposeful availment, “is grounded on the traditional due process concept

of minimum contacts.” Universal Leather, LLC, 773 F.3d at 559. This analysis is flexible and

analyzed on a case-by-case basis. Id. Courts have considered various factors in determining

whether a defendant has purposefully availed itself of the forum. Consulting Engineers Corp.,

561 F.3d at 278. In the business context, the Fourth Circuit has developed several nonexclusive

factors to be considered in determining whether a defendant has purposefully availed itself of the

privilege of conducting activities in the forum state:

(1) whether the defendant maintained offices or agents in the State; (2) whether the

defendant maintained property in the State; (3) whether the defendant reached into

the State to solicit or initiate business; (4) whether the defendant deliberately

engaged in significant or long-term business activities in the State; (5) whether a

choice of law clause selects the law of the State; (6) whether the defendant made

in-person contact with a resident of the State regarding the business relationship;

(7) whether the relevant contracts required performance of duties in the State; and

(8) the nature, quality, and extent of the parties’ communications about the business

being transacted.

Sneha Media & Entm’t, LLC, 911 F.3d at 198–99.

Through this analysis, if a court finds the defendant availed himself of the privilege of

conducting business in the forum, courts analyze the remaining factors necessary to determine if

specific jurisdiction exists, specifically, whether plaintiff’s claims arise out of those activities

directed at the forum state, and whether the exercise of personal jurisdiction would be

constitutionally reasonable. “The third prong—that the exercise of personal jurisdiction be

constitutionally reasonable—permits a court to consider additional factors to ensure the

appropriateness of the forum once it has determined that a defendant has purposefully availed itself

of the privilege of doing business there.” Id. at 279. These factors include: “(1) the burden on the

defendant of litigating in the forum; (2) the interest of the forum state in adjudicating the dispute;

(3) the plaintiff's interest in obtaining convenient and effective relief; (4) the shared interest of the

states in obtaining efficient resolution of disputes; and (5) the interests of the states in furthering

substantive social policies.” Id.

The Magistrate Judge considered whether the Court has specific jurisdiction and concluded

it does. This Court agrees. Plaintiff made a prima facie showing that all Defendants are subject

to personal jurisdiction in this Court. Defendants have purposefully availed themselves of the

privilege of conducting activities in North Carolina in numerous ways. First, according to the

Complaint, D. Ellmer and M. Ellmer, officers of PAG, reached into North Carolina to hire Plaintiff

as the General Manager of PAH. They each attended at least two in person meetings in North

Carolina with Plaintiff, where they traveled to North Carolina for the purpose of meeting Plaintiff

and discussing his employment with PAH. Further, they each acted as officers of PAH, a car

dealership located in North Carolina. Ultimately, D. Ellmer and M. Ellmer were involved in the

decision to hire Plaintiff, a resident in North Carolina, as General Manager of PAH, which

employment would be located and performed in North Carolina. Furthermore, M. Ellmer was the

signatory on the Pay Plan for Plaintiff’s employment at PAH, to be performed and paid to Plaintiff

in North Carolina, and Plaintiff reported directly to M. Ellmer while employed at PAH. Moreover,

D. Ellmer and M. Ellmer communicated to Plaintiff, in person in North Carolina, that Defendants

sold PAH which ultimately ended Plaintiff’s employment relationship with Defendants. All of the

aforementioned actions were conducted by officers of PAG. Moreover, PAG provided human

resources, payroll, and marketing to PAH in North Carolina, including during Plaintiff’s

employment at PAH. Finally, as will be discussed below, for purposes of Plaintiff’s NCWHA

claims, Plaintiff alleged sufficient facts that M. Ellmer and D. Ellmer are Plaintiff’s employers and

that PAG and PAH are a single enterprise.

Plaintiff’s claims arise out of these specific activities in which Defendants purposefully

availed themselves in North Carolina. In addition, the exercise of personal jurisdiction is

constitutionally reasonable in this case. The only relevant factor weighing in favor of Defendants

when determining constitutional reasonableness is the convenience on Defendants; however, given

the allegations in the Complaint, the contacts with North Carolina, and the nature of M. Ellmer

and D. Ellmer’s in person meetings in North Carolina, the burden on Defendants to litigate in

North Carolina is not constitutionally unreasonable.

Defendants argument that M. Ellmer and D. Ellmer are not subject to personal jurisdiction

because their contacts with North Carolina were as officers of PAG and PAH is unpersuasive.

While “the contacts of a company are not attributed to a corporate agent for jurisdictional

purposes” a party “is not immune from jurisdiction . . . merely because her contacts with the

[forum] were made ostensibly on behalf of [an employer].” ePlus Tech., Inc. v. Aboud, 313 F.3d

166, 177 (4th Cir. 2002). Courts may exercise personal jurisdiction over defendants if they have

sufficient contacts with the forum, even if those contacts “were made ostensibly on behalf of [an

employer.]” Id. The cases Defendants cite are inapposite. For example, in Thousand Oaks, the

court concluded it did not have personal jurisdiction over individuals when the allegations against

them “rest[ed] on nothing more than that they are officers or employees” of an entity Defendant.

Thousand Oaks Barrel Co. v. Deep South Barrels, LLC, 241 F. Supp. 3d 708, 718 (E.D. Va. 2017)

(noting that an amended complaint may assert sufficient allegations that the individual defendants

were involved in their employer’s allegedly unlawful activities in the forum such that personal

jurisdiction would exist). In contrast, as discussed herein, M. Ellmer and D. Ellmer had numerous

contacts with North Carolina and jurisdiction rests on more than solely their status as officers or

employees of PAG and PAH. Accordingly, Plaintiff made a prima facie showing that Defendants

are subject to personal jurisdiction in this Court.

B. North Carolina Wage and Hour Act Claims

1. Whether the Complaint Alleges Facts that D. Ellmer and M. Ellmer were

Employers

The NCWHA holds “employers” liable under certain circumstances as discussed herein.

The NCWHA defines “employer” as “any person acting directly or indirectly in the interest of an

employer in relation to an employee.” N.C. Gen. Stat. § 95-25.2(5). Because the NCWHA defines

employer identically to the Fair Labor Standards Act (FLSA), courts “may look to federal

interpretation of the FLSA for guidance” and apply the same standards to determine whether an

individual is an employer. Armento v. Asheville Buncombe Comm. Christian Ministry, Inc., 856

Fed. App’x 445, 451 (4th Cir. 2021); Lima v. MH & WH, LLC, 372 F. Supp. 3d 317, 335 n.9

(E.D.N.C. 2019). In deciding whether an individual is an employer, courts apply “an economic

reality test, examining the totality of the circumstances to determine whether the individual has

sufficient operational control over the workers in question and the allegedly violative actions to be

held liable for unpaid wages or other damages.” Garcia, 644 F. Supp. 2d 696, 720 (E.D.N.C.

2009) (quotation marks omitted). “Relevant factors include whether the alleged employer (1) had

the power to hire and fire the employees, (2) supervised and controlled employee work schedules

or conditions of employment, (3) determined the rate and method of payment, and (4) maintained

employment records.” Kerr v. Marshall Univ. Bd. of Governors, 824 F.3d 62, 83 (4th Cir. 2016)

(quotation marks omitted). No one factor is dispositive. Id. “Rather, the determination of whether

a particular individual had sufficient operational control within a business enterprise to be

considered an employer . . . requires a consideration of all of the circumstances and relevant

evidence.” Garcia, 644 F. Supp. 2d at 721.

Defendants argue Plaintiff “may be able to demonstrate that D. Ellmer and M. Ellmer were

remotely involved in two of the four factors [of the economic reality test]” but the M&R erred by

ascribing responsibility to them “as a pair as opposed to assessing their individual classification as

employers.” After assessing the allegations as to each M. Ellmer and D. Ellmer individually,

whose actions are inherently intertwined, the Court agrees with the Magistrate Judge that the

Complaint alleges sufficient factual allegations that M. Ellmer and D. Ellmer were Plaintiff’s

employer under the NCWHA.

First, the Complaint alleges facts indicating that M. Ellmer and D. Ellmer had the power

to hire and fire Plaintiff by interviewing him, negotiating his employment terms, hiring him, and

ultimately ending the employment relationship with Plaintiff when they sold PAH. Specifically,

both M. Ellmer and D. Ellmer met with Plaintiff in person to discuss hiring him. Afterward, M.

Ellmer informed Plaintiff that, after talking to D. Ellmer, “we are putting together an offer for

you.” (Doc. No. 11 ¶ 61). M. Ellmer emailed Plaintiff an offer of employment, with a Pay Plan

on which M. Ellmer was the signatory for PAH. Plaintiff contacted M. Ellmer to accept the offer.

During discussions prior to hiring Plaintiff, both M. Ellmer and D. Ellmer made reassurances that

the offer was for a long-term commitment. Additionally, in September 2020, M. Ellmer and D.

Ellmer met with Plaintiff to inform him that they sold PAH and could not employ him for two

years. While Defendants argue they did not ultimately fire Plaintiff, the facts alleged indicate M.

Ellmer and D. Ellmer were, at least in part, responsible for selling the dealership and ending

Plaintiff’s employment under the PAG umbrella.

The Complaint also alleges that M. Ellmer and D. Ellmer determined Plaintiff’s rate and

method of payment. For example, M. Ellmer provided Plaintiff with his Pay Plan for which M.

Ellmer was the signatory. Additionally, Plaintiff discussed with M. Ellmer on multiple occasions

his desire to purchase equity in PAH. M. Ellmer reassured Plaintiff he would have the opportunity

to purchase equity, and later informed Plaintiff he would need to speak to D. Ellmer about his

ability to purchase equity in PAH. In March 2020, D. Ellmer communicated to Plaintiff that he

would receive a $10,000 per month pay reduction. Finally, M. Ellmer and D. Ellmer negotiated

the conditions of Plaintiff’s employment, and ultimately changed the terms and conditions of his

employment during the relationship, and Plaintiff reported directly to M. Ellmer,

Accordingly, the facts alleged in the Complaint are sufficient to state claims under the

NCWHA against M. Ellmer and D. Ellmer as Plaintiff’s employers. To be clear, the Court is

considering this matter at the motion to dismiss stage, and does not conclude that M. Ellmer and

D. Ellmer were employers under the NCWHA as a matter of law.1

1 Defendants’ objection states, “[t]he Recommendation erroneously finds that D. Ellmer and M.

Ellmer are liable in their individual capacities as officers of PAH for alleged violations under the

NCWHA because they are ‘employers’ under the economic reality test.” (Doc. No. 28 at 8).

2. Whether the Complaint Alleges Facts that PAG and PAH are a Single

Enterprise

The Magistrate Judge concluded the Complaint alleges sufficient facts that PAG was

Plaintiff’s employer as a single enterprise with PAH. In reaching this conclusion, the M&R noted

that “[n]either the Fourth Circuit nor the North Carolina Supreme Court have examined whether

the single enterprise theory applies for the purposes of liability under the NCWHA” but applied

the single enterprise theory looking to Fourth Circuit cases analyzing FLSA liability because the

definitions of “employer” is identical to the NCWHA. Defendants’ objection largely does not

dispute that the single enterprise theory should be applied, other than to note it is a matter of first

impression that is “best resolved by this Court,” and then argues that in applying the single

enterprise theory the Magistrate Judge reached the wrong conclusion.

The Court agrees with the Magistrate Judge that applying the single enterprise theory is

appropriate here. When analyzing NCWHA claims, Courts looks to the interpretation of the FLSA

for guidance, including whether entities constitute an enterprise. Armento, 856 Fed. App’x at 451;

Leverette v. Labor Works Internt’l, LLC, 636 S.E.2d 258, (N.C. Ct. App. 2006) (applying FLSA

guidance to determine entities did not constitute an “enterprise” under NCWHA); 13 N.C. Admin.

Code § 12.0103 (“Where the legislature has adopted the language or terminology of the Fair Labor

Standards Act (F.L.S.A.) for the purpose of facilitating and simplifying compliance by employers

with both the federal and state labor laws, or has incorporated a federal act by reference, the

Department of Labor will look to the judicial and administrative interpretations and rulings

established under the federal law as a guide for interpreting the North Carolina law.”).

Two separate entities may constitute a single enterprise if they (1) conduct related

activities, (2) performed under unified operations or common control, and (3) for a common

business purpose. Brock v. Hamad, 867 F.2d 804, 806 (4th Cir. 1989).

Activities are deemed related . . . when they are the same or similar, such as those

of individual retail stores in a chain, or when they are auxiliary or service

activities. Auxiliary and service activities include generally all activities which are

necessary to the operation and maintenance of the particular business, such as

warehousing, bookkeeping, or advertising.

Dole v. Odd Fellows Home Endowment Bd., 912 F.2d 689, 692 (4th Cir. 1990) (quotation marks

and citations omitted). “[C]ommon control exists where the performance of the described

activities are controlled by one person or by a number of persons, corporations, or other

organizational units acting together.” Id. at 693. While ownership is an important consideration

for common control, it may be established in the absence of common ownership. Id. A common

business purpose includes activities which are directed to the same business objective or to similar

objectives in which the group has an interest. Brock, 867 F.2d at 807. “This common purpose

must be more than just the common goal to make a profit . . . but factors such as unified operation,

related activity, interdependency, and a centralization of ownership or control can all indicate a

common business purpose.” Gilbert v. Freshbikes, LLC, 32 F. Supp. 3d 594, 604 (D. Md. 2014)

(citations and quotation marks omitted). “When different business entities are involved, the critical

inquiry is whether there is operational interdependence in fact.” Dole v. Odd Fellows Home

Endowment Bd., 912 F.2d 689, 692 (4th Cir. 1990) (quotation marks omitted). “Entities which

provide mutually supportive services to the substantial advantage of each entity are operationally

interdependent and may be treated as a single enterprise under the Act.” Id. at 692-93.

Plaintiff has sufficiently alleged PAG and PAH are single enterprise for purposes of his

NCWHA claims. First, based on the facts alleged, PAG and PAH conduct related activities.

Specifically, according to the Complaint, PAG “performs human resources, payroll, marketing,

accounting, legal, and financial services for [PAH’s] North Carolina employees.” (Doc. No. 11

¶¶ 10, 36). This is precisely the type of auxiliary or service activities necessary for the operation

of PAH. Next, the Complaint alleges both PAG and PAH are under the leadership of D. Ellmer

and M. Ellmer. Specifically, D. Ellmer is the President of both PAH and PAG and M. Ellmer is

the Chief Operating Officer for both entities, and they each controlled, at least in part, whether

Plaintiff was able to obtain an ownership interest in PAH. Further, PAG controls employment

decisions and the operation and management of PAH, including policies and procedures,

purchasing its insurance policies, interchanging dealership inventory, and sharing an email URL

of @priorityauto.com. These facts combine to demonstrate a common business purpose and result

in the operational interdependence required to find that a single enterprise exists. Therefore, the

Court concludes the Complaint sufficiently alleges facts to state a claim against PAG as a single

enterprise with PAH. Again, the Court does not conclude that PAG and PAH are a single

enterprise as a matter of law.2

3. Whether the Complaint States Claims Pursuant to N.C. Gen. Stat. § 95-25.6

and N.C. Gen. Stat. § 95-25.13(3)

Pursuant to the NCWHA, “every employer shall pay every employee all wages and tips

accruing to the employee on the regular payday.” N.C. Gen. Stat. § 95-25.6. The NCWHA also

requires “every employer shall … (3) Notify employees, in writing or through a posted notice

maintained in a place accessible to its employees, at least 24 hours prior to any changes in promised

wages.”3 N.C. Gen. Stat. § 95-25.13(3).

The Magistrate Judge concluded Plaintiff sufficiently stated claims pursuant to N.C. Gen.

Stat. § 95-25.6 and N.C. Gen. Stat. § 95-25.13(3). Defendants object to these conclusions arguing

2 Defendants’ objection states, “the Recommendation applies that test and erroneously finds that

PAH and PAG are a ‘single enterprise’ and thus are both ‘employers’ who are liable under the

NCWHA.” (Doc. No. 28 at 13).

3 Effective July 8, 2021, the statute requires notice in writing at least one pay period prior to any

changes in promised wages. N.C. Gen. Stat. § 95-25.13(3).

the M&R does not apply the minimum pleading standard because Plaintiff’s Complaint does not

allege Defendants withheld the wages he earned or what he was actually paid during the months

his minimum guaranteed pay was reduced. Defendants do not cite any case law or other legal

authority explaining why Plaintiff must plead the amount he was paid in order to state a claim

under either N.C. Gen. Stat. § 95-25.6 or N.C. Gen. Stat. § 95-25.13(3).

Plaintiff’s Complaint alleges that he was entitled to guaranteed pay of $40,000 per month,

but in March 2020, his pay was retroactively reduced to $30,000 per month, and this was

communicated to him by D. Ellmer on the telephone. As a result PAG “owes Beckley $50,000

(February 2020 – July 2020).” (Doc. No. 11 ¶ 80). These facts are sufficient to state claims for

violation of N.C. Gen. Stat. § 95-25.6 and N.C. Gen. Stat. § 95-25.13(3) because they allege

Plaintiff was not paid “all wages . . . accruing to [him,] the employee” and it was not communicated

to him in writing at least 24 hours before it occurred. Even assuming Defendants’ argument is

correct, and Plaintiff is required to allege the specific amount withheld or the amount he was paid,

Plaintiff sufficiently did that here, by using basic math, where the Complaint states Plaintiff was

guaranteed $40,000 per month, his pay was reduced to $30,000 per month, and he is owed

$50,000. Accordingly, Plaintiff sufficiently stated claims under N.C. Gen. Stat. § 95-25.6 and

N.C. Gen. Stat. § 95-25.13(3).

C. Fraudulent Inducement and Negligent Misrepresentation Claims

Federal Rule of Civil Procedure 9(b) mandates a heightened standard for pleading a claim

for fraud. Topshelf Mgmt., Inc. v. Campbell-Ewald Co., 117 F.Supp.3d 722, 725 (M.D.N.C. 2015).

Rule 9(b) requires, “[i]n alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). To meet this standard, the

plaintiff must, at a minimum, describe “the time, place, and contents of the false representations,

as well as the identity of the person making the misrepresentation and what he obtained thereby,”

otherwise known as the “who, what, when, where, and how” of the alleged fraud. U.S. ex rel.

Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (quotation marks

omitted). While the circumstances constituting the fraud must be pled with particularity, “malice,

intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R.

Civ. P. 9(b).

The essential elements of fraud in the inducement are: (1) false representation or

concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to

deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party. Whisnant v.

Carolina Farm Credit, 693 S.E.2d 149, 157 (N.C. Ct. App. 2010); TradeWinds Airlines, Inc. v. C-

S Aviation Srvs., 733 S.E.2d 162, 168 (N.C. Ct. App. 2012). North Carolina has adopted the

definition of negligent misrepresentation set forth in the Restatement (Second) of Torts under

which:

[o]ne who, in the course of his business, profession or employment, or in any other

transaction in which he has a pecuniary interest, supplies false information for the

guidance of others in their business transactions, is subject to liability for pecuniary

loss caused to them by their justifiable reliance upon the information, if he fails to

exercise reasonable care or competence in obtaining or communicating the

information.

Lamb v. Styles, 824 S.E.2d 170, 177 (N.C. Ct. App. 2019) (quoting Restatement (Second) of Torts

§ 552 (1977)). Thus, the tort of negligent misrepresentation occurs when (1) a party justifiably

relies, (2) to his detriment, (3) on information prepared without reasonable care, (4) by one who

owed the relying party a duty of care. Simms v. Prudential Life Ins. Co. of Am., 537 S.E.2d 237,

240 (N.C. Ct. App. 2000); Supplee v. Miller-Motte Business College, Inc., 768 S.E.2d 582, 600

(N.C. Ct. App. 2015); T.W.T. Distributing, Inc. v. Johnson Products Co., Inc., 966 F. Supp. 2d

576, 582 (W.D.N.C. 2013).

Defendants argue (1) the claims are barred by the economic loss rule; (2) the Complaint

fails to plead fraud with particularity; (3) the Complaint is an impermissible group-pleading that

fails to inform each Defendant separately of the nature of his alleged participation the fraud; and

(4) the allegations are too remote because fifteen months passed between the alleged fraud and

sale of PAH.

First, Defendants argue Plaintiff’s fraudulent inducement and negligent misrepresentation

claims are partly barred by the economic loss rule. “The economic loss rule addresses the

intersection between contract remedies (including warranty remedies) and tort remedies.” Kelly v.

Georgia-Pacific LLC, 671 F. Supp. 2d 785, 791 (E.D.N.C. 2009). Under the rule, “[a] tort action

does not lie against a party to a contract who simply fails to properly perform the terms of the

contract, even if that failure to perform was due to the negligent or intentional conduct of that

party, when the injury resulting from the breach is damage to the subject matter of the contract.”

Rountree v. Chowan Cty., 796 S.E.2d 827, 830 (N.C. Ct. App. 2017). “North Carolina law requires

courts to limit plaintiffs’ tort claims to only those claims which are identifiable and distinct from

the primary breach of contract claim.” Legacy Data Access, Inc. v. Cadrillion, LLC, 889 F.3d 158,

164 (4th Cir. 2018) (quotation marks omitted). “[W]hile claims for negligence are barred by the

economic loss rule where a valid contract exists between the litigants, claims for fraud are not so

barred and, indeed, ‘[t]he law is, in fact, to the contrary: a plaintiff may assert both claims.’”

Bradley Woodcraft, Inc. v. Bodden, 795 S.E.2d 253, 259 (N.C. Ct. App. 2016) (citing Jones v.

Harrelson & Smith Contractors, LLC, 670 S.E.2d 242, 250 (N.C. Ct. App. 2008)). In other words,

a “tort action must be grounded on a violation of a duty imposed by operation of law, and the right

invaded must be one that the law provides without regard to the contractual relationship of the

parties.” Rountree, 796 S.E.2d at 831 (quotation marks omitted) (emphasis in original).

Plaintiff brings claims for fraudulent inducement and negligent misrepresentation based on

two representations: (1) that Defendants would not sell PAH, and (2) the Defendants intentions to

offer Plaintiff an equity partnership in PAH. Defendants do not argue that the former claims are

barred by the economic loss rule, but contend the economic loss rule bars the latter claims which

are governed by the Pay Plan. The Court agrees. The Pay Plan encompasses the terms agreed to

by the parties as to Plaintiff’s compensation and does not contain provisions that Plaintiff would

gain equity partnership in PAH after nine months. Now Plaintiff seeks to bring fraud and negligent

misrepresentation claims because he is unhappy with the Pay Plan and how the contractual

relationship ultimately ended. Plaintiff argues the economic loss rule does not apply because he

is not seeking damages for breach of contract, but rather, the loss resulting from leaving his

employment with Keffer Mazda in reliance on Defendants’ alleged promises to offer him equity

partnership. However, Plaintiff’s theory would turn any normal contractual negotiations into a

fraud claim by simply alleging a promise or discussion that occurred during negotiation that was

never incorporated into the final contractual agreement. This is precisely the type of claim the

economic loss rule bars, by preventing plaintiffs who are later unhappy with their contractual

agreement or relationship from couching contractual claims as tort claims. The agreed terms of

the Pay Plan superseded earlier discussions and negotiations by the parties regarding Plaintiff’s

compensation, including equity partnership, and Plaintiff’s fraud and misrepresentation claims

based on these negations are barred. As noted, Defendants do not argue Plaintiff’s claims are

barred to the extent they are based on Defendants’ representations about selling PAH, but observes

that, unlike the Plaintiff’s equity position in PAH, the Pay Plan does not address and Defendants

do not present any contractual agreement relating to the length of employment or the sale of PAH.

Thus, the Court will dismiss Plaintiff’s fraud in the inducement and negligent misrepresentation

claims but only to the extent they rely on misrepresentations made to Plaintiff regarding his ability

to obtain equity partnership in PAH.

Next, as it relates to the remaining claims, the Court concludes Plaintiff sufficiently pled

his claims for fraud and negligent misrepresentation. The Complaint contains several specific

representations made to Plaintiff, including who, what, when, where, and how. Specifically, as to

M. Ellmer, the Complaint alleges a meeting a dinner meeting with M. Ellmer in Charlotte, North

Carolina, during which M. Ellmer represented to Plaintiff that PAG was “offering a long-term

commitment” and a text message in April 2020 from M. Ellmer stating PAH was not begins old.

(Doc. No. 11 ¶¶ 18, 71). As to D. Ellmer, the Complaint alleges a meeting with D. Ellmer on July

2, 2019, in North Carolina, in which D. Ellmer represented to Plaintiff that PAH was not for sale,

PAH would not be sold, and Plaintiff’s employment with PAH would be a “long-term

relationship.” (Doc. No. 11 ¶ 60). The meeting was followed by a trip to Virginia on July 9, 2019,

during which D. Ellmer represented again to Plaintiff that PAH “would not be sold.” (Id.). M.

Ellmer and D. Ellmer made these statements as officers of PAG and PAH. These allegations meet

the Rule 9(b) pleading requirements and provide notice of the representations made separately by

the Defendants.

Finally, Defendants’ argument that the allegations related to the sale of PAH are too remote

because the sale of PAH occurred fifteen months after the alleged misrepresentations is also

unavailing. According to the Complaint, only one month after the misrepresentations were made

to Plaintiff, Defendants were attempting to sell PAH. Specifically, in August 2019, one month

after the alleged misrepresentations were made to Plaintiff that PAH would not be sold, Plaintiff

“heard from several industry sources” that PAG continued to search for a buyer for PAH.

According to the Complaint, Plaintiff estimates that he heard from at least four different

individuals, including a source he knew to be very reliable, between August 2019 and April 2020,

that Defendants were selling PAH. The fact that it took fifteen months to ultimately find a buyer

and sell PAH on the right terms is irrelevant when Defendants allegedly continued to search for a

buyer almost immediately after making the representations to Plaintiff. Moreover, as alleged in

the Complaint, Plaintiff raised concerns that Defendants were hiring him to increase the ultimate

value of PAH, such that the Complaint alleges facts indicating the time period between the

representations and the sale could be part of the alleged fraud itself.

D. Motion to Transfer Venue

Last, Defendants argues the M&R failed to address their alternative motion to transfer

venue to the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a). Section 1404(a)

authorizes a district court to transfer an action “[f]or the convenience of parties and witnesses [and]

in the interest of justice . . . to any other district or division where it might have been brought.” 28

U.S.C. § 1404(a). The statute sets forth a two-step process for determining whether to transfer a

case. First, the court must determine whether the action “might have been brought” in the district

to which the defendant seeks a transfer. Cable–La, Inc. v. Williams Commc'ns, Inc., 104 F. Supp.

2d 569, 574 (M.D.N.C.1999). “This requirement is met if the transferee court has jurisdiction over

the subject matter of the action, if venue is proper there, and if the defendant is amenable to process

issuing out of transferee court.” Id. (quotation marks omitted). “After determining that a suit

could have been brought in another district, the court must determine whether that forum is a

legally convenient one pursuant to 28 U.S.C. § 1404(a).” Knight Med., Inc. v. Nihon Kohden Am.,

Inc., 765 F. Supp. 291, 292 (M.D.N.C.1991).

The decision whether to transfer a case under section 1404(a) is within the district court’s

discretion and a court should make “an individualized, case-by-case consideration of convenience

and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quotation marks omitted).

Courts consider the following factors in deciding whether a case should be transferred:

(1) the plaintiff’s initial choice of forum; (2) the residence of the parties; (3) the

relative ease of access of proof; (4) the availability of compulsory process for

attendance of witnesses and the costs of obtaining attendance of willing witnesses;

(5) the possibility of a view by the jury; (6) the enforceability of a judgment, if

obtained; (7) the relative advantages and obstacles to a fair trial; (8) other practical

problems that make a trial easy, expeditious, and inexpensive; (9) the administrative

difficulties of court congestion; (10) the interest in having localized controversies

settled at home and the appropriateness in having the trial of a diversity case in a

forum that is at home with the state law that must govern the action; and (11) the

avoidance of unnecessary problems with conflict of laws.

Scholl v. Sagon RV Supercenter, LLC, 249 F.R.D. 230, 239 (W.D.N.C. 2008). “Generally, the

movant carries a heavy burden in establishing a case should be transferred pursuant to 28 U.S.C.

§ 1404(a).” Id. The moving party “must show (1) more than a bare balance of convenience in his

favor and (2) that a transfer does more than merely shift the inconvenience.” Datasouth Computer

Corp. v. Three Dimensional Tech., Inc., 719 F. Supp. 446, 451 (W.D.N.C. 1989). “[T]he analysis

of these factors is qualitative, not merely quantitative.” Commercial Equip. Co. v. Barclay

Furniture Co., 738 F. Supp. 974, 976 (W.D.N.C. 1990).

Again, Plaintiff asserts Defendants’ arguments regarding transfer of venue should be

limited to their opening brief, which fails to analyze the eleven factors and largely only argues the

Eastern District of Virginia is the more convenient forum because the majority of witnesses are

located there. Defendants only argued the eleven-factors in their reply brief. The Court agrees

that Defendants, with the burden of establishing that the case should be transferred, failed to

analyze the relevant factors in their opening brief and waived such arguments. Thus, they failed

to meet their burden in establishing the case should be transferred.4

Even if the Court considered Defendants’ analysis of the eleven-factors, the Court agrees

with the Magistrate Judge’s conclusion to deny the motion to transfer. The first factor weighs in

favor of Plaintiff, who initially chose this forum and “his choice of forum is given considerable

weight and ‘unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum

should rarely be disturbed.’” Stevens v. Atricure Inc., No. 3:17-CV-00010-MOC-DSC, 2021 WL

4785503, at *1 (W.D.N.C. Oct. 12, 2021) (quoting Collins v. Straight, Inc., 748 F.2d 916, 921 (4th

Cir. 1984)). Plaintiff’s choice of this forum is not arbitrary. Rather, Plaintiff resides in this

District, he was employed at PAH in this District, several of Plaintiff’s potential witnesses are

located in this District, Plaintiff met in person with Defendants in this District on numerous

occasions, and the harm occurred in this District. For these reasons, the second, third, fourth, fifth,

seventh, eighth, tenth, and eleventh factors are neutral.

While Defendants argue a judgment against Defendants may be more easily enforced

against Defendants in the Eastern District of Virginia, where they are located, and that civil cases

are disposed of “nearly eight months faster” in the Eastern District of Virginia which according to

Defendants is “especially advantageous for Plaintiff, because a more expeditious trial is a faster

route to any potential recovery,” the Court does not find these factors particularly persuasive,

where Plaintiff’s choice of forum is given considerable weight and Plaintiff opposes the request to

transfer, despite Defendants’ arguments that these factors are beneficial to Plaintiff. In sum,

4 Defendants’ objection states the “Recommendation summarily denies this motion to transfer

without engaging in or analyzing the eleven-factor test applied by this Court to determine when a

matter will be transferred;” however, as noted Defendants waived such arguments by failing to

analyze the eleven-factor test in their opening brief.

Defendants’ arguments in favor of transferring venue largely center around the convenience to

Defendants and their witnesses, which is insufficient to show the case should be transferred.

IV. CONCLUSION

IT IS, THEREFORE, ORDERED that:

1. The Magistrate Judge’s Amended Memorandum and Recommendation, (Doc. No. 27),

is ADOPTED in part; and

2. Defendant Priority Automotive Huntersville, Inc.’s Motion to Dismiss for Failure to

State a Claim, (Doc. No. 17), and Defendants Priority Auto Group, Inc., Dennis Ellmer,

and Matthew Ellmer’s Motion to Dismiss for Lack of Personal Jurisdiction and Failure

to State a Claim or, in the alternative, Transfer of Venue (Doc. No. 18), are GRANTED

IN PART and DENIED IN PART. Specifically, Defendants’ Motions are

GRANTED as to Plaintiff's NCWHA Claim for unlawfully withholding wages and as

to Plaintiff's fraud in the inducement and negligent misrepresentation claims but only

to the extent they rely on misrepresentations made to Plaintiff regarding his ability to

obtain equity partnership in PAH. The Motions are DENIED in all other respects.

Signed: March 28, 2022

Otef$ 4 CO

Robert J. Conrad, Jr. ees,

United States District Judge ee

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